BSF Bear State Financial, Inc. (delisted)

PROXY STATEMENT FOR A SPECIAL MEETING OF SHAREHOLDERS
[ • ] , 2017

This proxy statement is being furnished to holders of common stock, $.01 par value per share, of Bear State Financial,  Inc. (“Bear State,” “we,” “us” or “our”), the holding company of Bear State Bank. Proxies are being solicited on behalf of the board of directors of Bear State to be used at a special meeting of shareholders (the “special meeting”) to be held at Bear State’s office located at 900 South Shackleford Rd., Suite 605, Little Rock, Arkansas 72211, on [•], 2017 at 10:30 a.m., local time, for the purposes set forth in the Notice of Special Meeting of Shareholders. Bear State intends to deliver copies of the proxy materials for the special meeting to shareholders on or about [•], 2017.

SUMMARY

Parties to the Merger (Page 18 )

Bear State Financial, Inc.

Bear State Financial, Inc. is an Arkansas corporation and bank holding company. At June 30, 2017, Bear State had consolidated assets of $2.24 billion, total loans of $1.66 billion, deposits of $1.70 billion and stockholders ’ equity of $244.5 million.

Bear State Bank

Bear State Bank is an Arkansas state-chartered bank conducting business from its home office in Little Rock, Arkansas, 42 branches, three personalized technology centers equipped with interactive teller machines and three loan production offices which are located in various communities in Arkansas, Missouri and Oklahoma. Bear State Bank is a community-oriented financial institution offering a broad line of financial products to individuals and business customers.

Arvest Bank

Arvest Bank (“Arvest”) is an Arkansas state-chartered bank legally located in Fayetteville, Arkansas and which operated 254 branches in Arkansas, Kansas, Missouri and Oklahoma as of August 31, 2017. Arvest offers a broad line of financial products to individuals and business customers. At June 30, 2017, Arvest had consolidated assets of $17.30 billion, total loans of $10.18 billion, deposits of $14.98 billion and stockholders’ equity of $1.76 billion.

A cquisition

Arvest Acquisition Sub, Inc. is a wholly-owned subsidiary of Arvest and was formed on August 21, 2017. Acquisition was formed solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than those incidental to its formation and in connection with the transactions contemplated by the merger agreement.

The Special Meeting (Page 19)

Date, Time and Place of the Special Meeting (Page 19 )

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the Bear State board for use at the special meeting to be held on [•], 2017, at 10:30 a.m., local time, at 900 South Shackleford Rd., Suite 605, Little Rock, Arkansas, 72211, or at any postponement or adjournment thereof.

At the special meeting, holders of Bear State stock will be asked to  consider and vote on a proposal to adopt the merger agreement, an advisory (non-binding) resolution to approve certain compensation arrangements for Bear State’s named executive officers in connection with the merger (referred to below as the “golden parachute proposal”), and a proposal to adjourn the special meeting, if necessary, desirable or appropriate, to solicit additional proxies (referred to below as the “adjournment proposal”).

Record Date and Quorum (Page 20)

You are entitled to receive notice of, and to vote at, the special meeting if you owned Bear State shares at the close of business on [●], which the Bear State board has set as the record date for the determination of shareholders entitled to notice of, and to vote at, the special meeting. You will be entitled to one vote for each Bear State share that you owned on the record date. As of the record date, there were [●] shares of Bear State common stock outstanding and entitled to vote at the special meeting, held by [●] holders of record. Under Bear State’s bylaws, holders of a majority of Bear State shares issued and outstanding and entitled to vote at the special meeting, represented in person or by proxy, will constitute a quorum for the transaction of business at the special meeting. Abstentions will be counted as shares present for purposes of determining the presence of a quorum. Because, under applicable rules, banks, brokers and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the proposals described in this proxy statement, if a beneficial owner of Bear State shares held in “street name” does not give voting instructions to the bank, broker or other nominee, then those shares will not be counted as represented in person or by proxy at the special meeting unless an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority.

Vote Required (Page 21 )

The shareholder vote required to approve each proposal is set forth below:

Because the affirmative vote required to adopt the merger agreement is based upon the total number of outstanding Bear State shares entitled to vote on the proposal, if you abstain, fail to return your proxy card, fail to submit a proxy by phone or Internet, fail to vote in person at the special meeting, or, if your shares are held in “street name,” fail to provide your bank, broker or other nominee with instructions, this will have the same effect as a vote “AGAINST” approval of the proposal to adopt the merger agreement. Abstentions and broker non-votes will have no effect on the golden parachute proposal or the adjournment proposal.

Voting Agreement s (Page 21 )

Certain s hareholders of Bear State have entered into voting agreements with Arvest, pursuant to which each such shareholder has agreed to vote “FOR” the proposal to adopt the merger agreement and which generally prohibits them from entering into agreements regarding or transferring their shares, subject to certain exceptions. As of the close of business on the record date, these shareholders beneficially owned, in the aggregate, 15,940,880 issued and outstanding Bear State shares, allowing them to exercise approximately 42% of the voting power of Bear State shares. While not mandated by the voting agreements, we currently expect that these shareholders will vote their Bear State shares in favor of the golden parachute proposal and the adjournment proposal.

How to Vote (Page 21 )

Voting by record holders. If you are a shareholder of record, you may vote your Bear State shares by proxy prior to the special meeting or you may attend the special meeting and cast your vote in person. Shareholders of record have a choice of how to vote by proxy:

Please note that (i) telephone and Internet proxy voting will close at 11:59 p.m., Eastern Time, on [•],[•], 2017, the day before the special meeting and (ii) if you choose to submit your proxy card by mail, your proxy card must be received by [•],[•] , 2017, the day before the special meeting, for your proxy to be valid and your vote to count.

Voting by beneficial holders. If you are a beneficial owner of Bear State shares held in “street name,” you should receive instructions from your bank, broker or other nominee that you must follow in order to have your Bear State shares voted. Those instructions will identify which of the above choices are available to you in order to have your Bear State shares voted. Please note that if you are a beneficial owner of Bear State shares held in “street name” and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, broker or other nominee at the special meeting.

Revocation of Proxies (Page 22 )

You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later dated proxy through any of the methods available to you, by giving written notice of revocation to Bear State’s Corporate Secretary, which must be filed with the Corporate Secretary by 5:00 p.m. on the business day immediately prior to the date of the special meeting, or by attending the special meeting and voting in person. Attending the special meeting alone, without voting at the special meeting, will not be sufficient to revoke your proxy. Written notice of revocation should be mailed to: Bear State Financial, Inc., Attention: Corporate Secretary, 900 South Shackleford Rd., Suite 401, Little Rock, Arkansas 72211.

Shares Held in the B ear State Financial, Inc. Employees ’ Savings & Profit Sharing Plan and Trust (Page 23 )

Bear State shares held in the Bear State Financial, Inc. Employees’ Savings & Profit Sharing Plan, which we refer to as the Bear State 401(k) plan, are held of record and are voted by the trustee of the Bear State 401(k) plan at the direction of Bear State 401(k) plan participants. Participants in the Bear State 401(k) plan will be provided with a proxy card and voting instructions with these proxy materials. If you participate in the Bear State 401(k) plan, you may give voting instructions as to the number of full and fractional Bear State shares allocable to your account as of the record date for determining the shareholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You may provide voting instructions to the trustee by completing and returning the proxy card accompanying this proxy statement, or submitting your proxy by telephone or the Internet. The trustee will vote your Bear State shares in accordance with your completed proxy card if it is received by [•] , 2017. If you do not send instructions by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting designation or no voting designation at all, the trustee will vote the number of full and fractional Bear State shares allocable to your account in its discretion.

Bear State shares held in the Bear State 401(k) plan may NOT be voted in person at the special meeting as the trustee of the Bear State 401(k) plan votes the applicable Bear State shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.

The Merger and the Merger Agreement (Page s 24 and 52 )

Merger Consideration (Page 24 )

At the effective time, each Bear State share issued and outstanding immediately prior to the effective time (other than treasury shares and dissenting shares) will be converted into the right to receive $10.28 per Bear State share, without interest, less any applicable withholding or transfer taxes .

Recommendation of the Board of Directors (Page 30 )

After careful consideration, the Bear State board of directors determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Bear State and its shareholders and approved the merger agreement. The Bear State board recommends that you vote “FOR” the approval of the merger agreement. For the factors considered by the Bear State board of directors in reaching its decision to approve the merger agreement, see “The Merger —Reasons for the Merger; Recommendation of the Board of Directors” beginning on page 30.

Opinion of Raymond James & Associates, Inc. (Page 33 )

At the August 21, 2017 meeting of the Bear State board of directors, representatives of Raymond James & Associates, Inc. (“Raymond James”) rendered Raymond James’s written opinion to the Bear State board, dated August 21, 2017, that, as of such date, the merger consideration to be received by the holders of outstanding shares of Bear State common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders, based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion .

The full text of the written opinion of Raymond James, which sets forth, among other things, the various qualifications, assumptions and limitations on the scope of the review undertaken, is attached as Appendix C to this document and shareholders are encouraged to read it carefully in its entirety. The Raymond James opinion does not constitute a recommendation to the Bear State board or any holder of shares of Bear State common stock as to how the Bear State board, such shareholder or any other person should vote or otherwise act with respect to the merger or any other matter.

Financing of the Merger (Page 43 )

The obligations of Arvest and Acquisition to complete the merger are not contingent upon the receipt of any financing. Arvest has informed Bear State that it expects that funds needed by Arvest in connection with the merger will be derived from a capital injection from one or more shareholders of Arvest Bank Group, Inc., an affiliate of Arvest.

Interests of Certain Persons in the Merger (Page 44 )

In considering the recommendation of the Bear State board with respect to its approval of the merger agreement, shareholders should be aware that certain of Bear State’s directors and executive officers have interests in the merger that are different from, or in addition to, those of Bear State’s shareholders generally. These interests may create potential conflicts of interest. The Bear State board was aware of and considered these interests, among other matters, in reaching its decision to approve, and declare advisable, the merger agreement, the merger and the other transactions contemplated by the merger agreement. The material interests include the following:

Material U.S. Federal Income Tax Consequences of the Merger (Page 47 )

If you are a U.S. holder (as defined under “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”), the receipt of cash in exchange for shares of Bear State common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. You should consult your own tax advisor regarding the particular tax consequences to you of the receipt of cash for your shares pursuant to the merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).

Regulatory Approvals (Page 50 )

We cannot complete the merger unless it is approved by the Board of Governors of the Federal Reserve System, or the Federal Reserve, and the Arkansas State Bank Department. Once the Federal Reserve approves the merger, we have to wait from 15 to 30 days before we can complete it. During that time, the Department of Justice may challenge the merger. We anticipate that applications for regulatory approval for the merger will be filed on or before October 21, 2017. While we do not know of any reason why we would not be able to obtain the necessary regulatory approvals in a timely manner, we cannot be certain when or if we will receive them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to the combined company after completion of the merger.

Litigation Related to the Merger (Page 52 )

Following the announcement of the merger, a putative class action complaint challenging the merger was filed in the Circuit Court of Pulaski County, Arkansas. The complaint is captioned Owens v. Massey, et al , Case No. 60CV-17-5022. The complaint names the individual members of the Bear State board, as well as BSF Holdings, as defendants. The complaint generally alleges, among other things, that members of the Bear State board breached their fiduciary duties to Bear State’s shareholders by agreeing to sell Bear State for an inadequate price and agreeing to inappropriate deal protection provisions in the merger agreement that may preclude Bear State from soliciting any potential acquirers and limit the ability of the Bear State board to engage in discussions or negotiations for superior acquisition proposals. The complaint also alleges that Richard Massey and BSF Holdings, in their capacities as shareholders of Bear State, breached fiduciary duties owed by them to the minority shareholders of Bear State. The complaint seeks certification by the court as a shareholders’ class action, approval of the plaintiff as a proper plaintiff class representative, injunctive relief enjoining the companies from consummating the merger unless and until Bear State adopts and implements a procedure or process to obtain a merger agreement providing the best possible terms for shareholders (or, in the event the merger is consummated, rescinding the merger or awarding rescissory damages). The complaint also seeks to recover costs and disbursement from the defendants, including attorneys’ fees and experts’ fees.

The defendants believe these allegations are without merit and intend to defend vigorously against these allegations.

No Solicitation or Negotiation of Takeover Proposals (Page 61 )

Bear State has agreed, subject to certain limited exceptions, not to initiate discussions with another party regarding a business combination with such other party while the merger with Arvest is pending.

Conditions to Completion of the Merger (Page 63 )

Completion of the merger depends on a number of conditions being satisfied or waived, including the following:

Termination of the Merger Agreement (Page 64 )

The merger agreement contains termination rights which may be exercised by Arvest and/or Bear State in specific circumstances, such as the following: a regulatory approval is denied or approved with a burdensome condition, and the time period for appeals and requests for consideration has run; the Bear State shareholders fail to approve the merger and the merger agreement; the merger is not consummated within 270 days following the date of the merger agreement, subject to potential extension for 90 days; Bear State breaches any representation, warranty or covenant such that there is a failure of the related closing condition and such breach is not or cannot be cured in 30 days or if Bear State breaches its obligations to not solicit proposals from a third party for an alternative acquisition transaction, to hold the special meeting or to recommend that Bear State shareholders approve the merger.

Termination Fees (Page 65 )

Bear State must pay a termination fee of $14,000,000 to Arvest if:

Voting Agreement (Page 66 )

As a condition and inducement to the willingness of Arvest to enter into the merger agreement, concurrently with the execution and delivery of the merger agreement, Arvest entered into voting agreement s with each of Richard Massey, Chairman of the board of Bear State, and BSF Holdings, Bear State’s largest shareholder, who collectively own approximately 42% of the outstanding Bear State shares as of the record date. The voting agreement requires each such shareholder to vote or cause to be voted all of the Bear State shares beneficially owned or controlled by such shareholder to adopt the merger agreement at any meeting of the Bear State shareholders, and at any adjournment thereof, at which the merger agreement is submitted for the consideration and vote of the Bear State shareholders.

Restrictive Covenant Agreements (Page 67 )

One of the conditions to the merger is that each of Richard Massey, Matt Machen, Sherri Billings, Tom Fritsche, Donna Merriweather, Yurik Paroubek, Chad Rawls, Paul Lowe and Shelly Loftin enter into restrictive covenant agreements with Arvest at the effective time of the merger. Pursuant to the restrictive covenant agreements, each of the foregoing persons will be prohibited from, among other things : (i) for a period of one year (in the case of Ms. Loftin, Ms. Merriweather, Mr. Lowe, Mr. Paroubek or Mr. Rawls) or two years (in the case of Ms. Billings, Mr. Fritsche, Mr. Machen or Mr. Massey), performing any services for or owning any interest in any prohibited business ( as defined under “Restrictive Covenant Agreements”) ; (ii) for a period of three years hiring, soliciting or seeking to hire any Arvest employee or anyone who was an employee of Bear State during the six month period prior to the effective time of the merger, unless such person was involuntarily terminated by Arvest; and (iii) for a period of three years soliciting, diverting or attempting to solicit or divert any customer of Arvest or its affiliates (who was or became a customer of Arvest at the effective time of the merger) for the purpose of causing such customer to reduce of refrain from doing any business with Arvest or its affiliates.

Market Price of Bear State Shares (Page 69 )

Bear State shares are listed for trading on NASDAQ under the symbol “BSF.” The closing price of Bear State shares on NASDAQ on August 21, 2017, the last trading day prior to the public announcement of the execution of the merger agreement was $9.20 per Bear State share. If the merger is completed, you will be entitled to receive $10.28 in cash per Bear State share, without interest, less any applicable withholding or transfer taxes (unless you have validly made and not effectively withdrawn a demand for dissenters ’ rights). The cash amount per share represents an approximately 12% premium over Bear State’s closing share price on August 21, 2017, and over Bear State’s volume-weighted average trading price for the 30 day trading period ended August 21, 2017.

On [•] , 2017, the most recent practicable date before this proxy statement was mailed to our shareholders, the closing price for Bear State shares on NASDAQ was $[•] per Bear State share. You are encouraged to obtain current market quotations for Bear State shares in connection with voting your Bear State shares.

Dissenters ’ Rights (Page 72 )

If you are a Bear State shareholder and you follow the procedures required by the Arkansas Business Corporation Act of 1987 (“ABCA”) , you may dissent from the merger and receive the fair value of your shares of Bear State common stock as determined pursuant to those procedures. To perfect your dissenters’ rights, you must precisely follow the procedures specified in the ABCA at Ark. Code Ann. §§ 4-27-1301 et seq., the relevant portions of which have been excerpted and included as Appendix D to this proxy statement.

In order to perfect your dissenters’ rights and receive payment as a dissenting shareholder, you must:

If you (i) fail to provide notice of dissent to the merger, (ii) vote in favor of the merger or (iii) fail to make a written demand for payment of fair value in accordance with the requirements of Ark. Code Ann. § 4-27-1323, you will be bound by the terms of the merger and the merger agreement, and your shares of Bear State common stock will be converted into the right to receive the merger consideration. While a vote in favor of the merger will waive your dissenters’ rights, a failure to vote against the merger will not constitute a waiver of your dissenters’ rights. A vote against the merger will not be deemed to satisfy any notice requirements under Ark. Code Ann. §§ 4-27-1301 et seq.

The value of dissenting shares will be determined, as of the time immediately before effectuation of the merger but excluding any appreciation or depreciation in anticipation of the merger (unless exclusion would be inequitable), by Bear State (or Arvest as the successor thereto). Not later than 10 days following consummation of the merger, Arvest (as successor to Bear State) will deliver a written dissenters’ notice to all shareholders who timely provided an intent to demand payment and did not vote in favor of the merger that will specify a date by which Arvest must receive a payment demand under Ark. Code Ann. § 4-27-1323.  If the dissenting shareholder demands payment in compliance with Ark. Code Ann. § 4-27-1323, Arvest will pay each dissenting shareholder the amount that Arvest (as successor to Bear State) estimates to be the fair value of the shares. If a dissenting shareholder objects to such valuation, the shareholder may provide Arvest its estimate of the fair value of its shares and demand payment for such amount within 30 days after Arvest makes or offers payment for the dissenting shareholder’s shares. After receipt of such demand, Arvest may either (i) pay the dissenting shareholder the amount demanded by the shareholder or (ii) within 60 days of such receipt, petition a court to determine the fair value of the shares. If Arvest fails to take either of the foregoing actions within 60 days of such receipt, it shall pay the dissenting shareholder the amount demanded by such shareholder.

If you comply with the dissenters’ rights requirements, the fair value of your Bear State shares, determined in the manner described above, and which may be more or less than the value of the merger consideration you would have received in the merger had you not dissented, will be paid to you in cash. This cash payment will be fully taxable to you.

Delisting and Deregistration of Bear State Shares (Page 72 )

If the merger is completed, Bear State common stock will be delisted from NASDAQ and deregistered under the Securities Exchange Act of 1934 (the “Exchange Act”). As a result, we will no longer file periodic reports with the SEC on account of Bear State common stock.

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement , the voting agreements and the special meeting. These questions and answers may not address all questions that may be important to you as a Bear State s hare holder. Please refer to the “ Summary ” and the more detailed information contained elsewhere in this proxy statement, the appendices to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully and in their entirety.

Proxies solicited hereby may be exercised only at the special meeting and any adjournment or postponement of the special meeting and will not be used for any other meeting.

If your shares are held in “street name” by a bank, broker or other nominee, such bank, broker or other nominee is deemed the record holder of your shares. If you wish to vote in person at the meeting, you must obtain from your bank, broker or other nominee, and bring with you to the meeting, a “legal proxy” from the bank, broker or other nominee issued in your name. If you do not plan to vote in person at the special meeting, please mark, date, sign, and return the voting instruction form you received from your bank, broker or other nominee with this proxy statement. As indicated on the form or other documentation provided to you by your bank, broker or other nominee, you may have the choice of voting your shares over the Internet or by telephone as instructed by your bank, broker or other nominee. To do so, follow the instructions on the form you received from your bank, broker or other nominee.

If you wish to attend the special meeting in person, you may obtain directions to the meeting location by calling (501) 975-6033.

Bear State shares held in the Bear State 401(k) plan may NOT be voted in person at the special meeting as the trustee of the Bear State 401(k) plan votes the applicable Bear State shares two business da ys prior to the special meeting .

Only your latest Interne t or telephone vote prior to 11:59 p.m., Eastern Time, on [•],[•] , 2017 or your latest dated, valid proxy card received by Computershare not later than [•],[•] , 2017 will be counted.

If you hold Bear State shares in “street name,” you should contact the intermediary for instructions on how to change your voting instruction.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This proxy statement, other filings made by Bear State with the SEC and other oral and written statements or reports by Bear State, Bear State Bank or the management thereof, include certain forward-looking statements that are intended to come within the safe harbor afforded by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the beliefs of management as well as assumptions made by and information currently available to management. These forward-looking statements include, without limitation, statements relating to the terms and closing of the proposed transaction between Bear State and Arvest. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” “will,” “forecast,” “should,” and similar expressions, or the negative thereof, as they relate to Bear State, Bear State Bank or the management thereof, are intended to identify forward-looking statements.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, assumptions and changes in circumstances that are difficult to predict and many of which are outside of our control. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond the parties’ control, including the parties’ ability to consummate the transaction or satisfy the conditions to the completion of the transaction, including the receipt of shareholder approval; the receipt of regulatory approvals required for the transaction on the terms expected or on the anticipated schedule; the failure of the proposed merger to close for any other reason; the effect of the announcement of the merger on customer relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); the diversion of management time on transaction related issues; general competitive, economic, political and market conditions and fluctuations; and changes in the regulatory environment. These forward-looking statements are also qualified by, and should be read together with, the “Cautionary Note About Forward-Looking Statements,” the “Risk Factors” and the other statements in Bear State’s Annual Report on Form 10-K for the year ended December 31, 2016, Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, each as filed with the SEC and available at www.sec.gov, and shareholders should refer to such risk factors and other statements in evaluating the forward-looking statements contained in this proxy statement (see “Where You Can Find More Information”).

Any forward-looking statements speak only as of the date of this proxy statement, and Bear State does not undertake any obligation to correct or update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events except as otherwise required by law. New factors may emerge from time to time, and it is not possible for Bear State to predict all such factors. Furthermore, it may not be possible for Bear State to assess the impact of any such factor on its business (viewed independently or together) or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. The foregoing factors should not be construed as exhaustive.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement or, in the case of documents referred to or incorporated by reference, the dates of those documents.

P ARTIES TO THE MERGER

Bear State Financial, Inc.

Bear State Financial, Inc.
900 South Shackleford Rd., Suite 401
Little Rock, Arkansas 72211
Telephone: (501) 975-6033

Bear State Financial, Inc., an Arkansas corporation, is registered with the Federal Reserve as a bank holding company under the Bank Holding Company Act of 1956, as amended, which we refer to as the BHC Act. Bear State has one subsidiary, Bear State Bank. The business and management of Bear State consists of the business and management of Bear State Bank. Bear State’s common stock trades on NASDAQ under the symbol “BSF.”

At June 30, 2017, Bear State had consolidated assets of $2.24 billion, total loans of $1.66 billion, deposits of $1.70 billion and stockholders ’ equity of $244.5 million.

Bear State Bank

Bear State Bank
c/o Bear State Financial, Inc.
900 South Shackleford Rd., Suite 401
Little Rock, Arkansas 72211
Telephone: (501) 975-6033

Bear State Bank is a state chartered bank conducting business from its home office in Little Rock, Arkansas, 42 branches, three personalized technology centers equipped with interactive teller machines and three loan production offices which are located in various communities in Arkansas, Missouri and Oklahoma.

Bear State Bank is jointly supervised by the Arkansas State Bank Department (“ASBD”) and the Federal Reserve. Bear State Bank is also regulated by the Federal Deposit Insurance Corporation (“FDIC”), the administrator of the Deposit Insurance Fund (“DIF”), and its deposits are insured by the DIF to the maximum extent permitted by law.

Bear State Bank is a community-oriented financial institution offering a broad line of financial products to individuals and business customers. Retail and business deposit accounts include noninterest bearing and interest bearing checking accounts, savings and money market accounts, certificates of deposit, and individual retirement accounts. Loan products offered by Bear State Bank include residential real estate, consumer, construction, lines of credit, commercial real estate and commercial business loans. Other financial services include automated teller machines; 24-hour telephone banking; online banking, including account access, bill payment, and e-statements; mobile banking, including remote deposit capture and funds transfer; Bounce Protection ^TM overdraft service; debit cards; and safe deposit boxes. 

Arvest Bank

Arvest Bank
c/o Arvest Bank Group, Inc.
110 NW 2 ^nd Street, Suite 300
Bentonville, Arkansas 72712
Telephone: (479) 750-1400

Arvest Bank (“Arvest”) is an Arkansas state-chartered bank legally located in Fayetteville, Arkansas and which operated 254 branches in Arkansas, Kansas, Missouri and Oklahoma as of August 31, 2017. Arvest Bank Group, Inc., an Arkansas corporation is the sole owner of Arvest Holdings, Inc., an Arkansas corporation, the sole owner of all of the common stock of Arvest Bank. Both Arvest Bank Group, Inc. and Arvest Holdings, Inc. are registered bank holding companies under the BHC Act.

Arvest is supervised by the ASBD, the Federal Reserve, the Consumer Financial Protection Bureau and by the FDIC. The deposits of Arvest are insured by the DIF to the maximum extent permitted by law.

Arvest offers a broad line of financial products to individuals and business customers. Retail and business deposit accounts include noninterest bearing and interest bearing checking accounts, savings and money market accounts, certificates of deposit, and individual retirement accounts. Loan products offered by Arvest include residential real estate, equipment finance, consumer, construction, lines of credit, letters of credit, commercial real estate and commercial business loans. Other financial services include automated teller machines; 24-hour telephone banking; online banking, including account access, bill payment, and e-statements; mobile banking, including remote deposit capture and funds transfer; overdraft service; credit and debit cards; mortgage servicing, wire transfer, ACH, treasury management and safe deposit boxes. Arvest also provides access to investment, mortgage, title and insurance services through its subsidiaries.

At June 30, 2017, Arvest had consolidated assets of $17.30 billion, total loans of $10.18 billion, deposits of $14.98 billion and stockholders ’ equity of $1.76 billion.

Acquisition

Arvest Acquisition Sub, Inc.
c/o Arvest Bank Group, Inc.
110 NW 2 ^nd Street, Suite 300
Bentonville, Arkansas 72712
Telephone: (479) 750-1400

Acquisition is a wholly-owned subsidiary of Arvest and was formed on August 21, 2017. Acquisition was formed solely for the purpose of engaging in the transactions contemplated by the merger agreement and has not engaged in any business activities other than those incidental to its formation and in connection with the transactions contemplated by the merger agreement.

THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the Bear State board for use at the special meeting to be held on [•], 2017, at 10:30 a.m., local time, at 900 South Shackleford Rd., Suite 605, Little Rock, Arkansas, 72211, or at any postponement or adjournment thereof.

Purpose of the Special Meeting

At the special meeting, holders of Bear State shares will be asked to:

The Bear State board recommends that you vote “FOR” each of the above proposals. Bear State’s shareholders must approve the proposal to adopt the merger agreement in order for the merger to occur. If our shareholders fail to approve the proposal to adopt the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Appendix A to this proxy statement, which we encourage you to read carefully and in its entirety.

Record Ho lders and “Street Name” Holders

If your Bear State shares are registered directly in your name with Computershare, our transfer agent, you are considered, with respect to those Bear State shares, the “shareholder of record.” This proxy statement and proxy card have been sent directly to you by Bear State.

If your Bear State shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of Bear State shares held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those Bear State shares, the shareholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your Bear State shares by following their instructions for voting.

Record Date ; Quorum and Adjournment

The Bear State board has fixed the close of business on [•], 2017 as the record date for the determination of shareholders entitled to notice of, and to vote at, the special meeting, and only holders of record of Bear State shares on the record date are entitled to notice of, and to vote at (in person or by proxy), the special meeting. As of the close of business on the record date, there were [•] Bear State shares outstanding and entitled to vote, held by [•] holders of record. You will have one vote on all matters properly coming before the special meeting for each Bear State share that you owned on the record date.

Holders of a majority of the Bear State shares issued and outstanding and entitled to vote at the special meeting, represented in person or by proxy, will constitute a quorum for the transaction of business at the special meeting. Bear State shares represented at the special meeting but not voted, including Bear State shares for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.

Because, under applicable rules, banks, brokers and other nominees holding shares in “street name” do not have discretionary voting authority with respect to any of the proposals described in this proxy statement, if a beneficial owner of Bear State shares held in “street name” does not give voting instructions to the bank, broker or other nominee, then those shares will constitute broker non-votes and will not be counted as represented in person or by proxy at the special meeting.

In the event that a quorum is not present at the special meeting, the special meeting and any adjourned or postponed session of the special meeting may be adjourned or postponed to solicit additional proxies. Pursuant to the Arkansas Business Corporation Act of 1987, or the ABCA, approval of the adjournment of the special meeting in a situation in which a quorum is not present or represented at the special meeting requires the affirmative vote of holders of a majority of Bear State shares entitled to vote at the special meeting and represented either in person or by proxy. Even if a quorum is present at the special meeting, if Bear State shareholders approve the adjournment proposal, the special meeting may be adjourned, if necessary, desirable or appropriate, to solicit additional proxies.

Although we do not expect to bring any matters before the meeting other than the three proposals described in this proxy statement, if an additional matter is brought before the meeting and is one on which brokers have discretionary voting authority, then broker non-votes will be counted for purposes of determining a quorum.

Vote Required

Proposal No. 1 – Adoption of the merger agreement

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding Bear State shares entitled to vote on the proposal. For the proposal to adopt the merger agreement, you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions will not be counted as votes cast in favor of the proposal to adopt the merger agreement, but will count for the purpose of determining whether a quorum is present. Broker non-votes will not be counted as present at the meeting for quorum purposes and will not be counted as votes cast in favor of the proposal to adopt the merger agreement. If you abstain, fail to return your proxy card, fail to submit your proxy by phone or Internet, fail to vote in person at the special meeting, or, if your shares are held in “street name,” fail to provide your bank, broker or other nominee with instructions , it will have the same effect as a vote “AGAINST” approval of the proposal to adopt the merger agreement.

Proposal No. 2 – Golden parachute proposal

Approving the golden parachute proposal requires the affirmative vote of holders of a majority of the votes cast at the special meeting, whether in person or represented by proxy. For the golden parachute proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions and broker non-votes will have no effect on the golden parachute proposal. The golden parachute proposal is an advisory vote, and therefore, it will not be binding on Bear State, the Bear State board or the compensation committee of the board, nor will it create or imply any change in the fiduciary duties of the directors.

Proposal No. 3 – Adjournment proposal

The adjournment proposal requires the affirmative vote of holders of a majority of the votes cast at the special meeting, whether in person or represented by proxy. For the adjournment proposal, you may vote “FOR”, “AGAINST” or “ABSTAIN”. Abstentions and broker non-votes will have no effect on the adjournment proposal.

Voting Agreements

Certain s hareholders of Bear State have entered into voting agreements with Arvest, pursuant to which each such shareholder has agreed to vote “FOR” the proposal to adopt the merger agreement and generally prohibits them from entering into agreements regarding or transferring their shares, subject to certain exceptions. As of the close of business on the record date, these shareholders beneficially owned, in the aggregate, 15,940,880 issued and outstanding Bear State shares, allowing them to exercise approximately 42% of the voting power of Bear State shares. While not mandated by the voting agreements, we currently expect that these shareholders will vote their Bear State shares in favor of the golden parachute proposal and the adjournment proposal.

How to Vote

If you are a shareholder of record, you may have your Bear State shares voted on matters presented at the special meeting in any of the following ways:

If you are a beneficial owner of Bear State shares held in “street name”, you should receive instructions from your bank, broker or other nominee that you must follow in order to have your Bear State shares voted. Those instructions will identify which of the above choices are available to you in order to have your Bear State shares voted. Please note that if you are a beneficial owner of Bear State shares held in “street name” and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, broker or other nominee at the special meeting.

Please refer to the instructions on your proxy card or voting instruction form to determine the deadlines for submitting your proxy over the Internet or by telephone. If you choose to submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be received by the time the special meeting begins. Please do not send in your stock certificates with your proxy card. When the merger is completed, a separate letter of transmittal will be mailed to you that will enable you to receive the per share merger consideration in exchange for your stock certificates.

If you submit a proxy, regardless of the method you choose to submit such proxy, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your Bear State shares in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your Bear State shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your Bear State shares should be voted on a matter, the Bear State shares represented by your properly signed proxy will be voted “FOR” approval of the proposal to adopt the merger agreement, “FOR” approval of the golden parachute proposal and “FOR” approval of the adjournment proposal.

IT IS IMPORTANT THAT YOU VOTE YOUR BEAR STATE SHARES PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR OVER THE INTERNET. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

As of [•], 2017, the record date for the special meeting, the directors and executive officers of Bear State beneficially owned and were entitled to vote, in the aggregate, [•] Bear State shares, representing approximately [•] % of the outstanding Bear State shares. We currently expect that each of our directors and executive officers will vote their Bear State shares in favor of each of the proposals to be presented at the special meeting.

Revocation of Proxies

You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later dated proxy through any of the methods available to you, by giving written notice of revocation to Bear State’s Corporate Secretary, which must be filed with the Corporate Secretary by 5:00 p.m. on the business day immediately prior to the date of the special meeting, or by attending the special meeting and voting in person. Attending the special meeting alone, without voting at the special meeting, will not be sufficient to revoke your proxy. Written notice of revocation should be mailed to: Bear State Financial, Inc., Attention: Corporate Secretary, 900 South Shackleford Rd., Suite 401, Little Rock, Arkansas 72211.

Shares Held in the Bear State Financial, Inc. Employees’ Savings & Profit Sharing Plan

Bear State shares held in the Bear State Financial, Inc. Employees’ Savings & Profit Sharing Plan, which we refer to as the Bear State 401(k) plan, are held of record and are voted by the trustee of the Bear State 401(k) plan at the direction of Bear State 401(k) plan participants. Participants in the Bear State 401(k) plan will be provided with a proxy card and voting instructions with these proxy materials. If you participate in the Bear State 401(k) plan, you may give voting instructions as to the number of full and fractional Bear State shares allocable to your account as of the record date for determining the shareholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You may provide voting instructions to the trustee by completing and returning the proxy card accompanying this proxy statement, or submitting your proxy by telephone or the Internet. The trustee will vote your Bear State shares in accordance with your completed proxy card if it is received by [•] , 2017. If you do not send instructions by this deadline or submit a proxy by following the instructions set forth herein, or if you return your proxy card with an unclear voting designation or no voting designation at all, the trustee will vote the number of full and fractional Bear State shares allocable to your account in its discretion.

Bear State shares held in the Bear State 401(k) plan may NOT be voted in person at the special meeting as the trustee of the Bear State 401(k) plan votes the applicable Bear State shares two business days prior to the special meeting, after receiving voting instructions from the plan participants.

Anticipated Date of Completion of the Merger

We are working towards completing the merger as soon as possible. Assuming timely satisfaction of the necessary closing conditions (including approval by the Bear State shareholders), we currently expect the closing to occur late in the fourth quarter of 2017 or the first quarter of 2018. The closing is required to take place on the fifth business day following the date that the conditions set forth in the merger agreement (other than conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, or at such other time as Arvest and Bear State may mutually agree.

The merger will become effective at such time as the articles of merger are duly filed with the Arkansas Secretary of State or at such later time as may be specified in such articles of merger. See “The Merger Agreement —Effects of the Merger.”

Rights of Shareholders Who Seek Appraisal

If you are a Bear State shareholder and you follow the procedures required by ABCA, you may dissent from the merger and receive the fair value of your shares of Bear State common stock as determined pursuant to those procedures. To perfect your dissenters’ rights, you must precisely follow the procedures specified in the ABCA at Ark. Code Ann. §§ 4-27-1301 et seq., the relevant portions of which have been excerpted and included as Appendix D to this proxy statement.

In order to perfect your dissenters’ rights and receive payment as a dissenting shareholder, you must:

If you (i) fail to provide notice of dissent to the merger, (ii) vote in favor of the merger or (iii) fail to make a written demand for payment of fair value in accordance with the requirements of Ark. Code Ann. § 4-27-1323, you will be bound by the terms of the merger and the merger agreement, and your shares of Bear State common stock will be converted into the right to receive the merger consideration. While a vote in favor of the merger will waive your dissenters’ rights, a failure to vote against the merger will not constitute a waiver of your dissenters’ rights. A vote against the merger will not be deemed to satisfy any notice requirements under Ark. Code Ann. §§ 4-27-1301 et seq.

The value of dissenting shares will be determined, as of the time immediately before effectuation of the merger but excluding any appreciation or depreciation in anticipation of the merger (unless exclusion would be inequitable), by Bear State (or Arvest as the successor thereto). Not later than 10 days following consummation of the merger, Arvest (as successor to Bear State) will deliver a written dissenters’ notice to all shareholders who timely provided an intent to demand payment and did not vote in favor of the merger that will specify a date by which Arvest must receive a payment demand under Ark. Code Ann. § 4-27-1323.  If the dissenting shareholder demands payment in compliance with Ark. Code Ann. § 4-27-1323, Arvest will pay each dissenting shareholder the amount that Arvest (as successor to Bear State) estimates to be the fair value of the shares. If a dissenting shareholder objects to such valuation, the shareholder may provide Arvest its estimate of the fair value of its shares and demand payment for such amount within 30 days after Arvest makes or offers payment for the dissenting shareholder’s shares. After receipt of such demand, Arvest may either (i) pay the dissenting shareholder the amount demanded by the shareholder or (ii) within 60 days of such receipt, petition a court to determine the fair value of the shares. If Arvest fails to take either of the foregoing actions within 60 days of such receipt, it shall pay the dissenting shareholder the amount demanded by such shareholder.

If you comply with the appraisal rights requirements, the fair value of your Bear State shares, determined in the manner described above, and which may be more or less than the value of the merger consideration you would have received in the merger had you not dissented, will be paid to you in cash. This cash payment will be fully taxable to you.

Solicitation of Proxies; Payment of Solicitation Expenses

Proxies are being solicited by the board of directors of Bear State. Bear State will bear the cost of soliciting proxies, including the cost of preparing, printing and mailing the materials in connection with the solicitation of proxies. Bear State will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending the proxy materials to the beneficial owners of Bear State’s common stock. In addition to solicitations by mail, officers and regular employees of Bear State may, without being additionally compensated, solicit proxies personally and by mail, telephone, facsimile or electronic communication.

THE MERGER

Merger Consideration

At the effective time, each Bear State share issued and outstanding immediately prior to the effective time (other than treasury shares and dissenting shares) will be converted into the right to receive $10.28 per Bear State share, without interest, less any applicable withholding or transfer taxes .

As of the effective time, all such Bear State shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and will thereafter represent only the right to receive the per share merger consideration to be paid in accordance with the merger agreement, without interest.

Cash Payment for Outstanding Stock Options and Restricted Stock Units.  

In accordance with the terms of the merger agreement, all equity awards outstanding under Bear State ’s 2011 Omnibus Incentive Plan, which we refer to as the Incentive Plan, at the effective time of the merger, whether or not vested, will be cancelled and automatically converted into the right to receive a cash amount equal to (i) in the case of options, the aggregate number of shares of Bear State common stock subject to such option multiplied by the difference of $10.28 and the exercise price of such option and (ii) in the case of restricted stock units, $10.28 per unit.

Cash Payment for Outstanding Warrants.  

In accordance with the terms of the merger agreement, at the effective time of the merger, all warrants to purchase shares of Bear State common stock will be cancelled and automatically converted into the right to receive a cash amount equal to the aggregate number of shares Bear State common stock subject to such warrant multiplied by the difference of $10.28 and the exercise price of such warrants.

Background of the Merger

Bear State is the holding company of Bear State Bank. In May 2011, Bear State Financial Holdings, LLC, which we refer to as BSF Holdings, led by Richard Massey, Chairman of the board of directors of Bear State, made a significant recapitalizing investment in First Federal Bancshares of Arkansas, Inc. (the predecessor-in-interest to Bear State) and its wholly-owned subsidiary, First Federal Bank, which was a federally-chartered stock savings and loan association based in Harrison, Arkansas with 17 branches located in northwest and north central Arkansas. Mr. Massey and BSF Holdings have led the turnaround and transformation of First Federal Bancshares of Arkansas, Inc. and First Federal Bank, which included strategic acquisitions of First National Security Company (and its subsidiary banks First National Bank of Hot Springs and Heritage Bank, N.A.) in 2014 and Metropolitan National Bank in 2015, consolidating and renaming the banks under the Bear State brand, and converting Bear State Bank ’s charter from a national bank to an Arkansas state-chartered bank in 2016.

The board of directors and senior management of Bear State regularly review and assess Bear State ’s operations, performance, prospects and strategic direction, as well as the market conditions in the financial services industry and in Bear State’s markets. As part of this review and assessment, Bear State’s board and management regularly consider potential strategic alternatives to achieve Bear State’s strategic goals, strengthen Bear State’s business and maximize shareholder value, including, but not limited to, potential acquisitions and business combinations, as well as a potential sale of Bear State or a merger with another financial institution. To that end, Mr. Massey, Dabbs Cavin, vice chairman of the board of directors of Bear State, and senior management of Bear State have met from time to time with representatives from various banks and financial institutions in Arkansas and in neighboring states to discuss strategic opportunities, including mergers and consolidations.

In early March 2017, Randy Dennis of DD&F Consulting Group, Inc., a bank consulting firm based in Little Rock, Arkansas, which we refer to as DD&F, approached Mr. Massey, noting that Bear State could be an attractive and transformative acquisition candidate for Arvest, and asked for Mr. Massey’s permission to approach Arvest and inquire as to their interest in a potential strategic transaction. In light of the Bear State board’s prior discussions of other strategic alternatives, Mr. Massey authorized Mr. Dennis, acting on behalf of Bear State, to contact representatives of Arvest to gauge their interest in a potential transaction with Bear State. Acting pursuant to Mr. Massey’s authorization, on or about March 13, 2017, Mr. Dennis spoke with the Chairman of the board of directors of Arvest, about a potential transaction between Arvest and Bear State. The Arvest Chairman indicated that Arvest might be interested in a potential transaction, but it could not engage in serious discussions at that particular time. Around that time, Bob Kelly, chief risk officer of Arvest, began to conduct a preliminary due diligence investigation of Bear State by reviewing publicly available information about Bear State. Mr. Dennis discussed the issue further with Arvest on several occasions over the following weeks. In mid-April, Mr. Kelly requested certain immaterial, non-public information about Bear State from Mr. Dennis, as Arvest began to show interest in a potential transaction. Subsequently, the Arvest Chairman and Rick Chapman, vice president of Arvest’s parent holding companies Arvest Bank Group, Inc. and Arvest Holdings, Inc., agreed to a meeting with Mr. Massey and Mr. Dennis.

On June 13, 2017, Messrs. Massey and Dennis met in Bentonville, Arkansas with the Arvest chairman and Mr. Chapman where the Arvest representatives expressed a desire to acquire Bear State in an all-cash transaction. At the meeting, Mr. Dennis distributed information to the parties concerning valuations in recent financial institutions transactions with target companies comparable in size and geographic location to Bear State and its markets, and Mr. Massey noted that the comparable transactions showed recent valuations trending at approximately two times tangible book value. Mr. Massey also informed the Arvest representatives that if the Bear State board desired to pursue a transaction with Arvest, the directors’ fiduciary duties would require them to take measures to maximize the value to be paid to shareholders, which would most likely mean actively soliciting competing bids from third parties.

On June 22, 2017, Mr. Chapman contacted Mr. Massey and proposed a transaction, subject to formal due diligence and the negotiation of a definitive transaction agreement, whereby Arvest would acquire Bear State in an all-cash transaction valued at $10.53 per share, which represented a premium of approximately 10% to the closing price of Bear State common stock on that date of $9.55 per share, and a 2.04 multiple of Bear State’s tangible book value as of June 30, 2017.

On June 26, 2017, the Bear State board held a special meeting at which Mr. Massey informed the board of the Arvest proposal. At the request of the board, representatives from Kutak Rock LLP, legal counsel to Bear State, which we refer to as Kutak Rock, and DD&F were present. The board discussed its strategic plan as a stand-alone bank, including business and regulatory challenges facing Bear State, such as costs of deposits , a shrinking yield curve, slowing loan growth, and reliance on syndicated loans and commercial real estate loans as primary growth drivers (continued growth of which are anticipated to be curtailed by regulatory concerns, capital levels and tightening credit markets); and local, regional and national economic conditions and forecasts, including the average economic recession and expansion cycles based on historical data and the likelihood of economic recession in the near future. In addition to the challenges facing top-line revenue, the board noted that Bear State’s cost savings from expense management efforts in recent quarters have materially contributed to earnings growth, but that additional cost savings are unlikely to be material as Bear State and Bear State Bank have approached an efficiency ratio of 56%.

Mr. Massey also recounted to the board that since 2011, Bear State ’s strategic plan has included both organic growth and growth through acquisitions. He noted that with increasing regulation and declining margins, he believed Bear State Bank needed to grow to between $3 and $5 billion in total assets to continue to generate attractive yields. To that end, Mr. Massey and senior management of Bear State have actively sought out acquisition targets in Arkansas, Missouri and surrounding states. Mr. Machen noted the difficulty in finding attractive acquisition candidates that would be accretive to Bear State or that were otherwise a good strategic fit. Mr. Massey noted potential acquisition opportunities in Oklahoma and Louisiana, but noted certain risks and concerns in those markets, including the ongoing adverse impact of depressed oil and gas prices.

The board also discussed the Arvest proposal and the potential interest of other persons in acquiring Bear State. David McDaniel of Kutak Rock reviewed with the board the directors ’ fiduciary duties and other legal matters relating to the consideration of a potential strategic transaction. Following the discussion, the board authorized Mr. Massey and senior management to continue discussions with Arvest on a non-exclusive basis, to enter into a confidentiality agreement with Arvest and to allow Arvest to conduct a due diligence review of Bear State, and to perform a market check to determine if any other acquirers for Bear State might emerge and provide a proposal superior to the Arvest proposal. The board determined that a special transaction committee was unnecessary in this instance because (1) Mr. Massey, who was sufficiently independent of senior management, would lead the negotiations with Arvest on behalf of Bear State and would oversee the market check process, (2) the board as a whole was sufficiently independent of management, with Matt Machen, President and Chief Executive Officer of Bear State, being the only member of senior management serving on the board and (3) with the exception of Mr. Machen, none of the directors had any material special interest in a transaction other than as a shareholder of Bear State. The board also formally engaged DD&F as a consultant to assist in the performance of a market check and to provide other consulting services in connection with a potential transaction. In approving the engagement of DD&F, the board considered DD&F’s experience in advising on merger and acquisition transactions in the banking industry as well as their depth and breadth of knowledge of the banking industry and its participants in both Arkansas and neighboring states. Mr. Massey discussed the need to obtain a fairness opinion from a reputable investment bank in the event that Bear State was able to reach an agreement with Arvest or a third party on a change-in-control transaction and agreed to initiate discussions with various investment bankers and report back to the board.

Bear State and Arvest entered into a confidentiality agreement on June 26, 2017.

On June 29, 2017, Messrs. Massey and Cavin met with representatives of DD&F and Kutak Rock to develop a market check process and a list of potential acquirers whose interest in a potential transaction would be solicited. Messrs. Massey and Cavin reviewed the list of banks with whom they have had prior informal discussions about potential transactions, and Mr. Dennis provided a list of candidates that he determined, based on his professional judgment and knowledge of the marketplace, were most likely to yield a competing offer. These discussions resulted in a list of six financial institutions that were determined the most likely to have the interest and ability to consummate a transaction with Bear State. The parties decided not to include any financial buyers in the market check because of the regulated nature of Bear State ’s business and their belief that financial buyers would not have the strategic interest or be able to generate the expected financial returns to make a proposal competitive with strategic acquirers. Beginning on July 5, 2017, representatives of DD&F engaged in discussions with each of the six financial institutions about a potential transaction with Bear State, informing them that expressions of interest in a potential business combination transaction with Bear State should be submitted by July 21, 2017. The market check yielded one acquisition proposal from a third party, publicly-traded financial institution we refer to as Company A, which was submitted on July 20, 2017.

Company A ’s proposal contemplated an acquisition of Bear State by Company A in a stock-for-stock merger involving a fixed exchange ratio, subject to modification if the volume weighted average price of Company A’s common stock at closing (VWAP) fell outside a specified cap and collar, resulting in an implied price per share of between $9.45 and $10.95. In the event the VWAP was below the threshold collar price, Company A could elect to increase the number of shares to arrive at the collar price or Bear State could terminate the transaction. In the event the VWAP exceeded the cap price, the number of shares would be decreased to arrive at the cap price. Based on Company A’s closing stock price on July 20, 2017, the proposal reflected an implied per share price of $10.18 on that date. The Company A proposal required Bear State to immediately grant Company A exclusive negotiating rights while Company A conducted a due diligence review of Bear State, and expressed a desire to enter into a definitive agreement during the fourth quarter of 2017 with a targeted closing to occur no earlier than the first quarter of 2018. The Company A proposal requested a response by July 28, 2017.

None of the other financial institutions that DD&F contacted submitted a written expression of interest by July 21, 2017 or thereafter.

On July 14, 2017, Arvest ’s legal adviser, Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd., which we refer to as Hilburn, sent Kutak Rock a preliminary working draft of the merger agreement and supplemented that with a revised draft on July 24, 2017. The initial drafts of the merger agreement included, among other things, provisions for certain shareholders (not identified in the draft) to enter into voting agreements to support the transaction; a condition that certain key persons (not identified in the draft) enter into a restrictive covenant agreement with Arvest; a non-solicitation provision that would prevent Bear State from discussing or negotiating any third party proposals, subject to certain exceptions; a “force the vote” provision pursuant to which Bear State would be obligated to hold a shareholders’ meeting to consider the transaction (and the shareholders who had entered into the voting agreements would be required to vote in favor of the transaction) even if the Bear State board changed its recommendation in favor of the transaction; a provision that would prevent the Bear State board from submitting any third party proposal to a vote of the Bear State shareholders; and a termination fee payable by Bear State in certain circumstances in the amount of $14 million, which represented approximately 3.5% of the equity value of the proposed transaction.

On July 26, 2017, Kutak Rock sent to Hilburn a revised draft of the merger agreement, reflecting Bear State’s response to Arvest’s initial draft as revised. The revised draft provided that the shareholders subject to voting agreements would be limited to Mr. Massey and BSF Holdings, the exceptions to the non-solicitation provision would be expanded, the prohibition on submitting third party proposals to a vote of Bear State shareholders would be removed, and various other changes to the representations and warranties, pre-closing operating covenants and closing conditions reflected in Arvest’s initial draft.

Also, on July 26, 2017, the Bear State board met for a regularly scheduled meeting. At the request of the board, representatives from Kutak Rock and DD&F were present at the meeting. At the meeting, Mr. Dennis with DD&F provided an overview and summary of the results of the market check process as well as an overview of the Company A proposal. Additionally, Messrs. Machen and Massey and Mr. McDaniel with Kutak Rock discussed the status of Arvest ’s due diligence review and the status of the merger agreement. The Bear State board and its advisors discussed the Company A proposal and compared it against the terms of the Arvest proposal. The board noted that the Company A all-stock proposal would subject Bear State to market risk associated with Company A’s stock price, would require termination of negotiations with Arvest, and would not yield a definitive agreement until the fourth quarter of 2017, at the earliest. The board also noted that Bear State shareholders would own approximately 18% of the outstanding shares of Company A on a pro forma basis and expressed concern about the liquidity of those Company A shares. After discussing the Arvest proposal and the Company A proposal, the Bear State board determined that the Arvest proposal constituted a superior proposal. Notwithstanding that determination, the board requested that Mr. Dennis continue discussions with Company A to determine if Company A would modify its proposal to make it more attractive to Bear State’s shareholders. Mr. Massey provided an update on efforts to engage an investment banker to provide a fairness opinion in the event Bear State proceeded with a change-in-control transaction, noting that Raymond James had emerged from the search process as the preferred provider because Raymond James is a nationally recognized investment banking firm that has significant recent experience advising on merger and acquisition transactions in the banking industry and is regularly engaged in the valuation of financial institutions and their securities in connection with mergers, acquisitions and other corporate transactions. 

Following the board meeting on July 26, 2017, Mr. Massey engaged Raymond James, subject to final approval by the Bear State board, to provide a fairness opinion in the event Bear State was able to reach a definitive agreement with either Arvest or Company A, or any other party.

On July 27, 2017, Mr. Dennis requested an extension of the response deadline for the Company A proposal until August 4, 2017. On July 31, 2017, Mr. Dennis inquired from representatives of Company A whether Company A would modify its proposal to add cash consideration (and if so, the amount of cash consideration Company A was willing to offer) and to provide Bear State shareholders with board representation rights. Mr. Dennis also inquired as to the reasons for the delay in signing until at least the fourth quarter to determine if the process could be expedited. Company A representatives responded the same day, agreeing to the extension and stating that Company A may be willing to add some cash consideration but did not suggest an amount or a range and that Company A would not guarantee board representation to Bear State shareholders. Additionally, the response indicated that Company A’s timeline would not be accelerated.

During the weeks of July 24, July 31, and August 7 and thereafter, Arvest, together with its legal advisers, continued its business, legal and financial due diligence of Bear State and the parties continued to negotiate a definitive merger agreement. On August 2, 2017, Kutak Rock delivered an initial draft of the disclosure schedules to the merger agreement to Hilburn. On August 7, 2017, Hilburn delivered a revised draft of the merger agreement to Kutak Rock, reflecting continued negotiation of the representations and warranties, pre-closing operating covenants and closing conditions as well as the addition of a provision that Bear State would not submit a third party proposal to a vote of the Bear State shareholders prior to submission of the Arvest proposal to a vote of the Bear State shareholders. Additionally, Arvest’s revised draft included a new condition that Bear State’s closing date shareholders’ equity value would not be less than its shareholders’ equity value on June 30, 2017. On August 9, 2017, Kutak Rock delivered a subsequent markup of the merger agreement to Hilburn, requesting a list of persons that Arvest would require to enter into a restrictive covenant agreement, excluding any transaction-related expenses from the closing date shareholders’ equity value closing condition and reflecting additional changes to the agreement.

On August 11, 2017, the board of directors of each of Bear State and Bear State Bank met in a joint special meeting to evaluate the status of the Arvest proposal and the Company A proposal. At the invitation of the board, representatives of Kutak Rock, DD&F and Raymond James were in attendance. Prior to the meeting, among other things, copies of the draft merger agreement (including the related ancillary documents such as the form of voting agreement), presentations prepared by each of Kutak Rock and Raymond James, and proposed board resolutions were made available to the directors. At the meeting, the board ratified the prior engagement of Raymond James. In discussing the Arvest proposal, Mr. Massey summarized his recent discussions with representatives of Arvest, noting that they were attempting to complete their due diligence review by August 10. In the discussion, Mr. Massey had requested Arvest’s confirmation of the $10.53 per share transaction price. The Arvest representatives would not commit to the price. Mr. Massey concluded that the discussion could signal a potential price reduction in the Arvest proposal. Thereafter, Mr. Dennis of DD&F provided an overview of the regulatory application process. Following this discussion, the board revisited the Company A proposal. Mr. Dennis informed the board of his discussions with representatives of Company A on July 27 and July 31, 2017, and the board noted that the current value of the Company A proposal, based on the then current trading price of Company A common stock, was approximately $9.86 per share. At this time, the board reconfirmed its view that the Arvest proposal was superior to the Company A proposal as (i) it provided superior value to the Bear State shareholders, (ii) it provided a shorter time period for signing and closing and thus a definitive agreement was much more likely, (iii) it would not expose the transaction value to the economic risk of the acquirer’s stock price and (iv) it did not require Bear State to cease discussions with other parties.

Following this confirmation, Mr. McDaniel of Kutak Rock provided a brief review of the directors ’ fiduciary duties in approving a change-in-control transaction, including an evaluation of competing offers, and a detailed summary of the latest draft of the merger agreement, including the merger consideration provisions, covenants (including the board recommendation, non-solicitation and “force the vote” provisions), closing conditions, termination rights and associated termination fees. Thereafter, representatives of Raymond James provided their preliminary valuation analysis of Bear State and financial analysis of the Arvest proposal, together with a draft fairness opinion.

Following the Raymond James presentation, the Bear State board and its advisors discussed market conditions and recounted prior discussions pertaining to certain challenges facing Bear State and the industry. The Bear State board also discussed the process it had employed, including conducting a pre-signing market check among the persons most likely to have the desire and the means to acquire Bear State and the fact that only one company submitted a preliminary proposal. Finally, the board discussed the valuations from comparable transactions reflected in the Raymond James financial analysis. The Bear State board concluded that it was unlikely that any other counterparty would have the strategic interest and financial capability to offer value to Bear State’s shareholders in excess of that in the Arvest proposal. Following these discussions, the directors unanimously and preliminarily approved the Arvest proposal.

On August 18, 2017, following conclusion of a detailed due diligence review and in consideration of the magnitude and quantity of all charges and expenses expected to be incurred in connection with the transaction, Arvest informed Bear State it would be decreasing the value of its proposal. Mr. Massey engaged in further discussions and negotiations with Arvest, which resulted in the value of the proposal being reduced to $10.28 per share. On August 18, 2017 and over the ensuing weekend, Kutak Rock and Hilburn continued to negotiate additional terms of the merger agreement, disclosure schedules and other ancillary documents.

On August 21, 2017, the board of directors of each of Bear State and Bear State Bank reconvened in a special meeting to evaluate the revised Arvest proposal. At the invitation of the board, representatives of Kutak Rock, DD&F and Raymond James were in attendance. Prior to the meeting, among other things, copies of the revised financial analysis and fairness opinion prepared by Raymond James were made available to the directors. Mr. Massey informed the board of the decrease in purchase price of the Arvest proposal, as well as his further discussions and negotiations with Arvest representatives. Mr. McDaniel of Kutak Rock noted the changes to the merger agreement since the draft reviewed with the board at its August 11, 2017 meeting. The board noted that even with the decreased price, the Arvest proposal remained superior to the Company A proposal, which then reflected a $9.75 per share value based on the then current trading price of Company A common stock. Mr. Massey requested that John Roddy and Matt Paramore with Raymond James summarize Raymond James ’ revised financial analysis. Mr. Paramore summarized the changes to the preliminary financial analysis that was delivered to the board at its August 11, 2017 meeting, reflecting the decreased purchase price in the Arvest proposal. After a discussion of the financial analysis, including a discussion of the valuations of comparable transactions reflected in the analysis, Raymond James rendered an oral opinion, confirmed by delivery of a written opinion dated August 21, 2017, to the Bear State board to the effect that, as of such date and based on and subject to the matters set forth in its opinion, the merger consideration provided for in the merger agreement was fair, from a financial point of view, to the holders of Bear State common stock. For a more detailed discussion of Raymond James’s opinion, please see below under the caption “—Opinion of Raymond James & Associates, Inc.” Such opinion is attached to this proxy statement as Appendix C .

In discussing the fairness opinion the Bear State board and Raymond James discussed the fact that the merger consideration of $10.28 per share was below the 25 ^th percentile of the implied transaction metrics for the trailing twelve months EPS and next twelve months forecasted EPS of both the regional and national selected transactions. The Bear State board and Raymond James noted that many of the target companies included in the regional and national selected transactions list had considerable presences in large metropolitan markets that have experienced and are anticipated to continue to experience greater economic growth than that experienced in the markets in which Bear State operates, and that the earnings-based valuations for these other transactions reflect the greater historical and anticipated growth in those markets.

Following these discussions, the directors in attendance unanimously determined that it was advisable, and in the best interests of, Bear State and its shareholders to enter into the merger agreement, substantially in the form previously presented and as modified to date, and to consummate the merger and other transactions contemplated thereby. The directors in attendance unanimously approved and adopted the merger agreement, the merger and the transactions contemplated thereby, directed that the merger agreement be submitted to Bear State’s shareholders for consideration and, subject to the terms of the merger agreement, resolved to recommend that Bear State’s shareholders approve and adopt the merger agreement and the merger.

Prior to the commencement of trading the following morning, August 22, 2017, Bear State and Arvest entered into the merger agreement and Bear State issued a press release announcing the transaction. Concurrently with the execution of the merger agreement, Mr. Massey and BSF Holdings entered into voting agreements with Arvest agreeing to support the transaction on the terms and conditions set forth in the voting agreements.

Reasons for the Merger; Recommendation of the Board of Directors

In reaching its decision to approve and recommend the adoption of the merger agreement and the transactions contemplated by the merger agreement, the Bear State board consulted with Bear State’s management, as well as its financial and legal advisors and its bank consultants, and considered a number of factors, including the following material factors:

The Bear State board also considered a variety of potentially negative reasons in its deliberations concerning the merger agreement and the merger, including the following (not in any relative order of importance):

The foregoing discussion of the information and reasons considered by the Bear State board is not intended to be exhaustive, but includes the material reasons considered by the Bear State board. In view of the variety of reasons considered in connection with its evaluation of the merger, the Bear State board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific reasons considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different reasons. The Bear State board did not undertake to make any specific determination as to whether any reason, or any particular aspect of any reason, supported or did not support its ultimate determination. The Bear State board based its recommendation on the totality of the information presented. After considering these reasons, the Bear State board concluded that the positive reasons related to the merger agreement and the transactions contemplated thereby substantially outweighed the potential negative reasons.

Portions of this explanation of the reasons for the merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of “Cautionary Statement Regarding Forward-Looking Statements .”

Opinion of Raymond James & Associates, Inc.

Bear State retained Raymond James as its financial advisor on July 26, 2017 solely to deliver an opinion as to the fairness, from a financial point of view, of the merger consideration to the holders of shares of Bear State common stock.

At the August 21, 2017 meeting of the Bear State board of directors, representatives of Raymond James rendered its written opinion to the Bear State board, dated August 21, 2017, that, as of such date and based upon and subject to the qualifications, assumptions and other matters considered in connection with the preparation of its opinion, the merger consideration to be received by the holders of shares of Bear State common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Raymond James is attached as Appendix C to this proxy statement and is incorporated by reference herein. The summary of the opinion of Raymond James set forth in this proxy statement is qualified in its entirety by reference to the full text of such written opinion. Holders of shares of Bear State common stock are urged to read the opinion carefully in its entirety. Raymond James’s opinion speaks only as of the date of such opinion. Raymond James’s opinion does not reflect any developments that may occur or may have occurred after the date of its opinion and prior to the completion of the merger .

Raymond James provided its opinion for the information of the Bear State board of directors (solely in each director’s capacity as such) in connection with, and for purposes of, its consideration of the merger and its opinion only addresses whether the merger consideration to be received by the holders of the shares of Bear State common stock was fair, from a financial point of view, to such holders as of the date of such opinion. The opinion of Raymond James did not address any other term or aspect of the merger agreement or the agreement contemplated thereby. Raymond James was not requested to, and did not, make any recommendation to the Bear State board of directors as to the form or amount of the consideration to be paid to the shareholders of Bear State, which was determined through arm’s length negotiations between the parties. The Raymond James opinion did not and does not constitute a recommendation to any shareholder considering the execution of a shareholder voting agreement. The Raymond James opinion did not and does not constitute a recommendation to the Bear State board or to any holder of shares of Bear State common stock as to how the board, such shareholder or any other person should vote or otherwise act with respect to the merger or any other matter. Raymond James has consented to the inclusion of this summary in this proxy statement.

In connection with its review of the proposed merger and the preparation of its opinion, Raymond James, among other things:

With Bear State ’s consent, Raymond James assumed and relied upon the accuracy and completeness of all written and oral information supplied by or on behalf of Bear State, and Raymond James did not undertake any duty or responsibility to, nor did Raymond James, independently verify any of such information. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent or otherwise) of Bear State. Raymond James is not an expert in generally accepted accounting principles (GAAP) in general and also specifically regarding the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for loan and lease losses or any other reserves; accordingly, Raymond James assumed that such allowances and reserves are, in the aggregate, adequate to cover such losses. With respect to the Bear State Projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, Raymond James, with Bear State’s consent, assumed that the Bear State Projections and such other information and data were reasonably prepared in good faith on assumptions reflecting the best currently available estimates and judgments of management of Bear State and Raymond James relied upon the assurances of Bear State to advise Raymond James promptly if any information previously provided became inaccurate, misleading or was required to be updated during the period of its review. Raymond James expressed no opinion with respect to the Bear State Projections or the assumptions on which they were based. Raymond James assumed that the final form of the merger agreement would be substantially similar to the Draft Agreement reviewed by Raymond James and that the merger would be consummated in accordance with the terms of the merger agreement without waiver of or amendment to any of the conditions thereto and without adjustment to the merger consideration as reflected in the Draft Agreement. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the merger agreement were true and correct and that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement, and that the conditions precedent in the merger agreement will not be waived. Raymond James also relied upon and assumed, without independent verification, that (i) the merger would be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would have an effect on the merger, Bear State or Bear State Bank that would be material to its analysis or opinion.

Raymond James expressed no opinion as to the underlying business decision to effect the merger, the structure or tax consequences of the merger, or the availability or advisability of any alternatives to the merger. The Raymond James opinion is limited to the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of Bear State common stock. Raymond James expressed no opinion with respect to any other reasons (legal, business, or otherwise) that may support the decision of Bear State’s board of directors to approve or consummate the merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. Raymond James relied, with the consent of Bear State, on the fact that Bear State was assisted by legal, accounting and tax advisors, and, with the consent of Bear State relied upon and assumed the accuracy and completeness of the assessments by Bear State and its advisors, as to all legal, accounting and tax matters with respect to Bear State and the merger, including, without limitation, that Bear State’s financial statements have been prepared in accordance with GAAP.

In formulating its opinion, Raymond James considered only the merger consideration to be received by the holders of shares of Bear State common stock, and Raymond James did not consider, and its opinion did not address, the fairness of the amount or nature of any compensation to be paid or payable to any of Bear State’s or Bear State Bank’s officers, directors or employees, or such class of persons, in connection with the merger whether relative to the merger consideration or otherwise. Raymond James was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (1) the fairness of the merger to the holders of any class of securities, creditors or other constituencies of Bear State or Bear State Bank, or to any other party, except and only to the extent expressly set forth in the last sentence of its opinion or (2) the fairness of the merger to any one class or group of Bear State’s or any other party’s security holders or other constituents vis-à-vis any other class or group of Bear State’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the merger amongst or within such classes or groups of security holders or other constituents). Raymond James expressed no opinion as to the impact of the merger on the solvency or viability of Bear State or Arvest or the ability of Bear State or Arvest to pay their respective obligations when they come due.

The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. Accordingly, Raymond James believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create an incomplete or potentially misleading view of the process underlying its analyses and opinion. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before August 18, 2017 (the last trading day before the date of the Raymond James opinion), and is not necessarily indicative of current market conditions.

Material Financial Analyses

The following summarizes the material financial analyses reviewed by Raymond James with the Bear State board of directors at its meeting on August 21, 2017, which material was considered by Raymond James in rendering its opinion. No company or transaction used in the analyses described below is identical or directly comparable to Bear State or the contemplated merger, and certain of the selected companies may have characteristics that are materially different from those of Bear State. An analysis of selected companies and selected transactions is not mathematical, rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Bear State and the companies and transactions to which it and the merger, respectively, are being compared. Accordingly, Raymond James made judgments and assumptions concerning differences in financial and operating characteristics of the selected companies, the target companies in the selected transactions and other factors that could affect the public trading value of the selected companies or the merger transaction value in the selected transactions. These qualitative judgments related primarily to the differing sizes, differing geographies, historical and anticipated growth for the respective metropolitan markets, growth prospects for the selected companies and profitability levels between Bear State and the companies included in the selected companies analysis and between Bear State and the target companies included in the selected transactions analysis.

Selected Companies Analysis.

Raymond James analyzed the relative valuation multiples of twenty-nine (29) publicly-traded bank holding companies, banks, and thrifts headquartered in the Midwest (Iowa, Indiana, Illinois, Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, South Dakota, and Wisconsin) and Southeast (Alabama, Arkansas, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia) with the following characteristics: (i) listed on either the NASDAQ, NYSE, or NYSE MKT exchanges; (ii) total assets between $1.0 billion and $4.0 billion; (iii) a return on average assets for the last twelve months (“LTM”) between 0.75% and 1.25%, (iv) a ratio of tangible common equity to tangible assets between 6.0% and 12.0%, and (v) nonperforming assets to total assets ratio (NPAs / Assets) less than 2.00%. The aforementioned financial characteristics were shown for the bank subsidiary if consolidated data was unavailable, and the financial characteristics were based on the most recent LTM period reported as of August 18, 2017. Raymond James excluded mutual holding companies, targets of announced mergers, and C&F Financial Corporation, which was not comparable due to its unique business model. The selected companies that Raymond James deemed relevant included the following:

Raymond James calculated various financial multiples for each selected public company, including: price per share at close on August 18, 2017 compared to (i) tangible book value (“TBV”) per share at June 30, 2017; (ii) LTM earnings per share (“EPS”) for the most recent LTM period reported; (iii) consensus forward operating EPS for the 2017 calendar year based on FactSet Research Systems Inc. data and as shown by S&P Global Market Intelligence; and (iv) consensus forward operating EPS for the 2017 and 2018 fiscal years based on FactSet Research Systems Inc. data and as shown by S&P Global Market Intelligence. Raymond James used the Bear State Projections for Bear State’s 2017 and 2018 earnings per share. The estimates published by Wall Street research analysts were not prepared in connection with the merger or at the request of Raymond James and may or may not prove to be accurate. All financial multiples—TBV per share, LTM EPS, 2017 forward EPS, and 2018 forward EPS—greater than two standard deviations away from the unadjusted mean were considered not meaningful. Raymond James reviewed the 75 ^th percentile, mean, median and 25 ^th percentile relative valuation multiples of the selected public companies. The results of the selected public companies analysis are summarized below:

Furthermore, Raymond James applied the 75 ^th percentile, mean, median and 25 ^th percentile relative valuation multiples for each of the metrics to Bear State’s actual and projected financial results and adjusted them for outstanding options to acquire shares of Bear State common stock to derive an implied per share merger consideration. Raymond James then compared those implied values to the actual per share merger consideration of $10.28. The results of this analysis are summarized below:

Selected Transaction Analysis.

Raymond James also analyzed publicly available information relating to selected regional transactions announced since January 1, 2016 involving bank holding company targets headquartered in the Midwest or Southeast with (i) total assets between $1.0 billion and $4.0 billion, (ii) LTM return on average assets between 0.50% and 1.50%, (iii) tangible common equity to tangible assets between 6.0% and 12.0%, and (iv) non-performing assets to total assets of less than 2.0%. Raymond James also analyzed publicly available information relating to selected national transactions announced since August 1, 2016 involving bank holding company targets headquartered in the United States with (i) total assets between $1.0 billion and $4.0 billion, (ii) LTM return on average assets between 0.50% and 1.50%, (iii) tangible common equity to tangible assets between 6.0% and 12.0%, and (iv) non-performing assets to total assets of less than 2.0%. Total assets for the targets of the selected transactions were based on the most recent quarterly period reported as of the announcement of the transaction. Both regional and national selected transaction analyses excluded (i) transactions without publicly disclosed deal value or key financial information; (ii) transactions with cumulative equity ownership acquired less than 100%; (iii) investor recapitalizations; and (iv) mergers of equals. The selected transactions (with respective transaction announcement dates shown) used in the analyses included:

Regional :  

National:  

Raymond James examined valuation multiples of transaction value compared to the target companies ’ (i) most recent quarter TBV per share; (ii) most recent LTM EPS; (iii) forward operating EPS; and (iv) core deposits (total deposits less time deposits greater than $100,000). Where available, forward operating EPS multiples for the next twelve months (NTM EPS) were based on mean analyst estimates per FactSet Research Systems Inc. and public filings including merger prospectuses; where NTM earnings were not available earnings for the next fiscal year were used. The estimates published by Wall Street research analysts and the companies involved in the selected transaction analysis were not prepared in connection with the merger or at the request of Raymond James and may or may not prove to be accurate. All financial multiples—TBV, LTM EPS, NTM EPS and core deposits—greater than two standard deviations away from the unadjusted mean were considered not meaningful. Raymond James reviewed the  75 ^th   percentile, mean, median and 25 ^th   percentile relative valuation multiples of the selected transactions. Furthermore, Raymond James applied the 75 ^th  percentile, mean, median and 25 ^th   percentile relative valuation multiples to Bear State’s actual TBV, LTM EPS, NTM EPS, and core deposits and adjusted those values for outstanding options to acquire shares of Bear State common stock to derive an implied per share merger consideration. Raymond James then compared those implied values to the actual per share merger consideration of $10.28. The results of the selected transactions analysis are summarized below:

Discounted Cash Flow Analysis.

Raymond James analyzed the discounted present value of Bear State ’s projected free cash flows for the years ending December 31, 2017 through December 31, 2022 on a stand-alone basis, as provided by Bear State’s management. Raymond James used tangible common equity in excess of a target ratio of 8.0% at the end of each projection period for free cash flow.

Raymond James ’s discounted cash flow analysis was based on the Bear State Projections. Consistent with the periods included in the Bear State Projections, Raymond James used calendar year 2022 as the final year for the analysis and applied multiples, ranging from 12.0x to 18.0x, to calendar year 2022 adjusted net income in order to derive a range of terminal values for Bear State in 2022. Raymond James selected a range of terminal price-to-earnings multiples based upon the long-term average of the price-to-earnings multiple of selected banking indexes and current multiples for similar public companies.

The projected free cash flows and terminal values were discounted using rates ranging from 11.5% to 13.5%. The resulting range of equity values was adjusted for outstanding options to acquire shares of Bear State common stock and divided by the number of diluted shares outstanding in order to arrive at a range of present values per share of Bear State common stock. Raymond James reviewed the range of values derived in the discounted cash flow analysis and compared them to the actual per share merger consideration. The results of the discounted cash flow analysis are summarized below:

In connection with its analyses, Raymond James considered and discussed with Bear State ’s management how the discounted cash flow analyses would be affected by changes in the underlying assumptions. Raymond James noted that the discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results are not necessarily indicative of actual values or future results.

Additional Considerations.  

The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be construed to be the view of Raymond James as to the actual value of Bear State.

In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of Bear State. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Bear State board of directors (solely in each director ’s capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial point of view, of the merger consideration to the holders of Bear State common stock. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of Raymond James was one of many factors taken into account by the Bear State board of directors in making its determination to approve the merger. Neither Raymond James’s opinion, nor the analyses described above should be viewed as determinative of the views of the Bear State board of directors or Bear State management with respect to Bear State, Arvest, or the merger. Raymond James did not provide advice to Bear State with respect to the merger. Bear State placed no limits on the scope of the analyses performed, or opinion expressed, by Raymond James.

The Raymond James opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it as of August 18, 2017, and any material change in such circumstances and conditions may affect the opinion of Raymond James, but Raymond James does not have any obligation to update, revise or reaffirm that opinion. Raymond James relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of Bear State since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.

Except as described below, during the two years preceding the date of Raymond James ’s written opinion, Raymond James has not been engaged by or otherwise performed services for Bear State for which it was paid a fee.

For services rendered in connection with the delivery of its opinion, Bear State paid Raymond James $600,000 upon delivery of its opinion. Such fee was not contingent upon Raymond James reaching a certain conclusion or the success of the merger. Bear State also agreed to reimburse Raymond James for its reasonable expenses incurred in connection with the rendering of its fairness opinion, including the reasonable fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.

Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of Bear State and Arvest for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. In the two years preceding the date of Raymond James ’s opinion, Raymond James has not been engaged by or otherwise performed services for Arvest for which compensation received was deemed material. Raymond James may provide investment banking, financial advisory and other financial services to Bear State and/or Arvest or other participants in the merger in the future, for which Raymond James may receive compensation, although as of the date of Raymond James’s opinion, there was no agreement to do so.

Certain Unaudited Bear State Forecasts

Bear State does not as a matter of course publicly disclose forecasts or projections, due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, Bear State is including in this proxy statement certain unaudited prospective financial information that was made available to Raymond James in connection with the merger, which we refer to as the forecasts. These forecasts were prepared by management in good faith based on management’s reasonable best estimates and assumptions with respect to Bear State’s future financial performance at the time they were prepared and speak only as of that time. The forecasts, with certain additional adjustments and assumptions, were used by Raymond James in connection with the rendering of its fairness opinion to the Bear State board and performing its related financial analysis, as described in “The Merger—Opinion of Raymond James & Associates, Inc.”

The summaries of these forecasts are not included in this proxy statement to induce any Bear State shareholder to vote in favor of the adoption of the merger agreement or any other proposals to be voted on at the special meeting, but because these forecasts were made available to the Bear State board and Raymond James. The inclusion of these forecasts should not be regarded as an indication that Bear State, the Bear State board or Raymond James considered, or now considers, these forecasts to be a reliable prediction of future results or to support or fail to support your decision whether to vote for or against the proposal to adopt the merger agreement. No person has made or makes any representation or warranty to any Bear State shareholder regarding the information included in these forecasts.

While these forecasts were prepared in good faith by management, no assurance can be made regarding future events. These forecasts also reflect assumptions as of the time of their respective preparation as to certain business decisions that are subject to change. Although presented with numerical specificity, these forecasts are based upon a variety of estimates and numerous assumptions made by management with respect to, among other matters, industry performance, the future interest rate environment, general business, economic, regulatory, market and financial conditions and other matters, including the factors described in “Cautionary Note About Forward-Looking Statements,” many of which are difficult to predict, are subject to significant economic and competitive uncertainties, and are beyond Bear State’s control. These forecasts also assume that Bear State would continue to operate as a standalone company and do not reflect any impact of the merger. In addition, because these forecasts cover multiple years, such information by its nature becomes less reliable with each successive year. As a result, there can be no assurance that the estimates and assumptions made in preparing these forecasts will prove accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than projected results. These forecasts cannot, therefore, be considered a guaranty of future operating results, and this information should not be relied on as such.

These forecasts were not prepared with a view toward public disclosure, soliciting proxies or complying with U.S. Generally Accepted Accounting Principles, which we refer to as GAAP, the published guidelines of the SEC regarding financial projections and forecasts or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections and forecasts.  

Neither Bear State’s independent registered public accounting firm nor any other independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in these forecasts and, accordingly, neither Bear State’s independent registered public accounting firm nor any other independent registered public accounting firm has expressed any opinion or given any other form of assurance on such information or its achievability, and assumes no responsibility for, and disclaims any association with, the prospective financial information.

The forecasts were prepared by Bear State’s management based on certain assumptions they believed to be potentially achievable. In connection with the rendering of its fairness opinion to the Bear State board and performing its related financial analysis, Raymond James included certain additional adjustments and assumptions as described in “The Merger—Opinion of Raymond James & Associates, Inc.”

The following table summarizes Bear State’s unaudited prospective financial information for the years ending December 31, 2017 through 2022 provided to Raymond James and discussed by the Bear State board with Raymond James.

Financing of the Merger

The obligations of Arvest and Acquisition to complete the merger are not contingent upon the receipt of any financing. Arvest has informed Bear State that it expects that funds needed by Arvest in connection with the merger will be derived from a capital injection from one or more shareholders of Arvest Bank Group, Inc., an affiliate of Arvest.

Payment of Merger Consideration and Surrender of Stock Certificates

In connection with the merger, Arvest or its designee will act as the paying agent and, in such capacity, will make payment of the per share merger consideration to Bear State shareholders. At the effective time, Arvest will deposit funds into a segregated non-interest bearing account at Arvest, which we refer to as the exchange fund, necessary for the aggregate per share merger consideration to be paid in respect of Bear State shares and the cash payment to be made in exchange for termination of outstanding warrants, stock options and restricted stock units. The paying agent will send to each holder of Bear State shares that are being converted into the right to receive the per share merger consideration and to each holder of warrants to purchase Bear State common stock a letter of transmittal and instructions advising shareholders how to surrender their (i) stock certificates and uncertificated shares in exchange for the per share merger consideration and (ii) warrants in exchange for the cash termination value of such warrants.

Upon surrender to the paying agent of a certificate (or affidavit of loss in lieu thereof), together with a properly completed letter of transmittal, or receipt of an “agent's message” by the paying agent (or such other evidence, if any, of transfer as the paying agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, each Bear State shareholder (other than with respect to treasury shares and dissenting shares) will be entitled to receive the per share merger consideration for each Bear State share formerly represented by a certificate or for each uncertificated Bear State share. In accordance with the instructions in the letter of transmittal, holders of warrants to purchase shares of Bear State common stock will be entitled to receive the cash termination value of such warrants upon their termination at the effective time of the merger. To the extent reasonably practicable, Arvest will have the option to fund the cash termination value to be paid with respect to the Bear State stock options and restricted stock units by funding the necessary amounts to the payroll processor of the surviving corporation or Arvest or any of their affiliates for payment of such amounts to the applicable holders by such payroll processor.

No interest will be paid or accrued on any amount payable upon surrender of the certificates.

If a Bear State share certificate has been lost, stolen or destroyed, then, before a Bear State shareholder will be entitled to receive the per share merger consideration in respect thereof, such shareholder will need to deliver an affidavit of that fact and, if required by the surviving corporation, post a bond (in such reasonable amount as the surviving corporation may direct) as indemnity against any claim that may be made with respect to such lost certificate.

Each of the paying agent, the payroll processor, the surviving corporation and Arvest will be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to the merger agreement such amounts to the extent it is required to deduct and withhold with respect to the making of such payment under any provision of tax law. Any amounts so withheld will be remitted to the applicable governmental entity and treated for all purposes of the merger agreement as having been paid to such person.

Interests of Certain Persons in the Merger

In considering the recommendation of the Bear State board with respect to its approval of the merger agreement, shareholders should be aware that certain of Bear State’s directors and executive officers have interests in the merger that are different from, or in addition to, those of Bear State’s shareholders generally. These interests may create potential conflicts of interest. The Bear State board was aware of and considered these interests, among other matters, in reaching its decision to approve, and declare advisable, the merger agreement, the merger and the other transactions contemplated by the merger agreement. The material interests are summarized below.

Treatment of Bear Stat e Equity and Incentive Awards; Bear State Warrants

Cash Payment for Outstanding Stock Options and Restricted Stock Units. In connection with the merger, equity awards held by Bear State’s directors and executive officers will be treated the same as all outstanding equity awards. Pursuant to Bear State’s 2011 Omnibus Incentive Plan, which we refer to as the Incentive Plan, all unvested stock options and restricted stock units will vest in full upon the occurrence of a change in control transaction. In accordance with the terms of the merger agreement, all equity awards outstanding under the Incentive Plan at the effective time of the merger, whether or not vested, will be cancelled and automatically converted into the right to receive a cash amount equal to (i) in the case of options, the aggregate number of shares of Bear State common stock subject to such option multiplied by the difference of $10.28 and the exercise price of such option and (ii) in the case of restricted stock units, $10.28 per unit.

Acceleration of 2017 Performance Awards. In January 2017, the Bear State board approved performance-based incentive awards to certain members of senior management, including Bear State’s executive officers (other than Mr. Fritsche and Ms. Pritchett). The 2017 performance-based incentive awards granted to our executive officers are payable, if at all, upon Bear State achieving a threshold, target or maximum level of core earnings per share (a non-GAAP financial measure that Bear State defines as GAAP net income less non-core items) for the year ended December 31, 2017, with the threshold value of the awards equal to 20% of the executive’s annual base salary, the target value of the awards equal to 30% of the executive’s annual base salary, and the maximum value of the awards equal to 40% of the executive’s annual base salary. The 2017 performance-based incentive awards were granted under the Incentive Plan and are payable 25% in cash and 75% in equity awards (which would settle one-third in shares of unrestricted common stock and two-thirds in restricted stock units that vest ratably over a two-year vesting period). The terms of the 2017 performance-based incentive awards provide that, if a change in control occurs during 2017, the 2017 performance-based incentive awards will become payable 100% in cash based on Bear State’s core earnings per share through the last day of the calendar month ending prior to the change in control, with the performance measures of core earnings per share and cash payouts applicable to the awards prorated through that date.

Outstanding Warrants. Mr. Massey, chairman of the Bear State board, and Mr. Ford, a director of Bear State, each own warrants to purchase 39,381 shares of Bear State common stock. In accordance with the terms of the merger agreement, at the effective time of the merger, these warrants will be cancelled and automatically converted into the right to receive a cash amount equal to the aggregate number of shares of Bear State common stock subject to such warrant multiplied by the difference of $10.28 and the exercise price of such warrants.

Change in Control Severance Agreements with Certain Executive Officers

Bear State is party to change-in-control agreements with certain of its executive officers (including Mses. Billings, Loftin and Merriweather and Messrs. Machen, Fritsche, Lowe, Rawls and Paroubek), which provide that if, within one year following a change in control, the executive is terminated without cause or resigns for good reason (referred to below as a “qualifying termination”), the executive will be entitled to receive the following severance benefits: (i) payment, in cash, of an amount equal to a multiple (two times for Mses. Billings and Loftin and Messrs. Machen and Fritsche and one times for Ms. Merriweather and Messrs. Lowe, Rawls and Paroubek) of the executive’s then current annualized base salary (but in no event less than the executive’s annualized base salary on the effective date of his or her change-in-control agreement) and (ii) accelerated vesting of all unvested equity awards previously granted to the executive. Under the change-in-control agreements, the amount of severance benefits are subject to potential reduction to the extent that the payments would be classified as “excess parachute payments” under Section 280G of the Code. Following termination of employment, each executive officer will be required to sign a release of claims against Bear State prior to receiving severance benefits under the change-in-control agreements. 

The following table quantifies the potential payments that these executive officers may receive under their change-in-control agreements, assuming a termination without cause or resignation for good reason following the merger.

Retention Bonus

Jeri Pritchett, Executive Vice President and Chief Accounting Officer of Bear State, is not a party to a change-in-control agreement with Bear State. In connection with the merger, the Bear State board authorized a retention cash incentive award of $86,000 to Ms. Pritchett that will become payable upon the closing of the merger, subject to her continued service through the closing of the merger.

Indemnification; Directors ’ and Officers’ Insurance

For a period of six years after the closing of the merger, Arvest has agreed to indemnify and hold harmless each director, officer and employee of Bear State and Bear State Bank (in each case when acting in such capacity), against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the closing of the merger, whether asserted or claimed prior to, at or after the closing date, only and to the fullest extent to which Bear State or Bear State Bank would be required by applicable law or its charter or bylaws to indemnify its directors, officers and employees and in the manner to which it could indemnify its directors, officers and employees, in each case as in effect on the date of the merger agreement. These rights to indemnification in respect of any claim asserted or made during the six-year period after closing of the merger will continue until the final disposition of such claim.

For a period of six years after the closing of the merger, Arvest has also agreed to maintain in effect the current (or comparable substitute) policies of directors’ and officers’ liability insurance maintained by Bear State and Bear State Bank. If the premiums to maintain these insurance policies are more than 150% of the current annual premiums paid by Bear State and Bear State Bank, Arvest will maintain policies of insurance that provide the maximum coverage available at an amount equal to 150% of our current annual premium. As an alternative to the foregoing, Bear State and Bear State Bank, in consultation with Arvest, may obtain, at or prior to the closing date of the merger, a six-year “tail” policy under the existing directors’ and officers’ insurance policies if the tail insurance may be obtained for an amount that does not exceed 150% of our current annual premium.

Employment Following the Merger

Following the consummation of the merger, it is expected that the members of Bear State’s senior management team may continue as employees of Arvest or its affiliates. As of the date of this proxy statement, none of our executive officers has entered into any new agreement or arrangement with Arvest regarding employment. Prior to and following the closing of the merger, however, certain of our executive officers have had, and may continue to have, discussions, or may enter into agreements, with Arvest regarding future employment opportunities.