A $374.5 million accounting charge for projected credit losses dropped Bank OZK net income by 72% for the first half of 2020. However, the Little Rock-based bank holding company beat revenue and earnings per share estimates for the second quarter.
The bank reported Thursday (July 23) second quarter net income of $50.266 million, well below the $110.503 million during the same period of 2019. Earnings per share of 39 cents beat the consensus estimate among analysts of 33 cents. Revenue during the second quarter was $238.184 million, below the $251.139 million in the same quarter of 2019. The revenue beat the consensus estimate of $233.42 million.
Net income during the first half of 2020 was $62.132 million, down 72% from the $221.209 million in the first half of 2019. Revenue during the first half of 2020 was $475.638 million, down 5.08% from the $501.099 million in the same period of 2019.
Economic disruption caused by COVID-19 and a new method to determine credit losses resulted in the significant accounting charge for the bank.
“The COVID-19 pandemic significantly affected the global economy in the first half of 2020. The sudden and severe economic downturn, combined with the implementation of the current expected credit losses (“CECL”) method to calculate the Bank’s allowance for credit losses (“ACL”) and uncertain future economic projections, resulted in the Bank incurring provision for credit losses of $72.0 million in the second quarter and $189.7 million in the first six months of 2020, resulting in a total ACL of $374.5 million at June 30, 2020,” the company noted in the earnings report.
Following are other financial metrics from the earnings report.
• Total assets as of June 30 totaled $26.38 billion, up from the $22.96 billion as of June 30, 2019.
• Total loans as of June 30 totaled $19.311 billion, up from the $17.485 billion as of June 30, 2019.
• Total deposits as of June 30 totaled $20.723 billion, up from the $18.186 billion as of June 30, 2019. Of the deposits, $10.083 billion, or 48.7%, were from consumers.
• The return on assets as of June 30 was 0.50%, below the 1.97% as of June 30, 2019.
The regional bank has more than 250 offices in Alabama, Arkansas, California, Florida, Georgia, Mississippi, New York, North Carolina, South Carolina, and Texas.
The Bank OZK share price (NASDAQ: OZK) closed Thursday at $24.32, up 61 cents. The earnings report was posted after the markets closed. During the past 52 weeks the share price has ranged between $31.76 and $14.20.