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Bank OZK (OZK) Q4 Earnings Beat on Higher NII and Fee Income
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Bank OZK’s (OZK - Free Report) fourth-quarter 2023 earnings per share of $1.50 surpassed the Zacks Consensus Estimate of $1.46. The bottom line reflects a rise of 11.9% from the year-earlier quarter. This included the FDIC special assessment charge incurred during the reported quarter.
Results were positively impacted by an increase in net interest income (NII), driven by higher rates and solid improvement in loans and deposit balance. Also, the company’s non-interest income grew in the quarter. However, rising expenses and an increase in provision for credit losses were the undermining factors.
Net income available to common shareholders was $171.1 million, up 7.7% from the year-ago quarter. Our estimate for the metric was $154.5 million.
In 2023, earnings of $5.87 per share beat the consensus estimate of $5.83 and jumped 29.3% year over year. Net income available to common shareholders was $674.6 million, up 23.2%.
Revenues Improve, Expenses Rise
Quarterly net revenues were $407.6 million, up 16.4% year over year. The top line handily beat the Zacks Consensus Estimate of $392.72 million.
For 2023, net revenues surged 24.3% to $1.56 billion. The top line also outpaced the consensus estimate of $1.55 billion.
NII was $370.5 million, up 11.4%. Our estimate for the metric was $370.6 million.
Net interest margin (NIM), on a fully-taxable-equivalent basis, declined 64 basis points (bps) to 4.82%. Our estimate for NIM was 5.12%. However, substantially higher-than-expected deposit costs led the company to post lower numbers.
Non-interest income was $37 million, which rose 34.4%. The increase was primarily driven by BOLI income, gains on sales of other assets and loan service, maintenance and other fees.
Non-interest expenses were $145 million, up 21.8%. This included an FDIC special assessment charge of $9.9 million. Excluding this, non-interest expenses jumped 13.6% year over year. We had expected this metric to be $143.8 million.
Bank OZK’s efficiency ratio was 35.33%, up from 32.84% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, total loans were $26.5 billion, up 4.5% sequentially. As of the same date, total deposits amounted to $27.4 billion, up 7.2%.
Credit Quality Worsens
Net charge-offs to average total loans were 0.06%, stable year over year.
In the reported quarter, the company recorded a provision for credit losses of $43.8 million, up 34.8% from the year-ago quarter. We had projected a provision of $40.6 million.
The ratio of non-performing loans, as a percentage of total loans, increased 1 bps year over year to 0.23% as of Dec 31, 2023.
Profitability Ratios Worsens
At the end of the fourth quarter, the return on average assets was 2.04%, down from 2.35% in the year-earlier quarter. Return on average common equity was 14.58%, down from 14.76%.
Share Repurchase Update
In the reported quarter, Bank OZK did not repurchase any shares.
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.
Hancock Whitney Corp.’s (HWC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.08. Adjusted earnings per share, however, compared unfavorably with $1.65 registered in the year-ago quarter.
HWC’s results were impacted by a decline in both NII and non-interest income. Further, a slight decrease in loan balances and an increase in expenses and provisions acted as spoilsports.
Synovus Financial Corp.’s (SNV - Free Report) fourth-quarter adjusted earnings per share of 80 cents lagged the Zacks Consensus Estimate of 94 cents. Also, adjusted earnings compared unfavorably with $1.35 earned in the year-ago quarter.
Results were adversely impacted by a decline in both NII and non-interest revenues. A slight reduction in loan balances and increased expenses and provisions were other undermining factors. However, a modest increase in deposits provided some support to SNV’s quarterly performance.
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Bank OZK (OZK) Q4 Earnings Beat on Higher NII and Fee Income
Bank OZK’s (OZK - Free Report) fourth-quarter 2023 earnings per share of $1.50 surpassed the Zacks Consensus Estimate of $1.46. The bottom line reflects a rise of 11.9% from the year-earlier quarter. This included the FDIC special assessment charge incurred during the reported quarter.
Results were positively impacted by an increase in net interest income (NII), driven by higher rates and solid improvement in loans and deposit balance. Also, the company’s non-interest income grew in the quarter. However, rising expenses and an increase in provision for credit losses were the undermining factors.
Net income available to common shareholders was $171.1 million, up 7.7% from the year-ago quarter. Our estimate for the metric was $154.5 million.
In 2023, earnings of $5.87 per share beat the consensus estimate of $5.83 and jumped 29.3% year over year. Net income available to common shareholders was $674.6 million, up 23.2%.
Revenues Improve, Expenses Rise
Quarterly net revenues were $407.6 million, up 16.4% year over year. The top line handily beat the Zacks Consensus Estimate of $392.72 million.
For 2023, net revenues surged 24.3% to $1.56 billion. The top line also outpaced the consensus estimate of $1.55 billion.
NII was $370.5 million, up 11.4%. Our estimate for the metric was $370.6 million.
Net interest margin (NIM), on a fully-taxable-equivalent basis, declined 64 basis points (bps) to 4.82%. Our estimate for NIM was 5.12%. However, substantially higher-than-expected deposit costs led the company to post lower numbers.
Non-interest income was $37 million, which rose 34.4%. The increase was primarily driven by BOLI income, gains on sales of other assets and loan service, maintenance and other fees.
Non-interest expenses were $145 million, up 21.8%. This included an FDIC special assessment charge of $9.9 million. Excluding this, non-interest expenses jumped 13.6% year over year. We had expected this metric to be $143.8 million.
Bank OZK’s efficiency ratio was 35.33%, up from 32.84% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.
As of Dec 31, 2023, total loans were $26.5 billion, up 4.5% sequentially. As of the same date, total deposits amounted to $27.4 billion, up 7.2%.
Credit Quality Worsens
Net charge-offs to average total loans were 0.06%, stable year over year.
In the reported quarter, the company recorded a provision for credit losses of $43.8 million, up 34.8% from the year-ago quarter. We had projected a provision of $40.6 million.
The ratio of non-performing loans, as a percentage of total loans, increased 1 bps year over year to 0.23% as of Dec 31, 2023.
Profitability Ratios Worsens
At the end of the fourth quarter, the return on average assets was 2.04%, down from 2.35% in the year-earlier quarter. Return on average common equity was 14.58%, down from 14.76%.
Share Repurchase Update
In the reported quarter, Bank OZK did not repurchase any shares.
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-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 #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Hancock Whitney Corp.’s (HWC - Free Report) fourth-quarter 2023 adjusted earnings per share of $1.26 beat the Zacks Consensus Estimate of $1.08. Adjusted earnings per share, however, compared unfavorably with $1.65 registered in the year-ago quarter.
HWC’s results were impacted by a decline in both NII and non-interest income. Further, a slight decrease in loan balances and an increase in expenses and provisions acted as spoilsports.
Synovus Financial Corp.’s (SNV - Free Report) fourth-quarter adjusted earnings per share of 80 cents lagged the Zacks Consensus Estimate of 94 cents. Also, adjusted earnings compared unfavorably with $1.35 earned in the year-ago quarter.
Results were adversely impacted by a decline in both NII and non-interest revenues. A slight reduction in loan balances and increased expenses and provisions were other undermining factors. However, a modest increase in deposits provided some support to SNV’s quarterly performance.