In An Odd Twist, The Market Seems Relatively Calmer About Bank OZK's Credit Situation

I was positive on Bank OZK (OZK) after its last quarterly earnings report, my thinking being that the Street was letting its worst-case scenario thinking get a little too far in front of Bank OZK’s demonstrated historical underwriting excellence. Yes, every cycle is different, but not many banks change as dramatically as the valuation implied with Bank OZK.

Since then, the shares are down about 25%, which is hardly a performance to celebrate, but the stock has outperformed its peer group by about 10%, with most of that coming since earnings. In an odd twist, it seems like the Street is more comfortable with OZK’s reserving assumptions than with other banks. While these shares do still offer an attractive long-term prospective return, there are other banks with even more upside potential and more traditional risk exposures (i.e., not so much concentration in construction and CRE lending).

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In An Odd Twist, The Market Seems Relatively Calmer About Bank OZK's Credit Situation