##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
|- |  | --------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



|For |  | the quarterly period ended December 31, 2002
|--- |  | --------------------------------------------



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|- |  | ---------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934
| |  | -------------------------------



COMMISSION FILE # 0-23969



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POCAHONTAS BANCORP, INC.



|DELAWARE               |  | No. 71-0806097             
|---------------------- |  | ---------------------------
|State of Incorporation |  | IRS Employer Identification



|1700 E. Highland Jonesboro, Arkansas 72401 |  | (870) 802-1700  
|------------------------------------------ |  | ----------------
|Address                                    |  | Telephone Number



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



Indicate by check mark whether the Registrant is an accelerated filer (as
defined by the Rule 12g-2 of the Securities Exchange Act of 1934).  Yes ̈No  x



There were 4,299,395 shares of
Common Stock ($0.01 par value) issued and outstanding as of December 31, 2002.



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##### Table of Contents



POCAHONTAS BANCORP, INC.



TABLE OF CONTENTS



|                                                                                                                                       |  | Page
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                      
|PART I. FINANCIAL INFORMATION                                                                                                          |  |     
|                                                                                                                                      
|Item 1. Financial Statements:                                                                                                          |  |     
|                                                                                                                                      
|Condensed Consolidated Statements of Financial Condition at December 31, 2002 (unaudited) and September 30, 2002                       |  | 1   
|                                                                                                                                      
|Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended December 31, 2002 and 2001 (unaudited) |  | 2   
|                                                                                                                                      
|Condensed Consolidated Statement of Changes in Stockholders Equity for the Three Months Ended December 31, 2002 (unaudited)           |  | 4   
|                                                                                                                                      
|Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2002 and 2001 (unaudited)                      |  | 5   
|                                                                                                                                      
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                                       |  | 7   
|                                                                                                                                      
|Independent Accountants Report                                                                                                        |  | 11  
|                                                                                                                                      
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 12  
|                                                                                                                                      
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                                     |  | 17  
|                                                                                                                                      
|Item 4. Controls and Procedures                                                                                                        |  | 18  
|                                                                                                                                      
|PART II. OTHER INFORMATION                                                                                                             |  | 18  







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##### Table of Contents



Item 1



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                                                                                                           |  | (Unaudited) December 31, 2002 |             |   | September 30, 2002 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ----------- | - | ------------------ | -
|ASSETS                                                                                                                                                                                                     |  |                               |             |   |                    |  
|Cash                                                                                                                                                                                                       |  | $                             | 48,356,029  |   |                    | $
|Cash surrender value of life insurance                                                                                                                                                                     |  |                               | 6,931,865   |   |                    |  
|Investment securitiestrading                                                                                                                                                                              |  |                               | 1,071,517   |   |                    |  
|Investment securitiesheld to maturity                                                                                                                                                                     |  |                               | 7,736,024   |   |                    |  
|Investment securitiesavailable for sale                                                                                                                                                                   |  |                               | 142,811,534 |   |                    |  
|Loans receivable, net                                                                                                                                                                                      |  |                               | 393,728,600 |   |                    |  
|Loans receivable, held for sale                                                                                                                                                                            |  |                               | 1,935,494   |   |                    |  
|Accrued interest receivable                                                                                                                                                                                |  |                               | 4,270,417   |   |                    |  
|Premises and equipment, net                                                                                                                                                                                |  |                               | 13,991,179  |   |                    |  
|Federal Home Loan Bank stock, at cost                                                                                                                                                                      |  |                               | 2,140,200   |   |                    |  
|Goodwill                                                                                                                                                                                                   |  |                               | 8,847,572   |   |                    |  
|Core deposit premiums                                                                                                                                                                                      |  |                               | 8,807,567   |   |                    |  
|Other assets                                                                                                                                                                                               |  |                               | 2,955,637   |   |                    |  
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|TOTAL ASSETS                                                                                                                                                                                               |  | $                             | 643,583,635 |   |                    | $
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                       |  |                               |             |   |                    |  
|LIABILITIES:                                                                                                                                                                                               |  |                               |             |   |                    |  
|Deposits                                                                                                                                                                                                   |  | $                             | 546,966,721 |   |                    | $
|Federal Home Loan Bank advances                                                                                                                                                                            |  |                               | 22,059,382  |   |                    |  
|Deferred compensation                                                                                                                                                                                      |  |                               | 4,361,505   |   |                    |  
|Accrued expenses and other liabilities                                                                                                                                                                     |  |                               | 5,572,214   |   |                    |  
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|Total liabilities                                                                                                                                                                                          |  |                               | 578,959,822 |   |                    |  
|TRUST PREFERRED SECURITIES                                                                                                                                                                                 |  |                               | 16,905,575  |   |                    |  
|STOCKHOLDERS EQUITY                                                                                                                                                                                       |  |                               |             |   |                    |  
|Common stock, $0.01 par value, 8,000,000 shares authorized; 7,492,353 and 7,492,353
shares issued and 4,299,395 and 4,376,295 shares outstanding at December 31, 2002 and September 30, 2002, respectively |  |                               | 74,923      |   |                    |  
|Additional paid-in capital                                                                                                                                                                                 |  |                               | 56,342,563  |   |                    |  
|Unearned ESOP Shares                                                                                                                                                                                       |  |                               | (671,130    | ) |                    |  
|Unearned RRP Shares                                                                                                                                                                                        |  |                               | (26,439     | ) |                    |  
|Accumulated other comprehensive income                                                                                                                                                                     |  |                               | 1,797,967   |   |                    |  
|Retained earnings                                                                                                                                                                                          |  |                               | 17,165,410  |   |                    |  
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|                                                                                                                                                                                                           |  |                               | 74,683,294  |   |                    |  
|Treasury stock at cost, 3,192,958 and 3,116,058 shares at December 31, 2002 and
September 30, 2002, respectively                                                                                           |  |                               | (26,965,056 | ) |                    |  
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|Total stockholders equity                                                                                                                                                                                 |  |                               | 47,718,238  |   |                    |  
|                                                                                                                                                                                                           |  |                               |             |   |                    |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                 |  | $                             | 643,583,635 |   |                    | $
|                                                                                                                                                                                                           |  |                               |             |   |                    |  



See notes
to condensed consolidated financial statements.





1



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##### Table of Contents



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)



|                                                      |  | Three Months Ended December 31, |          
|----------------------------------------------------- |  | ------------------------------- | ---------
|                                                      |  | 2002                            |          
|INTEREST INCOME:                                      |  |                                 |          
|Loans receivable                                      |  | $                               | 6,981,531
|Investment securities                                 |  |                                 | 2,064,771
|                                                      |  |                                 |          
|Total interest income                                 |  |                                 | 9,046,302
|INTEREST EXPENSE:                                     |  |                                 |          
|Deposits                                              |  |                                 | 3,974,577
|Borrowed funds                                        |  |                                 | 661,546  
|                                                      |  |                                 |          
|Total interest expense                                |  |                                 | 4,636,123
|                                                      |  |                                 |          
|NET INTEREST INCOME                                   |  |                                 | 4,410,179
|PROVISION FOR LOAN LOSSES                             |  |                                 | 745,000  
|                                                      |  |                                 |          
|NET INTEREST INCOME AFTER                             |  |                                 |          
|PROVISION FOR LOAN LOSSES                             |  |                                 | 3,665,179
|OTHER INCOME:                                         |  |                                 |          
|Dividends                                             |  |                                 | 21,332   
|Fees and service charges                              |  |                                 | 934,510  
|Gain on sale of loans                                 |  |                                 | 1,127,845
|Gain on sale of securities                            |  |                                 | 5,496    
|Trading gains (losses), net                           |  |                                 | 39,400   
|Other, net                                            |  |                                 | 28,605   
|                                                      |  |                                 |          
|Total other income                                    |  |                                 | 2,157,188
|                                                      |  |                                 |          
|OPERATING EXPENSE:                                    |  |                                 |          
|Compensation and benefits                             |  |                                 | 2,592,936
|Occupancy and equipment                               |  |                                 | 618,722  
|Data processing                                       |  |                                 | 179,379  
|Advertising                                           |  |                                 | 171,053  
|Professional fees                                     |  |                                 | 270,727  
|Office supplies                                       |  |                                 | 74,643   
|Other                                                 |  |                                 | 525,520  
|                                                      |  |                                 |          
|Total operating expense                               |  |                                 | 4,432,980
|                                                      |  |                                 |          
|Income from Continuing Operations Before Income Taxes |  |                                 | 1,389,387
|Income Taxes                                          |  |                                 | 505,000  
|                                                      |  |                                 |          
|Net Income from Continuing Operations                 |  |                                 | 884,387  
|                                                     
|DISCONTINUED OPERATIONS (Note 6)                      |  |                                 |          
|Loss from Operations of Discontinued Branches         |  |                                 | (19,895  
|Gain on Sale of Branches                              |  |                                 | 513,595  
|Income Taxes (Benefit) on Discontinued Branches       |  |                                 | 165,000  
|                                                      |  |                                 |          
|Net Gain on Discontinued Operations                   |  |                                 | 328,700  
|                                                      |  |                                 |          
|NET INCOME                                            |  |                                 | 1,213,087



(Continued)



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##### Table of Contents



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)



|                                                                                      |  | Three Months Ended December 31, |          
|------------------------------------------------------------------------------------- |  | ------------------------------- | ---------
|                                                                                      |  | 2002                            |          
|                                                                                     
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                               |  |                                 |          
|Unrealized holding gain (loss) on available-for-sale securities arising during
period |  |                                 | 206,537  
|Reclassification adjustment for gains included in net income                          |  |                                 | (5,496   
|                                                                                      |  |                                 |          
|COMPREHENSIVE INCOME                                                                  |  | $                               | 1,414,128
|                                                                                      |  |                                 |          
|BASIC EARNINGS PER SHARE                                                              |  |                                 |          
|Earnings Per Share Before Discontinued Operations                                     |  | $                               | 0.21     
|Earnings Per Share From Discontinued Operations                                       |  | $                               | 0.07     
|                                                                                      |  |                                 |          
|BASIC EARNINGS PER SHARE                                                              |  | $                               | 0.28     
|                                                                                      |  |                                 |          
|DILUTED EARNINGS PER SHARE                                                            |  |                                 |          
|                                                                                     
|Earnings Per Share Before Discontinued Operations                                     |  | $                               | 0.20     
|Earnings Per Share From Discontinued Operations                                       |  | $                               | 0.80     
|                                                                                      |  |                                 |          
|DILUTED EARNINGS PER SHARE                                                            |  | $                               | 0.28     
|                                                                                      |  |                                 |          
|                                                                                     
|DIVIDENDS DECLARED PER SHARE:                                                         |  | $                               | 0.08     
|                                                                                      |  |                                 |          

(Concluded)





See notes to condensed
consolidated financial statements.





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POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)



|                                                           |  |           |  |        |  | Paid-In    |  | ESOP            |   |  | RRP             |   |  | Comprehensive |  | Retained   |   |  | Treasury Stock |  | Treasury Stock |   |  | Stockholders |  
|---------------------------------------------------------- |  | --------- |  | ------ |  | ---------- |  | --------------- | - |  | --------------- | - |  | ------------- |  | ---------- | - |  | -------------- |  | -------------- | - |  | ------------- | -
|                                                           |  | Shares    |  | Amount |  | Capital    |  | Shares (Amount) |   |  | Shares (Amount) |   |  | Income        |  | Earnings   |   |  | Shares         |  | Amount         |   |  | Equity        |  
|Balance, September 30, 2002                                |  | 7,492,353 |  | 74,923 |  | 56,342,563 |  | (671,130        | ) |  | (35,251         | ) |  | 1,596,925     |  | 16,304,221 |   |  | 3,116,058      |  | (26,119,636    | ) |  | 47,492,615    |  
|                                                           |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |               |  
|Repayment of ESOP loan and related increase in share value |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|Options exercised                                          |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|New IssuanceNARK Acquisition                              |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|RRP shares granted                                         |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|RRP shares forfeited                                       |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|RRP shares earned                                          |  |           |  |        |  |            |  |                 |   |  | 8,812           |   |  |               |  |            |   |  |                |  |                |   |  | 8,812         |  
|Net change in unrealized gain (loss) on                    |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|available-for-sale securities, net of tax                  |  |           |  |        |  |            |  |                 |   |  |                 |   |  | 201,042       |  |            |   |  |                |  |                |   |  | 201,042       |  
|Treasury stock purchased                                   |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  | 76,900         |  | (845,420       | ) |  | (845,420      | )
|Trust Preferred stock Sold                                 |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|Trust Preferred amortization                               |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |              |  
|Net income                                                 |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  | 1,213,087  |   |  |                |  |                |   |  | 1,213,087     |  
|Dividends                                                  |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  | (351,898   | ) |  |                |  |                |   |  | (351,898      | )
|                                                           |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |               |  
|Balance, December 31, 2002                                 |  | 7,492,353 |  | 74,923 |  | 56,342,563 |  | (671,130        | ) |  | (26,439         | ) |  | 1,797,967     |  | 17,165,410 |   |  | 3,192,958      |  | (26,965,056    | ) |  | 47,718,238    |  
|                                                           |  |           |  |        |  |            |  |                 |   |  |                 |   |  |               |  |            |   |  |                |  |                |   |  |               |  





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POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



|                                                                                         |  | Three months ended December 31, |            
|---------------------------------------------------------------------------------------- |  | ------------------------------- | -----------
|                                                                                         |  | 2002                            |            
|OPERATING ACTIVITIES:                                                                    |  |                                 |            
|Net income                                                                               |  | $                               | 1,213,087  
|Adjustments to reconcile net income to net cash provided (used) by operating
activities: |  |                                 |            
|Provision for loan losses                                                                |  |                                 | 745,000    
|Depreciation of premises and equipment                                                   |  |                                 | 281,372    
|Amortization of core deposit premium                                                     |  |                                 | 276,461    
|Amortization of deferred loan fees                                                       |  |                                 | (22,730    
|Amortization of premiums and discounts, net                                              |  |                                 | (166,248   
|Net (gain) loss on sales of assets                                                       |  |                                 | (1,127,845 
|Net (gain) loss on sales of investments                                                  |  |                                 | (5,496     
|Net (gain) loss on sales of branches                                                     |  |                                 | 513,595    
|Increase in cash surrender value of life insurance policies                              |  |                                 | (48,373    
|Change in operating assets and liabilities:                                              |  |                                 |            
|Trading securities                                                                       |  |                                 | 392,941    
|Accrued interest receivable                                                              |  |                                 | 87,717     
|Other assets                                                                             |  |                                 | (470,662   
|Deferred compensation                                                                    |  |                                 | 237,953    
|Accrued expenses and other liabilities                                                   |  |                                 | (743,739   
|                                                                                         |  |                                 |            
|Net cash provided (used) by operating activities                                         |  |                                 | 1,163,033  
|                                                                                         |  |                                 |            
|INVESTING ACTIVITIES:                                                                    |  |                                 |            
|Acquisition of Walden/Smith Financial Group, Inc., net of cash acquired                  |  |                                 |           
|Acquisition of Southern Mortgage Corporation, net of cash acquired                       |  |                                 |           
|Loan repayments, originations, and purchases, net                                        |  |                                 | (8,475,005 
|Net effect from sale of branches                                                         |  |                                 | (14,557,990
|Proceeds from sale of loans                                                              |  |                                 | 21,112,428 
|Proceeds from sale (purchase) of FHLB stock                                              |  |                                 | (14,700    
|Purchase of investment securities                                                        |  |                                 | (51,024,764
|Proceeds from sale of REO                                                                |  |                                 |           
|Proceeds from sale of premises and equipment                                             |  |                                 | 5,413      
|Proceeds from sales, maturities and principal repayments of securities                   |  |                                 | 26,319,834 
|Purchases of premises and equipment                                                      |  |                                 | (414,531   
|                                                                                         |  |                                 |            
|Net cash provided (used) by investing activities                                         |  |                                 | (27,049,315
|                                                                                         |  |                                 |            



(Continued)



5



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##### Table of Contents



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



|                                                                            |  | Three months ended December 31, |           
|--------------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                            |  | 2002                            |           
|FINANCING ACTIVITIES:                                                       |  |                                 |           
|Net increase in deposits                                                    |  | $                               | 41,201,803
|Net increase (decrease) in repurchase agreements                            |  |                                 |          
|Net decrease in FHLB advances                                               |  |                                 | (77,585   
|Proceeds from issuance of trust preferred securities, net of issuance
costs |  |                                 |          
|Purchase of treasury shares                                                 |  |                                 | (845,420  
|Issuance of RRPs                                                            |  |                                 | 8,812     
|Exercise of stock options                                                   |  |                                 |          
|Dividends paid                                                              |  |                                 | (351,898  
|                                                                            |  |                                 |           
|Net cash provided (used) by financing activities                            |  |                                 | 39,935,712
|                                                                            |  |                                 |           
|NET INCREASE IN CASH                                                        |  |                                 | 14,049,431
|CASH AT BEGINNING OF PERIOD                                                 |  |                                 | 34,306,598
|                                                                            |  |                                 |           
|CASH AT END OF PERIOD                                                       |  | $                               | 48,356,029
|                                                                            |  |                                 |           



(Concluded)



See notes to
condensed consolidated financial statements.





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POCAHONTAS BANCORP, INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



1. BASIS OF PRESENTATION



The consolidated balance sheet information at September 30, 2002 was derived from the audited balance sheets of Pocahontas Bancorp, Inc. (the Company), at September 30, 2002. The consolidated financial statements at and
for the three months ended December 31, 2002 and 2001 are unaudited. The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation 10 of Regulation S-X. Certain information required for a complete presentation in accordance with generally accepted accounting principles has been omitted. All adjustments that are, in the
opinion of management, necessary for a fair presentation of the interim financial statements have been included. The results of operations for the three months ended December 31, 2002, are not necessarily indicative of the results that may be
expected for the entire fiscal year or any interim period.



The
interim financial information should be read in conjunction with the consolidated financial statements and notes of the Company, including a summary of significant accounting policies followed by the Company, included in the Annual Report for the
fiscal year ended September 30, 2002. The accompanying consolidated financial statements include the accounts of the Company and First Community Bank (the Bank), its wholly owned subsidiary. The intercompany accounts of the Company and
the Bank have been eliminated in consolidation.



Critical Accounting Policy - The Companys critical accounting policy relates to the allowance for losses on loans. The Company has established a systematic method of periodically reviewing the credit
quality of the loan portfolio in order to establish a sufficient allowance for losses on loans. The allowance for losses on loans is based on managements current judgments about the credit quality of individual loans and segments of the loan
portfolio. The allowance for losses on loans is established through a provision for loan losses based on managements evaluation of the risk inherent in the loan portfolio, and considers all known internal and external factors that affect loan
collectability as of the reporting date. Such evaluation, which includes a review of all loans on which full collectability may not be reasonably assured, considers among other matters, the estimate net realizable value or the fair value of the
underlying collateral, economic conditions, historical loan loss experience, managements knowledge of inherent risks in the portfolio that are probable and reasonably estimable and other factors that warrant recognition in providing an
appropriate loan loss allowance.



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.



Recently Adopted Accounting Standards - In
October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 provides one accounting model, based on the framework established by SFAS No. 121, for long-lived assets to be disposed
of by sale and addresses significant implementation issues. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS No. 144 on October 1, 2002.



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##### Table of Contents



In October 2002, the FASB
issued SFAS No. 147, Acquisitions of Certain Financial Institutions. This Statement amends Statements No. 72 and 144 and FASB Interpretation No. 9. Among other topics, this Statement requires that an unidentifiable intangible asset that is
recognized in an acquisition of a financial institution, which is accounted for as a business combination, in which the liabilities assumed exceed the identifiable assets acquired, be recorded as goodwill. Consequently, this unidentifiable
intangible asset will be subject to the goodwill accounting standards set forth in SFAS No. 142 and will be evaluated for impairment on an annual basis instead of being amortized. The Company, which owns intangible assets of this nature, adopted
this Statement on October 1, 2002. The adoption of SFAS No. 147 did not have a material impact on the results of operations or financial condition of the Company.



Recently Issued Accounting Standards - In December 2002, the FASB issued Statement No. 148 (SFAS 148),
Accounting for Stock-Based Compensation  Transition and Disclosure, an amendment to FASB Statement 123. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS 148 is effective for financial statements for fiscal years ending after December 15, 2002. The adoption of SFAS No. 148 is not expected to have a material impact on the results of operations or
financial condition of the Company.



2. EARNINGS PER SHARE



The earnings per share amounts were computed using the
weighted average number of shares outstanding during the periods presented. In accordance with Statement of Position No. 93-6, Employers Accounting for Employee Stock Ownership Plans, issued by the American Institute of Certified Public
Accountants, shares owned by the Companys Employee Stock Ownership Plan that have not been committed to be released are not considered to be outstanding for the purpose of computing earnings per share.



The weighted average number of shares used in the basic and diluted earnings
per share calculation are set out in the table below:



|                                                                                      |  | Three Months Ended
|------------------------------------------------------------------------------------- |  | ------------------
|                                                                                      |  | December 31, 2002 
|Total weighted average basic shares outstanding                                       |  | 4,303,532         
|Add dilutive effect of unexercised options                                            |  | 37,085            
|                                                                                      |  |                   
|Total weighted average shares outstanding for dilutive earnings-per-share
calculation |  | 4,340,617         
|                                                                                      |  |                   



3. DECLARATION OF
DIVIDENDS



On November 19, 2002, the Board of Directors
declared a $.08 per share quarterly cash dividend for holders of record December 13, 2002. The dividend was paid January 3, 2003.



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4. BENEFIT PLANS



Stock Option Plan - The Companys
stockholders approved the 1998 Stock Option Plan (SOP) on October 23, 1998. The SOP provides for a committee of the Companys Board of Directors to award incentive stock options, non-qualified or compensatory stock options to
purchase up to 357,075 shares of Company common stock. The options vest in equal amounts over five years with the first vesting date on October 23, 1999. Options granted vest immediately in the event of retirement, disability, or death, or following
a change in control of the Company. Outstanding stock options can be exercised over a ten-year period. Under the SOP, options have been granted to directors and key employees of the Company. The exercise price in each case equals the fair market
value of the Companys stock at the date of grant. The Company granted 350,000 options on October 23, 1998, which have an exercise price of $9.00 per share. As of December 31, 2002, 270,000 options were outstanding.



The Company applies the provisions of APB 25 in accounting for its stock
options plans, as allowed under SFAS 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the options granted to employees or directors. Had compensation cost for these been determined on the
fair value at the grant dates for awards under those plans consistent with the methods of SFAS No. 123, the Companys pro forma net income and pro forma earnings per share for the three months ended December 31, 2002, would have been as
follows:



|                                  |  | Three-Months Ended December 31,
|--------------------------------- |  | -------------------------------
|                                  |  | 2002                           
|Net income (loss) (in thousands): |  |                                
|As reported                       |  | $                              
|Pro forma                         |  | $                              
|                                 
|Earnings (loss) per share:        |  |                                
|Basic - as reported               |  | $                              
|Basic - pro forma                 |  | $                              
|Diluted - as reported             |  | $                              
|Diluted - pro forma               |  | $                              



In determining the
above pro forma disclosure, the fair value of options granted during the year was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: expected volatility -37%, expected life of
grant - 6.5 years, risk free interest rate 5.25%, and expected dividend rate of 2.5%.



5. ACQUISITION



On November 27,
2002, the Company, announced that it had signed a definitive merger agreement pursuant to which the Company will acquire Marked Tree Bancshares in a stock transaction valued at approximately $2.8 million. The merger transaction is subject to the
approval of the stockholders of Marked Tree Bancshares and receipt of required regulatory approvals. Subject to those contingencies, it is expected that the transaction will be consummated during the first or second quarter of 2003. The Board of
Directors of each company has unanimously approved the transaction. Due diligence has been completed and the transaction is structured as a tax free reorganization whereby Marked Tree Bancshares stockholders will receive the Companys common
stock based on the stated book value per share of Marked Tree Bancshares divided by the stated book value per share of the Company.



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6. BRANCH SALES



On July 23, 2002, the Company entered into an agreement
with Bank of England for the Company to sell its two branches in Carlisle and England, Arkansas to the Bank of England. The sale of the branches resulted from managements decision to concentrate in the Banks primary market area. The sale
was finalized on October 11, 2002, with the Company recognizing a gain of approximately $0.5 million.



7. GOODWILL AND INTANGIBLE ASSETS



In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. The statement required
discontinuing the amortization of goodwill and other intangible assets with indefinite useful lives. Instead, these assets will be tested periodically for impairment and written down to their fair value as necessary. The Company adopted the
provisions of this statement on October 1, 2001.



The Company
has completed a transitional impairment review to identify if there is an impairment to the goodwill or intangible assets of indefinite life using fair value methodology which differs from an undiscounted cash flow methodology which continues to be
used for intangible assets with an identifiable life. There was no impairment loss resulting from the transitional impairment test as of October 1, 2001. As of March 31, 2002, the Company performed its annual impairment test and concluded there was
no impairment to the book value of the Companys goodwill. Absent any impairment indicators, the Company expects to perform its next impairment test as of March 31, 2003.



As of December 31, 2002 the Company had total core deposit intangible assets of $10,924,108, net of accumulated amortization
of $2,116,542. Core deposit intangible assets are estimated to have a useful life of 10 years.



The Company has no identifiable intangible assets with indefinite useful lives.



Total amortization expense for core deposit intangible assets was approximately $276,000 for the three month period ended December 31, 2002. Amortization
expense for the net carrying amount of core deposit intangible assets at December 31, 2002, is estimated to be as follows (in thousands):



|Year ended September 30, 2003 |  |   | 1,104
|----------------------------- |  | - | -----
|Year ended September 30, 2004 |  |   | 1,104
|Year ended September 30, 2005 |  |   | 1,104
|Year ended September 30, 2006 |  |   | 1,104
|Year ended September 30, 2007 |  |   | 1,104
|After September 30, 2007      |  |   | 3,288
|                              |  |   |      
|Total                         |  | $ | 8,808
|                              |  |   |      



8. COMMITMENTS AND
CONTINGENCIES



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 and subsidiaries.



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INDEPENDENT ACCOUNTANTS REPORT



The Board of Directors and Stockholders of

Pocahontas Bancorp, Inc.

Pocahontas, Arkansas



We have reviewed the accompanying condensed consolidated statement of financial condition of Pocahontas Bancorp, Inc. and subsidiaries (the
Company) as of December 31, 2002, and the related condensed consolidated statements of income and comprehensive income, and cash flows for the three-month periods ended December 31, 2002 and 2001, and stockholders equity for the
three-month period ended December 31, 2002. These financial statements are the responsibility of the Companys management.



We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.



We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the
consolidated statement of financial condition of Pocahontas Bancorp, Inc. and subsidiaries as of September 30, 2002, and the related consolidated statements of income and comprehensive income, stockholders equity, and cash flows for the year
then ended (not presented herein); and in our report dated November 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated
statement of financial condition as of September 30, 2002, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.



/s/ Deloitte & Touche LLP



Little Rock, Arkansas

February 10, 2003



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##### Table of Contents



ITEM 2



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



This quarterly report on Form 10-Q contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the
Companys actual results to differ materially from those contemplated by such forward-looking statements. These important factors include, without limitation, the Banks continued ability to originate quality loans, fluctuation of interest
rates, real estate market conditions in the Banks lending areas, general and local economic conditions, the Banks continued ability to attract and retain deposits, the Companys ability to control costs, new accounting
pronouncements and changing regulatory requirements.



Financial Condition at December 31, 2002, as compared to September 30, 2002.



General.The Companys total assets increased to $643.6 million at December 31, 2002 from $617.0 million at September 30, 2002, an increase of $26.6 million or 4.3%.
The increase was primarily the result of a net increase in investment securities of $25.5 million. The Company used the increase in cash obtained from the increase in deposits to purchase investment securities during the quarter. The average yield
on average interest earning assets for the quarter ended December 31, 2002 was 7.18% compared to 7.19% at September 30, 2002.



Loans receivable, net.Net loans receivable decreased to $393.7 million at December 31, 2002 from $396.1 million at September
30, 2002, a decrease of $2.4 million or 0.6%. Total nonperforming loans increased to $4.8 million at December 31, 2002 from $3.2 million at September 30, 2002, an increase of $1.6 million or 50.0%. The increase in nonperforming loans was primarily a
result of a weakening economy and a normal transition period of identifying problem loans following acquisitions.



Loans receivable, held for sale.Loans held for sale decreased to $1.9 million at December 31, 2002 from $11.9 million at
September 30, 2002, a decrease of $10.0 million or 84.0%. During the quarter ended December 31, 2002 the Bank sold $21.1 million of loans, of which $10.0 million were classified held for sale as of September 30, 2002. Management expects to continue
to sell loans in the secondary market as necessary to manage interest rate risks.



Investment securities available for sale.Investment securities available for sale increased $25.5 million, or 21.7%, to $142.8 million at December 31, 2002, from $117.3 million at September 30,
2002. This net change was due to the purchase of $51.0 million of securities, offset by the principal pay down, call and maturity of $26.3 million of investment securities.



Investment securities trading.Investment securities trading decreased $0.4 million, or 26.7%, to
$1.1 million, at December 31, 2002, from $1.5 million at September 30, 2002. The net change was primarily due to the purchase and transfer of treasury stock and changes in the market value of trading securities.



Deposits.Deposits increased to $547.0 million at
December 31, 2002 from $520.0 million at September 30, 2002, an increase of $27.0 million or 5.2%. The net increase in deposits was primarily the result of an increased deposit base from offering competitive rates and was partially offset by the
sale of Carlisle and England, Arkansas branches that had combined deposits of $14.8 million.



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Deferred
compensation.Deferred compensation increased $0.3 million or 7.3% to $4.4 million at December 31, 2002, from $4.1 million at September 30, 2002. The increase related to a new deferred compensation agreement entered into during the
quarter, net of quarterly payments made to retired directors and officers in accordance with their respective retirement and severance agreements.



Accrued expenses and other liabilities.Accrued expenses and other liabilities decreased $0.7 million, or 11.1%, to $5.6
million at December 31, 2002, from $6.3 million at September 30, 2002. The decrease was primarily due to the payment of accrued expenses resulting from the acquisitions of Peoples Bank and North Arkansas Bancshares, Inc.



Stockholders equity.Stockholders
equity increased $0.2 million or 0.4% to $47.7 million at December 31, 2002, from $47.5 million at September 30, 2002. The change in stockholders equity was primarily due to net income of $1.2 million and $0.2 million increase in unrealized
gain on securities, which was partially offset by dividends of $0.4 million and common stock repurchased for the three-month period of $0.8 million.



Comparison of Results of Operations for the Three Months Ended December 31, 2002 and 2001.



Overview.Net income was $1,213,087 for the
quarter ended December 31, 2002, compared to net income of $1,017,790 for quarter ended December 31, 2001, an increase of $195,297 or 19.2%. Basic and diluted earnings per share increased $0.05 per share or 21.7% to $0.28 for the quarter ended
December 31, 2002 compared to basic and diluted earnings per share of $0.23 for the same period last year.



Net interest income.Net interest income after provision for loan losses for the quarter ended December 31, 2002 was
$$3,665,179 compared to $3,735,499 for the quarter ended December 31, 2001, a decrease of $70,320 or 1.9%. The decrease was primarily due to $745,000 provision for loan loss for quarter ended December 31, 2002 compared to $100,000 provision for loan
loss for quarter ended December 31, 2001. The increase of $645,000 in the provision for loan loss was partly a result of a weakening economy and the Banks shift from being a traditional single-family lending institution to diversifying into a
larger percentage of commercial loans and the corresponding increase in reserve requirements. The Companys net interest rate spread was 3.54% for the quarter ended December 31, 2002 compared to 3.59% for the year ended September 30, 2002 and
3.89% for the quarter ended December 31, 2001. Net interest margin was 3.50% for the quarter ended December 31, 2002 compared to 3.56% for the year ended September 30, 2002 and 3.98% for the quarter ended December 31, 2001. The decrease was
primarily due to lower average yields on interest earning assets for the quarter ended December 31, 2002 compared to September 30, 2002 and December 31, 2001 and higher average costs associated with demand deposits.



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Average Balance Sheets
(Dollars in Thousands)



|                                                                                 |  | Quarter Ended December 31, 2002 |         |          | Year Ended September 30, 2002 |                     |  | Quarter Ended December 31, 2001 |                
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------- | -------- | ----------------------------- | ------------------- |  | ------------------------------- | ---------------
|                                                                                 |  | Average Balance                 |         | Interest |                               | Average Yield/ Cost |  |                                 | Average Balance
|Interest-earning assets: (1)                                                     |  |                                 |         |          |                               |                     |  |                                 |                
|Loan receivable, net (6)                                                         |  | $                               | 366,093 |          | $                             | 6,982               |  | 7.63                            | %              
|Investment securities                                                            |  |                                 | 137,833 |          |                               | 2,065               |  | 5.99                            | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Total interest-earning assets                                                    |  |                                 | 503,926 |          |                               | 9,046               |  | 7.18                            | %              
|Noninterest-earning cash                                                         |  |                                 | 21,611  |          |                               |                     |  |                                 |                
|Other noninterest-                                                               |  |                                 |         |          |                               |                     |  |                                 |                
|earning assets                                                                   |  |                                 | 39,366  |          |                               |                     |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Total assets                                                                     |  |                                 | 564,903 |          |                               |                     |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Interest-bearing liabilities:                                                    |  |                                 |         |          |                               |                     |  |                                 |                
|Demand deposits                                                                  |  | $                               | 168,183 |          | $                             | 917                 |  | 2.18                            | %              
|Time deposits                                                                    |  |                                 | 290,916 |          |                               | 3,058               |  | 4.20                            | %              
|Borrowed funds (5)                                                               |  |                                 | 49,137  |          |                               | 662                 |  | 5.38                            | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Total interest- bearing liabilities                                              |  |                                 | 508,236 |          |                               | 4,637               |  | 3.65                            | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Noninterest-bearing liabilities (2)                                              |  |                                 | 9,750   |          |                               |                     |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Total liabilities                                                                |  |                                 | 517,986 |          |                               |                     |  |                                 |                
|Stockholders equity                                                             |  |                                 | 46,917  |          |                               |                     |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Total liabilities and stockholders equity                                       |  | $                               | 564,903 |          |                               |                     |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Net interest income                                                              |  |                                 |         |          | $                             | 4,410               |  |                                 |                
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Net interest rate spread (3)                                                     |  |                                 |         |          |                               |                     |  | 3.54                            | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Interest-earning assets and net interest margin (4)                              |  | $                               | 503,926 |          |                               |                     |  | 3.50                            | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                
|Ratio of average interest-earning assets to average interest-bearing
liabilities |  |                                 |         |          |                               |                     |  | 99.15                           | %              
|                                                                                 |  |                                 |         |          |                               |                     |  |                                 |                



|(1) |  | All interest-earning assets are disclosed net of loans in process, unamortized yield adjustments, and valuation allowances.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(2) |  | Escrow accounts are noninterest-bearing and are included in noninterest-bearing liabilities.
|--- |  | --------------------------------------------------------------------------------------------

|(3) |  | Net interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Net interest margin represents the net interest income as a percentage of average interest-earning assets.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(5) |  | Includes FHLB advances and securities sold under agreements to repurchase.
|--- |  | --------------------------------------------------------------------------



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The table below analyzes net
interest income by component and in terms of changes in the volume of interest-earning assets and interest-bearing liabilities and the changes in the related yields and rates for the three-month period ended December 31, 2002, compared to the
three-months ended December 31, 2001.



|                                    |  | Rate/Volume Analysis (in thousands) Three-Month Period Ended December 31, 2002 vs. 2001 Increase/(Decrease) Due to |       
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------ | ------
|                                    |  | Volume                                                                                                             |       
|Interest income:                    |  |                                                                                                                    |       
|Loan Receivable                     |  | $                                                                                                                  | 7,186 
|Investment securities               |  |                                                                                                                    | 2,216 
|                                    |  |                                                                                                                    |       
|                                   
|Total interest earning assets       |  |                                                                                                                    | 9,402 
|                                   
|Interest expense:                   |  |                                                                                                                    |       
|Deposits                            |  |                                                                                                                    | 6,554 
|Borrowed funds                      |  |                                                                                                                    | (1,423
|                                    |  |                                                                                                                    |       
|Total interest bearing liabilities  |  |                                                                                                                    | 5,131 
|                                    |  |                                                                                                                    |       
|Net change in net interest income   |  | $                                                                                                                  | 4,271 
|                                    |  |                                                                                                                    |       
|Change in provision for loan losses |  |                                                                                                                    |       
|                                    |  |                                                                                                                    |       
|Net change after provision          |  |                                                                                                                    |       
|                                    |  |                                                                                                                    |       



Non-Interest income. Non-interest income increased to $2,157,188 for the three-month period ended December 31, 2002 compared to $1,159,080 for the quarter ended December 31, 2001, an increase of $998,108 or 86.1%. The
increase in non-interest income was primarily due to a gain on sale of loans of $1.1 million during the quarter ended December 31, 2002.



Operating expense.Total operating expenses were $4,432,980 for the quarter ended December 31, 2002, compared to $3,203,212
for the quarter ended December 31, 2001, an increase of $1,229,768 or 38.4%. The increase for the quarter ended December 31, 2002 compared to the same period last year was primarily the result of normal operating expenses associated with the
acquisitions of Peoples Bank of Imboden and North Arkansas Bancshares.



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Non-performing Loans and
Loan Loss Provisions



The allowance for loan losses is
established through a provision for loan losses based on managements quarterly asset classification review and evaluation of the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity. Such evaluation,
which includes a review of all loans on which full collection may not be reasonably assured, considers among other matters, the estimated value of collateral, cash flow analysis, historical loan loss experience, and other factors that warrant
recognition in providing allowances. A provision of $745,000 was made during the three month period ended December 31, 2002. Total nonperforming loans increased to $4.8 million at December 31, 2002 from $3.2 million at September 30, 2002, an
increase of $1.6 million.



The Companys allowance for loan
losses was $3,450,801 at December 31, 2002, or 0.86% of total loans, compared with $3,205,224 or 0.78% of total loans, at September 30, 2002, and $2,570,838, or 0.78% of total loans, at December 31, 2001. Changing economic and other conditions may
require future adjustments to the allowance for loan losses.



The
following table sets forth information regarding loans delinquent for 90 days or more and real estate owned by the Bank on the dates indicated.



|                                                               |  | December 31, 2002      |       |   | September 30, 2002 |  
|-------------------------------------------------------------- |  | ---------------------- | ----- | - | ------------------ | -
|                                                               |  | (Dollars in Thousands) |      
|Delinquent loans:                                              |  |                        |       |   |                    |  
|Single family mortgage                                         |  | $                      | 2,341 |   |                    | $
|Other mortgage loans                                           |  |                        | 1,356 |   |                    |  
|Other loans                                                    |  |                        | 1,092 |   |                    |  
|                                                               |  |                        |       |   |                    |  
|Total delinquent loans                                         |  |                        | 4,789 |   |                    |  
|Total real estate owned (1)                                    |  |                        | 1,547 |   |                    |  
|                                                               |  |                        |       |   |                    |  
|Total non-performing assets                                    |  | $                      | 6,336 |   |                    | $
|                                                               |  |                        |       |   |                    |  
|Total loans delinquent 90 days or more to net loans receivable |  |                        | 1.21  | % |                    |  
|Total loans delinquent 90 days or more to total assets         |  |                        | 0.75  | % |                    |  
|Total nonperforming loans and REO to total assets              |  |                        | 0.99  | % |                    |  
|(1) Net of valuation allowances                                |  |                        |       |   |                    |  



It is the policy of the
Bank to place loans 90 days or more past due on a non-accrual status by establishing a specific interest reserve that provides for a corresponding reduction in interest income. Delinquent loans 90 days or more past due increased $1.6 million or
50.5% between September 30, 2002 and December 31, 2002 to $4.8 million from $3.2 million.



Loan delinquency and losses on loans and REO are closely connected to the local economy. The Company operates in rural areas and in many of its locations one or two employers significantly influence the local markets. Should
the economy deteriorate to a point that those employers begin reducing their work force, it could have a material negative impact on the Company.





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ITEM 3



QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK



General.It is the
objective of the Company to minimize, to the degree prudently possible, its exposure to interest rate risk, while maintaining an acceptable interest rate spread. Interest rate spread is the difference between the Companys yield on its
interest-earning assets and its cost of interest-bearing liabilities. Interest rate risk is generally understood to be the sensitivity of the Companys earnings, net asset values, and stockholders equity to changes in market interest
rates.



Changes in interest rates affect the
Companys earnings. The effect on earnings of changes in interest rates generally depends on how quickly the Companys yield on interest-earnings assets and cost of interest-bearing liabilities react to the changes in market rates of
interest. If the Companys cost of deposit accounts reacts more quickly to changes in market interest rates than the yield on the Companys mortgage loans and other interest-earnings assets, then an increasing interest rate environment is
likely to adversely affect the Companys earnings and a decreasing interest rate environment is likely to favorably affect the Companys earnings. On the other hand, if the Companys yield on its mortgage loans and other
interest-earnings assets reacts more quickly to changes in market interest rates than the Companys cost of deposit accounts, then an increasing rate environment is likely to favorably affect the Companys earnings and a decreasing
interest rate environment is likely to adversely affect the Companys earnings.



Net Portfolio Value.The value of the Companys loan and investment portfolio will change as interest rates change. Rising interest rates will generally decrease the Companys net portfolio value
(NPV), while falling interest rates will generally increase the value of that portfolio. The following table sets forth, quantitatively, as of September 30, 2002, 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 a 100 basis point decrease in market interest rates. Due to the current low prevailing interest rate environment, the changes in NPV is not estimated for a decrease in interest rates
of 200 or 300 basis points.



|Changes in Interest Rates in Basis
Points (Rate Shock) |        | Net Portfolio Value |          |           |          | Change in NPV as a Percentage of Estimated Market Value of Assets
|------------------------------------------------------ | ------ | ------------------- | -------- | --------- | -------- | -----------------------------------------------------------------
|                                                       | Amount |                     | $ Change |           | % Change |                                                                  
|+300 bp                                                |        | $43,808             |          | $(17,547) |          | (28.6)%                                                          
|+200 bp                                                |        | 51,699              |          | (9,656)   |          | (15.7)%                                                          
|+100 bp                                                |        | 58,442              |          | (2,913)   |          | (4.7)%                                                           
|0
bp                                                   |        | 61,355              |          |          |          | 0 %                                                              
|-100 bp                                                |        | 60,912              |          | (443)     |          | (0.7)%                                                           



Computations of
prospective effects of hypothetical interest rate changes are calculated by the OTS from data provided by the Company 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 Company may undertake in response to changes in interest rates.



Management cannot predict future interest rates or their effect on the Companys NPV in the future. 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



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differing degrees to changes
in market interest rates. Additionally, certain assets, such as adjustable rate loans, which represent the Companys primary loan product, 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 Company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.



ITEM 4



CONTROLS AND PROCEDURES



The Companys Chief Executive Officer and Chief
Financial Officer have concluded, based on their evaluation within 90 days prior to the filing date of this report, that the Companys disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-14 (c) and 15d-14 (c))
are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the
significant changes in the Companys internal controls or in other factors that could significantly affect these controls subsequent to the date of the foregoing evaluation.



PART II. OTHER INFORMATION



Item 1.
Legal Proceedings



None



Item 2. Changes in Securities and Use of Proceeds



None



Item 3. Defaults Upon Senior Securities



None



Item 4. Submission of Matters to a Vote of Securities Holders



|Election of Directors: |  | For       |  | %     |  | Withheld |  | %   
|---------------------- |  | --------- |  | ----- |  | -------- |  | ----
|Ralph Baltz            |  | 3,864,144 |  | 99.8% |  | 8,235    |  | 0.2%
|Marcus Van Camp        |  | 3,858,172 |  | 99.6% |  | 14,207   |  | 0.4%



The ratification of
Auditors was approved by vote of 3,847,254 in favor, 4,524 against, and 20,601 abstentions.



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Item 5. Other Information



None



Item 6. Exhibits and Reports



(a)   Exhibits



Exhibit No. 99.1  Written statement of President and Chief Executive
Officer.



Exhibit No. 99.2  Written statement of Chief
Financial Officer



(b)   Reports



On December 9, 2002, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K. The report disclosed in Item 5 Other Events that the Company had entered into an Agreement and Plan of Merger with Marked Tree Bancshares. No financial statements were required to be filed with
this report. The Agreement and Plan of Merger dated November 27, 2002, was filed as an exhibit to the report.



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.



|      |  |                   |  | POCAHONTAS BANCORP, INC.
|----- |  | ----------------- |  | ------------------------
|     
|Date: |  | February 14, 2003 |  |                         
|      |  |                   |  |                         
|      |  |                   |  |                         
|      |  |                   |  |                         
|Date: |  | February 14, 2003 |  |                         
|      |  |                   |  |                         



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##### Table of Contents



Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



I, Dwayne Powell, President and Chief Executive Officer,
certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pocahontas Bancorp, Inc.;



2. Based on my knowledge, this
quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this quarterly report;



3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;



4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:



a) designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
quarterly report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls; and



6. The registrants other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                 
|-----------------
|February 14, 2003
|Date             



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##### Table of Contents



Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



I, Terry Prichard, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pocahontas Bancorp, Inc.;



2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this quarterly report;



3. Based on my knowledge, the financial statements and other financial information included in this quarterly report fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;



4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:



a) designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
quarterly report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrants internal controls; and



6. The registrants other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                 
|-----------------
|February 14, 2003
|Date             



22