Estimates have been rising for Bank of the Ozarks, Inc. (OZRK - Analyst Report) after the company posted better than expected first quarter results on April 12.
It is a Zacks #2 Rank (Buy) stock.
Unlike most banks, Bank of the Ozarks is growing its loan portfolio while maintaining very strong credit quality. And it was able to actually raise its dividend throughout the financial crisis and currently pays a dividend that yields 1.5%.
Bank of the Ozarks is a bank with 113 branches, including 66 in Arkansas, 27 in Georgia, 12 in Texas, four in Florida, two in North Carolina, and one each in South Carolina and Alabama.
It is headquartered in Little Rock, Arkansas and has a market cap of $1.1 billion.
First Quarter Results
Bank of the Ozarks reported better than expected results for the first quarter of 2012 on April 12. Earnings per share came in at 52 cents, beating the Zacks Consensus Estimates by a penny. It was a stellar 21% increase over the same quarter in 2011.
Net interest income, which is interest received minus interest paid, soared 22% to $43.8 million. And the net interest margin, which is net interest income divided by average interest-earning assets, expanded 37 basis points to a strong 5.98%.
Non-interest income rose 6%, driven by a 22% increase in service charges on deposit accounts. Meanwhile, the company's efficiency ratio, which is non-interest expenses divided by revenue, improved from 51.0% to 47.7% over the same period.
Credit quality was solid too. Non-performing loans and leases as a percentage of total loans and leases was just 0.61%, down from 0.77% in the same quarter last year.
Analysts revised their estimates higher for both 2012 and 2013 off the strong quarter. This sent shares to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2012 is now $2.08, representing 10% growth over 2011 EPS. The 2013 consensus estimate is currently $2.13, corresponding with 2% growth.
Bank of the Ozarks is one of the few banks to actually raise its dividend throughout the financial crisis. And it has raised it in each of the last 7 quarters.
Since 2000, the company has hiked its dividend at a compound annual rate of 20%:
It currently yields 1.5%.
Shares are trading at 14.9x 12-month forward earnings, a premium to the industry median of 13.4x. But this is certainly not unreasonable given the bank's earnings visibility.
Its price to book ratio of 2.5 is also a premium to the industry median, but this is justified by its superior return on equity.
The Bottom Line
Bank of the Ozarks is one of the strongest banks out there. And with rising estimates, solid growth projections, a 1.5% yield and reasonable valuation, it offers attractive upside potential.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.