Press Release

Bank OZK Announces First Quarter 2020 Earnings

Company Release - 4/23/2020 4:01 PM ET

LITTLE ROCK, Ark., April 23, 2020 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the first quarter of 2020 was $11.9 million, an 89.3% decrease from $110.7 million for the first quarter of 2019.  Diluted earnings per common share for the first quarter of 2020 were $0.09, an 89.5% decrease from $0.86 for the first quarter of 2019.

The COVID-19 pandemic significantly impacted the global economy in what was the first quarter of implementation of the current expected credit losses (“CECL”) method to calculate the Bank’s allowance for credit losses (“ACL”).  During the quarter just ended, the sudden and severe economic downturn in tandem with the adoption of CECL resulted in the Bank incurring provision for credit losses of $117.7 million, resulting in a total ACL of $316.4 million at March 31, 2020.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first quarter of 2020 were 0.20%, 1.16% and 1.39%, respectively, compared to 1.99%, 11.77% and 14.40%, respectively, for the first quarter of 2019.  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, “During the first quarter of 2020, we continued our long-standing focus on our team members, meeting the needs of our customers, serving the communities in which we operate and delivering favorable returns for our shareholders.  As we navigate the various challenges created by the current economic environment, we will continue to seek to capitalize on investment and other opportunities which may arise from such turbulent conditions.  We believe our team of industry and technology professionals is well-positioned to lead the Bank to continued success.”

KEY BALANCE SHEET METRICS

Total loans were $18.23 billion at March 31, 2020, a 4.3% increase from $17.48 billion at March 31, 2019.  Non-purchased loans, which exclude loans acquired in previous acquisitions, were $17.03 billion at March 31, 2020, a 9.1% increase from $15.61 billion at March 31, 2019.  Purchased loans, which consist of loans acquired in previous acquisitions, were $1.20 billion at March 31, 2020, a 35.8% decrease from $1.86 billion at March 31, 2019.

Deposits were $18.81 billion at March 31, 2020, a 1.8% increase from $18.48 billion at March 31, 2019.  Total assets were $24.57 billion at March 31, 2020, a 6.8% increase from $23.01 billion at March 31, 2019.

Common stockholders’ equity was $4.08 billion at March 31, 2020, a 5.2% increase from $3.88 billion at March 31, 2019, but a 1.6% decrease from $4.15 billion at December 31, 2019.  Tangible common stockholders’ equity was $3.40 billion at March 31, 2020, a 6.6% increase from $3.19 billion at March 31, 2019, but a 1.9% decrease from $3.47 billion at December 31, 2019.  Book value per common share was $31.57 at March 31, 2020, a 4.8% increase from $30.11 at March 31, 2019, but a 1.9% decrease from $32.19 at December 31, 2019.  Tangible book value per common share was $26.30 at March 31, 2020, a 6.3% increase from $24.73 at March 31, 2019, but a 2.2% decrease from $26.88 at December 31, 2019.  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 16.62% at March 31, 2020 compared to 16.88% at March 31, 2019.  Its ratio of total tangible common stockholders’ equity to total tangible assets was 14.24% at March 31, 2020 compared to 14.29% at March 31, 2019.  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 its quarterly results, which are available at http://ir.ozk.com.  This release should be read in conjunction with management’s comments on the quarterly results.

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 April 24, 2020.  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 5272316.  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 satisfactory sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices or relocating or closing existing offices; the ability to enter into and/or close additional acquisitions; 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; the potential impact of the proposed phase-out of LIBOR or other changes involving LIBOR; 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, including those in response to the coronavirus (COVID-19) pandemic such as the Coronavirus Aid, Relief and Economic Security Act and any similar or related rules and regulations; 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; natural disasters or acts of war or terrorism; the adverse effects of the ongoing global COVID-19 pandemic, including the magnitude and duration of the pandemic and actions taken to contain or treat COVID-19, on the Bank, the Bank’s customers, the global economy and financial markets; international or political instability; impairment of our goodwill or other intangible assets; adoption of new accounting standards, including the effects from the adoption of the CECL model on January 1, 2020, 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 described 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, 2019 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 is the #1 capitalized bank among the nation’s top 100 banks by asset size, based on Tier 1 Leverage Capital Ratio at December 31, 2019, according to data obtained from S&P Global Market Intelligence. Bank OZK was named Best Bank in the South for 2019-2020 by Money, the personal finance news and advice brand. Headquartered in Little Rock, Arkansas, Bank OZK conducts operations through more than 250 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
       
  March 31,  December 31, 
  2020  2019 
       
  (Dollars in thousands, except per share amounts) 
ASSETS        
Cash and cash equivalents $1,347,729  $1,495,757 
Investment securities - available for sale ("AFS")  2,816,556   2,277,389 
Federal Home Loan Bank of Dallas and other banker's bank stocks  50,614   21,855 
Non-purchased loans  17,030,378   16,224,539 
Purchased loans  1,197,826   1,307,504 
Allowance for loan losses  (238,737)  (108,525)
Net loans  17,989,467   17,423,518 
Premises and equipment, net  723,371   711,541 
Foreclosed assets  20,616   19,096 
Accrued interest receivable  82,827   75,208 
Bank owned life insurance (“BOLI”)  743,406   738,860 
Goodwill and intangible assets, net  681,747   684,542 
Other, net  109,477   107,962 
Total assets $24,565,810  $23,555,728 
         
LIABILITIES AND STOCKHOLDERS EQUITY        
Deposits:        
Demand non-interest bearing $3,003,305  $2,795,251 
Savings and interest bearing transaction  7,465,757   8,307,607 
Time  8,340,128   7,371,401 
Total deposits  18,809,190   18,474,259 
Repurchase agreements with customers  3,821   11,249 
Other borrowings  1,051,353   351,387 
Subordinated notes  223,759   223,663 
Subordinated debentures  120,055   119,916 
Reserve for losses on loan commitments  77,672    
Accrued interest payable and other liabilities  193,701   221,786 
Total liabilities  20,479,551   19,402,260 
         
Commitments and contingencies        
         
Stockholders’ equity:        
Preferred stock; $0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding at March 31, 2020 or December 31, 2019      
Common stock; $0.01 par value; 300,000,000 shares authorized; 129,324,435 and 128,951,024 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively  1,293   1,289 
Additional paid-in capital  2,253,991   2,251,824 
Retained earnings  1,772,978   1,869,983 
Accumulated other comprehensive income  54,888   27,255 
Total stockholders’ equity before noncontrolling interest  4,083,150   4,150,351 
Noncontrolling interest  3,109   3,117 
Total stockholders’ equity  4,086,259   4,153,468 
Total liabilities and stockholders’ equity $24,565,810  $23,555,728 
         


 
Bank OZK
Consolidated Statements of Income
Unaudited
   
 Three Months Ended March 31, 
 2020  2019 
      
 (Dollars in thousands, except per share amounts) 
Interest income:       
Non-purchased loans$231,853  $245,864 
Purchased loans 21,387   30,195 
Investment securities:       
Taxable 10,760   14,897 
Tax-exempt 3,597   3,873 
Deposits with banks and federal funds sold 4,376   414 
Total interest income 271,973   295,243 
        
Interest expense:       
Deposits 57,682   63,087 
Repurchase agreements with customers 6   22 
Other borrowings 50   1,389 
Subordinated notes 3,172   3,146 
Subordinated debentures 1,288   1,711 
Total interest expense 62,198   69,355 
        
Net interest income 209,775   225,888 
Provision for loan losses 117,663   6,681 
Net interest income after provision for loan losses 92,112   219,207 
        
Non-interest income:       
Service charges on deposit accounts 10,009   9,722 
Trust income 1,939   1,730 
BOLI income:       
Increase in cash surrender value 5,067   5,162 
Death benefits 608    
Other income from purchased loans    795 
Loan service, maintenance and other fees 3,716   4,874 
Gains on sales of other assets 161   284 
Net gains on investment securities 2,223    
Other 3,957   1,505 
Total non-interest income 27,680   24,072 
        
Non-interest expense:       
Salaries and employee benefits 51,473   44,868 
Net occupancy and equipment 15,330   14,750 
Other operating expenses 36,622   37,060 
Total non-interest expense 103,425   96,678 
        
Income before taxes 16,367   146,601 
Provision for income taxes 4,509   35,889 
Net income 11,858   110,712 
Earnings attributable to noncontrolling interest 8   (6)
Net income available to common stockholders$11,866  $110,706 
        
Basic earnings per common share$0.09  $0.86 
        
Diluted earnings per common share$0.09  $0.86 
        


 
Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited
                   
  Common
Stock
  Additional
Paid-In
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income
  Non-
Controlling
Interest
  Total 
                   
  (Dollars in thousands, except per share amounts) 
                         
Three months ended March 31, 2020:                        
Balances – December 31, 2019 $1,289  $2,251,824  $1,869,983  $27,255  $3,117  $4,153,468 
Cumulative effect of change in accounting principle        (75,344)        (75,344)
Balances – January 1, 2020  1,289   2,251,824   1,794,639   27,255   3,117   4,078,124 
Net income        11,858         11,858 
Earnings attributable to noncontrolling interest        8      (8)   
Total other comprehensive income           27,633      27,633 
Common stock dividends paid, $0.26 per share        (33,527)        (33,527)
Issuance of 4,300 shares of common stock for exercise of stock options     45            45 
Issuance of 447,085 shares of unvested restricted common stock  4   (4)            
Repurchase and cancellation of 61,873 shares of common stock     (1,853)           (1,853)
Stock-based compensation expense     3,979            3,979 
Forfeitures of 16,101 shares of unvested restricted common stock                  
Balances – March 31, 2020 $1,293  $2,253,991  $1,772,978  $54,888  $3,109  $4,086,259 
                         


 
Bank OZK
Consolidated Statements of Stockholders’ Equity (continued)
Unaudited
                   
  Common
Stock
  Additional
Paid-In
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
Loss
  Non-
Controlling
Interest
  Total 
                   
  (Dollars in thousands, except per share amounts) 
Three months ended March 31, 2019:                        
Balances – December 31, 2018 $1,286  $2,237,948  $1,565,201  $(34,105) $3,035  $3,773,365 
Net income        110,712         110,712 
Earnings attributable to noncontrolling interest        (6)     6    
Total other comprehensive income           28,429      28,429 
Common stock dividends paid, $0.22 per share        (28,281)        (28,281)
Noncontrolling interest cash contribution              80   80 
Issuance of 29,300 shares of common stock for exercise of stock options     387            387 
Issuance of 383,874 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     2,719            2,719 
Forfeiture of 13,953 shares of unvested restricted common stock                  
Balances – March 31, 2019 $1,289  $2,239,404  $1,647,626  $(5,676) $3,121  $3,885,764 
                         


 
Bank OZK
Summary of Non-Interest Expense
Unaudited
    
  Three Months Ended
March 31,
 
  2020  2019 
       
  (Dollars in thousands) 
Salaries and employee benefits $51,473  $44,868 
Net occupancy and equipment expense  15,330   14,750 
Other operating expenses:        
Professional and outside services  7,043   8,564 
Software and data processing  4,974   4,709 
Deposit insurance and assessments  3,420   3,652 
Telecommunication services  2,177   3,344 
Travel and meals  2,102   2,669 
Postage and supplies  2,053   2,103 
Advertising and public relations  1,703   1,683 
ATM expense  1,160   987 
Loan collection and repossession expense  694   984 
Writedowns of foreclosed assets  879   562 
Amortization of intangibles  2,795   3,145 
Other  7,622   4,658 
Total non-interest expense $103,425  $96,678 
         


 
Bank OZK
Summary of Total Loans Outstanding
Unaudited
                 
  March 31, 2020  December 31, 2019 
       
  (Dollars in thousands) 
Real estate:                
Residential 1-4 family $1,009,547   5.6% $998,632   5.7%
Non-farm/non-residential  4,510,484   24.7   3,956,579   22.6 
Construction/land development  6,380,341   35.0   6,391,429   36.4 
Agricultural  235,650   1.3   230,076   1.3 
Multifamily residential  1,334,763   7.3   1,194,192   6.8 
Total real estate  13,470,785   73.9   12,770,908   72.8 
Commercial and industrial  690,396   3.8   661,952   3.8 
Consumer  2,950,055   16.2   2,934,534   16.8 
Other  1,116,968   6.1   1,164,649   6.6 
Total loans  18,228,204   100.0%  17,532,043   100.0%
Allowance for loan losses  (238,737)      (108,525)    
Net loans $17,989,467      $17,423,518     
                 


 
Allowance for Credit Losses
Unaudited
             
  Allowance for
Loan Losses
  Reserve for
Losses on
Loan
Commitments
  Total Allowance
for Credit
Losses
 
          
  (Dollars in thousands) 
Balances – December 31, 2019 $108,525  $  $108,525 
Adoption of Current Expected Credit Loss (CECL) model  39,588   54,924   94,512 
Balances – January 1, 2020  148,113   54,924   203,037 
Net charge-offs  (4,291)     (4,291)
Provision  94,915   22,748   117,663 
Balances – March 31, 2020 $238,737  $77,672  $316,409 
             


 
Bank OZK
Summary of Deposits – By Account Type
Unaudited
                 
  March 31, 2020  December 31, 2019 
       
  (Dollars in thousands) 
Non-interest bearing $3,003,305   16.0% $2,795,251   15.1%
Interest bearing:                
Transaction (NOW)  2,784,268   14.8   2,706,426   14.7 
Savings and money market  4,681,489   24.9   5,601,181   30.3 
Time deposits less than $100  3,574,062   19.0   3,321,446   18.0 
Time deposits of $100 or more  4,766,066   25.3   4,049,955   21.9 
Total deposits $18,809,190   100.0% $18,474,259   100.0%
                 


 
Summary of Deposits – By Customer Type
Unaudited
    
  March 31, 2020  December 31, 2019 
       
  (Dollars in thousands) 
Consumer $8,535,172   45.4% $7,526,014   40.7%
Commercial  4,657,851   24.8   4,334,366   23.5 
Public Funds  2,667,234   14.2   3,782,415   20.5 
Brokered  2,233,240   11.8   2,115,193   11.4 
Reciprocal  715,693   3.8   716,271   3.9 
Total deposits $18,809,190   100.0% $18,474,259   100.0%
                 


 
Bank OZK
Selected Consolidated Financial Data
Unaudited
    
  Three Months Ended
March 31,
 
  2020  2019  % Change 
          
  (Dollars in thousands, except per share amounts) 
Income statement data:            
Net interest income $209,775  $225,888   (7.1)%
Provision for loan losses  117,663   6,681   1,661.2 
Non-interest income  27,680   24,072   15.0 
Non-interest expense  103,425   96,678   7.0 
Net income available to common stockholders  11,866   110,706   (89.3)
Common share and per common share data:            
Net income per share - diluted $0.09  $0.86   (89.5)%
Net income per share - basic  0.09   0.86   (89.5)
Cash dividends per share  0.26   0.22   18.2 
Book value per share  31.57   30.11   4.8 
Tangible book value per share(1)  26.30   24.73   6.3 
Weighted-average diluted shares outstanding (thousands)  129,307   128,964     
End of period shares outstanding (thousands)  129,324   128,948     
Balance sheet data at period end:            
Total assets $24,565,810  $23,005,652   6.8%
Total loans  18,228,204   17,475,396   4.3 
Non-purchased loans  17,030,378   15,610,681   9.1 
Purchased loans  1,197,826   1,864,715   (35.8)
Allowance for loan losses  238,737   105,954   125.3 
Foreclosed assets  20,616   14,096   46.3 
Investment securities - AFS  2,816,556   2,781,691   1.3 
Goodwill and other intangible assets, net  681,747   693,316   (1.7)
Deposits  18,809,190   18,476,868   1.8 
Other borrowings  1,051,353   1,489   70,508.0 
Subordinated notes  223,759   223,375   0.2 
Subordinated debentures  120,055   119,496   0.5 
Unfunded balance of closed loans  11,334,737   11,544,218   (1.8)
Reserve for losses on loan commitments  77,672     NM 
Total common stockholders’ equity  4,083,150   3,882,643   5.2 
Net unrealized gains (losses) on investment securities AFS included in common stockholders' equity  54,888   (5,676)    
Loan (including purchased loans) to deposit ratio  96.91%  94.58%    
Selected ratios:            
Return on average assets(2)  0.20%  1.99%    
Return on average common stockholders’ equity(2)  1.16   11.77     
Return on average tangible common stockholders’ equity(1) (2)  1.39   14.40     
Average common equity to total average assets  17.31   16.91     
Net interest margin – FTE(2)  3.96   4.53     
Efficiency ratio  43.35   38.49     
Net charge-offs to average non-purchased loans(2) (3)  0.08   0.05     
Net charge-offs to average total loans(2)  0.10   0.07     
Nonperforming loans to total loans(4)  0.16   0.22     
Nonperforming assets to total assets(4)  0.19   0.21     
Allowance for loan losses to total loans  1.31   0.61     
Other information:            
Non-accrual loans(4) $25,681  $33,405     
Accruing loans - 90 days past due(4)          
Troubled and restructured non-purchased loans - accruing(4)  757   470     
             
(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.
NM – Not meaningful
 


 
Bank OZK
Selected Consolidated Financial Data (continued)
Unaudited
    
  Three Months Ended 
  March 31,  December 31,     
  2020  2019  % Change 
          
 (Dollars in thousands, except per share amounts) 
Income statement data:            
Net interest income $209,775  $214,977   (2.4)%
Provision for loan losses  117,663   4,938   2,282.8 
Non-interest income  27,680   30,406   (9.0)
Non-interest expense  103,425   104,406   (0.9)
Net income available to common stockholders  11,866   100,806   (88.2)
Common share and per common share data:            
Net income per share - diluted $0.09  $0.78   (88.5)%
Net income per share - basic  0.09   0.78   (88.5)
Cash dividends per share  0.26   0.25   4.0 
Book value per share  31.57   32.19   (1.9)
Tangible book value per share (1)  26.30   26.88   (2.2)
Weighted-average diluted shares outstanding (thousands)  129,307   129,036     
End of period shares outstanding (thousands)  129,324   128,951     
Balance sheet data at period end:            
Total assets $24,565,810  $23,555,728   4.3%
Total loans  18,228,204   17,532,043   4.0 
Non-purchased loans  17,030,378   16,224,539   5.0 
Purchased loans  1,197,826   1,307,504   (8.4)
Allowance for loan losses  238,737   108,525   120.0 
Foreclosed assets  20,616   19,096   8.0 
Investment securities - AFS  2,816,556   2,277,389   23.7 
Goodwill and other intangible assets, net  681,747   684,542   (0.4)
Deposits  18,809,190   18,474,259   1.8 
Other borrowings  1,051,353   351,387   199.2 
Subordinated notes  223,759   223,663   0.1 
Subordinated debentures  120,055   119,916   0.1 
Unfunded balance of closed loans  11,334,737   11,325,598   0.1 
Reserve for losses on loan commitments  77,672     NM 
Total common stockholders’ equity  4,083,150   4,150,351   (1.6)
Net unrealized gains on investment securities AFS included in common stockholders' equity  54,888   27,255     
Loan (including purchased loans) to deposit ratio  96.91%  94.90%    
Selected ratios:            
Return on average assets(2)  0.20%  1.74%    
Return on average common stockholders’ equity(2)  1.16   9.73     
Return on average tangible common stockholders’ equity(1) (2)  1.39   11.68     
Average common equity to total average assets  17.31   17.86     
Net interest margin – FTE(2)  3.96   4.15     
Efficiency ratio  43.35   42.37     
Net charge-offs to average non-purchased loans(2) (3)  0.08   0.10     
Net charge-offs to average total loans(2)  0.10   0.12     
Nonperforming loans to total loans(4)  0.16   0.15     
Nonperforming assets to total assets(4)  0.19   0.18     
Allowance for loan losses to total loans  1.31   0.62     
Other information:            
Non-accrual loans(4) $25,681  $23,221     
Accruing loans - 90 days past due(4)          
Troubled and restructured non-purchased loans - accruing(4)  757   656     
             
(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.
NM – Not meaningful
 


 
Bank OZK
Supplemental Quarterly Financial Data
Unaudited
                         
  6/30/18  9/30/18  12/31/18  3/31/19  6/30/19  9/30/19  12/31/19  3/31/20 
                         
 (Dollars in thousands, except per share amounts) 
Earnings Summary:                                
Net interest income $224,661  $220,614  $228,382  $225,888  $224,536  $218,780  $214,977  $209,775 
Federal tax (FTE) adjustment  1,151   1,132   1,219   1,207   1,136   1,038   1,028   1,133 
Net interest income (FTE)  225,812   221,746   229,601   227,095   225,672   219,818   216,005   210,908 
Provision for loan losses  (9,610)  (41,949)  (7,271)  (6,681)  (6,769)  (7,854)  (4,938)  (117,663)
Non-interest income  27,386   24,121   27,560   24,072   26,603   26,446   30,406   27,680 
Non-interest expense  (89,107)  (102,942)  (94,893)  (96,678)  (99,131)  (100,914)  (104,406)  (103,425)
Pretax income (FTE)  154,481   100,976   154,997   147,808   146,375   137,496   137,067   17,500 
FTE adjustment  (1,151)  (1,132)  (1,219)  (1,207)  (1,136)  (1,038)  (1,028)  (1,133)
Provision for income taxes  (38,589)  (25,665)  (38,750)  (35,889)  (34,726)  (32,574)  (35,240)  (4,509)
Noncontrolling interest  10   1   3   (6)  (10)  7   7   8 
Net income available to common stockholders $114,751  $74,180  $115,031  $110,706  $110,503  $103,891  $100,806  $11,866 
Earnings per common share – diluted $0.89  $0.58  $0.89  $0.86  $0.86  $0.81  $0.78  $0.09 
Non-interest Income:                                
Service charges on deposit accounts $9,704  $9,730  $10,585  $9,722  $10,291  $10,827  $10,933  $10,009 
Trust income  1,591   1,730   1,821   1,730   1,839   1,975   2,010   1,939 
BOLI income:                                
Increase in cash surrender value  5,259   5,321   5,269   5,162   5,178   5,208   5,167   5,067 
Death benefits        482         206   2,989   608 
Other income from purchased loans  2,744   1,418   2,370   795   1,455   674   759    
Loan service, maintenance and other fees  5,641   4,724   5,245   4,874   4,565   4,197   4,282   3,716 
Gains (losses) on sales of other assets  844   (518)  465   284   402   189   1,358   161 
Net gains on investment securities              713         2,223 
Other  1,603   1,716   1,323   1,505   2,160   3,170   2,908   3,957 
Total non-interest income $27,386  $24,121  $27,560  $24,072  $26,603  $26,446  $30,406  $27,680 
Non-interest Expense:                                
Salaries and employee benefits $41,665  $41,477  $41,837  $44,868  $47,558  $48,376  $52,050  $51,473 
Net occupancy expense  13,827   14,358   14,027   14,750   14,587   14,825   14,855   15,330 
Other operating expenses  33,615   47,107   39,029   37,060   36,986   37,713   37,501   36,622 
Total non-interest expense $89,107  $102,942  $94,893  $96,678  $99,131  $100,914  $104,406  $103,425 
Balance Sheet Data:                                
Total assets $22,220,380  $22,086,539  $22,388,030  $23,005,652  $22,960,731  $23,402,679  $23,555,728  $24,565,810 
Non-purchased loans  14,183,533   14,440,623   15,073,791   15,610,681   15,786,809   16,307,621   16,224,539   17,030,378 
Purchased loans  2,580,341   2,285,168   2,044,032   1,864,715   1,698,396   1,427,230   1,307,504   1,197,826 
Investment securities – AFS  2,608,439   2,669,877   2,862,340   2,769,602   2,548,489   2,414,722   2,277,389   2,816,556 
Deposits  17,897,085   17,822,915   17,938,415   18,476,868   18,186,215   18,440,078   18,474,259   18,809,190 
Unfunded balance of closed loans  11,999,661   11,891,247   11,364,975   11,544,218   11,167,055   11,429,918   11,325,598   11,334,737 
Common stockholders' equity  3,613,903   3,653,596   3,770,330   3,882,643   3,993,247   4,078,324   4,150,351   4,083,150 
                                 


 
Bank OZK
Supplemental Quarterly Financial Data (Continued)
Unaudited
                         
  6/30/18  9/30/18  12/31/18  3/31/19  6/30/19  9/30/19  12/31/19  3/31/20 
                         
 (Dollars in thousands, except per share amounts) 
Allowance for Credit Losses:                                
Balance at beginning of period $98,097  $104,638  $98,200  $102,264  $105,954  $106,642  $109,001  $108,525 
Adoption of CECL(1) model                       94,512 
Net charge-offs  (3,069)  (48,387)  (3,207)  (2,991)  (6,081)  (5,495)  (5,414)  (4,291)
Provision for loan losses  9,610   41,949   7,271   6,681   6,769   7,854   4,938   117,663 
Balance at end of period $104,638  $98,200  $102,264  $105,954  $106,642  $109,001  $108,525  $316,409 
Allowance for loan losses $104,638  $98,200  $102,264  $105,954  $106,642  $109,001  $108,525  $238,737 
Reserve for unfunded balance of closed loans                       77,672 
Total allowance for credit losses $104,638  $98,200  $102,264  $105,954  $106,642  $109,001  $108,525  $316,409 
Selected Ratios:                                
Net interest margin – FTE(2)  4.66%  4.47% 4.55   4.53%  4.45%  4.26%  4.15%  3.96%
Efficiency ratio  35.19   41.87   36.90%  38.49   39.30   40.98   42.37   43.35 
Net charge-offs to average non-purchased loans(2) (3)  0.05   1.32   0.06   0.05   0.12   0.07   0.10   0.08 
Net charge-offs to average total loans(2)  0.07   1.14   0.07   0.07   0.14   0.12   0.12   0.10 
Nonperforming loans to total loans(4)  0.10   0.23   0.23   0.22   0.15   0.17   0.15   0.16 
Nonperforming assets to total assets(4)  0.15   0.23   0.23   0.21   0.25   0.26   0.18   0.19 
Allowance for loan losses to total loans  0.62   0.59   0.60   0.61   0.61   0.61   0.62   1.31 
Loans past due 30 days or more, including past due non-accrual loans, to total loans(4)  0.12   0.17   0.28   0.28   0.13   0.14   0.19   0.18 
                                 
(1) Current Expected Credit Loss model.
(2) Ratios for interim periods annualized based on actual days.
(3) Excludes purchased loans and net charge-offs related to such loss.
(4) Excludes purchased loans, except for their inclusion in total assets.
 


 
Bank OZK
Average Consolidated Balance Sheets and Net Interest Analysis – FTE
Unaudited
                         
  Three Months Ended March 31, 
  2020  2019 
  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 $1,367,297  $4,376   1.29% $67,015  $414   2.50%
Investment securities:                        
Taxable  1,796,061   10,760   2.41   2,310,770   14,897   2.61 
Tax-exempt – FTE  486,062   4,553   3.77   515,613   4,903   3.86 
Non-purchased loans – FTE  16,526,270   232,030   5.65   15,482,768   246,041   6.44 
Purchased loans  1,265,413   21,387   6.80   1,947,783   30,195   6.29 
Total earning assets – FTE  21,441,103   273,106   5.12   20,323,949   296,450   5.92 
Non-interest earning assets  2,353,330           2,232,416         
Total assets $23,794,433          $22,556,365         
LIABILITIES AND STOCKHOLDERS EQUITY                        
Interest bearing liabilities:                        
Deposits:                        
Savings and interest bearing transaction $8,131,400  $19,747   0.98% $9,531,133  $36,103   1.54%
Time deposits of $100 or more  4,388,337   22,190   2.03   3,170,510   15,555   1.99 
Other time deposits  3,333,529   15,745   1.90   2,435,425   11,429   1.90 
Total interest bearing deposits  15,853,266   57,682   1.46   15,137,068   63,087   1.69 
Repurchase agreements with customers  7,883   6   0.32   22,192   22   0.40 
Other borrowings (1)  296,969   50   0.07   269,588   1,389   2.09 
Subordinated notes  223,711   3,172   5.70   223,321   3,146   5.71 
Subordinated debentures (1)  119,984   1,288   4.31   119,412   1,711   5.81 
Total interest bearing liabilities  16,501,813   62,198   1.52   15,771,581   69,355   1.78 
Non-interest bearing liabilities:                        
Non-interest bearing deposits  2,927,296           2,757,110         
Other non-interest bearing liabilities  243,598           210,588         
Total liabilities  19,672,707           18,739,279         
Common stockholders’ equity  4,118,614           3,813,979         
Noncontrolling interest  3,112           3,107         
Total liabilities and stockholders’ equity $23,794,433          $22,556,365         
Net interest income – FTE     $210,908          $227,095     
Net interest margin – FTE          3.96%          4.53%
                         
(1) The interest expense and the rates for “other borrowings” and for “subordinated debentures” were affected by capitalized interest.  Capitalized interest included in other borrowings totaled $0.4 million for the first quarter of 2020 and $0.3 million for the first quarter of 2019.  In the absence of this interest capitalization, the rates on other borrowings would have been 0.55% for the first quarter of 2020 and 2.62% for the first quarter of 2019.  Capitalized interest included in subordinated debentures totaled $0.1 million for the first quarter of 2020 (none in the first quarter of 2019).  In the absence of this interest capitalization, the rate on subordinated debentures would have been 4.80% for the first quarter of 2020.
 


 
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 
  March 31,  December 31, 
  2020  2019  2019 
          
  (Dollars in thousands) 
Net income available to common stockholders $11,866  $110,706  $100,806 
Average common stockholders’ equity before noncontrolling interest $4,118,614  $3,813,979  $4,110,322 
Less average intangible assets:            
Goodwill  (660,789)  (660,789)  (660,789)
Core deposit and other intangibles, net of accumulated amortization  (22,412)  (34,437)  (25,315)
Total average intangibles  (683,201)  (695,226)  (686,104)
Average tangible common stockholders’ equity $3,435,413  $3,118,753  $3,424,218 
Return on average common stockholders’ equity(1)  1.16%  11.77%  9.73%
Return on average tangible common stockholders’ equity(1)  1.39%  14.40%  11.68%
             
(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
       
  March 31,  December 31, 
  2020  2019  2019 
          
  (In thousands, except per share amounts) 
Total common stockholders’ equity before noncontrolling interest $4,083,150  $3,882,643  $4,150,351 
Less intangible assets:            
Goodwill  (660,789)  (660,789)  (660,789)
Core deposit and other intangible assets, net of accumulated amortization  (20,958)  (32,527)  (23,753)
Total intangibles  (681,747)  (693,316)  (684,542)
Total tangible common stockholders’ equity $3,401,403  $3,189,327  $3,465,809 
Shares of common stock outstanding  129,324   128,948   128,951 
Book value per common share $31.57  $30.11  $32.19 
Tangible book value per common share $26.30  $24.73  $26.88 
             


 
Calculation of Total Tangible Common Stockholders’
Equity and the Ratio of Total Tangible Common
Stockholders’ Equity to Total Tangible Assets
Unaudited
    
  March 31, 
  2020  2019 
       
  (Dollars in thousands) 
Total common stockholders’ equity before noncontrolling interest $4,083,150  $3,882,643 
Less intangible assets:        
Goodwill  (660,789)  (660,789)
Core deposit and other intangible assets, net of accumulated amortization  (20,958)  (32,527)
Total intangibles  (681,747)  (693,316)
Total tangible common stockholders’ equity $3,401,403  $3,189,327 
Total assets $24,565,810  $23,005,652 
Less intangible assets:        
Goodwill  (660,789)  (660,789)
Core deposit and other intangible assets, net of accumulated amortization  (20,958)  (32,527)
Total intangibles