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Bank OZK (OZK) Q1 Earnings Beat on Higher Revenues, Costs Up

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Bank OZK’s (OZK - Free Report) first-quarter 2019 earnings per share of 86 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line was, however, lower than the prior-year figure of 88 cents.

Results primarily benefited from increase in net interest income and higher loan and deposit balances. However, decline in non-interest income, higher expenses and rise in provisions were the undermining factors.

Net income available to common shareholders was $110.7 million, down 2.2% from the year-ago quarter.

Revenues & Costs Rise

Net revenues were $250 million, up 1.6% year over year. However, the figure missed the Zacks Consensus Estimate of $251.9 million.  

Net interest income grew 3.7% year over year to $225.9 million. However, net interest margin, on a fully-taxable equivalent basis, declined 16 basis points (bps) to 4.53%.

Non-interest income totaled $24.1 million, down 16.1% from the year-ago quarter. The fall was due to decline in all components except service charges on deposit accounts and loan service, maintenance and other fees.

Non-interest expenses were $96.7 million, up 3.1% year over year. The rise mainly resulted from higher net occupancy and equipment costs, and other operating expenses.

Bank OZK’s efficiency ratio was 38.49% up from 37.88% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.

Rise in Loans & Deposits

As of Mar 31, 2019, total loans were $17.48 billion, up 2.1% sequentially. As of the same date, total deposits grew 3% from the prior-quarter end to $18.48 billion.

Further, the company had total assets of $23 billion, up 2.8% from the last quarter. Shareholders’ equity was $3.88 billion, increasing 3% sequentially.

Credit Quality Worsens

The ratio of non-performing loans, as a percentage of total loans, increased 13 bps year over year to 0.22% as of Mar 31, 2019. Further, annualized net charge off ratio to average total loans rose 3 bps to 0.07%.

In addition, provision for loan and lease losses jumped 20% from the year-earlier quarter to $6.7 million.

Profitability Ratios Deteriorate

At the end of the first quarter, return on average assets was 1.99%, down from 2.16% in the year-earlier quarter. Moreover, return on average common equity declined to 11.77% from 13.17% a year ago.    

Our Viewpoint

Bank OZK is well poised for organic growth on the back of continued improvement in loans and deposit balances. However, persistently rising expenses and declining net interest margin remain major near-term concerns.

Bank OZK Price, Consensus and EPS Surprise

 

Bank OZK Price, Consensus and EPS Surprise | Bank OZK Quote

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

Performance of Other Banks

Washington Federal’s (WAFD - Free Report) second-quarter fiscal 2019 (ended Mar 31) earnings came in at 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. The figure also reflects year-over-year growth of 10.5%.

Commerce Bancshares, Inc.’s (CBSH - Free Report) first-quarter 2019 earnings per share of 85 cents lagged the Zacks Consensus Estimate of 91 cents. Moreover, the figure compares unfavorably with the prior-year quarter’s earnings of 88 cents.

Hancock Whitney Corporation’s (HWC - Free Report) first-quarter 2019 operating earnings of $1.00 per share surpassed the Zacks Consensus Estimate of 98 cents. Further, the bottom line was 11.1% higher than the year-ago figure.

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