Print - Bank OZK Announces Second Quarter 2019 Earnings

Source: Bank OZK
July 18, 2019 16:01 ET

Bank OZK Announces Second Quarter 2019 Earnings

LITTLE ROCK, Ark., July 18, 2019 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the second quarter of 2019 was $110.5 million, a 3.7% decrease from $114.8 million for the second quarter of 2018. Diluted earnings per common share for the second quarter of 2019 were $0.86, a 3.4% decrease from $0.89 for the second quarter of 2018.

For the six months ended June 30, 2019, net income totaled $221.2 million, a 2.9% decrease from $227.9 million for the first six months of 2018. Diluted earnings per common share for the first six months of 2019 were $1.71, a 3.4% decrease from $1.77 for the first six months of 2018.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the second quarter of 2019 were 1.95%, 11.29% and 13.70%, respectively, compared to 2.10%, 12.90% and 16.08%, respectively, for the second quarter of 2018. The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first six months of 2019 were 1.97%, 11.52%, and 14.04%, respectively, compared to 2.13%, 13.03%, and 16.30%, respectively, for the first six months of 2018. The calculation of the Bank’s annualized 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, “Our strong credit culture and consistent discipline have been important ingredients in our long term success, and we are not wavering from those principles in today’s challenging competitive and interest rate environment. We are pleased that we continue to deliver financial metrics among the best in the industry, including the 1.95% annualized return on average assets, 4.45% net interest margin and 39.3% efficiency ratio for the quarter just ended. We will remain disciplined and focused on delivering long-term value for our shareholders.”

KEY BALANCE SHEET METRICS

Total loans were $17.49 billion at June 30, 2019, a 4.3% increase from $16.76 billion at June 30, 2018. Non-purchased loans, which exclude loans acquired in previous acquisitions, were $15.79 billion at June 30, 2019, an 11.3% increase from $14.18 billion at June 30, 2018. Purchased loans, which consist of loans acquired in previous acquisitions, were $1.70 billion at June 30, 2019, a 34.2% decrease from $2.58 billion at June 30, 2018. The unfunded balance of closed loans was $11.17 billion at June 30, 2019, a 6.9% decrease from $12.00 billion at June 30, 2018.

Deposits were $18.19 billion at June 30, 2019, a 1.6% increase from $17.90 billion at June 30, 2018, but a 1.6% decrease from March 31, 2019. Total assets were $22.96 billion at June 30, 2019, a 3.3% increase from $22.22 billion at June 30, 2018, but a 0.2% decrease from March 31, 2019.

Common stockholders’ equity was $3.99 billion at June 30, 2019, a 10.5% increase from $3.61 billion at June 30, 2018. Tangible common stockholders’ equity was $3.30 billion at June 30, 2019, a 13.5% increase from $2.91 billion at June 30, 2018. Book value per common share was $30.97 at June 30, 2019, a 10.2% increase from $28.10 at June 30, 2018. Tangible book value per common share was $25.61 at June 30, 2019, a 13.2% increase from $22.63 at June 30, 2018. 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 increased to 17.39% at June 30, 2019 compared to 16.26% at June 30, 2018. Its ratio of total tangible common stockholders’ equity to total tangible assets increased to 14.83% at June 30, 2019 compared to 13.53% at June 30, 2018. 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.

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, which are available at http://ir.ozk.com. This release should be read in conjunction with management’s comments on the results for the second quarter of 2019.

Management will conduct a conference call to take questions on these quarterly results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on July 19, 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 4369463. 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 http://ir.ozk.com. To receive automated email alerts for these materials, please visit http://ir.ozk.com/EmailNotification to sign up.

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; 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, the Bank’s operational or security systems or infrastructure, or those of third parties with whom it does 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 other public reports the Bank files with the FDIC, 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, 2018 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 top performing bank in the nation in its asset size 13 times in the past eight years. Headquartered in Little Rock, Arkansas, Bank OZK conducts operations through 254 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.

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

Bank OZK
Consolidated Balance Sheets
Unaudited


	June 30,			December 31,
	2019			2018
	(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents	$	738,566		$	290,672
Investment securities - available for sale ("AFS")		2,548,489			2,862,340
Federal Home Loan Bank of Dallas and other banker's bank stocks		11,607			25,941
Non-purchased loans		15,786,809			15,073,791
Purchased loans		1,698,396			2,044,032
Allowance for loan losses		(106,642	)		(102,264	)
Net loans		17,378,563			17,015,559
Premises and equipment, net		662,082			567,189
Foreclosed assets		33,467			16,171
Accrued interest receivable		81,003			81,968
Bank owned life insurance (“BOLI”)		730,871			721,238
Goodwill and other intangible assets, net		690,304			696,461
Other, net		85,779			110,491
Total assets	$	22,960,731		$	22,388,030

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	2,777,066		$	2,748,273
Savings and interest bearing transaction		9,226,197			9,682,713
Time		6,182,952			5,507,429
Total deposits		18,186,215			17,938,415
Repurchase agreements with customers		10,909			20,564
Other borrowings		201,455			96,692
Subordinated notes		223,471			223,281
Subordinated debentures		119,635			119,358
Accrued interest payable and other liabilities		222,668			216,355
Total liabilities		18,964,353			18,614,665

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding at June 30, 2019 or December 31, 2018		—			—
Common stock; $0.01 par value; 300,000,000 shares authorized; 128,946,716 and 128,611,049 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,289			1,286
Additional paid-in capital		2,243,779			2,237,948
Retained earnings		1,728,486			1,565,201
Accumulated other comprehensive income (loss)		19,693			(34,105	)
Total stockholders’ equity before noncontrolling interest		3,993,247			3,770,330
Noncontrolling interest		3,131			3,035
Total stockholders’ equity		3,996,378			3,773,365
Total liabilities and stockholders’ equity	$	22,960,731		$	22,388,030

Bank OZK
Consolidated Statements of Income
Unaudited

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans	$	250,081		$	210,385	$	495,946		$	400,812
Purchased loans		28,519			46,862		58,714			97,839
Investment securities:
Taxable		13,585			11,476		28,481			22,907
Tax-exempt		3,693			4,102		7,567			8,262
Deposits with banks and federal funds sold		941			839		1,354			1,336
Total interest income		296,819			273,664		592,062			531,156

Interest expense:
Deposits		67,392			43,832		130,479			78,224
Repurchase agreements with customers		11			385		33			544
Other borrowings		19			46		1,408			679
Subordinated notes		3,181			3,180		6,326			6,326
Subordinated debentures		1,680			1,560		3,392			2,946
Total interest expense		72,283			49,003		141,638			88,719

Net interest income		224,536			224,661		450,424			442,437
Provision for loan losses		6,769			9,610		13,450			15,177
Net interest income after provision for loan losses		217,767			215,051		436,974			427,260

Non-interest income:
Service charges on deposit accounts		10,291			9,704		20,014			19,229
Trust income		1,839			1,591		3,569			3,384
BOLI income		5,178			5,259		10,340			12,839
Other income from purchased loans		1,455			2,744		2,251			3,995
Loan service, maintenance and other fees		4,565			5,641		9,438			10,384
Net gains on investment securities		713			—		713			17
Gains on sales of other assets		402			844		686			2,270
Other		2,160			1,603		3,664			3,976
Total non-interest income		26,603			27,386		50,675			56,094

Non-interest expense:
Salaries and employee benefits		47,558			41,665		92,425			87,164
Net occupancy and equipment		14,587			13,827		29,338			27,977
Other operating expenses		36,986			33,615		74,046			67,776
Total non-interest expense		99,131			89,107		195,809			182,917

Income before taxes		145,239			153,330		291,840			300,437
Provision for income taxes		34,726			38,589		70,615			72,563
Net income		110,513			114,741		221,225			227,874
Earnings attributable to noncontrolling interest		(10	)		10		(16	)		21
Net income available to common stockholders	$	110,503		$	114,751	$	221,209		$	227,895

Basic earnings per common share	$	0.86		$	0.89	$	1.72		$	1.77

Diluted earnings per common share	$	0.86		$	0.89	$	1.71		$	1.77

Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Non- Controlling Interest			Total
	(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		—			—			227,874			—			—			227,874
Earnings attributable to noncontrolling interest		—			—			21			—			(21	)		—
Total other comprehensive loss		—			—			—			(34,201	)		—			(34,201	)
Common stock dividends paid, $0.385 per share		—			—			(49,487	)		—			—			(49,487	)
Issuance of 210,890 shares of common stock for exercise of stock options		2			5,585			—			—			—			5,587
Issuance of 214,591 shares of unvested restricted common stock		2			(2	)		—			—			—			—
Repurchase and cancellation of 71,750 shares of common stock		(1	)		(3,769	)		—			—			—			(3,770	)
Stock-based compensation expense		—			7,151			—			—			—			7,151
Forfeitures of 24,864 shares of unvested restricted common stock		—			—			—			—			—			—
Balances – June 30, 2018	$	1,286		$	2,230,809		$	1,428,721		$	(46,913	)	$	3,039		$	3,616,942

Balances – December 31, 2018	$	1,286		$	2,237,948		$	1,565,201		$	(34,105	)	$	3,035		$	3,773,365
Net income		—			—			221,225			—			—			221,225
Earnings attributable to noncontrolling interest		—			—			(16	)		—			16			—
Total other comprehensive income		—			—			—			53,798			—			53,798
Common stock dividends paid, $0.45 per share		—			—			(57,924	)		—			—			(57,924	)
Noncontrolling interest cash contribution		—			—			—			—			80			80
Issuance of 56,550 shares of common stock for exercise of stock options		1			876			—			—			—			877
Issuance of 406,074 shares of unvested restricted common stock		4			(4	)		—			—			—			—
Repurchase and cancellation of 62,742 shares of common stock		(1	)		(1,646	)		—			—			—			(1,647	)
Stock-based compensation expense		—			6,604			—			—			—			6,604
Forfeiture of 64,215 shares of unvested restricted common stock		(1	)		1			—			—			—			—
Balances – June 30, 2019	$	1,289		$	2,243,779		$	1,728,486		$	19,693		$	3,131		$	3,996,378

Bank OZK
Summary of Non-Interest Expense
Unaudited

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(Dollars in thousands)
Salaries and employee benefits	$	47,558	$	41,665	$	92,425	$	87,164
Net occupancy and equipment		14,587		13,827		29,338		27,977
Other operating expenses:
Professional and outside services		8,105		9,112		16,669		17,817
Software and data processing		4,757		3,110		9,466		6,450
Deposit insurance and assessments		3,488		3,558		7,140		7,120
Telecommunication services		2,810		3,487		6,154		6,683
Travel and meals		2,939		2,498		5,608		4,651
Postage and supplies		2,058		2,218		4,161		4,412
Advertising and public relations		1,671		1,777		3,353		3,107
ATM expense		1,099		1,118		2,086		2,481
Loan collection and repossession expense		918		503		1,901		1,293
Writedowns of foreclosed and other assets		594		460		1,155		611
Amortization of intangibles		3,012		3,145		6,157		6,290
Other		5,535		2,629		10,196		6,861
Total non-interest expense	$	99,131	$	89,107	$	195,809	$	182,917

Bank OZK
Summary of Total Loans Outstanding
Unaudited


	June 30, 2019				December 31, 2018
	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	1,017,698	5.8	%	$	1,049,460	6.1	%
Non-farm/non-residential		3,953,882	22.6			4,319,388	25.2
Construction/land development		6,662,921	38.1			6,562,185	38.4
Agricultural		190,348	1.1			165,088	1.0
Multifamily residential		1,411,584	8.1			1,116,026	6.5
Total real estate		13,236,433	75.7			13,212,147	77.2
Commercial and industrial		746,990	4.3			823,417	4.8
Consumer		2,740,344	15.7			2,345,863	13.7
Other		761,438	4.3			736,396	4.3
Total loans	$	17,485,205	100.0	%	$	17,117,823	100.0	%

Summary of Deposits
Unaudited


	June 30, 2019				December 31, 2018
	(Dollars in thousands)
Non-interest bearing	$	2,777,066	15.3	%	$	2,748,273	15.3	%
Interest bearing:
Transaction (NOW)		2,605,606	14.3			2,359,299	13.2
Savings and money market		6,620,591	36.4			7,323,414	40.8
Time deposits less than $100		2,807,587	15.4			2,297,101	12.8
Time deposits of $100 or more		3,375,365	18.6			3,210,328	17.9
Total deposits	$	18,186,215	100.0	%	$	17,938,415	100.0	%

Bank OZK
Selected Consolidated Financial Data
Unaudited

	Three Months Ended June 30,									Six Months Ended June 30,
	2019			2018			% Change			2019			2018			% Change
	(Dollars in thousands, except per share amounts)
Income statement data:
Net interest income	$	224,536		$	224,661			(0.1	)%	$	450,424		$	442,437			1.8	%
Provision for loan losses		6,769			9,610			(29.6	)		13,450			15,177			(11.4	)
Non-interest income		26,603			27,386			(2.9	)		50,675			56,094			(9.7	)
Non-interest expense		99,131			89,107			11.2			195,809			182,917			7.0
Net income available to common stockholders		110,503			114,751			(3.7	)		221,209			227,895			(2.9	)
Common stock data:
Net income per share - diluted	$	0.86		$	0.89			(3.4	)%	$	1.71		$	1.77			(3.4	)%
Net income per share - basic		0.86			0.89			(3.4	)		1.72			1.77			(2.8	)
Cash dividends per share		0.23			0.195			17.9			0.45			0.385			16.9
Book value per share		30.97			28.10			10.2			30.97			28.10			10.2
Tangible book value per share ⁽¹⁾		25.61			22.63			13.2			25.61			22.63			13.2
Diluted shares outstanding (thousands)		129,079			128,804						129,022			128,783
End of period shares outstanding (thousands)		128,947			128,616						128,947			128,616
Balance sheet data at period end:
Total assets	$	22,960,731		$	22,220,380			3.3	%	$	22,960,731		$	22,220,380			3.3	%
Total loans		17,485,205			16,763,874			4.3			17,485,205			16,763,874			4.3
Non-purchased loans		15,786,809			14,183,533			11.3			15,786,809			14,183,533			11.3
Purchased loans		1,698,396			2,580,341			(34.2	)		1,698,396			2,580,341			(34.2	)
Allowance for loan losses		106,642			104,638			1.9			106,642			104,638			1.9
Foreclosed assets		33,467			20,662			62.0			33,467			20,662			62.0
Investment securities		2,560,096			2,617,859			(2.2	)		2,560,096			2,617,859			(2.2	)
Goodwill and other intangible assets, net		690,304			702,751			(1.8	)		690,304			702,751			(1.8	)
Deposits		18,186,215			17,897,085			1.6			18,186,215			17,897,085			1.6
Repurchase agreements with customers		10,909			179,851			(93.9	)		10,909			179,851			(93.9	)
Other borrowings		201,455			1,766			11,307.4			201,455			1,766			11,307.4
Subordinated notes		223,471			223,088			0.2			223,471			223,088			0.2
Subordinated debentures		119,635			119,077			0.5			119,635			119,077			0.5
Unfunded balance of closed loans		11,167,055			11,999,661			(6.9	)		11,167,055			11,999,661			(6.9	)
Total common stockholders’ equity		3,993,247			3,613,903			10.5			3,993,247			3,613,903			10.5
Net unrealized gains (losses) on investment securities AFS included in common stockholders' equity		19,693			(46,913	)					19,693			(46,913	)
Loan, including purchased loans, to deposit ratio		96.15	%		93.67	%					96.15	%		93.67	%
Selected ratios:
Return on average assets⁽²⁾		1.95	%		2.10	%					1.97	%		2.13	%
Return on average common stockholders’ equity⁽²⁾		11.29			12.90						11.52			13.03
Return on average tangible common stockholders’ equity^{(1) (2)}		13.70			16.08						14.04			16.30
Average common equity to total average assets		17.31			16.30						17.12			16.34
Net interest margin – FTE⁽²⁾		4.45			4.66						4.49			4.68
Efficiency ratio		39.30			35.19						38.89			36.52
Net charge-offs to average non-purchased loans^{(2) (3)}		0.12			0.05						0.09			0.04
Net charge-offs to average total loans⁽²⁾		0.14			0.07						0.10			0.06
Nonperforming loans to total loans⁽⁴⁾		0.15			0.10						0.15			0.10
Nonperforming assets to total assets⁽⁴⁾		0.25			0.15						0.25			0.15
Allowance for loan losses to non-purchased loans⁽⁵⁾		0.67			0.73					0.67			0.73
Other information:
Non-accrual loans⁽⁴⁾	$	22,860		$	13,543					$	22,860		$	13,543
Accruing loans - 90 days past due⁽⁴⁾		—			—						—			—
Troubled and restructured non-purchased loans - accruing⁽⁴⁾		1,399			—						1,399			—
Impaired purchased loans		15,440			6,577						15,440			6,577

⁽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
Unaudited

	9/30/17			12/31/17			3/31/18			6/30/18			9/30/18			12/31/18			3/31/19			6/30/19
	(Dollars in thousands, except per share amount)
Earnings Summary:
Net interest income	$	209,722		$	214,831		$	217,776		$	224,661		$	220,614		$	228,382		$	225,888		$	224,536
Federal tax (FTE) adjustment		3,014			2,450			1,166			1,151			1,132			1,219			1,207			1,136
Net interest income (FTE)		212,736			217,281			218,942			225,812			221,746			229,601			227,095			225,672
Provision for loan losses		(7,777	)		(9,279	)		(5,567	)		(9,610	)		(41,949	)		(7,271	)		(6,681	)		(6,769	)
Non-interest income		32,747			30,213			28,707			27,386			24,121			27,560			24,072			26,603
Non-interest expense		(84,399	)		(86,177	)		(93,810	)		(89,107	)		(102,942	)		(94,893	)		(96,678	)		(99,131	)
Pretax income (FTE)		153,307			152,038			148,272			154,481			100,976			154,997			147,808			146,375
FTE adjustment		(3,014	)		(2,450	)		(1,166	)		(1,151	)		(1,132	)		(1,219	)		(1,207	)		(1,136	)
Provision for income taxes		(54,246	)		(3,434	)		(33,973	)		(38,589	)		(25,665	)		(38,750	)		(35,889	)		(34,726	)
Noncontrolling interest		(40	)		10			11			10			1			3			(6	)		(10	)
Net income available to common stockholders	$	96,007		$	146,164		$	113,144		$	114,751		$	74,180		$	115,031		$	110,706		$	110,503
Earnings per common share – diluted	$	0.75		$	1.14		$	0.88		$	0.89		$	0.58		$	0.89		$	0.86		$	0.86
Non-interest Income:
Service charges on deposit accounts	$	9,729		$	10,058		$	9,525		$	9,704		$	9,730		$	10,585		$	9,722		$	10,291
Trust income		1,755			1,729			1,793			1,591			1,730			1,821			1,730			1,839
BOLI income		4,453			5,166			7,580			5,259			5,321			5,751			5,162			5,178
Other income from purchased loans		2,933			2,009			1,251			2,744			1,418			2,370			795			1,455
Loan service, maintenance and other fees		5,274			4,289			4,743			5,641			4,724			5,245			4,874			4,565
Net gains on investment securities		2,429			1,201			17			—			—			—			—			713
Gains (losses) on sales of other assets		1,363			1,899			1,426			844			(518	)		465			284			402
Other		4,811			3,862			2,372			1,603			1,716			1,323			1,505			2,160
Total non-interest income	$	32,747		$	30,213		$	28,707		$	27,386		$	24,121		$	27,560		$	24,072		$	26,603
Non-interest Expense:
Salaries and employee benefits	$	35,331		$	38,417		$	45,499		$	41,665		$	41,477		$	41,837		$	44,868		$	47,558
Net occupancy expense		13,595			13,474			14,150			13,827			14,358			14,027			14,750			14,587
Other operating expenses		35,473			34,286			34,161			33,615			47,107			39,029			37,060			36,986
Total non-interest expense	$	84,399		$	86,177		$	93,810		$	89,107		$	102,942		$	94,893		$	96,678		$	99,131
Balance Sheet Data:
Total assets	$	20,768,493		$	21,275,647		$	22,039,439		$	22,220,380		$	22,086,539		$	22,388,030		$	23,005,652		$	22,960,731
Non-purchased loans		12,047,094			12,733,937			13,674,561			14,183,533			14,440,623			15,073,791			15,610,681			15,786,809
Purchased loans		3,731,536			3,309,092			2,934,535			2,580,341			2,285,168			2,044,032			1,864,715			1,698,396
Investment securities		1,975,102			2,622,796			2,612,961			2,617,859			2,706,156			2,888,281			2,781,691			2,560,096
Deposits		16,823,359			17,192,345			17,833,672			17,897,085			17,822,915			17,938,415			18,476,868			18,186,215
Unfunded balance of closed loans		12,519,839			13,192,439			12,551,032			11,999,661			11,891,247			11,364,975			11,544,218			11,167,055
Common stockholders' equity		3,334,740			3,460,728			3,526,605			3,613,903			3,653,596			3,770,330			3,882,643			3,993,247
Allowance for Loan Losses:
Balance at beginning of period	$	82,320		$	86,784		$	94,120		$	98,097		$	104,638		$	98,200		$	102,264		$	105,954
Net charge-offs		(3,313	)		(1,943	)		(1,590	)		(3,069	)		(48,387	)		(3,207	)		(2,991	)		(6,081	)
Provision for loan losses		7,777			9,279			5,567			9,610			41,949			7,271			6,681			6,769
Balance at end of period	$	86,784		$	94,120		$	98,097		$	104,638		$	98,200		$	102,264		$	105,954		$	106,642
Selected Ratios:
Net interest margin – FTE⁽¹⁾		4.84	%		4.72	%		4.69	%		4.66	%		4.47	%		4.55	%		4.53	%		4.45	%
Efficiency ratio		34.38			34.82			37.88			35.19			41.87			36.90			38.49			39.30
Net charge-offs to average non-purchased loans^{(1) (2)}		0.08			0.08			0.04			0.05			1.32			0.06			0.05			0.12
Net charge-offs to average total loans⁽¹⁾		0.09			0.05			0.04			0.07			1.14			0.07			0.07			0.14
Nonperforming loans to total loans⁽³⁾		0.11			0.10			0.09			0.10			0.23			0.23			0.22			0.15
Nonperforming assets to total assets⁽³⁾		0.20			0.18			0.16			0.15			0.23			0.23			0.21			0.25
Allowance for loan losses to total non-purchased loans⁽⁴⁾		0.71			0.73			0.71			0.73			0.67			0.67			0.67			0.67
Loans past due 30 days or more, including past due non- accrual loans, to total loans⁽³⁾		0.12			0.15			0.14			0.12			0.17			0.28			0.28			0.13

⁽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 June 30,														Six Months Ended June 30,
	2019							2018							2019							2018
	Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate
	(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold	$	118,761	$	941		3.18	%	$	186,103	$	839		1.81	%	$	93,031	$	1,354		2.94	%	$	148,304	$	1,336		1.82	%
Investment securities:
Taxable		2,172,732		13,585		2.51			2,055,737		11,476		2.24			2,241,370		28,481		2.56			2,058,995		22,907		2.24
Tax-exempt – FTE		509,119		4,675		3.68			545,173		5,192		3.82			512,348		9,579		3.77			550,942		10,458		3.83
Non-purchased loans – FTE		15,760,582		250,235		6.37			13,892,522		210,446		6.08			15,622,442		496,276		6.41			13,453,745		400,933		6.01
Purchased loans		1,785,374		28,519		6.41			2,757,235		46,862		6.82			1,866,130		58,714		6.34			2,968,315		97,839		6.65
Total earning assets – FTE		20,346,568		297,955		5.87			19,436,770		274,815		5.67			20,335,321		594,404		5.89			19,180,301		533,473		5.61
Non-interest earning assets		2,342,995							2,446,188							2,280,063							2,403,283
Total assets	$	22,689,563						$	21,882,958						$	22,615,384						$	21,583,584
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	9,640,727	$	37,510		1.56	%	$	10,248,619	$	29,249		1.14	%	$	9,586,233	$	73,613		1.55	%	$	10,054,064	$	51,818		1.04	%
Time deposits of $100 or more		3,137,419		16,698		2.13			3,182,463		11,027		1.39			3,153,873		32,252		2.06			3,109,697		19,808		1.28
Other time deposits		2,580,584		13,184		2.05			1,449,406		3,556		0.98			2,508,405		24,614		1.98			1,447,687		6,598		0.92
Total interest bearing deposits		15,358,730		67,392		1.76			14,880,488		43,832		1.18			15,248,511		130,479		1.73			14,611,448		78,224		1.08
Repurchase agreements with customers		11,101		11		0.41			161,246		385		0.96			16,616		33		0.40			136,975		544		0.80
Other borrowings		70,390		19		0.11			35,573		46		0.52			169,439		1,408		1.68			100,398		679		1.36
Subordinated notes		223,419		3,181		5.71			223,041		3,180		5.72			223,370		6,326		5.71			222,994		6,326		5.72
Subordinated debentures		119,559		1,680		5.64			119,006		1,560		5.26			119,486		3,392		5.72			118,935		2,946		5.00
Total interest bearing liabilities		15,783,199		72,283		1.84			15,419,354		49,003		1.27			15,777,422		141,638		1.81			15,190,750		88,719		1.18
Non-interest bearing liabilities:
Non-interest bearing deposits		2,723,657							2,717,316							2,740,291							2,691,855
Other non-interest bearing liabilities		252,062							176,302							223,491							172,081
Total liabilities		18,758,918							18,312,972							18,741,204							18,054,686
Common stockholders’ equity		3,927,522							3,566,944							3,871,065							3,525,849
Noncontrolling interest		3,123							3,042							3,115							3,049
Total liabilities and stockholders’ equity	$	22,689,563						$	21,882,958						$	22,615,384						$	21,583,584
Net interest income – FTE			$	225,672						$	225,812						$	452,766						$	444,754
Net interest margin – FTE						4.45	%						4.66	%						4.49	%						4.68	%

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						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Net income available to common stockholders	$	110,503		$	114,751		$	221,209		$	227,895
Average common stockholders’ equity before noncontrolling interest	$	3,927,522		$	3,566,944		$	3,871,065		$	3,525,849
Less average intangible assets:
Goodwill		(660,789	)		(660,789	)		(660,789	)		(660,789	)
Core deposit and other intangibles, net of accumulated amortization		(31,225	)		(43,862	)		(32,822	)		(45,483	)
Total average intangibles		(692,014	)		(704,651	)		(693,611	)		(706,272	)
Average tangible common stockholders’ equity	$	3,235,508		$	2,862,293		$	3,177,454		$	2,819,577
Return on average common stockholders’ equity⁽¹⁾		11.29	%		12.90	%		11.52	%		13.03	%
Return on average tangible common stockholders’ equity⁽¹⁾		13.70	%		16.08	%		14.04	%		16.30	%

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

Calculation of Total Tangible Common
Stockholders’ Equity and Tangible
Book Value per Common Share
Unaudited

	June 30,
	2019			2018
	(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest	$	3,993,247		$	3,613,903
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(29,515	)		(41,962	)
Total intangibles		(690,304	)		(702,751	)
Total tangible common stockholders’ equity	$	3,302,943		$	2,911,152
Shares of common stock outstanding		128,947			128,616
Book value per common share	$	30.97		$	28.10
Tangible book value per common share	$	25.61		$	22.63

Calculation of Total Tangible Common Stockholders’
Equity and the Ratio of Total Tangible Common
Stockholders’ Equity to Total Tangible Assets
Unaudited

	June 30,
	2019			2018
	(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest	$	3,993,247		$	3,613,903
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(29,515	)		(41,962	)
Total intangibles		(690,304	)		(702,751	)
Total tangible common stockholders’ equity	$	3,302,943		$	2,911,152
Total assets	$	22,960,731		$	22,220,380
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(29,515	)		(41,962	)
Total intangibles		(690,304	)		(702,751	)
Total tangible assets	$	22,270,427		$	21,517,629
Ratio of total common stockholders’ equity to total assets		17.39	%		16.26	%
Ratio of total tangible common stockholders’ equity to total tangible assets		14.83	%		13.53	%