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The Arkansas Governor’s Mansion in Little Rock, Ark. Bank OZK reported an earnings decline of 23% in its latest quarter.
Photo:
handout/Reuters
Shares of
Bank OZK
fell 23% Friday morning after the bank said it had charged off almost $46 million on two different real-estate credits.
In reporting its third-quarter earnings results Thursday, the Arkansas-based bank said the two loans have been in its portfolio for around the past decade and were for projects in North Carolina and South Carolina.
Together the credits have a balance of $20.6 million following the charge-offs, the bank said. They already had been considered “substandard” and weren’t related to each other, Bank OZK said.
As of the end of September, Bank OZK had $22.09 billion in assets. Its market cap is $4.48 billion.
Bank OZK, which was known as Bank of the Ozarks until it changed its name in July, had pursued an unorthodox real-estate lending strategy in recent years. The Midwestern bank got into lending in areas such as New York and Houston where the markets had been more unstable. In 2016, short seller Carson Block questioned the bank’s lending practices and said he was shorting the stock, sending shares down.
The company reported Thursday that its ratio of nonperforming assets to total assets was 0.23% at the end of the quarter, up from 0.15% at the end of the second quarter. Its allowance for loan losses at the end of the third quarter was 0.67% of total loans, down from 0.73% in the second quarter. Both measures exclude the company’s purchased loans.
The bank reported earnings of $74.2 million, down 23% from the third quarter last year. Net interest income rose, but noninterest income declined and the company also had saw a large increase in its provision for loan losses, which climbed to $41.9 million from $7.8 million.
The bank’s earnings per share were 58 cents, sharply missing estimates from analysts polled by Refinitiv, who were expecting earnings of 82 cents a share on a GAAP basis and 90 cents a share on an adjusted basis. Total revenue was $244.7 million, which missed estimates of $257.7 million.
Shares of the bank have declined 44% in 2018.
Write to Allison Prang at [email protected]
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