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Earnings estimates for Bank of the Ozarks Inc. (OZRK - Snapshot Report) have been advancing since this regional bank posted strong second quarter results, which included year-over-year earnings growth of 37.5%. Moreover, the company has a history of beating quarterly earnings estimates, and has amassed an average earnings surprise of 12.7% over the past four quarters.

Rising earnings estimates helped the stock hit its 52-week high on July 19, 2012. It achieved a Zacks #1 Rank (Strong Buy) on the same day. The company currently enjoys a decent dividend yield of 1.6%.

Second Quarter EPS Moves Higher

On July 12, Bank of the Ozarks reported second quarter 2012 net earnings per share of 55 cents, surpassing the Zacks Consensus Estimate of 52 cents by 5.8% and the year-ago earnings of 40 cents by 12.7%. The upsurge was mainly due to reduced non-interest expenses, reflecting better expense management and improved net interest margin.

Net interest income declined 0.4% to $42.3 million. Non-interest income decreased 79% to $15.7 million. However, net interest margin expanded 4 basis points to 5.84%. Additionally, the company's non-interest expenses decreased 22.5% to $27.3 million over the same period.

Credit quality improved in the quarter. Net charge-offs plummeted to $2.8 million from $3.9 million in the prior-year quarter. Moreover, provision for loan and lease losses declined to $3.1 million from $3.8 million in the prior-year quarter.

Rising Earnings Estimate Revisions

Five of nine estimates have moved higher over the last 7 days for 2012 and 2013 each. The Zacks Consensus Estimate for this year is up 2.9% to $2.16, while the Zacks Consensus Estimate for next year gained 3.7% to reach $2.23.

Additionally, the Zacks Consensus Estimate for 2012 reflects a year-over-year improvement of about 14.1%, while 2013 indicates a 3.6% year-over-year growth.

Steady Dividend Payment

Bank of the Ozarks is one of the few banks that increased its dividend throughout the financial crisis. The latest hike of 8.3% was announced in July 2012. Currently the company pays a quarterly dividend of 13 cents per share, affirming a dividend yield of 1.6%. Since 2002, the company has hiked its dividend at a compound annual rate of 21%.

Reasonable Valuation

Shares for Bank of the Ozarks currently trade at 15.4x 12-month forward earnings, a 2.7% premium to the peer group average of 15.0x. Its price to book ratio of 2.5 is also at a significant premium to the industry median of 1.2. The company has a trailing 12-month ROE of 17.0% compared with the peer group average of 8.3%.

Chart Shows Strength

The stock has been consistently trading above its 200 days moving average since October 2011.

Bank of the Ozarks is one of the strongest banks with rising estimates, strong growth projections, a decent dividend yield and reasonable valuation. Moreover, with consecutive dividend increases and synergies expected from completed acquisitions in 2011, it offers attractive upside potential.

Headquartered in Little Rock, Arkansas, Bank of the Ozarks provides various banking products and services. The company was founded in 1981 and conducts business through 113 branches as of September 30, 2011 in Arkansas, Georgia, Texas, Florida, North Carolina, South Carolina and Alabama. With a market capital of about $1.14 billion, Bank of the Ozarks competes with Cardinal Financial Corp. (CFNL) and Farmers Capital Bank Corporation (FFKT).

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