10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended            September 30, 2007

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 incorporation or organization)	(I.R.S. Employer Identification No.)
825 Central Avenue,   Fort Dodge, Iowa	50501
(Address of principal executive offices)	(Zip Code)

515-576-7531

(Registrant’s telephone number, including area code)

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  þ  No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨      Accelerated filer  ¨  Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

   Yes  ¨  No þ

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 October 31, 2007
Common Stock, $.01 par value	1,339,948

NORTH CENTRAL BANCSHARES, INC.

INDEX

Part I.  Financial Information

		Item 1.  Consolidated Condensed
		Financial Statements (Unaudited)
		Consolidated Condensed Statements of
		Financial Condition at September 30, 2007
		and December 31, 2006
		Consolidated Condensed Statements of
		Income for the Three and Nine Months Ended
		September 30, 2007 and 2006
		Consolidated Condensed Statements of
		Cash Flows for the Nine Months Ended
		September 30, 2007 and 2006
		Notes to Consolidated Condensed Financial
		Statements
		Item 2.  Management's Discussion and Analysis
		of Financial Condition and Results of Operations
		Item 3.  Quantitative and Qualitative Disclosures
		About Market Risk
		Item 4.  Controls and Procedures
Part II.	Other Information
		Item 1.    Legal Proceedings
		Item 1A. Risk Factors
		Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
		Item 3.    Defaults Upon Senior Securities
		Item 4.    Submission of Matters to a Vote of Security Holders
		Item 5.    Other Information
		Item 6.    Exhibits
		Signatures

PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

	September 30,		December 31,
ASSETS	2007		2006
Cash and due from banks: Interest-bearing	$	7,905,710	$	12,430,709
Noninterest-bearing		6,027,495		7,591,567
Securities available-for-sale		13,481,463		14,554,052
Federal Home Loan Bank stock, at cost		5,420,600		5,476,000
Loans receivable, net		460,618,623		449,043,259
Loans held for sale		865,055		583,700
Accrued interest receivable		2,384,775		2,262,273
Foreclosed real estate		569,108		468,117
Premises and equipment, net		12,544,502		12,633,711
Rental real estate		2,504,662		2,583,492
Title plant		671,704		671,704
Goodwill		4,946,960		4,946,960
Deferred taxes		1,102,802		1,027,680
Prepaid expenses and other assets		1,039,880		1,241,504
Total assets	$	520,083,339	$	515,514,728

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits	$	369,219,944		$	360,329,810
Borrowed funds		104,386,094			107,907,563
Advances from borrowers for taxes and insurance		999,270			2,050,991
Dividends payable		470,101			455,616
Accrued expenses and other liabilities		3,201,371			2,578,799
Total liabilities		478,276,780			473,322,779
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, authorized     3,000,000 shares; none issued and outstanding)		-			-
Common stock ($.01 par value, authorized 15,500,000           shares; at September 30, 2007 1,373,148 shares issued and             1,339,948 shares outstanding; at December 31, 2006,             1,380,653 shares issued and outstanding)		13,710			13,807
Additional paid-in capital		17,963,416			17,723,697
Retained earnings, substantially restricted		25,028,814			24,358,445
Accumulated other comprehensive gain		127,379			96,000
Treasury stock, at cost		(1,326,760	)		-
Total stockholders' equity		41,806,559			42,191,949
Total liabilities and stockholders' equity	$	520,083,339		$	515,514,728

See Notes to Consolidated Condensed Financial Statements

NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Interest income:
Loans receivable	$	7,653,605	$	6,942,650	$	22,331,328	$	20,167,724
Securities and cash deposits		336,321		251,008		1,093,254		751,942
		7,989,926		7,193,658		23,424,582		20,919,666
Interest expense:
Deposits		3,350,783		2,678,721		9,570,749		7,266,614
Borrowed funds		1,365,003		1,297,092		3,979,349		3,823,614
		4,715,786		3,975,813		13,550,098		11,090,228
Net interest income		3,274,140		3,217,845		9,874,484		9,829,438
Provision for loan losses		245,000		60,000		335,000		180,000
Net interest income after provision for loan losses		3,029,140		3,157,845		9,539,484		9,649,438
Noninterest income:
Fees and service charges		1,229,304		996,376		3,313,829		3,297,477
Abstract fees		245,922		282,816		750,179		966,349
Mortgage banking income		148,999		67,818		318,297		165,129
Other income		322,007		277,440		961,558		893,184
Total noninterest income		1,946,232		1,624,450		5,343,863		5,322,139
Noninterest expense:
Compensation and employee benefits		1,897,024		1,725,358		5,808,115		5,364,825
Premises and equipment		381,874		378,185		1,157,901		1,126,650
Data processing		199,728		177,527		547,975		503,219
Other expenses		1,028,901		948,737		2,966,955		2,829,768
Total noninterest expense		3,507,527		3,229,807		10,480,946		9,824,462
Income before income taxes		1,467,845		1,552,488		4,402,401		5,147,115
Provision for income taxes		454,800		446,400		1,319,600		1,543,400
Net income	$	1,013,045	$	1,106,088	$	3,082,801	$	3,603,715
Basic earnings per common share	$	0.75	$	0.78	$	2.27	$	2.50
Diluted earnings per common share	$	0.75	$	0.77	$	2.24	$	2.47
Dividends declared per common share	$	0.35	$	0.33	$	1.05	$	0.99
Comprehensive income	$	1,031,401	$	1,415,765	$	3,114,180	$	3,852,456

See Notes to Consolidated Condensed Financial Statements.

NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,082,801		$	3,603,715
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		335,000			180,000
Depreciation		610,176			567,114
Amortization and accretion		168,195			365,131
Deferred taxes		(93,869	)		(191,658	)
Effect of contribution to employee stock ownership plan		-			59,958
Stock-based compensation		73,143			100,444
Net tax benefit related to stock-based compensation		(96,249	)		(180,261	)
Gain on sale of foreclosed real estate and loans, net		(325,810	)		(191,688	)
Write-down of other real estate owned		31,000			82,035
Loss on sale or disposal of equipment and other assets, net		2,836			50,836
Proceeds from sales of loans held-for-sale		24,592,494			13,024,808
Originations of loans held-for-sale		(24,555,552	)		(12,848,240	)
Change in assets and liabilities:
Accrued interest receivable		(122,502	)		(71,426	)
Prepaid expenses and other assets		183,367			7,864
Accrued expenses and other liabilities		537,078			580,918
Net cash provided by operating activities		4,422,108			5,139,550
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans		23,149,028			6,192,644
Purchase of loans		(35,574,614	)		(35,382,799	)
Purchase of securities available-for-sale		-			(1,494,666	)
Proceeds from maturities and calls of securities available-for-sale		1,117,337			1,895,217
Proceeds from redemption of Federal Home Loan Bank stock		636,700			860,900
Purchase of Federal Home Loan Bank stock		(581,300	)		(1,366,500	)
Purchase of premises, equipment and rental real estate		(445,278	)		(2,303,203	)
Net proceeds from sale of foreclosed real estate		227,927			458,169
Other		305			249,997
Net cash (used in) investing activities		(11,469,895	)		(30,890,241	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		8,890,134			23,910,966
Net decrease in advances from borrowers for taxes and insurance		(1,051,721	)		(824,787	)
Net change in short-term borrowings		-			2,100,000
Proceeds from other borrowed funds		17,000,000			24,500,000
Payments of other borrowed funds		(20,521,469	)		(19,529,159	)
Purchase of common stock for retirement		(2,377,500	)		(4,494,705	)
Proceeds from issuance of common stock		333,230			442,164
Net tax benefit related to stock-based compensation		96,249			180,261
Dividends paid		(1,410,207	)		(1,382,542	)
Net cash provided by financing activities		958,716			24,902,198
Net decrease in cash		(6,089,071	)		(848,493	)
CASH AND DUE FROM BANKS
Beginning		20,022,276			8,639,672
Ending	$	13,933,205		$	7,791,179

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS-Continued (Unaudited)
	Nine Months Ended September 30,
	2007		2006
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest paid to depositors	$	9,267,126	$	6,867,872
Interest paid on borrowings		3,979,349		3,823,656
Income taxes		1,166,198		1,541,827
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING,    INVESTING AND FINANCING ACTIVITIES
Transfers from loans to other real estate owned	$	352,405	$	905,342
Cumulative effect of adoption of FIN 48		200,000		-
See Notes to Consolidated Condensed Financial Statements.

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 nine month periods ended September 30, 2007 and 2006 are unaudited.  In the opinion of the management of North Central Bancshares, Inc. (the “Company”), 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 that may be expected for an entire year.  Certain information and footnote disclosures 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 2006 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 September 30, 2007, the weighted-average number of shares outstanding for basic and diluted earnings per share computation were 1,343,441 and 1,357,655, respectively.  For the nine-month period ended September 30, 2007, the weighted-average number of shares outstanding for basic and diluted earnings per share computation were 1,358,909 and 1,373,451, respectively.  For the three-month period ended September 30, 2006, the weighted average number of shares outstanding for the basic and diluted earnings per share computation were 1,420,875 and 1,437,785, respectively.  For the nine-month period ended September 30, 2006, the weighted average number of shares outstanding for the basic and diluted earnings per share computations were 1,441,677 and 1,461,606, respectively.

3.           DIVIDENDS

On August 24, 2007, the Company declared a cash dividend on its common stock, payable on October 5, 2007 to stockholders of record as of September 14, 2007, equal to $0.35 per share.

4.           GOODWILL

As of January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets that eliminated the amortization and required a goodwill impairment test.  The Company completed the goodwill impairment test during the year ended December 31, 2006 and has determined that there has been no impairment of goodwill.

As of September 30, 2007 and December 31, 2006, the Company had goodwill of $4,946,960.  There was no goodwill impairment loss or amortization related to goodwill during the three months ended September 30, 2007 or September 30, 2006.

5.           OPERATING SEGMENTS

An operating segment is generally defined as a component of a business for which discrete financial information is available and whose results are reviewed by the chief operating decision-maker.  The Company has determined that it has two reportable segments:  a traditional banking segment and a nonbank segment.  The traditional banking segment consists of the Company’s banking subsidiary, First Federal Savings Bank of Iowa (the “Bank”), and the holding company.  First Federal Savings Bank of Iowa operates as a federal savings bank providing deposit, loan and other related products to individuals and small businesses, primarily in the communities where their offices are located.  The remaining grouping under the caption “All Others” consists of the operations of the subsidiaries under the Bank, which includes real estate abstracting services, insurance and investment services, and ownership of low-income housing tax credit apartment complexes.

Transactions between affiliates, the resulting revenues of which are shown in the inter-segment revenue category, are conducted at market prices, meaning prices that would be paid if the companies were not affiliates.

	Three Months Ended September 30, 2007							Nine Months Ended September 30, 2007
	Traditional							Traditional
	Banking		All Others			Total		Banking		All Others			Total
Interest income	$	7,989,926	$	-		$	7,989,926	$	23,424,582	$	-		$	23,424,582
Interest expense		4,715,786		-			4,715,786		13,550,098		-			13,550,098
Net interest income		3,274,140		-			3,274,140		9,874,484		-			9,874,484
Provision for loan losses		245,000		-			245,000		335,000		-			335,000
Net interest income after provision for loan losses		3,029,140		-			3,029,140		9,539,484		-			9,539,484
Noninterest income		1,430,988		515,244			1,946,232		3,779,124		1,564,739			5,343,863
Noninterest expense		3,211,498		296,029			3,507,527		9,555,056		925,890			10,480,946
Income before income taxes		1,248,630		219,215			1,467,845		3,763,552		638,849			4,402,401
Provision for income taxes		443,000		11,800			454,800		1,288,900		30,700			1,319,600
Net income	$	805,630	$	207,415		$	1,013,045	$	2,474,652	$	608,149		$	3,082,801
Inter-segment revenue (expense)	$	225,782	$	(225,782	)	$	-	$	684,210	$	(684,210	)	$	-
Total assets	$	516,518,893	$	3,564,446		$	520,083,339	$	516,518,893	$	3,564,446		$	520,083,339
Total deposits	$	369,219,944	$	-		$	369,219,944	$	369,219,944	$	-		$	369,219,944

	Three Months Ended September 30, 2006							Nine Months Ended September 30, 2006
	Traditional							Traditional
	Banking		All Others			Total		Banking		All Others			Total
Interest income	$	7,193,658	$	-		$	7,193,658	$	20,919,666	$	-		$	20,919,666
Interest expense		3,975,808		5			3,975,813		11,090,182		46			11,090,228
Net interest income (loss)		3,217,850		(5	)		3,217,845		9,829,484		(46	)		9,829,438
Provision for loan losses		60,000		-			60,000		180,000		-			180,000
Net interest income (loss) after provision for loan losses		3,157,850		(5	)		3,157,845		9,649,484		(46	)		9,649,438
Noninterest income		1,103,985		520,465			1,624,450		3,602,753		1,719,386			5,322,139
Noninterest expense		2,901,715		328,092			3,229,807		8,727,405		1,097,057			9,824,462
Income before income taxes		1,360,120		192,368			1,552,488		4,524,832		622,283			5,147,115
Provision for income taxes		431,900		14,500			446,400		1,503,700		39,700			1,543,400
Net income	$	928,220	$	177,868		$	1,106,088	$	3,021,132	$	582,583		$	3,603,715
Inter-segment revenue (expense)	$	215,883	$	(215,883	)	$	-	$	742,189	$	(742,189	)	$	-
Total assets	$	510,803,608	$	3,703,231		$	514,506,839	$	510,803,608	$	3,703,231		$	514,506,839
Total deposits	$	358,248,549	$	-		$	358,248,549	$	358,248,549	$	-		$	358,248,549

6.           RECENT ACCOUNTING PRONOUNCEMENTS

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  The statement also subjects beneficial interests in securitized financial assets to the requirements of SFAS No. 133.  For the Company, this statement is effective for all financial instruments acquired, issued, or subject to remeasurement after the beginning of its fiscal year that begins after September 15, 2006, with earlier adoption permitted.  The Company adopted SAFS No. 155 during the first quarter of 2007 with no material effects on its financial position, results of operation and cash flows.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140.  The statement amends SFAS No. 140 by (1) requiring the separate accounting for servicing assets and servicing liabilities, which arise from the sale of financial assets; (2) requiring all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; and (3) permitting an entity to choose between an amortization method or a fair value method for subsequent measurement for each class of separately recognized servicing assets and servicing liabilities.  This statement is effective for fiscal years beginning after September 15, 2006, with earlier adoption permitted.  The Company adopted SAFS No. 156 during the first quarter of 2007 with no material effects on its financial position, results of operation and cash flows.

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes.  This interpretation applies to all tax positions accounted for in accordance with SFAS No. 109, Accounting for Income Taxes.  FIN 48 clarifies the application of SFAS No. 109 by defining the criteria that an individual tax position must meet in order for the position to be recognized within the financial statements and provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition for tax positions.  This interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted.  The Company adopted the provisions of FIN 48, effective as of January 1, 2007.  (See Note 7.)

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.  This statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  It clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.  This Statement does not require any new fair value measurements, but rather, it provides enhanced guidance to other pronouncements that require or permit assets or liabilities to be measured at fair value.  This statement is effective for fiscal years beginning after November 15, 2007, with earlier adoption permitted.  The Company is currently evaluating the impact that the adoption of this interpretation will have on its financial position, results of operation and cash flows.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R).  SFAS No. 158 requires a company that sponsors a postretirement benefit plan (other than a multi-employer plan) to fully recognize, as an asset or liability, the over- or underfunded status of its benefit plan in its balance sheet.  The funded status is measured as the difference between the fair value of the plan’s assets and its benefit obligation (projected benefit obligation for pension plans and accumulated postretirement benefit obligation for other postretirement benefit plans).  Currently, the funded status of such plans are reported in the notes to the financial statements.  This provision is effective for public companies for fiscal years ending after December 15, 2006.  In addition, SFAS No. 158 also requires a company to measure its plan assets and benefit obligations as of its year-end balance sheet date.  Currently, a company is permitted to choose a measurement date up to three months prior to its year-end to measure the plan assets and obligations.  This provision is effective for all companies for fiscal years ending after December 15, 2008.  Since the Company participates in a multi-employer pension plan, it expects that the adoption of SFAS No. 158 will not have a material impact on its financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115, which provides all entities, including not-for-profit organizations, with an option to report selected financial assets and liabilities at fair value.  The objective of the Statement is to improve financial reporting by providing entities with the opportunity to mitigate volatility in earnings caused by measuring related assets and liabilities differently without having to apply the complex provisions of hedge accounting.  Certain specified items are eligible for the irrevocable fair value measurement option as established by SFAS No. 159.  SFAS No. 159 is effective as of the beginning of an entity's first fiscal year beginning after November 15, 2007.  Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007 provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements.  The Company is currently evaluating the impact that the adoption of this Statement will have on its financial position, results of operation and cash flows.

7.           INCOME TAXES

The Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, effective as of January 1, 2007.  As a result of the implementation of FIN 48, the Company recognized an increase of $200,000 in income tax liability for uncertain income tax expense.  This increase was accounted for as an adjustment reducing the beginning balance of retained earnings on the Statement of Financial Condition by $200,000; $170,000 in taxes and $30,000 in interest. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  There was no adjustment to these amounts during the three and nine months ended September 30, 2007.

The tax years 2004-2006 remain open to examination by the major taxing jurisdictions to which we are subject.

8.           RECLASSIFICATIONS

Certain amounts in the prior period financial statements have been reclassified, with no effect on net income or stockholders’ equity, to be consistent with the current period classification.

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 consolidated financial condition, results of operations and business of the Company and its subsidiaries, including the Bank, that are subject to various factors which could cause actual results to differ materially from these estimates.  These factors include changes in general, economic, market, legislative and regulatory conditions, and the development of an interest rate environment that adversely affects the interest rate spread or other income anticipated from the Company's operations and investments.  The Company's actual results may differ from the results discussed in the forward-looking statements.  The Company disclaims any obligation to publicly announce future events or developments that may affect the forward-looking financial statements contained herein.

Executive Overview

The Company’s business strategy is to operate the Bank as a well-capitalized, profitable and independent community-oriented savings bank.  Specifically, the Company’s business strategy incorporates the following elements:  (1) increasing loan and deposit balances in existing branch offices including the newly established de novo branch offices located in the Des Moines, Iowa metropolitan area where population growth trends are positive; (2) maintaining high asset quality by emphasizing investment in residential mortgage, multifamily and commercial real estate loans and consumer loans; (3) emphasizing growth in core deposits, which includes demand deposit, NOW, money market and savings accounts; (4) maintaining capital in excess of regulatory requirements; (5) controlling noninterest expense; (6) managing interest rate risk exposure; and (7)  increasing noninterest income through increases in fees, service charges and sales of noninsured products.

The purpose of this summary is to provide an overview of the items that management focuses on when evaluating the condition of the Company and our success in implementing our stockholder value strategy. Our stockholder value strategy has three major themes: (1) enhancing our shareholders’ value; (2) making our banking franchise more valuable; and (3) efficiently utilizing our capital.

Management believes the following points were the most important to that analysis this quarter:

• The Company has effectively managed its capital since the Company’s inception in 1996.  Annual dividends per share have increased from $0.25 per share in 1997 to $1.32 per share in 2006.  In 2007, the Company increased its quarterly dividend 6.1%, to $0.35 per share.  An active stock repurchase program has also been consistently used by the Company to manage capital and increase earnings per share.  The Company repurchased 15,200 and 59,500 shares during the three and nine months ended September 30, 2007.  As of September 30, 2007, the Company has repurchased 2,996,304 shares at a cost of $62.4 million, since its inception.

• In recent years the Bank has opened new offices in the Des Moines metropolitan area, where population growth trends are positive.  In August 2006, the Bank opened a new branch office in West Des Moines, Iowa near Jordan Town Center Mall.  We believe that this strategy will result in long-term loan and deposit growth for the Company, but will negatively impact short-term earnings until each de novo branch achieves profitability.

• Consistent with the Bank’s emphasis on attracting and retaining core deposits, growth in deposit fees, including overdraft fees, continued a strong positive trend.

• The Company continues to be liability sensitive. The growth of interest-bearing liabilities primarily reflects the growth of higher cost certificates of deposit, including brokered certificates of deposit.  Also contributing to the liability sensitivity of the Company is the continuing shift of lower cost non-maturing deposits into higher cost short-term certificates of deposit.

• The Company began utilizing brokered certificates of deposits in 2005 as an alternative funding source.  At September 30, 2007, the Company had brokered certificates of deposit of $30.4 million, compared to $29.8 million at September 30, 2006.

• Management believes that the allowance for loan losses is adequate.  The allowance for loan losses to nonaccrual loans was 155% at September 30, 2007.  Net annualized chargeoffs as of September 30, 2007 were 0.03% of total loans and have averaged 0.04% of total loans for the past five years.  During the nine months ended September 30, 2007, the Company’s net loan portfolio increased $11.6 million, or 2.6%.  The increase was due to increases in commercial real estate and consumer loans, offset in part by decreases in multifamily and one-to four-family real estate loans.  The Company’s provision for loan losses for the three and nine months ended September 30, 2007 was $245,000 and $335,000 respectively.

• Purchases of out-of-state real estate loans remain an integral part of the Company’s business plan.  The Company has continued to purchase out-of-state real estate loans to supplement local mortgage loan originations and to diversify its mortgage loan portfolio geographically.

FINANCIAL CONDITION

Total assets increased $4.6 million, or 0.9%, to $520.1 million at September 30, 2007, from $515.5 million at December 31, 2006.  The increase in assets was primarily due to an increase in net loans receivable, offset in part by a decrease in cash and cash equivalents.

Net loans receivable increased by $11.6 million, or 2.6%, to $460.6 million at September 30, 2007, from $449.0 million at December 31, 2006, primarily due to the origination of $56.2 million of first mortgage loans primarily secured by one-to four-family residences and commercial real estate; the purchase of $35.6 million of first mortgage loans secured by commercial real estate, multifamily, and one-to four-family residences; and the origination of $24.5 million of second mortgage loans during the nine months ended September 30, 2007.  These purchases and originations were offset in part by payments and prepayments of $89.1 million and loan sales of $24.3 million during the nine months ended September 30, 2007.  The Company sells substantially all fixed-rate residential loans originated with maturities of 15 years or more in the secondary mortgage market in order to reduce interest rate risk.

Deposits increased $8.9 million, or 2.5%, to $369.2 million at September 30, 2007, from $360.3 million at December 31, 2006, primarily reflecting increases in certificates of deposit.  Borrowings, primarily Federal Home Loan Bank (the “FHLB”) advances, decreased $3.5 million, or 3.3%, to $104.4 million at September 30, 2007, from $107.9 million at December 31, 2006. This decrease is due to the normal repayment of borrowings due to calls or maturities.

Total stockholders' equity decreased $385,000, or 0.9%, to $41.8 million at September 30, 2007, from $42.2 million at December 31, 2006, primarily due to stock repurchases ($2,378,000), declared dividends ($1,425,000), and the Company’s adoption of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes ($200,000), offset in part by earnings ($3,083,000), the exercise of stock options, FAS No. 123R option expense, and restricted stock amortization ($504,000), and an increase in the unrealized gain on securities available-for-sale ($31,000).  During the nine months ended September 30, 2007, the Company repurchased 59,500 shares of common stock, or approximately 4.3% of its outstanding shares of common stock, at prevailing market prices averaging $39.96 per share.

The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum tangible, leverage (core) and risk-based capital requirements.  As of September 30, 2007, the Bank exceeded all of its regulatory capital requirements.  The Bank's required, actual and excess capital levels as of September 30, 2007 were as follows:

	Amount		Percentage of Assets
	(Dollars in thousands)
Tangible capital:
Capital level	$	36,174		7.01	%
Less Requirement		7,743		1.50	%
Excess	$	28,431		5.51	%
Core capital:
Capital level	$	36,174		7.01	%
Less Requirement		20,647		4.00	%
Excess	$	15,527		3.01	%
Risk-based capital:
Capital level	$	40,070		10.67	%
Less Requirement		30,054		8.00	%
Excess	$	10,016		2.67	%

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of funds are cash provided by operating activities (including net income), certain financing activities (including increases in deposits and proceeds from borrowings) and certain investing activities (including principal payments on loans and maturities, calls and proceeds from the sale of securities).  During the first nine months of 2007 and 2006, principal payments, prepayments, and proceeds from the sale of loans totaled $113.6 million and $98.0, respectively.  The net increase in deposits during the first nine months of 2007 and 2006 totaled $8.9 million and $23.9 million, respectively.  The proceeds from borrowed funds during the nine months ended September 30, 2007 and 2006 totaled $17.0 and $24.5 million, respectively.  During the first nine months of 2007 and 2006, the proceeds from the maturities, calls and sales of securities totaled $1.8 and $2.8 million, respectively.  Cash provided from operating activities during the first nine months of 2007 and 2006 totaled $4.4 million and $5.1 million, respectively.  The Company's primary use of funds is to originate and purchase loans, purchase securities available-for-sale, repay borrowed funds and other financing activities.  During the first nine months of 2007 and 2006, the Company's gross purchases and origination of loans totaled $128.0 million and $122.8 million, respectively.  The purchase of securities available-for-sale for the nine months ended September 30, 2007 and 2006 totaled $581,000 and $2.9 million, respectively. The repayment of borrowed funds during the first nine months of 2007 and 2006 totaled $20.5 million and $19.5 million, respectively.  For additional information about cash flows from the Company's operating, financing and investing activities, see the Consolidated Condensed Statements of Cash Flows in the Company’s financial statements included as Item 1 of this report.

OTS regulations require the Company to maintain sufficient liquidity to ensure its safe and sound operation.

The Company has a line of credit agreement in the amount of $3.0 million with an unaffiliated bank.  As of September 30, 2007, there were no borrowings outstanding on this line of credit.  The Company may use this line of credit to fund stock repurchases in the future and for general corporate purposes.

On July 6, 2007, the Company paid a quarterly cash dividend of $0.35 per share on common stock outstanding as of the close of business on June 15, 2007, aggregating $477,000.  On August 24, 2007, the Company declared a quarterly cash dividend of $0.35 per share payable on October 5, 2007 to shareholders of record as of the close of business on September 14, 2007, aggregating $470,000.

RESULTS OF OPERATIONS

Net Income.  Net income decreased by $93,000 to $1.01 million for the quarter ended September 30, 2007, compared to $1.11 million for the quarter ended September 30, 2006.  Net income is an aggregate of net interest income, noninterest income, noninterest expense and income tax expense.  The decrease in net income was primarily due to increases in provision for loan losses.

Net income decreased by $521,000 to $3.08 million for the nine months ended September 30, 2007, compared to $3.60 million for the nine months ended September 30, 2006.  The decrease in net income was primarily due to increases in provision for loan losses and noninterest expense.

Net Interest Income.  Net interest income before provision for loan losses increased by $56,000 to $3.27 million for the quarter ended September 30, 2007, from $3.22 million for the quarter ended September 30, 2006.  The increase is due to an increase in the average balance of interest-earning assets and an increase in the yield on interest-earning assets, offset in part by an increase in the average balance of interest-bearing liabilities and an increase in the average cost of funds.  The interest rate spread (i.e., the difference in the average yield on assets and average cost of liabilities) decreased to 2.37% for the quarter ended September 30, 2007, from 2.52% for the quarter ended September 30, 2006.  The decrease in interest rate spread reflects the increase in the overall cost of interest-bearing liabilities, offset in part by an increase in the yield on interest-earning assets.  The increase in the cost of interest-bearing liabilities primarily reflects the repricing of interest-bearing liabilities at higher current market interest rates and the growth of interest-bearing liabilities in higher cost certificates of deposit.  Also contributing to the increase of the cost of funds is the continuing shift of lower cost non-maturing deposits into higher cost short-term certificates of deposit.

Net interest income before provision for loan losses increased by $45,000 to $9.87 million for the nine months ended September 30, 2007, from $9.83 million for the nine months ended September 30, 2006.  The increase is due to an increase in the average balance of interest-earning assets and an increase in the yield on interest-earning assets, offset in part by an increase in the average balance of interest-bearing liabilities and an increase in the average cost of funds. The interest rate spread (i.e., the difference in the average yield on assets and average cost of liabilities) decreased to 2.41% for the nine months ended September 30, 2007, from 2.58% for the nine months ended September 30, 2006.  The decrease in interest rate spread primarily reflects the increase in the overall cost of interest-bearing liabilities, offset in part by an increase in the yield on interest-earning assets.  The increase in the cost of interest-bearing liabilities primarily reflects the repricing of interest-bearing liabilities at higher current market interest rates and the growth of interest-bearing liabilities in higher cost certificates of deposit and borrowed funds.  Also contributing to the increase of the cost of funds is the shift of lower cost non-maturing deposits into higher cost short-term certificates of deposit.

Interest Income.  Interest income increased by $796,000 to $7.99 million for the quarter ended September 30, 2007, compared to $7.19 million for the quarter ended September 30, 2006.  The increase in interest income was due to an increase in the average balance of interest-earning assets and an increase in the yield on interest-earning assets.  The average balance of interest-earning assets increased $26.7 million to $497.3 million for the quarter ended September 30, 2007, from $470.6 million for the quarter ended September 30, 2006.  The average yield on interest-earning assets increased to 6.40% for the quarter ended September 30, 2007, from 6.11% for the quarter ended September 30, 2006, primarily due to an increase in a higher yielding commercial loan portfolio as well as an increase in market interest rates on consumer loans and adjustable rate mortgage loans.  The increase in the average balance of interest-earning assets primarily reflects increases in the average balances of interest-bearing cash, first mortgage loans and consumer loans, offset in part by a decrease in securities available-for-sale.  The increase in interest-bearing cash was due to large commercial loan payoffs in December 2006.  The increase in the average balance of first mortgage loans was derived from the origination and purchase of first mortgage loans secured by one-to four-family real estate, commercial real estate, and multifamily residences, which originations and purchases were offset in part by payments, prepayments, and sales of loans during the twelve months ended September 30, 2007.  This reflects the Company's continued emphasis on real estate lending.  The decrease in the average balance of securities available-for-sale was derived from payments and calls of securities during the twelve months ended September 30, 2007.

Interest income increased by $2.50 million to $23.42 million for the nine months ended September 30, 2007, compared to $20.92 million for the nine months ended September 30, 2006.  The increase in interest income is due to an increase in the average balance of interest-earning assets and an increase in the average yield on interest-earning assets.  The average balance of interest-earning assets increased $26.1 million to $491.0 million for the nine months ended September 30, 2007, from $464.9 million for 2006.  The average yield on interest-earning assets increased to 6.36% for the nine months ended September 30, 2007, from 6.00% for the nine months ended September 30, 2006, primarily due to the repricing of interest-earning assets at generally higher current market interest rates.  The increase in the average balance of interest-earning assets primarily reflects increases in the average balances of interest-bearing cash, first mortgage loans and consumer loans, offset in part by a decrease in securities available-for-sale.  The increase in the average balance of first mortgage loans was primarily derived from originations of first mortgage loans secured by one-to four-family residences and commercial real estate, purchases of first mortgage loans secured primarily by commercial real estate and multifamily residences, which originations and purchases were offset in part by payments, prepayments and sales of loans during the twelve months ended September 30, 2007.  This reflects the Company's continued emphasis on residential lending.  The decrease in the average balance of securities available-for-sale was derived from payments and calls of securities during the twelve months ended September 30, 2007.

Interest Expense.  Interest expense increased by $740,000 to $4.72 million for the quarter ended September 30, 2007, compared to $3.98 million for the quarter ended September 30, 2006.  The increase in interest expense was due to an increase in the average balance of interest-bearing liabilities and an increase in the average cost of funds.  The average balance of interest-bearing liabilities increased $23.9 million to $463.7 million for the quarter ended September 30, 2007, from $439.8 million for the quarter ended September 30, 2006.  The increase in the average balance of interest-bearing liabilities primarily reflects an increase in the average balance of certificates of deposit and borrowed funds, offset in part by decreases in NOW, money market, and savings account balances.  The increase in the average balance of certificates of deposit was primarily due to management’s decision on offering very competitive rates on certificate of deposits and an increase in the average balance of brokered certificates of deposit, which increased $12.1 million to $30.4 million for the quarter September 30, 2007, from $18.3 million for the quarter ended September 30, 2006.  The average cost of funds increased to 4.03% for the quarter ended September 30, 2007, from 3.59% for the quarter ended September 30, 2006, due to an increase in the current market interest rates, a shift of core deposits into higher cost certificates of deposits, and an increase in the average balance of certificates of deposit.

Interest expense increased by $2.46 million to $13.55 million for the nine months ended September 30, 2007, compared to $11.09 million for the nine months ended September 30, 2006.  The increase in interest expense was due to an increase in the average balance of interest-bearing liabilities and an increase in the average cost of funds.  The average balance of interest-bearing liabilities increased $25.0 million to $458.6 million for the nine months ended September 30, 2007, from $433.6 million for the nine months ended September 30, 2006.  The increase in the average balance of interest-bearing liabilities primarily reflects an increase in the average balance of certificates of deposit, offset in part by decreases in NOW, money market and savings balances and borrowed funds.  The increase in average interest-bearing liabilities was due to management’s decision on offering very competitive rates on certificate of deposits and in part to the Company’s utilization of brokered certificates of deposit, which the average balance increased $19.3 million to $30.4 million for the nine months ended September 30, 2007 from $11.1 million for the nine months ended September 30, 2006.  The average cost of funds increased to 3.95% for the nine months ended September 30, 2007, from 3.42% for the nine months ended September 30, 2006, due to an increase in the current market rates and a shift of core deposits into higher cost certificates of deposit.

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 months and nine months ended September 30, 2007 and 2006, respectively.

	For the Three Months Ended September 30,
	2007							2006
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	469,649	$	7,653		6.49	%	$	448,778	$	6,943		6.19	%
Securities available-for-sale		18,942		232		4.90			21,117		243		4.59
Interest-bearing cash		8,663		105		4.77			722		8		4.65
Total interest-earning assets		497,254	$	7,990		6.40	%		470,617		7,194		6.11	%
Noninterest-earning assets		29,157							30,398
Total assets	$	526,411						$	501,015
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings	$	82,858	$	287		1.37	%	$	83,511	$	272		1.29	%
Passbook savings		25,869		35		0.54			25,939		22		0.33
Certificates of deposit		246,353		3,031		4.88			222,298		2,385		4.26
Borrowed funds		108,639		1,363		4.98			108,015		1,297		4.76
Total interest-bearing liabilities		463,719	$	4,716		4.03	%		439,763	$	3,976		3.59	%
Noninterest-bearing liabilities		20,829							18,605
Total liabilities		484,548							458,368
Equity		41,863							42,647
Total liabilities and equity	$	526,411						$	501,015
Net interest income			$	3,274						$	3,218
Net interest rate spread						2.37	%						2.52	%
Net interest margin						2.64	%						2.74	%
Ratio of average interest-earning assets                    to average interest-bearing liabilities						107.23	%						107.02	%

	For the Nine Months Ended September 30,
	2007							2006
	Average Balance		Interest		Average Yield/Cost			Average Balance		Interest		Average Yield/Cost
	(Dollars in thousands)
Assets:
Interest-earning assets:
Loans	$	461,068	$	22,332		6.46	%	$	442,462	$	20,167		6.08	%
Securities available-for-sale		19,342		701		4.83			21,400		718		4.47
Interest-bearing cash		10,609		392		4.95			1,067		34		4.23
Total interest-earning assets		491,019	$	23,425		6.36	%		464,929		20,919		6.00	%
Noninterest-earning assets		29,183							29,314
Total assets	$	520,202						$	494,243
Liabilities and Equity:
Interest-bearing liabilities:
NOW and money market savings	$	83,216	$	812		1.30	%	$	86,231	$	785		1.22	%
Passbook savings		26,180		97		0.50			26,734		64		0.32
Certificates of deposit		241,004		8,662		4.81			212,305		6,417		4.04
Borrowed funds		108,195		3,979		4.92			108,314		3,824		4.72
Total interest-bearing liabilities		458,595	$	13,550		3.95	%		433,584	$	11,090		3.42	%
Noninterest-bearing liabilities		19,658							17,751
Total liabilities		478,253							451,335
Equity		41,949							42,908
Total liabilities and equity	$	520,202						$	494,243
Net interest income			$	9,875						$	9,829
Net interest rate spread						2.41	%						2.58	%
Net interest margin						2.67	%						2.82	%
Ratio of average interest-earning assets                    to average interest-bearing liabilities						107.07	%						107.23	%

Provision for Loan Losses.  The Company's provision for loan losses was $245,000 and $60,000 for the quarters ended September 30, 2007 and 2006, respectively.  The increase in provision is related to the increase in nonperforming and special mention loans outstanding.  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 Company's portfolio, and other factors related to the collectibility of the Company's loan portfolio.  The Company’s total loan portfolio increased $5.1 million, or 1.1% from September 30, 2006 to September 30, 2007.  This increase primarily consisted of increases in commercial real estate and consumer loans.  The Company’s out-of-state real estate loans decreased $5.2 million, or 3.6%, from September 30, 2006 to September 30, 2007.  Purchased out-of-state real estate loans generally constitute a higher rate of risk than originated loans due to the size, location and type of collateral securing such loans.  The economic conditions in the Bank’s primary market areas remain stable.  The net charge-offs were $119,000 for the nine months ended September 30, 2007, compared to $63,000 for  the nine months ended September 30, 2006.  The resulting allowance for loan loss was $3.7 million and $3.4 million at September 30, 2007 and September 30, 2006, respectively.

The allowance for loan losses as a percentage of total loans receivable increased to 0.79% at September 30, 2007 from 0.74% at September 30, 2006.  The level of nonperforming loans increased to $2.39 million at September 30, 2007 from $632,000 at September 30, 2006 and the level of special mention loans increased to $2.71 million at September 30, 2007 from $996,000 at September 30, 2006.  This increase is primarily associated with three borrowers.  Management has increased efforts on working out these weaker credits, which are directly related to single family home construction projects. Management believes that the increase in the allowance for loan loss reflects a shift in the economy in some of the markets the Company operates, specifically the Des Moines, Iowa metropolitan area. The Company’s charge-off history has not been affected by these borrowers but additional provisions have been realized due to the other assessment factors listed above.

Management believes that the allowance for loan losses is adequate as of September 30, 2007.  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 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 $322,000, or 19.8%, to $1.95 million for the quarter ended September 30, 2007, from $1.62 million for the quarter ended September 30, 2006.  The increase in noninterest income was primarily due to increases in fees and service charges, mortgage banking income, and other income, offset in part by decreases in abstract fees.  Fees and service charges increased $233,000 primarily due to an increase in fees associated with checking accounts, including overdraft fees and loan prepayment fees.  During the quarter ended September 30, 2007, the Company recorded $55,000 in loan prepayment fees, compared to $45,000 for the quarter ended September 30, 2006.  Abstract fees decreased $37,000 due to a decrease in real estate activity.  Other income, which primarily includes annuity, securities, and insurance sales, and income associated with foreclosed real estate, increased $45,000 primarily due to an increase in income from securities sales.  Mortgage banking income increased $81,000 due to an increase in loans originated for the secondary market.

Total noninterest income increased by $22,000, or 0.4%, to $5.34 million for the nine months ended September 30, 2007, from $5.32 million for the nine months ended September 30, 2006.  The increase was due to increases in fees and service charges, mortgage banking income, and other income, offset by decreases in abstract fees.  Fees and service charges increased $16,000 due primarily to a increase in overdraft fees, offset in part by decreases in loan prepayment fees.  During the nine months ended September 30, 2007, the Company recorded $118,000 in loan prepayment fees, compared to $489,000 for the nine months ended September 30, 2006.  Abstract fees decreased $216,000 due in part to the sale of one of the Company’s three abstract offices at the end of the second quarter of 2006 and a decrease in real estate activity.  Other income, which primarily includes annuity, securities, and insurance sales and income associated with foreclosed real estate, increased $68,000 primarily due to an increase in income from annuity, securities, and insurance sales.  Mortgage banking income increased $153,000 due to an increase in loans originated for the secondary market.

Noninterest Expense.  Total noninterest expense increased by $278,000, or 8.6%, to $3.51 million for the quarter ended September 30, 2007, from $3.23 million for the quarter ended September 30, 2006.  The increase is primarily due to an increase in compensation and employee benefits expense.  Compensation and employee benefits expense increased $172,000 primarily due to normal salary increases, increased personnel and severance costs.  The Company's efficiency ratio for the quarter ended September 30, 2007 and 2006 was 67.19% and 66.70%, respectively.  The Company's ratio of noninterest expense to average assets for the quarters ended September 30, 2007 and 2006 was 2.67% and 2.58%, respectively.

Total noninterest expense increased by $656,000 or 6.7%, to $10.48 million for the nine months ended September 30, 2007, from $9.82 million for the nine months ended September 30, 2006.  The increase was primarily due to increases in compensation and benefits, professional fees related to information technology enhancements, and other operating expenses related to the Bank’s growth.  The Company's efficiency ratio for the nine months ended September 30, 2007 and 2006 was 68.87% and 64.84%, respectively.  The Company's ratio of noninterest expense to average assets for the nine months ended September 30, 2007 and 2006 was 2.69% and 2.65%, respectively.

Income Taxes.  Income taxes increased by $9,000 to $455,000 for the quarter ended September 30, 2007, compared to $446,000 for the quarter ended September 30, 2006.  The increase in income taxes was primarily due to a reduction of available tax credits.

Income taxes decreased by $224,000 to $1.32 million for the nine months ended September 30, 2007, compared to $1.54 million for the nine months ended September 30, 2006.  The decrease was primarily due to a decrease in pre-tax earnings.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to financial instruments with off-statement of financial condition risk in the normal course of business to meet the financing needs of its customers.  These financial instruments consist primarily of commitments to extend credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial condition.  The contract or notional amounts of those instruments reflect the extent of involvement the Company has in a particular class of financial instruments.

The Company uses the same credit policies in making commitments and conditional obligations as it does for on-statement of financial condition instruments. The Company does require collateral, or other security, to support financial instruments with credit risks.

No material changes in the Company's off-statement of financial condition arrangements have occurred since December 31, 2006.

CRITICAL ACCOUNTING POLICIES

The section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the disclosures included within this report, are based on the Company’s consolidated financial statements.  These statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  The financial information contained in these statements is, for the most part, based on approximate measures of the financial effects of transactions and events that have already occurred.  However, the preparation of these statements requires management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” of the Company’s 2006 Annual Report on Form 10-K.  Based on its consideration of accounting policies that involve the most complex and subjective estimates and judgments, management has identified its most critical accounting policies to be that related to the allowance for loan losses and asset impairment judgments, including the recoverability of goodwill.

The allowance for loan losses is established through a provision for loan losses charged to expense.  Loans are charged against the allowance for loan losses when management believes that collectibility of the principal is unlikely.  The Company has policies and procedures for evaluating the overall credit quality of its loan portfolio, including timely identification of potential problem credits.  On a quarterly basis, management reviews the appropriate level for the allowance for loan losses, incorporating a variety of risk considerations, both quantitative and qualitative.  Quantitative factors include the Company’s historical loss experience, delinquency and charge-off trends, collateral values, known information about individual loans and other factors.  Qualitative factors include the general economic environment in the Company’s market area and the expected trend of those economic conditions.  To the extent that actual results differ from forecasts and management’s judgment, the allowance for loan losses may be greater or less than future charge-offs.

Asset impairment judgments include evaluating the decline in fair value of available-for-sale securities below their cost.  Declines in fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses.  In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Goodwill represents the excess of the acquisition cost over the fair value of the net assets acquired in a purchase acquisition.  Goodwill is tested for impairment at least annually.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In management's opinion, there has not been a material change in the Company’s market risk profile since December 31, 2006.  Please see the Company’s 2006 Annual Report on Form 10-K for a more detailed discussion of the Company’s interest rate sensitivity analysis.

ITEM 4.

CONTROLS AND PROCEDURES

Management, including the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer and Treasurer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report.  Based upon that evaluation, the Company’s President and Chief Executive Officer and the Chief Financial Officer and Treasurer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to the Company’s management, including the Company’s President and Chief Executive Officer and Chief Financial Officer and Treasurer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation that occurred during the Company’s last fiscal quarter that have materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business.  Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the Company’s financial condition and results of operations.

Item 1A.  Risk Factors

There have been no material changes to the risk factors disclosed on the Company’s 2006 Annual Report on Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

In March 2006 and June 2007, the Company approved Stock Repurchase Plans which provide for the repurchase of up to 100,000 shares and 75,000 shares respectively, of the Company’s common stock.  At September 30, 2007, the March 2006 Stock Repurchase Plan was fully utilized during the quarter and 64,250 shares can be repurchased under the June 2007 Stock Repurchase Plan.

The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchases” (as defined in rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Company’s common stock during the three months ended September 30, 2007.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares that May Yet Be Purchased Under The Plan
March 2006 Plan:
July 1, 2007 to July 31, 2007		-		-		-		4,450
August 1, 2007 to August 31, 2007		4,450	$	40.00		4,450		-
September 1, 2007 to September 30, 2007		-		-		-		-
June 2007 Plan:
July 1, 2007 to July 31, 2007		-		-		-		75,000
August 1, 2007 to August 31, 2007		7,550	$	39.44		7,550		67,450
September 1, 2007 to September 30, 2007		3,200	$	39.05		3,200		64,250
Total		15,200				15,200

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

Exhibit No.	Description	Reference No.
3.1	Articles of Incorporation of North Central Bancshares, Inc.	(1)
3.2	Bylaws of North Central Bancshares, Inc.	(1)
3.3	Bylaws of North Central Bancshares, Inc., as amended	(2)
4.1	Federal Stock Charter of First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge)	(1)
4.2	Bylaws of First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge).	(1)
4.3	Specimen Stock Certificate of North Central Bancshares, Inc.	(1)
4.4	Bylaws of First Federal Savings Bank of Iowa, as amended	(2)
10.1	Employee Stock Ownership Plan of First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and ESOP Trust Agreement (incorporating Amendments 1 and 2)	(6)
10.1A	Amendment #1 to Employee Stock Ownership Plan of First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and ESOP Trust Agreement	(7)
10.1B	Amendment #2 to Employee Stock Ownership Plan of First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and ESOP Trust Agreement	(7)
10.2	ESOP Loan Documents, dated September 3, 1996	(5)
10.3	Amended and Restated Employee Retention Agreements between First Federal Savings Bank of Fort Dodge and certain executive officers	(3)
10.4	Employment Agreement between First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge) and David M. Bradley, effective as of August 31, 1994	(1)
10.6	Form of Employment Agreement between North Central Bancshares, Inc. and David M. Bradley	(1)
10.8	North Central Bancshares, Inc. 1996 Stock Option Plan	(4)
10.9	Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option Plan	(6)
10.10	Supplemental Retirement and Deferred Compensation Plan of First Federal Savings Bank of Iowa	(7)
10.11	Form of Employment Agreement between First Federal Savings Bank of Iowa and C. Thomas Chalstrom	(8)
10.12	Tax Allocation Agreement between North Central Bancshares, Inc. and Subsidiaries	(2)
10.13	Form of Employment Agreement North Central Bancshares, Inc.  and C. Thomas Chalstrom	(8)
10.14	North Central Bancshares, Inc. 2006 Stock Incentive Plan	(9)
10.15	North Central Bancshares, Inc. 2006 Incentive Award Plan	(10)
10.16	Form of Restricted Stock Award Notice	(11)
10.17	Form of Stock Option Agreement	(12)
10.18	Novation of Employment Agreements
14.1	Code of Ethics for Senior Financial Officers of North Central Bancshares, Inc.	(2)
21.1	Subsidiaries of the Registrant	(1)
31	Rule 13a-14(a)/15d-14(a) Certifications
32	Section 1350 Certifications

(1)	Incorporated herein by reference to Registration Statement No. 33-80493 on Form S-1 filed with the SEC on December 18, 1995, as amended.
(2)	Incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 29, 2004.
(3)	Incorporated herein by reference to the Quarterly Report on Form 10-Q filed with the SEC on August 13, 1998.
(4)	Incorporated herein by reference to the Amended Schedule 14A filed with the SEC on August 14, 1996.
(5)	Incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 1997.
(6)	Incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 1998.
(7)	Incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 29, 2002.
(8)	Incorporated herein by reference to the Annual Report on Form 10-K filed with the SEC on March 31, 2006.
(9)	Incorporated herein by reference to the Schedule 14A filed with the SEC on March 20, 2006.
(10)	Incorporated herein by reference to the Quarterly Report on Form 10-Q filed with the SEC on August 11, 2006.
(11)	Incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on May 3, 2007.
(12)	Incorporated herein by reference to the Current Report on Form 8-K filed with the SEC on July 3, 2007.

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: November 13, 2007	BY:                     /s/ David M. Bradley
	David M. Bradley, Chairman, President & CEO
Date: November 13, 2007	BY:                     /s/ Kyle C. Cook
	Kyle C. Cook, Chief Financial Officer

EX-10.18

Exhibit 10.18                                                                                         

October 31, 2007

Mr. David M. Bradley

13321 Douglas Parkway

Urbandale, Iowa 50323

Re: Novation of Employment Agreements

Dear Mr. Bradley:

Reference is made to the Employment Agreement, made and entered into as of March 20, 1996 by and between First Federal Savings Bank of Iowa (formerly known as First Federal Savings Bank of Fort Dodge) (the “Bank”) and you (the “Bank Employment Agreement”) and the Employment Agreement, made and entered into as of March 20, 1996 by and between North Central Bancshares, Inc. (the “Company”) and you (the “Company Employment Agreement”).

We hereby confirm that, in addition to your current position as Chairman of the Board of the Company and the Bank, you have been re-elected to the positions of President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank, and all elements of your compensation and benefits have been restored to the level commensurate with those positions, all effective immediately upon the effectiveness of Paul F. Bognanno's resignation from such positions.  We further agree that (1) your not having performed the duties of President and Chief Executive Officer of the Company and/or Chief Executive Officer of the Bank for the period beginning July 1, 2007 and ending with the date of your re-election does not constitute, and we hereby waive any right we might otherwise have to cite it as, grounds for the Company or the Bank to terminate your employment for “cause” within the meaning of the Company Agreement and the Bank Agreement and (2) the assignment of such positions to others during such period, and adjustments to your compensation in effect during such period do not alone or collectively constitute, and you hereby waive any right that you might otherwise have to cite them as, grounds for you to terminate your employment with the Bank and the Company and claim severance benefits under the Bank Agreement and the Company Agreement.

To the extent described in the preceding paragraph, this letter shall constitute a waiver and modification of our respective rights as contemplated by sections 21 and 25 of the Company Agreement and the Bank Agreement.

If you are in agreement with the terms of this letter, kindly so indicate by countersigning in the space provided and returning the countersigned letter to C. Thomas Chalstrom.

Very truly yours,

North Central Bancshares, Inc.	First Federal Savings Bank of Iowa
/s/ Melvin R. Schroeder	/s/ C. Thomas Chalstrom
Name	Name
Compensation Committee Chairman	President
Title	Title
Agreed to and accepted onOctober 31, 2007
/s/ David M. Bradley
David M. Bradley

EX-31

Exhibit 31   Rule 13a-14(a)/15d-14(a) Certifications.

CERTIFICATIONS

I, David M. Bradley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of North Central Bancshares, Inc., (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is prepared;

(b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 13, 2007	/s/ David M. Bradley
	David M. Bradley
	Chairman, President & CEO

CERTIFICATIONS

I, Kyle C. Cook, certify that:

1. I have reviewed this quarterly report on Form 10-Q of North Central Bancshares, Inc., (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is prepared;

(b) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 13, 2007	/s/ Kyle C. Cook
	Kyle C. Cook
	Chief Financial Officer

EX-32

Exhibit 32 Section 1350 Certifications.

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

The undersigned, David M. Bradley, is the Chairman of North Central Bancshares, Inc. (the “Company”).  This statement is being furnished in connection with the filing by the Company of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (the “Report”).

By execution of this statement, I certify that:

A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and

B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.  It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

November 13, 2007	/s/ David M. Bradley
Dated	David M. Bradley
	Chairman, President & CEO

STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

The undersigned, Kyle C. Cook, is the Chief Financial Officer of North Central Bancshares, Inc. (the “Company”).  This statement is being furnished in connection with the filing by the Company of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (the “Report”).

By execution of this statement, I certify that:

A) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)) and

B) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods covered by the Report.

This statement is authorized to be attached as an exhibit to the Report so that this statement will accompany the Report at such time as the Report is filed with the Securities and Exchange Commission, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.  It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

November 13, 2007	/s/ Kyle C. Cook
Dated	Kyle C. Cook
	Chief Financial Officer