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Bank OZK Announces Fourth Quarter and Full Year 2018 Earnings

LITTLE ROCK, Ark., Jan. 17, 2019 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the fourth quarter of 2018 was $115.0 million, a 21.3% decrease from net income of $146.2 million for the fourth quarter of 2017.  Diluted earnings per common share for the fourth quarter of 2018 were $0.89, a 21.9% decrease from $1.14 for the fourth quarter of 2017.

For the full year of 2018, net income totaled $417.1 million, a 1.1% decrease from net income of $421.9 million for the full year of 2017.  Diluted earnings per common share for the full year of 2018 were $3.24, a 3.3% decrease from $3.35 for the full year of 2017.

During the fourth quarter of 2017, the Bank recognized a one-time income tax benefit of $49.8 million as a result of the revaluation, in the fourth quarter of 2017, of the Bank’s net deferred tax liability position to reflect the reduction in its federal corporate income tax rate from 35% to 21% due to the Tax Cuts and Jobs Act enacted on December 22, 2017.  Additionally, the Bank incurred pre-tax expenses of approximately $0.3 million for the fourth quarter and $11.7 million for the full year of 2018 (none in 2017) related to its name change and related strategic rebranding.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the fourth quarter of 2018 were 2.04%, 12.36% and 15.24%, respectively, compared to 2.81%, 17.23% and 21.84%, respectively, for the fourth quarter of 2017.  The Bank’s returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the full year of 2018 were 1.90%, 11.59% and 14.41%, respectively, compared to 2.15%, 13.49% and 17.49%, respectively, for the full year 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. 

“We had excellent fourth quarter results, achieving our most profitable quarter of the year with net income of $115.0 million and an annualized return on average assets of 2.04%,” stated George Gleason, Chairman and Chief Executive Officer. “For the full year of 2018, our net income was $417.1 million and our return on average assets was 1.90%.  Our strong net income in 2018 resulted in meaningful increases in our already strong risked based capital ratios and allowed us to increase our cash dividends each quarter.  In 2018 we completed our strategic rebranding and continued our efforts to enhance our team of industry and technology professionals, which is key to our competitive advantage.  We believe we are well positioned for success in 2019.”

KEY BALANCE SHEET METRICS

Total loans, including purchased loans, were $17.12 billion at December 31, 2018, a 6.7% increase from $16.04 billion at December 31, 2017.  Non-purchased loans, which exclude loans acquired in previous acquisitions, were $15.07 billion at December 31, 2018, an 18.4% increase from $12.73 billion at December 31, 2017.  Purchased loans, which consist of loans acquired in previous acquisitions, were $2.04 billion at December 31, 2018, a 38.2% decrease from $3.31 billion at December 31, 2017.  The unfunded balance of closed loans totaled $11.36 billion at December 31, 2018, a 13.9% decrease from $13.19 billion at December 31, 2017.

Deposits were $17.94 billion at December 31, 2018, a 4.3% increase from $17.19 billion at December 31, 2017.  Total assets were $22.39 billion at December 31, 2018, a 5.2% increase from $21.28 billion at December 31, 2017.

Common stockholders’ equity was $3.77 billion at December 31, 2018, an 8.9% increase from $3.46 billion at December 31, 2017.  Tangible common stockholders’ equity was $3.07 billion at December 31, 2018, an 11.7% increase from $2.75 billion at December 31, 2017.  Book value per common share was $29.32 at December 31, 2018, an 8.7% increase from $26.98 at December 31, 2017.  Tangible book value per common share was $23.90 at December 31, 2018, an 11.4% increase from $21.45 at December 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 16.84% at December 31, 2018 compared to 16.27% at December 31, 2017.  Its ratio of total tangible common stockholders’ equity to total tangible assets was 14.17% at December 31, 2018 compared to 13.38% at December 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 fourth quarter of 2018 was $228.4 million, a 6.3% increase from $214.8 million for the fourth quarter of 2017.  Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.55% for the fourth quarter of 2018, a decrease of 17 basis points from 4.72% for the fourth quarter of 2017.  Average earning assets were $20.00 billion for the fourth quarter of 2018, a 9.4% increase from $18.28 billion for the fourth quarter of 2017.  

Net interest income for the full year of 2018 was $891.4 million, a 9.1% increase from $817.4 million for the full year of 2017.  Net interest margin, on a FTE basis, was 4.59% for the full year of 2018, a decrease of 26 basis points from 4.85% for the full year of 2017.  Average earning assets were $19.52 billion for the full year of 2018, a 14.1% increase from $17.11 billion for the full year of 2017.

NON-INTEREST INCOME

Non-interest income for the fourth quarter of 2018 decreased 8.8% to $27.6 million compared to $30.2 million for the fourth quarter of 2017.  Non-interest income for the full year of 2018 decreased 13.0% to $107.8 million compared to $123.9 million for the full year of 2017. 

The Bank’s service charges on deposit accounts decreased from $42.9 million in 2017 to $39.5 million in 2018 primarily due to the Durbin Amendment’s impact on the Bank’s interchange revenue effective July 1, 2017.  The Bank’s mortgage lending income decreased from $6.4 million in 2017 to $0.5 million in 2018 as a result of the Bank’s decision in December 2017 to exit secondary market mortgage lending and the wind down of that business in early 2018. 

NON-INTEREST EXPENSE

Non-interest expense for the fourth quarter of 2018 increased 10.1% to $94.9 million compared to $86.2 million for the fourth quarter of 2017.  Non-interest expense for the full year of 2018 increased 14.5% to $380.8 million compared to $332.7 million for the full year of 2017.  Non-interest expense included approximately $0.3 million for the fourth quarter and $11.7 million for the full year of 2018 (none in 2017) related to the name change and the related strategic rebranding. 

The Bank’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the fourth quarter of 2018 was 36.9% compared to 34.8% for the fourth quarter of 2017.  The Bank’s efficiency ratio for the full year of 2018 was 37.9% compared to 34.9% for the full year of 2017.

ASSET QUALITY, CHARGE-OFFS, PROVISIONS AND ALLOWANCE

Excluding purchased loans, the Bank’s ratio of nonperforming loans as a percent of total loans was 0.23% at December 31, 2018 compared to 0.10% at December 31, 2017, and its ratio of nonperforming assets as a percent of total assets was 0.23% at December 31, 2018 compared to 0.18% at December 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 0.28% at December 31, 2018 compared to 0.15% at December 31, 2017.

The Bank’s annualized net charge-off ratio for non-purchased loans was 0.06% for the fourth quarter of 2018 compared to 0.08% for the fourth quarter of 2017, and it was 0.38% for the full year of 2018 compared to 0.06% for the full year of 2017.  The Bank’s annualized net charge-off ratio for all loans was 0.07% for the fourth quarter of 2018 compared to 0.05% for the fourth quarter of 2017, and it was 0.34% for the full year of 2018 compared to 0.07% for the full year of 2017. 

The Bank’s provision for loan losses totaled $7.3 million for the fourth quarter and $64.4 million for the full year of 2018 compared to $9.3 million for the fourth quarter and $28.1 million for the full year of 2017. 

The increases in the Bank’s net charge-off ratios and provision expense for the full year of 2018 compared to 2017 were primarily due to the charge-offs totaling $45.5 million during the third quarter of 2018 on two Real Estate Specialties Group credits.

The Bank’s allowance for loan losses for its non-purchased loans was $100.7 million, or 0.67% of total non-purchased loans, at December 31, 2018 compared to $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 both December 31, 2018 and 2017.

MANAGEMENT’S COMMENTS, CONFERENCE CALL, TRANSCRIPT AND FILINGS

In connection with this release, the Bank released management’s comments on its quarterly and year end results.  Management will conduct a conference call to take questions on the quarterly and year end results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on Friday, January 18, 2019.  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 OZK 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 4759034.  The call will be available live or in a recorded version on the Bank’s Investor Relations website at ir.ozk.com under “Company News/Webcasts.”  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 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 ir.ozk.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 of 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; 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; future 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 OZK (Nasdaq: OZK) is a regional bank providing innovative financial solutions delivered by expert bankers with a relentless pursuit of excellence.  Bank OZK has been recognized as the #1 bank in the nation in its asset size for eight consecutive years. Headquartered in Little Rock, Arkansas, Bank OZK conducts operations through 253 offices in Arkansas, Georgia, Florida, North Carolina, Texas, Alabama, South Carolina, California, New York and Mississippi.  Bank OZK can be found at www.ozk.com and on Facebook, Twitter and LinkedIn or contacted at (501) 978-2265 or P. O. Box 8811, Little Rock, Arkansas 72231-8811. 

   
Bank OZK  
Consolidated Balance Sheets  
Unaudited  
   
  December 31,  
  2018     2017  
     
  (Dollars in thousands, except per share amounts)  
     
ASSETS              
Cash and cash equivalents $ 290,672     $ 440,388  
Investment securities - available for sale   2,862,340       2,593,873  
Federal Home Loan Bank of Dallas and other banker's bank stocks   25,941       28,923  
Non-purchased loans   15,073,791       12,733,937  
Purchased loans   2,044,032       3,309,092  
Allowance for loan losses   (102,264 )     (94,120 )
Net loans   17,015,559       15,948,909  
Premises and equipment, net   567,189       519,811  
Foreclosed assets   16,171       25,357  
Accrued interest receivable   81,968       64,608  
Bank owned life insurance (“BOLI”)   721,238       658,147  
Intangible assets, net   696,461       709,040  
Other, net   110,491       286,591  
Total assets $ 22,388,030     $ 21,275,647  
               
LIABILITIES AND STOCKHOLDERS EQUITY              
Deposits:              
Demand non-interest bearing $ 2,748,273     $ 2,726,623  
Savings and interest bearing transaction   9,682,713       10,051,122  
Time   5,507,429       4,414,600  
Total deposits   17,938,415       17,192,345  
Repurchase agreements with customers   20,564       69,331  
Other borrowings   96,692       22,320  
Subordinated notes   223,281       222,899  
Subordinated debentures   119,358       118,800  
Accrued interest payable and other liabilities   216,355       186,164  
Total liabilities   18,614,665       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 December 31, 2018 or December 31, 2017
Common stock; $0.01 par value; 300,000,000 shares authorized;   1,286       1,283  
  128,611,049 and 128,287,550 shares issued and outstanding at
 December 31, 2018 and 2017, respectively
Additional paid-in capital   2,237,948       2,221,844  
Retained earnings   1,565,201       1,250,313  
Accumulated other comprehensive loss   (34,105 )     (12,712 )
Total stockholders’ equity before noncontrolling interest   3,770,330       3,460,728  
Noncontrolling interest   3,035       3,060  
Total stockholders’ equity   3,773,365       3,463,788  
Total liabilities and stockholders’ equity $ 22,388,030     $ 21,275,647  
 

 

   
Bank OZK  
Consolidated Statements of Income  
Unaudited  
   
   Three Months Ended     Year Ended  
December 31, December 31,
  2018     2017     2018     2017  
     
  (Dollars in thousands, except per share amounts)  
Interest income:                              
Non-purchased loans $ 237,443     $ 178,525     $ 858,102     $ 607,548  
Purchased loans   35,453       56,303       173,465       276,499  
Investment securities:                              
Taxable   14,642       9,661       50,021       25,460  
Tax-exempt   3,941       4,343       16,193       22,430  
Deposits with banks and federal funds sold   590       268       3,039       656  
Total interest income   292,069       249,100       1,100,820       932,593  
                               
Interest expense:                              
Deposits   56,608       29,150       186,617       96,083  
Repurchase agreements with customers   26       38       785       132  
Other borrowings   2,193       574       3,017       1,305  
Subordinated notes   3,216       3,190       12,757       12,620  
Subordinated debentures   1,644       1,317       6,211       5,024  
Total interest expense   63,687       34,269       209,387       115,164  
                               
Net interest income   228,382       214,831       891,433       817,429  
Provision for loan losses   7,271       9,279       64,398       28,092  
Net interest income after provision for loan losses   221,111       205,552       827,035       789,337  
                               
Non-interest income:                              
Service charges on deposit accounts   10,585       10,058       39,544       42,853  
Mortgage lending income   20       1,294       538       6,399  
Trust income   1,821       1,729       6,935       6,691  
BOLI income   5,751       5,166       23,911       18,677  
Other income from purchased loans   2,370       2,009       7,784       13,456  
Loan service, maintenance and other fees   5,245       4,289       20,354       15,696  
Gains on sales of other assets   465       1,899       2,219       5,553  
Net gains on investment securities         1,201       17       4,033  
Other   1,303       2,568       6,473       10,500  
Total non-interest income   27,560       30,213       107,775       123,858  
                               
Non-interest expense:                              
Salaries and employee benefits   41,837       38,417       170,478       152,194  
Net occupancy and equipment   14,027       13,474       56,362       53,198  
Other operating expenses   39,029       34,286       153,912       127,280  
Total non-interest expense   94,893       86,177       380,752       332,672  
                               
Income before taxes   153,778       149,588       554,058       580,523  
Provision for income taxes   38,750       3,434       136,977       158,586  
Net income   115,028       146,154       417,081       421,937  
Earnings attributable to noncontrolling interest   3       10       25       (46 )
Net income available to common stockholders $ 115,031     $ 146,164     $ 417,106     $ 421,891  
                               
Basic earnings per common share $ 0.89     $ 1.14     $ 3.24     $ 3.36  
                               
Diluted earnings per common share $ 0.89     $ 1.14     $ 3.24     $ 3.35  
                               
Dividends declared per common share $ 0.21     $ 0.185     $ 0.795     $ 0.71  
 


   
Bank OZK  
Consolidated Statements of Stockholders’ Equity  
Unaudited  
   
                     Accumulated           Total  
  Additional   Other Non-
 Common Paid-In  Retained Comprehensive Controlling 
 Stock  Capital  Earnings Loss  Interest
     
  (Dollars in thousands, except per share amounts)  
                                               
Balances – December 31, 2017 $ 1,283     $ 2,221,844     $ 1,250,313     $ (12,712 )   $ 3,060     $ 3,463,788  
Net income               417,081                   417,081  
Earnings attributable to noncontrolling interest               25             (25 )      
Total other comprehensive loss                     (21,393 )           (21,393 )
Common stock dividends paid, $0.795 per share               (102,218 )                 (102,218 )
Issuance of 223,840 shares of common stock for exercise of stock options   2       5,740                         5,742  
Issuance of 220,326 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         14,135                         14,135  
Forfeiture of 48,917 shares of unvested restricted common stock                                  
Balances – December 31, 2018 $ 1,286     $ 2,237,948     $ 1,565,201     $ (34,105 )   $ 3,035     $ 3,773,365  
   
   

 

 
Bank OZK
Summary of Non-Interest Expense
Unaudited
 
  Three Months Ended     Year Ended
December 31, December 31,
  2018     2017     2018     2017
   
  (Dollars in thousands)
Salaries and employee benefits $ 41,837     $ 38,417     $ 170,478     $ 152,194
Net occupancy and equipment   14,027       13,474       56,362       53,198
Other operating expenses:                            
Professional and outside services   8,325       10,269       35,867       32,441
Telecommunication services   3,023       3,537       13,080       13,935
Software and data processing   3,943       2,382       13,729       10,126
Postage and supplies   2,214       2,063       9,144       7,769
Advertising and public relations   1,472       1,634       11,557       5,989
ATM expense   544       1,644       4,227       5,725
Travel and meals   2,482       2,338       9,650       8,477
FDIC insurance   3,100       2,700       11,800       9,700
FDIC and state assessments   572       883       2,940       3,414
Loan collection and repossession expense   1,077       949       3,302       5,303
Writedowns of foreclosed assets   1,841       994       2,996       3,488
Writedown of signage due to strategic rebranding               4,915      
Amortization of intangibles   3,144       3,145       12,579       12,580
Other   7,292       1,748       18,126       8,333
Total non-interest expense $ 94,893     $ 86,177     $ 380,752     $ 332,672
 

 

 
Bank OZK
Summary of Total Loans Outstanding
Unaudited
 
   December 31,
  2018     2017
   
  (Dollars in thousands)
Real estate:            
Residential 1-4 family $ 1,049,460     $ 1,174,427
Non-farm/non-residential   4,319,388       4,478,876
Construction/land development   6,562,185       6,648,061
Agricultural   165,088       150,003
Multifamily residential   1,116,026       508,514
Total real estate   13,212,147       12,959,881
Commercial and industrial   823,417       738,225
Consumer   2,345,863       1,472,593
Other   736,396       872,330
Total loans $ 17,117,823     $ 16,043,029
 

 

   
Bank OZK  
Selected Consolidated Financial Data  
(Dollars in thousands, except per share amounts)  
Unaudited  
   
   Three Months Ended     Year Ended  
December 31, December 31,
  2018     2017     % Change     2018     2017     % Change  
Income statement data:                                              
Net interest income $ 228,382     $ 214,831       6.3 %   $ 891,433     $ 817,429       9.1 %
Provision for loan losses   7,271       9,279       (21.6 )     64,398       28,092       129.2  
Non-interest income   27,560       30,213       (8.8 )     107,775       123,858       (13.0 )
Non-interest expense   94,893       86,177       10.1       380,752       332,672       14.5  
Net income available to common stockholders   115,031       146,164       (21.3 )     417,106       421,891       (1.1 )
Common stock data:                                              
Net income per share - diluted $ 0.89     $ 1.14       (21.9 )%   $ 3.24     $ 3.35       (3.3 )%
Net income per share - basic   0.89       1.14       (21.9 )     3.24       3.36       (3.6 )
Cash dividends per share   0.21       0.185       13.5       0.795       0.71       12  
Book value per share   29.32       26.98       8.7       29.32       26.98       8.7  
Tangible book value per share(1)   23.9       21.45       11.4       23.9       21.45       11.4  
Diluted shares outstanding (thousands)   128,666       128,510               128,740       125,809          
End of period shares outstanding (thousands)   128,611       128,288               128,611       128,288          
Balance sheet data at period end:                                              
Assets $ 22,388,030     $ 21,275,647       5.2 %   $ 22,388,030     $ 21,275,647       5.2 %
Total loans   17,117,823       16,043,029       6.7       17,117,823       16,043,029       6.7  
Non-purchased loans   15,073,791       12,733,937       18.4       15,073,791       12,733,937       18.4  
Purchased loans   2,044,032       3,309,092       (38.2 )     2,044,032       3,309,092       (38.2 )
Allowance for loan losses   102,264       94,120       8.7       102,264       94,120       8.7  
Foreclosed assets   16,171       25,357       (36.2 )     16,171       25,357       (36.2 )
Investment securities   2,888,281       2,622,796       10.1       2,888,281       2,622,796       10.1  
Goodwill and other intangible assets   696,461       709,040       (1.8 )     696,461       709,040       (1.8 )
Deposits   17,938,415       17,192,345       4.3       17,938,415       17,192,345       4.3  
Repurchase agreements with customers   20,564       69,331       (70.3 )     20,564       69,331       (70.3 )
Other borrowings   96,692       22,320       333.2       96,692       22,320       333.2  
Subordinated notes   223,281       222,899       0.2       223,281       222,899       0.2  
Subordinated debentures   119,358       118,800       0.5       119,358       118,800       0.5  
Unfunded balance of closed loans   11,364,975       13,192,439       (13.9 )     11,364,975       13,192,439       (13.9 )
Common stockholders’ equity   3,770,330       3,460,728       8.9       3,770,330       3,460,728       8.9  
Net unrealized losses on investment securities AFS included in common stockholders' equity   (34,105 )     (12,712 )             (34,105 )     (12,712 )        
Loan (including purchased loans) to deposit ratio   95.43 %     93.31 %             95.43 %     93.31 %        
Selected ratios:                                              
Return on average assets(2)   2.04 %     2.81 %             1.9 %     2.15 %        
Return on average common stockholders’ equity(2)   12.36       17.23               11.59       13.49          
Return on average tangible common stockholders’ equity(1) (2)   15.24       21.84               14.41       17.49          
Average common equity to total average assets   16.54       16.32               16.42       15.91          
Net interest margin – FTE(2)   4.55       4.72               4.59       4.85          
Efficiency ratio   36.9       34.82               37.93       34.88          
Net charge-offs to average non-purchased loans(2) (3)   0.06       0.08               0.38       0.06          
Net charge-offs to average total loans(2)   0.07       0.05               0.34       0.07          
Nonperforming loans to total loans(4)   0.23       0.1               0.23       0.1          
Nonperforming assets to total assets(4)   0.23       0.18               0.23       0.18          
Allowance for loan losses to non-purchased loans(5)   0.67       0.73             0.67       0.73          
Other information:                                              
Non-accrual loans(4) $ 34,762     $ 12,899             $ 34,762     $ 12,899          
Accruing loans - 90 days past due(4)                                      
Troubled and restructured non-purchased loans - accruing(4)   627                     627                
Impaired purchased loans   7,801       10,019               7,971       10,019          
                                               
(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 OZK  
Supplemental Quarterly Financial Data  
(Dollars in thousands, except per share amounts)  
Unaudited  
   
   3/31/2017     6/30/2017     9/30/2017     12/31/2017     3/31/2018     6/30/2018     9/30/2018     12/31/2018  
Earnings Summary:                                                              
Net interest income $ 190,771     $ 202,105     $ 209,722     $ 214,831     $ 217,776     $ 224,661     $ 220,614     $ 228,382  
Federal tax (FTE) adjustment   3,594       3,396       3,014       2,450       1,166       1,151       1,132       1,219  
Net interest income (FTE)   194,365       205,501       212,736       217,281       218,942       225,812       221,746       229,601  
Provision for loan losses   (4,933 )     (6,103 )     (7,777 )     (9,279 )     (5,567 )     (9,610 )     (41,949 )     (7,271 )
Non-interest income   29,058       31,840       32,747       30,213       28,707       27,386       24,121       27,560  
Non-interest expense   (78,268 )     (83,828 )     (84,399 )     (86,177 )     (93,810 )     (89,107 )     (102,942 )     (94,893 )
Pretax income (FTE)   140,222       147,410       153,307       152,038       148,272       154,481       100,976       154,997  
FTE adjustment   (3,594 )     (3,396 )     (3,014 )     (2,450 )     (1,166 )     (1,151 )     (1,132 )     (1,219 )
Provision for income taxes   (47,417 )     (53,488 )     (54,246 )     (3,434 )     (33,973 )     (38,589 )     (25,665 )     (38,750 )
Noncontrolling interest   (23 )     6       (40 )     10       11       10       1       3  
Net income available to common stockholders $ 89,188     $ 90,532     $ 96,007     $ 146,164     $ 113,144     $ 114,751     $ 74,180     $ 115,031  
Earnings per common share – diluted $ 0.73     $ 0.73     $ 0.75     $ 1.14     $ 0.88     $ 0.89     $ 0.58     $ 0.89  
Non-interest Income:                                                              
Service charges on deposit accounts $ 11,301     $ 11,764     $ 9,729     $ 10,058     $ 9,525     $ 9,704     $ 9,730     $ 10,585  
Mortgage lending income   1,574       1,910       1,620       1,294       492       1       24       20  
Trust income   1,631       1,577       1,755       1,729       1,793       1,591       1,730       1,821  
BOLI income   4,464       4,594       4,453       5,166       7,580       5,259       5,321       5,751  
Other income from purchased loans   3,737       4,777       2,933       2,009       1,251       2,744       1,418       2,370  
Loan service, maintenance and other  fees   2,706       3,427       5,274       4,289       4,743       5,641       4,724       5,245  
Gains (losses) on sales of other assets   1,619       672       1,363       1,899       1,426       844       (518 )     465  
Net gains on investment securities         404       2,429       1,201       17                    
Other   2,026       2,715       3,191       2,568       1,880       1,602       1,692       1,303  
Total non-interest income $ 29,058     $ 31,840     $ 32,747     $ 30,213     $ 28,707     $ 27,386     $ 24,121     $ 27,560  
Non-interest Expense:                                                              
Salaries and employee benefits $ 38,554     $ 39,892     $ 35,331     $ 38,417     $ 45,499     $ 41,665     $ 41,477     $ 41,837  
Net occupancy expense   13,192       12,937       13,595       13,474       14,150       13,827       14,358       14,027  
Other operating expenses   26,522       30,999       35,473       34,286       34,161       33,615       47,107       39,029  
Total non-interest expense $ 78,268     $ 83,828     $ 84,399     $ 86,177     $ 93,810     $ 89,107     $ 102,942     $ 94,893  
Balance Sheet Data:                                                              
Total assets $ 19,152,212     $ 20,064,589     $ 20,768,493     $ 21,275,647     $ 22,039,439     $ 22,220,380     $ 22,086,539     $ 22,388,030  
Non-purchased loans   10,216,875       11,025,203       12,047,094       12,733,937       13,674,561       14,183,533       14,440,623       15,073,791  
Purchased loans   4,580,047       4,159,139       3,731,536       3,309,092       2,934,535       2,580,341       2,285,168       2,044,032  
Investment securities   1,470,568       2,101,751       1,975,102       2,622,796       2,612,961       2,617,859       2,706,156       2,888,281  
Deposits   15,713,427       16,241,440       16,823,359       17,192,345       17,833,672       17,897,085       17,822,915       17,938,415  
Unfunded balance of closed loans   11,258,762       11,883,679       12,519,839       13,192,439       12,551,032       11,999,661       11,891,247       11,364,975  
Common stockholders' equity   2,873,317       3,260,123       3,334,740       3,460,728       3,526,605       3,613,903       3,653,596       3,770,330  
Allowance for Loan Losses:                                                              
Balance at beginning of period $ 76,541     $ 78,224     $ 82,320     $ 86,784     $ 94,120     $ 98,097     $ 104,638     $ 98,200  
Net charge-offs   (3,250 )     (2,007 )     (3,313 )     (1,943 )     (1,590 )     (3,069 )     (48,387 )     (3,207 )
Provision for loan losses   4,933       6,103       7,777       9,279       5,567       9,610       41,949       7,271  
Balance at end of period $ 78,224     $ 82,320     $ 86,784     $ 94,120     $ 98,097     $ 104,638     $ 98,200     $ 102,264  
Selected Ratios:                                                              
Net interest margin – FTE(1)   4.88 %     4.99 %     4.84 %     4.72 %     4.69 %     4.66 %     4.47 %     4.55 %
Efficiency ratio   35.03       35.32       34.38       34.82       37.88       35.19       41.87       36.9  
Net charge-offs to average non-purchased loans(1) (2)   0.05       0.03       0.08       0.08       0.04       0.05       1.32       0.06  
Net charge-offs to average total loans(1)   0.09       0.05       0.09       0.05       0.04       0.07       1.14       0.07  
Nonperforming loans to total loans(3)   0.11       0.11       0.11       0.1       0.09       0.1       0.23       0.23  
Nonperforming assets to total assets(3)   0.25       0.23       0.2       0.18       0.16       0.15       0.23       0.23  
Allowance for loan losses to total non-purchased loans(4)   0.75       0.73       0.71       0.73       0.71       0.73       0.67       0.67  
Loans past due 30 days or more, including past due non-accrual loans, to total loans(3)   0.16       0.15       0.12       0.15       0.14       0.12       0.17       0.28  
   
(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 OZK  
Average Consolidated Balance Sheets and Net Interest Analysis – FTE  
Unaudited  
   
   Three Months Ended December 31,     Year Ended December 31,  
  2018     2017     2018     2017  
  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 $ 102,931   $ 590   2.27 %   $ 56,500   $ 268     1.88 %   $ 160,148   $ 3,039     1.9 %   $ 81,504   $ 656     0.81 %
Investment securities:                                                                            
Taxable   2,335,512     14,642   2.49       1,818,633     9,661     2.11       2,143,455     50,021     2.33       1,158,519     25,460     2.2  
Tax-exempt – FTE   516,512     4,988   3.83       577,614     6,680     4.59       537,616     20,497     3.81       714,329     34,508     4.83  
Non-purchased loans – FTE   14,874,156     237,615   6.34       12,293,725     178,638     5.76       14,040,952     858,466     6.11       10,979,369     607,925     5.54  
Purchased loans   2,170,489     35,453   6.48       3,528,823     56,303     6.33       2,633,271     173,465     6.59       4,175,146     276,499     6.62  
Total earning assets – FTE   19,999,600     293,288   5.82       18,275,295     251,550     5.46       19,515,442     1,105,488     5.66       17,108,867     945,048     5.52  
Non-interest earning assets   2,319,305                 2,345,373                   2,395,813                   2,545,797              
Total assets $ 22,318,905               $ 20,620,668                 $ 21,911,255                 $ 19,654,664              
LIABILITIES AND STOCKHOLDERS EQUITY                                                                            
Interest bearing liabilities:                                                                            
Deposits:                                                                            
Savings and interest bearing transaction $ 9,594,919   $ 33,200   1.37 %   $ 9,409,297   $ 18,052     0.76 %   $ 9,983,075   $ 118,771     1.19 %   $ 8,587,404   $ 53,496     0.62 %
Time deposits of $100 or more   3,204,627     14,595   1.81       3,043,311     8,218     1.07       3,183,108     47,691     1.5       3,164,843     31,222     0.99  
Other time deposits   2,124,920     8,813   1.65       1,452,325     2,880     0.79       1,651,960     20,155     1.22       1,560,035     11,365     0.73  
Total interest bearing deposits   14,924,466     56,608   1.5       13,904,933     29,150     0.83       14,818,143     186,617     1.26       13,312,282     96,083     0.72  
Repurchase agreements with customers   36,680     26   0.29       74,233     38     0.21       101,682     785     0.77       75,915     132     0.17  
Other borrowings   400,874     2,193   2.17       124,340     574     1.83       166,937     3,017     1.81       62,988     1,305     2.07  
Subordinated notes   223,230     3,216   5.71       222,846     3,190     5.68       223,089     12,757     5.72       222,705     12,620     5.67  
Subordinated debentures   119,284     1,644   5.47       118,723     1,317     4.4       119,076     6,211     5.22       118,515     5,024     4.24  
Total interest bearing liabilities   15,704,534     63,687   1.61       14,445,075     34,269     0.94       15,428,927     209,387     1.36       13,792,405     115,164     0.83  
Non-interest bearing liabilities:                                                                            
Non-interest bearing deposits   2,712,858                 2,729,090                   2,695,623                   2,652,895              
Other non-interest bearing liabilities   206,434                 77,588                   185,035                   78,684              
Total liabilities   18,623,826                 17,251,753                   18,309,585                   16,523,984              
Common stockholders’ equity   3,692,044                 3,365,848                   3,598,628                   3,127,576              
Noncontrolling interest   3,035                 3,067                   3,042                   3,104              
Total liabilities and stockholders’ equity $ 22,318,905               $ 20,620,668                 $ 21,911,255                 $ 19,654,664              
Net interest income – FTE       $ 229,601               $ 217,281                 $ 896,101                 $ 829,884        
Net interest margin – FTE             4.55 %                 4.72 %                 4.59 %                 4.85 %
   

 

Bank OZK  
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     Year Ended  
December 31, December 31,
  2018     2017     2018     2017  
     
  (Dollars in thousands)  
Net income available to common stockholders $ 115,031     $ 146,164     $ 417,106     $ 421,891  
Average common stockholders’ equity before noncontrolling interest $ 3,692,044     $ 3,365,848     $ 3,598,628     $ 3,127,576  
Less average intangible assets:                              
Goodwill   (660,789 )     (660,789 )     (660,789 )     (660,632 )
Core deposit and other intangibles, net of accumulated amortization   (37,654 )     (49,927 )     (42,315 )     (54,702 )
Total average intangibles   (698,443 )     (710,716 )     (703,104 )     (715,334 )
Average tangible common stockholders’ equity $ 2,993,601     $ 2,655,132     $ 2,895,524     $ 2,412,242  
Return on average common stockholders’ equity(1)   12.36 %     17.23 %     11.59 %     13.49 %
Return on average tangible common stockholders’ equity(1)   15.24 %     21.84 %     14.41 %     17.49 %
 
(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  
   
   December 31,  
  2018     2017  
     
  (In thousands, except per share amounts)  
Total common stockholders’ equity before noncontrolling interest $ 3,770,330     $ 3,460,728  
Less intangible assets:              
Goodwill   (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization   (35,672 )     (48,251 )
Total intangibles   (696,461 )     (709,040 )
Total tangible common stockholders’ equity $ 3,073,869     $ 2,751,688  
Shares of common stock outstanding   128,611       128,288  
Book value per common share $ 29.32     $ 26.98  
Tangible book value per common share $ 23.9     $ 21.45  
 

 

   
 Calculation of Total Tangible Common Stockholders’  
Equity and the Ratio of Total Tangible Common  
Stockholders’ Equity to Total Tangible Assets  
Unaudited  
   
   December 31,  
  2018     2017  
     
  (Dollars in thousands)  
Total common stockholders’ equity before noncontrolling interest $ 3,770,330     $ 3,460,728  
Less intangible assets:              
Goodwill   (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization   (35,672 )     (48,251 )
Total intangibles   (696,461 )     (709,040 )
Total tangible common stockholders’ equity $ 3,073,869     $ 2,751,688  
Total assets $ 22,388,030     $ 21,275,647  
Less intangible assets:              
Goodwill   (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization   (35,672 )     (48,251 )
Total intangibles   (696,461 )     (709,040 )
Total tangible assets $ 21,691,569     $ 20,566,607  
Ratio of total common stockholders’ equity to total assets   16.84 %     16.27 %
Ratio of total tangible common stockholders’ equity to total   14.17 %     13.38 %
  tangible assets
 

 

   
Media Contact: Susan Blair (501) 978-2217
Investor Contact: Tim Hicks (501) 978-2336

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