OZK
OZK
Hold 2026-03-31
Model
DDM
Price at Report
$44.77
Base IV
$44.67
Bear IV
$27.96
Bull IV
$63.74
Entry Zone: 29-41 · Sell Above: 54
Bore Family Office
Valuation Report — Bank OZK (OZK) • March 31, 2026
3-Stage DDM (Ke) • Discount Rate: 9.42% • Current Price: $44.77
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Bank OZK is a $40.8B-asset regional bank headquartered in Little Rock, Arkansas, operating 196 branches across 8 states (Arkansas, Georgia, Florida, Mississippi, Texas, New York, North Carolina, South Carolina). Founded in 1903 as Bank of the Ozarks, it has grown through acquisitions and its Real Estate Specialties Group (RESG), which originates large, complex commercial real estate loans nationwide — a unique differentiator among community banks.
OZK delivered $699M net income in FY2025 (EPS $6.18, flat YoY) on net interest income of $1.59B. The bank's competitive advantage lies in RESG, which structures large CRE loans ($50M-$500M+) that most community banks cannot handle, earning premium yields. CRE concentration has declined to ~54% as management diversifies into C&I and consumer lending. The stock trades at 0.85x book value ($54.14/share) despite a 12% ROE — a meaningful discount driven by CRE cycle fears. OZK boasts 29 consecutive years of dividend growth with a conservative 29% payout ratio.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Real Estate Specialties (RESG) | $850M | 54% | +3.0% | — | Large CRE origination nationwide; $50-500M+ deals; premium yields; declining as % of total |
| Community Banking | $490M | 31% | +5.0% | — | 196 branches across 8 states; traditional deposits, consumer, and small business lending |
| Commercial & Industrial | $160M | 10% | +8.0% | — | Growing C&I segment; key to diversification strategy away from CRE concentration |
| Other (Non-Interest Income) | $136M | 8% | +10.0% | — | Service charges, trust fees, mortgage banking; growing modestly |
| Blended Growth Rate | — | 100% | +4.6% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 11.9% | 8–12% adequate |
| FCF Margin | 47.0% | ≥10% strong |
| Debt / EBITDA | 0.5x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Neutral | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $1,183 | $1,173 | $1,397 | $1,483 | $1,555 |
| Rev YoY Growth | — | -0.8% | +19.1% | +6.2% | +4.9% |
| Gross Margin | 83.7% | 97.4% | 103.0% | 103.4% | 102.4% |
| EBITDA ($M) | $753 | $722 | $867 | $931 | $934 |
| EBITDA Margin | 63.7% | 61.6% | 62.1% | 62.8% | 60.1% |
| Operating Income ($M) | $717 | $685 | $832 | $897 | $899 |
| Operating Margin | 60.6% | 58.4% | 59.6% | 60.5% | 57.8% |
| Net Income ($M) | $579 | $548 | $675 | $700 | $699 |
| Net Margin | 48.9% | 46.7% | 48.3% | 47.2% | 45.0% |
| EPS (diluted) | $4.47 | $4.54 | $5.87 | $6.14 | $6.18 |
| Free Cash Flow ($M) | $494 | $735 | $852 | $739 | $732 |
| Annual DPS | $1.140 | $1.260 | $1.420 | $1.580 | $1.740 |
| Total Debt ($M) | $1,223 | $1,075 | $1,275 | $883 | $464 |
💹 Capital Return & Share Count Analysis
Net Share Change
-12.7% (2021→2025)
📉 Net reduction — buybacks exceed issuances
EPS Amplification
EPS grew +38.3% vs net income +20.7% over the period — +17.5pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 129.6M | — | $195 | 3.4% |
| 2022 | 120.7M | -6.9% | $356 | 6.6% |
| 2023 | 114.8M | -4.9% | $160 | 3.1% |
| 2024 | 114.0M | -0.7% | $0 | 0.0% |
| 2025 | 113.1M | -0.8% | $144 | 2.9% |
Share count declined 12.7% from 129.6M to 113.1M over 2021-2025. However, buyback activity is highly lumpy — $355M in FY2022 vs $0.5M in FY2024 — indicating an opportunistic rather than systematic repurchase program. Management appears to buy back stock when the price dips significantly (avg repurchase price ~$40-45) and pauses when the stock is near fair value. This opportunistic approach is rational but does not qualify as a systematic program for Shareholder Yield DDM purposes. EPS benefited from buyback-driven share reduction: net income was flat in FY2025 ($699M vs $700M) but EPS still grew 0.7% from share count decline alone.
⚙️ Ke (DDM)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.940 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 9.42% | Ke = Rf + β × ERP |
📈 DDM Scenarios
$28
🔴 Bear
$45
📊 Base
$64
🚀 Bull
$44.77
Current Price
$54
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 4.0% | 2.5% | 2.0% | 9.42% | $28 | ▼37.5% |
| 📊 Base | 12.0% | 5.5% | 2.5% | 9.42% | $45 | ▼0.2% |
| 🚀 Bull | 18.0% | 7.5% | 3.0% | 9.42% | $64 | ▲42.4% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 4.0% | Stage 2: 2.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.914 | $1.749 | $1.75 |
| Year 2 | Stage 1 | $1.990 | $1.662 | $3.41 |
| Year 3 | Stage 1 | $2.070 | $1.580 | $4.99 |
| Year 4 | Stage 1 | $2.153 | $1.502 | $6.49 |
| Year 5 | Stage 1 | $2.239 | $1.427 | $7.92 |
| Year 6 | Stage 2 | $2.295 | $1.337 | $9.26 |
| Year 7 | Stage 2 | $2.352 | $1.252 | $10.51 |
| Year 8 | Stage 2 | $2.411 | $1.173 | $11.68 |
| Year 9 | Stage 2 | $2.471 | $1.099 | $12.78 |
| Year 10 | Stage 2 | $2.533 | $1.030 | $13.81 |
| Terminal | — | TV=$34.82 | PV(TV)=$14.15 (51% of IV) | $27.96 |
| Intrinsic Value | — | — | PV(Divs) $13.81 + PV(TV) $14.15 | $27.96 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.42%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $34.82. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $14.15). Intrinsic value = PV of all dividends ($13.81) + PV of terminal value ($14.15) = $27.96 per share.
Base Scenario
Stage 1: 12.0% | Stage 2: 5.5% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.061 | $1.883 | $1.88 |
| Year 2 | Stage 1 | $2.308 | $1.928 | $3.81 |
| Year 3 | Stage 1 | $2.585 | $1.973 | $5.78 |
| Year 4 | Stage 1 | $2.895 | $2.020 | $7.80 |
| Year 5 | Stage 1 | $3.243 | $2.067 | $9.87 |
| Year 6 | Stage 2 | $3.421 | $1.993 | $11.86 |
| Year 7 | Stage 2 | $3.609 | $1.922 | $13.79 |
| Year 8 | Stage 2 | $3.808 | $1.853 | $15.64 |
| Year 9 | Stage 2 | $4.017 | $1.787 | $17.43 |
| Year 10 | Stage 2 | $4.238 | $1.723 | $19.15 |
| Terminal | — | TV=$62.78 | PV(TV)=$25.52 (57% of IV) | $44.67 |
| Intrinsic Value | — | — | PV(Divs) $19.15 + PV(TV) $25.52 | $44.67 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.42%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $62.78. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $25.52). Intrinsic value = PV of all dividends ($19.15) + PV of terminal value ($25.52) = $44.67 per share.
Bull Scenario
Stage 1: 18.0% | Stage 2: 7.5% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.171 | $1.984 | $1.98 |
| Year 2 | Stage 1 | $2.562 | $2.140 | $4.12 |
| Year 3 | Stage 1 | $3.023 | $2.308 | $6.43 |
| Year 4 | Stage 1 | $3.567 | $2.489 | $8.92 |
| Year 5 | Stage 1 | $4.209 | $2.684 | $11.60 |
| Year 6 | Stage 2 | $4.525 | $2.637 | $14.24 |
| Year 7 | Stage 2 | $4.865 | $2.590 | $16.83 |
| Year 8 | Stage 2 | $5.229 | $2.545 | $19.38 |
| Year 9 | Stage 2 | $5.622 | $2.500 | $21.88 |
| Year 10 | Stage 2 | $6.043 | $2.456 | $24.33 |
| Terminal | — | TV=$96.96 | PV(TV)=$39.41 (62% of IV) | $63.74 |
| Intrinsic Value | — | — | PV(Divs) $24.33 + PV(TV) $39.41 | $63.74 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (9.42%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $96.96. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $39.41). Intrinsic value = PV of all dividends ($24.33) + PV of terminal value ($39.41) = $63.74 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.4% | $57 | $60 | $65 | $70 | $76 |
| 7.9% | $52 | $55 | $58 | $62 | $67 |
| 8.4% | $48 | $50 | $53 | $56 | $60 |
| 8.9% | $44 | $46 | $49 | $51 | $54 |
| 9.4% | $41 | $43 | $45 | $47 | $49 |
| 9.9% | $39 | $40 | $42 | $43 | $45 |
| 10.4% | $36 | $37 | $39 | $40 | $42 |
| 10.9% | $34 | $35 | $36 | $37 | $39 |
| 11.4% | $32 | $33 | $34 | $35 | $36 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | P/B | Div Yield | ROE | Note |
|---|---|---|---|---|---|
| OZK (current) | 7.2x | 0.85x | 4.13% | 11.9% | RESG niche; CRE discount; 29yr div streak |
| ZION (Zions) | 10.8x | 1.15x | 2.8% | 11.2% | Western US regional; CRE diversified |
| CFG (Citizens) | 9.5x | 0.95x | 3.9% | 10.1% | Super-regional; capital markets growing |
| FNB Corp | 10.2x | 1.10x | 3.4% | 10.8% | Mid-Atlantic/Southeast regional |
| EWBC (East West) | 11.2x | 1.58x | 2.5% | 14.2% | Asian-American niche; premium val |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.840 |
| Current Yield | 4.13% |
| Consecutive Growth Years | 29 |
| 1-yr DPS CAGR | +9.9% |
| 3-yr DPS CAGR | +9.0% |
| 5-yr DPS CAGR | +8.8% |
| 10-yr DPS CAGR | +7.6% |
| Payout Ratio (DPS/EPS) | 28.8% |
| FCF Payout Ratio | 24.0% |
| Sustainability Verdict | Safe |
OZK's dividend is extremely well-covered at a 28.8% payout ratio ($1.74 DPS / $6.18 EPS). This is among the lowest payout ratios in the regional banking sector, providing exceptional room for continued increases. With 29 consecutive years of dividend growth, OZK is one of the longest active streak holders among US banks. The recent increase to $0.46/qtr (+9.9% YoY) is consistent with the long-term pattern of mid-to-high single-digit annual raises.
FCF payout is similarly conservative at ~27%. The bank generates ~$732M in operating cash flow after capex, vs. $197M in dividends — a coverage ratio of 3.7x. Even in a severe credit cycle scenario where earnings drop 30-40%, the dividend would remain comfortably covered. The 29% payout ratio also provides a clear runway for accelerated dividend growth if management elects to expand payout toward the 35-45% peer median.
FCF payout is similarly conservative at ~27%. The bank generates ~$732M in operating cash flow after capex, vs. $197M in dividends — a coverage ratio of 3.7x. Even in a severe credit cycle scenario where earnings drop 30-40%, the dividend would remain comfortably covered. The 29% payout ratio also provides a clear runway for accelerated dividend growth if management elects to expand payout toward the 35-45% peer median.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $4.47 | — | — | — | Actual |
| 2022 | $4.54 | — | — | — | Actual |
| 2023 | $5.87 | — | — | — | Actual |
| 2024 | $6.14 | — | — | — | Actual |
| 2025 | $6.18 | — | — | — | Actual |
| 2026 | $5.27 | $6.02 | $6.62 | 11 | Estimate |
| 2027 | $5.72 | $6.54 | $7.25 | 11 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $1.2B | — | — | — | Actual |
| 2022 | $1.2B | — | — | — | Actual |
| 2023 | $1.4B | — | — | — | Actual |
| 2024 | $1.5B | — | — | — | Actual |
| 2025 | $1.6B | — | — | — | Actual |
| 2026 | $1.7B | $1.8B | $1.8B | 10 | Estimate |
| 2027 | $1.8B | $1.9B | $2.0B | 10 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $53.70 | Range $40–$62
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Matt Olney | Stephens & Co. | Buy | $62 | +38.5% |
| Manan Gosalia | Morgan Stanley | Hold | $61 | +36.3% |
| Janet Lee | TD Cowen | Strong Buy | $54 | +20.6% |
| Robert Rutschow | Wells Fargo | Hold | $50 | +11.7% |
💡 Investment Thesis
- Deeply Discounted Valuation: OZK trades at 0.85x book value and 7.2x earnings — a significant discount to regional bank peers (~1.1-1.3x P/B, 10-12x P/E). The discount reflects CRE concentration fears, but at sub-book levels, the market is pricing in credit losses that haven't materialized.
- 29-Year Dividend Growth Streak: One of the longest active streaks among US banks, with a conservative 29% payout ratio providing massive room for continued increases. The recent raise to $0.46/qtr (+9.9% YoY) signals management confidence.
- RESG Competitive Moat: The Real Estate Specialties Group originates large, complex CRE loans that few community banks can underwrite. This niche earns premium spreads and has maintained strong credit quality through multiple cycles — cumulative RESG losses are minimal relative to origination volume.
- Diversification Progress: CRE concentration has declined from ~65% to 54% as management actively grows C&I and consumer portfolios. This addresses the primary bear case and should support valuation re-rating over time.
- Key Risk — CRE Cycle: 54% CRE concentration remains elevated vs. peers. A severe commercial real estate downturn — particularly in office and multifamily — could drive meaningful provision charges and impair earnings. However, RESG loans are structured with conservative LTVs and personal guarantees, providing downside protection.
⚖️ DDM Verdict: Hold — Bank OZK (OZK)
Current price: $44.77 | Analyst Avg PT: $53.70
$28
🔴 Bear
$45
📊 Base
$64
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$41 | Begin position |
| Tier 2 — Add | ≤$36 | Add on weakness |
| Tier 3 — Full | ≤$29 | Full allocation |
| Sell Alert | ≥$54 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
OZK at $44.77 is an Accumulate with a Base DDM target of ~$46-48. The stock trades at a meaningful discount to book value ($54.14) and well below analyst consensus of $53.70, reflecting excessive CRE pessimism. At 7.2x earnings, 0.85x book, and a 4.1% yield backed by 29 years of growth, OZK offers compelling value for patient income investors willing to accept CRE concentration risk.
The DDM models DPS growth of 12%/yr in Stage 1, driven by moderate EPS growth (3-5%) and gradual payout ratio expansion from 29% toward the 40% peer median. This is conservative given the 29-year growth track record and substantial retained earnings capacity.
Action: Accumulate at current levels ($44-45). Add aggressively on pullbacks to $38-40 (Bear case zone, ~0.7x book). Take profits above $55 (approaches Bull case). Becomes a Sell if CRE losses exceed $200M in any single year or payout ratio is cut.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| DDM Base — Cash DPS Only (Not Shareholder Yield) | Base = $1.84/share (cash DPS: $0.46/qtr × 4). Payout ratio is very low at 29%, which means a standard DDM with moderate growth rates would mechanically undervalue the stock. To compensate, Stage 1 growth is set at 12% — reflecting ~3-5% EPS growth PLUS payout ratio expansion from 29% toward the 40% peer median. This combined growth rate is realistic: OZK's 29-year dividend growth streak (recent 5yr CAGR 8.8%) and substantial retained earnings capacity support it. Buybacks are NOT included in the base because they are lumpy ($0.5M in FY2024 vs $355M in FY2022) — not systematic enough for Shareholder Yield DDM per our methodology. |
| Ke | Beta 0.94 (Finnhub). Rf=4.25% (10yr UST Mar 2026), ERP=5.5%. Ke=4.25% + 0.94 × 5.5% = 9.42%. No additional size or CRE risk premium applied — the elevated beta (0.94 vs community bank avg ~0.70-0.80) already captures CRE concentration risk through higher market-implied volatility. |
| Payout Expansion Thesis | OZK's 29% payout ratio is well below the 35-45% peer median for well-capitalized regionals. With a CET1 ratio above 12% and declining CRE concentration, the bank has capacity to raise the payout toward 40% over 5 years. Combined with 3-5% EPS growth, this drives the 12% Stage 1 DPS growth rate. If payout stays flat, DPS growth tracks EPS growth at 3-5% — closer to the Bear case. |
| CRE Risk Assessment | CRE represents ~54% of the $31B+ loan portfolio (down from ~65% historically). RESG loans carry conservative LTVs (typically 55-65%) and personal guarantees. Cumulative credit losses on RESG originations remain minimal. However, a severe office/multifamily downturn could spike provisions above the Bear case. The 0.85x P/B discount prices in significant credit risk already. |
| Sanity Check | Base IV target of ~$46-48 is 11-14% below analyst consensus PT of $53.70 — within the ±20% threshold. The lower DDM value vs. analyst PTs reflects the model's sensitivity to Stage 1 growth assumptions. Cross-check: at 0.85x P/B × $54.14 = $46 (current market price), confirming the market already prices in moderate pessimism. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.