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Bank OZK (OZK) Q2 Earnings Top, Stock Falls as Provisions Rise
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Bank OZK’s (OZK - Free Report) second-quarter 2024 earnings per share of $1.52 surpassed the Zacks Consensus Estimate by a penny. The bottom line reflects a rise of 3.4% from the prior-year quarter.
Results benefited from a rise in net interest income (NII), driven by higher rates and improvement in loans and deposit balances. However, increases in expenses and provision for credit losses, rising funding costs and lower non-interest income were the undermining factors. Given these concerns, shares of OZK tanked 2.2% in after-hours trading.
Net income available to common shareholders was $173.5 million, up 3.3% from the year-ago quarter. Our estimate for the metric was $170.4 million.
Revenues Improve, Expenses Rise
Net revenues were $416.776 million, up 7.2% year over year. The top line handily beat the Zacks Consensus Estimate of $409.6 million.
NII was $388 million, up 8.7% year over year. Our estimate for the metric was $381.7 million.
The net interest margin (NIM), on a fully-taxable-equivalent basis, contracted 64 basis points (bps) year over year to 4.68%. Our estimate for NIM was 4.70%.
Non-interest income was $28.8 million, down 10%. The decrease was mainly due to lower gains on sales of other assets. Our estimate for non-interest income was $23.3 million.
Non-interest expenses were $137.5 million, up 6.3%. The rise was due to an increase in salaries and employee benefits and other operating expenses. We expected this metric to be $134.2 million.
Bank OZK’s efficiency ratio was 32.74%, down from 33.05% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2024, total loans were $28.7 billion, up 2.3% sequentially. As of the same date, total deposits amounted to $29.9 billion, up 1.8%.
Credit Quality Weakens
Net charge-offs to average total loans were 0.18%, jumping 15 bps year over year. Also, provision for credit losses were $49 million, up 17.3%. We projected a provision of $42.4 million.
The ratio of non-performing loans, as a percentage of total loans, increased 13 bps to 0.28% as of Jun 30, 2024.
Profitability Ratios Worsen
At the end of the second quarter, the return on average assets was 1.92%, down from 2.27% in the year-earlier quarter. Return on average common equity was 13.98%, down from 15.14%.
Share Repurchase Update
Bank OZK announced a new share repurchase program, authorizing $200 million. The plan is set to expire on Jul 1, 2025.
Our Take
Bank OZK’s solid loan balance, branch consolidation efforts and higher rates are expected to continue aiding revenues. However, elevated operating expenses and deteriorating asset quality are major near-term concerns.
WaFd, Inc.’s (WAFD - Free Report) third-quarter fiscal 2024 (ended Jun 30) adjusted earnings of 76 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line rose 4.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan balances and lower provisions were other positives. However, a rise in expenses and a slight decline in the deposit balance acted as spoilsports.
Hancock Whitney Corp.’s (HWC - Free Report) second-quarter 2024 earnings per share of $1.31 beat the Zacks Consensus Estimate of $1.19. However, the bottom line compared unfavorably with $1.35 per share registered in the year-ago quarter.
The results were aided by an increase in non-interest income. However, a decline in NII and higher expenses and provisions were the undermining factors for HWC.
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Bank OZK (OZK) Q2 Earnings Top, Stock Falls as Provisions Rise
Bank OZK’s (OZK - Free Report) second-quarter 2024 earnings per share of $1.52 surpassed the Zacks Consensus Estimate by a penny. The bottom line reflects a rise of 3.4% from the prior-year quarter.
Results benefited from a rise in net interest income (NII), driven by higher rates and improvement in loans and deposit balances. However, increases in expenses and provision for credit losses, rising funding costs and lower non-interest income were the undermining factors. Given these concerns, shares of OZK tanked 2.2% in after-hours trading.
Net income available to common shareholders was $173.5 million, up 3.3% from the year-ago quarter. Our estimate for the metric was $170.4 million.
Revenues Improve, Expenses Rise
Net revenues were $416.776 million, up 7.2% year over year. The top line handily beat the Zacks Consensus Estimate of $409.6 million.
NII was $388 million, up 8.7% year over year. Our estimate for the metric was $381.7 million.
The net interest margin (NIM), on a fully-taxable-equivalent basis, contracted 64 basis points (bps) year over year to 4.68%. Our estimate for NIM was 4.70%.
Non-interest income was $28.8 million, down 10%. The decrease was mainly due to lower gains on sales of other assets. Our estimate for non-interest income was $23.3 million.
Non-interest expenses were $137.5 million, up 6.3%. The rise was due to an increase in salaries and employee benefits and other operating expenses. We expected this metric to be $134.2 million.
Bank OZK’s efficiency ratio was 32.74%, down from 33.05% in the prior-year quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2024, total loans were $28.7 billion, up 2.3% sequentially. As of the same date, total deposits amounted to $29.9 billion, up 1.8%.
Credit Quality Weakens
Net charge-offs to average total loans were 0.18%, jumping 15 bps year over year. Also, provision for credit losses were $49 million, up 17.3%. We projected a provision of $42.4 million.
The ratio of non-performing loans, as a percentage of total loans, increased 13 bps to 0.28% as of Jun 30, 2024.
Profitability Ratios Worsen
At the end of the second quarter, the return on average assets was 1.92%, down from 2.27% in the year-earlier quarter. Return on average common equity was 13.98%, down from 15.14%.
Share Repurchase Update
Bank OZK announced a new share repurchase program, authorizing $200 million. The plan is set to expire on Jul 1, 2025.
Our Take
Bank OZK’s solid loan balance, branch consolidation efforts and higher rates are expected to continue aiding revenues. However, elevated operating expenses and deteriorating asset quality are major near-term concerns.
Bank OZK Price, Consensus and EPS Surprise
Bank OZK price-consensus-eps-surprise-chart | Bank OZK Quote
The company 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
WaFd, Inc.’s (WAFD - Free Report) third-quarter fiscal 2024 (ended Jun 30) adjusted earnings of 76 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line rose 4.1% sequentially.
WAFD’s results reflected a rise in NII and other income, which aided the top line. Also, higher loan balances and lower provisions were other positives. However, a rise in expenses and a slight decline in the deposit balance acted as spoilsports.
Hancock Whitney Corp.’s (HWC - Free Report) second-quarter 2024 earnings per share of $1.31 beat the Zacks Consensus Estimate of $1.19. However, the bottom line compared unfavorably with $1.35 per share registered in the year-ago quarter.
The results were aided by an increase in non-interest income. However, a decline in NII and higher expenses and provisions were the undermining factors for HWC.