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Bank of the Ozarks gearing up for growth to $50B

hopes toreach $20 billion in total assets by year-end and now aspires to grow to $50billion in "a few years," Chairman and CEO George Gleason II said.

Ozarks'expansion will come with infrastructure costs as the company builds upinformation technology, cybersecurity, risk management and compliance systems,executives said on the bank's third-quarter earnings call. These costs werenoted as headwinds, although the costs of investment should be offset by somecost savings from acquisitions.

The Little Rock, Ark.-based bank announced net incomeavailable to common stockholders was $76.0 million, or 66 cents per share, upfrom $46.1 million, or 52 cents per share, in the same quarter last year.

Bankof the Ozarks sees continued involvement in commercial real estate lending,hoping to make CRE account for approximately 57% of the company’s growth inearning assets by 2018. The company is also strongly pursuing growth in scale,as it closed the acquisitions of Community & Southern Holdings Inc. and in July.

Also,the bank revised down its target for growth in nonpurchased loans and leases asit expects a pickup in prepayments to continue.

Thecompany cautioned that faster-than-expected loan prepayments might block itfrom achieving the $3.0 billion growth in nonpurchased loans and leases it hadprojected at the beginning of the year — guidance that it increased to $3.5billion in July. Ozarks' key business, its conservatively underwritten RealEstate Specialties Group portfolio, makes up 91.1% of the unfunded balance ofOzarks' nonpurchased loans and leases.

Gleasondefended the company by reiterating the fact that nonpurchased loans and leasesstill grew more than 60% year-over-year. But he acknowledged that the companyis seeing borrowers pay out construction and development loans much earlierthan expected, which hurts Ozarks' net interest margin.

"Ifyou want to look at this in a glass-half-full scenario, we're financing reallyfantastic assets that are selling or refinancing at very high values. … Theglass-half-empty version of that is we would like to keep them on books longerand earn more interest income on them," he said.