<PAGE>
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 June 30, 1998
[ ] 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
--------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code #(515)576-7531
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 13, 1998
- ----------------------------------------------------------------------------
(Common Stock, $.01 par value) 3,103,159
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C>
Item 1. Consolidated Condensed
Financial Statements (unaudited) 1 to 4
Consolidated Condensed Statements of
Financial Condition at June 30,
1998 and December 31, 1997 (Unaudited) 1
Consolidated Condensed Statements of
Income for the three and six months ended
June 30, 1998 and 1997 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the six months ended
June 30, 1998 and 1997 (Unaudited) 3 & 4
Notes to Consolidated Condensed Financial
Statements 5 & 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7 to 15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
Part II. Other Information 16 to 18
Items 1 through 6 16 & 17
Signatures 18
Exhibits
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
--------------------- ---------------------
<S> <C> <C>
Cash:
Interest-bearing $ 8,711,853 $ 2,462,809
Noninterest-bearing 1,510,967 982,354
Securities available for sale 53,657,204 19,815,913
Loans receivable, net 250,370,758 191,248,830
Loans held for sale 1,219,401 - -
Accrued interest receivable 2,153,495 1,300,495
Foreclosed real estate 214,570 67,107
Premises and equipment, net 3,329,747 2,143,016
Rental real estate 2,002,989 2,059,148
Title plant 925,256 925,256
Goodwill 6,564,464 195,628
Deferred taxes - - 105,139
Prepaid expenses and other assets 463,327 647,913
------------ ------------------
$331,124,031 $ 221,953,608
Total assets ============ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $246,397,519 $141,123,707
Other borrowed funds 32,342,000 28,550,000
Advances from borrowers for taxes and insurance 1,020,379 918,369
Dividend payable 253,479 204,155
Deferred income taxes 100,944 - -
Income taxes payable 114,603 194,325
Accrued expenses and other liabilities 1,708,370 545,976
------------ ------------
Total liabilities 281,937,294 171,536,532
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized 3,000,000 shares,
issued and outstanding none) - - - -
Common Stock ($.01 par value, authorized 15,500,000 shares;
issued and outstanding 4,011,057) 40,111 40,111
Additional paid-in capital 38,062,228 37,949,598
Retained earnings, substantially restricted 25,387,213 23,660,964
Accumulated other comprehensive income-unrealized gain on securities
available for sale, net of income taxes 310,952 354,781
Treasury stock at cost (884,674 and 744,574 shares, respectively) (13,502,812) (10,377,937)
Unearned shares, employee stock ownership plan (1,110,955) (1,210,441)
------------ ------------
Total stockholders' equity 49,186,737 50,417,076
------------ ------------
Total liabilities and stockholders' equity $331,124,031 $221,953,608
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
-1-
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $5,156,803 $3,551,492 $ 9,905,841 $7,055,562
Securities and cash deposits 893,120 380,070 1,609,302 780,948
---------- ---------- ----------- ----------
6,049,923 3,931,562 11,515,143 7,836,510
---------- ---------- ----------- ----------
Interest expense:
Deposits 2,820,935 1,580,062 5,214,252 3,130,329
Other borrowed funds 469,811 315,762 949,243 619,786
---------- ---------- ----------- ----------
3,290,746 1,895,824 6,163,495 3,750,115
---------- ---------- ----------- ----------
Net Interest Income 2,759,177 2,035,738 5,351,648 4,086,395
Provision for loan losses 60,000 60,000 120,000 120,000
---------- ---------- ----------- ----------
Net interest income after provision for loan losses 2,699,177 1,975,738 5,231,648 3,966,395
---------- ---------- ----------- ----------
Noninterest income:
Fees and service charges 311,779 154,636 549,398 309,000
Abstract fees 401,463 307,967 762,561 562,777
Gain on sale of securities available for sale, net - - - - 54,853 - -
Other income 260,505 135,995 422,277 211,206
---------- ---------- ----------- ----------
Total noninterest income 973,747 598,598 1,789,089 1,082,983
---------- ---------- ----------- ----------
Noninterest expense:
Salaries and employee benefits 873,667 531,720 1,644,236 1,055,903
Premises and equipment 181,514 102,675 334,729 206,489
Data processing 120,602 61,783 219,833 126,202
SAIF deposit insurance premiums 37,434 21,162 69,924 42,231
Goodwill amortization 116,730 13,973 196,339 13,973
Other expenses 564,693 387,745 1,064,009 783,890
---------- ---------- ----------- ----------
1,894,640 1,119,058 3,529,070 2,228,688
Total noninterest expense ---------- ---------- ----------- ----------
Income before income taxes 1,778,284 1,455,278 3,491,667 2,820,690
Provision for income taxes 661,995 495,954 1,269,875 972,216
---------- ---------- ----------- ----------
Net Income $1,116,289 $ 959,324 $ 2,221,792 $1,848,474
========== ========== =========== ==========
Basic earnings per common share $0.36 $0.30 $0.71 $0.57
========== ========== =========== ==========
Diluted earnings per common share $0.35 $0.30 $0.69 $0.56
========== ========== =========== ==========
Dividends declared per common share $0.0800 $0.0625 $0.1600 $0.1250
========== ========== =========== ==========
Comprehensive Income $1,115,926 $1,024,742 $ 2,082,420 $1,995,250
========== ========== =========== ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
-2-
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,221,792 $ 1,848,474
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 120,000 120,000
Depreciation, premises and equipment 132,843 92,063
Depreciation, rental real estate 56,894 32,500
Amortization and accretion 274,982 67,550
Deferred taxes (65,216) (49,054)
Effect of contribution to employee stock ownership plan 223,616 164,913
(Gain) on sale of foreclosed real estate and loans, net (3,214) (21,107)
(Gain) on sale of securities available for sale (54,853) - -
Loss on disposal of equipment - - 4,674
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable 166,373 (13,800)
(Increase) decrease in prepaid expenses and other assets 394,492 (54,972)
Decrease in income taxes payable (67,157) (73,395)
Increase in accrued expenses and other liabilities 313,366 90,657
----------- -----------
Net cash provided by operating activities 3,713,918 2,208,503
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net( increase) decrease in loans 3,697,638 (801,969)
Purchase of loans (8,420,666) (6,077,253)
Proceeds from sale of loans 2,663,900 161,381
Proceeds from sales, calls and maturities of securities available for sale 17,345,264 500,000
Purchase of securities available for sale (9,522,246) (2,598,973)
Proceeds from maturities of securities held to maturity - - 3,500,000
Purchase of premises and equipment (237,684) (351,714)
Proceeds from sale of equipment - - 31,300
Purchase of rental real estate (735) (332,336)
Proceeds from sale of title plant - - 43,491
Cash paid in connection with acquisition of Valley Financial Corp.,
net of cash received (8,561,493) - -
Other 78,311 31,188
----------- -----------
Net cash (used in) investing activities (2,957,711) (5,894,885)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 6,011,817 6,535,862
Increase (decrease) in advances from borrowers for taxes and insurance (199,773) 12,681
Net change in short term borrowings - - (6,000,000)
Proceeds from other borrowed funds 10,042,000 13,250,000
Payments of other borrowings (6,250,000) (3,035,000)
Purchase of treasury stock (3,124,875) (2,706,750)
Dividends paid (446,219) (425,027)
Other (11,500) - -
----------- -----------
Net cash provided by financing activities 6,021,450 7,631,766
----------- -----------
Net increase in cash 6,777,657 3,945,384
CASH
Beginning 3,445,163 3,936,815
----------- -----------
Ending $10,222,820 $ 7,882,199
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 5,163,177 $ 3,103,105
Interest paid on borrowings 949,243 332,751
Income taxes 1,402,247 1,097,131
</TABLE>
(Continued)
-3-
<PAGE>
The following is a summary of the assets acquired and liabilities assumed in
connection with the acquisition of Valley Financial Corp.
<TABLE>
<S> <C>
Securities $ 41,818,057
Loans 58,567,364
Accrued interest receivable 1,019,373
Premises and equipment 1,081,890
Goodwill 6,565,174
Prepaid expenses and other assets 209,906
Deposits (99,261,995)
Advances from borrowers for taxes and insurance (301,783)
Deferred income taxes (300,030)
Accrued taxes payable 12,565
Accrued expenses and other liabilities (849,028)
------------
Cash Paid, less cash received $ 8,561,493
============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
-4-
<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 six month
period ended June 30, 1998 and 1997 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 1997 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 Iowa (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 $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.
3. ACQUISITION OF VALLEY FINANCIAL CORP.
As of the close of business on January 30, 1998, the Bank completed the
acquisition of Valley Financial Corp., ("Valley Financial") (the "Acquisition")
pursuant to an Agreement and Plan of Merger, dated as of September 18, 1997 (the
"Merger Agreement"). The acquisition resulted in the merger of Valley
Financial's wholly owned subsidiary, Valley Savings Bank, FSB ("Valley Savings")
with and into the Bank, with the Bank as the resulting financial institution.
Valley Savings, headquartered in Burlington, Iowa, was a federally-charted stock
savings bank with three branch offices located in southeastern Iowa. The former
offices of Valley Savings are being operated as a division of the Bank.
In connection with the Acquisition, each share of Valley Financial's common
stock, par value $1.00 per share, issued and outstanding (other than shares held
as treasury stock of Valley Financial) was cancelled and converted automatically
into the right to receive $525 per share in cash pursuant to the terms and
conditions of the Merger Agreement. As a result of the Acquisition,
shareholders of Valley Financial were paid a total of $14,726,250 in cash. The
Acquisition was accounted for as a purchase transaction, resulting in goodwill
of $6.6 million. The operating results of the former offices of Valley Savings
are included in the 1998 operating results of the Company only from the date of
acquisition through June 30, 1998.
-5-
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)(Continued)
4. 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 month period ended June
30, 1998, the weighted average number of shares outstanding for basic and
diluted earnings per share computation were 3,105,277 and 3,216,117,
respectively. For the six month period ended June 30, 1998, the weighted
average number of shares outstanding for basic and diluted earnings per share
computation were 3,122,934 and 3,225,206, respectively. For the three month
period ended June 30, 1997, the weighted average number of shares outstanding
for basic and diluted earnings per share computation were 3,201,477 and
3,246,780, respectively. For the six month period ended June 30, 1997, the
weighted average number of shares outstanding for basic and diluted earning per
share computation were 3,241,620 and 3,283,629, respectively.
5. DIVIDENDS
On May 29, 1998, the Company declared a cash dividend on its common stock,
payable on July 6, 1998 to stockholders of record as of June 16, 1998, equal to
$0.08 per share.
6. STOCK REPURCHASE
The Company completed its fourth stock repurchase program on August 5, 1998.
The Company repurchased 163,324 shares of its outstanding stock, par value $.01
per share, at the aggregate cost of $3,584,419, in open market transactions.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivatives
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards for derivatives instruments, including
certain derivative instruments embedded in other contracts, and for hedging
contracts. It requires that an entity recognize all derivatives as either
assets or liabilities, and measures those instruments at fair value. It also
sets forth the proper accounting for hedging activities, which is determined by
the intended use of the derivative and how that use is designated by the entity.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
Earlier application is permitted and should not be applied retroactively to
financial statements of prior periods. Since the Company is not currently
holding any derivative instruments (as defined) and is not engaged in hedging
activities, the adoption of SFAS No. 133 is expected to have no effect on the
Company's financial condition or results of operations.
-6-
<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, market, 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. The Company's actual
results may differ from the results discussed in the forward looking statements.
ACQUISITION OF VALLEY FINANCIAL CORP.
On September 18, 1997, the Company announced the execution of a definitive
agreement to acquire Valley Financial, a privately held Iowa corporation and
parent company of Valley Savings, Burlington, Iowa. As of the close of business
on January 30, 1998 the Bank completed the Acquisition. Under the terms of the
Merger Agreement, the Bank was acquired in a cash transaction totalling
$14,726,250, or $525 per share, of all 28,050 shares outstanding of Valley
Financial's common stock.
Valley Savings was a federally chartered savings bank, with two offices in
Burlington, Iowa and one office in Mount Pleasant, Iowa. At January 30, 1998,
just prior to the merger, Valley Financial had assets of $108.0 million, loans
of $57.9 million and deposits of $98.9 million.
The acquisition of Valley Financial resulted in the merger of Valley Financial's
wholly-owned subsidiary, Valley Savings, with and into First Federal, with the
three Valley Savings branches continuing to operate as Valley Savings Bank, a
division of First Federal Savings Bank of Iowa. The transaction was accounted
for as a purchase, resulting in goodwill of $6.6 million and closed on January
30, 1998 and, thus, the operating results of the former Valley Savings are
included in the 1998 operating results of the Company only from the date of
acquisition through June 30, 1998.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The following unaudited pro forma consolidated financial statements presented on
the following pages are based on the historical financial statements of the
Company and Valley Financial. The unaudited pro forma consolidated statements
of income for the three and six months ended June 30, 1998 and 1997 were
prepared as if the Acquisition had occurred as of the beginning of the
respective periods for purposes of the combined consolidated statements of
income and as if such an acquisition had occurred at December 31, 1997 for
purposes of the combined consolidated statement of financial condition.
These pro forma financial statements are not necessarily indicative of the
results of operations that might have occurred had the Acquisition taken place
at the beginning of the period, or to project the Company's results of
operations at any future date or for any future period. The pro forma
consolidated condensed statements should be read in connection with the notes
thereto.
-7-
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
ACTUAL AND PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
Actual Pro Forma
June 30, December 31,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash:
Interest-bearing $ 8,711,853 $ 6,481,513
Noninterest-bearing 1,510,967 2,035,107
Securities available for sale 53,657,204 58,892,100
Loans receivable, net 250,370,758 250,700,535
Loans held for sale 1,219,401 - -
Accrued interest receivable 2,153,495 2,273,563
Foreclosed real estate 214,570 74,240
Premises and equipment, net 3,329,747 3,229,923
Rental real estate 2,002,989 2,059,148
Title plant 925,256 925,256
Goodwill 6,564,464 6,734,983
Prepaid expenses and other assets 463,327 742,395
------------ ------------
$331,124,031 $334,148,763
Total assets ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $246,397,519 $240,634,725
Other borrowed funds 32,342,000 39,858,760
Advances from borrowers for taxes and insurance 1,020,379 1,164,417
Dividend payable 253,479 204,155
Deferred income taxes 100,944 209,657
Income taxes payable 114,603 98,558
Accrued expenses and other liabilities 1,708,370 1,561,415
------------ ------------
Total liabilities 281,937,294 283,731,687
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized 3,000,000 shares,
issued and outstanding none) - - - -
Common Stock ($.01 par value, authorized 15,500,000 shares;
issued and outstanding 4,011,057) 40,111 40,111
Additional paid-in capital 38,062,228 37,949,598
Retained earnings, substantially restricted 25,387,213 23,660,964
Unrealized gain on securities available for sale, net of
income taxes 310,952 354,781
Treasury stock at cost (884,674 and 744,574 shares, respectively) (13,502,812) (10,377,937)
Unearned shares, employee stock ownership plan (1,110,955) (1,210,441)
------------ ------------
Total stockholders' equity 49,186,737 50,417,076
------------ ------------
Total liabilities and stockholders' equity $331,124,031 $334,148,763
============ ============
</TABLE>
-8-
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $6,049,923 $5,878,111 $12,137,452 $11,667,444
Interest expense 3,290,746 3,267,867 6,613,575 6,412,096
---------- ---------- ----------- -----------
Net interest income 2,759,177 2,610,244 5,523,877 5,255,348
Provision for loan losses 60,000 (40,000) 120,000 20,000
---------- ---------- ----------- -----------
Net interest income after provision for
loan losses 2,699,177 2,650,244 5,403,877 5,235,348
---------- ---------- ----------- -----------
Noninterest income:
Fees and service charges 311,779 261,404 585,303 516,961
Abstract fees 401,463 307,967 762,561 562,777
Gain on sale of securities available for
sale, net - - - - 54,853 - -
Other income 253,122 228,552 440,112 382,804
---------- ---------- ----------- -----------
Total noninterest income 966,364 797,923 1,842,829 1,462,542
---------- ---------- ----------- -----------
Noninterest expense:
Salaries and employee benefits 874,417 818,310 1,812,931 1,600,097
Premises and equipment 181,514 174,071 369,227 353,120
Data processing 120,602 105,078 249,656 213,323
SAIF deposit insurance premiums 37,434 37,023 75,218 61,289
Goodwill amortization 116,892 116,891 232,812 232,811
Other expenses 616,608 564,948 1,195,755 1,115,495
---------- ---------- ----------- -----------
Total noninterest expense 1,947,467 1,816,321 3,935,599 3,576,135
---------- ---------- ----------- -----------
Income before income taxes 1,718,074 1,631,846 3,311,107 3,121,755
Provision for income taxes 640,928 595,150 1,228,687 1,126,505
---------- ---------- ----------- -----------
Net Income $1,077,146 $1,036,696 $ 2,082,420 $ 1,995,250
========== ========== =========== ===========
</TABLE>
-9-
<PAGE>
FINANCIAL CONDITION
The pro forma statement of financial condition as of December 31, 1997 was used
for comparison purposes to the June 30, 1998 statement of financial condition in
order to more clearly present the changes in financial condition.
Total assets decreased $3.0 million, or 0.9%, to $331.1 million at June 30, 1998
compared to $334.1 million at December 31, 1997. Interest bearing cash
increased $2.2 million, or 34.4%. Securities available for sale decreased $5.2
million, or 8.9%, primarily due to $14.5 million of maturities, calls and
proceeds from sales, partially offset by $9.6 million of purchases. Total loans
receivable, net, decreased by $330,000, or 0.13%, from December 31, 1997, due
primarily to payments and prepayments of loans (of approximately $33.6 million)
and loan sales of $2.7 million, which payments, prepayments and sales were
offset in part by originations of $18.1 million of first mortgage loans secured
primarily by one-to-four family residences, purchases of $8.3 million of first
mortgage loans secured by multi-family residences and originations of $7.2
million of second mortgage loans. Deposits increased $5.8 million, or 2.4%,
from $240.6 million at December 31, 1997 to $246.4 million at June 30, 1998,
reflecting increases in certificates of deposit, NOW and money market
accounts. These increases were primarily due to advertising by the Company to
promote noninterest bearing checking accounts and offering competitive interest
rates on certain deposit products. Other borrowings, primarily FHLB advances,
decreased by $7.5 million, to $32.3 million at June 30, 1998 from $39.9 million
at December 31, 1997, primarily due to the repayment of short term advances with
excess cash available from the Acquisition of Valley Financial. Total
stockholders' equity decreased $1.2 million, from $50.4 million at December 31,
1997 to $49.2 million at June 30, 1998, primarily due to stock repurchases and
dividends declared, which were offset in part by earnings. See "Capital".
CAPITAL
The Company's total stockholders' equity decreased by $1.2 million to $49.2
million at June 30, 1998 from $50.4 million at December 31, 1997, primarily due
to stock repurchases and dividends declared, which were offset in part by
earnings. The changes in stockholders' equity were also due to a decrease in
the unrealized gain on securities available for sale by $44,000 to $311,000 at
June 30, 1998 from $355,000 at December 31, 1997. The unearned shares from the
Employee Stock Ownership Plan (the "ESOP") decreased by $99,000 to $1,111,000 at
June 30, 1998 from $1,210,000 at December 31, 1997, due to the release of shares
by the ESOP to employees of the Bank.
The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum
tangible, leverage (core) and risk-based capital requirements. As of June 30,
1998, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Amount Percentage of Assets
------- --------------------
(dollars in thousands)
<S> <C> <C>
Tangible capital:
Capital level $38,979 12.10%
Less Requirement 4,833 1.50%
------- -----
Excess $34,146 10.60%
======= =====
Core capital:
Capital level $38,979 12.10%
Less Requirement 12,887 4.00%
------- -----
Excess $26,092 8.10%
======= =====
Risk-based capital:
Capital level $41,383 24.23%
Less Requirement 13,662 8.00%
------- -----
Excess $27,721 16.23%
======= =====
</TABLE>
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including principal and interest payment on loans), certain financing
activities (including increases in deposits and proceeds from borrowings) and
certain investing activities (including maturities and calls of securities and
other investments). During the first six months of 1998 and 1997, principal
payments and repayments on loans totalled $33.6 million and $16.9 million,
respectively. The net increases in deposits during the first six months of 1998
and 1997 totalled $6.0 million and $6.5
-10-
<PAGE>
million, respectively. The proceeds from borrowed funds during the first six
months of 1998 and 1997 totalled $10.0 million and $13.3 million, respectively.
During the first six months of 1998 and 1997, the proceeds from the maturities,
calls and sales of securities totalled $17.3 million and $4.0 million,
respectively. Cash provided from operating activities during the first six
months of 1998 and 1997 totalled $3.7 million and $2.2 million, respectively, of
which $2.2 million and $1.8 million, respectively, represented net income of the
Company. The Company's primary use of funds is cash used to originate and
purchase loans, repayment of borrowed funds and other financing activities.
During the first six months of 1998 and 1997, the Company's gross purchases and
origination of loans totalled $37.6 million and $24.7 million, respectively. The
repayment of borrowed funds during the first six months of 1998 and 1997
totalled $6.2 million and $9.0 million, respectively. For additional information
about cash flows from the Company's operating, financing and investing
activities, see "Statements of Cash Flows in the Condensed Consolidated
Financial Statements."
The Bank is required to maintain an average daily balance of liquid assets
(cash, certain time deposits, bankers' acceptances, specified United States
Government, state or federal agency obligations, shares of certain mutual funds
and certain corporate debt securities and commercial paper) in each calendar
quarter of not less than four percent of either (1) the liquidity base at the
end of the preceding quarter, or (2) the average daily balance of the liquidity
base during the preceding quarter equal to a specified percentage of its net
withdrawable deposit accounts plus short-term borrowings. This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4.0% to 10%, depending upon economic conditions and the savings flows
of member institutions, and is currently 4.0%. Monetary penalties may be
imposed for failure to meet these liquidity requirements. At June 30, 1998, the
Bank's liquidity position was $40.9 million or 16.26% of liquid assets,
compared to $14.0 million, or 9.28%, at December 31, 1997. The increase in the
Bank's liquidity position was due primarily to the Acquisition of Valley
Financial on the close of business as of January 30, 1998. During the fourth
quarter of 1997, the OTS revised its liquidity requirements by reducing the
minimum liquidity requirements from 5% to 4%, eliminating the short term
liquidity requirement and requiring each savings association to maintain
sufficient liquidity to ensure its safe and sound operation.
Stockholders' equity totaled $49.2 million at June 30, 1998 compared to $50.4
million at December 31, 1997, reflecting the Company's earnings for the quarter,
stock repurchases, the amortization of the unallocated portion of shares held by
the ESOP, dividends declared on common stock and the change in the net
unrealized gains on securities, net of taxes.
On April 6, 1998, the Company paid a quarterly cash dividend equal to $0.08 per
share on common stock outstanding as of the close of business on March 16, 1998,
aggregating $261,000. On May 29, 1998, the Company declared a quarterly cash
dividend of $0.08 per share payable on July 6, 1998 to shareholders of record as
of the close of business on June 16, 1998, aggregating $253,000.
RESULTS OF OPERATIONS
The pro forma statements of income for the three and six months ended June 30,
1998 and 1997 were used for comparison purposes in order to more clearly present
the changes in the results of operations.
Interest Income. Interest income increased by $172,000 to $6.0 million for the
three months ended June 30, 1998 compared to $5.9 million for the three months
ended June 30, 1997. The increase in interest income was primarily due to a
$8.8 million increase in the average balance of interest assets (primarily first
mortgage and consumer loans) to $314.6 million for the three months ended June
30, 1998 from $305.8 million for the comparable 1997 period. The increase in
the average balance of 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 multi-family residences, which were offset,
in part, by payments and prepayments on such loans. See "Financial Condition."
The impact of the increase in the average balances of loans was offset in part
by a decrease in the average balance of securities available for sale. The
decrease in the average balance of securities available for sale was due to
sales, calls and maturities, which were offset, in part, by purchases of lower
yielding available for sale securities. The average yield on interest earning
assets increased from 7.69% for the three months ended June 30, 1997 to 7.70%
for the three months ended June 30, 1998.
Interest income increased by $470,000 to $12.1 million for the six months ended
June 30, 1998 compared to $11.7 million for the six months ended June 30, 1997.
The increase in interest income was primarily due to a $12.2 million
-11-
<PAGE>
RESULTS OF OPERATIONS (Continued)
increase in the average balance of interest earning assets (primarily first
mortgage and consumer loans) to $315.3 million for the six months ended June 30,
1998 from $303.1 million for the comparable 1997 period. The increase
in the average balance of 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 multi-family residences, which were offset,
in part, by payments and prepayments on such loans. See "Financial Condition."
The impact of the increase in the average balances of loans was offset in part
by a decrease in the average yield on loans and a decrease in the average
balance of securities available for sale. The average yield on loans decreased
to 8.21% for the six months ended June 30, 1998 from 8.25% for the six months
ended June 30, 1997, primarily due to a general decrease in market interest
rates. The decrease in the average balance of securities available for sale was
due to sale, calls and maturities, which were offset, in part, by purchases.
The average yield on interest earning assets remained the same at 7.71% for the
six months ended June 30, 1998 and 1997.
Interest Expense. Interest expense increased by $23,000 to $3.3 million for the
three months ended June 30, 1998 compared to $3.3 million for the three months
ended June 30, 1997. The increase in interest expense was primarily due to a
$4.2 million increase in the average balance of interest bearing deposits
(primarily NOW accounts, money market accounts and certificates of deposit),
partially offset by a decrease in borrowed funds, to $271.7 million for the
three months ended June 30, 1998 from $267.5 million for the comparable 1997
period. The increase in such deposit accounts are due to marketing of the
Company's noninterest bearing checking accounts, offering competitive rates on
the certificate of deposit and money market accounts. The decrease in borrowed
funds was due to the repayment of short term advances with excess cash available
from the Acquisition of Valley Financial. The impact of the increase in the
average balances of NOW accounts, money market accounts and certificates of
deposit was offset in part by a decrease in the average cost of interest bearing
liabilities. The decrease in the average cost of interest bearing liabilities
is primarily due to a general decrease in market interest rates. The average
cost of interest bearing liabilities decreased from 4.91% for the three months
ended June 30, 1997 to 4.87% for the three months ended June 30, 1998.
Interest expense increased by $201,000 to $6.6 million for the six months ended
June 30, 1998 compared to $6.4 million for the six months ended June 30, 1997.
The increase in interest expense was primarily due to a $9.3 million increase in
the average balance of interest bearing deposits (primarily NOW accounts, money
market accounts and certificates of deposit), partially offset by a decrease in
borrowed funds, to $273.0 million for the six months ended June 30, 1998 from
$263.7 million for the comparable 1997 period. The increase in such deposit
accounts are due to marketing of the Company's noninterest bearing checking
accounts, offering competitive rates on the certificate of deposit and money
market accounts and a $4.4 million money market account opened for a certain
governmental entity. The decrease in borrowed funds was due to the repayment
of short term advances with excess cash available from the Acquisition of Valley
Financial. The impact of the increase in the average balances of NOW accounts,
money market accounts and certificates of deposit was offset in part by a
decrease in the average cost of interest bearing liabilities. The decrease in
the average cost of interest bearing liabilities is primarily due to a general
decrease in market interest rates. The average cost of interest bearing
liabilities decreased from 4.89% for the six months ended June 30, 1997 to 4.88%
for the six months ended June 30, 1998.
Net Interest Income. Net interest income before the provision for loan losses
increased by $149,000 to $2.8 million for the three months ended June 30, 1998
from $2.6 million for the three months ended June 30, 1997. The increase is
primarily due to the increase in the excess of average interest earning assets
over the average interest bearing liabilities and an increase in the interest
rate spread. The interest rate spread (i.e., the difference in the average
yield on assets and average cost of liabilities) increased slightly from 2.78%
for the three months ended June 30, 1997 to 2.83% for the three months ended
June 30, 1998.
Net interest income before the provision for loan losses increased by $269,000
to $5.5 million for the six months ended June 30, 1998 from $5.3 million for the
six months ended June 30, 1997. The increase is primarily due to the increase
in the excess of average interest earning assets over the average interest
bearing liabilities and an increase in the interest rate spread. The interest
rate spread (i.e., the difference in the average yield on assets and average
cost of liabilities) increased slightly from 2.82% for the six months ended June
30, 1997 to 2.83% for the six months ended June 30, 1998.
The following table sets forth certain information relating to the Company's pro
forma average balance sheets and reflects the pro forma average yield on assets
and pro forma average cost of liabilities for the three and six month periods
ended June 30, 1998 and 1997.
-12-
<PAGE>
RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
For Three Months Ended June 30,
------------------------------------------------------------------------
1998 1997
------------------------------------- -------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
--------------- -------- ---------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans........................................ $251,736 $ 5,157 8.19% $236,257 $ 4,842 8.20%
Securities available for sale................ 54,324 792 5.85 65,666 986 6.02
Interest bearing cash........................ 8,550 101 4.74 3,898 50 5.19
-------- ------- ------ -------- ------- ------
Total interest-earning assets.............. 314,610 $ 6,050 7.70% 305,821 $ 5,878 7.69%
------- ------ ------- ------
Noninterest-earning assets..................... 16,326 18,077
-------- --------
Total assets............................... $330,936 $323,898
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings................. $ 47,365 $ 368 3.12% $ 40,894 $ 329 3.23%
Passbook savings............................. 26,625 156 2.35 26,566 164 2.47
Certificates of deposit...................... 165,289 2,297 5.57 161,027 2,207 5.50
Borrowed funds............................... 32,453 470 5.87 38,997 568 5.91
-------- ------- ------ -------- ------- ------
Total interest-bearing liabilities............. 271,732 $ 3,291 4.87% 267,484 $ 3,268 4.91%
------- ------ ------- ------
Noninterest-bearing liabilities................ 8,391 7,625
-------- --------
Total liabilities.......................... 280,123 275,109
Equity......................................... 50,813 48,789
-------- --------
Total liabilities and equity............... $330,936 $323,898
======== ========
Net interest income................................. $ 2,759 $ 2,610
======= =======
Net interest rate spread............................ 2.83% 2.78%
====== ======
Net interest margin................................. 3.51% 3.41%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 115.78% 114.33%
====== ======
For Six Months Ended June 30,
-----------------------------------------------------------------------
1998 1997
------------------------------------- ------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
--------------- -------- ---------- -------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans........................................ $251,151 $10,311 8.21% $233,742 $ 9,644 8.25%
Securities available for sale................ 56,411 1,636 5.85 65,392 1,924 5.93
Interest bearing cash........................ 7,740 190 4.96 3,919 99 5.12
-------- ------- ------ -------- ------- ------
Total interest-earning assets.............. 315,302 $12,137 7.71% 303,053 $11,667 7.71%
------- ------ ------- ------
Noninterest-earning assets..................... 17,354 18,356
-------- --------
Total assets............................... $332,656 $321,409
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings................. $ 47,012 $ 728 3.12% $ 39,895 $ 604 3.05%
Passbook savings............................. 26,412 310 2.37 26,584 324 2.46
Certificates of deposit...................... 164,489 4,551 5.79 159,702 4,384 5.54
Borrowed funds............................... 35,048 1,024 5.81 37,511 1,100 5.83
-------- ------- ------ -------- ------- ------
Total interest-bearing liabilities............. 272,961 $ 6,613 4.88% 263,692 $ 6,412 4.89%
------- ------ ------- ------
Noninterest-bearing liabilities................ 8,798 8,456
-------- --------
Total liabilities.......................... 281,759 272,148
Equity......................................... 50,897 49,261
-------- --------
Total liabilities and equity............... $332,656 $321,409
======== ========
Net interest income................................. $ 5,524 $ 5,255
======= =======
Net interest rate spread............................ 2.83% 2.82%
====== ======
Net interest margin................................. 3.50% 3.47%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 115.51% 114.93%
====== ======
</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 June 30, 1998 and $(40,000) for the three months
ended June 30, 1997. The Company's provision for loan losses was $120,000 for
the six months ended June 30, 1998 and $20,000 for the six months ended June 30,
1997. 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 and commercial real estate 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 $8,000 for the six months ended June 30,
1998 as compared to net charge offs of $52,000 for the six months ended June 30,
1997. The resulting allowance for loan losses was $2.6 million at June 30, 1998
as compared to $2.5 million at December 31, 1997 and $2.4 million at June 30,
1997. The level of nonperforming loans decreased to $162,000 at June 30, 1998
from $296,000 at December 31, 1997 and from $220,000 at June 30, 1997.
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 $168,000 to $966,000
for the three months ended June 30, 1998 from $798,000 for the three months
ended June 30, 1997. The increase is due to increases in all categories of
noninterest income. Abstract fees increased $93,000 due to increased sales
volume, which is in part attributable to an improved housing market and the
current level of interest rates. Other fees and service charges increased
$50,000, primarily due to increases in overdraft fees. Other income increased
$25,000, primarily due to increases in insurance sales.
Total noninterest income increased by $380,000 to $1.8 million for the six
months ended June 30, 1998 from $1.5 million for the six months ended June 30,
1997. The increase is due to increases in all categories of noninterest income.
Abstract fees increased $200,000 due to increased sales volume, which is in part
attributable to an improved housing market and the current level of interest
rates. Other fees and service charges increased $68,000, primarily due to
increases in overdraft fees. Other income increased $57,000, primarily due to
increases in insurance sales and rental income from the Bank's investment in the
Northridge Apartments Limited Partnership, which owns and operates a 44-unit
apartment complex in Fort Dodge, Iowa. Noninterest income for the six months
ended June 30, 1998 reflects gains on sales of securities available for sale of
$55,000, while no such gains were recorded for the corresponding six month
period in 1997.
Noninterest Expense. Total noninterest expense increased by $131,000 to $1.9
million for the three months ended June 30, 1998 from $1.8 million for the three
months ended June 30, 1997. The increase is primarily due to increases in
salaries and employee benefits, data processing and other expenses. The increase
in salaries and benefits was primarily a result of the increased costs
associated with the ESOP, normal salary increases and one time costs associated
with the acquisition of Valley Financial. The increase in data processing was
primarily a result of normal cost increases, additional data processing services
used and one time costs associated with the acquisition of Valley Financial. The
increase in other expenses was primarily as result of loan expenses, employee
expenses and one time costs associated with the acquisition of Valley Financial.
The Company's efficiency ratio for the three months ended June 30, 1998 and 1997
were 52.27% and 53.29%, respectively. The Company's ratio of noninterest expense
to average assets for the three moths ended June 30, 1998 and 1997 were 2.35%
and 2.24%, respectively.
Total noninterest expense increased by $359,000 to $3.9 million for the six
months ended June 30, 1998 from $3.6 million for the six months ended June 30,
1997. The increase is primarily due to increases in salaries and employee
benefits, data processing and other expenses. The increase in salaries and
benefits was primarily a result of the increased costs associated with the ESOP,
normal salary increases and one time costs associated with the acquisition of
Valley Financial. The increase in data processing was primarily a result of
normal cost increases, additional data processing services used and one time
costs associated with the acquisition of Valley Financial. The increase in other
expenses was primarily a result of one time costs associated with the
acquisition of Valley Financial,
-14-
<PAGE>
RESULTS OF OPERATIONS (Continued)
employee expenses and rental expenses in connection with Northridge Limited
Partnership, offset in part by decreases in professional fees and marketing
expenses. The Company's efficiency ratio for the six months ended June 30, 1998
and 1997 were 53.42% and 53.23%, respectively. The Company's ratio of
noninterest expense to average assets for the six months ended June 30, 1998 and
1997 were 2.37% and 2.23%, respectively.
Income Taxes. Income taxes increased by $46,000 to $641,000 for the three months
ended June 30, 1998 as compared to $595,000 for the three months ended June 30,
1997. The increase was primarily due to an increase in pre-tax earnings during
the 1998 period as compared to the corresponding 1997 period.
Income taxes increased by $102,000 to $1.2 million for the six months ended June
30, 1998 as compared to $1.1 million for the six months ended June 30, 1997. The
increase was primarily due to an increase in pre-tax earnings during the 1998
period as compared to the corresponding 1997 period.
Net Income. Net income totaled $1,077,000 for the three months ended June 30,
1998, compared to $1,037,000 for the same period in 1997.
Net income totaled $2,082,000 for the six months ended June 30, 1998, compared
to $1,995,000 for the same period in 1997.
Year 2000 Compliance. Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Year 2000 issue affects virtually all companies and
organizations.
The Company, working with its outside service providers, has initiated a project
to ensure that its computer systems are Year 2000 compliant. The Company has
sent letters to all service providers, that management believes impact the
Company's Year 2000 compliance, in order verify their status on Year 2000
compliance. The Company will begin testing for Year 2000 compliance of certain
computer applications in the fourth quarter of 1998. The Company believes that
the costs associated with Year 2000 compliance will not materially affect the
Company's future operating results or financial condition. The Company believes
the financial risk of noncompliance for Year 2000 is serious and would have a
material affect on the Company's financial condition and future operating
results.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In management's opinion, there has not been a material change in market risk
from December 31, 1997 as reported in Item 7A of the Form 10-K.
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1998 Annual Meeting of Stockholders on April 24, 1998. At
the meeting, the stockholders of the Company considered and voted upon:
1. The election as directors are as follows:
Three-year term: Howard A. Hecht
Melvin R. Schroeder
The results of the election of directors are as follows:
Votes
---------
In favor Withheld
------------ ------------
Howard A. Hecht 2,924,027 12,007
Melvin R. Schroeder 2,924,243 11,791
There were no broker non-votes on this proposal.
2. The approval of Amendment No. 2 to the North Central Bancshares, Inc. 1996
Stock Option Plan was approved by a vote of 2,628,557 in favor, 276,607 votes
against and 30,870 votes abstaining.
There were no broker non-votes on this proposal.
3. The ratification of the engagement of McGladrey & Pullen LLP, as the
Company's independent auditors, was approved by a vote of 2,910,402 in favor,
2,089 votes against and 23,543 votes abstaining.
There were no broker non-votes on this proposal.
Item 5. Other Information
None
-16-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10. Material Contracts - Revised employment agreements
Exhibit 27. Financial data schedule. (Only submitted with filing in electronic
format.)
Exhibit 99.1 Press Release, dated May 29, 1998 (regarding the declaration of a
dividend).
Exhibit 99.2 Press Release, dated July 27, 1998 (regarding the issuance of
limited financial information for the three and six months ended June 30, 1998).
(b) Reports of Form 8-K
None
-17-
<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: August 13, 1998 BY: /s/ David M. Bradley
David M. Bradley, CPA
Chairman, President and
Chief Executive Officer
DATE: August 13, 1998 BY: /s/ John L. Pierschbacher
John L. Pierschbacher, CPA
Principal Financial Officer
-18-
<PAGE>
Exhibit 10. Material Contracts - Revised Employee Agreements
FIRST FEDERAL SAVINGS BANK OF IOWA
AMENDED AND RESTATED EMPLOYEE RETENTION AGREEMENT
This Agreement is made effective as of March 20, 1998 by and between First
Federal Savings Bank of Iowa, a federally chartered savings institution, with
its principal administrative office at 825 Central Avenue, Fort Dodge, Iowa
50501 (the "Bank"), and Kirk A. Yung (the "Executive").
WHEREAS, the Bank and the Executive are parties to an Employee Retention
Agreement made and entered into as of the 20th day of March, 1996 ("Prior
Agreement"); and
WHEREAS, the Bank and the Executive desire to amend and restate the Prior
Agreement in its entirety as set forth herein; and
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
Senior Vice President of the Bank. During said period, Executive also agrees to
serve, if elected, as an officer and director of any subsidiary or affiliate of
the Bank.
2. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Prior to each anniversary date of this
Agreement, the members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting. If the Board determines
to extend the Agreement and the Executive agrees to such extension, the
Executive's period of employment shall be extended for an additional year such
that the remaining term shall be three (3) years from the upcoming anniversary
date. If the Board
<PAGE>
does not determine to extend the Agreement or if the Executive does not agree to
a proposed extension, the Agreement shall expire at the end of the term then in
effect.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially adversely affect the performance of Executive's duties pursuant to
this Agreement.
3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in section 2(b). The Bank
shall pay Executive as compensation a salary at an annualized rate of not less
than SIXTY-ONE THOUSAND DOLLARS ($61,000) per year ("Base Salary"). Such Base
Salary shall be payable monthly, on the first day of each month, or in
accordance with the Bank's customary payroll practices in effect from time to
time for other similarly situated employees. During the period of this
Agreement, Executive's Base Salary shall be reviewed at least annually. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary. In addition to the Base Salary provided in
this Section 3(a), the Bank shall provide Executive with all such other benefits
as are provided uniformly to full-time employees of the Bank, subject to and
upon the same terms and conditions generally applicable to full-time employees.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit form immediately prior
to the beginning of the term of this Agreement. Without limiting the generality
of the foregoing provisions of this Subsection (b), Executive will be entitled
to participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
<PAGE>
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during any portion of the Executive's
term of employment under this Agreement that follows a Change in Control. As
used in this Agreement, an "Event of Termination" shall mean and include any
termination by the Bank of Executive's full-time employment hereunder for any
reason other than a Termination for Cause as defined in Section 6 hereof and any
termination of employment by the Executive within sixty (60) days following any
material reduction in his compensation and benefits from the levels in effect
immediately prior to the Change in Control or any material adverse change in the
Executive's position, duties, authority or terms and conditions of employment
from those in effect immediately prior to the Change in Control. In the event of
a continuing breach of this Agreement by the Bank, the Executive shall not waive
any of his rights under this Agreement by virtue of the fact that the Executive
is engaged in good faith discussions to resolve such breach.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or 3
times the average of aggregate of the Executive's Base Salary plus bonus and
other cash compensation paid to, plus the amount of all determinable
contributions made to or under any employee benefit plan on behalf of, the
Executive by the Bank during the period of five (5) years ending on the Date of
Termination; provided, however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of thirty-six (36) full calendar months following the Date of
Termination.
(d) Upon the occurrence of an Event of Termination, Executive will be
entitled to any benefits granted to him pursuant to any stock option plan of the
Bank or Company.
(e) Upon the occurrence of an Event of Termination, the Executive will be
entitled to any benefits awarded to him under any restricted stock plan of the
Bank or the Company.
<PAGE>
(f) Notwithstanding the preceding paragraphs of this Section 4, in the
event that the Executive receives payments in the nature of compensation
(whether or not pursuant to this Agreement) that are subject to the tax imposed
under section 4999 of the Internal Revenue Code of 1986 or the corresponding
provision of any succeeding law ("Parachute Tax"), then:
(i) if, by reducing the payments and benefits provided for in this
Agreement, the aggregate payments in the nature of compensation may be
reduced to a level at which the Parachute Tax is imposed, such payments
shall be reduced to the maximum amount which may be provided without
resulting in the imposition of a Parachute Tax; and
(ii) in all other cases, the payments and benefits provided hereunder
shall not be affected.
The applicability of any reduction under Section 4(f)(i) and the amount and
manner of such reduction shall be determined by a firm of independent certified
public accountants selected by the Bank which shall, in determining the manner
of any reduction, consult with and take into accounts the preferences of the
Executive.
(g) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period which Executive is
incapable of performing his duties hereunder by reason of temporary disability.
(h) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12.U.S.C.
(S) 1818(k) and any regulations promulgated thereunder.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under Section 4 unless there shall have
been a Change in Control of the Bank or North Central Bancshares, Inc., an Iowa
corporation of which the Bank is a subsidiary (the "Company"), as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Company shall mean:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank
with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the
<PAGE>
outstanding equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled to vote
generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition; or
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the board of directors of the Bank do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the Bank
after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of such
board, or of a nominating committee thereof, in office at the
time of such first election; or
(II) upon election by the stockholders of the Bank to serve
as a member of the Board of the Bank, but only if nominated for
election by affirmative vote of three-quarters of the members of
the Board of the Bank, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the
<PAGE>
Bank;
(v) any event which would be described in Section 5(a)(i), (ii),
(iii) or (iv) if the term "Company" were substituted for the term "Bank"
therein.
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Bank, the
Company, or any affiliate or subsidiary of either of them, by the Bank, the
Company or any affiliate or subsidiary of either of them, or by any employee
benefit plan maintained by any of them. For purposes of this section 5 the term
"person" shall have the meaning assigned to it under sections 13(d)(3) or
14(d)(2) of the Exchange Act.
6. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of the Executive shall be considered "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary thereof,
shall become null and void effective upon Executive's receipt of Notice of
Termination for Cause pursuant to Section 7 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.
7. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's
<PAGE>
employment under the provision so indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination, which shall in no event be later than the date on which the Notice
of Termination is personally delivered by the notifying party to the other party
or five (5) days after the date on which such Notice of Termination is mailed by
certified mail, return receipt requested, to the other party.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of
Termination for Cause in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of an court of competent jurisdiction (the time for appeal having expired and no
appear having been perfected); provided however, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice of Termination; notwithstanding the
foregoing no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such nine-month
period, the Bank shall not be obligated, upon final resolution of such dispute,
to pay Executive compensation and other payments accruing more than nine months
from the Date of the Termination specified in the Notice of Termination. Amounts
paid under this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.
8. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for 3 full years after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party; provided, however, that the Executive shall be reimbursed
by the Bank for all of the reasonable costs which he incurs in complying with
this Section 8(b).
<PAGE>
9. NON-COMPETITION
(a) Executive agrees not to compete with the Bank and/or the Company
during the term of his employment hereunder and for a period of one (1) year
following his Date of Termination in any city, town or county in which the Bank,
the Company, or a subsidiary of the Bank of the Company has an office or other
physical location or has filed an application of regulatory approval to
establish an office, determined as of the effective date of such termination,
except as agreed to pursuant to a resolution duly adopted by the Board.
Executive agrees that during such period and within said cities, towns and
counties, Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank and/or the
Company. The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 9(a) agree that in the event of any such
breach by Executive, the Bank and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Nothing
herein will be construed as prohibiting the Bank and/or the Company from
pursuing any other remedies available to the Bank and/or the Company for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 9, the Bank will be entitled
to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
10. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank.
<PAGE>
11. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits that
those available to him without reference to this Agreement.
12. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
13. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
wavier or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
14. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive's right (if applicable) to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 6
herein above.
(b) If the Executive is suspended from office and/or temporarily
prohibited rom
<PAGE>
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C. (S) 1818(g)) of
the Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, the Bank's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Executive all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g)(12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at the time FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 U.S.C. (S) 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
15. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
16. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
<PAGE>
17. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Iowa, but only
to the extent not superseded by federal law.
18. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement may be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
19. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrator) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which me may be involved by reason of his having been a director
or officer of the Bank (whether or not he continued to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(k) or any regulations promulgated thereunder, or 12
C.F.R. 544.122.
20. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and the
Executive has signed this Agreement, on the day and date first above written.
ATTEST: FIRST FEDERAL SAVINGS BANK OF IOWA
BY: /s/ Jean Lake BY: /s/ David M. Bradley
----------------------- --------------------------------
Jean Lake, Secretary David M. Bradley
President and Chief Executive Officer
[SEAL]
WITNESS EXECUTIVE
BY: /s/ C. Thomas Chalstrom BY: /s/ Kirk A Yung
<PAGE>
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came
Kirk A. Yung, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at 1534 11th Avenue North, Fort Dodge, Iowa 50501, and that he signed
his name to the foregoing instrument.
/s/ C. Thomas Chalstrom
--------------------------
Notary Public
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came David M.
Bradley, to me known, who, being by me duly sworn, did depose and say that he
resides at 2905 12th Avenue North, Fort Dodge, Iowa, 50501, that he is the
President and Chief Executive Officer of First Federal Savings Bank of Iowa, the
savings bank described in and which executed the foregoing instrument; that he
knows the seal of said savings bank; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
savings bank; and that he signed his name thereto by like order.
/s/ C. Thomas Chalstrom
--------------------------
Notary Public
<PAGE>
FIRST FEDERAL SAVINGS BANK OF IOWA
AMENDED AND RESTATED EMPLOYEE RETENTION AGREEMENT
This Agreement is made effective as of March 20, 1998 by and between First
Federal Savings Bank of Iowa, a federally chartered savings institution, with
its principal administrative office at 825 Central Avenue, Fort Dodge, Iowa
50501 (the "Bank"), and C. Thomas Chalstrom (the "Executive").
WHEREAS, the Bank and the Executive are parties to an Employee Retention
Agreement made and entered into as of the 20th day of March, 1996 ("Prior
Agreement"); and
WHEREAS, the Bank and the Executive desire to amend and restate the Prior
Agreement in its entirety as set forth herein; and
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
21. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
Executive Vice President of the Bank. During said period, Executive also agrees
to serve, if elected, as an officer and director of any subsidiary or affiliate
of the Bank.
22. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Prior to each anniversary date of this
Agreement, the members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting. If the Board determines
to extend the Agreement and the Executive agrees to such extension, the
Executive's period of employment shall be extended for an additional year such
that the remaining term shall be three (3) years from the upcoming anniversary
date. If the Board does not determine to extend the Agreement or if the
Executive does not agree to a proposed extension, the Agreement shall expire at
the end of the term then in effect.
<PAGE>
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially adversely affect the performance of Executive's duties pursuant to
this Agreement.
23. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in section 2(b). The Bank
shall pay Executive as compensation a salary at an annualized rate of not less
than SEVENTY THOUSAND DOLLARS ($70,000) per year ("Base Salary"). Such Base
Salary shall be payable monthly, on the first day of each month, or in
accordance with the Bank's customary payroll practices in effect from time to
time for other similarly situated employees. During the period of this
Agreement, Executive's Base Salary shall be reviewed at least annually. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase Executive's Base Salary. In addition to the Base Salary provided in
this Section 3(a), the Bank shall provide Executive with all such other benefits
as are provided uniformly to full-time employees of the Bank, subject to and
upon the same terms and conditions generally applicable to full-time employees.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit form immediately prior
to the beginning of the term of this Agreement. Without limiting the generality
of the foregoing provisions of this Subsection (b), Executive will be entitled
to participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
24. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.
<PAGE>
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during any portion of the Executive's
term of employment under this Agreement that follows a Change in Control. As
used in this Agreement, an "Event of Termination" shall mean and include any
termination by the Bank of Executive's full-time employment hereunder for any
reason other than a Termination for Cause as defined in Section 6 hereof and any
termination of employment by the Executive within sixty (60) days following any
material reduction in his compensation and benefits from the levels in effect
immediately prior to the Change in Control or any material adverse change in the
Executive's position, duties, authority or terms and conditions of employment
from those in effect immediately prior to the Change in Control. In the event of
a continuing breach of this Agreement by the Bank, the Executive shall not waive
any of his rights under this Agreement by virtue of the fact that the Executive
is engaged in good faith discussions to resolve such breach.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or 3
times the average of aggregate of the Executive's Base Salary plus bonus and
other cash compensation paid to, plus the amount of all determinable
contributions made to or under any employee benefit plan on behalf of, the
Executive by the Bank during the period of five (5) years ending on the Date of
Termination; provided, however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of thirty-six (36) full calendar months following the Date of
Termination.
(d) Upon the occurrence of an Event of Termination, Executive will be
entitled to any benefits granted to him pursuant to any stock option plan of the
Bank or Company.
(e) Upon the occurrence of an Event of Termination, the Executive will be
entitled to any benefits awarded to him under any restricted stock plan of the
Bank or the Company.
(f) Notwithstanding the preceding paragraphs of this Section 4, in the
event that the Executive receives payments in the nature of compensation
(whether or not pursuant to this Agreement) that are subject to the tax imposed
under section 4999 of the Internal Revenue Code of 1986 or the corresponding
provision of any succeeding law ("Parachute Tax"), then:
<PAGE>
(i) if, by reducing the payments and benefits provided for in this
Agreement, the aggregate payments in the nature of compensation may be
reduced to a level at which the Parachute Tax is imposed, such payments
shall be reduced to the maximum amount which may be provided without
resulting in the imposition of a Parachute Tax; and
(ii) in all other cases, the payments and benefits provided hereunder
shall not be affected.
The applicability of any reduction under Section 4(f)(i) and the amount and
manner of such reduction shall be determined by a firm of independent certified
public accountants selected by the Bank which shall, in determining the manner
of any reduction, consult with and take into accounts the preferences of the
Executive.
(g) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period which Executive is
incapable of performing his duties hereunder by reason of temporary disability.
(h) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12.U.S.C.
(S) 1818(k) and any regulations promulgated thereunder.
25. CHANGE IN CONTROL
(a) No benefit shall be payable under Section 4 unless there shall have
been a Change in Control of the Bank or North Central Bancshares, Inc., an Iowa
corporation of which the Bank is a subsidiary (the "Company"), as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Company shall mean:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank
with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the outstanding equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially
<PAGE>
owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the securities entitled
to vote generally in the election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition; or
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the board of directors of the Bank do
not belong to any of the following groups:
(A) individuals who were members of the Board of the Bank on
the date of this Agreement; or
(B) individuals who first became members of the Board of the
Bank after the date of this Agreement either:
(I) upon election to serve as a member of the Board of
the Bank by affirmative vote of three-quarters of the members of
such board, or of a nominating committee thereof, in office at
the time of such first election; or
(II) upon election by the stockholders of the Bank to
serve as a member of the Board of the Bank, but only if nominated
for election by affirmative vote of three-quarters of the members
of the Board of the Bank, or of a nominating committee thereof,
in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank;
(v) any event which would be described in Section 5(a)(i), (ii),
(iii) or (iv) if the term "Company" were substituted for the term "Bank"
therein.
<PAGE>
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Bank, the
Company, or any affiliate or subsidiary of either of them, by the Bank, the
Company or any affiliate or subsidiary of either of them, or by any employee
benefit plan maintained by any of them. For purposes of this section 5 the term
"person" shall have the meaning assigned to it under sections 13(d)(3) or
14(d)(2) of the Exchange Act.
26. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of the Executive shall be considered "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary thereof,
shall become null and void effective upon Executive's receipt of Notice of
Termination for Cause pursuant to Section 7 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.
27. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination, which shall in no event be later than the date on which the Notice
of Termination is personally delivered by the notifying party to the other party
or five (5) days after the date on which such Notice of Termination is mailed by
certified mail, return receipt requested, to the other party.
<PAGE>
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of
Termination for Cause in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of an court of competent jurisdiction (the time for appeal having expired and no
appear having been perfected); provided however, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice of Termination; notwithstanding the
foregoing no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such nine-month
period, the Bank shall not be obligated, upon final resolution of such dispute,
to pay Executive compensation and other payments accruing more than nine months
from the Date of the Termination specified in the Notice of Termination. Amounts
paid under this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.
28. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for 3 full years after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party; provided, however, that the Executive shall be reimbursed
by the Bank for all of the reasonable costs which he incurs in complying with
this Section 8(b).
29. NON-COMPETITION
(a) Executive agrees not to compete with the Bank and/or the Company
during the term of his employment hereunder and for a period of one (1) year
following his Date of Termination in any city, town or county in which the Bank,
the Company, or a subsidiary of the Bank of the Company has an office or other
physical location or has filed an application
<PAGE>
of regulatory approval to establish an office, determined as of the effective
date of such termination, except as agreed to pursuant to a resolution duly
adopted by the Board. Executive agrees that during such period and within said
cities, towns and counties, Executive shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business activities of
the Bank and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the Bank and/or the Company, its business and property in
the event of Executive's breach of this Subsection 9(a) agree that in the event
of any such breach by Executive, the Bank and/or the Company will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employers, employees and all persons acting for or with Executive.
Nothing herein will be construed as prohibiting the Bank and/or the Company from
pursuing any other remedies available to the Bank and/or the Company for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 9, the Bank will be entitled
to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
30. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank.
31. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the
<PAGE>
Bank and Executive, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of a kind elsewhere
provided. No provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits that those available to him
without reference to this Agreement.
32. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
33. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
wavier or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
34. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive's right (if applicable) to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 6
herein above.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C.
(S) 1818(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their
<PAGE>
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g)(12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at the time FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 U.S.C. (S) 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
35. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
36. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
37. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Iowa, but only
to the extent not superseded by federal law.
<PAGE>
38. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement may be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
39. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrator) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which me may be involved by reason of his having been a director
or officer of the Bank (whether or not he continued to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(k) or any regulations promulgated thereunder, or 12
C.F.R. 544.122.
40. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and the
Executive has signed this Agreement, on the day and date first above written.
ATTEST: FIRST FEDERAL SAVINGS BANK OF IOWA
BY: /s/ Jean Lake BY: /s/ David M. Bradley
---------------------- -----------------------------------
Jean Lake, Secretary David M. Bradley
President and Chief Executive Officer
[SEAL]
EXECUTIVE
WITNESS
BY: /s/ Kirk A. Yung BY: /s/ C. Thomas Chalstrom
C. Thomas Chalstrom
<PAGE>
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came C. Thomas
Chalstrom, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at 1817 3rd Avenue North, Fort Dodge, Iowa 50501, and that he signed his
name to the foregoing instrument.
/s/ Linda K. Dyer
------------------
Notary Public
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came David M.
Bradley, to me known, who, being by me duly sworn, did depose and say that he
resides at 2905 12th Avenue North, Fort Dodge, Iowa, 50501, that he is the
President and Chief Executive Officer of First Federal Savings Bank of Iowa, the
savings bank described in and which executed the foregoing instrument; that he
knows the seal of said savings bank; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
savings bank; and that he signed his name thereto by like order.
/s/ Linda K. Dyer
------------------
Notary Public
<PAGE>
FIRST FEDERAL SAVINGS BANK OF IOWA
AMENDED AND RESTATED EMPLOYEE RETENTION AGREEMENT
This Agreement is made effective as of March 20, 1998 by and between First
Federal Savings Bank of Iowa, a federally chartered savings institution, with
its principal administrative office at 825 Central Avenue, Fort Dodge, Iowa
50501 (the "Bank"), and John L. Pierschbacher (the "Executive").
WHEREAS, the Bank and the Executive are parties to an Employee Retention
Agreement made and entered into as of the 20th day of March, 1996 ("Prior
Agreement"); and
WHEREAS, the Bank and the Executive desire to amend and restate the Prior
Agreement in its entirety as set forth herein; and
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
41. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
Treasurer of the Bank. During said period, Executive also agrees to serve, if
elected, as an officer and director of any subsidiary or affiliate of the Bank.
42. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Prior to each anniversary date of this
Agreement, the members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting. If the Board determines
to extend the Agreement and the Executive agrees to such extension, the
Executive's period of employment shall be extended for an additional year such
that the remaining term shall be three (3) years from the upcoming anniversary
date. If the Board does not determine to extend the Agreement or if the
Executive does not agree to a proposed extension, the Agreement shall expire at
the end of the term then in effect.
<PAGE>
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially adversely affect the performance of Executive's duties pursuant to
this Agreement.
43. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in section 2(b). The Bank
shall pay Executive as compensation a salary at an annualized rate of not less
than SEVENTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($77,500) per year ("Base
Salary"). Such Base Salary shall be payable monthly, on the first day of each
month, or in accordance with the Bank's customary payroll practices in effect
from time to time for other similarly situated employees. During the period of
this Agreement, Executive's Base Salary shall be reviewed at least annually.
Such review shall be conducted by a Committee designated by the Board, and the
Board may increase Executive's Base Salary. In addition to the Base Salary
provided in this Section 3(a), the Bank shall provide Executive with all such
other benefits as are provided uniformly to full-time employees of the Bank,
subject to and upon the same terms and conditions generally applicable to full-
time employees.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit form immediately prior
to the beginning of the term of this Agreement. Without limiting the generality
of the foregoing provisions of this Subsection (b), Executive will be entitled
to participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
44. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.
<PAGE>
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during any portion of the Executive's
term of employment under this Agreement that follows a Change in Control. As
used in this Agreement, an "Event of Termination" shall mean and include any
termination by the Bank of Executive's full-time employment hereunder for any
reason other than a Termination for Cause as defined in Section 6 hereof and any
termination of employment by the Executive within sixty (60) days following any
material reduction in his compensation and benefits from the levels in effect
immediately prior to the Change in Control or any material adverse change in the
Executive's position, duties, authority or terms and conditions of employment
from those in effect immediately prior to the Change in Control. In the event of
a continuing breach of this Agreement by the Bank, the Executive shall not waive
any of his rights under this Agreement by virtue of the fact that the Executive
is engaged in good faith discussions to resolve such breach.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or 3
times the average of aggregate of the Executive's Base Salary plus bonus and
other cash compensation paid to, plus the amount of all determinable
contributions made to or under any employee benefit plan on behalf of, the
Executive by the Bank during the period of five (5) years ending on the Date of
Termination; provided, however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of thirty-six (36) full calendar months following the Date of
Termination.
(d) Upon the occurrence of an Event of Termination, Executive will be
entitled to any benefits granted to him pursuant to any stock option plan of the
Bank or Company.
(e) Upon the occurrence of an Event of Termination, the Executive will be
entitled to any benefits awarded to him under any restricted stock plan of the
Bank or the Company.
(f) Notwithstanding the preceding paragraphs of this Section 4, in the
event that the Executive receives payments in the nature of compensation
(whether or not pursuant to this Agreement) that are subject to the tax imposed
under section 4999 of the Internal Revenue Code of 1986 or the corresponding
provision of any succeeding law ("Parachute Tax"), then:
<PAGE>
(i) if, by reducing the payments and benefits provided for in this
Agreement, the aggregate payments in the nature of compensation may be
reduced to a level at which the Parachute Tax is imposed, such payments
shall be reduced to the maximum amount which may be provided without
resulting in the imposition of a Parachute Tax; and
(ii) in all other cases, the payments and benefits provided hereunder
shall not be affected.
The applicability of any reduction under Section 4(f)(i) and the amount and
manner of such reduction shall be determined by a firm of independent certified
public accountants selected by the Bank which shall, in determining the manner
of any reduction, consult with and take into accounts the preferences of the
Executive.
(g) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period which Executive is
incapable of performing his duties hereunder by reason of temporary disability.
(h) Any payments made to Executive pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with 12.U.S.C. (S) 1818(k)
and any regulations promulgated thereunder.
45. CHANGE IN CONTROL
(a) No benefit shall be payable under Section 4 unless there shall have
been a Change in Control of the Bank or North Central Bancshares, Inc., an Iowa
corporation of which the Bank is a subsidiary (the "Company"), as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Company shall mean:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank
with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the outstanding equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions
<PAGE>
by persons who, immediately prior to such transaction, beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the securities entitled to vote generally in the
election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition; or
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following such event,
at least 50% of the members of the board of directors of the Bank do not
belong to any of the following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the Bank
after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of such
board, or of a nominating committee thereof, in office at the
time of such first election; or
(II) upon election by the stockholders of the Bank to serve
as a member of the Board of the Bank, but only if nominated for
election by affirmative vote of three-quarters of the members of
the Board of the Bank, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank;
(v) any event which would be described in Section 5(a)(i), (ii),
(iii) or (iv) if the term "Company" were substituted for the term "Bank"
therein.
<PAGE>
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Bank, the
Company, or any affiliate or subsidiary of either of them, by the Bank, the
Company or any affiliate or subsidiary of either of them, or by any employee
benefit plan maintained by any of them. For purposes of this section 5 the term
"person" shall have the meaning assigned to it under sections 13(d)(3) or
14(d)(2) of the Exchange Act.
46. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of the Executive shall be considered "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary thereof,
shall become null and void effective upon Executive's receipt of Notice of
Termination for Cause pursuant to Section 7 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.
47. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination, which shall in no event be later than the date on which the Notice
of Termination is personally delivered by the notifying party to the other party
or five (5) days after the date on which such Notice of Termination is mailed by
certified mail, return receipt requested, to the other party.
<PAGE>
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of
Termination for Cause in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of an court of competent jurisdiction (the time for appeal having expired and no
appear having been perfected); provided however, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice of Termination; notwithstanding the
foregoing no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such nine-month
period, the Bank shall not be obligated, upon final resolution of such dispute,
to pay Executive compensation and other payments accruing more than nine months
from the Date of the Termination specified in the Notice of Termination. Amounts
paid under this Section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement.
48. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for 3 full years after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party; provided, however, that the Executive shall be reimbursed
by the Bank for all of the reasonable costs which he incurs in complying with
this Section 8(b).
49. NON-COMPETITION
(a) Executive agrees not to compete with the Bank and/or the Company
during the term of his employment hereunder and for a period of one (1) year
following his Date of Termination in any city, town or county in which the Bank,
the Company, or a subsidiary of the Bank of the Company has an office or other
physical location or has filed an application of regulatory approval to
establish an office, determined as of the effective date of such
<PAGE>
termination, except as agreed to pursuant to a resolution duly adopted by the
Board. Executive agrees that during such period and within said cities, towns
and counties, Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank and/or the
Company. The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 9(a) agree that in the event of any such
breach by Executive, the Bank and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Nothing
herein will be construed as prohibiting the Bank and/or the Company from
pursuing any other remedies available to the Bank and/or the Company for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 9, the Bank will be entitled
to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
50. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank.
51. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision
<PAGE>
of this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits that those available to him without reference to this
Agreement.
52. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
53. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
wavier or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
54. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive's right (if applicable) to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 6
herein above.
(b) If the Executive is suspended from office and/or temporarily
prohibited rom participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C.
(S) 1818(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
<PAGE>
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g)(12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at the time FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 U.S.C. (S) 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
55. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
56. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
57. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Iowa, but only
to the extent not superseded by federal law.
<PAGE>
58. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement may be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
59. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrator) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which me may be involved by reason of his having been a director
or officer of the Bank (whether or not he continued to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(k) or any regulations promulgated thereunder, or 12
C.F.R. 544.122.
60. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and the
Executive has signed this Agreement, on the day and date first above written.
ATTEST: FIRST FEDERAL SAVINGS BANK OF IOWA
BY: /s/ Jean Lake BY: /s/ David M. Bradley
Jean Lake, Secretary David M. Bradley
President and Chief
Executive Officer
[SEAL]
EXECUTIVE
WITNESS
/s/ Kirk A. Yung BY: /s/ John L. Pierschbacher
John L. Pierschbacher
<PAGE>
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 7th day of July, 1998, before me personally came John L.
Pierschbacher, to me known, and known to me to be the individual described in
the foregoing instrument, who, being by me duly sworn, did depose and say that
he resides at 1151 Summit Avenue, Fort Dodge, Iowa 50501, and that he signed his
name to the foregoing instrument.
/s/ C. Thomas Chalstrom
--------------------------
Notary Public
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 7th day of July, 1998, before me personally came David M.
Bradley, to me known, who, being by me duly sworn, did depose and say that he
resides at 2905 12th Avenue North, Fort Dodge, Iowa, 50501, that he is the
President and Chief Executive Officer of First Federal Savings Bank of Iowa, the
savings bank described in and which executed the foregoing instrument; that he
knows the seal of said savings bank; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
savings bank; and that he signed his name thereto by like order.
/s/ C. Thomas Chalstrom
--------------------------
Notary Public
<PAGE>
FIRST FEDERAL SAVINGS BANK OF IOWA
AMENDED AND RESTATED EMPLOYEE RETENTION AGREEMENT
This Agreement is made effective as of March 20, 1998 by and between First
Federal Savings Bank of Iowa, a federally chartered savings institution, with
its principal administrative office at 825 Central Avenue, Fort Dodge, Iowa
50501 (the "Bank"), and Jean L. Lake (the "Executive").
WHEREAS, the Bank and the Executive are parties to an Employee Retention
Agreement made and entered into as of the 20th day of March, 1996 ("Prior
Agreement"); and
WHEREAS, the Bank and the Executive desire to amend and restate the Prior
Agreement in its entirety as set forth herein; and
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a full-
time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
61. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve as
Secretary of the Bank. During said period, Executive also agrees to serve, if
elected, as an officer and director of any subsidiary or affiliate of the Bank.
62. TERMS AND DUTIES
(a) The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Prior to each anniversary date of this
Agreement, the members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting. If the Board determines
to extend the Agreement and the Executive agrees to such extension, the
Executive's period of employment shall be extended for an additional year such
that the remaining term shall be three (3) years from the upcoming anniversary
date. If the Board does not determine to extend the Agreement or if the
Executive does not agree to a proposed extension, the Agreement shall expire at
the end of the term then in effect.
<PAGE>
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially adversely affect the performance of Executive's duties pursuant to
this Agreement.
63. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in section 2(b). The Bank
shall pay Executive as compensation a salary at an annualized rate of not less
than FORTY THOUSAND DOLLARS ($40,000) per year ("Base Salary"). Such Base Salary
shall be payable monthly, on the first day of each month, or in accordance with
the Bank's customary payroll practices in effect from time to time for other
similarly situated employees. During the period of this Agreement, Executive's
Base Salary shall be reviewed at least annually. Such review shall be conducted
by a Committee designated by the Board, and the Board may increase Executive's
Base Salary. In addition to the Base Salary provided in this Section 3(a), the
Bank shall provide Executive with all such other benefits as are provided
uniformly to full-time employees of the Bank, subject to and upon the same terms
and conditions generally applicable to full-time employees.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit form immediately prior
to the beginning of the term of this Agreement. Without limiting the generality
of the foregoing provisions of this Subsection (b), Executive will be entitled
to participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
64. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.
<PAGE>
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during any portion of the Executive's
term of employment under this Agreement that follows a Change in Control. As
used in this Agreement, an "Event of Termination" shall mean and include any
termination by the Bank of Executive's full-time employment hereunder for any
reason other than a Termination for Cause as defined in Section 6 hereof and any
termination of employment by the Executive within sixty (60) days following any
material reduction in his compensation and benefits from the levels in effect
immediately prior to the Change in Control or any material adverse change in the
Executive's position, duties, authority or terms and conditions of employment
from those in effect immediately prior to the Change in Control. In the event of
a continuing breach of this Agreement by the Bank, the Executive shall not waive
any of his rights under this Agreement by virtue of the fact that the Executive
is engaged in good faith discussions to resolve such breach.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or 3
times the average of aggregate of the Executive's Base Salary plus bonus and
other cash compensation paid to, plus the amount of all determinable
contributions made to or under any employee benefit plan on behalf of, the
Executive by the Bank during the period of five (5) years ending on the Date of
Termination; provided, however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. (S)(S) 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of thirty-six (36) full calendar months following the Date of
Termination.
(d) Upon the occurrence of an Event of Termination, Executive will be
entitled to any benefits granted to him pursuant to any stock option plan of the
Bank or Company.
(e) Upon the occurrence of an Event of Termination, the Executive will be
entitled to any benefits awarded to him under any restricted stock plan of the
Bank or the Company.
(f) Notwithstanding the preceding paragraphs of this Section 4, in the
event that the Executive receives payments in the nature of compensation
(whether or not pursuant to this Agreement) that are subject to the tax imposed
under section 4999 of the Internal Revenue Code of 1986 or the corresponding
provision of any succeeding law ("Parachute Tax"), then:
<PAGE>
(i) if, by reducing the payments and benefits provided for in this
Agreement, the aggregate payments in the nature of compensation may be
reduced to a level at which the Parachute Tax is imposed, such payments
shall be reduced to the maximum amount which may be provided without
resulting in the imposition of a Parachute Tax; and
(ii) in all other cases, the payments and benefits provided hereunder
shall not be affected.
The applicability of any reduction under Section 4(f)(i) and the amount and
manner of such reduction shall be determined by a firm of independent certified
public accountants selected by the Bank which shall, in determining the manner
of any reduction, consult with and take into accounts the preferences of the
Executive.
(g) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period which Executive is
incapable of performing his duties hereunder by reason of temporary disability.
(h) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12.U.S.C.
(S) 1818(k) and any regulations promulgated thereunder.
65. CHANGE IN CONTROL
(a) No benefit shall be payable under Section 4 unless there shall have
been a Change in Control of the Bank or North Central Bancshares, Inc., an Iowa
corporation of which the Bank is a subsidiary (the "Company"), as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Company shall mean:
(i) approval by the stockholders of the Bank of a transaction that
would result in the reorganization, merger or consolidation of the Bank
with one or more other persons, other than a transaction following which:
(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in
substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the outstanding equity ownership interests in the Bank; and
(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially
<PAGE>
owned (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) at least 51% of the securities entitled to vote generally in the
election of directors of the Bank;
(ii) the acquisition of all or substantially all of the assets of the
Bank or beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of the outstanding securities of the
Bank entitled to vote generally in the election of directors by any person
or by any persons acting in concert, or approval by the stockholders of the
Bank of any transaction which would result in such an acquisition; or
(iii) a complete liquidation or dissolution of the Bank, or approval
by the stockholders of the Bank of a plan for such liquidation or
dissolution; or
(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the board of directors of the Bank do
not belong to any of the following groups:
(A) individuals who were members of the Board of the Bank on the
date of this Agreement; or
(B) individuals who first became members of the Board of the
Bank after the date of this Agreement either:
(I) upon election to serve as a member of the Board of the
Bank by affirmative vote of three-quarters of the members of such
board, or of a nominating committee thereof, in office at the
time of such first election; or
(II) upon election by the stockholders of the Bank to serve
as a member of the Board of the Bank, but only if nominated for
election by affirmative vote of three-quarters of the members of
the Board of the Bank, or of a nominating committee thereof, in
office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of the Bank;
(v) any event which would be described in Section 5(a)(i), (ii),
(iii) or (iv) if the term "Company" were substituted for the term "Bank"
therein.
<PAGE>
(b) In no event, however, shall a Change of Control be deemed to have
occurred as a result of any acquisition of securities or assets of the Bank, the
Company, or any affiliate or subsidiary of either of them, by the Bank, the
Company or any affiliate or subsidiary of either of them, or by any employee
benefit plan maintained by any of them. For purposes of this section 5 the term
"person" shall have the meaning assigned to it under sections 13(d)(3) or
14(d)(2) of the Exchange Act.
66. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of the Executive shall be considered "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary thereof,
shall become null and void effective upon Executive's receipt of Notice of
Termination for Cause pursuant to Section 7 hereof, and shall not be exercisable
by Executive at any time subsequent to such Termination for Cause.
67. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination, which shall in no event be later than the date on which the Notice
of Termination is personally delivered by the notifying party to the other party
or five (5) days
<PAGE>
after the date on which such Notice of Termination is mailed by certified mail,
return receipt requested, to the other party.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of
Termination for Cause in which case the Date of Termination shall be the date
specified in the Notice, the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written agreement of the
parties, by a binding arbitration award, or by a final judgment, order or decree
of an court of competent jurisdiction (the time for appeal having expired and no
appear having been perfected); provided however, that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Bank will continue to pay Executive his full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice of Termination; notwithstanding the
foregoing no compensation or benefits shall be paid to Executive in the event
the Executive is Terminated for Cause. In the event that such Termination for
Cause is found to have been wrongful or such dispute is otherwise decided in
Executive's favor, the Executive shall be entitled to receive all compensation
and benefits which accrued for up to a period of nine months after the
Termination for Cause. If such dispute is not resolved within such nine-month
period, the Bank shall not be obligated, upon final resolution of such dispute,
to pay Executive compensation and other payments accruing more than nine months
from the Date of the Termination specified in the Notice of Termination.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.
68. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for 3 full years after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party; provided, however, that the Executive shall be reimbursed
by the Bank for all of the reasonable costs which he incurs in complying with
this Section 8(b).
<PAGE>
69. NON-COMPETITION
(a) Executive agrees not to compete with the Bank and/or the Company
during the term of his employment hereunder and for a period of one (1) year
following his Date of Termination in any city, town or county in which the Bank,
the Company, or a subsidiary of the Bank of the Company has an office or other
physical location or has filed an application of regulatory approval to
establish an office, determined as of the effective date of such termination,
except as agreed to pursuant to a resolution duly adopted by the Board.
Executive agrees that during such period and within said cities, towns and
counties, Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank and/or the
Company. The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 9(a) agree that in the event of any such
breach by Executive, the Bank and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Nothing
herein will be construed as prohibiting the Bank and/or the Company from
pursuing any other remedies available to the Bank and/or the Company for such
breach or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 9, the Bank will be entitled
to an injunction restraining Executive from disclosing, in whole or in part, the
knowledge of the past, present, planned or considered business activities of the
Bank or affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.
70. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank.
<PAGE>
71. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits that
those available to him without reference to this Agreement.
72. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
73. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
wavier or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
74. REQUIRED PROVISIONS
(a) The Bank may terminate the Executive's employment at any time, but any
termination by the Bank, other than Termination for Cause, shall not prejudice
Executive's right (if applicable) to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 6
herein above.
(b) If the Executive is suspended from office and/or temporarily prohibited
from
<PAGE>
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C. (S) 1818(g)) of
the Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, the Bank's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Executive all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligations which were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g)(12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Federal Deposit
Insurance Corporation ("FDIC"), at the time FDIC enters into an agreement to
provide assistance to or on behalf of the Bank under the authority contained in
Section 13(c) (12 U.S.C. (S) 1823(c)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
75. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
76. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience
<PAGE>
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
77. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Iowa, but only
to the extent not superseded by federal law.
78. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement may be settled by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
79. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrator) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which me may be involved by reason of his having been a director
or officer of the Bank (whether or not he continued to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(k) or any regulations promulgated thereunder, or 12
C.F.R. 544.122.
80. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and the
Executive has signed this Agreement, on the day and date first above written.
ATTEST: FIRST FEDERAL SAVINGS BANK OF IOWA
BY: /s/ Jean Lake BY: /s/ David M. Bradley
-------------------------- -------------------------------
Jean Lake, Secretary David M. Bradley
President and Chief Executive Officer
[SEAL]
EXECUTIVE
WITNESS
BY: /s/ Kirk A. Yung BY: /s/ Jean L. Lake
---------------- ----------------
Kirk A. Yung Jean L. Lake
<PAGE>
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came Jean L.
Lake, to me known, and known to me to be the individual described in the
foregoing instrument, who, being by me duly sworn, did depose and say that he
resides at 1227 North 24th Place, Fort Dodge, Iowa 50501, and that he signed his
name to the foregoing instrument.
/s/ C. Thomas Chalstrom
------------------------
Notary Public
STATE OF IOWA )
: ss.:
COUNTY OF WEBSTER )
On this 29th day of June, 1998, before me personally came David M.
Bradley, to me known, who, being by me duly sworn, did depose and say that he
resides at 2905 12th Avenue North, Fort Dodge, Iowa, 50501, that he is the
President and Chief Executive Officer of First Federal Savings Bank of Iowa, the
savings bank described in and which executed the foregoing instrument; that he
knows the seal of said savings bank; that the seal affixed to said instrument is
such seal; that it was so affixed by order of the Board of Directors of said
savings bank; and that he signed his name thereto by like order.
/s/ C. Thomas Chalstrom
-----------------------
Notary Public
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
the Balance Sheet/Income Statement and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,510,967
<INT-BEARING-DEPOSITS> 8,711,853
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 53,657,204
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 251,590,159
<ALLOWANCE> 2,601,688
<TOTAL-ASSETS> 331,124,031
<DEPOSITS> 246,397,519
<SHORT-TERM> 11,000,000
<LIABILITIES-OTHER> 3,197,775
<LONG-TERM> 21,342,000
0
0
<COMMON> 40,111
<OTHER-SE> 49,146,626
<TOTAL-LIABILITIES-AND-EQUITY> 331,124,031
<INTEREST-LOAN> 9,905,841
<INTEREST-INVEST> 1,609,302
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 11,515,143
<INTEREST-DEPOSIT> 5,214,252
<INTEREST-EXPENSE> 6,163,495
<INTEREST-INCOME-NET> 5,351,648
<LOAN-LOSSES> 120,000
<SECURITIES-GAINS> 54,853
<EXPENSE-OTHER> 3,529,070
<INCOME-PRETAX> 3,491,667
<INCOME-PRE-EXTRAORDINARY> 3,491,667
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,221,792
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.69
<YIELD-ACTUAL> 7.71
<LOANS-NON> 161,628
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,150,588
<CHARGE-OFFS> 13,048
<RECOVERIES> 730
<ALLOWANCE-CLOSE> 2,601,688
<ALLOWANCE-DOMESTIC> 2,601,688
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
Exhibit 99.1 Press Release
PRESS RELEASE
May 29, 1998 For further information contact:
David M. Bradley
Chairman, President & Chief Executive Officer
North Central Bancshares, Inc.
825 Central Avenue
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. DECLARES DIVIDEND
David M. Bradley, Chairman, President and Chief Executive Officer of North
Central Bancshares, Inc. (the "Company") announced on May 29, 1998 that the
Company declared a regular quarterly cash dividend of $.08 per share on the
Company's common stock for the fiscal quarter ended June 30, 1998. The dividend
will be payable to all stockholders of record as of June 16, 1998 and will be
paid on July 6, 1998.
The Company's common stock trades on the Nasdaq Stock Market under the symbol
"FFFD". The Company's wholly owned subsidiary, First Federal Savings Bank of
Iowa, is a federally chartered savings bank headquartered in Fort Dodge, Iowa.
<PAGE>
Exhibit 99.2 Press Release
PRESS RELEASE
July 27, 1998 For further information contact:
David M. Bradley
Chairman, President and Chief Executive Officer
North Central Bancshares, Inc.
825 Central Avenue PO Box 1237
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. ANNOUNCES RECORD
SECOND QUARTER 1998 EARNINGS
Fort Dodge, Iowa -- North Central Bancshares, Inc., (the "Company") the holding
company for First Federal Savings Bank of Iowa (the "Bank"), announced today
that the Company earned $1,116,000, or diluted earnings per share of $0.35, for
the second quarter of 1998, compared to $960,000, or diluted earnings per share
of $0.30, during the second quarter of 1997. For the six months ended June 30,
1998, the Company's net earnings were $2,222,000, or diluted earnings per share
of $0.69, as compared to $1,848,000, or diluted earnings per share of $0.56, for
the corresponding period a year ago.
As of the close of business on January 30, 1998, the Bank completed the
acquisition of Valley Financial Corp. pursuant to an Agreement and Plan of
Merger, dated as of September 18, 1997. The acquisition resulted in the merger
of Valley Financial's wholly owned subsidiary, Valley Savings Bank, FSB, with
and into the Bank, with the Bank as the resulting financial institution. Valley
Savings, headquartered in Burlington, Iowa, was a federally-charted stock
savings bank with three branch offices located in southeastern Iowa, with assets
of approximately $110 million. The former offices of Valley Savings are being
operated as a division of the Bank.
The acquisition was accounted for as a purchase transaction and therefore, the
operating results of the former offices of Valley Savings Bank are included in
the 1998 operating results of the Company only from the date of acquisition
through June 30, 1998. The operating results for the period ended June 30, 1997
and the Company's balance sheet as of December 31, 1997 have not been restated
to include any Valley Savings Bank assets, liabilities or operations. Therefore,
the comparison between periods is significantly impacted by this acquisition.
Total assets at June 30, 1998 were $331.1 million as compared to $222.0 million
at December 31, 1997.
Nonperforming assets were 0.14% of total assets as of June 30, 1998 compared to
0.10% of total assets as of December 31, 1997. The allowance for loan losses was
$2.6 million, or 1.02% of total loans at June 30, 1998, compared to $2.2
million, or 1.10% of total loans, at December 31, 1997.
The pro forma net interest spread for the quarter ended June 30, 1998 of 2.81%
was only slightly changed from 2.79% for the quarter ended June 30, 1997. The
pro forma net interest margin for the quarter ended June 30, 1998 of 3.49% was
only slightly changed from 3.43% for the quarter ended June 30, 1997. Pro forma
net interest income for the quarter ended June 30, 1998 was $2.8 million,
compared to $2.6 million for the corresponding quarter last year.
...MORE...
<PAGE>
The Company's provision for loan losses was $60,000 for the quarters ended June
30, 1998 and 1997. 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
conditions, the volume and type of loans in the Company's portfolio, and other
factors related to the collectibility of the Company's loan portfolio.
Stockholders' equity was $49.2 million at June 30, 1998, as compared to $50.4
million at December 31, 1997. Book value, or stockholders' equity, per share at
June 30, 1998 was $15.73, as compared to $15.43 at December 31, 1997. The ratio
of stockholders' equity to total assets was 14.9% at June 30, 1998, as compared
to a pro forma ratio of stockholders' equity of 15.1% at December 31, 1997.
North Central Bancshares, Inc. serves north central and southeastern Iowa at 7
full service locations in Fort Dodge, Nevada, Ames, Burlington and Mount
Pleasant, Iowa through its wholly-owned subsidiary, First Federal Savings Bank
of Iowa, 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".
For more information contact: David M. Bradley, President, 515-576-7531
<PAGE>
FINANCIAL HIGHLIGHTS OF NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
Actual Actual Pro Forma*
(Dollars in Thousands, except per share and share data) June 30, 1998 December 31, 1997 December 31, 1997
-------------- ------------------ ------------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 10,223 $ 3,445 $ 8,517
Securities available for sale 53,657 19,816 58,892
Loans (net of allowance
of loan loss of $2.6 million, $2.2 million and
$2.5 million, respectively) 250,371 191,249 250,701
Goodwill 6,564 196 6,735
Other assets 10,309 7,248 9,304
---------- ---------- ----------
Total Assets $ 331,124 $ 221,954 $ 334,149
========== ========== ==========
Liabilities
Deposits $ 246,398 $ 141,124 $ 240,635
Other borrowed funds 32,342 28,550 39,859
Other liabilities 3,197 1,863 3,238
---------- ---------- ----------
Total Liabilities 281,937 171,537 283,732
Stockholders' Equity $ 49,187 $ 50,417 $ 50,417
---------- ---------- ----------
Total Liabilities and Stockholders' Equity $ 331,124 $ 221,954 $ 334,149
========== ========== ==========
Stockholders' equity to total assets 14.85% 22.72% 15.09%
========== ========== ==========
Book value per share $15.73 $15.43 $15.43
========== ========== ==========
Total shares outstanding 3,126,383 3,266,483 3,266,483
========== ========== ==========
</TABLE>
* See explanatory note on following page.
Condensed Consolidated Statements of Income
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
------ ------ ------- ------
<S> <C> <C> <C> <C>
Interest income $6,050 $3,932 $11,515 $7,836
Interest expense 3,291 1,896 6,163 3,750
------ ------ ------- ------
Net interest income 2,759 2,036 5,352 4,086
Provision for loan loss 60 60 120 120
------ ------ ------- ------
Net interest income after provision for loan loss 2,699 1,976 5,232 3,966
Noninterest income 974 599 1,734 1,083
Gain on the sale of securities available for sale -- -- 55 --
Noninterest expense 1,895 1,119 3,529 2,229
------ ------ ------- ------
Income before income taxes 1,778 1,456 3,492 2,820
Income taxes 662 496 1,270 972
------ ------ ------- ------
Net income $1,116 $ 960 $ 2,222 $1,848
====== ====== ======= ======
Basic earnings per share $ 0.36 $ 0.30 $ 0.71 $ 0.57
====== ====== ======= ======
Diluted earnings per share $ 0.35 $ 0.30 $ 0.69 $ 0.56
====== ====== ======= ======
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
------ ------ ------- ------
<S> <C> <C> <C> <C>
Performance ratios: Actual
Net interest spread 2.85% 2.88% 2.84% 3.00%
Net interest margin 3.51% 4.07% 3.58% 4.24%
Return on average assets 1.35% 1.86% 1.42% 1.78%
Return on average equity 8.79% 7.87% 8.73% 7.51%
Efficiency ratio (noninterest expense divided by the
sum of net interest income before provision for
loan losses plus noninterest income) 50.75% 42.48% 49.42% 42.76%
</TABLE>
<PAGE>
Pro Forma Condensed Consolidated Statements of Income*
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Interest income $6,050 $5,878 $12,137 $11,667
Interest expense 3,291 3,268 6,614 6,412
------ ------ ------- -------
Net interest income 2,759 2,610 5,523 5,255
Provision for loan loss 60 (40) 120 20
------ ------ ------- -------
Net interest income after provision for loan loss 2,699 2,650 5,403 5,235
Noninterest income 966 798 1,788 1,463
Gain on the sale of securities available for sale -- -- 55 --
Noninterest expense 1,947 1,816 3,935 3,576
------ ------ ------- -------
Income before income taxes 1,718 1,632 3,311 3,122
Income taxes 641 595 1,229 1,127
------ ------ ------- -------
Net income $1,077 $1,037 $ 2,082 $ 1,995
====== ====== ======= =======
Basic earnings per share $ 0.35 $ 0.32 $ 0.67 $ 0.62
====== ====== ======= =======
Diluted earnings per share $ 0.33 $ 0.32 $ 0.65 $ 0.61
====== ====== ======= =======
</TABLE>
* See explanatory note below.
Selected Financial Ratios
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
------ ------ ------- -------
<S> <C> <C> <C> <C>
Performance ratios: Pro Forma*
Net interest spread 2.81% 2.79% 2.83% 2.80%
Net interest margin 3.49% 3.43% 3.50% 3.46%
Return on average assets 1.29% 1.30% 1.25% 1.25%
Return on average equity 8.45% 8.34% 8.18% 8.27%
Efficiency ratio (noninterest expense divided by the
sum of net interest income before provision for
loan losses plus noninterest income) 52.27% 53.29% 53.42% 53.23%
</TABLE>
*See explanatory note below.
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998 December 31, 1997
------------- -------------- -----------------
<S> <C> <C> <C>
Asset Quality Ratios:
Nonaccrual loans to total net loans 0.10% 0.22% 0.08%
Nonperforming assets to total assets 0.14% 0.26% 0.10%
Allowance for loan losses as a percent
of total loans receivable 1.02% 1.01% 1.10%
</TABLE>
*Pro Forma Consolidated Condensed Financial Statements (Unaudited)
The above unaudited pro forma consolidated financial statements presented are
based on the historical financial statements of the Company and Valley
Financial. The unaudited pro forma consolidated statements of income for the
three and six months ended June 30, 1998 and 1997 were prepared as if the
Acquisition had occurred as of the beginning of the respective periods for
purposes of the combined consolidated statements of income and as if such an
Acquisition had occurred at December 31, 1997 for purposes of the combined
consolidated statement of financial condition.
The pro forma financial statements are not necessarily indicative of the results
of operations that might have occurred had the Acquisition taken place at the
beginning of the period, or to project the Company' results of operations at any
future date or for any future period.