Exhibit 99.1
[First Federal Bancshares of Arkansas, Inc. Logo] FOR
IMMEDIATE
RELEASE
1401 Highway 62/65 North FOR FURTHER INFORMATION CONTACT:
P. O. Box 550 Larry J. Brandt/CEO
Harrison, AR 72602 Tommy Richardson/COO
Sherri Billings/CFO
870.741.7641
FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
ANNOUNCES EARNINGS
Harrison, Arkansas - October 27, 2006 - (NASDAQ GM:FFBH) First Federal
Bancshares of Arkansas, Inc. (the "Corporation"), a unitary savings and loan
holding company for First Federal Bank (the "Bank") announced today that the
Corporation's net income amounted to $1,700,000 or $0.34 basic earnings per
share and $0.33 diluted earnings per share during the third quarter of 2006
compared to net income of $2,036,000 or $0.41 basic earnings per share and
$0.39 diluted earnings per share during the third quarter of 2005. Earnings
for the nine months ended September 30, 2006 amounted to $5,960,000 or $1.19
basic earnings per share and $1.16 diluted earnings per share compared to
earnings of $5,950,000 or $1.19 basic earnings per share and $1.14 diluted
earnings per share for the same period ended September 30, 2005. Book value
or stockholders' equity per share at September 30, 2006, was $15.81.
Larry J. Brandt, CEO for the Corporation said, "We continued to enhance
shareholder value this quarter by increasing our cash dividend to $0.15 per
share, a 7% increase compared to $0.14 per share for the previous quarter and
a 15% increase compared to $0.13 per share for the same quarter in 2005. Our
year to date profits for the period ended September 30, 2006 are up slightly
compared to the same period last year. However, net income for the third
quarter of 2006 was less than that of the third quarter of 2005, primarily as
a result of continued net interest margin compression, as well as an increase
in provision for loan losses and costs related to branch office expansion. We
will continue our branch expansion in Northwest Arkansas with the opening of
our Lowell office and the relocation of our Farmington office into a larger
facility around year end. The current interest rate environment and level of
competition in our markets continue to be a challenge. However, we remain
focused on the growth of our bank franchise and will continue to explore
future branch expansion opportunities that will continue to provide us with
good long term potential for growth and profitability."
Total assets at September 30, 2006 amounted to $868.2 million, total
liabilities were $789.5 million and stockholders' equity totaled $78.7 million
or 9.1% of total assets. This compares with total assets of $852.4 million,
total liabilities of $774.6 million and stockholders' equity of $77.8 million
or 9.1% of total assets at December 31, 2005. At September 30, 2006 compared
to December 31, 2005, cash and cash equivalents increased $9.6 million or
45.3%, investment securities held to maturity increased $4.2 million or 7.3%,
and accrued interest receivable increased by $2.5 million or 33.7%. Accrued
interest receivable increased primarily due to the increase in interest
accrued on
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speculative construction loans. Net loans receivable decreased by $2.5
million, or 0.4%, primarily due to a decrease in construction loan originations
related to the oversupply of lots and homes in the Northwest Arkansas market.
The $14.9 million or 1.9% increase in total liabilities was primarily due
to an increase of $29.9 million or 4.9% in deposits offset by a decrease of
$14.2 million or 9.0% in Federal Home Loan Bank ("FHLB") of Dallas advances.
The increase in deposits was used to repay FHLB advances, as well as purchase
investment securities and increase our cash position. Stockholders' equity
increased during the nine month period ended September 30, 2006 due to net
income in the amount of $6.0 million resulting from continued profitable
operations, as well as the issuance of 113,631 shares of treasury stock
totaling $906,000 as a result of the exercise of stock options. Such
increases were partially offset by the purchase of 188,900 shares of treasury
stock totaling $4.7 million in connection with the Corporation's stock
repurchase program and, to a lesser extent, the payment of quarterly cash
dividends in the amount of $2.2 million.
Nonperforming assets amounted to $18.4 million or 2.12% of total assets at
September 30, 2006, compared to $14.1 million or 1.65% of total assets at
December 31, 2005. At September 30, 2006, nonperforming assets consisted of
$13.7 million of nonaccrual loans, $3.0 million of accruing loans 90 days or
more past due, and $1.7 million in real estate owned. In addition, at
September 30, 2006, we had $1.1 million in additional loans classified as
substandard. The increase in nonaccrual loans and real estate owned is due
primarily to single-family speculative construction loans. This increase in
nonaccrual single-family speculative construction loans reflects the general
slowdown in housing and oversupply of lots and speculative homes in the Bank's
Northwest Arkansas market. In turn, certain homebuilder customers of the Bank
have experienced extended marketing times for the sales of their speculative
homes and inadequate cash flow to service the interest carry on their loans.
The allowance for loan losses amounted to $2.4 million at September 30, 2006
or 0.32% of total loans and $2.1 million or 0.27% of total loans at December
31, 2005.
Net interest income, the primary component of net income, decreased from $6.8
million for the three months ended September 30, 2005 to $6.4 million for the
three months ended September 30, 2006. Net interest income increased to $20.3
million for the nine months ended September 30, 2006 from $19.7 million for
the comparable period in 2005. Net interest margin for the three months and
nine months ended September 30, 2006 was 3.12% and 3.34%, respectively,
compared to 3.55% and 3.54%, respectively, for the same periods in 2005. The
decrease in the net interest margin was due to a flat yield curve and an
increase in our nonaccrual loans.
The provision for loan losses increased $199,000 to $484,000 for the three
month period ended September 30, 2006 compared to $285,000 for the three month
period ended September 30, 2005 and increased $308,000 to $1.1 million for
the nine month period ended September 30, 2006 compared to $820,000 for the
nine month period ended September 30, 2005. The increase in the provision for
loan losses in both 2006 periods was due primarily to an increase in loss
experience on construction loans and increases in specific loan loss allowances
on home equity loans and commercial loans.
Noninterest income increased $212,000 or 11.7% to $2.0 million for the three
month period ended September 30, 2006 compared to $1.8 million for the same
period in 2005 and increased $1.3 million or 25.9% to $6.4 million for the
nine month period ended September 30, 2006 compared to $5.1 million for the
same period in 2005. The increase in the three month comparison period was
primarily due to an increase in deposit fee income and gains on sales of loans.
The increase in the nine month comparison period was also due to an increase
in deposit fee income and gains on sales of loans, as well as nonrecurring
gains on sales of two properties of approximately $528,000. These properties
represented excess land and a building adjacent to two existing branches.
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Noninterest expenses increased $153,000 or 2.9% to $5.5 million for the three
months ended September 30, 2006 compared to $5.3 million for the same period
in 2005 and increased $1.7 million or 11.1% to $16.9 million for the nine
months ended September 30, 2006 compared to $15.2 million for the same period
in 2005. The increase in the three month comparative period was mainly due
to an increase in net occupancy expense and an increase in other expenses
related to new or remodeled branch offices. The increase in the nine month
comparative period was primarily due to an increase in salaries and employee
benefits, as well as increases in net occupancy expense and other expenses
due to new or remodeled branch offices.
First Federal Bank is a community bank serving consumers and businesses with
a full range of checking, savings, investment and loan products and services.
The Bank, in its 72nd year, conducts business from 18 full-service branch
locations, one stand-alone loan production office, and 29 ATMs located in
Northcentral and Northwest Arkansas. For information on all the products and
services we offer, visit us at www.ffbh.com or contact our Account Information
Center at 870.365.8329 or 866-AIC-FFBH toll free or by email at aic@ffbh.com.
Financial Tables Attached
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FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands of dollars)
(Unaudited)
September 30, December 31,
ASSETS 2006 2005
------------- ------------
Cash and cash equivalents $ 30,671 $ 21,109
Investment securities held to maturity 60,855 56,695
Federal Home Loan Bank stock 8,329 8,412
Loans receivable, net of allowances 716,669 719,214
Accrued interest receivable 10,011 7,490
Real estate acquired in settlement of loans, net 1,688 892
Office properties and equipment, net 19,509 18,522
Cash surrender value of life insurance 19,210 18,654
Prepaid expenses and other assets 1,237 1,423
------- -------
TOTAL ASSETS $ 868,179 $ 852,411
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $ 641,600 $ 611,667
Federal Home Loan Bank advances 144,032 158,240
Advance payments by borrowers for
taxes and insurance 528 847
Other liabilities 3,317 3,815
------- -------
Total liabilities 789,477 774,569
TOTAL STOCKHOLDERS' EQUITY 78,702 77,842
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 868,179 $ 852,411
======= =======
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FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND RELATED SELECTED OPERATING DATA
(In thousands of dollars, except earnings per share)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
------- ------- ------- --------
Interest income $ 13,681 $ 11,916 $ 40,507 $ 33,512
Interest expense 7,307 5,135 20,197 13,850
------ ------ ------ ------
Net interest income 6,374 6,781 20,310 19,662
Provision for loan losses 484 285 1,128 820
------ ------ ------ ------
Net interest income after
provision for loan losses 5,890 6,496 19,182 18,842
Noninterest income 2,030 1,818 6,432 5,111
Noninterest expenses 5,466 5,313 16,867 15,188
------ ------ ------ ------
Income before income taxes 2,454 3,001 8,747 8,765
Income tax provision 754 965 2,787 2,815
------ ------ ------ ------
Net income $ 1,700 $ 2,036 $ 5,960 $ 5,950
====== ====== ====== ======
Earnings Per Share:
Basic $ 0.34 $ 0.41 $ 1.19 $ 1.19
====== ====== ====== ======
Diluted $ 0.33 $ 0.39 $ 1.16 $ 1.14
====== ====== ====== ======
Cash Dividends Declared $ 0.15 $ 0.13 $ 0.43 $ 0.37
====== ====== ====== ======
Selected Operating Data (Annualized):
Interest rate spread 3.02% 3.45% 3.24% 3.44%
Net interest margin 3.12% 3.55% 3.34% 3.54%
Return on average assets 0.77% 1.00% 0.91% 1.00%
Noninterest expenses to
average assets 2.49% 2.61% 2.58% 2.55%
Return on average equity 8.54% 11.15% 10.09% 10.60%
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