Bank of the Ozarks, Inc. today announced that net income for the second quarter of 2014 was $26.5 million, a 29.9% increase from $20.4 million for the second quarter of 2013. Diluted earnings per common share for the second quarter of 2014 were $0.34, a 17.2% increase from $0.29 for the second quarter of 2013.

During the last four quarters, the Company has completed three acquisitions including its July 2013 acquisition of The First National Bank of Shelby ("FNB Shelby"), its March 2014 acquisition of Bancshares, Inc. ("Bancshares") and its May 2014 acquisition of Summit Bancorp, Inc. ("Summit"). The Company's results for the second quarter just ended included acquisition-related expenses, net of applicable taxes, of approximately $0.5 million which reduced second quarter diluted earnings per common share by slightly less than $0.01.

For the six months ended June 30, 2014, net income totaled $51.8 million, a 28.2% increase from net income of $40.4 million for the first six months of 2013. Diluted earnings per common share for the first six months of 2014 were $0.68, a 19.3% increase from $0.57 for the first six months of 2013.

The Company's results for the first six months of 2014 included three significant unusual items. First, the Company's acquisition of Bancshares resulted in a tax-exempt bargain purchase gain during the first quarter of $4.7 million. Second, during the first six months of 2014, the Company incurred acquisition-related expenses, net of applicable taxes, of approximately $0.9 million. Third, after entering into an agreement for its newly acquired core banking software, the Company incurred charges in the first quarter, net of applicable taxes, of $3.1 million as a result of providing notices of termination to existing core banking software providers. Collectively, for the first six months of 2014, the net effect of these items added approximately $0.7 million, or approximately $0.01 of diluted earnings per common share.

On June 23, 2014, the Company completed a 2-for-1 stock split, in the form of a stock dividend, effected by issuing one share of common stock for each share of such stock outstanding on June 13, 2014. All share and per share information in this release has been adjusted to give effect to this stock split.

The Company's annualized returns on average assets, average common stockholders' equity and average tangible common stockholders' equity for the second quarter of 2014 decreased to 1.88%, 14.17% and 15.41%, respectively, compared to 2.08%, 15.50% and 15.83%, respectively, for the second quarter of 2013. Annualized returns on average assets, average common stockholders' equity and average tangible common stockholders' equity for the first six months of 2014 decreased to 1.99%, 14.90% and 15.90%, respectively, compared to 2.07%, 15.63% and 15.98%, respectively, for the first six months of 2013. The calculation of the Company's return on average tangible common stockholders' equity and the reconciliation to generally accepted accounting principles ("GAAP") is included in the schedules accompanying this release.

Loans and leases, excluding loans covered by Federal Deposit Insurance Corporation ("FDIC") loss share agreements ("covered loans") and purchased loans not covered by loss share ("purchased non-covered loans"), were $3.17 billion at June 30, 2014, a 29.8% increase from $2.44 billion at June 30, 2013. Including covered loans and purchased non-covered loans, total loans and leases were $4.58 billion at June 30, 2014, a 54.8% increase from $2.96 billion at June 30, 2013.

George Gleason, Chairman and Chief Executive Officer, stated, "We are pleased to report our excellent results for the second quarter and first six months of 2014. While acquisitions have contributed significantly to our growth and profitability in recent years, our ability to organically grow our portfolio of high quality, good yielding loans and leases has been even more important. Our balance of loans and leases outstanding, excluding covered loans and purchased non-covered loans, increased a record $393 million in the quarter just ended and $539 million for the first six months of 2014. Additionally, our unfunded balance of closed loans increased $418 million during the quarter just ended and $624 million for the first six months of 2014, growing to $1.83 billion at June 30, 2014."

Deposits were $4.98 billion at June 30, 2014, a 67.0% increase compared to $2.98 billion at June 30, 2013.

Total assets were $6.30 billion at June 30, 2014, a 55.8% increase compared to $4.04 billion at June 30, 2013.

Common stockholders' equity was $850 million at June 30, 2014, a 60.1% increase from $531 million at June 30, 2013. Tangible common stockholders' equity was $742 million at June 30, 2014, a 42.5% increase from $520 million at June 30, 2013. Book value per common share was $10.67 at June 30, 2014, a 42.5% increase from $7.49 at June 30, 2013. Tangible book value per common share was $9.31 at June 30, 2014, a 26.8% increase from $7.34 at June 30, 2013. The calculations of the company's tangible common stockholders' equity and tangible book value per common share and the reconciliations to GAAP are included in the schedules accompanying this release.

Changes in common stockholders' equity, tangible common stockholders' equity, book value per common share and tangible book value per common share reflect earnings, dividends paid, stock option and stock grant transactions, stock consideration issued in connection with the Company's FNB Shelby and Summit acquisitions, changes in the Company's mark-to-market adjustment for unrealized gains and losses on investment securities available for sale and, for tangible common stockholders' equity and tangible book value per share, changes in intangible assets. In addition, such changes reflect an increase of $4.1 million, or $0.05 per common share, as a result of the reversal during the second quarter of 2014 of a deferred tax asset valuation allowance established with the FNB Shelby acquisition. The Company has revised its initial estimates regarding the expected recovery of acquired assets with built-in losses, specifically the timing and amount of expected charge-offs of purchased non-covered loans. As a result of such revision, the Company concluded that the deferred tax asset valuation allowance of approximately $4.1 million was not necessary. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of changes in circumstances, the Company has recast its third quarter 2013 financial statements, along with all subsequent financial statements, to increase the bargain purchase gain on the FNB Shelby acquisition by $4.1 million to reflect this change in estimate.

The Company's ratio of common stockholders' equity to total assets increased to 13.50% at June 30, 2014, compared to 13.13% at June 30, 2013. Its ratio of tangible common stockholders' equity to total tangible assets decreased to 11.98% at June 30, 2014, compared to 12.90% at June 30, 2013. The calculation of the Company's ratio of tangible common stockholders' equity to total tangible assets and the reconciliation to GAAP is included in the schedules accompanying this release.

NET INTEREST INCOME

Net interest income for the second quarter of 2014 was a record $64.8 million, a 49.1% increase from $43.5 million for the second quarter of 2013. Net interest margin, on a fully taxable equivalent ("FTE") basis, was 5.62% in the second quarter of 2014, a six basis point increase from 5.56% in the second quarter of 2013. Average earning assets were $4.82 billion in the second quarter of 2014, a 46.8% increase from $3.29 billion in the second quarter of 2013.

Net interest income for the first six months of 2014 was $117.2 million, a 33.8% increase from $87.6 million for the first six months of 2013. Net interest margin was 5.55% for the first six months of 2014, a 13 basis point decrease from 5.68% for the first six months of 2013. Average earning assets were $4.45 billion in the first six months of 2014, a 36.6% increase from $3.26 billion in the first six months of 2013.

NON-INTEREST INCOME

Non-interest income for the second quarter of 2014 decreased 8.4% to $17.4 million compared to $19.0 million for the second quarter of 2013. There was no bargain purchase gain in the second quarters of 2014 or 2013. Non-interest income for the first six months of 2014 increased 6.8% to $37.7 million from $35.3 million for the first six months of 2013. Non-interest income for the first six months of 2014 included a tax-exempt bargain purchase gain of $4.7 million on the Bancshares acquisition. There was no bargain purchase gain in the first six months of 2013.

Service charges on deposit accounts increased 30.2% to a record $6.60 million in the second quarter of 2014 compared to $5.07 million in the second quarter of 2013. Service charges on deposit accounts were $12.24 million in the first six months of 2014, a 25.0% increase from $9.80 million in the first six months 2013.

Mortgage lending income decreased 31.5% to $1.13 million in the second quarter of 2014 compared to $1.64 million in the second quarter of 2013, but increased 18.0% compared to $0.95 million in the first quarter of 2014. Mortgage lending income was $2.08 million in the first six months of 2014, a 38.5% decrease from $3.38 million in the first six months of 2013.

Trust income for the second quarter of 2014 increased 57.7% to a record $1.36 million compared to $0.87 million for the second quarter of 2013. Trust income was $2.68 million in the first six months of 2014, a 53.3% increase from $1.75 million in the first six months of 2013.

Accretion/amortization of the Company's FDIC loss share receivable, including amortization of the Company's FDIC clawback payable, resulted in net amortization expense of $0.74 million in the second quarter of 2014 compared to net accretion income of $2.48 million in the second quarter of 2013, and net accretion income of $0.69 million in the first quarter of 2014. For the first six months of 2014, accretion/amortization of the Company's FDIC loss share receivable, including amortization of the Company's FDIC clawback payable, resulted in net amortization expense of $0.05 million, compared to net accretion income of $4.87 million in the first six months of 2013.

Other income from loss share and purchased non-covered loans decreased 1.6% to $3.63 million in the second quarter of 2014 compared to $3.69 million in the second quarter of 2013, but increased 9.6% compared to $3.31 million in the first quarter of 2014. For the first six months of 2014, other income from loss share and purchased non-covered loans was $6.94 million, an increase of 18.8% compared to $5.84 million in the first six months of 2013.

Net gains on sales of other assets decreased to $1.45 million in the second quarter of 2014 compared to $3.11 million in the second quarter of 2013, but increased from $0.97 million in the first quarter of 2014. Net gains on sales of other assets decreased to $2.42 million in the first six months of 2014 compared to $5.08 million in the first six months of 2013.

NON-INTEREST EXPENSE

Non-interest expense for the second quarter of 2014 increased 26.7% to $37.9 million, compared to $29.9 million for the second quarter of 2013. During the second quarter of 2014, the Company incurred pre-tax acquisition-related expenses of approximately $0.8 million. There were no acquisition-related expenses in the second quarter of 2013. The Company's efficiency ratio (non-interest expense divided by the sum of net interest income FTE and non-interest income) for the second quarter of 2014 decreased to 44.6% compared to 46.3% for the second quarter of 2013 and 49.8% in the first quarter of 2014.

Non-interest expense for the first six months of 2014 was $75.3 million, a 27.4% increase from $59.1 million for the first six months of 2013. During the first six months of 2014, the Company incurred pre-tax non-interest expense of $5.0 million as a result of providing notices to terminate existing core banking software contracts and approximately $1.5 million of acquisition-related expenses. There were no software termination charges or acquisition-related expenses in the first six months of 2013. The Company's efficiency ratio for the first six months of 2014 increased to 47.1% compared to 46.5% for the first six months of 2013.

ASSET QUALITY, CHARGE-OFFS AND ALLOWANCE

Loans, repossessions and foreclosed assets covered by FDIC loss share agreements, along with the related FDIC loss share receivable, are presented in the Company's financial reports with a carrying value equal to the net present value of expected future proceeds. The carrying value of covered loans decreased to $276 million at June 30, 2014, compared to $481 million at June 30, 2013. The carrying value of foreclosed assets covered by loss share decreased to $36 million at June 30, 2014, compared to $46 million at June 30, 2013. The carrying value of the FDIC loss share receivable decreased to $51 million at June 30, 2014, compared to $113 million at June 30, 2013.

Purchased non-covered loans include a small volume of non-covered loans acquired in FDIC-assisted acquisitions and loans acquired in non FDIC-assisted acquisitions. Purchased non-covered loans that contain evidence of credit deterioration on the date of purchase are initially recorded at fair value and are presented in the Company's financial reports with a carrying value equal to the net present value of expected future proceeds. Other purchased non-covered loans are initially recorded at fair value on the date of purchase and are presented in the Company's financial reports at their initial fair value, adjusted for subsequent advances, pay downs, amortization or accretion of any premium or discount on purchase, charge-offs and any other adjustments to carrying value. The carrying value of purchased non-covered loans increased to $1.13 billion at June 30, 2014, compared to $31 million at June 30, 2013 and $489 million at March 31, 2014.

Excluding covered loans and purchased non-covered loans, nonperforming loans and leases as a percent of total loans and leases decreased to 0.58% at June 30, 2014, compared to 0.66% at June 30, 2013, but increased compared to 0.42% at March 31, 2014.

Excluding covered loans, purchased non-covered loans and foreclosed assets covered by loss share, nonperforming assets as a percent of total assets decreased to 0.62% at June 30, 2014, compared to 0.66% at June 30, 2013, but increased compared to 0.57% at March 31, 2014.

Excluding covered loans and purchased non-covered loans, the Company's ratio of loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases decreased to 0.63% at June 30, 2014, compared to 0.74% at June 30, 2013 and 0.75% at March 31, 2014.

The Company's net charge-offs increased to $2.5 million for the second quarter of 2014, including $1.4 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.5 million for covered loans. The Company's net charge-offs were $1.7 million for the second quarter of 2013, including $0.6 million for non-purchased loans and leases, essentially none for purchased non-covered loans and $1.1 million for covered loans. Net charge-offs for covered loans are reported net of adjustments to applicable FDIC loss share receivable and FDIC clawback payable amounts.

The Company's annualized net charge-off ratio for its non-purchased loans and leases increased to 0.19% for the second quarter of 2014, compared to 0.12% for the second quarter of 2013 and 0.03% for the first quarter of 2014. The Company's annualized net charge-off ratio for its purchased non-covered loans increased to 0.28% for the second quarter of 2014, compared to 0.00% for both the second quarter of 2013 and the first quarter of 2014. The Company's annualized net charge-off ratio for its covered loans was 0.72% for the second quarter of 2014, compared to 0.83% for the second quarter of 2013 and 0.25% for the first quarter of 2014. The Company's annualized net charge-off ratio for all loans and leases was 0.25% for the second quarter of 2014, compared to 0.25% for the second quarter of 2013 and 0.05% for the first quarter of 2014.

The Company's net charge-offs for the first six months of 2014 decreased to $2.9 million, including $1.6 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.7 million for covered loans. The Company's net charge-offs for the first six months of 2013 were $4.8 million, including $1.7 million for non-purchased loans and leases, essentially none for purchased non-covered loans and $3.1 million for covered loans.

The Company's annualized net charge-off ratio for its non-purchased loans and leases decreased to 0.11% for the first six months of 2014 compared to 0.15% for the first six months of 2013. The Company's annualized net charge off ratio for its purchased non-covered loans increased to 0.19% for the first six months of 2014 compared to 0.00% for the first six months of 2013. The Company's annualized net charge-off ratio for its covered loans decreased to 0.47% for the first six months of 2014 compared to 1.15% for the first six months of 2013. The Company's annualized net charge-off ratio for all loans and leases decreased to 0.16% for the first six months of 2014 compared to 0.35% for the first six months of 2013.

For the second quarter of 2014, the Company's provision for loan and lease losses increased to $5.6 million, including $4.5 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.5 million for covered loans. For the second quarter of 2013, the Company's provision for loan and lease losses was $2.7 million, including $1.6 million for non-purchased loans and leases, none for purchased non-covered loans and $1.1 million for covered loans. For the first six months of 2014, the Company's provision for loan and lease losses increased to $6.9 million, including $5.6 million for non-purchased loans and leases, $0.6 million for purchased non-covered loans and $0.7 million for covered loans. For the first six months of 2013, the Company's provision for loan and lease losses was $5.4 million, which included $2.3 million for non-purchased loans and leases, none for purchased non-covered loans and $3.1 million for covered loans.

The Company's allowance for loan and lease losses was $47.0 million, or 1.48% of total loans and leases, excluding covered loans and purchased non-covered loans, at June 30, 2014, compared to $39.4 million, or 1.61% of total loans and leases, excluding covered loans and purchased non-covered loans, at June 30, 2013, and $43.9 million, or 1.58% of total loans and leases, excluding covered loans and purchased non-covered loans, at March 31, 2014.