<Page>

                                                                      EXHIBIT 13



                        [FIRST FEDERAL BANCSHARES LOGO]



                                 FIRST FEDERAL
                                  BANCSHARES
                               OF ARKANSAS, INC.








                              2001 ANNUAL REPORT


<Page>


                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                              PAGE
                                                                                              ----
<S>                                                                                           <C>
President's Letter to Stockholders...................................................          1

Corporate Profile....................................................................          3

Selected Consolidated Financial and Other Data.......................................          4

Selected Quarterly Operating Results.................................................          6

Management's Discussion and Analysis of Financial Condition
  and Results of Operations..........................................................          7

Independent Auditors' Report.........................................................         17

Consolidated Financial Statements....................................................         19

Directors and Executive Officers.....................................................         43

Banking Locations....................................................................         43

Stockholder Information..............................................................         44
</Table>

<Page>

[LOGO OF FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.]

Dear Stockholder:

The year 2001 was a year to remember for the United States of America and First
Federal Bank of Arkansas. The September 11th attack changed America forever,
impacting not only the economy for the country, but the way of life for all
Americans. We continue to heal from those tragic events as our Armed Forces are
fighting today to prevent future attacks. First Federal Bank joins all Americans
in saluting our Armed Forces for the sacrifices they make to defend our freedoms
and establish peace worldwide.

In May of 2001, First Federal Bank lost our long time chairman and friend,
Frank Lee Coffman. Frank Lee was an industry leader for 40 years and reached a
pinnacle in his career in 1980 when he was elected Chairman of the National
Savings and Loan League. His grandson, Jeff Brandt, carries on the banking
legacy as a fourth generation manager and newest board member for First Federal
Bank.

From a business perspective, considering everything, First Federal Bank had a
great year in 2001. We finished the year strong with two back-to-back quarters
of record-setting earnings per share. In addition, our overall earnings per
share for the year of $1.75 was a record. The repurchase of stock and improved
non-interest income were significant factors in the increase of earnings per
share. The overall price of our stock also increased over 21% from the previous
year to $23.00 per share at year-end.

First Federal Bank also implemented several new programs during the year. During
the first quarter, we converted to check imaging, which provides both cost
savings and operational efficiencies. We successfully implemented in the fourth
quarter an overdraft protection program that features enhanced benefits to our
customers while increasing checking account profitability as well. The year 2001
also was a record year for our secondary mortgage department with revenues
exceeding three times our projections. Finally, we increased your stock dividend
for the fourth straight year as a further sign of our commitment to our loyal
stockholders.

It may sound overused, but we sincerely appreciate the confidence you have in us
as a stockholder. First Federal Bank of Arkansas has a solid management team in
place to continue to lead us into the twenty-first century. We are committed to
be a "premier provider of financial services" and to maximize our stockholders'
value. With your support, and continued dedication from all of our team members,
we look forward to another great year in 2002.

                                 Sincerely,

                                 /s/ Larry J. Brandt
                                 Larry J. Brandt
                                 President and Chief Executive Officer

                                        1
<Page>

                                CORPORATE PROFILE

     First Federal Bancshares of Arkansas, Inc. (the "Company") was incorporated
in January 1996 under Texas law for the purpose of acquiring all of the capital
stock issued by First Federal Bank of Arkansas, FA ("First Federal" or the
"Bank") in connection with its conversion from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association (the "Conversion"). The Conversion was consummated on May 3, 1996
and, as a result, the Company became a unitary savings and loan holding company
of the Bank. The Company has no significant assets other than the shares of the
Bank's common stock acquired in the Conversion, the Company's loan to the
Employee Stock Ownership Plan ("ESOP") and the portion of the net Conversion
proceeds retained and invested by the Company. The Company has no significant
liabilities.

     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
thirteen 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 secured 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.

     At December 31, 2001, the Company had total assets of $680.3 million, total
deposits of $555.9 million and stockholders' equity of $71.1 million. The
Company's and the Bank's principal executive offices are located at 200 West
Stephenson, Harrison, Arkansas 72601, and their telephone number is
(870) 741-7641.

                                       3
<Page>

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The selected consolidated financial and other data of the Company set forth
below and on the following page does not purport to be complete and should be
read in conjunction with, and is qualified in its entirety by, the more detailed
information, including the Consolidated Financial Statements and related Notes,
appearing elsewhere herein.

<Table>
<Caption>
                                                                    At or For the
                                                               Year Ended December 31,
                                      --------------------------------------------------------------------------
                                          2001            2000            1999           1998           1997
                                      -------------    ------------     ----------    -----------    -----------
                                                          (In Thousands, Except Per Share Data)
 <S>                                     <C>             <C>            <C>            <C>            <C>
 SELECTED FINANCIAL CONDITION DATA:
   Total assets                          $ 680,255       $ 713,902      $ 680,719      $ 615,055      $ 549,607
   Cash and cash equivalents                72,326          11,564          9,983         26,163          6,627
   Investment securities                   100,878         184,310        189,263        127,175         95,533
   Loans receivable, net                   474,494         498,305        459,978        442,486        433,942
   Allowance for loan losses                   923             691            752            771          1,196
   Deposits                                555,933         540,327        507,875        481,093        450,874
   Federal Home Loan Bank advances          47,844          93,359         83,972         48,985         11,997
   Stockholders' equity                     71,065          76,622         78,815         81,023         82,884

 SELECTED OPERATING DATA:
   Interest income                       $  50,152       $  51,982      $  47,066      $  43,814      $  40,445
   Interest expense                         31,862          33,243         27,799         25,774         23,748
                                         ---------       ---------      ---------      ---------      ---------
   Net interest income                      18,290          18,739         19,267         18,040         16,697
   Provision for loan losses                   452              --             20             55             --
                                         ---------       ---------      ---------      ---------      ---------
   Net interest income after provision
     for loan losses                        17,838          18,739         19,247         17,985         16,697
   Noninterest income                        3,745           1,998          1,776          1,836          1,920
   Noninterest expense                      13,596          12,398         11,594         10,482         10,016
                                         ---------       ---------      ---------      ---------      ---------
   Income before income taxes                7,987           8,339          9,429          9,339          8,601
   Provision for income taxes                2,527           2,747          3,149          3,309          3,099
                                         ---------       ---------      ---------      ---------      ---------
      Net income                         $   5,460       $   5,592      $   6,280      $   6,030      $   5,502
                                         =========       =========      =========      =========      =========

 EARNINGS PER SHARE:
    Basic                                $    1.76       $    1.60      $    1.57      $    1.35      $    1.22
    Diluted                                   1.75            1.60           1.57           1.33           1.21

 CASH DIVIDENDS DECLARED PER SHARE       $    0.44       $    0.40      $    0.32      $    0.28      $    0.22
</Table>

                                        4
<Page>

<Table>
<Caption>
                                                             At or For the Year Ended December 31,
                                                ------------------------------------------------------------------------------
                                                     2001          2000           1999          1998             1997
                                                --------------  --------------  -------------  ------------  -----------------
     <S>                                           <C>           <C>             <C>           <C>             <C>
     SELECTED OPERATING RATIOS(1):
     Return on average assets                         .79%          .80%            .97%         1.04%           1.03%
     Return on average equity                        7.36          7.21            7.84          7.22            6.76
     Average equity to average assets               10.74         11.07           12.41         14.36           15.26
     Interest rate spread(2)                         2.35          2.29            2.59          2.55            2.47
     Net interest margin(2)                          2.76          2.77            3.10          3.20            3.22
     Net interest income after provision for
     loan losses to noninterest expense            131.20        151.14          166.02        171.58          166.70
     Noninterest expense to average assets           1.97          1.77            1.80          1.80            1.88
     Average interest-earning assets to
     average interest-bearing liabilities          108.61        109.77          111.21        114.20          116.21
     Operating efficiency(3)                        61.70         59.79           55.15         52.74           53.80

     ASSET QUALITY RATIOS(4):
     Nonperforming loans to total loans(5)           0.64          0.32            0.28          0.32            1.11
     Nonperforming assets to total assets(5)         0.53          0.27            0.78          0.93            0.94
     Allowance for loan losses to non-
     performing loans(5)                            29.71         41.96           55.82         52.65           24.12
     Allowance for loan losses to total loans        0.19          0.14            0.16          0.17            0.27

     CAPITAL RATIOS(6):
     Tangible capital to adjusted total assets       9.79         10.37           11.09         11.67           11.98
     Core capital to adjusted total assets           9.79         10.37           11.09         11.67           11.98
     Risk-based capital to risk-weighted
     Assets                                         17.29         19.69           21.52         22.44           22.52

     OTHER DATA:
     Dividend payout ratio(7)                       26.33         26.39           21.66         22.11           19.58
     Full service offices at end of period             14            14              13            12              12
</Table>

----------
(1)     Ratios are based on average daily balances.

(2)     Interest rate spread represents the difference between the weighted
        average yield on average interest-earning assets and the weighted
        average cost of average interest-bearing liabilities, and net interest
        margin represents net interest income as a percent of average
        interest-earning assets.

(3)     Noninterest expense to net interest income plus noninterest income.

(4)     Asset quality ratios are end of period ratios.

(5)     Nonperforming assets consist of nonperforming loans and real estate
        owned ("REO"). Nonperforming loans consist of non-accrual loans while
        REO consists of real estate acquired in settlement of loans.

(6)     Capital ratios are end of period ratios for First Federal Bank.

(7)     Dividend payout ratio is the total dividends declared divided by net
        income.

                                        5
<Page>

                      SELECTED QUARTERLY OPERATING RESULTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<Table>
<Caption>
                                                       FOURTH               THIRD               SECOND            FIRST
     YEAR ENDED DECEMBER 31, 2001                     QUARTER              QUARTER             QUARTER           QUARTER
                                                   ---------------  ------------------  -------------------  ----------------
     <S>                                               <C>                  <C>                <C>                 <C>
     Interest income                                   $ 11,781             $ 12,412           $ 12,826            $ 13,133
     Interest expense                                     7,124                7,747              8,304               8,687
                                                       --------             --------           --------            --------
     Net interest income                                  4,657                4,665              4,522               4,446
     Provision for loan losses                              289                  102                 52                   9
                                                       --------             --------           --------            --------
     Net interest income after provision                  4,368                4,563              4,470               4,437
       for loan losses
     Noninterest income                                   1,287                  927                856                 675
     Noninterest expense                                  3,319                3,146              3,735               3,396
                                                       --------             --------           --------            --------
     Income before income taxes                           2,336                2,344              1,591               1,716
     Provision for income taxes                             698                  727                529                 573
                                                       --------             --------           --------            --------
     Net income and comprehensive income               $  1,638             $  1,617           $  1,062            $  1,143
                                                       ========             ========           ========            ========

     Earnings per share(1):
      Basic                                            $   0.56             $   0.52           $   0.33            $   0.35
      Diluted                                          $   0.55             $   0.52           $   0.33            $   0.35

     Selected Ratios (Annualized):
     Net interest margin                                   2.87%                2.86%              2.70%               2.61%
     Return on average assets                              0.96                 0.95               0.61                0.65
     Return on average equity                              9.09                 8.74               5.69                6.03

<Caption>
     YEAR ENDED DECEMBER 31, 2000                       FOURTH               THIRD               SECOND            FIRST
                                                       QUARTER              QUARTER             QUARTER           QUARTER
                                                   ---------------  ------------------  -------------------  ----------------
     <S>                                               <C>                  <C>                 <C>                 <C>
     Interest income                                   $ 13,322             $13,218             $12,909             $12,533
     Interest expense                                     8,966               8,626               8,007               7,644
                                                       --------             --------           --------            --------
     Net interest income                                  4,356               4,592               4,902               4,889
     Provision for loan losses                               --                  --                  --                  --
                                                       --------             --------           --------            --------
     Net interest income after provision
       for loan losses                                    4,356               4,592               4,902               4,889
     Noninterest income                                     598                 564                 451                 385
     Noninterest expense                                  3,165               3,092               3,009               3,132
                                                       --------             --------           --------            --------
     Income before income taxes                           1,789               2,064               2,344               2,142
     Provision for income taxes                             585                 678                 772                 712
                                                       --------             --------           --------            --------
     Net income and comprehensive income               $  1,204             $ 1,386             $ 1,572             $ 1,430
                                                       ========             ========           ========            ========
     Earnings per share(1):
      Basic                                            $   0.36             $  0.41             $  0.44             $  0.39
      Diluted                                          $   0.36             $  0.41             $  0.44             $  0.39

     Selected Ratios (Annualized):
     Net interest margin                                   2.53%               2.67%               2.92%               2.96%
     Return on average assets                              0.68                0.78                0.90                0.84
     Return on average equity                              6.29                7.22                8.07                7.25
</Table>

----------
(1)     Basic and Diluted Shares Outstanding

<Table>
<Caption>
     YEAR ENDED DECEMBER 31, 2001                       FOURTH                THIRD             SECOND              FIRST
                                                        QUARTER              QUARTER            QUARTER            QUARTER
                                                   ---------------     ---------------     ----------------    --------------
<S>                                                    <C>                  <C>               <C>                  <C>
     Basic weighted - average shares                   2,928,472            3,066,123         3,146,277            3,254,571
     Effect of dilutive securities                        48,165               44,165            11,383                9,641
                                                       ---------            ---------         ---------            ---------
     Diluted weighted - average shares                 2,976,637            3,110,288         3,157,660            3,264,212
                                                       =========            =========         =========            =========

     YEAR ENDED DECEMBER 31, 2000
     Basic weighted - average shares                   3,333,317            3,407,258         3,569,403            3,712,414
     Effect of dilutive securities                           242                  125                --                   --
                                                       ---------            ---------         ---------            ---------
     Diluted weighted - average shares                 3,333,559            3,407,383         3,569,403            3,712,414
                                                       =========            =========         =========            =========
</Table>

                                        6
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

        Management's discussion and analysis of financial condition and results
of operations is intended to assist in understanding the consolidated financial
condition and results of operations of the Company. The information contained in
this section should be read in conjunction with the Consolidated Financial
Statements and the accompanying Notes to Consolidated Financial Statements and
the other sections contained in this Annual Report.

        The Company's results of operations depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities. The Company's
results of operations also are affected by the provision for loan losses, the
level of its noninterest income and expenses, and income tax expense.

ASSET AND LIABILITY MANAGEMENT

        The ability to maximize net interest income is largely dependent upon
the achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap", provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds the amount of interest-rate
sensitive liabilities, and is considered negative when the amount of
interest-rate sensitive liabilities exceeds the amount of interest-rate
sensitive assets. Generally, during a period of rising interest rates, a
negative gap within shorter maturities would adversely affect net interest
income, while a positive gap within shorter maturities would result in an
increase in net interest income, and during a period of falling interest rates,
a negative gap within shorter maturities would result in an increase in net
interest income while a positive gap within shorter maturities would have the
opposite effect. As of December 31, 2001, the Bank estimates that the ratio of
its one-year gap to total assets was a negative 37.6% and its ratio of
interest-earning assets to interest-bearing liabilities maturing or repricing
within one year was 46.9%.

        The Bank focuses its lending activities on the origination of one-,
three-, five- and seven-year adjustable-rate residential mortgage loans.
Although adjustable-rate loans involve certain risks, including increased
payments and the potential for default in an increasing interest rate
environment, such loans decrease the risks associated with changes in interest
rates. As a result of the Bank's efforts, as of December 31, 2001, $218.6
million or 66.1% of the Bank's portfolio of one- to four-family residential
mortgage loans consisted of ARMs, including $138.3 million in seven-year ARMs.

     The Company's investment securities portfolio amounted to $100.9 million or
14.8% of the Company's total assets at December 31, 2001. Of such amount, no
investment security is contractually due within one year and $599,000 or .6% is
contractually due after one year to five years. However, actual maturities can
be shorter than contractual maturities due to the ability of borrowers to call
or prepay such obligations without call or prepayment penalties. As of December
31, 2001, there was approximately $100.4 million of investment securities at an
average interest rate of 6.41% with call options held by the issuer, of which
approximately $82.3 million, at an average interest rate of 6.47%, are callable
within one year. In the prevailing interest rate environment it is likely that a
substantial amount of the higher yielding securities will be called.

        Deposits are the Bank's primary funding source and the Bank prices its
deposit accounts based upon competitive factors and the availability of prudent
lending and investment opportunities. The Bank seeks to lengthen the maturities
of its deposits by soliciting longer term certificates of deposit when market
conditions have created opportunities to attract such deposits. However, the
Bank does not solicit high-rate jumbo certificates of deposit and does not
pursue an aggressive growth strategy which would force the Bank to focus
exclusively on competitors' rates rather than deposit

                                        7
<Page>

affordability. At December 31, 2001 the Bank had $418.2 million in certificates
of deposit of which $313.0 million mature in one year or less. In 2001, the Bank
repaid FHLB of Dallas advances upon maturity. At December 31, 2001, the Bank had
$47.8 million of FHLB advances of which $34.9 million is due in one year or
less.

NET PORTFOLIO VALUE

        The value of the Bank's loan and investment portfolio will change as
interest rates change. Rising interest rates will generally decrease the Bank's
net portfolio value ("NPV"), while falling interest rates will generally
increase the value of that portfolio. NPV is the difference between incoming and
outgoing discounted cash flows from assets, liabilities, and off-balance sheet
contracts. The following tables set forth, quantitatively, as of
December 31, 2001 and 2000, the OTS estimate of the projected changes in NPV in
the event of a 100, 200 and 300 basis point instantaneous and permanent increase
and decrease in market interest rates:

<Table>
<Caption>
                                                         2001
-----------------------------------------------------------------------------------------------------------------------
                                                    Estimated NPV as a
  Change in                                           Percentage of
Interest Rates                                        Present Value                Amount                 Percent
(basis points)              Estimated NPV               of Assets                 of Change              of Change
---------------------    ----------------------    ----------------------    ----------------------    ----------------
                                                (Dollars in Thousands)
       <S>                      <C>                         <C>                     <C>                        <C>
       +300                     53,383                       8.04%                  $ (34,922)                 (40)%
       +200                     65,331                       9.62                     (22,974)                 (26)
       +100                     77,354                      11.12                     (10,951)                 (12)
         --                     88,305                      12.43                          --                   --
       -100                     93,459                      12.98                       5,154                    6
       -200                           *                          *                           *                    *
       -300                           *                          *                           *                    *
</Table>

*  On December 31, 2001, the yield of the three month Treasury bill was 1.72%.
   As a result, the OTS NPV model did not produce results for the minus 200 or
   300 basis points scenarios for December 31, 2001.

<Table>
<Caption>
                                                         2000
-----------------------------------------------------------------------------------------------------------------------
                                                    Estimated NPV as a
   Change in                                           Percentage of
 Interest Rates                                        Present Value                Amount                 Percent
 (basis points)              Estimated NPV               of Assets                 of Change              of Change
---------------------    ----------------------    ----------------------    ----------------------    ----------------
                                                   (Dollars in Thousands)
       <S>                     <C>                          <C>                     <C>                        <C>
       +300                    $ 22,393                      3.43%                  $ (55,311)                 (71)%
       +200                      40,778                      6.03                     (36,926)                 (48)
       +100                      59,813                      8.56                     (17,891)                 (23)
         --                      77,704                     10.79                          --                   --
       -100                      84,830                     11.59                       7,126                    9
       -200                      87,925                     11.89                      10,221                   13
       -300                      92,686                     12.38                      14,982                   19
</Table>

        Computations of prospective effects of hypothetical interest rate
changes are calculated by the OTS from data provided by the Bank and are based
on numerous assumptions, including relative levels of market interest rates,
loan repayments and deposit runoffs, and should not be relied upon as indicative
of actual results. Further, the computations do not contemplate any actions the
Bank may undertake in response to changes in interest rates.

                                       8
<Page>

        Management cannot predict future interest rates or their effect on the
Bank's NPV. Certain shortcomings are inherent in the method of analysis
presented in the computation of NPV. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in differing degrees to changes in market interest rates. Additionally, certain
assets, such as adjustable-rate loans, have features that restrict changes in
interest rates during the initial term and over the remaining life of the asset.
In addition, the proportion of adjustable-rate loans in the Bank's portfolio
could decrease in future periods due to refinancing activity if market rates
decrease. Further, in the event of a change in interest rates, prepayment and
early withdrawal levels could deviate significantly from those assumed in the
table. Finally, the ability of many borrowers to service their adjustable-rate
debt may decrease in the event of an interest rate increase.

CHANGES IN FINANCIAL CONDITION

        GENERAL. At December 31, 2001, the Company's total assets amounted to
$680.3 million as compared to $713.9 million at December 31, 2000. The $33.6
million or 4.7% decrease was primarily due to a decrease of $83.4 million or
45.3% in investment securities held to maturity and a decrease of $23.8 million
or 4.8% in loans receivable, net. Such decreases were partially offset by an
increase of $60.8 million in cash and cash equivalents and a $15.5 million
increase from $284,000 to $15.8 million in prepaid expenses and other assets
primarily due to a $15.0 million investment in bank owned life insurance.

        During 2001, investment securities totaling $57.7 million were purchased
and $141.1 million matured or were called resulting in a net decrease of $83.4
million or 45.3% in investment securities at December 31, 2001 compared to
December 31, 2000. The decrease in net loans receivable was primarily due to
customer refinancings in the lower interest rate environment and the sale by the
Bank of loans in the secondary mortgage market. Loan originations for the year
ended December 31, 2001 consisted of $129.1 million in one- to four- family
residential loans, $2.6 million in multi-family residential loans, $31.7 million
in commercial loans, $28.9 million in construction loans and $52.6 million in
consumer installment loans, of which $18.4 million consisted of automobile loans
and $22.9 million consisted of home equity loans. At December 31, 2001, the Bank
had outstanding loan commitments of $6.9 million, unused lines of credit of $8.4
million, and the undisbursed portion of construction loans of $10.1 million.
Liabilities decreased $28.1 million or 4.4% to $609.2 million at
December 31, 2001 compared to $637.3 million at December 31, 2000. The decrease
in liabilities was primarily due to a decrease of $45.5 million or 48.8% in
advances from the FHLB of Dallas which was partially offset by an increase of
$15.6 million or 2.9% in deposits. The funds available from the sale of loans
and the maturity of investment securities were used primarily to pay down FHLB
of Dallas advances with the excess temporarily invested in cash and cash
equivalents. Stockholders' equity amounted to $71.1 million or 10.4% of total
assets at December 31, 2001 compared to $76.6 million or 10.7% of total assets
at December 31, 2000.

        Nonperforming assets, consisting of nonperforming loans and repossessed
assets, amounted to $3.6 million or .53% of total assets at December 31, 2001,
compared to $1.9 million, or .27% of total assets at December 31, 2000. Such
increase was primarily due to an increase in non-accruing loans secured by
one-to four-family mortgage loans.

        LOANS RECEIVABLE. Net loans receivable decreased by $23.8 million, or
4.8%, to $474.5 million at December 31, 2001 from $498.3 million at
December 31, 2000. Loan originations for 2001 totaled $244.9 million. The net
loans receivable decrease was composed of decreases in single-family residential
loans of $46.5 million or 12.3% and construction loans, net of undisbursed
funds, of $1.1 million or 7.0%. Such decreases were partially offset by
increases in commercial loans of $12.0 million or 20.6%, multi-family
residential loans of $720,000 or 19.6%, and consumer loans of $10.7 million or
22.9%.

        Unearned loan fee income at December 31, 2001 amounted to $2.1 million,
down from $2.7 million at December 31, 2000. These unearned fees are recognized
as an adjustment to yield over the contractual lives of the related loans.
Undisbursed amounts of loans in process related to construction loans at
December 31, 2001 were $10.1 million, compared to $9.1 million at
December 31, 2000.

                                        9
<Page>

        ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses was $923,000 at
December 31, 2001, compared to $691,000 at December 31, 2000. The composition of
the allowance remained relatively unchanged. There were no changes in
concentrations, terms, methods or assumptions that occurred or significantly
affected the allowance during the year ended December 31, 2001. Management
compared the loan portfolio's loss experience ratios from year to year and
adjusted the ratios to reflect current loss experience. Management also
considered whether there were any other matters that might affect the adequacy
of the allowance and identified no such matters.

        INVESTMENT SECURITIES. Investment securities, all of which were
classified as held to maturity, amounted to $100.9 million as of
December 31, 2001 compared to $184.3 million as of December 31, 2000. In 2001,
approximately $55.5 million of government agency obligations and $2.2 of
municipal bonds were purchased. Securities which matured or were called during
2001 amounted to $141.1 million, which resulted in a decrease of $83.4 million
or 45.3% in investment securities at December 31, 2001 compared to December 31,
2000.

        DEPOSITS. Deposits at December 31, 2001 amounted to $555.9 million, an
increase of $15.6 million or 2.9% from the December 31, 2000 balance of $540.3
million. The Bank does not advertise for deposits outside of its primary market
area, Northcentral and Northwest Arkansas, or utilize the services of deposit
brokers. In 1997, the Bank began offering special promotion certificate of
deposits which continued throughout 2000 and into the second quarter of 2001. In
the fourth quarter, the Bank began offering Bounce Protection TRADE MARK.
This program allows customers in good standing to overdraw their checking
account up to defined limits. Customers get a little extra spending power while
providing the Bank additional fee revenue.

        BORROWED FUNDS. Borrowed funds, which consist entirely of FHLB of Dallas
advances, decreased by $45.5 million or 48.8% to $47.8 million at
December 31, 2001 from $93.4 million at December 31, 2000. The FHLB of Dallas
advances are being repaid upon maturity.

        STOCKHOLDERS' EQUITY. Stockholders' equity decreased $5.5 million to
$71.1 million at December 31, 2001 from $76.6 million at December 31, 2000. The
decrease in stockholders' equity was primarily due to the purchase of treasury
stock totaling $10.7 million. In addition, during the twelve months ended
December 31, 2001 cash dividends aggregating $1.4 million were paid. Such
decreases in stockholders' equity were partially offset by net income in the
amount of $5.5 million for the year ended December 31, 2001.

                                       10
<Page>

AVERAGE BALANCE SHEETS

        The following table sets forth certain information relating to the
Company's average balance sheets and reflects the average yield on assets and
average cost of liabilities for the periods indicated and the yields earned and
rates paid at December 31, 2001. Such yields and costs are derived by dividing
income or expense by the average balance of assets or liabilities, respectively,
for the periods presented and outstanding balances at December 31, 2001. Average
balances are based on daily balances during the period.

<Table>
<Caption>
                                                                       Year Ended December 31,
                                                 --------------------------------------------------------------------------
                                  December 31,
                                    2001                         2001                                  2000
                                --------------   -----------------------------------  -------------------------------------
                                                                             Average                              Average
                                   Yield/         Average                     Yield/      Average                  Yield/
                                    Cost          Balance       Interest      Cost        Balance     Interest     Cost
                                ---------------  -----------  -------------  --------  ------------  ---------  -----------
                                                                 (Dollars in Thousands)
<S>                                  <C>         <C>          <C>            <C>         <C>            <C>          <C>
Interest-earning assets:
  Loans receivable(1)                7.94%       $ 488,942    $ 39,678         8.12%     $ 481,112      $ 38,403       7.98%
  Investment securities(2)           6.27          144,457       9,561         6.62        194,454        13,479       6.93
  Other interest-earning assets      1.74           29,457         913         3.10          1,641           100       6.07
                                                 ---------    --------                   ---------      --------
     Total interest-earning
       assets                        7.08          662,856      50,152         7.57        677,207        51,982       7.68
Noninterest-earning assets                          27,662                                  23,175
                                                 ---------                               ---------
    Total assets                                 $ 690,518                               $ 700,382
                                                 =========                               =========
Interest-bearing liabilities:
  Deposits                           4.16        $ 543,919      27,497         5.06      $ 528,921        27,659       5.23
  Other borrowings                   6.41           66,409       4,365         6.57         87,999         5,584       6.35
                                                 ---------    --------                   ---------      --------
    Total interest-bearing
      liabilities                    4.34          610,328      31,862         5.22        616,920        33,243       5.39
Noninterest-bearing liabilities                      6,033                                   5,923
                                                 ---------                               ---------
    Total liabilities                              616,361                                 622,843
Stockholders' equity                                74,157                                  77,539
                                                 ---------                               ---------
    Total liabilities and
    stockholders' equity                         $ 690,518                               $ 700,382
                                                 =========                               =========
                                                              --------                                  --------
Net interest income                                           $ 18,290                                  $ 18,739
                                                              ========                                  ========
Net earning assets                               $  52,528                               $  60,287
                                                 =========                               =========
Interest rate spread                 2.74%                                     2.35%                                   2.29%
                                     ====                                      ====                                    ====
Net interest margin                                                            2.76%                                   2.77%
                                                                               ====                                    ====
Ratio of interest-earning
  assets to interest-bearing                                                 108.61%                                 109.77%
  interest-bearing liabilities                                               ======                                  ======

<Caption>
                                            Year Ended December 31,
                                                     1999
                                    ------------------------------------
                                                                Average
                                       Average                   Yield/
                                       Balance     Interest      Cost
                                    -----------   ----------   ---------
                                        (Dollars in Thousands)
<S>                                 <C>           <C>          <C>
Interest-earning assets:

  Loans receivable(1)               $ 447,631     $ 35,537       7.94%
  Investment securities(2)            164,790       11,052       6.71
  Other interest-earning assets        10,089          477       4.72
                                    ---------     --------
    Total interest-earning
      assets                          622,510       47,066       7.56
Noninterest-earning assets             23,099
                                    ---------
    Total assets                    $ 645,609
                                    =========
Interest-bearing liabilities:
  Deposits                          $ 501,820       24,566       4.90
  Other borrowings                     57,949        3,233       5.58
                                    ---------     --------
    Total interest-bearing
      liabilities                     559,769       27,799       4.97
Noninterest-bearing
  liabilities                          5,740
                                    ---------
    Total liabilities                565,509
Stockholders' equity                  80,100
                                    ---------
     Total liabilities and
       stockholders' equity        $ 645,609
                                   =========
                                                  --------
Net interest income                               $ 19,267
                                                  ========
Net earning assets                 $  62,741
                                   =========

Interest rate spread                                             2.59%
                                                               ======
Net interest margin                                              3.10%
                                                               ======
Ratio of interest-earning
  assets to interest-bearing                                   111.21%
  interest-bearing liabilities                                 ======
</Table>

----------------
(1)  Includes non-accrual loans.
(2)  Includes FHLB of Dallas stock.

                                       11
<Page>

RATE/VOLUME ANALYSIS

        The table below sets forth certain information regarding changes in
interest income and interest expense of the Company for the periods indicated.
For each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in average volume multiplied by prior rate); (ii) changes in rate
(change in rate multiplied by prior average volume); (iii) changes in
rate-volume (changes in rate multiplied by the change in average volume); and
(iv) the net change.

<Table>
<Caption>
                                                                       Year Ended December 31,
                              ------------------------------------------------------------------------------------------------------
                                                 2001 vs. 2000                                        2000 vs. 1999
                              -------------------------------------------------    -------------------------------------------------
                                      Increase (Decrease)                                   Increase (Decrease)
                                             Due to                                               Due to
                              --------------------------------                     ----------------------------------
                                                                      Total                                               Total
                                                        Rate/        Increase                                  Rate/     Increase
                               Volume       Rate       Volume       (Decrease)      Volume        Rate        Volume    (Decrease)
                              ---------    -------    ---------    ------------    ---------    ---------    --------   -----------
                                                                           (In Thousands)
<S>                            <C>           <C>        <C>          <C>             <C>         <C>           <C>         <C>
Interest Income:
 Loans receivable..........    $   625       $  639     $   11       $  1,275        $ 2,658     $    194      $   14      $ 2,866
 Investment securities.....     (3,466)        (609)       157         (3,918)         1,989          371          67        2,427
 Other interest-earning
   assets.................       1,688          (49)      (826)           813           (399)         135        (113)        (377)
                               -------       ------     ------       --------        -------     --------      ------      -------
    Total interest-earning
       Assets..............     (1,153)         (19)      (658)        (1,830)         4,248          700         (32)       4,916
                               -------       ------     ------       --------        -------     --------      ------      -------

Interest expense:
 Deposits..................        784         (920)       (26)          (162)         1,327        1,676          90        3,093
 Other borrowings..........     (1,370)         200        (49)        (1,219)         1,676          444         231        2,351
                               -------       ------     ------       --------        -------     --------      ------      -------
    Total interest-bearing
      Liabilities..........       (586)        (720)       (75)        (1,381)         3,003        2,120         321        5,444
                               -------       ------     ------       --------        -------     --------      ------      -------
Net change in net interest
  income                       $  (567)      $  701     $ (583)      $   (449)       $ 1,245     $ (1,420)     $ (353)     $  (528)
                               =======       ======     ======       ========        =======     ========      ------      -------
</Table>

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND
2000.

        GENERAL. The Company reported net income of $5.5 million for the year
ended December 31, 2001 compared to $5.6 million for the same period in 2000.
The decrease of $132,000 or 2.4% in net income in 2001 compared to 2000 was due
to a decrease in net interest income, an increase in the provision for loan
losses and an increase in noninterest expenses which were partially offset by a
decrease in income taxes and an increase in noninterest income.

        NET INTEREST INCOME. Net interest income is determined by the Company's
interest rate spread (i.e., the difference between the yields earned on its
interest-earning assets and the rates paid on its interest-bearing liabilities)
and the relative amounts of interest-earning assets and interest-bearing
liabilities. The Company's net interest income amounted to $18.3 million in
2001, a decrease of $449,000 or 2.4% compared to $18.7 million for 2000. The
Company's interest rate spread increased to 2.35% for 2001 from 2.29% for 2000.
The Company's net interest margin remained relatively stable at 2.76% for 2001
compared to 2.77% for 2000.

        INTEREST INCOME. Interest income amounted to $50.2 million for the year
ended December 31, 2001 compared to $52.0 million for the same period in 2000.
The decrease of $1.8 million or 3.5% was primarily due to a decrease in the
average balance and in the average yield earned on investment securities. Such
decrease in interest income was partially offset by an increase in the average
balance of other interest-earning assets, primarily overnight interest bearing
cash accounts. The average balance of loans receivable increased as well as the
average yield earned on such assets.

        INTEREST EXPENSE. Interest expense decreased $1.4 million or 4.2% to
$31.9 million for the year ended December 31, 2001 compared to $33.3 million for
the same period in 2000. Such decrease was primarily due to a decrease in the
average balance of FHLB of Dallas advances, as well as a decrease in the average
rate paid on deposit accounts. Such decreases were partially offset by an
increase in the average balance of deposits.

                                       12
<Page>

        PROVISION FOR LOAN LOSSES. Provisions for loan losses amounted to
$452,000 for 2001. No provisions for loan losses were made in 2000. Provisions
for loan losses include charges to reduce the recorded balance of loans to their
estimated fair value. Such provision and the adequacy of the allowance for loan
losses is evaluated quarterly by management of the Bank based on the Bank'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. The reasons for
the increase in 2001 compared to 2000 were primarily due to an increase in
nonperforming loans, economic conditions, and an increase in commercial and
consumer loans.

        NONINTEREST INCOME. Noninterest income amounted to $3.7 million for the
year ended December 31, 2001 compared to $2.0 million for the same period in
2000. The increase of $1.7 million or 87.4% was due primarily to an increase of
$659,000 from $89,000 to $748,000 in gain on the sale of mortgage loans in the
secondary mortgage market, an increase of $119,000 from $36,000 to $155,000 on
additional loan fees related to loan sales, an increase of $306,000 or 28.2%
from $1.1 million to $1.4 million in deposit fee income, an increase of $373,000
in earnings on bank owned life insurance purchased in 2001, an increase of
$92,000 from $86,000 to $178,000 in loan related insurance commissions and a
decline in the loss recognized from the operations of foreclosed property from a
loss of $111,000 for 2000 to none in 2001.

        NONINTEREST EXPENSE. Noninterest expenses increased $1.2 million or 9.7%
to $13.6 million for the year ended December 31, 2001 compared to $12.4 million
for the year ended December 31, 2000. Such increase in noninterest expenses
during 2001 was primarily due to increases in salaries and employee benefits,
data processing expenses, postage and supplies, net occupancy expense,
advertising expense and to a nonrecurring expense. Salaries and employee
benefits, excluding the nonrecurring death benefit of $352,000 as explained
below, amounted to $8.1 million compared to $7.9 million resulting in an
increase of $241,000 or 3.10% for the years ended December 31, 2001 and 2000,
respectively. Such increase in salaries and employee benefits was due to an
increase in personnel, normal salary and merit increases, and to an increase in
the employee stock ownership plan expense due to the increase in the Company's
average stock price. A nonrecurring expense was incurred in the amount of
$352,000 for a death benefit payable pursuant to the employment contract of the
Bank's Chief Executive Officer and Chairman of the Board as a result of his
death in May 2001. Such increase in salaries and employee benefits was partially
offset by a decline of $473,000 in the management recognition and retention plan
expense from $771,000 for the year ended 2000 to $298,000 for the year ended
2001 as a result of the awarded shares being fully vested. There will be no
comparable expense for 2002. Data processing expense increased $184,000 or 20.0%
from $921,000 to $1.1 million between 2000 and 2001, respectively. The increase
in data processing expense was primarily due to growth in electronic banking
services. Postage and supplies amounted to $546,000 compared to $479,000 or an
increase of $67,000 for the twelve month periods ended December 31, 2001 and
2000, respectively. Advertising expense increased $43,000 or 14.2% from $300,000
to $343,000 between 2000 and 2001, respectively. The increase in advertising
expense was primarily due to growth and increased advertising rates.

        INCOME TAXES. Income taxes amounted to $2.5 million and $2.7 million for
the years ended December 31, 2001 and December 31, 2000, respectively, resulting
in effective tax rates of 31.6% and 32.9%, respectively.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000 AND
1999.

        GENERAL. The Company reported net income of $5.6 million for the year
ended December 31, 2000 compared to $6.3 million for the same period in 1999.
The decrease of $688,000 or 11.0% in net income in 2000 compared to 1999 was due
to a decrease in net interest income and an increase in noninterest expenses
which were partially offset by a decrease in income taxes and an increase in
noninterest income.

        NET INTEREST INCOME. Net interest income is determined by the Company's
interest rate spread (i.e., the difference between the yields earned on its
interest-earning assets and the rates paid on its interest-bearing liabilities)
and the relative amounts of interest-earning assets and interest-bearing
liabilities. The Company's net interest income amounted to $18.7 million in
2000, a decrease of $528,000 or 2.7% compared to $19.3 million for 1999. The

                                       13
<Page>

Company's interest rate spread declined to 2.29% for 2000 from 2.59% for 1999.
The Company's net interest margin declined to 2.77% for 2000 compared to 3.10%
for 1999.

        INTEREST INCOME. Interest income amounted to $52.0 million for the year
ended December 31, 2000 compared to $47.1 million for the same period in 1999.
The increase of $4.9 million or 10.4% was primarily due to an increase in the
average balance of loans receivable and investment securities. The average
balance of loans receivable increased as a result of continued loan demand and
portfolio growth. Such increase in interest income was partially offset by a
decline in the average balance of other interest-earning assets, primarily
overnight interest bearing cash accounts.

        INTEREST EXPENSE. Interest expense increased $5.4 million or 19.6% to
$33.2 million for the year ended December 31, 2000 compared to $27.8 million for
the same period in 1999. Such increase was primarily due to an increase in the
average balance of deposits, an increase in the average balance of FHLB of
Dallas advances, as well as increases in the average yield paid on both deposit
accounts and FHLB of Dallas advances.

        PROVISION FOR LOAN LOSSES. No provisions for loan losses were made in
2000. Provisions for loan losses amounted to $20,000 for 1999. Provisions for
loan losses include charges to reduce the recorded balance of loans to their
estimated fair value. Such provision and the adequacy of the allowance for loan
losses is evaluated quarterly by management of the Bank based on the Bank'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.

        NONINTEREST INCOME. Noninterest income amounted to $2.0 million for the
year ended December 31, 2000 compared to $1.8 million for the same period in
1999. The increase of $222,000 or 12.5% was due primarily to an increase of
$149,000 from $48,000 to $197,000 in gross revenue from full service brokerage
operations, an increase of $116,000 or 11.9% from $971,000 to $1.1 million in
deposit fee income, and an increase of $52,000 or 25.5% from $204,000 to
$256,000 in electronic banking transaction fees. Such increases were partially
offset by a $100,000 decline in gain on the sale of mortgage loans in the
secondary mortgage market from $189,000 to $89,000 for the years ended
December 31, 1999 and 2000, respectively.

        NONINTEREST EXPENSE. Noninterest expenses increased $804,000 or 6.9% to
$12.4 million compared to $11.6 million for the year ended December 31, 2000 and
December 31, 1999, respectively. Such increase in noninterest expenses during
2000 compared to 1999 was primarily due to increases in salaries and employee
benefits, net occupancy expense, and advertising expense. Salaries and employee
benefits amounted to $7.9 million compared to $7.1 million resulting in an
increase of $815,000 or 11.5% for the years ended December 31, 2000 and 1999,
respectively. Such increase in salaries and employee benefits was primarily due
to an increase in personnel as well as normal salary and merit increases. Net
occupancy expense for the year ended December 31, 2000 was $1.1 million compared
to $933,000 for the same period in 1999. Such increase in net occupancy expense
was due to increased costs related to branch expansions. Advertising expense
increased $56,000 or 22.0% from $255,000 to $311,000 between 1999 and 2000,
respectively. The increase in advertising expense was primarily due to growth
and increased advertising rates. The increase in noninterest expense for the
comparable periods was partially offset by a decrease in provision for real
estate losses and a decline in FDIC insurance premiums. Provision for loss on
real estate owned amounted to $14,000 compared to $312,000 for the twelve month
periods ended December 31, 2000 and 1999, respectively. The provision in 1999
was due to a write-down of a commercial real estate property. Such property was
disposed of in June 2000. FDIC insurance premiums decreased by $179,000 from
$285,000 to $106,000 as a result of a decline in the deposit assessment rate.

        INCOME TAXES. Income taxes amounted to $2.7 million and $3.1 million for
the years ended December 31, 2000 and December 31, 1999, respectively, resulting
in effective tax rates of 32.9% and 33.4%, respectively.

                                       14
<Page>

LIQUIDITY AND CAPITAL RESOURCES

        The Bank's liquidity, represented by cash and cash equivalents and
eligible investment securities, is a product of its operating, investing and
financing activities. The Bank's primary sources of funds are deposits,
collections on outstanding loans, maturities and calls of investment securities
and other short-term investments and funds provided from operations. While
scheduled loan amortization and maturing investment securities and short-term
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by general interest rates, economic
conditions and competition. The Bank manages the pricing of its deposits to
maintain a steady deposit balance. In addition, the Bank invests excess funds in
overnight deposits and other short-term interest-earning assets which provide
liquidity to meet lending requirements. The Bank has generally been able to
generate enough cash through the retail deposit market, its traditional funding
source, to offset the cash utilized in investing activities. As an additional
source of funds, the Bank has borrowed from the FHLB of Dallas. At
December 31, 2001, the Bank had outstanding advances from the FHLB of Dallas of
$47.8 million. Such advances were used in the Bank's normal operating and
investing activities.

        Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as overnight deposits. On a longer-term basis, the Bank maintains a
strategy of investing in various lending products. The Bank uses its sources of
funds primarily to meet its ongoing commitments, to pay maturing savings
certificates and savings withdrawals, to repay maturing FHLB of Dallas advances,
and to fund loan commitments. At December 31, 2001, the total approved mortgage
loan origination commitments outstanding, excluding the undisbursed portion of
construction loans, amounted to $6.9 million. At the same date, the undisbursed
portion of construction loans approximated $10.1 million. The Bank's unused
lines of credit at December 31, 2001 were approximately $8.4 million.
Certificates of deposit scheduled to mature in one year or less at December 31,
2001 totaled $313.0 million. Management believes that a significant portion of
maturing deposits will remain with the Bank. FHLB of Dallas advances scheduled
to mature within one year at December 31, 2001 totaled $34.9 million. No
investment securities are scheduled to mature in one year or less at December
31, 2001. However, actual maturities can be shorter than contractual maturities
due to the ability of borrowers to call or prepay such obligations without call
or prepayment penalties. As of December 31, 2001, there was approximately $82.0
million of investment securities with call options held by the issuer
exercisable within one year.

        As of December 31, 2001, the Bank's regulatory capital was well in
excess of all applicable regulatory requirements. At December 31, 2001, the
Bank's tangible, core and risk-based capital ratios amounted to 9.79%, 9.79% and
17.29%, respectively, compared to regulatory requirements of 1.5%, 4.0% and
8.0%, respectively.

IMPACT OF INFLATION AND CHANGING PRICES

        The financial statements and related financial data presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation.

        Unlike most industrial companies, virtually all of the Bank's assets and
liabilities are monetary in nature. As a result, interest rates generally have a
more significant impact on a financial institution's performance than does the
effect of inflation.

                                       15
<Page>

FORWARD-LOOKING STATEMENTS

        The Company's Annual Report to Stockholders contains 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 this document,
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.

                                       16
<Page>

INDEPENDENT AUDITORS' REPORT

The Board of Directors of
First Federal Bancshares of Arkansas, Inc.:

We have audited the accompanying consolidated statements of financial condition
of First Federal Bancshares of Arkansas, Inc. and its subsidiary (the "Company")
as of December 31, 2001 and 2000, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of First Federal Bancshares of
Arkansas, Inc. and its subsidiary at December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Little Rock, Arkansas
March 1, 2002

                                       17
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 2001, 2000 (IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>
                                                                                2001           2000
<S>                                                                           <C>             <C>
ASSETS
Cash and cash equivalents:
 Cash and collection items                                                    $  11,199       $  11,445
 Interest-bearing deposits with banks                                            61,127             119
                                                                              ---------       ---------
        Total cash and cash equivalents                                          72,326          11,564

Investment securities -
 Held to maturity, at amortized cost (fair value at December 31, 2001
  and 2000, of $101,432 and $180,103, respectively)                             100,878         184,310
Federal Home Loan Bank stock, at cost                                             4,918           5,098
Loans receivable, net of allowance at December 31, 2001 and 2000,
 of $923 and $691, respectively                                                 474,494         498,305
Accrued interest receivable                                                       4,420           6,910
Real estate acquired in settlement of loans, net                                    455             261
Office properties and equipment, net                                              7,006           7,170
Prepaid expenses and other assets                                                15,758             284
                                                                              ---------       ---------
TOTAL                                                                         $ 680,255       $ 713,902
                                                                              =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
 Deposits:
  Interest-bearing                                                            $ 536,924       $ 524,712
  Noninterest-bearing                                                            19,009          15,615
                                                                              ---------       ---------
        Total deposits                                                          555,933         540,327

Federal Home Loan Bank advances                                                  47,844          93,359
Advance payments by borrowers for taxes and insurance                               929           1,006
Other liabilities                                                                 4,484           2,588
                                                                              ---------       ---------
        Total liabilities                                                       609,190         637,280
                                                                              ---------       ---------
STOCKHOLDERS' EQUITY:
 Preferred stock, no par value, 5,000,000 shares authorized, none issued
 Common stock, $.01 par value, 20,000,000 shares authorized, 5,153,751
   shares issued, 3,050,959 and 3,553,981 shares outstanding at                      52              52
   December 31, 2001 and 2000, respectively
Additional paid-in capital                                                       51,434          51,045
Employee stock benefit plans                                                     (1,967)         (2,680)
Retained earnings - substantially restricted                                     60,736          56,713
                                                                              ---------       ---------
                                                                                110,255         105,130
Treasury stock, at cost, 2,102,792 and 1,599,770 shares at
  December 31, 2001 and 2000, respectively                                      (39,190)        (28,508)
                                                                              ---------       ---------
        Total stockholders' equity                                               71,065          76,622
                                                                              ---------       ---------
TOTAL                                                                         $ 680,255       $ 713,902
                                                                              =========       =========
</Table>

See notes to consolidated financial statements.

                                       19
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

<Table>
<Caption>
                                                                  2001           2000           1999
<S>                                                             <C>            <C>             <C>
INTEREST INCOME:
 Loans receivable                                               $ 39,678       $ 38,403        $ 35,537
 Investment securities                                             9,561         13,479          11,052
 Other                                                               913            100             477
                                                                --------       --------        --------
        Total interest income                                     50,152         51,982          47,066

INTEREST EXPENSE:
 Deposits                                                         27,497         27,659          24,566
 Federal Home Loan Bank advances                                   4,365          5,584           3,233
                                                                --------       --------        --------
        Total interest expense                                    31,862         33,243          27,799
                                                                --------       --------        --------
NET INTEREST INCOME                                               18,290         18,739          19,267
PROVISION FOR LOAN LOSSES                                            452              -              20
                                                                --------       --------        --------
NET INTEREST INCOME AFTER PROVISION
 FOR LOAN LOSSES                                                  17,838         18,739          19,247

NONINTEREST INCOME:
 Deposit fee income                                                1,394          1,087             971
 Gain on sale of secondary market loans                              748             89             189
 Other                                                             1,603            822             616
                                                                --------       --------        --------
        Total noninterest income                                   3,745          1,998           1,776
                                                                --------       --------        --------
NONINTEREST EXPENSES:
 Salaries and employee benefits                                    8,488          7,895           7,080
 Net occupancy expense                                             1,136          1,087             933
 Federal insurance premiums                                          101            106             285
 Provision for real estate losses                                      8             14             312
 Data processing                                                   1,105            921             883
 Postage and supplies                                                546            479             446
 Other                                                             2,212          1,896           1,655
                                                                --------       --------        --------
        Total noninterest expenses                                13,596         12,398          11,594
                                                                --------       --------        --------
INCOME BEFORE INCOME TAXES                                         7,987          8,339           9,429
INCOME TAX PROVISION                                               2,527          2,747           3,149
                                                                --------       --------        --------
NET INCOME                                                      $  5,460       $  5,592        $  6,280
                                                                ========       ========        ========
EARNINGS PER SHARE:
 Basic                                                          $   1.76       $   1.60        $   1.57
                                                                ========       ========        ========
 Diluted                                                        $   1.75       $   1.60        $   1.57
                                                                ========       ========        ========
</Table>

See notes to consolidated financial statements.

                                       20
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 (IN THOUSANDS, EXCEPT EARNINGS PER
SHARE) DATA

<Table>
<Caption>
                                    ISSUED
                                   COMMON STOCK     ADDITIONAL     EMPLOYEE                      TREASURY STOCK          TOTAL
                               -------------------   PAID-IN        STOCK      RETAINED      ---------------------    STOCKHOLDERS'
                                   SHARES  AMOUNT    CAPITAL    BENEFIT PLANS  EARNINGS        SHARES      AMOUNT        EQUITY

<S>                             <C>        <C>      <C>          <C>          <C>            <C>        <C>            <C>
BALANCE, JANUARY 1, 1999        5,153,751  $  52    $ 50,487     $ (5,037)    $ 47,678         640,991  $ (12,157)     $ 81,023

 Net income                                                                      6,280                                    6,280
 Release of ESOP shares                                  316          416                                                   732
 Stock compensation
   expense                                                            754                                                   754
 Tax effect of stock
    compensation plans                                   (10)                                                               (10)
 Purchase of treasury
   stock, at cost                                                                              473,386     (8,604)       (8,604)
 Dividends paid                                                                 (1,360)                                  (1,360)
                                ---------  -----    --------     --------    ---------       ---------  ---------      --------
BALANCE, DECEMBER 31, 1999      5,153,751     52      50,793       (3,867)      52,598        1,114,37    (20,761)       78,815

 Net income                                                                      5,592                                    5,592
 Release of ESOP shares                                  259          416                                                   675
 Stock compensation expense                                           771                                                   771
 Tax effect of stock
   compensation plans                                     (7)                                                                (7)
 Purchase of treasury
   stock, at cost                                                                              485,393     (7,747)       (7,747)
 Dividends paid                                                                 (1,477)                                  (1,477)
                                ---------  -----    --------     --------    ---------       ---------  ---------      --------
BALANCE, DECEMBER 31, 2000      5,153,751     52      51,045       (2,680)      56,713       1,559,770    (28,508)       76,622

 Net income                                                                      5,460                                    5,460
 Release of ESOP shares                                  434          416                                                   850
 Stock compensation expense                                           297                                                   297
 Tax effect of stock
   compensation plans                                    (45)                                                               (45)
 Purchase of treasury
   stock, at cost                                                                              503,022    (10,682)      (10,682)
 Dividends paid                                                                 (1,437)                                  (1,437)
                                =========  =====    ========     ========    =========       =========  =========      ========
BALANCE, DECEMBER 31, 2001      5,153,751  $  52    $ 51,434     $ (1,967)    $ 60,736       2,102,792  $ (39,190)     $ 71,065
                                =========  =====    ========     ========    =========       =========  =========      ========
</Table>

See notes to consolidated financial statements

                                       21
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 (IN THOUSANDS)

<Table>
<Caption>
                                                                   2001            2000           1999
<S>                                                              <C>             <C>            <C>
OPERATING ACTIVITIES:
 Net income                                                      $  5,460        $  5,592       $  6,280
 Adjustments to reconcile net income to net cash
 provided by operating activities:
 Provision for loan losses                                            452               -             20
 Provision for real estate losses                                       8              14            312
 Deferred tax provision (benefit)                                      22             251           (192)
 Federal Home Loan Bank stock dividends                              (206)           (367)          (220)
 (Gain) loss on disposition of fixed assets                           (27)              -             (6)
 (Gain) loss on sale of repossessed assets, net                        15              (4)            (6)
 Originations of loans held for sale                              (64,655)         (8,847)       (14,931)
 Proceeds from sales of loans                                      60,633           8,603         15,574
 Gain on sale of mortgage loans originated to sell                   (748)            (89)          (189)
 Depreciation                                                         704             670            554
 Depreciation on real estate owned                                      -              32            129
 Accretion of deferred loan fees, net                                (673)           (444)          (735)
 Release of ESOP shares                                               850             675            732
 Bank owned life insurance earnings                                  (373)              -              -
 Stock compensation expense                                           297             771            754
 Changes in operating assets and liabilities:
  Accrued interest receivable                                       2,490            (933)        (1,222)
  Prepaid expenses and other assets                                   (82)            224           (299)
  Other liabilities                                                  (171)            113            305
                                                                 --------        --------       --------
     Net cash provided by operating activities                      3,996           6,261          6,860
                                                                 --------        --------       --------
INVESTING ACTIVITIES:
 Purchases of investment securities - held to maturity            (55,673)        (11,020)       (86,405)
 Proceeds from maturities of investment securities -
   held to maturity                                               141,105           9,500         30,182
 Federal Home Loan Bank stock redeemed                                385               -              -
 Purchase of bank owned life insurance                            (15,000)              -              -
 Loan originations, net of repayments                              28,081         (36,789)       (17,608)
 Proceeds from sales of repossessed assets                            472           2,923            235
 Proceeds from sales of office properties and equipment                40               -              -
 Purchases of office properties and equipment                        (539)         (1,029)        (1,332)
                                                                 --------        --------       --------
     Net cash provided by (used in) investing activities           98,871         (36,415)       (74,928)
                                                                 --------        --------       --------
                                                                                               (Continued)
</Table>

                                       22
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 (IN THOUSANDS)

<Table>
<Caption>
                                                                     2001         2000           1999
<S>                                                               <C>          <C>             <C>
FINANCING ACTIVITIES:
 Net increase in deposits                                         $ 15,606     $  32,452       $ 26,782
 Advances from Federal Home Loan Bank                                2,450       155,075         87,350
 Repayment of advances from Federal Home Loan Bank                 (47,965)     (145,688)       (52,363)
 Net increase (decrease) in advance payments by borrowers
   for taxes and insurance                                             (77)          (83)            83
 Purchase of treasury stock                                        (10,682)       (7,747)        (8,604)
 Dividends paid                                                     (1,437)       (1,477)        (1,360)
 Distributions related to minority interest                              -          (797)             -
                                                                  --------     ---------       --------
      Net cash provided by (used in) financing activities          (42,105)       31,735         51,888
                                                                  --------     ---------       --------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                                                   60,762         1,581         16,180

CASH AND CASH EQUIVALENTS:
 Beginning of year                                                  11,564         9,983         26,163
                                                                  --------     ---------       --------
 End of year                                                      $ 72,326     $  11,564       $  9,983
                                                                  ========     =========       ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION -
 Cash paid for:
 Interest                                                         $ 32,469     $  32,816       $ 27,565
                                                                  ========     =========       ========
 Income taxes                                                     $  2,587     $   2,475       $  3,434
                                                                  ========     =========       ========
SUPPLEMENTAL SCHEDULE OF NONCASH
 INVESTING ACTIVITIES:
 Real estate acquired in settlement of loans                      $    642     $     380       $    649
                                                                  ========     =========       ========
 Loans to facilitate sales of real estate owned                   $     18     $   1,170       $    325
                                                                  ========     =========       ========
 Investment securities purchased, not settled                     $  2,000     $       -       $  6,000
                                                                  ========     =========       ========
                                                                                               (Concluded)
</Table>

See notes to consolidated financial statements.

                                       23
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION - First Federal
     Bancshares of Arkansas, Inc. (the "Company") is a unitary holding company
     which owns all of the stock of First Federal Bank of Arkansas, FA (the
     "Bank"). The Bank provides a broad line of financial products to
     individuals and small to medium-sized businesses. The consolidated
     financial statements also include the accounts of the Bank's wholly-owned
     subsidiary, First Harrison Service Corporation ("FHSC"), whose activities
     were limited to owning a 75% interest in a partnership that owned a hotel
     which had been repossessed by the Bank and a participating lender. The
     property was sold in the second quarter of 2000 and the partnership has
     been dissolved. At December 31, 2001, the Bank has an $850,000 loan to the
     entity that purchased the hotel. All material intercompany transactions
     have been eliminated in consolidation.

     USE OF ESTIMATES - The preparation of financial statements in conformity
     with accounting principles generally accepted in the United States of
     America requires management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and liabilities at the date of the financial statements and the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates and such differences could
     be significant. A material estimate that is particularly susceptible to
     significant change in the near term relates to the determination of the
     allowance for loan losses.

     CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
     cash equivalents includes cash on hand and amounts due from depository
     institutions, which includes interest-bearing amounts available upon
     demand.

     The Federal Reserve Bank ("FRB") requires all depository institutions to
     maintain reserves against their transaction accounts and non-personal time
     deposits. As of December 31, 2001, no reserves were required to be
     maintained on the first $5.7 million of transaction accounts, reserves of
     3% were required to be maintained against the next $41.3 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.
     Required reserves must be maintained in the form of vault cash or a
     noninterest-bearing account at a Federal Reserve Bank. The average amount
     of the reserve balances maintained at the FRB for the year ended December
     31, 2001 and 2000, was approximately $391,000 and $303,000, respectively.

     INVESTMENT SECURITIES - The Company classifies investment securities into
     one of two categories: held to maturity or available for sale. The Company
     does not engage in trading activities. Debt securities that the Company has
     the positive intent and ability to hold to maturity are classified as held
     to maturity and recorded at cost, adjusted for the amortization of premiums
     and the accretion of discounts.

     Investment securities that the Company intends to hold for indefinite
     periods of time are classified as available for sale and are recorded at
     fair value. Unrealized holding gains and losses are excluded from earnings
     and reported net of tax in other comprehensive income. Investment
     securities in the available for sale portfolio may be used as part of the
     Company's asset and liability management practices and may be sold in
     response to changes in interest rate risk, prepayment risk, or other
     economic factors. At December 31, 2001 and 2000, the Company did not own
     any investment securities classified as available for sale.

                                       24
<Page>

     Premiums are amortized into interest income using the interest method to
     the earlier of maturity or call date. Discounts are accreted into interest
     income using the interest method over the period to maturity. The specific
     identification method of accounting is used to compute gains or losses on
     the sales of investment securities.

     If the fair value of an investment security declines for reasons other than
     temporary market conditions, the carrying value of such a security is
     written down to fair value by a charge to operations.

     LOANS RECEIVABLE - Loans receivable that management has the intent and
     ability to hold for the foreseeable future or until maturity or pay-off are
     stated at unpaid principal balances adjusted for any charge-offs, the
     allowance for loan losses, and any deferred loan fees or costs. Deferred
     loan fees or costs and discounts on first mortgage loans are amortized or
     accreted to income using the level-yield method over the remaining period
     to contractual maturity.

     Mortgage loans originated and committed for sale in the secondary market
     are carried at the lower of cost or estimated market value in the
     aggregate. Such loans are carried at cost due to the short period of time
     between funding and sale, generally two to three weeks.

     The accrual of interest on impaired loans is discontinued when, in
     management's opinion, the borrower may be unable to meet payments as they
     become due or when the loan becomes 90 days past due, whichever occurs
     first. When interest accrual is discontinued, all unpaid accrued interest
     is reversed against interest income. Interest income is subsequently
     recognized only to the extent cash payments in excess of principal due are
     received, until such time that in management's opinion, the borrower will
     be able to meet payments as they become due.

     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. 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 several factors, including 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)
     collateralized 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

                                       25
<Page>

     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 than 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.

     Estimates of the probability of loan losses involve judgment. 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
     judgment 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.

     REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS - Real estate acquired in
     settlement of loans is initially recorded at estimated fair value less
     estimated costs to sell and is subsequently carried at the lower of
     carrying amount or fair value less estimated disposal costs. Valuations are
     periodically performed by management, and the assets are carried at the
     lower of carrying amount or fair value less costs to sell. Costs relating
     to the development and improvement of the property are capitalized, whereas
     those relating to holding the property are expensed.

     OFFICE PROPERTIES AND EQUIPMENT - Office properties and equipment are
     stated at cost less accumulated depreciation and amortization. The Company
     computes depreciation of office properties and equipment using the
     straight-line method over the estimated useful lives of the individual
     assets which range from 3 to 40 years.

     LOAN ORIGINATION FEES - Loan origination fees and certain direct loan
     origination costs are deferred and the net fee or cost is recognized as an
     adjustment to interest income using the level-yield method over the
     contractual life of the loans. When a loan is fully repaid or sold, the
     amount of unamortized fee or cost is recorded in interest income.

     INCOME TAXES - The Company recognizes deferred tax liabilities and assets
     for the expected future tax consequences of temporary differences between
     the carrying amounts and the tax bases of assets and liabilities.

     INTEREST RATE RISK - The Bank's asset base is exposed to risk including the
     risk resulting from changes in interest rates and changes in the timing of
     cash flows. The Bank monitors the effect of such risks by considering the
     mismatch of the maturities of its assets and liabilities in the current
     interest rate environment and the sensitivity of assets and liabilities to
     changes in interest rates. The Bank's management has considered the effect
     of significant increases and decreases in interest rates and believes such
     changes, if they occurred, would be manageable and would not affect the
     ability of the Bank to hold its assets as planned. However, the Bank is
     exposed to significant market risk in the event of significant and
     prolonged interest rate changes.

                                       26
<Page>

     EMPLOYEE STOCK OWNERSHIP PLAN - Compensation expense for the Employee Stock
     Ownership Plan ("ESOP") is determined based on the average fair value of
     shares committed to be released during the period and is recognized as the
     shares are committed to be released. For the purpose of earnings per share,
     ESOP shares are included in weighted-average common shares outstanding as
     the shares are committed to be released.

     STOCK COMPENSATION PLANS - Statement of Financial Accounting Standards No.
     123, ACCOUNTING FOR STOCK-BASED COMPENSATION, provides that entities may
     adopt a fair value based method of accounting for employee stock
     compensation plans, whereby compensation cost is measured at the grant date
     based on the value of the award and is recognized over the service period,
     which is usually the vesting period. However, it also provides that an
     entity may measure compensation cost for those plans using the intrinsic
     value based method of accounting prescribed by Accounting Principles Board
     Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, whereby
     compensation cost is the excess, if any, of the quoted market price of the
     stock at the grant date (or other measurement date) over the amount an
     employee must pay to acquire the stock. Stock options issued under the
     Company's stock option plan have no intrinsic value at the grant date, and
     under Opinion No. 25, no compensation cost is recognized for them. The
     Company has elected to use the accounting methodology in Opinion No. 25 and
     to provide pro forma disclosures of net income and earnings per share and
     other disclosures, as if the fair value based method of accounting had been
     applied. The pro forma disclosures include the effects of all awards
     granted on or after January 1, 1995. (See Note 12.)

     EARNINGS PER COMMON SHARE - Basic earnings per share represents income
     available to common stockholders divided by the weighted-average number of
     common shares outstanding during the period. Diluted earnings per share
     reflects additional common shares that would have been outstanding if
     dilutive potential common shares had been issued, as well as any adjustment
     to income that would result from the assumed issuance. Potential common
     shares that may be issued by the Company relate solely to outstanding stock
     options, and are determined using the treasury stock method.

     RECENTLY ISSUED ACCOUNTING STANDARDS - In June 2001, the Financial
     Accounting Standards Board ("FASB") issued Statement of Financial
     Accounting Standards ("SFAS") No. 141, BUSINESS COMBINATIONS. This
     Statement addresses financial accounting and reporting for business
     combinations and supercedes APB Opinion No. 16, BUSINESS COMBINATIONS, and
     SFAS No. 38, ACCOUNTING FOR PREACQUISITION CONTINGENCIES OF PURCHASED
     ENTERPRISES. All business combinations in the scope of this Statement are
     to be accounted for using one method, the purchase method. This Statement
     does not change many of the provisions of Opinion 16 and Statement 38
     related to the application of the purchase method. The provisions of this
     Statement apply to all business combinations initiated after June 30, 2001.
     This Statement also applies to all business combinations accounted for
     using the purchase method for which the date of acquisition is
     July 1, 2001, or later.

     In June 2001, the FASB also issued SFAS No. 142, GOODWILL AND OTHER
     INTANGIBLE ASSETS. This Statement addresses financial accounting and
     reporting for acquired goodwill and other intangible assets and supercedes
     APB Opinion No. 17, INTANGIBLE ASSETS. It addresses how intangible assets
     that are acquired individually or with a group of other assets (but not
     those acquired in a business combination) should be accounted for in
     financial statements upon their acquisition. This Statement also addresses
     how goodwill and other intangible assets should be accounted for after they
     have been initially recognized in the financial statements. The provisions
     of this Statement are required to be applied starting with fiscal years
     beginning after December 15, 2001. This Statement is required to be applied
     at the beginning of an entity's fiscal year and to be applied to all
     goodwill and other intangible assets recognized in its financial statements
     at that date. Impairment losses for goodwill and indefinite-lived
     intangible assets that arise due to the initial application of this
     Statement (resulting from a

                                       27
<Page>

     transitional impairment test) are to be reported as resulting from a change
     in accounting principle. Goodwill and intangible assets acquired after
     June 30, 2001, will be subject immediately to the nonamortization and
     amortization provisions of this Statement.

     Based on its current activities, management does not expect these
     statements to have a material effect on the financial position, results of
     operations, or cash flows of the Company.

     RECLASSIFICATIONS - Certain amounts in the 2000 and 1999 consolidated
     financial statements have been reclassified to conform to the
     classifications adopted for reporting in 2001.

2.   INVESTMENT SECURITIES

     Investment securities consisted of the following at December 31 (in
     thousands):

<Table>
<Caption>
                                                                      2001
                                     -------------------------------------------------------------------
                                                            GROSS             GROSS
                                        AMORTIZED         UNREALISED        UNREALISED          FAIR
HELD TO MATURITY                           COST             GAINS             LOSSES            VALUE
<S>                                    <C>                   <C>            <C>               <C>
Municipal securities                   $   5,514             $  21          $      99         $   5,436
U.S. Government and
Agency obligations                        95,364               837                205            95,996
                                       ---------             -----          ---------         ---------
                                       $ 100,878             $ 858          $     304         $ 101,432
                                       =========             =====          =========         =========
<Caption>
                                                                      2000
                                     -------------------------------------------------------------------
                                                           GROSS              GROSS
                                         AMORTIZED       UNREALISED        UNREALISED           FAIR
HELD TO MATURITY                            COST           GAINS             LOSSES             VALUE

<S>                                    <C>                   <C>            <C>               <C>
U.S. Government and
  Agency obligations                   $ 184,310             $ 124          $   4,331         $ 180,103
                                       =========             =====          =========         =========
</Table>

     The Company has pledged investment securities held to maturity with
     carrying values of approximately $16.3 million and $14 million at
     December 31, 2001 and 2000, respectively, as collateral for certain
     deposits in excess of $100,000.

     The scheduled maturities of debt securities at December 31, 2001, by
     contractual maturity are shown below (in thousands). Expected maturities
     may differ from contractual maturities because borrowers may have the
     right to call or prepay obligations with or without call or prepayment
     penalties.

<Table>
<Caption>
                                                             2001
                                            --------------------------------------
                                                  AMORTIZED               FAIR
                                                    COST                  VALUE
<S>                                             <C>                     <C>
Due from one year to five years                 $     599               $     624
Due from five years to ten years                   19,098                  19,227
Due after ten years                                81,181                  81,581
                                                ---------               ---------
Total                                           $ 100,878               $ 101,432
                                                =========               =========
</Table>

     As of December 31, 2001 and 2000, substantially all investments have call
     options held by the issuer, of which approximately $82 million and $174
     million, respectively, were callable within one year.

                                       28
<Page>

3.    LOANS RECEIVABLE

      Loans receivable consisted of the following at December 31 (in thousands):

<Table>
<Caption>
                                                                         2001                   2000
<S>                                                                    <C>                    <C>
FIRST MORTGAGE LOANS:
 One- to- four family residences                                       $ 330,844              $ 377,341
 Other properties                                                         51,282                 41,751
 Construction                                                             24,842                 24,937
 Less:
  Unearned discounts                                                        (216)                  (191)
  Undisbursed loan funds                                                 (10,144)                (9,126)
  Deferred loan fees, net                                                 (2,127)                (2,747)
                                                                       ---------              ---------
     Total first mortgage loans                                          394,481                431,965
                                                                       ---------              ---------
Consumer and other loans:
 Commercial loans                                                         23,451                 20,239
 Automobile                                                               20,506                 16,051
 Consumer loans                                                            7,083                  5,893
 Home equity and second mortgage                                          24,933                 19,797
 Savings loans                                                             1,464                  2,042
 Other                                                                     3,234                  2,768
 Deferred loan costs                                                         265                    241
                                                                       ---------              ---------
     Total consumer and other loans                                       80,936                 67,031
                                                                       ---------              ---------
Allowance for loan losses                                                   (923)                  (691)
                                                                       ---------              ---------
     Loans receivable, net                                             $ 474,494              $ 498,305
                                                                       =========              =========
</Table>

      The Bank originates and maintains loans receivable which are substantially
      concentrated in its lending territory (primarily Northwest and
      Northcentral Arkansas). The majority of the Bank's loans are residential
      mortgage loans and construction loans for residential property. The Bank's
      policy calls for collateral or other forms of repayment assurance to be
      received from the borrower at the time of loan origination. Such
      collateral or other form of repayment assurance is subject to changes in
      economic value due to various factors beyond the control of the Bank.

      At December 31, 2001 and 2000, loans receivable included loans committed
      to be sold with net book values of $5.5 million and $788,000,
      respectively.

      In the normal course of business, the Bank has made loans to its
      directors, officers, and their related business interests. In the opinion
      of management, related party loans are made on substantially the same
      terms, including interest rates and collateral, as those prevailing at the
      time for comparable transactions with unrelated persons and do not involve
      more than the normal risk of collectibility. The aggregate dollar amount
      of loans outstanding to directors, officers, and their related business
      interests was approximately $1.9 million and $4.9 million at
      December 31, 2001 and 2000, respectively.

      Loans identified by management as impaired at December 31, 2001 and 2000,
      were not significant. The Bank is not committed to lend additional funds
      to debtors whose loans have been modified.

4.    LOAN SERVICING

      Mortgage loans serviced for others are not included in the accompanying
      consolidated statements of financial condition. The unpaid principal
      balances of these loans at December 31, 2001 and 2000, were $377,000 and
      $523,000, respectively. Servicing loans for others generally consists of
      collecting

                                       29
<Page>

      mortgage payments, maintaining escrow accounts, disbursing payments to
      investors, and foreclosure processing. Loan servicing income is recorded
      on the accrual basis and includes servicing fees from investors and
      certain charges collected from borrowers, such as late payment fees.

5.    ACCRUED INTEREST RECEIVABLE

      Accrued interest receivable consisted of the following at December 31
      (in thousands):

<Table>
<Caption>
                                                                          2001                      2000
<S>                                                                     <C>                       <C>
       Loans                                                            $ 2,840                   $ 3,292
       Investment securities                                              1,580                     3,618
                                                                        -------                   -------
            Total                                                       $ 4,420                   $ 6,910
                                                                        =======                   =======
</Table>

6.    ALLOWANCES FOR LOAN AND REAL ESTATE LOSSES

      A summary of the activity in the allowances for loan and real estate
      losses is as follows for the years ended December 31 (in thousands):

<Table>
<Caption>
                                              2001                         2000                      1999
                                     --------------------------  -------------------------  ----------------------
                                         LOANS      REAL ESTATE    LOANS    REAL ESTATE       LOANS     REAL ESTATE
      <S>                                <C>           <C>        <C>           <C>          <C>         <C>
      Balance, beginning of year         $ 691         $ -        $ 752         $  -         $ 771       $   -

       Provisions for estimated
        losses                             452           8            -           14            20         312
       Recoveries                           17           -           27            -            28           -
       Losses charged off                 (237)         (8)         (88)         (14)          (67)       (312)
                                         -----        ----        -----         ----         -----       -----
      Balance, end of year               $ 923         $ -        $ 691         $  -         $ 752       $   -
                                         =====        ====        =====         ====         =====       =====
</Table>

7.    FEDERAL HOME LOAN BANK STOCK

      The Bank is a member of the Federal Home Loan Bank System. As a member of
      this system, it is required to maintain an investment in capital stock of
      the Federal Home Loan Bank ("FHLB") in an amount equal to 1% of its
      outstanding home loans. No ready market exists for such stock and it has
      no quoted market value. The carrying value of the stock is its cost.

8.    OFFICE PROPERTIES AND EQUIPMENT

      Office properties and equipment consisted of the following at December 31
      (in thousands):

<Table>
<Caption>
                                                                                   2001                2000
<S>                                                                              <C>                 <C>
      Land                                                                       $  2,508            $  2,508
      Buildings and improvements                                                    4,334               4,330
      Furniture and equipment                                                       4,716               4,686
      Automobiles                                                                     645                 574
                                                                                 --------            --------
                Total                                                              12,203              12,098

      Accumulated depreciation                                                     (5,197)             (4,928)
                                                                                 --------            --------
                Office properties and equipment, net                             $  7,006            $  7,170
                                                                                 ========            ========
</Table>

                                       30
<Page>

      Depreciation expense for the years ended December 31, 2001, 2000, and
      1999, amounted to approximately $704,000, $670,000, and $554,000,
      respectively.

9.    DEPOSITS

      Deposits are summarized as follows at December 31 (in thousands):

<Table>
<Caption>
                                                                                      2001              2000
       <S>                                                                          <C>              <C>
       Demand and NOW accounts, including noninterest-bearing
        deposits of $19,009 and $15,615 in 2001 and 2000, respectively              $  75,849        $  66,026
       Money market                                                                    35,119           16,980
       Regular savings                                                                 26,784           24,300
       Certificates of deposit                                                        418,181          433,021
                                                                                     ---------        ---------
               Total                                                                $ 555,933        $ 540,327
                                                                                     =========        =========
</Table>

      The aggregate amount of time deposits in denominations of $100 thousand or
      more was  approximately  $98 million and $90 million at December  31, 2001
      and 2000, respectively.

      At December 31, 2001,  scheduled maturities of certificates of deposit are
      as follows (in thousands):

<Table>
<Caption>
        YEARS ENDING DECEMBER 31:
         <S>                                                                                       <C>
         2002                                                                                      $ 312,968
         2003                                                                                         57,776
         2004                                                                                         11,483
         2005                                                                                         14,566
         2006 and thereafter                                                                          21,388
                                                                                                   ---------
                Total                                                                              $ 418,181
                                                                                                   =========
</Table>

      Interest expense on deposits consisted of the following (in thousands):

<Table>
<Caption>
                                                                                    YEARS ENDED
                                                                                    DECEMBER 31,
                                                                    ---------------------------------------------
                                                                       2001              2000              1999
         <S>                                                        <C>                <C>              <C>
         NOW and money market                                       $  1,923           $  1,688         $  1,488
         Regular savings and certificate accounts                     25,662             26,094           23,182
         Early withdrawal penalties                                      (88)              (123)            (104)
                                                                    --------           --------         --------
                Total                                               $ 27,497           $ 27,659         $ 24,566
                                                                    ========           ========         ========
</Table>

     Eligible deposits of the Bank are insured up to $100 thousand by the
     Savings Association Insurance Fund ("SAIF") of the Federal Deposit
     Insurance Corporation ("FDIC").

     Legislation, passed by the U.S. House of Representatives and the Senate,
     was signed into law by the President on September 30, 1996, to recapitalize
     the SAIF. The legislation also mandated that the deposit insurance premiums
     charged to SAIF-insured institutions (such as the Bank) decline to
     approximately 6.50 basis points effective January 1, 1997. Effective
     July 1, 1998, the deposit insurance premium declined to 6.10 basis points,
     effective July 1, 1999, the deposit insurance premium declined to 5.80
     basis points, effective July 1, 2000, the deposit insurance premium
     declined to 2.06 basis points, and effective July 1, 2001, the deposit
     insurance premium declined to 1.88 basis points.

                                       31
<Page>

10.   FEDERAL HOME LOAN BANK ADVANCES

      The Bank pledges as collateral for FHLB advances their FHLB stock and has
      entered into blanket collateral agreements with the FHLB. The Bank agrees
      to maintain sufficient collateral to secure borrowings in an aggregate
      amount of the lesser 75% of the unpaid principal balance of the Bank's
      first mortgage collateral and 45% of the home equity and commercial loans
      or 35% of the Bank's assets. Advances at December 31, 2001 and 2000,
      consisted of the following (in thousands):

<Table>
<Caption>
                                                 2001                                2000
                                            --------------------------------------------------------
                                               WEIGHTED                     WEIGHTED
                                               AVERAGE                      AVERAGE
                                                RATE         AMOUNT          RATE           AMOUNT
          <S>                                   <C>         <C>                <C>         <C>
          Amounts maturing in years ending
           December 31:
           2001                                                                6.68%       $ 47,500
           2002                                 6.40%       $ 34,944           6.55%         32,959
           2003                                 6.41%          6,000           6.41%          6,000
           2004                                 6.07%          1,000           6.07%          1,000
           2005                                 6.54%          4,900           6.54%          4,900
           2006                                    -               -              -               -
           Thereafter                           6.44%          1,000           6.44%          1,000
                                                            --------                       --------
                Total                           6.41%       $ 47,844           6.60%       $ 93,359
                                                            ========                       ========
</Table>

11.   INCOME TAXES

      The provisions (benefits) for income taxes are summarized as follows (in
      thousands):

<Table>
<Caption>
                                                                                   YEARS ENDED
                                                                                   DECEMBER 31,
                                                               -------------------------------------------------
                                                                    2001                2000               1999
          <S>                                                      <C>                 <C>                <C>
          Income tax provision (benefit):
           Current                                                 $ 2,505             $ 2,496            $ 3,341
           Deferred                                                     22                 251               (192)
                                                                   -------             -------            -------
                Total                                              $ 2,527             $ 2,747            $ 3,149
                                                                   =======             =======            =======
</Table>

      The reasons for the differences between the statutory federal income tax
      rates and the effective tax rates are summarized as follows (in
      thousands):

<Table>
<Caption>
                                                                        YEARS ENDED
                                                                        DECEMBER 31,
                                          ------------------------------------------------------------------------
                                                    2001                    2000                       1999
          <S>                             <C>             <C>       <C>              <C>       <C>             <C>
          Taxes at statutory rate         $ 2,715         34.0%     $ 2,835          34.0%     $ 3,206         34.0%
          Increase (decrease)
           resulting from:
            State income tax, net
            Other, net                       (188)        (2.4)%        (88)         (1.1%)        (57)        (0.6%)
                                          -------        -----      -------         -----      -------        -----
                  Total                   $ 2,527         31.6%     $ 2,747          32.9%     $ 3,149         33.4%
                                          =======        =====      =======         =====      =======        =====
</Table>

                                       32
<Page>

The Company's net deferred tax liability account was comprised of the
following at December 31 (in thousands):

<Table>
<Caption>
                                                                               2001          2000
   <S>                                                                       <C>           <C>
   Deferred tax assets:                                                      $  140        $   334
    Stock based compensation                                                     26             26
    Real estate acquired in settlement of loans                                 164             55
    Allowance for loan losses                                                     -             88
    Other                                                                    ------        -------
         Total deferred tax assets                                              330            503
                                                                             ------        -------
   Deferred tax liabilities:
    Office properties                                                          (243)          (262)
    federal Home Loan Bank stock                                               (770)          (902)
                                                                             ------        -------
         Total deferred tax liabilites                                       (1,013)        (1,164)
                                                                             ------        -------
         Net deferred tax liability                                          $ (683)       $  (661)
                                                                             ======        =======
</Table>

      Specifically exempted from deferred tax recognition requirements are bad
      debt reserves for tax purposes of U.S. savings and loans in the
      institution's base year, as defined. Base year reserves totaled
      approximately $4.2 million. Consequently, a deferred tax liability of
      approximately $1.6 million related to such reserves was not provided for
      in the consolidated statements of financial condition at December 31, 2001
      and 2000. Payment of dividends to shareholders out of retained earnings
      deemed to have been made out of earnings previously set aside as bad debt
      reserves may create taxable income to the Bank. No provision has been made
      for income tax on such a distribution as the Bank does not anticipate
      making such distributions.

12.   BENEFIT PLANS

      STOCK OPTION PLAN - The Stock Option Plan ("SOP") provides for a committee
      of the Company's Board of Directors to award incentive stock options,
      non-qualified or compensatory stock options and stock appreciation rights
      representing up to 515,375 shares of Company stock. One-fifth of the
      options granted vested immediately upon grant, with the balance vesting in
      equal amounts on the four subsequent anniversary dates of the grant.
      Options granted vest immediately in the event of retirement, disability,
      or death. Stock options granted expire in ten years.

      Under the SOP, options have been granted to directors and key employees to
      purchase common stock of the Company. The exercise price in each case
      equals the fair market value of the Company's stock at the date of grant.
      Options granted are summarized as follows:

<Table>
<Caption>
                                                                                                     WEIGHTED AVERAGE
             YEAR                                              RANGE OF                                  REMAINING
            GRANTED                                         EXERCISE PRICES                           CONTRACT LIFE
            <S>                                             <C>                                           <C>
            1997                                            $ 19.25 - 20.38                               5.0 years
            1998                                              23.25 - 24.00                               5.8 years
            1999                                              17.06 - 18.63                               6.9 years
            2000                                              14.75 - 18.25                               8.7 years
            2001                                              18.69 - 22.70                               9.5 years
</Table>

                                       33
<Page>

A summary of the status of the Company's SOP as of December 31, 2001, 2000, and
1999, and changes during the years ending on those dates are presented below:

<Table>
<Caption>
                                                                                                     WEIGHTED
                                                                                                      AVERAGE
                                                                                                     EXERCISE
                                                                                    SHARES             PRICE
       <S>                                                                         <C>                 <C>
       Outstanding at January 1, 1999                                              503,873             $ 19.37

       Granted                                                                       5,000               18.23
       Forfeited                                                                   (11,508)              19.67
                                                                                   -------
       Outstanding at December 31, 1999                                            497,365               19.35

       Granted                                                                       5,000               17.55
       Forfeited                                                                    (1,800)              18.98
                                                                                   -------
       Outstanding at December 31, 2000                                            500,565               19.34

       Granted                                                                       8,000               20.53
       Forfeited                                                                         -                   -
                                                                                   -------             -------
       Outstanding at December 31, 2001                                            508,565             $ 19.36
                                                                                   =======             =======
       Options exercisable at December 31, 2001                                    495,365             $ 19.34
                                                                                   =======             =======
</Table>

The Company applies the provisions of APB Opinion No. 25 in accounting for its
stock option plan, as allowed under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"). Accordingly, no compensation cost has been recognized
for options granted to employees. Had compensation cost for these plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the methods of SFAS 123, the Company's pro forma net
income and pro forma earnings per share would have been as follows:

<Table>
<Caption>
                                      2001                         2000                           1999
                          ---------------------------  -----------------------------  ----------------------------
                          AS REPORTED     PRO FORMA     AS REPORTED     PRO FORMA     AS REPORTED     PRO FORMA

       <S>                  <C>            <C>            <C>            <C>            <C>            <C>
       Net income (in
         thousands)         $ 5,460        $ 4,934        $ 5,592        $ 5,072        $ 6,280        $ 5,763
       Earnings per
         share:
       Basic                $  1.76        $  1.59        $  1.60        $  1.45        $  1.57        $  1.44

       Diluted              $  1.75        $  1.58        $  1.60        $  1.45        $  1.57        $  1.44
</Table>

The fair value of options granted during 1999 was estimated on the date of grant
using the Binomial option-pricing model with the following assumptions: expected
volatility - 27% to 29%, expected life of options - 7.0 years, risk-free
interest rate - 4.81% to 6.54% and expected dividend rate - 1.70% to 1.88%. The
weighted average fair value of options granted during the fiscal year ended
December 31, 1999, was $7.27 per share.

The fair value of options granted during 2000 was estimated on the date of grant
using the Binomial option-pricing model with the following assumptions: expected
volatility - 25%, expected life of options - 7.0 years, risk-free interest rate
- 6.04% to 6.20% and expected dividend rate - 2.19% to 2.71%. The weighted
average fair value of options granted during the fiscal year ended December 31,
2001, was $6.36 per share.

                                       34
<Page>

The fair value of options granted during 2001 was estimated on the date of grant
using the Binomial option-pricing model with the following assumptions: expected
volatility - 18% to 22%, expected life of options - 7.0 years, risk-free
interest rate - 4.89% to 5.11% and expected dividend rate - 1.90% to 2.10%. The
weighted average fair value of options granted during the fiscal year ended
December 31, 2001, was $6.25 per share.

MANAGEMENT RECOGNITION AND RETENTION PLAN - The Management Recognition and
Retention Plan ("MRR Plan") provides for a committee of the Company's Board of
Directors to award restricted stock to key officers as well as non-employee
directors. The MRR Plan authorizes the Company to grant up to 206,150 shares of
the Company stock, of which 195,844 shares have been granted through December
31, 2001. Compensation expense has been recognized based on the fair market
value of the shares on the grant date of $19.25 over the vesting period which
ended in May 2001. Shares granted will be deemed vested in the event of
disability or death. All shares granted under the plan have been purchased in
the open market at a total cost of $4.4 million. Approximately $298,000,
$771,000, and $754,000 in compensation expense was recognized during the years
ended December 31, 2001, 2000, and 1999, respectively.

EMPLOYEE STOCK OWNERSHIP PLAN - The Company established an Employee Stock
Ownership Plan on May 3, 1996. During 1996, the ESOP borrowed $4.1 million from
the Company to purchase shares of Company stock. The loan is collateralized by
the shares that were purchased with the proceeds of the loan. As the loan is
repaid, ESOP shares will be allocated to participants of the ESOP and are
available for release to the participants subject to the vesting provisions of
the ESOP.

Forfeitures of nonvested benefits will be reallocated among remaining
participating employees in the same proportion as contributions. During each of
the years ended December 31, 2001, 2000, and 1999, 41,604 shares were released
by the ESOP to participant accounts. At December 31, 2001, there were 227,503
shares allocated to participant accounts and 176,816 unallocated shares. The
fair value of the unallocated shares amounted to approximately $4.1 million at
December 31, 2001.

During the years ended December 31, 2001, 2000, and 1999, ESOP expense was
approximately $754,000, $571,000, and $636,000, respectively.

OTHER POSTRETIREMENT BENEFITS - The Bank is a participant in a multi-employer
retirement plan and therefore separate information is not available. The plan is
noncontributory and covers substantially all employees. The plan provides a
retirement benefit and a death benefit. Retirement benefits are payable in
monthly installments for life and must begin not later than the first day of the
month coincident with or next month following the seventieth birthday or the
participant may elect a lump-sum distribution. Death benefits are paid in a
lump-sum distribution, the amount of which depends on years of service. There
was no net pension cost for the years ended December 31, 2001, 2000, and 1999.

                                       35
<Page>

13.    EARNINGS PER SHARE

<Table>
<Caption>
                                                               YEAR ENDED  DECEMBER 31, 2001
                                                --------------------------------------------------------------
                                                          INCOME                 SHARES                PER SHARE
                                                        (NUMERATOR)           (DENOMINATOR)             AMOUNT
      <S>                                               <C>                    <C>                     <C>
      Basic EPS -
       Income available to common stockholders          $ 5,459,546            3,097,877               $ 1.76

      Effect of dilutive securities -
       Stock options                                              -               29,020
                                                        -----------            ---------
      Diluted EPS -
       Income available to common stockholders
        and assumed conversions                         $ 5,459,546            3,126,897               $ 1.75
                                                        ===========            =========
</Table>

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31, 2001
                                                --------------------------------------------------------------
                                                          INCOME                 SHARES              PER SHARE
                                                        (NUMERATOR)            (DENOMINATOR)           AMOUNT
      <S>                                               <C>                    <C>                     <C>
      Basic EPS -
       Income available to common stockholders          $ 5,591,607            3,504,859               $ 1.60
      Effect of dilutive securities -
       Stock options                                              -                   79
                                                        -----------            ---------
      Diluted EPS -
       Income available to common stockholders
        and assumed conversions                         $ 5,591,607            3,504,938               $ 1.60
                                                        ===========            =========
</Table>

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31, 2001
                                                --------------------------------------------------------------
                                                          INCOME                 SHARES                PER SHARE
                                                        (NUMERATOR)           (DENOMINATOR)              AMOUNT
      <S>                                               <C>                    <C>                     <C>
      Basic EPS -
       Income available to common stockholders          $ 6,279,557            4,003,229               $ 1.57

      Effect of dilutive securities -
       Stock options                                              -                    -
                                                        -----------            ---------
      Diluted EPS -
       Income available to common stockholders
        and assumed conversions                         $ 6,279,557            4,003,229               $ 1.57
                                                        ===========            =========
</Table>

14.   FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

      The Bank is a party to financial instruments with off-balance sheet risk
      in the normal course of business to meet the financing needs of its
      customers. These financial instruments include commitments to extend
      credit and standby letters of credit. Those instruments involve, to
      varying degrees, elements of credit risk in excess of the amount
      recognized in the consolidated statements of financial condition.

      The Bank does not use financial instruments with off-balance sheet risk as
      part of its asset/liability management program or for trading purposes.
      The Bank's exposure to credit loss in the event of nonperformance by the
      other party to the financial instrument for commitments to extend credit
      and standby letters of credit is represented by the contractual amounts of
      those instruments. The Bank uses the same credit policies in making
      commitments and conditional obligations as it does for on-balance sheet
      instruments.

                                       36
<Page>

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses. The Bank evaluates each customer's creditworthiness on a
      case-by-case basis. The amount of collateral obtained, if deemed necessary
      by the Bank upon extension of credit, is based on management's credit
      evaluation of the counterparty. Such collateral consists primarily of
      residential properties. Standby letters of credit are conditional
      commitments issued by the Bank to guarantee the performance of a customer
      to a third party. The credit risk involved in issuing letters of credit is
      essentially the same as that involved in extending loan facilities to
      customers.

      The Bank had the following outstanding commitments at December 31, 2001
      (in thousands):

<Table>
<Caption>
      <S>                                                                               <C>
      Undisbursed construction loans                                                    $ 10,144
      Commitments to originate mortgage loans                                              6,911
      Letters of credit                                                                      660
      Unused lines of credit                                                               8,406
                                                                                        --------
             Total                                                                      $ 26,121
                                                                                        ========
</Table>

      The funding period for construction loans is generally less than nine
      months and commitments to originate mortgage loans are generally
      outstanding for 60 days or less. At December 31, 2001, interest rates on
      commitments ranged from 4% to 10%.

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      The estimated fair value amounts have been determined by the Company using
      available market information and appropriate valuation methodologies.
      However, considerable judgment is required to interpret market data to
      develop the estimates of fair value. Accordingly, the estimates presented
      herein are not necessarily indicative of the amounts the Company could
      realize in a current market exchange. The use of different market
      assumptions and/or estimation methodologies may have a material effect on
      the estimated fair value amounts. The estimated fair values of financial
      instruments are as follows (in thousands):

<Table>
<Caption>
                                                         DECEMBER 31, 2001                 DECEMBER 31, 2000
                                                 -------------------------------   -------------------------------
                                                                  ESTIMATED                           ESTIMATED
                                                 CARRYING           FAIR             CARRYING           FAIR
                                                   VALUE            VALUE             VALUE             VALUE
       <S>                                        <C>               <C>              <C>              <C>
       ASSETS:
        Cash and cash equivalents                 $ 72,326          $ 72,326         $ 11,564         $  11,564
        Investment securities -
         Held to maturity                          100,878           101,432          184,310           180,103
        Federal Home Loan Bank stock                 4,918             4,918            5,098             5,098
        Loans receivable, net                      474,494           482,349          498,305           495,163
        Accrued interest receivable                  4,420             4,420            6,910             6,910
       LIABILITIES:
        Deposits:
         Demand, NOW, money
          market and regular savings               137,752           137,752          107,306           107,306
         Certificates of deposit                   418,181           422,183          433,021           436,012
        Federal Home Loan Bank advances             47,844            49,507           93,359            93,913
        Accrued interest payable                       718               718            1,325             1,325
        Advance payments by borrowers
         for taxes and insurance                       929               929            1,006             1,006
        Commitments                                      -                 -                -                 -
</Table>

                                       37
<Page>

      For cash and cash equivalents, Federal Home Loan Bank stock and accrued
      interest receivable, the carrying value is a reasonable estimate of fair
      value, primarily because of the short-term nature of the instruments or,
      as to Federal Home Loan Bank stock, the ability to sell the stock back to
      the Federal Home Loan Bank at cost. The fair value of investment
      securities is based on quoted market prices, dealer quotes and prices
      obtained from independent pricing services. The fair value of variable
      rate loans is based on repricing dates. Fixed rate loans were valued using
      discounted cash flows. The discount rates used to determine the present
      value of these loans were based on interest rates currently being charged
      by the Bank on comparable loans as to credit risk and term.

      The fair value of demand deposit accounts, NOW accounts, savings accounts
      and money market deposits is the amount payable on demand at the reporting
      date. The fair value of fixed-maturity certificates of deposit and Federal
      Home Loan Bank advances is estimated using the rates currently offered for
      deposits of similar terms and advances of similar remaining maturities at
      the reporting date. For advance payments by borrowers, for taxes and
      insurance and for accrued interest payable the carrying value is a
      reasonable estimate of fair value, primarily because of the short-term
      nature of the instruments. Commitments are generally made at prevailing
      interest rates at the time of funding and, therefore, there is no
      difference between the contract amount and fair value.

      The fair value estimates presented herein are based on pertinent
      information available to management as of December 31, 2001 and 2000.
      Although management is not aware of any factors that would significantly
      affect the estimated fair value amounts, such amounts have not been
      comprehensively revalued for purposes of these financial statements since
      the reporting date and, therefore, current estimates of fair value may
      differ significantly from the amounts presented herein.

16.   COMMITMENTS AND CONTINGENCIES

      In the ordinary course of business, the Company has various outstanding
      commitments and contingent liabilities that are not reflected in the
      accompanying consolidated financial statements (see Note 14). In addition,
      the Company is a defendant in certain claims and legal actions arising in
      the ordinary course of business. In the opinion of management, after
      consultation with legal counsel, the ultimate disposition of these matters
      is not expected to have a material adverse effect on the consolidated
      financial statements of the Company.

17.   RETAINED EARNINGS - SUBSTANTIALLY RESTRICTED

      Upon conversion, the Company established a special liquidation account for
      the benefit of eligible account holders and the supplemental eligible
      account holders in an amount equal to the net worth of the Bank as of the
      date of its latest statement of financial condition contained in the final
      offering circular used in connection with the conversion. The liquidation
      account will be maintained for the benefit of eligible account holders and
      supplemental eligible account holders who continue to maintain their
      accounts in the Bank after conversion. In the event of a complete
      liquidation (and only in such event), each eligible and supplemental
      eligible account holder will be entitled to receive a liquidation
      distribution from the liquidation account in an amount proportionate to
      the current adjusted qualifying balances for accounts then held.

      The Company may not declare or pay cash dividends on its shares of common
      stock if the effect thereof would cause the Company's stockholders' equity
      to be reduced below applicable regulatory capital maintenance requirements
      for insured institutions or below the special liquidation account referred
      to above.

                                       38
<Page>

18.   REGULATORY MATTERS

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

      Quantitative measures established by regulation to ensure capital adequacy
      require the Bank to maintain minimum amounts and ratios (set forth in the
      table below) of tangible capital (as defined in the regulations) to
      tangible assets (as defined) and core capital (as defined) to adjusted
      tangible assets (as defined), and of total risk-based capital (as defined)
      to risk-weighted assets (as defined). Management believes, as of December
      31, 2001, that the Bank meets all capital adequacy requirements to which
      it is subject.

      At December 31, 2001 and 2000, the most recent notification from the OTS
      categorized the Bank as well capitalized under the regulatory framework
      for prompt corrective action. To be categorized as well capitalized the
      Bank must maintain minimum core (Tier I leverage), Tier I risk-based, and
      total risk-based ratios as set forth in the table. There are no conditions
      or events since that notification that management believes have changed
      the Bank's category.

      The Bank's actual capital amounts (in thousands) and ratios are also
      presented in the table:

<Table>
<Caption>
                                                                                                TO BE
                                                                                             CATEGORIZED
                                                                                               AS WELL
                                                                                          CAPITALIZED UNDER
FOR CAPITAL                                                                                    PROMPT
                                                                     FOR CAPITAL             CORRECTIVE
                                            ACTUAL               ADEQUACY PURPOSES        ACTION PROVISIONS
                                   -----------------------   -------------------------  ---------------------
                                     AMOUNT         RATIO       AMOUNT         RATIO    AMOUNT       RATIO

<S>                                  <C>            <C>          <C>             <C>     <C>            <C>
As of December 31, 2001:

  Tangible Capital to Tangible
   Assets                            $ 66,597        9.79%       $ 10,203        1.50%        N/A         N/A

  Core Capital to Adjusted
    Tangible Assets                    66,597        9.79%         27,207        4.00%   $ 34,009        5.00%

  Total Capital to Risk-Weighted
    Assets                             67,335       17.29%         31,160        8.00%     38,950       10.00%

  Tier I Capital to Risk-Weighted
    Assets                             66,597       17.10%            N/A         N/A      23,370        6.00%

As of December 31, 2000:

  Tangible Capital to Tangible
    Assets                           $ 74,035       10.37%       $ 10,705        1.50%        N/A         N/A

  Core Capital to Adjusted
    Tangible Assets                    74,035       10.37%         28,554        4.00%   $ 35,693        5.00%

  Total Capital to Risk-Weighted
    Assets                             74,666       19.69%         30,342        8.00%     37,927       10.00%

  Tier I Capital to Risk-Weighted
    Assets                             74,035       19.52%            N/A         N/A      22,756        6.00%
</Table>

                                       39
<Page>

19.   PARENT COMPANY ONLY FINANCIAL INFORMATION

      The following condensed statements of financial condition, as of December
      31, 2001 and 2000, and condensed statements of income and of cash flows
      for each of the three years in the period ended December 31, 2001, for
      First Federal Bancshares of Arkansas, Inc. should be read in conjunction
      with the consolidated financial statements and the notes herein.

         FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
         (PARENT COMPANY ONLY)

         CONDENSED STATEMENTS OF FINANCIAL CONDITION (IN THOUSANDS)
         DECEMBER 31, 2001 AND 2000

<Table>
<Caption>
         ASSETS                                                                            2001           2000

         <S>                                                                             <C>            <C>
         Cash and cash equivalents (deposits in Bank)                                    $    178       $    159
         Loan to Bank subsidiary                                                            4,096          1,818
         Accrued interest receivable                                                            6             11
         Investment in Bank                                                                66,597         74,035
         Other assets                                                                         511            808
                                                                                         --------       --------
         TOTAL ASSETS                                                                    $ 71,388       $ 76,831
                                                                                         ========       ========
         LIABILITIES AND STOCKHOLDERS' EQUITY

         Accrued expenses and other liabilities                                          $    323       $    209
         Stockholders' equity                                                              71,065         76,622
                                                                                         --------       --------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $ 71,388       $ 76,831
                                                                                         ========       ========
</Table>

                                       40
<Page>

         FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
         (PARENT COMPANY ONLY)

         CONDENSED STATEMENTS OF INCOME (in thousands)
         YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<Table>
<Caption>
                                                                               2001         2000          1999
         <S>                                                                <C>            <C>           <C>
         INCOME:
           Dividends from the Bank                                          $ 12,900       $ 7,000       $ 2,500
           Interest income - loan to the Bank                                    139           124           213
                                                                            --------       -------       -------
                Total income                                                  13,039         7,124         2,713

         EXPENSES:
           Management fees                                                        66            66            66
           Other operating expenses                                              144           125           117
                                                                            --------       -------       -------
                Total expenses                                                   210           191           183
                                                                            --------       -------       -------
         INCOME BEFORE INCOME TAX PROVISION
          (BENEFIT) AND EQUITY IN UNDISTRIBUTED
          EARNINGS (LOSS) OF BANK SUBSIDIARY                                  12,829         6,933         2,530

         INCOME TAX PROVISION (BENEFIT)                                          (24)          (23)           12
                                                                            --------       -------       -------
         INCOME BEFORE EQUITY IN UNDISTRIBUTED
          EARNINGS (LOSS) OF BANK SUBSIDIARY                                  12,853         6,956         2,518

         EQUITY OF UNDISTRIBUTED EARNINGS (LOSS) OF
          BANK SUBSIDIARY                                                     (7,393)       (1,364)        3,762
                                                                            --------       -------       -------
         NET INCOME                                                         $  5,460       $ 5,592       $ 6,280
                                                                            ========       =======       =======
</Table>

                                       41
<Page>

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

<Table>
<Caption>
                                                                      2001          2000          1999
<S>                                                                 <C>            <C>          <C>
OPERATING ACTIVITIES:
 Net income                                                         $  5,460       $ 5,592      $ 6,280
 Adjustments to reconcile net income to net cash provided
  by operating activities:
  Equity in undistributed net loss of Bank                             7,393         1,364       (3,762)
  Release of ESOP shares                                                 850           675          732
  Stock compensation expense                                             297           771          754
  Changes in operating assets and liabilities:
   Accrued interest receivable                                             5            (7)          31
   Other assets                                                          297            80            5
   Accrued expenses and other liabilities                                114             4          (12)
                                                                    --------       -------      -------
     Net cash provided by operating activities                        14,416         8,479        4,028
                                                                    --------       -------      -------
INVESTING ACTIVITIES -
 Loan to bank, net of repayments                                      (2,278)          786        5,969
                                                                    --------       -------      -------
     Net cash provided (used) by investing activities                 (2,278)          786        5,969
                                                                    --------       -------      -------
FINANCING ACTIVITIES:
 Purchase of treasury stock                                          (10,682)       (7,747)      (8,604)
 Dividends paid                                                       (1,437)       (1,477)      (1,360)
                                                                    --------       -------      -------
     Net cash used in financing activities                           (12,119)       (9,224)      (9,964)
                                                                    --------       -------      -------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                 19            41           33

CASH AND CASH EQUIVALENTS:
 Beginning of period                                                     159           118           85
                                                                    ========       =======      =======
 End of period                                                      $    178       $   159      $   118
                                                                    ========       =======      =======
</Table>

                                  * * * * * *

                                       42
<Page>

                   FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.
                       FIRST FEDERAL BANK OF ARKANSAS, FA
<Table>
<Caption>
DIRECTORS                                                   EXECUTIVE OFFICERS

<S>                                                         <C>
JOHN P. HAMMERSCHMIDT                                       LARRY J. BRANDT
Chairman of the Board and                                   President and Chief Executive Officer
U. S. Congressman, Retired

LARRY J. BRANDT                                             TOMMY W. RICHARDSON
President and Chief Executive Officer                       Executive Vice President, Chief Operating Officer
                                                            and Secretary

JAMES D. HEUER                                              SHERRI R. BILLINGS
Farming and Investments                                     Executive Vice President and Chief Financial Officer

KENNETH C. SAVELLS                                          ROSS MALLIOUX
Registered representative with                              Executive Vice President and Chief Lending Officer
AXA Advisors, LLC

JEFFREY L. BRANDT                                           SCOTT TENNYSON
Senior Vice President and Regional Manager                  Executive Vice President and Chief Retail Officer
</Table>

                                BANKING LOCATIONS

                                   MAIN OFFICE

                               200 West Stephenson
                            Harrison, Arkansas 72601

<Table>
<Caption>
                                                   BRANCH OFFICES

    <S>                                     <C>                                    <C>

          128 West Stephenson               Ozark Mall - Highway 62-65 North            301 Highway 62 West
       Harrison, Arkansas  72601                Harrison, Arkansas  72601           Yellville, Arkansas  72687

        Corner Central & Willow                 324 Highway 62-65 Bypass              307 North Walton Blvd.
       Harrison, Arkansas  72601                Harrison, Arkansas 72601            Bentonville, Arkansas 72712

            210 South Main                          1303 West Hudson                    3460 North College
      Berryville, Arkansas  72616                Rogers, Arkansas 72756            Fayetteville, Arkansas  72703

          668 Highway 62 East                        2030 West Elm                   2025 North Crossover Road
    Mountain Home, Arkansas  72653               Rogers, Arkansas 72756               Fayetteville, AR 72703

            1337 Hwy 62 SW                        249 West Main Street             201 East Henri De Tonti Blvd.
     Mountain Home, Arkansas 72653                Farmington, AR 72730               Tontitown, Arkansas 72764
</Table>

                                       43
<Page>

                             STOCKHOLDER INFORMATION

        First Federal Bancshares of Arkansas, Inc. is a unitary savings and loan
holding company conducting business through its wholly-owned subsidiary, First
Federal Bank of Arkansas, FA. The Bank is a federally-chartered, SAIF-insured
savings institution operating through its main office and thirteen full service
branch offices. The Company's and the Bank's principal executive office is
located at 200 West Stephenson, Harrison, Arkansas 72601.

                            TRANSFER AGENT/REGISTRAR

                         Registrar and Transfer Company
                                10 Commerce Drive
                           Cranford, New Jersey 07016
                              Phone: (800) 368-5948

--------------------------------------------------------------------------------
                              STOCKHOLDER REQUESTS

Request for annual reports, quarterly reports and related stockholder literature
should be directed to Investor Relations, First Federal Bancshares of Arkansas,
Inc., P. O. Box 550, Harrison, Arkansas 72602.

Stockholders needing assistance with stock records, transfers or lost
certificates, should contact the Company's transfer agent, Registrar and
Transfer Company, at the telephone number listed above.

--------------------------------------------------------------------------------
                            COMMON STOCK INFORMATION

        Shares of the Company's common stock are traded under the symbol "FFBH"
on the Nasdaq National Market System.  At March 18, 2002, the Company had
3,017,359 shares of common stock outstanding and had approximately 970
stockholders of record. Such holdings do not reflect the number of beneficial
owners of common stock.

        The following  table sets forth the reported high and low sale prices of
a share of the  Company's  common  stock as  reported  by Nasdaq for the periods
indicated.

<Table>
<Caption>
             --------------------------------------------------------------------------------------------------
                 QUARTER                        YEAR ENDED                            YEAR ENDED
                  ENDED                       DECEMBER 31, 2001                     DECEMBER 31, 2000
                                  -----------------------------------  ----------------------------------------
                                         HIGH           LOW       DIVIDEND      HIGH        LOW       DIVIDEND
                                  ------------------  --------  -----------  -----------  ---------  ----------
             <S>                       <C>             <C>           <C>        <C>         <C>         <C>
             MARCH 31                  $ 20.30         $ 18.21       $ 0.11     $ 15.86     $ 12.77     $ 0.10

             JUNE 30                   $ 21.28         $ 18.85       $ 0.11     $ 15.82     $ 13.39     $ 0.10

             SEPTEMBER 30              $ 22.85         $ 19.72       $ 0.11     $ 18.90     $ 14.59     $ 0.10

             DECEMBER 31               $ 23.27         $ 19.16       $ 0.11     $ 19.00     $ 16.16     $ 0.10
             --------------------------------------------------------------------------------------------------
</Table>

                                       44