Exhibit 99.1
FOR
[First Federal Bancshares of Arkansas, Inc. Logo] 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 - January 30, 2007 - (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 $1,423,000 or $0.30 basic earnings per
share and $0.29 diluted earnings per share during the fourth quarter of 2006
compared to net income of $1,902,000 or $0.38 basic earnings per share and
$0.37 diluted earnings per share during the fourth quarter of 2005. Earnings
for the year ended December 31, 2006 amounted to $7,383,000 or $1.48 basic
earnings per share and $1.44 diluted earnings per share compared to earnings
of $7,850,000 or $1.57 basic earnings per share and $1.50 diluted earnings per
share for the same period ended December 31, 2005. Book value or stockholders'
equity per share at December 31, 2006, was $15.62.
Larry J. Brandt, CEO for the Corporation said, "Our 2006 profits of $7.4 million
were down compared to our record year in 2005 primarily as a result of
compression of the net interest margin due to the flat yield curve, competitive
pressures and an increase in our nonaccrual loans. The downturn in the housing
market in northwest Arkansas contributed to the increase in our nonperforming
loans. We anticipate that the housing market in northwest Arkansas will begin
to improve in 2007 and that the level of nonperforming loans may correspondingly
decrease. We completed construction of our newest office in Farmington during
the fourth quarter of 2006 and moved into the new facility in January 2007.
This will be a challenging year for the banking industry in Arkansas and we
believe First Federal is positioned to meet those challenges."
Total assets at December 31, 2006 amounted to $852.5 million, total liabilities
were $776.9 million and stockholders' equity totaled $75.6 million or 8.9% 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 December 31, 2006 compared to
December 31, 2005, cash and cash equivalents increased $14.4 million or 68.3%,
investment securities held to maturity increased $4.1 million or 7.2%, real
estate acquired in settlement of loans ("REO") increased $3.0 million, or
332.5%, and accrued interest receivable increased by $2.5 million or 33.5%.
Accrued interest receivable increased primarily due to the increase in interest
accrued on speculative construction loans. Net loans receivable decreased by
$26.1 million, or 3.6%, primarily due to a decrease in construction loan
originations. The decrease in net loans receivable and the increase in REO
are related to the oversupply of lots and homes in the Northwest Arkansas
market.
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The $2.3 million or 0.3% increase in total liabilities was primarily due to
an increase of $40.6 million or 6.6% in deposits offset by a decrease of $37.9
million or 24.0% in Federal Home Loan Bank ("FHLB") of Dallas advances. The
funds available from the increase in deposits and the decrease in net loans
receivable were used to repay FHLB advances, as well as purchase investment
securities and increase our cash position. Stockholders' equity decreased
during the year ended December 31, 2006 due to the purchase of 354,266 shares
of treasury stock totaling $8.6 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 $2.9 million. Such decreases were partially
offset by net income in the amount of $7.4 million resulting from continued
profitable operations, as well as the issuance of 140,566 shares of treasury
stock totaling $1.0 million as a result of the exercise of stock options.
Nonperforming assets amounted to $23.5 million or 2.68% of total assets at
December 31, 2006, compared to $14.1 million or 1.65% of total assets at
December 31, 2005. At December 31, 2006, nonperforming assets consisted
primarily of $19.0 million of nonaccrual loans and $3.9 million in real estate
owned. The increases in nonaccrual loans and real estate owned are 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 $2.6 million at December 31, 2006 or
0.35% 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 December 31, 2005 to $6.2 million for the
three months ended December 31, 2006. Net interest income was approximately
$26.5 million for both of the years ended December 31, 2006 and 2005. Net
interest margin for the three months and twelve months ended December 31, 2006
was 3.14% and 3.29%, respectively, compared to 3.44% and 3.51%, 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 $75,000 to $354,000 for the three
month period ended December 31, 2006 compared to $279,000 for the three month
period ended December 31, 2005 and increased $381,000 to $1.5 million for the
year ended December 31, 2006 compared to $1.1 million for the year ended
December 31, 2005. The increase in the provision for loan losses in both 2006
periods was due primarily to an increase in nonaccrual loans as discussed
above.
Noninterest income increased $54,000 or 2.9% to $1.9 million for the three
month period ended December 31, 2006 compared to $1.8 million for the same
period in 2005 and increased $1.4 million or 19.7% to $8.3 million for the
year ended December 31, 2006 compared to $7.0 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. The increase in the twelve month
comparison period was also due to an increase in deposit fee income, as well
as gains on sales of loans and nonrecurring gains on sales of two properties
of approximately $528,000. These properties represented excess land and a
building adjacent to two existing branches.
Noninterest expenses increased $188,000 or 3.4% to $5.8 million for the three
months ended December 31, 2006 compared to $5.6 million for the same period
in 2005 and increased $1.9 million or 9.0% to $22.6 million for the year ended
December 31, 2006 compared to $20.8 million for the same period in 2005. The
increase in the three month comparative period was mainly due to an
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increase in net occupancy expense related to new or remodeled branch offices
and an increase in other expenses related to REO. The increase in the twelve
month comparative period was primarily due to an increase in salaries and
employee benefits, an increase in net occupancy expense due to new or remodeled
branch offices, and an increase in other expenses related to REO.
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, founded in 1934, 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)
ASSETS December 31, December 31,
2006 2005
------------ ------------
Cash and cash equivalents $ 35,518 $ 21,109
Investment securities held to maturity 60,746 56,695
Federal Home Loan Bank stock 7,089 8,412
Loans receivable, net of allowances 693,095 719,214
Accrued interest receivable 9,999 7,490
Real estate acquired in settlement of loans, net 3,858 892
Office properties and equipment, net 20,384 18,522
Cash surrender value of life insurance 19,396 18,654
Prepaid expenses and other assets 2,390 1,423
------- -------
TOTAL ASSETS $852,475 $852,411
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits $652,265 $611,667
Federal Home Loan Bank advances 120,305 158,240
Advance payments by borrowers for
taxes and insurance 666 847
Other liabilities 3,666 3,815
------- -------
Total liabilities 776,902 774,569
TOTAL STOCKHOLDERS' EQUITY 75,573 77,842
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $852,475 $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 Year Ended
December 31, December 31,
------------------- ------------------
2006 2005 2006 2005
------- ------ ------- -------
Interest income $13,610 $12,573 $54,119 $46,085
Interest expense 7,377 5,754 27,576 19,604
------- ------ ------- -------
Net interest income 6,233 6,819 26,543 26,481
Provision for loan losses 354 279 1,482 1,101
------- ------ ------- -------
Net interest income after
provision for loan losses 5,879 6,540 25,061 25,380
Noninterest income 1,903 1,849 8,335 6,961
Noninterest expenses 5,768 5,580 22,634 20,768
------- ------ ------- -------
Income before income taxes 2,014 2,809 10,762 11,573
Income tax provision 591 907 3,379 3,723
------- ------ ------- -------
Net income $ 1,423 $ 1,902 $ 7,383 $ 7,850
======= ====== ======= =======
Earnings Per Share:
Basic $ 0.30 $ 0.38 $ 1.48 $ 1.57
==== ==== ==== ====
Diluted $ 0.29 $ 0.37 $ 1.44 $ 1.50
==== ==== ==== ====
Cash Dividends Declared $ 0.15 $ 0.13 $ 0.58 $ 0.50
==== ==== ==== ====
Selected Operating Data
(Quarter Annualized):
-----------------------
Interest rate spread 3.04% 3.34% 3.19% 3.41%
Net interest margin 3.14% 3.44% 3.29% 3.51%
Return on average assets 0.66% 0.87% 0.85% 0.97%
Noninterest expenses to
average assets 2.69% 2.62% 2.60% 2.57%
Return on average equity 7.29% 9.79% 9.40% 10.27%
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