<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the Fiscal Year Ended September 30, 2000.

                                 OR
[_]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 [NO FEE REQUIRED]

     For the transition period from _______________ to  ______________________


                           Commission File #0-23969

                           POCAHONTAS BANCORP, INC.
                           ------------------------
                 (Exact name of registrant as specified in its charter)

                United States                                  71-0806097
          -----------------------------------      ----------------------
          (State or other jurisdiction of               (I.R.S. Employer
          incorporation or organization)             Identification Number)

      203 West Broadway, Pocahontas, Arkansas               72455
      ---------------------------------------               -----
      (Address of Principal Executive Offices)             Zip Code

                                (870) 892-4595
                       --------------------------------
                        (Registrant's telephone number)

<TABLE>
<S>                                                          <C>
Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:  Common Stock, par value $.01 per share
                                                             --------------------------------------
                                                                               (Title of Class)
</TABLE>

     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
requirements for the past 90 days.

     YES   X  .   NO _______.
         -----

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

     As of December 15, 2000, there were issued and outstanding 4,454,357 shares
of the Registrant's Common Stock.  Such shares were listed on the NASDAQ
National Market System.

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, computed by reference to the last sale price on December 15,
2000, was $22,360,088. This amount does not include shares held by the Employee
Stock Ownership Plan of Pocahontas Federal Savings and Loan Association (the
Registrant's subsidiary), by executive officers and directors, and by the
Registrant or treasury stock.

                                       1
<PAGE>

                                    PART I

ITEM 1    BUSINESS
------    --------

General

     Pocahontas Bancorp, Inc. (the "Registrant" or the "Company") was organized
in March 1998 to be the holding company for Pocahontas Federal Savings and Loan
Association (the "Bank"), a federally chartered savings and loan association
headquartered in Pocahontas, Arkansas. The Bank's deposits are insured by the
Federal Deposit Insurance Corporation ("FDIC") under the Savings Association
Insurance Fund ("SAIF"). The Company is registered as a savings and loan holding
company with the Office of Thrift Supervision ("OTS"). The Company's main office
is located at 203 West Broadway, Pocahontas, Arkansas, and its telephone number
is 870-892-4595.

     The Company was organized in conjunction with the mutual-to-stock
conversion of the Bank's majority stockholder, Pocahontas Bancorp, MHC, a
federal mutual holding company in March 1998. In this "second step" conversion,
3,570,750 shares of the Company's common stock were sold in a subscription and
community offering at $10.00 per share, and the outstanding common stock of the
Bank was exchanged for Company common stock at a ratio of 4.0245 to one. The
consolidated financial statements of the Company set forth herein reflect net
proceeds of approximately $34.8 million raised in conjunction with the second
step offering.

     The Bank is a community-oriented savings institution headquartered in
Pocahontas, Arkansas that operates fourteen full-service offices in its market
area consisting of Northeast Arkansas. The Bank is primarily engaged in the
business of originating single family residential mortgage loans funded with
deposits, Federal Home Loan Bank ("FHLB") advances and securities sold under
agreements to repurchase.

     The Bank's operations are affected by general economic conditions, the
monetary and fiscal policies of the federal government and the regulatory
policies of government authorities.  Deposit flows and the cost of interest-
bearing liabilities ("cost of funds") to the Bank are affected by interest rates
on competing investments and general market interest rates.  Similarly, the
Bank's loan volume and yields on loans and investment securities and the level
of prepayments on such loans and investment securities are affected by market
interest rates, as well as by additional factors affecting the supply of and
demand for housing and the availability of funds.

     At September 30, 2000, the Company and its affiliates employed 100 persons.

Competition

     The Bank faces strong competition both in attracting deposits and in
origination of loans. Competitors for deposits include thrift institutions,
commercial banks, credit unions, money market funds, and other investment
alternatives, such as mutual funds, full service and discount broker-dealers,
brokerage accounts, and savings bonds or other government securities. Primary
competitive factors include convenience of locations, variety of deposit or
investment options, rates or terms offered, and quality of customer service.

     The Bank competes for mortgage loan originations with thrift institutions,
banks and mortgage companies, including many large financial institutions which
have greater financial and marketing resources available to them.  Primary
competitive factors include service quality and speed, relationships with
builders and real estate brokers, and rates and fees.

     The Bank believes that it has been able to compete effectively in its
principal markets, and that competitive pressures have not materially interfered
with the Bank's ongoing operations.

                                       2
<PAGE>

Lending Activities

     Loan Portfolio Composition. The Bank's net loan portfolio consists
primarily of first mortgage loans collateralized by single-family residential
real estate and, to a lesser extent, multifamily residential real estate,
commercial real estate and agricultural real estate loans. However, it should be
noted that non single family loans are increasing at a greater rate than single
family loans. At September 30, 2000, the Bank's net loan portfolio totaled
$234.4 million, of which $175.6 million, or 75.0% were single-family residential
real estate mortgage loans, $1.2 million, or 0.5% were multifamily residential
real estate loans, $7.4 million, or 3.1%, were agricultural real estate loans,
and $25.7 million, or 11.0%, were commercial real estate loans (including land
loans). The remainder of the Bank's loans at September 30, 2000 included
commercial business loans (i.e., crop production, equipment and livestock loans)
which totaled $12.6 million, or 5.2%, of the Bank's net loan portfolio as of
September 30, 2000. Other loans, including automobile loans and loans
collateralized by deposit accounts totaled $15.3, or 6.5% of the Bank's net loan
portfolio as of September 30, 2000.

Analysis of Loan Portfolio

     Set forth below is selected data relating to the composition of the Bank's
loan portfolio, including loans held for sale, by type of loan as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                              At September 30,
                                 ---------------------------------------------------------------------------------------------------
                                         2000                   1999                1998                1997             1996
                                 --------------------- --------------------  ------------------- ----------------- -----------------
                                   Amount    Percent      Amount  Percent      Amount  Percent    Amount  Percent   Amount   Percent
                                 --------------------- --------------------  ------------------- ----------------- -----------------
                                                                               (Dollars in Thousands)
<S>                              <C>         <C>       <C>        <C>        <C>       <C>       <C>      <C>      <C>       <C>
Real estate loans:
  Single-family residential      $175,625       75.0%   $173,622     79.7%   $163,895    84.6%   $138,539   86.8%  $118,291   86.4%
  Multifamily residential           1,163        0.5       1,024      0.5       3,124     1.6       1,600    1.0      4,729    3.5
  Agricultural                      7,360        3.1       6,878      3.2       6,532     3.4       4,654    2.9      4,552    3.3
  Commercial                       25,730       11.0      23,296     10.7      10,268     5.3       9,606    6.0      6,703    4.9
                                 --------      -----    --------    -----    --------   -----    --------  -----   --------  -----

   Total real estate loans        209,878       89.6     204,820     94.1     183,819    94.9     154,399   96.7    134,275   98.1

Other loans:
  Savings account loans             1,665        0.7       1,528      0.7       1,161     0.6       1,015    0.6        886    0.6
  Commercial business (1)          12,555        5.3      10,932      5.0       8,568     4.4       6,533    4.1      5,729    4.2
  Other (2)                        13,617        5.8       8,113      3.7       5,943     3.1       2,716    1.7      1,913    1.4
                                 --------      -----    --------    -----    --------   -----    --------  -----   --------  -----

   Total other loans               27,837       11.8      20,573      9.4      15,672     8.1      10,264    6.4      8,528    6.2
                                 --------      -----    --------    -----    --------   -----    --------  -----   --------  -----

   Total loans receivable         237,715      101.4     225,393    103.5     199,491   103.0     164,663  103.1    142,803  104.3

Less:
  Undisbursed loan proceeds         1,345        0.6       5,753      2.6       3,655     1.9       2,815    1.8      3,715    2.7
  Unearned discount and net
    deferred loan fees                264        0.1         287      0.1         424     0.2         467    0.3        482    0.4
  Allowance for loan losses         1,689        0.7       1,643      0.8       1,684     0.9       1,691    1.0      1,734    1.3
                                 --------      -----    --------    -----    --------   -----    --------  -----   --------  -----

   Total loans receivable,
    net                          $234,417      100.0%   $217,710    100.0%   $193,728   100.0%   $159,690  100.0%  $136,872  100.0%
                                 ========      =====    ========    =====    ========   =====    ========  =====   ========  =====
</TABLE>

____________________________________
(1) Includes crop-production loans, livestock loans and equipment loans.
(2) Includes second mortgage loans, unsecured personal lines of credit and
  automobile loans.

     Loan Maturity Schedule.  The following table sets forth certain information
as of September 30, 2000, regarding the dollar amount of gross loans maturing in
the Bank's portfolio based on their contractual terms to maturity. Demand loans,
loans having no stated schedule of repayments, and overdrafts are reported as
due in one year or less.  Adjustable and floating rate loans are included in the
period in which interest rates are next scheduled to adjust rather than in which
they mature, and fixed rate loans are included in the period in which the final
contractual repayment is due.

<TABLE>
<CAPTION>
                                                                                             Beyond
                                 Within       1-3         3-5        5-10        10-20         20
                                 1 Year      Years       Years       Years       Years       Years        Total
                               ---------   ---------   ---------   ---------   ---------   ---------    ---------
                                                                (In Thousands)
<S>                            <C>         <C>         <C>         <C>         <C>         <C>         <C>
Fixed rate loans                 $22,113     $15,231     $16,709     $14,760     $36,568     $13,367     $118,748
Variable rate loans                   26         443       1,109       8,244      47,757      61,388      118,967
                                 -------     -------     -------     -------     -------     -------     --------

   Total                         $22,139     $15,674     $17,818     $23,004     $84,325     $74,755     $237,715
                                 =======     =======     =======     =======     =======     =======     ========
</TABLE>

                                       3
<PAGE>

     The following table sets forth at September 30, 2000, the dollar amount of
all fixed rate and adjustable rate loans due after September 30, 2001.


                                        Fixed         Adjustable        Total
                                    --------------  --------------  ------------
                                                    (in  Thousands)
Single-family residential                  $60,404        $117,940      $178,344
Multifamily residential                          -           1,001         1,001
Agricultural                                 6,235               -         6,235
Commercial                                  21,314               -        21,314
Other                                        8,682               -         8,682
                                           -------        --------      --------

Total                                      $96,635        $118,941      $215,576
                                           =======        ========      ========


     Single-Family Residential Real Estate Loans. The Bank's primary lending
activity is the origination of single-family, owner-occupied, residential
mortgage loans collateralized by properties located in the Bank's market area.
The Bank generally does not originate single-family residential loans
collateralized by properties outside of its market area. However, the Bank has
been an active purchaser of single family loans from outside the Bank's primary
marked area. At September 30, 2000, the Bank had $175.6 million, or 75.0%, of
its total net loan portfolio invested in single-family residential mortgage
loans, substantially all of which were collateralized by properties located in
the Bank's market area or in counties contiguous with the Bank's market area.

     The Bank's single-family, fixed rate, residential real estate loans
generally are originated and underwritten according to standards that qualify
such loans for resale in the secondary mortgage market. The Bank generally
retains adjustable rate mortgage ("ARM") loans that it originates. Whether the
Bank can or will sell fixed rate loans, however, depends on a number of factors
including the yield and the term of the loan, market conditions, and the Bank's
current interest rate risk analysis. At September 30, 2000 and 1999, loans held
for sale were insignificant. During the fiscal years ended September 30, 2000,
1999 and 1998, the Bank sold into the secondary market $0.6 million, $1.8
million, and $4.3 million, respectively, of single-family, fixed rate,
residential mortgage loans, generally from current period originations. The Bank
generally does not retain the servicing rights on loans it has sold.

     The Bank currently offers single-family residential mortgage loans with
terms typically ranging from 10 to 30 years, and with adjustable or fixed
interest rates. Single-family residential real estate loans often remain
outstanding for significantly shorter periods than their contractual terms
because borrowers may refinance or prepay loans at their option. The average
length of time that the Bank's single-family residential mortgage loans remain
outstanding varies significantly depending upon trends in market interest rates
and other factors. Accordingly, estimates of the average length of single-family
loans that remain outstanding cannot be made with any degree of accuracy.

     Originations of fixed-rate mortgage loans versus ARM loans are monitored on
an ongoing basis and are affected significantly by the level of market interest
rates, customer preference, the Bank's interest rate risk analysis, and loan
products offered by the Bank's competitors. Particularly in a relatively low
interest rate environment, borrowers may prefer fixed rate loans to ARM loans.
However, management's strategy is to emphasize ARM loans, and the Bank has been
successful in maintaining a level of ARM loan originations acceptable to
management.

     The Bank's ARM loans are generally for terms of 30 years, with interest
rates that adjust annually. The Bank establishes various annual and life-of-the-
loan caps on ARM loan interest rate adjustments. The Bank's current index on its
ARM loans is the one-year constant maturity treasury ("CMT") rate for one-year
ARM loans, a three-year CMT rate for three-year ARM loans, and a five-year CMT
rate for five-year ARM loans, plus a range of margin of 225 to 300 basis points,
subject to change based on market conditions. The Bank determines whether a
borrower qualifies for an ARM loan based on the fully indexed rate of the ARM
loan at the time the loan is originated.

     The primary purpose of offering ARM loans is to make the Bank's loan
portfolio more interest rate sensitive. ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, that during periods
of rising interest rates, the risk of default on ARM loans may increase due to
the upward adjustment of interest costs to the borrower. Management believes
that the

                                       4
<PAGE>

Bank's credit risk associated with its ARM loans is reduced because of the
lifetime interest rate adjustment limitations on such loans. However, interest
rate caps and the changes in the CMT rate, which is a lagging market index to
which the Bank's ARM loans are indexed, may reduce the Bank's net earnings in a
period of rising market interest rates.

     The Bank's single-family residential first mortgage loans customarily
include due-on-sale clauses, which are provisions giving the Bank the right to
declare a loan immediately due and payable in the event, among other things,
that the borrower sells or otherwise disposes of the underlying real property
serving as security for the loan. Due-on-sale clauses are an important means of
adjusting the rates on the Bank's fixed rate mortgage loan portfolio.

     Regulations limit the amount that a savings association may lend relative
to the appraised value of the real estate securing the loan, as determined by an
appraisal at the time of loan origination. Such regulations permit a maximum
loan-to-value ratio of 100% for residential property and a lower percentage for
other real estate loans, depending on the type of loan. The Bank's lending
policies limit the maximum loan-to-value ratio on both fixed rate and ARM loans
without private mortgage insurance to 90% of the lesser of the appraised value
or the purchase price of the property to serve as collateral for the loan. The
Bank generally requires fire and casualty insurance, as well as title insurance
regarding good title, on all properties securing real estate loans made by the
Bank.

     Multifamily Residential Real Estate Loans. Although the Bank does not
emphasize multifamily residential loans and has not been active recently in this
area, the Bank has originated loans collateralized by multifamily residential
real estate. Such loans constituted approximately $1.2 million, or 0.5% of the
Bank's total net loan portfolio on September 30, 2000, compared to $1.0 million,
or 0.5% of the Bank's total net loan portfolio at September 30, 1999, $3.1
million, or 1.6%, of the Bank's total net loan portfolio at September 30, 1998,
$1.6 million, or 1.0%, of the total net loan portfolio at September 30, 1997,
and $4.7 million, or 3.5%, of the total net loan portfolio as of September 30,
1996. The Bank's multifamily real estate loans are primarily collateralized by
multifamily residences, such as apartment buildings. Multifamily residential
real estate loans are offered with fixed and adjustable interest rates and are
structured in a number of different ways depending upon the circumstances of the
borrower and the type of multifamily project. Fixed interest rate loans
generally have five-to-seven-year terms with a balloon payment based on a 15 to
25 year amortization schedule.

     Loans collateralized by multifamily real estate generally involve a greater
degree of credit risk than single-family residential mortgage loans and carry
individually larger loan balances. This increased credit risk is a result of
several factors, including the concentration of principal in a limited number of
loans and borrowers, the effects of general economic conditions on income
producing properties, and the increased difficulty of evaluating and monitoring
these types of loans. Furthermore, the repayment of loans collateralized by
multifamily real estate typically depends upon the successful operation of the
related real estate property. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired.

     Agricultural Real Estate Loans.  In recent years the Bank has increased its
originations of agricultural real estate loans for the purchase of farmland in
the Bank's market area. Loans collateralized by farmland constituted
approximately $7.4 million or 3.1%, of the Bank's total net loan portfolio at
September 30, 2000, compared to $6.9 million, or 3.2%, $6.5 million, or 3.4%,
$4.7 million, or 2.9%, and $4.6 million, or 3.3%, of the Bank's total net loan
portfolio at September 30, 1999, 1998, 1997, and 1996, respectively.

     Agricultural mortgage loans have various terms up to 10 years with a
balloon payment based on a 20-year amortization schedule. Such loans are
originated with fixed rates and generally include personal guarantees. The loan-
to-value ratio on agricultural mortgage loans is generally limited to 75%. The
Bank earns higher yields on agricultural mortgage loans than on single-family
residential mortgage loans. Agricultural related lending, however, involves a
greater degree of risk than single-family residential mortgage loans because of
the typically larger loan amounts and a somewhat more volatile market. In
addition, repayments on agricultural mortgage loans are substantially dependent
on the successful operation or management of the farm property collateralizing
the loan, which is affected by many factors, such as weather and changing market
prices, outside the control of the borrower.
     Commercial Real Estate Loans. Loans collateralized by commercial real
estate, including land loans, constituted approximately $25.7 million, or 11.0%
of the Bank's total net loan portfolio at September 30, 2000, compared to $23.3
million, or 10.7%, $10.3 million, or 5.3%, $9.6 million, or 6.0%, and $6.7
million, or 4.9%, of the

                                       5
<PAGE>

Bank's total net loan portfolio at September 30, 1999, 1998, 1997, and 1996,
respectively. The Bank's commercial real estate loans are collateralized by
improved property such as office buildings, churches and other nonresidential
buildings. At September 30, 2000, substantially all of the Bank's commercial
real estate loans were collateralized by properties located within the Bank's
market area.

     Commercial real estate loans currently are offered with fixed rates only
and are structured in a number of different ways depending upon the
circumstances of the borrower and the nature of the project. Fixed rate loans
generally have five-to-seven year terms with a balloon payment based on a 15 to
25 year amortization schedule.

     Loans collateralized by commercial real estate generally involve a greater
degree of credit risk than single-family residential mortgage loans and carry
larger loan balances. This increased credit risk is a result of several factors,
including the concentration of principal in a limited number of loans and
borrowers, the effects of general economic conditions on income-producing
properties, and the increased difficulty of evaluating and monitoring these
types of loans. Furthermore, the repayment of loans collateralized by commercial
real estate is typically dependent upon the successful operation of the related
real estate property. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired.

     Other Loans.  The Bank originates various consumer loans, including
automobile, deposit account loans and second mortgage loans, principally in
response to customer demand. As of September 30, 2000, such loans totaled $15.3
million, or 6.5% of the Bank's total net loan portfolio as compared to $9.6
million, or 4.4%, $7.1 million, or 3.7%, $3.7 million, or 2.3%, and $2.8
million, or 2.0%, of the Bank's total net loan portfolio as of September 30,
1999, 1998, 1997, and 1996, respectively. Consumer loans are offered primarily
on a fixed rate basis with maturities generally of less than ten years.

     In recent years, the Bank has emphasized the origination of commercial
business loans, which principally include agricultural-related commercial loans
to finance the purchase of livestock, cattle, farm machinery and equipment,
seed, fertilizer and other farm-related products. Such loans comprised $12.6
million, or 5.3% of the Bank's total net loan portfolio at September 30, 2000,
as compared to $10.9 million, or 5.0%, $8.6 million, or 4.4%, $6.5 million, or
4.1%, and $5.7 million, or 4.2%, of the Bank's total net loan portfolio as of
September 30, 1999, 1998, 1997, and 1996.

     As with agricultural real estate loans, agricultural operating loans
involve a greater degree of risk than residential mortgage loans because the
payments on such loans are dependent on the successful operation or management
of the farm property for which the operating loan is utilized. See "Agricultural
Real Estate Loans" for the various risks associated with agricultural operating
loans.

                                       6
<PAGE>

     Origination, Purchase and Sale of Loans and Mortgage-Backed Securities.
The table below shows the Bank's originations, purchases and sales of loans and
mortgage-backed securities for the periods indicated.

<TABLE>
<CAPTION>
                                                                                      Year Ended September 30
                                                                     2000          1999          1998        1997       1996
                                                                  ----------     -------       -------     -------    --------
                                                                                          (In Thousands)
<S>                                                           <C>             <C>        <C>          <C>           <C>
Total loans receivable, net at beginning of year                 $217,710        $193,728   $159,690     $136,872       $116,447
Loans originated:
  Real estate:
    Single-family residential                                      38,629          53,499     66,988       49,215         48,568
    Multifamily residential                                             -             180        100           93              -
    Commercial                                                      6,346          13,708      2,010        3,467            299
    Agricultural                                                    1,766           2,317      3,429        2,863          1,596
Other:
  Commercial business                                              11,650          11,102      7,593        6,697          5,743
  Savings account loans                                             1,649           1,580        908          926            826
  Other                                                            10,316           7,504      4,162        2,684          2,023
                                                                 --------        --------   --------     --------       --------

    Total loans originated                                       $ 70,356          89,890     85,190       65,945         59,055

Loans purchased                                                     4,333          10,552          -            -              -
Loans sold                                                           (635)         (1,765)    (4,287)      (2,156)        (1,371)
Loans transferred to REO                                             (948)           (943)      (129)        (294)          (233)
Loans to facilitate the sale of REO                                  (505)           (513)         -         (349)          (145)
Loan repayments                                                   (55,989)        (73,239)   (46,478)     (40,004)       (36,470)
Other loan activity (net)                                              95               -       (258)        (324)          (411)
                                                                 --------        --------   --------     --------       --------

    Total loans receivable, net at end of year                   $234,417        $217,710   $193,728     $159,690       $136,872
                                                                 ========        ========   ========     ========       ========

Mortgage-backed securities, net at beginning of year             $191,125        $151,970   $168,836     $179,359       $163,287
Purchases                                                               -          65,737          -            -         38,430
Sales                                                             (91,600)         (1,205)         -            -        (10,020)
Fair value adjustment                                              (2,005)         (1,222)     2,474            -              -
Repayments                                                        (10,831)        (24,431)   (19,598)     (10,669)       (13,575)
Discount amortization                                                 241             276        258          146          1,237
                                                                 --------        --------   --------     --------       --------

Mortgage-backed and related securities, net at end of year       $ 86,930        $191,125   $151,970     $168,836       $179,359
                                                                 ========        ========   ========     ========       ========

Total loans receivable, net, and mortage-backed
  and related securities, net, at end of year                    $321,347        $408,835   $345,698     $328,526       $316,231
                                                                 ========        ========   ========     ========       ========
</TABLE>


     Loans to One Borrower.  The maximum loans that a savings association may
make to one borrower or a related group of borrowers is 15% of the savings
association's unimpaired capital and unimpaired surplus on an unsecured basis,
and an additional amount equal to 10% of unimpaired capital and unimpaired
surplus if the loan is collateralized by readily marketable collateral
(generally, financial instruments and bullion, but not real estate).

Asset Quality

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

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

                                       7
<PAGE>

     Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as real estate owned ("REO") until such time
as it is sold.  REO is initially recorded at its estimated fair value, less
estimated selling expenses.  Valuations are periodically performed by
management, and any subsequent decline in estimated fair value is charged to
operations.

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

<TABLE>
<CAPTION>
                                                                                  At September 30
                                                             --------------------------------------------------------
                                                               2000          1999        1998        1997        1996
                                                             ---------     --------    -------     -------      -----
                                                                                       (Dollars In Thousands)
<S>                                                       <C>           <C>           <C>         <C>        <C>
Nonperforming loans:
  Single-family residential real estate                      $1,477        $1,302      $2,240     $  422      $  766
  All other mortgage loans                                      485            10          15                    195
  Other loans                                                    54            66          41         31          62
                                                             ------        ------      ------     ------      ------

    Total delinquent loans                                   $2,016         1,378       2,296        453       1,023
Total real estate owned                                         646           261          16         17         111
                                                             ------        ------      ------     ------      ------

    Total nonperforming assets                               $2,662        $1,639      $2,312     $  470      $1,134
                                                             ======        ======      ======     ======      ======

Total loans delinquent 90 days or more
  to net loans receivable                                      0.86 %        0.63 %      1.19 %     0.28 %      0.74 %

Total loans delinquent 90 days or more
  to total assets                                              0.50 %        0.28 %      0.56 %     0.12 %      0.27 %

Total nonperforming loans and REO
  to total assets                                              0.66 %        0.34 %      0.57 %     0.12 %      0.30 %
</TABLE>


     Classification of Assets.  Federal regulations provide for the
classification of loans and other assets such as debt and equity securities
considered by the OTS to be of lesser quality as "substandard," "doubtful," or
"loss" assets.  An asset is considered "substandard" if it is inadequately
protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any.  "Substandard" assets include those characterized by
the "distinct possibility" that the savings institution will sustain "some loss"
if the deficiencies are not corrected.  Assets classified as "doubtful" have all
of the weaknesses inherent in those classified "substandard," with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable."  Assets classified as "loss" are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not warranted.  Assets
that do not expose the savings institution to risk sufficient to warrant
classification in one of the aforementioned categories, but which possess some
weaknesses, are required to be designated "special mention" by management.
Loans designated as special mention are generally loans that, while current in
required payments, have exhibited some potential weaknesses that, if not
corrected, could increase the level of risk in the future.

     A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by
federal regulators, who can order the establishment of additional general or
specific loss allowances.


                                       8
<PAGE>

     The following table sets forth the aggregate amount of the Bank's
classified assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                                     At September 30,
                                                        --------------------------------------------------------------------------
                                                           2000             1999             1998             1997          1996
                                                        ----------       ---------        ---------       ----------       -------
                                                                                    (Dollars In Thousands)
<S>                                             <C>                <C>              <C>              <C>              <C>
Substandard assets                                     $2,093           $2,905           $2,572           $1,640           $3,515
Doubtful assets                                           352                -               18                -                -
Loss assets                                                14               32                -               25               89
                                                       ------           ------           ------           ------           ------

    Total classified assets (1)                        $2,459           $2,937           $2,590           $1,665           $3,604
                                                       ======           ======           ======           ======           ======
</TABLE>



(1) With respect to assets classified "doubtful" and "loss," the Bank has
    established aggregate specific loan loss reserves of  $14,000,  $32,000, $0
    $25,000, $89,000, and $155,000 (in actual dollars) for the years ended
    September 30, 2000, 1999, 1998, 1997, 1996, and 1995, respectively.


     Allowance for Loan Losses.  It is management's policy to provide for
estimated losses on the Bank's loan portfolio based on management's evaluation
of the potential losses that may be incurred.  The Bank regularly reviews its
loan portfolio, including problem loans, to determine whether any loans require
classification or the establishment of appropriate reserves or allowances for
losses.  Such evaluation, which includes a review of all loans for which full
collection of interest and principal may not be reasonably assured, considers,
among other matters, the estimated fair value of the underlying collateral.
Other factors considered by management include the size and risk exposure of
each segment of the loan portfolio, present indicators such as delinquency rates
and the borrower's current financial condition, and the potential for losses in
future periods.  Management calculates the general allowance for loan losses in
part based on past experience, and in part based on specified percentages of
loan balances.  While both general and specific loss allowances are charged
against earnings, general loan loss allowances are added back to capital,
subject to a limitation of 1.25% of risk-based assets, in computing risk-based
capital under OTS regulations.

     During the fiscal year ended September 30, 2000, 1999, 1998, 1997 and 1996,
the Bank added $120,000, $0, $0, $60,000 and $411,200, respectively, to its
allowance for loan losses.  The Bank's allowance for loan losses totaled $1.7
million, $1.7 million, $1.7 million, $1.7 million, and $1.7 million at September
30, 2000, 1999, 1998, 1997 and 1996, respectively.

                                       9
<PAGE>

     Analysis of the Allowance for Loan Losses. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                                     Year Ended September 30
                                               -----------------------------------------------------------------------
                                                       2000          1999          1998          1997          1996
                                               -----------------   ---------   -------------   ---------    ----------
                                                                                     (In Thousands)
<S>                                            <C>               <C>           <C>           <C>           <C>
Total loans outstanding                            $237,715      $225,393      $199,491      $164,663      $142,803
Average net loans outstanding                       224,751       206,001       176,295       147,316       124,609

Allowance balances (at beginning of year)          $  1,643      $  1,684      $  1,691      $  1,734      $  1,357
Provision for losses:
  Real estate loans                                                     -             -            30             -
  Other loans                                           120             -             -            30           411
Charge-offs:
  Real estate loans                                     (54)          (67)           (7)          (11)          (17)
  Other loans                                           (28)          (29)            -           (93)          (32)
Recoveries:
  Real estate loans                                       4             1             -             1            15
  Other loans                                             4            54             -             -             -
                                                   --------      --------      --------      --------      --------

Allowance balance (at end of year)                    1,689      $  1,643      $  1,684      $  1,691      $  1,734
                                                   ========      ========      ========      ========      ========

Allowance for loan losses as a percent
  of total loans receivable at end of year             0.71%         0.73%         0.84%         1.03%        1.21%
Net loans charged off as a percent
  of average net loans outstanding                     0.04%         0.05%         0.00%         0.07%        0.04%
Ratio of allowance for loan losses
  to total nonperforming loans
  at end of year                                      83.78%       119.23%        73.34%       373.45%      169.50%
Ratio of allowance for loan losses to
  total nonperforming loans and
  REO at end of year                                  63.45%       100.24%        72.84%       359.79%       152.91%
</TABLE>


     Allocation of Allowance for Loan Losses. The following table sets forth the
allocation of allowance for loan losses by loan category at the dates indicated.

<TABLE>
<CAPTION>
                                                                         At September 30,
                                  --------------------------------------------------------------------------------------------------
                                      2000                 1999                1998               1997               1996
                                   ------------------  ------------------  ------------------ ------------------  ------------------
                                          % of Loans          % of Loans          % of Loans         % of Loans          % of Loans
                                            in Each             in Each             in Each            in Each             in Each
                                          Category to         Category to         Category to        Category to         Category to
                                   Amount Total Loans  Amount Total Loans  Amount Total Loans Amount Total Loans  Amount Total Loans
                                   ------------------  ------------------  ------------------ ------------------  ------------------
                                                                          (Dollars in Thousands)
<S>                               <C>       <C>       <C>      <C>        <C>       <C>       <C>      <C>       <C>     <C>
Balance at end of period
 applicable to:
  Mortgage loans                   $  843     90.5%   $  893     92.3%    $  958      94.9%   $  927     96.7%   $  903     93.9%
  Non-mortgage loans                  846      9.5       750      7.7        726       5.1       764      3.3       831      6.1
                                   ------   ------    ------   ------     ------    ------    ------   ------    ------   ------

  Total allowance for loan losses  $1,689    100.0%   $1,643    100.0%    $1,684     100.0%   $1,691    100.0%   $1,734    100.0%
                                   ======   ======    ======   ======     ======    ======    ======   ======    ======   ======
</TABLE>

Investment Activities

     Mortgage-Backed Securities. Mortgage-backed securities represent a
participation interest in a pool of single-family or multifamily mortgages, the
principal and interest payments on which are passed from the mortgagors, through
intermediaries that pool and repackage the participation interests in the form
of securities, to investors such as the Bank. Mortgage-backed securities
typically are issued with stated principal amounts. The securities are backed by
pools of mortgages that have loans with interest rates that are within a range
and have varying maturities. The underlying pool of mortgages can be composed of
either fixed-rate mortgages or ARM loans. As a result, the interest rate risk

                                       10
<PAGE>

characteristics of the underlying pool of mortgages, i.e., fixed-rate or
adjustable-rate, as well as the prepayment risk, are passed on to the
certificate holder.  The Bank invests in mortgage-backed securities to
supplement local single-family loan originations as well as to reduce interest
rate risk exposure, because mortgage-backed securities are more liquid than
mortgage loans.

     Set forth below is selected data relating to the composition of the Bank's
mortgage-backed securities portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                                       At September 30,
                                   2000                   1999                1998                  1997                 1996
                             ------------------------------------------------------------------------------------------------------
                               $         %           $          %          $        %          $          %         $          %
                             ------- ---------- ----------- --------- --------- --------- ----------- --------- ---------- --------
                                                                     (Dollars In Thousands)
<S>                         <C>       <C>       <C>         <C>       <C>       <C>       <C>         <C>       <C>        <C>
Mortgage-backed securities:
  Adjustable                 40,969     47.1%    $119,975      62.8%   $139,528     92.0%   $151,766     89.9%   $155,949     86.9%
  Fixed                      45,961     52.9       71,150      37.2      12,442      8.0      17,070     10.1      23,410     13.1
                            -------   ------     --------    ------    --------   ------    --------   ------    --------   ------

    Total mortgage-backed
      securities, net        86,930    100.0%    $191,125     100.0%   $151,970    100.0%   $168,836    100.0%   $179,359    100.0%
                            =======   ======     ========    ======    ========   ======    ========   ======    ========   ======
</TABLE>


     At September 30, 2000, mortgage-backed securities aggregated $86.9 million,
or 21.7% of the Bank's total assets.  At September 30, 2000, all of the Bank's
mortgage-backed securities were classified as available-for-sale.

     Other Investment Securities.  The Bank's investment portfolio, excluding
mortgage-backed securities and FHLB stock, consists of obligations of the United
States Government and agencies thereof, municipal bonds, interest-earning
deposits in other institutions and equity investments (principally in other
financial institutions).  The carrying value of this portion of the Bank's
investment portfolio totaled $41.7 million, $36.3 million, $32.7 million, $31.7
million, and $40.3 million at September 30, 2000, 1999, 1998, 1997, and 1996,
respectively.  At September 30, 2000, none of the Bank's investment securities,
excluding mortgage-backed securities, had a remaining term to maturity of one
year or less, and $0.2 million, or  less than 0.1%, had a remaining term to
maturity of five years or less.

     The Bank is required under federal regulations to maintain a minimum amount
of liquid assets that may be invested in specified short-term securities and
certain other investments.  See "Regulation - Liquidity Requirements."  The Bank
generally has maintained a portfolio of liquid assets that exceeds regulatory
requirements.  Liquidity levels may be increased or decreased depending upon the
yields on investment alternatives and upon management's judgment as to the
attractiveness of the available yields in relation to other opportunities,
management's expectation of the level of yield that will be available in the
future, as well as management's projections of short term demand for funds in
the Bank's loan origination and other activities.

<TABLE>
<CAPTION>
                                                                                 At September 30,
                                                      2000         1999         1998         1997         1996
                                                    --------     --------     --------     --------     --------
                                                                                 (Dollars In Thousands)
<S>                                                 <C>          <C>          <C>          <C>          <C>
Investment securities:
  Mortgage-backed securities                        $ 86,930     $191,125     $151,970     $168,836     $179,359
  U.S. Government treasury obligations                     -            -            -            -        1,000
  U.S. Government agency obligations                  27,095       25,403       21,656       26,858       38,872
  Trust Preferred                                      4,000            -            -            -            -
  Municipal bonds                                      9,466        9,446        9,425        4,859          459
  Equity securities                                    1,127        1,429        1,588            -            -
                                                    --------     --------     --------     --------     --------

    Total investment securities                      128,618      227,403      184,639      200,553      219,690

FHLB stock                                             5,988       10,981       10,060       10,053       11,608
                                                    --------     --------     --------     --------     --------

    Total investments                               $134,606     $238,384     $194,699     $210,606     $231,298
                                                    ========     ========     ========     ========     ========
</TABLE>

                                       11
<PAGE>

     Investment Portfolio Maturities  The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities at September 30, 2000.

<TABLE>
<CAPTION>
                                                                         At September 30, 2000
                                   ------------------------------------------------------------------------------------------------
                                                                      One to Five              Five to Ten
                                            One Year                     Years                    Years             Over Ten Years
                                   --------------------------   -----------------------  ---------------------   ------------------

                                                 Annualized                  Annualized             Annualized           Annualized
                                                  Weighted                    Weighted               Weighted             Weighted
                                     Carrying      Average      Carrying      Average    Carrying     Average   Carrying   Average
                                       Value        Yield        Value         Yield     Value         Yield     Value      Value
                                    -----------  ------------   ---------  -----------  --------   ----------  --------- ---------
                                                                           (Dollars In Thousands)
<S>                                 <C>          <C>             <C>       <C>          <C>         <C>        <C>       <C>
Investment securities:
  U.S. Government agency securities   $     -        0.00%                     7.20%      $12,718      0.00%     $ 14,377    7.13%
   Trust Preferred                          -        0.00%            -        0.00%        4,000      9.74%            -    0.00%
  State and municipal obligations
   (1)                                      5        5.40%           20        5.65%          991      5.26%        8,450    5.08%
  CMOs (2)                                  -        0.00%            -        0.00%        2,082      6.57%       57,378    7.10%
  Mortgage-backed securities                -        0.00%          152        7.27%        1,232      7.19%       26,086    6.89%
                                      -------        ----      --------        -----      -------      -----     --------    -----

    Total investment securities             5        5.40%          172        7.20%       21,023      8.03%      106,291    6.89%
                                                     =====                     =====                   =====                 ====

Equity securities
FHLB stock
Accrued interest on investments

    Total investment securities,

<CAPTION>
                                                   ---------------------------------------------
                                                                     Total

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

                                                                                      Annualized
                                                                           Average     Weighted
                                                   Carrying     Market     Life in      Average
                                                     Value      Value       Years        Yield
                                                   --------------------------------------------
<S>                                                <C>         <C>         <C>        <C>
Investment securities:
  U.S. Government agency securities                $ 27,095    $ 27,095      11.46         7.16%
   Trust Preferred                                    4,000       4,000       9.96         9.74%
  State and municipal obligations
   (1)                                                9,466       9,105       6.73         5.10%
  CMOs (2)                                           59,460      59,460      23.62         7.08%
  Mortgage-backed securities                         27,470      27,470      24.74         6.91%
                                                   --------    --------                    ----

    Total investment securities                     127,491     127,130                    7.00%
                                                                                           ====

Equity securities                                     1,127       1,127
FHLB stock                                            5,988       5,988                    6.50%
                                                                                           ====
Accrued interest on investments                       1,202       1,202
                                                   --------    --------
    Total investment securities,                    135,808     135,447
                                                   ========    ========
</TABLE>

(1)  The yield on these tax-exempt obligations has not been compiled on a tax-
     equivalent basis.
(2)  The average life in years is based on actual stated maturities; however,
     management anticipates a shorter life on these securities.

                                       12
<PAGE>

Sources of Funds

     General.  Deposits are a significant source of the Bank's funds for lending
and other investment purposes.  In addition to deposits, the Bank derives funds
from FHLB advances, the amortization and prepayment of loans and mortgage-backed
securities, the sale or maturity of investment securities, and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are influenced
significantly by general interest rates and market conditions.  Borrowings may
be used on a short-term basis to compensate for reductions in the availability
of funds from other sources or on a longer term basis for general business
purposes.

     Deposits.  Consumer and commercial deposits are received principally from
within the Bank's market area through the offering of a broad selection of
deposit instruments including NOW accounts, passbook savings, money market
deposit accounts, term certificate accounts and individual retirement accounts.
The Bank also markets term certificate accounts nationally to attract deposits.
Deposit account terms vary according to the minimum balance required, the period
of time during which the funds must remain on deposit, and the interest rate,
among other factors.  The maximum rate of interest the Bank must pay is not
established by regulatory authority.  The Bank regularly evaluates its internal
cost of funds, surveys rates offered by competing institutions, reviews the
Bank's cash flow requirements for lending and liquidity, and executes rate
changes when deemed appropriate.

     Time Deposit Rates.  The following table sets forth the certificates of
deposit of the Bank classified by rates as of the dates indicated:

<TABLE>
<CAPTION>
                                                                           At September 30,
                                          2000               1999               1998                1997              1996
                                        --------           --------           --------            --------          -------
                                                                            (In thousands)
<S>                                     <C>                <C>             <C>                    <C>               <C>
Rate

0.00-3.99%                              $     28           $      -           $    275            $     16           $    17
4.00-5.99%                                34,126            135,563            111,713              76,094            75,615
6.00-7.99%                               128,051             14,924             25,225              32,170             6,205
8.00-9.99%                                     -                  -                  -                   -                20
                                        --------           --------           --------            --------           -------

            Total                       $162,205           $150,487           $137,213            $108,280           $81,857
                                        ========           ========           ========            ========           =======
</TABLE>

     Time Deposit Maturities.  The following table sets forth the amount and
maturities of certificates of deposit at September 30, 2000.

<TABLE>
<CAPTION>
                                                                                 Maturity
                                                           -------------------------------------------------------
                                                          3 months     3 to 6     6 to 12     Over 12
                                                           or less      months      months     months      Total
                                                           -------     -------     -------    -------     --------
                                                                               (In thousands)
<S>                                                       <C>         <C>         <C>         <C>        <C>
Certificate of Deposit less than $100,000                  $24,528     $34,167     $62,239    $ 9,513     $130,447
Certificate of Deposit greater than $100,000                 6,085       5,400      18,680      1,593     $ 31,758
                                                           -------     -------     -------    -------     --------
Total Certificates of Deposit                               30,613      39,567      80,919     11,106      162,205
                                                           =======     =======     =======    =======     ========
</TABLE>

Borrowings

     Deposits of the Bank are a significant source of funds as is short term and
long term advances from the FHLB.  FHLB advances are collateralized by the
Bank's stock in the FHLB, investment securities and a blanket lien on the Bank's
mortgage portfolio.  Such advances are made pursuant to different credit
programs, each of which has its own

                                       13
<PAGE>

interest rate and range of maturities.  The maximum amount that the FHLB will
advance to member institutions, including the Bank, for purposes other than
meeting withdrawals, fluctuates from time to time in accordance with the
policies of the FHLB.  The maximum amount of FHLB advances to a member
institution generally is reduced by borrowings from any other source.  At
September 30, 2000, the Bank's FHLB advances totaled $118.0 million.

     The Bank sells securities under agreements to repurchase with selected
dealers (reverse repurchase agreements) as a means of obtaining short-term funds
as market conditions permit.  In a reverse repurchase agreement, the Bank sells
a fixed dollar amount of securities to a dealer under an agreement to repurchase
the securities at a specific price within a specific period of time, typically
not more than 180 days.  Reverse repurchase agreements are treated as a
liability of the Bank.  The dollar amount of securities underlying the
agreements remain an asset of the Bank.  At September 30, 2000, the Bank's
securities sold under agreements to repurchase totaled $1.4 million.

     The following table sets forth certain information regarding borrowings by
the Bank during the periods indicated.

<TABLE>
<CAPTION>
                                                                           Year Ended September 30,
                                                         2000          1999          1998          1997          1996
                                                       --------       -------      --------      --------      --------
                                                                             (Dollars In Thousands)
<S>                                                    <C>           <C>          <C>           <C>           <C>
Weighed average rate paid on: (1)
  FHLB advances                                            5.78 %        5.03 %        5.75 %        5.54 %        5.64 %
  Other borrowings (2)                                     5.62 %        5.16 %        4.97 %        5.81 %        5.59 %

FHLB advances:
  Maximum balance                                      $185,535      $216,844      $210,325      $230,317      $239,686
  Average balance                                      $145,312      $161,905      $173,812      $203,835      $224,719
Other borrowings: (2)
  Maximum balance                                      $  2,465      $  3,242      $ 21,850      $ 21,060      $ 10,306
  Average balance                                      $  1,901      $  2,273      $  6,215      $ 17,684      $  2,940
</TABLE>


(1) Calculated using monthly weighted average interest rates.
(2) Includes borrowings under reverse repurchase agreements.


Subsidiaries' Activities

     The Bank is the wholly owned subsidiary of the Company.  The Bank has two
wholly owned subsidiaries, Sun Realty, Inc. and P.F. Service, Inc.  Both are
Arkansas corporations and both are substantially inactive.

Regulation

     As a federally chartered, SAIF-insured savings association, the Bank is
subject to examination, supervision and extensive regulation by the OTS and the
FDIC. The Bank is a member of the Federal Home Loan Bank ("FHLB") system.  This
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the insurance fund and depositors.  The Registrant also is subject to
regulation by the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") governing reserves to be maintained against deposits and certain
other matters.  The OTS regularly examines the Registrant and the Bank and
prepares a report for the consideration of the Bank's Board of Directors on any
deficiencies that it may find in the Bank's operations.  The FDIC also examines
the Bank in its role as the administrator of the SAIF.  The Bank's relationship
with its depositors and borrowers also is regulated to a great extent by both
federal and state laws especially in such matters as the ownership of savings
accounts and the form and content of the Bank's mortgage documents.  Any change
in such regulation, whether by the FDIC, the OTS or the Congress, could have a
material impact on the Bank and its operations.  The description of statutory
provisions and regulations applicable to savings associations set forth herein
does not preport to be a complete description of these statutes and regulations
and their effect on the Bank.

                                       14
<PAGE>

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

     Under the tangible capital requirement, a savings association must maintain
tangible capital in an amount equal to at least 1.5% of adjusted total assets.
Tangible capital generally includes common stockholders' equity including
retained earnings and certain noncumulative perpetual preferred stock and
related earnings.  In addition, all intangible assets, other than a limited
amount of purchased mortgage-servicing rights, must be deducted from tangible
capital for calculating compliance with the requirement.  Further, the valuation
allowance applicable to the write-down of investments and mortgage-backed
securities in accordance with SFAS No. 115 is excluded from the regulatory
capital calculation.  At September 30, 2000, the Bank had no intangible assets
or unrealized loss, net of tax under SFAS No. 115.

     The leverage limit adopted by the OTS requires that savings associations
maintain "core capital" in an amount equal to at least 3% of adjusted total
assets.  Core capital generally consists of tangible capital plus certain
intangible assets, including supervisory goodwill (which is phased out over a
five-year period) and up to 25% of other intangibles that meet certain separate
salability and market valuation tests.  As a result of the prompt corrective
action provisions described below, however, a savings association must maintain
a core capital ratio of at least 4% of to be considered adequately capitalized
unless its supervisory condition is such to allow it to maintain a 3% ratio.  At
September 30, 2000, the Bank had core deposits intangibles totaling $2.2
million.

     Under the risk-based capital requirement, a savings association must
maintain total capital equal of at least 8% of risk-weighted assets.  Total
capital consists of core capital, as defined above, and supplementary capital.
Supplementary capital consists of certain permanent and maturing capital
instruments that do not qualify as core capital and general valuation loan and
lease loss allowances up to a maximum of 1.25% of risk-weighted assets.
Supplementary capital may be used to satisfy the risk-based requirement only to
the extent of core capital.  The OTS is also authorized to require a savings
association to maintain an additional amount of total capital to account for
concentration of credit risk and the risk of non-traditional activities.  At
September 30, 2000, the Bank had no capital instruments that qualify as
supplementary capital and $1.7 million of general loss reserves, which was less
than 1.0% of risk-weighted assets.

     The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against associations that fail to meet capital
requirements.   The OTS is generally required to take action to restrict the
activities of an "undercapitalized association" (generally defined to be one
with less than either a 4% core ratio, a Tier 1 risk-based capital ratio or an
8% risk-based capital ratio).  Any such association must submit a capital
restoration plan and until such plan is approved by the OTS may not increase its
assets, acquire another institution, establish a branch or engage in any new
activities, and generally may not make capital distributions.

     The imposition by the OTS or the FDIC of any of these measures on the Bank
may have a substantial adverse effect on the Registrant's operations and
profitability and the value of the Common Stock.  If the OTS or the FDIC require
an association such as the Bank, to raise additional capital through the
issuance of Company Common Stock or other capital instruments such issuance may
result in the dilution in the percentage of ownership of those persons holding
shares of Common Stock since the Registrant's shareholders do not have
preemptive rights.

     Qualified Thrift Lender Test.  All savings associations, including the
Bank, are required to meet a qualified thrift lender ("QTL") test to avoid
certain restrictions on their operations.  This test requires a savings
association to have at least 65% of its portfolio assets (which consists of
total assets less intangibles, properties used to conduct the savings
association's business and liquid assets not exceeding 20% of total assets) in
qualifying thrift investments on a monthly average for nine out of every twelve
months on a rolling basis.  At September 30, 2000, the Bank met the test.

     A savings institution that fails to become or maintain a qualified thrift
lender must either become a bank (other than a savings bank) or be subject to
certain restrictions.  A savings institution that converts to a bank must pay
applicable exit and entrance fees involved in converting from one insurance fund
to another.  A savings institution that

                                       15
<PAGE>

fails to meet the QTL test and does not convert to a bank will be: (1)
prohibited from making any investment or engaging in activities that would not
be permissible for national banks; (2) prohibited from establishing any new
branch office where a national bank located in the savings institution's home
state would not be able to establish a branch office; (3) ineligible to obtain
new advances from any FHLB; and (4) subject to limitations on the payment of
dividends comparable to the statutory and regulatory dividend restrictions
applicable to national banks.

     Community Reinvestment Act.  Under the Community Reinvestment Act ("CRA"),
every FDIC insured institution has a continuing and affirmative obligation
consistent with safe and sound banking practices to help meet the credit needs
of its entire community, including low and moderate-income neighborhoods.  In
addition, the Equal Credit Opportunity Act and the Fair Housing Act Prohibit
lenders from discriminating in their lending practices on the basis of
characteristics specified in those statutes.   The CRA requires the OTS, in
connection with the examination of the Bank, to assess the institution's record
of meeting the credit needs of its community and to take such record into
account in its evaluation of certain applications, such as a merger or the
establishment of a branch, by the Bank.  An institution's failure to comply with
the provisions of the CRA could, at a minimum, result in regulatory restrictions
on its activities, and failure to comply with the Equal Credit Opportunity Act
and the Fair Housing Act could result in enforcement actions by the OTS, as well
as other federal regulatory agencies and the Department of Justice.   The Bank
was examined for CRA compliance in August 1999 and received a rating of
satisfactory.

     Liquidity Requirements.  Federally insured savings associations are
required to maintain an average daily balance of liquid assets equal to a
certain percentage of the sum of average daily balances of net withdrawable
deposit accounts and borrowings payable in one year or less.    At the present
time, the minimum liquid asset ratio is 4%.  At September 30, 2000, the Bank's
liquidity ratio exceeded regulatory requirements.

     Accounting.  An OTS policy statement applicable to all savings associations
clarifies and re-emphasizes that the investment activities of a savings
association must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with generally
accepted accounting principles ("GAAP").  Under the policy statement, management
must support its classification of and accounting for loans and securities
(i.e., whether held for investment, sale or trading) with appropriate
documentation.  The Bank is in compliance with these policy statements.

     The OTS has adopted an amendment to its accounting regulations, which may
be made more stringent than GAAP, to require that transactions be reported in a
manner that best reflects their underlying economic substance and inherent risk
notwithstanding GAAP and that financial reports must incorporate any other
accounting regulations or orders prescribed by the OTS.

     Insurance of Accounts and Regulation by the FDIC.  As insurer of the Bank's
deposit accounts, the FDIC is authorized to conduct examinations of and to
require reporting by the Bank.  It also may prohibit any SAIF-insured
association from engaging in any activity the FDIC determines by regulation or
order to pose a serious threat to the SAIF.  The FDIC also has the authority to
initiate enforcement actions against savings associations, after first giving
the OTS an opportunity to take such action.

     The Federal Deposit Insurance Corporation has adopted a risk-based deposit
insurance assessment system.   The Federal Deposit Insurance Corporation assigns
an institution to one of three capital categories, based on the institution's
financial information, as of the reporting period ending seven months before the
assessment period, and one of three supervisory subcategories within each
capital group.   The three capital categories are well capitalized, adequately
capitalized and undercapitalized.   The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
Federal Deposit Insurance Corporation by the institution's primary federal
regulator and information which the Federal Deposit Insurance Corporation
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds.   An institution's assessment rate depends
on the capital category and supervisory category to which it is assigned.   The
Federal Deposit Insurance Corporation is authorized to raise the assessment
rates.   The Federal Deposit Insurance Corporation has exercised this authority
several times in the past and may raise insurance premiums in the future.   If
this type of action is taken by the Federal Deposit Insurance Corporation, it
could have an adverse effect on the earnings of the Bank.

     Limitations on Capital Distributions.  OTS regulations impose limitations
on all capital distributions by

                                       16
<PAGE>

savings institutions. Capital distributions include cash dividends, payments to
repurchase or otherwise acquire the savings association's shares, payments to
shareholders of another institution in a cash-out merger and other distributions
charged against capital.

     Under new regulations effective April 1, 1999, a savings institution must
file an application for OTS approval of the capital distribution if either (1)
the total capital distributions for the applicable calendar year exceed the sum
of the institution's net income for that year to date plus the institution's
retained net income for the preceding two years, (2) the institution would not
be at lease adequately capitalized following the distribution, (3) the
distribution would violate any applicable statute, regulation, agreement or OTS-
imposed condition, or (4) the institution is not eligible for expedited
treatment of its filings. If an application is not required to be filed, savings
institutions which are a subsidiary of a holding company, as well as certain
other institutions, must still file a notice with the OTS at least 30 days
before the board of directors declares a dividend or approves a capital
distribution.

     Any additional capital distributions would require prior regulatory
approval. In the event the Bank's capital fell below its required levels or the
Office of Thrift Supervision notified it that it was in need of more than normal
supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the Office of Thrift Supervision could prohibit a
proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the Office of Thrift Supervision determines that
the distribution would constitute an unsafe or unsound practice.

     Equity Risk Limitations.  Certain OTS regulations limit the Registrant's
investment in "equity risk investments," which include investments in equity
securities, real estate, service corporations and operating subsidiaries, as
well as land loans and non-residential construction loans with loan-to-value
ratios in excess of 80%. Equity risk investments increase the capital
requirements of the Bank. Federal laws and regulations also impose certain
limitations on operations, including restrictions on loans-to-one-borrower,
transactions with affiliates and affiliated persons and liability growth. They
also impose requirements for the retention of housing and thrift-related
investments. See "Qualified Thrift Lender Test."

Transactions with Affiliates

     The Bank's authority to engage in transactions with related parties or
"affiliates" or to make loans to specified insiders, is limited by Sections 23 A
and 23 B of the Federal Reserve Act. The term "affiliated" for these purposes
generally means any company that controls or is under common control with an
institution, including the Company and it non-savings institution subsidiaries.
Section 23 A limits the aggregate amount of certain "covered" transactions with
any individual affiliate to 10% of the capital and surplus of the savings
institution and also limits the aggregate amount of covered transactions with
all affiliates to 20% of the savings institution's capital and surplus. Covered
transactions with affiliates are required to be secured by collateral in an
amount and of a type described in Section 23A and the purchase of low quality
assets from affiliated is generally prohibited. Section 23 B Provides that
covered transactions with affiliated, including loans and asset purchases, must
be on terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies. In addition, savings institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank
holding companies and no savings institution may purchase the securities of any
affiliate other than a subsidiary.

     The Bank's authority to extend credit to executive officers, directors and
10% stockholders, as entities controlled by these persons, is currently governed
by Sections 22(g) and 22(h) of the Federal Reserve Act, and also by Regulation
O. Among other things, these regulations generally require these loans to be
made on terms substantially the same as those offered to unaffiliated
individuals and do not involve more than the normal risk of repayment. However,
recent regulations now permit executive officers and directors to receive the
same terms through benefit or compensation plans that are widely available to
other employees, as long as the director or executive officer is not given
preferential treatment compared to other participating employees. Regulation O
also places individual and aggregate limits on the amount of loans the Bank may
make to these person based, in part on the Bank's capital position, and requires
approval procedures to be followed. At September 30, 2000, the Bank was in
compliance with these regulations.

                                       17
<PAGE>

The Federal Reserve System

     Federal Reserve Board regulations require all depository institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and Super NOW checking accounts) and non-personal time deposits.
At September 30, 2000, the Bank was in compliance with these reserve
requirements. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity requirements that
may be imposed by the OTS. See "Federal Regulations -- Liquidity Requirements."

Holding Company Regulation

     The Company is a non-diversified savings and loan holding company within
the meaning of the HOLA, as amended.  As such, the Company is registered with
the OTS and is subject to OTS regulations, examinations, supervision and
reporting requirements.  In addition, the OTS has enforcement authority over the
Company and its non-savings institution subsidiaries.  Among other things, this
authority permits the OTS to restrict or prohibit activities that are determined
to be a serious risk to the subsidiary savings institution.  The Bank is
required to notify the OTS 30 days before declaring any dividend to the Company.

     As a unitary savings and loan holding company, the Company generally is not
restricted under existing laws as to the types of business activities in which
it may engage, provided that the Bank continues to be a QTL.  Upon any
nonsupervisory acquisition by the Company of another savings association or
savings bank that meets the QTL test and is deemed to be a savings institution
by the OTS, the Company would become a multiple savings and loan holding company
(if the acquired institution is held as a separate subsidiary) and would become
a multiple savings and loan holding company (if the acquired institution is held
as a separate subsidiary) and would be subject to extensive limitations on the
types of business activities in which it could engage.  The HOLA limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the
prior approval of the OTS, and activities authorized by OTS regulation.  The OTS
is prohibited from approving any acquisition that would result in a multiple
savings and loan holding company controlling savings institutions in more than
one state, subject to two exceptions:  (i) the approval of interstate
supervisory acquisitions by savings and loan holding companies, and (ii) the
acquisition of a savings institution in another state if the laws of the state
of the target savings institution specifically permit such acquisitions.

     The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring other savings
institution or holding company thereof, without prior written approval of the
OTS.  It also prohibits the acquisition or retention of, with certain
exceptions, more than 5% of non-subsidiary savings institution, a non-subsidiary
holding company, or a non-subsidiary company engaged in activities other than
those permitted by the HOLA; or acquiring or retaining control of an institution
that is not federally insured.  In evaluating applications by holding companies
to acquire savings institutions, the OTS must consider the financial and
managerial resources, future prospects of the company and institution involved,
the effect of the acquisition on the risk to the insurance fund, the convenience
and needs of the community and competitive factors.

Federal Securities Laws

     At the time of the "second step" Conversion, the Company filed with the
Securities and Exchange Commission (the "SEC") a registration statement under
the Securities Act of 1933 for the registration of the Common Stock to be issued
pursuant to the Conversion.  Upon completion of the conversion, the Company's
Common Stock was registered with the SEC under the Securities Exchange Act of
1934.  The Company is subject to the information, proxy solicitation, insider
trading restrictions and other requirements under the Exchange Act.

                                       18
<PAGE>

        The registration under the Securities Act of shares of the Common Stock
that were issued in the conversion did not cover the resale of such shares.
Shares of the Common Stock purchased by persons who are not affiliates of the
Company may be resold without registration. Shares purchased by an affiliate of
the Company are subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information requirements
of Rule 144 under the Securities Act, each affiliate of the Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) is able
to sell in the public market, without registration, a number of shares not to
exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made in the
future by the Company to permit affiliates to have their shares registered for
sale under the Securities Act under certain circumstances.

Executive Officers of the Registrant

        Listed below is information, as of September 30, 2000, concerning the
Company's executive officers. Such executive officers also serve in the same
positions with the Bank. There are no arrangements or understandings between the
Company and any of the persons named below with respect to which he or she was
or its to be selected as an officer.

        The following individuals hold positions as executive officers of the
Company as is set forth below opposite their names.

        Name                                      Position With the Company
        ----                                      -------------------------

        James Edington.........................   President and Chief Executive
        Dwayne Powell..........................   Officer Vice President,
                                                  Secretary Treasurer and
                                                  Chief Financial Officer

        The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors.

        Since the formation of the Company, none of the executive officers,
directors or other personnel has received remuneration from the Company.

        Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require savings
associations to exhaust other reasonable alternative sources of funds, including
FHLB advances, before borrowing from the Federal Reserve Bank.

                                       19
<PAGE>

                           FEDERAL AND STATE TAXATION

Federal Taxation

        Tax Bad Debt Reserves. The Bank is subject to the rules of federal
income taxation generally applicable to corporations under the Internal Revenue
Code of 1986, as amended (the "Code"). Most corporations are not permitted to
make deductible additions to bad debt reserves under the Code. However, savings
and loan associations and savings associations such as the Bank, which meet
certain tests prescribed by the Code may benefit from favorable provisions
regarding deductions from taxable income for annual additions to their bad debt
reserve. For purposes of the bad debt reserve deduction, loans are separated
into "qualifying real property loans," which generally are loans collateralized
by interests in real property, and non-qualifying loans, which are all other
loans. The bad debt reserve deduction with respect to non-qualifying loans must
be based on actual loss experience. The amount of the bad debt reserve deduction
with respect to qualifying real property loans may be based upon actual loss
experience (the "experience method") or a percentage of taxable income
determined without regard to such deduction (the "percentage of taxable income
method").

        The Bank has elected to use the method that results in the greatest
deduction for federal income tax purposes. The amount of the bad debt deduction
that a thrift institution may claim with respect to additions to its reserve for
bad debts is subject to certain limitations. First, the full deduction is
available only if at least 60% of the institution's assets fall within certain
designated categories. Second, under the percentage of taxable income method the
bad debt deduction attributable to "qualifying real property loans" cannot
exceed the greater of (i) the amount deductible under the experience method or
(ii) the amount which, when added to the bad debt deduction for non-qualifying
loans, equals the amount by which 12% of the sum of the total deposits and the
advance payments by borrowers for taxes and insurance at the end of the taxable
years exceeds the sum of the surplus, undivided profits, and reserves at the
beginning of the taxable year. Third, the amount of the bad debt deduction
attributable to qualifying real property loans computed using the percentage of
taxable income method is permitted only to the extent that the institution's
reserve for losses on qualifying real property loans at the close of the taxable
year does not exceed 6% of such loans outstanding at such time.

        Under recently enacted legislation, the percentage of taxable income
method has been repealed for years beginning after December 31, 1995, "large"
associations, i.e., the quarterly average of the association's total assets or
the consolidated group of which it is a member, exceeds $500 million for the
year, may no longer be entitled to use the experience method of computing
additions to their bad debt reserve. A "large" association must use the direct
write-off method for deducting bad debts, under which charge-offs are deducted
and recoveries are taken into taxable income as incurred. If the Bank is not a
"large" association, the Bank will continue to be permitted to use the
experience method. The Bank will be required to recapture (i.e., take into
income) over a six year period its applicable excess reserves, i.e. the balances
of its reserves for losses on qualifying loans and nonqualifying loans, as of
the close of the last tax year beginning before January 1, 1996, over the
greater of (a) the balance of such reserves as of December 31, 1987 (pre-1988
reserves) or (b) in the case of a bank which is not a "large" association, an
amount that would have been the balance of such reserves as of the close of the
last tax year beginning before January 1, 1996, had the bank always computed the
additions to its reserves using the experience method. Postponement of the
recapture is possible for a two-year period if an association meets a minimum
level of mortgage lending for 1996 and 1997. As of September 30, 2000, the
Bank's bad debt reserve subject to recapture over a four-year period totaled
approximately $584,000. The Bank has established a deferred tax liability of
approximately $223,000 for this recapture.

        If an association ceases to qualify as a "bank" (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and the
supplemental reserve are restored to income ratably over a six-year period,
beginning in the tax year the association no longer qualifies as a bank. The
balance of the pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on liquidation and
dissolution), or redemptions of, shareholders.

                                       20
<PAGE>

        Distributions. To the extent that (i) the Bank's tax bad debt reserve
for losses on qualifying real property loans exceeds the amount that would have
been allowed under an experience method and (ii) the Bank makes "non-dividend
distributions" to stockholders that are considered to result in distributions
from the excess tax bad debt reserve or the reserve for losses on loans ("Excess
Distributions"), then an amount based on the amount distributed will be included
in the Bank's taxable income. Non-dividend distributions include distributions
in excess of the Bank's current and accumulated earnings and profits,
distributions in redemption of stock and distributions in partial or complete
liquidation. However, dividends paid out of the Bank's current or accumulated
earnings and profits, as calculated for federal income tax purposes, will not be
considered to result in a distribution from the Bank's tax bad debt reserves.
Thus, any dividends to the Holding Company that would reduce amounts
appropriated to the Bank's tax bad debt reserves and deducted for federal income
tax purposes would create a tax liability for the Bank. The amount of additional
taxable income created from an Excess Distribution is an amount that when
reduced by the tax attributable to the income is equal to the amount of the
distribution. Thus, if certain portions of the Bank's accumulated tax bad debt
reserve are used for any purpose other than to absorb qualified tax bad debt
losses, such as for the payment of dividends or other distributions with respect
to the Bank's capital stock (including distributions upon redemption or
liquidation), approximately one and one-half times the amount so used would be
includable in gross income for federal income tax purposes, assuming a 34%
corporate income tax rate (exclusive of state taxes). See
"Regulation-Limitations on Capital Distributions" for limits on the payment of
dividends of the Bank. The Bank does not intend to pay dividends that would
result in a recapture of any portion of its tax bad debt reserves.

        Corporate Alternative Minimum Tax. The Bank is subject to the corporate
alternative minimum tax which is imposed to the extent it exceeds the Bank's
regular income tax for the year. The alternative minimum tax will be imposed at
the rate of 20% of a specially computed tax base. Included in this base will be
a number of preference items, including the following: (i) 100% of the excess of
a thrift institution's bad debt deduction over the amount that would have been
allowable on the basis of actual experience; (ii) interest on certain tax-exempt
bonds issued after August 7, 1986; and (iii) for years beginning in 1988 and
1989 an amount equal to one-half of the amount by which a institution's "book
income" (as specially defined) exceeds its taxable income with certain
adjustments, including the addition of preference items (for taxable years
commencing after 1989 this adjustment item is replaced with a new preference
item relating to "adjusted current earnings" as specially computed). In
addition, for purposes of the new alternative minimum tax, the amount of
alternative minimum taxable income that may be offset by net operating losses is
limited to 90% of alternative minimum taxable income.

        The Bank has not had its income tax returns examined by the IRS or the
State of Arkansas within the last three years. The Bank has not been audited by
the IRS or the Arkansas State Revenue Department in recent years.

Arkansas Taxation

        The State of Arkansas generally imposes income tax on thrift
institutions computed at a rate of 6.5% of net earnings. For the purpose of the
6.5% income tax, net earnings are defined as the net income of the thrift
institution computed in the manner prescribed for computing the net taxable
income for federal corporate income tax purposes, less (i) interest income from
obligations of the United States, of any county, municipal or public corporation
authority, special district or political subdivision of Arkansas, plus (ii) any
deduction for state income taxes.

        The Company is a Delaware business corporation is required to file
annual income tax returns and an annual franchise tax returns in the states of
Arkansas and Delaware. These taxes and fees are not expected to be material.

                                       21
<PAGE>

ITEM 2         PROPERTIES
------         ----------

        The Bank conducts its business through its main office and 13
full-service branch offices located in eight counties in Northeast Arkansas.
Each office is owned by the Bank. The following table sets forth certain
information concerning the main office and each branch office of the Bank at
September 30, 2000. The aggregate net book value of the Bank's premises and
equipment was $4.0 million at September 30, 2000.

Main Office:                                        Brinkley Branch
                                                    ---------------
203 W. Broadway                                     811 West Cedar
Pocahontas, Arkansas                                Brinkley, Arkansas
(Opened 1935)                                       (Opened 1998)


Branch Offices:                                     England Branch
                                                    --------------
Walnut Ridge Branch                                 100 Stuttgart Hwy.
-------------------                                 England, Arkansas
120 W. Main Street                                  (Opened 1998)
Walnut Ridge, Arkansas
(Opened 1968)

Jonesboro Branch                                    Carlisle Branch
----------------                                    ---------------
700 S.W. Drive                                      124 West Main
Jonesboro, Arkansas                                 Carlisle, Arkansas
(Opened 1976)                                       (Opened 1998)

Corning Branch                                      Lake City Branch
--------------                                      ----------------
309 Missouri Avenue                                 100 Colbine
Corning, Arkansas                                   Lake City, Arkansas
(Opened 1983)                                       (Opened 1998)

Highland Branch                                     Hardy Branch
---------------                                     ------------
Highway 62                                          530 Main Street
Hardy, Arkansas                                     Hardy, Arkansas
(Opened 1983)                                       (Opened 1998)

Jonesboro Branch                                    Pocahontas Walmart Branch
----------------                                    -------------------------
2213 Caraway Road                                   Hwy 67 South
Jonesboro, Arkansas                                 Pocahontas, Arkansas
(Opened 1996)                                       (Opened 1998)

Jonesboro Walmart Branch                            Paragould Walmart Branch
------------------------                            ------------------------
Highland Drive                                      2802 W. Kingshighway
Jonesboro, Arkansas                                 Paragould, Arkansas
(Opened 1999)                                       (Opened 1999)

                                       22
<PAGE>

ITEM 3         LEGAL PROCEEDINGS
------         -----------------

        There are various claims and lawsuits in which the Bank is periodically
involved incident to the Bank's business. In the opinion of management, no
material loss is expected from any of such pending claims or lawsuits.

ITEM 4         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------         ---------------------------------------------------

        No matters were submitted during the fourth quarter of fiscal 2000 to a
vote of security holders.

                                       23
<PAGE>

                                     PART II

ITEM 5    MARKET FOR REGISTRANT"S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
------    --------------------------------------------------------------------

Trading in Common Stock and Related Matters

The Registrant's Common Stock is traded on the NASDAQ National Market System
using the symbol "PFSL."

The following table shows the quarterly range of bid prices for the Company's
common stock during fiscal 2000 and 1999. This information has been obtained
from monthly statistical stock summaries provided by the Nasdaq Stock Market. As
of December 15, 2000, there were 4,454,357 shares of common stock issued and
outstanding and 764 stockholders of record.

                                                High                  Low
     Quarter Ended                               Bid                  Bid
     -------------                               ---                  ---


     December 31, 1999                        $ 7.063             $  5.625
     March 31, 2000                             6.313                5.500
     June 30, 2000                              6.188                5.375
     September 30, 2000                         7.563                6.250


                                                High                  Low
     Quarter Ended                               Bid                  Bid
     -------------                               ---                  ---

     December 31,2000                         $ 9.250             $  7.750
     March 31, 1999                             8.250                7.130
     June 30, 1999                              7.563                6.500
     September 30, 1999                         7.563                6.250


Cash Dividends Declared in Fiscal 2000:

                       Record                    Payment              Dividend
                        Date                       Date               Per Share
                        ----                       ----               ---------

     December 15, 1999                        January 3, 2000         $ 0.060
     March 15, 2000                           April 3, 2000             0.060
     June 15, 2000                            July 3, 2000              0.065
     September 15, 2000                       October 3, 2000           0.065



Cash Dividends Declared in Fiscal 1999:

                      Record                     Payment              Dividend
                       Date                        Date               Per Share
                       ----                        ----               ---------

     December 15, 1998                        January 3, 1999         $ 0.060
     March 15, 1999                           April 3, 1999           $ 0.060
     June 15, 1999                            July 3, 1999            $ 0.060
     September 15, 1999                       October 3, 1999         $ 0.060

                                       24
<PAGE>

ITEM 6         SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
------         ----------------------------------------------

Set forth below are selected consolidated financial and other data of the
Company. This information is derived in part from and should be read in
conjunction with the Consolidated Financial Statements of the Company and its
subsidiaries and the notes thereto presented elsewhere herein.

Selected Financial Condition Data

<TABLE>
<CAPTION>
                                                             At September 30,
                                       --------------------------------------------------------------
                                          2000         1999        1998        1997        1996
                                                              (In Thousands)
<S>                                      <C>          <C>        <C>         <C>          <C>
Total assets                             $ 401,105    482,131     406,981     383,417     381,562
Cash and cash equivalents                   12,941      8,622       3,781       2,805       2,046
Cash surrender value of life insurance       6,158      5,965       5,822       5,639       5,439
Investment securities                      128,618    227,403     184,640     200,553     219,690
Loans receivable, net                      234,417    217,710     193,728     159,690     136,872
Federal Home Loan Bank Stock                 5,988     10,981      10,060      10,053      11,608
Deposits (3)                               234,972    211,891     195,537     143,354     116,283
FHLB advances (2)                          117,990    213,105     143,670     190,601     227,221
Securities sold under agreements to
  repurchase                                 1,375      2,075       2,107      20,685      10,100
Stockholders' equity (2)                    41,378     48,032      60,567      24,246      22,689
</TABLE>

Summary of Operations

<TABLE>
<CAPTION>
                                                       Years Ended September 30,
                                       --------------------------------------------------------------
                                             2000        1999        1998         1997        1996
                                                               (in Thousands)
<S>                                      <C>         <C>          <C>         <C>         <C>
Interest income                          $  29,927   $   27,960   $  27,854   $  26,093   $  25,417
Interest expense                            19,724       17,217      18,401      18,699      18,628
                                         ---------   ----------   ---------   ---------   ---------

            Net interest income before
            provision for loan losses       10,203       10,743       9,453       7,394       6,789
Provision for loan losses                      120            -           -          60         411
                                         ---------   ----------   ---------   ---------   ---------
            Net interest income after
            provision for loan losses       10,083       10,743       9,453       7,334       6,378

Noninterest income                           3,102        1,927         920       1,351       1,526
Noninterest expense:
  Compensation and benefits                  4,383        7,628       3,825       2,954       2,704
  Occupancy and equipment                      996        1,137         662         566         439
  Federal deposit insurance premiums (1)        64          118         104         108       1,198
  Other                                      2,658        2,369       1,600       1,337       1,210
                                         ---------   ----------   ---------   ---------   ---------

            Total noninterest expense        8,101       11,252       6,191       4,965       5,551
                                         ---------   ----------   ---------   ---------   ---------

Income before income taxes                   5,084        1,418       4,182       3,720       2,353
Income tax provision                         1,632          466       1,294       1,344         386
                                         ---------   ----------   ---------   ---------   ---------
            Net income                   $   3,452    $      95   $   2,888   $   2,376       1,967
                                         ---------   ----------   ---------   ---------   ---------
</TABLE>

(1)  Includes nonrecurring SAIF Premium Assessment of approximately $937,000 in
     the fiscal year ended September 30, 1996.

(2)  Includes effect of second step offering during the year ended September 30,
     1998.
     See equity section of Management's Discussion and Analysis of Financial
     Condition and Results of Operations.

(3)  Increase during the year ended September 30, 1998, was due mainly to
     acquisition of branches. See Management's Discussion and Analysis of
     Financial Condition and Results of Operations.

                                       25
<PAGE>

Key Financial Ratios and Other Data

Certain ratios and other data:  (1)

<TABLE>
<CAPTION>
                                                  At or for the Year Ended September 30,

                                          2000        1999       1998        1997        1996
<S>                                       <C>         <C>        <C>         <C>         <C>
Performance Ratios:
  Return on average equity                  7.79 %     1.80 %      6.16 %     10.07 %      8.98 %
  Return on average assets                  0.80       0.23        0.67        0.63        0.54
  Interest rate spread (2)                  2.28       2.37        1.92        1.83        1.65
  Net interest margin (2)                   2.54       2.72        2.45        2.04        1.89
  Noninterest expense to average assets     1.92       2.66        1.55        1.32        1.52
  Net interest income after provision
   for loan losses to noninterest
   expense                                124.00      95.48      152.69      147.68      114.89
  Efficiency (5)                           61.77      88.80       59.69       57.17       70.23

Asset Quality Ratios:
  Average interest-earning assets to
   average interest-bearing liabilities   105.22     108.11      110.93      104.09      104.61
  Nonperforming loans to net loans
   (3) (4)                                  0.86       0.63        1.19        0.28        0.74
  Nonperforming assets to total
   assets (3) (4)                           0.66       0.34        0.57        0.12        0.30
  Allowance for loan losses to
   nonperforming loans (3) (4)             83.78     119.23       73.34      373.45      169.50
  Allowance for loan losses to
   nonperforming loan assets (3) (4)       63.45     100.24       72.84      359.79      152.91
  Allowance for loan losses to total        0.71       0.73        0.86        1.03        1.21
   loans (3)

Capital, Equity and Dividend Ratios:

  Tangible capital (3)                      8.92       9.35       10.24        6.32        5.97
  Core capital (3)                          8.92       9.35       10.24        6.32        5.97
  Risk-based capital (3)                   17.66      20.23       22.62       16.22       16.75
  Average equity to average assets
  ratio                                    10.31      12.45       10.87        6.26        5.98
  Dividend payout ratio                    38.46     151.55       43.20       60.74       63.46

Per Share Data:

  Dividends per share                       0.25       0.24        0.23        0.22        0.19
  Book value per share (6)                  9.29       8.70        9.46        3.82        3.62
  Basic earnings per share (7)              0.67       0.16        0.45        0.38        0.32
  Diluted earnings per share (8)            0.67       0.16        0.44        0.37        0.31

  Number of full service offices              14         14          11           6           5
</TABLE>


(1)  With the exception of period end ratios, ratios are based on average
     monthly balances.
(2)  Interest rate spread represents the difference between the weighted average
     yield on average interest earning assets and the weighted average cost of
     average interest bearing liabilities, and net interest margin represents
     net interest income as a percent of average interest earning assets.
(3)  End of period ratio.
(4)  Nonperforming assets consist of nonperforming loans and real estate owned.
     Nonperforming loans consist of non-accrual loans while REO consists of real
     estate acquired in settlement of loans.
(5)  The efficiency ratio is the ratio of noninterest expense to the sum of net
     interest income and noninterest income.
(6)  This calculation is based on 4,454,357, 5,518,614, 6,399,623, 6,341,553,
     and 6,267,905 shares outstanding at September 30, 2000, 1999, 1998, 1997,
     and 1996, respectively.
(7)  This calculation is based on weighted average shares outstanding of
     5,166,038, 5,802,860, 6,388,906, 6,327,798, and 6,240,231 for the fiscal
     years ended September 30, 2000, 1999, 1998, 1997, and 1996 , respectively.
(8)  This calculation is based on weighted average shares outstanding of
     5,172,751, 5,837,619, 6,535,068, 6,486,058, 6,382,328, and 6,367,886 for
     the fiscal years ended September 30, 2000, 1999, 1998,

                                       26
<PAGE>

ITEM 7     MANAGEMENT"S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------     ---------------------------------------------------------------
           RESULTS OF OPERATIONS
           ---------------------

Forward- Looking Statements

When used in this Annual Report, the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "estimate," "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area, and competition that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements.

The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.

General

The Company's net income is primarily affected by its net interest income, which
is the difference between interest income earned on its loan, mortgage-backed
securities, and investment portfolios, and its cost of funds consisting of
interest paid on deposits and borrowed funds, including FHLB advances. The
Company's net income also is affected by its provisions for losses on loans and
investments in real estate, as well as the amount of noninterest income
(including fees and service charges and gains or losses on sales of loans), and
noninterest expense, including salaries and employee benefits, premises and
equipment expense, data processing expense, federal deposit insurance premiums
and income taxes. Net income of the Company also is affected significantly by
general economic and competitive conditions, particularly changes in market
interest rates, government policies, and actions of regulatory authorities.

Market Risk Analysis

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.

                                       27
<PAGE>

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 set
forth, quantitatively, as of September 30, 2000, the OTS estimate of the
projected changes in NPV in the event of a 100, 200, and 300 basis point
instantaneous and permanent increase and decrease in market interest rates:

<TABLE>
<CAPTION>
    Change in                                                      Change in NPV
  Interest Rates                                                as a Percentage of
 in Basis Points          Net Portfolio Value                    Estimated Market
                   ----------------------------------
   (Rate Shock)      Amount    $  Change   % Change      Ratio   Value of Assets
   -----------       ------    ---------   --------      -----   ---------------
                        (Dollars in Thousands)
 <S>                <C>        <C>         <C>           <C>     <C>
       +300         $15,435    $ (23,984)   (60.8)%       4.14%       (5.98)
       +200          23,681      (15,738)   (39.9)%       6.19%       (3.92)
       +100          31,672       (7,747)   (19.7)%       8.08%       (1.93)
          0          39,419            0       0.0%       9.82%        0.00
       -100          45,267        5,848      14.8%      11.08%        1.46
       -200          49,163        9,744      24.7%      11.88%        2.43
       -300          53,197       13,778      35.0%      12.68%        3.43
</TABLE>

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

Management cannot predict future interest rates or their effect on the Company's
NPV in the future. Certain shortcomings are inherent in the method of analysis
presented in the computation of NPV. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in 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.

                                       28
<PAGE>

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

Discussion of Changes in Financial Condition

General. The Company's total assets decreased $81.0 million, or 16.8%, from
$482.1 million at September 30, 1999 to $401.1 million at September 30, 2000.
Total assets increased $75.1 million, or 18.5%, from $407.0 million at September
30, 1998 to $482.1 million at September 30, 1999.

Loans receivable, net. The Company's net loans receivable increased $16.7
million, or 7.7%, and $24.0 million, or 12.4%, in fiscal years 2000 and 1999,
respectively from the prior years. The increases in both periods were due to
modest loan demand within the Company's market area and purchases of loans from
outside the Bank's primary market area. During 2000 and 1999, the Bank purchased
$4.3 million and $10.6 million of loans. Management expects that it will be
necessary to supplement local demand with purchases of loans from outside the
Bank's primary market area. Demand for single family residential loans has been
particularly weak over the past 12 months.

Investment securities. The investment securities portfolio decreased $98.8
million or 43.4% from $227.4 at September 30, 1999, to $128.6 million at
September 30, 2000. In accordance with the Company's present strategy, the
principal paydowns and maturities of investments were used to fund loan growth.
The investment securities portfolio increased $44.2 million, or 24.1% to $227.4
million at September 30, 1999, compared to $183.2 million at September 30, 1998.

Cash surrender value of life insurance. During the year ended September 30,
1996, the Company purchased life insurance on the lives of executive officers
and members of the board of directors. Such life insurance had cash surrender
value of $6.2 million and $6.0 million at September 30, 2000 and 1999,
respectively. The increase in fiscal 2000 was due to earnings on the cash
surrender value, net of premiums.

Deposits. Historically, deposits have provided the Company with a stable source
of relatively low cost funding. The market for deposits is competitive, which
has caused the Company to utilize primarily certificate accounts that are more
responsive to market interest rates rather than passbook accounts. The Company
offers a traditional line of deposit products that currently includes checking,
interest-bearing checking, savings, certificates of deposit, commercial checking
and money market accounts. The $23.1 million, or 10.9%, increase in deposits
during the year ended September 30, 2000, was primarily due to core deposit
growth in the bank's market areas.

FHLB advances and reverse repurchase agreements. The Company also relies upon
FHLB advances and reverse repurchase agreements as a source to fund assets.
Approximately 29.4% and 44.2% of the Company's assets were funded with FHLB
advances and reverse repurchase agreements as of September 30, 2000 and 1999,
respectively. At September 30, 2000, FHLB advances and reverse repurchase
agreements totaled $119.4 million, a decrease of $95.8 million, or 44.5%, from
1999. FHLB advances and reverse repurchase agreements totaled $215.2 million at
September 30, 1999, an increase of $69.4 million, or 47.6% from 1998,
reflecting, in part, the increased deposits resulting from the Company's
acquisition of branches during 1999 and the proceeds from Company's second step
stock offering.

Stockholders' Equity. Stockholders' equity decreased $6.6 million, or 13.8%,
from $48.0 million to $41.4 million at September 30, 2000. This was primarily
due to stock repurchases of $7.8 million, and dividends paid of $1.3 million,
which more than offset net income of $3.5 million. Stockholders' equity
decreased by $12.0 million or 19.8%, to $48.0 million at September 30, 1999.
This was primarily due to stock repurchases of $11.9 million, and dividends paid
of $1.4 million which more than offsets net income of $0.9 million.

Treasury Stock. Treasury stock increased $7.8 million, or 65.5%, to $19.7
million at September 30, 2000 from $11.9 million at September 30, 1999. This
increase was the result of the repurchase of 1.1 million shares of the Company's
outstanding stock. Management anticipates that The Company will continue to
repurchase stock off of the open market from time to time as market conditions
permit.

                                       29
<PAGE>

Discussion of Results of Operations

Overview. Net income was $3.5 million for fiscal 2000, compared to $0.9 million
and $2.9 million for fiscal 1999 and 1998, respectively. The Company's average
interest earning assets have increased over the three year period ended
September 30, 2000, which has resulted in higher levels of interest income. The
Company's net interest rate spread decreased to 2.28% for the year ended
September 30, 2000 from 2.37% for the year ended September 30, 1999, and 1.92%
for the year ended September 30, 1998. The decrease in net interest rate spread
during 2000 was primarily due to an increased cost of funds. The weighted
average cost of funds increased 45 basis points for the year ended September 30,
2000 to 5.18% from 4.73% for the year ended September 30, 1999. The Bank's
weighted average cost of funds is directly related to market conditions and
competition for funds. The increase in the net interest rate spread for fiscal
1999 was a result of an increase in higher-yielding average loans outstanding, a
decrease in relatively lower-yielding average investments outstanding, a
decrease in the average cost of borrowed funds and a decrease in borrowed funds.
The Company's strategy has been to utilize principal repayments from investment
securities to fund loan growth within the Company's local market.

Net Interest Income. The Company's results of operations depend primarily on its
net interest income, which is the difference between interest income on
interest-earning assets and interest expense on interest-bearing liabilities.
The Company's net interest rate spread is impacted by changes in general market
interest rates, including changes in the relation between short- and long-term
interest rates (the "yield curve"), and the Company's interest rate sensitivity
position. While management seeks to manage its business to limit the exposure of
net interest income to changes in interest rates, different aspects of its
business nevertheless remain subject to risk from interest rate changes. Net
interest income was $10.2 million for fiscal 2000 compared to $10.7 million and
$9.5 million, for fiscal 1999 and 1998, respectively. The tables below analyze
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.

The Company's interest-earning assets are primarily comprised of single family
mortgage loans and investment securities, which are primarily mortgage-backed
securities. Interest-bearing liabilities primarily include deposits and FHLB
advances. The increases in average interest-earning assets during fiscal 2000,
1999, and 1998 can be attributed to increases in the loan portfolio, funded
primarily with deposits and FHLB advances and increases in capital. Fiscal 1998
also benefited from the proceeds of the sale of stock which provided
approximately $34 million to purchase investment securities or repay borrowings.
See "Discussion of Changes in Financial Condition" for a discussion of the
Company's asset portfolio and "Capital Resources and Liquidity" for discussion
of borrowings.

The majority of the Company's interest-earning assets are comprised of
adjustable-rate assets. The Company's adjustable-rate loans and investment
securities are subject to periodic interest rate caps. Periodic caps limit the
amount by which the interest rate on a particular mortgage loan may increase at
its next interest rate reset date. In a rising rate environment, the interest
rate spread could be negatively impacted when the repricing of interest-earning
assets is delayed or prohibited, compared to market interest rate movements, as
a result of periodic interest rate caps.

                                       30
<PAGE>

Average Balance Sheets (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                      Years Ended September 30,
                                               2000                              1999                             1998
                                  -----------------------------    -------------------------------   -----------------------------
                                                        Average                            Average                         Average
                                  Average               Yield/     Average                 Yield/    Average               Yield/
                                  Balance    Interest    Cost      Balance     Interest     Cost     Balance    Interest    Cost
                                  -----------------------------    -------------------------------   -----------------------------
<S>                               <C>        <C>        <C>        <C>         <C>         <C>       <C>        <C>        <C>
Interest-earning assets: (1)
  Loan receivable, net   (6)      $224,214   $ 17,671     7.88%    $206,001    $ 16,141      7.84%   $176,295   $ 14,240     8.08%
  Investment securities            176,783     12,256     6.93      187,796      11,818      6.29     209,799     13,614     6.49
                                  --------   --------   ------     --------    --------    ------    --------   --------   ------
     Total interest-
      earning assets               400,997     29,927     7.46      393,797      27,959      7.10     386,094     27,854     7.21

Noninterest-earning cash             3,622                            2,911                               685
Other noninterest-
 earning assets                     25,045                           25,750                            11,863
                                  --------                         --------                          --------
     Total assets                 $429,664                         $422,458                          $398,642
                                  ========                         ========                          ========
Interest-bearing liabilities:
 Demand deposits                  $ 68,779   $  1,705     2.48     $ 61,416    $  1,568      2.55    $ 45,513   $  1,056     2.32
 Time deposits                     158,052      8,645     5.47      138,651       7,328      5.29     121,232      6,797     5.61
  Borrowed funds (5)               154,287      9,374     6.08      164,189       8,321      5.07     181,319     10,548     5.82
                                  --------   --------   ------     --------    --------    ------    --------   --------   ------
     Total interest-
      bearing liabilities          381,118     19,724     5.18      364,256      17,217      4.73     348,064     18,401     5.29
                                             --------   ------                 --------    ------               --------   ------
Noninterest-bearing
 liabilities (2)                     4,262                            5,590                             7,233
                                  --------                         --------                          --------
     Total liabilities             385,380                          369,846                           355,297

Stockholders' equity                44,284                           52,612                            43,345
                                  --------                         --------                          --------
     Total liabilities and
      stockholders' equity        $429,664                         $422,458                          $398,642
                                  ========                         ========                          ========
Net interest income                          $ 10,203                          $ 10,742                         $  9,453
                                             ========                          ========                         ========

Net interest rate spread (3)                              2.28%                              2.37%                           1.92%
                                                        ======                             ======                          ======
Interest-earning assets and
 net interest margin (4)          $400,997                2.54%    $393,797                  2.72%   $386,094                2.45%
                                  ========              ======     ========                ======    ========              ======
Ratio of average interest-
 earning assets to average
 interest-bearing liabilities                           105.22%                            108.11%                         110.93%
                                                        ======                             ======                          ======
</TABLE>

(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.
(6)  Does not include interest on nonaccrual loans. Non-performing loans are
     included in loans receivable, net.

                                       31
<PAGE>

Rate/Volume Analysis (in thousands)

<TABLE>
<CAPTION>
                                                              2000 vs 1999                               1999 vs 1998
                                                ----------------------------------------   ----------------------------------------
                                                     Increase/(Decrease)                         Increase/(Decrease)
                                                            Due to                                     Due to
                                                ------------------------------- Total      ------------------------------   Total
                                                                   Rate/      Increase                           Rate/   Increase
                                                Volume    Rate     Volume    (Decrease)      Volume     Rate    Volume   (Decrease)
                                                ------  ------     ------     --------       ------     -----   ------    --------
<S>                                           <C>       <C>       <C>      <C>              <C>       <C>      <C>       <C>
Interest income:
  Loans receivable                            $ 1,427   $   124   $   12   $  1,563         $ 2,399   $  (423) $   257   $  2,233
  Investment securities                          (693)    1,183      (78)       412          (1,428)     (420)   1,375       (472)
                                              -------   -------   ------   --------         -------   -------  -------   --------
            Total interest-
            earning assets                    $   734   $ 1,307   $  (66)  $  1,975         $   971   $  (843) $ 1,632   $  1,760
                                              =======   =======   ======   ========         =======   =======  =======   ========
Interest expense:
  Deposits                                    $ 1,191   $   540   $   69   $  1,800         $ 1,569   $  (434) $   777   $  1,912
  Borrowed funds                                 (502)    1,314      (77)       734            (997)   (1,360)     145     (2,212)
                                              -------   -------   ------   --------         -------   -------  -------   --------
            Total interest-
            bearing liabilities               $   689   $ 1,854   $   (8)  $  2,534         $   572   $ 1,794  $   922   $   (300)
                                              =======   =======   ======   ========         =======   =======  =======   ========
Net change in net
  interest income                             $    45   $   547   $  (57)  $   (559)        $   399   $   951  $   710   $  2,060
                                              =======   =======   ======   ========         =======   =======  =======   ========

<CAPTION>
                                                               1998 vs 1997
                                                ----------------------------------------
                                                       Increase/(Decrease)
                                                              Due to
                                                ------------------------------  Total
                                                                     Rate/     Increase
                                                Volume      Rate     Volume   (Decrease)
                                                ------      ----     ------   ----------
<S>                                            <C>       <C>        <C>       <C>
Interest income:
  Loans receivable                             $ 2,059   $  (442)   $   616     $ 2,233
  Investment securities                           (357)     (473)       358        (472)
                                               -------   -------    -------     -------
            Total interest-
            earning assets                     $ 1,702   $  (915)   $   974     $ 1,761
                                               =======   =======    =======     =======

Interest expense:
  Deposits                                     $ 1,663   $  (840)   $ 1,091     $ 1,914
  Borrowed funds                                (2,362)    2,295     (2,145)     (2,212)
                                               -------   -------    -------     -------
            Total interest-
            bearing liabilities                $  (699)  $ 1,455    $(1,054)    $  (298)
                                               =======   =======    =======     =======
Net change in net
  interest income                              $ 2,401   $(2,370)   $(2,028)    $ 2,059
                                              ========   =======    =======     =======
</TABLE>

                                       32
<PAGE>

During fiscal 2000 mortgage loan demand weakened resulting in management's need
to seek loan production outside its current market area. During fiscal 2000, the
Bank purchased $4.3 million in loans from outside its market area. Management
anticipates that loan demand will remain weak for the foreseeable future.

During fiscal 1999, loan demand was relatively strong, resulting in an increase
in mortgage loans outstanding, an increase in the net interest rate spread and
an increase of $1.3 million, or 12.6%, in net interest income. The average yield
on interest earning assets increased to 7.46% in fiscal 2000 compared to 7.10%
and 7.21% in fiscal 1999 and fiscal 1998, respectively, while the average cost
of interest bearing liabilities increased to 5.18% from 4.73% and 5.29% in
fiscal 1999 and fiscal 1998, respectively. The increase in the average yield on
interest earning assets was largely due to an increase in average loans
receivable, net and a decrease in average investments receivable. The increase
in average cost of interest bearing liabilities was primarily due to an increase
in market rates.

Provision for Loan Losses. The Bank provided for loan losses of $120,000, $0,
and $0, respectively, in the fiscal years ended September 30, 2000, 1999, and
1998. Management considered several factors in determining the necessary level
of its allowance for loan losses and as a result of the process, the necessary
provision for loan losses including but not limited to historical loan losses
and current delinquency rates.

Noninterest Income. Non-interest income totaled $3.1 million for the fiscal year
ended September 30, 2000, compared to $1.9 million for the fiscal year ended
September 30, 1999, and $0.9 million for the fiscal year ended September 30,
1998. This increase in 2000 and 1999 was primarily due to an increase in fee
income due to an increase in demand deposit accounts and the change in gain or
loss on trading securities.

Noninterest Expense. Non-interest expense consisting primarily of salaries and
employee benefits, premises and equipment, data processing and federal deposit
insurance premiums totaled $8.1 million for the fiscal year ended September 30,
2000, compared to $11.3 million for the fiscal year ended September 30, 1999, a
decrease of 28.3%. The decrease was primarily attributable to the payment of a
severance agreement to a former executive officer in fiscal 1999.

Income Taxes. Income tax expense for the year ended September 30, 2000, was $1.6
million compared to $0.5 million for the year ended September 30, 1999. The
increase was primarily due to an increase in income before tax. Income tax
expense for the year ended September 30, 1999, was $0.5 million compared to $1.3
million for the year ended September 30, 1998. The decrease was primarily due to
a decrease in income before tax, a decrease in tax exempt income and a change in
an estimate in the year ended September 30, 1998.

Liquidity and Capital Resources

The Bank is required to maintain minimum levels of liquid assets as defined by
OTS regulations. This requirement, which varies from time to time depending upon
economic conditions and deposit flows, is based upon a percentage of deposits
and short-term borrowings. The required ratio is currently 4%. The Bank adjusts
liquidity as appropriate to meet its asset and liability management objectives.
At September 30, 2000, the Bank was in compliance with such liquidity
requirements.

The Bank's primary sources of funds are deposits, amortization and prepayment of
loans and mortgage-backed securities, maturities of investment securities, FHLB
advances, and funds provided from operations. While scheduled principal
repayments on loans, and mortgage-backed securities are a relatively predictable
source of funds, deposit flows, loan prepayments and mortgage-backed securities
are greatly influenced by general interest rates, economic conditions, and
competition. The Bank manages the pricing of its deposits to maintain a desired
deposit balance. For additional information about cash flows from the Bank's
operating, financing, and investing activities, see Consolidated Statements of
Cash Flows included in the Consolidated Financial Statements.

                                       33
<PAGE>

At September 30, 2000, the Bank exceeded all of its regulatory capital
requirements.

Impact of Inflation and Changing Prices

The consolidated financial statements of the Bank and notes thereto, presented
elsewhere herein, have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the change
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the increased cost of the Bank's operations. Unlike
most industrial companies, nearly all the assets and liabilities of the Bank are
monetary. As a result, interest rates have a greater impact on the Bank's
performance than do the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or to the same extent as the price
of goods and services.

FDIC Insurance Premiums and Assessment

In September 1996, Congress enacted legislation to recapitalize the SAIF by a
one-time assessment on all SAIF-insured deposits held as of March 31, 1995. The
assessment was 65.7 basis points per $100 in deposits, payable on November 30,
1996. For the Bank, the assessment amounted to $937,000 (or $618,000 after
consideration of tax benefits), based on the Bank's SAIF-insured deposits of
$142.6 million. In addition, beginning January 1, 1997, pursuant to the
legislation, interest payments on FICO bonds issued in the late 1980's by the
Financing Corporation to recapitalize the now defunct Federal Savings and Loan
Insurance Corporation were paid jointly by BIF-insured institutions and
SAIF-insured institutions. The FICO assessment will be 1.29 basis points per
$100 in BIF deposits and 6.44 basis points per $100 in SAIF deposits. Beginning
in January 1, 2000, the FICO interest payments will be paid pro-rata by banks
and thrifts based on deposits (approximately 2.4 basis points per $100 in
deposits). The BIF and SAIF was merged on January 1, 1999, provided the saving
association charter is eliminated by that date. In that event, pro-rata FICO
sharing will begin on January 1, 1999.

Impact of New Accounting Standards

In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive Income
("SFAS 130"). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company will be required
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the statement of financial condition. Also in June 1997, the FASB
issued Statement No. 131, Disclosures about Segments of an Enterprise and
Related Information, establishing standards for the way public enterprises
report information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS 130 and 131 did not have a material effect on the Company's consolidated
financial statements.

In February 1998, the FASB issued Statement No. 132, Employer's Disclosures
about Pensions and Other Postretirement Benefits, an amendment of FASB
Statements No. 87, 88 and 106 ("SFAS 132"). The statement revises employers'
disclosures about pensions and other postretirement benefits. It does not change
the measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful as
they were when FASB Statements No. 87, No. 88, and No. 106 were issued. The
Statement suggests combined formats for presentation of pension and other
postretirement benefit disclosures. The adoption of SFAS 132 did not have a
material effect on the Company's consolidated financial statements.

                                       34
<PAGE>

The Company adopted Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133") on
July 1, 1998. As permitted by SFAS No. 133, on July 1, 1998, the Company
transferred securities previously classified as held-to-maturity with a carrying
value of approximately $177,800,000 and a fair value of approximately
$182,400,000 into the available-for-sale category, where their carrying value
became their fair value. This transfer resulted in a approximately $2,900,000
unrealized gain, net of tax, at July 1, 1998. The other provisions of SFAS No.
133 had no material effect on the Company.

                                       35
<PAGE>

INDEPENDENT AUDITORS' REPORT


The Board of Directors of
Pocahontas Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition
of Pocahontas Bancorp, Inc. (the "Company") and subsidiaries as of September 30,
2000 and 1999, and the related consolidated statements of income and
comprehensive income, stockholders' equity, and cash flows for each of the three
years in the period ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company and
subsidiaries as of September 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States of America.

As discussed in Note 1 to the consolidated financial statements, on July 1,
1998, the Company adopted Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities.

/s/ Deloitte & Touche LLP

Little Rock, Arkansas
November 8, 2000

                                       36
<PAGE>

ITEM 8  FINANCIAL STATEMENTS
------  --------------------

POCAHONTAS BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

SEPTEMBER 30, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      2000          1999
<S>                                                               <C>            <C>
ASSETS

Cash and due from banks:
 Interest bearing                                                 $ 11,177,705   $  5,273,379
 Noninterest bearing                                                 1,763,742      3,348,671
                                                                  ------------   ------------

                                                                    12,941,447      8,622,050

Cash surrender value of life insurance                               6,158,076      5,964,588
Securities held-to-maturity, at amortized cost
 (fair value of $9,105,099 and $9,020,480 in 2000 and
 1999, respectively)                                                 9,465,856      9,482,122
Securities available-for-sale, at fair value (amortized cost
 of $119,683,250 and $215,874,086 in 2000 and 1999, respectively)  118,024,962    216,492,192
Securities-trading, at fair value (amortized cost of $1,536,982
 and $2,060,455 in 2000 and 1999, respectively)                      1,126,712      1,429,196
Loans receivable, net                                              234,416,895    217,709,933
Accrued interest receivable                                          3,251,939      3,165,427
Premises and equipment, net                                          3,779,850      4,018,157
Federal Home Loan Bank stock                                         5,988,200     10,981,300
Core deposit premium                                                 2,154,131      2,440,187
Other assets                                                         3,796,455      1,825,710
                                                                  ------------   ------------
TOTAL                                                             $401,104,523   $482,130,862
                                                                  ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
 Deposits                                                         $234,971,507   $211,890,791
 Federal Home Loan Bank advances                                   117,990,000    213,105,000
 Securities sold under agreements to repurchase                      1,375,000      2,075,000
 Deferred compensation                                               3,238,092      3,357,890
 Accrued expenses and other liabilities                              2,151,594      3,669,743
                                                                  ------------   ------------

      Total liabilities                                            359,726,193    434,098,424

STOCKHOLDERS' EQUITY:
 Common stock, $0.01 par value, 8,000,000 shares authorized;
  6,955,365 and 6,946,822 shares issued and 4,454,357 and
   5,518,614 shares outstanding in 2000 and 1999, respectively          69,553         69,468
 Additional paid-in capital                                         51,307,395     51,439,643
 Unearned ESOP shares                                               (2,032,221)    (2,443,525)
 Unearned RRP shares                                                  (277,660)      (524,476)
 Accumulated other comprehensive income (loss)                      (1,094,470)       407,950
 Retained earnings                                                  13,089,624     10,965,600
                                                                  ------------   ------------

                                                                    61,062,221     59,914,660
 Less treasury stock at cost, 2,501,008 and 1,428,208 shares       (19,683,891)   (11,882,222)
                                                                  ------------   ------------
   at 2000 and 1999, respectively
     Total stockholders' equity                                     41,378,330     48,032,438
                                                                  ------------   ------------
TOTAL                                                             $401,104,523   $482,130,862
                                                                  ============   ============
</TABLE>

See notes to consolidated financial statements.

                                       37
<PAGE>

POCAHONTAS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998.
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          2000            1999            1998
<S>                                                    <C>             <C>             <C>
INTEREST INCOME:
  Loans receivable                                     $17,671,439     $16,141,250     $14,239,771
  Securities:
    Taxable                                             11,798,274      11,362,574      13,298,678
    Nontaxable                                             457,757         455,706         315,008
                                                       -----------     -----------     -----------
            Total interest income
                                                        29,927,470      27,959,530      27,853,457
INTEREST EXPENSE:
  Deposits                                              10,350,181       8,895,824       7,852,334
  Borrowed funds                                         9,373,916       8,321,072      10,548,315
                                                      ------------    ------------    ------------
            Total interest expense                      19,724,097      17,216,896      18,400,649
                                                      ------------    ------------    ------------
NET INTEREST INCOME BEFORE PROVISION
  FOR LOAN LOSSES                                       10,203,373      10,742,634       9,452,808
PROVISION FOR LOAN LOSSES                                  120,000               -               -
                                                      ------------    ------------    ------------
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES                                       10,083,373      10,742,634       9,452,808

OTHER INCOME:
  Dividends on FHLB stock                                  657,457         590,825         627,676
  Fees and service charges                               1,617,073         833,277         484,419
  Trading gain (loss)                                      130,031         (51,564)       (427,120)
  Gain on sale of investment securities                    447,563         161,411           6,569
  Other                                                    249,817         393,492         228,343
                                                      ------------    ------------    ------------
     Total other income                                  3,101,941       1,927,441         919,887

OTHER EXPENSES:
  Compensation and benefits                              4,383,217       7,628,380       3,824,786
  Occupancy and equipment                                  996,156       1,136,583         662,486
  Deposit insurance                                         64,302         118,395         104,020
  Professional fees                                        382,171         297,561         231,714
  Data processing                                          406,865         415,597         294,837
  Advertising                                              483,289         472,338         220,862
  OTS assessment                                            92,669          87,943          93,629
  Other                                                  1,292,164       1,094,863         758,791
                                                       -----------     -----------     -----------
            Total other expenses                         8,100,833      11,251,660       6,191,125
                                                       -----------     -----------     -----------

INCOME BEFORE INCOME TAXES                               5,084,481       1,418,415       4,181,570

INCOME TAX PROVISION                                     1,632,852         466,178       1,294,239
                                                       -----------     -----------     -----------
NET INCOME                                               3,451,629         952,237       2,887,331
</TABLE>

                                                                     (Continued)

                                       38
<PAGE>

POCAHONTAS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      2000            1999            1998
<S>                                                <C>             <C>               <C>
OTHER COMPREHENSIVE INCOME (LOSS),
  NET OF TAX

  Unrealized holding gain (loss) on securities
    arising during period                           $(1,207,028)    $(1,291,164)    $ 1,809,981

  Reclassification adjustment for (gains) losses
    included in net income                             (295,392)       (106,531)         (4,336)
                                                    -----------     -----------     -----------
          Other comprehensive income (loss)          (1,502,420)     (1,397,695)      1,805,645
                                                    -----------     ------------    -----------

COMPREHENSIVE INCOME (LOSS)                         $ 1,949,209     $  (445,458)    $ 4,692,976
                                                    ===========     ===========     ===========

EARNINGS PER SHARE:

Basic earnings per share                            $      0.67     $      0.16     $      0.45
                                                    ===========     ===========     ===========
Diluted earnings per share                          $      0.67     $      0.16     $      0.44
                                                    ===========     ===========     ===========
Dividends per share                                 $      0.25     $      0.24     $      0.23
                                                    ===========     ===========     ===========
</TABLE>

                                                                     (Concluded)

See notes to consolidated financial statements.

                                       39
<PAGE>

POCAHONTAS BANCORP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                      Common Stock            Additional       Unearned         Unearned
                                               ---------------------------
                                                                                Paid-In          ESOP             RRP
                                                  Shares         Amount         Capital         Shares           Shares
<S>                                            <C>            <C>             <C>             <C>             <C>
BALANCE, SEPTEMBER 30, 1997                      6,669,185    $     66,692    $ 15,010,041    $   (103,644)
 Repayment of ESOP loan and related
  increase in share value                                                          256,356         103,644
 Options exercised                                  16,098             161          39,839
 Proceeds from stock offering                                                   34,788,225      (2,856,600)
 Cumulative effect of adoption
  of SFAS 133
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax
 Net income
 Dividends
                                               -----------    ------------    ------------    ------------    ------------
BALANCE, SEPTEMBER 30, 1998                      6,685,283          66,853      50,094,461      (2,856,600)
                                               -----------    ------------    ------------    ------------    ------------
 Repayment of ESOP loan and related
  increase in share value                                                                          413,075
 Options exercised                                 154,416           1,544         382,146
 RRP shares granted                                142,830           1,428       1,284,042                    $ (1,285,470)
 RRP shares forfeited                              (35,707)           (357)       (321,006)                        321,363
 RRP shares earned                                                                                                 439,631
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax
 Treasury stock purchased
 Net income
 Dividends
                                               -----------    ------------    ------------    ------------    ------------
BALANCE, SEPTEMBER 30, 1999                      6,946,822          69,468      51,439,643      (2,443,525)       (524,476)
 Repayment of ESOP loan and related
  decrease in share value                                                         (153,416)        411,304
 Options exercised                                   8,543              85          21,168
 RRP shares earned                                                                                                 246,816
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax
 Treasury stock purchased
 Net income
 Dividends
                                               -----------    ------------    ------------    ------------    ------------
BALANCE, SEPTEMBER 30, 2000                      6,955,365    $     69,553    $ 51,307,395    $ (2,032,221)   $   (277,660)
                                               ===========    ============    ============    ============    ============

<CAPTION>
                                                   Accumulated
                                                      Other                            Treasury Stock
                                                                                ----------------------------
                                                  Comprehensive    Retained                                   Stockholders'
                                                  Income (Loss)    Earnings       Shares         Amount          Equity
<S>                                               <C>            <C>            <C>             <C>           <C>
BALANCE, SEPTEMBER 30, 1997                                      $ 9,273,180                                  $ 24,246,269
 Repayment of ESOP loan and related
  increase in share value                                                                                          360,000
 Options exercised                                                                                                  40,000
 Proceeds from stock offering                                        449,424                                    32,381,049
 Cumulative effect of adoption
  of SFAS 133                                     $  2,944,822                                                   2,944,822
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax         (1,139,177)                                                 (1,139,177)
 Net income                                                        2,887,331                                     2,887,331
 Dividends                                                        (1,153,496)                                   (1,153,496)
                                                  ------------  ------------    ------------    ------------  ------------
BALANCE, SEPTEMBER 30, 1998                          1,805,645    11,456,439                                    60,566,798
                                                  ------------  ------------    ------------    ------------  ------------
 Repayment of ESOP loan and related
  increase in share value                                                                                          413,075
 Options exercised                                                                                                 383,690
 RRP shares granted
 RRP shares forfeited
 RRP shares earned                                                                                                 439,631
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax         (1,397,695)                                                 (1,397,695)
 Treasury stock purchased                                                          1,428,208    $(11,882,222)  (11,882,222)
 Net income                                                          952,237                                       952,237
 Dividends                                                        (1,443,076)                                   (1,443,076)
                                                  ------------  ------------    ------------    ------------  ------------
BALANCE, SEPTEMBER 30, 1999                            407,950    10,965,600       1,428,208     (11,882,222)   48,032,438
 Repayment of ESOP loan and related
  decrease in share value                                                                                          257,888
 Options exercised                                                                                                  21,253
 RRP shares earned                                                                                                 246,816
 Net change in unrealized gain (loss) on
  available-for-sale securities, net of tax         (1,502,420)                                                 (1,502,420)
 Treasury stock purchased                                                          1,072,800      (7,801,669)   (7,801,669)
 Net income                                                        3,451,629                                     3,451,629
 Dividends                                                        (1,327,605)                                   (1,327,605)
                                                  ------------  ------------    ------------    ------------  ------------
BALANCE, SEPTEMBER 30, 2000                       $ (1,094,470) $ 13,089,624       2,501,008    $(19,683,891) $ 41,378,330
                                                  ============  ============    ============    ============  ============
</TABLE>

See notes to consolidated financial statements.

                                      40
<PAGE>

POCAHONTAS BANCORP, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                          2000                1999           1998
<S>                                                                  <C>               <C>              <C>
OPERATING ACTIVITIES:
 Net income                                                         $  3,451,629       $    952,237      $  2,887,331
 Adjustments to reconcile net income to net cash
  provided (used) by operating activities:
  Depreciation of premises and equipment                                 478,937            472,633           298,725
  Deferred income tax benefit                                           (107,635)        (1,281,899)          (59,617)
  Amortization of deferred loan fees                                     (56,746)          (115,677)         (103,001)
  Amortization of premiums and discounts, net                           (266,428)          (280,855)         (269,489)
  Amortization of core deposit premium                                   286,056            136,721           126,228
  Adjustment of ESOP shares and release of
    shares under recognition and retention plan                          504,704            852,706           256,356
  Net gains on sales of assets                                          (469,895)           (30,821)          (60,597)
  Increase in cash surrender value of life
    insurance policies                                                  (193,488)          (142,788)         (182,639)
  Changes in operating assets and liabilities:
    Trading securities                                                   302,484            159,339        (1,588,535)
    Accrued interest receivable                                          (86,512)          (758,154)         (177,742)
    Other assets                                                      (2,485,432)            95,951           132,014
    Deferred compensation                                               (119,798)         2,640,164          (229,460)
    Accrued expenses and other liabilities                            (1,518,149)          (712,478)          (53,819)
                                                                    ------------       ------------      ------------
          Net cash provided (used) by operating activities              (280,273)         1,987,079           975,755

INVESTING ACTIVITIES:
 Purchases of investment securities                                   (8,000,000)       (91,852,663)       (4,571,962)
 Proceeds from sale of securities available-for-sale                  97,041,274         13,318,453                 -
 Proceeds from maturities and principal repayments
   of investment securities                                           13,646,889         33,572,759        25,157,038
 Increase in loans, net                                              (16,005,559)       (23,835,771)      (34,002,694)
 Core deposit premium paid                                                     -                  -        (2,703,136)
 Purchases of premises and equipment                                    (240,629)        (1,163,714)       (1,820,969)
                                                                    ------------       ------------      ------------
           Net cash provided (used) by in investing activities        86,441,975        (69,960,936)      (17,941,723)
</TABLE>

                                                                     (Continued)

                                       41
<PAGE>

POCAHONTAS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         2000                1999                1998
<S>                                                            <C>                   <C>                  <C>
FINANCING ACTIVITIES:
 Net increase (decrease) in deposits other
  than in acquisitions                                         $      23,080,716     $     16,354,083     $    (4,351,344)
 Deposits assumed in acquisitions                                              -                    -          56,533,956
 Federal Home Loan Bank advance                                    3,006,964,100        1,551,084,601       1,580,034,000
 Repayment of Federal Home Loan Bank
  advances                                                        (3,102,079,100)      (1,481,649,601)     (1,626,965,038)
 Net decrease in repurchase agreements                                  (700,000)             (32,645)        (18,577,355)
 Proceeds from stock offering                                                  -                    -          32,381,049
 Exercise of stock options                                                21,253              383,690              40,000
 Purchase of treasury shares                                          (7,801,669)         (11,882,222)                  -
Dividends paid                                                        (1,327,605)          (1,443,076)         (1,153,496)
                                                               -----------------     ----------------     ---------------
       Net cash provided (used) by
         financing activities                                        (81,842,305)          72,814,830          17,941,772

NET INCREASE IN CASH AND
 DUE FROM BANKS                                                        4,319,397            4,840,973             975,804

CASH AND DUE FROM BANKS,
  BEGINNING OF YEAR                                                    8,622,050            3,781,077           2,805,273
                                                               -----------------     ----------------      --------------

CASH AND DUE FROM BANKS,                                       $      12,941,447      $     8,622,050      $    3,781,077
 END OF YEAR                                                   =================      ===============      ==============

SUPPLEMENTAL DISCLOSURES OF
 CASH FLOW INFORMATION:
 Cash paid during the period for:
  Interest                                                     $      20,123,108      $    16,923,600      $   18,832,896
                                                               =================      ===============      ==============
  Income taxes                                                 $       2,274,076      $     1,175,000      $    1,201,232
                                                               =================      ===============      ==============
SUPPLEMENTAL DISCLOSURES OF
 NONCASH INVESTMENT ACTIVITIES:
 Transfers from loans to real estate acquired,
   or deemed acquired, through foreclosure                     $         947,756      $       943,789      $      128,829
                                                               =================      ===============      ==============

  Loans originated to finance the sale of real
    estate acquired through foreclosure                        $         505,147      $       513,150      $            -
                                                               =================      ===============      ==============
</TABLE>

                                                                     (Concluded)

See notes to consolidated financial statements

                                       42
<PAGE>

POCAHONTAS BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Organization and Principles of Consolidation - The accompanying
     consolidated financial statements include the accounts of Pocahontas
     Bancorp, Inc. ("Bancorp"), its wholly owned subsidiary, Pocahontas Federal
     Savings and Loan Association (the "Bank"), as well as the Bank's
     subsidiaries, 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. The Bank operates 14 branches in northern and eastern
     Arkansas as a federally chartered savings and loan.

     On March 31, 1998, the Bank and Pocahontas Federal Mutual Holding Company
     (the "Mutual Holding Company") completed a second step conversion (the
     "Reorganization"). As part of the Reorganization, Bancorp was formed as a
     first-tier wholly owned subsidiary of the Bank. The Mutual Holding Company
     was converted to an interim federal stock savings association and
     simultaneously merged with and into the Bank, at which point the Mutual
     Holding Company ceased to exist and 862,500 shares or 54% of the
     outstanding Bank common stock held by the Mutual Holding Company were
     canceled. A second interim savings and loan association ("Interim") formed
     by Bancorp solely for the Reorganization was then merged with and into the
     Bank. As a result of the merger of Interim with and into the Bank, the Bank
     became a wholly owned subsidiary of Bancorp. Pursuant to an exchange ratio
     of 4.0245 shares for each share of the Bank stock, which provided the
     public shareholders of the Bank a maintenance of their 46% ownership of
     Bancorp, the 769,924 outstanding shares held by the public shareholders of
     the Bank were exchanged for approximately 3,100,000 shares of Bancorp.
     Concurrent with the Reorganization, Bancorp sold 3,570,750 (essentially the
     equivalent of shares held by the Mutual Holding Company) additional shares
     to members of the Mutual Holding Company, employees of the Bank and the
     public at a price of $10.00 per share. Reorganization and stock offering
     costs of approximately $919,000 resulted in net proceeds from the offering
     of approximately $34,800,000.

     Each depositor of the Bank as of the effective date of the Reorganization
     will have, in the event of liquidation of the Bank, a right to his pro rata
     interest in a liquidation account established for the benefit of such
     depositors. The Reorganization was accounted for as a change in corporate
     form with the historic basis of accounting for the Bank unchanged.

     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.

     Cash Equivalents - For the purpose of presentation in the consolidated
     statements of cash flows, cash, and cash equivalents are defined as those
     amounts included in the statement of financial condition caption "cash and
     due from banks." Principally this includes cash on hand and amounts due
     from depository institutions and investments having a maturity at
     acquisition of three months or less.

                                       43
<PAGE>

     Liquidity Requirement - Regulations require the Bank to maintain an amount
     equal to 4% of deposits (net of loans on deposits) plus short-term
     borrowings in cash and U.S. Government and other approved securities.

     Trading Securities - Equity securities held principally for resale in the
     near term are classified as trading securities and recorded at their fair
     values. Unrealized gains and losses on trading securities are included in
     other income.

     Securities Held-to-Maturity - Bonds, notes, and debentures for which the
     Company has the positive intent and ability to hold to maturity are
     reported at cost, adjusted for the amortization of premiums and the
     accretion of discounts, which are recognized in income using the
     level-yield method over the assets' remaining lives, adjusted for
     anticipated prepayments. Should other than a temporary decline in the fair
     value of a security occur, the carrying value of such security would be
     written down to current market value by a charge to operations. As of
     September 30, 2000, no securities were determined to have other than a
     temporary decline in fair value below cost.

     Securities Available-for-Sale - Available-for-sale securities consist of
     bonds, notes and debentures. Unrealized holding gains and losses, net of
     tax, on available-for-sale securities are reported as accumulated other
     comprehensive income, a separate component of stockholders' equity, until
     realized. Gains and losses on the sale of available-for-sale securities are
     determined using the specific-identification method. Declines in the fair
     value of individual available-for-sale securities below their cost that are
     other than temporary would result in a write-down of the individual
     security to its fair value. The related write-down would be included in
     earnings as a realized loss. As of September 30, 2000, no securities were
     determined to have other than a temporary decline in fair value below cost.

     Loans Receivable - Loans receivable that management has the intent and
     ability to hold for the foreseeable future or until maturity or pay-off are
     reported at their outstanding principal adjusted for any charge-offs, the
     allowance for loan losses, and any deferred fees or costs on originated
     loans and unamortized premiums or discounts on purchased loans.

     Discounts and premiums on purchased residential real estate loans are
     amortized to income using the interest method over the remaining period to
     contractual maturity, adjusted for anticipated prepayments. Discounts and
     premiums on purchased consumer loans are recognized over the expected lives
     of the loans using methods that approximate the interest method. Loan
     origination fees and certain direct origination costs are capitalized and
     recognized as an adjustment of the yield of the related loan.

     The accrual of interest on impaired loans is discontinued when, in
     management's opinion, the borrower may be unable to meet contractual
     principal or interest obligations or where interest or principal is 90 days
     or more past due. When a loan is placed on nonaccrual status, accrual of
     interest ceases and, in general, uncollected past due interest (including
     interest applicable to prior reporting periods, if any) is reversed and
     charged against current income. Therefore, interest income is not
     recognized unless the financial condition or payment record of the borrower
     warrant the recognition of interest income. Interest on loans that have
     been restructured is generally accrued according to the renegotiated terms.

     Allowance for Loan Losses - The allowance for loan losses is a valuation
     allowance to provide for incurred but not yet realized losses. The Company
     reviews its loans for impairment on a quarterly basis. Impairment is
     determined by assessing the probability that the borrower will not be able
     to fulfill the contractual terms of the agreement. If a loan is determined
     to be impaired, the amount of the impairment is measured based on the
     present value of expected future cash flows discounted at the loan's
     effective interest rate or by use of the observable market price of the
     loan or fair value of collateral if the loan is collateral dependent.
     Throughout the year management estimates the level of

                                       44
<PAGE>

     probable losses to determine whether the allowance for loan losses is
     appropriate considering the estimated losses existing in the portfolio.
     Based on these estimates, an amount is charged to the provision for loan
     losses and credited to the allowance for loan losses in order to adjust the
     allowance to a level determined by management to be appropriate relative to
     losses. The allowance for loan losses is increased by charges to income
     (provisions) and decreased by charge-offs, net of recoveries.

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

     Homogeneous loans are those that are considered to have common
     characteristics that provide for evaluation on an aggregate or pool basis.
     The Company considers the characteristics of (1) one-to-four family
     residential first mortgage loans; (2) automobile loans and; (3) consumer
     and home improvement loans to permit consideration of the appropriateness
     of the allowance for losses of each group of loans on a pool basis. The
     primary methodology used to determine the appropriateness of the allowance
     for losses includes segregating certain specific, poorly performing loans
     based on their performance characteristics from the pools of loans as to
     type and then applying a loss factor to the remaining pool balance based on
     several factors including classification of the loans as to grade, past
     loss experience, inherent risks, economic conditions in the primary market
     areas and other factors which usually are beyond the control of the
     Company. Those segregated specific loans are evaluated using the present
     value of future cash flows, usually determined by estimating the fair value
     of the loan's collateral reduced by any cost of selling and discounted at
     the loan's effective interest rate if the estimated time to receipt of
     monies is more than three months.

     Non-homogeneous loans are those loans that can be included in a particular
     loan type, such as commercial loans and multi-family and commercial first
     mortgage loans, but which differ in other characteristics to the extent
     that valuation on a pool basis is not valid. After segregating specific,
     poorly performing loans and applying the methodology as noted in the
     preceding paragraph for such specific loans, the remaining loans are
     evaluated based on payment experience, known difficulties in the borrowers
     business or geographic area, loss experience, inherent risks and other
     factors usually beyond the control of the Company. These loans are then
     graded and a factor, based on experience, is applied to estimate the
     probable loss.

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

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

                                       45
<PAGE>

     Foreclosed Real Estate - Real estate properties acquired through, or in
     lieu of, loan foreclosure are initially recorded at fair value at the date
     of foreclosure establishing a new cost basis. After foreclosure, valuations
     are periodically performed by management and the real estate is carried at
     the lower of carrying amount or fair value less cost to sell. Revenue and
     expenses from operations and changes in the valuation allowance are
     included in loss on foreclosed real estate.

     Premises and Equipment - Land is carried at cost. Buildings and furniture,
     fixtures, and equipment are carried at cost, less accumulated depreciation.
     Depreciation for financial statement purposes is computed using the
     straight-line method over the estimated useful lives of the assets ranging
     from 3 to 40 years.

     Core Deposit Premium - Core deposit premiums paid are being amortized over
     ten years which approximates the estimated life of the purchased deposits.
     The carrying value of core deposit premiums is periodically evaluated to
     estimate the remaining periods of benefit. If these periods of benefits are
     determined to be less than the remaining amortizable life, an adjustment to
     reflect such shorter life may be made.

     Income Taxes - Deferred tax assets and liabilities are recorded for
     temporary differences between the carrying value and tax bases of assets
     and liabilities. Such amounts are reflected at currently enacted income tax
     rates applicable to the period in which the deferred tax assets or
     liabilities are expected to be realized or settled. As changes in tax laws
     or rates are enacted, deferred tax assets and liabilities are adjusted
     through the provision for income taxes.

     Stock Compensation - The Company applies the provisions of Accounting
     Principles Board Opinion No. 25 in accounting for its stock option plans.

     Impact of New Accounting Standards -  The Company adopted Statement of
     Financial Accounting Standards No. 133, Accounting for Derivative
     Instruments and Hedging Activities ("SFAS No. 133") on July 1, 1998. As
     permitted by SFAS No. 133, on July 1, 1998, the Company transferred
     securities previously classified as held-to-maturity with a carrying value
     of approximately $177,800,000 and a fair value of approximately
     $182,400,000 into the available-for-sale category, where their carrying
     value became their fair value. This transfer resulted in an unrealized
     gain, net of tax of approximately $2,900,000 at July 1, 1998. The other
     provisions of SFAS No. 133 had no significant effect on the Company at July
     1 or September 30, 1998, or for the year ended September 30, 1998.

     Reclassifications - Certain 1999 and 1998 amounts have been reclassified to
     conform to the 2000 presentation.

2.  FAIR VALUES OF FINANCIAL INSTRUMENTS

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

                                       46
<PAGE>

     fair values of financial instruments at September 30, 2000 and 1999, were
     as follows (items which are not financial instruments are not included):

<TABLE>
<CAPTION>
                                                                2000                             1999
                                                     Carrying         Estimated         Carrying        Estimated
                                                     Amounts         Fair Value         Amounts         Fair Value
       <S>                                         <C>              <C>              <C>               <C>
       Financial assets and liabilities:
         Cash and due from banks                   $ 12,941,447     $ 12,941,447     $  8,622,050      $  8,622,050
         Cash surrender value of
           life insurance                             6,158,076        6,158,076        5,964,588         5,964,588
         Securities held-to-maturity                  9,465,856        9,105,099        9,482,122         9,020,480
         Securities-available-for sale              118,024,962      118,024,962      216,492,192       216,492,192
         Securities-trading                           1,126,712        1,126,712        1,429,196         1,429,196
         Loans receivable, net                      234,416,895      234,896,000      217,709,933       216,702,000
         Accrued interest receivable                  3,251,939        3,251,939        3,165,427         3,165,427
         Federal Home Loan Bank stock                 5,988,200        5,988,200       10,981,300        10,981,300
         Demand and savings deposits                 72,766,639       72,766,639       61,403,521        61,403,521
         Time deposits                              162,204,868      162,144,000      150,487,270       150,024,000
         Federal Home Loan Bank advances            117,990,000      117,990,000      213,105,000       212,602,000
         Securities sold under
           agreements to repurchase                   1,375,000        1,375,000        2,075,000         2,075,000
</TABLE>


     For purposes of the above disclosures of estimated fair value, the
     following assumptions were used. The estimated fair value for cash and due
     from banks, cash surrender value of life insurance, accrued interest
     receivable, and Federal Home Loan Bank ("FHLB") stock is considered to
     approximate cost. The estimated fair values for securities are based on
     quoted market values for the individual securities or for equivalent
     securities. The fair value for loans is estimated by discounting the future
     cash flows using the current rates the Company would charge for similar
     such loans at the applicable date. The estimated fair value for demand and
     savings deposits is based on the amount for which they could be settled on
     demand. The estimated fair values for time deposits, FHLB advances and
     securities sold under agreement to repurchase are based on estimates of the
     rate the Company would pay on such deposits and borrowed funds at the
     applicable date, applied for the time period until maturity. The estimated
     fair values for other financial instruments and off-balance sheet loan
     commitments approximate cost and are not considered significant to this
     presentation.

3.  INVESTMENT SECURITIES

     The amortized cost and estimated fair values of securities at September 30
     are as follows:

<TABLE>
<CAPTION>
                                                            2000
                                                    Gross            Gross         Estimated
                                     Amortized    Unrealized       Unrealized         Fair
      Held-to-maturity                 Cost          Gains           Losses          Value
<S>                                <C>            <C>              <C>             <C>
State and municipal securities     $ 9,465,856    $    40,051      $  (400,808)    $ 9,105,099
                                   ===========    ===========      ===========     ===========
</TABLE>

                                       47
<PAGE>

<TABLE>
<CAPTION>
                                                                      2000
                                                               Gross          Gross           Estimated
                                             Amortized       Unrealized     Unrealized           Fair
    Available-for-sale                          Cost           Gains          Losses            Value
<S>                                          <C>             <C>            <C>              <C>
U.S. Government agencies                      $ 28,000,000   $          -   $  (904,802)     $ 27,095,198
Mortgage backed securities                      87,683,250        493,043    (1,246,529)       86,929,764
Corporate securities                             4,000,000              0             0         4,000,000
                                              ------------   ------------   -----------      ------------
              Total                           $119,683,250   $    493,043   $(2,151,331)     $118,024,962
                                              ============   ============   ===========      ============

                                                                      1999

                                                                  Gross          Gross        Estimated
                                                Amortized       Unrealized    Unrealized         Fair
      Held-to-maturity                            Cost            Gains         Losses          Value
U.S. Government agencies                      $     36,363   $          -   $         -      $     36,363
State and municipal securities                   9,445,759         32,008      (493,650)        8,984,117
                                              ------------   ------------   -----------      ------------
              Total                           $  9,482,122   $     32,008   $  (493,650)     $  9,020,480
                                              ============   ============   ===========      ============


                                                                      1999

                                                                   Gross          Gross         Estimated
                                                 Amortized      Unrealized     Unrealized          Fair
      Available-for-sale                            Cost           Gains         Losses           Value
U.S. Government agencies                      $ 26,000,000   $     34,375   $  (667,500)     $ 25,366,875
Mortgage backed securities                     189,874,086      2,274,571    (1,023,340)      191,125,317
                                              ------------   ------------   -----------      ------------
            Total                             $215,874,086   $  2,308,946   $(1,690,840)     $216,492,192
                                              ============   ============   ===========      ============
</TABLE>

The amortized cost and estimated fair value of debt securities at September 30,
2000, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                   Held-to-Maturity              Available-for-Sale
                                             ----------------------------- -------------------------------
                                                              Estimated                      Estimated
                                               Amortized         Fair         Amortized         Fair
                                                 Cost           Value           Cost           Value
<S>                                          <C>             <C>             <C>            <C>
Due in one year or less                      $     5,003     $     5,010     $          -   $          -
Due from one year to five years                   20,000          20,038                -              -
Due from five years to ten years                 991,274         998,041       13,000,000     12,717,698
Due after ten years                            8,449,579       8,082,010       19,000,000     18,377,500
Mortgage backed securities                             -               -       87,683,250     86,929,764
                                             -----------     -----------     ------------   ------------
            Total                            $ 9,465,856     $ 9,105,099     $119,683,250   $118,024,962
                                             ===========     ===========     ============   ============
</TABLE>

Securities with a carrying value and a fair value of $10,648,549 and $5,584,953
at September 30, 2000 and 1999, respectively, were pledged to collateralize
public and trust deposits.

                                       48
<PAGE>

4.  LOANS RECEIVABLE

     Loans receivable at September 30 are summarized as follows:

                                                    2000             1999
        Real estate loans:
          Single-family residential           $  175,625,198    $  173,621,025
          Multifamily residential                  1,163,052         1,024,020
          Agricultural                             7,360,257         6,877,745
          Commercial                              25,729,930        23,296,263
                                              --------------    --------------
            Total real estate loans              209,878,437       204,819,053

        Other loans:
          Savings account loans                    1,665,225         1,528,578
          Commercial business                     12,554,881        10,932,200
          Other                                   13,616,455         8,112,081
                                              --------------    --------------
            Total other loans                     27,836,561        20,572,859
                                              --------------    --------------
            Total loans receivable               237,714,998       225,391,912

        Less:
          Undisbursed loan proceeds                1,345,162         5,753,098
          Unearned fees, net                         264,192           285,542
          Allowance for loan losses                1,688,749         1,643,339
                                              --------------    --------------
            Loans receivable, net             $  234,416,895    $  217,709,933
                                              ==============    ==============

     The Company originates adjustable rate mortgage loans to hold for
     investment. The Company also originates 15 year and 30 year fixed rate
     mortgage loans and sells substantially all new originations of such loans
     to outside investors. Loans held for sale at September 30, 2000 and 1999,
     are considered by management to be immaterial. Such loans generally have
     market rates of interest.

     The Company is not committed to lend additional funds to debtors whose
     loans have been modified.

     The Company grants real estate loans, primarily single-family residential
     loans, and consumer and agricultural real estate loans, primarily in north
     and east Arkansas. Substantially all loans are collateralized by real
     estate or consumer assets.

 5.  ACCRUED INTEREST RECEIVABLE

      Accrued interest receivable at September 30 is summarized as follows:

                                               2000           1999
       Securities                          $ 1,202,317    $ 1,465,470
       Loans receivable                      2,049,622      1,699,957
                                           -----------    -----------

       TOTAL                               $ 3,251,939    $ 3,165,427
                                           ===========    ===========

                                       49
<PAGE>

6.   ALLOWANCE FOR LOAN AND FORECLOSED REAL ESTATE LOSSES

     Activity in the allowance for losses on loans and foreclosed real estate
     for the years ended September 30, 2000, 1999, 1998, and 1997 is as follows:

<TABLE>
<CAPTION>
                                                                                              Foreclosed
                                                                                Loans         Real Estate
                                                                                -----         ------------
            <S>                                                             <C>             <C>
             BALANCE, SEPTEMBER 30, 1997                                      $1,691,007      $  43,287

               Charge-offs, net of recoveries                                     (6,566)        (1,195)
                                                                              ----------      ---------

             BALANCE, SEPTEMBER 30, 1998                                      $1,684,441      $  42,092

               Charge-offs, net of recoveries                                    (41,102)       (42,092)
                                                                              ----------      ---------

             BALANCE, SEPTEMBER 30, 1999                                      $1,643,339      $       -
                                                                              ----------      ---------

               Provision for Loan Losses                                      $  120,000      $       -
               Charge-offs, net of recoveries                                    (74,590)             -
                                                                              ----------      ---------

             BALANCE, SEPTEMBER 30, 2000                                      $1,688,749      $       0
                                                                              ==========      =========
</TABLE>


        Gross charge-offs and recoveries are not material.

7.   PREMISES AND EQUIPMENT

        Premises and equipment at September 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                       2000             1999
          <S>                                                     <C>              <C>
          Cost:
            Land                                                  $   573,490      $   573,490
            Buildings and improvements                              3,820,888        3,684,512

            Furniture, fixtures, and equipment                      1,609,221        1,560,996
                                                                   ----------       ----------
                                                                    6,003,599        5,818,998
          Less accumulated depreciation                            (2,223,749)      (1,800,841)
                                                                  -----------      -----------
          TOTAL                                                   $ 3,779,850      $ 4,018,157
                                                                  ===========      ===========
</TABLE>


8.   DEPOSITS

            Deposits at September 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                2000              1999
       <S>                                                                <C>                 <C>
       Checking accounts, including noninterest-bearing deposits
         of $8,511,517 and $8,200,683 in 2000 and 1999, respectively       $  57,461,316      $  48,385,973
       Passbook savings                                                       15,305,323         13,017,548
       Certificates of deposit                                               162,204,868        150,487,270
                                                                           -------------       ------------
       TOTAL                                                               $ 234,971,507      $ 211,890,791
                                                                           =============       ============
</TABLE>


                                      50


<PAGE>

The aggregate amount of short-term jumbo certificates of deposit with a minimum
denomination of $100,000 was $31,757,753 and $26,779,134 at September 30, 2000
and 1999, respectively.

At September 30, 2000, scheduled maturities of certificates of deposit are
as follows:

   Years ending september 30:                                    Total

    2001                                                       151,098,243
    2002                                                         6,757,416
    2003                                                         2,301,623
    2004                                                         1,300,696
    2005                                                           675,538
    over 5 years                                                    71,352
                                                             -------------
   TOTAL                                                     $ 162,204,868
                                                             =============

     Interest expense on deposits for the years ended September 30, 2000, 1999,
     and 1998, is summarized as follows:

<TABLE>
<CAPTION>
                                                          2000           1999          1998
<S>                                                   <C>             <C>           <C>
      Checking                                        $ 1,008,497     $1,206,611    $  743,244
      Passbook savings                                    397,124        361,103       312,143
      Certificates of deposit                           8,944,560      7,328,110     6,796,947
                                                      -----------     ----------     ---------
TOTAL                                                 $10,350,181     $8,895,824    $7,852,334
                                                      ===========     ==========    ==========
</TABLE>

 9. FEDERAL HOME LOAN BANK ADVANCES

     The Company is required to purchase stock in the FHLB. Such stock may be
     redeemed at par but is not readily marketable. At September 30, 2000 and
     1999, the Company had stock of $5,988,200 and $10,981,300 respectively.
     Pursuant to collateral agreements with the FHLB, advances are
     collateralized by all of the Company's stock in the FHLB and by 75% of
     qualifying single-family first mortgage loans with a carrying value at
     September 30, 2000 and 1999, of approximately $132,000,000 and $127,000,000
     respectively, and investment securities having a carrying value of
     $85,239,671 at September 30, 1999. Advances at September 30, 2000 and 1999,
     have a maturity dates as follows:

<TABLE>
<CAPTION>
                                                       2000                        1999
                                             -------------------------  ----------------------------
                                              Weighted                     Weighted
                                              Average                      Average
                                               Rate          Amount         Rate         Amount
     <S>                                      <C>       <C>              <C>        <C>
     September 30
      2000                                         -                 -           -                 -
      2001                                         -                 -        5.31%     $131,105,000
      2002                                      6.63%     $109,990,000                             0
      2003                                      6.42%        4,000,000        6.42%        4,000,000
      2004                                         -                 -           -                 -
      2005                                         -                 -           -                 -
      Greater than 5 years                      7.03%        4,000,000        4.72        78,000,000
                                                          ------------                  ------------
     TOTAL                                                $117,990,000                  $213,105,000
                                                          ============                  ============
</TABLE>

     Interest expense on FHLB advances was $8,946,927, $7,966,406, and
     $9,987,640 for the years ended September 30, 2000, 1999, and 1998,
     respectively.


                                      51


<PAGE>

10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

     Securities sold under agreements to repurchase ("Reverse Repurchase
     Agreements" or "Reverse Repos") are as follows:

                                                  2000             1999

Balance outstanding at September 30             $  2,075,000     $  2,107,645

Average balance during the year                    1,900,833        2,273,133

Average interest rate during the year                   5.62%            5.16%

Maximum month-end balance during the year          2,465,000        3,241,800

Investment securities underlying the
  agreements at year-end:
  Carrying value                                   2,528,996        3,420,158
  Estimated market value                           2,528,996        3,420,158

    Interest expense on Reverse Repurchase Agreements was $108,293, $118,962,
    and $309,048 for the years ended September 30, 2000, 1999, and 1998,
    respectively.

11. DEFERRED COMPENSATION

     The Company has funded and unfunded deferred compensation agreements with a
     former executive and non-officer members of the Board of Directors. The
     plans limit the ability of the executive to compete with the Company and
     require that the directors continue to serve for a specified period of
     time. The amount of expense related to such plans for the years ended
     September 30, 2000, 1999, and 1998, was approximately $277,000, $277,000,
     and $179,000, respectively.

     On March 2, 1999, the Company, the Bank and an executive entered into an
     Employment Separation Agreement and Release (the "Agreement"). The
     Agreement provides, among other things, for the payment by the Company to
     the executive of $2,750,000, in installments of not less than $150,000
     annually, with the entire unpaid amount due upon the executive's death. The
     unpaid balance earns interest at the Federal Funds rate, as determined each
     month, compounded monthly, until distributed. The unpaid balance, including
     accrued interest, was approximately $2,645,814 and $2,702,888 at September
     30, 2000 and 1999, respectively. The Agreement provides that the executive
     will be entitled to an additional payout equal to $550,000 should there be
     a change in control of the Company or the Bank on or before April 30, 2003.
     Pursuant to the Agreement, the executive forfeits all shares of restricted
     stock awarded to him under the Company's current Recognition and Retention
     Plan and foregoes any additional benefits accruals or contributions under
     the Company's Restated Supplemental Executive Retirement Agreement.
     Pursuant to the Agreement, the executive's employment agreement was
     terminated (except for certain specified provisions) and no further payouts
     under the Employment Agreement are due to him.

12. RETIREMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN

     The Bank has a defined contribution retirement plan. The plan covers all
     employees who have accumulated one year with 1,000 hours of service in each
     year. A flat percentage rate, selected by discretion of the Board of
     Directors is applied to the base salary of each eligible employee. The
     retirement plan expense for the years ended September 30, 2000, 1999, and
     1998, was $0, $0, and $170,000, respectively.

     The Bank established an Employee Stock Ownership Plan ("ESOP") on October
     1, 1993. During 1994, the ESOP borrowed $523,250 which is collateralized by
     common stock of the Company and a guaranty

                                      52
<PAGE>

     of the Company. The note payable is guaranteed by the Company and was paid
     off during the year ended September 30, 1998. In connection with the
     Reorganization on March 31, 1998, the Company established a new ESOP.
     During 1998, the ESOP borrowed approximately $2.9 million from the Company
     to purchase shares of Company stock. The loan is collateralized by the
     shares that were purchased with the proceeds of the loan. As the loan is
     repaid, ESOP shares will be allocated to participants of the ESOP and are
     available for release to the participants subject to the vesting provisions
     of the ESOP. The Company contributed $500,000, $302,425, and $104,650,
     respectively to the ESOP in years ended September 30, 2000, 1999 and 1998.

     The Company also has a supplemental retirement plan for certain executive
     officers. The plan requires that a set amount be deposited into a trust
     each year until the executive officers reach 60 years of age. The amount of
     expense related to such plans was approximately $220,000, $402,000 and
     $402,000 for the years ended September 30, 2000, 1999, and 1998,
     respectively.

13. INCOME TAXES

     The Company and subsidiaries file consolidated federal income tax returns
     on a fiscal year basis. During the year ended September 30, 1997, new
     legislation was enacted which provides for the recapture into taxable
     income of certain amounts previously deducted as additions to the bad debt
     reserves for income tax purposes. The Company began changing its method of
     determining bad debt reserves for tax purposes following the year ended
     September 30, 1996. The amounts to be recaptured for income tax reporting
     purposes are considered by the Company in the determination of the net
     deferred tax liability.

     Income tax provision (benefit) for the years ended September 30 is
     summarized as follows:

                                               2000       1999         1998

Current                                     $1,740,487   $1,748,077  $1,353,856
Deferred                                      (107,635)  (1,281,899)    (59,617)
                                            ----------  -----------   ---------

TOTAL                                       $1,632,852     $ 466,178 $1,294,239
                                            ==========  ============ ==========

    The net deferred tax amount, which is included in other assets at September
    30, 2000, and other liabilities at September 30, 1999, consisted of the
    following:

<TABLE>
<CAPTION>

                                                                   2000           1999
<S>                                                         <C>                <C>
Deferred tax assets:
  Deferred compensation                                     $  1,327,210       $ 1,358,084
  Allowance for loan losses                                      447,220           305,219
  Unrealized loss on securities - trading                        162,753           170,411
  Unrealized loss on securities - AFS Securities                 537,238                 0
  Core deposit premium amortization                               96,703            50,866
  Other                                                          122,590           196,871
                                                            ------------       -----------
          Total deferred tax assets                            2,693,714         2,081,451

Deferred tax liabilities:
  Unrealized gain on available-for-sale securities                     0          (236,735)
  FHLB stock dividends                                          (628,423)         (665,158)
  Other                                                          (12,686)           (8,560)
                                                           -------------        ----------
            Total deferred tax liabilities                      (641,109)         (910,453)
                                                           -------------        ----------

Net deferred tax asset (liability)                          $  2,052,605       $ 1,170,998
                                                           =============        ==========
</TABLE>

                                      53
<PAGE>

The income tax provision differed from the amounts computed by applying the
federal income tax rates as a result of the following:


<TABLE>
<CAPTION>
                                             2000                    1999                  1998                    1997
                                  -------------------------- --------------------- ---------------------- ----------------------
<S>                               <C>          <C>           <C>      <C>          <C>       <C>          <C>        <C>
Expected income tax expense           34.0%    $1,728,724      34.0%  $ 482,261      34.0%   $1,421,734      34.0%   $1,264,802
Exempt income                         (3.0)      (155,637)    (10.2)   (144,679)     (2.6)     (107,103)     (1.5)      (54,618)
Cash surrender value of life
  insurance                              -              -      (6.4)    (90,565)     (1.5)      (62,098)     (2.0)      (73,096)
State tax, net of federal benefit     7.10        363,357      11.2     158,669       4.3       179,389       4.0       147,312
ESOP contribution                        -              -      (1.8)    (25,343)      2.1        87,161         -             -
Change in estimate                   (0.20)       (10,208)        -           -      (4.3)     (179,892)     (0.3)      (12,688)
Other                                (6.00)      (293,384)      6.1      85,835      (1.1)      (44,952)      1.9        72,778
                                   -------     ----------    ------   ---------     -----    ----------     -----    ----------
TOTAL                                 31.9%    $1,632,852      32.9%  $ 466,178      30.9%   $1,294,239      36.1%   $1,344,490
                                   =======     ==========    ======   =========     ======   ==========     =====    ==========
</TABLE>


      The Company and the Bank provide for the recognition of a deferred tax
      asset or liability for the future tax consequences of differences in
      carrying amounts and tax bases of assets and liabilities. Specifically
      exempted from this provision are bad debt reserves for tax purposes of
      U.S. savings and loan associations in the association's base year, as
      defined. Base year reserves total approximately $2,979,000 at September
      30, 2000. Consequently, a deferred tax liability of approximately
      $1,141,000 related to such reserves is not provided for in the statement
      of financial condition at September 30, 2000.

14. REGULATORY MATTERS

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

      Quantitative measures established by regulation to ensure capital adequacy
      require the Bank to maintain minimum amounts and ratios (set forth in the
      table below) of tangible and core capital (as defined in the regulations)
      to adjusted total assets (as defined), and of total capital (as defined)
      to risk weighted assets (as defined). Management believes, as of September
      30, 2000, that the Bank meets all capital adequacy requirements to which
      it is subject.

      As of September 30, 2000 and 1999, the most recent notification from the
      OTS categorized the Bank as well capitalized under the regulatory
      framework for prompt corrective action. To be categorized as well
      capitalized the Bank must maintain minimum total, tangible, and core
      capital ratios as set forth in the table below. There are no conditions or
      events since that notification that management believes have changed the
      institution's category.

                                       54
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                  Required
                                                                                            To Be Categorized As
                                                                           Required        Well Capitalized Under
                                                                         For Capital         Prompt Corrective
                                                     Actual           Adequacy Purposes      Action Provisions
                                             --------------------- ----------------------- -----------------------
                                                Amount    Ratio        Amount      Ratio     Amount      Ratio
<S>                                          <C>          <C>      <C>             <C>       <C>         <C>
As of September 30, 2000:

  Tangible capital to tangible assets           $35,423    8.92%        $ 5,955    1.50%       N/A        N/A

  Core capital to adjusted tangible assets       35,423    8.92          15,880    4.00     $19,850      5.00

  Total capital to risk weighted assets          37,050   17.66          16,784    8.00      20,968     10.00

  Tier I capital to risk weighted assets         35,423   16.88           8,392    4.00      12,581      6.00

As of September 30, 1999:

  Tangible capital to tangible assets           $44,555    9.35%        $ 7,151    1.50%       N/A        N/A

  Core capital to adjusted tangible assets       44,555    9.35          19,068    4.00     $23,835      5.00

  Total capital to risk weighted assets          46,167   20.23          18,212    8.00      22,764     10.00

  Tier I capital to risk weighted assests        44,555   19.56           9,106    4.00      13,659      6.00
</TABLE>


15. RETAINED EARNINGS

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

      The Bank may not declare or pay cash dividends on its shares of common
      stock if the effect thereof would cause the Bank's stockholders' equity to
      be reduced below applicable regulatory capital maintenance requirements
      for insured institutions or below the special liquidation account referred
      to above. This requirement effectively limits the dividend paying ability
      of the Company in that the Company must maintain an investment in equity
      of the Bank sufficient to enable the Bank to meet its requirements as
      noted above. Required capital amounts are shown in Note 14 to the
      consolidated financial statements. Liquidation account balances are not
      maintained because of the cost of maintenance and the remote likelihood of
      complete liquidation. Additionally, the Bank is limited to distributions
      it may make to Bancorp without OTS approval if the distribution would
      cause the total distributions to exceed the Bank's net income for the year
      to date plus the Bank's net income (less distributions) for the preceding
      two years. Bancorp may use assets other than its investment in the Bank as
      a source of dividends.

                                       55
<PAGE>

 16.    EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                                        Year Ended September 30

                                                    2000           1999          1998
<S>                                             <C>             <C>           <C>
Basic EPS weighted average shares                5,166,038      5,802,860     6,388,906
Add dilutive effect of unexercised options           6,713         34,759       146,162
                                                ----------      ---------     ---------

      Dilutive EPS weighted average shares       5,172,751      5,837,619     6,535,068
                                                ==========     ==========    ==========
</TABLE>


17. COMMITMENTS AND CONTINGENCIES

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

18. FINANCIAL INSTRUMENTS

     The Company is a party to financial instruments with off-balance sheet risk
     in the normal course of business to meet the financing needs of its
     customers and to reduce its own exposure to fluctuations in interest rates.
     These financial instruments include commitments to extend credit, standby
     letters of credit and financial guarantees. Those instruments involve, to
     varying degrees, elements of credit and interest-rate risk in excess of the
     amount recognized in the consolidated statements of financial condition.
     Instruments used to reduce exposure to fluctuations in interest rates are
     considered in the aggregate and individually immaterial. The contract or
     notional amounts of those instruments reflect the extent of the Company's
     involvement in particular classes of financial instruments.

     The Company's exposure to credit loss in the event of nonperformance by the
     other party to the financial instrument for commitments to extend credit,
     standby letters of credit, and financial guarantees written is represented
     by the contractual notional amount of those instruments. The Company uses
     the same credit policies in making commitments and conditional obligations
     as it does for on-balance sheet instruments.

     Unless noted otherwise, the Company does not require collateral or other
     security to support such financial instruments with credit risk.

     Commitments to Extend Credit and Financial Guarantees - Commitments to
     extend credit are agreements to lend to a customer as long as there is no
     violation of any condition established in the contract. Commitments
     generally have fixed expiration dates or other termination clauses and may
     require payment of a fee. Since many of the commitments are expected to
     expire without being drawn upon, the total commitment amounts do not
     necessarily represent future cash requirements. The Company evaluates each
     customer's creditworthiness on a case-by-case basis. The amount of
     collateral obtained, if it is deemed necessary by the Company upon
     extension of credit, is based on management's credit evaluation of the
     counterparty.

     Standby letters of credit are conditional commitments issued by the Company
     to guarantee the performance of a customer to a third party. The credit
     risk involved in issuing letters of credit is

                                      56
<PAGE>

     essentially the same as that involved in extending loan facilities to
     customers. The Company holds marketable securities as collateral supporting
     these commitments for which collateral is deemed necessary.

     At September 30, 2000, the Company had the following outstanding
     commitments to extend credit:

        Undisbursed loans in process                            $ 1,345,162
        Unfunded lines and letters of credit                      2,466,821
        Outstanding loan commitments                              1,816,593
                                                                -----------
            Total outstanding commitments                       $ 5,628,576
                                                                ===========

     The Company has not incurred any losses on its commitments in any of the
     three years in the period ended September 30, 2000.

RELATED PARTY TRANSACTIONS

     In the normal course of business, the Company has made loans to its
     directors, officers, and their related business interests. In the opinion
     of management, related party loans are made on substantially the same
     terms, including interest rates and collateral, as those prevailing at the
     time for comparable transactions with unrelated persons and do not involve
     more than the normal risk of collectibility. The aggregate dollar amount of
     loans outstanding to directors, officers, and their related business
     interests total approximately $1,542,073, $1,045,214 and $818,594 at
     September 30, 2000, 1999 and 1998, respectively. During the year ended
     September 30, 2000, total principal additions were $667,014 and total
     principal payments were $170,155.

     Deposits from related parties held by the Company at September 30, 2000 and
     1999 amounted to $627,578 and $849,889, respectively.

20. RESTRICTED STOCK AWARD PROGRAMS AND STOCK OPTION PLANS

     1994 Incentive Stock Option Plan -

     The 1994 Incentive Stock Option Plan for senior executives and key
     employees granted options to purchase 49,833 shares of common stock. The
     plan authorizes the grant of incentive stock options, non-statutory stock
     options, and limited rights. Under the plan, options become exercisable 20%
     after each of the five years following the grant. The exercise price for
     incentive stock options may not be less than the fair market value of the
     underlying shares on the date of grant. The plan is administered by a
     committee of the Board of Directors. The committee has the authority to
     determine the employees to whom awards will be made, the amount of the
     awards, and the other terms and conditions of the awards.

     1994 Stock Option Plan -

     The 1994 Stock Option Plan for outside directors may grant non-qualified
     stock options to purchase shares of common stock for each outside director
     who was serving in such a capacity on the date of the Company's initial
     stock offering in 1994. The purchase price of the common stock deliverable
     upon the execution of each non-qualified stock option was the price at
     which the common stock of the Company was offered in the initial offering
     ($10). The Company granted options on 20,643 shares of common stock
     (options on 24,917 shares may be granted under the plan). The plan also
     provides for subsequent grants of non-qualifying stock options to others
     who become outside directors after the date of the offering. Options
     reserved for future grant shall vest ratably at 20% each year commencing on
     the first September 30th after the person becomes an outside director
     through September 30, 2002, at which time all options shall become vested.
<PAGE>

      1998 Stock Option Plan -

      The Company's stockholders adopted 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 any one or a combination of incentive stock options,
      non-statutory or compensatory stock options, limited rights, dividend
      equivalent rights and reload options, representing up to 357,075 shares of
      the Company's stock. The options will vest in equal amounts over five
      years beginning one year from the date of grant. Options granted vest
      immediately in the event of retirement, disability, or death and are
      generally exercisable for a three year period following such event.
      Outstanding stock options expire no later than 10 years from the date of
      grant. 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, the fair value of the stock on that date. Seventy
      thousand options are exercisable of as September 30, 2000. The weighted
      average remaining contractual life of the options as of September 30,
      2000, is 8.1 years.

      A summary of the activity of the Company's 1998 Stock Option Plan is as
      follows:

<TABLE>
<CAPTION>
                                                                                            Weighted
                                                                                             Average
                                                                                            Exercise
                                                                              Shares          Price
<S>                                                                          <C>            <C>
Outstanding at September 30, 1998                                                   -
Granted                                                                       350,000         $9.00
Exercised                                                                           -
Forfeited                                                                           -
                                                                             --------
Outstanding at September 30, 1999                                             350,000         $9.00
Granted                                                                             -
Exercised                                                                           -
Forfeited                                                                           -
                                                                             --------
Outstanding at September 30, 2000                                             350,000         $9.00
                                                                             ========
Options exercisable at September 30, 1999                                           -
                                                                             ========
Options exercisable at September 30, 2000                                      70,000         $9.00
                                                                             ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                                    Year Ended
                                                                                    September 30
                                                                        ----------------------------------
<S>                                                                     <C>                      <C>
                                                                                 2000             1999
Net income (in thousands):
  As reported                                                                  $3,452            $ 952
  Pro forma                                                                     3,180              816
Earnings per share:
  Basic - as reported                                                            0.67             0.16
  Basic - pro forma                                                              0.62             0.14
  Diluted - as reported                                                          0.67             0.16
  Diluted - pro forma                                                            0.62             0.14
</TABLE>

                                      58
<PAGE>

     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%.

   1998 Recognition Plan -

   The 1998 Recognition and Retention Plan ("RRP") provides for a committee of
   the Company's Board of Directors to award restricted stock to key officers as
   well as non-employee directors.  The RRP authorizes the Company to grant up
   to 142,830 shares of the Company's common stock.  The Committee granted
   142,830 shares to key officers and non-employee directors on October 23,
   1998.

   Compensation expense is being recognized based on the fair market value of
   the shares on the grant date of $9.00 over the vesting period.  The shares
   will vest equally over a five year period with the first vesting date of
   January 3, 2000.  Shares granted will be vested immediately in the event of
   disability or death.  Approximately $247,000 and $440,000 in compensation
   expense was recognized during the year ended September 30, 2000 and 1999,
   respectively.

21.OTHER COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                 Year Ended September 30, 2000
                                                                ----------------------------------------------------------------
                                                                  Before Tax               Tax Expense               Net-of-Tax
                                                                     Amount                  (Benefit)                 Amount
<S>                                                             <C>                        <C>                     <C>
   UNREALIZED GAINS (LOSSES) ON SECURITIES:
    Unrealized holding gain (loss) on securities
     arising during period                                       $(1,828,831)                $(621,803)             $(1,207,028)
    Less reclassification adjustment for
     (gains) losses included in net income                          (447,563)                 (152,171)                (295,392)
                                                                 ------------                ----------             -----------
            Other comprehensive income (loss)                    $(2,276,394)                $(773,974)             $(1,502,420)
                                                                 ============                ==========             ===========
<CAPTION>
                                                                                 Year Ended September 30, 2000
                                                                ----------------------------------------------------------------
                                                                  Before Tax               Tax Expense               Net-of-Tax
                                                                     Amount                  (Benefit)                 Amount
<S>                                                             <C>                        <C>                     <C>
   UNREALIZED GAINS (LOSSES) ON SECURITIES:
    Unrealized holding gain (loss) on securities
     arising during period                                       $(1,956,309)                $(665,145)             $(1,291,164)
    Less reclassification adjustment for
     (gains) losses included in net income                          (161,411)                  (54,880)                (106,531)
                                                                 ------------                ----------             ------------
            Other comprehensive income (loss)                    $(2,117,720)                $(720,025)             $(1,397,695)
                                                                 ============                ==========             ============
</TABLE>

                                       59
<PAGE>

22.  PARENT COMPANY ONLY FINANCIAL INFORMATION

     The following condensed statements of financial condition as of September
     30, 2000 and 1999, and condensed statements of income and cash flows for
     the years ended September 30, 2000 and 1999, for Pocahontas Bancorp, Inc.
     should be read in conjunction with the consolidated financial statements
     and the notes herein.

     POCAHONTAS BANCORP, INC.
     (PARENT COMPANY ONLY)

     CONDENSED STATEMENTS OF FINANCIAL CONDITION
     SEPTEMBER 30, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                            2000           1999
     <S>                                                                <C>             <C>
     ASSETS

     Deposit in Bank                                                    $ 4,013,763     $ 1,011,892
     Investment in Bank                                                  36,481,860      47,552,329
     Loan                                                                 2,443,525       2,443,525
     Investment securities                                                1,126,712       1,429,196
     Other assets                                                         2,145,272       1,401,115
                                                                        -----------     -----------

     TOTAL ASSETS                                                       $46,211,132     $53,838,057
                                                                        ===========     ===========

     LIABILITIES AND STOCKHOLDERS' EQUITY

     Accrued expenses and other liabilities                             $ 2,186,988     $ 3,102,731
     Deferred compensation                                                2,645,814       2,702,888
     Stockholders' equity                                                41,378,330      48,032,438
                                                                        -----------     -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $46,211,132     $53,838,057
                                                                        ===========     ===========

     CONDENSED STATEMENTS OF INCOME
     YEARS ENDED SEPTEMBER 30, 2000 AND 1999

     INCOME:
       Interest and dividend income                                     $   515,573     $   423,375

     EXPENSES:
       Operating expenses                                                   785,477       3,709,582
                                                                        -----------     -----------
     LOSS BEFORE INCOME TAXES AND EQUITY IN
       IN UNDISTRIBUTED EARNINGS OF BANK SUBSIDIARY                        (269,904)     (3,286,207)

     INCOME TAX (BENEFIT)                                                  (289,582)       (957,778)
                                                                        -----------     -----------
     INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED
       EARNINGS OF BANK SUBSIDIARY
                                                                             19,678      (2,328,429)
     EQUITY IN UNDISTRIBUTED EARNINGS OF BANK
       SUBSIDIARY                                                         3,431,951       3,280,666
                                                                        -----------     -----------
     NET INCOME                                                         $ 3,451,629      $  952,237
                                                                        ===========     ===========
</TABLE>

                                       60
<PAGE>

POCAHONTAS BANCORP, INC.
(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                 2000                         1999
<S>                                                                          <C>                        <C>
  OPERATING ACTIVITIES:

   Net income                                                                $ 3,451,629                $    952,237
   Adjustments to reconcile net income to net cash provided
    (used) by operating activities:
    Equity in undistributed earnings of Bank subsidiary                       (3,431,951)                 (3,280,666)
    Stock compensation                                                           504,704                     852,706
    Other
    Changes in operating assets and liabilities:
      Investment securities                                                      302,484                     159,339
      Other assets                                                              (744,157)                 (1,261,176)
      Accrued expenses and other liabilities                                    (915,743)                    209,646
      Deferred compensation                                                      (57,074)                  2,702,888
                                                                             -----------                ------------
            Net cash provided (used) by operating activities                    (890,108)                    334,974

  INVESTING ACTIVITIES:
    Distribution from subsidiary                                             $13,000,000                $     15,577

  FINANCING ACTIVITIES:
    Options exercised                                                             21,253                     383,690
    Dividends paid                                                            (1,327,605)                 (1,443,076)
    Purchase of treasury stock                                                (7,801,669)                (11,882,222)
                                                                             -----------                ------------
            Net cash used by financing activities                             (9,108,021)                (12,941,608)
                                                                             -----------                ------------
  NET INCREASE (DECREASE)
   IN CASH AND CASH EQUIVALENTS                                                3,001,871                 (12,591,057)

    CASH AND CASH EQUIVALENTS
   Beginning of period                                                         1,011,892                  13,602,949
                                                                             -----------                ------------
   End of period                                                             $ 4,013,763                $  1,011,892
                                                                             ===========                ============
</TABLE>

                                       61
<PAGE>

23.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following tables represent summarized data for each of the four
     quarters in the years ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                     2000
                                                        (in thousands, except per share data)

                                                     Fourth      Third      Second       First
                                                     Quarter    Quarter     Quarter     Quarter
     <S>                                            <C>         <C>         <C>         <C>
     Interest income                                $ 7,037     $ 7,415     $ 7,659     $ 7,816
     Interest expense                                 4,908       4,981       4,904       4,932
                                                    -------     -------     -------     -------
     Net interest income                              2,129       2,434       2,755       2,884
     Provision for loan losses                          120           -           -           -
                                                    -------     -------     -------     -------
     Net interest income after
       provision for loan losses                      2,009       2,434       2,755       2,884
     Non-interest income                                761         879         630         832
     Non-interest expense                             1,695       2,125       2,177       2,102
                                                    -------     -------     -------     -------
     Income before income taxes                       1,075       1,188       1,208       1,614
     Income tax expense                                 218         441         399         575
                                                    -------     -------     -------     -------
     Net income                                     $   857     $   747         809     $ 1,039
                                                    =======     =======     =======     =======
     Basic earnings per share                       $  0.18     $  0.14     $  0.15     $  0.20
     Diluted earnings per share                     $  0.18     $  0.14     $  0.15     $  0.20
     Cash dividends declared per
       common share                                 $ 0.065     $ 0.065     $ 0.060     $ 0.060

                                                                     1999
                                                     (in thousands, except per share data)

                                                     Fourth      Third      Second       First
                                                     Quarter    Quarter     Quarter     Quarter
     <S>                                            <C>         <C>         <C>         <C>
     Interest income                                $ 7,673     $ 6,780     $ 6,642     $ 6,865
     Interest expense                                 4,859       4,192       3,948       4,218
                                                    -------     -------     -------     -------
     Net interest income                              2,814       2,588       2,694       2,647
     Provision for loan losses                            -           -           -           -
                                                    -------     -------     -------     -------
     Net interest income after
       provision for loan losses                      2,814       2,588       2,694       2,647
     Non-interest income                                466         564         322         575
     Non-interest expense                             2,129       2,078       4,992       2,053
                                                    -------     -------     -------     -------
     Income before income taxes                       1,151       1,074      (1,976)      1,169
     Income tax expense                                 375         372        (640)        359
                                                    -------     -------     -------     -------
     Net income                                     $   776     $   702     $(1,336)    $   810
                                                    =======     =======     =======     =======
     Basic earnings per share                       $  0.13     $  0.13     $ (0.23)    $  0.13
     Diluted earnings per share                     $  0.13     $  0.12     $ (0.23)    $  0.13
     Cash dividends declared per
       common share                                 $ 0.060     $ 0.060     $ 0.060     $ 0.060
</TABLE>

                            *  *  *  *  *  *  *  *
<PAGE>

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

          Not applicable.

<PAGE>

                                   PART III

ITEM 10     DIRECTORS AND OFFICERS OF THE REGISTRANT
-------     ----------------------------------------

     The table below sets forth certain information, as of September 30, 2000,
regarding members of the Company's Board of Directors, including the terms of
office of Board members.

<TABLE>
<CAPTION>
                                                                            Shares of
                                                                          Common Stock
                               Positions                                  Beneficially
                              Held in the      Served      Current Term     Owned on          Percent
Name (1)Age                     Company        Since (2)     to Expire    Record Date (3)     Of Class
-----------       ---------------------        ---------     ---------    --------------      --------
<S>                        <C>                 <C>          <C>           <C>                 <C>
Nominees
Skip Martin       51       Director              1988         2001            172,147             3.8%

Charles R. Ervin  63       Director              1988         2001             67,477             1.5%

Dwayne Powell     36       Chief Financial       2000         2001
                           Officer                                             96,057             2.1%

Directors Continuing in Office

Ralph B. Baltz    53       Chairman              1986         2000            141,902             3.1%

Marcus Van Camp   52       Director              1990         2000             39,182               *

N. Ray Campbell   50       Director              1992         2000             51,099               *

James A. Edington 50       President and         1994         1999            209,844             4.6%
                           Director

Robert Rainwater  65       Director              1981         1999             39,324               *

Executive Officer

Bill B. Stacy     58       SVP, Loan Officer                                   18,203               *

Richard Olvey     57       SVP, Loan Officer                                   34,043               *
</TABLE>

____________________

*     Less than 1%
(1)   The mailing address for each person listed is 203 West Broadway,
      Pocahontas, Arkansas 72455. Each of the persons listed is also a director
      of Pocahontas Federal Savings and Loan Association (the "Bank"), the
      Company's wholly owned subsidiary.

(2)   Reflects initial appointment to the Board of Directors of the Bank's
      mutual predecessor.
(3)   See definition of "beneficial ownership" in the table "Beneficial
      Ownership of Common Stock."

                                       64
<PAGE>

          James A. Edington has been President and CEO since April 1999. Prior
to that he served the Bank and the Company as Executive Vice President. He has
been the Bank's compliance officer, security officer, secretary, and treasurer.
Mr. Edington has been employed in executive roles with the Bank since 1983.

          Skip Martin was the President and Chief Executive Officer of the Bank
from 1990 through April 1999. He has been a member of the Board of Directors of
the Bank since 1988 and of the Company since its formation. Prior to his
appointment as President and Chief Executive Officer, Mr. Martin served as Vice
President of the Bank.

          Ralph P. Baltz has been Chairman of the Board of the Bank since
January 1997 and of the Company since its formation. Mr. Baltz is a general
contractor and residential developer and is the President and owner/operator of
Tri-County Sand and Gravel, Inc.

          Marcus Van Camp is the Superintendent of Schools at Pocahontas Public
Schools, and has been employed by such schools for 25 years.

          Charles R. Ervin is retired. Prior to his retirement, Mr. Ervin was
President and owner of C.E.C., Inc., a construction company, since March 1992.
Prior to that, Mr. Ervin was President and part-owner of M.T.C., Inc., a general
contractor specializing in tenant construction in shopping centers nationally.

          N. Ray Campbell is the Owner and Operator of Big Valley Trailer
Manufacturing. Prior to this, Mr. Campbell was the Plant Manager of Waterloo
Industries, an industrial firm located in Pocahontas, Arkansas.

          Robert Rainwater is semi-retired. Prior to his retirement, Mr.
Rainwater was the owner of Sexton Pharmacy in Walnut Ridge, Arkansas.

          Dwayne Powell, CPA, has served as Chief Financial Officer of the Bank
since October 1996 and of the Company since its formation. Prior to that, Mr.
Powell was an Audit Manager for Deloitte & Touche LLP, primarily serving
financial institution clients.

                                       65
<PAGE>

ITEM 11  EXECUTIVE COMPENSATION
-------  ----------------------

     The following table sets forth for the years ended September 30, 2000,
1999, and 1998, certain information as to the total remuneration paid by the
Company to the Chief Executive Officer and all other executive officers whose
salary and bonuses exceeded $100,000 ("Named Executive Officers").

<TABLE>
<CAPTION>
                                                                          Long-Term Compensation
                                                                     -------------------------------
                                           Annual Compensation         Awards               Payouts
                                     ------------------------------  -------------------------------
                            Year                           Other      Restricted   Options/                 All
Name and                    Ended                       Annual Com-     Stock       SARS      LTIP         Other
Principal Position        Sept. 30,  Salary (1)  Bonus   pensation    Awards (3)     (#)     Payouts  Compensation (2)
------------------------  ---------  ----------  -----  -----------  -----------  ---------  -------  ----------------
<S>                       <C>        <C>         <C>    <C>          <C>          <C>        <C>      <C>
Skip Martin.............       2000   $ 21,000      --           --          --         --        --          $    --
President and CEO(4)....       1999    142,418      --           --      80,000         --        --               --
                               1998    196,000      --           --          --         --        --           20,161

James A. Edington.......       2000    196,000      --           --          --         --        --           27,990
  President and CEO(4)..       1999    196,565      --           --     321,354     80,000        --           30,637
                               1998    171,000      --           --          --         --        --           20,161

Dwayne Powell...........       2000    153,500      --           --          --         --        --           27,668
  Chief Financial.......       1999    150,175      --           --     321,354     80,000        --           29,387
  Officer...............       1998    125,000      --           --          --         --        --           20,161
</TABLE>
_________________________

(1)  Includes Board of Director and committee fees.
(2)  Consists of payments made pursuant to the Bank's Profit Sharing Plan. See
     "--Benefits for Employees and Officers." Also includes the Bank's
     contributions or allocations (but not earnings) pursuant to the Bank's
     Employee Stock Ownership Plan. Does not include benefits pursuant to the
     Bank's Pension Plan. See "--Benefits for Employees and Officers."
(3)  Represents awards made pursuant to the Company's Recognition and Retention
     Plan for Employees, which awards vest in five equal annual installments
     commencing on January 3, 2000.  Dividends on such shares accrue and are
     paid to the recipient when the shares are granted.  The value of such
     shares was determined by multiplying the number of shares awarded by the
     price at which the shares of common stock were sold.
(4)  Mr. Edington was appointed President and Chief Executive Officer in April
     1999 upon retirement of Mr. Martin.

<TABLE>
<CAPTION>
 ==================================================================================================
                       AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                                  FISCAL YEAR-END OPTION VALUES
==================================================================================================
                        Shares
                       Acquired                 Number of Unexercised      Value of Unexercised
                         Upon       Value            Options at           In-The-Money Options at
Name                   Exercise    Realized        Fiscal Year-End            Fiscal Year-End
                                            ------------------------------------------------------
                                              Exercisable/Unexercisable  Exercisable/Unexercisable
==================================================================================================
<S>                   <C>          <C>       <C>                         <C>
Skip Martin                   --          --                   0/80,000             $0/$0

James A. Edington             --                               0/80,000             $0/$0

Dwayne Powell                 --                               0/80,000             $0/$0
==================================================================================================
</TABLE>

                                       66
<PAGE>

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

          Persons and groups who beneficially own in excess of 5% of Common
Stock are required to file certain reports with the Securities and Exchange
Commission (the "SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act").

          The following table sets forth, as of the Record Date, the shares of
Common Stock beneficially owned by the Company's directors, named executive
officers (as defined in ""Executive Compensation"), and executive officers and
directors as a group, as well as each person who was the beneficial owner of
more than 5% of the outstanding shares of Company Common Stock as of the Record
Date.

                                        Amount of Shares
                                        Owned and Nature   Percent of Shares
                                          of Beneficial     of Common Stock
 Holder                                   Ownership (1)     Outstanding (4)
 ------                                   ------------      --------------

All Directors and Executive Officers
as a Group (8 persons)                       869,278             18.9

Pocahontas Federal Savings and Loan          460,416             10.0
401(k) Savings and Employee Stock
Ownership Plan. (2)(3)

____________________________

(1)  Based solely upon the filings made pursuant to the Exchange Act and
     information furnished by the respective persons. In accordance with Rule
     13d 3 under the Exchange Act, a person is deemed to be the beneficial owner
     for purposes of this table, of any shares of Common Stock if he has sole or
     shared voting or investment power with respect to such shares, or has a
     right to acquire beneficial ownership at any time within 60 days from the
     date as to which beneficial ownership is being determined. As used herein,
     "voting power" is the power to vote or direct the voting of shares and
     "investment power" is the power to dispose or direct the disposition of
     shares. Includes all shares held directly as well as shares owned by
     spouses and minor children, in trust and other indirect ownership, over
     which shares the named individuals effectively exercise sole or shared
     voting or investment power.
(2)  Under the Pocahontas Federal Savings and Loan Association 401(k) Savings
     and Employee Stock Ownership Plan (the "ESOP"), shares allocated to
     participants' accounts are voted in accordance with the participants'
     directions. Unallocated shares held by the ESOP are voted by the ESOP
     Trustee in the manner calculated to most accurately reflect the
     instructions it has received from the participants regarding the allocated
     shares. As of the Record Date, 311,007 shares of Common Stock were
     allocated under the ESOP.
(3)  Excludes 79,970 shares of Common Stock or 14.4% of the shares of Common
     Stock outstanding, owned by the ESOP for the benefit of the named Executive
     Officers of the Bank.
(4)  Total Common Stock outstanding includes shares that may be acquired
     pursuant to presently exercisable options.

                                      67
<PAGE>

ITEM 13        CERTAIN TRANSACTIONS
-------        --------------------
          The Bank has followed a policy of granting consumer loans and loans
secured by one to four family real estate to officers, directors and employees.
Loans to directors and executive officers are made in the ordinary course of
business and on the same terms and conditions as those of comparable
transactions with the general public prevailing at the time, in accordance with
the Bank's underwriting guidelines, and do not involve more than the normal risk
of collectibility or present other unfavorable features.

          All loans by the Bank to its directors and executive officers are
subject to OTS regulations restricting loan and other transactions with
affiliated persons of the Bank. Federal law generally requires that all loans to
directors and executive officers be made on terms and conditions comparable to
those for similar transactions with non-affiliates, subject to limited
exceptions. However, recent regulations now permit executive officers and
directors to receive the same terms on loans through plans that are widely
available to other employees, as long as the director or executive officer is
not given preferential treatment compared to the other participating employees.
Loans to all directors, executive officers, and their associates totaled
$1,542,073 at September 30, 2000, which was 3.7% of the Company's stockholders'
equity at that date. There were no loans outstanding to any director, executive
officer or their affiliates at preferential rates or terms which in the
aggregate exceeded $60,000 during the three years ended September 30, 2000. All
loans to directors and officers were performing in accordance with their terms
at September 30, 2000.

                                    PART IV

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

        (a)(1) Financial Statements
               --------------------
        Financial statements have been included in Item 8.

        (a)(2) Financial Statement Schedules
               -----------------------------
        All financial statement schedules have been omitted as the required
information is inapplicable or has been included in the Notes to Consolidated
Financial Statements.

        (a)(3) Exhibits
               --------

<TABLE>
<CAPTION>
                                                     Sequential Page
                                                   Reference to Prior        Number Where
                                                    Filing or Exhibit      Attached Exhibits
Regulation S-K                                      Number Attached      Are Located in This
Exhibit Number              Document                     Hereto           Form 10-K Report
--------------              --------                 --------------       ----------------
<S>                   <C>                            <C>                  <C>
        2             Plan of Reorganization              None              Not Applicable

        3            Articles of Incorporation            None              Not Applicable
</TABLE>

                                      68
<PAGE>

<TABLE>
<CAPTION>
                                                     Sequential Page
                                                   Reference to Prior        Number Where
                                                    Filing or Exhibit      Attached Exhibits
Regulation S-K                                      Number Attached      Are Located in This
Exhibit Number              Document                     Hereto           Form 10-K Report
--------------              --------                   ------------       ----------------
<S>                         <C>                        <C>                <C>
        3                     Bylaws                      None              Not Applicable

        4            Instruments defining the             None              Not Applicable
                    rights of security holders,
                       including debentures

        9             Voting trust agreement              None              Not Applicable

       10               Material contracts                None              Not Applicable

       11            Statement re: computation             Not              Not Applicable
                       of per share earnings            Required

       12            Statement re: computation             Not              Not Applicable
                             of ratios                  Required

       13          Annual Report to Stockholders          None              Not Applicable


       16              Letter re: change in
                            certifying                    None              Not Applicable
                            accountants

       18              Letter re: change in
                       accounting principles              None              Not Applicable

       19               Previously unfiled
                             documents                    None              Not Applicable

       21           Subsidiaries of Registrant             21                   Page 29
</TABLE>

                                      69
<PAGE>

<TABLE>
<CAPTION>
                                                     Sequential Page
                                                   Reference to Prior        Number Where
                                                    Filing or Exhibit      Attached Exhibits
Regulation S-K                                      Number Attached      Are Located in This
Exhibit Number              Document                     Hereto           Form 10-K Report
--------------              --------                  ----------          ----------------
<S>                         <C>                       <C>                 <C>
       22           Published report regarding            None              Not Applicable
                   matters submitted to vote of
                         security holders

       23             Consent of Experts and               Not              Not Applicable
                              Counsel                    Required

       24                Power of Attorney                None              Not Applicable

       28            Information from reports             None              Not Applicable
                        furnished to state
                       insurance regulatory
                            authorities

       99               Additional Exhibits               None              Not Applicable
</TABLE>


        (b)    Reports on Form 8-K:

               None

                                      70
<PAGE>

                                  SIGNATURES

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

                                     POCAHONTAS BANCORP, INC.


Date: December 20, 2000                      By:  /s/ James Edington
      -----------------                           ------------------------------
                                                   James Edington, President and
                                                   Chief Executive Officer

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

By:  /s/  James Edington                     By:  /s/ Dwayne Powell
    -------------------------------------         ------------------------------
    James Edington                                Dwayne Powell
    President, Chief Executive Officer,           Chief Financial Officer,
Treasurer and Director                            Secretary and
    (Principal Executive Officer)                 (Principal Financial Officer)

Date: December 20, 2000                           Date: December 20, 2000
      -----------------                                 -----------------

By:  /s/  Ralph P. Baltz                     By:  /s/  Skip Martin
    -------------------------------------         ------------------------------
    Ralph P. Baltz                                Skip Martin
    Chairman of the Board and Director            Director

Date: December 20, 2000                           Date: December 20, 2000
      -----------------                                 -----------------


By:  /s/ Charles R. Ervin                    By: /s/ Marcus Van Camp
     ------------------------------------        -------------------------------
    Charles R. Ervin                             Marcus Van Camp
    Director                                     Director

Date: December 20, 2000                          Date:  December 20, 2000
      -----------------                                  -----------------



By:  /s/ N. Ray Campbell                     By:  /s/ Robert Rainwater
    -------------------------------------         ------------------------------
    N. Ray Campbell                               Robert Rainwater
    Director                                      Director

Date: December 20, 2000                           Date: December 20, 2000
      -----------------                                 -----------------

                                      71