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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------- ---------------
Commission File Number 0-27672
NORTH CENTRAL BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Iowa 42-1449849
----------------------------------------------------------------------
(State or Other Jurisdiction of (I. R. S. Employer
Incorporation or Organization) Identification Number)
825 Central Avenue Fort Dodge, Iowa 50501
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:(515) 576-7531
None
----
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark whether the Registrant is an accelerated Filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 25, 2003
- --------------------------------------------------------------------------------
Common Stock, $.01 par value 1,606,580
NORTH CENTRAL BANCSHARES, INC.
INDEX
Page
Part I. Financial Information
Item 1. Consolidated Condensed
Financial Statements (Unaudited) 1 to 3
Consolidated Condensed Statements of
Financial Condition at March 31, 2003
and December 31, 2002 1
Consolidated Condensed Statements of
Income for the three months ended
March 31, 2003 and 2002 2
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 31, 2003 and 2002 3
Notes to Consolidated Condensed Financial
Statements 4 & 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 6 to 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 11
Item 4. Controls and Procedures 11
Part II. Other Information
Items 1 through 6 12
Signatures 13
Section 302 Certifications
Exhibits
PART I. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
March 31, December 31,
ASSETS 2003 2002
--------- ------------
Cash and due from banks:
Interest-bearing $ 15,745,433 $ 13,025,657
Noninterest-bearing 2,072,614 2,142,944
Securities available-for-sale 32,998,864 22,833,742
Loans receivable, net 348,931,787 341,146,364
Loans held for sale 2,188,263 2,372,134
Accrued interest receivable 1,953,955 1,928,278
Foreclosed real estate 1,015,020 768,726
Premises and equipment, net 8,410,802 8,195,963
Rental real estate 2,748,003 2,197,382
Title plant 925,256 925,256
Goodwill 4,970,800 4,970,800
Deferred taxes 709,761 608,657
Prepaid expenses and other assets 2,950,431 2,755,778
------------- -------------
Total assets $ 425,620,989 $ 403,871,681
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 280,749,011 $ 277,000,082
Borrowed funds 102,992,316 85,026,438
Advances from borrowers for taxes and insurance 1,013,358 1,512,114
Dividends payable 338,810 295,250
Income taxes payable 520,398 63,553
Accrued expenses and other liabilities 1,543,686 1,226,040
------------- -------------
Total liabilities 387,157,579 365,123,477
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized
3,000,000 shares; issued and outstanding none) -- --
Common stock ($.01 par value, authorized 15,500,000
shares; issued 2003, 1,676,980; 2002,
1,640,280 shares) 16,770 16,403
Additional paid-in capital 17,879,495 17,011,095
Retained earnings, substantially restricted 23,034,688 21,862,248
Accumulated other comprehensive income 202,941 176,555
Less cost of treasury stock, 2003, 70,400 shares; 2002,
none (2,390,794) --
Unearned shares, employee stock ownership plan (279,690) (318,097)
------------- -------------
Total stockholders' equity 38,463,410 38,748,204
------------- -------------
Total liabilities and stockholders' equity $ 425,620,989 $ 403,871,681
============= =============
See Notes to Consolidated Condensed Financial Statements
1
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
2003 2002
----------- -----------
Interest income:
Loans receivable $ 6,168,662 $ 6,092,631
Securities and cash deposits 357,721 438,026
----------- -----------
6,526,383 6,530,657
----------- -----------
Interest expense:
Deposits 2,081,680 2,433,434
Borrowed funds 1,098,008 1,059,629
----------- -----------
3,179,688 3,493,063
----------- -----------
Net Interest Income 3,346,695 3,037,594
Provision for loan losses 60,000 180,000
----------- -----------
Net interest income after provision for loan losses 3,286,695 2,857,594
----------- -----------
Noninterest income:
Fees and service charges 563,592 588,581
Abstract fees 434,020 396,610
Mortgage banking fees 174,368 108,158
(Loss) on sale of securities available for
sale, net -- (1,365)
Other income 220,980 222,538
----------- -----------
Total noninterest income 1,392,960 1,314,522
----------- -----------
Noninterest expense:
Salaries and employee benefits 1,432,360 1,265,930
Premises and equipment 309,172 308,817
Data processing 134,319 128,932
SAIF deposit insurance premiums 11,647 12,186
Other expenses 670,252 649,591
----------- -----------
Total noninterest expense 2,557,750 2,365,456
----------- -----------
Income before income taxes 2,121,905 1,806,660
Provision for income taxes 619,520 575,924
----------- -----------
Net Income $ 1,502,385 $ 1,230,736
=========== ===========
Basic earnings per common share $ 0.94 $ 0.75
=========== ===========
Earnings per common share- assuming dilution $ 0.88 $ 0.71
=========== ===========
Dividends declared per common share $ 0.21 $ 0.18
=========== ===========
Comprehensive income $ 1,528,771 $ 1,179,093
=========== ===========
See Notes to Consolidated Condensed Financial Statements.
2
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,502,385 $ 1,230,736
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 60,000 180,000
Depreciation 180,507 175,574
Amortization and accretion 132,316 43,301
Deferred taxes (116,818) (39,045)
Effect of contribution to employee stock ownership plan 135,600 93,201
(Gain) on sale of foreclosed real estate and loans, net (184,570) (108,108)
Loss on sale of securities available for sale -- 1,365
(Gain) loss on disposal of equipment and premises, net 96 (15)
Proceeds from sales of loans held for sale 11,757,787 7,343,384
Originations of loans held for sale (11,399,548) (7,411,106)
Change in assets and liabilities:
Accrued interest receivable (25,677) (68,636)
Prepaid expenses and other assets (194,653) (117,077)
Income taxes payable 456,845 614,659
Accrued expenses and other liabilities 317,646 (385,467)
------------ ------------
Net cash provided by operating activities 2,621,916 1,552,766
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans 11,647,249 11,641,869
Purchase of loans (19,910,025) (36,314,323)
Proceeds from sales of securities available-for-sale -- 13,760
Purchase of securities available-for-sale (10,865,958) --
Proceeds from maturities of securities available-for-sale 735,258 5,192,377
Purchase of premises and equipment and rental real estate (946,063) (820,994)
Proceeds from sale of equipment -- 15
Other 56,623 (737)
------------ ------------
Net cash (used in) investing activities (19,282,916) (20,288,033)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 3,748,929 3,274,318
(Decrease) in advances from borrowers for taxes and
insurance (498,756) (518,536)
Net change in short-term borrowings 6,000,000 4,750,000
Proceeds from other borrowed funds 16,000,000 20,000,000
Payments on other borrowings (4,034,122) (8,532,381)
Purchase of treasury stock (2,390,794) (840,800)
Dividends paid (286,386) (246,555)
Issuance of common stock 771,575 --
------------ ------------
Net cash provided by financing activities 19,310,446 17,886,046
------------ ------------
Net increase (decrease) in cash 2,649,446 (849,221)
CASH
Beginning 15,168,601 19,908,902
------------ ------------
Ending $ 17,818,047 $ 19,059,681
============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 2,106,663 $ 2,596,731
Interest paid on borrowings 1,097,954 1,059,276
Income taxes -- 310
3
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated condensed financial statements for the three month periods
ended March 31, 2003 and 2002 are unaudited. In the opinion of the management of
North Central Bancshares, Inc. (the "Company" or the "Registrant") these
financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary to present fairly these consolidated financial
statements. The results of operations for the interim periods are not
necessarily indicative of results, which may be expected for an entire year.
Certain information and footnote disclosure normally included in complete
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the requirements for interim
financial statements. The financial statements and notes thereto should be read
in conjunction with the Company's 2002 Annual Report on Form 10-K.
The consolidated condensed financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
2. EARNINGS PER SHARE
The earnings per share amounts were computed using the weighted average number
of shares outstanding during the periods presented. In accordance with Statement
of Position No. 93-6, Employers' Accounting for Employee Stock Ownership Plans,
issued by the American Institute of Certified Public Accountants, shares owned
by First Federal Savings Bank of Iowa's Employee Stock Ownership Plan that have
not been committed to be released are not considered to be outstanding for the
purpose of computing earnings per share. For the three-month period ended March
31, 2003, the weighted average number of shares outstanding for basic and
diluted earnings per share computation were 1,594,015 and 1,701,331,
respectively. For the three-month period ended March 31, 2002, the weighted
average number of shares outstanding for basic and diluted earnings per share
computation were 1,639,190 and 1,734,670, respectively.
3. DIVIDENDS
On February 28, 2003, the Company declared a cash dividend on its common stock,
payable on April 7, 2003 to stockholders of record as of March 17, 2003, equal
to $0.21 per share.
4. GOODWILL
As of January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" that eliminated the
amortization and required a goodwill impairment test. The Company completed the
goodwill impairment test during the year ended December 31, 2002 and has
determined that there has been no impairment of goodwill.
As of March 31, 2003 and December 31, 2002, the Company had intangible assets of
$4,970,800, all of which has been determined to be goodwill. There was no
goodwill impairment loss or amortization related to goodwill during the three
months ended March 31, 2003 or March 31, 2002.
5. STOCK OPTION PLAN
FASB Statement No. 123, Accounting for Stock-Based Compensation, establishes a
fair value based method for financial accounting and reporting for stock-based
employee compensation plans and for transactions in which an entity issues its
equity instruments to acquire goods and services from nonemployees. However, the
standard allows compensation to continue to be measured by using the intrinsic
value based method of accounting prescribed by APB No. 25, Accounting for Stock
Issued to Employees, but requires expanded disclosures. The Company has elected
to apply the intrinsic value based method of accounting for stock options issued
to employees. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee must pay to acquire the stock.
4
Had compensation cost for the Plan been determined based on the grant date fair
values of awards (the method described in FASB Statement No. 123), the
approximate reported net income and earnings per common share would have been
decreased to the pro forma amounts shown below:
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
------------------ ------------------
Net income, as reported $ 1,502,385 $ 1,230,736
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects (39,677) (26,636)
----------- -----------
Pro forma net income $ 1,462,708 $ 1,204,100
=========== ===========
Earnings per common share - basic:
As reported $ 0.94 $ 0.75
Pro forma 0.92 0.73
Earnings per common share - assuming dilution:
As reported $ 0.88 $ 0.71
Pro forma 0.86 0.69
The fair values of the grants are estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for grants in 2003 and 2002, respectively: dividend rate of 2.3% and
3.5%, price volatility of 20% and 20%, risk-free interest rate of 3.70% and
4.92%, and expected lives of 8 years for all periods.
5
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
EXPLANATORY NOTE
This Quarterly Report on Form 10-Q contains forward-looking statements
consisting of estimates with respect to the financial condition, results of
operations and business of the Company that are subject to various factors which
could cause actual results to differ materially from these estimates. These
factors include changes in general, economic, market, legislative and regulatory
conditions, and the development of an interest rate environment that adversely
affects the interest rate spread or other income anticipated from the Company's
operations and investments. The Company's actual results may differ from the
results discussed in the forward-looking statements. The Company disclaims any
obligation to publicly announce future events or developments that may affect
the forward-looking financial statements contained here within.
FINANCIAL CONDITION
Total assets increased $21.7 million, or 5.4%, to $425.6 million at March 31,
2003 compared to $403.9 million at December 31, 2002. Interest-bearing cash
increased $2.7 million, or 20.9%, to $15.7 million at March 31, 2003 from $13.0
million at December 31, 2002. Securities available for sale increased $10.2
million, or 44.5% to $33.0 million at March 31, 2003 from $22.8 million at
December 31, 2002, primarily due to an increase in the Company's investments in
mortgage backed securities. Total loans receivable, net, increased by $7.8
million to $348.9 million at March 31, 2003 from $341.1 million at December 31,
2002, due primarily to originations of $26.0 million of first mortgage loans
secured primarily by one-to four-family residences, purchases of $19.9 million
of first mortgage loans secured primarily by one to four family, multifamily and
commercial real estate and originations of $4.8 million of second mortgage loans
secured primarily by one-to-four-family residences. These originations and
purchases were offset in part by payments, prepayments and sales proceeds of
loans of approximately $44.7 million.
Total deposits increased $3.7 million, or 1.4%, to $280.7 million at March 31,
2003 from $277.0 million at December 31, 2002, reflecting increases primarily in
checking, savings and money market accounts, offset by a decrease in retail and
public funds certificates of deposit accounts. Other borrowings, primarily
Federal Home Loan Bank ("FHLB") advances, increased by $18.0 million to $103.0
million at March 31, 2003 from $85.0 million at December 31, 2002, as management
elected to increase borrowings to fund asset growth. Total stockholders' equity
decreased $280,000, to $38.5 million at March 31, 2003 from $38.7 million at
December 31, 2002. See "Capital."
CAPITAL
The Company's total stockholders' equity decreased by $280,000 to $38.5 million
at March 31, 2003 from $38.7 million at December 31, 2002, primarily due to
stock repurchases and dividends declared, which were offset in part by earnings
and stock issued in connection with stock options exercised. The changes in
stockholders' equity were also due to a decrease in the unearned shares from
First Federal Savings Bank of Iowa's Employee Stock Ownership Plan (the "ESOP")
to $280,000 at March 31, 2003 from $318,000 at December 31, 2002. The decrease
in unearned shares resulted from the release of shares within the ESOP to
employees of First Federal Savings Bank of Iowa (the "Bank").
6
The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum
tangible, leverage (core) and risk-based capital requirements. As of March 31,
2003, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of March 31, 2003 were as follows:
Amount Percentage of Assets
(dollars in thousands)
Tangible capital:
Capital level $ 31,573 7.51%
Less Requirement 6,308 1.50%
-------- --------
Excess $ 25,265 6.01%
======== ========
Core capital:
Capital level $ 31,573 7.51%
Less Requirement 16,821 4.00%
-------- --------
Excess $ 14,752 3.51%
======== ========
Risk-based capital:
Capital level $ 34,692 12.41%
Less Requirement 22,361 8.00%
-------- --------
Excess $ 12,331 4.41%
======== ========
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including net income), certain financing activities (including increases in
deposits and proceeds from borrowings) and certain investing activities
(including principal payments on loans and maturities, calls and proceeds from
the sale of securities). During the first three months of 2003 and 2002,
principal payments, repayments and proceeds from sale of loans totaled $44.7
million and $27.6 million, respectively. The net increase in deposits during the
first three months of 2003 and 2002 totaled $3.7 million and $3.3 million,
respectively. The proceeds from borrowed funds during the three months ended
March 31, 2003 and 2002 totaled $16.0 million and $20.0 million, respectively.
The net change in short term borrowings during the three months ended March 31,
2003 and 2002 totalled $6.0 million and $4.8 million, respectively. During the
first three months of 2003 and 2002, the proceeds from the maturities, calls and
sales of securities totaled $735,000 and $5.2 million, respectively. Cash
provided from operating activities during the first three months of 2003 and
2002 totaled $2.6 million and $1.6 million, respectively. The Company's primary
use of funds is cash used to originate and purchase loans, purchase of
securities available for sale, repayment of borrowed funds and other financing
activities. During the first three months of 2003 and 2002, the Company's gross
purchases and origination of loans totaled $53.0 million and $59.0 million,
respectively. The purchase of securities available for sale for the three months
ended March 31, 2003 and 2002 totaled $10.9 million and none, respectively. The
repayment of borrowed funds during the first three months of 2003 and 2002
totaled $4.0 million and $8.5 million, respectively. For additional information
about cash flows from the Company's operating, financing and investing
activities, see "Statements of Cash Flows in the Condensed Consolidated
Financial Statements."
The OTS regulations require the Company to maintain sufficient liquidity to
ensure its safe and sound operation.
The Company has a line of credit agreement in the amount of $3.0 million with an
unaffiliated bank. As of March 31, 2003, there were no borrowings outstanding on
this line of credit. The Company may use this line of credit to fund stock
repurchases in the future and for general corporate purposes.
Stockholders' equity totaled $38.5 million at March 31, 2003 compared to $38.7
million at December 31, 2002, reflecting the Company's earnings, stock issued,
stock repurchases, the amortization of the unallocated portion of shares held by
the ESOP, dividends declared on common stock and the change in the accumulated
other comprehensive income. The Company repurchased 70,400 shares of common
stock during the three months ended March 31, 2003 at an average price of
$33.96.
7
On January 7, 2003, the Company paid a quarterly cash dividend of $0.18 per
share on common stock outstanding as of the close of business on December 16,
2002, aggregating $295,000. On February 28, 2003, the Company declared a
quarterly cash dividend of $0.21 per share payable on April 7, 2003 to
shareholders of record as of the close of business on March 17, 2003,
aggregating $339,000.
RESULTS OF OPERATIONS
Interest Income. Interest income is stable at $6.5 million for the three months
ended March 31, 2003 and 2002. The yield on interest earning assets decreased to
6.65% for the three months ended March 31, 2003 from 7.13% for the three months
ended March 31, 2002. The decrease in average yields was due primarily to a
decrease in the average yield on loans, securities available for sale and
interest-bearing cash. The average yield on loans decreased to 7.12% for the
three months ended March 31, 2003 from 7.72% for the three months ended March
31, 2002. The average yield on securities available for sale decreased to 4.42%
for the three months ended March 31, 2003 from 5.06% for the three months ended
March 31, 2002. The average yield on interest bearing cash decreased to 0.86%
for the three months ended March 31, 2003 from 1.39% for the three months ended
March 31, 2002. The decrease in the average yields on assets was primarily due
to decreases in market interest rates. The average balance of interest earning
assets increased $25.9 million to $393.4 million for the three months ended
March 31, 2003 from $367.5 million for the three months ended March 31, 2002.
This increase was primarily due to higher levels of loans, offset in part by a
decrease in interest bearing cash. The increase in the average balance of loans
generally reflects originations over the past twelve months of first mortgage
loans, second mortgage loans and purchases of first mortgage loans secured
primarily by one-to four-family residential, multifamily and commercial real
estate loans, offset in part by payments, sales and prepayments of loans. See
"Financial Condition."
Interest Expense. Interest expense decreased by $313,000 to $3.2 million for the
three months ended March 31, 2003 compared to $3.5 million for the three months
ended March 31, 2002. The decrease in interest expense was primarily due to a
decrease in the average cost of interest bearing liabilities, offset in part by
an increase in the average balances of interest bearing liabilities. The average
cost of interest bearing liabilities decreased to 3.54% for the three months
ended March 31, 2003 from 4.15% for the three months ended March 31, 2002. The
decrease in the average cost of interest bearing liabilities was due primarily
to decreases in all categories of interest bearing liabilities. The average NOW
and money market accounts decreased to 0.73% for the three months ended March
31, 2003 from 1.02% for the three months ended March 31, 2002. The average cost
of savings accounts decreased to 0.78% for the three months ended March 31, 2003
from 1.26% for the three months ended March 31, 2002. The average cost of
certificates of deposit decreased to 4.31% for the three months ended March 31,
2003 from 5.02% for the three months ended March 31, 2002. The average cost of
borrowed funds decreased to 4.75% for the three months ended March 31, 2003 from
5.62% for the three months ended March 31, 2002. The decreased in the average
cost of funds was primarily due to decreases in market interest rates. The
average balance of interest bearing liabilities increased $22.5 million to
$363.7 million for the three months ended March 31, 2003 from $341.2 million for
the three months ended March 31, 2002. This increase was due primarily to an
increase in savings accounts, certificates of deposit and borrowed funds. The
increase in the average balance of the certificates of deposit was offset in
part by a decrease in the average balance of the public funds certificates of
deposit.
Net Interest Income. Net interest income before the provision for loan losses
increased by $309,000 to $3.3 million for the three months ended March 31, 2003
from $3.0 million for the three months ended March 31, 2002. The increase is due
primarily to a widening interest rate spread. The interest rate spread (i.e.,
the difference in the average yield on assets and average cost of liabilities)
increased to 3.11% for the three months ended March 31, 2003 from 2.98% for the
three months ended March 31, 2002.
8
RESULTS OF OPERATIONS (Continued)
The following table sets forth certain information relating to the Company's
average balance sheets and reflects the average yield on assets and average cost
of liabilities for the three month periods ended March 31, 2003 and 2002,
respectively.
For the Three Months Ended March 31,
------------------------------------------------------------------------------------
2003 2002
------------------------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans $ 347,486 $ 6,169 7.12% $ 316,645 $ 6,093 7.72%
Securities available for sale 29,192 322 4.42 28,569 362 5.06
Interest bearing cash 16,710 35 0.86 22,249 76 1.39
--------- -------- ------- --------- ------- ------
Total interest-earning assets 393,388 6,526 6.65% 367,463 $ 6,531 7.13%
--------- -------- ------- --------- ------- ------
Noninterest-earning assets 21,166 19,337
--------- ---------
Total assets $ 414,554 $ 386,800
========= =========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings $ 63,052 $ 114 0.73% $ 63,286 $ 160 1.02%
Passbook savings 26,624 51 0.78 23,568 73 1.26
Certificates of deposit 180,204 1,916 4.31 177,897 2,200 5.02
Borrowed funds 93,816 1,098 4.75 76,477 1,060 5.62
--------- -------- ------- --------- ------- ------
Total interest-bearing liabilities 363,696 $ 3,179 3.54% 341,228 $ 3,493 4.15%
-------- ------- ------- ------
Noninterest-bearing liabilities 11,932 9,255
--------- ---------
Total liabilities 375,628 350,483
Equity 38,926 36,317
--------- ---------
Total liabilities and equity $ 414,554 $ 386,800
========= =========
Net interest income $ 3,347 $ 3,038
======== =======
Net interest rate spread 3.11% 2.98%
====== ======
Net interest margin 3.40% 3.31%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities 108.16% 107.69%
====== ======
9
RESULTS OF OPERATIONS (Continued)
Provision for Loan Losses. The Company's provision for loan losses was $60,000
and $180,000 for the three months ended March 31, 2003 and 2002, respectively.
The Company establishes provisions for loan losses, which are charged to
operations, in order to maintain the allowance for loan losses at a level, which
is deemed to be appropriate, based upon an assessment of a number of factors.
These factors include prior loss experience, industry standards, past due loans,
economic conditions, the volume and type of loans in the Bank's portfolio, which
includes a significant amount of multi-family and commercial real estate loans,
substantially all of which are purchased and are collateralized by properties
located outside of the Bank's market area, and other factors related to the
collectibility of the Bank's loan portfolio. The net charge offs were $23,000
for the three months ended March 31, 2003 as compared to net charge offs of
$22,000 for the three months ended March 31, 2002. The resulting allowance for
loan losses was $3.2 million, $3.1 million and $3.0 million at March 31, 2003,
December 31, 2002 and March 31, 2002, respectively.
The allowance for loan losses as a percentage of total loans receivable was
0.89%, 0.90% and 0.91% at March 31, 2003, December 31, 2002 and March 31, 2002,
respectively. The level of nonperforming loans was $544,000 at March 31, 2003,
$643,000 at December 31, 2002 and $452,000 at March 31, 2002.
The allowance for loan losses is management's best estimates of probable losses
inherent in the loan portfolio as of the balance sheet date. While management
estimates loan losses using the best available information, such as independent
appraisals for significant collateral properties, no assurance can be made that
future adjustments to the allowance will not be necessary based on changes in
economic and real estate market conditions, further information obtained
regarding known problem loans, identification of additional problem loans, and
other factors, both within and outside of management's control.
Noninterest Income. Total noninterest income increased by $78,000 to $1.4
million for the three months ended March 31, 2003 from $1.3 million for the
three months ended March 31, 2002. The increase is due to increases in abstract
fees and mortgage banking income, offset in part by a decrease in fees and
service charges. Abstract fees increased $37,000, primarily due to increased
sales volume. Sales volume increased in part due to a general increase in real
estate activity. Mortgage banking income increased $66,000 due in part to
increase in loan originations resulting from lower interest rates. Fees and
services charges decreased $25,000, primarily due to decreases in loan
prepayment fees, offset in part by increases in overdraft fees.
Noninterest Expense. Total noninterest expense increased by $192,000 to $2.6
million for the three months ended March 31, 2003 from $2.4 million for the
three months ended March 31, 2002. The increase is due primarily to increases in
salaries and employee benefits. The increase in salaries and employee benefits
was due in part to an increase in personnel in the Ankeny, Iowa office, normal
salary increases and increases in other employee benefit costs. Other increases
in noninterest expense were partially due to the Bank relocating its Ankeny
office to a newly constructed 5,000 square foot branch office in February, 2003.
The Company's efficiency ratio for the three months ended March 31, 2003 and
2002 was 53.96% and 54.35%, respectively. The Company's ratio of noninterest
expense to average assets for the three months ended March 31, 2003 and 2002 was
2.46% and 2.45%, respectively.
Income Taxes. Income taxes increased by $44,000 to $620,000 for the three months
ended March 31, 2003 as compared to $576,000 for the three months ended March
31, 2002, primarily due to an increase in net income before income taxes and a
decrease in nontaxable income, partially offset by a one time low-income housing
income tax credit which increased net income by approximately $100,000.
Net Income. Net income increased by $272,000 to $1.5 million for the three
months ended March 31, 2003, as compared to $1.2 million for the same period in
2002.
10
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In management's opinion, there has not been a material change in market risk
from December 31, 2002 as reported in Item 7A of the Annual Report on Form 10-K.
ITEM 4.
CONTROLS AND PROCEDURES
During the 90-day period prior to the filing date of this report, management,
including the Company's Chief Executive Officer and Treasurer, evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based upon, and as of the date of that evaluation, the Chief
Executive Officer and Treasurer concluded that the disclosure controls and
procedures were effective, in all material respects, to ensure that information
required to be disclosed in the reports the Company files and submits under the
Exchange Act is recorded, processed, summarized and reported as and when
required.
There have been no significant changes in the Company's internal controls or in
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation. There were no significant
deficiencies or material weaknesses identified in the evaluation and therefore,
no corrective actions were taken.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
The Company's Chief Executive Officer and Treasurer have furnished statements
relating to its Form 10-Q for the quarter ended March 31, 2003 pursuant to 18
U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002. The statements are attached hereto as Exhibit 99.3.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 Press Release, dated February 28, 2003 (regarding the
declaration of a dividend)
Exhibit 99.2 Press Release, dated March 27, 2003 (regarding stock
repurchase program)
Exhibit 99.3 Certification pursuant to Section 906 of the Sarbanes
Oxley Act of 2002.
(b) Reports on Form 8-K
None
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH CENTRAL BANCSHARES, INC.
DATE: May 14, 2003 BY: /s/ David M. Bradley
-----------------------------------------
David M. Bradley, Chairman, President and
Chief Executive Officer
DATE: May 14, 2003 BY: /s/ John L. Pierschbacher
-----------------------------------------
John L. Pierschbacher
Principal Financial Officer
13
Certification of Chief Executive Officer and Treasurer
SARBANES-OXLEY ACT - SECTION 302 CERTIFICATIONS
I, David M. Bradley, certify that:
1. I have reviewed this quarterly report on Form 10-Q of North Central
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 /s/ David M. Bradley
--------------------
David M. Bradley
President and Chief Executive Officer
SARBANES-OXLEY ACT - SECTION 302 CERTIFICATIONS
I, John L. Pierschbacher, certify that:
1. I have reviewed this quarterly report on Form 10-Q of North Central
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 14, 2003 /s/ John L. Pierschbacher
--------------------------
John L. Pierschbacher
Treasurer