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Bank OZK (OZK) Q2 Earnings & Revenues Lag Estimates, Costs Up
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Bank OZK’s (OZK - Free Report) second-quarter 2019 earnings per share of 86 cents lagged the Zacks Consensus Estimate by a penny. The bottom line was lower than the prior-year figure of 89 cents.
Results were adversely impacted by lower non-interest income, rise in operating expenses and decline in deposit balances. However, stable net interest income, a modest rise in loans and fall in credit costs were tailwinds.
Net income available to common shareholders was $110.5 million, down 3.7% from the year-ago quarter.
Revenues Down, Costs Rise
Net revenues were $251.1 million, down marginally year over year. Also, the figure missed the Zacks Consensus Estimate of $253.5 million.
Net interest income was relatively stable on a year-over-year basis at $224.5 million. Net interest margin, on a fully-taxable equivalent basis, declined 21 basis points (bps) to 4.45%.
Non-interest income totaled $26.6 million, down 2.9% from the year-ago quarter. The fall was due to decline in all components except service charges on deposit accounts, trust income and other income. The quarter also included net gains on investment securities.
Non-interest expenses were $99.1 million, up 11.2% year over year. The rise resulted from higher salaries and employee benefits costs, net occupancy and equipment costs, and other operating expenses.
Bank OZK’s efficiency ratio was 39.30%, up from 35.19% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
As of Jun 30, 2019, total loans were $17.49 billion, up slightly on a sequential basis. As of the same date, total deposits amounted to $18.19 billion, down 1.6% from the prior quarter.
Credit Quality: A Mixed Bag
The ratio of non-performing loans, as a percentage of total loans, increased 5 bps year over year to 0.15% as of Jun 30, 2019. Further, annualized net charge off ratio to average total loans rose 7 bps to 0.14%.
However, provision for loan and lease losses declined 29.6% from the year-earlier quarter to $6.8 million.
Profitability Ratios Deteriorate
At the end of the second quarter, return on average assets was 1.95%, down from 2.10% in the year-earlier quarter. Moreover, return on average common equity declined to 11.29% from 12.90%.
Our Viewpoint
Bank OZK is well poised for organic growth on the back of continued improvement in loan demand. However, persistently rising expenses and declining net interest margin remain major near-term concerns.
Washington Federal’s (WAFD - Free Report) third-quarter fiscal 2019 (ended Jun 30) earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure also reflects year-over-year growth of 10%.
Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2019 operating earnings per share of $1.01 came in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.
Commerce Bancshares, Inc.’s (CBSH - Free Report) second-quarter 2019 earnings per share of 96 cents surpassed the Zacks Consensus Estimate of 94 cents. Moreover, the figure was in line with prior-year quarter’s earnings.
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Bank OZK (OZK) Q2 Earnings & Revenues Lag Estimates, Costs Up
Bank OZK’s (OZK - Free Report) second-quarter 2019 earnings per share of 86 cents lagged the Zacks Consensus Estimate by a penny. The bottom line was lower than the prior-year figure of 89 cents.
Results were adversely impacted by lower non-interest income, rise in operating expenses and decline in deposit balances. However, stable net interest income, a modest rise in loans and fall in credit costs were tailwinds.
Net income available to common shareholders was $110.5 million, down 3.7% from the year-ago quarter.
Revenues Down, Costs Rise
Net revenues were $251.1 million, down marginally year over year. Also, the figure missed the Zacks Consensus Estimate of $253.5 million.
Net interest income was relatively stable on a year-over-year basis at $224.5 million. Net interest margin, on a fully-taxable equivalent basis, declined 21 basis points (bps) to 4.45%.
Non-interest income totaled $26.6 million, down 2.9% from the year-ago quarter. The fall was due to decline in all components except service charges on deposit accounts, trust income and other income. The quarter also included net gains on investment securities.
Non-interest expenses were $99.1 million, up 11.2% year over year. The rise resulted from higher salaries and employee benefits costs, net occupancy and equipment costs, and other operating expenses.
Bank OZK’s efficiency ratio was 39.30%, up from 35.19% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
As of Jun 30, 2019, total loans were $17.49 billion, up slightly on a sequential basis. As of the same date, total deposits amounted to $18.19 billion, down 1.6% from the prior quarter.
Credit Quality: A Mixed Bag
The ratio of non-performing loans, as a percentage of total loans, increased 5 bps year over year to 0.15% as of Jun 30, 2019. Further, annualized net charge off ratio to average total loans rose 7 bps to 0.14%.
However, provision for loan and lease losses declined 29.6% from the year-earlier quarter to $6.8 million.
Profitability Ratios Deteriorate
At the end of the second quarter, return on average assets was 1.95%, down from 2.10% in the year-earlier quarter. Moreover, return on average common equity declined to 11.29% from 12.90%.
Our Viewpoint
Bank OZK is well poised for organic growth on the back of continued improvement in loan demand. 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-eps-surprise-chart | Bank OZK Quote
Bank OZK currently has a Zacks Rank #4 (Sell).
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) third-quarter fiscal 2019 (ended Jun 30) earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure also reflects year-over-year growth of 10%.
Hancock Whitney Corporation’s (HWC - Free Report) second-quarter 2019 operating earnings per share of $1.01 came in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.
Commerce Bancshares, Inc.’s (CBSH - Free Report) second-quarter 2019 earnings per share of 96 cents surpassed the Zacks Consensus Estimate of 94 cents. Moreover, the figure was in line with prior-year quarter’s earnings.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>