Raymond James: 11 Takeaways From Bank Ozk’s Q1 Call

Bank Ozk (NASDAQ: OZK) reported first-quarter results April 17 that show a “relatively solid start” to 2019, highlighted by better-than-expected loan growth and net interest income, according to Raymond James.

The Analyst

Michael Rose maintains a Market Perform rating on Bank Ozk. 

The Thesis

Bank Ozk held a conference call following its first-quarter report, and Rose shared 11 takeaways in a Friday note. (See the analyst’s track record here.) 

• A higher level of prepayments compared to last year is factored into management’s low-to-mid-teen outlook for next year.
• Noninterest income and expenses in the first quarter are at “fairly good” run rates for the full year 2019.
• Around 98 percent of its floating rate loans have floors while 10 percent are at that floor.
• The core spread may turn negative for several quarters.
• CECL preparations are ongoing, and parallel modeling is likely to start in the third quarter.
• The loan-deposit ratio is expected to fall in the 89-99-percent range.
• Last year’s $1-billion growth in the marine and RV segment will likely be sustained moving forward, with the second quarter acting as a “watermark” period.
• The bank continues to view a stock buyback program as unlikely to occur. 
• The increase in the cost of interest-bearing deposits might be lower than the 67-basis point increase seen last year.
• The CRE and construction concentration ratios are expected to continue moving lower.
• The disclosed watchlist credit at 102 percent LTV has around $50 million funded and should be fully repaid.

Price Action

Bank Ozk shares were trading up 1.06 percent at $31.37 at the time of publication Monday. 

Related Links:

Bank Of Ozarks Drops 23%, Analysts Weigh In After Year-Over-Year EPS Decline

Barclays On Bank Ozk: New Name, New Bearish Stance

Public domain photo via Wikimedia.