Bank OZK – 2021 Q4 Earnings – Key Points to Know!
- Rupam Deb
- Feb 9, 2022
- 3 min read
Bank OZK – 2021 Q4 Earnings
Bank OZK released its earnings for 2021 Q4 on 20 Jan 2022. Bank OZK continued to deliver exceptional results with a record net interest income of $266 million and a quarterly record Real Estate Specialties Group (RESG) loans origination. Additionally, the management decided to ramp up their share repurchase program to a total of $650 million or 10% of their current market cap.
Here are our key points from the quarterly earnings results and earnings call!
Net interest income for 2021 Q4 was a record of $266 million, a 12% increase y/y from $238 million, and a 7.4% increase q/q from $248 million. This increase was mainly driven by the increase in net interest margin (NIM), which offset the impact of a slightly lower (4.7% lower) total loan balance compared to a year ago (or unchanged compared to a quarter ago).
Net interest margin (NIM) was 4.41% for 2021 Q4, a 0.53% point increase y/y, and a 0.25% point increase q/q. In 2021 Q3, the latest quarter for which comparative data was available, their NIM outperformed the industry by a record high level of 1.60% point (OZK’s NIM of 4.16%, vs industry’s NIM of 2.56%). Their NIM benefitted from unusually high levels of minimum interest and other interest income from loan repayments and short-term extensions, favorable levels of accretion income from collections on previously charged-off and non-accrual purchased loans, recognition of net deferred fees on loans originated under the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) that received forgiveness or paid off, and reductions in their cost of interest bearing deposits (COIBD).
The total provision expense for 2021 Q4 was a negative $8 million, which helped to push up the overall net income. As of 31 December 2021, their total allowance for loan losses (ALL) for outstanding loans was $217 million (or 1.1% of total outstanding loans). Their reserve for losses on unfunded loan commitments was $72 million (or 0.5% of unfunded loan commitments), bringing their total allowance for credit losses (ACL), which includes the ALL and the reserve for losses on their unfunded loan commitments, to $289 million.The calculation for provision expense and total allowance for credit loss was based on the assumptions of recent economic forecasts provided by Moody’s, which already included their updates in December 2021. Although Bank OZK has utilized this Moody’s forecast, they still made adjustments to capture certain risks not being fully reflected in Moody’s model.
Non-interest income for 2021 Q4 was $30 million, a 4% increase y/y, and a 14% decrease q/q. Non-interest expense for 2021 Q4 was $110 million, a 7% increase y/y, but a 0.3% decrease q/q.
Due to an increasing competitive environment in the labor market, they had increased salaries and employees benefits in the last two quarters and the management continued to expect an uptrend in non-interest expenses in the near future as they continued to respond to the ongoing competitive conditions in the labor market, fill currently unfilled positions, and add team members to support future growth.
Their efforts to close unprofitable and marginally profitable branches, and eliminate redundant and inefficient activities have helped to mitigate the impact of increasing wage pressures.
The efficiency ratio in 2021 Q4 was 37%, a decrease from the 39% a year ago, and a decrease from the 40% a quarter ago. This efficiency ratio remained among the best in the industry in the top decile of the industry for 20 consecutive years
For the remaining points of this earnings summary, check them out at our Multibagger Research Series (linked below).
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