The news: Bank OZK is rethinking its strategy after years of aggressive commercial real estate (CRE) lending, now shifting toward more diversification due to rising vacancies and market stress, per The Wall Street Journal.

The strategy: The Arkansas-based bank previously shrugged off critics of its CRE-heavy model, but is now acknowledging the risks—with many projects sitting mostly empty. Plus, its dependence on higher-cost funding (like CDs)—rather than cheap deposits—makes it more vulnerable than peers. As a result, Bank OZK plans to reduce reliance on construction and development loans, moving toward simpler business and consumer lending.

What this means for the financial industry: If a small bank that was able to compete with major US banks—thanks to its loyal investment in CRE—is admitting it's time to diversify, it likely signals a continued, broad reckoning across the banking sector. As high interest rates, remote work trends, and falling property values persist, banks with heavy exposure to commercial real estate may face mounting pressure to reassess their strategies.