Bank OZK Announces Second Quarter 2022 Earnings

Bank OZK

LITTLE ROCK, Ark., July 21, 2022 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income available to common stockholders for the second quarter of 2022 was $132.4 million, a 12.1% decrease from $150.5 million for the second quarter of 2021. Diluted earnings per common share for the second quarter of 2022 were $1.10, a 5.2% decrease from $1.16 for the second quarter of 2021.

For the six months ended June 30, 2022, net income available to common stockholders was $260.4 million, a 12.9% decrease from $299.0 million for the first six months of 2021. Diluted earnings per common share for the first six months of 2022 were $2.12, a 7.8% decrease from $2.30 for the first six months of 2021.

The Bank’s provision for credit losses was $7.0 million for the second quarter and $11.2 million for the first six months of 2022 compared to negative provision for credit losses of $30.9 million for the second quarter and $62.5 million for the first six months of 2021. The Bank’s total allowance for credit losses (“ACL”) was $299.9 million at June 30, 2022. The calculations of the Bank’s provision expense for the second quarter and first six months of 2022 and its total ACL at June 30, 2022 were based on a number of key estimates, assumptions and economic forecasts. The Bank’s provision expense for the second quarter and first six months of 2022 and its ACL at June 30, 2022 included certain qualitative adjustments to capture items that management believed were not fully reflected in its modeled results.

Pre-tax pre-provision net revenue (“PPNR”) was $182.8 million for the second quarter of 2022, a 10.9% increase from $164.8 million for the second quarter of 2021. For the six months ended June 30, 2022, PPNR was $355.9 million, a 9.4% increase from $325.5 million for the first six months 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 second quarter of 2022 were 2.02%, 12.40% and 14.69%, respectively, compared to 2.24%, 13.65% and 16.10%, respectively, for the second quarter of 2021. The Bank’s annualized returns on average assets, average common stockholder’s equity and average tangible common stockholders’ equity for the first six months of 2022 were 2.00%, 12.03%, and 14.20%, respectively, compared to 2.23%, 13.81%, and 16.33%, respectively, for the first six months 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 excellent results for the second quarter of 2022. Our results were highlighted by our third consecutive quarter of record RESG loan originations and solid contributions from Community Banking and other lending teams, reflecting the importance of organic growth and increased portfolio diversification in our long-term strategy. Our strong capital and liquidity, disciplined credit culture and outstanding team have us well positioned for the future.”

KEY BALANCE SHEET METRICS

Total loans were $18.74 billion at June 30, 2022, a 2.6% increase from $18.27 billion at June 30, 2021. Non-purchased loans were $18.30 billion at June 30, 2022, a 3.9% increase from $17.61 billion at June 30, 2021. Purchased loans, which consist of loans acquired in previous acquisitions, were $0.45 billion at June 30, 2022, a 32.5% decrease from $0.66 billion at June 30, 2021.

Deposits were $19.98 billion at June 30, 2022, a 3.5% decrease from $20.71 billion at June 30, 2021. Total assets were $25.92 billion at June 30, 2022, a 2.6% decrease from $26.61 billion at June 30, 2021.

Common stockholders’ equity was $4.27 billion at June 30, 2022, a 5.2% decrease from $4.50 billion at June 30, 2021. Tangible common stockholders’ equity was $3.60 billion at June 30, 2022, a 5.9% decrease from $3.83 billion at June 30, 2021. Book value per common share was $35.87 at June 30, 2022, a 3.4% increase from $34.70 at June 30, 2021. Tangible book value per common share was $30.27 at June 30, 2022, a 2.5% increase from $29.52 at June 30, 2021. The calculations of the Bank’s common stockholders’ equity, tangible common stockholders’ equity and tangible book value per common share and the reconciliations to GAAP are included in the schedules accompanying this release.

The Bank’s ratio of total common stockholders’ equity to total assets was 16.47% at June 30, 2022, compared to 16.92% at June 30, 2021. Its ratio of total tangible common stockholders’ equity to total tangible assets was 14.26% at June 30, 2022, compared to 14.77% at June 30, 2021. The calculation of the Bank’s ratio of total tangible common stockholders’ equity to total tangible assets and the reconciliation to GAAP are included in the schedules accompanying this release.

STOCK REPURCHASES

During the quarter just ended, the Bank repurchased approximately 3.7 million shares of its common stock at a weighted average price of $39.93, for a total of $147.4 million. During the first six months of 2022, the Bank repurchased approximately 6.6 million shares of its common stock at a weighted average price of $42.42, for a total of $279.0 million. In evaluating its plans for future stock repurchases, the Bank considers a variety of factors including its capital position, alternative uses of capital, liquidity, financial performance, stock price, regulatory requirements and other factors. The Bank may suspend its stock repurchase program at any time.

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 July 22, 2022. 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, total common stockholders’ equity, total 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 delays in identifying satisfactory sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, 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; changes in legal, financial and/or regulatory requirements; recently enacted and potential legislation and regulatory actions and the costs and expenses to comply with new and/or existing legislation and regulatory actions, including those actions in response to the coronavirus (“COVID-19”) pandemic such as the Coronavirus Aid, Relief and Economic Security Act, the Consolidated Appropriations Act of 2021, the American Rescue Plan Act of 2021, and any similar or related laws, rules and regulations; 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 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 $25.92 billion in total assets as of June 30, 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
		June 30,				December 31,
		2022				2021
		(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents		$	1,140,448			$	2,053,829
Investment securities ― available for sale (“AFS”)			3,705,807				3,916,733
Investment securities ― trading			4,080				14,957
Federal Home Loan Bank of Dallas and other bankers’ bank stocks			36,654				40,788
Non-purchased loans			18,297,638				17,791,610
Purchased loans			445,080				516,215
Allowance for loan losses			(190,795	)			(217,380	)
Net loans			18,551,923				18,090,445
Premises and equipment, net			687,093				695,857
Foreclosed assets			2,593				5,744
Accrued interest receivable			82,756				83,025
Bank owned life insurance (“BOLI”)			784,117				774,822
Goodwill and other intangible assets, net			666,029				669,063
Other, net			258,465				185,167
Total assets		$	25,919,965			$	26,530,430
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing		$	5,117,961			$	4,983,788
Savings and interest bearing transaction			9,655,436				9,245,727
Time			5,210,790				5,979,619
Total deposits			19,984,187				20,209,134
Other borrowings			505,221				756,321
Subordinated notes			346,536				346,133
Subordinated debentures			121,310				121,033
Reserve for losses on unfunded loan commitments			109,143				71,609
Accrued interest payable and other liabilities			243,666				186,840
Total liabilities			21,310,063				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 June 30, 2022 and December 31, 2021			338,980				338,980
Common stock; $0.01 par value; 300,000,000 shares authorized; 118,996,021 and 125,443,748 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively			1,190				1,254
Additional paid-in capital			1,817,650				2,093,702
Retained earnings			2,563,130				2,378,466
Accumulated other comprehensive (loss) income			(114,168	)			23,841
Total stockholders’ equity before noncontrolling interest			4,606,782				4,836,243
Noncontrolling interest			3,120				3,117
Total stockholders’ equity			4,609,902				4,839,360
Total liabilities and stockholders’ equity		$	25,919,965			$	26,530,430

Bank OZK Consolidated Statements of Income Unaudited
	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans	$	256,264			$	238,554			$	496,259			$	478,381
Purchased loans		8,982				11,699				17,152				23,635
Investment securities:
Taxable		10,367				9,467				20,978				17,550
Tax-exempt		4,020				3,883				7,006				7,563
Deposits with banks and federal funds sold		1,855				496				2,464				1,033
Total interest income		281,488				264,099				543,859				528,162
Interest expense:
Deposits		10,855				18,231				19,347				42,582
Other borrowings		1,042				1,002				2,039				1,982
Subordinated notes		2,603				3,181				5,177				6,326
Subordinated debentures		1,195				939				2,159				1,881
Total interest expense		15,695				23,353				28,722				52,771
Net interest income		265,793				240,746				515,137				475,381
Provision for credit losses		7,025				(30,932	)			11,215				(62,491	)
Net interest income after provision for credit losses		258,768				271,678				503,922				537,872
Non-interest income:
Service charges on deposit accounts:
NSF/Overdraft fees		4,247				3,244				8,449				6,567
All other service charges		7,184				7,067				13,874				13,409
Trust income		1,911				1,911				4,005				4,118
BOLI income:
Increase in cash surrender value		4,846				4,919				9,639				9,799
Death benefits		—				—				297				1,409
Loan service, maintenance and other fees		3,603				3,953				6,621				7,504
Gains on sales of other assets		784				2,341				7,776				8,169
Net (losses) gains on investment securities		531				—				441				—
Other		3,214				4,307				6,694				8,884
Total non-interest income		26,320				27,742				57,796				59,859
Non-interest expense:
Salaries and employee benefits		54,412				52,119				109,060				105,764
Net occupancy and equipment		17,014				16,168				34,230				32,636
Other operating expenses		37,874				35,424				73,726				71,371
Total non-interest expense		109,300				103,711				217,016				209,771
Income before taxes		175,788				195,709				344,702				387,960
Provision for income taxes		39,375				45,161				75,786				88,978
Net income		136,413				150,548				268,916				298,982
Earnings attributable to noncontrolling interest		(8	)			(13	)			(3	)			(32	)
Preferred stock dividends		4,047				—				8,527				—
Net income available to common stockholders	$	132,358			$	150,535			$	260,386			$	298,950
Basic earnings per common share	$	1.10			$	1.16			$	2.13			$	2.31
Diluted earnings per common share	$	1.10			$	1.16			$	2.12			$	2.30

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 June 30, 2022:
Balances – March 31, 2022		$	338,980			$	1,227			$	1,962,126			$	2,468,652			$	(80,928	)		$	3,112			$	4,693,169
Net income			—				—				—				136,413				—				—				136,413
Earnings attributable to noncontrolling interest			—				—				—				(8	)			—				8				—
Total other comprehensive loss			—				—				—				—				(33,240	)			—				(33,240	)
Preferred stock dividends, $0.28906 per share			—				—				—				(4,047	)			—				—				(4,047	)
Common stock dividends, $0.31 per share			—				—				—				(37,880	)			—				—				(37,880	)
Issuance of 20,087 shares of common stock for exercise of stock options			—				—				594				—				—				—				594
Issuance of 21,416 shares of unvested restricted common stock			—				—				—				—				—				—				—
Repurchase and cancellation of 3,689,819 shares of common stock under share repurchase program			—				(37	)			(147,396	)			—				—				—				(147,433	)
Stock-based compensation expense			—				—				2,326				—				—				—				2,326
Forfeitures of 32,858 shares of unvested restricted common stock			—				—				—				—				—				—				—
Balances – June 30, 2022		$	338,980			$	1,190			$	1,817,650			$	2,563,130			$	(114,168	)		$	3,120			$	4,609,902
Six months ended June 30, 2022:
Balances – December 31, 2021		$	338,980			$	1,254			$	2,093,702			$	2,378,466			$	23,841			$	3,117			$	4,839,360
Net income			—				—				—				268,916				—				—				268,916
Earnings attributable to noncontrolling interest			—				—				—				(3	)			—				3				—
Total other comprehensive loss			—				—				—				—				(138,009	)			—				(138,009	)
Preferred stock dividends, $0.60906 per share			—				—				—				(8,527	)			—				—				(8,527	)
Common stock dividends, $0.61 per share			—				—				—				(75,722	)			—				—				(75,722	)
Issuance of 69,107 shares of common stock for exercise of stock options			—				1				2,079				—				—				—				2,080
Issuance of 220,822 shares of unvested restricted common stock			—				2				(2	)			—				—				—				—
Repurchase and cancellation of 6,572,832 shares of common stock under share repurchase program			—				(65	)			(278,932	)			—				—				—				(278,997	)
Repurchase and cancellation of 112,974 of shares of common stock withheld for tax pursuant to restricted stock vesting			—				(1	)			(5,398	)			—				—				—				(5,399	)
Stock-based compensation expense			—				—				6,200				—				—				—				6,200
Forfeitures of 51,850 shares of unvested restricted common stock			—				(1	)			1				—				—				—				—
Balances – June 30, 2022		$	338,980			$	1,190			$	1,817,650			$	2,563,130			$	(114,168	)		$	3,120			$	4,609,902

Bank OZK Consolidated Statements of Stockholders’ Equity Unaudited
		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 June 30, 2021:
Balances – March 31, 2021		$	1,297			$	2,272,046			$	2,059,398			$	50,464			$	3,104			$	4,386,309
Net income			—				—				150,548				—				—				150,548
Earnings attributable to noncontrolling interest			—				—				(13	)			—				13				—
Total other comprehensive loss			—				—				—				(337	)			—				(337	)
Common stock dividends, $0.28 per share			—				—				(36,819	)			—				—				(36,819	)
Issuance of 14,300 shares of common stock for exercise of stock options			—				515				—				—				—				515
Issuance of 20,328 shares of unvested restricted common stock			—				—				—				—				—				—
Repurchase and cancellation of 153 shares of common stock			—				(6	)			—				—				—				(6	)
Stock-based compensation expense			—				4,583				—				—				—				4,583
Forfeitures of 33,241 shares of unvested restricted common stock			—				—				—				—				—				—
Balances – June 30, 2021		$	1,297			$	2,277,138			$	2,173,114			$	50,127			$	3,117			$	4,504,793
Six months ended June 30, 2021:
Balances – December 31, 2020		$	1,294			$	2,265,850			$	1,946,875			$	58,252			$	3,085			$	4,275,356
Net income			—				—				298,982				—				—