Bear State Financial Inc. of Little Rock, the publicly traded parent company of Bear State Bank, said Tuesday that privately owned Arvest Bank of Fayetteville will acquire Bear State in an all-cash transaction valued at about $391 million, or $10.28 per share of Bear State common stock.
Both companies' boards of directors unanimously approved the deal, the companies said.
Bear State's total equity capital as of June 30 was $254.7 million.
The deal is expected to close in the fourth quarter of 2017 or first quarter of 2018 and is subject to customary conditions, including regulatory approval and approval by Bear State's shareholders.
"This is a strategic move for us and one made after much careful consideration," Arvest President and CEO Kevin Sabin said. "In addition to giving us the opportunity to expand into some new communities, this deal also allows us to strengthen our presence in some existing markets.
"Because Bear State is such a solid company with dedicated employees – and because both banks are so committed to their communities – we believe this will be a great fit. From outstanding products and services to superior customer service, Arvest shares a lot of similarities to Bear State and we look forward to serving all of our customers – old and new – with the same courtesy, competency and care as we always have."
Bear State (Nasdaq: BSF), with assets of about $2.2 billion as of March 31, is the smallest of Arkansas' four publicly traded banks. The acquisition will push Arvest's assets — $17 billion at the end of March — closer to that of the state's largest bank, $20 billion Bank of the Ozarks Inc. of Little Rock (Nasdaq: OZRK).
Shares of Bear State rose by more than 10 percent on the news.
New Markets and Overlap
Bear State has 44 offices, operating in Arkansas (31), Missouri (11) and Oklahoma (2). In Arkansas, the deal will put Arvest for the first time in Jonesboro and Monette in Craighead County; Manila in Mississippi County; Dierks and Nashville in Howard County; Ashdown in Little River County; Mount Ida in Montgomery County; Glenwood in Pike County; De Queen in Sevier County; and Waldron in Scott County.
Outside Arkansas, Arvest will enter the new markets of Golden City, Kimberling City, Lamar and Marshfield in Missouri; and Broken Bow and Idabel in Oklahoma.
The two banks overlap in 18 markets. In Arkansas, that includes Mountain Home in Baxter County, Hot Springs in Garland County; and Harrison in Boone County. (Harrison has become a more competitive city for banks in recent months.)
In Missouri, Arvest and Bear State each have four locations in Springfield. Both also have operations in the Branson area.
Arvest's news release said every person employed by Bear State when the deal closes will become employees of Arvest. Bear State reported the equivalent of 443 full-time employees as of June 30 – an increase of six since its March 31 call report, which reflected a reduction of almost 10 percent in the first quarter.
The deal is also Arvest's first acquisition since December 2013, when it completed its purchase of National Bank of Arkansas of North Little Rock.
Arvest is controlled by Jim Walton, its chairman, and the youngest son of late Wal-Mart Stores Inc. founder Sam Walton.
In July, Bear State reported second-quarter earnings of $6.7 million, up about 49 percent from the same quarter last year, with "core earnings" of $6.3 million, up from $4.1 million in the same quarter last year.
Bear State was built on the recession-battered foundation of Harrison-based First Federal Bancshares of Arkansas Inc., the last publicly traded savings and loan association in Arkansas. In 2011, an investment group called Bear State Financial Holdings, led by former Alltel executives Rick Massey and Joe and Scott Ford, bought controlling interest and stabilized First Federal's balance sheet with an injection of $40.3 million in capital while buying back TARP obligations at a discount negotiated with federal regulators.
In mid-2015, First Federal Bancshares – later rebranded as Bear State Financial — announced that it would acquire the larger First National Security Co., the holding company of First National Bank of Hot Springs and Heritage Bank in Jonesboro, a deal that required another injection of investor capital. In the first quarter of 2015, all three institutions were merged into the First National Bank charter and rebranded as Bear State Bank. The headquarters moved to Little Rock.
In February 2016, Bear State acquired Metropolitan National Bank of Springfield, Missouri, and retained its CEO, Mark McFatridge, as CEO of Bear State Financial. McFatridge resigned in January, and Matt Machen, president of the subsidiary bank, replaced him.