-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EARMZLeampRM5ANfP4jVK6xU5GjhiK9ixpInVxumYkQd9NTTxq2/y/b5ce6ZUIyl y6nmp5L1oOP1D2SJg7Mlzw== 0000930661-98-001111.txt : 19980514 0000930661-98-001111.hdr.sgml : 19980514 ACCESSION NUMBER: 0000930661-98-001111 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANK OF THE OZARKS INC CENTRAL INDEX KEY: 0001038205 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 710556208 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22759 FILM NUMBER: 98617846 BUSINESS ADDRESS: STREET 1: 425 WEST CAPITOL AVENUE STREET 2: SUITE 3100 CITY: LITTLE ROCK STATE: AR ZIP: 72201 BUSINESS PHONE: 5013744100 MAIL ADDRESS: STREET 1: 425 WEST CAPITOL AVENUE STREET 2: SUITE 3100 CITY: LITTLE ROCK STATE: AR ZIP: 72201 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ---------------- (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________. Commission File Number 0-22759 BANK OF THE OZARKS, INC. (Exact name of registrant as specified in its charter) ARKANSAS 71-0556208 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 425 WEST CAPITOL AVENUE, SUITE 3100, LITTLE ROCK, ARKANSAS 72201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (501) 374-4100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practical date. Class Outstanding at March 31, 1998 - --------------------------------------- ----------------------------- Common Stock, $0.01 par value per share 3,779,555 BANK OF THE OZARKS, INC. FORM 10-Q March 31, 1998 INDEX PART I. FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets as of March 31, 1998 and 1997 and December 31, 1997 1 Consolidated Statements of Income for the Three Months Ended March 31, 1998 and 1997 2 Consolidated Statements of Stockholders' Equity 3 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Selected and Supplemental Financial Data 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings N/A Item 2. Change in Securities N/A Item 3. Defaults Upon Senior Securities N/A Item 4. Submission of Matters to a Vote of Security Holders N/A Item 5. Other Information N/A Item 6. Exhibits and Reports on Form 8-K (a). Exhibits Reference is made to the Exhibit Index contained at the end of this report. (b). Reports on Form 8-K N/A Signature 21 Exhibit Index 22 BANK OF THE OZARKS, INC. CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except Per Share Amounts) Unaudited MARCH 31, DECEMBER 31, ---------------------- ------------ 1998 1997 1997 -------- -------- ------------ ASSETS Cash and due from banks $ 14,021 $ 8,397 $ 9,021 Interest bearing deposits 10,885 56 6,607 Investment securities - available for sale 18,461 39,501 25,297 Investment securities - held to maturity 51,790 2,669 17,162 Federal Funds sold 7,780 100 2,885 Loans, net of unearned income 299,505 224,641 275,463 Allowance for loan losses (3,822) (3,240) (3,737) Bank premises and equipment, net 16,951 8,930 13,439 Interest receivable 3,414 2,846 3,013 Excess cost over fair value of net assets acquired, at amortized cost 2,162 1,380 1,337 Other 1,508 1,662 1,606 -------- -------- -------- Total assets $422,655 $286,942 $352,093 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Demand - non-interest bearing $ 39,259 $ 23,772 $ 31,091 Savings and interest bearing transaction 69,088 59,195 64,742 Time 243,965 164,296 199,722 -------- -------- -------- Total deposits 352,312 247,263 295,555 Notes payable 5,072 5,396 5,072 FHLB advances and federal funds purchased 25,993 12,232 14,017 Accrued interest and other liabilities 2,485 2,975 1,783 -------- -------- -------- Total liabilities 385,862 267,866 316,427 -------- -------- -------- Stockholders' equity Common stock; $0.01 par value; Authorized 10,000,000 shares; 3,779,555 shares issued and outstanding at December 31, 1997 and March 31, 1998; 2,879,800 shares issued and outstanding at March 31, 1997 38 29 38 Additional paid in capital 14,314 1,168 14,314 Retained earnings 22,347 17,920 21,162 Accumulated other comprehensive income (net of tax): Unrealized gain (loss) on available for sale securities 94 (41) 152 -------- -------- -------- Total stockholders' equity 36,793 19,076 35,666 -------- -------- -------- Total liabilities and stockholders' equity $422,655 $286,942 $352,093 ======== ======== ======== See accompanying notes to consolidated financial statements. 1 BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) Unaudited THREE MONTHS ENDED MARCH 31, -------------------------- 1998 1997 ------ ------ Interest income Loans $6,921 $5,307 Investment securities - taxable 776 612 - non-taxable 128 55 Federal funds sold 54 22 Deposits with banks 114 20 ------ ------ Total interest income 7,993 6,016 ------ ------ Interest expense Deposits 3,488 2,595 Borrowed funds 348 302 Federal funds purchased - 3 ------ ------ Total interest expense 3,836 2,900 ------ ------ Net interest income 4,157 3,116 Provision for loan losses (225) (259) ------ ------ Net interest income after provision for loan losses 3,932 2,857 ------ ------ Other income Income from fiduciary activities 78 59 Service charges on deposit accounts 281 211 Other service charges and loan fees 557 190 Gains (losses) on sale of securities 51 10 Other income 127 272 ------ ------ Total other income 1,094 742 ------ ------ Other expense Salaries and employee benefits 1,677 1,238 Net occupancy and equipment 426 285 Other operating expenses 821 582 ------ ------ Total other expense 2,924 2,105 ------ ------ Income before income taxes 2,102 1,494 Income taxes 728 537 ------ ------ Net income $1,374 $ 957 ====== ====== Basic and diluted earnings per common share $0.36 $0.33 ====== ====== See accompanying notes to consolidated financial statements. 2 BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands) Unaudited
ACCUMULATED ADDITIONAL OTHER COMMON PAID-IN RETAINED COMPREHENSIVE STOCK CAPITAL EARNINGS INCOME TOTAL ------ ------- -------- ------------- ------- BEGINNING BALANCE - JANUARY 1, 1997 $ 29 $ 1,168 $17,251 $ 99 $18,547 Comprehensive income: Net income: 957 957 Other comprehensive income Unrealized gains (loss) on available for sale securities net of $85 tax effect (137) (137) Less: reclassification adjustment for gains included in income net of $2 tax effect (3) (3) ------- Comprehensive income 817 ------- Cash dividends (288) (288) ---- ------- ------- ----- ------- ENDING BALANCE - MARCH 31, 1997 $ 29 $ 1,168 $17,920 $ (41) $19,076 ==== ======= ======= ===== ======= BEGINNING BALANCE JANUARY 1, 1998 $ 38 $14,314 $21,162 $ 152 $35,666 Comprehensive income: Net income: 1,374 1,374 Other comprehensive income Unrealized gains (loss) on available for sale securities net of $1 tax effect (2) (2) Less: reclassification adjustment for gains included in income net of $35 tax effect (56) (56) ------- Comprehensive income 1,316 ------- Cash dividends (189) (189) ---- ------- ------- ----- ------- ENDING BALANCE - MARCH 31, 1998 $ 38 $14,314 $22,347 $ 94 $36,793 ==== ======= ======= ===== =======
3 BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Unaudited
THREE MONTHS ENDED MARCH 31, ---------------------------------- 1998 1997 -------- -------- Cash flows from operating activities Net income $ 1,374 $ 957 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation 195 131 Amortization of goodwill 18 14 Provision for loan losses 225 259 Gain on sale of investments (51) (10) Gain on sale of loans - (68) Gain on disposition of premises and equipment (4) (45) Gain on disposition of foreclosed assets (84) (138) Deferred income tax benefit (22) (42) Changes in assets and liabilities Interest receivable (399) (294) Other assets, net 472 14 Accrued interest and other liabilities 167 780 -------- -------- Net cash provided by operating activities 1,891 1,558 -------- -------- Cash flows from investing activities Purchase of subsidiary, net of funds acquired 7,164 - Proceeds from sales and maturities of securities available for sale 7,230 1,566 Purchases of investment securities available for sale (280) (4,401) Proceeds from maturities of investment securities held to maturity 3,145 56 Purchase of investment securities held to maturity (37,781) - (Increase) decrease in federal funds sold (4,450) 250 Net increase in loans (24,429) (11,052) Proceeds from sales of loans - 811 Proceeds from dispositions of bank premises and equipment 4 117 Purchase of bank premises and equipment (3,038) (2,261) Proceeds from dispositions of foreclosed assets 210 162 -------- -------- Net cash used by investing activities (52,225) (14,752) -------- -------- Cash flows from financing activities Net increase in deposits 47,402 15,615 Payments of FHLB advances and federal funds purchased (15,595) - Proceeds from FHLB advances and federal funds purchased 27,994 (495) Proceeds from notes payable 5,000 - Payments of notes payable (5,000) - Proceeds from sale of common stock - - Dividends paid (189) (288) -------- -------- Net cash provided by financing activities 59,612 14,832 -------- -------- Net increase in cash and cash equivalents 9,278 1,638 Cash and due from banks - beginning of period 15,628 6,815 -------- -------- Cash and due from banks - end of period $ 24,906 $ 8,453 ======== ========
See accompanying notes to consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of Bank of the Ozarks, Inc. include the accounts of the parent company and its wholly-owned subsidiaries, Bank of the Ozarks, wca, Bank of the Ozarks, nwa, Bank of the Ozarks and Ozark Commercial Corporation (collectively the "Company"). All material intercompany transactions have been eliminated. 2. BASIS OF PRESENTATION: The accompanying consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information, accounting policies and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. It is therefore suggested that these consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1997. In the opinion of management all adjustments necessary, consisting of only normal recurring items, have been included for a fair presentation of the accompanying consolidated financial statements. Operating results for the three months ended March 31, 1998 are not necessarily indicative of the results that may be expected for the full year. 3. EARNINGS PER COMMON SHARE: In 1997, the FASB issued SFAS No. 128, "Earnings per Share". The new statement was effective for financial statements for periods ending after December 15, 1997 and superseded Accounting Principles Board Opinion 15. SFAS No. 128 replaces primary earnings per share ("EPS") with basic EPS. Basic EPS is computed by dividing reported earnings available to common stockholders by weighted average shares outstanding. No dilution for any potentially dilutive securities is included. Diluted EPS replaces fully diluted EPS and includes the effects of stock options. In computing dilution for stock options, the average share price for the period is used. The Company adopted SFAS No. 128 on December 31, 1997. Basic and diluted earnings per common share is computed as follows (in thousands, except per share amount): THREE MONTHS ENDED MARCH 31, -------------------------- 1998 1997 ---- ---- Common shares - weighted averages.............. 3,780 2,880 Common share equivalents - weighted averages... 41 - ------ ------ 3,821 2,880 ====== ====== Net income..................................... $1,374 $ 957 Basic earnings per share....................... $ 0.36 $ 0.33 Diluted earnings per common share.............. 0.36 0.33 5 4. COMPREHENSIVE INCOME: In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income". This statement is effective for fiscal years beginning after December 15, 1997. This statement establishes standards for reporting and display of comprehensive income and its components in the financial statements. The object of the statement is to report a measure of all changes in equity of an enterprise that results from transactions and other economic events of the period from nonowner sources. Comprehensive income begins with net income as reported and includes gains and losses that under generally accepted accounting principles are directly charged to equity. Examples include foreign currency translations, pension liability adjustments and unrealized gains and losses on available for sale securities (SFAS 115 adjustment). The Company currently has only unrealized gains or losses on available for sale securities as an item of comprehensive income. The Company adopted this statement in the first quarter of 1998 and has included its comprehensive income in the consolidated statements of stockholders' equity. 5. SUPPLEMENTARY DATA FOR CASH FLOWS: Cash payments for interest on notes payable during the three months ended March 31, 1998 amounted to $113,000 and during the three months ended March 31, 1997 no payments were made. Cash payments for income taxes during the three months ended March 31, 1998 and 1997 amounted to $72,000 and $33,000, respectively. (The remainder of this page intentionally left blank) 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Net income was $1,374,000 for the first quarter of 1998, a 43.6% increase over net income of $957,000 for the same quarter in 1997. Earnings per share, which was impacted by the Company's issuance of 899,755 additional shares of common stock in the Company's initial public offering ("IPO") completed during the third quarter of 1997, rose 9.1% to $0.36 per share for the quarter ended March 31, 1998 compared to $0.33 per share for the same quarter in 1997. The Company's annualized return on average assets and on average stockholders' equity were 1.46% and 15.41%, respectively, for the first quarter of 1998, compared with 1.39% and 20.63%, respectively, for the same quarter of 1997. The 1998 first quarter return on average stockholders' equity was impacted by the increase in equity due to the issuance of new shares in the IPO. Total assets increased 47.3% from $286.9 million at March 31, 1997 to $422.7 million at March 31, 1998. Loans were $299.5 million at March 31, 1998 compared to $224.6 million at March 31, 1997, an increase of 33.3%. Deposits were $352.3 million at March 31, 1998 compared to $247.3 million at March 31, 1997, an increase of 42.5%. As a result of the Company's IPO and earnings, stockholders' equity increased 92.7% from $19.1 million at March 31, 1997, to $36.8 million at March 31, 1998 increasing per share book value 47.0% from $6.62 to $9.73. Annualized results for these interim periods may not be indicative of those for the full year or future periods. ANALYSIS OF RESULTS OF OPERATIONS The Company's results of operations depend primarily on net interest income, which is the difference between the interest income from earning assets, such as loans and investments, and the interest expense incurred on interest bearing liabilities, such as deposits and other borrowings. The Company also generates non-interest income, including service charges on deposit accounts, fees from origination of residential mortgage loans for resale, other service charges and fees, trust fees, and gains on sales. The Company's non-interest expenses primarily consist of employee compensation and benefits, occupancy, equipment, and other operating expenses. The Company's results of operations are significantly affected by its provision for loan losses. The following discussion provides a summary of the Company's operations for the first quarters ended March 31, 1998 and 1997. (The remainder of this page intentionally left blank) 7 NET INTEREST INCOME Net interest income is analyzed in the discussion and tables below on a fully taxable equivalent ("FTE") basis. The adjustment to convert certain income to an FTE basis consists of dividing tax exempt income by one minus the federal income tax rate (34%). Three months ended March 31, 1998 compared to three months ended March 31, 1997 Net interest income (FTE) increased 34.5% to $4,229,000 for the three months ended March 31, 1998 from $3,144,000 for the three months ended March 31, 1997. This increase primarily resulted from a 36.0% increase in average earning assets to $355.3 million for the 1998 period from $261.3 million for the 1997 period. The increase in average earning assets resulted primarily from continued growth in the Company's loan portfolio. The increased interest income resulting from this growth was somewhat offset by a 5 basis point reduction in the net interest margin to 4.83% in the three month 1998 period from 4.88% in the comparable 1997 period. ANALYSIS OF NET INTEREST INCOME (FTE = FULLY TAXABLE EQUIVALENT) THREE MONTHS ENDED MARCH 31, ----------------------------- 1998 1997 ---- ---- (Dollars in thousands) Interest income............................. $7,993 $6,016 FTE adjustment.............................. 72 28 ------ ------ Interest income -- FTE...................... 8,065 6,044 Interest expense............................ 3,836 2,900 ------ ------ Net interest income -- FTE.................. $4,229 $3,144 ====== ====== Yield on interest earning assets -- FTE..... 9.21% 9.38% Cost of interest bearing liabilities........ 5.03 5.01 Net interest spread -- FTE.................. 4.18 4.37 Net interest margin -- FTE.................. 4.83 4.88 (The remainder of this page intentionally left blank) 8 AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS (Dollars in Thousands)
THREE MONTHS ENDED MARCH 31, ----------------------------------------------------------- 1998 1997 --------------------------- -------------------------- AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ BALANCE EXPENSE RATE BALANCE EXPENSE RATE ------- ------- ------ ------- ------- ------ ASSETS Earning assets: Interest-earning deposits................... $ 8,490 $ 114 5.45% $ 1,559 $ 20 5.20% Federal funds sold.......................... 3,967 55 5.62 1,693 22 5.27 Investment securities: Taxable................................... 46,501 776 6.77 36,907 612 6.73 Tax-exempt - FTE.......................... 9,677 194 8.13 3,230 83 10.42 Loans (net of unearned income).............. 286,647 6,927 9.80 217,905 5,307 9.88 -------- ------ -------- ------ Total earnings assets................... 355,282 8,066 9.21 261,294 6,044 9.38 Non-earning assets............................ 27,124 17,175 -------- -------- Total assets............................ $382,406 $278,469 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest bearing transaction and savings.. $ 64,828 $ 453 2.83% $ 57,867 $ 420 2.94% Certificates of deposits $100,000 or 64,513 900 5.66 43,812 604 5.59 more..................................... Other time deposits....................... 152,776 2,136 5.67 115,165 1,571 5.53 -------- ------ -------- ------ Total interest bearing deposits......... 282,117 3,489 5.02 216,844 2,595 4.85 Federal funds and FHLB borrowings............. 22,072 240 4.41 12,348 183 6.01 Notes payable................................. 5,072 108 8.64 5,396 122 9.17 -------- ------ -------- ------ Total interest bearing liabilities...... 309,261 3,837 5.03 234,588 2,900 5.01 Non-interest liabilities: Non-interest bearing deposits............... 34,844 22,052 Other non-interest liabilities.............. 2,130 3,017 -------- -------- Total liabilities....................... 346,235 259,657 Stockholders' equity.......................... 36,171 18,812 -------- -------- Total liabilities and stockholders' equity................................. $382,406 $278,469 ======== ======== Interest rate spread.......................... 4.18% 4.37% ------ ------ Net interest income - FTE..................... $4,229 $3,144 ======= ====== Net interest margin........................... 4.83% 4.88%
9 NON-INTEREST INCOME The Company's non-interest income can primarily be broken down into five main sources: service charges on deposit accounts, fees from origination of residential mortgage loans for resale, other service charges and fees including appraisal fees and commissions from the sale of credit related insurance products, trust fees, and gains on sales. Non-interest income for the first quarter of 1998 was $1,094,000 compared with $742,000 for the first quarter of 1997, a 47.4% increase. During the first quarter of 1998, the Company benefited from strong increases in revenue from loan fees, including fees on residential mortgage loans originated for resale in the secondary market. These increases, along with increases in other non- interest income categories, more than offset a substantial decrease in gains on sale of assets from the first quarter of 1997. The table below shows non-interest income for the three months ended March 31, 1998 and 1997. NON-INTEREST INCOME THREE MONTHS ENDED MARCH 31, ------------------------ 1998 1997 ------ ------ (Dollars in thousands) Trust income....................................... $ 78 $ 59 Service charges on deposit accounts................ 281 211 Loan fees.......................................... 395 55 Other service charges and fees..................... 162 135 Gain on sale of loans.............................. - 68 Gain on sale of previously foreclosed real estate.. 84 123 Gain on sale of other assets....................... 4 45 Securities gains (losses).......................... 51 10 Printed check sales................................ 32 26 Other income....................................... 7 10 ------ ------ Total non-interest income............ $1,094 $ 742 ====== ====== (The remainder of this page intentionally left blank) 10 NON-INTEREST EXPENSE Non-interest expense for the first quarter of 1998 was $2,924,000 compared with $2,105,000 for the same period in 1997, a 38.9% increase. This increase resulted primarily from the Company's continued growth and expansion, including commencement of operations at the Company's newly acquired Little Rock savings bank and preparation for opening additional offices in Little Rock and Fort Smith later this year. The overhead ratio (annualized non-interest expenses divided by average assets) for the first quarter of 1998 was 3.10%, up 3 basis points from 3.07% for the same quarter in 1997. The efficiency ratio (non-interest expenses divided by the sum of net interest income on a tax equivalent basis and non-interest income) was 54.93% for the first quarter of 1998 compared to 54.17% for the first quarter of 1997. The table below shows non-interest expense for the three months ended March 31, 1998 and 1997. NON-INTEREST EXPENSE THREE MONTHS ENDED MARCH 31, --------------------- 1998 1997 ------ ------ (Dollars in thousands) Salaries and employee benefits..................... $1,677 $1,238 Net occupancy expense.............................. 187 133 Equipment expense.................................. 239 152 Other real estate and foreclosure expense.......... 16 31 Other operating expense: Professional and outside services.............. 45 48 Postage........................................ 68 32 Telephone...................................... 67 33 Operating supplies............................. 121 73 Advertising and public relations............... 96 45 Directors' fees................................ 28 23 Software expense............................... 38 27 Check printing charges......................... 37 28 FDIC & state assessment........................ 32 25 Travel and entertainment....................... 27 14 Amortization of goodwill....................... 17 14 Miscellaneous.................................. 229 189 ------ ------ Total non-interest expense........... $2,924 $2,105 ====== ====== INCOME TAXES The provision for income taxes was $728,000 for the quarter ended March 31, 1998 compared to $537,000 for the same period in 1997. The effective income tax rates were 34.6% and 35.9%, respectively, for these periods. The decrease in effective tax rate for the 1998 period resulted primarily from an increase in tax-exempt interest income as a percent of total pre-tax income. 11 ANALYSIS OF FINANCIAL CONDITION LOAN PORTFOLIO At March 31, 1998 the Company's loan portfolio was $299.5 million, an increase of 33.3% from $224.6 million at March 31, 1997. As of March 31, 1998, the Company's loan portfolio consisted of approximately 61.5% real estate loans, 18.5% consumer loans, 14.5% commercial and industrial loans and 4.7% agricultural loans (non-real estate). The amount and type of loans outstanding at March 31, 1998 and 1997 and December 31, 1997 are reflected in the following table. LOAN PORTFOLIO MARCH 31, DECEMBER 31, --------------------- ------------ 1998 1997 1997 -------- -------- -------- (Dollars in thousands) Real Estate: Single family residential... $103,225 $ 81,747 $ 96,943 Non-farm/non-residential.... 45,691 36,953 41,710 Agricultural................ 13,585 11,308 13,443 Construction/land 17,591 10,211 16,257 development................ Multifamily residential..... 4,180 2,580 3,897 -------- -------- -------- Total real estate....... $184,272 $142,799 $172,250 Consumer.................... 55,362 43,284 53,233 Commercial and industrial... 43,348 29,103 37,470 Agricultural (non-real 14,131 8,667 10,824 estate).................... Other....................... 2,392 788 1,686 -------- -------- -------- Total loans............. $299,505 $224,641 $275,463 ======== ======== ======== NONPERFORMING ASSETS Nonperforming assets consist of (i) nonaccrual loans, (ii) loans for which the terms have been restructured to provide a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower and (iii) real estate or other assets that have been acquired in partial or full satisfaction of loan obligations or upon foreclosure. Nonperforming assets as a percent of total assets were 0.40% as of March 31, 1998 compared to 0.24% as of December 31, 1997 and 0.66% as of March 31, 1997. Nonperforming loans as a percent of total loans were 0.54% as of March 31, 1998 compared to 0.25% as of December 31, 1997 and 0.80% as of March 31, 1997. The reduction in nonperforming assets and loans since March 31, 1997 resulted primarily from the payoff of a large nonaccrual loan in the fourth quarter of 1997. The Company's policy generally is to place a loan on nonaccrual status when payment of principal or interest is contractually past due 90 days, or earlier when doubt exists as to the ultimate collection of principal and interest. The Company continues to accrue interest on certain loans contractually past due 90 days if such loans are both well secured and in the process of collection. At the time a loan is placed on nonaccrual status, interest previously accrued but uncollected is generally reversed and charged against interest income. If a loan is determined to be uncollectible, the portion of the loan principal determined to be uncollectible will be charged against the allowance for loan losses. Interest income on nonaccrual loans is recognized on a cash basis when and if actually collected. (The remainder of this page intentionally left blank) 12 The following table presents information concerning nonperforming assets, including nonaccrual and restructured loans and foreclosed assets held for sale. NONPERFORMING ASSETS
MARCH 31, DECEMBER 31 -------------------- ----------- 1998 1997 1997 ---- ---- ---- (Dollars in thousands) Nonaccrual loans.......................................... $1,583 $1,771 $ 664 Accruing loans 90 days or more past due................... 49 22 35 Restructured loans........................................ - - - ------ ------ ----- Total nonperforming loans............... $1,632 $1,793 $ 699 Foreclosed assets hold for sale and repossessions......... 77 113 136 ------ ------ ----- Total nonperforming assets............... $1,709 $1,906 $ 835 ====== ====== ===== Nonperforming loans to total loans........................ 0.54% 0.80% 0.25% Nonperforming assets to total assets...................... 0.40 0.66 0.24
Foreclosed assets held for sale and repossessions are generally written down to appraised value at the time of transfer from the loan portfolio. The value of such assets is reviewed from time to time throughout the holding period, with the value being adjusted to the then market value, if lower, until disposition. Under Arkansas banking law, other real estate owned is generally required to be written off over a five year period unless approval of the Arkansas State Bank Department can be obtained to write such assets off over an extended period. ALLOWANCE AND PROVISION FOR LOAN LOSSES Allowance: The following table shows an analysis of the allowance for loan losses for the three month periods ended March 31, 1998 and 1997 and the year ended December 31, 1997.
THREE MONTHS TWELVE MONTHS ENDED MARCH 31, ENDED DECEMBER 31, --------------- ------------------ 1998 1997 1997 ---- ---- ---- (Dollars in thousands) Balance of allowance for loan losses at beginning of period... $ 3,737 $ 3,019 $ 3,019 Loans charged off: Real estate............................................ 11 2 35 Consumer............................................... 93 48 434 Commercial and industrial.............................. 42 - - ------- ------- ------- Total loans charged off.......................... 146 50 469 ------- ------- ------- Recoveries of loans previously charged off: Real estate............................................ - - 7 Consumer............................................... 5 12 39 Commercial and industrial.............................. 1 - 2 ------- ------- ------- Total recoveries................................ 6 12 48 ------- ------- ------- Net loans charged off......................................... 140 38 421 Provision charged to operating expense........................ 225 259 1,139 ------- ------- ------- Balance, end of period........................................ $ 3,822 $ 3,240 $ 3,737 ======= ======= ======= Net charge-offs to average loans outstanding during the periods indicated................................. 0.20%(1) 0.07%(1) 0.17% Allowance for loan losses to total loans...................... 1.28 1.44 1.36 Allowance for loan losses to nonperforming loans.............. 234.19 180.70 534.62 (1) Annualized
13 The amounts of additions to the allowance for loan losses are based on management's judgment and evaluation of the loan portfolio utilizing objective and subjective criteria. The objective criteria utilized by the Company to assess the adequacy of its allowance for loan losses and required additions to such reserve are (i) an internal grading system, (ii) a peer group analysis and (iii) a historical analysis. In addition to this objective criteria, the Company subjectively assesses adequacy of the allowance for loan losses and the need for additions thereto, with consideration given to the nature and volume of the portfolio, overall portfolio quality, review of specific problem loans, national, regional and local business and economic conditions that may affect the borrowers' ability to pay or the value of collateral securing the loans, and other relevant factors. Based on these procedures, management is of the opinion that the allowance of $3,822,000 at March 31, 1998 is adequate. While management believes the current allowance is adequate, changing economic and other conditions may require future adjustments to the allowance for loan losses. For the first three months of 1998, annualized net charge-offs were 0.20% of average outstanding loans compared to with 0.17% for the year of 1997 and 0.07% annualized for the first three month period in 1997. Provision for Loan Losses: The loan loss provision reflects management's ongoing assessment of the loan portfolio and is evaluated in light of risk factors mentioned above. The provision for loan losses was $225,000 for the three months ended March 31, 1998 compared to $259,000 for the same three month period in 1997. INVESTMENTS AND SECURITIES The Company's securities portfolio is the second largest component of earning assets and provides a significant source of revenue for the Company. The table below presents the amortized cost and the fair value of investment securities for each of the dates indicated. INVESTMENT SECURITIES
MARCH 31, MARCH 31, DECEMBER 31, 1998 1997 1997 --------------------- --------------------- ------------------- AMORTIZED FAIR AMORTIZED FAIR AMORTIZED Fair COST VALUE/(1)/ COST VALUE/(1)/ COST VALUE/(1)/ --------------------- --------------------- ------------------- (Dollars in thousands) Securities of U.S. Government agencies......................... $43,079 $43,044 $27,673 $27,458 $24,562 $24,596 Mortgage-backed securities............ 7,189 7,295 9,959 10,092 9,340 9,571 Obligations of states and political subdivisions..................... 17,765 17,777 3,176 3,204 6,801 6,819 Other securities...................... 2,068 2,068 1,429 1,429 1,510 1,510 ------- ------- ------- ------- ------- ------- Total.......... $70,101 $70,184 $42,237 $42,183 $42,213 $42,496 ======= ======= ======= ======= ======= =======
(1) The fair value of the Company's financial instruments is determined pursuant to Statement of Financial Accounting Standards No. 107. LIQUIDITY AND CAPITAL RESOURCES Credit Agreement. Effective March 25, 1998 the Company renegotiated the terms of its credit facility with Union Planters Bank, N.A., Memphis, Tennessee. The Company consolidated its existing $5 million term loan and $5 million line of credit into a new revolving line of credit ("Credit Agreement") for up to $22 million. The Credit Agreement matures March 31, 2003 and interest accrues on all outstanding borrowings due under the Credit Agreement at a variable rate equal to the average prime lending rate reported from time to time by the Wall Street Journal minus 1.25%, provided however, the rate is not to exceed 7.75%. Interest is payable quarterly commencing June 30, 1998. The Credit Agreement is effective through March 31, 2003, subject to an annual compliance review by the lender. No standby or unused commitment fees are payable by the Company under the Credit Agreement. 14 All borrowings under the Credit Agreement are secured by a pledge of 100% of the Company's stock in each of Bank of the Ozarks, wca and Bank of the Ozarks, nwa. As of March 31, 1998, $5.0 million was borrowed under the revolving Credit Facility. The Credit Agreement requires the Company's bank subsidiaries, Bank of the Ozarks, wca and Bank of the Ozarks, nwa, to maintain (i) a return on average assets for each calendar year equal to at least 1.0%, (ii) a ratio of primary capital to assets at levels acceptable to bank regulatory authorities but at least 7.0% at each calendar year end and (iii) net charges to the reserve for loan losses at less than 1.0% of net loans during any calendar year. In addition, the Credit Agreement requires (i) that the Company's aggregate indebtedness not exceed 60.0% of the Company's tangible net worth through March 31, 1999 reducing 5% a year thereafter and (ii) borrowings under the Credit Agreement not exceed 50.0% of the tangible book value of all subsidiary bank stock pledged to secure such borrowings. At March 31, 1998 the Company was in compliance with these requirements. Growth and Expansion. In the first quarter of 1998 the Company closed its acquisition of Heartland Community Bank, FSB, a federal savings bank in Little Rock, Arkansas. The Company paid $3.1 million in cash (1.38 times tangible book value) to acquire the charter and all Little Rock operations including approximately $9.4 million in deposits. No loans were acquired as a part of the transaction. Following closing the Company commenced operations in Little Rock under the Bank of the Ozarks' name. During the first three months of 1998 the Company continued construction of its Little Rock Headquarters facility and the permanent Fort Smith office. The Little Rock facility, which will consolidate the Company's existing corporate offices and two existing Little Rock loan production offices, is expected to be completed around mid-year 1998. The Company has also applied for regulatory approval to open a branch of its recently acquired Little Rock savings bank at this location. Completion of the Fort Smith facility is expected in the last half of 1998. Pending completion, in the fourth quarter of 1997 the Company has opened a temporary Fort Smith branch, which includes a single family mortgage lending operation. In April and May, 1998 the Company acquired two additional branch locations in Little Rock and is seeking regulatory approval to operate full service offices at both locations. One location has an existing 2,500 square foot branch bank office. The Company plans to construct a new 2,700-square-foot branch bank office at the other location. Bank Liquidity. Liquidity represents an institution's ability to provide funds to satisfy demands from depositors and borrowers by either converting assets into cash or accessing new or existing sources of incremental funds. Generally, the Company's bank subsidiaries rely on customer deposits and loan repayments as their primary sources of funds. These funds are used to make loans, acquire investment securities and other assets and to fund continuing operations. The Company has experienced significant growth in its loan portfolio. While scheduled loan repayments are a relatively stable source of funds, such loans generally are not readily convertible to cash. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments and general economic conditions. Accordingly, the Company may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include FHLB advances, federal funds lines of credit from correspondent banks and borrowings by the Company under its revolving credit agreement described above. At March 31, 1998, the Company's bank subsidiaries had an aggregate of $39.7 million of unused blanket FHLB borrowing availability. Additionally at March 31, 1998 the bank subsidiaries maintained pre-approved unsecured federal funds lines of credit in an amount of up to $16.2 million. Management anticipates that the Company's bank subsidiaries will continue to rely primarily on customer deposits and loan repayments to provide liquidity. Additionally, where necessary, the above described borrowings (including borrowings under the Company's Credit Agreement) will be used to augment the Company's primary funding sources. (The remainder of this page intentionally left blank) 15 Capital Compliance. Bank regulatory authorities in the United States impose certain capital standards on all bank holding companies and banks. These capital standards require compliance with certain minimum "risk-based capital ratios" and a minimum "leverage ratio". The risk-based capital ratios consist of (i) Tier 1 capital (i.e. common stockholders' equity excluding goodwill and appreciation on investment securities, but including certain other qualifying items) to total risk-weighted assets and (ii) total capital (Tier 1 capital plus Tier 2 capital which is the qualifying portion of the allowance for loan losses) to risk-weighted assets. The leverage ratio is measured as Tier 1 capital to adjusted average assets. The Company's risk-based and leverage capital ratios exceed these minimum requirements at March 31, 1998 and December 31, 1997 and are presented below, followed by the capital ratios of each of the Company's two bank subsidiaries at March 31, 1998. CONSOLIDATED CAPITAL RATIOS MARCH 31, December 31, 1998 1997 ---- ---- (Dollars in thousands) Tier 1 capital: Stockholders' equity........................ $ 36,793 $ 35,666 Less net unrealized gains on available for sale securities............ (94) (152) Less goodwill............................... (2,162) (1,337) -------- -------- Total tier 1 capital........ $ 34,537 $ 34,177 ======== ======== Tier 2 capital: Qualifying allowance for loan losses........ 3,706 3,288 -------- -------- Total risk-based capital................. $ 38,243 $ 37,465 ======== ======== Risk-weighted assets.......................... $296,391 $262,592 ======== ======== Ratios at end of period: Leverage.................................... 9.08% 9.86% Tier 1 risk-based capital................... 11.65 13.01 Total risk-based capital.................... 12.90 14.27 Minimum ratio guidelines: Leverage.................................... 3.00%/(1)/ 3.00%/(1)/ Tier 1 risk- based capital.................. 4.00 4.00 Total risk-based capital.................... 8.00 8.00 CAPITAL RATIOS OF SUBSIDIARY BANKS MARCH 31, 1998 ------------------------------------- BANK OF THE BANK OF THE BANK OF THE OZARKS, WCA OZARKS, NWA OZARKS/(2)/ ----------- ----------- ----------- (Dollars in thousands) Stockholders' equity - Tier 1.. $26,572 $9,993 $2,189 Leverage ratio................. 10.45% 8.37% 9.01% Risk-based capital ratios:..... Tier 1................. 13.13 11.99 26.84 Total capital.......... 14.38 13.24 27.95 (1) Regulatory authorities require institutions to operate at varying levels (ranging from 100-200 basis points) above a minimum leverage ratio of 3% depending upon capitalization classification. (2) A federal savings bank acquired by the Company in February 1998. 16 FORWARD-LOOKING INFORMATION This Management's Discussion and Analysis of Financial Condition and Results of Operations, other filings made by the Company with the Securities and Exchange Commission and other oral and written statements or reports by the Company and its management, may include certain forward-looking statements including, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition opportunities and other similar forecasts and statements of expectation. Words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Forward-looking statements made by the Company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information, or otherwise. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management due to certain risks, uncertainties and assumptions. Certain factors that may affect operating results of the Company include, but are not limited to, the following: (i) potential delays in opening new branches and other operating locations; (ii) the ability to attract deposits and loans from new locations or markets; (iii) competitive factors and pricing pressures; (iv) changes in legal and regulatory requirements; (v) interest rate fluctuations and (vi) general economic conditions, as well as, other factors described in this and other Company reports and statements. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in the forward- looking statements. (The remainder of this page intentionally left blank) 17 SELECTED AND SUPPLEMENTAL FINANCIAL DATA The Company is also providing the selected and supplemental financial data in the tables below. The following table sets forth selected consolidated financial data concerning the Company for the three month periods ended March 31, 1998 and 1997 and is qualified in its entirety by the consolidated financial statements, including the notes thereto, included elsewhere herein. SELECTED CONSOLIDATED FINANCIAL DATA (Dollars in Thousands, Except Per Share Amounts) Unaudited THREE MONTHS ENDED MARCH 31, ------------------------- 1998 1997 ---- ---- Income statement data: Net interest income............................. $ 4,157 $ 3,116 Provision for loan losses....................... 225 259 Non-interest income............................. 1,094 742 Non-interest expense............................ 2,924 2,105 Income tax expense.............................. 728 537 Net income...................................... $ 1,374 $ 957 PER COMMON SHARE DATA: Earnings........................................ $ 0.36 $ 0.33 Book value...................................... 9.73 6.62 Fully diluted shares outstanding (thousands).... 3,821 2,880 End of period shares outstanding (thousands).... 3,780 2,880 BALANCE SHEET DATA AT PERIOD END: Total assets.................................... $422,655 $286,942 Total loans..................................... 299,505 224,641 Allowance for loan losses....................... 3,822 3,240 Total investment securities..................... 70,252 42,170 Total deposits.................................. 352,312 247,263 FHLB advances & Fed Funds....................... 25,993 12,017 Notes payable................................... 5,072 5,396 Total stockholders' equity...................... 36,793 19,076 Loan to deposit ratio........................... 85.01% 90.85% PERFORMANCE RATIOS: Return on average assets*....................... 1.46% 1.39% Return on average stockholders' equity*......... 15.41 20.63 Net interest margin*............................ 4.83 4.88 Overhead ratio*................................. 3.10 3.07 Efficiency ratio................................ 54.93 54.17 ASSETS QUALITY RATIOS: Net charge-offs as a percentage of average total loans (annualized)....................... 0.20% 0.07% Nonperforming loans to total loans.............. 0.54 0.80 Nonperforming assets to total assets............ 0.40 0.66 ALLOWANCE FOR LOAN LOSSES AS A PERCENTAGE OF: Total loans..................................... 1.28% 1.44% Nonperforming loans............................. 234.19 180.70 CAPITAL RATIOS AT PERIOD END: Leverage capital ratio.......................... 9.08% 6.40% Tier 1 risk-based capital....................... 11.65 8.29 Total risk-based capital........................ 12.90 9.53 * Ratios annualized based on actual days 18 BANK OF THE OZARKS, INC. SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Dollars in Thousands, Except Per Share Amounts) Unaudited
FOR THE QUARTER ENDED ------------------------------------------------------------------------------------------------------ 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98 -------- -------- -------- -------- -------- -------- -------- -------- EARNINGS SUMMARY: - ---------------- Net interest income $ 2,938 $ 3,110 $ 3,040 $ 3,116 $ 3,419 $ 3,703 $ 4,251 $ 4,157 Federal tax (FTE) Adjustment 51 45 38 28 28 32 56 72 ------- ------- ------- ------- ------- ------- ------- ------- Net interest margin (FTE) 2,989 3,155 3,078 3,144 3,447 3,735 4,307 4,229 Loan loss provision (323) (375) (567) (259) (265) (150) (465) (225) Non-interest income 298 488 740 742 641 662 880 1,094 Non-interest expense (1,637) (1,856) (2,033) (2,105) (2,219) (2,316) (2,588) (2,924) ------- ------- ------- ------- ------- ------- ------- ------- Pretax income (FTE) 1,327 1,412 1,218 1,522 1,604 1,931 2,134 2,174 FTE adjustment (51) (45) (38) (28) (28) (32) (56) (72) Provision for taxes (455) (489) (633) (537) (572) (698) 709 (728) ------- ------- ------- ------- ------- ------- ------- ------- Net income $ 821 $ 878 $ 547 $ 957 $ 1,004 $ 1,201 $ 1,369 $ 1,374 ======= ======= ======= ======= ======= ======= ======= ======= Earnings per share $ 0.29 $ 0.30 $ 0.19 $ 0.33 $ 0.35 $ 0.34 $ 0.36 $ 0.36 NON-INTEREST INCOME DETAILS: - --------------------------- Income from fiduciary activities $ 57 $ 60 $ 51 $ 59 $ 78 $ 39 $ 98 $ 78 Service charges on deposits accounts 176 193 226 211 242 242 263 281 Loan fees 15 15 31 55 156 156 199 395 Gain (losses) sale of assets - 7 271 236 (17) 30 138 88 Security gains (losses) (123) 24 1 10 4 - - 51 Other income 173 189 160 171 178 195 182 201 ------- ------- ------- ------- ------- ------- ------- ------- Total non-interest income $ 298 $ 488 $ 740 $ 742 $ 641 $ 662 $ 880 $ 1,094 NON-INTEREST EXPENSE DETAIL: - --------------------------- Salaries and employee benefits $ 978 $ 1,110 $ 1,244 $ 1,238 $ 1,283 $ 1,301 $ 1,502 1,677 Net occupancy expense 242 262 260 285 293 341 386 426 Other operating expenses 417 484 529 582 643 674 700 821 ------- ------- ------- ------- ------- ------- ------- ------- Total non-interest expense $ 1,637 $ 1,856 $ 2,033 $ 2,105 $ 2,219 $ 2,316 $ 2,588 $ 2,924 ALLOWANCE FOR LOAN LOSSES: - ------------------------- Balance beginning of period $ 2,051 $ 2,282 $ 2,617 $ 3,019 $ 3,240 $ 3,462 $ 3,535 $ 3,737 Net charge offs (92) (40) (165) (38) (43) (77) (263) (140) Loan loss provision 323 375 567 259 265 150 465 225 ------- ------- ------- ------- ------- ------- ------- ------- Balance at end of period $ 2,282 $ 2,617 $ 3,019 $ 3,240 $ 3,462 $ 3,535 $ 3,737 $ 3,822 SELECTED RATIOS: - --------------- Overhead expense ratio* 2.87% 3.05% 3.02% 3.07% 2.95% 2.78% 2.95% 3.10% Efficiency ratio 49.80 50.95 53.25 54.17 54.28 52.67 49.89 54.93 Non-performing loans to total loans 0.48 0.58 1.08 0.80 0.75 0.77 0.25 0.54
*Annualized 19 PART I (continued) Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the information that was provided under Item 305 of Regulation S-K in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. PART II Other Information Item 1. LEGAL PROCEEDINGS ----------------- Not Applicable Item 2. CHANGES IN SECURITIES --------------------- Not Applicable Item 3. DEFAULTS UPON SENIOR SECURITIES ------------------------------- Not Applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- Not Applicable Item 5. OTHER MATTERS ------------- Not Applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a). Exhibits Reference is made to the Exhibit Index contained at the end of this report. (b). Reports on Form 8-K Not Applicable 20 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Bank of the Ozarks, Inc. DATE: May 13, 1998 /s/ PAUL E. MOORE ------------------------------------ Paul E. Moore Chief Financial Officer (Chief Accounting Officer) 21 Bank of the Ozarks, Inc. Exhibit Index Exhibit Number - ------ 3(a) Amended and Restated Articles of Incorporation of the Company, effective May 22, 1997 (previously filed as Exhibit 3.1 to the Company's Form S-1 Registration Statement (File No. 333-27641) and incorporated herein by reference. 3(b) Amended and Restated Bylaws of the Company, dated as of March 13, 1997 (previously filed as Exhibit 3.2 to the Company's Form S-1 Registration Statement (File No. 333-27641) and incorporated herein by reference). 10 Loan Agreement dated March 25, 1998 by and between the Company and Union Planters Bank, N.A. (attached). 27 Financial Data Schedule for the period ended March 31, 1998 (attached). 22 EX-10 2 LOAN AGREEMENT DATED MARCH 25, 1998 EXHIBIT 10 LOAN AGREEMENT THIS AGREEMENT made and entered into this 25th day of March, 1998, by and between UNION PLANTERS BANK, N.A. a national banking association with offices at 6200 Poplar Avenue, Memphis, Tennessee 38119 (hereinafter referred to as the "Lender"), and BANK OF THE OZARKS, INC., an Arkansas corporation (hereinafter referred to as the "Borrower"), having as an address for purposes of notice of TCBY Tower Building, Suite 3100, 425 West Capitol Avenue, Little Rock, Arkansas, 72201. W I T N E S S E T H: WHEREAS, the Borrower has applied to the Lender for a loan and the Lender is willing to make available such funds to the Borrower subject to the terms, provisions and conditions provided for herein; and WHEREAS, this Agreement has been entered into by the parties for the purpose of confirming the terms and conditions under which funds will be advanced to Borrower; and NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: SECTION 1.0 DEFINITION OF TERMS - --------------------------------- As used herein, the following terms shall have those meanings ascribed thereto below: 1.1 "Agreement" shall mean this Loan Agreement. 1.2 "Bank Stock" shall, unless otherwise indicated, mean the common stock of Bank of the Ozarks, wca, P.O. Box 196, Ozark, Arkansas 72949 and Bank of the Ozarks, nwa, P.O. Box 437, Jasper, Arkansas. 1.3 "Capital" shall mean the total of all equity capital, surplus, undivided profits and 50% of reserves for loan losses shown on the most recent quarterly call reports of the Subsidiary Banks. 1.4 "Closing" shall mean that date on which the Lender and Borrower execute this Loan Agreement and the Lender advances the proceeds of the Loan to Borrower. 1.5 "Collateral" shall mean not less than 27,399 shares of the common stock of Bank of the Ozarks, wca, and 2,340 shares of the common stock of Bank of the Ozarks, nwa, now owned by Borrower, and any additional common stock now or hereafter owned or acquired by the Borrower and pledged to Lender in order that (i) Lender shall have a first lien, perfected security interest in not less than 80% of the outstanding stock of Subsidiary Banks; and (ii) the outstanding balance of the Loan shall not exceed 50% of the Tangible Book Value of the Collateral. 1.6 "Commitment" shall mean the lesser of (i) Twenty-two Million Dollars ($22,000,000.00); or (ii) a percentage of Borrower's Net Worth calculated as follows: Closing through March 31, 1999 60% of Borrower's Net Worth April 1, 1999 through March 31, 2000 55% of Borrower's Net Worth April 1, 2000 through March 31, 2001 50% of Borrower's Net Worth April 1, 2001 through March 31, 2002 45% of Borrower's Net Worth April 1, 2002 through March 31, 2003 40% of Borrower's Net Worth 1.7 "Debt" shall mean the Loan and all liabilities, obligations and indebtedness (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or which may hereafter be contracted or acquired, of the Borrower to the Lender incurred under or pursuant to this Loan Agreement, and including without limitation the Loan, the Notes, and any security agreement or other agreement, instrument or document executed to evidence, secure or govern the terms of the Loan. 1.8 "Event of Default" shall mean the occurrence of any one of those events described in Section 10.1 hereof 1.9 "Line of Credit Note" or "Note" shall mean that certain promissory note of the Borrower, and any promissory note delivered in substitution or replacement thereof, evidencing the Line of Credit and incorporating the terms of Section 2 of this Agreement. 1.10 "Line of Credit" shall mean the revolving credit facility and any Advances made by Lender in accordance with the terms of Section 2 hereof. 1.11 "Loan" shall mean borrowings and advances to the Borrower by the Lender pursuant to the terms of this Loan Agreement and shall include all sums advanced to or for the benefit of the Borrower pursuant hereto. 1.12 "Prime Rate" shall mean the average prime lending rate reported from time to time by the Wall Street Journal under its column "Money Rates." Effective on the date on which any change in the prime rate shall occur, any interest adjustment required hereby shall be adjusted upward or downward by a number of percentage points (and fractional parts thereof) equal to the adjustment upward or downward in the Wall Street Journal reported Prime Rate; provided however, that the rate of interest, as adjusted, shall not exceed the maximum rate of interest which the Lender, as a national bank, is permitted by law to contract for and charge. Interest shall be calculated on the basis of a 365 day year unless calculations on that basis would result in Lender receiving interest 2 at a rate in excess of the maximum rate of interest which Lender is permitted by law to contract for and charge, in which case the principal debt evidenced hereby shall bear interest at such maximum rate. 1.13 "Security Agreement" shall mean that certain security agreement of even date herewith executed by the Borrower and Lender providing for the pledge of and the grant of a security interest by the Borrower to Lender in the Collateral. 1.14 "Subsidiary Banks" shall mean the Bank of the Ozarks, wca, Ozark, Arkansas and the Bank of the Ozarks, nwa, Jasper, Arkansas. 1.15 All accounting terms used herein shall have such meaning ascribed thereto by application of generally accepted accounting principles applied consistently. 1.15.1 "Assets", as that term is used herein, or as any computation shall be made with reference thereto, shall (i) for purposes of calculating Borrower's Net Worth be calculated in accordance with generally accepted accounting principles and shall include goodwill and (ii) for purposes of calculating Tangible Book Value of the Subsidiary Banks, shall be calculated in accordance with generally accepted accounting principles but shall not include goodwill. 1.15.2 "Liabilities", as that term is used herein, or as any computation shall be made with reference thereto, shall include, (a) guaranties, repurchase agreements and endorsements (other than for purposes of collection in the ordinary course of Borrower's business); and (b) indebtedness secured by assets of the Borrower, regardless of any limitation on recourse against Borrower. 1.15.3 "Net Worth" shall mean, with respect to the Borrower, Assets, including goodwill, minus Liabilities. 1.15.4 "Tangible Book Value" shall mean, with respect to the Subsidiary Banks, Assets, excluding goodwill, minus Liabilities. SECTION 2.0 TERMS OF THE LINE OF CREDIT. 2.1 The Revolving Line of Credit. Upon the terms and conditions set forth ---------------------------- in this Agreement, Lender agrees to fund advances from time to time requested by Borrower in an aggregate outstanding amount not to exceed the Commitment. 2.2 Making the Revolving Loans. Each advance shall be made either: (i) -------------------------- on written notice given by the Borrower to the Lender; or (ii) in a telephonic request, which request shall be followed by written notice from the Borrower to Lender within five days from the 3 telephonic request; and in either event not later than noon (Central Standard Time) one business day prior to the business day upon which the advance is to be made. 2.3 Funding of Revolving Loans. The Lender agrees on each advance date -------------------------- to make available to the Borrower the amount of the requested advance (provided that the aggregate amount of all Advances does not exceed the limitation set forth in Section 2.1) by transfer of immediately available funds to a deposit account maintained by Borrower. The revolving credit advances made by the Lender from time to time to the Borrower under this Agreement shall be made against, evidenced by and repaid with interest thereon in accordance with the Line of Credit Note of the Borrower. 2.4 Interest. Interest shall accrue on the outstanding balance of all -------- advances made under the Line of Credit at a per annum rate of the lesser of (i) one and one-quarter of one percentage point (1.25%) less than the Prime Rate or (ii) 7.75%. Accrued interest shall be payable quarterly commencing on the 30th day of June, 1998 and continuing on the last day of each September, December, March and June thereafter. 2.5 Term. Lender's commitment to fund advances under the Line of ---- Credit shall terminate on March 31, 2003. Lender shall have the opportunity on each anniversary date of the execution of this Agreement to review the terms and agreements applicable to the Line of Credit, provided however that Lender will not require the modification of such terms and agreements unless: (i) there has been a material adverse change in the financial condition of the Borrower or the Subsidiary Banks; or (ii) the occurrence of any other Event of Default and the expiration of any applicable cure period under Section 10.1 of this Agreement. 2.6 Late Payment Charge. The Borrower shall pay a late payment charge ------------------- equal to one-half of one percent of the amount of any payment that is more than fifteen (15) days past the due date thereof. SECTION 3.0 PREPAYMENT - ---------------------- 3.1 Voluntary Prepayment of the Line of Credit. The Borrower shall have ------------------------------------------ the right and privilege of prepaying the Line of Credit, in whole or in part, at any time and from time to time without penalty. 3.2 Effect of Prepayment. Each prepayment of the Line of Credit shall -------------------- be applied, first to the payment of all accrued and unpaid interest to the date of prepayment, and the balance shall be applied to the outstanding principal balance thereof. 4 SECTION 4.0 COLLATERAL - ----------------------- The Loan and the Line of Credit Note shall be secured by a pledge of and a first and prior security interest in not less than 100% of the Bank of the Ozarks, wca, capital stock and not less than 100% of the Bank of the Ozarks, nwa, capital stock, whether such capital stock is now owned directly or indirectly, or hereafter acquired by Borrower. SECTION 5.0 REPRESENTATIONS AND WARRANTIES - ------------------------------------------- To induce the Lender to make the Loan provided for herein, the Borrower represents and warrants unto the Lender (which representations and warranties will survive the delivery of the Note and the making of the Loan) that: 5.1 Non-Violation. The execution, delivery and performance of this ------------- Agreement, the borrowings hereunder, and the execution and delivery of the Notes executed pursuant hereto will not violate any provision of law, or any order of any court or governmental agency, any provision of any trust agreement, indenture, agreement or other instrument to which the Borrower or any Subsidiary Bank is a party, or be in conflict with, result in a breach of, or constitute (with or without notice and/or lapse of time) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or any Subsidiary Bank, except as otherwise expressly granted to Lender pursuant hereto. 5.2 Binding Obligation. This Agreement and the Note, when executed and ------------------ delivered pursuant hereto for value received, will constitute the valid and legally binding obligation of the Borrower in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, moratorium, or other laws affecting the enforcement of creditors' rights). 5.3 Financial Condition. All financial statements or information ------------------- furnished to the Lender in connection herewith are, to the best of the Borrower's knowledge, in all material respects, true and correct and accurately represent the financial condition and operations of the person or corporation shown therein including the statements of the Subsidiary Banks furnished herewith, as of their date, and since such date there has been no material or adverse changes in the said financial condition or operations. 5.4 Litigation. There is no action, suit or proceeding at law or in ---------- equity, or by or before any governmental instrumentality or other agency, now pending, or, to the knowledge of the Borrower, threatened against or affecting the Borrower, the collateral described in Section 5 hereof, or the Subsidiary Banks which, if adversely determined, would materially impair the right, capacity, ability or authority of Borrower or the Subsidiary Banks to carry on business substantially as now conducted, or would materially adversely affect the condition, financial or otherwise, of the Borrower, or of the Subsidiary Banks. 5 5.5 Existing Defaults. Borrower has no knowledge of the existence of any ----------------- condition or event which would, with or without notice and/or lapse of time, constitute an Event of Default hereunder. 5.6 Taxes. Except as to the pending tax dispute with the State of ----- Arkansas for tax years 1992 through 1995, which has been disclosed to Lender and Lender has agreed has been adequately provided for, the Borrower and the Subsidiary Banks have filed all required federal, state and local tax returns and have paid all taxes as shown on such returns as they have become due. 5.7 Priority of Liens. The liens to be provided the Lender pursuant to ----------------- the provisions of Section 4 and the Security Agreement shall be of such dignity and priority as may be provided for herein, and there shall hereafter be no additional lien, charge, or encumbrance at any time existing with respect thereto without the prior written consent of Lender, which consent shall not be unreasonably withheld. 5.8 Use of Proceeds. The proceeds of the Loan shall be used exclusively --------------- as set forth in Section 9 hereof. 5.9 Ownership of Shares. The shares of stock pledged to secure the Loan ------------------- shall, at the time of delivery to the Lender of certificates evidencing same, be owned by the Borrower free and clear of any lien, charge, security interest or restriction. The Borrower shall be the registered owner of not less than 100% of the common stock of each Subsidiary Bank on the date of Closing, all of which are validly issued, fully paid and non-assessable. SECTION 6.0 AFFIRMATIVE COVENANTS - ---------------------------------- Unless waived by the Lender in writing, Borrower covenants and agrees that from the date hereof until payment in full of the principal of and interest on the Note: 6.1 Corporate Existence and Properties. The Borrower will do or cause to ---------------------------------- be done all things necessary to preserve and keep in full force and effect the corporate existence, rights and franchises of both itself and of the Subsidiary Banks, and comply, in all material respects, with all laws applicable thereto; and continue to conduct and operate the business of the Subsidiary Banks in accordance with sound banking practices. 6.2 Financial Reports. The Borrower will furnish or cause to be furnished ----------------- to the Lender the following: 6.2.1 Within ninety (90) days after each fiscal year of each Subsidiary Bank, a copy of the Subsidiary Bank's operating and financial statements, including a copy of the Consolidated Report of Condition and Income. 6 6.2.2 Within ten (10) days after their preparation, a copy of all quarterly call reports, quarterly balance sheets and operating statements and such other information regarding the operations, properties, capital, condition and business affairs of each Subsidiary Bank as the Lender may reasonably request. 6.2.3 Within ninety (90) days after each fiscal year of the Borrower, a copy of the Borrower's audited consolidated financial statements, with details of consolidation reflecting the Subsidiary Banks and parent only. 6.2.4 Promptly, from time to time, such other information regarding the operations, properties, business affairs and conditions, financial or otherwise, of the Subsidiary Banks or of the Borrower as the Lender may reasonably request including copies of any examinations conducted by federal or state bank regulatory agencies, which Lender agrees shall be furnished to it in accordance with applicable rules and regulations of the regulatory agency compiling such report. 6.3 Taxes and Other Liens. The Borrower will duly pay and discharge, and --------------------- cause to be discharged, all taxes, assessments and governmental charges in any material amount upon it or its properties or upon the Subsidiary Banks or its property prior to the date on which penalties are attached thereto, and shall pay all claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien against the property unless and to the extent only that the same shall be contested in good faith by appropriate proceedings and adequate reserves are set aside with respect thereto. The Borrower shall maintain the collateral provided for herein to secure the Debt free and clear of all liens, charges and encumbrances of any nature whatsoever except those granted and conveyed to the Lender pursuant to the terms hereof. 6.4 Expenses. The Borrower will pay all out-of-pocket expenses incurred -------- by the Lender in connection with the preparation of Loan Documents and taking of collateral, and in the event of default, in connection with the enforcement of the rights of the Lender under this Agreement and the Note, including without limitation reasonable attorney fees owing to Lender counsel by reason thereof. 6.5 Inspections. The Borrower will permit the Lender, and will cause the ----------- Subsidiary Banks from time to time during reasonable business hours to permit the Lender to inspect any business properties or premises of the Borrower or the Subsidiary Banks or inspect books and records relating to any thereof, as well as those relating to their general business affairs and financial condition. 6.6 Loan Loss Reserves. Borrower shall cause the Subsidiary Banks to ------------------ maintain a reserve for loan losses in an amount acceptable to all applicable regulatory agencies. 7 6.7 Financial Requirement of Borrower. The Borrower shall conduct the --------------------------------- affairs of the Subsidiary Banks in a businesslike and lawful manner, and shall (based on sound accounting principles consistently applied) cause the Subsidiary Banks to continuously meet the following required standards: 6.7.1 Borrower shall cause the Subsidiary Banks to maintain a return on average assets for each year (beginning with calendar year 1997, and recomputed at the close of each calendar year thereafter) equal to at least 1.0%. 6.7.2 Borrower shall cause each Subsidiary Bank to maintain a ratio of Capital to assets at a level at all times acceptable to the applicable bank regulatory authorities but in no event shall such ratio be less than seven percent (7.0%) at each calendar year-end. 6.7.3 Net charges to the Subsidiary Bank' reserve for loan losses shall not exceed one percent (1.0%) of Net Loans during any calendar year. 6.8 Compliance with Regulatory Agencies. Borrower shall comply and shall ----------------------------------- also cause the Subsidiary Banks to comply with all notices, orders, and memoranda of applicable regulatory agencies. Borrower shall and shall also cause the Subsidiary Banks to furnish to Lender copies of any cease and desist orders, memoranda of understanding, or any other regulatory actions or orders against Borrower, the Subsidiary Banks or any officer, director or shareholder of same upon Borrower or the Subsidiary Banks' receipt of same. SECTION 7.0 NEGATIVE COVENANTS - ------------------------------- From the date hereof until payment in full of the principal of, and interest on, the Note, the Borrower shall not and shall not allow the Subsidiary Banks to, without the Lender's prior written consent which consent shall not be unreasonably withheld: 7.1 Contingent Liabilities. Assume, guarantee, endorse, contingently ---------------------- agree to purchase or to provide funds for the payment of, agree to maintain or otherwise become liable upon, the obligations for borrowed money of any other person, firm or corporation, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of its banking business. 7.2 Redemptions and Recapitalization of Borrower or the Subsidiary Banks. -------------------------------------------------------------------- Make or commit to make any purchase or acquisition of shares of its outstanding capital stock, with the exception of redemptions of shares of stock required under the terms of Borrower's Employee Stock Ownership Plan, or in any way to modify Borrower's capital structure or the capital structure of any Subsidiary Bank. Borrower may, however, purchase additional stock of the Subsidiary Banks and issue additional shares of its preferred or common stock. 8 7.3 Loans and Advances. Other than in the normal course of business, make ------------------ any loans, advances or extensions of credit to, or purchase or make any commitment to purchase any stock, bonds, notes, debentures or other securities of, any person, firm, corporation or enterprise except (a) purchases of certificates of deposit issued by a national bank or otherwise insured by a federal agency; (b) deposits required by government agencies or public utilities; (c) obligations fully guaranteed by the U.S. government; (d) tax exempt securities; and (e) such other financial instruments or securities as the applicable federal and state regulatory agencies may approve from time to time. 7.4 Consolidation, Merger or Sale. Consolidate with or merge into any ----------------------------- other corporation or entity, or sell all or a substantial part of its assets. Lender agrees that Borrower may merge its Subsidiary Banks, provided that the Net Worth of the surviving bank following the merger transaction is equal to the combined Net Worth of the Subsidiary Banks. In the event of the merger of the Subsidiary Banks, Borrower agrees to substitute not less than 100% of the capital stock of the surviving bank for the Bank Stock pledged to Lender. Nothing in this Section 7.4 or in the preceding Section 7.3 shall prohibit the Borrower's acquisition of additional subsidiary banks and the issuance of its common stock in connection therewith. 7.5 Indebtedness. Incur, create, assume or permit to exist any ------------ indebtedness for borrowed money except Indebtedness evidenced by the Note, if such indebtedness would cause the aggregate indebtedness of the Borrower, including Indebtedness evidenced by the Note, to exceed: Closing through March 31, 1999 60% of Borrower's Net Worth April 1, 1999 through March 31, 2000 55% of Borrower's Net Worth April 1, 2000 through March 31, 2001 50% of Borrower's Net Worth April 1, 2001 through March 31, 2002 45% of Borrower's Net Worth April 1, 2002 through March 31, 2003 40% of Borrower's Net Worth The Loan hereunder shall at no time exceed fifty percent (50%) of the Tangible Book Value of the Collateral. 7.6 Liens. Incur, assume or permit to exist any encumbrance, pledge or ----- lien against any of its profits, property or assets, except: a. An encumbrance provided to secure the Loans and Note. b. Pledges or deposits made in connection with or to secure deposits of public funds, deposits of trust accounts, workmen's compensation, unemployment insurance, pensions or other employee benefits, performance and payment bonds or appeal bonds. c. Liens of judgments which are discharged and released within thirty (30) days from their date. 9 d. Tax liens or mechanics', materialmen's or furnisher's liens which are being contested in good faith by appropriate proceedings with adequate reserves set aside therefor. e. An encumbrance on stock of the Subsidiary Banks not pledged to Lender under the Security Agreement. f. Liens securing any indebtedness otherwise permitted pursuant to Section 7.5 of this Agreement. 7.7 Loan Participations. Borrower will allow Lender to review ------------------- participations from unaffiliated financial institutions, from time to time, and Lender, at its discretion, may limit the Subsidiary Banks' purchase of participations from unaffiliated financial institutions as Lender may deem advisable under sound banking practices. 7.8 Insider Transactions. Neither Borrower, any corporation, firm or -------------------- association owned by the Borrower, nor any officer, director, or shareholder of the foregoing shall hereafter obtain or maintain, directly or indirectly: (a) any loan or extension of credit from a Subsidiary Bank, if such loan or extension of credit is criticized by any applicable regulatory agency unless payment is made in full within ninety (90) days; or (ii) any unsecured loan or extension of credit in an amount exceeding 3% of the Subsidiary Bank's capital, as to any one borrower, or 10% when aggregated with all such unsecured credits extended by the Subsidiary Banks. SECTION 8.0 CONDITIONS OF LENDING - ---------------------------------- The obligation of the Lender to make the Loans is and shall be subject to existence of the following conditions precedent on the date of Closing: 8.1 Warranties. Representations and warranties of the Borrower herein ---------- contained shall be true and accurate in all material respects on and as of the date of Closing (except to the extent that such representations and warranties relate solely to an earlier date in which event no material adverse change shall have occurred with respect thereto). 8.2 No Default. No condition or event shall have occurred or be ---------- continuing which would constitute an Event of Default hereunder or which, after notice or lapse of time, or both, would constitute an Event of Default hereunder, or with respect to any indebtedness for borrowed money secured by a lien or security interest upon any property of Borrower. 8.3 Loan Documents. The Borrower shall deliver, or shall have delivered, -------------- to the Lender such documents, certificates, instruments, resolutions and opinions, in form and content required by the Lender, including without limitation the following: a. Note of Borrower. 10 b. This Agreement. c. The Pledge and Security Agreement. d. Such financial statements of the Borrower and of the Subsidiary Banks as the Lender may require. e. A certificate signed by the Borrower dated the date of Closing that, to the best of its knowledge no Event of Default or event which might (with or without the giving of notice and/or lapse of time) mature into an Event of Default exists or is imminent. f. Certificates evidencing 27,399 shares of the common stock of the Bank of the Ozarks, WCA, and 2,340 shares of the common stock of the Bank of the Ozarks, NWA, together with stock powers signed by the Borrower. g. Federal Reserve Form U-1 (Statement of Purpose). h. Corporate resolutions of Borrower authorizing the borrowing described herein, together with the Secretary's certificate setting forth the officers and authorized signatories for the Borrower. i. A Certificate of Existence/Good Standing issued by the Secretary of State for the state of Arkansas. j. Copies of the Borrower's and Subsidiary Bank's corporate charters and bylaws, certified by the respective corporate secretaries as being true and copies of each. SECTION 9.0 USE OF PROCEEDS - --------------------------- The Borrower covenants, represents and warrants to the Lender that the proceeds of the Loan shall be used for the refinance of certain existing loans, making additional capital contributions to the Subsidiary Banks, making additional capital contributions to other present or future subsidiaries of the Borrower, financing acquisitions of additional subsidiaries of the Borrower and for other general corporate purposes. 11 SECTION 10.0 DEFAULT AND REMEDIES - ----------------------------------- 10. Events of Default. Upon the occurrence of any of the following, and ----------------- the expiration of applicable periods for notice and cure, there shall be deemed to have occurred an Event of Default: 10.1.1 Any representation or warranty made herein, or any report, certificate, financial statement or other instrument furnished in connection with any of the foregoing, shall prove to be false and misleading in any material respect; or 10.1.2 Default in payment when due of the principal of or interest on any promissory note of Borrower to Bank within ten (10) days after the due date thereof and failure to cure same within ten (10) days from the date on which notice of default is given by Lender to Borrower; or 10.1.3 Failure to duly observe or perform any covenant, agreement, or condition to be observed or performed in connection with this Agreement, any agreement executed herewith as security for the Debt and failure to cure same within thirty days (30) from the date on which notice of default is given by Lender to Borrower; or 10.1.4 The Borrower or any Subsidiary Bank shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or its properties or assets; (ii) admit in writing its inability to pay its debts as they mature; (iii) make a general assignment for the benefit of creditors; (iv) be adjudicated a bankrupt or insolvent; or, (v) file a voluntary petition in bankruptcy or a petition seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation under law or statute, or file an answer admitting the material allegations of a petition filed against it in any such proceeding; or 10.1.5 An order, judgment or decree shall be entered without the application, approval or consent of the Borrower or the Subsidiary Banks by any court of competent jurisdiction approving a petition seeking reorganization thereof, or of all or a substantial part of its properties or assets, or a receiver, trustee or liquidator thereof; or 10.1.6 The occurrence of a material adverse change in the financial condition of the Borrower and the failure to take measures reasonably demanded by Lender to cure same within thirty days (30) from the date of notice of same from Lender to Borrower; or 10.1.7 Any Subsidiary Bank shall surrender, forfeit or otherwise lose its charter as a state chartered bank (except upon the merger of the two Subsidiary Banks as permitted 12 hereunder), or shall have any portion of its properties or operations sold or seized by or at the direction of any regulatory or governmental agency; or 10.1.8 Failure by the Borrower to take such measures reasonably demanded by Lender to cure any cease and desist orders or memoranda of understanding or any other regulatory actions or orders between the Borrower or any Subsidiary Bank and its regulatory agencies, within thirty (30) days from the date of written notice of the same from Lender to Borrower; or 10.1.9 The Borrower shall surrender, forfeit or otherwise lose its charter, or shall fail to maintain its status as an Arkansas corporation in good standing, or shall have any portion of its properties or operations sold or seized by or at the direction of any regulatory or governmental agency; or 10.1.10 The Borrower shall fail to lawfully continue to be a bank holding company within the meaning of the Bank Holding Company Act, 12 U.S.C. (S)(S)1841 et seq. 10.1.11 Any event of default in any promissory note or loan agreement evidencing or governing any additional indebtedness of the Borrower permitted hereunder. 10.2 Acceleration and Remedies Upon Default. Upon the occurrence of an -------------------------------------- Event of Default the indebtedness arising hereunder shall at the absolute option of Lender, become immediately due and payable, or upon the non-performance by Borrower of any of the agreements or conditions contained in any of the documents or instruments related to the indebtedness arising hereunder or in connection herewith, the said Loans and indebtedness shall at the absolute option of the Lender become immediately due and payable, and in any such event Lender shall have full power and authority at any time or times thereafter to exercise all or any one or more of the remedies and shall have all of the rights of a secured party under the applicable law, including the Uniform Commercial Code of Tennessee (Code), if applicable, and is hereby authorized im mediately to sell the whole or any part of the collateral for the indebtedness evidenced hereby and by the Note or any substitute therefor or additions thereto or at public or private sale, at the option of Lender without notice of the amounts due or claimed to be due, in accordance with the provisions of the Code, and to apply the net proceeds of such sale after deduction of expenses for collection, sale or delivery to the payment of the indebtedness to Lender specifically secured hereby and of any other liability or liabilities, whether due or not due, of Borrower to Lender, returning the surplus, if any to Borrower unless other disposition thereof is required by said Code. Upon any sale by virtue hereof, Lender may repurchase, unless otherwise prohibited by said Code, the whole or any part of the aforesaid collateral discharged from any statutory right of redemption, equity of redemption exemption from execution, or similar rights all of which are hereby expressly waived and released. Any requirement of said Code for reasonable notice shall be met if such notice is mailed, postage prepaid, to Borrower at the address of Borrower as shown on the records of Lender at least ten (10) days prior to the time of the sale, disposition or other event or thing giving rise to the requirement of notice. 13 10.3 Offset of Deposits. Upon the occurrence of an Event of Default, ------------------ Lender may apply toward payment of the Debt all balances of any deposit accounts of the Borrower with the Lender then or any time thereafter existing. SECTION 11.0 MISCELLANEOUS - ---------------------------- 11.1 Closing. Subject to the terms and conditions set forth herein, ------- closing of the Loan and other matters required herein will take place at the offices of Lender on or before April 30, 1998. 11.2 Non-Waiver. No omission or delay by the Lender in exercising any ---------- right, remedy or power it may have under this Agreement, the Note, the loan documents or governing law will impair such right, remedy or power, or be construed to be a waiver of any default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any right or power, and no waiver will be valid unless in writing and signed by the Lender, and then only to the extent specified. All remedies herein and by law afforded will be cumulative and available to Lender until the Debt is paid or satisfied in full. 11.3 Binding Effect. Whenever any of the parties to this Agreement are -------------- referred to, such reference shall be deemed to include the successors, assigns and personal representatives of said parties, and all covenants by or on behalf of the Borrower shall bind and inure to the benefit of successors and assigns of the Lender. 11.4 Notices. Any notice permitted or required by this Agreement shall be ------- in writing and delivered by hand delivery or by depositing it in the U.S. Mail, postage prepaid, or by telegram, charges prepaid, addressed to the parties as follows: If to Borrower: George G. Gleason, II Chairman Bank of the Ozarks, Inc. TCBY Tower Building, Suite 3100 425 Capitol Avenue Little Rock, Arkansas 72201 14 If to Lender: Wayne F. Massing Vice President Union Planters Bank, N.A. P.O. Box 387 Memphis, Tennessee 38147 Any party may designate in writing any other person or address in which such notice or demand shall be delivered and such shall become effective upon receipt by the other party. 11.5 Expenses of Enforcement. Borrower agrees to pay all reasonable ----------------------- attorneys' fees and other costs and charges incurred in collection of any indebtedness arising under this Agreement, in the enforcement of the Bank's rights hereunder, in the protection and preservation of any property securing any indebtedness hereunder and in the perfection of any security interest or lien contemplated hereby and in maintaining the perfected status of the same. 11.6 Headings. Whenever in this Agreement headings are used to denote -------- paragraphs, such headings shall not be referred to in interpreting the terms thereof or hereof, but are used merely for convenience. 11.7 Governing Law. This Agreement, the Note and associated documents, ------------- will be governed by and construed in accordance with the laws of the State of Tennessee, except with respect to interest which shall be governed by applicable provisions of federal law. 15 IN WITNESS WHEREOF, the parties hereunto have executed this Agreement as of the day and year first above written. UNION PLANTERS BANK, N.A. By: /s/ WAYNE F. MASSING ----------------------------- Wayne F. Massing Vice President BANK OF THE OZARKS, INC. By: /s/ GEORGE G. GLEASON, II ----------------------------- George G. Gleason, II Chairman 16 EX-27 3 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCORPORATED BY REFERENCE IN THE QUARTERLY REPORT FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 14,021 10,885 7,780 0 18,461 51,790 51,723 299,505 (3,822) 422,655 352,312 0 2,485 31,065 0 0 38 36,755 422,655 6,921 904 168 7,993 3,488 3,836 4,157 225 51 2,924 2,102 2,102 0 0 1,374 .36 .36 4.83 1,583 49 0 2,212 3,737 146 6 3,822 3,822 0 0
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