Sunday, June 17, 2012

Neustar tops 1Q

Neustar reported results topping analyst estimates for the first quarter of 2012 on crisp execution and new offerings, driving growth. Revenues increased 37% to $199.6 million. Income from continuing operations increased 1% to $34.0 million. Diluted EPS increased 11% to $0.50. For the quarter share repurchases total $23.8 million or 655,000 shares. This comes on the back of a $250 million share repurchase in the fourth quarter of 2011, demonstrating management’s confidence in the future of Neustar. As President and CEO Lisa Hook stated during the call, Neustar “demonstrated that we [they] are executing on our [their] strategy”, delivering the highest quality services to their NPAC customers, successfully integrating Information Services, TARGUSinfo, and growing its revenues, and achieving their consolidated financial targets.


Looking forward, key drives include its highly recurring revenue, positive exposure to wireless and IP-based services, high operating leverage, and significant EPS accretion from more aggressive capital allocation. We believe that the street is still underestimating the accretive benefits of NSR’s buyback efforts, which continued in the first quarter, and the long-term benefits of its newly formed Information Services segment. Although no new details surfaced, NSR remains well positioned to successfully renew its NPAC contract(53% of revenues), given their successful operating track record, high service level delivery, and the complex management skills required to run this contract. A decision is not expected until 2013 and a successful renewal is key to further multiple expansions. 

Tuesday, June 5, 2012

Bank of the Ozarks Named Top Performing Mid-Sized Bank for 2011






The ABA Banking Journal's May 2012 issue named the Bank of the Ozarks as the top performing mid-sized publicly held bank in the country for 2011. This is the second year in a row that OZRK has been the top performing bank of its size. According to the ABA Banking Journal, "A total of 253 public banks, thrifts, and holding companies qualified under the selection criteria. They were ranked by return on average total equity (ROAE) for 2011." The mid-sized bank category consists of banks with assets between $1 Billion and $10 Billion. As of March 31, 2012, the Bank of the Ozarks had $3.8 Billion in total assets.


In April of this year, SNL Financial rated Bank of the Ozarks as the top performing regional bank in the country for 2011, based on an evaluation of return on average tangible common equity, net charge-offs as a percentage of average loans, adjusted Texas ratio, efficiency ratio, net interest margin and loan growth. For this ranking, banks with less than $500 Billion in assets and more than 60 branch offices were considered regional banks.


In early May, the Bank of the Ozarks presented at the Gulf South Bank Conference, where they again reiterated guidance for quarter-over-quarter net income growth for 2012 and a net interest margin between 5.80% and 6.05%. Gleason likened the bank to a “Financial Triathlete,” striving for excellence in net interest margin, efficiency, and asset quality. When discussing the net interest margin, George Gleason, CEO commented that their net interest margin was more average in '06 and '07, but that they “became much more disciplined in pricing [their] loans” as well as shifting a deposit mix of about 70% CDs and 30% non-CDs to 29.3% CDs and 70.7% non-CDs, decreasing their cost of interest bearing accounts. Gleason believes that they will continue to decrease these risks while focusing on well-priced high-quality loans. While OZRK's efficiency ratio is better than peers, Gleason apologized for the 47.7% they saw in Q1 2012, then explained that while they could fund their balance sheet with fewer branches, having the additional branches and continuing to expand, which weighs on the efficiency ratio, is a solid investment in the future and he expects long-term for the efficiency ratio to return to around or below 40%. Lastly, he mentioned asset quality. The Dallas Real Estate Specialties Group, which drives approximately 15.5% of all loans, had a zero balance of past-due and non-performing assets as of March 31. For the last 12 years, their charge-off ratio has been 40 percent lower than the industry average.


Looking forward, there are plans for continued growth with the opening of new branches, relocating branches from leased to owned properties, and expanding offices. The FDIC-assisted acquisitions of 2010 and 2011 greatly increased their southeastern presence, where they plan on being more aggressive. Gleason also reiterated that the Bank is continuing to pursue additional FDIC-assisted acquisitions and, while they are conservative in bidding, anticipate further acquisitions. The Bank has also begun looking into traditional M&A activity, “carefully, patiently look[ing] for opportunities to do really accretive transactions, much like our FDIC-assisted transactions, that are highly profitable for our shareholders.” Furthermore, Ozarks is expanding their Mortgage, Trust, and Wealth Management services, which are currently only available in a few markets, throughout the franchise. Another area of growth for the future is their “growing pipeline” of loans, a large number of which have cash equity. Gleason sees this future loan growth through the growth of their closed but unfunded loans, which increased from $166m in 2010 to $313m in 2011 to $391m in Q1 2012. Lastly, they look to make advantageous expansions of their investment portfolio, saying that they “ expect the economy to be very uneven and very choppy for many years to come, and [they] actually think that plays very well to [their] strengths and the mindset and abilities of [their] management team.”


In closing, Gleason shared his view of the backward looking data, saying “it's interesting to look back...if you're approaching retirement...because when you retire, you have no future, you just have the past to dwell on...but none of us are contemplating retirement so when we look at these numbers, we're not looking at them in the context of saying 'wow, look what we did,' we're looking at them with the clear understanding that the performance that we've achieved establishes the standards by which we've got to achieve and perform in the future...the bar is set high..we feel like there are going to be a tremendous number of opportunities for us in the years to come and that we're well-positioned to take advantage of those opportunities.”