Bank of the Ozarks Announces First Quarter 2018 Earnings

LITTLE ROCK, Ark.--()--Bank of the Ozarks (the “Bank”) (NASDAQ: OZRK) today announced that net income for the first quarter of 2018 was $113.1 million, a 26.9% increase from $89.2 million for the first quarter of 2017. Diluted earnings per common share for the first quarter of 2018 were $0.88, a 20.5% increase from $0.73 for the first quarter of 2017.

“We are very pleased to report our results for the first quarter of 2018, including record net interest income, an annualized return on average assets of 2.16%, $941 million growth in the funded balance of non-purchased loans, a 4.69% net interest margin and excellent asset quality metrics.”

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first quarter of 2018 were 2.16%, 13.17% and 16.53%, respectively, compared to 1.93%, 12.80% and 17.17%, respectively, for the first quarter 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 our results for the first quarter of 2018, including record net interest income, an annualized return on average assets of 2.16%, $941 million growth in the funded balance of non-purchased loans, a 4.69% net interest margin and excellent asset quality metrics.”

KEY BALANCE SHEET METRICS

Total loans, including purchased loans, were $16.61 billion at March 31, 2018, a 12.2% increase from $14.80 billion at March 31, 2017. Non-purchased loans, which exclude loans acquired in previous acquisitions, were $13.67 billion at March 31, 2018, a 33.8% increase from $10.22 billion at March 31, 2017. Purchased loans, which consist of loans acquired in previous acquisitions, were $2.93 billion at March 31, 2018, a 35.9% decrease from $4.58 billion at March 31, 2017. The unfunded balance of closed loans totaled $12.55 billion at March 31, 2018, an 11.5% increase from $11.26 billion at March 31, 2017, but a 4.9% decrease from $13.19 billion at December 31, 2017.

Deposits were $17.83 billion at March 31, 2018, a 13.5% increase from $15.71 billion at March 31, 2017. Total assets were $22.04 billion at March 31, 2018, a 15.1% increase from $19.15 billion at March 31, 2017.

Common stockholders’ equity was $3.53 billion at March 31, 2018, a 22.7% increase from $2.87 billion at March 31, 2017. Tangible common stockholders’ equity was $2.82 billion at March 31, 2018, a 30.9% increase from $2.15 billion at March 31, 2017. Book value per common share was $27.42 at March 31, 2018, a 16.0% increase from $23.63 at March 31, 2017. Tangible book value per common share was $21.93 at March 31, 2018, a 23.8% increase from $17.72 at March 31, 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 16.00% at March 31, 2018 compared to 15.00% at March 31, 2017. Its ratio of total tangible common stockholders’ equity to total tangible assets was 13.22% at March 31, 2018 compared to 11.69% at March 31, 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 first quarter of 2018 was a record $217.8 million, a 14.2% increase from $190.8 million for the first quarter of 2017. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.69% for the first quarter of 2018, a decrease of 19 basis points from 4.88% for the first quarter of 2017. Average earning assets were $18.92 billion for the first quarter of 2018, a 17.2% increase from $16.14 billion for the first quarter of 2017.

NON-INTEREST INCOME

Non-interest income for the first quarter of 2018 decreased 1.2% to $28.7 million compared to $29.1 million for the first quarter of 2017. The Bank’s non-interest income for the first quarter of 2018 included $2.73 million of tax-exempt bank owned life insurance (“BOLI”) death benefits, which increased the Bank’s diluted earnings per common share by $0.02. There were no such benefits in the first quarter of 2017. The Bank’s service charges on deposit accounts declined from $11.3 million for the first quarter of 2017 to $9.5 million for the first 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 $1.6 million for the first quarter of 2017 to $0.5 million for the first 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 quarter just ended. The Bank expects only a nominal amount of mortgage lending income in the second quarter of 2018 and none thereafter.

NON-INTEREST EXPENSE

Non-interest expense for the first quarter of 2018 increased 19.9% to $93.8 million compared to $78.3 million for the first quarter of 2017.

The Bank’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the first quarter of 2018 was 37.9% compared to 35.0% for the first quarter 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 0.09% at March 31, 2018 compared to 0.11% at March 31, 2017.

Excluding purchased loans, the Bank’s ratio of nonperforming assets as a percent of total assets was 0.16% at March 31, 2018 compared to 0.25% at March 31, 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 0.14% at March 31, 2018 compared to 0.16% at March 31, 2017.

The Bank’s annualized net charge-off ratio for non-purchased loans was 0.04% for the first quarter of 2018 compared to 0.05% for the first quarter of 2017. The Bank’s annualized net charge-off ratio for purchased loans was 0.05% for the first quarter of 2018 compared to 0.16% for the first quarter of 2017. The Bank’s annualized net charge-off ratio for all loans was 0.04% for the first quarter of 2018 compared to 0.09% for the first quarter of 2017.

The Bank’s allowance for loan losses for its non-purchased loans was $96.5 million, or 0.71% of total non-purchased loans, at March 31, 2018 compared to $76.6 million, or 0.75% of total non-purchased loans, at March 31, 2017 and $92.5 million, or 0.73% of total non-purchased loans, at December 31, 2017. The Bank had $1.6 million of allowance for loan losses for its purchased loans at March 31, 2018 and 2017 and at December 31, 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 on the first quarter at 10:00 a.m. CT (11:00 a.m. ET) on Thursday, April 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 9078203. 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; competitive factors and pricing pressures, including their effect on the Bank’s net interest margin; 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 our 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 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 our public filings, including those factors included in the disclosures under the headings “Forward-Looking Information” and “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2017. 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 254 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    
March 31, December 31,
2018 2017
(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents $ 632,873 $ 440,388
Investment securities - available for sale 2,612,961 2,622,796
Non-purchased loans 13,674,561 12,733,937
Purchased loans 2,934,535 3,309,092
Allowance for loan losses   (98,097 )   (94,120 )
Net loans 16,510,999 15,948,909
Premises and equipment, net 532,263 519,811
Foreclosed assets 21,931 25,357
Accrued interest receivable 69,126 64,608
Bank owned life insurance (“BOLI”) 691,067 658,147
Intangible assets, net 705,896 709,040
Other, net   262,323     286,591  
Total assets $ 22,039,439   $ 21,275,647  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing $ 2,783,095 $ 2,726,623
Savings and interest bearing transaction 10,513,959 10,051,122
Time   4,536,618     4,414,600  
Total deposits 17,833,672 17,192,345
Repurchase agreements with customers 149,075 69,331
Other borrowings 1,942 22,320
Subordinated notes 222,993 222,899
Subordinated debentures 118,938 118,800
Accrued interest payable and other liabilities   183,165     186,164  
Total liabilities   18,509,785     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 March 31, 2018 or December 31, 2017

Common stock; $0.01 par value; 300,000,000 shares authorized; 128,611,611 and 128,287,550 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

1,286 1,283
Additional paid-in capital 2,227,178 2,221,844
Retained earnings 1,339,049 1,250,313
Accumulated other comprehensive loss   (40,908 )   (12,712 )
Total stockholders’ equity before noncontrolling interest 3,526,605 3,460,728
Noncontrolling interest   3,049     3,060  
Total stockholders’ equity   3,529,654     3,463,788  
Total liabilities and stockholders’ equity $ 22,039,439   $ 21,275,647  
 
 

Bank of the Ozarks

Consolidated Statements of Income

Unaudited

 
    Three Months Ended
March 31,
2018     2017
(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans $ 190,426 $ 127,428
Purchased loans 50,977 75,994
Investment securities:
Taxable 11,431 3,816
Tax-exempt 4,160 6,512
Deposits with banks and federal funds sold   498   20  
Total interest income   257,492   213,770  
 
Interest expense:
Deposits 34,392 18,378
Repurchase agreements with customers 159 30
Other borrowings 633 222
Subordinated notes 3,146 3,188
Subordinated debentures   1,386   1,181  
Total interest expense   39,716   22,999  
 
Net interest income 217,776 190,771
Provision for loan losses   5,567   4,933  
Net interest income after provision for loan losses   212,209   185,838  
 
Non-interest income:
Service charges on deposit accounts 9,525 11,301
Mortgage lending income 492 1,574
Trust income 1,793 1,631
BOLI income 7,580 4,464
Other income from purchased loans, net 1,251 3,737
Loan service, maintenance and other fees 4,743 2,706
Net gains on investment securities 17
Gains on sales of other assets 1,426 1,619
Other   1,880   2,026  
Total non-interest income   28,707   29,058  
 
Non-interest expense:
Salaries and employee benefits 45,499 38,554
Net occupancy and equipment 14,150 13,192
Other operating expenses   34,161   26,522  
Total non-interest expense   93,810   78,268  
 
Income before taxes 147,106 136,628
Provision for income taxes   33,973   47,417  
Net income 113,133 89,211
Earnings attributable to noncontrolling interest   11   (23 )
Net income available to common stockholders $ 113,144 $ 89,188  
 
Basic earnings per common share $ 0.88 $ 0.73  
 
Diluted earnings per common share $ 0.88 $ 0.73  
 
Dividends declared per common share $ 0.19 $ 0.17  
 
 

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 89,211 89,211
Earnings attributable to noncontrolling interest (23 ) 23
Total other comprehensive income 7,853 7,853
Common stock dividends paid, $0.17 per share (20,659 ) (20,659 )

Issuance of 69,655 shares of common stock for exercise of stock options

1 1,170 1,171

Issuance of 238,794 shares of unvested restricted common stock

2 (2 )
Stock-based compensation expense 3,712 3,712

Forfeiture of 1,018 shares of unvested restricted common stock

                       
Balances – March 31, 2017 $ 1,216   $ 1,907,893   $ 985,683   $ (21,475 ) $ 3,287   $ 2,876,604  
 
Balances – December 31, 2017 $ 1,283 $ 2,221,844 $ 1,250,313 $ (12,712 ) $ 3,060 $ 3,463,788
Net income 113,133 113,133
Earnings attributable to noncontrolling interest 11 (11 )
Total other comprehensive loss (28,196 ) (28,196 )
Common stock dividends paid, $0.19 per share (24,408 ) (24,408 )

Issuance of 200,025 shares of common stock for exercise of stock options

2 5,323 5,325

Issuance of 198,268 shares of unvested restricted common stock

2 (2 )

Repurchase and cancellation of 70,931 shares of common stock

(1 ) (3,729 ) (3,730 )
Stock-based compensation expense 3,742 3,742

Forfeitures of 3,301 shares of unvested restricted common stock

                       
Balances – March 31, 2018 $ 1,286   $ 2,227,178   $ 1,339,049   $ (40,908 ) $ 3,049   $ 3,529,654  
 
 

Bank of the Ozarks

Summary of Non-Interest Expense

Unaudited

 
    Three Months Ended
March 31,
2018     2017
(Dollars in thousands)
Salaries and employee benefits $ 45,499 $ 38,554
Net occupancy and equipment 14,150 13,192
Other operating expenses:
Professional and outside services 8,705 5,338
Postage and supplies 2,195 1,919
Advertising and public relations 1,331 1,190
Telecommunication services 3,197 3,970
Software and data processing 3,340 2,473
ATM expense 1,363 1,138
Travel and meals 2,153 1,855
FDIC insurance 2,700 1,000
FDIC and state assessments 862 742
Loan collection and repossession expense 790 1,302
Writedowns of foreclosed and other assets 151 596
Amortization of intangibles 3,145 3,145
Other   4,229   1,854
Total non-interest expense $ 93,810 $ 78,268
 
 

Bank of the Ozarks

Summary of Total Loans Outstanding

Unaudited

 
    March 31, 2018     December 31, 2017
(Dollars in thousands)
Real estate:        
Residential 1-4 family $ 1,099,699 6.6 % $ 1,174,427 7.3 %
Non-farm/non-residential 4,347,791 26.2 4,478,876 27.9
Construction/land development 7,187,863 43.3 6,648,061 41.5
Agricultural 156,133 0.9 150,003 0.9
Multifamily residential   556,133 3.4     508,514 3.2  
Total real estate 13,347,619 80.4 12,959,881 80.8
Commercial and industrial 786,932 4.7 738,225 4.6
Consumer 1,651,567 9.9 1,472,593 9.2
Other   822,978 5.0     872,330 5.4  
Total loans $ 16,609,096 100.0 % $ 16,043,029 100.0 %
 
 

Bank of the Ozarks

Selected Consolidated Financial Data

Unaudited

 
   

Three Months Ended
March 31,

2018     2017     % Change
(Dollars in thousands, except per share amounts)

Income statement data:

Net interest income $ 217,776 $ 190,771 14.2 %
Provision for loan losses 5,567 4,933 12.9
Non-interest income 28,707 29,058 (1.2 )
Non-interest expense 93,810 78,268 19.9
Net income available to common stockholders 113,144 89,188 26.9

Common share and per common share data:

Earnings - diluted $ 0.88 $ 0.73 20.5 %
Earnings - basic 0.88 0.73 20.5
Cash dividends 0.19 0.17 11.8
Book value 27.42 23.63 16.0
Tangible book value(1) 21.93 17.72 23.8
Weighted-average diluted shares outstanding (thousands) 128,762 121,954
End of period shares outstanding (thousands) 128,612 121,575

Balance sheet data at period end:

Total assets $ 22,039,439 $ 19,152,212 15.1 %
Total loans 16,609,096 14,796,922 12.2
Non-purchased loans 13,674,561 10,216,875 33.8
Purchased loans 2,934,535 4,580,047 (35.9 )
Allowance for loan losses 98,097 78,224 25.4
Foreclosed assets 21,931 36,899 (40.6 )
Investment securities 2,612,961 1,470,568 77.7
Goodwill and other intangible assets 705,896 718,475 (1.8 )
Deposits 17,833,672 15,713,427 13.5
Repurchase agreements with customers 149,075 80,609 84.9
Other borrowings 1,942 42,291 (95.4 )
Subordinated notes 222,993 222,611 0.2
Subordinated debentures 118,938 118,380 0.5
Unfunded balance of closed loans 12,551,032 11,258,762 11.5
Total common stockholders’ equity 3,526,605 2,873,317 22.7

Selected ratios:

Return on average assets(2) 2.16 % 1.93 %
Return on average common stockholders’ equity(2) 13.17 12.80
Return on average tangible common stockholders’ equity(1) (2) 16.53 17.17
Loan, including purchased loans, to deposit ratio 93.13 94.17
Average common equity to total average assets 16.37 15.08
Net interest margin – FTE(2) 4.69 4.88
Efficiency ratio 37.88 35.03
Net charge-offs to average non-purchased loans(2) (3) 0.04 0.05
Net charge-offs to average total loans(2) 0.04 0.09
Nonperforming loans to total loans(4) 0.09 0.11
Nonperforming assets to total assets(4) 0.16 0.25
Allowance for loan losses to non-purchased loans(5) 0.71 0.75

Other information:

Non-accrual loans(4) $ 12,471 $ 11,069
Accruing loans - 90 days past due(4)
Troubled and restructured loans(4)
Impaired purchased loans 6,849 13,869
 

(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

Unaudited

 
    6/30/16     9/30/16     12/31/16     3/31/17     6/30/17     9/30/17     12/31/17     3/31/18
(Dollars in Thousands, Except Per Share Amounts)

Earnings Summary:

Net interest income $ 119,038 $ 175,150 $ 194,800 $ 190,771 $ 202,105 $ 209,722 $ 214,831 $ 217,776
Federal tax (FTE) adjustment   2,067     2,533     3,254     3,594     3,396     3,014     2,450     1,166  
Net interest income (FTE) 121,105 177,683 198,054 194,365 205,501 212,736 217,281 218,942
Provision for loan losses (4,834 ) (7,086 ) (9,855 ) (4,933 ) (6,103 ) (7,777 ) (9,279 ) (5,567 )
Non-interest income 22,733 29,231 30,571 29,058 31,840 32,747 30,213 28,707
Non-interest expense   (50,928 )   (78,781 )   (78,358 )   (78,268 )   (83,828 )   (84,399 )   (86,177 )   (93,810 )
Pretax income (FTE) 88,076 121,047 140,412 140,222 147,410 153,307 152,038 148,272
FTE adjustment (2,067 ) (2,533 ) (3,254 ) (3,594 ) (3,396 ) (3,014 ) (2,450 ) (1,166 )
Provision for income taxes (31,514 ) (42,470 ) (49,312 ) (47,417 ) (53,488 ) (54,246 ) (3,434 ) (33,973 )
Noncontrolling interest   (21 )   (14 )   (59 )   (23 )   6     (40 )   10     11  

Net income available to common stockholders

$ 54,474   $ 76,030   $ 87,787   $ 89,188   $ 90,532   $ 96,007   $ 146,164   $ 113,144  
Earnings per common share – diluted $ 0.60 $ 0.66 $ 0.72 $ 0.73 $ 0.73 $ 0.75 $ 1.14 $ 0.88

Non-interest Income:

Service charges on deposit accounts $ 8,119 $ 10,926 $ 11,759 $ 11,301 $ 11,764 $ 9,729 $ 10,058 $ 9,525
Mortgage lending income 2,057 2,616 2,097 1,574 1,910 1,620 1,294 492
Trust income 1,574 1,564 1,623 1,631 1,577 1,755 1,729 1,793
BOLI income 2,745 4,638 4,564 4,464 4,594 4,453 5,166 7,580
Other income from purchased loans 4,599 4,635 4,993 3,737 4,777 2,933 2,009 1,251

Loan service, maintenance and other fees

1,238 1,687 2,962 2,706 3,427 5,274 4,289 4,743
Net gains on investment securities 4 404 2,429 1,201 17
Gains on sales of other assets 998 594 1,537 1,619 672 1,363 1,899 1,426
Other   1,403     2,571     1,032     2,026     2,715     3,191     2,568     1,880  
Total non-interest income $ 22,733   $ 29,231   $ 30,571   $ 29,058   $ 31,840   $ 32,747   $ 30,213   $ 28,707  

Non-interest Expense:

Salaries and employee benefits $ 24,921 $ 38,069 $ 36,481 $ 38,554 $ 39,892 $ 35,331 $ 38,417 $ 45,499
Net occupancy expense 8,388 11,669 13,936 13,192 12,937 13,595 13,474 14,150
Other operating expenses   17,619     29,043     27,941     26,522     30,999     35,473     34,286     34,161  
Total non-interest expense $ 50,928   $ 78,781   $ 78,358   $ 78,268   $ 83,828   $ 84,399   $ 86,177   $ 93,810  

Balance Sheet Data:

Total assets $ 12,279,579 $ 18,451,783 $ 18,890,142 $ 19,152,212 $ 20,064,589 $ 20,768,493 $ 21,275,647 $ 22,039,439
Non-purchased loans 8,214,900 8,759,766 9,605,093 10,216,875 11,025,203 12,047,094 12,733,937 13,674,561
Purchased loans 1,515,104 5,399,831 4,958,022 4,580,047 4,159,139 3,731,536 3,309,092 2,934,535
Deposits 10,195,072 15,123,804 15,574,878 15,713,427 16,241,440 16,823,359 17,192,345 17,833,672

Common stockholders’ equity

1,556,921 2,756,346 2,791,607 2,873,317 3,260,123 3,334,740 3,460,728 3,526,605

Allowance for Loan Losses:

Balance at beginning of period $ 61,760 $ 65,133 $ 69,760 $ 76,541 $ 78,224 $ 82,320 $ 86,784 $ 94,120
Net charge-offs (1,461 ) (2,459 ) (3,074 ) (3,250 ) (2,007 ) (3,313 ) (1,943 ) (1,590 )
Provision for loan losses   4,834     7,086     9,855     4,933     6,103     7,777     9,279     5,567  
Balance at end of period $ 65,133   $ 69,760   $ 76,541   $ 78,224   $ 82,320   $ 86,784   $ 94,120   $ 98,097  

Selected Ratios:

Net interest margin – FTE(1) 4.82 % 4.90 % 5.02 % 4.88 % 4.99 % 4.84 % 4.72 % 4.69 %
Efficiency ratio 35.41 38.07 34.27 35.03 35.32 34.38 34.82 37.88
Net charge-offs to average

non-purchased loans(1) (2)

0.05 0.06 0.08 0.05 0.03 0.08 0.08 0.04
Net charge-offs to average

total loans(1)

0.06 0.07 0.09 0.09 0.05 0.09 0.05 0.04
Nonperforming loans

to total loans(3)

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

total non-purchased loans(4)

0.78 0.78 0.78 0.75 0.73 0.71 0.73 0.71

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

0.22 0.17 0.16 0.16 0.15 0.12 0.15 0.14
 

(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 March 31,
2018     2017

Average
Balance

   

Income/
Expense

   

Yield/
Rate

Average
Balance

   

Income/
Expense

   

Yield/
Rate

(Dollars in thousands)
ASSETS
Interest earning assets:

Interest earning deposits and federal funds sold

$ 110,085 $ 498 1.83 % $ 41,806 $ 20 0.19 %
Investment securities:
Taxable 2,062,358 11,431 2.25 663,153 3,816 2.33
Tax-exempt – FTE 556,776 5,265 3.84 803,589 10,019 5.06
Non-purchased loans – FTE 13,010,093 190,487 5.94 9,827,717 127,515 5.26
Purchased loans   3,181,740   50,977 6.50   4,807,080   75,993 6.41
Total earning assets – FTE 18,921,052 258,658 5.54 16,143,345 217,363 5.46
Non-interest earning assets   2,359,796   2,603,381
Total assets $ 21,280,848 $ 18,746,726

LIABILITIES AND STOCKHOLDERS’ EQUITY

Interest bearing liabilities:
Deposits:

Savings and interest bearing transaction

$ 9,857,347 $ 22,570 0.93 % $ 7,862,653 $ 8,458 0.44 %
Time deposits of $100 or more 3,036,123 8,781 1.17 3,241,587 7,132 0.89
Other time deposits   1,445,948   3,041 0.85   1,699,858   2,787 0.66
Total interest bearing deposits 14,339,418 34,392 0.97 12,804,098 18,377 0.58
Repurchase agreements with customers 112,434 159 0.57 79,884 30 0.15
Other borrowings 165,943 633 1.55 42,137 222 2.14
Subordinated notes 222,947 3,146 5.72 222,561 3,188 5.81
Subordinated debentures   118,864   1,386 4.73   118,300   1,181 4.05
Total interest bearing liabilities 14,959,606 39,716 1.08 13,266,980 22,998 0.70
Non-interest bearing liabilities:
Non-interest bearing deposits 2,666,111 2,574,540
Other non-interest bearing liabilities   167,778   75,107
Total liabilities 17,793,495 15,916,627
Common stockholders’ equity 3,484,297 2,826,832
Noncontrolling interest   3,056   3,267

Total liabilities and stockholders’ equity

$ 21,280,848   $ 18,746,726  
Net interest income – FTE $ 218,942 $ 194,365
Net interest margin – FTE 4.69 % 4.88 %
 
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

Bank of the Ozarks

Calculation of Average Tangible Common

Stockholders’ Equity and the Return on

Average Tangible Common Stockholders’ Equity

Unaudited

 
    Three Months Ended
March 31,
2018     2017
(Dollars in thousands)
Net income available to common stockholders $ 113,144   $ 89,188  
Average common stockholders’ equity before

noncontrolling interest

$ 3,484,297 $ 2,826,832
Less average intangible assets:
Goodwill (660,789 ) (660,151 )

Core deposit and other intangibles, net of accumulated amortization

  (47,122 )   (59,596 )
Total average intangibles   (707,911 )   (719,747 )
Average tangible common stockholders’ equity $ 2,776,386   $ 2,107,085  
Return on average common stockholders’ equity(1)   13.17 %   12.80 %
Return on average tangible common stockholders’ equity(1)   16.53 %   17.17 %
 
(1)   Ratios for interim periods annualized based on actual days.
 
 

Bank of the Ozarks

Calculation of Total Tangible Common

Stockholders’ Equity and Tangible

Book Value per Common Share

Unaudited

 
    March 31,
2018     2017
(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest $ 3,526,605 $ 2,873,317
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (45,107 )   (57,686 )
Total intangibles   (705,896 )   (718,475 )
Total tangible common stockholders’ equity $ 2,820,709   $ 2,154,842  
Shares of common stock outstanding   128,612     121,575  
Book value per common share $ 27.42   $ 23.63  
Tangible book value per common share $ 21.93   $ 17.72  
 
 

Bank of the Ozarks

Calculation of Total Tangible Common Stockholders’

Equity and the Ratio of Total Tangible Common

Stockholders’ Equity to Total Tangible Assets

Unaudited

 
    March 31,
2018     2017
(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest $ 3,526,605 $ 2,873,317
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (45,107 )   (57,686 )
Total intangibles   (705,896 )   (718,475 )
Total tangible common stockholders’ equity $ 2,820,709   $ 2,154,842  
Total assets $ 22,039,439 $ 19,152,212
Less intangible assets:
Goodwill (660,789 ) (660,789 )

Core deposit and other intangibles, net of accumulated amortization

  (45,107 )   (57,686 )
Total intangibles   (705,896 )   (718,475 )
Total tangible assets $ 21,333,543   $ 18,433,737  
Ratio of total common stockholders’ equity to total assets   16.00 %   15.00 %

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

  13.22 %   11.69 %

Contacts

Bank of the Ozarks
Media Contact:
Susan Blair, 501-978-2217
or
Investor Contact:
Tim Hicks, 501-978-2336

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