Bank OZK profit plummets on CRE-related charge-offs
Quarterly profit fell sharply at Bank OZK after the Little Rock, Ark., company charged off two big commercial real estate loans.
The $22 billion-asset company said in a press release Thursday that its third-quarter earnings fell 23% from a year earlier, to $74.2 million, or 58 cents a share. The results were 29 cents lower than the mean estimate of analysts compiled by FactSet Research Systems.
The company's loan-loss provision spiked to $42 million in the third quarter from $7.8 million a year earlier.
Bank OZK charged off $45.5 million to partially write down the value of a pair of CRE loans. One loan is tied to a regional mall in South Carolina that has had declining property performance and uncertainty around anchor tenants Sears and JCPenney. The other loan is associated with a residential real estate development in North Carolina were housing sales have dropped sharply.
Net interest income increased by 5%, to $220 million. Deposit costs nearly doubled, to $51.8 million, because of rising interest rates.
"While our third quarter results did not meet our usual high standards for performance, we are very pleased with the continued enhancement of our team, technology and business capabilities," George Gleason, the company's chairman and CEO, said in the release.
Noninterest income fell by 26%, to $24.1 million. Deposit service charges declined due to lower interchange revenue. Mortgage banking revenue declined as the company exited the secondary market mortgage lending business late last year.
Noninterest expense increased by 22%, to $102.9 million. The company spent $10.8 million in the quarter on marketing and rebranding costs after changing its name to Bank OZK from Bank of the Ozarks. The company said it expects to record an additional $1 million to $3 million in expenses during the fourth quarter for the name change.