Bank OZK (NASDAQ:OZK) outlined plans for stronger loan growth in 2027 while acknowledging that elevated repayments in its Real Estate Specialties Group, or RESG, portfolio are expected to pressure loan balances in the fourth quarter of 2026.
During the company’s third-quarter conference call, Chairman and CEO George Gleason said third-quarter loan growth was driven primarily by Corporate and Institutional Banking, or CIB, with additional contributions from indirect RV and marine lending and community banking. However, several anticipated RESG repayments shifted from the third quarter into the fourth quarter.
In the first 19 days of October, Bank OZK had already recorded roughly $690 million of RESG payoffs and paydowns, Gleason said. The company expects near-record, and potentially record, RESG repayments during the fourth quarter. As a result, the bank expects a modest retracement in loan balances during the quarter and maintained full-year loan growth guidance of 3% to 5%.
Loan Growth Expected to Accelerate in 2027
Looking ahead, Gleason said Bank OZK expects loan growth of 10% to 12% in 2027, supported by opportunities across its business lines. He said the projected growth outlook reflects both continued momentum in CIB, indirect lending and community banking, as well as the timing of repayments that may occur earlier than initially expected.
“We have a pretty good line of sight into opportunities that all of our business lines are working on,” Gleason said, while noting that prospective loans are not final until they close and are booked.
The bank expects loan growth to accelerate further in 2028 as the current wave of RESG repayments subsides. Gleason said RESG balances, which have been declining due to high payoff activity, could reach an inflection point and begin contributing to growth in 2028.
Bank OZK also launched a Powersports lending business on Oct. 1, expanding its indirect lending platform beyond RV and marine financing. Gleason said the new business can use some of the same dealer relationships while reaching a customer base that differs from its existing RV and marine borrowers.
Diversification Remains a Core Strategy
Management emphasized that reducing concentration in commercial real estate remains a central strategic priority. Gleason said RESG represented about 70% of loans several years ago but has since fallen below 50% and continues to decline. CIB is expected to exceed RESG in outstanding balances at some point in 2027.
Gleason said CIB’s expansion does not simply replace one concentration with another because the business spans multiple loan types, geographies, industries and customers. The company said its CIB customer base includes borrowers across 44 different three-digit North American Industry Classification System codes.
Jake Munn, president of Corporate and Institutional Banking, said CIB now has nine major business lines and that recent loan growth was supported by more than 65 new relationships and more than 18 material loan upsizes. He said the portfolio had no past-due loans and no trailing net charge-offs at the end of the quarter.
Management said it remains focused on high-prime and super-prime borrowers in indirect lending, while community banking is pursuing more small-business and consumer relationships. Gleason said indirect lending has historically represented roughly 12% to 13% of loans and could rise a few percentage points above the company’s prior 10% to 15% target range following the Powersports launch.
Deposit Mix, Fee Income and Efficiency
Bank OZK said it is investing in treasury management capabilities, technology and personnel to deepen relationships with CIB and community banking clients and generate more low-cost and non-interest-bearing deposits.
Munn said CIB deposits increased more than 20% quarter over quarter. He added that the bank is seeking to expand fee-generating services including commodity hedging, interest-rate hedging, capital markets offerings, private wealth and treasury management.
Gleason said the company has made more progress diversifying its loan portfolio than it has improving its deposit mix, but he expects more visible gains in deposits and fee income through 2027 and 2028. The company expects fourth-quarter non-interest income to set another record, excluding periods that included bargain-purchase gains from acquisitions, and projected high-single-digit growth in non-interest income in 2027 compared with 2026.
Management also said it is seeking to preserve its historically low efficiency ratio despite continued investments in customer-facing businesses and technology. Gleason said Bank OZK has reduced its total headcount by 94 employees over the past two quarters while adding personnel in targeted growth areas.
“That is not a result of getting out of any businesses,” Gleason said. “That is just a fact that we’ve looked at a lot of these things we built over the last decade and realized … we can re-engineer those units and be much more effective.”
Credit Outlook and Real Estate Assets
The company said it is encouraged by leasing, refinancing and sales activity across its commercial real estate portfolio. President Brannon Hamblen cited continued leasing in multifamily, industrial, office and life-science properties, as well as liquidity in debt markets that has supported loan repayments.
Management said net charge-offs are likely to remain elevated in 2026 and 2027 but should show improvement during 2027. Chief Financial Officer Tim Hicks said lower special-mention balances and the company’s lowest quarterly net charge-off ratio of the year were positive developments, though future provisioning will also depend on loan growth and macroeconomic conditions.
Bank OZK reported approximately $420 million in foreclosed assets, consisting principally of seven properties. Gleason said the bank has active prospective buyers for all but one of the assets. For an Atlanta property, management is prioritizing leasing rather than a sale, citing potential upside from a patient approach.
The company also addressed the RaDD project in San Diego, where the mezzanine lender and equity sponsor contributed a combined $100 million of additional capital. Gleason said the additional investment and negotiations over potential future capital contributions demonstrate the sponsors’ commitment to the project. Hamblen said the property’s leasing strategy has expanded beyond local life-science and office users to include potential tenants in clinical research, pharmaceutical, technology, artificial intelligence and defense industries.
On capital deployment, Hicks said organic growth remains the bank’s first priority, while its capital levels also provide flexibility for share repurchases and continued dividend increases. Bank OZK has increased its dividend for 65 consecutive quarters, he said, and has repurchased nearly $1 billion of shares over the past five years.
About Bank OZK (NASDAQ:OZK)
Bank OZK (NASDAQ:OZK) is a regional financial institution headquartered in Little Rock, Arkansas. The company provides banking services to individuals, businesses and institutions, including deposit accounts, commercial and consumer loans, mortgage lending, treasury management and online and mobile banking.
Bank OZK also operates specialized lending businesses, including its Real Estate Specialties Group, which provides financing for commercial real estate development and other complex real estate projects.
