Bank OZK Announces Fourth Quarter and Full Year 2018 Earnings

1/17/2019 at 4:01 PM EST

LITTLE ROCK, Ark., Jan. 17, 2019 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the fourth quarter of 2018 was $115.0 million, a 21.3% decrease from net income of $146.2 million for the fourth quarter of 2017. Diluted earnings per common share for the fourth quarter of 2018 were $0.89, a 21.9% decrease from $1.14 for the fourth quarter of 2017.

For the full year of 2018, net income totaled $417.1 million, a 1.1% decrease from net income of $421.9 million for the full year of 2017. Diluted earnings per common share for the full year of 2018 were $3.24, a 3.3% decrease from $3.35 for the full year of 2017.

During the fourth quarter of 2017, the Bank recognized a one-time income tax benefit of $49.8 million as a result of the revaluation, in the fourth quarter of 2017, of the Bank’s net deferred tax liability position to reflect the reduction in its federal corporate income tax rate from 35% to 21% due to the Tax Cuts and Jobs Act enacted on December 22, 2017. Additionally, the Bank incurred pre-tax expenses of approximately $0.3 million for the fourth quarter and $11.7 million for the full year of 2018 (none in 2017) related to its name change and related strategic rebranding.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the fourth quarter of 2018 were 2.04%, 12.36% and 15.24%, respectively, compared to 2.81%, 17.23% and 21.84%, respectively, for the fourth quarter of 2017. The Bank’s returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the full year of 2018 were 1.90%, 11.59% and 14.41%, respectively, compared to 2.15%, 13.49% and 17.49%, respectively, for the full year of 2017. The calculation of the Bank’s return on average tangible common stockholders’ equity and the reconciliation to generally accepted accounting principles (“GAAP”) are included in the schedules accompanying this release.

“We had excellent fourth quarter results, achieving our most profitable quarter of the year with net income of $115.0 million and an annualized return on average assets of 2.04%,” stated George Gleason, Chairman and Chief Executive Officer. “For the full year of 2018, our net income was $417.1 million and our return on average assets was 1.90%. Our strong net income in 2018 resulted in meaningful increases in our already strong risked based capital ratios and allowed us to increase our cash dividends each quarter. In 2018 we completed our strategic rebranding and continued our efforts to enhance our team of industry and technology professionals, which is key to our competitive advantage. We believe we are well positioned for success in 2019.”

KEY BALANCE SHEET METRICS

Total loans, including purchased loans, were $17.12 billion at December 31, 2018, a 6.7% increase from $16.04 billion at December 31, 2017. Non-purchased loans, which exclude loans acquired in previous acquisitions, were $15.07 billion at December 31, 2018, an 18.4% increase from $12.73 billion at December 31, 2017. Purchased loans, which consist of loans acquired in previous acquisitions, were $2.04 billion at December 31, 2018, a 38.2% decrease from $3.31 billion at December 31, 2017. The unfunded balance of closed loans totaled $11.36 billion at December 31, 2018, a 13.9% decrease from $13.19 billion at December 31, 2017.

Deposits were $17.94 billion at December 31, 2018, a 4.3% increase from $17.19 billion at December 31, 2017. Total assets were $22.39 billion at December 31, 2018, a 5.2% increase from $21.28 billion at December 31, 2017.

Common stockholders’ equity was $3.77 billion at December 31, 2018, an 8.9% increase from $3.46 billion at December 31, 2017. Tangible common stockholders’ equity was $3.07 billion at December 31, 2018, an 11.7% increase from $2.75 billion at December 31, 2017. Book value per common share was $29.32 at December 31, 2018, an 8.7% increase from $26.98 at December 31, 2017. Tangible book value per common share was $23.90 at December 31, 2018, an 11.4% increase from $21.45 at December 31, 2017. The calculations of the Bank’s tangible common stockholders’ equity and tangible book value per common share and the reconciliations to GAAP are included in the schedules accompanying this release.

The Bank’s ratio of total common stockholders’ equity to total assets was 16.84% at December 31, 2018 compared to 16.27% at December 31, 2017. Its ratio of total tangible common stockholders’ equity to total tangible assets was 14.17% at December 31, 2018 compared to 13.38% at December 31, 2017. The calculation of the Bank’s ratio of total tangible common stockholders’ equity to total tangible assets and the reconciliation to GAAP are included in the schedules accompanying this release.

NET INTEREST INCOME

Net interest income for the fourth quarter of 2018 was $228.4 million, a 6.3% increase from $214.8 million for the fourth quarter of 2017. Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 4.55% for the fourth quarter of 2018, a decrease of 17 basis points from 4.72% for the fourth quarter of 2017. Average earning assets were $20.00 billion for the fourth quarter of 2018, a 9.4% increase from $18.28 billion for the fourth quarter of 2017.

Net interest income for the full year of 2018 was $891.4 million, a 9.1% increase from $817.4 million for the full year of 2017. Net interest margin, on a FTE basis, was 4.59% for the full year of 2018, a decrease of 26 basis points from 4.85% for the full year of 2017. Average earning assets were $19.52 billion for the full year of 2018, a 14.1% increase from $17.11 billion for the full year of 2017.

NON-INTEREST INCOME

Non-interest income for the fourth quarter of 2018 decreased 8.8% to $27.6 million compared to $30.2 million for the fourth quarter of 2017. Non-interest income for the full year of 2018 decreased 13.0% to $107.8 million compared to $123.9 million for the full year of 2017.

The Bank’s service charges on deposit accounts decreased from $42.9 million in 2017 to $39.5 million in 2018 primarily due to the Durbin Amendment’s impact on the Bank’s interchange revenue effective July 1, 2017. The Bank’s mortgage lending income decreased from $6.4 million in 2017 to $0.5 million in 2018 as a result of the Bank’s decision in December 2017 to exit secondary market mortgage lending and the wind down of that business in early 2018.

NON-INTEREST EXPENSE

Non-interest expense for the fourth quarter of 2018 increased 10.1% to $94.9 million compared to $86.2 million for the fourth quarter of 2017. Non-interest expense for the full year of 2018 increased 14.5% to $380.8 million compared to $332.7 million for the full year of 2017. Non-interest expense included approximately $0.3 million for the fourth quarter and $11.7 million for the full year of 2018 (none in 2017) related to the name change and the related strategic rebranding.

The Bank’s efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the fourth quarter of 2018 was 36.9% compared to 34.8% for the fourth quarter of 2017. The Bank’s efficiency ratio for the full year of 2018 was 37.9% compared to 34.9% for the full year of 2017.

ASSET QUALITY, CHARGE-OFFS, PROVISIONS AND ALLOWANCE

Excluding purchased loans, the Bank’s ratio of nonperforming loans as a percent of total loans was 0.23% at December 31, 2018 compared to 0.10% at December 31, 2017, and its ratio of nonperforming assets as a percent of total assets was 0.23% at December 31, 2018 compared to 0.18% at December 31, 2017.

Excluding purchased loans, the Bank’s ratio of loans past due 30 days or more, including past due non-accrual loans, to total loans was 0.28% at December 31, 2018 compared to 0.15% at December 31, 2017.

The Bank’s annualized net charge-off ratio for non-purchased loans was 0.06% for the fourth quarter of 2018 compared to 0.08% for the fourth quarter of 2017, and it was 0.38% for the full year of 2018 compared to 0.06% for the full year of 2017. The Bank’s annualized net charge-off ratio for all loans was 0.07% for the fourth quarter of 2018 compared to 0.05% for the fourth quarter of 2017, and it was 0.34% for the full year of 2018 compared to 0.07% for the full year of 2017.

The Bank’s provision for loan losses totaled $7.3 million for the fourth quarter and $64.4 million for the full year of 2018 compared to $9.3 million for the fourth quarter and $28.1 million for the full year of 2017.

The increases in the Bank’s net charge-off ratios and provision expense for the full year of 2018 compared to 2017 were primarily due to the charge-offs totaling $45.5 million during the third quarter of 2018 on two Real Estate Specialties Group credits.

The Bank’s allowance for loan losses for its non-purchased loans was $100.7 million, or 0.67% of total non-purchased loans, at December 31, 2018 compared to $92.5 million, or 0.73% of total non-purchased loans, at December 31, 2017. The Bank had $1.6 million of allowance for loan losses for its purchased loans at both December 31, 2018 and 2017.

MANAGEMENT’S COMMENTS, CONFERENCE CALL, TRANSCRIPT AND FILINGS

In connection with this release, the Bank released management’s comments on its quarterly and year end results. Management will conduct a conference call to take questions on the quarterly and year end results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on Friday, January 18, 2019. Interested parties may listen to this call by dialing 1-844-818-5110 (U.S. and Canada) or 210-229-8841 (internationally) and asking for the Bank OZK conference call. A recorded playback of the call will be available for one week following the call at 1-855-859-2056 (U.S. and Canada) or 404-537-3406 (internationally). The passcode for this playback is 4759034. The call will be available live or in a recorded version on the Bank’s Investor Relations website at ir.ozk.com under “Company News/Webcasts.” The Bank will also provide a transcript of the conference call on its Investor Relations website.

The Bank files annual, quarterly and current reports, proxy materials and other information required by the Securities Exchange Act of 1934 with the Federal Deposit Insurance Corporation (“FDIC”), copies of which are available electronically at the FDIC’s website at https://efr.fdic.gov/fcxweb/efr/index.html and are also available on the Bank’s Investor Relations website at ir.ozk.com.

NON-GAAP FINANCIAL MEASURES

This release contains certain non-GAAP financial measures. The Bank uses these non-GAAP financial measures, specifically return on average tangible common stockholders’ equity, tangible book value per common share, total tangible common stockholders’ equity and the ratio of total tangible common stockholders’ equity to total tangible assets, as important measures of the strength of its capital and its ability to generate earnings on its tangible capital invested by its shareholders. These measures typically adjust GAAP financial measures to exclude intangible assets. Management believes presentation of these non-GAAP financial measures provides useful supplemental information which contributes to a proper understanding of the financial results and capital levels of the Bank. 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 banks. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”

FORWARD-LOOKING STATEMENTS

This release and other communications by the Bank include certain “forward-looking statements” regarding the Bank’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future 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. These risks, uncertainties and other factors include, but are not limited to: potential delays or other problems implementing the Bank’s growth, expansion and acquisition strategies including delays in identifying 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; problems with managing acquisitions; the effect of the announcements of any future acquisition on customer relationships and operating results; the availability of and access to capital; possible downgrades in the Bank’s credit ratings or outlook which could increase the costs or availability of funding from capital markets; the ability to attract new or retain existing or acquired deposits or to retain or grow loans, 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 or changes in the relative relationships of various interest rate indices; competitive factors and pricing pressures, including their effect on the Bank’s net interest margin or core spread; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; changes in legal, financial and/or regulatory requirements; recently enacted and potential legislation and regulatory actions and the costs and expenses to comply with new and/or existing legislation and regulatory actions; changes in U.S. government monetary and fiscal policy; future FDIC special assessments or changes to regular assessments; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity; the impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Bank or its 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 or rulings as well as other factors identified in this press release or as detailed from time to time in the Bank’s public filings, including those factors included in the disclosures under the headings “Forward-Looking Information” and “Item 1A. Risk Factors” in the Bank’s most recent Annual Report on Form 10-K for the year ended December 31, 2017 and its quarterly reports 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 projected in, or implied by, such forward-looking statements. The Bank disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.

GENERAL INFORMATION

Bank OZK (Nasdaq: OZK) is a regional bank providing innovative financial solutions delivered by expert bankers with a relentless pursuit of excellence. Bank OZK has been recognized as the #1 bank in the nation in its asset size for eight consecutive years. Headquartered in Little Rock, Arkansas, Bank OZK conducts operations through 253 offices in Arkansas, Georgia, Florida, North Carolina, Texas, Alabama, South Carolina, California, New York and Mississippi. Bank OZK can be found at www.ozk.com and on Facebook, Twitter and LinkedIn or contacted at (501) 978-2265 or P. O. Box 8811, Little Rock, Arkansas 72231-8811.


Bank OZK
Consolidated Balance Sheets
Unaudited

	December 31,
	2018			2017

	(Dollars in thousands, except per share amounts)

ASSETS
Cash and cash equivalents	$	290,672		$	440,388
Investment securities - available for sale		2,862,340			2,593,873
Federal Home Loan Bank of Dallas and other banker's bank stocks		25,941			28,923
Non-purchased loans		15,073,791			12,733,937
Purchased loans		2,044,032			3,309,092
Allowance for loan losses		(102,264	)		(94,120	)
Net loans		17,015,559			15,948,909
Premises and equipment, net		567,189			519,811
Foreclosed assets		16,171			25,357
Accrued interest receivable		81,968			64,608
Bank owned life insurance (“BOLI”)		721,238			658,147
Intangible assets, net		696,461			709,040
Other, net		110,491			286,591
Total assets	$	22,388,030		$	21,275,647

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand non-interest bearing	$	2,748,273		$	2,726,623
Savings and interest bearing transaction		9,682,713			10,051,122
Time		5,507,429			4,414,600
Total deposits		17,938,415			17,192,345
Repurchase agreements with customers		20,564			69,331
Other borrowings		96,692			22,320
Subordinated notes		223,281			222,899
Subordinated debentures		119,358			118,800
Accrued interest payable and other liabilities		216,355			186,164
Total liabilities		18,614,665			17,811,859

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.01 par value; 100,000,000 shares authorized; no shares		—			—
issued or outstanding at December 31, 2018 or December 31, 2017		—			—
Common stock; $0.01 par value; 300,000,000 shares authorized;		1,286			1,283
128,611,049 and 128,287,550 shares issued and outstanding at
December 31, 2018 and 2017, respectively
Additional paid-in capital		2,237,948			2,221,844
Retained earnings		1,565,201			1,250,313
Accumulated other comprehensive loss		(34,105	)		(12,712	)
Total stockholders’ equity before noncontrolling interest		3,770,330			3,460,728
Noncontrolling interest		3,035			3,060
Total stockholders’ equity		3,773,365			3,463,788
Total liabilities and stockholders’ equity	$	22,388,030		$	21,275,647


Bank OZK
Consolidated Statements of Income
Unaudited

	Three Months Ended				Year Ended
	December 31,				December 31,
	2018		2017		2018		2017

	(Dollars in thousands, except per share amounts)
Interest income:
Non-purchased loans	$	237,443	$	178,525	$	858,102	$	607,548
Purchased loans		35,453		56,303		173,465		276,499
Investment securities:
Taxable		14,642		9,661		50,021		25,460
Tax-exempt		3,941		4,343		16,193		22,430
Deposits with banks and federal funds sold		590		268		3,039		656
Total interest income		292,069		249,100		1,100,820		932,593

Interest expense:
Deposits		56,608		29,150		186,617		96,083
Repurchase agreements with customers		26		38		785		132
Other borrowings		2,193		574		3,017		1,305
Subordinated notes		3,216		3,190		12,757		12,620
Subordinated debentures		1,644		1,317		6,211		5,024
Total interest expense		63,687		34,269		209,387		115,164

Net interest income		228,382		214,831		891,433		817,429
Provision for loan losses		7,271		9,279		64,398		28,092
Net interest income after provision for loan losses		221,111		205,552		827,035		789,337

Non-interest income:
Service charges on deposit accounts		10,585		10,058		39,544		42,853
Mortgage lending income		20		1,294		538		6,399
Trust income		1,821		1,729		6,935		6,691
BOLI income		5,751		5,166		23,911		18,677
Other income from purchased loans		2,370		2,009		7,784		13,456
Loan service, maintenance and other fees		5,245		4,289		20,354		15,696
Gains on sales of other assets		465		1,899		2,219		5,553
Net gains on investment securities		—		1,201		17		4,033
Other		1,303		2,568		6,473		10,500
Total non-interest income		27,560		30,213		107,775		123,858

Non-interest expense:
Salaries and employee benefits		41,837		38,417		170,478		152,194
Net occupancy and equipment		14,027		13,474		56,362		53,198
Other operating expenses		39,029		34,286		153,912		127,280
Total non-interest expense		94,893		86,177		380,752		332,672

Income before taxes		153,778		149,588		554,058		580,523
Provision for income taxes		38,750		3,434		136,977		158,586
Net income		115,028		146,154		417,081		421,937
Earnings attributable to noncontrolling interest		3		10		25		(46	)
Net income available to common stockholders	$	115,031	$	146,164	$	417,106	$	421,891

Basic earnings per common share	$	0.89	$	1.14	$	3.24	$	3.36

Diluted earnings per common share	$	0.89	$	1.14	$	3.24	$	3.35

Dividends declared per common share	$	0.21	$	0.185	$	0.795	$	0.71


Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited

										Accumulated						Total
				Additional						Other			Non-
	Common			Paid-In			Retained			Comprehensive			Controlling
	Stock			Capital			Earnings			Loss			Interest

	(Dollars in thousands, except per share amounts)

Balances – December 31, 2017	$	1,283		$	2,221,844		$	1,250,313		$	(12,712	)	$	3,060		$	3,463,788
Net income		—			—			417,081			—			—			417,081
Earnings attributable to noncontrolling interest		—			—			25			—			(25	)		—
Total other comprehensive loss		—			—			—			(21,393	)		—			(21,393	)
Common stock dividends paid, $0.795 per share		—			—			(102,218	)		—			—			(102,218	)
Issuance of 223,840 shares of common stock for exercise of stock options		2			5,740			—			—			—			5,742
Issuance of 220,326 shares of unvested restricted common stock		2			(2	)		—			—			—			—
Repurchase and cancellation of 71,750 shares of common stock		(1	)		(3,769	)		—			—			—			(3,770	)
Stock-based compensation expense		—			14,135			—			—			—			14,135
Forfeiture of 48,917 shares of unvested restricted common stock		—			—			—			—			—			—
Balances – December 31, 2018	$	1,286		$	2,237,948		$	1,565,201		$	(34,105	)	$	3,035		$	3,773,365


Bank OZK
Summary of Non-Interest Expense
Unaudited

	Three Months Ended				Year Ended
	December 31,				December 31,
	2018		2017		2018		2017

	(Dollars in thousands)
Salaries and employee benefits	$	41,837	$	38,417	$	170,478	$	152,194
Net occupancy and equipment		14,027		13,474		56,362		53,198
Other operating expenses:
Professional and outside services		8,325		10,269		35,867		32,441
Telecommunication services		3,023		3,537		13,080		13,935
Software and data processing		3,943		2,382		13,729		10,126
Postage and supplies		2,214		2,063		9,144		7,769
Advertising and public relations		1,472		1,634		11,557		5,989
ATM expense		544		1,644		4,227		5,725
Travel and meals		2,482		2,338		9,650		8,477
FDIC insurance		3,100		2,700		11,800		9,700
FDIC and state assessments		572		883		2,940		3,414
Loan collection and repossession expense		1,077		949		3,302		5,303
Writedowns of foreclosed assets		1,841		994		2,996		3,488
Writedown of signage due to strategic rebranding		—		—		4,915		—
Amortization of intangibles		3,144		3,145		12,579		12,580
Other		7,292		1,748		18,126		8,333
Total non-interest expense	$	94,893	$	86,177	$	380,752	$	332,672


Bank OZK
Summary of Total Loans Outstanding
Unaudited

	December 31,
	2018		2017

	(Dollars in thousands)
Real estate:
Residential 1-4 family	$	1,049,460	$	1,174,427
Non-farm/non-residential		4,319,388		4,478,876
Construction/land development		6,562,185		6,648,061
Agricultural		165,088		150,003
Multifamily residential		1,116,026		508,514
Total real estate		13,212,147		12,959,881
Commercial and industrial		823,417		738,225
Consumer		2,345,863		1,472,593
Other		736,396		872,330
Total loans	$	17,117,823	$	16,043,029


Bank OZK
Selected Consolidated Financial Data
(Dollars in thousands, except per share amounts)
Unaudited

	Three Months Ended									Year Ended
	December 31,									December 31,
	2018			2017			% Change			2018			2017			% Change
Income statement data:
Net interest income	$	228,382		$	214,831			6.3	%	$	891,433		$	817,429			9.1	%
Provision for loan losses		7,271			9,279			(21.6	)		64,398			28,092			129.2
Non-interest income		27,560			30,213			(8.8	)		107,775			123,858			(13.0	)
Non-interest expense		94,893			86,177			10.1			380,752			332,672			14.5
Net income available to common stockholders		115,031			146,164			(21.3	)		417,106			421,891			(1.1	)
Common stock data:
Net income per share - diluted	$	0.89		$	1.14			(21.9	)%	$	3.24		$	3.35			(3.3	)%
Net income per share - basic		0.89			1.14			(21.9	)		3.24			3.36			(3.6	)
Cash dividends per share		0.21			0.185			13.5			0.795			0.71			12
Book value per share		29.32			26.98			8.7			29.32			26.98			8.7
Tangible book value per share⁽¹⁾		23.9			21.45			11.4			23.9			21.45			11.4
Diluted shares outstanding (thousands)		128,666			128,510						128,740			125,809
End of period shares outstanding (thousands)		128,611			128,288						128,611			128,288
Balance sheet data at period end:
Assets	$	22,388,030		$	21,275,647			5.2	%	$	22,388,030		$	21,275,647			5.2	%
Total loans		17,117,823			16,043,029			6.7			17,117,823			16,043,029			6.7
Non-purchased loans		15,073,791			12,733,937			18.4			15,073,791			12,733,937			18.4
Purchased loans		2,044,032			3,309,092			(38.2	)		2,044,032			3,309,092			(38.2	)
Allowance for loan losses		102,264			94,120			8.7			102,264			94,120			8.7
Foreclosed assets		16,171			25,357			(36.2	)		16,171			25,357			(36.2	)
Investment securities		2,888,281			2,622,796			10.1			2,888,281			2,622,796			10.1
Goodwill and other intangible assets		696,461			709,040			(1.8	)		696,461			709,040			(1.8	)
Deposits		17,938,415			17,192,345			4.3			17,938,415			17,192,345			4.3
Repurchase agreements with customers		20,564			69,331			(70.3	)		20,564			69,331			(70.3	)
Other borrowings		96,692			22,320			333.2			96,692			22,320			333.2
Subordinated notes		223,281			222,899			0.2			223,281			222,899			0.2
Subordinated debentures		119,358			118,800			0.5			119,358			118,800			0.5
Unfunded balance of closed loans		11,364,975			13,192,439			(13.9	)		11,364,975			13,192,439			(13.9	)
Common stockholders’ equity		3,770,330			3,460,728			8.9			3,770,330			3,460,728			8.9
Net unrealized losses on investment securities AFS included in common stockholders' equity		(34,105	)		(12,712	)					(34,105	)		(12,712	)
Loan (including purchased loans) to deposit ratio		95.43	%		93.31	%					95.43	%		93.31	%
Selected ratios:
Return on average assets⁽²⁾		2.04	%		2.81	%					1.9	%		2.15	%
Return on average common stockholders’ equity⁽²⁾		12.36			17.23						11.59			13.49
Return on average tangible common stockholders’ equity^{(1) (2)}		15.24			21.84						14.41			17.49
Average common equity to total average assets		16.54			16.32						16.42			15.91
Net interest margin – FTE⁽²⁾		4.55			4.72						4.59			4.85
Efficiency ratio		36.9			34.82						37.93			34.88
Net charge-offs to average non-purchased loans^{(2) (3)}		0.06			0.08						0.38			0.06
Net charge-offs to average total loans⁽²⁾		0.07			0.05						0.34			0.07
Nonperforming loans to total loans⁽⁴⁾		0.23			0.1						0.23			0.1
Nonperforming assets to total assets⁽⁴⁾		0.23			0.18						0.23			0.18
Allowance for loan losses to non-purchased loans⁽⁵⁾		0.67			0.73					0.67				0.73
Other information:
Non-accrual loans⁽⁴⁾	$	34,762		$	12,899					$	34,762		$	12,899
Accruing loans - 90 days past due⁽⁴⁾		—			—						—			—
Troubled and restructured non-purchased loans - accruing⁽⁴⁾		627			—						627			—
Impaired purchased loans		7,801			10,019						7,971			10,019

⁽¹⁾Calculations of tangible book value per common share and return on average tangible common stockholders’ equity and the reconciliations to GAAP are included in the schedules accompanying this release. ⁽²⁾Ratios for interim periods annualized based on actual days. ⁽³⁾Excludes purchased loans and net charge-offs related to such loans. ⁽⁴⁾Excludes purchased loans, except for their inclusion in total assets. ⁽⁵⁾Excludes purchased loans and any allowance for such loans.

Bank OZK
Supplemental Quarterly Financial Data
(Dollars in thousands, except per share amounts)
Unaudited

	3/31/2017			6/30/2017			9/30/2017			12/31/2017			3/31/2018			6/30/2018			9/30/2018			12/31/2018
Earnings Summary:
Net interest income	$	190,771		$	202,105		$	209,722		$	214,831		$	217,776		$	224,661		$	220,614		$	228,382
Federal tax (FTE) adjustment		3,594			3,396			3,014			2,450			1,166			1,151			1,132			1,219
Net interest income (FTE)		194,365			205,501			212,736			217,281			218,942			225,812			221,746			229,601
Provision for loan losses		(4,933	)		(6,103	)		(7,777	)		(9,279	)		(5,567	)		(9,610	)		(41,949	)		(7,271	)
Non-interest income		29,058			31,840			32,747			30,213			28,707			27,386			24,121			27,560
Non-interest expense		(78,268	)		(83,828	)		(84,399	)		(86,177	)		(93,810	)		(89,107	)		(102,942	)		(94,893	)
Pretax income (FTE)		140,222			147,410			153,307			152,038			148,272			154,481			100,976			154,997
FTE adjustment		(3,594	)		(3,396	)		(3,014	)		(2,450	)		(1,166	)		(1,151	)		(1,132	)		(1,219	)
Provision for income taxes		(47,417	)		(53,488	)		(54,246	)		(3,434	)		(33,973	)		(38,589	)		(25,665	)		(38,750	)
Noncontrolling interest		(23	)		6			(40	)		10			11			10			1			3
Net income available to common stockholders	$	89,188		$	90,532		$	96,007		$	146,164		$	113,144		$	114,751		$	74,180		$	115,031
Earnings per common share – diluted	$	0.73		$	0.73		$	0.75		$	1.14		$	0.88		$	0.89		$	0.58		$	0.89
Non-interest Income:
Service charges on deposit accounts	$	11,301		$	11,764		$	9,729		$	10,058		$	9,525		$	9,704		$	9,730		$	10,585
Mortgage lending income		1,574			1,910			1,620			1,294			492			1			24			20
Trust income		1,631			1,577			1,755			1,729			1,793			1,591			1,730			1,821
BOLI income		4,464			4,594			4,453			5,166			7,580			5,259			5,321			5,751
Other income from purchased loans		3,737			4,777			2,933			2,009			1,251			2,744			1,418			2,370
Loan service, maintenance and other fees		2,706			3,427			5,274			4,289			4,743			5,641			4,724			5,245
Gains (losses) on sales of other assets		1,619			672			1,363			1,899			1,426			844			(518	)		465
Net gains on investment securities		—			404			2,429			1,201			17			—			—			—
Other		2,026			2,715			3,191			2,568			1,880			1,602			1,692			1,303
Total non-interest income	$	29,058		$	31,840		$	32,747		$	30,213		$	28,707		$	27,386		$	24,121		$	27,560
Non-interest Expense:
Salaries and employee benefits	$	38,554		$	39,892		$	35,331		$	38,417		$	45,499		$	41,665		$	41,477		$	41,837
Net occupancy expense		13,192			12,937			13,595			13,474			14,150			13,827			14,358			14,027
Other operating expenses		26,522			30,999			35,473			34,286			34,161			33,615			47,107			39,029
Total non-interest expense	$	78,268		$	83,828		$	84,399		$	86,177		$	93,810		$	89,107		$	102,942		$	94,893
Balance Sheet Data:
Total assets	$	19,152,212		$	20,064,589		$	20,768,493		$	21,275,647		$	22,039,439		$	22,220,380		$	22,086,539		$	22,388,030
Non-purchased loans		10,216,875			11,025,203			12,047,094			12,733,937			13,674,561			14,183,533			14,440,623			15,073,791
Purchased loans		4,580,047			4,159,139			3,731,536			3,309,092			2,934,535			2,580,341			2,285,168			2,044,032
Investment securities		1,470,568			2,101,751			1,975,102			2,622,796			2,612,961			2,617,859			2,706,156			2,888,281
Deposits		15,713,427			16,241,440			16,823,359			17,192,345			17,833,672			17,897,085			17,822,915			17,938,415
Unfunded balance of closed loans		11,258,762			11,883,679			12,519,839			13,192,439			12,551,032			11,999,661			11,891,247			11,364,975
Common stockholders' equity		2,873,317			3,260,123			3,334,740			3,460,728			3,526,605			3,613,903			3,653,596			3,770,330
Allowance for Loan Losses:
Balance at beginning of period	$	76,541		$	78,224		$	82,320		$	86,784		$	94,120		$	98,097		$	104,638		$	98,200
Net charge-offs		(3,250	)		(2,007	)		(3,313	)		(1,943	)		(1,590	)		(3,069	)		(48,387	)		(3,207	)
Provision for loan losses		4,933			6,103			7,777			9,279			5,567			9,610			41,949			7,271
Balance at end of period	$	78,224		$	82,320		$	86,784		$	94,120		$	98,097		$	104,638		$	98,200		$	102,264
Selected Ratios:
Net interest margin – FTE⁽¹⁾		4.88	%		4.99	%		4.84	%		4.72	%		4.69	%		4.66	%		4.47	%		4.55	%
Efficiency ratio		35.03			35.32			34.38			34.82			37.88			35.19			41.87			36.9
Net charge-offs to average non-purchased loans^{(1) (2)}		0.05			0.03			0.08			0.08			0.04			0.05			1.32			0.06
Net charge-offs to average total loans⁽¹⁾		0.09			0.05			0.09			0.05			0.04			0.07			1.14			0.07
Nonperforming loans to total loans⁽³⁾		0.11			0.11			0.11			0.1			0.09			0.1			0.23			0.23
Nonperforming assets to total assets⁽³⁾		0.25			0.23			0.2			0.18			0.16			0.15			0.23			0.23
Allowance for loan losses to total non-purchased loans⁽⁴⁾		0.75			0.73			0.71			0.73			0.71			0.73			0.67			0.67
Loans past due 30 days or more, including past due non-accrual loans, to total loans⁽³⁾		0.16			0.15			0.12			0.15			0.14			0.12			0.17			0.28

⁽¹⁾Ratios for interim periods annualized based on actual days. ⁽²⁾Excludes purchased loans and net charge-offs related to such loans. ⁽³⁾Excludes purchased loans, except for their inclusion in total assets. ⁽⁴⁾Excludes purchased loans and any allowance for such loans.


Bank OZK
Average Consolidated Balance Sheets and Net Interest Analysis – FTE
Unaudited

	Three Months Ended December 31,														Year Ended December 31,
	2018							2017							2018							2017
	Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/			Average		Income/		Yield/
	Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate			Balance		Expense		Rate

	(Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold	$	102,931	$	590		2.27	%	$	56,500	$	268		1.88	%	$	160,148	$	3,039		1.9	%	$	81,504	$	656		0.81	%
Investment securities:
Taxable		2,335,512		14,642		2.49			1,818,633		9,661		2.11			2,143,455		50,021		2.33			1,158,519		25,460		2.2
Tax-exempt – FTE		516,512		4,988		3.83			577,614		6,680		4.59			537,616		20,497		3.81			714,329		34,508		4.83
Non-purchased loans – FTE		14,874,156		237,615		6.34			12,293,725		178,638		5.76			14,040,952		858,466		6.11			10,979,369		607,925		5.54
Purchased loans		2,170,489		35,453		6.48			3,528,823		56,303		6.33			2,633,271		173,465		6.59			4,175,146		276,499		6.62
Total earning assets – FTE		19,999,600		293,288		5.82			18,275,295		251,550		5.46			19,515,442		1,105,488		5.66			17,108,867		945,048		5.52
Non-interest earning assets		2,319,305							2,345,373							2,395,813							2,545,797
Total assets	$	22,318,905						$	20,620,668						$	21,911,255						$	19,654,664
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction	$	9,594,919	$	33,200		1.37	%	$	9,409,297	$	18,052		0.76	%	$	9,983,075	$	118,771		1.19	%	$	8,587,404	$	53,496		0.62	%
Time deposits of $100 or more		3,204,627		14,595		1.81			3,043,311		8,218		1.07			3,183,108		47,691		1.5			3,164,843		31,222		0.99
Other time deposits		2,124,920		8,813		1.65			1,452,325		2,880		0.79			1,651,960		20,155		1.22			1,560,035		11,365		0.73
Total interest bearing deposits		14,924,466		56,608		1.5			13,904,933		29,150		0.83			14,818,143		186,617		1.26			13,312,282		96,083		0.72
Repurchase agreements with customers		36,680		26		0.29			74,233		38		0.21			101,682		785		0.77			75,915		132		0.17
Other borrowings		400,874		2,193		2.17			124,340		574		1.83			166,937		3,017		1.81			62,988		1,305		2.07
Subordinated notes		223,230		3,216		5.71			222,846		3,190		5.68			223,089		12,757		5.72			222,705		12,620		5.67
Subordinated debentures		119,284		1,644		5.47			118,723		1,317		4.4			119,076		6,211		5.22			118,515		5,024		4.24
Total interest bearing liabilities		15,704,534		63,687		1.61			14,445,075		34,269		0.94			15,428,927		209,387		1.36			13,792,405		115,164		0.83
Non-interest bearing liabilities:
Non-interest bearing deposits		2,712,858							2,729,090							2,695,623							2,652,895
Other non-interest bearing liabilities		206,434							77,588							185,035							78,684
Total liabilities		18,623,826							17,251,753							18,309,585							16,523,984
Common stockholders’ equity		3,692,044							3,365,848							3,598,628							3,127,576
Noncontrolling interest		3,035							3,067							3,042							3,104
Total liabilities and stockholders’ equity	$	22,318,905						$	20,620,668						$	21,911,255						$	19,654,664
Net interest income – FTE			$	229,601						$	217,281						$	896,101						$	829,884
Net interest margin – FTE						4.55	%						4.72	%						4.59	%						4.85	%

Bank OZK
Reconciliation of Non-GAAP Financial Measures

Calculation of Average Tangible Common
Stockholders’ Equity and the Annualized Return on
Average Tangible Common Stockholders’ Equity
Unaudited

	Three Months Ended						Year Ended
	December 31,						December 31,
	2018			2017			2018			2017

	(Dollars in thousands)
Net income available to common stockholders	$	115,031		$	146,164		$	417,106		$	421,891
Average common stockholders’ equity before noncontrolling interest	$	3,692,044		$	3,365,848		$	3,598,628		$	3,127,576
Less average intangible assets:
Goodwill		(660,789	)		(660,789	)		(660,789	)		(660,632	)
Core deposit and other intangibles, net of accumulated amortization		(37,654	)		(49,927	)		(42,315	)		(54,702	)
Total average intangibles		(698,443	)		(710,716	)		(703,104	)		(715,334	)
Average tangible common stockholders’ equity	$	2,993,601		$	2,655,132		$	2,895,524		$	2,412,242
Return on average common stockholders’ equity⁽¹⁾		12.36	%		17.23	%		11.59	%		13.49	%
Return on average tangible common stockholders’ equity⁽¹⁾		15.24	%		21.84	%		14.41	%		17.49	%

⁽¹⁾Ratios for interim periods annualized based on actual days.


Calculation of Total Tangible Common
Stockholders’ Equity and Tangible
Book Value per Common Share
Unaudited

	December 31,
	2018			2017

	(In thousands, except per share amounts)
Total common stockholders’ equity before noncontrolling interest	$	3,770,330		$	3,460,728
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(35,672	)		(48,251	)
Total intangibles		(696,461	)		(709,040	)
Total tangible common stockholders’ equity	$	3,073,869		$	2,751,688
Shares of common stock outstanding		128,611			128,288
Book value per common share	$	29.32		$	26.98
Tangible book value per common share	$	23.9		$	21.45


Calculation of Total Tangible Common Stockholders’
Equity and the Ratio of Total Tangible Common
Stockholders’ Equity to Total Tangible Assets
Unaudited

	December 31,
	2018			2017

	(Dollars in thousands)
Total common stockholders’ equity before noncontrolling interest	$	3,770,330		$	3,460,728
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(35,672	)		(48,251	)
Total intangibles		(696,461	)		(709,040	)
Total tangible common stockholders’ equity	$	3,073,869		$	2,751,688
Total assets	$	22,388,030		$	21,275,647
Less intangible assets:
Goodwill		(660,789	)		(660,789	)
Core deposit and other intangible assets, net of accumulated amortization		(35,672	)		(48,251	)
Total intangibles		(696,461	)		(709,040	)
Total tangible assets	$	21,691,569		$	20,566,607
Ratio of total common stockholders’ equity to total assets		16.84	%		16.27	%
Ratio of total tangible common stockholders’ equity to total		14.17	%		13.38	%
tangible assets		14.17	%		13.38	%


Media Contact:	Susan Blair (501) 978-2217
Investor Contact:	Tim Hicks (501) 978-2336

Source: Bank OZK

Bank OZK Announces Fourth Quarter and Full Year 2018 Earnings

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Bank OZK Announces Fourth Quarter and Full Year 2018 Earnings

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