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Bank of the Ozarks (OZRK) Q3 Earnings Beat, Stock Down
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Bank of the Ozarks, Inc.’s 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.
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.
Among other South-east banks, First Horizon National Corporation (FHN - Free Report) , Trustmark Corporation (TRMK - Free Report) and State Bank Financial Corporation are scheduled to announce results on Oct 14, Oct 25 and Oct 27, respectively.
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Bank of the Ozarks (OZRK) Q3 Earnings Beat, Stock Down
Bank of the Ozarks, Inc.’s 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 are scheduled to announce results on Oct 14, Oct 25 and Oct 27, respectively.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>