Bank OZK $OZK: 2020 Q4 Earnings – 19 Points You Don’t Want to Miss!
- Rupam Deb
- Mar 16, 2021
- 3 min read
Bank OZK – 2020 Q4 Earnings Results
2020 Q4 Earnings Results
Bank OZK released its earnings for 2020 Q4 on 21 January 2021. In finishing one of the most challenging years in history due to the COVID-19 pandemic, Bank OZK has reported one of their best quarters ever, highlighted by record quarterly net interest income, and their second highest quarterly net income in the company history!!!
Here’s our detailed summary of the 19 key points from the quarterly earnings results and earnings call!
Net interest income for the quarter was $237.6 million, an increase of 10.5% from the $215.0 million in 2019 Q4, or a 5.8% increase from the $224.7 million in 2020 Q3. This increase from the previous quarter was partly a result from improvements in their core spread and net interest margin, which increased from the previous quarter by 0.30% and 0.19% respectively, to 4.57% and 3.88% respectively.
Net interest margin (NIM) was 3.88%, down by 0.27% from 2019 Q4 but up by 0.19% from 2020 Q3. This quarter was the first quarter that they were able to increase the quarter-over-quarter NIM since 2018 Q4. Moreover, they continued to outperform the industry on NIM. The decreased NIM from 2019 Q4 was mainly due to the cuts in the Fed funds target rate and Bank OZK’s increasing amounts of assets with high liquidity, in the form of cash balances and very short-term securities to better position themselves for the economic uncertainty during the pandemic, which negatively impact their NIM. The improvement in NIM from the previous quarter was due to their ability to continue to decrease the cost of interest bearing deposit, which also widened their core spread and NIM, which was expected and discussed in our previous quarter earnings update.
Net income for 2020 Q4 was $120.5 million, a 19.5% increase from $100.8 million in 2019 Q4, or a 10.3% increase from $109.2 million in 2020 Q3. This was their second best quarterly net income ever. For the full year of 2020, net income was $291.9 million, a 31.5% decrease from $425.9 million for the full year of 2019.
The total provision expense for the quarter was $6.8 million, a slight reduction from the $7.2 million in 2020 Q3. As of 31 December 2020, the allowance for loan losses (ALL) for outstanding loans was $295.8 million, or 1.54% of total outstanding loan, and their reserve for potential losses on unfunded loan commitments was $81.5 million, or 0.69% of unfunded loan commitments. This results in a total allowance for credit losses (ACL) of $377.3 million, which includes the ALL and the reserve for potential loss on their unfunded loans commitments. The calculation for provision expense and total allowance for credit loss was based on assumption of recent economic forecasts provided by Moody’s. Being conservative, the management did some certain adjustments to increase their ACL to capture items that they thought were not fully reflected in their modeled results. This current ACL amount has only changed slightly from the levels in June and September 2020, thereby not posing any headwind to its net profit and net profit margins, which is a positive thing.
Non-purchased loan yield was 5.27%, a 0.61% decrease from 2019 Q4 but a 0.12% increase from 2020 Q3. The slight increase for non-purchased loan yield was from favorable levels of minimum interest and loan fees, which vary from quarter to quarter. Their yield on non-purchased loans was 5.31% for the full 2020, a decrease of 0.88% from 2019.
For the remaining points, check out our Multibagger Research Series at https://moneywisesmart.com/MultibaggerResearch/.
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