Bank OZK Announces Fourth Quarter and Full Year 2022 Earnings

Bank OZK

LITTLE ROCK, Ark., Jan. 19, 2023 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income available to common stockholders for the fourth quarter of 2022 was $158.8 million, a 6.1% increase from $149.8 million for the fourth quarter of 2021. Diluted earnings per common share for the fourth quarter of 2022 were $1.34, a 14.5% increase from $1.17 for the fourth quarter of 2021. These results were impacted by a $32.5 million provision for credit losses in the fourth quarter of 2022 compared to a negative provision for credit losses of $8.0 million in the fourth quarter of 2021.

For the full year of 2022, net income available to common stockholders was $547.5 million, a 5.4% decrease from $579.0 million for the full year of 2021. Diluted earnings per common share for the full year of 2022 were a record $4.54, a 1.6% increase from $4.47 for the full year of 2021. These results were impacted by a $83.5 million provision for credit losses for 2022 compared to a negative provision for credit losses of $77.9 million for 2021.

Growth in both funded and unfunded loan balances during the quarter and full year of 2022 contributed to the higher provision for credit losses. The Bank’s total allowance for credit losses (“ACL”) was $365.3 million at December 31, 2022 compared to $289.0 million at December 31, 2021. The calculations of the Bank’s provision expense for the fourth quarter and full year of 2022 and its total ACL at December 31, 2022 were based on a number of key estimates, assumptions and economic forecasts and included certain qualitative adjustments to capture items not fully reflected in the modeled results.

Pre-tax pre-provision net revenue (“PPNR”) was $241.0 million for the fourth quarter of 2022, a 29.6% increase from $186.0 million for the fourth quarter of 2021. PPNR was $805.0 million for the full year of 2022, a 19.3% increase from $675.0 million for the full year of 2021. The calculation of PPNR and the reconciliation to generally accepted accounting principles (“GAAP”) are included in the schedules accompanying this release.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the fourth quarter of 2022 were 2.35%, 14.76% and 17.48%, respectively, compared to 2.25%, 13.08% and 15.34%, respectively, for the fourth quarter of 2021. The Bank’s returns on average assets, average common stockholder’s equity and average tangible common stockholders’ equity for the full year of 2022 were 2.08%, 12.66%, and 14.97%, respectively, compared to 2.17%, 13.01%, and 15.32%, respectively, for the full year of 2021. The calculation of the Bank’s returns on average common stockholders’ equity and average tangible common stockholders’ equity and the reconciliations to GAAP are included in the schedules accompanying this release.

George Gleason, Chairman and Chief Executive Officer, stated, “We are pleased to report our strong results for the fourth quarter and full year of 2022. Our high level of profitability, strong capital and liquidity, disciplined credit culture and outstanding team have us well positioned for the current environment and the longer term.”

KEY BALANCE SHEET METRICS

Total loans were $20.78 billion at December 31, 2022, a 13.5% increase from $18.31 billion at December 31, 2021. Non-purchased loans were $20.40 billion at December 31, 2022, a 14.7% increase from $17.79 billion at December 31, 2021. Purchased loans, which consist of loans acquired in previous acquisitions, were $0.38 billion at December 31, 2022, a 26.7% decrease from $0.52 billion at December 31, 2021.

Deposits were $21.50 billion at December 31, 2022, a 6.4% increase from $20.21 billion at December 31, 2021. Total assets were $27.66 billion at December 31, 2022, a 4.2% increase from $26.53 billion at December 31, 2021.

Common stockholders’ equity was $4.35 billion at December 31, 2022, a 3.3% decrease from $4.50 billion at December 31, 2021. Tangible common stockholders’ equity was $3.69 billion at December 31, 2022, a 3.7% decrease from $3.83 billion at December 31, 2021. During 2022, the Bank repurchased approximately 8.37 million shares of its common stock at a weighted average cost of $41.80, for a total of $350.0 million.

Book value per common share was $37.13 at December 31, 2022, a 3.6% increase from $35.85 at December 31, 2021. Tangible book value per common share was $31.47 at December 31, 2022, a 3.1% increase from $30.52 at December 31, 2021.

The Bank’s ratio of total common stockholders’ equity to total assets was 15.73% at December 31, 2022, compared to 16.95% at December 31, 2021. Its ratio of total tangible common stockholders’ equity to total tangible assets was 13.66% at December 31, 2022, compared to 14.80% at December 31, 2021.

The calculations of the Bank’s common stockholders’ equity, tangible common stockholders’ equity, tangible book value per common share, and ratio of total tangible common stockholders’ equity to total tangible assets and the reconciliations to GAAP are included in the schedules accompanying this release.

MANAGEMENT’S COMMENTS, CONFERENCE CALL, TRANSCRIPT AND FILINGS

In connection with this release, the Bank released management’s comments on its quarterly results, which are available at http://ir.ozk.com. This release should be read in conjunction with management’s comments on the quarterly results.

Management will conduct a conference call to take questions on these quarterly results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on January 20, 2023. Interested parties may access the conference call live via webcast on the Bank’s investor relations website at https://ir.ozk.com/news/event-calendar, or may participate via telephone by registering using this online form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call webcast will be archived on the Bank's website for at least 30 days.

The Bank files annual, quarterly and current reports, proxy materials, and other information required by the Securities Exchange Act of 1934 with the Federal Deposit Insurance Corporation (“FDIC”), copies of which are available electronically at the FDIC’s website at https://efr.fdic.gov/fcxweb/efr/index.html and are also available on the Bank’s investor relations website at ir.ozk.com. To receive automated email alerts for these materials please visit https://ir.ozk.com/other/email-alerts to sign up.

NON-GAAP FINANCIAL MEASURES

This release contains certain non-GAAP financial measures. The Bank uses these non-GAAP financial measures, specifically return on average common stockholders’ equity, average tangible common stockholders’ equity, tangible book value per common share, common stockholders’ equity, tangible common stockholders’ equity, the ratio of total tangible common stockholders’ equity to total tangible assets, and PPNR, to assess the strength of its capital, its ability to generate earnings on tangible capital invested by its shareholders and trends in its net revenue. These measures typically adjust GAAP financial measures to exclude intangible assets or provision for credit losses. Management believes presentation of these non-GAAP financial measures provides useful supplemental information which contributes to a proper understanding of the financial results and capital levels of the Bank. These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP performance measures that may be presented by other banks. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”

FORWARD-LOOKING STATEMENTS

This presentation and other communications by the Bank include certain “forward-looking statements” regarding the Bank’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. Those statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: potential delays or other problems in implementing the Bank’s growth, expansion and acquisition strategies, including hiring or retaining qualified personnel, obtaining regulatory or other approvals, delays in identifying satisfactory sites, obtaining permits and designing, constructing and opening new offices or relocating, selling or closing existing offices; the ability to enter into and/or close additional acquisitions; the availability of and access to capital; possible downgrades in the Bank’s credit ratings or outlook which could increase the costs of or decrease the availability of funding from capital markets; the ability to attract new or retain existing or acquired deposits or to retain or grow loans, including growth from unfunded closed loans; the ability to generate future revenue growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term interest rates or changes in the relative relationships of various interest rate indices; the potential impact of the transition from the London Interbank Offered Rate (“LIBOR”) as a reference rate; competitive factors and pricing pressures, including their effect on the Bank’s net interest margin or core spread; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; recently enacted and potential laws and regulatory requirements, or changes to existing laws and regulatory requirements, including changes affecting oversight of the financial services industry, changes intended to manage or mitigate climate and related environmental risks, or changes in the interpretation and enforcement of such laws and requirements, and the costs and expenses to comply with new and/or existing legislation and regulatory requirements; uncertainty regarding the U.S. government’s debt limit or changes in U.S. government monetary and fiscal policy; FDIC special assessments or changes to regular assessments; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity; the impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Bank or its customers; natural disasters or acts of war or terrorism; the adverse effects of the ongoing global coronavirus (“COVID-19”) pandemic, including the duration of the pandemic and actions taken to contain or treat COVID-19, on the Bank, the Bank’s customers, the Bank’s staff, the global economy and the financial markets; the potential impact of continuing inflationary pressures; the potential impact of supply chain disruptions; national, international or political instability or military conflict, including the ongoing war in Ukraine; the competition and costs of recruiting and retaining human talent; impairment of our goodwill or other intangible assets; adoption of new accounting standards, or changes in existing standards; and adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions or rulings as well as other factors identified in this communication or as detailed from time to time in our public filings, including those factors described in the disclosures under the headings “Forward-Looking Information” and “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2021 and our quarterly reports on Form 10-Q. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in, or implied by, such forward-looking statements. The Bank disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.

GENERAL INFORMATION

Bank OZK (Nasdaq: OZK) is a regional bank providing innovative financial solutions delivered by expert bankers with a relentless pursuit of excellence. Established in 1903, Bank OZK conducts banking operations with over 240 offices in eight states including Arkansas, Georgia, Florida, North Carolina, Texas, New York, California and Mississippi and had $27.66 billion in total assets as of December 31, 2022. Bank OZK can be found at www.ozk.com and on Facebook, Twitter and LinkedIn or contacted at (501) 978-2265 or P.O. Box 8811, Little Rock, Arkansas 72231-8811.

Bank OZK
Consolidated Balance Sheets
Unaudited
		December 31,
		2022				2021
		(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents		$	1,033,454			$	2,053,829
Investment securities ― available for sale (“AFS”)			3,491,613				3,916,733
Investment securities ― trading			8,817				14,957
Federal Home Loan Bank of Dallas and other bankers’ bank stocks			42,406				40,788
Non-purchased loans			20,400,154				17,791,610
Purchased loans			378,637				516,215
Allowance for loan losses			(208,858	)			(217,380	)
Net loans			20,569,933				18,090,445
Premises and equipment, net			678,405				695,857
Foreclosed assets			6,616				5,744
Accrued interest receivable			125,130				83,025
Bank owned life insurance (“BOLI”)			789,805				774,822
Goodwill and other intangible assets, net			663,543				669,063
Other, net			246,846				185,167
Total assets		$	27,656,568			$	26,530,430
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing		$	4,658,451			$	4,983,788
Savings and interest bearing transaction			9,905,717				9,245,727
Time			6,935,975				5,979,619
Total deposits			21,500,143				20,209,134
Other borrowings			606,666				756,321
Subordinated notes			346,947				346,133
Subordinated debentures			121,591				121,033
Reserve for losses on unfunded loan commitments			156,419				71,609
Accrued interest payable and other liabilities			233,864				186,840
Total liabilities			22,965,630				21,691,070
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $0.01 par value; 100,000,000 shares authorized; 14,000,000 issued and outstanding at December 31, 2022 and 2021, respectively			338,980				338,980
Common stock; $0.01 par value; 300,000,000 shares authorized; 117,176,928 and 125,443,748 shares issued and outstanding at December 31, 2022 and 2021, respectively			1,172				1,254
Additional paid-in capital			1,753,941				2,093,702
Retained earnings			2,773,135				2,378,466
Accumulated other comprehensive (loss) income			(177,649	)			23,841
Total stockholders’ equity before noncontrolling interest			4,689,579				4,836,243
Noncontrolling interest			1,359				3,117
Total stockholders’ equity			4,690,938				4,839,360
Total liabilities and stockholders’ equity		$	27,656,568			$	26,530,430

Bank OZK
Consolidated Statements of Income
Unaudited
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans	$	367,019			$	256,021			$	1,158,332			$	972,660
Purchased loans		7,141				11,190				31,441				46,174
Investment securities:
Taxable		10,280				9,448				41,526				36,234
Tax-exempt		8,521				2,869				22,653				13,729
Deposits with banks and federal funds sold		5,961				953				12,116				2,510
Total interest income		398,922				280,481				1,266,068				1,071,307
Interest expense:
Deposits		53,230				9,514				94,574				64,422
Other borrowings		8,534				1,020				13,033				4,029
Subordinated notes		2,631				2,631				10,439				9,386
Subordinated debentures		2,039				935				5,780				3,750
Total interest expense		66,434				14,100				123,826				81,587
Net interest income		332,488				266,381				1,142,242				989,720
Provision for credit losses		32,508				(7,992	)			83,494				(77,938	)
Net interest income after provision for credit losses		299,980				274,373				1,058,748				1,067,658
Non-interest income:
Service charges on deposit accounts:
NSF/Overdraft fees		4,467				4,315				17,724				14,962
All other service charges		7,138				7,149				28,102				27,656
Trust income		1,977				2,141				7,990				8,506
BOLI income:
Increase in cash surrender value		4,953				4,901				19,532				19,640
Death benefits		—				618				807				2,028
Loan service, maintenance and other fees		3,780				3,148				13,819				13,959
Gains on sales of other assets		510				1,330				11,467				9,962
Net gains on investment securities		1,256				504				2,019				504
Other		3,463				5,589				13,043				18,321
Total non-interest income		27,544				29,695				114,503				115,538
Non-interest expense:
Salaries and employee benefits		59,946				55,034				226,373				214,567
Net occupancy and equipment		17,584				17,004				70,058				66,801
Other operating expenses		41,483				38,068				155,290				148,907
Total non-interest expense		119,013				110,106				451,721				430,275
Income before taxes		208,511				193,962				721,530				752,921
Provision for income taxes		45,686				44,197				157,440				173,888
Net income		162,825				149,765				564,090				579,033
Earnings attributable to noncontrolling interest		54				(5	)			51				(32	)
Preferred stock dividends		4,047				—				16,621				—
Net income available to common stockholders	$	158,832			$	149,760			$	547,520			$	579,001
Basic earnings per common share	$	1.35			$	1.17			$	4.55			$	4.49
Diluted earnings per common share	$	1.34			$	1.17			$	4.54			$	4.47

Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited
		Preferred Stock				Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Non- Controlling Interest				Total
		(Dollars in thousands, except per share amounts)
Three months ended December 31, 2022:
Balances – September 30, 2022		$	338,980			$	1,178			$	1,773,562			$	2,653,377			$	(227,673	)		$	3,120			$	4,542,544
Net income			—				—				—				162,825				—				—				162,825
Earnings attributable to noncontrolling interest			—				—				—				54				—				(54	)			—
Total other comprehensive loss			—				—				—				—				50,024				—				50,024
Preferred stock dividends, $0.28906 per share			—				—				—				(4,047	)			—				—				(4,047	)
Common stock dividends, $0.33 per share			—				—				—				(39,074	)			—				—				(39,074	)
Return of capital to non-controlling interest			—				—				—				—				—				(1,707	)			(1,707	)
Issuance of 7,039 shares of common stock for exercise of stock options			—				—				241				—				—				—				241
Issuance of 3,457 shares of unvested restricted common stock			—				—				—				—				—				—				—
Repurchase and cancellation of 574,878 shares of common stock under share repurchase program			—				(6	)			(23,219	)			—				—				—				(23,225	)
Repurchase and cancellation of 3,890 shares of common stock withheld for tax pursuant to restricted stock vesting			—				—				(174	)			—				—				—				(174	)
Stock-based compensation expense			—				—				3,531				—				—				—				3,531
Forfeitures of 16,405 shares of unvested restricted common stock			—				—				—				—				—				—				—
Balances – December 31, 2022		$	338,980			$	1,172			$	1,753,941			$	2,773,135			$	(177,649	)		$	1,359			$	4,690,938
Year ended December 31, 2022:
Balances – December 31, 2021		$	338,980			$	1,254			$	2,093,702			$	2,378,466			$	23,841			$	3,117			$	4,839,360
Net income			—				—				—				564,090				—				—				564,090
Earnings attributable to noncontrolling interest			—				—				—				51				—				(51	)			—
Total other comprehensive loss			—				—				—				—				(201,490	)			—				(201,490	)
Preferred stock dividends, $1.187 per share			—				—				—				(16,621	)			—				—				(16,621	)
Common stock dividends, $1.26 per share			—				—				—				(152,851	)			—				—				(152,851	)
Return of capital to non-controlling interest			—				—				—				—				—				(1,707	)			(1,707	)
Issuance of 81,560 shares of common stock for exercise of stock options			—				1				2,492				—				—				—				2,493
Issuance of 224,279 shares of unvested restricted common stock			—				2				(2	)			—				—				—				—
Repurchase and cancellation of 8,373,398 shares of common stock under share repurchase program			—				(83	)			(349,886	)			—				—				—				(349,969	)
Repurchase and cancellation of 116,864 shares of common stock withheld for tax pursuant to restricted stock vesting			—				(1	)			(5,572	)			—				—				—				(5,573	)
Stock-based compensation expense			—				—				13,206				—				—				—				13,206
Forfeitures of 82,397 shares of unvested restricted common stock			—				(1	)			1				—				—				—				—
Balances – December 31, 2022		$	338,980			$	1,172			$	1,753,941			$	2,773,135			$	(177,649	)		$	1,359			$	4,690,938

Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited
		Preferred Stock				Common Stock				Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income				Non- Controlling Interest				Total
		(Dollars in thousands, except per share amounts)
Three months ended December 31, 2021:
Balances – September 30, 2021		$	—			$	1,288			$	2,245,012			$	2,266,234			$	40,706			$	3,112			$	4,556,352
Net income			—				—				—				149,765				—				—				149,765
Earnings attributable to noncontrolling interest			—				—				—				(5	)			—				5				—
Total other comprehensive loss			—				—				—				—				(16,865	)			—				(16,865	)
Common stock dividends, $0.29 per share			—				—				—				(37,528	)			—				—				(37,528	)
Issuance of 14,000,000 shares of preferred stock, net of offering costs			338,980				—				—				—				—				—				338,980
Issuance of 31,400 shares of common stock for exercise of stock options			—				—				1,131				—				—