<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 MARCH 31, 1998
( ) 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 March 31, 1998
- --------------------------------------- -----------------------------
Common Stock, $0.01 par value per share 3,779,555
<PAGE>
BANK OF THE OZARKS, INC.
FORM 10-Q
March 31, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets as of March 31,
1998 and 1997 and December 31, 1997 1
Consolidated Statements of Income for the
Three Months Ended March 31, 1998 and 1997 2
Consolidated Statements of Stockholders' Equity 3
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Selected and Supplemental Financial Data 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities N/A
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 21
Exhibit Index 22
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
MARCH 31, DECEMBER 31,
---------------------- ------------
1998 1997 1997
-------- -------- ------------
ASSETS
Cash and due from banks $ 14,021 $ 8,397 $ 9,021
Interest bearing deposits 10,885 56 6,607
Investment securities -
available for sale 18,461 39,501 25,297
Investment securities -
held to maturity 51,790 2,669 17,162
Federal Funds sold 7,780 100 2,885
Loans, net of unearned income 299,505 224,641 275,463
Allowance for loan losses (3,822) (3,240) (3,737)
Bank premises and equipment, net 16,951 8,930 13,439
Interest receivable 3,414 2,846 3,013
Excess cost over fair value of
net assets acquired, at
amortized cost 2,162 1,380 1,337
Other 1,508 1,662 1,606
-------- -------- --------
Total assets $422,655 $286,942 $352,093
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Demand - non-interest bearing $ 39,259 $ 23,772 $ 31,091
Savings and interest bearing
transaction 69,088 59,195 64,742
Time 243,965 164,296 199,722
-------- -------- --------
Total deposits 352,312 247,263 295,555
Notes payable 5,072 5,396 5,072
FHLB advances and federal funds
purchased 25,993 12,232 14,017
Accrued interest and other
liabilities 2,485 2,975 1,783
-------- -------- --------
Total liabilities 385,862 267,866 316,427
-------- -------- --------
Stockholders' equity
Common stock; $0.01 par value;
Authorized 10,000,000 shares;
3,779,555 shares issued and
outstanding at December 31,
1997 and March 31, 1998;
2,879,800 shares issued and
outstanding at March 31, 1997 38 29 38
Additional paid in capital 14,314 1,168 14,314
Retained earnings 22,347 17,920 21,162
Accumulated other comprehensive
income (net of tax):
Unrealized gain (loss) on
available for sale
securities 94 (41) 152
-------- -------- --------
Total stockholders' equity 36,793 19,076 35,666
-------- -------- --------
Total liabilities and
stockholders' equity $422,655 $286,942 $352,093
======== ======== ========
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
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
------ ------
Interest income
Loans $6,921 $5,307
Investment securities - taxable 776 612
- non-taxable 128 55
Federal funds sold 54 22
Deposits with banks 114 20
------ ------
Total interest income 7,993 6,016
------ ------
Interest expense
Deposits 3,488 2,595
Borrowed funds 348 302
Federal funds purchased - 3
------ ------
Total interest expense 3,836 2,900
------ ------
Net interest income 4,157 3,116
Provision for loan losses (225) (259)
------ ------
Net interest income after provision
for loan losses 3,932 2,857
------ ------
Other income
Income from fiduciary activities 78 59
Service charges on deposit accounts 281 211
Other service charges and loan fees 557 190
Gains (losses) on sale of securities 51 10
Other income 127 272
------ ------
Total other income 1,094 742
------ ------
Other expense
Salaries and employee benefits 1,677 1,238
Net occupancy and equipment 426 285
Other operating expenses 821 582
------ ------
Total other expense 2,924 2,105
------ ------
Income before income taxes 2,102 1,494
Income taxes 728 537
------ ------
Net income $1,374 $ 957
====== ======
Basic and diluted earnings per common share $0.36 $0.33
====== ======
See accompanying notes to consolidated financial statements.
2
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)
Unaudited
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN RETAINED COMPREHENSIVE
STOCK CAPITAL EARNINGS INCOME TOTAL
------ ------- -------- ------------- -------
<S> <C> <C> <C> <C> <C>
BEGINNING BALANCE - JANUARY 1, 1997 $ 29 $ 1,168 $17,251 $ 99 $18,547
Comprehensive income:
Net income: 957 957
Other comprehensive income
Unrealized gains (loss) on available
for sale securities net of $85
tax effect (137) (137)
Less: reclassification adjustment for
gains included in income net of
$2 tax effect (3) (3)
-------
Comprehensive income 817
-------
Cash dividends (288) (288)
---- ------- ------- ----- -------
ENDING BALANCE - MARCH 31, 1997 $ 29 $ 1,168 $17,920 $ (41) $19,076
==== ======= ======= ===== =======
BEGINNING BALANCE JANUARY 1, 1998 $ 38 $14,314 $21,162 $ 152 $35,666
Comprehensive income:
Net income: 1,374 1,374
Other comprehensive income
Unrealized gains (loss) on available
for sale securities net of $1
tax effect (2) (2)
Less: reclassification adjustment for
gains included in income net of $35
tax effect (56) (56)
-------
Comprehensive income 1,316
-------
Cash dividends (189) (189)
---- ------- ------- ----- -------
ENDING BALANCE - MARCH 31, 1998 $ 38 $14,314 $22,347 $ 94 $36,793
==== ======= ======= ===== =======
</TABLE>
3
<PAGE>
BANK OF THE OZARKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,374 $ 957
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation 195 131
Amortization of goodwill 18 14
Provision for loan losses 225 259
Gain on sale of investments (51) (10)
Gain on sale of loans - (68)
Gain on disposition of premises and equipment (4) (45)
Gain on disposition of foreclosed assets (84) (138)
Deferred income tax benefit (22) (42)
Changes in assets and liabilities
Interest receivable (399) (294)
Other assets, net 472 14
Accrued interest and other liabilities 167 780
-------- --------
Net cash provided by operating activities 1,891 1,558
-------- --------
Cash flows from investing activities
Purchase of subsidiary, net of funds acquired 7,164 -
Proceeds from sales and maturities of securities available
for sale 7,230 1,566
Purchases of investment securities available for sale (280) (4,401)
Proceeds from maturities of investment securities held to
maturity 3,145 56
Purchase of investment securities held to maturity (37,781) -
(Increase) decrease in federal funds sold (4,450) 250
Net increase in loans (24,429) (11,052)
Proceeds from sales of loans - 811
Proceeds from dispositions of bank premises and equipment 4 117
Purchase of bank premises and equipment (3,038) (2,261)
Proceeds from dispositions of foreclosed assets 210 162
-------- --------
Net cash used by investing activities (52,225) (14,752)
-------- --------
Cash flows from financing activities
Net increase in deposits 47,402 15,615
Payments of FHLB advances and federal funds purchased (15,595) -
Proceeds from FHLB advances and federal funds purchased 27,994 (495)
Proceeds from notes payable 5,000 -
Payments of notes payable (5,000) -
Proceeds from sale of common stock - -
Dividends paid (189) (288)
-------- --------
Net cash provided by financing activities 59,612 14,832
-------- --------
Net increase in cash and cash equivalents 9,278 1,638
Cash and due from banks - beginning of period 15,628 6,815
-------- --------
Cash and due from banks - end of period $ 24,906 $ 8,453
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<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, Bank of the Ozarks 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 annual report on Form 10-K for the year ended
December 31, 1997.
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
months ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the full year.
3. EARNINGS PER COMMON SHARE:
In 1997, the FASB issued SFAS No. 128, "Earnings per Share". The new
statement was effective for financial statements for periods ending after
December 15, 1997 and superseded Accounting Principles Board Opinion 15. SFAS
No. 128 replaces primary earnings per share ("EPS") with basic EPS. Basic EPS
is computed by dividing reported earnings available to common stockholders by
weighted average shares outstanding. No dilution for any potentially dilutive
securities is included. Diluted EPS replaces fully diluted EPS and includes the
effects of stock options. In computing dilution for stock options, the average
share price for the period is used. The Company adopted SFAS No. 128 on
December 31, 1997.
Basic and diluted earnings per common share is computed as follows (in
thousands, except per share amount):
THREE MONTHS
ENDED MARCH 31,
--------------------------
1998 1997
---- ----
Common shares - weighted averages.............. 3,780 2,880
Common share equivalents - weighted averages... 41 -
------ ------
3,821 2,880
====== ======
Net income..................................... $1,374 $ 957
Basic earnings per share....................... $ 0.36 $ 0.33
Diluted earnings per common share.............. 0.36 0.33
5
<PAGE>
4. COMPREHENSIVE INCOME:
In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This statement is effective for fiscal years beginning after December 15, 1997.
This statement establishes standards for reporting and display of comprehensive
income and its components in the financial statements. The object of the
statement is to report a measure of all changes in equity of an enterprise that
results from transactions and other economic events of the period from nonowner
sources. Comprehensive income begins with net income as reported and includes
gains and losses that under generally accepted accounting principles are
directly charged to equity. Examples include foreign currency translations,
pension liability adjustments and unrealized gains and losses on available for
sale securities (SFAS 115 adjustment). The Company currently has only
unrealized gains or losses on available for sale securities as an item of
comprehensive income. The Company adopted this statement in the first quarter
of 1998 and has included its comprehensive income in the consolidated statements
of stockholders' equity.
5. SUPPLEMENTARY DATA FOR CASH FLOWS:
Cash payments for interest on notes payable during the three months ended
March 31, 1998 amounted to $113,000 and during the three months ended March 31,
1997 no payments were made. Cash payments for income taxes during the three
months ended March 31, 1998 and 1997 amounted to $72,000 and $33,000,
respectively.
(The remainder of this page intentionally left blank)
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Net income was $1,374,000 for the first quarter of 1998, a 43.6% increase
over net income of $957,000 for the same quarter in 1997. Earnings per share,
which was impacted by the Company's issuance of 899,755 additional shares of
common stock in the Company's initial public offering ("IPO") completed during
the third quarter of 1997, rose 9.1% to $0.36 per share for the quarter ended
March 31, 1998 compared to $0.33 per share for the same quarter in 1997.
The Company's annualized return on average assets and on average
stockholders' equity were 1.46% and 15.41%, respectively, for the first quarter
of 1998, compared with 1.39% and 20.63%, respectively, for the same quarter of
1997. The 1998 first quarter return on average stockholders' equity was impacted
by the increase in equity due to the issuance of new shares in the IPO.
Total assets increased 47.3% from $286.9 million at March 31, 1997 to
$422.7 million at March 31, 1998. Loans were $299.5 million at March 31, 1998
compared to $224.6 million at March 31, 1997, an increase of 33.3%. Deposits
were $352.3 million at March 31, 1998 compared to $247.3 million at March 31,
1997, an increase of 42.5%.
As a result of the Company's IPO and earnings, stockholders' equity
increased 92.7% from $19.1 million at March 31, 1997, to $36.8 million at
March 31, 1998 increasing per share book value 47.0% from $6.62 to $9.73.
Annualized results for these interim periods may not be indicative of those
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. 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, 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. The following
discussion provides a summary of the Company's operations for the first quarters
ended March 31, 1998 and 1997.
(The remainder of this page intentionally left blank)
7
<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 March 31, 1998 compared to three months ended March 31, 1997
Net interest income (FTE) increased 34.5% to $4,229,000 for the three
months ended March 31, 1998 from $3,144,000 for the three months ended March 31,
1997. This increase primarily resulted from a 36.0% increase in average earning
assets to $355.3 million for the 1998 period from $261.3 million for the 1997
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 5 basis point reduction in the net
interest margin to 4.83% in the three month 1998 period from 4.88% in the
comparable 1997 period.
ANALYSIS OF NET INTEREST INCOME
(FTE = FULLY TAXABLE EQUIVALENT)
THREE MONTHS
ENDED MARCH 31,
-----------------------------
1998 1997
---- ----
(Dollars in thousands)
Interest income............................. $7,993 $6,016
FTE adjustment.............................. 72 28
------ ------
Interest income -- FTE...................... 8,065 6,044
Interest expense............................ 3,836 2,900
------ ------
Net interest income -- FTE.................. $4,229 $3,144
====== ======
Yield on interest earning assets -- FTE..... 9.21% 9.38%
Cost of interest bearing liabilities........ 5.03 5.01
Net interest spread -- FTE.................. 4.18 4.37
Net interest margin -- FTE.................. 4.83 4.88
(The remainder of this page intentionally left blank)
8
<PAGE>
AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST ANALYSIS
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------
1998 1997
--------------------------- --------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Interest-earning deposits................... $ 8,490 $ 114 5.45% $ 1,559 $ 20 5.20%
Federal funds sold.......................... 3,967 55 5.62 1,693 22 5.27
Investment securities:
Taxable................................... 46,501 776 6.77 36,907 612 6.73
Tax-exempt - FTE.......................... 9,677 194 8.13 3,230 83 10.42
Loans (net of unearned income).............. 286,647 6,927 9.80 217,905 5,307 9.88
-------- ------ -------- ------
Total earnings assets................... 355,282 8,066 9.21 261,294 6,044 9.38
Non-earning assets............................ 27,124 17,175
-------- --------
Total assets............................ $382,406 $278,469
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Interest bearing transaction and savings.. $ 64,828 $ 453 2.83% $ 57,867 $ 420 2.94%
Certificates of deposits $100,000 or 64,513 900 5.66 43,812 604 5.59
more.....................................
Other time deposits....................... 152,776 2,136 5.67 115,165 1,571 5.53
-------- ------ -------- ------
Total interest bearing deposits......... 282,117 3,489 5.02 216,844 2,595 4.85
Federal funds and FHLB borrowings............. 22,072 240 4.41 12,348 183 6.01
Notes payable................................. 5,072 108 8.64 5,396 122 9.17
-------- ------ -------- ------
Total interest bearing liabilities...... 309,261 3,837 5.03 234,588 2,900 5.01
Non-interest liabilities:
Non-interest bearing deposits............... 34,844 22,052
Other non-interest liabilities.............. 2,130 3,017
-------- --------
Total liabilities....................... 346,235 259,657
Stockholders' equity.......................... 36,171 18,812
-------- --------
Total liabilities and stockholders'
equity................................. $382,406 $278,469
======== ========
Interest rate spread.......................... 4.18% 4.37%
------ ------
Net interest income - FTE..................... $4,229 $3,144
======= ======
Net interest margin........................... 4.83% 4.88%
</TABLE>
9
<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 first quarter of 1998 was $1,094,000 compared
with $742,000 for the first quarter of 1997, a 47.4% increase. During the first
quarter of 1998, the Company benefited from strong increases in revenue from
loan fees, including fees on residential mortgage loans originated for resale in
the secondary market. These increases, along with increases in other non-
interest income categories, more than offset a substantial decrease in gains on
sale of assets from the first quarter of 1997.
The table below shows non-interest income for the three months ended March
31, 1998 and 1997.
NON-INTEREST INCOME
THREE MONTHS
ENDED MARCH 31,
------------------------
1998 1997
------ ------
(Dollars in thousands)
Trust income....................................... $ 78 $ 59
Service charges on deposit accounts................ 281 211
Loan fees.......................................... 395 55
Other service charges and fees..................... 162 135
Gain on sale of loans.............................. - 68
Gain on sale of previously foreclosed real estate.. 84 123
Gain on sale of other assets....................... 4 45
Securities gains (losses).......................... 51 10
Printed check sales................................ 32 26
Other income....................................... 7 10
------ ------
Total non-interest income............ $1,094 $ 742
====== ======
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10
<PAGE>
NON-INTEREST EXPENSE
Non-interest expense for the first quarter of 1998 was $2,924,000 compared
with $2,105,000 for the same period in 1997, a 38.9% increase. This increase
resulted primarily from the Company's continued growth and expansion, including
commencement of operations at the Company's newly acquired Little Rock savings
bank and preparation for opening additional offices in Little Rock and Fort
Smith later this year.
The overhead ratio (annualized non-interest expenses divided by average
assets) for the first quarter of 1998 was 3.10%, up 3 basis points from 3.07%
for the same quarter in 1997.
The efficiency ratio (non-interest expenses divided by the sum of net
interest income on a tax equivalent basis and non-interest income) was 54.93%
for the first quarter of 1998 compared to 54.17% for the first quarter of 1997.
The table below shows non-interest expense for the three months ended March
31, 1998 and 1997.
NON-INTEREST EXPENSE
THREE MONTHS
ENDED MARCH 31,
---------------------
1998 1997
------ ------
(Dollars in thousands)
Salaries and employee benefits..................... $1,677 $1,238
Net occupancy expense.............................. 187 133
Equipment expense.................................. 239 152
Other real estate and foreclosure expense.......... 16 31
Other operating expense:
Professional and outside services.............. 45 48
Postage........................................ 68 32
Telephone...................................... 67 33
Operating supplies............................. 121 73
Advertising and public relations............... 96 45
Directors' fees................................ 28 23
Software expense............................... 38 27
Check printing charges......................... 37 28
FDIC & state assessment........................ 32 25
Travel and entertainment....................... 27 14
Amortization of goodwill....................... 17 14
Miscellaneous.................................. 229 189
------ ------
Total non-interest expense........... $2,924 $2,105
====== ======
INCOME TAXES
The provision for income taxes was $728,000 for the quarter ended March 31,
1998 compared to $537,000 for the same period in 1997. The effective income tax
rates were 34.6% and 35.9%, respectively, for these periods. The decrease in
effective tax rate for the 1998 period resulted primarily from an increase in
tax-exempt interest income as a percent of total pre-tax income.
11
<PAGE>
ANALYSIS OF FINANCIAL CONDITION
LOAN PORTFOLIO
At March 31, 1998 the Company's loan portfolio was $299.5 million, an
increase of 33.3% from $224.6 million at March 31, 1997. As of March 31, 1998,
the Company's loan portfolio consisted of approximately 61.5% real estate loans,
18.5% consumer loans, 14.5% commercial and industrial loans and 4.7%
agricultural loans (non-real estate).
The amount and type of loans outstanding at March 31, 1998 and 1997 and
December 31, 1997 are reflected in the following table.
LOAN PORTFOLIO
MARCH 31, DECEMBER 31,
--------------------- ------------
1998 1997 1997
-------- -------- --------
(Dollars in thousands)
Real Estate:
Single family residential... $103,225 $ 81,747 $ 96,943
Non-farm/non-residential.... 45,691 36,953 41,710
Agricultural................ 13,585 11,308 13,443
Construction/land 17,591 10,211 16,257
development................
Multifamily residential..... 4,180 2,580 3,897
-------- -------- --------
Total real estate....... $184,272 $142,799 $172,250
Consumer.................... 55,362 43,284 53,233
Commercial and industrial... 43,348 29,103 37,470
Agricultural (non-real 14,131 8,667 10,824
estate)....................
Other....................... 2,392 788 1,686
-------- -------- --------
Total loans............. $299,505 $224,641 $275,463
======== ======== ========
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.
Nonperforming assets as a percent of total assets were 0.40% as of March 31,
1998 compared to 0.24% as of December 31, 1997 and 0.66% as of March 31, 1997.
Nonperforming loans as a percent of total loans were 0.54% as of March 31, 1998
compared to 0.25% as of December 31, 1997 and 0.80% as of March 31, 1997. The
reduction in nonperforming assets and loans since March 31, 1997 resulted
primarily from the payoff of a large nonaccrual loan in the fourth quarter of
1997.
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.
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12
<PAGE>
The following table presents information concerning nonperforming assets,
including nonaccrual and restructured loans and foreclosed assets held for sale.
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31
-------------------- -----------
1998 1997 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Nonaccrual loans.......................................... $1,583 $1,771 $ 664
Accruing loans 90 days or more past due................... 49 22 35
Restructured loans........................................ - - -
------ ------ -----
Total nonperforming loans............... $1,632 $1,793 $ 699
Foreclosed assets hold for sale and repossessions......... 77 113 136
------ ------ -----
Total nonperforming assets............... $1,709 $1,906 $ 835
====== ====== =====
Nonperforming loans to total loans........................ 0.54% 0.80% 0.25%
Nonperforming assets to total assets...................... 0.40 0.66 0.24
</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 three month periods ended March 31, 1998 and 1997 and the year
ended December 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ENDED MARCH 31, ENDED DECEMBER 31,
--------------- ------------------
1998 1997 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Balance of allowance for loan losses at beginning of period... $ 3,737 $ 3,019 $ 3,019
Loans charged off:
Real estate............................................ 11 2 35
Consumer............................................... 93 48 434
Commercial and industrial.............................. 42 - -
------- ------- -------
Total loans charged off.......................... 146 50 469
------- ------- -------
Recoveries of loans previously charged off:
Real estate............................................ - - 7
Consumer............................................... 5 12 39
Commercial and industrial.............................. 1 - 2
------- ------- -------
Total recoveries................................ 6 12 48
------- ------- -------
Net loans charged off......................................... 140 38 421
Provision charged to operating expense........................ 225 259 1,139
------- ------- -------
Balance, end of period........................................ $ 3,822 $ 3,240 $ 3,737
======= ======= =======
Net charge-offs to average loans outstanding during
the periods indicated................................. 0.20%(1) 0.07%(1) 0.17%
Allowance for loan losses to total loans...................... 1.28 1.44 1.36
Allowance for loan losses to nonperforming loans.............. 234.19 180.70 534.62
(1) Annualized
</TABLE>
13
<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 $3,822,000 at March 31, 1998 is adequate. While management
believes the current allowance is adequate, changing economic and other
conditions may require future adjustments to the allowance for loan losses.
For the first three months of 1998, annualized net charge-offs were 0.20%
of average outstanding loans compared to with 0.17% for the year of 1997 and
0.07% annualized for the first three month period in 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 $225,000 for the
three months ended March 31, 1998 compared to $259,000 for the same three month
period in 1997.
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.
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, DECEMBER 31,
1998 1997 1997
--------------------- --------------------- -------------------
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......................... $43,079 $43,044 $27,673 $27,458 $24,562 $24,596
Mortgage-backed securities............ 7,189 7,295 9,959 10,092 9,340 9,571
Obligations of states and political
subdivisions..................... 17,765 17,777 3,176 3,204 6,801 6,819
Other securities...................... 2,068 2,068 1,429 1,429 1,510 1,510
------- ------- ------- ------- ------- -------
Total.......... $70,101 $70,184 $42,237 $42,183 $42,213 $42,496
======= ======= ======= ======= ======= =======
</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. Effective March 25, 1998 the Company renegotiated the
terms of its credit facility with Union Planters Bank, N.A., Memphis, Tennessee.
The Company consolidated its existing $5 million term loan and $5 million line
of credit into a new revolving line of credit ("Credit Agreement") for up to $22
million.
The Credit Agreement matures March 31, 2003 and interest accrues on all
outstanding borrowings due under the Credit Agreement at a variable rate equal
to the average prime lending rate reported from time to time by the Wall Street
Journal minus 1.25%, provided however, the rate is not to exceed 7.75%.
Interest is payable quarterly commencing June 30, 1998. The Credit Agreement is
effective through March 31, 2003, subject to an annual compliance review by the
lender. No standby or unused commitment fees are payable by the Company under
the Credit Agreement.
14
<PAGE>
All borrowings under the Credit Agreement are secured by a pledge of 100%
of the Company's stock in each of Bank of the Ozarks, wca and Bank of the
Ozarks, nwa. As of March 31, 1998, $5.0 million was borrowed under the revolving
Credit Facility.
The Credit Agreement requires the Company's bank subsidiaries, Bank of the
Ozarks, wca and Bank of the Ozarks, nwa, to maintain (i) a return on average
assets for each calendar year equal to at least 1.0%, (ii) a ratio of primary
capital to assets at levels acceptable to bank regulatory authorities but at
least 7.0% at each calendar year end and (iii) net charges to the reserve for
loan losses at less than 1.0% of net loans during any calendar year. In
addition, the Credit Agreement requires (i) that the Company's aggregate
indebtedness not exceed 60.0% of the Company's tangible net worth through March
31, 1999 reducing 5% a year thereafter and (ii) borrowings under the Credit
Agreement not exceed 50.0% of the tangible book value of all subsidiary bank
stock pledged to secure such borrowings. At March 31, 1998 the Company was in
compliance with these requirements.
Growth and Expansion. In the first quarter of 1998 the Company closed its
acquisition of Heartland Community Bank, FSB, a federal savings bank in Little
Rock, Arkansas. The Company paid $3.1 million in cash (1.38 times tangible book
value) to acquire the charter and all Little Rock operations including
approximately $9.4 million in deposits. No loans were acquired as a part of the
transaction. Following closing the Company commenced operations in Little Rock
under the Bank of the Ozarks' name.
During the first three months of 1998 the Company continued construction of
its Little Rock Headquarters facility and the permanent Fort Smith office. The
Little Rock facility, which will consolidate the Company's existing corporate
offices and two existing Little Rock loan production offices, is expected to be
completed around mid-year 1998. The Company has also applied for regulatory
approval to open a branch of its recently acquired Little Rock savings bank at
this location. Completion of the Fort Smith facility is expected in the last
half of 1998. Pending completion, in the fourth quarter of 1997 the Company has
opened a temporary Fort Smith branch, which includes a single family mortgage
lending operation.
In April and May, 1998 the Company acquired two additional branch locations
in Little Rock and is seeking regulatory approval to operate full service
offices at both locations. One location has an existing 2,500 square foot branch
bank office. The Company plans to construct a new 2,700-square-foot branch bank
office at the other location.
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. 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 competitors, 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 agreement described above.
At March 31, 1998, the Company's bank subsidiaries had an aggregate of
$39.7 million of unused blanket FHLB borrowing availability. Additionally at
March 31, 1998 the bank subsidiaries maintained pre-approved unsecured federal
funds lines of credit in an amount of up to $16.2 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)
15
<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 March 31, 1998 and December 31, 1997 and are presented below,
followed by the capital ratios of each of the Company's two bank subsidiaries at
March 31, 1998.
CONSOLIDATED CAPITAL RATIOS
MARCH 31, December 31,
1998 1997
---- ----
(Dollars in thousands)
Tier 1 capital:
Stockholders' equity........................ $ 36,793 $ 35,666
Less net unrealized gains on available
for sale securities............ (94) (152)
Less goodwill............................... (2,162) (1,337)
-------- --------
Total tier 1 capital........ $ 34,537 $ 34,177
======== ========
Tier 2 capital:
Qualifying allowance for loan losses........ 3,706 3,288
-------- --------
Total risk-based capital................. $ 38,243 $ 37,465
======== ========
Risk-weighted assets.......................... $296,391 $262,592
======== ========
Ratios at end of period:
Leverage.................................... 9.08% 9.86%
Tier 1 risk-based capital................... 11.65 13.01
Total risk-based capital.................... 12.90 14.27
Minimum ratio guidelines:
Leverage.................................... 3.00%/(1)/ 3.00%/(1)/
Tier 1 risk- based capital.................. 4.00 4.00
Total risk-based capital.................... 8.00 8.00
CAPITAL RATIOS OF SUBSIDIARY BANKS
MARCH 31, 1998
-------------------------------------
BANK OF THE BANK OF THE BANK OF THE
OZARKS, WCA OZARKS, NWA OZARKS/(2)/
----------- ----------- -----------
(Dollars in thousands)
Stockholders' equity - Tier 1.. $26,572 $9,993 $2,189
Leverage ratio................. 10.45% 8.37% 9.01%
Risk-based capital ratios:.....
Tier 1................. 13.13 11.99 26.84
Total capital.......... 14.38 13.24 27.95
(1) 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.
(2) A federal savings bank acquired by the Company in February 1998.
16
<PAGE>
FORWARD-LOOKING INFORMATION
This Management's Discussion and Analysis of Financial Condition and
Results of Operations, other filings made by the Company with the Securities and
Exchange Commission and other oral and written statements or reports by the
Company and its management, may include certain forward-looking statements
including, without limitation, statements with respect to anticipated future
operating and financial performance, growth opportunities and growth rates,
acquisition opportunities and other similar forecasts and statements of
expectation. Words such as "anticipate," "believe," "estimate," "expect,"
"intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Forward-looking statements made
by the Company and its management are based on estimates, projections, beliefs
and assumptions of management at the time of such statements and are not
guarantees of future performance. The Company disclaims any obligation to update
or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management due to certain risks, uncertainties and assumptions. Certain factors
that may affect operating results of the Company include, but are not limited
to, the following: (i) potential delays in opening new branches and other
operating locations; (ii) the ability to attract deposits and loans from new
locations or markets; (iii) competitive factors and pricing pressures; (iv)
changes in legal and regulatory requirements; (v) interest rate fluctuations and
(vi) general economic conditions, as well as, other factors described in this
and other Company reports and statements. Should one or more of the foregoing
risks materialize, or should underlying assumptions prove incorrect, actual
results or outcomes may vary materially from those described in the forward-
looking statements.
(The remainder of this page intentionally left blank)
17
<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 periods ended March 31, 1998 and 1997
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
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
---- ----
Income statement data:
Net interest income............................. $ 4,157 $ 3,116
Provision for loan losses....................... 225 259
Non-interest income............................. 1,094 742
Non-interest expense............................ 2,924 2,105
Income tax expense.............................. 728 537
Net income...................................... $ 1,374 $ 957
PER COMMON SHARE DATA:
Earnings........................................ $ 0.36 $ 0.33
Book value...................................... 9.73 6.62
Fully diluted shares outstanding (thousands).... 3,821 2,880
End of period shares outstanding (thousands).... 3,780 2,880
BALANCE SHEET DATA AT PERIOD END:
Total assets.................................... $422,655 $286,942
Total loans..................................... 299,505 224,641
Allowance for loan losses....................... 3,822 3,240
Total investment securities..................... 70,252 42,170
Total deposits.................................. 352,312 247,263
FHLB advances & Fed Funds....................... 25,993 12,017
Notes payable................................... 5,072 5,396
Total stockholders' equity...................... 36,793 19,076
Loan to deposit ratio........................... 85.01% 90.85%
PERFORMANCE RATIOS:
Return on average assets*....................... 1.46% 1.39%
Return on average stockholders' equity*......... 15.41 20.63
Net interest margin*............................ 4.83 4.88
Overhead ratio*................................. 3.10 3.07
Efficiency ratio................................ 54.93 54.17
ASSETS QUALITY RATIOS:
Net charge-offs as a percentage of average
total loans (annualized)....................... 0.20% 0.07%
Nonperforming loans to total loans.............. 0.54 0.80
Nonperforming assets to total assets............ 0.40 0.66
ALLOWANCE FOR LOAN LOSSES AS A PERCENTAGE OF:
Total loans..................................... 1.28% 1.44%
Nonperforming loans............................. 234.19 180.70
CAPITAL RATIOS AT PERIOD END:
Leverage capital ratio.......................... 9.08% 6.40%
Tier 1 risk-based capital....................... 11.65 8.29
Total risk-based capital........................ 12.90 9.53
* Ratios annualized based on actual days
18
<PAGE>
BANK OF THE OZARKS, INC.
SUPPLEMENTAL QUARTERLY FINANCIAL DATA
(Dollars in Thousands, Except Per Share Amounts)
Unaudited
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
------------------------------------------------------------------------------------------------------
6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97 3/31/98
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY:
- ----------------
Net interest income $ 2,938 $ 3,110 $ 3,040 $ 3,116 $ 3,419 $ 3,703 $ 4,251 $ 4,157
Federal tax (FTE)
Adjustment 51 45 38 28 28 32 56 72
------- ------- ------- ------- ------- ------- ------- -------
Net interest margin (FTE) 2,989 3,155 3,078 3,144 3,447 3,735 4,307 4,229
Loan loss provision (323) (375) (567) (259) (265) (150) (465) (225)
Non-interest income 298 488 740 742 641 662 880 1,094
Non-interest expense (1,637) (1,856) (2,033) (2,105) (2,219) (2,316) (2,588) (2,924)
------- ------- ------- ------- ------- ------- ------- -------
Pretax income (FTE) 1,327 1,412 1,218 1,522 1,604 1,931 2,134 2,174
FTE adjustment (51) (45) (38) (28) (28) (32) (56) (72)
Provision for taxes (455) (489) (633) (537) (572) (698) 709 (728)
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 821 $ 878 $ 547 $ 957 $ 1,004 $ 1,201 $ 1,369 $ 1,374
======= ======= ======= ======= ======= ======= ======= =======
Earnings per share $ 0.29 $ 0.30 $ 0.19 $ 0.33 $ 0.35 $ 0.34 $ 0.36 $ 0.36
NON-INTEREST INCOME DETAILS:
- ---------------------------
Income from fiduciary
activities $ 57 $ 60 $ 51 $ 59 $ 78 $ 39 $ 98 $ 78
Service charges on deposits
accounts 176 193 226 211 242 242 263 281
Loan fees 15 15 31 55 156 156 199 395
Gain (losses) sale of
assets - 7 271 236 (17) 30 138 88
Security gains (losses) (123) 24 1 10 4 - - 51
Other income 173 189 160 171 178 195 182 201
------- ------- ------- ------- ------- ------- ------- -------
Total non-interest
income $ 298 $ 488 $ 740 $ 742 $ 641 $ 662 $ 880 $ 1,094
NON-INTEREST EXPENSE DETAIL:
- ---------------------------
Salaries and employee
benefits $ 978 $ 1,110 $ 1,244 $ 1,238 $ 1,283 $ 1,301 $ 1,502 1,677
Net occupancy expense 242 262 260 285 293 341 386 426
Other operating expenses 417 484 529 582 643 674 700 821
------- ------- ------- ------- ------- ------- ------- -------
Total non-interest
expense $ 1,637 $ 1,856 $ 2,033 $ 2,105 $ 2,219 $ 2,316 $ 2,588 $ 2,924
ALLOWANCE FOR LOAN LOSSES:
- -------------------------
Balance beginning of period $ 2,051 $ 2,282 $ 2,617 $ 3,019 $ 3,240 $ 3,462 $ 3,535 $ 3,737
Net charge offs (92) (40) (165) (38) (43) (77) (263) (140)
Loan loss provision 323 375 567 259 265 150 465 225
------- ------- ------- ------- ------- ------- ------- -------
Balance at end of period $ 2,282 $ 2,617 $ 3,019 $ 3,240 $ 3,462 $ 3,535 $ 3,737 $ 3,822
SELECTED RATIOS:
- ---------------
Overhead expense ratio* 2.87% 3.05% 3.02% 3.07% 2.95% 2.78% 2.95% 3.10%
Efficiency ratio 49.80 50.95 53.25 54.17 54.28 52.67 49.89 54.93
Non-performing loans
to total loans 0.48 0.58 1.08 0.80 0.75 0.77 0.25 0.54
</TABLE>
*Annualized
19
<PAGE>
PART I (continued)
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the information that was
provided under Item 305 of Regulation S-K in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.
PART II
Other Information
Item 1. LEGAL PROCEEDINGS
-----------------
Not Applicable
Item 2. CHANGES IN SECURITIES
---------------------
Not Applicable
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
20
<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: May 13, 1998 /s/ PAUL E. MOORE
------------------------------------
Paul E. Moore
Chief Financial Officer
(Chief Accounting Officer)
21
<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 filed 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 Loan Agreement dated March 25, 1998 by and between the Company and
Union Planters Bank, N.A. (attached).
27 Financial Data Schedule for the period ended March 31, 1998
(attached).
22
<PAGE>
EXHIBIT 10
LOAN AGREEMENT
THIS AGREEMENT made and entered into this 25th day of March, 1998, by and
between UNION PLANTERS BANK, N.A. a national banking association with offices at
6200 Poplar Avenue, Memphis, Tennessee 38119 (hereinafter referred to as the
"Lender"), and BANK OF THE OZARKS, INC., an Arkansas corporation (hereinafter
referred to as the "Borrower"), having as an address for purposes of notice of
TCBY Tower Building, Suite 3100, 425 West Capitol Avenue, Little Rock, Arkansas,
72201.
W I T N E S S E T H:
WHEREAS, the Borrower has applied to the Lender for a loan and the
Lender is willing to make available such funds to the Borrower subject to the
terms, provisions and conditions provided for herein; and
WHEREAS, this Agreement has been entered into by the parties for the
purpose of confirming the terms and conditions under which funds will be
advanced to Borrower; and
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties do hereby agree as follows:
SECTION 1.0 DEFINITION OF TERMS
- ---------------------------------
As used herein, the following terms shall have those meanings ascribed
thereto below:
1.1 "Agreement" shall mean this Loan Agreement.
1.2 "Bank Stock" shall, unless otherwise indicated, mean the common stock
of Bank of the Ozarks, wca, P.O. Box 196, Ozark, Arkansas 72949 and Bank of the
Ozarks, nwa, P.O. Box 437, Jasper, Arkansas.
1.3 "Capital" shall mean the total of all equity capital, surplus,
undivided profits and 50% of reserves for loan losses shown on the most recent
quarterly call reports of the Subsidiary Banks.
1.4 "Closing" shall mean that date on which the Lender and Borrower
execute this Loan Agreement and the Lender advances the proceeds of the Loan to
Borrower.
1.5 "Collateral" shall mean not less than 27,399 shares of the common
stock of Bank of the Ozarks, wca, and 2,340 shares of the common stock of Bank
of the Ozarks, nwa, now owned by Borrower, and any additional common stock now
or hereafter owned or acquired by the
<PAGE>
Borrower and pledged to Lender in order that (i) Lender shall have a first lien,
perfected security interest in not less than 80% of the outstanding stock of
Subsidiary Banks; and (ii) the outstanding balance of the Loan shall not exceed
50% of the Tangible Book Value of the Collateral.
1.6 "Commitment" shall mean the lesser of (i) Twenty-two Million Dollars
($22,000,000.00); or (ii) a percentage of Borrower's Net Worth calculated as
follows:
Closing through March 31, 1999 60% of Borrower's Net Worth
April 1, 1999 through March 31, 2000 55% of Borrower's Net Worth
April 1, 2000 through March 31, 2001 50% of Borrower's Net Worth
April 1, 2001 through March 31, 2002 45% of Borrower's Net Worth
April 1, 2002 through March 31, 2003 40% of Borrower's Net Worth
1.7 "Debt" shall mean the Loan and all liabilities, obligations and
indebtedness (primary, secondary, direct, contingent, sole, joint or several)
due or to become due, or which may hereafter be contracted or acquired, of the
Borrower to the Lender incurred under or pursuant to this Loan Agreement, and
including without limitation the Loan, the Notes, and any security agreement or
other agreement, instrument or document executed to evidence, secure or govern
the terms of the Loan.
1.8 "Event of Default" shall mean the occurrence of any one of those
events described in Section 10.1 hereof
1.9 "Line of Credit Note" or "Note" shall mean that certain promissory
note of the Borrower, and any promissory note delivered in substitution or
replacement thereof, evidencing the Line of Credit and incorporating the terms
of Section 2 of this Agreement.
1.10 "Line of Credit" shall mean the revolving credit facility and any
Advances made by Lender in accordance with the terms of Section 2 hereof.
1.11 "Loan" shall mean borrowings and advances to the Borrower by the
Lender pursuant to the terms of this Loan Agreement and shall include all sums
advanced to or for the benefit of the Borrower pursuant hereto.
1.12 "Prime Rate" shall mean the average prime lending rate reported from
time to time by the Wall Street Journal under its column "Money Rates."
Effective on the date on which any change in the prime rate shall occur, any
interest adjustment required hereby shall be adjusted upward or downward by a
number of percentage points (and fractional parts thereof) equal to the
adjustment upward or downward in the Wall Street Journal reported Prime Rate;
provided however, that the rate of interest, as adjusted, shall not exceed the
maximum rate of interest which the Lender, as a national bank, is permitted by
law to contract for and charge. Interest shall be calculated on the basis of a
365 day year unless calculations on that basis would result in Lender receiving
interest
2
<PAGE>
at a rate in excess of the maximum rate of interest which Lender is permitted by
law to contract for and charge, in which case the principal debt evidenced
hereby shall bear interest at such maximum rate.
1.13 "Security Agreement" shall mean that certain security agreement of
even date herewith executed by the Borrower and Lender providing for the pledge
of and the grant of a security interest by the Borrower to Lender in the
Collateral.
1.14 "Subsidiary Banks" shall mean the Bank of the Ozarks, wca, Ozark,
Arkansas and the Bank of the Ozarks, nwa, Jasper, Arkansas.
1.15 All accounting terms used herein shall have such meaning ascribed
thereto by application of generally accepted accounting principles applied
consistently.
1.15.1 "Assets", as that term is used herein, or as any computation
shall be made with reference thereto, shall (i) for purposes of calculating
Borrower's Net Worth be calculated in accordance with generally accepted
accounting principles and shall include goodwill and (ii) for purposes of
calculating Tangible Book Value of the Subsidiary Banks, shall be
calculated in accordance with generally accepted accounting principles but
shall not include goodwill.
1.15.2 "Liabilities", as that term is used herein, or as any
computation shall be made with reference thereto, shall include, (a)
guaranties, repurchase agreements and endorsements (other than for purposes
of collection in the ordinary course of Borrower's business); and (b)
indebtedness secured by assets of the Borrower, regardless of any
limitation on recourse against Borrower.
1.15.3 "Net Worth" shall mean, with respect to the Borrower,
Assets, including goodwill, minus Liabilities.
1.15.4 "Tangible Book Value" shall mean, with respect to the
Subsidiary Banks, Assets, excluding goodwill, minus Liabilities.
SECTION 2.0 TERMS OF THE LINE OF CREDIT.
2.1 The Revolving Line of Credit. Upon the terms and conditions set forth
----------------------------
in this Agreement, Lender agrees to fund advances from time to time requested by
Borrower in an aggregate outstanding amount not to exceed the Commitment.
2.2 Making the Revolving Loans. Each advance shall be made either: (i)
--------------------------
on written notice given by the Borrower to the Lender; or (ii) in a telephonic
request, which request shall be followed by written notice from the Borrower to
Lender within five days from the
3
<PAGE>
telephonic request; and in either event not later than noon (Central Standard
Time) one business day prior to the business day upon which the advance is to be
made.
2.3 Funding of Revolving Loans. The Lender agrees on each advance date
--------------------------
to make available to the Borrower the amount of the requested advance (provided
that the aggregate amount of all Advances does not exceed the limitation set
forth in Section 2.1) by transfer of immediately available funds to a deposit
account maintained by Borrower. The revolving credit advances made by the
Lender from time to time to the Borrower under this Agreement shall be made
against, evidenced by and repaid with interest thereon in accordance with the
Line of Credit Note of the Borrower.
2.4 Interest. Interest shall accrue on the outstanding balance of all
--------
advances made under the Line of Credit at a per annum rate of the lesser of (i)
one and one-quarter of one percentage point (1.25%) less than the Prime Rate or
(ii) 7.75%. Accrued interest shall be payable quarterly commencing on the 30th
day of June, 1998 and continuing on the last day of each September, December,
March and June thereafter.
2.5 Term. Lender's commitment to fund advances under the Line of
----
Credit shall terminate on March 31, 2003. Lender shall have the opportunity on
each anniversary date of the execution of this Agreement to review the terms and
agreements applicable to the Line of Credit, provided however that Lender will
not require the modification of such terms and agreements unless: (i) there has
been a material adverse change in the financial condition of the Borrower or the
Subsidiary Banks; or (ii) the occurrence of any other Event of Default and the
expiration of any applicable cure period under Section 10.1 of this Agreement.
2.6 Late Payment Charge. The Borrower shall pay a late payment charge
-------------------
equal to one-half of one percent of the amount of any payment that is more than
fifteen (15) days past the due date thereof.
SECTION 3.0 PREPAYMENT
- ----------------------
3.1 Voluntary Prepayment of the Line of Credit. The Borrower shall have
------------------------------------------
the right and privilege of prepaying the Line of Credit, in whole or in part, at
any time and from time to time without penalty.
3.2 Effect of Prepayment. Each prepayment of the Line of Credit shall
--------------------
be applied, first to the payment of all accrued and unpaid interest to the date
of prepayment, and the balance shall be applied to the outstanding principal
balance thereof.
4
<PAGE>
SECTION 4.0 COLLATERAL
- -----------------------
The Loan and the Line of Credit Note shall be secured by a pledge of and a
first and prior security interest in not less than 100% of the Bank of the
Ozarks, wca, capital stock and not less than 100% of the Bank of the Ozarks,
nwa, capital stock, whether such capital stock is now owned directly or
indirectly, or hereafter acquired by Borrower.
SECTION 5.0 REPRESENTATIONS AND WARRANTIES
- -------------------------------------------
To induce the Lender to make the Loan provided for herein, the Borrower
represents and warrants unto the Lender (which representations and warranties
will survive the delivery of the Note and the making of the Loan) that:
5.1 Non-Violation. The execution, delivery and performance of this
-------------
Agreement, the borrowings hereunder, and the execution and delivery of the Notes
executed pursuant hereto will not violate any provision of law, or any order of
any court or governmental agency, any provision of any trust agreement,
indenture, agreement or other instrument to which the Borrower or any Subsidiary
Bank is a party, or be in conflict with, result in a breach of, or constitute
(with or without notice and/or lapse of time) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower or any Subsidiary Bank, except as
otherwise expressly granted to Lender pursuant hereto.
5.2 Binding Obligation. This Agreement and the Note, when executed and
------------------
delivered pursuant hereto for value received, will constitute the valid and
legally binding obligation of the Borrower in accordance with their terms
(subject, as to enforcement of remedies, to applicable bankruptcy, moratorium,
or other laws affecting the enforcement of creditors' rights).
5.3 Financial Condition. All financial statements or information
-------------------
furnished to the Lender in connection herewith are, to the best of the
Borrower's knowledge, in all material respects, true and correct and accurately
represent the financial condition and operations of the person or corporation
shown therein including the statements of the Subsidiary Banks furnished
herewith, as of their date, and since such date there has been no material or
adverse changes in the said financial condition or operations.
5.4 Litigation. There is no action, suit or proceeding at law or in
----------
equity, or by or before any governmental instrumentality or other agency, now
pending, or, to the knowledge of the Borrower, threatened against or affecting
the Borrower, the collateral described in Section 5 hereof, or the Subsidiary
Banks which, if adversely determined, would materially impair the right,
capacity, ability or authority of Borrower or the Subsidiary Banks to carry on
business substantially as now conducted, or would materially adversely affect
the condition, financial or otherwise, of the Borrower, or of the Subsidiary
Banks.
5
<PAGE>
5.5 Existing Defaults. Borrower has no knowledge of the existence of any
-----------------
condition or event which would, with or without notice and/or lapse of time,
constitute an Event of Default hereunder.
5.6 Taxes. Except as to the pending tax dispute with the State of
-----
Arkansas for tax years 1992 through 1995, which has been disclosed to Lender and
Lender has agreed has been adequately provided for, the Borrower and the
Subsidiary Banks have filed all required federal, state and local tax returns
and have paid all taxes as shown on such returns as they have become due.
5.7 Priority of Liens. The liens to be provided the Lender pursuant to
-----------------
the provisions of Section 4 and the Security Agreement shall be of such dignity
and priority as may be provided for herein, and there shall hereafter be no
additional lien, charge, or encumbrance at any time existing with respect
thereto without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
5.8 Use of Proceeds. The proceeds of the Loan shall be used exclusively
---------------
as set forth in Section 9 hereof.
5.9 Ownership of Shares. The shares of stock pledged to secure the Loan
-------------------
shall, at the time of delivery to the Lender of certificates evidencing same, be
owned by the Borrower free and clear of any lien, charge, security interest or
restriction. The Borrower shall be the registered owner of not less than 100%
of the common stock of each Subsidiary Bank on the date of Closing, all of which
are validly issued, fully paid and non-assessable.
SECTION 6.0 AFFIRMATIVE COVENANTS
- ----------------------------------
Unless waived by the Lender in writing, Borrower covenants and agrees that
from the date hereof until payment in full of the principal of and interest on
the Note:
6.1 Corporate Existence and Properties. The Borrower will do or cause to
----------------------------------
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights and franchises of both itself and of the Subsidiary
Banks, and comply, in all material respects, with all laws applicable thereto;
and continue to conduct and operate the business of the Subsidiary Banks in
accordance with sound banking practices.
6.2 Financial Reports. The Borrower will furnish or cause to be furnished
-----------------
to the Lender the following:
6.2.1 Within ninety (90) days after each fiscal year of each
Subsidiary Bank, a copy of the Subsidiary Bank's operating and financial
statements, including a copy of the Consolidated Report of Condition and
Income.
6
<PAGE>
6.2.2 Within ten (10) days after their preparation, a copy of all
quarterly call reports, quarterly balance sheets and operating statements
and such other information regarding the operations, properties, capital,
condition and business affairs of each Subsidiary Bank as the Lender may
reasonably request.
6.2.3 Within ninety (90) days after each fiscal year of the Borrower,
a copy of the Borrower's audited consolidated financial statements, with
details of consolidation reflecting the Subsidiary Banks and parent only.
6.2.4 Promptly, from time to time, such other information regarding
the operations, properties, business affairs and conditions, financial or
otherwise, of the Subsidiary Banks or of the Borrower as the Lender may
reasonably request including copies of any examinations conducted by
federal or state bank regulatory agencies, which Lender agrees shall be
furnished to it in accordance with applicable rules and regulations of the
regulatory agency compiling such report.
6.3 Taxes and Other Liens. The Borrower will duly pay and discharge, and
---------------------
cause to be discharged, all taxes, assessments and governmental charges in any
material amount upon it or its properties or upon the Subsidiary Banks or its
property prior to the date on which penalties are attached thereto, and shall
pay all claims for labor, supplies, rent and other obligations which, if unpaid,
might become a lien against the property unless and to the extent only that the
same shall be contested in good faith by appropriate proceedings and adequate
reserves are set aside with respect thereto. The Borrower shall maintain the
collateral provided for herein to secure the Debt free and clear of all liens,
charges and encumbrances of any nature whatsoever except those granted and
conveyed to the Lender pursuant to the terms hereof.
6.4 Expenses. The Borrower will pay all out-of-pocket expenses incurred
--------
by the Lender in connection with the preparation of Loan Documents and taking of
collateral, and in the event of default, in connection with the enforcement of
the rights of the Lender under this Agreement and the Note, including without
limitation reasonable attorney fees owing to Lender counsel by reason thereof.
6.5 Inspections. The Borrower will permit the Lender, and will cause the
-----------
Subsidiary Banks from time to time during reasonable business hours to permit
the Lender to inspect any business properties or premises of the Borrower or the
Subsidiary Banks or inspect books and records relating to any thereof, as well
as those relating to their general business affairs and financial condition.
6.6 Loan Loss Reserves. Borrower shall cause the Subsidiary Banks to
------------------
maintain a reserve for loan losses in an amount acceptable to all applicable
regulatory agencies.
7
<PAGE>
6.7 Financial Requirement of Borrower. The Borrower shall conduct the
---------------------------------
affairs of the Subsidiary Banks in a businesslike and lawful manner, and shall
(based on sound accounting principles consistently applied) cause the Subsidiary
Banks to continuously meet the following required standards:
6.7.1 Borrower shall cause the Subsidiary Banks to maintain a return
on average assets for each year (beginning with calendar year 1997, and
recomputed at the close of each calendar year thereafter) equal to at least
1.0%.
6.7.2 Borrower shall cause each Subsidiary Bank to maintain a ratio
of Capital to assets at a level at all times acceptable to the applicable
bank regulatory authorities but in no event shall such ratio be less than
seven percent (7.0%) at each calendar year-end.
6.7.3 Net charges to the Subsidiary Bank' reserve for loan losses
shall not exceed one percent (1.0%) of Net Loans during any calendar year.
6.8 Compliance with Regulatory Agencies. Borrower shall comply and shall
-----------------------------------
also cause the Subsidiary Banks to comply with all notices, orders, and
memoranda of applicable regulatory agencies. Borrower shall and shall also
cause the Subsidiary Banks to furnish to Lender copies of any cease and desist
orders, memoranda of understanding, or any other regulatory actions or orders
against Borrower, the Subsidiary Banks or any officer, director or shareholder
of same upon Borrower or the Subsidiary Banks' receipt of same.
SECTION 7.0 NEGATIVE COVENANTS
- -------------------------------
From the date hereof until payment in full of the principal of, and
interest on, the Note, the Borrower shall not and shall not allow the Subsidiary
Banks to, without the Lender's prior written consent which consent shall not be
unreasonably withheld:
7.1 Contingent Liabilities. Assume, guarantee, endorse, contingently
----------------------
agree to purchase or to provide funds for the payment of, agree to maintain or
otherwise become liable upon, the obligations for borrowed money of any other
person, firm or corporation, except by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of its
banking business.
7.2 Redemptions and Recapitalization of Borrower or the Subsidiary Banks.
--------------------------------------------------------------------
Make or commit to make any purchase or acquisition of shares of its outstanding
capital stock, with the exception of redemptions of shares of stock required
under the terms of Borrower's Employee Stock Ownership Plan, or in any way to
modify Borrower's capital structure or the capital structure of any Subsidiary
Bank. Borrower may, however, purchase additional stock of the Subsidiary Banks
and issue additional shares of its preferred or common stock.
8
<PAGE>
7.3 Loans and Advances. Other than in the normal course of business, make
------------------
any loans, advances or extensions of credit to, or purchase or make any
commitment to purchase any stock, bonds, notes, debentures or other securities
of, any person, firm, corporation or enterprise except (a) purchases of
certificates of deposit issued by a national bank or otherwise insured by a
federal agency; (b) deposits required by government agencies or public
utilities; (c) obligations fully guaranteed by the U.S. government; (d) tax
exempt securities; and (e) such other financial instruments or securities as the
applicable federal and state regulatory agencies may approve from time to time.
7.4 Consolidation, Merger or Sale. Consolidate with or merge into any
-----------------------------
other corporation or entity, or sell all or a substantial part of its assets.
Lender agrees that Borrower may merge its Subsidiary Banks, provided that the
Net Worth of the surviving bank following the merger transaction is equal to the
combined Net Worth of the Subsidiary Banks. In the event of the merger of the
Subsidiary Banks, Borrower agrees to substitute not less than 100% of the
capital stock of the surviving bank for the Bank Stock pledged to Lender.
Nothing in this Section 7.4 or in the preceding Section 7.3 shall prohibit the
Borrower's acquisition of additional subsidiary banks and the issuance of its
common stock in connection therewith.
7.5 Indebtedness. Incur, create, assume or permit to exist any
------------
indebtedness for borrowed money except Indebtedness evidenced by the Note, if
such indebtedness would cause the aggregate indebtedness of the Borrower,
including Indebtedness evidenced by the Note, to exceed:
Closing through March 31, 1999 60% of Borrower's Net Worth
April 1, 1999 through March 31, 2000 55% of Borrower's Net Worth
April 1, 2000 through March 31, 2001 50% of Borrower's Net Worth
April 1, 2001 through March 31, 2002 45% of Borrower's Net Worth
April 1, 2002 through March 31, 2003 40% of Borrower's Net Worth
The Loan hereunder shall at no time exceed fifty percent (50%) of the Tangible
Book Value of the Collateral.
7.6 Liens. Incur, assume or permit to exist any encumbrance, pledge or
-----
lien against any of its profits, property or assets, except:
a. An encumbrance provided to secure the Loans and Note.
b. Pledges or deposits made in connection with or to secure deposits
of public funds, deposits of trust accounts, workmen's compensation,
unemployment insurance, pensions or other employee benefits, performance
and payment bonds or appeal bonds.
c. Liens of judgments which are discharged and released within thirty
(30) days from their date.
9
<PAGE>
d. Tax liens or mechanics', materialmen's or furnisher's liens which
are being contested in good faith by appropriate proceedings with adequate
reserves set aside therefor.
e. An encumbrance on stock of the Subsidiary Banks not pledged to
Lender under the Security Agreement.
f. Liens securing any indebtedness otherwise permitted pursuant to
Section 7.5 of this Agreement.
7.7 Loan Participations. Borrower will allow Lender to review
-------------------
participations from unaffiliated financial institutions, from time to time, and
Lender, at its discretion, may limit the Subsidiary Banks' purchase of
participations from unaffiliated financial institutions as Lender may deem
advisable under sound banking practices.
7.8 Insider Transactions. Neither Borrower, any corporation, firm or
--------------------
association owned by the Borrower, nor any officer, director, or shareholder of
the foregoing shall hereafter obtain or maintain, directly or indirectly: (a)
any loan or extension of credit from a Subsidiary Bank, if such loan or
extension of credit is criticized by any applicable regulatory agency unless
payment is made in full within ninety (90) days; or (ii) any unsecured loan or
extension of credit in an amount exceeding 3% of the Subsidiary Bank's capital,
as to any one borrower, or 10% when aggregated with all such unsecured credits
extended by the Subsidiary Banks.
SECTION 8.0 CONDITIONS OF LENDING
- ----------------------------------
The obligation of the Lender to make the Loans is and shall be subject to
existence of the following conditions precedent on the date of Closing:
8.1 Warranties. Representations and warranties of the Borrower herein
----------
contained shall be true and accurate in all material respects on and as of the
date of Closing (except to the extent that such representations and warranties
relate solely to an earlier date in which event no material adverse change shall
have occurred with respect thereto).
8.2 No Default. No condition or event shall have occurred or be
----------
continuing which would constitute an Event of Default hereunder or which, after
notice or lapse of time, or both, would constitute an Event of Default
hereunder, or with respect to any indebtedness for borrowed money secured by a
lien or security interest upon any property of Borrower.
8.3 Loan Documents. The Borrower shall deliver, or shall have delivered,
--------------
to the Lender such documents, certificates, instruments, resolutions and
opinions, in form and content required by the Lender, including without
limitation the following:
a. Note of Borrower.
10
<PAGE>
b. This Agreement.
c. The Pledge and Security Agreement.
d. Such financial statements of the Borrower and of the Subsidiary
Banks as the Lender may require.
e. A certificate signed by the Borrower dated the date of Closing
that, to the best of its knowledge no Event of Default or event which might
(with or without the giving of notice and/or lapse of time) mature into an
Event of Default exists or is imminent.
f. Certificates evidencing 27,399 shares of the common stock of the
Bank of the Ozarks, WCA, and 2,340 shares of the common stock of the Bank
of the Ozarks, NWA, together with stock powers signed by the Borrower.
g. Federal Reserve Form U-1 (Statement of Purpose).
h. Corporate resolutions of Borrower authorizing the borrowing
described herein, together with the Secretary's certificate setting forth
the officers and authorized signatories for the Borrower.
i. A Certificate of Existence/Good Standing issued by the Secretary
of State for the state of Arkansas.
j. Copies of the Borrower's and Subsidiary Bank's corporate charters
and bylaws, certified by the respective corporate secretaries as being true
and copies of each.
SECTION 9.0 USE OF PROCEEDS
- ---------------------------
The Borrower covenants, represents and warrants to the Lender that the
proceeds of the Loan shall be used for the refinance of certain existing loans,
making additional capital contributions to the Subsidiary Banks, making
additional capital contributions to other present or future subsidiaries of the
Borrower, financing acquisitions of additional subsidiaries of the Borrower and
for other general corporate purposes.
11
<PAGE>
SECTION 10.0 DEFAULT AND REMEDIES
- -----------------------------------
10. Events of Default. Upon the occurrence of any of the following, and
-----------------
the expiration of applicable periods for notice and cure, there shall be deemed
to have occurred an Event of Default:
10.1.1 Any representation or warranty made herein, or any report,
certificate, financial statement or other instrument furnished in
connection with any of the foregoing, shall prove to be false and
misleading in any material respect; or
10.1.2 Default in payment when due of the principal of or interest on
any promissory note of Borrower to Bank within ten (10) days after the due
date thereof and failure to cure same within ten (10) days from the date on
which notice of default is given by Lender to Borrower; or
10.1.3 Failure to duly observe or perform any covenant, agreement, or
condition to be observed or performed in connection with this Agreement,
any agreement executed herewith as security for the Debt and failure to
cure same within thirty days (30) from the date on which notice of default
is given by Lender to Borrower; or
10.1.4 The Borrower or any Subsidiary Bank shall (i) apply for or
consent to the appointment of a receiver, trustee or liquidator of itself
or its properties or assets; (ii) admit in writing its inability to pay its
debts as they mature; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated a bankrupt or insolvent; or, (v) file a
voluntary petition in bankruptcy or a petition seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation under law or statute, or file an answer admitting the material
allegations of a petition filed against it in any such proceeding; or
10.1.5 An order, judgment or decree shall be entered without the
application, approval or consent of the Borrower or the Subsidiary Banks by
any court of competent jurisdiction approving a petition seeking
reorganization thereof, or of all or a substantial part of its properties
or assets, or a receiver, trustee or liquidator thereof; or
10.1.6 The occurrence of a material adverse change in the financial
condition of the Borrower and the failure to take measures reasonably
demanded by Lender to cure same within thirty days (30) from the date of
notice of same from Lender to Borrower; or
10.1.7 Any Subsidiary Bank shall surrender, forfeit or otherwise lose
its charter as a state chartered bank (except upon the merger of the two
Subsidiary Banks as permitted
12
<PAGE>
hereunder), or shall have any portion of its properties or operations sold
or seized by or at the direction of any regulatory or governmental agency;
or
10.1.8 Failure by the Borrower to take such measures reasonably
demanded by Lender to cure any cease and desist orders or memoranda of
understanding or any other regulatory actions or orders between the
Borrower or any Subsidiary Bank and its regulatory agencies, within thirty
(30) days from the date of written notice of the same from Lender to
Borrower; or
10.1.9 The Borrower shall surrender, forfeit or otherwise lose its
charter, or shall fail to maintain its status as an Arkansas corporation in
good standing, or shall have any portion of its properties or operations
sold or seized by or at the direction of any regulatory or governmental
agency; or
10.1.10 The Borrower shall fail to lawfully continue to be a bank
holding company within the meaning of the Bank Holding Company Act, 12
U.S.C. (S)(S)1841 et seq.
10.1.11 Any event of default in any promissory note or loan agreement
evidencing or governing any additional indebtedness of the Borrower
permitted hereunder.
10.2 Acceleration and Remedies Upon Default. Upon the occurrence of an
--------------------------------------
Event of Default the indebtedness arising hereunder shall at the absolute option
of Lender, become immediately due and payable, or upon the non-performance by
Borrower of any of the agreements or conditions contained in any of the
documents or instruments related to the indebtedness arising hereunder or in
connection herewith, the said Loans and indebtedness shall at the absolute
option of the Lender become immediately due and payable, and in any such event
Lender shall have full power and authority at any time or times thereafter to
exercise all or any one or more of the remedies and shall have all of the rights
of a secured party under the applicable law, including the Uniform Commercial
Code of Tennessee (Code), if applicable, and is hereby authorized im mediately
to sell the whole or any part of the collateral for the indebtedness evidenced
hereby and by the Note or any substitute therefor or additions thereto or at
public or private sale, at the option of Lender without notice of the amounts
due or claimed to be due, in accordance with the provisions of the Code, and to
apply the net proceeds of such sale after deduction of expenses for collection,
sale or delivery to the payment of the indebtedness to Lender specifically
secured hereby and of any other liability or liabilities, whether due or not
due, of Borrower to Lender, returning the surplus, if any to Borrower unless
other disposition thereof is required by said Code. Upon any sale by virtue
hereof, Lender may repurchase, unless otherwise prohibited by said Code, the
whole or any part of the aforesaid collateral discharged from any statutory
right of redemption, equity of redemption exemption from execution, or similar
rights all of which are hereby expressly waived and released. Any requirement
of said Code for reasonable notice shall be met if such notice is mailed,
postage prepaid, to Borrower at the address of Borrower as shown on the records
of Lender at least ten (10) days prior to the time of the sale, disposition or
other event or thing giving rise to the requirement of notice.
13
<PAGE>
10.3 Offset of Deposits. Upon the occurrence of an Event of Default,
------------------
Lender may apply toward payment of the Debt all balances of any deposit accounts
of the Borrower with the Lender then or any time thereafter existing.
SECTION 11.0 MISCELLANEOUS
- ----------------------------
11.1 Closing. Subject to the terms and conditions set forth herein,
-------
closing of the Loan and other matters required herein will take place at the
offices of Lender on or before April 30, 1998.
11.2 Non-Waiver. No omission or delay by the Lender in exercising any
----------
right, remedy or power it may have under this Agreement, the Note, the loan
documents or governing law will impair such right, remedy or power, or be
construed to be a waiver of any default or an acquiescence therein, and any
single or partial exercise of any such right or power will not preclude other or
further exercise thereof or the exercise of any right or power, and no waiver
will be valid unless in writing and signed by the Lender, and then only to the
extent specified. All remedies herein and by law afforded will be cumulative
and available to Lender until the Debt is paid or satisfied in full.
11.3 Binding Effect. Whenever any of the parties to this Agreement are
--------------
referred to, such reference shall be deemed to include the successors, assigns
and personal representatives of said parties, and all covenants by or on behalf
of the Borrower shall bind and inure to the benefit of successors and assigns of
the Lender.
11.4 Notices. Any notice permitted or required by this Agreement shall be
-------
in writing and delivered by hand delivery or by depositing it in the U.S. Mail,
postage prepaid, or by telegram, charges prepaid, addressed to the parties as
follows:
If to Borrower:
George G. Gleason, II
Chairman
Bank of the Ozarks, Inc.
TCBY Tower Building, Suite 3100
425 Capitol Avenue
Little Rock, Arkansas 72201
14
<PAGE>
If to Lender:
Wayne F. Massing
Vice President
Union Planters Bank, N.A.
P.O. Box 387
Memphis, Tennessee 38147
Any party may designate in writing any other person or address in which such
notice or demand shall be delivered and such shall become effective upon receipt
by the other party.
11.5 Expenses of Enforcement. Borrower agrees to pay all reasonable
-----------------------
attorneys' fees and other costs and charges incurred in collection of any
indebtedness arising under this Agreement, in the enforcement of the Bank's
rights hereunder, in the protection and preservation of any property securing
any indebtedness hereunder and in the perfection of any security interest or
lien contemplated hereby and in maintaining the perfected status of the same.
11.6 Headings. Whenever in this Agreement headings are used to denote
--------
paragraphs, such headings shall not be referred to in interpreting the terms
thereof or hereof, but are used merely for convenience.
11.7 Governing Law. This Agreement, the Note and associated documents,
-------------
will be governed by and construed in accordance with the laws of the State of
Tennessee, except with respect to interest which shall be governed by applicable
provisions of federal law.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement as of
the day and year first above written.
UNION PLANTERS BANK, N.A.
By: /s/ WAYNE F. MASSING
-----------------------------
Wayne F. Massing
Vice President
BANK OF THE OZARKS, INC.
By: /s/ GEORGE G. GLEASON, II
-----------------------------
George G. Gleason, II
Chairman
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCORPORATED BY REFERENCE
IN THE QUARTERLY REPORT FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 14,021
<INT-BEARING-DEPOSITS> 10,885
<FED-FUNDS-SOLD> 7,780
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,461
<INVESTMENTS-CARRYING> 51,790
<INVESTMENTS-MARKET> 51,723
<LOANS> 299,505
<ALLOWANCE> (3,822)
<TOTAL-ASSETS> 422,655
<DEPOSITS> 352,312
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,485
<LONG-TERM> 31,065
0
0
<COMMON> 38
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<INTEREST-INVEST> 904
<INTEREST-OTHER> 168
<INTEREST-TOTAL> 7,993
<INTEREST-DEPOSIT> 3,488
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<LOAN-LOSSES> 225
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<EXPENSE-OTHER> 2,924
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<INCOME-PRE-EXTRAORDINARY> 2,102
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 4.83
<LOANS-NON> 1,583
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
