ozrk-10q_20150930.htm

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 September 30, 2015

o	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

incorporation or organization)

(I.R.S. Employer

Identification Number)

17901 CHENAL PARKWAY, LITTLE ROCK, ARKANSAS		72223
(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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

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 October 30, 2015
Common Stock, $0.01 par value per share				88,268,727

BANK OF THE OZARKS, INC.

FORM 10-Q

September 30, 2015

INDEX

PART I.	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, 2015 and 2014 and December 31, 2014	3

	Consolidated Statements of Income for the Three Months Ended September 30, 2015 and 2014 and for the Nine Months Ended September 30, 2015 and 2014	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2015 and 2014 and for the Nine Months Ended September 30, 2015 and 2014	5

	Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2015 and 2014	6

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	72

Item 4.	Controls and Procedures	73

PART II.	Other Information

Item 1.	Legal Proceedings	74

Item 1A.	Risk Factors	74

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	75

Item 4.	Mine Safety Disclosures	75

Item 5.	Other Information	75

Item 6.	Exhibits	75

Signature		76

Exhibit Index		77

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

BANK OF THE OZARKS, INC.

CONSOLIDATED BALANCE SHEETS

	Unaudited
	September 30,						December 31,
	2015			2014			2014
	(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	279,111		$	109,877		$	147,751
Interest earning deposits		2,513			2,207			2,452
Cash and cash equivalents		281,624			112,084			150,203
Investment securities - available for sale (“AFS”)		796,373			859,876			839,321
Non-purchased loans and leases		5,447,278			3,639,142			3,979,870
Purchased loans		1,959,502			1,279,790			1,147,947
Total loans and leases		7,406,780			4,918,932			5,127,817
Allowance for loan and lease losses		(59,017	)		(49,606	)		(52,918	)
Net loans and leases		7,347,763			4,869,326			5,074,899
Federal Deposit Insurance Corporation (“FDIC”) loss share receivable		—			36,583			—
Premises and equipment, net		296,433			267,888			273,591
Foreclosed assets		24,397			42,663			37,775
Accrued interest receivable		28,095			20,966			20,192
Bank owned life insurance (“BOLI”)		283,016			180,667			182,052
Intangible assets, net		156,756			107,108			105,576
Other, net		114,759			83,199			82,890
Total assets	$	9,329,216		$	6,580,360		$	6,766,499

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	1,413,892		$	1,089,415		$	1,145,454
Savings and interest bearing transaction		4,010,103			2,787,958			2,892,989
Time		2,182,795			1,262,332			1,457,939
Total deposits		7,606,790			5,139,705			5,496,382
Repurchase agreements with customers		80,040			73,942			65,578
Other borrowings		161,861			352,616			190,855
Subordinated debentures		117,544			64,950			64,950
FDIC clawback payable		—			26,676			—
Accrued interest payable and other liabilities		45,307			43,452			36,892
Total liabilities		8,011,542			5,701,341			5,854,657

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at September 30, 2015 and 2014 or at December 31, 2014		—			—			—
Common stock; $0.01 par value; 125,000,000 shares authorized; 88,264,627, 79,704,950 and 79,924,350 shares issued at September 30, 2015, September 30, 2014 and December 31, 2014, respectively		883			797			799
Additional paid-in capital		633,941			317,390			324,354
Retained earnings		667,972			546,667			571,454
Accumulated other comprehensive income		11,721			10,724			14,132
Treasury stock, at cost, none at September 30, 2015 or September 30, 2014, 72,268 shares at December 31, 2014		—			—			(2,349	)
Total stockholders’ equity before noncontrolling interest		1,314,517			875,578			908,390
Noncontrolling interest		3,157			3,441			3,452
Total stockholders’ equity		1,317,674			879,019			911,842
Total liabilities and stockholders’ equity	$	9,329,216		$	6,580,360		$	6,766,499

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans and leases	$	62,688		$	43,153		$	169,757		$	113,400
Purchased loans		33,255			28,686			101,877			70,700
Investment securities:
Taxable		3,253			2,986			9,968			8,135
Tax-exempt		4,280			5,247			13,405			14,617
Deposits with banks and federal funds sold		8			11			35			50
Total interest income		103,484			80,083			295,042			206,902

Interest expense:
Deposits		4,634			2,285			12,088			5,693
Repurchase agreements with customers		20			15			56			40
Other borrowings		1,459			2,736			4,605			8,083
Subordinated debentures		984			426			2,660			1,267
Total interest expense		7,097			5,462			19,409			15,083

Net interest income		96,387			74,621			275,633			191,819
Provision for loan and lease losses		(3,581	)		(3,687	)		(14,205	)		(10,574	)
Net interest income after provision for loan and lease losses		92,806			70,934			261,428			181,245

Non-interest income:
Service charges on deposit accounts		7,425			7,356			21,140			19,601
Mortgage lending income		1,825			1,728			5,104			3,807
Trust income		1,500			1,419			4,395			4,099
BOLI income		2,264			1,390			7,672			3,799
Net amortization of FDIC loss share receivable and FDIC clawback payable		—			(562	)		—			(611	)
Other income from purchased loans, net		5,456			3,369			21,335			10,309
Net gains on investment securities		—			43			2,619			67
Gains on sales of other assets		1,905			1,688			7,290			4,111
Gain on merger and acquisition transaction		—			—			—			4,667
Other		1,763			2,817			4,920			7,147
Total non-interest income		22,138			19,248			74,475			56,996

Non-interest expense:
Salaries and employee benefits		21,207			20,876			66,450			57,396
Net occupancy and equipment		8,076			6,823			22,711			17,574
Other operating expenses		16,145			14,824			50,175			42,886
Total non-interest expense		45,428			42,523			139,336			117,856

Income before taxes		69,516			47,659			196,567			120,385
Provision for income taxes		23,385			15,579			65,714			36,559
Net income		46,131			32,080			130,853			83,826
Earnings attributable to noncontrolling interest		(3	)		13			(55	)		29
Net income available to common stockholders	$	46,128		$	32,093		$	130,798		$	83,855

Basic earnings per common share	$	0.53		$	0.40		$	1.52		$	1.09

Diluted earnings per common share	$	0.52		$	0.40		$	1.51		$	1.08

Dividends declared per common share	$	0.14		$	0.12		$	0.405		$	0.345

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
	(Dollars in thousands)
Net income	$	46,131		$	32,080		$	130,853		$	83,826
Other comprehensive income (loss):
Unrealized gains and losses on investment securities AFS		5,918			1,223			(1,274	)		23,754
Tax effect of unrealized gains and losses on investment securities AFS		(2,265	)		(479	)		484			(9,317	)
Reclassification of gains and losses on investment securities AFS included in net income		—			(43	)		(2,619	)		(67	)
Tax effect of reclassification of gains and losses on investment securities AFS included in net income		—			17			998			26
Total other comprehensive income (loss)		3,653			718			(2,411	)		14,396
Total comprehensive income	$	49,784		$	32,798		$	128,442		$	98,222

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Non- Controlling Interest			Total
	(Dollars in thousands)
Balances – January 1, 2014	$	737	$	143,017		$	488,978		$	(3,672	)	$	—		$	3,470		$	632,530
Net income		—		—			83,826			—			—			—			83,826
Earnings attributable to noncontrolling interest		—		—			29			—			—			(29	)		—
Total other comprehensive income		—		—			—			14,396			—			—			14,396
Common stock dividends paid		—		—			(26,166	)		—			—			—			(26,166	)
Issuance of 228,600 shares of common stock for exercise of stock options		2		2,065			—			—			—			—			2,067
Forfeiture of 1,200 shares of unvested restricted common stock		—		—			—			—			—			—			—
Excess tax benefit on stock-based compensation		—		1,649			—			—			—			—			1,649
Stock-based compensation expense		—		4,402			—			—			—			—			4,402
Issuance of 5,765,846 shares of common stock for acquisition of Summit Bancorp, Inc., net of issuance costs of $88,000		58		166,257			—			—			—			—			166,315
Balances – September 30, 2014	$	797	$	317,390		$	546,667		$	10,724		$	—		$	3,441		$	879,019

Balances – January 1, 2015	$	799	$	324,354		$	571,454		$	14,132		$	(2,349	)	$	3,452		$	911,842
Net income		—		—			130,853			—			—			—			130,853
Earnings attributable to noncontrolling interest		—		—			(55	)		—			—			55			—
Total other comprehensive income (loss)		—		—			—			(2,411	)		—			—			(2,411	)
Common stock dividends paid		—		—			(34,280	)		—			—			—			(34,280	)
Dividend paid to non-controlling interest		—		—			—			—			—			(350	)		(350	)
Issuance of 116,050 shares of common stock for exercise of stock options		1		1,285			—			—			—			—			1,286
Issuance of 245,300 shares of unvested restricted common stock		2		(2,351	)		—			—			2,349			—			—
Excess tax benefit on stock-based compensation		—		818			—			—			—			—			818
Stock-based compensation expense		—		6,214			—			—			—			—			6,214
Forfeiture of 41,325 shares of unvested restricted common stock		—		—			—			—			—			—			—
Issuance of 7,657 shares of common stock to non-employee directors		—		—			—			—			—			—			—
Issuance of 6,637,243 shares of common stock for acquisition of Intervest Bancshares Corporation, net of issuance costs of $100,000		66		238,310			—			—			—			—			238,376
Issuance of 1,447,620 shares of common stock for acquisition of Bank of the Carolinas Corporation, net of issuance costs of $64,000		15		65,311			—			—			—			—			65,326
Balances – September 30, 2015	$	883	$	633,941		$