GENERAL

Net income available to common stockholders for Bank of the Ozarks, Inc. (the "Company") was $19.1 million for the second quarter of 2012, a 62.0% decrease from $50.2 million for the second quarter of 2011. Diluted earnings per common share were $0.55 for the second quarter of 2012, a 62.3% decrease from $1.46 for the second quarter of 2011. For the first six months of 2012, net income available to common stockholders totaled $37.1 million, a 42.8% decrease from $64.8 million for the first six months of 2011. Diluted earnings per common share for the first six months of 2012 were $1.06, a 43.6% decrease from $1.88 for the first six months of 2011.

The Company made no Federal Deposit Insurance Corporation ("FDIC")-assisted acquisitions during the first six months of 2012, and its results for the second quarter and first six months of 2012 did not include any bargain purchase gains or any acquisition or conversion costs related to its seven previous FDIC-assisted acquisitions. The Company's results for the second quarter of 2011 included two FDIC-assisted acquisitions which resulted in a gain, net of acquisition and conversion costs, of approximately $36.4 million after taxes, or approximately $1.06 of diluted earnings per common share. The Company's results for the first six months of 2011 included three FDIC-assisted acquisitions which resulted in a gain, net of acquisition and conversion costs, of approximately $37.3 million after taxes, or approximately $1.09 of diluted earnings per common share.

On August 16, 2011 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 August 5, 2011. All share and per share information in this Management's Discussion and Analysis has been adjusted to give effect to this stock split.

The Company's annualized return on average assets was 2.04% for the second quarter of 2012 compared to 5.24% for the second quarter of 2012. Its annualized return on average common stockholders' equity was 17.07% for the second quarter of 2012 compared to 55.88% for the second quarter of 2011. The Company's annualized return on average assets was 1.97% for the first six months of 2012 compared to 3.63% for the first six months of 2011. Its annualized return on average common stockholders' equity was 16.91% for the first six months of 2012 compared to 38.05% for the first six months of 2011.

Total assets were $3.76 billion at June 30, 2012 compared to $3.84 billion at December 31, 2011. Loans and leases, excluding those covered by FDIC loss share agreements, were $1.98 billion at June 30, 2012 compared to $1.89 billion at December 31, 2011. Total loans and leases, including loans covered by FDIC loss share agreements ("covered loans"), were $2.69 billion at both June 30, 2012 and December 31, 2011. Deposits were $2.81 billion at June 30, 2012 compared to $2.94 billion at December 31, 2011.

Common stockholders' equity was $459.6 million at June 30, 2012 compared to $424.6 million at December 31, 2011. Book value per common share was $13.29 at June 30, 2012 compared to $12.32 at December 31, 2011. Tangible book value per common share, which is calculated by dividing total common stockholders' equity less intangible assets, by total common shares outstanding, was $12.96 at June 30, 2012 compared to $12.06 at December 31, 2011. Changes in 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, changes in unrealized gains and losses on investment securities available for sale ("AFS"), and, for tangible book value per common share, changes in intangible assets.

Annualized results for these interim periods may not be indicative of results for the full year or future periods.

ANALYSIS OF RESULTS OF OPERATIONS

The Company is a bank holding company whose primary business is commercial banking conducted through its wholly-owned state chartered bank subsidiary - Bank of the Ozarks (the "Bank"). 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, leases, covered loans and investments, and the interest expense incurred on interest bearing liabilities, such as deposits, borrowings and subordinated debentures. The Company also generates non-interest income, including service charges on deposit accounts, mortgage lending income, trust income, bank owned life insurance ("BOLI") income, accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable, other loss share income, gains on investment securities and from sales of other assets, and gains on FDIC-assisted acquisitions.

The Company's non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses. The Company's results of operations are significantly impacted by its provision for loan and lease losses and its provision for income taxes. The following discussion provides a comparative summary of the Company's operations for the three months and six months ended June 30, 2012 and 2011 and should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report.

Net Interest Income

Net interest income is analyzed in this discussion and the following tables on a fully taxable equivalent ("FTE") basis. The adjustment to convert certain income to a FTE basis consists of dividing federal tax-exempt income by one minus the Company's statutory federal income tax rate of 35%. The FTE adjustments to net interest income were $2.2 million for each of the quarters ended June 30, 2012 and 2011 and $4.4 million and $4.6 million for the six months ended June 30, 2012 and 2011, respectively. No adjustments have been made in this analysis for income exempt from state income taxes or for interest expense deductions disallowed under the provisions of the Internal Revenue Code as a result of investment in certain tax-exempt securities.

Net interest income for the second quarter of 2012 decreased 0.6% to $44.4 million compared to $44.7 million for the second quarter of 2011. Net interest income for the six months ended June 30, 2012 increased 9.0% to $90.6 million compared to $83.1 million for the six months ended June 30, 2011. Net interest margin was 5.84% for the second quarter and 5.91% for the first six months of 2012 compared to 5.80% for the second quarter and 5.71% for the first six months of 2011. The decrease in net interest income for the second quarter of 2012 compared to the second quarter of 2011 was primarily due to a decrease in average earning assets from $3.09 billion for the second quarter of 2011 to $3.06 billion for the second quarter of 2012, partially offset by an increase in net interest margin, which increased four basis points ("bps"). The increase in net interest income for the first six months of 2012 compared to the first six months of 2011 was a result of the increase in average earning assets from $2.93 billion for the first six months of 2011 to $3.08 billion for the first six months of 2012 and the improvement in net interest margin, which increased 20 bps in the first six months of 2012 compound to the first six months of 2011.

The Company's four bps improvement in net interest margin for the second quarter of 2012 compared to the same period in 2011 was primarily due to a reduction in the ratio of average interest bearing liabilities to average earning assets and a 31 bps reduction in rates paid on interest bearing liabilities which combined to more than offset the 33 bps decrease in yields on average earning assets. The Company's 20 bps improvement in net interest margin for the first six months of 2012 compared to the same period in 2011 was primarily due to a reduction in the ratio of average interest bearing liabilities to average earning assets and a 32 bps reduction in rates paid on interest bearing liabilities which were partially offset by an 18 bps decrease in yields on average earning assets.

Yields on earning assets decreased 33 bps to 6.56% for the second quarter of 2012 and decreased 18 bps to 6.66% for the first six months of 2012 compared to 6.89% for the second quarter of 2011 and 6.84% for the first six months of 2011. The yield on the Company's portfolio of non-covered loans decreased 42 bps for the second quarter and 28 bps for the first six months of 2012 compared to the same periods in 2011. The yield on covered loans and leases decreased 19 bps for the second quarter and eight bps for the first six months of 2012 compared to the same periods in 2011.

The decline in rates on average interest bearing liabilities was primarily due to the declines in rates on interest bearing deposits, the largest component of the Company's interest bearing liabilities. Rates on interest bearing deposits decreased 40 bps for the second quarter and 38 bps for the first six months of 2012 compared to the same periods in 2011. This decrease in the rate on interest bearing deposits was principally due to (i) a change in mix of the Company's interest bearing deposits due to growth in the volume of savings and interest bearing transaction accounts resulting in an increase in the average balance of these deposits to 66% of total average interest bearing deposits for the second quarter and 65% for the first six months of 2012 compared to 58% for both the second quarter and first six months of 2011 and (ii) effectively managing the repricing of both time deposits and savings and interest bearing transaction deposits which resulted in lower rates paid on deposits as they were renewed or otherwise repriced.

The Company's other borrowing sources include (i) repurchase agreements with customers ("repos"), (ii) other borrowings comprised primarily of federal funds purchased and Federal Home Loan Bank of Dallas ("FHLB - Dallas") advances, and
(iii) subordinated debentures. The rates on repos decreased 43 bps for the second quarter and 40 bps for the first six months of 2012 compared to the same periods in 2011 primarily as a result of the Company's efforts to effectively manage the rates on its interest bearing liabilities, including repos. The rates on the Company's other borrowings, which consist primarily of fixed rate callable FHLB - Dallas advances, increased eight bps in the second quarter and three bps in the first six months of 2012 compared to the same periods in 2011. The rates paid on the Company's subordinated debentures, which are tied to a spread over the 90-day London Interbank Offered Rate ("LIBOR") and reset periodically, increased 18 bps in the second quarter and 23 bps in the first six months of 2012 compared to the same periods in 2011 primarily as a result of the increase in the 90-day LIBOR on the applicable reset dates.

The decrease in average earning assets for the second quarter of 2012 compared to the second quarter of 2011 was primarily due to decreases in the average balances of covered loans of $70 million and aggregate investment securities of $52 million, partially offset by an increase in the average balance of non-covered loans and leases of $93 million. The increase in average earning assets for the first six months of 2012 compared to the first six months of 2011 was primarily due to the $80 million increase in average balance of covered loans and the $75 million increase in the average balance of non-covered loans and leases.

      Average Consolidated Balance Sheets and Net Interest Analysis - FTE



                                                                                    Three Months Ended June 30,                                                           Six Months Ended June 30,
                                                                           2012                                      2011                                      2012                                       2011
                                                             Average       Income/      Yield/         Average       Income/      Yield/         Average        Income/      Yield/         Average       Income/      Yield/
                                                             Balance       Expense       Rate          Balance       Expense       Rate          Balance        Expense       Rate          Balance       Expense       Rate
                                                                                                                                 (Dollars in thousands)
ASSETS
Earning assets:
Interest earning deposits and federal funds sold           $     1,361     $      1        0.44 %    $     3,178     $     25        3.16 %    $     1,094     $       3        0.58 %    $     2,092     $     28        2.66 %
Investment securities:
Taxable                                                         82,434          705        3.44          131,223        1,057        3.23           84,170         1,420        3.39           86,977        1,484        3.44
Tax-exempt - FTE                                               337,208        6,127        7.31          340,696        6,368        7.50          343,573        12,644        7.40          346,103       12,972        7.56
Loans and leases - FTE                                       1,907,898       27,422        5.78        1,814,949       28,052        6.20        1,897,170        55,725        5.91        1,821,998       55,935        6.19
Covered loans                                                  732,038       15,668        8.61          802,371       17,607        8.80          756,503        32,362        8.58          676,111       29,030        8.66

Total earning assets - FTE                                   3,060,939       49,923        6.56        3,092,417       53,109        6.89        3,082,510       102,154        6.66        2,933,281       99,449        6.84
Non-interest earning assets                                    704,404                                   751,287                                   700,967                                    665,309

Total assets                                               $ 3,765,343                               $ 3,843,704                               $ 3,783,477                                $ 3,598,590

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Savings and interest bearing transaction                   $ 1,574,598     $  1,138        0.29 %    $ 1,527,094     $  2,516        0.66 %    $ 1,562,376     $   2,515        0.32 %    $ 1,433,168     $  4,783        0.67 %
Time deposits of $100,000 or more                              348,278          494        0.57          524,381        1,239        0.95          372,520         1,163        0.63          502,693        2,474        0.99
Other time deposits                                            455,629          679        0.60          581,600        1,436        0.99          475,043         1,548        0.66          522,541        2,715        1.05

Total interest bearing deposits                              2,378,505        2,311        0.39        2,633,075        5,191        0.79        2,409,939         5,226        0.44        2,458,402        9,972        0.82
Repurchase agreements with customers                            35,952           12        0.14           40,213           57        0.57           37,313            33        0.18           41,396          118        0.58
Other borrowings                                               285,210        2,691        3.79          294,042        2,718        3.71          292,142         5,391        3.71          295,683        5,389        3.68
Subordinated debentures                                         64,950          460        2.85           64,950          432        2.67           64,950           934        2.89           64,950          858        2.66

Total interest bearing liabilities                           2,764,617        5,474        0.80        3,032,280        8,398        1.11        2,804,344        11,584        0.83        2,860,431       16,337        1.15
Non-interest bearing liabilities:
Non-interest bearing deposits                                  490,760                                   396,788                                   471,526                                    355,516
Other non-interest bearing liabilities                          56,591                                    50,749                                    62,938                                     35,525

Total liabilities                                            3,311,968                                 3,479,817                                 3,338,808                                  3,251,472
Common stockholders' equity                                    449,955                                   360,459                                   441,246                                    343,686
Noncontrolling interest                                          3,420                                     3,428                                     3,423                                      3,432

Total liabilities and stockholders' equity                 $ 3,765,343                               $ 3,843,704                               $ 3,783,477                                $ 3,598,590

Net interest income - FTE                                                  $ 44,449                                  $ 44,711                                  $  90,570                                  $ 83,112

Net interest margin - FTE                                                                  5.84 %                                    5.80 %                                     5.91 %                                    5.71 %

The following table reflects how changes in the volume of interest earning assets and interest bearing liabilities and changes in interest rates have affected the Company's interest income, interest expense and net interest income for the periods indicated. Information is provided in each category with respect to changes attributable to (1) changes in volume (changes in volume multiplied by prior yield/rate); (2) changes in yield/rate (changes in yield/rate multiplied by prior volume); and (3) changes in both yield/rate and volume (changes in yield/rate multiplied by changes in volume). The changes attributable to the combined impact of volume and yield/rate have all been allocated to the changes due to volume.

                Analysis of Changes in Net Interest Income - FTE



                                                Three Months Ended                        Six Months Ended
                                                  June 30, 2012                             June 30, 2012
                                                       Over                                     Over
                                                Three Months Ended                        Six Months Ended
                                                  June 30, 2011                             June 30, 2011
                                                      Yield/         Net                       Yield/         Net
                                        Volume         Rate         Change       Volume         Rate         Change
                                                                  (Dollars in thousands)
Increase (decrease) in:
Interest income - FTE:
Interest earning deposits and
federal funds sold                     $     (2 )    $    (22 )    $    (24 )    $    (3 )    $    (22 )    $    (25 )
Investment securities:
Taxable                                    (417 )          65          (352 )        (47 )         (17 )         (64 )
Tax-exempt - FTE                            (64 )        (177 )        (241 )        (93 )        (235 )        (328 )
Loans and leases - FTE                    1,336        (1,966 )        (630 )      2,208        (2,418 )        (210 )
Covered loans                            (1,505 )        (434 )      (1,939 )      3,439          (107 )       3,332

Total interest income - FTE                (652 )      (2,534 )      (3,186 )      5,504        (2,799 )       2,705

Interest expense:
Savings and interest bearing
transaction                                  34        (1,412 )      (1,378 )        208        (2,476 )      (2,268 )
Time deposits of $100,000 or more          (250 )        (495 )        (745 )       (406 )        (905 )      (1,311 )
Other time deposits                        (188 )        (569 )        (757 )       (155 )      (1,012 )      (1,167 )
Repurchase agreements with customers         (1 )         (44 )         (45 )         (4 )         (81 )         (85 )
Other borrowings                            (83 )          56           (27 )        (65 )          67             2
Subordinated debentures                      -             28            28           -             76            76

Total interest expense                     (488 )      (2,436 )      (2,924 )       (422 )      (4,331 )      (4,753 )

Increase (decrease) in net interest
income - FTE                           $   (164 )    $    (98 )    $   (262 )    $ 5,926      $  1,532      $  7,458

Non-Interest Income

The Company's non-interest income consists primarily of service charges on deposit accounts, mortgage lending income, trust income, BOLI income, accretion of FDIC loss share receivable, net of amortization of FDIC clawback payable, other loss share income, gains on investment securities and on sales of other assets, and gains on FDIC-assisted acquisitions.

Non-interest income for the second quarter of 2012 decreased 79.1% to $15.7 million compared to $75.1 million for the second quarter of 2011. Non-interest income for the six months ended June 30, 2012 decreased 66.5% to $29.5 million compared to $88.0 million for the six months ended June 30, 2011. These results include no pre-tax bargain purchase gains on FDIC-assisted acquisitions for the second quarter or first six months of 2012 compared to $62.8 million for the second quarter and $65.7 million for the first six months of 2011.

Service charges on deposit accounts increased 7.0% to $4.9 million for the second quarter of 2012 compared to $4.6 million for the second quarter of 2011. Service charges on deposit accounts increased 14.0% to $9.6 million for the six months ended June 30, 2012 compared to $8.4 million for the same period in 2011. The increase in service charges on deposit accounts is primarily due to growth in the number of transaction accounts and the addition of deposit customers from the Company's FDIC-assisted acquisitions.

Mortgage lending income increased 109.5% to $1.3 million for the second quarter of 2012 compared to $0.6 million for the second quarter of 2011. Mortgage lending income increased 84.7% to $2.4 million for the six months ended June 30, 2012 compared to $1.3 million for the same period in 2011. The volume of originations of mortgage loans available for sale increased 93.7% and 85.9%, respectively for the second quarter and first six months of 2012 compared to the same periods in 2011. During the second quarter of 2012, approximately 50% of the Company's originations of mortgage loans available for sale were related to mortgage refinancings and 50% were related to new home purchases, compared to approximately 39% for refinancings and approximately 61% for new home purchases in the second quarter of 2011. During the first six months of 2012, approximately 59% of the Company originations of mortgage loans available for sale were related to mortgage refinancings and approximately 41% were related to new home purchases compared to approximately 44% for refinancings and approximately 56% for new home purchases in the first six months of 2011.

Trust income was $0.9 million in the quarter ended June 30, 2012, an increase of 10.6% from $0.8 million for the same period in 2011. Trust income was $1.7 million for the six months ended June 30, 2012, an increase of 4.9% from $1.6 million for the same period in 2011. The increase in trust income was primarily due to growth in personal trust income.

The Company recognized $2.0 million of income from the accretion of the FDIC loss share receivable, net of amortization of the FDIC clawback payable, during the second quarter of 2012 and $4.3 million of such income during the first six months of 2012, compared to $2.9 million during the second quarter of 2011 and $4.9 million for the first six months of 2011. The FDIC loss share receivable reflects the indemnification provided by the FDIC in FDIC-assisted acquisitions, and the FDIC clawback payable represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss share agreement. The FDIC loss share receivable and the FDIC clawback payable are both carried at net present value.

As the Company collects payments in future periods from the FDIC under the loss share agreements, the balance of the FDIC loss share receivable, absent any significant revisions of the amounts expected to be collected under the loss share agreements, will decline, resulting in a corresponding decrease in the accretion of the FDIC loss share receivable. Because any amounts due under the FDIC clawback payable are due at the conclusion of the loss share agreements, absent any significant revision of the amounts expected to be paid to the FDIC under the clawback provisions of the loss share agreements, the amortization of this liability is not expected to change significantly over the next several quarters.

Other loss share income, consisting primarily of income recognized on covered loan prepayments and payoffs that are not considered yield adjustments, was $3.2 million in the second quarter of 2012 and $5.2 million in the first six months of 2012 compared to $1.0 million in the second quarter and $2.0 million in the first six month of 2011.

Net gains on sales of other assets were $1.4 million in the second quarter of 2012 compared to $0.7 million in the second quarter of 2011. Net gains on sales of other assets were $3.0 million in the first six months of 2012 compared $1.1 million in the first six months of 2011. These net gains on sales of other assets were primarily due to net gains on sales of foreclosed assets covered by FDIC loss share agreements, or covered foreclosed assets. Because the estimated fair value of acquired covered foreclosed assets includes a net present value component, which is not accreted into income over the expected holding period of the covered foreclosed assets, the sale of a majority of the Company's covered foreclosed assets has resulted in gains.

During the second quarter of 2011, the Company made two FDIC-assisted acquisitions resulting in total pre-tax bargain purchase gains of $62.8 million. Specifically, on April 29, 2011 the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former First Choice Community Bank. This FDIC-assisted acquisition resulted in the Company recognizing a pre-tax bargain purchase gain of $2.95 million in the second quarter of 2011. On April 29, 2011 the Company, through the Bank, entered into a purchase and assumption agreement with loss share agreements with the FDIC pursuant to which it acquired substantially all of the assets and assumed substantially all of the deposits and certain other liabilities of the former The Park Avenue Bank. This FDIC-assisted acquisition resulted in the Company recognizing a pre-tax bargain purchase gain of $59.8 million in the second . . .