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Bank OZK (OZK) Q3 Earnings Beat, Revenues & Expenses Rise

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Bank OZK’s (OZK - Free Report) third-quarter 2020 earnings per share of 84 cents surpassed the Zacks Consensus Estimate of 57 cents. Moreover, the bottom line indicates a rise of 3.7% from the prior-year quarter’s reported number.

Results were aided by an improvement in revenues, partly offset by higher expenses. Moreover, lower provision for credit losses was a positive for the company. Further, the balance sheet position remained strong in the quarter.

Net income available to common shareholders was $109.3 million as compared with $103.9 million in the year-ago quarter.

Revenues Improve, Expenses Rise

Net revenues were $251.3 million, up 2.5% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $244.7 million.

Net interest income was $224.7 million, up 2.7% on a year-over-year basis. Net interest margin, on a fully-taxable equivalent basis, declined 57 basis points (bps) year over year to 3.69%.

Non-interest income totaled $26.7 million, up nearly 1% from the year-ago quarter. The rise was primarily driven by an increase in gain on sale of other assets. Moreover, in the reported quarter, the company recorded net gains on investment securities.

Non-interest expenses were $105.6 million, up 4.7% year over year. The rise resulted from higher salaries and employee benefits costs as well as net occupancy and equipment costs.

Bank OZK’s efficiency ratio was 41.77%, up from 40.98% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.

As of Sep 30, 2020, total loans were $19.36 billion, up from $17.53 billion recorded as of Dec 31, 2019. As of the same date, total deposits amounted to $21.29 billion, up from $18.47 billion recorded as of Dec 31, 2019.

Credit Quality Improves

The ratio of non-performing loans, as a percentage of total loans, declined 2 bps year over year to 0.15% as of Sep 30, 2020. Moreover, provision for credit losses declined 8.3% from the year-earlier quarter to $7.2 million.

Annualized net charge off ratio to average total loans decreased from 0.12% to 0.09% on a year-over-year basis.

Profitability Ratios Mixed

At the end of the third quarter, return on average assets was 1.63%, down from 1.81% in the year-earlier quarter. Return on average common equity was 10.48%, up from 10.22% in the prior-year quarter.

Our Viewpoint

Bank OZK’s steadily improving loan balances along with its growth initiatives are expected to support revenues. However, owing to near-zero interest rates, the company’s margins are expected to remain under pressure in the near term. Also, elevated expenses (as witnessed in the third quarter as well) will likely hurt profits.

Bank OZK Price, Consensus and EPS Surprise

 

Bank OZK Price, Consensus and EPS Surprise

Bank OZK price-consensus-eps-surprise-chart | Bank OZK Quote

Bank OZK 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

Bank of New York Mellon Corporation’s (BK - Free Report) third-quarter 2020 earnings per share of 98 cents surpassed the Zacks Consensus Estimate of 96 cents. The reported figure, however, was 8.4% lower than the prior-year quarter’s level.

First Republic Bank delivered an earnings surprise of 16.7% in the third quarter on solid top-line strength. Earnings per share of $1.61 outpaced the Zacks Consensus Estimate of $1.38. Additionally, the bottom line climbed 22.9% from the year-ago quarter.

Regions Financial (RF - Free Report) reported third-quarter 2020 adjusted earnings of 49 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Also, results compared favorably with the prior-year period earnings of 39 cents.

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