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Analyst Blog

Bank of the Ozarks, Inc.’s (OZRK - Free Report) third-quarter 2016 earnings of 66 cents per share surpassed the Zacks Consensus Estimate of 59 cents. Further, the figure improved by nearly 27% on a year-over-year basis.

Better-than-expected results were driven by a rise in both net interest income and non-interest income during the quarter. Further, growth in total loans and deposits acted as tailwinds. However, rising provision for credit losses and non-interest expenses, along with a fall in the broader market sentiments led to a 3.5% decline in the shares of the company.

Net income came in at $76.0 million, up 64.9% year over year.

 

Revenues & Expenses Increase

Net revenue rose 72.4% year over year to $204.4 million. Moreover, the figure surpassed the Zacks Consensus Estimate of $202.0 million.

Net interest income grew 81.7% year over year to $175.2 million. However, net interest margin, on a fully taxable equivalent basis, declined 17 basis points (bps) to 4.90%.

Non-interest income totaled $29.2 million, up 32.0% year over year. The growth was driven by a rise in all the components except other income from purchased loans and gain on sale of other assets.

Non-interest expense summed to $78.8 million, reflecting a rise of 73.4% year over year. The increase was triggered by a rise in all the expense components.

Bank of the Ozarks’ efficiency ratio came in at 38.07%, compared with 37.58% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.

Strong Balance Sheet

As of Sep 30, 2016, Bank of the Ozarks had total assets of $18.5 billion, while shareholders equity summed up to $2.8 billion. Further, as of the same date, total loans and leases (including purchased loans) jumped 91.1% to $14.2 billion, while total deposits surged 98.8% to $15.1 billion.

Credit Quality: A Mixed Bag

Annualized net charge-off ratio for all loans and leases declined 1 bps to 0.07%.

The ratio of non-performing loans and leases, as a percentage of total loans and leases, fell 18 bps to 0.08% as of Sep 30, 2016.

Conversely, provision for loan and lease losses jumped 97.9% year over year to $7.1 million.

Profitability Ratios Deteriorate

As of Sep 30, 2016, return on average assets stood at 1.80%, down 25 bps year over year. Additionally, return on average common equity decreased 2.28% to 12.18%.

Our Viewpoint

Bank of the Ozarks’ consistent revenue growth, expansion plans, superior asset quality and improvement in loan and deposits assure a steady growth in the future.

However, the company’s increasing exposure to real estate loans, margin compression and elevated expense levels remain matters of concern.

BANK OZARKS Price, Consensus and EPS Surprise

BANK OZARKS Price, Consensus and EPS Surprise | BANK OZARKS Quote

Bank of the Ozarks currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other South-east banks, First Horizon National Corporation (FHN - Free Report) , Trustmark Corporation (TRMK - Free Report) and State Bank Financial Corporation (STBZ - Free Report) are scheduled to announce results on Oct 14, Oct 25 and Oct 27, respectively.

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