Bank OZK's Q4 2024 Earnings Show Strong Performance Despite Challenges

Bank OZK (OZK) reported a strong fourth-quarter earnings per share of $1.56, exceeding the Zacks Consensus Estimate of $1.45. This marks a 4% increase compared to the same quarter last year.

These positive results were primarily driven by an increase in net interest income (NII), attributed to growth in loan and deposit balances. Additionally, lower non-interest expenses and provisions contributed to the overall earnings success. However, the bank faced challenges from a decline in non-interest income and rising funding costs.

The net income for common shareholders reached $178.1 million, representing a 4.1% increase from the previous year’s quarter, surpassing our estimate of $160.9 million.

For the full year of 2024, Bank OZK achieved earnings of $6.14 per share, again exceeding the consensus estimate of $6.03 and reflecting a year-over-year rise of 4.6%. The net income available to common shareholders rose to $700.3 million, up 3.8% compared to the previous year.

Revenue Growth and Lower Expenses

Bank OZK's net revenues for the fourth quarter were $412.3 million, a 1.2% year-over-year increase, which beat the Zacks Consensus Estimate of $408 million.

In 2024, the bank's total net revenues increased by 6.2% to $1.66 billion, exceeding the consensus estimate of $1.65 billion.

Net interest income was reported at $379.3 million, reflecting a 2.4% increase compared to the previous year, although it fell short of our estimate of $387.3 million.

The net interest margin (NIM), calculated on a fully taxable equivalent basis, contracted by 49 basis points year over year, landing at 4.33%. Our forecast for NIM was 4.40%.

Non-interest income totaled $32.9 million, a decline of 11% compared to the same quarter last year. This decrease was primarily due to lower gains from asset sales, reduced death benefits income, and fewer net gains from investment securities, along with the absence of non-sufficient funds fees. Our estimate for non-interest income was $30.8 million.

On the expense side, non-interest expenses decreased to $140.1 million, down 3.4% year-over-year, driven by a reduction in other operating expenses. We had expected this figure to be $144.3 million.

The efficiency ratio for Bank OZK improved to 33.71%, down from 35.33% in the same quarter last year, highlighting a boost in profitability.

As of December 31, 2024, the bank reported total loans of $30 billion, a sequential increase of 2.6%. Total deposits reached $31 billion, marking a 1.5% increase.

Deteriorating Credit Quality

Bank OZK's credit quality showed signs of deterioration, with net charge-offs to average total loans rising to 0.16%, an increase of 10 basis points year-over-year. Conversely, the provision for credit losses decreased to $37.2 million, down 15.2%, which was lower than our expected provision of $47.8 million.

The ratio of non-performing loans as a percentage of total loans increased by 19 basis points to 0.44% as of December 31, 2024.

Decline in Profitability Ratios

At the close of the fourth quarter, the return on average assets was recorded at 1.87%, a decline from 2.04% in the previous year. The return on average common equity also fell to 13.33%, down from 14.58%.

Share Repurchase Status

During the fourth quarter, Bank OZK did not engage in any share repurchases.

Conclusion on Bank OZK's Performance

Bank OZK's performance indicators such as solid loan growth and lower deposit costs suggest a potential for revenue growth in the future. However, rising operating expenses and a decline in asset quality present significant concerns for the short term.

The company currently holds a Zacks Rank of #3 (Hold), indicating a neutral stance on its stock performance.

Upcoming Earnings Reports for Other Banks

Hancock Whitney Corp is set to report its fourth-quarter and full-year 2024 results on January 21. The Zacks Consensus Estimate for Hancock Whitney's quarterly earnings has remained stable at $1.28, implying a 1.6% increase from the same quarter last year.

Zions Bancorporation is also expected to report its fourth-quarter and full-year 2024 results on January 21. The Zacks Consensus Estimate for Zions' quarterly earnings has held at $1.26, suggesting a decrease of 2.3% from the previous year's quarter.

Earnings, Bank, Finance