SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
[Mark One]
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to____________
Commission File Number 0-27672
NORTH CENTRAL BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
IOWA 42-1449849
---- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification Number)
825 CENTRAL AVENUE FORT DODGE, IOWA 50501
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(Address of principal executive offices)
Registrant's telephone number, including area code(515)573-7531
NONE
-------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 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
---- -----
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [x]
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding At November 12, 1996
- ----- --------------------------------
(Common Stock, $.01 par value) 3,810,505
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed
Financial Statements (unaudited) 1 to 5
Consolidated Condensed Statements of
Financial Condition at September 30,
1996 and December 31, 1995 1
Consolidated Condensed Statements of
Income for the nine months ended
September 30, 1996 and 1995 2
Consolidated Condensed Statements of
Cash Flows for the nine months ended
September 30, 1996 and 1995 3
Notes to Consolidated Condensed Financial
Statements 4 & 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 6 to 15
PART II. OTHER INFORMATION 16 to 23
Items 1 through 6 16
Signatures 17
Exhibits 18 to 23
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<CAPTION>
ASSETS September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Cash:
Interest-bearing $ 2,092,437 $ 2,362,244
Noninterest-bearing 1,013,779 709,398
Securities available for sale 21,893,884 7,799,445
Securities held to maturity 6,498,658 15,994,521
Loans receivable, net 160,384,650 147,871,666
Accrued interest receivable 1,317,519 1,415,111
Foreclosed real estate 120,425 127,989
Premises and equipment, net 1,776,850 1,621,734
Title plant 857,800 857,800
Income taxes receivable 120,965 31,766
Deferred taxes 244,500 67,626
Prepaid expenses and other assets 1,599,541 1,070,396
----------------- -----------------
Total assets $ 197,921,008 $ 179,929,696
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 129,458,652 $ 126,672,313
Other borrowed funds 10,500,000 21,940,000
Advances from borrowers for taxes and insurance 368,046 781,545
Dividend payable 250,691 127,829
Accrued expenses and other liabilities 1,274,522 507,681
----------------- -----------------
Total liabilities $ 141,851,911 $ 150,029,368
----------------- -----------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common Stock 40,111 37,000
Additional paid-in capital 37,750,227 12,350,840
Retained earnings, substantially restricted 19,781,048 18,220,626
Unrealized gain (loss) on securities available
for sale, net of income taxes (32,076) 60,652
Unearned shares, employee stock ownership plan (1,470,213) (768,790)
----------------- -----------------
Total stockholders' equity 56,069,097 29,900,328
----------------- -----------------
Total liabilities and stockholders' equity $ 197,921,008 $ 179,929,696
================= =================
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
1
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------- -----------------------------
1996 1995 1996 1995
---------------------- ---------------------- -------------------- -------------
<S> <C> <C> <C> <C>
Interest Income:
Loans receivable:
First mortgage loans $ 2,823,390 $ 2,500,667 $ 8,241,977 $ 7,137,035
Consumer loans 521,388 439,605 1,472,851 1,243,458
Securities and cash deposits 479,904 407,377 1,421,624 1,215,585
-------------- -------------- -------------- --------------
3,824,682 3,347,649 11,136,452 9,596,078
-------------- -------------- -------------- --------------
Interest expense:
Deposits 1,553,231 1,606,957 4,652,589 4,671,351
Other borrowed funds 119,513 175,186 463,945 484,625
-------------- -------------- -------------- --------------
1,672,744 1,782,143 5,116,534 5,155,976
-------------- -------------- -------------- --------------
Net Interest Income 2,151,938 1,565,506 6,019,918 4,440,102
Provision for loan losses 60,000 60,000 180,000 190,000
-------------- -------------- -------------- --------------
Net interest income after provision for
loan losses 2,091,938 1,505,506 5,839,918 4,250,102
-------------- -------------- -------------- --------------
Noninterest income:
Fees and service charges 166,355 108,218 415,458 325,625
Abstract fees 250,048 220,105 702,301 588,458
Gain on sale of securities
available for sale -- -- 13,774 181,871
Other income 83,908 65,515 273,049 206,534
-------------- -------------- -------------- --------------
Total noninterest income 500,311 393,838 1,404,582 1,302,488
-------------- -------------- -------------- --------------
Noninterest expense:
Salaries and employee benefits 466,115 404,108 1,495,268 1,227,910
Premises and equipment 93,367 96,552 317,185 278,930
Data processing 59,887 60,077 178,959 171,500
One-time SAIF special assessment 817,275 -- 817,275 --
SAIF deposit insurance premiums 74,215 71,527 220,314 214,599
Other expenses 320,913 286,632 843,321 822,721
-------------- -------------- -------------- --------------
Total noninterest expense 1,831,772 918,896 3,872,322 2,715,660
-------------- -------------- -------------- --------------
Income before income taxes 760,477 980,448 3,372,178 2,836,930
Provision for income taxes 260,216 355,287 1,209,599 1,043,738
-------------- -------------- -------------- --------------
Net income $ 500,261 $ 625,161 $ 2,162,579 $ 1,793,192
============== ============== ============== ==============
Earnings per share $ 0.13 $ 0.16 $ 0.56 $ 0.46
============== ============== ============== ==============
Dividends declared per common share $ 0.0625 $ 0.1000 $ 0.2250 $ 0.5500
============== ============== ============== ==============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Nine Months Ended
SEPTEMBER 30,
---------------------------------------------
1996 1995
--------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 2,162,579 $ 1,793,192
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 180,000 190,000
Depreciation 150,878 122,228
Amortization and accretion (141,992) (213,053)
Deferred taxes (125,964) 29,396
Effect of contribution to employee stock ownership plan 112,508 --
(Gain) on sale of foreclosed real estate and loans, net (9,323) (8,045)
(Gain) on sale of securities available for sale (13,774) (181,871)
Loss on disposal of equipment 19,781 --
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable 97,592 (184,296)
(Increase) in income taxes receivable (89,199) --
(Increase) in prepaid expenses and other assets (529,145) (662,748)
(Decrease) in income taxes payable -- (34,775)
Increase in accrued expenses and other liabilities 766,841 3,576
------------- --------------
Net cash provided by operating activities 2,580,782 853,604
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) in loans (5,188,068) (6,889,409)
Purchase of loans (7,370,289) (13,102,339)
Proceeds from sale of securities available for sale 53,891 1,165,856
Purchase of securities available for sale (14,274,965) (1,674,631)
Proceeds from maturities of securities held to maturity 9,500,000 6,000,000
Purchase of securities held to maturity -- (4,991,650)
Purchase of premises and equipment (325,874) (233,991)
Proceeds from sale of equipment 100 500
Purchase of title plant -- (699,270)
Other 16,885 (73,432)
-------------- ---------------
Net cash (used in) investing activities (17,588,320) (20,498,366)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 2,786,339 2,376,678
(Decrease) in advances from borrowers for taxes and insurance (413,499) (357,090)
Net change in short term borrowings (10,500,000) 13,000,000
Proceeds from other borrowed funds -- 3,150,000
Payments of other borrowings (892,000) (245)
Proceeds from issuance of 2,625,467 shares of common stock 25,412,159 --
Payments for expenses incurred relating to conversion to stock form (871,592) --
Dividends paid (479,295) (654,063)
-------------- --------------
Net cash provided by financing activities 15,042,112 17,515,280
-------------- -------------
Net increase (decrease) in cash 34,574 (2,129,482)
CASH
Beginning 3,071,642 4,977,724
-------------- --------------
Ending $ 3,106,216 $ 2,848,242
============== ==============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 4,632,704 $ 4,683,642
Interest paid on borrowings 455,175 445,099
Income taxes 1,424,761 1,049,117
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
ITEM 1.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated condensed financial statements for the three and nine month
periods ended September 30, 1996 and 1995 are unaudited. In the opinion of the
management of North Central Bancshares, Inc. (the "Company" or the "Registrant")
these financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary to present fairly these consolidated financial
statements. The results of operations for the interim periods are not
necessarily indicative of results which may be expected for an entire year.
Certain information and footnote disclosure normally included in complete
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the requirements for interim
financial statements. The financial statements and notes thereto should be read
in conjunction with the Company's 1995 Annual Report on Form 10-K.
The consolidated condensed financial statements include the accounts of the
Company and its wholly-owned subsidiaries (See Note 2). All significant
intercompany balances and transactions have been eliminated in consolidation.
2. REORGANIZATION
The Company was organized on December 5, 1995 at the direction of the Board of
Directors of First Federal Savings Bank of Fort Dodge (the "Bank") for the
purpose of acquiring all of the capital stock of the Bank, in connection with
the conversion of the Bank, and North Central Bancshares, M.H.C. (the "Mutual
Holding Company" or "MHC") from the mutual to the stock holding company
structure (these transactions are collectively referred to as the
"Reorganization"). On March 20, 1996, upon completion of the Reorganization, the
Company issued an aggregate of 4,011,057 shares of its common stock, 1,385,590
shares of which were issued in exchange for all of the Bank's issued and
outstanding shares, except for shares owned by the MHC which were cancelled, and
2,625,467 shares of which were sold in Subscription and Community Offerings (the
"Offering") at a price of $10.00 per share, with gross proceeds amounting to
approximately $26,254,670. In addition, the Company replaced the Bank as the
issuer listed on The Nasdaq Stock Market.
At this time, the Company conducts business as a unitary savings and loan
holding company and the principal business of the Company consists of the
operation of its wholly owned subsidiary, the Bank.
The accompanying condensed consolidated financial statements include the
accounts of the Company and its subsidiaries. For periods prior to the
Reorganization the statements include the accounts of the Bank and its
subsidiaries and the accounts of the MHC. The inclusion of the accounts of the
MHC had the effect of increasing stockholders' equity at December 31, 1995 by
$314,000 and decreasing net income for the three and nine months ended September
30, 1995 by $19,000 and $39,000, respectively as compared to amounts previously
reported by the Bank.
4
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(Continued)
3. EARNINGS PER SHARE
The earnings per share amounts were computed using the weighted average number
of shares outstanding during the periods presented. In accordance with Statement
of Position No. 93-6, Employers' Accounting for Employee Stock Ownership Plans,
issued by the American Institute of Certified Public Accountants, shares owned
by the Bank'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. For the three and nine month periods ended September 30,
1996, the weighted average number of shares outstanding were 3,852,586 and
3,872,209, respectively. For the three and nine month periods ended September
30, 1995, the weighted average number of shares outstanding were 3,921,180 and
3,917,828, respectively. The number of shares outstanding for the three and nine
month periods ended at September 30, 1995 were restated to reflect the
conversion ratio effected as part of the Reorganization.
4. DIVIDENDS
On August 22, 1996, the Company declared a cash dividend on its common stock,
payable on October 10, 1996 to stockholders of record as of September 12, 1996,
equal to $0.0625 per share.
5. PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has approved,
effective for fiscal years beginning after December 15, 1995,
Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, Statement No.
122, Accounting for Mortgage Servicing Rights and Statement No.
123, Accounting for Stock-Based Compensation. The implementation
of FASB Statements No. 121, 122 and 123 did not have a material
effect on the Company's financial statements when adopted.
FASB has approved, effective for transactions entered into after
December 31, 1996, Statement No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities. The implementation of FASB Statement No. 125 is not
expected to have a material effect on the Company's financial
statements when adopted.
6. RECENT DEVELOPMENTS
On October 22, 1996, the Company completed a stock repurchase program, acquiring
200,552 shares of the Company's common stock, which represented 5% of the
outstanding shares at an aggregate cost of $2,594,642. For the quarter ended
September 30, 1996, the Company did not repurchase any shares of the Company's
common stock.
5
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q contains forward-looking statements
consisting of estimates with respect to the financial condition, results of
operations and business of the Company that are subject to various factors which
could cause actual results to differ materially from these estimates. These
factors include, changes in general, economic and market, and legislative and
regulatory conditions, and the development of an adverse interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
FINANCIAL CONDITION
Total assets increased by $18.0 million, or 10.0%, from $179.9 million at
December 31, 1995 to $197.9 million at September 30, 1996. Securities available
for sale increased by $14.1 million, or 180.7%, primarily due to the purchase of
U.S. Treasury Notes and equity securities. Securities held to maturity decreased
$9.5 million, or 59.4%, primarily due to the maturity of U.S. Treasury Notes and
the reinvestment of the proceeds from such securities into securities classified
as available for sale. Total loans receivable, net, increased by $12.5 million,
or 8.5%, due to originations of $18.2 million of first mortgage loans secured
primarily by one-to-four family residences, purchases of $7.4 million of first
mortgage loans secured by one-to-four family and multi-family residences and
originations of $7.6 million of second mortgage loans, which originations and
purchases were offset in part by payments and prepayments of loans (of
approximately $25.7 million) during the nine months ended September 30, 1996.
Deposits increased $2.8 million, or 2.2%, from $126.7 million at December 31,
1995 to $129.5 million at September 30, 1996. Other borrowings, primarily
Federal Home Loan Bank of Des Moines ("FHLB") advances, decreased by $11.4
million, to $10.5 million at September 30, 1996 from $21.9 million at December
31, 1995, primarily due to the use of a portion of the proceeds from the
Offering to repay FHLB advances. Total stockholders' equity increased $26.2
million, from $29.9 million at December 31, 1995 to $56.1 million at September
30, 1996, primarily due to the proceeds received from the issuance of common
stock in the Offering.
CAPITAL
The Company's total stockholders' equity increased by $26.2 million to $56.1
million at September 30, 1996 from $29.9 million at December 31, 1995. The
unrealized gain (loss) on securities available for sale decreased by $93,000 to
$(32,000) at September 30, 1996 from $61,000 at December 31, 1995. The unearned
shares from the Employee Stock Ownership Plan increased by $701,000 to $1.5
million at September 30, 1996 from $769,000 at December 31, 1995, primarily due
to the purchase of additional shares by the Employee Stock Ownership Plan as a
part of the Offering.
The Office of Thrift Supervision (the "OTS") requires that the
Bank meet minimum tangible, leverage (core) and risk-based
capital requirements. As of September 30, 1996, the Bank
exceeded all of its regulatory capital requirements. The Bank's
6
<PAGE>
required, actual and excess capital levels as of September 30,
1996 are as follows:
Amount Percentage
of Assets
(DOLLAR AMOUNTS IN
THOUSANDS)
Tangible capital:
Capital level $ 42,871 21.82%
Requirement 2,947 1.50%
----------- -----------
Excess $ 39,924 20.32%
=========== ===========
Core capital:
Capital level $ 42,871 21.82%
Requirement 5,893 3.00%
----------- -----------
Excess $ 36,978 18.82%
=========== ===========
Risk-based capital:
Capital level $ 44,222 41.11%
Requirement 8,605 8.00%
----------- -----------
Excess $ 35,617 33.11%
=========== ===========
LIQUIDITY
OTS regulations require that thrift institutions such as the Bank maintain an
average daily balance of liquid assets (cash, certain time deposits, banker's
acceptances and specified U.S. government, state or federal agency obligations)
equal to a monthly average of not less than 5% of their net withdrawable
deposits, plus short term borrowings. At September 30, 1996, the Bank's
liquidity position was $17.1 million or 12.8% of liquid assets, compared to $9.8
million or 6.9% at December 31, 1995. The increase of $7.3 million was primarily
due to the release of $8.5 million of pledged liquid assets held as collateral
on the Bank's borrowings from the FHLB.
OTS regulations also require that thrift institutions such as the Bank maintain
an average daily balance of short term liquid assets (cash, certain time
deposits, banker's acceptances and specified U.S. government, state or federal
agency obligations) equal to a monthly average of not less than 1% of their net
withdrawable deposits, plus short term borrowings. At September 30, 1996, the
Bank's short term liquidity position was $3.1 million or 2.4% of short term
liquid assets, compared to $3.3 million or 2.3% at December 31, 1995.
The Bank's primary sources of funds are deposits, amortization and prepayment of
loans, maturities of securities and other investments, and earnings and funds
provided from operations. While scheduled principal repayments on loans are a
relatively predictable source of funds, deposit flows and loan prepayments 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. In addition, the Bank invests in short-term interest-earning
assets, which provide liquidity to meet lending requirements. At September 30,
1996, $8.5 million, or 45.9%, of the Bank's investment portfolio, excluding
equity securities, was scheduled to mature in one year or less and $10.0
million, or 54.1%, was scheduled to mature in one to five years. For additional
information about cash flows from the Bank's operating, financing and investing
activities, see Statements of Cash Flows included in the Condensed Consolidated
Financial Statements.
7
<PAGE>
DEPOSIT INSURANCE-SAIF RECAPITALIZATION
For the first three quarters of 1996, SAIF-insured institutions paid deposit
insurance assessment rates of $0.23 to $0.31 per $100 of deposits. In contrast,
institutions insured by the FDIC's Bank Insurance Fund (the "BIF") that were
well capitalized and without any significant supervisory concerns paid the
minimum annual assessment of $2,000, and all other BIF-insured institutions paid
deposit insurance assessment rates of $0.03 to $0.27 per $100 of deposits.
In response to the SAIF/BIF assessment disparity, the Deposit Insurance Funds
Act of 1996 (the "Funds Act") was enacted into law on September 30, 1996. The
Funds Act amended the Federal Deposit Insurance Act (the "FDIA") in several ways
to recapitalize the SAIF and reduce the disparity in the assessment rates for
the BIF and the SAIF. The Funds Act authorized the FDIC to impose a special
assessment on all institutions with SAIF-assessable deposits in the amount
necessary to recapitalize the SAIF. As implemented by the FDIC, institutions
with SAIFassessable deposits will pay a special assessment, subject to
adjustment, of 65.7 basis points per $100 of the institution's SAIF-assessable
deposits, and the special assessment will be paid on November 27, 1996. The
special assessment is based on the amount of SAIF-assessable deposits held on
March 31, 1995. The Funds Act provides that the amount of the special assessment
will be deductible for federal income tax purposes for the taxable year in which
the special assessment is paid. Based on the foregoing, the special assessment
for the Bank is $817,000 (before taxes) and has been charged against income for
the quarter ended September 30, 1996.
In view of the recapitalization of the SAIF, the FDIC proposed on October 8,
1996, to reduce the assessment rate for SAIFassessable deposits for periods
beginning on October 1, 1996. As would be effective for the SAIF-assessable
deposits of SAIFinsured savings points for the last quarter of 1996 and would
range from 0 to 27 basis points for subsequent assessment periods. However, the
Funds Act also provides that the FDIC cannot assess regular insurance
assessments for an insurance fund unless required to maintain or to achieve the
designated reserve ratio of 1.25%, except on those of its member institutions
that are not classified as "well capitalized" or that have been found to have
"moderately severe" or "unsatisfactory" financial, operational or compliance
weaknesses. The Bank has not been so classified by the FDIC or the OTS.
Accordingly, assuming that the designated reserve ratio is maintained by the
SAIF after the collection of the special SAIF assessment, the Bank, as long as
it maintains its regulatory status, will have to pay substantially lower regular
SAIF assessments compared to those paid by the Bank in recent years.
In addition, the Funds Act expanded the assessment base for the payments on the
bonds (the "FICO bonds") issued in the late 1980s by the Financing Corporation
to recapitalize the now defunct Federal Savings and Loan Insurance Corporation
to include the deposits of both BIF- and SAIF-insured institutions beginning
January 1, 1997. Until December 31, 1999, or such earlier date on which the last
savings association ceases to exist, the rate of assessment for BIF-assessable
deposits will be one-fifth of the rate imposed on SAIF-assessable deposits. It
has been estimated that the rates of assessment for the payment of interest on
the FICO bonds will be approximately 1.3 basis points for BIF-assessable
deposits and approximately 6.4 basis points
8
<PAGE>
for SAIF-assessable deposits.
The Funds Act also provides for the merger of the BIF and SAIF on January 1,
1999, with such merger being conditioned upon the prior elimination of the
thrift charter. The Secretary of the Treasury is required to conduct a study of
relevant factors with respect to the development of a common charter for all
insured depository institutions and abolition of separate charters for banks and
thrifts and to report the Secretary's conclusions and findings to the Congress
on or before March 31, 1997.
RECAPTURE OF BAD DEBT RESERVES
Prior to the enactment, on August 20, 1996, of the Small Business Job Protection
Act of 1996 (the "1996 Act"), for federal income tax purposes, thrift
institutions such as the Bank, which met certain definitional tests primarily
relating to their assets and the nature of their business, were permitted to
establish tax reserves for bad debt and to make annual additions thereto, which
additions could, within specified limitations, be deducted in arriving at their
taxable income. The Bank's deduction with respect to "qualifying loans," which
are generally loans secured by certain interests in real property, could be
computed using an amount based on a six-year moving average of the Bank's actual
loss experience (the "Experience Method"), or a percentage equal to 8.0% of the
Bank's taxable income (the "PTI Method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve.
Under the 1996 Act, the PTI Method was repealed and the Bank will be required to
use the Experience Method of computing additions to its bad debt reserve for
taxable years beginning with the Bank's taxable year beginning January 1, 1996.
In addition, the Bank will be required to recapture (i.e., take into income)
over a six-year period, beginning with the Bank's taxable year beginning January
1, 1996, the excess of the balance of its bad debt reserves (other than the
supplemental reserve) as of December 31, 1995 over the greater of (a) the
balance of such reserves as of December 31, 1987 (or over a lesser amount if the
Bank's portfolio decreased since December 31, 1987) or (b) an amount that would
have been the balance of such reserves as of December 31, 1995 had the Bank
always computed the additions to its reserves using the six-year moving average
Experience Method. However, under the 1996 Act, such recapture requirements will
be suspended for each of the two successive taxable years beginning January 1,
1996 in which the Bank originates a minimum amount of certain residential loans
during such years that is not less than the average of the principal amounts of
such loans made by the Bank during its six taxable years preceding January 1,
1996. This legislation will result in the Bank's recapture of reserves with the
aggregate tax liability of $530,000. Since the Bank has already provided a
deferred income tax liability of this amount for financial reporting purposes,
there will be no adverse impact to the Bank's financial condition or results of
operations from the enactment of this legislation.
RESULTS OF OPERATIONS
INTEREST INCOME. Interest income increased by $477,000 to $3.8 million for the
three months ended September 30, 1996 compared to $3.3 million for the three
months ended September 30, 1995. The increase in interest income was primarily
due to a $25.6 million increase in the average balance of interest earning
assets
9
<PAGE>
RESULTS OF OPERATIONS (Continued)
(primarily first and second mortgage loans) to $191.0 million for the three
months ended September 30, 1996, from $165.4 million for the comparable 1995
period. The increase in the average balance in first mortgage loans and consumer
loans (primarily second mortgage loans) generally reflects an increase over the
past twelve months in originations of first and second mortgage loans and
purchases of first mortgage loans secured by one-to-four family residences and
multi-family residences in excess of payments and prepayments. See "Financial
Condition." The increase in interest income was also due to an increase of $3.4
million in the average balance of securities to $27.4 million for the three
months ended September 30, 1996 from $24.0 million for the three months ended
September 30, 1996, reflecting the investment of proceeds from the Offering. The
impact of the increase in the average balances was offset in part by a decrease
in the average yield on first mortgage loans from 8.29% for the three months
ended September 30, 1995 to 8.09% for the three months ended September 30, 1996.
The increase in interest income also reflected unscheduled prepayments and
repayments of purchased loans which resulted in increased amortization of the
unearned discount in 1995. The average yield on interest earning assets
decreased from 8.07% for the three months ended September 30, 1995 to 8.00% for
the three months ended September 30, 1996.
Interest income increased by $1.5 million to $11.1 million for the nine months
ended September 30, 1996 compared to $9.6 million for the nine months ended
September 30, 1995. The increase in interest income was primarily due to a $22.5
million increase in the average balance of interest earning assets (primarily
first and second mortgage loans) to $185.3 million for the nine months ended
September 30, 1996, from $162.8 million for the comparable 1995 period. The
increase in the average balance in first and second mortgage loans generally
reflects an increase over the past twelve months in originations of first and
second mortgage loans and purchases of first mortgage loans secured by
one-to-four family residences and multi-family residences in excess of payments
and prepayments. See "Financial Condition." The increase in interest income was
also due to an increase in the average yield on securities to 6.60% for the nine
months ended September 30, 1996 compared to 6.06% for the nine months ended
September 30, 1995. This increase was due to the purchase of certain higher
yielding equity securities and increases in market interest rates. The increase
in interest income was also due to an increase in the average yield on first
mortgage loans to 8.13% for the nine months ended September 30, 1996 from 8.08%
for the nine months ended September 30, 1995, reflecting an upward adjustment of
interest rates on the Bank's adjustable-rate mortgage loan portfolio and the
higher yields on loans purchased. The increase in interest income also reflected
unscheduled prepayments and repayments of purchased loans which resulted in
increased amortization of the unearned discount in 1995. The average yield on
interest earning assets increased to 8.02% for the nine months ended September
30, 1996 from 7.86% for the nine months ended September 30, 1995.
INTEREST EXPENSE. Interest expense decreased by $109,000 to $1.7 million for the
three months ended September 30, 1996 compared to $1.8 million for the three
months ended September 30, 1995. The decrease in interest expense was primarily
due to a decrease in the cost of interest-bearing deposits to 4.90% for the
three months ended September 30, 1996 from 5.15% for the three months ended
September 30, 1995. The decline in average costs was due
10
<PAGE>
RESULTS OF OPERATIONS (Continued)
to a net increase of $2.1 million in the average balance of NOW, Money Market
and passbook savings accounts to $37.5 million for the three months ended
September 30, 1996 from $35.5 million for the three months ended September 30,
1995, which accounts bear interest at lower rates than the Company's average
cost of funds. The decline in the average costs was also due to a general
decline in the Company's average cost of deposits (particularly passbook
accounts) reflecting a decline in market interest rates. The decrease in
interest expense was also due to a decrease of $3.9 million in the average
borrowings from $12.1 million for the three months ended September 30, 1995 to
$8.2 million for the three months ended September 30, 1996, as the Company used
a portion of the proceeds of the Offering to repay FHLB advances, shortly after
the Offering. This decrease was offset in part by an increase of $2.3 million in
the average interest-bearing deposits from $123.8 million for the three months
ended September 30, 1995 to $126.1 million for the three months ended September
30, 1996, due to the Bank's offering of favorable rates on certain types of
deposit accounts. The average cost of interest bearing liabilities decreased to
4.96% for the three months ended September 30, 1996 from 5.20% for the three
months ended September 30, 1995.
Interest expense decreased by $39,000 to $5.1 million for the nine months ended
September 30, 1996 compared to $5.2 million for the nine months ended September
30, 1995. The decrease in interest expense was primarily due to the decrease in
the average cost of average interest-bearing deposits to 4.92% for the nine
months ended September 30, 1996 from 5.09% for the nine months ended September
30, 1995. The decline in average costs was due to a net increase of $3.4 million
in the average balance of NOW, Money Market and passbook savings accounts to
$37.9 million for the nine months ended September 30, 1996 from $34.5 million
for the nine months ended September 30, 1995, which accounts bear interest at
lower rates than the Company's average cost of funds. The decline in the average
cost was primarily due to a decline in the Company's average cost of passbook
accounts reflecting a general decline in market interest rates. The decrease in
interest expense was also due to a decrease of $768,000 in the average
borrowings from $11.2 million for the nine months ended September 30, 1995 to
$10.4 million for the nine months ended September 30, 1996, as the Company used
a portion of the proceeds of the Offering to repay FHLB advances shortly after
the Offering, offset in part by an increase in the cost of such funds. This
decrease was offset in part by an increase of $3.6 million in the average
interest-bearing deposits from $122.6 million for the nine months ended
September 30, 1995 to $126.2 million for the nine months ended September 30,
1996, due to the Bank's offering of favorable rates on certain types of deposit
accounts. The average cost of interest bearing liabilities decreased to 5.00%
for the nine months ended September 30, 1996 from 5.15% for the nine months
ended September 30, 1995.
NET INTEREST INCOME. Net interest income before provision for loan losses
increased by $586,000 to $2.2 million for the three months ended September 30,
1996 from $1.6 million for the three months ended September 30, 1995. The
increase is primarily due to the increase in the excess of average interest
earning assets over average interest bearing liabilities and the increase in the
Bank's interest rate spread (i.e., the difference in the average yield on assets
and the average cost of liabilities) from 2.87% for the three months ended
September 30, 1995 to 3.04% for the
11
<PAGE>
RESULTS OF OPERATIONS (Continued)
three months ended September 30, 1996.
Net interest income before provision for loan losses increased by $1.6 million
to $6.0 million for the nine months ended September 30, 1996 from $4.4 million
for the nine months ended September 30, 1995. The increase is primarily due to
the increase in the excess of average interest earning assets over average
interest bearing liabilities and the increase in the Bank's interest rate spread
from 2.71% for the nine months ended September 30, 1995 to 3.02% for the nine
months ended September 30, 1996.
The following tables set forth certain information relating to the Bank's
average balance sheets and reflect the average yield on assets and average cost
of liabilities for the three and nine month periods ended September 30, 1996 and
1995.
12
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1996 NINE MONTHS ENDED SEPTEMBER 30, 1995
---------------------------------------- ---------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
First mortgage loans $135,109 $ 8,242 8.13% $117,842 $ 7,137 8.08%
Consumer loans 20,524 1,473 9.59% 17,552 1,243 9.47%
Securities available for sale 14,292 692 6.47% 5,175 247 6.38%
Securities held to maturity 11,775 595 6.75% 19,876 888 5.98%
Interest bearing cash 3,613 134 4.97% 2,336 81 4.59%
------- ------- ------- ------- ------- -------
Total interest-earning assets $185,313 $11,136 8.02% $162,781 $ 9,596 7.86%
------- ------- ------- -------
Noninterest-earning assets 4,574 3,640
------- -------
Total assets $189,887 $166,421
======== ========
Interest-bearing liabilities:
NOW and money market savings $18,538 $ 394 2.84% $14,465 $ 298 2.77%
Passbook savings 19,361 330 2.28% 20,078 440 2.92%
Certificates of deposits 88,270 3,928 5.94% 88,043 3,933 5.97%
Borrowed funds 10,392 464 5.96% 11,160 485 5.81%
------- ------- -------- ------- ------- -------
Total interest-bearing liabilities $136,561 $ 5,116 5.00% $133,746 $ 5,156 5.15%
------- ------- ------- -------
Noninterest-bearing liabilities 5,094 4,139
------- -------
Total liabilities $141,655 $137,885
Equity 48,232 28,536
------- -------
Total liabilities and equity $189,887 $166,421
======== ========
Net interest income $ 6,020 $ 4,440
======= =======
Net interest rate spread 3.02% 2.71%
======= =======
Interest-earning assets and net
interest margin 4.33% 3.63%
======= =======
Ratio of average interest-earning
assets to average interest-bearing
liabilities 135.70% 121.71%
======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1996 THREE MONTHS ENDED SEPTEMBER 30, 1995
---------------------------------------- ----------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- -------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
First mortgage loans $139,558 $ 2,823 8.09% $120,617 $ 2,501 8.29%
Consumer loans 21,701 521 9.56% 18,206 440 9.58%
Securities available for sale 18,917 304 6.38% 5,354 89 6.62%
Securities held to maturity 8,498 148 6.92% 18,656 292 6.21%
Interest bearing cash 2,307 29 4.93% 2,564 26 4.07%
------- ------- ------- ------- ------- -------
Total interest-earning assets $190,981 $ 3,825 8.00% $165,398 $ 3,348 8.07%
------- ------- ------- -------
Noninterest-earning assets 4,944 3,673
------- -------
Total assets $195,925 $169,071
======== ========
Interest-bearing liabilities:
NOW and money market savings $19,096 $ 139 2.89% $16,176 $ 121 2.96%
Passbook savings 18,427 103 2.23% 19,296 134 2.75%
Certificates of deposits 88,562 1,311 5.89% 88,313 1,352 6.07%
Borrowed funds 8,210 120 5.79% 12,113 175 5.74%
------- ------- -------- ------- ------- -------
Total interest-bearing liabilities $134,295 $ 1,673 4.96% $135,898 $ 1,782 5.20%
------- ------- ------- -------
Noninterest-bearing liabilities 5,531 4,178
------- -------
Total liabilities $139,826 $140,076
Equity 56,099 28,995
------- -------
Total liabilities and equity $195,925 $169,071
======== ========
Net interest income $ 2,152 $ 1,566
======= =======
Net interest rate spread 3.04% 2.87%
======= =======
Interest-earning assets and net
interest margin 4.51% 3.78%
======= =======
Ratio of average interest-earning
assets to average interest-bearing
liabilities 142.21% 121.71%
======= =======
</TABLE>
13
<PAGE>
RESULTS OF OPERATIONS (Continued)
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses was $60,000
for the three months ended September 30, 1996 and 1995. The Company's provision
for loan losses was $180,000 for the nine months ended September 30, 1996 and
$190,000 for the nine months ended September 30, 1995. The Company establishes
provisions for loan losses, which are charged to operations, in order to
maintain the allowance for loan losses at a level which is deemed to be
appropriate based upon an assessment of prior loss experience, industry
standards, past due loans, economic conditions, the volume and type of loans in
the Bank's portfolio, which includes a significant amount of multifamily loans,
substantially all of which are purchased and are collateralized by properties
located outside of the Bank's market area, and other factors related to the
collectibility of the Bank's loan portfolio. The net charge offs were $9,000 for
the nine months ended September 30, 1996 as compared to $54,000 for the nine
months ended September 30, 1995. The resulting allowance for loan losses was
$1.9 million at September 30, 1996 as compared to $1.7 million at September 30,
1995 and $1.7 million at December 31, 1995. This increase in the allowance
reflects the increase in total loans from $144.8 million at September 30, 1995
to $160.4 million at September 30, 1996. The level of nonperforming loans
increased to $287,000 at September 30, 1996 from $211,000 at September 30, 1995.
Management believes that the allowance for loan losses is adequate. While
management estimates loan losses using the best available information, such as
independent appraisals for significant collateral properties, no assurance can
be made that future adjustments to the allowance will not be necessary based on
changes in economic and real estate market conditions, further information
obtained regarding known problem loans, identification of additional problem
loans, and other factors, both within and outside of management's control.
NONINTEREST INCOME. Total noninterest income increased by $106,000 to $500,000
for the three months ended September 30, 1996 from $394,000 for the three months
ended September 30, 1995. The increase is due to increases in all categories of
noninterest income. Fees and service charges increased $58,000, primarily due to
increases in overdraft fees and loan prepayment fees. Abstract fees increased
$30,000 due to increased sales volume. Other income increased $18,000 primarily
due to increases in annuity sales.
Total noninterest income increased by $102,000 to $1.4 million for the nine
months ended September 30, 1996 from $1.3 million for the nine months ended
September 30, 1995. The increase is due to increases in fees and service
charges, abstract fees and other income, offset in part by a decrease in the
gain on the sale of securities of $168,000. Fees and service charges increased
$90,000, primarily due to increases in overdraft fees and loan prepayment fees.
Abstract fees increased $113,000 due to increased sales volume. Other income
increased $67,000 primarily due to increases in annuity sales.
NONINTEREST EXPENSE. Total noninterest expense increased by $913,000 to $1.8
million for the three months ended September 30, 1996 from $919,000 for the
three months ended September 30, 1995. The increase is primarily due to the
$817,000 one-time special assessment to recapitalize the SAIF. See "Deposit
Insurance SAIF Recapitalization". Absent the one-time assessment, the increase
in noninterest expense reflects a $62,000 increase in
14
<PAGE>
RESULTS OF OPERATIONS (Continued)
salaries and benefits and a $34,000 increase in other expenses. The increase in
salaries and benefits was primarily a result of the increased costs associated
with the ESOP and normal salary increases. The increase in other expenses is
primarily a result of higher expenditures for professional fees, costs
associated with being a public company and costs associated with certain demand
and NOW checking account customers, offset in part by lower advertising costs
and a write down of the National bankruptcy claim. The Company's efficiency
ratio for the three months ended September 30, 1996 and 1995 was 69.06% and
46.90%, respectively. The Company's ratio of noninterest expense to average
assets for the three months ended September 30, 1996 and 1995 was 3.74% and
2.17%, respectively. Excluding the one-time SAIF assessment for the three months
ended September 30, 1996, the efficiency ratio would have been 38.25% and the
ratio of noninterest expense to average assets would have been 2.07%.
Total noninterest expense increased by $1.2 million to $3.9 million for the nine
months ended September 30, 1996 from $2.7 million for the nine months ended
September 30, 1995. The increase is primarily due to the $817,000 one-time
special assessment to recapitalize the SAIF. See "Deposit Insurance SAIF
Recapitalization". Absent the one-time assessment, the increase in noninterest
expense reflects a $267,000 increase in salaries and benefits and a $38,000
increase in premises and equipment. The increase in salaries and benefits was
primarily a result of a one time adoption of a retirement plan for the benefit
of the chairman of the board, the increased costs associated with the ESOP and
normal salary increases. The increase in premises and equipment is primarily a
result of increased depreciation expense due to expenditures on buildings and
equipment in the Bank's Nevada office and equipment in the abstract companies.
The Company's efficiency ratio for the nine months ended September 30, 1996 and
1995 was 52.16% and 47.29%, respectively. The Company's ratio of noninterest
expense to average asset for the nine months ended September 30, 1996 and 1995
was 2.72% and 2.18%, respectively. Excluding the one-time SAIF assessment for
the nine months ended September 30, 1996, the efficiency ratio would have been
41.15% and the ratio of noninterest expense to average assets would have been
2.15%.
INCOME TAXES. Income taxes decreased by $95,000 to $260,000 for the three months
ended September 30, 1996 as compared to $355,000 for the three months ended
September 30, 1995. The decrease was primarily due to a decrease in pre-tax
earnings during the 1996 period as compared to the 1995 period.
Income taxes increased by $166,000 to $1.2 million for the nine months ended
September 30, 1996 as compared to $1.0 million for the nine months ended
September 30, 1995. The increase was primarily due to an increase in pre-tax
earnings during the 1996 period as compared to the 1995 period.
NET INCOME. Net income totalled $500,000 for the three months
ended September 30, 1996, compared to $626,000 for the same
period in 1995.
Net income totalled $2.2 million for the nine months ended September 30, 1996,
compared to $1.8 million for the same period in 1995.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting of shareholders held on September 21,
1996, the following matter was voted upon, and the results of the voting on such
matter are indicated below:
The proposal to approve the 1996 North Central Bancshares, Inc.
Stock Option Plan:
For 2,796,589
Against 240,551
Abstain 34,602
Broker non-votes 588,792
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11. Statement on computation of per share earnings.
Exhibit 27. Financial data schedule. (Only submitted with filing in
electronic format.)
Exhibit 99.1 Press Release (regarding the issuance of limited financial
information for the quarter ended September 30, 1996).
(b) Reports on Form 8-K
A Form 8-K was filed on July 24, 1996 to report, pursuant to Item 5,
the issuance of limited financial information for the quarter ended June 30,
1996.
A Form 8-K was filed on August 26, 1996 to report, pursuant to Item 5,
the payment of a cash dividend on the Company's common stock.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
NORTH CENTRAL BANCSHARES, INC.
DATE: November 12, 1996 BY: /s/ David M. Bradley
David M. Bradley, CPA
President and
Chief Executive Officer
DATE: November 12, 1996 BY: /s/ John L. Pierschbacher
John L. Pierschbacher, CPA
Principal Financial Officer
17
Exhibit 11. Statement on computation of per share earnings.
For the three months ended September 30, 1996 and 1995, the primary and
fully diluted weighted average number of shares outstanding were 3,852,586 and
3,921,180, respectively. For the nine months ended September 30, 1996 and 1995,
the primary and fully diluted weighted average number of shares outstanding were
3,872,209 and 3,917,828, respectively. The number of shares outstanding for the
three and nine month periods ended September 30, 1995 were restated to reflect
the conversion ratio of 1.0841375 shares of the Company's common stock per share
of the Bank's common stock effected as part of the Reorganization.
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed statement of financial condition and the consolidated
condensed statement of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,013,779
<INT-BEARING-DEPOSITS> 2,092,437
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,893,884
<INVESTMENTS-CARRYING> 6,498,658
<INVESTMENTS-MARKET> 6,529,221
<LOANS> 160,384,650
<ALLOWANCE> 1,905,931
<TOTAL-ASSETS> 197,921,008
<DEPOSITS> 129,458,652
<SHORT-TERM> 7,500,000
<LIABILITIES-OTHER> 1,893,259
<LONG-TERM> 3,000,000
0
0
<COMMON> 40,111
<OTHER-SE> 56,028,986
<TOTAL-LIABILITIES-AND-EQUITY> 197,921,008
<INTEREST-LOAN> 9,714,828
<INTEREST-INVEST> 1,421,624
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11,136,452
<INTEREST-DEPOSIT> 4,652,589
<INTEREST-EXPENSE> 5,116,534
<INTEREST-INCOME-NET> 6,019,918
<LOAN-LOSSES> 180,000
<SECURITIES-GAINS> 13,774
<EXPENSE-OTHER> 3,872,322
<INCOME-PRETAX> 3,372,178
<INCOME-PRE-EXTRAORDINARY> 3,372,178
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,162,579
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<YIELD-ACTUAL> 8.02
<LOANS-NON> 287,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,735,599
<CHARGE-OFFS> 9,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,905,931
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
Exhibit 99.1 Press release
FORT DODGE, IOWA -- North Central Bancshares, Inc., (the "Company") the holding
company for First Federal Savings Bank of Fort Dodge (the "Bank"), announced
today that the Company earned $500,000, or $0.13 per share for the third quarter
of 1996, after posting the one-time pre-tax special assessment of $817,000 to
fulfill the Bank's obligation under recently enacted legislation to recapitalize
the Savings Association Insurance Fund ("SAIF"). This compares to net income of
$625,000, or $0.16 per share during the third quarter of 1995. For the nine
months ended September 30, 1996, net earnings were $2,163,000, or $0.56 per
share, after posting the one-time SAIF special assessment, as compared to
$1,793,000 or $0.46 per share for the corresponding period a year ago, an
increase of $369,000 or 20.6%. The Company earned $1,013,000, or $0.26 per share
during the third quarter of 1996 and $2,675,000, or $0.69 per share during the
nine months ended September 30, 1996, before posting the SAIF special
assessment.
David M. Bradley, President and Chief Executive Officer said, "While the special
recapitalization assessment adversely impacted earnings for the third quarter,
the short-term impact of this assessment is outweighed by the long-term benefit
of significantly reduced deposit insurance premiums for well capitalized
institutions such as First Federal. A reduction in noninterest expense may begin
as early as the fourth quarter 1996."
On March 20, 1996, First Federal Savings Bank completed a reorganization from a
mutual holding company form of organization to a stock holding company form of
organization. Pursuant to this transaction, the Bank became a wholly-owned
subsidiary of North Central Bancshares, Inc. and the Company replaced the Bank
as the issuer listed by The Nasdaq Stock Market. In addition to the exchange of
the Bank's common stock for 1,385,590 shares of the Company's stock, the Company
sold 2,625,467 shares of stock in a subscription offering. This stock offering
resulted in net proceeds for the Company of $25.4 million.
Total assets at September 30, 1996 amount to $197.9 million compared to $179.9
at December 31, 1995. The primary reason for the $18.0 million or 10.0% increase
in total assets was the $25.4 million in net proceeds received from the
offering, a portion of which were used to repay certain borrowings.
Securities increased $4.6 million, or 19.3%, and net loans increased $12.5
million, or 8.5% from December 31, 1995. Deposits increased $2.8 million, or
2.2%. and other borrowed funds decreased by $11.4
20
<PAGE>
million, or 52.1% from December 31, 1995.
Nonperforming assets were 0.23% of total assets as of September 30, 1996
compared to 0.21% as of June 30, 1996 and 0.17% as of December 31, 1995. The
allowance for loan losses was to $1.9 million or 1.16% of total loans at
September 30, 1996, compared to $1.7 million or 1.15% of total loans at December
31, 1995.
The net interest margin for the quarter ended September 30, 1996 was 4.51%
compared to 3.78% for the corresponding quarter in 1995. Net interest income
for the quarter ending September 30, 1996 was $2.2 million, an increase of 37.5%
from $1.6 million for the corresponding period last year. Interest income for
the quarter ended September 30, 1996 increased $477,000, or 14.2%, compared with
the corresponding period in 1995, due primarily to increased average balances of
interest-earning assets. Interest expense decreased $109,000 or 6.1%, when
comparing the third quarter of 1996 with the corresponding period of 1995. The
decrease in interest expense was due primarily to a decrease in the cost of
interest-bearing deposits and the decrease in the average balances of borrowed
funds, offset by an increase in the average balances of interest-bearing
deposits.
The Bank's provision for loan losses was $60,000, for each of the three months
ended September 30, 1996 and 1995. The Bank establishes provisions for loan
losses, which are charged to operations, in order to maintain the allowance for
loan losses at a level which is deemed to be appropriate based upon an
assessment of prior conditions, the volume and type of loans in the Bank's
portfolio, and other factors related to the collectibility of the Bank's loan
portfolio.
Noninterest income increased $106,000 or 27.0% and noninterest expense, which
included the one-time SAIF special assessment, increased $913,000 or 99.3%, in
the third quarter of 1996 compared to the corresponding period of 1995.
Noninterest income, excluding the gain on sale of securities available for sale,
increased $270,000 or 24.1%, and noninterest expense, which included the
one-time SAIF special assessment, increased $1,157,000 or 42.6%, for the nine
months ended September 30, 1996 as compared to the corresponding period of 1995.
Book value, or stockholders' equity, per share at September 30, 1996 was $13.98
and stockholders' equity to total assets was 28.3%. Stockholders' equity was
$56.1 million at September 30, 1996 compared to $29.9 million at December 31,
1995. The ratio of stockholders' equity to total assets was 16.6% as of December
31,
21
<PAGE>
1995.
North Central Bancshares, Inc. serves north central Iowa at 4 full service
locations in Fort Dodge, Nevada and Ames, Iowa through its wholly-owned
subsidiary, First Federal Savings Bank of Fort Dodge, headquartered in Fort
Dodge, Iowa. The Bank's deposits are insured by the Federal Deposit Insurance
Corporation. The Company's stock is traded on The Nasdaq National Market under
the symbol "FFFD".
FINANCIAL HIGHLIGHTS OF NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA) SEPTEMBER 30, 1996 DECEMBER 31, 1995
-------------------------------- -----------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,106 $ 3,071
Securities available for sale 21,894 7,799
Securities held to maturity (Market value 6,499 15,995
$6.5 million and $16.2 million, respectively)
Loans (net of allowance of loan loss of $1.9 160,385 147,872
million and $1.7 million, respectively)
Other assets 6,037 5,193
---------------- ----------------
Total Assets $ 197,921 $ 179,930
================ ================
Liabilities
Deposits $ 129,459 $ 126,672
Other borrowed funds 10,500 21,940
Other liabilities 1,893 1,418
---------------- ----------------
Total Liabilities 141,852 150,030
Stockholders' Equity 56,069 29,900
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 197,921 $ 179,930
================ ================
Stockholders' equity to total assets 28.33% 16.62%
================ ================
Book value per share $ 13.98 $ 7.45
================ ================
Total shares outstanding 4,011,057 4,011,057
================ ================
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------------------------------- --------------------------------------
1996 1995 1996 1995
-------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 3,825 $ 3,348 $ 11,136 $ 9,596
Interest expense 1,673 1,782 5,117 5,156
---------- ---------- ---------- ----------
Net interest income 2,152 1,566 6,019 4,440
Provision for loan loss 60 60 180 190
---------- ---------- ---------- ----------
Net interest income after provision for
loan loss 2,092 1,506 5,839 4,250
Noninterest income 500 393 1,391 1,121
Gain on sale of securities available for sale -- -- 14 182
One-time SAIF special assessment 817 -- 817 --
Noninterest expense 1,015 919 3,055 2,716
---------- ---------- ---------- ----------
Income before income taxes 760 980 3,372 2,837
Income taxes 260 355 1,209 1,044
---------- ---------- ---------- ----------
Net income $ 500 $ 625 $ 2,163 $ 1,793
========== ========== ========== ==========
Earnings per share $ 0.13 $ 0.16 $ 0.56 $ 0.46
========== ========== ========== ==========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL RATIOS
For the Three Months For the Nine Months For the Year
Ended September 30, Ended September 30, Ended
------------------------------- ------------------------------
1996 1995 1996 1995 DECEMBER 31, 1995
------------- --------------- ------------- -------------- ----------------------
<S> <C> <C> <C> <C> <C>
Performance Ratios: (annualized)
Net interest spread 3.04% 2.87% 3.02% 2.71% 2.75%
Net interest margin 4.51% 3.78% 4.33% 3.63% 3.66%
Return on average assets 1.02% 1.48% 1.52% 1.44% 1.48%
Return on average equity 3.57% 8.62% 5.98% 8.38% 8.78%
Efficiency ratio (noninterest
expense divided by the sum of
net income before provision for
loan losses plus noninterest
income) 69.06% 46.90% 52.16% 47.29% 46.48%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996 DECEMBER 31, 1995
------------------ ------------------ ---------------------
<S> <C> <C> <C>
Asset Quality Ratios:
Nonaccrual loans and total net loans 0.18% 0.14% 0.12%
Nonperforming assets to total assets 0.23% 0.21% 0.17%
Allowance for loan losses as a percent of total 1.16% 1.16% 1.15%
loan's receivable
</TABLE>
23
