There are hundreds of small community banks across the U.S. that focus on fundamental banking services like savings accounts and small business lending and steer clear of things like derivatives that make some of the big-bank stocks so risky. I’ve written multiple times about this often-overlooked segment of the banking industry, and one name has consistently made the list of promising small-bank stocks.

That’s Bank of the Ozarks (NASDAQ: OZRK), a Little Rock, Ark. bank with fewer than 200 branches spread across multiple southern states. Earlier this week, the Bank of the Ozarks earnings report for the first quarter beat analyst estimates, underscoring the big potential of this little bank.

Bank of the Ozarks earningsEarnings Jump

Bank of the Ozarks’ first quarter showed a clear rebound from a recent miss, as earnings jumped almost 30% to $51.7 million. The bank’s total loans and leases rose 45.7%, total non-purchased loans jumped 76.1%. Earnings per share of 57 cents easily beat the analyst consensus of 55 cents. The company also increased its quarterly dividend by about 3%.

But wait, there’s more. One of the strongest pieces of data coming out of Bank of the Ozarks’ first-quarter results was its ultra-low rate of net charge-offs – just 0.05%.

There’s a conventional wisdom of investing that with high gains come high levels of risk, while a “safer” investment will grow at a more modest rate. Bank of the Ozarks, however, appears to be delivering on both fronts: strong growth coupled with a low risk profile.

Although the stock has grown only modestly over the past year, it is up a robust 33%  over the past two years and more than 277% since 2011. In just two years, Bank of the Ozarks has doubled its net income, from $91 million to $182 million, while its revenues have grown from $288 million to $515 million over the same time period.

About That Growth Rate. . .

If you are wondering whether there is a “catch,” keep in mind that Bank of the Ozarks is a small business that cannot grow at this clip forever. Perhaps the biggest question right now is how much strong growth potential remains. It’s not an easy question to answer. While many community banks have enjoyed strong growth through acquisitions, they will ultimately have to balance that relatively easy source of growth with the pressure to stay close to the conservative, local values that made the company successful in the first place.

For Bank of the Ozarks, however, the future seems to be a win-win. Even if it shifts to a lower rate of growth, it still has its low-risk profile and strong dividend to fall back on.

A golden opportunity for the “little guy”

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Published by Wyatt Investment Research at