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Bank OZK cuts real estate exposure to 47% of its loan book
In Q2, Bank OZK originated $1B in real estate loans, while real estate charge-offs rose to 0.69% of its loan book from 0.57% in Q1.
Bank OZK said its real estate exposure fell to 47% of its overall loan book in the second quarter, down from 52% in the first quarter and below its historical average, as it continues its plan to cut nonperforming real estate assets.
According to Bank OZK’s second-quarter earnings, the bank originated $1B in real estate loans in Q2, roughly matching the previous quarter, but originations were the slowest for the lender in five years. The bank linked part of the slowdown to sponsors struggling to raise equity for new construction amid macro uncertainty, with material prices staying high due to tariffs.
Bank OZK said its real estate portfolio is largely tied to multifamily, residential, mixed-use, industrial, office, and life sciences assets. It also noted that construction pipeline improvements have been driven mainly by data center projects.
Still, the lender warned that strain in its book is persisting, and it expects commercial real estate charge-offs to continue increasing. Real estate charge-offs were 0.69% in Q2 versus 0.57% in Q1, and nonperforming assets rose to 1.42% of its portfolio from 1.08% in Q1, including 77 of the 92 basis points tied to past-due and nonperforming loans for real estate.