<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
________________
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
( ) 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 (I.R.S. Employer
incorporation or organization) Identification Number)
425 WEST CAPITOL AVENUE, SUITE 3100, LITTLE ROCK, ARKANSAS 72201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 374-4100
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 (X) 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 September 30, 1997
- --------------------------------------- -----------------------------------
Common Stock, $0.01 par value per share 3,779,555
<PAGE>
BANK OF THE OZARKS, INC.
FORM 10-Q
September 30, 1997
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets as of September 30,
1997 and 1996 and December 31, 1996 1
Consolidated Statements of Income for the
Three Months Ended September 30, 1997 and
1996 and the Nine Months Ended September 30,
1997 and 1996 2
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Selected and Supplemental Financial Data 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities 17
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of
Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Reference is made to the Exhibit Index contained
at the end of this report.
(b). Reports on Form 8-K N/A
Signature 18
Exhibit Index 19
</TABLE>
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------
1997 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 8,644 $ 8,104 $ 6,711
Interest bearing deposits with FHLB 143 3,079 104
Securities - available for sale 39,814 30,483 36,883
Securities - held to maturity 13,139 4,318 2,725
Federal Funds sold - 2,975 350
Loans, net of unearned income 262,287 199,284 214,462
Allowance for loan losses (3,535) (2,617) (3,019)
Bank premises and equipment, net 11,751 6,770 6,872
Foreclosed real estate held for sale, net - - 47
Interest receivable 3,094 2,527 2,552
Excess cost over fair value of net assets acquired, at amortized cost 1,352 1,408 1,394
Other 1,732 1,455 1,519
-------- -------- --------
Total assets $338,421 $257,786 $270,600
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - non-interest bearing $ 26,896 $ 22,512 $ 21,295
Now, savings and MMDA's 62,876 52,136 56,929
Time 192,250 144,386 153,424
-------- -------- --------
Total deposits 282,022 219,034 231,648
Notes payable 5,096 5,420 5,396
FHLB advances and federal funds purchased 13,852 13,017 12,727
Accrued interest and other liabilities 2,964 2,475 2,282
-------- -------- --------
Total liabilities 303,934 239,946 252,053
-------- -------- --------
Stockholders' equity
Common stock; $0.01 par value; Authorized 10,000,000 shares;
3,779,555 shares issued and outstanding September 30, 1997;
2,879,800 shares issued and outstanding December 31, 1996
and September 30, 1996 38 29 29
Additional paid in capital 14,311 1,168 1,168
Retained earnings 19,982 16,582 17,251
Unrealized appreciation on investment securities 156 61 99
-------- -------- --------
Total stockholders' equity 34,487 17,840 18,547
-------- -------- --------
Total liabilities and stockholders' equity $338,421 $257,786 $270,600
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income
Loans $ 6,289 $ 4,930 $ 17,495 $ 13,842
Investment securities - taxable 699 532 1,931 1,525
- non-taxable 50 88 162 289
Federal funds sold 29 25 71 102
Deposits with banks 102 16 160 121
------------ ------------ ------------ ------------
Total interest income 7,169 5,591 19,819 15,879
Interest expense
Deposits 3,136 2,257 8,582 6,515
Interest on borrowed funds 330 222 997 619
Federal funds purchased - 2 2 2
------------ ------------ ------------ ------------
Total interest expense 3,466 2,481 9,581 7,136
------------ ------------ ------------ ------------
Net interest income 3,703 3,110 10,238 8,743
Provision for loan losses 150 375 674 919
------------ ------------ ------------ ------------
Net interest income after provision
for loan losses 3,553 2,735 9,564 7,824
------------ ------------ ------------ ------------
Other income
Income from fiduciary activities 39 60 176 164
Service charges on deposit accounts 242 192 694 512
Other service charges and loan fees 310 171 799 452
Gains (losses) on sale of securities - 23 14 (78)
Other income 71 42 362 97
------------ ------------ ------------ ------------
Total other income 662 488 2,045 1,147
------------ ------------ ------------ ------------
Other expense
Salaries and employee benefits 1,301 1110 3,822 3,019
Net occupancy and equipment 341 262 919 738
Other operating expenses 674 484 1,899 1,361
------------ ------------ ------------ ------------
Total other expense 2,316 1,856 6,640 5,118
------------ ------------ ------------ ------------
Income before income taxes 1,899 1,367 4,969 3,853
Income taxes 698 489 1,807 1,373
------------ ------------ ------------ ------------
Net income $ 1,201 $ 878 $ 3,162 $ 2,480
============ ============ ============ ============
Weighted average number of shares
outstanding during period 3,546,844 2,879,800 3,104,591 2,879,800
Earnings per common share $0.34 $0.30 $1.02 $0.86
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,162 $ 2,480
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation 445 364
Amortization of goodwill 42 42
Provision for loan losses 674 919
Gain on sale of loans (57) -
Gain on disposition of premises and equipment (61) -
Gain on disposition of foreclosed assets (131) (7)
Deferred income tax benefit (146) (222)
Changes in assets and liabilities
Interest receivable (542) (539)
Other assets, net (64) (63)
Accrued interest and other liabilites 644 634
------------- -------------
Net cash provided by operating activities 3,966 3,608
------------- -------------
Cash flows from investing activities
Proceeds from sales and maturities of securities available
for sale 15,692 28,084
Purchases of securities available for sale (18,527) (26,039)
Purchases of securities held to maturity (10,515) -
Proceeds from maturities of securities held to maturity 101 176
Decrease (increase) in interest bearing deposits with FHLB (39) 454
Decrease in federal funds sold 350 1,105
Net increase in loans (48,978) (46,441)
Proceeds from sales of loans 811 -
Proceeds from dispositions of bank premises and equipment 132 -
Purchase of bank premises and equipment (5,395) (755)
Proceeds from dispositions of foreclosed assets 415 105
------------- -------------
Net cash used by investing activities (65,953) (43,311)
------------- -------------
Cash flows from financing activities
Net increase in deposits 50,374 36,571
Payments of FHLB advances and federal funds purchased (710) -
Proceeds from FHLB advances and federal funds purchased 1,835 5,070
Proceeds from notes payable 10,096 1,500
Payments of notes payable (10,396) -
Proceeds from sale of common stock 13,153 -
Dividends paid (432) (864)
------------- -------------
Net cash provided by financing activities 63,920 42,277
------------- -------------
Net increase in cash and cash equivalents 1,933 2,574
Cash and due from banks - beginning of period 6,711 5,530
------------- -------------
Cash and due from banks - end of period $ 8,644 $ 8,104
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Bank of the Ozarks, Inc. include
the accounts of the parent company and its wholly-owned subsidiaries, Bank of
the Ozarks, wca, Bank of the Ozarks, nwa and Ozark Commercial Corporation
(collectively the "Company"). All material intercompany transactions have been
eliminated.
2. BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Certain information, accounting
policies and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with such rules and regulations.
It is therefore suggested that these consolidated financial statements be read
in conjunction with the audited consolidated financial statements and notes
thereto included in the Company's final prospectus filed with the SEC (File No.
333-27641) pursuant to Rule 424 (b) of the Securities Act of 1933 and used in
connection with the Company's initial public offering ("IPO") of its common
stock.
In the opinion of management all adjustments necessary, consisting of only
normal recurring items, have been included for a fair presentation of the
accompanying consolidated financial statements. Operating results for the three
and nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the full year.
3. EARNINGS PER COMMON SHARE:
Earnings per common share was computed based on the following (in
thousands, except per share amount):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares - weighted averages............ 3,537 2,880 3,102 2,880
Common share equivalents - weighted averages.. 10 - 3 -
------ ------ ------ ------
3,547 2,880 3,105 2,880
====== ====== ====== ======
Net income.................................... $1,201 $ 878 $3,162 $2,480
Earnings per common share..................... $ 0.34 $ 0.30 $ 1.02 $ 0.86
</TABLE>
4. SUPPLEMENTARY DATA FOR CASH FLOWS:
Cash payments for interest on notes payable during the nine months ended
September 30, 1997 amounted to $217,000 and during the nine months ended
September 30, 1996 no payments were made. Cash payments for income taxes during
the nine months ended September 30, 1997 and 1996 amounted to $1,846,000 and
$1,469,000, respectively.
5. STOCKHOLDERS' EQUITY:
On July 17, 1997, the Company commenced the IPO of its common stock. A
total of 899,755 shares (including 199,755 over-allotment shares) were sold by
the Company at a price of $16.00 per share, yielding net proceeds to the Company
of approximately $13.2 million.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Net income was $1,201,000 for the third quarter of 1997, a 36.8% increase
over net income of $878,000 for the same period in 1996. Earnings per share,
which was impacted by the Company's issuance of 899,755 additional shares of
common stock in the Company's IPO completed during the third quarter, rose 13.3%
to $0.34 per share compared to $0.30 per share for the same quarter in 1996.
The Company's annualized return on average assets and return on average
stockholders' equity were 1.44% and 15.7%, respectively, for the third quarter
of 1997, compared with 1.44% and 20.0%, respectively, for the third quarter of
1996. The third quarter return on average stockholders' equity was impacted by
the increase in equity due to the issuance of new shares in the IPO.
For the nine months ended September 30, 1997, net income totaled
$3,162,000, a 27.5% increase over net income of $2,480,000 for the first nine
months of 1996. Earnings for the first nine months of 1997 were $1.02 per share,
compared to $0.86 per share for the same period in 1996, an 18.6% increase.
Annualized return on average assets and return on average stockholders' equity
for the nine months ended September 30, 1997, were 1.40% and 18.3%.,
respectively, compared to 1.44% and 19.9% for the same period in 1996.
Total assets increased 31.3% from $257.8 million at September 30, 1996 to
$338.4 million at September 30, 1997. Loans were $262.3 million at September
30, 1997, compared to $199.3 million at September 30, 1996, an increase of
31.6%. Deposits were $282.0 million at September 30, 1997, compared to $219.0
million at September 30, 1996, an increase of 28.8%.
As a result of the Company's IPO and earnings, stockholders' equity
increased 93.3% from $17.8 million at September 30, 1996, to $34.5 million at
September 30, 1997, increasing per share book value 47.3% from $6.19 to $9.12.
Annualized results for these interim periods may not be indicative of those
achieved for the full year or future periods.
ANALYSIS OF RESULTS OF OPERATIONS
The Company's results of operations depend primarily on net interest
income, which is the difference between the interest income from earning assets,
such as loans and investments, and the interest expense incurred on interest
bearing liabilities, such as deposits and other borrowings. Factors that
determine the level of net interest income include the volume of earning assets
and interest bearing liabilities, yields earned and rates paid, fee income from
portfolio loans, the level of nonperforming loans and other non-earning assets
and the amount of non-interest bearing liabilities supporting earning assets.
The Company also generates non-interest income, including service charges on
deposit accounts, fees from origination of residential mortgage loans for
resale, other service charges and fees including appraisal fees and commissions
from the sale of credit related insurance products, trust fees, and gains on
sales. The Company's non-interest expenses primarily consist of employee
compensation and benefits, occupancy, equipment, and other operating expenses.
The Company's results of operations are significantly affected by its provision
for loan losses. Results of operations may also be significantly affected by
many other factors including general economic and competitive conditions,
mergers and acquisitions of other financial institutions within the market area,
changes in market interest rates, government policies, and actions of regulatory
agencies.
5
<PAGE>
NET INTEREST INCOME
Net interest income is analyzed in the discussion and tables below on a
fully taxable equivalent ("FTE") basis. The adjustment to convert certain income
to an FTE basis consists of dividing tax exempt income by one minus the federal
income tax rate (34%).
Three months ended September 30, 1997 compared to three months ended September
30, 1996
Net interest income (FTE) increased 18.4% to $3,735,000 for the three
months ended September 30, 1997 from $3,155,000 for the three months ended
September 30, 1996. This increase primarily resulted from a 36.0% increase in
average earning assets to $307.4 million for the 1997 period from $226.1 million
for the 1996 period. The increase in average earning assets resulted primarily
from continued growth in the Company's loan portfolio. The increased interest
income resulting from this growth was somewhat offset by a 72 basis point
reduction in the net interest margin to 4.82% in the three month 1997 period
from 5.54% in the comparable 1996 period. A substantial portion of this decrease
in net interest margin for the 1997 period resulted from lower average balances
and yields on a relatively high-yielding portfolio of loans acquired from the
Resolution Trust Corporation ("RTC").
Nine months ended September 30, 1997 compared to nine months ended September 30,
1996.
Net interest income (FTE) increased 16.1% to $10,328,000 for the nine
months ended September 30, 1997 from $8,892,000 for the nine months ended
September 30, 1996. This increase primarily resulted from a 31.9% increase in
average earning assets to $283.5 million for the 1997 period from $214.9 million
for the 1996 period. The increase in average earning assets resulted primarily
from continued growth in the Company's loan portfolio. The increased interest
income resulting from this growth was somewhat offset by a 66 basis point
reduction in the net interest margin to 4.87% in the 1997 period from 5.53% in
the comparable 1996 period. A substantial portion of this decrease in net
interest margin for the 1997 period resulted from lower average balances and
yields on a relatively high-yielding portfolio of loans acquired from the RTC.
ANALYSIS OF NET INTEREST INCOME
(FTE = FULLY TAXABLE EQUIVALENT)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest income................................ $7,169 $5,591 $19,819 $15,879
FTE adjustment................................. 32 45 90 149
------ ------ ------- -------
Interest income -- FTE......................... 7,201 5,636 19,909 16,028
Interest expense............................... 3,466 2,481 9,581 7,136
------ ------ ------- -------
Net interest income -- FTE..................... $3,735 $3,155 $10,328 $ 8,892
====== ====== ======= =======
Yield on interest earning assets -- FTE........ 9.29% 9.89% 9.39% 9.97%
Cost of interest bearing liabilities........... 5.11 4.92 5.08 4.99
Net interest spread -- FTE..................... 4.18 4.97 4.31 4.98
Net interest margin -- FTE..................... 4.82 5.54 4.87 5.53
</TABLE>
6
<PAGE>
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1997 1996
------------------------------ -------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
--------- ---------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earnings assets:
Interest-earning deposits..................................... $ 7,206 $ 102 5.62% $ 1,265 $ 16 5.02%
Federal funds sold............................................ 2,023 29 5.69 1,807 25 5.49
Investment securities:
Taxable..................................................... 40,441 699 6.86 32,421 532 6.51
Tax-exempt-FTE.............................................. 2,882 76 10.46 4,948 133 10.66
Loans (net of unearned income).............................. 254,876 6,295 9.80 185,622 4,930 10.54
-------- ------ -------- ------
Total earnings assets................................. 307,428 7,201 9.29 226,063 5,636 9.89
Non-earning assets.............................................. 22,722 15,401
-------- --------
Total assets.......................................... $330,150 $241,464
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits
Interest bearing transaction and savings................... $ 63,501 $ 477 2.98% $ 50,503 $ 353 2.77%
Certificates of deposits $100,000 or more................... 49,415 699 5.61 33,815 479 5.62
Other time deposits......................................... 137,739 1,960 5.65 102,443 1,425 5.52
-------- ------- -------- ------
Total interest bearing deposits............................. 250,655 3,136 4.96 186,761 2,257 4.79
Federal funds and FHLB borrowings............................... 12,079 185 6.08 9,435 136 5.72
Holding company debt............................................ 6,292 145 9.14 3,985 88 8.76
-------- ------- -------- ------
Total interest bearing liabilities......................... 269,026 3,466 5.11 200,181 2,481 4.92
Non-interest liabilities:
Non-interest bearing deposits................................. 27,446 21,667
Other non-interest liabilities................................ 3,387 2,215
-------- --------
Total liabilities....................................... 299,858 224,063
Stockholders' equity............................................ 30,292 17,401
-------- --------
Total liabilities and stockholders' equity.... $330,150 $241,464
======== ========
Interest rate spread............................................ 4.18% 4.97%
------- ------
Net interest income............................................. $ 3,735 $3,155
Net interest margin............................................. 4.82% 5.54%
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------
1997 1996
-------------------------- -------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earnings assets:
Interest-earning deposits............................ $ 3,934 $ 160 5.44% $ 2,959 $ 123 5.56%
Federal funds sold................................... 1,768 72 5.44 2,547 100 5.25
Investment securities:
Taxable............................................ 37,845 1,931 6.82 32,503 1,526 6.28
Tax-exempt-FTE..................................... 3,166 247 10.43 5,520 438 10.61
Loans (net of unearned income)..................... 236,783 17,499 9.88 171,404 13,841 10.80
-------- ------- -------- -------
Total earnings assets........................ 283,496 19,909 9.39 214,933 16,028 9.97
Non-earning assets..................................... 19,417 14,788
-------- --------
Total assets................................. $302,913 $229,721
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits
Interest bearing transaction and savings.......... $ 60,110 $ 1,327 2.95% $ 46,705 $ 906 2.59%
Certificates of deposits $100,000 or more.......... 46,802 1,965 5.61 32,666 1,406 5.75
Other time deposits................................ 126,533 5,290 5.59 99,597 4,203 5.64
-------- ------- -------- -------
Total interest bearing deposits.................... 233,445 8,582 4.92 178,968 6,515 4.87
Federal funds and FHLB borrowings...................... 12,391 559 6.03 8,460 364 5.75
Holding company debt................................... 6,473 440 9.09 3,942 257 8.72
-------- ------- -------- -------
Total interest bearing liabilities................ 252,309 9,581 5.08 191,370 7,136 4.99
Non-interest liabilities:
Non-interest bearing deposits........................ 24,742 19,613
Other non-interest liabilities....................... 2,743 2,080
-------- --------
Total liabilities.............................. 279,794 213,063
Stockholders' equity................................... 23,119 16,658
-------- --------
Total liabilities and stockholders' equity..... $302,913 $229,721
======== ========
Interest rate spread................................... 4.31% 4.98%
------- --------
Net interest income.................................... $10,328 $ 8,892
Net interest margin.................................... 4.87% 5.53%
</TABLE>
7
<PAGE>
NON-INTEREST INCOME
The Company's non-interest income can primarily be broken down into five
main sources: service charges on deposit accounts, fees from origination of
residential mortgage loans for resale, other service charges and fees including
appraisal fees and commissions from the sale of credit related insurance
products, trust fees, and gains on sales.
Non-interest income for the third quarter of 1997 was $662,000 compared
with $488,000 for the third quarter of 1996, a 35.7% increase. For the first
nine months of 1997 non-interest income was $2,045,000 compared with $1,147,000
for the same period in 1996, an increase of 78.3%. The Company's growth in non-
interest income is primarily due to increases in service charges on deposit
accounts, loans fees, and gains on sale of assets. In the third quarter of 1996,
the Company began to originate residential mortgage loans for resale in the
secondary market. The volume of secondary market loans has grown resulting in
loan fees being the largest single contributor to the Company's improvement in
non-interest income.
The table below shows non-interest income for the three months and nine
months ended September 30, 1997 and 1996.
NON-INTEREST INCOME
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- --------------------
1997 1996 1997 1996
--------- -------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Trust income....................................... $ 39 $ 60 $ 176 $ 164
Service charges on deposit accounts................ 242 192 694 512
Loan fees.......................................... 156 15 367 38
Other service charges and fees..................... 154 156 432 414
Gain on sale of loans.............................. - 7 57 8
Gain on sale of previously foreclosed real estate.. - - 131 -
Gain on sale of other assets....................... 30 - 61 -
Securities gains (losses).......................... - 23 14 (78)
Printed check sales................................ 33 25 88 67
Other income....................................... 8 10 25 22
----- ----- ------ ------
Total non-interest income......................... $ 662 $ 488 $2,045 $1,147
===== ===== ====== ======
</TABLE>
(The remainder of this page intentionally left blank)
8
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense consists of salaries and employee benefits, occupancy,
equipment and other operating expenses. Non-interest expense for the third
quarter of 1997 was $2,316,000 compared with $1,856,000 for the third quarter of
1996, a 24.8% increase. For the first nine months of 1997 non-interest expense
was $6,640,000 compared with $5,118,000 for the same period in 1996, an increase
of 29.7%. These increases in non-interest expense are primarily attributable to
increases in staff, facilities and operating volumes resulting from the
Company's continued growth and expansion, including the cost of preparation for
and opening of new offices. During the first quarter of 1997 the Company opened
an office in Mulberry, Arkansas and during the third quarter of 1997 opened
offices in Paris and Alma, Arkansas.
The overhead ratio (annualized non-interest expenses divided by average
assets) for the third quarter of 1997 was 2.78% , down 27 basis points from
3.05% for the same quarter in 1996. For the first nine months of 1997 the
overhead ratio was 2.93%, down five basis points from 2.98% for the same period
in 1996.
The efficiency ratio (non-interest expenses divided by the sum of net
interest income on a tax equivelant basis and non-interest income) was 52.67%
for the third quarter of 1997 compared to 50.95% for the third quarter of 1996.
For the first nine months of 1997 the efficiency ratio was 53.67% compared with
50.20% for the first nine months of 1996.
The table below shows non-interest expense for the three months and nine
months ended September 30, 1997 and 1996.
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Salaries and employee benefits............. $1,301 $1,110 $3,822 $3,019
Net occupancy expense...................... 149 118 407 336
Equipment expense.......................... 192 144 512 402
Other real estate and foreclosure expense.. 34 12 108 27
Other operating expense:
Professional services................. 16 8 65 56
Postage............................... 41 33 125 94
Telephone............................. 41 23 118 93
Operating supplies.................... 59 50 153 118
Advertising and public relations...... 77 34 223 73
Directors' fees....................... 33 24 86 63
Software expense...................... 31 16 85 49
Check printing charges................ 33 30 94 73
FDIC & state assessment............... 28 27 80 78
Amortization of goodwill.............. 14 14 42 42
Miscellaneous......................... 267 213 720 595
------ ------ ------ ------
Total non-interest expense $2,316 $1,856 $6,640 $5,118
====== ====== ====== ======
</TABLE>
INCOME TAXES
The provision for income taxes was $698,000 for the quarter ended September
30, 1997 compared to $489,000 for the same period in 1996. The effective income
tax rates were 36.8% and 35.8%, respectively, for these periods. The provision
for income taxes was $1,807,000 for the nine months ended September 30, 1997
compared to $1,373,000 for the same period in 1996. The effective income tax
rates were 36.4% and 35.6%, respectively, for these periods. The increase in
effective tax rates for the 1997 periods resulted primarily from a decrease in
tax-exempt interest income as a percent of total pre-tax income.
9
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
At September 30, 1997 the Company's loan portfolio was $262.3 million, an
increase of 31.6% from $199.3 million at September 30, 1996. As of September
30, 1997, the Company's loan portfolio consisted of approximately 63.3% real
estate loans, 18.8% consumer loans, 14.1% commercial and industrial loans and
3.8% agricultural loans (non-real estate).
The amount and type of loans outstanding at September 30, 1997 and 1996 and
December 31, 1996 are reflected in the following table.
LOAN PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------ ------------
1997 1996 1996
-------- -------- ------------
(Dollars in thousands)
<S> <C> <C> <C>
Real Estate:
Single family residential....... $ 92,753 $ 69,455 $ 78,124
Non-farm/non-residential........ 44,568 39,315 35,258
Agricultural.................... 11,429 10,328 11,583
Construction/land development... 13,828 7,143 8,808
Multifamily residential......... 3,340 4,170 3,743
-------- -------- --------
Total real estate.......... $165,918 $130,411 $137,516
Consumer........................ 49,180 37,848 39,868
Commercial and industrial....... 37,070 23,242 28,154
Agricultural (non-real estate).. 10,083 7,751 8,363
Other........................... 36 32 561
-------- -------- --------
Total loans................ $262,287 $199,284 $214,462
======== ======== ========
</TABLE>
NONPERFORMING ASSETS
Nonperforming assets consist of (i) nonaccrual loans, (ii) loans for which
the terms have been restructured to provide a reduction or deferral of interest
or principal because of a deterioration in the financial position of the
borrower and (iii) real estate or other assets that have been acquired in
partial or full satisfaction of loan obligations or upon foreclosure. As of
September 30, 1997, one loan for $1.3 million accounted for 68% of the total
$1.9 million nonaccrual loans. This large nonaccrual loan is secured by real
estate. Nonperforming loans as a percent of total loans were .75% as of
September 30, 1997 compared to 1.08% as of December 31, 1996 and .58% as of
September 30, 1996.
The Company's policy generally is to place a loan on nonaccrual status when
payment of principal or interest is contractually past due 90 days, or earlier
when doubt exists as to the ultimate collection of principal and interest. The
Company continues to accrue interest on certain loans contractually past due 90
days if such loans are both well secured and in the process of collection. At
the time a loan is placed on nonaccrual status, interest previously accrued but
uncollected is generally reversed and charged against interest income. If a loan
is determined to be uncollectible, the portion of the loan principal determined
to be uncollectible will be charged against the allowance for loan losses.
Interest income on nonaccrual loans is recognized on a cash basis when and if
actually collected.
(The remainder of this page intentionally left blank)
10
<PAGE>
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans and foreclosed assets held for sale.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1997 1996 1996
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans................................... $1,911 $ 798 $2,057
Accruing loans 90 days or more past due............ 62 274 253
Restructured loans................................. - - -
------ ------ ------
Total nonperforming loans......................... $1,973 $1,072 $2,310
Foreclosed assets held for sale and repossessions.. 154 138 78
------ ------ ------
Total nonperforming assets........................ $2,127 $1,210 $2,388
====== ====== ======
Nonperforming loans to total loans................. .75% .58% 1.08%
Nonperforming assets to total assets............... .62 .46 .88
</TABLE>
Foreclosed assets held for sale and repossessions are generally written
down to appraised value at the time of transfer from the loan portfolio. The
value of such assets is reviewed from time to time throughout the holding
period, with the value being adjusted to the then market value, if lower, until
disposition. Under Arkansas banking law, other real estate owned is generally
required to be written off over a five year period unless approval of the
Arkansas State Bank Department can be obtained to write such assets off over an
extended period.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
Allowance: The following table shows an analysis of the allowance for loan
losses for the nine month periods ended September 30, 1997 and 1996 and the year
ended December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
ENDED SEPTEMBER 30, ENDED DECEMBER 31,
--------------------------------- -------------------
1997 1996 1996
-------- --------- --------
Dollars in thousands)
<S> <C> <C> <C>
Balance of allowance for loan losses at beginning of period.. $ 3,019 $ 1,909 $ 1,909
Loans charged off:
Real estate................................................. 4 50 73
Consumer.................................................... 200 127 216
Commercial and industrial................................... - 75 128
-------- -------- -------
Total loans charged off................................ 204 252 417
-------- -------- -------
Recoveries of loans previously charged off:
Real estate................................................. 7 2 2
Consumer.................................................... 38 34 35
Commercial and industrial................................... 1 5 4
-------- -------- -------
Total recoveries....................................... 46 41 41
-------- -------- -------
Net loans charged off........................................ 158 211 376
Provision charged to operating expense....................... 674 919 1,486
-------- -------- -------
Balance, end of period....................................... $ 3,535 $ 2,617 $ 3,019
======== ======== =======
Net charge-offs to average loans outstanding during
the periods indicated....................................... .09% (1) .16% (1) .21%
Allowance for loan losses to total loans..................... 1.35 1.31 1.41
Allowance for loan losses to nonperforming loans............. 179.17 244.12 130.69
(1) Annualized.
</TABLE>
11
<PAGE>
The amounts of additions to the allowance for loan losses are based on
management's judgment and evaluation of the loan portfolio utilizing objective
and subjective criteria. The objective criteria utilized by the Company to
assess the adequacy of its allowance for loan losses and required additions to
such reserve are (i) an internal grading system, (ii) a peer group analysis and
(iii) a historical analysis. In addition to this objective criteria, the
Company subjectively assesses adequacy of the allowance for loan losses and the
need for additions thereto, with consideration given to the nature and volume of
the portfolio, overall portfolio quality, review of specific problem loans,
national, regional and local business and economic conditions that may affect
the borrowers' ability to pay or the value of collateral securing the loans, and
other relevant factors. Based on these procedures, management is of the opinion
that the allowance of $3,535,000 at September 30, 1997 is adequate. While
management believes the current allowance is adequate, changing economic and
other conditions may require future adjustments to the allowance.
For the first nine months of 1997, annualized net charge-offs were .09% of
average outstanding loans compared to .16% for the same period in 1996. The
reduction in charge-offs in the first nine months of 1997 allowed the Company to
reduce loan loss provisions while still maintaining the allowance for possible
loan losses at 1.35% of outstanding loans at September 30, 1997.
Provision for Loan Losses: The loan loss provision reflects management's
ongoing assessment of the loan portfolio and is evaluated in light of risk
factors mentioned above. The provision for loan losses was $674,000 for the nine
months ended September 30, 1997 compared to $919,000 for the same nine month
period in 1996.
INVESTMENTS AND SECURITIES
The Company's securities portfolio is the second largest component of
earning assets and provides a significant source of revenue for the Company.
The table below presents the amortized cost and the fair value of investment
securities for each of the dates indicated.
<TABLE>
<CAPTION>
INVESTMENT SECURITIES
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1997 1996 1996
---------------------- -------------------- -------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE(1) COST VALUE(1) COST VALUE(1)
---------------------- -------------------- -------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Securities of U.S. Government
agencies........................ $37,994 $38,035 $18,961 $18,729 $23,881 $23,896
Mortgage-backed securities........... 9,612 9,825 9,841 9,958 10,119 10,256
Obligations of states and political
subdivisions.................... 3,605 3,642 4,762 4,796 4,094 4,119
Other securities..................... 1,488 1,488 1,337 1,337 1,353 1,353
------- ------- ------- ------- ------- -------
Total.................... $52,699 $52,990 $34,901 $34,820 $39,447 $39,624
======= ======= ======= ======= ======= =======
</TABLE>
(1) The fair value of the Company's financial instruments is determined
pursuant to Statement of Financial Accounting Standards No. 107.
LIQUIDITY AND CAPITAL RESOURCES
Credit Agreement. The Company has a $10.0 million term loan and revolving
credit facility with Union Planters National Bank, Memphis, Tennessee (the
"Credit Agreement"). The term loan portion has a principal balance of $5.0
million, payable in equal annual principal installments of $500,000 commencing
in 1998 plus interest payable annually at 8.804% per annum. The term loan
matures in 2007 and provides for prepayment penalties under certain
circumstances.
The Credit Agreement also provides for a revolving line of credit of up to
$5.0 million. Advances remaining unpaid for any consecutive period of 365 days
are converted to term loans under the facility, with a corresponding reduction
in availability, and are payable in equal annual installments of principal
through 2007. Interest accrues on outstanding borrowings under the revolving
line of credit (including any amounts converted to term loans thereunder) at a
variable rate equal to the average prime lending rate reported from time to time
by the Wall Street Journal minus 0.25% and is payable quarterly. The revolving
line of credit commitment expires in 2007 and is subject to an annual compliance
review by the lender. No standby or unused commitment fees are payable by the
Company under the revolving line of credit. There were no outstanding balances
on the revolving line of credit at September 30, 1997.
12
<PAGE>
The Credit Agreement requires the Company's bank subsidiaries to maintain
certain levels of return on assets, primary capital, loan charge-off and
debt/equity ratios. At September 30, 1997 the Company was in compliance with
these requirements. Borrowings under the Credit Agreement are secured by a
pledge of 80% of the Company's stock in the subsidiary banks.
Initial Public Offering. On July 16, 1997, the Securities and Exchange
Commission ("SEC") declared effective the Company's Registration Statement on
Form S-1 (File No. 333-27641) with respect to the IPO of 899,755 shares
(including over-allotment shares) of the Company's Common Stock. Stephens Inc.
was the managing underwriter for the offering, which was commenced on July 17,
1997 and which was terminated after the entire amount of the 899,755 shares
registered had been sold for an aggregate offering price of approximately $14.4
million. The net proceeds to the Company from this offering were approximately
$13.2 million (including proceeds from over-allotment shares) after deduction
for aggregate offering expenses of approximately $1.2 million. Proceeds from
the offering in the amount of $5 million were used to repay the outstanding
balance under the revolving line of credit described above. An additional $4.5
million of the proceeds was used to make a capital infusion to a subsidiary
bank. The remainder of the proceeds (including proceeds from exercise of the
underwriters over-allotment option) were or will be used for general corporate
purposes, including additional investments in and advances to the Company's
subsidiaries and financing its continued growth, expansion and branching
strategy.
Growth and Expansion. During the first nine months of 1997, the Company's
banking subsidiaries invested approximately $1.6 million to complete
construction and equipping of three new offices in Mulberry, Paris and Alma,
Arkansas and approximately 3.0 million to acquire sites for future construction
in Little Rock and Fort Smith, Arkansas. The Mulberrry office opened during the
first quarter of 1997 and the Paris and Alma offices opened during the third
quarter of 1997. Construction on the Little Rock facility began in the third
quarter of 1997. The Little Rock site will initially be used as the Company's
corporate offices and as a loan production office. Construction on the Fort
Smith facility is expected to begin in the fourth quarter of 1997 or the first
quarter of 1998. Pending completion of the Fort Smith facility, the Company has
leased space and plans to open during the fourth quarter of 1997 a temporary
mortgage loan production and banking office in Fort Smith. The Company has
received regulatory approval for this temporary office. Opening of this
temporary office reflects acceleration of the Company's previously announced
plans to enter the Fort Smith market.
Bank Liquidity. Liquidity represents an institution's ability to provide
funds to satisfy demands from depositors and borrowers by either converting
assets into cash or accessing new or existing sources of incremental funds.
Generally, the Company's bank subsidiaries rely on customer deposits and loan
repayments as their primary sources of funds. These funds are used to make
loans, acquire investment securities and other assets and to fund continuing
operations.
The Company has experienced significant growth in its loan portfolio which
has resulted in a continuation of the Company's high loan-to-deposit ratio
(93.0% at September 30, 1997). While scheduled loan repayments are a relatively
stable source of funds, such loans generally are not readily convertible to
cash. Additionally, deposit levels may be affected by a number of factors,
including rates paid by competitiors, general interest rate levels, returns
available to customers on alternative investments and general economic
conditions. Accordingly, the Company may be required from time to time to rely
on secondary sources of liquidity to meet withdrawal demands or otherwise fund
operations. Such sources include FHLB advances, federal funds lines of credit
from correspondent banks and borrowings by the Company under its revolving
credit facility described above.
At September 30, 1997, the Company's bank subsidiaries had an aggregate of
$41.0 million of unused blanket FHLB borrowing availability. Additionally at
September 30, 1997 the bank subsidiaries maintained pre-approved unsecured
federal funds lines of credit in an amount of up to $14.5 million.
Management anticipates that the Company's bank subsidiaries will continue
to rely primarily on customer deposits and loan repayments to provide liquidity.
Additionally, where necessary, the above described borrowings (including
borrowings under the Company's Credit Agreement) will be used to augment the
Company's primary funding sources.
(The remainder of this page intentionally left blank)
13
<PAGE>
Capital Compliance. Bank regulatory authorities in the United States
impose certain capital standards on all bank holding companies and banks. These
capital standards require compliance with certain minimum "risk-based capital
ratios" and a minimum "leverage ratio". The risk-based capital ratios consist of
(i) Tier 1 capital (i.e. common stockholders' equity excluding goodwill and
appreciation on investment securities, but including certain other qualifying
items) to total risk-weighted assets and (ii) total capital (Tier 1 capital plus
Tier 2 capital which is the qualifying portion of the allowance for loan losses)
to risk-weighted assets. The leverage ratio is measured as Tier 1 capital to
adjusted average assets.
The Company's risk-based and leverage capital ratios exceed these minimum
requirements at September 30, 1997 and December 31, 1996 and are presented
below, followed by the capital ratios of each of the Company's two bank
subsidiaries at September 30, 1997.
CONSOLIDATED CAPITAL RATIOS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------ ------
(Dollars in Thousands)
<S> <C> <C>
Tier 1 capital:
Stockholders' equity..................................................... $ 34,487 $ 18,547
Add (less) net unrealized losses (gains) on available for sale securities (156) (99)
Less goodwill............................................................ (1,352) (1,394)
-------- --------
Total tier 1 capital................................................... $ 32,979 $ 17,054
-------- --------
Tier 2 capital:
Qualifying allowance for loan losses..................................... 3,109 2,529
-------- --------
Total risk-based capital............................................... $ 36,088 $ 19,583
======== ========
Risk-weighted assets......................................................... $248,263 $201,802
======== ========
Ratios at end of period:
Leverage 10.03% (1) 6.42% (1)
Tier 1 risk-based capital................................................ 13.28 8.45
Total risk-based capital................................................. 14.54 9.70
Minimum ratio guidelines:
Leverage................................................................. 3.00% (2) 3.00% (2)
Tier 1 risk-based capital................................................ 4.00 4.00
Total risk-based capital................................................. 8.00 8.00
</TABLE>
CAPITAL RATIOS OF SUBSIDIARY BANKS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------
BANK OF THE BANK OF THE
OZARKS, WCA OZARKS, NWA
-------------------------------
(Dollars in Thousands)
<S> <C> <C>
Stockholders' equity - Tier 1....... $ 25,067 $ 9,238
Leverage ratio...................... 11.45% (3) 8.47% (3)
Risk-based capital ratios:
Tier 1.......................... 14.24 12.34
Total capital................... 15.49 13.60
</TABLE>
(1) Based upon quarterly average assets (excluding goodwill) of $328.8 million
and $265.5 million at September 30, 1997 and December 31, 1996,
respectively.
(2) Regulatory authorities require institutions to operate at varying levels
(ranging from 100-200 basis points) above a minimum leverage ratio of 3%
depending upon capitalization classification.
(3) Based upon quarterly average assets of $218.8 million for Bank of the
Ozarks, wca and $109.0 million for Bank of the Ozarks, nwa.
14
<PAGE>
SELECTED AND SUPPLEMENTAL FINANCIAL DATA
The Company is also providing the selected and supplemental financial data in
the tables below.
The following table sets forth selected consolidated financial data
concerning the Company for the three month and nine month periods ended
September 30, 1997 and 1996 and is qualified in its entirety by the consolidated
financial statements, including the notes thereto, included elsewhere herein.
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income................................... $ 3,703 $ 3,110 $ 10,238 $ 8,743
Provision for loan losses............................. 150 375 674 919
Non-interest income................................... 662 488 2,045 1,147
Non-interest expense.................................. 2,316 1,856 6,640 5,118
Income tax expense.................................... 698 489 1,807 1,373
Net income............................................ $ 1,201 $ 878 $ 3,162 $ 2,480
PER COMMON SHARE DATA:
Earnings.............................................. $ 0.34 $ 0.30 $ 1.02 $ 0.86
Book value............................................ 9.12 6.19 9.12 6.19
Weighted avg. shares outstanding (thousands).......... 3,547 2,880 3,105 2,880
BALANCE SHEET DATA AT PERIOD END:
Total assets.......................................... $338,421 $257,786 $338,421 $257,786
Total loans........................................... 262,287 199,284 262,287 199,284
Allowance for loan losses............................. 3,535 2,617 3,535 2,617
Total investment securities........................... 52,953 34,801 52,953 34,801
Total deposits........................................ 282,022 219,034 282,022 219,034
FHLB advances & Fed Funds............................. 13,852 13,017 13,852 13,017
Notes payable......................................... 5,096 5,420 5,096 5,420
Total stockholders' equity............................ 34,487 17,840 34,487 17,840
Loan to deposit ratio................................. 93.00% 90.98% 93.00% 90.98%
AVERAGE BALANCE SHEET DATA:
Total average assets.................................. $330,150 $241,464 $302,913 $229,721
Total average stockholders' equity.................... 30,292 17,401 23,119 16,658
PERFORMANCE RATIOS:
Return on average assets.............................. 1.44% 1.44% 1.40% 1.44%
Return on average stockholders' equity................ 15.73 20.02 18.29 19.90
Net interest margin................................... 4.82 5.54 4.87 5.53
Overhead ratio........................................ 2.78 3.05 2.93 2.98
Efficiency ratio...................................... 52.67 50.95 53.67 50.20
ASSETS QUALITY RATIOS:
Net charge-offs as a percentage of average total.
loans (annualized)................................... 0.12% 0.09% 0.09% 0.16%
Nonperforming loans to total loans.................... 0.75 0.58 0.75 0.58
Nonperforming assets to total assets.................. 0.62 0.46 0.62 0.46
ALLOWANCE FOR LOAN LOSSES AS A PERCENTAGE OF:
Total loans........................................... 1.35% 1.31% 1.35% 1.31%
Nonperforming loans................................... 179.17 244.12 179.17 244.12
CAPITAL RATIOS AT PERIOD END:
Leverage capital ratio................................ 10.03% 6.86% 10.03% 6.86%
Tier I risk-based capital............................. 13.28 8.42 13.28 8.42
Total risk-based capital.............................. 14.54 9.67 14.54 9.67
</TABLE>
15
<PAGE>
SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
<TABLE>
<CAPTION>
For the Quarters Ended
---------------------------------------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
- -----------------
Net interest income $ 2,698 $ 2,938 $ 3,110 $ 3,040 $ 3,116 $ 3,419 $ 3,703
Federal tax FTE adjustment 53 51 45 38 28 28 32
-------- -------- -------- --------- -------- -------- --------
Net interest margin FTE 2,751 2,989 3,155 3,078 3,144 3,447 3,735
Loan loss provision (221) (323) (375) (567) (259) (265) (150)
Non-interest income 358 298 488 740 742 641 662
Non-interest expense (1,625) (1,637) (1,856) (2,033) (2,105) (2,219) (2,316)
-------- -------- -------- --------- -------- -------- --------
Pretax income (FTE) 1,263 1,327 1,412 1,218 1,522 1,604 1,931
FTE adjustment (53) (51) (45) (38) (28) (28) (32)
Provision for taxes (429) (455) (489) (633) (537) (572) (698)
-------- -------- -------- --------- -------- -------- --------
Net income $ 781 $ 821 $ 878 $ 547 $ 957 $ 1,004 $ 1,201
======== ======== ======== ========= ======== ======== ========
Earnings per share $0.27 $0.29 $0.30 $0.19 $0.33 $0.35 $0.34
NON-INTEREST INCOME DETAILS:
- ---------------------------
Income from fiduciary activities $ 47 $ 57 $ 60 $ 51 $ 59 $ 78 $ 39
Service charges on deposit accounts 143 176 193 226 211 242 242
Loan fees 8 15 15 31 55 156 156
Gain (losses) sale of assets 1 - 7 271 236 (17) 30
Security gains (losses) 21 (123) 24 1 10 4 -
Other income 138 173 189 160 171 178 195
-------- -------- -------- --------- -------- -------- --------
Total non-interest income* $ 358 $ 298 $ 488 $ 740 $ 742 $ 641 $ 662
NON-INTEREST EXPENSE DETAIL:
- ----------------------------
Salaries and employee benefits $ 932 $ 978 $1,110 $1,244 $1,238 $1,283 $1,301
Net occupancy expense 234 242 262 260 285 293 341
Other operating expenses 459 417 484 529 582 643 674
------ ------ ------ ------ ------ ------ ------
Total non-interest expense* $1,625 $1,637 $1,856 $2,033 $2,105 $2,219 $2,316
*Reclassification from previously reported data totaling less than $22,000 have been made between non-interest
income and non-interest expense for each of the quarters ended 3/31/97 and 6/30/97.
ALLOWANCE FOR LOAN LOSSES:
- --------------------------
Balance at beginning of period $1,909 $2,051 $2,282 $2,617 $3,019 $3,240 $3,462
Net charge offs (79) (92) (40) (165) (38) (43) (77)
Loan loss provision 221 323 375 567 259 265 150
------ ------ ------ ------ ------ ------ ------
Balance at end of period $2,051 $2,282 $2,617 $3,019 $3,240 $3,462 $3,535
SELECTED RATIOS:
- ----------------
Overhead expense ratio (annualized) 3.01% 2.87% 3.05% 3.05% 3.07% 2.95% 2.78%
Efficiency ratio 52.26 49.80 50.95 53.25 54.17 54.29 52.67
Non-performing loans to total loans 0.58 0.48 0.58 1.08 0.80 0.75 0.75
</TABLE>
16
<PAGE>
PART II
Other Information
Item 1. LEGAL PROCEEDINGS
-----------------
Not Applicable
Item 2. CHANGES IN SECURITIES
---------------------
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources -Initial Public Offering" for the disclosure required by
paragraph (f) of Item 701 of Regulation S-K.
Item 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not Applicable
Item 5. OTHER MATTERS
-------------
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a). Exhibits
Reference is made to the Exhibit Index contained at the end of
this report.
(b). Reports on Form 8-K
Not Applicable
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Bank of the Ozarks, Inc.
DATE: November 12, 1997 /s/ Paul E. Moore
-----------------
Paul E. Moore
Chief Financial Officer
(Chief Accounting Officer)
18
<PAGE>
Bank of the Ozarks, Inc.
Exhibit Index
Exhibit
Number
- ------
3 (a) Amended and Restated Articles of Incorporation of the Company,
effective May 22, 1997 (previously as Exhibit 3.1 to the Company's
Form S-1 Registration Statement (File No. 333-27641) and incorporated
herein by reference.
3 (b) Amended and Restated Bylaws of the Company, dated as of March 13, 1997
(previously filed as Exhibit 3.2 to the Company's Form S-1
Registration Statement (File No. 333-27641) and incorporated herein by
reference).
10 Amendment to Employment Agreement, dated September 16, 1997 by and
between the Company and George G. Gleason, II (attached).
27 Financial Data Schedule for the period ended September 30, 1997
(attached).
19
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This Amendment to Employment Agreement (the "Amendment") is made and
entered into on this 16th day of September, 1997, by and between Bank of the
Ozarks, Inc., an Arkansas Corporation (the "Corporation"), and George G.
Gleason, II, an individual and resident of Arkansas ("Gleason").
W I T N E S S E T H:
WHEREAS, the Corporation and Gleason entered into an Employment Agreement
(the "Agreement") dated May 22, 1997;
WHEREAS, the Corporation and Gleason have negotiated this Amendment of the
Agreement to expand the criteria by which Gleason's performance will be
evaluated for purposes of determining the amount of bonus, if any, to be paid to
him;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Paragraph 3(b) of the Agreement is hereby amended and restated as
follows:
(b) A bonus for each fiscal year of the Corporation, commencing with
the fiscal year ended December 31, 1997, in a maximum aggregate amount
not to exceed 1% of the Corporation's Net Income (on a consolidated
basis) for the fiscal year. The actual amount of such bonus will be
subjectively determined by majority vote of the Compensation Committee
of the Board of Directors of the Corporation, with members of the
Gleason family or any other interested director abstaining. Such
bonus will be based on, among other things, individual merit and
performance, taking into account Gleason's contribution to the overall
success of the Corporation and its subsidiaries and various measures
of corporate performance including long-term growth in deposits, loans
and assets, return on average assets, return on average stockholders'
equity, net interest margin, overhead ratio, efficiency ratio, net
charge-offs ratio, other measures of growth, earnings, asset quality
and risk and other factors deemed appropriate by the Compensation
Committee. As used herein, the term "Net Income"
<PAGE>
means, for a fiscal year, the Corporation's income after federal and
state income taxes. Each bonus shall be payable to Gleason no later
than the end of the first quarter of the succeeding fiscal year.
2. Except as explicitly amended hereby, all other terms, provisions and
conditions of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment in duplicate
original the day and year first above recited.
ATTEST: BANK OF THE OZARKS, INC.
By: /s/ Mark D. Ross
-------------------------
/s/ Donna Quandt Mark D. Ross, President
- ----------------------------
Donna Quandt, Secretary
/s/ George G. Gleason, II
-------------------------
George G. Gleason, II
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE QUARTERLY REPORT ON FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,644
<INT-BEARING-DEPOSITS> 143
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39,814
<INVESTMENTS-CARRYING> 13,139
<INVESTMENTS-MARKET> 13,176
<LOANS> 262,287
<ALLOWANCE> 3,535
<TOTAL-ASSETS> 338,421
<DEPOSITS> 282,022
<SHORT-TERM> 1,835
<LIABILITIES-OTHER> 2,964
<LONG-TERM> 17,113
0
0
<COMMON> 38
<OTHER-SE> 34,449
<TOTAL-LIABILITIES-AND-EQUITY> 338,421
<INTEREST-LOAN> 17,495
<INTEREST-INVEST> 2,093
<INTEREST-OTHER> 231
<INTEREST-TOTAL> 19,819
<INTEREST-DEPOSIT> 8,582
<INTEREST-EXPENSE> 9,581
<INTEREST-INCOME-NET> 10,238
<LOAN-LOSSES> 674
<SECURITIES-GAINS> 14
<EXPENSE-OTHER> 6,640
<INCOME-PRETAX> 4,969
<INCOME-PRE-EXTRAORDINARY> 3,162
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,162
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 4.87
<LOANS-NON> 1,911
<LOANS-PAST> 62
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,534
<ALLOWANCE-OPEN> 3,019
<CHARGE-OFFS> 204
<RECOVERIES> 46
<ALLOWANCE-CLOSE> 3,535
<ALLOWANCE-DOMESTIC> 3,535
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
