Market Overview

Bear State Financial, Inc. Announces Third Quarter 2017 Earnings

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FINANCIAL HIGHLIGHTS:

  • Third quarter 2017 GAAP net income was $5.1 million, an 8% increase
    from $4.7 million for the third quarter of 2016. Diluted earnings per
    common share for the third quarter of 2017 was $0.14, an 8% increase
    from $0.13 for the third quarter of 2016.
  • Third quarter 2017 core earnings were $5.9 million, a 38% increase
    from $4.3 million for the third quarter of 2016. Diluted core earnings
    per common share for the third quarter of 2017 was $0.16, a 45%
    increase from $0.11 for the third quarter of 2016.
  • The Company's efficiency ratio improved to 61% in the third quarter
    of 2017 compared to 63% in the third quarter of 2016. Further, the
    Company's core efficiency ratio improved to 55% in the third quarter
    of 2017 compared to 67% in the third quarter of 2016.
  • Net interest income increased 14% for the third quarter of 2017
    compared to the third quarter of 2016 primarily due to loan portfolio
    growth of 13% year over year.
  • The ratio of nonperforming assets to total assets improved to 0.85%
    at September 30, 2017 compared to 0.95% at September 30, 2016.
  • Book value per common share was $6.61 at September 30, 2017, a 7%
    increase from $6.18 at September 30, 2016. Tangible book value per
    common share was $5.29 at September 30, 2017, a 10% increase from
    $4.83 at September 30, 2016.
  • On August 22, 2017, Bear State Bank entered into an agreement with
    Arvest Bank for Arvest to acquire the Company in an all-cash
    transaction.

Bear State Financial, Inc. (the "Company,")(NASDAQ:BSF), today reported
earnings of $5.1 million and earnings per diluted common share of $0.14
in the third quarter of 2017, compared to earnings of $4.7 million or
$0.13 per diluted common share in the third quarter of 2016. Core
earnings for the third quarter of 2017 were $5.9 million or $0.16 per
diluted common share compared to core earnings of $4.3 million or $0.11
per diluted common share in the third quarter of 2016.

On August 22, 2017, the Company and Bear State Bank entered into an
Agreement and Plan of Reorganization with Arvest Bank, an Arkansas
banking corporation ("Arvest"), and Arvest Acquisition Sub, Inc., an
Arkansas corporation and a wholly-owned subsidiary of Arvest
("Acquisition Sub"), pursuant to which Arvest will acquire the Company
by merging Acquisition Sub with and into the Company with the Company
surviving as a wholly-owned subsidiary of Arvest (the "Merger").

Pursuant to the Agreement, each share of the Company's common stock
issued and outstanding as of the effective time of the Merger will be
converted into a right to receive $10.28 per share, payable in cash. The
Merger is expected to close in the fourth quarter of 2017 or first
quarter of 2018 and is subject to customary closing conditions,
including both regulatory approval and approval by the Company's
shareholders.

FINANCIAL CONDITION

Total assets were $2.24 billion at September 30, 2017, a 12% increase
compared to $2.01 billion at September 30, 2016. The increase in total
assets was primarily due to increases in investment securities and
loans. Total loans were $1.71 billion at September 30, 2017, an increase
of $196.2 million, or 13%, compared to September 30, 2016 and investment
securities were $248.3 million at September 30, 2017, an increase of
$50.6 million, or 26%, compared to September 30, 2016. Total deposits
were $1.59 billion at September 30, 2017, a 4% decrease compared to
$1.65 billion at September 30, 2016.

Total stockholders' equity was $249.2 million at September 30, 2017, a
7% increase from $232.4 million at September 30, 2016. Tangible common
stockholders' equity was $199.4 million at September 30, 2017, a 10%
increase from $181.6 million at September 30, 2016. Book value per
common share was $6.61 at September 30, 2017, a 7% increase from $6.18
at September 30, 2016. Tangible book value per common share was $5.29 at
September 30, 2017, a 10% increase from $4.83 at September 30, 2016. The
Company's ratio of total stockholders' equity to total assets decreased
to 11.12% at September 30, 2017, compared to 11.57% at September 30,
2016. The calculation of the Company's tangible book value per common
share and tangible common stockholders' equity and the reconciliation of
such non-GAAP financial measures to the most comparable GAAP measures
are included in the schedules accompanying this release.

RESULTS OF OPERATIONS

The Company recognized third quarter 2017 net income of $5.1 million or
$0.14 per diluted common share compared to net income of $4.7 million or
$0.13 per diluted common share in the third quarter of 2016, resulting
in a return on average assets of 0.91% in the third quarter of 2017,
compared to 0.95% in the third quarter of 2016. Calculation of net
income in accordance with GAAP includes what the Company considers
"non-core" items, which are items that we do not consider indicative of
our core operating performance and which are not necessarily comparable
from year to year. The Company reports core earnings, which is a
non-GAAP financial measure that the Company defines as GAAP net income
less non-core items. The reconciliation of GAAP net income to core
earnings together with related financial measures and ratios is included
in the schedules accompanying this release.

Third quarter 2017 core earnings totaled $5.9 million or $0.16 per
diluted common share, compared to core earnings of $4.3 million or $0.11
per diluted common share in the third quarter of 2016. The core return
on average assets measured 1.04% and 0.85%, core return on average
equity measured 9.38% and 7.28% and core return on average tangible
equity measured 11.74% and 9.34%, each for the third quarters of 2017
and 2016, respectively. Non-core items during the third quarter of 2017
included transaction-related expenses incurred in connection with the
pending transaction with Arvest totaling $1.3 million, branch
restructure expenses of $279,000 and a deferred tax asset adjustment of
$186,000. The effect of non-core items, net of taxes, decreased GAAP net
income by approximately $746,000 for the third quarter of 2017.

Net interest income for the third quarter of 2017 was $19.1 million
compared to $16.8 million for the same period in 2016. Net interest
income for the nine months ended September 30, 2017 was $56.6 million,
compared to $50.4 million for the same period in 2016. Interest income
for the third quarter of 2017 was $22.1 million compared to $18.8
million for the same period in 2016. Interest income for the nine months
ended September 30, 2017 was $64.3 million compared to $56.2 million for
the same period in 2016. The increases in interest income for the three
and nine months ended September 30, 2017 compared to the same periods in
2016 were primarily related to increases in the average balances of and
the yields earned on loans receivable and investment securities.
Interest expense for the third quarter of 2017 was $3.0 million compared
to $2.0 million for the same period in 2016. Interest expense for the
nine months ended September 30, 2017 was $7.7 million compared to $5.8
million for the same period in 2016. The increases in interest expense
for the three and nine months ended September 30, 2017 compared to the
same periods in 2016 were primarily due to increases in the average
balance of borrowings and increases in the average rate paid on deposits.

Net interest margin measured 3.70% for the third quarter of 2017,
compared to 3.78% for the same period in 2016. Net interest margin for
the nine months ended September 30, 2017 was 3.83%, compared to 3.89%
for the same period in 2016. The average yield on interest-earning
assets for the third quarter of 2017 was 4.28% compared to 4.23% for the
same period in 2016 and was 4.35% for the nine months ended September
30, 2017 compared to 4.34% for the same period in 2016. The average cost
of interest-bearing liabilities increased to 0.66% for the third quarter
of 2017, compared to 0.53% for the same period in 2016. The average cost
of total interest-bearing liabilities for the nine months ended
September 30, 2017 was 0.60%, compared to 0.52% for the same period in
2016.

Noninterest income is generated primarily through deposit account fee
income, profit on sale of mortgage loans, and earnings on life insurance
policies. Total noninterest income for the three months ended September
30, 2017 decreased to $4.2 million from $4.3 million for the same period
in 2016, a 3% decrease. Total noninterest income of $13.1 million for
the nine months ended September 30, 2017 increased from $12.3 million
for the same period in 2016, a 6% increase. The decrease in the three
month comparison period was primarily due to a decrease in gain on sales
of loans due to a decrease in the number of loans sold during the
quarter, slightly offset by an increase in deposit fee income. The
increase in the nine month comparison period was primarily due to
increases in deposit fee income and earnings on bank owned life
insurance, offset by a decrease in gain on sales of loans.

Total noninterest expense increased $860,000, or 6%, for the third
quarter of 2017 compared to the second quarter of 2016. Total
noninterest expense decreased $2.2 million or 5% during the nine months
ended September 30, 2017 compared to the same period in 2016. The
increase in total noninterest expense for the three month comparative
period was primarily related to expenses of $1.3 million associated with
the Company's pending transaction with Arvest. The decrease in total
noninterest expense for the nine month comparative period was primarily
related to the Company's efforts to improve its operational efficiency
as well as a decrease in the number of branches.

Income tax provision decreased by $312,000, or 13%, for the third
quarter of 2017 compared to the third quarter of 2016, primarily due to
a tax rate adjustment of the federal deferred tax asset. Income tax
provision for the nine months ended September 30, 2017 increased by $2.8
million or 60% compared to the same period in 2016, primarily due to an
increase in taxable income in 2017 partially offset by the recording of
a valuation allowance reversal of $897,000 on deferred tax assets in the
second quarter of 2016. The Company's effective tax rate for the quarter
ended September 30, 2017 was 28.8% compared to 33.5% for the quarter
ended September 30, 2016. The Company's effective tax rate for the nine
months ended September 30, 2017 was 30.8% compared to 27.0% for the nine
months ended September 30, 2016.

ASSET QUALITY

The ratio of nonperforming assets to total assets decreased to 0.85% at
September 30, 2017, compared to 0.95% at September 30, 2016. The
allowance for loan losses represented 1.09% of total loans at September
30, 2017 compared to 1.00% at September 30, 2016. The ratio of the
allowance for loan losses to nonperforming loans was 105% at September
30, 2017, compared to 86% at September 30, 2016. Annualized net
charge-offs as a percentage of average loans for the quarter ended
September 30, 2017 was 0.06% compared to 0.07% for the quarter ended
September 30, 2016. Provision for loan losses increased from $643,000
for the third quarter of 2016 to $1.9 million for the third quarter of
2017. Provision for loan losses for the nine months ended September 30,
2017 increased to $4.0 million from $1.7 million for the same period in
2016. The increase in the provision was primarily attributable to loan
originations and migration of acquired loans from the purchased loan
portfolio to the originated loan portfolio.

About Bear State Financial, Inc.

Bear State Financial, Inc. is the parent company for Bear State Bank.
Bear State Financial, Inc. common stock is traded on the NASDAQ Global
Market under the symbol BSF. For more information on Bear State
Financial, Inc. please visit www.bearstatefinancial.com.
Its principal subsidiary, Bear State Bank, is a community oriented
financial institution providing a broad line of financial products to
individuals and business customers. Bear State Bank operates 42
branches, three personalized technology centers equipped with
interactive teller machines and three loan production offices throughout
Arkansas, Southwest Missouri and Southeast Oklahoma.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures in addition to
results presented in accordance with accounting principles generally
accepted in the United States ("GAAP"). These non-GAAP measures provide
supplemental perspectives on operating results, performance trends, and
financial condition. They are not a substitute for GAAP measures and
they should be read and used in conjunction with the Company's GAAP
financial information. In all cases, it should be understood that
non-GAAP per share measures do not depict amounts that accrue directly
to the benefit of shareholders. The Company utilizes the non-GAAP
measure of core earnings, which management believes is useful in
evaluating operating trends from period to period, including components
of core revenue and core expense. Core earnings and its components
exclude amounts that the Company views as unrelated to its normalized
operations. Management and the Board of Directors also utilize core
earnings or components of core earnings and related ratios in the
preparation of the Company's operating budgets, monthly financial
performance reporting and investor presentations of Company performance
and in the calculation of annual performance-based incentives for
certain members of management. In 2016, the Company modified its
definition of core earnings to clarify that a material amount of net
gains, losses or impairments to the Company's real estate owned ("REO")
portfolio during an applicable reporting period will be considered a
non-core item and will thus be excluded from core earnings. Immaterial
net gains, losses and impairments to the REO portfolio, however, will
not be considered a non-core item and will not be excluded from core
earnings. The Company believes that while activity within the REO
portfolio is a recurring aspect of its core business, material changes
to the portfolio are not indicative of the Company's normalized banking
operations.

The Company also reports certain non-GAAP equity measures (including
tangible stockholders' equity, tangible book value per common share and
related ratios) that exclude intangible assets from their calculation.
Management believes that these non-GAAP tangible measures provide
additional useful information about the capital strength of the Company
to the investment community, as these measures are widely used by
industry analysts for banks and bank holding companies with prior merger
and acquisition activity. A reconciliation of non-GAAP financial
measures to GAAP measures is included in the accompanying financial
tables.

Forward-Looking Statements

This press release contains statements about future events that
constitute forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact are forward-looking statements. Such
forward-looking statements may be identified by reference to a future
period or periods, or by the use of forward-looking terminology, such as
"may," "will," "believe," "plan," "intend," "anticipate," "expect," or
similar terms or variations of those terms, or the negative of those
terms. These forward-looking statements include, without limitation,
statements relating to the terms and closing of the proposed transaction
between the Company and Arvest.
Forward-looking statements are
subject to numerous risks and uncertainties, including, but not limited
to, those risks previously disclosed in the Company's filings with the
SEC, the Company and Arvest ability to consummate the Merger or satisfy
the conditions to the completion of the Merger, including the receipt of
shareholder approval, the receipt of regulatory approvals required for
the Merger on the terms expected or on the anticipated schedule; the
failure of the proposed Merger to close for any other reason; occurrence
of any event, change or other circumstances that could give rise to the
termination of the Agreement; the effect of the announcement of the
Merger on customer relationships and operating results (including,
without limitation, difficulties in maintaining relationships with
employees or customers); the diversion of management time on transaction
related issues;
general economic conditions, changes in interest
rates, regulatory considerations, competition, technological
developments, retention and recruitment of qualified personnel, and
market acceptance of Bear State Bank's pricing, products and services,
and with respect to the loans extended by Bear State Bank and real
estate owned, market prices of the property securing loans and the costs
of collection and sales. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak
only as of the date made. The Company does not undertake and
specifically declines any obligation to publicly release the result of
any revisions that may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to
reflect the occurrence of anticipated or unanticipated events.

 
BEAR STATE FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA – UNAUDITED
(In thousands)
                   
September June March December September
2017 2017 2017 2016 2016
 

Balance sheet data, at quarter end:

Commercial real estate - mortgage loans $ 661,155 $ 632,149 $ 604,888 $ 587,633 $ 566,302
Consumer real estate - mortgage loans 393,082 396,550 397,898 389,107 385,126
Farmland 99,189 97,881 98,672 94,018 94,187
Construction and land development 147,071 131,046 129,078 125,785 119,433
Commercial and industrial loans 373,464 364,194 370,961 323,096 312,957
Consumer and other 36,859 36,624 36,100 36,265 36,645
Total loans 1,710,820 1,658,444 1,637,597 1,555,904 1,514,650
Loans held for sale 7,258 7,470 4,735 8,954 13,995
Allowance for loan losses (18,682 ) (17,083 ) (16,821 ) (15,584 ) (15,112 )
Investment securities 273,073 275,805 268,981 229,212 209,508
Goodwill 40,196 40,196 40,196 40,196 40,196
Core deposit intangible, net 9,587 9,842 10,098 10,353 10,608
Total assets 2,241,459 2,239,090 2,174,041 2,053,175 2,007,938
Noninterest-bearing deposits 232,004 255,806 221,891 223,038 239,831
Total deposits 1,589,136 1,703,246 1,669,066 1,644,080 1,653,523
Short term borrowings 21,629 17,856 17,831 19,114 13,511
FHLB advances 359,791 254,928 225,072 129,992 80,138
Other borrowings 12,525 11,600 13,506 22,012 22,518
Total stockholders' equity 249,209 244,533 237,912 233,427 232,403
 

Balance sheet data, quarterly averages:

Total loans $ 1,706,952 $ 1,659,830 $ 1,607,892 $ 1,536,703 $ 1,522,106
Investment securities 276,578 271,402 248,355 217,522 202,868
Total earning assets 2,049,894 1,990,562 1,886,813 1,810,802 1,768,892
Goodwill 40,196 40,196 40,196 40,196 40,196
Core deposit intangible, net 9,754 10,008 10,265 10,519 10,775
Total assets 2,246,331 2,190,240 2,092,022 2,019,792 1,981,582
Noninterest-bearing deposits 225,383 220,511 213,467 229,296 239,886
Interest-bearing deposits 1,411,163 1,435,630 1,414,137 1,416,991 1,395,501
Total deposits 1,636,546 1,656,141 1,627,604 1,646,287 1,635,387
Short term borrowings 20,375 15,463 15,549 17,983 13,699
FHLB advances 321,631 258,658 190,965 94,336 73,418
Other borrowings 12,193 11,898 16,247 22,161 22,634
Total stockholders' equity 248,559 242,263 236,247 234,339 231,758
 

Statement of income data for the three
months ended:

Interest income $ 22,094 $ 21,153 $ 21,048 $ 19,212 $ 18,849
Interest expense   2,958     2,496     2,214     2,105     2,014  
Net interest income 19,136 18,657 18,834 17,107 16,835
Provision for loan losses   1,863     821     1,349     851     643  
Net interest income after provision for loan losses 17,273 17,836 17,485 16,256 16,192
Noninterest income 4,191 4,694 4,176 4,394 4,333
Noninterest expense   14,260     12,795     14,444     13,625     13,400  
Income before taxes 7,204 9,735 7,217 7,025 7,125
Income tax provision   2,072     3,078     2,300     2,192     2,384  
Net income $ 5,132   $ 6,657   $ 4,917   $ 4,833   $ 4,741  
 
 
BEAR STATE FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA – UNAUDITED
 
                   
September June March December September
2017 2017 2017 2016 2016
 

Common stock data:

Net income per share, diluted $ 0.14 $ 0.18 $ 0.13 $ 0.13 $ 0.13
Core earnings per share, diluted $ 0.16 $ 0.17 $ 0.15 $ 0.13 $ 0.11
Book value per share $ 6.61 $ 6.48 $ 6.31 $ 6.21 $ 6.18
Tangible book value per share $ 5.29 $ 5.16 $ 4.98 $ 4.86 $ 4.83
Diluted weighted average shares outstanding 37,921,016 37,883,264 37,880,022 37,833,124 37,807,419
End of period shares outstanding 37,729,837 37,713,171 37,689,939 37,618,597 37,600,986
 

Profitability and performance ratios:

Return on average assets 0.91 % 1.22 % 0.95 % 0.95 % 0.95 %
Core return on average assets 1.04 % 1.15 % 1.14 % 0.95 % 0.85 %
Return on average equity 8.19 % 11.02 % 8.44 % 8.18 % 8.12 %
Core return on average equity 9.38 % 10.36 % 10.06 % 8.23 % 7.28 %
Core return on average tangible equity 11.74 % 13.07 % 12.80 % 10.50 % 9.34 %
Net interest margin 3.70 % 3.76 % 4.05 % 3.75 % 3.78 %
Noninterest income to total revenue 17.97 % 20.10 % 18.15 % 20.44 % 20.47 %
Noninterest income to average assets 0.74 % 0.86 % 0.81 % 0.86 % 0.87 %
Noninterest expense to average assets 2.52 % 2.34 % 2.80 % 2.68 % 2.68 %
Efficiency ratio 61.13 % 54.79 % 62.77 % 63.37 % 63.30 %
Core efficiency ratio(1) 54.56 % 55.70 % 56.00 % 63.18 % 66.99 %
Average loans to average deposits 104.30 % 100.22 % 98.79 % 93.34 % 93.07 %
Securities to total assets 12.18 % 12.32 % 11.52 % 10.49 % 9.84 %
 

Asset quality ratios:

Allowance for loan losses to total loans 1.09 % 1.03 % 1.03 % 1.00 % 1.00 %
Allowance for loan losses to non-performing loans 104.56 % 104.00 % 94.20 % 89.69 % 86.41 %
Nonperforming loans to total loans 1.04 % 0.99 % 1.09 % 1.12 % 1.15 %
Nonperforming assets to total assets 0.85 % 0.78 % 0.87 % 0.94 % 0.95 %
Annualized net charge offs to average total loans 0.06 % 0.14 % 0.03 % 0.10 % 0.07 %
 

Regulatory capital ratios:

Tier 1 leverage ratio 9.16 % 9.18 % 9.27 % 9.47 % 9.37 %
Common equity tier 1 capital ratio 10.83 % 10.85 % 10.58 % 11.04 % 11.00 %
Tier 1 capital to risk weighted assets 10.83 % 10.85 % 10.58 % 11.04 % 11.00 %
Total capital to risk weighted assets 11.84 % 11.80 % 11.51 % 11.96 % 11.92 %
 
(1) Core efficiency ratio is a non-GAAP ratio that is calculated by
dividing core noninterest expense by total core revenue (the sum of
net interest income and core noninterest income). Other companies
may define and calculate this data differently.
 
 

BEAR STATE FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share data)
(Unaudited)
       

September 30,
2017

December 31,
2016

ASSETS
Cash and cash equivalents $ 80,571 $ 78,789
Interest-bearing time deposits in banks 4,075 4,571
Investment securities:
Available for sale securities, at fair value 205,392 188,476
Held to maturity securities, at amortized cost (fair value of
$42,446 and $25,090, respectively)
42,879 26,977
Other investment securities, at cost 24,802 13,759
Loans receivable, net of allowance of $18,682 and $15,584,
respectively
1,692,463 1,540,805
Loans held for sale 7,258 8,954
Accrued interest receivable 8,027 7,006
Real estate owned, net 1,461 1,945
Office properties and equipment, net 51,353 54,049
Office properties and equipment held for sale 4,669 5,337
Cash surrender value of life insurance 57,794 57,267
Goodwill 40,196 40,196
Core deposit intangibles, net 9,587 10,353
Deferred tax asset, net 7,277 11,619
Prepaid expenses and other assets   3,655   3,072  
 
TOTAL $ 2,241,459 $ 2,053,175  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
LIABILITIES:
Noninterest bearing deposits $ 232,004 $ 223,038
Interest bearing deposits   1,357,132   1,421,042  
Total deposits 1,589,136 1,644,080
Securities sold under agreement to repurchase 21,629 19,114
Other borrowings 372,316 152,004
Other liabilities   9,169   4,550  
 
Total liabilities   1,992,250   1,819,748  
 
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value—5,000,000 shares authorized; none
issued at September 30, 2017 or December 31, 2016
-- --
Common stock, $0.01 par value—100,000,000 shares authorized;
37,729,837 and 37,618,597 shares issued and outstanding at September
30, 2017 and December 31, 2016, respectively
377 376
Additional paid-in capital 210,049 209,274
Accumulated other comprehensive loss 256 (1,436 )
Retained earnings   38,527   25,213  
 
Total stockholders' equity   249,209   233,427  
 
TOTAL $ 2,241,459 $ 2,053,175  
 
 

BEAR STATE FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except earnings per share)
(Unaudited)
 
    Three Months Ended     Nine Months Ended
September 30,     September 30, September 30,     September 30,
2017 2016 2017 2016
INTEREST INCOME:
Loans receivable $ 20,184 $ 17,808 $ 59,055 $ 53,012
Investment securities:
Taxable 726 467 2,015 1,477
Nontaxable 950 508 2,773 1,456
Other   234     66     452     230  
Total interest income   22,094     18,849     64,295     56,175  
 
INTEREST EXPENSE:
Deposits 1,855 1,662 5,272 4,785
Other borrowings   1,103     352     2,396     1,027  
Total interest expense   2,958     2,014     7,668     5,812  
 
NET INTEREST INCOME 19,136 16,835 56,627 50,363
 
PROVISION FOR LOAN LOSSES   1,863     643     4,034     1,665  
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   17,273     16,192     52,593     48,698  
 
NONINTEREST INCOME:
Net gain on sales of investment securities -- 21 48 19
Deposit fee income 2,519 2,253 7,509 6,639
Earnings on life insurance policies 406 414 1,625 1,247
Gain on sales of loans 1,003 1,368 3,071 3,454
Other   263     277     808     960  
 
Total noninterest income   4,191     4,333     13,061     12,319  
 
NONINTEREST EXPENSES:
Salaries and employee benefits 6,913 7,618 21,767 23,725
Net occupancy expense 1,681 1,826 5,255 5,652
Real estate owned, net (38 ) (381 ) (31 ) (379 )
FDIC insurance 248 224 774 870
Amortization of intangible assets 255 255 766 766
Data processing 1,415 1,341 4,307 4,180
Professional fees 408 545 1,431 1,700
Advertising and public relations 342 419 893 1,284
Postage and supplies 207 273 631 889
Other   2,829     1,280     5,705     5,036  
 
Total noninterest expenses   14,260     13,400     41,498     43,723  
 
INCOME BEFORE INCOME TAXES 7,204 7,125 24,156 17,294
 
INCOME TAX PROVISION   2,072     2,384     7,450     4,668  
 
NET INCOME $ 5,132   $ 4,741   $ 16,706   $ 12,626  
 
Basic earnings per common share $ 0.14   $ 0.13   $ 0.44   $ 0.34  
 
Diluted earnings per common share $ 0.14   $ 0.13   $ 0.44   $ 0.33  
 
       

BEAR STATE FINANCIAL, INC.

AVERAGE CONSOLIDATED BALANCE SHEETS and NET INTEREST ANALYSIS -
UNAUDITED
(Dollars in thousands)
 

 

    Three Months Ended September 30,
2017 2016
Average

Balance

    Interest Average

Yield/

Cost

Average

Balance

    Interest     Average

Yield/

Cost

(Dollars in Thousands)
Interest-earning assets:
Loans receivable(1) $ 1,706,952 $ 20,184 4.69 % $ 1,522,106 $ 17,808 4.64 %
Investment securities(2) 276,578 1,676 2.40 202,868 975 1.91
Other interest-earning assets   66,364   234   1.40   43,918   66 0.60
Total interest-earning assets 2,049,894 22,094 4.28 1,768,892 18,849 4.23
Noninterest-earning assets   196,437   212,690
Total assets $ 2,246,331 $ 1,981,582
Interest-bearing liabilities:
Deposits $ 1,411,163 1,855 0.52 $ 1,395,501 1,662 0.47
Other borrowings   354,199   1,103   1.24   109,751   352 1.27
Total interest-bearing liabilities 1,765,362 2,958 0.66 1,505,252 2,014 0.53
Noninterest-bearing deposits 225,383 239,886
Noninterest-bearing liabilities   7,027   4,686
Total liabilities 1,997,772 1,749,824
Stockholders' equity   248,559   231,758

Total liabilities and stockholders' equity

$ 2,246,331 $ 1,981,582
     
Net interest income $ 19,136   $ 16,835
Net earning assets $ 284,532 $ 263,640
Interest rate spread 3.62 %   3.70 %
Net interest margin 3.70 %   3.78 %

Ratio of interest-earning assets to Interest-bearing liabilities

 

116.12 %   117.51 %
 

 

Nine Months Ended September 30,
2017 2016
Average

Balance

Interest Average

Yield/

Cost

Average

Balance

Interest Average

Yield/

Cost

(Dollars in Thousands)
Interest-earning assets:
Loans receivable(1) $ 1,658,587 $ 59,055 4.76 % $ 1,492,010 $ 53,012 4.75 %
Investment securities(2) 265,549 4,788 2.41 199,324 2,933 1.97
Other interest-earning assets   52,218   452   1.16   40,863   230 0.75
Total interest-earning assets 1,976,354 64,295 4.35 1,732,197 56,175 4.34
Noninterest-earning assets   200,409   214,644
Total assets $ 2,176,763 $ 1,946,841
Interest-bearing liabilities:
Deposits $ 1,420,299 5,272 0.50 $ 1,386,540 4,785 0.46
Other borrowings   288,140   2,396   1.11   103,764   1,027 1.32
Total interest-bearing liabilities 1,708,439 7,668 0.60 1,490,304 5,812 0.52
Noninterest-bearing deposits 219,831 225,905
Noninterest-bearing liabilities   6,092   3,043
Total liabilities 1,934,362 1,719,252
Stockholders' equity   242,401   227,589

Total liabilities and stockholders' equity

$ 2,176,763 $ 1,946,841
     
Net interest income $ 56,627   $ 50,363
Net earning assets $ 267,915 $ 241,893
Interest rate spread 3.75 %   3.82 %
Net interest margin 3.83 %   3.89 %

Ratio of interest-earning assets to Interest-bearing liabilities

115.68 %   116.23 %
 

(1) Includes nonaccrual loans.

(2) Includes FHLB and FRB stock.

 
 

BEAR STATE FINANCIAL, INC.

ASSET QUALITY ANALYSIS - UNAUDITED
(Dollars in thousands)
 
    September 30, 2017     December 31, 2016    

Net (2)

   

% Total
Assets

Net (2)

   

% Total
Assets

Increase
(Decrease)

Nonaccrual Loans:
One- to four-family residential $ 6,891 0.30 % $ 6,709 0.33 % $ 182
Nonfarm nonresidential 8,128 0.35 % 5,177 0.25 % 2,951
Farmland 1,174 0.05 % 783 0.04 % 391
Construction and land development 207 0.01 % 463 0.02 % (256 )
Commercial 1,300 0.06 % 4,071 0.20 % (2,771 )
Consumer   167 0.01 %   173 0.01 %   (6 )
 
Total nonaccrual loans 17,867 0.78 % 17,376 0.85 % 491
 
Accruing loans 90 days or more past due -- -- -- -- --
 
Real estate owned   1,461 0.07 %   1,945 0.09 %   (484 )
 
Total nonperforming assets 19,328 0.85 % 19,321 0.94 % 7
Performing restructured loans   1,180 0.05 %   4,804 0.23 %   (3,624 )
 
Total nonperforming assets and performing restructured loans (1) $ 20,508 0.90 % $ 24,125 1.17 % $ (3,617 )

___________________

(1) The table does not include substandard loans which were judged
not to be impaired totaling $21.6 million at September 30, 2017
and $30.7 million at December 31, 2016 or acquired ASC 310-30
purchased credit impaired loans which are considered performing.

(2) Loan balances are presented net of undisbursed loan funds,
partial charge-offs and interest payments recorded as reductions
in principal balances for financial reporting purposes.

 
 
BEAR STATE FINANCIAL, INC.
CALCULATION OF RETURN ON AVERAGE TANGIBLE COMMON STOCKHOLDERS'
EQUITY – UNAUDITED
(Dollars in thousands)
 
    For the Quarter Ending
9/30/2017     6/30/2017     3/31/2017     12/31/2016     9/30/2016
Net income available to common stockholders $ 5,132   $ 6,657   $ 4,917   $ 4,833   $ 4,741  
Average common stockholders' equity 248,559 242,263 236,247 234,339 231,758
Less average intangible assets:
Goodwill (40,196 ) (40,196 ) (40,196 ) (40,196 ) (40,196 )
Core deposit intangible, net of accumulated amortization   (9,754 )   (10,008 )   (10,265 )   (10,519 )   (10,775 )
 
Average tangible common stockholders' equity $ 198,609   $ 192,059   $ 185,786   $ 183,624   $ 180,787  
 

Annualized return on average tangible common stockholders' equity

  10.3 %   13.9 %   10.7 %   10.4 %   10.4 %
 
 
BEAR STATE FINANCIAL, INC.
CALCULATION OF TANGIBLE BOOK VALUE PER COMMON SHARE - UNAUDITED
(In thousands, except per share data)
 
For the Quarter Ending
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Total common stockholder's equity $ 249,209 $ 244,533 $ 237,912 $ 233,427 $ 232,403
Less intangible assets:
Goodwill (40,196 ) (40,196 ) (40,196 ) (40,196 ) (40,196 )
Core deposit intangible, net of accumulated amortization   (9,587 )   (9,842 )   (10,098 )   (10,353 )   (10,608 )
Total intangible assets   (49,783 )   (50,038 )   (50,294 )   (50,549 )   (50,804 )
Total tangible common stockholder's equity $ 199,426   $ 194,495   $ 187,618   $ 182,878   $ 181,599  
 
Common shares outstanding   37,730     37,713     37,690     37,619     37,601  
 
Tangible book value per common share $ 5.29   $ 5.16   $ 4.98   $ 4.86   $ 4.83  
 
 
BEAR STATE FINANCIAL, INC.
RECONCILIATION OF NON-GAAP SELECTED CONSOLIDATED FINANCIAL DATA -
UNAUDITED
(In thousands, except share data)
                     
For the Quarter Ending
September June March December September
2017 2017 2017 2016 2016
Net income $ 5,132 $ 6,657 $ 4,917 $ 4,833 $ 4,741
Adj: Loss (gain) on sale of securities, net -- (37 ) (11 ) -- (21 )
Adj: Claim on bank owned life insurance -- (395 ) -- -- --
Adj: Merger, acquisition and integration expenses 1,253 -- -- -- --
Adj: Branch restructure expense (1) 279 29 1,565 41 (323 )
Adj: Net provision/loss/(gain) on real estate owned -- -- -- -- (444 )
Adj: Deferred tax asset tax rate adjustment (186 ) -- -- -- --
Tax effect of adjustments (2)           (600 )       3         (608 )       (16 )       302  
Total core earnings   (A)     $ 5,878       $ 6,257       $ 5,863       $ 4,858       $ 4,255  
 
Total revenue $ 23,327 $ 23,351 $ 23,010 $ 21,501 $ 21,168
Adj: Loss (gain) on sale of securities, net -- (37 ) (11 ) -- (21 )
Adj: Claim on bank owned life insurance           --         (395 )       --         --         --  
Total core revenue         $ 23,327       $ 22,919       $ 22,999       $ 21,501       $ 21,147  
 
Total non-interest expense $ 14,260 $ 12,795 $ 14,444 $ 13,625 $ 13,400
Adj: Merger, acquisition and integration expenses (1,253 ) -- -- -- --
Adj: Branch restructure expense (1) (279 ) (29 ) (1,565 ) (41 ) 323
Adj: Net provision/loss/(gain) on real estate owned           --         --         --         --         444  
Total core noninterest expense         $ 12,728       $ 12,766       $ 12,879       $ 13,584       $ 14,167  
 
Total average assets (B) $ 2,246,331 $ 2,190,240 $ 2,092,022 $ 2,019,792 $ 1,981,582
Total average stockholders' equity (C) 248,559 242,263 236,247 234,339 231,758
Total average tangible stockholders' equity (D) 198,609 192,059 185,786 183,624 180,787
Total tangible stockholders' equity, period end (E) 199,426 194,495 187,618 182,878 181,599
 
Total common shares outstanding, period-end (F) 37,729,837 37,713,171 37,689,939 37,618,597 37,600,986
Diluted weighted average shares outstanding (G) 37,921,016 37,883,264 37,880,022 37,833,124 37,807,419
 
Core earnings per share, diluted (A/G) $ 0.16 $ 0.17 $ 0.15 $ 0.13 $ 0.11
Tangible book value per share, period-end (E/F) $ 5.29 $ 5.16 $ 4.98 $ 4.86 $ 4.83
 
Core return on average assets (A/B) 1.04 % 1.15 % 1.14 % 0.95 % 0.85 %
Core return on average equity (A/C) 9.38 % 10.36 % 10.06 % 8.23 % 7.28 %
Core return on average tangible equity (A/D) 11.74 % 13.07 % 12.80 % 10.50 % 9.34 %
Core efficiency ratio(3)           54.56 %       55.70 %       56.00 %       63.18 %       66.99 %

(1) This adjustment primarily consists of costs associated with
properties disposed or held for sale as a result of branch
restructuring, including net (gains) losses on sales, impairment
charges, and other expenses such as accelerated depreciation. For
the quarter ended March 31,2017, this adjustment also included
severance expense totaling $1.1 million resulting from branch and
other organizational restructure, primarily due to severance of
$0.8 million accrued upon the departure of the former CEO in
January 2017.

(2) The tax effect is calculated at the Company's blended
statutory rate of 39.14% for adjustments that impact taxable
income for periods in 2017 and 38.29% for periods ending in 2016.

(3) Core efficiency ratio is a non-GAAP ratio that is calculated
by dividing core noninterest expense by total core revenue (the
sum of net interest income and core noninterest income). Other
companies may define and calculate this data differently.

 

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