Fords Invest In First Federal

First Federal Bancshares of Arkansas, Inc. announced Friday that it has entered into a definitive investment agreement with Bear State Financial Holdings, LLC in which Bear State will invest up to $55 million in the troubled Harrison-based financial institution.

Bear State is a private equity invest group led by former Alltel executives Joe and Scott Ford and Rick Massey.  First Federal has been struggling for more than two years with troubled loans in its northwest Arkansas portfolio. Bank leaders have referred to the problematic financial conditions as "The Great Recession."

As part of the recapitalization plan disclosed by the two firms, First Federal will conduct a "rights offering" following an initial closing of the investment by Bear State.  The rights offering will allow existing shareholders to purchase the company’s common stock at the same purchase price per share paid by Bear State.

The investment by Bear State is subject to the approval of the company’s shareholders and the Office of Thrift Supervision and certain other conditions related to the investment, including, among others, the consummation by the company of a 1-for-5 reverse stock split of its common stock.  According to an SEC filing, upon approval of the transaction, Bear State will receive more than 15 million post-reverse split shares for $.60 a share. 

Bear State could own anywhere between 81.8% to 94.9% of First Federal’s stock after the deal closes. Officials expect to close the initial investment in the second quarter of 2011.