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Bank OZK (OZK) Down 3.2% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Bank OZK (OZK - Free Report) . Shares have lost about 3.23 % in that time frame.

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

Bank OZK’s Q2 Earnings in Line, Costs Rise

Bank OZK’s second-quarter 2018 earnings per share of 89 cents came in line with the Zacks Consensus Estimate of 89 cents. The reported figure represents year-over-year growth of 21.9%.

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

Net income available to common shareholders for the reported quarter was $114.8 million, up 26.75% from the year-ago quarter.

Revenues Improve, Costs Flare Up

Net revenues were $252 million, up 7.7% year over year. However, the top line missed the Zacks Consensus Estimate of $256.2 million.

Net interest income jumped 11.2% year over year to $224.7 million. However, net interest margin, on a fully-taxable equivalent basis, shrunk 33 basis points (bps) to 4.66%.

Non-interest income totaled $27.4 million, down 14% from the year-ago quarter. The fall reflected lower service charge on deposit accounts and the company’s exit from the mortgage-lending operation.

Non-interest expenses were $89.1 million, up 6.3% year over year. The upsurge resulted from rise in all expense components.

Bank OZK’s efficiency ratio was 35.19% compared with 35.32% in the prior-year quarter. A fall in the efficiency ratio indicates higher profitability.

Loans & Deposits Rise

As of Jun 30, 2018, net loans were $16.66 billion, up 0.9% sequentially, while total deposits inched up 0.4% from the prior-quarter end to $17.90 billion.

Furthermore, as of the same date, the company had total assets of $22.22 billion while shareholders’ equity was $3.62 billion.

Credit Quality: Mixed Bag

The ratio of non-performing loans, as a percentage of total loans, contracted 1 basis point, year over year, to 0.10% as of Jun 30, 2018. Additionally, annualized net charge-off ratio to average total loans expanded 2 bps year over year to 0.07%.

However, provision for loan and lease losses increased 57.5% from the year-earlier quarter to $9.6 million.

Profitability Ratios Improve

At the end of the reported quarter, return on average assets was 2.10%, up from 1.90% in the year-ago quarter. Also, return on average common equity rose from 12.05% to 12.90%.


Bank OZK expects non-purchased loans and leases to grow at a strong pace in 2018, higher than growth recorded in 2017. Likewise, growth in 2019 is likely to exceed that of 2018’s. However, the increasingly competitive environment might slow down the growth to some extent.

The company expects its core spread to increase over the second half of 2018, provided that the Fed continues to hike rates and LIBOR rates increase correspondingly.

Notably, one-time pre-tax costs of nearly $15-$25 million are expected to be incurred in third-quarter 2018 for marketing, rebranding and other related expenses, owing to the company’s name change.

Management expects its efficiency ratio (excluding the one-time costs) to keep improving in 2018 and by the end of the year, the ratio will be similar to the 2017 level.

The company expects the effective tax rate to be 25-27% in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to four lower.

Bank OZK Price and Consensus


Bank OZK Price and Consensus | Bank OZK Quote

VGM Scores

At this time, OZK has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than growth investors.


Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, OZK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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