<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 March 31, 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 May 13, 1998
- --------------------------------------------------------------------------------
(Common Stock, $.01 par value) 3,266,483
<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 March 31,
1998 and December 31, 1997 (Unaudited) 1
Consolidated Condensed Statements of
Income for the three months ended
March 31, 1998 and 1997 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 31, 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 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Part II. Other Information 15 & 16
Items 1 through 6 15
Signatures 16
Exhibits
</TABLE>
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash:
Interest-bearing $ 11,084,683 $ 2,462,809
Noninterest-bearing 1,503,559 982,354
Securities available for sale 56,554,348 19,815,913
Loans receivable, net 247,660,677 191,248,830
Accrued interest receivable 2,287,627 1,300,495
Foreclosed real estate 331,518 67,107
Premises and equipment, net 3,202,638 2,143,016
Rental real estate 2,030,701 2,059,148
Title plant 925,256 925,256
Goodwill 6,651,971 195,628
Deferred taxes -- 105,139
Prepaid expenses and other assets 578,820 647,913
------------ ------------
Total assets $332,811,798 $221,953,608
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $244,733,479 $141,123,707
Other borrowed funds 33,592,000 28,550,000
Advances from borrowers for taxes and insurance 607,841 918,369
Dividend payable 261,319 204,155
Deferred income taxes 145,113 --
Income taxes payable 839,368 194,325
Accrued expenses and other liabilities 1,298,941 545,976
------------ ------------
Total liabilities 281,478,061 171,536,532
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.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 38,006,397 37,949,598
Retained earnings, substantially restricted 24,514,349 23,660,964
Accumulated other comprehensive income-unrealized gain
on securities available for sale, net of income taxes 311,315 354,781
Treasury stock at cost (744,574 shares) (10,377,937) (10,377,937)
Unearned shares, employee stock ownership plan (1,160,498) (1,210,441)
------------ ------------
Total stockholders' equity 51,333,737 50,417,076
------------ ------------
Total liabilities and stockholders' equity $332,811,798 $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
March 31,
1998 1997
---------- ----------
<S> <C> <C>
Interest income:
Loans receivable $4,749,038 $3,504,070
Securities and cash deposits 716,182 400,878
---------- ----------
5,465,220 3,904,948
---------- ----------
Interest expense:
Deposits 2,393,317 1,550,267
Other borrowed funds 479,432 304,024
---------- ----------
2,872,749 1,854,291
---------- ----------
Net Interest Income 2,592,471 2,050,657
Provision for loan losses 60,000 60,000
---------- ----------
Net interest income after provision for loan losses 2,532,471 1,990,657
---------- ----------
Noninterest income:
Fees and service charges 237,619 154,364
Abstract fees 361,098 254,810
Gain on sale of securities available for sale, net 54,853 --
Other income 161,772 75,211
---------- ----------
Total noninterest income 815,342 484,385
---------- ----------
Noninterest expense:
Salaries and employee benefits 770,569 524,183
Premises and equipment 153,215 103,814
Data processing 99,231 64,419
SAIF deposit insurance premiums 32,490 21,069
Goodwill amortization 79,609 6,987
Other expenses 499,316 389,158
---------- ----------
Total noninterest expense 1,634,430 1,109,630
---------- ----------
Income before income taxes 1,713,383 1,365,412
Provision for income taxes 607,880 476,262
---------- ----------
Net Income $1,105,503 $ 889,150
========== ==========
Basic earnings per common share $ 0.35 $ 0.27
========== ==========
Diluted earnings per common share $ 0.34 $ 0.27
========== ==========
Dividends declared per common share $ 0.08 $ 0.0625
========== ==========
Comprehensive Income $1,062,037 $ 937,452
========== ==========
</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>
Three Months Ended
March 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,105,503 $ 889,150
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 60,000 60,000
Depreciation, premises and equipment 61,299 54,544
Depreciation, rental real estate 28,447 --
Amortization and accretion 123,818 29,426
Deferred taxes (44,835) (30,925)
Effect of contribution to employee stock ownership plan 106,742 81,287
(Gain) on sale of foreclosed real estate and loans, net (2,560) (2,855)
(Gain) on sale of securities available for sale (54,853) --
Loss on disposal of equipment -- 5,024
Change in assets and liabilities:
Decrease in accrued interest receivable 32,241 41,737
(Increase) decrease in prepaid expenses and other assets 278,999 (166,179)
Increase in income taxes payable 657,608 420,323
(Decrease) in accrued expenses and other liabilities (96,063) (46,757)
----------- -----------
Net cash provided by operating activities 2,256,346 1,334,775
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans 1,879,166 1,632,421
Purchase of loans (1,655,000) (4,940,253)
Proceeds from sale of loans 1,644,000 161,381
Proceeds from sales, calls and maturities of securities available for sale 9,060,169 --
Purchase of securities available for sale (4,050,821) (236,948)
Proceeds from maturities of securities held to maturity -- 2,500,000
Purchase of premises and equipment (39,031) (124,640)
Proceeds from sale of equipment -- 30,450
Purchase of rental real estate -- (330,264)
Proceeds from sale of title plant -- 43,491
Cash paid in connection with acquisition of Valley Financial Corp.,
net of cash received (8,532,270) --
Other (1,992) (6,107)
----------- -----------
Net cash (used in) investing activities (1,695,779) (1,270,469)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 4,347,777 2,652,383
Increase in advances from borrowers for taxes and insurance (612,311) (374,921)
Net change in short term borrowings -- (7,000,000)
Proceeds from other borrowed funds 8,042,000 4,000,000
Payments of other borrowings (3,000,000) (35,000)
Dividends paid (194,954) (230,344)
----------- -----------
Net cash provided by (used in) financing activities 8,582,512 (987,882)
----------- -----------
Net increase (decrease) in cash 9,143,079 (923,576)
CASH
Beginning 3,445,163 3,936,815
----------- -----------
Ending $12,588,242 $ 3,013,239
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 2,331,593 $ 1,524,121
Interest paid on borrowings 479,432 344,648
Income taxes 85 86,864
</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>
<CAPTION>
<S> <C>
Securities $ 41,818,057
Loans 58,567,364
Accrued interest receivable 1,019,373
Premises and equipment 1,081,890
Goodwill 6,535,951
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 $ 8,532,270
=============
</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 month period ended
March 31, 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, First Federal Savings Bank of
Iowa (the "Bank") completed the acquisition of Valley Financial Corp., ("Valley
Financial") (the "Merger") 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 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 March 31, 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 March
31, 1998, the weighted average number of shares outstanding for basic and
diluted earnings per share computation were 3,140,815 and 3,233,867,
respectively. For the three month period ended March 31, 1997, the weighted
average number of shares outstanding were 3,282,240 and 3,321,003, respectively.
5. DIVIDENDS
On February 27, 1998, the Company declared a cash dividend on its common stock,
payable on April 6, 1998 to stockholders of record as of March 16, 1998, equal
to $0.08 per share.
-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 and market, and legislative and
regulatory conditions, and the development of an adverse interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.
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 this acquisition. Under the terms of the
Agreement, the Bank was acquired in a cash transaction totalling $14,726,250, or
$525 per share, 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 and closed on January 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 months ended March 31, 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 ProForma
March 31, December 31,
ASSETS 1998 1997
------------ ------------
<S> <C> <C>
Cash:
Interest-bearing $ 11,084,683 $ 6,481,513
Noninterest-bearing 1,503,559 2,035,107
Securities available for sale 56,554,348 58,892,100
Loans receivable, net 247,660,677 250,700,535
Accrued interest receivable 2,287,627 2,273,563
Foreclosed real estate 331,518 74,240
Premises and equipment, net 3,202,638 3,229,923
Rental real estate 2,030,701 2,059,148
Title plant 925,256 925,256
Goodwill 6,651,971 6,734,983
Prepaid expenses and other assets 578,820 742,395
------------ ------------
Total assets $332,811,798 $334,148,763
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $244,733,479 $240,634,725
Other borrowed funds 33,592,000 39,858,760
Advances from borrowers for taxes and insurance 607,841 1,164,417
Dividend payable 261,319 204,155
Deferred income taxes 145,113 209,657
Income taxes payable 839,368 98,558
Accrued expenses and other liabilities 1,298,941 1,561,415
------------ ------------
Total liabilities 281,478,061 283,731,687
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.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 38,006,397 37,949,598
Retained earnings, substantially restricted 24,514,349 23,660,964
Unrealized gain on securities available for sale, net of
income taxes 311,315 354,781
Treasury stock at cost (744,574 shares) (10,377,937) (10,377,937)
Unearned shares, employee stock ownership plan (1,160,498) (1,210,441)
------------ ------------
Total stockholders' equity 51,333,737 50,417,076
------------ ------------
Total liabilities and stockholders' equity $332,811,798 $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
March 31
1998 1997
---------- ----------
<S> <C> <C>
Interest income $6,087,529 $5,789,333
Interest expense 3,322,829 3,144,229
---------- ----------
Net interest income 2,764,700 2,645,104
Provision for loan losses 60,000 60,000
---------- ----------
Net interest income after provision for loan losses 2,704,700 2,585,104
---------- ----------
Noninterest income:
Fees and service charges 273,524 255,557
Abstract fees 361,098 254,810
Gain on sale of securities available for sale 54,853 --
Other income 186,990 154,252
---------- ----------
Total noninterest income 876,465 664,619
---------- ----------
Noninterest expense:
Salaries and employee benefits 938,514 781,787
Premises and equipment 187,713 179,049
Data processing 129,054 108,245
SAIF deposit insurance premiums 37,784 24,266
Goodwill amortization 115,920 115,920
Other expenses 579,147 550,547
---------- ----------
Total noninterest expense 1,988,132 1,759,814
---------- ----------
Income before income taxes 1,593,033 1,489,909
Provision for income taxes 587,759 531,355
---------- ----------
Net Income $1,005,274 $ 958,554
========== ==========
</TABLE>
-9-
<PAGE>
FINANCIAL CONDITION
The pro forma statement of financial condition as of December 31, 1997 was used
for comparison purposes to the March 31, 1998 statement of financial condition
in order to more clearly present the changes in financial condition.
Total assets decreased $1.3 million, or 0.4%, to $332.8 million at March 31,
1998 compared to $334.1 million at December 31, 1997. Interest bearing cash
increased $4.6 million, or 71.0%. Securities available for sale decreased $2.3
million, or 4.0%, primarily due to $6.1 million of maturities, calls and
proceeds from sales, partially offset by $4.1 million of purchases. Total loans
receivable, net, decreased by $3.0 million, or 1.2%, from December 31, 1997, due
primarily to payments and prepayments of loans (of approximately $13.5 million)
and loan sales of $1.6 million, which payments, prepayments and sales were
offset in part by originations of $7.0 million of first mortgage loans secured
primarily by one-to-four family residences, purchases of $1.7 million of first
mortgage loans secured by multi-family residences and originations of $3.1
million of second mortgage loans. Deposits increased $4.1 million, or 1.7%,
from $240.6 million at December 31, 1997 to $244.7 million at March 31, 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 $6.3 million, to $33.6 million at March 31, 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 increased $917,000, from $50.4 million at December 31, 1997
to $51.3 million at March 31, 1998, primarily due to earnings, which were offset
in part by dividends declared. See "Capital".
CAPITAL
The Company's total stockholders' equity increased by $917,000 to $51.3 million
at March 31, 1998 from $50.4 million at December 31, 1997, primarily due to
earnings, which were offset in part by dividends declared. The changes in
stockholders' equity were also due to the unrealized gain on securities
available for sale decreased by $43,000 to $311,000 at March 31, 1998 from
$355,000 at December 31, 1997. The unearned shares from the Employee Stock
Ownership Plan (the "ESOP") decreased by $50,000 to $1,160,000 at March 31, 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 March 31,
1998, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
Amount Percentage of Assets
------- --------------------
(dollars in thousands)
Tangible capital:
<S> <C> <C>
Capital level $37,655 11.63%
Less Requirement 4,856 1.50%
------- -----
Excess $32,799 10.13%
======= =====
Core capital:
Capital level $37,655 11.63%
Less Requirement 9,711 3.00%
------- -----
Excess $27,944 8.63%
======= =====
Risk-based capital:
Capital level $39,955 23.42%
Less Requirement 13,647 8.00%
------- -----
Excess $26,308 15.42%
======= =====
</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
-10-
<PAGE>
borrowings) and certain investing activities (including maturities and calls of
securities and other investments). During the first three months of 1998 and
1997, principal payments and repayments on loans totalled $13.5 million and $9.1
million, respectively. The net increases in deposits during the first three
months of 1998 and 1997 totalled $4.3 million and $2.7 million, respectively.
The proceeds from borrowed funds during the first three months of 1998 and 1997
totalled $8.0 million and $4.0 million, respectively. During the first three
months of 1998 and 1997, the proceeds from the maturities, calls and sales of
securities totalled $9.1 million and $2.5 million, respectively. Cash provided
from operating activities during the first three months of 1998 and 1997
totalled $2.3 million and $1.3 million, respectively, of which $1.1 million and
$889,000, 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 three months of
1998 and 1997, the Company's gross purchases and origination of loans totalled
$13.5 million and $12.6 million, respectively. The repayment of borrowed funds
during the first three months of 1998 and 1997 totalled $3.0 million and $7.0
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) equal to a monthly
average of not less than 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 March 31, 1998, the Bank's liquidity position
was $47.2 million or 18.48% 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 $51.3 million at March 31, 1998 compared to $50.4
million at December 31, 1997, reflecting the Company's earnings for the quarter,
the amortization of the unallocated portion of shares held by the ESOP,
dividends paid on common stock and the change in the net unrealized gains on
securities, net of taxes.
On January 6, 1998, the Company paid a quarterly cash dividend equal to $0.0625
per share on common stock outstanding as of the close of business on December
15, 1997, aggregating $204,000. On February 27, 1998, the Company declared a
quarterly cash dividend of $0.08 per share payable on April 6, 1998 to
shareholders of record as of the close of business on March 16, 1998,
aggregating $261,000.
RESULTS OF OPERATIONS
The pro forma statements of income for the three months ended March 31, 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 $298,000 to $6.1 million for the
three months ended March 31, 1998 compared to $5.8 million for the three months
ended March 31, 1997. The increase in interest income was primarily due to a
$15.7 million increase in the average balance of interest earning
assets(primarily first mortgage and consumer loans) to $316.0 million for the
three months ended March 31, 1998 from $300.3 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. The average yield on loans decreased to 8.23% for the three months ended
March 31, 1998 from 8.31% for the three months ended March 31, 1997, primarily
due to a general decrease in market interest rates. The average balance of
securities held to maturity decreased $2.5 million, or 100.0%, and such
securities were in part, replaced by
-11-
<PAGE>
RESULTS OF OPERATIONS (Continued)
lower yielding securities available for sale. The average balance of securities
available for sale decreased $4.1 million, or 6.6%, as such maturing, sold and
called securities were partially replaced with securities available for sale.
The average yield on interest earning assets decreased from 7.73% for the three
months ended March 31, 1997 to 7.72% for the three months ended March 31, 1998.
Interest Expense. Interest expense increased by $179,000 to $3.3 million for
the three months ended March 31, 1998 compared to $3.1 million for the three
months ended March 31, 1997. The increase in interest expense was primarily due
to a $14.3 million increase in the average balance of interest bearing
liabilities (primarily NOW accounts, money market accounts and certificates of
deposit) to $274.2 million for the three months ended March 31, 1998 from $259.9
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 average cost of interest bearing liabilities was 4.91%
for the three months ended March 31, 1998 and 1997.
Net Interest Income. Net interest income before the provision for loan losses
increased by $120,000 to $2.8 million for the three months ended March 31, 1998
from $2.6 million for the three months ended March 31, 1998. The increase is
primarily due to the increase in the excess of average interest earning assets
over the average interest bearing liabilities. The interest rate spread (i.e.,
the difference in the average yield on assets and average cost of liabilities)
decreased slightly from 2.82% for the three months ended March 31, 1997 to 2.81%
for the three months ended March 31, 1998.
The following table sets forth certain information relating to the Company's
average balance sheets and reflect the average yield on assets and average cost
of liabilities for the three month periods ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
For Three Months Ended March 31,
-----------------------------------------------------------------
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.................................... $250,567 $5,154 8.23% $231,229 $4,803 8.31%
Securities available for sale............ 58,497 844 5.85 62,617 897 5.81
Securities held to maturity.............. - - - - - - 2,500 41 6.71
Interest bearing cash.................... 6,930 90 5.24 3,939 48 5.04
-------- ------ ------ -------- ------ ------
Total interest-earning assets.......... 315,994 $6,088 7.72% 300,285 $5,789 7.73%
------ ------ ------ ------
Noninterest-earning assets................. 18,383 18,634
-------- --------
Total assets........................... $334,377 $318,919
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings............. $ 46,658 $ 360 3.13% $ 38,896 $ 274 2.86%
Passbook savings......................... 26,200 155 2.39 26,602 161 2.45
Certificates of deposit.................. 163,690 2,254 5.58 158,377 2,178 5.58
Borrowed funds........................... 37,642 554 5.98 36,026 531 5.98
-------- ------ ------ -------- ------ ------
Total interest-bearing liabilities......... 274,190 $3,323 4.91% 259,901 $3,144 4.91%
------ ------ ------ ------
Noninterest-bearing liabilities............ 9,206 9,286
-------- --------
Total liabilities...................... 283,396 269,187
Equity..................................... 50,981 49,732
-------- --------
Total liabilities and equity........... $334,377 $318,919
======== ========
Net interest income........................ $2,765 $2,645
====== ======
Net interest rate spread................... 2.81% 2.82%
====== ======
Net interest margin........................ 3.50% 3.52%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities...... 115.25% 115.54%
====== ======
</TABLE>
-12-
<PAGE>
RESULTS OF OPERATIONS (Continued)
Provision for Loan Losses. The Company's provision for loan losses was $60,000
for each of the three months ended March 31, 1998 and 1997. For the month ended
January 31, 1998 and the three months ended March 31, 1997, Valley Financial did
not have a provision for loan loss. 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 $1,000 for
the three months ended March 31, 1998 as compared to net charge offs
(recoveries) of $(6,000) for the three months ended March 31, 1997. The
resulting allowance for loan losses was $2.6 million at March 31, 1998 as
compared to $2.5 million at December 31, 1997 and $2.5 million at March 31,
1997. The level of nonperforming loans increased to $539,000 at March 31, 1998
from $296,000 at December 31, 1997 and from $407,000 at March 31, 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 $212,000 to $876,000
for the three months ended March 31, 1998 from $665,000 for the three months
ended March 31, 1997. The increase is primarily due to increases in abstract
fees, gains of sale of securities available for sale and other income. Abstract
fees increased $106,000 due to increased sales volume, which is in part
attributable to an improved housing market and the current level of interest
rates. Other income increased $33,000, primarily due to increases in 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 three months ended March 31, 1998 reflects
gains on sales of securities available for sale of $55,000, while no such gains
were recorded for the corresponding three month period in 1997.
Noninterest Expense. Total noninterest expense increased by $228,000 to $2.0
million for the three months ended March 31, 1998 from $1.8 million for the
three months ended March 31, 1997. The increase is primarily due to increases in
salaries and employee benefits. The increase in salaries and benefits was
primarily a result of the increased costs associated with the ESOP, normal
salary increases, one time costs associated with the acquisition of Valley
Financial and an increase in the number of employees. The Company's efficiency
ratio for the three months ended March 31, 1998 and 1997 were 54.60% and 53.17%,
respectively. The Company's ratio of noninterest expense to average assets for
the three months ended March 31, 1998 and 1997 were 2.38% and 2.21%,
respectively.
Income Taxes. Income taxes increased by $56,000 to $588,000 for the three months
ended March 31, 1998 as compared to $531,000 for the three months ended March
31, 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 $1,005,000 for the three months ended March 31,
1998, compared to $959,000 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 insuring year 2000 compliance will not materially
affect the Company's future operating results or financial condition.
-13-
<PAGE>
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.
-14-
<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
Not applicable
Item 5. Other Information
First Federal Savings Bank of Fort Dodge changed its name to First Federal
Savings Bank of Iowa on February 27, 1998.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27. Financial data schedule. (Only submitted with filing in electronic
format.)
Exhibit 99.1 Press Release (regarding the approval of Valley Savings Bank, FSB
by the Office of Thrift Supervision).
Exhibit 99.2 Press Release (regarding the completion of the acquisition of
Valley Financial Corp. as of the close of business on January 30, 1998).
Exhibit 99.3 Press Release (regarding the declaration of a dividend).
Exhibit 99.4 Press Release (regarding the announcement of a stock repurchase
program).
Exhibit 99.5 Press Release (regarding the issuance of limited financial
information for the quarter ended March 31, 1998).
(b)Reports on Form 8-K
A Form 8-K was filed on February 6, 1998 to report, pursuant to Item 2, the
acquisition of Valley Financial as of the close of business on January 30, 1998.
A Form 8-K was filed on March 27, 1998 to report, pursuant to Item 7, the
financial statements of Valley Financial and the pro forma combined financial
statements of the Company and Valley Financial.
-15-
<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: May 13, 1998 BY: /s/ David M. Bradley
David M. Bradley, CPA
Chairman, President and
Chief Executive Officer
DATE: May 13, 1998 BY: /s/ John L. Pierschbacher
John L. Pierschbacher, CPA
Principal Financial Officer
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from the
consolidated condensed statement of financial condition and the consolidated
condensed statement of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,503,559
<INT-BEARING-DEPOSITS> 11,084,683
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,554,348
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 247,660,677
<ALLOWANCE> 2,553,296
<TOTAL-ASSETS> 332,811,798
<DEPOSITS> 244,733,479
<SHORT-TERM> 12,250,000
<LIABILITIES-OTHER> 3,152,582
<LONG-TERM> 21,342,000
<COMMON> 40,111
0
0
<OTHER-SE> 51,293,626
<TOTAL-LIABILITIES-AND-EQUITY> 332,811,798
<INTEREST-LOAN> 4,749,038
<INTEREST-INVEST> 716,182
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,465,220
<INTEREST-DEPOSIT> 2,393,317
<INTEREST-EXPENSE> 2,872,749
<INTEREST-INCOME-NET> 2,592,471
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 54,853
<EXPENSE-OTHER> 1,634,430
<INCOME-PRETAX> 1,713,383
<INCOME-PRE-EXTRAORDINARY> 1,713,383
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,105,503
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
<YIELD-ACTUAL> 7.78
<LOANS-NON> 539,189
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,150,588
<CHARGE-OFFS> 1,315
<RECOVERIES> 605
<ALLOWANCE-CLOSE> 2,553,296
<ALLOWANCE-DOMESTIC> 2,553,296
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
Exhibit 99.1 Press Release
PRESS RELEASE
January 5, 1998
For more 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. ACQUISITION OF VALLEY SAVINGS BANK, FSB
APPROVED BY OFFICE OF THRIFT SUPERVISION
Fort Dodge, Iowa, January 5, 1998...North Central Bancshares, Inc.
(NASDAQ/NMS:FFFD) has received approval from the Office of Thrift Supervision
for the acquisition of Valley Financial Corp. and its wholly owned subsidiary
Valley Savings Bank, FSB. In connection with the acquisition, Valley Savings
Bank will be merged into First Federal Savings Bank of Fort Dodge, the wholly
owned subsidiary of North Central. The shareholders of Valley Financial
previously approved the transaction at a meeting held in November, 1997.
Mr. David M. Bradley, Chairman of the Board, President and Chief Executive
Officer of both North Central and First Federal commented, "We are very pleased
to have received both Valley Financial shareholder and bank regulatory approval.
We are confident that the transaction will enhance shareholder value and provide
long-term benefits for our customers and the communities that First Federal and
Valley Savings Bank serve."
The closing of the transaction is scheduled to occur as of the close of business
on January 30, 1998. Each share of Valley Financial common stock outstanding
will be converted into the right to receive cash consideration equal to $525.00
per share. The transaction will be accounted for by First Federal as a purchase
transaction. The branch offices of Valley Savings Bank will be operated as a
separate division of First Federal.
North Central Bancshares, Inc. serves north central Iowa at 4 full service
locations in Fort Dodge, Nevada and Ames, Iowa through its wholly-owned
subsidiary, First Federal Savings Bank of Fort Dodge, headquartered in Fort
Dodge, Iowa. Upon completion of the transaction, North Central will have assets
in excess of $300 million and will operate seven banking offices in southeastern
and north central Iowa. First Federal'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."
<PAGE>
Exhibit 99.2 Press Release
PRESS RELEASE
January 30, 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. COMPLETES
ACQUISITION OF VALLEY FINANCIAL CORP
Fort Dodge, Iowa, January 30, 1998...North Central Bancshares, Inc.
(NASDAQ/NMS:FFFD) has announced today the successful completion of the
acquisition of Valley Financial Corp. and the merger of Valley Savings Bank,
FSB, Burlington, Iowa, Valley Financial's wholly owned subsidiary, with and into
First Federal Savings Bank of Fort Dodge, the wholly owned subsidiary of North
Central, both of which will be effective as of the close of business today. The
shareholders of Valley Financial received $525.00 in cash for each share of
Valley Financial common stock held. The total consideration amounted to
$14,726,250.00. The branch offices of Valley Savings Bank will continue to
operate as Valley Savings Bank, a division of First Federal. The addition of
Valley Savings Bank's three banking offices will increase the number of First
Federal's banking offices to a total of seven in southeastern and north central
Iowa.
Mr. David M. Bradley, Chairman of the Board, President and Chief Executive
Officer of both North Central and First Federal, commented, "In addition to
representing our first acquisition to enhance our franchise, the acquisition of
Valley Financial effectively deploys some of the capital raised in our second
step conversion completed in 1996. We are confident that the transaction will
enhance shareholder value and provide long-term benefits for our customers and
the communities that First Federal and Valley Savings Bank serve."
As a result of the acquisition, North Central will have in excess of $300
million in assets and $240 million in deposits.
North Central Bancshares, Inc., through its wholly owned subsidiary, First
Federal Savings Bank of Fort Dodge, headquartered in Fort Dodge, Iowa now serves
north central Iowa at four full service locations in Fort Dodge, Nevada and
Ames, Iowa and southeastern Iowa at three full service locations in Burlington
and Mount Pleasant, Iowa, which will operate as Valley Savings Bank branches.
First Federal'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."
<PAGE>
Exhibit 99.3 Press Release
PRESS RELEASE
February 27, 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 February 27, 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 March 31, 1998. This amount
is an increase of 28% compared to the previous dividend rate. The dividend will
be payable to all stockholders of record as of March 16, 1998 and will be paid
on April 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
Fort Dodge, is a federally chartered savings bank headquartered in Fort Dodge,
Iowa.
<PAGE>
Exhibit 99.4 Press Release
PRESS RELEASE
March 5, 1998
For further information contact:
David M. Bradley
Chairman, President and Chief Executive Officer
North Central Bancshares, Inc.
825 Central Avenue
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. ANNOUNCES
STOCK REPURCHASE PROGRAM
Fort Dodge, Iowa, March 5, 1998 - North Central Bancshares, Inc. (Nasdaq:
"FFFD") (the "Company"), the holding company for First Federal Savings Bank of
Fort Dodge, announced that it will commence a stock repurchase program beginning
on or about March 11, 1998. The program authorizes the Company to repurchase up
to five percent of its 3,266,483 outstanding shares of common stock during the
next twelve months. The repurchases will be made from time to time, in open
market transactions, at the discretion of management.
North Central Bancshares, Inc., with over $300 million in assets, is the holding
company for First Federal Savings Bank of Fort Dodge, a federally chartered
stock savings bank. First Federal is a community-oriented institution serving
Iowa through 7 full service locations in Fort Dodge, Nevada, Ames, Burlington
and Mt. Pleasant, Iowa. First Federal's deposits are insured by the Federal
Deposit Insurance Corporation.
<PAGE>
Exhibit 99.5 Press Release
For further information contact:
David M. Bradley
Chairman, President and Chief Executive Officer
North Central Bancshares, Inc.
825 Central Avenue
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. ANNOUNCES RECORD
FIRST QUARTER 1998 EARNINGS
(Nasdaq: FFFD)
Fort Dodge, Iowa -- North Central Bancshares, Inc., (the "Company") the holding
company for First Federal Savings Bank of Iowa (formerly known as First Federal
Savings Bank of Fort Dodge) (the "Bank"), announced today the Company's results
of operations for the first quarter. For the quarter ended March 31, 1998, the
Company reported net income of $1,105,000, or diluted earnings per share of
$0.34, which represents an increase of over 24% from the first quarter of 1997,
when the company reported net income of $889,000 or diluted earnings per share
of $0.27.
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 March 31, 1998. The operating results for the period ended March 31,
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 March 31, 1998 totalled $332.8 million as compared
to $222.0 million at December 31, 1997.
Stockholders of record on March 16, 1998, received a quarter cash dividend of
$0.08 per share, a 28% increase from the cash dividend of $0.0625 per share paid
during the previous quarter.
Nonperforming assets were 0.26% of total assets as of March 31, 1998 compared to
0.10% of total assets as of December 31, 1997. This increase is due primarily to
the acquisition of Valley Financial Corp. The allowance for loan losses was $2.6
million or 1.01% of total loans at March 31, 1997, compared to $2.2 million or
1.10% of total loans at December 31, 1997.
...MORE...
<PAGE>
The net interest spread for the quarter ended March 31, 1998 of 2.86% was only
slightly changed from 2.87% for the quarter ended March 31, 1997, however, the
net interest margin for the quarter ended March 31, 1998 was reduced to 3.68%
compared to 4.15% for the corresponding quarter in 1997, primarily due to a
shift in the ratio of interest earning assets to interest bearing liabilities
caused by the acquisition of Valley Financial Corp. Net interest income for the
quarter ended March 31, 1998 was $2.6 million, an increase of 26.4% from $2.1
million for the corresponding quarter last year.
The Company's provision for loan losses was $60,000 for the quarters ended March
31, 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 $51.3 million at March 31, 1998, compared to $50.4
million at December 31, 1997. Book value, or stockholders' equity, per share at
March 31, 1998 was $15.72 and was $15.43 at December 31, 1997. The ratio of
stockholders' equity to total assets was 15.4% at March 31, 1998, as compared to
22.7% for the corresponding date in 1997. This decrease was primarily due to the
acquisition of Valley Financial Corp.
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>
(Dollars in Thousands, except per share and share data) March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 12,588 $ 3,445
Securities available for sale 51,643 19,816
Mortgage backed securities
Loans (net of allowance of loan loss of $2.6 4,911 --
million and $2.2 million, respectively) 247,661 191,249
Goodwill 6,652 --
Other assets 9,357 7,444
---------- ----------
Total Assets $ 332,812 $ 221,954
========== ==========
Liabilities
Deposits $ 244,733 $ 141,124
Other borrowed funds 33,592 28,550
Other liabilities 3,153 1,863
---------- ----------
Total Liabilities 281,478 171,537
Stockholders' Equity $ 51,334 $ 50,417
---------- ----------
Total Liabilities and Stockholders' Equity $ 332,812 $ 221,954
========== ==========
Stockholders' equity to total assets 15.42% 22.72%
========== ==========
Book value per share $15.72 $15.43
========== ==========
Total shares outstanding 3,266,483 3,266,483
========== ==========
</TABLE>
Condensed Consolidated Statements of Income
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31, 1998
1998 1997
------ ------
<S> <C> <C>
Interest income $5,465 $3,905
Interest expense 2,873 1,854
------ ------
Net interest income 2,592 2,051
Provision for loan loss 60 60
------ ------
Net interest income after provision for loan loss 2,532 1,991
Noninterest income 760 484
Gain on the sale of securities available for sale 55 --
Noninterest expense 1,634 1,110
------ ------
Income before income taxes 1,713 1,365
Income taxes 608 476
------ ------
Net income $1,105 $ 889
====== ======
Basic earnings per share $ 0.35 $ 0.27
====== ======
Diluted earnings per share $ 0.34 $ 0.27
====== ======
</TABLE>
Selected Financial Ratios
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
------ ------
<S> <C> <C>
Performance ratios:
Net interest spread 2.86% 2.87%
Net interest margin 3.68% 4.15%
Return on average assets 1.49% 1.74%
Return on average equity 8.67% 7.15%
Efficiency ratio (noninterest expense divided by the
sum of net interest income before provision for
loan losses plus noninterest income) 47.96% 43.79%
</TABLE>
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997 March 31, 1997
-------------- ----------------- --------------
<S> <C> <C> <C>
Asset Quality Ratios:
Nonaccrual loans to total net loans 0.22% 0.08% 0.18%
Nonperforming assets to total assets 0.26% 0.10% 0.22%
Allowance for loan losses as a percent
of total loans receivable 1.01% 1.10% 1.17%
</TABLE>
