ozrk-10q_20170331.htm

Large accelerated filer

Accelerated filer

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

Smaller reporting company

Emerging growth company

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, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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.

	Unaudited
	March 31,			December 31,
	2017			2016
	(Dollars in thousands, except per share amounts)
ASSETS
Cash and due from banks	$	892,085		$	814,255
Interest earning deposits		36,680			52,105
Cash and cash equivalents		928,765			866,360
Investment securities - available for sale (“AFS”)		1,470,568			1,471,612
Non-purchased loans and leases		10,216,875			9,605,093
Purchased loans		4,580,047			4,958,022
Allowance for loan and lease losses		(78,224	)		(76,541	)
Net loans and leases		14,718,698			14,486,574
Premises and equipment, net		506,520			504,086
Foreclosed assets		36,899			43,702
Accrued interest receivable		37,531			51,919
Bank owned life insurance (“BOLI”)		585,409			580,945
Intangible assets, net		718,475			720,950
Other, net		149,347			163,994
Total assets	$	19,152,212		$	18,890,142

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	2,704,022		$	2,589,458
Savings and interest bearing transaction		8,179,718			8,048,355
Time		4,829,687			4,937,065
Total deposits		15,713,427			15,574,878
Repurchase agreements with customers		80,609			65,110
Other borrowings		42,291			41,903
Subordinated notes		222,611			222,516
Subordinated debentures		118,380			118,242
Accrued interest payable and other liabilities		98,290			72,622
Total liabilities		16,275,608			16,095,271

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at March 31, 2017 or December 31, 2016		—			—
Common stock; $0.01 par value; 300,000,000 shares authorized; 121,575,047 and 121,267,616 shares issued at March 31, 2017 and December 31, 2016, respectively		1,216			1,213
Additional paid-in capital		1,907,893			1,901,880
Retained earnings		982,275			914,434
Accumulated other comprehensive income (loss)		(18,067	)		(25,920	)
Total stockholders’ equity before noncontrolling interest		2,873,317			2,791,607
Noncontrolling interest		3,287			3,264
Total stockholders’ equity		2,876,604			2,794,871
Total liabilities and stockholders’ equity	$	19,152,212		$	18,890,142

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans and leases	$	127,428		$	87,010
Purchased loans		75,994			29,023
Investment securities:
Taxable		3,816			2,270
Tax-exempt		6,512			3,432
Deposits with banks and federal funds sold		20			6
Total interest income		213,770			121,741

Interest expense:
Deposits		18,378			7,850
Repurchase agreements with customers		30			19
Other borrowings		222			302
Subordinated notes		3,188			—
Subordinated debentures		1,181			1,053
Total interest expense		22,999			9,224

Net interest income		190,771			112,517
Provision for loan and lease losses		4,933			2,017
Net interest income after provision for loan and lease losses		185,838			110,500

Non-interest income:
Service charges on deposit accounts		11,301			7,657
Mortgage lending income		1,574			1,284
Trust income		1,631			1,507
BOLI income		4,464			2,861
Other income from purchased loans, net		3,737			3,052
Gains on sales of other assets		1,619			1,027
Other		4,732			2,477
Total non-interest income		29,058			19,865

Non-interest expense:
Salaries and employee benefits		38,554			23,362
Net occupancy and equipment		13,192			8,531
Other operating expenses		26,522			15,793
Total non-interest expense		78,268			47,686

Income before taxes		136,628			82,679
Provision for income taxes		47,417			30,984
Net income		89,211			51,695
Earnings attributable to noncontrolling interest		(23	)		(7	)
Net income available to common stockholders	$	89,188		$	51,688

Basic earnings per common share	$	0.73		$	0.57

Diluted earnings per common share	$	0.73		$	0.57

Dividends declared per common share	$	0.17		$	0.15

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Non- Controlling Interest		Total
	(Dollars in thousands, except per share amounts)
Balances – December 31, 2015	$	906	$	755,995		$	706,628		$	7,959		$	(6,857	)	$	3,163	$	1,467,794
Net income		—		—			51,695			—			—			—		51,695
Earnings attributable to noncontrolling interest		—		—			(7	)		—			—			7		—
Total other comprehensive income		—		—			—			2,472			—			—		2,472
Common stock dividends paid, $0.15 per share		—		—			(13,603	)		—			—			—		(13,603	)
Issuance of 27,200 shares of common stock for exercise of stock options		—		322			—			—			—			—		322
Issuance of 213,907 shares of unvested restricted common stock		1		(6,858	)		—			—			6,857			—		—
Excess tax benefit on exercise and forfeiture of stock options and restricted common stock		—		550			—			—			—			—		550
Stock-based compensation expense		—		2,020			—			—			—			—		2,020
Forfeiture of 5,804 shares of unvested restricted common stock		—		—			—			—			—			—		—
Balances – March 31, 2016	$	907	$	752,029		$	744,713		$	10,431		$	—		$	3,170	$	1,511,250

Balances – December 31, 2016	$	1,213	$	1,901,880		$	914,434		$	(25,920	)	$	—		$	3,264	$	2,794,871
Cumulative effect of change in accounting principal		—		1,133			(688	)		—			—			—		445
Balances – January 1, 2017, as adjusted		1,213		1,903,013			913,746			(25,920	)		—			3,264		2,795,316
Net income		—		—			89,211			—			—			—		89,211
Earnings attributable to noncontrolling interest		—		—			(23	)		—			—			23		—
Total other comprehensive income		—		—			—			7,853			—			—		7,853
Common stock dividends paid, $0.17 per share		—		—			(20,659	)		—			—			—		(20,659	)
Issuance of 69,655 shares of common stock for exercise of stock options		1		1,170			—			—			—			—		1,171
Issuance of 238,794 shares of unvested restricted common stock		2		(2	)		—			—			—			—		—
Stock-based compensation expense		—		3,712			—			—			—			—		3,712
Forfeiture of 1,018 shares of unvested restricted common stock		—		—			—			—			—			—		—
Balances – March 31, 2017	$	1,216	$	1,907,893		$	982,275		$	(18,067	)	$	—		$	3,287	$	2,876,604

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	89,211		$	51,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,027			2,970
Amortization		3,377			1,865
Earnings attributable to noncontrolling interest		(23	)		(7	)
Provision for loan and lease losses		4,933			2,017
Provision for losses on foreclosed assets		596			670
Net amortization of investment securities AFS		2,819			230
Originations of mortgage loans held for sale		(48,222	)		(47,322	)
Proceeds from sales of mortgage loans held for sale		56,041			45,059
Accretion of purchased loans		(20,619	)		(9,651	)
Gains on sales of other assets		(1,619	)		(1,027	)
Deferred income tax expense (benefits)		6,899			(1,921	)
Increase in cash surrender value of BOLI		(4,464	)		(2,861	)
Stock-based compensation expense		3,712			2,020
Excess tax benefit on stock-based compensation		—			(550	)
Changes in assets and liabilities:
Accrued interest receivable		14,388			(7,828	)
Other assets, net		5,939			(2,135	)
Accrued interest payable and other liabilities		24,036			12,091
Net cash provided by operating activities		142,031			45,315
Cash flows from investing activities:
Proceeds from maturities/calls/paydowns of investment securities AFS		32,188			58,176
Purchases of investment securities AFS		(21,882	)		(79,810	)
Net increase of non-purchased loans and leases		(546,734	)		(1,064,677	)
Net payments received on purchased loans		312,514			135,373
Purchases of premises and equipment		(7,465	)		(6,582	)
Purchases of BOLI		—			(42,000	)
Proceeds from sales of other assets		16,847			5,654
Cash (invested in) received from unconsolidated investments and noncontrolling interest		(42	)		223
Net cash used by investing activities		(214,574	)		(993,643	)
Cash flows from financing activities:
Net increase in deposits		138,549			1,655,357
Net proceeds from (repayments of) other borrowings		388			(162,608	)
Net increase in repurchase agreements with customers		15,499			83
Proceeds from exercise of stock options		1,171			322
Excess tax benefit on stock-based compensation		—			550
Cash dividends paid on common stock		(20,659	)		(13,603	)
Net cash provided by financing activities		134,948			1,480,101
Net increase in cash and cash equivalents		62,405			531,773
Cash and cash equivalents – beginning of period		866,360			90,988
Cash and cash equivalents – end of period	$	928,765		$	622,761

Bank of the Ozarks, Inc. (the “Company”) is a bank holding company headquartered in Little Rock, Arkansas, which operates under the rules and regulations of the Board of Governors of the Federal Reserve System. The Company owns a wholly-owned state chartered bank subsidiary – Bank of the Ozarks (the “Bank”), eight 100%-owned finance subsidiary business trusts – Ozark Capital Statutory Trust II (“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory Trust V (“Ozark V”) (collectively, the “Ozark Trusts”), Intervest Statutory Trust II (“Intervest II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory Trust IV (“Intervest IV”) and Intervest Statutory Trust V (“Intervest V”), (collectively, the “Intervest Trusts”; and together with Ozark Trusts, the “Trusts”) and, indirectly through the Bank, a subsidiary that holds the Company’s investment securities, a subsidiary engaged in the development of real estate, a subsidiary that owns private aircraft and various other entities that hold loans, foreclosed assets or tax credits or engage in other activities. The Company and Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities. The consolidated financial statements include the accounts of the Company, the Bank, the investment subsidiary, the real estate subsidiary, the aircraft subsidiary and certain of those various other entities in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant intercompany transactions and amounts have been eliminated in consolidation.

At March 31, 2017 the Company, through the Bank, conducted operations through 250 offices, including offices in Arkansas, Georgia, Florida, North Carolina, Texas, Alabama, South Carolina, California and New York.

The accompanying interim 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 in accordance with the instructions to Form 10-Q and GAAP for interim financial information. Certain information, accounting policies and footnote disclosures normally included in complete financial statements prepared in accordance with GAAP 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, 2016.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments considered necessary, consisting of normal recurring items, have been included for a fair statement of the accompanying consolidated financial statements. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year or future periods.

During the three months ended March 31, 2017, the Company revised its initial estimates regarding certain acquired assets and liabilities associated with its 2016 acquisition of C1 Financial, Inc. (“C1”). As a result, goodwill recorded in the C1 acquisition increased by approximately $0.7 million during the first quarter of 2017. As provided under GAAP, management has up to twelve months following the date of an acquisition to finalize the fair values of the acquired assets and assumed liabilities. Once management has finalized the fair values of acquired assets and assumed liabilities within this 12-month period, management considers such values to be the day 1 fair values (“Day 1 Fair Values”).

On January 1, 2017, the Company adopted Accounting Standards Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting.” In accordance with the provisions of ASU 2016-09, the Company elected to account for forfeitures of stock-based compensation awards as they occur. Prior to the adoption of ASU 2016-09, the Company estimated forfeiture rates and the impact that estimated forfeitures would have on the number of stock-based awards that were expected to vest. The Company believes this policy election related to forfeitures will be a more efficient method of accounting for forfeitures. The adoption of ASU 2016-09 resulted in a cumulative adjustment to increase stockholders’ equity at January 1, 2017 by approximately $0.4 million.

Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding after consideration of the dilutive effect, if any, of outstanding common stock options using the treasury stock method. For the three months ended March 31, 2017, options to purchase 1,095,976 shares of the Company’s common stock were excluded from the diluted EPS calculations, and for the three months ended March 31, 2016, options to purchase 659,858 shares of the Company’s common stock were excluded from the diluted EPS calculations as inclusion of such options during such periods would have been anti-dilutive.

The following table presents the computation of basic and diluted EPS for the periods indicated.

At both March 31, 2017 and December 31, 2016, the Company classified all of its investment securities portfolio as AFS. Accordingly, investment securities are stated at estimated fair value in the consolidated financial statements with unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income (loss).

The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s investment in the “CRA qualified investment fund” includes shares held in a mutual fund that qualifies under the Community Reinvestment Act of 1977 for community reinvestment purposes. The Company’s holdings of “other equity securities” include Federal Home Loan Bank of Dallas (“FHLB”) and First National Banker’s Bankshares, Inc. (“FNBB”) shares which do not have readily determinable fair values and are carried at cost.

The following table shows estimated fair value of investment securities AFS having gross unrealized losses and the amount of such unrealized losses, aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position, as of the dates indicated.

	Less than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(Dollars in thousands)
March 31, 2017:
Obligations of state and political subdivisions	$	593,962	$	27,290	$	3,330	$	9	$	597,292	$	27,299
U.S. Government agency securities		473,508		9,727		21		—		473,529		9,727
Corporate obligations		2,525		22		485		11		3,010		33
CRA qualified investment fund		1,041		26		—		—		1,041		26
Total temporarily impaired securities	$	1,071,036	$	37,065	$	3,836	$	20	$	1,074,872	$	37,085

December 31, 2016:
Obligations of state and political subdivisions	$	641,862	$	35,648	$	4,501	$	10	$	646,363	$	35,658
U.S. Government agency securities		480,000		12,764		160		5		480,160		12,769
Corporate obligations		6,915		171		—		—		6,915		171
CRA qualified investment fund		1,035		27		—		—		1,035		27
Total temporarily impaired securities	$	1,129,812	$	48,610	$	4,661	$	15	$	1,134,473	$	48,625

In evaluating the Company’s unrealized loss positions for other-than-temporary impairment of its investment securities portfolio, management considers the credit quality, financial condition and near term prospects of the issuer, the nature and cause of the unrealized loss, the severity and duration of the impairments and other factors. At both March 31, 2017 and December 31, 2016, management determined the unrealized losses were the result of fluctuations in interest rates and did not reflect deteriorations of the credit quality of the investments. Accordingly, management considers these unrealized losses to be temporary in nature. The Company does not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost.

The following table shows the amortized cost and estimated fair value of investment securities AFS by maturity or estimated date of repayment as of the date indicated.

For purposes of this maturity or repayment distribution, all investment securities AFS are shown based on their contractual maturity date or estimated date of repayment, except (i) FHLB and FNBB equity securities and the CRA qualified investment fund with no contractual maturity date are shown in the longest maturity category and (ii) U.S. Government agency securities and municipal housing authority securities backed by residential mortgages are allocated among various maturities or repayment categories based on an estimated repayment schedule utilizing Bloomberg median prepayment speeds or other estimates of prepayment speeds and interest rate levels at the measurement date. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

The Company had no sales activity within its investment securities AFS for the three months ended March 31, 2017 or 2016.

The following table is a summary of activity within the ALLL for the periods indicated.

The following tables are a summary of the Company’s ALLL for the periods indicated.

	Beginning Balance		Charge-offs			Recoveries		Provision			Ending Balance
	(Dollars in thousands)
Three months ended March 31, 2017:
Non-purchased loans and leases:
Real estate:
Residential 1-4 family	$	10,225	$	(169	)	$	4	$	898		$	10,958
Non-farm/non-residential		21,555		(6	)		11		1,480			23,040
Construction/land development		20,673		(67	)		6		(979	)		19,633
Agricultural		2,787		—			—		(494	)		2,293
Multifamily residential		2,447		—			—		318			2,765
Commercial and industrial		2,359		(225	)		86		195			2,415
Consumer		1,945		(113	)		111		991			2,934
Direct financing leases		10,684		(677	)		5		418			10,430
Other		2,266		(492	)		209		173			2,156
Total non-purchased loans and leases		74,941		(1,749	)		432		3,000			76,624
Purchased loans		1,600		(2,787	)		854		1,933			1,600
Total loans and leases	$	76,541	$	(4,536	)	$	1,286	$	4,933		$	78,224

Three months ended March 31, 2016:
Non-purchased loans and leases:
Real estate:
Residential 1-4 family	$	8,672	$	(243	)	$	24	$	976		$	9,429
Non-farm/non-residential		16,796		(12	)		—		1,977			18,761
Construction/land development		18,176		(20	)		2		(2,899	)		15,259
Agricultural		3,388		(7	)		—		303			3,684
Multifamily residential		3,031		—			—		883			3,914
Commercial and industrial		2,574		(11	)		33		803			3,399
Consumer		707		(33	)		12		21			707
Direct financing leases		3,835		(660	)		11		1,049			4,235
Other		2,475		(361	)		171		(1,113	)		1,172
Total non-purchased loans and leases		59,654		(1,347	)		253		2,000			60,560
Purchased loans		1,200		(65	)		48		17			1,200
Total loans and leases	$	60,854	$	(1,412	)	$	301	$	2,017		$	61,760

The following table is a summary of the Company’s ALLL for non-purchased loans and leases and recorded investment in non-purchased loans and leases as of the dates indicated.

	ALLL for Non-Purchased Loans and Leases						Non-Purchased Loans and Leases
	ALLL for Individually Evaluated Impaired Loans and Leases		ALLL for All Other Loans and Leases		Total ALLL⁽¹⁾		Individually Evaluated Impaired Loans and Leases		All Other Loans and Leases		Total Loans and Leases
	(Dollars in thousands)
March 31, 2017:
Real estate:
Residential 1-4 family	$	212	$	10,746	$	10,958	$	2,425	$	511,605	$	514,030
Non-farm/non-residential		338		22,702		23,040		3,282		2,669,826		2,673,108
Construction/land development		353		19,280		19,633		2,197		4,768,102		4,770,299
Agricultural		287		2,006		2,293		1,099		109,024		110,123
Multifamily residential		—		2,765		2,765		100		557,551		557,651
Commercial and industrial		511		1,904		2,415		809		200,251		201,060
Consumer		23		2,911		2,934		83		352,205		352,288
Direct financing leases		—		10,430		10,430		—		134,948		134,948
Other		41		2,115		2,156		212		903,156		903,368
Total	$	1,765	$	74,859	$	76,624	$	10,207	$	10,206,668	$	10,216,875

December 31, 2016:
Real estate:
Residential 1-4 family	$	326	$	9,899	$	10,225	$	2,411	$	478,652	$	481,063
Non-farm/non-residential		174		21,381		21,555		2,136		2,383,516		2,385,652
Construction/land development		1,384		19,289		20,673		5,501		4,757,466		4,762,967
Agricultural		387		2,400		2,787		1,198		96,668		97,866
Multifamily residential		59		2,388		2,447		879		434,463		435,342
Commercial and industrial		463		1,896		2,359		750		227,730		228,480
Consumer		16		1,929		1,945		60		216,457		216,517
Direct financing leases		—		10,684		10,684		—		137,188		137,188
Other		41		2,225		2,266		158		859,860		860,018
Total	$	2,850	$	72,091	$	74,941	$	13,093	$	9,592,000	$	9,605,093

The following table is a summary of impaired non-purchased loans and leases as of and for the three months ended March 31, 2017.

	Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Three Months Ended March 31, 2017
	(Dollars in thousands)
Impaired loans and leases for which there is a related ALLL:
Real estate:
Residential 1-4 family	$	1,459	$	(218	)	$	1,241	$	212	$	1,464
Non-farm/non-residential		2,254		(530	)		1,724		338		1,186
Construction/land development		1,828		(34	)		1,794		353		3,448
Agricultural		964		—			964		287		1,014
Commercial and industrial		859		(81	)		778		511		633
Consumer		78		(4	)		74		23		62
Other		207		—			207		41		180
Total impaired loans and leases with a related ALLL		7,649		(867	)		6,782		1,765		7,987

Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		1,301		(117	)		1,184		—		954
Non-farm/non-residential		1,972		(414	)		1,558		—		1,523
Construction/land development		1,217		(814	)		403		—		400
Agricultural		367		(232	)		135		—		135
Multifamily residential		233		(133	)		100		—		50
Commercial and industrial		81		(50	)		31		—		147
Consumer		14		(5	)		9		—		9
Other		5		—			5		—		5
Total impaired loans and leases without a related ALLL		5,190		(1,765	)		3,425		—		3,223
Total impaired non-purchased loans and leases	$	12,839	$	(2,632	)	$	10,207	$	1,765	$	11,210

The following table is a summary of impaired non-purchased loans and leases as of and for the year ended December 31, 2016.

	Principal Balance		Net Charge-offs to Date			Principal Balance, Net of Charge-offs		Specific ALLL		Weighted Average Carrying Value – Year Ended December 31, 2016
	(Dollars in thousands)
Impaired loans and leases for which there is a related ALLL:
Real estate:
Residential 1-4 family	$	1,904	$	(216	)	$	1,688	$	326	$	1,088
Non-farm/non-residential		1,171		(523	)		648		174		186
Construction/land development		5,137		(34	)		5,103		1,384		1,118
Agricultural		1,064		—			1,064		387		1,118
Multifamily		879		—			879		59		176
Commercial and industrial		809		(322	)		487		463		506
Consumer		55		(4	)		51		16		23
Other		153		—			153		41		31
Total impaired loans and leases with a related ALLL		11,172		(1,099	)		10,073		2,850		4,246

Impaired loans and leases for which there is not a related ALLL:
Real estate:
Residential 1-4 family		879		(156	)		723		—		896
Non-farm/non-residential		1,997		(509	)		1,488		—		1,131
Construction/land development		1,208		(810	)		398		—		1,998
Agricultural		366		(232	)		134		—		169
Multifamily residential		133		(133	)		—		—		33
Commercial and industrial		313		(50	)		263		—		209
Consumer		14		(5	)		9		—		11
Other		5		—			5		—		6
Total impaired loans and leases without a related ALLL		4,915		(1,895	)		3,020		—		4,453
Total impaired non-purchased loans and leases	$	16,087	$	(2,994	)	$	13,093	$	2,850	$	8,699

Management has determined that certain of the Company’s impaired non-purchased loans and leases do not require any specific allowance at March 31, 2017 or at December 31, 2016 because (i) management’s analysis of such individual loans and leases resulted in no impairment or (ii) all identified impairment on such loans and leases had previously been charged off.

Interest income on impaired non-purchased loans and leases is recognized on a cash basis when and if actually collected. Total interest income recognized on impaired non-purchased loans and leases for the three months ended March 31, 2017 and 2016 was not material.

The following table is a summary of credit quality indicators for the Company’s non-purchased loans and leases as of the dates indicated.

	Satisfactory		Moderate		Watch		Substandard		Total
	(Dollars in thousands)
March 31, 2017:
Real estate:
Residential 1-4 family⁽¹⁾	$	507,218	$	—	$	2,516	$	4,296	$	514,030
Non-farm/non-residential		2,252,848		334,454		78,462		7,344		2,673,108
Construction/land development		4,378,663		376,589		11,912		3,135		4,770,299
Agricultural		47,750		51,844		8,504		2,025		110,123
Multifamily residential		508,219		46,355		1,942		1,135		557,651
Commercial and industrial		111,729		82,318		5,514		1,499		201,060
Consumer⁽¹⁾		351,910		—		133		245		352,288
Direct financing leases		133,972		36		179		761		134,948
Other⁽¹⁾		899,028		3,898		226		216		903,368
Total	$	9,191,337	$	895,494	$	109,388	$	20,656	$	10,216,875

December 31, 2016:
Real estate:
Residential 1-4 family⁽¹⁾	$	474,853	$	—	$	1,938	$	4,272	$	481,063
Non-farm/non-residential		2,010,397		287,157		81,527		6,571		2,385,652
Construction/land development		4,409,108		336,004		11,402		6,453		4,762,967
Agricultural		48,835		37,712		9,158		2,161		97,866
Multifamily residential		381,845		49,607		1,971		1,919		435,342
Commercial and industrial		149,698		73,559		3,994		1,229		228,480
Consumer⁽¹⁾		216,120		—		164		233		216,517
Direct financing leases		135,980		46		208		954		137,188
Other⁽¹⁾		855,217		4,710		81		10		860,018
Total	$	8,682,053	$	788,795	$	110,443	$	23,802	$	9,605,093

Satisfactory – Loans and leases in this category are considered to be a satisfactory credit risk and are generally considered to be collectible in full.

Moderate – Loans and leases in this category are considered to be a marginally satisfactory credit risk and are generally considered to be collectible in full.

Watch – Loans and leases in this category are presently protected from apparent loss; however, weaknesses exist which could cause future impairment of repayment of principal or interest.

Substandard – Loans and leases in this category are characterized by deterioration in quality exhibited by a number of weaknesses requiring corrective action and posing risk of some loss.

The following table is an aging analysis of past due non-purchased loans and leases as of the dates indicated.

	30-89 Days Past Due⁽¹⁾		90 Days or More⁽²⁾		Total Past Due		Current⁽³⁾		Total
	(Dollars in thousands)
March 31, 2017:
Real estate:
Residential 1-4 family	$	3,227	$	2,257	$	5,484	$	508,546	$	514,030
Non-farm/non-residential		1,753		2,535		4,288		2,668,820		2,673,108
Construction/land development		1,714		2,208		3,922		4,766,377		4,770,299
Agricultural		55		51		106		110,017		110,123
Multifamily residential		—		100		100		557,551		557,651
Commercial and industrial		484		561		1,045		200,015		201,060
Consumer		162		79		241		352,047		352,288
Direct financing leases		656		607		1,263		133,685		134,948
Other		17		212		229		903,139		903,368
Total	$	8,068	$	8,610	$	16,678	$	10,200,197	$	10,216,875

December 31, 2016:
Real estate:
Residential 1-4 family	$	2,410	$	2,082	$	4,492	$	476,571	$	481,063
Non-farm/non-residential		1,718		1,318		3,036		2,382,616		2,385,652
Construction/land development		3,082		198		3,280		4,759,687		4,762,967
Agricultural		1,220		136		1,356		96,510		97,866
Multifamily residential		—		883		883		434,459		435,342
Commercial and industrial		522		551		1,073		227,407		228,480
Consumer		169		52		221		216,296		216,517
Direct financing leases		408		812		1,220		135,968		137,188
Other		196		6		202		859,816		860,018
Total	$	9,725	$	6,038	$	15,763	$	9,589,330	$	9,605,093

As of March 31, 2017, the Company had identified purchased loans where it had determined it was probable that the Company would be unable to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or the expected performance of such loans had deteriorated from its performance expectations established in conjunction with the determination of the Day 1 Fair Values or since its most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). At March 31, 2017, the Company had $13.9 million of impaired purchased loans compared to $6.5 million at December 31, 2016.

The following table is a summary of credit quality indicators for the Company’s purchased loans as of the dates indicated.

	Purchased Loans Without Evidence of Credit Deterioration at Date of Acquisition										Purchased Loans With Evidence of Credit Deterioration at Date of Acquisition				Total Purchased
	FV 33		FV 44		FV 55		FV 36		FV 77		FV 66		FV 88		Loans
	(Dollars in thousands)
March 31, 2017:
Real estate:
Residential 1-4 family	$	93,432	$	355,484	$	162,513	$	57,320	$	621	$	67,020	$	1,868	$	738,258
Non-farm/non-residential		283,183		1,275,136		394,880		2,821		6,693		124,614		3,850		2,091,177
Construction/land development		90,834		363,467		59,200		2,114		22		13,160		68		528,865
Agricultural		11,220		4,922		3,638		369		—		3,926		394		24,469
Multifamily residential		19,389		198,358		52,548		678		—		10,182		—		281,155
Commercial and industrial		15,703		129,111		9,460		1,324		24		7,687		127		163,436
Consumer		297,715		376,332		69,136		1,987		202		278		—		745,650
Other		5,096		1,473		127		36		—		305		—		7,037
Total	$	816,572	$	2,704,283	$	751,502	$	66,649	$	7,562	$	227,172	$	6,307	$	4,580,047

December 31, 2016:
Real estate:
Residential 1-4 family	$	99,447	$	379,883	$	162,166	$	62,507	$	282	$	72,052	$	1,889	$	778,226
Non-farm/non-residential		309,450		1,415,399		419,978		3,128		712		128,347		2,735		2,279,749
Construction/land development		104,303		351,001		63,561		2,536		33		11,404		55		532,893
Agricultural		13,169		5,154		3,825		404		—		4,058		381		26,991
Multifamily residential		11,838		231,758		54,116		714		—		10,237		—		308,663
Commercial and industrial		17,268		172,168		10,897		1,722		22		9,463		127		211,667
Consumer		319,442		414,116		75,812		2,496		194		328		86		812,474
Other		5,229		1,497		132		44		—		457		—		7,359
Total	$	880,146	$	2,970,976	$	790,487	$	73,551	$	1,243	$	236,346	$	5,273	$	4,958,022

The following grades are used for purchased loans without evidence of credit deterioration at the date of acquisition.

FV 33 – Loans in this category are considered to be satisfactory with minimal credit risk and are generally considered collectible.

FV 44 – Loans in this category are considered to be marginally satisfactory with minimal to moderate credit risk and are generally considered collectible.

FV 55 – Loans in this category exhibit weakness and are considered to have elevated credit risk and elevated risk of repayment.

FV 36 – Loans in this category were not individually reviewed at the date of purchase and are assumed to have characteristics similar to the characteristics of the aggregate acquired portfolio.

FV 77 – Loans in this category have deteriorated since the date of purchase and are considered impaired.

The following grades are used for purchased loans with evidence of credit deterioration at the date of acquisition.

FV 66 – Loans in this category are performing in accordance with or exceeding management’s performance expectations established in conjunction with the determination of Day 1 Fair Values.

FV 88 – Loans in this category have deteriorated from management’s performance expectations established in conjunction with the determination of Day 1 Fair Values.

The following table is an aging analysis of past due purchased loans as of the dates indicated.

	30-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Purchased Loans
	(Dollars in thousands)
March 31, 2017:
Real estate:
Residential 1-4 family	$	10,023	$	7,439	$	17,462	$	720,796	$	738,258
Non-farm/non-residential		6,779		22,426		29,205		2,061,972		2,091,177
Construction/land development		2,281		1,279		3,560		525,305		528,865
Agriculture		144		547		691		23,778		24,469
Multifamily residential		—		—		—		281,155		281,155
Commercial and industrial		1,112		1,242		2,354		161,082		163,436
Consumer		2,983		704		3,687		741,963		745,650
Other		—		—		—		7,037		7,037
Total	$	23,322	$	33,637	$	56,959	$	4,523,088	$	4,580,047

Purchased loans without evidence of credit deterioration at date of acquisition	$	16,916	$	10,704	$	27,620	$	4,318,948	$	4,346,568
Purchased loans with evidence of credit deterioration at date of acquisition		6,406		22,933		29,339		204,140		233,479
Total	$	23,322	$	33,637	$	56,959	$	4,523,088	$	4,580,047

December 31, 2016:
Real estate:
Residential 1-4 family	$	10,547	$	8,665	$	19,212	$	759,014	$	778,226
Non-farm/non-residential		7,471		20,528		27,999		2,251,750		2,279,749
Construction/land development		21,008		527		21,535		511,358		532,893
Agriculture		49		638		687		26,304		26,991
Multifamily residential		—		—		—		308,663		308,663
Commercial and industrial		891		1,305		2,196		209,471		211,667
Consumer		4,421		1,502		5,923		806,551		812,474
Other		—		—		—		7,359		7,359
Total	$	44,387	$	33,165	$	77,552	$	4,880,470	$	4,958,022

Purchased loans without evidence of credit deterioration at date of acquisition	$	38,621	$	8,619	$	47,240	$	4,669,163	$	4,716,403
Purchased loans with evidence of credit deterioration at date of acquisition		5,766		24,546		30,312		211,307		241,619
Total	$	44,387	$	33,165	$	77,552	$	4,880,470	$	4,958,022

The following table provides supplemental cash flow information for the periods indicated.

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 maximum amount of future payments the Company could be required to make under these guarantees at March 31, 2017 was $49.6 million. The Company holds collateral to support guarantees when deemed necessary. Collateralized commitments at March 31, 2017 totaled $35.3 million.

At March 31, 2017, the Company had outstanding commitments totaling $11.26 billion to extend credit, consisting primarily of loans closed but not yet funded. The following table shows, as of the date indicated, the contractual maturities of such outstanding commitments.

The Company has a nonqualified stock option plan for certain employees and officers of the Company. This plan provides for the granting of nonqualified options to purchase shares of common stock in the Company. No option may be granted under this plan for less than the fair market value of the common stock, defined by the plan as the average of the highest reported asked price and the lowest reported bid price, on the date of the grant. The benefits or amounts that may be received by or allocated to any particular officer or employee of the Company or any subsidiary under this plan will be determined in the sole discretion of the Company’s board of directors or its personnel and compensation committee. All employee options outstanding at March 31, 2017 were issued with a vesting date three years after issuance and an expiration date seven years after issuance. All shares issued in connection with options exercised under the employee nonqualified stock option plan were in the form of newly issued shares.

In addition, the Company has a non-employee director stock plan (the “Director Plan”) that provides for awards of common stock to eligible non-employee directors. The Director Plan grants to each director who is not otherwise an employee of the Company, or any subsidiary, shares of common stock on the day of his or her election as director of the Company at each annual shareholders meeting, or any special meeting called for the purpose of electing a director or directors of the Company, and upon appointment for the first time as a director of the Company. The number of shares of common stock to be awarded is the equivalent of $35,000 worth of shares of common stock based on the average of the highest reported asked price and lowest reported bid price on the grant date. The common stock awarded under this plan is fully vested on the grant date. During the three months ended March 31, 2017 and 2016, no shares were issued and no stock-based compensation expense was recorded under the Director Plan.

Prior to the adoption of the Director Plan, the Company had a nonqualified stock option plan for non-employee directors. No options were granted under this plan during the three months ended March 31, 2017 or 2016. All options previously granted under this plan were exercisable immediately and expire ten years after issuance.

The following table summarizes stock option activity for both the employee and non-employee director stock option plans for the period indicated.

Intrinsic value for stock options is defined as the amount by which the current market price of the underlying stock exceeds the exercise price. For those stock options where the exercise price exceeds the current market price of the underlying stock, the intrinsic value is zero. The total intrinsic value of options exercised during the three months ended March 31, 2017 and 2016 was $2.6 million and $0.8 million, respectively.

Options to purchase 603,414 shares were granted during the three months ended March 31, 2017 with an average grant date fair value of $15.49. The fair value for each option grant is estimated on the date of grant using the Black-Sholes option pricing model.

The following table is a summary of the weighted-average assumptions used in the Black-Sholes option pricing model for stock options granted during the three months ended March 31, 2017:

The Company uses the U.S. Treasury yield curve in effect at the time of the grant to determine the risk-free interest rate. The expected dividend yield is estimated using the current annual dividend level and recent stock price of the Company’s common stock at the date of grant. Expected stock volatility is based on historical volatilities of the Company’s common stock. The expected life of stock options is calculated based on the “simplified” method as provided for under SEC Staff Accounting Bulletin No. 110.

Stock based compensation expense for stock options included in non-interest expense was $1.5 million and $1.0 million for the three months ended March 31, 2017 and 2016, respectively. Total unrecognized compensation cost related to non-vested stock option grants was $14.1 million at March 31, 2017 and is expected to be recognized over a weighted-average period of 2.3 years.

The Company has a restricted stock and incentive plan whereby all officers and employees of the Company or any subsidiary are eligible to receive awards of restricted stock, restricted stock units or performance awards. The benefits or amounts that may be received by or allocated to any particular officer or employee of the Company or any subsidiary under this plan will be determined in the sole discretion of the Company’s board of directors or its personnel and compensation committee. Shares of common stock issued under the plan may be shares of original issuance or shares held in treasury that have been reacquired by the Company. The vesting period for all restricted stock awards granted under the plan shall be not less than three years from the date of grant, subject to limited exceptions.

The following table summarizes non-vested restricted stock activity for the period indicated.

Restricted stock awards for 238,794 shares were granted during the three months ended March 31, 2017 with a weighted-average grant date fair value of $52.09.

The fair value of the restricted stock awards is amortized to compensation expense over the three-year vesting period and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted. Stock-based compensation expense for restricted stock included in non-interest expense was $2.2 million and $1.0 million for the three months ended March 31, 2017 and 2016, respectively. Unrecognized compensation expense for non-vested restricted stock awards was $19.3 million at March 31, 2017 and is expected to be recognized over a weighted-average period of 2.3 years.

The Company measures certain of its assets and liabilities on a fair value basis using various valuation techniques and assumptions, depending on the nature of the asset or liability. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, fair value is used either annually or on a non-recurring basis to evaluate certain assets and liabilities for impairment or for disclosure purposes. The Company had no liabilities that were accounted for at fair value at March 31, 2017 or December 31, 2016.

The following table sets forth the Company’s assets, as of the dates indicated, that are accounted for at fair value.

	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
March 31, 2017:
Investment securities AFS⁽¹⁾:
Obligations of state and political subdivisions	$	—	$	896,802	$	16,835	$	913,637
U.S. Government agency securities		—		539,628		—		539,628
Corporate obligations		—		10,089		—		10,089
CRA qualified investment fund		1,041		—		—		1,041
Total investment securities AFS		1,041		1,446,519		16,835		1,464,395
Impaired non-purchased loans and leases		—		—		8,442		8,442
Impaired purchased loans		—		—		13,869		13,869
Foreclosed assets		—		—		36,899		36,899
Total assets at fair value	$	1,041	$	1,446,519	$	76,045	$	1,523,605

December 31, 2016:
Investment securities AFS ⁽¹⁾:
Obligations of state and political subdivisions	$	—	$	901,634	$	17,379	$	919,013
U.S. Government agency securities		—		535,490		—		535,490
Corporate obligations		—		9,915		—		9,915
CRA qualified investment fund		1,034		—		—		1,034
Total investment securities AFS		1,034		1,447,039		17,379		1,465,452
Impaired non-purchased loans and leases		—		—		10,243		10,243
Impaired purchased loans		—		—		6,516		6,516
Foreclosed assets		—		—		43,702		43,702
Total assets at fair value	$	1,034	$	1,447,039	$	77,840	$	1,525,913

The following table presents information related to Level 3 non-recurring fair value measurements as of the date indicated.

The following methods and assumptions are used to estimate the fair value of the Company’s assets that are accounted for at fair value.

Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities which are measured on a recurring basis. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables and pricing matrices or a combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs. All fair value estimates of the Company’s investment securities are reviewed on a quarterly basis.

The Company has determined that certain of its investment securities had a limited to non-existent trading market at March 31, 2017. As a result, the Company considers these investments as Level 3 in the fair value hierarchy. Specifically, the fair values of certain obligations of state and political subdivisions consisting primarily of certain unrated private placement bonds (the “private placement bonds”) in the amount of $16.8 million at March 31, 2017 were calculated using Level 3 hierarchy inputs and assumptions as the trading market for such securities was determined to be “not active.” This determination was based on the limited number of trades or, in certain cases, the existence of no reported trades for the private placement bonds. The private placement bonds are generally prepayable at par value at the option of the issuer. As a result, management believes the private placement bonds should be individually valued at the lower of (i) the matrix pricing provided by the Company’s third party pricing services for comparable unrated municipal securities or (ii) par value. At March 31, 2017, the third parties’ pricing matrices valued the Company’s portfolio of private placement bonds at $16.8 million which was approximately the same as the aggregate par value of the private placement bonds. Accordingly, at March 31, 2017, the Company reported the private placement bonds at $16.8 million.

Impaired non-purchased loans and leases – Fair values are measured on a nonrecurring basis and are based on the underlying collateral value of the impaired loan or lease, net of holding and selling costs, or the estimated discounted cash flows for such loan or lease. At March 31, 2017 the Company had reduced the carrying value of its impaired non-purchased loans and leases (all of which are included in nonaccrual loans and leases) by $4.4 million to the estimated fair value of $8.4 million. The $4.4 million adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of $2.6 million of partial charge-offs and $1.8 million of specific allowance allocations for loan and lease losses.

Impaired purchased loans – Impaired purchased loans are measured at fair value on a non-recurring basis. As of March 31, 2017, the Company had identified purchased loans where current information indicates it is probable that (i) the Company will not be able to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or (ii) the expected performance of such loans had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or since management’s most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). At March 31, 2017, the Company had $13.9 million of impaired purchased loans.

Foreclosed assets – Repossessed personal properties and real estate acquired through or in lieu of foreclosure are measured on a non-recurring basis and are initially recorded at the lesser of current principal investment or fair value less estimated cost to sell (generally 8% to 10%) at the date of repossession or foreclosure. Purchased foreclosed assets are initially recorded at Day 1 Fair Values. In estimating such Day 1 Fair Values, management considered a number of factors including, among others, appraised value, estimated selling price, estimated holding periods and net present value of cash flows expected to be received. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted to the then estimated fair value net of estimated selling costs, if lower, until disposition. Fair values of foreclosed and repossessed assets are generally based on third party appraisals, broker price opinions or other valuations of the property.

The following table presents additional information for the periods indicated about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value.

The following methods and assumptions were used to estimate the fair value of financial instruments.

Cash and due from banks – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities which are measured on a recurring basis. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables, pricing matrices or a combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs. All fair value estimates of the Company’s investment securities are reviewed on a quarterly basis. The Company’s investments in FHLB and FNBB equity securities totaling $6.2 million at both March 31, 2017 and December 31, 2016 do not have readily determinable fair values and are carried at cost.

Loans and leases – The fair value of loans and leases, including purchased loans, is estimated by discounting the contractual cash flows to be received in future periods using the current rate at which similar loans or leases would be made to borrowers or lessees with similar credit ratings and for the same remaining maturities.

Deposit liabilities – The fair value of demand deposits, savings accounts, money market deposits and other transaction accounts is the amount payable on demand at the reporting date. The fair value of fixed maturity time deposits is estimated using the rate currently available for deposits of similar remaining maturities.

Repurchase agreements – For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Other borrowed funds – For these short-term instruments, the carrying amount is a reasonable estimate of fair value. The fair value of long-term instruments is estimated based on the current rates available to the Company for borrowings with similar terms and remaining maturities.

Subordinated notes and debentures – The fair values of these instruments are based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities.

Off-balance sheet instruments – The fair values of commercial loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, and were not material at March 31, 2017 or December 31, 2016.

The fair values of certain of these instruments were calculated by discounting expected cash flows, which contain numerous uncertainties and involve significant judgments by management. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the estimated fair values may differ materially from the values which the respective financial instruments could be sold individually or in the aggregate.

The following table presents the carrying amounts and estimated fair values as of the dates indicated and the fair value hierarchy of the Company’s financial instruments.

At March 31, 2017 and December 31, 2016, securities sold under agreements to repurchase (“repurchase agreements”) totaled $80.6 million and $65.1 million, respectively. Securities utilized as collateral for repurchase agreements are primarily U.S. Government agency residential mortgage-backed securities and are maintained by the Company’s safekeeping agents. These securities are reviewed by the Company on a daily basis, and the Company may be required to provide additional collateral due to changes in the fair market value of these securities. The terms of the Company’s repurchase agreements are continuous but may be cancelled at any time by the Company or the customer.

The following table is a summary of other operating expenses for the periods indicated.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers.” ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this standard to annual and interim periods beginning after December 15, 2017; however, early adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. While the Company continues to evaluate the impact that ASU 2014-09 may have on its financial position, results of operations, and financial statement disclosures, it is not expected that the adoption of ASU 2014-09 will have a significant impact.

In January 2016, FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 revises the accounting for the classification and measurement of investments in equity securities and revises the presentation of certain fair value changes for financial liabilities measured at fair value. For equity securities, the guidance in ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income. For financial liabilities that are measured at fair value in accordance with the fair value option, the guidance requires presenting, in other comprehensive income, the change in fair value that relates to a change in instrument-specific credit risk. ASU 2016-01 also eliminates the disclosure assumptions used to estimate fair value for financial instruments measured at amortized cost and requires disclosure of an exit price notion in determining the fair value of financial instruments measured at amortized cost. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017. The Company is evaluating the impact, if any, that ASU 2016-01 will have on its financial position, results of operations, and its financial statement disclosures.

In February 2016, FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance sheet. The right-of-use asset and related lease liability will be initially measured at the present value of the remaining lease payments; however, if the original term of the lease is less than twelve months and the lease does not contain a purchase option that is reasonably certain to be exercised, a lessee may account for the lease as an operating lease. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018. While the Company continues to evaluate the effect that ASU 2016-02 will have on its financial position, results of operations, and its financial statement disclosures, the adoption of ASU 2016-02 is expected to result in leased assets and related lease liabilities to be included on its balance sheet, along with the related leasehold amortization and interest expense included in its statement of income.

In March 2016, FASB issued ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 requires entities to record all of the tax effects related to share-based payments at settlement (or expiration) through the income statement. In addition, all tax-related cash flows, such as excess tax benefits, should be reported as operating activities rather than financing activity in the statement of cash flows. Also, entities are allowed to make a policy election related to forfeitures to either estimate the number of awards expected to vest or account for forfeitures when they occur. The Company adopted ASU 2016-09

beginning January 1, 2017, including the provision to account for forfeitures as they occur, and recorded a cumulative adjustment to increase stockholders’ equity at January 1, 2017 by approximately $0.4 million.

In June 2016, FASB issued ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which significantly revises the guidance related to impairment of financial instruments. The new guidance replaces the current incurred loss model that is utilized in estimating the allowance for loan and lease losses with a model that requires management to estimate all contractual cash flows that are not expected to be collected over the life of the loan. This revised model is what FASB describes as the current expected credit loss (“CECL”) model and FASB believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of ASU 2016-13 includes loans, including purchased loans with credit deterioration, available-for-sale debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company continues to evaluate the effect that ASU 2016-13 will have on its financial position, results of operations, and its financial statement disclosures and has engaged an outside third party to assist with data analysis, model development, and implementation of ASU 2016-03.

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230)” which FASB believes clarifies guidance on how certain transactions are classified within the statement of cash flows. The standard addresses a number of cash flow presentation items including a) debt prepayment and extinguishment, b) contingent consideration payments made after a business combination, c) proceeds from the settlement of insurance claims, corporate owned life insurance policies and BOLI policies, d) distributions received from equity method investees, e) classification of beneficial interest received in a securitization transaction and cash receipts from beneficial interest in securitized trade receivables and f) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted. Since ASU 2016-15 applies to the classification of cash flows, no impact is anticipated on the Company’s financial position or results of operations; however, the Company is evaluating the effect, if any, on its statement of cash flows and its financial statement disclosures.

In January 2017, FASB issued ASU 2017-01 “Business Combinations (Topic 805), Clarifying the Definition of a Business” that changes the definition of a business when evaluating whether transactions should be accounted for as the acquisition of assets or the acquisition of a business. ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the assets acquired are concentrated in a single asset or a group of similar identifiable assets; if so, the acquired assets or group of identifiable assets is not considered a business. In addition, the guidance requires that to be considered a business, the acquired assets must include an input and a substantive process that together significantly contribute to the ability to create output. The ASU removes the evaluation of whether a market participant could replace any of the missing elements. ASU 2017-01 is effective for interim and annual periods beginning after December 15, 2017. The Company will evaluate the effect, if any, that ASU 2017-01 may have any future acquisitions.

In January 2017, FASB issued ASU 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323) Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings.” ASU-2017-03 provides guidance on additional qualitative disclosures when a registrant cannot reasonably estimate the impact of adoption of ASU 2014-09, ASU 2016-02 and ASU 2016-13 will have on its financial statements. In addition, ASU 2017-03 provides guidance on ASU 2014-01 related to the proportional amortization method in accounting for investments in qualified affordable housing projects. ASU 2017-03 was effective when issued and did not have a significant impact on the Company’s financial position, results of operations or its financial statement disclosures.

In January 2017, FASB issued ASU 2017-04 “Intangibles-Goodwill and Other (Topic 350)” which amends the requirement that entities compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, entities should perform their annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment if the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 is effective for annual periods beginning after December 15, 2019. The Company is evaluating the effect that ASU 2017-04 may have, if any, on its financial position, results of operations and its financial statement disclosures.

In March 2017, FASB issued ASU 2017-08 “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20)” which amends the accounting for the amortization of premiums for certain purchased callable debt securities by shortening the amortization period to the earliest call date. ASU 2017-08 is effective for interim and annual periods beginning after December 15, 2019. The Company is evaluating the effect that ASU 2017-09 may have, if any, on its financial position, results of operations and its financial statement disclosures.

On April 10, 2017 the Company, as part of an internal corporate reorganization, entered into an Agreement and Plan of Merger (the “Plan of Merger”) with the Bank. Under the terms of the Plan of Merger, the Company will be merged with and into the Bank (the “Reorganization”) with the Bank continuing as the surviving entity.

At the effective time of the Reorganization, each share of the Company’s common stock outstanding immediately prior to the effective time will be automatically converted into one share of Bank common stock. As a result, the shares of capital stock of the Bank will be owned directly by the Company’s shareholders in the same proportion as their ownership of the Company’s capital stock immediately prior to the Reorganization.

The Plan of Merger has been approved by the boards of directors of the Company and the Bank. In connection with the Reorganization, the Company expects to hold a special meeting of its shareholders on June 23, 2017 to consider and vote upon the Reorganization. The Reorganization is subject to various closing conditions including, among others, (i) approval by the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote on the Reorganization, (ii) receipt of all required regulatory approvals, including the approval of the FDIC and the Arkansas State Bank Department, and (iii) approval for listing on NASDAQ of the Bank’s common stock.

Unless this quarterly report on Form 10-Q indicates otherwise, or the context otherwise requires, the terms “we,” “our,” “us,” and “the Company,” as used herein refer to Bank of the Ozarks, Inc. and its subsidiaries, including Bank of the Ozarks, which we sometimes refer to as “Bank of the Ozarks,” “our bank subsidiary,” or “the Bank.”

This quarterly report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), other filings made by us with the Securities and Exchange Commission (“SEC”) and other oral and written statements or reports by us and our management include certain forward-looking statements that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. Those statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Forward-looking statements include, without limitation, statements about economic, real estate market, competitive, employment, credit market and interest rate conditions, including expectations for further changes in monetary and interest rate policy by the Federal Reserve; our plans, goals, beliefs, expectations, thoughts, estimates and outlook for the future with respect to our revenue growth; net income and earnings per common share; net interest margin; net interest income; non-interest income, including service charges on deposit accounts, mortgage lending and trust income, bank owned life insurance income, gains (losses) on investment securities and sales of other assets and other income from purchased loans; non-interest expense, including acquisition-related, systems conversion and contract termination expenses; efficiency ratio; anticipated future operating results and financial performance; asset quality and asset quality ratios, including the effects of current economic and real estate market conditions; nonperforming loans and leases; nonperforming assets; net charge-offs and net charge-off ratios; provision and allowance for loan and lease losses; past due loans and leases; current or future litigation; interest rate sensitivity, including the effects of possible interest rate changes; future growth and expansion opportunities, including plans for making additional acquisitions; problems with obtaining regulatory approval of or integrating or managing acquisitions; the effect of the announcement of any future acquisition on customer relationships and operating results; plans for opening new offices or relocating or closing existing offices; opportunities and goals for future market share growth; expected capital expenditures; loan, lease and deposit growth, including growth from unfunded closed loans; changes in the volume, yield and value of our investment securities portfolio; availability of unused borrowings; the need to issue debt or equity securities and other similar forecasts and statements of expectation. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “hope,” “intend,” “look,” “may,” “plan,” “project,” “seek,” “target,” “trend,” “will,” “would,” and similar expressions, as they relate to us or our management, identify forward-looking statements.

Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by us and our management due to certain risks, uncertainties and assumptions. Certain factors that may affect our future results include, but are not limited to, potential delays or other problems in implementing our growth, expansion and acquisition strategies, including delays in identifying satisfactory sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices; the ability to enter into and/or close additional acquisitions; problems with or additional expenses relating to integrating acquisitions; the inability to realize expected cost savings and/or synergies from acquisitions, including the proposed reorganization; problems with managing acquisitions; the effect of the announcement of any future acquisition on customer relationships and operating results; the ability to consummate the proposed reorganization, including the receipt of shareholder approval and the receipt of required regulatory approvals; the availability of and access to capital; possible downgrades in our credit ratings or outlook which could increase the costs of funding from capital markets; the ability to attract new or retain existing or acquired deposits or to retain or grow loans and leases, including growth from unfunded closed loans; the ability to generate future revenue growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term interest rates; competitive factors and pricing pressures, including their effect on our net interest margin; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers and lessees, collateral values, the value of investment securities and asset recovery values; changes in legal and regulatory requirements, including additional legal, financial and regulatory requirements to which we are subject as a result of our total assets exceeding $10 billion; recently enacted and potential legislation and regulatory actions, and the costs and expenses to comply with new legislation and regulatory actions, including legislation and regulatory actions intended to stabilize economic conditions and credit markets, strengthen the capital of financial institutions, increase regulation of the financial services industry and protect homeowners or consumers; changes in U.S. government monetary and fiscal policy; possible further downgrade of U.S. Treasury securities; the ability to keep pace with technological changes, including changes regarding cyber security; an increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting us or our customers; adoption of new accounting standards or changes in existing standards; and adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions as well as other factors described in this quarterly report on Form 10-Q or as detailed from time to time in the other reports we file with the SEC, including those factors included in the disclosures under the heading “Forward-Looking Information” and “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2016 and under “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in, or implied by, such forward-looking statements. We disclaim any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise.

The following tables set forth selected unaudited consolidated financial data as of and for the three months ended March 31, 2017 and 2016 and supplemental unaudited quarterly financial data for each of the most recent eight quarters beginning with the second quarter of 2015 through the first quarter of 2017. These tables are qualified in their entirety by our consolidated financial statements and related notes presented elsewhere in this quarterly report on Form 10-Q. The calculations of our tangible book value per common share and our annualized returns on average tangible common stockholders’ equity and the reconciliations to generally accepted accounting principles (“GAAP”) are included in this MD&A under “Capital Resources and Liquidity” in this quarterly report on Form 10-Q.

	Three Months Ended March 31,
	2017			2016
	(Dollars in thousands, except per share amounts)
Income statement data:
Interest income	$	213,770		$	121,741
Interest expense		22,999			9,224
Net interest income		190,771			112,517
Provision for loan and lease losses		4,933			2,017
Non-interest income		29,058			19,865
Non-interest expense		78,268			47,686
Net income available to common stockholders		89,188			51,688
Common share and per common share data:
Earnings – diluted	$	0.73		$	0.57
Book value		23.63			16.62
Tangible book value		17.72			14.96
Dividends		0.17			0.15
Weighted-average diluted shares outstanding (thousands)		121,954			91,251
End of period shares outstanding (thousands)		121,575			90,714
Balance sheet data at period end:
Total assets	$	19,152,212		$	11,427,419
Non-purchased loans and leases		10,216,875			7,591,339
Purchased loans		4,580,047			1,678,351
Allowance for loan and lease losses		78,224			61,760
Foreclosed assets		36,899			22,248
Investment securities		1,470,568			627,946
Goodwill		660,789			125,693
Other intangibles - net of amortization		57,686			25,172
Deposits		15,713,427			9,626,825
Repurchase agreements with customers		80,609			65,883
Other borrowings		42,291			41,933
Subordinated notes		222,611			—
Subordinated debentures		118,380			117,823
Total common stockholders’ equity		2,873,317			1,508,080
Loan and lease (including purchased loans) to deposit ratio		94.17	%		96.29	%
Average balance sheet data:
Total average assets	$	18,746,726		$	10,492,707
Total average common stockholders’ equity		2,826,832			1,484,657
Average common equity to average assets		15.08	%		14.15	%
Performance ratios:
Return on average assets ⁽¹⁾		1.93	%		1.98	%
Return on average common stockholders’ equity ⁽¹⁾		12.80			14.00
Return on average tangible common stockholders’ equity ⁽¹⁾		17.17			15.59
Net interest margin – FTE ⁽¹⁾		4.88			4.92
Efficiency ratio		35.03			35.51
Common stock dividend payout ratio		23.16			26.31
Asset quality ratios:
Net charge-offs to average non-purchased loans and leases ^{(1) (2)}		0.05	%		0.06	%
Net charge-offs to average total loans and leases ⁽¹⁾		0.09			0.05
Nonperforming loans and leases to total loans and leases⁽³⁾		0.11			0.15
Nonperforming assets to total assets⁽³⁾		0.25			0.29
Allowance for loan and lease losses as a percentage of:
Total non-purchased loans and leases⁽⁴⁾		0.75	%		0.80	%
Nonperforming loans and leases⁽⁴⁾		692	%		543	%
Capital ratios at period end:
Common equity tier 1		9.94	%		10.08	%
Tier 1 risk based capital		9.94			10.89
Total risk based capital		11.89			11.35
Tier 1 leverage		11.95			14.05

	6/30/15			9/30/15			12/31/15			3/31/16			6/30/16			9/30/16			12/31/16			3/31/17
	(Dollars in thousands, except per share amounts)
Earnings Summary:
Net interest income	$	93,756		$	96,387		$	106,518		$	112,517		$	119,038		$	175,150		$	194,800		$	190,771
Federal tax (FTE) adjustment		2,552			2,368			2,092			1,911			2,067			2,533			3,254			3,594
Net interest income (FTE)		96,308			98,755			108,610			114,428			121,105			177,683			198,054			194,365
Provision for loan and lease losses		(4,308	)		(3,581	)		(5,211	)		(2,017	)		(4,834	)		(7,086	)		(9,855	)		(4,933	)
Non-interest income		23,270			22,138			30,540			19,865			22,733			29,231			30,571			29,058
Non-interest expense		(43,724	)		(45,428	)		(51,646	)		(47,686	)		(50,928	)		(78,781	)		(78,358	)		(78,268	)
Pretax income (FTE)		71,546			71,884			82,293			84,590			88,076			121,047			140,412			140,222
FTE adjustment		(2,552	)		(2,368	)		(2,092	)		(1,911	)		(2,067	)		(2,533	)		(3,254	)		(3,594	)
Provision for income taxes		(24,190	)		(23,385	)		(28,740	)		(30,984	)		(31,514	)		(42,470	)		(49,312	)		(47,417	)
Noncontrolling interest		(28	)		(3	)		(6	)		(7	)		(21	)		(14	)		(59	)		(23	)
Net income available to common stockholders	$	44,776		$	46,128		$	51,455		$	51,688		$	54,474		$	76,030		$	87,787		$	89,188
Earnings per common share – diluted	$	0.51		$	0.52		$	0.57		$	0.57		$	0.60		$	0.66		$	0.72		$	0.73
Non-interest Income:
Service charges on deposit accounts	$	7,088		$	7,425		$	7,558		$	7,657		$	8,119		$	10,926		$	11,759		$	11,301
Mortgage lending income		1,772			1,825			1,713			1,284			2,057			2,616			2,097			1,574
Trust income		1,463			1,500			1,508			1,507			1,574			1,564			1,623			1,631
BOLI income		1,785			2,264			2,412			2,861			2,745			4,638			4,564			4,464
Other income from purchased loans		6,971			5,456			4,790			3,052			4,599			4,635			4,993			3,737
Gains on investment securities		85			—			2,863			—			—			—			4			—
Gains on sales of other assets		2,557			1,905			7,463			1,027			998			594			1,537			1,619
Other		1,549			1,763			2,233			2,477			2,641			4,258			3,994			4,732
Total non-interest income	$	23,270		$	22,138		$	30,540		$	19,865		$	22,733		$	29,231		$	30,571		$	29,058
Non-interest Expense:
Salaries and employee benefits	$	22,646		$	21,207		$	21,504		$	23,362		$	24,921		$	38,069		$	36,481		$	38,554
Net occupancy expense		7,344			8,076			8,537			8,531			8,388			11,669			13,936			13,192
Other operating expenses		12,094			14,448			19,879			14,067			16,062			26,447			24,783			23,377
Amortization of intangibles		1,640			1,697			1,726			1,726			1,557			2,596			3,158			3,145
Total non-interest expense	$	43,724		$	45,428		$	51,646		$	47,686		$	50,928		$	78,781		$	78,358		$	78,268
Allowance for Loan and Lease Losses:
Balance at beginning of period	$	54,147		$	56,749		$	59,017		$	60,854		$	61,760		$	65,133		$	69,760		$	76,541
Net charge-offs		(1,706	)		(1,313	)		(3,374	)		(1,111	)		(1,461	)		(2,459	)		(3,074	)		(3,250	)
Provision for loan and lease losses		4,308			3,581			5,211			2,017			4,834			7,086			9,855			4,933
Balance at end of period	$	56,749		$	59,017		$	60,854		$	61,760		$	65,133		$	69,760		$	76,541		$	78,224
Selected Ratios:
Net interest margin – FTE ⁽¹⁾		5.37	%		5.07	%		4.98	%		4.92	%		4.82	%		4.90	%		5.02	%		4.88	%
Efficiency ratio		36.56			37.58			37.12			35.51			35.41			38.07			34.27			35.03
Net charge-offs to average non-purchased loans and leases ^{(1) (2)}		0.12			0.05			0.22			0.06			0.05			0.06			0.08			0.05
Net charge-offs to average total loans and leases ⁽¹⁾		0.11			0.08			0.17			0.05			0.06			0.07			0.09			0.09
Nonperforming loans and leases to total loans and leases⁽³⁾		0.34			0.26			0.20			0.15			0.09			0.08			0.15			0.11
Nonperforming assets to total assets ⁽³⁾		0.49			0.41			0.37			0.29			0.25			0.28			0.31			0.25
Allowance for loan and lease losses to total non-purchased loans and leases⁽⁴⁾		1.19			1.08			0.91			0.80			0.78			0.78			0.78			0.75
Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases⁽³⁾		0.50			0.41			0.28			0.23			0.22			0.17			0.16			0.16

The following discussion explains our financial condition and results of operations as of and for the three months ended March 31, 2017. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the consolidated financial statements. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 2016 previously filed with the SEC. Annualized results for these interim periods may not be indicative of results for the full year or future periods.

Bank of the Ozarks, Inc. is a bank holding company whose primary business is commercial banking conducted through its wholly-owned state chartered bank subsidiary – Bank of the Ozarks and various subsidiaries of the Bank. Our results of operations depend primarily on net interest income, which is the difference between the interest income from earning assets, such as loans, leases and investments, and the interest expense incurred on interest bearing liabilities, such as deposits, borrowings, subordinated notes and subordinated debentures. We also generate non-interest income, including, among others, service charges on deposit accounts, mortgage lending income, trust income, bank owned life insurance (“BOLI”) income, other income from purchased loans and gains on investment securities and from sales of other assets.

Our non-interest expense consists primarily of employee compensation and benefits, net occupancy and equipment expense and other operating expenses. Our results of operations are significantly affected by our provision for loan and lease losses and our provision for income taxes.

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. Our determination of (i) the provisions to and the adequacy of the allowance for loan and lease losses (“ALLL”), (ii) the fair value of our investment securities portfolio, (iii) the fair value of foreclosed assets and (iv) the fair value of the assets acquired and liabilities assumed pursuant to business combination transactions all involve a higher degree of judgment and complexity than our other significant accounting policies. Accordingly, we consider the determination of (i) provisions to and the adequacy of the ALLL, (ii) the fair value of our investment securities portfolio, (iii) the fair value of foreclosed assets and (iv) the fair value of the assets acquired and liabilities assumed pursuant to business combination transactions to be critical accounting policies. A detailed discussion of each of these critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2016 previously filed with the SEC. Other than the adoption of Accounting Standards Update 2016-09 “Improvements to Employee Share-Based Payment Accounting” effective January 1, 2017, there has been no change in our critical accounting policies and no material change in the application of critical accounting policies as presented in our Annual Report on Form 10-K for the year ended December 31, 2016.

Net income available to our common stockholders was $89.2 million for the first quarter of 2017, a 72.6% increase from $51.7 million for the first quarter of 2016. Diluted earnings per common share were $0.73 for the first quarter of 2017, a 28.1% increase from $0.57 for the first quarter of 2016.

Our annualized return on average assets was 1.93% for the first quarter of 2017 compared to 1.98% for the first quarter of 2016. Our annualized return on average common stockholders’ equity was 12.80% for the first quarter of 2017 compared to 14.00% for the first quarter of 2016. Our annualized return on average tangible common stockholders’ equity was 17.17% for the first quarter of 2017 compared to 15.59% for the first quarter of 2016. The calculations of our average tangible common stockholders’ equity and our annualized return on average tangible common stockholders’ equity and the reconciliations to generally accepted accounting principles (“GAAP”) are included under the heading “Capital Resources and Liquidity” in this MD&A.

Total assets were $19.15 billion at March 31, 2017 compared to $18.89 billion at December 31, 2016. Non-purchased loans and leases were $10.22 billion at March 31, 2017 compared to $9.61 billion at December 31, 2016. Purchased loans were $4.58 billion at March 31, 2017 compared to $4.96 billion at December 31, 2016. Total loans and leases were $14.80 billion at March 31, 2017 compared to $14.56 billion at December 31, 2016. Deposits were $15.71 billion at March 31, 2017 compared to $15.57 billion at December 31, 2016.

Common stockholders’ equity was $2.87 billion at March 31, 2017 compared to $2.79 billion at December 31, 2016. Tangible common stockholders’ equity was $2.15 billion at March 31, 2017 compared to $2.07 billion at December 31, 2016. Book value per common share was $23.63 at March 31, 2017 compared to $23.02 at December 31, 2016. Tangible book value per common share was $17.72 at March 31, 2017 compared to $17.08 at December 31, 2016. The calculations of our tangible common stockholders’ equity

and tangible book value per common share and the reconciliations to GAAP are included under the heading “Capital Resources and Liquidity” in this MD&A.

Net interest income is a significant source of our earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on interest bearing liabilities. The volume of interest earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income.

Net interest income and net interest margin are analyzed in this discussion and the following tables on a fully taxable equivalent (“FTE”) basis. The adjustment to convert certain income to a FTE basis consists of dividing federal tax-exempt income by one minus our statutory federal income tax rate of 35%. The FTE adjustments to net interest income were $3.6 million and $1.9 million for the three months ended March 31, 2017 and 2016, respectively. No adjustments have been made in this analysis for income exempt from state income taxes or for interest expense deductions disallowed under the provisions of the Internal Revenue Code as a result of investment in certain tax-exempt securities.

Net interest income for the first quarter of 2017 increased 69.9% to $194.4 million compared to $114.4 million for the first quarter of 2016. This increase in net interest income for the first quarter of 2017 compared to the same period in 2016 was primarily due to the increase in average earning assets, which increased 72.5% to $16.14 billion for the first quarter of 2017 compared to $9.36 billion for the first quarter of 2016, partially offset by a decrease in our net interest margin.

The increase in average earning assets was primarily due to an increase in the average balances of non-purchased loans and leases which increased $2.81 billion, or 40.2%, for the first quarter of 2017 compared to the same period in 2016 and an increase in the average balance of our purchased loans which increased $3.07 billion, or 176.1%, for the first quarter of 2017 compared to the same period in 2016. The increase in the average balance of our non-purchased loans and leases was due primarily to strong growth in loan originations and fundings. The increase in the average balance of our purchased loans was due to our acquisitions of Community & Southern Holdings, Inc. (“C&S”) on July 20, 2016 and C1 Financial, Inc. (“C1”) on July 21, 2016.

Our net interest margin for the first quarter of 2017 decreased four basis points (“bps”) to 4.88% compared to 4.92% for the first quarter in 2016. This decrease was primarily due to a 20 bps increase in the rate paid on interest bearing liabilities, partially offset by a 14 bps increase in the yield on interest earning assets.

The yield on interest earning assets was 5.46% for the first quarter of 2017 compared to 5.32% for the first quarter of 2016. The yield on our non-purchased loans and leases increased 26 bps for the first quarter of 2017 compared to the same period in 2016. This increase was primarily due to (i) higher yields on newly originated loans in recent months and prepayment penalties and/or yield maintenance provisions on certain loans that paid off early during the first quarter of 2017 and (ii) recent increases in London Interbank Offered Rates (“LIBOR”) and the federal funds target rate. The yield on our purchased loan portfolio decreased 30 bps for the first quarter of 2017 compared to the same period in 2016. This decrease was primarily attributable to the loans acquired in our C&S and C1 acquisitions, many of which did not contain evidence of credit deterioration on the dates of acquisition and were priced at a lower yield compared to the then existing yield on our purchased loan portfolio. The yield on our aggregate investment securities portfolio decreased 120 bps for the first quarter of 2017 compared to the same period in 2016. This decrease was primarily the result of (i) the investment securities acquired in our C&S acquisition whose yields were lower than our existing portfolio of investment securities and, to a lesser extent, (ii) the relatively low interest rate environment for tax-exempt municipal securities which resulted in certain issuers of such investment securities calling higher-rate environment securities and refinancing those securities at lower interest rates during 2016.

The overall increase in rates on average interest bearing liabilities, which increased 20 bps for the first quarter of 2017 compared to the same period in 2016, was primarily due to (i) an increase in rates on interest bearing deposits, which increased 14 bps for the first quarter of 2017 compared to the same period in 2016, (ii) an increase in rates on our subordinated debentures, which increased 45 bps for the first quarter of 2017 compared to the same period in 2016 and (iii) the issuance of our subordinated notes in the second quarter of 2016. These increases were partially offset by a decrease in rates on other borrowings. The increase in rates on our interest bearing deposits, the largest component of our interest bearing liabilities, was primarily due to our deposit gathering initiatives that were implemented in several target markets to fund growth in loans and leases. To the extent we have future growth in loans and leases, we would expect to increase deposit pricing in certain target markets to fund such growth. Any such increase in deposit pricing is expected to result in increased deposit costs in future periods.

Our other borrowing sources include (i) repurchase agreements with customers (“repos”), (ii) other borrowings comprised primarily of Federal Home Loan Bank of Dallas (“FHLB”) advances, and, to a lesser extent, federal funds purchased, (iii) subordinated notes and (iv) subordinated debentures. The rates on repos increased four bps for the first quarter of 2017 compared to the same period in 2016. The rates on our other borrowing sources, which consist primarily of fixed rate callable FHLB advances, decreased 24 bps in the first quarter of 2017 compared to the same period in 2016. On June 23, 2016, the Company completed an

underwritten public offering of $225 million in aggregate principal amount of our 5.50% fixed-to-floating rate subordinated notes. The rate on these subordinated notes, including amortization of debt issuance costs, using a level-yield methodology over the estimated holding period of seven years, was 5.81% during the first quarter of 2017. The rates paid on our subordinated debentures, which are tied to a spread over the 90-day LIBOR and reset periodically, increased due to increases in LIBOR on the applicable reset dates.

The following table sets forth certain information relating to our net interest income for the periods indicated. The yields and rates are derived by dividing interest income or interest expense by the average balance of the related assets or liabilities, respectively. Average balances are derived from daily average balances for such assets and liabilities. The average balances of investment securities are computed based on amortized cost adjusted for unrealized gains and losses on investment securities AFS and other-than-temporary impairment writedowns, if any. The yields on investment securities include amortization of premiums and accretion of discounts. The average balance of non-purchased loans and leases includes non-purchased loans and leases on which we have discontinued accruing interest. The yields on non-purchased loans and leases and purchased loans without evidence of credit deterioration at date of acquisition include late fees, any prepayment penalties or yield maintenance provisions on loan payments and amortization of certain deferred fees, origination costs and, for such purchased loans, accretion or amortization of any purchase accounting yield adjustment. The yields on purchased loans with evidence of credit deterioration at date of acquisition consist of accretion of the net present value of expected future cash flows using the effective yield method over the term of the loans and include late fees. Interest expense and rates on our other borrowing sources are presented net of interest capitalized on construction projects and include the amortization of debt issuance costs, if any. The interest expense on the subordinated debentures assumed in our acquisition of Intervest Bancshares Corporation (“Intervest”) includes the amortization of purchase accounting adjustments.

	Three Months Ended March 31,
	2017							2016
	Average Balance		Income/ Expense		Yield/ Rate			Average Balance		Income/ Expense		Yield/ Rate
	(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold	$	41,806	$	20		0.19	%	$	2,987	$	6		0.77	%
Investment securities:
Taxable		663,153		3,816		2.33			264,098		2,270		3.46
Tax-exempt – FTE		803,589		10,019		5.06			338,780		5,281		6.27
Non-purchased loans and leases – FTE		9,827,717		127,515		5.26			7,009,068		87,072		5.00
Purchased loans		4,807,080		75,993		6.41			1,740,827		29,023		6.71
Total earning assets – FTE		16,143,345		217,363		5.46			9,355,760		123,652		5.32
Non-interest earning assets		2,603,381							1,136,947
Total assets	$	18,746,726						$	10,492,707
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	7,862,653	$	8,458		0.44	%	$	4,595,405	$	3,718		0.33	%
Time deposits of $100,000 or more		3,241,587		7,132		0.89			1,622,703		2,947		0.73
Other time deposits		1,699,858		2,787		0.66			987,231		1,185		0.48
Total interest bearing deposits		12,804,098		18,377		0.58			7,205,339		7,850		0.44
Repurchase agreements with customers		79,884		30		0.15			68,301		19		0.11
Other borrowings		42,137		222		2.14			51,053		302		2.38
Subordinated notes		222,561		3,188		5.81			—		—		—
Subordinated debentures		118,300		1,181		4.05			117,749		1,053		3.60
Total interest bearing liabilities		13,266,980		22,998		0.70			7,442,442		9,224		0.50
Non-interest bearing liabilities:
Non-interest bearing deposits		2,574,540							1,508,829
Other non-interest bearing liabilities		75,107							53,615
Total liabilities		15,916,627							9,004,886
Common stockholders’ equity		2,826,832							1,484,657
Noncontrolling interest		3,267							3,164
Total liabilities and stockholders’ equity	$	18,746,726						$	10,492,707
Net interest income – FTE			$	194,365						$	114,428
Net interest margin – FTE						4.88	%						4.92	%

The following table reflects how changes in the volume of interest earning assets and interest bearing liabilities and changes in interest rates have affected our interest income - FTE, interest expense and net interest income - FTE for the periods indicated. Information is provided in each category with respect to changes attributable to (1) changes in volume (changes in volume multiplied by prior yield/rate); (2) changes in yield/rate (changes in yield/rate multiplied by prior volume); and (3) changes in both yield/rate and volume (changes in yield/rate multiplied by changes in volume). The changes attributable to the combined impact of volume and yield/rate have all been allocated to the changes due to volume.

Our non-interest income consists primarily of, among others, service charges on deposit accounts, mortgage lending income, trust income, BOLI income, other income from purchased loans and gains on investment securities and on sales of other assets. Non-interest income for the first quarter of 2017 increased 46.3% to $29.1 million compared to $19.9 million for the first quarter of 2016.

Service charges on deposit accounts increased 47.6% to $11.3 million for the first quarter of 2017 compared to $7.7 million for the first quarter of 2016. The increase in service charges on deposit accounts was primarily a result of the addition of deposit customers from our C&S and C1 acquisitions and growth in the number of transaction accounts. Effective July1, 2017, we will be subject to the provisions of the Durbin Amendment, which are applicable to financial institutions whose total assets exceed $10 billion and which limit the amount of interchange fees that may be charged for debit and prepaid card transactions. Had we been subject to the Durbin Amendment in 2016, our interchange fee income (which is included in our non-interest income from service charges on deposit accounts) would have been reduced by approximately $7.4 million for the full year of 2016.

Mortgage lending income increased 22.6% to $1.6 million for the first quarter of 2017 compared to $1.3 million for the first quarter of 2016. The increase in mortgage lending income was primarily attributable to better pricing in recent months on mortgage originations for new home purchases. The volume of originations of mortgage loans available for sale increased 1.9% to $48.2 million for the first quarter of 2017 compared to $47.3 million for the first quarter of 2016.

Trust income increased 8.2% to $1.6 million for the first quarter of 2017 compared to $1.5 million for the first quarter of 2016. The increase in trust income is primarily the result of growth in both corporate trust and personal trust income.

BOLI income increased 56.0% to $4.5 million for the first quarter of 2017 compared to $2.9 million for the first quarter of 2016. The increase in BOLI income for the first quarter of 2017 was primarily due to income earned on the purchase of $103 million of BOLI in August 2016. BOLI income in the form of increases in cash surrender value helps to offset a portion of employee benefit costs.

Other income from purchased loans was $3.7 million in the first quarter of 2017 compared to $3.1 million in the first quarter of 2016. Other income from purchased loans consists primarily of income recognized on purchased loan prepayments and payoffs that are not considered yield adjustments. Because other income from purchased loans may be significantly affected by purchased loan payments and payoffs, this income item may vary significantly from period to period.

Gains on sale of other assets were $1.6 million in the first quarter of 2017 compared to $1.0 million in the first quarter of 2016.

Our non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses. Non-interest expense increased 64.1% to $78.3 million for the first quarter of 2017 compared to $47.7 million for the first quarter of 2016. The increase in our non-interest expense is primarily attributable to our C&S and C1 acquisitions, both of which closed in July 2016.

Salaries and employee benefits, our largest component of non-interest expense, increased 65.0% to $38.6 million in the first quarter of 2017 compared to $23.4 million in the first quarter of 2016. We had 2,344 full-time equivalent employees at March 31, 2017, an increase of 42.4%, compared to 1,646 full-time equivalent employees at March 31, 2016.

Net occupancy and equipment expense for the first quarter of 2017 increased 54.6% to $13.2 million compared to $8.5 million for the first quarter of 2016. At March 31, 2017, we had 250 offices, an increase of 42.0%, compared to 176 offices at March 31, 2016.

Our aggregate other operating expenses increased 67.9% to $26.5 million for the first quarter of 2017 compared to $15.8 million for the first quarter of 2016. These increases were primarily due to the growth of the Company, including the growth added from the C&S and C1 acquisitions.

Our efficiency ratio (non-interest expense divided by the sum of net interest income – FTE and non-interest income) was 35.0% for the first quarter of 2017 compared to 35.5% for the first quarter of 2016.

The provision for income taxes was $47.4 million for the first quarter of 2017 compared to $31.0 million for the first quarter of 2016. The effective income tax rate was 34.7% for the first quarter of 2017 compared to 37.5% for the first quarter of 2016. The decrease in the effective tax rate for the first quarter of 2017 compared to the first quarter of 2016 was due primarily to a decrease in certain non-deductible executive compensation expenses and the change in the treatment of excess tax benefits pursuant to the adoption of ASU 2016-09. The effective tax rates were also affected by various other factors related to non-taxable income and non-deductible expenses.

At March 31, 2017, our total loan and lease portfolio was $14.80 billion compared to $14.56 billion at December 31, 2016. Real estate loans, our largest category of loans, consist of all loans secured by real estate as evidenced by mortgages or other liens, including all loans made to finance the development of real property construction projects, provided such loans are secured by real estate. Total real estate loans were $12.29 billion at March 31, 2017 compared to $12.09 billion at December 31, 2016. The amount and type of loans and leases outstanding as of the dates indicated, and their respective percentage of the total loan and lease portfolio, are reflected in the following table.

Included in “other” loans at March 31, 2017 and December 31, 2016 are loans totaling $877 million and $835 million, respectively, which were originated to acquire promissory notes from non-depository financial institutions and are typically collateralized by an assignment of the promissory note and all related note documents including mortgages, deeds of trust, etc. While the loans are considered “other” loans in accordance with Federal Deposit Insurance Corporation (“FDIC”) Call Report instructions, we underwrite these lending transactions based on the fundamentals of the underlying collateral, repayment sources and guarantors, among others, consistent with other similar lending transactions.

The amount and type of our total real estate loans at March 31, 2017, based on the metropolitan statistical area (“MSA”) and other geographic areas in which the principal collateral is located, are reflected in the following table. Data for individual states and MSAs is separately presented when aggregate real estate loans in that state or MSA exceed $10.0 million.

	Residential 1-4 Family		Non-Farm/ Non-Residential		Construction/ Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)
New York:
New York–Newark–Jersey City, NY–NJ–PA MSA	$	6,400	$	486,833	$	2,061,049	$	—	$	71,729	$	2,626,011
All other New York⁽¹⁾		624		8,224		810		—		—		9,658
Total New York		7,024		495,057		2,061,859		—		71,729		2,635,669
Florida:
Miami–Fort Lauderdale–West Palm Beach, FL MSA		147,868		318,531		361,964		400		3,720		832,483
Tampa–St. Petersburg–Clearwater, FL MSA		69,876		258,083		92,264		318		21,163		441,704
North Port–Sarasota–Bradenton, FL MSA		39,811		53,742		36,100		9,130		801		139,584
Orlando–Kissimmee–Sanford, FL MSA		6,209		77,821		55,171		—		56		139,257
Cape Coral–Fort Myers, FL MSA		20,186		60,353		38,656		—		496		119,691
Jacksonville, FL MSA		4,845		55,068		12,448		—		28,248		100,609
Crestview–Fort Walton Beach–Destin, FL MSA		4,013		2,367		32,336		145		—		38,861
Deltona–Daytona Beach–Ormond Beach, FL MSA		743		11,269		7,283		—		14,774		34,069
Lakeland–Winter Haven, FL MSA		490		23,688		1,841		—		48		26,067
Ocala, FL MSA		2,998		21,323		—		—		—		24,321
Punta Gorda, FL MSA		10,116		6,507		5,646		—		—		22,269
Sebastian–Vero Beach, FL MSA		20		20,451		—		—		1,450		21,921
Sebring, FL MSA		—		21,092		—		—		26		21,118
Pensacola–Ferry Pass–Brent, FL MSA		2,493		859		12,475		—		—		15,827
Palm Bay–Melbourne–Titusville, FL MSA		581		5,966		—		—		4,263		10,810
All other Florida⁽¹⁾		7,209		97,510		—		986		654		106,359
Total Florida		317,458		1,034,630		656,184		10,979		75,699		2,094,950
Georgia:
Atlanta–Sandy Springs–Roswell, GA MSA		184,543		435,493		286,804		4,036		81,269		992,145
Savannah, GA MSA		3,938		43,359		14		—		—		47,311
Dalton, GA MSA		12,219		20,689		900		1,135		1,082		36,025
Gainesville, GA MSA		5,382		15,379		5,760		160		714		27,395
Brunswick, GA MSA		10,212		4,551		937		—		8,233		23,933
Macon, GA MSA		4,919		8,803		360		13		4,728		18,823
Athens–Clarke County, GA MSA		3,457		10,956		2,244		124		—		16,781
Valdosta, GA MSA		6,080		5,607		836		417		163		13,103
Augusta–Richmond County GA–SC MSA		576		9,586		—		—		16		10,178
All other Georgia⁽¹⁾		59,143		57,702		25,291		4,525		26,260		172,921
Total Georgia		290,469		612,125		323,146		10,410		122,465		1,358,615
Texas:
Dallas–Fort Worth–Arlington, TX MSA		39,765		125,478		321,613		185		35,235		522,276
Houston–The Woodlands–Sugar Land, TX MSA		11,041		82,987		164,457		—		151,921		410,406
Austin–Round Rock, TX MSA		10,476		65,780		145,790		—		3,421		225,467
College Station–Bryan, TX MSA		—		1,307		13,832		—		16,634		31,773
Texarkana, TX–AR MSA		10,757		9,335		1,045		703		783		22,623
Lubbock, TX MSA		—		4,681		—		—		17,155		21,836
San Antonio–New Braunfels, TX MSA		1,446		5,936		5,165		—		1,156		13,703
All other Texas⁽¹⁾		1,115		29,424		11,309		43		200		42,091
Total Texas		74,600		324,928		663,211		931		226,505		1,290,175

Geographic Distribution of Total Real Estate Loans (continued)

	Residential 1-4 Family		Non-Farm/ Non-Residential		Construction/ Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)
Arkansas:
Little Rock–North Little Rock–Conway, AR MSA		155,926		283,316		49,590		16,572		21,490		526,894
Hot Springs, AR MSA		49,896		84,847		17,809		855		3,023		156,430
Fayetteville–Springdale–Rogers, AR–MO MSA		16,921		58,488		24,470		12,440		13,487		125,806
Fort Smith, AR–OK MSA		26,777		57,282		6,812		3,022		11,261		105,154
Southern Arkansas⁽²⁾		26,397		18,638		2,435		20,038		710		68,218
Western Arkansas⁽³⁾		18,574		32,280		8,528		6,537		1,153		67,072
Northern Arkansas⁽⁴⁾		31,276		11,717		2,773		11,474		2,700		59,940
All other Arkansas⁽¹⁾		20,360		23,184		16,500		30,926		3,248		94,218
Total Arkansas		346,127		569,752		128,917		101,864		57,072		1,203,732
North Carolina/South Carolina:
Charlotte–Concord–Gastonia, NC–SC MSA		52,575		129,799		119,237		1,352		11,139		314,102
Winston–Salem, NC MSA		40,781		35,350		7,510		—		1,160		84,801
North Carolina Foothills⁽⁵⁾		42,347		26,273		5,299		2,822		1,428		78,169
Charleston–North Charleston, SC MSA		1,302		12,708		37,827		—		5,114		56,951
Wilmington, NC MSA		8,939		27,808		8,752		416		—		45,915
Columbia, SC MSA		1,717		41,078		1,327		—		—		44,122
Greensboro–High Point, NC MSA		15,997		17,997		5,101		827		2,231		42,153
Raleigh, NC MSA		708		3,341		14,368		—		19,353		37,770
Hilton Head Island–Bluffton–Beaufort, SC MSA		3,350		10,288		5,004		—		2,329		20,971
Myrtle Beach–Conway–North Myrtle Beach, SC–NC MSA		3,427		6,333		718		—		5,171		15,649
Greenville–Anderson–Mauldin, SC MSA		5,990		2,604		2,670		—		—		11,264
Spartanburg, SC MSA		1,596		96		8,342		—		550		10,584
All other North Carolina⁽¹⁾		8,035		24,225		38,475		—		445		71,180
All other South Carolina⁽¹⁾		738		10,949		2,110		—		—		13,797
Total North Carolina / South Carolina		187,502		348,849		256,740		5,417		48,920		847,428
California:
Los Angeles–Long Beach–Anaheim, CA MSA		—		132,278		181,570		—		—		313,848
Riverside–San Bernardino–Ontario, CA MSA		—		102,144		4,451		—		38,569		145,164
San Francisco–Oakland–Hayward, CA MSA		—		91,403		7,791		—		—		99,194
San Diego–Carlsbad, CA MSA		—		45,810		27,503		—		—		73,313
Sacramento–Roseville–Arden–Arcade, CA MSA		—		—		57,544		—		—		57,544
Oxnard–Thousand Oaks–Ventura, CA MSA		—		—		33,216		—		—		33,216
San Jose–Sunnyvale–Santa Clara, CA MSA		—		—		28,213		—		—		28,213
Stockton–Lodi, CA MSA		—		—		24,878		—		—		24,878
All other California⁽¹⁾		—		4,779		—		—		—		4,779
Total California		—		376,414		365,166		—		38,569		780,149
Colorado:
Denver–Aurora–Lakewood, CO MSA		9		88,141		142,838		—		—		230,988
Boulder, CO MSA		—		38,699		—		—		—		38,699
All other Colorado⁽¹⁾		1,348		—		46,995		—		—		48,343
Total Colorado		1,357		126,840		189,833		—		—		318,030
Tennessee:
Nashville–Davidson–Murfreesboro–Franklin, TN MSA		—		166,555		93,188		—		—		259,743
Chattanooga, TN–GA MSA		665		33,247		45		—		—		33,957
All other Tennessee⁽¹⁾		1,379		8,359		257		—		—		9,995
Total Tennessee		2,044		208,161		93,490		—		—		303,695

Geographic Distribution of Total Real Estate Loans (continued)

	Residential 1-4 Family		Non-Farm/ Non-Residential		Construction/ Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)
Illinois:
Chicago–Naperville–Elgin, IL–IN–WI MSA		—		1,856		158,956		—		2,170		162,982
Bloomington, IL MSA		—		12,204		—		—		—		12,204
All other Illinois⁽¹⁾		—		1,350		1,206		—		—		2,556
Total Illinois		—		15,410		160,162		—		2,170		177,742

Phoenix–Mesa–Scottsdale, AZ MSA		—		19,720		113,046		—		32,989		165,755

Seattle–Tacoma–Bellevue, WA MSA		—		53,864		87,079		—		—		140,943

Nevada:
Las Vegas–Henderson–Paradise, NV MSA		—		81,161		—		—		37,787		118,948
Reno, NV MSA		—		10,604		—		—		—		10,604
Total Nevada		—		91,765		—		—		37,787		129,552

Cayman Islands		—		128,575		—		—		—		128,575

Washington, DC / Maryland:
Washington–Arlington–Alexandria, DC–VA– MD–WV MSA		319		10,992		66,676		—		—		77,987
All other Maryland⁽¹⁾		—		1,383		—		—		8,970		10,353
Total Washington, DC / Maryland		319		12,375		66,676		—		8,970		88,340

Providence–Warwick, RI–MA MSA		—		82,024		—		—		—		82,024

Alabama:
Birmingham–Hoover, AL MSA		603		—		20,154		—		—		20,757
Mobile, AL MSA		4,738		14,444		840		—		724		20,746
Huntsville, AL MSA		743		10,705		1,548		—		—		12,996
All other Alabama⁽¹⁾		14,994		4,413		3,450		418		3,267		26,542
Total Alabama		21,078		29,562		25,992		418		3,991		81,041
Pennsylvania:
Philadelphia–Camden–Wilmington, PA–NJ–DE– MD MSA		—		—		31,107		—		—		31,107
Lebanon, PA MSA		—		18,557		—		—		—		18,557
All other Pennsylvania⁽¹⁾		—		21,435		—		—		—		21,435
Total Pennsylvania		—		39,992		31,107		—		—		71,099

Urban Honolulu, HI MSA		—		—		—		—		61,043		61,043

Oregon:
Portland–Vancouver–Hillsboro, OR–WA MSA		—		—		17,737		—		23,427		41,164
Bend–Redmond, OR MSA		—		11,425		—		—		—		11,425
All other Oregon⁽¹⁾		—		8,391		—		—		—		8,391
Total Oregon		—		19,816		17,737		—		23,427		60,980
Ohio:
Cincinnati, OH–KY–IN MSA		—		25,449		—		—		—		25,449
Columbus, OH MSA		—		7,185		5,722		—		—		12,907
All other Ohio⁽¹⁾		—		2,967		—		—		—		2,967
Total Ohio		—		35,601		5,722		—		—		41,323

Geographic Distribution of Total Real Estate Loans (continued)

	Residential 1-4 Family		Non-Farm/ Non-Residential		Construction/ Land Development		Agricultural		Multifamily Residential		Total
	(Dollars in thousands)
Missouri:
St. Louis, MO–IL MSA		—		397		—		—		19,367		19,764
Kansas City, MO–KS MSA		210		10,768		1,694		—		—		12,672
All other Missouri⁽¹⁾		534		5,059		2,536		—		—		8,129
Total Missouri		744		16,224		4,230		—		19,367		40,565

Minneapolis–St. Paul–Bloomington, MN MSA		—		29,145		—		—		—		29,145

Kansas:
Manhattan, KS MSA		—		—		24,675		—		—		24,675
All other Kansas⁽¹⁾		—		1,243		—		—		—		1,243
Total Kansas		—		1,243		24,675		—		—		25,918
Virginia:
Virginia Beach–Norfolk–Newport News, VA–NC MSA		—		7,370		4,753		—		—		12,123
All other Virginia⁽¹⁾		591		8,822		703		—		76		10,192
Total Virginia		591		16,192		5,456		—		76		22,315
Oklahoma:
Tulsa, OK MSA		—		8,309		—		—		1,991		10,300
All other Oklahoma⁽¹⁾		909		2,848		29		4,009		3,978		11,773
Total Oklahoma		909		11,157		29		4,009		5,969		22,073
Indiana:
Indianapolis–Carmel–Anderson, IN MSA		—		2,405		8,269		—		—		10,674
All Other Indiana		—		1,864		—		—		—		1,864
Total Indiana		—		4,269		8,269		—		—		12,538
Mississippi:
Gulfport–Biloxi–Pascagoula, MS MSA		—		9,514		2,140		—		—		11,654
All other Mississippi⁽¹⁾		36		—		—		563		—		599
Total Mississippi		36		9,514		2,140		563		—		12,253

Bahamas		—		11,377		—		—		—		11,377

Connecticut		—		10,525		—		—		—		10,525

All other states⁽⁶⁾		2,028		29,180		8,299		—		2,058		41,565

Total Real Estate Loans	$	1,252,286	$	4,764,286	$	5,299,165	$	134,591	$	838,806	$	12,289,134

The amount and type of total non-farm/non-residential loans, as of the dates indicated, and their respective percentage of the total non-farm/non-residential loan portfolio are reflected in the following table.

The amount and type of total construction/land development loans, as of the dates indicated, and their respective percentage of the total construction/land development loan portfolio are reflected in the following table.

Many of our construction and development loans provide for the use of interest reserves. When we underwrite construction and development loans, we consider the expected total project costs, including hard costs such as land, site work and construction costs and soft costs such as architectural and engineering fees, closing costs, leasing commissions and construction period interest. For any construction and development loan with interest reserves, we also consider the construction period interest in our underwriting process (otherwise, our underwriting of such loans with and without interest reserves is virtually identical). Based on the total project costs and other factors, we determine the required borrower cash equity contribution and the maximum amount we are willing to loan. In the vast majority of cases, we require that all of the borrower’s equity and all other required subordinated elements of the capital structure be fully funded prior to any significant loan advances. This ensures that the borrower’s cash equity required to complete the project will be available for such purposes. As a result of this practice, the borrower’s cash equity typically goes toward the purchase of the land and early stage hard costs and soft costs. This results in our funding the loan later as the project progresses, and accordingly, we typically fund the majority of the construction period interest through loan advances. Generally, as part of our underwriting process, we require the borrower’s cash equity to cover a majority, or all, of the soft costs, including an amount equal to construction period interest and an appropriate portion of the hard costs. While we had advanced interest reserves as part of the funding process, we

believe that the borrowers in effect had in most cases provided for these sums as part of their initial equity contribution. During the three months ended March 31, 2017, there were no situations where additional interest reserves were advanced on a loan to avoid such loan from becoming nonperforming, and at March 31, 2017, we had no construction and development loans with interest reserves that were nonperforming.

During the first quarter of 2017, we recognized $35.2 million of interest income on construction and development loans from the advance of interest reserves. We advanced construction period interest on construction and development loans totaling $44.1 million in the first quarter of 2017.

The maximum committed balance of all construction and development loans which provide for the use of interest reserves at March 31, 2017 was approximately $14.08 billion, of which $4.38 billion was outstanding at March 31, 2017 and $9.70 billion remained to be advanced. The weighted average loan-to-cost on such loans, assuming such loans are ultimately fully advanced, will be approximately 50%, which means that the weighted average cash equity contributed on such loans, assuming such loans are ultimately fully advanced, will be approximately 50%. The weighted average final loan-to-value ratio on such loans, based on the most recent appraisals and assuming such loans are ultimately fully advanced, is expected to be approximately 43%.

The following table reflects total loans and leases as of March 31, 2017 grouped by expected amortizations, expected paydowns or the earliest repricing opportunity for floating rate loans. This cash flow or repricing schedule approximates our ability to reprice the outstanding principal of total loans and leases either by adjusting rates on existing loans and leases or reinvesting principal cash flow in new loans and leases. For non-purchased loans and leases and purchased loans without evidence of credit deterioration on the date of acquisition, the table below reflects the earliest contractual repricing period. For purchased loans with evidence of credit deterioration at the date of acquisition, the table below reflects estimated cash flows based on the most recent evaluation of each individual loan. Because income on purchased loans with evidence of credit deterioration on the date of acquisition is recognized by accretion of the discount of estimated cash flows, such loans are not considered to be floating or adjustable rate loans and are reported below as fixed rate loans.

At March 31, 2017, most of our floating rate loans are tied to three major benchmark interest rates, the 1-month LIBOR, 3-month LIBOR and Wall Street Journal Prime interest rate. The following table is a summary of our floating rate loan portfolio and contractual interest rate indices.

The following table presents the amount of unpaid principal balance, the valuation discount and the carrying value of purchased loans as of the dates indicated.

The following table presents a summary, for the periods indicated, of the activity of our purchased loans with evidence of credit deterioration at the date of acquisition.

A summary of changes in the accretable difference on purchased loans with evidence of credit deterioration at the date of acquisition is shown below for the periods indicated.

Our nonperforming assets consist of (1) nonaccrual loans and leases, (2) accruing loans and leases 90 days or more past due, (3) certain troubled and restructured loans for which a concession has been granted by us to the borrower 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 or lease obligations or upon foreclosure. Purchased loans are not included in the following table as nonperforming assets, except for their inclusion in total assets for purposes of calculation of certain asset quality ratios, but are analyzed and discussed separately elsewhere in this MD&A.

The accrual of interest on non-purchased loans and leases is discontinued when, in management’s opinion, the borrower or lessee may be unable to meet payments as they become due. We generally place a loan or lease on nonaccrual status when such loan or lease is (i) deemed impaired or (ii) 90 days or more past due, or earlier when doubt exists as to the ultimate collection of payments. We may continue to accrue interest on certain loans or leases contractually past due 90 days or more if such loans or leases are both well secured and in the process of collection. At the time a loan or lease is placed on nonaccrual status, interest previously accrued but uncollected is reversed and charged against interest income. Nonaccrual loans and leases are generally returned to accrual status when payments are less than 90 days past due and we reasonably expect to collect all payments. If a loan or lease is determined to be uncollectible, the portion of the principal determined to be uncollectible will be charged against the ALLL. Loans for which the terms have been modified and for which (i) the borrower is experiencing financial difficulties and (ii) we have granted a concession to the borrower are considered troubled debt restructurings (“TDRs”) and are included in impaired loans and leases. Income on nonaccrual loans or leases, including impaired loans and leases but excluding certain TDRs which may continue to accrue interest, is recognized on a cash basis when and if actually collected.

The following table presents a summary of nonperforming assets, excluding purchased loans, as of the dates indicated.

If an adequate current determination of collateral value has not been performed, once a loan or lease is considered impaired, we seek to establish an appropriate value for the collateral. This assessment may include (i) obtaining an updated appraisal, (ii) obtaining one or more broker price opinions or comprehensive market analyses, (iii) internal evaluations or (iv) other methods deemed appropriate considering the size and complexity of the loan and the underlying collateral. On an ongoing basis, typically at least quarterly, we evaluate the underlying collateral on all impaired loans and leases and, if needed, due to changes in market or property conditions, the underlying collateral is reassessed and the estimated fair value is revised. The determination of collateral value includes any adjustments considered necessary related to estimated holding periods and estimated selling costs.

At March 31, 2017, we had reduced the carrying value of our non-purchased loans and leases deemed impaired (all of which were included in nonaccrual loans and leases) by $4.4 million to the estimated fair value of such loans and leases of $8.4 million. The adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of $2.6 million of partial charge-offs and $1.8 million of specific loan and lease loss allocations. These amounts do not include our $13.9 million of impaired purchased loans at March 31, 2017.

The following table is a summary of the amount and type of foreclosed assets as of the dates indicated.

The following tables present information concerning the geographic location of nonperforming assets, excluding purchased loans, as of the dates indicated. Nonperforming loans and leases are reported in the physical location of the principal collateral. Foreclosed assets are reported in the physical location of the asset. Repossessions are reported at the physical location where the borrower resided or had its principal place of business at the time of repossession.

As of March 31, 2017 and December 31, 2016, we had identified purchased loans where we had determined it was probable that we would be unable to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or the expected performance of such loans had deteriorated from our performance expectations established in conjunction with the determination of the Day 1 Fair Values or since our most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). The following table presents a summary of such impaired purchased loans as of the dates indicated.

At March 31, 2017, our ALLL was $78.2 million, including $76.6 million allocated to our non-purchased loans and leases and $1.6 million allocated to our purchased loans compared to $61.8 million at March 31, 2016, including $60.6 million allocated to our non-purchased loans and leases and $1.2 million allocated to our purchased loans. At December 31, 2016, our ALLL was $76.5 million, including $74.9 million allocated to our non-purchased loans and leases and $1.6 million allocated to our purchased loans. Our ALLL allocated to non-purchased loans and leases as a percent of total non-purchased loans and leases was 0.75% at March 31, 2017 compared to 0.80% at March 31, 2016 and 0.78% at December 31, 2016. Our ALLL allocated to non-purchased loans and leases was equal to 692% of our total nonperforming non-purchased loans and leases at March 31, 2017 compared to 532% at March 31, 2016 and 521% at December 31, 2016. The amount of ALLL and provision to the ALLL is based on our analysis of the adequacy of the ALLL utilizing the criteria discussed in the Critical Accounting Policies section of our Annual Report on Form 10-K for the year ended December 31, 2016.

In recent years, we have focused on loan transactions that include various combinations of (i) marquee properties, (ii) strong and capable sponsors or borrowers, (iii) low leverage, and (iv) defensive loan structure. At the same time, our loan portfolio has expanded throughout the United States and consists of a very diversified portfolio in terms of geographic location. We consider this geographic diversification to be a substantial source of strength in regard to portfolio credit quality. Additionally, we have continued to focus on originating high quality loans at low leverage. At March 31, 2017, our ratios of weighted-average loan-to-cost and weighted-average loan-to-value on construction loans with interest reserves, assuming such loans are ultimately fully funded, were approximately 50% and approximately 43%, respectively. Each of these factors mentioned above has contributed to our favorable asset quality ratios and net charge-off ratios in recent years. In addition, these factors have also helped to contribute to recent decreases in our ratio of ALLL to total non-purchased loans and leases.

The provision for loan and lease losses for the first quarter of 2017 was $4.9 million, including $3.0 million for non-purchased loans and leases and $1.9 million for purchased loans, compared to $2.0 million for the first quarter of 2016, almost all of which was for our non-purchased loans and leases.

Our practice is to charge off any estimated loss as soon as we are able to identify and reasonably quantify such potential loss. Accordingly, only a small portion of our ALLL is needed for potential losses on non-performing loans. Our ALLL allocated to non-purchased loans and leases as a percent of total non-purchased loans and leases decreased to 0.75% at March 31, 2017 compared to 0.80% at March 31, 2016 and 0.78% at December 31, 2016, primarily as a result of the low level of net charge-offs in recent quarters, our conservative underwriting practices, our general trends in recent years of lower loan-to-cost and loan-to-value ratios in our construction and development portfolio and generally improving economic conditions in many of our markets. While we believe our ALLL at March 31, 2017 and related provision for the first quarter of 2017 were appropriate, changing economic and other conditions may require future adjustments to the ALLL or the amount of provision thereto.

Activity within the allowance for loan and lease losses for the periods indicated is shown in the following table.

	Three Months Ended March 31,
	2017			2016
	(Dollars in thousands)

Balance, beginning of period	$	76,541		$	60,854
Charge-offs of non-purchased loans and leases:
Real estate:
Residential 1-4 family		(169	)		(243	)
Non-farm/non-residential		(6	)		(12	)
Construction/land development		(67	)		(20	)
Agricultural		—			(7	)
Total real estate		(242	)		(282	)
Commercial and industrial		(225	)		(11	)
Consumer		(113	)		(33	)
Direct financing leases		(677	)		(660	)
Other		(492	)		(361	)
Total charge-offs of non-purchased loans and leases		(1,749	)		(1,347	)
Recoveries of non-purchased loans and leases previously charged off:
Real estate:
Residential 1-4 family		4			24
Non-farm/non-residential		11			—
Construction/land development		6			2
Total real estate		21			26
Commercial and industrial		86			33
Consumer		111			12
Direct financing leases		5			11
Other		209			171
Total recoveries of non-purchased loans and leases previously charged off		432			253
Net charge-offs of non-purchased loans and leases		(1,317	)		(1,094	)
Charge-offs of purchased loans		(2,787	)		(65	)
Recoveries of purchased loans previously charged off		854			48
Net charge-offs of purchased loans		(1,933	)		(17	)
Net charge-offs – total loans and leases		(3,250	)		(1,111	)
Provision for loan and lease losses:
Non-purchased loans and leases		3,000			2,000
Purchased loans		1,933			17
Total provision		4,933			2,017
Balance, end of period	$	78,224		$	61,760
ALLL allocated to non-purchased loans and leases	$	76,624		$	60,560
ALLL allocated to purchased loans		1,600			1,200
Total ALLL	$	78,224		$	61,760

A summary of our net charge-off ratios and certain other ALLL ratios, as of and for the periods indicated, is presented in the following table.

At March 31, 2017 and December 31, 2016, we classified all of our investment securities portfolio as AFS. Accordingly, our investment securities are stated at estimated fair value in the consolidated financial statements with the unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income (loss).

The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s investment in the “CRA qualified investment fund” includes shares held in a mutual fund that qualify under the Community Reinvestment Act of 1977 for community reinvestment purposes. Our holdings of “other equity securities” include FHLB and First National Banker’s Bankshares, Inc. shares which do not have readily determinable fair values and are carried at cost.

Our investment securities portfolio is reported at estimated fair value, which included gross unrealized gains of $9.3 million and gross unrealized losses of $37.1 million at March 31, 2017 and gross unrealized gains of $8.7 million and gross unrealized losses of $48.6 million at December 31, 2016. We believe that all unrealized losses on individual investment securities at March 31, 2017 and December 31, 2016 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments. Accordingly, we consider these unrealized losses to be temporary in nature. We do not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost.

The following table presents unaccreted discounts and unamortized premiums of our investment securities as of the dates indicated.

We had no net gains or sales of investment securities in the first quarter of 2017 or 2016. During the first quarter of 2017 and 2016, respectively, investment securities totaling $32.2 million and $58.2 million matured, were called or were paid down by the issuer. We purchased $21.9 million in investment securities during the first quarter of 2017 compared to $79.8 million during the first quarter of 2016.

We invest in securities we believe offer good relative value at the time of purchase, and we will, from time to time, reposition our investment securities portfolio. In making decisions to sell or purchase securities, we consider credit quality, call features, maturity dates, relative yields, current market factors, interest rate risk and other relevant factors.

The following table presents the types and estimated fair values of our investment securities at March 31, 2017 based on credit ratings by one or more nationally-recognized credit rating agency.

Our lending and investment activities are funded primarily by deposits. The amount and type of deposits outstanding, as of the dates indicated, and their respective percentage of the total deposits are reflected in the following table.

At March 31, 2017 brokered deposits totaled $2.00 billion, or 12.75% of total deposits, compared to $1.99 billion, or 12.78% of total deposits, at December 31, 2016.

We use brokered deposits, subject to certain limitations and requirements, as a source of funding to augment deposits generated from our branch network, which are our principal source of funding. Our board of directors has established policies and procedures with respect to the use of brokered deposits. Such policies and procedures require, among other things, that (i) we limit the amount of brokered deposits as a percentage of total deposits and (ii) our ALCO Committee (“ALCO”), which reports to the board of directors, monitor our use of brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total liabilities. ALCO has typically approved the use of brokered deposits when such deposits are (i) from respected and stable funding sources and (ii) less costly to the Company than the marginal cost of additional deposits generated from our branch network.

The amount and percentage of our deposits by state of originating office, as of the dates indicated, are reflected in the following table.

We rely on other interest bearing liabilities to supplement the funding of our lending and investing activities. Such liabilities consist of repurchase agreements with customers, other borrowings (FHLB advances and, to a lesser extent, federal funds purchased), subordinated notes and subordinated debentures.

The following table reflects the average balance and rate paid for each category of other interest bearing liabilities for the periods indicated.

During the second quarter of 2016, the Company issued $225 million in aggregate principal amount, net of debt issuance costs, of subordinated notes with a 5.50% fixed-to-floating rate that mature on July 1, 2026. The rate on such subordinated notes includes amortization of debt issuance costs.

Subordinated Notes. On June 23, 2016, we completed an underwritten public offering of $225 million in aggregate principal amount of our 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”) for net proceeds of $222.3 million. The Notes are unsecured, subordinated debt obligations and mature on July 1, 2026. From and including the date of issuance to, but excluding July 1, 2021, the Notes bear interest at an initial rate of 5.50% per annum. From and including July 1, 2021 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month LIBOR as calculated on each applicable date of determination plus a spread of 442.5 basis points; provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be deemed to be zero.

We may, beginning with the interest payment date of July 1, 2021, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. We may also redeem the Notes at any time, including prior to July 1, 2021, at our option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent us from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) we are required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. The Notes provide us with additional Tier 2 regulatory capital to support our expected future growth.

Subordinated Debentures. We own eight 100%-owned finance subsidiary business trusts – Ozark Capital Statutory Trust II (“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory Trust V (“Ozark V”) (collectively, the “Ozark Trusts”), and as a result of our Intervest acquisition, Intervest Statutory Trust II (“Intervest II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory Trust IV (“Intervest IV”) and Intervest Statutory Trust V (“Intervest V”), (collectively, the “Intervest Trusts”; and together with Ozark Trusts, the “Trusts”). At March 31, 2017, we had the following issues of trust preferred securities and subordinated debentures owed to the Trusts.

Our subordinated debentures and securities generally mature 30 years after issuance and may be prepaid at par, subject to regulatory approval, on or after approximately five years from the date of issuance, or at an earlier date upon certain changes in tax laws, investment company laws or regulatory capital requirements. These subordinated debentures and the related trust preferred securities provide us additional regulatory capital to support our expected future growth and expansion.

Other Sources of Capital. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs. As a publicly traded company, a likely source of additional funds is the capital markets, which can provide us with funds through the public issuance of equity, both common and preferred stock, and the issuance of senior debt and/or subordinated debentures. We have an effective shelf registration statement on file with the SEC which provides us increased flexibility and more efficient access to the public debt and equity markets. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial performance.

Corporate Reorganization. On April 10, 2017, the Company, as part of an internal corporate reorganization, entered into an Agreement and Plan of Merger (the “Plan of Merger”) with the Bank, whereby the Company will be merged with and into the Bank (the “Reorganization”) with the Bank continuing as the surviving entity.

At the effective time of the Reorganization, the issued and outstanding shares of the Company’s common stock, par value $0.01 per share, will automatically be converted into an equivalent number of shares of the Bank’s common stock. As a result, the shares of capital stock of the Bank will be owned directly by the Company’s shareholders in the same proportion as their ownership of the Company’s capital stock immediately prior to the Reorganization.

As an Arkansas state-chartered bank that is not a member of the Federal Reserve System, the Bank will continue to be subject to regulation and supervision by the Arkansas State Bank Department (“ASBD”) and the FDIC. The Company is currently subject to regulation and supervision by the Federal Reserve Board (“FRB”) as a bank holding company; following the Reorganization, the Bank will not be subject to the FRB’s regulation and supervision (except such regulations as are made applicable to the Bank by law and regulations of the FDIC).

Following the Reorganization, it is expected that the Bank’s shares of common stock will be listed on The NASDAQ Global Select Market (“NASDAQ”) under the same ticker symbol currently used by the Company, “OZRK.” The Bank’s common stock will be registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which vests the FDIC with the power to administer and enforce certain sections of the Exchange Act applicable to banks. Following the Reorganization, the Bank will no longer file periodic or current reports or other materials with the SEC but will be required to file such periodic and current reports and other materials required under the Exchange Act with the FDIC.

Pursuant to Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), securities issued by the Bank, including the common stock to be issued in connection with the Reorganization, are exempt from registration under the Securities Act.

The Plan of Merger has been approved by the boards of directors of each of the Company and the Bank. In connection with the Reorganization, the Company will convene and hold a special meeting of its shareholders on June 23, 2017 to consider and vote upon the Reorganization. The Reorganization is subject to various closing conditions including, among others, (i) approval by the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote on the Reorganization, (ii) receipt of all required regulatory approvals, including the approval of the FDIC and ASBD, and (iii) approval for listing on NASDAQ of the Bank’s common stock.

Common Stockholders’ Equity and Reconciliation of Non-GAAP Financial Measures. We use non-GAAP financial measures, specifically tangible common stockholders’ equity to total tangible assets, tangible book value per common share and return on average tangible common stockholders’ equity as important measures of the strength of our capital and our ability to generate earnings on tangible common equity invested by our shareholders. We believe presentation of these non-GAAP financial measures provides useful supplemental information that contributes to a proper understanding of our financial results and capital levels. These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following tables.

Common Stock Dividend Policy. During the three months ended March 31, 2017, we paid a dividend of $0.17 per common share compared to $0.15 per common share in the three months ended March 31, 2016. On April 3, 2017, our board of directors approved a cash dividend of $0.175 per common share that was paid on April 21, 2017. The determination of future dividends on our common stock will depend on conditions existing at that time and approval of our board of directors.

Regulatory Capital. We are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about component risk weightings and other factors.

The FDIC and other federal banking regulators revised the risk-based capital requirements applicable to bank holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Basel III Rules”). The Basel III Rules became effective for the Company and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). The Basel III Rules require the maintenance of minimum amounts and ratios of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets, and of tier 1 capital to adjusted quarterly average assets.

Under the Basel III Rules, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and certain other items as specified by the Basel III Rules.

Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under the Basel III Rules. The tier 1 capital for our holding company consists of common equity tier 1 capital and, prior to the third quarter of 2016, $118 million of trust preferred securities issued by the Trusts. The Basel III Rules include certain provisions that require trust preferred securities to be phased out of, or no longer be considered, qualifying tier 1 capital for certain institutions depending on the size of the institution as measured by total assets. As a result of our acquisitions of C&S on July 20, 2016 and C1 on July 21, 2016, our total assets exceeded $15 billion. Accordingly, pursuant to the Basel III Rules, our trust preferred securities are no longer included in tier 1 capital as of September 30, 2016, but continue to be included in total capital.

Basel III Rules allow for insured depository institutions to make a one-time election not to include most elements of accumulated other comprehensive income in regulatory capital and instead effectively use the existing treatment under the general risk-based capital rules. We made this opt-out election to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of our investments securities portfolio.

Total capital includes tier 1 capital and tier 2 capital. Tier 2 capital includes, among other things, the allowable portion of the ALLL and, for the Company, the trust preferred securities and the subordinated notes.

The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted quarterly average total assets.

The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” in addition to the amount necessary to meet minimum risk-based capital requirements for common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets. The capital conservation buffer began phasing in January 1, 2016 at 0.625% of risk-weighted assets, and will increase each year until fully implemented at 2.5% on January 1, 2019. When fully phased in on January 1, 2019, the Basel III Rules will require us and our subsidiary bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 7.0% upon full implementation, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 8.5% upon full implementation, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 10.5% upon full implementation and (iv) a minimum leverage ratio of 4.0%. Additionally, in order to be considered well-capitalized under the Basel III Rules, we must maintain (i) a ratio of common equity tier 1 capital to risk-weighted assets of at least 6.5%, (ii) a ratio of tier 1 capital to risk-weighted assets of at least 8.0%, (iii) a ratio of total capital to risk-weighted assets of at least 10.0% and (iv) a leverage ratio of at least 5.0%.

The following table presents actual and required capital ratios at March 31, 2017 and December 31, 2016 for the Company and the Bank under the Basel III Rules. The minimum required capital amounts presented include the minimum required capital levels based on the current phase-in provisions of the Basel III Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Rules are fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Rules.

	Actual					Minimum Capital Required – Basel III Phase-In Schedule					Minimum Capital Required – Basel III Fully Phased-In					Required to be Considered Well Capitalized
	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount		Ratio
	(Dollars in thousands)
March 31, 2017:
Common equity tier 1 to risk-weighted assets:
Company	$	2,157,706		9.94	%	$	1,247,562		5.75	%	$	1,518,772		7.00	%	N/A		N/A
Bank		2,463,577		11.36			1,246,878		5.75			1,517,938		7.00		$	1,410,288		6.50	%
Tier 1 capital to risk-weighted assets:
Company		2,157,706		9.94			1,573,014		7.25			1,844,223		8.50		N/A		N/A
Bank		2,463,577		11.36			1,572,151		7.25			1,843,211		8.50			1,735,739		8.00
Total capital to risk-weighted assets:
Company		2,578,930		11.89			2,006,948		9.25			2,278,157		10.50		N/A		N/A
Bank		2,541,801		11.72			2,005,847		9.25			2,276,908		10.50			2,169,674		10.00
Tier 1 leverage to average assets:
Company		2,157,706		11.95			751,275		4.00			751,275		4.00		N/A		N/A
Bank		2,463,577		13.66			750,906		4.00			750,906		4.00			939,093		5.00
December 31, 2016:
Common equity tier 1 to risk-weighted assets:
Company	$	2,093,548		9.99	%	$	1,074,382		5.125	%	$	1,467,448		7.00	%	N/A		N/A
Bank		2,405,095	11.48				1,073,635		5.125			1,466,428		7.00		$	1,361,684		6.50	%
Tier 1 capital to risk-weighted assets:
Company		2,093,548		9.99			1,388,835		6.625			1,781,902		8.50		N/A		N/A
Bank		2,405,095		11.48			1,387,870		6.625			1,780,663		8.50			1,675,918		8.00
Total capital to risk-weighted assets:
Company		2,513,089		11.99			1,808,106		8.625			2,201,173		10.50		N/A		N/A
Bank		2,481,636		11.85			1,806,849		8.625			2,199,643		10.50			2,094,898		10.00
Tier 1 leverage to average assets:
Company		2,093,548		11.99			698,438		4.00			698,438		4.00		N/A		N/A
Bank		2,405,095		13.77			698,597		4.00			698,597		4.00			873,246		5.00

At March 31, 2017 and December 31, 2016, capital levels at both the Company and the Bank exceed all minimum capital requirements under the Basel III Rules on a fully phased-in basis.

General. Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility we may be unable to satisfy current or future funding requirements and needs. ALCO has primary responsibility for oversight of our liquidity, funds management, asset/liability (interest rate risk) position and capital.

The objective of managing liquidity risk is to ensure the cash flow requirements resulting from depositor, borrower and other creditor demands are met, as well as operating cash needs of the Company, and the cost of funding such requirements and needs is reasonable. We maintain an asset/liability and interest rate risk policy and a liquidity and funds management policy, including a contingency funding plan that, among other things, include policies and procedures for managing liquidity risk. Generally we rely on deposits, repayments of loans and leases, and repayments of our investment securities as our primary sources of funds. Our principal deposit sources include consumer, commercial and public funds customers in our markets. We have used these funds, together with

wholesale deposit sources such as brokered deposits, along with FHLB advances, federal funds purchased and other sources of short-term borrowings, to make loans and leases, 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, general economic and market conditions and other factors. Loan and lease repayments are generally a relatively stable source of funds but are subject to the borrowers’ and lessees’ ability to repay the loans and leases, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans and leases generally are not readily convertible to cash. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet growth in loans and leases and deposit withdrawal demands or otherwise fund operations. Such secondary sources include wholesale deposit sources, FHLB advances, secured and unsecured federal funds lines of credit from correspondent banks, FRB borrowing programs and/or accessing the capital markets.

At March 31, 2017, we had $11.26 billion in unfunded balances on loans already closed, the vast majority of which is attributable to construction loans for which construction has commenced. In most cases the borrower’s equity and all other required subordinated elements of the capital structure must be fully funded before we advance funds. Typically we are the last to advance funds and the first to be repaid. In many cases we do not advance funds on loans for many months after closing because the borrower’s equity and other funding sources must fund first. This conservative practice for handling construction loans has led to the large unfunded balance of closed loans. As a result, we maintain a detailed 36-month forward funding forecast projecting all loan fundings and loan pay downs and pay offs. Our ability to project monthly net portfolio growth with a substantial degree of accuracy is an important part of our liquidity management process.

At March 31, 2017, we had substantial unused borrowing availability. This availability was primarily comprised of the following four options: (1) $4.63 billion of available blanket borrowing capacity with the FHLB, (2) $738 million of investment securities available to pledge for federal funds or other borrowings, (3) $230 million of available unsecured federal funds borrowing lines and (4) up to $155 million of available borrowing capacity from borrowing programs of the FRB.

We anticipate we will continue to rely primarily on deposits, repayments of loans and leases and cash flows from our investment securities portfolio to provide liquidity, as well as other funding sources as appropriate. Additionally, where necessary, the sources of borrowed funds described above will be used to augment our primary funding sources.

Sources and Uses of Funds. Operating activities provided net cash of $142 million in the first quarter of 2017 and $45 million in the first quarter of 2016. Net cash used or provided by operating activities is comprised primarily of net income, adjusted for non-cash items and for changes in various operating assets and liabilities. The increase in cash provided by operating activities during the first quarter of 2017 compared to the first quarter of 2016 is due, in part, to the increase in net income.

Investing activities used net cash of $215 million in the first quarter of 2017 and $994 million in the first quarter of 2016. The decrease in net cash used by investing activities was primarily the result of the lower growth rate of our non-purchased loans and leases during the first quarter of 2017 compared to the same period in 2016 and the increase in net payments received on our purchased loan portfolio.

Financing activities provided $135 million in the first quarter of 2017 and $1.48 billion in the first quarter of 2016. The decrease in cash provided by financing activities is primarily the result of a lower growth rate of deposits needed to fund growth of interest earning assets during the first quarter of 2017 compared to the first quarter of 2016.

Off-Balance Sheet Commitments. We are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments primarily include commitments to extend credit (most of which are in the form of unfunded balances on loans already closed) and standby letters of credit. See Note 7 to the Consolidated Financial Statements for more information about our outstanding guarantees and commitments as of March 31, 2017.

De Novo Growth. In January 2017, we consolidated our New York, New York RESG loan production office in with our retail banking office in New York, New York, and in February 2017, we opened a loan production office in Atlanta, Georgia for our mortgage lending team. We also expect to open a retail banking office in McKinney, Texas in 2017, and we expect to replace leased facilities with Bank-owned facilities in Miami Beach, Florida and Harrisburg, North Carolina in 2017.

We intend to continue our growth and de novo branching strategy in the future years through the opening of additional retail banking and loan production offices. Opening new offices is subject to local banking market conditions, availability of suitable sites, hiring qualified personnel, obtaining regulatory and other approvals and many other conditions and contingencies that we cannot

predict with certainty. We may increase or decrease our expected number of new office openings as a result of a variety of factors including our financial results, changes in economic or competitive conditions, strategic opportunities or other factors.

During the first quarter of 2017, we spent approximately $7.5 million on capital expenditures for premises and equipment. Our capital expenditures for the full year 2017 are expected to be in the range of $35 million to $50 million, including progress payments on construction projects expected to be completed in future periods, furniture and equipment costs and acquisition of sites for future development. Actual expenditures may vary significantly from those expected, depending on the number and cost of additional offices acquired or constructed and sites acquired for future development, progress or delays encountered on ongoing and new construction projects, delays in or inability to obtain required approvals, potential premises and equipment expenditures associated with acquisitions, if any, and other factors.

Future Growth Strategy. We expect to continue growing through both our de novo branching strategy and traditional acquisitions. With respect to our de novo branching strategy, future de novo branches are expected to be focused in states where we currently have banking offices and in larger markets and MSAs across the U.S. where we currently do not have retail banking offices and believe we can generate significant growth from one or two strategically located offices in each such market. Future RESG loan production offices are expected to be focused in strategically important markets (most likely offices in Seattle, Washington, D.C., Boston and Chicago). With respect to acquisitions, we are seeking acquisitions that are either immediately accretive to book value, tangible book value, and diluted earnings per share, or strategic to our business, or both.

See Note 14 to the Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements.

Interest rate risk results from timing differences in the repricing of assets and liabilities or from changes in relationships between interest rate indexes. Our interest rate risk management is the responsibility of ALCO.

We regularly review our exposure to changes in interest rates. Among the factors considered are changes in the mix of interest earning assets and interest bearing liabilities, interest rate spreads and repricing periods. Typically, ALCO reviews on at least a quarterly basis our relative ratio of rate sensitive assets (“RSA”) to rate sensitive liabilities (“RSL”) and the related cumulative gap for different time periods. However, the primary tool used by ALCO to analyze our interest rate risk and interest rate sensitivity is an earnings simulation model.

This earnings simulation modeling process projects a baseline net interest income (assuming no changes in interest rate levels) and estimates changes to that baseline net interest income resulting from changes in interest rate levels. We rely primarily on the results of this model in evaluating our interest rate risk. This model incorporates a number of additional factors including: (1) the expected exercise of call features on various assets and liabilities, (2) the expected rates at which various RSA and RSL will reprice, (3) the expected growth in various interest earning assets and interest bearing liabilities and the expected interest rates on 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, (7) the timing and amount of cash flows expected to be received on purchased loans, (8) the need for additional capital and/or debt to support continued growth and (9) other relevant factors. Inclusion of these factors in the model is intended to more accurately project our expected changes in net interest income resulting from interest rate changes. We typically model our change in net interest income assuming interest rates go up 100 bps, up 200 bps, up 300 bps, up 400 bps, up 500 bps, down 100 bps, down 200 bps, down 300 bps, down 400 bps and down 500 bps. Based on current conditions, we believe that modeling our change in net interest income assuming interest rates go down 100 bps, down 200 bps, down 300 bps, down 400 bps and down 500 bps is not meaningful. For purposes of this model, we have assumed that the change in interest rates phases in over a 12-month period. While we believe this model provides a reasonably accurate projection of our interest rate risk, the model includes a number of assumptions and predictions which may or may not be correct and may impact the model results. These assumptions and predictions include inputs to compute baseline net interest income, growth rates, expected changes in administered rates on interest bearing deposit accounts, competition and a variety of other factors that are difficult to accurately predict. Accordingly, there can be no assurance the earnings simulation model will accurately reflect future results.

The following table presents the earnings simulation model’s projected impact of a change in interest rates on our projected baseline net interest income for the 12-month period commencing April 1, 2017. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve or the impact of any possible future acquisitions.

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 interest earning assets and interest bearing liabilities, seeking alternative funding sources or investment opportunities and modifying the pricing or terms of loans, leases and deposits.

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of the Company’s Chairman and Chief Executive Officer (principal executive officer) and its Chief Financial Officer and Chief Accounting Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in SEC Rule 13a-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure. Based on that evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Our management, including our Chairman and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period covered by this report and has concluded that there were no changes during the quarterly period covered by this report that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

On December 19, 2011, the Company and Bank were named as defendants in a purported class action lawsuit filed in the Circuit Court of Lonoke County, Arkansas, Division III, styled Robert Walker, Ann B. Hines and Judith Belk vs. Bank of the Ozarks, Inc. and Bank of the Ozarks. On December 20, 2012, the Bank was named as a defendant in a purported class action lawsuit filed in the Circuit Court of Pulaski County, Arkansas, Ninth Division, styled Audrey Muzingo v. Bank of the Ozarks. Subsequently, counsel for the plaintiffs in the Walker case and counsel for the plaintiff in the Muzingo case have reached an agreement whereby Ms. Muzingo is now considered a member of the class in the Walker case. The complaint challenges the manner in which overdraft fees were charged and the policies related to the posting order of payments. In addition, the complaint alleges violations of the Arkansas Deceptive Trade Practices Act. The complaint seeks to have the case certified by the court as a class action for all Bank account holders located in the State of Arkansas similarly situated, and seeks (1) a declaratory judgment as to the wrongful nature of the Bank’s overdraft fee policies, (2) restitution of overdraft fees paid by the plaintiffs and the putative class as a result of the actions cited in the complaint, (3) disgorgement of profits as a result of the alleged wrongful actions, (4) unspecified compensatory and statutory or punitive damages, and (5) pre-judgment interest, costs, and plaintiffs’ attorneys’ fees. The Company and the Bank filed a motion to dismiss and to compel arbitration pursuant to the terms of the consumer deposit account agreement, which was denied by the trial court. The Company and the Bank appealed the trial court’s ruling to the Arkansas Supreme Court on an interlocutory basis. The Arkansas Supreme Court recently affirmed the trial courts’ decision to deny the Company and Bank’s motion to compel arbitration, finding that there was no mutual agreement or obligation to arbitrate under the terms of the subject deposit account agreement. The parties are now engaged in pre-trial discovery and have agreed to participate in non-binding mediation regarding the plaintiff’s claims.

Although there are significant uncertainties in any purported class action litigation, the Company and the Bank believe that the Plaintiffs’ claims are subject to meritorious defenses and intend to defend against these claims.

The Company and/or the Bank are parties to various other legal proceedings, as both plaintiff and defendant, arising in the ordinary course of business, including claims of lender liability, broken promises, and other similar lending-related claims. While the ultimate resolution of the various claims and proceedings described above cannot be determined at this time, management of the Company believes that such claims and proceedings, individually or in the aggregate, will not have a material adverse effect on the future results of operations, financial condition, or liquidity of the Company.

There are no material changes from the risk factors set forth under Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

We had no unregistered sales of equity securities and did not purchase any shares of our common stock during the period covered by this report.

Reference is made to the Exhibit Index set forth immediately following the signature page of this report.

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.

17901 CHENAL PARKWAY, LITTLE ROCK, ARKANSAS		72223
(Address of principal executive offices)		(Zip Code)

PART I.	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016	3

	Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)	4

	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016 (Unaudited)	5

	Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2017 and 2016 (Unaudited)	6

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited)	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62

Item 4.	Controls and Procedures	63

PART II.	Other Information

Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

Item 3.	Defaults Upon Senior Securities	64

Item 4.	Mine Safety Disclosures	64

Item 5.	Other Information	64

Item 6.	Exhibits	64

Signature		65

Exhibit Index		66

	March 31, 2017
Maturity or Estimated Repayment	Amortized Cost		Estimated Fair Value
	(Dollars in thousands)
One year or less	$	81,122	$	80,060
After one year to five years		302,717		299,451
After five years to ten years		342,714		342,572
After ten years		771,813		748,485
Total	$	1,498,366	$	1,470,568

	Three Months Ended March 31,
	2017		2016
	(Dollars in thousands)
Cash paid during the period for:
Interest	$	26,782	$	9,146
Taxes		1,714		17,552
Supplemental schedule of non-cash investing and financing activities:
Net change in unrealized gains/losses on investment securities AFS		12,081		4,195
Loans transferred to foreclosed assets		5,732		4,706
Loans advanced for sales of foreclosed assets		—		30

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(Dollars in thousands)
March 31, 2017:
Obligations of state and political subdivisions	$	932,781	$	8,155	$	(27,299	)	$	913,637
U.S. Government agency securities		548,284		1,071		(9,727	)		539,628
Corporate obligations		10,061		61		(33	)		10,089
CRA qualified investment fund		1,067		—		(26	)		1,041
Other equity securities		6,173		—		—			6,173
Total	$	1,498,366	$	9,287	$	(37,085	)	$	1,470,568
December 31, 2016:
Obligations of state and political subdivisions	$	946,886	$	7,785	$	(35,658	)	$	919,013
U.S. Government agency securities		547,297		962		(12,769	)		535,490
Corporate obligations		10,086		—		(171	)		9,915
CRA qualified investment fund		1,061		—		(27	)		1,034
Other equity securities		6,160		—		—			6,160
Total	$	1,511,490	$	8,747	$	(48,625	)	$	1,471,612

Contractual Maturities at March 31, 2017
Maturity	Amount
(Dollars in thousands)
2017	$	575,370
2018		2,096,376
2019		4,119,085
2020		3,576,543
2021		669,503
Thereafter		221,885
Total	$	11,258,762

	Options			Weighted- Average Exercise Price/Share		Weighted-Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Three Months Ended March 31, 2017:
Outstanding – January 1, 2017		1,635,484		$	37.10
Granted		603,414			52.08
Exercised		(69,655	)		16.82
Forfeited		(26,990	)		46.12
Outstanding – March 31, 2017		2,142,253			41.87		5.4	$	22,369	⁽¹⁾
Fully vested and exercisable – March 31, 2017		459,975		$	19.82		3.5	$	14,808	⁽¹⁾

	Three Months Ended March 31, 2017
Risk-free interest rate		1.93	%
Expected dividend yield		1.40	%
Expected stock volatility		35.6	%
Expected life (years)		5.0

	Three Months Ended March 31, 2017
Outstanding – December 31, 2016		430,497
Granted		238,794
Forfeited		(1,018	)
Vested		—
Outstanding – March 31, 2017		668,273

Weighted-average grant date fair value	$	44.25

Description	Fair Value at March 31, 2017		Technique	Unobservable Inputs
(Dollars in thousands)
Impaired non-purchased loans and leases	$	8,442	Third party appraisal⁽¹⁾ and/or discounted cash flows	1. Management discount based on underlying collateral characteristics and market conditions 2. Life of Loan

Impaired purchased loans	$	13,869	Third party appraisal ⁽¹⁾ and/or discounted cash flows	1. Management discount based on underlying collateral characteristics and market conditions 2. Life of Loan

Foreclosed assets	$	36,899	Third party appraisal, ⁽¹⁾ broker price opinions and/or discounted cash flows	1. Management discount based on underlying collateral characteristics and market conditions 2. Discount rate 3. Holding period

	Investment Securities AFS
	(Dollars in thousands)
Balance – December 31, 2016	$	17,379
Total realized gains (losses) included in earnings		—
Total unrealized gains (losses) included in comprehensive income		32
Paydowns and maturities		(576	)
Sales		—
Transfers in and/or out of Level 3		—
Balance – March 31, 2017	$	16,835

Balance – December 31, 2015	$	18,504
Total realized gains (losses) included in earnings		—
Total unrealized gains (losses) included in comprehensive income		—
Paydowns and maturities		(554	)
Sales		—
Transfers in and/or out of Level 3		—
Balance – March 31, 2016	$	17,950

		March 31, 2017				December 31, 2016
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
		(Dollars in thousands)
Financial assets:
Cash and cash equivalents	Level 1	$	892,085	$	892,085	$	866,360	$	866,360
Investment securities AFS	Levels 1, 2 and 3		1,470,568		1,470,568		1,471,612		1,471,612
Loans and leases, net of ALLL	Level 3		14,718,698		14,490,939		14,486,574		14,221,113

Financial liabilities:
Demand, savings and interest bearing transaction deposits	Level 1	$	10,883,740	$	10,883,740	$	10,637,813	$	10,637,813
Time deposits	Level 2		4,829,687		4,857,010		4,937,065		4,965,279
Repurchase agreements with customers	Level 1		80,609		80,609		65,110		65,110
Other borrowings	Level 2		42,291		42,829		41,903		42,696
Subordinated notes	Level 2		222,611		222,442		222,516		223,133
Subordinated debentures	Level 2		118,380		85,749		118,242		84,478

	Three Months Ended March 31, 2017 Over Three Months Ended March 31, 2016
	Volume			Yield/ Rate			Net Change
	(Dollars in thousands)
Increase (decrease) in:
Interest income – FTE:
Interest earning deposits and federal funds sold	$	18		$	(4	)	$	14
Investment securities:
Taxable		2,296			(750	)		1,546
Tax-exempt – FTE		5,795			(1,057	)		4,738
Non-purchased loans and leases – FTE		36,572			3,871			40,443
Purchased loans		48,473			(1,503	)		46,970
Total interest income – FTE		93,154			557			93,711

Interest expense:
Savings and interest bearing transaction		3,514			1,226			4,740
Time deposits of $100,000 or more		3,562			623			4,185
Other time deposits		1,168			434			1,602
Repurchase agreements with customers		4			7			11
Other borrowings		(47	)		(33	)		(80	)
Subordinated notes		3,188			—			3,188
Subordinated debentures		5			123			128
Total interest expense		11,394			2,380			13,774
Increase (decrease) in net interest income – FTE	$	81,760		$	(1,823	)	$	79,937

				Over 1			Over 2			Over 3
	1 Year			Through			Through			Through			Over
	or Less			2 Years			3 Years			5 Years			5 Years			Total
	(Dollars in thousands)
Fixed rate	$	1,047,233		$	847,659		$	575,353		$	831,602		$	1,125,783		$	4,427,630
Floating rate (not at a floor or ceiling rate)		7,709,623			54,536			99,911			131,238			27,868			8,023,176
Floating rate (at floor rate) ⁽¹⁾		1,979,432			36,640			102,646			166,695			29,123			2,314,536
Floating rate (at ceiling rate)		31,529			5			5			41			—			31,580
Total	$	10,767,817		$	938,840		$	777,915		$	1,129,576		$	1,182,774		$	14,796,922

Percentage of total		72.8	%		6.3	%		5.3	%		7.6	%		8.0	%		100.0	%
Cumulative percentage of total		72.8	%		79.1	%		84.4	%		92.0	%		100.0	%

Contractual Interest Rate Index	Floating Rate (at floor rate)		Floating Rate (not at a floor or ceiling rate)		Floating Rate (at ceiling rate)		Total Floating Rate
	(Dollars in thousands)
1-month LIBOR	$	1,071,781	$	5,681,457	$	—	$	6,753,238
3-month LIBOR		286,453		551,934		—		838,387
Wall Street Journal Prime		712,188		1,452,959		31,580		2,196,727
Other contractual interest rate indices		244,114		336,826		—		580,940
Total	$	2,314,536	$	8,023,176	$	31,580	$	10,369,292

	Nonperforming Loans and Leases		Foreclosed Assets and Repossessions		Total Nonperforming Assets
March 31, 2017:	(Dollars in thousands)
Arkansas	$	6,253	$	11,209	$	17,462
North Carolina		482		2,283		2,765
Georgia		482		8,343		8,825
Texas		2,158		1,555		3,713
Florida		48		12,566		12,614
South Carolina		—		541		541
Alabama		121		154		275
All other		1,525		248		1,773
Total	$	11,069	$	36,899	$	47,968

	As of and for the Three Months Ended March 31,				As of and for the Year Ended December 31,
	2017		2016		2016
Net charge-offs of non-purchased loans and leases to average non-purchased loans and leases ⁽¹⁾⁽²⁾		0.05%		0.06%		0.06%
Net charge-offs of purchased loans to average purchased loans⁽¹⁾		0.16%		—		0.09%
Net charge-offs of total loans and leases to average total loans and leases⁽¹⁾		0.09%		0.05%		0.07%

ALLL for non-purchased loans and leases to total non-purchased loans and leases⁽³⁾		0.75%		0.80%		0.78%
ALLL for purchased loans to total purchased loans		0.03%		0.07%		0.03%
ALLL to total loans and leases		0.53%		0.67%		0.53%
ALLL to nonperforming loans and leases ⁽³⁾		692%		532%		521%


	March 31, 2017				December 31, 2016
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Dollars in thousands)
Obligations of state and political subdivisions	$	932,781	$	913,637	$	946,886	$	919,013
U.S. Government agency securities		548,284		539,628		547,297		535,490
Corporate obligations		10,061		10,089		10,086		9,915
CRA qualified investment fund		1,067		1,041		1,061		1,034
Other equity securities		6,173		6,173		6,160		6,160
Total	$	1,498,366	$	1,470,568	$	1,511,490	$	1,471,612

	Amortized Cost		Unaccreted Discount		Unamortized Premium			Par Value
	(Dollars in thousands)
March 31, 2017:
Obligations of states and political subdivisions	$	932,781	$	6,021	$	(35,162	)	$	903,640
U.S. Government agency securities		548,284		108		(18,012	)		530,380
Corporate obligations		10,061		—		(81	)		9,980
CRA qualified investment fund		1,067		—		—			1,067
Other equity securities		6,173		—		—			6,173
Total	$	1,498,366	$	6,129	$	(53,255	)	$	1,451,240

December 31, 2016:
Obligations of states and political subdivisions	$	946,886	$	6,124	$	(36,567	)	$	916,443
U.S. Government agency securities		547,297		119		(19,002	)		528,414
Corporate obligations		10,086		5,500		(72	)		15,514
CRA qualified investment fund		1,061		—		—			1,061
Other equity securities		6,160		—		—			6,160
Total	$	1,511,490	$	11,743	$	(55,641	)	$	1,467,592

	AAA ⁽¹⁾			AA ⁽²⁾			A ⁽³⁾			BBB ⁽⁴⁾			Non- Rated ⁽⁵⁾			Total
	(Dollars in thousands)
Obligations of states and political subdivisions	$	162,978		$	409,643		$	160,596		$	17,592		$	162,828		$	913,637
U.S. Government agency securities		47,236			492,392			—			—			—			539,628
Corporate obligations		—			—			485			9,604			—			10,089
CRA qualified investment fund		—			—			—			—			1,041			1,041
Other equity securities		6,173			—			—			—			—			6,173
Total	$	216,387		$	902,035		$	161,081		$	27,196		$	163,869		$	1,470,568
Percentage of total		14.7	%		61.3	%		11.0	%		1.8	%		11.2	%		100.0	%
Cumulative percentage of total		14.7	%		76.0	%		87.0	%		88.8	%		100.0	%

Deposits Attributable to Offices In	March 31, 2017				December 31, 2016
	(Dollars in thousands)
Arkansas	$	6,466,066	41.1	%	$	6,309,230	40.5	%
Georgia		3,621,149	23.0			3,714,963	23.9
Texas		2,185,100	13.9			2,015,492	12.9
Florida		1,950,054	12.4			2,056,956	13.2
North Carolina		925,199	5.9			890,091	5.7
New York		355,705	2.3			378,348	2.4
Alabama		110,081	0.7			107,458	0.7
South Carolina		100,073	0.7			102,343	0.7
Total	$	15,713,427	100.0	%	$	15,574,881	100.0	%

	Subordinated Debentures Owed to Trust		Unamortized Discount at March 31, 2017			Carrying Value of Subordinated Debentures at March 31, 2017		Trust Preferred Securities of the Trusts		Contractual Interest Rate at March 31, 2017			Final Maturity Date
	(Dollars in thousands)
Ozark II	$	14,433	$	—		$	14,433	$	14,000		4.05	%	September 29, 2033
Ozark III		14,434		—			14,434		14,000		3.97		September 25, 2033
Ozark IV		15,464		—			15,464		15,000		3.27		September 28, 2034
Ozark V		20,619		—			20,619		20,000		2.73		December 15, 2036
Intervest II		15,464		(522	)		14,942		15,000		4.10		September 17, 2033
Intervest III		15,464		(605	)		14,859		15,000		3.94		March 17, 2034
Intervest IV		15,464		(1,100	)		14,364		15,000		3.55		September 20, 2034
Intervest V		10,310		(1,045	)		9,265		10,000		2.78		December 15, 2036
	$	121,652	$	(3,272	)	$	118,380	$	118,000

	March 31, 2017			December 31, 2016
	(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest	$	2,873,317		$	2,791,607
Less intangible assets:
Goodwill		(660,789	)		(660,119	)
Other intangible assets, net of accumulated amortization		(57,686	)		(60,831	)
Total intangibles		(718,475	)		(720,950	)
Total tangible common stockholders’ equity	$	2,154,842		$	2,070,657
Total assets	$	19,152,212		$	18,890,142
Less intangible assets:
Goodwill		(660,789	)		(660,119	)
Other intangible assets, net of accumulated amortization		(57,686	)		(60,831	)
Total intangibles		(718,475	)		(720,950	)
Total tangible assets	$	18,433,737		$	18,169,192
Ratio of total common stockholders’ equity to total assets		15.00	%		14.78	%
Ratio of total tangible common stockholders’ equity to total tangible assets		11.69	%		11.40	%

	March 31, 2017			December 31, 2016
	(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest	$	2,873,317		$	2,791,607
Less intangible assets:
Goodwill		(660,789	)		(660,119	)
Other intangible assets, net of accumulated amortization		(57,686	)		(60,831	)
Total intangibles		(718,475	)		(720,950	)
Total tangible common stockholders’ equity	$	2,154,842		$	2,070,657
Shares of common stock outstanding		121,575			121,268
Book value per common share	$	23.63		$	23.02
Tangible book value per common share	$	17.72		$	17.08

Shift in Interest Rates (in bps)	% Change in Projected Baseline Net Interest Income
+500		18.2%
+400	14.6
+300		10.9
+200		7.2
+100		3.5
-100	Not meaningful
-200	Not meaningful
-300	Not meaningful
-400	Not meaningful
-500	Not meaningful

		Bank of the Ozarks, Inc.

DATE: May 5, 2017		/s/ Greg McKinney
		Greg McKinney
		Chief Financial Officer and
		Chief Accounting Officer
		(Principal Financial Officer and Authorized Officer)