Bank Of The Ozarks Inc (NASDAQ:OZRK) Q4 2014 Earnings Conference Call - Final Transcript
Jan 16, 2015 • 11:00 am ET
adversely effect our efficiency ratio, in the quarters in which we closed this acquisition encumbered the systems.
When we exceed $10 billion in total assets either as a result of additional acquisitions, organic growth or a combination of the two, we will lose some interchange revenue as a result of Durbin amendment.
And we will incur increased regulatory compliance cost, both of which will eventually create some headwinds to our efforts to improve our efficiency ratio.
In our last conference call, we were asked to quantify the estimated
estimated impact of the Durbin amendment on our interchanged revenue after we exceed $10 billion in total assets. If the Durbin amendment had been applicable to us in the quarter just ended, we estimate that our interchange revenue would have been reduced to approximately $1.2 million or roughly $4.8 million on an annualized basis.
Our results for both the fourth quarter and full year of 2014, were significantly impacted by unusual items of non-interest income and non-interest expense.
During the quarter just ended, we benefited from $8.0 million of income from termination of our FDIC loss share agreements, but we incurred prepayment charges of $8.1 million from prepaying FHLB advances and approximately $1.1 million of acquisition related in system conversion expenses.
For the full year of 2014, we benefited from the $8.0 million of income from termination of our FDIC loss share agreements and $4.7 million of tax exempt bargain purchased gain from our Omni Bank acquisition.
But we incurred the prepayment charges of $8.1 million from prepaying FHLB advances, $5.6 million of software and other contract termination charges. Approximately $4.7 million of acquisition related in system conversion expenses and approximately $0.6 million of fraud losses attributable to the Home Depot system breach.
Among the unusual non-interest expense items for the quarter just ended, with cost related to our Omni Bank core system conversion which we completed in October. Our Summit core system conversion, which we completed in November and charges related to closing eight overlapping Summit and legacy branches in November.
We will incur additional unusual items of non-interest expense in future quarters, including non-interest expense related to our core system conversions in recent and future acquisitions.
In the first quarter of 2015, we expect to incur acquisition related expenses in connection with the planned completion of the Intervest acquisition and additional cost in connection with the February core system conversion of FNB Shelby acquisition.
In the second quarter of 2015, we expect to incur cost related to the core system conversion of Intervest. Notwithstanding our expectation of some unusual items of non-interest expense still to come, we expect to see improvement in our efficiency ratio in 2015 as the magnitude of such unusual items of non-interest expense wanes and as the benefits of cost savings from our new core systems software, operational consolidations, and the recent branch closings are realized.
Traditionally we would close our call with the discussion of asset
quality and our traditional strong focus on credit quality.