FIRST UNITED BANCSHARES INC /AR/, S-4, 1997-12-31

FIRST UNITED BANCSHARES INC /AR/
S-4, 1997-12-31
STATE COMMERCIAL BANKS

Previous: FORTIS FIDUCIARY FUND INC, 485BPOS, 1997-12-31

Next: DEAN WITTER U S GOVERNMENT MONEY MARKET TRUST, 497, 1997-12-31

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

FIRST UNITED BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
ARKANSAS 6022 71-0538646
(State or other jurisdiction of (Primary Standard Industrial) (I.R.S. Employer
incorporation or organization) Classification Code) Identification No.)
</TABLE>

MAIN AND WASHINGTON STREETS
EL DORADO, ARKANSAS 71730
(870) 863-3181
(Address, including ZIP Code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------

JOHN E. BURNS
MAIN AND WASHINGTON STREETS
EL DORADO, ARKANSAS 71730
(870) 863-3181
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
---------------------

Copies to:

STAN D. SMITH
MITCHELL, WILLIAMS, SELIG, GATES & WOODYARD, P.L.L.C.
320 WEST CAPITOL AVENUE, SUITE 1000
LITTLE ROCK, ARKANSAS 72201

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time of the Merger, as defined in the Agreement and Plan of
Reorganization dated September 15, 1997 by and between Registrant and Citizens
National Bancshares of Hope, Inc., attached as Annex I to the Prospectus/Proxy
Statement.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
- ---------------

If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
- ---------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=======================================================================================================================
TITLE OF EACH CLASS OF SECURITIES PROPOSED AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED TO BE REGISTERED OFFERING PRICE PER UNIT(1) OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock........................ 1,570,000 N/A $28,759,000(2) $8,484.00(2)
=======================================================================================================================
</TABLE>

(1) Represents the estimated maximum number of shares of common stock, par value
$1.00 per share, of First United Bancshares, Inc. ("First Limited"),
expected to be issued in exchange for up to 497,850 shares of common stock
par value $2.00 per share, of Citizens National Bancshares of Hope Inc.
("Citizens"), upon consummation of the merger of Citizens with and into
First United

(2) Estimated solely for purposes of calculated the registration fee. The
registration fee has been computed pursuant to Rule 457(1)(2) under the
Securities Act of 1933, as amended, based on the book value ($28,754,000) of
shares of Citizens common stock of September 30, 1997

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE> 2

FIRST UNITED BANCSHARES, INC.

Cross Reference Sheet Showing Location in Prospectus of Information
Required by Item 501(b) of Regulation S-K

A. INFORMATION ABOUT THE TRANSACTION

<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS AND PROXY STATEMENT
--------------------------------------- ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement;
Cross Reference Sheet, Cover Page of Proxy
Statement
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary; Financial Information
4. Terms of the Transaction................... The Merger
5. Pro Forma Financial Information............ Summary -- Selected Financial Data;
Financial Information
6. Material Contacts with the Company Being
Acquired................................... The Merger -- Background of the Merger;
Citizens National Bancshares of Hope,
Inc. -- Resulting Ownership in First United
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Not Applicable
8. Interests of Named Experts and Counsel..... Legal Matters and Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable

B. INFORMATION ABOUT THE REGISTRANT

10. Information with Respect to S-3
Registrants................................ First United Bancshares, Inc.
11. Incorporation of Certain Information by
Reference.................................. Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information by
Reference.................................. Not Applicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants.......... Not Applicable

C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED

15. Information with Respect to S-3
Companies.................................. Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information with Respect to Companies Other
than S-3 or S-2 Companies
(1) Description of Business................ Citizens National Bancshares of Hope,
Inc. -- Description of Business
(2) Market Price of and Dividends on the
Registrant's Common Equity............. Summary -- Comparative Per Share Data;
Citizens National Bancshares of Hope,
Inc. -- Principal Stockholders of Citizens
and Related Stockholder Matters
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS AND PROXY STATEMENT
--------------------------------------- ------------------------------------------
<C> <S> <C>
(3) Selected Financial Data................ Summary -- Selected Financial Data
(4) Supplementary Financial Information.... Not Applicable
(5) Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. Citizens National Bancshares of Hope,
Inc. -- Management Discussion and Analysis
(6) Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure............................. Not Applicable
(7) Financial Statements................... Financial Information
(8) Quarterly Financial Information........ Financial Information
(9) Financial Statement Schedules.......... Not Applicable

D. VOTING AND MANAGEMENT INFORMATION

18. Information if Proxies, Consents or
Authorizations Are to be Solicited
(1) Date, Time and Place of Information.... Cover Page of Proxy
(2) Revocability of Proxy.................. The Citizens Special Meeting -- Voting;
Solicitation of Proxies; The First United
Special Meeting -- Voting; Solicitation of
Proxies
(3) Dissenters' Rights of Appraisal........ The Merger -- Right of Dissent Under the
1965 Act; Right of Dissent under the
Arkansas Business Corporation Act of 1987
(4) Persons Making the Solicitation........ The Citizens Special Meeting -- Voting;
Solicitation of Proxies; The First United
Special Meeting -- Voting; Solicitation of
Proxies
(5) Interest of Affiliates of the
Registrant in the Proposed Transaction;
Voting Securities and Principal
Holders................................ Citizens National Bancshares of Hope,
Inc. -- Principal Stockholders of Citizens;
The Merger -- Background of the Merger
(6) Vote Required for Approval............. The Citizens Special Meeting -- Vote
Required; The First United Special
Meeting -- Vote Required
(7) (i) Directors and Executive
Officers.......................... Incorporation of Certain Documents by
Reference
(ii) Executive Compensation........... Incorporation of Certain Documents by
Reference
(iii) Certain Relationships and Related
Transactions..................... Incorporation of Certain Documents by
Reference
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited
or in an Exchange Offer................ Not Applicable
</TABLE>
<PAGE> 4

FIRST UNITED BANCSHARES, INC.

To the Stockholders of
First United Bancshares, Inc.

Enclosed is a Notice of Special Meeting of Stockholders of First United
Bancshares, Inc. ("First United") which will be held at the main office of First
National Bank of El Dorado at Main and Washington Streets, El Dorado, Arkansas
on , 1998 at 2:00 P.M.

At a Special Meeting, Stockholders of First United will consider and vote
upon the merger of First United and Citizens National Bancshares of Hope, Inc.
("Citizens") whereby Citizens will be merged with and into First United. The
Agreement between First United and Citizens provides that the stockholders of
Citizens common stock will receive total consideration consisting of one million
five hundred seventy thousand (1,570,000) shares of fully paid and nonassessable
shares of Common Stock, $1.00 par value of First United ("Purchase Price"). All
of the issued and outstanding shares of Citizens common stock, other than shares
of Citizens common stock held by dissenting stockholders, shall be converted
into the right to receive a pro rata portion of the Purchase Price based upon
each Citizens stockholder's pro rata ownership of the total number of issued and
outstanding shares of Citizens Common Stock at the effective time of the Merger.
Fractional shares of First United Common Stock shall not be issued. Any Citizens
Shareholder entitled to receive a fractional share shall receive a cash payment
in lieu thereof equal to the value of the fractional share based on the average
sales price per share of First United Common Stock. The average price of First
United Common Stock is defined as the average sales price per share for all
trades occurring during the period of ten (10) trading days on which one or more
trades actually takes place and which ends immediately prior to the second
trading day preceding the closing date.

Citizens is a bank holding company which is primarily engaged in the
business of banking through its two wholly-owned bank subsidiaries, with bank
offices in Hempstead and Lafayette Counties, Arkansas, which provide a full
range of banking services to its customers.

The Board of Directors believes that the proposed merger upon the terms and
conditions set forth in the accompanying Proxy Statement is in the best
interests of our stockholders and therefore recommends that you vote in favor of
the merger. Additional information regarding the proposed merger, Citizens and
the rights of dissenting stockholders is set forth in the enclosed Proxy
Statement and I urge you to read this material carefully.

You are cordially invited to attend the meeting in person. Whether or not
you plan to attend the Special Meeting, please sign, date and return as soon as
possible the enclosed proxy in the enclosed self-addressed and stamped envelope.
If you attend the meeting, you may vote in person if you wish, even though you
previously returned your proxy.

Very truly yours,

James V. Kelley
Chairman of the Board
<PAGE> 5

FIRST UNITED BANCSHARES, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

, 1998

NOTICE is hereby given that a Special Meeting of Stockholders of First
United Bancshares, Inc. has been called by the Board of Directors and will be
held at the main office of First National Bank of El Dorado at Main and
Washington Streets, El Dorado, Arkansas on , 1998 at 2:00 p.m. for
the following purposes:

1. To consider and vote upon an Agreement and Plan of Reorganization
dated as of September 15, 1997, and Plan of Merger (collectively, the
"Agreement"), which provides for the merger of Citizens National Bancshares
of Hope, Inc. with and into First United.

2. To transact such other business as may properly come before the
meeting or any adjournment thereof.

All stockholders of record at the close of business on , 1998
are entitled to vote at the meeting. Proposal 1 above requires the affirmative
vote of two-thirds of shares entitled to vote for approval.

Whether or not you plan to attend, please sign the enclosed Proxy and
return it at once in the stamped return envelope in order to insure that your
shares will be represented at the meeting. If you attend in person, the proxy
can be disregarded, if you wish, and you may vote your own shares.

By Order of the Board of Directors

------------------------------------
Robert G. Dudley, Secretary

Dated: , 1998
<PAGE> 6

CITIZENS NATIONAL BANCSHARES OF HOPE, INC.

To the Stockholders of
Citizens National Bancshares of Hope, Inc.

Enclosed is a Notice of Special Meeting of Stockholders of Citizens
National Bancshares of Hope, Inc. ("Citizens") which will be held at 200 South
Elm Street, Hope, Arkansas 71801 on , 1998 at .M.

At the Special Meeting, Stockholders of Citizens will consider and vote
upon the merger of Citizens with and into First United Bancshares, Inc. ("First
United"). The Agreement between First United and Citizens provides that the
stockholders of Citizens will receive total consideration consisting of one
million five hundred seventy thousand (1,570,000) shares of fully paid and
nonassessable shares of Common Stock, $1.00 par value of First United ("Purchase
Price"). All of the issued and outstanding shares of Citizens common stock,
other than shares of Citizens common stock held by dissenting stockholders,
shall be converted into the right to receive a pro rata portion of the Purchase
Price based upon each Citizens stockholder's pro rata ownership of the total
number of issued and outstanding shares of Citizens common stock at the
effective time of the Merger. Fractional shares of First United Common Stock
shall not be issued. Any Citizens Shareholder entitled to receive a fractional
share shall receive a cash payment in lieu thereof equal to the value of the
fractional share based on the average sales price per share of First United
Common Stock. The average price of First United Common Stock is defined as the
average sales price per share for all trades occurring during the period of ten
(10) trading days on which one or more trades actually takes place and which
ends immediately prior to the second trading day preceding the closing date.

First United is a bank holding company which is engaged in the business of
banking through its ten (10) wholly-owned bank subsidiaries and its trust
company subsidiary, with bank offices in Union, Sebastian, Columbia, Ouachita,
Izard, Arkansas, Prairie, Monroe, Lonoke and Crawford Counties in Arkansas,
Caddo Parish in Louisiana, and in Bowie and Nacogdoches Counties in Texas, which
provide a full range of banking services to its customers.

Stockholders of Citizens will also consider and vote upon the election by
Citizens to be governed by the Arkansas Business Corporation Act of 1987. This
vote will be incidental to the vote on the merger in that the election will only
be made in order to facilitate compliance with statutory law in consummating the
merger and no election will be made unless the merger is approved.

The Board of Directors believes that the proposed merger upon the terms and
conditions set forth in the accompanying Proxy Statement is in the best
interests of our stockholders and therefore recommends that you vote in favor of
the merger. Additional information regarding the proposed merger, First United
and the rights of dissenting stockholders is set forth in the enclosed Proxy
Statement and I urge you to read this material carefully.

Very truly yours,

John Robert Graves
President and Chief Executive
Officer
<PAGE> 7

CITIZENS NATIONAL BANCSHARES OF HOPE, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

, 1998

NOTICE is hereby given that a Special Meeting of Stockholders of Citizens
National Bancshares of Hope, Inc. has been called by the Board of Directors and
will be held at 200 South Elm Street, Hope, Arkansas 71801 on , 1998
at .m. for the following purposes:

2. To consider and vote upon an election to be governed by the
Arkansas Business Corporation Act of 1987. This vote will be incidental to
the vote upon the Agreement and will only be effective if the Agreement is
approved.

3. To transact such other business as may properly come before the
meeting or any adjournment thereof.

All stockholders of record at the close of business on , 1998
are entitled to vote at the meeting. Proposal 1 above requires the affirmative
vote of at least two-thirds of shares entitled to vote for approval.

By Order of the Board of Directors

------------------------------------
John Robert Graves
President and Chief Executive
Officer

Dated: , 1998
<PAGE> 8

FIRST UNITED BANCSHARES, INC.

AND

CITIZENS NATIONAL BANCSHARES OF HOPE, INC.

JOINT PROXY STATEMENT

---------------------

FIRST UNITED BANCSHARES, INC.
PROSPECTUS
1,570,000 Shares of Common Stock
Par Value $1.00

This Joint Proxy Statement and Prospectus ("Proxy Statement") is being
furnished to the stockholders of Citizens National Bancshares of Hope, Inc.
("Citizens") and First United Bancshares, Inc. ("First United" or the "Company")
in connection with the solicitation of proxies by the Boards of Directors of
Citizens and First United for use at a special meeting of stockholders of
Citizens to be held on , 1998, including any adjournments or
postponements of the meeting, and for use at a special meeting of shareholders
of First United to be held on , 1998, including any adjournments or
postponements of the meeting. At the meeting or any adjournments or
postponements thereof, the stockholders of Citizens and First United will be
asked to consider and vote on a proposal to authorize and approve the
transactions contemplated by the Agreement and Plan of Reorganization between
First United and Citizens, dated September 15, 1997 (the "Agreement"). Pursuant
to the Agreement and the Plan of Merger ("Plan of Merger") which is Exhibit A to
the Agreement, First United (or " the Company") would acquire Citizens through a
merger transaction (the "Merger") in which Citizens would merge with and into
First United, in exchange for the issuance to the stockholders of Citizens of
1,570,000 shares of First United common stock, par value $1.00 ("Common Stock").

First United has agreed to register under the Securities Act of 1933, as
amended (the "Securities Act") the shares of First United Common Stock that may
be issued to stockholders of Citizens in exchange for their stock in Citizens.
Consequently, this Proxy Statement serves as a Prospectus of First United under
the Securities Act for the issuance of shares of First United Common Stock to
stockholders of Citizens.

Stockholders of Citizens will also consider and vote upon the election by
Citizens to be governed by the Arkansas Business Corporation Act of 1987. This
vote will be incidental to the vote on the Merger in that the election will only
be made in order to facilitate compliance with statutory law in consummating the
Merger and no election will be made unless the Merger is approved.

This Proxy Statement and the accompanying forms of proxy are first being
mailed to stockholders of Citizens and stockholders of First United on or about
, 1998. On , 1998, the closing price on the National
Association of Securities Dealers Automatic Quotation System of a share of First
United Common Stock was $ .
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY STATEMENT. STOCKHOLDERS
ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT IN ITS
ENTIRETY.

---------------------

THE SECURITIES TO BE ISSUED IN THE PROPOSED TRANSACTION HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

---------------------

THE DATE OF THIS PROXY STATEMENT IS , 1998.
<PAGE> 9

NO PERSON IS AUTHORIZED BY FIRST UNITED OR CITIZENS TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY
STATEMENT, IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE BY THIS
PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES
NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN ANY JURISDICTION IN
WHICH SUCH SOLICITATION OR OFFERING MAY NOT LAWFULLY BE MADE.

NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF FIRST UNITED OR CITIZENS SINCE
THE DATE HEREOF.

AVAILABLE INFORMATION

First United is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance therewith,
files proxy statements, reports and other information with the Securities and
Exchange Commission ("Commission"). This filed material can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices in Chicago (500 West Madison, Citicorp Center, 14th Floor,
Chicago, Illinois 60661-2511) and in New York (7 World Trade Center, Suite 1300,
New York, New York 10048) and copies of such material can be obtained by mail
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding issuers who file electronically with the Commission.
The address of that site is http://www.sec.gov. First United's Common Stock is
traded on the National Association of Securities Dealers Automated Quotation
National Market System and the Company's Exchange Act reports and other
information can be inspected and copied at the National Association of
Securities Dealers, 1735 "K" Street, N.W., Washington, D.C. 20006.

First United has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act with respect to a maximum 1,570,000 shares of First United
Common Stock to be issued upon consummation of the transactions contemplated by
the Agreement. This Proxy Statement does not contain all the information set
forth in the Registration Statement and the exhibits thereto, certain portions
of which have been omitted as permitted by rules and regulations of the
Commission. Copies of the Registration Statement are available from the
Commission, upon payment of prescribed rates. For further information, reference
is made to the Registration Statement and the exhibits filed therewith.
Statements contained in this Proxy Statement or any document incorporated by
reference in this Proxy Statement relating to the contents of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM MR. JOHN E. BURNS, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
FIRST UNITED BANCSHARES, INC., MAIN AND WASHINGTON STREETS, EL DORADO, ARKANSAS
71730, (870) 863-3181 . IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST, ALTHOUGH NOT REQUIRED, SHOULD BE MADE, BY CERTIFIED MAIL, ON OR BEFORE
, 1998.

2
<PAGE> 10

The following documents of First United, which have been filed with the
Commission under the Exchange Act, are incorporated by reference into this Proxy
Statement:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the Commission on March 31, 1997.

2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, 1997, and September 30, 1997.

3. The Company's Current Reports on Form 8-K, filed with the
Commission on September 16, 1997, October 3, 1997 and October 7,
1997.

4. The description of the Company's Common Stock contained in the
Company's Registration Statement filed with the Commission and any
amendment or report filed for the purpose of updating such
description.

Each document filed subsequent to the date of this Proxy Statement pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the holding of
the Special Meeting of the Stockholders of Citizens, shall be deemed to be
incorporated by reference in this Proxy Statement and shall be part hereof from
the date of filing of such document. Any statement contained in a document
incorporated or deemed to be incorporated in this Proxy Statement shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference modifies or
supersedes such document.

All information contained in this Proxy Statement relating to First United
has been supplied by First United and all information relating to Citizens has
been supplied by Citizens.

3
<PAGE> 11

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY
The Company............................................... 6
Citizens.................................................. 6
The Merger................................................ 6
Combined Company.......................................... 7
Fairness Opinion.......................................... 7
Election by Citizens Stockholders under the 1987 Act...... 7
The First United Special Meeting.......................... 8
The Citizens Special Meeting.............................. 8
Certain Federal Income Tax Consequences................... 8
Dissenters' Rights........................................ 8
Regulatory Approvals...................................... 8
Accounting Treatment...................................... 8
Market Prices............................................. 9
Comparative Per Share Data................................ 9
Selected Financial Data................................... 10
THE CITIZENS SPECIAL MEETING
Date, Time and Place...................................... 12
Purpose of Meeting........................................ 12
Shares Outstanding and Entitled to Vote; Record Date...... 12
Vote Required............................................. 12
Voting; Solicitation of Proxies........................... 12
THE FIRST UNITED SPECIAL MEETING
Date, Time and Place...................................... 13
Purpose of Meeting........................................ 13
Shares Outstanding and Entitled to Vote; Record Date...... 13
Vote Required............................................. 13
Voting; Solicitation of Proxies........................... 13
THE MERGER
Reason for the Merger..................................... 14
Opinion of Financial Advisor.............................. 14
The Agreement............................................. 18
Regulatory Approvals...................................... 18
Antitrust Matters......................................... 18
Federal Income Tax Consequences........................... 19
Accounting Treatment...................................... 20
Right of Dissent Under the 1965 Act....................... 20
Right of Dissent Under the 1987 Act....................... 21
Exchange Ratio for the Merger............................. 22
Expenses of the Merger.................................... 22
FINANCIAL INFORMATION
Pro Forma Combining Balance Sheet......................... 24
Pro Forma Combining Statements of Income.................. 25
Notes to Pro Forma Combining Financial Statements......... 29
ELECTION BY CITIZENS STOCKHOLDERS UNDER THE 1987 ACT
Election Incidental to the Merger......................... 30
Reason for the Election................................... 30
Result of the Election.................................... 30
</TABLE>

4
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FIRST UNITED BANCSHARES, INC.
General................................................... 32
Pending Acquisition....................................... 32
Regulation................................................ 33
Offices................................................... 34
Employees................................................. 35
Description of First United Common Stock.................. 35
Resale of First United Common Stock....................... 35
CITIZENS NATIONAL BANCSHARES OF HOPE, INC.
Description of Business................................... 35
Management Discussion and Analysis........................ 35
Directors and Executive Officers.......................... 45
Transactions with Management.............................. 46
Principal Stockholders of Citizens........................ 46
Resulting Ownership in First United....................... 47
Competition............................................... 47
Litigation................................................ 47
Offices................................................... 47
Employees................................................. 47
Description of Citizens Stock............................. 47
Comparison of Rights of Holders of Citizens Common Stock
and First United Common Stock.......................... 47
LEGAL MATTERS AND EXPERTS
Legal Opinions............................................ 48
Experts................................................... 48
General................................................... 48
INDEX TO CITIZENS FINANCIAL STATEMENTS...................... F-1
</TABLE>

ANNEXES

<TABLE>
<S> <C> <C>
I -- Agreement and Plan of Reorganization, including Plan of
Merger attached as Exhibit A thereto..................... A-I-1
II -- Arkansas Business Corporation Act of 1965
sec.4-26-1007............................................ A-II-1
III -- Arkansas Business Corporation Act of 1987 sec.4-27-1301
et. seq.................................................. A-III-1
IV -- Fairness Opinion of Citizens' Financial Advisor.......... A-IV-1
</TABLE>

5
<PAGE> 13

SUMMARY

The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this Proxy
Statement, in the attached Annexes and in the documents incorporated by
reference. Stockholders are urged to read carefully this Proxy Statement and the
attached Annexes in their entirety.

THE COMPANY

First United Bancshares, Inc. ("First United") is a multi-bank holding
company located in El Dorado, Arkansas with ten (10) wholly-owned subsidiary
banks and a trust company operating in over thirty communities throughout the
States of Arkansas, Louisiana and Texas. First United's subsidiaries consist of
First National Bank of El Dorado, El Dorado, Arkansas; First National Bank of
Magnolia, Magnolia, Arkansas; City National Bank of Fort Smith, Fort Smith,
Arkansas; Merchants and Planters Bank, N.A., Camden, Arkansas; Commercial Bank
at Alma, Alma, Arkansas; The Bank of North Arkansas, Melbourne, Arkansas; First
United Bank, Stuttgart, Arkansas; City Bank & Trust of Shreveport, Shreveport,
Louisiana; FirstBank, Texarkana, Texas; Fredonia State Bank, Nacogdoches, Texas,
and First United Trust Company, N.A., El Dorado, Arkansas (collectively called
the "Subsidiary Banks"). First United had consolidated assets of $1,842,287,000
and stockholders' equity of $184,950,000 as of September 30, 1997.

On September 2, 1997, First United acquired by merger, which was made
effective on September 3, 1997, Fredonia Bancshares, Inc. ("Fredonia") and in
connection therewith issued 1,605,683 shares of common stock for all of
Fredonia's outstanding common stock (the "Fredonia Merger"). The Fredonia Merger
was accounted for as a pooling-of-interests and, accordingly, First United's
financial statements for periods prior to the Fredonia Merger have been restated
to include the results of Fredonia for all periods presented.

On December 31, 1997, First United acquired by merger City Bank & Trust of
Shreveport ("City Bank") and in connection therewith issued 425,000 shares of
common stock for all of City Bank's common stock (the "City Bank Merger").

On May 20, 1996, the Board of Directors of First United declared a 3-for-2
stock split effected in the form of a 50% stock dividend. The dividend was
distributed on June 28, 1996 to holders of record as of June 7, 1996. Unless
otherwise indicated, all per share data, numbers of common shares and capital
accounts contained herein have been restated to reflect this stock split.

First United's Common Stock is traded on the National Association of
Securities Dealers Automated Quotation National Market System Over-the-Counter
Market (NASDAQ-NMS) under the symbol "UNTD". First United's principal executive
offices are located at Main and Washington Streets, El Dorado, Arkansas, 71730,
and its telephone number is (870) 863-3181.

CITIZENS

Citizens is an Arkansas bank holding company which owns 100% of The
Citizens National Bank of Hope, Hope, Arkansas, Peoples Bank & Loan Company,
Lewisville, Arkansas and indirectly owns 100% of Citizens Investment Services,
Inc. which is wholly owned by The Citizens National Bank of Hope. Citizens had
consolidated assets of $262,996,000 and stockholders' equity of $28,759,000 as
of September 30, 1997. Citizens was chartered in 1983 and has six (6) banking
offices in Hope, Lewisville, and Texarkana, Arkansas.

There is no public market for shares of Citizens' outstanding capital
stock. Citizens' principal executive offices are located at 200 South Elm
Street, Hope, Arkansas, 71801. Its telephone number is (870) 777-2313.

THE MERGER

On September 15, 1997, First United and Citizens entered into a definitive
agreement pursuant to which First United proposes to acquire all of the issued
and outstanding stock of Citizens by merger of Citizens with and into First
United. The acquisition of Citizens will be consummated through the issuance to
Citizens'
6
<PAGE> 14

stockholders of approximately 1,570,000 shares of First United Common Stock. The
reason for the Merger is to expand the markets of First United and thereby
increase the earning potential of First United. The Agreement requires that the
merger be accounted for as a pooling-of-interests. See "The Merger -- The
Agreement."

On June 10, 1997, the date immediately prior to the announcement of the
agreement in principle, shares of First United Common Stock traded on the
NASDAQ-NMS had a closing sales price of $39.50. There is no established market
value for the stock of Citizens.

THE BOARDS OF DIRECTORS OF FIRST UNITED AND CITIZENS RECOMMEND THAT FIRST
UNITED AND CITIZENS STOCKHOLDERS VOTE IN FAVOR OF THE APPROVAL OF THE AGREEMENT.

COMBINED COMPANY

The pro forma combined financial statements and its constituent parts of
First United and Citizens as of and for the periods indicated reflect assets,
shareholders' equity, net interest income and income from continuing operations
as follows (dollars in thousands):

<TABLE>
<CAPTION>
% %
FIRST PRO FORMA PRO FORMA PRO FORMA
UNITED COMBINED CITIZENS COMBINED COMBINED
--------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Assets
September 30, 1997....... 1,842,287 87.51% 262,996 12.49% 2,105,283
Shareholders' Equity
September 30, 1997....... 184,950 86.54% 28,759 13.46% 213,709
Net Interest Income
Year ended December 31,
1996.................. 65,582 88.48% 8,538 11.52% 74,120
Nine months ended
September 30, 1997.... 52,859 88.83% 6,649 11.17% 59,508
Income from continuing
operations:
Year ended December 31,
1996.................. 22,372 87.03% 3,334 12.97% 25,706
Nine months ended
September 30, 1997.... 17,558 86.87% 2,653 13.13% 20,211
</TABLE>

Upon issuance of the 1,570,000 shares of common stock of First United to
Citizens stockholders, First United will have a total of approximately
11,846,900 shares of common stock issued and outstanding. Present First United
stockholders will control 86.75% of such shares and Citizens stockholders will
control approximately 13.25% of such shares.

FAIRNESS OPINION

The Agreement requires as a condition which must occur or be waived by
Citizens, that Citizens shall have received a written fairness opinion on or
before the Closing Date stating that in such financial advisor's opinion to the
Board of Directors of Citizens that the consideration to be paid in the Merger
is fair to the Citizens Shareholders from a financial point of view. See "The
Merger -- Opinion of Financial Advisor."

ELECTION BY CITIZENS SHAREHOLDERS UNDER THE 1987 ACT

The Election by the stockholders of Citizens to be governed by the Arkansas
Business Corporation Act of 1987 codified as Ark. Code Ann. sec. 4-27-101 et.
seq. (the "1987 Act") is incidental to and a condition of the Merger proposal
and approval of such election will have no force or effect unless the Merger is
likewise approved.
7
<PAGE> 15

Citizens is a corporation organized under the Arkansas Business Corporation
Act of 1965, codified as Ark. Code Ann. sec. 4-26-101 et. seq. (the "1965 Act").
The 1987 Act is applicable to those corporations that were incorporated on or
after January 1, 1988 or those "1965 Act" corporations that elect to be governed
by the 1987 Act by amending their Articles of Incorporation to so state.

The 1965 Act and 1987 Act have statutory merger procedures that must be
complied with in order legally to consummate a merger. Although both Acts
contain similar provisions, Citizens must elect to be governed by the 1987 Act
in order to facilitate compliance with the applicable statutory procedures.

THE FIRST UNITED SPECIAL MEETING

Approval of the Merger by the stockholders of First United will be
considered at a Special Meeting to be held at the First National Bank Building,
El Dorado, Arkansas, on , 1998 at 2:00 p.m. Central Time.

The affirmative vote of the holders of two-thirds of the outstanding shares
of First United Common Stock is required for approval of the Merger.
Stockholders of First United are entitled to dissenters' rights. See "The
Merger -- Right of Dissent Under the 1987 Act."

THE CITIZENS SPECIAL MEETING

Approval of the Merger by the stockholders of Citizens will be considered
at a Special Meeting to be held at 200 South Elm Street, Hope, Arkansas 71801 on
, 1998, at .m. Central Time.

The affirmative vote of the holders of two-thirds of the outstanding shares
of Citizens common stock is required for the approval of the Merger. Directors,
executive officers and their affiliates hold a total of % of the
outstanding stock of Citizens as of , 1997. Stockholders of Citizens
are entitled to dissenters' rights. See "The Merger -- Right of Dissent under
the 1965 Act; Right of Dissent under the 1987 Act."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

It is intended that for federal income tax purposes the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and, accordingly, for federal
income tax purposes, no gain or loss will be recognized by either First United
or Citizens as a result of the Merger and Citizens' stockholders will not
recognize gain or loss upon the receipt of First United Common Stock in exchange
for Citizens common stock. Citizens expects to receive an opinion of counsel,
dated as of the effective date of the Merger, to the effect that no gain or loss
will be recognized by the Citizens stockholders upon the receipt of First United
Common Stock in exchange for Citizens common stock in connection with the
Merger. The parties to this transaction will not request a ruling from the
Internal Revenue Service concerning the taxability of this transaction. See "The
Merger -- Certain Federal Income Tax Consequences."

DISSENTERS' RIGHTS

Holders of First United Common Stock and Citizens common stock are entitled
to dissenters' rights with respect to the Merger. Holders of First United Common
Stock may exercise their right of dissent under the 1987 Act, while holders of
Citizens common stock may exercise their right of dissent under either the 1965
Act or the 1987 Act. See "The Merger -- Right of Dissent under the 1965 Act;
Right of Dissent under the 1987 Act."

REGULATORY APPROVALS

The Merger is subject to prior approval by the appropriate banking
regulatory authorities. An application has been filed for approval of the Merger
with the Board of Governors of the Federal Reserve System ("Board") for First
United to acquire Citizens. In conjunction with the Board application, the
Merger is also subject to review by the Department of Justice as to its
competitive effects. An application has also been filed
8
<PAGE> 16

with the Arkansas State Bank Department for approval of the Merger. See "The
Merger -- Regulatory Approvals."

ACCOUNTING TREATMENT

First United intends to treat the Merger as a pooling of interests for
accounting purposes. Consummation of the Merger is conditioned upon the receipt
of the opinion of Arthur Andersen LLP that the Merger will qualify for the
pooling of interests accounting treatment. See "The Merger -- Accounting
Treatment."

MARKET PRICES

First United Common Stock is traded over-the-counter in the NASDAQ National
Market System. Citizens common stock is not traded publicly and there is no
quoted market for the stock. The table below shows the high and low closing
sales prices for First United Common Stock adjusted for stock splits.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1994........................................................ $22.00 $17.67
1995........................................................ 28.67 19.00
1996........................................................ 33.00 26.50
1997 (through December 30, 1997)............................ 49.00 31.50
</TABLE>

On June 10, 1997 immediately prior to the public announcement of the
agreement in principle between First United and Citizens as to the proposed
merger transaction, the closing sales price for First United Common Stock was
$39.50. On December 1997, the closing sales price for First United Common
Stock was $ .

COMPARATIVE PER SHARE DATA

The following table sets forth for the periods indicated selected
historical per share data of First United and Citizens and the corresponding pro
forma and pro forma equivalent per share amounts giving effect to the proposed
Merger. The data presented are based upon the consolidated financial statements
and related notes of First United which are incorporated by reference in this
Proxy Statement, and the consolidated financial statements and related notes of
Citizens and the pro forma combining balance sheet and income statements,
including the notes thereto, appearing elsewhere herein. This information should
be read in conjunction with such historical and pro forma financial statements
and related notes thereto. The assumptions used in the preparation of this table
appear elsewhere in this Proxy Statement. See " Financial Information." These
data are not necessarily indicative of the results of the future operations of
the combined organization or the actual results that would have occurred if the
Merger had been consummated prior to the periods indicated.

<TABLE>
<CAPTION>
FIRST UNITED/
FIRST CITIZENS CITIZENS
UNITED CITIZENS PRO FORMA PRO FORMA
HISTORICAL HISTORICAL COMBINED EQUIVALENT
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
December 31, 1996.......................... $17.55 $53.18 $17.46 $55.05
September 30, 1997......................... 18.77 57.99 18.72 59.03
Cash dividends per common share:
Year ended December 31, 1994............... 0.45 1.32 0.45 1.42
Year ended December 31, 1995............... 0.52 1.80 0.52 1.63
Year ended December 31, 1996............... 0.59 1.90 0.59 1.86
Nine months ended September 30, 1997....... 0.57 1.64 0.57 1.80
</TABLE>

9
<PAGE> 17

- ---------------

(1) On May 20, 1996, the Board of Directors of First United declared a 3-for-2
stock split effected in the form of a 50% stock dividend. The dividend was
distributed on June 28, 1996 to holders of record as of June 7, 1996. All
per share data have been restated to reflect this stock split.

(2) On September 2, 1997, First United acquired by merger, which was made
effective on September 3, 1997, Fredonia Bancshares, Inc. of Nacogdoches,
Texas.

(3) The Citizens pro forma equivalents represent the respective First
United/Citizens pro forma combined earnings, dividends and book value per
common share multiplied by the applicable exchange ratio of 3.1535 shares of
First United Common Stock for each share of Citizens common stock so that
the First United/Citizens pro forma equivalent amounts are equated to the
respective values for one share of Citizens common stock. The exchange ratio
is determined by dividing First United Common Stock to be received by the
Citizens stockholders by the 497,860 shares of Citizens common stock
currently outstanding without reflecting outstanding options to purchase
Citizens Common Stock.

SELECTED FINANCIAL DATA

The table on the following page presents selected historical financial data
of First United and Citizens and selected unaudited pro forma financial data
after giving effect to the Merger as a pooling of interests for accounting
purposes, assuming the Merger had occurred at the beginning of the earliest
period presented, but without giving effect to costs associated with the
consummation of the Merger, which currently are estimated to total $200,000. The
First United historical data for each of the years in the five-year period ended
December 31, 1996 are based on the historical financial statements of First
United as audited by Arthur Andersen LLP, independent public accountants. The
Citizens historical data for each of the years in the five-year period ended
December 31, 1996 is derived from the historical financial statements of
Citizens as audited by Moore Stephens Frost, P.A., independent auditors. The
selected financial data for First United for the nine month periods ended
September 30, 1996 and 1997, and for Citizens for the nine month periods ended
September 30, 1996 and 1997 have been obtained from unaudited financial
statements and, in the opinion of the respective management of First United and
Citizens, include all adjustments necessary to present fairly the data for such
periods. The pro forma data is not necessarily indicative of the results of
operations or the financial condition that would have been reported had the
Merger been in effect during those periods, or as of those dates, or that may be
reported in the future. Pro forma combined per share data of First United and
Citizens give effect to the exchange of each share of Citizens common stock for
3.1535 shares of First United Common Stock.
10
<PAGE> 18

These data should be read in conjunction with the consolidated financial
statements of each of First United and Citizens, and the related notes thereto,
incorporated by reference herein and in conjunction with the unaudited pro forma
financial information, including the notes thereto, appearing elsewhere in this
Proxy Statement. See "Incorporation of Certain Documents by Reference" and
"Financial Information."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST UNITED HISTORICAL(1)
Operating Data:
Total interest income.............. $ 89,862 $ 83,930 $ 86,614 $ 108,079 $ 123,947 $ 92,482 $ 98,194
Net interest income................ 49,127 50,017 50,478 57,510 65,582 49,115 52,859
Provision for possible loan
losses........................... 3,011 1,815 334 574 725 305 1,435
Income from continuing
operations....................... 15,303 16,187 16,711 18,376 22,372 17,081 17,558
Per Share Data:
Income from continuing
operations....................... $ 1.64 $ 1.74 $ 1.79 $ 1.97 $ 2.27 $ 1.73 $ 1.78
Cash dividends paid................ 0.33 0.41 0.45 0.52 0.59 0.46 0.57
Selected Balance Sheet Items:
Total assets....................... $1,259,887 $1,334,383 $1,339,440 $1,572,682 $1,772,992 $1,758,273 $1,842,287
Total securities................... 588,428 615,282 598,129 647,502 731,802 700,968 730,999
Net loans.......................... 519,898 580,685 598,171 741,080 831,600 825,301 918,054
Total deposits..................... 1,105,212 1,163,703 1,168,815 1,340,492 1,514,038 1,508,896 1,565,185
Long-term debt..................... 8,821 7,723 13,892 16,832 22,426 23,827 22,250
Capital accounts................... 108,643 123,876 125,466 150,163 172,794 165,986 184,950
CITIZENS -- HISTORICAL
Operating Data:
Total interest income.............. $ 13,642 $ 13,457 $ 13,514 $ 15,513 $ 18,372 $ 13,797 $ 14,556
Net interest income................ 6,329 6,998 6,830 7,186 8,538 6,405 6,649
Provision for possible loan
losses........................... 110 47 -- 60 201 105 375
Income from continuing
operations....................... 2,017 2,405 2,624 2,824 3,334 2,464 2,653
Per Share Data:
Income from continuing
operations....................... $ 4.86 $ 4.82 $ 5.27 $ 5.67 $ 6.69 $ 4.94 $ 5.33
Cash dividends paid................ 1.32 1.62 1.32 1.80 1.90 1.10 1.64
Selected Balance Sheet Items:
Total assets....................... $ 187,208 $ 197,005 $ 210,845 $ 239,657 $ 255,054 $ 259,569 $ 262,996
Total securities................... 96,989 93,978 106,833 113,140 120,995 124,719 133,396
Net loans.......................... 76,267 83,392 91,753 108,796 112,628 114,896 111,249
Total deposits..................... 164,497 168,217 168,024 200,972 219,873 212,917 224,014
Long-term debt..................... 1,786 6,542 5,196 4,675 5,791 6,944 6,271
Capital accounts................... 15,356 20,151 20,967 24,204 26,386 25,392 28,759
PRO FORMA -- COMBINED
Operating Data:
Total interest income.............. $ 103,504 $ 97,387 $ 100,128 $ 123,592 $ 142,319 $ 106,279 $ 112,750
Net interest income................ 55,456 57,015 57,308 64,696 74,120 55,520 59,508
Provision for possible loan
losses........................... 3,121 1,862 334 634 926 410 1,810
Income from continuing
operations....................... 17,320 18,592 19,335 21,200 25,706 19,545 20,211
Per Share Data:
Income from continuing
operations....................... $ 1.59 $ 1.70 $ 1.77 $ 1.94 $ 2.25 $ 1.71 $ 1.77
Cash dividends paid................ 0.33 0.41 0.45 0.52 0.59 0.46 0.57
Selected Balance Sheet Items:........ -- -- -- -- -- -- --
Total assets....................... $1,447,095 $1,531,388 $1,550,285 $1,812,339 $2,028,046 $2,017,842 $2,105,283
Total securities................... 685,417 709,260 704,962 760,642 852,797 825,687 864,395
Net loans.......................... 596,165 664,077 689,924 849,876 944,228 940,197 1,029,303
Total deposits..................... 1,269,709 1,331,920 1,336,839 1,541,464 1,733,911 1,721,813 1,789,199
Long-term debt..................... 10,607 14,265 19,088 21,507 28,217 30,771 28,521
Capital accounts................... 123,999 144,027 146,433 174,367 199,180 191,378 213,709
</TABLE>

- ---------------

(1) Restated to reflect the September 3, 1997 pooling-of-interests with Fredonia
Bancshares, Inc.
11
<PAGE> 19

THE CITIZENS SPECIAL MEETING

DATE, TIME AND PLACE

The Citizens Special Meeting will be held on , 1998, commencing
at .m. Central Time, at the offices of Citizens at 200 South Elm Street, Hope,
Arkansas.

PURPOSE OF MEETING

The purpose of the Citizens Special Meeting is to consider and vote upon
the adoption of the Agreement between Citizens and First United.

SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE

The close of business on , 1998 has been fixed by the Board of
Directors of Citizens as the record date ("Citizens Record Date") for the
determination of holders of Citizens common stock entitled to notice of and to
vote at the Citizens Special Meeting. At the close of business on the Citizens
Record Date, there were 497,860 shares of Citizens common stock outstanding held
by 226 shareholders of record. Holders of record of Citizens common stock on the
record date are entitled to one vote per share and are entitled to dissenters'
rights. See "The Merger -- Right of Dissent under the 1965 Act; Right of Dissent
Under the 1987 Act."

VOTE REQUIRED

The affirmative vote of two-thirds of all the shares of Citizens common
stock outstanding on the record date is required to adopt the Agreement.

As of , 1997, directors, executive officers and their
affiliates own % of the outstanding stock of Citizens.

VOTING; SOLICITATION OF PROXIES

Proxies for use at the Citizens Special Meeting accompany copies of this
Proxy Statement delivered to record holders of Citizens common stock and such
proxies are solicited on behalf of the Board of Directors of Citizens. A holder
of Citizens common stock may use his proxy if he is unable to attend the
Citizens Special Meeting in person or wishes to have his shares voted by proxy
even if he does attend the meeting. The proxy may be revoked in writing by the
person giving it at any time before it is exercised by notice of such revocation
to the secretary of Citizens, or by submitting a proxy having a later date, or
by such person appearing at the Citizens meeting and electing to vote in person.
All proxies validly submitted and not revoked will be voted in the manner
specified therein. If no specification is made, the proxies will be voted in
favor of the Merger.

Citizens will bear the cost of solicitation of proxies from its
stockholders. In addition to using the mails, proxies may be solicited by
personal interview. Officers and other employees of Citizens acting on Citizens'
behalf, may solicit proxies personally.

THE FIRST UNITED SPECIAL MEETING

DATE, TIME AND PLACE

The First United Special Meeting will be held on , 1998,
commencing at 2:00 p.m. Central Time, at the main office of First National Bank
of El Dorado at Main and Washington Streets, El Dorado, Arkansas.

PURPOSE OF MEETING

The purpose of the First United Special Meeting is to consider and vote
upon the adoption of the Agreement between First United and Citizens.

12
<PAGE> 20

SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE

The close of business on , 1998 has been fixed by the Board of
Directors of First United as the record date ("First United Record Date") for
the determination of holders of First United Common Stock entitled to notice of
and to vote at the First United Special Meeting. At the close of business on the
First United Record Date, there were shares of First United Common
Stock outstanding held by shareholders of record. Holders of record of
First United Common Stock on the record date are entitled to one vote per share,
are entitled to dissenters' rights. See "The Merger -- Right of Dissent under
the 1987 Act."

VOTE REQUIRED

The affirmative vote of two-thirds of all the shares of First United Common
Stock outstanding on the record date is required to adopt the Agreement.

As of the Record Date, directors, executive officers and their affiliates
own approximately % of the outstanding common stock of First United.

VOTING; SOLICITATION OF PROXIES

Proxies for use at the First United Special Meeting accompany copies of
this Proxy Statement delivered to record holders of First United common stock
and such proxies are solicited on behalf of the Board of Directors of First
United. A holder of First United common stock may use his proxy if he is unable
to attend the First United Special Meeting in person or wishes to have his
shares voted by proxy even if he does attend the meeting. The proxy may be
revoked in writing by the person giving it at any time before it is exercised by
notice of such revocation to the secretary of First United, or by submitting a
proxy having a later date, or by such person appearing at the First United
meeting and electing to vote in person. All proxies validly submitted and not
revoked will be voted in the manner specified therein. If no specification is
made, the proxies will be voted in favor of the Merger.

First United will bear the cost of solicitation of proxies from its
stockholders. In addition to using the mails, proxies may be solicited by
personal interview. Officers and other employees of First United acting on First
United's behalf, may solicit proxies personally.

THE MERGER

REASONS FOR THE MERGER

The acquisition of Citizens will expand First United's current markets. The
banking subsidiaries of Citizens are located in Hope, Lewisville, and Texarkana,
Arkansas. Currently, there are no banking offices in the First United system
located in Hope, Lewisville, or Texarkana, Arkansas. Thus, the acquisition of
Citizens expands First United's market into new areas.

Management of First United believes that by expanding its markets, it will
increase the range and competitiveness of its banking services to persons
residing in the Hope, Lewisville, and Texarkana, Arkansas areas while increasing
the earning power of First United.

In reaching its decision to approve the Merger and Merger Agreement,
Citizens' Board consulted with its counsel, as well as with Citizens'
management, and considered a number of factors, including, without limitation,
the following:

a. Citizens' Board's familiarity with and review of Citizens'
business, operations, earnings and financial condition and future capital
requirements;

b. Citizens' Board's belief that the terms of the Merger Agreement are
attractive in that the Merger Agreement allows Citizens stockholders to
become stockholders in First United, an institution whose

13
<PAGE> 21

stock is traded over the NASDAQ Stock Market, and the recent earnings and
stock performance of First United;

c. First United's wide range of banking products and services and its
dividend payment history;

d. Citizens' Board's belief, based upon analysis of the anticipated
financial effects of the Merger, that upon consummation of the Merger,
First United and its banking subsidiaries would be well capitalized
institutions, the financial positions of which will be well in excess of
all applicable regulatory capital requirements;

e. The current and prospective economic and regulatory environment and
competitive constraints facing the banking industry and financial
institutions in Citizens' market area;

f. Citizens' Board's belief that, in light of the reasons discussed
above, First United was the most attractive choice as a long term
affiliation partner of Citizens; and

g. The expectation that the Merger will generally be a tax-free
transaction to Citizens and its stockholders.

Citizens' Board did not assign any specific or relative weight to any of
the factors discussed above in their considerations.

OPINION OF FINANCIAL ADVISOR

Citizens' Board of Directors retained Hoefer & Arnett to render to the
Board of Directors a written opinion (the "Fairness Opinion") as investment
bankers as to the fairness, from a financial point of view, to the Board of
Directors of Citizens of the terms of the proposed Merger of Citizens with and
into First United, as defined in the Agreement. No limitations were imposed by
Citizens' Board of Directors upon Hoefer & Arnett with respect to the
investigations made or procedures followed in rendering the Fairness Opinion.

A copy of the Fairness Opinion of Hoefer & Arnett, dated as of September
22, 1997, which sets forth certain assumptions made, matters considered and
limits on the review undertaken by Hoefer & Arnett, is attached as Annex IV to
this Proxy Statement. Citizens' shareholders are urged to read the Fairness
Opinion in its entirety. The following summary of the procedures and analysis
performed, and assumptions used by Hoefer & Arnett is qualified in its entirety
by reference to the text of such Fairness Opinion. The Fairness Opinion is
directed to Citizens' Board of Directors only and is directed only to the
financial terms of the transaction and does not constitute a recommendation to
any Citizens shareholder as to how such shareholder should vote at the Special
Meeting.

In arriving at its opinion, Hoefer & Arnett reviewed and analyzed, among
other things, the following: (i) the Agreement; (ii) Annual Reports to
shareholders of Citizens and First United for the years ended December 31, 1995
and December 31, 1996; (iii) quarterly FDIC Call reports for the quarters ended
June 30, 1996, September 30, 1996, December 31, 1996, March 31, 1997 and June
30, 1997; (iv) certain other publicly available financial and other information
concerning Citizens and First United; (v) the historical market prices and
trading activity for the common stock of First United; and (vi) publicly
available information concerning other banks and holding companies, the trading
markets for their securities and the nature and terms of certain other merger
transactions Hoefer & Arnett believes relevant to its inquiry. Hoefer & Arnett
held discussions with senior management of Citizens and First United concerning
their past and current operations, financial condition and prospects, as well as
the results of regulatory examinations.

Hoefer & Arnett reviewed with senior management of First United earnings
projections for 1997 through 2002 for First United as a stand-alone entity,
assuming the Merger does not occur. Hoefer & Arnett reviewed with senior
management of Citizens earnings projections for 1997 through 2002 for Citizens
as a stand-alone entity, assuming the Merger does not occur, prepared by
Citizens. Certain pro forma financial projections for the years 1997 through
2002 for the combined entity were derived by Hoefer & Arnett based partially
upon the information discussed above, as well as Hoefer &Arnett's assessment of
general economic, market and financial conditions.

14
<PAGE> 22

In conducting its review and in arriving at its opinion, Hoefer & Arnett
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or publicly available, and did not attempt to
independently verify the same. Hoefer & Arnett relied upon the management of
Citizens as to the reasonableness of the financial and operating forecasts,
projections (and the assumptions and bases therefor) provided to it, and Hoefer
& Arnett assumed that such forecasts and projections reflect the best currently
available estimates and judgment of the management of Citizens. Hoefer & Arnett
also assumed, without independent verification, that the aggregate allowance for
loan losses for Citizens and First United are adequate to cover such losses.
Hoefer & Arnett did not make or obtain any evaluations or appraisals of the
properties of Citizens or First United, nor did it examine any individual loan
credit files. For purposes of its opinion. Hoefer & Arnett assumed that the
Merger will have the tax, accounting and legal effects described in the
Agreement and relied, as to legal matters, exclusively on counsel to Citizens as
to the accuracy of the disclosures set forth in the Agreement. Hoefer & Arnett's
opinion is limited to the fairness, from a financial point of view, to the
holders of the common stock of Citizens of the terms of the proposed Merger with
First United and does not address Citizens' underlying business decision to
proceed with the Merger.

As more fully discussed below, Hoefer & Arnett considered such financial
and other factors as Hoefer & Arnett deemed appropriate under the circumstances,
including among others the following: (i) the historical and current financial
position and results of operations of Citizens and First United, including
interest income, interest expense, net interest income, net interest margin,
provision for loan losses, non-interest income, non-interest expense, earnings,
dividends, internal capital generation, book value, intangible assets, return on
assets, return on shareholders' equity, capitalization, the amount and type of
non-performing assets, loan losses and the reserve for loan losses, all as set
forth in the financial statements for Citizens and First United; (ii) the assets
and liabilities of Citizens and First United, including the loan, investment and
mortgage portfolios, deposits, other liabilities, historical and current
liability sources and costs and liquidity; and (iii) the nature and terms of
certain other merger transactions involving banks and bank holding companies.
Hoefer & Arnett also took into account its assessment of general economic,
market and financial conditions and its experience in other transactions, as
well as its experience in securities valuation and its knowledge of the banking
industry generally. Hoefer & Arnett's opinion is necessarily based upon
conditions as they existed and can be evaluated on the date of its opinion and
the information made available to it through that date.

In connection with rendering its Fairness Opinion to Citizens' Board of
Directors, Hoefer & Arnett performed certain financial analyses, which are
summarized below. Hoefer & Arnett believes that its analysis must be considered
as a whole and that selecting portions of such analysis and the factors
considered therein, without considering all factors and analysis, could create
an incomplete view of the analysis and the processes underlying Hoefer &
Arnett's Fairness Opinion. The preparation of a fairness opinion is a complex
process involving subjective judgments and it is not necessarily susceptible to
partial analysis or summary description. In its analyses Hoefer & Arnett made
numerous assumptions with respect to industry performance, business and economic
conditions, and other matters, many of which are beyond the control of Citizens.
Any estimates contained in Hoefer & Arnett's analyses are not necessarily
indicative of future results or values, which may be significantly more or less
favorable than such estimates. Estimates of values of companies do not purport
to be appraisals or necessarily reflect the prices at which companies or their
securities may actually be sold. Except as described below, none of the
financial analyses performed by Hoefer & Arnett was assigned a greater
significance by Hoefer & Arnett than any other.

The financial forecasts and projections of Citizens and First United
prepared by Hoefer & Arnett were based on projections provided by the respective
companies as well as Hoefer & Arnett's own assessment of general economic,
market and financial conditions. All such information was reviewed with the
respective managements of Citizens and First United. Citizens and First United
do not publicly disclose internal management financial forecasts and projections
of the type provided to Hoefer & Arnett in connection with its review of the
proposed Merger. Such forecasts and projections were not prepared with a view
towards public disclosure. The forecasts and projections prepared by Hoefer &
Arnett were based on numerous variables and assumptions which are inherently
uncertain, including without limitation, factors related to general economic and
market conditions. Accordingly, actual results could vary significantly from
those set forth in such forecasts and projections.

15
<PAGE> 23

In order to determine the fairness of the proposed offer by First United,
Hoefer & Arnett utilized net asset value, market value and investment value
approaches, as explained below.

Net Asset value is the value of the net equity of a bank, including every
kind of property and value. This approach normally assumes liquidation on the
date of appraisal with recognition of securities gains or losses, real estate
appreciation or depreciation and any adjustments to the loan loss reserve,
discounts to the loan portfolio or changes in the net value of other assets. As
such, it is not the best approach to use when valuing a going concern, because
it is based on historical costs and varying accounting methods. Even if the
assets and liabilities are adjusted to reflect prevailing prices and yields
(which is often of limited accuracy because readily available data is often
lacking), it still results in a liquidation value for the concern. Furthermore,
since this method does not take into account the values attributable to the
going concern such as the interrelationship among the company's assets,
liabilities, customer relations, market presence, image and reputation, and
staff expertise and depth, little weight is given to the net asset value method
of valuation.

Market value is defined as the price, established on an "arm's-length"
basis, at which knowledgeable, unrelated buyers and sellers would agree. The
market value is frequently used to determine the price of a minority block of
stock when both the quantity and the quality of the "comparable" data are deemed
sufficient. However, the relative thinness of the specific market for the stock
of the banking company being appraised may result in the need to review
alternative markets of comparative pricing purposes. The "hypothetical" market
value for a small bank with a thin market for its stock is normally determined
by comparison to the average price to earnings, price the equity and dividend
yield of local or regional publicly-traded bank issues, adjusted for lack of
marketability or liquidity.

The market value in connection with the evaluation of control of a bank is
determined by the previous sales of banks in the state or region. In valuing a
business enterprise, when sufficient comparable trade data is available, the
market value deserves greater weighting than the net asset value and equal or
possibly greater weighting than the investment value. In analyzing the fair
market value of Citizens, Hoefer & Arnett has considered the market approach and
has evaluated price to equity and price to earnings multiples of banking
organizations that were sold in Arkansas between January 1, 1996 and September
19, 1997. This data was obtained from SNL Securities, L.P.

Hoefer & Arnett calculated an "Adjusted Book Value" based on June 30, 1997
equity and the price to book value multiples paid for Arkansas banks in 1996 and
1997 at $115.20. Hoefer & Arnett calculated an "Adjusted Earnings Value" based
on Citizens' estimated 1997 earnings and the price to earnings multiples paid
for Arkansas banks in 1996 and 1997 at $121.56. These "Adjusted Book Value" and
"Adjusted Earnings Value" approaches are utilized in supporting the fairness of
the price ($124.56) to be offered for shares of Citizens' Common Stock as
provided for in the Agreement.

Hoefer & Arnett analyzed the value of the aggregate consideration to be
received in the transactions that were announced in 1996 and 1997 in
relationship to the stated book value and earnings as compared to the value of
the aggregate consideration to be received by holders of Citizens' common stock.

Investment value is sometimes referred to as the income value or the
earnings value. The investment value is frequently defined as an estimate of the
present value of future benefits. Another popular investment value method is to
determine the level of the current annual benefits and then capitalize one or
more of the benefit types using an appropriate capitalization rate such as an
earnings or dividend yield. Using a net present value discount rate of 12%, an
acceptable discount rate considering the risk-return relationship most investors
would demand for an investment of this type as of the valuation date, the net
present value of future earnings equaled $72.27.

In order to analyze the reasonableness of the transaction value, the return
on investment is calculated to determine the return that would accrue to a
potential buyer at the transaction value. The return on investment, assuming
sale in year 2000 at the average multiple of book value paid for Arkansas banks,
equaled 8.81% which is lower than what we normally see when evaluating a
controlling interest in a financial institution and, therefore, supports the
fairness of the proposed transaction.

16
<PAGE> 24

The transaction value to assets was calculated and compared to the average
purchase price to assets for banking organizations sold in Arkansas in 1996 and
1997. Based on the proposed offer of $124.56 per share (based on the current
market value of First United's stock of $39.50), the price to assets equaled
22.94%, which is above the Arkansas average of 17.05%. Hoefer & Arnett also
calculated the net present value to transaction value, as it has been recognized
that there is a relationship between the net present value of a community
banking organization and the fair market value of a majority block of the
banking organization's stock. The net present value to transaction value ratio
equaled 58.02% which is lower than what we would normally expect and, therefore,
also supports the fairness of the proposed transaction.

Based upon input from senior management of First United and Citizens, as
well as Hoefer & Arnett's own assessment of general economic, market and
financial conditions, and all financial and other factors it deemed appropriate
under the circumstances, Hoefer & Arnett prepared financial projections for
First United and Citizens on a stand alone basis. The projections were based on
numerous variables and assumptions which are inherently uncertain, and
accordingly, actual results could vary from those set forth in such projections.

First United is projected to generate a return on average assets of 1.29%
gradually increasing to 1.50% in the years 1997 through 2002. First United's
assets are projected to increase by 3.53% in 1997 and 5.00% in 1998 through
2002. (The projections for First United include the acquisitions of Fredonia
Bancshares, Inc., Nacogdoches, Texas, and City Bank & Trust, Shreveport,
Louisiana.) Citizens is projected to generate a return on average assets of
1.30% in 1997, 1.40% in 1998 through 2002. Citizens' assets are projected to
increase by 5.08% in 1997 and 4.00% in 1998 through 2002.

Proforma financial projections for the combined entity were derived by
Hoefer & Arnett based upon the projections discussed above. Hoefer & Arnett
analyzed the book value and earnings per share impact of the proposed
transaction on Citizens' shareholders over the next five years. At an exchange
ratio of 3.1535 shares of First United's Common Stock for each share of
Citizens' common stock, Citizens shareholders are projected to experience equity
per share appreciation ranging from 3.53% to 5.75% in the years 1998 through
2002. On an earnings per share basis, Citizens shareholders are projected to
experience appreciation ranging from 3.44% to 18.79% in the years 1998 through
2002.

For services rendered in connection with the Merger, Citizens has paid
Hoefer & Arnett a fee of $17,000 and agreed to reimburse Hoefer & Arnett for all
reasonable expenses incurred in connection with its services. Citizens has also
agreed to indemnify Hoefer & Arnett against certain liabilities relating to or
arising out of its engagement, including liabilities under securities laws.

THE AGREEMENT

The following description of certain features of the Agreement is qualified
in its entirety by the full text of the Agreement, which is incorporated herein
by reference and attached hereto by Annex I.

Under the terms of the Agreement, Citizens will be merged with and into
First United. As part of the Merger, the Agreement provides that the
stockholders of Citizens will receive total consideration consisting of one
million five hundred seventy thousand (1,570,000) shares of fully paid and
nonassessable shares of Common Stock, $1.00 par value of First United ("Purchase
Price"). All of the issued and outstanding shares of Citizens common stock,
other than shares of Citizens common stock held by dissenting stockholders,
shall be converted into the right to receive the Purchase Price based upon each
Citizens stockholder's pro rata ownership of the total number of issued and
outstanding shares of Citizens common stock at the effective time of the Merger.
Fractional shares of First United Common Stock shall not be issued. Any Citizens
shareholder entitled to receive a fractional share shall receive a cash payment
in lieu thereof equal to the value of the fractional share based on the average
price of First United Common Stock common stock. The average price of First
United Common Stock is defined as the average sales price per share for all
trades occurring during the period of ten (10) trading days on which one or more
trades actually takes place and which ends immediately prior to the second
trading day preceding the closing date.

17
<PAGE> 25

In addition, either party may terminate the Agreement, if the Merger is not
closed on or before March 31, 1998 provided that the failure to close is not
caused by a breach of the Agreement by the party seeking to terminate it.

Citizens has agreed, for the period prior to the consummation of the
Merger, to operate its businesses only in the usual, regular and ordinary
course. In addition, Citizens will use reasonable efforts to maintain and keep
its properties in as good repair and condition as at present, except for
ordinary wear and tear and to perform all obligations required under all
material contracts, leases, and documents relating to or affecting their
respective assets prior to the consummation of the Merger. Citizens has further
agreed that, prior to consummation of the Merger, it will not incur any material
liabilities or obligations, except in the ordinary course of business, or take
any action which would or is reasonably likely to adversely affect the ability
of either First United or Citizens to obtain any necessary approvals, adversely
affect the ability of First United or Citizens to perform their covenants and
agreements under the Agreement, or result in any of the conditions to the Merger
not being satisfied. Citizens has further agreed that, unless otherwise required
by applicable law, it shall not initiate, solicit or encourage any inquiry or
proposal which constitutes a competing transaction.

The Agreement requires that certain conditions occur or be waived prior to
the closing date ("conditions precedent"), including (a) approval by Citizens
and First United stockholders by two-thirds of all outstanding shares,
respectively; (b) approval by the appropriate bank regulatory authorities; (c)
receipt by Citizens of letter from Hoefer & Arnett dated on or before the
Closing Date stating that in such financial advisor's opinion to the Board of
Directors of Citizens that the consideration to be paid in the merger is fair to
the Citizens shareholders from a financial point of view; (d) receipt by First
United of an opinion from Arthur Andersen LLP that the Merger will qualify for
pooling of interests treatment under the applicable accounting principles; and
(e) satisfaction of other normal conditions to closing a merger transaction. It
is also a condition to the Merger that First United have an effective
registration statement on file with the Securities and Exchange Commission
covering the issuance of shares to be exchanged pursuant to the Merger. Prior to
the effective date of the Merger, any condition of the Agreement, except those
required by law, may be waived by the party benefitted by the condition.

The effective date of the Merger will be the date the Articles of Merger
are filed with the Arkansas Secretary of State, or the date so stated in the
Articles of Merger. The Agreement provides that a closing date will be set by
mutual agreement to occur within a reasonable time following the date on which
the last of all regulatory and other approvals necessary to consummate the
Merger have been received and all necessary time periods imposed by regulatory
authorities have elapsed. The parties may, however, amend the Agreement to
provide a later closing date.

REGULATORY APPROVALS

ANTITRUST MATTERS

The Department of Justice has fifteen (15) calendar days after approval by
the Board in which to challenge the proposed Merger on anti-trust
considerations. The approval letter or Order from the Board, therefore will
provide that the Merger may not be consummated until fifteen (15) calendar days
after the effective date of such letter or Order. The letter or Order will also
provide that the transaction must be consummated no later than ninety (90)
calendar days from that effective date unless the period is extended for good
cause by the Board upon request by First United.

18
<PAGE> 26

FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of certain material federal income tax
considerations in connection with the Merger and of the tax opinion of Friday,
Eldredge & Clark, special tax counsel to Citizens. This discussion does not
address all aspects of federal income taxation that may be relevant to
particular stockholders of Citizens and may not be applicable to stockholders
who are not citizens or residents of the United States, or who may acquire First
United Common Stock pursuant to the exercise or termination of employee stock
options or otherwise as compensation, nor does the discussion address the effect
of any applicable foreign, state, local or other tax laws. This discussion
assumes that the Citizens stockholders hold their Citizens common stock as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the "Code"). EACH CITIZENS STOCKHOLDER SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF
THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND
OTHER TAX LAWS.

The Merger will qualify as a tax-free corporate reorganization for federal
income tax purposes under Section 368(a)(1)(A) of the Code, if it satisfies the
specific requirements of the Code, the regulations promulgated thereunder, and
pertinent judicial decisions. The most important of these requirements are (i)
the transaction must qualify as a merger under applicable state or federal law
and (ii) the stockholders of Citizens must maintain a "continuity of interest"
in the surviving corporation after the Merger. The Internal Revenue Service
takes the position that this "continuity of interest" test will be satisfied if
the former Citizens stockholders receive, in the Merger, a number of shares of
common stock of First United having a value, as of the Effective Date (as
defined herein), equal to at least fifty percent (50%) of the value of all the
outstanding stock of Citizens as of such date, and acquire such stock without a
present intent to sell, transfer or otherwise dispose of such stock in a manner
that would cause the fifty percent (50%) continuity of interest threshold to be
violated. In general, this requires the stockholders of Citizens to collectively
surrender at least 50% of their Citizens common stock in exchange for First
United Common Stock in the Merger, without a present intent to sell, transfer or
otherwise dispose of such stock in violation of the fifty percent (50%)
continuity of interest requirement.

The Merger has been structured in a manner to qualify as a statutory merger
under the law of the State of Arkansas. In addition, it is expected that the
stockholders of Citizens will collectively exchange a sufficient number of
shares of Citizens common stock for First United Common Stock so that the 50%
"continuity of interest" test initially should be satisfied in connection with
the Merger.

Accordingly, assuming these tests are satisfied, and provided other
specific requirements contained in the Code, the regulations promulgated
thereunder, and pertinent judicial decisions are met, the transaction should
qualify as a tax-free corporate reorganization for federal income tax purposes
pursuant to the provisions of Section 368(a)(1)(A) of the Code.

If the Merger qualifies as a tax-free corporate reorganization, the
material federal income tax consequences of the Merger will be as follows: (i)
no material gain or loss will be recognized by Citizens or First United as a
result of the Merger; (ii) no gain or loss will be recognized by the
stockholders of Citizens upon the receipt of First United Common Stock received
solely in exchange for their shares of Citizens common stock in connection with
the Merger; (iii) the tax basis of the shares of First United Common Stock
received by the stockholders of Citizens in the Merger will, in each instance,
be the same as the basis of the shares of Citizens common stock surrendered in
exchange therefor; (iv) the holding period of the shares of First United Common
Stock received by the stockholders of Citizens in the Merger will, in each
instance, include the holding period of the shares of Citizens common stock
exchanged therefor, provided that the shares of Citizens common stock were held
as capital assets on the date of the Merger; and (v) the payment of cash to
stockholders of Citizens in lieu of fractional shares of First United Common
Stock will be a taxable transaction and will be treated as if the fractional
shares were distributed as part of the exchange and then redeemed by First
United for cash, and any such cash payments will be treated as having been
received by the stockholder as a distribution in redemption of the fractional
share interest, subject to the provisions of Section 302 of the Code.

19
<PAGE> 27

Stockholders of Citizens who exercise dissenters' rights and receive cash
for their shares of Citizens common stock will have engaged in a taxable
transaction and will be treated as having received such cash as a distribution
in redemption of such stockholders' Citizens common stock, subject to the
conditions and limitations of Section 302 of the Code.

If the Merger does not qualify as a tax-free corporate reorganization for
federal income tax purposes, it will constitute a taxable transaction to the
stockholders of Citizens. In such circumstances, gain or loss will be recognized
by the stockholders of Citizens to the extent of the difference between the fair
market value, on the Effective Date, of the shares of First United Common Stock
received in connection with the Merger, and the adjusted basis of the shares of
Citizens common stock surrendered in the transaction. The fair market value of
the First United Common Stock on the Effective Date may be determined on the
basis of the average high and low selling prices of such stock on the day of the
transaction. If the transaction is taxable, the holding period for the shares of
First United Common Stock to be received by the stockholders of Citizens will
commence on the day following the date of the transaction.

Because the tax consequences to any particular stockholder may be affected
by matters not pertaining to the Merger, it is recommended that each stockholder
of Citizens consult his or her own personal tax advisor concerning the specific
income tax consequences of the Merger, including the applicability and effect of
foreign, state, local and other tax laws.

ACCOUNTING TREATMENT

First United intends to treat the merger as a pooling-of-interests for
accounting purposes. Consequently, in accordance with generally accepted
accounting principles, First United anticipates that it will restate its 1997
and prior consolidated financial statements to include the assets, liabilities,
stockholders' equity and results of operations of Citizens as reflected in its
consolidated financial statements, subject to appropriate adjustments, if any,
to conform accounting principles of the two companies.

RIGHT OF DISSENT UNDER THE 1965 ACT

HOLDERS OF CITIZENS COMMON STOCK WILL BE ENTITLED TO EXERCISE DISSENTER'S
RIGHTS EITHER UNDER THE 1965 ACT OR THE 1987 ACT. IF APPROVED, THE ELECTION TO
BE GOVERNED BY THE 1987 ACT BY THE STOCKHOLDERS OF CITIZENS, AS DISCUSSED BELOW,
WILL BE MADE PRIOR TO CONSUMMATION OF THE MERGER BUT SUBSEQUENT TO A VOTE ON
SUCH MERGER. THEREFORE, FIRST UNITED WILL RECOGNIZE COMPLIANCE WITH EITHER THE
1965 ACT OR THE 1987 ACT AS A VALID EXERCISE OF DISSENTER'S RIGHTS WITH RESPECT
TO SUCH MERGER. FOR A DISCUSSION OF THE PROCEDURE TO BE FOLLOWED UNDER THE 1987
ACT, SEE "THE MERGER -- RIGHT OF DISSENT UNDER THE 1987 ACT."

Under Arkansas law, holders of Citizens common stock are entitled to
dissenters' rights pursuant to Ark. Code Ann. sec.4-26-1007 of the 1965 Act.
However, if a holder of shares of Citizens common stock chooses to follow the
procedure under the 1965 Act, he shall only be entitled to such rights if he
complies with that statute. The following summary does not purport to be a
complete statement of the method of compliance with Section 4-26-1007 and is
qualified by reference to those statutory sections which are attached hereto by
Annex.

A holder of Citizens stock who wishes to perfect his dissenter's rights in
the event that the Merger is adopted must:

(a) File with the corporation, prior to or at the meeting of
stockholders at which the vote on the Agreement is to be made, written
objection to the Agreement; and

(b) Not have voted in favor of the Agreement.

Any written notice of objection to the Agreement pursuant to clause (a) of
the immediately proceeding paragraph should be mailed or delivered to Citizens
National Bancshares of Hope, Inc., 200 South Elm

20
<PAGE> 28

Street, Hope, Arkansas 71801, Attention: Dennis Ramsey, Secretary. Because the
written objection must be delivered prior to or at the stockholder vote on the
Agreement, it is recommended, although not required, that a stockholder using
the mail should use certified or registered mail, return receipt requested, to
confirm that he has made timely delivery.

Within ten (10) days after the consummation of the Merger, any stockholder
objecting to the Merger must make a written demand on First United for payment
of the fair value of his shares as of the day before the vote on the Agreement
was taken. This second notice should be mailed to First United Bancshares, Inc.,
Main and Washington Streets, El Dorado, Arkansas, 71730, Attention: John E.
Burns, Vice President and Chief Financial Officer. The demand must state the
number and class of shares owned. If a demand is not made within the 10-day
period, the stockholder is bound by the Agreement.

Within ten (10) days after the Merger is effected, First United shall give
notice to each dissenting stockholder who made demand as provided above for the
payment of the value of his shares. If the dissenting stockholder and First
United agree upon the value of the shares within thirty (30) days after the date
of the Merger, then payment shall be made within ninety (90) days of the Merger.
Simultaneously with the payment, the dissenting stockholder shall surrender the
certificates representing his shares.

If within the thirty-day period no agreement is reached as to the value of
the dissenting stockholder's shares, the dissenting stockholder must file a
petition in Pulaski County Circuit Court within 60 days after the expiration of
the 30-day period asking for a determination of the fair value of his shares.
The judgment will be final and is payable only upon and simultaneously with the
surrender of the certificates representing the shares to First United. If a
dissenting stockholder fails to file a petition within the 60-day period, he and
all persons claiming under him shall be bound by the terms of the Agreement.

RIGHT OF DISSENT UNDER THE 1987 ACT

HOLDERS OF FIRST UNITED COMMON STOCK OR CITIZENS COMMON STOCK SHALL BE
ENTITLED TO DISSENTER'S RIGHTS PURSUANT TO ARK. CODE ANN. SEC.4-27-1301 ET. SEQ.
OF THE 1987 ACT WITH RESPECT TO THE MERGER. HOWEVER, A HOLDER OF FIRST UNITED
COMMON STOCK SHALL ONLY BE ENTITLED TO EXERCISE DISSENTER'S RIGHTS UNDER THE
1987 ACT, WHEREAS A HOLDER OF CITIZENS COMMON STOCK MAY ALSO EXERCISE SUCH
RIGHTS UNDER THE 1965 ACT. SEE "THE MERGER -- RIGHT OF DISSENT UNDER THE 1965
ACT."

The following summary does not purport to be a complete statement of the
method of compliance with the 1987 Act and is qualified by reference to those
statutory sections which are attached hereto as Annex II.

A holder of First United Common Stock who wishes to perfect his dissenter's
rights in the event that the Merger is adopted must:

(a) File with the corporation, prior to or at the meeting of
stockholders at which the vote on the Agreement is to be made, written
objection to the Agreement; and

(b) Not have voted in favor of the Agreement.

Any written notice of objection to the Agreement pursuant to clause (a) of
the immediately preceding paragraph should be mailed or delivered by a Citizens
stockholder to Citizens National Bancshares of Hope, Inc., 200 South Elm Street,
Hope, Arkansas, 71801, Attention: Dennis Ramsey, Secretary, or by a stockholder
of First United, to First United Bancshares, Inc., Main and Washington Streets,
El Dorado, Arkansas, 71730, Attention: John Burns, Vice President and Chief
Financial Officer. Because the written objection must be delivered prior to or
at the time of the stockholder votes on the Merger, it is recommended, although
not required, that a stockholder using the mail should use certified or
registered mail, return receipt requested, to confirm that he has made timely
delivery.

If the Merger is adopted at the special stockholders meeting, the
corporation must send to the dissenting stockholder, no later than ten (10) days
after the corporate action was taken, a dissenter's notice which will

21
<PAGE> 29

inform the stockholder where a demand for payment must be sent, where the
stockholder's share certificates must be deposited and provide a form for
demanding payment. The dissenter's notice will also notify the stockholder of a
time period of not fewer than thirty (30) nor more than sixty (60) days within
which the stockholder must deliver the payment demand form and stock
certificates to the corporation.

As soon as the Merger is consummated, or upon receipt of a payment demand
by the dissenting stockholder, First United must pay the dissenting stockholder
the amount First United estimates to be the fair value of the shares, plus
accrued interest and deliver to the dissenting stockholder the corporation's
balance sheet as of the most recent fiscal year, an income statement for that
year, a statement of changes in stockholder equity for that year, and the latest
available interim financial statement. At this time, First United shall also
deliver to the dissenting stockholder a statement of the corporation's estimate
of fair value of the shares, an explanation of how interest was calculated, a
statement of the dissenter's right to demand a higher value for his shares and a
copy of the appropriate statutory provisions governing the dissenters rights
procedure.

Within thirty (30) days after the dissenting stockholder has received
payment in the amount the corporation estimates to be the fair value of the
shares, the dissenting stockholder must notify the corporation, in writing, of
his own estimate of fair value. If the dissenting stockholder does not notify
the corporation within this thirty (30) day period, he waives his right to
demand a higher payment.

If the demand for payment, as referenced in the immediately preceding
paragraph remains unsettled for sixty (60) days from the date the corporation
receives the dissenting stockholder's demand for payment, the corporation must
commence a proceeding and file a petition in Pulaski County Circuit Court to
determine the fair value of the shares and the amount of accrued interest to be
paid.

EXCHANGE RATIO FOR THE MERGER

The Agreement between First United and Citizens provides that the
stockholders of Citizens will receive total consideration consisting of one
million five hundred seventy thousand (1,570,000) shares of fully paid and
nonassessable shares of Common Stock, $1.00 par value of First United ("Purchase
Price"). All of the issued and outstanding shares of Citizens common stock and
all outstanding options to acquire Citizens common stock, other than shares of
Citizens common stock held by dissenting stockholders, shall be converted into
the right to receive a pro rata portion of the Purchase Price based upon each
Citizens stockholder's pro rata ownership of the total number of issued and
outstanding shares of Citizens common stock at the effective time of the Merger.
Fractional shares of First United Common Stock shall not be issued. Any Citizens
shareholder entitled to receive a fractional share shall receive a cash payment
in lieu thereof equal to the value of the fractional share based on the average
sales price per share of First United Common Stock. The average price of First
United Common Stock is defined as the average sales price per share for all
trades occurring during the period of ten (10) trading days on which one or more
trades actually takes place and which ends immediately prior to the second
trading day preceding the closing date ("Average Price"). The following table
illustrates a range of average sales prices for First United Common Stock and
based upon these average prices, calculates the purchase price, and the value
received by Citizens shareholders. The actual Average Price at the effective
time of the Merger may be higher or lower than the per share examples used
below. THIS TABLE IS FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE RELIED
UPON AS THE ACTUAL AVERAGE PRICE, ACTUAL EXCHANGE RATIOS, OR THE ACTUAL AMOUNT
OF CONSIDERATION TO BE EXCHANGED.

<TABLE>
<CAPTION>
CALCULATION OF VALUE RECEIVED(1)
--------------------------------
<S> <C> <C> <C>
First United Average Price................. $ 38.00 $ 42.00 $ 46.00
Total Purchase Price....................... $59,660,000 $65,940,000 $72,220,000
First United Common Stock Issued........... 1,570,000 1,570,000 1,570,000
Share Exchange Ratio....................... 3.1535 3.1535 3.1535
Value Received per Share of Citizens....... $ 119.83 $ 132.45 $ 145.06
</TABLE>

22
<PAGE> 30

- ---------------

(1) The Share Exchange Ratio represents the number of shares of First United
Common Stock that a stockholder of Citizens would receive for one share of
Citizens common stock. However, as discussed above, fractional shares will
not be issued.

EXPENSES OF THE MERGER

First United and Citizens will bear their own expenses incident to
preparing for, entering into, and carrying out the Merger Agreement and the
consummation of the Merger, except that First United will pay all expenses
incident to the preparation of this Proxy Statement and its printing and
distribution and for the filing of necessary applications for approval of the
Merger with the Board and Department.

FINANCIAL INFORMATION

The following unaudited Pro Forma Combining Balance Sheet as of September
30, 1997, and Unaudited Pro Forma Combining Income Statements for the nine
months ended September 30, 1997 and 1996 and for the years ended December 31,
1996, 1995, and 1994 illustrate the effect of the proposed Merger as if the
Merger had occurred at the beginning of the earliest period presented.

These Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of First United and the
supplemental post-pooled financial statement of First United which are
incorporated by reference herein and Citizens which are included herein.

The Pro Forma Combining Financial Statements are presented for comparative
purposes only and are not intended to be indicative of actual results had the
transactions occurred as of the dates indicated above nor do they purport to
indicate which may be attained in the future.

23
<PAGE> 31

PRO FORMA COMBINING BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------------------------------
FIRST PRO FORMA PRO FORMA
UNITED CITIZENS ADJUSTMENTS(2) COMBINED
---------- -------- -------------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks..................... $ 76,577 $ 6,830 $ -- $ 83,407
Short-term investments...................... 45,563 2,276 -- 47,839
Securities available-for-sale............... 485,684 -- -- 485,684
Investment securities....................... 245,315 133,396 -- 378,711
Net Loans................................... 918,054 111,249 -- 1,029,303
Premises and equipment...................... 33,608 4,237 -- 37,845
Goodwill.................................... 10,882 813 -- 11,695
Other real estate owned..................... 834 310 -- 1,144
Other assets................................ 25,770 3,885 -- 29,655
---------- -------- ------- ----------
Total Assets...................... $1,842,287 $262,996 $ -- $2,105,283
========== ======== ======= ==========

LIABILITIES AND CAPITAL

Total deposits.............................. $1,565,185 $224,014 $ -- $1,789,199
Federal funds purchased and securities sold
under repurchase.......................... 55,734 695 -- 56,429
Other liabilities........................... 14,168 3,257 -- 17,425
Notes payable............................... 22,250 6,271 -- 28,521
Total Liabilities................. 1,657,337 234,237 -- 1,891,574
Capital Accounts
Preferred stock........................... -- -- -- --
Common stock.............................. 9,852 1,000 1,570 11,422
(1,000)
Surplus..................................... 22,295 10,882 (1,681) 32,496
1,000
Undivided profits........................... 151,852 16,257 -- 168,109
Less: Treasury stock........................ -- (111) 111 --
Unrealized gains (losses) of
available-for-sale........................ 951 731 -- 1,682
Total Capital Accounts............ 184,950 28,759 -- 213,709
---------- -------- ------- ----------
Total Liabilities and Capital..... $1,842,287 $262,996 $ -- $2,105,283
========== ======== ======= ==========
</TABLE>

24
<PAGE> 32

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
-------------------------------------
PRO FORMA
FIRST UNITED CITIZENS COMBINED
------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................ $98,194 $14,556 $112,750
Interest expense........................................... 45,335 7,907 53,242
------- ------- --------
Net interest income........................................ 52,859 6,649 59,508
Provision for loan losses.................................. 1,435 375 1,810
------- ------- --------
Net interest income after provision for loan losses........ 51,424 6,274 57,698
------- ------- --------
Other income
Service charges on deposit accounts...................... 5,217 512 5,729
Trust department income.................................. 1,792 16 1,808
Security gains (losses).................................. 1 183 184
Other operating income................................... 3,385 294 3,679
------- ------- --------
Total other income............................... 10,395 1,005 11,400
------- ------- --------
Other expense
Salaries................................................. 15,023 1,673 16,696
Pension and other employee benefits...................... 4,911 542 5,453
Net occupancy expense.................................... 3,142 258 3,400
Equipment expense........................................ 2,282 402 2,684
Data processing expense.................................. 2,238 -- 2,238
Other operating expenses................................. 9,305 926 10,231
------- ------- --------
Total other expense.............................. 36,901 3,801 40,702
------- ------- --------
Income before income taxes................................. 24,918 3,478 28,396
Income tax expense......................................... 7,360 825 8,185
------- ------- --------
Income from continuing operations.......................... $17,558 $ 2,653 $ 20,211
======= ======= ========
Earnings per share(3)...................................... $ 1.78 $ 5.33 $ 1.77
======= ======= ========
Weighted average shares outstanding........................ 9,852 499 11,422
======= ======= ========
</TABLE>

25
<PAGE> 33

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
-----------------------------------
PRO FORMA
FIRST UNITED CITIZENS COMBINED
------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $92,482 $13,797 $106,279
Interest expense............................................ 43,367 7,392 50,759
------- ------- --------
Net interest income......................................... 49,115 6,405 55,520
Provision for loan losses................................... 305 105 410
------- ------- --------
Net interest income after provision for loan losses......... 48,810 6,300 55,110
------- ------- --------
Other income
Service charges on deposit accounts....................... 5,191 479 5,670
Trust department income................................... 1,384 16 1,400
Security gains (losses)................................... 12 22 34
Other operating income.................................... 2,508 216 2,724
------- ------- --------
Total other income................................ 9,095 733 9,828
------- ------- --------
Other expense
Salaries.................................................. 13,618 1,654 15,272
Pension and other employee benefits....................... 4,583 481 5,064
Net occupancy expense..................................... 2,975 245 3,220
Equipment expense......................................... 2,129 296 2,425
Data processing expense................................... 1,451 -- 1,451
Other operating expenses.................................. 9,333 1,066 10,399
------- ------- --------
Total other expense............................... 34,089 3,742 37,831
------- ------- --------
Income before income taxes.................................. 23,816 3,291 27,107
Income tax expense.......................................... 6,735 827 7,562
------- ------- --------
Income from continuing operations........................... $17,081 $ 2,464 $ 19,545
======= ======= ========
Earnings per share(3)....................................... $ 1.73 $ 4.94 $ 1.71
======= ======= ========
Weighted average shares outstanding......................... 9,846 499 11,416
======= ======= ========
</TABLE>

26
<PAGE> 34

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
-----------------------------------
PRO FORMA
FIRST UNITED CITIZENS COMBINED
------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $123,947 $18,372 $142,319
Interest expense............................................ 58,365 9,834 68,199
-------- ------- --------
Net interest income......................................... 65,582 8,538 74,120
Provision for loan losses................................... 725 201 926
-------- ------- --------
Net interest income after provision for loan................ 64,857 8,337 73,194
-------- ------- --------
Other income
Service charges on deposit accounts....................... 6,609 646 7,255
Trust department income................................... 2,180 30 2,210
Security gains (losses)................................... 122 53 175
Other operating income.................................... 3,365 248 3,613
-------- ------- --------
Total other income................................ 12,276 977 13,253
-------- ------- --------
Other expense
Salaries.................................................. 17,302 2,338 19,640
Pension and other employee benefits....................... 5,882 661 6,543
Net occupancy expense..................................... 4,162 290 4,452
Equipment expense......................................... 2,852 400 3,252
Data processing expense................................... 2,331 -- 2,331
Other operating expenses.................................. 13,142 1,397 14,539
-------- ------- --------
Total other expense............................... 45,671 5,086 50,757
-------- ------- --------
Income before income taxes.................................. 31,462 4,228 35,690
Income tax expense.......................................... 9,090 894 9,984
-------- ------- --------
Income from continuing operations........................... $ 22,372 $ 3,334 $ 25,706
======== ======= ========
Earnings per share(3)....................................... $ 2.27 $ 6.69 $ 2.25
======== ======= ========
Weighted average shares outstanding......................... 9,846 499 11,416
======== ======= ========
</TABLE>

27
<PAGE> 35

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
-------------------------------------
PRO FORMA
FIRST UNITED CITIZENS COMBINED
------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................ $108,079 $15,513 $123,592
Interest expense........................................... 50,569 8,327 58,896
-------- ------- --------
Net interest income........................................ 57,510 7,186 64,696
Provision for loan losses.................................. 574 60 634
-------- ------- --------
Net interest income after provision for loan............... 56,936 7,126 64,062
-------- ------- --------
Other income
Service charges on deposit accounts...................... 5,876 527 6,403
Trust department income.................................. 1,799 33 1,832
Security gains (losses).................................. (355) (45) (400)
Other operating income................................... 2,311 253 2,564
-------- ------- --------
Total other income............................... 9,631 768 10,399
-------- ------- --------
Other expense
Salaries................................................. 15,228 1,890 17,118
Pension and other employee benefits...................... 4,919 537 5,456
Net occupancy expense.................................... 3,350 239 3,589
Equipment expense........................................ 1,953 324 2,277
Data processing expense.................................. 1,715 -- 1,715
Other operating expenses................................. 12,793 1,249 14,042
-------- ------- --------
Total other expense.............................. 39,958 4,239 44,197
-------- ------- --------
Income before income taxes................................. 26,609 3,655 30,264
Income tax expense......................................... 8,233 831 9,064
-------- ------- --------
Income from continuing operations.......................... $ 18,376 $ 2,824 $ 21,200
======== ======= ========
Earnings per share(3)...................................... $ 1.97 $ 5.67 $ 1.94
======== ======= ========
Weighted average shares outstanding........................ 9,338 498 10,908
======== ======= ========
</TABLE>

28
<PAGE> 36

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1994
-------------------------------------
PRO FORMA
FIRST UNITED CITIZENS COMBINED
------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $86,614 $13,514 $100,128
Interest expense............................................ 36,136 6,684 42,820
------- ------- --------
Net interest income......................................... 50,478 6,830 57,308
Provision for loan losses................................... 334 -- 334
------- ------- --------
Net interest income after provision for loan................ 50,144 6,830 56,974
------- ------- --------
Other income
Service charges on deposit accounts....................... 4,661 423 5,084
Trust department income................................... 1,379 52 1,431
Security gains (losses)................................... 5 68 73
Other operating income.................................... 1,815 302 2,117
------- ------- --------
Total other income................................ 7,860 845 8,705
------- ------- --------
Other expense
Salaries.................................................. 13,268 1,842 15,110
Pension and other employee benefits....................... 4,271 537 4,808
Net occupancy expense..................................... 2,823 235 3,058
Equipment expense......................................... 1,504 344 1,848
Data processing expense................................... 1,526 -- 1,526
Other operating expenses.................................. 10,882 1,241 12,123
------- ------- --------
Total other expense............................... 34,274 4,199 38,473
------- ------- --------
Income before income taxes.................................. 23,730 3,476 27,206
Income tax expense.......................................... 7,019 852 7,871
------- ------- --------
Income from continuing operations........................... $16,711 $ 2,624 $ 19,335
======= ======= ========
Earnings per share(3)....................................... $ 1.79 $ 5.27 $ 1.77
======= ======= ========
Weighted average shares outstanding......................... 9,338 498 10,908
======= ======= ========
</TABLE>

29
<PAGE> 37

NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS

(1) The First United amounts have been restated to reflect the September 3, 1997
pooling-of-interests with Fredonia Bancshares, Inc.

(2) The adjustments to the Pro Forma Combining Financial Statements do not
include direct expenses related to the Merger, which will be recorded at the
time of the Merger. The pro forma data are not necessarily indicative of the
operating results or financial position that would have occurred had the
Merger been consummated at the dates indicated, nor necessarily indicative
of future operating results of financial position.

(3) Pro forma per share are based on the number of shares of First United Common
Stock that would have been outstanding had the Merger occurred at the
beginning of the earliest period presented.

30
<PAGE> 38

ELECTION BY CITIZENS STOCKHOLDERS UNDER THE 1987 ACT

ELECTION INCIDENTAL TO THE MERGER

THE ELECTION BY THE STOCKHOLDERS OF CITIZENS TO BE GOVERNED BY THE ARKANSAS
BUSINESS CORPORATION ACT OF 1987 IS INCIDENTAL TO THE MERGER PROPOSAL AND
APPROVAL OF SUCH ELECTION WILL HAVE NO FORCE OR EFFECT UNLESS THE MERGER IS
LIKEWISE APPROVED.

REASON FOR THE ELECTION

Citizens is a corporation that was organized under the Arkansas Business
Corporation Act of 1965, codified at Ark. Code Ann. sec.4-26-101 et. seq. The
1987 Act is applicable to those corporations that were incorporated on or after
January 1, 1988 or those "1965 Act" corporations that elect to be governed by
the 1987 Act by amending their Articles of Incorporation to so state.

The 1965 Act and 1987 Act have statutory merger procedures that must be
complied with in order legally to consummate a merger. Although both acts
contain similar provisions, it is advisable for Citizens to elect to be governed
by the 1987 Act in order to facilitate compliance with the applicable statutory
requirements.

RESULT OF THE ELECTION

The affirmative vote of two-thirds of all outstanding shares of Citizens
common stock will authorize Citizens to amend its Articles of Incorporation and
thereby elect to be governed by the 1987 Act. First United is governed by the
1987 Act and shares of First United Common Stock received by Citizens
stockholders upon consummation of the Merger will entitle such stockholders
rights under the 1987 Act. The following discussion is an analysis of the
material differences between the 1965 and 1987 Act with respect to Stockholders'
rights.

Powers of Directors in Setting Preferences, Rights and Limitation of
Classes and Series of Stocks. The 1965 Act states that the preferences, rights
and limitations of classes of stock must be specified in the Articles, and that
the power to establish certain limited rights and preferences for series may be
delegated to the Board. The 1987 Act, however, allows inclusion of a provision
in the Articles which gives the Board the power to set the preferences, rights
and limitations of any class or series of stock before any shares of the class
or series are issued. This power is exercised by filing with the Secretary of
State Articles of Amendment, adopted without stockholder action.

Preemptive Rights. The 1987 Act denies stockholders preemptive rights
(i.e., the right of existing stockholders to acquire newly-issued shares of
stock on a pro rata basis of current ownership interest) unless the Articles
specifically authorize preemptive rights. In contrast, the 1965 Act grants
certain preemptive rights unless denied by the Articles.

Restrictions On Distributions. The 1987 Act allows a corporation to elect
in its Articles to restrict its ability to make distributions. The 1965 Act has
no such provision.

Quorum. The 1987 Act, like the 1965 Act, provides that a quorum, for
purposes of a stockholders meeting, will be a majority of the shares entitled to
vote unless the Articles provide otherwise. The 1987 Act does not provide a
minimum size for the quorum. The 1965 Act provides that a quorum may not be less
than one-third of the shares entitled to vote.

Cumulative Voting. Cumulative voting is a method of voting for directors
where each share entitled to vote is given as many votes as there are board
positions being voted on; the votes may be "cumulated," or cast for a single
position, rather than spread among the available positions. The 1987 Act does
not allow stockholders to cumulate their votes for election of directors unless
the Articles of Incorporation so provide. This is contrary to the 1965 Act,
which grants stockholders absolute cumulative voting rights.

31
<PAGE> 39

Removal of Directors. The 1987 Act allows the Articles to provide that
directors may be removed only for cause. The 1965 Act does not allow such a
limitation and provides that directors may be removed with or without cause by a
majority of the shares entitled to vote.

Vacancy on Board of Directors. The 1987 Act provides that unless the
Articles provide otherwise, any vacancy on the board may be filled by either the
stockholders or the remaining directors. This is a change from the 1965 Act,
under which the remaining directors fill vacancies unless the Articles provide
otherwise.

Amendment of By-Laws. The 1987 Act provides that the Articles may reserve
to the stockholders the power to amend a corporation's by-laws. If the power is
not so reserved, the board may amend the by-laws, but stockholders may not be
excluded from the power to amend the by-laws. The 1965 Act provides that the
board of directors alone have the power to amend the by-laws, unless the
Articles reserve that power solely to the stockholders.

By-Law Increasing Quorum or Voting Requirements for Stockholders. The 1987
Act allows the stockholders to adopt a by-law that fixes a greater stockholder
quorum or voting requirement than the statutory requirement if such by-law is
authorized by the Articles of Incorporation. The 1965 Act has no such provision.

Voting to Adopt Merger. The 1987 Act allows the Articles to set a voting
requirement for mergers which is greater than the statutory requirement of a
majority of votes to be cast. The 1965 Act includes a statutory requirement of
two-thirds of the votes entitled to be cast to approve a merger.

Sales of Assets in Regular Course of Business and Mortgage of
Assets. Unless otherwise provided in the Articles, the 1987 Act allows the board
to act without stockholder approval in the sale or other disposition of all, or
substantially all, of the property of the corporation in the usual course of
business and to mortgage all or any of the corporation's property, whether or
not in the usual course of business. However, the 1965 Act contains the same
provision.

Notice of Stockholder Meetings. The 1987 Act requires notice of the date,
time, and place of each annual or special meeting of the stockholders. If the
meeting is to consider a proposal to increase the authorized capital stock or
bonded indebtedness of the corporation, the notice must be given no fewer than
75 days before the meeting period. The 1965 Act has the same provision. Under
the 1987 Act, in all other cases the notice must be given no fewer than 10 and
no more than 60 days before the meeting date. Under the 1965 Act notice cannot
be given fewer than 10 and more than 50 days prior to the meeting.

Proxies. Like the 1965 Act, the 1987 Act allows a stockholder to vote by
proxy. The procedural provisions for the exercise of proxies under the 1987 Act
are the same as under the 1965 Act.

Voting. The 1987 Act, unlike the 1965 Act, does not count abstaining votes
in determining whether there are sufficient affirmative votes to approve a
measure. The 1965 Act states that (unless a greater number is required by
statute or by the Articles) approval by stockholders takes the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter. The 1987 Act, however, provides that the action is approved
if the votes cast within the voting group favoring the action exceed the votes
cast opposing the action.

Dissenting Stockholders. Those transactions giving rise to dissenters'
rights under the 1965 Act are as follows:

1. Consummation of a sale of all or substantially all of the assets of
a corporation otherwise than in the usual or ordinary course of its
business.

2. Consummation of a merger or consolidation to which the corporation
is a party unless on the date the Articles of Merger are filed the
surviving corporation wholly owns the other corporations that are parties
to the Merger.

32
<PAGE> 40

Under the 1987 Act, a stockholder is entitled to dissent from the following
corporate actions:

1. Consummation of a plan of merger to which the corporation is a
party if stockholder approval is required or if the corporation is a
subsidiary that is merged with its parent;

2. Consummation of a plan of share exchange to which the corporation
is a party and which requires stockholder approval;

3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business if stockholder approval is required;

4. An amendment of the Articles of Incorporation that materially and
adversely affects the rights of dissenters' shares; or

5. Any other corporate action taken pursuant to a stockholder vote to
the extent the Articles of Incorporation, the By-Laws, or a resolution of
the board of directors provides that stockholders are entitled to dissent.

For a summary of the procedure that would be followed in order to exercise
dissenters' rights under the 1965 Act, See "The Merger -- Right of Dissent under
the 1965 Act." For a summary of the procedure that would be followed in order to
exercise dissenters' rights under the 1987 Act, See "The Merger -- Right of
Dissent under the 1987 Act."

FIRST UNITED BANCSHARES, INC.

GENERAL

First United is a multi-bank holding company incorporated in 1980 for the
purpose of holding all of the outstanding stock of The First National Bank of El
Dorado, El Dorado, Arkansas. Between 1981 and 1997, First United acquired twelve
other banks in different cities within Arkansas, Louisiana and Texas. The banks
acquired were the First National Bank of Magnolia, Magnolia, Arkansas; Merchants
and Planters Bank, N.A. of Camden, Camden, Arkansas; City National Bank of Fort
Smith, Fort Smith, Arkansas; Commercial Bank at Alma, Alma, Arkansas; The Bank
of North Arkansas, Melbourne, Arkansas; First United Bank, Stuttgart, Arkansas;
FirstBank, Texarkana, Texas; Citizens Bank & Trust, Carlisle Arkansas; Hazen
First State Bank, Hazen, Arkansas; First Bank of Arkansas, Brinkley, Arkansas;
City Bank & Trust of Shreveport, Shreveport, Louisiana; and Fredonia State Bank,
Nacogdoches, Texas. On May 16, 1997, the Carlisle, Hazen and Brinkley banks were
merged with and into First United Bank. Each of the banks are wholly-owned by
First United, and, furthermore, are banks organized under the laws of the United
States, Arkansas, Texas, or Louisiana and are regulated by the Office of the
Comptroller of the Currency, the Federal Reserve System, the Arkansas Bank
Department, the Texas Department of Banking, or the Louisiana Office of
Financial Institutions. As of September 30, 1997, First United, on a
consolidated basis, had a total of $931,545,000 of loans outstanding, an
allowance for loan losses of $13,491,000, total deposits of $1,565,185,000 and
total stockholders' equity of $184,950,000. In 1996 First United Trust Company
was chartered as a wholly-owned subsidiary of First United to handle and expand
trust business formerly done by First United's subsidiary banks.

The banks offer customary services of banks of similar size and similar
markets, including interest-bearing and non-interest-bearing deposit accounts,
commercial, real estate and personal loans, trust services, correspondent
banking services and safe deposit box activities.

The banking business is highly competitive. The subsidiary banks of First
United compete actively with national and state banks, savings and loan
associations, securities dealers, mortgage bankers, finance companies and
insurance companies.

33
<PAGE> 41

PENDING ACQUISITION

First Republic Bancshares, Inc. On December 9, 1997 First United and First
Republic Bancshares, Inc., a bank holding company headquartered in Rayville,
Louisiana ("Republic") entered into an Agreement and Plan of Reorganization that
calls for First United to acquire for shares of First United's Common Stock all
of the issued and outstanding shares of Republic and its wholly-owned bank
subsidiary, First Republic Bank, Rayville, Louisiana. At September 30, 1997
Republic had consolidated assets of approximately $148.9 million and
shareholders' equity of approximately $11.53 million. Upon consummation of the
transaction First Republic Bank would become a wholly-owned subsidiary of First
United. The total number of shares of First United Common Stock to be issued in
the transaction would be 800,000 shares, which represents approximately 6.75
percent of the total number of shares of First United outstanding as of the date
hereof. The Republic acquisition, which is subject to shareholder and regulatory
approvals, is expected to be completed in the first or second quarter of 1998.
There can be no assurance that the transaction will be consummated. Consummation
of the Merger is not conditioned upon consummation of the Republic acquisition.

REGULATION

First United is a registered bank holding company pursuant to the Bank
Holding Company Act of 1956, as amended (the "Act"), and as such, is subject to
regulation and examination by the Federal Reserve Board and is required to file
with the Federal Reserve Board annual reports and other information regarding
the business operations of itself and its subsidiaries. The Act provides that a
bank holding company may be required to obtain Federal Reserve Board approval
for the acquisition of more than 5% of the voting securities of substantially
all of the assets of any bank or bank holding company, unless it already owns a
majority of the voting securities of such bank or bank holding company. The Act
prohibits First United from engaging in any business other than banking or
bank-related activities specifically allowed by the Federal Reserve Board. The
Act also prohibits First United and its subsidiaries from engaging in certain
tie-in arrangements in connection with the extension of credit, the lease of
sale of property or the provision of any services.

As a registered bank holding company, First United is subject to the
Federal Reserve Board's position that a bank holding company should serve as a
"source of strength" for its bank subsidiaries. In an early appreciation of the
doctrine the Federal Reserve Board announced that failure to assist a troubled
bank subsidiary when its holding company was in a position to do so was an
unsafe and unsound practice and the Federal Reserve Board claimed the authority
to order a bank holding company to capitalize its subsidiary banks.

In 1991, Congress modified the source of strength doctrine by creating a
system of prompt corrective actions under which the federal banking agencies are
required to take certain actions to resolve the problems of depository
institutions based on their level of capitalization. In a bank holding company
organization, an undercapitalized insured depository institution must submit a
capital restoration plan to the appropriate agency which may not accept the plan
unless the company controlling the institution has guaranteed that the
institution will comply with the plan until the institution has been adequately
capitalized on average during each of four consecutive calendar quarters. The
aggregate liability to the guaranteeing companies is the lesser of an amount
equal to 5 percent of the institution's total assets at the time the institution
became undercapitalized, or the amount which is necessary to bring the
institution into compliance with applicable capital standards.

For a significantly undercapitalized institution, the appropriate agency
must prohibit a bank holding company from making any capital distribution
without prior Federal Reserve Board approval. The agency also may require a bank
holding company to divest or liquidate the institution.

First United and its subsidiaries are subject to various federal banking
laws including the Financial Institutions, Reform, Recovery and Enforcement Act
of 1989 ("FIRREA") which, among other things, made substantive changes to the
deposit insurance system. As a part of the reorganization of the deposit
insurance funds, the deposit premiums for insurance of Bank Insurance Fund
members were significantly increased. FIRREA also authorized bank holding
companies to acquire savings and thrift institutions without tandem operation
restrictions. Furthermore, FIRREA expanded the authority of regulatory agencies
to assess severe

34
<PAGE> 42

penalties ranging from $5,000 per day to $1,000,000 per day, on persons or
institutions that the agency finds in violation of a broad range of activities.

First United and its subsidiaries are also subject to the provisions of the
Federal Deposit Insurance Corporation Improvement Act of 1991, which provided
for industry-wide standards in such areas as real estate lending, further
restrictions on brokered deposits and insider lending, establishment of a
risk-based deposit insurance system, enhanced examinations and audits of banking
institutions, the adoption of a Truth-in-Savings Act, various
merger-and-acquisitions related provisions, and the implementation of
legislation on foreign bank operations in the United States.

The provisions of the Community Reinvestment Act of 1977, as amended, are
applicable to the subsidiaries of First United. Federal Regulators are required
to consider performance under the Community Reinvestment Act before approving an
application to establish a branch or acquire another financial institution. The
Federal Reserve Board has promulgated regulations governing compliance with the
Community Reinvestment Act in Regulation BB. Recent regulatory and statutory
developments show that compliance with the Community Reinvestment Act is subject
to strict scrutiny and is often grounds for denial of an application to federal
regulators. First United's subsidiary banks are all rated "satisfactory" for CRA
purposes.

On January 19, 1989, the Federal Reserve Board issued final guidelines to
implement risk-based capital requirements for bank holding companies. The
guidelines establish a systematic analytical framework that makes regulatory
capital requirements more sensitive to differences in risk profiles among
banking organizations, takes off-balance sheet exposures into account in
assessing capital adequacy, and minimizes disincentives to holding liquid,
low-risk assets. The guidelines provided for phasing in risk-basked capital
standards through the end of 1992, at which time the standards became fully
effective. First United's year end 1996 Tier 1 ratio of 16.61% and Total capital
ratio of 9.75% exceeds the current minimum regulatory requirements of 4.00% and
6.00% respectively.

The table below illustrates all of the capital requirements applicable to
First United and its subsidiaries.

REGULATORY COMPARISON OF CAPITAL RATIOS(1)

<TABLE>
<CAPTION>
REGULATORY
FIRST UNITED REQUIREMENTS
------------ ------------
<S> <C> <C>
SEPTEMBER 30, 1997
Total Capital/Total Assets................................ 10.69% 6.00%
Primary Capital/Total Assets.............................. 10.69% 5.50%
Total Risk-Based Capital.................................. 17.78% 8.00%
Tier 1 Capital............................................ 16.53% 4.00%
Leverage Ratio............................................ 9.44% 3.00%
</TABLE>

- ---------------

(1) Excludes unrealized gains and losses on securities available-for-sale.

First United's Subsidiary Banks are subject to a variety of regulations
concerning the maintenance of reserves against deposits, limitations on the
rates that can be charged on loans or paid on deposits, branching, restrictions
on the nature and amounts of loans and investments that can be made and limits
on daylight overdrafts.

The Subsidiary Banks are limited in the amount of dividends they may
declare. Prior approval must be obtained from the appropriate regulatory
authorities before dividends can be paid by the Subsidiary Banks to First United
if the amount of adjusted capital, surplus and retained earnings is below
defined regulatory limits. As of December 31, 1996 First United's Subsidiary
Banks had available for payment of dividends without regulatory approval,
approximately $16,508,000 of undistributed earnings plus the net income earned
in 1997. The Subsidiary Banks are also restricted from extending credit or
making loans to or investments in First United and certain other affiliates as
defined in the Act. Furthermore, loans and extensions of credit are subject to
certain other collateral requirements.

35
<PAGE> 43

OFFICES

First United's executive offices are located in the offices of First
National Bank of El Dorado at Main and Washington Streets, El Dorado, Arkansas
71730.

EMPLOYEES

As of December 31, 1996, First United and its Subsidiary Banks (adjusted to
include employees of Fredonia State Bank) had approximately 762 full-time
equivalent employees.

DESCRIPTION OF FIRST UNITED COMMON STOCK

The following summary of the terms of First United Common Stock does not
purport to be complete and is qualified in its entirety by reference to the 1987
Act and First United's Articles of Incorporation. First United's Articles of
Incorporation authorizes the issuance of 24,000,000 shares of Common Stock,
$1.00 par value. As of , 1997 there were fully paid and
non-assessable shares of First United Common Stock issued and outstanding.

Each share of First United Common Stock is entitled to one vote on all
matters to be voted on by stockholders, including the right to cumulate votes
for the election of the Board of Directors, and to dividends when and if
declared from time to time by the Board of Directors. There is no right of
preemption associated with the First United Common Stock. Upon liquidation, each
share would be entitled to share pro rata in all of the assets of First United
available for distribution to the holders of Common Stock. The transfer agent
for First United Common Stock is First National Bank of El Dorado, El Dorado,
Arkansas. First United Common Stock is traded on NASDAQ-National Market System
over-the-counter under the symbol of "UNTD."

RESALE OF FIRST UNITED COMMON STOCK

The First United Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act of 1933 (the "Securities Act"), except for
shares issued to any Citizens stockholder who may be deemed to be an "affiliate"
of Citizens for purposes of Rule 145 under the Securities Act. At Closing, each
such stockholder will enter into an agreement with First United providing that
such affiliate will not transfer any First United Common Stock received in the
merger except in compliance with the Securities Act and will not sell or
otherwise transfer such Common Stock (or any interest therein) until financial
results of First United and its subsidiaries (including Citizens) for at least
30 days of combined operations are published. This restriction is expected to
expire by , 1998. See also "Citizens National Bancshares of Hope,
Inc. -- Resulting Ownership in First United".

CITIZENS NATIONAL BANCSHARES OF HOPE, INC.

DESCRIPTION OF BUSINESS

Citizens is an Arkansas multi-bank holding company which owns 100% of the
Citizens National Bank of Hope, Hope, Arkansas ("CNB") and Peoples Bank & Loan
Company ("Peoples"), Lewisville, Arkansas; and indirectly owns 100% of Citizens
Investment Services, Inc. which is wholly owned by CNB. Citizens may engage,
directly or through subsidiaries, in those activities closely related to banking
which are specifically permitted under the Bank Holding Company Act of 1956, as
amended. CNB and Peoples are community banks that offer financial products and
services to commercial and consumer customers. CNB and Peoples grant commercial,
installment, and real estate loans to customers principally located in the
Hempstead, Miller, and Lafayette Counties of Arkansas. As of September 30, 1997,
on a consolidated basis, Citizens had a total of $112,507,000 of loans
outstanding, an allowance for loan losses of $1,258,000, total deposits of
$224,014,000 and total stockholders' equity of $28,759,000.

36
<PAGE> 44

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis highlights the significant factors
affecting Citizens' consolidated financial statements. For a more complete
understanding of the following discussion, reference should be made to Citizens'
consolidated financial statements and related notes thereto presented elsewhere
in this Proxy Statement.

BALANCE SHEET ANALYSIS

Financial Condition. The total assets of Citizens increased by $15,397,000
or 6.42% between December 31, 1996 and 1995. The increase was due to growth in
investment securities, federal funds sold, and loans. At September 30, 1997,
assets were $262,996,000 compared to the December 31, 1996 level of
$255,054,000. Citizens receives a major portion of its income from earning
assets which consist of interest bearing deposits with other banks, federal
funds sold, investment securities, and loans. See Tables 1 and 2 for an analysis
of the average balances of interest-earning assets and interest-bearing
liabilities for the years ended December 31, 1996 and 1995.

Citizens' loan portfolio represents a large component of the earning asset
base and has a large impact on income from earning assets. The markets in which
Citizens operates are dependent upon the small to medium size businesses and
real estate loans. As the economy of this market has improved over the past
several years, there has been an increase in loan volume, deposits, and
investment securities.

Inherent in Citizens' loan portfolio is credit risk. Citizens maintains an
allowance for loan losses which is evaluated for adequacy by management.
Management's methodology to determine the adequacy of the allowance considers
review of individual loans, recent loan loss experience, current economic
conditions and the risk characteristics of the various categories of loans. See
Tables 5 through 9 for detailed information concerning the loan portfolio and
the allowance for loan losses.

Investment securities are another large component of the earning asset
base. The average volume of investment securities gradually increased during the
nine months ended September 30, 1997, and the years ended December 31, 1996 and
1995. See Tables 3 and 4 for details concerning the composition and maturity
ranges of the investment portfolio.

Deposits, the primary source of funding earning assets, increased by
$18,901,000 or 9.40% between December 31, 1995 and December 31, 1996. The
majority of this increase was in the certificate of deposits greater than
$100,000 category reflecting the increase in market interest rates for such
deposits. See Table 10 for a maturity analysis of certificates of deposits in
excess of $100,000 as of December 31, 1996.

During the period between December 31, 1995 and December 31, 1996, Citizens
increased the level of borrowings from the Federal Home Loan Bank in order to
provide funds for the increase in loan growth.

Liquidity and Interest Rate Sensitivity Management. Liquidity is the
ability of an institution to fund the needs of its borrowers, depositors, and
creditors. Based on the maturity structure and anticipated loan and deposit
funding requirements, Citizens anticipates that its liquidity requirements will
be met in the foreseeable future. Citizens' management is of the opinion that
the traditional funding sources of maturing loans and investment securities,
federal funds, the base of core deposits, the borrowing lines of credit with the
Federal Home Loan Bank and the Arkansas Bankers' Bank will be adequate to
provide liquidity needs. See Tables 4, 6, and 10 for additional information on
certain investment, loan and time deposit maturities.

Capital. The Federal Reserve Board requires banks to maintain capital based
on "risk-adjusted" assets so that categories of assets with potentially higher
risk will require more capital backing than assets with lower risk. In addition,
banks are required to maintain capital to support, on a risk-adjusted basis,
certain off-balance sheet activities such as loan commitments.

At September 30, 1997, Citizens' Tier 1 capital and total capital as a
percentage of total risk-adjusted assets exceeded the required minimum levels.
See Table 12 for additional information concerning Citizens' capital ratios.

37
<PAGE> 45

EARNINGS ANALYSIS

Net income for the first nine months of 1997 was approximately $2,653,000 ,
an increase of $189,000 or 7.67% over the same period in 1996. The increase was
due primarily to a $244,000 or 3.81% increase in net interest income and a
$272,000, or a 37.11% increase in other operating income. For the years ended
December 31, 1996, 1995, and 1994, net income was approximately $3,334,000,
$2,824,000, and $2,624,000, respectively. The annualized return on average
assets and return on average equity for the first nine months of 1997 was 1.35%
and 12.90%, respectively, compared to 1.34% and 12.83% for the first nine months
of 1996. For the years ended December 31, 1996, 1995, and 1994, the return on
average assets was 1.34%, 1.33%, and 1.29%, respectively, while the return on
average equity was 13.03%, 12.20%, and 12.31%, respectively.

The primary components of total income and expense which affect net income
are net interest income, provision for loan losses, noninterest income,
noninterest expense and the provision for income taxes. Significant factors
affecting these categories are presented below.

Net Interest Income. Net interest income for the first nine months of 1997
was $6,649,000, a 3.81% increase over the same period in 1996. The reason for
the increase was due to the increase of $12,401,000 in investment securities
during the period from December 31, 1996 to September 30, 1997. Interest on
investment securities for the nine months ended September 30, 1997 increased by
$811,000 or 14.40% compared to the corresponding period of 1996. Interest
expense for the nine months ended September 30, 1997 increased by $515,000 or
6.97% compared to the corresponding period of 1996. As a percentage of total
assets at September 30, 1997, net loans totaled 42.3% while investment
securities were 50.72%.

For the years ended December 31, 1996, 1995, and 1994, net interest income
was $8,538,000, $7,186,000, and $6,830,000, respectively. The increase during
1996 compared to 1995 was due primarily to the increase in the net yield on
interest earning assets. See Tables 1 and 2 for more detailed information
regarding rate and volume factors which affected net interest income during the
three-year period ended December 31, 1996.

Provision for Loan Losses. For the first nine months of 1997 Citizens
provided $375,000 for loan losses compared to $105,000 for the comparable period
in 1996. The provision for loan losses was $201,000, $60,000, and -0- for the
years ended December 31, 1996, 1995, and 1994.

Net charge-offs (recoveries) on loans were $190,000 in 1996, $101,000 in
1995 and (15,000) in 1994. For the nine months ended September 30, 1997, net
charge-offs totaled $354,000. The allowance for loan losses was $1,258,000 or
1.12% of loans at September 30, 1997, compared to $1,237,000 or 1.09% at
December 31, 1996, and $1,226,000 or 1.11% at December 31, 1995. See Tables 7,
8, and 9 for more information regarding loan quality and the allowance for loan
losses.

Other Operating Income. Total other operating income for the nine months
ended September 30, 1997 and 1996 was $1,005,000 and $733,000, respectively.
There was an increase in 1997 of $33,000 in service charge income compared to
September 30, 1996. Total other operating income for the year ended December 31,
1996 was $977,000, as compared to $768,000 for 1995 and $845,000 in 1994.

Other Operating Expense. Total other operating expense for the nine months
ended September 30, 1997 and 1996 was $3,801,000 and $3,742,000, respectively.

Total other operating expense for the year ended December 31, 1996 was
$5,086,000 as compared to $4,239,000 for 1995 and $4,199,000 in 1994.

Provision for Income Taxes. Income tax expense for the nine months ended
September 30, 1997 and 1996 was $825,000 and $827,000, respectively. Income tax
expense for the years ended December 31, 1996, 1995, and 1994 was $894,000,
$831,000, and $852,000, respectively. Effective tax rates were 21.13%, 22.72%,
and 24.51%, respectively. Note 9 or Notes to the Financial Statements provides
further details of the applicable income tax expense for 1996, 1995, and 1994.

38
<PAGE> 46

STATISTICAL DISCLOSURES

CITIZENS NATIONAL BANCSHARES OF HOPE, INC.
STATISTICAL DISCLOSURES

TABLE 1 -- COMPARATIVE AVERAGE BALANCES -- YIELDS AND RATES ($ IN THOUSANDS)

The table below shows the average balances of the assets and liabilities of
Citizens, the interest income or expense associated with those assets and
liabilities, and the computed yield or rate based upon the interest income or
expense for each of the last two years.

<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- ---------------------------- ----------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans.............................. $112,588 $10,625 9.44% $ 96,553 $ 8,974 9.29% $ 86,786 $ 7,365 8.49%
Investment securities.............. 120,142 7,616 6.34% 104,281 6,474 6.21% 104,658 6,053 5.78%
Federal funds sold................. 1,685 93 5.52% 267 15 5.62% 495 21 4.24%
Deposits in other banks............ 441 38 8.62% 541 50 9.24% 1,018 75 7.37%
Total interest-earning assets........ 234,856 18,372 7.82% 201,642 15,513 7.69% 192,957 13,514 7.00%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Noninterest-earning assets:
Cash and due from banks............ 4,894 3,976 4,378
Other assets....................... 8,654 6,814 7,678
Allowance for loan losses.......... (1,166) (892) (925)
-------- -------- --------
Total.......................... $247,238 $211,540 $204,088
======== ======== ========
LIABILITIES
Interest-bearing liabilities:
Savings and interest-bearing
deposits......................... $ 43,119 $ 1,135 2.63% $ 36,333 $ 1,005 2.77% $ 39,383 $ 954 2.42%
Time deposits...................... 148,895 8,156 5.48% 119,409 6,337 5.31% 114,634 5,174 4.51%
Federal funds purchased............ 4,481 239 5.33% 10,111 666 6.59% 5,535 255 4.61%
Other.............................. 5,859 304 5.19% 5,517 319 5.78% 5,648 300 5.31%
Total interest-bearing liabilities... 202,354 9,834 4.86% 171,370 8,327 4.86% 165,200 6,683 4.05%
-------- ------- ----- -------- ------- ----- -------- ------- -----
Non-interest bearing liabilities:
Demand deposits.................... 18,244 15,210 15,950
Other liabilities.................. 1,053 1,811 1,627
Shareholders' Equity............... 25,587 23,149 21,311
-------- -------- --------
Total.......................... $247,238 $211,540 $204,088
======== ======== ========
Net interest-earnings.......... $ 8,538 $ 7,186 $ 6,831
======= ======= =======
Net yield on interest-earning
assets....................... 3.64% 3.56% 3.54%
===== ===== =====
</TABLE>

- ---------------

(1) The amount of federal funds purchased at December 31, 1996 was $-0-. The
maximum amount of such borrowings outstanding at any month-end during 1996
was $-0-.

Nonaccruing loans have been included in the average loan balances and
interest collected prior to these loans having been placed on nonaccrual has
been included in interest income.

39
<PAGE> 47

TABLE 2 -- VOLUME AND YIELD/RATE VARIANCE ANALYSIS

The following table shows the change from year to year for each component
of the net interest margin separated into the amount generated by volume changes
and the amount generated by changes in the yield or rate ($ in thousands):

<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994 1994 COMPARED TO 1993
CHANGE DUE TO: CHANGE DUE TO: CHANGE DUE TO:
----------------------- ------------------------ ------------------------
YIELD/ YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET VOLUME RATE NET
------ ------ ----- ------- ------ ----- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans................................ 1,490 161 1,651 829 780 1,609 318 (126) 192
Investment securities................ 975 167 1,142 (52) 473 421 568 (602) (34)
Federal funds sold................... 181 (103) 78 (17) 11 (6) (53) 5 (48)
Deposits in other banks.............. (9) (3) (12) (35) 10 (25) (46) (7) (53)
Total interest-earning assets.... 2,637 222 2,859 725 1,274 1,999 787 (730) 57
----- ----- ----- ----- ----- ----- ----- ----- -----
Interest paid on:
Savings and interest-bearing
deposits........................... 188 (58) 130 (74) 124 50 63 (63) 0
Time Deposits........................ 1,565 254 1,819 216 947 1,163 (78) 3 (75)
Federal funds purchased.............. (371) (56) (427) 211 200 411 150 63 213
Other................................ 20 (35) (15) (7) 26 19 72 15 87
Total interest-bearing
liabilities.................... 1,402 105 1,507 346 1,297 1,643 208 17 225
----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>

The change in interest due to both volume and yield/rate has been allocated
to change due to volume and change due to yield/rate in proportion to the
absolute value of the change of each. The balances of nonaccrual loans and
related income recognized have been included for purposes of these computations.

TABLE 3 -- INVESTMENT PORTFOLIO

The table below indicates carrying values of investment securities by type
at year-end for each of the last three years ($ in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
HELD-TO-MATURITY
U.S. Treasury and U.S. Government Agencies.................. 0 0 15,703
Obligations of states and political subdivisions............ 0 0 10,867
Other securities............................................ 0 0 13,782
Total Held-To-Maturity Investment Securities...... 0 0 40,352
AVAILABLE-FOR-SALE
U.S. Treasury and U.S. Government Agencies.................. 65,609 53,246 32,454
Obligations of states and political subdivisions............ 30,548 29,652 13,657
Other securities............................................ 23,601 29,005 19,486
Total debt securities............................. 119,758 111,903 65,597
Equity Securities........................................... 1,237 1,237 884
Total Available-For-Sale Investment Securities.... 120,995 113,140 66,481
Total Securities.................................. 120,995 113,140 106,833
</TABLE>

40
<PAGE> 48

TABLE 4 -- MATURITY DISTRIBUTION AND YIELDS OF INVESTMENT PORTFOLIO

The following table details the maturities of investment securities at
December 31, 1996 and the weighted average yield for each range of maturities ($
in thousands):
<TABLE>
<CAPTION>
WITHIN AFTER ONE AFTER FIVE AFTER MORTGAGE
ONE BUT WITHIN BUT WITHIN TEN BACKED
YEAR YIELD FIVE YEARS YIELD TEN YEARS YIELD YEARS YIELD SECURITIES YIELD
------ ----- ---------- ----- ---------- ----- ------ ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-Sale
U.S. Treasury and U.S.
Government Agencies.... 5,654 6.63% 26,812 6.43% 17,722 7.08% 1,746 7.16% 13,675 6.73%
Obligations of states and
political
subdivisions........... 3,302 5.96% 7,250 5.31% 8,314 5.42% 11,782 5.76%
Other securities......... 550 8.24% 855 7.24% 1,333 8.03% 16 6.46% 20,847 6.84%
Total debt
securities......... 9,406 6.54% 34,917 6.40% 27,369 6.65% 13,544 5.93% 34,522 6.80%
Equity Securities........ 1,237 5.86%
Total
Available-for-Sale
Investment
Securities......... 9,406 6.54% 34,917 6.40% 27,369 6.65% 14,781 5.93% 34,522 6.80%

TOTAL YIELD
------- -----
<S> <C> <C>
Available-for-Sale
U.S. Treasury and U.S.
Government Agencies.... 65,609 6.71%
Obligations of states and
political
subdivisions........... 30,548 5.58%
Other securities......... 23,601 6.95%
Total debt
securities......... 119,758 6.47%
Equity Securities........ 1,237 5.86%
Total
Available-for-Sale
Investment
Securities......... 120,995 6.47%
</TABLE>

TABLE 5 -- COMPOSITION OF THE LOAN PORTFOLIO ($ IN THOUSANDS):

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Commercial and industrial................................... 15,595 16,992 12,525
Real estate-construction.................................... 2,376 1,814 2,297
Real estate-residential..................................... 38,206 35,488 29,514
Real estate-commercial...................................... 37,165 35,841 31,511
Consumer loans.............................................. 22,457 21,828 18,421
Total loans....................................... 115,799 111,893 94,268
</TABLE>

TABLE 6 -- LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES ($ IN
THOUSANDS):

<TABLE>
<CAPTION>
MATURING
----------------------------------------
ONE YEAR
WITHIN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -------
<S> <C> <C> <C> <C>
Fixed Rate Loans................................ 57,327 35,421 2,711 95,459
Variable Rate Loans............................. 8,382 11,958 0 20,340
Total loans........................... 65,709 47,379 2,711 115,799
</TABLE>

<TABLE>
<CAPTION>
REPRICING FOR VARIABLE RATE LOANS
----------------------------------------
ONE YEAR
WITHIN ONE THROUGH AFTER
YEAR OR LESS FIVE YEARS FIVE YEARS TOTAL
------------ ---------- ---------- -------
<S> <C> <C> <C> <C>
Variable Rate Loans............................. 20,340 0 0 20,340
</TABLE>

TABLE 7 -- NONPERFORMING LOANS AND PAST DUE LOANS

The table below shows Citizens nonperforming loans and past due loans at
the end of each of the last two years ($ in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1996 1995 1994 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Loans on nonaccrual or
restructured................. 448 63 223 322 303
Accruing loans past due 90 days
or more...................... 468 178 75 253 114
Total Nonperforming
loans.............. 916 241 298 575 417
</TABLE>

41
<PAGE> 49

If interest on nonaccrual loans had been accrued for 1996, such income
would not have been material. The interest which was included in earnings for
1996 for nonaccrual loans is immaterial.

At December 31, 1996, Citizens had no loan concentrations greater than ten
percent (10%) of total loans except as shown in Table 5.

Citizens does not accrue interest on any loan for which payment of interest
or principal is not expected, on any loan which is seriously delinquent unless
the obligation is both well secured and in the process of collection, or on any
loan that is maintained on a cash basis due to deterioration in the financial
condition of the borrower. Management considers a debt to be "well secured" if
it is secured by collateral in the form of liens on or pledges of real or
personal property that have a realizable value sufficient to discharge the debt
in full or by the guaranty of a financially responsible party. A debt is
considered to be "in process of collection" if, based on a probable specific
event, it is expected that the loan will be repaid or brought current. At
December 31, 1996, Citizens has no loans which are not included in the
nonperforming or past due categories above about which management has serious
doubts as to their collectibility.

TABLE 8 -- ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

The table below summarizes Citizens' loan loss experience for each of the
last two years ($ in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Amount of loan loss reserve at
beginning of period.......... 1,226 919 904 885 818
Loans charged off:
Real estate.................. (53) (1) (8) (6) (43)
Commercial................... (213) (146) (18) (51) (77)
----- ---- ----- ---- ----
Total charge-offs.... (266) (147) (26) (57) (120)
Recoveries on loans previously
charged-off:
Real estate.................. 19 7 4 4 5
Commercial................... 57 39 37 25 72
----- ---- ----- ---- ----
Total recoveries..... 76 46 41 29 77
Net charge-offs................ (190) (101) 15 (28) (43)
Additions to allowance charged
to operating expense......... 201 60 0 47 110
Increase in allowance due to
Peoples acquisition.......... -- 348 -- -- --
Amount of loan loss reserve at
end of period................ 1,237 1,226 919 904 885
Percentage of net charge-offs
during period to average
loans outstanding during the
period....................... 0.18% 0.10% (0.02)% 0.03% 0.06%
</TABLE>

- ---------------

(1) The amount charged to operations and the related balance in the allowance
for loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including, but not
limited to, general economic conditions, loan portfolio composition, prior
loan loss experience, and management's reviews of individual loans.

42
<PAGE> 50

TABLE 9 -- ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

The following table is a summary by allocation category of Citizens'
allowance for loan losses ($ in thousands):

<TABLE>
<CAPTION>
% LOANS % LOANS % LOANS % LOANS % LOANS
DEC. 31, IN EACH DEC. 31, IN EACH DEC. 31, IN EACH DEC. 31, IN EACH DEC. 31, IN EACH
1996 CATEGORY 1995 CATEGORY 1994 CATEGORY 1993 CATEGORY 1992 CATEGORY
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural... 210 17% 184 15% 119 13% 118 13% 106 12%
Real estate.......... 841 68% 821 67% 625 68% 614 68% 620 70%
Consumer............. 186 15% 221 18% 175 19% 172 19% 159 18%
1,237 1,226 919 904 885
</TABLE>

TABLE 10 -- TIME DEPOSITS OF $100,000 OR MORE

The table below shows maturities on outstanding time deposits of $100,000
or more at December 31, 1996 ($ in thousands):

<TABLE>
<S> <C>
3 months or less............................................ 25,089
Over 3 months through 6 months.............................. 15,272
Over 6 months through 12 months............................. 11,868
Over 12 months.............................................. 11,926
64,155
</TABLE>

TABLE 11 -- RETURN ON EQUITY AND ASSETS

The following table shows operating and equity ratios of Citizens for each
of the last two years:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Return on assets............................................ 1.34% 1.33% 1.29%
Return on equity............................................ 13.03% 12.20% 12.31%
Dividend payout ratio....................................... 28.41% 31.77% 33.59%
Equity to assets ratio...................................... 10.83% 10.61% 10.38%
</TABLE>

TABLE 12 -- COMPARISON OF CAPITAL RATIOS WITH REGULATORY REQUIREMENTS(1)

<TABLE>
<CAPTION>
REGULATORY
CITIZENS REQUIREMENTS
-------- ------------
<S> <C> <C>
SEPTEMBER 30, 1997
Total Capital/Total Assets.................................. 10.66% 6.00%
Primary Capital/Total Assets................................ 11.14% 5.50%
Total Risk-Based Capital.................................... 10.83% 8.00%
Tier 1 Capital.............................................. 10.35% 4.00%
Leverage Ratio.............................................. 10.34% 3.00%
</TABLE>

43
<PAGE> 51

DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors of Citizens will be dissolved and positions held by
executive officers of Citizens will no longer exist upon consummation of the
Merger. The present directors and executive officers of Citizens subsidiaries
are expected to remain in their respective position of CNB and Peoples. Upon
consummation of the Merger, James V. Kelley, First United's Chairman of the
Board, President and Chief Executive Officer will be elected to the board of
directors of CNB. Al Graves, Jr., who is presently a director of Citizens, is
expected to be nominated to be on the Board of Directors of First United after
consummation of the Merger. The directors and executive officers of Citizens and
its subsidiaries are set forth below:

DIRECTORS OF CITIZENS AND ITS SUBSIDIARIES

<TABLE>
<CAPTION>
CITIZENS SHARES
BENEFICIALLY OWNED AS OF
SEPTEMBER 30, 1997
DIRECTOR PRINCIPAL OCCUPATION AND PERCENT OF CLASS
DIRECTORS AGE SINCE(1) & DIRECTORSHIP IF MORE THAN 1%
--------- --- -------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Albert Graves.......... 87 1981 Director of Citizens and CNB, Chairman
Board of Directors of Citizens and CNB;
Attorney 111,022 (22.3%)
Mitchell LaGrone....... 65 1981 Director of Citizens and CNB,
Vice-Chairman Board of Directors of
Citizens and CNB; Investments 8,430 (1.7%)
Rodney Bobo............ 48 1986 Director of Citizens and CNB; President
General Farm Services 1,603
John M. Cox............ 62 1981 Director of Citizens and CNB; President of
Cox Bros. Foundry 2,683
George Frazier......... 79 1981 Director of Citizens and CNB; President of
Frazier Ins. Co. 1,633
Al Graves, Jr.......... 61 1981 Director of Citizens and CNB; Attorney 16,384 (3.29%)
John R. Graves......... 56 1981 Director, CEO & President of Citizens and
CNB; Director of Peoples 61,855 (12.42%)
Jim Hart............... 56 1981 Director of Citizens and CNB; President of
Meyers Bakeries 1,183
Henry Haynes........... 87 1981 Director of Citizens and CNB; Retired 8,000 (1.64%)
Louis C. Jordan........ 50 1988 Director, Exec. Vice-Pres. of CNB 1,000
Hillman Koen........... 69 1981 Director of Citizens and CNB; President of
Koen Farms 3,665
Ned Ray Purtle......... 61 1981 Director of Citizens and CNB; Cattleman,
Investments 1,390
Dennis Ramsey.......... 49 1988 Director of Citizens, CNB and Peoples;
Exec. Vice-President of Citizens 1,050
William R. Routon...... 73 1981 Director of Citizens and CNB; Timber,
Investments 5,725 (1.15%)
Phil Alford, Jr........ 75 1986 Director and Chairman of Peoples;
Cattleman 0
Charles Black.......... 46 1990 Director, Chief Executive Officer and
President of Peoples 0
O. M. Covington........ 57 1983 Director of Peoples; Owner of Tim's
Grocery, Lewisville, AR and Covington
Grocery, Benton, LA 0
Wilma Wilbanks......... 75 1980 Director of Peoples; Retired 0
Bruce Burton........... 42 1995 Director of Peoples; Forester; Partnership
Triplett Timber and Realty, Inc. 0
</TABLE>

44
<PAGE> 52
<TABLE>
<CAPTION>
CITIZENS SHARES
BENEFICIALLY OWNED AS OF
SEPTEMBER 30, 1997
DIRECTOR PRINCIPAL OCCUPATION AND PERCENT OF CLASS
DIRECTORS AGE SINCE(1) & DIRECTORSHIP IF MORE THAN 1%
--------- --- -------- -------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Kathy Struckman........ 48 Officer, Sr. Vice-Pres. of CNB
Vice-President of Citizens 1,300
J. S. Tate, Sr......... 56 Officer, Sr. Vice-Pres. of CNB 2,500
</TABLE>

- ---------------

(1) This column represents the year in which the directorship commenced. If a
person serves as director for both Citizens and one or both of its
subsidiaries, the year disclosed reflects the date the directorship in
Citizens commenced.

During 1996, the Board of Directors of Citizens held twelve (12) regularly
scheduled meetings and all incumbent directors then in office attended more than
seventy-five percent of the meetings except one director who had four (4)
absences. Two (2) other directors were absent twice. The Board of Directors has
an Executive Committee, Investment Committee, Loan Review Committee, Audit
Committee, and CRA Committee.

TRANSACTIONS AND MANAGEMENT

Directors and executive officers of Citizens, their associates and members
of immediate families were customers of and had transactions including loans and
commitments to borrow from Citizens' subsidiaries in the ordinary course of
business during 1996. All such loans and commitments were made by Citizens'
subsidiaries on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than normal risk of collectibility or
present other unfavorable features. Similar transactions may be expected to take
place in the ordinary course of business in the future. On September 30, 1997,
the aggregate of these related party loans was approximately $4,689,000 or
approximately 4.17% of total loans outstanding of the subsidiaries.

PRINCIPAL STOCKHOLDERS OF CITIZENS

All persons who as of September 30, 1997, owned of record or beneficially
more than five (5%) of the Citizens Common Stock and the number of shares owned
beneficially by each of them are reflected in the foregoing table.

<TABLE>
<CAPTION>
CITIZENS COMMON STOCK
BENEFICIALLY OWNED ON
SEPTEMBER 30, 1997
----------------------------
NAME SHARES PERCENT OF CLASS
---- ------- ----------------
<S> <C> <C>
Albert Graves............................................... 111,022 22.3%
Graves Family Partnership, an Arkansas General
Partnership............................................... 25,000 5.02%
John Robert Graves.......................................... 61,855(1) 12.42%
</TABLE>

- ---------------

(1) Includes 25,000 shares owned by the Graves Family Partnership, which shares
are voted by John Robert Graves.

All directors and executive officers of Citizens and members of their
immediate families and associates as of September 30, 1997 owned 233,200 shares
or 47% of the outstanding shares of Citizens Common Stock. John Robert Graves
also owns 15,000 shares of First United common stock. No other director or
officer of Citizens owns any other shares. Neither First United nor any of its
subsidiaries nor any director or executive officer of First United owns any
shares of Citizens common stock.

RESULTING OWNERSHIP IN FIRST UNITED

No stockholder of Citizens will own five percent (5%) or more of First
United's outstanding common stock subsequent to the Merger.

45
<PAGE> 53

COMPETITION

Citizens competes actively with national and state banks, savings and loan
associations, securities dealers, mortgage bankers, finance companies and
insurance companies.

LITIGATION

There is no material pending litigation in which Citizens is a party.

OFFICES

Citizens' executive offices are located at 200 South Elm Street, Hope,
Arkansas 71801.

EMPLOYEES

As of December 31, 1996, Citizens had 88 employees, all of whom are located
in Hope, Lewisville and Texarkana, Arkansas.

DESCRIPTION OF CITIZENS STOCK

Citizens has one class of common stock issued and outstanding. As of
September 30, 1997, Citizens had 1,000,000 shares of authorized common stock,
$2.00 par value, and 497,860 shares outstanding with 2,140 shares held in
treasury. Currently, approximately 220 stockholders own shares of the common
stock of Citizens.

<TABLE>
<CAPTION>
DIVIDENDS PAID PER SHARE
------------------------------
1994 1995 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Common Stock................................................ $1.76(1) $1.80 $1.90 $1.64
</TABLE>

- ---------------

(1) On May 17, 1994, there was a five (5) for two (2) stock split. The 1994 data
has been restated to reflect the stock split

COMPARISON OF RIGHTS OF HOLDERS OF CITIZENS COMMON STOCK AND FIRST UNITED COMMON
STOCK

Citizens is a corporation organized and existing under the laws of the
State of Arkansas including the Arkansas Business Corporation Act of 1965. First
United is a corporation organized and existing under the laws of the State of
Arkansas, including the Arkansas Business Corporation Act of 1987 ("1987 Act").
Holders of Citizens common stock have the rights, privileges and duties provided
by the 1965 Act, while the holders of First United Common Stock have the rights,
privileges and duties provided by the 1987 Act. For a detailed discussion of all
material differences between the rights of security holders of Citizens, and the
rights of security holders of First United, see "Election by Citizens
Stockholders under the 1987 Act -- Result of Election."

The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Citizens common stock may authorize the Merger pursuant to
the 1965 Act. First United's Articles of Incorporation requires approval by
two-thirds of all shares issued and outstanding that are entitled to vote for
all mergers requiring the approval of First United Shareholders.

Both the holders of Citizens common stock and the holders of First United
Common Stock are entitled to cumulative voting in the election of directors.
Pursuant to First United's By-Laws, the number of directors of the corporation
may not be less than five nor more than twenty-five. The Citizens By-Laws
require that the number of directors may not be less than five nor more than
twenty-five. Neither holders of Citizens common stock nor holders of First
United Common Stock have preemptive rights with respect to issuance of
additional securities.

Both Citizens and First United have corporate power to indemnify their
officers and directors with respect to certain liabilities. Under the 1987 Act,
the ability to indemnify officers and directors with respect to

46
<PAGE> 54

liabilities incurred by them in their conduct of the business of the corporation
is broader than under the 1965 Act. Such power is limited, however, by
applicable federal laws and regulations including federal banking laws and
regulations and the applicable state law.

First United's Articles of Incorporation contain a paragraph that may have
the effect of operating as an anti-takeover provision. Paragraph SEVENTH
contains a super-majority voting requirement of two-thirds ( 2/3) of all shares
issued and outstanding that are entitled to vote for approval of (1) a merger or
share exchange with another corporation unless such merger or share exchange can
be effected under the authority of state law without shareholder approval, (2) a
transaction to sell, exchange, lease or otherwise dispose of all, or
substantially all, of the corporation's assets and property except where
accomplished in the usual and regular course of business, (3) a transaction
effecting a dissolution or liquidation of the corporation, or (4) any amendment
of the Articles of Incorporation. The Citizens Articles of Incorporation do not
contain a like provision, but the 1965 Act requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares to approve a merger.

LEGAL MATTERS AND EXPERTS

LEGAL OPINIONS

The legality of the First United Common Stock to be issued after the Merger
has been consummated by and between First United and Citizens will be passed
upon for First United by Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.,
320 West Capitol Avenue, Suite 1000, Little Rock, Arkansas 72201. Certain tax
matters relating to the Merger will be passed upon by Friday, Eldredge & Clark,
400 West Capitol Avenue, Suite 2000, Little Rock, Arkansas 72201-3493.

EXPERTS

The consolidated financial statements of First United and the supplemental
post-pooled financial statements of First United as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
incorporated by reference in this Proxy Statement have been audited by Arthur
Andersen LLP, independent public accountants as set forth in their reports. The
financial statements referred to above have been incorporated by reference
herein in reliance upon the authority of said firm as an expert in accounting
and auditing in giving said reports.

The consolidated financial statements of Citizen's National Bancshares,
Inc. as of December 31, 1995 and 1996 and for each of the years in the three
year period ended December 31, 1996 included in this Registration Statement have
been included herein in reliance upon the report of Moore Stephens Frost,
independent certified public accountants, given upon their authority as experts
in accounting and auditing.

GENERAL

As of the date of this Proxy Statement, the board of directors of First
United or Citizens does not intend to present, and has not been informed that
another person intends to present, any matter for action at the special meeting
of stockholders other than as discussed in this Proxy Statement. If any other
matters properly come before the meeting, it is intended that the holders of the
proxies will act in accordance with their best judgment.

47
<PAGE> 55

INDEX TO CITIZENS CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Financial Statements
Independent Auditor's Report.............................. F-2
Consolidated Balance Sheets -- December 31, 1996 and 1995
(Audited) and September 30, 1997 (Unaudited)........... F-3
Consolidated Statements of Income -- Years ended December
31, 1996, 1995 and 1994 (Audited) and Nine Months Ended
September 30, 1997 and 1996 (Unaudited)................ F-4
Consolidated Statements of Stockholders' Equity -- Years
ended December 31, 1996, 1995 and 1994 (Audited) and
Nine Months Ended September 30, 1997 (Unaudited)....... F-5
Consolidated Statements of Cash Flows -- Years ended
December 31, 1996, 1995 and 1994 (Audited) and Nine
Months Ended September 30, 1997 and 1996 (Unaudited)... F-6
Notes to Financial Statements............................. F-7
</TABLE>

F-1
<PAGE> 56

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Citizens National Bancshares, Inc.
Hope, Arkansas

We have audited the accompanying consolidated balance sheets of Citizens
National Bancshares, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of Bancshares' management. Our responsibility
is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Citizens
National Bancshares, Inc. as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

Moore Stephens Frost

/s/ MOORE STEPHENS FROST
------------------------------------
Certified Public Accountants

Little Rock, Arkansas
January 10, 1997

F-2
<PAGE> 57

CITIZENS NATIONAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Cash and due from banks.................................. $ 5,157 $ 4,683 $ 6,830
Interest-bearing deposits................................ 574 630 536
Investment securities.................................... 113,140 120,995 133,396
Federal funds sold....................................... 3,360 6,830 1,740
Trading account securities............................... 91 91 --
Loans, net............................................... 108,796 112,628 111,249
Bank premises and equipment, net......................... 4,029 4,427 4,237
Other.................................................... 4,510 4,770 5,008
-------- -------- --------
Total assets................................... $239,657 $255,054 $262,996
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
Demand -- non-interest bearing......................... $ 19,049 $ 19,765 $ 25,637
Savings and time deposits.............................. 181,923 200,108 198,377
-------- -------- --------
Total deposits........................................... 200,972 219,873 224,014
Note payable............................................. 125 100 150
Federal funds purchased and securities sold under
repurchase agreements.................................. 6,755 70 695
Other liabilities for borrowed money..................... 4,675 5,791 6,121
Accrued expenses and other liabilities................... 2,926 2,834 3,257
-------- -------- --------
Total liabilities.............................. 215,453 228,668 234,237
-------- -------- --------
Stockholders' equity
Common stock; par value, $2.00 per share; authorized
and issued, 500,000 shares.......................... 1,000 1,000 1,000
Additional paid-in capital............................. 10,873 10,882 10,882
Retained earnings...................................... 12,035 14,421 16,257
Unrealized appreciation on investment securities....... 371 182 731
-------- -------- --------
24,279 26,485 28,870
Treasury stock, at cost, 1,660 and 1,940 shares at
December 1995 and 1996 and 2,140 shares at September
30, 1997, respectively.............................. (75) (99) (111)
-------- -------- --------
Total stockholders' equity..................... 24,204 26,386 28,759
-------- -------- --------
Total liabilities and stockholders' equity..... $239,657 $255,054 $262,996
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE> 58

CITIZENS NATIONAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans............ $ 7,365 $ 8,974 $10,625 $ 8,070 $ 8,043
Federal funds sold.................... 21 15 93 66 46
Investment securities:
United States treasury
securities....................... 770 725 561 435 304
Government agencies................ 1,864 2,195 3,456 2,440 3,662
State and political subdivisions... 1,206 1,468 1,625 1,209 1,273
Other securities................... 2,213 2,086 1,974 1,548 1,204
Deposits in other banks............... 75 50 38 29 24
------- ------- ------- ------- -------
Total interest income......... 13,514 15,513 18,372 13,797 14,556
------- ------- ------- ------- -------
Interest expense
Deposits.............................. 6,129 7,342 9,291 6,877 7,322
Federal funds purchased............... 255 666 239 181 184
Interest on borrowed funds............ 300 319 304 334 401
------- ------- ------- ------- -------
Total interest expense........ 6,684 8,327 9,834 7,392 7,907
------- ------- ------- ------- -------
Net interest income..................... 6,830 7,186 8,538 6,405 6,649
Provision for loan losses............. -- (60) (201) (105) (375)
------- ------- ------- ------- -------
Net interest income after provision for
loan losses........................... 6,830 7,126 8,337 6,300 6,274
------- ------- ------- ------- -------
Other operating income
Service charges on deposit accounts... 423 527 646 479 512
Other service charges and fees........ 195 180 212 100 81
Securities gains (losses)............. 68 (45) 53 22 183
Trading profits and interest.......... 10 41 10 3 26
Other income.......................... 149 65 56 129 203
------- ------- ------- ------- -------
Total other income............ 845 768 977 733 1,005
------- ------- ------- ------- -------
Other expenses
Salaries and employee benefits........ 2,379 2,427 2,999 2,135 2,215
Net occupancy and equipment........... 579 563 690 541 660
Other................................. 1,241 1,249 1,397 1,066 926
------- ------- ------- ------- -------
Total other operating
expenses.................... 4,199 4,239 5,086 3,742 3,801
------- ------- ------- ------- -------
Income before income taxes.............. 3,476 3,655 4,228 3,291 3,478
Income taxes............................ 852 831 894 827 825
------- ------- ------- ------- -------
Net income.............................. $ 2,624 $ 2,824 $ 3,334 $ 2,464 $ 2,653
======= ======= ======= ======= =======
Earnings per common share............... $ 5.27 $ 5.67 $ 6.69 $ 4.94 $ 5.33
======= ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE> 59

CITIZENS NATIONAL BANCSHARES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL (DEPRECIATION)
COMMON PAID-IN RETAINED ON INVESTMENT TREASURY
STOCK CAPITAL EARNINGS SECURITIES STOCK TOTAL
------ ---------- -------- -------------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance -- January 1, 1994...................... $1,000 $10,836 $ 8,365 $ -- $ (50) $20,151
Effect of change in accounting method for
investment securities....................... -- -- -- 493 -- 493
Purchased 1,670 shares of treasury stock...... -- -- -- -- (118) (118)
Sold 1,700 shares of treasury stock........... -- 29 -- -- 87 116
Net income.................................... -- -- 2,624 -- -- 2,624
Dividends..................................... -- -- (881) -- -- (881)
Change in unrealized appreciation
(depreciation) on investment securities..... -- -- -- (1,418) -- (1,418)
------ ------- ------- ------- ----- -------
Balance -- December 31, 1994.................... 1,000 10,865 10,108 (925) (81) 20,967
Unrealized depreciation on securities
transferred from held-to-maturity to
available-for-sale.......................... -- -- -- (41) -- (41)
Purchased 2,220 shares of treasury stock...... -- -- -- -- (100) (100)
Sold 2,500 shares of treasury stock........... -- 8 -- -- 106 114
Net income.................................... -- -- 2,824 -- -- 2,824
Dividends..................................... -- -- (897) -- -- (897)
Change in unrealized appreciation
(depreciation) on investment securities..... -- -- -- 1,337 -- 1,337
------ ------- ------- ------- ----- -------
Balance -- December 31, 1995.................... 1,000 10,873 12,035 371 (75) 24,204
Purchased 2,180 shares of treasury stock...... -- -- -- -- (111) (111)
Sold 1,900 shares of treasury stock........... -- 9 -- -- 87 96
Net income.................................... -- -- 3,334 -- -- 3,334
Dividends..................................... -- -- (948) -- -- (948)
Change in unrealized appreciation
(depreciation) on investment securities..... -- -- -- (189) -- (189)
------ ------- ------- ------- ----- -------
Balance -- December 31, 1996.................. 1,000 10,882 14,421 182 (99) 26,386
Purchased 300 shares of treasury stock........ -- -- -- -- (16) (16)
Sold 100 shares of treasury stock............. -- -- -- -- 4 4
Net income.................................... -- -- 2,653 -- -- 2,653
Dividends..................................... -- -- (817) -- -- (817)
Change in unrealized appreciation
(depreciation) on investment securities..... -- -- -- 549 -- 549
------ ------- ------- ------- ----- -------
Balance -- September 30, 1997 (unaudited)....... $1,000 $10,882 $16,257 $ 731 $(111) $28,759
====== ======= ======= ======= ===== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE> 60

CITIZENS NATIONAL BANCSHARES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1994 1995 1996 1996 1997
-------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 2,624 $ 2,824 $ 3,334 $ 2,462 $ 2,653
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Provision for loan losses and losses on other real
estate................................................ 411 60 201 105 375
Depreciation and amortization........................... 52 332 387 290 425
Change in valuation reserve on trading securities....... 20 (20) -- -- --
(Gain) loss on sale of securities....................... (97) 45 28 20 10
Gain on sale of premises and equipment.................. (4) (1) -- -- --
(Gain) loss on sale of other real estate................ (66) 15 -- -- --
Net change in trading account securities................ 549 390 -- 31 91
Change in other assets.................................. (545) (579) (297) (170) (313)
Change in accrued expenses and other liabilities........ (12) 906 (92) (458) 423
-------- ------- -------- -------- --------
Net cash provided (used) by operating activities...... 2,932 3,972 3,561 2,280 3,664
-------- ------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sales of trading and investment
securities.............................................. 42,608 24,915 47,350 25,091 41,963
Purchases of trading and investment securities............ (56,861) (21,310) (55,395) (37,426) (53,825)
Increase in loans......................................... (8,409) (5,661) (4,032) (6,205) 1,004
Acquisition of Peoples Bancshares, Inc.................... -- (3,803) -- -- --
Proceeds from sales of property, plant and equipment...... 45 2 5 5 --
Purchases of property, plant and equipment................ (128) (231) (781) (697) (160)
Proceeds from sales of other real estate.................. 326 420 -- -- --
(Increase) decrease in interest-bearing deposits.......... 769 205 (56) (1,596) 94
Change in Federal funds sold.............................. 5,930 2,415 (3,470) 2,155 5,090
-------- ------- -------- -------- --------
Net cash provided (used) by investing activities...... (15,720) (3,048) (16,379) (18,673) (5,834)
-------- ------- -------- -------- --------
Cash flows from financing activities:
Change in deposits........................................ (179) 8,619 18,901 11,945 4,141
Change in Federal funds purchased and securities sold
under repurchase agreements............................. 14,985 (8,398) (6,685) 4,993 625
Change in other liabilities for borrowed money............ (1,346) (521) 1,116 2,269 330
Proceeds from note payable................................ -- 125 -- -- 50
Payments on note payable.................................. -- -- (25) (25) --
Dividends paid............................................ (881) (897) (948) (550) (817)
Proceeds from sale of treasury stock...................... 116 114 96 55 4
Purchase of treasury stock................................ (118) (100) (111) (43) (16)
-------- ------- -------- -------- --------
Net cash provided (used) by financing activities...... 12,577 (1,058) 12,344 18,644 4,317
-------- ------- -------- -------- --------
Cash obtained in Peoples Bancshares, Inc. acquisition....... -- 1,150 -- -- --
-------- ------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (211) 1,016 (474) 2,251 2,147
Cash and cash equivalents -- beginning of period............ 4,352 4,141 5,157 5,157 4,683
-------- ------- -------- -------- --------
Cash and cash equivalents -- end of period.................. $ 4,141 $ 5,157 $ 4,683 $ 7,408 $ 6,830
======== ======= ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 61

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS
UNAUDITED)
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Citizens National Bancshares, Inc.
("Bancshares") conform with generally accepted accounting principles and
practices within the banking industry. The financial statements for the nine
months ended September 30, 1997 and 1996 are unaudited and, in the opinion of
management, include all adjustments necessary (which consist of only normal
recurring adjustments) for a fair presentation of the financial position,
results of operations and cash flows for the interim periods. The financial
position and results of operations of the interim periods are not necessarily
indicative of the financial position and results of operations that may be
obtained for a full fiscal year.

The policies that materially affect financial position and the results of
operations are summarized as follows:

a. Basis of presentation -- The consolidated financial statements
include the accounts of Bancshares and its wholly owned subsidiaries,
Citizens National Bank of Hope and Peoples Bancshares, Inc. and its wholly
owned subsidiary Peoples Bank and Loan of Lewisville (the "Banks"). As
discussed in Note 11, effective December 1, 1995, Bancshares acquired all
the outstanding stock of Peoples Bancshares, Inc., the parent holding
company of Peoples Bank and Loan Company ("Peoples Bank") in a business
combination which was accounted for as a purchase transaction. Accordingly,
the operations of Peoples subsequent to the date of acquisition are
included in the operations of Bancshares for the years ended December 31,
1995 and 1996. All material intercompany accounts and transactions have
been eliminated in consolidation.

b. Nature of operations -- Citizens National Bank of Hope operates
under a national bank charter and Peoples Bank and Loan of Lewisville
operates under a state charter. The Banks are subject to the regulations of
the Office of the Comptroller of the Currency or the State Banking
Commission and the Federal Deposit Insurance Corporation. The Banks provide
full banking services, including trust services, to an area located in the
southwest region of Arkansas.

c. Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

d. Cash and cash equivalents -- For the purpose of presentation in the
statement of cash flows, cash and cash equivalents are defined as those
amounts included in the balance sheet caption "Cash and Due from Banks."

e. Investments securities -- Debt and equity securities are classified
into three categories: securities held as trading securities, securities
which are available-for-sale and securities being held-to-maturity.
Securities classified as trading securities are reported at fair value,
with realized gains and losses included in earnings. Securities classified
as available-for-sale are reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
stockholders' equity. Securities classified as held-to-maturity are
reported at amortized cost.

Gains and losses on sales of securities are recognized when realized
on a specific identification basis. Premiums and discounts are amortized
into interest income using a level yield method.

f. Loans -- Interest on commercial loans and real estate mortgage
loans is credited to income based upon the principal amount outstanding.
Interest on installment loans is credited to income based upon the interest
method and upon the principal amount outstanding.

F-7
<PAGE> 62

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

g. Reserve for loan losses -- For financial reporting purposes, the
reserve for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the reserve for loan losses
when management believes that the collectibility of the principal is
unlikely. The reserve is an amount that management believes will be
adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and
prior loan loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrowers' ability to pay. Accrual of
interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that
the borrowers' financial condition is such that collection of interest is
doubtful. For income tax purposes, Bancshares utilizes the direct write-off
method for loan losses.

h. Bank premises and equipment -- Bancshares premises and equipment
are stated at cost, less accumulated depreciation. Depreciation is charged
to operating expenses over the estimated useful lives of the assets and is
computed using the straight-line method for financial statement purposes
and accelerated methods for tax purposes.

i. Acquisition costs -- The costs associated with the Bancshares'
acquisition of certain assets and liabilities of a savings and loan
association are being amortized on a straight-line basis over ten years.
The excess of purchase price over fair value arising from the acquisition
of Peoples Bancshares, Inc. is being amortized on a straight-line basis
over fifteen years.

j. Real estate acquired through foreclosure -- Real estate properties
acquired through or in lieu of loan foreclosure are to be sold and are
initially recorded at fair value at the date of foreclosure establishing a
new cost basis. Valuations are periodically performed by management and the
real estate is carried at the lower of carrying amount of fair value less
cost to sell. Gains and losses from the sale of other real estate are
recorded in other income, and expenses used to maintain the properties are
included as operating expenses.

k. Income taxes -- The Company utilizes the liability method of
accounting for income taxes. This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the financial
statements or tax returns. Under this method, deferred tax assets or
liabilities are determined based upon the difference between the values of
the assets and liabilities as reflected in the financial statement and
their related tax basis using enacted tax rates in effect for the year in
which the differences are expected to be recovered or settled. As changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.

Bancshares and its subsidiaries file consolidated income tax returns.
Its subsidiaries provide for income taxes on a separate return basis, and
remit to Bancshares amounts determined to be currently payable.

l. Trust department income -- Property, other than cash deposits, held
by Bancshares' trust department in fiduciary or agency capacities for its
customers, are not included in the accompanying financial statements, since
such items are not assets of Bancshares. Trust department income has been
recognized on the cash basis in accordance with customary banking practice,
which does not materially affect reported net income.

m. Pension plan -- Bancshares has defined benefit pension plans
covering substantially all employees. Costs of the plans, based on
actuarial computations of current and future benefits for employees, are
charged to operating expenses and are funded as accrued.

F-8
<PAGE> 63

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

n. Earnings per common share -- Net income per common share is
calculated based on the weighted average number of common shares
outstanding during the period. Reported earnings per share amounts are
based on 498,241, 498,460 and 498,525 weighted average common shares
outstanding at December 31, 1994, 1995 and 1996 and 498,525 and 497,960
weighted average common shares at September 30, 1996 and 1997,
respectively.

o. Financial instruments -- In the ordinary course of business,
Bancshares has entered into off-balance sheet financial instruments
consisting of commitments to extend credit, commitments under credit card
arrangements, and letters of credit. Such financial instruments are
recorded in the financial statements when they are funded or related fees
are incurred or received.

2. INVESTMENT SECURITIES

The amortized cost and estimated market values of investment securities
classified as available-for-sale were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. treasury securities.............. $ 13,629 $ 76 $(162) $ 13,543
U.S. government agencies and
corporations........................ 39,541 343 (181) 39,703
State and political subdivisions...... 29,140 670 (158) 29,652
Other securities...................... 30,267 282 (307) 30,242
-------- ------ ----- --------
Total available-for-sale securities... $112,577 $1,371 $(808) $113,140
======== ====== ===== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. treasury securities.............. $ 8,135 $ 39 $ (32) $ 8,142
U.S. government agencies and
corporations........................ 57,517 301 (351) 57,467
State and political subdivisions...... 30,141 472 (65) 30,548
Other securities...................... 24,926 245 (333) 24,838
-------- ------ ----- --------
Total available-for-sale securities... $120,719 $1,057 $(781) $120,995
======== ====== ===== ========
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS GAINS VALUE
--------- ---------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
U.S. treasury securities.............. $ 6,644 $ 27 $ (53) $ 6,618
U.S. government agencies and
corporations........................ 73,587 434 (135) 73,886
State and political subdivisions...... 32,054 847 (24) 32,877
Other securities...................... 20,004 187 (176) 20,015
-------- ------ ----- --------
Total available-for-sale securities... $132,289 $1,495 $(388) $133,396
======== ====== ===== ========
</TABLE>

F-9
<PAGE> 64

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The amortized cost and estimated market value by contractual maturity of
investment securities classified as available-for-sale at December 31, 1996 and
September 30, 1997, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
-------------------- --------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Due in one year or less............................... $ 9,368 $ 9,406 $ 2,156 $ 2,163
Due after one year through five years................. 34,733 34,917 34,064 33,861
Due after five years through ten years................ 27,377 27,369 42,636 42,996
Due after ten years................................... 14,672 14,781 24,602 25,027
-------- -------- -------- --------
86,150 86,473 103,458 104,047
Mortgage backed securities............................ 13,484 13,636 11,818 11,999
Collateralized mortgage obligations................... 21,084 20,886 17,363 17,350
-------- -------- -------- --------
$120,718 $120,995 $132,639 $133,396
======== ======== ======== ========
</TABLE>

At December 31, 1995 and 1996, net unrealized appreciation on
available-for-sale securities, net of deferred income tax effect, of $371 and
$182, respectively, is reflected as a separate component of stockholders'
equity. At September 30, 1997, the net unrealized appreciation on
available-for-sale securities, net of deferred income taxes, was $731.
Additionally, changes in net unrealized appreciation, net of deferred income tax
effect, for the years ended December 31, 1994, 1995 and 1996 and for the period
ended September 30, 1997 of $1,418, $1,296 and $(189) and $549, respectively,
are reflected as separate components of the change in stockholders' equity.

Proceeds from the sale of available-for-sale securities during 1994 were
approximately $42,608. Gross gains of $87 and gross losses of $19 were realized
on these sales in 1994. Proceeds from the sale of available-for-sale securities
during 1995 were approximately $24,915. Gross gains of $43 and gross losses of
$88 were realized on these sales in 1995. Proceeds from the sale of
available-for-sale securities during 1996 were approximately $47,350. Gross
gains of $102 and gross losses of $49 were realized on these sales in 1996.
Proceeds from the sale of available-for-sale securities during the period ended
September 30, 1997 were approximately $41,963. Gross gains of $245 and gross
losses of $62 were realized on these sales during the period.

Assets, principally investment securities carried at approximately $27,259
at December 31, 1995, $23,685 at December 31, 1996 and $26,815 at September 30,
1997 were pledged to secure public deposits and for other purposes required or
permitted by law.

F-10
<PAGE> 65

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. LOANS

The following is a summary of the loan portfolio by principal categories:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1995 1996 1997
-------- -------- -------------
<S> <C> <C> <C>
Commercial/real estate........................... $ 90,064 $ 93,341 $ 93,365
Installment...................................... 21,828 22,457 20,684
-------- -------- --------
111,893 115,799 114,049
Unearned income.................................. (1,871) (1,934) (1,542)
-------- -------- --------
110,022 113,864 112,507
Reserve for possible loan losses................. (1,226) (1,237) (1,258)
-------- -------- --------
$108,796 $112,627 $111,249
======== ======== ========
</TABLE>

Loans on which the accrual of interest has been reduced or discontinued
aggregated approximately $63, $448 and $87 at December 31, 1995 and 1996, and
September 30, 1997, respectively.

The outstanding balance of borrowings by officers, directors and their
affiliates as of December 31, 1995 and 1996 and September 30, 1997 were
approximately $4,448, $7,389 and $4,689, respectively. All loans to officers and
directors of the bank and affiliates of such persons are, in the opinion of
management, made in the ordinary course of business at substantially the same
terms, including interest rates and collateral, as those prevailing at the time
of comparable loans of like qualities and risks of collectibility.

4. RESERVE FOR POSSIBLE LOAN LOSSES

A summary of transactions within the reserve for possible loan losses:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- ---------------
1994 1995 1996 1996 1997
---- ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance -- beginning of year.................... $904 $ 919 $1,226 $1,226 $1,237
Reserve added with Peoples Bancshares, Inc.
acquisition................................ -- 348 -- -- --
Provision charged to operating expense........ -- 60 201 105 375
Recoveries on loans previously charged off.... 41 46 76 57 49
---- ------ ------ ------ ------
945 1,373 1,503 1,388 1,661
Loans charged off............................. (26) (147) (266) (206) (403)
---- ------ ------ ------ ------
Balance -- end of year.......................... $919 $1,226 $1,237 $1,182 $1,258
==== ====== ====== ====== ======
</TABLE>

Real estate securing loans having a carrying value of $48 was transferred
to foreclosed assets held for sale in 1994. All such items were sold during
1995. The Banks are not committed to lend additional funds to debtors whose
loans have been modified.

F-11
<PAGE> 66

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. BANK PREMISES AND EQUIPMENT

Bank premises and equipment consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1995 1996 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings................................. $ 4,521 $ 4,551 $ 4,598
Furniture and equipment............................ 2,263 2,799 2,912
------- ------- -------
6,784 7,350 7,510
Accumulated depreciation........................... (2,755) (2,923) (3,273)
------- ------- -------
$ 4,029 $ 4,427 $ 4,237
======= ======= =======
</TABLE>

Depreciation, included in operating expenses, amounted to $291, $269, $349
and $350 for the years ended December 31, 1994, 1995 and 1996 and for the period
ended September 30, 1997, respectively.

6. TIME DEPOSITS

Time deposits consist of:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- SEPTEMBER 30,
1995 1996 1997
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Time deposits over $100,000..................... $ 45,060 $ 64,155 $ 64,732
Time deposits under $100,000.................... 93,970 94,402 91,900
-------- --------- --------
Total...................................... $139,031 $ 158,557 $156,632
======== ========= ========
</TABLE>

Maturities of time deposits are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Three months or less....................................... $ 48,257 $ 46,371
Four through six months.................................... 36,610 37,664
Seven through nine months.................................. 19,204 15,760
Ten through twelve months.................................. 13,473 16,931
Over twelve months......................................... 41,010 39,906
-------- --------
Total................................................. $158,557 $156,632
======== ========
</TABLE>

7. NOTE PAYABLE

Note payable consists of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
1995 1996 1997
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a bank; interest at variable rate which
is tied to the lender's base rate of interest floating
(9.25% at December 31, 1996 and 9.50% at September 30,
1997). Payable on demand or if no demand is made, due
May 26, 1998, unsecured............................... $125 $100 $150
==== ==== ====
</TABLE>

F-12
<PAGE> 67

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES

The components of income taxes expense for the years ended December 31,
1994, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current provision........................................... $800 $779 $974
Deferred provision (benefit)................................ 52 52 (80)
---- ---- ----
Income taxes................................................ $852 $831 $894
==== ==== ====
</TABLE>

A reconciliation of tax computed at the statutory Federal and state income
tax rate to the actual tax expense is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
"Expected" tax expense................... $1,363 39.23% $1,433 39.23% $1,658 39.23%
Interest and other items exempt from
income tax............................. (511) (14.72) (602) (16.51)% (764) (18.10)%
------ ------ ------ ------ ------ ------
Actual tax expense....................... $ 852 24.51% $ 831 22.72% $ 894 21.13%
====== ====== ====== ====== ====== ======
</TABLE>

The sources of timing differences that result in deferred income tax
expense and the tax effects of each are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Use of accelerated depreciation for income tax purposes..... $ 14 $ 3 $ 12
Deferred compensation fees.................................. -- (21) (10)
Prepaid pension costs....................................... 4 (10) (23)
Amortization of excess of cost over market value............ 33 (2) (15)
Book/tax difference in accrued assets/liabilities........... (15) -- (62)
Basis difference in accreted investment securities.......... 16 -- 18
Valuation adjustment on investment securities............... -- 82 --
---- ---- ----
Deferred provision (benefit)................................ $ 52 $ 52 $(80)
==== ==== ====
</TABLE>

Temporary differences giving rise to deferred tax assets and liabilities
include differences between the financial statement and tax basis of
investments, bank premises and equipment, reserve for loan losses and losses on
other real estate, and differences in the accrual period of certain expenses for
financial statement purposes from the accrual period for tax return purposes.
Total gross deferred tax assets and gross deferred tax liabilities at December
31, 1995 and 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
----- -----
<S> <C> <C>
Gross deferred tax liabilities.............................. $ 870 $ 767
Gross deferred tax assets................................... (331) (424)
----- -----
Net deferred tax liability.................................. $ 538 $ 343
===== =====
</TABLE>

F-13
<PAGE> 68

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

a. Bancshares is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of it
customers and to reduce its own exposure to fluctuation in interest rates. These
financial instruments include commitments to extend credit, standby letters of
credit and interest rate caps and floors written.

Bancshares' exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual notional amount of those instruments. Bancshares
has the same credit policies in making commitments and conditional obligations
as it does for on-balance sheet instruments. For interest rate caps and floors,
the contract or notional amounts do not represent exposure to credit loss.

Financial instruments, whose contract amounts represents credit risk,
consist of loan commitments and unfunded lines of credit of approximately $5,244
and $6,936 at December 31, 1995 and 1996, respectively.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since these commitments may expire without
being drawn upon, the total commitment amount does not necessarily represent
future cash requirements. Bancshares evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained, if deemed necessary
by Bancshares upon extension of credit, is based on management's credit
evaluation of the counterpart. Collateral held varies but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.

b. Bancshares grants agribusiness, commercial and residential loans to
customers within its lending region. Bancshares maintains a limited diversified
loan portfolio with a high concentration on residential and agribusiness loans.

10. PENSION PLAN

The periodic pension expense of $107, $122 and $161 for the years ended
December 31, 1994, 1995 and 1996, respectively, is shown below. Total
contributions made during 1994, 1995 and 1996 were $135, $120 and $138,
respectively.

The actuarially determined net periodic pension cost is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Service cost.............................................. $ 120 $ 123 $ 156
Interest cost............................................. 102 115 151
Actual return (gain) on assets for the year............... (114) (115) (144)
Amortization of transition asset.......................... (1) (1) (2)
----- ----- -----
Net periodic pension cost................................. $ 107 $ 122 $ 161
===== ===== =====
</TABLE>

F-14
<PAGE> 69

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following is a reconciliation of the actually determined funding status
of the plans with the amount reported in Bancshares balance sheet as of December
31, 1995 and 1996, respectively.

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Fair value of plan assets................................... $ 2,117 $ 2,453
Projected benefit obligation (vested benefit obligation
$1,607 and $1,979 for the years ended December 31, 1995
and 1996; accumulated benefit obligation $1,626 and $1,996
for the years ended December 31, 1995 and 1996)........... (2,023) (2,447)
Unrecognized net gain....................................... (48) (23)
Remaining unrecognized transition (asset) liability......... (17) 11
------- -------
Net asset (liability) recognized in the balance sheet....... $ 29 $ (6)
======= =======
</TABLE>

For the years ended December 31, 1995 and 1996, weighted-average assumed
discount rates of 7.00% and rates of compensation increase of 4.50% were used to
measure the actuarially projected benefit obligation. The weighted-average
expected long-term rate of return on plan assets was 7.00% for the years ended
December 31, 1995 and 1996.

11. ACQUISITION

Effective December 1, 1995, Bancshares acquired all the outstanding stock
of Peoples Bancshares, Inc., the parent holding company of Peoples Bank and Loan
Company ("Peoples Bank") in Lewisville, Arkansas, for approximately $3,100. In
addition, in connection with this acquisition, Bancshares assumed liability for
outstanding debt and accrued interest payable totaling approximately $703. This
business combination was accounted for as a purchase transaction. Accordingly,
the assets and liabilities of Peoples Bancshares, Inc. and Peoples Bank were
recorded at their fair value and goodwill totaling approximately $653 has been
included in other assets.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair values
of each class of financial instruments for which it is practicable to estimate a
value.

a. Cash and short term investments -- For those short term
instruments, the carrying amount is a reasonable estimate of fair value.

b. Investment securities -- For marketable equity securities held for
investment purposes, fair values are based on quoted market prices or
dealer quotes. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities or the carrying
amount.

c. Trading account securities -- The fair values of trading account
securities are based on quoted market prices or dealer quotes.

d. Loans -- The fair value of loans is estimated by discounting the
future cash flows using the current rate at which similar loans would be
made to borrowers with similar credit ratings and for the same remaining
maturities.

e. Deposit liabilities -- The fair value of demand deposits, savings
accounts and certain money market deposits is the amount payable on demand
at the reporting date. The fair value of fixed maturity certificates is
estimated using the rates currently offered for deposits of similar
remaining maturities.

f. Note payable -- For those short term instruments, the carrying
amount is a reasonable estimate of fair value.

F-15
<PAGE> 70

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

g. Commitments to extend credit and standby letters of credit -- The
fair value of commitments is based upon the remaining terms of the
agreements and the difference between current levels of interest rates and
committed rates.

The following table presents the estimated fair values of Bancshares'
financial instruments. The fair values of certain of these instruments were
calculated by discounting expected cash flows, which involves significant
judgements by management and uncertainties. Fair value is the estimated amount
at which financial assets or liabilities could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Because no market exists for certain of these financial instruments and because
management does not intend to sell these financial instruments, Bancshares does
not know whether the fair values shown below represent values at which the
respective financial instruments could be sold individually or in the aggregate.

<TABLE>
<CAPTION>
ASSETS 1995 1996
------ -------- --------
<S> <C> <C>
Cash and due from banks..................................... $ 5,156 $ 4,683
Interest bearing deposits................................... 574 630
Investment securities United States treasury securities..... 13,542 8,143
Securities of United States government agencies and
corporations........................................... 39,703 57,466
Obligations of state and political subdivision............ 29,652 30,548
Other investments......................................... 30,242 24,838
-------- --------
Total investment securities....................... 113,139 120,995
-------- --------
Federal funds sold.......................................... 3,360 6,830
-------- --------
Trading account securities.................................. 91 91
-------- --------
Loans....................................................... 109,916 114,141
-------- --------
Total financial assets............................ $232,236 $247,370
======== ========
</TABLE>

<TABLE>
<CAPTION>
LIABILITIES 1995 1996
----------- -------- --------
<S> <C> <C>
Deposits
Demand deposits........................................... $ 19,049 $ 19,639
Savings and time deposits................................. 182,395 200,583
-------- --------
Total deposits.................................... 201,444 220,222
-------- --------
Note Payable................................................ 125 100
-------- --------
Federal funds purchased and securities sold under repurchase
agreement................................................. 6,755 70
-------- --------
Other liabilities for borrowed money........................ 4,675 5,790
-------- --------
Accrued expenses and other liabilities...................... 2,926 2,834
-------- --------
Total financial liabilities....................... $215,925 $229,016
======== ========
Unrecognized Financial Instruments
Standby letters of credit................................. $ 163 $ 42
Commitments to extend credit.............................. 5,219 6,695
-------- --------
Total unrecognized financial instruments.......... $ 5,382 $ 6,737
======== ========
</TABLE>

F-16
<PAGE> 71

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------ ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid during the period for:
Interest............................... $6,642 $8,291 $9,720 $7,162 $7,868
Income taxes........................... 845 687 1,103 818 718
</TABLE>

14. NEW AUTHORITATIVE PRONOUNCEMENTS

The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". SFAS No. 125
is effective for transfers and servicing of financial assets and extinguishment
of liabilities occurring after December 31, 1996. Earlier application is
prohibited. Adoption on January 1, 1997 is not expected to have a material
impact on the Company. The FASB deferred some provisions of SFAS No. 125, which
are not expected to be relevant to the Company.

The FASB issued SFAS No. 128, "Earnings Per Share", and SFAS No. 129,
"Disclosure of Information about Capital Structure" in February 1997. SFAS No.
128 simplifies the earnings per share ("EPS") calculations required by
Accounting Principles Board ("APB") Opinion No. 15, and related interpretations,
by replacing the presentation of primary EPS with a presentation of basic EPS.
SFAS No. 128 requires dual presentation of basic and diluted EPS by entities
with complex capital structures. Basic EPS includes no dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution of securities that could share in the earnings of an entity,
similar to the fully diluted EPS of APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. When
adopted, SFAS No. 128 will require restatement of all prior-period EPS data
presented. However, the Company's prior years EPS will not be effected by these
restatements.

SFAS No. 129 does not change any previous disclosure requirements, but
rather consolidated existing disclosure requirements for ease of retrieval.

15. CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)

CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
ASSETS 1995 1996 1997
------ ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents.................................. $ 2,052 $ 2,875 $ 2,654
Investment in subsidiaries................................. 24,070 26,397 28,788
Dividends receivable....................................... 375 400 310
Property................................................... 118 114 114
Other...................................................... 115 117 8
------- ------- -------
Total assets............................................... $26,730 $29,903 $31,874
======= ======= =======
</TABLE>

F-17
<PAGE> 72

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1996 1997
------------------------------------ ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Notes payable............................................. $ 2,115 $ 2,890 $ 2,744
Dividends payable......................................... 374 398 309
Accrued expenses and other liabilities.................... 37 229 62
------- ------- -------
Total liabilities......................................... 2,526 3,517 3,115
------- ------- -------
Stockholders' equity
Common stock............................................ 1,000 1,000 1,000
Additional paid-in capital.............................. 10,873 10,882 10,882
Retained earnings....................................... 12,035 14,421 16,257
Unrealized appreciation (depreciation) on
investment securities................................ 371 182 731
------- ------- -------
24,279 26,485 28,870
Treasury stock, at cost, 1,660 and 1,930 shares in 1995
and 1996, respectively............................... (75) (99) (111)
------- ------- -------
Total stockholders' equity...................... 24,204 26,386 28,759
------- ------- -------
Total liabilities and stockholders' equity...... $26,730 $29,903 $31,874
======= ======= =======
</TABLE>

CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30
-------------------------- ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income
Equity in earnings of subsidiaries......... $2,645 $2,851 $3,467 $2,610 $2,825
Trading gains (losses)..................... (33) 4 (9) (4) (10)
Gain on sale of property................... 3 -- -- -- --
Dividend income............................ 1 -- -- -- --
------ ------ ------ ------ ------
Total income....................... 2,616 2,855 3,458 2,606 2,815
------ ------ ------ ------ ------
Expenses
Interest................................... -- 19 184 130 157
Other...................................... 6 28 15 12 5
------ ------ ------ ------ ------
Total expenses..................... 6 47 199 142 162
------ ------ ------ ------ ------
Income before income taxes................... 2,610 2,808 3,259 2,464 2,653
Income taxes (benefit)....................... (14) (16) (75) -- --
------ ------ ------ ------ ------
Net income................................... $2,624 $2,824 $3,334 $2,464 $2,653
====== ====== ====== ====== ======
</TABLE>

F-18
<PAGE> 73

CITIZENS NATIONAL BANCSHARES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 2,624 $ 2,824 $ 3,334 $ 2,464 $ 2,653
Adjustments to reconcile net income to
net cash provided (used) by
operating activities:
Equity in income of unconsolidated
subsidiary, net of dividend
income........................... (1,760) 1,849 (2,517) (2,060) (1,842)
Depreciation....................... (3) -- 3 1 --
Change in valuation reserve on
trading securities............... 21 (21) -- -- --
Change in dividends receivable..... (15) -- (25) 175 90
Change in other assets............. (57) 2 (1) (18) 109
Change in accrued expenses and
other liabilities................ 49 3 192 185 (167)
Change in dividends payable........ (89) -- 24 (175) (89)
------- ------- ------- ------- -------
Net cash provided (used) by
operating activities.......... 770 4,657 1,010 572 754
------- ------- ------- ------- -------
Cash flows from investing activities
Acquisition of Peoples Bancshares,
Inc................................ -- (3,804) -- -- --
Proceeds from sales of property....... 35 -- 1 -- --
Purchases of property................. (73) (77) -- -- --
------- ------- ------- ------- -------
Net cash provided by investing
activities:................... (38) (3,881) 1 -- --
------- ------- ------- ------- -------
Cash flows from financing activities:
Borrowing on note payable............. -- 2,115 800 800 50
Payment on notes payable.............. -- -- (25) (25) (196)
Dividends paid........................ (881) (897) (948) (550) (817)
Proceeds from sale of treasury
stock.............................. 116 114 96 55 4
Purchase of treasury stock............ (118) (100) (111) (43) (16)
------- ------- ------- ------- -------
Net cash provided (used) by
financing activities.......... (883) 1,232 (188) 237 (975)
------- ------- ------- ------- -------
Cash obtained in Peoples Bancshares,
Inc. acquisition...................... -- 42 -- -- --
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents........................... (151) 2,050 823 809 (221)
Cash and cash equivalents -- beginning
of year............................... 153 2 2,052 2,052 2,875
------- ------- ------- ------- -------
Cash and cash equivalents -- end of
year.................................. $ 2 $ 2,052 $ 2,875 $ 2,861 $ 2,654
======= ======= ======= ======= =======
</TABLE>

F-19
<PAGE> 74

ANNEX I

AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of
September 15, 1997 by and between First United Bancshares, Inc. ("Bancshares"),
and Citizens National Bancshares of Hope, Inc. ("Citizens").

WHEREAS, Citizens owns one hundred percent (100%) of the issued and
outstanding shares of capital stock of The Citizens National Bank of Hope, Hope,
Arkansas ("CNB") and Peoples Bank & Loan Company, Lewisville, Arkansas
("Peoples"); and CNB owns one hundred percent (100%) of the issued and
outstanding shares of capital stock of Citizens Investment Services, Inc.
("CIS"); and

WHEREAS, Bancshares desires to acquire one hundred percent (100%) of the
capital stock of Citizens (the "Citizens Common Stock") upon the terms and
conditions hereinafter set forth through the merger of Citizens with and into
Bancshares, (the "Merger") pursuant to a Plan of Merger in substantially the
form attached hereto as Exhibit A (the "Plan of Merger"); and

WHEREAS, the respective Boards of Directors of Bancshares and Citizens
believe that such proposed Merger and the exchange of shares of Bancshares Stock
(as defined in Section 2.01(a) hereof) for the Citizens Common Stock, pursuant
and subject to the terms of this Agreement and the Plan of Merger (the "Merger
Agreements"), is desirable and in the best interests of their respective
corporations and shareholders; and

WHEREAS, Bancshares and Citizens desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;

NOW, THEREFORE, in consideration of the promises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:

ARTICLE I

THE MERGER

1.01. The Merger. Subject to the terms and conditions of this Agreement,
Bancshares and Citizens agree to effect the Merger of Citizens with and into
Bancshares in accordance with the Arkansas Business Corporation Act (the
"ABCA").

1.02. Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger shall be duly prepared and executed by Bancshares
and Citizens (the "Articles of Merger") and thereafter delivered to the
Secretary of State of Arkansas for filing, as provided in the ABCA, as soon as
practicable on or after the Closing Date (as defined in Section 1.03). The
Merger shall become effective upon the filing of the Articles of Merger with the
Secretary of State of Arkansas or at such time within two business days
thereafter as is provided in the Articles of Merger (the "Effective Time").

1.03. Closing. The closing of the Merger (the "Closing") will take place at
the offices of Bancshares at a time and on a date (the "Closing Date") to be
specified in writing by the parties as soon as reasonably practicable after the
later to occur of all regulatory and other approvals and the expiration of all
waiting periods.

A-I-1
<PAGE> 75

ARTICLE II

EFFECT OF THE MERGER

2.01. Effect on Common Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
Citizens Common Stock ("Citizens Shareholder"), but subject to the rights of
dissenting shareholders of Citizens:

(a) Conversion of Citizens Common Stock. The purchase price paid by
Bancshares shall be equal to 1,570,000 shares of Bancshares Common Stock,
$1.00 par value (the "Bancshares Stock"). One hundred percent of the issued
and outstanding shares of Citizens Common Stock shall be converted into the
right to receive an aggregate amount of fully paid and nonassessable shares
of voting common stock, $1.00 par value, of Bancshares. Each Citizens
Shareholder shall be entitled to receive a pro rata portion of the
Bancshares Stock based upon each Citizens Shareholder's pro rata ownership
of the total of issued and outstanding shares of Citizens Common Stock at
the Effective Time. Fractional shares of Bancshares Stock shall not be
issued. Any Seller entitled to receive a fractional share shall receive a
cash payment in lieu thereof equal to the value of the fractional share
based on the Bancshares Average Price. The Bancshares Average Price shall
be the average sales price per share of Bancshares common stock for all
trades occurring during the period of 10 trading days on which one or more
trades actually takes place and which ends immediately prior to the second
trading day preceding the Closing Date.

(b) Cancellation of Shares. All shares of Citizens Common Stock issued
and outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive a pro rata number of shares of Bancshares Stock to be
issued in consideration therefor upon the surrender of such certificate in
accordance with the Plan of Merger.

(c) Anti-Dilution. If prior to the Effective Time Bancshares shall
declare a stock dividend or subdivide, split up, reclassify or combine its
shares of Bancshares common stock or make a distribution on Bancshares
common stock of any security, appropriate adjustment or adjustments will be
made in the conversion rate set forth in subsection (a).

(d) Registration. The Bancshares Stock shall when issued be subject to
and covered by an effective registration statement as filed under the
Securities Act of 1933 (the "Securities Act") and such issuance shall
comply with any applicable state "Blue Sky" laws.

(e) Termination of 401(k) Plan. As soon as practical after execution
of this Agreement, Citizens shall cause Citizens, CNB, Peoples and CIS to
make all filings, take all action and receive all approvals necessary and
appropriate to allow termination of the Citizens 401(k) plan immediately
prior to the Closing Date. Bancshares shall assist Citizens in
accomplishing the above procedures. If, as of the Effective Time, all
assets from the terminated plan have not yet been distributed, Bancshares
shall complete the liquidation process for the Citizens 401(k) plan. Prior
to and effective as of the Effective Time, Citizens shall appoint Kathy
Struckman as the Plan Administrator of the Citizens 401(k) Plan and shall
authorize Kathy Struckman to execute all documents necessary to complete
the liquidation process, including the execution of the annual returns.
Bancshares shall indemnify Kathy Struckman against any and all claims,
expenses, liabilities, damages and losses which may result from her
assumption of the status of Plan Administrator of Citizens 401(k) Plan as
of and subsequent to the Effective Time. To the extent that any Citizens
Employee becomes subject to a surrender or withdrawal fee under any group
annuity contract, or other investment vehicle, which funds the Citizens
401(k) plan, Bancshares shall reimburse such Citizens Employee for any such
fee, as current compensation, within thirty (30) days of the date such fee
is incurred. With respect to the 401(k) plan maintained by Bancshares, all
Citizens Employees shall, as of the Effective Time, be immediately eligible
to participate in such plan. To the extent necessary to achieve immediate
participation, Bancshares shall amend such plan to credit service with
Citizens for purposes of eligibility and vesting.

A-I-2
<PAGE> 76

2.02 Merger and Termination of Defined Benefit Plans. Citizens and Peoples
shall take all action and receive all approvals necessary and appropriate to
merge the Peoples Bank and Loan Company Employees Pension Plan ("Peoples Pension
Plan") into the Citizens National Bank of Hope Retirement Plan ("Citizens
Pension Plan") during 1997. The Citizens Pension Plan shall be the surviving
plan. Bancshares, through its counsel, shall assume responsibility for ensuring
that all necessary documents, filings and actions are timely prepared and made
to accomplish the merger. As soon as practical after execution of this
Agreement, Citizens shall take all action and receive all approvals necessary
and appropriate to terminate the Citizens Pension Plan (as merged with the
Peoples Plan), with such termination to be effective immediately prior to the
Closing Date. Bancshares, through its counsel, shall assume responsibility for
ensuring that all necessary documents, filings and actions are timely prepared
and made to accomplish the termination. Bancshares' counsel shall provide copies
of all such documentation and filings to Citizens' counsel. Benefits shall
continue to accrue under the Citizens Pension Plan up until the Closing Date.
There shall be no amendments made to the Citizens Pension Plan prior to
termination, except for amendments which are necessary either to: (a) effect the
merger of the Peoples Pension Plan into the Citizens Pension Plan; or (b)
maintain the qualified status of the Plan. At the time of distribution,
participants in the Citizens Pension Plan will be given the opportunity to
rollover their benefit directly into the 401(k) plan maintained by Bancshares.

2.03. Approval By Shareholders. Consummation of the Merger shall be
contingent upon its approval by the legally required votes of the shares of
Citizens Common Stock and Bancshares Common Stock at shareholders meetings duly
called for the purpose of voting on the Merger. In the event the number of
shares owned by Citizens Shareholders exercising dissenters' rights would or
could, in the written opinion of Bancshares' outside accountants, reasonably be
expected to cause the cash consideration paid by Bancshares to dissenters to
jeopardize Bancshares' ability to account for the Merger as a pooling of
interests then Bancshares shall have the right to terminate this Agreement. The
Board of Directors of Citizens and Bancshares shall recommend approval of the
Merger to their respective shareholders.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF CITIZENS

Citizens hereby represents and warrants to Bancshares the following:

3.01. Organization, Standing and Power of Citizens. Citizens is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Arkansas and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failure to have such power or authority would not
have a material adverse effect on the business, operations or financial
condition of Citizens or any Citizens Subsidiary (as hereinafter defined).
Citizens is not qualified to do business in any other state or foreign
jurisdiction, and its ownership or leasing of property or the conduct of its
business does not require it to be so qualified, except where such failure to be
so qualified would not have a material adverse effect on the business,
operations or financial condition of Citizens or any Citizens Subsidiary.
Citizens is registered as a bank holding company with the Federal Reserve Board
under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). Citizens
has delivered to Bancshares true, accurate and complete copies of its currently
effective Articles of Incorporation and Bylaws, including all amendments
thereto.

3.02. Ownership, Organization, Standing and Power of Citizens
Subsidiaries. Citizens directly and beneficially owns all of the shares of the
outstanding capital stock of CNB and Peoples. CNB directly and beneficially owns
all of the shares of the outstanding capital stock of CIS. CNB, Peoples and CIS
are hereinafter called collectively the "Citizens Subsidiaries" or individually
a "Citizens Subsidiary". CNB, Peoples and CIS are Citizens's only subsidiaries.
No equity securities of CNB, Peoples or CIS are or may become required to be
issued by reason of any option, warrant, call, right or agreement of any
character whatsoever; there are outstanding no securities or rights convertible
into or exchangeable for shares of any capital stock of CNB, Peoples or CIS; and
there are no other contracts, commitments, understandings or arrangements by
which either CNB, Peoples or CIS is bound to issue additional shares of its
capital stock or options, warrants, calls, rights or agreements to purchase or
acquire any additional shares of its capital stock.

A-I-3
<PAGE> 77

All of the shares of capital stock of CNB and Peoples owned by Citizens and all
of the shares of capital stock of CIS owned by CNB are fully paid and
nonassessable and are owned free and clear of any claim, lien, encumbrance or
agreement with respect thereto. CNB and Peoples are banking associations duly
organized, validly existing and in good standing under, respectively, the laws
of the United States and of Arkansas, and have the corporate power and authority
to own or lease their properties and assets and to carry on their businesses as
they are now being conducted, except where the failure to have such power or
authority would not have a material adverse effect on the business, operations
or financial condition of CNB or Peoples. The deposits of CNB and Peoples are
insured by the Federal Deposit Insurance Corporation ("FDIC") to the extent
provided by law. Citizens has delivered to Bancshares true, accurate and
complete copies of the currently effective Articles of Incorporation and Bylaws
of CNB and Peoples, including all amendments thereto. Except for the interest
held by CNB in its subsidiary, CIS, and for securities held in their capacities
as fiduciaries or as investments made and held in the ordinary course of
business, CNB and Peoples do not own beneficially, directly or indirectly, any
class of equity securities, partnership interests or similar interests of any
corporation, bank, partnership, limited partnership, business trust, association
or similar organization. The authorized capital stock of CNB consists of 200,000
shares of common stock, $5.00 par value, of which 200,000 shares are outstanding
and are owned by Citizens. The authorized capital stock of Peoples consists of
4,000 shares of common stock, $25.00 par value, of which 4,000 shares of common
stock are outstanding and are owned by Citizens. CNB and Peoples or their
predecessor banks have been chartered as banking institutions for more than 5
years. The authorized capital stock of CIS consists of 400 shares of common
stock, no par value, of which 400 shares of common stock are issued and
outstanding and are owned by CNB.

3.03. Capital Structure of Citizens. The authorized capital stock of
Citizens consists of 1,000,000 shares of common stock, $2.00 par value, of which
497,860 shares are issued and outstanding and 2,140 shares are held by Citizens
in its treasury. Neither Citizens, CNB, Peoples nor CIS has issued and has
outstanding bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into securities having the right to vote) on any matters on
which shareholders may vote ("Voting Debt"). All outstanding shares of Citizens
Common Stock are validly issued, fully paid, nonassessable, and have not been
issued in violation of any preemptive rights. There are no options, warrants,
calls, rights, or agreements of any character whatsoever to which Citizens, CNB,
Peoples or CIS is a party or by which Citizens, CNB, Peoples or CIS is obligated
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or any voting debt securities or by which Citizens, CNB,
Peoples or CIS is obligated to grant, extend or enter into any such option,
warrant, call, right or agreement. Immediately before and after the Effective
Time there will be no option, warrant, call, right or agreement obligating
Citizens, CNB, Peoples or CIS to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or obligating Citizens, CNB,
Peoples or CIS to grant, extend or enter into any such option, warrant, call,
right or agreement.

3.04. Authority. Citizens has all requisite corporate power and authority
to enter into this Agreement and the Plan of Merger and, subject only to
approval of this Agreement and the Plan of Merger by the shareholders of
Citizens and of applicable regulatory authorities, to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Citizens's board of directors. This Agreement
and the Plan of Merger have been duly executed and delivered by Citizens, and,
subject to such shareholder approval, each constitutes a valid and binding
obligation of Citizens enforceable in accordance with its terms, except as the
enforceability of the Agreement may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors and by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law). The execution and delivery of this Agreement and the Plan
of Merger do not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or the loss
of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation"), pursuant to any provision of (a) the Articles of Incorporation or
Bylaws of Citizens, CNB, Peoples or CIS or (b) any loan or credit agreement,
note, mortgage, indenture,

A-I-4
<PAGE> 78

lease, or other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Citizens, CNB, Peoples or CIS or their respective
properties or assets, except where such violation would not have a material
adverse effect on the business, operations or financial condition of Citizens or
any Citizens Subsidiary. Other than in connection or in compliance with the
provisions of the ABCA, the Securities Act and the regulations thereunder, the
Securities and Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states, and consents, authorizations, approvals, notices or exemptions required
under the BHC Act, the National Bank Act, Arkansas banking laws, and from other
regulatory agencies, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), is required by or with respect to Citizens,
CNB, Peoples or CIS in connection with the execution and delivery of this
Agreement and the Plan of Merger by Citizens or the consummation by Citizens of
the transactions contemplated hereby and thereby.

3.05. Citizens Financial Statements.

(a) The (i) consolidated balance sheet of Citizens as of December 31,
1996 and 1995 and the related consolidated statements of income,
consolidated statements of cash flows and consolidated statements of
shareholders equity for the year then ended certified by Moore Stephens
Frost P.A., and (ii) the internally prepared and unaudited financial
statements for CNB and Peoples dated June 30, 1997, (items (i)-(ii) being
called collectively the "Citizens Financial Statements"), copies of which
have been furnished by Citizens to Bancshares, have been prepared in
accordance with (A) generally accepted accounting principles and practices
with respect to item (i) and (B) accounting principles and practices with
respect to item (ii), applied on a consistent basis throughout the periods
involved (except as otherwise noted therein and, except for year-end
adjustments of the unaudited financial statements of a non-material
nature), present fairly the consolidated financial condition of Citizens
and the financial condition of CNB and Peoples, at the dates, and the
results of operations and cash flows for the periods, stated therein.
Neither Citizens, CNB, Peoples nor CIS has any liability of any nature,
whether direct, indirect, accrued, absolute, contingent or otherwise, which
is material to Citizens except as provided for or disclosed in the Citizens
Financial Statements and except for such of the following liabilities as
are incurred in the ordinary course of business:

(i) deposit liabilities and interest payable thereon,

(ii) federal funds purchased and securities sold under repurchase
agreements and interest payable thereon,

(iii) other short term borrowings,

(iv) contingent liability upon negotiable instruments endorsed for
the purpose of collection,

(v) taxes,

(vi) accounts payable of the operating business,

(vii) salaries and benefits payable,

(viii) unearned income and premiums,

(ix) abandoned and garnished accounts, and

(x) letters of credit and similar commitments.

(b) Without limitation of the foregoing, Citizens has no reserve
allowance for self-insured health and dental benefit claims and knows of no
facts which should cause it to create such a reserve.

3.06. Citizens Reports. Citizens, CNB, Peoples and CIS have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were and are required to be filed with (i)
the Federal Reserve Board ("FRB"), (ii) the FDIC, (iii) the Arkansas State Bank
Department (the "ASBD") and (iv) any other applicable securities, banking or
regulatory authorities

A-I-5
<PAGE> 79

(all such reports and statements are collectively referred to herein as the
"Citizens Reports"), except where such failure to file would not have a material
adverse effect on the business operations or financial condition of Citizens or
any Citizens Subsidiary. The Citizens Reports complied in all material respects
with all of the statutes, rules and regulations enforced or promulgated by the
regulatory authority with which they were filed and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

3.07. Information Supplied. None of the information supplied or to be
supplied by Citizens for inclusion or incorporation by reference in any document
to be filed with the Securities and Exchange Commission ("SEC"), the FRB, or any
regulatory agency in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Citizens has made available to Bancshares all financial and
other information reasonably requested by Bancshares.

3.08. Authorizations; Compliance with Applicable Laws. Citizens, CNB,
Peoples and CIS hold all authorizations, permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities which are material
to the operations of the businesses of Citizens, CNB, Peoples or CIS (the
"Citizens Permits"), including appropriate authorizations from the ASBD.
Citizens, CNB, Peoples and CIS are in compliance with the terms of the Citizens
Permits, except where the failure so to comply would not have a material adverse
effect on Citizens, CNB, Peoples or CIS. To the knowledge of Citizens, the
businesses of Citizens, CNB, Peoples and CIS are not being conducted in
violation of any federal, state or local law, statute, ordinance or regulation
of any Governmental Entity (collectively "Laws"), including, without limitation,
Regulation O of the FRB, except for possible violations which individually or in
the aggregate do not and, insofar as reasonably can be foreseen, in the future
will not, have a material adverse effect on Citizens, CNB, Peoples or CIS. No
investigation or review by any Governmental Entity with respect to Citizens,
CNB, Peoples or CIS is pending or, to the best of their knowledge, threatened,
nor has any Governmental Entity indicated an intention to conduct the same.
Without limiting the foregoing, to the knowledge of Citizens there have been no
acts or omissions occurring on or with respect to real estate currently or
previously owned, leased or otherwise used in the ordinary course of business by
Citizens, CNB, Peoples or CIS in which Citizens, CNB, Peoples or CIS has or had
an investment or security interest (by mortgage, deed of trust, or otherwise),
including, without limitation, properties under foreclosure, properties held by
Citizens, CNB, Peoples or CIS in its capacity as a trustee, or properties in
which any venture capital or similar unit of Citizens or Peoples has or had an
interest (the "Citizens Property"), which, to the knowledge of Citizens,
constitute or result, or may have constituted or resulted, in the creation of
any federal, state or common law nuisance (whether or not the nuisance condition
is, or was, foreseen or unforeseen) or which, to the knowledge of Citizens, do
not comply or have not complied with federal, state or local environmental laws
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental, Response, Compensation and Liability Act, as
amended, and their state and local law counterparts, all rules and regulations
promulgated thereunder and all other legal requirements associated with the
ownership and use of the Citizens Property (collectively, "Environmental Laws"),
and as a result of which acts or omissions Citizens, CNB or Peoples is subject
to or reasonably likely to incur a material liability or suffer a diminution in
value of any interest exceeding $100,000.00. To their knowledge, neither
Citizens, CNB, Peoples nor CIS is subject to or reasonably likely to incur a
material liability or suffer a diminution in value of any interest exceeding
$100,000.00 as a result of its ownership, lease, operation, or use of any
Citizens Property or as a result of its investment or security interest (as
described above) in any Citizens Property (a) that is contaminated by or
contains any hazardous waste, toxic substances or related materials, including
without limitation asbestos, PCBs, pesticides, herbicides, petroleum products,
substances defined as "hazardous substances" or "toxic substances" in the
Environmental Laws, and any other substances or waste that is hazardous to human
health or the environment (collectively, "Toxic Substances"), or (b) on which
any Toxic Substance has been stored, disposed of, placed, or used in the
construction thereof. No claim, action, suit or proceeding is pending against
Citizens, CNB, Peoples or CIS relating to the Citizens Property before any court
or other governmental authority or arbitration tribunal relating to Toxic
Substances,

A-I-6
<PAGE> 80

pollution or the environment, and there is no outstanding judgment, order, writ,
injunction, decree, or award against or affecting Citizens, CNB, Peoples or CIS
with respect thereto.

3.09. Litigation and Claims. (a) Neither Citizens, CNB, Peoples nor CIS is
subject to any continuing order of, or written agreement or memorandum of
understanding with, or continuing material investigation by, any federal or
state banking or insurance authority or other Governmental Entity, or any
judgment, order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or other orders of
any bank regulatory authority, (b) there is no claim of any kind, action, suit,
litigation, proceeding, arbitration, investigation, or controversy affecting
Citizens, CNB, Peoples or CIS pending or, to the best of their knowledge,
threatened, which will have or can reasonably be expected to have a material
adverse effect on Citizens, and (c) there are no uncured material violations, or
violations with respect to which material refunds or restitutions may be
required, cited in any compliance report to Citizens, CNB, Peoples or CIS as a
result of the examination by any bank regulatory authority.

3.10. Taxes. Citizens, CNB, Peoples and CIS have filed all tax returns
required to be filed by them and have paid or have set up an adequate reserve
for the payment of, all taxes required to be paid as shown on such returns, and
the most recent Citizens Financial Statements reflect an adequate reserve for
all taxes payable by Citizens, CNB, Peoples and CIS accrued through the date of
such financial statements. There has been no examination by the United States
Internal Revenue Service ("IRS") of Citizens, CNB, Peoples or CIS for over seven
years. There is no examination pending by the IRS with respect to Citizens, CNB,
Peoples or CIS. Neither Citizens, CNB, Peoples nor CIS has executed or filed
with the IRS any agreement which is still in effect extending the period for
assessment and collection of any federal tax, and there are no existing material
disputes as to federal, state, or local taxes due from Citizens, CNB, Peoples or
CIS. There are no material liens for taxes upon the assets of Citizens, CNB,
Peoples or CIS, except for statutory liens for taxes not yet delinquent. Neither
Citizens, CNB, Peoples nor CIS is a party to any action or proceeding by any
governmental authority for assessment and collection of taxes, and no claim for
assessment and collection of taxes has been asserted against any of them. For
the purpose of this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all federal, state, and
local income, profits, franchise, gross receipts, payroll, sales, employment,
use, personal and real property, withholding, excise and other taxes, duties or
assessments of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts. Citizens, CNB, Peoples and CIS
have withheld from their employees and timely paid to the appropriate
governmental agency proper and accurate amounts for all periods through the date
hereof in material compliance with all tax withholding provisions of applicable
federal, state, and local laws (including without limitation income, social
security and employment tax withholding for all types of compensation).

3.11. Certain Agreements. Except as disclosed in Exhibit 3.12(j), neither
Citizens, CNB, Peoples nor CIS is a party to any (i) consulting, professional
services, employment or other agreement not terminable at will providing any
term of employment, compensation, guarantee, or severance or supplemental
retirement benefit, (ii) union, guild or collective bargaining agreement, (iii)
agreement or plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of the transactions
contemplated by this Agreement, (iv) any stock option plan, stock appreciation
rights plan, restricted stock plan, stock purchase plan or similar plan granting
rights to acquire stock in Citizens, CNB, Peoples or CIS, or (v) contract
containing covenants which limit the ability of Citizens, CNB, Peoples or CIS to
compete in any line of business or with any person or which involve any
restriction of the geographical area in which, or method by which, Citizens,
CNB, Peoples or CIS may carry on its business (other than as may be required by
law or applicable regulatory authorities). Citizens, CNB, Peoples and CIS shall
terminate all existing consulting, professional services and employment
contracts, other than at will employment contracts by no later than the Closing
Date.

3.12. Benefit Plans.

(a) With respect to any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,

A-I-7
<PAGE> 81

retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, policy, program, arrangement or understanding (whether or
not legally binding) including "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section (3)(1) of ERISA) (sometimes referred to
herein as "Welfare Plans")(collectively, "Plans") providing benefits to any
current or former employee, officer or director of Citizens or a Citizens
Subsidiary that are in effect on the date hereof, and all Plans currently
maintained, or contributed to, or required to be maintained or contributed to,
by Citizens or any other person or entity that, together with Citizens, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") or Section 4001(a) (14)
or 4001(b) of ERISA (each a "Commonly Controlled Entity") (including each
Pension Plan that Citizens or any Commonly Controlled Entity that is, or within
the last six years was, subject to Title IV of ERISA and for which Citizens
could have material liability) (all of the foregoing such plans being herein
referred to as the "Citizens Benefit Plans"), Citizens has delivered, or caused
to be delivered, to Bancshares true, complete and correct copies of (i) each
Citizens Benefit Plan, (ii) annual reports (Forms 5500) and all schedules
thereto filed with the IRS with respect to each Citizens Benefit Plan for the
past five years (if any such report was required), (iii) the most recent summary
plan description for each Citizens Benefit Plan for which such summary plan
description is required, (iv) each trust agreement, group annuity contract,
investment management agreement, and any other insurance contract or funding
arrangement relating to any Citizens Benefit Plan; (v) the most recent actuarial
report or valuation relating to a Citizens Benefit Plan subject to Title IV of
ERISA; (vi) the most recent determination letter as to qualification of each
Citizens Benefit Plan and the forms and attachments submitted to the IRS for
such determination letter; (vii) a list of the Citizens Benefit Plans; (viii)
copies of all tests for compliance for the past five years under Code Sections
401(a)(4), 401(a)(26), 401(k), 401(m), 404, 410(b), 415, and 416, if applicable,
for the Citizens Benefit Plans; (ix) copies of all closing agreements and
documentation regarding any IRS, Department of Labor or Pension Benefit Guaranty
Corporation audits or self-correction procedures affecting the qualification
and/or operation of each Citizens Benefit Plan; and (x) all Pension Benefit
Guaranty Corporation filings within the last five years.

(b) Exhibit 3.12(b) lists each deferred compensation plan, bonus and
incentive arrangement, stock option plan, restricted stock arrangement,
"cafeteria plan" as described in Section 125 of the Code and any other "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) and each "employee
pension benefit plan" (as defined in Section 3 (2) of ERISA) maintained by
Citizens or any Commonly Controlled Entity or to which Citizens or any Commonly
Controlled Entity contributes or is required to contribute, and sets forth the
amount of any liability of Citizens for contributions more than 30 days past due
with respect to each as of the date hereof and as of the end of any subsequent
month ending prior to the Closing.

(c) Unless otherwise listed in Exhibit 3.12(b), neither Citizens nor any
Commonly Controlled Entity nor any entity that has ever been a Commonly
Controlled Entity has ever maintained any Pension Plan which is a defined
benefit plan. In the event a defined benefit plan maintained by Citizens or any
Commonly Controlled Entity has been terminated within the last five years,
Citizens has delivered to Bancshares a copy of all forms and documents required
to be filed with the Pension Benefit Guaranty Corporation on termination and
copies of any notices received from the Pension Benefit Guaranty Corporation
regarding such plan.

(d) No Welfare Plan provides for continuing benefits or coverage for any
participant, beneficiary or former employee after such participant's or former
employee's termination of employment except as may be required by Section 4980B
of the Code and Sections 601-608 of ERISA.

(e) Each Citizens Benefit Plan has been administered in accordance with its
terms. Except as disclosed in Exhibit 3.12(e), all of the Citizens Benefit Plans
and any related funding instruments comply, and have complied in the past, both
as to form and operation in all material respects (including, but not limited to
applicable reporting and disclosure requirements) with the provisions of ERISA,
the Code and with all other applicable laws, rules and regulations. Unless
otherwise listed in Exhibit 3.12(e), with respect to each Pension Plan that is
intended to be tax-qualified under Section 401(a) of the Code, a favorable
determination letter as to the qualification under the Code of each such Pension
Plan and each amendment thereto has been issued by the IRS, including any such
letter that covers the amendments required by the Tax Reform Act of 1986 (and

A-I-8
<PAGE> 82

nothing has occurred since the date of the last such determination letter which
resulted in, or is likely to result in, the revocation of such determination).
No event or condition exists which could reasonably be expected to adversely
affect the qualified status of a Citizens Benefit Plan that is a Pension Plan.

(f) Neither Citizens nor any Commonly Controlled Entity, nor any plan
fiduciary of any Citizens Benefit Plan or, to the best knowledge of Citizens,
any other party in interest of any Citizens Benefit Plan, has engaged in any
transaction in violation of Section 406 of ERISA (for which transaction no
exemption exists under Section 408 of ERISA) or in any "prohibited transaction"
as defined in Section 4975(c)(1) of the Code (for which no exemption exists
under Section 4975(c)(2) or 4975(d) of the Code) or engaged in any other breach
of fiduciary responsibility that could subject Citizens or any Commonly
Controlled Entity or any officer of Citizens or any Commonly Controlled Entity
to tax or penalty under ERISA, the Code or other applicable law. Except as
disclosed in Exhibit 3.12(f), neither any Citizens Benefit Plan that is a
Pension Plan or a funded Welfare Plan nor any trust of such plan has been
terminated, nor has there been any "reportable event" (as that term is defined
in Section 4043 of ERISA) with respect to a Citizens Benefit Plan that is a
Pension Plan, as to which Citizens or any Commonly Controlled Entity could have
any liability.

(g) Neither Citizens nor any Commonly Controlled Entity has ever maintained
or contributed to, or has participated in or agreed to participate in, a
multi-employer plan (as defined in Section 3(37) of ERISA), and neither Citizens
nor any Commonly Controlled Entity could have any liability under a
multi-employer plan.

(h) None of the Citizens Benefit Plans that is a Pension Plan has an
"accumulated funding deficiency" (as such term is defined in Section 302 of
ERISA or Section 412 of the Code), and there has been no application for a
waiver of the minimum funding standards imposed by Section 412 of the Code with
respect to any such Pension Plan.

(i) Except as set forth in Exhibit 3.12(i) there are no claims pending with
respect to, or under, any Citizens Benefit Plan other than routine claims for
plan benefits, and there are no disputes or litigation pending or threatened
with respect to any such plans, and no such claim, dispute or litigation appears
reasonably likely to arise.

(j) Except as set forth in Exhibit 3.12(j), neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment to be made by Citizens, Bancshares or any
Commonly Controlled Entity (including, without limitation, severance,
unemployment compensation, golden parachute (defined in Section 280G of the
Code), or otherwise becoming due to any employee, or (ii) increase or vest any
benefits otherwise payable under any Citizens Benefit Plan.

(k) With respect to any Citizens Benefit Plan that is a Welfare Plan (i) no
such Benefit Plan is funded through a "welfare benefit fund," as such term is
defined in Section 419(e) of the Code, (ii) each such Citizens Benefit Plan that
is a "group health plan," as such term is defined in Section 5000(b)(1) of the
Code, complies in all material respects with the applicable requirements of
Section 4980B of the Code and Sections 601-609 of ERISA, and (iii) each such
Citizens Benefit Plan may be amended or terminated without any liability to
Citizens on or at any time after the consummation of this Agreement.

(l) Neither Citizens nor a Commonly Controlled Entity has incurred any
material liability with respect to a Pension Plan (other than for contributions
not yet due) and to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums not yet due), which liability has not been fully paid as of
the date hereof.

(m) Except as set forth in Exhibit 3.12(m) or as required by applicable
law, since June 30, 1996 there has not been any adoption or amendment in any
material respect of any Citizens Benefit Plan. Except as disclosed in Exhibit
3.12(m), there exist no employment, consulting, severance, termination or
indemnification agreements, arrangements or understandings between Citizens or
any Commonly Controlled Entity and any current or former employee, officer or
director of Citizens or any Commonly Controlled Entity.

(n) Except as set forth in Exhibit 3.12(n), any amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer
or director of Citizens or any Commonly Controlled Entity who is a "disqualified

A-I-9
<PAGE> 83

individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or Citizens Benefit Plan currently in effect would not
be characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).

3.13. Insurance. Citizens has delivered to Bancshares correct and complete
copies of all material policies of insurance of Citizens, CNB, Peoples and CIS
currently in effect, including, but not limited to, directors and officers
liability policies and blanket bond policies. Neither Citizens, CNB, Peoples nor
CIS has any liability for unpaid premiums or premium adjustments not properly
reflected on the Citizens Financial Statements.

3.14. Conduct of Citizens to Date. Except as contemplated by this Agreement
and the Plan of Merger, from and after December 31, 1996 through the date of
this Agreement: (a) Citizens, CNB, Peoples and CIS have carried on their
respective businesses in the ordinary and usual course consistent with past
practices, (b) Citizens, CNB, Peoples and CIS have not issued or sold any
capital stock or issued or sold any corporate debt securities which would be
classified as long term debt on the balance sheet of Citizens, CNB, Peoples or
CIS, (c) Citizens, CNB, Peoples and CIS have not granted any option for the
purchase of capital stock, effected any stock split, or otherwise changed their
capitalization, (d) Except as set forth in Exhibit 3.14, Citizens has not
declared, set aside, or paid any cash or stock dividend or other distribution in
respect to its capital stock, (e) neither Citizens, CNB, Peoples nor CIS has
incurred any material obligation or liability (absolute or contingent), except
normal trade or business obligations or liabilities incurred in the ordinary
course of business or mortgaged, pledged, or subjected to lien, claim, security
interest, charge, encumbrance or restriction any of its assets or properties,
(f) neither Citizens, CNB, Peoples nor CIS has discharged or satisfied any
material lien, mortgage, pledge, claim, security interest, charges, encumbrance,
or restriction or paid any material obligation or liability (absolute or
contingent), other than in the ordinary course of business, (g) neither
Citizens, CNB, Peoples nor CIS has since December 31, 1996, sold, assigned,
transferred, leased, exchanged, or otherwise disposed of any of its properties
or assets other than for a fair consideration in the ordinary course of
business, (h) except as set forth in Exhibit 3.14, neither Citizens, CNB,
Peoples nor CIS has increased the rate of compensation of, or paid any bonus to,
any of its directors, officers, or other employees, except merit or promotion
increases in accordance with existing policy; entered into any new, or amended
or supplemented any existing, employment, management, consulting, deferred
compensation, severance, or other similar contract; adopted, entered into,
terminated, amended or modified any Citizens Benefit Plan in respect of any of
present or former directors, officers or other employees; or agreed to do any of
the foregoing, (i) neither Citizens, CNB, Peoples nor CIS has suffered any
material damage, destruction, or loss, whether as the result of flood, fire,
explosion, earthquake, accident, casualty, labor trouble, requisition or taking
of property by any government or any agency of any government, windstorm,
embargo, riot, act of God, or other similar or dissimilar casualty or event or
otherwise, whether or not covered by insurance, (j) except as set forth in
Exhibit 3.14, neither Citizens, CNB, Peoples nor CIS has cancelled or
compromised any debt to an extent exceeding $50,000.00 owed to Citizens, CNB,
Peoples or CIS or claim to an extent exceeding $50,000.00 asserted by Citizens,
CNB, Peoples or CIS, (k) neither Citizens, CNB, Peoples nor CIS has entered into
any transaction, contract, or commitment outside the ordinary course of its
business, (1) neither Citizens, CNB, Peoples nor CIS has entered, or agreed to
enter, into any agreement or arrangement granting any preferential right to
purchase any of its material assets, properties or rights or requiring the
consent of any party to the transfer and assignment of any such material assets,
properties or rights, (m) there has not been any change in the method of
accounting or accounting practices of Citizens, CNB, Peoples and CIS, and (n)
Citizens, CNB, Peoples and CIS have kept all records substantially in accordance
with all regulatory and statutory requirements and substantially in accordance
with industry standards specified by the American Bankers Association, and have
retained such records for the periods required by statute, regulation or
American Bankers Association industry standards.

3.15. Material Adverse Change. Since December 31, 1996, there has been no
material adverse change in the financial condition, results of operations or
business of Citizens or any Citizens Subsidiary.

3.16. Properties, Leases and Other Agreements. Except (i) with respect to
debts reflected in the Citizens Financial Statements, (ii) for any lien for
current taxes not yet delinquent, (iii) for pledges to secure deposits and (iv)
for such other liens, security interests, claims, charges, options or other
encumbrances and

A-I-10
<PAGE> 84

imperfections of title which do not materially affect the value or interfere
with or impair the present and continued use of personal or real property
reflected in the Citizens Financial Statements or acquired since the date of
such Statements, Citizens, CNB, Peoples and CIS have good title, free and clear
of any liens, security interests, claims, charges, options or other encumbrances
to all of the personal and real property reflected in the Citizens Financial
Statements, and all personal and real property acquired since the date of such
Citizens Financial Statements, except such personal and real property as has
been disposed of in the ordinary course of business. Substantially all of the
buildings and equipment in regular use by Citizens, CNB, Peoples and CIS have
been reasonably maintained and are in good and serviceable condition, reasonable
wear and tear excepted. All leases material to Citizens, CNB, Peoples and CIS
pursuant to which Citizens, CNB, Peoples or CIS, as lessee, leases real or
personal property are valid and effective in accordance with their respective
terms and there is not, under any of such leases, any material existing default
by Citizens, CNB, Peoples or CIS, or, to their knowledge, any other party
thereto, or any event which with notice or lapse of time or both would
constitute such a material default. No options to renew said leases have lapsed
and the terms of the leases govern the rights of the respective landlords of
Citizens, CNB, Peoples and CIS. Except for the interest held by CNB in its
subsidiary, CIS, and for securities held in their capacities as fiduciaries or
as investments made and held in the ordinary course of business, neither
Citizens nor any Citizens Subsidiary owns beneficially, directly or indirectly,
any equity securities, partnership interests or similar interests of any
corporation, bank, partnership, limited partnership, business trust association
or similar organization.

3.17. No Untrue Statements. To the knowledge of Citizens, no representation
or warranty hereunder or information contained in any financial statement or any
other document delivered to Bancshares pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading.

3.18. Proper Documentation. With respect to all loans to borrowers which
are payable to Citizens, CNB, Peoples or CIS either directly or as a participant
and except for such imperfections in documentation which when considered as a
whole would not have a material adverse effect on the business, operations or
financial condition of either Citizens, CNB, Peoples or CIS:

(a) All loans were made for good, valuable and adequate consideration
in the normal and ordinary course of business, and the notes and other
evidences of indebtedness and any loan agreements or security documents
executed in connection therewith are true and genuine and, to the knowledge
of Citizens, constitute the valid and legally binding obligations of the
borrowers to whom the loans were made and are legally enforceable against
such borrowers in accordance with their terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar debtor
relief laws from time to time in effect, as well as general principles of
equity applied by a court of proper jurisdiction (regardless of whether
such enforceability is considered in a proceeding in equity or at law);

(b) The amounts represented to Bancshares as the balances owing on the
loans are the correct amounts actually and unconditionally owing, are
undisputed, and are not subject to any offsets, credits, deductions or
counterclaims;

(c) The collateral securing each loan as referenced in a loan officer
worksheet, loan summary report or similar interoffice loan documentation is
in fact the collateral held by Citizens, CNB, Peoples or CIS to secure each
loan;

(d) Citizens, CNB, Peoples or CIS has possession of all loan document
files and credit files for all loans held by them containing promissory
notes and other relevant evidences of indebtedness with original signatures
of their borrowers and guarantors;

(e) To their knowledge, Citizens, CNB, Peoples and CIS Peoples hold
validly perfected liens or security interests in the collateral granted to
them to secure all loans as referenced in the loan officer worksheets, loan
summary reports or similar interoffice loan documentation and the loan or
credit files contain the original security agreements, mortgages, or other
lien creation and perfection documents unless originals of such documents
are filed of public record;

A-I-11
<PAGE> 85

(f) To their knowledge, each lien or security interest of Citizens,
CNB, Peoples or CIS in the collateral held for each loan is properly
perfected in the priority described as being held by Citizens, CNB, Peoples
or CIS in the loan officer worksheets, loan summary reports or similar
interoffice loan documentation contained in the loan document or credit
files;

(g) Citizens, CNB, Peoples and CIS are in possession of all collateral
that the loan document files or credit files indicate they have in their
possession;

(h) To their knowledge, all guaranties granted to Citizens, CNB,
Peoples and CIS to insure payment of loans constitute the valid and legally
binding obligations of the guarantors and are enforceable in accordance
with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar debtor relief laws from time to
time in effect, as well as general principles of equity applied by a court
of proper jurisdiction (regardless of whether such enforceability is
considered in a proceeding in equity or at law);

(i) With respect to any loans in which Citizens, CNB, Peoples and CIS
have sold participation interests to another bank or other financial
institution, to their knowledge, none of the buyers of such participation
interests are in default under any participation agreements.

3.19. Not in Default. Neither Citizens, CNB, Peoples nor CIS is in default
under any material agreement, ordinance, resolution, decree, bond, note,
indenture, order or judgment to which it is a party, by which it is bound, or to
which its properties or assets are subject.

3.20 No Individual Warranties. No representation or warranty is made by any
director, officer, or employee of Citizens, CNB, Peoples or CIS as an
individual.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BANCSHARES

Bancshares hereby represents and warrants to Citizens as follows:

4.01. Organization, Standing and Power. Bancshares is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arkansas and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to have such power or authority would not have a
material adverse effect on the business, operations or financial condition of
Bancshares and its subsidiaries. Bancshares is registered as a bank holding
company with the FRB under the BHC Act.

4.02. Authority. Subject to the approval of this Agreement and the Plan of
Merger by the shareholders of Bancshares and by applicable regulatory
authorities, Bancshares has all requisite corporate power and authority to enter
into this Agreement and the Plan of Merger and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Plan of Merger and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Bancshares' board of directors. This Agreement and the Plan of
Merger have been duly executed and delivered by Bancshares and, subject to
regulatory approval, each constitutes a valid and binding obligation of
Bancshares enforceable in accordance with its terms, except as the
enforceability of the Agreement may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
relating to or affecting the rights of creditors. The execution and delivery of
this Agreement and the Plan of Merger do not, and the consummation of the
transactions contemplated hereby and thereby will not, result in any Violation
pursuant to any provision of the Articles of Incorporation or Bylaws of
Bancshares or any of its subsidiaries or result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Bancshares or
any of its subsidiaries or their respective properties or assets. Other than as
described below in connection or in compliance with the provisions of the ABCA,
the Securities Act, the Exchange Act, the securities or blue sky laws of the
various states, and consents, authorizations, approvals, notices or exemptions
required under

A-I-12
<PAGE> 86

the BHC Act, the National Bank Act, Arkansas banking laws, and from other
regulatory authorities, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Bancshares in connection with the execution and delivery of
this Agreement and the Plan of Merger by Bancshares or the consummation by
Bancshares of the transactions contemplated hereby and thereby, the failure to
obtain which would have a material adverse effect on Bancshares or any
Bancshares subsidiary. Pursuant to a contract Bancshares must obtain the consent
of First Tennessee Bank, N.A. prior to consummation of the merger.

4.03. Capital Structure of Bancshares. The authorized capital stock of
Bancshares consists of 24,000,000 shares of common stock, $1.00 par value, and
500,000 shares of preferred stock, $1.00 par value, of which 9,851,892 shares of
common stock are issued and outstanding. Bancshares has no issued and
outstanding bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into securities having the right to vote) on any matters on
which shareholders may vote. All outstanding shares of Bancshares common stock
are validly issued, fully paid, nonassessable, and not subject to preemptive
rights. Except as disclosed in Exhibit 4.03, there are no options, warrants,
calls, rights, or agreements of any character whatsoever to which Bancshares is
a party or by which Bancshares is obligated to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or any
voting debt securities, or by which Bancshares is obligated to grant, extend or
enter into any such option, warrant, call, right or agreement. Immediately
before and after the Effective Time there will be no option, warrant, call,
right or agreement obligating Bancshares to issue, deliver or sell, or cause to
be issued, delivered or sold, any shares of capital stock, or obligating
Bancshares to grant, extend or enter into any such option, warrant, call, right
or agreement, except as disclosed in Exhibit 4.03. Notwithstanding the foregoing
or any other provision of this Agreement, (i) no issuance of options to purchase
common stock of Bancshares to executive officers of Bancshares and its
subsidiaries, (ii) no issuance of shares of common stock pursuant to the
exercise of outstanding options, and (iii) no increase in the authorized or
outstanding common stock of Bancshares, or commitment to issue additional shares
of Bancshares common stock, in connection with any acquisition by Bancshares of
a bank or corporation, through merger or otherwise, shall constitute a breach of
any representation, warranty or other provision of this Agreement. Bancshares
will provide notice to Citizens of any commitments to issue Bancshares common
stock made between the date hereof and the Effective Time.

4.04. Bancshares Financial Statements. (a) The (i) consolidated balance
sheets of Bancshares as of December 31, 1996 and 1995 and the related
consolidated statements of income, consolidated statements of cash flows and
consolidated statements of shareholders equity for the years then ended
certified by Arthur Andersen LLP ("Bancshares Financial Statements") copies of
which have been furnished by Bancshares to Citizens, have been prepared in
accordance with generally accepted accounting principles and practices applied
on a consistent basis throughout the periods involved (except as otherwise noted
therein and except for year end adjustments of a non-material nature), and
present fairly the consolidated financial condition of Bancshares, at the dates,
and the consolidated results of operations and cash flows for the periods,
stated therein. Neither Bancshares nor any Bancshares subsidiary has any
liability of any nature, whether direct, indirect, accrued, absolute, contingent
or otherwise, which is material to Bancshares, except as provided for or
disclosed in the Bancshares Financial Statements and except for such of the
following liabilities as are incurred in the ordinary course of business:

(i) deposit liabilities and interest payable thereon,

(ii) federal funds purchased and securities sold under repurchase
agreements and interest payable thereon,

(iii) other short term borrowings,

(iv) contingent liability upon negotiable instruments endorsed for the
purpose of collection,

(v) taxes,

(vi) accounts payable of the operating business,

(vii) salaries and benefits payable,

A-I-13
<PAGE> 87

(viii) unearned income and premiums,

(ix) abandoned and garnished accounts, and

(x) letters of credit and similar commitments.

4.05. Bancshares Reports. Bancshares and its subsidiaries have filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were and are required to be filed with (i)
the FRB, (ii) the Office of the Comptroller of the Currency, (iii) the FDIC,
(iv) the Arkansas State Bank Department (the "ASBD"), (v) the SEC, and (vi) any
other applicable securities, banking or regulatory authorities (all such reports
and statements are collectively referred to herein as the "Bancshares Reports")
except where such failure to file would not have a material adverse effect on
the business operations or financial condition of Bancshares. The Bancshares
Reports complied in all material respects with all of the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they
were filed and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

4.06. Authorizations; Compliance with Applicable Laws. Bancshares and its
subsidiaries hold all authorizations, permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities which are material to the
operations of the businesses of Bancshares and its subsidiaries (the "Bancshares
Permits"). Bancshares and its subsidiaries are in compliance with the terms of
the Bancshares Permits, except where the failure to comply would not have a
material adverse effect on Bancshares. The businesses of Bancshares and its
subsidiaries are not being conducted in violation of any Laws, including,
without limitation, Regulation O of the FRB, except for possible violations
which individually or in the aggregate do not and, insofar as reasonably can be
foreseen, in the future will not, have a material adverse effect on Bancshares.
No investigation or review by any Governmental Entity with respect to Bancshares
or its subsidiaries is pending or threatened, nor has any Governmental Entity
indicated an intention to conduct the same. Without limiting the foregoing,
there have been no acts or omissions occurring on or with respect to real estate
currently or previously owned, leased or otherwise used by Bancshares or any
Bancshares subsidiary or in which Bancshares or any Bancshares subsidiary has or
had an investment or security interest (by mortgage, deed of trust, or
otherwise), including, without limitation, properties under foreclosure,
properties held by Bancshares or a Bancshares subsidiary in its capacity as a
trustee, or properties in which any venture capital or similar unit of
Bancshares or a Bancshares subsidiary has or had an interest (the "Bancshares
Property"), which constitute or result, or may have constituted or resulted, in
the creation of any federal, state or common law nuisance (whether or not the
nuisance condition is, or was, foreseen or unforeseen) or which do not comply or
have not complied with federal, state or local Environmental Laws, and as a
result of which acts or omissions Bancshares or a Bancshares subsidiary is
subject to or reasonably likely to incur a material liability. Neither
Bancshares nor any Bancshares subsidiary is subject to or reasonably likely to
incur a material liability as a result of its ownership, lease, operation, or
use of any Bancshares Property or as a result of its investment or security
interest (as described above) in any Bancshares Property (a) that is
contaminated by or contains any hazardous waste, toxic substances or related
materials, including without limitation asbestos, PCBs, pesticides, herbicides,
petroleum products, substances defined as "hazardous substances" or "toxic
substances" in the Environmental Laws, and any other Toxic Substances, or (b) on
which any Toxic Substance has been stored, disposed of, placed, or used in the
construction thereof. No claim, action, suit or proceeding is pending against
Bancshares or any Bancshares subsidiary relating to the Bancshares Property
before any court or other governmental authority or arbitration tribunal
relating to Toxic Substances, pollution or the environment, and there is no
outstanding judgment, order, writ, injunction, decree, or award against or
affecting Bancshares or any Bancshares subsidiary with respect thereto.

4.07. Litigation and Claims. Except as disclosed in Exhibit 4.07, (a)
neither Bancshares nor any Bancshares subsidiary is subject to any continuing
order of, or written agreement or memorandum of understanding with, or
continuing material investigation by, any federal or state banking or insurance
authority or other Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or arbitrator, including,
without limitation, cease-and-desist or other orders of any bank regulatory

A-I-14
<PAGE> 88

authority, (b) there is no claim of any kind, action, suit, litigation,
proceeding, arbitration, investigation, or controversy affecting Bancshares or
any Bancshares subsidiary pending or threatened, which will have or can
reasonably be expected to have a material adverse effect on Bancshares and (c)
there are no uncured material violations, or violations with respect to which
material refunds or restitutions may be required, cited in any compliance report
to Bancshares or any Bancshares subsidiary as a result of the examination by any
bank regulatory authority.

4.08. Regulatory Approval. To the knowledge of Bancshares, there is no
reason that approval from regulatory authorities, including but not limited to
the SEC, necessary to consummate the transactions contemplated hereby cannot or
will not be obtained in the ordinary course, except as has been disclosed in
writing to Citizens.

4.09. No Untrue Statements. To Bancshares knowledge, no representation or
warranty hereunder or information contained in any financial statement or any
other document delivered to Citizens pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading.

4.10. Material Adverse Change. Since December 31, 1996, there has been no
material adverse change in the financial condition, results of operations or
business of Bancshares.

4.11. Not in Default. Neither Bancshares nor any Bancshares subsidiary is
in default under any material agreement, ordinance, resolution, decree, bond,
note, indenture, order or judgment to which it is a party, by which it is bound,
or to which its properties or assets are subject.

ARTICLE V

COVENANTS

5.01. Affirmative Covenants. Citizens hereby covenants and agrees with
Bancshares that prior to the Effective Time, unless the prior written consent of
Bancshares shall have been obtained, which consent shall not be unreasonably
withheld, and except as otherwise contemplated herein, Citizens will and
Citizens will cause CNB, Peoples and CIS to:

(a) operate their businesses only in the usual, regular and ordinary
course consistent with past practices;

(b) use reasonable efforts to preserve intact their business
organization and assets, maintain their rights and franchises, retain the
services of their officers and key employees (except that they shall have
the right to lawfully terminate the employment of any officer or key
employee if such termination is in accordance with Citizens's existing
employment procedures) and maintain their relationships with customers;

(c) use reasonable efforts to maintain and keep their properties in as
good repair and condition as at present, except for depreciation due to
ordinary wear and tear;

(d) use reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that now
maintained;

(e) perform in all material respects all obligations required to be
performed by them under all material contracts, leases, and documents
relating to or affecting their assets, properties, and business;

(f) comply with and perform in all material respects all obligations
and duties imposed upon them by all Laws; and

(g) give Bancshares notice of all board of directors meetings, allow
Bancshares to have a non-voting representative at each such meeting except
to the extent that Citizens's legal counsel advises the directors that
permitting Bancshares's presence would constitute a breach of their
fiduciary duties, and provide Bancshares with all written materials and
communications provided to the directors in connection with such meetings.

A-I-15
<PAGE> 89

5.02. Negative Covenants. Except as specifically contemplated by this
Agreement, from the date hereof until the earlier of the termination of the
Agreement or the Effective Time, Citizens shall not do, and Citizens will cause
CNB, Peoples and CIS not to do, without the prior written consent of Bancshares,
which consent shall not be unreasonably withheld, any of the following:

(a) incur any material liabilities or material obligations, whether
directly or by way of guaranty, including any obligation for borrowed money
whether or not evidenced by a note, bond, debenture or similar instrument,
except in the ordinary course of business consistent with past practice;

(b) (i) except as disclosed in Exhibit 3.14 and except for merit or
promotion increases in accordance with existing policy, grant any bonuses
or increase in compensation to their employees, officers or directors, (ii)
effect any change in retirement or any other benefits to any class of
employees or officers (unless any such change shall be required by this
Agreement or applicable law) which would increase their retirement benefit
liabilities, (iii) adopt, enter into, amend or modify any Citizens Benefit
Plan except as provided herein, or (iv) hire any executive officer or elect
any new director;

(c) except as set forth in Exhibit 5.02(c), declare or pay any
dividend on, or make any other distribution in respect of, their
outstanding shares of capital stock except dividends by CNB, Peoples or
CIS;

(d) (i) redeem, purchase or otherwise acquire any shares of their
capital stock or any securities or obligations convertible into or
exchangeable for any shares of their capital stock, or any options,
warrants, conversion or other rights to acquire any shares of their capital
stock or any such securities or obligations; (ii) merge with or into or
consolidate with any other corporation or bank, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire any
substantial portion of the assets or any class of stock, of any
corporation, bank or other business; (iv) liquidate, sell, dispose of, or
encumber any assets or acquire any assets, other than in the ordinary
course of business consistent with past practice; or (v) split, combine or
reclassify any of their capital or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of their capital stock;

(e) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of their capital
stock of any class (including shares held in treasury), any Voting Debt or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, Voting Debt or convertible securities;

(f) except as required by applicable law, initiate, solicit or
encourage (including by way of furnishing information or assistance), or
take any other action to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as such term is defined below), or negotiate with
any person in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize
any of their officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by
Citizens, CNB, Peoples or CIS to take any such action and, upon learning of
such action by any representative, shall take appropriate steps to
terminate such action and shall promptly notify Bancshares orally of all of
the relevant details relating to all inquiries and proposals which it may
receive relating to any of such matters. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following involving Citizens,
CNB, Peoples or CIS; any merger, consolidation, share exchange or other
business combination; a sale, lease, exchange, mortgage, pledge, transfer
or other disposition of a substantial portion of assets; a sale of shares
of capital stock (or securities convertible or exchangeable into or
otherwise evidencing, or any agreement or instrument evidencing, the right
to acquire capital stock);

(g) propose or adopt any amendments to their corporate charters or
bylaws except as provided in this Agreement;

(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle
with respect to any acquisition of a material amount of assets or

A-I-16
<PAGE> 90

securities or any release or relinquishment of any material contract rights
not in the ordinary course of business;

(i) except in their fiduciary capacities, purchase any shares of
Bancshares common stock;

(j) change any method of accounting in effect at December 31, 1996, or
change any method of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1996, except as may be
required by law or generally accepted accounting principles;

(k) change the lending, investment, asset/liability management and
other material policies concerning the business of Citizens, CNB, Peoples
or CIS, unless required by Law or order or unless such change does not
cause a material adverse effect on Citizens, CNB, Peoples or CIS;

(l) agree in writing or otherwise to do any of the foregoing;

(m) make any single new loan or series of loans not in accordance with
existing loan policies to one borrower or related series of borrowers in an
aggregate amount greater than $250,000.00;

(n) sell or otherwise dispose of securities owned as investments
except at maturity dates or in accordance with past practices for
securities held for sale or trading or in accordance with Generally
Accepted Accounting Principles for securities classified as "held to
maturity"; or

(o) sell or dispose of any real estate or other assets having a value
in excess of $100,000.00.

5.03. Access and Information. Upon reasonable notice, Citizens shall (and
shall cause CNB, Peoples and CIS to) afford to Bancshares's officers, employees,
accountants, counsel and other representatives, access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records. During such period, Citizens shall
(and shall cause CNB, Peoples and CIS to) furnish promptly to Bancshares (i) a
copy of each Citizens Report filed or received by it during such period pursuant
to the requirements of all applicable federal or state banking laws or bank
holding company laws promptly after such documents are available, (ii) the
monthly financial statements of CNB, Peoples and CIS promptly after such
financial statements are available, (iii) a summary of any action taken by the
Boards of Directors, or any committee thereof, of Citizens, CNB, Peoples and
CIS, and (iv) all other information concerning its business, properties and
personnel as Bancshares may reasonably request. Unless otherwise required by
law, each party will hold any information obtained from the other in connection
with the transaction which is nonpublic in confidence until such time as such
information otherwise becomes publicly available through no wrongful act of the
party holding nonpublic information of the other party, and in the event of
termination of this Agreement for any reason, each party shall promptly return
all nonpublic documents obtained from the other party, and any copies made of
such documents, to such other party or destroy such documents and copies.

5.04. Update Disclosure; Breaches. From and after the date hereof until the
earlier of the termination of this Agreement or the Effective Time, Citizens and
Bancshares shall provide to the other party prompt notice of any matters which
have become known or which have occurred from and after the date hereof which
are material to the financial condition or operations of the disclosing party or
which have a material bearing on any matter dealt with herein.

5.05. Amendment of Citizens Articles. Citizens shall prior to the Closing
Date effect an amendment to Citizens's Articles of Incorporation to elect for
Citizens to be governed by the Arkansas Business Corporation Act of 1987.

5.06. Quarterly Reports; Current Reports. Bancshares shall, between the
date of this Agreement and the Effective Time, promptly provide to Citizens
copies of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
its Current Reports on Form 8-K filed with the Securities and Exchange
Commission and its regulatory reports filed with the FRB.

A-I-17
<PAGE> 91

5.07. Employee Benefits. Bancshares agrees to provide Citizens, CNB,
Peoples and CIS employees ("Citizens Employees") who become employed by
Bancshares or who remain employed by any Citizens Subsidiary following the
Merger with substantially the same benefits as those provided to other
Bancshares employees. For purposes of Bancshares 401(k) and welfare plans,
Citizens Employees shall receive credit for all service performed for Citizens,
CNB, Peoples, and CIS ("Citizens Service") for all purposes under the plans
including, but not limited to, eligibility service, accrual service and vesting
service. All Citizens Employees who have satisfied the eligibility service
required for any such plan, after taking into consideration all Citizens
Service, as described above, shall enter such plan(s) immediately at the
Effective Time. To the extent necessary to satisfy this provision, Bancshares
agrees to amend any such plan(s) to provide for the crediting of Citizens
Service and the addition of the Effective Time as an entry date.

5.08. Registration of Bancshares Stock. Bancshares will prepare and file
with the SEC, as soon as practicable following the date hereof, a registration
statement on Form S-4 for the registration under the Securities Act of the
shares of Bancshares common stock constituting the consideration for the Merger.
Bancshares shall use its best efforts to cause the registration statement to
become effective as soon as practicable, and to cause such shares of Bancshares
common stock to be listed or included for trading on the NASDAQ National Market
or any other market on which shares of Bancshares common stock trade at the time
of effectiveness of the registration statement.

5.09. Ability to Perform. Neither Citizens nor Bancshares will knowingly
take action which would or is reasonably likely to (i) adversely affect the
ability of either of Bancshares or Citizens to obtain any necessary approvals of
governmental authorities required for the transactions contemplated hereby; (ii)
adversely affect Citizens' or Bancshares' ability to perform their covenants and
agreements under this Agreement; or (iii) result in any of the conditions to the
Merger set forth in Article VIII not being satisfied.

5.10. Accounting. Neither Citizens, Bancshares, any Citizens Subsidiary,
nor any Bancshares Subsidiary will knowingly take any action that would prevent
the Merger from qualifying for pooling of interests accounting treatment.

ARTICLE VI

ADDITIONAL AGREEMENTS

6.01. Shareholders Meeting. Citizens and Bancshares shall call meetings of
their shareholders to be held as promptly as practicable for the purpose of
voting upon the Merger Agreements.

6.02. Legal Conditions to Merger. Each of Citizens and Bancshares will take
all reasonable actions necessary to comply promptly with all legal requirements
it may have with respect to the Merger (including furnishing all information
required by the FRB or in connection with approvals of or filings with any other
Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon either of them
or any of their subsidiaries in connection with the Merger. Each of Citizens and
Bancshares will, respectively, cause their subsidiaries to take in a prompt
manner all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any agreement, consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public or private third
party, required to be obtained or made by Bancshares, Citizens or any of their
subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement and the Plan of Merger.

6.03. Reports.

(a) Prior to the Effective Time, Citizens and Bancshares shall
respectively, prepare and file as and when required all Citizens Reports and
Bancshares Reports.

(b) Citizens and Bancshares shall prepare such Citizens Reports and
Bancshares Reports such that (i) they comply in all material respects with all
of the statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they are filed and do not contain any untrue statement of a
material

A-I-18
<PAGE> 92

fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) with respect to any Citizens
Report or Bancshares Report containing financial information of the type
included in the Citizens Financial Statements or the Bancshares Financial
Statements, the financial information (A) is prepared in accordance with
accounting principles and practices as utilized in the Citizens Financial
Statements or the Bancshares Financial Statements, applied on a consistent basis
(except as stated therein or in the notes thereto) (B) presents fairly the
consolidated financial condition of Citizens or Bancshares, at the dates, and
the consolidated results of operations and cash flows for the periods, stated
therein and (C) in the case of interim fiscal periods, reflects all adjustments,
consisting only of normal recurring items necessary for a fair presentation,
subject to year-end audit adjustments.

6.04. Brokers or Finders. Except as set forth in Section 7.03(c),
Bancshares and Citizens represent that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.

6.05. Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including cooperating fully with the other parties. In case at any time after
the Effective Time any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement or to vest Bancshares with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of Citizens, CNB, Peoples or CIS, the proper officers and directors of
each party to this Agreement shall take all such necessary action.

6.06. Governmental and Other Third Party Approvals. Citizens and Bancshares
shall each use their reasonable best efforts to obtain all governmental and
other third party approvals, authorizations and consents that may be necessary
or reasonably required of them in order to effect the transactions contemplated
by this Agreement. Citizens and Bancshares agree to make all filings and
applications for such approvals and reviews as soon as practicable, to prosecute
the same with reasonable diligence and to notify each other when such approvals,
authorizations and consents have been received. Citizens and Bancshares will
provide each other with copies of all regulatory notices and filings made in
connection with the transactions contemplated by this Agreement prior to filing.
Bancshares and Citizens will each provide to the other copies of any
correspondence received from any regulatory agency relating to such filings, and
shall use its best efforts to keep the other party advised of the progress of
obtaining all regulatory and third party approvals required for the consummation
of all transactions contemplated by this Agreement.

ARTICLE VII

CONDITIONS PRECEDENT

7.01. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:

(a) Shareholder Approval. The Merger Agreements shall have been
approved and adopted by the legally required vote of the holders of the
outstanding shares of Citizens Common Stock and the Bancshares common stock
at shareholders meetings duly called for the purpose of voting on the
Merger.

(b) Federal Reserve Board. The Merger Agreements and the transactions
contemplated hereby shall have been approved by the FRB and other necessary
banking authorities without any condition not acceptable to Bancshares, all
conditions required to be satisfied prior to the Effective Time imposed by
the terms of such approvals shall have been satisfied and all waiting
periods relating to such approvals shall have expired.

A-I-19
<PAGE> 93

(c) Arkansas State Bank Commissioner. The Arkansas State Bank
Commissioner shall have approved the transfer of ownership of CNB and
Peoples to Bancshares without any condition not acceptable to Bancshares.

(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.

(e) No Proceeding or Litigation. No material action, suit or
proceeding before any court or any governmental or regulatory authority
shall have been commenced against Bancshares, Citizens or any affiliate,
subsidiary, associate, officer or director of either of them, seeking to
restrain, enjoin, prevent, change or rescind the transactions contemplated
hereby or questioning the validity or legality of any such transactions.

(f) Closing Date. The Closing Date shall occur as soon as practicable
but in no event earlier than January 2, 1998 or later than March 31, 1998
unless extended by Citizens and Bancshares.

(g) Consents Under Agreements. Bancshares, Citizens and their
subsidiaries shall have obtained the consent or approval of each person
whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument.

(h) Securities Laws. A registration statement for the Bancshares Stock
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order. Bancshares
shall have obtained all securities or "blue sky" permits and other
authorizations necessary under state securities laws for Bancshares to
issue the Bancshares Stock and consummate the Merger.

7.02. Conditions to Obligations of Bancshares. The obligation of Bancshares
to effect the Merger is subject to the satisfaction of the following conditions
unless waived in writing by Bancshares:

(a) Representations and Warranties. Each of the representations and
warranties of Citizens set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except for changes expressly contemplated by this Agreement,
and Bancshares shall have received a certificate signed on behalf of
Citizens by its chief executive officer and chief financial officer to such
effect.

(b) Performance of Obligations of Citizens. Citizens shall have
performed in all material respects each of the obligations required to be
performed by it under this Agreement and the Plan of Merger at or prior to
the Closing Date, and Bancshares shall have received a certificate signed
on behalf of Citizens by its chief executive officer and chief financial
officer to such effect.

(c) Opinion of Counsel. Citizens shall have delivered to Bancshares an
opinion of its counsel, Friday, Eldredge & Clark, dated as of the Closing
Date and in form and substance satisfactory to counsel for Bancshares, to
the aggregate effect that: (i) Citizens has been duly incorporated and
organized and is a corporation validly existing in good standing under the
laws of Arkansas with full corporate power and authority to enter into this
Agreement and the Plan of Merger and to consummate the transactions
contemplated thereby; (ii) all corporate proceedings and other actions on
the part of Citizens necessary to be taken in connection with the Merger
and (except for the filing of the Articles of Merger) necessary to make
same effective have been duly and validly taken; (iii) this Agreement and
the Plan of Merger have been duly and validly authorized, executed and
delivered on behalf of Citizens and constitute (subject to standard
exceptions to enforceability arising from the bankruptcy laws and rules of
equity) valid and binding agreements of Citizens; (iv) the execution of the
Articles of Merger by Citizens has been duly and validly authorized; and
(v) Citizens is governed by the Arkansas Business Corporation Act of 1987.

A-I-20
<PAGE> 94

(d) No Material Adverse Change. There shall have been no material
adverse change since December 31, 1996 in the financial condition, results
of operations or business of Citizens.

(e) Environmental Audits. Phase I environmental audits of the Citizens
Property shall have been conducted at Bancshares's expense and shall, to
Bancshares's satisfaction, reflect no material problems under Environmental
Laws.

(f) Pooling Opinion. Bancshares shall have received an opinion from
Arthur Andersen LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment under applicable accounting
principles and that it will be so treated by the SEC if consummated in
accordance with the Merger Agreements.

(g) Amendment of Articles of Incorporation. Citizens shall have
perfected an amendment to its articles of incorporation to provide that it
shall be governed by the Arkansas Business Corporation Act of 1987.

(h) Affiliates. Each person who receives a portion of the Bancshares
Stock and who might reasonably be considered to be an affiliate of
Citizens, as defined in paragraph (a) of Rule 144 of the Rules of the SEC
under the Securities Act, shall have executed and delivered at Closing a
letter substantially in the form set forth in Exhibit 7.02(h).

(i) Consents Under Agreements. Bancshares and its subsidiaries shall
have obtained the consent or approval of each person whose consent or
approval of any transaction contemplated herein is required under any loan
or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument.

(j) Dissenting Shares. The number of dissenting shares shall not
exceed 10% of Citizens Common Stock.

7.03. Conditions to Obligations of Citizens. The obligations of Citizens to
effect the Merger are subject to the satisfaction of the following conditions
unless waived by Citizens:

(a) Representations and Warranties. Each of the representations and
warranties of Bancshares set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, except for changes expressly contemplated by this Agreement,
and Citizens shall have received a certificate signed on behalf of
Bancshares by its chief executive officer and chief financial officer to
such effect.

(b) Performance of Obligations of Bancshares. Bancshares shall have
performed in all material respects each of the obligations required to be
performed by it under this Agreement and the Plan of Merger at or prior to
the Closing Date, and Citizens shall have received a certificate signed on
behalf of Bancshares by its chief executive officer and chief financial
officer to such effect.

(c) Fairness Opinion. Citizens shall have obtained, at its expense, on
or before the Closing Date, the opinion of an investment banking or
appraisal firm acceptable to it to the effect that the terms of the
transaction contemplated by this Agreement are fair from a financial point
of view to the Citizens Shareholders.

(d) Opinion of Counsel. Bancshares shall have delivered to Citizens an
opinion of its counsel, Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C., dated as of the Closing Date and in form and substance
satisfactory to counsel for Citizens, to the aggregate effect that: (i)
Bancshares is a corporation validly existing under the laws of Arkansas
with full corporate power and authority to enter into this Agreement and
the Plan of Merger and to consummate the transactions contemplated thereby;
(ii) all corporate proceedings and other actions on the part of Bancshares
necessary to be taken in connection with the Merger and (except for the
filing of the Articles of Merger) necessary to make same effective have
been duly and validly taken; (iii) this Agreement has been duly and validly
authorized, executed and delivered on behalf of Bancshares and constitutes
(subject to standard exceptions to enforceability arising from the
bankruptcy laws and rules of equity) a valid and binding agreement of
Bancshares; (iv)

A-I-21
<PAGE> 95

the execution of the Articles of Merger by Bancshares has been duly and
validly authorized ; and (vi) the shares of Bancshares common stock issued
to the Citizens Shareholders pursuant to the Agreement have been registered
with the SEC pursuant to Section 5 of the Securities Act and may be sold or
transferred by the Citizens Shareholders without further registration under
Section 5 of the Act, except as may otherwise be provided by Rules 144 and
145 of the Act and the terms of the letter to be delivered by certain
Citizens Shareholders pursuant to Section 7.02(h) of this Agreement.

(e) Tax Opinion. Citizens shall have received an opinion of its
counsel, Friday, Eldredge & Clark, to the effect that the transactions
contemplated herein will be treated for federal income tax purposes as a
tax-free corporate reorganization within the meaning of Section
368(a)(1)(A) of the Code.

(f) No Material Adverse Change. There shall have been no material
adverse change since December 31, 1996 in the financial condition, results
of operations or business of Bancshares.

ARTICLE VIII

TERMINATION AND AMENDMENT

8.01. Termination. This Agreement and the Plan of Merger may be terminated
at any time prior to the Effective Time:

(a) by mutual consent of the Board of Directors of Bancshares and the
Board of Directors of Citizens;

(b) by either Bancshares or Citizens (A) if there has been a breach in
any material respect of any representation, warranty, covenant or agreement
on the part of Citizens, on the one hand, or Bancshares on the other hand,
respectively, set forth in this Agreement, or (B) if any representation or
warranty of Citizens on the one hand, or Bancshares on the other hand,
respectively, shall be discovered to have become untrue in any material
respect and, in either case such breach or other condition has not been
cured within 10 business days following receipt by the nonterminating party
of notice of such breach or other condition from the terminating party;

(c) by either Bancshares or Citizens if any permanent Injunction
preventing the consummation of the Merger shall have become final and
nonappealable;

(d) by either Bancshares or Citizens if the Merger shall not have been
consummated on or before March 31, 1998, for a reason other than the
failure of the terminating party to comply with its obligations under this
Agreement;

(e) by either Bancshares or Citizens if the FRB has denied approval of
the Merger and such denial has become final and nonappealable; or

(f) by either Bancshares or Citizens if any condition precedent to the
terminating party's obligation to effect the Merger has not been satisfied
and such condition cannot reasonably be expected to be satisfied prior to
the date specified in Subsection 8.01(d).

8.02. Effect of Termination. In the event of termination of this Agreement
by either Citizens or Bancshares as provided in Section 8.01, this Agreement and
the Plan of Merger shall forthwith become void and there shall be no liability
or obligation on the part of Citizens, Bancshares or their respective officers
or directors, except to the extent that such termination results from the
willful breach by a party hereto of any of its or their representations,
warranties, covenants or agreements set forth in this Agreement; provided,
however, that the duties of the parties with respect to nonpublic information as
set forth in Section 5.03 will not be terminated.

8.03. Amendment. Subject to the next following sentence, this Agreement and
the Plan of Merger may be amended by the parties hereto by action taken or
authorized by the respective Boards of Directors of Bancshares and Citizens at
any time prior to the Closing Date. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.

A-I-22
<PAGE> 96

8.04. Extension; Waiver. At any time prior to the Effective Time,
Bancshares, on the one hand, and Citizens, on the other hand, by action taken or
authorized by their respective Boards of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other contained herein or in any document
delivered by the other pursuant hereto, and (iii) waive compliance by the other
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.

ARTICLE IX

GENERAL PROVISIONS

9.01. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally (with receipt
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):

(a) if to Bancshares, to

First United Bancshares, Inc.
Attention: John E. Burns
P. O. Box 751
El Dorado, Arkansas 71731

with a copy to:

Hermann Ivester, Esq.
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
320 West Capitol Avenue, Suite 1000
Little Rock, Arkansas 72201

(b) if to Citizens, to:

Mr. John Robert GravesCitizens National Bancshares, Inc.
200 South Elm Street
Hope, Arkansas 71801

with a copy to:

Allison Graves, Esq.
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493

9.02. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.

9.03. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

A-I-23
<PAGE> 97

9.04. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein, including the Plan of Merger) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.

9.05. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Arkansas.

9.06. Publicity. The parties hereto agree that they will consult with each
other concerning any proposed press release or public announcement pertaining to
the Merger and will use their best efforts to agree upon the text of such press
release or public announcement prior to the publication of such press release or
the making of such public announcement. However, the determination by Bancshares
as to when and whether it will make a public statement and the contents of any
such public statement shall be final and binding.

9.07. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
heirs, successors and assigns.

9.08. Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made to the knowledge of a party hereto, such
knowledge shall include the actual knowledge, after due inquiry, of any
executive officer of such party or an executive officer of any subsidiary
thereof.

9.09. Expenses. Except as otherwise provided herein, all expenses incurred
by Bancshares and Citizens in connection with or related to the authorization,
preparation and execution of this Agreement, the Plan of Merger, and all other
matters related to the closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by either
such party or its affiliates, shall be borne solely and entirely by the party
which has incurred the same.

9.10. Non-Survival of Representations and Warranties. Except as hereinafter
provided, the representations and warranties contained in this Agreement and all
other terms, covenants and conditions hereof shall merge in the closing
documents and shall not survive Closing or, after Closing be the basis for any
action by any party, except as to any matter which is based upon willful fraud
by a party with respect to which the representations, warranties, terms,
covenants and conditions set forth in this Agreement shall expire only upon
expiration of the applicable statute of limitations.

A-I-24
<PAGE> 98

IN WITNESS WHEREOF, Citizens and Bancshares have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.

First United Bancshares, Inc.

By: /s/ JAMES V. KELLEY
----------------------------------
James V. Kelley
Chairman, President and Chief
Executive Officer
Attest:

/s/ ROBERT G. DUDLEY
- ------------------------------------
Robert G. Dudley, Secretary
The Citizens National Bancshares,
Inc.

By: /s/ JOHN ROBERT GRAVES
----------------------------------
John Robert Graves
President and Chief Executive
Officer
Attest:

/s/ DENNIS E. RAMSEY
- -------------------------------------------
Dennis E. Ramsey, Secretary

A-I-25
<PAGE> 99

EXHIBIT A
PLAN OF MERGER

This Plan of Merger, dated as of September , 1997 ("Plan of Merger"), by
and between First United Bancshares, Inc., an Arkansas corporation
("Bancshares"), and The Citizens National Bancshares, Inc., an Arkansas
corporation ("Citizens").

WHEREAS, Citizens is a corporation with authorized capital stock consisting
of 1,000,000 shares of common stock, $2.00 par value of which 497,860 shares of
common stock ("Citizens Common Stock") are validly issued and outstanding on the
date hereof;

WHEREAS, Bancshares is a corporation with authorized capital stock of
24,000,000 shares of common stock, $1.00 par value, and 500,000 shares of
preferred stock, $1.00 par value, of which 8,246,209 shares of common stock are
validly issued and outstanding on the date hereof;

WHEREAS, Bancshares and Citizens are corporations duly organized and
existing under the laws of Arkansas;

WHEREAS, concurrently with the execution and delivery of this Plan of
Merger, Bancshares and Citizens have entered into an Agreement and Plan of
Reorganization (the "Agreement" and, together with this Plan of Merger, the
"Merger Agreements") that contemplates the merger of Citizens with and into
Bancshares (the "Merger") upon the terms and conditions provided in this Plan of
Merger and the Agreement and pursuant to the Arkansas Business corporation Act
(the "ABCA");

WHEREAS, the Boards of Directors of Bancshares and Citizens deem it fair
and equitable to, and in the best interests of, their respective corporations
and shareholders that Citizens be merged with and into Bancshares with
Bancshares being the surviving corporation, and each such Board of Directors has
approved this Plan of Merger, has authorized its execution and delivery, and has
directed that this Plan of Merger and the Merger be submitted to Citizens and
Bancshares shareholders for approval, and has recommended that the shareholders
approve the Merger.

NOW, THEREFORE, in consideration of the promises and the agreements herein
contained, the parties hereto adopt and agree to the following agreements, terms
and conditions relating to the Merger and the mode of carrying the same into
effect:

ARTICLE I

THE MERGER

1.01. The Merger. Subject to the terms and conditions of the Merger
Agreements, Citizens will be merged with and into Bancshares , which will
continue as the surviving corporation, in accordance with and with the effect
provided in the ABCA.

1.02. Effective Time of the Merger. Subject to the provisions of the Merger
Agreements, articles of merger (the "Articles of Merger") shall be duly prepared
and executed by Bancshares and Citizens and thereafter delivered to the
Secretary of State of the State of Arkansas for filing, as provided in the ABCA,
as soon as practicable on or after the Closing Date (as defined in the
Agreement). The Merger shall become effective upon the filing of the Articles of
Merger with the Secretary of the State of Arkansas or at such time within two
business days thereafter as is provided in the Articles of Merger (the
"Effective Time").

1.03. Effects of the Merger. (a) At the Effective Time, (i) the separate
existence of Citizens shall cease and Citizens shall be merged with and into
Bancshares ( Bancshares and Citizens are sometimes referred to herein as the
"Constituent Corporations" and Bancshares is sometimes referred to herein as the
"Surviving Corporation"), (ii) the Articles of Incorporation of Bancshares in
effect as of the Effective Time (the "Articles") shall be the Articles of
Incorporation of the Surviving Corporation, and (iii) the Bylaws of Bancshares
in effect as of the Effective Time (the "Bylaws") shall be the Bylaws of the
Surviving Corporation.

A-I-26
<PAGE> 100

(b) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and liabilities had been
incurred by it. Any action or proceeding, whether civil, criminal or
administrative, pending by or against either Constituent Corporation shall be
prosecuted as if the Merger had not taken place, and the Surviving Corporation
may be substituted as a party in such action or proceeding in place of any
Constituent Corporation.

ARTICLE II

EFFECT OF THE MERGER ON THE COMMON STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES

2.01. Conversion of Citizens Common Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Citizens Common Stock, but subject to the rights of dissenting
shareholders of Citizens:

(a) Conversion of Citizens Common Stock. The issued and outstanding
shares of Citizens Common Stock shall be converted in accordance with the
Agreement into the right to receive the consideration provided in Section
2.01 of the Agreement.

(b) Cancellation of Shares. All shares of Citizens Common Stock issued
and outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the
right to receive a pro rata amount of the consideration provided therefor
upon the surrender of such certificate in accordance with the Plan of
Merger.

2.02. Exchange of Certificates. (a) Exchange Agent. As of the Effective
Time, Bancshares shall deposit with the Trust Department of First National Bank
of El Dorado, El Dorado, Arkansas or such other bank or trust company designated
by Bancshares (the "Exchange Agent") for the benefit of the holders of shares of
Citizens Common Stock, for exchange in accordance with this Article II through
the Exchange Agent, the number of shares of Bancshares common stock and cash
(the "Exchange Fund") to be paid pursuant to Section 2.01 in exchange for shares
of Citizens Common Stock outstanding immediately prior to the Effective Time.

(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Citizens Common Stock (the "Certificates")
whose shares were converted into the right to receive shares of Bancshares
common stock and cash pursuant to Section 2.01, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Bancshares may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for the Bancshares common stock
and cash payment due. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Bancshares, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole

A-I-27
<PAGE> 101

shares of Bancshares common stock and cash which such holder has the right to
receive pursuant to Section 2.01 of the Agreement, and the Certificate so
surrendered shall forthwith be cancelled. Until surrendered as contemplated by
this Section 2.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
consideration specified in Section 2.01 of the Agreement.

(c) Distributions with Respect to Unexchanged Shares. No delivery of
Bancshares common stock or cash payment of any kind shall be made to the holder
of any unsurrendered Certificate until the holder of record of such Certificate
shall surrender such Certificate. However, Citizens Shareholders shall be
entitled to receive, subject to applicable abandoned property, escheat and
similar laws, payment of dividends declared by Bancshares subsequent to the
Effective Time, but delivery of payment of such dividends will not be required
of Bancshares until such persons have delivered their certificates representing
shares of Citizens common stock in exchange for certificates representing shares
of Bancshares common stock in accordance with the provisions of Section 2.02(b)
above.

(d) No Further Ownership Rights in Citizens Common Stock. The consideration
paid upon the surrender of shares of Citizens Common Stock in accordance with
the terms hereof including any cash shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Citizens Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Citizens Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and payment shall be made as provided in this
Plan of Merger.

(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the shareholders of Citizens for six months after the
Effective Time shall be delivered to Bancshares, upon demand, and any
shareholders of Citizens who have not theretofore complied with this Section
2.02 shall thereafter look only to Bancshares for payment of the Bancshares
common stock and cash due for their Citizens stock.

(f) No Liability. Neither Bancshares nor Citizens shall be liable to any
holder of shares of Citizens Common Stock for shares of Bancshares common stock
or cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.

ARTICLE III

CONDITIONS; TERMINATION; AMENDMENT

3.01. Conditions to the Merger. Consummation of the Merger is conditional
upon the fulfillment or waiver of the conditions precedent set forth in Article
VII of the Agreement.

3.02. Termination. This Plan of Merger may be terminated and the Merger
abandoned by mutual consent of the respective Boards of Directors of Citizens
and Bancshares at any time prior to the Effective Time. If the Agreement is
terminated in accordance with Article IX thereof, then this Plan of Merger will
terminate simultaneously and the Merger will be abandoned without further action
by Citizens or Bancshares.

3.03. Amendment. Subject to the next following sentence, this Plan of
Merger may be amended by the parties hereto by action taken or authorized by
their respective Boards of Directors at any time before the Closing Date. This
Plan of Merger may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.

3.04. Extension; Waiver. At any time prior to the Closing Date, Bancshares
and Citizens, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and (ii) waive compliance by the other with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument on
behalf of such party.

A-I-28
<PAGE> 102

ARTICLE IV

GENERAL PROVISIONS

4.01. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally (with receipt
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):

(a) if to Bancshares, to

First United Bancshares, Inc.
Attention: John E. Burns
P. O. Box 751
El Dorado, Arkansas 71731

with a copy to:

Hermann Ivester, Esq.
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
320 West Capitol Avenue, Suite 1000
Little Rock, Arkansas 72201

(b) if to Citizens, to:

Mr. John Robert Graves
Citizens National Bancshares, Inc.
200 South Elm Street
Hope, Arkansas 71801

with a copy to:

Allison Graves, Esq.
Friday, Eldredge & Clark
400 West Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493

4.02. Interpretation. When a reference is made in this Plan of Merger to
Sections, such reference shall be to a Section of this Plan of Merger unless
otherwise indicated. The headings contained in this Plan of Merger are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Plan of Merger.

4.03. Counterparts. This Plan of Merger may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

4.04. Governing Law. This Plan of Merger shall be governed and construed in
accordance with the laws of the State of Arkansas.

A-I-29
<PAGE> 103

IN WITNESS WHEREOF, Citizens and Bancshares have caused this Plan of Merger
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.

First United Bancshares, Inc.

By:
----------------------------------
James V. Kelley
Chairman, President and Chief
Executive Officer

Attest:

- ------------------------------------------------------
Robert G. Dudley, Secretary

The Citizens National Bancshares,
Inc.

By:
----------------------------------
John Robert Graves
President and Chief Executive
Officer

- ------------------------------------------------------
, Secretary

A-I-30
<PAGE> 104

EXHIBIT 4.03

CAPITAL STRUCTURE OF BANCSHARES

The following options to purchase Bancshares Common Stock are outstanding:

RESTRICTED STOCK OPTIONS(1)

<TABLE>
<CAPTION>
NAME DATE OF GRANT EXERCISE PRICES NUMBER OF SHARES
---- ------------- --------------- ----------------
<S> <C> <C> <C>
A) James V. Kelley............................... 08/15/94 -0- 805.5
01/17/95 -0- 768.0
01/16/96 -0- 733.5
10/21/96 -0- 10,000.0
01/21/97 -0- 701.0
--------
Total Restricted Stock Options......... 13,008.0
</TABLE>

NON-STATUTORY STOCK OPTIONS(2)

<TABLE>
<CAPTION>
NAME DATE OF GRANT EXERCISE PRICES NUMBER OF SHARES
---- ------------- --------------- ----------------
<S> <C> <C> <C>
A) James V. Kelley............................... 08/15/94 $19.00 7,248.0
01/17/95 18.92 6,918.0
01/16/96 26.28 6,603.0
10/21/96 26.48 20,000.0
01/21/97 32.49 6,603.0
B) John Burns.................................... 10/21/96 26.48 2,500.0
C) Jim Harwood................................... 10/21/96 26.48 5,000.0
--------
Total Non-Statutory Stock Options...... 54,872.0
</TABLE>

- ---------------

(1) Vesting occurs one-hundred percent (100%) five years after the date of the
grant.

(2) Vesting occurs twenty-five percent (25%) per year up to one hundred percent
(100%) over a four (4) year period.

Under an Agreement and Plan of Reorganization between Bancshares and City
Bank & Trust of Shreveport, Shreveport, Louisiana, Bancshares is obligated to
issue approximately 425,000 shares of Bancshares Common Stock upon closing of an
acquisition of City Bank & Trust by Bancshares.

A-I-31
<PAGE> 105

EXHIBIT 4.07

LITIGATION AND CLAIMS

None

A-I-32
<PAGE> 106

EXHIBIT 7.02(H)

First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730

Gentlemen:

I may presently be considered to be an "affiliate", as defined in paragraph
(a) of Rule 144 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the "Act"), of
The Citizens National Bancshares, Inc., Hope, Arkansas, a bank holding company
("Citizens"). Pursuant to the merger (the "Merger") of Citizens with and into a
subsidiary of First United Bancshares, Inc. ("First United"), I will acquire
shares of the common stock, par value $1 per share ("Common Stock"), of
First United . I represent and warrant that I (i) am acquiring said shares (as
the same may be increased, decreased or are changed in accordance with the
Agreement and Plan of Merger dated , 1997, relating to the Merger,
the ("Shares")) for my own account (or in the capacity indicated hereon) and
with no present intention of dividing my participation with others or otherwise
making a distribution of the Shares and (ii) shall not make any sale, transfer
or other disposition of the Shares in violation of the Act or the General Rules
and Regulations promulgated thereunder by the SEC.

I have been advised that the Shares issued to me pursuant to the Merger
have been registered under the Act in the Registration Statement on SEC Form
S-4, as amended, Registration No. ("Registration Statement") as filed
with the SEC, and have received a copy of the proxy/prospectus filed as a part
of the Registration Statement. However, I have also been advised that any public
offering or sale by me of any of the Shares will, under current law, require
either (i) the further registration (by amendment of such Form S-4 or otherwise)
under the Act of the Shares to be sold or (ii) compliance with Rule 145
promulgated under the Act or (iii) the availability of another exemption from
such registration.

I agree not to sell, transfer or dispose of the Shares unless (i) there is
in effect a registration statement under the Act covering such sale, transfer,
or other disposition, or (ii), such sale, transfer or disposition complies with
Rule 145 or is otherwise exempt from registration. Further, I will furnish to
First United such documentation incident to such sale, transfer or other
disposition as First United shall reasonably request evidencing compliance with
Rule 145 or the availability of any exemption from registration being claimed.
Such documentation shall be provided to First United prior to any such sale,
transfer or other disposition in order that First United, and its counsel may
have a reasonable opportunity to review the documentation and form an opinion as
to the validity of any such exemption.

I agree that notwithstanding any provision herein or contained in the
Agreement and Plan of Reorganization that I will not sell, transfer, or
otherwise dispose of any of the Shares unless First United has made public
disclosure of financial results reflecting 30 days' of post-Merger combined
operations of Citizens and First United within the meaning of Section 201.01 of
the SEC's Codification of Financial Reporting Policies. First United has agreed
to make the required public disclosure of financial results as set out above as
soon as feasible after the Merger is consummated. In addition, I hereby
represent and warrant to First United that I have not made any sales of Citizens
or First United common stock during the 30-day period immediately preceding the
date hereof and I further agree not to engage in any such sales prior to the
Merger, nor have I pledged or will I pledge any First United or Citizens common
stock to secure any obligation during such period.

I represent and warrant to First United that:

1. I have carefully read this letter and discussed its requirements
and other applicable limitations upon the sale, transfer or other
disposition of the Shares, to the extent I felt necessary, with my counsel
or counsel for Citizens.

2. I have been informed by First United that any distribution by me of
the Shares has not been registered under the Act and that the Shares must
be held by me indefinitely until (i) such distribution of the Shares has
been registered under the Act, (ii) a sale of the Shares is made in
conformity with the

A-I-33
<PAGE> 107

volume and other limitations of Rule 145 promulgated by the SEC under the
Act, or (iii) some other exemption from registration is available with
respect to any such proposed sale, transfer or other disposition of the
Shares.

3. I have been informed by First United that it is required to file
periodic reports with the SEC and the NASDAQ and that certain sales of the
Shares by me may not be required to be registered under the Act by virtue
of Rule 145 promulgated by the SEC under the Act, provided that such sales
are made in accordance with all of the terms and conditions of such Rule,
including among other things the following:

(a) The amount of First United Common Stock sold by me pursuant to
Rule 145 during any period of three months cannot exceed the quantity
limit of (i) one percent of the total outstanding First United Common
Stock or (ii) the average reported weekly trading volume on NASDAQ
during the four week period immediately preceding receipt of the order
by the broker to execute the transaction, whichever of (i) or (ii) is
greater. In computing the quantity limit it is necessary to count sales
not only by me but also by certain immediate family members and other
related persons and others with whom I may act in concert.

(b) Sales must be made in brokers' transactions as defined by the
SEC Rule 144 (certain provisions of which are incorporated by reference
into Rule 145).

(c) No sales may be made under the Rule unless First United has
filed all SEC reports required to be filed by First United.

(d) The broker must be given information showing compliance with
Rule 145.

4. I understand that First United is under no obligation to register
the sale, transfer or other disposition of the Shares by me or on my behalf
or to take any other action necessary in order to make compliance with an
exemption from registration available.

5. I understand and agree that stop transfer instructions will be
issued with respect to the Shares and there will be placed on the
certificates representing such Shares, or any certificate delivered in
substitution therefor, a legend stating in substance:

"The shares represented by this Certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933, as
amended, applied. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
dated , 1997, by the registered holder in favor of First
United Bancshares, Inc., a copy of which agreement is on file at the
principal offices of First United Bancshares, Inc."

I have been informed by First United that after the restrictions imposed by
Rule 145 have expired First United will, upon my request, reissue share
certificates for the shares which do not contain a restrictive legend.

6. I understand and agree that unless the transfer by me of Shares is
a sale made in compliance with the provisions of this letter, First United
reserves the right to place the following legend on any certificates issued
to my transferee:

"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, and were
acquired from a person who received such shares in a transaction to
which Rule 145 under the Securities Act of 1933, as amended, applied.
The shares have not been acquired by the holder with a view to, or for
resale in connection with, any distribution thereof within the meaning
of the Securities Act of 1933, as amended, and may not be sold, pledged
otherwise transferred unless the shares have been registered under the
Securities Act of 1933, as amended, or an exemption from registration is
available."

7. I understand and agree that the legends set forth in paragraphs 5
and 6 above shall be removed by delivery of substitute Certificates without
any legend if I deliver to First United a copy of a letter from the staff
of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to First United, to the effect that no such legend
is required for the purpose of the Securities Act.

A-I-34
<PAGE> 108

8. I have been informed by First United that if I propose to sell any
of these Shares pursuant to Rule 145, and if such sale would be permitted
under the terms of this letter, First United will, upon my written request,
supply me with the following:

(a) A statement as to whether First United has complied with the
provisions of Rule 145 regarding filing of SEC reports as a condition to
sales made pursuant to that Rule;

(b) A confirmation as to the number of shares of First United
Common Stock outstanding as shown by the most recent report or statement
published by it; and

I have carefully read this letter and have had an adequate opportunity to
review the Merger Agreement and understand the requirements and the limitations
imposed upon the distribution, sale, transfer or other disposition of Bank
common stock or Shares of First United.

Very truly yours,

A-I-35
<PAGE> 109

ANNEX II

4-26-1007. RIGHTS OF DISSENTING
SHAREHOLDERS.

(a) If a shareholder of a corporation which is a party to a merger or
consolidation files with the corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to the plan of merger or consolidation and does not
vote in favor thereof, and the shareholder within ten (10) days after the date
on which the vote was taken makes written demand on the surviving or new
domestic or foreign corporation for payment of the fair value of his shares as
of the day prior to the date on which the vote was taken approving the merger or
consolidation, then, if the merger or consolidation is effected, the surviving
or new corporation shall pay to the shareholder, upon surrender of this
certificate or certificates representing the shares, the fair value thereof.

(b) The demand shall state the number and class of the shares owned by the
dissenting shareholder.

(c) Any shareholder failing to make demand within the ten-day period shall
be bound by the terms of the merger or consolidation.

(d) Within ten (10) days after the merger or consolidation is effected, the
surviving, or new corporation, as the case may be, shall give notice to each
dissenting shareholder who has made demand as herein provided for the payment of
the fair value of his shares.

(e)(1) If within thirty (30) days after the date on which the merger or
consolidation was effected the value of such shares is agreed upon between
dissenting shareholder and the surviving or new corporation, payment shall be
made within ninety (90) days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing, those shares.

(2) Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in those shares or in the corporation.

(f)(1) If within the period of thirty (30) days the shareholder and the
surviving or new corporation do not so agree, then the dissenting shareholder,
within sixty (60) days after the expiration of the thirty-day period, may file a
petition in the circuit court of the county in which the registered office of
the surviving corporation is located, if the surviving corporation is a domestic
corporation or in the Pulaski County Circuit Court if the surviving corporation
is a foreign corporation, asking, for a finding and determination of the fair
value of the shares and shall be entitled to judgement against the surviving or
new corporation for the amount of the fair value as of the day prior to the date
on which the vote was taken approving such merger or consolidation, together
with interest thereon to the date of the judgement.

(2) The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing the shares.

(3) Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in the shares or in the surviving or new corporation.

(4) Unless the dissenting shareholder files the petition within the time
herein limited, the shareholder and all persons claiming under him shall be
bound by the terms of the merger or consolidation.

(g) Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgement entered, as
in this section provided, may be held and disclosed of by the corporation as in
the case of other treasury shares.

(h) The provisions of this section shall not apply to a merger if. on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other domestic or foreign
corporations that are parties to the merger.

HISTORY. Acts 1965, No. 576, sec. 76; A.S.A. 1947, sec. 64-707.

A-II-1
<PAGE> 110

ANNEX III

RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES

4-27-1301. DEFINITIONS.

In this subchapter:

1. "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;

2. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under sec. 4-27-1302 and who exercises that right when and
in the manner required by sec.sec. 4-27-1320 -- 4-27-1328;

3. "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable;

4. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances;

5. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation;

6. "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder;

7. "Shareholder" means the record shareholder or the beneficial
shareholder.

HISTORY. Acts 1987, No. 958, sec. 64-1301; 1987 (1st Ex. Sess.), No. II, sec.
10.

4-27-1302. RIGHT OF DISSENT.

A. A shareholder is entitled to dissent from and obtain payment of the fair
value of his shares in the event of any of the following corporate actions:

1. Consummation of a plan of merger to which the corporation is a
party:

(i) If shareholder approval is required for the merger by sec.
4-27-1103 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or

(ii) If the corporation is a subsidiary that is merged with its
parent under sec. 4-27-1104;

2. Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;

3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;

4. An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:

(i) Alters or abolishes a preferential right of the shares;

(ii) Creates, alters, or abolishes a right in respect of
redemption. including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;

A-III-1
<PAGE> 111

(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;

(iv) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or

(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under sec. 4-27-604; or

5. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.

B. A shareholder entitled to dissent and obtain payment for his shares
under this subchapter may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.

HISTORY. Acts 1987, No. 958, sec. 64-1302; 1987 (1st Ex. Sess.), No. 11, sec.
11.

4-27-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.

A. A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one (1) person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.

B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:

1. He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and

2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.

HISTORY. Acts 1987, No. 958, sec. 64-1303.

4-27-1403 -- 4-27-1319. [RESERVED.]

PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

4-27-1320. NOTICE OF DISSENTERS' RIGHTS.

A. If proposed corporate action creating dissenters' rights under sec.
4-27-1302 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this chapter and be accompanied by a copy of this chapter.

B. If corporate action creating dissenters' rights under sec. 4-27-1302 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in sec. 4-27-1322.

HISTORY. Acts 1987, No. 958, sec. 64-1304.

A-III-2
<PAGE> 112

4-27-1321. NOTICE OF INTENT TO DEMAND PAYMENT.

A. If proposed corporate action creating dissenters' rights under sec.
4-27-1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:

(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and

(2) Must not vote his shares in favor of the proposed action.

B. A shareholder who does not satisfy the requirements of subsection A. of
this section is not entitled to payment for his shares under this subchapter.

HISTORY. Acts 1987, No. 958, sec. 64-1305.

4-27-1322. DISSENTERS' NOTICE.

A. If proposed corporate action creating dissenters' rights under sec.
4-27-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of sec. 4-27-1321.

B. The dissenters' notice must be sent no later than ten (10) days after
the corporate action was taken. and must:

1. State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;

2. Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;

3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date;

4. Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty (30) nor more than sixty
(60) days after the date the notice required by subsection A. of this
section is delivered; and

5. Be accompanied by a copy of this subchapter.

HISTORY. Acts 1987, No. 958, sec. 64-1306.

4-27-1323. DUTY TO DEMAND PAYMENT

A. A shareholder sent a dissenters' notice described in sec. 4-27-1322 must
demand payment, certify whether he acquired beneficial ownership of the shares
before the date required to be set forth in the dissenters' notice pursuant to
sec. 4-27-1322B.3., and deposit his certificates in accordance with the terms of
the notice.

B. The shareholder who demands payment and deposits his share certificates
under subsection A. of this section retains all other rights of a shareholder
until these rights are cancelled or modified by the takings of the proposed
corporate action.

C. A shareholder who does not demand payment or deposit his share
certificates where required. each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subchapter.

HISTORY. Acts 1987, No. 958, sec. 64-1307.

A-III-3
<PAGE> 113

4-27-1324. SHARE RESTRICTIONS.

A. The corporation may restrict the transfer of uncertificated shares from
the date the payment is received until the proposed corporate action is taken or
the restrictions released under sec. 4-27-1326.

B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.

HISTORY. Acts 1987, No. 958, sec. 64-1308.

4-27-1325. PAYMENT.

A. Except as provided in sec. 4-27-1327, as soon as the proposed
corporation action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with sec. 4-27-1323 the amount
the corporation estimates to be the fair value of his shares, plus accrued
interest.

B. The payment must be accompanied by:

1. The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;

2. A statement of the corporations' estimate of the fair value of the
shares;

3. An explanation of how the interest was calculated;

4. A statement of the dissenter's right to demand payment under sec.
4-27-1328; and

5. A copy of this subchapter.

HISTORY. Acts 1987, No. 958, sec. 64-1309.

4-27-1326. FAILURE TO TAKE ACTION.

A. If the corporation does not take the proposed action within sixty (60)
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.

B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under sec. 4-27-1322 and repeat the payment demand procedure.

HISTORY. Acts 1987, No. 958, sec. 64-1310.

4-27-1327. AFTER-ACQUIRED SHARES.

A. A corporation may elect to withhold payment required by sec. 4-27-1325
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.

B. To the extent the corporation elects to withhold payment under
subsection. A. of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
sec. 4-27-1328.

HISTORY. Acts 1987, No. 958, sec. 64-1311.

A-III-4
<PAGE> 114

4-27-1328. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.

A. A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate (less any payment under sec. 4-27-1325), or reject the
corporation's offer under sec. 4-27-1327 and demand payment of the fair value of
his shares and interest due, if.

1. The dissenter believes that the amount paid under sec. 4-27-1325 or
offered under sec. 4-27-1327 is less than the fair value of his shares or
that the interest due is incorrectly calculated;

2. The corporation fails to make payment under sec. 4-27-1325 within
sixty (60) days after the date set for demanding payment; or

3. The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date set
for demanding payment.

B. A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection A. of this
section within thirty (30) days after the corporation made or offered payment
for his shares.

HISTORY. Acts 1987, No. 958, sec. 64-1312.

4-27-1329. [RESERVED.]

JUDICIAL APPRAISAL OF SHARES

4-27-1330. COURT ACTION.

A. If a demand for payment under sec. 4-27-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

B. The corporation shall commence the proceeding, in the circuit court of
the county where the corporation's principal office (or, if none in this state,
its registered office) is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.

C. The corporation shall make all dissenters (whether or nor residents of
this state) whose demands remain unsettled parties to the proceeding as in an
action a- against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.

D. The jurisdiction of the court in which the proceeding is commenced under
subsection B. of this section is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.

E. Each dissenter made a party to the proceeding is entitled to judgment:

(1) For the amount, if any, by which the court finds the fair value of
his shares. plus interest, exceeds the amount paid by the corporation: or

(2) For the fair value. plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under sec.
4-27-1327.

HISTORY. Acts 1987, No. 958, sec. 64-1313.

A-III-5
<PAGE> 115

4-27-1331. COURT COSTS AND COUNSEL FEES.

A. The court in an appraisal proceeding commenced under sec. 4-27-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under sec. 4-27-1328.

B. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:

1. Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of sec.sec. 4-27-1320 -- 4-27-1328; or

2. Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this chapter.

C. If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.

HISTORY. Acts 1987, No. 958, sec. 64-1314.

A-III-6
<PAGE> 116

ANNEX IV

September 22, 1997

Members of the Board of Directors
Citizens National Bancshares, Inc.
200 S. Elm Street
Hope, Arkansas 71802

Members of the Board:

You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of Citizens National
Bancshares, Inc., Hope, Arkansas ("Citizens") of the terms of the proposed
merger of Citizens with and into First United Bancshares, Inc., El Dorado,
Arkansas ("First United") as defined in the Agreement and Plan of
Reorganization, dated as of September 15, 1997 (the "Agreement"). Pursuant to
the Agreement and subject to the terms and conditions therein, the purchase
price paid by First United to the owners of Citizens Common Stock shall be One
Million Five Hundred and Seventy Thousand (1,570,000) shares of First United
Common Stock.

As part of its investment banking business, Hoefer & Arnett, Incorporated
is continually engaged in the valuation of bank, bank holding company and thrift
securities in connection with mergers and acquisitions nationwide. We have not
previously provided investment banking and financial advisory services to
Citizens.

In arriving at our opinion, we have reviewed and analyzed, among other
things, the following: (i) the Agreement; (ii) Annual Reports to Shareholders of
Citizens and First United for the years ended December 31, 1995 and December 31,
1996; (iii) Quarterly FDIC call reports for the quarters ended June 30, 1997,
March 31, 1997, December 31, 1996, September 30, 1996 and June 30, 1996; (iv)
certain other publicly available financial and other information concerning
Citizens and First United; (v) the historical market prices and trading activity
for the common stock of First United; and (vi) publicly available information
concerning other banks and holding companies, the trading markets for their
securities and the nature and terms of certain other merger transactions we
believe relevant to our inquiry. We have held discussions with senior management
of Citizens and First United concerning their past and current operations,
financial condition and prospects, as well as the results of regulatory
examinations.

We have reviewed with senior management of First United earnings
projections for 1997 through 2001 for First United as a stand-alone entity,
assuming the merger does not occur. We reviewed with senior management of
Citizens earnings projections for 1997 through 2001 as a stand-alone entity,
assuming the merger does not occur. Certain pro forma financial projections for
the years 1997 through 2001 for the combined entity were derived by us based
partially upon the projections discussed above, as well as our own assessment of
general economic, market and financial conditions. In certain cases, such
combined pro forma financial projections included projected operating cost
savings derived by us partially based upon the projections discussed above to be
realizable in the merger.

In conducting our review and in arriving at our opinion, we have relied
upon and assumed the accuracy and completeness of the financial and other
information provided to us or publicly available, and we have not assumed any
responsibility for independent verification of the same. We have relied upon the
managements of Citizens and First United as to the reasonableness of the
financial and operating forecasts, projections and projected operating cost
savings (and the assumptions and bases therefor) provided to us, and we have
assumed that such forecasts, projections and projected operating cost savings
reflect the best currently available estimates and judgments of the applicable
managements. We have also assumed, without assuming any responsibility for the
independent verification of the same, that the aggregate allowance for loan
losses for Citizens and First United are adequate to cover such losses. We have
not made or obtained any evaluations or appraisals of the property of Citizens
or First United, nor have we examined any individual loan credit files. For
purposes of this opinion, we have assumed that the merger will have the tax,
accounting and legal effects described in the Agreement and assumed the accuracy
of the disclosures set forth in the Agreement. Our opinion as expressed herein
is limited to the fairness, from a financial point of view, to the holders of
the

A-IV-1
<PAGE> 117

Common Shares of Citizens of the terms of the proposed merger of Citizens with
and into First United and does not address Citizens' underlying business
decision to proceed with the merger.

We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Citizens and First United, including interest income, interest expense, net
interest income, net interest margin, provision for loan losses, non-interest
income, non-interest expense, earnings, dividends, internal capital generation,
book value, intangible assets, return on assets, return on shareholders' equity,
capitalization, the amount and type of nonperforming assets, loan losses and the
reserve for loan losses, all as set forth in the financial statements for
Citizens and First United; (ii) the assets and liabilities of Citizens and First
United, including the loan, investment and mortgage portfolios, deposits, other
liabilities, historical and current liability sources and costs and liquidity;
and (iii) the nature and terms of certain other merger transactions involving
banks and bank holding companies. We have also taken into account our assessment
of general economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.

Based upon and subject to the foregoing, we are of the opinion as
investment bankers that, as of the date hereof, the terms of proposed merger of
Citizens with and into First United are fair, from a financial point of view, to
the holders of the Common Shares of Citizens.

It is understood that this letter is for the information of the Board of
Directors of Citizens and does not constitute a recommendation to the Board of
Directors or to any shareholder of Citizens with respect to any approval of the
merger. We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.

Very truly yours,

/s/ HOEFER & ARNETT, INCORPORATED
Hoefer & Arnett, Incorporated

A-IV-2
<PAGE> 118

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Arkansas Business Corporation Act of 1987 (the "Act") codified at Ark.
Code Ann. sec.4-27-101 et. seq.and more specifically at Ark. Code Ann.
sec.4-27-850 permits an Arkansas Corporation to indemnify directors, officers,
employees and agents under some circumstances, and mandates indemnification
under certain limited circumstances. The Act permits a corporation to indemnify
a director, officer, employee, or agent for expenses (including attorneys'
fees), judgements, fines and amounts paid in settlement actually and reasonably
incurred if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification against expenses incurred by a director, officer, employee or
agent in connection with his defense of a proceeding against such person for
actions in such capacity is mandatory to the extent that such person has been
successful on the merits. If a director, officer, employee, or agent is
determined to be liable to the corporation, indemnification for expenses is not
allowable, subject to limited exceptions where a court deems the award of
expenses appropriate. The Act grants express power to an Arkansas corporation to
purchase liability insurance for its directors, officers, employees and agents,
regardless of whether any such person is otherwise eligible for indemnification
by the corporation. Advancement of expenses is permitted, but a person receiving
such advances must repay those expenses if it is ultimately determined that he
is not entitled to indemnifications.

The Amended and Restated Articles of Incorporation and the Bylaws of First
United provides that the directors, officers, employees and agents of First
United shall be indemnified as set forth below.

AMENDED AND RESTATED ARTICLES OF INCORPORATION

Twelfth. The corporation may indemnify any person who was, or is, a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding to the fullest extent permitted by the Arkansas
Business Corporation Act as it now exists or may hereafter be amended.

BY-LAWS

Article VII, Section 6. Indemnification. Every person who was or is a party
or is threatened to be made a party to or is involved in any action, suit,
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that he is or was a director or officer of the Corporation or is or
was serving at the request of the Corporation as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust, or other enterprise, shall be indemnified and held harmless to the
fullest extent legally permissible under and pursuant to any procedure specified
in the Arkansas Business Corporation Act of the State of Arkansas, as amended
and as the same may be amended hereafter, against all expenses, liabilities, and
losses (including attorney's fees, judgments, fines and amounts paid or to be
paid in settlement) reasonably incurred or suffered by him in connection
therewith. Such right of indemnification shall be a contract right that may be
enforced in any lawful manner by such person. Such right of indemnification
shall not be exclusive of any other right which such director or officer may
have or hereafter acquire and, without limiting the generality of such
statement, he shall be entitled to his rights of indemnification under any
agreement, vote of stockholders, provisions of law, or otherwise, as well as his
rights under this paragraph.

The board of directors may cause the Corporation to purchase and maintain
insurance on behalf of any person who is or was a Director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the Corporation would have power to indemnify such
person.

II-1
<PAGE> 119

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
2 -- Agreement and Plan of Reorganization Between First United
Bancshares, and Citizens National Bancshares of Hope,
Inc. and Plan of Merger attached as Exhibit A thereto,
(included as Annex I of Prospectus/Proxy Statement).
3(a) -- Articles of Incorporation of First United Bancshares,
Inc., as amended and restated.
3(b) -- Bylaws of First United Bancshares, Inc. (filed as Exhibit
3(b) of the Annual Report of First United Bancshares,
Inc. on Form 10-K for the year ended December 31, 1995)
incorporated herein by reference.
5 -- Opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C.
8 -- Tax Opinion of Friday, Eldredge & Clark regarding
Citizens National Bancshares of Hope, Inc. Acquisition
21 -- Subsidiaries of First United Bancshares, Inc.
23(a) -- Consent of Arthur Andersen LLP
23(b) -- Consent of Moore Stephens Frost, P.A.
23(c) -- Consent of Hoefer & Arnett
23(d) -- Consent of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. (included in Exhibit 5)
23(e) -- Consent of Friday, Eldredge & Clark
24 -- Power of Attorney -- Signature Page of the Registration
Statement
99(a) -- First United Bancshares, Inc. Form of Proxy
99(b) -- Citizens National Bancshares of Hope, Inc. Form of Proxy
</TABLE>

ITEM 22. UNDERTAKINGS

(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(2) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.

(3) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such

II-2
<PAGE> 120

indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

(6) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

(7) The undersigned registrant hereby undertakes:

(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement.

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 (sec.239.13 of this
chapter) or Form S-8 (sec.239.16b of this chapter), and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.

(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-3
<PAGE> 121

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of El Dorado, State of
Arkansas, on December 31, 1997.

FIRST UNITED BANCSHARES, INC.

By: /s/ JAMES V. KELLEY

----------------------------------
James V. Kelley,
Chairman, President and
Chief Executive Officer

/s/ JOHN E. BURNS

------------------------------------
John E. Burns
Vice President, Chief Financial
Officer
and Principal Accounting Officer

KNOW ALL MEN BY THESE PRESENTS: That the undersigned, a Director or
Officer, or both, of First United Bancshares, Inc. (the "Corporation"), acting
pursuant to authorization of the Board of Directors of the Corporation hereby
appoints James V. Kelley and John E. Burns, attorney-in-fact and agents for me
and in my name and on behalf, individually and as a Director or Officer, or
both, of the Corporation to sign a Registration Statement on Form S-4 and any
amendments (including post effective amendments) and supplements thereto, of the
Corporation to be filed with the Securities and Exchange Commission pursuant to
any applicable rule under the Securities Act of 1933, as amended (the "Act")
with respect to the issue and sale of not more than 1,570,000 shares of common
stock, par value $1.00 of the Corporation, said shares to be exchanged to the
shareholder of Citizens National Bancshares of Hope, Inc. with respect to the
merger by and between Citizens National Bancshares of Hope, Inc. will be merged
with and into the Corporation, and generally to do and perform all things
necessary to be done in connection with the foregoing as fully in all respects
as I could do personally.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 31st day of December, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JAMES V. KELLEY Chairman, President, Chief
- ----------------------------------------------------- Executive Officer and
James V. Kelley Director

/s/ JOHN E. BURNS Vice President, Chief
- ----------------------------------------------------- Financial Officer and
John E. Burns Principal Accounting Officer

/s/ E. LARRY BURROW Director
- -----------------------------------------------------
E. Larry Burrow

Director
- -----------------------------------------------------
Claiborne P. Deming
</TABLE>

II-4
<PAGE> 122
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ TOMMY HILLMAN Director
- -----------------------------------------------------
Tommy Hillman

Director
- -----------------------------------------------------
Roy E. Ledbetter

/s/ MICHAEL F. MAHONY Director
- -----------------------------------------------------
Michael F. Mahony

/s/ RICHARD H. MASON Director
- -----------------------------------------------------
Richard H. Mason

Director
- -----------------------------------------------------
George Middlebrook, III

/s/ JACK W. MCNUTT Director
- -----------------------------------------------------
Jack W. McNutt

/s/ R. MADISON MURPHY Director
- -----------------------------------------------------
R. Madison Murphy

/s/ ROBERT C. NOLAN Director
- -----------------------------------------------------
Robert C. Nolan

Director
- -----------------------------------------------------
Cal Partee, Jr.

Director
- -----------------------------------------------------
Carolyn Tennyson

/s/ JOHN D. TRIMBLE, JR. Director
- -----------------------------------------------------
John D. Trimble, Jr.
</TABLE>

II-5
<PAGE> 123

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

---------------------

EXHIBITS

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

---------------------

FIRST UNITED BANCSHARES, INC.
(Exact name of registrant as specified in its charter)

================================================================================
<PAGE> 124

FIRST UNITED BANCSHARES, INC.

FORM S-4 REGISTRATION STATEMENT

INDEX TO EXHIBITS

<TABLE>
<C> <S>
2 -- Agreement and Plan of Reorganization Between First United
Bancshares, Inc. and Citizens National Bancshares of
Hope, Inc. and Plan of Merger attached as Exhibit A
thereto, (included as Annex I of Prospectus/Proxy
Statement).
3(a) -- Articles of Incorporation of First United Bancshares,
Inc., as amended and restated.
3(b) -- Bylaws of First United Bancshares, Inc. (filed as Exhibit
3(b) of the Annual Report of First United Bancshares,
Inc. on Form 10-K for the year ended December 31, 1995)
incorporated herein by reference.
5 -- Opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C.
8 -- Tax Opinion of Friday, Eldredge & Clark regarding
Citizens National Bancshares of Hope, Inc. Acquisition
21 -- Subsidiaries of First United Bancshares, Inc.
23(a) -- Consent of Arthur Andersen LLP
23(b) -- Consent of Moore Stephens Frost, P.A.
23(c) -- Consent of Hoefer & Arnett
23(d) -- Consent of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. (included in Exhibit 5)
23(e) -- Consent of Friday, Eldredge & Clark
24 -- Power of Attorney -- Signature Page of the Registration
Statement
99(a) -- First United Bancshares, Inc. Form of Proxy
99(b) -- Citizens National Bancshares of Hope, Inc. Form of Proxy
</TABLE>

<PAGE> 1
EXHIBIT 3(a)

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FIRST UNITED BANCSHARES, INC.

FIRST. The name of the corporation is FIRST UNITED BANCSHARES, INC.

SECOND. The period of its duration is perpetual.

THIRD. The purpose or purposes for which the corporation is organized
are:

(a) To engage in all business activities allowable for a bank
holding company and to own and manage banks and other
businesses in the area of financial services.

(b) To acquire and own property, both real and personal, including
common stock or other beneficial interest in corporations,
associations, trusts and other forms of businesses whether
incorporated or unincorporated, and to provide services to or
for such businesses, and to engage in businesses related to
any such businesses, and to do any and all lawful acts
necessary, convenient, advisable or desirable which may be
incidental or pertinent to such businesses.

FOURTH. The total number of shares of authorized capital stock which
the corporation shall have the authority to issue shall be as follows:

<TABLE>
<CAPTION>
SHARES CLASS PAR VALUE PER SHARE
----------- ------- -------------------
<S> <C> <C>
24,000,000 Common $1.00
500,000 Preferred $1.00
</TABLE>

The board of directors may determine, in whole or in part, the preferences,
limitations, and relative rights of any class of stock, or one (1) or more
series within a class, before the issuance of such class or series,
respectively, and may amend The Articles of Incorporation to set forth such
preferences, limitations, and relative rights without shareholder's approval or
action.

FIFTH. Shareholders shall have no pre-emptive right to acquire
additional or treasury shares of the corporation.

SIXTH. All shareholders are entitled to cumulate their votes for the
election of directors.

SEVENTH. Except upon the approval of two-thirds (2/3) of all shares
issued and outstanding that are entitled to vote at a duly called shareholders
meeting, the corporation shall not:

(i) effect any transaction pursuant to which a purchaser would
acquire control of the corporation, whether by merger,
consolidation, purchase of stock or otherwise,

(ii) effect a merger or share exchange with another entity pursuant
to which the corporation would issue shares of common stock in
an amount greater than twenty percent (20%) of the number of
shares of common stock issued and outstanding immediately
prior to consummation of the transaction,

(iii) effect a merger or share exchange with another entity pursuant
to which the corporation would issue shares of common stock in
an amount that would cause the total number of shares issued
during any consecutive twelve month period in connection with
such transactions to exceed
<PAGE> 2
twenty percent (20%) of the number of shares of common stock
issued and outstanding immediately prior to consummation of
the transaction,

(iv) sell, exchange, lease or otherwise dispose of all or
substantially all of the corporation's assets and property
other than in the usual and regular course of business of the
corporation,

(v) effect a dissolution or liquidation of the corporation, or

(vi) amend these Articles of Incorporation.

EIGHTH. The internal affairs of the corporation shall be regulated in
accordance with the By-Laws duly adopted in accordance with the laws of the
State of Arkansas.

NINTH. The address of the registered office of the corporation is
First National Bank Building, Main at Washington Streets, El Dorado, Arkansas
71730. The name of its registered agent at such address is Robert G. Dudley.

TENTH. The number of directors that constitutes the Board of
Directors of the corporation shall not exceed twenty-five (25). The number of
directors shall be determined by the stockholders at each annual meeting or may
be determined at any special meeting. The Board of Directors may increase or
decrease by thirty percent (30%) or less the number of directors last fixed by
the stockholders, provided that the number of directors shall not be less than
three (3) nor more than twenty-five (25). The Board of Directors may fill a
vacancy created by the Board of Directors under this Article Tenth.

ELEVENTH. To the fullest extent permitted by the Arkansas Business
Corporation Act, as it now exists or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.

TWELFTH. The corporation may indemnify any person who was, or is, a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding to the fullest extent permitted by the
Arkansas Business Corporation Act as it now exists or may hereafter be amended.

THIRTEENTH. The corporation elects to be governed by the provisions
of the Arkansas Business Corporation Act of 1987 as it now exists or may
hereafter be amended from time to time.

FOURTEENTH. The name and address of the incorporator is:

Robert G. Dudley
Main at Washington Streets
El Dorado, Arkansas 71730

/s/ James V. Kelley
----------------------------
James V. Kelley, President

ATTEST:

/s/ Robert G. Dudley
- ----------------------------
Robert G. Dudley, Secretary

<PAGE> 1
Exhibit 5

December 31, 1997

First United Bancshares, Inc.
Main and Washington Streets
El Dorado, Arkansas 71730

Gentlemen:

In connection with the registration under the Securities Act of 1933
(the "Act") of 1,570,000 shares (the "Securities") of Common Stock, $1.00 par
value, of First United Bancshares, Inc., an Arkansas corporation (the
"Company"), we, as your special counsel, have examined such corporate records,
certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion. Upon the
basis of such examination, we advise you that, in our opinion, when the
registration statement relating to the Securities (the "Registration
Statement") has become effective under the Act, the terms of the sale of the
Securities have been duly established in conformity with the Company's articles
of incorporation, and the Securities have been duly issued and sold as
contemplated by the Registration Statement and upon consummation of the merger
of Citizens National Bancshares of Hope, Inc. with and into the Company, the
Securities will be validly issued, fully paid and nonassessable.

The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of Arkansas, and we are expressing no opinion
as to the effect of the laws of any other jurisdiction.

We have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to
be responsible.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the heading "Legal
Opinions" in the Prospectus. In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section
7 of the Act.

MITCHELL, WILLIAMS, SELIG, GATES &
WOODYARD, P.L.L.C.

/s/ Mitchell, Williams, Selig, Gates &
Woodyard, P.L.L.C.

<PAGE> 1
EXHIBIT 8

[LETTERHEAD OF FRIDAY, ELDREDGE & CLARK]

February ___, 1998

Mr. John Robert Graves
Citizens National Bancshares, Inc.
200 South Elm Street
Hope, AR 72801

Re: Merger of Citizens National Bancshares, Inc. with and into
First United Bancshares, Inc.

Gentlemen:

You have asked for our opinion regarding certain federal income tax
consequences in connection with the proposed merger of Citizens National
Bancshares, Inc. (Citizens"), an Arkansas corporation, with and into First
United Bancshares, Inc. ("Bancshares"), an Arkansas corporation, pursuant to an
Agreement and Plan of Reorganization dated as of September 15, 1997 (the
"Merger Agreement"). This opinion is being delivered pursuant to Section
7.03(e) of the Merger Agreement. Capitalized terms not otherwise defined in
this opinion shall have then meaning ascribed to such term under the Merger
Agreement.

This opinion is based upon the following factual assumptions:

(a) Bancshares and Citizens are engaged in the business of
operating as bank holding companies under the laws of the State of Arkansas and
the federal laws of the United States.

(b) Upon the effective date of the merger, the shareholders of
Citizens (other than Citizens shareholders who exercise dissenters' rights
under applicable state law), will receive their pro rata share of 1,570,000
shares of Bancshares voting common stock in exchange for their respective
outstanding shares of Citizens common stock. Bancshares will make a cash
payment to shareholders of Citizens in lieu of issuing fractional shares of
Bancshares common stock based upon the Bancshares Average Price as
of the Effective Time of the Merger. Citizens shares of common stock having a
value equal to at least fifty percent (50%) of the value of the outstanding
shares of Citizens common stock shall be exchanged in the merger solely for
Bancshares common stock.

(c) Citizens presently has, and within the last three (3) years
has had, only one class of capital stock outstanding, all of which is common
stock having a par value of $2.00 per share.

(d) Citizens will be merged with and into Bancshares pursuant to
laws of the State of Arkansas and the separate existence of Citizens shall
cease and Bancshares shall continue as the surviving corporation with all the
assets and liabilities of Citizens and Bancshares combined. Bancshares will
continue to carry on the business previously conducted by it.

(e) The Bancshares common stock to be received by the Citizens
shareholders in connection with the merger will be voting common stock with all
of the rights normally accorded to Bancshares common stockholders.

<PAGE> 2

(f) The merger is being consummated for valid business reasons
germane to the business of the parties, separate and apart from tax purposes.

(g) The fair market value of the Bancshares common stock to be
received by each Citizens shareholder will be approximately equal to the fair
market value of the Citizens stock surrendered in the exchange.

(h) There is no plan or intention by the shareholders of Citizens
to sell, exchange, or otherwise dispose of a number of shares of Bancshares
common stock received in the transaction that would reduce the Citizens
shareholders' ownership of Bancshares stock to a number of shares having a
value, as of the date of the transaction, of less than 50% of the value of all
of the outstanding stock of Citizens as of the same date. For purposes of this
assumption, shares of Citizens stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional shares
of Bancshares stock, will be treated as outstanding Citizens stock on the date
of the transaction. Moreover, shares of Citizens stock and shares of
Bancshares stock held by Citizens shareholders and otherwise sold, redeemed, or
disposed of prior or subsequent to the transaction will be considered in making
this assumption. There will have been no transfers, in the aggregate, of more
than fifty percent (50%) of the value of the Citizens stock prior to the
effective date of the merger which were made in contemplation of the merger.

(i) Bancshares has no plan or intention to reacquire any of its
stock issued in the transaction.

(j) Bancshares has no plan or intention to sell or otherwise
dispose of any of the assets of Citizens acquired in the transaction, except
for dispositions made in the ordinary course of business or transfers described
in I.R.C. Section 368(a)(2)(C).

(k) The liabilities of Citizens assumed by Bancshares and the
liabilities to which the transferred assets of Citizens are subject were
incurred by Citizens in the ordinary course of its business. The assumption by
Bancshares of the liabilities of Citizens pursuant to the merger will be for a
bona fide business purpose and not for the purpose of avoiding federal income
tax. No liabilities of any person other than Citizens shall be assumed by
Bancshares in the merger, and none of the shares of Citizens stock surrendered
in the merger in exchange for Bancshares stock will be subject to any
liabilities.

(l) Following the transaction, Bancshares will continue the
historic business of Citizens or use a significant portion of Citizens's
historic business assets in a business.

(m) Bancshares, Citizens and the shareholders of Citizens will pay
their respective expenses, if any, incurred in connection with the transaction.

(n) There is no intercorporate indebtedness existing between
Bancshares and Citizens that was issued, acquired, or will be settled at a
discount.

(o) No two parties to the transaction are investment companies as
defined in I.R.C. Section 368(a)(2)(F)(iii) and (iv).

(p) Citizens is not under the jurisdiction of a court pursuant to
a case under Title XI of the United States Code, or a receivership,
foreclosure, or other similar proceeding in a federal or state court.

(q) The fair market value of the assets of Citizens transferred to
Bancshares will exceed the sum of the liabilities assumed by Bancshares, plus
the amount of liabilities, if any, to which the transferred assets are subject.

(r) No fractional share interests in Bancshares common stock will
be issued in connection with the transaction. The payment of cash in lieu of
fractional shares of Bancshares common stock is solely for the purpose of
avoiding the expense and inconvenience to Bancshares of issuing fractional
shares and does not represent separately bargained-for consideration.

(s) None of the compensation received by any shareholder-employee
of Citizens will be separate consideration for, or allocable to, any of his or
her shares of Citizens stock.

<PAGE> 3

(t) None of the shares of Bancshares stock received by any
shareholder-employee of Citizens will be separate consideration for, or
allocable to, any employment agreement, and the compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with the amounts paid to third parties bargaining at arm's length
for similar services.

Based upon the foregoing factual representations and assumptions, and
subject to the comments and qualifications expressed herein, we are of the
opinion that:

1. The proposed merger will constitute a reorganization
with the meaning of I.R.C. Section 368(a)(1)(A).

2. Citizens and Bancshares will each be "a party to a
reorganization" within the meaning of I.R.C. Section 368(b).

3. No gain or loss will be recognized by Citizens on the
transfer of its assets to Bancshares in exchange for Bancshares common stock
and the assumption by Bancshares of the liabilities, if any, of Citizens.
I.R.C. Sections 357(a) and 361(a).

4. No gain or loss will be recognized by Bancshares upon
the receipt of the assets of Citizens in exchange for Bancshares common stock.
I.R.C. Section 1032(a).

5. The basis of the assets of Citizens acquired by
Bancshares will be the same in the hands of Bancshares as the basis of such
assets in the hands of Citizens immediately prior to the exchange. I.R.C.
Section 362(b).

6. The holding period of the assets of Citizens in the
hands of Bancshares will, in each instance, include the period for which such
assets were held by Citizens. I.R.C. Section 1223(2).

7. No gain or loss will be recognized by the
shareholders of Citizens upon the exchange of Citizens common stock solely for
Bancshares common stock. I.R.C. Section 354(a)(1).

8. The basis of the Bancshares common stock received by
the shareholders of Citizens will be the same as the basis of the Citizens
stock surrendered in exchange therefor. I.R.C. Section 358(a)(1).

9. The holding period of the Bancshares common stock
received by the shareholders of Citizens will include the period during which
the Citizens stock surrendered in exchange therefor was held, provided the
stock of Citizens is a capital asset in the hands of the shareholders of
Citizens on the date of the exchange. I.R.C. Section 1223(1).

10. Where a shareholder of Citizens dissents to the
proposed transaction and receives solely cash in exchange for his stock, such
cash will be treated as having been received by the shareholder as a
distribution in redemption of such shareholder's stock subject to the
provisions and limitations of I.R.C. Section 302. Rev. Rul. 74-515, 1974-2
C.B. 118.

11. The payment of cash to Citizens shareholders in lieu
of fractional share interests of Bancshares common stock will be treated as if
the fractional shares were distributed as part of the exchange and then
redeemed by Bancshares. These cash payments will be treated as having been
received as distributions in full payment in exchange for the stock redeemed
subject to the provisions and limitations of I.R.C. Section 302. Rev. Rul.
66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574.

The opinions expressed herein are subject to the following
qualifications:

(i) We have assumed that the express written terms of the
Merger Agreement set forth the entire agreement of the parties with respect to
the proposed transaction, and that there are no oral or written statements,
representations, agreements, or understandings which modify, amend, or vary any
of the terms thereof.

<PAGE> 4

(ii) This opinion is limited to the matters expressly set
forth herein, and no opinion may be implied or inferred beyond the specific
language and scope so stated.

(iii) The opinions expressed above regarding tax-free
reorganization treatment of the merger assume that the Citizens shareholders
have, and will continue following the merger to maintain, a "continuity of
interest" in the business of the Citizens, directly through the ownership of
Citizens stock prior to the merger, and indirectly through the ownership of
Bancshares common stock following the merger. For this purpose, a "continuity
of interest" shall mean the ownership of stock having a value, as of the date
of the transaction, of 50% or more of the value of all of the formerly
outstanding stock of Citizens on such date.

(iv) This opinion is based upon the factual assumptions
and representations described herein. Accordingly, we shall have no liability
in rendering this opinion to the extent it is adversely affected by reason of
any such factual assumptions or representations being false or incorrect.

(v) This opinion is rendered as of the date hereof and is
based upon the current version of the Internal Revenue Code, regulations
promulgated thereunder, current rulings of the Internal Revenue Service and
applicable case law, and, accordingly, is subject to any changes in such law,
regulations, rulings, or judicial decisions occurring after the date of this
opinion.

(vi) This opinion is provided solely for the benefit of
Citizens and the shareholders of Citizens and may not be relied upon by any
other person or entity, quoted in whole or in part, filed with any governmental
agency, or otherwise referred to or utilized for any other purpose, without, in
each instance, or prior written consent. We consent to the use and filing of
this opinion in connection with filings to be made with the Federal Reserve
Board and Securities and Exchange Commission concerning this transaction and in
connection with the disclosure documents to Citizens shareholders with respect
to the proposed transaction. In addition, we specifically consent to the use
of this opinion as an exhibit to Bancshares's Registration Statement on Form
S-4 which is being filed to register the shares of Bancshares common stock to
be issued in the proposed transaction, as it may be amended, and consent to
such references to our firm as are made therein.

(vii) This opinion is being furnished as of the date hereof
and we have no obligation or duty to update or supplement this opinion by
reason of events or changes in applicable law occurring after the date of this
letter.

Very truly yours,

FRIDAY, ELDREDGE & CLARK

FEC/PCG/tsc

<PAGE> 1
EXHIBIT 21

FIRST UNITED BANCSHARES, INC.
Subsidiaries

<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
The First National Bank United States
of El Dorado, El Dorado
Arkansas

First United Trust Company, N.A. United States
El Dorado, Arkansas

City National Bank United States
of Fort Smith, Fort Smith
Arkansas

First National Bank United States
of Magnolia, Magnolia
Arkansas

Merchants and Planters Bank United States
N.A., Camden, Arkansas

Commercial Bank at Alma Arkansas
Alma, Arkansas

The Bank of North Arkansas Arkansas
Melbourne, Arkansas

First United Bank Arkansas
Stuttgart, Arkansas

City Bank & Trust of Shreveport Louisiana
Shreveport, Louisiana

FirstBank Texas
Texarkana, Texas

Fredonia State Bank Texas
Nacogdoches, Texas
</TABLE>

<PAGE> 1

EXHIBIT 23(a)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-4 of our report dated
January 22, 1997 included in First United Bancshares, Inc.'s Form 10-K for the
year ended December 31, 1996 and our report dated October 3, 1997 included in
First United Bancshares, Inc.'s Form 8-K filed on October 3, 1997 and to all
references to our Firm included in this Registration Statement.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

New Orleans, Louisiana
December 31, 1997

<PAGE> 1

EXHIBIT 23(b)

CONSENT OF MOORE STEPHENS FROST

As independent public accountants, we hereby consent to the use in this
Form S-4 Registration Statement of our report dated January 10, 1997. We also
consent to the reference to our firm under "Experts" in the Form S-4.

/s/ MOORE STEPHENS FROST
Moore Stephens Frost

Little Rock, Arkansas
December 31, 1997

<PAGE> 1
EXHIBIT 23(c)

CONSENT OF HOEFER & ARNETT, INCORPORATED

We hereby consent to the inclusion in this registration statement on Form S-4 of
our opinion dated September 22, 1997 and to all references to our firm in the
registration statement.

December 30, 1997

/S/ HOEFER & ARNETT, INCORPORATED

HOEFER & ARNETT, INCORPORATED
AUSTIN, TEXAS

<PAGE> 1
EXHIBIT 23(e)

CONSENT OF FRIDAY, ELDREDGE & CLARK

We consent to the references to our firm in the S-4 Registration Statement of
First United Bancshares, Inc. in connection with the issuance of its common
stock to acquire Citizens National Bancshares of Hope, Inc.

Little Rock, Arkansas FRIDAY, ELDREDGE & CLARK
December 31, 1997

/s/ Friday, Eldredge & Clark
------------------------------

<PAGE> 1
Exhibit 99(a)

FIRST UNITED BANCSHARES, INC.

PROXY

The undersigned hereby appoints James V. Kelley and John E. Burns, or
either of them acting in the absence of the other, as attorneys and proxies of
the undersigned, to represent the undersigned at the Special Meeting of
Stockholders of First United Bancshares, Inc. ("First United") to be held on
__________, 1998 at 2:00 p.m. local time at the First National Bank Building,
Main and Washington Streets, El Dorado, Arkansas and at any adjournment or
adjournments thereof and to vote all shares of stock of First United held of
record by the undersigned:

1. Approval of the Agreement and Plan of Reorganization which provides
for the merger of Citizens National Bancshares of Hope, Inc. into
First United.

FOR AGAINST ABSTAIN
----- ----- -----

2. In their discretion on such other matters as may properly come before
the meeting.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Continued and to be signed on other side)

THIS PROXY WILL BE VOTED AS DIRECTED BUT, WHERE NO DIRECTION IS GIVEN, IT WILL
BE VOTED "FOR" APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION, FOR THE
PROPOSED AMENDMENT TO ARTICLE SEVENTH OF FIRST UNITED'S ARTICLES OF
INCORPORATION AND FOR THE PROPOSED AMENDMENT TO ARTICLE TENTH OF FIRST UNITED'S
ARTICLES OF INCORPORATION. A COPY OF THE PROXY STATEMENT HAS BEEN RECEIVED BY
THE UNDERSIGNED.

DATED:
-------------------- ----------------------------
Signature

----------------------------
Signature

Please sign exactly as name(s) appear(s) hereon and return promptly in the
enclosed envelope. When signing as attorney, executor, administrator, trustee,
guardian or corporate official, please give your title as such.

PLEASE CHECK IF YOU PLAN TO ATTEND THIS MEETING.
- ---

<PAGE> 1
Exhibit 99(b)

Citizens National Bancshares of Hope, Inc.

PROXY

The undersigned hereby appoints John Robert Graves and Dennis Ramsey
or either of them acting in the absence of the other, as attorneys and proxies
of the undersigned, to represent the undersigned at the Special Meeting of
Stockholders of Citizens National Bancshares of Hope, Inc. ("Citizens") to be
held on __________, 1998 at _____ _.m. local time at 200 South Elm Street,
Hope, Arkansas 71801 and at any adjournment or adjournments thereof and to vote
all shares of stock of Citizens held of record by the undersigned on the
following matters:

1. Approval of the Agreement and Plan of Reorganization which provides
for the merger of Citizens National Bancshares of Hope, Inc. into
First United Bancshares, Inc.

FOR AGAINST ABSTAIN
----- ----- -----

2. Approval of the election by Citizens to be governed by the Business
Corporation Act of 1987.

FOR AGAINST ABSTAIN
----- ----- -----

3. In their discretion on such other matters as may properly come before
the meeting.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
(Continued and to be signed on other side)

THIS PROXY WILL BE VOTED AS DIRECTED BUT, WHERE NO DIRECTION IS GIVEN, IT WILL
BE VOTED "FOR" APPROVAL OF THE AGREEMENT AND ELECTION. A COPY OF THE PROXY
STATEMENT HAS BEEN RECEIVED BY THE UNDERSIGNED.

DATED:
-------------------- ----------------------------
Signature

----------------------------
Signature

PLEASE CHECK IF YOU PLAN TO ATTEND THIS MEETING.
- ---