Bank OZK Announces Third Quarter 2019 Earnings

10/17/2019 at 4:01 PM EDT

LITTLE ROCK, Ark., Oct. 17, 2019 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the third quarter of 2019 was $103.9 million, a 40.1% increase from $74.2 million for the third quarter of 2018, but a 6.0% decrease from $110.5 million for the second quarter of 2019. Diluted earnings per common share for the third quarter of 2019 were $0.81, a 39.7% increase from $0.58 for the third quarter of 2018, but a 5.8% decrease from $0.86 for the second quarter of 2019.

The Bank’s results for the third quarter of 2018 included (i) pretax expenses of $10.8 million as a result of its name change and strategic rebranding and (ii) net charge-offs of $45.5 million on two unrelated credits.

For the first nine months of 2019, net income totaled $325.1 million, a 7.6% increase from $302.1 million for the first nine months of 2018. Diluted earnings per common share for the first nine months of 2019 were $2.52, a 7.2% increase from $2.35 for the first nine months of 2018.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the third quarter of 2019 were 1.81%, 10.22% and 12.33%, respectively, compared to 1.33%, 8.07% and 9.99%, respectively, for the third quarter of 2018. The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first nine months of 2019 were 1.92%, 11.07%, and 13.44%, respectively, compared to 1.85%, 11.32%, and 14.11%, respectively, for the first nine 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, “We are very pleased to have once again delivered financial metrics among the best in the industry for the quarter just ended. We continue to maintain our focus on our strong credit culture and consistent discipline, which are paramount in this interest rate and competitive environment. Our excellent team of bankers have us well positioned for continued success as we remain focused on delivering long-term value for our shareholders.”

KEY BALANCE SHEET METRICS

Total loans were $17.73 billion at September 30, 2019, a 6.0% increase from $16.73 billion at September 30, 2018. Non-purchased loans, which exclude loans acquired in previous acquisitions, were $16.31 billion at September 30, 2019, a 12.9% increase from $14.44 billion at September 30, 2018. Purchased loans, which consist of loans acquired in previous acquisitions, were $1.43 billion at September 30, 2019, a 37.5% decrease from $2.29 billion at September 30, 2018. The unfunded balance of closed loans was $11.43 billion at September 30, 2019, a 3.9% decrease from $11.89 billion at September 30, 2018, but a 2.4% increase from $11.17 billion at June 30, 2019.

Deposits were $18.44 billion at September 30, 2019, a 3.5% increase from $17.82 billion at September 30, 2018. Total assets were $23.40 billion at September 30, 2019, a 6.0% increase from $22.09 billion at September 30, 2018.

Common stockholders’ equity was $4.08 billion at September 30, 2019, an 11.6% increase from $3.65 billion at September 30, 2018. Tangible common stockholders’ equity was $3.39 billion at September 30, 2019, a 14.8% increase from $2.95 billion at September 30, 2018. Book value per common share was $31.63 at September 30, 2019, an 11.3% increase from $28.41 at September 30, 2018. Tangible book value per common share was $26.30 at September 30, 2019, a 14.5% increase from $22.97 at September 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 17.43% at September 30, 2019 compared to 16.54% at September 30, 2018. Its ratio of total tangible common stockholders’ equity to total tangible assets increased to 14.93% at September 30, 2019 compared to 13.81% at September 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 third 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 October 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 7188336. 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 change in the method for determining 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; 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, including the estimated effects from the adoption of the current expected credit loss (“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, 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 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.

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

Bank OZK
Consolidated Balance Sheets
Unaudited

	September 30,			December 31,
	2019			2018

	(Dollars in thousands, except per share amounts)
ASSETS
Cash and cash equivalents	$	1,029,946		$	290,672
Investment securities - available for sale ("AFS")		2,414,722			2,862,340
Federal Home Loan Bank of Dallas and other banker's bank stocks		13,656			25,941
Non-purchased loans		16,307,621			15,073,791
Purchased loans		1,427,230			2,044,032
Allowance for loan losses		(109,001	)		(102,264	)
Net loans		17,625,850			17,015,559
Premises and equipment, net		687,511			567,189
Foreclosed assets		33,319			16,171
Accrued interest receivable		76,218			81,968
Bank owned life insurance (“BOLI”)		735,531			721,238
Goodwill and other intangible assets, net		687,397			696,461
Other, net		98,529			110,491
Total assets	$	23,402,679		$	22,388,030

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	2,793,369		$	2,748,273
Savings and interest bearing transaction		8,441,339			9,682,713
Time		7,205,370			5,507,429
Total deposits		18,440,078			17,938,415
Repurchase agreements with customers		12,156			20,564
Other borrowings		301,421			96,692
Subordinated notes		223,567			223,281
Subordinated debentures		119,775			119,358
Accrued interest payable and other liabilities		224,234			216,355
Total liabilities		19,321,231			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 September 30, 2019 or December 31, 2018		—			—
Common stock; $0.01 par value; 300,000,000 shares authorized; 128,946,359 and 128,611,049 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		1,289			1,286
Additional paid-in capital		2,247,973			2,237,948
Retained earnings		1,801,414			1,565,201
Accumulated other comprehensive income (loss)		27,648			(34,105	)
Total stockholders’ equity before noncontrolling interest		4,078,324			3,770,330
Noncontrolling interest		3,124			3,035
Total stockholders’ equity		4,081,448			3,773,365
Total liabilities and stockholders’ equity	$	23,402,679		$	22,388,030

Bank OZK
Consolidated Statements of Income
Unaudited

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019			2018

	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans	$	244,954	$	219,847		$	740,900		$	620,659
Purchased loans		26,042		40,173			84,756			138,012
Investment securities:
Taxable		12,511		12,472			40,992			35,380
Tax-exempt		3,363		3,991			10,930			12,252
Deposits with banks and federal funds sold		2,647		1,112			4,001			2,448
Total interest income		289,517		277,595			881,579			808,751

Interest expense:
Deposits		66,248		51,785			196,727			130,009
Repurchase agreements with customers		5		215			39			759
Other borrowings		90		144			1,497			824
Subordinated notes		3,216		3,216			9,542			9,542
Subordinated debentures		1,178		1,621			4,570			4,567
Total interest expense		70,737		56,981			212,375			145,701

Net interest income		218,780		220,614			669,204			663,050
Provision for loan losses		7,854		41,949			21,303			57,126
Net interest income after provision for loan losses		210,926		178,665			647,901			605,924

Non-interest income:
Service charges on deposit accounts		10,827		9,730			30,841			28,959
Trust income		1,975		1,730			5,544			5,114
BOLI income		5,414		5,321			15,753			18,160
Other income from purchased loans		674		1,418			2,925			5,413
Loan service, maintenance and other fees		4,197		4,724			13,636			15,108
Gains (losses) on sales of other assets		189		(518	)		875			1,753
Net gains on investment securities		—		—			713			17
Other		3,170		1,716			6,834			5,691
Total non-interest income		26,446		24,121			77,121			80,215

Non-interest expense:
Salaries and employee benefits		48,376		41,477			140,801			128,641
Net occupancy and equipment		14,825		14,358			44,163			42,335
Other operating expenses		37,713		47,107			111,760			114,883
Total non-interest expense		100,914		102,942			296,724			285,859

Income before taxes		136,458		99,844			428,298			400,280
Provision for income taxes		32,574		25,665			103,189			98,227
Net income		103,884		74,179			325,109			302,053
Earnings attributable to noncontrolling interest		7		1			(9	)		22
Net income available to common stockholders	$	103,891	$	74,180		$	325,100		$	302,075

Basic earnings per common share	$	0.81	$	0.58		$	2.52		$	2.35

Diluted earnings per common share	$	0.81	$	0.58		$	2.52		$	2.35

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)

Three months ended September 30, 2019:
Balances – June 30, 2019	$	1,289		$	2,243,779		$	1,728,486		$	19,693		$	3,131		$	3,996,378
Net income		—			—			103,884			—			—			103,884
Earnings attributable to noncontrolling interest		—			—			7			—			(7	)		—
Total other comprehensive income		—			—			—			7,955			—			7,955
Common stock dividends paid, $0.24 per share		—			—			(30,963	)		—			—			(30,963	)
Issuance of 10,800 shares of common stock for exercise of stock options		—			214			—			—			—			214
Stock-based compensation expense		—			3,980			—			—			—			3,980
Forfeitures of 11,157 shares of unvested restricted common stock		—			—			—			—			—			—
Balances – September 30, 2019	$	1,289		$	2,247,973		$	1,801,414		$	27,648		$	3,124		$	4,081,448

Nine months ended September 30, 2019:
Balances – December 31, 2018	$	1,286		$	2,237,948		$	1,565,201		$	(34,105	)	$	3,035		$	3,773,365
Net income		—			—			325,109			—			—			325,109
Earnings attributable to noncontrolling interest		—			—			(9	)		—			9			—
Total other comprehensive income		—			—			—			61,753			—			61,753
Common stock dividends paid, $0.69 per share		—			—			(88,887	)		—			—			(88,887	)
Noncontrolling interest cash contribution		—			—			—			—			80			80
Issuance of 67,350 shares of common stock for exercise of stock options		1			1,090			—			—			—			1,091
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		—			10,584			—			—			—			10,584
Forfeiture of 75,372 shares of unvested restricted common stock		(1	)		1			—			—			—			—
Balances – September 30, 2019	$	1,289		$	2,247,973		$	1,801,414		$	27,648		$	3,124		$	4,081,448

Bank OZK
Consolidated Statements of Stockholders’ Equity (continued)
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)
Three months ended September 30, 2018:
Balances – June 30, 2018	$	1,286		$	2,230,809		$	1,428,721		$	(46,913	)	$	3,039		$	3,616,942
Net income		—			—			74,179			—			—			74,179
Earnings attributable to noncontrolling interest		—			—			1			—			(1	)		—
Total other comprehensive loss		—			—			—			(12,338	)		—			(12,338	)
Common stock dividends paid, $0.20 per share		—			—			(25,723	)		—			—			(25,723	)
Issuance of 6,100 shares of common stock for exercise of stock options		—			92			—			—			—			92
Issuance of 5,511 shares of unvested restricted common stock		—			—			—			—			—			—
Stock-based compensation expense		—			3,482			—			—			—			3,482
Forfeitures of 18,791 shares of unvested restricted common stock		—			—			—			—			—			—
Balances – September 30, 2018	$	1,286		$	2,234,383		$	1,477,178		$	(59,251	)	$	3,038		$	3,656,634

Nine months ended September 30, 2018:
Balances – December 31, 2017	$	1,283		$	2,221,844		$	1,250,313		$	(12,712	)	$	3,060		$	3,463,788
Net income		—			—			302,053			—			—			302,053
Earnings attributable to noncontrolling interest		—			—			22			—			(22	)		—
Total other comprehensive loss		—			—			—			(46,539	)		—			(46,539	)
Common stock dividends paid, $0.585 per share		—			—			(75,210	)		—			—			(75,210	)
Issuance of 216,990 shares of common stock for exercise of stock options		2			5,677			—			—			—			5,679
Issuance of 220,102 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		—			10,633			—			—			—			10,633
Forfeitures of 43,655 shares of unvested restricted common stock		—			—			—			—			—			—
Balances – September 30, 2018	$	1,286		$	2,234,383		$	1,477,178		$	(59,251	)	$	3,038		$	3,656,634

Bank OZK
Summary of Non-Interest Expense
Unaudited

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(Dollars in thousands)
Salaries and employee benefits	$	48,376	$	41,477	$	140,801	$	128,641
Net occupancy and equipment		14,825		14,358		44,163		42,335
Other operating expenses:
Professional and outside services		9,204		9,725		25,874		27,542
Software and data processing		5,095		3,336		14,561		9,786
Deposit insurance and assessments		2,505		3,948		9,645		11,068
Travel and meals		2,777		2,517		8,385		7,168
Telecommunication services		2,094		3,373		8,248		10,056
Postage and supplies		2,040		2,517		6,201		6,930
Advertising and public relations		2,067		6,977		5,421		10,084
ATM expense		1,277		1,202		3,363		3,683
Loan collection and repossession expense		317		932		2,218		2,225
Writedowns of foreclosed and other assets		354		544		1,509		1,156
Writedown of signage due to strategic rebranding		—		4,915		—		4,915
Amortization of intangibles		2,907		3,145		9,064		9,435
Other		7,076		3,976		17,271		10,835
Total non-interest expense	$	100,914	$	102,942	$	296,724	$	285,859

Bank OZK
Summary of Total Loans Outstanding
Unaudited

	September 30, 2019					December 31, 2018

	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	1,016,834		5.7	%	$	1,049,460		6.1	%
Non-farm/non-residential		3,883,113		21.9			4,319,388		25.2
Construction/land development		6,682,143		37.7			6,562,185		38.4
Agricultural		207,801		1.2			165,088		1.0
Multifamily residential		1,358,127		7.6			1,116,026		6.5
Total real estate		13,148,018		74.1			13,212,147		77.2
Commercial and industrial		706,048		4.0			823,417		4.8
Consumer		2,921,307		16.5			2,345,863		13.7
Other		959,478		5.4			736,396		4.3
Total loans		17,734,851		100.0	%		17,117,823		100.0	%
Allowance for loan losses		(109,001	)				(102,264	)
Net loans	$	17,625,850				$	17,015,559

Summary of Deposits
Unaudited

	September 30, 2019				December 31, 2018

	(Dollars in thousands)
Non-interest bearing	$	2,793,369	15.1	%	$	2,748,273	15.3	%
Interest bearing:
Transaction (NOW)		2,730,018	14.8			2,359,299	13.2
Savings and money market		5,711,321	31.0			7,323,414	40.8
Time deposits less than $100		3,445,873	18.7			2,297,101	12.8
Time deposits of $100 or more		3,759,497	20.4			3,210,328	17.9
Total deposits	$	18,440,078	100.0	%	$	17,938,415	100.0	%

Bank OZK
Selected Consolidated Financial Data
Unaudited

		Three Months Ended September 30,									Nine Months Ended September 30,
		2019			2018			% Change			2019			2018			% Change

	(Dollars in thousands, except per share amounts)
Income statement data:
Net interest income		$	218,780		$	220,614			(0.8	)%	$	669,204		$	663,050			0.9	%
Provision for loan losses			7,854			41,949			(81.3	)		21,303			57,126			(62.7	)
Non-interest income			26,446			24,121			9.6			77,121			80,215			(3.9	)
Non-interest expense			100,914			102,942			(2.0	)		296,724			285,859			3.8
Net income available to common stockholders			103,891			74,180			40.1			325,100			302,075			7.6
Common stock data:
Net income per share - diluted		$	0.81		$	0.58			39.7	%	$	2.52		$	2.35			7.2	%
Net income per share - basic			0.81			0.58			39.7			2.52			2.35			7.2
Cash dividends per share			0.24			0.20			20.0			0.69			0.585			17.9
Book value per share			31.63			28.41			11.3			31.63			28.41			11.3
Tangible book value per share⁽¹⁾			26.30			22.97			14.5			26.30			22.97			14.5
Diluted shares outstanding (thousands)			129,012			128,744						128,995			128,771
End of period shares outstanding (thousands)			128,946			128,609						128,946			128,609
Balance sheet data at period end:
Total assets		$	23,402,679		$	22,086,539			6.0	%	$	23,402,679		$	22,086,539			6.0	%
Total loans			17,734,851			16,725,791			6.0			17,734,851			16,725,791			6.0
Non-purchased loans			16,307,621			14,440,623			12.9			16,307,621			14,440,623			12.9
Purchased loans			1,427,230			2,285,168			(37.5	)		1,427,230			2,285,168			(37.5	)
Allowance for loan losses			109,001			98,200			11.0			109,001			98,200			11.0
Foreclosed assets			33,319			18,470			80.4			33,319			18,470			80.4
Investment securities - AFS			2,414,722			2,669,877			(9.6	)		2,414,722			2,669,877			(9.6	)
Goodwill and other intangible assets, net			687,397			699,606			(1.7	)		687,397			699,606			(1.7	)
Deposits			18,440,078			17,822,915			3.5			18,440,078			17,822,915			3.5
Repurchase agreements with customers			12,156			51,891			(76.6	)		12,156			51,891			(76.6	)
Other borrowings			301,421			1,729		NM				301,421			1,729		NM
Subordinated notes			223,567			223,185			0.2			223,567			223,185			0.2
Subordinated debentures			119,775			119,217			0.5			119,775			119,217			0.5
Unfunded balance of closed loans			11,429,918			11,891,247			(3.9	)		11,429,918			11,891,247			(3.9	)
Total common stockholders’ equity			4,078,324			3,653,596			11.6			4,078,324			3,653,596			11.6
Net unrealized gains (losses) on investment securities AFS included in common stockholders' equity			27,648			(59,251	)					27,648			(59,251	)
Loan (including purchased loans) to deposit ratio			96.18	%		93.84	%					96.18	%		93.84	%
Selected ratios:
Return on average assets⁽²⁾			1.81	%		1.33	%					1.92	%		1.85	%
Return on average common stockholders’ equity⁽²⁾			10.22			8.07						11.07			11.32
Return on average tangible common stockholders’ equity^{(1) (2)}			12.33			9.99						13.44			14.11
Average common equity to total average assets			17.69			16.47						17.31			16.38
Net interest margin – FTE⁽²⁾			4.26			4.47						4.41			4.60
Efficiency ratio			40.98			41.87						39.58			38.28
Net charge-offs to average non-purchased loans^{(2) (3)}			0.07			1.32						0.08			0.49
Net charge-offs to average total loans⁽²⁾			0.12			1.14						0.11			0.43
Nonperforming loans to total loans⁽⁴⁾			0.17			0.23						0.17			0.23
Nonperforming assets to total assets⁽⁴⁾			0.26			0.23						0.26			0.23
Allowance for loan losses to non-purchased loans⁽⁵⁾			0.66			0.67					0.66			0.67
Other information:
Non-accrual loans⁽⁴⁾		$	25,552		$	32,960					$	25,552		$	32,960
Accruing loans - 90 days past due⁽⁴⁾			—			—						—			—
Troubled and restructured non-purchased loans - accruing ⁽⁴⁾			1,510			—						1,510			—
Impaired purchased loans			12,969			5,064						12,969			5,064

⁽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.
NM – Not meaningful



Bank OZK
Selected Consolidated Financial Data
Unaudited

		Three Months Ended
		September 30,			June 30,
		2019			2019			% Change

	(Dollars in thousands, except per share amounts)
Income statement data:
Net interest income		$	218,780		$	224,536			(2.6	)%
Provision for loan losses			7,854			6,769			16.0
Non-interest income			26,446			26,603			(0.6	)
Non-interest expense			100,914			99,131			1.8
Net income available to common stockholders			103,891			110,503			(6.0	)
Common stock data:
Net income per share - diluted		$	0.81		$	0.86			(5.8	)%
Net income per share - basic			0.81			0.86			(5.8	)
Cash dividends per share			0.24			0.23			4.3
Book value per share			31.63			30.97			2.1
Tangible book value per share ⁽¹⁾			26.30			25.61			2.7
Diluted shares outstanding (thousands)			129,012			129,079
End of period shares outstanding (thousands)			128,946			128,947
Balance sheet data at period end:
Total assets		$	23,402,679		$	22,960,731			1.9	%
Total loans			17,734,851			17,485,205			1.4
Non-purchased loans			16,307,621			15,786,809			3.3
Purchased loans			1,427,230			1,698,396			(16.0	)
Allowance for loan losses			109,001			106,642			2.2
Foreclosed assets			33,319			33,467			(0.4	)
Investment securities - AFS			2,414,722			2,548,489			(5.2	)
Goodwill and other intangible assets, net			687,397			690,304			(0.4	)
Deposits			18,440,078			18,186,215			1.4
Repurchase agreements with customers			12,156			10,909			11.4
Other borrowings			301,421			201,455			49.6
Subordinated notes			223,567			223,471			0.1
Subordinated debentures			119,775			119,635			0.1
Unfunded balance of closed loans			11,429,918			11,167,055			2.4
Total common stockholders’ equity			4,078,324			3,993,247			2.1
Net unrealized gains on investment securities AFS included in common stockholders' equity			27,648			19,693
Loan (including purchased loans) to deposit ratio			96.18	%		96.15	%
Selected ratios:
Return on average assets⁽²⁾			1.81	%		1.95	%
Return on average common stockholders’ equity⁽²⁾			10.22			11.29
Return on average tangible common stockholders’ equity^{(1) (2)}			12.33			13.70
Average common equity to total average assets			17.69			17.31
Net interest margin – FTE⁽²⁾			4.26			4.45
Efficiency ratio			40.98			39.30
Net charge-offs to average non-purchased loans^{(2) (3)}			0.07			0.12
Net charge-offs to average total loans⁽²⁾			0.12			0.14
Nonperforming loans to total loans⁽⁴⁾			0.17			0.15
Nonperforming assets to total assets⁽⁴⁾			0.26			0.25
Allowance for loan losses to non-purchased loans⁽⁵⁾			0.66		0.67
Other information:
Non-accrual loans⁽⁴⁾		$	25,552		$	22,860
Accruing loans - 90 days past due⁽⁴⁾			—			—
Troubled and restructured non-purchased loans - accruing⁽⁴⁾			1,510			1,399
Impaired purchased loans			12,969			15,440



Bank OZK
Supplemental Quarterly Financial Data
Unaudited

	12/31/17			3/31/18			6/30/18			9/30/18			12/31/18			3/31/19			6/30/19			9/30/19

	(Dollars in thousands, except per share amounts)
Earnings Summary:
Net interest income	$	214,831		$	217,776		$	224,661		$	220,614		$	228,382		$	225,888		$	224,536		$	218,780
Federal tax (FTE) adjustment		2,450			1,166			1,151			1,132			1,219			1,207			1,136			1,038
Net interest income (FTE)		217,281			218,942			225,812			221,746			229,601			227,095			225,672			219,818
Provision for loan losses		(9,279	)		(5,567	)		(9,610	)		(41,949	)		(7,271	)		(6,681	)		(6,769	)		(7,854	)
Non-interest income		30,213			28,707			27,386			24,121			27,560			24,072			26,603			26,446
Non-interest expense		(86,177	)		(93,810	)		(89,107	)		(102,942	)		(94,893	)		(96,678	)		(99,131	)		(100,914	)
Pretax income (FTE)		152,038			148,272			154,481			100,976			154,997			147,808			146,375			137,496
FTE adjustment		(2,450	)		(1,166	)		(1,151	)		(1,132	)		(1,219	)		(1,207	)		(1,136	)		(1,038	)
Provision for income taxes		(3,434	)		(33,973	)		(38,589	)		(25,665	)		(38,750	)		(35,889	)		(34,726	)		(32,574	)
Noncontrolling interest		10			11			10			1			3			(6	)		(10	)		7
Net income available to common stockholders	$	146,164		$	113,144		$	114,751		$	74,180		$	115,031		$	110,706		$	110,503		$	103,891
Earnings per common share – diluted	$	1.14		$	0.88		$	0.89		$	0.58		$	0.89		$	0.86		$	0.86		$	0.81
Non-interest Income:
Service charges on deposit accounts	$	10,058		$	9,525		$	9,704		$	9,730		$	10,585		$	9,722		$	10,291		$	10,827
Trust income		1,729			1,793			1,591			1,730			1,821			1,730			1,839			1,975
BOLI income		5,166			7,580			5,259			5,321			5,751			5,162			5,178			5,414
Other income from purchased loans		2,009			1,251			2,744			1,418			2,370			795			1,455			674
Loan service, maintenance and other fees		4,289			4,743			5,641			4,724			5,245			4,874			4,565			4,197
Net gains on investment securities		1,201			17			—			—			—			—			713			—
Gains (losses) on sales of other assets		1,899			1,426			844			(518	)		465			284			402			189
Other		3,862			2,372			1,603			1,716			1,323			1,505			2,160			3,170
Total non-interest income	$	30,213		$	28,707		$	27,386		$	24,121		$	27,560		$	24,072		$	26,603		$	26,446
Non-interest Expense:
Salaries and employee benefits	$	38,417		$	45,499		$	41,665		$	41,477		$	41,837		$	44,868		$	47,558		$	48,376
Net occupancy expense		13,474			14,150			13,827			14,358			14,027			14,750			14,587			14,825
Other operating expenses		34,286			34,161			33,615			47,107			39,029			37,060			36,986			37,713
Total non-interest expense	$	86,177		$	93,810		$	89,107		$	102,942		$	94,893		$	96,678		$	99,131		$	100,914
Balance Sheet Data:
Total assets	$	21,275,647		$	22,039,439		$	22,220,380		$	22,086,539		$	22,388,030		$	23,005,652		$	22,960,731		$	23,402,679
Non-purchased loans		12,733,937			13,674,561			14,183,533			14,440,623			15,073,791			15,610,681			15,786,809			16,307,621
Purchased loans		3,309,092			2,934,535			2,580,341			2,285,168			2,044,032			1,864,715			1,698,396			1,427,230
Investment securities - AFS		2,593,873			2,603,600			2,608,439			2,669,877			2,862,340			2,769,602			2,548,489			2,414,722
Deposits		17,192,345			17,833,672			17,897,085			17,822,915			17,938,415			18,476,868			18,186,215			18,440,078
Unfunded balance of closed loans		13,192,439			12,551,032			11,999,661			11,891,247			11,364,975			11,544,218			11,167,055			11,429,918
Common stockholders' equity		3,460,728			3,526,605			3,613,903			3,653,596			3,770,330			3,882,643			3,993,247			4,078,324
Allowance for Loan Losses:
Balance at beginning of period	$	86,784		$	94,120		$	98,097		$	104,638		$	98,200		$	102,264		$	105,954		$	106,642
Net charge-offs		(1,943	)		(1,590	)		(3,069	)		(48,387	)		(3,207	)		(2,991	)		(6,081	)		(5,495	)
Provision for loan losses		9,279			5,567			9,610			41,949			7,271			6,681			6,769			7,854
Balance at end of period	$	94,120		$	98,097		$	104,638		$	98,200		$	102,264		$	105,954		$	106,642		$	109,001
Selected Ratios:
Net interest margin – FTE⁽¹⁾		4.72	%		4.69	%		4.66	%		4.47	%		4.55	%		4.53	%		4.45	%		4.26	%
Efficiency ratio		34.82			37.88			35.19			41.87			36.90			38.49			39.30			40.98
Net charge-offs to average non-purchased loans^{(1) (2)}		0.08			0.04			0.05			1.32			0.06			0.05			0.12			0.07
Net charge-offs to average total loans⁽¹⁾		0.05			0.04			0.07			1.14			0.07			0.07			0.14			0.12
Nonperforming loans to total loans⁽³⁾		0.10			0.09			0.10			0.23			0.23			0.22			0.15			0.17
Nonperforming assets to total assets⁽³⁾		0.18			0.16			0.15			0.23			0.23			0.21			0.25			0.26
Allowance for loan losses to total non-purchased loans⁽⁴⁾		0.73			0.71			0.73			0.67			0.67			0.67			0.67			0.66
Loans past due 30 days or more, including past due non- accrual loans, to total loans⁽³⁾		0.15			0.14			0.12			0.17			0.28			0.28			0.13			0.14

⁽¹⁾Ratios for interim periods annualized based on actual days.
⁽²⁾Excludes purchased loans and net charge-offs related to such loans.
⁽³⁾Excludes purchased loans, except for their inclusion in total assets.
⁽⁴⁾Excludes purchased loans and any allowance for such loans.



Bank OZK
Average Consolidated Balance Sheets and Net Interest Analysis – FTE
Unaudited

	Three Months Ended September 30,														Nine Months Ended September 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	$	486,174	$	2,647		2.16	%	$	240,665	$	1,112		1.83	%	$	242,476	$	4,001		2.21	%	$	179,429	$	2,448		1.82	%
Investment securities:
Taxable		2,027,267		12,511		2.45			2,117,498		12,472		2.34			2,169,218		40,992		2.53			2,078,710		35,380		2.28
Tax-exempt – FTE		462,927		4,256		3.65			532,503		5,051		3.76			495,694		13,835		3.73			544,728		15,509		3.81
Non-purchased loans – FTE		15,934,033		245,099		6.10			14,363,015		219,919		6.07			15,727,447		741,375		6.30			13,760,166		620,851		6.03
Purchased loans		1,553,398		26,042		6.65			2,436,888		40,173		6.54			1,760,740		84,756		6.44			2,789,226		138,012		6.62
Total earning assets – FTE		20,463,799		290,555		5.63			19,690,569		278,727		5.62			20,395,575		884,959		5.80			19,352,259		812,200		5.61
Non-interest earning assets		2,323,028							2,457,577							2,277,584							2,421,623
Total assets	$	22,786,827						$	22,148,146						$	22,673,159						$	21,773,882
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	8,792,998	$	30,108		1.36	%	$	10,231,569	$	33,753		1.31	%	$	9,318,915	$	103,721		1.49	%	$	10,113,882	$	85,571		1.13	%
Time deposits of $100 or more		3,564,862		19,803		2.20			3,306,014		13,288		1.59			3,292,375		52,056		2.11			3,175,855		33,096		1.39
Other time deposits		3,069,997		16,337		2.11			1,580,886		4,744		1.19			2,697,660		40,950		2.03			1,492,575		11,342		1.02
Total interest bearing deposits		15,427,857		66,248		1.70			15,118,469		51,785		1.36			15,308,950		196,727		1.72			14,782,312		130,009		1.18
Repurchase agreements with customers		9,037		5		0.24			97,249		215		0.88			14,062		39		0.37			123,587		759		0.82
Other borrowings⁽¹⁾		29,422		90		1.21			63,909		144		0.90			122,254		1,497		1.64			88,101		824		1.25
Subordinated notes		223,516		3,216		5.71			223,135		3,216		5.72			223,419		9,542		5.71			223,042		9,542		5.72
Subordinated debentures⁽¹⁾		119,700		1,178		3.90			119,145		1,621		5.40			119,558		4,570		5.11			119,006		4,567		5.13
Total interest bearing liabilities		15,809,532		70,737		1.78			15,621,907		56,981		1.45			15,788,243		212,375		1.80			15,336,048		145,701		1.27
Non-interest bearing liabilities:
Non-interest bearing deposits		2,728,596							2,685,802							2,736,350							2,689,818
Other non-interest bearing liabilities		213,505							189,003							220,126							177,824
Total liabilities		18,751,633							18,496,712							18,744,719							18,203,690
Common stockholders’ equity		4,032,066							3,648,398							3,925,321							3,567,148
Noncontrolling interest		3,128							3,036							3,119							3,044
Total liabilities and stockholders’ equity	$	22,786,827						$	22,148,146						$	22,673,159						$	21,773,882
Net interest income – FTE			$	219,818						$	221,746						$	672,584						$	666,499
Net interest margin – FTE						4.26	%						4.47	%						4.41	%						4.60	%

⁽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 $0.11 million for the third quarter and $0.86 million for the first nine months of 2019 and $0.20 million for the third quarter and $0.38 million for the first nine months of 2018. In the absence of this interest capitalization, the rates on other borrowings would have been 2.69% for the third quarter and 2.57% for the first nine months of 2019 and 2.12% for the third quarter and 1.83% for the first nine months of 2018. Capitalized interest included in subordinated debentures totaled $0.45 million for both the third quarter and the first nine months of 2019 and none in 2018. In the absence of this interest capitalization, the rates on subordinated debentures would have been 5.39% for the third quarter and 5.61% for the first nine months of 2019



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									Nine Months Ended
	September 30,						June 30,			September 30,
	2019			2018			2019			2019			2018

	(Dollars in thousands)
Net income available to common stockholders	$	103,891		$	74,180		$	110,503		$	325,100		$	302,075
Average common stockholders’ equity before noncontrolling interest	$	4,032,066		$	3,648,398		$	3,927,522		$	3,925,321		$	3,567,148
Less average intangible assets:
Goodwill		(660,789	)		(660,789	)		(660,789	)		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(28,275	)		(40,743	)		(31,225	)		(31,290	)		(43,886	)
Total average intangibles		(689,064	)		(701,532	)		(692,014	)		(692,079	)		(704,675	)
Average tangible common stockholders’ equity	$	3,343,002		$	2,946,866		$	3,235,508		$	3,233,242		$	2,862,473
Return on average common stockholders’ equity⁽¹⁾		10.22	%		8.07	%		11.29	%		11.07	%		11.32	%
Return on average tangible common stockholders’ equity⁽¹⁾		12.33	%		9.99	%		13.70	%		13.44	%		14.11	%

⁽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

	September 30,						June 30,
	2019			2018			2019

	(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest	$	4,078,324		$	3,653,596		$	3,993,247
Less intangible assets:
Goodwill		(660,789	)		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(26,608	)		(38,817	)		(29,515	)
Total intangibles		(687,397	)		(699,606	)		(690,304	)
Total tangible common stockholders’ equity	$	3,390,927		$	2,953,990		$	3,302,943
Shares of common stock outstanding		128,946			128,609			128,947
Book value per common share	$	31.63		$	28.41		$	30.97
Tangible book value per common share	$	26.30		$	22.97		$	25.61

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

	September 30,
	2019			2018


	(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest	$	4,078,324		$	3,653,596
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(26,608	)		(38,817	)
Total intangibles		(687,397	)		(699,606	)
Total tangible common stockholders’ equity	$	3,390,927		$	2,953,990
Total assets	$	23,402,679		$	22,086,539
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(26,608	)		(38,817	)
Total intangibles		(687,397	)		(699,606	)
Total tangible assets	$	22,715,282		$	21,386,933
Ratio of total common stockholders’ equity to total assets		17.43	%		16.54	%
Ratio of total tangible common stockholders’ equity to total tangible assets		14.93	%		13.81	%

Source: Bank OZK

Bank OZK Announces Third Quarter 2019 Earnings

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Bank OZK Announces Third Quarter 2019 Earnings

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