21.	REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking regulators. Effective

June

28,

2016,

the Bank converted from a national bank supervised by the Office of the Comptroller of the Currency to a state chartered bank jointly supervised by the Arkansas State Bank Department (“ASBD”) and the Board of Governors of the Federal Reserve Bank (“FRB”). The FRB is the primary regulator for the Company. Failure to meet minimum regulatory capital requirements can result in certain mandatory—and possible additional discretionary—actions by regulators that, if undertaken, could have a direct and material effect on the Company’s or the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s and the Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of tier

capital (as defined by regulation) to average assets (as defined by regulation) and common equity tier

capital, tier

capital and total capital (as defined by regulation) to risk-weighted assets (as defined by regulation). Management believes that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of the most recent notification from regulatory authorities, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed any of the Bank’s categorizations.

The actual and required capital amounts (in thousands) and ratios of the Company (Consolidated) and the Bank as of

December

31,

2016

are presented in the following table:

											To be Categorized
											as Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes*					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio


Tier 1 Capital to Adjusted Average Assets
Consolidated	$	186,604		9.47	%	$	78,840		4.00	%		N/A		N/A
Bear State Bank		204,319		10.38	%		78,710		4.00	%	$	98,388		5.00	%

Common Equity Tier 1 to Risk-Weighted Assets
Consolidated	$	186,604		11.04	%	$	76,084		4.50	%		N/A		N/A
Bear State Bank		204,319		12.10	%		76,017		4.50	%	$	109,802		6.50	%

Tier I Capital to Risk-Weighted Assets
Consolidated	$	186,604		11.04	%	$	101,445		6.00	%		N/A		N/A
Bear State Bank		204,319		12.10	%		101,355		6.00	%	$	135,141		8.00	%

Total Capital to Risk-Weighted Assets
Consolidated	$	202,188		11.96	%	$	135,261		8.00	%		N/A		N/A
Bear State Bank		219,903		13.02	%		135,141		8.00	%	$	168,926		10.00	%

Beginning in

2016,

a Capital Conservation Buffer (“CCB”) requirement became effective for banking organizations. The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of

2.5%

of common equity tier

capital, tier

capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer began to be phased in on

January

2016,

0.625%

of risk-weighted assets, and will continue to be increased each year by that amount until fully implemented at

2.5%

January

2019.

When fully phased in on

January

2019,

the Basel III Rules will require the Company and Bank to maintain (i) a minimum ratio of common equity tier

capital to risk-weighted assets of at least

4.5%,

plus a

2.5%

capital conservation buffer, which effectively results in a minimum ratio of

7.0%

upon full implementation, (ii) a minimum ratio of tier

capital to risk-weighted assets of at least

6.0%,

plus a

2.5%

capital conservation buffer, which effectively results in a minimum ratio of

8.50%

upon full implementation, (iii) a minimum ratio of total capital to risk-weighted assets of at least

8.0%,

plus a

2.5%

capital conservation buffer, which effectively results in a minimum ratio of

10.5%

upon full implementation and (iv) a minimum leverage ratio of at least

4.0%.

The actual and required capital amounts (in thousands) and ratios of the Company (Consolidated) and Bear State Bank and Metropolitan as of

December

31,

2015

are presented in the following table:

											To be Categorized
											as Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio


Tier 1 Capital to Adjusted Average Assets
Consolidated	$	170,819		9.15	%	$	74,705		4.00	%		N/A		N/A
Bear State Bank		150,561		10.58	%		56,933		4.00	%	$	71,166		5.00	%
Metropolitan		36,776		8.30	%		17,717		4.00	%		22,147		5.00	%

Common Equity Tier 1 to Risk-Weighted Assets
Consolidated	$	170,819		10.62	%	$	72,395		4.50	%		N/A		N/A
Bear State Bank		150,561		12.19	%		55,564		4.50	%	$	80,288		6.50	%
Metropolitan		36,776		9.89	%		16,740		4.50	%		24,180		6.50	%

Tier I Capital to Risk-Weighted Assets
Consolidated	$	170,819		10.62	%	$	96,526		6.00	%		N/A		N/A
Bear State Bank		150,561		12.19	%		74,112		6.00	%	$	98,816		8.00	%
Metropolitan		36,776		9.89	%		22,320		6.00	%		29,760		8.00	%

Total Capital to Risk-Weighted Assets
Consolidated	$	185,369		11.52	%	$	128,702		8.00	%		N/A		N/A
Bear State Bank		164,500		13.32	%		98,816		8.00	%	$	123,519		10.00	%
Metropolitan		37,388		10.05	%		29,760		8.00	%		37,200		10.00	%

Dividends

The Company

may

not declare or pay cash dividends on its shares of common stock if the effect thereof would cause the Company’s stockholders’ equity to be reduced below applicable regulatory capital maintenance requirements for insured institutions. In addition, the Bank is subject to limitations on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. ASBD regulations specify that the maximum dividend state banks

may

pay

to the parent company in any calendar year without prior approval is

75%

of the current year earnings plus

75%

of the retained net earnings of the preceding year. Since the Bank is also under supervision of the FRB, the maximum dividend that

may

be paid without prior approval by the FRB is the Bank’s net profits to date for that year combined with its retained net profits for the preceding

two

years. At

December

31,

2016,

the Bank had approximately

$10.5

million available for payment of dividends to the Company without prior regulatory approval from the ASBD and approximately

$13.9

million available for payment of dividends to the Company without prior regulatory approval from the FRB.

The principal source of the Company’s revenues is dividends from the Bank. Our ability to pay dividends to our stockholders depends to a large extent upon the dividends we receive from the Bank.

Repurchase Program.

During the year ended

December

31,

2016,

the Company repurchased

5,114

shares of its common stock for an average purchase price of

$8.50

under a share repurchase program that was initially approved by the Board of Directors on

March

13,

2015

and most recently amended on

April

20,

2016,

whereby the Company is authorized to repurchase up to

million of its common stock (the “Repurchase Program”). As of

December

31,

2016,

the Company had

$2.0

million of remaining capacity under the Repurchase Program.

February

2016,

the Company purchased through

one

broker in an unsolicited single block trade

448,068

shares of its common stock for a cash purchase price of

$8.05

per share, or an aggregate purchase price for all of the shares of approximately

$3.6

million. This repurchase was approved by the Board of Directors of the Company, including all of the independent directors, and is in addition to, and did not reduce, the then remaining capacity under the Repurchase Program.