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Bear State Financial, Inc. Announces Record Earnings for 2014 and Consolidation of Bank Charters to Form Bear State Bank

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Bear State Financial, Inc. (“Bear State”) (NASDAQ:BSF) , today reported earnings of $4.8 million and earnings per diluted common share of $0.14 in the fourth quarter of 2014, compared to earnings of $199,000 or $0.01 per diluted common share in the fourth quarter of 2013, a 2,319% increase. Net income for the fourth quarter of 2014 includes an income tax benefit of $1.6 million primarily resulting from the reversal of most of the Company’s remaining valuation allowance against its deferred tax assets.

For the full year of 2014, net income was $24.3 million and earnings per diluted common share of $0.84, compared to net income of $729,000 or $0.03 per diluted common share for the full year of 2013. Net income for the full year of 2014 includes an income tax benefit of $21.9 million primarily resulting from the reversal of the Company’s valuation allowance against its deferred tax assets.

On June 13, 2014, Bear State completed its merger of First National Security Company (“First National”), the parent company for First National Bank headquartered in Hot Springs, Arkansas and Heritage Bank headquartered in Jonesboro, Arkansas. The Company’s results of operations for the twelve months ended December 31, 2014 includes results of operations for First National for the period from June 14, 2014 through December 31, 2014. Bear State’s three banks continue to progress towards more highly efficient and integrated operations. On February 13, 2015 the three banking charters were consolidated into a single charter forming Bear State Bank. The Company’s operational integration project is ongoing and includes the conversion of all bank operations to a single technology platform. The Company expects the bulk of this integration project to be completed during the second quarter of 2015.

On December 15, 2014 the Company completed an 11% stock dividend by issuing one share of common stock for every nine shares of such stock outstanding as of December 1, 2014. Total shares outstanding at December 31, 2013 were 22,268,320 and at December 31, 2014 were 33,365,845. All share and per share information in this release has been adjusted to give effect to this stock dividend.

Company reported core earnings of $3.4 million in the fourth quarter of 2014, compared to $248,000 in the fourth quarter of 2013, a 1,284% increase. The fourth quarter of 2014 included two significant non-core items. First, the Company incurred merger and rebranding related expenses of approximately $265,000. Second, the Company realized a tax benefit of $1.6 million as a result of the reversal of the majority of the remaining valuation allowance against its deferred tax asset. Collectively, the net effect of all non-core items was an increase in earnings of approximately $1.4 million, or approximately $0.04 of diluted earnings per share.

Book value per common share was $5.11 at December 31, 2014, a 60% increase from $3.20 at December 31, 2013. Tangible book value per common share was $4.12 at December 31, 2014, a 29% increase from $3.20 at December 31, 2013.

Total loan growth for the twelve months ended December 31, 2014 for each of Bear State’s three banks was as follows: First Federal Bank 12%; First National Bank 1%; Heritage Bank 18%; or 9% on a consolidated basis.

FINANCIAL CONDITION

Total assets were $1.51 billion at December 31, 2014, a 176% increase compared to $549 million at December 31, 2013. Total deposits were $1.26 billion at December 31, 2014, a 169% increase compared to $470 million at December 31, 2013. The increase in both assets and deposits was primarily due to the First National merger. Total loans, including those acquired and held for sale, were $1.06 billion at December 31, 2014, an increase of $673 million, or 173%, compared to the same period in 2013.

Common stockholders’ equity was $170 million at December 31, 2014, a 140% increase from $71 million at December 31, 2013. Tangible common stockholders’ equity was $137 million at December 31, 2014, an 93% increase from $71 million at December 31, 2013. Book value per common share was $5.11 at December 31, 2014, a 60% increase from $3.20 at December 31, 2013. Tangible book value per common share was $4.12 at December 31, 2014, a 29% increase from $3.20 at December 31, 2013. The Company’s ratio of common stockholders’ equity to total assets decreased to 11.25% at December 31, 2014, compared to 12.97% at December 31, 2013. The calculation of the Company’s tangible book value per common share, tangible common stockholders’ equity and the reconciliation to GAAP are included in the schedules accompanying this release.

RESULTS OF OPERATIONS

Fourth quarter 2014 core earnings totaled $3.4 million or $0.10 per diluted common share, compared to core earnings of $248,000 or $0.01 per diluted common share in the fourth quarter of 2013. The core return on average assets measured 0.89% and 0.18%; core return on average equity measured 8.16% and 1.37%; and core return on average tangible equity measured 10.19% and 1.37% for these periods, respectively.

GAAP earnings include what the company considers non-core items. The reconciliation of net income and core income, together with related financial measures is included in the schedules accompanying this release. Non-core items totaled $1.4 million or $0.04 per diluted common share in the most recent quarter. Including these net non-core items, fourth quarter 2014 GAAP results were earnings of $4.8 million or $0.14 per diluted common share. GAAP net income was $199,000 or $0.01 per diluted common share in the fourth quarter of 2013. The GAAP net income resulted in a GAAP return on average assets of 1.25% in the most recent quarter, compared to 0.15% in the fourth quarter of 2013.

Net interest income for the fourth quarter 2014 was $13.3 million, compared to $3.9 million for the same period in 2013. Net interest income for the twelve months ended December 31, 2014 was $37.4 million, compared to $15.0 million for the same period in 2013. Interest income for the fourth quarter of 2014 was $14.9 million compared to $4.7 million for the same period in 2013. Interest income for the twelve months ended December 31, 2014 was $42.5 million compared to $18.4 million for the same period in 2013. The increase in interest income for the three and twelve months ended December 31, 2014, compared to the comparable periods in 2013, was primarily related to increases in the average balances of loans receivable and investment securities as a result of the merger with First National, which contributed interest income of approximately $9.7 million and $22.3 million of interest income for the three and twelve month periods ending December 31, 2014 respectively. Interest expense for the fourth quarter of 2014 was $1.6 million compared to $878,000 for the same period in 2013. Interest expense for the twelve months ended December 31, 2014 was $5.1 million compared to $3.4 million for the same period in 2013. The increase in interest expense for the three and twelve months ended December 31, 2014 compared to the same period in 2013 was primarily due to an increase in the average balance of deposit accounts as a result of the First National merger.

Net interest margin measured 3.91% for the fourth quarter 2014, compared to 3.12% for the same period in 2013. Net interest margin for the twelve months ended December 31, 2014 was 3.84%, compared to 3.09% for the same period in 2013. The Company’s net interest margin increased primarily as a result of an increase in yields on loans receivable resulting from loans acquired in the First National merger. The average cost of total interest-bearing liabilities decreased to 0.55% for the fourth quarter 2014, compared to 0.78% for the same period in 2013. Average cost of total interest-bearing liabilities for the twelve months ended December 31, 2014 was 0.60%, compared to 0.77% for the same period 2013.

Noninterest income is generated primarily through deposit account fee income, profit on sale of loans, and earnings on life insurance policies. Total noninterest income of $3.4 million for the three months ended December 31, 2014 increased from $1.4 million for the same period in 2013, a 139% increase. Total noninterest income of $10.0 million for the twelve months ended December 31, 2014 increased from $5.4 million for the same period in 2013, an 85% increase. The increase in the three and twelve month comparison periods was primarily due to an increase in deposit fee income and gain on sale of loans. The increase in gain on sale of loans was due to an increase in the number of mortgage loans sold and the average profit on loans held for sale.

Total noninterest expense increased $6.3 million or 124% during the fourth quarter of 2014 compared to the fourth quarter of 2013. Total noninterest expense increased $22.4 million or 114% during the twelve months ended December 31, 2014 compared to the same period in 2013. The variances in total noninterest expense were primarily related to First National. Noninterest expense attributable to First National for the three and twelve months ended December 31, 2014 amounted to $6.5 million and $13.7 million, respectively. In addition, noninterest expenses also increased due to the election to retire certain pension liabilities, an increase in loss provision on REO, and expenses related to the First National merger. The Company’s core efficiency ratio improved to 66.54% in the fourth quarter of 2014 compared to 95.31% in the fourth quarter of 2013.

Nonperforming assets declined 27% to $14.9 million at December 31, 2014, compared to $20.6 million at December 31, 2013. Nonperforming assets were 0.98% of total assets at December 31, 2014, compared to 3.75% at December 31, 2013. The allowance for loan losses represented 1.29% of total loans at December 31, 2014, compared 3.31% at December 31, 2013. The allowance for loan losses plus discount on acquired loans to total loans was 2.42% at December 31, 2014. The ratio of the allowance for loan losses to nonperforming loans was 139.82% at December 31, 2014, compared to 106.48% at December 31, 2013. Annualized net charge-offs as a percentage of average loans for the quarter ended December 31, 2014 were 0.22% compared to 0.36% for the quarter ended December 31, 2013. Provision for loan losses increased from $0 for the fourth quarter of 2013 to $758,000 for the fourth quarter of 2014. The provision was $600,000 for the third quarter of 2014. The increase in provision is attributable to loan growth at Bear State’s three banks and a migration of the First National renewed loans from the purchased loan portfolio to the originated loan portfolio.

About Bear State Financial, Inc.

Bear State Financial is the parent company for Bear State Bank. Bear State Financial, Inc. stock is traded on the NASDAQ Global Market under the symbol BSF. For more information on Bear State Financial, please visit www.bearstatefinancial.com. Its principal subsidiary, Bear State Bank (the “Bank”), is a community oriented financial institution providing a broad line of financial products to individuals and business customers. The Bank operates 46 branch offices throughout Arkansas and Southeast Oklahoma.

Non-GAAP Financial Measures

This release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; 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, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. 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 the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding the Company’s operational integration project. 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,” “expect,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those risks previously disclosed in Bear State’s filings with the SEC, general economic conditions, changes in interest rates, regulatory considerations, competition, technological developments, retention and recruitment of qualified personnel, and market acceptance of the Bank’s pricing, products and services, and with respect to the loans extended by the Bank and real estate owned, market prices of the property securing loans and the costs of collection and sales. Bear State wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Bear State 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, except share data)
December September June December
2014 2014 2014 2013

Balance sheet data, at quarter end:

Commercial real estate – mortgage loans $ 415,155 $ 423,925 $ 390,848 $ 194,675
Consumer real estate – mortgage loans 320,254 318,508 303,413 129,230
Farmland 47,199 48,892 48,710 2,663
Construction and land development 98,594 89,165 94,084 23,891
Commercial and industrial loans 139,871 149,073 142,058 29,033
Consumer and other 33,809 33,268 32,171 4,368

Total loans

1,054,882 1,062,831 1,011,284 383,860
Allowance for loan losses (13,660 ) (12,964 ) (12,392 ) (12,711 )
Investment securities 174,218 190,376 213,557 70,828
Goodwill 25,717 25,801 25,610
Core deposit intangible, net 7,338 7,494 7,651
Total assets 1,514,595 1,528,387 1,448,205 548,872
Noninterest-bearing deposits 180,136 169,962 167,600 19,427
Total deposits 1,263,797 1,277,306 1,231,414 469,725
Short term borrowings 12,083 12,081 20,270
FHLB advances 43,095 49,783 34,127 5,941
Other borrowings 18,163 19,519 13,750

Total stockholders’ equity

170,454 165,419 142,995 71,187

Balance sheet data, quarterly averages:

Total loans $ 1,059,636 $ 1,045,076 $ 505,754 $ 376,932
Investment securities 183,735 213,813 101,562 72,440
Total earning assets 1,350,646 1,309,259 665,536 492,769
Goodwill 25,773 25,612 4,497
Core deposit intangible, net 7,441 7,773 1,512
Total assets 1,525,455 1,493,527 748,967 539,926
Noninterest-bearing deposits 178,286 170,310 56,988 19,052
Interest-bearing deposits 1,106,867 1,096,212 587,429 443,469
Total deposits 1,285,153 1,266,522 644,417 462,521
Short term borrowings 11,992 14,763 2,918
FHLB Advances 37,942 47,559 10,953 3,559
Other borrowings 19,552 14,675 1,338

Total stockholders’ equity

166,793 145,737 86,613 71,764

Statement of operation data for the three months ended:

Interest income $ 14,945 $ 16,223 $ 6,568 $ 4,748
Interest expense 1,627 1,567 1,050 878
Net interest income 13,318 14,656 5,518 3,870
Provision for loan losses 758 600 230
Net interest income after provision for loan losses 12,560 14,056 5,288 3,870
Noninterest income 3,382 3,631 1,825 1,413
Noninterest expense 11,387 15,324 10,019 5,084
Income before taxes 4,555 2,363 (2,906 ) 199
Income tax expense (benefit) (259 ) (20,312 )
Net income $ 4,814 $ 22,675 $ (2,906 ) $ 199
BEAR STATE FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA – UNAUDITED
(In thousands, except share data)
December September June December
2014 2014 2014 2013

Common stock data:

Core earnings per share, diluted $ 0.10 $ 0.12 $ 0.04 $ 0.01
Net income per share, diluted $ 0.14 $ 0.68 $ (0.12 ) $ 0.01
Tangible book value per share $ 4.12 $ 3.96 $ 3.29 $ 3.20
Book value per share $ 5.11 $ 4.96 $ 4.29 $ 3.20
Diluted weighted average shares outstanding 33,508,230 33,432,486 24,466,899 23,208,554
End of period shares outstanding 33,365,845 33,366,345 33,362,928 22,268,320

Profitability and performance ratios:

Core return on average assets 0.89 % 1.09 % 0.54 % 0.18 %
Return on average assets 1.25 % 6.02 % -1.56 % 0.15 %
Core return on average equity 8.16 % 11.12 % 4.65 % 1.37 %
Core return on tangible equity 10.19 % 14.42 % 5.00 % 1.37 %
Return on average equity 11.45 % 61.73 % -13.46 % 1.10 %
Net interest margin 3.91 % 4.44 % 3.33 % 3.12 %
Noninterest income to total revenue 20.25 % 19.86 % 24.85 % 26.75 %
Noninterest income to average assets 0.88 % 0.96 % 0.98 % 1.04 %
Noninterest expense to average assets 2.96 % 4.07 % 5.37 % 3.74 %
Efficiency ratio(1) 66.54 % 77.62 % 83.19 % 95.31 %
Average loans to average deposits 82.45 % 82.52 % 78.48 % 81.50 %
Securities to total assets 11.50 % 12.46 % 14.75 % 12.90 %

Asset quality ratios:

Allowance for loan losses to total loans 1.29 % 1.22 % 1.23 % 3.31 %
Allowance for loan losses to non-performing loans 139.82 % 136.79 % 134.68 % 106.48 %
Nonperforming loans to total loans 0.93 % 0.89 % 0.91 % 3.11 %
Nonperforming assets to total assets 0.96 % 0.98 % 1.07 % 3.75 %
Annualized net charge offs to average total loans 0.22 % 0.01 % 0.25 % 0.36 %

Capital ratios:

Core Capital to Adjusted Tangible Assets 8.29 % 8.11 % 7.54 % 12.90 %
Total Capital to Risk-Weighted Assets 12.11 % 11.45 % 10.85 % 18.68 %
Tier I Capital to Risk-Weighted Assets 10.89 % 10.31 % 10.31 % 17.40 %
(1) Efficiency ratio is a non-GAAP ratio that is calculated by dividing core noninterest expense by the sum of net interest income and noninterest income. Other companies may define and calculate this data differently.

BEAR STATE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION – UNAUDITED
DECEMBER 31, 2014 AND 2013
(In thousands, except share data)
ASSETS 2014 2013
Cash and cash equivalents:
Cash and collection items $ 25,971 $ 6,242
Interest bearing deposits with banks 87,115 17,728
Total cash and cash equivalents 113,086 23,970
Interest bearing time deposits in banks 12,421 24,118
Investment securities, available for sale 174,218 70,828
Other investment securities, at cost 5,864 457

Loans receivable, net of allowance at December 31, 2014 and 2013, of $13,660 and $12,711, respectively

1,041,222 371,149
Loans held for sale 6,409 4,205
Accrued interest receivable 4,485 1,473
Real estate owned – net 4,792 8,627
Office properties and equipment – net 50,332 18,769
Cash surrender value of life insurance 44,130 23,811
Goodwill 25,717
Core deposit tangible, net 7,338
Deferred tax asset, net 20,697
Prepaid expenses and other assets 3,884 1,465
TOTAL $ 1,514,595 $ 548,872
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing $ 180,136 $ 19,427
Interest bearing 1,083,661 450,298
Total deposits 1,263,797 469,725
Short term borrowings 12,083
Other borrowings 61,258 5,941
Other liabilities 7,003 2,019
Total liabilities $ 1,344,141 $ 477,685
STOCKHOLDERS’ EQUITY:

Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued at December 31, 2014 and 2013

$

$

Common stock, $0.01 par value-100,000,000 and 30,000,000 shares authorized at December 31, 2014 and 2013, respectively; 33,365,845 and 22,268,320 (as adjusted) shares issued and outstanding at December 31, 2014 and 2013, respectively 334 200
Additional paid-in capital 169,543 92,740
Accumulated other comprehensive income (loss) 577 (467 )
Accumulated deficit (21,286 )
Total stockholders’ equity 170,454 71,187
TOTAL $ 1,514,595 $ 548,872

BEAR STATE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME – UNAUDITED
YEARS ENDED DECEMBER 31, 2014 AND 2013
(In thousands, except earnings per share and share data)
Three Months Ended Twelve Months Ended

December 31,
2014

December 31,
2013

December 31,
2014

December 31,
2013

INTEREST INCOME:
Loans receivable $ 14,084 $ 4,119 $ 39,465 $ 16,202
Investment securities:
Taxable 299 226 1,076 482
Nontaxable 445 292 1,514 1,189
Other 117 111 436 492
Total interest income 14,945 4,748 42,491 18,365
INTEREST EXPENSE:
Deposits 1,362 861 4,538 3,339
Other borrowings 265 17 600 53
Total interest expense 1,627 878 5,138 3,392
NET INTEREST INCOME 13,318 3,870 37,353 14,973
PROVISION FOR LOAN LOSSES 758 1,588

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

12,560 3,870 35,765 14,973
NONINTEREST INCOME:
Net gain on sales and calls of investment securities 1 31 25
Deposit fee income 1,902 708 5,349 3,059
Earnings on life insurance policies 368 204 1,126 808
Gain on sales of loans 851 377 2,774 1,103
Other 260 124 759 431
Total noninterest income 3,382 1,413 10,039 5,426
NONINTEREST EXPENSES:
Salaries and employee benefits 6,025 2,983 21,819 11,167
Net occupancy expense 1,539 563 4,391 2,373
Real estate owned, net (71 ) 147 1,387 229
FDIC insurance 259 109 753 589
Amortization of intangible assets 157 339
Data processing 1,096 386 6,254 1,495
Professional fees 223 95 867 613
Advertising and public relations 561 73 1,354 288
Postage and supplies 248 100 712 408
Other 1,350 628 4,192 2,497
Total noninterest expenses 11,387 5,084 42,068 19,659
INCOME BEFORE INCOME TAXES 4,555 199 3,736 740
INCOME TAX PROVISION (BENEFIT) (259 ) (20,570 ) 11
NET INCOME $ 4,814 $ 199 $ 24,306 $ 729
Basic earnings per common share $ 0.14 $ 0.01 $ 0.86 $ 0.03
Diluted earnings per common share $ 0.14 $ 0.01 $ 0.84 $ 0.03

BEAR STATE FINANCIAL, INC.

AVERAGE CONSOLIDATED BALANCE SHEETS and NET INTEREST ANALYSIS – UNAUDITED

(In thousands)

Three Months Ended December 31,
2014 2013

Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

(Dollars in Thousands)
Interest-earning assets:
Loans receivable(1) $ 1,059,636 $ 14,084 5.27% $ 376,932 $ 4,119 4.34%
Investment securities(2) 183,735 744 1.61 72,440 519 2.84
Other interest-earning assets 107,275 117 0.43 43,397 110 1.02
Total interest-earning assets 1,350,646 14,945 4.39 492,769 4,748 3.82
Noninterest-earning assets 174,809 47,157
Total assets $ 1,525,455 $ 539,926
Interest-bearing liabilities:
Deposits $ 1,106,867 1,362 0.49 $ 443,469 861 0.77
Other borrowings 69,486 265 1.51 3,559 17 1.85
Total interest-bearing liabilities 1,176,353 1,627 0.55 447,028 878 0.78
Noninterest-bearing deposits 178,286 19,052
Noninterest-bearing liabilities 4,023 2,082
Total liabilities 1,358,662 463,162

Stockholders’ equity

166,793 71,764

Total liabilities and stockholders’ equity

$ 1,525,455 $ 539,926
Net interest income $ 13,318 $ 3,870
Net earning assets $ 174,293 $ 45,741
Interest rate spread 3.84% 3.04%
Net interest margin 3.91% 3.12%

Ratio of interest-earning assets to Interest-bearing liabilities

114.82% 110.23%

(1) Includes nonaccrual loans.

(2) Includes FHLB of Dallas and Federal Reserve Bank stock.

Twelve Months Ended December 31,

2014 2013

Average
Balance

Interest

Average
Yield/
Cost

Average
Balance

Interest

Average
Yield/
Cost

(Dollars in Thousands)
Interest-earning assets:
Loans receivable(1) $ 756,078 $ 39,465 5.22% $ 361,094 $ 16,202 4.49%
Investment securities(2) 144,410 2,590 1.79 59,301 1,671 2.82
Other interest-earning assets 72,535 436 0.60 63,811 492 0.77
Total interest-earning assets 973,023 42,491 4.37 484,206 18,365 3.79
Noninterest-earning assets 111,447 50,325
Total assets $ 1,084,470 $ 534,531
Interest-bearing liabilities:
Deposits $ 814,251 4,538 0.56 $ 436,735 3,339 0.76
Other borrowings 42,176 600 1.42 2,615 53 2.03
Total interest-bearing liabilities 856,427 5,138 0.60 439,350 3,392 0.77
Noninterest-bearing deposits 107,066 21,710
Noninterest-bearing liabilities 3,224 2,283
Total liabilities 966,717 463,343

Stockholders’ equity

117,753 71,188

Total liabilities and stockholders’ equity

$ 1,084,470 $ 534,531
Net interest income $ 37,353 $ 14,973
Net earning assets $ 116,596 $ 44,856
Interest rate spread 3.77% 3.02%
Net interest margin 3.84% 3.09%
Ratio of interest-earning assets to

Interest-bearing liabilities

113.61% 110.21%
(1) Includes nonaccrual loans.
(2) Includes FHLB of Dallas and Federal Reserve Bank stock.

BEAR STATE FINANCIAL, INC.
ASSET QUALITY ANALYSIS – UNAUDITED
(In thousands)

December 31, 2014 December 31, 2013

Net (2)

% Total
Assets

Net (2)

% Total
Assets

Increase
(Decrease)

Nonaccrual Loans:
One- to four-family residential $ 4,959 0.33 % $ 4,258 0.77 % $ 701
Nonfarm nonresidential 3,113 0.21 % 4,057 0.75 % (944 )
Farmland 734 0.05 % 782 0.15 % (48 )
Construction and land development 624 0.04 % 2,467 0.44 % (1,843 )
Commercial 306 0.02 % 350 0.06 % (44 )
Consumer 34 24 0.01 % 10
Total nonaccrual loans 9,770 0.65 % 11,938 2.18 % (2,168 )
Accruing loans 90 days or more past due 353 0.02 % 353
Real estate owned 4,792 0.31 % 8,627 1.57 % (3,835 )
Total nonperforming assets 14,915 0.98 % 20,565 3.75 % (5,650 )
Performing restructured loans 566 0.04 % 494 0.09 % 72
Total nonperforming assets and performing restructured loans (1) $ 15,481 1.02 % $ 21,059 3.84 % $ (5,578 )
(1) The table does not include substandard loans which were judged not to be impaired totaling $24.9 million at December 31, 2014 and $2.9 million at December 31, 2013 or acquired ASC 310-30 purchased credit impaired loans which are considered performing at December 31, 2014.
(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

(in thousands)
For the Quarter ending
12/31/2014 9/30/2014 6/30/2014 12/31/2013
Net income available to common stockholders $ 4,814 $ 22,675 $ (2,906 ) $ 199

Average common stockholders’ equity

166,793 145,737 86,613 71,764
Less Average Intangible Assets:
Goodwill (25,773 ) (25,612 ) (4,497 )
Core Deposit Intangible, net of accumulated amortization (7,441 ) (7,773 ) (1,512 )

Average tangible common stockholders’ equity

$ 133,579 $ 112,352 $ 80,604 $ 71,764

Annualized return on average tangible common stockholders’ equity

14.3 % 80.1 % -14.5 % 1.1 %
BEAR STATE FINANCIAL, INC.
CALCULATION OF TANGIBLE BOOK VALUE per COMMON SHARE – UNAUDITED
(in thousands)
For the period ending
12/31/2014 9/30/2014 6/30/2014 12/31/2013

Total common stockholder’s equity

170,454 165,419 142,995 71,187
Less intangible assets:
Goodwill (25,717 ) (25,801 ) (25,610 )
Core Deposit Intangible, net of accumulated amortization (7,338 ) (7,494 ) (7,651 )
Total intangibles (33,055 ) (33,295 ) (33,261 )

Total tangible common stockholder’s equity

$ 137,399 $ 132,124 $ 109,734 $ 71,187
Common Shares Outstanding 33,366 33,367 33,363 22,268
Tangible book value per common share $ 4.12 $ 3.96 $ 3.29 $ 3.20
BEAR STATE FINANCIAL, INC.
RECONCILIATION OF NON-GAAP SELECTED CONSOLIDATED FINANCIAL DATA – UNAUDITED
(In thousands, except share data)
December September June December
2014 2014 2014 2013
Net income (loss) $ 4,814 $ 22,675 $ (2,906 ) $ 199
Adj: Gain on sale of securities, net (1 ) (30 )
Adj: Merger, acquisition and integration expenses 55 477 392 49
Adj: Rebranding expenses 219
Adj: Pension plan payment 2,900
Adj: Real estate owned provision 653 618
Adj. Data processing termination fees 3,035
Adj: Deferred tax asset valuation allowance reversal (1,550 ) (21,142 )
Tax Effect of Adjustments (105 ) (1,583 )
Total core income (A) $ 3,432 $ 4,085 $ 1,004 $ 248
Total revenue $ 16,700 $ 18,287 $ 7,343 $ 5,283
Adj: Gain on sale of securities, net (1 ) (30 )
Total core revenue $ 16,699 $ 18,257 $ 7,343 $ 5,283
Total non-interest expense $ 11,387 $ 15,324 $ 10,019 $ 5,084
Less: Merger, acquisition and integration expenses (55 ) (477 ) (392 ) (49 )
Less: Rebranding Expenses (219 )
Less: Pension plan payment (2,900 )
Less: Real estate owned provision (653 ) (618 )
Less: Data processing termination fees
Core noninterest expense $ 11,113 $ 14,194 $ 6,109 $ 5,035
Total average assets (B) $ 1,525,455 $ 1,493,527 $ 748,967 $ 539,926

Total average stockholders’ equity

(C) 166,793 145,737 86,613 71,764

Total average tangible stockholders’ equity

(D) 133,579 112,352 80,604 71,764

Total tangible stockholders’ equity, period end

(E) 137,399 132,124 109,734 71,187
Total common shares outstanding, period-end (F) 33,365,845 33,366,345 33,362,928 22,268,320
Average diluted shares outstanding (G) 33,508,230 33,432,486 24,466,899 23,208,554
Core earnings per share, diluted (A/G) 0.10 $ 0.12 $ 0.04 $ 0.01
Tangible book value per share, period-end (E/F) $ 4.12 $ 3.96 $ 3.29 $ 3.20
Core return on average assets (A/B) 0.89 % 1.09 % 0.54 % 0.18 %
Core return on average equity (A/C) 8.16 % 11.12 % 4.65 % 1.37 %
Core return on average tangible equity (A/D) 10.19 % 14.42 % 5.00 % 1.37 %
Efficiency ratio(1) 66.54 % 77.62 % 83.19 % 95.31 %

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

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