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, 2002
[ ] 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 3, 2002
- --------------------------------------------------------------------------------
Common Stock, $.01 par value 1,688,280
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 March 31, 2002
(Unaudited) and December 31, 2001 1
Consolidated Condensed Statements of
Income for the three months ended
March 31, 2002 and 2001 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 31, 2002 and 2001 (Unaudited) 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 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 9
Part II. Other Information
Items 1 through 6 10
Signatures 11
Exhibits
PART I. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
ASSETS 2002 2001
------------- ------------
(Unaudited)
Cash and due from banks:
Interest-bearing $ 17,023,914 $ 17,650,064
Noninterest-bearing 2,035,767 2,258,838
Securities available-for-sale 26,074,390 31,365,731
Loans receivable, net 332,390,064 307,981,424
Loans held for sale 1,781,590 1,605,710
Accrued interest receivable 1,982,193 1,913,557
Foreclosed real estate 1,116,347 1,073,873
Premises and equipment, net 7,447,938 6,797,505
Rental real estate 1,660,819 1,681,337
Title plant 925,256 925,256
Goodwill 4,970,800 4,970,800
Deferred taxes 554,871 484,904
Prepaid expenses and other assets 798,810 666,228
------------- -------------
Total assets $ 398,762,759 $ 379,375,227
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $ 272,088,049 $ 268,813,731
Borrowed funds 87,630,342 71,412,723
Advances from borrowers for taxes and insurance 1,070,778 1,589,314
Dividends payable 301,190 256,587
Income taxes payable 693,370 78,711
Accrued expenses and other liabilities 925,945 1,311,412
------------- -------------
Total liabilities 362,709,674 343,462,478
------------- -------------
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 1,700,280 shares) 17,003 17,003
Additional paid-in capital 16,833,362 16,780,875
Retained earnings, substantially restricted 20,342,284 19,402,706
Accumulated other comprehensive income 138,348 189,991
Less cost of treasury stock, 2002, 37,000 shares; 2001, none (840,800) --
Unearned shares, employee stock ownership plan (437,112) (477,826)
------------- -------------
Total stockholders' equity 36,053,085 35,912,749
------------- -------------
Total liabilities and stockholders' equity $ 398,762,759 $ 379,375,227
============= =============
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,
2002 2001
----------- -----------
Interest income:
Loans receivable $ 6,092,631 $ 6,373,033
Securities and cash deposits 438,026 667,520
----------- -----------
6,530,657 7,040,553
----------- -----------
Interest expense:
Deposits 2,433,434 3,132,595
Borrowed funds 1,059,629 1,248,818
----------- -----------
3,493,063 4,381,413
----------- -----------
Net Interest Income 3,037,594 2,659,140
Provision for loan losses 180,000 30,000
----------- -----------
Net interest income after provision for loan losses 2,857,594 2,629,140
----------- -----------
Noninterest income:
Fees and service charges 588,581 408,806
Abstract fees 396,610 302,272
Mortgage banking fees 108,158 108,763
Gain (loss) on sale of securities available for
sale, net (1,365) 800
Other income 222,538 217,935
----------- -----------
Total noninterest income 1,314,522 1,038,576
----------- -----------
Noninterest expense:
Salaries and employee benefits 1,265,930 1,099,846
Premises and equipment 308,817 297,145
Data processing 128,932 105,580
SAIF deposit insurance premiums 12,186 12,836
Goodwill amortization -- 118,073
Other expenses 649,591 540,379
----------- -----------
Total noninterest expense 2,365,456 2,173,859
----------- -----------
Income before income taxes 1,806,660 1,493,857
Provision for income taxes 575,924 512,719
----------- -----------
Net Income $ 1,230,736 $ 981,138
=========== ===========
Basic earnings per common share $ 0.75 $ 0.53
=========== ===========
Earnings per common share- assuming dilution $ 0.71 $ 0.51
=========== ===========
Dividends declared per common share $ 0.18 $ 0.15
=========== ===========
Comprehensive income $ 1,179,093 $ 1,364,347
=========== ===========
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,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,230,736 $ 981,138
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 180,000 30,000
Depreciation 175,574 167,772
Amortization and accretion 43,301 148,295
Deferred taxes (39,045) (78,885)
Effect of contribution to employee stock ownership plan 93,201 88,129
(Gain) on sale of foreclosed real estate and loans, net (108,108) (18,061)
(Gain) loss on sale of securities available for sale 1,365 (800)
(Gain) loss on impairment and disposal of equipment and premises, net (15) 396
Proceeds from sales of loans held for sale 7,343,384 7,736,192
Originations of loans held for sale (7,411,106) (9,806,324)
Change in assets and liabilities:
Accrued interest receivable (68,636) 165,287
Income taxes receivable -- 209,995
Prepaid expenses and other assets (117,077) (92,044)
Income taxes payable 614,659 463,801
Accrued expenses and other liabilities (385,467) 400,400
------------ ------------
Net cash provided by operating activities 1,552,766 395,291
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in loans 11,641,869 4,765,257
Purchase of loans (36,314,323) (1,126,469)
Proceeds from sales of securities available-for-sale 13,760 11,400
Purchase of securities available-for-sale -- (5,499,000)
Proceeds from maturities of securities available-for-sale 5,192,377 12,091,001
Purchase of premises and equipment and rental real estate (820,994) (350,355)
Proceeds from sale of equipment 15 3,336
Other (737) --
------------ ------------
Net cash provided by (used in) investing activities (20,288,033) 9,895,170
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 3,274,318 5,728,917
(Decrease) in advances from borrowers for taxes and insurance (518,536) (418,843)
Net change in short-term borrowings 4,750,000 (5,000,000)
Proceeds from other borrowed funds 20,000,000 3,000,000
Payments of other borrowings (8,532,381) (9,530,728)
Purchase of treasury stock (840,800) (1,093,813)
Dividends paid (246,555) (229,547)
Other -- (9,704)
------------ ------------
Net cash provided by (used in) financing activities 17,886,046 (7,553,718)
------------ ------------
Net increase (decrease) in cash (849,221) 2,736,743
CASH
Beginning 19,908,902 8,849,726
------------ ------------
Ending $ 19,059,681 $ 11,586,469
============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments (receipts) for:
Interest paid to depositors $ 2,596,731 $ 3,225,623
Interest paid on borrowings 1,059,276 1,300,368
Income taxes 310 (82,192)
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, 2002 and 2001 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 2001 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, 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. For the three month period ended March 31, 2001, the weighted
average number of shares outstanding for basic and diluted earnings per share
computation were 1,834,939 and 1,921,261, respectively.
3. DIVIDENDS
On February 22, 2002, the Company declared a cash dividend on its common stock,
payable on April 8, 2002 to stockholders of record as of March 15, 2002, equal
to $0.18 per share.
4. GOODWILL
On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 141, "Business Combinations, " and No. 142, "Goodwill and Other
Intangible Assets" (SFAS 141 and 142). SFAS 141 addresses financial accounting
and reporting for business combinations and replaces APB Opinion No. 16,
"Business Combinations" (APB 16). SFAS 141 no longer allows the pooling of
interests method of accounting for acquisitions, provides new recognition
criteria for intangible assets and carries forward without reconsideration the
guidance in APB 16 related to the application of the purchase method of
accounting. SFAS 142 addresses financial accounting and reporting for acquired
goodwill and other intangible assets and replaces APB Opinion No. 17,
"Intangible Assets." SFAS 142 addresses how intangible assets should be
accounted for upon their acquisition and after they have been initially
recognized in the financial statements. The new standards provide specific
guidance on measuring goodwill for impairment annually using a two-step process.
The first step identifies potential impairment and the second step measures the
amount of goodwill impairment loss to be recognized.
As of January 1, 2002, the Company has undertaken to identify those intangible
assets that remain separable under the provisions of the new standard and those
that are to be included in goodwill and concluded that all amounts should be
included in goodwill. In the year of adoption, SFAS 142 requires the first step
of the goodwill impairment test to be completed within the first six months and
the final step to be completed within the twelve months of adoption. The Company
has completed the first step of the goodwill impairment test and has determined
that there is no impairment of goodwill.
4
Had the provisions of SFAS 141 and 142 been applied in fiscal year 2001, the
Company's net income and net income per share would have been as follows:
Three months ended
March 31, 2001
Net Basic earnings Diluted earnings
Income Per Share Per Share
------------ ------------------ ----------------
Net Income:
As reported......................... $ 981,138 $ .53 $ .51
Add: Goodwill amortization.......... 118,073 .07 .06
---------- ----- -----
Pro forma net income............ $ 1,099,211 $ .60 $ .57
=========== ===== =====
As of December 31, 2001 and March 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, 2002.
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 which may affect
the forward-looking financial statements contained here within.
FINANCIAL CONDITION
Total assets increased $19.4 million, or 5.1%, to $398.8 million at March 31,
2002 compared to $379.4 million at December 31, 2001. Securities available for
sale decreased $5.3 million, or 16.9% from $31.4 million at December 31, 2001 to
$26.1 million at March 31, 2002, primarily due to $5.2 million of maturities,
calls and sales and decreases in fair market value of $83,000 of such
securities. Total loans receivable, net, increased by $24.4 million to $332.4
million at March 31, 2002 from $308.0 million at December 31, 2001, due
primarily to originations of $12.8 million of first mortgage loans secured
primarily by one-to four-family residences, purchases of $36.3 million of first
mortgage loans secured primarily by multifamily and commercial real estate and
originations of $6.3 million of second mortgage loans secured primarily by one-
to-four-family residences. These originations and purchases were offset in part
by payments and prepayments of loans of approximately $27.6 million. Total
deposits increased $3.3 million, or 1.2%, to $272.1 million at March 31, 2002
from $268.8 million at December 31, 2001, reflecting increases primarily in
checking, savings and retail certificates of deposit accounts, offset in part by
a decrease in the money market account and public funds certificates of deposit.
Other borrowings, primarily Federal Home Loan Bank ("FHLB") advances, increased
by $16.2 million to $87.6 million at March 31, 2002 from $71.4 million at
December 31, 2001. Total stockholders' equity increased $140,000, to $36.1
million at March 31, 2002 from $35.9 million at December 31, 2001. See
"Capital."
CAPITAL
The Company's total stockholders' equity increased by $140,000 to $36.1 million
at March 31, 2002 from $35.9 million at December 31, 2001, primarily due to
earnings, which were offset in part by stock repurchases, dividends declared and
a decrease in the accumulated other comprehensive income. 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 $437,000 at March 31, 2002 from $478,000 at December 31, 2001. 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").
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,
2002, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of March 31, 2002 were as follows:
Amount Percentage of Assets
---------- --------------------
(dollars in thousands)
Tangible capital:
Capital level $ 29,323 7.47%
Less Requirement 5,887 1.50%
---------- ---------
Excess $ 23,436 5.97%
========== =========
Core capital:
Capital level $ 29,323 7.47%
Less Requirement 15,704 4.00%
---------- ---------
Excess $ 13,619 3.47%
========== =========
Risk-based capital:
Capital level $ 32,283 12.94%
Less Requirement 19,952 8.00%
---------- ---------
Excess $ 12,331 4.94%
========== =========
6
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including net income), certain financing activities (including increases in
deposits and proceeds from borrowings) and certain investing activities
(including principal payments on loans and maturities and calls of securities).
During the first three months of 2002 and 2001, principal payments and
repayments on loans totalled $27.6 million and $21.1 million, respectively. The
net increase in deposits during the first three months of 2002 and 2001 totalled
$3.3 million and $5.7 million, respectively. The proceeds from borrowed funds
during the three months ended March 31, 2002 and 2001 totalled $20.0 million and
$3.0 million, respectively. The net change in short-term borrowings during the
three months ended March 31, 2002 totalled $4.8 million. During the first three
months of 2002 and 2001, the proceeds from the maturities, calls and sales of
securities totalled $5.2 million and $12.1 million, respectively. Cash provided
from operating activities during the first three months of 2002 and 2001
totalled $1.6 million and $395,000, respectively, of which $1.2 million and
$981,000, respectively, represented net income of the Company. The Company's
primary use of funds is cash used to originate and purchase loans, purchase of
securities available for sale, repayment of borrowed funds and other financing
activities. During the first three months of 2002 and 2001, the Company's gross
purchases and origination of loans totalled $59.0 million and $24.6 million,
respectively. The purchase of securities available for sale for the three months
ended March 31, 2002 and 2001 totalled none and $5.5 million, respectively. The
repayment of borrowed funds during the first three months of 2002 and 2001
totalled $8.5 million and $9.5 million, respectively. The net change in
short-term borrowings during the three months ended March 31, 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 October 1,
2001 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 March
31, 2002, there were no borrowings outstanding on this line of credit.
Stockholders' equity totaled $36.1 million at March 31, 2002 compared to $35.9
million at December 31, 2001, 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 income. The Company repurchased 37,000 shares of common stock
during the three months ended March 31, 2002 at an average price of $22.72.
On January 7, 2002, the Company paid a quarterly cash dividend of $0.15 per
share on common stock outstanding as of the close of business on December 17,
2001, aggregating $256,000. On February 22, 2002, the Company declared a
quarterly cash dividend of $0.18 per share payable on April 8, 2002 to
shareholders of record as of the close of business on March 15, 2002,
aggregating $301,000.
Interest Income. Interest income decreased by $510,000 to $6.5 million for the
three months ended March 31, 2002 compared to $7.0 million for the three months
ended March 31, 2001. The decrease in interest income was primarily due to a
decreases in the average yield on interest earning assets and changes in the
average balances of certain interest earning assets. The yield on interest
earning assets decreased to 7.13% for the three months ended March 31, 2002 from
7.68% for the three months ended March 31, 2001. The decrease in average yields
was due primarily to a decrease in the average yield on loans, an increase in
the average balance of interest bearing cash, a decrease in the average yield on
interest bearing cash, a decrease in the average yield on securities available
for sale and a decrease in the average balance of securities available for sale.
The average yield on loans decreased to 7.72% for the three months ended March
31, 2002 from 8.02% for the three months ended March 31, 2001. The average yield
on securities available for sale decreased to 5.06% for the three months ended
March 31, 2002 from 5.47% for the three months ended March 31, 2001. The average
yield on interest bearing cash decreased to 1.39% for the three months ended
March 31, 2002 from 5.36% for the three months ended March 31, 2001. The
decreases in the average yields on assets was primarily due to decreases in
market interest rates. The average balance of interest earning assets decreased
$314,000 to $367.5 million for the three months ended March 31, 2002 from $367.8
million for the three months ended March 31, 2001. This decrease was primarily
due to lower levels of loans and securities available for sale, offset by an
increase in interest bearing cash. The decrease in the average balance of loans
generally reflects payments, sales and prepayments of loans in excess of
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. See
"Financial Condition. "The decrease in securities available for sale reflects
maturities, calls and sales, offset in part by purchases and increases in fair
market value.
7
RESULTS OF OPERATIONS (Continued)
Interest Expense. Interest expense decreased by $888,000 to $3.5 million for the
three months ended March 31, 2002 compared to $4.4 million for the three months
ended March 31, 2001. The decrease in interest expense was primarily due to a
decrease in the average cost of interest bearing liabilities and changes in the
average balances of certain interest bearing liabilities. The average cost of
interest bearing liabilities decreased to 4.15% for the three months ended March
31, 2002 from 5.21% for the three months ended March 31, 2001. The decrease in
the average cost of interest bearing liabilities was due primarily to a decrease
in the average cost of certificates of deposit and borrowed funds. The average
cost of certificates of deposit decreased to 5.02% for the three months ended
March 31, 2002 from 5.97% for the three months ended March 31, 2001. The average
cost of borrowed funds decrease to 5.62% for the three months ended March 31,
2002 from 6.08% for the three months ended March 31, 2001. 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 $459,000 to $341.2
million for the three months ended March 31, 2002 from $340.8 million for the
three months ended March 31, 2001. This increase was due primarily to an
increase in NOW and money market savings accounts, offset by a decrease in
certificates of deposits and borrowed funds. The decrease in the certificates of
deposit was due in part to a decrease in the average balances of public funds
certificates of deposits, offset in part by an increase in the average balance
of retail certificates of deposit.
Net Interest Income. Net interest income before the provision for loan losses
increased by $378,000 to $3.0 million for the three months ended March 31, 2002
from $2.7 million for the three months ended March 31, 2001. The increase is due
primarily to an increase in the interest rate spread. The interest rate spread
(i.e., the difference in the average yield on assets and average cost of
liabilities) increased to 2.98% for the three months ended March 31, 2002 from
2.47% for the three months ended March 31, 2001.
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, 2002 and 2001,
respectively.
For the Three Months Ended March 31,
2002 2001
---- ----
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans..................................... $ 316,645 $ 6,093 7.72% $ 318,647 $ 6,373 8.02%
Securities available for sale............. 28,569 362 5.06 39,732 543 5.47
Interest bearing cash..................... 22,249 76 1.39 9,398 124 5.36
--------- --------- ------ --------- ------- ------
Total interest-earning assets........... 367,463 $ 6,531 7.13% 367,777 $ 7,040 7.68%
--------- ------ ------- ------
Noninterest-earning assets.................. 19,337 18,952
--------- ---------
Total assets............................ $ 386,800 $ 386,729
========= =========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings.............. $ 63,286 $ 160 1.02% $ 56,262 $ 387 2.79%
Passbook savings.......................... 23,568 73 1.26 21,448 97 1.84
Certificates of deposit................... 177,897 2,200 5.02 179,800 2,648 5.97
Borrowed funds............................ 76,477 1,060 5.62 83,259 1,249 6.08
--------- --------- ------ --------- ------- ------
Total interest-bearing liabilities.......... 341,228 $ 3,493 4.15% 340,769 $ 4,381 5.21%
--------- ------ ------- ------
Noninterest-bearing liabilities............. 9,255 9,119
--------- ---------
Total liabilities....................... 350,483 349,888
Equity...................................... 36,317 36,841
--------- ---------
Total liabilities and equity ........... $ 386,800 $ 386,729
========= =========
Net interest income.......................... $ 3,038 $ 2,659
========= =======
Net interest rate spread..................... 2.98% 2.47%
====== ======
Net interest margin.......................... 3.31% 2.89%
====== ======
Ratio of average interest-earning assets to
average interest-bearing liabilities........ 107.69% 107.93%
====== ======
8
RESULTS OF OPERATIONS (Continued)
Provision for Loan Losses. The Company's provision for loan losses was $180,000
and $30,000 for the three months ended March 31, 2002 and 2001, respectively.
The increase in the provision for loan loss is primarily due to the increase in
the loan portfolio, specifically the commercial real estate loan portfolio,
nonperforming loans and general economic conditions. 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 $22,000
for the three months ended March 31, 2002 as compared to net charge offs of
$33,000 for the three months ended March 31, 2001. The resulting allowance for
loan losses was $3.0 million, $2.9 million and $2.8 million at March 31, 2002,
December 31, 2001 and March 31, 2001, respectively.
The allowance for loan losses as a percentage of total loans receivable was
0.91%, 0.92% and 0.89% at March 31, 2002, December 31, 2001 and March 31, 2001,
respectively. The level of nonperforming loans was $452,000 at March 31, 2002,
$277,000 at December 31, 2001 and $1.1 million at March 31, 2001. The level of
nonperforming assets was $1.6 million, $1.4 million and $1.2 million at March
31, 2002, December 31, 2001 and March 31, 2001, respectively.
Management believes that the allowance for loan losses is adequate as of March
31, 2002. 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 $276,000 to $1.3
million the three months ended March 31, 2002 from $1.0 million for the three
months ended March 31, 2001. The increase is due to increases in fees and
services charges and abstract fees. Fees and services charges increased
$180,000, primarily due to increases in loan prepayment fees. Abstract fees
increased $94,000, primarily due to increased sales volume. Sales volume
increased in part due to a general increase in real estate activity. Noninterest
income for the three months ended March 31, 2002 reflects losses on the sales of
securities available for sale of $1,400, while the three months ended March 31,
2001 reflects gains on the sale of securities available for sale of $800.
Noninterest Expense. Total noninterest expense increased by $192,000 to $2.4
million for the three months ended March 31, 2002 from $2.2 million for the
three months ended March 31, 2001. The increase is due primarily to increases in
salaries and employee benefits, data processing and other expenses, offset in
part by a decrease in goodwill amortization. The increase in salaries and
employee benefits was due in part to normal salary increases, increases in
health insurance costs and the opening of a new office in Ankeny, Iowa. The
increase in data processing was primarily due to normal data processing costs
increases and an increase in consulting costs. The increase in other expenses
were primarily due to an increase in marketing expenses, professional expenses
and the opening of a new office in Ankeny, Iowa. The decrease in goodwill
expense was due to no amortization of goodwill expense for the three months
ended March 31, 2002 due to the Company's adoption of SFAS No. 142, Goodwill and
Other Intangible Assets. The Company expects that this trend in the decrease of
$118,000 to goodwill expense will likely continue. The Company's efficiency
ratio for the three months ended March 31, 2002 and 2002 were 54.35% and 58.79%,
respectively. The Company's ratio of noninterest expense to average assets for
the three months ended March 31, 2002 and 2001 were 2.45% and 2.25%,
respectively.
Income Taxes. Income taxes increased by $63,000 to $576,000 for the three months
ended March 31, 2002 as compared to $513,000 for the three months ended March
31, 2001, primarily due to an increase in net income before income taxes,
partially offset by a decrease in nondeductible amortization as a result of the
Company's adoption of SFAS 142.
Net Income. Net income increased by $250,000 to $1.2 million for the three
months ended March 31, 2001, as compared to $981,000 for the same period in
2001.
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, 2001 as reported in Item 7A of the Annual Report on Form 10-K.
9
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
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 Press Release, dated February 1, 2002 (regarding the
repurchase program).
Exhibit 99.2 Press Release, dated February 22, 2002 (regarding the
declaration of a dividend).
Exhibit 99.3 Press Release, dated April 17, 2002 (regarding 2002 1st
Quarter earnings)
(b) Reports on Form 8-K
None
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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, 2002 BY: /s/ David M. Bradley
-----------------------------------------
David M. Bradley, Chairman, President and
Chief Executive Officer
DATE: May 14, 2002 /s/ John L. Pierschbacher
-----------------------------------------
John L. Pierschbacher
Principal Financial Officer
11