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Bank OZK (OZK) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

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Bank OZK’s (OZK - Free Report) first-quarter 2021 adjusted earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 87 cents. In the year-earlier quarter, the company recorded earnings per share of 9 cents.

Results were aided by an improvement in revenues, partly offset by higher expenses. Moreover, the company recorded provision benefits in the quarter, which was a major positive.

Notably, the reported quarter’s results excluded pretax gains from the sale of South Carolina branches and tax-exempt bank-owned life insurance death benefits. After considering these, net income available to common shareholders was $148.4 million or $1.14 per share, up from $11.9 million or 9 cents per share reported in the year-ago quarter.

Revenues Improve, Expenses Rise

Net revenues were $266.8 million, up 12.3% year over year. Also, the top line outpaced the Zacks Consensus Estimate of $258.4 million.

Net interest income was $234.6 million, up 11.9% year over year. Net interest margin, on a fully-taxable equivalent basis, declined 10 basis points (bps) to 3.86%.

Non-interest income was $32.1 million, up 16% on a year-over-year basis. The rise was driven primarily by an improvement in gains on sales of other assets.

Non-interest expenses were $106.1 million, up 2.5% year over year. The rise was due to an increase in salaries and employee benefit costs, and net occupancy and equipment costs.

Bank OZK’s efficiency ratio was 39.57%, down from 43.35% in the prior-year quarter. A fall in efficiency ratio indicates an improvement in profitability.

As of Mar 31, 2021, net loans were $18.4 billion, down from $18.9 billion recorded as of Dec 31, 2020. As of the same date, total deposits amounted to $21.3 billion, down from $21.5 billion.

Credit Quality: A Mixed Bag

The ratio of non-performing loans, as a percentage of total loans, rose 9 bps year over year to 0.25% as of Mar 31, 2021.

However, in the reported quarter, the company recorded a provision benefit of $31.6 million against provision for credit losses of $117.7 million in the year-ago quarter. Annualized net charge-off ratio to average total loans decreased 3 bps year over year to 0.07%.

Profitability Ratios Improve

At the end of the first quarter, return on average assets was 2.23%, up from 0.20% in the year-earlier quarter. Return on average common equity was 13.97%, up from 1.16%.

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) first-quarter 2021 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 96 cents. Also, the bottom line surged significantly from 42 cents earned in the prior-year quarter.

Zions Bancorporation’s (ZION - Free Report) first-quarter 2021 net earnings per share of $1.90 surpassed the Zacks Consensus Estimate of $1.15. Also, the bottom line marks a significant improvement from 4 cents earned in the year-ago quarter.

Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2021 (ended Mar 31) earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 49 cents. Further, the figure reflects a year-over-year rise of 19.1%.

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