EX-99.2 4 d890765dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

On February 10, 2015, Bank of the Ozarks, Inc. (“Ozarks”) completed its acquisition of Intervest Bancshares Corporation (“Intervest”) and its wholly-owned bank subsidiary, Intervest National Bank, pursuant to the previously announced definitive agreement and plan of merger dated July 31, 2014 (the “Merger Agreement”). Pursuant to the Merger Agreement, Intervest merged with and into Ozarks and Intervest National Bank merged with and into Ozarks’ wholly-owned bank subsidiary, Bank of the Ozarks, effective February 10, 2015 (collectively, the “Merger”).

Pursuant to the terms of the Merger Agreement, each share of Intervest common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.3014 of a share of Ozarks’ common stock. For each fractional share that would have otherwise been issued, Ozarks paid cash in an amount equal to such fraction of a share multiplied by $33.88, which was the average closing sale price of Ozarks’ common stock, as quoted on the NASDAQ Global Select Market, for the ten consecutive trading days ending on February 3, 2015. As a result of the closing of the Merger, Ozarks issued 6,637,243 shares of common stock to former holders of Intervest common stock.

The following unaudited pro forma combined financial information has been prepared using the acquisition method of accounting, giving effect to Ozarks’ completed acquisitions of Summit Bancorp, Inc., or Summit, which closed on May 16, 2014, and the acquisition of Intervest, which closed on February 10, 2015, including pro forma assumptions and adjustments related to the Summit and Intervest acquisitions, as described in the accompanying notes to the unaudited pro forma combined financial information. The unaudited pro forma combined balance sheet combines the historical financial information of Ozarks and Intervest as of December 31, 2014, and assumes that the Intervest merger was completed on that date. The unaudited pro forma combined statement of income for the year ended December 31, 2014 gives effect to the Summit and Intervest acquisitions as if each transaction had been completed on January 1, 2014.

The following unaudited pro forma combined financial information is provided for informational purposes only. The unaudited pro forma combined financial information is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined financial information and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined financial information should be read together with:

 

    the accompanying notes to the unaudited pro forma combined financial information;

 

    Ozarks’ separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in Ozarks’ Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on February 27, 2015; and

 

    Intervest’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in Exhibit 99.1 to Ozarks’ Current Report on Form 8-K filed on the date hereof.


Unaudited Pro Forma Combined Balance Sheet

As of December 31, 2014

 

     Ozarks
Historical
    Intervest
Historical
    Intervest
Pro forma
Adjustments
    Pro forma
Combined
 
     (Dollars in thousands)  

Assets

        

Cash and due from banks

   $ 147,751      $ 109,684      $ (7 )(a)    $ 257,428   

Interest earning deposits

     2,452        3,065        —          5,517   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents

  150,203      112,749      (7   262,945   

Investment securities

  839,321      215,950      321 (b)    1,055,592   

Loans and leases, including purchased loans

  5,127,817      1,133,068      (33,868 )(c)    6,227,017   

Allowance for loan and lease losses

  (52,918   (25,204   25,204 (d)    (52,918
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loans and leases

  5,074,899      1,107,864      (8,664   6,174,099   

Premises and equipment, net

  273,591      4,414      2,256 (e)    280,261   

Foreclosed assets

  37,775      2,350      (1,710 )(c)    38,415   

Accrued interest receivable

  20,192      4,409      —        24,601   

Bank owned life insurance

  182,052      —        —        182,052   

Goodwill

  78,669      —        44,801 (f)    123,470   

Other intangible assets, net

  26,907      —        4,881 (g)    31,788   

Current and deferred income taxes

  48,438      13,107      7,874 (h)    69,419   

Other, net

  34,452      5,118      (2,741 )(i)    36,829   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

$ 6,766,499    $ 1,465,961    $ 47,011    $ 8,279,471   
  

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Stockholders' Equity

Deposits:

Demand non-interest bearing

$ 1,145,454    $ 29,063    $ —        1,174,517   

Savings and interest bearing transaction

  2,892,989      358,916      —        3,251,905   

Time

  1,457,939      805,791      22,211 (j)    2,285,941   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total deposits

  5,496,382      1,193,770      22,211      6,712,363   

Repurchase agreements

  65,578      —        —        65,578   

Other borrowings

  190,855      —        —        190,855   

Subordinated debentures

  64,950      56,702      (4,463 )(k)    117,189   

Accrued interest payable and other liabilities

  36,892      5,918      358 (l)    43,168   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  5,854,657      1,256,390      18,106      7,129,153   
  

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders' equity:

Common stock

  799      22,022      66 (a)    865   
  (22,022 )(m) 

Additional paid-in capital

  324,354      84,793      238,410 (a)    562,764   
  (84,793 )(m) 

Retained earnings

  571,454      103,330      (103,330 )(m)    571,454   

Accumulated other comprehensive income

  14,132      (574   574 (m)    14,132   

Treasury stock, at cost

  (2,349   —        —        (2,349
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders' equity before noncontrolling interest

  908,390      209,571      28,905      1,146,866   

Noncontrolling interest

  3,452      —        —        3,452   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders' equity

  911,842      209,571      28,905      1,150,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders' equity

$ 6,766,499    $ 1,465,961    $ 47,011    $ 8,279,471   
  

 

 

   

 

 

   

 

 

   

 

 

 


Unaudited Pro Forma Combined Income Statement

For the Year Ended December 31, 2014

 

     Ozarks
Historical
    Summit
Historical (1)
    Summit
Pro forma
Adjustments
    Summit
Historical and
Pro forma
Adjustments
    Ozarks
and Summit
Pro forma
Combined
    Intervest
Historical
    Intervest
Pro forma
Adjustments
    Pro forma
Combined
 
     (Dollars in thousands, except per share data)  

Interest income:

                

Loans and leases, including purchased loans

   $ 260,779      $ 13,685      $ 3,089 (2)    $ 16,774      $ 277,553      $ 58,327      $ 7,923 (n)    $ 343,803   

Investment securities

     30,614        2,757        —          2,757        33,371        4,373        —          37,744   

Other

     56        76        —          76        132        59        —          191   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

  291,449      16,518      3,089      19,607      311,056      62,759      7,923      381,738   

Interest expense:

Deposits

  8,566      1,842      (975 )(3)    867      9,433      18,369      (9,095 )(o)    18,707   

Repurchase agreements

  54      11      —        11      65      —        —        65   

Other borrowings

  10,642      3,539      (394 )(4)    3,145      13,787      —        —        13,787   

Subordinated debentures

  1,693      —        —        —        1,693      1,578      560 (p)    3,831   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

  20,955      5,392      (1,369   4,023      24,978      19,947      (8,535   36,390   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

  270,494      11,126      4,457      15,583      286,077      42,812      16,458      345,347   

Provision for loan and lease losses

  16,915      —        —        —        16,915      (2,500   —        14,415   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision

  253,579      11,126      4,457      15,583      269,162      45,312      16,458      330,932   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest income

Service charges on deposit accounts

  26,609      1,389      —        1,389      27,998      385      —        28,383   

Mortgage lending income

  5,187      —        —        —        5,187      —        —        5,187   

Trust income

  5,592      151      —        151      5,743      —        —        5,743   

Bank owned life insurance income

  5,184      332      —        332      5,516      —        —        5,516   

Amortization of FDIC loss share payable, net of amortization of FDIC clawback payable

  (611   —        —        —        (611   —        —        (611

Other income from purchased loans, net

  14,803      —        —        —        14,803      —        —        14,803   

Net gains (losses) on investment securities

  144      348      —        348      492      301      —        793   

Gains (losses) on sales of other assets

  6,023      (1   —        (1   6,022      —        —        6,022   

Gain on merger and acquisition transaction

  4,667      —        —        —        4,667      —        —        4,667   

Other

  17,285      376      —        376      17,661      5,437      —        23,098   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

  84,883      2,595      —        2,595      87,478      6,123      —        93,601   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-interest expense:

Salaries and employee benefits

  76,884      10,799      —        10,799      87,683      10,358      —        98,041   

Net occupancy and equipment

  24,102      2,054      (75 )(5)    1,979      26,081      2,134      —        28,215   

Other operating expenses

  65,029      5,040      959 (6)    5,999      71,028      7,069      976 (q)    79,073   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest expenses

  166,015      17,893      884      18,777      184,792      19,561      976      205,329   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

  172,447      (4,172   3,573      (599   171,848      31,874      15,482      219,204   

Provision for income taxes

  53,859      (2,367   1,379 (7)    (988   52,871      14,199      5,976 (r)    73,046   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  118,588      (1,805   2,194      389      118,977      17,675      9,506      146,158   

Net income attributable to noncontrolling interest

  18      —        —        —        18      —        —        18   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

$ 118,606    $ (1,805 $ 2,194    $ 389    $ 118,995    $ 17,675    $ 9,506    $ 146,176   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share:

Earnings (loss) per share

$ 1.53    $ (0.29 $ 1.49    $ 0.80    $ 1.69   

Weighted average shares outstanding (thousands)

  77,538      6,138      79,700      22,016      86,337   

Diluted earnings per common share:

Earnings (loss) per share

$ 1.52    $ (0.29 $ 1.48    $ 0.80    $ 1.68   

Weighted average shares outstanding (thousands)

  78,060      6,205      80,222      22,231      86,859   


Notes to Unaudited Pro Forma Combined Financial Information

As of and for the Year Ended December 31, 2014

 

(a) This represents the merger consideration of $238.5 million consisting of 6,637,243 shares of common stock (plus cash in lieu of fractional shares).
(b) This adjustment reflects the fair value adjustment based on Ozarks’ pricing of the acquired investment securities portfolio.
(c) This adjustment represents Ozarks' estimate of the necessary writedown of Intervest's loan portfolio and foreclosed assets to estimated fair value. The estimated purchase accounting adjustment for the acquired loan portfolio is comprised of approximately $9.0 million of non-accretable credit adjustments and approximately $24.9 million of accretable interest rate adjustments. The estimated purchase accounting adjustment of approximately $1.7 million for the acquired foreclosed assets consists entirely of non-accretable adjustments.
(d) This adjustment represents the elimination of Intervest's allowance for loan losses.
(e) This adjustment reflects the fair value adjustment based on Ozarks’ evaluation of the premises and equipment acquired.
(f) This adjustment represents the purchase price allocation for Intervest, assuming the transaction closed on December 31, 2014, and is calculated as follows (in thousands):

 

Total purchase price

$ 238,483   

Less: equity at book value

  (209,571

Elimination of allowance for loan losses

  (25,204

Current and deferred income taxes

  (7,874

Allocated to:

Investment securities

  (321

Loans and foreclosed assets

  35,578   

Premises and equipment, net

  (2,256

Core deposit intangible

  (4,881

Other assets

  2,741   

Time deposits

  22,211   

Subordinated debentures

  (4,463

Accrued interest payable and other liabilities

  358   
  

 

 

 

Goodwill

$ 44,801   
  

 

 

 

 

(g) This adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition.
(h) This adjustment includes current and deferred income tax assets and liabilities recorded to reflect the differences in the carrying values of the acquired assets and the assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes.
(i) This adjustment represents the write-off of certain other assets to estimated fair value.
(j) This adjustment represents the estimated write-up of assumed time deposits to reflect a current market rate of interest.
(k) This adjustment reflects the fair value adjustment of these assumed liabilities based on a valuation of such instruments by an independent, third party valuation firm to reflect a current market rate of interest.


(l) This adjustment reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the acquisition of Intervest.
(m) This adjustment represents the elimination of the historical equity of Intervest.
(n) This adjustment represents Ozarks' estimate of the expected accretion that would have been recorded in 2014 assuming the Intervest merger transaction closed on January 1, 2014 and using a weighted average maturity of approximately 4.7 years. The estimated accretion adjustments are approximately $7.9 million in year 1, approximately $6.1 million in year 2, approximately $4.7 million in year 3, approximately $3.1 million in year 4, approximately $1.7 million in year 5 and approximately $1.4 million thereafter.
(o) This adjustment represents Ozarks' estimate of the expected accretion that would have been recorded in 2014 assuming the Intervest merger transaction closed on January 1, 2014 and using a weighted-average maturity of approximately 2.1 years. The estimated accretion adjustments are approximately $9.1 million in year 1, approximately $7.0 million in year 2, approximately $3.6 million in year 3, approximately $2.0 million in year 4, approximately $0.3 million in year 5 and approximately $0.2 million thereafter.
(p) This adjustment represents Ozarks' estimate of the expected amortization of the fair value adjustment to the subordinated debentures that would have been recorded in 2014 assuming the Intervest merger transaction closed on January 1, 2014. The fair value adjustment will be amortized on a straight-line basis over the projected holding period of eight years.
(q) This represents the expected amortization during 2014 of the core deposit intangible assuming the transaction closed on January 1, 2014. The estimated useful life of the acquired intangible asset is estimated to be five years.
(r) This represents income tax expense on the pro forma adjustments at Ozarks' statutory federal and state income tax rate of 38.6%.

 

(1) Includes the historical results of operations for Summit from January 1, 2014 through May 16, 2014, the date the Summit merger transaction closed.
(2) This adjustment represents Ozarks' estimate of the accretion on the acquired loan portfolio of Summit that would have been recorded during 2014 assuming the Summit merger transaction closed on January 1, 2014.
(3) This adjustment represents Ozarks' estimate of the accretion on the assumed time deposits from Summit that would have been recorded during 2014 assuming the Summit merger transaction closed on January 1, 2014.
(4) This adjustment represents the estimated amount of accretion on Federal Home Loan Bank of Dallas advances assumed from Summit that would have been recorded in 2014 assuming the Summit merger transaction closed on January 1, 2014.
(5) This adjustment represents the estimated decrease in depreciation and amortization expense during 2014 assuming the Summit merger transaction closed on January 1, 2014.
(6) This represents the amortization of the core deposit intangible during 2014 assuming the Summit merger transaction closed on January 1, 2014.
(7) This represents income tax expense on the pro forma adjustments at Ozarks' statutory federal and state income tax rate of 38.6%.