Bank of The Ozarks Earnings 2017-03-31

Bank of The Ozarks Earnings 2017-03-31

OZK 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 ozrk-10q_20170331.htm OZRK-10Q-20170331 ozrk-10q_20170331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2017

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

For the transition period from to .

Commission File Number 0-22759

BANK OF THE OZARKS, INC.

(Exact name of registrant as specified in its charter)

ARKANSAS

71-0556208

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

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

Registrant’s telephone number, including area code: (501) 978-2265

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

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

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date.

Class

Outstanding at

April 30, 2017

Common Stock, $0.01 par value per share

121,577,177

BANK OF THE OZARKS, INC.

FORM 10-Q

March 31, 2017

INDEX

PART I.	Financial Information

Item 1.	Financial Statements

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

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

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

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

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

	Notes to Consolidated Financial Statements	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62

Item 4.	Controls and Procedures	63

PART II.	Other Information

Item 1.	Legal Proceedings	64

Item 1A.	Risk Factors	64

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

Item 3.	Defaults Upon Senior Securities	64

Item 4.	Mine Safety Disclosures	64

Item 5.	Other Information	64

Item 6.	Exhibits	64

Signature		65

Exhibit Index		66

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

BANK OF THE OZARKS, INC.

CONSOLIDATED BALANCE SHEETS

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

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

Commitments and contingencies

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

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Unaudited

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

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

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

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

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

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

Basic earnings per common share	$	0.73		$	0.57

Diluted earnings per common share	$	0.73		$	0.57

Dividends declared per common share	$	0.17		$	0.15

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

	Three Months Ended
	March 31,
	2017			2016
	(Dollars in thousands)
Net income	$	89,211		$	51,695
Other comprehensive income:
Unrealized gains and losses on investment securities AFS		12,081			4,195
Tax effect of unrealized gains and losses on investment securities AFS		(4,228	)		(1,723	)
Reclassification of gains and losses on investment securities AFS included in net income		—			—
Tax effect of reclassification of gains and losses on investment securities AFS included in net income		—			—
Total other comprehensive income		7,853			2,472
Total comprehensive income	$	97,064		$	54,167

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Unaudited

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

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

See accompanying notes to consolidated financial statements.

BANK OF THE OZARKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

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

Price	38.98	EPS	3
Shares	122	P/E	15
MCap	4,754	P/FCF	14
Net Debt	-929	EBIT	557
TEV	3,825	TEV/EBIT	7
TTM 2017-03-31, in MM, except price, ratios

10-Q	2017-03-31	Filed 2017-05-05
10-K	2016-12-31	Filed 2017-03-01
10-Q	2016-09-30	Filed 2016-11-08
10-Q	2016-06-30	Filed 2016-08-08
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-19
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-07
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-08-07
10-Q	2014-03-31	Filed 2014-05-09
10-K	2013-12-31	Filed 2014-02-28
10-Q	2013-09-30	Filed 2013-11-07
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-10
10-K	2012-12-31	Filed 2013-02-28
10-Q	2012-09-30	Filed 2012-11-05
10-Q	2012-06-30	Filed 2012-08-08
10-Q	2012-03-31	Filed 2012-05-10
10-K	2011-12-31	Filed 2012-02-29
10-Q	2011-09-30	Filed 2011-11-08
10-Q	2011-06-30	Filed 2011-08-05
10-Q	2011-03-31	Filed 2011-05-05
10-K	2010-12-31	Filed 2011-03-10
10-Q	2010-09-30	Filed 2010-11-08
10-Q	2010-06-30	Filed 2010-08-09
10-Q	2010-03-31	Filed 2010-05-07
10-K	2009-12-31	Filed 2010-03-11

EX-12.1	ozrk-ex121_9.htm
EX-31.1	ozrk-ex311_10.htm
EX-31.2	ozrk-ex312_8.htm
EX-32.1	ozrk-ex321_7.htm
EX-32.2	ozrk-ex322_6.htm

Large accelerated filer

Accelerated filer

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

Smaller reporting company

Emerging growth company