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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-Q



xQUARTERLY 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

POCAHONTAS BANCORP, INC.



|                         
|-------------------------
|State of Incorporation   
|                         
|DELAWARE                 
|                         
|                         
|Address                  
|                         
|1700 E. Highland         
|Jonesboro, Arkansas 72401



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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##### Table of Contents



POCAHONTAS BANCORP, INC.



TABLE OF CONTENTS

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|                                                                                                                                            |  | Page
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION                                                                                                               |  |     
|Item 1. Financial Statements:                                                                                                               |  |     
|Condensed Consolidated Statements of Financial Condition at March 31, 2003 (unaudited) and September 30, 2002                               |  | 1   
|Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended March 31, 2003 and 2002 (unaudited) |  | 2   
|Condensed Consolidated Statement of Changes in Stockholders Equity for the Six Months Ended March 31, 2003 (unaudited)                     |  | 4   
|Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2003 and 2002 (unaudited)                                |  | 5   
|Notes to Condensed Consolidated Financial Statements (unaudited)                                                                            |  | 7   
|Independent Accountants Report                                                                                                             |  | 12  
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                                               |  | 13  
|Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                                                          |  | 18  
|Item 4.
Controls and Procedures                                                                                                             |  | 19  
|PART II.    OTHER INFORMATION                                                                                                               |  | 19  
|Signatures                                                                                                                                  |  | 21  
|Certifications                                                                                                                              |  | 22  
|Exhibits                                                                                                                                    |  | 24  



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##### Table of Contents

Item 1



POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                                                                                                          |  | (Unaudited)    |             |   |                    |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | - | ------------------ | -
|                                                                                                                                                                                          |  | 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.



1



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##### Table of Contents

POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)



|                                                     |  | Three Months Ended March 31, |           |      | Six Months Ended March 31, |          
|---------------------------------------------------- |  | ---------------------------- | --------- | ---- | -------------------------- | ---------
|                                                     |  | 2003                         |           | 2002 |                            |          
|INTEREST INCOME:                                     |  |                              |           |      |                            |          
|Loans receivable                                     |  | $                            | 6,675,796 |      | $                          | 6,001,535
|Investment securities                                |  |                              | 2,557,352 |      |                            | 1,770,978
|                                                     |  |                              |           |      |                            |          
|Total interest income                                |  |                              | 9,233,148 |      |                            | 7,772,513
|INTEREST EXPENSE:                                    |  |                              |           |      |                            |          
|Deposits                                             |  |                              | 4,226,693 |      |                            | 2,960,062
|Borrowed funds                                       |  |                              | 259,451   |      |                            | 435,306  
|Interest on Trust Preferred Securities               |  |                              | 318,402   |      |                            | 332,168  
|                                                     |  |                              |           |      |                            |          
|Total interest expense                               |  |                              | 4,804,546 |      |                            | 3,727,536
|                                                     |  |                              |           |      |                            |          
|NET INTEREST INCOME                                  |  |                              | 4,428,602 |      |                            | 4,044,977
|PROVISION FOR LOAN LOSSES                            |  |                              | 100,000   |      |                            | 100,000  
|                                                     |  |                              |           |      |                            |          
|NET INTEREST INCOME AFTERPROVISION FOR LOAN LOSSES   |  |                              | 4,328,602 |      |                            | 3,944,977
|OTHER INCOME:                                        |  |                              |           |      |                            |          
|Dividends                                            |  |                              | 16,306    |      |                            | 27,619   
|Fees and service charges                             |  |                              | 942,916   |      |                            | 892,883  
|Gain on sale of loans                                |  |                              | 513,731   |      |                            | 141,496  
|Trading gains, net                                   |  |                              | 48,000    |      |                            | 23,899   
|Other, net                                           |  |                              | 156,375   |      |                            | 98,957   
|                                                     |  |                              |           |      |                            |          
|Total other income                                   |  |                              | 1,677,328 |      |                            | 1,184,854
|                                                     |  |                              |           |      |                            |          
|OPERATING EXPENSE:                                   |  |                              |           |      |                            |          
|Compensation and benefits                            |  |                              | 2,415,659 |      |                            | 1,872,148
|Occupancy and equipment                              |  |                              | 634,761   |      |                            | 536,058  
|Insurance premiums                                   |  |                              | 87,929    |      |                            | 67,968   
|Professional fees                                    |  |                              | 277,019   |      |                            | 150,965  
|Data processing                                      |  |                              | 181,956   |      |                            | 140,662  
|Advertising                                          |  |                              | 110,644   |      |                            | 163,951  
|Office supplies                                      |  |                              | 88,152    |      |                            | 87,095   
|Other                                                |  |                              | 528,284   |      |                            | 605,289  
|                                                     |  |                              |           |      |                            |          
|Total operating expense                              |  |                              | 4,324,404 |      |                            | 3,624,136
|                                                     |  |                              |           |      |                            |          
|INCOME FROM CONTINUING OPERATIONSBEFORE INCOME TAXES |  |                              | 1,681,526 |      |                            | 1,505,695
|Income taxes                                         |  |                              | 657,257   |      |                            | 509,857  
|                                                     |  |                              |           |      |                            |          
|INCOME FROM CONTINUING OPERATIONS                    |  |                              | 1,024,269 |      |                            | 995,838  
|DISCONTINUED OPERATIONS: (Note 6)                    |  |                              |           |      |                            |          
|Loss from operations of discontinued branches        |  |                              |          |      |                            | (213,462 
|Gain on sale of branches                             |  |                              |          |      |                            |         
|Income taxes (benefit) on discontinued branches      |  |                              |          |      |                            | (71,000  
|                                                     |  |                              |           |      |                            |          
|Net gain (loss) on discontinued operations           |  |                              |          |      |                            | (142,462 
|                                                     |  |                              |           |      |                            |          
|NET INCOME                                           |  | $                            | 1,024,269 |      | $                          | 835,376  
|                                                     |  |                              |           |      |                            |          



(Continued)





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POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)



|                                                                                      |  | Three Months Ended March 31, |         |   | Six Months Ended March 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:                                                             |  |                              |         |   |                            |  
|Earnings per share before discontinued operations                                     |  | $                            | 0.24    |   |                            | $
|Earnings per share from discontinued operations                                       |  | $                            | 0.00    |   |                            | $
|                                                                                      |  |                              |         |   |                            |  
|BASIC EARNINGS PER SHARE                                                              |  | $                            | 0.24    |   |                            | $
|                                                                                      |  |                              |         |   |                            |  
|DILUTED EARNINGS PER SHARE:                                                           |  |                              |         |   |                            |  
|Earnings per share before discontinued operations                                     |  | $                            | 0.24    |   |                            | $
|Earnings per share from discontinued operations                                       |  | $                            | 0.00    |   |                            | $
|                                                                                      |  |                              |         |   |                            |  
|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)

---



|                                                                                 |  | Common Stock |  |        |        |                            |   |                      |  |   |                     |   |  |                                        |         |                   | Treasury Stock |   |           |  |       
|-------------------------------------------------------------------------------- |  | ------------ |  | ------ | ------ | -------------------------- | - | -------------------- |  | - | ------------------- | - |  | -------------------------------------- | ------- | ----------------- | -------------- | - | --------- |  | ------
|                                                                                 |  | Shares       |  | Amount |        | Additional Paid-In Capital |   | Unearned ESOP Shares |  |   | Unearned RRP Shares |   |  | Accumulated Other Comprehensive Income |         | Retained Earnings |                |   | 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) onavailable-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.



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POCAHONTAS BANCORP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

---



|                                                                                         |  | Six months ended March 31, |             
|---------------------------------------------------------------------------------------- |  | -------------------------- | ------------
|                                                                                         |  | 2003                       |             
|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     
|Amortization of deferred loan fees                                                       |  |                            | (32,629     
|Amortization of premiums and discounts, net                                              |  |                            | (201,752    
|Net (gain) loss on sales of assets                                                       |  |                            | (1,641,575  
|Net (gain) loss on sales of investments                                                  |  |                            | (5,728      
|Net gain (loss) 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                                         |  |                            | 492,850     
|                                                                                         |  |                            |             
|INVESTING ACTIVITIES:                                                                    |  |                            |             
|Acquisition of Walden/Smith Financial Group, Inc., net of cash acquired                  |  |                            |            
|Acquisition of Southern Mortgage Corporation, net of cash acquired                       |  |                            |            
|Loan repayments, originations, and purchases, net                                        |  |                            | (12,177,274 
|Net decrease in deposits from sale of branches                                           |  |                            | (14,557,990 
|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                                         |  | $                          | (91,620,093 
|                                                                                         |  |                            |             



(Continued)



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##### Table of Contents

POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

---



|                                                                            |  | Six months endedMarch 31, |            
|--------------------------------------------------------------------------- |  | ------------------------- | -----------
|                                                                            |  | 2003                      |            
|FINANCING ACTIVITIES:                                                       |  |                           |            
|Net increase in deposits                                                    |  | $                         | 82,581,659 
|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                            |  |                           | 79,284,525 
|                                                                            |  |                           |            
|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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POCAHONTAS BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

---



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



The consolidated balance sheet information at September 30, 2002 was derived from the audited balance sheets of Pocahontas Bancorp, Inc.
(the Company), at September 30, 2002. The consolidated financial statements at and for the six months ended March 31, 2003 and 2002 are unaudited. The accompanying consolidated financial statements were prepared in accordance with
generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation 10 of Regulation S-X. Certain information required for a complete presentation in accordance with
generally accepted accounting principles has been omitted. All adjustments that are, in the opinion of management, necessary for a fair presentation of the interim financial statements have been included. The results of operations for the 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 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.



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.



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



Recently Adopted Accounting Standards- In
October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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



7



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##### Table of Contents



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 FASB Statement 123. SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for financial statements for fiscal years ending after December 15, 2002. The 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 4 to the unaudited consolidated financial statements.



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.



|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.



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##### Table of Contents



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 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.



The Company applies the provisions of APB 25 in accounting for its stock options plans, as allowed under SFAS 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the
options granted to employees or directors with strike prices at or above the market value of the stock. Had compensation cost for these options been determined 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:



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|                           |  | Three-Months Ended March 31, |       | Six-Months Ended March 31,
|-------------------------- |  | ---------------------------- | ----- | --------------------------
|                           |  | 2003                         |       | 2002                      
|Net income (in thousands): |  |                              |       |                           
|As reported                |  | $                            | 1,024 |                           
|Pro forma                  |  | $                            | 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%.



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



The Company has completed a transitional impairment review to identify if there is 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.



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##### Table of Contents



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



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



Total amortization
expense for core deposit intangible assets was approximately $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 consolidated financial statements of the Company and its subsidiaries.



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



The corporation, 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 corporation had no interests in non-consolidated special purpose
entities. At March 31, 2003, commitments included:



Total approved loan origination commitments outstanding were $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 were $3.7 million.



Total unused lines of credit were $31.2 million.



Outstanding letters of credit were $1.6 million.



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



Based on historical experience, management believes that a
significant portion of maturing deposits will remain with the Bank. We anticipate that we will continue to have sufficient funds, through repayments, deposits and borrowings, to meet our current commitments.



11



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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 on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated
statement of financial condition as of September 30, 2002, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.



/s/ Deloitte & Touche LLP



Little Rock, Arkansas

May 2, 2003



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##### Table of Contents

ITEM 2



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



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



Financial Condition at 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 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.





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##### Table of Contents

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 including discontinued operations 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 from continuing operations was $1,024,269 for the
quarter ended March 31, 2003, compared to $995,838 for the quarter ended March 31, 2002, an increase of $28,431 or 2.9%. Net income including discontinued operations 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 income from continuing operations for the six-month period ended March 31, 2003 was $1,908,657 compared to $2,109,205 for the same period ended March 31, 2002, a decrease of $200,548 or 9.5%.



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 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 March2003 |         |          | Year Ended September2002 |                     |  | Six Months Ended March2002 |                
|-------------------------------------------------------------------------------- |  | -------------------------- | ------- | -------- | ------------------------ | ------------------- |  | -------------------------- | ---------------
|                                                                                 |  | 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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##### Table of Contents

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 Ended March 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.



Discontinued Operations. During the six-month period ended March 31, 2003, the Company sold its Carlisle and
England, Arkansas operations resulting in a gain on sale of $513,595. The net gain on these discontinued operations for the six-month period ended March 31, 2003 was $328,700 compared to a net loss on discontinued operations of $238,039 for the
six-month period ended March 31, 2002.





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##### Table of Contents



Non-performing Loans and
Loan Loss Provisions



The allowance for loan losses is
established through a provision for loan losses based on managements quarterly asset classification review and evaluation of the risk inherent in its loan portfolio and changes in the nature and volume of its loan activity. Such evaluation,
which includes a review of all loans on which full collection may not be reasonably assured, considers among other matters, the estimated value of collateral, cash flow analysis, historical loan loss experience, and other factors that warrant
recognition in providing allowances. A provision of $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.



During the twenty one months ending March 31,
2003, the Company has completed three total acquisitions of banks, which had the result of increasing commercial loans by $99.6 million. The increases in commercial loans associated with the acquisitions have resulted in an increase of $2.7 million
of nonperforming commercial loans. Approximately, $2.0 million of loan loss allowance on the commercial loans was transferred with these bank acquisitions. Further, $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. 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 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.



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##### Table of Contents



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



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



18



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##### Table of Contents

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



None



19



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##### Table of Contents



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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##### Table of Contents



SIGNATURES



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





|                   |  | POCAHONTAS BANCORP, INC.             
|------------------ |  | -------------------------------------
|                  
|Date: May 14, 2003 |  | /s/ DWAYNE POWELL                    
|                   |  | Dwayne Powell                        
|                   |  | President and Chief Executive Officer
|                  
|Date: May 14, 2003 |  | /s/ TERRY PRICHARD                   
|                   |  | Terry Prichard                       
|                   |  | Chief Financial Officer              





21



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##### Table of Contents

Certification of Chief Executive Officer

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



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



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



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



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



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



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



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



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



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



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



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



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



|May 14,
2003Date |  | /S/    DWAYNE POWELL                 
|---------------- |  | -------------------------------------
|                 |  | Dwayne Powell                        
|                 |  | President and Chief Executive Officer



22



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##### Table of Contents

Certification of Chief Financial Officer

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



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



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



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



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



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



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



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



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



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



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



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



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



|May 14,
2003Date |  | /S/    TERRY PRICHARD  
|---------------- |  | -----------------------
|                 |  | Terry Prichard         
|                 |  | Chief Financial Officer



23