N. Canal Street, Suite 1101 Chicago, IL60606

April 16, 2007

Research Associate: Mridula Bhatter, M.Fin.

Editor: Swati Chamaria, CA

Sr. Ed.: Ian Madsen, CFA; ; 1-800-767-3771 x9417

N. Canal Street, Suite 1101Chicago, IL60606

Bank of the Ozarks, Inc. (OZRK - NYSE)$29.99

Note:This report contains substantially new material. Subsequent reports will have changeshighlighted.

Reason for Report:1Q07Earnings Update Previous Edition:January 19, 2007

Recent Events

On April 12, 2007, OZRK announced its 1Q07 earnings. Highlights are as follows:

Net income was $7.52 M, a decrease of 10.4% from the record net income of $8.40 M in 1Q06.
GAAP earnings per share were $0.45 versus $0.50 in 1Q06, a decrease of 10.0%.

Overview

Based in Little Rock, Arkansas, Bank of the Ozarks, Inc. (OZRK) operates as the holdingcompanyof Bank of the Ozarks, which provides retail and commercial banking services. It offers a range of deposit services, including checking, savings, money market, time deposit, and individual retirement accounts. The bank’s loan services comprise various types of real estate, consumer, commercial, industrial, agricultural loans, and various leasing services. The Company also provides mortgage lending, cash management, trust services, safety deposit boxes, real estate appraisals, credit related life and disability insurance, ATMs, telephone banking, Internet banking, and debit cards. It owns an Arkansas-chartered subsidiary bank that conducts banking operations through 62 offices in 34 communities throughout northern, western and central Arkansas, fiveTexas banking offices, and loan production offices in Little Rock, Arkansas, Charlotte, North Carolina and Tulsa, Oklahoma. The Company's website is OZRK operates on a calendar year basis.

Analysts have identified the following factors for evaluating the investment merits of OZRK:

Key Positive Arguments / Key Negative Arguments

Consistently performing small-cap company in thesoutheast United States
Solid management reputation established through past execution
Plans of de novo expansion
Better than expected balance sheet growth
Improved NIM
No direct credit exposure to the subprime mortgage market

Inverted yield curve creates a pressure ontheinterest margin
Fierce competition
Rising interest rate
Stock is believed to be priced to perfection

A substantial number of the commercial banks operating in OZRK's market area are branches or subsidiaries of much larger organizations affiliated with statewide, regional or national banking companies, and as a result, may have greater resources and lower costs of funds than the company. Moreover, the company faces competition from a large number of community banks, including de novo community banks, many of which have senior management members who were previously employed in other local banks or investor groups with strong local business and community ties. Despite the highly competitive environment, management believes the company will continue to be competitive because of its strong commitment to quality customer service, convenient local branches, active community involvement, and competitive products and pricing.

Revenue

The tables are current as of 04/16/07.

The company reported that the net interest income (NII) in 1Q07 increased 4.7% to $18.25 Mfrom $17.44 Min 1Q06. Net interest margin (NIM), on a fully taxable equivalent basis, was 3.35% in 1Q07, a decrease of 0.49% from 3.84% in 1Q06 but an increase of0.13% sequentially.

Prior tothe 1Q07 earnings release, the Digest NII growth forecast was 7.7% for 2007 and 21.7%for 2008. The Digest growth forecasts for non-interest income for 2007 and 2008 were 0.6% and 11.1%, respectively. After the 1Q07 earnings release, the Digest NII growth forecast decreased to 6.7% for 2007 and to 19.8% for 2008. The Digest growth forecasts for total non-interest income for 2007 and 2008 also decreased to (0.2%) and 5.2%, respectively.

($ in millions) / FY05A / 1Q06A / 4Q06A / FY06A / 1Q07A / 2Q07E / FY07E / FY08E
Net Interest Income / $73.0 / $18.8 / $18.3 / $75.3 / $18.7 / $19.5↓ / $80.4↓ / $96.3↑
Provision for Credit Losses / $2.3 / $0.5 / $0.9 / $2.5 / $1.1 / $1.1↑ / $4.8↑ / $7.0↑
Core non-interest income / $19.0 / $4.3 / $5.4 / $19.8 / $5.4 / $5.4 / $22.1↑ / $23.6↓
Securities Gains / $0.2 / $1.8 / $1.0 / $3.4 / $0.4 / $0.0 / $0.4↑ / $0.0
Total Non-Interest Income / $19.3 / $6.2 / $6.2 / $22.5 / $5.7 / $5.4 / $22.4↑ / $23.6↓
Total Revenue / $92.3 / $25.0 / $24.4 / $97.8 / $24.4 / $24.9↓ / $102.8 / $119.9↓
Net Interest Margin / 4.18% / 3.84% / 3.23% / 3.49% / 3.33% / 3.38%↑ / 3.38%↓ / 3.48%↑

The inversion of the yield curve between short-term and long-term interest rates and intense competition continue to provide a challenging interest margin environment. Despite these conditions, the company posted record growth in loans and leases and the net interest income in 1Q07. Management’s target is toimprovethe net interest margin in 2007 by achieving good growth in earning assets, primarily loans and leases.

($ in millions) / 2005A / 1Q06A / 2Q06A / 3Q06A / 4Q06A / 2006A / 1Q07A
Core non-interest income detail
Trust income / $1.67 / $0.43 / $0.48 / $0.49 / $0.55 / $1.95 / $0.47
Service charges on deposits / $9.88 / $2.32 / $2.59 / $2.54 / $2.77 / $10.22 / $2.83
Mortgage lending income / $3.03 / $0.60 / $0.78 / $0.79 / $0.74 / $2.92 / $0.73
Gains (losses) on sale of assets / $0.57 / $0.00 / $0.01 / $0.04 / $(0.15) / $(0.09) / $0.04
Gain on sale of investment securities / $1.82 / $1.83 / $0.03 / $0.72 / $1.34 / $3.92 / $0.34
Bank owned life insurance income / $2.07 / $0.44 / $0.46 / $0.46 / $0.47 / $1.83 / $0.47
Other / $0.00 / $0.53 / $0.62 / $0.64 / $0.71 / $2.49 / $1.09
Total core non-interest income / $19.04 / $6.16 / $4.95 / $5.68 / $6.43 / $23.23 / $5.96

Non-interest income in1Q07 was $5.96 M,a decrease of 3.3% from $6.16Min1Q06 and 7.9% from $6.43 M in 4Q06.

Service charges on deposit accounts, which are traditionally the company's largest source of non-interest income, increased 22.0% from $2.32Min 1Q06 and 2.2%from $2.77M in 4Q06 to $2.83 M in 1Q07.

Mortgage lending income increased 21.7% from $0.60 M in 1Q06 and1.4% from $0.74 M in 4Q06 to $0.73 M in 1Q07.

Trust income increased 9.3% from $0.43 M in 1Q06 and14.5% from $0.55 M in 4Q06 to $0.47 M in 1Q07.

Net gains from sales of assets and investment securities totaled $0.38M in 1Q07versus $1.83 Min 1Q06 and $3.83 M in 4Q06. Bank owned life insurance income was $0.47 M in 1Q07 versus $0.44 M in 1Q06 and was $0.47 in 4Q06.

Please refer to the separately published OZRK spreadsheet for additional details and updated forecasts.

Margins

Prior to the 1Q07 earnings releasethe pre-tax operating margin expectations for 2Q07 and 2007were 45.7% and 46.3%, respectively. After the 1Q07 earnings release the pre-tax operating margin estimate for 2Q07 changed to 45.6% but that for 2007 remained unchanged at 46.3%.

FY05A / 1Q06A / 4Q06A / FY06A / 1Q07A / 2Q07E / FY07E / FY08E
Pre-tax operating income / 54.1% / 53.3% / 45.1% / 50.0% / 45.8% / 45.6%↓ / 46.3% / 47.5%↓
After-tax net operating income / 34.1% / 33.6% / 28.7% / 31.8% / 29.5% / 30.0%↑ / 30.3%↑ / 31.3%↑
Efficiency ratio / 43.4% / 44.7% / 51.2% / 47.4% / 49.7% / 49.9%↓ / 48.9%↓ / 46.6%↓

Non-interest expense in 1Q07 was $12.14 M versus $11.16 Min 1Q06, an increase of 8.8%, but was slightly lower than the $12.51 M recorded in 4Q06. The company's efficiency ratio in 1Q07 was 49.7%, compared to 44.7% in 1Q06.

A number of factors contributed to the company's growth in non-interest expense in 1Q07 compared to 1Q06. These factors are primarily related to ongoing costs of facilities and staff added as part of the company's 2006 branching and corporate growth initiatives.

Management indicated that it believes deposit costs will peak in the near futureand assuming the Fed funds rates remain unchanged, deposits rates could decline a few basis points over the next couple of quarters. Management expects the loan portfolio, which has been re-priced more slowly than deposits over the last few years, will provide opportunities for improvement in earning asset yields. Thus, the CEO is optimistic that the company will show an improved NIM over the remainder ofthe year.

Please refer to the separately published OZRK spreadsheet for additional details and updated forecasts.

Earnings per Share

Bank of the Ozarks reported net income for 1Q07 of $7.52 M, a decrease of 10.4% compared to its record net income of $8.40 M in 1Q06. GAAP earnings per sharewere $0.45 in 1Q07, compared to $0.50 in 1Q06, a decrease of 10.0%.

Prior to the 1Q07 earnings release, the Digest average EPS estimates for 2Q07 and 2007 were$0.44 and $1.84, respectively. Following the1Q07 earnings release, the Digest average estimates for 2Q07 have changed to $0.45 while that for 2007 remain unchanged.

FY05A / 1Q06A / 4Q06A / FY06A / 1Q07A / 2Q07E / FY07E / FY08E
GAAP EPS / $1.88 / $0.50 / $0.44 / $1.89 / $0.45 / $0.45↑ / $1.88↑ / $2.22↓
Operating EPS / $1.88 / $0.50 / $0.41 / $1.85 / $0.41 / $0.45↑ / $1.84 / $2.21↓
Zacks Consensus / $1.88 / $0.50 / $0.41 / $1.85 / $0.41 / $0.45↑ / $1.84 / $2.21
Digest High EPS / $1.88 / $0.50 / $0.44 / $1.89 / $0.42 / $0.45↓ / $1.85↓ / $2.25↓
Digest Low EPS / $1.88 / $0.50 / $0.38 / $1.80 / $0.41 / $0.44↑ / $1.81↑ / $2.18
Digest Average / $1.88 / $0.50 / $0.41 / $1.85 / $0.41 / $0.45↑ / $1.84 / $2.21↓
Digest Average Y-o-Y Growth / 20.2% / (11.8%) / 0.7% / (17.5%) / (5.1%)↑ / (0.4%)↓ / 20.0%↓

One firm (Sandler) had increased its 2007 EPS estimate by $0.06 to $1.89, to reflect the run rate implications of a highNIMand lower expenses, offset by a slow pace of balance sheet growth and a high provision for loan losses. Another firm (Howe Barnes) raised its 2007 EPS estimate to $1.85 from $1.80, as a result of changes to loan growth, NIM and credit cost assumptions.

Please refer to the separately published OZRK spreadsheet for additional details and updated forecasts.

Balance Sheet

The company's annualized returns on average assets and average stockholders' equity in 1Q07 were 1.20% and 17.11%, compared to 1.57% and 22.31%, respectively, in 1Q06.

Stockholders' equity increased 19.2% to $182 M in 1Q07 from $153 M in 1Q06. Book value per share increased 18.9% to $10.88 in 1Q07 from $9.15 in 1Q06. The company's ratio of common equity to assets was 7.17% in 1Q07 versus 6.84% in 1Q06, and its ratio of tangible common equity to tangible assets was 6.94% in 1Q07 versus 6.57% in 1Q06.

Loans and leases were $1.72 B in 1Q07 versus $1.42 B in 1Q06, an increase of 21.0%. Deposits were $2.17 B in 1Q07 compared to $1.74 B in 1Q06, an increase of 24.9%. Total assets were $2.54 B in 1Q07, a 13.7% increase from $2.24 B in 1Q06.

Non-performing loans and leases as a percent of total loans and leases were 0.25% in 1Q07 versus 0.24% in 1Q06 and 0.34% in 1Q06. Non-performing assets as a percent of total assets were 0.27% in 1Q07 versus 0.17% in 1Q06 and 0.24% in 4Q06. 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, was 0.84% in 1Q07 versus 0.63% in 1Q06 and 0.60% in 4Q06.

The company's annualized net charge-off ratio for 1Q07 was 0.16% compared to 0.10% in 1Q06.

The Company's allowance for loan and lease losses was $18.1 Min 1Q07 or 1.05% of total loans and leases, compared to $17.2 M or 1.21% of total loans and leasesin 1Q06. In 1Q07, the company's allowance for loan and lease losses equaled 421% of its total non-performing loans and leases.

Management indicated that the company does not own any collateralized mortgage obligations (CMOs) or other mortgage backed securities (MBS) that are backed bysubprime mortgage assets. The company also does not have any mortgage loan products targeting subprimeborrowers. It does originate subprime mortgage loans for resale in the secondary market, but theseloans are sold on a non-recourse basis. In short, the company believesit has no direct credit exposure to the subprime mortgage market.

Please refer to the separately published OZRK spreadsheet for additional details and updated forecasts.

Target Price / Valuation

Following the 1Q07 earnings release, one analyst (Cohen Bros.) upgraded the stock to Buy from Hold and another analyst (Stephens) upgraded the stock from Equal weight to Overweight. One analyst(Cohen Bros.) lowered the target pricewhile another analyst (Stephens) raised the target price. Ofthe eight analysts covering the stock two provided positive ratings and six provided neutral ratings. Five analysts provided a target price for the stock. The Digest average target price of $32.80 (↓from the last report; 9.37% upside from the current price) lies between $31.00 (Sandler) (3.37% upside from the current price) and $35.00 (Stephens) (16.71% upside from the current price). The most common valuation method used by the analysts was the PE multiple.

Rating Distribution
Positive / 2
Neutral / 6
Negative / 0
Average Target Price / $32.80↓
Digest High / $35.00↑
Digest Low / $31.00↓
Number of Analysts with Target price/ Total / 5/8

Risks to the price target include a pronounced inversion of the yield curve, deterioration in the economy that could affect loan demand and credit quality, and a revaluation of the small-cap bank sector.

Please refer to the separately published OZRK spreadsheet for additional details and updated forecasts.

Capital Structure/Solvency/Cash Flow/Governance/Other

Insiders own 30% (including Chairman and CEO, Gleason’s 25%) of the company’s stock. Institutional investors reportedly own 57% of the total shares outstanding. Major institutional holders include Fidelity (9.6%), Neuberger Berman (8.9%) and Wasatch Advisors (7.4%).

De novo branching

During 2006, the company continued with its de novo branching strategy, resulting in the addition of a record 11 new banking offices. Additionally, the company replaced one temporary office and one of its oldest offices with new banking facilities and established a loan production office in Tulsa, Oklahoma.

The 11 new banking offices added in 2006 expanded the company's presence in four important new markets. These markets include northwest Arkansas (Benton and Washington counties); Hot Springs in Garland County, Arkansas; the Texarkana market (both Bowie County, Texas and Miller County, Arkansas); and Frisco, Texas.

Going forward, the company expects to continue with its de novo branching strategy, although at a slower pace. It has reduced its previous plans for 2007 office additions, and now expects to replace one temporary banking office with a new permanent facility and open approximately five new banking offices in 2007. One of these new banking offices is expected to replace its current Oklahoma loan production office.

Opening new offices and replacing existing temporary offices with permanent facilities are subject to availability of suitable sites, designing, constructing, equipping and staffing such offices, obtaining regulatory and other approvals, and many other conditions and contingencies that the company cannot accurately predict with certainty.

Potentially Severe Problems

There are none other than those discussed in other sections of this report.

Long-Term Growth

OZRK remains a well-managed, highly-profitable growth story in the banking universe, generating growth in both revenue and earnings consistently over the past few years. The majority of this growth has come from de novo branching, a strategy management intends to continue in 2007. Alongside, OZRK has managed to improve itscost structure.

Management continues to focus on profitable growth. The company's plans for the future include acceleratingthe rate of its revenue growth and decelerating the rate of its overhead growth.

Upcoming Events

Events / Dates
FOMC Meeting / May9, 2007
FOMC Meeting / June 27/28, 2007
2Q Earnings Release / Mid July, 2007

Individual Analyst Opinions

POSITIVE RATINGS

Cohen – Buy ($32) – (04/12/07): The analyst has upgraded the stock from Hold to Buy but decreased the price target from $33 to $32. INVESTMENT SUMMARY: With a price to earnings growth (PEG) ratio of less than 1, the analyst views OZRK as an attractive investment opportunity.

Stephens – Overweight ($35) – (04/12/07): The analyst has upgraded the stock from Equal weight to Overweight and increased the price target from $34 to $35. INVESTMENT SUMMARY: The analysthas upgraded the stock based on the improved balance sheet, cost control and the stock’s current valuation.

NEUTRAL RATINGS

Howe Barnes – Neutral – (04/13/07): The firm has maintained a Neutral rating.

Sidoti – Neutral ($33) – (04/12/07): The firm has maintained a Neutral rating anda target price of $33.

Stanford – Hold – (04/13/07): The firm has reiterated a Hold rating. INVESTMENT SUMMARY: The firm believes that the company will continue to face significant headwinds in the coming quarters primarily due to an operating environment defined by an inverted yield curve and intense competition. Performance is likely to remain under pressure in the near term but the firm expects quarterly performance to show marked improvement through the course of 2007.

FTN Midwest Res. – Neutral ($33) – (04/12/07): The firm has reiterated a Neutral rating and a target price of $33.

Sandler – Hold ($31) – (04/13/07): The firm has reiterated a Hold rating and a price target of $31. INVESTMENT SUMMARY: The firm believes OZRK’s priorities should be focusing onaccelerating revenue growth and decelerating expense growth, and in this respect, the company is made considerable progress. This leaves a continued normalization of credit quality indicators as the main concern surrounding OZRK.

Stifel Nicolaus – Hold – (04/13/07): The firm has reiterated a Hold rating. INVESTMENT SUMMARY: The firm expects the shares to positively react as the key issue plaguing the company, NIM compression, has finally reversed and NIM has surprisingly rebounded.

NEGATIVE RATINGS

None

Research Associate: Mridula Bhatter

Copy Editor:Joyoti D.

Reviewed By : Swati Chamaria

Zacks Investment ResearchPage 1