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Bank of the Ozarks (OZRK) Up 1.2% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Bank of the Ozarks, Inc. . Shares have added about 1.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is OZRK due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Bank of the Ozarks’ Q1 Earnings Beat Estimates, Costs Up

Bank of the Ozarks’ earnings per share of 88 cents for first-quarter 2018 surpassed the Zacks Consensus Estimate of 85 cents. The figure also represents an improvement of 20.5% on a year-over-year basis.

Results primarily benefited from an improvement in net interest income. Also, loans and deposit balances improved, which supported results to some extent. However, higher expenses, lower non-interest income and higher provisions were the undermining factors.

Net income available to common shareholders for the quarter was $113.1 million, up from $89.2 million recorded in the prior-year quarter.

Revenues Improve, Costs Rise

Net revenues were $246.5 million, up 12.1% year over year. Also, the figure marginally surpassed the Zacks Consensus Estimate of $246.1 million.

Net interest income jumped 14.2% year over year to $217.8 million. Nonetheless, net interest margin, on a fully-taxable equivalent basis, decreased 19 basis points (bps) to 4.69%.

Non-interest income totaled $28.7 million, down 1.2% from the year-ago quarter. The fall reflected lower service charge on deposit accounts, mortgage lending income, net other income from purchased loans, gains on sales of other assets and other income.

Non-interest expenses were $93.8 million, up 19.9% year over year. The increase was due to rise in all expense components.

Bank of the Ozarks’ efficiency ratio was 37.88% compared with 35.03% in the prior-year quarter. Rise in efficiency ratio indicates lower profitability.

Strong Balance Sheet

As of Mar 31, 2018, net loans were $16.51 billion, up 3.5% sequentially while total deposits increased 3.7% from the prior quarter-end to $17.83 billion.

Further, as of the same date, the company had total assets of $22.04 billion while shareholders’ equity was $3.53 billion.

Credit Quality: Mixed Bag

The ratio of non-performing loans, as a percentage of total loans, decreased 2 bps year over year to 0.09% as of Mar 31, 2018. Further, annualized net charge-off ratio to average total loans decreased 5 bps year over year to 0.04%.

However, provision for loan and lease losses increased 12.9% from the prior-year quarter to $5.6 million.

Profitability Ratios Improve

At the end of the reported quarter, return on average assets was 2.16%, up from 1.93% in the year-ago quarter. Also, return on average common equity increased from 12.80% to 13.17%.


Bank of the Ozarks expects non-purchased loans and leases to grow at a strong pace in 2018, higher than 2017’s growth. Likewise, growth in 2019 is likely to exceed that of 2018’s.

On the cost front, the company anticipates total non-interest expenses in the remaining quarters of 2018 to be lower than the first-quarter level.

Notably, given that the company plans on changing its name, a one-time pre-tax cost of nearly $15-$25 million is expected to be incurred in third-quarter 2018 for marketing, rebranding and other related expenses.

Management expects its efficiency ratio to keep improving in 2018 and that by the end of the year, the ratio will be similar to the 2017 level.

The company expects effective tax rate to range between 25-27% in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.

Bank of the Ozarks, Inc. Price and Consensus


VGM Scores

At this time, OZRK has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth and momentum investors.


Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, OZRK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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