SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended September 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].
For the transition period from _______________ to ______________________
Commission File Number: 000-23969
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
First Community Bank 401(k) Savings and Employee Stock Ownership Plan
B: Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Pocahontas Bancorp, Inc.
203 West Broadway
Pocahontas, Arkansas 72455
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-78607 of Pocahontas Bancorp, Inc. on Form S-8 of our report dated January
12, 2004, appearing in the Annual Report on Form 11-K of First Community Bank
401(k) Savings and Employee Stock Ownership Plan for the year ended September
30, 2003.
/s/ Deloitte & Touche LLP
Little Rock, Arkansas
March 8, 2004
First Community Bank 401(k) Savings and Employee Stock Ownership Plan
Financial Statements for the Years Ended
September 30, 2003 and 2002, Supplemental
Schedule as of September 30, 2003 and
Independent Auditors' Report
First Community Bank
401(K) Savings and Employee Stock Ownership Plan
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2003
AND 2002, AND FOR THE YEARS THEN ENDED:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE AS OF SEPTEMBER 30, 2003-- 8
Form 5500, Schedule H, Part IV, Line 4i--Schedule of
Assets (Held at End of Year) 9
INDEPENDENT AUDITORS' REPORT
Trustees and Participants
First Community Bank
401(k) Savings and Employee Stock Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of the First Community Bank 401(k) Savings and Employee Stock Ownership Plan
(the "Plan") as of September 30, 2003 and 2002, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at September 30,
2003 and 2002, and the changes in net assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
table of contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 2003 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ Deloitte & Touche LLP
January 12, 2004
FIRST COMMUNITY BANK
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 2003 AND 2002
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2003 2002
----------------------------------------- -----------------------------------------
Allocated Unallocated Total Allocated Unallocated Total
ASSETS
INVESTMENTS--At fair value:
Cash $ 80,599 $ -- $ 80,599 $ 64,355 $ -- $ 64,355
Pocahontas Bancorp, Inc.--common stock 7,162,624 555,504 7,718,128 5,032,278 720,796 5,753,074
Union Planters stock 6,227 6,227 4,983 4,983
Mutual funds 992,623 2,840 995,463 815,493 476 815,969
Participant loans 35,596 35,596 38,055 38,055
---------- ---------- ---------- ---------- ---------- ----------
Total investments 8,277,669 558,344 8,836,013 5,955,164 721,272 6,676,436
RECEIVABLES--Employer contributions 800,000 800,000
---------- ---------- ---------- ---------- ---------- ----------
Total assets 8,277,669 558,334 8,836,013 6,755,164 721,272 7,476,436
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
LOAN PAYABLE 538,121 538,121 1,373,202 1,373,202
ACCRUED INTEREST PAYABLE 71,651 71,651
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities -- 538,121 538,121 -- 1,444,853 1,444,853
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $8,277,669 $ 20,223 $8,297,892 $6,755,164 $ (723,581) $6,031,583
========== ========== ========== ========== ========== ==========
See notes to financial statements.
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FIRST COMMUNITY BANK
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
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2003 2002
------------------------------------- --------------------------------------
Allocated Unallocated Total Allocated Unallocated Total
ADDITIONS TO NET ASSETS ATTRIBUTABLE TO:
Net appreciation in fair value of investments $1,289,790 $ 118,925 $1,408,715 $1,028,865 $ 278,056 $1,306,921
Interest 2,950 2,950 6,372 6,372
Dividends 149,569 21,141 170,710 105,610 38,929 144,539
Employee contributions 91,739 91,739 93,251 93,251
Employer contributions 177,769 622,231 800,000 800,000 800,000
Realized gain on sale of assets 2,426 2,426 11,887 11,887
---------- ---------- ---------- ---------- ---------- ----------
Total additions 1,714,243 762,297 2,476,540 2,045,985 316,985 2,362,970
DEDUCTIONS FROM NET ASSETS ATTRIBUTABLE TO:
Distributions to participants 191,738 191,738 170,688 170,688
Interest expense 18,493 18,493 94,805 94,805
---------- ---------- ---------- ---------- ---------- ----------
Total deductions 191,738 18,493 210,231 170,688 94,805 265,493
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS 1,522,505 743,804 2,266,309 1,875,297 222,180 2,097,477
TRANSFER OF ASSETS 188,247 188,247
NET ASSETS--Beginning of year 6,755,164 (723,581) 6,031,583 4,691,620 (945,761) 3,745,859
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS--End of year $8,277,669 $ 20,223 $8,297,892 $6,755,164 $ (723,581) $6,031,583
========== ========== ========== ========== ========== ==========
See notes to financial statements.
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First Community Bank
401(K) Savings and Employee Stock Ownership Plan
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
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1. DESCRIPTION OF THE PLAN
The following brief description of the First Community Bank 401(k) Savings
and Employee Stock Ownership Plan (the "Plan") provides only general
information. Participants should refer to the Plan agreement for a more
complete description of the Plan's provisions.
General--The Plan is a qualified employee stock ownership plan with a
salary reduction feature. First Community Bank (formerly known as
Pocahontas Federal Savings and Loan Association) (the "Employer") formed
the Plan by combining its existing 401(k) plan, which had been effective
since January 1, 1986, and its Employee Stock Ownership Plan ("ESOP"),
which had been effective since October 1, 1993. Pocahontas Bancorp, Inc.
(the "Company") accomplished the combination of the existing plans through
a combination and restatement, with neither the 401(k) nor the ESOP being
the surviving plan, effectively creating a new plan with an effective date
of October 1, 1997. The Plan covers substantially all employees of the
Employer. The Employer is 100% owned by the Company. It is subject to the
provisions of the Employee Retirement Income Security Act of 1974.
On May 15, 2001, the Company completed its acquisition of Walden/Smith
Financial Group, Inc. and its wholly-owned bank subsidiary, First
Community Bank. The former employees of First Community Bank became
eligible to participate in the Plan on May 15, 2001. Net assets of the
former First Community Bank employees were transferred to the Plan during
the year ended 2002 from the Frontier Trust Plan.
Contributions--Each eligible participant may, but shall not be required
to, enter into an elective deferral agreement with the employer under
which the participant agrees to reduce his cash compensation by a
specified percentage, up to a maximum of 15%, and contribute such amounts
to the Plan. The amount of any matching contributions, qualified matching
contributions, discretionary contributions, qualifying non-elective
contributions, and ESOP contributions for each plan year will be made at
the sole discretion of the Board of Directors.
Participation--Employees are generally eligible to participate in the Plan
after completing one year of service. Only participants at least 21 years
of age, who complete at least 1,000 hours of service during the Plan year,
and are employed on the last day of the Plan year are eligible to share in
the Employer's discretionary contribution for the year. An employee may
decline to participate in the Plan. For purposes of participation in any
election deferral contributions, completion of one hour of service and an
open enrollment date is required.
Participant Accounts--Each participant's account is credited with an
allocation of (a) the Employer's discretionary ESOP contributions, (b)
eligible forfeitures of terminated participants' nonvested accounts, (c)
and earnings of the Plan for the year. Allocations are based on
participant wages as defined in the Plan agreement. The benefit to which a
participant is entitled, subject to vesting, is the benefit that can be
provided from the participant's account.
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Participant Loans--Participants may borrow, upon written application, any
amount provided that the aggregate amount of all outstanding loans to the
participant from the Plan and from any other qualified plan maintained by
the employer, including accrued interest thereon, shall not exceed the
lesser of $50,000 or 50% of the participants vested 401(k) account
balance. Loan transactions are treated as a transfer to (from) the
investment fund from (to) the Participant Loan fund. Loan terms shall not
exceed five years, except for the purchase of a primary residence. The
loans are collateralized by the balance in the participant's account and
bear interest at a rate commensurate with local prevailing rates as
determined by the Plan administrator. Principal and interest is paid
ratably not less than quarterly through payroll deductions. Participants
may not have more than three loans outstanding.
Plan Borrowings--The Plan purchased Company stock using the proceeds of
borrowings from the Company. The Plan's debt is collateralized by the
stock. A trustee holds such stock in a suspense account in a trust
established under the Plan. As the Plan makes payments of principal and
interest, shares are released into a suspense account to be allocated to
eligible employees' accounts at the end of the Plan year, in accordance
with the Plan. The lender has no rights against shares once they are
allocated under the Plan. Accordingly, the financial statements of the
Plan present separately the assets and liabilities and changes therein
pertaining to:
(a) the accounts of employees with rights in allocated stock
("Allocated") and
(b) stock not yet allocated to employees ("Unallocated").
Vesting--Vesting of accounts is based upon years of service as defined in
the Plan agreement. A participant becomes fully vested after five years of
credited service.
Payments of Benefits--No distributions from the Plan will be made until a
participant retires, dies (in which case, payment shall be made to his or
her beneficiary or, if none, his or her legal representatives), becomes
disabled or otherwise terminates employment with the Employer. Amounts
payable for such distributions remains a part of net assets available for
benefits and, at September 30, 2003 and 2002, totaled $445,354 and
$283,113. Distributions are made in cash or Company stock, or both.
Voting and Dividend Rights--No participant shall have any voting or
dividend rights or other rights of a stockholder prior to the time that
shares are allocated to the participant.
Termination of the Plan--The Employer reserves the right to amend or
terminate the Plan agreement at any time by action of the Board of
Directors. Upon full or partial termination of the Plan, participants'
accounts will become 100% vested and all unallocated shares will be
allocated to the accounts of all participants in accordance with the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The financial statements of the Plan are prepared
under the accrual method of accounting.
Investment Valuations and Income Recognition--Investments are stated at
fair value as determined from quoted market prices. The investment in
shares of the Company's common stock is stated at fair value and is based
on the closing price in an active market as of the last trading day of the
year.
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
-5-
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.
3. INVESTMENT PROGRAMS
Upon enrollment, each participant shall direct that his elective
contribution be invested in one or more of the 56 investment options.
Investment direction may be revised daily by a participant. A
participant's salary deferral percentage may be changed quarterly. All
ESOP contributions are invested in Company stock.
4. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated March 18, 1998, that the Plan is qualified and the trust
established under the Plan is tax-exempt, under the appropriate sections
of the Internal Revenue Code ("IRC"). The Plan has been amended since
receiving the determination letter. However, the Plan administrator and
the Plan's tax counsel believe that the Plan is currently designed and
being operated in compliance with the applicable requirements of the IRC.
Therefore, they believe that the Plan is qualified and the related trust
is tax-exempt.
5. ADMINISTRATION OF PLAN ASSETS
The Plan's assets, which consist principally of Company common stock and
mutual funds, are held by the Company's trustees, First Bankers Trust
Company, N.A. and Manulife Financial, respectively. The Company
administers the payment of principal and interest on the loan and makes
distributions to participants. During the year ended September 30, 2003
and 2002, Plan expenses were paid directly by the Company.
Certain administrative functions are performed by officers or employees of
the Company. No such officer or employee receives compensation from the
Plan.
6. INVESTMENTS
Included in the September 30 investment portfolios are the following
investments representing more than 5% of net assets available for
benefits:
2003 Fair Value
Pocahontas Bancorp, Inc.-common stock-allocated $7,162,624
Pocahontas Bancorp, Inc.-common stock-unallocated 555,504
2002
Pocahontas Bancorp, Inc.-common stock-allocated $5,032,278
Pocahontas Bancorp, Inc.-common stock-unallocated 720,796
-6-
7. LOAN PAYABLE
The Plan has entered into a loan agreement at 6% interest maturing
December 31, 2012, with the Company, the proceeds of which were used to
purchase Company stock. The loan was collateralized by all unallocated
shares of the Plan. In December 2002, the Plan made payments of
approximately $1,373,202 to repay the September 30, 2002 outstanding loan
balance with the Company.
In March 2003, the Plan entered into a term loan agreement with the
Company to borrow up to $2 million. The loan matures December 31, 2012 and
has interest rate of 6%. Proceeds of the loan are intended to be used to
purchase shares of the Company's common stock. The loan is collateralized
by all the unallocated shares of the Plan. As of September 30, 2003,
$538,121 was outstanding related to such loan.
******
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Supplemental schedule
-8-
FIRST COMMUNITY BANK
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i--SCHEDULE OF ASSETS (HELD AT END OF YEAR)
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Fair
Market
Value
Cash $ 80,599
Pocahontas Bancorp, Inc.--common stock-allocated (549,281 shares)* 7,162,624
Pocahontas Bancorp, Inc.--common stock-unallocated (42,600 shares)* 555,504
Manulife Lifestyle Fund--Conservative Portfolio 44,710
Manulife Lifestyle Fund--Moderate Portfolio 107,723
Manulife Lifestyle Fund--Balanced Portfolio 268,358
Manulife Lifestyle Fund--Growth Portfolio 226,405
Manulife Lifestyle Fund--Aggressive Portfolio 41,440
3-Year Compound 2,840
Manulife Money Market Fund 59,920
MFC Short-Term Federal Fund 4,015
MFC PIMCO Total Return Fund 28,484
MFC Salomon Brothers High Yield 9,080
MFC T. Rowe Price Spectrum Income Fund 3,694
Manulife Balanced Fund 30,653
Manulife Equity Income 227
MFC T. Rowe PriceEquity Income 2
MFC Davis New York Venture Fund 591
MFC Mutual Beacon Fund 17,890
MFC Weitz Partners Value Fund 28,240
MFC Fidelity Advisor Dividend Growth Fund 913
MFC Franklin Balance Sheet Investment Fund 14,356
MFC Domini Social Equity Fund 9,565
MFC MFS Strategic Value 995
MFC T. Rowe Price Blue Chip Growth Fund 5,855
Manulife Capital Growth Stock Fund 89
Manulife Growth Plus Stock Fund 3,517
MFC Morgan Stanley Institutional Fund Equity Growth 9,069
MFC Excelsior Value and Restructuring Fund 2,462
MFC Fidelity Advisor Large Cap Fund 94
MFC Putnam Global Equity Fund 1,187
MFC Prudential Jennison Growth Fund 584
MFC Janus Adviser Worldwide Fund 8,297
MFC Templeton Foreign Fund 7,987
MFC Templeton Foreign Small Co. 726
MFC Janus Twenty Fund 19,486
MFC Schudder Mid Cap 1,508
MFC AIM Aggressive Growth Fund 4,129
MFC T. Rowe Price Science & Technology Fund 1,154
MFC Templeton Developing Markets Fund 3,397
500 Index Fund 24,905
Total Stock Market Index Fund 5
Mid Cap Index Fund 641
Small Cap Index Fund 270
Union Planters Stock 6,227
Participant Loans* 35,596
----------
Total $8,836,013
==========
*Party in interest
See Independent Auditors' Report.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST COMMUNITY BANK
401(k) SAVINGS AND EMPLOYEE
STOCK OWNERSHIP PLAN
Date: March 8, 2004 By: /s/ Dwayne Powell
-------------------------------------
Dwayne Powell
President and Chief Executive Officer