Bank OZK lending rose 9% in the third quarter of 2020

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Bank OZK CEO George Gleason (Unsplash; Bank OZK)

The New York commercial real estate market was hit by the pandemic, but one of the largest condominium lenders reported almost no write-downs in the third quarter.

On its conference call on Friday, Arkansas-based bank OZK reported that its net depreciation rate, or ratio of loans written off to total loans issued, was 0.09 percent. That is well below the industry average of 0.52 percent, said the bank.

It also has a number of deferred loans, which may indicate a distress across the board.

The company’s net income for the third quarter was $ 109.3 million, up 5.2 percent from $ 103.9 million a year earlier. It also reported that total lending rose 9.2 percent this year to $ 19.36 billion, up from $ 17.7 billion in the third quarter of 2019.

Since the last recession, bank OZK, formerly known as Bank of the Ozarks, has grown into one of the largest condominium loan issuers in New York, Los Angeles and Miami, working with developers such as JDS Development, Starwood Capital and Square Mile Capital. This includes a $ 558 million loan to Jules Trumps Estates at Acqualina condo project in Sunny Isles Beach, Florida that was granted in 2018.

The bank reported two major write-downs in the third quarter of 2018, causing the share price to fall 24 percent. It has not reported any major loan discounts since then.

The bank said it always was repaid on its loans, although the economy in general is grappling with the aftermath of the pandemic. George Gleason, CEO and chairman of bank OZK, said contracts are being signed on condominium projects it has loaned to in New York City.

“We’re pretty optimistic about New York’s long-term outlook,” he said. “It’ll just come back slower.”

Based on the bank’s ratings, the ratings of its properties (including condos, apartment buildings, hotels and retail stores) have not changed materially since the pandemic began. Of the 22 newly rated loans, the loan-to-value ratio remained unchanged at 17. With four loans it rose by more than 5 percent and decreased with one loan by more than 5 percent, according to the statement of the management of the bank OZK.

Bank OZK had a balance of 583 deferred loans totaling $ 550 million, or about 2.8 percent of the balance of its total loans, in the third quarter. With its real estate loans, the bank is asking borrowers to make more payments into their future reserves.

“We said we were going to extend three months, but you need to put off the other three months and rebalance the reserves so it’s not a problem,” Gleason said on the call.

Before the pandemic, the bank was built Lending slowed due to increased competition from debt funds and non-bank lenders. But since the pandemic began, the bank has continued to lend, including one $ 59 million Construction loan for a condominium project in Miami Beach. In its second quarter conference call, the bank said it was looking at loan opportunities in the multi-family sector.

The regional bank has attracted a share of critics and short sellers who claimed it was too aggressive outside of its home market, particularly on construction loans, which are widely viewed as risky. The bank also separated from its holding company, which allowed it to stop filing quarterly and annual reports with the U.S. Securities and Exchange Commission and to lift its Federal Reserve oversight.

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