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NORTH CENTRAL BANCSHARES, INC.
825 Central Avenue
Fort Dodge, Iowa 50501
March 30, 2001
Via EDGAR
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Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
RE: North Central Bancshares, Inc.
Commission File Number 0-27672
Annual Report on Form 10-K
Ladies and Gentlemen:
Pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended,
and Rule 13a-1 promulgated thereunder, enclosed is the Annual Report on Form
10-K for the year ended December 31, 2000, including exhibits. In accordance
with Rule 302 of Regulation S-T, a copy of the Annual Report on Form 10-K has
been manually signed and will be retained for five years. Upon request, such
copy will be furnished to the Commission.
Please direct questions or comments regarding the enclosures to the undersigned
at 515-576- 7531.
Sincerely,
NORTH CENTRAL BANCSHARES, INC.
By: /s/ John L. Pierschbacher
John L. Pierschbacher
Enclosure
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
0-27672
(Commission File Number)
NORTH CENTRAL BANCSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)
Iowa 421449849
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
c/o First Federal Savings Bank of Iowa
825 Central Avenue, Fort Dodge, Iowa 50501
(Address of Principal Executive Offices) (Zip Code)
(515) 576-7531
(Registrant's Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file reports) and (2) has been subject to such
requirements for the past 90 days.
YES_X_ NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
As of March 19, 2001, there were issued and outstanding 1,892,380 shares of
the Registrant's Common Stock. The aggregate value of the voting stock held by
non-affiliates of the Registrant, computed by reference to the average bid and
asked prices of the Common Stock as of March 12, 2001 was $35,545,823.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Proxy Statement for the Registrant's 2001 Annual Meeting of
Shareholders are incorporated by reference into Items 10, 11, 12 and 13 of
Part III hereof.
2. Portions of the 2000 Annual Report to Shareholders are incorporated by
reference into Items 7, 7A, 8 and 9 of Part II hereof.
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PART I
North Central Bancshares, Inc., and First Federal Savings Bank may from
time to time make written or oral "forward-looking statements." These
forward-looking statements may be contained in this annual filing with the
Securities and Exchange Commission (the "SEC"), the Annual Report to
Shareholders, other filings with the SEC, and in other communications by the
Company and the Bank, which are made in good faith pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The words
"may,""could," "should,""would," "believe," "anticipate," "estimate," "expect,"
"intend," "plan" and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, that are subject to significant risks and
uncertainties. The following factors, many of which are subject to change based
on various other factors beyond the Company's control, and other factors
discussed in this Form 10-K, as well as other factors identified in the
Company's filings with the SEC and those presented elsewhere by management from
time to time, could cause its financial performance to differ materially from
the plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements:
o the strength of the United States economy in general and the
strength of the local economies in which
the Company and the Bank conduct operations;
o the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies
of the Federal Reserve Board;
o inflation, interest rate, market and monetary fluctuations;
o the timely development of and acceptance of new products and
services and the perceived overall value of these products and
services by users, including the features, pricing and quality
compared to competitors' products and services;
o the willingness of users to substitute competitors' products and
services for the Company's and the Bank's products and services;
o the Company's and the Bank's success in gaining regulatory approval
of their products and services, when required;
o the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
o the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
o the impact of technological changes;
o acquisitions;
o changes in consumer spending and saving habits; and
o the Company's and the Bank's success at managing the risks involved
in their business.
This list of important factors is not exclusive. The Company or the
Bank does not undertake to update any forward-looking statement, whether written
or oral, that may be made from time to time by or on behalf of the Company or
the Bank.
ITEM 1. BUSINESS
General
North Central Bancshares, Inc. (the "Holding Company"), an Iowa
corporation, is the holding company for First Federal Savings Bank of Iowa (the
"Bank"), a federally chartered savings bank. Collectively, the Holding Company
and the Bank are referred to herein as the "Company." The Holding Company was
organized on December 5, 1995 at the direction of the Board of Directors of the
Bank for the purpose of acquiring all of the capital stock to be issued by the
Bank in connection with the conversion and reorganization of the Bank and North
Central Bancshares, M.H.C. (the "MHC") from the mutual to the stock holding
company structure (these transactions are collectively referred to as the
"Conversion"). On March 20, 1996, upon completion of the Conversion, the Holding
Company issued an aggregate of 4,011,057 shares of its Common Stock, par value
$0.01 per share, of which 1,385,590 shares 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 at a price of $10.00 per share, with gross proceeds
amounting to $26,254,670. At this time, the Holding Company conducts business as
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a unitary savings and loan holding company and the principal business of the
Holding Company consists of the operation of its wholly-owned subsidiary, the
Bank.
The Holding Company's executive offices are located at the home office
of the Company at 825 Central Avenue, Fort Dodge, Iowa. The Holding Company's
telephone number is (515) 576-7531.
First Federal Savings Bank of Iowa
The Bank is a federally chartered savings bank that conducts its
operations from its main office located in Fort Dodge, Iowa and seven branch
offices located in Iowa. Four of the Bank's branches are located in north
central and central Iowa, in the cities of Fort Dodge, Nevada, Ames and Perry.
On January 30, 1998, the Bank completed the acquisition of Valley Financial
Corp., an Iowa corporation, and the holding company for Valley Savings Bank, FSB
(the "Acquisition"). See "Acquisition of Valley Financial Corp." As a result of
the Acquisition, the Bank also has three branches in southeastern Iowa, in the
cities of Burlington and Mount Pleasant. The Bank is the successor to First
Federal Savings and Loan Association of Fort Dodge, which was chartered
originally in 1954, and on May 7, 1987 became a federally chartered savings
bank. The Bank adopted its present name on February 27, 1998. The Bank is a
community-oriented savings institution that is primarily engaged in the business
of attracting deposits from the general public in the Bank's market areas, and
investing such deposits in one-to-four family residential real estate mortgages,
multifamily and commercial mortgages and, to a lesser extent, secured and
unsecured consumer loans, with emphasis on second mortgage loans. The Bank's
deposits are insured by the FDIC under the SAIF. The Bank has been a member of
the Federal Home Loan Bank ("FHLB") System since 1954. At December 31, 2000, the
Bank had total assets of $388.5 million, total deposits of $261.7 million, and
total shareholders' equity of $34.6 million.
The Bank's principal executive office is located at 825 Central Avenue,
Fort Dodge, Iowa and its telephone number at that address is (515) 576-7531.
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"), 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 (the "Bank Merger").
Valley Savings, formerly headquartered in Burlington, Iowa was a
federally-chartered stock savings bank with three branch offices located in
southeastern Iowa.
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 $525.00 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 source of funds for the Acquisition consisted of the Bank's
accumulation of its cash flow from the maturity of short-term liquid
investments, principal and interest on loans, sale of other investment
securities, other cash receipts, net of operating expenses and other projected
disbursements.
Market Area and Competition
The Company is an independent savings and loan holding company serving
its primary market area of Webster, Story, Dallas, Henry and Des Moines
Counties, which are located in the central and north central and southeastern
parts of the State of Iowa. The Company's market area is influenced by
agriculture as well as retail sales, professional services and public education.
The Company is headquartered in Fort Dodge, the Webster County seat, where it
operates two Company locations.
The unemployment rate as of December 2000 for Webster County was 2.5%,
for Story County was 1.8%, for Dallas County was 1.4%, for Henry County was 2.4%
and for Des Moines County was 2.9%. These compare to the national rate of 4.0%
and the State of Iowa rate of 2.5%.
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Due to the loan demand in the Company's overall market area, increased
competition, and the Company's decision to diversify its loan portfolio, the
Company has originated and purchased loans (primarily multifamily and commercial
real estate loans) from out of state. The Company intends to continue such
originations and purchases pursuant to its underwriting standards for
Company-originated loans.
The Company encounters strong competition both in attracting deposits
and in originating real estate and other loans. Its most direct competition for
deposits has historically come from commercial and savings banks, other savings
associations, and credit unions in its market area. Competition for loans comes
from such financial institutions as well as mortgage banking companies. The
Company expects continued strong competition in the foreseeable future. Many
such institutions have greater financial and marketing resources available to
them than does the Company. The Company competes for savings deposits by
offering depositors a high level of personal service and a wide range of
competitively priced financial products. In recent years, additional strong
competition has come from stock and bond dealers and brokers and, in particular,
mutual funds. The Company competes for real estate loans primarily through the
interest rates and loan fees it charges and advertising, as well as by offering
high levels of personal service.
Lending Activities
Loan Portfolio Composition. The principal components of the Company's
loan portfolio are fixed- and adjustable-rate first mortgage loans secured by
one-to-four family owner-occupied residential real estate, fixed- and
adjustable-rate first mortgage loans secured by multifamily residential and
commercial real estate and, to a lesser extent, secured and unsecured consumer
loans, with emphasis on second mortgage loans. At December 31, 2000, the
Company's loans receivable totalled $322.4 million, of which $176.6 million, or
54.8%, were one-to-four family residential real estate first mortgage loans, and
$100.0 million, or 31.0%, were other first mortgage loans, primarily multifamily
and commercial real estate loans purchased by the Company. Consumer loans,
consisting primarily of automobile loans and second mortgage loans, totalled
$45.8 million, or 14.2%, of the Company's loan portfolio.
Savings associations, such as the Bank, are generally subject to the
same limits on loans to one borrower as are imposed on national banks.
Generally, under these limits, a savings association may not make a loan or
extend credit to a single or related group of borrowers in excess of 15% of the
association's unimpaired capital and surplus. Additional amounts may be lent, in
the aggregate not exceeding 10% of unimpaired capital and surplus, if any such
loan or extension of credit is fully secured by readily-marketable collateral.
Such collateral is defined to include certain debt and equity securities and
bullion, but generally does not include real estate. For the year ended December
31, 2000, it was the Company's policy to limit loans to one borrower to $2.5
million. At December 31, 2000, the Company's largest aggregate outstanding loan
to one borrower was $2.5 million and the second largest borrower had an
aggregate balance of $2.0 million, both of which were first mortgage multifamily
residential real estate loans and both were performing as of that date.
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Analysis of Loan Portfolio. Set forth below are selected data relating
to the composition of the Company's loan portfolio by type of loan as of the
dates indicated:
At December 31,
---------------
2000 1999
---- ----
Percent Percent
Amount of Total Amount of Total
------ -------- ------ --------
(Dollars in thousands)
First mortgage loans:
One-to-four family residential(1) $ 176,615 54.78% $ 164,057 56.23
Multifamily ..................... 75,858 23.53 73,417 25.16
Commercial ...................... 24,127 7.48 17,723 6.07
------ ---- ------ ----
Total first mortgage loans .... $ 276,600 85.79 255,197 87.47
--------- ----- ------- -----
Consumer loans:
Automobiles ..................... $ 8,803 2.73% $ 8,003 2.74%
Second mortgage(2) .............. 31,910 9.90 23,604 8.09
Other(3) ........................ 5,095 1.58 4,956 1.70
----- ---- ----- ----
Total consumer loans .......... 45,808 14.21 36,563 12.53
------ ----- ------ -----
Total loans receivable ........ $ 322,408 100.00% $ 291,760 100.00%
Less:
Undisbursed portion of
construction loans ............ $ 1,493 0.45% $ 1,982 0.68%
Unearned loan discount .......... 69 0.02 136 0.05
Net deferred loan origination
fee(expense) ................. (23) (0.01) 106 0.04
Allowance for loan losses ....... 2,843 0.88 2,777 0.95
----- ---- ----- ----
Total loans receivable, net . $ 318,026 98.64% $ 286,759 98.29%
========= ===== ========= =====
At December 31,
---------------
1998 1997 1996
---- ---- ----
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
------ -------- ------ -------- ------ --------
(Dollars in thousands)
First mortgage loans:
One-to-four family residential(1) $ 148,992 57.46% $ 115,763 59.48% $ 107,168 63.44%
Multifamily ..................... 64,895 25.02 51,345 26.38 34,488 20.42
Commercial ...................... 11,396 4.39 3,800 1.95 5,225 3.09
------ ---- ----- ---- ----- ----
Total first mortgage loans .... 225,283 86.87 170,908 87.81 146,881 86.95
------- ----- ------- ----- ------- -----
Consumer loans:
Automobiles ..................... $ 7,348 2.83% $ 4,696 2.41% $ 4,155 2.46%
Second mortgage(2) .............. 20,784 8.01 16,226 8.34 15,303 9.06
Other(3) ........................ 5,946 2.29 2,796 1.44 2,582 1.53
-- ----- ---- ----- ---- ----- ----
Total consumer loans .......... 34,078 13.13 23,718 12.19 22,040 13.05
------ ----- ------ ----- ------ -----
Total loans receivable ........ $ 259,361 100.00% $ 194,626 100.00% $ 168,921 100.00%
Less:
Undisbursed portion of
construction loans ............ $ 2,025 0.78% $ 453 0.23% $ 371 0.22%
Unearned loan discount .......... 312 0.12 424 0.22 525 0.31
Net deferred loan origination
fee(expense) ................. 316 0.12 349 0.18 241 0.14
Allowance for loan losses ....... 2,676 1.03 2,151 1.11 1,953 1.16
----- ---- ----- ---- ----- ----
Total loans receivable, net . $ 254,032 97.95% $ 191,249 98.26% $ 165,831 98.17%
========= ===== ========= ===== ========= =====
(1) Includes interest-only construction loans that convert to permanent loans.
(2) Second mortgage loans included $1.6 million, $1.5 million, $1.4 million,
$1.1 million and $862,000 (in actual dollars) of nonowner-occupied
residential first mortgage loans at December 31, 2000, 1999, 1998, 1997
and 1996, respectively.
(3) Other consumer loans included $1.5 million, $1.6 million, $2.3 million,
$269,000 and $213,000 (in actual dollars) of commercial mortgage loans at
December 31, 2000, 1999, 1998, 1997 and 1996, respectively.
-5-
Loan Maturity Schedule. The following table sets forth the maturity or
period to repricing of the Company's loan portfolio at December 31, 2000.
Overdraft lines of credit are reported as due in one year or less.
Adjustable-rate loans are included in the period in which interest rates are
next scheduled to adjust rather than in which they contractually mature, and
fixed rate loans are included in the period in which the final contractual
repayment is due.
At December 31, 2000
--------------------
Within 1-3 3-5 5-10 10-20 Beyond 20
1 Year Years Years Years Years Years Total
------ ----- ----- ----- ----- ----- -----
(In thousands)
First mortgage loans:
One-to-four family
residential(1).... $28,785 $28,897 $ 51,373 $59,487 $ 7,213 $ 860 $176,615
Multifamily......... 37,829 10,788 17,556 9,673 12 -- 75,858
Commercial.......... 5,045 5,044 9,342 3,217 1,479 -- 24,127
Consumer loans (2)...... 5,254 12,456 26,336 1,676 74 12 45,808
----- ------ ------ ----- ----- ----- ------
Total ............ $76,913 $57,185 $104,607 $74,053 $ 8,778 $ 872 $322,408
======= ======= ======== ======= ======= ======= ========
(1) One-to-four family loans include $102.7 million of 7 year fixed rate
loans that convert to adjustable rates at the beginning of the eighth
year and are annually adjustable thereafter. $49.4 million of these
loans with repricing periods greater than 5 years have been classified
as fixed rate loans. $53.3 million of these loans with repricing
periods less than 5 years have been classified as adjustable rate
loans.
(2) Includes second mortgage loans of $31.9 million at December 31, 2000.
The following table sets forth the dollar amounts of all fixed rate and
adjustable rate loans in each loan category at December 31, 2000 due after
December 31, 2001.
Due After December 31, 2001
---------------------------
Fixed Adjustable Total
----- ---------- -----
(In thousands)
First mortgage loans:
One-to-four family residential(1)..... $ 66,376 $ 81,454 $ 147,830
Multifamily........................... 5,126 32,903 38,029
Commercial............................ 7,095 11,987 19,082
Consumer loans (2)........................ 38,894 1,660 40,554
------ ----- ------
Total............................... $ 117,491 $ 128,004 $ 245,495
========= ========= =========
(1) One-to-four family loans include $93.5 million of 7 year fixed rate
loans that convert to adjustable rates at the beginning of the eighth
year and are annually adjustable thereafter. $49.4 million of these
loans with repricing periods greater than 5 years have been classified
as fixed rate loans. $44.1 million of these loans with repricing
periods less than 5 years have been classified as adjustable rate
loans.
(2) Includes second mortgage loans of $28.6 million at December 31, 2000.
One-to-Four Family Residential Real Estate Loans. Traditionally, the
Company's primary lending activity consists of the origination of fixed- and
adjustable-rate one-to-four family owner-occupied residential first mortgage
loans, substantially all of which are collateralized by properties located in
the Company's market area. The Company also originates one-to-four family,
interest only construction loans that convert to permanent loans after an
initial construction period that generally does not exceed nine months. At
December 2000, 37.7% of the Company's residential real estate loans had fixed
rates, and 62.3% had adjustable rates.
The Company originates loans for portfolio and sells loans in the
secondary mortgage market. However, the Company's one-to-four family,
fixed-rate, residential real estate loans originated for portfolio are generally
originated and underwritten according to standards that qualify such loans to be
included in Federal Home Loan Mortgage Corporation ("FHLMC") and Federal
National Mortgage Association ("FNMA") purchase and guarantee programs and that
otherwise permit resale in the secondary mortgage market. The Bank has sold
fixed-rate loans with maturities equal to or in excess of 15 years in the
secondary mortgage market. For the year ended December 31, 2000, the Bank sold
$818,000 of mortgage loans consisting of fifteen one-to-four family residential
mortgage loans. One-to-four family loans are underwritten and originated
according to policies approved by the Board of Directors. First Iowa Mortgage,
Inc., the Bank's wholly owned mortgage banking subsidiary, sold $13.3 million of
mortgage loans consisting of 146 one-to-four family residential mortgage loans.
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Originations of one-to-four family fixed-rate first mortgage loans are
monitored on an ongoing basis and are affected significantly by the level of
market interest rates, the Company's interest rate gap position, and loan
products offered by the Company's competitors. The Company's one-to-four family
fixed-rate first mortgage loans amortize on a monthly basis with principal and
interest due each month. The Company also offers 5 and 7-year fixed-rate first
mortgage loans that convert to adjustable-rate loans that adjust on an annual
basis after the initial fixed rate term. The overall maturity of these loans may
be up to 30 years. The Company determines whether a customer qualifies for these
loans based upon the initial fixed interest rate.
The Company's adjustable rate mortgage loans, or "ARM loans", are
generally originated for terms of up to 30 years, with interest rates that
adjust annually. The Company establishes various annual and life-of-the-loan
caps on ARM loan interest rate adjustments. Currently, the Company offers ARM
loans with annual rate caps of 1.5% and maximum life-of-loan caps of 11.95%.
Prior to 1995, the Company's ARM loans originated for retention in its portfolio
generally were based on the 11th District Cost of Funds Index, a lagging market
index. At present, the interest rate on its ARM loans is calculated by using the
weekly average yield on United States Treasury Securities adjusted to a constant
maturity of one year. The Company determines whether a borrower qualifies for an
ARM loan based on the fully indexed rate of the ARM loan at the time the loan is
originated, rather than the introductory or "teaser" rate or the maximum
life-of-the rate to which the loan could adjust. In addition, the Company
establishes floors for each loan originated below which the loan may not adjust.
One-to- four family residential ARM loans totalled $110.0 million, or 34.1%, of
the Company's total net loan portfolio at December 31, 2000.
The primary purpose of offering ARM loans is to make the Company's loan
portfolio more interest rate sensitive. ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, that during periods
of rising interest rates, the risk of default on ARM loans may increase due to
the upward adjustment of interest costs to the borrower. Management believes
that the Company's credit risk associated with its ARM loans is reduced because
of the annual and lifetime interest rate adjustment limitations on such loans,
although such limitations do create an element of interest rate risk. See Item
7A. "Discussion of Market Risk-- Interest Rate Sensitivity Analysis" in the 2000
Annual Report to Shareholders, which is attached to this Form 10-K as Exhibit
13.
The Company's one-to-four family residential first mortgage loans
customarily include due-on-sale clauses, which are provisions giving the Company
the right to declare a loan immediately due and payable in the event, among
other things, that the borrower sells or otherwise disposes of the underlying
real property serving as security for the loan. Due-on-sale clauses are an
important means of adjusting the rates on the Company's fixed rate mortgage loan
portfolio, and the Company has generally exercised its rights under these
clauses.
Regulations limit the amount that a savings institution may lend
relative to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination.
"Regulation-Regulation of Federal Savings Associations-Real Estate Lending
Standards." The Company's lending policies limit the maximum loan-to-value ratio
on mortgage loans without private mortgage insurance to 80% of the lesser of the
appraised value or the purchase price of the property to serve as collateral for
the loan. The Company generally makes one-to-four family first real estate loans
with loan-to-value ratios of up to 95%; however, for one-to-four family real
estate loans with loan-to-value ratios greater than 80%, the Company requires
the loan amount to be covered by private mortgage insurance. The Company
requires fire and casualty insurance, flood insurance, where applicable, an
abstract of title, and a title opinion on all properties securing real estate
loans originated by the Company.
Multifamily Residential and Commercial Real Estate Loans. The Company's
loan portfolio contains loans secured by multifamily residential and commercial
real estate. Such loans constituted approximately $100.0 million, or 31.4%, of
the Company's total net loan portfolio at December 31, 2000. Of such loans,
$92.2 million, or 92.3%, were purchased or originated by the Company and were
secured by properties outside the State of Iowa (the "out of state" properties).
There were two loans secured by multifamily and commercial real estate more than
90 days past due at December 31, 2000. They consisted of one commercial real
estate loan in the amount of $489,000 and one multifamily real estate loan in
the amount of $67,000. Subsequent to year end, the $67,000 loan was paid in
full. The multifamily and commercial real estate loans are primarily secured by
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multifamily residences such as apartment buildings and by commercial facilities
such as office buildings and retail buildings. Multifamily residential real
estate loans are offered with fixed and adjustable rates and are structured in a
number of different ways depending upon the circumstances of the borrower and
the type of multifamily project. Fixed rate loans generally amortize over 15 to
30 years, and generally contain call provisions permitting the Company to
require that the entire principal balance be repaid at the end of five to
fifteen years. Such loans are priced as five to fifteen year loans with maximum
loan-to-value ratios of 80%. See " -- Purchased or Out of State Originated
Loans".
All purchased or out of state originated loans in excess of $200,000
are approved by the Chief Executive Officer, Chief Operating Officer and the
Board of Directors and are subject to the same underwriting standards as for
loans originated by the Company. All purchased or out of state originated loans
less than $200,000 are approved by the Chief Executive Officer and Chief
Operating Officer and ratified by the Board of Directors and are subject to the
same underwriting standards as loans originated by the Company. Before a loan is
purchased, the Company obtains a copy of the original loan application,
certified rent rolls, the original title insurance policy and personal financial
statements of any guarantors of the loan. An executive officer or director of
the Company also makes a personal inspection of the property securing the loan.
Such purchases are made without recourse to the seller. $25.4 million, or 24.9%,
of out of state loans are serviced by the Bank. $76.3 million, or 75.1% of the
out of state loans are serviced by the originating financial institution or
mortgage company. The Company imposes a $2.5 million limit on the aggregate size
of multifamily and commercial loans to any one borrower. Any exceptions to the
limit must be specifically approved by the Board of Directors on a loan-by-loan
basis within the Company's legal lending limit. See "Regulation -- Regulation of
Federal Savings Associations -- Loans to One Borrower".
Loans secured by multifamily and commercial real estate generally
involve a greater degree of credit risk than single-family residential mortgage
loans and typically, such loans also have larger loan balances. This increased
credit risk is a result of several factors, including the concentration of
principal in a limited number of loans and borrowers, the effects of general
economic conditions on income producing properties, and the increased difficulty
of evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multifamily and commercial real estate is typically dependent
upon the successful operation of the related real estate property. If the cash
flow from such real estate projects are reduced, the borrower's ability to repay
the loan may be impaired.
Consumer Loans, Including Second Mortgage Loans. The Company also
originates consumer loans, which primarily include second mortgage loans. As of
December 31, 2000, consumer loans totalled $45.8 million, of which second
mortgage loans totalled $31.9 million, or 10.0%, of the Company's net total loan
portfolio. The Company's second mortgage loans have fixed interest rates and are
generally for terms of 3 to 5 years. The Company's second mortgage loans are
secured by the borrower's principal residence with a maximum loan-to-value
ratio, including the principal balances of both the first and second mortgage
loans, of generally no more than 80%. The average principal amount of the
Company's second mortgage loans is approximately $15,000.
To a lesser extent, the Company also originates loans secured by
automobiles, with fixed rates generally on a 80% loan-to-value basis for new
cars. All of the Company's automobile loans were originated by the Company and
generally, have terms of up to five years.
In addition, the Company also makes other types of consumer loans,
primarily unsecured signature loans for various purposes. The minimum loan
amount for such loans is $1,000, the maximum loan amount for such loans is
generally $7,500, and the average balance of such loans is approximately $2,600.
The Company originates a limited number of commercial business loans,
which the Company includes with its consumer loan portfolio for reporting
purposes. Such loans may be unsecured and are originated for any business
purpose, such as for the purchase of computers and business equipment. The
maximum loan amount for such unsecured loans is generally $7,500.
The Company's business plan calls for an increase in consumer lending
for the foreseeable future, particularly second mortgage lending. The Company
generally expects consumer loan demand will come from its mortgage loan
customers. Consumer loans generally provide for shorter terms and higher yields
as compared to residential first mortgage loans, but generally carry higher
risks of default. At December 31, 2000, $244,000, or 0.53%, of the Company's
consumer loan portfolio was on non-accrual status.
-8-
Loan Originations, Solicitation, Processing, and Commitments. Loan
originations are derived from a number of sources such as real estate agent
referrals, existing customers, borrowers, builders, and walk-in customers. Upon
receiving a loan application, the Company obtains a credit report and employment
verification to verify specific information relating to the applicant's
employment, income, and credit standing. In the case of a real estate loan, an
appraiser approved by the Company appraises the real estate intended to
collateralize the proposed loan. An underwriter in the Company's loan department
checks the loan application file for accuracy and completeness, and verifies the
information provided. Pursuant to the Company's written loan policies, senior
management approves all first mortgage loans. The Loan Committee of the Board of
Directors meets monthly to review a sampling of all loans originated in the
month.
After a loan is approved, a loan commitment letter is promptly issued
to the borrower. The commitment letter specifies the terms and conditions of the
proposed loan including the amount of the loan, interest rate, amortization
term, a brief description of the required collateral, and required insurance
coverage. Commitments are typically issued for 60-day periods in the case of
loans to refinance, loans to purchase existing real estate, and construction
loans. The borrower must provide proof of fire and casualty insurance on the
property serving as collateral, which insurance must be maintained during the
full term of the loan. An abstract of title along with an attorney's title
opinion is required on all first mortgage loans secured by real property in
Iowa. At December 31, 2000, the Company had outstanding commitments to originate
$480,000 of loans. This amount does not include commitments to purchase loans,
the undisbursed overdraft loan privileges or the unfunded portion of loans in
process.
Purchased or Out of State Originated Loans. The Company's loan
portfolio contains $101.7 million of loans secured by out of state properties.
These loans represented 31.5% of the Company's total loan portfolio at December
31, 2000. Substantially all of the multifamily residential and commercial real
estate loans in the Company's loan portfolio are purchased or originated out of
state by the Company without recourse to the seller. At December 31, 2000,
approximately $20.2 million of these purchased loans represented loans secured
by real estate in the West Coast states of California, Oregon and Washington. At
that date, the Company's investment in properties located in California totalled
$16.4 million and was distributed primarily in southern California. The
Company's investment in properties located in Wisconsin totalled $33.4 million
and was primarily distributed between the Milwaukee and Madison areas. The
Company's investment in properties in Colorado totalled $28.4 million and was
primarily distributed between the Colorado Springs and Denver areas. The
remainder of the Company's purchased or out of state originated loans are
distributed in various states. At December 31, 2000, the Company's multifamily
residential and commercial real estate loans had an average balance of $435,000
and the largest loan had a principal balance of $2.5 million. As of December 31,
2000 there was one multifamily and one commercial real estate loan that were
more than 90 days past due and were on nonaccrual status.
To supplement its origination of one-to-four family first mortgage
loans, the Company also purchases loans secured by one-to-four family residences
out of state. At December 31, 2000, $9.5 million, or 2.9%, of the Company's
total loan portfolio consisted of purchased one-to-four family loans, of which
$5.8 million were secured by properties located in Missouri and $1.6 million
were secured by properties in Wisconsin. As of December 31, 2000 there were no
purchased one-to-four family first mortgage loans that were on a nonaccrual
status.
Loans purchased by the Company entail certain risks not necessarily
associated with loans the Company originates. The Company's purchased loans are
generally acquired without recourse. $25.4 million, or 24.9%, of out of state
loans are serviced by the Bank. $76.3 million, or 75.1% of the out of state
loans are serviced by the originating financial institution or mortgage company.
Although the Company reviews each purchased loan using the Company's
underwriting criteria for originations and a Company officer or director
performs an on-site inspection of each purchased loan, the Company is dependent
on the servicer of the loan for ongoing collection efforts and collateral
review. In addition, the Company purchases loans with a variety of terms,
including maturities, interest rate caps and indices for adjustment of interest
rates that may differ from those offered at the time by the Company in
connection with loans the Company originates. Finally, the market areas in which
the properties which secure the purchased loans are located are subject to
economic and real estate market conditions that may significantly differ from
those experienced in the Company's market areas. If economic conditions continue
to limit the Company's opportunities to originate loans in its market areas, the
Company may increase its investment in out of state mortgage loans. There can be
no assurance, however, that economic conditions in these out of state areas will
not deteriorate in the future resulting in increased loan delinquencies and loan
losses among the loans secured by property in these areas.
-9-
In an effort to reduce the risk of loss on out of state purchased
loans, the Company only purchases loans that meet the underwriting policies for
loans originated by the Company although specific rates and terms may differ
from the rates and terms offered by the Company. The Company also requires
appropriate documentation, and personal inspections of the underlying real
estate collateral by an executive officer or director prior to purchase.
Set forth below is a table of the Company's purchased or out of state
originated loans by state of origin (including multifamily residential,
commercial real estate and one-to-four family first mortgage loans) as of
December 31, 2000.
Balance as of
State December 31, 2000
----- -----------------
(In thousands)
Arizona $ 695
California 16,370
Colorado 28,368
Florida 275
Georgia 48
Illinois 7
Indiana 802
Kansas 766
Michigan 11
Minnesota 772
Missouri 8,599
Montana 77
Nebraska 541
Nevada 640
New Mexico 7
North Carolina 653
North Dakota 61
Ohio 2,886
Oregon 1,880
South Carolina 117
Tennessee 189
Texas 1,393
Utah 1,157
Virginia 39
Washington 1,901
Wisconsin 33,442
------
Total $ 101,696
===========
-10-
Origination, Purchase and Sale of Loans. The table below shows the
Company's originations, purchases and sales of loans for the periods indicated.
For the Years Ended
December 31,
------------
2000 1999 1998
---- ---- ----
(In thousands)
Total loans receivable at beginning of period......... $ 291,760 $ 258,361 $ 194,626
----------- ----------- -----------
Originations:
First mortgage loans:
One-to-four family residential..................... 35,512 31,645 36,226
Multifamily........................................ -- 700 --
Commercial......................................... -- -- 1,100
Consumer loans:
Automobile......................................... 6,856 4,866 6,349
Second mortgage ................................... 21,500 12,321 14,493
Other ............................................. 2,853 1,778 2,595
----- ----- -----
Total originations:.............................. 66,721 51,310 60,763
Effect of Valley Financial Acquisition............. -- -- 58,911
Loan Purchases:
First mortgage-- one-to-four family................ 1,677 5,870 3,159
First mortgage-- multifamily....................... 10,449 23,332 21,315
First mortgage-- commercial........................ 7,499 11,142 --
Loan Sales:
First mortgage-- one-to-four family................ 818 475 4,517
Transfer of mortgage loans to (from)
foreclosed real estate............................. (166) 212 373
Repayments............................................ 55,046 57,567 75,523
------ ------ ------
Net loan activity..................................... 30,648 33,400 63,734
------ ------ ------
Total loans receivable at end of period.......... $ 322,408 $ 291,760 $ 258,361
=========== =========== ===========
Loan Origination Fees and Other Income. In addition to interest earned
on loans, the Company generally receives fees in connection with loan
originations. Such loan origination fees, net of costs to originate, are
deferred and amortized using an interest method over the contractual life of the
loan. Fees deferred are recognized into income immediately upon prepayment of
the related loan. At December 31, 2000, the Company had $23,000 of deferred loan
origination expenses, net. Such fees vary with the type of loans and commitments
made. The Company typically charges an document preparation fee on fixed- and
adjustable-rate first mortgage loans. In addition to loan origination fees, the
Company also receives other fees, service charges (such as overdraft fees), and
other income that consist primarily of deposit transaction account service
charges and late charges. The Company recognized fees and service charges of
$1.6 million, $1.5 million and $1.2 million for the fiscal years ended December
31, 2000, 1999 and 1998 respectively.
Investment Activities
At December 31, 2000, the Company's investment portfolio is comprised
of United States Government Agencies, Municipal Obligations, mortgage-backed
securities, interest-bearing deposits and equity securities consisting of FHLMC
preferred stocks, FNMA preferred stock, FHLB stock, other common and preferred
stocks. At December 31, 2000, $362,000, or 1.2%, of the Company's investment
portfolio, excluding equity securities, was scheduled to mature in one year or
less, and $17.0 million, or 56.9% was scheduled to mature within one to five
years.
The Company is required under federal regulations to maintain a minimum
amount of liquid assets that may be invested in specified short term securities
and certain other investments. The Company generally has maintained a portfolio
of liquid assets that exceeds regulatory requirements. Liquidity levels may be
increased or decreased depending upon the yields on investment alternatives and
upon management's judgment as to the attractiveness of the yields then available
in relation to other opportunities and its expectation of the level of yield
that will be available in the future, as well as
-11-
management's projections as to the short term demand for funds to be used in the
Company's loan origination and other activities. In addition, the Company's
liquidity levels are affected by the level and source of its borrowed funds.
Investment Portfolio. The following table sets forth the carrying value
of the Company's investment portfolio at the dates indicated.
At December 31,
---------------
2000 1999 1998
---- ---- ----
(In thousands)
Investment securities:
U.S. Treasury Notes.................. $ -- $ 4,260 $ 9,410
U.S. Government agencies (1).......... 17,278 18,799 18,884
Mortgage-backed securities............ 8,183 9,955 7,508
State and Local Obligations (1)....... 4,473 4,772 4,378
FHLB stock............................ 4,429 3,035 2,379
Equity securities..................... 8,989 8,872 7,323
----- ----- -----
Total investment securities......... 43,352 49,693 49,882
Interest-earning deposits............. 6,331 4,127 13,201
----- ----- ------
Total investments................... $ 49,683 $ 53,820 $ 63,083
=========== =========== ===========
(1) Certain securities have call features which allows the issuer to call the
security prior to maturity date.
-12-
Investment Portfolio Maturities. The following table sets forth the
scheduled maturities, carrying values, market values and weighted average yields
for the Company's investment portfolio at December 31, 2000.
At December 31, 2000
--------------------
One Year or Less One to Five Years Five to Ten Years
---------------- ----------------- -----------------
Annualized Annualized Annualized
Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- -----
Investment securities:
U.S. Government agencies(1) .. $ -- --% $16,091 5.92% $ 1,187 7.09%
Mortgage-backed securities ... -- -- 1,561 5.51 1,950 5.76
State and Local Obligations(1) 362 4.35 937 4.09 2,609 4.78
FHLB Stock ................... -- -- -- -- -- --
Common and Preferred Stock ... -- -- -- -- -- --
Preferred Stock-FNMA ......... -- -- -- -- -- --
Preferred Stock-FHLMC ........ -- -- -- -- -- --
------ ----- ------- ----- ----- ----
Total ...................... $ 362 4.35% $18,589 5.79% $5,746 5.59%
Interest-bearing deposits
at the FHLB .................. 6,330 6.10 -- -- -- --
----- ----- ------ ----- ----- -----
Total investments .......... $ 6,692 6.01% $18,589 5.79% $ 5,746 5.59%
======= ==== ======= ==== ======= ====
At December 31, 2000
--------------------
Over Ten Years Total
-------------- -----
Annualized Annualized
Weighted Average Weighted
Carrying Average Carrying Market Life in Average
Value Yield Value Value Years Yield
----- ----- ----- ----- ----- -----
(Dollars in thousands)
Investment securities:
U.S. Government agencies(1) .. $ -- --% $17,278 $17,278 4 5.99%
Mortgage-backed securities ... 4,672 6.16 8,183 8,183 4 5.94
State and Local Obligations(1) 565 5.20 4,473 4,473 4 4.65
FHLB Stock ................... -- -- 4,429 4,429 7.10
Common and Preferred Stock ... -- -- 464 464 4.78
Preferred Stock-FNMA ......... -- -- 5,130 5,130 6.48
Preferred Stock-FHLMC ........ -- -- 3,395 3,395 5.73
----- ---- ----- ----- ----
Total ...................... $ 5,237 6.06% $43,352 $43,352 5.98%
Interest-bearing deposits
at the FHLB .................. -- -- 6,330 6,330 6.10
----- ----- ----- ----- ----
Total investments .......... $ 5,237 6.06% $49,682 $49,682 5.99%
======= ==== ======= ======= ====
(1) Certain securities have call features which allows the issuer to call the
security prior to maturity date.
-13-
Sources of Funds
General. Deposits are the major source of the Company's funds for
lending and other investment purposes. In addition to deposits, the Company
derives funds from FHLB advances, the amortization and prepayment of loans, the
maturity of investment securities and operations. Scheduled loan principal
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are influenced significantly by general interest
rates and market conditions. The Company may use borrowings on a short-term
basis to compensate for reductions in the availability of funds from other
sources or on a longer term basis for general business purposes.
Deposits. During 2000, consumer and commercial deposits were attracted
principally from within the Company's market area through the offering of a
broad selection of deposit instruments including NOW accounts, savings accounts,
money market savings, certificates of deposit and individual retirement
accounts. The Company also offers these products in its new market area which it
now serves as a result of the Acquisition. See "Acquisition of Valley Financial
Corp." Deposit account terms vary according to the minimum balance required, the
period of time during which the funds must remain on deposit, and the interest
rate, among other factors. The maximum rate of interest which the Company may
pay is not established by regulatory authority. The Company regularly evaluates
its internal cost of funds, surveys rates offered by competing institutions,
reviews the Company's cash flow requirements for lending and liquidity, and
executes rate changes when deemed appropriate. During 1999 and 2000, the Company
became a more active bidder for public funds in the state of Iowa. As a result,
public fund deposits totalled $15.8 million at December 31, 2000. The Company
does not obtain retail funds through brokers through a solicitation of funds,
nor by offering negotiated rates on certificates of deposit in excess of
$100,000.
Deposit Portfolio. Deposits with the Company as of December 31, 2000,
were represented by the various types of deposit programs described below.
Weighted Percentage
Average Checking and Minimum of Total
Interest Rate Original Term Savings Deposits Balance Balances Deposits
- ------------- ------------- ---------------- ------- -------- --------
(Dollars in
thousands)
0.00% None Noninterest-bearing demand $ 50 $ 6,071 2.32%
1.25 None NOW accounts 50 30,225 11.57
1.83 None Savings accounts 25 21,724 8.32
4.92 None Money Market savings 2,500 24,519 9.39
Certificates of Deposit
-----------------------
6.43 1-3 months Fixed term, fixed rate $1,000 $ 2,114 0.81
4.63 4-6 months Fixed term, fixed rate 1,000 2,012 0.77
6.83 7-9 months Fixed term, fixed rate 1,000 11,330 4.34
5.99 10-12 months Fixed term, fixed rate 1,000 20,360 7.80
6.01 13-24 months Fixed term, fixed rate 1,000 64,793 24.82
5.81 25-36 months Fixed term, fixed rate 1,000 27,982 10.71
6.45 37-48 months Fixed term, fixed rate 1,000 3,454 1.32
6.03 49-60 months Fixed term, fixed rate 1,000 45,628 17.47
6.30 61 months or greater Fixed term, fixed rate 1,000 817 0.31
4.75 Various Variable rate 100 138 0.05
------- ------
Total certificates of deposit $261,167 100.00%
======== ======
-14-
The following table sets forth the change in dollar amount of deposits
in the various types of deposit accounts offered by the Company between the
dates indicated.
Increase Increase Increase Increase
Balance (Decrease) (Decrease) Balance (Decrease) (Decrease) Balance
12/31/00 % $ 12/31/99 % $ 12/31/98
-------------------------------------------------------------------------------------------------
(Dollars in thousands)
Noninterest bearing demand.... $ 6,071 (5.32)% $ (341) $ 6,412 17.48% $ 954 $ 5,458
NOW........................... 30,225 0.43 129 30,096 2.63 (813) 30,909
Savings account .............. 21,724 (15.90) (4,106) 25,830 1.03 (269) 26,099
Money market savings.......... 24,519 40.40 7,055 17,464 11.92 (2,364) 19,828
Certificates of deposit
that mature:
within 12 months.......... 93,172 (20.71) (24,343) 117,515 44.55 36,220 81,295
within 12-36 months....... 61,972 17.58 9,265 52,707 18.86 (12,255) 64,962
beyond 36 months.......... 23,484 11.78 2,477 21,007 15.81 2,868 18,139
------ ----- ----- ------ ----- ----- ------
Total................... $ 261,167 (3.64)% $ (9,864) $ 271,031 9.87% $ 24,341 $246,690
========= ===== ========= ========== ====== ======== ========
Increase Increase Increase Increase
Balance (Decrease) (Decrease) Balance (Decrease) (Decrease) Balance
12/31/98 % $ 12/31/97 % $ 12/31/96
-------------------------------------------------------------------------------------------------
(Dollars in thousands)
Noninterest bearing demand.. $ 5,458 73.55% $ 2,313 $ 3,145 38.24% $ 870 $ 2,275
NOW......................... 30,909 113.80 16,452 14,457 22.27 2,633 11,824
Passbook savings............ 26,099 52.45 8,979 17,120 (3.58) (636) 17,756
Money market savings........ 19,828 121.34 10,870 8,958 23.05 1,678 7,280
Certificates of deposit
that mature:
within 12 months........ 81,295 99.44 40,533 40,762 10.25 3,790 36,972
within 12-36 months..... 64,962 53.20 22,558 42,404 33.24 10,578 31,826
beyond 36 months........ 18,139 27.04 3,861 14,278 (34.47) (7,511) 21,789
-- ------ ----- ----- ------ ------ ------ ------
Total................ $ 246,690 $ 74.80% $ 105,566 $ 141,124 8.79% $ 11,402 $129,722
========== ======== ========== ========== ====== ========= ========
-15-
The following table sets forth the certificates of deposit in the
Company classified by rates as of the dates indicated:
At December 31,
------------------------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands)
Rate
- ----
3.99% or less......... $ 24 $ 688 $ 232
4.00-5.99%............ 78,138 154,231 110,152
6.00-7.99%............ 100,455 36,300 53,829
8.00% or greater...... 11 10 183
------- ------- -------
$ 178,628 $ 191,229 $ 164,396
=========== =========== ===========
The following table sets forth the amount and maturities of
certificates of deposit at December 31, 2000.
Amount Due
--------------------------------------------------------------------------------------
Less
Than 1 1-2 2-3 3-4 4-5 After 5
Year Years Years Years Years Years Total
---- ----- ----- ----- ----- ----- -----
(In thousands)
Rate
- ----
3.99% or less...... $ 24 $ -- $ -- $ -- $ -- $ -- $ 24
4.00-5.99% 46,225 11,553 9,270 8,227 2,861 2 78,138
6.00-7.99%......... 46,923 31,946 9,192 2,190 9,996 208 100,455
8.00% or greater... -- 11 -- -- -- -- 11
- ---- ------ ------ ------ ------ ------ ------ -------
$ 93,172 $ 43,510 $ 18,462 $ 10,417 $ 12,857 $ 210 $ 178,628
======== ======== ======== ======== ======== ======== =========
The following table indicates the amount of the Company's certificates
of deposit of $100,000 or more by time remaining until maturity at December 31,
2000. This amount does not include savings accounts of greater than $100,000,
which totalled approximately $697,000 at December 31, 2000.
Certificates
of Deposit over
Remaining Maturity $100,000
- ------------------------------------------------- ---------------
(In thousands)
Three months or less............................. $ 6,955
Three through six months......................... 4,944
Six through twelve months........................ 7,995
Over twelve months............................... 10,437
------
Total.......................................... $ 30,331
=========
-16-
The following table sets forth the savings activities of the Company
for the periods indicated:
Year Ended December 31,
----------------------------------------------------
2000 1999 1998
---- ---- ----
(In thousands)
Net increase (decrease) before interest
credited and deposits acquired......... $ (18,730) $ 15,582 $ (2,943)
Effect of Valley Financial Acquisition..... -- -- 99,269
Interest credited.......................... 8,866 8,758 9,240
----- ----- -----
Net increase (decrease) in deposits.... $ (9,864) $ 24,340 $ 105,566
========== ========== ==========
Borrowings
Deposits are the Company's primary source of funds. The Company may
also obtain funds from the FHLB. FHLB advances are collateralized by selected
assets of the Company. Such advances are made pursuant to several different
credit programs, each of which has its own interest rate and range of
maturities. The maximum amount that the FHLB will advance to member
institutions, including the Bank, for purposes other than meeting withdrawals,
fluctuates from time to time in accordance with the policies of the OTS and the
FHLB. The maximum amount of FHLB advances to a member institution generally is
reduced by borrowings from any other source.
In conjunction with the Bank's conversion from mutual to stock form in
1994, the Bank established an Employee Stock Ownership Plan (the "ESOP") for
eligible employees. The ESOP borrowed $960,000 from an unrelated third party
lender to finance the purchase of 104,075 shares of the Bank's common stock.
Collateral for such loan consisted of the common stock held by the ESOP. The
term of the loan was 10 years. The ESOP also borrowed funds in the amount of
$840,000 from the Holding Company to purchase 84,000 shares of the Holding
Company's Common Stock issued in the reorganization of the Bank and the MHC to
the stock holding company form in 1996. In September 1996, these two loans were
consolidated into a single loan from the Holding Company to the ESOP.
For the
Year Ended December 31,
---------------------------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in thousands)
Weighted average rate paid on: (1)
FHLB advances.................. 6.20% 5.62% 5.81%
FHLB advances:
Maximum balance................ $ 88,572 $ 60,691 $ 42,550
Average balance................ 71,570 43,711 33,980
Weighted average rate paid on:
Other borrowings............... 1.00% 1.00% 1.00%
Other borrowings:
Maximum balance................ $ 34 $ 38 $ 42
Average balance................ 32 36 40
(1) Calculated using monthly weighted average interest rates.
Title Abstract Business
A component of the Company's operating strategy is to increase
non-interest income, primarily through the expansion of the abstract company
business conducted through a wholly owned subsidiary, First Iowa Title Services
Inc. ("First Iowa"). First Iowa currently provides real estate title abstracting
services in Webster, Boone and Jasper counties. These services include
researching recorded documents at the county courthouse and providing a history
-17-
of those documents as they pertain to specific parcels of real estate. This
information is used to determine who owns specific parcels of real estate and
what encumbrances are on those specific parcels. The abstract business performed
by First Iowa replaces a significant portion of the function of a title
insurance company. Iowa law prohibits Iowa insurance companies or companies
authorized to do business in Iowa from issuing title insurance or insurance
against loss or damage by reason of defective title, encumbrance or otherwise.
Institutions can purchase title insurance, for their own protection or to sell
loans on the secondary market, but the cost of this insurance may not be passed
on to the borrower. First Iowa had 15 employees as of December 31, 2000.
Insurance and Annuity Business
The Company has another wholly-owned subsidiary, First Federal
Investment Services, Inc. (formerly known as First Financial Service
Corporation) ("First Federal Investments"), which the Company began in 1971.
First Federal Investments activities include the sale of life insurance on
mortgage loans, and credit life and accident and health insurance on consumer
loans made by the Company. In addition, First Federal Investments sells life
insurance annuity products and mutual funds. In connection with the Acquisition,
the Bank acquired Valley Services, Inc., which was merged into First Federal
Investments. First Federal Investments has no employees. The subsidiary has
executed a management agreement with the Company which provides its management
and staff.
Mortgage Company Business
First Iowa Mortgage, Inc. was acquired as a part of the Acquisition of
Valley Financial and is a wholly-owned subsidiary of the Bank. First Iowa
Mortgage, Inc. originates first mortgage loans and subsequently sells these
loans and the mortgage servicing rights to investors. First Iowa Mortgage, Inc.
currently operates in the Bank's office in Ames, Iowa. First Iowa Mortgage, Inc.
had 3 employees at December 31, 2000.
Multifamily Apartment Building
On July 13, 1995, the Company formed the Northridge Apartments Limited
Partnership with the Fort Dodge Housing Corporation ("FDHC"), a non-profit Iowa
corporation formed to acquire, develop and manage low-and moderate- income
housing for residents of the Fort Dodge area. The FDHC is controlled by the Fort
Dodge Municipal Housing Agency, an agency chartered by the City of Fort Dodge.
The Northridge Partnership is a low-income housing tax credit project for
certain federal tax purposes. A 44-unit apartment complex was completed on
February 1, 1997. The tax credits for the year ended December 31, 2000 are
approximately $154,000. The tax credits will continue for a six-year period.
Personnel
At December 31, 2000, the Company had 103 full-time and 28 part-time
employees (including the 15 employees of First Iowa and the 3 employees at First
Iowa Mortgage, Inc.). None of the Company's employees is represented by a
collective bargaining group. The Company believes its relationship with its
employees to be good.
-18-
FEDERAL AND STATE TAXATION
Federal Taxation
General. The following is a general discussion of material tax matters
and does not purport to be a comprehensive description of the tax rules
applicable to the Holding Company or the Bank. The Bank has not been audited in
the last five years. For federal income tax purposes, the Holding Company and
the Bank will be eligible to file consolidated income tax returns and report
their income on a calendar year basis using the accrual method of accounting and
will be subject to federal income taxation in the same manner as other
corporations with some exceptions, including particularly the Bank's tax reserve
for bad debts, discussed below.
Bad Debt Reserves. The Bank, as a "small bank" (one with assets having
an adjusted tax basis of $500 million or less) is permitted to maintain a
reserve for bad debts with respect to "qualifying loans," which, in general, are
loans secured by certain interests in real property, and to make, within
specified formula limits, annual additions to the reserve which are deductible
for purposes of computing the Bank's taxable income. Pursuant to the Small
Business Job Protection Act of 1996, the Bank is now recapturing (taking into
income) over a multi-year period a portion of the balance of its bad debt
reserve as of December 31, 1995.
Distributions. To the extent that the Company makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Company's "base year reserve", i.e. its reserve as of
December 31, 1987, to the extent thereof and then from its supplemental reserve
for losses on loans, and an amount based on the amount distributed will be
included in the Company's taxable income. Nondividend distributions include
distributions in excess of the Company's current and accumulated earnings and
profits, distributions in redemption of stock and distributions in partial or
complete liquidation. However, dividends paid out of the Company's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will not constitute nondividend distributions and, therefore, will not be
included in the Company's income.
The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate.
Corporate Alternative Maximum Tax. The Internal Revenue Code (the
"Code") imposes a tax on alternative minimum taxable income ("AMTI") at a rate
of 20%. Only 90% of AMTI can be offset by net operating losses. AMTI is also
adjusted by determining the tax treatment of certain items in a manner that
negates the deferral of income resulting from the regular tax treatment of those
items. Thus, the Company's AMTI is increased by an amount equal to 75% of the
amount by which the Company's adjusted current earnings exceeds its AMTI
(determined without regard to this adjustment and prior to reduction for net
operating losses). The Company does not expect to be subject to the AMT.
Dividends-Received Deduction. The Holding Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Bank will not file a consolidated tax
return, except that if the Holding Company or the Bank owns more than 20% of the
stock of a corporation distributing a dividend, then 80% of any dividends
received may be deducted.
State and Local Taxation
Iowa Taxation. The Holding Company and the Bank's subsidiaries will
file Iowa corporation tax returns and the Bank will file an Iowa franchise tax
return. The Bank currently files an Iowa franchise tax return, and the Holding
Company and the Bank's subsidiaries file Iowa corporation tax returns, on a
calendar year basis.
The State of Iowa imposes a tax on the Iowa franchise taxable income of
thrift institutions at the rate of 5%. Iowa franchise taxable income is
generally similar to federal taxable income except that interest from state and
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municipal obligations is taxable, and no deduction is allowed for state
franchise taxes. The net operating loss carryback and carryforward rules are
similar to the federal rules.
The state corporation income tax rate ranges from 6% to 12% depending
upon Iowa corporation taxable income. Interest from federal securities is not
deductible for purposes of the Iowa corporation income tax.
REGULATION
General
The Bank is a federal savings bank subject to the regulation,
examination and supervision by the OTS and is subject to the examination and
supervision of the Federal Deposit Insurance Corporation ("FDIC") as its deposit
insurer. The Bank is a member of the SAIF, and its deposit accounts are insured
up to applicable limits by the FDIC. All of the deposit premiums paid by the
Bank to the FDIC for deposit insurance are currently paid to the SAIF. The Bank
is also a member of the FHLB of Des Moines, which is one of the 12 regional
FHLBs. The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition, and it must obtain regulatory approvals
prior to entering into certain transactions, such as mergers with, or
acquisitions of, other depository institutions. The OTS and the FDIC conduct
periodic examinations to assess the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings association can engage and is
intended primarily for the protection of the insurance fund and depositors. The
Holding Company, as a savings and loan holding company, files certain reports
with, and otherwise complies with, the rules and regulations of the OTS and of
the SEC under the federal securities laws.
The OTS and the FDIC have significant discretion in connection with
their supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in such
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Bank, and their operations and stockholders.
On November 12, 1999, President Clinton signed into law landmark
financial services legislation, titled the Gramm-Leach-Bliley Act ("GLB Act").
The GLB Act repeals depression-era laws restricting affiliations among banks,
securities firms, insurance companies and other financial services providers.
The impact of the GLB Act on the Company and the Bank, where relevant, is
discussed throughout the regulation section below.
The following discussion is intended to be a summary of the material
statutes and regulations applicable to savings associations and their holding
companies, and it does not purport to be a comprehensive description of all such
statutes and regulations.
Regulation of Savings and Loan Holding Companies
The Holding Company is a savings and loan holding company and is
subject to OTS regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority over the Holding
Company and any of its non-savings association subsidiaries. Among other things,
this authority permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the financial safety, soundness or stability
of a subsidiary savings association.
The Home Owner and Loan Act ("HOLA"), as amended, prohibits a savings
and loan holding company, directly or indirectly, or through one or more
subsidiaries, from acquiring another savings association or holding company
thereof, without prior written approval of the OTS; acquiring or retaining, with
certain exceptions, more than 5.0% of a non-subsidiary savings association, a
non-subsidiary holding company or a non-subsidiary company engaged in activities
other than those permitted by HOLA; or acquiring or retaining control of a
depository institution that is not insured by the FDIC. In evaluating an
application by a holding company to acquire a savings association, the OTS must
consider the financial and managerial resources and future prospects of the
company and savings association involved, the effect of the acquisition on the
risk to the insurance funds, the convenience and needs of the community and
competitive factors.
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As a unitary savings and loan holding company, the Company generally is
not restricted under existing laws as to the types of business activities in
which it may engage, provided that the Bank continues to satisfy the QTL test.
See "-- Regulation of Federal Savings Associations -- QTL Test" for a discussion
of the QTL requirements.
In addition, for grandfathered savings and loans companies (such as the
Company), the GLB Act prohibits the sale of such entities to nonfinancial
companies. This prohibition is intended to restrict the transfer of
grandfathered rights to other entities and, thereby, prevent evasion of the
limitation on the creation of new unitary savings and loan holding companies.
The Company believes that the GLB Act will not have a material
adverse effect on its operations in the near-term. However, to the extent that
it permits banks, securities firms and insurance companies to affiliate, the
financial services industry may experience further consolidation. This could
result in a growing number of larger financial institutions that offer a wider
variety of financial services than the Company currently offers and that can
aggressively compete in the markets that the Company currently serves.
Upon any nonsupervisory acquisition by the Company of another savings
association or savings bank that meets the QTL test and is deemed to be a
savings association by the OTS and that will be held as a separate subsidiary,
the Holding Company would become a multiple savings and loan holding company and
would be subject to limitations on the types of business activities in which it
could engage. HOLA limits the activities of a multiple savings and loan holding
company and its non-insured association subsidiaries primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act (the "BHC Act"), subject to the prior approval of the OTS, and to
other activities authorized by OTS regulation.
The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings associations
in more than one state, subject to two exceptions: an acquisition of a savings
association in another state (i) in a supervisory transaction, and (ii) pursuant
to authority under the laws of the state of the association to be acquired that
specifically permit such acquisitions. The conditions imposed upon interstate
acquisitions by those states that have enacted authorizing legislation vary.
Some states impose conditions of reciprocity, which have the effect of requiring
that the laws of both the state in which the acquiring holding company is
located (as determined by the location of its subsidiary savings association)
and the state in which the association to be acquired is located, have each
enacted legislation allowing its savings associations to be acquired by
out-of-state holding companies on the condition that the laws of the other state
authorize such transactions on terms no more restrictive than those imposed on
the acquiror by the state of the target association. Some of these states also
impose regional limitations, which restrict such acquisitions to states within a
defined geographic region. Other states allow full nationwide banking without
any condition of reciprocity. Some states do not authorize interstate
acquisitions of savings associations.
Transactions between the Bank and the Holding Company and its other
subsidiaries are subject to various conditions and limitations. See "--
Regulation of Federal Savings Associations -- Transactions with Related
Parties." The Bank must give 30-days written notice to the OTS prior to any
declaration of the payment of any dividends or other capital distributions to
the Holding Company. See "-- Regulation of Federal Savings Associations --
Limitation on Capital Distributions."
Federal Securities Laws
The Company's common stock is registered with the SEC under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company is subject to information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.
Regulation of Federal Savings Associations
Business Activities. The Bank derives its lending and investment powers
from the HOLA and the regulations of the OTS thereunder. Under these laws and
regulations, the Bank may invest in mortgage loans secured by residential and
commercial real estate, commercial and consumer loans, certain types of debt
securities, and certain other assets. The Bank may also establish service
corporations that may engage in activities not otherwise permissible for the
Bank, including certain real estate equity investments and securities and
insurance brokerage. These investment powers are subject to
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various limitations, including: (i) a prohibition against the acquisition of any
corporate debt security that is not rated in one of the four highest rating
categories; (ii) a limit of 400% of an association's capital on the aggregate
amount of loans secured by nonresidential real estate property; (iii) a limit of
20% of an association's assets on commercial loans with the amount of commercial
loans in excess of 10% of assets being limited to small business loans; (iv) a
limit of 35% of an association's assets on the aggregate amount of consumer
loans and acquisitions of certain debt securities; (v) a limit of 5.0% of assets
on non-conforming loans (loans in excess of the specific limitations of HOLA);
and (vi) a limit of the greater of 5.0% of assets or an association's capital on
certain construction loans made for the purpose of financing what is or is
expected to become residential property.
Loans to One Borrower. Under HOLA, savings associations are generally
subject to the same limits on loans to one borrower as are imposed on national
banks. Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of
the association's unimpaired capital and surplus. Additional amounts may be
lent, in the aggregate not exceeding 10% of unimpaired capital and surplus, if
any such loan or extension of credit is fully secured by readily-marketable
collateral. Such collateral is defined to include certain debt and equity
securities and bullion, but generally does not include real estate. For the year
ended December 31, 2000, the Bank imposed a $2.5 million limit on the aggregate
size of loans to any one borrower. Any exception to the limit must be
specifically approved by the Board of Directors on a loan-by-loan basis within
the Bank's legal lending limit. At December 31, 2000, the Bank's largest
aggregate amount of loans to one borrower was $2.5 million, and the second
largest borrower had an aggregate balance of $2.0 million. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
QTL Test. HOLA requires a savings association to meet a QTL test. Under
the QTL test, a savings association is required to maintain at least 65% of its
"portfolio assets" in certain "qualified thrift investments" in at least 9
months of the most recent 12-month period. "Portfolio assets" means, in general,
an association's total assets less the sum of (i) specified liquid assets up to
20% of total assets, (ii) goodwill and other intangible assets, and (iii) the
value of property used to conduct the association's business. "Qualified thrift
investments" includes various types of loans made for residential and housing
purposes, investments related to such purposes, including certain
mortgage-backed and related securities, and loans for personal, family,
household and certain other purposes up to a limit of 20% of an association's
portfolio assets. Recent legislation broadened the scope of "qualified thrift
investments" to include 100% of an institution's credit card loans, education
loans, and small business loans. A savings association may also satisfy the QTL
test by qualifying as a "domestic building and loan association" as defined in
the Internal Revenue Code of 1986. At December 31, 2000, the Bank maintained
90.9% of its portfolio assets in qualified thrift investments, and it had more
than 65% of its portfolio assets in qualified thrift investments in the
requisite number of the prior 12 months. A savings association that fails the
QTL test must either operate under certain restrictions on its activities or
convert to a bank charter.
Capital Requirements. The OTS regulations require savings associations
to meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted under the OTS regulations, a leverage ratio
requirement of 3.0% of core capital to such adjusted total assets, if a savings
association has been assigned the highest composite rating of 1 under the
Uniform Financial Institutions Rating System, and a risk-based capital ratio
requirement of 8.0% of core and supplementary capital to total risk-based
assets. The minimum leverage capital ratio for any other depository institution
that does not have a composite rating of 1 will be 4%, unless a higher leverage
capital ratio is warranted by the particular circumstances or risk profile of
the depository institution. In determining the amount of risk-weighted assets
for purposes of the risk-based capital requirement, a savings association must
compute its risk-based assets by multiplying its assets and certain off-balance
sheet items by risk-weights, which range from 0% for cash and obligations issued
by the United States Government or its agencies to 100% for consumer and
commercial loans, as assigned by the OTS capital regulation based on the risks
found by the OTS to be inherent in the type of asset.
Tangible capital is defined, generally, as common stockholder's equity
(including retained earnings), certain noncumulative perpetual preferred stock
and related earnings, minority interests in equity accounts of fully
consolidated subsidiaries, less intangibles other than certain mortgage
servicing rights and investments in and loans to subsidiaries engaged in
activities not permissible for a national bank. Core capital is defined
similarly to tangible capital, but core capital also includes certain qualifying
supervisory goodwill and certain purchased credit card relationships.
Supplementary capital currently includes cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses.
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The allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital cannot exceed the
amount of core capital.
The OTS and the other federal banking agencies are required to take
into account interest rate risk ("IRR") in their risk-based capital standards.
The OTS adopted regulations, effective January 1, 1994, that set forth the
methodology for calculating an IRR component to be incorporated into the OTS
risk-based capital regulations. The OTS has indefinitely deferred the
implementation of the IRR component in the computation of an institution's
risk-based capital requirement. The OTS continues to monitor the IRR of
individual institutions and retains the right to impose additional capital on
individual institutions. At December 31, 2000, the Bank was not required to
maintain any additional risk-based capital under this regulation.
At December 31, 2000, the Bank met each of its capital requirements, in
each case on a fully phased-in basis. The table below presents the Bank's
regulatory capital as compared to the OTS regulatory capital requirements at
December 31, 2000:
Capital
Bank Requirements Excess Capital
------ ------------ --------------
(In thousands)
Tangible capital............................. $ 28,456 $ 5,732 $ 22,724
Core capital................................. 28,456 11,464 16,992
Risk-based capital........................... 31,241 17,830 13,411
A reconciliation between regulatory capital and GAAP capital at
December 31, 2000 in the accompanying financial statements is presented below:
Tangible Capital Core Capital Risk-based Capital
---------------- ------------ ------------------
(In thousands)
GAAP capital................................... $ 34,649 $ 34,649 $ 34,649
Intangible assets.............................. (6,368) (6,368) (6,368)
Unrealized loss on certain available for sale
assets....................................... 175 175 175
Allowance for loan losses includable
in supplementary capital..................... -- -- 2,785
-------- -------- --------
Regulatory capital............................. $ 28,456 $ 28,456 $ 31,241
======== ======== ========
Limitation on Capital Distributions. Under OTS capital distribution
regulations, certain savings associations are permitted to pay capital
distributions during a calendar year that do not exceed the association's net
income for that year plus its retained net income for the prior two years,
without notice to, or the approval of, the OTS. However, a savings association
subsidiary of a savings and loan holding company, such as the Bank, will
continue to have to file a notice unless the specific capital distribution
requires an application. In addition, the OTS can prohibit a proposed capital
distribution, otherwise permissible under the regulation, if the OTS has
determined that the association is in need of more than normal supervision or if
it determines that a proposed distribution by an association would constitute an
unsafe or unsound practice. Furthermore, under the OTS prompt corrective action
regulations, the Bank would be prohibited from making any capital distribution
if, after the distribution, the Bank failed to meet its minimum capital
requirements, as described below. See "Prompt Corrective Regulatory Action."
Liquidity. 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 December 31, 2000, the
Bank's liquidity position was $26.0 million or 8.27% of liquid assets, compared
to $31.7 million or 10.84% at December 31, 1999.
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Assessments. Savings associations are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS. The general
assessment, paid on a semi-annual basis, is computed by totaling three
components: the size of the association, on which the basic assessment would be
based; the association's supervisory condition, which would result in an
additional assessment based of a percentage of the basic assessment for any
savings institution with a composite rating of 3, 4 or 5 in its most recent
safety and soundness examination; and the complexity of the association's
operations, which would result in an additional assessment based of a percentage
of the basic assessment for any savings association that managed over $1 billion
in trust assets, serviced for others loans aggregating more than $1 billion, or
had certain off-balance sheet assets aggregating more than $1 billion. In order
to avoid a disproportionate impact on the smaller savings institutions, which
are those whose total assets never exceeded $100 million, the new regulations
provide that the portion of the assessment based on assets size will be lesser
of the assessment under the amended regulations or the regulations before the
amendment.
Branching. Subject to certain limitations, HOLA and the OTS regulations
permit federally chartered savings associations to establish branches in any
state of the United States. The authority to establish such a branch is
available (i) in states that expressly authorize branches of savings
associations located in another state and (ii) to an association that qualifies
as a "domestic building and loan association" under the Code, which imposes
qualification requirements similar to those for a "qualified thrift lender"
under HOLA. See "-- QTL Test." The authority for a federal savings association
to establish an interstate branch network would facilitate a geographic
diversification of the association's activities. This authority under HOLA and
the OTS regulations preempts any state law purporting to regulate branching by
federal savings associations.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"),
as implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OTS, in connection with its examination of a savings association,
to assess the association's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such association. The CRA also requires all institutions to make public
disclosure of their CRA ratings. The Bank received an "Outstanding" CRA rating
in its most recent examination.
The CRA regulations establish an assessment system that bases an
associations rating on its actual performance in meeting community needs. In
particular, the assessment system focuses on three tests: (a) a lending test, to
evaluate the institution's record of making loans in its assessment areas; (b)
an investment test, to evaluate the institution's record of investing in
community development projects, affordable housing, and programs benefitting low
or moderate income individuals and businesses; and (c) a service test, to
evaluate the institution's delivery of services through its branches, ATMs and
other offices.
Transactions with Related Parties. The Bank's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act ("FRA"). In general, an
affiliate of the Bank is any company that controls the Bank or any other company
that is controlled by a company that controls the Bank, excluding the Bank's
subsidiaries other than those that are insured depository institutions. The OTS
regulations prohibit a savings association (i) from lending to any of its
affiliates that is engaged in activities that are not permissible for bank
holding companies under Section 4(c) of the BHC Act and (ii) from purchasing the
securities of any affiliate other than a subsidiary. Section 23A limits the
aggregate amount of transactions with any individual affiliate to 10% of the
capital and surplus of the savings association and also limits the aggregate
amount of transactions with all affiliates to 20% of the savings association's
capital and surplus. Extensions of credit to affiliates are required to be
secured by collateral in an amount and of a type described in Section 23A, and
the purchase of low quality assets from affiliates is generally prohibited.
Section 23B provides that certain transactions with affiliates, including loans
and asset purchases, must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the
association as those prevailing at the time for comparable transactions with
nonaffiliated companies. In the absence of comparable transactions, such
transactions may only occur under terms and circumstances, including credit
standards, that in good faith would be offered to or would apply to
nonaffiliated companies.
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The Bank's authority to extend credit to its directors, executive
officers and 10% stockholders, as well as to entities controlled by such
persons, is currently governed by the requirements of Sections 22(g) and 22(h)
of the FRA and Regulation O of the Federal Reserve Board (the "FRB") thereunder.
Among other things, these provisions require that extensions of credit to
insiders (i) be made on terms that are substantially the same as, and follow
credit underwriting procedures that are not less stringent than, those
prevailing for comparable transactions with unaffiliated persons and that do not
involve more than the normal risk of repayment or present other unfavorable
features and (ii) not exceed certain limitations on the amount of credit
extended to such persons, individually and in the aggregate, which limits are
based, in part, on the amount of the association's capital. In addition,
extensions of credit in excess of certain limits must be approved by the
association's board of directors.
Enforcement. Under the Federal Deposit Insurance Act (the "FDI Act"),
the OTS has primary enforcement responsibility over savings associations and has
the authority to bring enforcement action against all "institution-affiliated
parties," including any controlling stockholder or any stockholder, attorney,
appraiser and accountant who knowingly or recklessly participates in any
violation of applicable law or regulation or breach of fiduciary duty or certain
other wrongful actions that causes or is likely to cause a more than a minimal
loss or other significant adverse effect on an insured savings association.
Civil penalties cover a wide range of violations and actions and range from
$5,000 for each day during which violations of law, regulations, orders and
certain written agreements and conditions continue, up to $1,000,000 per day for
such violations if the person obtained a substantial pecuniary gain as a result
of such violation or knowingly or recklessly caused a substantial loss to the
institution. Criminal penalties for certain financial institution crimes include
fines of up to $10 million and imprisonment for up to 30 years. In addition,
regulators have substantial discretion to take enforcement action against an
institution that fails to comply with its regulatory requirements, particularly
with respect to its capital requirements. Possible enforcement actions range
from the imposition of a capital plan and capital directive to receivership,
conservatorship or the termination of deposit insurance. Under the FDI Act, the
FDIC has the authority to recommend to the Director of OTS that enforcement
action be taken with respect to a particular savings association. If action is
not taken by the Director of the OTS, the FDIC has authority to take such action
under certain circumstances.
Standards for Safety and Soundness. Pursuant to the FDI Act, as amended
by Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
the Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Community Development Act"), the OTS and the federal bank regulatory agencies
adopted, effective August 9, 1995, a set of guidelines prescribing safety and
soundness standards. The guidelines establish general standards relating to
internal controls and information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth, asset
quality, earnings, and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal stockholder. In addition, the OTS adopted regulations that
authorize, but do not require, the OTS to order an institution that has been
given notice by the OTS that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so notified, an
institution fails to submit an acceptable compliance plan or fails in any
material respect to implement an accepted compliance plan, the OTS must issue an
order directing action to correct the deficiency and may issue an order
directing other actions of the types to which an undercapitalized association is
subject under the "prompt corrective action" provisions of FDICIA. See "--
Prompt Corrective Regulatory Action." If an institution fails to comply with
such an order, the OTS may seek to enforce such order in judicial proceedings
and to impose civil money penalties.
Real Estate Lending Standards. The OTS and the other federal banking
agencies adopted regulations to prescribe standards for extensions of credit
that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction of improvements on real estate. The OTS regulations
require each savings association to establish and maintain written internal real
estate lending standards that are consistent with safe and sound banking
practices and appropriate to the size of the association and the nature and
scope of its real estate lending activities. The standards also must be
consistent with accompanying OTS guidelines, which include loan-to-value ratios
for the different types of real estate loans. Associations are also permitted to
make a limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified appropriately.
The guidelines also list a number of lending situations in which exceptions to
the loan-to-value standards are justified.
-25-
Prompt Corrective Regulatory Action. FDICIA establishes a system of
prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, the banking regulators are required to take
certain supervisory actions against undercapitalized institutions, based upon
the five categories of institutions established by FDICIA: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized," which are categories defined by the
institution's regulatory capital ratios. Generally, a capital restoration plan
must be filed with the OTS within 45 days of the date an association receives
notice that it is "undercapitalized," "significantly undercapitalized," or
"critically undercapitalized." In addition, various mandatory supervisory
actions become immediately applicable to any undercapitalized institution,
including restrictions on growth of assets and other forms of expansion. The OTS
could also take any one of a number of discretionary supervisory actions,
including the issuance of a capital directive and the replacement of senior
executive officers and directors. Generally, subject to a narrow exception,
FDICIA requires the applicable banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. Under the
OTS regulations, generally, a federally chartered savings association is treated
as well capitalized if its total risk-based capital ratio is 10% or greater, its
Tier 1 risk-based capital ratio is 6% or greater, and its leverage ratio is 5%
or greater, and it is not subject to any order or directive by the OTS to meet a
specific capital level. As of December 31, 2000, the Association met the
criteria for being considered "well capitalized" by the OTS.
Where appropriate, the OTS can impose corrective action by a savings
and loan holding company under the "prompt corrective action" provisions of
FDICIA.
Insurance of Deposit Accounts. The Bank is a member of the SAIF, and
the Bank pays its deposit insurance assessments to the SAIF. The FDIC also
maintains another insurance fund, the Bank Insurance Fund, which primarily
insures the deposits of banks and state chartered savings banks.
Under federal law, the FDIC established a risk based assessment system
for determining the deposit insurance assessments to be paid by insured
depositary institutions. Under the assessment system, the FDIC assigns an
institution to one of three capital categories based on the institution's
financial information as of the quarter ending three months before the beginning
of the assessment period. An institution's assessment rate depends on the
capital category and supervisory category to which it is assigned. Under the
regulation, there are nine assessment risk classifications (i.e., combinations
of capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates currently range from 0.0% of deposits for an
institution in the highest category (i.e., well-capitalized and financially
sound, with no more than a few minor weaknesses) to 0.27% of deposits for an
institution in the lowest category (i.e., undercapitalized and substantial
supervisory concern). The FDIC is authorized to raise the assessment rates as
necessary to maintain the required reserve ratio of 1.25%.
In addition, all FDIC insured institutions are required to pay
assessments to the FDIC at an annual rate of approximately .0212 of insured
deposits to fund interest payment on bonds issued by the Financing Corporation,
an agency of the federal government established to recapitalize the predecessor
to the SAIF. These assessments will continue until the Financing Corporation
bonds mature in 2017.
Federal Home Loan Bank System. The Bank is a member of the FHLB of Des
Moines, which is one of the regional FHLBs composing the FHLB System. Each FHLB
provides a central credit facility primarily for its member institutions. The
Bank, as a member of the FHLB of Des Moines, is required to acquire and hold
shares of capital stock in the FHLB of Des Moines in an amount at least equal to
the greater of 1.0% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year or 1/20 of
its advances (borrowings) from the FHLB of Des Moines. The Bank was in
compliance with this requirement with an investment in FHLB of Des Moines stock
at December 31, 2000 of $4.4 million. Any advances from a FHLB must be secured
by specified types of collateral, and all long-term advances may be obtained
only for the purpose of providing funds for residential housing finance.
The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of earnings that the FHLBs can pay as
dividends to their members and could also result in the FHLBs imposing a higher
rate of interest on advances to their members. If dividends were reduced, or
interest on future FHLB advances increased, the Bank's net interest income would
be affected.
-26-
Under the GLB Act, membership in the FHLB is now voluntary for all
federally-chartered savings associations, such as the Bank. The GLB Act also
replaces the existing redeemable stock structure of the FHLB System with a
capital structure that requires each FHLB to meet a leverage limit and a
risk-based permanent capital requirement. Two classes of stock are authorized:
Class A (redeemable on 6-months notice) and Class B (redeemable on 5-years
notice).
Federal Reserve System. The Bank is subject to provisions of the FRA
and the FRB's regulations pursuant to which depositary institutions may be
required to maintain non-interest-earning reserves against their deposit
accounts and certain other liabilities. Currently, reserves must be maintained
against transaction accounts (primarily NOW and regular checking accounts). The
FRB regulations generally require that reserves be maintained in the amount of
3.0% of the aggregate of transaction accounts up to $46.5 million. The amount of
aggregate transaction accounts in excess of $46.5 million are currently subject
to a reserve ratio of 10.0%, which ratio the FRB may adjust between 8.0% and
12%. The FRB regulations currently exempt $4.9 million of otherwise reservable
balances from the reserve requirements, which exemption is adjusted by the FRB
at the end of each year. The Bank is in compliance with the foregoing reserve
requirements. Because required reserves must be maintained in the form of either
vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a
pass-through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets. The balances
maintained to meet the reserve requirements imposed by the FRB may be used to
satisfy liquidity requirements imposed by the OTS. FHLB System members are also
authorized to borrow from the Federal Reserve discount window, but FRB
regulations require such institutions to exhaust all FHLB sources before
borrowing from a Federal Reserve Bank.
New Privacy Regulations. Pursuant to the GLB Act, the OTS has published
final regulations implementing the privacy protection provisions of the GLB Act.
These regulations, effective on November 13, 2000 with full compliance required
by July 1, 2001, require each financial institution to adopt procedures to
protect customers' "nonpublic personal information." The new regulations
generally require that the Bank disclose its privacy policy, including
identifying with whom it shares a customer's "nonpublic personal information,"
to customers at the time of establishing the customer relationship and annually
thereafter. In addition, the Bank will be required to provide its customers with
the ability to "opt-out" of having it share their personal information with
unaffiliated third parties and not to disclose account numbers or access codes
to nonaffiliated third parties for marketing purposes. The Bank currently has a
privacy protection policy in place and intends to review and amend that policy,
if necessary, for compliance with the regulations.
ATM Fees. The GLB Act also requires the Bank to disclose, on its ATM
machines and to its customers upon the issuance of an ATM card, any fees that
may be imposed on ATM users. For older ATMs, the Bank will have until December
31, 2004 to provide such notices.
-27-
ITEM 2. PROPERTIES
The Company conducts its business through its main office located in
Fort Dodge, Iowa and seven full-service offices located in Fort Dodge, Nevada,
Ames, Perry, Burlington and Mount Pleasant, Iowa. The following table sets forth
certain information concerning the main office and each branch office of the
Company and the offices of First Iowa Title Services and First Iowa Mortgage,
Inc. at December 31, 2000. All of the offices of the Company are owned. In
addition to the properties listed below, First Federal Investments owns land and
an office building in Fort Dodge, Iowa with a net book value of $322,000 and
Northridge Apartments Limited Partnership owns a multifamily apartment building
with a net book value of $1.8 million at December 31, 2000. The aggregate net
book value of the Company's premises and equipment, on a consolidated basis was
$6.7 million at December 31, 2000.
Lease
Location Opening Date Expiration Date Net Book Value
-------- ------------ --------------- --------------
Main Office:
825 Central Avenue 1973 N/A $ 1,056,101
Fort Dodge, Iowa
Branch Offices:
201 South 25th Street 1977 N/A $ 258,026
Fort Dodge, Iowa
404 Lincolnway 1977 N/A $ 504,965
Nevada, Iowa
316 South Duff 1977 N/A $ 1,973,966
Ames, Iowa
1st Avenue and Hwy 141 1999 N/A $ 900,898
Perry, Iowa
321 North Third Street 1953 N/A $ 565,305
Burlington, Iowa
1010 North Roosevelt 1975 N/A $ 813,792
Burlington, Iowa
102 South Main 1991 N/A $ 228,208
Mount Pleasant, Iowa
First Iowa Offices:
628 Central Avenue 1982 N/A $ 44,652
Fort Dodge, Iowa
814 8th Street 1996 2003 (1) $ 35,702
Boone, Iowa
200 1st Street South 1996 2003 (1) $ 34,662
Newton, Iowa
First Iowa Mortgage Office: 1998 N/A $ 22,005
316 South Duff
Ames, Iowa
(1) Does not include option to renew for an additional 5 years.
-28-
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business. Such
routine legal proceedings in the aggregate are believed by management to be
immaterial to the Company's financial condition and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The information required by this Item is incorporated herein by
reference to page 63 of the Company's 2000 Annual Report to Shareholders under
the heading "Shareholder Information," which section is included in Exhibit 13.1
to this Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by
reference to page 4 of the Company's 2000 Annual Report to Shareholders under
the heading "Selected Financial Data," which section is included in Exhibit 13.1
to this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by
reference to pages 7 through 26 of the Company's 2000 Annual Report to
Shareholders under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which section is included in
Exhibit 13.1 to this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item is incorporated herein by
reference to pages 12 through 14 of the Company's 2000 Annual Report to
Shareholders under the heading "Discussion of Market Risk--Interest Rate
Sensitivity Analysis," which section is included in Exhibit 13.1 to this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated herein by
reference to pages 28 through 60 of the Company's 2000 Annual Report to
Shareholders under the headings "Independent Auditor's Report," "Consolidated
Financial Statements" and "Notes to Consolidated Financial Statements," which
section are included in Exhibit 13.1 to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-29-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Directors and Executive Officers of the
Registrant is included under the headings "Information with Respect to Nominees
and Continuing Directors," "Nominees for Election as Directors," "Continuing
Directors," "Executive Officers" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held on April 27, 2001, which has been filed with the SEC and
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is included under the
headings "Executive Compensation" (excluding the Stock Performance Graph and the
Compensation Committee Report) and "Directors' Compensation" in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on April 27,
2001, which has been filed with the SEC and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information relating to security ownership of certain beneficial owners
and management is included under the headings "Principal Shareholders of the
Company" and "Security Ownership of Management" in the Company's Proxy Statement
for its Annual Meeting of Shareholders to be held on April 27, 2001, which has
been filed with the SEC and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
included under the heading "Transaction with Certain Related Persons" in the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
April 27, 2001, which has been filed with the SEC and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Schedules and Exhibits
1. The consolidated balance sheets of North Central Bancshares,
Inc. and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of income, equity and cash
flows for the years ended December 31, 2000, 1999 and 1998,
together with the related notes and the independent auditor's
report of McGladrey & Pullen, LLP, independent certified
public accounts.
2. Financial Statement Schedules have been omitted because they
are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
3. See Exhibit Index on following page.
(b) Reports on Form 8-K filed during the last quarter of 2000
None.
-30-
(c) Exhibits Required by Item 601 of Securities and Exchange Commission
Regulation S-K:
Exhibit No. Description Page No.
- ----------- ----------- --------
3.1 Articles of Incorporation of North Central Bancshares, Inc. *
3.2 Bylaws of North Central Bancshares, Inc. *
3.3 Amendment to Article IV of the Bylaws of North Central Bancshares, Inc.
4.1 Federal Stock Charter of First Federal Savings Bank of Iowa (formerly *
known as First Federal Savings Bank of Fort Dodge)
4.2 Bylaws of First Federal Savings Bank of Iowa (formerly known as First
Federal Savings Bank of Fort Dodge). *
4.3 Specimen Stock Certificate of North Central Bancshares, Inc. *
4.4 Amendment to Article III of the Bylaws of First Federal Savings Bank of Iowa
10.1 Employee Stock Ownership Plan of First Federal Savings Bank of Iowa *****
(formerly known as First Federal Savings Bank of Fort
Dodge) and ESOP Trust Agreement (incorporating Amendments 1
and 2)
10.2 ESOP Loan Documents, dated September 3, 1996 ****
10.3 Employee Retention Agreements between First Federal Savings Bank of Fort **
Dodge and certain executive officers
10.4 Employment Agreement between First Federal Savings Bank of Iowa *
(formerly known as First Federal Savings Bank of Fort Dodge) and David M.
Bradley, effective as of August 31, 1994
10.5 Form of Employment Agreement between First Federal Savings Bank of *
Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and
David M. Bradley
10.6 Form of Employment Agreement between North Central Bancshares, Inc. *
and David M. Bradley
10.8 North Central Bancshares, Inc. 1996 Stock Option Plan ***
10.9 Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option *****
Plan
13.1 Annual Report to security holders
21.1 Subsidiaries of the Registrant *
23.1 Consent of McGladrey & Pullen, LLP
99.1 Press Release dated October 27, 2000
99.2 Press Release dated November 29, 2000
99.3 Press Release dated January 22, 2001
-31-
* Incorporated herein by reference to Registration Statement No. 33-80493
on Form S-1 of North Central Bancshares, Inc. (the "Registrant") filed
with the Securities and Exchange Commission, (the "Commission") on
December 18, 1995, as amended.
** Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by Registrant for fiscal year 1995, filed with the
Commission on March 29, 1996.
*** Incorporated herein by reference to the Amended Schedule 14A of
Registrant filed with the Commission on August 19, 1996.
**** Incorporated herein by reference to the Annual Report on Form 10-K of
the Registrant filed with the Commission on March 31, 1997.
***** Incorporated herein by reference to the Annual Report on Form 10-K of
the Registrant filed with the Commission on March 31, 1998.
-32-
Conformed
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant and has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
North Central Bancshares, Inc.
Date: March 21, 2001 /s/ David M. Bradley
--------------------
By: David M. Bradley
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ David M. Bradley President, Chief Executive 03/21/01
- -------------------- Officer, Director,and Chairman
David M. Bradley of the Board(principal executive
officer)
/s/ John L. Pierschbacher Treasurer 03/21/01
- ------------------------- (principal accounting and
John L. Pierschbacher financial officer)
/s/ Robert H. Singer, Jr. Director 03/21/01
- -------------------------
Robert H. Singer, Jr.
/s/ KaRene Egemo Director 03/21/01
- ----------------
KaRene Egemo
/s/ Howard A. Hecht Director 03/21/01
- -------------------
Howard A. Hecht
/s/ Melvin R. Schroeder Director 03/21/01
- -----------------------
Melvin R. Schroeder
/s/ Mark M. Thompson Director 03/21/01
- --------------------
Mark M. Thompson
/s/ Craig R. Barnes Director 03/21/01
- -------------------
Craig R. Barnes
-33-
TABLE OF CONTENTS
List of Exhibits (filed herewith unless otherwise noted)
Exhibit No. Description Page No.
- ----------- ----------- --------
3.1 Articles of Incorporation of North Central Bancshares, Inc. *
3.2 Bylaws of North Central Bancshares, Inc. *
3.3 Amendment to Article IV of the Bylaws of North Central Bancshares, Inc.
4.1 Federal Stock Charter of First Federal Savings Bank of Iowa (formerly *
known as First Federal Savings Bank of Fort Dodge)
4.2 Bylaws of First Federal Savings Bank of Iowa (formerly known as First
Federal Savings Bank of Fort Dodge). *
4.3 Specimen Stock Certificate of North Central Bancshares, Inc. *
4.4 Amendment to Article III of the Bylaws of First Federal Savings Bank of Iowa
10.1 Employee Stock Ownership Plan of First Federal Savings Bank of Iowa *****
(formerly known as First Federal Savings Bank of Fort
Dodge) and ESOP Trust Agreement (incorporating Amendments 1
and 2)
10.2 ESOP Loan Documents, dated September 3, 1996 ****
10.3 Employee Retention Agreements between First Federal Savings Bank of Fort **
Dodge and certain executive officers
10.4 Employment Agreement between First Federal Savings Bank of Iowa *
(formerly known as First Federal Savings Bank of Fort Dodge) and David M.
Bradley, effective as of August 31, 1994
10.5 Form of Employment Agreement between First Federal Savings Bank of *
Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and
David M. Bradley
10.6 Form of Employment Agreement between North Central Bancshares, Inc. *
and David M. Bradley
10.8 North Central Bancshares, Inc. 1996 Stock Option Plan ***
10.9 Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option *****
Plan
13.1 Annual Report to security holders
21.1 Subsidiaries of the Registrant *
23.1 Consent of McGladrey & Pullen, LLP
99.1 Press Release dated October 27, 2000
99.2 Press Release dated November 29, 2000
99.3 Press Release dated January 22, 2001
-34-
* Incorporated herein by reference to Registration Statement No. 33-80493
on Form S-1 of North Central Bancshares, Inc. (the "Registrant") filed
with the Securities and Exchange Commission, (the "Commission") on
December 18, 1995, as amended.
** Incorporated herein by reference to the Exhibits to the Annual Report
on Form 10-K filed by Registrant for fiscal year 1995, filed with the
Commission on March 29, 1996.
*** Incorporated herein by reference to the Amended Schedule 14A of
Registrant filed with the Commission on August 19, 1996.
**** Incorporated herein by reference to the Annual Report on Form 10-K of
the Registrant filed with the Commission on March 31, 1997.
***** Incorporated herein by reference to the Annual Report on Form 10-K of
the Registrant filed with the Commission on March 31, 1998.
-35-