LITTLE ROCK — Shares of Harrison-based First Federal Bancshares of Arkansas Inc. saw the biggest turnaround of any stock in the state in 2012.

First Federal had the worst performance in the state in 2011, dropping 42 percent.

But in 2012, First Federal posted the best performance of the 16 Arkansas companies that trade on the major stock exchanges, more than doubling for the year - a 126 percent gain. First Federal shares closed Monday at $9.75.

Improvement in the bank’s risk profile helped drive the turnaround, said Christopher Wewers, First Federal’s president and chief operating officer.

The bank’s substandard loans dropped more than 50 percent from December 2011 to September 2012, Wewers said. Other ratios measuring a bank’s loan quality also improved significantly in 2012, Wewers said.

“Our markets are solid; they are performing well,” Wewers said Monday.

In June 2011, First Federal opened a lending office in Little Rock. The bank has improved its loans in central Arkansas, Northwest Arkansas and in north-central Arkansas since then, Wewers said.

Little Rock-based retailer Dillard’s Inc. was second to First Federal with a 98 percent increase in stock price.

“Dillard’s has been reporting impressive earnings results and improved gross margins throughout [2012],” said Bob Williams, senior vice president and managing director of Delta Trust Investments Inc. in Little Rock. “For the first time in the last decade, Dillard’s has not reported negative quarterly same-store sales results for over two years.”

Dillard’s shares closed Monday at $83.77.

Little Rock’s Acxiom Corp., a marketing-services provider, posted the third-best return in 2012, rising 43 percent for the year.

“Acxiom continues to prosper as a result of the data revolution,” Williams said. “Tough economic conditions have driven companies to spend for more focused target marketing as they attempt to reach more customers in the most efficient way.”

Acxiom shares closed Monday at $17.46.

The Arkansas Index, which tracks the performance of the state’s 16 major stocks, was up almost 17 percent in 2012. Eleven of the 16 Arkansas companies saw stock gains last year.

The two worst-performing stocks in the state last year were trucking firms - Van Buren-based USA Truck Inc., down 55 percent, and Fort Smith-based trucker Arkansas Best Corp., down 50 percent.

USA Truck’s revenue continued to decline in 2012 compared with 2011, Williams said.

The company’s book value has fallen for the past three years along with its share price, Williams said.

“The industry is being hurt by higher fuel prices, difficulty passing on those costs and weak volume,” Williams said.

Arkansas Best faces the same challenges that the entire less-than-truckload business is dealing with, Williams said.

“The lack of pricing power, weak demand and specifically [Arkansas Best’s] above-peer cost structure are hitting its bottom line,” Williams said. “Negotiations with the Teamsters Union began [in December] with their contract expiring in March. The company hopes for badly needed wage and benefit relief.”

Business, Pages 19 on 01/01/2013