Safe and Sound

Bank of the Ozarks

Little Rock, AR
5
Star Rating
Little Rock, AR-based Bank of the Ozarks is an FDIC-insured bank started in 1903. Regulatory filings show the bank having equity of $3.46 billion on $21.28 billion in assets, as of December 31, 2017.

With 2,400 full-time employees in 256 offices in multiple states, the bank holds loans and leases worth $15.95 billion, including real estate loans of $12.96 billion. U.S. bank customers currently have $17.19 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Bank of the Ozarks exhibited a superior condition, earning a full 5 stars for safety and soundness. Keep reading for a breakdown of how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is an important measurement of a bank's financial strength. It acts as a bulwark against losses and affords protection for accountholders when a bank is experiencing financial trouble. From a safety and soundness perspective, more capital is preferred.

Bank of the Ozarks racked up 18 out of a possible 30 points on our test to measure the adequacy of a bank's capital, exceeding the national average of 13.13.

One widely followed measure of this buffer is a bank's Tier 1 capital ratio. Bank of the Ozarks's Tier 1 capital ratio was 11.17 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic headwinds.

Overall, Bank of the Ozarks held equity amounting to 16.27 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to determine the impact of troubled assets, such as unpaid loans, on the bank's capitalization and allocated loan loss reserves.

A bank with extensive holdings of these types of assets could eventually be required to use capital to absorb losses, shrinking its equity buffer. It also means that there are likely to be many assets that are in non-accrual status and no longer earning interest for the bank, resulting in diminished earnings and potentially more risk of a future failure.

Bank of the Ozarks exceeded the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A helpful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.39 percent of Bank of the Ozarks's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problematic loans. Unfortunately, the FDIC did not provide information on Bank of the Ozarks's loan loss allowance in its most recent filings.

Earnings score

A bank's earnings performance has an effect on its long-term survivability. A bank can retain its earnings, boosting its capital cushion, or put them to work addressing problematic loans, likely making the bank better prepared to withstand economic shocks. Banks that are losing money, however, have less ability to do those things.

Bank of the Ozarks received above-average marks on Bankrate's test of earnings, achieving a score of 22 out of a possible 30.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one widely used measure of a bank's earnings. Bank of the Ozarks's most recent annualized quarterly return on equity was 12.91 percent, above the national average of 8.10 percent.

The bank reported net income of $421.9 million on total equity of $3.46 billion for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 2.11 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.