By Sinead Carew
(Reuters) - Shares in Bank of the Ozarks (O:OZRK) tumbled more than 11 percent on Friday after the company said Dan Thomas had resigned as vice chairman and president of its real estate specialties group and investors worried why he was leaving the company.
The stock was last down 11.7 percent at $42.02 after falling as low as $41.83. Trading volume was 5.2 times the 10-day moving average. Stephens Inc downgraded the stock because of the news.
The bank said the resignation would not have a material impact on the company yet the stock was on track for its biggest one-day percentage decline since October 2008 after the news, which was released in a regulatory filing on Thursday.
Thomas, who was with the bank for 14 years, was seen as a key part of the group, which is typically responsible for the majority of the company's growth, according to Sandler O'Neill analyst Stephen Scouten.
Blair Brantley at Brean Capital saw the decline as a buying opportunity that "should reward shareholders once the dust settles." But investors fleeing the stock Friday worried the move could signal regulatory problems or credit problems or that Thomas could be leaving for a competitor.
"There's a lot of ways this is creating fearfulness around the stock," he said, also suggesting that short sellers could be adding on their bearish bets as a result of the news.
More than 8.5 percent of the company's shares were sold short as of July 14, according to the latest Reuters data.
"People are short the bank because of the exposure in this group because it's a lot of lumpy credit that's been most of the growth and there's fears of regulatory pressure because of this group," Scouten said.
While Scouten maintained his buy rating on the stock, he said the loss would not be "easily glossed over."
Stephens analyst Matt Olney downgraded the stock to an equal-weight rating from 'overweight' and cut his price target to $48 from $58 as a result of the resignation.
"We expect this news to create an overhang for the stock's valuation until the bank's growth outlook is assured," said Olney adding that the news would create "long-term strategic concerns on sustainability of growth."
Olney said the real estate group represents 70 percent of
originated loans, 50 percent of current revenue and accounted for 61 percent of its loan growth in the last 12 months.
Bank of the Ozarks did not immediately respond to a request for comment.