Bank OZK's Fourth-Quarter 2024 Earnings Analysis

Bank OZK (OZK - Free Report) reported an impressive fourth-quarter 2024 earnings per share of $1.56, exceeding the Zacks Consensus Estimate of $1.45. This reflects a 4% increase compared to the same quarter in the previous year.

Factors contributing to these results included a rise in net interest income (NII), which was positively influenced by growth in loans and deposits. Additionally, lower non-interest expenses and provisions played a favorable role. However, challenges arose from decreased non-interest income and increasing funding costs.

The net income available to common shareholders reached $178.1 million, showing a 4.1% increase from the previous year. This surpassed the estimate of $160.9 million.

Overall earnings for 2024 were $6.14 per share, exceeding the consensus estimate of $6.03 and representing a year-over-year increase of 4.6%. The net income available to common shareholders was $700.3 million, a rise of 3.8%.

Revenue Growth and Expense Management

Net revenues amounted to $412.3 million, which is a 1.2% increase year-over-year, also beating the Zacks Consensus Estimate of $408 million.

Throughout 2024, net revenues increased by 6.2% to $1.66 billion, and this figure also surpassed the consensus estimate of $1.65 billion.

NII was reported at $379.3 million, reflecting a 2.4% year-over-year growth, although it fell short of the expected $387.3 million.

On a fully-taxable-equivalent basis, the net interest margin (NIM) decreased by 49 basis points (bps) year-over-year to 4.33%. This was slightly below the projected NIM of 4.40%.

In contrast, non-interest income was recorded at $32.9 million, down 11% from the prior year. This decrease was primarily due to reduced gains on sales of other assets, a drop in death benefits income, lower net gains on investment securities, and the absence of non-sufficient funds (NSF) fees. Our estimates for non-interest income stood at $30.8 million.

Non-interest expenses decreased to $140.1 million, down 3.4% from the previous year's level, primarily due to lower operational expenditures. We had projected this figure to be $144.3 million.

Bank OZK maintained an efficiency ratio of 33.71%, improved from 35.33% in the same quarter last year, indicating increased profitability.

As of December 31, 2024, total loans grew to $30 billion, a 2.6% sequential increase, while total deposits rose to $31 billion, marking a 1.5% growth.

Deterioration in Credit Quality

Credit quality showed some signs of strain, as the ratio of net charge-offs to average total loans increased to 0.16%, a rise of 10 bps year-over-year. However, the provision for credit losses was reported at $37.2 million, declining by 15.2%, significantly better than our forecast of $47.8 million.

Furthermore, the ratio of non-performing loans as a percentage of total loans increased by 19 bps to 0.44% by the end of 2024.

Profitability Ratios in Decline

Returning to profitability metrics, the return on average assets dropped to 1.87%, down from 2.04% the previous year. Similarly, the return on average common equity saw a decline to 13.33% from 14.58%.

No Share Repurchases During the Quarter

It is noteworthy that Bank OZK did not initiate any share repurchase activities during the fourth quarter.

Outlook for Bank OZK

Looking ahead, Bank OZK's solid loan portfolio and improved branch consolidation, coupled with a reduction in deposit costs due to interest rate cuts, are expected to support revenue growth. Nevertheless, the challenges associated with higher operating expenses and declining asset quality present significant near-term risks.

Currently, the bank holds a Zacks Rank of #3 (Hold). Interested readers can find more details on investment opportunities and market standings.

Upcoming Earnings Announcements from Other Banks

Hancock Whitney Corp (HWC - Free Report) is set to announce its fourth-quarter and full-year 2024 results on January 21. The earnings consensus estimate remains steady at $1.28, indicating a slight rise of 1.6% from the previous year.

Additionally, Zions Bancorporation (ZION - Free Report) is also scheduled to release its fourth-quarter and full-year 2024 results on January 21, with an unchanged consensus estimate of $1.26, suggesting a decline of 2.3% from the year-ago quarter.

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