<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

          For the transition period from __________ to _______________

                          Commission File No.: 0-28312

                   FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             TEXAS                                        71-0785261
 ---------------------------------                   -----------------------
  (State or other jurisdiction                         (I.R.S. Employer
 of incorporation or organization)                   Identification Number)

      200 WEST STEPHENSON
       HARRISON, ARKANSAS                                     72601
 ---------------------------------                   -----------------------
           (Address)                                       (Zip Code)

       Registrant's telephone number, including area code: (870) 741-7641

           Securities registered pursuant to Section 12(b) of the Act:
                                 NOT APPLICABLE

           Securities registered pursuant to Section 12(g) of the Act

                     COMMON STOCK (PAR VALUE $.01 PER SHARE)
                     ---------------------------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes   X   No
    ----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   /  X  /

As of March 22, 1999, the aggregate value of the 4,036,685 shares of Common
Stock of the Registrant issued and outstanding on such date, which excludes
382,012 shares held by all directors and officers of the Registrant as a group,
was approximately $66.6 million. This figure is based on the last sales price of
$16.50 per share of the Registrant's Common Stock on March 22, 1999.

Number of shares of Common Stock outstanding as of March 22, 1999:   4,418,697

                       DOCUMENTS INCORPORATED BY REFERENCE

    List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated.

(1) Portions of the Annual Report to Stockholders for the year ended December
31, 1998 are incorporated into Part II, Items 5 through 8 of this Form 10-K.

(2) Portions of the definitive proxy statement for the 1999 Annual Meeting of
Stockholders are incorporated into Part III, Items 10 through 13 of this Form
10-K.

<PAGE>

PART I.

ITEM 1.  BUSINESS

GENERAL

    FIRST FEDERAL BANCSHARES OF ARKANSAS, INC. First Federal Bancshares of
Arkansas, Inc. (the "Company") is a Texas corporation organized in January 1996
by First Federal Bank of Arkansas, FA ("First Federal" or the "Bank") for the
purpose of becoming a unitary holding company of the Bank. The only significant
assets of the Company are the capital stock of the Bank, the Company's loan to
the Employee Stock Ownership Plan ("ESOP"), and the portion of the net proceeds
retained by the Company in connection with the Bank's conversion to stock form
and the concurrent offering of the Company's common stock (the "Conversion").
The business and management of the Company consists of the business and
management of the Bank. The Company does not presently own or lease any
property, but instead uses the premises, equipment and furniture of the Bank. At
the present time, the Company does not employ any persons other than officers of
the Bank, and the Company utilizes the support staff of the Bank from time to
time. Additional employees will be hired as appropriate to the extent the
Company expands or changes its business in the future. At December 31, 1998, the
Company had $615.1 million in total assets, $481.1 million in total deposits and
$81.0 million in stockholders' equity.

    The Company's executive office is located at the home office of the Bank at
200 West Stephenson Avenue, Harrison, Arkansas 72601, and its telephone number
is (870) 741-7641.

    FIRST FEDERAL BANK OF ARKANSAS, FA. The Bank is a federally chartered stock
savings and loan association which was formed in 1934. First Federal conducts
business from its main office and twelve full service branch offices, all of
which are located in a six county area in Northcentral and Northwest Arkansas
comprised of Benton, Marion, Washington, Carroll, Baxter and Boone counties.
First Federal's deposits are insured by the Savings Association Insurance Fund
("SAIF"), which is administered by the Federal Deposit Insurance Corporation
("FDIC"), to the maximum extent permitted by law.

    The Bank is a community oriented savings institution which has traditionally
offered a wide variety of savings products to its retail customers while
concentrating its lending activities on the origination of loans collateralized
by one- to four-family residential dwellings. To a significantly lesser extent,
the Bank's activities have also included origination of multi-family residential
loans, commercial real estate loans, construction loans, commercial loans and
consumer loans. In addition, the Bank maintains a significant portfolio of
investment securities. In addition to interest and dividend income on loans and
investments, the Bank receives other income from loan fees and various service
charges. The Bank's goal is to continue to serve its market area as an
independent community oriented financial institution dedicated primarily to
financing home ownership while providing financial services to its customers in
an efficient manner.

    The Bank is subject to examination and comprehensive regulation by the
Office of Thrift Supervision ("OTS"), which is the Bank's chartering authority
and primary regulator. The Bank is also regulated by the FDIC, the administrator
of the SAIF. The Bank is also subject to certain reserve requirements
established by the Board of Governors of the Federal Reserve System ("FRB") and
is a member of the Federal Home Loan Bank ("FHLB") of Dallas, which is one of
the 12 regional banks comprising the FHLB System.

                                       1

<PAGE>

    This Form 10-K and the Company's Annual Report to Stockholders contain
certain forward-looking statements and information relating to the Company that
are based on the beliefs of management as well as assumptions made by and
information currently available to management. In addition, in those and other
portions of this document and the Company's Annual Report to Stockholders, the
words "anticipate", "believe," "estimate," "expect," "intend," "should" and
similar expressions, or the negative thereof, as they relate to the Company or
the Company's management, are intended to identify forward-looking statements.
Such statements reflect the current views of the Company with respect to future
looking events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. The Company does not intend to update these forward-looking
statements.

LENDING ACTIVITIES

    GENERAL. At December 31, 1998, the Bank's total portfolio of loans
receivable ("total loan portfolio"), amounted to $453.3 million or 73.7% of the
Company's $615.1 million of total assets at such time. The Bank has
traditionally concentrated its lending activities on conventional first mortgage
loans collateralized by single-family (one- to four-family) residential
property. Consistent with such approach, $370.2 million or 81.66% of the Bank's
total loan portfolio consisted of one- to four-family residential loans at
December 31, 1998. To a significantly lesser extent, the Bank also originates
multi-family residential loans, commercial real estate loans, construction
loans, commercial loans and consumer loans. At December 31, 1998, such loan
categories amounted to $1.5 million, $23.2 million, $18.2 million, $8.4 million
and $31.7 million, respectively, or .34%, 5.12%, 4.02%, 1.86% and 7.00% of the
total loan portfolio, respectively. The Bank currently does not offer loans
which are insured by the Federal Housing Administration ("FHA") nor partially
guaranteed by the Office of Veterans Affairs ("VA").

                                        2

<PAGE>

LOAN COMPOSITION. The following table sets forth certain data relating to the
composition of the Bank's loan portfolio by type of loan at the dates indicated.

<TABLE>
<CAPTION>

                                                                December 31,
                               ------------------------------------------------------------------------------
                                          1998                      1997                      1996
                               -------------------------  -------------------------  ------------------------

                                             Percentage of               Percentage               Percentage
                                  Amount         Loans       Amount       of Loans      Amount     of Loans
                               -----------   -----------  -----------   -----------  -----------  -----------
<S>                          <C>           <C>          <C>           <C>          <C>          <C>
                                                           (Dollars in Thousands)
Real estate loans:
 Single-family residential       $370,211         81.66%    $370,955        83.18%    $338,349        82.36%
 Multi-family residential           1,540           .34        1,303          .29        1,555          .38
 Commercial real estate            23,196          5.12       18,593         4.17       19,136         4.66
 Construction                      18,226          4.02       20,753         4.66       20,053         4.88
                               -----------   -----------  -----------   -----------  -----------  -----------
   Total real estate loans        413,173         91.14      411,604        92.30      379,093        92.28
                               -----------   -----------  -----------   -----------  -----------  -----------

Commercial loans                    8,437          1.86        5,649         1.27        4,348         1.06
                               -----------   -----------  -----------   -----------  -----------  -----------

Consumer loans:
 Home equity and second
  mortgage loans                   13,308          2.94       13,023         2.92       12,549         3.06
 Automobile                        10,693          2.36        8,307         1.86        7,556         1.84
 Other                              7,712          1.70        7,372         1.65        7,244         1.76
                               -----------   -----------  -----------   -----------  -----------  -----------
   Total consumer loans            31,713          7.00       28,702         6.43       27,349         6.66
                               -----------   -----------  -----------   -----------  -----------  -----------

    Total loans receivable        453,323        100.00%     445,955       100.00%     410,790       100.00%
                               -----------   -----------  -----------   -----------  -----------  -----------
                                             -----------                -----------               -----------
Less:
 Undisbursed loan funds            (6,770)                    (7,305)                   (8,670)
 Unearned discounts and net
  deferred loan fees               (3,296)                    (3,512)                   (4,361)
 Allowance for loan losses           (771)                    (1,196)                   (1,251)
                               -----------                -----------                -----------

   Total loans receivable, net   $442,486                   $433,942                  $396,508
                               -----------                -----------                -----------
                               -----------                -----------                -----------

</TABLE>

<TABLE>
<CAPTION>

                                                  December 31,
                               --------------------------------------------------
                                          1995                     1994
                               -------------------------   -----------------------

                                              Percentage                Percentage of
                                  Amount       of Loans     Amount         Loans
                               -----------    ----------  ----------     ----------
                                             (Dollars in Thousands)
<S>                          <C>            <C>          <C>          <C>
Real estate loans:
 Single-family residential       $287,872        82.54%    $237,724        82.96%
 Multi-family residential           1,060          .30          800         0.28
 Commercial real estate            19,723         5.66       17,529         6.12
 Construction                      11,603         3.33        7,468         2.61
                               -----------    ----------  ----------     ----------
   Total real estate loans        320,258        91.83      263,521        91.97
                               -----------    ----------  ----------     ----------

Commercial loans                    4,014         1.15        3,192         1.11
                               -----------    ----------  ----------     ----------

Consumer loans:
 Home equity and second
  mortgage loans                   10,466         3.00        8,752         3.05
 Automobile                         6,993         2.01        5,154         1.80
 Other                              7,021         2.01        5,938         2.07
                               -----------    ----------  ----------     ----------
   Total consumer loans            24,480         7.02       19,844         6.92
                               -----------    ----------  ----------     ----------

    Total loans receivable        348,752       100.00%     286,557       100.00%
                               -----------    ----------  ----------     ----------
                                              ----------                 ----------
Less:
 Undisbursed loan funds            (4,298)                   (3,318)
 Unearned discounts and net
  deferred loan fees               (3,721)                   (2,322)
 Allowance for loan losses         (1,228)                   (1,134)
                               -----------                ----------

   Total loans receivable, net   $339,505                  $279,783
                               -----------                ----------
                               -----------                ----------

</TABLE>

                                        3

<PAGE>

    LOAN MATURITY AND INTEREST RATES. The following table sets forth certain
information at December 31, 1998 regarding the dollar amount of loans maturing
in the Bank's loan portfolio based on their contractual terms to maturity.
Demand loans and loans having no stated schedule of repayments and no stated
maturity are reported as due in one year or less. All other loans are included
in the period in which the final contractual repayment is due.

<TABLE>
<CAPTION>

                                                              After Three     After Five      After Ten
                                                One Year         Years          Years           Years        Beyond
                                 Within       Through Three  Through Five    Through Ten       Through       Twenty
                                One Year          Years          Years          Years       Twenty Years      Years        Total
                              -----------     -------------  -------------   ------------   -------------  -----------  -----------
                                                                        (In Thousands)
<S>                          <C>            <C>            <C>             <C>            <C>             <C>          <C>
Real estate loans:
 Single-family residential     $     420        $  1,095       $  3,818         $43,219        $144,257      $177,402     $370,211
 Multi-family residential            172              --             --             485             883            --        1,540
 Commercial real estate            2,235           1,662          6,070           6,973           6,256            --       23,196
 Construction                      1,928              --             --             510           4,911        10,877       18,226
Commercial loans                   4,227           1,087          1,689             897             537            --        8,437
Consumer loans                     9,307           7,080         14,031           1,208              87            --       31,713
                              -----------     -------------  -------------   ------------   -------------  -----------  -----------
     Total(1)                    $18,289         $10,924        $25,608         $53,292        $156,931      $188,279     $453,323
                              -----------     -------------  -------------   ------------   -------------  -----------  -----------
                              -----------     -------------  -------------   ------------   -------------  -----------  -----------

</TABLE>

(1) Gross of undisbursed loan funds, unearned discounts and net deferred loan
fees and the allowance for loan losses.

    The following table sets forth the dollar amount of the Bank's loans at
December 31, 1998 due after one year from such date which have fixed interest
rates or which have floating or adjustable interest rates.

<TABLE>
<CAPTION>

                                                                             Floating or
                                                        Fixed-Rates         Adjustable-Rates            Total
                                                    -------------------   -------------------       ---------------
                                                                           (In Thousands)
<S>                                               <C>                   <C>                      <C>
Real estate loans:
  Single-family residential                              $135,286                $234,505               $369,791
  Multi-family residential                                    940                     428                  1,368
  Commercial real estate                                   20,961                      --                 20,961
  Construction                                              5,321                  10,977                 16,298
Commercial loans                                            4,210                      --                  4,210
Consumer loans                                             22,406                      --                 22,406
                                                    -------------------   -------------------       ---------------
     Total                                               $189,124                $245,910               $435,034
                                                    -------------------   -------------------       ---------------
                                                    -------------------   -------------------       ---------------

</TABLE>

    Scheduled contractual maturities of loans do not necessarily reflect the
actual term of the Bank's portfolio. The average life of mortgage loans is
substantially less than their average contractual terms because of loan
prepayments and refinancing. The average life of mortgage loans tends to
increase, however, when current mortgage loan rates substantially exceed rates
on existing mortgage loans and, conversely, decrease when rates on existing
mortgage loans substantially exceed current mortgage loan rates.

    ORIGINATION, PURCHASE AND SALE OF LOANS. The lending activities of the Bank
are subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Bank's Board of Directors and
management. Loan originations are obtained by a variety of sources, including
realtors, walk-in customers, branch managers and radio, television and newspaper
advertising. In its marketing, the Bank emphasizes its community ties and an
efficient underwriting and approval process. The Bank believes it can provide
its personalized service to its customers in a more efficient manner due in part
to the use of in-house appraisal and underwriting staff. The Bank requires
hazard, title and, to the extent applicable, flood insurance on all security
property.

                                        4

<PAGE>

    Loan applications are initially processed by branch managers or loan
officers and all real estate loans up to $500,000 must be approved by two
members of the Bank's Loan Committee, one of which must be a member of senior
management. Loans in excess of $500,000 up to $750,000 must be approved by three
members of the Bank's Loan Committee, two of which must be members of senior
management. Real estate loans in excess of $750,000 must be approved by the
Bank's Board of Directors. Consumer loans are initially processed by consumer
loan officers and are required to be approved by designated officers of the Bank
depending on the amount of the loan. All loans are ratified by the Board of
Directors.

    Historically, the Bank has not been an active purchaser of loans due to
consistent loan demand. No loans were purchased during the last three years.

    The Bank originates and sells loans with fixed terms of fifteen years or
greater to specific investors in the secondary mortgage loan market. This allows
the Bank to provide to its' customers competitive long-term fixed-rate loan
products without assuming additional interest rate risk. These loans are
originated subject to underwriting by a third party with the purchase price
confirmed by the respective investor prior to loan closing. Due to these loans
being underwritten by a third party, the repurchase risk typically associated
with such contracts is being assumed by the underwriter. The Bank is not
involved in loan hedging or other speculative mortgage origination activities.
In 1998, 1997, and 1996, the Bank's loan sales were $20.5 million, $2.2 million,
and $73,000, respectively.

    Set forth below is a table showing the Bank's originations, purchases, sales
and repayments of loans during the periods indicated.

<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                   ---------------------------------------------------------
                                                      1998                    1997                   1996
                                                    --------                ---------              -------
                                                                         (In Thousands)
<S>                                               <C>                  <C>                      <C>
Loans receivable at beginning
  of period                                         $445,955                $410,790               $348,752
                                                    --------                ---------              --------
Loan originations:
  Real estate:
    Single-family residential                        114,518                  92,684                102,214
    Multi-family residential                             590                      --                    556
    Commercial real estate                            13,776                   3,633                  4,866
    Construction                                      24,033                  20,587                 25,537
  Commercial loans                                     7,159                   5,257                  3,060
  Consumer:
    Home equity and second
      mortgage loans                                   9,652                   8,807                 10,400
    Automobile                                        10,273                   7,311                  7,235
    Other                                              8,830                   6,798                  7,225
                                                    --------                ---------              --------
      Total loan originations                        188,831                 145,077                161,093
Purchases                                                 --                      --                    --
                                                    --------                ---------              --------
      Total loan originations and
        purchases                                    188,831                 145,077                161,093
Repayments                                          (156,426)               (106,408)               (98,540)
Loan sales                                           (20,494)                 (2,244)                   (73)
Other                                                 (4,543)                 (1,260)                  (442)
                                                    --------                ---------              --------
Net loan activity                                      7,368                  35,165                 62,038
                                                    --------                ---------              --------
Loans receivable
  at end of period                                  $453,323                $445,955               $410,790
                                                    --------                ---------              --------
                                                    --------                ---------              --------

</TABLE>

                                        5

<PAGE>

    LOANS-TO-ONE BORROWER. A savings institution generally may not make
loans-to-one borrower and related entities in an amount which exceeds 15% of its
unimpaired capital and surplus, although loans in an amount equal to an
additional 10% of unimpaired capital and surplus may be made to a borrower if
the loans are fully secured by readily marketable securities. At December 31,
1998, the Bank's limit on loans-to-one borrower was approximately $10.9 million.
At December 31, 1998, the Bank's largest loans or groups of loans-to-one
borrower, including persons or entities related to the borrower, amounted to
$5.7 million. Such amount consists of 22 loans, primarily commercial real estate
loans, all of which were current at December 31, 1998. The Bank's ten largest
loans or groups of loans-to-one borrower, including persons or entities related
to the borrower, amounted to $22.3 million at December 31, 1998. All of such
loans are current.

    ONE-TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LOANS. The Bank has historically
concentrated its lending activities on the origination of loans collateralized
by first mortgage liens on existing one- to four-family residences. At December
31, 1998, $370.2 million or 81.7% of the Bank's total loan portfolio consisted
of one- to four-family residential real estate loans. The Bank originated $114.5
million, $92.7 million and $102.2 million of one- to four-family residential
loans in 1998, 1997, and 1996, respectively, and intends to continue to
emphasize the origination of permanent loans collateralized by first mortgage
liens on one- to four-family residential properties in the future. Of the $370.2
million of such loans at December 31, 1998, $234.5 million or 63.3% had
adjustable-rates of interest (including $190.3 million in seven-year adjustable
rates) and $136.0 million or 36.7% had fixed-rates of interest.

    The Bank currently originates both fixed-rate and adjustable-rate one- to
four-family residential mortgage loans. The Bank's fixed-rate loans for
portfolio are presently originated with maximum terms of 15 years and are fully
amortizing with monthly payments sufficient to repay the total amount of the
loan with interest by the end of the loan term. The Bank does offer fixed-rate
loans with terms exceeding fifteen years although such loans are typically sold
in the secondary market. The Bank's one- to four-family loans are typically
originated under terms, conditions and documentation which permit them to be
sold to U.S. Government sponsored agencies such as the Federal Home Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA"). However, as stated above, such loans with terms of 15 years or less
are generally originated for portfolio while substantially all of such loans
over 15 years are sold in the secondary market. The Bank's fixed-rate loans
typically include "due on sale" clauses.

    The Bank's adjustable-rate mortgage loans typically provide for an interest
rate which adjusts every one-, three-, five- or seven-years in accordance with a
designated index plus a margin. Such loans are typically based on a 25- or
30-year amortization schedule. The Bank generally does not offer below market
rates, and the amount of any increase or decrease in the interest rate per one
or three year period is generally limited to 2%, with a limit of 6% over the
life of the loan. The Bank's five-year adjustable rate loans provide that any
increase or decrease in the interest rate per period is limited to 3%, with a
limit of 6% over the life of the loan. The Bank's seven-year adjustable rate
loans provide that any increase or decrease in the interest rate per period is
limited to 5% with a limit of 5% over the life of the loan. The Bank's
adjustable-rate loans are assumable (generally without release of the initial
borrower), do not contain prepayment penalties and do not provide for negative
amortization. The Bank's adjustable-rate mortgage loans typically include "due
on sale" clauses. Such loans may be converted to a fixed-rate loan at the
discretion of the Bank. The Bank generally underwrites its one- and three-year
adjustable-rate loans on the basis of the borrowers' ability to pay at the rate
after the first adjustment. Adjustable-rate loans decrease the risks associated
with changes in interest rates but involve other risks, primarily because as
interest rates rise, the payment by the borrower rises to the extent permitted
by the terms of the loan, thereby increasing the potential for default. At the
same time, the marketability of the underlying property may be adversely
affected by higher interest rates.

    The Bank's residential mortgage loans typically do not exceed 90% of the
appraised value of the security property. However, pursuant to underwriting
guidelines adopted by the Board of Directors, the Bank can lend up to 97% of the
appraised value of the property securing a one- to four-family residential loan,
and requires borrowers to obtain private mortgage insurance on the portion of
the principal amount of the loan that exceeds 90% of the appraised value of the
security property. At December 31, 1998, the Bank had $1.3 million of
nonperforming single-family residential loans. See "- Asset Quality."

    MULTI-FAMILY RESIDENTIAL REAL ESTATE LOANS. Although the Bank does not
emphasize multi-family residential loans and has not been active in this area,
the Bank offers mortgage loans for the acquisition and refinancing of existing
multi-family residential properties. At December 31, 1998, $1.5 million or .3%
of the Bank's total loan portfolio consisted of loans collateralized by existing
multi-family residential real estate properties.

                                        6

<PAGE>

    Multi-family loans are generally made on terms up to ten years with fixed
rates although the Bank will originate such loans with call provisions up to
five years. Loan to value ratios on the Bank's multi-family real estate loans
are currently limited to 80%. It is also the Bank's general policy to obtain
corporate or personal guarantees, as applicable, on its multi-family residential
real estate loans from the principals of the borrower.

    Multi-family real estate lending entails significant additional risks as
compared with one- to four-family residential property lending. Such loans
typically involve large loan balances to single borrowers or groups of related
borrowers. The payment experience on such loans is typically dependent on the
successful operation of the real estate project. The success of such projects is
sensitive to changes in supply and demand conditions in the market for
multi-family real estate as well as economic conditions generally. At December
31, 1998, the Bank did not have any nonperforming multi-family real estate
loans. See "- Asset Quality."

    COMMERCIAL REAL ESTATE LOANS. The Bank originates mortgage loans for the
acquisition and refinancing of commercial real estate properties. At December
31, 1998, $23.2 million or 5.1% of the Bank's total loan portfolio consisted of
loans collateralized by existing commercial real estate properties. The Bank
does not actively market its commercial real estate loan products and offers
such loans primarily as an accommodation to its present customers. Management
does not expect the Bank's portfolio of commercial real estate loans to
significantly increase in the future.

    The majority of the Bank's commercial real estate loans are collateralized
by office buildings, convenience stores, service stations, mini-storage
facilities, hotels, churches and small shopping malls. The majority of the
Bank's commercial real estate loans are collateralized by property located in
the Bank's market area.

    At December 31, 1998, the Bank had approximately $8.7 million of loans which
are either for the construction of service station and convenience store
facilities or are collateralized by such facilities. The Bank requires that
construction loans for such facilities meet present standards established by the
Environmental Protection Agency. With respect to existing facilities, the Bank
requires an environmental study of the property. To date, the Bank has not
experienced any material credit or environmental problems with such loans.

    The Bank requires appraisals of all properties securing commercial real
estate loans. The Bank considers the quality and location of the real estate,
the credit of the borrower, cash flow of the project and the quality of
management involved with the property. The Bank's commercial real estate loans
are originated with fixed interest rates based on a ten or fifteen year
amortization schedule and loan to value ratios on such loans are generally
limited to 80%. As part of the criteria for underwriting multi-family and
commercial real estate loans, the Bank generally imposes a debt coverage ratio
(the ratio of net cash from operations before payment of debt service to debt
service) of not less than 1.2. It is also the Bank's policy to typically obtain
corporate or personal guarantees, as applicable, on its commercial real estate
loans from the principals of the borrower.

    Commercial real estate lending entails significant additional risks as
compared with single-family residential property lending. Such loans typically
involve large loan balances to single borrowers or groups of related borrowers.
The payment experience on such loans is typically dependent on the successful
operation of the real estate project. The success of such projects is sensitive
to changes in supply and demand conditions in the market for commercial real
estate as well as regional and economic conditions generally. At December 31,
1998, the Bank did not have any nonperforming commercial real estate loans.
See"-Asset Quality."

    CONSTRUCTION LOANS. The Bank also originates primarily residential
construction loans, although the Bank has originated commercial real estate and
multi-family residential construction loans to a limited degree. The Bank's
construction lending activities are limited to the Bank's primary market area.
At December 31, 1998, construction loans amounted to $18.2 million or 4.0% of
the Bank's total loan portfolio, of which $16.4 million consisted of
single-family residential construction loans and $1.8 million consisted of
commercial real estate and multi-family residential construction loans. The
Bank's construction loans generally have fixed interest rates for a term of six
months to nine months. However, the Bank is permitted to originate construction
loans with terms of up to two years under its loan policy. Commercial real
estate and multi-family residential

                                        7

<PAGE>

construction loans are made with a maximum loan to value ratio of 80%.
Construction loans to individuals are typically made with a loan to value ratio
of up to 90% and non-owner occupied construction loans are limited to 80%.

    With limited exceptions, the Bank's construction loans are made to
individual homeowners and a limited number of local real estate builders and
developers for the purpose of constructing one- to four-family residential
homes. Construction loans to individuals are typically made in connection with
the granting of the permanent financing on the property. Such loans convert to a
fully amortizing adjustable or fixed-rate loan at the end of the construction
term. The Bank typically requires that permanent financing with the Bank or some
other lender be in place prior to closing any construction loan to an
individual. Interest on construction/permanent loans is due upon completion of
the construction phase of the loan. At such time, the loan automatically
converts to a permanent loan with an interest rate which is determined upon the
closing of the construction/permanent loan.

    Upon application, credit review and analysis of personal and, if applicable,
corporate financial statements, the Bank makes construction loans to local
builders for the purpose of construction of speculative (or unsold) residential
properties and for the construction of pre-sold single-family homes. Prior to
making a commitment to fund a construction loan, the Bank requires an appraisal
of the property by the Bank's appraisal staff. The Bank's appraisal staff also
reviews and inspects each project at the commencement of construction and
typically before each disbursement of funds during the term of the construction
loan. Loan proceeds are disbursed after inspections of the project based on a
percentage of completion or presentation of substantiated costs incurred.
Interest on construction loans is due upon maturity.

    Construction lending is generally considered to involve a higher level of
risk as compared to one- to four-family residential lending, due to the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic conditions on developers and builders. Moreover, a
construction loan can involve additional risks because of the inherent
difficulty in estimating both a property's value at completion of the project
and the estimated cost (including interest) of the project. The nature of these
loans is such that they are generally more difficult to evaluate and monitor. In
addition, speculative construction loans to a builder are not pre-sold and thus
pose a greater potential risk to the Bank than construction loans to individuals
on their personal residences.

    The Bank has attempted to minimize the foregoing risks by, among other
things, limiting the extent of its construction lending generally and by
limiting its construction lending to primarily residential properties. In
addition, the Bank has adopted underwriting guidelines which impose stringent
loan to value, debt service and other requirements for loans which are believed
to involve higher elements of credit risk, by limiting the geographic area in
which the Bank will do business and by working with builders with whom it has
established relationships. At December 31, 1998, the Bank did not have any
nonperforming construction loans. See "- Asset Quality."

    COMMERCIAL LOANS. To a limited extent, the Bank offers commercial loans
which primarily consist of equipment and inventory loans which are typically
cross-collateralized by commercial real estate. The Bank does not actively
market such loans and offers such loans primarily as an accommodation to its
present customers. At December 31, 1998, such loans amounted to $8.4 million or
1.9% of the total loan portfolio. At December 31, 1998, the Bank had three
nonperforming commercial loans totaling $30,000. See "- Asset Quality."

    The Bank's commercial loans are originated with fixed interest rates with
call provisions between one and five years. Such loans are typically based on a
ten year amortization schedule.

    CONSUMER LOANS. The Bank offers consumer loans in order to provide a full
range of financial services to its customers. The consumer loans offered by the
Bank include primarily home equity and second mortgage loans, automobile loans,
deposit account secured loans and unsecured loans. Consumer loans amounted to
$31.7 million or 7.0% of the total loan portfolio at December 31, 1998, of which
$13.3 million, $10.7 million and $7.7 million consisted of home equity and
second mortgage loans, automobile loans and other consumer loans, respectively.
The Bank intends to continue its emphasis on consumer loans in furtherance of
its role as a community oriented financial institution. Consumer loans are
subject to Arkansas usury law

                                        8

<PAGE>

which limits the interest rate that may be charged to 5% over the Federal
Reserve discount rate, which was 4.50% at December 31, 1998. A change in the
usury rate does not affect loans already in portfolio.

    The Bank's home equity and second mortgage loans are typically fixed-rate
loans with terms of up to 15 years. Although the Bank does not require that it
hold the first mortgage on the secured property, the Bank does hold the first
mortgage on a significant majority of its home equity and second mortgage loans.
The Bank limits the mortgages on the secured property to 85% of the value of the
secured property.

    The Bank's automobile loans are typically originated for the purchase of new
and used cars and trucks. Such loans are generally originated with a maximum
term of five years.

    Other consumer loans consist primarily of deposit account loans and
unsecured loans. Loans secured by deposit accounts are originated for up to 90%
of the account balance, with a hold placed on the account restricting the
withdrawal of the account balance.

    Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciating assets such as automobiles. In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Furthermore, the application of various federal and state laws, including
federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans. At December 31, 1998, the Bank had $159,000 of
nonperforming consumer loans. See "-Asset Quality."

ASSET QUALITY

    When a borrower fails to make a required payment on a loan, the Bank
attempts to cure the deficiency by contacting the borrower and seeking the
payment. Depending upon the type of loan, late notices are sent and/or personal
contacts are made. In most cases, deficiencies are cured promptly. While the
Bank generally prefers to work with borrowers to resolve such problems, when a
mortgage loan becomes 90 days delinquent, the Bank generally institutes
foreclosure or other proceedings, as necessary, to minimize any potential loss.

    Loans are placed on non-accrual status when, in the judgment of management,
the probability of collection of interest is deemed to be insufficient to
warrant further accrual. When a loan is placed on non-accrual status, previously
accrued but unpaid interest is deducted from interest income. The Bank does not
accrue interest on loans past due 90 days or more. Loans may be reinstated to
accrual status when payments are made to bring the loan under 90 days past due
and, in the opinion of management, collection of the remaining balance can be
reasonably expected.

    Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at fair value at the date of foreclosure. After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost to sell. Revenue
and expenses from operations are included in the current period income.
Additions to the valuation allowance are included in the provision for real
estate losses.

                                        9

<PAGE>

    DELINQUENT LOANS. The following table sets forth information concerning
delinquent loans at December 31, 1998, in dollar amounts and as a percentage of
the Bank's total loan portfolio. The amounts presented represent the total
outstanding principal balances of the related loans, rather than the actual
payment amounts which are past due.

<TABLE>
<CAPTION>
                      Single-family           Commercial
                       Residential            Real Estate             Commercial            Consumer
                    -------------------    -------------------    ----------------      ---------------
                             Percentage             Percentage          Percentage           Percentage
                              of Total              of Total             of Total            of Total
                    Amount     Loans      Amount     Loans     Amount     Loans      Amount    Loans
                    ------     -----      ------     -----     ------     -----      ------    -----
                                                 (Dollars in Thousands)
<S>                <C>       <C>          <C>       <C>        <C>      <C>          <C>     <C>
Loans
delinquent:
30-59 days         $1,682       .37%      $  35      .01%      $ --         --%      $ 257      .06%
60-89 days            612       .14          80      .02         34        .01          38      .01
90 days and
over                1,275       .28          --       --         30        .01         159      .04
                   ------                 -----                ----                  -----
Total              $3,569                 $ 115                $ 64                  $ 454
                   ------                 -----                ----                  -----
                   ------                 -----                ----                  -----
</TABLE>



    Interest income that would have been recorded under the original terms of
the Bank's non-accruing loans for the year ended December 31, 1998 amounted to
$114,000, and the interest recognized during this period amounted to $64,000.

    The following table sets forth the amounts and categories of the Bank's
nonperforming assets at the dates indicated.


<TABLE>
<CAPTION>
                                                             December-31,
                                    ----------------------------------------------------------
                                     1998          1997          1996        1995        1994
                                    ------        ------        ------      ------      ------
                                                         (Dollars in Thousands)
<S>                                 <C>           <C>           <C>         <C>         <C>
Nonperforming loans:
  Single-family residential         $1,275        $1,001        $  493      $  223      $  159
  Multi-family residential            --             109          --          --          --
  Commercial real estate              --           3,365(1)       --          --          --
  Construction loans                  --            --            --          --            78
  Commercial loans                      30            48          --          --          --
  Consumer loans                       159           434           228         127          33
                                    ------        ------        ------      ------      ------
     Total nonperforming loans       1,464         4,957           721         350         270
                                    ------        ------        ------      ------      ------
Real estate owned                    4,270(1)        195           154         234         250
                                    ------        ------        ------      ------      ------
     Total nonperforming assets     $5,734        $5,152        $  875      $  584      $  520
                                    ------        ------        ------      ------      ------
                                    ------        ------        ------      ------      ------
Total nonperforming loans as a
  percentage of total loans
  receivable                          0.32%         1.11%         0.18%       0.10%       0.09%
                                    ------        ------        ------      ------      ------
                                    ------        ------        ------      ------      ------
Total nonperforming assets as a
  percentage of total assets          0.93%         0.94%         0.17%       0.13%       0.12%
                                    ------        ------        ------      ------      ------
                                    ------        ------        ------      ------      ------
</TABLE>

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

(1) The Bank reclassified a previously reported non-accrual commercial real
estate loan secured by a 202 room hotel in Oklahoma to real estate owned in
1998. Real estate owned primarily consists of the Bank's 75% ownership of this
property. As a result of such 75% ownership interest, the Bank is required to
include the 25% minority interest ownership in the real estate owned amount
shown above.

                                       10

<PAGE>


    CLASSIFIED ASSETS. Federal regulations require that each insured savings
association classify its assets on a regular basis. In addition, in connection
with examinations of insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them. There are three
classifications for problem assets: "substandard," "doubtful" and "loss."
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. An
asset classified loss is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted. At December 31,
1998, the Bank had $4.8 million of classified assets, $4.7 million of which were
classified as substandard and $91,000 of which were classified as loss. In
addition, at such date, the Bank had $16,000 of assets designated as special
mention.

    ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is a valuation
allowance to provide for incurred but not yet realized losses. The Bank reviews
its non-homogeneous loans for impairment on a quarterly basis. Impairment is
determined by assessing the probability that the borrower will not be able to
fulfill the contractual terms of the agreement. If a loan is determined to be
impaired, the amount of the impairment is measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate or
by use of the observable market price of the loan or fair value of collateral if
the loan is collateral dependent. Throughout the year management estimates the
level of probable losses to determine whether the allowance for loan losses is
appropriate considering the estimated losses existing in the portfolio. Based on
these estimates, an amount is charged to the provision for loan losses and
credited to the allowance for loan losses in order to adjust the allowance to a
level determined by management to be appropriate relative to losses. The
allowance for loan losses is increased by charges to income (provisions) and
decreased by charge-offs, net of recoveries.

    Management's periodic evaluation of the appropriateness of the allowance is
based on the Company's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral and current economic
conditions.

    Homogeneous loans are those that are considered to have common
characteristics that provide for evaluation on an aggregate or pool basis. The
Bank considers the characteristics of (1) one-to-four family residential first
mortgage loans; (2) unsecured consumer loans and; (3) secured consumer loans to
permit consideration of the appropriateness of the allowance for losses of each
group of loans on a pool basis. The primary methodology used to determine the
appropriateness of the allowance for losses includes segregating certain
specific, poorly performing loans based on their performance characteristics
from the pools of loans as to type, grading these loans, and then applying a
loss factor to the remaining pool balance based on several factors including
past loss experience, inherent risks, economic conditions in the primary market
areas, and other factors which usually are beyond the control of the Bank.

    Non-homogeneous loans are those loans that can be included in a particular
loan type, such as commercial loans, construction loans, multi-family, and
commercial first mortgage loans, but which differ in other characteristics to
the extent that valuation on a pool basis is not valid. Those segregated
specific loans are evaluated using the present value of future cash flows,
usually determined by estimating the fair value of the loan's collateral reduced
by any cost of selling and discounted at the loan's effective interest rate if
the estimated time to receipt of monies is more that three months or by use of
the observable market price of the loan or fair value of collateral if the loan
is collateral dependent. After segregating specific, poorly performing loans,
the remaining loans are evaluated based on payment experience, known
difficulties in the borrower's business or geographic area, loss experience,
inherent risks and other factors usually beyond the control of the Bank. A
factor, based on experience, is applied to these loans to estimate the probable
loss.



                                       11

<PAGE>



    Estimates of the probability of loan losses involve an exercise of
judgement. While it is possible that in the near term the Bank may sustain
losses which are substantial in relation to the allowance for loan losses, it is
the judgement of management that the allowance for loan losses reflected in the
consolidated statements of financial condition is appropriate considering the
estimated probable losses in the portfolio.

    The following table summarizes changes in the allowance for loan losses and
other selected statistics for the periods presented.


<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                     -------------------------------------------------------------------------
                                        1998           1997            1996            1995             1994
                                     ---------       ---------       ---------       ---------       ---------
                                                                    (Dollars in Thousands)
<S>                                  <C>             <C>             <C>             <C>             <C>
Total loans outstanding at
 end of period                       $ 453,323       $ 445,955       $ 410,790       $ 348,752       $ 286,557
                                     ---------       ---------       ---------       ---------       ---------
                                     ---------       ---------       ---------       ---------       ---------
Average loans outstanding            $ 441,702       $ 415,075       $ 369,185       $ 306,175       $ 257,261
                                     ---------       ---------       ---------       ---------       ---------
                                     ---------       ---------       ---------       ---------       ---------
Allowance at beginning of period     $   1,196       $   1,251       $   1,228       $   1,134       $   1,447
                                     ---------       ---------       ---------       ---------       ---------
Charge-offs:
  Single-family residential                (17)           --              --                (2)            (24)
  Commercial real estate                  (369)           --              --                (8)           (335)
  Consumer loans                          (103)            (67)            (40)            (30)             (9)
                                     ---------       ---------       ---------       ---------       ---------
    Total charge-offs                     (489)            (67)            (40)            (40)           (368)
                                     ---------       ---------       ---------       ---------       ---------
Recoveries:
  Commercial real estate                  --              --                 1            --              --
  Consumer loans                             9              12               2               1               1
                                     ---------       ---------       ---------       ---------       ---------
    Total recoveries                         9              12               3               1               1
                                     ---------       ---------       ---------       ---------       ---------
Net charge-offs                           (480)            (55)            (37)            (39)           (367)
                                     ---------       ---------       ---------       ---------       ---------
Total provisions for losses                 55            --                60             133              54
                                     ---------       ---------       ---------       ---------       ---------
Allowance at end of period           $     771       $   1,196       $   1,251       $   1,228       $   1,134
                                     ---------       ---------       ---------       ---------       ---------
                                     ---------       ---------       ---------       ---------       ---------
Allowance for loan losses as a
  percentage of total loans
  outstanding at end of period            0.17%           0.27%           0.30%           0.35%           0.40%
                                     ---------       ---------       ---------       ---------       ---------
                                     ---------       ---------       ---------       ---------       ---------
Net loans charged-off as a
  percentage of average loans
  outstanding                             0.11%           0.01%           0.01%           0.01%           0.14%
                                     ---------       ---------       ---------       ---------       ---------
                                     ---------       ---------       ---------       ---------       ---------
</TABLE>



                                       12

<PAGE>



    The following table presents the allocation of the Bank's allowance for loan
losses by the type of loan at each of the dates indicated. The significant
portion of the allowance which is unallocated is due to historically low levels
of nonperforming single-family residential loans, multi-family residential
loans, commercial real estate loans, construction loans, commercial loans and
consumer loans, which would otherwise require a larger allocation of the
allowance, balanced with management's desire to provide for an adequate
allowance in light of the size of the Bank's loan portfolio.



<TABLE>
<CAPTION>

                                                                         December 31,
                                -----------------------------------------------------------------------------------------------
                                          1998                    1997                     1996                   1995
                                -----------------------   --------------------     --------------------   ---------------------
                                           Percent of               Percent of              Percent of              Percent of
                                         Total Loans by            Total Loans              Total Loans             Total Loans
                                Amount      Category      Amount   by Category     Amount   by Category   Amount    by Category
                                ------   --------------   ------   -----------     ------   -----------   ------    -----------
                                                                   (Dollars in Thousands)
<S>                            <C>       <C>             <C>       <C>             <C>      <C>           <C>       <C>
Single-family residential      $   46         81.66%     $    49        83.18%     $   11       82.36%    $   11        82.54%
Multi-family residential           --           .34           --          .29          --         .38         --          .30
Commercial real estate            147          5.12          125         4.17         117        4.66        124         5.66
Construction loans                  -          4.02           --         4.66          --        4.88         --         3.33
Commercial loans                   60          1.86           13         1.27          19        1.06         27         1.15
Consumer loans                    135          7.00          221         6.43         270        6.66        241         7.02
Unallocated                       383            --          788           --         834          --        825           --
                               ------        ------       ------       ------      ------      ------     ------       ------
    Total                      $  771        100.00%      $1,196       100.00%     $1,251      100.00%    $1,228       100.00%
                               ------        ------       ------       ------      ------      ------     ------       ------
                               ------        ------       ------       ------      ------      ------     ------       ------
</TABLE>

<TABLE>
<CAPTION>
                                        December 31,
                                  -------------------------
                                           1994
                                  -------------------------
                                               Percent of
                                             Total Loans by
                                  Amount        Category
                                  ------     --------------
                                   (Dollars in Thousands)
<S>                               <C>        <C>
Single-family residential         $   16           82.96%
Multi-family residential              --            0.28
Commercial real estate               117            6.12
Construction loans                    --            2.61
Commercial loans                      21            1.11
Consumer loans                       143            6.92
Unallocated                          837              --
                                  ------          ------
    Total                         $1,134          100.00%
                                  ------          ------
                                  ------          ------
</TABLE>



                                       13

<PAGE>


INVESTMENT ACTIVITIES

    MORTGAGE-BACKED SECURITIES. Mortgage-backed securities (which also are known
as mortgage participation certificates or pass-through certificates) typically
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators, through intermediaries (generally U.S. Government agencies
and government sponsored enterprises) that pool and repackage the participation
interests in the form of securities, to investors such as the Bank. Such U.S.
Government agencies and government sponsored enterprises, which guarantee the
payment of principal and interest to investors, primarily include the FHLMC, the
FNMA and the Government National Mortgage Association ("GNMA").

    The FHLMC is a public corporation chartered by the U.S. Government and
guarantees the timely payment of interest and the ultimate return of principal
within one year. The FHLMC mortgage-backed securities are not backed by the full
faith and credit of the United States, but because the FHLMC is a U.S.
Government sponsored enterprise, these securities are considered high quality
investments with minimal credit risks. The GNMA is a government agency within
the Department of Housing and Urban Development which is intended to help
finance government assisted housing programs. The GNMA guarantees the timely
payment of principal and interest, and GNMA securities are backed by the full
faith and credit of the U.S. Government. The FNMA guarantees the timely payment
of principal and interest, and FNMA securities are indirect obligations of the
U.S. Government.

      Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as
the prepayment risk, are passed on to the certificate holder. Accordingly, the
life of a mortgage-backed pass-through security approximates the life of the
underlying mortgages. It has been the Bank's practice to invest only in
fixed-rate mortgage-backed securities. Mortgage-backed securities that
management has the positive intent and ability to hold to maturity are
classified as held to maturity and are reported at amortized cost.

      The following table sets forth certain information relating to the
composition of the Bank's mortgage-backed securities at the dates indicated.



<TABLE>
<CAPTION>
                                                      December 31,
                                          -------------------------------------
                                          1998             1997            1996
                                          ----             ----            ----
                                                     (In Thousands)
<S>                                       <C>             <C>             <C>
Mortgage-backed securities
  held to maturity:
  FHLMC                                   $  25           $ 157           $ 227
                                           ----            ----            ----
   Total mortgage-backed
     securities                           $  25           $ 157           $ 227
                                           ----            ----            ----
                                           ----            ----            ----
</TABLE>

         Mortgage-backed securities are generally backed by insurance or
guarantees, are more liquid than individual mortgage loans and may be used to
collateralize borrowings or other obligations of the Bank. At December 31, 1998,
no mortgage-backed securities were pledged to secure obligations of the Bank.




                                       14

<PAGE>



         Of the $25,000 of mortgage-backed securities at December 31, 1998,
$5,000 was scheduled to mature between one and five years and $20,000 between
five and ten years. The $5,000 and $20,000 of mortgage-backed securities had
weighted average yields of 7.13% and 8.50%, respectively. At such date, all of
the Bank's mortgage-backed securities were fixed-rate and are disclosed above in
the periods in which they are scheduled to mature. The actual maturity of a
mortgage-backed security may be less than its stated maturity due to prepayments
of the underlying mortgages. Prepayments that are faster than anticipated will
shorten the life of the security and adversely affect its yield to maturity. The
yield is based upon the interest income and the amortization of any premium or
discount related to the mortgage-backed security. In accordance with generally
accepted accounting principles, premiums and discounts are amortized over the
estimated lives of the securities, which decrease and increase interest income,
respectively. The prepayment assumptions used to determine the amortization
period for premiums and discounts can significantly affect the yield of the
mortgage-backed security, and these assumptions are reviewed periodically to
reflect actual prepayments. Although prepayments of underlying mortgages depend
on many factors, including the type of mortgages, the coupon rate, the age of
mortgages, the geographical location of the underlying real estate
collateralizing the mortgages and general levels of market interest rates, the
difference between the interest rates on the underlying mortgages and the
prevailing mortgage interest rates generally is the most significant determinant
of the rate of prepayments. During periods of falling mortgage interest rates,
if the coupon rate of the underlying mortgages exceeds the prevailing market
interest rates offered for mortgage loans, refinancing generally increases and
accelerates the prepayment of the underlying mortgages and the related security.
Under such circumstances, the Bank may be subject to reinvestment risk because
to the extent that the Bank's mortgage-backed securities amortize or prepay
faster than anticipated, the Bank may not be able to reinvest the proceeds of
such repayments and prepayments at a comparable interest rate.

         INVESTMENT SECURITIES. The investment policy of the Bank, as
established by the Board of Directors, is designed primarily to provide and
maintain liquidity and to generate a favorable return on investments without
incurring undue interest rate risk, credit risk, and investment portfolio asset
concentrations. The Bank's investment policy is currently implemented by the
Bank's President within the parameters set by the Board of Directors. The Bank
is authorized to invest in obligations issued or fully guaranteed by the U.S.
Government, certain federal agency obligations, certain time deposits,
negotiable certificates of deposit issued by commercial banks and other insured
financial institutions, investment grade corporate debt securities and other
specified investments.

         Investment securities that management has the positive intent and
ability to hold to maturity are classified as held to maturity and are reported
at amortized cost. Investment securities classified as available for sale are
reported at fair value, with unrealized gains and losses excluded from earnings,
net of taxes, and reported as a separate component of equity. At December 31,
1998, the Bank held no investment securities classified as available for sale.
At December 31, 1998, approximately $16 million of the Bank's investment
securities were pledged to secure obligations of the Bank. At December 31, 1998,
investments in the debt and/or equity securities of any one issuer, other than
those issued by U.S. Government agencies, did not exceed more than 10% of the
Company's stockholders' equity.

         At December 31, 1998, the Bank's investment securities included
structured notes of $2.1 million, of which $2.0 million were adjustable-rate
FHLB notes and $126,000 were FHLB zero coupon bonds with a face value of
$550,000. The adjustable-rate FHLB notes adjust semi-annually based on a
multiple of the ten-year CMT index plus 160 basis points with a floor of 4.50%
and a cap of 24.0%. The adjustable-rate FHLB notes are non-callable with a
stated maturity of March 2000. The CMT index could result in the interest rate
on these notes being less than market rates of interest. At December 31, 1998,
the FHLB zero coupon bond had a remaining maturity of nineteen years with a call
date within one year.

         The maturity terms of the investment securities purchased in 1998
totaling $111.4 million generally have been longer term, up to twenty years with
three month to two year call protection.




                                       15

<PAGE>



         The following table sets forth the amount of investment securities
which contractually mature during each of the periods indicated and the weighted
average yields for each range of maturities at December 31, 1998. Expected
maturities may differ from contractual maturities because issuers may have the
right to call or prepay the obligation without prepayment penalties.


<TABLE>
<CAPTION>
                                   Less Than         One to Five      Five to Ten        After Ten
                                    One Year            Years             Years             Years             Total
                                ---------------    ----------------   ---------------    --------------    --------------
                                 Amount   Yield     Amount    Yield    Amount   Yield    Amount   Yield    Amount   Yield
                                --------  -----    --------  ------   -------  ------    -------  -----    ------   -----
<S>                             <C>       <C>      <C>       <C>      <C>      <C>       <C>      <C>      <C>      <C>
                                                                       (Dollars in Thousands)
Bonds and other debt
 securities held to maturity:
 U.S. Government and
  agency obligations            $10,008    6.12%    $8,188    5.70%   $14,100   6.76%    $94,854   6.74%  $127,150   6.63%
                                 ------              -----             ------              ------          -------
Total investment securities     $10,008             $8,188            $14,100             $94,854         $127,150
                                 ------              -----             ------              ------          -------
                                 ------              -----             ------              ------          -------
</TABLE>

         As of December 31, 1998, there were approximately $113 million of
investments with issuer call options, of which approximately $97 million are
callable within one year.

         The following table sets forth the carrying value of the Company's
investment securities classified as held to maturity and available for sale at
the dates indicated.


<TABLE>
<CAPTION>
                                                                December 31,
                                               -----------------------------------------------
                                                  1998               1997               1996
                                               ---------            -------            -------
                                                                (In Thousands)
<S>                                            <C>                 <C>                 <C>
Investment securities held
  to maturity:
  U.S. Government and agency
    obligations                                 $127,150            $95,376            $90,755

  Equity securities available
  for sale:
  FHLMC preferred stock(1)                            --                --                 340
                                               ---------            -------            -------
Total investment securities                    $ 127,150            $95,376            $91,095
                                               ---------            -------            -------
                                               ---------            -------            -------
</TABLE>

----------------
(1)      Reflects carrying value at fair market value. At December 31, 1998 and
         1997 the Company held no securities as available for sale.

         As a member of the FHLB of Dallas, the Bank is required to maintain an
investment in FHLB stock. At December 31, 1998, the Bank's investment in FHLB
stock amounted to $3.9 million. No ready market exists for such stock and it has
no quoted market value.



                                       16

<PAGE>

SOURCES OF FUNDS

         GENERAL. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, the Bank derives
funds from loan principal repayments and prepayments and interest payments,
maturities of investment securities and advances from the FHLB of Dallas. Loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows are significantly influenced by general interest rates and money market
conditions. Borrowings may be used on a short-term basis to compensate for
reductions in the availability of funds from other sources. They may also be
used on a longer term basis for general business purposes. The Bank began
utilizing FHLB of Dallas advances as an additional source of funds during 1997.

         DEPOSITS. The Bank's deposit products include a broad selection of
deposit instruments, including negotiable order of withdrawal ("NOW") accounts,
demand deposit accounts ("DDA"), money market accounts, regular savings accounts
and term certificate accounts. Deposit account terms vary, with the principal
differences being the minimum balance required, the time period the funds must
remain on deposit, early withdrawal penalties and the interest rate.

         The Bank considers its primary market area to be Northcentral and
Northwest Arkansas. The Bank utilizes traditional marketing methods to attract
new customers and savings deposits. The Bank does not advertise for deposits
outside of its primary market area or utilize the services of deposit brokers,
and management believes that an insignificant number of deposit accounts were
held by non-residents of Arkansas at December 31, 1998.

         The Bank has been competitive in the types of accounts and in interest
rates it has offered on its deposit products but does not necessarily seek to
match the highest rates paid by competing institutions. Although market demand
generally dictates which deposit maturities and rates will be accepted by the
public, the Bank intends to continue to promote longer term deposits to the
extent possible and consistent with its asset and liability management goals.

         The following table shows the distribution of, and certain other
information relating to, the Bank's deposits by type of deposit, as of the dates
indicated.


<TABLE>
<CAPTION>
                                                                December 31,
                                     ------------------------------------------------------------------
                                            1998                    1997                    1996
                                     ------------------      ------------------      ------------------
                                      Amount        %         Amount        %         Amount        %
                                     --------     -----      --------     -----      --------     -----
                                                           (Dollars in Thousands)
<S>                                  <C>          <C>        <C>          <C>        <C>          <C>
Certificate accounts:
      3.00% - 3.99%                  $    453      .1 %      $    362        .1%     $    607        .2%
      4.00% - 5.99%                   278,335      57.9       241,660      53.6       205,912      48.7
      6.00% - 7.99%                    91,156      18.9        97,885      21.7        90,568      21.4
      8.00% and over                    8,821       1.8        20,236       4.5        36,408       8.6
                                     --------     -----      --------     -----      --------     -----
  Total certificate accounts          378,765      78.7       360,143      79.9       333,495      78.9
                                     --------     -----      --------     -----      --------     -----

Transaction accounts:
  Passbook and statement savings       25,916       5.4        25,330       5.6        26,451       6.2
  Money market accounts                16,164       3.4        15,438       3.4        17,214       4.1
  NOW accounts/DDA                     60,248      12.5        49,963      11.1        45,698      10.8
                                                  -----      --------     -----      --------     -----
     Total transaction accounts       102,328      21.3        90,731      20.1        89,363      21.1
                                     --------     -----      --------     -----      --------     -----
     Total deposits                  $481,093     100.0%     $450,874     100.0%     $422,858     100.0%
                                     --------     -----      --------     -----      --------     -----
                                     --------     -----      --------     -----      --------     -----
</TABLE>



                                       17

<PAGE>



         The following table presents the average balance of each type of
deposit and the average rate paid on each type of deposit and/or total deposits
for the periods indicated.



<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                    -----------------------------------------------------------------------------------
                                               1998                         1997                         1996
                                    -----------------------     -----------------------------     ---------------------
                                                    Average                        Average                     Average
                                      Average        Rate          Average           Rate        Average        Rate
                                      Balance        Paid          Balance           Paid        Balance        Paid
                                    ----------    ----------    -------------    ------------   ----------    ---------
                                                                   (Dollars in Thousands)
<S>                                 <C>           <C>           <C>              <C>            <C>           <C>  
Passbook and statement savings
  accounts                          $ 26,128        2.72%        $ 26,092            2.72%       $ 27,149       2.72%

Money market accounts and
  NOW accounts                        58,226        2.33           55,486            2.34          54,748       2.42
Demand deposit accounts               11,758          --            9,624              --           9,244         --
Certificates of deposit              366,484        5.99          348,945            6.11         328,921       6.19
                                     -------        ----          -------            ----         -------       ----
    Total deposits                  $462,596        5.19%        $440,147            5.30%       $420,062       5.33%
                                     -------        ----          -------            ----         -------       ----
                                     -------        ----          -------            ----         -------       ----
</TABLE>


         The following table presents, by various interest rate categories, the
amount of certificates of deposit at December 31, 1998 and 1997 and the amounts
at December 31, 1998 which mature during the periods indicated.


<TABLE>
<CAPTION>
                                                                               Balance at December 31, 1998
                                              December 31,             Maturing in the 12 Months Ending December 31,
                                     --------------------------     --------------------------------------------------
                                         1998           1997         1999           2000         2001       Thereafter
                                     -----------    -----------   ----------      ---------    --------    -----------
                                                                         (In Thousands)
<S>                                  <C>             <C>           <C>            <C>         <C>           <C>
Certificates of Deposit
3.00% - 3.99%                         $    453        $    362      $    453       $     --     $    --       $    --
4.00% - 5.99%                          278,335         241,660       212,808         49,238      10,578         5,711
6.00% - 7.99%                           91,156          97,885        20,602         13,328      12,404        44,822
8.00% and over                           8,821          20,236         3,167             --          --         5,654
                                      --------        --------      --------        -------     -------       -------
  Total certificate accounts          $378,765        $360,143      $237,030        $62,566     $22,982       $56,187
                                      --------        --------      --------        -------     -------       -------
                                      --------        --------      --------        -------     -------       -------
</TABLE>

         The following table sets forth the savings flows of the Bank during the
periods indicated.


<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                   -----------------------------------------
                                                     1998            1997             1996
                                                   -------          -------         --------
                                                             (In Thousands)
<S>                                                <C>              <C>             <C>
Increase (decrease) before interest credited       $11,895          $10,786         $(10,731)
Interest credited                                   18,324           17,230           16,360
                                                   -------          -------         --------
  Net increase in deposits                         $30,219          $28,016         $  5,629
                                                   -------          -------         --------
                                                   -------          -------         --------
</TABLE>

         The decrease in deposits before interest credited in 1996 was primarily
due to the use of such funds by customers to purchase shares of the Company's
common stock in the Conversion.

         The following table sets forth maturities of the Bank's certificates of
deposit of $100,000 or more at December 31, 1998 by time remaining to maturity.

<TABLE>
<CAPTION>
                                                       Amounts
                                                      ----------
Period Ending:                                      (In Thousands)
<S>                                                 <C>
March 31, 1999                                         $20,364
June 30, 1999                                           20,509
December 31, 1999                                       10,814
After December 31, 1999                                 22,757
                                                       -------
  Total certificates of deposit with
    balances of $100,000 or more                       $74,444
                                                       -------
                                                       -------
</TABLE>

                                       18
<PAGE>

         BORROWED FUNDS. The Bank has utilized FHLB advances in its normal
operating and investing activities during 1998 and 1997. There were no advances
outstanding at previous year ends. The Bank pledges as collateral for FHLB
advances their FHLB stock and has entered into blanket collateral agreements
with the FHLB whereby the Bank agrees to maintain, free of other encumbrances,
qualifying single family first mortgage loans with unpaid principal balances,
when discounted at 75% of the such balances, of at least 100% of total
outstanding advances.

         Advances at December 31, 1998, have maturity dates and weighted average
rates as follows:


<TABLE>
<CAPTION>
                        WEIGHTED
    YEAR ENDING          AVERAGE
    DECEMBER 31            RATE           AMOUNT
-----------------    ------------    -------------
<S>                  <C>             <C>
        1999             5.71%         $19,000
        2000             5.31           14,000
        2001             4.85            7,000
        2002             6.60            3,985
        2003             5.56            1,000
     THEREAFTER          6.01            4,000
                                       -------
       TOTAL            5.57%          $48,985
                                       -------
                                       -------
</TABLE>



         THE FOLLOWING TABLE SETS FORTH INFORMATION WITH RESPECT TO THE
COMPANY'S FHLB ADVANCES AT AND DURING THE PERIODS INDICATED.


<TABLE>
<CAPTION>
                                        AT OR FOR THE YEAR ENDED DECEMBER 31,
                                  ---------------------------------------------
                                    1998              1997                 1996
                                  -------          -------               ------
                                               (DOLLARS IN THOUSANDS)
<S>                               <C>              <C>                   <C>
MAXIMUM BALANCE                   $50,687          $12,997               $2,600

AVERAGE BALANCE                    30,452            6,493                  916

YEAR END BALANCE                   48,985           11,997                   --

WEIGHTED AVERAGE
INTEREST RATE:

  AT END OF YEAR                     5.57%            6.31%                  --

  DURING THE YEAR                    5.81             6.42                 5.45%
</TABLE>


EMPLOYEES

         The Bank had 168 full-time employees and 22 part-time employees at
December 31, 1998. None of these employees is represented by a collective
bargaining agent, and the Bank believes that it enjoys good relations with its
personnel.



                                       19

<PAGE>



SUBSIDIARIES

         The Bank is permitted to invest up to 2% of its assets in the capital
stock of, or secured or unsecured loans to, subsidiary corporations, with an
additional investment of 1% of assets when such additional investment is
utilized primarily for community development purposes. The Bank's only
subsidiary, First Harrison Service Corporation (the "Service Corporation"), was
formed in 1971. At December 31, 1998, the Service Corporation's only significant
asset was a $4.0 million repossessed commercial loan collateralized by a hotel
in Oklahoma City, Oklahoma. The property has been listed and is being operated
by a management company until disposition. The Service Corporation generated net
income of approximately $9,000 during 1998.

COMPETITION

         The Bank faces strong competition both in attracting deposits and
making real estate loans. Its most direct competition for deposits has
historically come from other savings associations, credit unions and commercial
banks, including many large financial institutions which have greater financial
and marketing resources available to them. In addition, during times of high
interest rates, the Bank has faced additional significant competition for
investors' funds from short-term money market securities, mutual funds and other
corporate and government securities. The ability of the Bank to attract and
retain savings deposits depends on its ability to generally provide a rate of
return, liquidity and risk comparable to that offered by competing investment
opportunities.

         The Bank experiences strong competition for real estate loans
principally from savings associations, commercial banks and mortgage companies.
The Bank competes for loans principally through the interest rates and loan fees
it charges and the efficiency and quality of services it provides borrowers.
Competition has increased as a result of the continuing reduction of
restrictions on the interstate operations of financial institutions.


                                       20

<PAGE>



                                   REGULATION


         SET FORTH BELOW IS A BRIEF DESCRIPTION OF THOSE LAWS AND REGULATIONS
WHICH, TOGETHER WITH THE DESCRIPTIONS OF LAWS AND REGULATIONS CONTAINED
ELSEWHERE HEREIN, ARE DEEMED MATERIAL TO AN INVESTOR'S UNDERSTANDING OF THE
EXTENT TO WHICH THE COMPANY AND THE BANK ARE REGULATED. THE DESCRIPTION OF THE
LAWS AND REGULATIONS HEREUNDER, AS WELL AS DESCRIPTIONS OF LAWS AND REGULATIONS
CONTAINED ELSEWHERE HEREIN, DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO APPLICABLE LAWS AND REGULATIONS.

THE COMPANY

         GENERAL. The Company, as a savings and loan holding company within the
meaning of the Home Owners Loan Act ("HOLA"), has registered with the OTS and is
subject to OTS regulations, examinations, supervision and reporting
requirements. As a subsidiary of a savings and loan holding company, the Bank is
subject to certain restrictions in its dealings with the Company and affiliates
thereof.

         ACTIVITIES RESTRICTIONS. There are generally no restrictions on the
activities of a savings and loan holding company which holds only one subsidiary
savings institution. However, if the Director of the OTS determines that there
is reasonable cause to believe that the continuation by a savings and loan
holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings institution, the
Director may impose such restrictions as deemed necessary to address such risk,
including limiting (i) payment of dividends by the savings institution; (ii)
transactions between the savings institution and its affiliates; and (iii) any
activities of the savings institution that might create a serious risk that the
liabilities of the holding company and its affiliates may be imposed on the
savings institution. Notwithstanding the above rules as to permissible business
activities of unitary savings and loan holding companies, if the savings
institution subsidiary of such a holding company fails to meet the qualified
thrift lender ("QTL") test, as discussed under "- The Bank - Qualified Thrift
Lender Test," then such unitary holding company also shall become subject to the
activities restrictions applicable to multiple savings and loan holding
companies and, unless the savings institution requalifies as a QTL within one
year thereafter, shall register as, and become subject to the restrictions
applicable to, a bank holding company. See "- The Bank - Qualified Thrift Lender
Test."

         If the Company were to acquire control of another savings institution,
other than through merger or other business combination with the Bank, the
Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions and where each subsidiary savings institution meets the QTL
test, as set forth below, the activities of the Company and any of its
subsidiaries (other than the Bank or other subsidiary savings institutions)
would thereafter be subject to further restrictions. Among other things, no
multiple savings and loan holding company or subsidiary thereof which is not a
savings institution shall commence or continue for a limited period of time
after becoming a multiple savings and loan holding company or subsidiary thereof
any business activity, upon prior notice to, and no objection by the OTS, other
than: (i) furnishing or performing management services for a subsidiary savings
institution; (ii) conducting an insurance agency or escrow business; (iii)
holding, managing, or liquidating assets owned by or acquired from a subsidiary
savings institution; (iv) holding or managing properties used or occupied by a
subsidiary savings institution; (v) acting as trustee under deeds of trust; (vi)
those activities authorized by regulation as of March 5, 1987 to be engaged in
by multiple savings and loan holding companies; or (vii) unless the Director of
the OTS by regulation prohibits or limits such activities for savings and loan
holding companies, those activities authorized by the Federal Reserve Board
("FRB") as permissible for bank holding companies. Those activities described in
(vii) above also must be approved by the Director of the OTS prior to being
engaged in by a multiple savings and loan holding company.

         LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. Transactions between
savings institutions and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company or
entity which controls, is controlled by or is under common control with the
savings institution. In a holding


                                       21

<PAGE>


company context, the parent holding company of a savings institution (such as
the Company) and any companies which are controlled by such parent holding
company are affiliates of the savings institution. Generally, Sections 23A and
23B (i) limit the extent to which the savings institution or its subsidiaries
may engage in "covered transactions" with any one affiliate to an amount equal
to 10% of such institution's capital stock and surplus, and contain an aggregate
limit on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus and (ii) require that all such transactions be on
terms substantially the same, or at least as favorable, to the institution or
subsidiary as those provided to a non-affiliate. The term "covered transaction"
includes the making of loans, purchase of assets, issuance of a guarantee and
other similar transactions. In addition to the restrictions imposed by Sections
23A and 23B, no savings institution may (i) loan or otherwise extend credit to
an affiliate, except for any affiliate which engages only in activities which
are permissible for bank holding companies, or (ii) purchase or invest in any
stocks, bonds, debentures, notes or similar obligations of any affiliate, except
for affiliates which are subsidiaries of the savings institution.

         RESTRICTIONS ON ACQUISITIONS. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director of the OTS, (i) control of any other savings
institution or savings and loan holding company or substantially all the assets
thereof or (ii) more than 5% of the voting shares of a savings institution or
holding company thereof which is not a subsidiary. Except with the prior
approval of the Director of the OTS, no director or officer of a savings and
loan holding company or person owning or controlling by proxy or otherwise more
than 25% of such company's stock, may acquire control of any savings
institution, other than a subsidiary savings institution, or of any other
savings and loan holding company.

         The Director of the OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan holding
company involved controls a savings institution which operated a home or branch
office located in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by the state-chartered institutions or savings and loan holding
companies located in the state where the acquiring entity is located (or by a
holding company that controls such state-chartered savings institutions).

         Under the Bank Holding Company Act of 1956, the FRB is authorized to
approve an application by a bank holding company to acquire control of a savings
institution. In addition, a bank holding company that controls a savings
institution may merge or consolidate the assets and liabilities of the savings
institution with, or transfer assets and liabilities to, any subsidiary bank
which is a member of the BIF with the approval of the appropriate federal
banking agency and the FRB. As a result of these provisions, there have been a
number of acquisitions of savings institutions by bank holding companies in
recent years.



                                       22

<PAGE>



THE BANK

         GENERAL. The OTS has extensive authority over the operations of
federally chartered savings institutions. As part of this authority, savings
institutions are required to file periodic reports with the OTS and are subject
to periodic examinations by the OTS and the FDIC. The last regulatory
examination of the Bank by the OTS was completed in January, 1999. The Bank was
not required to make any material changes to its operations as a result of such
examination. The investment and lending authority of savings institutions are
prescribed by federal laws and regulations, and such institutions are prohibited
from engaging in any activities not permitted by such laws and regulations.
Those laws and regulations generally are applicable to all federally chartered
savings institutions and may also apply to state-chartered savings institutions.
Such regulation and supervision is primarily intended for the protection of
depositors.

         The OTS' enforcement authority over all savings institutions and their
holding companies includes, among other things, the ability to assess civil
money penalties, to issue cease and desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS.

         INSURANCE OF ACCOUNTS. The deposits of the Bank are insured to the
maximum extent permitted by the SAIF, which is administered by the FDIC, and are
backed by the full faith and credit of the U.S. Government. As insurer, the FDIC
is authorized to conduct examinations of, and to require reporting by,
FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious threat to the FDIC. The FDIC also has the authority to initiate
enforcement actions against savings institutions, after giving the OTS an
opportunity to take such action.

         The deposits of the Bank are currently insured by the SAIF. Both the
SAIF and the BIF, the federal deposit insurance fund that covers commercial bank
deposits, are required by law to attain and thereafter maintain a reserve ratio
of 1.25% of insured deposits. The BIF had achieved a fully funded status in
contrast to the SAIF and, therefore, the FDIC substantially reduced the average
deposit insurance premium paid by commercial banks to a level approximately 75%
below the average premium paid by savings institutions.

         The FDIC is authorized to establish separate annual assessment rates
for deposit insurance for members of the BIF and the SAIF. The FDIC may increase
assessment rates for either fund if necessary to restore the fund's ratio of
reserves to insured deposits to its target level within a reasonable time and
may decrease such assessment rates if such target level is met. The FDIC has
established a risk-based assessment system for both SAIF and BIF members. Under
this system, assessments are set within a range, based on the risk the
institution poses to its deposit insurance fund. This risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.

         The premium schedule for BIF and SAIF insured institutions ranges from
0 to 27 basis points. However, SAIF insured institutions are required to pay a
Financing Corporation assessment, in order to fund the interest on bonds issued
to resolve thrift failures in the 1980s, equal to approximately 6 basis points
for each $100 in domestic deposits, while BIF insured institutions pay an
assessment equal to approximately 1 basis point for each $100 in domestic
deposits. The SAIF assessment is expected to be reduced to about 2 basis points
no later than January 1, 2000, when BIF insured institutions fully participate
in the assessment. These assessments, which may be revised based upon the level
of BIF and SAIF deposits will continue until the bonds mature in the year 2017.

         The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the


                                       23

<PAGE>



hearing process for the permanent termination of insurance, if the institution
has no tangible capital. If insurance of accounts is terminated, the accounts at
the institution at the time of the termination, less subsequent withdrawals,
shall continue to be insured for a period of six months to two years, as
determined by the FDIC. Management is aware of no existing circumstances which
would result in termination of the Bank's deposit insurance.

         REGULATORY CAPITAL REQUIREMENTS. Federally insured savings institutions
are required to maintain minimum levels of regulatory capital. The OTS has
established capital standards applicable to all savings institutions. These
standards generally must be as stringent as the comparable capital requirements
imposed on national banks. The OTS also is authorized to impose capital
requirements in excess of these standards on individual institutions on a
case-by-case basis.

         Current OTS capital standards require savings institutions to satisfy
three different capital requirements. Under these standards, savings
institutions must maintain "tangible" capital equal to at least 1.5% of adjusted
total assets, "core" capital equal to at least 3.0% of adjusted total assets and
"total" capital (a combination of core and "supplementary" capital) equal to at
least 8.0% of "risk-weighted" assets. For purposes of the regulation, core
capital generally consists of common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, minority
interests in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and "qualifying supervisory
goodwill." Tangible capital is given the same definition as core capital but
does not include qualifying supervisory goodwill and is reduced by the amount of
all the savings institution's intangible assets, with only a limited exception
for purchased mortgage servicing rights. The Bank had no goodwill or other
intangible assets at December 31, 1998. Both core and tangible capital are
further reduced by an amount equal to a savings institution's debt and equity
investments in subsidiaries engaged in activities not permissible to national
banks (other than subsidiaries engaged in activities undertaken as agent for
customers or in mortgage banking activities and subsidiary depository
institutions or their holding companies). These adjustments do not materially
affect the Bank's regulatory capital. At December 31, 1998, the Bank exceeded
its tangible, core and risk-based capital requirements.

         In determining compliance with the risk-based capital requirement, a
savings institution is allowed to include both core capital and supplementary
capital in its total capital, provided that the amount of supplementary capital
included does not exceed the savings institution's core capital. Supplementary
capital generally consists of hybrid capital instruments; perpetual preferred
stock which is not eligible to be included as core capital; subordinated debt
and intermediate-term preferred stock; and general allowances for loan losses up
to a maximum of 1.25% of risk-weighted assets. In determining the required
amount of risk-based capital, total assets, including certain off-balance sheet
items, are multiplied by a risk weight based on the risks inherent in the type
of assets. The risk weights assigned by the OTS for principal categories of
assets are (i) 0% for cash and securities issued by the U.S. Government or
unconditionally backed by the full faith and credit of the U.S. Government; (ii)
20% for securities (other than equity securities) issued by U.S.
Government-sponsored agencies and mortgage-backed securities issued by, or fully
guaranteed as to principal and interest by, the FNMA or the FHLMC, except for
those classes with residual characteristics or stripped mortgage-related
securities; (iii) 50% for prudently underwritten permanent one- to four-family
first lien mortgage loans not more than 90 days delinquent and having a
loan-to-value ratio of not more than 80% at origination unless insured to such
ratio by an insurer approved by the FNMA or the FHLMC, qualifying residential
bridge loans made directly for the construction of one- to four-family
residences and qualifying multi-family residential loans; and (iv) 100% for all
other loans and investments, including consumer loans, commercial loans, and
one- to four-family residential real estate loans more than 90 days delinquent,
and for repossessed assets.

         LIQUIDITY REQUIREMENTS. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At the present time, the required minimum
liquid asset ratio is 4%. At December 31, 1998, the Bank's liquidity ratio was
28.0%.



                                       24

<PAGE>



         QUALIFIED THRIFT LENDER TEST. All savings institutions are required to
meet a QTL test to avoid certain restrictions on their operations. A savings
institution that does not meet the QTL test must either convert to a bank
charter or comply with the following restrictions on its operations: (i) the
institution may not engage in any new activity or make any new investment,
directly or indirectly, unless such activity or investment is permissible for a
national bank; (ii) the branching powers of the institution shall be restricted
to those of a national bank; (iii) the institution shall not be eligible to
obtain any advances from its FHLB; and (iv) payment of dividends by the
institution shall be subject to the rules regarding payment of dividends by a
national bank. Upon the expiration of three years from the date the savings
institution ceases to be a QTL, it must cease any activity and not retain any
investment not permissible for a national bank and immediately repay any
outstanding FHLB advances (subject to safety and soundness considerations).

         Currently, the QTL test requires that 65% of an institution's
"portfolio assets" (as defined) consist of certain housing and consumer-related
assets on a monthly average basis in nine out of every 12 months. Assets that
qualify without limit for inclusion as part of the 65% requirement are loans
made to purchase, refinance, construct, improve or repair domestic residential
housing and manufactured housing; home equity loans; mortgage-backed securities
(where the mortgages are secured by domestic residential housing or manufactured
housing); stock issued by the FHLB of Dallas; and direct or indirect obligations
of the FDIC. In addition, the following assets, among others, may be included in
meeting the test subject to an overall limit of 20% of the savings institution's
portfolio assets: 50% of residential mortgage loans originated and sold within
90 days of origination; 100% of consumer and educational loans (limited to 10%
of total portfolio assets); and stock issued by the FHLMC or the FNMA. Portfolio
assets consist of total assets minus the sum of (i) goodwill and other
intangible assets, (ii) property used by the savings institution to conduct its
business, and (iii) liquid assets up to 20% of the institution's total assets.
At December 31, 1998, the qualified thrift investments of the Bank were
approximately 87.0% of its portfolio assets.

         FEDERAL HOME LOAN BANK SYSTEM. The Bank is a member of the FHLB of
Dallas, which is one of 12 regional FHLBs that administers the home financing
credit function of savings institutions. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB. At December
31, 1998, the Bank had $49.0 million of outstanding FHLB advances.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of Dallas in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At December 31, 1998, the Bank had $3.9 million in
FHLB stock, which was in compliance with this requirement. No ready market
exists for such stock and it has no quoted market value.

         The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest subsidies on advances targeted for community investment
and low- and moderate-income housing projects. These contributions have
adversely affected the level of FHLB dividends paid in the past and could
continue to do so in the future. These contributions also could have an adverse
effect on the value of FHLB stock in the future.

         FEDERAL RESERVE SYSTEM. The FRB requires all depository institutions to
maintain reserves against their transaction accounts and non-personal time
deposits. As of December 31, 1998, no reserves were required to be maintained on
the first $4.9 million of transaction accounts, reserves of 3% were required to
be maintained against the next $46.5 million of net transaction accounts (with
such dollar amounts subject to adjustment by the FRB), and a reserve of 10%
(which is subject to adjustment by the FRB to a level between 8% and 14%)
against all remaining net transaction accounts. Because required reserves must
be maintained in the form of vault cash or a noninterest-bearing account at a
Federal Reserve Bank, the effect of this reserve requirement is to reduce an
institution's earning assets.



                                       25

<PAGE>



                                    TAXATION
FEDERAL TAXATION

         GENERAL. The Company and Bank are subject to the generally applicable
corporate tax provisions of the Internal Revenue Code of 1986, as amended
("Code"), and Bank is subject to certain additional provisions of the Code which
apply to thrift and other types of financial institutions. The following
discussion of federal taxation is intended only to summarize certain pertinent
federal income tax matters material to the taxation of the Company and the Bank
and is not a comprehensive discussion of the tax rules applicable to the Company
and Bank.

         YEAR. The Bank files a federal income tax return on the basis of a
fiscal year ending on December 31. The Company filed a consolidated federal
income tax return with both the Bank and the Service Corporation.

         BAD DEBT RESERVES. Prior to the enactment of the Small Business Jobs
Protection Act (the "Act"), which was signed into law on August 21, 1996,
certain thrift institutions, such as the Bank, were allowed deductions for bad
debts under methods more favorable than those granted to other taxpayers.
Qualified thrift institutions could compute deductions for bad debts using
either the specific charge off method of Section 166 of the Code or the reserve
method of Section 593 of the Code.

         Under Section 593, a thrift institution annually could elect to deduct
bad debts under either (i) the "percentage of taxable income" method applicable
only to thrift institutions, or (ii) the "experience" method that also was
available to small banks. Under the "percentage of taxable income" method, a
thrift institution generally was allowed a deduction for an addition to its bad
debt reserve equal to 8% of its taxable income (determined without regard to
this deduction and with additional adjustments). Under the experience method, a
thrift institution was generally allowed a deduction for an addition to its bad
debt reserve equal to the greater of (i) and amount based on its actual average
experience for losses in the current and five preceding taxable years, or (ii)
an amount necessary to restore the reserve to its balance as of the close of the
base year. A thrift institution could elect annually to compute its allowable
addition to bad debt reserves for qualifying loans either under the experience
method or the percentage of taxable income method. For tax years 1995 and 1994,
the Bank used the percentage of taxable income method because such method
provided a higher bad debt deduction than the experience method.

         Section 1616(a) of the Act repealed the Section 593 reserve method of
accounting for bad debts by thrift institutions, effective for taxable years
beginning after 1995. Thrift institutions that are treated as small banks are
allowed to utilize the experience method applicable to such institutions, while
thrift institutions that are treated as large banks are required to use only the
specific charge off method. The percentage of taxable income method of
accounting for bad debts is no longer available for any financial institution.

         A thrift institution required to change its method of computing
reserves for bad debts will treat such change as a change in the method of
accounting, initiated by the taxpayer and having been made with the consent of
the Secretary of the Treasury. Section 481(a) of the Code requires certain
amounts to be recaptured with respect to such change. Generally, the amounts to
be recaptured will be determined solely with respect to the "applicable excess
reserves" of the taxpayer. The amount of the applicable excess reserves will be
taken into account ratably over a six-taxable year period, beginning with the
first taxable year beginning after 1995, subject to the residential loan
requirement described below. In the case of a thrift institution that is treated
as a large bank, the amount of the institution's applicable excess reserves
generally is the excess of (i) the balances of its reserve for losses on
qualifying real property loans (generally loans secured by improved real estate)
and its reserve for losses on nonqualifying loans (all other types of loans) as
of the close of its last taxable year beginning before January 1, 1996, over
(ii) the balances of such reserves as of the close of its last taxable year
beginning before January 1, 1988 (i.e., the "pre-1988 reserves"). In the case of
a thrift institution that is treated as a small bank, like the Bank, the amount
of the institution's applicable excess reserves generally is the excess of (i)
the balances of its reserve for losses on qualifying real property loans and its
reserve for losses on nonqualifying loans as of the close of its last taxable
year beginning before January 1, 1996,


                                       26

<PAGE>



over (ii) the greater of the balance of (a) its pre-1988 reserves or, (b) what
the thrift's reserves would have been at the close of its last year beginning
before January 1, 1996, had the thrift always used the experience method.

         For taxable years that begin after December 31, 1995, and before
January 1, 1998, if a thrift meets the residential loan requirement for a tax
year, the recapture of the applicable excess reserves otherwise required to be
taken into account as a Code Section 481(a) adjustment for the year will be
suspended. A thrift meets the residential loan requirement if, for the tax year,
the principal amount of residential loans made by the thrift during the year is
not less than its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996.

         A residential loan is a loan as described in Section 7701(a)(19)(C)(v)
(generally a loan secured by residential or church property and certain mobile
homes), but only to the extent that the loan is made to the owner of the
property.

         The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e), as modified by the Act, which requires recapture in the case of
certain excessive distributions to shareholders. The pre-1988 reserves may not
be utilized for payment of cash dividends or other distributions to a
shareholder (including distributions in dissolution or liquidation) or for any
other purpose (except to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the pre-1988 reserves; and third, out of such other accounts as may be proper.
To the extent a distribution by the Bank to the Company is deemed paid out of
its pre-1988 reserves under these rules, the pre-1988 reserves would be reduced
and the Bank's gross income for tax purposes would be increased by the amount
which, when reduced by the income tax, if any, attributable to the inclusion of
such amount in its gross income, equals the amount deemed paid out of the
pre-1988 reserves. As of December 31, 1998, the Bank's pre-1988 reserves for tax
purposes totaled approximately $4.2 million.

         MINIMUM TAX. The Code imposes an alternative minimum tax at a rate of
20%. The alternative minimum tax generally applies to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income" or
"AMTI") and is payable to the extent such AMTI is in excess of an exemption
amount. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage of
taxable income method over the amount allowable under the experience method.
Other items of tax preference that constitute AMTI include (a) tax-exempt
interest on newly issued (generally, issued on or after August 8, 1986) private
activity bonds other than certain qualified bonds and (b) 75% of the excess (if
any) of (i) adjusted current earnings as defined in the Code, over (ii) AMTI
(determined without regard to this preference and prior to reduction by net
operating losses).

         NET OPERATING LOSS CARRYOVERS. A financial institution may, for federal
income tax purposes, carry back net operating losses ("NOLs") to the preceding
three taxable years and forward to the succeeding 15 taxable years. This
provision applies to losses incurred in taxable years beginning after 1986. At
December 31, 1998, the Bank had no NOL carryforwards for federal income tax
purposes.

         CAPITAL GAINS AND CORPORATE DIVIDENDS-RECEIVED DEDUCTION. Corporate net
capital gains are taxed at a maximum rate of 35%. The corporate
dividends-received deduction is 80% in the case of dividends received from
corporations with which a corporate recipient does not file a consolidated tax
return, and corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of dividends received or accrued on
their behalf. However, a corporation may deduct 100% of dividends from a member
of the same affiliated group of corporations.

         OTHER MATTERS. Federal legislation is introduced from time to time that
would limit the ability of individuals to deduct interest paid on mortgage
loans. Individuals are currently not permitted to deduct interest on consumer
loans. Significant increases in tax rates or further restrictions on the
deductibility of mortgage interest could adversely affect the Bank.


                                       27

<PAGE>




         The Bank's federal income tax returns for the tax years ended December
31, 1995 forward are open under the statute of limitations and are subject to
review by the IRS.

STATE TAXATION

         The Bank will continue to be subject to Arkansas corporation income tax
which is a progressive rate up to a maximum of 6.5% of all taxable earnings.

         The Company is incorporated under Texas law and, accordingly, is
subject to Texas franchise tax in an amount equal to 4.5% of net income
allocated to Texas pursuant to apportionments of gross receipts based upon where
the Company conducts business.




                                       28

<PAGE>



ITEM 2.  PROPERTIES.

         At December 31, 1998, the Bank conducted its business from its
executive office in Harrison, Arkansas, and eleven full service offices, all of
which are located in Northcentral and Northwest Arkansas.

         The following table sets forth the net book value (including leasehold
improvements and equipment) and certain other information with respect to the
offices and other properties of the Bank at December 31, 1998.


<TABLE>
<CAPTION>
                                        Leased/        Net Book Value
         Description/Address             Owned          of Property       Amount of Deposits
                                                                 (In Thousands)
<S>                                   <C>              <C>                <C>
200 West Stephenson
Harrison, AR 72601                       Owned           $ 1,819(1)          $145,424

128 West Stephenson                      Owned               105                     (2)
Harrison, AR  72601

Corner Central & Willow                  Owned               256                     (2)
Harrison, AR  72601

Ozark Mall - Hwy. 62-65 North          Leased(3)              24               25,361
Harrison, AR  72601

324 Hwy. 62-65 Bypass                    Owned               287               40,139
Harrison, AR  72601

210 South Main                           Owned               271               25,682
Berryville, AR  72616

668 Highway 62 East                      Owned               681              159,623
Mountain Home, AR  72653

1337 Highway 62 SW                       Owned(5)            320                     (5)
Mountain Home, AR 72653

301 Highway 62 West                      Owned               114               20,184
Yellville, AR  72687

307 North Walton Blvd.                   Owned               290               23,457
Bentonville, AR  72712

3460 North College                       Owned               436               27,325
Fayetteville, AR  72703

1303 West Hudson                         Owned               230                2,062
Rogers, AR  72756

201 East Henri De Tonti Blvd.            Owned               241                3,889
Tontitown, AR  72762

2025 North Crossover Road                Owned               800                4,611
Fayetteville, AR 72703

249 West Main Street                    Leased(4)            181                3,336
Farmington, AR 72730
</TABLE>

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

(1)  Includes property acquisition for expansion in North Harrison.
(2)  Such offices do not open deposit accounts.
(3)  Such property is subject to a month-to-month lease.
(4)  Such property is subject to a five year lease expiring November 1, 2002.
(5)  Such property was under construction at December 31, 1998 and opened in
     February 1999.


                                       29

<PAGE>



ITEM 3.  LEGAL PROCEEDINGS.

         Neither the Company nor the Bank is involved in any pending legal
proceedings other than nonmaterial legal proceedings occurring in the ordinary
course of business.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.

         None.

PART II.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The information required herein, to the extent applicable, is
incorporated by reference from page 44 of the Company's 1998 Annual Report to
Stockholders ("1998 Annual Report").

ITEM 6.  SELECTED FINANCIAL DATA.

         The information required herein is incorporated by reference from pages
3 and 4 of the 1998 Annual Report.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         The information required herein is incorporated by reference from pages
6 to 16 of the 1998 Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

         The information required herein is incorporated by reference from pages
6 and 7 of the 1998 Annual Report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The information required herein is incorporated by reference from page
5 and pages 18 to 42 of the 1998 Annual Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         Not Applicable.



PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required herein is incorporated by reference from pages
3 to 5 of the definitive proxy statement of the Company for the Annual Meeting
of Stockholders to be held on April 21, 1999 ("Definitive Proxy Statement").

ITEM 11.  EXECUTIVE COMPENSATION.

         The information required herein is incorporated by reference from pages
8 to 11 of the Definitive Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required herein is incorporated by reference from pages
6 and 7 of the Definitive Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required herein is incorporated by reference from page
12 of the Definitive Proxy Statement.


                                       30

<PAGE>



PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

         (A)  DOCUMENTS FILED AS PART OF THIS REPORT

         (1) The following financial statements are incorporated by reference
from Item 8 hereof (see Exhibit 13):

             Independent Auditors' Report
             Consolidated Statements of Financial Condition at December 31,
               1998 and 1997
             Consolidated Statements of Income for the years ended
               December 31, 1998, 1997 and 1996
             Consolidated Statements of Changes in Stockholders' Equity for
               the years ended December 31, 1998, 1997 and 1996.
             Consolidated Statements of Cash Flows for the years ended
               December 31, 1998, 1997 and 1996.
             Notes to Consolidated Financial Statements.

         (2) All schedules for which provision is made in the applicable
accounting regulation of the SEC are omitted because of the absence of
conditions under which they are required or because the required information is
included in the financial statements and related notes thereto.

         (3) The following exhibits are filed as part of this Form 10-K and this
list includes the Exhibit Index.



                                       31

<PAGE>



                                  EXHIBIT INDEX





2.1*     Plan of Conversion

3.1*     Articles of Incorporation of First Federal Bancshares of Arkansas, Inc.

3.2*     Bylaws of First Federal Bancshares of Arkansas, Inc.

4.0**    Stock Certificate of First Federal Bancshares of Arkansas, Inc.

10.5*    Employment Agreement between the Company, the Bank and Frank L.
         Coffman, Jr.

10.6*    Employment Agreement between the Company, the Bank and Larry J. Brandt

10.7*    Employment Agreement between the Company, the Bank and Carolyn M.
         Thomason

13.0     1998 Annual Report to Stockholders

22.0     Subsidiaries of the Registrant - Reference is made to
         "Item 1 Business - Subsidiaries" for the required information

27.0      Financial Data Schedule


----------
(*)  Incorporated herein by reference from the Company's Registration Statement
     on Form S-1 (File No. 333-612) filed with the SEC.

(**) Incorporated herein by reference from the Company's Registration Statement
     on Form 8-A filed with the SEC.




                                       32

<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                  FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.



                                  By:  /S/ LARRY J. BRANDT
                                       -------------------------------------
                                       Larry J. Brandt
                                       President and Chief Operating Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.





/S/ FRANK L. COFFMAN, JR.                                  March 24, 1999
---------------------------------------
Frank L. Coffman, Jr.
Chairman of the Board and Chief
  Executive Officer


/S/ LARRY J. BRANDT                                        March 24, 1999
----------------------------------------
Larry J. Brandt
President and Chief
 Operating Officer


/S/ JOHN P. HAMMERSCHMIDT                                  March 24, 1999
---------------------------------------
John P. Hammerschmidt
Director

/S/ JAMES D. HEUER                                         March 24, 1999
---------------------------------------
James D. Heuer
Director

/S/ WILLIAM F. SMITH                                       March 24, 1999
---------------------------------------
William F. Smith
Director

                                                           March 24, 1999
/S/ TOMMY W. RICHARDSON
---------------------------------------
Tommy W. Richardson
Senior Vice President and Chief
 Financial Officer