News Column

Bank of the Ozarks, Inc. Announces Second Quarter 2014 Earnings

July 14, 2014

LITTLE ROCK, Ark.--(BUSINESS WIRE)-- Bank of the Ozarks, Inc. (NASDAQ: OZRK) today announced that net income for the second quarter of 2014 was $26.5 million, a 29.9% increase from $20.4 million for the second quarter of 2013. Diluted earnings per common share for the second quarter of 2014 were $0.34, a 17.2% increase from $0.29 for the second quarter of 2013.

During the last four quarters, the Company has completed three acquisitions including its July 2013 acquisition of The First National Bank of Shelby (“FNB Shelby”), its March 2014 acquisition of Bancshares, Inc. (“Bancshares”) and its May 2014 acquisition of Summit Bancorp, Inc. (“Summit”). The Company’s results for the second quarter just ended included acquisition-related expenses, net of applicable taxes, of approximately $0.5 million which reduced second quarter diluted earnings per common share by slightly less than $0.01.

For the six months ended June 30, 2014, net income totaled $51.8 million, a 28.2% increase from net income of $40.4 million for the first six months of 2013. Diluted earnings per common share for the first six months of 2014 were $0.68, a 19.3% increase from $0.57 for the first six months of 2013.

The Company’s results for the first six months of 2014 included three significant unusual items. First, the Company’s acquisition of Bancshares resulted in a tax-exempt bargain purchase gain during the first quarter of $4.7 million. Second, during the first six months of 2014, the Company incurred acquisition-related expenses, net of applicable taxes, of approximately $0.9 million. Third, after entering into an agreement for its newly acquired core banking software, the Company incurred charges in the first quarter, net of applicable taxes, of $3.1 million as a result of providing notices of termination to existing core banking software providers. Collectively, for the first six months of 2014, the net effect of these items added approximately $0.7 million, or approximately $0.01 of diluted earnings per common share.

On June 23, 2014, the Company completed a 2-for-1 stock split, in the form of a stock dividend, effected by issuing one share of common stock for each share of such stock outstanding on June 13, 2014. All share and per share information in this release has been adjusted to give effect to this stock split.

The Company’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the second quarter of 2014 decreased to 1.88%, 14.17% and 15.41%, respectively, compared to 2.08%, 15.50% and 15.83%, respectively, for the second quarter of 2013. Annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first six months of 2014 decreased to 1.99%, 14.90% and 15.90%, respectively, compared to 2.07%, 15.63% and 15.98%, respectively, for the first six months of 2013. The calculation of the Company’s return on average tangible common stockholders’ equity and the reconciliation to generally accepted accounting principles (“GAAP”) is included in the schedules accompanying this release.

Loans and leases, excluding loans covered by Federal Deposit Insurance Corporation (“FDIC”) loss share agreements (“covered loans”) and purchased loans not covered by loss share (“purchased non-covered loans”), were $3.17 billion at June 30, 2014, a 29.8% increase from $2.44 billion at June 30, 2013. Including covered loans and purchased non-covered loans, total loans and leases were $4.58 billion at June 30, 2014, a 54.8% increase from $2.96 billion at June 30, 2013.

George Gleason, Chairman and Chief Executive Officer, stated, “We are pleased to report our excellent results for the second quarter and first six months of 2014. While acquisitions have contributed significantly to our growth and profitability in recent years, our ability to organically grow our portfolio of high quality, good yielding loans and leases has been even more important. Our balance of loans and leases outstanding, excluding covered loans and purchased non-covered loans, increased a record $393 million in the quarter just ended and $539 million for the first six months of 2014. Additionally, our unfunded balance of closed loans increased $418 million during the quarter just ended and $624 million for the first six months of 2014, growing to $1.83 billion at June 30, 2014.”

Deposits were $4.98 billion at June 30, 2014, a 67.0% increase compared to $2.98 billion at June 30, 2013.

Total assets were $6.30 billion at June 30, 2014, a 55.8% increase compared to $4.04 billion at June 30, 2013.

Common stockholders’ equity was $850 million at June 30, 2014, a 60.1% increase from $531 million at June 30, 2013. Tangible common stockholders’ equity was $742 million at June 30, 2014, a 42.5% increase from $520 million at June 30, 2013. Book value per common share was $10.67 at June 30, 2014, a 42.5% increase from $7.49 at June 30, 2013. Tangible book value per common share was $9.31 at June 30, 2014, a 26.8% increase from $7.34 at June 30, 2013. The calculations of the company’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.

Changes in common stockholders’ equity, tangible common stockholders’ equity, book value per common share and tangible book value per common share reflect earnings, dividends paid, stock option and stock grant transactions, stock consideration issued in connection with the Company’s FNB Shelby and Summit acquisitions, changes in the Company’s mark-to-market adjustment for unrealized gains and losses on investment securities available for sale and, for tangible common stockholders’ equity and tangible book value per share, changes in intangible assets. In addition, such changes reflect an increase of $4.1 million, or $0.05 per common share, as a result of the reversal during the second quarter of 2014 of a deferred tax asset valuation allowance established with the FNB Shelby acquisition. The Company has revised its initial estimates regarding the expected recovery of acquired assets with built-in losses, specifically the timing and amount of expected charge-offs of purchased non-covered loans. As a result of such revision, the Company concluded that the deferred tax asset valuation allowance of approximately $4.1 million was not necessary. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of changes in circumstances, the Company has recast its third quarter 2013 financial statements, along with all subsequent financial statements, to increase the bargain purchase gain on the FNB Shelby acquisition by $4.1 million to reflect this change in estimate.

The Company’s ratio of common stockholders’ equity to total assets increased to 13.50% at June 30, 2014, compared to 13.13% at June 30, 2013. Its ratio of tangible common stockholders’ equity to total tangible assets decreased to 11.98% at June 30, 2014, compared to 12.90% at June 30, 2013. The calculation of the Company’s ratio of tangible common stockholders’ equity to total tangible assets and the reconciliation to GAAP is included in the schedules accompanying this release.

NET INTEREST INCOME

Net interest income for the second quarter of 2014 was a record $64.8 million, a 49.1% increase from $43.5 million for the second quarter of 2013. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 5.62% in the second quarter of 2014, a six basis point increase from 5.56% in the second quarter of 2013. Average earning assets were $4.82 billion in the second quarter of 2014, a 46.8% increase from $3.29 billion in the second quarter of 2013.

Net interest income for the first six months of 2014 was $117.2 million, a 33.8% increase from $87.6 million for the first six months of 2013. Net interest margin was 5.55% for the first six months of 2014, a 13 basis point decrease from 5.68% for the first six months of 2013. Average earning assets were $4.45 billion in the first six months of 2014, a 36.6% increase from $3.26 billion in the first six months of 2013.

NON-INTEREST INCOME

Non-interest income for the second quarter of 2014 decreased 8.4% to $17.4 million compared to $19.0 million for the second quarter of 2013. There was no bargain purchase gain in the second quarters of 2014 or 2013. Non-interest income for the first six months of 2014 increased 6.8% to $37.7 million from $35.3 million for the first six months of 2013. Non-interest income for the first six months of 2014 included a tax-exempt bargain purchase gain of $4.7 million on the Bancshares acquisition. There was no bargain purchase gain in the first six months of 2013.

Service charges on deposit accounts increased 30.2% to a record $6.60 million in the second quarter of 2014 compared to $5.07 million in the second quarter of 2013. Service charges on deposit accounts were $12.24 million in the first six months of 2014, a 25.0% increase from $9.80 million in the first six months 2013.

Mortgage lending income decreased 31.5% to $1.13 million in the second quarter of 2014 compared to $1.64 million in the second quarter of 2013, but increased 18.0% compared to $0.95 million in the first quarter of 2014. Mortgage lending income was $2.08 million in the first six months of 2014, a 38.5% decrease from $3.38 million in the first six months of 2013.

Trust income for the second quarter of 2014 increased 57.7% to a record $1.36 million compared to $0.87 million for the second quarter of 2013. Trust income was $2.68 million in the first six months of 2014, a 53.3% increase from $1.75 million in the first six months of 2013.

Accretion/amortization of the Company’s FDIC loss share receivable, including amortization of the Company’s FDIC clawback payable, resulted in net amortization expense of $0.74 million in the second quarter of 2014 compared to net accretion income of $2.48 million in the second quarter of 2013, and net accretion income of $0.69 million in the first quarter of 2014. For the first six months of 2014, accretion/amortization of the Company’s FDIC loss share receivable, including amortization of the Company’s FDIC clawback payable, resulted in net amortization expense of $0.05 million, compared to net accretion income of $4.87 million in the first six months of 2013.

Other income from loss share and purchased non-covered loans decreased 1.6% to $3.63 million in the second quarter of 2014 compared to $3.69 million in the second quarter of 2013, but increased 9.6% compared to $3.31 million in the first quarter of 2014. For the first six months of 2014, other income from loss share and purchased non-covered loans was $6.94 million, an increase of 18.8% compared to $5.84 million in the first six months of 2013.

Net gains on sales of other assets decreased to $1.45 million in the second quarter of 2014 compared to $3.11 million in the second quarter of 2013, but increased from $0.97 million in the first quarter of 2014. Net gains on sales of other assets decreased to $2.42 million in the first six months of 2014 compared to $5.08 million in the first six months of 2013.

NON-INTEREST EXPENSE

Non-interest expense for the second quarter of 2014 increased 26.7% to $37.9 million, compared to $29.9 million for the second quarter of 2013. During the second quarter of 2014, the Company incurred pre-tax acquisition-related expenses of approximately $0.8 million. There were no acquisition-related expenses in the second quarter of 2013. The Company’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the second quarter of 2014 decreased to 44.6% compared to 46.3% for the second quarter of 2013 and 49.8% in the first quarter of 2014.

Non-interest expense for the first six months of 2014 was $75.3 million, a 27.4% increase from $59.1 million for the first six months of 2013. During the first six months of 2014, the Company incurred pre-tax non-interest expense of $5.0 million as a result of providing notices to terminate existing core banking software contracts and approximately $1.5 million of acquisition-related expenses. There were no software termination charges or acquisition-related expenses in the first six months of 2013. The Company’s efficiency ratio for the first six months of 2014 increased to 47.1% compared to 46.5% for the first six months of 2013.

ASSET QUALITY, CHARGE-OFFS AND ALLOWANCE

Loans, repossessions and foreclosed assets covered by FDIC loss share agreements, along with the related FDIC loss share receivable, are presented in the Company’s financial reports with a carrying value equal to the net present value of expected future proceeds. The carrying value of covered loans decreased to $276 million at June 30, 2014, compared to $481 million at June 30, 2013. The carrying value of foreclosed assets covered by loss share decreased to $36 million at June 30, 2014, compared to $46 million at June 30, 2013. The carrying value of the FDIC loss share receivable decreased to $51 million at June 30, 2014, compared to $113 million at June 30, 2013.

Purchased non-covered loans include a small volume of non-covered loans acquired in FDIC-assisted acquisitions and loans acquired in non FDIC-assisted acquisitions. Purchased non-covered loans that contain evidence of credit deterioration on the date of purchase are initially recorded at fair value and are presented in the Company’s financial reports with a carrying value equal to the net present value of expected future proceeds. Other purchased non-covered loans are initially recorded at fair value on the date of purchase and are presented in the Company’s financial reports at their initial fair value, adjusted for subsequent advances, pay downs, amortization or accretion of any premium or discount on purchase, charge-offs and any other adjustments to carrying value. The carrying value of purchased non-covered loans increased to $1.13 billion at June 30, 2014, compared to $31 million at June 30, 2013 and $489 million at March 31, 2014.

Excluding covered loans and purchased non-covered loans, nonperforming loans and leases as a percent of total loans and leases decreased to 0.58% at June 30, 2014, compared to 0.66% at June 30, 2013, but increased compared to 0.42% at March 31, 2014.

Excluding covered loans, purchased non-covered loans and foreclosed assets covered by loss share, nonperforming assets as a percent of total assets decreased to 0.62% at June 30, 2014, compared to 0.66% at June 30, 2013, but increased compared to 0.57% at March 31, 2014.

Excluding covered loans and purchased non-covered loans, the Company’s ratio of loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases decreased to 0.63% at June 30, 2014, compared to 0.74% at June 30, 2013 and 0.75% at March 31, 2014.

The Company’s net charge-offs increased to $2.5 million for the second quarter of 2014, including $1.4 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.5 million for covered loans. The Company’s net charge-offs were $1.7 million for the second quarter of 2013, including $0.6 million for non-purchased loans and leases, essentially none for purchased non-covered loans and $1.1 million for covered loans. Net charge-offs for covered loans are reported net of adjustments to applicable FDIC loss share receivable and FDIC clawback payable amounts.

The Company’s annualized net charge-off ratio for its non-purchased loans and leases increased to 0.19% for the second quarter of 2014, compared to 0.12% for the second quarter of 2013 and 0.03% for the first quarter of 2014. The Company’s annualized net charge-off ratio for its purchased non-covered loans increased to 0.28% for the second quarter of 2014, compared to 0.00% for both the second quarter of 2013 and the first quarter of 2014. The Company’s annualized net charge-off ratio for its covered loans was 0.72% for the second quarter of 2014, compared to 0.83% for the second quarter of 2013 and 0.25% for the first quarter of 2014. The Company’s annualized net charge-off ratio for all loans and leases was 0.25% for the second quarter of 2014, compared to 0.25% for the second quarter of 2013 and 0.05% for the first quarter of 2014.

The Company’s net charge-offs for the first six months of 2014 decreased to $2.9 million, including $1.6 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.7 million for covered loans. The Company’s net charge-offs for the first six months of 2013 were $4.8 million, including $1.7 million for non-purchased loans and leases, essentially none for purchased non-covered loans and $3.1 million for covered loans.

The Company’s annualized net charge-off ratio for its non-purchased loans and leases decreased to 0.11% for the first six months of 2014 compared to 0.15% for the first six months of 2013. The Company’s annualized net charge off ratio for its purchased non-covered loans increased to 0.19% for the first six months of 2014 compared to 0.00% for the first six months of 2013. The Company’s annualized net charge-off ratio for its covered loans decreased to 0.47% for the first six months of 2014 compared to 1.15% for the first six months of 2013. The Company’s annualized net charge-off ratio for all loans and leases decreased to 0.16% for the first six months of 2014 compared to 0.35% for the first six months of 2013.

For the second quarter of 2014, the Company’s provision for loan and lease losses increased to $5.6 million, including $4.5 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.5 million for covered loans. For the second quarter of 2013, the Company’s provision for loan and lease losses was $2.7 million, including $1.6 million for non-purchased loans and leases, none for purchased non-covered loans and $1.1 million for covered loans. For the first six months of 2014, the Company’s provision for loan and lease losses increased to $6.9 million, including $5.6 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.7 million for covered loans. For the first six months of 2013, the Company’s provision for loan and lease losses was $5.4 million, which included $2.3 million for non-purchased loans and leases, none for purchased non-covered loans and $3.1 million for covered loans.

The Company’s allowance for loan and lease losses was $47.0 million, or 1.48% of total loans and leases, excluding covered loans and purchased non-covered loans, at June 30, 2014, compared to $39.4 million, or 1.61% of total loans and leases, excluding covered loans and purchased non-covered loans, at June 30, 2013, and $43.9 million, or 1.58% of total loans and leases, excluding covered loans and purchased non-covered loans, at March 31, 2014.

CONFERENCE CALL

Management will conduct a conference call to review announcements made in this release at 10:00 a.m. CDT (11:00 a.m. EDT) on July 15, 2014. The call will be available live or in recorded version on the Company’s website www.bankozarks.com under “Investor Relations” or interested parties calling from locations within the United States and Canada may call 1-888-468-2440 ten minutes prior to the beginning of the call and ask for the Bank of the Ozarks conference call. A recorded playback of the entire call will be available on the Company’s website or by telephone by calling 1-888-203-1112 in the United States and Canada or 719-457-0820 internationally. The passcode for this telephone playback is 1117306. The telephone playback will be available for one week following the call, and the website recording of the call will be available for 12 months.

NON-GAAP FINANCIAL MEASURES

This release contains certain non-GAAP financial measures. The Company’s management uses these non-GAAP financial measures, specifically tangible common stockholders’ equity, tangible book value per common share, the ratio of tangible common stockholders’ equity to total tangible assets and return on average tangible common stockholders’ equity, as the principal 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 that contributes to a proper understanding of the financial results and capital levels of the Company. 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 companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table 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 Company contain “forward looking statements” regarding the Company’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 subject to certain risks, uncertainties and other factors that may cause actual results to differ materially from those projected in such forward looking statements. These risks, uncertainties, and other factors include, but are not limited to: potential delays or other problems implementing the Company’s growth and expansion strategy 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 FDIC-assisted or traditional acquisitions; problems with integrating or managing acquisitions; opportunities to profitably deploy capital; the ability to attract new or retain existing or acquired deposits; the ability to achieve growth in loans and leases, 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; competitive factors and pricing pressures, including their effect on the Company’s net interest margin; general economic, unemployment, credit market and real estate market conditions, and the effect of any such conditions on the creditworthiness of borrowers and lessees, collateral values, the value of investment securities and asset recovery values, including the value of the FDIC loss share receivable and related assets covered by FDIC loss share agreements; changes in legal and regulatory requirements; recently enacted and potential legislation and regulatory actions, including legislation and regulatory actions intended to stabilize economic conditions and credit markets, strengthen the capital of financial institutions, increase regulation of the financial services industry and protect homeowners or consumers; changes in U.S. government monetary and fiscal policy; possible further downgrade of U.S. Treasury securities; the ability to keep pace with technological changes, including changes regarding cyber security; adoption of new accounting standards or changes in existing standards; and adverse results in current or future litigation or regulatory examinations as well as other factors identified in this press release or as detailed from time to time in the Company’s reports filed with the Securities Exchange Commission (“SEC”), including those factors included in the disclosures under the headings “Forward-Looking Information” and “Item 1A. Risk Factors” in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC. 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 or described in such forward-looking statements. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

GENERAL INFORMATION

Bank of the Ozarks, Inc. common stock trades on the NASDAQ Global Select Market under the symbol “OZRK.” The Company owns a state-chartered subsidiary bank that conducts banking operations through 164 offices, including 88 in Arkansas, 28 in Georgia, 21 in Texas, 16 in North Carolina, five in Florida, three in Alabama and one office each in South Carolina, New York and California. The Company may be contacted at (501) 978-2265 or P.O. Box 8811, Little Rock, Arkansas 72231-8811. The Company’s website is www.bankozarks.com.


 
 
 

Bank of the Ozarks, Inc.

Selected Consolidated Financial Data

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

 
    Quarters Ended     Six Months Ended
June 30,June 30,

2014

   

2013

   

% Change

2014

   

2013

   

% Change

Income statement data:

Net interest income $ 64,801 $ 43,465 49.1 % $ 117,198 $ 87,604 33.8 %
Provision for loan and lease losses 5,582 2,666 109.4 6,887 5,394 27.7
Non-interest income 17,388 18,987 (8.4 ) 37,749 35,344 6.8
Non-interest expense 37,878 29,901 26.7 75,333 59,132 27.4
Net income available to common stockholders 26,486 20,387 29.9 51,762 40,387 28.2
 

Common stock data*:

Net income per share – diluted $ 0.34 $ 0.29 17.2 % $ 0.68 $ 0.57 19.3 %
Net income per share – basic 0.35 0.29 20.7 0.69 0.57 21.1
Cash dividends per share 0.115 0.085 35.3 0.225 0.16 40.6
Book value per share 10.67 7.49 42.5 10.67 7.49 42.5
Diluted shares outstanding (thousands) 77,466 71,482 75,981 71,342
End of period shares outstanding (thousands) 79,662 70,876 79,662 70,876
 

Balance sheet data at period end:

Assets $ 6,297,975 $ 4,043,632 55.8 % $ 6,297,975 $ 4,043,632 55.8 %
Loans and leases 3,171,585 2,443,342 29.8 3,171,585 2,443,342 29.8
Purchased loans not covered by loss share 1,127,689 31,027 3,534.5 1,127,689 31,027 3,534.5
Loans covered by loss share 276,380 480,752 (42.5 ) 276,380 480,752 (42.5 )
Allowance for loan and lease losses 46,958 39,373 19.3 46,958 39,373 19.3
Foreclosed assets covered by loss share 35,775 46,157 (22.5 ) 35,775 46,157 (22.5 )
FDIC loss share receivable 50,679 112,716 (55.0 ) 50,679 112,716 (55.0 )
Investment securities 892,129 490,748 81.8 892,129 490,748 81.8
Goodwill 78,669 5,243 1,400.5 78,669 5,243 1,400.5
Other intangibles – net of amortization 29,971 5,447 450.2 29,971 5,447 450.2
Deposits 4,983,897 2,984,629 67.0 4,983,897 2,984,629 67.0
Repurchase agreements with customers 55,999 24,704 126.7 55,999 24,704 126.7
Other borrowings 280,875 391,690 (28.3 ) 280,875 391,690 (28.3 )
Subordinated debentures 64,950 64,950 - 64,950 64,950 -
Common stockholders’ equity 850,204 531,125 60.1 850,204 531,125 60.1
Net unrealized gains (losses) on investment securities AFS included in common stockholders’ equity 10,006

(898

)

 

10,006

(898

)

Loan and lease, including covered loans and purchased non-covered loans, to deposit ratio 91.81 %

99.01

%

91.81 %

99.01

%

 

Selected ratios:

Return on average assets** 1.88 % 2.08 % 1.99 % 2.07 %
Return on average common stockholders’ equity** 14.17 15.50 14.99 15.63
Return on average tangible common stockholders’ equity** 15.41 15.83 15.90 15.98
Average common equity to total average assets 13.25 13.43 13.27 13.25
Net interest margin – FTE** 5.62 5.56 5.55 5.68
Efficiency ratio 44.60 46.34 47.05 46.54
Net charge-offs to average loans and leases**(1) 0.21 0.11 0.13 0.15
Nonperforming loans and leases to total loans and leases(2) 0.58

0.66

0.58

0.66

Nonperforming assets to total assets(2) 0.62 0.66 0.62 0.66
Allowance for loan and lease losses to total loans and leases(2) 1.48

1.61

1.48

1.61

 

Other information:

Non-accrual loans and leases(2) $ 18,393 $ 16,136 $ 18,393 $ 16,136
Accruing loans and leases – 90 days past due(2) - - - -
Troubled and restructured loans and leases(2) - - - -

ORE and repossessions(2)

20,581 10,451 20,581 10,451
Impaired covered loans 22,276 52,586 22,276 52,586
Impaired purchased non-covered loans 89 - 89 -
 

*Adjusted to give effect to 2-for-1 stock split on June 23, 2014.

**Ratios for interim periods annualized based on actual days.

(1) Excludes covered loans and net charge-offs related to covered loans.

(2) Excludes purchased non-covered loans, covered loans and covered foreclosed assets, except for their inclusion in total assets.



 
 
 

Bank of the Ozarks, Inc.

Supplemental Quarterly Financial Data

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

 
    9/30/12     12/31/12     3/31/13     6/30/13     9/30/13     12/31/13     3/31/14     6/30/14

Earnings Summary:

 
Net interest income $ 44,444 $ 43,771 $ 44,139 $ 43,465 $ 50,633 $ 55,282 $ 52,396 $ 64,801
Federal tax (FTE) adjustment   2,087     2,009     2,020     2,076     2,161     2,372     2,424       2,737  
Net interest income (FTE) 46,531 45,780 46,159 45,541 52,794 57,654 54,820 67,538
Provision for loan and lease losses (3,080 ) (2,533 ) (2,728 ) (2,666 ) (3,818 ) (2,863 ) (1,304 ) (5,582 )
Non-interest income 14,491 18,848 16,357 18,987 22,102 18,592 20,360 17,388
Non-interest expense   (28,682 )   (29,891 )   (29,231 )   (29,901 )   (32,208 )   (34,728 )   (37,454 )     (37,878 )
Pretax income (FTE) 29,260 32,204 30,557 31,961 38,870 38,655 36,422 41,466
FTE adjustment (2,087 ) (2,009 ) (2,020 ) (2,076 ) (2,161 ) (2,372 ) (2,424 ) (2,737 )
Provision for income taxes (7,883 ) (9,519 ) (8,526 ) (9,506 ) (10,224 ) (11,893 ) (8,730 ) (12,251 )
Noncontrolling interest   (15 )   (9 )   (11 )   8     (33 )   8     8       8  
Net income available to common stockholders

$

19,275

 

$

20,667

 

$

20,000

 

$

20,387

 

$

26,452

 

$

24,398

 

$

25,276

    $ 26,486  
 
Earnings per common share – diluted* $ 0.28 $ 0.29 $ 0.28 $ 0.29 $ 0.36 $ 0.33 $ 0.34 $ 0.34
 

Non-interest Income:

Service charges on deposit accounts $ 5,000 $ 4,799 $ 4,722 $ 5,074 $ 5,817 $ 6,031 $ 5,639 $ 6,605
Mortgage lending income 1,672 1,483 1,741 1,643 1,276 967 954 1,126
Trust income 865 928 883 865 1,060 1,289 1,316 1,364
Bank owned life insurance income 598 1,027 1,083 1,104 1,179 1,164 1,130 1,278
Accretion/amortization of FDIC loss share receivable, net of amortization of FDIC clawback payable

 

1,699

 

1,336

 

2,392

 

2,481

 

1,396



901

 

692

(741 )
Other income from loss share and purchased non-covered loans, net

2,270

3,194

2,155

3,689

2,484

4,825

3,311

3,629
Gains on investment securities - 55 156 - - 4 5 18
Gains on sales of other assets 1,425 2,431 1,974 3,110 2,501 1,801 974 1,448
Gains on merger and acquisition transactions

-

2,403

-

-

5,163

-

4,667

-
Other   962     1,192     1,251     1,021     1,226     1,610     1,672       2,661  
Total non-interest income $ 14,491   $ 18,848   $ 16,357   $ 18,987   $ 22,102   $ 18,592   $ 20,360     $ 17,388  
 

Non-interest Expense:

Salaries and employee benefits $ 15,040 $ 15,362 $ 15,694 $ 15,294 $ 16,456 $ 17,381 $ 17,689 $ 18,831
Net occupancy expense 4,105 4,160 4,514 4,370 4,786 5,039 5,044 5,707
Other operating expenses 9,028 9,860 8,455 9,669 10,178 11,427 13,908 12,221
Amortization of intangibles   509     509     568     568     788     881     813       1,119  
Total non-interest expense $ 28,682   $ 29,891   $ 29,231   $ 29,901   $ 32,208   $ 34,728   $ 37,454     $ 37,878  
 

Allowance for Loan and Lease Losses:

Balance at beginning of period $ 38,862 $ 38,672 $ 38,738 $ 38,422 $ 39,373 $ 41,660 $ 42,945 $ 43,861
Net charge-offs (3,270 ) (2,467 ) (3,044 ) (1,715 ) (1,531 ) (1,578 ) (388 ) (2,485 )
Provision for loan and lease losses   3,080     2,533     2,728     2,666     3,818     2,863     1,304       5,582  
Balance at end of period $ 38,672   $ 38,738   $ 38,422   $ 39,373   $ 41,660   $ 42,945   $ 43,861     $ 46,958  
 

Selected Ratios:

Net interest margin - FTE** 5.97 % 5.84 % 5.83 % 5.56 % 5.55 % 5.63 % 5.46 % 5.62 %
Efficiency ratio 47.00 46.25 46.76 46.34 43.00 45.55 49.82 44.60
Net charge-offs to average loans and leases**(1)

0.32

0.28

0.19

0.11

0.09

0.12

0.02

0.21
Nonperforming loans and leases to total loans and leases(2)

0.43

0.43

0.40

0.66

0.41

0.33

0.42

0.58
Nonperforming assets to total assets(2) 0.59 0.57 0.50 0.66 0.47 0.43 0.57 0.62
Allowance for loan and lease losses to total loans and leases(2)

1.90

1.83

1.78

1.61

1.65

1.63

1.58

1.48
Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases(2)

 

 

0.61

 

 

0.73

 

 

0.56

 

 

0.74

 

 

0.54

 

 

0.45

 

 

0.75

0.63
 

*Adjusted to give effect to 2-for-1 stock split on June 23, 2014.

**Ratios for interim periods annualized based on actual days.

(1) Excludes covered loans and net charge-offs related to covered loans.

(2) Excludes purchased non-covered loans, covered loans and covered foreclosed assets, except for their inclusion in total assets.



 
 
 

Bank of the Ozarks, Inc.

Average Consolidated Balance Sheets and Net Interest Analysis – FTE

Unaudited

 
    Three Months Ended June 30,     Six Months Ended June 30,
2014     20132014     2013
Average     Income/     Yield/Average     Income/     Yield/Average     Income/     Yield/Average     Income/     Yield/

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

Balance

Expense

Rate

(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold $ 12,398 $ 35 1.14 %

$

1,312

$

2

0.84

%

$ 6,770 $ 38 1.14 %

$

1,090

$

10

1.81

%

Investment securities:
Taxable 320,298 2,790 3.49 141,836 1,183 3.34 298,551 5,149 3.48 147,097 2,468 3.38
Tax-exempt – FTE 471,001 7,652 6.52 349,878 5,921 6.79 437,364 14,416 6.65 343,284 11,681 6.86
Loans and leases – FTE 2,913,816 36,892 5.08 2,242,441 30,723 5.50 2,785,645 70,358 5.09 2,183,975 60,606 5.60
Purchased non-covered loans 817,864 13,998 6.86 34,864 724 8.33 611,179 21,478 7.09 37,373 1,713 9.24
Covered loans   287,380   11,130 15.53   515,547   11,480 8.93   308,225   20,535 13.44   542,675   24,344 9.05
Total earning assets – FTE 4,822,757 72,497 6.03 3,285,878 50,033 6.11 4,447,734 131,974 5.98 3,255,494 100,822 6.25
Non-interest earning assets   837,379   642,650   799,487   676,198
Total assets $ 5,660,136 $ 3,928,528 $ 5,247,221 $ 3,931,692
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction $ 2,484,649 $ 1,271 0.21 %

$

1,654,637

$

806

0.20

%

$ 2,291,407 $ 2,337 0.21 %

$

1,660,156

$

1,670

0.20

%

Time deposits of $100,000 or more

488,265 281 0.23 331,094 243 0.29 435,850 516 0.24 332,939 532 0.32
Other time deposits   505,260   275 0.22   404,408   325 0.32   481,887   555 0.23   415,499   718 0.35
Total interest bearing deposits 3,478,174 1,827 0.21 2,390,139 1,374 0.23 3,209,144 3,408 0.21 2,408,594 2,920 0.24
Repurchase agreements with customers 58,607 13 0.09

29,815

6

0.08

61,808 25 0.08

31,872

13

0.09

Other borrowings 281,009 2,692 3.84 286,719 2,684 3.75 280,968 5,347 3.84 283,755 5,332 3.79
Subordinated debentures   64,950   427 2.64   64,950   428 2.65   64,950   840 2.61   64,950   857 2.66
Total interest bearing liabilities 3,882,740 4,959 0.51 2,771,623 4,492 0.65 3,616,870 9,620 0.54 2,789,171 9,122 0.66
Non-interest bearing liabilities:
Non-interest bearing deposits 964,935 577,930 878,349 567,153
Other non-interest bearing liabilities   59,311   47,814   52,180   50,840
Total liabilities 4,906,986

 

3,397,367 4,547,399 3,407,164
Common stockholders’ equity 749,692 527,713 696,360 521,082
Noncontrolling interest   3,458   3,448   3,462   3,446
Total liabilities and stockholders’ equity $ 5,660,136

$

3,928,528

$ 5,247,221

$

3,931,692

       
Net interest income – FTE $ 67,538 $ 45,541 $ 122,354 $ 91,700
Net interest margin – FTE 5.62 % 5.56 % 5.55 % 5.68 %



 
 
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

Bank of the Ozarks, Inc.

Calculation of Return on Average

Tangible Common Stockholders’ Equity

Unaudited

 
    Quarters Ended     Six Months Ended
June 30,June 30,
2014     20132014     2013
(Dollars in thousands)
 
Net income available to common stockholders $ 26,486   $ 20,387   $ 51,762   $ 40,387  
Average common stockholders’ equity before noncontrolling interest $ 749,692 $ 527,713 $ 696,360 $ 521,082
Less average intangible assets:
Goodwill (44,083 ) (5,243 ) (24,770 ) (5,243 )
Core deposit and bank charter intangibles, net of accumulated amortization   (16,033 )   (5,780 )   (14,973 )   (6,059 )
 
Average tangible common stockholders’ equity before noncontrolling interest $ 689,576   $ 516,690   $ 656,617   $ 509,780  
 
Return on average tangible common stockholders’ equity   15.41 %   15.83 %   15.90 %   15.98 %
 
 
 
 

Bank of the Ozarks, Inc.

Calculation of the Ratio of Tangible Book

Value per Common Share

Unaudited

 
      June 30,
2014     2013
(In thousands, except per share amounts)
 
Total common stockholders’ equity before noncontrolling interest $ 850,204 $ 531,125
Less intangible assets:
Goodwill (78,669 ) (5,243 )

Core deposit and bank charter intangibles, net of accumulated amortization

 

(29,971

)

 

(5,447

)

Total intangibles   (108,640 )   (10,690 )
 
Total tangible common stockholders’ equity $ 741,564   $ 520,435  
 
Common shares outstanding   79,662  

70,876

*

 
Tangible book value per common share $ 9.31   $ 7.34  
 
 

*Adjusted to give effect to 2-for-1 stock split on June 23, 2014.



 
 
 

Bank of the Ozarks, Inc.

Calculation of the Ratio of Total Tangible Common

Stockholders’ Equity to Total Tangible Assets

Unaudited

 
    June 30,
2014     2013
(Dollars in thousands)
 
Total common stockholders’ equity before noncontrolling interest $ 850,204 $ 531,125
Less intangible assets:
Goodwill (78,669 ) (5,243 )

Core deposit and bank charter intangibles, net of accumulated amortization

 

(29,971

)

 

(5,447

)

Total intangibles   (108,640 )   (10,690 )
 
Total tangible common stockholders’ equity $ 741,564   $ 520,435  
 
Total assets $ 6,297,975 $ 4,043,632
Less intangible assets:
Goodwill (78,669 ) (5,243 )

Core deposit and bank charter intangibles, net of accumulated amortization

 

(29,971

)

 

(5,447

)

Total intangibles   (108,640 )   (10,690 )
 
Total tangible assets $ 6,189,335   $ 4,032,942  
 
Ratio of total tangible common stockholders’ equity to total tangible assets   11.98 %   12.90 %
 
 





Bank of the Ozarks, Inc.

Susan Blair, 501-978-2217

Source: Bank of the Ozarks, Inc.


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