<PAGE>

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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the Fiscal Year Ended December 31, 1999

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from __________ to _________

                                    0-27672
                           (Commission File Number)

                        NORTH CENTRAL BANCSHARES, INC.
            (Exact Name of Registrant as Specified in its Charter)

              Iowa                                     421449849
    (State or Other Jurisdiction of      (I.R.S. Employer Identification Number)
    Incorporation or Organization)



    c/o First Federal Savings Bank of Iowa
    825 Central Avenue, Fort Dodge, Iowa                   50501
    (Address of Principal Executive Offices)             (Zip Code)


                                (515) 576-7531
              (Registrant's Telephone Number including area code)


          Securities Registered Pursuant to Section 12(b) of the Act:
                                     None

          Securities Registered Pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.01 per share
                               (Title of Class)

     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 twelve months (or for such shorter period that the
Registrant was required to file reports), and (2) has been subject to such
requirements for the past 90 days. YES  [X]  NO  [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]

     As of March 19,2000, there were issued and outstanding 2,057,242 shares of
the Registrant's Common Stock. The aggregate value of the voting stock held by
non-affiliates of the Registrant, computed by reference to the average bid and
asked prices of the Common Stock as of March 1, 2000 was $27,526,539.

                      DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the Proxy Statement for the Registrant's 2000 Annual Meeting of
     Shareholders are incorporated by reference into Items 10, 11, 12 and 13 of
     Part III hereof.

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<PAGE>

                                    PART I

ITEM 1.   BUSINESS

Forward Looking Statements

     This Annual Report on Form 10-K contains certain 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 conditions; 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; and depositor and borrower preferences.

General

     North Central Bancshares, Inc. (the "Holding Company"), an Iowa
corporation, is the holding company for First Federal Savings Bank of Iowa (the
"Bank"), a federally chartered savings bank.  Collectively, the Holding Company
and the Bank are referred to herein as the "Company."  The Holding Company was
organized on December 5, 1995 at the direction of the Board of Directors of the
Bank for the purpose of acquiring all of the capital stock to be issued by the
Bank in connection with the conversion and reorganization of the Bank and North
Central Bancshares, M.H.C. (the "MHC") from the mutual to the stock holding
company structure (these transactions are collectively referred to as the
"Conversion").  On March 20, 1996, upon completion of the Conversion, the
Holding Company issued an aggregate of 4,011,057 shares of its Common Stock, par
value $0.01 per share, of which 1,385,590 shares 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 were sold in Subscription and
Community Offerings at a price of $10.00 per share, with gross proceeds
amounting to $26,254,670.  At this time, the Holding Company conducts business
as a unitary savings and loan holding company and the principal business of the
Holding Company consists of the operation of its wholly-owned subsidiary, the
Bank.

     The Holding Company's executive offices are located at the home office of
the Company at 825 Central Avenue, Fort Dodge, Iowa.  The Holding Company's
telephone number is (515) 576-7531.

First Federal Savings Bank of Iowa

     The Bank is a federally chartered savings bank that conducts its operations
from its main office located in Fort Dodge, Iowa and seven branch offices
located in Iowa.  Four of the Bank's branches are located in north central Iowa
in the cities of Fort Dodge, Nevada, Ames and Perry.  On January 30, 1998, the
Bank completed the acquisition of Valley Financial Corp., an Iowa corporation
and the holding company for Valley Savings Bank, FSB (the "Acquisition").  See
"Acquisition of Valley Financial Corp."  As a result of the Acquisition, the
Bank also has three branches in southeastern Iowa in the cities of Burlington
and Mount Pleasant.  The Bank is the successor to First Federal Savings and Loan
Association of Fort Dodge, which was chartered originally in 1954, and on May 7,
1987 became a federally chartered savings bank.  The Bank adopted its present
name on February 27, 1998.

     The Bank is a community-oriented savings institution that is primarily
engaged in the business of attracting deposits from the general public in the
Bank's market areas and investing such deposits in one- to four-family
residential real estate mortgages, multi-family and commercial mortgages and, to
a lesser extent, secured and unsecured consumer loans, with emphasis on second
mortgage loans.  The Bank's deposits are insured by the FDIC under the Savings
Association Insurance Fund ("SAIF"). The Bank has been a member of the Federal
Home Loan Bank ("FHLB") System since 1954. At December 31, 1999, the Bank had
total assets of $367.6 million, total deposits of $271.8 million, and total
shareholders' equity of $36.8 million.

                                      -2-
<PAGE>

     The Bank's principal executive office is located at 825 Central Avenue,
Fort Dodge, Iowa and its telephone number at that address is (515) 576-7531.

Acquisition of Valley Financial Corp.

     As of the close of business on January 30, 1998, the Bank completed the
Acquisition of Valley Financial Corp. ("Valley Financial"), pursuant to an
Agreement and Plan of Merger, dated as of September 18, 1997, (the "Merger
Agreement").  The Acquisition resulted in the merger of Valley Financial's
wholly owned subsidiary, Valley Savings Bank, FSB ("Valley Savings") with and
into the Bank, with the Bank as the resulting financial institution (the "Bank
Merger").  Valley Savings, formerly headquartered in Burlington, Iowa, was a
federally-chartered stock savings bank with three branch offices located in
southeastern Iowa.

     In connection with the Acquisition, each share of Valley Financial's common
stock, par value $1.00 per share, issued and outstanding (other than shares held
as treasury stock of Valley Financial) was cancelled and converted automatically
into the right to receive $525.00 per share in cash pursuant to the terms and
conditions of the Merger Agreement.  As a result of the Acquisition,
shareholders of Valley Financial were paid a total of $14,726,250 in cash.  The
source of funds for the Acquisition consisted of the Bank's accumulation of its
cash flow from the maturity of short-term liquid investments, principal and
interest on loans, sale of other investment securities, other cash receipts, net
of operating expenses and other projected disbursements.

Market Area and Competition

     The Company is an independent savings and loan company serving its primary
market area of Webster, Story, Dallas, Henry and Des Moines Counties, which are
located in the central, north central and south eastern parts of the State of
Iowa.  The Company's market area is influenced by agriculture as well as retail
sales, professional services and public education.  The Company is headquartered
in Fort Dodge, the Webster County seat, where it operates two Company locations.
The Company's Nevada branch operates in the city of Nevada, Iowa, the county
seat for Story County.  Nevada is located close to Ames, the location of Iowa
State University, and is also located 35 miles from Des Moines, the state
capital.  The Company's Ames branch operates in the city of Ames, Iowa and is
also located 30 miles from Des Moines.  Burlington, the county seat of Des
Moines County, is a strong retail center for southeastern Iowa.  Mount Pleasant
is the county seat of Henry County.

     The unemployment rate for Webster County as of December 1999 was 2.2%,
compared to the national rate of 4.1% and the State of Iowa rate of 2.2%.  The
unemployment rate for Story County was 1.8%, for Des Moines County was 1.9%, for
Henry County was 2.2% and for Dallas County was 1.5%.

     The Nevada, Iowa and Ames, Iowa markets have been a source of loan and
depositor growth for the Company in recent periods, and the Company expects to
continue to pursue lending and deposit growth opportunities in these markets, as
well as the markets in Burlington, Mount Pleasant and Perry, Iowa.  However, due
to the loan demand in the Company's overall market area, increased competition,
and the Company's decision to diversify its loan portfolio, the Company has
originated and purchased loans (primarily multi-family and commercial real
estate loans) from out of state. The Company intends to continue such
originations and purchases pursuant to its underwriting standards for Company-
originated loans.

     The Company faces strong and increasing competition both in making loans
and in attracting savings deposits.  The Company's competition for loans comes
principally from commercial banks, savings banks, other savings and loan
associations, mortgage banking companies, finance companies and credit unions.
The Company's most direct competition for savings deposits historically has come
from commercial banks, savings banks, other savings and loan associations and
credit unions.  In addition, the Company faces increasing competition for
savings deposits from non-bank institutions such as brokerage firms, insurance
companies, money market mutual funds, other mutual funds (such as corporate and
government securities funds) and annuities.  Many such institutions have greater
financial and marketing resources available to them than does the Company.
Trends toward the consolidation of the banking industry, especially after
enactment of the

                                      -3-
<PAGE>

Gramm-Leach-Bliley Act, and the lifting of interstate banking and branching
restrictions may make it more difficult for relatively smaller institutions,
such as the Bank, to compete effectively with large national and regional
financial institutions.

     While the Company is subject to competition from other financial
institutions which may have greater financial and marketing resources, the
Company believes that it benefits from its community bank orientation and can
compete with other institutions by offering customers a high level of personal
service and a wide range of competitively priced financial products.  Further,
management believes that the variety, depth and stability  of the communities in
which the Company is located support the service and lending activities
conducted by the Bank.

Lending Activities

     Loan Portfolio Composition.  The principal components of the Company's loan
portfolio are fixed- and adjustable-rate first mortgage loans secured by one- to
four-family owner-occupied residential real estate, fixed- and adjustable-rate
first mortgage loans secured by multi-family residential real estate and, to a
lesser extent, secured and unsecured consumer loans, with emphasis on second
mortgage loans.  At December 31, 1999, the Company's loans receivable totalled
$291.8 million, of which $164.1 million, or 56.3%, were one- to four-family
residential real estate first mortgage loans and $91.1 million, or 31.2%, were
other first mortgage loans, primarily multi-family and commercial real estate
loans purchased by the Company.  Consumer loans, consisting primarily of
automobile loans and second mortgage loans, totalled $36.6 million, or 12.5%, of
the Company's  loan portfolio.

     Savings associations, such as the Bank, are generally subject to the same
limits on loans to one borrower as are imposed on national banks.  Generally,
under these limits, a savings association may not make a loan or extend credit
to a single or related group of borrowers in excess of 15% of the association's
unimpaired capital and surplus.  Additional amounts may be lent, in the
aggregate not exceeding 10% of unimpaired capital and surplus, if any such loan
or extension of credit is fully secured by readily-marketable collateral.  Such
collateral is defined to include certain debt and equity securities and bullion,
but generally does not include real estate.  For the year ended December 31,
1999, it was the Company's policy to limit loans to one borrower to $2.5
million.  At December 31, 1999, the Company's largest aggregate outstanding loan
to one borrower was $2.5 million and the second largest borrower had an
aggregate balance of $2.0 million.  All such loans were first mortgage multi-
family residential real estate loans and were performing as of that date.

                                      -4-
<PAGE>

     Analysis of Loan Portfolio.  Set forth below are selected data relating to
the composition of the Company's loan portfolio by type of loan as of the dates
indicated:


<TABLE>
<CAPTION>
                                           ----------------------------------------------------------------------------------
                                                                           At December 31,
                                           ----------------------------------------------------------------------------------
                                                      1999                       1998                       1997
                                           ---------------------------- --------------------------- -------------------------
                                                             Percent                     Percent                    Percent
                                              Amount        of Total       Amount       of Total       Amount      of Total
                                           ------------  -------------- ------------  ------------- ------------  -----------
<S>                                        <C>           <C>            <C>           <C>           <C>           <C>
                                                                                  (Dollars in thousands)
First mortgage loans:
  One- to four-family residential(1).....     $164,057         56.23%      $148,992        57.46%      $115,763       59.48%
  Multi-family...........................       73,417         25.16         64,895        25.02         51,345       26.38
  Commercial.............................       17,723          6.07         11,396         4.39          3,800        1.95
                                              --------        ------       --------       ------       --------      ------
   Total first mortgage loans............      255,197         87.47        225,283        86.87        170,908       87.81
                                              --------        ------       --------       ------       --------      ------

Consumer loans:
  Automobiles............................     $  8,003          2.74%      $  7,348         2.83%      $  4,696        2.41%
  Second mortgage(2).....................       23,604          8.09         20,784         8.01         16,226        8.34
  Other(3)...............................        4,956          1.70          5,946         2.29          2,796        1.44
                                              --------        ------       --------       ------       --------      ------
   Total consumer loans..................       36,563         12.53         34,078        13.13         23,718       12.19
                                              --------        ------       --------       ------       --------      ------
   Total loans receivable................     $291,760        100.00%      $259,361       100.00%      $194,626      100.00%

Less:
  Undisbursed portion of
   construction loans....................     $  1,982          0.68%      $  2,025         0.78%      $    453        0.23%
  Unearned loan discount.................          136          0.05            312         0.12            424        0.22
  Net deferred loan origination fee......          106          0.04            316         0.12            349        0.18
  Allowance for loan losses..............        2,777          0.95          2,676         1.03          2,151        1.11
                                              --------        ------       --------       ------       --------      ------
   Total loans receivable, net...........     $286,759         98.29%      $254,032        97.95%      $191,249       98.26%
                                              --------        ------       --------       ------       --------      ------

<CAPTION>

                                                        1996                         1995
                                               ---------------------------------------------------------
                                                              Percent                         Percent
                                                 Amount       of Total         Amount         of Total
                                               ----------  -------------    ------------   -------------
<S>                                            <C>         <C>              <C>            <C>
First mortgage loans:
  One- to four-family residential(1)........     $107,168       63.44%      $   84,203          65.48%
  Multi-family..............................       34,488       20.42           21,474          16.70
  Commercial................................        5,225        3.09            6,163           4.79
                                                 --------      ------       ----------         ------
   Total first mortgage loans...............      146,881       86.95          111,840          86.97
                                                 --------      ------       ----------         ------

Consumer loans:
  Automobiles...............................     $  4,155        2.46%      $    2,889           2.25%
  Second mortgage(2)........................       15,303        9.06           10,735           8.35
  Other(3)..................................        2,582        1.53            3,127           2.43
                                                 --------      ------       ----------         ------
   Total consumer loans.....................       22,040       13.05           16,751          13.03
                                                 --------      ------       ----------         ------
   Total loans receivable...................     $168,921      100.00%       $ 128,591         100.00%

Less:
  Undisbursed portion of
   construction loans.......................     $    371        0.22%      $    1,048           0.81%
  Unearned loan discount....................          525        0.31            1,013           0.79
  Net deferred loan origination fee.........          241        0.14              203           0.16
  Allowance for loan losses.................        1,953        1.16            1,543           1.20
                                                 --------      ------       ----------         ------
   Total loans receivable, net..............     $165,831       98.17%       $ 124,784          97.04%
                                                 ========      ======       ==========         ========
</TABLE>

_______________________

(1)  Includes interest-only construction loans that convert to permanent loans.
(2)  Second mortgage loans included $1.5 million, $1.4 million, $1.1 million,
     $862,000 and $724,000 (in actual dollars) of nonowner-occupied residential
     first mortgage loans at December 31, 1999, 1998, 1997, 1996 and 1995,
     respectively.
(3)  Other consumer loans included $1.6 million, $2.3 million, $269,000,
     $213,000 and $299,000 (in actual dollars) of commercial mortgage loans at
     December 31, 1999, 1998, 1997, 1996 and 1995, respectively.

                                      -5-
<PAGE>

     Loan Maturity Schedule. The following table sets forth the maturity or
period to repricing of the Company's loan portfolio at December 31, 1999.
Overdraft lines of credit are reported as due in one year or less. Adjustable-
rate loans are included in the period in which interest rates are next scheduled
to adjust rather than in which they contractually mature, and fixed rate loans
are included in the period in which the final contractual repayment is due.

<TABLE>
<CAPTION>
                                                               At December 31, 1999
                               ------------------------------------------------------------------------------------
                                 Within         1-3        3-5       5-10         10-20      Beyond 20
                                 1 Year        Years      Years     Years         Years        Years        Total
                               -----------   --------    --------    --------    --------    ---------   ----------
                                                                  (In thousands)
<S>                            <C>           <C>         <C>         <C>         <C>         <C>         <C>
First mortgage loans:
     One- to four-family
       residential(1).........     $31,786    $17,799     $42,215     $63,060     $ 8,297        $900      $164,057
     Multi-family.............      31,862     14,816      15,065      11,670           4          --        73,417
     Commercial...............       3,040      2,262       6,225       4,411       1,785          --        17,723
Consumer loans (2)............       4,865      9,699      20,789       1,190          20          --        36,563
                                   -------    -------     -------     -------     -------        ----      --------
       Total..................     $71,553    $44,576     $84,294     $80,331     $10,106        $900      $291,760
                                   =======    =======     =======     =======     =======        ====      ========
</TABLE>

________________________

(1)  One- to four-family loans include $93.5 million of 7 year fixed rate loans
     that convert to adjustable rates at the beginning of the eighth year and
     are annually adjustable thereafter.  $50.5 million of these loans with
     repricing periods greater than 5 years have been classified as fixed rate
     loans.  $43.0 million of these loans with repricing periods less than 5
     years have been classified as adjustable rate loans.
(2)  Includes second mortgage loans of $23.6 million at December 31, 1999.


     The following table sets forth the dollar amounts of all fixed rate and
adjustable rate loans in each loan category at December 31, 1999 due after
December 31, 2000.

<TABLE>
<CAPTION>
                                                         Due After December 31, 2000
                                                     ----------------------------------
                                                        Fixed     Adjustable   Total
                                                     ----------   ----------   ---------
                                                                (In thousands)
<S>                                                  <C>          <C>          <C>
First mortgage loans:
  One- to four-family residential(1).............      $ 70,906     $ 61,365    $132,271
  Multi-family...................................         6,498       35,057      41,555
  Commercial.....................................         7,321        7,362      14,683
Consumer loans (2)...............................        31,343          355      31,698
                                                       --------     --------    --------
 Total...........................................      $116,068     $104,139    $220,207
                                                       ========     ========    ========
</TABLE>

________________________

(1)  One- to four-family loans include $86.8 million of 7 year fixed rate loans
     that convert to adjustable rates at the beginning of the eighth year and
     are annually adjustable thereafter. $50.5 million of these loans with
     repricing periods greater than 5 years have been classified as fixed rate
     loans. $36.3 million of these loans with repricing periods less than 5
     years have been classified as adjustable rate loans.
(2)  Includes second mortgage loans of $21.2 million at December 31, 1999.


     One- to four-family Residential Real Estate Loans.  Traditionally, the
Company's primary lending activity consists of the origination of fixed- and
adjustable-rate one- to four-family owner-occupied residential first mortgage
loans, substantially all of which are collateralized by properties located in
the Company's market area.  The Company also originates one- to four-family,
interest only construction loans that convert to permanent loans after an
initial construction period that generally does not exceed nine months.  At
December 1999, 43.5%  of the Company's residential real estate loans had fixed
rates, and 56.5% had adjustable rates.

     The Company originates loans for portfolio and sells loans in the secondary
mortgage market. However, the Company's one- to four-family, fixed-rate,
residential real estate loans originated for portfolio are generally originated
and underwritten according to standards that qualify such loans to be included
in Federal Home Loan Mortgage Corporation ("FHLMC") and Federal National
Mortgage Association ("FNMA") purchase and guarantee programs and that otherwise
permit resale in the secondary mortgage market. The Bank has sold fixed-rate
loans with maturities equal to or in excess of 15 years in the secondary
mortgage market.

                                      -6-
<PAGE>

For the year ended December 31, 1999, the Bank sold $475,000 of mortgage loans
consisting of seven one- to four-family residential mortgage loans. One- to
four-family loans are underwritten and originated according to policies approved
by the Board of Directors. First Iowa Mortgage, Inc., the Bank's wholly owned
mortgage banking subsidiary, sold $19.6 million of mortgage loans consisting of
207 one- to four-family residential mortgage loans.

     Originations of one- to four-family fixed-rate first mortgage loans are
monitored on an ongoing basis and are affected significantly by the level of
market interest rates, the Company's interest rate gap position, and loan
products offered by the Company's competitors. The Company's one- to four-family
fixed-rate first mortgage loans amortize on a monthly basis with principal and
interest due each month. To make the Company's fixed-rate loan portfolio more
interest rate sensitive, the Company currently emphasizes the origination of
fixed-rate loans with terms of 15 years or less to be held in portfolio. The
Company also offers 5 and 7-year fixed-rate first mortgage loans that convert to
adjustable-rate loans that adjust on an annual basis after the initial fixed-
rate term. The overall maturity of these loans may be up to 30 years. The
Company determines whether a customer qualifies for these loans based upon the
initial fixed interest rate.

     The Company's adjustable rate mortgage loans, or "ARM loans," are generally
originated for terms of up to 30 years, with interest rates that adjust
annually. The Company establishes various annual and life-of-the-loan caps on
ARM loan interest rate adjustments. Currently, the Company offers ARM loans with
annual rate caps of 1.5% and maximum life-of-loan caps of 11.95%. Prior to 1995,
the Company's ARM loans originated for retention in its portfolio generally were
based on the 11th District Cost of Funds Index, a lagging market index. At
present, the interest rate on its ARM loans is calculated by using the weekly
average yield on United States Treasury Securities adjusted to a constant
maturity of one year. The Company currently offers one-year ARM loans with
initially discounted rates, often known as "teaser rates." The Company
determines whether a borrower qualifies for an ARM loan based on the fully
indexed rate of the ARM loan at the time the loan is originated, rather than the
introductory or "teaser" rate or the maximum life-of-the rate to which the loan
could adjust. In addition, the Company establishes floors for each loan
originated below which the loan may not adjust. One- to four-family residential
ARM loans totalled $92.7 million, or 32.3%, of the Company's total net loan
portfolio at December 31, 1999.

     The primary purpose of offering ARM loans is to make the Company's loan
portfolio more interest rate sensitive. ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, that during periods
of rising interest rates, the risk of default on ARM loans may increase due to
the upward adjustment of interest costs to the borrower. Management believes
that the Company's credit risk associated with its ARM loans is reduced because
of the annual and lifetime interest rate adjustment limitations on such loans,
although such limitations do create an element of interest rate risk. See
"Discussion of Market Risk-- Interest Rate Sensitivity Analysis."

     The Company's one- to four-family residential first mortgage loans
customarily include due-on-sale clauses, which are provisions giving the Company
the right to declare a loan immediately due and payable in the event, among
other things, that the borrower sells or otherwise disposes of the underlying
real property serving as security for the loan. Due-on-sale clauses are an
important means of adjusting the rates on the Company's fixed rate mortgage loan
portfolio, and the Company has generally exercised its rights under these
clauses.

     Regulations limit the amount that a savings institution may lend
relative to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. See "Regulation--
Regulation of Federal Savings Associations--Real Estate Lending Standards."  The
Company's lending policies limit the maximum loan-to-value ratio on mortgage
loans without private mortgage insurance to 80% of the lesser of the appraised
value or the purchase price of the property to serve as collateral for the loan.
The Company generally makes one- to four-family first real estate loans with
loan-to-value ratios of up to 90%; however, for one- to four-family real estate
loans with loan-to-value ratios greater than 80%, the Company requires the loan
amount to be covered by private mortgage insurance.  The Company requires fire

                                      -7-
<PAGE>

and casualty insurance, flood insurance, where applicable, an abstract of title,
and a title opinion on all properties securing real estate loans originated by
the Company.

     Multi-family Residential and Commercial Real Estate Loans. The Company's
loan portfolio contains loans secured by multi-family residential and commercial
real estate. Such loans constituted approximately $91.1 million, or 31.8%, of
the Company's total net loan portfolio at December 31, 1999. Of such loans,
$83.6 million, or 91.8%, were purchased or originated by the Company and were
secured by properties outside the State of Iowa (the "out of state" properties).
There was no multi-family or commercial real estate loan more than 90 days past
due at December 31, 1999. These loans are primarily secured by multi-family
residences such as apartment buildings, and by commercial facilities, such as
office buildings and retail buildings. Multi-family residential real estate
loans are offered with fixed- and adjustable-rates and are structured in a
number of different ways depending upon the circumstances of the borrower and
the type of multi-family project. Fixed- rate loans generally amortize over 15
to 30 years, and generally contain call provisions permitting the Company to
require that the entire principal balance be repaid at the end of five to
fifteen years. Such loans are priced as five to fifteen year loans with maximum
loan-to-value ratios of 80%. See "-- Purchased or Out of State Originated
Loans."

     All purchased or out of state originated loans in excess of $200,000 are
approved by the Chief Executive Officer, Chief Operating Officer and the Board
of Directors and are subject to the same underwriting standards as for loans
originated by the Company. All purchased or out of state originated loans less
than $200,000 are approved by the Chief Executive Officer and Chief Operating
Officer and ratified by the Board of Directors and are subject to the same
underwriting standards as loans originated by the Company. Before a loan is
purchased, the Company obtains a copy of the original loan application,
certified rent rolls, the original title insurance policy and personal financial
statements of any guarantors of the loan. An executive officer or director of
the Company also makes a personal inspection of the property securing the loan.
Such purchases are made without recourse to the seller. The originating
financial institution or mortgage banker may continue service the loans,
remitting principal and interest to the Company. As of December 31, 1999, $21.5
million purchased or out of state originated loans were serviced by the Bank and
$72.4 million were serviced by the originating financial institution or mortgage
banker. The Company has a $2.5 million limit on the aggregate size of multi-
family and commercial loans to any one borrower. Any exceptions to the limit
must be specifically approved by the Board of Directors on a loan-by-loan basis
within the Company's legal lending limit. See "Regulation -- Regulation of
Federal Savings Associations -- Loans to One Borrower."

     Loans secured by multi-family and commercial real estate generally involve
a greater degree of credit risk than single-family residential mortgage loans
and typically, such loans also have larger loan balances. This increased credit
risk is a result of several factors, including the concentration of principal in
a limited number of loans and borrowers, the effects of general economic
conditions on income producing properties, and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans secured by multi-family and commercial real estate is typically dependent
upon the successful operation of the related real estate property. If the cash
flow from such real estate projects are reduced, the borrower's ability to repay
the loan may be impaired.

     Consumer Loans, Including Second Mortgage Loans. The Company also
originates consumer loans, which primarily include second mortgage loans. As of
December 31, 1999, second mortgage loans totalled $23.6 million, or 8.2%, of the
Company's net total loan portfolio. The Company's second mortgage loans have
fixed interest rates and are generally for terms of 3 to 5 years. The Company's
second mortgage loans are secured by the borrower's principal residence
generally with a maximum loan-to-value ratio, including the principal balances
of both the first and second mortgage loans, of generally no more than 80%. The
average principal amount of the Company's second mortgage loans is approximately
$13,000. The Company also offers home equity lines of credit secured by second
mortgage loans.

                                      -8-
<PAGE>

     To a lesser extent, the Company also originates loans secured by
automobiles, with fixed rates generally on a 80% loan-to-value basis for new
cars. All of the Company's automobile loans were originated by the Company and
generally have terms of up to five years.

     In addition, the Company also makes other types of consumer loans,
primarily unsecured signature loans for various purposes. The minimum loan
amount for such loans is $1,000, the maximum loan amount for such loans is
$7,500, and the average balance of such loans is approximately $2,500.

     The Company originates a limited number of commercial business loans, which
the Company includes with its consumer loan portfolio for reporting purposes.
Such loans may be unsecured and are originated for any business purpose, such as
for the purchase of computers and business equipment. The maximum loan amount
for such unsecured loans is $7,500.

     The Company's business plan calls for an increase in consumer lending for
the foreseeable future, particularly second mortgage lending. The Company
generally expects consumer loan demand will come from its mortgage loan
customers. Consumer loans generally provide for shorter terms and higher yields
as compared to residential first mortgage loans, but generally carry higher
risks of default. At December 31, 1999, $102,000, or 0.28%, of the Company's
consumer loan portfolio was on nonaccrual status.

     Loan Originations, Solicitation, Processing, and Commitments. Loan
originations are derived from a number of sources such as real estate agent
referrals, existing customers, borrowers, builders, attorneys, and walk-in
customers. Upon receiving a loan application, the Company obtains a credit
report and employment verification to verify specific information relating to
the applicant's employment, income, and credit standing. In the case of a real
estate loan, an appraiser approved by the Company appraises the real estate
intended to collateralize the proposed loan. An underwriter in the Company's
loan department checks the loan application file for accuracy and completeness,
and verifies the information provided. Pursuant to the Company's written loan
policies, all first mortgage loans originated prior to 1998 were approved by the
Chief Executive Officer. Beginning in 1998, the Chief Executive Officer approves
all first mortgage loans greater than $150,000. All first mortgage loans less
than $150,000 are approved by two members of senior management. The Loan
Committee of the Board of Directors meets monthly to review a sampling of all
loans originated in the month.

     After a loan is approved, a loan commitment letter is promptly issued to
the borrower. The commitment letter specifies the terms and conditions of the
proposed loan including the amount of the loan, interest rate, amortization
term, a brief description of the required collateral, and required insurance
coverage. Commitments are typically issued for 60-day periods in the case of
loans to refinance, loans to purchase existing real estate, and construction
loans. The borrower must provide proof of fire and casualty insurance on the
property serving as collateral, which insurance must be maintained during the
full term of the loan. An abstract of title along with an attorney's title
opinion is required on all first mortgage loans secured by real property in
Iowa. At December 31, 1999, the Company had outstanding commitments to originate
$1.4 million of loans. This amount does not include commitments to purchase
loans, the undisbursed overdraft loan privileges or the unfunded portion of
loans in process.

     Purchased or Out of State Originated Loans. The Company's loan portfolio
contains $94.0 million of loans secured by out of state properties. These loans
represented 32.2% of the Company's total loan portfolio at December 31, 1999.
Substantially all of the multi-family residential and commercial real estate
loans in the Company's loan portfolio are purchased or originated out of state
by the Company without recourse to the seller. The Company's investment in
properties located in Wisconsin totalled $36.0 million and was primarily
distributed between the Milwaukee and Madison areas. The Company's investment in
properties in Colorado totalled $22.7 million and was primarily distributed
between the Colorado Springs and Denver areas. At December 31, 1999, the
Company's investment in properties located in California totalled $15.0 million
and was distributed primarily in southern California. The remainder of the
Company's purchased or out of state originated loans are distributed in various
states. At December 31, 1999, the Company's multi-family residential and
commercial real estate loans had an average balance of $410,000 and the largest
loan had a principal

                                      -9-
<PAGE>

balance of $2.5 million. As of December 31, 1999 there were no multi-family or
commercial real estate loan that was more than 90 days past due or on a
nonaccrual status.

     To supplement its origination of one- to four-family first mortgage loans,
the Company also purchases loans secured by one- to four-family residences out
of state. At December 31, 1999, $10.3 million, or 3.5%, of the Company's total
loan portfolio consisted of purchased one- to four-family loans, of which $4.5
million were secured by properties located in Missouri and $1.9 million were
secured by properties in Wisconsin. As of December 31, 1999 there were no
purchased one- to four-family first mortgage loans that were on a nonaccrual
status.

     Loans purchased by the Company entail certain risks not necessarily
associated with loans the Company originates. The Company's purchased loans are
generally acquired without recourse with servicing retained by the seller or
originator of the loans. Although the Company reviews each purchased loan using
the Company's underwriting criteria for originations and a Company officer or
director performs an on-site inspection of each purchased loan, the Company is
dependent on the servicer of the loan for ongoing collection efforts and
collateral review. In addition, the Company purchases loans with a variety of
terms, including maturities, interest rate caps and indices for adjustment of
interest rates that may differ from those offered at the time by the Company in
connection with loans the Company originates. Finally, the market areas in which
the properties which secure the purchased loans are located are subject to
economic and real estate market conditions that may significantly differ from
those experienced in the Company's market areas. If economic conditions continue
to limit the Company's opportunities to originate loans in its market areas, the
Company may increase its investment in out of state mortgage loans. There can be
no assurance, however, that economic conditions in these out of state areas will
not deteriorate in the future resulting in increased loan delinquencies and loan
losses among the loans secured by property in these areas.

     In an effort to reduce the risk of loss on out of state purchased loans,
the Company only purchases loans that meet the underwriting policies for loans
originated by the Company although specific rates and terms may differ from the
rates and terms offered by the Company. The Company also requires appropriate
documentation, and personal inspections of the underlying real estate collateral
by an executive officer or director prior to purchase. The servicers of the
loans generally conduct annual inspections of the underlying real estate
collateral and copies of the reports of such inspections are typically provided
to the Company.

                                      -10-
<PAGE>

     Set forth below is a table of the Company's purchased or out of state
originated loans by state of origin (including multi-family residential,
commercial real estate and one- to four-family first mortgage loans) as of
December 31, 1999.


                                             Balance as of
                    State                  December 31, 1999
                    -----                  -----------------
                                             (In thousands)
                         Arizona                $ 1,204
                      California                 14,976
                        Colorado                 22,708
                         Florida                    289
                         Georgia                     69
                        Illinois                    249
                         Indiana                    813
                          Kansas                    817
                        Michigan                     19
                       Minnesota                    332
                        Missouri                  5,406
                         Montana                    101
                        Nebraska                    556
                          Nevada                    655
                      New Mexico                     75
                  North Carolina                    737
                    North Dakota                     80
                            Ohio                    806
                          Oregon                  2,716
                  South Carolina                    122
                       Tennessee                    196
                           Texas                  1,818
                            Utah                  1,185
                        Virginia                     47
                      Washington                  1,942
                       Wisconsin                 36,037
                                                -------
                           Total                $93,955
                                                =======

                                      -11-
<PAGE>

     Origination, Purchase and Sale of Loans. The table below shows the
Company's originations, purchases and sales of loans for the periods indicated.

<TABLE>
<CAPTION>
                                                             For the Years Ended
                                                                 December 31,
                                                       -----------------------------------
                                                          1999         1998         1997
                                                       ---------    ---------    ---------
                                                                  (In thousands)
<S>                                                    <C>        <C>        <C>
Total loans receivable at beginning of period........  $259,361     $194,626     $168,921
                                                       --------     --------     --------
Originations:
First mortgage loans:
     One- to four-family residential.................    60,811       58,120       25,001
     Multi-family....................................       700           --           --
     Commercial......................................        --        1,100           50
Consumer loans:
     Automobile......................................     6,912        6,349        3,698
     Second mortgage.................................    16,141       14,493        9,642
     Other...........................................     2,301        2,595        1,591
                                                       --------     --------     --------
       Total originations:...........................    86,865       82,657       39,982
     Effect of Valley Financial Acquisition..........        --       58,911           --
Loan Purchases:
     First mortgage -- one- to four-family...........     5,870        3,159           51
     First mortgage -- multi-family..................    23,332       21,315       22,313
     First mortgage -- commercial....................    11,142           --
Loan Sales:
     First mortgage -- one- to four-family...........    20,117       26,411          815
Transfer of mortgage loans to
     foreclosed real estate..........................       212          373          175
Repayments...........................................    74,481       74,523       35,651
                                                       --------     --------     --------
Net loan activity....................................    33,399       63,734       25,705
                                                       --------     --------     --------
       Total loans receivable at end of period.......  $291,760     $259,361     $194,626
                                                       ========     ========     ========
</TABLE>

     Loan Origination Fees and Other Income. In addition to interest earned on
loans, the Company generally receives fees in connection with loan originations.
Such loan origination fees, net of costs to originate, are deferred and
amortized using an interest method over the contractual life of the loan. Fees
deferred are recognized into income immediately upon prepayment of the related
loan. At December 31, 1999, the Company had $106,000 of deferred loan
origination fees, net. Such fees vary with the type of loans and commitments
made. The Company typically charges a document preparation fee on fixed- and
adjustable-rate first mortgage loans. In addition to loan origination fees, the
Company also receives other fees, service charges (such as overdraft fees), and
other income that consist primarily of deposit transaction account service
charges and late charges. The Company recognized fees and service charges of
$1.5 million, $1.2 million and $657,000 for the fiscal years ended December 31,
1999, 1998 and 1997, respectively.

                                      -12-
<PAGE>

Investment Activities

     At December 31, 1999, the Company's investment portfolio is comprised of
United States Treasury securities, United States Government agencies, municipal
obligations, mortgage-backed securities, equity securities consisting of FHLMC
preferred stock, FNMA preferred stock, FHLB stock, other common and preferred
stocks and interest-earning deposits. At December 31, 1999, $4.5 million, or
11.8%, of the Company's investment portfolio, excluding equity securities, was
scheduled to mature in one year or less, and $13.1 million, or 34.7%, was
scheduled to mature within one to five years.

     The Company is required under federal regulations to maintain a minimum
amount of liquid assets that may be invested in specified short term securities
and certain other investments. The Company generally has maintained a portfolio
of liquid assets that exceeds regulatory requirements. Liquidity levels may be
increased or decreased depending upon the yields on investment alternatives and
upon management's judgment as to the attractiveness of the yields then available
in relation to other opportunities and its expectation of the level of yield
that will be available in the future, as well as management's projections as to
the short term demand for funds to be used in the Company's loan origination and
other activities. In addition, the Company's liquidity levels are affected by
the level and source of its borrowed funds.

     Investment Portfolio. The following table sets forth the carrying value of
the Company's investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                   At December 31,
                                             ----------------------------
                                               1999      1998      1997
                                             --------  --------  --------
<S>                                          <C>       <C>       <C>
                                                   (In thousands)
Investment securities:
     U.S. Treasury notes..................   $ 4,260   $ 9,410   $11,046
     U.S. Government agencies.............    18,799    18,884        --
     Mortgage-backed securities...........     9,955     7,508        --
     State and local obligations..........     4,772     4,378        --
     FHLB stock...........................     3,035     2,379     1,550
     Equity securities....................     8,872     7,323     7,220
                                             -------   -------   -------
       Total investment securities........    49,693    49,882    19,816
     Interest-earning deposits............     4,127    13,201     2,463
                                             -------   -------   -------
       Total investments..................   $53,820   $63,083   $22,279
                                             =======   =======   =======
</TABLE>

                                      -13-
<PAGE>

     Investment Portfolio Maturities. The following table sets forth the
scheduled maturities, carrying values, market values and weighted average yields
for the Company's investment portfolio at December 31, 1999.

<TABLE>
<CAPTION>
                                                                          At December 31, 1999
                                  -------------------------------------------------------------------------------------------------
                                     One Year or Less         Over Five Years        Over Five Years               Total
                                  -------------------------------------------------------------------------------------------------
                                             Annualized               Annualized                Annualized
                                              Weighted                 Weighted                  Weighted
                                  Carrying     Average     Carrying     Average     Carrying      Average     Carrying     Market
                                   Value        Yield        Value       Yield        Value        Yield        Value       Value
                                  --------   -----------   ---------  -----------   ---------   -----------   ---------   ---------
                                                                                    (Dollars in thousands)
Investment securities:
  U.S. Treasury notes............   $3,757      5.67%       $   503       6.81%      $     0        0.00%      $ 4,260     $ 4,260
  U.S. Government agencies(1)....      324      5.84         17,478       6.01           998        7.18        18,800      18,800
  Mortgage-backed securities.....      507      5.48          1,869       5.73         7,579        6.16         9,955       9,955
  State and local obligations....       --        --          1,664       5.31         3,108        5.07         4,772       4,772
  FHLB stock.....................       --        --             --         --            --          --         3,035       3,035
  Common Stock...................       --        --             --         --            --          --           457         457
  Preferred stock-other..........       --        --             --         --            --          --            --          --
  Preferred stock-FNMA...........       --        --             --         --            --          --         5,157       5,157
  Preferred stock-FHLMC..........       --        --             --         --            --          --         3,257       3,257
                                    ------                  -------                  -------                   -------     -------
     Total.......................   $4,588      5.66%       $21,514       5.95%      $11,685        5.96%      $49,693     $49,693
  Interest-bearing deposits
    at the FHLB..................    4,127      4.91             --         --            --          --          4,127       4,127
                                    ------                  -------                  -------                   -------     -------
     Total investments...........   $8,715      5.30%       $21,514       5.95%      $11,685        5.96%      $53,820     $53,820
                                    ======                  =======                  =======                   =======     =======

<CAPTION>
                                             Annualized
                                 Average      Weighted
                                 Life in       Average
                                  Years         Yield
                                 -------     -----------
<S>                              <C>         <C>
Investment securities:
U.S. Treasury notes..............   1           5.77%
U.S. Government agencies(1)......   5           6.05
Mortgage-backed securities.......   4           5.92
State and local obligations......   5           4.65
FHLB stock.......................               6.35
Common Stock.....................               4.65
Preferred stock-other............                 --
Preferred stock-FNMA.............               6.53
Preferred stock-FHLMC............               5.77

     Total.......................               5.90%
Interest-bearing deposits
  at the FHLB....................               4.91

     Total investments...........               5.83%
</TABLE>

___________________

(1)  Certain securities have call features which allows the issuer to call the
     security prior to maturity date.

                                      -14-
<PAGE>

Sources of Funds

     General. Deposits are the major source of the Company's funds for lending
and other investment purposes.  In addition to deposits, the Company derives
funds from FHLB advances, the amortization and prepayment of loans, the maturity
of investment securities and operations.  Scheduled loan principal repayments
are a relatively stable source of funds, while deposit inflows and outflows and
loan prepayments are influenced significantly by general interest rates and
market conditions.  The Company may use borrowings on a short-term basis to
compensate for reductions in the availability of funds from other sources or on
a longer term basis for general business purposes.

     Deposits.  During 1999, consumer and commercial deposits were attracted
principally from within the Company's market area through the offering of a
broad selection of deposit instruments including NOW accounts, savings accounts,
money market savings, certificates of deposit and individual retirement
accounts.  The Company also offers these products in its new market area which
it now serves as a result of the Acquisition.  See "--Acquisition of Valley
Financial Corp."  Deposit account terms vary according to the minimum balance
required, the period of time during which the funds must remain on deposit, and
the interest rate, among other factors. The maximum rate of interest which the
Company may pay is not established by regulatory authority. The Company
regularly evaluates its internal cost of funds, surveys rates offered by
competing institutions, reviews the Company's cash flow requirements for lending
and liquidity, and executes rate changes when deemed appropriate. During 1999,
the Company became a more active bidder for public funds in the State of Iowa.
As a result, public fund deposits totalled $20.5 million at December 31, 1999.
The Company does not obtain retail funds through brokers by solicitation of
funds, nor by offering negotiated rates on certificates of deposit in excess of
$100,000.

     Deposit Portfolio.  Deposits with the Company as of December 31, 1999 were
represented by the various types of deposit programs described below.

<TABLE>
<CAPTION>
    Weighted                                                                                                    Percentage
    Average                                   Checking and                     Minimum                           of Total
 Interest Rate      Original Term            Savings Deposits                  Balance         Balances          Deposits
---------------    ---------------         --------------------               ---------      ------------      ------------
                                                                                             (Dollars in
                                                                                              thousands)
<S>                <C>                     <C>                                <C>            <C>               <C>
     0.00%         None                    Noninterest-bearing demand           $   50           $  6,412           2.37%
     1.25          None                    NOW accounts                             50             30,096          11.10
     2.00          None                    Savings accounts                         25             25,830           9.53
     3.61          None                    Money Market savings                  2,500             17,464           6.44

                                           Certificates of Deposit
                                           -----------------------

     4.78          1-3 months              Fixed term, fixed rate               $1,000           $  1,328           0.49
     4.84          4-6 months              Fixed term, fixed rate                1,000              5,426           2.00
     5.58          7-9 months              Fixed term, fixed rate                1,000              5,757           2.12
     5.12          10-12 months            Fixed term, fixed rate                1,000             18,731           6.91
     5.25          13-24 months            Fixed term, fixed rate                1,000             84,465          31.17
     5.48          25-36 months            Fixed term, fixed rate                1,000             24,138           8.91
     5.85          37-48 months            Fixed term, fixed rate                1,000              1,488           0.55
     6.09          49-60 months            Fixed term, fixed rate                1,000             48,926          18.05
     6.16          61 months or greater    Fixed term, fixed rate                1,000                827           0.31
     3.50          Various                 Variable rate                           100                143           0.05
                                                                                                 --------         ------
                                           Total certificates of deposit                         $271,031         100.00%
                                                                                                 ========         ======
</TABLE>

                                      -15-
<PAGE>

The following table sets forth the change in dollar amount of deposits in the
various types of deposit accounts offered by the Company between the dates
indicated.

<TABLE>
<CAPTION>
                                                   Increase    Increase               Increase    Increase
                                        Balance    (Decrease)  (Decrease)  Balance    (Decrease)  (Decrease)  Balance
                                        12/31/99       %           $       12/31/98       %           $       12/31/97
                                       -------------------------------------------------------------------------------
<S>                                     <C>        <C>         <C>         <C>        <C>         <C>         <C>
                                                                   (Dollars in thousands)
Noninterest-bearing demand........     $   6,412      17.48%   $    954   $   5,458      73.55%   $  2,313   $   3,145
NOW...............................        30,096      (2.63)       (813)     30,909     113.80      16,452      14,457
Savings account...................        25,830      (1.03)       (269)     26,099      52.45       8,979      17,120
Money market savings..............        17,464     (11.92)     (2,364)     19,828     121.34      10,870       8,958
Certificates of deposit
  that mature:
    within 12 months..............       117,515      44.55      36,220      81,295      99.44      40,533      40,762
    within 12-36 months...........        52,707     (18.86)    (12,255)     64,962      53.20      22,558      42,404
    beyond 36 months..............        21,007      15.81       2,868      18,139      27.04       3,861      14,278
                                       ---------               --------   ---------               --------   ---------
       Total......................     $ 271,031       9.87%   $ 24,341   $ 246,690      74.80%   $105,566   $ 141,124
                                       =========               ========   =========               ========   =========

<CAPTION>
                                                   Increase    Increase               Increase    Increase
                                        Balance    (Decrease)  (Decrease)  Balance    (Decrease)  (Decrease)  Balance
                                        12/31/97       %           $       12/31/96       %           $       12/31/95
                                       -------------------------------------------------------------------------------
<S>                                     <C>        <C>         <C>         <C>        <C>         <C>         <C>
                                                                   (Dollars in thousands)
Noninterest-bearing demand........     $   3,145      38.24%    $   870   $   2,275       0.04%    $     8   $   2,267
NOW...............................        14,457      22.27       2,633      11,824       3.39         388      11,436
Passbook savings..................        17,120      (3.58)       (636)     17,756      (5.85)     (1,104)     18,860
Money market savings..............         8,958      23.05       1,678       7,280      29.38       1,653       5,627
Certificates of deposit
  that mature:
    within 12 months..............        40,762      10.25       3,790      36,972      22.37       6,759      30,213
    within 12-36 months...........        42,404      33.24      10,578      31,826      (6.77)     (2,311)     34,137
    beyond 36 months..............        14,278     (34.47)     (7,511)     21,789      (9.71)     (2,343)     24,132
                                       ---------                -------   ---------                -------   ---------
       Total......................     $ 141,124       8.79%    $11,402   $ 129,722       2.41%    $ 3,050   $ 126,672
                                       =========                =======   =========                =======   =========
</TABLE>

                                      -16-
<PAGE>

     The following table sets forth the certificates of deposit in the Company
classified by rates as of the dates indicated:

<TABLE>
<CAPTION>
                                        At December 31,
                         --------------------------------------
                           1999           1998           1997
                         ---------       --------      --------
<S>                      <C>             <C>           <C>
                                      (In thousands)
Rate
----

3.99% or less........     $    688       $    232       $    91
4.00-5.99%...........      154,231        110,152        45,749
6.00-7.99%...........       36,300         53,829        51,585
8.00 or greater......           10            183            19
                         ---------       --------       -------
                          $191,229       $164,396       $97,444
                         =========       ========       =======
</TABLE>


     The following table sets forth the amount and maturities of certificates of
deposit at December 31, 1999.


<TABLE>
<CAPTION>
                                                          Amount Due
                             ---------------------------------------------------------------------
                             Less
                             Than 1      1-2       2-3       3-4       4-5     After 5
                             Year       Years     Years     Years     Years     Years    Total
                             ---------  --------  --------  --------  --------  -------  ---------
<S>                          <C>        <C>       <C>       <C>       <C>       <C>      <C>
                                                        (In thousands)
Rate
----
3.99% or less...........      $    688  $     --   $    --   $    --   $    --     $ --   $    688
4.00-5.99%..............       100,804    29,711     4,709     8,853    10,025      130    154,232
6.00-7.99%..............        16,023    11,069     7,208     1,796         6      197     36,299
8.00 or greater.........            --        --        10        --        --       --         10
                              --------   -------   -------   -------   -------     ----   --------
                              $117,515   $40,780   $11,927   $10,649   $10,031     $327   $191,229
                              ========   =======   =======   =======   =======     ====   ========
</TABLE>


     The following table indicates the amount of the Company's certificates of
deposit of $100,000 or more by time remaining until maturity at December 31,
1999.  This amount does not include savings accounts of greater than $100,000,
which totalled approximately $981,000 at December 31, 1999.


<TABLE>
<CAPTION>
                                                             Certificates
                                                            of Deposit over
                        Remaining Maturity                     $100,000
                    ------------------------------------    -----------------
                    <S>                                     <C>
                                                            (In thousands)
                    Three months or less................           $  3,395
                    Three through six months............             12,886
                    Six through twelve months...........              6,580
                    Over twelve months..................              9,355
                                                                   --------
                      Total.............................           $ 32,216
                                                                   ========
</TABLE>

                                      -17-
<PAGE>

The following table sets forth the savings activities of the Company for the
periods indicated:


<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                ------------------------------
                                                  1999       1998       1997
                                                --------  ----------  --------
<S>                                             <C>       <C>         <C>
                                                        (In thousands)
Net increase (decrease) before interest
 credited and deposits acquired................  $15,582   $ (2,943)   $ 6,132
Effect of Valley Financial Acquisition.........       --     99,269         --
Interest credited..............................    8,758      9,240      5,270
                                                 -------   --------    -------
    Net increase in deposits...................  $24,340   $105,566    $11,402
                                                 =======   ========    =======
</TABLE>

Borrowings

     Deposits are the Company's primary source of funds. The Company may also
obtain funds from the FHLB. FHLB advances are collateralized by selected assets
of the Company. Such advances are made pursuant to several different credit
programs, each of which has its own interest rate and range of maturities. The
maximum amount that the FHLB will advance to member institutions, including the
Bank, for purposes other than meeting withdrawals, fluctuates from time to time
in accordance with the policies of the OTS and the FHLB. The maximum amount of
FHLB advances to a member institution generally is reduced by borrowings from
any other source.


<TABLE>
<CAPTION>
                                                       For the
                                               Year Ended December 31,
                                             ----------------------------
                                               1999      1998      1997
                                             --------  --------  --------
<S>                                          <C>       <C>       <C>
                                               (Dollars in thousands)
Weighted average rate paid on: (1)
  FHLB advances..........................       5.62%     5.81%     5.94%
FHLB advances:
  Maximum balance........................    $60,691   $42,550   $29,800
  Average balance........................     43,711    33,980    23,672
Weighted average rate paid on:
  Other borrowings.......................       1.00%     1.00%     9.00%
Other borrowings:
  Maximum balance........................    $    38   $    42   $    35
  Average balance........................         36        40         7
</TABLE>

________________________

(1)  Calculated using monthly weighted average interest rates.

Title Abstract Business

     A component of the Company's operating strategy is to increase noninterest
income through the expansion of its abstract company business conducted by First
Iowa Title Services Inc. ("First Iowa"), a wholly owned subsidiary of the
Company.  On December 28, 1996, First Iowa purchased the assets of two abstract
companies located in Webster and Calhoun Counties in Iowa.  The abstract company
in Calhoun County was subsequently sold on March 30, 1997.  First Iowa currently
provides real estate title abstracting services in Webster, Boone and Jasper
Counties.  These services include researching recorded documents at the county
courthouse and providing a history of those documents as they pertain to
specific parcels of real estate.  This information is used to determine who owns
specific parcels of real estate and what encumbrances are on those specific
parcels.  The abstract business performed by First Iowa replaces a significant
portion of the function of a title insurance company.  Iowa law prohibits Iowa
insurance companies or companies authorized to do business in Iowa from issuing
title insurance or insurance against loss or

                                      -18-
<PAGE>

damage by reason of defective title, encumbrance or otherwise. Institutions can
purchase title insurance, for their own protection or to sell loans on the
secondary market, but the cost of this insurance may not be passed on to the
borrower. First Iowa had 19 employees as of December 31, 1999.

Insurance, Annuity and Mutual Fund Business

     The Company has another wholly-owned subsidiary, First Federal Investment
Services, Inc., ("First Federal Investment") formerly known as First Financial
Service Corporation, which the Company began in 1971.  On February 25, 2000,
First Financial's name was changed to First Federal Investment Services, Inc.
First Federal Investment's activities include the sale of life insurance on
mortgage loans, and credit life, accident and health insurance on consumer loans
made by the Company. In addition, First Federal Investment sells life insurance
annuity products and mutual funds.  First Federal Investment also originates
leases for equipment such as computers, office equipment, light industrial
equipment and commercial cleaning equipment.  First Federal Investment has no
employees.  The subsidiary has executed a management agreement with the Company
which provides its management and staff.

Mortgage Company Business

     First Iowa Mortgage, Inc. (formerly known as Hearthstone Mortgage Company,
Inc., "FIM") was acquired by the Company as part of the Acquisition and is a
wholly-owned subsidiary of the Bank.  FIM originates first mortgage loans and
subsequently sells these loans and the mortgage servicing rights to investors.
FIM currently operates in Ames, Iowa and at December 31, 1999 had 3 employees.

Multi-family Apartment Building

     On July 13, 1995, the Company formed the Northridge Apartments Limited
Partnership with the Fort Dodge Housing Corporation ("FDHC"), a non-profit Iowa
corporation formed to acquire, develop and manage low- and moderate-income
housing for residents of the Fort Dodge area.  The FDHC is controlled by the
Fort Dodge Municipal Housing Agency, an agency chartered by the City of Fort
Dodge.  The Northridge Partnership is a low-income housing tax credit project
for certain federal tax purposes.  A 44-unit apartment complex was completed on
February 1, 1997.  The tax credits for the year ended December 31, 1999 are
approximately $154,000.  The tax credits will continue for a seven-year period.

Personnel

     At December 31, 1999, the Company had 106 full-time and 23 part-time
employees (including the 19 employees of First Iowa and the 3 employees at FIM).
None of the Company's employees is represented by a collective bargaining group.
The Company believes its relationship with its employees to be good.

                                      -19-
<PAGE>

                          FEDERAL AND STATE TAXATION



Federal Taxation

     General. The following is a general discussion of material tax matters and
does not purport to be a comprehensive description of the tax rules applicable
to the Holding Company or the Bank. The Bank has not been audited in the last
five years. For federal income tax purposes, the Holding Company and the Bank
will be eligible to file consolidated income tax returns and report their income
on a calendar year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Bank's tax reserve for bad debts,
discussed below.

     Bad Debt Reserves.  The Bank, as a "small bank" (one with assets having an
adjusted tax basis of $500 million or less) is permitted to maintain a reserve
for bad debts with respect to "qualifying loans," which, in general, are loans
secured by certain interests in real property, and to make, within specified
formula limits, annual additions to the reserve which are deductible for
purposes of computing the Bank's taxable income.  Pursuant to the Small Business
Job Protection Act of 1996, the Bank is now recapturing (taking into income)
over a multi-year period a portion of the balance of its bad debt reserve as of
December 31, 1995.

     Distributions. To the extent that the Company makes "nondividend
distributions" to shareholders, such distributions will be considered to result
in distributions from the Company's "base year reserve," i.e. its reserve as "of
December 31, 1987, to the extent thereof and then from its supplemental reserve
for losses on loans, and an amount based on the amount distributed will be
included in the Company's taxable income.  Nondividend distributions include
distributions in excess of the Company's current and accumulated earnings and
profits, distributions in redemption of stock and distributions in partial or
complete liquidation. However, dividends paid out of the Company's current or
accumulated earnings and profits, as calculated for federal income tax purposes,
will not constitute nondividend distributions and, therefore, will not be
included in the Company's income.

     The amount of additional taxable income created from a nondividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, approximately one and
one-half times the nondividend distribution would be includable in gross income
for federal income tax purposes, assuming a 34% federal corporate income tax
rate.

     Corporate Alternative Maximum Tax.  The Internal Revenue Code (the "Code")
imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%.
Only 90% of AMTI can be offset by net operating losses. AMTI is also adjusted by
determining the tax treatment of certain items in a manner that negates the
deferral of income resulting from the regular tax treatment of those items.
Thus, the Company's AMTI is increased by an amount equal to 75% of the amount by
which the Company's adjusted current earnings exceeds its AMTI (determined
without regard to this adjustment and prior to reduction for net operating
losses).  The Company does not expect to be subject to the AMT.

     Dividends-Received Deduction.  The Holding Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Bank will not file a consolidated tax
return, except that if the Holding Company or the Bank owns more than 20% of the
stock of a corporation distributing a dividend, then 80% of any dividends
received may be deducted.

                                      -20-
<PAGE>

State and Local Taxation

     Iowa Taxation.  The Holding Company and the Bank's subsidiaries will file
Iowa corporation tax returns and the Bank will file an Iowa franchise tax
return.  The Bank currently files an Iowa franchise tax return, and the Holding
Company and the Bank's subsidiaries file Iowa corporation tax returns, on a
calendar year basis.

     The State of Iowa imposes a tax on the Iowa franchise taxable income of
thrift institutions at the rate of 5%.  Iowa franchise taxable income is
generally similar to federal taxable income except that interest from state and
municipal obligations is taxable, and no deduction is allowed for state
franchise taxes.  The net operating loss carryback and carryforward rules are
similar to the federal rules.

     The state corporation income tax rate ranges from 6% to 12% depending upon
Iowa corporation taxable income.  Interest from federal securities is not
deductible for purposes of the Iowa corporation income tax.


                                  REGULATION

General

     The Bank is subject to regulation, examination and supervision by the OTS,
as its chartering agency, and the Federal Deposit Insurance Corporation
("FDIC"), as its deposit insurer.  The Bank must file reports with the OTS and
the FDIC concerning its activities and financial condition, and it must obtain
regulatory approvals prior to entering into certain transactions, such as
mergers with or acquisitions of other depository institutions.  The OTS and the
FDIC conduct periodic examinations to assess the Bank's compliance with various
regulatory requirements.  This regulation and supervision establishes a
comprehensive framework of activities in which a savings association can engage
and is intended primarily for the protection of the insurance fund and
depositors.  The Holding Company, as a savings and loan holding company, files
certain reports with, and otherwise complies with, the rules and regulations of
the OTS and of the Securities and Exchange Commission (the "SEC") under the
federal securities laws.

     The OTS and the FDIC have significant discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes.  Any change in such
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Bank, and the operations of both.

     The following discussion is intended to be a summary of the material
statutes and regulations applicable to savings associations and their holding
companies, and it does not purport to be a comprehensive description of all such
statutes and regulations.

Regulation of Savings and Loan Holding Companies

     The Holding Company is a savings and loan holding company and is subject to
OTS regulations, examinations, supervision and reporting requirements.  In
addition, the OTS has enforcement authority over the Holding Company and any of
its non-savings association subsidiaries.  Among other things, this authority
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the financial safety, soundness or stability of a subsidiary
savings association.

     The Home Owners' and Loan Act ("HOLA"), as amended, prohibits a savings and
loan holding company, directly or indirectly, or through one or more
subsidiaries, from acquiring another savings association or holding company
thereof, without prior written approval of the OTS; acquiring or retaining, with
certain exceptions, more than 5% of a non-subsidiary savings association, a non-
subsidiary holding company or a non-subsidiary company engaged in activities
other than those permitted by HOLA; or acquiring or retaining control of a
depository institution that is not insured by the FDIC.  In evaluating an
application by a holding company to acquire a savings association, the OTS must
consider the financial and managerial resources and future prospects of the
company and savings association

                                      -21-
<PAGE>

involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors.

     As a unitary savings and loan holding company "grandfathered" under the
Gramm-Leach-Bliley Act, the Holding Company generally is not restricted under
existing laws as to the types of business activities in which it may engage,
provided that the Bank continues to satisfy the QTL test.  Upon any
nonsupervisory acquisition by the Company of another savings association or
savings bank that meets the QTL test and is deemed to be a savings association
by the OTS and that will be held as a separate subsidiary, the Holding Company
would become a multiple savings and loan holding company and would be subject to
limitations on the types of business activities in which it could engage.  HOLA
limits the activities of a multiple savings and loan holding company and its
non-insured association subsidiaries primarily to activities permissible for
bank holding companies under Section 4(c)(8) of the Bank Holding Company Act
(the "BHC Act"), subject to the prior approval of the OTS, and to other
activities authorized by OTS regulation.

     The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings associations in
more than one state, subject to two exceptions: an acquisition of a savings
association in another state (i) in a supervisory transaction, and (ii) pursuant
to authority under the laws of the state of the association to be acquired that
specifically permit such acquisitions.  The conditions imposed upon interstate
acquisitions by those states that have enacted authorizing legislation vary.
Some states impose conditions of reciprocity, which have the effect of requiring
that the laws of both the state in which the acquiring holding company is
located (as determined by the location of its subsidiary savings association)
and the state in which the association to be acquired is located, have each
enacted legislation allowing its savings associations to be acquired by out-of-
state holding companies on the condition that the laws of the other state
authorize such transactions on terms no more restrictive than those imposed on
the acquiror by the state of the target association.  Some of these states also
impose regional limitations, which restrict such acquisitions to states within a
defined geographic region.  Other states allow full nationwide banking without
any condition of reciprocity.  Some states do not authorize interstate
acquisitions of savings associations.

Regulation of Federal Savings Associations

     Business Activities.  The Bank derives its lending and investment powers
from the HOLA and the regulations of the OTS thereunder.  Under these laws and
regulations, the Bank may invest in mortgage loans secured by residential and
commercial real estate, commercial and consumer loans, certain types of debt
securities, and certain other assets.  The Bank may also establish service
corporations that may engage in activities not otherwise permissible for the
Bank, including certain real estate equity investments and securities and
insurance brokerage.  These investment powers are subject to various
limitations, including: (i) a prohibition against the acquisition of any
corporate debt security that is not rated in one of the four highest rating
categories; (ii) a limit of 400% of an association's capital on the aggregate
amount of loans secured by nonresidential real estate property; (iii) a limit of
20% of an association's assets on commercial loans with the amount of commercial
loans in excess of 10% of assets being limited to small business loans; (iv) a
limit of 35% of an association's assets on the aggregate amount of consumer
loans and acquisitions of certain debt securities; (v) a limit of 5% of assets
on non-conforming loans (loans in excess of the specific limitations of HOLA);
and (vi) a limit of the greater of 5% of assets or an association's capital on
certain construction loans made for the purpose of financing what is or is
expected to become residential property.

     Loans to One Borrower. Under HOLA, savings associations are generally
subject to the same limits on loans to one borrower as are imposed on national
banks.  Generally, under these limits, a savings association may not make a loan
or extend credit to a single or related group of borrowers in excess of 15% of
the association's unimpaired capital and surplus.  Additional amounts may be
lent, in the aggregate not exceeding 10% of unimpaired capital and surplus, if
any such loan or extension of credit is fully secured by readily-marketable
collateral.  Such collateral is defined to include certain debt and equity
securities and bullion, but generally does not include real estate.  For the
year ended December 31, 1999, the Bank generally imposed a $2.5 million limit on
the aggregate size of loans to any one borrower.  Any exception to the limit
must be specifically approved by the Board of Directors on a loan-by-loan basis
within the Bank's legal lending limit.  At December 31, 1999, the Bank's largest
aggregate amount of loans to one

                                      -22-
<PAGE>

borrower was $2.5 million, and the second largest borrower had an aggregate
balance of $2.0 million. The Bank is in compliance with all applicable
limitations on loans to one borrower.

     QTL Test.  HOLA requires a savings association to meet a qualified thrift
lender, or "QTL" test.  Under the QTL test, a savings association is required to
maintain at least 65% of its "portfolio assets" in certain "qualified thrift
investments" in at least 9 months of the most recent 12-month period.
"Portfolio assets" means, in general, an association's total assets less the sum
of (i) specified liquid assets up to 20% of total assets, (ii) goodwill and
other intangible assets, and (iii) the value of property used to conduct the
association's business.  "Qualified thrift investments" includes various types
of loans made for residential and housing purposes, investments related to such
purposes, including certain mortgage-backed and related securities, consumer
loans, small business loans, education loans and credit card loans.   A savings
association may also satisfy the QTL test by qualifying as a "domestic building
and loan association" as defined in the Internal Revenue Code of 1986. At
December 31, 1999, the Bank maintained 91.4% of its portfolio assets in
qualified thrift investments, and it had more than 65% of its portfolio assets
in qualified thrift investments in the requisite number of the prior 12 months.

     A savings association that fails the QTL test must either operate under
certain restrictions on its activities or convert to a bank charter.  The
initial restrictions include prohibitions against (i) engaging in any new
activity not permissible for a national bank, (ii) paying dividends not
permissible under national bank regulations, (iii) obtaining new advances from
any FHLB, and (iv) establishing any new branch office in a location not
permissible for a national bank in the association's home state.  In addition,
within one year of the date a savings association ceases to meet the QTL test,
any company controlling the association would have to register under, and become
subject to the requirements of, the BHC Act.  If the savings association does
not requalify under the QTL test within the three-year period after it failed
the QTL test, it would be required to terminate any activity and to dispose of
any investment not permissible for a national bank and would have to repay as
promptly as possible any outstanding advances from an FHLB.  A savings
association that has failed the QTL test may requalify under the QTL test and be
free of such limitations, but it may do so only once.

     Capital Requirements.  The OTS regulations require savings associations to
meet three minimum capital standards: a tangible capital ratio requirement of
1.5% of total assets as adjusted under the OTS regulations, a leverage ratio
requirement of 3% of core capital to such adjusted total assets, and a risk-
based capital ratio requirement of 8% of total risk-based capital to total risk-
weighted assets.  In determining compliance with the risk-based capital
requirement, a savings association must compute its risk-weighted assets by
multiplying its assets and certain off balance sheet items by risk weights,
which range from 0% for cash and obligations issued by the United States
Government or its agencies to 100% for consumer and commercial loans, as
assigned by the OTS capital regulation based on the risks the OTS believes are
inherent in the type of asset.  Tangible capital is defined, generally, as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related earnings and minority interests in equity
accounts of fully consolidated subsidiaries, less intangibles (other than
certain purchased mortgage servicing rights) and investments in an loans to
subsidiaries engaged in activities not permissible for a national bank.  Core
capital is defined similarly to tangible capital, but core capital also includes
certain qualifying supervisory goodwill and certain purchased credit card
relationships.  Supplementary capital currently includes cumulative and other
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock and the allowance for loan and lease losses.
The allowance for loan and lease losses includable in supplementary capital is
limited to a maximum of 1.25% of risk-weighted assets, and the amount of
supplementary capital that may be included as total capital cannot exceed the
amount of core capital.

     The OTS and the other federal banking agencies are required to take into
account interest rate risk ("IRR") in their risk-based capital standards.  The
OTS adopted regulations, effective January 1, 1994, that set forth the
methodology for calculating an IRR component to be incorporated into the OTS
risk-based capital regulations.  The OTS has indefinitely deferred the
implementation of the IRR component in the computation of an institution's risk-
based capital requirement.  The OTS continues to monitor the IRR of individual
institutions and retains the right to impose additional capital on individual
institutions.  At December 31, 1999, the Bank was not required to maintain any
additional risk-based capital under this regulation.

                                      -23-
<PAGE>

     At December 31, 1999, the Bank met each of its capital requirements, in
each case on a fully phased-in basis.  The table below presents the Bank's
regulatory capital as compared to the OTS regulatory capital requirements at
December 31, 1999:

<TABLE>
<CAPTION>
                                         Bank                  Capital Requirements            Excess Capital
                                  Amount       Percent        Amount         Percent        Amount       Percent
                                 --------      --------       -------        -------       --------      --------
<S>                              <C>           <C>            <C>            <C>           <C>           <C>
                                                                 (In thousands)
Tangible capital...............   $30,685          8.5%       $ 5,416        1.5%           $25,269          7.0%
Core capital...................    30,685          8.5         10,833        3.0             19,852          5.5
Risk-based capital.............    33,168         16.7         15,870        8.0             17,298          8.7
</TABLE>


     A reconciliation between regulatory capital and GAAP capital at December
31, 1999 in the accompanying financial statements is presented below:


<TABLE>
<CAPTION>
                                                           Tangible Capital   Core Capital   Risk-based Capital
                                                           -----------------  -------------  -------------------
                                                                              (In thousands)
<S>                                                        <C>                <C>            <C>
GAAP capital...........................................             $36,766        $36,766              $36,766
Intangible assets......................................              (6,842)        (6,842)              (6,842)
Unrealized loss on certain available for sale
  assets...............................................                 761            761                  761
Allowance for loan losses includable
  in supplementary capital.............................                  --             --                2,483
                                                                    -------        -------              -------
Regulatory capital.....................................             $30,685        $30,685              $33,168
                                                                    =======        =======              =======
</TABLE>

     Limitation on Capital Distributions.  Effective April 1, 1999, the OTS
amended its capital distribution regulations to reduce regulatory burdens on
savings associations.  Under the amendments adopted by the OTS, certain savings
associations will be permitted to pay capital distributions during a calendar
year that do not exceed the association's net income for that year plus it
retained net income for the prior two years, without notice to, or the approval
of the OTS.  However, a savings association subsidiary of a savings and loan
holding company, such as the Bank, will continue to have to file a notice unless
the specific capital distribution requires an application.  In addition, the OTS
can prohibit a proposed capital distribution, otherwise permissible under the
regulation, if the OTS has determined that the association is in need of more
than normal supervision or if it determines that a proposed distribution by an
association would constitute an unsafe or unsound practice.  Furthermore, under
the OTS prompt corrective action regulations, the Bank would be prohibited from
making any capital distribution if, after the distribution, the Bank failed to
meet its minimum capital requirements, as described above.  See"--Prompt
Corrective Regulatory Action."

     Liquidity.  The Bank is required to maintain an average daily balance of
liquid assets (cash, certain time deposits, bankers' acceptances, specified
United States Government, state or federal agency obligations, shares of certain
mutual funds and certain corporate debt securities and commercial paper) equal
to a monthly average of not less than a specified percentage of its net
withdrawable deposit accounts plus short-term borrowings.  This liquidity
requirement may be changed from time to time by the OTS to any amount within the
range of 4% to 10% depending upon economic conditions and the savings flows of
member institutions, and is currently 4%.  OTS regulations also require each
savings association to maintain an average daily balance of short-term liquid
assets at a specified percentage of the total of its net withdrawable deposit
account and borrowings payable in one year or less.  Monetary penalties may be
imposed for failure to meet these liquidity requirements.  At December 31, 1999,
the Bank's liquidity position was $31.7 million, or 10.84% of liquid  assets,
compared to $45.7 million or 17.58% at December 31, 1998.  The Bank has never
been subject to monetary penalties for failure to meets its liquidity
requirements.

     Assessments.  Savings associations are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS.  The general
assessment, paid on a semi-annual basis, is computed upon the savings
association's total assets, including consolidated subsidiaries, as reported in
the association's latest quarterly Thrift Financial Report.  The OTS adopted
amendments to its regulations, effective January 1, 1999, that are intended to
assess savings associations on a more equitable basis.  The new regulations base
the assessment for an individual

                                      -24-
<PAGE>

savings association on three components: the size of the association, on which
the basic assessment would be based; the association's supervisory condition,
which would result in an additional assessment based on a percentage of the
basic assessment for any savings institution with a composite rating of 3, 4 or
5 in its most recent safety and soundness examination; and the complexity of the
association's operations, which would result in an additional assessment based
on a percentage of the basic assessment for any savings association that managed
over $1 billion in trust assets, serviced for others loans aggregating more than
$1 billion, or had certain off-balance sheet assets aggregating more than $1
billion. In order to avoid a disproportionate impact on the smaller savings
institutions, which are those whose total assets never exceeded $100 million,
the new regulations provide that the portion of the assessment based on assets
size will be the lesser of the assessment under the amended regulations or the
regulations before the amendment. Management believes that the change in its
rate of OTS assessments under the amended regulations was not material.

     Branching.  Subject to certain limitations, HOLA and the OTS regulations
permit federally chartered savings associations to establish branches in any
state of the United States.  The authority to establish such a branch is
available (i) in states that expressly authorize branches of savings
associations located in another state and (ii) to an association that qualifies
as a "domestic building and loan association" under the Code, which imposes
qualification requirements similar to those for a "qualified thrift lender"
under HOLA.  See "-- QTL Test."  The authority for a federal savings association
to establish an interstate branch network would facilitate a geographic
diversification of the association's activities.  This authority under HOLA and
the OTS regulations preempts any state law purporting to regulate branching by
federal savings associations.

     Community Reinvestment.  Under the Community Reinvestment Act ("CRA"), as
implemented by OTS regulations, a savings association has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire community, including low and moderate income
neighborhoods.  The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA.  The CRA
requires the OTS, in connection with its examination of a savings association,
to assess the association's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such association.  The CRA also requires all institutions to make public
disclosure of their CRA ratings.  The Bank received an "Outstanding" CRA rating
in its most recent examination.

     The CRA regulations establish an assessment system that bases an
association's rating on its actual performance in meeting community needs.  In
particular, the assessment system focuses on three tests: (i) a lending test, to
evaluate the institution's record of making loans in its service areas; (ii) an
investment test, to evaluate the institution's record of investing in community
development projects, affordable housing and programs benefitting low or
moderate income individuals and businesses; and (iii) a service test, to
evaluate the institution's delivery of services through its branches, ATMs and
other offices.

     Transactions with Related Parties.  The Bank's authority to engage in
transactions with its "affiliates" is limited by the OTS regulations and by
Sections 23A and 23B of the Federal Reserve Act ("FRA").  In general, an
affiliate of the Bank is any company that controls the Bank or any other company
that is controlled by a company that controls the Bank, excluding the Bank's
subsidiaries other than those that are insured depository institutions.  The OTS
regulations prohibit a savings association (i) from lending to any of its
affiliates that is engaged in activities that are not permissible for bank
holding companies under Section 4(c) of the BHC Act and (ii) from purchasing the
securities of any affiliate other than a subsidiary.  Section 23A limits the
aggregate amount of transactions with any individual affiliate to 10% of the
capital and surplus of the savings association and also limits the aggregate
amount of transactions with all affiliates to 20% of the savings association's
capital and surplus.  Extensions of credit to affiliates are required to be
secured by collateral in an amount and of a type described in Section 23A, and
the purchase of low quality assets from affiliates is generally prohibited.
Section 23B provides that certain transactions with affiliates, including loans
and asset purchases, must be on terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the
association as those prevailing at the time for comparable transactions with
nonaffiliated companies.  In the absence of comparable transactions, such
transactions may only occur under terms and circumstances, including credit
standards, that in good faith would be offered to or would apply to
nonaffiliated companies.

                                      -25-
<PAGE>

     The Bank's authority to extend credit to its directors, executive officers
and 10% stockholders, as well as to entities controlled by such persons, is
currently governed by the requirements of Sections 22(g) and 22(h) of the FRA
and Regulation O of the Federal Reserve Board (the "FRB") thereunder.  Among
other things, these provisions require that extensions of credit to insiders (i)
be made on terms that are substantially the same as, and follow credit
underwriting procedures that are not less stringent than, those prevailing for
comparable transactions with unaffiliated persons and that do not involve more
than the normal risk of repayment or present other unfavorable features and (ii)
not exceed certain limitations on the amount of credit extended to such persons,
individually and in the aggregate, which limits are based, in part, on the
amount of the association's capital.  In addition, extensions of credit in
excess of certain limits must be approved by the association's board of
directors.

     Enforcement.  Under the Federal Deposit Insurance Act (the "FDI Act"), the
OTS has primary enforcement responsibility over savings associations and has the
authority to bring enforcement action against all "institution-affiliated
parties," including any controlling stockholder or any stockholder, attorney,
appraiser and accountant who knowingly or recklessly participates in any
violation of applicable law or regulation or breach of fiduciary duty or certain
other wrongful actions that causes or is likely to cause a more than a minimal
loss or other significant adverse effect on an insured savings association.
Civil penalties cover a wide range of violations and actions and range from
$5,000 for each day during which violations of law, regulations, orders and
certain written agreements and conditions continue, up to $1,000,000 per day for
such violations if the person obtained a substantial pecuniary gain as a result
of such violation or knowingly or recklessly caused a substantial loss to the
institution.  Criminal penalties for certain financial institution crimes
include fines of up to $10 million and imprisonment for up to 30 years.  In
addition, regulators have substantial discretion to take enforcement action
against an institution that fails to comply with its regulatory requirements,
particularly with respect to its capital requirements.  Possible enforcement
actions range from the imposition of a capital plan and capital directive to
receivership, conservatorship or the termination of deposit insurance.  Under
the FDI Act, the FDIC has the authority to recommend to the Director of OTS that
enforcement action be taken with respect to a particular savings association.
If action is not taken by the Director of the OTS, the FDIC has authority to
take such action under certain circumstances.

     Standards for Safety and Soundness.  Pursuant to the FDI Act, as amended by
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the
Riegle Community Development and Regulatory Improvement Act of 1994 (the
"Community Development Act"), the OTS and the federal bank regulatory agencies
have adopted a set of guidelines prescribing safety and soundness standards.
The guidelines establish general standards relating to internal controls and
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, asset quality, earnings, and
compensation, fees and benefits.  In general, the guidelines require, among
other things, appropriate systems and practices to identify and manage the risks
and exposures specified in the guidelines.  The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director or principal
stockholder.  In addition, the OTS adopted regulations that authorize, but do
not require, the OTS to order an institution that has been given notice by the
OTS that it is not satisfying any of such safety and soundness standards to
submit a compliance plan.  If, after being so notified, an institution fails to
submit an acceptable compliance plan or fails in any material respect to
implement an accepted compliance plan, the OTS must issue an order directing
action to correct the deficiency and may issue an order directing other actions
of the types to which an undercapitalized association is subject under the
"prompt corrective action" provisions of FDICIA.  If an institution fails to
comply with such an order, the OTS may seek to enforce such order in judicial
proceedings and to impose civil money penalties.

     Real Estate Lending Standards.  The OTS and the other federal banking
agencies adopted regulations to prescribe standards for extensions of credit
that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction of improvements on real estate.  The OTS regulations
require each savings association to establish and maintain written internal real
estate lending standards that are consistent with safe and sound banking
practices and appropriate to the size of the association and the nature and
scope of its real estate lending activities.  The standards also must be
consistent with accompanying OTS guidelines, which include loan-to-value ratios
for the different types of real estate loans.  Associations are also permitted
to make a limited amount of loans that do not

                                      -26-
<PAGE>

conform to the proposed loan-to-value limitations so long as such exceptions are
reviewed and justified appropriately. The guidelines also list a number of
lending situations in which exceptions to the loan-to-value standards are
justified.

     Prompt Corrective Regulatory Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, the banking regulators are required to take certain
supervisory actions against undercapitalized institutions, based upon the five
categories of institutions established by FDICIA: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized," which are categories defined by the
institution's regulatory capital ratios.  Generally, a capital restoration plan
must be filed with the OTS within 45 days of the date an association receives
notice that it is "undercapitalized," "significantly undercapitalized," or
"critically undercapitalized."  In addition, various mandatory supervisory
actions become immediately applicable to any undercapitalized institution,
including restrictions on growth of assets and other forms of expansion.  The
OTS could also take any one of a number of discretionary supervisory actions,
including the issuance of a capital directive and the replacement of senior
executive officers and directors.  Generally, subject to a narrow exception,
FDICIA requires the applicable banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized.  Under the
OTS regulations, generally, a federally chartered savings association is treated
as well capitalized if its total risk-based capital ratio is 10% or greater, its
Tier 1 risk-based capital ratio is 6% or greater, and its leverage ratio is 5%
or greater, and it is not subject to any order or directive by the OTS to meet a
specific capital level.  As of December 31, 1999, the Bank met the criteria for
being considered "well capitalized" by the OTS.

     When appropriate, the OTS can impose corrective action by a savings and
loan holding company under the "prompt corrective action" provisions of FDICIA.

     Insurance of Deposit Accounts.  Pursuant to FDICIA, the FDIC established a
risk-based assessment system for determining the deposit insurance assessments
to be paid by insured depositary institutions.  Under the assessment system, the
FDIC assigns an institution to one of three capital categories based on the
institution's financial information as of the reporting period ending seven
months before the assessment period.  The three capital categories consist of
(i) well capitalized, (ii) adequately capitalized, or (iii) undercapitalized.
The FDIC also assigns an institution to one of three supervisory subcategories
within each capital group.  The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information that the FDIC determines
to be relevant to the institution's financial condition and the risk posed to
the deposit insurance funds.  An institution's assessment rate depends on the
capital category and supervisory category to which it is assigned.  Under the
regulation, there are nine assessment risk classifications (i.e., combinations
of capital groups and supervisory subgroups) to which different assessment rates
are applied.  Assessment rates currently range from 0.0% of deposits for an
institution in the highest category (i.e., well-capitalized and financially
sound, with no more than a few minor weaknesses) to 0.27% of deposits for an
institution in the lowest category (i.e., undercapitalized and substantial
supervisory concern).  The FDIC is authorized to raise the assessment rates as
necessary to maintain the required reserve ratio of 1.25%.  As a result of the
Deposit Insurance Funds Act of 1996 (the "1996 Funds Act"), both the BIF and the
SAIF currently satisfy the reserve ratio requirement.  If the FDIC determines
that assessment rates should be increased, institutions in all risk categories
could be affected.  The FDIC has exercised this authority several times in the
past and could raise insurance assessment rates in the future.  If such action
is taken by the FDIC, it could have an adverse effect on the earnings of the
Bank.

     The 1996 Funds Act also provides that the FDIC cannot assess regular
insurance assessments for an insurance fund unless required to maintain or to
achieve the designated reserve ratio of 1.25%, except on those of its member
institutions that are not classified as "well capitalized" or that have been
found to have "moderately severe" or "unsatisfactory" financial, operational or
compliance weaknesses.  The Bank has not been so classified by the FDIC or the
OTS.

     In addition, the 1996 Funds Act expanded the assessment base for the
payments on the FICO bonds.  Beginning January 1, 1997, the deposits of both
BIF- and SAIF-insured institutions were assessed for the payments on the FICO
bonds.  Until December 31, 1999, or such earlier date on which the last savings
association ceases to exist, the rate of assessment for BIF-assessable deposits
shall be one-fifth of the rate imposed on SAIF-assessable deposits.  The

                                      -27-
<PAGE>

annual rate of assessments for the payments on the FICO bonds for the first,
second, third and fourth quarters of the fiscal year 1999 were 0.0610%, 0.0588%,
0.0580% and 0.0592%, respectively.

     Under the FDI Act, insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS.  The management of the Bank does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

     Privacy Protection.  The OTS has recently proposed regulations implementing
the privacy protection provisions of the Gramm-Leach-Bliley Act (the "GLB Act").
The proposed regulations would require each financial institution to adopt
procedures to protect customers' and consumers' "nonpublic personal information"
by November 13, 2000.  The Bank would be required to disclose its privacy
policy, including identifying with whom the Bank shares "nonpublic personal
information," to customers at the time of establishing the customer relationship
and annually thereafter.  In addition, the Bank would be required to provide its
customers with the ability to "opt-out" of having to share their personal
information with unaffiliated third parties.  The Bank intends to have a privacy
protection policy in place prior to when the regulations are adopted in final
form.

     The GLB Act also provides for the ability of each state to enact
legislation that is more protective of consumers' personal information.
Currently, there are no privacy bills pending in the Iowa legislature.  If any
such bills are considered by the Iowa legislature, the Bank cannot predict what
impact, if any, these bills would have.

     Federal Home Loan Bank System.  The Bank is a member of the FHLB of Des
Moines, which is one of the regional FHLBs composing the FHLB System.  Each FHLB
provides a central credit facility primarily for its member institutions.  The
Bank, as a member of the FHLB of Des Moines, has been required to acquire and
hold shares of capital stock in the FHLB of Des Moines in an amount at least
equal to the greater of 1.0% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each year
or 1/20 of its advances (borrowings) from the FHLB of Des Moines.  The Bank was
in compliance with this requirement with an investment in FHLB of Des Moines
stock at December 31, 1999 of $3.0 million.  Any advances from a FHLB must be
secured by specified types of collateral, and all long-term advances were
required to be obtained only for the purpose of providing funds for residential
housing finance.

     Pursuant to the GLB Act, the foregoing minimum share ownership requirements
will be replaced by regulations to be promulgated by the Federal Housing Finance
Board.  The GLB Act specifically provides that the minimum requirements in
existence immediately prior to adoption of the GLB Act shall remain in effect
until such regulations are adopted.  Formerly, federal savings associations,
such as the Bank, were also required to be members of the FHLB System.  The new
law removed the mandatary membership requirement and authorized voluntary
membership for federal savings associations as is the case for all other
eligible institutions.

     In addition to changes to the membership and share ownership requirements,
the GLB Act removed certain requirements governing advances made by FHLBs.
Greater stock purchases required of non-QTL FHLB members when they receive
advances were eliminated, as was the requirement that such members only apply
for advances for housing finance purposes.  A priority for making advances to
QTL members and a 30% limit on total advances to non-QTL members was also
removed.  Further, the new law eliminated restrictions on obtaining new advances
and having to repay advances after three years applicable to savings
associations that are not QTLs.

     The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs.  These
requirements could reduce the amount of earnings that the FHLBs can pay as
dividends to their members and could also result in the FHLBs imposing a higher
rate of interest on advances to their members.  If dividends were reduced, or
interest on future FHLB advances increased, the Bank's net interest income would
likely also be reduced.

     Federal Reserve System.  The Bank is subject to provisions of the FRA and
the FRB's regulations pursuant to which depositary institutions may be required
to maintain noninterest-earning reserves against their deposit accounts

                                      -28-
<PAGE>

and certain other liabilities. Currently, reserves must be maintained against
transaction accounts (primarily NOW and regular checking accounts). The FRB
regulations generally require that reserves be maintained in the amount of 3% of
the aggregate of transaction accounts up to $46.5 million. The amount of
aggregate transaction accounts in excess of $46.5 million are currently subject
to a reserve ratio of 10%, which ratio the FRB may adjust between 8% and 12%.
The FRB regulations currently exempt $4.9 million of otherwise reservable
balances from the reserve requirements, which exemption is adjusted by the FRB
at the end of each year. The Bank is in compliance with the foregoing reserve
requirements. Because required reserves must be maintained in the form of either
vault cash, a noninterest-bearing account at a Federal Reserve Bank, or a pass-
through account as defined by the FRB, the effect of this reserve requirement is
to reduce the Bank's interest-earning assets. The balances maintained to meet
the reserve requirements imposed by the FRB may be used to satisfy liquidity
requirements imposed by the OTS. FHLB System members are also authorized to
borrow from the Federal Reserve "discount window," but FRB regulations require
such institutions to exhaust all FHLB sources before borrowing from a Federal
Reserve Bank.

Federal Securities Law

     The Holding Company is registered with the SEC under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").  The Holding
Company is subject to information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.

                                      -29-
<PAGE>

ITEM 2.   PROPERTIES

     The Company conducts its business through its main office located in Fort
Dodge, Iowa and seven full-service offices located in Fort Dodge, Nevada, Ames,
Perry, Burlington and Mount Pleasant, Iowa. The following table sets forth
certain information concerning the main office and each branch office of the
Company and the offices of First Iowa Title Services and First Iowa Mortgage,
Inc. at December 31, 1999.  All of the offices of the Company are owned.  In
addition to the properties listed below, First Federal Investment Services, Inc.
owns land in Fort Dodge, Iowa with a net book value of $99,000 and Northridge
Apartments Limited Partnership owns a multi-family apartment building with a net
book value of $1.8 million at December 31, 1999.  The aggregate net book value
of the Company's premises and equipment, on a consolidated basis was $5.4
million at December 31, 1999.

<TABLE>
<CAPTION>
                                                  Lease
Location                       Opening Date  Expiration Date   Net Book Value
--------                       ------------  ----------------  --------------
<S>                            <C>           <C>               <C>

   Main Office:
   825 Central Avenue             1973            N/A            $1,042,286
   Fort Dodge, Iowa

   Branch Offices:
   201 South 25th Street          1977            N/A            $  237,037
   Fort Dodge, Iowa

   404 Lincolnway                 1977            N/A            $  529,970
   Nevada, Iowa

   107 Main Street                1977            N/A            $  368,051
   Ames, Iowa

   1111-141st Street              1999            N/A            $  946,903
   Perry, Iowa

   321 North Third Street         1953            N/A            $  578,092
   Burlington, Iowa

   1010 North Roosevelt           1975            N/A            $  329,675
   Burlington, Iowa

   102 South Main                 1991            N/A            $  235,414
   Mount Pleasant, Iowa

   First Iowa Offices:
   805 Central Avenue             1982            2001 (1)       $   42,464
   Fort Dodge, Iowa

   814 8th Street                 1996            2003 (2)       $   15,424
   Boone, Iowa

   200 1st Street South           1996            2003 (2)       $    8,011
   Newton, Iowa

   First Iowa Mortgage Office:    1998            2003           $   30,110
   415 South Duff
   Ames, Iowa

   Construction in Process:
   316 South Duff                  N/A             N/A           $  992,660
   Ames, Iowa
</TABLE>

      _____________________
(1)  Does not include option to renew for an additional 3 years.
(2)  Does not include option to renew for an additional 5 years.

                                      -30-
<PAGE>

ITEM 3.   LEGAL PROCEEDINGS

     The Registrant 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 Registrant's financial condition and results of operations.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1999.

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
          MATTERS

     The information required by this Item is incorporated herein by reference
to page 65 of the Company's 1999 Annual Report to Shareholders under the heading
"Shareholder Information," which section is included in Exhibit 13.1 to this
Report.

                                      -31-
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

     The selected consolidated financial and other data of the Company set forth
below is derived in part from, and should be read in conjunction with, the
Consolidated Financial Statements of the Company and Notes thereto presented
elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                        At  December 31, (11)
                                        -----------------------------------------------------
                                          1999       1998       1997       1996       1995
                                        ---------  ---------  ---------  ---------  ---------
                                                           (In thousands)
<S>                                      <C>        <C>        <C>        <C>        <C>
Selected Consolidated Financial
  Condition Data:
Total assets..........................   $367,433   $336,690   $221,954   $203,093   $179,930
Cash (noninterest-bearing)............      8,542      2,435        982        963        709
Loans receivable, net:(1)
  First mortgage loans secured
    by one- to four-family
    residences........................    161,547    145,967    114,286    106,053     93,438
  First mortgage loans secured
    by multi-family properties........     71,503     63,285     49,895     33,015     30,070
  First mortgage loans secured
    by commercial properties..........     17,470     11,168      3,724      5,068      5,650
  Consumer loans......................     36,239     33,612     23,344     21,695     18,714
                                         --------   --------   --------   --------   --------
    Total loans receivable, net.......    286,759    254,032    191,249    165,831    147,872
Investment securities(2)..............     53,820     63,084     22,279     29,577     26,156
Deposits..............................    271,031    246,690    141,124    129,722    126,672
Borrowed funds........................     55,715     38,832     28,550     22,335     21,940
Total shareholders' equity............     38,127     48,207     50,417     49,235     29,900


                                                 For the Year Ended December 31,
                                            1999      1998       1997       1996      1995
                                         --------   --------   --------   -------   --------
                                                            (In thousands)
Selected Operating Data:
Interest income.......................    $24,556    $23,602    $16,205    $15,090    $13,148
Interest expense......................     13,604     12,869      7,900      6,929      7,079
                                          -------    -------    -------    -------    -------
   Net interest income before
     provision for loan losses........     10,952     10,733      8,305      8,161      6,069
Provision for loan losses.............        120        210        240        240        250
                                          -------    -------    -------    -------    -------
   Net interest income after
     provision for loan losses........     10,832     10,523      8,065      7,921      5,819
                                          -------    -------    -------    -------    -------
Noninterest income:
     Fees and service charges.........      1,485      1,243        657        580        445
     Abstract fees....................      1,421      1,584      1,222        931        794
     Other income.....................      1,157      1,088        658        382        463
                                          -------    -------    -------    -------    -------
       Total noninterest income.......      4,063      3,915      2,537      1,893      1,702
                                          -------    -------    -------    -------    -------
Noninterest expense:
     Salaries and employee benefits...      4,026      3,482      2,209      2,004      1,681
     Premises and equipment...........        931        812        444        421        382
     Data processing..................        522        553        258        244        236
     One-time SAIF special assessment.         --         --         --        817         --
     SAIF deposit insurance
       premiums.......................        147        143         85        279        287
   Goodwill...........................        472        436         28         29         30
     Other expenses...................      2,356      2,146      1,553      1,144      1,042
                                          -------    -------    -------    -------    -------
       Total noninterest expense......      8,454      7,572      4,577      4,938      3,658
                                          -------    -------    -------    -------    -------
Income before income taxes............      6,441      6,866      6,025      4,876      3,863
Income tax expense....................      2,241      2,481      2,108      1,744      1,403
                                          -------    -------    -------    -------    -------
   Net income.........................    $ 4,200    $ 4,385    $ 3,917    $ 3,132    $ 2,460
                                          =======    =======    =======    =======    =======
</TABLE>

                                      -32-
<PAGE>

<TABLE>
<CAPTION>
                                                          At or for the Year Ended December 31,
                                                  ------------------------------------------------------
                                                     1999       1998       1997        1996       1995
                                                  ----------  --------   ---------   ---------  --------
<S>                                               <C>         <C>        <C>         <C>        <C>
Key Financial Ratios and Other Data:
Performance Ratios: (%)
Net interest rate spread (difference between
  average yield on interest-earning
  assets and average cost of interest-
  bearing liabilities).......................          2.86%     2.81%       2.87%       3.01%     2.75%
Net interest margin (net interest income
  as a percentage of average interest-
  earning assets)............................          3.35      3.50        4.06        4.33      3.66
Return on average assets (net income
  divided by average total assets)...........          1.21      1.35        1.86        1.62      1.45
Return on average equity (net income
  divided by average equity).................          9.51      8.73        7.94        6.30      8.54
Noninterest income to average assets.........          1.21      1.21        1.20        0.98      1.00
Efficiency ratio(3)..........................         56.30     51.69       42.21       49.11     47.07
Noninterest expense to average assets........          2.45      2.34        2.17        2.56      2.16
Net interest income after provision for
  loan losses to noninterest expenses........        128.13    138.97      176.22      160.40    159.07
Financial Condition Ratios: (%) (4)
Equity to assets at period end...............         10.38     14.32       22.72       24.24     16.62
Tangible equity to tangible assets
  at period end (5) (6)......................          8.68     12.42       22.32       23.80     16.09
Average shareholders' equity divided by
  average total assets.......................         12.77     15.52       23.38       25.73     16.99
Average tangible shareholders equity divided
  by average tangible total assets (5) (6)...         10.94     13.71       22.96       25.29     16.42
Average interest-earning assets to average
  interest-bearing liabilities...............        112.05    116.28      130.97      136.02    121.37
Asset Quality Ratios: (%) (4)
Nonaccrual loans to total net loans..........          0.07      0.38        0.08        0.11      0.12
Nonperforming assets to total assets(7)......          0.20      0.34        0.10        0.15      0.23
Allowance for loan losses as a percent of
  total loans receivable at end of period....          0.95      1.03        1.10        1.16      1.15
Allowance for loan losses to nonaccrual
  loans......................................      1,301.13    279.72    1,468.33    1,059.35    960.20
Per Share Data:
Book value per share.........................     $   16.86   $ 16.26   $   15.43   $   14.36   $  8.72
Tangible book value per share(5).............         13.83     13.79       15.09       14.01      8.39
Basic earnings per share (8).................          1.64      1.44        1.23        0.82      0.63
Diluted earnings per share (9)...............          1.60      1.40        1.21        0.82      0.63
Dividends declared per share.................          0.40      0.32        0.25        0.28      0.60
Dividend payout ratio........................          0.24      0.22        0.20        0.34      0.95
Key Financial Ratios Excluding
SAIF Assessment: (%) (10)
Return on average assets (net income divided
  by average total assets)...................          1.21%     1.35%       1.86%       1.89%     1.45%
Return on average equity (net income
  divided by average equity).................          9.51      8.73        7.94        7.34      8.54
Efficiency ratio (3).........................         56.30     51.69       42.21       40.99     47.07
Noninterest expense to average assets........          2.45      2.34        2.17        2.13      2.16
Net interest income after provision for
loan losses to noninterest expenses..........        128.13    138.97      176.22      192.21    159.07
Other Data:
Cash earnings (12)...........................     $   4,672   $ 4,821   $   3,945   $   3,161   $ 2,490
Cash earnings per share diluted (9) (12).....          1.78      1.54        1.22        0.83      0.64
Cash return on average assets (12)...........          1.35      1.49        1.87        1.64      1.47
Cash return on average equity (12)...........         10.58      9.60        7.99        6.77      8.64
</TABLE>

_______________________
                                                       (Notes on following page)

                                      -33-
<PAGE>

(1)  Loans receivable, net represents total loans less discounts, loans in
     process, net deferred loan fees and allowance for loan losses.  The
     allowance for loan losses at December 31, 1999, 1998, 1997, 1996 and 1995
     was $2.8 million, $2.7 million, $2.2 million, $2.0 million and $1.7
     million, respectively.

(2)  Includes interest-bearing deposits with the Federal Home Loan Bank of Des
     Moines (the "FHLB").

(3)  Efficiency ratio represents noninterest expense divided by the sum of net
     interest income before provision for loan losses plus noninterest income.

(4)  Asset Quality Ratios are end of period ratios.  With the exception of end
     of period ratios, all ratios are based on average monthly balances during
     the indicated periods and are annualized where appropriate.

(5)  Tangible equity consists of stockholders' equity less goodwill and title
     plant. Goodwill and title plant at December 31, 1999, 1998, 1997, 1996 and
     1995 was $6.8 million, $7.3 million, $1.1 million, $1.2 million and $1.1
     million, respectively.

(6)  Tangible assets consists of total assets less goodwill and title plant.
     Goodwill and title plant at December 31, 1999, 1998, 1997, 1996 and 1995
     was $6.8 million, $7.3 million, $1.1 million, $1.2 million and $1.1
     million, respectively.

(7)  Nonperforming assets consists of nonaccrual loans, foreclosed real estate
     and other nonperforming assets.

(8)  Basic earnings per share information is calculated by dividing net income
     by the weighted average number of shares outstanding.  The weighted average
     number of shares outstanding for basic earnings per share computation for
     1999, 1998, 1997, 1996 and 1995 were 2,562,940, 3,048,148, 3,184,269,
     3,818,273 and 3,919,488, respectively.

(9)  Diluted earnings per share information is calculated by dividing net income
     by the weighted average number of shares outstanding, adjusted for the
     effect of dilutive potential common shares outstanding which consists of
     stock options granted. The weighted average number of shares outstanding
     for diluted earnings per share computation for 1999, 1998, 1997, 1996 and
     1995 were 2,621,542, 3,132,833, 3,241,069, 3,818,273 and 3,919,488,
     respectively.

(10) For 1996, excludes the one-time $817,000 (pre-tax) special assessment for
     the recapitalization of the Savings Association Insurance Fund ("SAIF").

(11) As of the close of business on January 30, 1998, the Company completed the
     Acquisition of Valley Financial Corp. Subsequent to January 30, 1998, the
     information contained in the Financial Selected Data tables reflect the
     effect of the Acquisition. Financial data prior to January 30, 1998, does
     not reflect the Acquisition and is based upon historical figures.

(12) Cash earnings excludes from net income the amortization of goodwill.

                                      -34-
<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     The information required by this Item is incorporated herein by reference
to pages 7 through 30 of the Company's 1999 Annual Report to Shareholders under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which section is included in Exhibit 13.1 to this
Report.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this Item is incorporated herein by reference
to pages 12 through 14 of the Company's 1999 Annual Report to Shareholders under
the heading "Discussion of Market Risk--Interest Rate Sensitivity Analysis,"
which section is included in Exhibit 13.1 to this Report.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this Item is incorporated herein by reference
to pages 31 through 63 of the Company's 1999 Annual Report to Shareholders under
the headings "Independent Auditor's Report," "Consolidated Financial Statements"
and "Notes to Consolidated Financial Statements," which section are included in
Exhibit 13.1 to this Report.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     None.
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding Directors and Executive Officers of the Registrant is
included under the headings "Information with Respect to Nominees and Continuing
Directors," "Nominees for Election as Directors," "Continuing Directors,"
"Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held on April 28,2000, which has been filed with the SEC and
is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     Information relating to executive compensation is included under the
headings "Executive Compensation" (excluding the Stock Performance Graph and the
Compensation Committee Report) and "Directors' Compensation" in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on April 28,
2000, which has been filed with the SEC and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information relating to security ownership of certain beneficial owners and
management is included under the headings "Principal Shareholders of the
Company" and "Security Ownership of Management" in the Company's Proxy Statement
for its Annual Meeting of Shareholders to be held on April 28, 2000, which has
been filed with the SEC and is incorporated herein by reference.

                                      -35-
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information regarding certain relationships and related transactions is
included under the heading "Transaction with Certain Related Persons" in the
Company's Proxy Statement for its Annual Meeting of Shareholders to be held on
April 28, 2000, which has been filed with the SEC and is incorporated herein by
reference.
                                  PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Financial Statements, Schedules and Exhibits

1.   The consolidated balance sheets of North Central Bancshares, Inc. and
     subsidiaries as of December 31, 1999 and 1998, and the related consolidated
     statements of income, equity and cash flows for the years ended December
     31, 1999, 1998 and 1997, together with the related notes and the
     independent auditor's report of McGladrey & Pullen, LLP, independent
     certified public accounts.

2.   Financial Statement Schedules have been omitted because they are not
     applicable or the required information is shown in the Consolidated
     Financial Statements or Notes thereto.

3.   See Exhibit Index on following page.

(b)  Reports on Form 8-K filed during the last quarter of 1999

None.

                                      -36-
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.                           Description
-----------                           -----------
<S>             <C>
     3.1        Articles of Incorporation of North Central Bancshares, Inc.*

     3.2        Bylaws of North Central Bancshares, Inc.*

     4.1        Federal Stock Charter of First Federal Savings Bank of Iowa*

     4.2        Bylaws of First Federal Savings Bank of Iowa*

     4.3        Specimen Stock Certificate of North Central Bancshares, Inc.*

    10.1        Employee Stock Ownership Plan of First Federal Savings Bank of Iowa and ESOP Trust
                Agreement (incorporating Amendments 1 and 2)*****

    10.2        ESOP Loan Documents, dated September 3, 1996****

    10.3        Employee Retention Agreements between First Federal Savings Bank of Iowa and certain executive officers**

    10.4        Employment Agreement between First Federal Savings Bank of Iowa and David M.
                Bradley, effective as of August 31, 1994*

    10.5        Form of Employment Agreement between First Federal Savings Bank of Iowa and David M. Bradley*

    10.6        Form of Employment Agreement between North Central Bancshares, Inc. and David M. Bradley*

    10.8        North Central Bancshares, Inc. 1996 Stock Option Plan***

    10.9        Amendment No. 1 to the North Central Bancshares, Inc. 1996 Stock Option Plan*****

    13.1        Annual Report to security holders

    21.1        Subsidiaries of the Registrant*

    23.1        Consent of McGladrey & Pullen, LLP

    27.1        Financial Data Schedule

    99.1        Proxy Statement for Annual Meeting of Shareholders of North Central Bancshares, Inc. filed with the Securities and
                Exchange Commission

    99.2        Press release dated October 29, 1999 (regarding stock repurchase program)

    99.3        Press release dated November 19, 1999 (regarding declaration of dividend)

    99.4        Press release dated January 18, 2000 (regarding fourth quarter and year end 1999 earnings)
 </TABLE>

                                      -37-
<PAGE>

*      Incorporated herein by reference to Registration Statement No. 33-80493
       on Form S-1 of North Central Bancshares, Inc. (the "Registrant") filed
       with the Securities and Exchange Commission, (the "Commission") on
       December 18, 1995, as amended.

**     Incorporated herein by reference to the Exhibits to the Annual Report on
       Form 10-K filed by Registrant for fiscal year 1995, filed with the
       Commission on March 29, 1996.

***    Incorporated herein by reference to the Amended Schedule 14A of
       Registrant filed with the Commission on August 19, 1996.

****   Incorporated herein by reference to the Annual Report on Form 10-K of the
       Registrant filed with the Commission on March 31, 1997.

*****  Incorporated herein by reference to the Annual Report on Form 10-K of
       the Registrant filed with the Commission on March 31, 1998.

                                      -38-
<PAGE>

Conformed

                                  SIGNATURES

     Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant and has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                 North Central Bancshares, Inc.

Date:  March 27, 2000       /s/ David M. Bradley
                            ------------------------
                                 By: David M. Bradley
                                 Chairman, President and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

          Name                               Title                                        Date
          ----                               -----                                        ----
<S>                                  <C>                                              <C>
/s/ David M. Bradley                 President, Chief Executive Officer,              March 27, 2000
---------------------------
David M. Bradley                     Director, and Chairman of the Board
                                     (principal executive officer)

/s/ John L. Pierschbacher            Treasurer                                        March 27, 2000
---------------------------
John L. Pierschbacher                (principal accounting and
                                     financial officer)

/s/ Robert H. Singer, Jr.            Director                                         March 27, 2000
---------------------------
Robert H. Singer, Jr.

/s/ KaRene Egemo                     Director                                         March 27, 2000
---------------------------
KaRene Egemo

/s/ Howard A. Hecht                  Director                                         March 27, 2000
---------------------------
Howard A. Hecht

/s/ Melvin R. Schroeder              Director                                         March 27, 2000
---------------------------
Melvin R. Schroeder

/s/ Mark M. Thompson                 Director                                         March 27, 2000
---------------------------
Mark M. Thompson
</TABLE>

                                      -39-