Back to top

Image: Bigstock

Bank OZK's (OZK) Shares Rally Despite Q1 Earnings Miss

Read MoreHide Full Article

Bank OZK’s (OZK - Free Report) first-quarter 2023 earnings per share of $1.41 missed the Zacks Consensus Estimate of $1.43. The bottom line, however, reflects a rise of 38.2% from the year-earlier quarter. We had projected earnings of $1.39 per share.

Results were adversely impacted by lower non-interest income, higher expenses and a rise in provision for credit losses on worsening economic outlook. Yet, there was an improvement in net interest income, driven by higher loan balances and rising rates. Also, the company witnessed a rise in deposit balance during the quarter. The investors turned bullish on the stock, as the share price rose 1.21% in after-hours trading, following the release of the quarterly results.

Net income available to common shareholders was $165.9 million, up 29.5% from the year-ago quarter. Our estimate for the metric was $163.7 million.

Revenues Improve, Expenses Rise

Net revenues were $372.7 million, growing 32.7% year over year. The top line also beat the Zacks Consensus Estimate of $364.1 million. Our estimate for the metric was $357.9 million.

Net interest income was $344.9 million, jumping 38.3%. Net interest margin, on a fully-taxable-equivalent basis, expanded 130 basis points (bps) to 5.54%. Our estimates for NII and NIM were $335.7 million and 5.61%, respectively.

Non-interest income was $27.8 million, which declined 11.6%. The decline was primarily due to gains in sales of other assets and the absence of death benefits. We had projected a non-interest income of $22.3 million.

Non-interest expenses were $126.2 million, up 17.2%. The rise was due to an increase in all cost components. We had expected this metric to be $122.2 million.

Bank OZK’s efficiency ratio was 33.63%, down from 38.22% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.

As of Mar 31, 2023, total loans were $22.1 billion, up 6.2% sequentially. As of the same date, total deposits amounted to $22.3 billion, up from $21.5 billion as of Dec 31, 2022.

Credit Quality: A Mixed Bag

The ratio of non-performing loans, as a percentage of total loans, contracted 6 bps year over year to 0.15% as of Mar 31, 2023.

Net charge-offs to average total loans were 0.14% against net recoveries of 0.01%. In the reported quarter, the company recorded a provision for credit losses of $35.8 million, up substantially from $4.2 million in the year-ago quarter. We had projected provisions of $19.5 million.

Profitability Ratios Improve

At the end of the first quarter, the return on average assets was 2.41%, up from 1.97% in the year-earlier quarter. Return on average common equity was 15.24%, up from 11.67%.

Share Repurchase Update

In the reported quarter, Bank OZK repurchased 2.35 million shares for $85.34 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.

Bank OZK Price, Consensus and EPS Surprise

Bank OZK Price, Consensus and EPS Surprise

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

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks # Rank (Strong Buy) stocks here.

Performance of Other Banks

Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2023 earnings of $1.45 per share met the Zacks Consensus Estimate. The bottom line rose 3.6% from the prior-year quarter. Our estimate for earnings was $1.38 per share.

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 provisions were concerning.

Commerce Bancshares Inc.’s (CBSH - Free Report) first-quarter 2023 earnings per share of 95 cents surpassed the Zacks Consensus Estimate of 92 cents. The bottom line increased 3.3% 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.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Commerce Bancshares, Inc. (CBSH) - free report >>

Hancock Whitney Corporation (HWC) - free report >>

Bank OZK (OZK) - free report >>

Published in