Bear State’s ‘core’ net income dips 18.7% in the third quarter

Little Rock-based Bear State Financial reported third quarter “core” net income of $3.319 million, down from core net income of $4.085 million during the same quarter of 2014.

A typical net income comparison is difficult for the third quarter because in 2014 the bank posted a non-recurring income benefit of $20.3 million.

Total revenue during the quarter was $15.538 million, down from $18.287 million in the third quarter of 2014.

For the first nine months of the year, the financial holding company reported net income of $8.014 million, compared to $19.492 million during the same period of 2014. Again, the 2014 period includes the large one-time charge.

Part of the third quarter earnings decline was the result of added expenses with the acquisition of Springfield, Mo.-based Metropolitan National Bank, a deal competed Oct. 1.

Mark McFatridge, CEO of Metropolitan National Bank, was appointed president and CEO of the the holding company and Bear State Bank. McFatridge and John Ghirardelli, a member of the board of directors of Metropolitan, were also elected to the respective boards of directors of the holding company and Bear State Bank.

The company plans to convert Metropolitan’s systems to its core technology platform, and, subject to regulatory approval, consolidate its two banking charters to a single charter. They anticipate the conversion and charter consolidation to be substantially completed by the second quarter of 2016. He said the bank is working to ensure a smooth transition for its customers which now span Arkansas, southeast Oklahoma and southwest Missouri.

“This is a great time to be with Bear State Financial,” McFatridge said in the earnings statement. “Bear State continues to build on our strong foundation while making solid progress in achieving our goals with respect to improved operational efficiency.”

After swallowing Metropolitan National, Bear State execs said they are taking a conservative stance on lending in part because of unacceptable levels of rate and/or credit risk in the deals they see. The conservative strategy resulted in a 4% decrease in total assets year-over-year. The bank reported assets of $1.47 billion as of Sept. 30, down compared to $1.53 billion a year ago.

Deposits also shrunk 5% to $1.21 billion from $1.28 billion in the year-ago period. Bank execs said part of the decrease in deposits comes from efforts to reduce unprofitable and marginally profitable accounts and more efficiently manage its deposit base. 

Bear State did manage to grow its total loans to $1.08 billion, or about 1% from a year ago.

Net interest income for the third quarter of 2015 was $12.2 million, compared to $14.7 million for the same period in 2014. The decline relates to fewer earning assets. The bank reduced interest expense to $1.5 million, compared to $1.6 million a year ago.

Total noninterest income was $3.3 million for the three months ended Sept. 30, down 9% from $3.6 million for the same period in 2014. Total noninterest expense increased $3.3 million, or 11%, during the nine months in the quarter compared to a year ago. The higher noninterest expense is related to non-performing assets which was $19.1 million in the third quarter, up from $15 million a year ago.

Bank officials said the increase is primarily attributable to a single relationship that management has been actively monitoring. The company anticipates a resolution of this matter within the next six months and management believes reserves adequately reflect its estimated loss exposure.

The thinly traded shares of Bear State Financial (NASDAQ: BSF) were trading midday at $9.95, down 27 cents. During the past 52 weeks the share price has ranged from an $11.48 high to a $7.96 low.