FIRST UNITED BANCSHARES INC /AR/, S-4, 1997-10-06

FIRST UNITED BANCSHARES INC /AR/
S-4, 1997-10-06
STATE COMMERCIAL BANKS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION OCTOBER 6, 1997

REGISTRATION NO.
================================================================================
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)

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<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: As soon as
practicable after the effective date of this Registration 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. [ ]

CALCULATION OF REGISTRATION FEE

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===================================================================================================================
TITLE OF EACH CLASS PROPOSED PROPOSED MAXIMUM AGGREGATE
OF SECURITIES AMOUNT TO OFFERING PRICE PER OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED UNIT(1) PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock................. 425,000 $40.00 $17,000,000 $5152.00
==================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee based
on the average ($40.00) of the high and low prices of a share of common
stock as reported on the NASDAQ Stock Market's National Market on October 2,
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

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REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS AND PROXY STATEMENT
--------------------------------------- ------------------------------------------
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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;
City Bank & Trust of
Shreveport -- 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........................ City Bank & Trust of Shreveport --
Description of Business
</TABLE>
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REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS AND PROXY STATEMENT
--------------------------------------- ------------------------------------------
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(2) Market Price of and Dividends on the
Registrant's Common Equity......................... Summary -- Comparative Per Share Data;
City Bank & Trust of
Shreveport -- Principal Stockholders of
CBT and Related Stockholder Matters
(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...... City Bank & Trust of Shreveport --
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 CBT Special Meeting -- Voting;
Solicitation of Proxies
(3) Dissenters' Rights of Appraisal................ The Merger -- Right of Dissent under the
LRS
(4) Persons Making the Solicitation................ The CBT Special Meeting -- Voting;
Solicitation of Proxie
(5) Interest of Affiliates of the Registrant in the
Proposed Transaction; Voting Securities and
Principal Holders.............................. City Bank & Trust of Shreveport --
Principal Stockholders of CBT; The
Merger -- Background of the Merger
(6) Vote Required for Approval..................... The CBT 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 , 1997 at 2:00 P.M.

At a Special Meeting, Stockholders of First United will consider and vote
upon the merger of City Bank & Trust of Shreveport ("CBT") with a newly created,
wholly-owned subsidiary of First United. The Agreement between First United and
CBT provides that the stockholders of CBT and optionholders of CBT common stock
will receive total consideration consisting of four hundred twenty-five thousand
(425,000) 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 CBT Common Stock and all outstanding options to acquire CBT Common
Stock, other than shares of CBT Common Stock held by dissenting stockholders,
shall be converted into the right to receive the Purchase Price based upon an
exchange formula set forth in the Agreement. Fractional shares of First United
Common Stock shall not be issued. Any CBT Shareholder or holder of options to
purchase CBT Common Stock 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"). Of the
425,000 shares of First United to be issued, the number of First United shares
to be received by the holders of the outstanding shares of CBT Common Stock and
the number of First United shares to be received by the holders of Options will
depend upon the Average Price of First United stock. On September 3, 1997, the
closing price on the NASDAQ Stock Market of a share of First United was $42.00.
If at the effective time of the Merger $42.00 is assumed to be the Average Price
of First United stock, under the exchange formula in the Agreement, holders of
the 386,496 outstanding shares of CBT Common Stock will receive 318,124 shares
of First United Common Stock (an exchange ratio of 0.8231 share of First United
Common Stock for each one share of CBT Common Stock) and the holders of the
187,189 outstanding Options will receive 106,876 shares of First United Common
Stock (an exchange ratio of 0.5710 share of First United Common Stock for each
one CBT Option). The actual Average Price at the effective time of the Merger
may be higher or lower than the $42.00 per share example used above.

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.

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,

/s/ JAMES V. KELLEY
------------------------------------
James V. Kelley
Chairman of the Board
<PAGE> 5

FIRST UNITED BANCSHARES, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

, 1997

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 , 1997 at 2:00 p.m. for
the following purposes:

1. To consider and vote upon an Agreement and Plan of Reorganization
dated as of June 18, 1997, and Plan of Merger (collectively, the
"Agreement"), which provides for the merger of City Bank & Trust of
Shreveport into a newly created, wholly-owned subsidiary of 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 , 1997
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

/s/ ROBERT G. DUDLEY
------------------------------------
Robert G. Dudley, Secretary

Dated: , 1997
<PAGE> 6

CITY BANK & TRUST OF SHREVEPORT

To the Stockholders of
City Bank & Trust of Shreveport

Enclosed is a Notice of Special Meeting of Stockholders of City Bank &
Company of Shreveport ("CBT") which will be held at 6025 Line Avenue,
Shreveport, Louisiana 71106 on , 1997 at .M.

At the Special Meeting, Stockholders of CBT will consider and vote upon the
merger of CBT with a newly created, wholly-owned subsidiary of First United
Bancshares, Inc. ("First United"). The Agreement between First United and CBT
provides that the stockholders and optionholders of CBT will receive total
consideration consisting of four hundred twenty-five thousand (425,000) 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 CBT
Common Stock and all outstanding options to acquire CBT Common Stock, other than
shares of CBT Common Stock held by dissenting stockholders, shall be converted
into the right to receive the Purchase Price based upon an exchange formula set
forth in the Agreement. Fractional shares of First United Common Stock shall not
be issued. Any CBT Shareholder or holder of options to purchase CBT Common Stock
("Options") 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"). Of the 425,000 shares
of First United to be issued, the number of First United shares to be received
by the holders of the outstanding shares of CBT Common Stock and the number of
First United shares to be received by the holders of Options will depend upon
the Average Price of First United stock. On September 3, 1997, the closing price
on the NASDAQ Stock Market of a share of First United was $42.00. If at the
effective time of the Merger $42.00 is assumed to be the Average Price of First
United stock, under the exchange formula in the Agreement, holders of the
386,496 outstanding shares of CBT Common Stock will receive 318,124 shares of
First United Common Stock (an exchange ratio of 0.8231 share of First United
Common Stock for each one share of CBT Common Stock) and the holders of the
187,189 outstanding Options will receive 106,876 shares of First United Common
Stock (an exchange ratio of 0.5710 share of First United Common Stock for each
one CBT Option). The actual Average Price at the effective time of the Merger
may be higher or lower than the $42.00 per share example used above.

First United is a bank holding company which is engaged in the business of
banking through its nine (9) 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 and
in Bowie and Nacogdoches Counties in Texas, which provide a full range of
banking services to its customers.

Very truly yours,

/s/ RON C. BOUDREAUX
------------------------------------
Ron C. Boudreaux
President and Chief Executive
Officer
<PAGE> 7

CITY BANK & TRUST OF SHREVEPORT

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

, 1997

NOTICE is hereby given that a Special Meeting of Stockholders of City Bank
& Trust of Shreveport has been called by the Board of Directors and will be held
at 6025 Line Avenue, Shreveport Louisiana 71106 on , 1997 at .m.
for the following purposes:

1. To consider and vote upon an Agreement and Plan of Reorganization
dated as of June 18, 1997, and Plan of Merger (collectively, the
"Agreement"), which provides for the merger of City Bank & Trust of
Shreveport with a newly created, wholly-owned subsidiary of First United
Bancshares, Inc. of El Dorado, Arkansas.

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 , 1997
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.

DISSENTING STOCKHOLDERS WHO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF THE
LOUISIANA BANKING LAW WILL BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR CASH VALUE
OF THEIR SHARES IF THE MERGER IS EFFECTED, UPON APPROVAL BY LESS THAN EIGHTY
PERCENT (80%) OF CITY BANK & TRUST OF SHREVEPORT'S TOTAL VOTING POWER.

By Order of the Board of Directors

/s/ RON C. BOUDREAUX
-------------------------------------------
Ron C. Boudreaux
President and Chief Executive Officer

Dated: , 1997
<PAGE> 8

FIRST UNITED BANCSHARES, INC.
AND
CITY BANK & TRUST OF SHREVEPORT

JOINT PROXY STATEMENT

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

FIRST UNITED BANCSHARES, INC.
PROSPECTUS
425,000 SHARES OF COMMON STOCK
PAR VALUE $1.00

This Joint Proxy Statement and Prospectus ("Proxy Statement") is being
furnished to the stockholders of City Bank & Trust of Shreveport ("CBT") and
First United Bancshares, Inc. ("First United") in connection with the
solicitation of proxies by the Boards of Directors of CBT and First United for
use at a special meeting of stockholders of CBT to be held on ,
1997, including any adjournments or postponements of the meeting, and for use at
a special meeting of shareholders of First United to be held on ,
1997, including any adjournments or postponements of the meeting. At the meeting
or any adjournments or postponements thereof, the stockholders of CBT 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 CBT, dated June 18, 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 CBT through a
merger transaction (the "Merger") in which CBT would merge with and into a newly
created interim bank which will be a wholly-owned subsidiary of First United, in
exchange for the issuance to the stockholders and optionholders of CBT of up to
425,000 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 and optionholders of CBT in exchange for their stock
in CBT. 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 and optionholders of CBT.

This Proxy Statement and the accompanying forms of proxy are first being
mailed to stockholders of CBT, optionholders of CBT stock, and Stockholders of
First United on or about , 1997. On September 25, 1997, the closing
price on the National Association of Securities Dealers Automatic Quotation
System of a share of First United Common Stock was $40.00.

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 OCTOBER , 1997.
<PAGE> 9

NO PERSON IS AUTHORIZED BY FIRST UNITED OR CBT 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 CBT 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 425,000 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
, 1997.

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 and June 30, 1997.

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

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 CBT, 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 CBT has been
supplied by CBT.

3
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TABLE OF CONTENTS

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PAGE
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SUMMARY
The Company............................................... 6
CBT....................................................... 6
The Merger................................................ 6
Combined Company.......................................... 7
Fairness Opinion.......................................... 7
The First United Special Meeting.......................... 7
The CBT Special Meeting................................... 7
Certain Federal Income Tax Consequences................... 8
Dissenters' Rights........................................ 8
Regulatory Approvals...................................... 8
Accounting Treatment...................................... 8
Market Prices............................................. 8
Comparative Per Share Data................................ 9
Selected Financial Data................................... 9
THE CBT 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
Background of the Merger.................................. 14
Reason for the Merger..................................... 14
Opinion of Financial Advisor.............................. 14
The Agreement............................................. 16
Regulatory Approvals...................................... 17
Antitrust Matters......................................... 18
Certain Federal Income Tax Consequences................... 18
Accounting Treatment...................................... 20
Right of Dissent Under the 1987 Act....................... 20
Right of Dissent Under the LRS............................ 21
Exchange Ratio for the Merger............................. 22
Expenses of the Merger.................................... 23
FINANCIAL INFORMATION
Pro Forma Combining Balance Sheet......................... 24
Pro Forma Combining Statements of Income.................. 25
Notes to Pro Forma Combining Financial Statements......... 29
</TABLE>

4
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PAGE
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FIRST UNITED BANCSHARES, INC.
General................................................... 30
Pending Acquisition....................................... 30
Regulation................................................ 30
Offices................................................... 32
Employees................................................. 32
Description of First United Common Stock.................. 32
Resale of First United Common Stock....................... 33
CITY BANK & TRUST OF SHREVEPORT
Description of Business................................... 33
Management Discussion and Analysis........................ 33
Directors and Executive Officers.......................... 41
Transactions with Management.............................. 42
Principal Stockholders of CBT............................. 42
Resulting Ownership in First United....................... 43
Competition............................................... 43
Litigation................................................ 43
Offices................................................... 43
Employees................................................. 43
Description of CBT Stock.................................. 43
Comparison of Rights of Holders of CBT Common Stock and
First United Common Stock.............................. 43
LEGAL MATTERS AND EXPERTS
Legal Opinions............................................ 44
Experts................................................... 44
General................................................... 44
INDEX TO CBT FINANCIAL STATEMENTS........................... F-1
ANNEXES
I -- Agreement and Plan of Reorganization, including Plan
of Merger attached as Exhibit A thereto............. A-I-1
II -- Arkansas Business Corporation Act of 1987
sec.4-27-1301 et. seq............................... A-II-1
III -- Louisiana Revised Statutes 6:376 -- Rights of
Dissenting Stockholders............................. A-III-1
IV -- Fairness Opinion of CBT's 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

The Company is a multi-bank holding company located in El Dorado, Arkansas
with nine wholly-owned subsidiary banks and a trust company operating in
twenty-eight communities throughout the States of Arkansas and Texas. The
Company'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,
FirstBank, Texarkana, Texas; Fredonia State Bank, Nacogdoches, Texas, and First
United Trust Company, N.A., El Dorado, Arkansas (collectively called the
"Subsidiary Banks"). The Company had consolidated assets of $1,808,356,000 and
stockholders' equity of $179,796,000 as of June 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 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.

The Company'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". The Company's principal executive
offices are located at Main and Washington Streets, El Dorado, Arkansas, 71730,
and its telephone number is (870) 863-3181.

CBT

CBT is a Louisiana state bank. CBT had consolidated assets of $62,913,000
and stockholders' equity of $7,145,000 as of June 30, 1997. CBT was chartered in
1982 and has five (5) banking offices in Shreveport, Caddo Parish, Louisiana.

There is no public market for shares of CBT's outstanding capital stock.
CBT's principal executive offices are located 6025 Line Avenue, Shreveport,
Louisiana, 71106. Its telephone number is (318) 865-6555.

THE MERGER

On June 18, 1997, the Company and CBT entered into a definitive agreement
pursuant to which the Company proposes to acquire all of the issued and
outstanding stock of CBT by merger of CBT with and into a newly created interim
bank which will be a wholly-owned subsidiary of the Company. The acquisition of
CBT will be consummated through the issuance to CBT's stockholders and
optionholders of CBT stock, of approximately 425,000 shares of First United
Common Stock. The reason for the Merger is to expand the markets of the Company
and thereby increase the earning potential of the Company. The Agreement
requires that the merger be accounted for as a pooling of interests. See "The
Merger -- The Agreement."

6
<PAGE> 14

On June 17, 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 $40.50. There is no established market
value for the stock of CBT.

THE BOARDS OF DIRECTORS OF FIRST UNITED AND CBT RECOMMEND THAT FIRST UNITED
AND CBT 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 CBT 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 CBT COMBINED COMBINED
---------- --------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Assets
June 30, 1997.................... $1,808,356 96.64% $62,913 3.36% $1,871,269
Shareholders' equity
June 30, 1997.................... 179,796 96.18% 7,145 3.82% 186,941
Net interest income
Year ended December 31, 1996..... 65,582 94.91% 3,515 5.09% 69,097
Six months ended June 30, 1997... 34,651 95.00% 1,825 5.00% 36,476
Income from continuing operations:
Year ended December 31, 1996..... 22,372 94.84% 1,218 5.16% 23,590
Six months ended June 30, 1997... 11,517 93.55% 794 6.45% 12,311
</TABLE>

Upon issuance of the 425,000 shares of common stock of First United to CBT
stockholders and optionholders, First United will have a total of 10,276,892
shares of common stock issued and outstanding. Present First United stockholders
will control 95.86% of such shares and CBT stockholders will control 4.14% of
such shares.

FAIRNESS OPINION

The Agreement requires as a condition which must occur or be waived by CBT,
that CBT shall have received a written fairness opinion from Southard Financial
dated not later than the date of the mailing of the Proxy Statement to the CBT
Shareholders and updated prior to the effective time of the Merger, confirming
such financial advisor's opinion to the Board of Directors of CBT that the
consideration to be paid in the Merger is fair to the CBT Shareholders from a
financial point of view. See "The Merger -- Opinion of Financial Advisor."

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 , 1997 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 CBT SPECIAL MEETING

Approval of the Merger by the stockholders of CBT will be considered at a
Special Meeting to be held at 6025 Line Avenue, Shreveport, Louisiana 71106 on
, 1997, at .m. Central Time.

7
<PAGE> 15

The affirmative vote of the holders of two-thirds of the outstanding shares
of CBT common stock is required for the approval of the Merger. Directors,
executive officers and their affiliates hold a total of 47.99% of the
outstanding stock of CBT as of July 31, 1997. Stockholders of CBT are entitled
to dissenters' rights if the holders of less than eighty percent (80%) of the
outstanding shares of CBT common stock vote in favor of the Merger. See "The
Merger -- Right of Dissent under the LRS."

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 CBT as a result of the Merger and CBT's stockholders will not recognize gain
or loss upon the receipt of First United Common Stock in exchange for CBT common
stock. CBT 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
CBT stockholders upon the receipt of First United Common Stock in exchange for
CBT 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 are entitled to dissenters' rights
with respect to the Merger. Holders of First United Common Stock may exercise
their right of dissent under the Arkansas Business Corporation Act of 1987
("1987 Act"). See "The Merger -- Right of Dissent under the 1987 Act."

Holders of CBT common stock are entitled to dissenter's rights with respect
to the Merger if the holders of less than eighty percent (80%) of CBT's common
stock vote in favor of the Merger. Holders of CBT Common Stock may exercise
their right of dissent under the Louisiana Revised Statutes of 1950, as amended
("LRS"). See "The Merger -- Right of Dissent under the LRS".

REGULATORY APPROVALS

First United has received the preliminary approval of the Board of
Governors of the Federal Reserve to acquire CBT. First United and CBT have also
received the approval of the Federal Deposit Insurance Corporation and the
Louisiana Office of Financial Institutions to consummate 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. CBT 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 September 25, 1997)......................... 49.00 31.50
</TABLE>

8
<PAGE> 16

On June 17, 1997 immediately prior to the public announcement of the
agreement in principle between First United and CBT as to the proposed merger
transaction, the closing sales price for First United Common Stock was $40.50.
On September 25, 1997, the closing sales price for First United Common Stock was
$40.00.

COMPARATIVE PER SHARE DATA

The following table sets forth for the periods indicated selected
historical per share data of First United and CBT 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
CBT 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/ CBT
FIRST UNITED CBT CBT PRO FORMA
HISTORICAL(1)(2) HISTORICAL COMBINED EQUIVALENT
---------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
December 31, 1996............................ $17.55 $16.81 $17.43 $19.49
June 30, 1997................................ 18.28 18.64 18.21 20.37
Cash Dividends per common share:
Year ended December 31, 1994................. 0.45 0.20 0.44 0.49
Year ended December 31, 1995................. 0.52 0.30 0.51 0.55
Year ended December 31, 1996................. 0.59 0.30 0.58 0.63
Six Months ended June 30, 1997............... 0.37 0.15 0.36 0.40
</TABLE>

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

(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. This merger was accounted for as a pooling-of-interests and
accordingly, First United's historical per share data has been restated to
reflect this merger.

(3) The CBT pro forma equivalents represent the respective First United/CBT pro
forma combined earnings, dividends and book value per common share
multiplied by the applicable exchange ratio of 1.12 shares of First United
Common Stock for each share of CBT Common Stock so that the First United/CBT
pro forma equivalent amounts are equated to the respective values for one
share of CBT Common Stock. The exchange ratio is determined by dividing
First United common stock to be received by the CBT stockholders by the
386,496 shares of CBT Common Stock currently outstanding without reflecting
outstanding options to purchase CBT Common Stock.

SELECTED FINANCIAL DATA

The table on the following page presents selected historical financial data
of First United and CBT 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 CBT historical data
for each of the years in the three-year period ended December 31, 1996 is
derived from the historical financial statements of CBT as audited by Heard,
McElroy & Vestal, L.L.P. independent auditors. The selected financial data for
First United for the six

9
<PAGE> 17

month periods ended June 30, 1996 and 1997, and for CBT for the six month
periods ended June 30, 1996 and 1997 have been obtained from unaudited financial
statements and, in the opinion of the respective management of First United and
CBT, 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
CBT give effect to the exchange of each share of CBT common stock for 1.12
shares of First United Common Stock.

These data should be read in conjunction with the consolidated financial
statements of each of First United and CBT, 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."

10
<PAGE> 18

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST UNITED(1)
Operating Data:
Total interest income.............. $ 89,862 $ 83,930 $ 86,614 $ 108,079 $ 123,947 $ 61,101 $ 64,595
Net interest income................ 49,127 50,017 50,478 57,510 65,582 32,280 34,651
Provision for possible loan
losses........................... 3,011 1,815 334 574 725 (85) 693
Income from continuing
operations....................... 15,303 16,187 16,711 18,554 22,372 11,495 11,517
Per Share Data:
Income from continuing
operations....................... $ 1.64 1.74 1.79 1.99 $ 2.27 $ 1.17 $ 1.17
Cash dividends paid................ 0.33 0.41 0.45 0.52 0.59 0.30 0.37
Selected Balance Sheet Items:
Total assets....................... $1,259,887 $1,334,383 $1,339,440 $1,572,682 $1,772,992 $1,703,369 $1,808,356
Total securities................... 588,428 615,282 598,129 647,502 731,802 691,458 748,434
Net loans.......................... 519,898 580,685 598,171 741,080 831,600 822,372 882,272
Total deposits..................... 1,105,212 1,163,703 1,168,815 1,340,492 1,514,038 1,453,446 1,532,004
Long-term debt..................... 8,821 7,723 13,892 16,832 22,426 20,798 22,309
Capital accounts................... 108,643 123,876 125,466 150,163 172,794 163,553 179,796

CBT -- HISTORICAL
Operating Data:
Total interest income.............. $ 3,184 $ 3,301 $ 3,334 $ 4,380 $ 5,056 $ 2,420 $ 2,645
Net interest income................ 1,950 2,206 2,347 2,961 3,515 1,697 1,825
Provision for possible loan
losses........................... 280 130 55 151 75 60 10
Income from continuing
operations....................... 298 446 674 874 1,218 663 794
Per Share Data:
Income from continuing
operations....................... $ 1.30 $ 1.64 $ 1.93 $ 2.50 $ 3.41 $ 1.86 $ 2.11
Cash dividends paid................ -- -- 0.20 0.30 0.30 0.15 0.15
Selected Balance Sheet Items:
Total assets....................... $ 39,377 $ 43,681 $ 47,675 $ 52,597 $ 60,928 $ 56,066 $ 62,913
Total securities................... 9,777 9,325 11,993 10,929 9,961 10,144 9,499
Net loans.......................... 19,298 24,769 30,169 34,104 40,003 38,455 46,518
Total deposits..................... 36,067 38,639 40,220 46,942 54,021 49,771 51,890
Long-term debt..................... 241 1,163 96 -- -- -- 3,500
Capital accounts................... 2,954 3,530 4,015 5,028 6,311 5,635 7,145

PRO FORMA -- COMBINED
Operating Data:
Total interest income.............. $ 93,046 $ 87,231 $ 89,948 $ 112,459 $ 129,003 $ 63,521 $ 67,240
Net interest income................ 51,077 52,223 52,825 60,471 69,097 33,977 36,476
Provision for possible loan
losses........................... 3,291 1,945 389 725 800 (25) 703
Income from continuing
operations....................... 15,601 16,633 17,385 19,428 23,590 12,158 12,311
Per Share Data:
Income from continuing
operations....................... $ 1.60 $ 1.47 $ 1.78 $ 1.99 $ 2.30 $ 1.18 $ 1.20
Cash dividends paid................ 0.32 0.39 0.44 0.51 0.58 0.29 0.36
Selected Balance Sheet Items:
Total assets....................... $1,299,264 $1,378,064 $1,387,115 $1,625,279 $1,833,920 $1,759,435 $1,871,269
Total securities................... 598,205 624,607 610,122 658,431 741,763 757,933 757,933
Net loans.......................... 539,196 605,454 628,340 775,184 871,603 928,790 928,790
Total deposits..................... 1,141,279 1,202,342 1,209,035 1,387,434 1,568,059 1,583,894 1,583,894
Long-term debt..................... 9,062 8,886 13,988 16,832 22,426 25,809 25,809
Capital accounts................... 111,597 127,406 129,481 155,191 179,105 186,941 186,941
</TABLE>

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

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

11
<PAGE> 19

THE CBT SPECIAL MEETING

DATE, TIME AND PLACE

The CBT Special Meeting will be held on , 1997, commencing at
.m. Central Time, at the offices of CBT at 6025 Line Avenue, Shreveport,
Louisiana.

PURPOSE OF MEETING

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

SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE

The close of business on , 1997 has been fixed by the Board of
Directors of CBT as the record date ("CBT Record Date") for the determination of
holders of CBT common stock entitled to notice of and to vote at the CBT Special
Meeting. At the close of business on the CBT Record Date, there were 386,496
shares of CBT common stock outstanding held by 215 shareholders of record.
Holders of record of CBT common stock on the record date are entitled to one
vote per share and, if the holders of less than eighty percent (80%) of the
outstanding shares of CBT common stock are voted in favor of the merger, are
entitled to dissenters' rights. See "The Merger -- Right of Dissent under the
LRS"

VOTE REQUIRED

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

As of July 31, 1997, directors, executive officers and their affiliates own
47.99% of the outstanding stock of CBT.

VOTING; SOLICITATION OF PROXIES

Proxies for use at the CBT Special Meeting accompany copies of this Proxy
Statement delivered to record holders of CBT common stock and such proxies are
solicited on behalf of the Board of Directors of CBT. A holder of CBT common
stock may use his proxy if he is unable to attend the CBT 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 CBT, or
by submitting a proxy having a later date, or by such person appearing at the
CBT 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.

CBT 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 CBT acting on CBT's behalf, may solicit proxies
personally.

12
<PAGE> 20

THE FIRST UNITED SPECIAL MEETING

DATE, TIME AND PLACE

The First United Special Meeting will be held on , 1997,
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 CBT.

SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE

The close of business on ,1997 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 9,851,892 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.

13
<PAGE> 21

THE MERGER

BACKGROUND FOR THE MERGER

During the early summer, 1996, CBT received an informal acquisition
overture from a large publicly-traded bank holding company. As a result of
receiving that informal acquisition overture, the Board of Directors of CBT
determined that it would be in the best interest of CBT and its stockholders if
CBT were to actively solicit acquisition proposals from any interested
acquirors. In August, 1996, CBT retained its counsel to assist CBT in obtaining
offers to acquire all of the outstanding shares of CBT common stock. CBT's
counsel contacted over two dozen financial institutions in the region, including
First United, in an effort to determine if those financial institutions would be
interested in making an offer to acquire CBT. As a result of those contacts, CBT
received preliminary acquisition proposals from four financial institutions,
including First United. Based on the preliminary offer submitted by First
United, information was exchanged between CBT and First United relative to the
proposed transaction and negotiations ensued between CBT and First United. On
March 19, 1997, CBT's Board met for purposes of considering and acting upon a
revised acquisition proposal from First United to acquire CBT. That revised
acquisition proposal was approved by the Board of Directors of CBT. At that
point, negotiations commenced regarding a definitive agreement for the
transaction, and on June 18, 1997, the Board of Directors of CBT approved the
Merger Agreement.

REASONS FOR THE MERGER

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

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

b. CBT's Board's belief that the terms of the Merger Agreement are
attractive in that the Merger Agreement allows CBT stockholders to become
stockholders in First United, an institution whose stock is traded over the
NASDAQ Stock Market, and the recent earnings performance of First United;

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

d. CBT's 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 CBT's market area;

f. CBT's 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 CBT; and

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

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

OPINION OF FINANCIAL ADVISOR

CBT retained Southard Financial, a Memphis, Tennessee financial valuation
consulting firm, to render its opinion as to the fairness, from a financial
point of view to the holders of CBT common stock of the consideration to be paid
in the Merger. In connection with this engagement, Southard Financial evaluated
the financial terms of the Merger, but was not asked to, and did not, recommend
the specific ratio of exchange between First United and CBT's respective common
stocks and did not assist in the Merger negotiations. The

14
<PAGE> 22

ratio of exchange was determined by First United and CBT after arm's length
negotiations. CBT did not place any limitations on the scope of Southard
Financial's investigation or review.

Southard Financial provided CBT's Board with a fairness opinion letter and
supporting documentation to the Board of Directors. The full text of the opinion
letter of Southard Financial, dated August 29, 1997, which sets forth certain
assumptions made, matters considered and limitations on the review performed is
attached as Annex III and is incorporated herein by reference. The summary of
the opinion of Southard Financial set forth in this Proxy Statement is qualified
in its entirety by reference to the opinion.

In arriving at its opinion, Southard Financial conducted interviews with
officers of First United and CBT and reviewed the documents indicated in the
fairness letter. Southard Financial did not independently verify the accuracy
and/or the completeness of the financial and other information reviewed in
rendering its opinion. Southard Financial did not, and was not requested to,
solicit third party indications of interest in acquiring any or all the assets
of CBT.

In connection with rendering its opinion, Southard Financial performed a
variety of financial analyses which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the opinion. In its analyses, Southard Financial made
numerous assumptions, many of which are beyond the control of CBT and First
United. Any estimates contained in the analyses prepared by Southard Financial
are not necessarily indicative of future results or values, which may vary
significantly from such estimates. Estimates of value of companies do not
purport to be appraisals or necessarily reflect the prices at which companies or
their securities may actually be sold. None of the analyses performed by
Southard Financial was assigned a greater significance that any other.

The summary of Southard Financial's analysis set forth below is based on an
assumed exchange ratio of First United Common Stock for shares of CBT common
stock. Under the Agreement, CBT shareholders and optionholders are to receive
425,000 shares of First United Common Stock. The number of First United shares
to be received for each outstanding share of CBT common stock will vary
depending upon the Average Price of First United stock at the effective date of
the Merger. See "The Merger -- The Agreement." For purposes of Southard
Financial's analysis and the summary below, the Average Price of First United is
assumed to be $41.50. Based upon this assumption, 318,305 shares of First United
Common Stock would be issued in exchange for the 386,496 outstanding shares of
CBT common stock, for an exchange ratio of 0.8241 share of First United Common
Stock for each one share of CBT common stock and an effective "purchase" price
of the outstanding CBT common stock of $34.20 per share. A total of 106,495
shares of First United Common Stock (the balance of the 425,000 shares to be
issued) would be issued to the CBT optionholders.

Dividend Yield Analysis. In evaluating the impact of the proposed merger on
the shareholders of CBT, Southard Financial reviewed the dividend paying
histories of CBT and First United. Based upon this review, it is reasonable to
expect that the shareholders of CBT, in total, will receive dividends
substantially above the level currently paid by CBT after the Merger is
completed (defined as post Merger combined dividend per share times the exchange
ratio). Based upon 1996 and 1997 dividend payments for First United and CBT and
an exchange ratio of 0.8241 share of First United common stock for each
outstanding share of CBT common stock, the shareholders of CBT will see more
than a two-fold increase in dividends.

Earnings Yield Analysis. In evaluating the impact of the proposed Merger on
the shareholders of CBT, Southard Financial determined that, based upon an
exchange ratio of 0.8241 share of First United common stock for each outstanding
share of CBT common stock, the shareholders of CBT would have seen a decrease of
23% in their share of earnings based upon 1996 earnings of First United and CBT.

Book Value Analysis. In evaluating the impact of the proposed Merger on the
shareholders of CBT, Southard Financial determined that the shareholders of CBT
would have seen an increase in the book value of their investment had the Merger
been consummated at year-end 1996. Reported diluted book value of CBT at June
30, 1997 was $13.85 per share. Reported book value of First United at June 30,
1997 was $18.90 per share. Had the Merger been consummated as of June 30, 1997,
each former CBT share of Common Stock

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<PAGE> 23

would have book value of $15.58 (First United's June 30, 1997 book value of
$18.90 per share times 0.8241 shares). This represents 112.5% of CBT's book
value as of June 30, 1997.

Analysis of Alternatives. In evaluating the fairness of the proposed Merger
to the shareholders of CBT, Southard Financial reviewed with management other
offers received for the purchase/Merger of CBT. Further, Southard Financial
considered recent public market merger pricing information.

Analysis of Market Transactions. Based upon an exchange ratio of 0.8241,
CBT shareholders will receive 247% of June 30, 1997 book value per share and
13.05 times trailing 12 months earnings. Based upon the review conducted by
Southard Financial, the pricing for CBT in the Merger is within the range of
multiples seen in recent bank acquisitions.

Fundamental Analysis. Southard Financial reviewed the financial
characteristics of CBT and First United with respect to profitability, capital
ratios, liquidity, asset quality and other factors. Southard Financial compared
CBT and First United to a universe of publicly traded banks and bank holding
companies and to peer groups prepared by the Federal Financial Institutions
Examination Council. Southard Financial found that the post-Merger combined
entity will have capital ratios and profitability ratios near those of the
public peer group.

Liquidity. Unlike CBT common stock, shares of First United common stock to
be received in the Merger will be registered with the SEC, and First United
common stock is traded in the NASDAQ Market. Further, except in the case of
officers, directors and certain large shareholders of CBT, First United shares
received will be freely tradeable with no restrictions.

Southard Financial is a financial valuation consulting firm, specializing
in the valuation of closely-held companies and financial institutions. Since its
founding in 1987, Southard Financial has provided approximately 2,000 valuation
opinions for clients in 43 states. Further, Southard Financial provides
valuation services for approximately 100 financial institutions annually. For
rendering its opinion, Southard Financial received a fee of $10,000, plus
reasonable out of pocket expenses. Southard Financial has never been engaged
previously by CBT or First United, except that in 1988, Southard Financial was
retained by First United to render a fairness opinion on behalf of First
United's shareholders for First United's acquisition of First City Corp., Fort
Smith, Arkansas. Neither Southard Financial nor its principals own an interest
in the securities of CBT or First United.

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.

Under the terms of the Agreement, First United will establish an interim
bank chartered under the laws of the State of Louisiana which will be merged
with and into CBT.

As part of the Merger, the Agreement provides that the stockholders of CBT
and optionholders of CBT common stock will receive, based on an exchange formula
set forth in the Agreement, total consideration consisting of four hundred
twenty-five thousand (425,000) 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 CBT common stock, other than shares of CBT
common stock held by dissenting stockholders, and all outstanding options to
purchase CBT common stock (the "Options") shall be converted into the right to
receive a portion of the Purchase Price based upon each Stockholder's and
Optionholder's ownership of the total number of issued and outstanding shares
and outstanding options of CBT common stock at the effective time of the Merger.
Fractional shares of First United Common Stock shall not be issued. Any CBT
Shareholder or holder of Options is 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").

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<PAGE> 24

Of the 425,000 shares of First United to be issued, the number of First
United shares to be received by the holders of the outstanding shares of CBT
Common Stock and the number of First United shares to be received by the holders
of Options will depend upon the Average Price of First United stock. On
September 3, 1997, the closing price on the NASDAQ Stock Market of a share of
First United was $42.00. If at the effective time of the Merger $42.00 is
assumed to be the Average Price of First United stock, under the exchange
formula in the Agreement, holders of the 386,496 outstanding shares of CBT
Common Stock will receive 318,124 shares of First United Common Stock (an
exchange ratio of 0.8231 share of First United Common Stock for each one share
of CBT Common Stock) and the holders of the 187,189 outstanding Options will
receive 106,876 shares of First United Common Stock (an exchange ratio of 0.5710
share of First United Common Stock for each one CBT Option). The actual Average
Price at the effective time of the Merger may be higher or lower than the $42.00
per share example used above.

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.

CBT 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, CBT 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. CBT 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 CBT
to obtain any necessary approvals, adversely affect the ability of First United
or CBT to perform their covenants and agreements under the Agreement, or result
in any of the conditions to the Merger not being satisfied. CBT 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 CBT and
First United stockholders by two-thirds of all outstanding shares, respectively;
(b) approval by the appropriate bank regulatory authorities; (c) receipt by CBT
of letters from Southard Financial dated the date of the mailing of the Proxy
Statement to the CBT Shareholders and updated prior to the effective time of the
Merger confirming such financial advisor's prior opinion to the Board of
Directors of CBT that the consideration to be paid in the merger is fair to the
CBT 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 Louisiana Office of Financial Institutions, 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

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 CBT. In conjunction with the Board application, the Merger is
also subject to review by the Department of Justice as to its competitive
effects. Applications have also been filed

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<PAGE> 25

with the Federal Deposit Insurance Corporation and the Louisiana Office of
Financial Institutions for approval of the Merger.

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.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

THE FOLLOWING IS A SUMMARY OF THE MATERIAL ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO CBT STOCKHOLDERS. THIS SUMMARY IS BASED ON THE
FEDERAL INCOME TAX LAWS AS NOW IN EFFECT AND AS CURRENTLY INTERPRETED. IT DOES
NOT TAKE INTO ACCOUNT POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS,
INCLUDING AMENDMENTS TO APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN
JUDICIAL OR ADMINISTRATIVE RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT.
THIS SUMMARY DOES NOT PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY
PERSON. IN PARTICULAR, AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CBT STOCKHOLDERS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN
PERSONS, TAX-EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, AND
CORPORATIONS, AMONG OTHERS) OR THE CONSEQUENCES TO THOSE PERSONS WHO ACQUIRE
FIRST UNITED COMMON STOCK PURSUANT TO THE EXERCISE OR TERMINATION OF EMPLOYEE
STOCK OPTIONS. NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER
UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. CBT STOCKHOLDERS AND
OPTIONHOLDERS, THEREFORE, ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND
OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.

A federal income tax ruling with respect to this transaction has not been,
and will not be requested from the Internal Revenue Service ("IRS"). Instead,
Gerrish & McCreary, P.C., counsel to CBT, has rendered an opinion ("Tax
Opinion") to CBT concerning certain federal income tax consequences of the
proposed Merger under federal income tax law. It is such firm's opinion that,
based upon the assumptions that the Merger is consummated in accordance with
Louisiana law and the Agreement and in conformity with certain factual
representations made by the managements of CBT and First United, the transaction
will have the following federal income tax consequences:

(a) The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").

(b) No gain or loss will be recognized by the interim bank to be
formed by First United ("Interim") upon the transfer of substantially all
of its assets to CBT in exchange for CBT common stock and the assumption of
its liabilities, if any, by CBT.

(c) No gain or loss will be recognized by CBT upon the receipt of
substantially all the assets of Interim in exchange for CBT common stock.

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<PAGE> 26

(d) No gain or loss will be recognized by First United upon the
receipt of CBT common stock in exchange for stock of Interim.

(e) The tax basis of the assets of Interim acquired by CBT will be the
same in the hands of CBT as the tax basis of such assets in the hands of
Interim immediately prior to the exchange.

(f) The holding period of the assets of Interim received by CBT will,
in each instance, include the period for which such assets were held by
Interim.

(g) No gain or loss will be recognized by CBT stockholders upon the
exchange of CBT common stock solely for First United Common Stock.

(h) The tax basis of First United Common Stock received by CBT
stockholders will be the same as the basis of CBT common stock surrendered
in exchange therefore.

(i) The holding period of First United Common Stock received by CBT
stockholders will include the period during which CBT common stock
surrendered therefor was held, provided the CBT common stock is a capital
asset in the hands of CBT stockholders on the date of the exchange.

(j) The payment of cash to CBT stockholders in lieu of fractional
share interests of First United Common Stock will be treated as if
fractional shares were distributed as part of the Merger and then redeemed
by First United in payment of and in exchange for the shareholders' First
United Common Stock as provided for in Sections 301 or 302 of the Code,
depending on the attribution rules of Section 318 of the Code. Assuming a
stockholder's stock is a capital asset, a stockholder receiving such cash
will recognize a capital gain or loss equal to the difference between the
amount of cash received and the stockholder's adjusted basis in the
fractional share interest.

The Tax Opinion does not address any state, local, or other tax
consequences of the Merger. Additionally, the tax opinion does not address tax
consequences to any CBT optionholder who receives First United Common Stock in
exchange for the cancellation of Options. The Tax Opinion does not bind the IRS
or preclude the IRS from adopting a contrary position. In addition, the Tax
Opinion will be subject to certain assumptions and qualifications and will be
based on the truth and accuracy of certain representations made by the
management of CBT and First United, as to, among other things, the fact that
there is no plan or intention by any of the stockholders of CBT who own 5% or
more of the outstanding CBT common stock, and to the best of the knowledge of
the managements of CBT and First United, the remaining CBT stockholders have no
plan or intention, to sell, exchange or otherwise dispose of a number of shares
of First United Common Stock that they will receive in the Merger that will
reduce on the part of the CBT stockholders such stockholders' ownership of First
United Common Stock to a number of shares having an aggregate value as of the
date of the Merger of less than 50% of the aggregate value of all the stock of
CBT outstanding immediately prior to the Merger; the fair market value of First
United Common Stock to be received by CBT stockholders will be, in each
instance, approximately equal to the fair market value of the CBT common stock
to be surrendered in exchange therefor; after the consummation of the Merger,
CBT will hold at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by CBT immediately
prior to the effective time of the Merger; First United has no plan or intention
to reacquire any of its shares issued in the Merger; and, following the
transaction, CBT will continue the historic business of CBT or use a significant
portion of CBT's historic business assets in its business.

A successful IRS challenge to the "reorganization" status of the Merger
would result in a CBT stockholder recognizing gain or loss with respect to each
share of CBT common stock surrendered equal to the difference between the
stockholder's adjusted tax basis in such share and the fair market value, as of
the effective time of the Merger, of the First United Common Stock received in
exchange therefor. In such event, a CBT stockholder's aggregate basis in the
First United Common Stock received would equal its fair market value and his or
her holding period for such First United Common Stock would begin the day after
the Merger.

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<PAGE> 27

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 CBT 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 1987 ACT

HOLDERS OF FIRST UNITED 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.

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
stockholder of First United, to First United Bancshares, Inc., Main and
Washington Streets, El Dorado, Arkansas 71730, Attention: John E. 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 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.

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RIGHT OF DISSENT UNDER THE LRS

HOLDERS OF CBT COMMON STOCK MAY BE ENTITLED TO EXERCISE DISSENTER'S RIGHTS
UNDER THE LRS.

Unless the Merger Agreement is approved by the holders of at least (80%) of
the total voting power of the Bank, Section 376 of the Louisiana Banking Law
(L.R.S. Section 6:376) allows a stockholder of CBT who objects to the Merger
Agreement and who complies with the provisions of that section to dissent from
that Merger Agreement and to have paid to him in cash the fair cash value of his
shares of CBT common stock as of the day before the Special Meeting, as
determined by agreement between the stockholder and CBT or by the State District
Court for the Parish of Caddo if the stockholder and CBT are unable to agree
upon the fair cash value.

To exercise the right of dissent, a stockholder (i) must file with CBT a
written objection to the Merger Agreement prior to or at the Special Meeting AND
(ii) must also vote his shares (in person or by Proxy) against the Merger
Agreement at the Special Meeting. Neither a vote against the Merger Agreement
nor a specification in a Proxy to vote against the Merger Agreement will in and
of itself constitute the necessary written objection to the Merger Agreement.
Moreover, by voting in favor of, or abstaining from voting on, the Merger
Agreement, or by returning the enclosed Proxy without instructing the Proxy
holders to vote against the Merger Agreement, a stockholder waives his rights
under Section 376.

If the Merger Agreement is approved by less than 80% of the total number of
shares of CBT common stock outstanding, then promptly after the consummation
date of the Merger, written notice of the consummation of the Merger will be
given by registered mail to each former stockholder of CBT who filed a written
objection to the Merger Agreement and voted against it. Within 20 days after the
mailing of such notice, the stockholder must file with CBT a written demand for
payment for his shares at their fair cash value as of the day before the Special
Meeting and must state the amount demanded and a post office address to which
CBT may reply. He must also deposit the certificate(s) formerly representing his
shares of CBT common stock in escrow with a bank or trust company located in
Caddo Parish, Louisiana. With the above-mentioned demand, the stockholder must
also deliver to CBT the written acknowledgment of such bank or trust company
that it holds the certificate(s), duly endorsed and transferred to CBT, upon the
sole condition that the certificate(s) will be delivered to CBT upon payment of
the value of the shares in accordance with Section 376.

Unless the stockholder objects to and votes against the Merger Agreement,
demands payment, deposits his certificates and delivers the required
acknowledgment in accordance with the procedures and within the time period set
forth above, the stockholder will conclusively be presumed to have acquiesced to
the Merger and will forfeit any right to seek payment pursuant to Section 376.

If CBT does not agree to the amount demanded by the stockholder, or does
not agree that payment is due, it will, within 20 days after receipt of such
demand and acknowledgment, notify such stockholder in writing of either (i) the
value if will pay or (ii) its belief that no payment is due. If the stockholder
does not agree to accept the offered amount, or disagrees with CBT's assertion
that no payment is due, he must, within 60 days after receipt of such notice,
file suit against CBT in the Civil District Court for the Parish of Caddo for a
judicial determination of the fair cash value of the shares. Any stockholder
entitled to file such suit may, within such 60 day period but not thereafter,
intervene as a plaintiff in any suit filed against CBT by another former
stockholder of CBT for a judicial determination of the fair cash value of such
other stockholder's shares. If a stockholder fails to bring or to intervene in
such a suit within the applicable 60 day period, he will be deemed to have
consented to accept CBT's statement that no payment is due or, if CBT does not
contend that no payment is due, to accept the amount specified by CBT in its
notice of disagreement.

If upon the filing of any such suit or intervention, CBT deposits with the
court the amount, if any, which it specified in its notice of disagreement, and
if in that notice CBT offered to pay such amount to the stockholder on demand,
then the costs of the suit or intervention will be taxed against the stockholder
if the amount finally awarded to him, exclusive of interest and costs, is equal
to or less than the amount so deposited; otherwise, the costs will be taxed
against CBT.

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Upon filing a demand for the value of his shares, a stockholder ceases to
have any rights of a stockholder except the rights created by Section 376. The
stockholder's demand may be withdrawn voluntarily at any time before CBT gives
its notice of disagreement, but thereafter only with the written consent of CBT.
If his demand is properly withdrawn, or if the stockholder otherwise loses his
dissenters' rights, he will be restored to his rights as a stockholder as of the
time of the filing of his demand for fair cash value.

Dissenting stockholders of CBT should send any communications regarding
their rights to Ron C. Boudreaux, President and Chief Executive Officer, City
Bank & Trust of Shreveport, 6025 Line Avenue, Shreveport, Louisiana 71106. All
such communications should be signed by or on behalf of the dissenting
stockholder in the form in which his shares are registered on the books of CBT.

THE FOREGOING SUMMARY OF SECTION 376 OF THE LOUISIANA BANKING LAW IS
NECESSARILY INCOMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXCERPTS
FROM THAT SECTION SET FORTH HEREIN AS ANNEX III.

EXCHANGE RATIO FOR THE MERGER

The Agreement between First United and CBT provides that the stockholders
and optionholders of CBT will receive total consideration consisting of four
hundred twenty-five thousand (425,000) 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 CBT Common Stock and all outstanding
options to acquire CBT Common Stock, other than shares of CBT Common Stock held
by dissenting stockholders, shall be converted into the right to receive the
Purchase Price based upon an exchange formula set forth in the Agreement.
Fractional shares of First United Common Stock shall not be issued. Any CBT
Shareholder or holder of options to purchase CBT Common Stock ("Options")
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"). Of the 425,000 shares of First
United to be issued, the number of First United shares to be received by the
holders of the outstanding shares of CBT Common Stock and the number of First
United shares to be received by the holders of Options will depend upon the
Average Price of First United stock. 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, the resulting exchange ratios, and the
value received by CBT shareholders and optionholders. On September 3, 1997, the
closing price on the NASDAQ Stock Market of a share of First United was $42.00.
If at the effective time of the Merger $42.00 is assumed to be the Average Price
of First United stock, under the exchange formula in the Agreement, holders of
the 386,496 outstanding shares of CBT Common Stock will receive 318,124 shares
of First United Common Stock (an exchange ratio of 0.8231 share of First United
Common Stock for each one share of CBT Common Stock) and the holders of the
187,189 outstanding Options will receive 106,876 shares of First United Common
Stock (an exchange ratio of 0.5710 share of First United Common Stock for each
one CBT Option). The actual Average Price at the effective time of the Merger
may be higher or lower than the $42.00 per share example used above.

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<PAGE> 30

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.

CALCULATION OF EXCHANGE RATIOS(1)

<TABLE>
<S> <C> <C> <C>
First United Average Price.................... $ 38.00 $ 42.00 $ 46.00
Total Purchase Price.......................... $16,150,000 $17,850,000 $19,550,000
First United Common Stock Issued.............. 425,000 425,000 425,000
Share Exchange Ratio.......................... 0.8317 0.8231 0.8160
Value Received per Share of CBT............... $ 31.60 $ 34.57 $ 37.53
Option Exchange Ratio......................... 0.5532 0.5710 0.5857
Value Received per Option of CBT.............. $ 21.02 $ 23.98 $ 26.94
</TABLE>

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

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

EXPENSES OF THE MERGER

First United and CBT 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 June 30,
1997, and Unaudited Pro Forma Combining Income Statements for the six months
ended June 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 CBT 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 JUNE 30, 1997
------------------------------------------------------
PRO FORMA PRO FORMA
FIRST UNITED(1) CBT ADJUSTMENT(2) COMBINED
--------------- ------- ------------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks................... $ 76,715 $ 3,852 $ -- $ 80,567
Short-term investments.................... 29,231 1,000 -- 30,231
Securities available-for-sale............. 499,242 6,480 -- 505,722
Investment securities..................... 249,192 3,019 -- 252,211
Net Loans................................. 882,272 46,518 -- 928,790
Premises and equipment.................... 33,345 1,141 -- 34,486
Goodwill.................................. 11,169 -- -- 11,169
Other real estate owned................... 846 182 -- 1,028
Other assets.............................. 26,344 721 -- 27,065
---------- ------- -------- ----------
Total Assets.................... $1,808,356 $62,913 $ -- $1,871,269
========== ======= ======== ==========

LIABILITIES

Total deposits............................ $1,532,004 $51,890 $ -- $1,583,894
Federal funds purchased and securities
sold under agreements to repurchase..... 58,030 -- -- 58,030
Other liabilities......................... 16,217 378 -- 16,595
Notes payable............................. 22,309 3,500 -- 25,809
---------- ------- -------- ----------
Total Liabilities............... 1,628,560 55,768 -- 1,684,328
---------- ------- -------- ----------
Capital Accounts
Preferred stock......................... -- -- -- --
Common stock............................ 9,846 1,901 425(3) 10,271
(1,901)(3)
Surplus................................... 21,971 1,931 (425)(3) 25,378
1,901(3)
Undivided profits......................... 148,149 3,251 -- 151,400
Less: Treasury stock...................... -- -- -- --
Unrealized gains (losses) of securities
available-for-sale...................... (170) 62 -- (108)
---------- ------- -------- ----------
Total Capital Accounts.......... 179,796 7,145 -- 186,941
---------- ------- -------- ----------
Total Liabilities and Capital
Accounts...................... $1,808,356 $62,913 $ -- $1,871,269
========== ======= ======== ==========
</TABLE>

24
<PAGE> 32

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
--------------------------------------
PRO FORMA
FIRST UNITED(1) CBT COMBINED
--------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income........................................... $64,595 $2,645 $67,240
Interest expense.......................................... 29,944 820 30,764
------- ------ -------
Net interest income....................................... 34,651 1,825 36,476
Provision for loan losses................................. 693 10 703
------- ------ -------
Net interest income after provision for loan losses....... 33,958 1,815 35,773
------- ------ -------
Other income
Service charges on deposit accounts..................... 3,272 338 3,610
Trust department income................................. 1,179 -- 1,179
Security gains (losses)................................. 4 -- 4
Other operating income.................................. 2,146 54 2,200
------- ------ -------
Total other income.............................. 6,601 392 6,993
------- ------ -------
Other expense
Salaries................................................ 10,015 443 10,458
Pension and other employee benefits..................... 3,224 -- 3,224
Net occupancy expense................................... 2,055 160 2,215
Equipment expense....................................... 1,468 -- 1,468
Data processing expense................................. 1,582 -- 1,582
Other operating expenses................................ 6,034 453 6,487
------- ------ -------
Total other expense............................. 24,378 1,056 25,434
------- ------ -------
Income before income taxes................................ 16,181 1,151 17,332
Income tax expense........................................ 4,664 357 5,021
------- ------ -------
Income from continuing operations......................... $11,517 $ 794 $12,311
======= ====== =======
Earnings per share........................................ $ 1.17 $ 2.11 $ 1.20
======= ====== =======
Weighted average shares outstanding....................... 9,846 376 10,271
======= ====== =======
</TABLE>

25
<PAGE> 33

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------
PRO FORMA
FIRST UNITED(1) CBT COMBINED
---------------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $61,101 $2,420 $63,521
Interest expense............................................ 28,821 723 29,544
Net interest income......................................... 32,280 1,697 33,977
------- ------ -------
Provision for loan losses................................... (85) 60 (25)
------- ------ -------
Net interest income after provision for loan losses......... 32,365 1,637 34,002
------- ------ -------
Other income
Service charges on deposit accounts....................... 3,262 276 3,538
Trust department income................................... 901 -- 901
Security gains (losses)................................... 45 -- 45
Other operating income.................................... 1,817 49 1,866
------- ------ -------
Total other income................................ 6,025 325 6,350
------- ------ -------
Other expense
Salaries.................................................. 9,105 429 9,534
Pension and other employee benefits....................... 2,910 -- 2,910
Net occupancy expense..................................... 1,932 149 2,081
Equipment expense......................................... 1,452 -- 1,452
Data processing expense................................... 1,031 -- 1,031
Other operating expenses.................................. 6,051 408 6,459
------- ------ -------
Total other expense............................... 22,481 986 23,467
------- ------ -------
Income before income taxes.................................. 15,909 976 16,885
Income tax expense.......................................... 4,414 313 4,727
------- ------ -------
Income from continuing operations........................... $11,495 $ 663 $12,158
======= ====== =======
Earnings per share.......................................... $ 1.17 $ 1.86 $ 1.18
======= ====== =======
Weighted average shares outstanding......................... 9,846 356 10,271
======= ====== =======
</TABLE>

26
<PAGE> 34

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------
PRO FORMA
FIRST UNITED(1) CBT COMBINED
---------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $123,947 $5,056 $129,003
Interest expense............................................ 58,365 1,541 59,906
-------- ------ --------
Net interest income......................................... 65,582 3,515 69,097
Provision for loan losses................................... 725 75 800
-------- ------ --------
Net interest income after provision for loan................ 64,857 3,440 68,297
-------- ------ --------
Other income
Service charges on deposit accounts....................... 6,609 593 7,202
Trust department income................................... 2,180 -- 2,180
Security gains (losses)................................... 122 -- 122
Other operating income.................................... 3,365 95 3,460
-------- ------ --------
Total other income................................ 12,276 688 12,964
-------- ------ --------
Other expense
Salaries.................................................. 17,505 1,056 18,561
Pension and other employee benefits....................... 5,679 -- 5,679
Net occupancy expense..................................... 4,162 309 4,471
Equipment expense......................................... 2,684 -- 2,684
Data processing expense................................... 1,978 -- 1,978
Other operating expenses.................................. 13,663 965 14,628
-------- ------ --------
Total other expense............................... 45,671 2,330 48,001
-------- ------ --------
Income before income taxes.................................. 31,462 1,798 33,260
Income tax expense.......................................... 9,090 580 9,670
-------- ------ --------
Income from continuing operations........................... $ 22,372 $1,218 $ 23,590
======== ====== ========
Earnings per share.......................................... $ 2.27 $ 3.41 $ 2.30
======== ====== ========
Weighted average shares outstanding......................... 9,846 357 10,271
======== ====== ========
</TABLE>

27
<PAGE> 35

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------
PRO FORMA
FIRST UNITED(1) CBT COMBINED
---------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income............................................. $108,079 $4,380 $112,459
Interest expense............................................ 50,569 1,419 51,988
-------- ------ --------
Net interest income......................................... 57,510 2,961 60,471
Provision for loan losses................................... 574 151 725
-------- ------ --------
Net interest income after provision for loan................ 56,936 2,810 59,746
-------- ------ --------
Other income
Service charges on deposit accounts....................... 5,876 490 6,366
Trust department income................................... 1,799 -- 1,799
Security gains (losses)................................... (355) -- (355)
Other operating income.................................... 2,311 87 2,398
-------- ------ --------
Total other income................................ 9,631 577 10,208
-------- ------ --------
Other expense
Salaries.................................................. 15,050 989 16,039
Pension and other employee benefits....................... 4,919 -- 4,919
Net occupancy expense..................................... 3,350 292 3,642
Equipment expense......................................... 1,953 -- 1,953
Data processing expense................................... 1,715 -- 1,715
Other operating expenses.................................. 12,793 869 13,662
-------- ------ --------
Total other expense............................... 39,780 2,150 41,930
-------- ------ --------
Income before income taxes.................................. 26,787 1,237 28,024
Income tax expense.......................................... 8,233 363 8,596
-------- ------ --------
Income from continuing operations........................... $ 18,554 $ 874 $ 19,428
======== ====== ========
Earnings per share.......................................... $ 1.99 $ 2.50 $ 1.99
======== ====== ========
Weighted average shares outstanding......................... 9,338 350 9,763
======== ====== ========
</TABLE>

28
<PAGE> 36

PRO FORMA COMBINING INCOME STATEMENT

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------
PRO FORMA
FIRST UNITED(1) CBT COMBINED
--------------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income........................................... $86,614 $3,334 $89,948
Interest expense.......................................... 36,136 987 37,123
------- ------ -------
Net interest income....................................... 50,478 2,347 52,825
Provision for loan losses................................. 334 55 389
------- ------ -------
Net interest income after provision for loan.............. 50,144 2,292 52,436
------- ------ -------
Other income
Service charges on deposit accounts..................... 4,661 352 5,013
Trust department income................................. 1,379 -- 1,379
Security gains (losses)................................. 5 15 20
Other operating income.................................. 1,815 82 1,897
------- ------ -------
Total other income.............................. 7,860 449 8,309
------- ------ -------
Other expense
Salaries................................................ 13,268 733 14,001
Pension and other employee benefits..................... 4,271 -- 4,271
Net occupancy expense................................... 2,823 254 3,077
Equipment expense....................................... 1,504 -- 1,504
Data processing expense................................. 1,526 -- 1,526
Other operating expenses................................ 10,882 798 11,680
------- ------ -------
Total other expense............................. 34,274 1,785 36,059
------- ------ -------
Income before income taxes................................ 23,730 956 24,686
Income tax expense........................................ 7,019 282 7,301
------- ------ -------
Income from continuing operations......................... $16,711 $ 674 $17,385
======= ====== =======
Earnings per share........................................ $ 1.79 $ 1.93 $ 1.78
======= ====== =======
Weighted average shares outstanding....................... 9,338 350 9,763
======= ====== =======
</TABLE>

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.

29
<PAGE> 37

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 eleven
other banks in different cities within Arkansas 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;
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 or Texas and are
regulated by the Office of the Comptroller of the Currency, the Federal Reserve
System, the Arkansas Bank Department or the Texas Department of Banking. As of
June 30, 1997, First United, on a consolidated basis, had a total of
$895,220,000 of loans outstanding, an allowance for loan losses of $12,948,000,
total deposits of $1,532,004,000 and total stockholders' equity of $179,796,000.
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.

PENDING ACQUISITION

The Citizens National Bancshares, Inc. On June 12, 1997 First United
announced that it had signed a letter of intent with The Citizen's National
Bancshares, Inc., a bank holding company headquartered in Hope, Arkansas
("Citizens") that calls for First United to acquire for shares of First United's
Common Stock all of the issued and outstanding shares of Citizens and its two
wholly-owned bank subsidiaries, Citizens National Bank of Hope, Hope, Arkansas
("CNB"), and Peoples Bank & Loan Company, Lewisville, Arkansas ("Peoples"). At
June 30, 1997 Citizens had consolidated assets of approximately $267.5 million
and shareholders' equity of approximately $27.7 million. Upon consummation of
the transaction CNB and Peoples would become wholly-owned subsidiaries of First
United. The total number of shares of First United Common Stock to be issued in
the transaction would be 1,570,000 shares, which represents less than 15.94
percent of the total number of shares of First United outstanding as of the date
hereof. The Citizens acquisition, which is subject to the parties entering into
a definitive agreement and to shareholder and regulatory approvals, is expected
to be completed in the fourth quarter of 1997 or the first 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 Citizens 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

30
<PAGE> 38

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 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. The Company's year end 1996

31
<PAGE> 39

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
JUNE 30, 1997 FIRST UNITED REQUIREMENTS
------------- ------------ ------------
<S> <C> <C>
Total Capital/Total Assets.................................. 10.59% 6.00%
Primary Capital/Total Assets................................ 10.59% 5.50%
Total Risk-Based Capital.................................... 17.32% 8.00%
Tier 1 Capital.............................................. 16.07% 4.00%
Leverage Ratio.............................................. 10.03% 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.

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 September 25, 1997 there were 9,851,892 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

32
<PAGE> 40

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 CBT stockholder who may be deemed to be an "affiliate" of
CBT for purposes of Rule 145 under the Securities Act. At Closing, each such
stockholder has entered 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 CBT) for at least 30 days of
combined operations are published. This restriction is expected to expire by
January 31, 1998. See also "City Bank & Trust of Shreveport -- Resulting
Ownership in First United".

CITY BANK & TRUST OF SHREVEPORT

DESCRIPTION OF BUSINESS

CBT is a Louisiana state bank located in Shreveport, Caddo Parish,
Louisiana and operates a main office and four full-service branches. The bank is
a community bank that offers financial products and services to commercial and
consumer customers. The bank grants commercial, installment and real estate
loans to customers principally located in Caddo Parish, Louisiana. As of June
30, 1997, on a consolidated basis CBT had a total of $46,959,000 of loans
outstanding, an allowance for loan losses of $441,000, total deposits of
$51,891,000 and total stockholders' equity of $7,145,000.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

BALANCE SHEET ANALYSIS

Financial Condition. The total assets of CBT increased by $8,331,000 or
15.84% between December 31, 1996 and 1995. The increase was due primarily to
growth in the loan portfolio. At June 30, 1997 assets were $62,913,000 compared
to the December 31, 1996 level of $60,928,000. CBT 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.

CBT's loan portfolio represents the largest component of the earning asset
base and has the largest impact on income from earning assets. The markets in
which CBT 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 and a decline in
investment securities. This contributes to the increase in loans and a decrease
in investment securities, at June 30, 1997 compared to the December 31, 1996
levels.

Inherent in CBT's loan portfolio is credit risk. CBT maintains an allowance
for loan losses which is evaluated for adequacy by management. Management's
methodology to determine the adequacy of the allowance considers reviews 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.

33
<PAGE> 41

Investment securities are the second largest component of the earning asset
base. The average volume of investment securities has remained relatively stable
during the six months ended June 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
$7,079,000 or 15.08% 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, 1996 and June 30, 1997, CBT
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, CBT anticipates that its liquidity requirements will be
met in the foreseeable future. CBT's 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 First National Banker's 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 June 30, 1997, CBT's 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 CBT's capital ratios.

EARNINGS ANALYSIS

Net income for the first six months of 1997 was approximately $794,000, an
increase of $131,000 or 19.76% over the same period in 1996. The increase was
due primarily to a $128,000 or 7.54% increase in net interest income and a
$67,000, or a 20.62% increase in noninterest income. For the years ended
December 31, 1996, 1995, and 1994, net income was approximately $1,218,000,
$874,000 and $674,000, respectively. The annualized return on average assets and
return on average equity for the first six months of 1997 was 2.60% and 23.70%,
respectively, compared to 2.42% and 24.94% for the first six months of 1996. For
the years ended December 31, 1996, 1995 and 1994 and the return on average
assets was 2.14%, 1.74%, and 1.47%, respectively, while the return on average
equity was 21.50%, 19.33% and 17.87%, 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 six months of 1997
was $1,825,000, a 7.54% increase over the same period in 1996. The primary
reason for the increase was due to the large increase of $6,530,000 in loans
during the period from December 31, 1996 to June 30, 1997 as compared to a
decrease in deposit growth of $2,131,000 for the same period. Interest on loans
for the six months ended June 30, 1997 increased by $280,000 or 13.76% compared
to the corresponding period of 1996. Interest expense for the six months ended
June 30, 1997 increased by $97,000 or 13.42% compared to the corresponding
period of 1996. As a percentage of total assets at June 30, 1997, loans totaled
73.94% while investment securities were 15.10%.

For the years ended December 31, 1996, 1995, and 1994, net interest income
was $3,515,000, $2,961,000, and $2,347,000, 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.

34
<PAGE> 42

Provision for Loan Losses. For the first six months of 1997 CBT provided
$10,000 for loan losses compared to $60,000 for the comparable period in 1996.
The provision for loan losses was $75,000, $151,000 and $55,000 for the years
ended December 31, 1996, 1995 and 1994.

Net charge-offs on loans were $41,000 in 1996, $40,000 in 1995 and $88,000
in 1994. For the six months ended June 30, 1997, net charge-offs (recoveries)
totaled ($5,000). The allowance for loan losses was $441,000 or .94% of loans at
June 30, 1997, compared to $426,000 or 1.05% at December 31, 1996, and $392,000
or 1.14% at December 31, 1995. See Tables 7, 8, and 9 for more information
regarding loan quality and the allowance for loan losses.

Noninterest Income. Total noninterest income for the six months ended June
30, 1997 and 1996 was $392,000 and $325,000, respectively. The increase was due
primarily to an increase in 1997 of $62,000 in service charge income. Total
noninterest income for the year ended December 31, 1996 was $688,000, as
compared to $577,000 for 1995 and $449,000 in 1994.

Noninterest Expense. Total noninterest expense for the six months ended
June 30, 1997 and 1996 was $1,056,000 and $986,000, respectively. The increase
was due primarily to an increase in 1997 of $26,000 in capital stock taxes and
an increase in legal expenses of $24,000.

Total noninterest expense for the year ended December 31, 1996 was
$2,330,000 as compared to $2,150,000 for 1995 and $1,785,000 in 1994.

Provision for Income Taxes. Income tax expense for the six months ended
June 30, 1997 and 1996 was $357,000 and 313,000, respectively, or effective tax
rates of 31.0% and 32.1%, respectively. Income tax expense for the years ended
December 31, 1996, 1995 and 1994 was $580,000, $363,000 and $282,000,
respectively. Effective tax rates were 32.3%, 29.3%, and 29.3% for 1996, 1995,
1994, respectively. Note 9 of Notes to the Financial Statements provides further
details of the applicable income tax expense for 1996, 1995 and 1994.

ACCOUNTING STANDARDS

In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities." SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a "financial-components approach" that
focuses on control. The impact of SFAS No. 125 will not be material to CBT's
financial condition or results of operations.

35
<PAGE> 43

STATISTICAL DISCLOSURES

CITY BANK & TRUST OF SHREVEPORT
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
CBT, 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.

ASSETS

<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans............................... $37,955 $4,268 11.24% $32,157 $3,576 11.12%
Investment securities:
Taxable.......................... 8,088 536 6.63% 9,508 619 6.51%
Tax-exempt....................... 3,424 154 4.50% 3,303 149 4.51%
Federal funds sold.................. 1,835 98 5.34% 640 36 5.63%
------- ------ ----- ------- ------ -----
Total interest-earning assets......... 51,302 5,056 9.86% 45,608 4,380 9.60%
Noninterest-earning assets:
Cash and due from banks............. 2,805 2,524
Other assets........................ 2,090 2,231
Allowance for loan losses........... (413) (324)
------- -------
Total....................... $55,784 $50,039
======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing liabilities:
Demand deposits..................... $13,218 $ 330 2.50% $13,007 $ 327 2.51%
Savings deposits.................... 1,897 37 1.95% 1,430 28 1.96%
Time deposits....................... 23,417 1,174 5.01% 20,541 1,012 4.93%
Federal funds purchased(1)
Other............................... 0 0 0.00% 867 52 6.00%
------- ------ ------- ------
Total interest-bearing liabilities.... 38,532 1,541 4.00% 35,845 1,419 3.96%
Noninterest-bearing liabilities:
Demand deposits..................... 11,054 9,218
Other............................... 481 408
------- -------
11,535 9,626
Shareholders' equity.................. 5,717 4,568
------- -------
Total....................... $55,784 $50,039
======= =======
Net interest earnings................. $3,515 $2,961
====== ======
Net yield on interest-earning
assets.............................. 6.85% 6.49%
</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.

36
<PAGE> 44

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
CHANGE DUE TO: CHANGE DUE TO:
---------------------- ------------------------
YIELD/ YIELD/
VOLUME RATE NET VOLUME RATE NET
------ ------ ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans................................... $652 $ 40 $692 $755 $210 $ 965
Investment securities:
Taxable............................... (95) 12 (83) 4 82 86
Tax-exempt............................ 5 0 5 23 (5) 18
Federal funds sold.................... 64 (2) 62 (129) 106 (23)
---- ---- ---- ---- ---- ------
Total interest-earning assets............. $626 $ 50 $676 $653 $393 $1,046
==== ==== ==== ==== ==== ======
Interest paid on:
Interest-bearing demand deposits........ $ 5 $ (2) $ 3 $ 11 $ 46 $ 57
Savings deposits........................ 9 0 9 2 0 2
Time deposits........................... 144 18 162 169 208 377
Other................................... (26) (26) (52) (84) 80 (4)
---- ---- ---- ---- ---- ------
Total interest-bearing liabilities........ $132 $(10) $122 $ 98 $334 $ 432
==== ==== ==== ==== ==== ======
</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 two years ($ in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------ ------
<S> <C> <C>
Held-to-Maturity
U.S. Treasury and U.S. Government agencies.................. $ 0 $ 0
Obligations of states and political subdivisions............ 1,745 1,744
Other securities (mortgage-backed).......................... 1,342 1,548
------ ------
Total debt securities............................. 3,087 3,292
Equity securities........................................... 0 0
------ ------
Total Held-to-Maturity Investment Securities...... $3,087 $3,292
====== ======
Available-for-Sale
U.S. Treasury and U.S. Government agencies.................. $ 502 $ 506
Obligations of states and political subdivisions............ 1,890 1,593
Other securities (mortgage-backed).......................... 3,963 5,045
------ ------
Total debt securities............................. 6,355 7,144
Equity securities........................................... 519 493
------ ------
Total Available-for-Sale Investment Securities.... $6,874 $7,637
====== ======
</TABLE>

37
<PAGE> 45

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>
MATURING
---------------------------------------------------------------------------
AFTER ONE AFTER FIVE AFTER
WITHIN BUT WITHIN BUT WITHIN TEN
ONE YEAR YIELD FIVE YEARS YIELD TEN YEARS YIELD YEARS YIELD TOTAL
-------- ----- ---------- ----- ---------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
U.S. Treasury and U.S.
Government Agencies.......... $ 0 0 $ 0 0 $ 0 0 $ 0 0 $ 0
Obligations of state and
political securities......... 0 0 1,057 4.10 688 4.17 0 0 1,745
Other securities............... 0 0 0 0 0 0 1,342 7.21 1,342
---- ------ ------ ------ ------
Total debt securities... 0 1,057 688 1,342 3,087
Equity securities................ 0 0 0 0 0 0 0 0 0
---- ------ ------ ------ ------
Total Held-to-Maturity
Investment
Securities............ $ 0 $1,057 $ 688 $1,342 $3,087
==== ====== ====== ====== ======
Available-for-Sale
U.S. Treasury and U.S.
Government Agencies.......... $ 0 0 $ 502 5.42 $ 0 0 $ 0 0 $ 502
Obligations of states and
political subdivisions....... 0 0 275 5.10 1,615 4.89 0 0 1,890
Other securities............... 132 9.43 424 6.73 0 0 3,407 7.20 3,963
---- ------ ------ ------ ------
Total debt securities... 132 1,201 1,615 3,407 6,355
Equity securities................ 0 0 0 0 0 0 519 5.35 519
---- ------ ------ ------ ------
Total Available-for-Sale
Investment
Securities............ $132 $1,201 $1,615 $3,926 $6,874
==== ====== ====== ====== ======
</TABLE>

At December 31, 1996, there were no securities in the portfolio of any one
issuer with a carrying value exceeding ten percent of total stockholders'
equity, except the following mortgage-backed securities:

<TABLE>
<S> <C>
GNMA Pool...................................... 718
FNMA ARM Pool.................................. 805
FHLMC ARM Pool................................. 664
</TABLE>

At December 31, 1996, CBT held $-0- of municipal bonds which are in
default.

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

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------- -------
<S> <C> <C>
Commercial and industrial................................... $14,438 $11,060
Real estate -- construction................................. 1,397 1,729
Real estate -- residential.................................. 15,510 14,591
Real estate -- commercial................................... 7,892 5,858
Consumer loans.............................................. 2,771 2,423
------- -------
Total loans....................................... $42,008 $35,661
======= =======
</TABLE>

38
<PAGE> 46

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>
(1) Fixed Rate Loans....................... $10,451 $8,113 $14,646 $33,210
</TABLE>

<TABLE>
<CAPTION>
MATURING
--------------------------------------
WITHIN ONE OVER
YEAR OR LESS ONE YEAR
------------ ----------
<S> <C> <C> <C> <C>
(1)(2) Variable Rate Loans................. $ 3,935 $4,863 $ 8,798
-------
Total loans...................... $42,008
=======
</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>
(3) Variable Rate Loans.................... $ 6,014 $2,784 $ 0 $ 8,798
======= ====== ======= =======
</TABLE>

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

(1) The maturity information by loan type was not available.

(2) The maturity on variable loans only available in 1 year or less and over 1
year.

(3) Repricing versus maturity information provided on variable rate loans.

TABLE 7 -- NONPERFORMING LOANS AND PAST DUE LOANS

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

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
----- -----
<S> <C> <C>
Loans accounted for on a nonaccrual basis................... $113 $136
Restructured loans.......................................... 0 0
---- ----
Nonperforming loans....................................... $113 $136
==== ====
Accruing loans past due 90 days or more..................... $861 $ 73
==== ====
</TABLE>

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, CBT had no loan concentrations greater than ten
percent (10%) of total loans except as shown in Table 5.

CBT 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, CBT 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.

39
<PAGE> 47

TABLE 8 -- ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1996 1995
----- -----
<S> <C> <C>
Amount of loan loss reserve at beginning of period.......... $392 $281
Loans charged off:
Real estate............................................... 11 33
Commercial................................................ 41 28
---- ----
Total charge-offs................................. 52 61
Recoveries on loans previously charged-off:
Real estate............................................... 5 1
Commercial................................................ 6 20
---- ----
Total recoveries.................................. 11 21
Net charge-offs............................................. 41 40
Additions to allowance charged to operating expense(1)...... 75 151
---- ----
Amount of loan loss reserve at end of period................ $426 $392
==== ====
Percentage of net charge-offs during period to average loans
outstanding during the period............................. .11% .12%
==== ====
</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.

TABLE 9 -- ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
% LOANS % LOANS
IN EACH IN EACH
1996 CATEGORY 1995 CATEGORY
----- -------- ----- --------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural.... $ 59 36.31% $ 50 63.94%
Real estate-construction.................. 8 4.39% 0 0.00%
Real estate-mortgage...................... 134 52.97% 140 33.76%
Consumer.................................. 13 6.33% 3 2.30%
Unallocated............................... 212 199
----- -----
$ 426 $ 392
===== =====
</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................................... $ 3,293
Over 3 months through 6 months..................... 1,748
Over 6 months through 12 months.................... 3,291
Over 12 months..................................... 2,820
-------
$11,152
=======
</TABLE>

40
<PAGE> 48

TABLE 11 -- RETURN ON EQUITY AND ASSETS

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

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
----- -----
<S> <C> <C>
Return on assets............................................ 2.14% 1.74%
Return on equity............................................ 21.50% 19.33%
Dividend payout ratio....................................... 8.78% 12.01%
Equity to assets ratio...................................... 10.62% 9.49%
</TABLE>

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

<TABLE>
<CAPTION>
REGULATORY
JUNE 30, 1997 CBT REQUIREMENTS
------------- ----- ------------
<S> <C> <C>
Total Capital/Total Assets.................................. 12.56% 6.00%
Primary Capital/Total Assets................................ 11.91% 5.50%
Total Risk-Based Capital.................................... 16.75% 8.00%
Tier 1 Capital.............................................. 15.77% 4.00%
Leverage Ratio.............................................. 11.91% 3.00%
</TABLE>

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

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

DIRECTORS AND EXECUTIVE OFFICERS

The present directors and executive officers of CBT are expected to remain
in their respective positions. Upon consummation of the Merger John E. Burns and
Gordon Lewis will be elected to the boards of directors of CBT. At this time
none of the directors or executive officers of CBT are expected to be on the
Board of Directors or an executive officer of First United after consummation of
the Merger. The directors and executive officers of CBT are set forth below:

DIRECTORS AND EXECUTIVE OFFICERS OF CBT AND ITS SUBSIDIARIES

<TABLE>
<CAPTION>
SHARES OF CBT
COMMON STOCK
OWNED BENEFICIALLY
PRINCIPAL OCCUPATION, AS OF JULY 31, 1997
DIRECTOR EXECUTIVE OFFICER POSITION AND PERCENT OF CLASS
NAME AGE SINCE AND DIRECTORSHIP IF MORE THAN 1%
---- --- -------- -------------------------------- ---------------------
<S> <C> <C> <C> <C> <C>
Ron C. Boudreaux(1)............. 48 1987 President & CEO, Director, 35,952 6.27%
Executive Officer, CBT
James C. Egan, Jr.(1)........... 77 1982 Real Estate Developer and 16,582 2.89%
Builder, Director, CBT,
Secretary of the Board
John C. Gehl(1)................. 67 1982 Restaurant Business, Director, 44,722 7.80%
CBT
R. A. Mackey(2)................. 78 1982 Real Estate Developer, Director, 67,499 11.77%
Chairman of the Board
James R. Reeves, Sr.(3)......... 83 1982 Retail Sales, Director, CBT 67,449 11.76%
Richard K. Speairs, Jr., 67 1982 Retired Professor (Biological 19,502 3.40%
Ph.D.(1)...................... Consultant), Director, CBT
Gene C. Sigler(4)............... 64 1982 Oil & Gas, Director, CBT 20,820 3.63%
Sam M. Trombetta(1)............. 61 1987 CPA, Director, CBT 10,633 1.85%
David L. Winkler(1)............. 53 1982 Investor, Director, CBT, Vice 17,102 2.98%
Chairman of the Board
Rhonda R. Hensley(1)............ 46 1983 Sr. Vice President & Cashier, 13,472 2.35%
CBT
Rodney L. Murchison(1).......... 48 1991 Sr. Vice President, CBT 13,100 2.28%
Jo E. May(1).................... 46 1987 Vice President, CBT 6,500 1.13%
</TABLE>

41
<PAGE> 49

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

(1) Share ownership includes unexercised stock options as follows:

<TABLE>
<CAPTION>
<S> <C>
Ron C. Boudreaux............................................ 18,057
James C. Egan, Jr........................................... 5,500
John C. Gehl................................................ 19,500
Richard K. Speairs, PhD..................................... 5,802
Sam M. Trombetta............................................ 5,000
David Winkler............................................... 6,000
Rhonda R. Hensley........................................... 9,442
Rodney L. Murchison......................................... 13,000
Jo E. May................................................... 6,030
</TABLE>

(2) Includes 30,024 unexercised stock options owned by R. A. Mackey; and, 35,225
shares in name Mackey Limited Partnership (Family Partnership)

(3) 29,974 unexercised stock options owned by James R. Reeves; 7,750 in name of
J. R. Reeves Family Partnership (Family Partnership)

(4) 6,500 unexercised stock options owned by Gene C. Sigler; 6,820 shares in the
name of B. I. Enterprises (10%) ownership

During 1996, the Board of Directors of CBT held twelve (12) regularly
scheduled meetings, and four (4) special board meetings. There were five
directors with one absence each. The Board of Directors have an Executive
Committee, Loan Committee, Loan Review Committee, Audit Committee, and CRA
Committee.

TRANSACTIONS WITH MANAGEMENT

Directors and executive officers of CBT, their associates and members of
their immediate families were customers of and had transactions including loans
and commitments to lend CBT in the ordinary course of business during 1996. All
such loans and commitments were made by CBT 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 June 30, 1997, the aggregate of these related party loans was
approximately $1,117,000 or approximately 2.31% of total loans outstanding of
the subsidiaries.

PRINCIPAL STOCKHOLDERS OF CBT

All persons who as of July 31, 1997, owned of record or beneficially more
than five (5%) of the CBT Common Stock and the number of shares owned
beneficially by each of them are reflected in the foregoing table:

<TABLE>
<CAPTION>
SHARES OF CBT
COMMON STOCK
OWNED BENEFICIALLY
AS OF JULY 31, 1997
DIRECTOR PRINCIPAL OCCUPATION, EXECUTIVE AND PERCENT OF CLASS
NAME AGE SINCE OFFICER POSITION AND DIRECTORSHIP IF MORE THAN 1%
---- --- -------- --------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
R. A. Mackey(1)............ 78 1987 Real Estate Developer, Director, 67,499 11.77%
CBT, Chairman of the Board
James Russell Reeves, 83 1982 Retail Sales, Director, CBT 67,449 11.76%
Sr.(2)...................
John C. Gehl(3)............ 67 1982 Restaurant Business, Director, 44,722 7.80%
CBT
Ron C. Boudreaux........... 48 1987 President & CEO, Director, 35,952 6.27%
Executive Officer, CBT
</TABLE>

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

(1) Includes 30,024 unexercised stock options owned by R. A. Mackey; and, 35,225
shares in the name of Mackey Limited (Family Partnership)

42
<PAGE> 50

(2) Includes 29,974 unexercised stock options owned by James R. Reeves, Sr.;
and, 7,750 shares in the name of J. R. Reeves Family Partnership (Family
Partnership)

(3) Includes 19,500 unexercised stock options owned by John C. Gehl

(4) Includes 18,057 unexercised stock options owned by Ron C. Boudreaux

All directors and executive officers of CBT (12 persons) and members of
their immediate families and associates as of July 31, 1997 owned 185,465 shares
or 47.99% of the outstanding shares of CBT Common Stock (excluding the effect of
any Options). No director or executive officer of CBT owns any shares of First
United Common Stock. Neither First United nor any of its subsidiaries nor any
director or executive officer of First United owns any shares of CBT Common
Stock.

RESULTING OWNERSHIP IN FIRST UNITED

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

COMPETITION

CBT 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 CBT is a party.

OFFICES

CBT's executive offices are located at 6025 Line Avenue, Shreveport,
Louisiana 71106.

EMPLOYEES

As of December 31, 1996, CBT had 32 employees, all of whom are located in
Shreveport, Louisiana.

DESCRIPTION OF CBT STOCK

CBT has one class of common stock issued and outstanding. As of July 31,
1997, CBT had 1,000,000 shares of authorized common stock, $5.00 par value, and
386,496 shares outstanding with no shares held in treasury. Currently,
approximately 215 stockholders own shares of the common stock of CBT.

<TABLE>
<CAPTION>
DIVIDENDS PAID PER SHARE
--------------------------------
1994 1995 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Common Stock........................................ $0.20 $0.30 $0.30 $0.15
</TABLE>

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

CBT is a corporation organized and existing under the laws of the State of
Louisiana, including the LRS. 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 CBT common stock have
the rights, privileges and duties provided by the LRS, while the holders of
First United Common Stock have the rights, privileges and duties provided by the
1987 Act.

The affirmative vote of the holders of at least two-thirds of the
outstanding shares of CBT common stock may authorize the Merger pursuant to the
LRS. 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.

43
<PAGE> 51

The holders of CBT common stock are not entitled to cumulative voting in
the election of directors. The holders of First United Common Stock are entitled
to cumulative voting for 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 CBT By-Laws require that the number of directors may not be
less than three nor more than thirty. Furthermore, with certain exceptions,
including the issuance of shares to satisfy stock options, holders of CBT Common
Stock have preemptive rights with respect to issuance of additional securities.
Holders of First United Common Stock do not have preemptive rights with respect
to issuance of additional securities.

Both CBT and First United have corporate power to indemnify their officers
and directors with respect to certain liabilities. 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 CBT Articles of Incorporation do not
contain a like provision, but the LRS 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 CBT 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 Gerrish & McCreary, P.C., 700
Colonial Road, Suite 700, Memphis, Tennessee 38117.

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 firms as experts in accounting and
auditing.

The consolidated financial statements of CBT 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 Heard,
McElroy & Vestal, L.L.P., independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.

GENERAL

As of the date of this Proxy Statement, the board of directors of First
United or CBT 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.

44
<PAGE> 52

INDEX TO CBT FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Financial Statements
Reports of Independent Auditor's Report................... F-2
Balance Sheets -- December 31, 1996 and 1995.............. F-3
Statements of Income -- Years ended December 31, 1996,
1995 and 1994.......................................... F-4
Statements of Changes in Stockholders' Equity -- Years
ended December 31, 1996, 1995 and 1994................. F-5
Statements of Cash Flows -- Years ended December 31, 1996,
1995 and 1994.......................................... F-6
Notes to Financial Statements -- December 31, 1996........ F-7

Financial Statements
Balance Sheets -- June 30, 1997 (Unaudited) and December
31, 1996............................................... F-17
Statements of Income (Unaudited) -- Six Months ended June
30, 1997 and 1996...................................... F-18
Statements of Changes in Stockholders' Equity
(Unaudited) -- Six Months
ended June 30, 1997.................................... F-19
Statements of Cash Flows (Unaudited) -- Six Months ended
June 30, 1996 and 1996................................. F-20
Notes to Financial Statements (Unaudited) -- June 30,
1997................................................... F-21
</TABLE>

F-1
<PAGE> 53

INDEPENDENT AUDITOR'S REPORT

JANUARY 16, 1997

The Board of Directors and Stockholders
City Bank & Trust of Shreveport
Shreveport, Louisiana

We have audited the accompanying balance sheets of City Bank & Trust of
Shreveport as of December 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1996. These financial statements are
the responsibility of the Bank's 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 financial position of City Bank & Trust of
Shreveport as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1996 in conformity with generally accepted accounting principles.

F-2
<PAGE> 54

CITY BANK & TRUST OF SHREVEPORT

BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks................................... $ 4,952 $ 4,372
Federal funds sold........................................ 3,975 1,103
------- -------
8,927 5,475
Investment securities -- Note 2:
Securities held to maturity............................... 3,087 3,292
Securities available for sale............................. 6,874 7,637
------- -------
9,961 10,929
Loans, less allowance for loan losses of $426 and
$392 -- Notes 3 and 6..................................... 40,003 34,104
Accrued interest receivable................................. 429 439
Bank premises and equipment -- Note 4....................... 1,193 1,186
Real estate owned other than bank premises -- Note 11....... 224 226
Other assets................................................ 191 238
------- -------
Total assets...................................... $60,928 $52,597
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand................................................. $12,736 $10,481
Savings and interest-bearing demand.................... 15,950 15,253
Time -- Note 8......................................... 25,335 21,208
------- -------
Total deposits.................................... 54,021 46,942
Accrued interest payable.................................. 200 191
Other liabilities -- Note 9............................... 396 436
------- -------
Total liabilities................................. 54,617 47,569
Stockholders' equity:
Common stock, par value $5.00 per share; authorized
1,000,000 shares; issued and outstanding 371,646 and
355,418 shares -- Notes 13 and 14...................... 1,858 1,777
Surplus................................................... 1,883 1,780
Undivided profits -- Note 5............................... 2,514 1,403
Unrealized gain on securities available for sale.......... 56 68
------- -------
Total stockholders' equity........................ 6,311 5,028
------- -------
Total liabilities and stockholders' equity........ $60,928 $52,597
======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE> 55

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans................................ $4,268 $3,576 $2,611
Investment securities:
U.S. Treasury.......................................... 32 35 21
U.S. Government Agency................................. 419 488 435
Obligations of state and political subdivisions........ 154 149 131
Federal funds sold........................................ 98 36 58
Other..................................................... 85 96 78
------ ------ ------
Total interest income............................. 5,056 4,380 3,334
Interest expense:
Savings and interest-bearing demand deposits.............. 367 355 297
Time deposits............................................. 1,173 1,012 634
Other borrowed money...................................... 1 52 56
------ ------ ------
Total interest expense............................ 1,541 1,419 987
------ ------ ------
Net interest income............................... 3,515 2,961 2,347
Provision for loan losses -- Note 3......................... 75 151 55
------ ------ ------
Net interest income after provision for loan
losses.......................................... 3,440 2,810 2,292
Other income:
Service charges........................................... 594 490 352
Gain on sale of investment securities..................... -- -- 15
Gain on sale of real estate owned other than bank
premises............................................... 2 -- --
Other operating income.................................... 92 87 82
------ ------ ------
Total other income................................ 688 577 449
Operating expenses:
Salaries and employee benefits............................ 1,056 989 733
Occupancy expense -- Note 10.............................. 309 292 254
Loss on sale of real estate owned other than bank
premises............................................... -- 8 15
Writedowns on real estate owned other than bank
premises............................................... 14 17 32
Other operating expense................................... 951 844 751
------ ------ ------
Total operating expenses.......................... 2,330 2,150 1,785
------ ------ ------
Income before income taxes.................................. 1,798 1,237 956
Income taxes -- Note 9...................................... 580 363 282
------ ------ ------
Net income.................................................. $1,218 $ 874 $ 674
====== ====== ======
Earnings per share.......................................... $ 3.41 $ 2.50 $ 1.93
====== ====== ======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE> 56

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN
(LOSS) ON
TOTAL SECURITIES
STOCKHOLDERS' COMMON UNDIVIDED AVAILABLE
EQUITY STOCK SURPLUS PROFITS FOR SALE
------------- ------ ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.................. $3,530 $1,750 $ 875 $ 905 $ --
Cumulative effect of change in accounting
principle -- unrealized loss on
securities available for sale, net of
deferred income taxes of $45............. 86 -- -- -- 86
Dividends paid.............................. (70) -- -- (70) --
Net income.................................. 674 -- -- 674 --
Change in unrealized loss on securities
available for sale, net of deferred
income taxes of $106..................... (205) -- -- -- (205)
------ ------ ------ ------ -----
Balance at December 31, 1994.................. 4,015 1,750 875 1,509 (119)
Dividends paid.............................. (105) -- -- (105) --
Net income.................................. 874 -- -- 874 --
Issuance of 5,418 common stock shares....... 57 27 30 -- --
Transfer from undivided profits to
surplus.................................. -- -- 875 (875) --
Change in unrealized gain (loss) on
securities available for sale, net of
deferred income taxes of $96............. 187 -- -- -- 187
------ ------ ------ ------ -----
Balance at December 31, 1995.................. 5,028 1,777 1,780 1,403 68
Dividends paid.............................. (107) -- -- (107) --
Net income.................................. 1,218 -- -- 1,218 --
Issuance of 16,228 common stock shares...... 184 81 103 -- --
Change in unrealized gain (loss) on
securities available for sale, net of
deferred income taxes of $6.............. (12) -- -- -- (12)
------ ------ ------ ------ -----
Balance at December 31, 1996.................. $6,311 $1,858 $1,883 $2,514 $ 56
====== ====== ====== ====== =====
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE> 57

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,218 $ 874 $ 674
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 118 105 95
Provision for loan losses............................... 75 151 55
Writedowns on real estate owned other than bank
premises.............................................. 14 17 32
(Gain) on sale of investment securities................. -- -- (15)
(Gain) loss on sale of real estate owned other than bank
premises.............................................. (2) 8 15
(Increase) decrease in accrued interest receivable...... 9 (11) 49
Increase in accrued interest payable.................... 9 85 17
(Increase) decrease in other assets..................... 48 (96) (138)
Increase (decrease) in other liabilities................ (35) 101 182
Decrease in loans held for sale......................... 251 5,004 (4,323)
------- ------- -------
Total adjustments.................................. 487 5,364 (4,031)
------- ------- -------
Net cash provided (used) by operating activities... 1,705 6,238 (3,357)
Cash flows from investing activities:
Proceeds from sale of investment securities available for
sale.................................................... -- -- 865
Proceeds from maturities of investment securities
available for sale...................................... 1,578 1,200 1,679
Proceeds from maturities of investment securities held to
maturity................................................ 205 172 124
Purchases of investment securities available for sale..... (833) (27) (3,029)
Purchases of investment securities held to maturity....... -- -- (2,471)
Proceeds from sale of real estate owned other than bank
premises................................................ 145 571 171
Purchase of bank premises and equipment (net of
disposal)............................................... (125) (89) (302)
Net (increase) in loans................................... (6,380) (9,294) (1,442)
------- ------- -------
Net cash (used) by investing activities............ (5,410) (7,467) (4,405)
Cash flows from financing activities:
Net increase in demand deposits........................... 2,254 1,379 368
Net increase (decrease) in savings and interest-bearing
demand.................................................. 698 1,206 (87)
Net increase in time deposits............................. 4,128 4,136 1,300
Net (decrease) in advances from Federal Home Loan Bank.... -- (95) (1,067)
Net increase (decrease) in securities sold under agreement
to repurchase........................................... -- (3,000) 3,000
Dividends paid............................................ (107) (105) (70)
Proceeds from issuance of common stock.................... 184 57 --
------- ------- -------
Net cash provided by financing activities.......... 7,157 3,578 3,444
------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 3,452 2,349 (4,318)
Cash and cash equivalents at beginning of year.............. 5,475 3,126 7,444
------- ------- -------
Cash and cash equivalents at end of year.................... $ 8,927 $ 5,475 $ 3,126
======= ======= =======
Interest paid............................................... $ 1,532 $ 1,335 $ 970
======= ======= =======
Income taxes paid........................................... $ 630 $ 299 $ 296
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE> 58

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Investment securities

Investment securities consist of debt and equity instruments, including
mortgage-backed securities. In accordance with the requirements of SFAS No. 115,
debt securities that management has the ability and intent to hold to maturity
are classified as held to maturity and carried at cost, adjusted for
amortization of premium and accretion of discount using methods approximating
the interest method. Other marketable securities are classified as available for
sale and are carried at fair value. Unrealized gains and losses on securities
available for sale are recognized as direct increases or decreases in
stockholders' equity, net of related deferred tax effects.

Realized gains and losses on the sale of securities are determined using
the specific identification method.

Declines in the fair value below the cost of individual securities
available for sale or held to maturity are recognized as realized losses if
those declines are other than temporary.

b. Loans and allowance for loan losses

Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for loan losses. Loans held for sale are stated at the
lower of aggregate cost or market. Unearned discount on installment loans is
generally recognized as income under the effective yield method. Interest on
other loans is calculated by using the simple interest method on daily balances
of the principal amount outstanding. Gains and losses on the sale of loans held
for sale are determined using the specific identification method.

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance 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 after it is 90
days or more past due and 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.

c. Premises and equipment

Premises and equipment are carried at cost less accumulated depreciation.
Depreciation of premises and equipment is provided over the estimated useful
lives of the respective assets on the straight-line basis. Expenditures for
major renewals and betterments of premises and equipment are capitalized and
those for maintenance and repairs are charged to expense as incurred.

d. Federal funds

Federal funds sold are stated at the cash amount loaned to the member bank.
Interest is recognized on a daily basis as the funds are regularly rolled over.

e. Income taxes

Provisions for income taxes are based on taxes payable or refundable for
the current year (after exclusion of nontaxable income such as interest on state
and municipal securities) and deferred taxes on temporary differences between
the amount of taxable income and pretax financial income and between the tax
bases of

F-7
<PAGE> 59

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

assets and liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are included in the financial statements at
currently enacted tax rates applicable to the period in which the deferred tax
assets and liabilities are expected to be realized or settled as prescribed in
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.

f. Cash and cash equivalents

For purposes of the statement of cash flows, the Bank considers all cash on
hand, demand deposits with other banks, and federal funds sold to be cash
equivalents.

g. Use of 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 reported
period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans, the valuation
of real estate acquired in connection with foreclosures or in satisfaction of
loans, and market values of certain investment securities. In connection with
the determination of the allowances for losses on loans and foreclosed real
estate, management obtains independent appraisals for significant properties.

While management uses available information to recognize losses on loans,
future additions to the allowances may be necessary based on changes in local
economic conditions. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowances for losses
on loans and foreclosed real estate. Such agencies may require the Bank to
recognize additions to the allowances based on their judgments about information
available to them at the time of their examination. Because of these factors, it
is reasonably possible that the allowances for losses on loans may change
materially in the near future.

h. Advertising costs

Advertising costs are expensed as incurred.

i. Earnings per share

Earnings per share are computed using the weighted number of shares
outstanding during each year. The number of weighted average outstanding shares
was 357,147 in 1996, 350,045 in 1995, and 350,000 in 1994. No effect has been
given to the unexercised stock options which were for 202,039, 215,582, and -0-
shares at December 31, 1996, 1995, and 1994, respectively.

F-8
<PAGE> 60

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. INVESTMENT SECURITIES

Investment securities consist of the following:

<TABLE>
<CAPTION>
1996
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities held to maturity
Obligations of state and political
subdivisions........................... $1,745 $ -- $20 $1,725
Mortgage-backed........................... 1,342 -- 19 1,323
------ ---- --- ------
3,087 -- 39 3,048
====== ==== === ======
Securities available for sale
U. S. Government.......................... 504 -- 2 502
Obligations of state and political
subdivisions........................... 1,862 29 1 1,890
Mortgage-backed........................... 3,904 67 8 3,963
Equities.................................. 519 -- -- 519
------ ---- --- ------
$6,789 $ 96 $11 $6,874
====== ==== === ======
</TABLE>

<TABLE>
<CAPTION>
1995
---------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Securities held to maturity
Obligations of state and political
subdivisions........................... $1,744 $ -- $15 $1,729
Mortgage-backed........................... 1,548 7 1 1,554
------ ---- --- ------
3,292 7 16 3,283
====== ==== === ======
Securities available for sale
U. S. Government.......................... 501 5 -- 506
Obligations of state and political
subdivisions........................... 1,560 33 -- 1,593
Mortgage-backed........................... 4,981 68 4 5,045
Equities.................................. 493 -- -- 493
------ ---- --- ------
$7,535 $106 $ 4 $7,637
====== ==== === ======
</TABLE>

Scheduled maturities of debt securities held to maturity and debt
securities available for sale at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
SECURITIES HELD TO SECURITIES AVAILABLE
MATURITY FOR SALE
------------------ --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------ ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less......................... $ -- $ -- $ -- $ --
Due from one to five years...................... 1,057 1,045 778 777
Due from five to ten years...................... 688 680 1,588 1,615
Mortgage-backed securities...................... 1,342 1,323 3,904 3,963
------ ------ ------ ------
$3,087 $3,048 $6,270 $6,355
====== ====== ====== ======
</TABLE>

Investment securities having approximate carrying values of $2,631,000 and
$3,166,000 at December 31, 1996 and 1995 were pledged to secure public deposits
and for other purposes as required by law. The Bank,

F-9
<PAGE> 61

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

using an opportunity allowed by the Financial Accounting Standards Board to
restructure its investment portfolio, transferred during 1995 from its held to
maturity to its available for sale categories municipal securities having
approximate amortized cost and fair values of $1,560,000 and $1,593,000. There
were no securities sold during 1995 or 1996. Proceeds from sales of investment
securities available-for-sale during 1994 was $865,000. Gains of $15,000 were
realized on such sales.

3. LOANS

Loans at December 31, 1996 and 1995, consisted of the following:

<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Commercial.................................................. $31,351 $25,111
Consumer and installment.................................... 10,372 10,033
Held for sale............................................... 228 480
Overdrafts.................................................. 57 37
------- -------
42,008 35,661
Unearned discount........................................... (1,579) (1,165)
------- -------
40,429 34,496
Allowance for loan losses................................... (426) (392)
------- -------
$40,003 $34,104
======= =======
</TABLE>

Commitments to fund loans at December 31, 1996 and 1995, amounted to
approximately $5,656,000 and $5,188,000.

Changes in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>
1996 1995 1994
---- ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Beginning balance........................................ $392 $281 $ 314
Provision charged to operations........................ 75 151 55
Loans charged off...................................... (52) (61) (101)
Recoveries............................................. 11 21 13
---- ---- -----
Ending balance........................................... $426 $392 $ 281
==== ==== =====
</TABLE>

Loans on which the accrual of interest has been discontinued amounted to
approximately $113,000 at December 31, 1996, and $136,000 at December 31, 1995.
Had these loans been current per their original terms, interest income on these
loans would have approximated $9,500 and $23,000 for 1996 and 1995,
respectively. Impaired loan amounts are considered immaterial.

Loan origination fees and certain related direct origination costs are
recognized currently. They are not capitalized and amortized as an adjustment of
loan yield because the effect on income each year is not significant.

The Bank grants consumer, commercial and residential loans to customers in
Shreveport, Louisiana and the surrounding area. Although the Bank has a
diversified loan portfolio, a substantial portion of loan repayment is dependent
upon the local economic sector.

F-10
<PAGE> 62

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. BANK PREMISES AND EQUIPMENT

Bank premises and equipment at December 31, 1996 and 1995, are summarized
as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1996 1995
------------ -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Land................................................ $ 402 $ 402
Buildings and improvements.......................... 20 years 802 778
Furniture, fixtures and equipment................... 5-10 years 779 679
Vehicles............................................ 3 years 21 21
Construction in progress............................ -- 1
------ ------
2,004 1,881
Less -- accumulated depreciation.................... 811 695
------ ------
Bank premises and equipment....................... $1,193 $1,186
====== ======
</TABLE>

Depreciation charged to operations amounted to $118,000, $105,000 and
$95,000 in 1996, 1995 and 1994, respectively.

5. UNDIVIDED PROFITS

At December 31, 1996 and 1995, the Bank's undivided profits were legally
available for dividends. In addition to formal legal requirements, regulatory
authorities consider the adequacy of the Bank's total capital in relation to its
deposits and other considerations. Therefore, such capital adequacy
considerations would possibly limit the amount of undivided profits available
for dividends to an amount less than the legal limit.

6. RELATED PARTY TRANSACTIONS

At December 31, 1996 and 1995, certain officers, directors, or companies in
which they have 10% or more beneficial ownership were indebted to the Bank in
the approximate aggregate amounts of $913,000 and $1,002,000, respectively. Such
parties held deposits in the Bank amounting to approximately $2,346,000 at
December 31, 1996. Below is a summary of the activity for 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Beginning balance........................................... $1,002 $ 867
Additional borrowings....................................... 412 405
Repayment of borrowings..................................... 501 270
------ ------
Ending balance.............................................. $ 913 $1,002
====== ======
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

There are outstanding commitments and contingent liabilities on which
management does not anticipate losses. They include, among other things,
commitments to extend credit and letters of credit undertaken in the normal
course of business. Outstanding letters of credit amounted to $188,000 at
December 31, 1996 and $266,000 at December 31, 1995.

These commitments represent off-balance sheet risk to the Bank, with the
contractual notional amount representing the Bank's exposure to credit loss in
the event of nonperformance by the other party to the instruments. 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. They generally have
fixed expiration dates and require

F-11
<PAGE> 63

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

payment of a fee. Since many commitments are expected to expire without being
drawn upon, the total commitments do not represent future cash requirements. The
Bank evaluates each customer's creditworthiness on a case-by-case basis, and
obtains an amount of collateral it deems sufficient.

8. TIME DEPOSITS

Time deposits of $100,000 or more amounted to approximately $11,152,000 at
December 31, 1996 and $6,825,000 at December 31, 1995. Approximate maturities of
time deposits over the next five years are as follows: 1997 -- $8,332,000;
1998 -- $1,730,000; 1999 -- $990,000; 2000 -- $-0-; 2001 -- $100,000.

9. INCOME TAXES

The Bank adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, on January 1, 1993. This standard requires that
deferred income taxes be measured on the temporary differences in tax bases of
assets and liabilities for financial statement and income tax purposes, and that
such deferred income taxes be measured using currently enacted tax laws and
rates that apply to the periods in which those temporary differences are
expected to be settled. A valuation allowance is established, if necessary, to
reduce deferred tax assets to amounts that will more likely than not be
realized. Under this standard, income tax expense consists of income taxes
currently payable or refundable for the period, plus the net change in deferred
tax assets and liabilities.

Income taxes are summarized as follows:

<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Currently payable......................................... $619 $403 $304
Deferred.................................................. (39) (40) (22)
---- ---- ----
Net income taxes.................................. $580 $363 $282
==== ==== ====
</TABLE>

Net deferred tax liabilities at December 31, 1996 and 1995 consist of the
following:

<TABLE>
<CAPTION>
1996 1995
------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets......................................... $ 39 $ 15
Deferred tax liabilities.................................... (43) (34)
---- ----
Net deferred tax (liability)................................ $ (4) $(19)
==== ====
</TABLE>

These deferred tax assets and liabilities arise from temporary differences
related to the allowance for loan losses, accumulated writedowns on real estate
owned other than bank premises, accumulated depreciation on bank premises and
equipment, and unrealized gains or losses on investment securities available for
sale. The major difference in reported income tax expense and expected income
taxes based upon pretax income results from tax-exempt interest income on
obligations of political subdivisions.

10. LEASES

The Bank currently leases space for one of its locations under an agreement
accounted for as an operating lease. This agreement provides for an annual
rental of approximately $18,000 through April 30, 1998, and an increased annual
rental of $19,000 through April 30, 1999.

F-12
<PAGE> 64

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual rentals under this lease are as follows:

<TABLE>
<CAPTION>
(DOLLAR IN THOUSANDS)
<S> <C>
1997................................................. $18
1998................................................. 19
1999................................................. 6
---
Total................................................ $43
===
</TABLE>

11. REAL ESTATE OWNED OTHER THAN BANK PREMISES

Real estate owned other than bank premises represents property acquired
through foreclosure or deeded in lieu of foreclosure on loans on which the
borrowers have defaulted as to payment of principal and interest. Amounts are
carried at the lower of cost of acquisition or the asset's fair value less
estimated costs to sell. Reductions in the balance at the date of acquisition
are charged to the allowance for loan losses. Any subsequent write-downs to
reflect current fair value are charged to noninterest expense. There were no
allowances for possible write-downs at December 31, 1996 or 1995.

12. REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.

As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as
adequately capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. The Bank's
actual capital amounts and ratios are also presented in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES: ACTION PROVISIONS:
--------------- ------------------ -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- -------- ------ -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total capital (to Risk Weighted
Assets)....................... $6,681 16.8% $$3,188 $8.0% $$3,985 $10.0%
Tier I Capital (to Risk Weighted
Assets)....................... $6,255 15.7% $$1,594 $4.0% $$2,391 $6.0%
Tier I Capital (to Average
Assets)....................... $6,255 10.6% $$2,356 $4.0% $$2,945 $5.0%
</TABLE>

F-13
<PAGE> 65

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13. EMPLOYEE STOCK OWNERSHIP PLAN

The Bank sponsors a 401(k) savings plan under which eligible employees may
choose to defer a portion of salary income on a pre-tax basis, subject to
certain IRS limits. The Bank may, but is not obligated to, match employee
contributions up to one percent of each employee's salary. Amounts placed in the
plan, at the option of the employee, may be invested in money market instruments
or Bank common stock, which is provided by the Bank's employee stock ownership
plan (ESOP). The Bank makes contributions to the ESOP sufficient to cover
elective employee deferrals and any matching amounts elected by the Bank. ESOP
shares are pledged as collateral for the debt incurred to purchase the shares.
As the debt is repaid, shares are released from collateral and allocated to
employees who made 401(k) contributions during the year. Dividends on allocated
shares are recorded as a reduction in retained earnings.

Compensation expense for the 401(k) match was $19,000 and $4,000 for 1996
and 1995. There was no compensation match for 1994. ESOP shares at December 31,
1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Allocated shares............................................ 6,815 1,934
Unreleased shares........................................... -- 21
----- -----
Total ESOP shares........................................... 6,815 1,955
===== =====
</TABLE>

14. STOCK OPTION PLAN

The Bank established a nonqualified stock option plan for directors and
officers under which options to purchase shares of the Bank's common stock are
granted at $10.59 per share, generally for the next ten years. Options must be
exercised during this period; in addition, officers may not purchase over
$100,000 in stock annually.

<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Shares under option......................................... 202,039 215,582
======= =======
Shares issued from exercise of options...................... 13,543 5,418
======= =======
</TABLE>

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (Statement 107), requires that the Bank disclose
estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for its financial instruments.

a. Investment securities

The fair value of investment securities, except certain agency and state
and municipal securities, is estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers. The
fair value of certain agency and state and municipal securities is not readily
available through market sources other than dealer quotations, so fair value
estimates are based on quoted market prices of similar instruments, adjusted for
differences between the quoted instruments and the instruments being valued. The
carrying value and estimated fair value of investment securities at December 31,
1996 and 1995, are disclosed in Note 2.

b. Loans

Fair values are estimated for portfolios of loans that have similar
financial characteristics. Loans are segregated by type and maturity. Each loan
category is further segmented into fixed and adjustable rate interest terms.

F-14
<PAGE> 66

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risk inherent in the loan. The
estimate of maturity is based on the Bank's historical experience with
repayments for each loan classification, modified, as required, by an estimate
of the effect of current economic and lending conditions. For purposes of
estimating fair value, loans with a remaining maturity of three months or less
and adjustable rate loans are assumed to be carried at approximate fair value
due to repricing at current market rates.

Fair value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not available, estimated cash flows are discounted
using a rate commensurate with the risk associated with the estimated cash
flows. Assumptions regarding credit risk, cash flows and discount rates are
judgmentally determined using available market information and specific borrower
information. The following table presents information on loans:

<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
APPROXIMATE ESTIMATED APPROXIMATE ESTIMATED
BOOK VALUE FAIR BOOK VALUE FAIR
(GROSS) VALUE (GROSS) VALUE
----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Loans............................... 40,429 40,406 34,496 34,427
====== ====== ====== ======
</TABLE>

c. Deposit liabilities

Under Statement 107, the fair value of deposits with no stated maturity,
such as noninterest-bearing demand deposits, savings, and interest-bearing
transaction accounts is equal to the amount payable on demand as of December 31,
1996 and 1995. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using
the rates currently offered for deposits of similar remaining maturities. The
following table presents information on deposits:

<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
APPROXIMATE ESTIMATED APPROXIMATE ESTIMATED
BOOK FAIR BOOK FAIR
VALUE VALUE VALUE VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Noninterest-bearing demand....................... 12,736 12,736 10,481 10,481
Savings and interest-bearing demand.............. 15,950 15,950 15,253 15,253
Certificates of deposit.......................... 25,335 25,409 21,208 21,413
------ ------ ------ ------
54,021 54,095 46,942 47,147
====== ====== ====== ======
</TABLE>

d. Other categories of financial instruments

The carrying amounts of cash and due from banks, federal funds sold,
accrued interest receivable, accrued interest payable, and other liabilities,
approximate fair value because of the short maturities or periodic repricing of
these instruments.

e. Limitations

Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of particular financial
instruments. Because no market exists for a significant portion of the Bank's
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instrument, and other factors. These
estimates are subjective in nature and involve

F-15
<PAGE> 67

CITY BANK & TRUST OF SHREVEPORT

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.

Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments.

16. ACCOUNTING STANDARDS

In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities." SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a "financial-components approach" that
focuses on control. The impact of SFAS No. 125, when adopted on January 1, 1997,
will not be material to the Company's financial condition or results of
operations.

F-16
<PAGE> 68

CITY BANK & TRUST OF SHREVEPORT

BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents:
Cash and due from banks................................... $ 3,852 $ 4,952
Federal funds sold........................................ 1,000 3,975
------- -------
4,852 8,927
Investment securities:
Securities held to maturity............................... 3,019 3,087
Securities available for sale............................. 6,480 6,874
------- -------
9,499 9,961
Loans, less allowance for loan losses of $441 and $426...... 46,518 40,003
Accrued interest receivable................................. 512 429
Bank premises and equipment................................. 1,141 1,193
Real estate owned other than bank premises.................. 182 224
Other assets................................................ 209 191
------- -------
Total assets...................................... $62,913 $60,928
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand................................................. $12,058 $12,736
Savings and interest-bearing demand.................... 15,076 15,950
Time................................................... 24,756 25,335
------- -------
Total deposits.................................... 51,890 54,021
Borrowed funds............................................ 3,500 --
Accrued interest payable.................................. 178 200
Other liabilities......................................... 200 396
------- -------
Total liabilities................................. 55,768 54,617
Stockholders' equity:
Common stock, par value $5.00 per share; authorized
1,000,000 shares; issued and outstanding 380,196 and
371,646 shares......................................... 1,901 1,858
Surplus................................................... 1,931 1,883
Undivided profits......................................... 3,251 2,514
Unrealized gain on securities available for sale.......... 62 56
------- -------
Total stockholders' equity........................ 7,145 6,311
------- -------
Total liabilities and stockholders' equity........ $62,913 $60,928
======= =======
</TABLE>

F-17
<PAGE> 69

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996
------ ------
(UNAUDITED)
<S> <C> <C>
Interest income:
Interest and fees on loans................................ $2,315 $2,035
Investment securities:
U.S. Treasury.......................................... 14 16
U.S. Government Agency................................. 180 221
Obligations of state and political subdivisions........ 82 75
Federal funds sold........................................ 23 35
Other..................................................... 31 38
------ ------
Total interest income............................. 2,645 2,420
Interest expense:
Savings and interest-bearing demand deposits.............. 185 182
Time deposits............................................. 617 541
Other borrowed money...................................... 18 --
------ ------
Total interest expense............................ 820 723
------ ------
Net interest income............................... 1,825 1,697
Provision for loan losses................................... 10 60
------ ------
Net interest income after provision for loan
losses........................................... 1,815 1,637
Other income:
Service charges........................................... 338 276
Gain on sale of real estate owned other than bank
premises............................................... 2 --
Other operating income.................................... 52 49
------ ------
Total other income................................ 392 325
Operating expenses:
Salaries and employee benefits............................ 443 429
Occupancy expense......................................... 160 149
Writedowns on real estate owned other than bank
premises............................................... 9 10
Other operating expense................................... 444 398
------ ------
Total operating expenses.......................... 1,056 986
------ ------
Income before income taxes.................................. 1,151 976
Income taxes................................................ 357 313
------ ------
Net income.................................................. $ 794 $ 663
====== ======
Earnings per share.......................................... $ 2.11 $ 1.86
====== ======
</TABLE>

F-18
<PAGE> 70

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
TOTAL SECURITIES
STOCKHOLDERS' COMMON UNDIVIDED AVAILABLE
EQUITY STOCK SURPLUS PROFITS FOR SALE
------------- ------ ------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.................. $6,311 $1,858 $1,883 $2,514 $56
Dividends paid.............................. (57) -- -- (57) --
Net income.................................. 794 -- -- 794 --
Issuance of 8,550 common stock shares....... 91 43 48 -- --
Change in unrealized gain on securities
available for sale, net of deferred
income taxes of $3....................... 6 -- -- -- 6
------ ------ ------ ------ ---
Balance at June 30, 1997...................... $7,145 $1,901 $1,931 $3,251 $62
====== ====== ====== ====== ===
</TABLE>

F-19
<PAGE> 71

CITY BANK & TRUST OF SHREVEPORT

STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 794 $ 663
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 61 56
Provision for loan losses.............................. 10 60
Writedowns on real estate owned other than bank
premises.............................................. 9 10
(Gain) on sale of real estate owned other than bank
premises.............................................. (2) --
(Increase) decrease in accrued interest receivable..... (83) 2
(Decrease) in accrued interest payable................. (22) (11)
(Increase) in other assets............................. (18) (245)
Increase (decrease) in other liabilities............... (196) 44
------- -------
Total adjustments................................. (241) (84)
------- -------
Net cash provided by operating activities......... 553 579
Cash flows from investing activities:
Proceeds from maturities of investment securities
available for sale..................................... 400 634
Proceeds from maturities of investment securities held to
maturity............................................... 68 95
Proceeds from sale of real estate owned other than bank
premises............................................... 35 --
Purchase of bank premises and equipment (net of
disposal).............................................. (9) (113)
Net (increase) in loans................................... (6,525) (4,411)
------- -------
Net cash (used) by investing activities........... (6,031) (3,795)
Cash flows from financing activities:
Net increase (decrease) in demand deposits................ (678) 526
Net (decrease) in savings and interest-bearing demand..... (874) (392)
Net increase (decrease) in time deposits.................. (579) 2,695
Net increase in advances from Federal Home Loan Bank...... 3,500 --
Dividends paid............................................ (57) (53)
Proceeds from issuance of common stock.................... 91 49
------- -------
Net cash provided by financing activities......... 1,403 2,825
------- -------
Net (decrease) in cash and cash equivalents................. (4,075) (391)
Cash and cash equivalents at beginning of period............ 8,927 5,475
------- -------
Cash and cash equivalents at end of period.................. $ 4,852 $ 5,084
======= =======
Interest paid............................................... $ 842 $ 734
======= =======
Income taxes paid........................................... $ 370 $ 301
======= =======
</TABLE>

F-20
<PAGE> 72

CITY BANK & TRUST OF SHREVEPORT

NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1997

1. FINANCIAL STATEMENT PRESENTATION

The balance sheet as of June 30, 1997, the statements of income and cash
flows for the six month ended June 30, 1997 and 1996 and the statement of
stockholders' equity for the six months ended June 30, 1997, have been prepared
by City Bank & Trust of Shreveport (CBT), without audit. In the opinion of
management, all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position, results of operations and
cash flows at June 30, 1997 and for all periods presented have been made.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1997.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted in accordance with Article 10 of Regulation S-X. These
financial statements should be read in conjunction with the financial statements
and notes thereto for the year ended December 31, 1996 included elsewhere
herein.

2. NET INCOME PER SHARE

Net income per share of common stock is computed by dividing net income by
the weighted average number of shares of common stock outstanding during the
period (375,724 shares and 356,175 shares for the six-month periods ended June
30, 1997 and 1996, respectively). No effect has been given to the unexercised
stock options which were for 193,489 and 214,782 shares at June 30, 1997 and
1996, respectively.

3. THE MERGER

On June 18, 1997, First United Bancshares, Inc. (Bancshares) and CBT
entered into an agreement pursuant to which Bancshares proposes to acquire all
of the issued and outstanding stock of CBT. The acquisition of CBT will be
consummated through the issuance to CBT's shareholders and optionholders of
approximately 425,000 shares of Bancshares common stock. Bancshares' reason for
entering into the merger is to expand the markets of the company and thereby
increase the earning potential of the company. The agreement requires that the
merger be accounted for as a pooling of interests.

On June 17, 1997, the trading date immediately prior to the execution of
the agreement, the closing sales price of shares of Bancshares' common stock on
the NASDAQ-NMS was $39.88. There is no established market value for the stock of
CBT.

F-21
<PAGE> 73

ANNEX I

AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of June
18, 1997 by and between First United Bancshares, Inc., an Arkansas corporation
("Bancshares"), and City Bank and Trust of Shreveport, Shreveport, Louisiana, a
bank chartered under the laws of Louisiana ("Bank" or "Surviving Bank").

WHEREAS, Bancshares desires to acquire one hundred percent (100%) of the
capital stock of Bank (the "Bank Common Stock") upon the terms and conditions
hereinafter set forth; and

WHEREAS, the parties desire to merge an interim bank to be created for the
purposes of consummating this Agreement and which will be wholly owned by
Bancshares with and into Bank (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 Bank believe
that such proposed Merger and the payment of shares of Bancshares Stock (as
defined in Section 2.01(a) hereof) for the Merger, 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 Bank intend that the merger shall qualify for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and shall
be recorded for accounting purposes as a pooling of interests; and

WHEREAS, Bancshares and Bank 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, 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 Bank agree to effect the Merger of an interim bank established by
Bancshares in accordance with the Louisiana Revised Statutes of 1950, as
amended, (the "LRS") with and into Bank.

1.02. Effective Time of the Merger. The Merger shall become effective at
5:00 p.m., central time, on the date of the Closing (the "Effective Time").

1.03. Closing. The closing of the Merger (the "Closing") will take place at
the offices of Bancshares or such other location as the parties may agree upon
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.

1.04. Establishment of Interim Bank. Bancshares agrees to apply to the
Louisiana Office of Financial Institutions to charter an interim bank ("Interim
Bank") which will be merged with and into Bank at the Effective Time. Bank will
be the surviving bank, under the name City Bank and Trust of Shreveport.

1.05. Deferred Compensation and Split Dollar Insurance Plan Agreements. Ron
C. Boudreaux and Rhonda R. Hensley have entered into certain deferred
compensation and split dollar insurance plan agreements with Bank, effective
January 1, 1995. The obligations under the deferred compensation and split
dollar insurance plan agreements shall remain in full force and effect as
obligations of Bank after consummation of the Merger. For and in consideration
of the receipt of continued benefits under said agreements Mr. Boudreaux and Ms.
Hensley agree to forego any future participation in the Bancshares

A-I-1
<PAGE> 74

defined benefit pension plan. Mr. Boudreaux and Ms. Hensley agree to execute all
documentation required by law to opt out of said defined benefit pension plan.

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 Bank
Common Stock:

(a) Conversion of Bank Common Stock and Options. The purchase price
paid by Bancshares to the owners of Bank Common Stock ("Bank Shareholders")
and holders of options to purchase common stock of Bank ("Bank
Optionholders") shall be Four Hundred Twenty Five Thousand (425,000) shares
of fully paid and nonassessable shares of voting Common Stock, $1.00 par
value, of Bancshares (the "Purchase Price" or "Bancshares Stock"). All of
the issued and outstanding shares of Bank Common Stock, other than
Dissenting Shares (as defined below), and all outstanding options to
purchase common stock of Bank (the "Option Shares") shall be converted into
the right to receive a portion of the Purchase Price based upon each
Shareholder's and Optionholder's ownership of the total number of issued
and outstanding shares of Bank Common Stock and outstanding options at the
Effective Time, as described in subsections (i) and (j) below.

(b) Fractional Shares. Fractional shares of Bancshares Stock shall not
be issued. Any Bank Shareholder or holder of options to purchase Bank
Common Stock ("Options") 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 Bancshares common stock
for all trades occurring on NASDAQ during the period of ten (10) trading
days on which one or more trades take place and which ends immediately
prior to the second trading day preceding the Closing Date ("Pricing
Average").

(c) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Bank Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by Bank
Shareholders who have not voted such shares in favor of the Merger and who
shall have delivered a written demand for payment of the fair value of such
shares within the time and in the manner provided in Section 6:376 of the
LRS (the "Dissenting Shares") shall not be converted into or exchangeable
for the right to receive the applicable portion of the Purchase Price
provided in this subsection 2.01, and such Bank Shareholders shall only be
entitled to receive payment of the fair cash value of such shares in
accordance with the provisions of Section 6:376 of the LRS unless and until
such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, at which time such Bank Shareholder's Bank
Common Stock shall be deemed to have been converted into and have become
exchangeable for, at the Effective Time, the right to receive the
applicable portion of the Purchase Price without any interest thereon.

(d) Cancellation of Shares and Options. All shares of Bank Common
stock issued and outstanding and all Options outstanding immediately prior
to the Effective Time shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist as of the
Effective Time, and each holder of a certificate representing any such
shares or Options shall cease to have any rights with respect thereto,
except the right to receive the portion of the Purchase Price applicable to
such shares or Options in consideration therefor upon the surrender of such
certificate in accordance with the Plan of Merger, without interest as
defined below or, if applicable, cash as provided in Section 6:376 of the
LRS.

(e) Conversion of Stock of Interim Bank. At the Effective Time, the
shares of Interim Bank common stock validly issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action by the holder thereof, be converted into the capital
stock of the Surviving Bank, so that all shares of capital stock of the
Surviving Bank will be owned by Bancshares. The outstanding certificates
representing shares of the Interim Bank common stock will, after the
Effective Time, be deemed to represent the number of shares of the
Surviving Bank into which they have

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<PAGE> 75

been converted and may be exchanged for new certificates of the Surviving
Bank upon request of the holder thereof.

(f) Anti-Dilution. If prior to the Effective Time shares of Bancshares
Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares, readjustment or similar transaction, or if a stock dividend shall
be declared, appropriate and proportionate adjustment or adjustments will
be made in the conversion rates set forth in this Section 2.01.

(g) 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, as amended, and the rules and regulations
thereunder (the "Securities Act"), and such issuance shall comply with any
applicable state "Blue Sky" laws.

(h) Termination of 401(k) Plan. As soon as practicable after execution
of this Agreement, Bank shall make all filings, take all action and receive
all approvals necessary and appropriate to allow termination of the Bank
401(k) plan immediately prior to the Closing Date. Bancshares shall assist
Bank in accomplishing the above procedures and shall assist Bank employees
in any distribution or rollover of their 401(k) benefits to an individual
retirement account or to a qualified retirement plan, including a
Bancshares plan as set forth in Section 6.07 of this Agreement to the
extent such rollovers are permissible under the qualified retirement plan,
ERISA (as defined below) and applicable rules and regulations.

(i) Stock Options. Each outstanding Option to purchase Bank Common
Stock shall be converted into the right to receive Bancshares Common Stock
equal to the appreciated value of said Option as of the Effective Time as
follows:

(1) Using the following formula, the Bank Common Stock value will
be determined:

A(x) + B(x - 10.59) = 425,000y

where

<TABLE>
<S> <C> <C>
A = number of issued and outstanding shares of Bank at the
Effective Time
B = number of outstanding Options
x = Bank Common Stock value at Effective Time
y = Pricing Average
</TABLE>

(2) The Bank Common Stock value is reduced by $10.59 and the
difference is multiplied by the number of outstanding Options
to determine the aggregate value of all Options.

(3) The aggregate value of all Options is divided by the Pricing
Average, the quotient of which shall be the number of shares of
Bancshares Common Stock to be issued to the Option holders
("Option Conversion Shares") on a pro rata basis.

(j) Share Conversion Ratio. The total number of Option Conversion
Shares shall be subtracted from 425,000 and the result shall be divided by
the number of shares of Bank Common Stock outstanding immediately prior to
the Effective Time to determine the Share Conversion Ratio. The number of
shares of Bank Common Stock owned by each Bank Shareholder immediately
prior to the Effective Time shall be multiplied by the Share Conversion
Ratio to determine the number of shares of Bancshares Common Stock to be
received by each Bank Shareholder.

2.02. Approval By Shareholders. Consummation of the Merger shall be
contingent upon its approval by the legally required votes of the shares of Bank
Common Stock and Bancshares common stock at shareholders meetings duly called
for the purpose of voting on the Merger. The Boards of Directors of Bank and
Bancshares shall recommend approval of the Merger to their respective
shareholders.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BANK

Bank hereby represents and warrants to Bancshares the following:

3.01. Organization, Standing and Power of Bank. Bank is a banking
association duly organized, validly existing and in good standing under the laws
of the State of Louisiana 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 Bank. Bank 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 Bank. Bank is not a member of the Federal
Reserve System. The deposits of Bank are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the extent provided by law. Bank has delivered
to Bancshares true, accurate and complete copies of its currently effective
Articles of Incorporation and Bylaws, including all amendments thereto. Bank has
no subsidiaries.

3.02. Capital Structure of Bank. The authorized capital stock of Bank
consists of 1,000,000 shares of common stock, $5.00 par value, 380,196 of which
shares are issued and outstanding and no shares are held by Bank in its
treasury. Bank 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 ("Voting Debt").
All outstanding shares of Bank Common Stock are validly issued, fully paid and
nonassessable. No Options have been granted and no outstanding shares of Bank
Common Stock and no shares of Bank Common Stock issued pursuant to exercise of
outstanding options will, upon such issuance, have been issued (a) without
affording to all prior shareholders their preemptive rights to maintain their
proportionate ownership of outstanding shares of Bank Common Stock or without
obtaining a legally binding waiver of such preemptive rights, or (b) in
violation of any shareholder's preemptive rights. Except for 193,489 Option
Shares and except as set forth in Exhibit 3.02, there are no options, warrants,
calls, rights, or agreements of any character whatsoever to which Bank is a
party or by which Bank 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 Bank is obligated to grant, extend or enter into any such
option, warrant, call, right or agreement. Except for 193,489 Option Shares and
except as set forth in Exhibit 3.02, immediately before and after the Effective
Time there will be no option, warrant, call, right or agreement obligating Bank
to issue, deliver or sell, or cause to be issued, delivered or sold, any shares
of capital stock or obligating Bank to grant, extend or enter into any such
option, warrant, call, right or agreement.

3.03. Authority. Bank 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 Bank 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
Bank's board of directors. This Agreement and the Plan of Merger have been duly
executed and delivered by Bank, and, subject to such regulatory and shareholder
approval, each constitutes a valid and binding obligation of Bank 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, acceleration, loss or creation, a "Violation"),
pursuant to any provision of (a) the Articles of Incorporation or Bylaws of Bank
or (b) any loan or credit agreement, note, mortgage, indenture, lease, or

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<PAGE> 77

other agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Bank or its properties or assets, except where such violation would not have
a material adverse effect on the business, operations or financial condition of
Bank. Other than in connection or in compliance with the provisions of the LRS,,
Louisiana banking laws, and approvals of 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 Bank in connection with the execution and
delivery of this Agreement and the Plan of Merger by Bank or the consummation by
Bank of the transactions contemplated hereby and thereby.

3.04. Bank Financial Statements.

(a) The (i) consolidated balance sheets of Bank as of December 31,
1996, and December 31, 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 Heard, McElroy
& Vestal, L.L.P., Certified Public Accountants, and (ii) the internally
prepared and unaudited financial statements for Bank dated March 31, 1997
(items (i) - (ii) being called collectively the "Bank Financial
Statements"), copies of which have been furnished by Bank 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 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)
with respect to item (ii). The Bank Financial Statements present fairly the
financial condition of Bank and the financial condition of Bank at the
dates, and the results of operations and cash flows for the periods, stated
therein. Bank has no liability of any nature, whether direct, indirect,
accrued, absolute, contingent or otherwise, which is material to Bank
except as provided for or disclosed in the Bank Financial Statements, the
notes thereto or in Exhibit 3.04.

(b) Without limitation of the foregoing, except as described in
Exhibit 3.04(b), Bank 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.

3.05. Bank Reports. Bank has 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 FDIC, (ii) the
Louisiana Office of Financial Institutions and (iii) any other applicable
securities, banking or regulatory authorities (all such reports and statements
are collectively referred to herein as the "Bank Reports"), except where such
failure to file would not have a material adverse effect on the business
operations or financial condition of Bank. The Bank 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.

3.06. Information Supplied. None of the information supplied or to be
supplied by Bank for inclusion or incorporation by reference in any document to
be filed with the Securities and Exchange Commission ("SEC"), the Federal
Reserve Board ("FRB"), or any regulatory agency in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit 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. Bank has made available to
Bancshares all financial and other information reasonably requested by
Bancshares.

3.07. Authorizations; Compliance with Applicable Laws. Bank holds all
authorizations, permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities which are material to the operations of the
businesses of Bank (the "Bank Permits"), including appropriate authorizations
from the Louisiana Office of Financial Institutions. Bank is in compliance with
the terms of the Bank Permits, except where the failure so to comply would not
have a material adverse effect on Bank. Except as set forth in Exhibit 3.07 the
business of Bank is not being conducted in violation of any federal, state or
local law, statute, ordinance or

A-I-5
<PAGE> 78

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 Bank. No
investigation or review by any Governmental Entity with respect to Bank is
pending or, to the best of Bank's knowledge, 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 in the
ordinary course of business by Bank or, to the best of their knowledge, in which
Bank has or had an investment or security interest (by mortgage, deed of trust,
or otherwise), including, without limitation, properties under foreclosure,
properties held by Bank in its capacity as a trustee, or properties in which any
venture capital or similar unit of Bank has or had an interest (the "Bank
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 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 Bank Property (collectively, "Environmental Laws"), and
as a result of which acts or omissions Bank is subject to or reasonably likely
to incur a material liability or suffer a diminution in value of any interest
exceeding $100,000.00. Bank is not 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 Bank
Property or as a result of its investment or security interest (as described
above) in any Bank 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
Bank relating to the Bank 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 Bank with respect thereto.

3.08. Litigation and Claims. Except for regular examinations by banking
authorities and except as disclosed in Exhibit 3.08 (a) Bank is not 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 Bank pending
or, to the best of its knowledge, threatened, which will have or can reasonably
be expected to have a material adverse effect on Bank 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 Bank
as a result of the examination by any bank regulatory authority.

3.09. Taxes. Bank has filed all tax returns required to be filed and has
paid or has set up an adequate reserve for the payment of, all taxes required to
be paid as shown on such returns, and the most recent Bank Financial Statements
reflect an adequate reserve for all taxes payable by Bank accrued through the
date of such financial statements. There has been no examination by the United
States Internal Revenue Service ("IRS") of Bank for over seven years. There is
no examination pending by the IRS with respect to Bank. Bank has not 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 Bank. There are
no material liens for taxes upon the assets of Bank except for statutory liens
for taxes not yet delinquent. Bank is not 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 Bank. 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,

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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. Bank has withheld from its 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).

3.10. Certain Agreements.

(a) Except as disclosed in Exhibit 3.10(a) or 3.11(a), Bank is not a
party to any (i) consulting, professional services, employment or other
agreement not terminable at will providing any term of employment,
compensation, guarantee, severance, supplemental retirement benefits, or
other employment benefits or rights, (ii) 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, (iii) any stock option plan, stock appreciation rights plan,
restricted stock plan, stock purchase plan or similar plan granting rights
to acquire stock in Bank, or (iv) contract containing covenants which limit
the ability of Bank 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, Bank may carry on its business (other than as may be
required by law or applicable regulatory authorities). Except as set forth
in Exhibit 3.10(a), Bank shall terminate all existing consulting,
professional services and employment contracts, other than at will
employment contracts with such termination effective at the Effective Time.

(b) Except as set forth on Exhibit 3.10(b), Bank is not a party to any
oral or written union, guild or collective bargaining agreement or to any
conciliation agreement with the Department of Labor, the Equal Employment
Opportunity Commission or any federal, state or local agency which requires
equal employment opportunities or affirmative action in employment. To the
best of Bank's knowledge, there are no unfair labor practice complaints
pending against Bank before the National Labor Relations Board and there
are no similar claims pending before any similar state, local or foreign
agency. There is no activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any employees of
Bank, nor any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any such employees. Bank is in compliance
with all applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and Bank is not
engaged in any unfair labor practice except where any violation would not
have a material adverse effect on the business, operations or financial
condition of Bank.

3.11. 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, 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 herein as "Welfare Plans")(collectively, "Plans")
providing benefits to any current or former employee, officer or director
of Bank 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 Bank or any other person or entity that, together with Bank, 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 Bank or any Commonly Controlled Entity that is, or
within the last six years was, subject to Title IV of ERISA and for which
Bank could have material liability) (all of the foregoing such plans being
herein referred to as the "Bank Benefit Plans"), Bank has delivered, or
caused to be delivered, to Bancshares true, complete and correct copies of

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<PAGE> 80

(i) each Bank Benefit Plan, (ii) annual reports (Forms 5500) and all
schedules thereto filed with the IRS with respect to each Bank Benefit Plan
for the past five years (if any such report was required), (iii) the most
recent summary plan description for each Bank 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 Bank Benefit Plan; (v) the
most recent actuarial report or valuation relating to a Bank Benefit Plan
subject to Title IV of ERISA; (vi) the most recent determination letter as
to qualification of each Bank Benefit Plan and the forms and attachments
submitted to the IRS for such determination letter; (vii) a list of the
Bank 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 Bank Benefit Plans; and (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 Bank Benefit Plan.

(b) Exhibit 3.11(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 Bank or to which Bank contributes or is required to
contribute, and sets forth the amount of any liability of Bank 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 3.11(b), neither Bank 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.

(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 Bank Benefit Plan has been administered in accordance with
its terms. Except as disclosed in Exhibit 3.11(3), all of the Bank 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 3.11(e), with respect
to each Pension Plan that is intended to be taxqualified 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 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 Bank Benefit Plan
that is a Pension Plan.

(f) Neither Bank nor any Commonly Controlled Entity, nor any plan
fiduciary of any Bank Benefit Plan or, to the best knowledge of Bank, any
other party in interest of any Bank 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
Bank or any officer of Bank to tax or penalty under ERISA, the Code or
other applicable law. Except as disclosed in Exhibit 3.11(a), neither any
Bank 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
Bank Benefit Plan that is a Pension Plan, as to which Bank could have any
liability.

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<PAGE> 81

(g) Neither Bank 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 Bank nor any Commonly Controlled Entity could have any
liability under a multi-employer plan.

(h) None of the Bank 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 3.11(i) there are no claims pending
with respect to, or under, any Bank 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 3.11(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 Bank,
Bancshares or Interim Bank, 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
Bank Benefit Plan.

(k) With respect to any Bank 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 Bank 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 Bank Benefit Plan may be amended or
terminated without any liability to Bank on or at any time after the
consummation of this Agreement.

(l) Neither Bank 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 3.11(m) or as required by
applicable law, since June 30, 1996 there has not been any adoption of
amendment in any material respect of any Bank Benefit Plan. Except as
disclosed in Exhibit 3.11(m), there exist no employment, consulting,
severance, termination or indemnification agreements, arrangements or
understandings between Bank and any current or former employee, officer or
director of Bank.

(n) Except as set forth in Exhibit 3.11(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 Bank who is a "disqualified 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 Bank 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).

3.12. Insurance. Bank has delivered to Bancshares correct and complete
copies of all material policies of insurance of Bank currently in effect,
including, but not limited to, directors and officers liability policies and
blanket bond policies. Bank has no liability for unpaid premiums or premium
adjustments not properly reflected on the Bank Financial Statements.

3.13. Conduct of Bank 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) Bank has carried on its businesses in the ordinary and usual
course consistent with past practices, (b) except for issuance of shares
pursuant to the exercise of Options Bank has not issued or sold any capital
stock or issued or sold any corporate debt securities

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which would be classified as long term debt on the balance sheet of Bank, (c)
except as disclosed in Exhibit 3.02, Bank has not granted any option for the
purchase of capital stock, effected any stock split, or otherwise changed its
capitalization, (d) except as disclosed in Exhibit 3.13(d), Bank has not
declared, set aside, or paid any cash or stock dividend or other distribution in
respect to its capital stock, (e) except as disclosed in Exhibit 3.13(e) Bank
has not 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) Bank has not 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) Bank has not 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 3.13(h), Bank
has not 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 Bank Benefit Plan in respect of any present
or former directors, officers or other employees; or agreed to do any of the
foregoing, (i) Bank has not 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) Bank has not cancelled or compromised any debt to an extent exceeding
$50,000.00 owed to Bank or claim to an extent exceeding $50,000.00 asserted by
Bank, (k) Bank has not entered into any transaction, contract, or commitment
outside the ordinary course of its business, (1) Bank has not 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 Bank, and (n) Bank has kept and retained
all records substantially in accordance with all regulatory and statutory
requirements and substantially in accordance with industry standards.

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

3.15. Properties, Leases and Other Agreements. Except (i) with respect to
debts reflected in the Bank 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 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 Bank Financial Statements or acquired since the date of such
Statements, Bank has 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 Bank Financial Statements, and all personal
and real property acquired since the date of such Bank 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 Bank has been reasonably maintained and are in good and serviceable
condition, reasonable wear and tear excepted. All leases material to Bank
pursuant to which Bank, 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 Bank, or 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
Bank. Except for securities held in its capacity as fiduciary, Bank does 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.

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3.16. Accounting. Bank will not, and will use its best efforts to cause any
of its affiliates to not knowingly take any action that would, in the reasonable
opinion of Bancshares, prevent the Merger from qualifying for pooling of
interests accounting treatment.

3.17. No Untrue Statements. 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 Bank 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
Bank:

(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 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). For purposes of the
foregoing sentence, it is understood and agreed that the phrase
"enforceable against such borrowers in accordance with their terms" shall
not mean that the borrower has the financial ability to repay a loan or
that the collateral is sufficient in value to result in payment of the loan
secured thereby;

(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 Bank to secure each loan;

(d) Bank has possession of all loan document files and credit files
for all loans held by it containing promissory notes and other relevant
evidences of indebtedness with original signatures of their borrowers and
guarantors;

(e) Bank holds validly perfected liens or security interests in the
collateral granted to it 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;

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

(g) Bank is in possession of all collateral that the loan document
files or credit files indicate it has in its possession;

(h) All guaranties granted to Bank 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); and

(i) With respect to any loans in which Bank has sold participation
interests to another bank or other financial institution, none of the
buyers of such participation interests are in default under any
participation agreements.

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3.19. No Default. Bank is not in default under any material agreement,
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. Directors and Officers Insurance. Bank has made no application for
liability insurance coverage for directors and officers that has, within the
last five years, been denied, no outstanding insurance policy affording such
coverage has been cancelled by an insurance carrier within the last five years
and no outstanding insurance policy has lapsed within the last five years
because of a refusal by the insurance carrier to renew the policy.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BANCSHARES

Bancshares hereby represents and warrants to Bank 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 businesses in all states and
jurisdictions 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 Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Bancshares has delivered or
made available to Bank a true, accurate and complete copy of its currently
effective Articles of Incorporation and Bylaws, including all amendments
thereto.

4.02. Authority. Subject to the approval of this Agreement and the Plan of
Merger by the Bancshares shareholders and 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 shareholder and
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
Arkansas Business Corporation Act, the LRS, the Securities Act, 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, Louisiana 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.

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 8,246,209 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

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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 described 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.

4.04. Bancshares Financial Statements. The 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 Bank, 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,

(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 Texas State
Banking Commissioner, (vi) the SEC, and(vii) 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

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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
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. 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.

4.09. No 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.

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4.10 Regulatory Approvals. Bancshares has no reason to believe that it will
not be able to obtain all requisite regulatory approvals necessary to consummate
the transactions set forth in this Agreement.

4.11. Availability of Bancshares Stock. Bancshares has available a
sufficient number of authorized and unissued shares of Bancshares Stock to pay
the Purchase Price, and Bancshares will not take any action during the term of
this Agreement that will cause it not to have a sufficient number of authorized
and unissued shares of Bancshares Stock to pay the Purchase Price.

4.12. Taxes. Bancshares and its subsidiaries have filed all tax returns
required to be filed 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 Bancshares Financial Statements reflect an adequate reserve for all taxes
payable by Bancshares and its subsidiaries accrued through the date of such
financial statements. There has been no examination by the United States
Internal Revenue Service ("IRS") of Bancshares for over seven years. There is no
examination pending by the IRS with respect to Bancshares. Bancshares has not
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
Bancshares or its subsidiaries. There are no material liens for taxes upon the
assets of Bancshares or its subsidiaries except for statutory liens for taxes
not yet delinquent. Neither Bancshares nor any Bancshares subsidiary 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 Bancshares or any Bancshares subsidiary. 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. Bancshares and its subsidiaries 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).

4.13. Insurance. During each of the past three (3) calendar years,
Bancshares, and its subsidiaries, and their respective properties and employees,
have been insured for customary risks (including, but not limited to, employee
fidelity and fiduciary liabilities), all with limits, deductibles, and
exclusions as are customary in the banking industry. Such insurance protection
continues in effect, and Bancshares is not aware of any facts or events relating
to its operations or financial condition which reasonably can be expected to
increase materially the premiums or reduce the coverage under any of such
policies, except as indicated in Exhibit 4.13.

4.14. Employee Relations. Neither Bancshares nor any of its subsidiaries
has agreements with any labor or other organization representing employees for
collective bargaining or other labor relations purposes.

4.15. Conduct of Business. Bancshares will conduct its business so as to
preserve its business organization and the goodwill of its employees,
depositors, customers, and others having dealings with it. Bancshares will
maintain its books and records in the usual, ordinary, and normal course.
Bancshares will promptly advise Bank, in writing, of (i) the institution of any
material litigation against Bancshares or its subsidiaries, (ii) the occurrence
of any event that would have a material adverse effect on the condition
(financial or otherwise) of its properties, assets, liabilities, business,
operations, or prospects, and (iii) any material contacts with regulatory
agencies regarding their approval of the Merger."

4.16. No Untrue Statements. No representation or warranty herein or
information contained in any financial statement or any other document delivered
to Bank 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.

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ARTICLE V

COVENANTS OF BANK

5.01. Affirmative Covenants. Bank 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, Bank will:

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

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

(c) use reasonable efforts to maintain and keep its 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 under all material contracts, leases, and documents relating to
or affecting its assets, properties, and business;

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

(g) give Bancshares notice of all boards of directors meetings, allow
Bancshares to have a non-voting representative at each such meeting except
to the extent that Bank'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, except such written materials and communications subject to
the attorney-client or work product privilege, provided to the directors in
connection with such meetings.

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, Bank shall not, without the prior written
consent of Bancshares, which consent shall not be unreasonably withheld, do 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 3.13(h), grant any bonuses or
increase in compensation to its 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 Bank Benefit Plan
except as provided herein, or (iv) hire any executive officer or elect any
new director;

(c) except for the issuance of shares pursuant to the exercise of
Options and except as set forth in Exhibit 3.13(d), declare or pay any
dividend on, or make any other distribution in respect of, its outstanding
shares of capital stock;

(d) (i) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, or any options, warrants,
conversion or other rights to acquire any shares of its 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,

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combine or reclassify any of its 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 its capital stock;

(e) except for the issuance of shares pursuant to the exercise of
Options, issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of its 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, or upon a written opinion of
legal counsel that failure to take such action would violate the directors'
fiduciary duties, 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 Bank to take any such action and, upon
learning of such action by any representative, shall take appropriate steps
to terminate such action. Bank 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 Bank; 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
securities or any release or relinquishment of any material contract rights
not in the ordinary course of business;

(i) except in its 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) take action which would or is reasonably likely to (i) adversely
affect the ability of either of Bancshares or Bank to obtain any necessary
approvals of governmental authorities required for the transactions
contemplated hereby; (ii) adversely affect Bank's ability to perform its
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;

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

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

(n) 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;

(o) 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";

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(p) except as set forth in Exhibit 5.02(p), sell or dispose of any
real estate or other assets having a value in excess of $100,000.00; or

(q) except as set forth in Exhibit 5.02(q) make any contribution or
payment to or distribution from (i) the Directors Performance Pool or (ii)
the Officers and Employees Incentive Program.

5.03. Access and Information. Upon reasonable notice, Bank shall afford to
Bancshares' and Bancshares shall afford to Bank's officers, employees,
accountants, counsel and other representatives, access, during normal business
hours during the period prior to the Effective Time, to all their respective
properties, books, contracts, commitments and records. During such period, Bank
shall furnish promptly to Bancshares and Bancshares shall furnish promptly to
Bank (i) a copy of each Bank Report or Bancshares Report, respectively, filed or
received by it during such period pursuant to the requirements of all applicable
federal or state banking or bank holding company laws promptly after such
documents are available, (ii) the monthly financial statements of Bank or
Bancshares, respectively, promptly after such financial statements are
available, (iii) a summary of any action taken by the Boards of Directors, or
any committee thereof, of Bank or Bancshares, respectively, and (iv) all other
information concerning its business, properties and personnel as Bancshares or
Bank, respectively, 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, Bank 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.

ARTICLE VI

ADDITIONAL AGREEMENTS

6.01. Shareholders Meetings. Bank 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 Bank 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. Bancshares will
cause it 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, Bank or any subsidiary 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, Bank and Bancshares shall
respectively, prepare and file as and when required all Bank Reports and
Bancshares Reports.

(b) Bank and Bancshares shall prepare such Bank 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 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

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misleading, and (ii) with respect to any Bank Report or Bancshares Report
containing financial information of the type included in the Bank Financial
Statements or the Bancshares Financial Statements, the financial
information (A) is prepared in accordance with accounting principles and
practices as utilized in the Bank 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 Bank 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. Bancshares and Bank represent, as to itself or
themselves, and their subsidiaries, 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. Except as set forth in Section
6.04, it is agreed and understood by Bancshares and Bank that the firm of
Gerrish & McCreary, P.C., shall be compensated for their services by Bank in
accordance with engagement letters executed by Bank, and the obligations of Bank
under said engagement letters shall survive the Merger.

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 actions, 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 Bank,
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. Bank 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. Bank 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. Bank 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 Bank 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 parties advised of the progress of obtaining all
regulatory and third party approvals required for the consummation of all
transactions contemplated by this Agreement.

6.07 Employee Benefits and Contracts. Following the Effective Time,
Bancshares shall provide generally to officers and employees of Bank, who at or
after the Effective Time become employees of Bancshares or any of its
affiliates, employee benefits under Bancshares employee pension and welfare
benefit plans, on terms and conditions as provided by said plan agreements.
Bancshares also shall cause Bank to honor on terms reasonably agreed upon by
Bancshares and Bank all employment, severance, consulting, and other
compensation contracts disclosed in Exhibit 3.10(a) to this Agreement between
Bank and any current or former director, officer, or employee thereof, and all
provisions for vested benefits or other vested amounts earned or accrued through
the Effective Time under the Bank Benefit Plans. For purposes of vesting
employees of Bank will be given credit under Bancshares' Employee Stock
Ownership Plan for prior service rendered to Bank.

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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 Bank Common Stock and Bancshares common stock at
shareholders meetings duly called for the purpose of voting on the Merger.

(b) Federal Reserve Board and FDIC. The Merger Agreements and the
transactions contemplated hereby shall have been approved by the FRB and
FDIC 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.

(c) State Banking Authorities. The Louisiana Office of Financial
Institutions and Arkansas State Banking Commissioner shall have approved
the transfer of ownership of Bank 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, Bank 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 later than December 31, 1997 unless extended by Bank and
Bancshares.

(g) Consents Under Agreements. Bancshares, Bank 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 Bank set forth in this Agreement shall be true and correct in
all material respects (except that where any statement in a representation
or warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects consistent with said standard of
materiality) 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.

(b) Performance of Obligations of Bank. Bank 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

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the Closing Date, and Bancshares shall have received a certificate signed
on behalf of Bank by the chief executive officer and by the chief financial
officer of Bank to such effect.

(c) Opinion of Counsel. Bank shall have delivered to Bancshares an
opinion of its counsel, Gerrish & McCreary, P.C., dated as of the Closing
Date and in form and substance satisfactory to counsel for Bancshares, to
the aggregate effect that: (i) Bank has been duly incorporated and
organized and is a banking association validly existing in good standing
under the laws of Louisiana 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 Bank 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 Bank and constitute (subject to standard exceptions
to enforceability arising from the bankruptcy laws and rules of equity)
valid and binding agreements of Bank; (iv) the execution of the Articles of
Merger by Bank has been duly and validly authorized; (v) Bank is governed
by the LRS; (vi) to the best knowledge of counsel, Bank has filed all
reports required by federal and state laws and banking authorities; (vii)
Bank has the requisite corporate power and authority to own or lease its
properties as owned or leased, and to conduct its business as conducted;
(viii) the Agreement is enforceable against Bank in accordance with its
terms (subject to the qualification that the enforceability of the
Agreement may be (a) subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting
creditors' rights generally and (b) subject to general principles of
equity, regardless of whether such enforceability is considered in a
proceeding at law or in equity); (ix) the execution, delivery and
performance of the Agreement by Bank and the consummation of the Merger (a)
do not violate any presently existing provision of any law, or to counsel's
actual knowledge, any rule, or regulation applicable to, or any judgment,
order, or decree which is binding upon Bank, (b) do not conflict with any
provisions of the articles of incorporation or by-laws, as amended, of
Bank, (c) do not conflict with or constitute a default under any indenture
or agreement which is, to counsel's actual knowledge, binding upon Bank and
which is material to Bank; (x) no issued and outstanding shares of Bank
Common Stock were issued in violation of the preemptive rights of any
holder of previously issued common stock of Bank; (xi) no shares of Bank
Common Stock that could have been issued pursuant to outstanding Stock
Options would, upon issuance, have been issued in violation of the
preemptive rights of any holder of previously issued common stock of Bank;
and (xii) no preemptive rights of any holder of previously issued common
stock of Bank were violated by the granting of any Stock Option granted by
Bank, whether such Stock Option is presently outstanding or has been
exercised . In rendering such opinion, said counsel may rely upon
certificates of officers of Bank, state officials and/or other regulatory
authorities, and opinions of other counsel.

(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 Bank.

(e) Environmental Audits. Phase I environmental audits of the Bank
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) Affiliates. Each person who receives a portion of the Bancshares
Stock and who might reasonably be considered to be an affiliate of Bank, as
defined in paragraph (a) of Rule 144 of the Rules of the Securities and
Exchange Commission under the Securities Act, shall have executed and
delivered at Closing a letter substantially in the form set forth in
Exhibit 7.02(g).

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(h) 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.

(i) Dissenting Shares. The number of Dissenting Shares shall not
exceed 10% of the Bank Common Stock.

(j) Bank Optionholders. Each holder of Options to purchase shares of
Bank Common Stock shall have entered into a written agreement with
Bancshares and Bank providing that each Optionholder will accept in full
satisfaction of Bank's obligations under all stock Options granted to said
Optionholder the Option Conversion Shares determined in accordance with
Section 2.01(i) above.

7.03. Conditions to Obligations of Bank. The obligation of Bank to effect
the Merger is subject to the satisfaction of the following conditions unless
waived by Bank:

(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 (except that where any statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects consistent with
said standard of materiality) 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 Bank shall
have received a certificate signed on behalf of Bancshares by the chief
executive officer and by the chief financial officer of Bancshares 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 Bank shall have received a certificate signed on
behalf of Bancshares by the chief executive officer and by the chief
financial officer of Bancshares to such effect.

(c) Opinion of Counsel. Bancshares shall have delivered to Bank 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 Bank, 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) Bancshares is a Bank Holding Company registered under, and
to counsel's actual knowledge, has filed all reports required by BHC; (v)
Bancshares is duly qualified to do business in each jurisdiction in which
the nature of the business conducted or the properties or assets owned or
leased by it make such qualification necessary and where failure to be so
qualified would have a material adverse effect on Bancshares on a
consolidated basis; (vi) Bancshares has the requisite corporate power and
authority to own or lease its properties as owned or leased, and to conduct
its business as conducted; (vii) the Agreement is enforceable against
Bancshares in accordance with its terms (subject to the qualification that
the enforceability of the Agreement may be (a) subject to bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium
or similar laws affecting creditors' rights generally and (b) subject to
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity); (viii) the execution,
delivery and performance of the Agreement by Bancshares and the
consummation of the Merger (a) do not violate any presently existing
provision of any law, or, to counsel's actual knowledge, any rule, or
regulation applicable to, or any judgment, order, or decree which is
binding upon, Bancshares, (b) do not conflict with any provisions of the
articles of incorporation or by-laws, as amended, of Bancshares, (c) do not
conflict with or constitute a default under any indenture or agreement
which is, to Counsel's actual knowledge, binding upon Bancshares and which
is material to Bancshares on a consolidated basis; (ix) all necessary
approvals from the Board of Governors of the

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Federal Reserve System, FDIC and the banking authorities in the states of
Arkansas and Louisiana relating to Bancshares with respect to the Merger
have been obtained, and no further authorization from the foregoing or any
other regulatory authority is required prior to consummation of the Merger;
(x) the shares of Bancshares Common Stock to be issued to the Bank
Shareholders and Bank Optionholders in the Merger (a) have been registered
under the Securities Act of 1933, as amended, and the Registration
Statement covering such shares has been declared effective by the
Securities and Exchange Commission ("SEC"), and to counsel's actual
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued by the SEC; (b) have been duly and validly
authorized by all necessary corporate action of Bancshares; and (c) when
issued to the Bank Shareholders and Bank Optionholders pursuant to the
Agreement, will be validly issued, fully paid, and nonassessable; and (xi)
all necessary "Blue Sky" filings and notices with respect to the Bancshares
Common Stock have been made. In rendering such opinion, said counsel may
rely upon certificates of officers of Bancshares, state officials and other
regulatory authorities, and opinions of other counsel.

(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 Bancshares.

(e) Authorized Shares. The shares of Bancshares Stock to be delivered
to Bank Shareholders pursuant to this Agreement shall have been authorized
for listing on the NASDAQ Market.

(f) Federal Income Tax Opinion. Bank shall have received an opinion
from counsel to Bank that, for federal income tax purposes, (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of
the Code; (ii) no gain or loss will be recognized by holders of Bank Common
Stock upon receipt of Bancshares Stock except for cash received in lieu of
fractional shares; (iii) the aggregate tax basis of Bancshares Stock
received by a Bank Shareholder will be the same as the aggregate basis of
the Bank Common Stock surrendered in exchange therefor, and (iv) the
holding period of the Bancshares Stock to be received by each Bank
Shareholder will include the period during which the Shareholder held the
Bank Common Stock surrendered in exchange therefor, provided that the Bank
Common Stock is held as a capital asset as of the date of exchange.

(g) Fairness Opinion. Southard Financial shall have issued its written
Fairness Opinion to the Board of Directors of Bank stating that the terms
of the Merger are fair to the Bank Shareholders from a financial point of
view. Such written Fairness Opinion shall (a) be in form and substance
reasonably satisfactory to Bank, (b) be dated as of a date not later than
the mailing of the proxy statement/prospectus relating to the Merger to be
mailed to the Bank Shareholders, (c) be included as an exhibit to the proxy
statement/prospectus, and (d) be updated and reissued to Bank prior to the
Effective Time.

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 Bank;

(b) by either Bancshares or Bank (A) if there has been a breach in any
material respect (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall
have been breached in any respect) of any representation, warranty,
covenant or agreement on the part of Bank, on the one hand, or Bancshares
on the other hand, respectively, set forth in this Agreement, or (B) if any
representation or warranty of Bank on the one hand, or Bancshares on the
other hand, respectively, shall be discovered to have become untrue in any
material respect (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall
have become untrue in any respect), in either case which breach or other
condition

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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 Bank if any permanent Injunction
preventing the consummation of the Merger shall have become final and
nonappealable;

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

(f) either by Bancshares or Bank 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 Bank 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 Bank or 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.

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 Bank 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.

8.04. Extension; Waiver. At any time prior to the Effective Time,
Bancshares, on the one hand, and Bank, 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

OTHER PROVISIONS

9.01. Approvals. Bancshares shall have primary responsibility for the
preparation, filing, and cost of all regulatory applications required for
consummation of the Merger. Bancshares shall file all regulatory applications as
soon as practicable after the execution of this Agreement. Bancshares shall
provide to Bank's counsel copies of all applications filed and copies of all
material written communications with all state and federal bank regulatory
agencies relating to such applications. Bancshares shall proceed expeditiously,
cooperate fully, and use its best efforts to procure, upon terms and conditions
reasonably acceptable to Bancshares, all consents, authorizations, approvals,
registrations, and certificates to complete all filings and applications and to
satisfy all other requirements prescribed by law which are necessary for
consummation of the Merger on the terms and conditions provided in this
Agreement at the earliest practicable date.

9.02. SEC Registration. Bancshares shall file with the SEC as soon as
practicable after the execution of this Agreement a Registration Statement on an
appropriate form under the Securities Act covering the Bancshares Stock and
shall use its best efforts to cause the same to become effective and thereafter,
until the Effective Time or termination of this Agreement, to keep the same
effective and, if necessary, amend and supplement the same. Such Registration
Statement, and any amendments and supplements thereto, are referred to in this
Agreement as the "Registration Statement." The Registration Statement shall
include a proxy statement/prospectus reasonably acceptable to Bancshares and
Bank, prepared for use in connection

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with the meetings of shareholders of Bancshares and Bank as referred to in
Section 6.01 of this Agreement, all in accordance with the rules and regulations
of the SEC. Bancshares shall, as soon as practicable after the filing of the
Registration Statement, make all filings required to obtain all Blue Sky
exemptions, authorizations, consents, or approvals required by the issuance of
the Bancshares Stock. In advance of filing the Registration Statement,
Bancshares shall provide Bank and its counsel with a copy of the Registration
Statement and provide an opportunity to comment thereon.

9.03. Indemnification and Insurance. (a) Indemnification. From and after
the Effective Time, Bancshares shall assume and honor any obligations as
provided for and permitted by applicable federal and state law which Bank had
immediately prior to the date of this Agreement with respect to the
indemnification of each person who is, on the date hereof, or has been at any
time prior to the date hereof, or who becomes, prior to the Effective Time, a
director or officer of Bank, or was serving at the request of Bank as a director
or officer of any domestic or foreign corporation, joint venture, trust,
employee benefit plan, or other enterprise (collectively, the "indemnitees")
arising out of Bank's Articles of Incorporation or By-Laws in effect at the
Effective Time, against any and all losses in connection with or arising out of
any claim, which is based upon, arises out of, or in any way relates to any
actual or alleged act or omission occurring at or prior to the Effective Time in
the Indemnitee's capacity as a director or officer (whether elected or
appointed), of Bank. Indemnification of employees and directors of Bank
following the Effective Time will be provided to the same extent as provided to
other persons serving in similar capacities for Bancshares or its subsidiaries
following the Effective Time.

(b) Insurance. Following the Effective Time, Bancshares will provide any
Bank directors and employees who remain or become directors or officers of
Bancshares, or any of its subsidiaries, including Bank, with the same directors'
and officers' liability insurance coverage that Bancshares provides to other
similarly situated officers of Bancshares and its bank subsidiaries.

9.04. Accounting Treatment. Bancshares shall not intentionally take or
cause to be taken any action which would prevent the Merger from qualifying for
pooling of interests accounting treatment solely as a means to terminate this
Agreement.

9.05. Disclosure of Combined Operations. Bancshares agrees to make public
disclosure of financial results reflecting 30 days' of post-merger combined
operations of Bank and Bancshares within the meaning of Section 201.01 of the
SEC's Codification of Financial Reporting Policies. Bancshares agrees to make
the required public disclosure of financial results as set out above as soon as
feasible after the Merger is consummated.

9.06. Notice of Changes. Until the Closing Date, Bancshares will give Bank
prompt written notice of the occurrence of any event or the failure of any event
to occur that results in a breach of any representation or warranty by
Bancshares or a failure by Bancshares to comply with any covenant, condition, or
agreement contained herein, or any other changes, or any inaccuracies in any
information previously given or made available to Bank pursuant to this
Agreement.

9.07. 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
Chief Financial Officer
P. O. Box 751
El Dorado, Arkansas 71731

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<PAGE> 98

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 Bank to:

City Bank & Trust of Shreveport
Attention: Mr. Ron Boudreaux, President and Chief Executive Officer
6025 Line Avenue
Shreveport, Louisiana 71106

with a copy to:

Jeffrey C. Gerrish
Gerrish McCreary, P.C.
700 Colonial Road, Suite 200
Memphis, Tennessee 38117

9.08. 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.

9.09. 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.

9.10. 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.

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

9.12. 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.

9.13. 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.

9.14. Knowledge of the Parties. Wherever in this Agreement any
representation or warranty is made to the best knowledge of a party, 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.

9.15. Expenses. Except as otherwise provided herein, all Expenses incurred
by Bancshares and Bank 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,

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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.

9.16. Nonsurvival of Representations and Warranties. The representations
and warranties of Bancshares and Bank contained in this Agreement shall expire
at the Effective Time and thereafter neither Bank nor Bancshares, nor any of
their respective directors, officers, employees and attorneys shall have any
further liability with respect thereto, except as to any matter which is based
upon willful fraud, 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.

IN WITNESS WHEREOF, Bank 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/ JOHN E. BURNS
- ------------------------------------
John E. Burns
Vice President and Chief Financial
Officer

CITY BANK AND TRUST OF SHREVEPORT

By: /s/ RON C. BOUDREAUX

----------------------------------
Ron C. Boudreaux
President and Chief Executive
Officer

ATTEST:

/s/ RODNEY L. MURCHINSON
- ------------------------------------
Rodney L. Murchinson
Senior Vice President

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EXHIBIT A

PLAN OF MERGER

This Plan of Merger, is made as of , 1997 ("Plan of Merger"),
by and between First United Bancshares, Inc., an Arkansas corporation
("Bancshares"), City Bank & Trust of Shreveport, a Louisiana state Bank
("Bank"), and Interim Bank, a Louisiana state bank.

WHEREAS, Bank is a Louisiana state-chartered bank with authorized capital
stock consisting of 1,000,000 shares of common stock, $5.00 par value of which
shares of common stock ("Bank 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, of which shares
are validly issued and outstanding on the date hereof;

WHEREAS, Bancshares is a corporation duly organized and existing under the
laws of Arkansas;

WHEREAS, Bancshares has received approval of the Louisiana Office of
Financial Institutions to establish an interim bank ("Interim Bank") under the
laws of Louisiana, as described more fully below, the capital stock of which is
wholly owned by Bancshares;

WHEREAS, Bancshares and Bank 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 Interim Bank with and into
Bank (the "Merger") upon the terms and conditions provided in this Plan of
Merger and the Agreement and pursuant to the Louisiana Revised Statutes of 1950,
as amended (the "LRS");

WHEREAS, the Boards of Directors of Bancshares and Bank deem it fair and
equitable to, and in the best interests of, their respective organizations and
shareholders that Interim Bank be merged with and into Bank with Bank being the
surviving bank, and each such Board of Directors has approved this Plan of
Merger, has authorized its execution and delivery, and Bancshares and Bank have
directed that this Plan of Merger and the Merger be submitted to their
shareholders for approval;

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, Interim Bank will be merged with and into Bank, which will continue
as the surviving corporation, in accordance with and with the effect provided in
the LRS.

1.02. Effective Time of the Merger. Subject to the provisions of the Merger
Agreements, the Merger shall become effective at 5:00 p.m. Central Time on the
date of Closing (the "Effective Time").

1.03. Effects of the Merger. (a) At the Effective Time, (i) the separate
existence of Interim Bank shall cease and Interim Bank shall be merged with and
into Bank (Bank and Interim Bank are sometimes referred to herein as the
"Constituent Banks" and Bank is sometimes referred to herein as the "Surviving
Bank"), (ii) the Articles of Incorporation of Bank in effect as of the Effective
Time (the "Articles") shall be the Articles of Incorporation of the Surviving
Bank, subject to any amendments of the Articles required by the LRS as a result
of the Merger, and (iii) the Bylaws of Bank in effect as of the Effective Time
(the "Bylaws") shall be the Bylaws of the Surviving Bank.

(b) At and after the Effective Time, the Surviving Bank 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 Banks; and all and singular rights, privileges,
powers and franchises of each of the

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<PAGE> 101

Constituent Banks, and all property, real, personal and mixed and all debts due
to either of the Constituent Banks on whatever account, as well as for stock
subscriptions and all other things in action or belonging to each of the
Constituent Banks, shall be vested in the Surviving Bank; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Bank as they
were of the Constituent Banks, and the title to any real estate vested by deed
or otherwise, in either of the Constituent Banks, 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 Banks shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Banks shall thenceforth attach to the
Surviving Bank, 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 Bank
shall be prosecuted as if the Merger had not taken place, and the Surviving Bank
may be substituted as a party in such action or proceeding in place of any
Constituent Bank.

ARTICLE II

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

2.01. Conversion of Bank 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
Bank Common Stock or options to purchase Bank Common Stock ("Option
Agreements"), but subject to the rights of dissenting shareholders of Bank:

(a) Conversion of Bank Common Stock. The issued and outstanding shares
and Option Agreements of Bank 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 Bank Common Stock and all
Option Agreements 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 or Option Agreement shall cease to have any
rights with respect thereto, except the right to receive the consideration
to be paid therefor upon the surrender of such certificate or Option
Agreement in accordance with the Plan of Merger, without interest.

2.02. Exchange of Certificates. (a) Exchange Agent. As of the Effective
Time, Bancshares shall deliver to 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
Bank Common Stock and Option Agreements, 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 of the
Agreement in exchange for shares of Bank Common Stock and Option Agreements
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 an
Option Agreement and a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Bank Common Stock (the
"Certificates") whose shares or options were converted into the right to receive
consideration pursuant to Section 2.01 of the Agreement, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates and Option Agreements shall pass, only upon
delivery of the Certificates and Option Agreements 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 and Option Agreements in exchange for the consideration due.
Upon surrender of a Certificate or Option Agreement 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 or Option Agreement shall be entitled to receive in exchange
therefor a certificate representing the number of whole 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 or Option Agreement so
surrendered shall forthwith be

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<PAGE> 102

cancelled. Until surrendered as contemplated by this Section 2.02, each
Certificate or Option Agreement 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 paid to the holder
of any unsurrendered Certificate or Option Agreement until the holder of record
of such Certificate or Option Agreement shall surrender such Certificate or
Option Agreement.

(d) No Further Ownership Rights in Bank Common Stock. The consideration
paid upon the surrender of shares of Bank Common Stock and Option Agreements in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Bank Common Stock and
Option Agreements, and there shall be no further issuance of Bank Common Stock
pursuant to exercise of options and no further registration of transfers on the
stock transfer books of the Surviving Bank of the shares of Bank Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates or Option Agreements are presented to the Surviving
Bank for any reason, they shall be cancelled and payment therefor 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 and optionholders of Bank for six
months after the Effective Time shall be delivered to Bancshares, upon demand,
and any shareholders or optionholders of Bank who have not theretofore complied
with this Section 2.02 shall thereafter look only to Bancshares for payment of
the consideration due for their stock or option.

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

(g) Conversion of Stock of Interim Bank. At the Effective Time, the shares
of the Interim Bank common stock validly issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without any action
by the holder thereof, be converted into shares of common stock, $5.00
par value, of the Surviving Bank so that all shares of capital stock of the
Surviving Bank will be owned by Bancshares. The outstanding certificates
representing shares of the Interim Bank common stock will, after the Effective
Time, be deemed to represent the number of shares of the Surviving Bank into
which they have been converted and may be exchanged for new certificates of the
Surviving Bank upon request of the holder thereof.

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 Bank 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 Bank 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 Bank, 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

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<PAGE> 103

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.

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

Mr. John E. Burns
Chief Financial Officer
First United Bancshares, Inc.
P. O. Box 751
El Dorado, Arkansas 71731

with a copy to:

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

(b) if to Bank, to

Mr. Ron C. Boudreaux
President and Chief Executive Officer
City Bank & Trust of Shreveport
6025 Line Avenue
Shreveport, Louisiana 71106

with a copy to:

Jeffrey C. Gerrish
Gerrish McCreary, P.C.
700 Colonial Road, Suite 200
Memphis, Tennessee 38117

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 Louisiana.

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<PAGE> 104

IN WITNESS WHEREOF, Bank 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 of the Board, President
and
Chief Executive Officer

Attest:

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

CITY BANK & TRUST COMPANY OF
SHREVEPORT

By:
----------------------------------
Ron C. Boudreaux
President and Chief Executive
Officer

Attest:

- ------------------------------------------------------
________, Secretary

INTERIM BANK

By:
----------------------------------
Ron C. Boudreaux
President and Chief Executive
Officer

Attest:

- ------------------------------------------------------
________, Secretary

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<PAGE> 105

ANNEX II

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. 11, 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;

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<PAGE> 106

(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.

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

A. If proposed corporate action creating dissenters' rights under Section
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

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(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 taking 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.

4-27-1324. SHARE RESTRICTIONS.

A. The corporation may restrict the, transfer of uncertificated shares from
the date the demand for their 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.

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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.

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

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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 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.

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.

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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.

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ANNEX III

RIGHTS OF DISSENTING STOCKHOLDERS

SECTION 376. RIGHTS OF A STOCKHOLDER DISSENTING FROM CERTAIN ACTIONS

A. Except as provided in Subsection B of this Section, if a state bank has,
by vote of its stockholders, authorized a sale, lease, or exchange of all of
substantially all of its assets, or become a party to a merger or consolidation,
or authorized a conversion into a national bank, or authorized a voluntary
liquidation, then, unless such authorization or action shall have been given or
approved by at least eighty percent of the total voting power, a stockholder who
voted against such action shall have the right to dissent.

B. The right to dissent provided by this Section shall not exist in the
case of stockholders holding shares of any class of stock which, at the record
date fixed to determine stockholders entitled to receive notice of and to vote
at the meeting of stockholders at which a merger or consolidation was acted on,
were listed on a national securities exchange, unless the articles of the bank
issuing such stock provide otherwise, or the shares of such stockholders were
not converted by the merger or consolidation solely into shares of the surviving
or new bank.

C. (1) Except as provided in the last sentence of this Subsection, any
stockholder electing to exercise such right of dissent shall file with the bank,
prior to or at the meeting of stockholders at which such proposed action is
submitted to a vote, a written objection to such proposed action and shall vote
his shares against such action.

(2) If such proposed action be taken by the required vote but less than
eighty percent of the total voting power, and the merger, consolidation, sale,
liquidation, or conversion authorized thereby be effected, the bank shall
promptly thereafter given written notice thereof, by registered mail, to each
stockholder who filed such written objection to and voted his shares against
such action at such stockholder's last address on the bank's records.

(3) Each such stockholder may, within twenty days after the mailing of such
notice to him but not thereafter, file with the bank a demand in writing for the
fair cash value of his shares as of the day before such vote was taken, provided
that he state in such demand the value demanded and a post office address to
which the reply of the bank may be sent and at the same time deposit in escrow
in a bank or trust company located in the parish of the domicile of the bank the
certificates representing his shares, duly endorsed and transferred to the
escrow bank upon the sole condition that said certificates shall be delivered to
the bank upon payment of the value of the shares determined in accordance with
the provisions of this Section. With his demand, the stockholder shall deliver
to the bank the written acknowledgement of such escrow bank or trust company
with which such certificates have been deposited that it so holds his
certificates of stock.

(4) Unless the objection, demand, and acknowledgment aforesaid be made and
delivered by the stockholder within the period described in this Subsection, he
shall conclusively be presumed to have acquiesced in the action proposed or
taken.

D. If the bank does not agree to the value so stated and demanded or does
not agree that a payment is due, it shall, within twenty days after the receipt
of such demand and acknowledgment, notify in writing the stockholder at the
designated post office address of its disagreement and shall state in such
notice the value it will agree to pay if any payment should be held to be due;
otherwise, it shall be liable for and shall pay to the dissatisfied stockholder
the value demanded by him for his shares.

E. (1) In case of disagreement as to such fair cash value or as to whether
any payment is due after compliance by the parties with the provisions of
Subsections C and D of this Section, the dissatisfied stockholder within sixty
days after receipt of notice in writing of the bank's disagreement but not
thereafter may file suit against the bank or the merged or consolidated bank, as
the case may be, in the district court of the parish in which the bank or the
merged or consolidated bank, as the case may be, is domiciled praying the court
to fix and decree the fair cash value of the dissatisfied stockholder's shares
as of the day before the action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto,

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determine summarily whether any payment is due and, if so, such cash value, and
render judgment accordingly.

(2) Any stockholder entitled to file such a suit may, within such sixty-day
period but not thereafter, intervene as a plaintiff in such a suit filed by
another stockholder and recover therein judgment against the bank for the fair
cash value of his shares. No order or decree shall be made by the court staying
the proposed action, and any such action may be carried to completion
notwithstanding any such suit.

(3) Failure of the stockholder to bring suit or to intervene in such a suit
within sixty days after receipt of notice of disagreement by the bank shall
conclusively bind the stockholder:

(a) By the bank's statement that no payment is due; or

(b) If the bank does not contend that no payment is due, to accept the
value of his shares as fixed by the bank in its notice of disagreement.

F. When the fair value of the shares has been agreed upon between the
stockholder and the bank, or when the bank has become liable for the value
demanded by the stockholder because of failure to give notice of disagreement
and of the value it will pay, or when the stockholder has become bound to accept
the value the bank agrees is due because of his failure to bring suit within
sixty days after receipt of notice of the bank's disagreement, the action of the
stockholder to recover such value must be brought within five years from the
date the value was agreed upon or the liability of the bank became fixed.

G. If the bank or the merged or consolidated bank, as the case may be,
shall, in its notice of disagreement, have offered to pay the dissatisfied
stockholder on demand an amount in cash deemed by it to be fair cash value of
his shares, and if, on the institution of a suit by the dissatisfied stockholder
claiming an amount in excess of the amount offered, the bank or the merged or
consolidated bank, as the case may be, shall deposit in the registry of the
court, there to remain until the final determination of the cause, the amount so
offered; then, if the amount finally awarded such stockholder, exclusive of
interest and costs, be more than the amount offered and deposited as aforesaid,
the costs of the proceeding shall be taxed against the bank or the merged or
consolidated bank, as the case may be, and judicial interest may be awarded
against such bank only on the amount of the award in excess of the amount
deposited in the registry of the court; otherwise, the costs of the proceeding
shall be taxed against such stockholder.

H. Upon filing a demand for the value of his shares, the stockholder shall
cease to have any of the rights of a stockholder except the rights accorded by
this Section. Such a demand may be withdrawn by the stockholder at any time
before the bank gives notice of disagreement as provided in Subsection D of this
Section. After such notice of disagreement is given, withdrawal of a notice of
election shall require the written consent of the bank. If a notice of election
is withdrawn, or the proposed corporate action is abandoned or rescinded, or a
court should determine that the stockholder is not entitled to receive payment
for his shares, or the stockholder should otherwise lose his dissenter's rights:

(1) He shall not have the right to receive a payment for his shares;

(2) His share certificates shall be returned to him and, on his
request, new certificates shall be issued to him in exchange for the old
ones endorsed to the bank; and

(3) He shall be reinstated to all his rights as a stockholder as of
the filing of his demand for value, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution, or, if any rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the bank he shall receive the fair value thereof in cash as
determined by the board as of the time of such expiration or completion,
but without prejudice otherwise to any proceeding that may have been taken
in the interim.

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ANNEX IV

August 29, 1997

Board of Directors
City Bank and Trust of Shreveport
Shreveport, Louisiana

RE: FAIRNESS OPINION RELATIVE TO PENDING AGREEMENT OF CITY BANK AND TRUST OF
SHREVEPORT, SHREVEPORT, LOUISIANA, TO MERGE WITH AND INTO FIRST UNITED
BANCSHARES, INC., EL DORADO, ARKANSAS.

Directors:

The Board of Directors of City Bank and Trust of Shreveport ("CBT" or the
"Bank") retained Southard Financial, in its capacity as a financial valuation
and consulting firm, to render its opinion of the fairness, from a financial
viewpoint, of the acquisition of CBT by First United Bancshares, Inc. ("First
United"). Southard Financial was previously engaged by First United to render a
fairness opinion for First United's 1988 acquisition of First City Corp, Fort
Smith, Arkansas. That opinion was issued on behalf of the shareholders of First
United. Other than described above, Southard Financial and its principals have
no past, present, or future contemplated financial, equity, or other interest in
either CBT or First United. This opinion is issued based upon financial data as
of June 30, 1997.

APPROACH TO ASSIGNMENT

The approach to this assignment was to consider the following factors:

- A review of the financial performance and position of CBT and the value
of its common stock;

- A review of the financial performance and position of First United and
the value of its common stock;

- A review of recent Bank merger transactions;

- A review of the current and historical market prices of bank holding
companies in Louisiana, Arkansas, and surrounding states;

- A review of the investment characteristics of the common stock of CBT and
First United;

- A review of the Agreement and Plan of Reorganization between First United
and CBT, dated June 18, 1997;

- An evaluation of the impact of the merger on the expected return to the
current shareholders of CBT; and,

- An evaluation of other factors as was considered necessary to render this
opinion.

It is Southard Financial's understanding that the merger and resulting
exchange of the stock of First United for the outstanding common stock of CBT
constitutes a non-taxable exchange for federal income tax purposes.

DUE DILIGENCE REVIEW PROCESS

In performing this assignment, Southard Financial reviewed certain
documents pertaining to CBT and pertaining to First United.

REVIEW OF CITY BANK AND TRUST OF SHREVEPORT

Southard Financial visited with the management of City Bank and Trust in
Shreveport, Louisiana. Discussions included questions regarding the current and
historical financial position and performance of CBT, its outlook for the
future, and other pertinent factors.

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REVIEW OF FIRST UNITED BANCSHARES, INC.

Southard Financial visited with the management of First United Bancshares,
Inc. in El Dorado, Arkansas. Discussions included questions regarding the
current and historical financial position and performance of First United, its
outlook for the future, and other pertinent factors. Southard Financial also
reviewed publicly available information relative to First United and its stock.

MERGER DOCUMENTATION

Southard Financial reviewed the Agreement and Plan of Reorganization (the
"Agreement"). Appropriate aspects of this agreement were discussed with the
management of CBT and First United.

Southard Financial did not independently verify the information reviewed,
but relied on such information as complete and accurate in all material
respects. Southard Financial did not make any independent evaluation of the
assets of First United or CBT, but reviewed data supplied by the management of
both institutions.

MAJOR CONSIDERATIONS

Numerous factors were considered in the overall review of the proposed
merger. The review process included considerations regarding CBT, First United,
and the proposed merger. The major considerations are as follows:

CITY BANK AND TRUST OF SHREVEPORT

- Historical earnings;

- Historical dividend payments;

- Outlook for future performance, earnings, and dividends;

- Economic conditions and outlook in CBT's market;

- The competitive environment in CBT's market;

- Comparisons with peer banks;

- Potential risks in the loan and securities portfolios;

- Recent minority stock transactions in CBT's common stock; and,

- Other such factors as were deemed appropriate in rendering this opinion.

FIRST UNITED BANCSHARES, INC.

- Historical earnings;

- Historical dividend payments;

- Outlook for future performance, earnings, and dividends;

- Economic conditions and outlook in First United's market;

- The competitive environment in First United's market;

- Comparisons with peer banks;

- Recent minority stock transactions in First United's common stock; and,

- Other such factors as were deemed appropriate in rendering this opinion.

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COMMON FACTORS

- Historical and current bank merger pricing; and,

- Current market prices for minority blocks of common stocks of regional
bank holding companies in Louisiana, Arkansas, and surrounding states.

THE PROPOSED MERGER

- The terms of the Agreement and Plan of Reorganization;

- The specific pricing of the merger;

- Adequacy of the consideration paid to the shareholders of CBT;

- The assumption that the merger will be treated as a tax-free exchange;

- The impact on First United's capital and liquidity positions;

- The historical dividend payments of First United and the likely impact on
the dividend income of the current shareholders of CBT (equivalency of
cash dividends);

- Pro-forma combined income statements for First United post merger and the
expected returns to CBT shareholders (equivalency of earnings yield);

- The market for minority blocks of First United common stock; and,

- Other such factors as deemed appropriate.

OVERVIEW OF FAIRNESS ANALYSIS

In connection with rendering its opinion, Southard Financial performed a
variety of financial analyses, which are summarized below. Southard Financial
believes that its analyses must be considered as a whole and that considering
only selected factors could create an incomplete view of the analyses and the
process underlying the opinion. The preparation of a fairness opinion is a
complex process involving subjective judgment and is not susceptible to partial
analyses. In its analyses, Southard Financial made numerous assumptions, many of
which are beyond the control of CBT and First United. Any estimates contained in
the analyses prepared by Southard Financial are not necessarily indicative of
future results or values, which may vary significantly from such estimates.
Estimates of value of companies do not purport to be appraisals or necessarily
reflect the prices at which companies or their securities may actually be sold.
None of the analyses performed by Southard Financial was assigned greater
significance than any other.

DIVIDEND YIELD ANALYSIS

In evaluating the impact of the proposed merger on the shareholders of CBT,
Southard Financial reviewed the dividend paying histories of CBT and First
United. Based upon this review, it is reasonable to expect that the shareholders
of CBT, in total, will receive dividends significantly above the level currently
paid by CBT, after the merger is completed (defined as post merger dividends per
share times the exchange ratio). This is predicated on the assumption that First
United will continue per share dividends at or above current levels.

EARNINGS YIELD ANALYSIS

In evaluating the impact of the proposed merger on the shareholders of CBT,
Southard Financial determined that, based upon an assumed proposed exchange
ratio, the shareholders of CBT would have seen a decrease in fully diluted
earnings per share (defined as post merger combined earnings per share times the
assumed exchange ratio), had the merger been consummated prior to either January
1, 1996 or January 1, 1997. This is due to the much higher ROAA of CBT relative
to First United.

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BOOK VALUE ANALYSIS

In evaluating the impact of the proposed merger on the shareholders of CBT,
Southard Financial determined that the shareholders of CBT would have
experienced a positive impact on the book value of their investment had the
merger been consummated on December 31, 1996 or June 30, 1997. It is also
important to note that the market price of First United stock was nearly twice
its book value at year-end 1996 and about 220% of book value at June 30, 1997.

ANALYSIS OF ALTERNATIVES

In evaluating the fairness of the proposed merger to the shareholders of
CBT, Southard Financial reviewed with management the terms of other offers
received for the purchase/merger of CBT. Based upon an extensive search of about
two dozen potential acquirors, management received several initial responses,
including four written offers. However, some of the potential acquirors did not
have traded stocks and others were interested in cash (taxable) transactions.
Negotiations took place with First United over about a 60-day period before a
definitive agreement was reached. Further, Southard Financial considered recent
public market merger pricing information.

ANALYSIS OF MARKET TRANSACTIONS

Based upon the merger terms and the recent market price of First United
common stock, CBT shareholders will receive about 247% of June 30, 1997 fully
diluted book value, 13.05 times fully diluted trailing 12-month earnings, and
27.88% of diluted assets. Based upon the review conducted by Southard Financial,
and given the financial characteristics of CBT, the pricing for CBT in the
merger is within the range of multiples seen in recent bank acquisitions.

FUNDAMENTAL ANALYSIS

Southard Financial reviewed the financial characteristics of CBT and First
United with respect to profitability, capital ratios, liquidity, asset quality,
and other factors. Southard Financial compared CBT and First United to a
universe of publicly traded banks and bank holding companies and to peer groups
prepared by the Federal Financial Institutions Examination Council (FFIEC).
Southard Financial found that the post-merger combined entity will have capital
ratios and profitability ratios near those of the public peer group and the
FFIEC peer group (predominantly non-publicly traded banks).

LIQUIDITY

Unlike CBT stock, First United shares are traded in the NASDAQ market, and
there are currently three market makers of First United stock. Further, except
in the case of officers, directors, and certain large shareholders of CBT, First
United shares received will be freely tradeable with no restrictions.

SUMMARY OF ANALYSES

The summary set forth does not purport to be a complete description of the
analyses performed by Southard Financial. The analyses performed by Southard
Financial are not necessarily indicative of actual values, which may differ
significantly from those suggested by such analyses. Southard Financial did not
appraise any individual assets or liabilities of CBT or First United.

Throughout the due diligence process, all information provided by CBT,
First United, and third party sources, was relied upon by Southard Financial
without independent verification.

Based upon the analyses discussed above, and other analyses performed by
Southard Financial, the impact of the merger on the shareholders of CBT is
expected to be favorable.

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FAIRNESS OPINION

Based upon the analyses of the foregoing and such matters as were
considered relevant, it is the opinion of Southard Financial that the terms of
the offer for the acquisition of City Bank and Trust of Shreveport by First
United Bancshares, Inc. pursuant to the Agreement and Plan of Reorganization are
fair, from a financial viewpoint, to the shareholders of City Bank and Trust of
Shreveport.

Thank you for this opportunity to be of service to the shareholders of City
Bank and Trust of Shreveport

Sincerely yours,

SOUTHARD FINANCIAL

/s/ DAVID A. HARRIS
------------------------------------
David A. Harris, CFA, ASA

/s/ DOUGLAS K. SOUTHARD
------------------------------------
Douglas K. Southard, DBA, CFA, ASA

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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. Section 4-27-101 et. seq. and more specifically at Ark. Code Ann.
Section 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 City Bank & Trust of Shreveport and Plan
of Merger attached as Exhibit A thereto.
3(a) -- Articles of Incorporation of First United Bancshares,
Inc., as amended.
3(b) -- Bylaws of First United Bancshares, Inc.
5 -- Opinion of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C.
8 -- Tax Opinion of Gerrish & McCreary, P.C. regarding City
Bank & Trust of Shreveport Acquisition
21 -- Subsidiaries of First United Bancshares, Inc.
23(a) -- Consent of Arthur Andersen LLP
23(b) -- Consent of Heard, McElroy & Vestal, L.L.P.
23(c) -- Consent of Southard Financial
23(d) -- Consent of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. (included in Exhibit 5)
23(e) -- Consent of Gerrish & McCreary, P.C.
24 -- Power of Attorney -- Signature Page of the Registration
Statement
99(a) -- First United Bancshares, Inc. Form of Proxy
99(b) -- City Bank & Trust of Shreveport 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 to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

(3) 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.

(4) 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

II-2
<PAGE> 120

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.

(5) 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 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.

(6) 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.

(7) 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.

(8) The undersigned registrant hereby undertakes:

(1) 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.

(2) 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.

(3) 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 September 26, 1997.

FIRST UNITED BANCSHARES, INC.

/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 425,000 shares of common
stock, par value $1.00 of the Corporation, said shares to be exchanged to the
shareholder of City Bank & Trust Company of Shreveport with respect to the
merger by and between City Bank & Trust Company of Shreveport will be merged
with and into a newly created wholly-owned subsidiary of 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 26th day of September, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/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

/s/ CLAIBORNE P. DEMING Director
- -----------------------------------------------------
Claiborne P. Deming
</TABLE>

II-4
<PAGE> 122
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Director
- -----------------------------------------------------
Tommy Hillman

/s/ ROY E. LEDBETTER Director
- -----------------------------------------------------
Roy E. Ledbetter

/s/ MICHAEL F. MAHONY Director
- -----------------------------------------------------
Michael F. Mahony

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

/s/ CAL PARTEE, JR. Director
- -----------------------------------------------------
Cal Partee, Jr.

/s/ CAROLYN TENNYSON 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 OCTOBER 6, 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

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
-----------------
<S> <C>
2 -- Agreement and Plan of Reorganization Between First United
Bancshares, Inc. and City Bank & Trust of Shreveport 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, (filed as Exhibit 3(a) to Annual Report
of First United Bancshares, Inc. on Form 10-K for the
year ended December 31, 1996) incorporated herein by
reference.
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 Gerrish & McCreary, P.C. regarding City
Bank & Trust of Shreveport Acquisition
21 -- Subsidiaries of First United Bancshares, Inc.
23(a) -- Consent of Arthur Andersen LLP
23(b) -- Consent of Heard, McElroy & Vestal, L.L.P.
23(c) -- Consent of Southard Financial
23(d) -- Consent of Mitchell, Williams, Selig, Gates & Woodyard,
P.L.L.C. (included in Exhibit 5)
23(e) -- Consent of Gerrish & McCreary, P.C.
24 -- Power of Attorney -- Signature Page of the Registration
Statement
99(a) -- First United Bancshares, Inc. Form of Proxy
99(b) -- City Bank & Trust Company of Shreveport Form of Proxy
</TABLE>

<PAGE> 1

Exhibit 5

October 6, 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 425,000 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 City Bank and Trust of Shreveport with and into a new created wholly-owned
subsidiary of 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

September 22, 1997

Board of Directors
City Bank and Trust of Shreveport
6025 Line Avenue
Shreveport, Louisiana 71106

Gentlemen:

You have requested our opinion as to certain federal income tax
consequences resulting from the merger ("Merger") of a Louisiana bank ("Interim
Bank") formed by First United Bancshares, Inc., an Arkansas corporation
("Bancshares"), with and into City Bank and Trust of Shreveport, a bank
chartered under the laws of Louisiana ("Bank" or "Surviving Bank") as set forth
and more fully described in the Agreement and Plan of Reorganization
("Agreement") by and between Bancshares and Bank dated June 18, 1997, including
the appendices attached thereto.

We have acted as special counsel to Bank with respect to the Merger.
In this capacity, we have examined the Agreement and the securities
registration statement on Form S-4 (the "Registration Statement") pursuant to
which Bancshares is issuing additional shares of its common stock, $1.00 par
value per share, to the shareholders of Bank ("Bank Shareholders") and
optionholders of Bank ("Bank Optionholders"). All capitalized terms used
herein shall, except where the context indicates otherwise, be deemed to have
the meanings assigned to such terms in the Registration Statement and the
Agreement.

In reaching our opinion, we have relied on certain representations
made by the management of Bancshares, Interim Bank and Bank including the
representations, warranties and covenants in the Agreement and have examined
such documents, records and other instruments as we have deemed necessary or
appropriate, including, without limitation, the Registration Statement and the
Agreement. We have assumed that Bank and Bancshares have been previously and
will be in the future maintained and operated in conformance with the laws of
the applicable states and the United States and the terms of the aforementioned
documents.

Bancshares is a registered bank holding company organized and existing
under the laws of the State of Arkansas. Bancshares has authorized capital
stock consisting of 24,000,000 shares of common stock, par value $1.00 per
share ("Bancshares Common Stock") and 500,000 shares of preferred stock, $1.00
par value, of which 9,851,892 shares of Bancshares Common Stock are issued and
outstanding as of September 18, 1997 and no shares of preferred stock are
outstanding.

Interim Bank is a banking corporation to be duly organized under the
laws of Louisiana as a wholly-owned subsidiary of Bancshares solely in order to
effectuate the Merger. Interim Bank will conduct no business operations and
will be merged out of existence in the Merger shortly after its formation.

There are no outstanding securities or obligations which are
convertible into shares of stock or options, warrants, rights, calls or any
other commitments of any nature relating to the unissued shares of Bancshares
Common Stock or Interim Bank Common Stock, except for non-statutory options for
52,723 shares of Bancshares Common Stock all of which options are held by the
President of Bancshares.
<PAGE> 2
Bank is a banking corporation duly organized and existing under the
laws of Louisiana and has authorized capital stock consisting of 1,000,000
shares of common stock, par value $5.00 per share ("Bank Common Stock"), of
which 386,496 shares are issued and outstanding on the date hereof.

There are no outstanding securities or obligations which are
convertible into shares of stock or options, warrants, rights, calls or any
other commitments by any nature relating to the unissued shares of Bank Common
Stock, except for qualified options and non-statutory options (collectively,
the "Options") for (in the aggregate) 187,189 shares of Bank Common Stock which
such options are held in varying amounts by the Bank Optionholders. Such
Options were granted prior to the negotiation of and date of the Agreement and
there is no increase in the vesting of such Options as a result of the
Agreement or Merger.

Pursuant to the Merger Agreement at the Effective Date of the Merger,
the following transactions will be consummated:

1. Interim Bank shall merge with and into Bank whereby (a) each
one share of $5.00 par value Bank Common Stock issued and outstanding other
than shares whose holders have perfected their rights to dissent to the Merger,
shall be converted into and exchanged for shares of newly issued $1.00 par
value Bancshares Common Stock in the manner determined under Section 2.01(j) of
the Agreement, and (b) each Option shall be cancelled and in lieu thereof newly
issued shares of $1.00 par value Bancshares Common Stock shall be distributed
to the Optionholders in the manner determined under Section 2.01(i) of the
Agreement. Bank shall survive the Merger and the Bank Shareholders and Bank
Optionholders shall become shareholders of Bancshares. No fractional shares of
Bancshares Common Stock shall be issued. The former Bank Shareholders and Bank
Optionholders entitled to fractional shares of Bancshares Common Stock shall be
paid cash by Bancshares for such fractional shares, the value of which shall be
computed by multiplying the fraction thereof by the average sales price per
share of Bancshares Common Stock for all trades occurring on NASDAQ during the
period of ten (10) trading days on which one or more trades take place and
which ends immediately prior to the second trading day preceding the Closing
Date ("Pricing Average").

2. The Merger is subject to various conditions including, among
others, that the Merger be approved by the holders of two-thirds of the Bank
Common Stock entitled to vote at the Bank Special Meeting, that the Merger be
approved by the holders of two-thirds of the Bancshares Common Stock at a
special meeting of Bancshares's shareholders, that the Merger be approved by
all applicable regulatory authorities and that no more than 10% of the Bank
Common Stock outstanding will be surrendered for cash by dissenters.

This opinion is conditioned on the following assumptions and
representations being made by the management of Bancshares, Interim Bank and/or
Bank in connection with the transaction at or before the Effective Date:

1. The Merger shall be consummated pursuant to and in accordance
with the Agreement.

2. The fair market value of newly issued $1.00 par value
Bancshares Common Stock to be received by Bank shareholders will be, in each
instance, approximately equal to the fair market value of the Bank Common Stock
to be surrendered in exchange therefor.

3. After consummation of the Merger transaction, Bank will
continue its historical business in a substantially unchanged manner.

4. Without conducting any investigation, the management of Bank
knows of no plan or intention by the shareholders of Bank to sell or otherwise
dispose of the shares of Bancshares Common Stock to be received in the Merger
transaction other than the shares of stock surrendered by dissenters for cash
or shares of stock surrendered for cash in lieu of fractional shares of
Bancshares. The management of Bank is not aware of any transfers of Bank stock
by any holders thereof prior to the Merger which were made in contemplation of
the Merger.

5. After the consummation of the Merger, Bank will hold at least
90% of the fair market value of the net assets and at least 70% of the fair
market value of the gross assets held by Bank immediately prior to the
Effective Date of the Merger. For purposes of this representation, amounts
paid by Bank to dissenters prior to and including the
<PAGE> 3
Effective Date (if any), amounts paid by Bank to shareholders who receive cash
or other property, Bank assets used to pay its reorganization expenses, and all
redemptions and other distributions (except for regular, normal dividends) made
by Bank immediately preceding the transfer, will be included as assets of Bank
held immediately prior to the transaction.

6. Prior to the transaction, Bancshares will be in control of
Interim Bank within the meaning of Section 368(c) of the Internal Revenue Code
of 1986, as amended (the "Code" or "IRC").

7. Following the transaction, Bank will not issue additional
shares of its stock that would result in Bancshares losing control of Bank
within the meaning of Section 368(c) of the Code.

8. Bancshares has no plan or intention to reacquire any of its
stock issued in the transaction.

9. Bank shareholders who perfect their rights to dissent from the
Merger in accordance with Section 6:376 of the LRS shall be paid the value for
shares of Bank Common Stock. The value to be paid shall be determined in
accordance with Section 6:376 of the LRS.

10. Bancshares has no plan or intention to liquidate Bank, to
merge Bank with and into another bank or corporation, to sell or otherwise
dispose of the stock of Bank or to cause Bank to sell or otherwise dispose of
any of the assets of Bank, except for dispositions made in the ordinary course
of business or transfers described in Section 368(a)(2)(C) of the Code.

11. The assumption by Bank of the liabilities of Interim Bank, if
any, pursuant to the Merger is for a bona fide business purpose and the
principal purpose of such assumption is not the avoidance of federal income tax
on the transfer of assets of Interim Bank to Bank pursuant to the Merger.

12. Following the transaction, Bank will continue the historic
business of Bank or use a significant portion of Bank's historic business
assets in its business.

13. Each Party to the Merger Agreement will pay its own expenses
incurred in connection with the Merger including the cost of soliciting proxies
for the Bank Special Meeting and printing costs and expenses incurred in
connection with the Proxy Statement/Prospectus and the associated Registration
Statement of which the Proxy Statement/Prospectus forms a part. In the event
that the Merger is terminated by either Bancshares or Bank for specific
circumstances set forth in the Merger Agreement, each party will pay its own
costs, fees and expenses incident to the actions required by the contemplated
Merger.

14. There is no intercorporate indebtedness existing between
Bancshares and Bank or between Interim Bank and Bank that was issued, acquired,
or will be settled at a discount.

15. No parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.

16. Neither Bank, Bancshares nor Interim Bank is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.

17. The fair market value of the assets of Interim Bank
transferred to Bank will equal or exceed the sum of the liabilities of Interim
Bank, if any, assumed by Bank, plus the amount of liabilities, if any, to which
the transferred assets are subject.

18. No stock of Bank will be issued in the transaction.

19. None of the compensation received by any shareholder-employee
of Bank will be separate consideration for, or allocable to, any of his or her
shares of Bank Common Stock; none of the shares of Bancshares Common Stock
received by any shareholder-employee will be separate consideration for, or
allocable to, any employment agreement, consulting agreement or similar
arrangement; and the compensation paid to any shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
<PAGE> 4
20. The payment of cash in lieu of fractional shares of Bancshares
Common Stock was not separately bargained for consideration and is being made
solely for the purpose of saving Bancshares the expense and inconvenience of
issuing fractional shares.

21. Bancshares and Interim Bank have not owned during the past
five years, any shares of the stock of Bank.

Based solely on the information submitted and on the representations
set forth above, it is held as follows:

1. Provided that the proposed Merger of Interim Bank with and
into Bank qualifies as a merger under Louisiana law and since (a) after the
transaction, Bank will hold substantially all of its assets and substantially
all of the assets of Interim Bank and (b) in the transaction, Bank Shareholders
will exchange an amount of stock constituting control of Bank for Bancshares
voting stock, the proposed Merger will constitute a reorganization within the
meaning of IRC Sections 368(a)(1)(A) and 368(a)(2)(e). For purposes of this
opinion, "substantially all" means at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the gross assets of
Interim Bank and Bank held immediately prior to the proposed transaction.
Bank, Interim Bank and Bancshares will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.

2. No gain or loss will be recognized by Interim upon the
transfer of substantially all of its assets to Bank in exchange for Bank Common
Stock and the assumption of its liabilities, if any, by Bank (IRC Sections
361(a) and 357(a)).

3. No gain or loss will be recognized by Bank upon the receipt of
substantially all of the assets of Interim Bank in exchange for Bank Common
Stock (IRC Section 1032(a)).

4. No gain or loss will be recognized by Bancshares upon the
receipt of Bank Common Stock in exchange for Interim Bank stock (IRC Section
354(a)(1)).

5. The tax basis of the assets of Interim Bank acquired by Bank
will be the same in the hands of Bank as the tax basis of such assets in the
hands of Interim Bank immediately prior to the exchange (IRC Section 362(b)).

6. The holding period of the assets of Interim Bank received by
Bank will, in each instance, include the period for which such assets were held
by Interim Bank (IRC Section 1223(2)).

7. No gain or loss will be recognized to Bank Shareholders upon
the exchange of Bank Common Stock solely for Bancshares Common Stock (IRC
Section 354(a)(1)).

8. The tax basis of the Bancshares Common Stock received by Bank
Shareholders will be the same as the basis of the Bank Common Stock surrendered
in exchange therefor (IRC Section 358(a)(1)).

9. The holding period of the Bancshares Common Stock received by
Bank Shareholders will include the period during which Bank Common Stock
surrendered therefor was held, provided the Bank Common Stock is a capital
asset in the hands of Bank Shareholders on the date of the exchange (IRC
Section 1223(1)).

10. The payment of cash to Bank Shareholders in lieu of fractional
share interests of Bancshares Common Stock will be treated as if fractional
shares were distributed as part of the Merger and then redeemed by Bancshares
in payment of and in exchange for the shareholders' Bancshares stock as
provided for in IRC Sections 302 or 301, depending on the attribution rules of
IRC Section 318. Assuming a shareholder's stock is a capital asset, a
shareholder receiving such cash will recognize capital gain or loss equal to
the difference between the amount of cash received and the shareholder's
adjusted basis in the fractional share interest.

No opinion is expressed about the tax treatment of the Merger
transaction under other provisions of the Code and regulations or about the
federal income tax or state income tax treatment of any conditions existing at
the time of, or other tax consequences resulting from the Merger transaction,
that are not specifically covered above. In addition, no opinion is expressed
with regard to the issuance of the Bancshares Common Stock to the Bank
Optionholders as provided for in the Agreement.
<PAGE> 5
This opinion is addressed only to you and concerns only the
transaction described above. This opinion may be relied upon only by you.

We consent to the inclusion of this opinion in the Registration
Statement of First United Bancshares, Inc. relating to the Merger and to the
reference to our firm under the caption "Legal Matters" in the Prospectus/Proxy
Statement which is part of the Registration Statement.

Very truly yours,

GERRISH & McCREARY, P.C.

<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

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.

ARTHUR ANDERSEN LLP

Jackson, Mississippi
October 3, 1997

<PAGE> 1

EXHIBIT 23(b)

CONSENT OF INDEPENDENT AUDITORS

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 16, 1997 on the financial statements of City Bank & Trust of Shreveport
as of December 31, 1996 and 1995 and for each of the years in the three-year
period ended December 31, 1996 and to all references to our Firm included in
this Registration Statement.

Heard, McElroy & Vestal, L.L.P.

/s/ Heard, McElroy & Vestal, L.L.P.

Shreveport, Louisiana
October 6, 1997

<PAGE> 1
EXHIBIT 23(c)

CONSENT OF SOUTHARD FINANCIAL

We hereby consent to the inclusion in this registration statement on Form
S-4 of our opinion dated August 29, 1997 and to all references to our firm
in the registration statement.

SOUTHARD FINANCIAL

/s/ Douglas K. Southard
October 2, 1997 ----------------------------------
Douglas K. Southard

<PAGE> 1
EXHIBIT 23(e)

CONSENT OF GERRISH & MCCREARY, P.C.

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 City Bank & Trust of Shreveport.

Memphis, Tennessee GERRISH & MCCREARY, P.C.
October 2, 1997

/s/ Gerrish & McCreary, P.C.
---------------------------------

<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
__________, 1997 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 City Bank & Trust of Shreveport into a newly created
wholly-owned subsidiary of 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)

CITY BANK & TRUST OF SHREVEPORT

PROXY

The undersigned hereby appoints Ron C. Boudreaux and R. A. Mackey 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 City Bank & Trust of Shreveport ("CBT") to be held on
__________, 1997 at _____ _.m. local time at 6025 Line Avenue, Shreveport,
Louisiana 71106 and at any adjournment or adjournments thereof and to vote all
shares of stock of CBT 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 City Bank & Trust Company of
Shreveport into a newly created wholly-owned subsidiary of
First United Bancshares, Inc.

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 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.