The most interesting thing about Bank of the Ozarks' (NASDAQ:OZK) second-quarter conference call was what wasn't discussed: Only five days earlier, Bank of the Ozarks permanently stopped submitting regulatory filings to the Securities & Exchange Commission (SEC).
I had never heard of a bank doing this. Two analysts I spoke to, each with decades of experience, had never heard of it either. Even an analyst who follows Bank of the Ozarks was caught off guard and didn't seem to understand the bank's move when we discussed it two months later.
Yet, when I asked Bank of the Ozarks' chairman and CEO, George Gleason, about the decision to suspend SEC filings, here was his response (emphasis added):
Under applicable federal law, publicly traded bank holding companies file all of their public company filings with the SEC, and publicly traded banks file all of their public company filings with the Federal Deposit Insurance Corporation. The requirements for content and timelines for such filings are substantially identical whether the law requires you to file with the SEC or the FDIC. In advance of our corporate reorganization, we discussed and thoroughly disclosed these filing requirements. Of course, bank stock analyst and investors covering other publicly traded banks such as Signature Bank, First Republic Bank and Towne Bank, to name a few, were well aware of this difference in filing procedures.
To Gleason's point, it's true that other banks are exempt from SEC filings. But there aren't many of them. Gleason cites three, while a spokesperson for the bank said there "over a dozen banks in total." Either way, it's a minuscule fraction of the hundreds of banks that trade publicly.
This is why you would have been excused for thinking that Bank of the Ozarks would have gone out of its way on its latest earnings call to let analysts and investors understand the rationale behind the move and quell any concern about it. But it didn't.
When I asked a bank spokesperson about this, she responded by pointing to two places where the bank touched tangentially on the topic:
Our Q2 2017 earnings release disclosed on page 4 that our filings are available on the FDIC's website and our IR website. Tim Hicks, Chief Administrative Officer and Executive Director of Investor Relations also mentioned on the earnings call that the filings can be found on our IR website.
Here's the section she referenced from the bank's second-quarter earnings release:
The Bank files certain reports, proxy materials, and other information required by the Securities and Exchange Act of 1934 with the Federal Deposit Insurance Corporation ("FDIC"), copies of which are available electronically at the FDIC's website at http://www.fdic.gov and are also available on the Bank's Investor Relations website at http://ir.bankozarks.com under "Filings".
And here's the relevant portion from Executive Vice President Tim Hicks' prepared remarks on the bank's second-quarter earnings call:
Information about such factors as well as GAAP reconciliations and other information on non-GAAP financial measures we discuss is included in today's earnings press release and in our 10-K, 10-Qs and various other public filings and investor materials. These are all available on our corporate website, bankozarks.com, under Investor Relations.
These explain where the bank's filings can be found, but it doesn't say the bank will no longer submit regulatory filings to the SEC. That's an independently significant fact, which, given how unusual it is, seems like it would warrant a more patent disclosure.
This may seem trivial, but it isn't. It's an affront to transparency, closing off one of the principle places where analysts and investors get information about publicly traded companies. Even more importantly, it leaves an objective observer to ask why the top performing bank stock in the country over the past two decades would even consider doing something with such bad optics.