Bank OZK (OZK) Q1 Earnings Beat, NII Up on Higher Loans
Bank OZK’s OZK first-quarter 2022 earnings per share of $1.02 handily surpassed the Zacks Consensus Estimate of 92 cents. The bottom line, however, reflects a fall of 10.5% from the year-earlier quarter’s number.
Results were aided by a rise in net interest income and higher loan balance. However, higher expenses and provision for credit losses were the undermining factors.
Net income available to common shareholders was $128 million, down 13.7% from the year-ago quarter.
Revenues Improve, Expenses Rise
Net revenues were $280.8 million, up 6.5% year over year. The top line also beat the Zacks Consensus Estimate of $275.3 million.
Net interest income was $249.3 million, up 6.3%. Net interest margin, on a fully-taxable-equivalent basis, grew 38 basis points (bps) to 4.24%.
Non-interest income was $31.5 million, down 2%. The fall was mainly due to lower other income.
Non-interest expenses were $107.7 million, up 1.6%. The rise was due to an increase in almost all cost components except for other expenses.
Bank OZK’s efficiency ratio was 38.22%, down from 39.57% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Mar 31, 2022, net loans were $18.73 billion, up 3.5% sequentially. As of the same date, total deposits amounted to $20.33 billion, up marginally.
Credit Quality: Mixed Bag
The ratio of non-performing loans, as a percentage of total loans, contracted 4 bps year over year to 0.21% as of Mar 31, 2022. Net charge-off ratio to average total loans was a recovery of 0.01% against a charge-off of 0.07% in the prior-year quarter.
In the reported quarter, the company recorded a provision for credit losses of $4.2 million against a provision benefit of $31.6 million in the year-ago quarter.
Profitability Ratios Deteriorate
At the end of the first quarter, return on average assets was 1.97%, down from 2.23% in the year-earlier quarter. Return on average common equity was 11.67%, down from 13.97%.
Share Repurchase Update
In the reported quarter, Bank OZK repurchased 2.9 million shares for $131.6 million.
Our Take
Bank OZK’s solid loan balance, along with its business restructuring and branch consolidation initiatives, is expected to continue aiding revenue growth. However, operating expenses are likely to stay elevated due to the bank’s efforts to improve technology and invest in franchise, which will likely hurt profits.
BankUnited, Inc. Price, Consensus and EPS Surprise
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Bank OZK currently carries 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
Commerce Bancshares Inc.’s CBSH first-quarter 2022 earnings of 97 cents per share easily surpassed the Zacks Consensus Estimate of 89 cents. The bottom line, however, declined 8.5% from the prior-year quarter.
Results benefited from an improvement in net interest income, a slight rise in loan balance and provision benefit. However, an increase in non-interest expenses and lower non-interest income were the major headwinds for CBSH.
Hancock Whitney Corporation’s HWC first-quarter 2022 earnings of $1.40 per share handily outpaced the Zacks Consensus Estimate of $1.32. The bottom line improved 15.7% from the prior-year quarter.
Results benefited from a fall in non-interest expenses, a slight rise in loan balance and provision benefit. However, a decline in net interest income, which reflected relatively lower interest rates and reduced non-interest income, were the undermining factors for HWC.
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