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 June 30, 2003

¨ 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)

12615 CHENAL PARKWAY, LITTLE ROCK, ARKANSAS	72211
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (501) 978-2265

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 by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).  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 June 30, 2003
Common Stock, $0.01 par value per share	8,054,570

BANK OF THE OZARKS, INC.

FORM 10-Q

June 30, 2003

INDEX

PART I. Financial Information
Item 1.	Consolidated Balance Sheets as of June 30, 2003 and 2002 and December 31, 2002	1
	Consolidated Statements of Income for the Three Months Ended June 30, 2003 and 2002 and the Six Months Ended June 30, 2003 and 2002	2
	Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2003 and 2002	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Selected and Supplemental Financial Data	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	23
PART II. Other Information
Item 1.	Legal Proceedings	24
Item 2	Changes in Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	25
Item 6.	Exhibits and Reports on Form 8-K	25
	(a).   Exhibits	25
	Reference is made to the Exhibit Index contained at the end of this report.
	(b).     Reports on Form 8-K	25
Signature		26
Exhibit Index		27

BANK OF THE OZARKS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

Unaudited

	June 30,						December 31,
	2003			2002			2002
ASSETS
Cash and due from banks	$	28,769		$	21,126		$	24,755
Interest bearing deposits		428			419			427
Investment securities—available for sale		268,408			185,583			222,965
Investment securities—held to maturity		—			4,385			9,203
Federal funds sold		—			—			—
Loans		825,726			647,113			717,895
Allowance for loan losses		(12,579	)		(9,649	)		(10,936	)
Net loans		813,147			637,464			706,959
Premises and equipment, net		45,970			35,830			39,050
Foreclosed assets held for sale, net		628			428			333
Interest receivable		6,550			5,679			6,029
Goodwill		4,870			1,808			1,808
Intangible assets, net		1,566			939			863
Other		24,127			2,492			23,461
Total assets	$	1,194,463		$	896,153		$	1,035,853
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand non-interest bearing	$	99,893		$	82,037		$	85,838
Savings and interest bearing transaction		359,706			288,670			312,637
Time		487,475			336,169			391,698
Total deposits		947,074			706,876			790,173
Repurchase agreements with customers		37,697			18,076			20,739
Other borrowings		98,594			85,318			129,366
Accrued interest and other liabilities		3,830			3,764			5,407
Total liabilities		1,087,195			814,034			945,685
Guaranteed preferred beneficial interest in the Company’s subordinated debentures		17,250			17,250			17,250
Stockholders’ equity
Preferred stock; $0.01 par value, 1,000,000 shares authorized, no shares issued and outstanding		—			—			—
Common stock; $0.01 par value, 10,000,000 shares authorized, 8,054,570, 7,648,360 and 7,752,910 shares issued and outstanding at June 30, 2003, June 30, 2002 and December 31, 2002, respectively		81			76			78
Additional paid-in capital		25,773			15,462			17,010
Retained earnings		62,425			48,263			54,755
Accumulated other comprehensive income (loss)		1,739			1,068			1,075
Total stockholders’ equity		90,018			64,869			72,918
Total liabilities and stockholders’ equity	$	1,194,463		$	896,153		$	1,035,853

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 June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Interest income
Loans	$	13,412		$	12,002		$	26,104		$	23,804
Investment securities—taxable		3,065			2,793			5,967			5,154
—nontaxable		338			137			619			351
Deposits with banks and federal funds sold		7			5			15			9
Total interest income		16,822			14,937			32,705			29,318
Interest expense
Deposits		3,332			3,511			6,644			7,344
Repurchase agreements with customers		88			80			153			136
Other borrowings		1,218			1,152			2,450			2,310
Total interest expense		4,638			4,743			9,247			9,790
Net interest income		12,184			10,194			23,458			19,528
Provision for loan losses		(1,095	)		(945	)		(1,845	)		(1,495	)
Net interest income after provision for loan losses		11,089			9,249			21,613			18,033
Other income
Service charges on deposit accounts		1,981			1,806			3,655			3,311
Mortgage lending income		1,626			498			2,668			992
Trust income		312			163			548			325
Bank owned life insurance income		291			—			575			—
Gain (loss) on sale of securities		97			—			97			(217	)
Other		263			242			549			490
Total other income		4,570			2,709			8,092			4,901
Other expense
Salaries and employee benefits		4,511			3,461			8,578			6,663
Net occupancy and equipment		1,095			878			2,089			1,737
Other operating expenses		2,148			1,719			3,841			3,294
Total other expense		7,754			6,058			14,508			11,694
Income before income taxes and trust preferred distributions		7,905			5,900			15,197			11,240
Distributions on trust preferred securities		397			397			793			793
Provision for income taxes		2,668			2,068			5,089			3,918
Net income	$	4,840		$	3,435		$	9,315		$	6,529
Basic earnings per common share	$	0.61		$	0.45		$	1.19		$	0.86
Diluted earnings per common share	$	0.60		$	0.44		$	1.16		$	0.84
Dividends declared per common share	$	0.11		$	0.07		$	0.21		$	0.13

See accompanying notes to consolidated financial statements.

2

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)

Unaudited

	Common Stock	Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance—January 1, 2002	$38	$14,360		$42,718		$(499	)	$56,617
Comprehensive income:
Net income				6,529				6,529
Other comprehensive income
Unrealized gains on available for sale securities net of $921 tax effect						1,485		1,485
Reclassification adjustment for losses included in income net of $51 tax effect						82		82
Comprehensive income								8,096
Issuance of 84,250 split adjusted shares of common stock from exercise of stock options		822						822
Tax benefits related to exercise of stock options		318						318
Cash dividends				(984	)			(984	)
2-for-1 stock split in the form of a 100% stock dividend	38	(38	)					—
Balance—June 30, 2002	$76	$15,462		$48,263		$1,068		$64,869
Balance—January 1, 2003	$78	$17,010		$54,755		$1,075		$72,918
Comprehensive income:
Net income				9,315				9,315
Other comprehensive income
Unrealized gains on available for sale securities net of $458 tax effect						709		709
Reclassification adjustment for gains included in income net of $29 tax effect						(45	)	(45	)
Comprehensive income								9,979
Issuance of 184,760 shares pursuant to acquisition of RVB Bancshares, Inc.	2	6,705						6,707
Issuance of 116,900 shares of common stock from exercise of stock options	1	1,155						1,156
Tax benefits related to exercise of stock options		903						903
Cash dividends				(1,645	)			(1,645	)
Balance—June 30, 2003	$81	$25,773		$62,425		$1,739		$90,018

See accompanying notes to consolidated financial statements.

3

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

Unaudited

	Six Months Ended June 30,
	2003			2002
Cash flows from operating activities
Net income	$	9,315		$	6,529
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		911			767
Amortization		98			93
Provision for loan losses		1,845			1,495
Provision for losses on foreclosed assets		15			20
Amortization and accretion on investment securities		119			59
(Gain) loss on sale of securities		(97	)		217
Net (increase) decrease in mortgage loans held for sale		(977	)		7,456
Gain on disposition of foreclosed assets		(3	)		(29	)
Deferred income taxes		16			(154	)
Increase in bank owned life insurance value		(575	)		—
Changes in assets and liabilities:
Interest receivable		(214	)		143
Other assets, net		(478	)		(239	)
Accrued interest and other liabilities		(597	)		(102	)
Net cash provided by operating activities		9,378			16,255
Cash flows from investing activities
Proceeds from sales and maturities of investment securities available for sale		236,282			55,628
Purchases of investment securities available for sale		(270,414	)		(56,212	)
Proceeds from maturities of investment securities held to maturity		2,985			80
Purchases of investment securities held to maturity		(2,171	)		(34	)
Net increase in loans held for portfolio		(67,579	)		(39,682	)
Purchases of premises and equipment		(6,152	)		(3,474	)
Proceeds from dispositions of foreclosed assets		878			872
Cash and federal funds sold received in acquisition, net of cash paid		8,984			—
Net cash used in investing activities		(97,187	)		(42,822	)
Cash flows from financing activities
Net increase in deposits		106,755			29,133
Net repayments of other borrowings		(31,399	)		(14,372	)
Net increase in repurchase agreements with customers		16,957			1,863
Proceeds on exercise of stock options		1,156			1,140
Dividends paid		(1,645	)		(984	)
Net cash provided by financing activities		91,824			16,780
Net increase (decrease) in cash and cash equivalents		4,015			(9,787	)
Cash and cash equivalents—beginning of period		25,182			31,332
Cash and cash equivalents—end of period	$	29,197		$	21,545

See accompanying notes to consolidated financial statements.

4

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, a state chartered bank, and Ozark Capital Trust, a Delaware business trust (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”) in Article 10 of Regulation S-X and with the instructions to Form 10-Q, and in accordance with accounting principles generally accepted in the United States for interim financial information. Certain information, accounting policies and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in accordance with such rules and regulations. These consolidated financial statements should 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, 2002.

In the opinion of management all adjustments considered necessary, consisting of normal recurring items, have been included for a fair presentation of the accompanying consolidated financial statements. Operating results for the three and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the full year or future periods.

During the quarter ended June 30, 2003, the Company determined that certain of its investment securities held to maturity no longer met the Company’s investment objectives. As a result the Company sold certain of the held-to-maturity investment securities and transferred the remainder of its investment securities from held to maturity to available for sale. Investment securities held to maturity with amortized cost of $2.9 million were sold for total proceeds of $3.0 million, resulting in a gain on the sale of $96,000. The remaining portion of the Company’s held-to-maturity investment securities with amortized cost of $8.5 million were transferred to available for sale. The unrealized gain on these held-to-maturity investment securities was $573,000 at June 30, 2003, and is not materially different from the amount of unrealized gain at the date of transfer.

3. Earnings Per Common Share

On June 17, 2002, the Company completed a 2-for-1 stock split, in the form of a stock dividend, effected by issuing one share of common stock for each share of such stock outstanding on June 3, 2002. All share and per share information contained in the consolidated financial statements or other disclosures in this report relating to periods prior to this date have been adjusted to give effect to this stock split.

Basic earnings per share (“EPS”) is computed by dividing reported earnings available to common stockholders by weighted average shares outstanding. Diluted EPS includes only the dilutive effect of stock options. In computing dilution for stock options, a simple average share price based on the daily ending trade as reported on Bloomberg is used for the reporting period. For the three and six months ended June 30, 2003 all of the Company’s outstanding stock options were included in the diluted EPS calculation. For the three months ended June 30, 2002 there were no options to purchase shares excluded from the diluted EPS calculation and for the six months ended June 30, 2002 there were options to purchase 16,000 shares excluded from the diluted EPS calculation because such shares were antidilutive.

Basic and diluted earnings per common share are computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
	(In thousands, except per share amounts)
Common shares—weighted averages (basic)		7,885		7,614		7,859		7,590
Common share equivalents—weighted averages		176		207		174		185
Common shares—diluted		8,061		7,821		8,033		7,775
Net income	$	4,840	$	3,435	$	9,315	$	6,529
Basic earnings per common share	$	0.61	$	0.45	$	1.19	$	0.86
Diluted earnings per common share		0.60		0.44		1.16		0.84

5

4. Federal Home Loan Bank (“FHLB”) Advances

FHLB advances with original maturities exceeding one year totaled $71.6 million at June 30, 2003. Interest rates on these advances ranged from 1.30% to 6.43% at June 30, 2003 with a weighted average rate of 5.65%. At June 30, 2003 aggregate annual maturities (amounts in thousands) and weighted average interest rates of FHLB advances with an original maturity of over one year are as follows:

Maturity	Amount		Weighted Average Rate
2003	$	3,056	1.76	%
2004		7,485	2.33
2005		481	3.55
2006		197	6.30
Thereafter		60,395	6.27
	$	71,614	5.65

FHLB advances of $60.0 million maturing in 2010 may be called quarterly and if called the Company expects to refinance with short-term FHLB advances, other short-term funding sources or FHLB long-term callable advances.

At June 30, 2003 the Company had no FHLB advances with original maturities of one year or less.

5. Guaranteed Preferred Beneficial Interest in the Company’s Subordinated Debentures

On June 18, 1999 Ozark Capital Trust, a Delaware business trust wholly owned by Bank of the Ozarks, Inc., sold to investors in a public underwritten offering $17.3 million of 9% cumulative trust preferred securities. The proceeds were used to purchase an equal principal amount of 9% subordinated debentures of Bank of the Ozarks, Inc. Bank of the Ozarks, Inc. has, through various contractual arrangements, fully and unconditionally guaranteed all obligations of Ozark Capital Trust on a subordinated basis with respect to the preferred securities. Subject to certain limitations, the preferred securities qualify as Tier 1 capital and are presented in the Consolidated Balance Sheets as “Guaranteed preferred beneficial interest in the Company’s subordinated debentures.” The sole asset of Ozark Capital Trust is the subordinated debentures issued by Bank of the Ozarks, Inc. Both the preferred securities of Ozark Capital Trust and the subordinated debentures of Bank of the Ozarks, Inc. will mature on June 18, 2029; however, they may be prepaid, subject to regulatory approval, prior to maturity at any time on or after June 18, 2004, or earlier upon certain changes in tax or investment company laws or regulatory capital requirements.

In May 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 established standards for how entities classify and measure certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. As a result of the Company’s adoption of this statement on July 1, 2003, the “Guaranteed preferred beneficial interest in the Company’s subordinated debentures” will be reclassified as a liability in the Company’s consolidated balance sheet, and the distributions on these trust preferred securities will be reported as interest expense in the consolidated statement of income.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 requires a variable interest entity (“VIE”) to be consolidated when a company is subject to the majority of the risk of loss or entitled to a majority of the VIE’s residual returns. Ozark Capital Trust may be a VIE, under the provision of FIN 46. This is an emerging financial reporting issue in the financial services industry. When the reporting under FIN 46 is resolved, it will not have a significant impact on the Company’s consolidated financial statements. Management will continue to monitor the financial reporting developments in this area during the third quarter of 2003.

6. Supplementary Data for Cash Flows

Cash payments for interest by the Company during the six months ended June 30, 2003 amounted to $9.1 million and during the six months ended June 30, 2002 amounted to $9.8 million. Cash payments for income taxes during the six months ended June 30, 2003 were $4.8 million and for the six months ended June 30, 2002 were $4.2 million.

6

7. Guarantees

Outstanding standby letters of credit are contingent commitments issued by the Company generally to guarantee the performance of a customer in third party arrangements. The term of the guarantee generally is for a period of one year. The maximum amount of future payments the Company could be required to make under these guarantees at June 30, 2003 and 2002 is $5.2 million and $3.9 million, respectively. The Company holds collateral to support guarantees when deemed necessary. The total of collateralized commitments at June 30, 2003 was $1.3 million.

8. Stock Based Compensation

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based compensation. The Company adopted the fair value method of recording stock-based compensation in 2003 and will use the prospective transition method for all stock options granted after December 31, 2002. The Company recognized $83,000 of pretax non-interest expense for both the quarter and the six months ended June 30, 2003 as a result of applying the provisions of SFAS No. 148 using the prospective transition method.

The Company continues to apply APB Opinion No. 25 and related interpretations in accounting for stock options granted prior to January 1, 2003. Accordingly, no stock-based compensation cost is reflected in net income for periods prior to that date. The following table illustrates the effects on net income and EPS had the Company applied the fair value recognition provisions of SFAS No. 123 “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148 to its stock-based compensation plans for the three and six month periods ended June 30, 2003 and 2002:

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
	(Dollars in thousands, except per share amounts)
Net income, as reported	$	4,840	$	3,435	$	9,315	$	6,529
Add: Total stock-based compensation expense net of related tax effects included in reported net income		51		—		51		—
Deduct: Total stock-based compensation expense net of related tax effects determined under fair value based method		87		105		123		144
Pro forma net income	$	4,804	$	3,330	$	9,243	$	6,385
EPS:
Basic—as reported	$	0.61	$	0.45	$	1.19	$	0.86
Basic—pro forma		0.61		0.44		1.18		0.84
Diluted—as reported	$	0.60	$	0.44	$	1.16	$	0.84
Diluted—pro forma		0.60		0.43		1.15		0.82

The fair value of the options is amortized over the option’s vesting period. Pro forma net income reflects only options granted after December 31, 1996. The pro forma disclosures may not be representative of the effects on net income and EPS in future periods.

9. Acquisition of RVB

On June 13, 2003, the Company purchased RVB Bancshares, Inc. (“RVB”) and its River Valley Bank subsidiary in Russellville, Arkansas. The Company acquired approximately $41 million in loans and approximately $50 million in deposits in this transaction. The purchase price for the RVB acquisition was $7.8 million and consisted of cash of $1.1 million and 184,760 shares of the Company’s common stock valued at $6.7 million. This acquisition resulted in the recording of $3.1 million of goodwill and $784,000 of core deposit intangibles. The results of operations of RVB are included in the Company’s results from the date of acquisition. The pro forma effect of the acquisition is not material to the Company’s results for any of the periods presented.

7

10. Comprehensive Income

Unrealized gains and losses on investment securities available for sale are the only items included in accumulated other comprehensive income. Total comprehensive income (which consists of net income plus unrealized gains and losses on investment securities available for sale, net of income taxes) was $6.8 million and $6.0 million for the three months ended June 30, 2003 and 2002, respectively, and $10.0 million and $8.1 million for the six months ended June 30, 2003 and 2002, respectively.

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8

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

General

Net income was $4,840,000 for the second quarter of 2003, a 40.9% increase from net income of $3,435,000 for the comparable quarter in 2002. Diluted earnings per share increased 36.4% to $0.60 for the quarter ended June 30, 2003, compared to $0.44 for the comparable quarter in 2002. For the six months ended June 30, 2003, net income totaled $9,315,000, a 42.7% increase over net income of $6,529,000 for the first six months of 2002. Diluted earnings per share for the first six months of 2003 were $1.16 compared to $0.84 for the comparable period in 2002, a 38.1% increase.

On June 17, 2002, the Company completed a 2-for-1 stock split, in the form of a stock dividend, effected by issuing one share of common stock for each share of such stock outstanding on June 3, 2002. All share and per share information contained in this discussion relating to periods prior to this date have been adjusted to give effect to this stock split.

The Company’s annualized returns on average assets and average stockholders’ equity were 1.69% and 23.89%, respectively, for the second quarter of 2003, compared with 1.55% and 22.41%, respectively, for the comparable quarter of 2002.

Total assets increased from $1.0 billion at December 31, 2002 to $1.2 billion at June 30, 2003. Loans were $826 million at June 30, 2003, compared to $718 million at December 31, 2002. Deposits were $947 million at June 30, 2003, compared to $790 million at December 31, 2002.

Stockholders’ equity increased from $72.9 million at December 31, 2002, to $90.0 million at June 30, 2003, resulting in book value per share increasing from $8.48 to $11.18.

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, mortgage lending income, trust income, bank owned life insurance income, appraisal, credit life commissions and other credit related fees, safe deposit box rental, brokerage fees and other miscellaneous fees and net gains on sales of assets. 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 also impacted by its provision for loan losses. The following discussion provides a summary of the Company’s operations for the three and six months ended June 30, 2003.

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9

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 statutory federal income tax rate (35% in 2003 and 2002 periods and 34% in 2001 and prior periods).

Net interest income (FTE) increased 20.4% to $12,391,000 for the three months ended June 30, 2003 compared to $10,289,000 for the three months ended June 30, 2002. Net interest income (FTE) increased 20.7% to $23,845,000 for the six months ended June 30, 2003, from $19,761,000 for the six months ended June 30, 2002. The growth in net interest income was primarily attributable to a 27.5% and 24.0% growth in average earning assets for the three and six month periods ended June 30, 2003, respectively.

Net interest margin, on a fully taxable equivalent basis, was 4.70% for the second quarter of 2003 compared to 4.97% for the second quarter of 2002, a decrease of 27 basis points. Net interest margin for the six months ended June 30, 2003 was 4.75% compared with 4.88% for the same period in 2002, a decrease of 13 basis points. Net interest margin for the second quarter and first six months of 2003 declined as a result of a decrease in earning asset yields which was only partially offset by the decline in interest bearing deposit and liability cost for each of these periods. Both security and loan yields declined during these periods, resulting in a decline in total earning asset yields of 81 basis points and 71 basis points, respectively, for the second quarter and first six months of 2003 compared with the comparable periods in 2002. These declines were offset by a decline in interest bearing liability costs of 66 and 69 basis points, respectively, for these periods.

The Financial Accounting Standards Board (“FASB”) issued Statement of Accounting Financial Standards (“SFAS”) No. 150 which will be effective for the Company as of July 1, 2003. SFAS No. 150 establishes standards for accounting for certain financial instruments with characteristics of both debt and equity such as the trust-preferred securities the Company has outstanding. These securities have previously been reported between liabilities and equity in the Company’s financial statements and the payment of dividends thereon have been reported as distributions on trust-preferred securities in the same manner as distributions to minority interests. This accounting has been in accordance with generally accepted accounting principles. Effective for the third quarter of 2003, SFAS No. 150 will require these securities to be reported as debt and the payments of dividends thereon will be shown as interest expense. This change will have no effect on net income or earnings per share, but it will reduce net interest income and net interest margin and increase the efficiency ratio in future periods. Restatement of prior period numbers is not permitted; however, if SFAS No. 150 were effective for the second quarter of 2003, net interest margin would have been decreased by 15 basis points and the efficiency ratio would have increased 109 basis points.

Analysis of Net Interest Income

(FTE = Fully Taxable Equivalent)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
	(Dollars in thousands)
Interest income	$	16,822		$	14,937		$	32,705		$	29,318
FTE adjustment		207			95			387			233
Interest income—FTE		17,029			15,032			33,092			29,551
Interest expense		4,638			4,743			9,247			9,790
Net interest income—FTE	$	12,391		$	10,289		$	23,845		$	19,761
Yield on interest earning assets—FTE		6.46	%		7.27	%		6.59	%		7.30	%
Cost of interest bearing liabilities		1.95			2.61			2.05			2.74
Net interest spread—FTE		4.50			4.66			4.54			4.56
Net interest margin—FTE		4.70			4.97			4.75			4.88

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10

Average Consolidated Balance Sheet and Net Interest Analysis

(Dollars in thousands)

	Three Months Ended June 30,												Six Months Ended June 30,
	2003						2002						2003						2002
	Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/ Rate
ASSETS
Earnings assets:
Interest bearing deposits and federal funds sold	$	430	$	7	6.58	%	$	355	$	5	5.68	%	$	509	$	15	5.94	%	$	289	$	9	6.38	%
Investment securities:
Taxable		254,543		3,065	4.83			187,783		2,793	5.97			239,777		5,967	5.02			180,540		5,154	5.76
Tax-exempt—FTE		28,461		520	7.33			11,319		211	7.48			26,060		952	7.36			14,336		540	7.59
Loans—FTE		774,331		13,437	6.96			630,153		12,023	7.65			746,098		26,158	7.07			621,210		23,848	7.74
Total earning assets		1,057,765		17,029	6.46			829,610		15,032	7.27			1,012,444		33,092	6.59			816,375		29,551	7.30
Non-earning assets		88,821						59,650						85,857						59,556
Total assets	$	1,146,586					$	889,260					$	1,098,301					$	875,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	344,015	$	956	1.11	%	$	276,386	$	1,139	1.65	%	$	328,333	$	1,993	1.22	%	$	259,985	$	2,077	1.61	%
Time deposit of $100,000 or more		273,045		1,324	1.94			177,590		1,178	2.66			252,532		2,527	2.02			182,362		2,584	2.86
Other time deposits		186,511		1,052	2.26			164,846		1,194	2.91			182,268		2,124	2.35			167,502		2,683	3.23
Total interest bearing deposits		803,571		3,332	1.66			618,822		3,511	2.28			763,133		6,644	1.76			609,849		7,344	2.43
Repurchase agreements with customers		32,775		88	1.08			20,123		80	1.59			27,823		153	1.11			17,828		136	1.54
Other borrowings		115,910		1,218	4.21			90,789		1,152	5.09			119,564		2,450	4.13			91,966		2,310	5.06
Total interest bearing liabilities		952,256		4,638	1.95			729,734		4,743	2.61			910,520		9,247	2.05			719,643		9,790	2.74
Non-interest liabilities:
Non-interest bearing deposits		91,126						76,657						87,645						75,249
Other non-interest liabilities		4,693						4,136						4,898						4,346
Total liabilities		1,048,075						810,527						1,003,063						799,238
Trust preferred securities		17,250						17,250						17,250						17,250
Stockholders’ equity		81,261						61,483						77,988						59,443
Total liabilities and stockholders’ equity	$	1,146,586					$	889,260					$	1,098,301					$	875,931
Interest rate spread—FTE					4.50	%					4.66	%					4.54	%					4.56	%
Net interest income—FTE			$	12,391					$	10,289					$	23,845					$	19,761
Net interest margin—FTE					4.70	%					4.97	%					4.75	%					4.88	%

11

Non-Interest Income

The Company’s non-interest income can primarily be broken down into seven main sources: (1) service charges on deposit accounts, (2) mortgage lending income, (3) trust income, (4) bank owned life insurance income, (5) appraisal, credit life commissions and other credit related fees (6) safe deposit box rental, brokerage fees and other miscellaneous fees and (7) net gains on sales of assets.

Non-interest income for the second quarter of 2003 was $4,570,000 compared with $2,709,000 for the second quarter of 2002, a 68.7% increase. Non-interest income for the six months ended June 30, 2003 was $8,092,000 compared to $4,901,000 for the six months ended June 30, 2002, a 65.1% increase. During the first six months of 2002, the Company’s non-interest income was reduced by $217,000 of securities losses compared to $97,000 in securities gains during the first six months of 2003. During the first six months of 2003, the Company had income from bank owned life insurance purchased in the fourth quarter of 2002 and also benefited from a high level of mortgage lending activity and continued growth in its customer base.

The table below shows non-interest income for the three and six months ended June 30, 2003 and 2002.

Non-Interest Income

	Three Months Ended June 30,					Six Months Ended June 30,
	2003			2002		2003		2002
	(Dollars in thousands)
Service charges on deposit accounts	$	1,981		$	1,806	$	3,655	$	3,311
Mortgage lending income		1,626			498		2,668		992
Trust income		312			163		548		325
Bank owned life insurance income		291			—		575		—
Appraisal, credit life commissions and other credit related fees		147			127		273		233
Safe deposit box rental, brokerage fees and other miscellaneous fees		124			94		273		227
Gain (loss) on sale of other assets		(8	)		21		3		30
Gain (loss) on sale of securities		97			—		97		(217	)
Total non-interest income	$	4,570		$	2,709	$	8,092	$	4,901

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12

Non-Interest Expense

Non-interest expense for the second quarter of 2003 was $7,754,000 compared with $6,058,000 for the comparable period in 2002, a 28.0% increase. Non-interest expense for the six months ended June 30, 2003 was $14,508,000 compared to $11,694,000 for the six months ended June 30, 2002, a 24.1% increase.

The Company’s growth in non-interest expense is primarily a result of its continued growth and expansion. During the past 12 months, the Company has opened six new banking offices, three new loan production offices and completed the acquisition of RVB Bancshares, Inc. (“RVB”) and its subsidiary bank. A number of factors contributed to the Company’s growth in non-interest expense in the second quarter of 2003. In April and May of 2003 the Company opened four new banking offices in Conway, Bryant, Little Rock and Cabot and a new loan production office in Mountain Home. During the second quarter of 2003, the Company incurred $121,000 of pretax expenses for contract termination charges, data processing conversion and other similar matters in connection with the RVB acquisition. Also the Company has adopted the prospective method of fair value recognition of stock option compensation expense as provided under SFAS No. 123, as amended by SFAS No. 148. As a result, during the second quarter, the Company incurred a pretax expense of $83,000 in connection with the annual issuance of director stock options.

The table below shows non-interest expense for the three and six months ended June 30, 2003 and 2002.

Non-Interest Expense

	Three Months Ended June 30,				Six Months Ended June 30,
	2003		2002		2003		2002
	(Dollars in thousands)
Salaries and employee benefits	$	4,511	$	3,461	$	8,578	$	6,663
Net occupancy and equipment expense		1,095		878		2,089		1,737
Other operating expense:
Professional and other outside services		254		120		314		187
Postage		89		106		184		192
Telephone		153		127		294		250
Data lines		85		54		155		106
Operating supplies		298		151		535		303
Advertising and public relations		213		179		408		433
Software expense		145		84		277		179
ATM expense		141		103		265		184
FDIC & state assessment		81		73		159		156
Other real estate and foreclosure expense		60		117		108		159
Business development, meals and travel		45		34		86		68
Amortization of deposit intangibles		43		38		81		76
OD/NSF check losses		92		177		131		314
Other		449		356		844		687
Total non-interest expense	$	7,754	$	6,058	$	14,508	$	11,694

The Company’s efficiency ratio (non-interest expenses divided by the sum of net interest income on a tax equivalent basis and non-interest income) for the second quarter and first six months ended June 30, 2003 improved to 45.7% and 45.4%, respectively, compared to 46.6% and 47.4%, respectively, for the second quarter and first six months of 2002.

Income Taxes

The provision for income taxes was $2,668,000 for the quarter ended June 30, 2003, compared to $2,068,000 for the same period in 2002. The effective income tax rates were 35.5% and 37.6%, respectively, for these quarterly periods. The provision for income taxes was $5,089,000 for the six months ended June 30, 2003, compared to $3,918,000 for the comparable six months period in 2002. The effective income tax rates were 35.3% and 37.5%, respectively, for these six month periods. The reduction of approximately 2% in the effective tax rates for these periods is principally attributable to the non-taxable increase in the cash surrender value of bank owned life insurance in the 2003 periods.

13

Analysis of Financial Condition

Loan Portfolio

At June 30, 2003, the Company’s loan portfolio was $826 million, an increase from $718 million at December 31, 2002. As of June 30, 2003, the Company’s loan portfolio consisted of approximately 78.6% real estate loans, 7.3% consumer loans, 11.5% commercial and industrial loans and 2.1% agricultural loans (non-real estate).

The amount and type of loans outstanding at June 30, 2003 and 2002 and December 31, 2002 are reflected in the following table.

Loan Portfolio

	June 30,				December 31,
	2003		2002		2002
	(Dollars in thousands)
Real Estate:
Residential 1-4 family	$	212,866	$	169,142	$183,687
Non-farm/non-residential		249,764		190,860	212,481
Agricultural		61,657		53,863	57,525
Construction/land development		93,608		55,502	65,474
Multifamily residential		31,045		26,780	28,555
Total real estate		648,940		496,147	547,722
Consumer		60,567		53,407	54,097
Commercial and industrial		94,810		77,295	95,951
Agricultural (non-real estate)		16,973		15,280	15,388
Other		4,436		4,984	4,737
Total loans	$	825,726	$	647,113	$717,895

Nonperforming Assets

Nonperforming assets consist of (1) nonaccrual loans, (2) accruing loans 90 days or more past due, (3) certain restructured loans providing for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower and (4) real estate or other assets that have been acquired in partial or full satisfaction of loan obligations or upon foreclosure.

The Company generally places 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. At the time a loan is placed on nonaccrual status, interest previously accrued but uncollected is generally reversed and charged against interest income. Nonaccrual loans are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has established a consistent pattern of timely payments, and the Company reasonably expects to collect all principal and interest. 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.

Nonperforming loans as a percent of total loans were 0.53% as of June 30, 2003, compared to 0.31% at December 31, 2002 and 0.37% as of June 30, 2002. Nonperforming assets as a percent of total assets were 0.42% as of June 30, 2003 compared to 0.24% at December 31, 2002 and 0.31% as of June 30, 2002. The RVB acquisition contributed to the Company’s increase in nonperforming loans and assets as of June 30, 2003, increasing the ratio of nonperforming loans as a percentage of total loans and nonperforming assets as a percentage of total assets by eight and six basis points, respectively.

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14

The following table presents information concerning nonperforming assets, including nonaccrual and certain restructured loans and foreclosed assets held for sale.

Nonperforming Assets

	June 30.						December 31,
	2003			2002			2002
	(Dollars in thousands)
Nonaccrual loans	$	4,413		$	2,388		$2,194
Accruing loans 90 days or more past due		—			—		—
Restructured loans		—			—		—
Total nonperforming loans		4,413			2,388		2,194
Foreclosed assets held for sale and repossessions(1)		628			428		333
Total nonperforming assets	$	5,041		$	2,816		$2,527
Nonperforming loans to total loans		0.53	%		0.37	%	0.31	%
Nonperforming assets to total assets		0.42			0.31		0.24

(1) Foreclosed assets held for sale and repossessions are generally written down to estimated market 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 adjusted to the then estimated market value, if lower, until disposition.

Allowance and Provision for Loan Losses

Allowance for Loan Losses: The following table shows an analysis of the allowance for loan losses for the six month periods ended June 30, 2003 and 2002 and the year ended December 31, 2002.

	Six Months Ended June 30,					Year Ended December 31,
	2003			2002		2002
	(Dollars in thousands)
Balance, beginning of period	$	10,936		$8,712		$  8,712
Loans charged off:
Real estate		385		298		801
Consumer		244		323		626
Commercial and industrial		334		74		217
Agricultural (non-real estate)		16		14		29
Total loans charged off		979		709		1,673
Recoveries of loans previously charged off:
Real estate		33		103		111
Consumer		64		40		112
Commercial and industrial		20		7		12
Agricultural (non-real estate)		—		1		2
Total recoveries		117		151		237
Net loans charged off		862		558		1,436
Provision charged to operating expense		1,845		1,495		3,660
Allowance added in bank acquisition		660		—		—
Balance, end of period	$	12,579		$9,649		$10,936
Net charge-offs to average loans outstanding during the periods indicated		0.23	%(1)	0.18	%(1)	0.22	%
Allowance for loan losses to total loans		1.52		1.49		1.52
Allowance for loan losses to nonperforming loans		285.04		404.06		498.45

(1) Annualized

15

The amounts of provisions 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 allowance are (1) an internal grading system, (2) a peer group analysis and (3) a historical analysis. In addition to these 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 borrowers’ ability to pay or the value of collateral securing loans, and other relevant factors. Our methodology for estimating the allowance for loan losses is considered to be a critical accounting policy.

The Company’s allowance for loan losses was $12,579,000 at June 30, 2003, or 1.52% of total loans, compared with $10,936,000, or 1.52% of total loans, at December 31, 2002 and $9,649,000, or 1.49% of total loans, at June 30, 2002. The increase in the Company’s allowance for loan losses from June 30, 2002 reflects the Company’s cautious outlook regarding the current uncertainty about economic conditions, as well as changes in the mix and size of the Company’s loan portfolio. While management believes the current allowance is adequate, changing economic and other conditions may require future adjustments to the allowance for loan losses.

The Company’s annualized net charge-off ratio for the first six months of 2003 was 0.23% compared to 0.18% for the first six months of 2002.

Provision for Loan Losses: The loan loss provision reflects management’s ongoing assessment of the loan portfolio and is evaluated in light of factors mentioned above. The provision for loan losses was $1,845,000 for the six months ended June 30, 2003 compared to $1,495,000 for the comparable six month period in 2002.

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 book value and the fair value of investment securities for each of the dates indicated.

Investment Securities

	June 30, 2003				June 30, 2002				December 31, 2002
	Book Value(1)		Fair Value(2)		Book Value(1)		Fair Value(2)		Book Value(1)		Fair Value(2)
	(Dollars in thousands)
Securities of U.S. Government Agencies	$	30,048	$	30,048	$	30,235	$	30,235	$	41,499	$	41,499
Mortgage-backed securities		187,094		187,094		141,332		141,332		156,710		156,710
Obligations of state and political subdivisions		36,562		36,562		10,729		10,766		21,492		21,517
Other securities		14,704		14,704		7,672		7,677		12,467		12,550
Total	$	268,408	$	268,408	$	189,968	$	190,010	$	232,168	$	232,276

(1) Book value for available-for-sale securities equals their original cost adjusted for unrealized gains or losses as reflected in the Company’s consolidated financial statements.

(2) The fair value of the Company’s investment securities is based on quoted market prices where available. If quoted market prices are not available, fair values are based on market prices for comparable securities.

During the quarter ended June 30, 2003, the Company determined that certain of its investment securities held to maturity no longer met the Company’s investment objectives. As a result the Company sold certain of the held-to-maturity investment securities and transferred the remainder of its investment securities held to maturity to available for sale. Investment securities held to maturity with amortized cost of $2.9 million were sold for total proceeds of $3.0 million, resulting in a gain on the sale of $96,000. The remaining portion of the Company’s held-to-maturity investment securities with amortized cost of $8.5 million were transferred to available for sale. The unrealized gain on these held-to-maturity investment securities was $573,000 at June 30, 2003, and is not materially different from the amount of unrealized gain at the date of transfer.

16

Liquidity and Capital Resources

Growth and Expansion. The Company expects to continue its growth and de novo branching strategy in the second half of 2003 by opening approximately two to four new banking offices in addition to the four banking offices opened in the second quarter. During the third quarter of 2003, the Company expects to open one or two new banking offices, including a third Fort Smith office. Depending on progress in construction, the Company expects to open one or two additional new banking offices in the fourth quarter of 2003. These are expected to include the Company’s first Benton office and second Cabot office. Also in the fourth quarter of 2003, the Company expects to complete construction of permanent facilities in Conway and Cabot which will replace its initial temporary offices in those markets. Opening new offices is subject to availability of suitable sites, hiring qualified personnel, obtaining regulatory approvals and other conditions and contingencies.

In February 2003 the Company opened a loan production office in Frisco, Texas focusing on suburban markets in the north Dallas area. This office has concentrated primarily on originating mortgage loans for resale on a non-recourse basis in the secondary market and is also expected to originate some construction, development and other loans. The Company is very pleased with the early success of this office, including the fact that it was profitable in the second quarter. This office is now substantially fully staffed. Because of its success and the opportunity to hire additional quality lenders, the Company plans to open a second loan production office in the Dallas area during the third quarter of 2003. This second office is expected to primarily focus on commercial mortgage loans, but may also make residential mortgage, construction and development loans.

In May 2003 the Company opened a new loan production office in Mountain Home, Arkansas as a result of an opportunity to hire several quality lending personnel in that market. The Company expects to open a full-service banking office in Mountain Home in 2004.

On June 13, 2003 the Company closed its previously announced purchase of RVB and its bank subsidiary in Russellville, Arkansas. The Company acquired $41 million in loans and $50 million in deposits in this transaction.

In March the Company hired a senior officer to develop a leasing division. During the second quarter the Company hired additional staff and completed preparations for operations, which will commence in the third quarter. The Company plans to primarily originate equipment leases among small business customers within its existing markets.

During the first six months of 2003, the Company spent $6.2 million on capital expenditures excluding assets acquired in the RVB acquisition. The Company expects its capital expenditures for the remainder of the year will be in the range of approximately $6.7 to $8.5 million including progress payments on construction projects expected to be completed in 2003 and 2004 and acquisition cost of sites for future development. Actual expenditures may vary significantly from those expected, primarily depending on the number and cost of additional sites acquired for future development and construction projects commenced.

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 subsidiary relies on customer deposits and loan repayments as its primary sources of funds. The Company has used these funds, together with FHLB advances, brokered deposits and other borrowings, to make loans, acquire investment securities and other assets and to fund continuing operations.

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 and market conditions. Loan repayments are a relatively stable source of funds but are subject to the ability of borrowers’ to repay the loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather and natural disasters. Furthermore, loans generally are not readily convertible to cash. Accordingly, the Company may be required from time to time to rely on secondary sources of liquidity to meet loan and withdrawal demands or otherwise fund operations. Such sources include FHLB advances, federal funds lines of credit from correspondent banks, Federal Reserve Bank borrowings and brokered deposits.

17

At June 30, 2003, the Company’s bank subsidiary had substantial unused borrowing availability. This availability was primarily comprised of the following three options: (1) $92.7 million from the Federal Home Loan Bank, (2) $19.8 million of securities available to pledge for federal funds borrowings and (3) up to $117.0 million from borrowing programs of the Federal Reserve Bank. As of June 30, 2003 the Company had outstanding brokered deposits of $23.6 million.

Management anticipates that the Company’s bank subsidiary will continue to rely primarily on customer deposits and loan repayments to provide liquidity. Additionally, where necessary, the above described sources will be used to augment the Company’s primary funding sources.

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 (1) Tier 1 capital (i.e. common stockholders’ equity excluding goodwill, certain intangibles and net unrealized gains on available-for-sale securities, but including, subject to limitations, trust preferred securities and other qualifying items) to total risk-weighted assets and (2) total capital (Tier 1 capital plus Tier 2 capital which is the qualifying portion of the allowance for loan losses and the portion of trust preferred securities not counted as Tier 1 capital) to risk-weighted assets. The leverage ratio is measured as Tier 1 capital to adjusted quarterly average assets.

The Company’s risk-based and leverage capital ratios exceeded these minimum requirements at June 30, 2003 and December 31, 2002, and are presented below, followed by the capital ratios of the Company’s bank subsidiary at June 30, 2003.

Consolidated Capital Ratios

	June 30, 2003			December 31, 2002
	(Dollars in thousands)
Tier 1 capital:
Stockholders’ equity	$	90,018		$  72,918
Allowed amount of guaranteed preferred beneficial interest in the Company’s subordinated debentures (trust preferred securities)		17,250		17,250
Less net unrealized gains on available for sale securities		(1,739	)	(1,075	)
Less goodwill and certain intangible assets		(6,436	)	(2,671	)
Total tier 1 capital		99,093		86,422
Tier 2 capital:
Qualifying allowance for loan losses		10,991		9,469
Total risk-based capital	$	110,084		$  95,891
Risk-weighted assets	$	877,714		$756,081
Ratios at end of period:
Leverage capital		8.69	%	8.64	%
Tier 1 risk-based capital		11.29		11.43
Total risk-based capital		12.54		12.68
Minimum ratio guidelines:
Leverage capital (1)		3.00	%	3.00	%
Tier 1 risk-based capital		4.00		4.00
Total risk-based capital		8.00		8.00

(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.

Capital Ratios of Bank Subsidiary

	June 30, 2003
	(Dollars in thousands)
Stockholders’ equity—Tier 1	$95,918
Leverage capital	8.48%
Tier 1 risk-based capital	10.94
Total risk-based capital	12.19

18

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, include certain forward-looking statements including, without limitation, statements with respect to net interest margin, net interest income and anticipated future operating and financial performance, statements regarding asset quality and nonperforming loans, growth opportunities and growth rates, the effects of the RVB acquisition, the development of a new leasing division, planned new offices, capital expenditures 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: (1) potential delays or other problems in implementing the Company’s growth and expansion strategy, including delays in identifying satisfactory sites and opening new offices; (2) the ability to attract new deposits and loans; (3) interest rate fluctuations; (4) competitive factors and pricing pressures; (5) general economic conditions, including the effects of the current economic slowdown; (6) changes in legal and regulatory requirements; and (7) the demand for new Company products and services, including services offered by new loan production offices and the new leasing division, 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.

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19

Selected and Supplemental Financial Data

The following table sets forth selected consolidated financial data concerning the Company for the three and six months ended June 30, 2003 and 2002 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 June 30,						Six Months Ended June 30,
	2003			2002			2003			2002
Income statement data
Interest income	$	16,822		$	14,937		$	32,705		$	29,318
Interest expense		4,638			4,743			9,247			9,790
Net interest income		12,184			10,194			23,458			19,528
Provision for loan losses		1,095			945			1,845			1,495
Non-interest income		4,570			2,709			8,092			4,901
Non-interest expenses		7,754			6,058			14,508			11,694
Net income		4,840			3,435			9,315			6,529
Per common share data
Earnings—diluted	$	0.60		$	0.44		$	1.16		$	0.84
Book value		11.18			8.48			11.18			8.48
Dividends		0.11			0.07			0.21			0.13
Weighted avg. diluted shares outstanding (thousands)		8,061			7,821			8,033			7,775
Balance sheet data at period end
Total assets	$	1,194,463		$	896,153		$	1,194,463		$	896,153
Total loans		825,726			647,113			825,726			647,113
Allowance for loan losses		12,579			9,649			12,579			9,649
Total investment securities		268,408			189,968			268,408			189,968
Total deposits		947,074			706,876			947,074			706,876
Repurchase agreements with customers		37,697			18,076			37,697			18,076
Other borrowings		98,594			85,318			98,594			85,318
Total stockholders’ equity		90,018			64,869			90,018			64,869
Loan to deposit ratio		87.19	%		91.55	%		87.19	%		91.55	%
Average balance sheet data
Total average assets	$	1,146,586		$	889,260		$	1,098,301		$	875,931
Total average stockholders’ equity		81,261			61,483			77,988			59,443
Average equity to average assets		7.09	%		6.91	%		7.10	%		6.79	%
Performance ratios
Return on average assets*		1.69	%		1.55	%		1.71	%		1.50	%
Return on average stockholders’ equity*		23.89			22.41			24.09			22.15
Net interest margin FTE*		4.70			4.97			4.75			4.88
Efficiency		45.72			46.60			45.43			47.42
Dividend payout		18.33			15.91			18.10			15.48
Asset quality ratios
Net charge-offs as a percentage of average total loans*		0.16	%		0.16	%		0.23	%		0.18	%
Nonperforming loans to total loans		0.53			0.37			0.53			0.37
Nonperforming assets to total assets		0.42			0.31			0.42			0.31
Allowance for loan losses as a percentage of
Total loans		1.52	%		1.49	%		1.52	%		1.49	%
Nonperforming loans		285.04			404.06			285.04			404.06
Capital ratios at period end
Leverage capital		8.69	%		8.83	%		8.69	%		8.83	%
Tier 1 risk-based capital		11.29			11.96			11.29			11.96
Total risk-based capital		12.54			13.21			12.54			13.21

* Ratios annualized based on actual days

20

Bank of the Ozarks, Inc.

Supplemental Quarterly Financial Data

(Dollars in Thousands, Except Per Share Amounts)

Unaudited

	9/30/01			12/31/01			3/31/02			6/30/02			9/30/02			12/31/02			3/31/03			6/30/03
Earnings Summary:
Net interest income	$	7,825		$	8,939		$	9,334		$	10,194		$	10,851		$	11,093		$	11,274		$	12,184
Federal tax (FTE) adjustment		187			145			138			95			95			114			180			207
Net interest income (FTE)		8,012			9,084			9,472			10,289			10,946			11,207			11,454			12,391
Loan loss provision		(910	)		(1,479	)		(550	)		(945	)		(1,080	)		(1,085	)		(750	)		(1,095	)
Non-interest income		1,737			2,039			2,192			2,709			2,958			3,782			3,522			4,570
Non-interest expense		(4,816	)		(5,171	)		(5,636	)		(6,058	)		(6,382	)		(6,839	)		(6,754	)		(7,754	)
Pretax income (FTE)		4,023			4,473			5,478			5,995			6,442			7,065			7,472			8,112
FTE adjustment		(187	)		(145	)		(138	)		(95	)		(95	)		(114	)		(180	)		(207	)
Provision for taxes		(1,138	)		(1,348	)		(1,849	)		(2,068	)		(2,254	)		(2,374	)		(2,421	)		(2,668	)
Distribution on trust preferred securities		(397	)		(397	)		(397	)		(397	)		(397	)		(396	)		(396	)		(397	)
Net income	$	2,301		$	2,583		$	3,094		$	3,435		$	3,696		$	4,181		$	4,475		$	4,840
Earnings per share—diluted*	$	0.30		$	0.34		$	0.40		$	0.44		$	0.47		$	0.53		$	0.56		$	0.60
Non-interest Income Detail:
Trust income	$	142		$	116		$	162		$	163		$	177		$	227		$	237		$	312
Service charges on deposit accounts		979			1,035			1,505			1,806			1,770			1,859			1,674			1,981
Mortgage lending income		410			647			494			498			734			1,197			1,042			1,626
Gain (loss) on sale of assets		19			(9	)		9			21			8			4			11			(8	)
Security gains (losses)		(16	)		51			(217	)		—			—			—			—			97
Bank owned life insurance income		—			—			—			—			—			236			284			291
Other		203			199			239			221			269			259			274			271
Total non-interest income	$	1,737		$	2,039		$	2,192		$	2,709		$	2,958		$	3,782		$	3,522		$	4,570
Non-interest Expense Detail:
Salaries and employee benefits	$	2,716		$	2,894		$	3,202		$	3,461		$	3,653		$	4,078		$	4,068		$	4,511
Net occupancy expense		792			795			859			878			872			887			994			1,095
Other operating expenses		1,247			1,422			1,537			1,681			1,819			1,836			1,654			2,105
Goodwill charges		23			22			—			—			—			—			—			—
Amortization of other intangibles—pretax		38			38			38			38			38			38			38			43
Total non-interest expense	$	4,816		$	5,171		$	5,636		$	6,058		$	6,382		$	6,839		$	6,754		$	7,754
Allowance for Loan Losses:
Balance beginning of period	$	7,139		$	7,754		$	8,712		$	8,963		$	9,649		$	10,308		$	10,936		$	11,124
Allowance added in bank acquisition		—			—			—			—			—			—			—			660
Net charge offs		(295	)		(521	)		(299	)		(259	)		(421	)		(457	)		(562	)		(300	)
Loan loss provision		910			1,479			550			945			1,080			1,085			750			1,095
Balance at end of period	$	7,754		$	8,712		$	8,963		$	9,649		$	10,308		$	10,936		$	11,124		$	12,579
Selected Ratios:
Net interest margin—FTE**		4.35	%		4.62	%		4.78	%		4.97	%		4.96	%		4.81	%		4.81	%		4.70	%
Overhead expense ratio**		2.41			2.43			2.65			2.73			2.72			2.71			2.61			2.71
Efficiency ratio		49.40			46.49			48.32			46.60			45.90			45.63			45.10			45.72
Nonperforming loans/total loans		0.21			0.29			0.22			0.37			0.39			0.31			0.27			0.53
Nonperforming assets/total assets		0.27			0.28			0.22			0.31			0.34			0.24			0.21			0.42
Loans past due 30 days or more, including past due non-accrual loans, to total loans		0.74			0.72			0.79			0.69			0.83			0.75			0.77			0.76

* Data prior to the second quarter of 2002 has been adjusted to give effect to 2-for-1 stock split on June 17, 2002

** Annualized

21

PART I (continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s interest rate risk management is the responsibility of the Asset/Liability Management Committee, which reports to the Board of Directors. This committee establishes policies that monitor and coordinate the Company’s sources, uses and pricing of funds. The committee is also involved with management in the Company’s planning and budgeting process.

The Company regularly reviews its exposure to changes in interest rates. Among the factors considered are changes in the mix of earning assets and interest bearing liabilities, interest rate spreads and repricing periods. Typically, the committee reviews on at least a quarterly basis the bank subsidiary’s relative ratio of rate sensitive assets to rate sensitive liabilities and the related cumulative gap for different time periods. Additionally, the committee and management utilize a simulation model in assessing the Company’s interest rate sensitivity.

This simulation modeling process projects a baseline net interest income (assuming no changes in market interest rate levels) and estimates changes to that baseline net interest income resulting from changes in interest rate levels. The Company relies primarily on the results of this model in evaluating its interest rate risk. In addition to the repricing data used to prepare the GAP table presented below, this model incorporates a number of assumptions and predictions regarding additional factors. These factors include: (1) the expected exercise of call features on various assets and liabilities, (2) the expected rates at which various rate sensitive assets and liabilities will reprice, (3) the expected growth in various interest earning assets and interest bearing liabilities and the expected rates on such new assets and liabilities, (4) the expected relative movements in different interest rate indexes which are used as the basis for pricing or repricing various assets and liabilities, (5) existing and expected contractual cap and floor rates on various assets and liabilities, (6) expected changes in administered rates on interest bearing transaction, savings, money market and time deposit accounts and the expected impact of competition on the pricing or repricing of such accounts and (7) other factors. Inclusion of these factors in the model is intended to more accurately project the Company’s changes in net interest income resulting from an immediate and sustained parallel shift in interest rates of up 100 basis points (bps), up 200 bps and down 100 bps. Because of current market conditions, the data for an immediate and sustained parallel shift in interest rates of down 200 bps has been omitted because the Company believes the data is not meaningful. While the Company believes this model provides a more accurate projection of its interest rate risk, the model includes a number of assumptions and predictions which may or may not be accurate. These assumptions and predictions include inputs to compute baseline net interest income, growth rates, competition and a variety of other factors that are difficult to accurately predict. Accordingly, there can be no assurance the estimated results projected by the simulation model will reflect future results.

The following table presents the simulation model’s projected impact of an immediate and sustained parallel shift in interest rates on the projected baseline net interest income for a twelve month period commencing June 30, 2003. A parallel shift in interest rates is an arbitrary assumption which fails to take into account changes in the slope of the yield curve.

Shift in Interest Rates (in bps)	% Change in Projected Baseline Net Interest Income
+200	(3.1)%
+100	(2.7)
-100	(2.8)
-200	Not meaningful

In the event of a shift in interest rates, management may take certain actions intended to mitigate the negative impact to net interest income or to maximize the positive impact to net interest income. These actions may include, but are not limited to, restructuring of earning assets and interest bearing liabilities, seeking alternative funding sources or investment opportunities and modifying the pricing or terms of loans and deposits.

The Company’s simple static GAP analysis is shown in the following table. At June 30, 2003 the cumulative ratios of rate sensitive assets to rate sensitive liabilities at six months and one year, respectively, were 60.1% and 66.6%. A financial institution is considered to be liability sensitive, or as having a negative GAP, when the amount of its interest bearing liabilities maturing or repricing within a given time period exceeds the amount of its interest earning assets also maturing or repricing within that time period. Conversely, an institution is considered to be asset sensitive, or as having a positive GAP, when the amount of its interest bearing liabilities maturing and repricing is less than the amount of its interest earning assets also maturing or repricing during the same period. Generally, in a falling interest rate environment a negative GAP should result in an increase in net interest income, and in a rising interest rate environment this negative GAP should adversely affect net interest income. The converse would be true for a positive GAP. Due to inherent limitations in any static GAP analysis and since conditions change on a daily basis, these expectations may not reflect future results.

22

	Rate Sensitive Assets and Liabilities
	June 30, 2003
	Rate Sensitive Assets		Rate Sensitive Liabilities		Period Gap			Cumulative Gap			Cumulative Gap to Total RSA(1)		Cumulative RSA(1) to RSL(2)
	(Dollars in thousands)
Immediate to 6 months	$	370,031	$	615,384	$	(245,353	)	$	(245,353	)	(22.42	)%	60.13	%
7 months - 12 months		154,157		172,121		(17,964	)		(263,317	)	(24.06	)	66.56
1 - 2 years		233,769		70,175		163,594			(99,723	)	(9.11	)	88.37
2 - 3 years		112,346		4,377		107,969			8,246		0.75		100.96
3 - 5 years		110,052		31,148		78,904			87,150		7.96		109.76
Over 5 years		114,207		90,267		23,940			111,090		10.15		111.30
Total	$	1,094,562	$	983,472	$	111,090

(1) Rate Sensitive Assets

(2) Rate Sensitive Liabilities

The data used in the table above is based on contractual repricing dates for variable or adjustable rate instruments except for interest-bearing Now accounts (except MaxYield^™ which is considered as immediately repricing) and regular savings accounts of which 50% are reflected as repricing prorata during the first two years with the remaining 50% distributed over future periods. Callable investments or borrowings are scheduled on their contractual maturity unless the Company has received notification the investment or borrowing will be called. In the event the Company has received notification of call, the investment or borrowing is placed in the fixed rate category for the time period in which the call occurs or is expected to occur. Collateralized mortgage obligations and other mortgage-backed securities are scheduled over maturity periods based on Bloomberg consensus prepayment speeds. Other financial instruments are scheduled on their contractual maturity. A large portion of the Company’s adjustable rate loans contain minimum “floor” rates. Because of the current interest rate environment many of these loans are at their floor rate. These loans are included among rate sensitive assets since their interest rate may adjust if interest rates increase.

This simple GAP analysis gives no consideration to a number of factors which can have a material impact on the Company’s interest rate risk position. Such factors include among other things, call features on certain assets and liabilities, prepayments, interest rate floors and caps on various assets and liabilities, the current interest rates on assets and liabilities to be repriced in each period, and the relative changes in interest rates on different types of assets and liabilities.

Item  4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

An evaluation as of the end of the period covered by this quarterly report was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” which are defined under SEC rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting.

The Company’s management, including the Company’s Chairman and Chief Executive Officer and its Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarterly period covered by this report, and has concluded that there was no change during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

23

PART II

Other Information

Item 1. Legal Proceedings

On July 26, 2000, the case of David Dodds, et. al. vs. Bank of the Ozarks and Jean Arehart was filed in the Circuit Court of Pulaski County, Arkansas, Fifth Division, which contained allegations that the Company’s bank subsidiary (the “Bank”) committed breach of contract, certain common law torts, fraud, and a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et. seq. (“RICO”). The Bank made several residential construction loans related to houses built by the plaintiffs, and in 1998, the Bank commenced foreclosure of a house that was being constructed by one of the plaintiffs. The complaint related to such transactions. The Bank removed the case to the United States District Court for the Eastern District of Arkansas, Western Division. The original complaint sought alternative remedies of either (a) compensatory damages of $5 million and punitive damages of $10 million based on the common law tort claims or (b) compensatory damages of $5 million trebled to $15 million based on RICO. The Bank filed a Motion for Partial Summary Judgment in which the Bank asked the Court to dismiss with prejudice the plaintiffs’ RICO claims, as well as their state law claims of fraud, defamation and outrage/intentional infliction of emotional distress. On October 29, 2001, the Court granted the Bank’s Motion for Partial Summary Judgment and dismissed the plaintiffs’ RICO claims and state law claims of fraud, defamation and outrage/intentional infliction of emotional distress. The time for an appeal of the District Court’s award of partial summary judgment has passed. Presently the only surviving claims of the plaintiffs are breach of contract and intentional interference with contract. The District Court has remanded the case back to the Circuit Court of Pulaski County, Arkansas, Fifth Division, where it is currently pending. Mr. and Mrs. Dodds have also filed a suit in the Circuit Court of Faulkner County, Arkansas attempting to set aside a foreclosure sale by Bank and alleging tort claims and seeking $2 million in compensatory damages and $5 million in punitive damages from Bank. The Faulkner County Circuit Court issued an order on July 18, 2003 granting the Bank’s Motion for Summary Judgment and Motion to Dismiss the plaintiffs’ First Amended Petition to Set Aside and Complaint at Law. This order effectively dismisses all claims pending against the Bank in the Faulkner County action. That order is not yet appealable as another party’s foreclosure action against the plaintiffs in the Faulkner County case is still pending. The Company believes it has substantial defenses to the remaining claims made in the complaint and intends to vigorously defend the case.

Item 2. Changes in Securities and Use of Proceeds

Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

The 2003 Annual Meeting of Stockholders of the Company was held on April 22, 2003. The following item of business was presented to the stockholders:

Election of Directors

The eleven (11) directors were elected as proposed in the Proxy Statement dated March 13, 2003, under the caption “Election of Directors”:

	Total Vote For Each Director	Total Vote Withheld For Each Director
George Gleason	7,449,192	22,124
Mark Ross	7,451,692	19,624
Jean Arehart	7,451,234	20,082
Steven Arnold	7,451,272	20,044
Jerry Davis	7,443,792	27,524
Robert East	7,443,792	27,524
Linda Gleason	7,449,072	22,244
Porter Hillard	7,451,292	20,024
Henry Mariani	7,443,592	27,724
R. L. Qualls	7,443,992	27,324
Kennith Smith	7,451,292	20,024

24

Item 5. Other Information

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

Form 8-K dated April 11, 2003

25

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: August 12, 2003	/s/ Paul E. Moore
	Paul E. Moore Chief Financial Officer (Chief Accounting Officer)

26

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).
31.1	Certification of Chairman and Chief Executive Officer
31.2	Certification of Chief Financial Officer
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27