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 June 30, 2001
[ ] 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
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(State or Other Jurisdiction of (I. R. S. Employer
Incorporation or Organization) Identification Number)
825 Central Avenue Fort Dodge, Iowa 50501
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(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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 3, 2001
-------------------------------------------------------------------------
Common Stock, $.01 par value 1,822,280
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 June 30, 2001
(Unaudited) and December 31, 2000 1
Consolidated Condensed Statements of
Income for the three and six months ended
June 30, 2001 and 2000 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the six months ended
June 30, 2001 and 2000 (Unaudited) 3
Notes to Consolidated Condensed Financial
Statements 4 to 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 6 to 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 12
Part II. Other Information
Items 1 through 6 13
Signatures 14
Exhibits
PART I. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
June 30, December 31,
ASSETS 2001 2000
------------- -------------
(Unaudited)
Cash and due from banks:
Interest-bearing $ 11,559,457 $ 6,330,525
Noninterest-bearing 2,399,941 2,519,201
Securities available-for-sale 33,727,370 43,351,850
Loans receivable, net 321,142,907 318,025,782
Loans held for sale 1,751,727 498,387
Accrued interest receivable 2,128,305 2,257,153
Foreclosed real estate 113,977 63,866
Premises and equipment, net 6,799,353 6,660,783
Rental real estate 1,716,319 1,757,014
Title plant 925,256 925,256
Goodwill 5,206,945 5,443,091
Deferred taxes 459,610 556,913
Income taxes receivable -- 209,995
Prepaid expenses and other assets 518,751 397,970
------------- -------------
Total assets $ 388,449,918 $ 388,997,786
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 271,903,991 $ 261,166,646
Borrowed funds 77,026,226 88,592,226
Advances from borrowers for taxes and insurance 1,448,419 1,318,069
Dividends payable 272,697 240,235
Income taxes payable 47,432 --
Accrued expenses and other liabilities 1,207,647 1,282,495
------------- -------------
Total liabilities 351,906,412 352,599,671
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized 3,000,000 shares,
issued and outstanding none) -- --
Common stock ($.01 par value, authorized 15,500,000 shares;
issued and outstanding 2001 4,021,557 shares; 2000 4,011,057 shares) 40,216 40,111
Additional paid-in capital 38,632,854 38,378,315
Retained earnings, substantially restricted 34,900,710 33,345,852
Accumulated other comprehensive income (loss) 134,969 (247,340)
Less cost of treasury stock, 2001 2,204,277 shares; 2000 2,099,177 shares (36,603,896) (34,471,911)
Unearned shares, employee stock ownership plan (561,347) (646,912)
------------- -------------
Total stockholders' equity 36,543,506 36,398,115
------------- -------------
Total liabilities and stockholders' equity $ 388,449,918 $ 388,997,786
============= =============
See Notes to Consolidated Condensed Financial Statements.
1
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ -------------
Interest income:
Loans receivable $ 6,344,461 $ 5,972,166 $ 12,717,494 $ 11,709,072
Securities and cash deposits 577,961 759,024 1,245,481 1,552,379
------------ ------------ ------------ ------------
6,922,422 6,731,190 13,962,975 13,261,451
------------ ------------ ------------ ------------
Interest expense:
Deposits 3,086,479 2,998,314 6,219,074 5,949,889
Borrowed funds 1,168,504 1,032,173 2,417,322 1,866,529
------------ ------------ ------------ ------------
4,254,983 4,030,487 8,636,396 7,816,418
------------ ------------ ------------ ------------
Net Interest Income 2,667,439 2,700,703 5,326,579 5,445,033
Provision for loan losses 60,000 30,000 90,000 60,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 2,607,439 2,670,703 5,236,579 5,385,033
------------ ------------ ------------ ------------
Noninterest income:
Fees and service charges 471,470 380,361 880,276 734,187
Abstract fees 378,302 353,976 680,574 657,750
Mortgage banking fees 201,073 34,026 309,836 72,590
(Loss) on sale of securities available for sale, net (1,733) -- (933) --
Other income 186,078 183,412 404,013 442,532
------------ ------------ ------------ ------------
Total noninterest income 1,235,190 951,775 2,273,766 1,907,059
------------ ------------ ------------ ------------
Noninterest expense:
Salaries and employee benefits 1,048,007 992,199 2,147,853 2,035,014
Premises and equipment 289,359 244,534 586,504 481,455
Data processing 117,219 116,107 222,799 229,536
SAIF deposit insurance premiums 12,451 14,109 25,287 27,934
Goodwill amortization 118,072 118,072 236,145 236,145
Other expenses 599,482 624,914 1,139,861 1,212,544
------------ ------------ ------------ ------------
Total noninterest expense 2,184,590 2,109,935 4,358,449 4,222,628
------------ ------------ ------------ ------------
Income before income taxes 1,658,039 1,512,543 3,151,896 3,069,464
Provision for income taxes 547,735 507,780 1,060,454 1,057,597
------------ ------------ ------------ ------------
Net Income $ 1,110,304 $ 1,004,763 $ 2,091,442 $ 2,011,867
============ ============ ============ ============
Basic earnings per common share $ 0.62 $ 0.51 $ 1.16 $ 0.99
============ ============ ============ ============
Earnings per common share- assuming dilution $ 0.59 $ 0.50 $ 1.10 $ 0.98
============ ============ ============ ============
Dividends declared per common share $ 0.15 $ 0.125 $ 0.30 $ 0.25
============ ============ ============ ============
Comprehensive income $ 1,109,404 $ 1,141,328 $ 2,473,751 $ 1,885,062
============ ============ ============ ============
See Notes to Consolidated Condensed Financial Statements.
2
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,091,442 $ 2,011,867
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 90,000 60,000
Depreciation 345,437 283,842
Amortization and accretion 309,002 289,019
Deferred taxes (131,415) 37,994
Effect of contribution to employee stock ownership plan 178,947 136,808
(Gain) on sale of foreclosed real estate and loans, net (295,211) (26,995)
Loss on sale of securities available for sale 933 --
Loss on impairment and disposal of equipment and premises, net 5,121 29,820
Proceeds from sales of loans held for sale 21,345,410 4,471,928
Originations of loans held for sale (22,303,539) (4,684,245)
Change in assets and liabilities:
Accrued interest receivable 128,848 (39,554)
Income taxes receivable 209,995 --
Prepaid expenses and other assets (120,781) (165,237)
Income taxes payable 47,432 (34,287)
Accrued expenses and other liabilities (74,848) 148,629
------------ ------------
Net cash provided by operating activities 1,826,773 2,519,589
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans 11,103,149 (9,874,897)
Purchase of loans (14,408,497) (10,556,370)
Proceeds from sales of securities available-for-sale 220,125 --
Purchase of securities available-for-sale (6,736,938) (896,600)
Proceeds from maturities of securities available-for-sale 16,726,643 5,433,590
Purchase of premises and equipment and rental real estate (466,809) (1,113,912)
Proceeds from sale of equipment 18,376 180
Other -- (1,982)
------------ ------------
Net cash provided by (used in) investing activities 6,456,049 (17,009,991)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 10,737,345 (5,189,285)
Increase (decrease) in advances from borrowers for taxes and insurance 130,350 (72,989)
Net change in short-term borrowings (5,000,000) 17,000,000
Proceeds from other borrowed funds 3,000,000 15,000,000
Payments of other borrowings (9,566,000) (9,062,801)
Purchase of treasury stock (2,131,985) (3,960,563)
Dividends paid (504,121) (462,133)
Issuance of common stock 170,965 --
Other (9,704) (5,409)
------------ ------------
Net cash provided by (used in) financing activities (3,173,150) 13,246,820
------------ ------------
Net increase (decrease) in cash 5,109,672 (1,243,582)
CASH
Beginning 8,849,726 12,668,678
------------ ------------
Ending $ 13,959,398 $ 11,425,096
============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 6,294,220 $ 5,900,010
Interest paid on borrowings 2,468,872 1,816,408
Income taxes 934,442 1,053,890
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 and six month
periods ended June 30, 2001 and 2000 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 2000 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 June
30, 2001, the weighted average number of shares outstanding for basic and
diluted earnings per share computation were 1,777,141 and 1,870,053,
respectively. For the six month period ended June 30, 2001, the weighted average
number of shares outstanding for basic and diluted earnings per share
computation were 1,805,929 and 1,895,546, respectively. For the three month
period ended June 30, 2000, the weighted average number of shares outstanding
for basic and diluted earnings per share computation were 1,966,800 and
1,995,014, respectively. For the six month period ended June 30, 2000, the
weighted average number of shares outstanding for basic and diluted earnings per
share computation were 2,028,718 and 2,061,402, respectively.
3. DIVIDENDS
On May 24, 2001, the Company declared a cash dividend on its common stock,
payable on July 6, 2001 to stockholders of record as of June 15, 2001, equal to
$0.15 per share.
4. PRONOUNCEMENTS ISSUED NOT YET ADOPTED
In July, 2001, the Financial Accounting Standards Board issued two
statements-Statement 141, Business Combinations, and Statement 142, Goodwill and
Other Intangible Assets, which will potentially impact the Company's accounting
for its reported goodwill and other intangible assets.
Statement 141:
Eliminates the pooling method for accounting for business combinations.
Requires that intangible assets that meet certain criteria be reported
separately from goodwill.
Requires negative goodwill arising from a business combination to be
recorded as an extraordinary gain.
Statement 142:
Eliminates the amortization of goodwill and other intangibles that are
determined to have an indefinite life.
Requires, at a minimum, annual impairment tests for goodwill and other
intangible assets that are determined to have an indefinite life.
4
Upon adoption of these Statements, the Company is required to:
Re-evaluate goodwill and other intangibles assets that arose from
business combinations entered into before July 1, 2001. If the recorded
other intangible assets do not meet the criteria for recognition, they
should be reclassified to goodwill. Similarly, if there are other
intangible assets that meet the criteria for recognition but were not
separately recorded from goodwill, they should be reclassified from
goodwill.
Reassess the useful lives of intangible assets and adjust the remaining
amortization periods accordingly.
Write-off any remaining negative goodwill.
The Company has not yet completed its full assessment of the effects of these
new pronouncements on its financial statements and so is uncertain as to the
impact. The standards generally are required to be implemented by the Company in
its 2002 financial statements.
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.
FINANCIAL CONDITION
Total assets decreased $548,000, or 0.1%, to $388.4 million at June 30, 2001
compared to $389.0 million at December 31, 2000. Interest bearing cash increased
$5.2 million, or 82.6% to $11.6 million at June 30, 2001 from $6.3 million at
December 31, 2000. Securities available for sale decreased $9.6 million, or
22.2% from $43.4 million at December 31, 2000 to $33.7 million at June 30, 2001,
primarily due to $16.9 million of maturities, calls and sales, offset in part by
increases in fair market value of $611,000 and purchases of $6.7 million of such
securities. Total loans receivable, net and loans held for sale, increased by
$4.4 million to $322.9 million at June 30, 2001 from $318.5 million at December
31, 2000, due primarily to originations of $35.6 million of first mortgage loans
secured primarily by one-to four-family residences, purchases of $14.4 million
of first mortgage loans secured primarily by one-to four-family, multifamily and
commercial real estate and originations of $13.5 million of second mortgage
loans. These originations and purchases were offset in part by payments and
prepayments of loans of approximately $43.6 million and loan sales of $20.7
million. Total deposits increased $10.7 million, or 4.1%, to $271.9 million
at June 30, 2001 from $261.2 million at December 31, 2000, reflecting increases
primarily in money market savings accounts and certificates of deposit accounts.
Other borrowings, primarily Federal Home Loan Bank ("FHLB") advances, decreased
by $11.6 million from $88.6 million at December 31, 2000 to $77.0 million at
June 30, 2001. Total stockholders' equity increased $145,000, to $36.5 million
at June 30, 2001 from $36.4 million at December 31, 2000. See "Capital."
CAPITAL
The Company's total stockholders' equity increased by $145,000 to $36.5 million
at June 30, 2001 from $36.4 million at December 31, 2000, primarily due to
earnings and an increase in the accumulated other comprehensive income, which
were offset in part by stock repurchases and dividends declared. 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 $561,000 at June 30, 2001 from $647,000 at December 31, 2000. The decrease in
unearned shares resulted from the release of shares by 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 June 30,
2001, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of June 30, 2001 were as follows:
Amount Percentage of Assets
------ --------------------
(dollars in thousands)
Tangible capital:
Capital level $ 28,808 7.55%
Less Requirement 5,726 1.50%
--------- -----
Excess $ 23,082 6.05%
========= =====
Core capital:
Capital level $ 28,808 7.55%
Less Requirement 15,269 4.00%
--------- -----
Excess $ 13,539 3.55%
========= =====
Risk-based capital:
Capital level $ 31,581 13.79%
Less Requirement 18,320 8.00%
--------- -----
Excess $ 13,261 5.79%
========= =====
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including net income), certain financing activities (including increases in
deposits and proceeds from borrowings) and certain investing activities
(including principal payments on loans and maturities and calls of securities).
During the first six months of 2001 and 2000, principal payments and repayments
on loans totalled $43.6 million and $26.3 million, respectively. The net
increase in deposits during the first six months of 2001 totalled $10.7 million.
The proceeds from borrowed funds during the six months ended June 30, 2001 and
2000 totalled $3.0 million and $15.0 million, respectively. The net change in
short-term borrowings during the six months ended June 30, 2000 totalled $17.0
million. During the first six months of 2001 and 2000, the proceeds from the
maturities, calls and sales of securities totalled $16.9 million and $5.4
million, respectively. Cash provided from operating activities during the first
six months of 2001 and 2000 totalled $1.8 million and $2.5 million,
respectively, of which $2.1 million and $2.0 million, respectively, represented
net income of the Company. The Company's primary use of funds is cash used to
originate and purchase loans, purchase of securities available for sale,
repayment of borrowed funds and other financing activities (including decreases
in deposits). During the first six months of 2001 and 2000, the Company's gross
purchases and origination of loans totalled $69.9 million and $47.5 million,
respectively. The increase in purchases and originations in due in part to lower
market interest rates in 2001. The purchase of securities available for sale for
the six months ended June 30, 2001 and 2000 totalled $6.7 million and $897,000,
respectively. The net decrease in deposits during the first six months of 2000
totalled $5.2 million. The repayment of borrowed funds during the first six
months of 2001 and 2000 totalled $9.6 million and $9.1 million, respectively.
The net change in short-term borrowings during the six months ended June 30,
2001 totalled $5.0 million. 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 entered into a $2.0 million line of credit agreement on September
21, 2000 with another unaffiliated bank. The Company may use this line of credit
to fund stock repurchases in the future and general corporate purposes. As of
June 30, 2001, there were no borrowings outstanding on this line of credit.
Stockholders' equity totaled $36.5 million at June 30, 2001 compared to $36.4
million at December 31, 2000, reflecting the Company's earnings, 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 loss. The Company repurchased 105,100 shares of common stock
during the six months ended June 30, 2001 at an average price of $20.29.
On April 6, 2001, the Company paid a quarterly cash dividend of $0.15 per share
on common stock outstanding as of the close of business on March 15, 2001,
aggregating $285,000. On May 24, 2001, the Company declared a quarterly cash
dividend of $0.15 per share payable on July 6, 2001 to shareholders of record as
of the close of business on June 15, 2001, aggregating $273,000.
7
Interest Income. Interest income increased by $191,000 to $6.9 million for the
three months ended June 30, 2001 compared to $6.7 million for the three months
ended June 30, 2000. The increase in interest income was primarily due to
increases in the average balance and average yield on interest earning assets.
The average balance of interest earning assets increased $5.6 million to $361.5
million for the three months ended June 30, 2001 from $355.8 million for the
three months ended June 30, 2000. This increase was primarily due to first
mortgage loans, consumer loans and interest bearing cash, offset by a decrease
in securities available for sale. The increase in the average balance of loans
generally reflects an increase over the past twelve months in originations of
first mortgage loans, second mortgage loans and purchases of first mortgage
loans secured primarily by multi-family, one-to four-family residential and
commercial real estate loans, which were offset in part by payments, sales and
prepayments of loans. See "Financial Condition." The decrease in securities
available for sale reflects maturities, calls and sales, offset in part by
purchases. The yield on interest earning assets increased to 7.66% for the three
months ended June 30, 2001 from 7.57% for the three months ended June 30, 2000.
The increase in average yields was due primarily to an increase in the average
balance of loans as compared to the average balance of interest bearing assets,
an increase in the average yield on loans, offset in part by a decrease in the
average yield on interest bearing cash. The average yield on loans increased to
7.96% for the three months ended June 20, 2001 from 7.85% for the three months
ended June 30, 2000. The average yield on interest bearing cash decreased to
4.19% for the three months ended June 30, 2001 from 5.95% for the three months
ended June 30, 2000.
Interest income increased by $702,000 to $14.0 million for the six months ended
June 30, 2001 compared to $13.3 million for the six months ended June 30, 2000.
The increase in interest income was primarily due to increases in the average
balance and average yield on interest earning assets. The average balance of
interest earning assets increased $12.3 million to $364.6 million for the six
months ended June 30, 2001 from $352.3 million for the six month ended June 30,
2000. This increase was primarily due to first mortgage loans, consumer loans
and interest bearing cash, offset by a decrease in securities available for
sale. The increase in the average balance of loans generally reflects an
increase over the past twelve months in originations of first mortgage loans,
second mortgage loans and purchases of first mortgage loans secured primarily by
multi-family, one-to four-family residential and commercial real estate loans,
which were offset in part by payments, sales and prepayments of loans. See
"Financial Condition." The decrease in securities available for sale reflects
maturities, calls and sales, offset in part by purchases. The yield on interest
earning assets increased to 7.67% for the six months ended June 30, 2001 from
7.54% for the six months ended June 30, 2000. The increase in average yields was
due primarily to an increase in the average balance of loans as compared to the
average balance of interest bearing assets, an increase in the average yield on
loans, offset in part by a decrease in the average yield on securities available
for sale. The average yield on loans increased to 7.99% for the six months ended
June 30, 2001 from 7.83% for the six months ended June 30, 2000. The average
yield on securities available for sale decreased to 5.63% for the six months
ended June 30, 2001 from 5.87% for the six months ended June 30, 2000. The
decrease in the average yield on securities available for sale was due in part
to a change in the average yield on Federal Home Loan Bank stock. The average
yield on the Federal Home Loan Bank stock for the six months ended June 30, 2001
and 2000 was 4.09% and 6.51%, respectively. The average yield on interest
bearing cash decreased to 4.74% for the six months ended June 30, 2001 from
5.65% for the six months ended June 30, 2000.
Interest Expense. Interest expense increased by $224,000 to $4.3 million for the
three months ended June 30, 2001 compared to $4.0 million for the three months
ended June 30, 2000. The increase in interest expense was primarily due to an
increase in the average balance and average cost of interest bearing
liabilities. The average balance of interest bearing liabilities increased $9.3
million to $338.4 million for the three months ended June 30, 2001 from $329.0
million for the three months ended June 30, 2000. This increase was due
primarily to money market savings accounts and borrowed funds, offset by a
decrease in savings accounts and certificates of deposit. The increase in money
market funds was primarily due to the offering of a premium money market
product. The increase in the borrowed funds was in part to fund the
corresponding asset growth and stock repurchases. The decrease in the
certificates of deposit was due in part to a decrease in the deposits of public
funds. The average cost of interest bearing liabilities increased to 5.04% for
the three months ended June 30, 2001 from 4.90% for the three months ended June
30, 2000. The increase in the average cost of interest bearing liabilities was
due primarily to an increase in the average cost of certificates of deposit and
borrowed funds resulting from the increase in market interest rates over the
past twelve months.
Interest expense increased by $820,000 to $8.6 million for the six months ended
June 30, 2001 compared to $7.8 million for the six months ended June 30, 2000.
The increase in interest expense was primarily due to an increase in the average
balance and average cost of interest bearing liabilities. The average balance of
interest bearing liabilities increased $15.4 million to $339.6 million for the
six months ended June 30, 2001 from $324.2 million for the six months ended June
30, 2000. This increase was due primarily to money market savings accounts and
borrowed funds, offset by a decrease in savings accounts and certificates of
deposit. The increase in money market funds was primarily due to the offering of
a premium money market product. The increase in the borrowed funds was in part
to fund the corresponding asset growth and stock repurchases. The decrease in
the certificates of deposit was due in part to a decrease in the deposits of
public
8
RESULTS OF OPERATIONS (Continued)
funds. The average cost of interest bearing liabilities increased to 5.13% for
the six months ended June 30, 2001 from 4.82% for the six months ended June 30,
2000. The increase in the average cost of interest bearing liabilities was due
primarily to an increase in the average cost of certificates of deposit and
borrowed funds resulting from the increase in market interest rates over the
past twelve months and the offering of a premium money market product.
Net Interest Income. Net interest income before the provision for loan losses
decreased by $33,000 to $2,667,000 for the three months ended June 30, 2001 from
$2,701,000 for the three months ended June 30, 2000. The decrease is due
primarily to decreases in the interest rate spread and the ratio of average
interest earning assets to average interest bearing liabilities. The interest
rate spread (i.e., the difference in the average yield on assets and average
cost of liabilities) decreased to 2.62% for the three months ended June 30, 2001
from 2.67% for the three months ended June 30, 2000. The ratio of average
interest earning assets to average interest bearing liabilities decreased to
106.83% for the three months ended June 30, 2001 from 108.15% for the three
months ended June 30, 2000.
Net interest income before the provision for loan losses decreased by $118,000
to $5,327,000 for the six months ended June 30, 2001 from $5,445,000 for the six
months ended June 30, 2000. The decrease is due primarily to decreases in the
interest rate spread and the ratio of average interest earning assets to average
interest bearing liabilities. The interest rate spread (i.e., the difference in
the average yield on assets and average cost of liabilities) decreased to 2.54%
for the six months ended June 30, 2001 from 2.72% for the six months ended June
30, 2000. The ratio of average interest earning assets to average interest
bearing liabilities for decreased to 107.38% for the six months ended June 30,
2001 from 108.67% for the six months ended June 30, 2000.
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 and six month periods ended June 30, 2001 and 2000,
respectively.
9
RESULTS OF OPERATIONS (Continued)
For the Three Months Ended June 30,
----------------------------------------------------------------------------------
2001 2000
----------------------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans..................................... $ 318,889 $ 6,344 7.96% $ 304,360 $ 5,972 7.85%
Securities available for sale............. 32,132 469 5.83 47,341 697 5.89
Interest bearing cash..................... 10,462 109 4.19 4,146 62 5.95
--------- --------- --------- --------- --------- ---------
Total interest-earning assets........... 361,483 $ 6,922 7.66% 355,847 $ 6,731 7.57%
--------- --------- --------- ---------
Noninterest-earning assets.................. 22,318 18,201
--------- ---------
Total assets............................ $ 383,801 $ 374,048
========= =========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings.............. $ 58,040 $ 331 2.29% $ 46,324 $ 259 2.25%
Passbook savings.......................... 21,807 94 1.72 25,783 129 2.01
Certificates of deposit................... 181,343 2,662 5.89 189,009 2,610 5.54
Borrowed funds............................ 77,172 1,168 6.07 67,904 1,032 6.01
--------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities.......... 338,362 $ 4,255 5.04% 329,020 $ 4,030 4.90%
--------- --------- --------- ---------
Noninterest-bearing liabilities............. 8,759 9,365
--------- ---------
Total liabilities....................... 347,121 338,385
Equity...................................... 36,680 35,663
--------- ---------
Total liabilities and equity ........... $ 383,801 $ 374,048
========= =========
Net interest income.......................... $ 2,667 $ 2,701
========= =========
Net interest rate spread..................... 2.62% 2.67%
========= =========
Net interest margin.......................... 2.95% 3.04%
========= =========
Ratio of average interest-earning assets to
average interest-bearing liabilities........ 106.83% 108.15%
========= =========
For the Six Months Ended June 30,
---------------------------------------------------------------------------------
2001 2000
---------------------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans..................................... $ 318,768 $ 12,718 7.99% $ 299,221 $ 11,709 7.83%
Securities available for sale............. 35,932 1,012 5.63 48,860 1,433 5.87
Interest bearing cash..................... 9,930 233 4.74 4,238 119 5.65
--------- --------- --------- --------- --------- ---------
Total interest-earning assets........... 364,630 $ 13,963 7.67% 352,319 $ 13,261 7.54%
--------- --------- --------- ---------
Noninterest-earning assets.................. 20,635 18,317
--------- ---------
Total assets............................ $ 385,265 $ 370,636
========= =========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings.............. $ 57,151 718 2.53% $ 46,537 507 2.19%
Passbook savings.......................... 21,628 191 1.78 25,868 259 2.01
Certificates of deposit................... 180,571 5,310 5.93 189,374 5,184 5.49
Borrowed funds............................ 80,216 2,417 6.08 62,428 1,866 5.91
--------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities.......... 339,566 $ 8,636 5.13% 324,207 $ 7,816 4.82%
--------- --------- --------- ---------
Noninterest-bearing liabilities............. 8,938 10,186
--------- ---------
Total liabilities....................... 348,504 334,393
Equity...................................... 36,761 36,243
--------- ---------
Total liabilities and equity ........... $ 385,265 $ 370,636
========= =========
Net interest income.......................... $ 5,327 $ 5,445
========= =========
Net interest rate spread..................... 2.54% 2.72%
========= =========
Net interest margin.......................... 2.92% 3.09%
========= =========
Ratio of average interest-earning assets to
average interest-bearing liabilities........ 107.38% 108.67%
========= =========
10
RESULTS OF OPERATIONS (Continued)
Provision for Loan Losses. The Company's provision for loan losses was $60,000
and $30,000 for the three months ended June 30, 2001 and 2000, respectively. The
Company's provision for loan losses was $90,000 and $60,000 for each of the six
months ended June 30, 2001 and 2000, 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 $33,000
for the six months ended June 30, 2001 as compared to net charge offs of $37,000
for the six months ended June 30, 2000. The resulting allowance for loan losses
was $2.9 million at June 30, 2001, $2.8 million at December 31, 2000 and $2.8
million at June 30, 2000. The level of nonperforming loans increased to $1.5
million at June 30, 2001 from $1.0 million at December 31, 2000 and from
$837,000 at June 30, 2000. Management believes that the allowance for loan
losses is adequate. While management estimates loan losses using the best
available information, such as independent appraisals for significant collateral
properties, no assurance can be made that future adjustments to the allowance
will not be necessary based on changes in economic and real estate market
conditions, further information obtained regarding known problem loans,
identification of additional problem loans, and other factors, both within and
outside of management's control.
Noninterest Income. Total noninterest income increased by $283,000 to $1,235,000
for the three months ended June 30, 2001 from $952,000 for the three months
ended June 30, 2000. The increase is due to increases in fees and services
charges, abstracting income and mortgage banking income. Fees and services
charges increased $91,000, primarily due to increases in overdraft fees.
Abstracting income increased $24,000, due to an increased sales volume, which
resulted in part from a general increase in real estate activity. Mortgage
banking income increased $167,000 due to an increase in loan originations.
Noninterest income for the three months ended June 30, 2001 reflects losses on
the sales of securities available for sale of $2,000 (actual dollars), while the
three months ended June 30, 2000 does not include any gains or losses on the
sale of securities available for sale.
Total noninterest income increased by $367,000 to $2,274,000 for the six months
ended June 30, 2001 from $1,907,000 for the six months ended June 30, 2000. The
increase is due to increases in fees and services charges and mortgage banking
income, offset in part by decreases in other income. Fees and services charges
increased $146,000, primarily due to increases in overdraft fees. Mortgage
banking income increased $237,000 due to an increase in loan originations. Other
income decreased $39,000, primarily due to decreases in revenues from the sale
of annuities and mutual funds, offset in part by an increase in revenues from
the sale of insurance. Noninterest income for the six months ended June 30,
2001 reflects losses on the sales of securities available for sale of $900
(actual dollars), while the six months ended June 30, 2000 does not include any
gains or losses on the sale of securities available for sale.
Noninterest Expense. Total noninterest expense increased by $75,000 to
$2,185,000 for the three months ended June 30, 2001 from $2,110,000 for the
three months ended June 30, 2000. The increase is due primarily to increases in
salaries and employee benefits and premises and equipment. The increase in
salaries and employee benefits were due in part to normal salary increases and
increases as a result of the employee stock ownership plan. The increases in
premises and equipment were due in part to increases in utility costs, real
estate taxes and depreciation. The Company's efficiency ratio for the three
months ended June 30, 2001 and 2000 were 55.98% and 57.77%, respectively. The
Company's ratio of noninterest expense to average assets for the three months
ended June 30, 2001 and 2000 were 2.28% and 2.26%, respectively.
Total noninterest expense increased by $136,000 to $4,358,000 for the six months
ended June 30, 2001 from $4,223,000 for the six months ended June 30, 2000. The
increase is due primarily to increases in salaries and employee benefits and
premises and equipment, offset in part by a decrease in other expenses. The
increase in salaries and employee benefits were due in part to normal salary
increases and increases as a result of the employee stock ownership plan. The
increases in premises and equipment were due in part to increases in utility
costs, real estate taxes and depreciation. The decrease in other expenses were
due in part to decreases in marketing costs, loan costs, check charges, one time
charges, offset by increases in donations. The Company's efficiency ratio for
the six months ended June 30, 2001 and 2000 were 57.35% and 57.43%,
respectively. The Company's ratio of noninterest expense to average assets for
the six months ended June 30, 2001 and 2000 were 2.26% and 2.28%, respectively.
Income Taxes. Income taxes increased by $40,000 to $548,000 for the three months
ended June 30, 2001 as compared to $508,000 for the three months ended June 30,
2000, primarily due to an increase in net income before income taxes.
11
RESULTS OF OPERATIONS (Continued)
Income taxes increased by $3,000 to $1,060,000 for the six months ended June 30,
2001 as compared to $1,058,000 for the six months ended June 30, 2000, primarily
due to an increase in net income before income taxes
Net Income. Net income increased by $106,000 to $1,110,000 for the three months
ended June 30, 2001, as compared to $1,005,000 for the same period in 2000.
Net income increased by $80,000 to $2,091,000 for the six months ended June 30,
2001, as compared to $2,012,000 for the same period in 2000.
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, 2000 as reported in Item 7A of the Annual Report on Form 10-K.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 2001 Annual Meeting of Stockholders on April 27,
2001. At the meeting, the stockholders of the Company considered and voted upon
the following matters:
1. The election of the following individuals as directors for a
three-year term:
Melvin R. Schroeder
Craig R. Barnes
The results of the election of directors are as follows:
Votes
-----
In favor Withheld
-------- --------
Melvin R. Schroeder 1,745,526 6,963
Craig R. Barnes 1,745,526 6,963
There were no broker non-votes or abstentions on this proposal.
The following directors' terms of office continued after the meeting:
David M. Bradley
KaRene Egemo
Robert H. Singer, Jr.
Mark M. Thompson
2. The ratification of the engagement of McGladrey & Pullen LLP, as the
Company's independent auditors, was approved by a vote of 1,748,772 in
favor, 1,099 votes against and 2,618 votes abstaining.
There were no broker non-votes on this proposal.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 Press Release, dated May 24, 2001 (regarding declaration
of dividend).
Exhibit 99.2 Press Release, dated July 18, 2001 (regarding the second
quarter earnings).
(b) Reports on Form 8-K
None
13
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: August 14, 2001 BY: /s/ David M. Bradley
--------------------------
David M. Bradley, Chairman, President and
Chief Executive Officer
DATE: August 14, 2001 /s/ John L. Pierschbacher
-------------------------
John L. Pierschbacher, CPA
Principal Financial Officer
14