SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2000
[ ] 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
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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 12, 2000
- --------------------------------------------------------------------------------
(Common Stock, $.01 par value) 2,052,242
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,
2000 (Unaudited) and December 31, 1999 1
Consolidated Condensed Statements of
Income for the three months ended
March 31, 2000 and 1999 (Unaudited) 2
Consolidated Condensed Statements of
Cash Flows for the three months ended
March 31, 2000 and 1999 (Unaudited) 3
Notes to Consolidated Condensed Financial
Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 5 to 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 10
Part II. Other Information 11 & 12
Items 1 through 6 11
Signatures 12
Exhibits
PART 1. FINANCIAL INFORMATION
ITEM 1.
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
ASSETS
Cash and due from banks:
Interest-bearing $ 4,737,911 $ 4,127,153
Noninterest-bearing 2,244,941 8,541,525
Securities available-for-sale 47,720,488 49,692,857
Loans receivable, net 294,319,524 286,759,101
Loans held for sale 353,260 335,564
Accrued interest receivable 2,049,288 2,082,598
Foreclosed real estate 358,815 503,150
Premises and equipment, net 5,621,748 5,356,097
Rental real estate 1,823,854 1,846,134
Title plant 925,256 925,256
Goodwill 5,797,308 5,915,381
Deferred taxes 1,017,650 921,057
Prepaid expenses and other assets 774,410 426,772
------------ ------------
Total assets $367,744,453 $367,432,645
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $268,916,986 $271,030,791
Borrowed funds 60,686,130 55,715,289
Advances from borrowers for taxes and insurance 789,833 1,204,025
Dividend payable 257,155 226,174
Income taxes payable 559,398 74,214
Accrued expenses and other liabilities 1,222,778 1,055,228
------------ ------------
Total liabilities 332,432,280 329,305,721
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized
3,000,000 shares, issued and outstanding none) -- --
Common Stock ($.01 par value, authorized 15,500,000
shares; issued and outstanding 4,011,057) 40,111 40,111
Additional paid-in capital 38,299,070 38,278,872
Retained earnings, substantially restricted 31,050,946 30,290,488
Accumulated other comprehensive (loss) (1,184,508) (921,138)
Less cost of treasury stock, 2000 1,953,815 shares;
1999 1,749,315 shares (32,113,363) (28,735,925)
Unearned shares, employee stock ownership plan (780,083) (825,484)
------------ ------------
Total stockholders' equity 35,312,173 38,126,924
------------ ------------
Total liabilities and stockholders' equity $367,744,453 $367,432,645
============ ============
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,
-----------------------
2000 1999
---------- ----------
Interest income:
Loans receivable $5,736,906 $5,099,590
Securities and cash deposits 793,355 867,178
---------- ----------
6,530,261 5,966,768
---------- ----------
Interest expense:
Deposits 2,951,575 2,665,780
Borrowed funds 834,356 533,735
---------- ----------
3,785,931 3,199,515
---------- ----------
Net Interest Income 2,744,330 2,767,253
Provision for loan losses 30,000 30,000
---------- ----------
Net interest income after provision for loan losses 2,714,330 2,737,253
---------- ----------
Noninterest income:
Fees and service charges 353,826 361,338
Abstract fees 303,774 343,473
Mortgage banking fees 38,564 89,503
Other income 259,120 125,935
---------- ----------
Total noninterest income 955,284 920,249
---------- ----------
Noninterest expense:
Salaries and employee benefits 1,042,815 973,004
Premises and equipment 236,921 207,334
Data processing 113,429 147,932
SAIF deposit insurance premiums 13,825 37,415
Goodwill amortization 118,073 118,070
Other expenses 587,630 570,554
---------- ----------
Total noninterest expense 2,112,693 2,054,309
---------- ----------
Income before income taxes 1,556,921 1,603,193
Provision for income taxes 549,817 545,501
---------- ----------
Net Income $1,007,104 $1,057,692
========== ==========
Basic earnings per common share $ 0.48 $ 0.37
========== ==========
Earnings per common share--assuming dilution $ 0.47 $ 0.36
========== ==========
Dividends declared per common share $ 0.125 $ 0.10
========== ==========
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,
--------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,007,104 $ 1,057,692
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 30,000 30,000
Depreciation 138,496 122,943
Amortization and accretion 132,256 19,814
Deferred taxes 60,990 (59,507)
Effect of contribution to employee stock ownership plan 71,008 83,368
(Gain) on sale of foreclosed real estate and loans, net (6,776) (8,372)
(Gain) loss on sale and disposal of equipment, net (30) 14,101
Proceeds from sales of loans held for sale 2,442,334 6,945,948
Originations of loans held for sale (2,460,030) (5,829,889)
Change in assets and liabilities:
Accrued interest receivable 33,310 (19,629)
Prepaid expenses and other assets (347,638) (111,088)
Income taxes payable 485,184 603,254
Accrued expenses and other liabilities 167,550 (470,243)
----------- -----------
Net cash provided by operating activities 1,753,758 2,378,392
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in loans (3,868,878) 8,983,457
Purchase of loans (3,561,000) (9,102,362)
Purchase of securities available-for-sale (148,600) (8,441,322)
Proceeds from maturities of securities available-for-sale 1,670,549 5,786,768
Purchase of premises and equipment and rental real estate (381,867) (372,016)
Proceeds from sale of equipment 30 197
Other 5,849 (6,996)
----------- -----------
Net cash (used in) investing activities (6,283,917) (3,152,274)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in deposits (2,113,805) (969,010)
(Decrease) in advances from borrowers for taxes and insurance (414,192) (451,356)
Net change in short-term borrowings 2,000,000 --
Proceeds from other borrowed funds 7,000,000 --
Payments of other borrowings (4,029,159) (1,027,670)
Purchase of treasury stock (3,377,438) (126,122)
Issuance of treasury stock (5,409) --
Dividends paid (215,664) (227,080)
----------- -----------
Net cash provided by (used in) financing activities (1,155,667) (2,801,238)
----------- -----------
Net (decrease) in cash (5,685,826) (3,575,120)
CASH
Beginning 12,668,678 15,636,876
----------- -----------
Ending $ 6,982,852 $12,061,756
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors $ 2,848,125 $ 2,730,040
Interest paid on borrowings 814,833 533,641
Income taxes 3,641 1,754
-3-
ITEM 1.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated condensed financial statements for the three month periods
ended March 31, 2000 and 1999 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 1999 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 the Bank's Employee Stock Ownership Plan that have
not been committed to be released are not considered to be outstanding for the
purpose of computing earnings per share. For the three month period ended March
31, 2000, the weighted average number of shares outstanding for basic and
diluted earnings per share computation were 2,090,636 and 2,127,790,
respectively. For the three month period ended March 31, 1999, the weighted
average number of shares outstanding for basic and diluted earnings per share
computation were 2,854,867 and 2,912,166, respectively.
3. DIVIDENDS
On February 25, 2000, the Company declared a cash dividend on its common stock,
payable on April 6, 2000 to stockholders of record as of March 16, 2000, equal
to $0.125 per share.
4. COMPREHENSIVE INCOME
Comprehensive income for the three months ended March 31, 2000 and 1999 was
$743,734 and $877,698, respectively.
-4-
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 increased $312,000, or 0.08%, to $367.7 million at March 31, 2000
compared to $367.4 million at December 31, 1999. Noninterest bearing cash
decreased $6.3 million, or 73.7%, due to customer focused preparations for the
Year 2000 which resulted in increases in cash as of December 31, 1999.
Securities available for sale decreased $2.0 million, or 4.0%, primarily due to
$1.7 million of maturities and calls and decreases in fair market value of
$421,000, offset in part by purchases of $149,000. Total loans receivable, net,
increased by $7.6 million from December 31, 1999, due primarily to originations
of $7.6 million of first mortgage loans secured primarily by one-to-four family
residences, purchases of $3.6 million of first mortgage loans secured primarily
by one-to-four family and multi-family residences and originations of $5.4
million of second mortgage loans which originations and purchases were offset in
part by payments and prepayments of loans (of approximately $12.1 million).
Deposits decreased $2.1 million, or 0.8%, from $271.0 million at December 31,
1999 to $268.9 million at March 31, 2000, reflecting decreases primarily in
certificates of deposit accounts. Other borrowings, primarily Federal Home Loan
Bank ("FHLB") advances, increased by $5.0 million to $60.7 million at March 31,
2000 from $55.7 million at December 31, 1999. Total stockholders' equity
decreased $2.8 million, to $35.3 million at March 31, 2000 from $38.1 million at
December 31, 1999. See "Capital".
CAPITAL
The Company's total stockholders' equity decreased by $2.8 million to $35.3
million at March 31, 2000 from $38.1 million at December 31, 1999, primarily due
to stock repurchases, dividends declared and increases in accumulated other
comprehensive losses, which were offset in part by earnings. The changes in
stockholders' equity were also due to a decrease in the unearned shares from the
Employee Stock Ownership Plan (the "ESOP") to $780,000 at March 31, 2000 from
$825,000 at December 31, 1999, due to the release of shares by the ESOP to
employees of First Federal Savings Bank of Iowa (the "Bank").
-5-
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,
2000, the Bank exceeded all of its regulatory capital requirements. The Bank's
required, actual and excess capital levels as of March 31, 2000 are as follows:
Amount Percentage of Assets
-------- ---------------------
(dollars in thousands)
Tangible capital:
Capital level $27,781 7.69%
Less Requirement 5,422 1.50%
------- -------
Excess $22,359 6.19%
======= =======
Core capital:
Capital level $27,781 7.69%
Less Requirement 14,459 4.00%
------- -------
Excess $13,322 3.69%
======= =======
Risk-based capital:
Capital level $30,326 14.90%
Less Requirement 16,278 8.00%
------- -------
Excess $14,048 6.90%
======= =======
LIQUIDITY
The Company's primary sources of funds are cash provided by operating activities
(including net income), certain financing activities (including proceeds from
borrowings) and certain investing activities (including principal payments on
loans and maturities and calls of securities). During the first three months of
2000 and 1999, principal payments and repayments on loans totalled $12.1 million
and $21.3 million, respectively. The proceeds from borrowed funds during the
three months ended March 31, 2000 and 1999 totalled $9.0 million and none,
respectively. During the first three months of 2000 and 1999, the proceeds from
the maturities, calls and sales of securities totalled $1.7 million and $5.8
million, respectively. Cash provided from operating activities during the first
three months of 2000 and 1999 totalled $1.8 million and $2.4 million,
respectively, of which $1.0 million and $1.1 million, respectively, represented
net income of the Company. The Company's primary use of funds is cash used to
originate and purchase loans, purchase of securities available for sale,
repayment of borrowed funds and other financing activities (including decreases
in deposits). During the first three months of 2000 and 1999, the Company's
gross purchases and origination of loans totalled $19.1 million and $22.3
million, respectively. The purchase of securities available for sale for the
three months ended March 31, 2000 and 1999 totalled $149,000 and $8.4 million,
respectively. The net decrease in deposits during the first three months of 2000
and 1999 totalled $2.1 million and $969,000, respectively. The repayment of
borrowed funds during the first three months of 2000 and 1999 totalled $4.0
million and $1.0 million, respectively. For additional information about cash
flows from the Company's operating, financing and investing activities, see
"Statements of Cash Flows in the Condensed Consolidated Financial Statements."
The Bank is required to maintain an average daily balance of liquid assets
(cash, certain time deposits, bankers' acceptances, specified United States
Government, state or federal agency obligations, shares of certain mutual funds
and certain corporate debt securities and commercial paper) in each calendar
quarter of not less than four percent of either (1) the liquidity base at the
end of the preceding calendar quarter, or (2) the average daily balance of the
liquidity base during the preceding quarter equal to a specified percentage of
its net withdrawable deposit accounts plus short-term borrowings. This
liquidity requirement may be changed from time to time by the OTS to any amount
within the range of 4.0% to 10%, depending upon economic conditions and the
savings flows of member institutions, and is currently 4.0%. Monetary penalties
may be imposed for failure to meet these liquidity requirements. At March 31,
2000, the Bank's liquidity position was $30.5 million, or 10.3%, of liquid
assets, compared to $31.7 million, or 10.8%, at December 31, 1999.
-6-
Stockholders' equity totaled $35.3 million at March 31, 2000 compared to $38.1
million at December 31, 1999, reflecting the Company's earnings for the quarter,
stock repurchases, the amortization of the unallocated portion of shares held by
the ESOP, dividends declared on common stock and the change in the accumulated
other comprehensive loss.
On January 6, 2000, the Company paid a quarterly cash dividend of $0.10 per
share on common stock outstanding as of the close of business on December 20,
1999, aggregating $226,000. On February 25, 2000, the Company declared a
quarterly cash dividend of $0.125 per share payable on April 6, 2000 to
shareholders of record as of the close of business on March 16, 2000,
aggregating $257,000.
Interest Income. Interest income increased by $563,000 to $6.5 million for the
three months ended March 31, 2000 compared to $6.0 million for the three months
ended March 31, 1999. The increase in interest income was primarily due to an
increase in the average balance of interest earning assets, offset in part by a
decrease in the average yield on average assets. The average balance of
interest earning assets increased $32.6 million (primarily due to first mortgage
and consumer loans, offset by a decrease in interest earning cash) to $349.4
million for the three months ended March 31, 2000 from $316.8 million for the
three months ended March 31, 1999. 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 loans
and commercial real estate, which were offset in part by payments, sales and
prepayments of loans. See "Financial Condition." The decrease in interest
bearing cash was used to fund asset growth. The impact of this increase in the
average balance of interest earning assets was offset in part by a decrease in
the average yields. The yields on interest earning assets decreased from 7.56%
for the three months ended March 31, 1999 to 7.49% for the three months ended
March 31, 2000. The decrease in average yields was due primarily to a decrease
in the average yield on loans offset in part by an increase in the average yield
on interest earning cash. The yields on loans declined due to lower market
interest rates over the past twelve months. The yield on interest earning cash
increased due to an increase in short term interest rates as of March 31, 2000
as compared to March 31, 1999.
Interest Expense. Interest expense increased by $586,000 to $3.8 million for the
three months ended March 31, 2000 compared to $3.2 million for the three months
ended March 31, 1999. The increase in interest expense was primarily due to an
increase in the average balance of interest bearing liabilities and an increase
in the average cost of interest bearing liabilities. The average balance of
interest bearing liabilities increased $40.3 million (primarily due to
certificates of deposit and borrowed funds) to $319.4 million for the three
months ended March 31, 2000 from $279.1 million for the three months ended March
31, 1999. The increase in certificates of deposit was primarily due to an
increase in the deposits of public funds. The increase in borrowed funds was due
to the borrowing of funds in part to fund the corresponding asset growth and
stock repurchases. The average cost of interest bearing liabilities increased to
4.74% for the three months ended March 31, 2000 from 4.64% for the three months
ended March 31, 1999. The increase in the average cost of interest bearing
liabilities was due primarily to an increase in the average cost of borrowed
funds resulting from the increase in market interest rates.
Net Interest Income. Net interest income before the provision for loan losses
decreased by $23,000 to $2.744 million for the three months ended March 31, 2000
from $2.767 million for the three months ended March 31, 1999. The decrease is
primarily due to the decrease in the interest rate spread, offset by increases
in the average interest earning assets over the increases in 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 2.75% for
the three months ended March 31, 2000 from 2.92% for the three months ended
March 31, 1999.
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, 2000 and 1999,
respectively.
-7-
RESULTS OF OPERATIONS (Continued)
For Three Months Ended March 31,
--------------------------------------------------------------------
2000 1999
-------------------------------- --------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-------- -------- ---------- -------- -------- ----------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans .............................. $294,708 $5,736 7.79% $254,270 $5,100 8.04%
Securities available for sale ...... 50,379 736 5.84 50,428 730 5.86
Interest bearing cash .............. 4,297 58 5.36 12,099 137 4.60
-------- ------ ------ -------- ------ ------
Total interest-earning assets .. 349,384 $6,530 7.49% 316,797 $5,967 7.56%
------ ------ ------ ------
Noninterest-earning assets ............. 17,841 17,430
-------- --------
Total assets ................... $367,225 $334,227
======== ========
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings ....... $ 46,751 $ 247 2.12% $ 50,825 $ 276 2.20%
Passbook savings ................... 25,952 130 2.01 26,570 148 2.26
Certificates of deposit ............ 189,738 2,575 5.44 163,572 2,242 5.56
Borrowed funds ..................... 56,952 834 5.80 38,150 534 5.60
-------- ------ ------ -------- ------ ------
Total interest-bearing liabilities ..... 319,393 $3,786 4.74% 279,117 $3,200 4.64%
------ ------ ------ ------
Noninterest-bearing liabilities ........ 11,009 6,522
-------- --------
Total liabilities .............. 330,402 285,639
Equity ................................. 36,823 48,635
-------- --------
Total liabilities and equity ... $367,225 $334,227
======== ========
Net interest income ........................ $2,744 $2,767
====== ======
Net interest rate spread ................... 2.75% 2.92%
====== ======
Net interest margin ........................ 3.14% 3.49%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities .. 109.39% 113.50%
====== ======
Provision for Loan Losses. The Company's provision for loan losses was $30,000
each of the three months ended March 31, 2000 and 1999, respectively. The
Company establishes provisions for loan losses, which are charged to operations,
in order to maintain the allowance for loan losses at a level which is deemed to
be appropriate based upon an assessment of prior loss experience, industry
standards, past due loans, economic conditions, the volume and type of loans in
the Bank's portfolio, which includes a significant amount of multifamily and
commercial real estate loans, substantially all of which are purchased and are
collateralized by properties located outside of the Bank's market area, and
other factors related to the collectibility of the Bank's loan portfolio. The
net charge offs were $18,000 for the three months ended March 31, 2000 as
compared to net charge offs of $2,000 for the three months ended March 31, 1999.
The resulting allowance for loan losses was $2.8 million at March 31, 2000 as
compared to $2.8 million at December 31, 1999 and $2.7 million at March 31,
1999. The level of nonperforming loans increased to $762,000 at March 31, 2000
from $213,000 at December 31, 1999 and from $291,000 at March 31, 1999.
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 $35,000 to $955,000
for the three months ended March 31, 2000 from $920,000 for the three months
ended March 31, 1999. The increase is due to increases in other income, offset
in part by decreases in abstract fees and mortgage banking income. Other income
increased $133,000, primarily due to increases in revenues from the sale of
insurance, annuities and mutual funds. Abstract fees decreased $40,000 due to
decreased sales volume. Sales volume decreased in part due to a general decline
in real estate activity. Mortgage banking income decreases by $51,000 due to a
decrease in loan originations.
-8-
RESULTS OF OPERATIONS (Continued)
Noninterest Expense. Total noninterest expense increased by $58,000 to $2.113
million for the three months ended March 31, 2000 from $2.054 million for the
three months ended March 31, 1999. The increase is primarily due to increases
in salaries and employee benefits, premises and equipment, offset in part by
decreases in data processing and SAIF deposit insurance premiums. The increase
in salaries and employee benefits was primarily a result of normal salary
increases, increased personnel due to the opening of a branch in Perry, Iowa, an
increase in the number of employees, offset by decreases as a result of expenses
associated with the employee stock ownership plan. The increases in premises
and equipment were primarily due to an increase in depreciation expense relating
primarily to the opening of a branch office in Perry, Iowa and normal cost
increases. The decreases in data processing expense were due primarily to the
Bank signing a new multi year data processing contract in 1999 and costs
associated with the Year 2000 issues incurred in 1999. The decrease in the SAIF
deposit insurance premium was primarily due to lower SAIF deposit premium rates.
The Company's efficiency ratio for the three months ended March 31, 2000 and
1999 were 57.11% and 55.71%, respectively. The Company's ratio of noninterest
expense to average assets for the three months ended March 31, 2000 and 1999
were 2.30% and 2.46%, respectively.
Income Taxes. Income taxes increased by $4,000 to $550,000 for the three months
ended March 31, 2000 as compared to $546,000 for the three months ended March
31, 1999.
Net Income. Net income totaled $1.0 million for the three months ended March
31, 2000, compared to $1.1 million for the same period in 1999.
IMPACT OF ENACTMENT OF THE GRAMM-LEACH-BLILEY ACT
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act (the "GLB Act"), which among other things, established a comprehensive
framework to permit affiliations among commercial banks, insurance companies and
securities firms. Generally, the new law (i) repeals the historic restrictions
and eliminates many federal and state law barriers to affiliations among banks,
securities firms, insurance companies and other financial service providers,
(ii) provides a uniform framework for the activities of banks, savings
institutions and their holding companies, (iii) broadens the activities that may
be conducted by subsidiaries of national banks and state banks, (iv) provides an
enhanced framework for protecting the privacy of information gathered by
financial institutions regarding their customers and consumers, (v) adopts a
number of provisions related to the capitalization, membership, corporate
governance and other measures designed to modernize the Federal Home Loan Bank
System, (vi) requires public disclosure of certain agreements relating to funds
expended in connection with an institutions' compliance with the Community
Reinvestment Act, and (vii) addresses a variety of other legal and regulatory
issues affecting both day-to-day operations and long-term activities of
financial institutions, including the functional regulation of bank securities
and insurance activities.
The GLB Act also restricts the powers of new unitary savings and loan holding
companies. Unitary savings and loan holding companies that are "grandfathered,"
i.e., unitary savings and loan holding companies in existence, or with
applications filed with the OTS, on or before May 4, 1999, such as the Company,
retain their authority under prior law to engage in any type of commercial or
other non-financial activity so long as their thrift subsidiary meets in the
Qualified Thrift Lender test. All other unitary savings and loan holding
companies are limited to financially related activities permissible for bank
holding companies, as defined under the GLB ACT. The GLB Act also prohibits
non-financial companies from acquiring grandfathered unitary savings and loan
holding companies.
Further, the new law requires financial institutions to disclose (a) on ATM
machines any non-customer fees and (b) to their customers upon the issuance of
an ATM card any fees that may be imposed by the institutions on ATM users. For
older ATMs, the new law gives financial institutions until December 31, 2004 to
provide such notices.
The OTS has recently proposed regulations implementing the privacy protection
provisions of the GLB Act. The proposed regulations would require each
financial institution to adopt procedures to protect customers' and consumers'
nonpublic personal information. The Bank would be required to disclose its
privacy policy, including identifying with whom the Bank shares "nonpublic
personal information," to customers at the time of establishing the customer
relationship and annually thereafter. In addition, the Bank would be required to
provide its customers with the ability to "opt-out" of having it share their
personal information with unaffiliated third parties.
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The GLB Act also provides for the ability of each state to enact legislation
that is more protective of consumers' personal information. Currently, there are
no privacy bills pending in the Iowa legislature. If any such bills are
considered by the Iowa legislature, we cannot predict what impact, if any, these
bills would have.
Under the GLB Act, bank holding companies are permitted to engage in a wider
variety of financial activities than permitted under the prior law, particularly
with respect to insurance and securities activities. In addition, in a change
from the prior law, bank holding companies are in a position to be owned,
controlled or acquired by any company engaged in financially related activities.
Management does not believe that the new law will have a material adverse affect
upon the Company's operations in the near-term. However, to the extent that the
new law permits banks, securities firms and insurance companies to affiliate,
the financial services industry may experience further consolidation. This type
of consolidation could result in a growing number of larger financial
institutions that offer a wider variety of financial services than the Company
currently offers and that can aggressively compete in the markets that the
Company currently serves.
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, 1999 as reported in Item 7A of the Form 10-K.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial data schedule. (Only submitted with filing in electronic
format.)
Exhibit 99.1 Press Release, dated January 28, 2000 (regarding the completion of
a stock repurchase program).
Exhibit 99.2 Press Release, dated February 25, 2000 (regarding the declaration
of a dividend).
Exhibit 99.3 Press Release, dated March 6, 2000 (regarding completion of stock
repurchase program)
Exhibit 99.4 Press Release, dated March 31, 2000 (regarding stock repurchase
program)
Exhibit 99.5 Press Release, dated April 24, 2000 (regarding the issuance of
limited financial information for the three months ended March 31, 2000).
(b) Reports of 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 12, 2000 BY: /s/ David M. Bradley
David M. Bradley,
Chairman, President and
Chief Executive Officer
DATE: May 12, 2000 BY: /s/ John L. Pierschbacher
John L. Pierschbacher, CPA
Principal Financial Officer
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