Bank OZK’s Q4 Profit Rises 4.1% as New Sectors Power Loan Growth

A Bank OZK branch in Houston, Texas (Shutterstock)

Bank OZK of Little Rock (Nasdaq: OZK) on Thursday reported a 4.1% increase in fourth-quarter net income, marking the bank’s ninth consecutive quarter of record profits.

Net income was $178.1 million, up from $171.1 million in the same quarter a year ago. Per share, earnings came to $1.56.

The results exceeded Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for earnings of $1.45 per share.

Revenue in the period was $695.6 million. The bank’s revenue net of interest expense was $412.3 million, which also topped Street forecasts. Four analysts surveyed by Zacks expected $408 million.

For the full year, the company reported profit of $716.5 million, or $6.14 per share. Revenue was reported as $1.66 billion.

Shares of the company rose 1.5% to $45.34 in after-hours trading Thursday. Over the past year, shares were down about 1%.

The bank continued to diversify its loan assets in the fourth quarter. Loan products in RV and marine, corporate and institutional banking, and community banking collectively contributed about $730 million to quarterly growth, while Bank OZK’s Real Estate Specialties Group (RESG) grew by only about $16 million.

Total RESG loans remained at record levels, accounting for 62% of Bank OZK’s funded balances. But the lender said it sees progress. It was the third consecutive quarter — and the second full year in the past three years — that products outside the RESG category have collectively provided more than half of Bank OZK’s loan growth.

The lender said in an earnings report that headwinds from higher rates and uncertain economic conditions were factors in restrained RESG loan growth in 2024, particularly in the fourth quarter, which saw the lowest growth in 27 quarters.

The company’s focus on loan diversification comes as investors raise concerns about its high exposure to commercial real estate.

Total loans in the quarter reached $29.5 billion, up 13.3% from the fourth quarter of 2023.

The bank continued to set aside money for bad loans, raising its total allowance for credit losses by $25 million to $619 million. Over the last 10 quarters since the Federal Reserve started increasing interest rates, Bank OZK has more than doubled its allowance for credit losses.

The bank said the increase reflects both a $12.94 billion increase in loans over that time and “our cautious outlook on macroeconomic conditions,” including decreases in appraised values and higher-for-longer interest rates, which have created challenges for some Bank OZK-funded projects.

Bank OZK has written off about $94 million in loans as losses during that 10-quarter period. It recovered a $9.3 million charge-off in December after a loan sponsor sold an office building in Los Angeles. “Our sponsor’s continued efforts to sell this property resulted in our full principal recovery and collection of some additional interest income and demonstrates the quality of sponsors with whom we like to do business,” the lender said.

Los Angeles is Bank OZK’s fifth-largest market, with $1.43 billion in loan commitments, but none of the 14 projects it’s financing in the metropolitan area have been affected by the wildfires that have devastated the city.

Bank OZK ended the fourth quarter with $31.04 billion in deposits, up 13.3% from $27.41 billion a year ago.

The bank reported total assets of $38.3 billion, up 11.7% from $34.2 billion in the fourth quarter of 2023.

Bank OZK has more than 240 offices in Arkansas, Georgia, Florida, North Carolina, Tennessee, Texas, New York, California and Mississippi.