Bank of the Ozarks, Inc.’s OZRK fourth-quarter 2016 earnings of 72 cents per share surpassed the Zacks Consensus Estimate of 69 cents. Further, the figure improved nearly 26.3% on a year-over-year basis.
Better-than-expected results were driven by an increase in both net interest income and non-interest income during the quarter. Further, growth in total loans and deposits acted as tailwinds. However, concerns over rising provision for loan and lease losses and higher non-interest expenses probably led to a 2.5% decline in the shares of the company following the announcement.
Net income for the quarter came in at $87.8 million, up 70.5% year over year.
The company reported full-year earnings per share of $2.58, up 23.4% from the prior-year. Also, the figure surpassed the Zacks Consensus Estimate of $2.52. Further, net income for 2016 was $270 million, up 48.1% year over year.
Revenues & Expenses Increase
Net revenue for the quarter rose 64.4% year over year to $225.4 million. Moreover, the figure surpassed the Zacks Consensus Estimate of $216.6 million.
For 2016, net revenue was $703.9 million, up 44.5% year over year. Moreover, the figure surpassed the Zacks Consensus Estimate of $698.0 million.
Net interest income for the quarter grew 82.9% year over year to $194.8 million. Also, net interest margin, on a fully taxable equivalent basis, increased 4 basis points (bps) to 5.02%.
Non-interest income totaled $30.6 million, up marginally year over year. The rise was driven by an increase in all the components except net gains on investment securities and gain on sale of other assets.
Non-interest expense summed to $78.4 million, reflecting a rise of 51.7% year over year. The increase was triggered by a rise in all the expense components.
Bank of the Ozarks’ efficiency ratio came in at 34.27%, compared with 37.12% in the prior-year quarter. A fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Dec 31, 2016, the company had total assets of $18.9 billion, while shareholders equity summed up to $2.8 billion. Further, as of the same date, total loans and leases (including purchased loans) jumped 74.7% year over year to $14.6 billion, while total deposits surged 95.4% to $15.6 billion.
Credit Quality: A Mixed Bag
Annualized net charge-off ratio for all loans and leases declined 8 bps to 0.09%.
The ratio of non-performing loans and leases, as a percentage of total loans and leases, fell 5 bps to 0.15% as of Dec 31, 2016.
Conversely, provision for loan and lease losses jumped 89.1% year over year to $9.9 million.
Profitability Ratios Deteriorate
As of Dec 31, 2016, return on average assets was 1.92%, down 20 bps year over year. Additionally, return on average common equity decreased from 15.02% to 12.62%.
Bank of the Ozarks’ consistent revenue growth, expansion plans, superior asset quality and improvement in loan and deposit balances assure a steady growth in the future. Moreover, its capital deployment activity remains impressive.
However, the company’s increasing exposure to real estate loans and elevated expense levels remain matters of concern.
Bank of the Ozarks Price, Consensus and EPS Surprise
Bank of the Ozarks Price, Consensus and EPS Surprise | Bank of the Ozarks Quote
Bank of the Ozarks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Among other Southeast banking stocks, First Horizon National Corporation FHN posted earnings per share of 23 cents for fourth-quarter 2016, lagging the Zacks Consensus Estimate of 25 cents. Lower-than-expected results were primarily because of a fall in non-interest income. The company also experienced poor capital ratios.
Regions Financial Corporation RF is slated to report results on Jan 20, while BancorpSouth, Inc. BXS is scheduled to report earnings on Jan 25.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Regions Financial Corp. (RF): Free Stock Analysis Report
First Horizon National Corp. (FHN): Free Stock Analysis Report
BancorpSouth Inc. (BXS): Free Stock Analysis Report
Bank of the Ozarks Inc. (OZRK): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research