<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, 1999
[ ] 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 14, 1999
- -------------------------------------------------------------------------
(Common Stock, $.01 par value) 2,765,242
<PAGE>
NORTH CENTRAL BANCSHARES, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed
Financial Statements (Unaudited) 1 to 4
Consolidated Condensed Statements of
Financial Condition at March 31,
1999 and December 31, 1998 (Unaudited) 1
Consolidated Condensed Statements of
Income for the three months ended
March 31, 1999 and 1998 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 31, 1999 and 1998 (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 14
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>
PART 1. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1999 1998
<S> ----------- -------------
Cash: <C> <C>
Interest-bearing $ 10,529,198 $ 13,201,437
Noninterest-bearing 1,532,558 2,435,439
Securities available for sale 52,292,839 49,882,544
Loans receivable, net 254,086,234 254,032,497
Loans held for sale 564,958 1,681,017
Accrued interest receivable 1,952,866 1,933,237
Foreclosed real estate 268,671 186,931
Premises and equipment, net 3,876,157 3,616,438
Rental real estate 1,920,907 1,945,851
Title plant 925,256 925,256
Goodwill 6,269,598 6,387,671
Deferred taxes 204,317 13,490
Prepaid expenses and other assets 559,419 448,331
------------ ------------
$334,982,978 $336,690,139
TOTAL ASSETS ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $245,721,303 $246,690,313
Other borrowed funds 37,804,569 38,832,239
Advances from borrowers for taxes and insurance 614,669 1,066,025
Dividend payable 295,724 237,133
Income taxes payable 802,478 199,224
Accrued expenses and other liabilities 988,148 1,458,391
------------ ------------
TOTAL LIABILITIES 286,226,891 288,483,325
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.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 38,171,550 38,135,817
Retained earnings, substantially restricted 27,856,928 27,084,907
Accumulated other comprehensive income-unrealized gain on securities
available for sale, net of income taxes 178,672 358,666
Treasury stock at cost (1,053,815 and 1,046,608 shares, respectively) (16,525,525) (16,399,403)
Unearned shares, employee stock ownership plan (965,649) (1,013,284)
------------ ------------
Total stockholders' equity 48,756,087 48,206,814
------------ ------------
Total liabilities and stockholders' equity $334,982,978 $336,690,139
============ ============
</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,
1999 1998
----------- -----------
<S> <C> <C>
Interest income:
Loans receivable $5,099,590 $4,749,038
Securities and cash deposits 867,178 716,182
---------- ----------
5,966,768 5,465,220
---------- ----------
Interest expense:
Deposits 2,665,780 2,393,317
Other borrowed funds 533,735 479,432
---------- ----------
3,199,515 2,872,749
---------- ----------
Net Interest Income 2,767,253 2,592,471
Provision for loan losses 30,000 60,000
---------- ----------
Net interest income after provision for loan losses 2,737,253 2,532,471
---------- ----------
Noninterest income:
Fees and service charges 361,338 237,619
Abstract fees 343,473 361,098
Gain on sale of securities available for sale, net - - 54,853
Other income 215,438 161,772
---------- ----------
Total noninterest income 920,249 815,342
---------- ----------
Noninterest expense:
Salaries and employee benefits 973,004 770,569
Premises and equipment 207,334 153,215
Data processing 147,932 99,231
SAIF deposit insurance premiums 37,415 32,490
Goodwill amortization 118,070 79,609
Other expenses 570,554 499,316
---------- ----------
Total noninterest expense 2,054,309 1,634,430
---------- ----------
Income before income taxes 1,603,193 1,713,383
Provision for income taxes 545,501 607,880
---------- ----------
Net Income $1,057,692 $1,105,503
========== ==========
Basic earnings per common share $ 0.37 $ 0.35
========== ==========
Diluted earnings per common share $ 0.36 $ 0.34
========== ==========
Dividends declared per common share $ 0.10 $ 0.08
========== ==========
</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,
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,057,692 $ 1,105,503
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 30,000 60,000
Depreciation 122,943 89,746
Amortization and accretion 19,814 123,818
Deferred taxes (59,507) (44,835)
Effect of contribution to employee stock ownership plan 83,368 106,742
(Gain) on sale of foreclosed real estate and loans, net (8,372) (2,560)
(Gain) on sale of securities available for sale -- (54,853)
Loss on sale and disposal of equipment, net 14,101 --
Net (increase) decrease in loans held for sale 1,116,059 (117,042)
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (19,629) 32,241
(Increase) decrease in prepaid expenses and other assets (111,088) 278,999
Increase in income taxes payable 603,254 657,608
Increase (decrease) in accrued expenses and other liabilities (470,243) 20,979
----------- -----------
Net cash provided by operating activities 2,378,392 2,256,346
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans 8,983,457 3,523,166
Purchase of loans (9,102,362) (1,655,000)
Proceeds from sales of securities available for sale -- 3,485,697
Purchase of securities available for sale (8,441,322) (4,050,821)
Proceeds from maturities of securities available for sale 5,786,768 5,574,472
Purchase of premises and equipment and rental real estate (372,016) (39,031)
Proceeds from sale of equipment 197 --
Cash paid in connection with acquisition of Valley Financial Corporation
net of cash received -- (8,532,270)
Other (6,996) (1,992)
----------- -----------
Net cash (used in) investing activities (3,152,274) (1,695,779)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (969,010) 4,347,777
(Decrease) in advances from borrowers for taxes and insurance (451,356) (612,311)
Proceeds from other borrowed funds - - 8,042,000
Payments of other borrowings (1,027,670) (3,000,000)
Purchase of treasury stock (126,122) - -
Dividends paid (227,080) (194,954)
----------- -----------
Net cash provided by (used in) financing activities (2,801,238) 8,582,512
----------- -----------
Net increase (decrease) in cash (3,575,120) 9,143,079
CASH
Beginning 15,636,876 3,445,163
----------- -----------
Ending $12,061,756 $12,588,242
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 2,730,040 $ 2,331,593
Interest paid on borrowings 533,641 479,432
Income taxes 1,754 85
</TABLE>
(Continued)
-3-
<PAGE>
The following is a summary of the assets acquired and liabilities assumed in
connection with the acquisition of Valley Financial Corporation
<TABLE>
<S> <C>
Cash $ 6,157,507
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 (878,251)
------------
Cash Paid $ 14,689,777
Less Cash Received (6,157,507)
------------
Cash Paid, net of 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, 1999 and 1998 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
1998 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, formerly known as First Federal
Savings Bank of Fort Dodge, (the "Bank") for the purpose of acquiring all of the
capital stock of the Bank, in connection with the conversion of the Bank and
North Central Bancshares, M.H.C. (the "Mutual Holding Company" or "MHC") from
the mutual to the stock holding company structure (these transactions are
collectively referred to as the "Reorganization"). On March 20, 1996, upon
completion of the Reorganization, the Company issued an aggregate of 4,011,057
shares of its common stock, 1,385,590 shares of which were issued in exchange
for all of the Bank's issued and outstanding shares, except for shares owned by
the MHC which were canceled, 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 $26.3 million. 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 canceled 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 $14.7 million 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 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, 1999, the
weighted average number of shares outstanding for basic and diluted earnings per
share computation were 2,854,867 and 2,912,166, respectively. 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.
5. DIVIDENDS
On February 26, 1999, the Company declared a cash dividend on its common stock,
payable on April 6, 1999 to stockholders of record as of March 16, 1999, equal
to $0.10 per share.
6. COMPREHENSIVE INCOME
Comprehensive income for the three months ended March 31, 1999 and 1998 was
$877,698 and $1,062,037, respectively.
-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 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 $14.7
million, 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 the Bank, 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,
consequently 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 March 31, 1998.
FINANCIAL CONDITION
Total assets decreased $1.7 million, or 0.5%, to $335.0 million at March 31,
1999 compared to $336.7 million at December 31, 1998. Interest bearing cash
decreased $2.7 million, or 20.2%. Securities available for sale increased $2.4
million, or 4.8%, primarily due to $8.4 million of purchases, partially offset
by $5.8 million of maturities and calls. Total loans receivable, net, increased
by $54,000 from December 31, 1998, due primarily to payments and prepayments of
loans (of approximately $21.3 million) and loan sales of $381,000, which
payments, prepayments and sales were offset in part by originations of $7.6
million of first mortgage loans secured primarily by one-to-four family
residences, purchases of $9.1 million of first mortgage loans secured primarily
by multi-family residences and commercial real estate and originations of $3.6
million of second mortgage loans. Deposits decreased $969,000, or 0.4%, from
$246.7 million at December 31, 1998 to $245.7 million at March 31, 1999,
reflecting decreases primarily in NOW accounts. This decrease was due in part to
the timing of certain deposits to NOW accounts at December 31, 1998. Other
borrowings, primarily FHLB advances, decreased by $1.0 million to $37.8 million
at March 31, 1999 from $38.8 million at December 31, 1998, due to the repayment
of an advance. Total stockholders' equity increased $549,000, to $48.8 million
at March 31, 1999 from $48.2 million at December 31, 1998. See "Capital".
-7-
<PAGE>
CAPITAL
The Company's total stockholders' equity increased by $549,000 to $48.8 million
at March 31, 1999 from $48.2 million at December 31, 1998, primarily due to
earnings, which were offset in part by stock repurchases and dividends declared.
The changes in stockholders' equity were also due to an decrease in the
unrealized gain on securities available for sale by $180,000 to $179,000 at
March 31, 1999 from $359,000 at December 31, 1998. The unearned shares from the
Employee Stock Ownership Plan (the "ESOP") decreased by $48,000 to $966,000 at
March 31, 1999 from $1,013,000 at December 31, 1998, 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,
1999, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of March 31, 1999 are as follows:
Amount Percentage of Assets
-------------- --------------------------
(dollars in thousands)
Tangible capital:
Capital level $ 30,438 9.32%
Less Requirement 4,900 1.50%
------- -----
Excess $ 25,538 7.82%
======= =====
Core capital:
Capital level $ 30,438 9.32%
Less Requirement 13,068 4.00%
------- -----
Excess $ 17,370 5.32%
======= =====
Risk-based capital:
Capital level $ 32,649 18.74%
Less Requirement 13,936 8.00%
------- -----
Excess $ 18,713 10.74%
======= =====
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including net income), certain financing activities (including increases in
deposits and proceeds from borrowings) and certain investing activities
(including principal payments on loans and maturities and calls of securities).
During the first three months of 1999 and 1998, principal payments and
repayments on loans totalled $21.3 million and $13.5 million, respectively. The
increase in loan payments and repayments is due to the current low interest rate
environment. The net increase (decrease) in deposits during the first three
months of 1999 and 1998 totalled $(969,000) and $4.3 million, respectively. The
proceeds from borrowed funds during the first three months ended March 31, 1999
and 1998 totalled none and $8.0 million, respectively. During the first three
months of 1999 and 1998, the proceeds from the maturities, calls and sales of
securities totalled $5.8 million and $9.1 million, respectively. The decrease in
proceeds from securities is due in part to the sales of certain investments in
1998 of which there were none in 1999. Cash provided from operating activities
during the first three months of 1999 and 1998 totalled $2.4 million and $2.3
million, respectively, of which $1.1 million and $1.1 million, respectively,
represented net income of the Company. The Company's primary use of funds is
cash used to originate and purchase loans, purchase of securities available for
sale, repayment of borrowed funds and other financing activities. During the
first three months of 1999 and 1998, the Company's gross purchases and
origination of loans totalled $22.3 million and $13.5 million, respectively. The
increase in purchase and origination of loans is due to the current low interest
rate environment. The purchase of securities available for sale for the three
months ended March 31, 1999 and 1998 totalled $8.4 million and $4.1 million,
respectively. The repayment of borrowed funds during the first three months of
1999 and 1998 totalled $1.0 million and $3.0 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."
-8-
<PAGE>
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 March 31, 1999, the Bank's
liquidity position was $44.7 million, or 17.1%, of liquid assets, compared to
$45.7 million, or 17.6%, at December 31, 1998.
Stockholders' equity totaled $48.8 million at March 31, 1999 compared to $48.2
million at December 31, 1998, 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 January 6, 1999, the Company paid a quarterly cash dividend equal to $0.08
per share on common stock outstanding as of the close of business on December
16, 1998, aggregating $237,000. On February 26, 1999, the Company declared a
quarterly cash dividend of $0.10 per share payable on April 6, 1999 to
shareholders of record as of the close of business on March 16, 1999,
aggregating $296,000.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
The following unaudited pro forma consolidated statement of income for the three
months ended March 31, 1998 presented on the following page is based on the
historical income statements of the Company and Valley Financial. The unaudited
pro forma consolidated statement of income for the three months ended March 31,
1998 was prepared as if the Acquisition had occurred as of the beginning of the
respective period for purposes of the combined consolidated statements of
income.
This pro forma income statement is 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
statement of income should be read in connection with the notes thereto.
-9-
<PAGE>
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
- -----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
ACTUAL PRO FORMA
1999 1998
----------- -----------
<S> <C> <C>
Interest income $5,966,768 $6,087,529
Interest expense 3,199,515 3,322,829
---------- ----------
Net interest income 2,767,253 2,764,700
Provision for loan losses 30,000 60,000
---------- ----------
Net interest income after provision for loan losses 2,737,253 2,704,700
---------- ----------
Noninterest income:
Fees and service charges 361,338 273,524
Abstract fees 343,473 361,098
Gain on sale of securities available for sale -- 54,853
Other income 215,438 186,990
---------- ----------
Total noninterest income 920,249 876,465
---------- ----------
Noninterest expense:
Salaries and employee benefits 973,004 938,514
Premises and equipment 207,334 187,713
Data processing 147,932 129,054
SAIF deposit insurance premiums 37,415 37,784
Goodwill amortization 118,070 115,920
Other expenses 570,554 579,147
---------- ----------
Total noninterest expense 2,054,309 1,988,132
---------- ----------
Income before income taxes 1,603,193 1,593,033
Provision for income taxes 545,501 587,759
---------- ----------
Net Income $1,057,692 $1,005,274
========== ==========
</TABLE>
RESULTS OF OPERATIONS
The actual statement of income for the three months ended March 31, 1999 was
used for comparison purposes to the pro forma statement of income for the three
months ended March 31 1998 in order to more clearly present the changes in the
results of operations.
INTEREST INCOME. Interest income decreased by $121,000 to $6.0 million for the
three months ended March 31, 1999 compared to $6.1 million for the three months
ended March 31, 1998. The decrease in interest income was primarily due to a
decrease in the average yield on interest earning assets from 7.72% for the
three months ended March 31, 1998 to 7.56% for the three months ended March 31,
1999. The average yields on interest bearing assets declined due to a general
decrease in the market interest rates. The impact of the decrease in average
yields was offset in part by an increase in the average balance of interest
earning assets . The average balance of interest bearing assets increased
$803,000 (primarily first mortgage and consumer loans and interest bearing cash)
to $316.8 million for the three months ended March 31, 1999 from $316.0 million
for the comparable 1998 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
primarily by multi-family residences and commercial
-10-
<PAGE>
RESULTS OF OPERATIONS (Continued)
real estate, 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 available for sale securities.
INTEREST EXPENSE. Interest expense decreased by $123,000 to $3.2 million for the
three months ended March 31, 1999 compared to $3.3 million for the three months
ended March 31, 1998. The decrease in interest expense was primarily due to a
decrease in the average cost of interest bearing liabilities from 4.91% for the
three months ended March 31, 1998 to 4.64% for the three months ended March 31,
1999. The average cost of interest bearing liabilities declined due to a general
decrease in the market interest rates. The impact of the decrease in average
cost of interest bearing liabilities was offset in part by an increase in the
average balance of interest bearing liabilities . The increase in the average
balance of interest bearing liabilities was primarily due to a $4.2 million
increase in the average balance of NOW and money market savings accounts. The
increase in such deposit accounts is due to marketing of the Company's NOW
accounts.
NET INTEREST INCOME. Net interest income before the provision for loan losses
increased by $3,000 to $2.8 million for the three months ended March 31, 1999
from $2.8 million for the three months ended March 31, 1998. The increase is
primarily due to the increase in the interest rate spread, offset by the
decrease 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) increased to 2.92%
for the three months ended March 31, 1999 from 2.81% for the three months ended
March 31, 1998.
The following table sets forth certain information relating to the Company's
actual and pro forma average balance sheets and reflects the actual and pro
forma average yield on assets and actual and pro forma average cost of
liabilities for the three month periods ended March 31, 1999 and 1998,
respectively.
-11-
<PAGE>
RESULTS OF OPERATIONS (Continued)
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED MARCH 31,
------------------------------------------------------------------
ACTUAL PRO FORMA
1999 1998
------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST YIELD/COST BALANCE INTEREST YIELD/COST
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Loans.......................................... $254,270 $5,100 8.04% $250,567 $5,154 8.23%
Securities available for sale.................. 50,428 730 5.86 58,497 844 5.85
Interest bearing cash.......................... 12,099 137 4.60 6,930 90 5.24
-------- ------ ------ -------- ------ ------
Total interest-earning assets................ 316,797 $5,967 7.56% 315,994 $6,088 7.72%
------ ------ ------ ------
Noninterest-earning assets....................... 17,430 18,383
-------- --------
Total assets................................. $334,227 $334,377
======== ========
LIABILITIES AND EQUITY:
Interest-bearing liabilities:
NOW and money market savings................... $ 50,825 $ 276 2.20% $ 46,658 $ 360 3.13%
Passbook savings............................... 26,570 148 2.26 26,200 155 2.39
Certificates of deposit........................ 163,572 2,242 5.56 163,690 2,254 5.58
Borrowed funds................................. 38,150 534 5.60 37,642 554 5.98
-------- ------ ------ -------- ------ ------
Total interest-bearing liabilities............... 279,117 $3,200 4.64% 274,190 $3,323 4.91%
------ ------ ------ ------
Noninterest-bearing liabilities.................. 6,522 9,206
-------- --------
Total liabilities............................ 285,639 283,396
Equity........................................... 48,635 50,981
-------- --------
Total liabilities and equity................. $334,227 $334,377
======== ========
Net interest income................................. $2,767 $2,765
====== ======
Net interest rate spread............................ 2.92% 2.81%
====== ======
Net interest margin................................. 3.49% 3.50%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities............. 113.50% 115.25%
====== ======
</TABLE>
RESULTS OF OPERATIONS (Continued)
PROVISION FOR LOAN LOSSES. The Company's provision for loan losses was
$30,000 and $60,000 for the three months ended March 31, 1999 and 1998,
respectively. 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 $2,000 for the three months ended March 31, 1999 as compared to
net charge offs of $1,000 for the three months ended March 31, 1998. The
resulting allowance for loan losses was $2.7 million at March 31, 1999 as
compared to $2.7 million at December 31, 1998 and $2.6 million at March 31,
1998. The level of nonperforming loans decreased to $291,000 at March 31,
1999 from $956,000 at December 31, 1998 and from $539,000 at March 31,
1998. 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 $44,000 to
$920,000 for the three months ended March 31, 1999 from $876,000 for the
three months ended March 31, 1998. The increase is due to increases in fees
and service charges and other income, offset in part by decreases in
abstract fees. Other fees and service charges increased
-12-
<PAGE>
RESULTS OF OPERATIONS (Continued)
$88,000, primarily due to increases in overdraft fees, NOW and savings account
service charges and loan prepayment fees. Other income increased $28,000,
primarily due to an increase in revenues from the sale of loans, offset by
losses on disposal of certain equipment and decreases in annuity sales. Abstract
fees decreased $18,000 due to decreased sales volume. Noninterest income for the
three months ended March 31, 1998 reflects gains on sales of securities
available for sale of $55,000, while the three months ended March 31, 1999 does
not include any gains on sale of securities available for sale.
NONINTEREST EXPENSE. Total noninterest expense increased by $66,000 to $2.1
million for the three months ended March 31, 1999 from $2.0 million for the
three months ended March 31, 1998. The increase is primarily due to increases in
premisses and equipment and data processing. The increases in premises and
equipment was primarily due to an increase in depreciation expense relating
primarily to the purchase of computer equipment and software and normal cost
increases. The increase in data processing expense was due to one time costs
incurred as a result of some Year 2000 costs and normal cost increases. The
Company's efficiency ratio for the three months ended March 31, 1999 and 1998
were 55.71% and 54.60%, respectively. The Company's ratio of noninterest expense
to average assets for the three months ended March 31, 1999 and 1998 were 2.46%
and 2.38%, respectively.
INCOME TAXES. Income taxes decreased by $42,000 to $546,000 for the three months
ended March 31, 1999 as compared to $588,000 for the three months ended March
31, 1998. The decrease was primarily due to a decrease in pre-tax earnings
during the 1999 period as compared to the corresponding 1998 period.
NET INCOME. Net income totaled $1.1 million for the three months ended March 31,
1999, compared to $1.0 million for the same period in 1998.
YEAR 2000 COMPLIANCE. The Year 2000 "Y2K" issue is a serious operational problem
that is widespread and complex, affecting all industries. The problem consists
essentially of the risk that programming code in existing computer systems will
fail to properly recognize the new millennium when it occurs in the Year 2000.
Many computer programs and related hard-printed memory circuits were developed
with six-digit date fields. These programs and memory circuits 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. Because banks rely heavily on their computer
systems, the Federal Financial Institutions Examination council ("FFIEC") has
placed significant emphasis on the problems surrounding the year 2000 issues and
has required financial institutions to document the assessment, testing and
corrections made to ready their computer systems and programs for the year 2000
date change. The FFIEC and the OTS have strict regulations, guidelines and
milestones in place that each FDIC insured financial institution must follow in
order to remain operational. The Company's board of directors has remained
informed of the Company's position and progress in its year 2000 project.
In addition, noninformation technology systems, such as equipment like
telephones, copies and elevators may also contain embedded technology which
controls its operation and which may be effected by the Y2K problem. When the
Year 2000 arrives, systems, including some of those with embedded chips, may not
work properly because of the way they store date information. They may not be
able to deal with the date 01/01/00, and may not be able to deal with
operational 'cycles' such as 'do X every 100 days'. Thus, even noninformation
technology systems may affect the normal operations of the Company upon arrival
of the Year 2000.
In order to address the Y2K issue and to minimize its potential adverse impact,
management has begun a process to identify areas that will be affected by the
Y2K Problem, assess its potential impact on the operations of the Company,
monitor the progress of FIserv, Inc. of Milwaukee ("FIserv") and other third
party software vendors in addressing the matter, test changes provided by these
vendors, and develop contingency plans for all critical systems. An internal
committee of the Company has been formed to address the potential risks that Y2K
poses for the Company. The Company's Y2K committee has completed the awareness,
inventory and assessment phases of Y2K. The testing of the Company's internal
computer system and software should be completed by the second quarter of 1999.
The Company's most critical exposure to Y2K system problems is with its data
processing provider, FIserv. The Company
-13-
<PAGE>
RESULTS OF OPERATIONS (Continued)
has been advised by FIserv that Fiserv's Vision system is Y2K ready as of
February, 1999. During the early second quarter of 1999, the Company intends to
complete the testing phase of Y2K. Management anticipates that the enhancements
necessary to prepare it's mission critical systems for Y2K will be completed
during the second quarter of 1999. Although the effort to prepare for Y2K is
intended to address all Y2K issues, the Company's has developed a contingency
plan to address potential Y2K issues that arise from noncompliance. Contingency
plans have been developed on a department-by-department basis in anticipation of
the possibility of unplanned system difficulties or failure of third parties to
successfully prepare reporting procedures. The testing phase on the Company's
contingency plan will begin in the second quarter of 1999.
The Company anticipates that it has and will incur internal staff costs,
consulting costs, data processing costs, additional purchase of equipment and
other expenses related to the enhancements necessary to prepare its systems for
Y2K. The Company has replaced some equipment, software and incurred consulting
fees at a cost of approximately $40,000. Management anticipates the additional
costs associated with Year 2000 compliance will not exceed $100,000. Any
personnel and consulting costs have been and will continue to be expense as
incurred. If the Company is not Y2K compliant, the costs to become compliant
would likely be material to the financial condition and operating results of the
Company.
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, 1998 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
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial data schedule. (Only submitted with filing in electronic
format.)
Exhibit 99.1 Press Release, dated January 28, 1999 (regarding the completion of
a stock repurchase program).
Exhibit 99.2 Press Release, dated February 26, 1999 (regarding the declaration
of a dividend).
Exhibit 99.3 Press Release, dated March 26, 1999 (regarding stock repurchase
program)
Exhibit 99.4 Press Release, dated April 16, 1999 (regarding the issuance of
limited financial information for the three months ended March 31, 1999).
(b) Reports of Form 8-K
None
-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 14, 1999 BY: /s/ David M. Bradley
David M. Bradley, CPA
Chairman, President and
Chief Executive Officer
DATE: May 14, 1999 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-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,532,558
<INT-BEARING-DEPOSITS> 10,529,198
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,292,839
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 253,519,327
<ALLOWANCE> 2,704,152
<TOTAL-ASSETS> 334,416,071
<DEPOSITS> 245,721,303
<SHORT-TERM> 10,000,000
<LIABILITIES-OTHER> 2,134,112
<LONG-TERM> 27,804,569
0
0
<COMMON> 40,111
<OTHER-SE> 48,715,976
<TOTAL-LIABILITIES-AND-EQUITY> 334,416,071
<INTEREST-LOAN> 5,099,590
<INTEREST-INVEST> 867,178
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 5,966,768
<INTEREST-DEPOSIT> 2,665,780
<INTEREST-EXPENSE> 3,199,515
<INTEREST-INCOME-NET> 2,767,253
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,054,309
<INCOME-PRETAX> 1,603,193
<INCOME-PRE-EXTRAORDINARY> 1,603,193
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,057,692
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.36
<YIELD-ACTUAL> 7.56
<LOANS-NON> 290,941
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,676,438
<CHARGE-OFFS> 2,286
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,704,152
<ALLOWANCE-DOMESTIC> 2,704,152
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
Exhibit 99.1 Press Release
PRESS RELEASE
January 28, 1999
For further information contact:
David M. Bradley
President and Chief Executive Officer
North Central Bancshares, Inc.
825 Central Avenue
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. COMPLETES STOCK REPURCHASE
Fort Dodge, Iowa January 28, 1999 - North Central Bancshares, Inc. (Nasdaq:
"FFFD") announced that it has completed a 5% stock repurchase program on January
28, 1999. The Company said it repurchased 155,207 shares of its outstanding
common stock, par value $.01 per share, at the aggregate cost of $2,706,123, in
open market transactions. The repurchase program began on November 13, 1998.
Upon settlement of the last transaction on or about February 2, 1999, there will
be 2,957,242 shares of North Central Bancshares, Inc. common stock outstanding.
North Central Bancshares, Inc., with over $335 million in assets, is the holding
company for First Federal Savings Bank of Iowa, 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 99.2 Press Release
PRESS RELEASE
February 26, 1999 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 today that the Company
declared a regular quarterly cash dividend of $0.10 per share on the Company's
common stock for the fiscal quarter ended March 31, 1999. This amount is an
increase of 25% compared to the previous dividend rate. The dividend will be
payable to all stockholders of record as of March 16, 1999 and will be paid on
April 6, 1999.
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".
<PAGE>
Exhibit 99.3 Press Release
PRESS RELEASE
March 26, 1999
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 26, 1999 - North Central Bancshares, Inc. (Nasdaq:
"FFFD") (the "Company"), the holding company for First Federal Savings Bank of
Iowa, announced that it will commence a stock repurchase program beginning on or
about three business days after the release of the Company's first quarter
earnings for 1999. The program authorizes the Company to repurchase up to 5.1%
or 150,000 shares of its 2,957,242 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 $335 million in assets, is the holding
company for First Federal Savings Bank of Iowa, 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 99.4 Press Release
PRESS RELEASE For More Information Contact:
April 16, 1999 David M. Bradley, President
North Central Bancshares, Inc.
825 Central Avenue
Fort Dodge, Iowa 50501
515-576-7531
NORTH CENTRAL BANCSHARES, INC. ANNOUNCES FIRST QUARTER 1999 EARNINGS
(Nasdaq: FFFD)
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 $1,058,000, or diluted earnings per shares of $0.36, for
the first quarter of 1999, compared to $1,106,000, or diluted earnings per share
of $0.34, for the first quarter of 1998.
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. Therefore, the comparison between periods is
significantly impacted by this acquisition.
Stockholders of record on March 16, 1999, received a quarterly cash dividend of
$0.10 per share, a 25% increase from the cash dividend of $0.08 per share paid
during the previous quarter.
Total assets at March 31, 1999 were $334.4 million as compared to $336.7 million
at December 31, 1998. The decrease in assets resulted primarily from decreases
in interest-bearing cash and loans, offset by increases in securities available
for sale. Interest-bearing cash decreased $2.4 million, or 18.4% from $13.2
million at December 31, 1998 to $10.8 million at March 31, 1999. Loans decreased
by $513,000, or 0.2% from $254.0 million at December 31, 1998 to $253.5 million
at March 31, 1999. Securities available for sale increased $2.2 million, or 4.3%
from $49.9 million at December 31, 1998 to $52.0 million at March 31, 1999.
- MORE -
<PAGE>
Deposits decreased $969,000, or 0.4% from $246.7 million at December 31, 1998 to
$245.7 million at March 31, 1999. Other borrowed funds decreased $1.0 million,
or 2.6% from $38.8 million at December 31, 1998 to $37.8 million at March 31,
1999.
The unaudited pro forma consolidated statement of income, for the three months
ended March 31, 1998, presented in this press release is based on the historical
financial statements of the Company and Valley Financial and was prepared as if
the Acquisition had occurred as of the beginning of the period for purposes of
the combined consolidated statement of income.
The pro forma financial statement of income is 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.
Nonperforming assets were 0.17% of total assets as of March 31, 1999 compared to
0.34% of total assets as of December 31, 1998. The allowance for loan losses
was $2.7 million or 1.05% of total loans at March 31, 1999, compared to $2.7
million or 1.03% of total loans at December 31, 1998.
The net interest spread for the three months ended March 31, 1999 of 2.92% was
increased from the pro forma net interest spread of 2.81% for the three months
ended March 31, 1998. The net interest margin for the three months ended March
31, 1999 was 3.49% compared to the pro forma net interest margin of 3.50% for
the three months ended March 31, 1998. Net interest income for the three months
ended March 31, 1999 was $2.8 million, compared to pro forma net interest income
of $2.8 million for the corresponding period a year ago.
The Bank's provision for loan losses was $30,000 for the three months ended
March 31, 1999, compared to pro forma provision for loan losses of $60,000 for
the corresponding period a year ago. 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 Bank's
portfolio, and other factors related to the collectibility of the Bank's loan
portfolio.
Stockholders' equity was $48.8 million at March 31, 1999, compared to $48.2
million at December 31, 1998. Book value, or stockholders' equity, per share at
March 31, 1999 was $16.49 and was $16.26 at December 31, 1998. The ratio of
stockholders' equity to total assets was 14.6% at March 31, 1999, as compared to
14.3% at December 31, 1998.
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 March 31, 1999 December 31, 1998
data)
--------------- ------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 12,307 $ 15,637
Securities available for sale 52,047 49,883
Loans (net of allowance of loan loss of $2.7
million and $2.7 million, respectively) 253,519 254,032
Goodwill 6,270 6,388
Other assets 10,273 10,750
---------- ----------
Total Assets $ 334,416 $ 336,690
========== ==========
Liabilities
Deposits $ 245,721 $ 246,690
Other borrowed funds 37,805 38,832
Other liabilities 2,134 2,961
---------- ----------
Total Liabilities 285,660 288,483
Stockholders' Equity 48,756 48,207
---------- ----------
Total Liabilities and Stockholders' Equity $ 334,416 $ 336,690
========== ==========
Stockholders' equity to total assets 14.58% 14.32%
========== ==========
Book value per share $ 16.49 $ 16.26
========== ==========
Total shares outstanding 2,957,242 2,964,449
========== ==========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
--------- ---------
<S> <C> <C>
Interest income $5,967 $5,465
Interest expense 3,200 2,873
------ ------
Net interest income 2,767 2,592
Provision for loan loss 30 60
------ ------
Net interest income after provision for loan loss 2,737 2,532
Noninterest income 920 760
Gain on the sale of securities available for sale -- 55
Noninterest expense 2,054 1,634
------ ------
Income before income taxes 1,603 1,713
Income taxes 545 607
------ ------
Net income $1,058 $1,106
====== ======
Basic earnings per share $ 0.37 $ 0.35
====== ======
Diluted earnings per share $ 0.36 $ 0.34
====== ======
SELECTED FINANCIAL RATIOS
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
---------- ----------
<S> <C> <C>
Performance ratios:
Net interest spread 2.92% 2.86%
Net interest margin 3.49% 3.68%
Return on average assets 1.27% 1.49%
Return on average equity 8.71% 8.67%
Efficiency ratio (noninterest expense divided by the
sum of net interest income before provision for 55.71% 47.96%
loan losses plus noninterest income)
<CAPTION>
March 31, 1999 December 31, 1998
--------------- ------------------
<S> <C> <C>
Asset Quality Ratios:
Nonaccrual loans to total net loans 0.11% 0.38%
Nonperforming assets to total assets 0.17% 0.34%
Allowance for loan losses as a percent
of total loans receivable 1.05% 1.03%
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
Actual ProForma*
1999 1998
-------- ----------
<S> <C> <C>
Interest income $5,967 $6,088
Interest expense 3,200 3,323
------ ------
Net interest income 2,767 2,765
Provision for loan loss 30 60
------ ------
Net interest income after provision for loan loss 2,737 2,705
Noninterest income 920 821
Gain on the sale of securities available for sale -- 55
Noninterest expense 2,054 1,988
------ ------
Income before income taxes 1,603 1,593
Income taxes 545 588
------ ------
Net income $1,058 $1,005
====== ======
*See explanatory note below.
SELECTED FINANCIAL RATIOS
<CAPTION>
For the Three Months
Ended March 31,
Actual ProForma*
1999 1998
--------- -----------
<S> <C> <C>
Performance ratios:
Net interest spread 2.92% 2.81%
Net interest margin 3.49% 3.50%
Return on average assets 1.27% 1.20%
Return on average equity 8.71% 7.89%
Efficiency ratio (noninterest expense divided by the
sum of net interest income before provision for
loan losses plus noninterest income) 55.71% 54.60%
</TABLE>
*See explanatory note below.
*PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
The above unaudited pro forma consolidated statement of income presented is
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 was prepared as if the Acquisition had
occurred as of the beginning of the respective period for purposes of the
combined consolidated statements of income.
The pro forma statement of income is 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.
