Bank of the Ozarks (OZRK) in Little Rock announced earnings of the $19.3 million for the third quarter, up 2% from a year earlier, as low expenses more than offset rising credit costs.
The earnings, reported late Thursday, met analysts' expectations at 55 cents per share. The stock was closed at $32.57, down 4.6% in a day of heavy trading.
The $3.8 billion-asset company reported a provision for loan losses of $3.1 million in the quarter, which more than doubled from a year earlier. The increase, however, was attributed to a $1.7 million in provision for loans covered by loss-share agreements with the Federal Deposit Insurance Corp. Bank of the Ozarks acquired seven failed banks from the FDIC in 2010 and 2011. The company had $653 million in loans and $58 million of foreclosed property covered by loss-share agreements at the end of the third quarter.
The provision attributed to non-covered loans was $1.4 million, or 6.6% less than a year earlier. Bank of the Ozarks' relatively clean non-covered portfolio also improved, with nonperforming assets dropping to 0.59% of total assets at Sept. 30, compared 1.45% a year earlier.
Noninterest expense for the quarter was $28.7 million, down 9.8% from a year earlier. The drop was attributed to $1.2 million in costs related to FDIC-assisted acquisitions that occurred in the third quarter of 2011. Expenses were up 5.1% from the second quarter of 2012.
Joseph Fenech, an analyst with Sandler O'Neill, said the quarterly increase was likely caused by higher incentive-related compensation related to the company's mortgage results. Bank of the Ozarks reported $1.7 million in mortgage lending income in the quarter, up 105.2% from a year earlier.
The mortgage revenues helped cushion the company's noninterest income, which was $14.5 million, down 9.8% from a year earlier. The drop was largely attributed to less loss-share income related to the failed bank deals.
The company's net interest income was relatively flat at $44.4 million. The net interest margin, however, increased seven basis points, to 5.97% from a year earlier. Bank of the Ozarks also added $51 million in new loans in the quarter, up 2.5% from the second quarter.
