For $391M, Arvest to gain Bear State

Price is record for Arkansas bank deal

This Bear State Bank at 5315 Highland Drive in Little Rock is one of 44 branches Bear State Financial has in 34 communities in Arkansas, Missouri and Oklahoma. Sixteen are in new markets for Arvest.
This Bear State Bank at 5315 Highland Drive in Little Rock is one of 44 branches Bear State Financial has in 34 communities in Arkansas, Missouri and Oklahoma. Sixteen are in new markets for Arvest.

Fayetteville-based Arvest Bank agreed to acquire Bear State Financial of Little Rock for $391 million in cash, the two banks said Tuesday.

The $391 million price is the highest paid by an Arkansas bank for another Arkansas bank. The second-highest price was the $280 million paid in stock and cash in 2013 by Home BancShares of Conway for Liberty Bancshares of Jonesboro.

Bear State closed at $10.21 Tuesday, up $1.01, in trading on the Nasdaq exchange. There were 377,000 shares traded, almost 14 times the average volume.

"This is a good acquisition by Arvest," said Garland Binns, a Little Rock banking attorney with the Dover Dixon Horne firm. "I would not be surprised if there is more expansions on the horizon for Arvest."

Bear State decided to sell to Arvest because it got a great cash offer, said Richard Massey, Bear State's chairman and largest shareholder.

"We were very pleased and flattered by the offer from Arvest," Massey said. "The outcome was best for our people. Arvest is a very good employer, and it's a good home for our people."

In discussions with Jim Walton, chairman of Arvest Bank Group, Arvest's parent company, Walton made a convincing case that he is an ardent believer in the community banking model, Massey said.

"He likes our business model," Massey said. "That's what his business model is. I knew during that meeting, this was the best home for our employees and our customers."

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There was more than one party interested in Bear State, Massey said, although he could not identify any other suitor because of a confidentiality agreement he signed.

Bear State has $2.2 billion in assets, $1.7 billion in deposits and $1.6 billion in loans.

Arvest is the second-largest bank in Arkansas, with more than $17 billion in assets and more than 250 branches in Arkansas, Kansas, Missouri and Oklahoma. Little Rock's Bank of the Ozarks is the largest bank in the state, with more than $20 billion in assets.

Arvest is a private company founded by Sam Walton and owned primarily by the Walton family. It is neither owned by Wal-Mart or affiliated with Wal-Mart.

"Bear State Bank is a well-run bank," Jason Kincy, an Arvest spokesman, said when asked why Arvest wanted to buy Bear State. "It has a focus on customers and communities. There are many similarities between us and them, including products, services and dedication to community involvement. It was a good fit culturally."

It also was a good fit geographically, Kincy said.

Bear State has 44 branches in 34 communities in Arkansas, Missouri and Oklahoma. Of those, 16 branches are in new markets for Arvest -- primarily in northeast and southwest Arkansas, southern Missouri and southeast Oklahoma.

"It opens up several new areas for us that we have wanted to be in," Kincy said. "Notably the Jonesboro area, and communities in southwest Arkansas and southeast Oklahoma."

It also is beneficial in locations where Arvest already has a presence, such as Springfield, Mo., where the additional branches will help, Kincy said.

Bear State began only six years ago when it bought the bulk of First Federal Bancshares, a publicly traded thrift in Harrison.

It invested only about $9 million at the time, Massey said.

"And we turned it into [almost] $400 million," Massey said. "There were a lot of people who had to be on their game to make that possible."

First Federal had lost almost $30 million in 2009, was under a sanction from the Office of Thrift Supervision and had less than $500 million in assets.

"They were broke as you can be and just about to be closed," Massey said.

Three years after the First Federal purchase, Bear State bought First National Security Co. of Hot Springs, John Hendrix's firm that included First National Bank in Hot Springs and Heritage Bank in Jonesboro. That raised Bear State's assets to $1.5 billion, Massey said.

Bear State's shareholders include Massey; Witt Stephens Jr.; Joe and Scott Ford, who each were chief executive officers of Alltel Corp.; and Ronnie Cameron, chief executive officer of Mountaire Corp. of North Little Rock.

"This is a culmination and a validation of what these people have accomplished," Massey said.

All Bear State employees when the deal closes will become employees of Arvest Bank. Bear State had 443 employees as of June 30.

The deal is expected to close late this year or early next year, the banks said.

Clients of Bear State will not see any changes immediately, Bear State said. Bear State's name will change to Arvest at a later date and computer conversion is expected to occur next year.

A Section on 08/23/2017

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