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Bank OZK (OZK) Q1 Earnings Lag Estimates, Revenues Decline Y/Y
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Bank OZK’s (OZK - Free Report) first-quarter 2020 earnings per share of 9 cents missed the Zacks Consensus Estimate of 58 cents. Further, the bottom line reflects a decline of 89.5% from the prior-year quarter’s earnings per share of 86 cents.
Significant increase in provision for loan losses and an uptick in expenses impacted the company’s performance. Nonetheless, improvement in non-interest income aided results. Moreover, total deposits and loans increased in the reported quarter, which was a positive.
Net income available to common shareholders was $11.9 million as compared with $110.7 million in the year-ago quarter.
Revenues Decline, Expenses Rise
Net revenues for the quarter were $237.5 million, down 5% year over year. Nonetheless, the figure surpassed the Zacks Consensus Estimate of $233.7 million.
Quarterly net interest income was $209.8 million, down 7.1% on a year-over-year basis. Net interest margin, on a fully-taxable equivalent basis, declined 57 basis points (bps) to 3.96%.
Non-interest income totaled $27.7 million, up 15% from the year-ago quarter. The rise was due to an increase in almost all components, except for other income from purchased loans, loan service, maintenance and other fees as well as lower gains on sales of other assets.
Non-interest expenses were $103.4 million, up 7% year over year. The rise resulted from higher salaries and employee benefits costsas well as net occupancy and equipment costs.
Bank OZK’s efficiency ratio was 43.35%, up from 38.49% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
As of Mar 31, 2020, total loans were $18.23 billion, up 4% on a sequential basis. As of the same date, total deposits amounted to $18.81 billion, up from $18.47 billion recorded in the prior quarter.
Credit Quality
The ratio of non-performing loans, as a percentage of total loans, decreased 7 bps year over year to 0.16% as of Mar 31, 2020. Moreover, provision for loan losses increased from $6.7 million in the year-earlier quarter to $117.7 million.
However, annualized net charge off ratio to average total loans increased from 0.07% to 0.10% on a year-over-year basis.
Profitability Ratios
At the end of the first quarter, return on average assets was 0.20%, up from 1.99% in the year-earlier quarter. Nonetheless, return on average common equity declined to 1.16% from 11.77%.
Our Viewpoint
Bank OZK is well-poised for organic growth on continued improvement in loan demand. However, pressure on margins and increasing expenses are expected to hurt the company’s bottom-line growth. Furthermore, rising provision for loan losses in response to the coronavirus outbreak is concerning.
M&T Bank Corporation (MTB - Free Report) pulled off first-quarter 2020 positive earnings surprise of 26% on higher mortgage banking revenues. Net operating earnings per share of $1.95 surpassed the Zacks Consensus Estimate of $1.55. However, the bottom line compared unfavorably with $3.35 per share reported in the year-ago quarter.
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
Regions Financial Corporation (RF - Free Report) reported first-quarter 2020 adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5% year over year.
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Bank OZK (OZK) Q1 Earnings Lag Estimates, Revenues Decline Y/Y
Bank OZK’s (OZK - Free Report) first-quarter 2020 earnings per share of 9 cents missed the Zacks Consensus Estimate of 58 cents. Further, the bottom line reflects a decline of 89.5% from the prior-year quarter’s earnings per share of 86 cents.
Significant increase in provision for loan losses and an uptick in expenses impacted the company’s performance. Nonetheless, improvement in non-interest income aided results. Moreover, total deposits and loans increased in the reported quarter, which was a positive.
Net income available to common shareholders was $11.9 million as compared with $110.7 million in the year-ago quarter.
Revenues Decline, Expenses Rise
Net revenues for the quarter were $237.5 million, down 5% year over year. Nonetheless, the figure surpassed the Zacks Consensus Estimate of $233.7 million.
Quarterly net interest income was $209.8 million, down 7.1% on a year-over-year basis. Net interest margin, on a fully-taxable equivalent basis, declined 57 basis points (bps) to 3.96%.
Non-interest income totaled $27.7 million, up 15% from the year-ago quarter. The rise was due to an increase in almost all components, except for other income from purchased loans, loan service, maintenance and other fees as well as lower gains on sales of other assets.
Non-interest expenses were $103.4 million, up 7% year over year. The rise resulted from higher salaries and employee benefits costsas well as net occupancy and equipment costs.
Bank OZK’s efficiency ratio was 43.35%, up from 38.49% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
As of Mar 31, 2020, total loans were $18.23 billion, up 4% on a sequential basis. As of the same date, total deposits amounted to $18.81 billion, up from $18.47 billion recorded in the prior quarter.
Credit Quality
The ratio of non-performing loans, as a percentage of total loans, decreased 7 bps year over year to 0.16% as of Mar 31, 2020. Moreover, provision for loan losses increased from $6.7 million in the year-earlier quarter to $117.7 million.
However, annualized net charge off ratio to average total loans increased from 0.07% to 0.10% on a year-over-year basis.
Profitability Ratios
At the end of the first quarter, return on average assets was 0.20%, up from 1.99% in the year-earlier quarter. Nonetheless, return on average common equity declined to 1.16% from 11.77%.
Our Viewpoint
Bank OZK is well-poised for organic growth on continued improvement in loan demand. However, pressure on margins and increasing expenses are expected to hurt the company’s bottom-line growth. Furthermore, rising provision for loan losses in response to the coronavirus outbreak is concerning.
Bank OZK Price, Consensus and EPS Surprise
Bank OZK price-consensus-eps-surprise-chart | Bank OZK Quote
Bank OZK currently carries 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
M&T Bank Corporation (MTB - Free Report) pulled off first-quarter 2020 positive earnings surprise of 26% on higher mortgage banking revenues. Net operating earnings per share of $1.95 surpassed the Zacks Consensus Estimate of $1.55. However, the bottom line compared unfavorably with $3.35 per share reported in the year-ago quarter.
Truist Financial’s (TFC - Free Report) first-quarter 2020 adjusted earnings of 87 cents per share surpassed the Zacks Consensus Estimate of 54 cents. However, the bottom line declined 22.3% from the prior quarter.
Regions Financial Corporation (RF - Free Report) reported first-quarter 2020 adjusted earnings of 15 cents per share, missing the Zacks Consensus Estimate of 19 cents. The figure plummeted 59.5% year over year.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>