-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RO5We1jCyuVW7LSj46YmWCXJFeOpTPdhVoewAsSOsxmYWZziYEIraJZd2o6967Ns uLeKbBvwhqOqoz1Z5jv0xQ== 0000950131-97-006792.txt : 19971115 0000950131-97-006792.hdr.sgml : 19971115 ACCESSION NUMBER: 0000950131-97-006792 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH CENTRAL BANCSHARES INC CENTRAL INDEX KEY: 0001005188 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 421449849 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27672 FILM NUMBER: 97717482 BUSINESS ADDRESS: STREET 1: 825 CENTRAL AVE STREET 2: C/O FIRST FED SAVINGS BANK OF FT DODGE CITY: FORT DODGE STATE: I0 ZIP: 50501 BUSINESS PHONE: 5155767531 MAIL ADDRESS: STREET 1: 825 CENTRAL AVENUE CITY: FORT DODGE STATE: IA ZIP: 50501 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ---------------------------------------- FORM 10-Q [Mark One] [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ___________________________________ to _____________________________________ Commission File Number 0-27672 NORTH CENTRAL BANCSHARES, INC. (Exact name of registrant as specified in its charter) Iowa 42-1449849 ------------------------------------------------------------------ (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification Number) 825 Central Avenue Fort Dodge, Iowa 50501 -------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code #(515)576-7531 None ------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 November 13, 1997 - ------------------------------------------------------------------------------- (Common Stock, $.01 par value) 3,266,483 NORTH CENTRAL BANCSHARES, INC. INDEX Page Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements (unaudited) 1 to 5 Consolidated Condensed Statements of Financial Condition at September 30, 1997 and December 31, 1996 1 Consolidated Condensed Statements of Income for the three and nine months ended September 30, 1997 and 1996 2 Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 1997 and 1996 3 Notes to Consolidated Condensed Financial Statements 4 to 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 to 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II. Other Information 15 & 16 Items 1 through 6 15 Signatures 16 Exhibits
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION (Unaudited) September 30, December 31, ASSETS 1997 1996 ------------ ------------ Cash: Interest-bearing $ 3,674,325 $ 2,973,490 Noninterest-bearing 846,228 963,325 Securities available for sale 22,241,637 23,103,614 Securities held to maturity -- 3,499,528 Loans receivable, net 181,119,869 165,831,040 Accrued interest receivable 1,328,799 1,327,733 Foreclosed real estate 231,814 128,471 Premises and equipment, net 2,015,152 1,780,392 Rental real estate 2,083,625 1,775,844 Title plant 925,256 968,747 Deferred taxes 74,000 198,000 Prepaid expenses and other assets 592,683 542,351 ------------ ------------ Total assets $215,133,388 $203,092,535 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits $139,254,875 $129,722,044 Other borrowed funds 25,550,000 22,335,000 Advances from borrowers for taxes and insurance 346,994 845,488 Dividend payable 203,624 230,344 Income taxes payable 118,930 182,826 Accrued expenses and other liabilities 356,169 542,026 ------------ ------------ Total liabilities 165,830,592 153,857,728 ------------ ------------ COMMITMENTS STOCKHOLDERS' EQUITY Preferred stock ($.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 37,895,518 37,796,611 Retained earnings, substantially restricted 22,760,386 20,531,604 Unrealized gain on securities available for sale, net of income taxes 364,532 73,097 Treasury stock at cost (1997 753,074 shares; 1996 581,602 shares) (10,496,411) (7,789,661) Unearned shares, employee stock ownership plan (1,261,340) (1,416,955) ------------ ------------ Total stockholders' equity 49,302,796 49,234,807 ------------ ------------ Total liabilities and stockholders' equity $215,133,388 $203,092,535 ============ ============
See Notes to Consolidated Condensed Financial Statements. -1- NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ---------- ---------- ----------- ----------- Interest Income: Loans receivable: First mortgage loans $3,117,288 $2,823,390 $ 9,111,895 $ 8,241,977 Consumer loans 562,520 521,388 1,623,475 1,472,851 Securities and cash deposits 419,857 479,904 1,200,805 1,421,624 ---------- ---------- ----------- ----------- 4,099,665 3,824,682 11,936,175 11,136,452 ---------- ---------- ----------- ----------- Interest expense: Deposits 1,665,152 1,553,231 4,795,481 4,652,589 Other borrowed funds 360,422 119,513 980,208 463,945 ---------- ---------- ----------- ----------- 2,025,574 1,672,744 5,775,689 5,116,534 ---------- ---------- ----------- ----------- Net Interest Income 2,074,091 2,151,938 6,160,486 6,019,918 Provision for loan losses 60,000 60,000 180,000 180,000 ---------- ---------- ----------- ----------- Net interest income after provision for loan losses 2,014,091 2,091,938 5,980,486 5,839,918 ---------- ---------- ----------- ----------- Noninterest income: Fees and service charges 163,074 166,355 472,074 415,458 Abstract fees 324,204 250,048 886,981 702,301 Gain on sale of securities available for sale -- -- -- 13,774 Other income 106,165 83,908 317,371 273,049 ---------- ---------- ----------- ----------- Total noninterest income 593,443 500,311 1,676,426 1,404,582 ---------- ---------- ----------- ----------- Noninterest expense: Salaries and employee benefits 551,866 466,115 1,607,769 1,495,268 Premises and equipment 110,419 93,367 316,908 317,185 Data processing 65,022 59,887 191,224 178,959 SAIF deposit insurance premiums 20,950 891,490 63,181 1,037,589 Other expenses 362,813 320,913 1,160,676 843,321 ---------- ---------- ----------- ----------- Total noninterest expense 1,111,070 1,831,772 3,339,758 3,872,322 ---------- ---------- ----------- ----------- Income before income taxes 1,496,464 760,477 4,317,154 3,372,178 Provision for income taxes 523,347 260,216 1,495,563 1,209,599 ---------- ---------- ----------- ----------- Net Income $ 973,117 $ 500,261 $ 2,821,591 $ 2,162,579 ========== ========== =========== =========== Earnings per share $ 0.31 $ 0.13 $ 0.88 $ 0.56 ========== ========== =========== =========== Dividends declared per common share $ 0.0625 $ 0.0625 $ 0.1875 $ 0.2250 ========== ========== =========== ===========
See Notes to Consolidated Condensed Financial Statements. -2- NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 1997 1996 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,821,591 $ 2,162,579 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 180,000 180,000 Depreciation, premises and equipment 143,081 150,878 Depreciation, rental real estate 55,000 -- Amortization and accretion 73,508 (141,992) Deferred taxes (57,825) (125,964) Effect of contribution to employee stock ownership plan 254,522 112,508 (Gain) on sale of foreclosed real estate and loans, net (20,685) (9,323) (Gain) on sale of securities available for sale -- (13,774) Loss on disposal of equipment 4,674 19,781 Change in assets and liabilities: (Increase) decrease in accrued interest receivable (1,066) 97,592 (Increase) in income taxes receivable -- (89,199) (Increase) in prepaid expenses and other assets (50,332) (529,145) (Decrease) in income taxes payable (63,896) -- Increase (decrease) in accrued expenses and other liabilities (185,857) 766,841 ------------ ------------ Net cash provided by operating activities 3,152,715 2,580,782 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net (increase) in loans (3,376,990) (5,188,068) Purchase of loans (12,259,359) (7,370,289) Proceeds from sale of loans 161,381 -- Proceeds from sales and maturities of securities available for sale 3,933,750 53,891 Purchase of securities available for sale (2,664,973) (14,274,965) Proceeds from maturities of securities held to maturity 3,500,000 9,500,000 Purchase of premises and equipment (413,815) (325,874) Proceeds from sale of equipment 31,300 100 Purchase of rental real estate (362,781) -- Proceeds from sale of title plant 43,491 -- Other (84,039) 16,885 ------------ ------------ Net cash (used in) investing activities (11,492,035) (17,588,320) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 9,532,831 2,786,339 Increase in advances from borrowers for taxes and insurance (498,494) (413,499) Net change in short term borrowings (10,000,000) (10,500,000) Proceeds from other borrowed funds 16,250,000 -- Payments of other borrowings (3,035,000) (892,000) Proceeds from issuance of common stock -- 25,412,159 Payments for expenses incurred relating to conversion to stock form -- (871,592) Purchase of treasury stock (2,706,750) -- Dividends paid (619,529) (479,295) ------------ ------------ Net cash provided by financing activities 8,923,058 15,042,112 ------------ ------------ Net increase in cash 583,738 34,574 CASH Beginning 3,936,815 3,071,642 ------------ ------------ Ending $ 4,520,553 $ 3,106,216 ============ ============ SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash payments for: Interest paid to depositors $ 4,757,337 $ 4,632,704 Interest paid on borrowings 1,052,379 455,175 Income taxes 1,619,750 1,424,761
See Notes to Consolidated Condensed Financial Statements. -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 and nine month periods ended September 30, 1997 and 1996 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 1996 Annual Report on Form 10-K. The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries (See Note 2). All significant intercompany balances and transactions have been eliminated in consolidation. 2. REORGANIZATION The Company was organized on December 5, 1995 at the direction of the Board of Directors of First Federal Savings Bank of Fort Dodge (the "Bank") for the purpose of acquiring all of the capital stock of the Bank, in connection with the conversion of the Bank, and North Central Bancshares, M.H.C. (the "Mutual Holding Company" or "MHC") from the mutual to the stock holding company structure (these transactions are collectively referred to as the "Reorganization"). On March 20, 1996, upon completion of the Reorganization, the Company issued an aggregate of 4,011,057 shares of its common stock, 1,385,590 shares of which were issued in exchange for all of the Bank's issued and outstanding shares, except for shares owned by the MHC which were cancelled, and 2,625,467 shares of which were sold in Subscription and Community Offerings (the "Offering") at a price of $10.00 per share, with gross proceeds amounting to $26,254,670. In addition, the Company replaced the Bank as the issuer listed on The Nasdaq Stock Market. At this time, the Company conducts business as a unitary savings and loan holding company and the principal business of the Company consists of the operation of its wholly owned subsidiary, the Bank. 3. 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 and nine month periods ended September 30, 1997, the weighted average number of shares outstanding were 3,121,633 and 3,201,605, respectively. For the three and nine month periods ended September 30, 1996, the weighted average number of shares outstanding were 3,852,586 and 3,872,209, respectively. The number of shares outstanding for the nine month period ended September 30, 1996 was restated to reflect the conversion ratio effected as part of the Reorganization. 4. DIVIDENDS On August 22, 1997, the Company declared a cash dividend on its common stock, payable on October 6, 1997 to stockholders of record as of September 15, 1997, equal to $0.0625 per share. -4- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued) 5. RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 specifies the computation, presentation, and disclosure requirements for earnings per share ("EPS") for entities with publicly held common stock or potential common stock. This statement simplifies the standards for computing EPS previously found in Accounting principles Board Opinion No. 15 ("APB No. 15"). It replaces the presentation of primary EPS with a presentation of Basic EPS, and requires dual presentation of basic and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997 and requires restatement of all prior-period EPS data presented. Upon adoption of SFAS No. 128, the change will not result in a material change in the Company's EPS presentation from primary to basic EPS and from fully diluted to diluted EPS. In February 1997, the FASB issued Statement of Financial Accounting Standards No. 129 ("SFAS No. 129") "Disclosure of Information about Capital Structure." SFAS No. 129 requires nonpublic entities to include disclosure requirements regarding capital structure as specified in APB Opinion No. 15, "Earnings Per Share." These disclosure requirements are effective for financial statements for periods ending after December 15, 1997. The adoption of SFAS No. 129 will have no effect on the financial condition or results of operations. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 requires that all items that are components of comprehensive income (defined as "the change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners"), be reported in a financial statement that is displayed with the same prominence as other financial statements. Companies will be required to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997, and requires reclassification of prior periods presented. As the requirements of SFAS No. 130 are disclosure-related, its implementation will have no impact on the Company's financial condition or results of operations. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 requires that enterprises report certain financial and descriptive information about operating segments in complete sets of financial statements of the Company and in condensed financial statements of interim periods issued to shareholders. It also requires that a Company report certain information about their products and services, geographic areas in which they operate, and their major customers. SFAS No. 131 is effective for fiscal years beginning after December 15, 1997. As the requirements of SFAS No. 131 are disclosure-related, its implementation will have no impact on the Company's financial condition or results of operations. 6. ACQUISITION OF VALLEY FINANCIAL CORP. On September 18, 1997, the Company announced the execution of a definitive agreement to acquire Valley Financial Corp., a privately held Iowa corporation and parent company of Valley Savings Bank, FSB, Burlington, Iowa. The acquisition is subject to approval by the shareholders of Valley, approval of the appropriate regulatory authorities and the satisfaction of certain other customary conditions. The acquisition will be accounted for as a purchase and is expected to close during the first quarter of 1998. -5- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Under the terms of the Agreement, North Central will acquire in a cash transaction valued at $14.7 million, or $525.00 per share, all 28,050 shares outstanding of Valley's common stock. The pricing reflects 190.6% of Valley's June 30, 1997 book value and 13.0 times Valley's earnings for the twelve months ended June 30, 1997, as adjusted for the one-time SAIF charge. Valley's $7.7 million of capital stood at 6.95% of assets as of June 30, 1997 and earnings were $635,000 for the six months ended June 30, 1997. Valley Savings Bank, FSB, a federally chartered savings bank, has two offices in Burlington, Iowa and one office in Mount Pleasant, Iowa. At June 30, 1997, Valley Savings Bank, FSB had assets of $110.9 million, loans of $60.2 million and deposits of $102.1 million. -6- 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 and market, and legislative and regulatory conditions, and the development of an adverse interest rate environment that adversely affects the interest rate spread or other income anticipated from the Company's operations and investments. ACQUISITION OF VALLEY FINANCIAL CORP. On September 18, 1997, the Company announced the execution of a definitive agreement to acquire Valley Financial Corp., a privately held Iowa corporation and parent company of Valley Savings Bank, FSB, Burlington, Iowa. Under the terms of the Agreement, North Central will acquire in a cash transaction valued at $14.7 million, or $525.00 per share, all 28,050 shares outstanding of Valley's common stock. The pricing reflects 190.6% of Valley's June 30, 1997 book value and 13.0 times Valley's earnings for the twelve months ended June 30, 1997, as adjusted for the one-time assessment to recapitalize the Savings Association Insurance Fund. Valley's $7.7 million of capital stood at 6.95% of assets as of June 30, 1997 and earnings were $635,000 for the six months ended June 30, 1997. Valley Savings Bank, FSB, a federally chartered savings bank, has two offices in Burlington, Iowa and one office in Mount Pleasant, Iowa. At June 30, 1997, Valley Savings Bank, FSB had assets of $110.9 million, loans of $60.2 million and deposits of $102.1 million. The acquisition of Valley will result in the merger of Valley Savings Bank with and into First Federal, with the three Valley branches continuing to operate as Valley Savings Bank, a division of First Federal. Doyle Ruble, the current President of Valley Savings Bank, will continue as President of the Valley Savings Bank division. The combined banking operation will have assets in excess of $300 million. The transaction, which will be accounted for as a purchase, is expected to close in the first quarter of 1998. The transaction has the unanimous approval of the boards of directors of North Central and Valley. The acquisition is subject to approval by the shareholders of Valley, approval of the appropriate regulatory authorities and the satisfaction of certain other customary conditions. Each member of Valley's Board of Directors, representing in excess of 25% of the voting power of Valley, has individually agreed to vote such person's shares in favor of the transaction. FINANCIAL CONDITION Total assets increased $12.0 million, or 5.9%, to $215.1 million at September 30, 1997 compared to $203.1 million at December 31, 1996. Securities available for sale decreased $862,000, or 3.9%, primarily due to the maturities of several U.S. Treasury Notes and the call of certain equity securities, partially offset by the purchase of several U.S. Treasury Notes and the purchase of certain equity securities. Securities held to maturity decreased $3.5 million, or 100.0%, due to the maturities of several U.S. Treasury Notes and the Company's decision not to replace such securities at the present time, in order to allow the Company greater flexibility in managing its portfolio of investment securities. Total loans receivable, net, increased by $15.3 million, or 9.2%, from December 31, 1996, due primarily to originations of $18.5 million of first mortgage loans secured primarily by one-to-four family residences, purchases of $12.3 million of first mortgage loans secured by one-to-four family and multi- family residences and originations of $7.7 million of second mortgage loans, which originations and purchases were offset in part by payments and prepayments of loans (of -7- approximately $26.4 million). The increase in loans receivable reflects the Company's strategy to leverage its balance sheet by increasing its loan portfolio, which strategy includes purchasing loans. Deposits increased $9.5 million, or 7.3%, from $129.7 million at December 31, 1996 to $139.3 million at September 30, 1997, reflecting an increases in certificates of deposit, NOW and money market accounts. These increases were primarily due to increased advertising by the Company to promote such products, the expansion of a branch of the Bank in Ames, Iowa and fluctuations in market interest rates. Other borrowings, primarily FHLB advances, increased by $3.2 million, to $25.6 million at September 30, 1997 from $22.3 million at December 31, 1996, primarily to fund asset growth which was not funded by deposit increases. Total stockholders' equity increased $68,000, from $49.2 million at December 31, 1996 to $49.3 million at September 30, 1997, primarily due to earnings, which were offset in part by stock repurchases and dividends declared. See "Capital". CAPITAL The Company's total stockholders' equity increased by $68,000 to $49.3 million at September 30, 1997 from $49.2 million at December 31, 1996, primarily due to earnings, which were offset in part by stock repurchases and dividends declared. The changes in stockholders' equity were also due to the unrealized gain on securities available for sale increased by $291,000 to $365,000 at September 30, 1997 from $73,000 at December 31, 1996. The unearned shares from the Employee Stock Ownership Plan (the "ESOP") decreased by $156,000 to $1.3 million at September 30, 1997 from $1.4 million at December 31, 1996, due to the release of shares by the ESOP to employees of the Bank. The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum tangible, leverage (core) and risk-based capital requirements. As of September 30, 1997, the Bank exceeded all of its regulatory capital requirements. The Bank's required, actual and excess capital levels as of September 30, 1997 are as follows:
Amount Percentage of Assets -------- --------------------- (dollars in thousands) Tangible capital: Capital level $36,908 17.43% Less Requirement 3,177 1.50% ------- ----- Excess $33,731 15.93% ======= ===== Core capital: Capital level $36,908 17.43% Less Requirement 6,354 3.00% ------- ----- Excess $30,544 14.43% ======= ===== Risk-based capital: Capital level $38,385 32.67% Less Requirement 9,401 8.00% ------- ----- Excess $28,984 24.67% ======= =====
LIQUIDITY The Company's primary sources of funds are cash provided by operating activities (including principal and interest payment on loans), certain financing activities (including increases in deposits and proceeds from borrowings) and certain investing activities (including maturities of securities and other investments). During the first nine months of 1997 and 1996, principal payments and repayments on loans totalled $26.4 million and $23.3 million, respectively. The net increases in deposits during the first nine months of 1997 and 1996 totalled $9.5 million and $2.8 million, respectively. The proceeds from borrowed funds during the first nine months of 1997 totalled $16.3 million. During the first nine months of 1997 and 1996, the proceeds from the maturities and sales of securities totalled $7.4 million and $9.6 million, respectively. Cash provided from operating activities during the first nine months of 1997 and 1996 totalled $3.2 million and $2.6 million, respectively, of which $2.8 and $2.2 million, respectively, represented net income of the Company. In the first nine months of 1996, the Company also received net proceeds from the Reorganization of $24.5 million. The Company's primary use of funds is cash used to originate and purchase loans, repayment of borrowed funds and other financing activities. During the first nine months of 1997 and 1996, the Company's gross -8- purchases and origination of loans totalled $42.8 million and $36.5 million, respectively. The repayment of borrowed funds during the first nine months of 1997 and 1996 totalled $13.0 million and $11.4 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. OTS regulations require that thrift institutions such as the Bank maintain an average daily balance of liquid assets (cash, certain time deposits, banker's acceptances and specified U.S. government, state or federal agency obligations) equal to a monthly average of not less than 5% of their net withdrawable deposits, plus short term borrowings. At September 30, 1997, the Bank's liquidity position was $11.8 million or 7.83% of liquid assets, compared to $13.1 million or 9.11% at December 31, 1996. OTS regulations also require that thrift institutions such as the Bank maintain an average daily balance of short term liquid assets (cash, certain time deposits, banker's acceptances and specified U.S. government, state or federal agency obligations) equal to a monthly average of not less than 1% of their net withdrawable deposits, plus short term borrowings. At September 30, 1997, the Bank's short term liquidity position was $4.3 million or 2.85% of short term liquid assets, compared to $4.1 million or 2.84% at December 31, 1996. Stockholders' equity totaled $49.3 million at September 30, 1997 compared to $49.2 million at December 31, 1996, reflecting the repurchase of the Company's common stock, the Company's earnings for the quarter, the amortization of the unallocated portion of shares held by the ESOP, dividends paid on common stock and the change in the net unrealized gains on securities, net of taxes. The Company repurchased 171,472 shares of its outstanding common stock at an aggregate cost of $2,706,750 in open market purchases during the nine months ended September 30, 1997. On July 3, 1997, the Company paid a quarterly cash dividend equal to $0.0625 per share on common stock outstanding as of the close of business on June 13, 1997, aggregating $204,000. On August 22, 1997, the Company declared a quarterly cash dividend of $0.0625 per share payable on October 6, 1997 to shareholders of record as of the close of business on September 15, 1997 aggregating $204,000. RESULTS OF OPERATIONS Interest Income. Interest income increased by $275,000 to $4.1 million for the three months ended September 30, 1997 compared to $3.8 million for the three months ended September 30, 1996. The increase in interest income was primarily due to a $15.9 million increase in the average balance of interest earning assets (primarily first mortgage and consumer loans) to $206.9 million for the three months ended September 30, 1997, from $191.0 million for the comparable 1996 period. The increase in the average balance of first mortgage loans and consumer loans (primarily second mortgage loans) generally reflects an increase over the past twelve months in originations of first and second mortgage loans and purchases of first mortgage loans secured by one-to-four family residences and multi-family residences, which were offset, in part, by payments and prepayments on such loans. See "Financial Condition." The impact of the increase in the average balances of first mortgage and consumer loans was offset in part by a decrease in the average yield on first mortgage loans, consumer loans and securities available for sale. The average yield on first mortgage loans decreased to 8.04% for the three months ended September 30, 1997 from 8.09% for the three months ended September 30, 1996, primarily due to a general decrease in market interest rates. The average yield on consumer loans decreased to 9.50% for the three months ended September 30, 1997 from 9.56% for the three months ended September 30, 1996, also primarily due to a general decrease in market interest rates. The average balance of securities held to maturity decreased $8.5 million, or 100.0%, and such securities were in part, replaced by lower yielding securities available for sale. The lower rate on available for sale securities is due to lower market interest rates for the nine months ended September 30, 1997 and the call of certain equity securities whose rate were higher than the Company's average rate on available-for-sale securities. The average yield on interest earning assets decreased from 8.00% for the three months ended September 30, 1996 to 7.91% for the three months ended September 30, 1997. Interest income increased by $800,000 to $11.9 million for the nine months ended September 30, 1997 compared to $11.1 million for the nine months ended September 30, 1996. The increase in interest income -9- RESULTS OF OPERATIONS (Continued) was primarily due to a $16.3 million increase in the average balance of interest earning assets (primarily first mortgage and consumer loans) to $201.6 million for the nine months ended September 30, 1997, from $185.3 million for the comparable 1996 period. The increase in the average balance of first mortgage loans and consumer loans (primarily second mortgage loans) generally reflects an increase over the past twelve months in originations of first and second mortgage loans and purchases of first mortgage loans secured by one-to-four family residences and multi-family residences, which were offset, in part, by payments and prepayments on such loans. See "Financial Condition." The impact of the increase in the average balances of first mortgage and consumer loans was offset in part by a decrease in the average yield on first mortgage loans, consumer loans and securities available for sale. The average yield on first mortgage loans decreased to 8.06% for the nine months ended September 30, 1997 from 8.13% for the nine months ended September 30, 1996, primarily due to a general decrease in market interest rates. The average yield on consumer loans decreased to 9.49% for the nine months ended September 30, 1997 from 9.59% for the nine months ended September 30, 1996, also primarily due to a general decrease in market interest rates. The average balance of securities held to maturity decreased $10.8 million, or 91.5%, and such securities were in part, replaced by lower yielding securities available for sale. The average yield on interest earning assets decreased from 8.02% for the nine months ended September 30, 1996 to 7.90% for the nine months ended September 30, 1997. Interest Expense. Interest expense increased by $353,000 to $2.0 million for the three months ended September 30, 1997 compared to $1.7 million for the three months ended September 30, 1996. The increase in interest expense was primarily due to a $24.5 million increase in the average balance of interest bearing liabilities (primarily borrowed funds and certificates of deposit) to $158.8 million for the three months ended September 30, 1997 from $134.3 million for the comparable 1996 period. The increase in the average balance in borrowed funds in 1997 reflects the repayment of borrowed funds with the proceeds of the Reorganization in 1996 and the increase of borrowed funds subsequent to the Reorganization in order to fund asset growth. The average cost of interest bearing liabilities increased to 5.06% for the three months ended September 30, 1997 from 4.96% for the three months ended September 30, 1996, primarily due to the increase in the average balance of borrowed funds and increases in the average balance of certificates of deposit, each of which bears interest at a rate greater than the average interest bearing liabilities. Interest expense increased by $659,000 to $5.8 million for the nine months ended September 30, 1997 compared to $5.1 million for the nine months ended September 30, 1996. The increase in interest expense was primarily due to a $16.8 million increase in the average balance of interest bearing liabilities (primarily borrowed funds and certificates of deposit) to $153.4 million for the nine months ended September 30, 1997 from $136.6 million for the comparable 1996 period. The increase in the average balance in borrowed funds in 1997 reflects the repayment of borrowed funds with the proceeds of the Reorganization in 1996 and the increase of borrowed funds subsequent to the Reorganization in order to fund asset growth. The average cost of interest bearing liabilities increased to 5.03% for the nine months ended September 30, 1997 from 5.00% for the three months ended September 30, 1996, primarily due to the increase in the average balance of borrowed funds and increases in the average balance of certificates of deposit, each of which bears interest at a rate greater than the average interest bearing liabilities. Net Interest Income. Net interest income before the provision for loan losses decreased by $78,000 to $2.1 million for the three months ended September 30, 1997 from $2.2 million for the three months ended September 30, 1996. The decrease is primarily due to the decrease in the excess of average interest earning assets over the average interest bearing liabilities. This net decrease was also due in part to the decrease in the Company's interest rate spread (i.e., the difference in the average yield on assets and average cost of liabilities) from 3.04% for the three months ended September 30, 1996 to 2.85% for the three months ended September 30, 1997. The decline in the spread reflects the general decline in the overall yields on interest-earning assets combined with the increase in the average balance of borrowed funds and certificates of deposit which have higher average costs than other interest- bearing liabilities. Net interest income before provision for loan losses increased by $141,000 to $6.2 million for the nine months ended September 30, 1997 from $6.0 million for the nine months ended September 30, 1996. The increase is primarily due to increases in the average interest earning assets and increased in the average interest bearing -10- RESULTS OF OPERATIONS (Continued) liabilities. This net increase was offset in part due to the decrease in the Company's interest rate spread (i.e., the difference in the average yield on assets and average cost of liabilities) from 3.02% for the nine months ended September 30, 1996 to 2.87% for the nine months ended September 30, 1997. The decline in the spread reflects the general decline in the overall yields on interest-earning assets combined with the increase in the average balance of borrowed funds and certificates of deposit which have higher average costs than other interest-bearing liabilities. The following tables set forth certain information relating to the Company's average balance sheets and reflect the average yield on assets and average cost of liabilities for the three and nine month periods ended September 30, 1997 and 1996. -11- RESULTS OF OPERATIONS (Continued)
For Nine Months Ended September 30, --------------------------------------------------------------- 1997 1996 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost -------- -------- ---------- -------- -------- ---------- (Dollars in thousands) Assets: Interest-earning assets: First mortgage loans..................... $150,782 $ 9,112 8.06% $135,109 $ 8,242 8.13% Consumer loans........................... 22,862 1,623 9.49 20,524 1,473 9.59 Securities available for sale............ 23,172 1,004 5.79 14,292 692 6.47 Securities held to maturity.............. 1,000 49 6.58 11,775 595 6.75 Interest bearing cash.................... 3,794 148 5.21 3,613 134 4.97 -------- ------- ------ -------- ------- ------ Total interest-earning assets.......... 201,610 $11,936 7.90% 185,313 $11,136 8.02% ------- ------ ------- ------ Noninterest-earning assets................. 6,594 4,574 -------- -------- Total assets........................... $208,204 $189,887 ======== ======== Liabilities and Equity: Interest-bearing liabilities: NOW and money market savings............. $ 21,540 $ 466 2.89% $ 18,538 $ 394 2.84% Passbook savings......................... 17,521 295 2.25 19,361 330 2.28 Certificates of deposit.................. 92,122 4,035 5.86 88,270 3,928 5.94 Borrowed funds........................... 22,215 980 5.90 10,392 464 5.96 -------- ------- ------ -------- ------- ------ Total interest-bearing liabilities..... 153,398 $ 5,776 5.03% 136,561 $ 5,116 5.00% ------- ------ ------- ------ Noninterest-bearing liabilities............ 5,678 5,094 -------- -------- Total liabilities...................... 159,076 141,655 Equity..................................... 49,128 48,232 -------- -------- Total liabilities and equity........... $208,204 $189,887 ======== ======== Net interest income.......................... $ 6,160 $ 6,020 ======= ======= Net interest rate spread..................... 2.87% 3.02% ====== ====== Net interest margin.......................... 4.07% 4.33% ====== ====== Ratio of average interest-earning assets to.. 131.43% 135.70% average interest-bearing liabilities....... ====== ======
For Three Months Ended September 30, --------------------------------------------------------------- 1997 1996 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost -------- -------- ---------- -------- -------- ---------- (Dollars in thousands) Assets: Interest-earning assets: First mortgage loans..................... $155,005 $ 3,118 8.04% $139,558 $ 2,823 8.09% Consumer loans........................... 23,493 563 9.50 21,701 521 9.56 Securities available for sale............ 22,438 340 6.02 18,917 304 6.38 Securities held to maturity.............. -- -- -- 8,498 148 6.92 Interest bearing cash.................... 5,954 79 5.29 2,307 29 4.93 -------- ------- ------ -------- ------- ------ Total interest-earning assets.......... 206,890 $ 4,100 7.91% 190,981 $ 3,825 8.00% ------- ------ ------- ------ Noninterest-earning assets................. 6,695 4,944 -------- -------- Total assets........................... $213,585 $195,925 ======== ======== Liabilities and Equity: Interest-bearing liabilities: NOW and money market savings............. $ 22,241 $ 164 2.92% $ 19,096 $ 139 2.89% Passbook savings......................... 17,371 99 2.25 18,427 103 2.23 Certificates of deposit.................. 95,115 1,403 5.85 88,562 1,311 5.89 Borrowed funds........................... 24,033 360 5.95 8,210 120 5.79 -------- ------- ------ -------- ------- ------ Total interest-bearing liabilities..... 158,760 $ 2,026 5.06% 134,295 $ 1,673 4.96% ------- ------ ------- ------ Noninterest-bearing liabilities............ 5,961 5,531 -------- -------- Total liabilities...................... 164,721 139,826 Equity..................................... 48,864 56,099 -------- -------- Total liabilities and equity........... $213,585 $195,925 ======== ======== Net interest income.......................... $ 2,074 $ 2,152 ======= ======= Net interest rate spread..................... 2.85% 3.04% ====== ====== Net interest margin.......................... 4.01% 4.51% ====== ====== Ratio of average interest-earning assets to average interest-bearing liabilities....... 130.32% 142.21% ====== ======
-12- RESULTS OF OPERATIONS (Continued) Provision for Loan Losses. The Company's provision for loan losses was $60,000 for each of the three months ended September 30, 1997 and 1996. The Company's provision for loan losses was $180,000 for each of the nine months ended September 30, 1997 and 1996. 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 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 $13,000 for the nine months ended September 30, 1997 as compared to net charge offs of $9,000 for the nine months ended September 30, 1996. The resulting allowance for loan losses was $2.1 million at September 30, 1997 as compared to $2.0 million at December 31, 1996 and $1.9 million at September 30, 1996. This increase in the allowance for the first nine months of 1997 reflects the increase in total loans from $164.4 million at September 30, 1996 to $185.0 million at September 30, 1997. The level of nonperforming loans increased to $244,000 at September 30, 1997 from $184,000 at December 31, 1996, yet reflected a decrease from $287,000 at September 30, 1996. 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 $93,000 to $593,000 for the three months ended September 30, 1997 from $500,000 for the three months ended September 30, 1996. The increase is due to increases in abstract fees and other income. Abstract fees increased $74,000 due to increased sales volume, which is in part attributable to the purchase of the assets of an abstract company in December, 1996. Other income increased $22,000 primarily due to increases in rental income from the Bank's investment in the Northridge Apartments Limited Partnership, which owns and operates a 44-unit apartment complex in Fort Dodge, Iowa, offset in part by decreases in annuity sales and insurance sales. Other income for the three months ended September 30, 1996 also reflects losses on the sale of equipment, while no such losses were recorded for the corresponding three month period in 1997. Total noninterest income increased by $272,000 to $1.7 million for the nine months ended September 30, 1997 from $1.4 million for the nine months ended September 30, 1996. The increase is due to increases in fees and service charges, abstract fees and other income, offset by decreases in gain on sale of securities available for sale. Fees and service charges increased $57,000, primarily due to increases in overdraft fees and checking account service charges. Abstract fees increased $185,000 due to increased sales volume, which is in part attributable to the purchase of the assets of an abstract company in December, 1996. Other income increased $44,000, primarily due to increases in rental income from the Bank's investment in the Northridge Apartments Limited Partnership, offset in part by decreases in annuity sales and insurance sales. Other income for the nine months ended September 30, 1996 also reflects losses on the sale of equipment, while no such losses were recorded for the corresponding three month period in 1997. Noninterest income for the nine months ended September 30, 1996 also reflects gains on sales of securities available for sale of $14,000, while no such gains were recorded for the corresponding nine month period in 1997. Noninterest Expense. Total noninterest expense decreased by $721,000 to $1.1 million for the three months ended September 30, 1997 from $1.8 million for the three months ended September 30, 1996. The decrease is primarily due to the $817,000 one-time special assessment to recapitalize the Savings Association Insurance Fund ("SAIF"). Absent the one-time assessment, the noninterest expense for the three months ended September 30, 1997 increased $96.000 over the corresponding period in 1996. The increase is primarily due to increases in salaries and employee benefits and other expenses, offset by decreases in SAIF deposit insurance premiums. The increase in salaries and benefits was primarily a result of the increased costs associated with the ESOP, normal salary increases and an increase in the number of employees at the Ames office and at First Iowa Title Services, Inc. The increase in other expenses is primarily a result of higher expenditures for advertising, employee expenses and costs associated with the Bank's investment in the Northridge Apartments Limited Partnership, offset in part by decreases in professional fees. The decrease in SAIF deposit insurance premiums, excluding the one-time assessment, was primarily due to the enactment of legislation which decreased assessment rates for institutions such as the Bank. The Company's efficiency ratio, excluding the one-time SAIF assessment, for the three months ended September 30, 1997 and 1996 were 41.65% and 38.25%, respectively. The Company's ratio of noninterest expense -13- RESULTS OF OPERATIONS (Continued) to average assets, excluding the one-time SAIF assessment, for the three months ended September 30, 1997 and 1996 were 2.08% and 2.07%, respectively. Total noninterest expense decreased by $533,000 to $3.3 million for the nine months ended September 30, 1997 from $3.9 million for the nine months ended September 30, 1996. The decrease is primarily due to the $817,000 one-time special SAIF assessment accrued during the third quarter of 1996. Absent the one-time assessment, noninterest expense for the nine months ended September 30, 1997 increased $284,000 over the corresponding period in 1996. The increase is primarily due to increases in salaries and employee benefits and other expenses, offset by decreases in SAIF deposit insurance premiums. The increase in salaries and benefits was primarily a result of the increased costs associated with the ESOP, normal salary increases and an increase in the number of employees at the Ames office and at First Iowa Title Services, Inc., offset in part by the costs incurred in the 1996 period related to the adoption of a retirement plan for the benefit of the former chairman of the board. The increase in other expenses is primarily a result of higher expenditures for professional fees, advertising and costs associated with the Bank's investment in the Northridge Apartments Limited Partnership. The decrease in SAIF deposit insurance premiums, excluding the one- time assessment, was primarily due to the enactment of legislation which decreased assessment rates for institutions such as the Bank. The Company's efficiency ratio, excluding the one-time SAIF assessment, for the nine months ended September 30, 1997 and 1996 were 42.62% and 41.15%, respectively. The Company's ratio of noninterest expense to average assets, excluding the one-time SAIF assessment, for the nine months ended September 30, 1997 and 1996 were 2.14% and 2.15%, respectively. Income Taxes. Income taxes increased by $263,000 to $523,000 for the three months ended September 30, 1997 as compared to $260,000 for the three months ended September 30, 1996. The increase was primarily due to an increase in pre- tax earnings during the 1997 period as compared to the corresponding 1996 period, offset in part by the tax credits recognized from the Bank's investment in the Northridge Apartments Limited Partnership in 1997. Income taxes increased by $286,000 to $1.5 million for the nine months ended September 30, 1997 as compared to $1.2 million for the nine months ended September 30, 1996. The increase was primarily due to an increase in pre-tax earnings during the 1997 period as compared to the corresponding 1996 period, offset in part by tax credits recognized from the Bank's investment in the Northridge Apartments Limited Partnership in 1997. Net Income. Net income totaled $973,000 for the three months ended September 30, 1997, compared to $500,000 for the same period in 1996. Net income totaled $2.8 million for the nine months ended September 30, 1997, compared to $2.2 million for the same period in 1996. Year 2000 Compliance. Many existing computer programs use only two digits to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. The Year 2000 issue affects virtually all companies and organizations. The Company, working with its outside service providers, has initiated a project to ensure that its computer systems are year 2000 compliant. The Company believes that the costs associated with insuring year 2000 compliance will not materially affect the Company's future operating results or financial condition. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. -14- 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 Not applicable Item 6. Exhibits and Reports on Form 8-K Exhibit 27. Financial data schedule. (Only submitted with filing in electronic format.) Exhibit 99.1 Press Release (regarding the declaration of a dividend). Exhibit 99.2 Press Release (regarding the execution of a definitive agreement for North Central Bancshares, Inc. to acquire Valley Financial Corp. and its wholly-owned subsidiary, Valley Savings Bank, FSB, Burlington, Iowa) Exhibit 99.3 Press Release (regarding the issuance of limited financial information for the quarter ended September 30, 1997). (b)Reports on Form 8-K A Form 8-K was filed on September 18, 1997 to report, pursuant to Item 5, the execution of a definitive agreement for North Central Bancshares, Inc. to acquire Valley Financial Corp. -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned thereunto duly authorized. NORTH CENTRAL BANCSHARES, INC. DATE: November 13, 1997 BY: /s/ David M. Bradley David M. Bradley, CPA Chairman, President and Chief Executive Officer DATE: November 13, 1997 BY: /s/ John L. Pierschbacher John L. Pierschbacher, CPA Principal Financial Officer -16- EX-27 2 FINANCIAL DATA SCHEDULE
9 This schedule contains summary financial information extracted from the consolidated condensed statement of financial condition and the consolidated condensed statement of income and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 846,228 3,674,325 0 0 22,241,637 0 0 181,119,869 2,125,151 215,133,388 139,254,875 8,250,000 1,025,717 17,300,000 0 0 40,111 49,262,685 215,133,388 10,735,370 1,200,805 0 11,936,175 4,795,481 5,775,689 6,160,486 180,000 0 3,339,758 4,317,154 4,317,154 0 0 2,821,591 .88 .88 7.90 243,608 0 0 0 1,952,887 17,949 10,213 2,125,151 2,125,151 0 0
EX-99.1 3 PRESS RELEASE: REGARDING THE DECLARATION Exhibit 99.1 Press Release August 25, 1997 For further information contact: David M. Bradley Chairman, President & Chief Executive Officer North Central Bancshares, Inc. 825 Central Avenue Fort Dodge, Iowa 50501 515-576-7531 NORTH CENTRAL BANCSHARES, INC. DECLARES DIVIDEND David M. Bradley, Chairman, President and Chief Executive Officer of North Central Bancshares, Inc. (the "Company") announced on August 22, 1997 that the Company declared a regular quarterly cash dividend of $.0625 per share on the Company's common stock for the fiscal quarter ended September 30, 1997. The dividend will be payable to all stockholders of record as of September 15, 1997 and will be paid on October 6, 1997. The Company's common stock trades on the Nasdaq Stock Market under the symbol "FFFD". The Company's wholly owned subsidiary, First Federal Savings Bank of Fort Dodge, is a federally chartered savings bank headquartered in Fort Dodge, Iowa. EX-99.2 4 PRESS RELEASE: EXECUTION OF DEFINITIVE AGREEMENT Exhibit 99.2 Press Release September 18, 1997 For further information contact: David M. Bradley Chairman, President and Chief Executive Officer North Central Bancshares, Inc. 825 Central Avenue PO Box 1237 Fort Dodge, Iowa 50501 515-576-7531 NORTH CENTRAL BANCSHARES, INC. TO ACQUIRE VALLEY FINANCIAL CORP. Fort Dodge, Iowa, September 18, 1997 - David M. Bradley, Chairman, President and Chief Executive Officer of North Central Bancshares, Inc. ("North Central") (NASDAQ/NMS:FFFD), the holding company for First Federal Savings Bank of Fort Dodge ("First Federal"), and Larry L. Wenzl, Chairman of Valley Financial Corp., ("Valley"), a privately held Iowa corporation and parent company of Valley Savings Bank, FSB, Burlington, Iowa announced today the execution of a definitive agreement ("Agreement") for North Central to acquire Valley. Under the terms of the Agreement, North Central will acquire in a cash transaction valued at $14.7 million, or $525.00 per share, all 28,050 shares outstanding of Valley's common stock. The pricing reflects 190.6% of Valley's June 30, 1997 book value and 13.0 times Valley's earnings for the twelve months ended June 30, 1997, as adjusted for the one-time SAIF charge. Valley's $7.7 million of capital stood at 6.95% of assets as of June 30, 1997 and earnings were $635,000 for the six months ended June 30, 1997. Valley Savings Bank, FSB, a federally chartered savings bank, has two offices in Burlington, Iowa and one office in Mount Pleasant, Iowa. At June 30, 1997, Valley Savings Bank, FSB had assets of $110.9 million, loans of $60.2 million and deposits of $102.1 million. The acquisition of Valley will result in the merger of Valley Savings Bank with and into First Federal, with the three Valley branches continuing to operate as Valley Savings Bank, a division of First Federal. Doyle Ruble, the current President of Valley Savings Bank, will continue as President of the Valley Savings Bank division. The combined banking operation will have assets in excess of $300 million. The transaction, which will be accounted for as a purchase, is expected to close in the first quarter of 1998. ...MORE... Commenting on the proposed transaction, Mr. Bradley stated, "This significant acquisition presents a terrific opportunity for expansion of our organization into south eastern Iowa. As a community oriented banking organization, we believe we can provide the high level of quality service to the Burlington and Mount Pleasant areas that our customers in north central Iowa have experienced. We are excited about the talented staff of Valley joining our organization. The combination of these two institutions is expected to be slightly accretive to North Central's net income and earnings per share in 1998." Mr. Wenzl, Chairman of Valley, added, "We look forward to the merger of Valley Savings Bank with First Federal Savings Bank of Fort Dodge. We believe this transaction is in the best interest of Valley and its stockholders. Our customers will be well-served by the combined company, which will continue Valley Savings Bank's tradition of providing quality service and products to our customers in the Burlington and Mount Pleasant area." The transaction has the unanimous approval of the boards of directors of North Central and Valley. The acquisition is subject to approval by the shareholders of Valley, approval of the appropriate regulatory authorities and the satisfaction of certain other customary conditions. Each member of Valley's Board of Directors, representing in excess of 25% of the voting power of Valley, has individually agreed to vote such person's shares in favor of the transaction. North Central Bancshares, Inc. serves north central Iowa at 4 full service locations in Fort Dodge, Nevada and Ames, Iowa through its wholly-owned subsidiary, First Federal Savings Bank of Fort Dodge, headquartered in Fort Dodge, Iowa. At June 30, 1997, North Central had assets of $212.9 million, deposits of $136.3 million and stockholders' equity of $48.3 million, totalling 22.7% of assets. Subsequent to this acquisition, North Central anticipates a continued strong equity level of approximately 13% tangible net worth to assets. First Federal's deposits are insured by the Federal Deposit Insurance Corporation. North Central's stock is traded on the Nasdaq National Market under the symbol "FFFD." This press release may contain certain forward-looking statements regarding the acquisition of Valley Financial Corp., including earnings accretion, which are based on management's current expectations regarding economic, legislative and regulatory issues. The factors which may cause future results to vary materially include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values and competition; changes in accounting principles, policies or quidelines; changes in legislation or regulation; and other economic, competitive, regulatory and technological factors affecting each company's operations, pricing, products and services. EX-99.3 5 PRESS RELEASE: ISSUANCE OF LIMITED FINANCIAL Exhibit 99.3 Limited Financial Information October 20, 1997 For further information contact: David M. Bradley Chairman, President and Chief Executive Officer North Central Bancshares 825 Central Avenue PO Box 1237 Fort Dodge, Iowa 50501 515-576-7531 NORTH CENTRAL BANCSHARES, INC. ANNOUNCES EARNINGS (Nasdaq: FFFD) Fort Dodge, Iowa -- North Central Bancshares, Inc., (the "Company") the holding company for First Federal Savings Bank of Fort Dodge (the "Bank"), announced today that the Company earned $973,000, or $0.31 per share for the third quarter of 1997, compared to $500,000, or $0.13 per share, during the third quarter of 1996. For the nine months ended September 30, 1997, the Company's net earnings were $2.8 million or $0.88 per share, as compared to $2.2 million or $0.56 per share for the corresponding period a year ago. Total assets at September 30, 1997 were $215.1 million as compared to $203.1 million at December 31, 1996. The increase in total assets resulted primarily from increases in loans, partially offset by decreases in securities held to maturity and securities available for sale. Loans increased $15.3 million, or 9.2% from $165.8 million at December 31, 1996 to $181.1 million at September 30, 1997. Deposits increased $9.5 million, or 7.3% from $129.7 million at December 31, 1996 to $139.3 million at September 30, 1997. Other borrowed funds increased $3.2 million or 14.4% from $22.3 million at December 31, 1996 to $25.6 million at September 30, 1997. Nonperforming assets were 0.22% of total assets as of September 30, 1997 compared to 0.15% of total assets as of December 31, 1996. The allowance for loan losses was $2.1 million or 1.15% of total loans at September 30, 1997, compared to $2.0 million or 1.14% of total loans at December 31, 1996. The net interest margin for the quarter ended September 30, 1997 was 4.01% compared to 4.51% for the corresponding quarter in 1996. Net interest income for the quarter ended September 30, 1997 was $2.1 million, a decrease of 3.6% from $2.2 million for the corresponding period last year. Interest income for the quarter ended September 30, 1997 increased $275,000, or 7.2%, compared with the corresponding period in 1996, due primarily to increased average balances of interest-earning assets, partially offset by a decrease in the average yield on such assets. Interest expense increased $353,000 or 21.1%, when comparing the quarter ended September 30, 1997 with the corresponding period of 1996. The increase in interest expense was due primarily to an increase in the average balance of interest-bearing liabilities and an increase in the average cost of interest-bearing liabilities. ...MORE... The Company's provision for loan losses was $60,000, for the quarter ended September 30, 1997 and 1996. 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 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. Noninterest income for the three months ended September 30, 1997 increased $93,000, or 18.6%, compared to the three months ended September 30, 1996, primarily as a result of the increases in abstract fees due to increased sales volume and rental income, partially offset by decreases in annuity and insurance sales. Noninterest expense for the three months ended September 30, 1997 decreased $721,000 or 39.3%, compared to the three months ended September 30, 1996, primarily as a result of the one time SAIF special assessment accrued during the third quarter of 1996, partially offset by increases in salaries and employee benefits and other expenses. Noninterest expense for the three months ended September 30, 1997 increased $96,000 or 9.5%, compared to the three months ended September 30, 1996, excluding the one time SAIF special assessment accrued during the third quarter of 1996. Stockholders' equity was $49.3 million at September 30, 1997, compared to $49.2 million at December 31, 1996. Book value, or stockholders' equity, per share at September 30, 1997 was $15.13 and was $14.36 at December 31, 1996. The ratio of stockholders' equity to total assets was 22.9% at September 30, 1997, as compared to 24.2% at December 31, 1996. On September 19, 1997, the Company announced that it had entered into a definitive agreement pursuant to which the Company will acquire Valley Financial Corp. ("Valley"), an Iowa corporation, and its wholly-owned subsidiary, Valley Savings Bank, FSB, a federally chartered savings bank. Valley Savings Bank has two offices in Burlington, Iowa and one office in Mount Pleasant, Iowa. At September 30, 1997, Valley had assets of $111.5 million, loans of $60.0 million and deposits of $101.9 million. The transaction, subject to regulatory approval and approval of Valley's shareholders, is expected to close in the first quarter of 1998. North Central Bancshares, Inc. serves north central Iowa at 4 full service locations in Fort Dodge, Nevada and Ames, Iowa through its wholly-owned subsidiary, First Federal Savings Bank of Fort Dodge, headquartered in Fort Dodge, Iowa. The Bank's deposits are insured by the Federal Deposit Insurance Corporation. The Company's stock is traded on The Nasdaq National Market under the symbol "FFFD". For more information contact: David M. Bradley, President, 515-576-7531 FINANCIAL HIGHLIGHTS OF NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition (Dollars in Thousands, except per share and share data) September 30, 1997 December 31, 1996 ------------------ ----------------- Assets Cash and cash equivalents $ 4,521 $ 3,937 Securities available for sale 22,242 23,104 Securities held to maturity (Market value $3.5 million) -- 3,500 Loans (net of allowance of loan loss of $2.1 million and $2.0 million, respectively) 181,120 165,831 Other assets 7,250 6,721 ------------------ ----------------- Total Assets $ 215,133 $ 203,093 ================== ================= Liabilities Deposits $ 139,255 129,722 Other borrowed funds 25,550 22,335 Other liabilities 1,025 1,801 ------------------ ----------------- Total Liabilities 165,830 153,858 Stockholders' Equity 49,303 49,235 ------------------ ----------------- Total Liabilities and Stockholders' Equity $ 215,133 $ 203,093 ================== ================= Stockholders' equity to total assets 22.92% 24.24% ================== ================= Book value per share $ 15.13 $ 14.36 ================== ================= Total shares outstanding 3,257,983 3,429,455 ================== =================
Condensed Consolidated Statements of Income (Dollars in Thousands, except per share data) For the Three Months For the Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 ------ ------ ------- ----- Interest income $4,100 $3,825 $11,936 $11,136 Interest expense 2,026 1,673 5,775 5,116 ------ ------ ------- ------- Net interest income 2,074 2,152 6,161 6,020 Provision for loan loss 60 60 180 180 ------ ------ ------- ------- Net interest income after provision for loan loss 2,014 2,092 5,981 5,840 Noninterest income 593 500 1,677 1,391 Gain on the sale of securities available for sale -- -- -- 14 Noninterest expense 1,111 1,832 3,340 3,872 ------ ------ ------- ------- Income before income taxes 1,496 760 4,318 3,373 Income taxes 523 260 1,496 1,210 ------ ------ ------- ------- Net income $ 973 $ 500 $ 2,822 $ 2,163 ====== ====== ======= ======= Earnings per share $ 0.31 $ 0.13 $ 0.88 $ 0.56 ====== ====== ======= =======
Selected Financial Ratios For the Three Months For the Nine Months Ended September 30, Ended September 30, 1997 1996 1997 1996 ------ ------ ------ ------ Performance ratios: Net interest spread 2.85% 3.04% 2.87% 3.02% Net interest margin 4.01% 4.51% 4.07% 4.33% Return on average assets 1.82% 1.02% 1.81% 1.52% Return on average equity 7.97% 3.57% 7.66% 5.98% Efficiency ratio (noninterest expense divided by the sum of net interest income before provision for loan losses plus noninterest income) 41.65% 69.06% 42.62% 52.16%
September 30, 1997 June 30, 1997 December 31, 1996 ------------------ ------------- ----------------- Asset Quality Ratios: Nonaccrual loans to total net loans 0.13% 0.08% 0.11% Nonperforming assets to total assets 0.22% 0.12% 0.15% Allowance for loan losses as a percent of total loans receivable 1.15% 1.18% 1.14%
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