Bank of the Ozarks (OZRK)

Income Taxes

The provision for income taxes was $2.5 million for the first quarter of 2009 compared to $2.9 million for the same period in 2008. The effective income tax rate was 19.7% for the first quarter of 2009 compared to 27.2% for the first quarter of 2008. The increase in the Company’s tax-exempt income, principally as a result of the significant increase in investment securities, both in volume and as a percentage of earning assets, which are exempt from federal and/or state income taxes, was the primary factor in the decrease in the effective tax rate in the first quarter of 2009 compared to the same period in 2008.

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Income Taxes

The Company’s provision for income taxes was $9.9 million for the year ended December 31, 2008 compared to $14.4 million in 2007 and $13.4 million in 2006. Its effective income tax rates were 22.2%, 31.3% and 29.7%, respectively, for 2008, 2007 and 2006. The decrease in the effective tax rate of 910 bps in 2008 compared to 2007 was due primarily to (i) the significant increase, both in volume and as a percentage of earning assets, in investment securities which are exempt from federal and/or state income taxes and (ii) the $2.1 million of non-taxable income from death benefits on BOLI in 2008 compared to none in 2007. The increase in the effective tax rate of 160 bps in 2007 compared to 2006 was due primarily to a decline in tax-exempt investment securities in both volume and as a percentage of earning assets. The effective tax rates were also affected by various other factors including other non-taxable income and non-deductible expenses.

Income Taxes

SIZE="2">The Company’s provision for income taxes was $9.9 million for the year ended December 31, 2008 compared to $14.4 million in 2007 and $13.4 million in 2006. Its effective income tax rates were 22.2%, 31.3% and 29.7%, respectively,
for 2008, 2007 and 2006. The decrease in the effective tax rate of 910 bps in 2008 compared to 2007 was due primarily to (i) the significant increase, both in volume and as a percentage of earning assets, in investment securities which are
exempt from federal and/or state income taxes and (ii) the $2.1 million of non-taxable income from death benefits on BOLI in 2008 compared to none in 2007. The increase in the effective tax rate of 160 bps in 2007 compared to 2006 was due
primarily to a decline in tax-exempt investment securities in both volume and as a percentage of earning assets. The effective tax rates were also affected by various other factors including other non-taxable income and non-deductible expenses.

Income Taxes

The provision for income taxes was $3.3 million for the third quarter and $9.3 million for the first nine months of 2008 compared to $3.9 million for the third quarter and $11.0 million for the first nine months of 2007. The effective income tax rate was 26.5% for the third quarter and 26.8% for the first nine months of 2008 compared to 31.5% for the third quarter and 31.4% for the first nine months of 2007. The increase in the Company’s tax-exempt income, principally as a result of purchasing tax-exempt securities beginning in late February 2008 and continuing through September 2008, was the primary factor in the decrease in the effective tax rates as compared to the same periods in 2007. Income exempt from federal and, in some cases, state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The provision for income taxes was $3.1 million for the second quarter and $6.0 million for the first six months of 2008 compared to $3.7 million for the second quarter and $7.2 million for the first six months of 2007. The effective income tax rate was 26.5% for the second quarter and 26.9% for the first six months of 2008 compared to 31.4% for both the second quarter and first six months of 2007. The increase in the Company’s tax-exempt income, principally as a result of purchasing tax-exempt securities beginning in late February 2008 and continuing through June 2008, was the primary factor in the decrease in the effective tax rates as compared to the same periods in 2007. Income exempt from federal, and in some cases state, income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The provision for income taxes was $2.9 million for the first quarter of 2008 compared to $3.4 million for the same period in 2007. The effective income tax rate was 27.2% for the first quarter 2008 compared to 31.4% for the first quarter of 2007. The increase in the Company’s tax-exempt income, principally as a result of purchasing tax-exempt securities during the first quarter of 2008, was the primary factor in the decrease in the effective tax rate for the first quarter of 2008 compared to the same period in 2007. Income exempt from federal and, in some cases, state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The Company’s provision for income taxes was $14.4 million for the year ended December 31, 2007 compared to $13.4 million in 2006 and $14.0 million in 2005. Its effective income tax rates were 31.3%, 29.7% and 30.7%, respectively, for 2007, 2006 and 2005. The increase in the effective tax rate of 160 bps in 2007 compared to 2006 was due primarily to a decline in investment securities which are exempt from state income taxes or both federal and state income taxes. During 2007 such tax-exempt investment securities declined, both in absolute dollar volume and as a percentage of earning assets. The decline in effective tax rate of 100 bps in 2006 compared to 2005 was due primarily to an increase in the amount of such tax-exempt investment securities during 2006 compared to 2005. The effective tax rates were also affected by various other factors including the levels of BOLI and other non-taxable income and non-deductible expenses. Additionally, the effective tax rates were affected by the impact of certain tax credit investments, which reduced combined federal and state income taxes by $0.4 million in 2007, $0.3 million in 2006 and $0.2 million in 2005.

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Income Taxes

FACE="Times New Roman" SIZE="2">The Company’s provision for income taxes was $14.4 million for the year ended December 31, 2007 compared to $13.4 million in 2006 and $14.0 million in 2005. Its effective income tax rates were 31.3%, 29.7%
and 30.7%, respectively, for 2007, 2006 and 2005. The increase in the effective tax rate of 160 bps in 2007 compared to 2006 was due primarily to a decline in investment securities which are exempt from state income taxes or both federal and state
income taxes. During 2007 such tax-exempt investment securities declined, both in absolute dollar volume and as a percentage of earning assets. The decline in effective tax rate of 100 bps in 2006 compared to 2005 was due primarily to an increase in
the amount of such tax-exempt investment securities during 2006 compared to 2005. The effective tax rates were also affected by various other factors including the levels of BOLI and other non-taxable income and non-deductible expenses.
Additionally, the effective tax rates were affected by the impact of certain tax credit investments, which reduced combined federal and state income taxes by $0.4 million in 2007, $0.3 million in 2006 and $0.2 million in 2005.

Income Taxes

The provision for income taxes was $3.9 million for the third quarter and $11.0 million for the first nine months of 2007 compared to $3.2 million for the third quarter and $10.2 million for the first nine months of 2006. The effective income tax rate was 31.5% for the third quarter and 31.4% for the first nine months of 2007 compared to 28.5% for the third quarter and 28.7% for the first nine months of 2006. A reduction in the Company’s tax-exempt income, primarily as a result of selling a portion of its tax-exempt securities during 2006 and the first quarter of 2007, contributed to the increase in the effective tax rates for the third quarter and first nine months of 2007 compared to the same periods in 2006. Income exempt from both federal and state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The provision for income taxes was $3.7 million for the second quarter and $7.2 million for the first six months of 2007 compared to $3.5 million for the second quarter and $7.0 million for the first six months of 2006. The effective income tax rate was 31.4% for both the second quarter and first six months of 2007 compared to 30.6% for the second quarter and 30.1% for the first six months of 2006. The decline in the Company’s tax-exempt income, primarily as a result of selling a portion of its tax-exempt securities during 2006 and the first quarter of 2007, contributed to the increase in the effective tax rates for the second quarter and first six months of 2007 compared to the same periods in 2006. Income exempt from both federal and state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The provision for income taxes was $3.4 million for the first quarter of 2007 compared to $3.5 million for the same period in 2006. The effective income tax rate was 31.4% for the first quarter of 2007 compared to 29.7% for the first quarter of 2006. The decline in the Company’s tax exempt income, primarily as a result of selling a portion of its tax-exempt securities during 2006 and the first quarter of 2007, contributed to the increase in the effective tax rates for the first quarter of 2007 compared to the same period in 2006. Income exempt from both federal and state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes but are subject to federal income tax.

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Income Taxes

The Company’s provision for income taxes was $13.4 million for the year ended December 31, 2006 compared to $14.0 million in 2005 and $12.0 million in 2004. Its effective income tax rates were 29.7%, 30.7% and 31.7%, respectively, for 2006, 2005 and 2004. The decline in the effective tax rates of 97 bps in 2006 compared to 2005 and 102 bps in 2005 compared to 2004 is due primarily to increases in investment securities which are exempt from state income taxes or both federal and state income taxes in both absolute dollar and as a percentage of earning assets during 2006 compared to 2005 and during 2005 compared to 2004. The effective tax rates were also affected by various other factors including the impact of certain tax credit investments, which reduced combined federal and state income taxes by $0.3 million in 2006, $0.2 million in 2005 and $0.7 million in 2004.

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Income Taxes

The provision for income taxes was $3.2 million for the third quarter and $10.2 million for the first nine months of 2006 compared to $3.5 million and $10.5 million, respectively, for the same periods in 2005. The effective income tax rate was 28.5% for the third quarter and 28.7% for the first nine months of 2006 compared to 30.1% for the third quarter and 31.2% for the first nine months of 2005. Growth in the Company’s tax exempt income contributed to the decline in the effective tax rates for the third quarter and first nine months of 2006 compared to the same periods in 2005. Income exempt from both federal and state income taxes includes earnings on certain investment securities, loans and leases with state and political subdivisions, increases in the cash surrender value of BOLI and returns on an investment in a low income housing limited liability company. Certain U.S. government agency securities are exempt from state income taxes and have increased during 2006 compared to 2005.

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Income Taxes

The provision for income taxes was $3.5 million for the second quarter and $7.0 million for the first six months of 2006 compared to $3.5 million and $7.0 million, respectively, for the same periods in 2005. The effective income tax rate was 30.6% for the second quarter and 30.1% for the first six months of 2006 compared to 31.2% for the second quarter and 31.8% for the first six months of 2005. Growth in the Company’s municipal securities investment portfolio, which is generally exempt from federal income taxes and portions of which are exempt from state income taxes, was a significant contributor to the decline in the Company’s effective tax rates for the second quarter and first six months of 2006 compared to the same periods of 2005.

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Income Taxes

The provision for income taxes was $3.5 million for both the first quarter of 2006 and the first quarter of 2005. The effective income tax rate was 29.7% for the first quarter of 2006 compared to 32.4% for the first quarter of 2005. Growth in the Company’s municipal securities investment portfolio, which is generally exempt from both federal and state income taxes, was the primary contributor to this decline and accounted for a decrease in the effective tax rate of approximately 310 bps for the first quarter of 2006 compared with the same period in 2005.

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Income Taxes

The Company’s provision for income taxes was $14.0 million for the year ended December 31, 2005 compared to $12.0 million in 2004 and $10.1 million in 2003. Its effective income tax rates were 30.7%, 31.7% and 33.3%, respectively, for 2005, 2004 and 2003.

The decline in the effective tax rate of 102 bps in 2005 compared with 2004, and the decline in the effective tax rate of 160 bps in 2004 compared with 2003 are primarily a result of the following factors. First, the Company has increased its municipal investment securities portfolio, which is exempt from federal and state taxes, in both absolute dollar amount and as a percentage of earning assets during 2005 compared with 2004 and during 2004 compared with 2003. This accounted for a decline in the effective tax rate of approximately 207 bps for 2005 compared to 2004 and approximately 192 bps for 2004 compared to 2003. Second, certain tax credit investments impacted the Company’s effective tax rates. These investments generated tax benefits which reduced combined federal and state income taxes by $235,000 in 2005, $712,000 in 2004 and $556,000 in 2003. The reduced level of such benefits in 2005 accounted for an increase in the effective tax rate of approximately 156 bps in 2005 compared to 2004. The impact of such tax credit investments on the Company’s 2004 effective tax rate compared to 2003 was not significant. The Company incurred pretax impairment charges of $191,000 in 2005, $424,000 in 2004 and $320,000 in 2003 associated with these investments.

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Income Taxes

The provision for income taxes was $3.5 million for the third quarter and $10.5 million for the first nine months of 2005 compared to $3.1 million and $8.9 million, respectively, for the same periods in 2004. The effective income tax rate was 30.1% for the third quarter and 31.2% for the first nine months of 2005 compared to 31.7% for the third quarter and 32.1% for the first nine months of 2004. Growth in the Company’s municipal securities investment portfolio, which is generally exempt from both federal and state income taxes, is the primary reason for these declines in effective tax rate for both the third quarter and nine months ended September 30, 2005 compared with the same periods in 2004.

The Company has made certain investments resulting in federal and state income tax credits and other adjustments to the Company’s state and federal income tax expense in 2005 and 2004. The Company’s aggregate state and federal income tax expense was reduced by $53,000 for the third quarter and $159,000 for the nine months ended September 30, 2005 and its aggregate federal and state income tax expense for the third quarter and the nine months ended September 30, 2004 was reduced by $139,000 and $465,000, respectively, as a result of these investments. These benefits were partially offset by related impairment charges of $48,000 during the third quarter and $143,000 during the nine months ended September 30, 2005, and $114,000 during the third quarter and $290,000 during the nine months ended September 30, 2004. Such impairment charges were recognized in order to reduce the carrying value of these investments to estimated fair value.

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Income Taxes

The provision for income taxes was $3.5 million for the second quarter and $7.0 million for the first six months of 2005 compared to $3.0 million and $5.8 million, respectively, for the same periods in 2004. The effective income tax rate was 31.2% for the second quarter and 31.8% for the first six months of 2005 compared to 32.5% for the second quarter and 32.3% for the first six months of 2004. The Company’s effective tax rate declined for both the second quarter and six months ended June 30, 2005 compared with the same periods in 2004. Growth in the Company’s municipal securities investment portfolio, which is generally exempt from both federal and state income taxes, is the primary reason for this decline in effective tax rate.

The Company has made certain investments resulting in federal and state income tax credits and other adjustments to the Company’s state and federal income tax expense in 2005 and 2004. The Company’s aggregate state and federal income tax expense was reduced by $89,000 for the second quarter and $106,000 for the six months ended June 30, 2005 and its aggregate federal and state income tax expense for the second quarter and six months ended June 30, 2004 was reduced by $161,000 and $304,000, respectively, as a result of these investments. These benefits were partially offset by related impairment charges of $82,000 during the second quarter and $96,000 during the six months ended June 30, 2005, and $93,000 during the second quarter and $176,000 during the six months ended June 30, 2004. Such impairment charges were recognized in order to reduce the carrying value of these investments to estimated fair value.

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Income Taxes

The provision for income taxes was $3.5 million for the first quarter of 2005 compared to $2.8 million for the same period in 2004. The effective income tax rate was 32.4% for the first quarter of 2005 compared to 32.1% for the first quarter of 2004. The Company has made certain investments resulting in federal and state income tax credits and other adjustments to the Company’s state and federal income tax expense in 2005 and 2004. The Company’s aggregate state and federal income tax expense was reduced by $17,000 and $143,000, respectively, during the quarters ended March 31, 2005 and 2004, as a result of these investments. These benefits were partially offset by impairment charges of $13,000 incurred during the first quarter 2005 and $83,000 incurred during the first quarter of 2004 to reduce the carrying value of these investments to estimated fair value.

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Income Taxes

The provision for income taxes was $12.0 million for the year ended December 31, 2004 compared to $10.1 million in 2003 and $8.5 million in 2002. The effective income tax rates were 31.7%, 33.3% and 37.2%, respectively, for 2004, 2003 and 2002.

The decline in the effective tax rate of 160 bps in 2004 compared with 2003, and the decline in the effective tax rate of 390 bps in 2003 compared with 2002 are primarily a result of the following factors. First the Company increased its municipal investment securities portfolio which is exempt from federal and state taxes in both absolute dollar amount and as a percentage of earning assets during 2004 compared with 2003 and during 2003 compared with 2002. This accounted for a decline in the effective tax rate of approximately 190 bps for 2004 as compared to 2003 and approximately 150 bps for 2003 as compared to 2002. Additionally certain tax credit investments made during 2004 and 2003 impacted the Company’s effective tax rates. These investments generated tax benefits which reduced combined federal and state income taxes by approximately $712,000 in 2004 and $556,000 in 2003. This accounted for a decline of the effective tax rate of approximately 220 bps in 2003 as compared to 2002. The impact on the Company’s 2004 effective tax rate as compared to 2003 as a result of these tax credit investments was not significant. The Company incurred pretax impairment charges of $424,000 in 2004 and $320,000 in 2003 associated with these investments.