UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

☐ 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  ☒    No  ☐

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  ☒    No  ☐

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	☒	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  ☐    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 October 31, 2016
Common Stock, $0.01 par value per share		121,147,658

BANK OF THE OZARKS, INC.

FORM 10-Q

September 30, 2016

INDEX

PART I.	Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015	3
	Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2016 and 2015 (Unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2016 and 2015 (Unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2016 and 2015 (Unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015 (Unaudited)	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
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,
	2016			2015
	(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	876,096		$	89,122
Interest earning deposits		93,426			1,866
Cash and cash equivalents		969,522			90,988
Investment securities - available for sale (“AFS”)		1,341,894			602,348
Non-purchased loans and leases		8,759,766			6,528,634
Purchased loans		5,399,831			1,806,037
Total loans and leases		14,159,597			8,334,671
Allowance for loan and lease losses		(69,760	)		(60,854	)
Net loans and leases		14,089,837			8,273,817
Premises and equipment, net		503,188			296,238
Foreclosed assets		44,250			22,870
Accrued interest receivable		33,022			25,499
Bank owned life insurance (“BOLI”)		576,380			300,427
Intangible assets, net		722,153			152,340
Other, net		171,537			114,932
Total assets	$	18,451,783		$	9,879,459
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	2,562,913		$	1,515,482
Savings and interest bearing transaction		7,575,977			4,017,504
Time		4,984,914			2,438,482
Total deposits		15,123,804			7,971,468
Repurchase agreements with customers		70,640			65,800
Other borrowings		41,978			204,540
Subordinated notes		222,420			—
Subordinated debentures		118,102			117,685
Accrued interest payable and other liabilities		115,288			52,172
Total liabilities		15,692,232			8,411,665
Commitments and contingencies
Stockholders’ equity:
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares    outstanding at September 30, 2016 or December 31, 2015		—			—
Common stock; $0.01 par value; 300,000,000 and 125,000,000 shares authorized     at September 30, 2016 and December 31, 2015, respectively; 121,134,158 and 90,612,388     shares issued at September 30, 2016 and December 31, 2015, respectively		1,211			906
Additional paid-in capital		1,894,864			755,995
Retained earnings		846,636			706,628
Accumulated other comprehensive income		13,635			7,959
Treasury stock, at cost, none at September 30, 2016 and    133,492 shares at December 31, 2015		—			(6,857	)
Total stockholders’ equity before noncontrolling interest		2,756,346			1,464,631
Noncontrolling interest		3,205			3,163
Total stockholders’ equity		2,759,551			1,467,794
Total liabilities and stockholders’ equity	$	18,451,783		$	9,879,459

See accompanying notes to consolidated financial statements.

3

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans and leases	$	109,365		$	62,688		$	294,410		$	169,757
Purchased loans		77,208			33,255			132,942			101,877
Investment securities:
Taxable		3,102			3,253			7,815			9,968
Tax-exempt		4,549			4,280			11,708			13,405
Deposits with banks and federal funds sold		133			8			151			35
Total interest income		194,357			103,484			447,026			295,042
Interest expense:
Deposits		14,535			4,634			32,598			12,088
Repurchase agreements with customers		22			20			64			56
Other borrowings		286			1,459			880			4,605
Subordinated notes		3,259			—			3,542			—
Subordinated debentures		1,105			984			3,237			2,660
Total interest expense		19,207			7,097			40,321			19,409
Net interest income		175,150			96,387			406,705			275,633
Provision for loan and lease losses		(7,086	)		(3,581	)		(13,937	)		(14,205	)
Net interest income after provision for loan and lease losses		168,064			92,806			392,768			261,428
Non-interest income:
Service charges on deposit accounts		10,926			7,425			26,703			21,140
Mortgage lending income		2,616			1,825			5,957			5,104
Trust income		1,564			1,500			4,645			4,395
BOLI income		4,638			2,264			10,243			7,672
Other income from purchased loans, net		4,635			5,456			12,285			21,335
Gains on sales of other assets		594			1,905			2,619			7,290
Net gains on investment securities		—			—			—			2,619
Other		4,258			1,763			9,377			4,920
Total non-interest income		29,231			22,138			71,829			74,475
Non-interest expense:
Salaries and employee benefits		38,069			21,207			86,351			66,450
Net occupancy and equipment		11,669			8,076			28,587			22,711
Other operating expenses		29,043			16,145			62,457			50,175
Total non-interest expense		78,781			45,428			177,395			139,336
Income before taxes		118,514			69,516			287,202			196,567
Provision for income taxes		42,470			23,385			104,967			65,714
Net income		76,044			46,131			182,235			130,853
Earnings attributable to noncontrolling interest		(14	)		(3	)		(42	)		(55	)
Net income available to common stockholders	$	76,030		$	46,128		$	182,193		$	130,798
Basic earnings per common share	$	0.66		$	0.53		$	1.84		$	1.52
Diluted earnings per common share	$	0.66		$	0.52		$	1.84		$	1.51
Dividends declared per common share	$	0.16		$	0.14		$	0.465		$	0.405

See accompanying notes to consolidated financial statements.

4

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(Dollars in thousands)
Net income	$	76,044		$	46,131		$	182,235		$	130,853
Other comprehensive income (loss):
Unrealized gains and losses on investment securities AFS		(2,262	)		5,918			8,120			(1,274	)
Tax effect of unrealized gains and losses on investment    securities AFS		791			(2,265	)		(2,444	)		484
Reclassification of gains and losses on investment    securities AFS included in net income		—			—			—			(2,619	)
Tax effect of reclassification of gains and losses    on investment securities AFS included in net income		—			—			—			998
Total other comprehensive income (loss)		(1,471	)		3,653			5,676			(2,411	)
Total comprehensive income	$	74,573		$	49,784		$	187,911		$	128,442

See accompanying notes to consolidated financial statements.

5

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Non- Controlling Interest			Total
	(Dollars in thousands, except per share amounts)
Balances – December 31, 2014	$	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, $0.405 per share		—		—			(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 exercise and forfeiture of    stock options and restricted common stock		—		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		$	667,972		$	11,721		$	—		$	3,157		$	1,317,674
Balances – December 31, 2015	$	906	$	755,995		$	706,628		$	7,959		$	(6,857	)	$	3,163		$	1,467,794
Net income		—		—			182,235			—			—			—			182,235
Earnings attributable to noncontrolling interest		—		—			(42	)		—			—			42			—
Total other comprehensive income		—		—			—			5,676			—			—			5,676
Common stock dividends paid, $0.465 per share		—		—			(42,185	)		—			—			—			(42,185	)
Issuance of 83,670 shares of common    stock for exercise of stock options		1		1,254			—			—			—			—			1,255
Issuance of 218,761 shares of unvested    restricted common stock		2		(6,859	)		—			—			6,857			—			—
Excess tax benefit on exercise and forfeiture of    stock options and restricted common stock		—		962			—			—			—			—			962
Stock-based compensation expense		—		7,953			—			—			—			—			7,953
Forfeiture of 13,986 shares of unvested    restricted common stock		—		—			—			—			—			—			—
Issuance of 12,415 shares of common stock to    non-employee directors		—		—			—			—			—			—			—
Issuance of 20,983,815 shares of common stock    for acquisition of Community & Southern    Holdings, Inc., net of issuance costs of    $395,000		209		787,337			—			—			—			—			787,546
Issuance of 9,370,587 shares of common stock    for acquisition of C1 Financial, Inc., net of    issuance costs of $82,000		93		348,222			—			—			—			—			348,315
Balances – September 30, 2016	$	1,211	$	1,894,864		$	846,636		$	13,635		$	—		$	3,205		$	2,759,551

See accompanying notes to consolidated financial statements.

6

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

	Nine Months Ended
	September 30,
	2016			2015
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	182,235		$	130,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		10,268			7,252
Amortization		6,402			4,934
Earnings attributable to noncontrolling interest		(42	)		(55	)
Provision for loan and lease losses		13,937			14,205
Provision for losses on foreclosed assets		2,117