Bank OZK’s (OZK - Free Report) second-quarter 2023 earnings per share of $1.47 missed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a rise of 33.6% from the year-earlier quarter.
Results were positively impacted by an improvement in net interest income (NII), driven by higher rates and loan balances. However, rising expenses and a rise in provision for credit losses on challenging economic backdrop were concerns. As a result, shares of the company witnessed a decline of 4.5% in the after-market trading.
Net income available to common shareholders was $167.9 million, up 26.9% from the year-ago quarter. Our estimate for the metric was $169 million.
Revenues Improve, Expenses Rise
Net revenues were $388.8 million, up 33.1% year over year. The top line beat the Zacks Consensus Estimate of $375.2 million.
NII was $356.8 million, up 34.2% from the year-earlier quarter. Our estimate for the metric was $348.6 million. Better-than-expected loan growth has led the company to post higher numbers.
Net interest margin (NIM), on a fully-taxable-equivalent basis, expanded 80 basis points (bps) to 5.32%. Our estimate for NIM was 5.56%. However, substantially higher-than-expected deposit cost led the company to post lower numbers.
Non-interest income was $32 million, which increased 21.5% from the year-earlier quarter. The increase was primarily due to gains on sales of other assets, loan service, maintenance and other fees. We had projected a non-interest income of $23.4 million. However, larger-than-expected gains on sales of other assets drove the company to post higher numbers.
Non-interest expenses were $129.4 million, up 18.3%. The rise was due to an increase in all cost components. We had expected this metric to be $122.8 million.
Bank OZK’s efficiency ratio was 33.05%, down from 37.25% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2023, total loans were $23.6 billion, up 7% sequentially. As of the same date, total deposits amounted to $24 billion, up from $22.3 billion as of Mar 31, 2023. Our estimate for total deposits was $21.8 billion.
Credit Quality Worsens
Net charge-offs to average total loans were 0.15%, up from 0.01% in the prior-year quarter. In the reported quarter, the company recorded a provision for credit losses of $41.8 million, up substantially from $7 million in the year-ago quarter. We had projected provision of $28.5 million, but better-than-expected loan growth and expectation of economic slowdown led the company to post higher numbers.
The ratio of non-performing loans, as a percentage of total loans, contracted 1 bps year over year to 0.15% as of Mar 31, 2023.
Profitability Ratios: Mixed
At the end of the second quarter, the return on average assets was 2.27%, up from 2.02% in the year-earlier quarter. Return on average common equity was 15.14%, up from 12.40%.
Share Repurchase Update
In the reported quarter, Bank OZK repurchased 1.96 million shares for $66.1 million.
Our Take
Bank OZK’s solid loan balance, branch consolidation efforts and higher rates are expected to continue aiding revenues. However, elevated operating expenses and rising credit costs are major near-term concerns.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2023 earnings of $1.35 per share met the Zacks Consensus Estimate. The bottom line rose 2.2% from the prior-year quarter.
HWC's results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provision were concerning.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2023 earnings per share of $1.02 surpassed the Zacks Consensus Estimate of 93 cents. The bottom line increased 10.9% from the prior-year quarter.
CBSH's results benefited from an increase in NII, driven by a rise in loan balance and higher interest rates. Also, non-interest income grew during the quarter.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
Bank OZK’s (OZK - Free Report) second-quarter 2023 earnings per share of $1.47 missed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a rise of 33.6% from the year-earlier quarter.
Results were positively impacted by an improvement in net interest income (NII), driven by higher rates and loan balances. However, rising expenses and a rise in provision for credit losses on challenging economic backdrop were concerns. As a result, shares of the company witnessed a decline of 4.5% in the after-market trading.
Net income available to common shareholders was $167.9 million, up 26.9% from the year-ago quarter. Our estimate for the metric was $169 million.
Revenues Improve, Expenses Rise
Net revenues were $388.8 million, up 33.1% year over year. The top line beat the Zacks Consensus Estimate of $375.2 million.
NII was $356.8 million, up 34.2% from the year-earlier quarter. Our estimate for the metric was $348.6 million. Better-than-expected loan growth has led the company to post higher numbers.
Net interest margin (NIM), on a fully-taxable-equivalent basis, expanded 80 basis points (bps) to 5.32%. Our estimate for NIM was 5.56%. However, substantially higher-than-expected deposit cost led the company to post lower numbers.
Non-interest income was $32 million, which increased 21.5% from the year-earlier quarter. The increase was primarily due to gains on sales of other assets, loan service, maintenance and other fees. We had projected a non-interest income of $23.4 million. However, larger-than-expected gains on sales of other assets drove the company to post higher numbers.
Non-interest expenses were $129.4 million, up 18.3%. The rise was due to an increase in all cost components. We had expected this metric to be $122.8 million.
Bank OZK’s efficiency ratio was 33.05%, down from 37.25% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2023, total loans were $23.6 billion, up 7% sequentially. As of the same date, total deposits amounted to $24 billion, up from $22.3 billion as of Mar 31, 2023. Our estimate for total deposits was $21.8 billion.
Credit Quality Worsens
Net charge-offs to average total loans were 0.15%, up from 0.01% in the prior-year quarter. In the reported quarter, the company recorded a provision for credit losses of $41.8 million, up substantially from $7 million in the year-ago quarter. We had projected provision of $28.5 million, but better-than-expected loan growth and expectation of economic slowdown led the company to post higher numbers.
The ratio of non-performing loans, as a percentage of total loans, contracted 1 bps year over year to 0.15% as of Mar 31, 2023.
Profitability Ratios: Mixed
At the end of the second quarter, the return on average assets was 2.27%, up from 2.02% in the year-earlier quarter. Return on average common equity was 15.14%, up from 12.40%.
Share Repurchase Update
In the reported quarter, Bank OZK repurchased 1.96 million shares for $66.1 million.
Our Take
Bank OZK’s solid loan balance, branch consolidation efforts and higher rates are expected to continue aiding revenues. However, elevated operating expenses and rising credit costs are major near-term concerns.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2023 earnings of $1.35 per share met the Zacks Consensus Estimate. The bottom line rose 2.2% from the prior-year quarter.
HWC's results benefited from higher NII, a rise in loan balance and increasing interest rates. However, lower non-interest income, higher expenses and a rise in provision were concerning.
Commerce Bancshares Inc.’s (CBSH - Free Report) second-quarter 2023 earnings per share of $1.02 surpassed the Zacks Consensus Estimate of 93 cents. The bottom line increased 10.9% from the prior-year quarter.
CBSH's results benefited from an increase in NII, driven by a rise in loan balance and higher interest rates. Also, non-interest income grew during the quarter.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How To Profit From Trillions On Spending For Infrastructure >>
Get the latest research report on CBSH - FREE
Get the latest research report on HWC - FREE
Get the latest research report on OZK - FREE