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Why Is Bank OZK (OZK) Up 3.5% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Bank OZK (OZK). Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Bank OZK due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Bank OZK Q1 Earnings Beat on Higher Revenues, Costs Up

Bank OZK’s first-quarter 2019 earnings per share of 86 cents surpassed the Zacks Consensus Estimate by a penny. However, the bottom line was 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.


Bank OZK expects non-purchased loans and leases to grow in the low to mid-teens in 2019, while varying quarter to quarter. Management expects purchased loan runoff to continue, and be a headwind to overall earning asset growth in 2019.

RESG loan repayments are expected to remain high in 2019 and exceed 2018 level, due to high levels of property sales, leasing and refinancing activity. Further, RESG loan originations for 2019 will likely equal or exceed the $4.74 billion achieved in 2018.

The company anticipates the increase in COIBD for 2019 will be less than 67 bps recorded in 2018. Also, rise in COIBD in the remaining quarters of 2019 will be significantly less than the 19 bps increase in the first quarter of 2019.

The company expects its core spread to decrease in some quarters in 2019. Also, it expects factors such as the Fed’s decision to hike rates and movement in LIBOR rates to affect spread.

Non-interest income for the remaining quarters of 2019 is expected to be in the range that the company has reported over the last several quarters.

The company expects the effective tax rate to be 24-26% in 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Bank OZK has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bank OZK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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