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Bank of the Ozarks rebrands in bid to build national bank

Bank of the Ozarks is rebranding in an effort to broaden its footprint from regional to national.

On March 15, the company's board proposed to rebrand the lender as Bank OZK. CEO and Chairman George Gleason II said in an interview that the bank's national ambitions spread beyond its Real Estate Specialties Group, a division for construction financing that already has national reach.

"Over the next several years, we'll continue to add community banking offices in new markets across the country," Gleason said. He said the bank continues to prioritize growth in existing markets like New York City, Miami and major Texas metropolitan areas. For new markets, he said Nashville and Raleigh, N.C., make sense as the next steps in the bank's evolution. Further into the future, the bank could add offices and resources in Denver, Chicago, Los Angeles, San Francisco, Portland and Seattle.

Bank of the Ozarks' Real Estate Specialties Group has been the primary driver of loan growth. The RESG business line focuses on commercial real estate and acquisition, construction and development loans. At year-end 2017, the division delivered $1.43 billion of year-over-year growth, or nearly half of the bank's growth in non-purchased loans. The bank's office in New York City has been a driving force behind its RESG business with more than $3 billion of funded commitments at year-end 2017, accounting for nearly one-third of total production and more than triple the volume of the bank's No. 2 RESG market, Miami.

At the same time, New York City is delivering more than RESG loans. Bank of the Ozarks reported $1.39 billion of deposit growth in the city, more than the $1.05 billion of deposit growth the bank reported in 156 other cities combined.

"We hope to continue to grow our balance sheet in a profitable and sound way and continue to add more services in more markets," Gleason said. The bank's technology initiative, known as OZRK Labs, will launch an online account opening platform this year and tablet-based services. The bank plans to open several new branches in 2019, including up to three offices in Nashville.

The bank expects to incur one-time expenses of $15 million to $25 million pretax in the third quarter related to the rebranding, which is expected to take place in July pending shareholder and regulatory approvals. The bank's ticker will also change, to OZK from OZRK.

Management hopes the new name will retain brand equity with customers familiar with Bank of the Ozarks while attracting new clients by losing the geographic tie. Gleason said the bank's board considered several other names during a two-year process that included focus groups of both existing and prospective clients.

"It's a tricky balance," said Matt Olney, an analyst who covers the bank for Stephens Inc. "You're trying to keep your legacy customers and not have them notice any change and continue to feel good about the brand while you're trying to grow and attract a new customer base."

Olney said there was risk in any branding move but called the switch to Bank OZK a natural evolution for the lender and one that would aid its moves to become a national player. Olney said the bank was already a leading national lender for its RESG products and its aggressive growth strategy has so far proven successful.

"You're seeing them reach out more on their deposit franchise. It's in a handful of states and we expect them to be in additional states in the next few years," Olney said.

Analysts at Sandler O'Neill expressed surprise that the new name was so similar to the original considering the cost and work that went into the change. But they expected little to no effect on operations and said the rebrand should give the bank less of a regional feel. Catherine Mealor, an analyst for Keefe Bruyette & Woods, called the rebranding "a smart move for the company given its evolution into a national franchise."