Bank of the Ozarks Beats, Reports Improved Loan Performance

| About: Bank of (OZRK)

Bank of the Ozarks Inc. (NASDAQ:OZRK) reported second quarter 2010 results after the closing bell on Monday. The bank holding company posted 14.6% growth in earnings to $10.9 million or 64 cents per share, compared to $9.5 million or 56 cents per share in the year-ago quarter, primarily due to a significant decline in its provision for loan losses. Quarterly earnings also came in well ahead of the Zacks Consensus Estimate of 56 cents per share.

Bank of the Ozarks’ net interest income declined 1.8% to $29.7 million from $30.3 million in the year-ago quarter. The decline was caused by a 9% decrease in average earning assets to $2.54 billion at the end of the quarter from $2.79 billion last year, due to the company’s efforts to reduce its investment securities portfolio and lessen interest rate risk. However, the decline in net interest income was partially offset by a 30-basis point (bps) increase in net interest margin to 5.10%.

During the quarter, provision for loan losses plunged 83.9% year-over-year to $3.4 million, while the annualized net charge-off ratio fell to 0.64% from 2.89% in the year-ago period, indicating a significant improvement in asset quality.

Bank of the Ozarks’ non-interest income slumped 59.6% year-over-year to $9.1 million from $22.6 million in the year-ago period. The decline was mainly attributable to a significant decrease in gains from the investment portfolio, partially offset by higher income from service charges.

Bank of the Ozarks’ non-interest expense increased 17.6% to $21.1 million, mainly due to a write-down related to foreclosed real estate, due diligence costs on potential acquisitions, integration expenses associated with the recently acquired Unity National Bank and increased marketing spending. In March this year, Bank of the Ozarks agreed to acquire Georgia-based Unity National Bank in a loss-sharing arrangement with the Federal Deposit Insurance Corporation (FDIC).

Bank of the Ozarks exited the quarter with a stronger balance sheet with the ratio of common stockholders’ equity to assets improving to 10.16%, compared to 8.80% in the year-ago period, while tangible equity-to-tangible assets ratio increased to 9.94% from 8.63% last year.

Meanwhile, the Zacks Consensus Estimate on the company’s earnings for 2010 derived from 10 covering analysts has remained unchanged at $2.70 per share over the past 2 months. For the next year as well, the Zacks Consensus Estimate has remained stagnant at $2.54 per share over the past 2 months.

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Tagged: , Regional - Southeast Banks, Earnings
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