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Bank of Ozarks Continues to Grow Inorganically: Time to Hold?

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On Oct 7, 2016, we issued an updated research report on Bank of the Ozarks, Inc. . Despite mounting expenses and margin compression, the company's impressive inorganic growth strategy ensures steady growth.

Bank of the Ozarks’ strategy to grow through acquisitions is expected to continue further and augment top-line growth. 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, given its strong balance sheet position, the company is estimated to continue expanding through acquisitions, with primary focus on locations where it does not have offices yet.

Further, Bank of the Ozarks has been witnessing improvement in asset quality. With the overall economic recovery, the asset quality improvement is likely to continue.

However, like most banks, Bank of the Ozarks continues to 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 anticipated 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 $2.41 and $3.01, respectively.

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