Bank of the Ozarks agrees to participate in bailout program

Little Rock-based Bank of the Ozarks has gained preliminary approval from the U.S. Department of Treasury to participate in the Capital Purchase Program — a component of the federal bailout package designed to inject cash into the nation’s troubled financial markets.

However, bank officials noted that the bank is not in financial trouble.

“Our Company is well capitalized by all applicable regulatory measures, and we have enjoyed strong earnings as evidenced by the record net income and record earnings per share we have achieved in each of the last two quarters,” George Gleason, bank chairman and CEO noted in a statement. “However, we believe participation in the program provides a cost-effective source of capital which may allow us to expand lending, increase investments and take advantage of other opportunities which could be beneficial to our customers and shareholders and contribute to general economic growth.”

Once the Treasury and Bank of the Ozarks agree in full, the bank will issue $75 million of preferred stock which will have a 5 percent per annum dividend rate for five years, and a 9 percent per annum dividend rate thereafter. In addition the Treasury Department will gain rights to purchase approximately 379,811 shares of the banks’ stock at an exercise price of $29.62 per share. These rights expire 10 years after issuance. Shares of Bank of the Ozarks (Nasdaq: OZRK) closed Tuesday at $25.89, up $1.46.

The $75 million capital increase from issuance of the preferred stock would boost the bank’s regulatory capital ratios, giving it more flexibility to pursue loans, leases and investments.

Bank of the Ozarks Inc. is a bank holding company with $3.1 billion in total assets as of Sept. 30, 2008, and owns a state-chartered subsidiary bank with operations in 73 offices including 65 banking offices in 34 communities throughout northern, western and central Arkansas, six Texas banking offices, and loan production offices in Little Rock, Arkansas, and Charlotte, N.C.

Pine Bluff-based Simmons First National Bank is the only other bank operating in the Fort Smith region to announce preliminary approval to participate in the Treasury program.