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5 Expensive Bank Stocks Still Worth Buying (Update 3)

3. Bank of the Ozarks

Shares of Bank of the Ozarks (OZRK) of Little Rock, Ark., closed at $29.23, declining 1% year-to-date. Based on a quarterly payout of 9.5 cents, the shares have a dividend yield of 1.27%.

The bank expanded through three failed-bank purchases from the FDIC during 2011, following four in 2010. The 2011 acquisitions included The Park Avenue Bank of Valdosta, Ga., which had total assets of $953 million when it was shuttered by state regulators last April.

Bank of the Ozarks reported fourth-quarter net income available to common shareholders of $17.6 million, or 51 cents a share, declining from $18.9 million, or 55 cents a share, in the third quarter, but increasing from $16.9 million, or 49 cents a share, a year earlier. The sequential earnings decline reflected an increase in the provision for loan losses to $4.3 million in the fourth quarter, from $1.5 million in the third quarter.

The bank's fourth-quarter net revenue grew 5% from the third quarter and 30% year-over-year, to $31.7 million.

Over the past five quarters, Bank of the Ozarks has seen a major boost in earnings from bargain purchase gains on its failed bank acquisitions, with ROA ranging from 1.75% to 5.23%. The bank was included among TheStreet's 10 Bank Stocks Bringing Home the Bacon in November, as one of the strongest and most consistent earnings among actively traded banks, for the preceding five years.

FIG Partners analyst Brian Martin on Jan. 20 reiterated his "Market Perform" rating on Bank of the Ozarks, "primarily due to valuation," with a $29.50 price target, saying the bank remained "an active bidder and is optimistic more deals are on the horizon and that covered loans will continue to be a key driver of balance sheet growth in 2012."

The shares trade for 2.4 times tangible book value and for 14 times the consensus 2012 EPS estimate of $2.04. The shares are expensive when compared to the many of the largest U.S. banking names, yes, however, the bank's long-term track record speaks for itself.

The shares rose slightly on Wednesday, to close at $29.05.

Interested in more on Bank of the Ozarks? See TheStreet Ratings' report card for this stock.
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