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Bank OZK (OZK) Stock Up on Q2 Earnings Beat, Revenues Rise
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Shares of Bank OZK (OZK - Free Report) gained 5.1% in after-market trading following the release of its second-quarter 2022 results. Earnings per share of $1.10 handily surpassed the Zacks Consensus Estimate of $1.02. The bottom line, however, reflects a fall of 5.2% from the year-earlier quarter.
Results were aided by a rise in net interest income and higher loan balances. However, higher expenses, lower non-interest income and higher provision for credit losses were the undermining factors.
Net income available to common shareholders was $132.4 million, down 12.1% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $292.1 million, up 8.8% year over year. The top line also beat the Zacks Consensus Estimate of $285.4 million.
Net interest income was $265.8 million, up 10.4% year over year. Net interest margin, on a fully-taxable-equivalent basis, grew 57 basis points (bps) year over year to 4.52%.
Non-interest income was $26.3 million, down 5.1%. The fall was mainly due to lower loan service, maintenance and other fees, gains on sales of other assets, and other income.
Non-interest expenses were $109.3 million, up 5.4% year over year. The rise was due to an increase in all cost components.
Bank OZK’s efficiency ratio was 37.25%, down from 38.43% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2022, net loans were $18.55 billion, up 2.6% from the end of December 2021. As of the same date, total deposits amounted to $19.98 billion, down from $20.21 billion as of Dec 31, 2021.
Credit Quality: A Mixed Bag
The ratio of non-performing loans, as a percentage of total loans, contracted 6 bps year over year to 0.16% as of Jun 30, 2022. Net charge-offs to average total loans was 0.01%, down from 0.08% in the prior-year quarter.
In the reported quarter, the company recorded a provision for credit losses of $7 million against a provision benefit of $30.9 million in the year-ago quarter.
Profitability Ratios Deteriorate
At the end of the second quarter, return on average assets was 2.02%, down from 2.24% in the year-earlier quarter. Return on average common equity was 12.40%, down from 13.65%.
Share Repurchase Update
In the reported quarter, Bank OZK repurchased 3.7 million shares for $147.4 million.
Our Take
Bank OZK’s solid loan balance, along with its business restructuring and branch consolidation initiatives, is expected to continue aiding revenue growth. However, operating expenses are likely to stay elevated due to the bank’s efforts to improve technology and invest in franchise, which might hurt profits.
Bank of America’s (BAC - Free Report) second-quarter 2022 earnings of 73 cents per share lagged the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with $1.03 per share earned in the prior-year quarter.
As expected, BAC’s investment banking business did not perform well. The asset management business did not offer much support. However, driven by robust loan growth and rising interest rates, the company recorded an improvement in NII. BAC’s trading numbers were good.
BankUnited, Inc.’s (BKU - Free Report) second-quarter 2022 earnings per share of 82 cents lagged the Zacks Consensus Estimate of 90 cents. The bottom line also declined 26.1% from the prior-year quarter.
BKU’s results were largely hurt by lower non-interest income, a rise in provisions and higher expenses. Deposit balances witnessed a fall on a sequential basis. Profitability ratios deteriorated. Nevertheless, growth in net interest income was a tailwind for BankUnited.
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Bank OZK (OZK) Stock Up on Q2 Earnings Beat, Revenues Rise
Shares of Bank OZK (OZK - Free Report) gained 5.1% in after-market trading following the release of its second-quarter 2022 results. Earnings per share of $1.10 handily surpassed the Zacks Consensus Estimate of $1.02. The bottom line, however, reflects a fall of 5.2% from the year-earlier quarter.
Results were aided by a rise in net interest income and higher loan balances. However, higher expenses, lower non-interest income and higher provision for credit losses were the undermining factors.
Net income available to common shareholders was $132.4 million, down 12.1% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $292.1 million, up 8.8% year over year. The top line also beat the Zacks Consensus Estimate of $285.4 million.
Net interest income was $265.8 million, up 10.4% year over year. Net interest margin, on a fully-taxable-equivalent basis, grew 57 basis points (bps) year over year to 4.52%.
Non-interest income was $26.3 million, down 5.1%. The fall was mainly due to lower loan service, maintenance and other fees, gains on sales of other assets, and other income.
Non-interest expenses were $109.3 million, up 5.4% year over year. The rise was due to an increase in all cost components.
Bank OZK’s efficiency ratio was 37.25%, down from 38.43% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2022, net loans were $18.55 billion, up 2.6% from the end of December 2021. As of the same date, total deposits amounted to $19.98 billion, down from $20.21 billion as of Dec 31, 2021.
Credit Quality: A Mixed Bag
The ratio of non-performing loans, as a percentage of total loans, contracted 6 bps year over year to 0.16% as of Jun 30, 2022. Net charge-offs to average total loans was 0.01%, down from 0.08% in the prior-year quarter.
In the reported quarter, the company recorded a provision for credit losses of $7 million against a provision benefit of $30.9 million in the year-ago quarter.
Profitability Ratios Deteriorate
At the end of the second quarter, return on average assets was 2.02%, down from 2.24% in the year-earlier quarter. Return on average common equity was 12.40%, down from 13.65%.
Share Repurchase Update
In the reported quarter, Bank OZK repurchased 3.7 million shares for $147.4 million.
Our Take
Bank OZK’s solid loan balance, along with its business restructuring and branch consolidation initiatives, is expected to continue aiding revenue growth. However, operating expenses are likely to stay elevated due to the bank’s efforts to improve technology and invest in franchise, which might hurt profits.
Bank OZK Price, Consensus and EPS Surprise
Bank OZK price-consensus-eps-surprise-chart | Bank OZK Quote
Bank OZK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Bank of America’s (BAC - Free Report) second-quarter 2022 earnings of 73 cents per share lagged the Zacks Consensus Estimate of 77 cents. The bottom line compared unfavorably with $1.03 per share earned in the prior-year quarter.
As expected, BAC’s investment banking business did not perform well. The asset management business did not offer much support. However, driven by robust loan growth and rising interest rates, the company recorded an improvement in NII. BAC’s trading numbers were good.
BankUnited, Inc.’s (BKU - Free Report) second-quarter 2022 earnings per share of 82 cents lagged the Zacks Consensus Estimate of 90 cents. The bottom line also declined 26.1% from the prior-year quarter.
BKU’s results were largely hurt by lower non-interest income, a rise in provisions and higher expenses. Deposit balances witnessed a fall on a sequential basis. Profitability ratios deteriorated. Nevertheless, growth in net interest income was a tailwind for BankUnited.