Bank of the Ozarks, Inc.’s (OZRK - Analyst 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%.
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 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 - Analyst Report) , Trustmark Corporation (TRMK - Snapshot Report) and State Bank Financial Corporation (STBZ - Snapshot Report) are scheduled to announce results on Oct 14, Oct 25 and Oct 27, respectively.
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