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Bank of Ozarks Expands Via Acquisitions, Costs Woe Lingers

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On Aug 12, 2016, we issued an updated research report on Bank of the Ozarks, Inc. . Despite mounting expenses and margin compression, the company's inorganic growth strategy assures a steady growth ahead.

Bank of the Ozarks’ inorganic growth strategy should continue to further augment revenue improvement. In Jul 2016, the company closed the acquisitions of Community & Southern Holdings and C1 Financial, which are expected to be accretive to its earnings over the next few quarters. Further, the deals increased the company’s branch network to 224 from 177 as of Jun 30.

We believe Bank of the Ozarks will continue expanding inorganically, given its strong balance sheet position. The company plans to focus on M&As across locations where it does not have offices at present.

However, like most banks, Bank of the Ozarks faces margin compression given the low rate environment. Management expects net interest margin (excluding the effect of any future acquisitions) to remain under pressure in 2016.

Also, persistently rising operating expenses remains a matter of concern for Bank of the Ozarks. Going forward, expenses are expected to further rise as the company continues with its expansion.

Notably, over the past 30 days, the Zacks Consensus Estimate for 2016 and 2017 remained stable at $2.42 and $3.02, respectively.

Stocks That Warrant a Look

Some other banking stocks include Hancock Holding Company , Southern National Bancorp of Virginia Inc. and State Bank Financial Corporation .

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