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ank OZK reported a 2% increase in third-quarter loans from the prior quarter and a 10% jump from the start of the year, reaching $29.2 billion. This marks the ninth consecutive quarterly record for the bank. Chairman and CEO George Gleason expressed confidence in the bank's growth prospects, citing strong pipelines.
The Little Rock, Arkansas-based bank reported net income of $181.2 million, up from $173.8 million a year earlier, with earnings per share increasing to $1.56 from $1.50. Pre-tax, pre-provision net revenue totaled $282.6 million for the third quarter, a 7% increase from the same period last year.
Bank OZK has been diversifying its commercial real estate-heavy loan book in response to investor concerns about vulnerabilities in office, multifamily, and retail properties. The bank's Real Estate Specialties Group accounted for 64% of its loan portfolio at the end of the third quarter, down from over 70% earlier this year.
Gleason expects the figure to decline further as the bank grows its recreational vehicle and marine, corporate and institutional banking, and community lending divisions. However, real estate lending continued to expand and accounted for the remainder of the bank's loan growth.
The bank reported a rise in loan charge-offs but maintained low levels overall. Net charge-offs increased to $26 million from $9.4 million a year earlier, with an annualized ratio of 0.36%. Historically, a ratio below 1% is considered healthy.
Gleason views the quarter as positive for asset quality, citing high collateral and low loan-to-value levels on its credits. The bank's provision for credit losses increased to $46.4 million from $44 million in the third quarter last year.
The American Bankers Association's Credit Conditions Index rose 28.2 points from the prior quarter to 56.9, indicating improved overall credit conditions driven by consumer and business credit improvements. The Federal Reserve's interest rate cuts are expected to support both the economy and credit quality.
Bank OZK expects more loan growth in the fourth quarter and projects a mid- to upper single-digit percentage range of portfolio expansion next year. Gleason sees "lots of opportunities to grow out there."
