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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q/A



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|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------



For the
quarterly period ended March 31, 2003



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.



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|State of Incorporation                     |  | IRS Employer Identification
|------------------------------------------ |  | ---------------------------
|DELAWARE                                   |  | No. 71-0806097             
|                                           | 
|Address                                    |  | Telephone Number           
|1700 E. Highland Jonesboro, Arkansas 72401 |  | (870) 802-1700             



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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 12b-2 of the Securities Exchange Act of 1934).    Yes ̈No  x



There were 4,279,395 shares of Common Stock ($0.01 par value) issued and outstanding as of March 31, 2003.



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POCAHONTAS BANCORP, INC.



TABLE OF CONTENTS

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|                                                                                                                                              |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION                                                                                                                 |  |     
|                                                                                                                                              | 
|Item 1. Unaudited Financial Statements:                                                                                                       |  |     
|                                                                                                                                              | 
|Condensed Consolidated Statements of Financial Condition at March 31, 2003 and September 30, 2002                                             |  | 2   
|Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended March 31, 2003 and 2002 (As Restated) |  | 3   
|                                                                                                                                              | 
|Condensed Consolidated Statement of Changes in Stockholders Equity for the Six Months Ended March 31, 2003                                   |  | 5   
|                                                                                                                                              | 
|Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2003 (As Restated) and 2002                                |  | 6   
|                                                                                                                                              | 
|Notes to Condensed Consolidated Financial Statements                                                                                          |  | 8   
|                                                                                                                                              | 
|Independent Accountants Report                                                                                                               |  | 15  
|                                                                                                                                              | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 16  
|                                                                                                                                              | 
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 22  
|                                                                                                                                              | 
|Item 4.
Controls and Procedures                                                                                                               |  | 23  
|                                                                                                                                              | 
|PART II. OTHER INFORMATION                                                                                                                    |  | 23  
|                                                                                                                                              | 
|Signatures                                                                                                                                    |  | 25  
|                                                                                                                                              | 
|Certifications                                                                                                                                |  | 26  
|                                                                                                                                              | 
|Exhibits                                                                                                                                      |  | 28  



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EXPLANATORY NOTE



This Form 10-Q/A amends the Companys quarterly report on Form 10-Q for the quarter ended March 31, 2003, as filed on May 14, 2003. Refer to note 11 in the condensed
consolidated financial statements for further discussion of the amendment and the restatement of the condensed consolidated financial statements that lead to the amendment. In order to preserve the nature and character of the disclosures set forth
in the original filing, no attempt has been made in this amendment to modify or update such disclosures, except as required to reflect the effects of the matters described in note 11 in the condensed consolidated financial statements and to make
other non-substantive revisions. The Company therefore recommends that this report be read in conjunction with the Companys reports filed subsequent to the original filing date, including the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2003.



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##### Table of Contents

Item 1



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

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|                                                                                                                                                                                          |  | March 31, 2003 |             |   | September 30, 2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ------------------ | -
|ASSETS                                                                                                                                                                                    |  |                |             |   |                    |  
|Cash                                                                                                                                                                                      |  | $              | 22,463,880  |   |                    | $
|Cash surrender value of life insurance                                                                                                                                                    |  |                | 7,073,589   |   |                    |  
|Securities held-to-maturity                                                                                                                                                               |  |                | 7,737,309   |   |                    |  
|Securities available-for-sale                                                                                                                                                             |  |                | 214,825,711 |   |                    |  
|Trading securities, at fair value                                                                                                                                                         |  |                | 1,052,743   |   |                    |  
|Loans receivable, net                                                                                                                                                                     |  |                | 387,145,134 |   |                    |  
|Loans receivable, held for sale                                                                                                                                                           |  |                | 1,871,227   |   |                    |  
|Accrued interest receivable                                                                                                                                                               |  |                | 4,662,167   |   |                    |  
|Premises and equipment, net                                                                                                                                                               |  |                | 14,733,127  |   |                    |  
|Federal Home Loan Bank stock, at cost                                                                                                                                                     |  |                | 2,153,300   |   |                    |  
|Goodwill                                                                                                                                                                                  |  |                | 8,847,572   |   |                    |  
|Core deposit premiums                                                                                                                                                                     |  |                | 8,531,106   |   |                    |  
|Other assets                                                                                                                                                                              |  |                | 2,375,448   |   |                    |  
|                                                                                                                                                                                          |  |                |             |   |                    |  
|TOTAL ASSETS                                                                                                                                                                              |  | $              | 683,472,313 |   |                    | $
|                                                                                                                                                                                          |  |                |             |   |                    |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                      |  |                |             |   |                    |  
|LIABILITIES:                                                                                                                                                                              |  |                |             |   |                    |  
|Deposits                                                                                                                                                                                  |  | $              | 588,346,576 |   |                    | $
|Federal Home Loan Bank advances                                                                                                                                                           |  |                | 20,587,253  |   |                    |  
|Deferred compensation                                                                                                                                                                     |  |                | 4,261,854   |   |                    |  
|Accrued expenses and other liabilities                                                                                                                                                    |  |                | 5,219,265   |   |                    |  
|                                                                                                                                                                                          |  |                |             |   |                    |  
|Total liabilities                                                                                                                                                                         |  |                | 618,414,948 |   |                    |  
|                                                                                                                                                                                          |  |               
|TRUST PREFERRED SECURITIES                                                                                                                                                                |  |                | 16,910,767  |   |                    |  
|                                                                                                                                                                                          |  |               
|STOCKHOLDERS EQUITY:                                                                                                                                                                     |  |                |             |   |                    |  
|Common stock, $0.01 par value, 8,000,000 shares authorized; 7,492,353 shares issued and 4,279,395 and 4,376,295 shares outstanding
at March 31, 2003 and September 30, 2002, respectively |  |                | 74,923      |   |                    |  
|Additional paid-in capital                                                                                                                                                                |  |                | 56,342,563  |   |                    |  
|Unearned ESOP Shares                                                                                                                                                                      |  |                | (671,130    | ) |                    |  
|Unearned RRP Shares                                                                                                                                                                       |  |                | (17,626     | ) |                    |  
|Accumulated other comprehensive income                                                                                                                                                    |  |                | 1,760,972   |   |                    |  
|Retained earnings                                                                                                                                                                         |  |                | 17,846,527  |   |                    |  
|                                                                                                                                                                                          |  |                |             |   |                    |  
|                                                                                                                                                                                          |  |                | 75,336,229  |   |                    |  
|Treasury stock at cost, 3,212,958 and 3,116,058 shares, at March 31, 2003 and September 30, 2002, respectively                                                                            |  |                | (27,189,631 | ) |                    |  
|                                                                                                                                                                                          |  |                |             |   |                    |  
|Total stockholders equity                                                                                                                                                                |  |                | 48,146,598  |   |                    |  
|                                                                                                                                                                                          |  |                |             |   |                    |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                |  | $              | 683,472,313 |   |                    | $
|                                                                                                                                                                                          |  |                |             |   |                    |  



See
notes to condensed consolidated financial statements.



2



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##### Table of Contents

POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED) (AS RESTATED, SEE
NOTE 11)

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|                                                    |  | Three Months EndedMarch 31, |           | Six Months EndedMarch 31,
|--------------------------------------------------- |  | --------------------------- | --------- | -------------------------
|                                                    |  | 2003                        |           | 2002                     
|INTEREST INCOME:                                    |  |                             |           |                          
|Loans receivable                                    |  | $                           | 6,675,796 |                          
|Investment securities                               |  |                             | 2,557,352 |                          
|                                                    |  |                             |           |                          
|Total interest income                               |  |                             | 9,233,148 |                          
|INTEREST EXPENSE:                                   |  |                             |           |                          
|Deposits                                            |  |                             | 4,226,693 |                          
|Borrowed funds                                      |  |                             | 259,451   |                          
|Interest on Trust Preferred Securities              |  |                             | 318,402   |                          
|                                                    |  |                             |           |                          
|Total interest expense                              |  |                             | 4,804,546 |                          
|                                                    |  |                             |           |                          
|NET INTEREST INCOME                                 |  |                             | 4,428,602 |                          
|PROVISION FOR LOAN LOSSES                           |  |                             | 100,000   |                          
|                                                    |  |                             |           |                          
|NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES |  |                             | 4,328,602 |                          
|OTHER INCOME:                                       |  |                             |           |                          
|Dividends                                           |  |                             | 16,306    |                          
|Fees and service charges                            |  |                             | 942,916   |                          
|Gain on sale of loans                               |  |                             | 513,731   |                          
|Gain on sale of branches                            |  |                             |           |                          
|Trading gains, net                                  |  |                             | 48,000    |                          
|Other, net                                          |  |                             | 156,375   |                          
|                                                    |  |                             |           |                          
|Total other income                                  |  |                             | 1,677,328 |                          
|                                                    |  |                             |           |                          
|OPERATING EXPENSE:                                  |  |                             |           |                          
|Compensation and benefits                           |  |                             | 2,415,659 |                          
|Occupancy and equipment                             |  |                             | 634,761   |                          
|Insurance premiums                                  |  |                             | 87,929    |                          
|Professional fees                                   |  |                             | 277,019   |                          
|Data processing                                     |  |                             | 181,956   |                          
|Advertising                                         |  |                             | 110,644   |                          
|Office supplies                                     |  |                             | 88,152    |                          
|Other                                               |  |                             | 528,284   |                          
|                                                    |  |                             |           |                          
|Total operating expense                             |  |                             | 4,324,404 |                          
|                                                    |  |                             |           |                          
|INCOME BEFORE INCOME TAXES                          |  |                             | 1,681,526 |                          
|Income taxes                                        |  |                             | 657,257   |                          
|                                                    |  |                             |           |                          
|NET INCOME                                          |  | $                           | 1,024,269 |                          
|                                                    |  |                             |           |                          



(Continued)



3



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##### Table of Contents

POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED) (AS RESTATED, SEE NOTE 11)

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|                                                                                      |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31, |  
|------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | -
|                                                                                      |  | 2003                        |         |   | 2002                      |  
|OTHER COMPREHENSIVE INCOME, NET OF TAX:                                               |  |                             |         |   |                           |  
|Unrealized holding gain (loss) on available-for-sale securities arising during period |  |                             | (35,306 | ) |                           |  
|Reclassification adjustment for gains included in net income                          |  |                             | (1,689  | ) |                           |  
|                                                                                      |  |                             |         |   |                           |  
|COMPREHENSIVE INCOME (LOSS)                                                           |  | $                           | 987,274 |   |                           | $
|                                                                                      |  |                             |         |   |                           |  
|BASIC EARNINGS PER SHARE                                                              |  | $                           | 0.24    |   |                           | $
|                                                                                      |  |                             |         |   |                           |  
|DILUTED EARNINGS PER SHARE                                                            |  | $                           | 0.24    |   |                           | $
|                                                                                      |  |                             |         |   |                           |  
|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)

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|                                                                                  |  | Common Stock |  | AdditionalPaid-InCapital |        | UnearnedESOPShares |   |            | UnearnedRRPShares |   |          | AccumulatedOtherComprehensiveIncome |        | RetainedEarnings |         |   | Treasury Stock |   |           | TotalStockholdersEquity |  
|--------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | ------ | ------------------ | - | ---------- | ----------------- | - | -------- | ----------------------------------- | ------ | ---------------- | ------- | - | -------------- | - | --------- | ------------------------ | -
|                                                                                  |  | Shares       |  | Amount                   |        |                    |   |            |                   |   | Shares   |                                     | Amount |                  |        
|Balance, September 30, 2002                                                       |  | 7,492,353    |  | $                        | 74,923 |                    | $ | 56,342,563 |                   | $ | (671,130 | )                                   |        | $                | (35,251 | ) |                | $ | 1,596,925 |                          | $
|RRP shares earned                                                                 |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  | 17,625  |   |                |   |           |                          |  
|Net change in unrealized gain (loss) on available-for-sale securities, net of tax |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   | 164,047   |                          |  
|Treasury stock purchased                                                          |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   |           |                          |  
|Net income                                                                        |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   |           |                          |  
|Dividends                                                                         |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   |           |                          |  
|                                                                                  |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   |           |                          |  
|Balance, March 31, 2003                                                           |  | 7,492,353    |  | $                        | 74,923 |                    | $ | 56,342,563 |                   | $ | (671,130 | )                                   |        | $                | (17,626 | ) |                | $ | 1,760,972 |                          | $
|                                                                                  |  |              |  |                          |        |                    |   |            |                   |   |          |                                     |        |                  |         |   |                |   |           |                          |  



See
notes to condensed consolidated financial statements.



5



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##### Table of Contents

POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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|                                                                                         |  | Six months endedMarch 31,  |             
|---------------------------------------------------------------------------------------- |  | -------------------------- | ------------
|                                                                                         |  | 2003                       |             
|                                                                                         |  | (As restated, see note 11) |             
|OPERATING ACTIVITIES:                                                                    |  |                            |             
|Net income                                                                               |  | $                          | 2,237,357   
|Adjustments to reconcile net income to net cash provided (used) by operating activities: |  |                            |             
|Provision for loan losses                                                                |  |                            | 845,000     
|Depreciation of premises and equipment                                                   |  |                            | 561,713     
|Amortization of core deposit premium                                                     |  |                            | 552,921     
|Accretion of deferred loan fees                                                          |  |                            | (32,629     
|Amortization (accretion) of premiums and discounts, net                                  |  |                            | (201,752    
|Net (gain) loss on sales of loans                                                        |  |                            | (1,641,575  
|Net (gain) loss on sales of securities                                                   |  |                            | (5,728      
|Net gain on sales of branches                                                            |  |                            | (513,595    
|Increase in cash surrender value of life insurance policies                              |  |                            | (190,096    
|Change in operating assets and liabilities:                                              |  |                            |             
|Trading securities                                                                       |  |                            | 411,715     
|Accrued interest receivable                                                              |  |                            | (304,034    
|Other assets                                                                             |  |                            | (1,295,251  
|Deferred compensation                                                                    |  |                            | 138,301     
|Accrued expenses and other liabilities                                                   |  |                            | (1,096,687  
|                                                                                         |  |                            |             
|Net cash provided (used) by operating activities                                         |  |                            | (534,340    
|                                                                                         |  |                            |             
|INVESTING ACTIVITIES:                                                                    |  |                            |             
|Adjustment to acquisition of Walden/Smith Financial Group, Inc., net                     |  |                            |            
|Acquisition of Southern Mortgage Corporation, net of cash acquired                       |  |                            |            
|Loan repayments, originations, and purchases, net                                        |  |                            | (12,177,274 
|Net decrease in cash from sale of branches                                               |  |                            | (14,044,395 
|Proceeds from sale of loans                                                              |  |                            | 31,886,059  
|Proceeds from sale (purchase) of FHLB stock                                              |  |                            | (27,800     
|Purchase of investment securities                                                        |  |                            | (160,940,692
|Proceeds from sale of REO                                                                |  |                            | 1,404,777   
|Proceeds from sale of premises and equipment                                             |  |                            | 31,659      
|Proceeds from sales, maturities and principal repayments of securities                   |  |                            | 64,224,233  
|Purchases of premises and equipment                                                      |  |                            | (1,463,065  
|                                                                                         |  |                            |             
|Net cash provided (used) by investing activities                                         |  | $                          | (91,106,498 
|                                                                                         |  |                            |             





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POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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|                                                                            |  | Six months endedMarch 31, |            
|--------------------------------------------------------------------------- |  | ------------------------- | -----------
|                                                                            |  | 2003                      |            
|                                                                            |  | (As restated,see note 11) |            
|FINANCING ACTIVITIES:                                                       |  |                           |            
|Net increase in deposits                                                    |  | $                         | 83,095,254 
|Net increase (decrease) in repurchase agreements                            |  |                           |           
|Net decrease in FHLB advances                                               |  |                           | (1,549,713 
|Proceeds from issuance of trust preferred securities, net of issuance costs |  |                           |           
|Purchase of treasury shares                                                 |  |                           | (1,069,995 
|Issuance of RRPs                                                            |  |                           | 17,625     
|Dividends paid                                                              |  |                           | (695,051   
|                                                                            |  |                           |            
|Net cash provided (used) by financing activities                            |  |                           | 79,798,120 
|                                                                            |  |                           |            
|NET INCREASE (DECREASE) IN CASH                                             |  |                           | (11,842,718
|                                                                            |  |                          
|CASH AT BEGINNING OF PERIOD                                                 |  |                           | 34,306,598 
|                                                                            |  |                           |            
|CASH AT END OF PERIOD                                                       |  | $                         | 22,463,880 
|                                                                            |  |                           |            



(Concluded)



See notes to condensed consolidated financial
statements.



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##### Table of Contents

POCAHONTAS BANCORP, INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---



|1. |  | BASIS OF PRESENTATION
|-- |  | ---------------------



The condensed 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 condensed consolidated financial statements at and for the six months ended March 31, 2003 and 2002 are unaudited. The accompanying condensed 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 six months ended March 31, 2003, 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 condensed consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, First Community Bank (the Bank), Pocahontas Capital Trust I and II (the Trusts), which are business trusts established to facilitate the issuance of the trust preferred securities; as well as the
Banks subsidiaries, Southern Mortgage Corporation, P.F. Service, Inc. and Sun Realty, Inc., which provide real estate services (collectively referred to as the Company). All significant intercompany transactions have been
eliminated in consolidation.



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



Stock CompensationThe Company applies the
provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees(APB 25) in accounting for its stock options plans, as allowed under Statement of Financial Accounting Standards (SFAS) No. 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 and six months ended March 31, 2003 and 2002, would have been as follows:



8



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##### Table of Contents

|                                                                                                                    |  | Three-Months Ended March 31, |       |   | Six-Months Ended March 31, |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | - | -------------------------- | -
|                                                                                                                    |  | 2003                         |       |   | 2002                       |  
|                                                                                                                    |  | (in thousands)               |      
|Net income, as reported                                                                                             |  | $                            | 1,024 |   |                            | $
|Deduct: Total stock-based compensation expense determined under fair value based method, net of related tax
effects |  |                              | (27   | ) |                            |  
|                                                                                                                    |  |                              |       |   |                            |  
|Pro forma net income                                                                                                |  | $                            | 997   |   |                            | $
|                                                                                                                    |  |                              |       |   |                            |  
|Earnings per share:                                                                                                 |  |                              |       |   |                            |  
|Basic - as reported                                                                                                 |  | $                            | 0.24  |   |                            | $
|Basic - pro forma                                                                                                   |  | $                            | 0.24  |   |                            | $
|Diluted - as reported                                                                                               |  | $                            | 0.24  |   |                            | $
|Diluted - pro forma                                                                                                 |  | $                            | 0.23  |   |                            | $



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%.



Recently Adopted Accounting StandardsIn October 2001, the Financial Accounting Standards Board (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. The adoption of SFAS No. 144 did not have a material impact on the results of operations or
financial condition of the Company.



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.



In December 2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for Stock-Based CompensationTransition and
Disclosure, an amendment to SFAS 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 provisions of the statement related to interim disclosures are effective for interim periods beginning after December 15, 2002. The Company has adopted the
disclosure provisions of SFAS 148 for the quarter ended March 31, 2003 and has included the required disclosure in Note 1 to the unaudited condensed consolidated financial statements.



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FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others (FIN 45) elaborates on the disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantors fiscal year-end. The disclosure requirements in FIN 45 are effective for financial statements of annual periods ending after December
15, 2002. Management has concluded that the adoption of FIN 45 did not have a material effect on the financial statements of the Company.



ReclassificationsCertain amounts for the three-month and six-month periods ended March 31, 2002 have been reclassified to conform to
the presentation for the three-month and six-month periods ended March 31, 2003.



|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 OwnershipPlans, 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 numbers of shares used in the basic and diluted earnings per share calculation are set out in the table below:



|                                                                                      |  | Three Months Ended |  | Six Months Ended
|------------------------------------------------------------------------------------- |  | ------------------ |  | ----------------
|                                                                                      |  | March 31,2003      |  | March 31,2002   
|Total weighted average basic shares outstanding                                       |  | 4,218,504          |  | 4,320,366       
|Add dilutive effect of unexercised options                                            |  | 50,006             |  | 27,476          
|                                                                                      |  |                    |  |                 
|Total weighted average shares outstanding for dilutive earnings-per-share calculation |  | 4,268,510          |  | 4,347,842       
|                                                                                      |  |                    |  |                 



|3. |  | DECLARATION OF DIVIDENDS
|-- |  | ------------------------



On February 19, 2003, the Board of Directors declared a $.08 per share quarterly cash dividend for holders of record March 21, 2003. The dividend was paid
April 3, 2003.



|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 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



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##### Table of Contents

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 March 31, 2003, 254,000
options were outstanding.



NARK Stock Option
PlanIn connection with the acquisition of North Arkansas Bancshares, Inc. (NARK) by the Company on June 18, 2002, the outstanding options of the 1998 Stock Option and Incentive Plan (SOIP) of NARK were exchanged for options to
purchase stock of the Company. Each outstanding option to purchase a share of NARK stock was exchanged for an option to purchase 1.515 shares of the Companys stock. The SOIP granted both incentive and non-incentive options to key employees and
directors of NARK. All options granted expire one year after the employee or director ceases to maintain continuous service as an employee or director of the Company or an affiliate. The exercise price in each case equals the original exercise price
divided by the exchange rate. On June 19, 2002 the exchange resulted in 30,970 outstanding options at an exercise price of $6.44 each. On March 31, 2003, 30,970 options were outstanding.



|5. |  | ACQUISITION
|-- |  | -----------



On April 30, 2003, the Company completed the acquisition of Marked Tree Bancshares (Marked Tree) and its bank subsidiary, Marked Tree Bank, in
a stock transaction valued at approximately $3.2 million. The transaction was structured as a tax-free reorganization whereby Marked Tree stockholders received 103.1004 shares of the Company stock for each outstanding share of Marked Tree stock.
Marked Tree is headquartered in Marked Tree, Arkansas and operates one full-service banking office. At March 31, 2003, Marked Tree had total assets of $31.8 million, total deposits of $27.5 million and stockholders equity of $3.2 million.



|6. |  | BRANCH SALES
|-- |  | ------------



On October 11, 2002, the Company sold its two branches in Carlisle and England, Arkansas to the Bank of England, Arkansas. The sale of the branches
reflected managements decision to concentrate in the Banks primary market area. The Company recognized a gain of approximately $0.5 million on the branch sales.



|7. |  | GOODWILL AND INTANGIBLE ASSETS
|-- |  | ------------------------------



In July 2001, the FASB issued 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 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 will perform its next impairment test as of April 1, 2003 and report the result of the annual impairment test during the quarter ended June 30, 2003.



As of March 31, 2003 the Company had total core deposit premiums of
$10,924,108, net of accumulated amortization of $2,393,002. Core deposit premiums are estimated to have a useful life of 10 years.



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



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##### Table of Contents

Total amortization expense for core deposit intangible assets was approximately $553,000 for the
six-month period ended March 31, 2003. Amortization expense for the net carrying amount of core deposit intangible assets at March 31, 2003, is estimated to be as follows (in thousands):



|Six months ending September 30, 2003 |  | $ | 553  
|------------------------------------ |  | - | -----
|Year ending September 30, 2004       |  |   | 1,106
|Year ending September 30, 2005       |  |   | 1,106
|Year ending September 30, 2006       |  |   | 1,106
|Year ending September 30, 2007       |  |   | 1,106
|After September 30, 2007             |  |   | 3,554
|                                     |  |   |      
|Total                                |  | $ | 8,531
|                                     |  |   |      



|8. |  | 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 condensed consolidated financial statements of the Company and its subsidiaries.



|9. |  | OFF-BALANCE SHEET ARRANGEMENTS AND COMMITMENTS
|-- |  | ----------------------------------------------



The Company, in the normal course of business, makes commitments to buy or sell assets or to incur or fund liabilities. Commitments include, but are not
limited to the origination, purchase, or sale of loans, the purchase of investment securities, fulfillment of commitments under letters-of-credit, extensions of credit on home equity lines of credit and construction loans, and the commitment to fund
withdrawals of savings accounts at maturity.



At March 31,
2003, the banks off-balance sheet arrangements principally included lending commitments, which are described below. At March 31, 2003, the Company had no interests in non-consolidated special purpose entities. At March 31, 2003, commitments
included:



Total approved loan origination commitments
outstanding of $22.1 million, including $13.9 million loans committed to sell.



Rate lock agreements with customers of $2.8 million, all of which have been locked with an investor.



Undisbursed balances of construction loans of $3.7 million.



Total unused lines of credit of $31.2 million.



Outstanding letters of credit of $1.6 million.



Total certificates of deposit scheduled to mature in one year or less of $145.7 million.



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##### Table of Contents

|10. |  | ALLOWANCE FOR LOAN LOSSES
|--- |  | -------------------------



A summary of the activity in the allowance for loan losses is as follows (in thousands):



|                                       |  | Three Months Ended |       |   | Six Months Ended |  
|-------------------------------------- |  | ------------------ | ----- | - | ---------------- | -
|                                       |  | March 31,2003      |       |   | March 31,2002    |  
|Balance at the beginning of the period |  | $                  | 3,451 |   |                  | $
|Provision for losses                   |  |                    | 100   |   |                  |  
|Charge-offs, net of recoveries         |  |                    | (283  | ) |                  |  
|                                       |  |                    |       |   |                  |  
|Balance at the end of the period       |  | $                  | 3,268 |   |                  | $
|                                       |  |                    |       |   |                  |  



|11. |  | RESTATEMENT
|--- |  | -----------



Subsequent to the filing of Form 10-Q for the quarter ended March 31, 2003, the Company determined that the sale of its bank branches that occurred during
the first quarter ended December 31, 2002 should not have been reported as discontinued operations. The Company initially determined that the sale of branches met the requirements in SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets for presentation as discontinued operations. However, after further consideration, we have determined that the sale of our two branches did not meet such requirements. Net income, basic and diluted earning per share and
stockholders equity were not affected by such presentation. The Company determined that it was necessary to amend the December 31, 2002 and the March 31, 2003, Form 10-Qs to exclude the sale of branches from the discontinued operations
presentation. The effect of the amendment related to the sale of the branches is reflected in the table below.



The Company also corrected a mathematical error in the condensed consolidated statement of cash flows related to the presentation of the gain on sale of
the branches, the net decrease in cash from the sale of the branches, and the net increase in deposits. Additionally, the Company determined that it was necessary to add a footnote disclosure on the activity in the allowance for loan losses, which
is included in note 10 to condensed consolidated financial statements.



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##### Table of Contents

|                                                |  |                            |           | Three Months Ended March 31, 2002
|----------------------------------------------- |  | -------------------------- | --------- | ---------------------------------
|                                                |  |                            |           |                                  
|Total interest income                           |  |                            |           |                                  
|Total interest expense                          |  |                            |           |                                  
|Total other income                              |  |                            |           |                                  
|Total operating expenses                        |  |                            |           |                                  
|Income Taxes                                    |  |                            |           |                                  
|DISCONTINUED OPERATIONS:                        |  |                            |           |                                  
|Loss from operations of discontinued branches   |  |                            |           |                                  
|Income taxes (benefit) on discontinued branches |  |                            |           |                                  
|                                                |  |                           
|                                                |  |                            |           | Three Months Ended March 31 2002 
|                                                |  |                            |           |                                  
|NET INCOME                                      |  |                            |           |                                  
|                                                |  |                            |           |                                  
|BASIC EARNINGS PER SHARE                        |  |                            |           |                                  
|                                                |  |                            |           |                                  
|DILUTED EARNINGS PER SHARE                      |  |                            |           |                                  
|                                                |  |                            |           |                                  
|                                                | 
|                                                |  | Six Months Ended March 31,
|                                                |  | 2003                       |           | 2002                             
|                                                |  | As Previously Reported     |           |                                  
|Total interest income                           |  |                            |           |                                  
|Total interest expense                          |  |                            |           |                                  
|Total other income                              |  | $                          | 3,834,516 |                                  
|Total operating expenses                        |  |                            | 8,757,384 |                                  
|Income Taxes                                    |  |                            | 1,162,257 |                                  
|DISCONTINUED OPERATIONS:                        |  |                            |           |                                  
|Loss from operations of discontinued branches   |  |                            | (19,895   | )                                
|Gain on sale of branches                        |  |                            | 513,595   |                                  
|Income taxes (benefit) on discontinued branches |  |                            | 165,000   |                                  
|                                                | 
|                                                |  | Six Months Ended March 31,
|                                                |  | 2003                       |           | 2002                             
|                                                |  | As Previously Reported     |           |                                  
|NET INCOME                                      |  | $                          | 2,237,357 |                                  
|                                                |  |                            |           |                                  
|BASIC EARNINGS PER SHARE                        |  | $                          | 0.53      |                                  
|                                                |  |                            |           |                                  
|DILUTED EARNINGS PER SHARE                      |  | $                          | 0.52      |                                  
|                                                |  |                            |           |                                  





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##### Table of Contents

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
March 31, 2003, and the related condensed consolidated statements of income and comprehensive income and of cash flows for the three and six month periods ended March 31, 2003 and 2002, and stockholders equity for the six-month period ended
March 31, 2003. 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, which includes an explanatory paragraph relating to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets 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.



As discussed in Note 11, the accompanying condensed consolidated financial statements for
the three and six month periods ended March 31, 2003 and 2002 have been restated.



/s/ Deloitte & Touche LLP



Little Rock, Arkansas

May 2, 2003

(August 1, 2003, as to Notes 10 and 11)



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ITEM 2



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



As discussed in
Note 11 to the condensed consolidated financial statements, the Company restated its condensed consolidated financial statements for the three-months and six-months ended March 31, 2003. The accompanying managements discussion and analysis
gives effect to the restatement.



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.



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 estimated 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.



Financial Condition at March 31, 2003, as compared to September 30, 2002.



General. The Companys total assets increased to $683.5 million at March
31, 2003 from $617.0 million at September 30, 2002, an increase of $66.5 million or 10.8%. The increase was primarily the result of $160.9 million of securities purchased using cash obtained from the growth in deposits, offset by principal payments
and maturities of $64.2 million, which resulted in a net increase in securities of $97.1 million or 77.4%. The yield on average interest earning assets at March 31, 2003 was 6.82% compared to 7.19 % at September 30, 2002.



Loans receivable, net. Net loans receivable decreased to $387.1 million at
March 31, 2003 from $396.1 million at September 30, 2002, a decrease of $9.0 million or 2.3%. Total nonperforming loans increased to $5.5 million at March 31, 2003 from $3.2 million at September 30, 2002, an increase of $2.3 million or 71.8%. 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 March 31, 2003 from $11.9 million at
September 30, 2002, a decrease of $10.0 million or 84.0%. During the six-month period ended March 31, 2003, the Company sold $31.9 million of loans, of which $11.9 million were classified held for



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##### Table of Contents

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 $97.5 million, or 83.1%, to $214.8 million at March 31, 2003, from $117.3 million at September 30, 2002. This increase was the result of excess cash obtained from deposit growth used
to purchase $160.9 million of securities, offset by the principal pay down, call and maturity of $64.2 million of investment securities.



Investment securities trading. Investment securities trading decreased $0.4 million, or 26.7%, to $1.1 million at March 31, 2003, from $1.5 million at
September 30, 2002. The net change was due to an additional investment of $0.3 million, increase in market value of $0.1 million offset by purchasing $0.8 million of the Companys common stock that was reclassified to treasury stock.



Deposits. Deposits increased to $588.3 million at March 31, 2003
from $520.0 million at September 30, 2002, an increase of $68.3 million or 13.1%. The net increase in deposits was largely due to a 50+ checking account promotion that resulted in an increased deposit base that was partially offset by the sale of
Carlisle and England, Arkansas branches that had combined deposits of $14.8 million.



Deferred compensation. Deferred compensation increased $0.2 million or 4.8% to $4.3 million at March 31, 2003, from $4.1 million at September 30, 2002. The increase related to a new deferred compensation agreement entered into
during the period, net of scheduled 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 $1.1 million, or 17.5%, to $5.2 million at March 31, 2003, from
$6.3 million at September 30, 2002. The decrease was primarily the result of $1.3 million paid for state and federal income taxes during the period.



Stockholders equity. Stockholders equity increased $0.6 million or 1.3% to $48.1 million at March 31, 2003, from $47.5 million at September 30,
2002. The increase in stockholders equity was primarily due to net income of $2.2 million and a $0.2 million increase in unrealized gain on securities, which was partially offset by dividends of $0.7 million and common stock repurchased for
the six-month period of $1.1 million.



Comparison of
Results of Operations for the Three and Six Months Ended March 31, 2003 and 2002.



Overview. Net income was $1,024,269 for the quarter ended March 31, 2003, compared to $853,376 for the quarter ended March 31, 2002, an increase of $170,893 or 20.0%. Basic and diluted earnings per share
increased $0.04 per share or 20.0% to $0.24 for the quarter ended March 31, 2003 compared to basic and diluted earnings per share of $0.20 for the same period last year. Net income for the six-month period ended March 31, 2003 was $2,237,357
compared to $1,871,166 for the same period ended March 31, 2002, an increase of $366,191 or 19.6%. Basic earnings per share were $0.53 and diluted earnings per share were $0.52 for the six-month period ended March 31, 2003, compared to basic and
diluted earnings per share of $0.43, for the same period last year.



Net
interest income.Net interest income for the quarter ended March 31, 2003 was $4,428,602 compared to $4,044,977 for the quarter ended March 31, 2002, an increase of $383,625 or 9.5%. Net interest income for the six-month period ended March
31, 2003 was $8,838,782 compared to $7,880,476 for the six-month period ended March 31, 2002, an increase of $958,306 or 12.2%. The increases in net interest income resulted from the increase in earnings due to the purchase of investment securities
with cash provided by deposit growth. The increase in earnings on the loan portfolio was the result of an increase in the loan portfolio due to the acquisitions of North Arkansas Bancshares and Peoples Bank of Imboden offset by a



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##### Table of Contents

lower rate environment. Interest expense increased as a result of offering competitive rates on specific deposit products
and an increased deposit portfolio balance due to the acquisitions of North Arkansas Bancshares and Peoples Bank of Imboden while interest expense on borrowed funds decreased during the period compared to the same period last year, due to a decrease
in both borrowings and the average rate on such borrowings. The Companys net interest rate spread was 3.39% for the six months ended March 31, 2003 compared to 3.94% for the six months ended March 31, 2002. Net interest margin was 3.30% for
the six months ended March 31, 2003 compared to 3.91% for the six months ended March 31, 2002. The decrease was primarily due to lower yields on average interest earning assets for the six months ended March 31, 2003 compared to the same period last
year.



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##### Table of Contents

Average Balance Sheets (Dollars in Thousands)



|                                                                                 |  | Six Months Ended March 2003 |         |          | Year Ended September 2002 |                     |  | Six Months Ended March 2002 |                
|-------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------- | ------------------------- | ------------------- |  | --------------------------- | ---------------
|                                                                                 |  | Average Balance             |         | Interest |                           | Average Yield/ Cost |  |                             | Average Balance
|Interest-earning assets: (1)                                                     |  |                             |         |          |                           |                     |  |                             |                
|Loan receivable, net (6)                                                         |  | $                           | 381,854 |          | $                         | 13,657              |  | 7.15                        | %              
|Investment securities                                                            |  |                             | 154,259 |          |                           | 4,622               |  | 5.99                        | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Total interestearning assets                                                    |  |                             | 536,113 |          |                           | 18,279              |  | 6.82                        | %              
|Noninterestearning cash                                                         |  |                             | 24,311  |          |                           |                     |  |                             |                
|Other noninterestearning assets                                                 |  |                             | 47,340  |          |                           |                     |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Total assets                                                                     |  |                             | 607,764 |          |                           |                     |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Interest-bearing liabilities:                                                    |  |                             |         |          |                           |                     |  |                             |                
|Demand deposits                                                                  |  | $                           | 207,835 |          | $                         | 2,471               |  | 2.38                        | %              
|Time deposits                                                                    |  |                             | 295,564 |          |                           | 5,730               |  | 3.88                        | %              
|Borrowed funds (5)                                                               |  |                             | 46,855  |          |                           | 1,239               |  | 5.29                        | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Total interestbearing liabilities                                               |  |                             | 550,254 |          |                           | 9,440               |  | 3.43                        | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Noninterestbearing liabilities (2)                                              |  |                             | 9,964   |          |                           |                     |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Total liabilities                                                                |  |                             | 560,218 |          |                           |                     |  |                             |                
|Stockholders equity                                                             |  |                             | 47,546  |          |                           |                     |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Total liabilities and stockholders equity                                       |  | $                           | 607,764 |          |                           |                     |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Net interest income                                                              |  |                             |         |          | $                         | 8,839               |  |                             |                
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Net interest rate spread (3)                                                     |  |                             |         |          |                           |                     |  | 3.39                        | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Interestearning assets and net interest margin (4)                              |  | $                           | 536,113 |          |                           |                     |  | 3.30                        | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                
|Ratio of average interestearning assets to average interest-bearing liabilities |  |                             |         |          |                           |                     |  | 97.43                       | %              
|                                                                                 |  |                             |         |          |                           |                     |  |                             |                

---

|(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 six-month period ended March 31, 2003, compared to the six-month period ended March 31, 2002.



|                                    |  | Rate/Volume Analysis (in thousands) Six-Month Period EndedMarch 31, 2003 vs. 2002 Increase/(Decrease) Due to |      
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------ | -----
|                                    |  | Volume                                                                                                       |      
|Interest income:                    |  |                                                                                                              |      
|Loan Receivable                     |  | $                                                                                                            | 5,989
|Investment securities               |  |                                                                                                              | 3,715
|                                    |  |                                                                                                              |      
|Total interest earning assets       |  |                                                                                                              | 9,704
|Interest expense:                   |  |                                                                                                              |      
|Deposits                            |  |                                                                                                              | 6,122
|Borrowed funds                      |  |                                                                                                              | (957 
|                                    |  |                                                                                                              |      
|Total interest bearing liabilities  |  |                                                                                                              | 5,165
|                                    |  |                                                                                                              |      
|Net change in net interest income   |  | $                                                                                                            | 4,539
|                                    |  |                                                                                                              |      
|Change in provision for loan losses |  |                                                                                                              |      
|                                    |  |                                                                                                              |      
|Net change after provision          |  |                                                                                                              |      
|                                    |  |                                                                                                              |      



Provision for Loan Losses.Provision for loan losses was $100,000 for both quarters ended March 31, 2003 and March 31, 2002. Provision for loan losses increased to $845,000 for the six-month period ended March 31, 2003 compared to $200,000 for the six-month period
ended March 31, 2002, an increase of $645,000 or 322.5%. The increase in the provision for loan loss was 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.



Non-Interest income. Non-interest income increased to $1,677,328 for the quarter ended March 31, 2003 compared to $1,184,854 for the quarter ended March 31, 2002, an increase of $492,474 or 41.6%.
Non-interest income increased to $3,834,516 for the six-month period ended March 31, 2003 compared to $2,343,935 for the six-month period ended March 31, 2002, an increase of $1,490,581 or 63.6%. The increase in non-interest income was primarily the
result of an increase in gain on sale of loans.



Operating expense.Total operating expenses were $4,324,404 for the quarter ended March 31, 2003, compared to $3,624,136 for quarter ended March 31, 2002, an increase of $700,268 or 19.3%. Total operating expenses increased to $8,757,384 for the six-month
period ended March 31, 2003, compared to $6,827,349, for the six-month period ended March 31, 2002, an increase of $1,930,035 or 28.3%. The increase in operating expenses compared to last year was primarily the result of increased operating expenses
associated with the growth of the Company due to 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.



Over the last twenty one months, the Company has completed acquisitions of three separate
banks, which had the result of increasing commercial loans by $99.6 million. The Company expects to continue to diversify its loan portfolio from being a traditional single-family lending institution to an increase in the percentage of commercial
loans through originations or additional whole bank acquisitions. The increases in commercial loans associated with the acquisitions have resulted in an increase of $2.7 million of nonperforming commercial loans during the last twenty-one months. We
believe that the increase in non-performing commercial loans is a result of the weakening economy and due to commercial loans having a higher degree of risk of uncollectability than single-family loans. Additionally, approximately $1.0 million in
charge offs have been recorded in connection with the loans acquired in these acquisitions.



The Companys allowance for loan losses was $3,267,607 at March 31, 2003, or 0.84% of total loans, compared with $3,205,224 or 0.78% of total loans, at September 30, 2002, and $2,550,606, or 0.79% of total loans,
at March 31, 2002. A provision of $845,000 was made during the six month period ended March 31, 2003. Total nonperforming loans increased to $5.5 million at March 31, 2003 from $3.2 million at September 30, 2002, an increase of $2.3 million. Based
on presently available information, management believes that the current allowance for loan losses is adequate. 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
(nonperforming loans) and real estate owned by the Company on the dates indicated.



|                                                   |  | March 31, 2003         |       |   | September 30, 2002 |  
|-------------------------------------------------- |  | ---------------------- | ----- | - | ------------------ | -
|                                                   |  | (Dollars in Thousands) |      
|Nonperforming loans:                               |  |                        |       |   |                    |  
|Single family mortgage                             |  | $                      | 1,992 |   |                    | $
|Other mortgage loans                               |  |                        | 2,562 |   |                    |  
|Other loans                                        |  |                        | 911   |   |                    |  
|                                                   |  |                        |       |   |                    |  
|Total nonperforming loans:                         |  |                        | 5,465 |   |                    |  
|Total real estate owned and repossessed assets (1) |  |                        | 894   |   |                    |  
|                                                   |  |                        |       |   |                    |  
|Total non-performing assets                        |  | $                      | 6,359 |   |                    | $
|                                                   |  |                        |       |   |                    |  
|Total nonperforming loans to net loans receivable  |  |                        | 1.41  | % |                    |  
|Total nonperforming loans to total assets          |  |                        | 0.80  | % |                    |  
|Total nonperforming assets to total assets         |  |                        | 0.93  | % |                    |  

---

|(1) |  | Net of valuation allowances
|--- |  | ---------------------------



It is the policy of the Company 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 $2.3 million or 71.7% between September 30, 2002 and



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March 31, 2003 to $5.5 million from $3.2 million. The balance of the specific interest reserve on non-accrual loans
increased $0.2 million from $0.3 million on September 30, 2002 to $0.5 million on March 31, 2003.



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.



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 |          | Ratio     |          | 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



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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 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



(a)Evaluation of disclosure controls and
procedures.



Under the supervision and with the participation
of our management, including the Companys Chief Executive Officer and Chief Financial Officer, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act) as of March 31, 2003 (the Evaluation Date) within 90 days prior to the filing date of this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation
Date, the Companys disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company (or its consolidated subsidiaries) required to be included in its periodic SEC filings.



(b)Changes in internal controls.



There were no significant changes made in the Companys internal
controls during the period covered by this report or, to managements knowledge, in other factors that could significantly affect these controls subsequent to the date of their 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



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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 | %
|                       |  |           |  |     
|Continuing Directors:  |  |           |  |      |   |  |          |  |     |  
|Dwayne Powell          |  |           |  |      |   |  |          |  |     |  
|Bob Rainwater          |  |           |  |      |   |  |          |  |     |  
|N. Ray Campbell        |  |           |  |      |   |  |          |  |     |  
|James Edington         |  |           |  |      |   |  |          |  |     |  
|A.J. Baltz, Jr.        |  |           |  |      |   |  |          |  |     |  



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



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



None



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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:    August 14, 2003 |  |                         
|                         |  |                         
|                         |  |                         
|Date:    August 14, 2003 |  |                         
|                         |  |                         



25