Nervous investors and shareholders battered by recent stock market volatility will get their first peek at how Arkansas’ publicly traded concerns fared in 2015 on Thursday (Jan. 14) when Little Rock-based Bank of the Ozarks is expected to release its year-end results.
After completing the largest acquisition in the bank’s history during the quarter, Bank of the Ozarks will set the tone for Arkansas stocks as Wall Street and the investment community looks for bright spots as signs of anxiety spread across the overall market.
Already in 2016, based on some earnings forecasts, the Dow Jones Industrial index has kicked off the year with the worst first week of trading since the Great Depression. The market’s other major bellwether indices, the S&P 500 and tech-driven Nasdaq Composite, have not fared much better with significant losses entering into the new year.
Still, Bank of Ozarks has an opportunity to begin the quarter for Arkansas stocks with a rare upbeat financial report. On Thursday, the fast-growing regional banking holding company is expected to see strong growth for the quarter and full-year, and announce another hike in the Arkansas financial concern’s dividend payout for the 22nd straight quarter.
HIGH HOPES FOR ‘OZRK’
For the three-month period ended Dec. 31, a survey of Wall Street analysts expects the Little Rock bank to report fourth quarter earnings of 56 cents per share on revenue of $128.7 million, according to Thomson Reuters.
A year ago, Bank of the Ozarks (NASDAQ: OZRK) posted full year net income of $118.6 million, a record for the company and a 30% increase compared to 2013. The total was boosted by fourth quarter income of $34.8 million, up 42.4% compared to the 2013 quarter.
In fiscal 2016, the Arkansas regional banked ended year with a flourish, putting some distance between it and publicly-traded rivals Simmons First National Bank of Pine Bluff and Conway-based Home Bancshares with the biggest acquisition in the bank’s history.
On Oct. 19, Bank of the Ozarks announced an all-stock pact and plan of merger to acquire Community & Southern Holdings Inc., and its wholly-owned bank subsidiary, Community & Southern Bank, in a deal valued at nearly $800 million, or approximately $20.50 per fully diluted CSB share.
“This combination is a hand in glove fit,” Bank of the Ozarks Chairman and CEO George Gleason said following the bank’s 14th acquisition since March 2010. “The synergies created by our highly complementary combined network of 75 Georgia banking offices, with virtually no overlap, will give us a powerful presence in Georgia, providing customers with great access and convenience.”
Like acquisition-hungry Bank of the Ozarks, Community & Southern Holdings itself has completed 14 deals in its five-year history that resulted in a portfolio of 47 Georgia banking offices and one Jacksonville, Fla., location. Most recently, CSB acquired certain CertusBank branches on Oct. 9, 2015. At Sept. 30, 2015, CSB had approximately $4.4 billion of total assets, $3 billion of loans and $3.7 billion of deposits.
After the deal closes, CSB will merge into the Little Rock regional banking group and Community & Southern Bank will merge into the parent company’s wholly-owned bank subsidiary, Bank of the Ozarks. Completion of the transaction is subject to certain closing conditions, expected in the first half of this year, including customary regulatory and shareholder approvals.
$10 BILLION ASSET TARGET IN REACH
Following the CSB deal, Bank of the Ozarks made another surprise announcement in early November that it would expand its southern reach and acquire St. Petersburg, Fla.-based C1 Financial, Inc. in an all-stock transaction valued at $402.5 million.
C1 operates 32 Florida banking offices on the west coast of Florida and in Miami-Dade and Orange counties. The majority of the offices are located in Florida’s top six metropolitan markets. At September 30, 2015, C1 had approximately $1.7 billion of total assets, $1.4 billion of loans and $1.3 billion of deposits.
The transaction is expected to close later this quarter or early in the second quarter, bank officials said, marking the Little Rock bank’s 15th acquisition in the past six years. After Bank of the Ozarks consume both deals later this year, the biggest development will be that the Little Rock regional financial group will easily surpass the $10 billion asset mark, a long-stated goal of Gleason and his executive team.
According the Bank of the Ozarks most recent S-4 registration with the federal Securities and Exchange Commission, the bank has consolidated total assets of approximately $9.3 billion, total deposits of approximately $7.6 billion and total common shareholders’ equity of approximately $1.3 billion. By those calculations, the CSB and C1 mergers would catapult the bank’s total asset value well over the $10 billion mark and well beyond the FDIC’S “community bank” statutory threshold.
Competitors Simmons First and Home Bancshares are also poised to eclipse the $10 billion mark in 2016 or 2017 at the current rate of growth. Simmons First and Home Bancshares have total assets of $7.6 billion and $8.5 billion, respectively, according to SEC filings.
MIXED EARNINGS RESULTS EXPECTED FOR ARKANSAS STOCKS
Simmons First and Home Bancshares are expected to release their fourth quarter earnings on Jan. 21 before the market opens. Industrial bellwether stock, Lowell-based trucking giant J.B. Hunt, is also expected to release its fourth quarter and year-end earnings report on the same day.
Murphy Oil Corp. is the only other Arkansas Fortune 500 concern expected to report fourth quarter financial and yearly results in January, although the El Dorado-based oil giant has yet to schedule a date for its year-end financial statement. With crude oil and natural gas prices at their lowest level in years, Wall Street forecasts for the Arkansas oil company are dire. According to a survey of oil and gas analysts by Thomson Reuters, Wall Street expects Murphy to see huge losses of $1.10 per share on scant revenue of $617 million. Last year, the Arkansas oil producer reported adjusted fourth quarter earnings of $69 million, or 39 cents per share, on sales of $1.4 billion.
The fourth quarter and annual reporting period will be fully underway in February when Tyson Foods, Wal-Mart Stores, Windstream, Murphy USA, Acxiom Corp., Dillard’s, ArcBest and other smaller public concerns issue their financial statements. Top publicly-traded companies with major operations in Arkansas are also expected to begin reporting their fourth quarter results this month, including Verizon, Entergy, Southwestern Entergy, ExxonMobil, AT&T, Nucor and most of the banking concerns.
Fourth quarter results for Verizon and Southwestern may also provide further details on the companies’ operations in Arkansas. Recent national reports say Verizon is looking to downsize or auction off its call center and data center operations across the U.S. Verizon operates a data center at its regional headquarters in Little Rock – the outgrowth of the company’s $28 billion acquisition of Alltel Corp. in 2009.
In the oil and gas sector, some industry experts expect Southwestern Energy, which has shuttered its natural gas drilling operations in the Arkansas shale, to announce across the board cuts in capital spending. That could result in substantial job losses in the company’s exploration and production business as the company seeks to cut expenses and reduce long-term debt.
In Tuesday’s session on Wall Street, U.S. stocks gave up a 193-point gain in early trading on the Dow as blue chip companies struggled to remain in positive territory at 16,445 at midday, up 0.13.%. The S&P 500 was trading flat at 1,924 with four of its 10 main sectors trading lower, while the Nasdaq Composite was still up 20 points, or 0.4%, to 4,678, on pace to break an eight-day slump.