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Bank OZK (OZK) Q4 Earnings Beat Estimates as Revenues Rise

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Bank OZK’s (OZK - Free Report) fourth-quarter 2020 earnings per share of 93 cents surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line jumped 19.2% on year-over-year basis.

Results were aided by an improvement in net interest income and lower expenses. However, decline in non-interest income and higher provision for credit losses acted as headwinds.

Net income available to common shareholders was $120.5 million, up 19.5% from the year-ago quarter.

In 2020, earnings of $2.26 per share beat the consensus estimate of $2.12 but fell 31.5% from the prior year. Net income available to common shareholders declined 31.5% to $291.9 million.

Revenues Improve, Expenses Fall

Net revenues in the reported quarter were $266.3 million, up 8.5% year over year. Also, the top line outpaced the Zacks Consensus Estimate of $250 million.

In 2020, net revenues rose marginally to $993.2 million. Also, it beat the consensus estimate of $977.6 million.

Net interest income was $237.6 million, up 10.5% year over year. Net interest margin, on a fully-taxable equivalent basis, declined 27 basis points (bps) to 3.88%.

Non-interest income was $28.7 million, down 5.7%. The fall was primarily due to decrease in all fee income components except gain on sale of other assets.

Non-interest expenses were $103.4 million, down 1%. The decline was largely due to lower other operating expenses.

Bank OZK’s efficiency ratio was 38.61%, down from 42.37% in the prior-year quarter. A fall in efficiency ratio indicates improvement in profitability.

As of Dec 31, 2020, total loans were $19.2 billion, up from $17.5 billion recorded as of Dec 31, 2019. As of the same date, total deposits amounted to $21.5 billion, up from $18.5 billion.

Credit Quality Worsens

The ratio of non-performing loans, as a percentage of total loans, rose 10 bps year over year to 0.25% as of Dec 31, 2020. Moreover, provision for credit losses increased 36.7% to $6.8 million.

Annualized net charge off ratio to average total loans increased 2 bps 0.14%.

Profitability Ratios Improve

At the end of the fourth quarter, return on average assets was 1.79%, up from 1.74% in the year-earlier quarter. Return on average common equity was 11.36%, up from 9.73%.

Our Take

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.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Performance of Other Banks

Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.

Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2020 net earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.01. Moreover, the reported figure represents a rise of 71.1% from the year-ago quarter’s number.

Washington Federal’s (WAFD - Free Report) first-quarter fiscal 2021 (ended Dec 31) earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 42 cents. However, the figure reflects a year-over-year decline of 40.7%.

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