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Bank of the Ozarks (OZRK) also issued a capital raise this week, issuing Bonds Value 1-Wk. Δ
common stock worth $310 million. Counter to statements by OZRK
Fed Funds 0.91% unch
management, the timing and reason behind the raise sparked speculation
among analysts that the company has M&A in mind. Management claimed 1 Month LIBOR 1.04% +3 bps
the additional capital is needed as they prepare for their first Dodd-Frank 3 Month LIBOR 1.20% +2 bps
stress test (DFAST) scheduled for June 2018, as well as to support future 5Yr - 1Mo Swap +179 bps +3 bps
organic growth. But analysts didn’t buy in. “The capital raise is somewhat of 2 Year Treasury 1.30% +2 bps
a surprise,” said one analyst at FIG Partners. “We assumed OZRK had ample 5 Year Treasury 1.79% +0 bps
capital to support future growth for at least another couple quarters and into 10 Year Treasury 2.25% +2 bps
2018.” Raymond James said the capital raise was “not opportunistic,” as the
bank “remains well-capitalized according to regulatory definitions, has made Yield Curve
no indications in that it would be interested in raising capital near term, and
has seen its stock price fall 15% over the past three months.” Nonetheless, the 3%
company sold the shares at a comfortable 236% of pro forma tangible book
value. OZRK has been a prolific acquirer, purchasing eight whole banks with
2%
a combined $10 billion in assets over the past five years.
Current
Last Year 1%
On the macro econ front, data released by the Commerce Department on Last Month
Friday showed stronger than expected economic growth in the first quarter of
2017. Real GDP grew at an annualized 1.2% in Q1, a beat to economists’ 0%
0y 5y 10y 15y 20y 25y 30y
forecasts of 0.7%. This is up from last year’s Q1 growth rate of 0.8%, but
1
Weekly Market Update May 26, 2017
down from the 2.1% growth experienced in Q4 2016. Weekly jobless claims declined -- yet again -- to the lowest
level since the 1970’s, indicating unusually strong demand for labor. Correspondingly, minutes from the Fed’s May
meeting stated that it would “soon be appropriate” to raise short term interest rates. Multiple Fed officials have
indicated in recent weeks that they believe the strength of the economy in 2017 still warrants two more 25-basis-
point rate hikes by the end of 2017. Fed Fund futures pointed to a 95% probability of a 25 bps rate hike at the
upcoming meeting on June 14th.