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CST: 20/11/2019 15:40:39   

Bank OZK Announces Third Quarter 2019 Earnings

33 Days ago

LITTLE ROCK, Ark., Oct. 17, 2019 (GLOBE NEWSWIRE) -- Bank OZK (the “Bank”) (Nasdaq: OZK) today announced that net income for the third quarter of 2019 was $103.9 million, a 40.1% increase from $74.2 million for the third quarter of 2018, but a 6.0% decrease from $110.5 million for the second quarter of 2019.  Diluted earnings per common share for the third quarter of 2019 were $0.81, a 39.7% increase from $0.58 for the third quarter of 2018, but a 5.8% decrease from $0.86 for the second quarter of 2019.

The Bank’s results for the third quarter of 2018 included (i) pretax expenses of $10.8 million as a result of its name change and strategic rebranding and (ii) net charge-offs of $45.5 million on two unrelated credits.

For the first nine months of 2019, net income totaled $325.1 million, a 7.6% increase from $302.1 million for the first nine months of 2018.  Diluted earnings per common share for the first nine months of 2019 were $2.52, a 7.2% increase from $2.35 for the first nine months of 2018.

The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the third quarter of 2019 were 1.81%, 10.22% and 12.33%, respectively, compared to 1.33%, 8.07% and 9.99%, respectively, for the third quarter of 2018.  The Bank’s annualized returns on average assets, average common stockholders’ equity and average tangible common stockholders’ equity for the first nine months of 2019 were 1.92%, 11.07%, and 13.44%, respectively, compared to 1.85%, 11.32%, and 14.11%, respectively, for the first nine months of 2018. The calculation of the Bank’s annualized return on average tangible common stockholders’ equity and the reconciliation to generally accepted accounting principles (“GAAP”) are included in the schedules accompanying this release.  

George Gleason, Chairman and Chief Executive Officer, stated, “We are very pleased to have once again delivered financial metrics among the best in the industry for the quarter just ended.  We continue to maintain our focus on our strong credit culture and consistent discipline, which are paramount in this interest rate and competitive environment.  Our excellent team of bankers have us well positioned for continued success as we remain focused on delivering long-term value for our shareholders.”

KEY BALANCE SHEET METRICS

Total loans were $17.73 billion at September 30, 2019, a 6.0% increase from $16.73 billion at September 30, 2018.  Non-purchased loans, which exclude loans acquired in previous acquisitions, were $16.31 billion at September 30, 2019, a 12.9% increase from $14.44 billion at September 30, 2018.  Purchased loans, which consist of loans acquired in previous acquisitions, were $1.43 billion at September 30, 2019, a 37.5% decrease from $2.29 billion at September 30, 2018.  The unfunded balance of closed loans was $11.43 billion at September 30, 2019, a 3.9% decrease from $11.89 billion at September 30, 2018, but a 2.4% increase from $11.17 billion at June 30, 2019.

Deposits were $18.44 billion at September 30, 2019, a 3.5% increase from $17.82 billion at September 30, 2018.  Total assets were $23.40 billion at September 30, 2019, a 6.0% increase from $22.09 billion at September 30, 2018.

Common stockholders’ equity was $4.08 billion at September 30, 2019, an 11.6% increase from $3.65 billion at September 30, 2018.  Tangible common stockholders’ equity was $3.39 billion at September 30, 2019, a 14.8% increase from $2.95 billion at September 30, 2018.  Book value per common share was $31.63 at September 30, 2019, an 11.3% increase from $28.41 at September 30, 2018.  Tangible book value per common share was $26.30 at September 30, 2019, a 14.5% increase from $22.97 at September 30, 2018.  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 increased to 17.43% at September 30, 2019 compared to 16.54% at September 30, 2018.  Its ratio of total tangible common stockholders’ equity to total tangible assets increased to 14.93% at September 30, 2019 compared to 13.81% at September 30, 2018.  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. 

MANAGEMENT’S COMMENTS, CONFERENCE CALL, TRANSCRIPT AND FILINGS

In connection with this release, the Bank released management’s comments on the results for the quarter just ended, which are available at http://ir.ozk.com.  This release should be read in conjunction with management’s comments on the results for the third quarter of 2019. 

Management will conduct a conference call to take questions on these quarterly results and management’s comments at 10:00 a.m. CT (11:00 a.m. ET) on October 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 7188336.  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 http://ir.ozk.com.  To receive automated email alerts for these materials, please visit http://ir.ozk.com/EmailNotification to sign up.

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 satisfactory sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices or relocating or closing existing offices; the ability to enter into and/or close additional acquisitions; 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; the potential impact of the change in the method for determining LIBOR; 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; 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, the Bank’s operational or security systems or infrastructure, or those of third parties with whom it does 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, including the estimated effects from the adoption of the current expected credit loss (“CECL”) model on January 1, 2020, 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 other public reports the Bank files with the FDIC, including those factors described 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, 2018 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 top performing bank in the nation in its asset size 13 times in the past eight years. Headquartered in Little Rock, Arkansas, Bank OZK conducts operations through more than 250 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. 

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


Bank OZK
Consolidated Balance Sheets
Unaudited
           
    September 30,     December   31,  
    2019     2018  
                 
    (Dollars in thousands, except per share amounts)  
ASSETS                
Cash and cash equivalents   $ 1,029,946     $ 290,672  
Investment securities - available for sale ("AFS")     2,414,722       2,862,340  
Federal Home Loan Bank of Dallas and other banker's bank stocks     13,656       25,941  
Non-purchased loans     16,307,621       15,073,791  
Purchased loans     1,427,230       2,044,032  
Allowance for loan losses     (109,001 )     (102,264 )
Net loans     17,625,850       17,015,559  
Premises and equipment, net     687,511       567,189  
Foreclosed assets     33,319       16,171  
Accrued interest receivable     76,218       81,968  
Bank owned life insurance (“BOLI”)     735,531       721,238  
Goodwill and other intangible assets, net     687,397       696,461  
Other, net     98,529       110,491  
Total assets   $ 23,402,679     $ 22,388,030  
                 
LIABILITIES AND STOCKHOLDERS EQUITY                
Deposits:                
Demand non-interest bearing   $ 2,793,369     $ 2,748,273  
Savings and interest bearing transaction     8,441,339       9,682,713  
Time     7,205,370       5,507,429  
Total deposits     18,440,078       17,938,415  
Repurchase agreements with customers     12,156       20,564  
Other borrowings     301,421       96,692  
Subordinated notes     223,567       223,281  
Subordinated debentures     119,775       119,358  
Accrued interest payable and other liabilities     224,234       216,355  
Total liabilities     19,321,231       18,614,665  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
Preferred stock; $0.01 par value; 100,000,000 shares authorized; no shares
  issued or outstanding at September 30, 2019 or December 31, 2018
           
Common stock; $0.01 par value; 300,000,000 shares authorized;
  128,946,359 and 128,611,049 shares issued and outstanding at
  September 30, 2019 and December 31, 2018, respectively
    1,289       1,286  
Additional paid-in capital     2,247,973       2,237,948  
Retained earnings     1,801,414       1,565,201  
Accumulated other comprehensive income (loss)     27,648       (34,105 )
Total stockholders’ equity before noncontrolling interest     4,078,324       3,770,330  
Noncontrolling interest     3,124       3,035  
Total stockholders’ equity     4,081,448       3,773,365  
Total liabilities and stockholders’ equity   $ 23,402,679     $ 22,388,030  
                 


Bank OZK
Consolidated Statements of Income
Unaudited
 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
                                 
    (Dollars in thousands, except per share amounts)  
Interest income:                                
Non-purchased loans   $ 244,954     $ 219,847     $ 740,900     $ 620,659  
Purchased loans     26,042       40,173       84,756       138,012  
Investment securities:                                
Taxable     12,511       12,472       40,992       35,380  
Tax-exempt     3,363       3,991       10,930       12,252  
Deposits with banks and federal funds sold     2,647       1,112       4,001       2,448  
Total interest income     289,517       277,595       881,579       808,751  
                                 
Interest expense:                                
Deposits     66,248       51,785       196,727       130,009  
Repurchase agreements with customers     5       215       39       759  
Other borrowings     90       144       1,497       824  
Subordinated notes     3,216       3,216       9,542       9,542  
Subordinated debentures     1,178       1,621       4,570       4,567  
Total interest expense     70,737       56,981       212,375       145,701  
                                 
Net interest income     218,780       220,614       669,204       663,050  
Provision for loan losses     7,854       41,949       21,303       57,126  
Net interest income after provision for loan losses     210,926       178,665       647,901       605,924  
                                 
Non-interest income:                                
Service charges on deposit accounts     10,827       9,730       30,841       28,959  
Trust income     1,975       1,730       5,544       5,114  
BOLI income     5,414       5,321       15,753       18,160  
Other income from purchased loans     674       1,418       2,925       5,413  
Loan service, maintenance and other fees     4,197       4,724       13,636       15,108  
Gains (losses) on sales of other assets     189       (518 )     875       1,753  
Net gains on investment securities                 713       17  
Other     3,170       1,716       6,834       5,691  
Total non-interest income     26,446       24,121       77,121       80,215  
                                 
Non-interest expense:                                
Salaries and employee benefits     48,376       41,477       140,801       128,641  
Net occupancy and equipment     14,825       14,358       44,163       42,335  
Other operating expenses     37,713       47,107       111,760       114,883  
Total non-interest expense     100,914       102,942       296,724       285,859  
                                 
Income before taxes     136,458       99,844       428,298       400,280  
Provision for income taxes     32,574       25,665       103,189       98,227  
Net income     103,884       74,179       325,109       302,053  
Earnings attributable to noncontrolling interest     7       1       (9 )     22  
Net income available to common stockholders   $ 103,891     $ 74,180     $ 325,100     $ 302,075  
                                 
Basic earnings per common share   $ 0.81     $ 0.58     $ 2.52     $ 2.35  
                                 
Diluted earnings per common share   $ 0.81     $ 0.58     $ 2.52     $ 2.35  
                                 


Bank OZK
Consolidated Statements of Stockholders’ Equity
Unaudited
 
    Common
Stock
    Additional
Paid-In
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Non-
Controlling
Interest
    Total  
                                                 
    (Dollars in thousands, except per share amounts)  
                                                 
Three months ended September 30, 2019:                                                
Balances – June 30, 2019   $ 1,289     $ 2,243,779     $ 1,728,486     $ 19,693     $ 3,131     $ 3,996,378  
Net income                 103,884                   103,884  
Earnings attributable to noncontrolling interest                 7             (7 )      
Total other comprehensive income                       7,955             7,955  
Common stock dividends paid, $0.24 per
  share
                (30,963 )                 (30,963 )
Issuance of 10,800 shares of common
  stock for exercise of stock options
          214                         214  
Stock-based compensation expense           3,980                         3,980  
Forfeitures of 11,157 shares of unvested
  restricted common stock
                                   
Balances – September 30, 2019   $ 1,289     $ 2,247,973     $ 1,801,414     $ 27,648     $ 3,124     $ 4,081,448  
                                                 
Nine months ended September 30, 2019:                                                
Balances – December 31, 2018   $ 1,286     $ 2,237,948     $ 1,565,201     $ (34,105 )   $ 3,035     $ 3,773,365  
Net income                 325,109                   325,109  
Earnings attributable to noncontrolling
  interest
                (9 )           9        
Total other comprehensive income                       61,753             61,753  
Common stock dividends paid, $0.69
  per share
                (88,887 )                 (88,887 )
Noncontrolling interest cash contribution                             80       80  
Issuance of 67,350 shares of common
  stock for exercise of stock options
    1       1,090                         1,091  
Issuance of 406,074 shares of unvested
  restricted common stock
    4       (4 )                        
Repurchase and cancellation of 62,742
  shares of common stock
    (1 )     (1,646 )                       (1,647 )
Stock-based compensation expense           10,584                         10,584  
Forfeiture of 75,372 shares of unvested
  restricted common stock
    (1 )     1                          
Balances – September 30, 2019   $ 1,289     $ 2,247,973     $ 1,801,414     $ 27,648     $ 3,124     $ 4,081,448  
                                                 


Bank OZK
Consolidated Statements of Stockholders’ Equity (continued)
Unaudited
 
    Common
Stock
    Additional
Paid-In
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Non-
Controlling
Interest
    Total  
                                                 
    (Dollars in thousands, except per share amounts)  
Three months ended September 30, 2018:                                                
Balances – June 30, 2018   $ 1,286     $ 2,230,809     $ 1,428,721     $ (46,913 )   $ 3,039     $ 3,616,942  
Net income                 74,179                   74,179  
Earnings attributable to noncontrolling interest                 1             (1 )      
Total other comprehensive loss                       (12,338 )           (12,338 )
Common stock dividends paid, $0.20 per
  share
                (25,723 )                 (25,723 )
Issuance of 6,100 shares of common
  stock for exercise of stock options
          92                         92  
Issuance of 5,511 shares of unvested
  restricted common stock
                                   
Stock-based compensation expense           3,482                         3,482  
Forfeitures of 18,791 shares of unvested
  restricted common stock
                                   
Balances – September 30, 2018   $ 1,286     $ 2,234,383     $ 1,477,178     $ (59,251 )   $ 3,038     $ 3,656,634  
                                                 
Nine months ended September 30, 2018:                                                
Balances – December 31, 2017   $ 1,283     $ 2,221,844     $ 1,250,313     $ (12,712 )   $ 3,060     $ 3,463,788  
Net income                 302,053                   302,053  
Earnings attributable to noncontrolling interest                 22             (22 )      
Total other comprehensive loss                       (46,539 )           (46,539 )
Common stock dividends paid, $0.585 per
  share
                (75,210 )                 (75,210 )
Issuance of 216,990 shares of common
  stock for exercise of stock options
    2       5,677                         5,679  
Issuance of 220,102 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           10,633                         10,633  
Forfeitures of 43,655 shares of unvested
  restricted common stock
                                   
Balances – September 30, 2018   $ 1,286     $ 2,234,383     $ 1,477,178     $ (59,251 )   $ 3,038     $ 3,656,634  
                                                 


Bank OZK
Summary of Non-Interest Expense
Unaudited
 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
    (Dollars in thousands)  
Salaries and employee benefits   $ 48,376     $ 41,477     $ 140,801     $ 128,641  
Net occupancy and equipment     14,825       14,358       44,163       42,335  
Other operating expenses:                                
Professional and outside services     9,204       9,725       25,874       27,542  
Software and data processing     5,095       3,336       14,561       9,786  
Deposit insurance and assessments     2,505       3,948       9,645       11,068  
Travel and meals     2,777       2,517       8,385       7,168  
Telecommunication services     2,094       3,373       8,248       10,056  
Postage and supplies     2,040       2,517       6,201       6,930  
Advertising and public relations     2,067       6,977       5,421       10,084  
ATM expense     1,277       1,202       3,363       3,683  
Loan collection and repossession expense     317       932       2,218       2,225  
Writedowns of foreclosed and other assets     354       544       1,509       1,156  
Writedown of signage due to strategic rebranding           4,915             4,915  
Amortization of intangibles     2,907       3,145       9,064       9,435  
Other     7,076       3,976       17,271       10,835  
Total non-interest expense   $ 100,914     $ 102,942     $ 296,724     $ 285,859  
                                 


Bank OZK
Summary of Total Loans Outstanding
Unaudited
 
    September 30, 2019     December 31, 2018  
                                 
    (Dollars in thousands)  
Real estate:                                
Residential 1-4 family   $ 1,016,834       5.7 %   $ 1,049,460       6.1 %
Non-farm/non-residential     3,883,113       21.9       4,319,388       25.2  
Construction/land development     6,682,143       37.7       6,562,185       38.4  
Agricultural     207,801       1.2       165,088       1.0  
Multifamily residential     1,358,127       7.6       1,116,026       6.5  
Total real estate     13,148,018       74.1       13,212,147       77.2  
Commercial and industrial     706,048       4.0       823,417       4.8  
Consumer     2,921,307       16.5       2,345,863       13.7  
Other     959,478       5.4       736,396       4.3  
Total loans     17,734,851       100.0 %     17,117,823       100.0 %
Allowance for loan losses     (109,001 )             (102,264 )        
Net loans   $ 17,625,850             $ 17,015,559          
                                 


Summary of Deposits
Unaudited
 
    September 30, 2019     December 31, 2018  
                                 
    (Dollars in thousands)  
Non-interest bearing   $ 2,793,369       15.1 %   $ 2,748,273       15.3 %
Interest bearing:                                
Transaction (NOW)     2,730,018       14.8       2,359,299       13.2  
Savings and money market     5,711,321       31.0       7,323,414       40.8  
Time deposits less than $100     3,445,873       18.7       2,297,101       12.8  
Time deposits of $100 or more     3,759,497       20.4       3,210,328       17.9  
Total deposits   $ 18,440,078       100.0 %   $ 17,938,415       100.0 %
                                 


Bank OZK
Selected Consolidated Financial Data
Unaudited
 
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2019     2018     % Change     2019     2018     % Change  
                                                 
  (Dollars in thousands, except per share amounts)  
Income statement data:                                                
Net interest income   $ 218,780     $ 220,614       (0.8 )%   $ 669,204     $ 663,050       0.9 %
Provision for loan losses     7,854       41,949       (81.3 )     21,303       57,126       (62.7 )
Non-interest income     26,446       24,121       9.6       77,121       80,215       (3.9 )
Non-interest expense     100,914       102,942       (2.0 )     296,724       285,859       3.8  
Net income available to common stockholders     103,891       74,180       40.1       325,100       302,075       7.6  
Common stock data:                                                
Net income per share - diluted   $ 0.81     $ 0.58       39.7 %   $ 2.52     $ 2.35       7.2 %
Net income per share - basic     0.81       0.58       39.7       2.52       2.35       7.2  
Cash dividends per share     0.24       0.20       20.0       0.69       0.585       17.9  
Book value per share     31.63       28.41       11.3       31.63       28.41       11.3  
Tangible book value per share(1)     26.30       22.97       14.5       26.30       22.97       14.5  
Diluted shares outstanding (thousands)     129,012       128,744               128,995       128,771          
End of period shares outstanding (thousands)     128,946       128,609               128,946       128,609          
Balance sheet data at period end:                                                
Total assets   $ 23,402,679     $ 22,086,539       6.0 %   $ 23,402,679     $ 22,086,539       6.0 %
Total loans     17,734,851       16,725,791       6.0       17,734,851       16,725,791       6.0  
Non-purchased loans     16,307,621       14,440,623       12.9       16,307,621       14,440,623       12.9  
Purchased loans     1,427,230       2,285,168       (37.5 )     1,427,230       2,285,168       (37.5 )
Allowance for loan losses     109,001       98,200       11.0       109,001       98,200       11.0  
Foreclosed assets     33,319       18,470       80.4       33,319       18,470       80.4  
Investment securities - AFS     2,414,722       2,669,877       (9.6 )     2,414,722       2,669,877       (9.6 )
Goodwill and other intangible assets, net     687,397       699,606       (1.7 )     687,397       699,606       (1.7 )
Deposits     18,440,078       17,822,915       3.5       18,440,078       17,822,915       3.5  
Repurchase agreements with customers     12,156       51,891       (76.6 )     12,156       51,891       (76.6 )
Other borrowings     301,421       1,729     NM       301,421       1,729     NM  
Subordinated notes     223,567       223,185       0.2       223,567       223,185       0.2  
Subordinated debentures     119,775       119,217       0.5       119,775       119,217       0.5  
Unfunded balance of closed loans     11,429,918       11,891,247       (3.9 )     11,429,918       11,891,247       (3.9 )
Total common stockholders’ equity     4,078,324       3,653,596       11.6       4,078,324       3,653,596       11.6  
Net unrealized gains (losses) on investment securities AFS
  included in common stockholders' equity
    27,648       (59,251 )             27,648       (59,251 )        
Loan (including purchased loans) to deposit ratio     96.18 %     93.84 %             96.18 %     93.84 %        
Selected ratios:                                                
Return on average assets(2)     1.81 %     1.33 %             1.92 %     1.85 %        
Return on average common stockholders’ equity(2)     10.22       8.07               11.07       11.32          
Return on average tangible common stockholders’ equity(1) (2)     12.33       9.99               13.44       14.11          
Average common equity to total average assets     17.69       16.47               17.31       16.38          
Net interest margin – FTE(2)     4.26       4.47               4.41       4.60          
Efficiency ratio     40.98       41.87               39.58       38.28          
Net charge-offs to average non-purchased loans(2) (3)     0.07       1.32               0.08       0.49          
Net charge-offs to average total loans(2)     0.12       1.14               0.11       0.43          
Nonperforming loans to total loans(4)     0.17       0.23               0.17       0.23          
Nonperforming assets to total assets(4)     0.26       0.23               0.26       0.23          
Allowance for loan losses to non-purchased loans(5)     0.66       0.67             0.66     0.67          
Other information:                                                
Non-accrual loans(4)   $ 25,552     $ 32,960             $ 25,552     $ 32,960          
Accruing loans - 90 days past due(4)                                        
Troubled and restructured non-purchased loans - accruing (4)     1,510                     1,510                
Impaired purchased loans     12,969       5,064               12,969       5,064          

(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.
NM – Not meaningful

 
 
Bank OZK
Selected Consolidated Financial Data
Unaudited
 
    Three Months Ended          
    September 30,     June 30,          
    2019     2019     % Change  
                         
  (Dollars in thousands, except per share amounts)  
Income statement data:                        
Net interest income   $ 218,780     $ 224,536       (2.6 )%
Provision for loan losses     7,854       6,769       16.0  
Non-interest income     26,446       26,603       (0.6 )
Non-interest expense     100,914       99,131       1.8  
Net income available to common stockholders     103,891       110,503       (6.0 )
Common stock data:                        
Net income per share - diluted   $ 0.81     $ 0.86       (5.8 )%
Net income per share - basic     0.81       0.86       (5.8 )
Cash dividends per share     0.24       0.23       4.3  
Book value per share     31.63       30.97       2.1  
Tangible book value per share (1)     26.30       25.61       2.7  
Diluted shares outstanding (thousands)     129,012       129,079          
End of period shares outstanding (thousands)     128,946       128,947          
Balance sheet data at period end:                        
Total assets   $ 23,402,679     $ 22,960,731       1.9 %
Total loans     17,734,851       17,485,205       1.4  
Non-purchased loans     16,307,621       15,786,809       3.3  
Purchased loans     1,427,230       1,698,396       (16.0 )
Allowance for loan losses     109,001       106,642       2.2  
Foreclosed assets     33,319       33,467       (0.4 )
Investment securities - AFS     2,414,722       2,548,489       (5.2 )
Goodwill and other intangible assets, net     687,397       690,304       (0.4 )
Deposits     18,440,078       18,186,215       1.4  
Repurchase agreements with customers     12,156       10,909       11.4  
Other borrowings     301,421       201,455       49.6  
Subordinated notes     223,567       223,471       0.1  
Subordinated debentures     119,775       119,635       0.1  
Unfunded balance of closed loans     11,429,918       11,167,055       2.4  
Total common stockholders’ equity     4,078,324       3,993,247       2.1  
Net unrealized gains on investment securities AFS
  included in common stockholders' equity
    27,648       19,693          
Loan (including purchased loans) to deposit ratio     96.18 %     96.15 %        
Selected ratios:                        
Return on average assets(2)     1.81 %     1.95 %        
Return on average common stockholders’ equity(2)     10.22       11.29          
Return on average tangible common stockholders’ equity(1) (2)     12.33       13.70          
Average common equity to total average assets     17.69       17.31          
Net interest margin – FTE(2)     4.26       4.45          
Efficiency ratio     40.98       39.30          
Net charge-offs to average non-purchased loans(2) (3)     0.07       0.12          
Net charge-offs to average total loans(2)     0.12       0.14          
Nonperforming loans to total loans(4)     0.17       0.15          
Nonperforming assets to total assets(4)     0.26       0.25          
Allowance for loan losses to non-purchased loans(5)     0.66     0.67          
Other information:                        
Non-accrual loans(4)   $ 25,552     $ 22,860          
Accruing loans - 90 days past due(4)                    
Troubled and restructured non-purchased loans - accruing(4)     1,510       1,399          
Impaired purchased loans     12,969       15,440          

(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
Unaudited
 
     12/31/17     3/31/18     6/30/18     9/30/18     12/31/18     3/31/19     6/30/19     9/30/19  
                                                                 
    (Dollars in thousands, except per share amounts)  
Earnings Summary:                                                                
Net interest income   $ 214,831     $ 217,776     $ 224,661     $ 220,614     $ 228,382     $ 225,888     $ 224,536     $ 218,780  
Federal tax (FTE) adjustment     2,450       1,166       1,151       1,132       1,219       1,207       1,136       1,038  
Net interest income (FTE)     217,281       218,942       225,812       221,746       229,601       227,095       225,672       219,818  
Provision for loan losses     (9,279 )     (5,567 )     (9,610 )     (41,949 )     (7,271 )     (6,681 )     (6,769 )     (7,854 )
Non-interest income     30,213       28,707       27,386       24,121       27,560       24,072       26,603       26,446  
Non-interest expense     (86,177 )     (93,810 )     (89,107 )     (102,942 )     (94,893 )     (96,678 )     (99,131 )     (100,914 )
Pretax income (FTE)     152,038       148,272       154,481       100,976       154,997       147,808       146,375       137,496  
FTE adjustment     (2,450 )     (1,166 )     (1,151 )     (1,132 )     (1,219 )     (1,207 )     (1,136 )     (1,038 )
Provision for income taxes     (3,434 )     (33,973 )     (38,589 )     (25,665 )     (38,750 )     (35,889 )     (34,726 )     (32,574 )
Noncontrolling interest     10       11       10       1       3       (6 )     (10 )     7  
Net income available to
  common stockholders
  $ 146,164     $ 113,144     $ 114,751     $ 74,180     $ 115,031     $ 110,706     $ 110,503     $ 103,891  
Earnings per common share – diluted   $ 1.14     $ 0.88     $ 0.89     $ 0.58     $ 0.89     $ 0.86     $ 0.86     $ 0.81  
Non-interest Income:                                                                
Service charges on deposit accounts   $ 10,058     $ 9,525     $ 9,704     $ 9,730     $ 10,585     $ 9,722     $ 10,291     $ 10,827  
Trust income     1,729       1,793       1,591       1,730       1,821       1,730       1,839       1,975  
BOLI income     5,166       7,580       5,259       5,321       5,751       5,162       5,178       5,414  
Other income from purchased loans     2,009       1,251       2,744       1,418       2,370       795       1,455       674  
Loan service, maintenance and
  other fees
    4,289       4,743       5,641       4,724       5,245       4,874       4,565       4,197  
Net gains on investment securities     1,201       17                               713        
Gains (losses) on sales of other assets     1,899       1,426       844       (518 )     465       284       402       189  
Other     3,862       2,372       1,603       1,716       1,323       1,505       2,160       3,170  
Total non-interest income   $ 30,213     $ 28,707     $ 27,386     $ 24,121     $ 27,560     $ 24,072     $ 26,603     $ 26,446  
Non-interest Expense:                                                                
Salaries and employee benefits   $ 38,417     $ 45,499     $ 41,665     $ 41,477     $ 41,837     $ 44,868     $ 47,558     $ 48,376  
Net occupancy expense     13,474       14,150       13,827       14,358       14,027       14,750       14,587       14,825  
Other operating expenses     34,286       34,161       33,615       47,107       39,029       37,060       36,986       37,713  
Total non-interest expense   $ 86,177     $ 93,810     $ 89,107     $ 102,942     $ 94,893     $ 96,678     $ 99,131     $ 100,914  
Balance Sheet Data:                                                                
Total assets   $ 21,275,647     $ 22,039,439     $ 22,220,380     $ 22,086,539     $ 22,388,030     $ 23,005,652     $ 22,960,731     $ 23,402,679  
Non-purchased loans     12,733,937       13,674,561       14,183,533       14,440,623       15,073,791       15,610,681       15,786,809       16,307,621  
Purchased loans     3,309,092       2,934,535       2,580,341       2,285,168       2,044,032       1,864,715       1,698,396       1,427,230  
Investment securities - AFS     2,593,873       2,603,600       2,608,439       2,669,877       2,862,340       2,769,602       2,548,489       2,414,722  
Deposits     17,192,345       17,833,672       17,897,085       17,822,915       17,938,415       18,476,868       18,186,215       18,440,078  
Unfunded balance of closed loans     13,192,439       12,551,032       11,999,661       11,891,247       11,364,975       11,544,218       11,167,055       11,429,918  
Common stockholders' equity     3,460,728       3,526,605       3,613,903       3,653,596       3,770,330       3,882,643       3,993,247       4,078,324  
Allowance for Loan Losses:                                                                
Balance at beginning of period   $ 86,784     $ 94,120     $ 98,097     $ 104,638     $ 98,200     $ 102,264     $ 105,954     $ 106,642  
Net charge-offs     (1,943 )     (1,590 )     (3,069 )     (48,387 )     (3,207 )     (2,991 )     (6,081 )     (5,495 )
Provision for loan losses     9,279       5,567       9,610       41,949       7,271       6,681       6,769       7,854  
Balance at end of period   $ 94,120     $ 98,097     $ 104,638     $ 98,200     $ 102,264     $ 105,954     $ 106,642     $ 109,001  
Selected Ratios:                                                                
Net interest margin – FTE(1)     4.72 %     4.69 %     4.66 %     4.47 %     4.55 %     4.53 %     4.45 %     4.26 %
Efficiency ratio     34.82       37.88       35.19       41.87       36.90       38.49       39.30       40.98  
Net charge-offs to average
  non-purchased loans(1) (2)
    0.08       0.04       0.05       1.32       0.06       0.05       0.12       0.07  
Net charge-offs to average
  total loans(1)
    0.05       0.04       0.07       1.14       0.07       0.07       0.14       0.12  
Nonperforming loans
  to total loans(3)
    0.10       0.09       0.10       0.23       0.23       0.22       0.15       0.17  
Nonperforming assets to total assets(3)     0.18       0.16       0.15       0.23       0.23       0.21       0.25       0.26  
Allowance for loan losses to
  total non-purchased loans(4)
    0.73       0.71       0.73       0.67       0.67       0.67       0.67       0.66  
Loans past due 30 days or
  more, including past due non-
  accrual loans, to total loans(3)
    0.15       0.14       0.12       0.17       0.28       0.28       0.13       0.14  

(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 September 30,     Nine Months Ended September 30,  
    2019     2018     2019     2018  
    Average
Balance
    Income/
Expense
  Yield/
Rate
    Average
Balance
  Income/
Expense
  Yield/
Rate
    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   $ 486,174     $ 2,647     2.16 %   $ 240,665   $ 1,112     1.83 %   $ 242,476     $ 4,001     2.21 %   $ 179,429   $ 2,448     1.82 %
Investment securities:                                                                                    
Taxable     2,027,267       12,511     2.45       2,117,498     12,472     2.34       2,169,218       40,992     2.53       2,078,710     35,380     2.28  
Tax-exempt – FTE     462,927       4,256     3.65       532,503     5,051     3.76       495,694       13,835     3.73       544,728     15,509     3.81  
Non-purchased loans – FTE     15,934,033       245,099     6.10       14,363,015     219,919     6.07       15,727,447       741,375     6.30       13,760,166     620,851     6.03  
Purchased loans     1,553,398       26,042     6.65       2,436,888     40,173     6.54       1,760,740       84,756     6.44       2,789,226     138,012     6.62  
Total earning assets – FTE     20,463,799       290,555     5.63       19,690,569     278,727     5.62       20,395,575       884,959     5.80       19,352,259     812,200     5.61  
Non-interest earning assets     2,323,028                     2,457,577                   2,277,584                     2,421,623              
Total assets   $ 22,786,827                   $ 22,148,146                 $ 22,673,159                   $ 21,773,882              
LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    
Interest bearing liabilities:                                                                                    
Deposits:                                                                                    
Savings and interest bearing transaction   $ 8,792,998     $ 30,108     1.36 %   $ 10,231,569   $ 33,753     1.31 %   $ 9,318,915     $ 103,721     1.49 %   $ 10,113,882   $ 85,571     1.13 %
Time deposits of $100 or more     3,564,862       19,803     2.20       3,306,014     13,288     1.59       3,292,375       52,056     2.11       3,175,855     33,096     1.39  
Other time deposits     3,069,997       16,337     2.11       1,580,886     4,744     1.19       2,697,660       40,950     2.03       1,492,575     11,342     1.02  
Total interest bearing deposits     15,427,857       66,248     1.70       15,118,469     51,785     1.36       15,308,950       196,727     1.72       14,782,312     130,009     1.18  
Repurchase agreements with customers     9,037       5     0.24       97,249     215     0.88       14,062       39     0.37       123,587     759     0.82  
Other borrowings (1)     29,422       90     1.21       63,909     144     0.90       122,254       1,497     1.64       88,101     824     1.25  
Subordinated notes     223,516       3,216     5.71       223,135     3,216     5.72       223,419       9,542     5.71       223,042     9,542     5.72  
Subordinated debentures (1)     119,700       1,178     3.90       119,145     1,621     5.40       119,558       4,570     5.11       119,006     4,567     5.13  
Total interest bearing liabilities     15,809,532       70,737     1.78       15,621,907     56,981     1.45       15,788,243       212,375     1.80       15,336,048     145,701     1.27  
Non-interest bearing liabilities:                                                                                    
Non-interest bearing deposits     2,728,596                     2,685,802                   2,736,350                     2,689,818              
Other non-interest bearing liabilities     213,505                     189,003                   220,126                     177,824              
Total liabilities     18,751,633                     18,496,712                   18,744,719                     18,203,690              
Common stockholders’ equity     4,032,066                     3,648,398                   3,925,321                     3,567,148              
Noncontrolling interest     3,128                     3,036                   3,119                     3,044              
Total liabilities and stockholders’ equity   $ 22,786,827                   $ 22,148,146                 $ 22,673,159                   $ 21,773,882              
Net interest income – FTE           $ 219,818                 $ 221,746                   $ 672,584                 $ 666,499        
Net interest margin – FTE                   4.26 %                 4.47 %                   4.41 %                 4.60 %

(1) The interest expense and the rates for “other borrowings” and for “subordinated debentures” were affected by capitalized interest.  Capitalized interest included in other borrowings totaled $0.11 million for the third quarter and $0.86 million for the first nine months of 2019 and $0.20 million for the third quarter and $0.38 million for the first nine months of 2018.  In the absence of this interest capitalization, the rates on other borrowings would have been 2.69% for the third quarter and 2.57% for the first nine months of 2019 and 2.12% for the third quarter and 1.83% for the first nine months of 2018.  Capitalized interest included in subordinated debentures totaled $0.45 million for both the third quarter and the first nine months of 2019 and none in 2018.  In the absence of this interest capitalization, the rates on subordinated debentures would have been 5.39% for the third quarter and 5.61% for the first nine months of 2019

 
 
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     Nine Months Ended  
    September 30,     June 30,     September 30,  
    2019     2018     2019     2019     2018  
                                         
    (Dollars in thousands)  
Net income available to common stockholders   $ 103,891     $ 74,180     $ 110,503     $ 325,100     $ 302,075  
Average common stockholders’ equity before
  noncontrolling interest
  $ 4,032,066     $ 3,648,398     $ 3,927,522     $ 3,925,321     $ 3,567,148  
Less average intangible assets:                                        
Goodwill     (660,789 )     (660,789 )     (660,789 )     (660,789 )     (660,789 )
Core deposit and other intangible assets, net of
  accumulated amortization
    (28,275 )     (40,743 )     (31,225 )     (31,290 )     (43,886 )
Total average intangibles     (689,064 )     (701,532 )     (692,014 )     (692,079 )     (704,675 )
Average tangible common stockholders’ equity   $ 3,343,002     $ 2,946,866     $ 3,235,508     $ 3,233,242     $ 2,862,473  
Return on average common stockholders’ equity(1)     10.22 %     8.07 %     11.29 %     11.07 %     11.32 %
Return on average tangible common stockholders’ equity(1)     12.33 %     9.99 %     13.70 %     13.44 %     14.11 %

(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
 
    September 30,     June 30,  
    2019     2018     2019  
                         
    (In thousands, except per share amounts)  
Total common stockholders’ equity before noncontrolling interest   $ 4,078,324     $ 3,653,596     $ 3,993,247  
Less intangible assets:                        
Goodwill     (660,789 )     (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization     (26,608 )     (38,817 )     (29,515 )
Total intangibles     (687,397 )     (699,606 )     (690,304 )
Total tangible common stockholders’ equity   $ 3,390,927     $ 2,953,990     $ 3,302,943  
Shares of common stock outstanding     128,946       128,609       128,947  
Book value per common share   $ 31.63     $ 28.41     $ 30.97  
Tangible book value per common share   $ 26.30     $ 22.97     $ 25.61  
                         
                         


Calculation of Total Tangible Common Stockholders’
Equity and the Ratio of Total Tangible Common
Stockholders’ Equity to Total Tangible Assets
Unaudited
 
    September 30,  
    2019     2018  
                 
                 
    (Dollars in thousands)  
Total common stockholders’ equity before noncontrolling interest   $ 4,078,324     $ 3,653,596  
Less intangible assets:                
Goodwill     (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization     (26,608 )     (38,817 )
Total intangibles     (687,397 )     (699,606 )
Total tangible common stockholders’ equity   $ 3,390,927     $ 2,953,990  
Total assets   $ 23,402,679     $ 22,086,539  
Less intangible assets:                
Goodwill     (660,789 )     (660,789 )
Core deposit and other intangible assets, net of accumulated amortization     (26,608 )     (38,817 )
Total intangibles     (687,397 )     (699,606 )
Total tangible assets   $ 22,715,282     $ 21,386,933  
Ratio of total common stockholders’ equity to total assets     17.43 %     16.54 %
Ratio of total tangible common stockholders’ equity to total
  tangible assets
    14.93 %     13.81 %

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