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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x    QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE # 0-23969

POCAHONTAS BANCORP, INC.

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined by the Rule 12b-2 of the Securities Exchange Act of 1934).

Yes  ¨    No  x

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

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POCAHONTAS BANCORP, INC.

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Item 1

POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

See notes to condensed consolidated financial statements.

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POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)

(Continued)

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POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)

(Concluded)

See notes to condensed consolidated financial statements.

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POCAHONTAS BANCORP, INC.

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

See notes to condensed consolidated financial statements.

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POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Continued)

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POCAHONTAS BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Concluded)

See notes to condensed consolidated financial statements.

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POCAHONTAS BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The consolidated balance sheet information at September 30, 2002 was derived from the audited balance sheets of Pocahontas Bancorp, Inc. (the “Company”), at September 30, 2002. The consolidated financial statements at and for the six months ended March 31, 2003 and 2002 are unaudited. The accompanying consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation 10 of Regulation S-X. Certain information required for a complete presentation in accordance with generally accepted accounting principles has been omitted. All adjustments that are, in the opinion of management, necessary for a fair presentation of the interim financial statements have been included. The results of operations for the six months ended March 31, 2003, are not necessarily indicative of the results that may be expected for the entire fiscal year or any interim period.

The interim financial information should be read in conjunction with the consolidated financial statements and notes of the Company, including a summary of significant accounting policies followed by the Company, included in the Annual Report for the fiscal year ended September 30, 2002. The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, First Community Bank (the “Bank”), Pocahontas Capital Trust I and II (the “Trusts”), which are business trusts established to facilitate the issuance of the trust preferred securities; as well as the Bank’s subsidiaries, Southern Mortgage Corporation, P.F. Service, Inc. and Sun Realty, Inc., which provide real estate services (collectively referred to as the “Company”). All significant intercompany transactions have been eliminated in consolidation.

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

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

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

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December 15, 2001. The Company adopted SFAS No. 144 on October 1, 2002. The adoption of SFAS No. 144 did not have a material impact on the results of operations or financial condition of the Company.

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

In December 2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment to FASB Statement 123. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS 148 is effective for financial statements for fiscal years ending after December 15, 2002. The provisions of the statement related to interim disclosures are effective for interim periods beginning after December 15, 2002. The Company has adopted the disclosure provisions of SFAS 148 for the quarter ended March 31, 2003 and has included the required disclosure in Note 4 to the unaudited consolidated financial statements.

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

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

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

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

Stock Option Plan - The Company’s stockholders approved the 1998 Stock Option Plan (“SOP”) on October 23, 1998. The SOP provides for a committee of the Company’s Board of Directors to award incentive non-qualified or compensatory stock options to purchase up to 357,075 shares of Company common stock. The options vest in equal amounts over five years with the first vesting date on October 23, 1999. Options granted vest immediately in the event of retirement, disability, or death, or following a change in control of the Company. Outstanding stock options can be exercised over a ten-year period. Under the SOP, options have been granted to directors and key employees of the Company. The exercise price in each case equals the fair market value of the Company’s stock at the date of grant. The Company granted 350,000 options on October 23, 1998, which have an exercise price of $9.00 per share. As of March 31, 2003, 254,000 options were outstanding.

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

The Company applies the provisions of APB 25 in accounting for its stock options plans, as allowed under SFAS 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for the options granted to employees or directors with strike prices at or above the market value of the stock. Had compensation cost for these options been determined at the grant dates for awards under those plans consistent with the methods of SFAS No. 123, the Company’s pro forma net income and pro forma earnings per share for the three and six months ended March 31, 2003 and 2002, would have been as follows:

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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%.

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

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

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

The Company has completed a transitional impairment review to identify if there is impairment to the goodwill or intangible assets of indefinite life using fair value methodology, which differs from an undiscounted cash flow methodology which continues to be used for intangible assets with an identifiable life. There was no impairment loss resulting from the transitional impairment test as of October 1, 2001. As of March 31, 2002, the Company performed its annual impairment test and concluded there was no impairment to the book value of the Company’s goodwill. Absent any impairment indicators, the Company will perform its next impairment test as of April 1, 2003 and report the result of the annual impairment test during the quarter ended June 30, 2003.

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

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

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

The Company is a defendant in certain claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial statements of the Company and its subsidiaries.

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

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

Total approved loan origination commitments outstanding were $22.1 million, including $13.9 million loans  

committed to sell.

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

Undisbursed balances of construction loans were $3.7 million.

Total unused lines of credit were $31.2 million.

Outstanding letters of credit were $1.6 million.

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

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

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INDEPENDENT ACCOUNTANTS’ REPORT

The Board of Directors and Stockholders of

Pocahontas Bancorp, Inc.

Pocahontas, Arkansas

We have reviewed the accompanying condensed consolidated statement of financial condition of Pocahontas Bancorp, Inc. and subsidiaries (the “Company”) as of March 31, 2003, and the related condensed consolidated statements of income and comprehensive income and of cash flows for the three and six month periods ended March 31, 2003 and 2002, and stockholders’ equity for the six-month period ended March 31, 2003. These financial statements are the responsibility of the Company’s management.

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

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

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

/s/ Deloitte & Touche LLP

Little Rock, Arkansas

May 2, 2003

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ITEM 2

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

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

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

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

Loans receivable, net. Net loans receivable decreased to $387.1 million at March 31, 2003 from $396.1 million at September 30, 2002, a decrease of $9.0 million or 2.3%. Total nonperforming loans increased to $5.5 million at March 31, 2003 from $3.2 million at September 30, 2002, an increase of $2.3 million or 71.8%. The increase in nonperforming loans was primarily a result of a weakening economy and a normal transition period of identifying problem loans following acquisitions.

Loans receivable, held for sale. Loans held for sale decreased to $1.9 million at March 31, 2003 from $11.9 million at September 30, 2002, a decrease of $10.0 million or 84.0%. During the six-month period ended March 31, 2003, the Company sold $31.9 million of loans, of which $11.9 million were classified held for sale as of September 30, 2002. Management expects to continue to sell loans in the secondary market as necessary to manage interest rate risks.

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

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

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

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Deferred compensation. Deferred compensation increased $0.2 million or 4.8% to $4.3 million at March 31, 2003, from $4.1 million at September 30, 2002. The increase related to a new deferred compensation agreement entered into during the period, net of scheduled payments made to retired directors and officers in accordance with their respective retirement and severance agreements.

Accrued expenses and other liabilities. Accrued expenses and other liabilities decreased $1.1 million, or 17.5%, to $5.2 million at March 31, 2003, from $6.3 million at September 30, 2002. The decrease was primarily the result of $1.3 million paid for state and federal income taxes during the period.

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

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

Overview. Net income including discontinued operations was $1,024,269 for the quarter ended March 31, 2003, compared to $853,376 for the quarter ended March 31, 2002, an increase of $170,893 or 20.0%. Basic and diluted earnings per share increased $0.04 per share or 20.0% to $0.24 for the quarter ended March 31, 2003 compared to basic and diluted earnings per share of $0.20 for the same period last year. Net income from continuing operations was $1,024,269 for the quarter ended March 31, 2003, compared to $995,838 for the quarter ended March 31, 2002, an increase of $28,431 or 2.9%. Net income including discontinued operations for the six-month period ended March 31, 2003 was $2,237,357 compared to $1,871,166 for the same period ended March 31, 2002, an increase of $366,191 or 19.6%. Basic earnings per share were $0.53 and diluted earnings per share were $0.52 for the six-month period ended March 31, 2003, compared to basic and diluted earnings per share of $0.43, for the same period last year. Net income from continuing operations for the six-month period ended March 31, 2003 was $1,908,657 compared to $2,109,205 for the same period ended March 31, 2002, a decrease of $200,548 or 9.5%.

Net interest income. Net interest income for the quarter ended March 31, 2003 was $4,428,602 compared to $4,044,977 for the quarter ended March 31, 2002, an increase of $383,625 or 9.5%. Net interest income for the six-month period ended March 31, 2003 was $8,838,782 compared to $7,880,476 for the six-month period ended March 31, 2002, an increase of $958,306 or 12.2%. The increases in net interest income resulted from the increase in earnings due to the purchase of investment securities with cash provided by deposit growth. The increase in earnings on the loan portfolio was the result of an increase in the loan portfolio due to the acquisitions of North Arkansas Bancshares and Peoples Bank of Imboden offset by a lower rate environment. Interest expense increased as a result of offering competitive rates on specific deposit products and an increased deposit portfolio balance due to the acquisitions of North Arkansas Bancshares and Peoples Bank of Imboden while interest expense on borrowed funds decreased during the period compared to the same period last year, due to a decrease in both borrowings and the average rate on such borrowings. The Company’s net interest rate spread was 3.39% for the six months ended March 31, 2003 compared to 3.94% for the six months ended March 31, 2002. Net interest margin was 3.30% for the six months ended March 31, 2003 compared to 3.91% for the six months ended March 31, 2002. The decrease was primarily due to lower yields on average interest earning assets for the six months ended March 31, 2003 compared to the same period last year.

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Average Balance Sheets (Dollars in Thousands)