Bank OZK Is Cutting Its Losses. These Are The Properties To Watch

Bank OZK dipped into the wall of reserves it’s been building to cover potential loan losses for the first time this cycle, ending the year with its highest level of loan losses in 15 years. 

The bank, which was the largest construction lender in the U.S. in 2023, expects to continue drawing from its allowance for credit losses as it works through the loans it handed out when other lenders pulled back as the pandemic lingered. 

“The longer this challenging cycle drags on for our sponsors, the more likely it would be that individual sponsors on some individual projects would run into trouble and either choose to no longer support their projects or become unable to support their projects,” CEO George Gleason said. 

“And we've seen that over the last couple of years,” he said. 

Bank OZK doubled its allowance for credit losses from 2022 to more than $600M at the end of 2025 and began drawing down the reserves after realizing net charge-offs totaling $98.3M in the last three months of the year. 

The bank’s 2025 charge-off rate of 0.5% was its highest since 2010. While still behind the industry average of 0.62%, it was boosted by four fourth-quarter charge-offs on four real estate loans.

Bank OZK pulled in $172M in net income in the fourth quarter with earnings per share at $1.53, both down quarter-over-quarter. Still, the bank came in ahead of Wall Street’s revenue expectations and posted a modest annualized EPS gain. Its stock has traded mostly flat this week.

The bank has been focused on growing the other parts of its business outside commercial real estate lending, which made up 54.4% of its loan composition at the end of the year, down from nearly 58% in September and an all-time high of 70%. 

As the bank works through its problem loans, here’s a look at some of Bank OZK’s recent moves and the properties it has flagged as substandard. 

Already Moving

Bank OZK sold two foreclosed properties in the fourth quarter and the note covering another property but saw one deal fall apart at the finish line. 

It sold a Boston office building covered by a $9.4M foreclosed-on loan and a Seattle office burdened with $6.4M in bad debt for a combined $300K gain during the fourth quarter, according to management comments included with the financial results. 

It also sold the loan covering Pacific Center, a recently completed 500K SF life sciences project developed by Sterling Bay in San Diego. 

“We sold that loan at par. We collected all our outstanding principal, all our accrued interest on the note sale,” President Brannon Hamblen said on the earnings call. 

A buyer was also lined up for a Los Angeles land parcel that Bank OZK had foreclosed on, but the deal failed to close by the contractual deadline and the parcel is back on the market. 

“The one project we had that didn’t sell was under contract for a couple of years, and the sponsor paid us $12M in contract extension fees and forfeited earnest money on that,” Gleason said. 

$72M Charge-Off On A Boston Office

Bank OZK took a $72.4M charge-off in the fourth quarter on the construction loan covering a courthouse redevelopment in Cambridge, Massachusetts. 

The bank gave a joint venture between Leggat McCall Properties and Granite Properties a $300M construction loan in 2021 for the project, which delivered 422K SF of office space to the market in 2024. 

The carrying balance on the loan is now $156.4M, or 95% of the property’s as-is appraised value, and the debt matures this month.

The developers are continuing to look for tenants for the building, but their equity partners are no longer willing to keep backing the project without a lease in place, Gleason said on the call. The landlord is also searching for new equity partners.

“We're hopeful they'll be successful, but we're also dual-tracking our acquiring title to that property so that if they're not successful, we're ready to take that asset over and continue to move that asset forward in a constructive way” he said, adding that the bank would prioritize a sale if it ended up holding the asset.

A Mostly Empty Creative Office 

Bank OZK also ended the quarter with a $5.7M charge-off for a loan on a creative office in Santa Monica, California, after the sponsor stopped making payments.

Local developer Redcar Properties unveiled plans for the 65K SF, three-story office building at 1650 Euclid St. in 2021. Construction wrapped up in the middle of 2024, and the property was 15% leased at the end of 2025.

After the charge-off, the loan has an outstanding $50.1M balance equal to the property’s as-is value. In its management comments, Bank OZK said it was “pursuing opportunities to market this asset” but would move to acquire the property title if those efforts failed. 

Redcar is running up against a competitive office market and limited demand in Santa Monica. The office availability rate in the neighborhood is among the highest in Los Angeles at 34.6%, a full seven percentage points ahead of the city average, according to Savills. 

Another Chicago Haircut 

The sole finished development in Sterling Bay’s Lincoln Yards megaproject in Chicago is vacant and weighing on Bank OZK’s bottom line for a second consecutive quarter. 

The 284K SF life sciences property was built by Sterling Bay, J.P. Morgan and Harrison Street Real Estate Capital on a parcel that cost roughly $200M to assemble. Bank OZK took a $5.1M charge-off on the debt in the third quarter and another $9M charge-off in the quarter that just ended to bring the loan balance to $50M. 

The developers have been trying to sell the empty property, and reports in December indicated that local general contractor Novak Construction plans to buy the property and an adjacent 18-acre parcel along the Chicago River. 

A price hasn’t been disclosed, but Bank OZK management said in their commentary that the $50M loan balance is equal to the net proceeds from an expected short sale. 

“If they accomplish that [sale], then we could be paid off quickly over the next couple of quarters, however long it takes to close that,” Gleason said of the deal. “If they don't accomplish that sale at a price that's satisfactory to us, then we'll take that property and sell it.”

Baltimore Megaproject Loan

The smallest of the nonaccruing loans on Bank OZK’s books is a note with a $40M outstanding balance that the owner is planning to turn over to the bank.

The loan, originally for $66M, covers the undeveloped portion of the 1.1M SF Baltimore Peninsula mixed-use development owned and built by Goldman Sachs and Sagamore Ventures, the investment firm founded by Under Armour CEO Kevin Plank. 

The development group cut a deal with Bank OZK, announced at the end of last year, to extend the $189M loan covering Baltimore Peninsula’s completed first phase through 2028, allowing the developers to retain ownership of the completed project while turning over the undeveloped land.

Bank OZK took a $5.1M charge-off on the loan in the third quarter and added another $4.6M charge-off in the fourth quarter while collecting $700K in interest payments. Management said in their commentary that they are in active discussions with a potential buyer. 

Hines has been in talks to partner on future parts of the Baltimore Peninsula, a Sagamore spokesperson told Bisnow in December. 

“If this transaction does not close, we will proceed to acquire title to the property,” bank executives wrote in their fourth-quarter commentary. “We have a good working relationship with the sponsor, which we expect to remain helpful with our development of the project if we acquire title.”

Gloomy In Seattle

The Jack, a Seattle office project built by local developer Urban Visions that delivered in 2023, stands out as the only substandard loan on Bank OZK’s books to be upside down, with a loan-to-value ratio of 111% at the end of the year. 

The entirety of the 145K SF waterfront property is listed as available for lease by JLL, and the loan backing the property has been in substandard accrual, meaning the debt is still pulling in interest income payments, since the middle of 2024.

The total commitment from Bank OZK was $72.5M with $56.2M outstanding, and the high LTV followed a new appraisal in December.

The property at 74 S. Jackson St. faces a tough market. Seattle had 1.5M SF of net negative absorption across 2025 — although the rate slowed to nearly neutral in the fourth quarter — and asking rents are falling as the vacancy rate continues to climb past 33%, according to Colliers. 

Another fully vacant, newly built office building sold to owner-user MangoApps for $7.75M, or $118 per SF, in the city’s largest office deal of the fourth quarter. 

The Holdout That Pays Out

The oldest substandard credit on Bank OZK’s books is a loan covering a group of home lots near Lake Tahoe, California. 

The financing for roughly 475 acres and 458 homesites was originated in 2014 and has been substandard but still collecting interest since 2019. The debt has a $43.2M outstanding balance, but Gleason said that debt service over the years had effectively covered any loss. 

“We've earned more in interest and fees than our outstanding balance on that loan,” Gleason said. “And there's a very high probability that we get through that all the way to payoff with a successful resolution of that asset, earning money all the way and never taking a loss on that.”

A Pioneering Milwaukee Hotel

Bank OZK also moved the debt covering the 196-key Renaissance Milwaukee West hotel into the substandard accrual column in the fourth quarter. 

The Marriott-operated property opened in 2020 as the first Renaissance-branded property in Wisconsin. Bank OZK provided a $28.7M construction loan for the project in 2019, and the outstanding balance was down to $22.6M at the end of the year, or roughly 68% of the property’s value. 

The local developer, HKS Holdings LLC, is looking to sell the property ahead of the loan’s maturity date next month, according to Bank OZK’s management comments.