Bank of the Ozarks (the “Bank”) (Nasdaq: OZRK) today announced that net income for the second quarter of 2018 was $114.8 million, a 26.8% increase from the second quarter of 2017. Diluted earnings per common share for the second quarter of 2018 were $0.89, a 21.9% increase from the second quarter of 2017.

For the six months ended June 30, 2018, net income totaled $227.9 million, a 26.8% increase from the first six months of 2017. Diluted earnings per common share for the first six months of 2018 were $1.77, a 21.2% increase from the first six months of 2017.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the second quarter of 2018 were 2.10%, 12.90% and 16.08%, respectively, compared to 1.90%, 12.05% and 15.81%, respectively, for the second quarter of 2017. The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first six months of 2018 were 2.13%, 13.03%, and 16.30%, respectively, compared to 1.92%, 12.41%, and 16.45%, respectively, for the first six months of 2017. The calculation of the Bank’s return on average tangible common stockholders’ equity and the reconciliation to generally accepted accounting principles (“GAAP”) are included in the schedules accompanying this release.

George Gleason, Chairman and Chief Executive Officer, stated, “We are very pleased to report another excellent quarter, continuing our long tradition of achieving industry-leading results quarter after quarter. Our 2.10% annualized return on average assets, 4.66% net interest margin, 35.2% efficiency ratio, and 0.07% annualized net charge-off ratio for total loans are just a few among many highlights in the quarter. In addition, our non-purchased loans have grown $3.2 billion, or 28.6%, over the last four quarters. Our outstanding team continues to work hard delivering great results for both our shareholders and customers.”

KEY BALANCE SHEET METRICS

Total loans, including purchased loans, were $16.8 billion at June 30, 2018, a 10.4% increase from $15.2 billion at June 30, 2017. Non-purchased loans, which exclude loans acquired in previous acquisitions, were $14.2 billion at June 30, 2018, a 28.6% increase from $11.0 billion at June 30, 2017. Purchased loans, which consist of loans acquired in previous acquisitions, were $2.6 billion at June 30, 2018, a 38.0% decrease from $4.2 billion at June 30, 2017. The unfunded balance of closed loans totaled $12.0 billion at June 30, 2018, a 1.0% increase from $11.9 billion at June 30, 2017, but a 4.4% decrease from $12.6 billion at March 31, 2018.

Deposits were $17.9 billion at June 30, 2018, a 10.2% increase from $16.2 billion at June 30, 2017. Total assets were $22.2 billion at June 30, 2018, a 10.7% increase from $20.1 billion at June 30, 2017.

Common stockholders’ equity was $3.61 billion at June 30, 2018, a 10.9% increase from $3.26 billion at June 30, 2017. Tangible common stockholders’ equity was $2.91 billion at June 30, 2018, a 14.4% increase from $2.54 billion at June 30, 2017. Book value per common share was $28.10 at June 30, 2018, a 10.5% increase from $25.43 at June 30, 2017. Tangible book value per common share was $22.63 at June 30, 2018, a 14.0% increase from $19.85 at June 30, 2017. The calculations of the Bank’s tangible common stockholders’ equity and tangible book value per common share and the reconciliations to GAAP are included in the schedules accompanying this release.

The Bank’s ratio of total common stockholders’ equity to total assets was 16.26% at June 30, 2018 compared to 16.25% at June 30, 2017. Its ratio of total tangible common stockholders’ equity to total tangible assets was 13.53% at June 30, 2018 compared to 13.15% at June 30, 2017. The calculation of the Bank’s ratio of total tangible common stockholders’ equity to total tangible assets and the reconciliation to GAAP are included in the schedules accompanying this release.

NET INTEREST INCOME

Net interest income for the second quarter of 2018 was a record $224.7 million, an 11.2% increase from $202.1 million for the second quarter of 2017. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.66% for the second quarter of 2018, a decrease of 33 basis points from 4.99% for the second quarter of 2017. Average earning assets were $19.4 billion for the second quarter of 2018, a 17.7% increase from $16.5 billion for the second quarter of 2017.

Net interest income for the first six months of 2018 was $442.4 million, a 12.6% increase from $392.9 million for the first six months of 2017. Net interest margin, on a FTE basis, was 4.68% for the first six months of 2018, a decrease of 25 basis points from 4.93% for the first six months of 2017. Average earning assets were $19.2 billion for the first six months of 2018, a 17.3% increase from $16.3 billion for the first six months of 2017.

NON-INTEREST INCOME

Non-interest income for the second quarter of 2018 decreased 14.0% to $27.4 million compared to $31.8 million for the second quarter of 2017. Non-interest income for the first six months of 2018 decreased 7.9% to $56.1 million compared to $60.9 million for the first six months of 2017. The Bank’s service charges on deposit accounts declined from $11.76 million for the second quarter of 2017 to $9.70 million for the second quarter of 2018 primarily due to the Durbin Amendment’s impact on the Bank’s interchange revenue effective as of July 1, 2017. The Bank’s mortgage lending income declined from $1.91 million in the second quarter of 2017 to effectively none in the second quarter of 2018. This was a result of the Bank’s decision in December 2017 to exit the secondary market mortgage lending business and the substantial wind down of that business in the first quarter of 2018.

NON-INTEREST EXPENSE

Non-interest expense for the second quarter of 2018 increased 6.3% to $89.1 million compared to $83.8 million for the second quarter of 2017. Non-interest expense for the first six months of 2018 increased 12.8% to $182.9 million compared to $162.1 million for the first six months of 2017. Non-interest expense for both the second quarter and the first six months of 2018 included approximately $0.6 million related to the pending name change that will be effective on July 16, 2018 and the related strategic rebranding initiatives.

The Bank’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the second quarter of 2018 was 35.2% compared to 35.3% for the second quarter of 2017. The Bank’s efficiency ratio for the first six months of 2018 was 36.5% compared to 35.2% for the first six months of 2017.

ASSET QUALITY, CHARGE-OFFS AND ALLOWANCE

Excluding purchased loans, the Bank’s ratio of nonperforming loans as a percent of total loans was 0.10% at June 30, 2018 compared to 0.11% at June 30, 2017, and its ratio of nonperforming assets as a percent of total assets was 0.15% at June 30, 2018 compared to 0.23% at June 30, 2017.

Excluding purchased loans, the Bank’s ratio of loans past due 30 days or more, including past due non-accrual loans, to total loans was 0.12% at June 30, 2018 compared to 0.15% at June 30, 2017.

The Bank’s annualized net charge-off ratio for non-purchased loans was 0.05% for the second quarter of 2018 compared to 0.03% for the second quarter of 2017 and 0.04% for both the first six months of 2018 and the first six months of 2017. The Bank’s annualized net charge-off ratio for all loans was 0.07% for the second quarter of 2018 compared to 0.05% for the second quarter of 2017 and 0.06% for the first six months of 2018 compared to 0.07% for the first six months of 2017.

The Bank’s allowance for loan losses for its non-purchased loans was $103.0 million, or 0.73% of total non-purchased loans, at June 30, 2018 compared to $80.7 million, or 0.73% of total non-purchased loans, at June 30, 2017. The Bank had $1.6 million of allowance for loan losses for its purchased loans at both June 30, 2018 and 2017.

MANAGEMENT’S COMMENTS, CONFERENCE CALL, TRANSCRIPT AND FILINGS

In connection with this release, the Bank released management’s comments on the results for the quarter just ended. Management will conduct a conference call to take questions on these quarterly results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on Thursday, July 12, 2018. Interested parties may listen to this call by dialing 1-844-818-5110 (U.S. and Canada) or 210-229-8841 (internationally) and asking for the Bank of the Ozarks conference call. A recorded playback of the call will be available for one week following the call at 1-855-859-2056 (U.S. and Canada) or 404-537-3406 (internationally). The passcode for this playback is 5268256. The call will be available live or in a recorded version on the Bank’s Investor Relations website at ir.bankozarks.com under “Company News.” The Bank will also provide a transcript of the conference call on its Investor Relations website.

The Bank files annual, quarterly and current reports, proxy materials and other information required by the Securities and Exchange Act of 1934 with the Federal Deposit Insurance Corporation (“FDIC”), copies of which are available electronically at the FDIC’s website at https://efr.fdic.gov/fcxweb/efr/index.html and are also available on the Bank’s Investor Relations website at http://ir.bankozarks.com.

NON-GAAP FINANCIAL MEASURES

This release contains certain non-GAAP financial measures. The Bank uses these non-GAAP financial measures, specifically return on average tangible common stockholders’ equity, tangible book value per common share, total tangible common stockholders’ equity and the ratio of total tangible common stockholders’ equity to total tangible assets, as important measures of the strength of its capital and its ability to generate earnings on its tangible capital invested by its shareholders. These measures typically adjust GAAP financial measures to exclude intangible assets. Management believes presentation of these non-GAAP financial measures provides useful supplemental information which contributes to a proper understanding of the financial results and capital levels of the Bank. These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”

FORWARD-LOOKING STATEMENTS

This release and other communications by the Bank include certain “forward-looking statements” regarding the Bank’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. Those statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: potential delays or other problems implementing the Bank’s growth, expansion and acquisition strategies including delays in identifying sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices; the ability to enter into and/or close additional acquisitions; problems with, or additional expenses relating to, integrating acquisitions; the inability to realize expected cost savings and/or synergies from acquisitions; problems with managing acquisitions; the effect of the announcements of any future acquisition on customer relationships and operating results; the availability and access to capital; possible downgrades in the Bank’s credit ratings or outlook which could increase the costs or availability of funding from capital markets; the ability to attract new or retain existing or acquired deposits or to retain or grow loans, including growth from unfunded closed loans; the ability to generate future revenue growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term interest rates or changes in the relative relationships of various interest rate indices; competitive factors and pricing pressures, including their effect on the Bank’s net interest margin or core spread; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; failure to receive approval of the Bank’s pending applications for change in accounting methods with the Internal Revenue Service; changes in legal, financial and/or regulatory requirements; recently enacted and potential legislation and regulatory actions, including changes expected to result from the Tax Cuts and Jobs Act and the Economic Growth, Regulatory Relief and Consumer Protection Act and the costs and expenses to comply with new and/or existing legislation and regulatory actions; changes in U.S. government monetary and fiscal policy; FDIC special assessments or changes to regular assessments; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity; the impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Bank or its customers; adoption of new accounting standards or changes in existing standards; and adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions or rulings as well as other factors identified in this press release or as detailed from time to time in the Bank’s public filings, including those factors included in the disclosures under the headings “Forward-Looking Information” and “Item 1A. Risk Factors” in the Bank’s most recent Annual Report on Form 10-K for the year ended December 31, 2017 and its quarterly reports on Form 10-Q. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those projected in, or implied by, such forward-looking statements. The Bank disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.

GENERAL INFORMATION

Bank of the Ozarks (Nasdaq: OZRK) is a regional bank providing innovative financial solutions delivered by expert bankers with a relentless pursuit of excellence. Bank of the Ozarks has been recognized as the #1 bank in the nation in its asset size for eight consecutive years.

Headquartered in Little Rock, Arkansas, Bank of the Ozarks conducts operations through 253 offices in Arkansas, Georgia, Florida, North Carolina, Texas, Alabama, South Carolina, California, New York, and Mississippi. Bank of the Ozarks can be found at www.bankozarks.com and on Facebook, Twitter and LinkedIn or contacted at (501) 978-2265 or P.O. Box 8811, Little Rock, Arkansas 72231-8811.

 

Bank of the Ozarks

Consolidated Balance Sheets

Unaudited

 
    June 30,     December 31,
2018 2017
(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents $ 585,352 $ 440,388
Investment securities - available for sale 2,617,859 2,622,796
Non-purchased loans 14,183,533 12,733,937
Purchased loans 2,580,341 3,309,092
Allowance for loan losses   (104,638 )   (94,120 )
Net loans 16,659,236 15,948,909
Premises and equipment, net 540,998 519,811
Foreclosed assets 20,662 25,357
Accrued interest receivable 71,828 64,608
Bank owned life insurance (“BOLI”) 711,327 658,147
Intangible assets, net 702,751 709,040
Other, net   310,367     286,591  
Total assets $ 22,220,380   $ 21,275,647  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing $ 2,785,861 $ 2,726,623
Savings and interest bearing transaction 10,267,464 10,051,122
Time   4,843,760     4,414,600  
Total deposits 17,897,085 17,192,345
Repurchase agreements with customers 179,851 69,331
Other borrowings 1,766 22,320
Subordinated notes 223,088 222,899
Subordinated debentures 119,077 118,800
Accrued interest payable and other liabilities   182,571     186,164  
Total liabilities   18,603,438     17,811,859  
 
Commitments and contingencies
 
Stockholders’ equity:

Preferred stock; $0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding at June 30, 2018 or December 31, 2017

Common stock; $0.01 par value; 300,000,000 shares authorized; 128,616,417 and 128,287,550 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively

1,286 1,283
Additional paid-in capital 2,230,809 2,221,844
Retained earnings 1,428,721 1,250,313
Accumulated other comprehensive loss   (46,913 )   (12,712 )
Total stockholders’ equity before noncontrolling interest 3,613,903 3,460,728
Noncontrolling interest   3,039     3,060  
Total stockholders’ equity   3,616,942     3,463,788  
Total liabilities and stockholders’ equity $ 22,220,380   $ 21,275,647  
 
 

Bank of the Ozarks

Consolidated Statements of Income

Unaudited

 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans $ 210,385 $ 141,985 $ 400,812 $ 269,413
Purchased loans 46,862 75,729 97,839 151,723
Investment securities:
Taxable 11,476 4,181 22,907 7,997
Tax-exempt 4,102 6,148 8,262 12,660
Deposits with banks and federal funds sold   839   115   1,336   134  
Total interest income   273,664   228,158   531,156   441,927  
 
Interest expense:
Deposits 43,832 21,479 78,224 39,856
Repurchase agreements with customers 385 30 544 60
Other borrowings 46 255 679 477
Subordinated notes 3,180 3,052 6,326 6,240
Subordinated debentures   1,560   1,237   2,946   2,418  
Total interest expense   49,003   26,053   88,719   49,051  
 
Net interest income 224,661 202,105 442,437 392,876
Provision for loan losses   9,610   6,103   15,177   11,036  
Net interest income after provision for loan losses   215,051   196,002   427,260   381,840  
 
Non-interest income:
Service charges on deposit accounts 9,704 11,764 19,229 23,065
Mortgage lending income 1 1,910 493 3,484
Trust income 1,591 1,577 3,384 3,208
BOLI income 5,259 4,594 12,839 9,058
Other income from purchased loans, net 2,744 4,777 3,995 8,515
Loan service, maintenance and other fees 5,641 3,427 10,384 6,133
Net gains on investment securities 404 17 404
Gains on sales of other assets 844 672 2,270 2,292
Other   1,602   2,715   3,483   4,739  

Total non-interest income

  27,386   31,840   56,094   60,898  
 
Non-interest expense:
Salaries and employee benefits 41,665 39,892 87,164 78,446
Net occupancy and equipment 13,827 12,937 27,977 26,129
Other operating expenses   33,615   30,999   67,776   57,520  
Total non-interest expense   89,107   83,828   182,917   162,095  
 
Income before taxes 153,330 144,014 300,437 280,643
Provision for income taxes   38,589   53,488   72,563   100,907  
Net income 114,741 90,526 227,874 179,736
Earnings attributable to noncontrolling interest   10   6   21   (16 )
Net income available to common stockholders $ 114,751 $ 90,532 $ 227,895 $ 179,720  
 
Basic earnings per common share $ 0.89 $ 0.73 $ 1.77 $ 1.47  
 
Diluted earnings per common share $ 0.89 $ 0.73 $ 1.77 $ 1.46  
 
Dividends declared per common share $ 0.195 $ 0.175 $ 0.385 $ 0.345  
 
 

Bank of the Ozarks

Consolidated Statements of Stockholders’ Equity

Unaudited

 
   

Common
Stock

   

Additional
Paid-In
Capital

   

Retained
Earnings

   

Accumulated
Other
Comprehensive
Loss

   

Non-
Controlling
Interest

    Total
(Dollars in thousands, except per share amounts)
 
Balances – December 31, 2016 $ 1,213 $ 1,901,880 $ 914,434 $ (25,920 ) $ 3,264 $ 2,794,871

Cumulative effect of change in accounting principals

      1,133     2,720     (3,408 )       445  
Balances – January 1, 2017, as adjusted 1,213 1,903,013 917,154 (29,328 ) 3,264 2,795,316
Net income 179,736 179,736
Earnings attributable to noncontrolling interest (16 ) 16
Total other comprehensive income 20,928 20,928

Common stock dividends paid, $0.345 per share

(41,935 ) (41,935 )
Dividend paid to non-controlling interest (250 ) (250 )

Issuance of 81,350 shares of common stock for exercise of stock options

1 1,365 1,366

Issuance of 238,794 shares of unvested restricted common stock

2 (2 )
Stock-based compensation expense 8,269 8,269

Forfeiture of 12,231 shares of unvested restricted common stock

Issuance of 14,476 shares of common stock to non-employee directors

Issuance of 6,600,000 shares of common stock, net of stock issue costs

  66     299,657                 299,723  
Balances – June 30, 2017 $ 1,282   $ 2,212,302   $ 1,054,939   $ (8,400 ) $ 3,030   $ 3,263,153  
 
Balances – December 31, 2017 $ 1,283 $ 2,221,844 $ 1,250,313 $ (12,712 ) $ 3,060 $ 3,463,788
Net income 227,874 227,874
Earnings attributable to noncontrolling interest 21 (21 )
Total other comprehensive loss (34,201 ) (34,201 )

Common stock dividends paid, $0.385 per share

(49,487 ) (49,487 )

Issuance of 210,890 shares of common stock for exercise of stock options

2 5,585 5,587

Issuance of 214,591 shares of unvested restricted common stock

2 (2 )

Repurchase and cancellation of 71,750 shares of common stock

(1 ) (3,769 ) (3,770 )
Stock-based compensation expense 7,151 7,151

Forfeitures of 24,864 shares of unvested restricted common stock

                       
Balances – June 30, 2018 $ 1,286   $ 2,230,809   $ 1,428,721   $ (46,913 ) $ 3,039   $ 3,616,942  
 
 

Bank of the Ozarks

Summary of Non-Interest Expense

Unaudited

 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
(Dollars in thousands)
Salaries and employee benefits $ 41,665 $ 39,892 $ 87,164 $ 78,446
Net occupancy and equipment 13,827 12,937 27,977 26,129
Other operating expenses:
Professional and outside services 9,112 6,816 17,817 12,154
Postage and supplies 2,218 1,934 4,412 3,853
Advertising and public relations 1,777 1,258 3,107 2,448
Telecommunication services 3,487 3,107 6,683 7,077
Software and data processing 3,110 2,289 6,450 4,762
ATM expense 1,118 1,513 2,481 2,651
Travel and meals 2,498 2,061 4,651 3,916
FDIC insurance 2,700 2,500 5,400 3,500
FDIC and state assessments 858 908 1,720 1,650
Loan collection and repossession expense 503 1,803 1,293 3,105
Writedowns of foreclosed and other assets 460 870 611 1,466
Amortization of intangibles 3,145 3,145 6,290 6,290
Other   2,629   2,795   6,861   4,648
Total non-interest expense $ 89,107 $ 83,828 $ 182,917 $ 162,095
 
 

Bank of the Ozarks

Summary of Total Loans Outstanding

Unaudited

 
    June 30, 2018     December 31, 2017
(Dollars in thousands)
Real estate:        
Residential 1-4 family $ 1,073,455 6.4 % $ 1,174,427 7.3 %
Non-farm/non-residential 4,329,453 25.8 4,478,876 27.9
Construction/land development 7,344,070 43.8 6,648,061 41.5
Agricultural 160,805 1.0 150,003 0.9
Multifamily residential   400,867 2.4     508,514 3.2  
Total real estate 13,308,650 79.4 12,959,881 80.8
Commercial and industrial 780,193 4.6 738,225 4.6
Consumer 1,977,483 11.8 1,472,593 9.2
Other   697,548 4.2     872,330 5.4  
Total loans $ 16,763,874 100.0 % $ 16,043,029 100.0 %
 
 

Bank of the Ozarks

Selected Consolidated Financial Data

(Dollars in thousands, except per share amounts)

Unaudited

 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2018     2017     % Change 2018     2017     % Change

Income statement data:

Net interest income $ 224,661 $ 202,105 11.2 % $ 442,437 $ 392,876 12.6 %
Provision for loan losses 9,610 6,103 57.5 15,177 11,036 37.5
Non-interest income 27,386 31,840 (14.0 ) 56,094 60,898 (7.9 )
Non-interest expense 89,107 83,828 6.3 182,917 162,095 12.8
Net income available to common stockholders 114,751 90,532 26.8 227,895 179,720 26.8

Common stock data:

Net income per share - diluted $ 0.89 $ 0.73 21.9 % $ 1.77 $ 1.46 21.2 %
Net income per share - basic 0.89 0.73 21.9 1.77 1.47 20.4
Cash dividends per share 0.195 0.175 11.4 0.385 0.345 11.6
Book value per share 28.10 25.43 10.5 28.10 25.43 10.5
Tangible book value per share(1) 22.63 19.85 14.0 22.63 19.85 14.0
Diluted shares outstanding (thousands) 128,804 124,198 128,783 123,084
End of period shares outstanding (thousands) 128,616 128,190 128,616 128,190

Balance sheet data at period end:

Assets $ 22,220,380 $ 20,064,589 10.7 % $ 22,220,380 $ 20,064,589 10.7 %
Total loans 16,763,874 15,184,342 10.4 16,763,874 15,184,342 10.4
Non-purchased loans 14,183,533 11,025,203 28.6 14,183,533 11,025,203 28.6
Purchased loans 2,580,341 4,159,139 (38.0 ) 2,580,341 4,159,139 (38.0 )
Allowance for loan losses 104,638 82,320 27.1 104,638 82,320 27.1
Foreclosed assets 20,662 34,000 (39.2 ) 20,662 34,000 (39.2 )
Investment securities 2,617,859 2,101,751 24.6 2,617,859 2,101,751 24.6
Goodwill and other intangible assets 702,751 715,330 (1.8 ) 702,751 715,330 (1.8 )
Deposits 17,897,085 16,241,440 10.2 17,897,085 16,241,440 10.2
Repurchase agreements with customers 179,851 68,502 162.5 179,851 68,502 162.5
Other borrowings 1,766 42,486 (95.8 ) 1,766 42,486 (95.8 )
Subordinated notes 223,088 222,706 0.2 223,088 222,706 0.2
Subordinated debentures 119,077 118,519 0.5 119,007 118,519 0.5
Unfunded balance of closed loans 11,999,661 11,883,679 1.0 11,999,661 11,883,679 1.0
Common stockholders’ equity 3,613,903 3,260,123 10.9 3,613,903 3,260,123 10.9

Net unrealized losses on investment securities AFS included in common stockholders’ equity

(46,913 ) (8,400 ) (46,913 ) (8,400 )
Loan (including purchased loans) to deposit ratio 93.67 % 93.49 % 93.67 % 93.49 %

Selected ratios:

Return on average assets (2) 2.10 % 1.90 % 2.13 % 1.92 %
Return on average common stockholders’ equity (2) 12.90 12.05 13.03 12.41
Return on average tangible common stockholders’ equity (1) (2) 16.08 15.81 16.30 16.45
Average common equity to total average assets 16.30 15.81 16.34 15.45
Net interest margin – FTE (2) 4.66 4.99 4.68 4.93
Efficiency ratio 35.19 35.32 36.52 35.18
Net charge-offs to average non-purchased loans (2) (3) 0.05 0.03 0.04 0.04
Net charge-offs to average total loans(2) 0.07 0.05 0.06 0.07
Nonperforming loans to total loans (4) 0.10 0.11 0.10 0.11
Nonperforming assets to total assets(4) 0.15 0.23 0.15 0.23

Allowance for loan losses to non-purchased loans (5)

0.73 0.73 0.73 0.73

Other information:

Non-accrual loans(4) $ 13,543 $ 11,628 $ 13,543 $ 11,628
Accruing loans - 90 days past due(4)
Troubled and restructured loans(4)
Impaired purchased loans 6,577 11,679 6,577 11,679
 

(1)

 

Calculations of tangible book value per common share and return on average tangible common stockholders’ equity and the reconciliations to GAAP are included in the schedules accompanying this release.

(2)

Ratios for interim periods annualized based on actual days.

(3)

Excludes purchased loans and net charge-offs related to such loans.

(4)

Excludes purchased loans, except for their inclusion in total assets.

(5)

Excludes purchased loans and any allowance for such loans.

 
 

Bank of the Ozarks

Supplemental Quarterly Financial Data

(Dollars in thousands, except per share amounts)

Unaudited

 
    9/30/16     12/31/16     3/31/17     6/30/17     9/30/17     12/31/17     3/31/18     6/30/18

Earnings Summary:

Net interest income $ 175,150 $ 194,800 $ 190,771 $ 202,105 $ 209,722 $ 214,831 $ 217,776 $ 224,661
Federal tax (FTE) adjustment   2,533     3,254     3,594     3,396     3,014     2,450     1,166     1,151  
Net interest income (FTE) 177,683 198,054 194,365 205,501 212,736 217,281 218,942 225,812
Provision for loan losses (7,086 ) (9,855 ) (4,933 ) (6,103 ) (7,777 ) (9,279 ) (5,567 ) (9,610 )
Non-interest income 29,231 30,571 29,058 31,840 32,747 30,213 28,707 27,386
Non-interest expense   (78,781 )   (78,358 )   (78,268 )   (83,828 )   (84,399 )   (86,177 )   (93,810 )   (89,107 )
Pretax income (FTE) 121,047 140,412 140,222 147,410 153,307 152,038 148,272 154,481
FTE adjustment (2,533 ) (3,254 ) (3,594 ) (3,396 ) (3,014 ) (2,450 ) (1,166 ) (1,151 )
Provision for income taxes (42,470 ) (49,312 ) (47,417 ) (53,488 ) (54,246 ) (3,434 ) (33,973 ) (38,589 )
Noncontrolling interest   (14 )   (59 )   (23 )   6     (40 )   10     11     10  

Net income available to common stockholders

$ 76,030   $ 87,787   $ 89,188   $ 90,532   $ 96,007   $ 146,164   $ 113,144   $ 114,751  
Earnings per common share – diluted $ 0.66 $ 0.72 $ 0.73 $ 0.73 $ 0.75 $ 1.14 $ 0.88 $ 0.89

Non-interest Income:

Service charges on deposit accounts $ 10,926 $ 11,759 $ 11,301 $ 11,764 $ 9,729 $ 10,058 $ 9,525 $ 9,704
Mortgage lending income 2,616 2,097 1,574 1,910 1,620 1,294 492 1
Trust income 1,564 1,623 1,631 1,577 1,755 1,729 1,793 1,591
BOLI income 4,638 4,564 4,464 4,594 4,453 5,166 7,580 5,259
Other income from purchased loans 4,635 4,993 3,737 4,777 2,933 2,009 1,251 2,744

Loan service, maintenance and other fees

1,687 2,962 2,706 3,427 5,274 4,289 4,743 5,641
Net gains on investment securities 4 404 2,429 1,201 17
Gains on sales of other assets 594 1,537 1,619 672 1,363 1,899 1,426 844
Other   2,571     1,032     2,026     2,715     3,191     2,568     1,880     1,602  
Total non-interest income $ 29,231   $ 30,571   $ 29,058   $ 31,840   $ 32,747   $ 30,213   $ 28,707   $ 27,386  

Non-interest Expense:

Salaries and employee benefits $ 38,069 $ 36,481 $ 38,554 $ 39,892 $ 35,331 $ 38,417 $ 45,499 $ 41,665
Net occupancy expense 11,669 13,936 13,192 12,937 13,595 13,474 14,150 13,827
Other operating expenses   29,043     27,941     26,522     30,999     35,473     34,286     34,161     33,615  
Total non-interest expense $ 78,781   $ 78,358   $ 78,268   $ 83,828   $ 84,399   $ 86,177   $ 93,810   $ 89,107  

Balance Sheet Data:

Total assets $ 18,451,783 $ 18,890,142 $ 19,152,212 $ 20,064,589 $ 20,768,493 $ 21,275,647 $ 22,039,439 $ 22,220,380
Non-purchased loans 8,759,766 9,605,093 10,216,875 11,025,203 12,047,094 12,733,937 13,674,561 14,183,533
Purchased loans 5,399,831 4,958,022 4,580,047 4,159,139 3,731,536 3,309,092 2,934,535 2,580,341
Investment securities 1,341,894 1,471,612 1,470,568 2,101,751 1,975,102 2,622,796 2,612,961 2,617,859
Deposits 15,123,804 15,574,878 15,713,427 16,241,440 16,823,359 17,192,345 17,833,672 17,897,085
Unfunded balance of closed loans 8,660,804 10,070,043 11,258,762 11,883,679 12,519,839 13,192,439 12,551,032 11,999,661

Common stockholders’ equity

2,756,346 2,791,607 2,873,317 3,260,123 3,334,740 3,460,728 3,526,605 3,613,903

Allowance for Loan Losses:

Balance at beginning of period $ 65,133 $ 69,760 $ 76,541 $ 78,224 $ 82,320 $ 86,784 $ 94,120 $ 98,097
Net charge-offs (2,459 ) (3,074 ) (3,250 ) (2,007 ) (3,313 ) (1,943 ) (1,590 ) (3,069 )
Provision for loan losses   7,086     9,855     4,933     6,103     7,777     9,279     5,567     9,610  
Balance at end of period $ 69,760   $ 76,541   $ 78,224   $ 82,320   $ 86,784   $ 94,120   $ 98,097   $ 104,638  

Selected Ratios:

Net interest margin – FTE(1) 4.90 % 5.02 % 4.88 % 4.99 % 4.84 % 4.72 % 4.69 % 4.66 %
Efficiency ratio 38.07 34.27 35.03 35.32 34.38 34.82 37.88 35.19

Net charge-offs to average non-purchased loans(1) (2)

0.06 0.08 0.05 0.03 0.08 0.08 0.04 0.05

Net charge-offs to average total loans(1)

0.07 0.09 0.09 0.05 0.09 0.05 0.04 0.07

Nonperforming loans to total loans(3)

0.08 0.15 0.11 0.11 0.11 0.10 0.09 0.10
Nonperforming assets to total assets(3) 0.28 0.31 0.25 0.23 0.20 0.18 0.16 0.15

Allowance for loan losses to total non-purchased loans(4)

0.78 0.78 0.75 0.73 0.71 0.73 0.71 0.73

Loans past due 30 days or more, including past due non-accrual loans, to total loans(3)

0.17 0.16 0.16 0.15 0.12 0.15 0.14 0.12
 

(1)

 

Ratios for interim periods annualized based on actual days.

(2)

Excludes purchased loans and net charge-offs related to such loans.

(3)

Excludes purchased loans, except for their inclusion in total assets.

(4)

Excludes purchased loans and any allowance for such loans.

 
 

Bank of the Ozarks

Average Consolidated Balance Sheets and Net Interest Analysis – FTE

Unaudited

 
    Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Average

Balance

    Income/

Expense

    Yield/

Rate

Average

Balance

    Income/

Expense

    Yield/

Rate

Average

Balance

    Income/

Expense

    Yield/

Rate

Average

Balance

    Income/

Expense

    Yield/

Rate

(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold $ 186,103 $ 839 1.81 % $ 87,025 $ 115 0.53 % $ 148,304 $ 1,336 1.82 % $ 83,302 $ 135 0.33 %
Investment securities:
Taxable 2,055,737 11,476 2.24 739,184 4,181 2.27 2,058,995 22,907 2.24 701,378 7,997 2.30
Tax-exempt – FTE 545,173 5,192 3.82 774,837 9,458 4.90 550,942 10,458 3.83 789,134 19,477 4.98
Non-purchased loans – FTE 13,892,522 210,446 6.08 10,517,666 142,071 5.42 13,453,745 400,933 6.01 10,174,598 269,586 5.34
Purchased loans   2,757,235   46,862 6.82   4,391,894   75,729 6.92   2,968,315   97,839 6.65   4,598,340   151,723 6.65
Total earning assets – FTE 19,436,770 274,815 5.67 16,510,606 231,554 5.63 19,180,301 533,473 5.61 16,346,752 448,918 5.54
Non-interest earning assets   2,446,188   2,558,960   2,403,283   2,562,131
Total assets $ 21,882,958 $ 19,069,566 $ 21,583,584 $ 18,908,883
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction $ 10,248,619 $ 29,249 1.14 % $ 8,084,021 $ 10,912 0.54 % $ 10,054,064 $ 51,818 1.04 % $ 7,973,949 $ 19,370 0.49 %
Time deposits of $100 or more 3,182,463 11,027 1.39 3,211,778 7,737 0.97 3,109,697 19,808 1.28 3,226,600 14,869 0.93
Other time deposits   1,449,406   3,556 0.98   1,572,703   2,830 0.72   1,447,687   6,598 0.92   1,635,929   5,617 0.69
Total interest bearing deposits 14,880,488 43,832 1.18 12,868,502 21,479 0.67 14,611,448 78,224 1.08 12,836,478 39,856 0.63
Repurchase agreements with customers 161,246 385 0.96 76,610 30 0.16 136,975 544 0.80 78,238 60 0.16
Other borrowings 35,573 46 0.52 42,365 255 2.41 100,398 679 1.36 42,251 477 2.27
Subordinated notes 223,041 3,180 5.72 222,660 3,052 5.50 222,994 6,326 5.72 222,611 6,240 5.65
Subordinated debentures   119,006   1,560 5.26   118,449   1,237 4.19   118,935   2,946 5.00   118,375   2,418 4.12
Total interest bearing liabilities 15,419,354 49,003 1.27 13,328,586 26,053 0.78 15,190,750 88,719 1.18 13,297,953 49,051 0.74
Non-interest bearing liabilities:
Non-interest bearing deposits 2,717,316 2,643,836 2,691,855 2,609,420
Other non-interest bearing liabilities   176,302   79,331   172,081   77,195
Total liabilities 18,312,972 16,051,753 18,054,686 15,984,568
Common stockholders’ equity 3,566,944 3,014,462 3,525,849 2,921,165
Noncontrolling interest   3,042   3,351   3,049   3,150
Total liabilities and stockholders’ equity $ 21,882,958   $ 19,069,566   $ 21,583,584   $ 18,908,883  
Net interest income – FTE $ 225,812 $ 205,501 $ 444,754 $ 399,867
Net interest margin – FTE 4.66 % 4.99 % 4.68 % 4.93 %
 
 

Bank of the Ozarks

Reconciliation of Non-GAAP Financial Measures

 

Calculation of Average Tangible Common

Stockholders’ Equity and the Annualized Return on

Average Tangible Common Stockholders’ Equity

Unaudited

 
    Three Months Ended     Six Months Ended
June 30, June 30,
2018     2017 2018     2017
(Dollars in thousands)
Net income available to common stockholders $ 114,751   $ 90,532   $ 227,895   $ 179,720  

Average common stockholders’ equity before noncontrolling interest

$ 3,566,944 $ 3,014,462 $ 3,525,849 $ 2,921,165
Less average intangible assets:
Goodwill (660,789 ) (660,789 ) (660,789 ) (660,472 )

Core deposit and other intangibles, net of accumulated amortization

  (43,862 )   (56,281 )   (45,483 )   (57,929 )
Total average intangibles   (704,651 )   (717,070 )   (706,272 )   (718,401 )
Average tangible common stockholders’ equity $ 2,862,293   $ 2,297,392   $ 2,819,577   $ 2,202,764  
Return on average common stockholders’ equity(1)   12.90 %   12.05 %   13.03 %   12.41 %
Return on average tangible common stockholders’ equity(1)   16.08 %   15.81 %   16.30 %   16.45 %
 

(1) Ratios for interim periods annualized based on actual days.

 
 

Calculation of Total Tangible Common

Stockholders’ Equity and Tangible

Book Value per Common Share

Unaudited

 
    June 30,
2018     2017
(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest $ 3,613,903 $ 3,260,123
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (41,962 )   (54,541 )
Total intangibles   (702,751 )   (715,330 )
Total tangible common stockholders’ equity $ 2,911,152   $ 2,544,793  
Shares of common stock outstanding   128,616     128,190  
Book value per common share $ 28.10   $ 25.43  
Tangible book value per common share $ 22.63   $ 19.85  
 
 

Calculation of Total Tangible Common Stockholders’

Equity and the Ratio of Total Tangible Common

Stockholders’ Equity to Total Tangible Assets

Unaudited

 
    June 30,
2018     2017
(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest $ 3,613,903 $ 3,260,123
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (41,962 )   (54,541 )
Total intangibles   (702,751 )   (715,330 )
Total tangible common stockholders’ equity $ 2,911,152   $ 2,544,793  
Total assets $ 22,220,380 $ 20,064,589
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (41,962 )   (54,541 )
Total intangibles   (702,751 )   (715,330 )
Total tangible assets $ 21,517,629   $ 19,349,259  
Ratio of total common stockholders’ equity to total assets   16.26 %   16.25 %

Ratio of total tangible common stockholders’ equity to total tangible assets

  13.53 %   13.15 %