Exhibit
                  13.1
              Annual
                  Report to Shareholders.





**NORTH
      CENTRAL BANCSHARES, INC.**





**Holding
      Company for First Federal**


**Savings
      Bank of Iowa**




















**2006
      ANNUAL REPORT**








**TABLE
      OF CONTENTS**








MESSAGE
      OF THE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER





SELECTED
      CONSOLIDATED FINANCIAL AND OTHER DATA





MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS





INDEX
      TO
      FINANCIAL STATEMENTS





QUARTERLY
      RESULTS OF OPERATIONS (Unaudited)





MANAGEMENT
      OF THE HOLDING COMPANY AND THE BANK





SHAREHOLDER
      INFORMATION







This
      Annual Report to Shareholders contains certain forward-looking statements
      consisting of estimates with respect to the financial condition, results of
      operations (including noninterest expense and availability of potential tax
      credits) and business of North Central Bancshares, Inc. (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 changes in depositor preferences
      for
      financial products. The Company does not undertake to update any forward-looking
      statement, whether written or oral, that may be made from time to time by or
      on
      behalf of the Company.








**North
                Central Bancshares, Inc.****Holding
                Company for****First
                Federal Savings Bank of Iowa**825
                Central AvenueFort
                Dodge, Iowa 50501515-576-7531**www.firstfederaliowa.com****Branch
                Locations**





**Fort
                Dodge, Iowa**
            **Fort
                Dodge, Iowa**
            **Ames,
                Iowa**
            **Nevada,
                Iowa**825
                Central Avenue
            201
                South 25thStreet
            316
                South Duff
            404
                Lincoln HighwayFort
                Dodge, Iowa 50501
            Fort
                Dodge, Iowa 50501
            Ames,
                Iowa 50010
            Nevada,
                Iowa 50201515-576-7531
            515-576-3177
            515-232-4304
            515-382-5408**Perry,
                Iowa**
            **Ankeny,
                Iowa**
            **Clive,
                Iowa**
            **West
                Des Moines, Iowa**1111
                - 141stStreet
            2110
                SE Delaware Street
            13150
                Hickman Road
            120
                South 68thStreetPerry,
                Iowa 50220
            Ankeny,
                Iowa 50021
            Clive,
                Iowa 50325
            West
                Des Moines, Iowa 50266515-465-3187
            515-963-4488
            515-440-6300
            515-226-0800





**Burlington,
                Iowa**
            **Burlington,
                Iowa**
            **Mt.
                Pleasant, Iowa**1010
                N. Roosevelt
            321
                North 3rdStreet
            102
                South MainBurlington,
                Iowa 52601
            Burlington,
                Iowa 52601
            Mt.
                Pleasant, Iowa 52641319-754-6521
            319-754-7517
            319-385-8000













MESSAGE
      OF THE CHAIRMAN, PRESIDENT AND


CHIEF
      EXECUTIVE OFFICER





Dear
      Shareholders:





We
      are
      pleased to report to you the operating results of North Central Bancshares,
      Inc.
      (“North Central Bancshares” or the “Company”) for the year ended December 31,
      2006. North Central Bancshares is the holding company for First Federal Savings
      Bank of Iowa (the “Bank”).





For
      the
      year ended December 31, 2006, North Central Bancshares’ net income was
      $4,812,000 or $3.32 diluted earnings per share. Total shareholder return was
      impacted favorably by a 13.8% increase in quarterly dividends effective April
      2006. Some of our achievements during the past year include:





2006
      HIGHLIGHTS





* 
       Total assets increased 6.3% to a new high of $515.5 million.





* 
       Net loans increased 4.4% to a new high of $449.0 million.





* 
       Increased quarterly dividends in April, 2006 to $0.33 per share, a 13.8%
      increase.





* 
       Repurchased a total of 151,250 shares of outstanding stock during the year ended
      December 31, 2006.





* 
       Opened a new 6,000 sq. ft. full service office in West Des Moines,
      Iowa.





With
      the
      support of our directors, officers, staff and the continuing confidence of
      our
      shareholders, we look forward to continued success in the coming year. We remain
      committed to increasing shareholder value.








Sincerely,/s/
                  David M.
                  BradleyDavid
                M. BradleyChairman,
                President and Chief Executive
                Officer












**SELECTED
      CONSOLIDATED FINANCIAL AND OTHER DATA**





The
      selected consolidated financial and other data of North Central Bancshares
      set
      forth below is derived in part from, and should be read in conjunction with,
      the
      Consolidated Financial Statements and Notes thereto presented elsewhere in
      this
      Annual Report.




**At
                December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)****Selected
                Consolidated Financial****Condition
                Data:**Total
                assets
            
            $
            515,515
            
            $
            485,191
            
            $
            462,735
            
            $
            424,009
            
            $
            403,872Cash
                (noninterest-bearing)
            
            
            7,592
            
            
            8,087
            
            
            7,315
            
            
            8,674
            
            
            2,143Loans
                receivable, net: (1)
              First
                mortgage loans secured by one- to four-family residences
            
            
            215,992
            
            
            210,793
            
            
            184,324
            
            
            171,468
            
            
            147,479First
                mortgage loans secured by multifamily properties
            
            
            65,237
            
            
            73,453
            
            
            77,995
            
            
            69,507
            
            
            70,194First
                mortgage loans secured by commercial properties
            
            
            103,220
            
            
            85,794
            
            
            89,816
            
            
            68,933
            
            
            70,502Consumer
                loans
            
            
            64,594
            
            
            60,238
            
            
            55,181
            
            
            53,051
            
            
            52,971Total
                loans receivable, net
            
            
            449,043
            
            
            430,278
            
            
            407,316
            
            
            362,959
            
            
            341,146Investment
                securities (2)
            
            
            32,461
            
            
            21,260
            
            
            23,710
            
            
            28,297
            
            
            35,859Deposits
                (3)
            
            
            360,330
            
            
            334,338
            
            
            316,334
            
            
            283,964
            
            
            277,000Borrowed
                funds
            
            
            107,908
            
            
            102,444
            
            
            100,975
            
            
            95,005
            
            
            85,026Total
                shareholders' equity
            
            
            42,192
            
            
            44,279
            
            
            41,534
            
            
            41,592
            
            
            38,748




**For
                the Year Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)****Selected
                Operating Data:**Interest
                income
            
            $
            28,537
            
            $
            26,272
            
            $
            24,757
            
            $
            25,412
            
            $
            26,965Interest
                expense
            
            
            15,415
            
            
            12,607
            
            
            11,367
            
            
            12,342
            
            
            13,911Net
                interest income before provision for loan losses
            
            
            13,122
            
            
            13,665
            
            
            13,390
            
            
            13,070
            
            
            13,054Provision
                for loan losses
            
            
            240
            
            
            260
            
            
            240
            
            
            255
            
            
            383Net
                interest income after provision for loan losses
            
            
            12,882
            
            
            13,405
            
            
            13,150
            
            
            12,815
            
            
            12,671Noninterest
                income:
              Fees
                and service charges
            
            
            4,381
            
            
            4,483
            
            
            3,123
            
            
            2,864
            
            
            2,375Abstract
                fees
            
            
            1,223
            
            
            1,289
            
            
            1,461
            
            
            1,811
            
            
            1,686Other
                income
            
            
            1,507
            
            
            776
            
            
            1,476
            
            
            1,910
            
            
            1,668Total
                noninterest income
            
            
            7,111
            
            
            6,548
            
            
            6,060
            
            
            6,585
            
            
            5,729Noninterest
                expense:
              Salaries
                and employee benefits
            
            
            7,223
            
            
            6,660
            
            
            6,192
            
            
            5,950
            
            
            5,223Premises
                and equipment
            
            
            1,500
            
            
            1,452
            
            
            1,429
            
            
            1,287
            
            
            1,192Data
                processing
            
            
            669
            
            
            597
            
            
            567
            
            
            578
            
            
            544Other
                expenses
            
            
            3,727
            
            
            3,730
            
            
            3,127
            
            
            3,016
            
            
            2,623Total
                noninterest expense
            
            
            13,119
            
            
            12,439
            
            
            11,315
            
            
            10,831
            
            
            9,582Income
                before income taxes
            
            
            6,874
            
            
            7,514
            
            
            7,895
            
            
            8,569
            
            
            8,818Income
                tax expense
            
            
            2,062
            
            
            2,499
            
            
            2,496
            
            
            2,721
            
            
            2,953Net
                income
            
            $
            4,812
            
            $
            5,015
            
            $
            5,399
            
            $
            5,848
            
            $
            5,865










**At
                or For the Year Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****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)
            
            
            2.56
            %
            
            2.83
            %
            
            3.02
            %
            
            3.03
            %
            
            3.15
            %Net
                interest margin (net interest income as a percentage of average
                interest-earning assets)
            
            
            2.79
            
            
            3.05
            
            
            3.22
            
            
            3.27
            
            
            3.44Return
                on average assets (net income divided by average total
                assets)
            
            
            0.96
            
            
            1.05
            
            
            1.21
            
            
            1.38
            
            
            1.47Return
                on average equity (net income divided by average equity)
            
            
            11.24
            
            
            11.57
            
            
            12.97
            
            
            14.65
            
            
            15.57Noninterest
                income to average assets
            
            
            1.42
            
            
            1.37
            
            
            1.36
            
            
            1.55
            
            
            1.43Efficiency
                ratio (4)
            
            
            64.84
            
            
            61.54
            
            
            58.18
            
            
            55.11
            
            
            51.01Noninterest
                expense to average assets
            
            
            2.63
            
            
            2.61
            
            
            2.54
            
            
            2.55
            
            
            2.40Net
                interest income after provision for loan losses to noninterest
                expenses
            
            
            98.19
            
            
            107.76
            
            
            116.22
            
            
            118.32
            
            
            132.24**Financial
                Condition Ratios:**(%) (5)Equity
                to assets at period end
            
            
            8.18
            
            
            9.13
            
            
            8.98
            
            
            9.81
            
            
            9.59Tangible
                equity to tangible assets at period end (6) (7)
            
            
            7.17
            
            
            8.01
            
            
            7.80
            
            
            8.54
            
            
            8.25Average
                shareholders' equity divided by average total assets
            
            
            8.57
            
            
            9.09
            
            
            9.35
            
            
            9.40
            
            
            9.42Average
                tangible shareholders equity divided by average tangible total assets
                (6)
                (7)
            
            
            7.53
            
            
            7.95
            
            
            8.13
            
            
            8.12
            
            
            8.06Average
                interest-earning assets to average interest-bearing
                liabilities
            
            
            107.09
            
            
            107.62
            
            
            107.24
            
            
            107.63
            
            
            107.91**Asset
                Quality Ratios:**(%) (5)Nonaccrual
                loans to total net loans
            
            
            0.13
            
            
            0.14
            
            
            0.16
            
            
            0.17
            
            
            0.19Nonperforming
                assets to total assets (8)
            
            
            0.20
            
            
            0.36
            
            
            0.37
            
            
            0.49
            
            
            0.35Allowance
                for loan losses as a percent of total loans receivable at end of
                period
            
            
            0.77
            
            
            0.76
            
            
            0.77
            
            
            0.86
            
            
            0.90Allowance
                for loan losses to nonaccrual loans
            
            
            603.41
            
            
            567.98
            
            
            513.13
            
            
            515.02
            
            
            485.00**Per
                Share Data:**Book
                value per share
            
            $
            30.56
            
            $
            29.37
            
            $
            27.14
            
            $
            25.92
            
            $
            23.62Tangible
                book value per share (6)
            
            
            26.49
            
            
            25.46
            
            
            23.28
            
            
            22.24
            
            
            20.03Basic
                earnings per share (9)
            
            
            3.36
            
            
            3.29
            
            
            3.47
            
            
            3.69
            
            
            3.58Diluted
                earnings per share (10)
            
            
            3.32
            
            
            3.20
            
            
            3.34
            
            
            3.48
            
            
            3.37Dividends
                declared per share
            
            
            1.32
            
            
            1.16
            
            
            1.00
            
            
            0.84
            
            
            0.72Dividend
                payout ratio
            
            
            0.39
            
            
            0.35
            
            
            0.29
            
            
            0.23
            
            
            0.20




_______________________





*(Notes
      on following page)*








(1)
            Loans
                receivable, net, represents total loans less discounts, loans in
                process,
                net deferred loan fees and allowance for loan losses, plus premiums.
                The
                allowance for loan losses at December 31, 2006, 2005, 2004, 2003
                and 2002
                was $3.5 million, $3.3 million, $3.2 million, $3.2 million and $3.1
                million, respectively.





(2)
            Includes
                interest-bearing cash and Federal Home Loan Bank
                stock.





(3)
            Includes
                brokered certificates of deposits of $30.4 million, $4.0 million,
                $0.0
                million, $0.0 million and $0.0 million for the years ended December
                31,
                2006, 2005, 2004, 2003 and 2002,
                respectively.





(4)
            Efficiency
                ratio represents noninterest expense divided by the sum of net interest
                income before provision for loan losses plus noninterest
                income.





(5)
            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.





(6)
            Tangible
                equity consists of stockholders’ equity less goodwill and title plant.
                Goodwill and title plant was $5.6 million for the year ended December
                31,
                2006 and $5.9 million for each of the years ended December 31, 2005,
                2004,
                2003 and 2002.





(7)
            Tangible
                assets consist of total assets less goodwill and title plant. Goodwill
                and
                title plant was $5.6 million for the year ended December 31, 2006
                and $5.9
                million for each of the years ended December 31, 2005, 2004, 2003
                and
                2002.





(8) Nonperforming
      assets consists of nonaccrual loans and foreclosed real estate.





(9)
            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
                2006,
                2005, 2004, 2003 and 2002 were 1,429,912, 1,524,056, 1,554,329, 1,583,568
                and 1,637,749, respectively.





(10) 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 2006, 2005, 2004, 2003 and 2002 were 1,448,857,
      1,566,848, 1,616,689, 1,679,046 and 1,739,535, respectively.







**MANAGEMENT'S
      DISCUSSION AND ANALYSIS**


**OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





**General**





North
      Central Bancshares, Inc. (the "Company"), an Iowa corporation, is the holding
      company for First Federal Savings Bank of Iowa (the "Bank"), a
      federally-chartered savings bank. The principal business of the Company consists
      of the operation of its wholly-owned subsidiary, the Bank.





The
      profitability of the Company depends primarily on its level of net interest
      income, which is the difference between interest earned on the Company's
      interest-earning assets, consisting primarily of loans and investment
      securities, and the interest paid on interest-bearing liabilities, which
      primarily consist of deposits and borrowed funds in the form of advances from
      the Federal Home Loan Bank of Des Moines (the “FHLB”). Net interest income is a
      function of the Company's interest rate spread, which is the difference between
      the average yield on interest-earning assets and the average rate paid on
      interest-bearing liabilities, as well as a function of the average balance
      of
      interest-earning assets as compared to interest-bearing liabilities. The
      Company's net income is affected by its level of noninterest income which
      primarily consists of service fees and charges, abstract fees, mortgage banking
      income and other income, and noninterest expense, which primarily consists
      of
      compensation and employee benefit expenses, premises and equipment, data
      processing and other expenses. Net income also is affected significantly by
      general, economic and competitive conditions, particularly changes in market
      interest rates, government policies and actions of regulatory authorities,
      which
      events are beyond the control of the Company.





**Executive
      Overview**





The
      Company’s business strategy is to operate the Bank as a well-capitalized,
      profitable and independent community oriented savings bank. Specifically, the
      Company’s business strategy incorporates the following elements: (1) operating
      the Bank as a community oriented financial institution; (2) increasing loan
      and
      deposit balances in existing branch offices as well as by establishing de novo
      branch offices in markets where population growth trends are positive such
      as
      the Des Moines, Iowa metropolitan area; (3) maintaining high asset quality
      by
      emphasizing investment in residential mortgage, multifamily and commercial
      real
      estate loans and consumer loans; (4) emphasizing growth in core deposits, which
      includes demand deposit, NOW, money market and savings accounts; (5) maintaining
      capital in excess of regulatory requirements; (6) controlling noninterest
      expense; (7) managing interest rate risk exposure; and (8) increasing
      noninterest income through increases in fees and service charges.





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





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




•
            The
                Company has effectively managed its capital since the Company’s inception
                in 1996. Annual dividends per share have increased from $.25 per
                share in
                1997 to $1.32 per share in 2006. In addition, an active stock repurchase
                program has consistently been used by the Company to manage capital
                and
                increase earnings per share. Since the Company’s inception, it has
                repurchased 2,936,804 shares at a cost of $60.1 million as of December
                31,
                2006, including 151,250 shares purchased in 2006 at a cost of $5.9
                million.





•
            The
                Bank has opened new offices in market areas where population growth
                trends
                are positive. New offices were opened in Ankeny, Iowa in February
                2003 and
                in Clive, Iowa in March, 2004. In August, 2006, the Bank opened a
                new
                branch office in West Des Moines, Iowa near Jordan Town Center Mall.
                These
                locations are in suburbs of Des Moines, Iowa, which is Iowa’s largest
                metropolitan area. The Company will continue to analyze de novo branch
                opportunities in the Des Moines metropolitan area. Noninterest expenses
                have increased each year since 2003 due in part to the Company’s strategy
                of opening de novo branch offices. We believe that this strategy
                will
                result in long-term loan and deposit growth for the Company, but
                will
                negatively impact short-term earnings until each de novo branch achieves
                profitability.










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




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




•
            The
                Company began utilizing brokered certificates of deposits in 2005
                as an
                alternative funding source. At December 31, 2006, the Company had
                brokered
                certificates of deposit of $30.4 million, compared to $4.0 million
                at
                December 31, 2005.





•
            Noninterest
                income for the year ended December 31, 2006, included $569,000 in
                loan
                prepayment fees, compared to $1.0 million for the year ended December
                31,
                2005.





•
            During
                the year ended December 31, 2005, the Company recognized an
                other-than-temporary impairment of $680,000 on three Freddie Mac
                adjustable rate, perpetual preferred stocks that had declined in
                value.
                The securities are investment grade securities that are held in the
                Company’s available-for-sale portfolio. The Company recognized an
                other-than-temporary impairment on the securities based on the facts
                and
                circumstances surrounding each of the securities at the time, including
                the duration and amount of the unrealized loss, as well as the prospect
                for the recovery of market value within a reasonable period of
                time.





•
            Management
                believes that the allowance for loan losses is adequate. The allowance
                for
                loan losses to nonaccrual loans was 603% at December 31, 2006. Net
                annualized charge-offs for 2006 were 0.02% of total loans and have
                averaged under 0.04% of total loans for the past five years. During
                2006,
                the Company’s total loan portfolio increased $14.7 million, or 3.4%. This
                increase primarily consisted of increases in the one- to four-family
                first
                and second mortgage real estate loans. The Company’s provision for loan
                losses in 2006 was $240,000.




•
            The
                Company has lowered its effective tax rate through the use of federal
                Low
                Income Housing Tax Credits (LIHTC). The Company owns and operates
                two
                LIHTC projects in Fort Dodge. These projects generated $278,000 in
                federal
                income tax credits in 2006. The federal income tax credits associated
                with
                these projects will decline to $173,000 in
                2007.




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





**Critical
      Accounting Policies**





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





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





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





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





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





**Business
      Strategy**





The
      Company's current business strategy is to operate the Bank as a
      well-capitalized, profitable and independent community-oriented savings bank.
      Generally, the Company has sought to implement this strategy primarily by using
      deposits, including brokered certificates of deposit, and advances from the
      FHLB
      as its source of funds and maintaining a substantial part of its assets in
      loans
      secured by one- to four-family residential real estate, multifamily real estate
      and commercial real estate located both inside and outside the Company's market
      area, consumer and other loans and in other liquid investment securities.
      Specifically, the Company's business strategy incorporates the following
      elements: (1) operating the Bank as a community-oriented financial institution,
      maintaining a strong core customer base by providing dedicated service to the
      individual consumer; (2) increasing loan and deposit balances in existing branch
      offices as well as by establishing de novo branch offices in markets where
      population growth trends are positive such as the Des Moines, Iowa metropolitan
      area; (3) maintaining high asset quality by emphasizing investment in
      residential mortgage, multifamily and commercial real estate loans and consumer
      loans; (4) emphasizing growth in core deposits, which includes demand deposit,
      NOW, money market and savings accounts; (5) maintaining capital in excess of
      regulatory requirements; (6) controlling noninterest expense; (7) managing
      interest rate risk exposure; and (8) increasing noninterest income through
      increases in fees and service charges.





Highlights
      of the Company's business strategy are as follows:





*Community-Oriented
      Institution* .
      The
      Company is committed to meeting the financial needs of the communities in which
      it operates. Based in part on its participation in several different programs
      designed to facilitate residential lending to low- and moderate-income
      households, the Bank has received an "Outstanding" as its most recent Community
      Reinvestment Act rating.





*Retail
      Deposit Base* .
      In
      2006, the Company had eleven offices located in Fort Dodge, Ames, Nevada, Perry,
      Ankeny, Clive, West Des Moines, Burlington and Mount Pleasant, Iowa. At December
      31, 2006, 33.9% of the deposit base, or $122.3 million, consisted of core
      deposits, which included money market accounts, savings accounts, NOW accounts,
      and noninterest-bearing demand accounts. Core deposits are generally considered
      to be a more stable and lower cost source of funds than certificates of deposit
      or outside borrowings. The Company continues to emphasize growth in core
      deposits.





*Asset
      Quality and Emphasis on Residential Mortgage Lending* .
      The
      Company has historically emphasized residential real estate financing. The
      Company expects to continue its commitment to financing the purchase,
      construction or improvement of residential real estate in its market area.
      At
      December 31, 2006, 41.9% of the Company's total assets consisted of one- to
      four-family residential first mortgage loans. To supplement local mortgage
      loan
      originations and to diversify its mortgage loan portfolio geographically, the
      Company has originated or purchased loans in the secondary mortgage market,
      with
      an emphasis on multifamily and commercial real estate loans, secured by
      properties outside the State of Iowa (the "out of state properties"). At
      December 31, 2006, the Company's portfolio of loans which were either originated
      or purchased by the Company and secured by out of state properties totaled
      $135.3 million and consisted of $15.0 million one- to four-family residential
      mortgage loans, or 3.3%, $54.5 million multifamily real estate loans, or 12.0%,
      and $65.8 million commercial real estate loans, or 14.5%, of the Company's
      total
      loan portfolio. At December 31, 2006, the Company's ratio of nonperforming
      assets to total assets was 0.20%. The Company also invests in state and local
      obligations, mortgage-backed securities, interest-earning deposits, equity
      securities and FHLB stock.





Generally,
      the yield on mortgage loans originated and purchased by the Company is greater
      than that of securities purchased by the Company. Future economic conditions
      and
      continued strong banking competition could result in diminished lending
      opportunities. The Company may increase its investment in securities and in
      purchased mortgage loans outside its market area.





*Increasing
      Noninterest Income.* The
      Company has attempted to increase its level of noninterest income from both
      new
      and traditional lines of business to supplement net interest income. The Company
      generally increases noninterest income by emphasizing growth in core deposit
      accounts. During the year ended December 31, 2006, fees and service charges
      totaled $4.4 million, a decrease of $102,000 from the prior year. This decrease
      was primarily due to a decrease in loan prepayment fees of $444,000, offset
      in
      part by an increase in fees associated with checking accounts, including
      overdraft fees, of $343,000. The Company also maintains its noninterest income
      through emphasizing growth in mortgage banking income, annuity and mutual fund
      sales, and insurance sales. In addition, the Company currently owns abstract
      companies in Webster and Boone counties in Iowa, through First Iowa Title
      Services, Inc. ("First Iowa"), the Bank's wholly owned subsidiary. The abstract
      business performed by First Iowa replaces the function of a title insurance
      company. The Company believes that First Iowa can continue to be an important
      source of fee income. Noninterest income from First Iowa’s business for the
      years ended December 31, 2006 and 2005 was $1.2 and $1.3 million, respectively,
      offset by noninterest expense attributable to First Iowa. The decline in First
      Iowa’s income was due in part to the sale of one of the Company’s three abstract
      offices at the end of the second quarter of 2006.





*Liquidity
      and Interest Rate Risk Management* .
      Management seeks to manage the Company's interest rate risk exposure by
      monitoring the levels of interest rate sensitive assets and liabilities while
      maintaining an acceptable interest rate spread. At December 31, 2006, total
      interest-bearing liabilities maturing or repricing within one year exceeded
      total interest-earning assets maturing or repricing in the same period by $51.8
      million, representing a one-year gap to total assets ratio of -10.1%, compared
      to a -12.3% at December 31, 2005. To manage the Company’s interest rate
      exposure, the Company emphasizes the origination of five- and seven-year
      fixed-rate mortgage loans that convert to adjustable rates at the conclusion
      of
      their initial terms and have overall maturities of up to 30 years, and the
      origination of adjustable rate home equity lines of credit and short-term
      consumer loans. The Company also manages its interest rate risk and liquidity
      by
      investing in mortgage-backed, municipal and equity securities. In addition,
      the
      Company generally sells all fixed rate one- to four-family residential loans
      with maturities of fifteen years or greater. See "Discussion of Market Risk
      -
      Interest Rate Sensitivity Analysis".





**Liquidity
      and Capital Resources**





The
      Company's primary sources of funds are deposits, amortization and prepayment
      of
      loans, borrowings such as FHLB advances, brokered certificates of deposit,
      maturities of securities and other investments, and earnings and funds provided
      from operations. While scheduled principal repayments on loans are a relatively
      predictable source of funds, deposit flows and loan prepayments are greatly
      influenced by interest rates, economic conditions, and competition. The Company
      manages the pricing of its deposits to maintain a desired deposit balance.
      In
      addition, the Company invests in interest-earning assets, which provide
      liquidity to meet lending requirements. At December 31, 2006, $960,000, or
      26.1%
      of the Company's investment portfolio excluding mortgage-backed, mutual fund
      and
      equity securities, was scheduled to mature within one year or less, $1.9
      million, or 51.1%, was scheduled to mature within one to five years and
      $837,000, or 22.8%, was scheduled to mature in more than five years. At December
      31, 2006, certificates of deposit scheduled to mature in less than one year
      totaled $134.4 million. Based on prior experience, management believes that
      a
      significant portion of such deposits will remain with the Company. If the
      Company requires funds beyond its ability to generate them internally, borrowing
      agreements exist with the FHLB, which provide an additional source of funds.
      The
      amount of eligible collateral for blanket lien pledges from the FHLB was $201.8
      million **** as
      of
      December 31, 2006. The Company may also use brokered certificates of deposit,
      up
      to 10% of total assets, as an additional source of funds. For additional
      information about cash flows from the Company's operating, financing and
      investing activities, see the Statements of Cash Flows included in the
      Consolidated Financial Statements.





At
      December 31, 2006, the Company had outstanding loan commitments of $3.8 million.
      This amount does not include undisbursed overdraft loan privileges and the
      undisbursed home equity lines of credit. The Company monitors its liquidity
      position and expects to have sufficient funds to meet its current funding
      commitments.





The
      main
      sources of liquidity for the Company are proceeds from dividends and loan
      repayments from the Bank and the proceeds from stock options exercised. The
      main
      cash outflows are dividend payments to shareholders and funds used to repurchase
      shares of the Company’s common stock. During 2006, the Company repurchased
      151,250 shares of its common stock. The Company has determined that a share
      repurchase program is appropriate to enhance shareholder value. Share
      repurchases generally increase earnings per share, return on average assets,
      and
      return on average equity, three performance benchmarks against which the Company
      and thrift holding companies are often measured. The Company buys stock in
      the
      open market whenever the price of the stock is deemed reasonable and the Company
      has funds available for the purchase. The Company's ability to pay dividends
      to
      shareholders depends substantially on dividends and loan payments received
      from
      the Bank. The Bank may not declare or pay cash dividends on any of its shares
      of
      common stock if the effect thereof would cause equity to be reduced below
      applicable regulatory capital requirements or the amount required to be
      maintained for the liquidation account. For a description of the liquidation
      account, see Note 17 to the Consolidated Financial Statements. Unlike the Bank,
      the Company is not subject to OTS formula-based regulatory restrictions on
      the
      payment of dividends to its shareholders; however, it is subject to the
      requirements of Iowa law. Iowa law generally prohibits the Company from paying
      a
      dividend if either of the following would result: (a) the Company would not
      be
      able to pay its debts as they become due in the usual course of business; or
      (b)
      the Company's total assets would be less than the sum of its total liabilities,
      plus the amount that would be needed, if the Company were to be dissolved at
      the
      time of distribution, to satisfy the preferential rights upon dissolution of
      shareholders whose preferential rights are superior to those receiving the
      distribution.





The
      primary investing activities of the Company are the origination and purchase
      of
      mortgage and other loans and the purchase of securities. During the years ended
      December 31, 2006, 2005 and 2004, the Company's disbursements for loan
      originations and purchases totaled $153.3 million, $143.1 million and $160.2
      million, respectively. These activities were funded primarily by net deposit
      inflows, principal repayments on loans, proceeds from the sale of loans,
      proceeds from the maturity and call of securities, brokered certificates of
      deposit, and FHLB advances. Net cash flows (used in) investing activities were
      $(20.0) million, $(23.1) million and $(42.4) million for the years ended
      December 31, 2006, 2005 and 2004, respectively. Net cash flows provided by
      financing activities were $24.4 million, $16.5 million and $33.2 million for
      the
      years ended December 31, 2006, 2005 and 2004, respectively.





The
      OTS
      regulations require savings associations, such as the Bank, 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 core and supplementary capital to total risk-based assets.
      The Bank satisfied these minimum capital standards at December 31, 2006 with
      tangible and leverage capital ratios of 7.1% and a total risk-based capital
      ratio of 11.9 % **.** In
      determining the amount of risk-weighted assets for purposes of the risk-based
      capital requirement, a savings association must compute its risk-based 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 regulations. These capital requirements, which
      are
      applicable to the Bank only, do not consider additional capital held at the
      Company level, and require certain adjustments to shareholders’ equity to arrive
      at the various regulatory capital amounts.





The
      table
      below presents the Bank's regulatory capital amounts as compared to the OTS
      regulatory capital requirements at December 31, 2006:





**Amount**
            
            **Capital**
              **Requirements**
            
            **Excess**
              **Capital****(In
                thousands)**Tangible
                capital
            
            $
            36,174
            
            $
            7,665
            
            $
            28,509Core
                capital
            
            
            36,174
            
            
            15,330
            
            
            20,844Risk-based
                capital
            
            
            39,851
            
            
            28,072
            
            
            11,779








**Discussion
      of Market Risk—Interest Rate Sensitivity Analysis**





As
      a
      financial institution, the Company's primary component of market risk is
      interest rate volatility. Fluctuations in interest rates will ultimately impact
      both the level of income and expense recorded on a large portion of the Bank's
      assets and liabilities, and the market value of all interest-earning assets,
      other than those which possess a short term to maturity. Since all of the
      Company's interest-bearing liabilities and virtually all of the Company's
      interest-earning assets are located at the Bank, virtually all of the Company's
      interest rate risk management procedures are performed at the Bank level. Based
      upon the Bank's nature of operations, the Bank is not subject to foreign
      currency exchange or commodity price risk. The Bank's real estate loan
      portfolio, within Iowa, is subject to risks associated with the local economy.
      The Company has sought to diversify its loan portfolio by purchasing loans
      secured by properties outside of Iowa. At December 31, 2006, $135.3 million,
      or
      29.8%, of the Company's total loan portfolio was secured by properties outside
      the State of Iowa, located in twenty-one states. The Bank does not own any
      trading assets. At December 31, 2006, neither the Company nor the Bank had
      any
      hedging transactions in place, such as interest rate swaps and
      caps.





The
      Company seeks to manage its interest rate risk by monitoring and controlling
      the
      variation in repricing intervals between its assets and liabilities. To a lesser
      extent, the Company also monitors its interest rate sensitivity by analyzing
      the
      estimated changes in market value of its assets and liabilities assuming various
      interest rate scenarios. As discussed more fully below, there are a variety
      of
      factors which influence the repricing characteristics of any given asset or
      liability.





The
      matching of assets and liabilities may be analyzed by examining the extent
      to
      which such assets and liabilities are “interest rate sensitive” and by
      monitoring an institution's “interest rate sensitivity gap.” An asset or
      liability is said to be interest rate sensitive within a specific time period
      if
      it will mature or reprice within that time period. The “interest rate
      sensitivity gap” is defined as the difference between the amount of
      interest-earning assets maturing or repricing within a specific time period
      and
      the amount of interest-bearing liabilities maturing or repricing within that
      same time period. A gap is considered positive when the amount of interest
      rate
      sensitive assets exceeds the amount of interest rate sensitive liabilities.
      A
      gap is considered negative when the amount of interest rate sensitive
      liabilities exceeds the amount of interest rate sensitive assets. During a
      period of rising interest rates, a negative gap would tend to adversely affect
      net interest income, while a positive gap would tend to positively affect net
      interest income. Similarly, during a period of falling interest rates, a
      negative gap would tend to positively affect net interest income, while a
      positive gap would tend to adversely affect net interest income.





The
      Company's policy in recent years has been to manage its exposure to interest
      rate risk generally by focusing on the maturities of its interest rate sensitive
      assets and by emphasizing adjustable-rate mortgage loans and short-term consumer
      loans, and maintaining a level of liquidity by investing in short-term
      interest-earning deposits and equity securities. In addition, the Company
      generally sells all fixed rate one- to four-family residential loans with
      maturities of fifteen years or greater.





At
      December 31, 2006, total interest-bearing liabilities maturing or repricing
      within one year exceeded total interest-earning assets maturing or repricing
      in
      the same period by $51.8 million, representing a one-year gap ratio of
      -10.1% **,** compared
      to a one-year gap ratio of -12.3% at December 31, 2005. The chief executive
      officer meets regularly with the Bank's senior executive officers to review
      trends in deposits as well as mortgage and consumer lending activities. The
      chief executive officer reports quarterly to the board of directors on interest
      rate risks and trends, as well as liquidity and capital ratio
      requirements.





*Gap
      Table* .
      The
      following table (the “Gap Table”) sets forth the amounts of interest-earning
      assets and interest-bearing liabilities outstanding at December 31, 2006, which
      are expected to reprice or mature, based upon certain assumptions, in each
      of
      the future time periods shown. Except as stated below, the amounts of assets
      and
      liabilities shown that reprice or mature during a particular period were
      determined in accordance with the earlier of the terms of repricing or the
      contractual terms of the asset or liability. Certain assumptions used in
      preparing the table are set forth in the following table. Management believes
      that these assumptions approximate actual experience and considers them
      appropriate and reasonable.




**At
                December 31, 2006 (1)****Within**
              **1
                Year**
            
            **1-3**
              **Years**
            
            **3-5**
              **Years**
            
            **5-10**
              **Years**
            
            **10-20**
              **Years**
            
            **Over
                20**
              **Years**
            
            **Total****(Dollars
                in thousands)****Interest-earning
                assets:**First
                mortgage loansAdjustable
                (2)
            
            $
            99,888
            
            $
            117,209
            
            $
            46,957
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            264,054Fixed
                (2)
            
            
            24,845
            
            
            40,045
            
            
            23,625
            
            
            34,870
            
            
            2,468
            
            
            83
            
            
            125,936Consumer
                and other loans
            
            
            23,946
            
            
            26,173
            
            
            10,986
            
            
            4,121
            
            
            197
            
            
            5
            
            
            65,428Investment
                securities (3)(4)
            
            
            23,187
            
            
            2,100
            
            
            500
            
            
            862
            
            
            -
            
            
            2,930
            
            
            29,579Total
                interest-earning assets
            
            $
            171,866
            
            $
            185,527
            
            $
            82,068
            
            $
            39,853
            
            $
            2,665
            
            $
            3,018
            
            $
            484,997**Rate
                sensitive liabilities:**Savings
                accounts
            
            $
            4,277
            
            $
            6,497
            
            $
            4,476
            
            $
            6,007
            
            $
            3,298
            
            $
            605
            
            $
            25,160NOW
                accounts
            
            
            18,365
            
            
            18,859
            
            
            7,485
            
            
            4,438
            
            
            484
            
            
            5
            
            
            49,636Money
                market accounts
            
            
            27,403
            
            
            7,285
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            34,688Certificate
                accounts
            
            
            134,323
            
            
            82,830
            
            
            20,905
            
            
            -
            
            
            -
            
            
            -
            
            
            238,058Noninterest
                bearing deposits
            
            
            12,788
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            12,788FHLB
                advances and other liabilities (5)
            
            
            26,529
            
            
            54,561
            
            
            26,565
            
            
            188
            
            
            64
            
            
            -
            
            
            107,907Total
                interest-bearing liabilities
            
            $
            223,685
            
            $
            170,032
            
            $
            59,431
            
            $
            10,633
            
            $
            3,846
            
            $
            610
            
            $
            468,237Interest
                sensitivity gap
            
            $
            (51,819
            )
            $
            15,495
            
            $
            22,637
            
            $
            29,220
            
            $
            (1,181
            )
            $
            2,408Cumulative
                interest-sensitivity gap
            
            $
            (51,819
            )
            $
            (36,324
            )
            $
            (13,687
            )
            $
            15,533
            
            $
            14,352
            
            $
            16,760Interest
                sensitivity gap to total asset
            
            
            (10.05
            )%
            
            3.01
            %
            
            4.39
            %
            
            5.67
            %
            
            (0.23
            )%
            
            0.47
            %Cumulative
                interest-sensitivity gap to total asset
            
            
            (10.05
            )
            
            (7.05
            )
            
            (2.66
            )
            
            3.01
            
            
            2.78
            
            
            3.25Ratio
                of interest-earning assets to interest-bearing liabilities
            
            
            76.83
            
            
            109.11
            
            
            138.09
            
            
            374.80
            
            
            69.29
            
            
            494.75
            
            
            103.58
            %Cumulative
                ratio of interest-earning assets to interest-bearing
                liabilities
            
            
            76.83
            
            
            90.77
            
            
            96.98
            
            
            103.35
            
            
            103.07
            
            
            103.58
            
            
            103.58Total
                assets
            
            $
            515,515
            
            $
            515,515
            
            $
            515,515
            
            $
            515,515
            
            $
            515,515
            
            $
            515,515
            
            $
            515,515Cumulative
                interest-earning assets
            
            $
            171,866
            
            $
            357,393
            
            $
            439,461
            
            $
            479,314
            
            $
            481,979
            
            $
            484,997
            
            $
            484,997Cumulative
                interest-bearing liabilities
            
            $
            223,685
            
            $
            393,717
            
            $
            453,148
            
            $
            463,781
            
            $
            467,627
            
            $
            468,237
            
            $
            468,237





________________________________





(1) The
      following assumptions were used in regard to prepayment speed for loans: (i)
      fixed rate commercial real estate loans and mortgage-backed securities will
      prepay at 10 percent per year, (ii) one- to four-family loans (both fixed rate
      and adjustable rate) will prepay at 12 percent per year, (iii) all multifamily
      loans (both fixed and adjustable rate) and adjustable rate commercial real
      estate loans will prepay at 15 percent per year, (iv) all second mortgage real
      estate loans and all other loans will prepay at 20 percent year. Besides
      prepayment assumptions, the chart above also includes normal principal payments
      based upon the loan contractual agreements. Savings accounts are assumed to
      be
      withdrawn at an annual rate of 17 percent. NOW accounts are assumed to be
      withdrawn at an annual rate of 37 percent. Money market accounts are assumed
      to
      be withdrawn at 79 percent during the first year with the balance being
      withdrawn within the one-to-three year category. These assumptions are annual
      percentages based on remaining balances and should not be regarded as indicative
      of the actual prepayments and withdrawals that may be experienced by the
      Company. Certain shortcomings are inherent in the analysis presented by the
      foregoing table.





(2) Includes
      $2.4 million and $0.5 million in mortgage-backed securities in adjustable and
      fixed first mortgage loans, respectively.





(3) Includes
      other equity securities, interest-bearing deposits and FHLB stock, all of which
      are shown in the within-one-year category. Components include interest-bearing
      deposits of $12.4 million and securities available-for-sale of $11.7
      million.





(4) Includes
      $5.0 million of FHLMC preferred stock and $1.0 million of FNMA preferred stock.
      $2.9 million is fixed rate and $3.1 million is adjustable rate. The fixed rate
      preferred stock was included in the appropriate category based upon their
      maturity date. The adjustable rate preferred stock was included in the
      appropriate category based upon their repricing date.





(5) Includes
      $107.9 million of advances from the FHLB. Of these advances, $69.4 million
      are
      term advances and $38.5 million are callable. The term advances have been
      categorized based upon their maturity date. Of the $38.5 million of callable
      advances, $28.5 million have been categorized based upon their maturity date
      because the interest rates on such advances are near or above current market
      rates. The remaining $10.0 million callable advance was placed in the repricing
      category based upon its call date because the rate on this advance was below
      current market rates.





Certain
      shortcomings are inherent in the method of analysis presented in the above
      Gap
      Table. For example, although certain assets and liabilities may have similar
      maturities or periods to repricing, they may react in different degrees to
      changes in market interest rates. Also, the interest rates on certain types
      of
      assets and liabilities may fluctuate in advance of changes in market interest
      rates, while interest rates on other types of assets and liabilities may lag
      behind changes in market rates. Additionally, certain assets, such as
      adjustable-rate loans, have features which restrict changes in interest rates
      both on a short-term basis and over the life of the asset. Further, in the
      event
      of changes in interest rates, prepayment and early withdrawal levels would
      likely deviate significantly from those assumed in calculating the table.
      Finally, the ability of many borrowers to service their adjustable-rate loans
      may decrease in the event of an interest rate increase.





*Net
      Portfolio Value Analysis.* As part
      of its efforts to maximize net interest income and manage the risks associated
      with changing interest rates, management uses the "net portfolio value" ("NPV")
      methodology which the OTS has adopted as part of its capital
      regulations.





Under
      this methodology, interest rate risk exposure is assessed by reviewing the
      estimated changes in NPV which would hypothetically occur if interest rates
      rapidly rise or fall along the yield curve. Projected values of NPV at both
      higher and lower regulatory defined rate scenarios are compared to base case
      values (no change in rates) to determine the sensitivity to changing interest
      rates.





Presented
      below, as of December 31, 2006, is an analysis of the Company's interest rate
      risk ("IRR") as measured by changes in NPV for instantaneous and sustained
      parallel shifts of 100 basis points in market interest rates. Such limits have
      been established with consideration of the impact of various rate changes and
      the Company's current capital position.





**Interest
      Rate Sensitivity of Net Portfolio Value (NPV)(1)**





**Net
                Portfolio Value**
            
            
            
            **NPV
                as % of PV of Assets****Change
                in Rates**
            
            **$
                Amount**
            
            **$
                Change**
            
            **%
                Change**
            
            **NPV
                Ratio**
            
            **Change****(Dollars
                in thousands)**+300
                bp
            
            
            40,161
            
            
            (11,499)
            
            
            (22)
            
            
            8.01
            
            
            (184)
                bp+200
                bp
            
            
            45,268
            
            
            (6,392)
            
            
            (12)
            
            
            8.87
            
            
            (97) bp+100
                bp
            
            
            49,267
            
            
            (2,393)
            
            
            (5)
            
            
            9.51
            
            
            (34) bp0
                bp
            
            
            51,660
            
            
            -
            
            
            -
            
            
            9.84
            
            
            --100
                bp
            
            
            51,601
            
            
            (59)
            
            
            -
            
            
            9.74
            
            
            (10) bp-200
                bp
            
            
            51,727
            
            
            67
            
            
            -
            
            
            9.67
            
            
            (17) bp


_________________________________





(1)       
      Denotes rate shock used to compute interest rate risk capital
      component.





As
      is the
      case with the Gap Table, certain shortcomings are inherent in the methodology
      used in the above interest rate risk measurements. Modeling changes in NPV
      require the making of certain assumptions which may or may not reflect the
      manner in which actual yields and costs respond to changes in market interest
      rates. In this regard, the NPV Table presented above assumes that the
      composition of the Company's interest sensitive assets and liabilities existing
      at the beginning of a period remains constant over the period being measured
      and
      also assumes that a particular change in interest rates is reflected uniformly
      across the yield curve regardless of the duration to maturity or repricing
      of
      specific assets and liabilities. Accordingly, although the NPV Table provides
      an
      indication of the Company's interest rate risk exposure at a particular point
      in
      time, such measurements are not intended to and do not provide a precise
      forecast of the effect of changes in market interest rates on the Company's
      net
      interest income and will differ from actual results.





*Nonperforming
      Assets* .
      Loans
      are reviewed on a regular basis and are placed on nonaccrual status when, in
      the
      opinion of management, the collection of additional interest is doubtful.
      Mortgage loans and consumer loans are placed on nonaccrual status generally
      when
      either principal or interest is 90 days or more past due. Interest accrued
      and
      unpaid at the time a loan is placed on nonaccrual status is charged against
      interest income.





Real
      estate acquired by the Company as a result of foreclosure, or by deed in lieu
      of
      foreclosure, is deemed foreclosed real estate until such time as it is
      sold.








When
      foreclosed real estate is acquired or otherwise deemed foreclosed real estate,
      it is recorded at the lower of the unpaid principal balance of the related
      loan
      or its estimated fair value, less estimated selling expenses. Valuations are
      periodically performed by management and any subsequent decline in fair value
      is
      charged to operations. At December 31, 2006, the Company's foreclosed real
      estate consisted of 7 properties with an aggregate carrying value of
      $468,000.





*Delinquent
      Loans, Nonaccrual Loans and Nonperforming Assets.* The
      following table sets forth information regarding loans on nonaccrual status
      and
      foreclosed real estate of the Company at the dates indicated. At the dates
      indicated, the Company did not have any material restructured loans and did
      not
      have any loans that were ninety days past due and still accruing
      interest.




**At
                December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(Dollars
                in thousands)****Nonaccrual
                loans and nonperforming assets:**First
                mortgage loans:One-
                to four-family residential
            
            $
            222
            
            $
            389
            
            $
            335
            
            $
            414
            
            $
            434Multifamily
                and commercial properties
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            37Consumer
                loans:
            
            
            357
            
            
            196
            
            
            299
            
            
            201
            
            
            172Total
                nonaccrual loans
            
            
            579
            
            
            585
            
            
            634
            
            
            615
            
            
            643Total
                foreclosed real estate
            
            
            468
            
            
            1,143
            
            
            1,079
            
            
            1,453
            
            
            769Other
                nonperforming assets
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                nonperforming assets
            
            $
            1,047
            
            $
            1,728
            
            $
            1,713
            
            $
            2,068
            
            $
            1,412Total
                nonaccrual loans to net loans receivable
            
            
            0.13
            %
            
            0.14
            %
            
            0.16
            %
            
            0.17
            %
            
            0.19
            %Total
                nonaccrual loans to total assets
            
            
            0.11
            
            
            0.12
            
            
            0.14
            
            
            0.15
            
            
            0.16Total
                nonperforming assets to total assets
            
            
            0.20
            
            
            0.36
            
            
            0.37
            
            
            0.49
            
            
            0.35


________________________________




The
      following table sets forth information with respect to loans delinquent 60-89
      days in the Company's portfolio at the dates indicated.




**At
                December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)****Loans
                past due 60-89 days:**First
                mortgage loans:One-
                to four-family residential
            
            $
            765
            
            $
            1,106
            
            $
            1,001
            
            $
            649
            
            $
            830Multifamily
                and commercial properties
            
            
            -
            
            
            -
            
            
            40
            
            
            463
            
            
            -Consumer
                loans
            
            
            68
            
            
            214
            
            
            238
            
            
            223
            
            
            183Total
                past due
            
            $
            833
            
            $
            1,320
            
            $
            1,279
            
            $
            1,335
            
            $
            1,013








The
      following table sets forth information with respect to the Company's delinquent
      loans and other problem assets at December 31, 2006.





**At
                December 31, 2006****Balance**
            
            **Number****(Dollars
                in thousands)**One-
                to four-family first mortgage loans:
              Loans
                60 to 89 days delinquent
            
            
            $ 
                765
            
            
            17Loans
                90 days or more delinquent
            
            
            222
            
            
            6Multifamily
                and commercial first mortgage loans:
              Loans
                60 to 89 days delinquent
            
            
            -
            
            
            -Loans
                90 days or more delinquent
            
            
            -
            
            
            -Consumer
                Loans:Loans
                60 to 89 days delinquent
            
            
            68
            
            
            1Loans
                90 days or more delinquent
            
            
            357
            
            
            12Foreclosed
                real estate
            
            
            468
            
            
            7Other
                nonperforming assets
            
            
            -
            
            
            -Loans
                to facilitate sale of foreclosed real estate
            
            
            87
            
            
            2Special
                mention loans
            
            
            751
            
            
            27





*Classification
      of Assets* .
      Federal
      regulations provide for the classification of loans and other assets such as
      debt and equity securities considered by the OTS to be of lesser quality as
      "substandard," "doubtful," or "loss" assets. An asset is considered
      "substandard" if it is inadequately protected by the current net worth and
      paying capacity of the obligor or of the collateral pledged, if any.
      "Substandard" assets include those characterized by the "distinct possibility"
      that the savings institution will sustain "some loss" if the deficiencies are
      not corrected. Assets classified as "doubtful" have all of the weaknesses
      inherent in those classified "substandard," with the added characteristic that
      the weaknesses present make "collection or liquidation in full," on the basis
      of
      currently existing facts, conditions, and values, "highly questionable and
      improbable.” Assets classified as "loss" are those considered "uncollectible"
      and of such little value that their continuance as assets without the
      establishment of a specific loss reserve is not warranted. Assets that do not
      expose the savings institution to risk sufficient to warrant classification
      in
      one of the aforementioned categories, but which possess some weaknesses, are
      required to be designated "special mention" by management. Loans designated
      as
      special mention are generally loans that, while current in required payments,
      have exhibited some potential weaknesses that, if not corrected, could increase
      the level of risk in the future. At December 31, 2006, the Company had $751,000
      of special mention loans, consisting of ten loans secured by one- to four-family
      residences and seventeen consumer loans.





The
      following table sets forth the aggregate amount of the Company's classified
      assets, which include nonperforming loans and foreclosed real estate, at the
      dates indicated.





**At
                December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands)**Substandard
                assets
            
            $
            1,038
            
            $
            1,670
            
            $
            1,680
            
            $
            2,046
            
            $
            1,361Doubtful
                assets
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Loss
                assets
            
            
            24
            
            
            58
            
            
            58
            
            
            22
            
            
            51Total
                classified assets
            
            $
            1,062
            
            $
            1,728
            
            $
            1,738
            
            $
            2,068
            
            $
            1,412





*Allowance
      for Loan Losses* .
      It is
      management's policy to provide an allowance and provision for probable losses
      on
      the Company's loan portfolio based on management's evaluation of the prior
      loss
      experience, industry standards, past due loans, economic conditions, the volume
      and type of loans in the Company's portfolio, which includes a significant
      amount of multifamily and commercial loans, substantially all of which are
      purchased and are collateralized by properties located outside of the Company's
      market area, and other factors related to the collectibility of the Company's
      loan portfolio. The Company regularly reviews its loan portfolio, including
      problem loans, to determine whether any loans require classification or the
      establishment of appropriate allowances for losses. Such evaluation, which
      includes a review of all loans of which full collectibility of interest and
      principal may not be reasonably assured, considers, among other matters, the
      estimated fair value of the underlying collateral. During 2006 the Company’s
      total loan portfolio increased $14.7 million, or 3.4%. During the years ended
      December 31, 2006, 2005 and 2004 the Company's provision for loan losses were
      $240,000, $260,000 and $240,000, respectively. The Company's allowance for
      loan
      losses totaled $3.5 million, $3.3 million and $3.2 million at December 31,
      2006,
      2005 and 2004, respectively.





Management
      believes that the allowance for losses on loans is adequate. While management
      uses available information to recognize losses on loans, future additions to
      the
      allowances may be necessary based on changes in economic conditions. In
      addition, various regulatory agencies, as an integral part of their examination
      process, periodically review the Bank's allowances for loan losses. Such
      agencies may require the Bank to recognize additions to the allowances based
      on
      their judgments about information available to them at the time of their
      examination.





*Analysis
      of the Allowance for Loan Losses* .
      The
      following table sets forth the analysis of the allowance for loan losses for
      the
      periods indicated.





**For
                the Year Ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(Dollars
                in thousands)**Total
                loans outstanding
            
            $
            453,335
            
            $
            438,650
            
            $
            418,841
            
            $
            367,396
            
            $
            344,574Average
                loans outstanding
            
            
            447,440
            
            
            424,633
            
            
            389,190
            
            
            358,260
            
            
            337,693Allowance
                balances (at beginning of period)
            
            
            3,326
            
            
            3,235
            
            
            3,165
            
            
            3,118
            
            
            2,883Provisions
                for losses
            
            
            240
            
            
            260
            
            
            240
            
            
            255
            
            
            383Charge-Offs:
              First
                mortgage loans
            
            
            22
            
            
            5
            
            
            66
            
            
            36
            
            
            27Consumer
                loans
            
            
            70
            
            
            182
            
            
            114
            
            
            265
            
            
            135Recoveries:
              First
                mortgage loans
            
            
            -
            
            
            3
            
            
            2
            
            
            -
            
            
            -Consumer
                loans
            
            
            19
            
            
            15
            
            
            8
            
            
            93
            
            
            14Net
                charge-offs
            
            
            73
            
            
            169
            
            
            170
            
            
            208
            
            
            148Allowance
                balance (at end ofperiod)
            
            $
            3,493
            
            $
            3,326
            
            $
            3,235
            
            $
            3,165
            
            $
            3,118Allowance
                for loan losses as a percent of total loans receivable at end of
                period
            
            
            0.77
            %
            
            0.76
            %
            
            0.77
            %
            
            0.86
            %
            
            0.90
            %Net
                loans charged off as a percent of average loans
                outstanding
            
            
            0.02
            
            
            0.04
            
            
            0.04
            
            
            0.06
            
            
            0.04Ratio
                of allowance for loan losses to total nonaccrual loans at end of
                period
            
            
            603.41
            
            
            567.98
            
            
            513.13
            
            
            515.02
            
            
            485.00Ratio
                of allowance for loan losses to total nonaccrual loans and foreclosed
                real
                estate at end of period
            
            
            333.63
            
            
            192.41
            
            
            188.86
            
            
            153.05
            
            
            220.90




*Allocation
      of Allowance for Loan Losses* .
      The
      following table sets forth the allocation for loan losses by loan category
      for
      the periods indicated:




**At
                December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Amount**
            
            **%
                of Loans**
              **In
                Each**
              **Category
                to**
              **Total
                Loans**
            
            **Amount**
            
            **%
                of Loans**
              **In
                Each**
              **Category
                to**
              **Total
                Loans**
            
            **Amoun****t**
            
            **%
                of Loans**
              **In
                Each**
              **Category
                to**
              **Total
                Loans**
            
            **Amount**
            
            **%
                of Loans**
              **In
                Each**
              **Category
                to**
              **Total
                Loans**
            
            **Amount**
            
            **%
                of Loans**
              **In
                Each**
              **Category
                to**
              **Total
                Loans****(Dollars
                in thousands)**Balance
                at end of period applicable to:One-
                to four-family residential mortgage loans
            $
            570
            
            
            48.01
            %
            $
            593
            
            
            49.47
            %
            $
            510
            
            
            45.99
            %
            $
            517
            
            
            47.33
            %
            $
            395
            
            
            43.17
            %Multifamily
                residential mortgage loans
            
            646
            
            
            14.52
            
            
            704
            
            
            16.86
            
            
            731
            
            
            18.73
            
            
            686
            
            
            19.04
            
            
            709
            
            
            20.54Commercial
                mortgage loans
            
            1,443
            
            
            23.04
            
            
            1,201
            
            
            19.76
            
            
            1,240
            
            
            21.94
            
            
            978
            
            
            18.95
            
            
            1,223
            
            
            20.68Consumer
                loans
            
            834
            
            
            14.43
            
            
            828
            
            
            13.91
            
            
            754
            
            
            13.34
            
            
            984
            
            
            14.68
            
            
            791
            
            
            15.61Total
                allowance for loan losses
            $
            3,493
            
            
            100.00
            %
            $
            3,326
            
            
            100.00
            %
            $
            3,235
            
            
            100.00
            %
            $
            3,165
            
            
            100.00
            %
            $
            3,118
            
            
            100.00
            %





**Average
      Balance Sheet**





The
      following table sets forth certain information relating to the Company's average
      balance sheet and reflects the average yield on assets and average cost of
      liabilities for the periods indicated and the average yields earned and rates
      paid. Such yields and costs are derived by dividing income or expense by the
      average balance of assets or liabilities, respectively, for the periods
      presented. For purposes of this table, average balances were computed on a
      monthly basis.








**For
                the Year Ended December 31,****2006**
            
            **2005**
            
            **2004****Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/**
              **Cost**
            
            **Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/**
              **Cost**
            
            **Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/**
              **Cost****(Dollars
                in thousands)****Assets:**Interest-earning
                assets:First mortgage loans(1)
            
            $
            384,965
            
            $
            23,102
            
            
            6.00
            %
            $
            365,647
            
            $
            21,391
            
            
            5.85
            %
            $
            334,676
            
            $
            20,027
            
            
            5.98
            %Consumer
                loans(1)
            
            
            62,474
            
            
            4,420
            
            
            7.07
            
            
            58,986
            
            
            3,933
            
            
            6.67
            
            
            54,513
            
            
            3,757
            
            
            6.89Investment
                securities
            
            
            22,403
            (4)
            
            1,015
            
            
            4.53
            
            
            23,738
            (5)
            
            948
            
            
            3.99
            
            
            27,232
            (6)
            
            973
            
            
            3.57Total
                interest-earning assets
            
            $
            469,842
            
            $
            28,537
            
            
            6.07
            %
            $
            448,371
            
            $
            26,272
            
            
            5.86
            %
            $
            416,421
            
            $
            24,757
            
            
            5.95
            %Noninterest-earning
                assets
            
            
            29,578
            
            
            
            
            
            
            
            
            28,724
            
            
            
            
            
            
            
            
            28,818Total
                assets
            
            $
            499,420
            
            
            
            
            
            
            
            $
            477,095
            
            
            
            
            
            
            
            $
            445,239**Liabilities
                and Equity:**Interest-bearing
                liabilities:NOW
                and money marketsavings
            
            $
            85,008
            
            $
            1,048
            
            
            1.23
            %
            $
            95,781
            
            $
            1,061
            
            
            1.11
            %
            $
            78,865
            
            $
            542
            
            
            0.69
            %Savings
            
            
            26,335
            
            
            87
            
            
            0.33
            
            
            28,710
            
            
            91
            
            
            0.32
            
            
            29,217
            
            
            91
            
            
            0.31Certificates
                of Deposit
            
            
            218,655
            
            
            9,119
            
            
            4.17
            
            
            189,900
            
            
            6,743
            
            
            3.55
            
            
            182,368
            
            
            6,324
            
            
            3.47Borrowed
                funds
            
            
            108,753
            
            
            5,161
            
            
            4.75
            
            
            102,234
            
            
            4,712
            
            
            4.61
            
            
            97,848
            
            
            4,410
            
            
            4.51Total
                interest-bearing liabilities
            
            $
            438,751
            
            $
            15,415
            
            
            3.51
            %
            $
            416,625
            
            $
            12,607
            
            
            3.03
            %
            $
            388,298
            
            $
            11,367
            
            
            2.93
            %Noninterest-bearing
                liabilities
            
            
            17,858
            
            
            
            
            
            
            
            
            17,110
            
            
            
            
            
            
            
            
            15,322Total
                liabilities
            
            $
            456,609
            
            
            
            
            
            
            
            $
            433,735
            
            
            
            
            
            
            
            $
            403,620Equity
            
            
            42,811
            
            
            
            
            
            
            
            
            43,360
            
            
            
            
            
            
            
            
            41,619Total
                liabilities and equity
            
            $
            499,420
            
            
            
            
            
            
            
            $
            477,095
            
            
            
            
            
            
            
            $
            445,239Net
                interest income
            
            
            
            
            $
            13,122
            
            
            
            
            
            
            
            $
            13,665
            
            
            
            
            
            
            
            $
            13,390Net
                interest rate spread(2)
            
            
            
            
            
            
            
            
            2.56
            %
            
            
            
            
            
            
            
            2.83
            %
            
            
            
            
            
            
            
            3.02
            %Net
                interest margin (3)
            
            
            
            
            
            
            
            
            2.79
            
            
            
            
            
            
            
            
            3.05
            
            
            
            
            
            
            
            
            3.22Ratio
                of average interest-earningassets
                to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            107.09
            
            
            
            
            
            
            
            
            107.62
            
            
            
            
            
            
            
            
            107.24


___________________


(1)  Balance
      is net of deferred loan fees, deferred loan costs, loan premiums and loans
      in
      process. Nonaccrual loans are included in the balances.


(2)  Net
      interest rate spread represents the difference between the yield on average
      interest-earning assets and the cost of average interest-bearing
      liabilities.


(3)  Net
      interest margin represents net interest income divided by average total
      interest-earning assets.


(4) Includes
      interest-bearing deposits of $1,238,000, Federal Home Loan Bank stock of
      $5,563,000, and securities available-for-sale of $15,602,000.


(5) Includes
      interest-bearing deposits of $1,150,000, Federal Home Loan Bank stock of
      $5,212,000, and securities available-for-sale of $17,376,000.


(6) Includes
      interest-bearing deposits of $1,735,000, Federal Home Loan Bank stock of
      $4,993,000, and securities available-for-sale of $20,504,000.







**Rate/Volume
      Analysis**





The
      table
      below sets forth certain information regarding changes in interest income and
      interest expense of the Company for the periods indicated. For each category
      of
      interest-earning assets and interest-bearing liabilities, information is
      provided on changes attributable to (i) changes in average volume (changes
      in
      average volume multiplied by old rate); (ii) changes in rates (changes in rate
      multiplied by old average volume); (iii) changes in rate-volume (changes in
      rate
      multiplied by the changes in average volume); and (iv) the net
      change.




**Year
                Ended**
              **December
                31, 2006**
              **Compared
                to**
              **Year
                Ended**
              **December
                31, 2005**
            
            **Year
                Ended**
              **December
                31, 2005**
              **Compared
                to**
              **Year
                Ended**
              **December
                31, 2004****Increase/(Decrease)**
              **Due
                to**
            
            **Increase/(Decrease)**
              **Due
                to****Volume**
            
            **Rate**
            
            **Rate/**
              **Volume**
            
            **Total**
              **Increase**
              **(Decrease)**
            
            **Volume**
            
            **Rate**
            
            **Rate/**
              **Volume**
            
            **Total**
              **Increase**
              **(Decrease)****(In
                thousands)****Interest
                income:**First
                mortgage loans
            
            $
            1,130
            
            $
            552
            
            $
            29
            
            $
            1,711
            
            $
            1,853
            
            $
            (447
            )
            $
            (41
            )
            $
            1,365Consumer
                loans
            
            
            233
            
            
            240
            
            
            14
            
            
            487
            
            
            308
            
            
            (122
            )
            
            (10
            )
            
            176Investment
                securities
            
            
            (59
            )
            
            123
            
            
            3
            
            
            67
            
            
            (125
            )
            
            113
            
            
            (13
            )
            
            (25
            )Total
                interest-earning assets
            
            $
            1,304
            
            $
            915
            
            $
            46
            
            $
            2,265
            
            $
            2,036
            
            $
            (456
            )
            $
            (64
            )
            $
            1,516**Interest
                expense:**NOW
                and money market savings
            
            $
            (119
            )
            $
            120
            
            $
            (14
            )
            $
            (13
            )
            $
            117
            
            $
            331
            
            $
            71
            
            $
            519Savings
            
            
            (8
            )
            
            4
            
            
            -
            
            
            (4
            )
            
            (2
            )
            
            2
            
            
            -
            
            
            -Certificate
                of deposits
            
            
            1,021
            
            
            1,177
            
            
            178
            
            
            2,376
            
            
            261
            
            
            152
            
            
            6
            
            
            419Borrowed
                funds
            
            
            301
            
            
            139
            
            
            9
            
            
            449
            
            
            199
            
            
            100
            
            
            4
            
            
            303Total
                interest-bearing liabilities
            
            
            1,195
            
            
            1,440
            
            
            173
            
            
            2,808
            
            
            575
            
            
            585
            
            
            81
            
            
            1,241Net
                change in net interest income
            
            $
            109
            
            $
            (525
            )
            $
            (127
            )
            $
            (543
            )
            $
            1,461
            
            $
            (1,041
            )
            $
            (145
            )
            $
            275







**Comparison
      of Financial Condition as of December 31, 2006 and December 31,
      2005**





Total
      assets increased $30.3 million, or 6.3%, to $515.5 million at December 31,
      2006
      from $485.2 million at December 31, 2005. The increase in assets was primarily
      due to increases in net loans receivable, cash and cash equivalents, and
      premises and equipment, offset in part by a decrease in securities
      available-for-sale. Asset growth was funded by increases in deposits, consisting
      primarily of brokered certificates of deposit, and FHLB advances.





Total
      loans receivable, net, increased by $18.8 million, or 4.4%, to $449.0 million
      at
      December 31, 2006 from $430.3 million at December 31, 2005, primarily due to
      the
      origination of $46.2 million of first mortgage loans secured by one- to
      four-family residences, the origination of $16.3 million of first mortgage
      loans
      secured by commercial real estate, the origination of $9.7 million of first
      mortgage loans secured by multifamily residences; the purchase of first mortgage
      loans secured by one- to four-family residences, multifamily residences and
      commercial real estate of $40.4 million; and the origination of $28.8 million
      of
      second mortgage loans during the year ended December 31, 2006. These
      originations and purchases were offset in part by payments and prepayments
      of
      $119.2 million and sales of loans of $19.2 million during the year ended
      December 31, 2006. The Company sells substantially all fixed-rate loans with
      maturities of 15 years or more in the secondary mortgage market in order to
      reduce interest rate risk. Cash and cash equivalents increased $11.4 million,
      or
      131.7%, to $20.0 million at December 31, 2006 from $8.6 million at December
      31,
      2005. The increase in cash and cash equivalents was primarily due to large
      commercial loan payoffs in December. Premises and equipment, net, increased
      by
      $1.7 million, or 15.2%, to $12.6 million at December 31, 2006 from $11.0 million
      at December 31, 2005. The increase in premises and equipment was primarily
      due
      to the construction costs associated with the construction of a new branch
      office located at the Jordan Creek Town Center in West Des Moines, Iowa and
      the
      expansion of the Crossroads branch in Fort Dodge, Iowa. Securities
      available-for-sale decreased $904,000, or 5.8%, to $14.6 million at December
      31,
      2006 from $15.5 million at December 31, 2005. The decrease in securities
      available-for-sale consisted primarily of a decrease in investments in
      mortgage-backed securities, offset in part by an increase in investments in
      municipal securities stock and an increase in unrealized gains. Proceeds of
      such
      calls, payments and maturities were used to fund loan growth.





Deposits
      increased $26.0 million, or 7.8%, to $360.3 million at December 31, 2006 from
      $334.3 million at December 31, 2005, primarily reflecting an increase in
      certificates of deposit, offset in part by decreases in money market and savings
      account balances. The increase in certificates of deposit is primarily due
      to
      the utilization of brokered certificates of deposit, which increased $26.4
      million, to $30.4 million at December 31, 2006. Borrowed funds, primarily FHLB
      advances, increased $5.5 million, or 5.3%, to $107.9 million at December 31,
      2006 from $102.4 million at December 31, 2005. The increases in the deposits
      and
      borrowed funds were used to fund loan growth.





Total
      shareholders' equity decreased $2.1 million, or 4.7%, to $42.2 million at
      December 31, 2006 from $44.3 million at December 31, 2005, primarily due to
      stock repurchases and declared dividends, offset in part by earnings, the
      exercise of stock options, and an increase in unrealized gain on securities
      available-for-sale.





**Comparison
      of Financial Condition as of December 31, 2005 and December 31,
      2004**





Total
      assets increased $22.5 million, or 4.9%, to $485.2 million at December 31,
      2005
      from $462.7 million at December 31, 2004. The increase in assets was primarily
      due to increases in net loans receivable, premises and equipment, and cash
      and
      cash equivalents, offset in part by a decrease in securities available-for-sale.
      Asset growth was funded by increases in deposits and FHLB advances.





Total
      loans receivable, net, increased by $23.0 million, or 5.6%, to $430.3 million
      at
      December 31, 2005 from $407.3 million at December 31, 2004, primarily due to
      the
      origination of $74.6 million of first mortgage loans secured by one- to
      four-family residences, originations of $8.5 million of first mortgage loans
      secured by commercial real estate, purchases of first mortgage loans primarily
      secured by one- to four-family residences, multifamily residences and commercial
      real estate of $24.0 million, and originations of $24.8 million of second
      mortgage loans during the year ended December 31, 2005. These originations
      and
      purchases were offset in part by payments and prepayments of $103.0 million
      and
      sales of loans of $19.5 million during the year ended December 31, 2005. The
      Company sells substantially all fixed-rate loans with maturities in excess
      of 15
      years in the secondary mortgage market in order to reduce interest rate risk.
      Premises and equipment, net, increased by $1.1 million, or 10.8%, to $11.0
      million at December 31, 2005 from $9.9 million at December 31, 2004. The
      increase in premises and equipment was primarily due to the initial construction
      costs associated with the construction of a new branch office located at the
      Jordan Creek Town Center in West Des Moines, Iowa and the expansion of the
      Crossroads branch in Fort Dodge, Iowa. Cash and cash equivalents increased
      $721,000, or 9.1%, to $8.6 million at December 31, 2005 from $7.9 million at
      December 31, 2004. Securities available-for-sale decreased $2.6 million, or
      14.4%, to $15.5 million at December 31, 2005 from $18.1 million at December
      31,
      2004, primarily due to calls, payments and maturities of mortgage-backed and
      municipal securities. Proceeds of such calls, payments and maturities were
      used
      to fund loan growth.





Deposits
      increased $18.0 million, or 5.7%, to $334.3 million at December 31, 2005 from
      $316.3 million at December 31, 2004, primarily reflecting increases in checking
      accounts, NOW accounts, and certificates of deposit, offset in part by decreases
      in savings accounts and money market accounts. The increase in deposits is
      due
      primarily to management’s pricing strategies, continued marketing efforts, and
      the utilization of brokered certificates of deposit. In 2005, the Company began
      issuing brokered certificates of deposit. At December 31, 2005, the Company
      had
      $4.0 million of brokered certificates of deposit. Borrowed funds, primarily
      FHLB
      advances, increased $1.5 million, or 1.5%, to $102.4 million at December 31,
      2005 from $101.0 million at December 31, 2004. The increases in the deposits
      and
      borrowed funds were used to fund loan growth.





Total
      shareholders' equity increased $2.8 million, or 6.6%, to $44.3 million at
      December 31, 2005 from $41.5 million at December 31, 2004, primarily due to
      earnings, the exercise of stock options, and a decrease in unrealized loss
      on
      securities available-for-sale, offset in part by stock repurchases and declared
      dividends.





**Comparison
      of Results of Operations for the Years Ended December 31, 2006 and
      2005**





*Net
      Income.* Net
      income decreased by $203,000, or 4.1%, to $4.8 million for the year ended
      December 31, 2006, compared to $5.0 million for the year ended December 31,
      2005. Net income is primarily dependent on net interest income, noninterest
      income, noninterest expense and income tax expense. The decrease in net income
      was primarily due to a decrease in net interest income and an increase in
      noninterest expense, offset in part by an increase in noninterest
      income.





*Net
      Interest Income* .
      Net
      interest income before provision for loan losses decreased by $543,000, or
      4.0%,
      to $13.1 million for the year ended December 31, 2006 from $13.7 million for
      the
      year ended December 31, 2005. The decrease is due to an increase in the average
      balance of interest-bearing liabilities and an increase in the average cost
      of
      funds, offset in part by an increase in the average balance of interest-earning
      assets and an increase in the yield on interest-earning assets. The interest
      rate spread (i.e., the difference in the average yield on assets and average
      cost of liabilities) decreased to 2.56% for the year ended December 31, 2006
      from 2.83% for the year ended December 31, 2005. The decrease in interest rate
      spread reflects the increase in the overall cost of interest-bearing
      liabilities, offset in part by an increase in the yield on interest-earning
      assets. The increase in the cost of interest-bearing liabilities primarily
      reflects the repricing of interest-bearing liabilities at higher current market
      interest rates and the growth of interest-bearing liabilities in higher cost
      certificates of deposit and borrowed funds. Also contributing to the increase
      of
      the cost of funds is the continuing shift of lower cost non-maturing deposits
      into higher cost short-term certificates of deposit.





*Interest
      Income* .
      Interest income increased by $2.3 million, or 8.6%, to $28.5 million for the
      year ended December 31, 2006, compared to $26.3 million for the year ended
      December 31, 2005. The increase in interest income was due to increases in
      the
      average balance of interest-earning assets and the average yield on
      interest-earning assets. The average balance of interest-earning assets
      increased $21.5 million, or 4.8%, to $469.8 million for the year ended December
      31, 2006, from $448.4 million for 2005. The increase in the average balance
      of
      interest-earning assets primarily reflects increases in the average balances
      of
      first mortgage loans and consumer loans. The increases in first mortgage loans
      and consumer loans were primarily derived from the origination of $46.2 million
      of first mortgage loans secured by one- to four-family residences, the
      origination of $16.3 million of first mortgage loans secured by commercial
      real
      estate, the origination of $9.7 million of first mortgage loans secured by
      multifamily residences; the purchase of first mortgage loans secured by one-
      to
      four-family residences, multifamily residences, and commercial real estate
      of
      $40.4 million; and the origination of $28.8 million of second mortgage loans,
      which originations and purchases were offset in part by payments and prepayments
      of $119.2 million and sales of loans of $19.2 million during the year ended
      December 31, 2006. This reflects the Company's continued emphasis on residential
      lending. See “-Business Strategy.” The average yield on interest-earning assets
      increased to 6.07% for the year ended December 31, 2006, from 5.86% for the
      year
      ended December 31, 2005. The increase in the average yield on interest-earning
      assets was primarily due to loan growth at rates generally higher than portfolio
      rates and the repricing of adjustable rate loans within the portfolio at
      generally higher current market interest rates.





*Interest
      Expense* .
      Interest expense increased by $2.8 million, or 22.3%, to $15.4 million for
      the
      year ended December 31, 2006, compared to $12.6 million for the year ended
      December 31, 2005. The increase in interest expense was due to an increase
      in
      the average cost of funds and an increase in the average balance of
      interest-bearing liabilities. The average cost of funds increased to 3.51%
      for
      the year ended December 31, 2006 from 3.03% for the year ended December 31,
      2005, due to an increase in the current market interest rates, a shift of core
      deposits into higher cost certificates of deposits, and an increase in
      certificates of deposit and borrowed funds. The average balance of
      interest-bearing liabilities increased $22.1 million, or 5.3%, to $438.8 million
      for the year ended December 31, 2006 from $416.6 million for 2005. The increase
      in the average balance of interest-bearing liabilities primarily reflects an
      increase in the average balances of certificates of deposit and borrowed funds,
      offset in part by a decrease in the average balance of money market and savings
      accounts. The increase in certificates of deposit is primarily due to the
      Company’s utilization of brokered certificates of deposit, which increased $26.4
      million, to $30.4 million at December 31, 2006. Borrowed funds, primarily FHLB
      advances, increased $5.5 million, or 5.3%, to $107.9 million at December 31,
      2006 from $102.4 million at December 31, 2005. The increase in interest-bearing
      liabilities was used to fund asset growth.





*Provision
      for Loan Losses* .
      The
      Company's provision for loan losses was $240,000 and $260,000 for the years
      ended December 31, 2006 and December 31, 2005, respectively. The Company
      establishes provisions for loan losses, which are charged to operations, in
      order to maintain the allowance for loan losses at a level which is deemed
      to be
      appropriate based upon an assessment of prior loss experience, industry
      standards, past due loans, economic conditions, the volume and type of loans
      in
      the Company's portfolio, which includes a significant amount of multifamily
      and
      commercial real estate loans, substantially all of which are purchased and
      are
      secured by properties located out of state, and other factors related to the
      collectibility of the Company's loan portfolio. During 2006, the Company’s total
      loan portfolio increased $14.7 million, or 3.4%. This increase primarily
      consisted of increases in commercial real estate and consumer loans, which
      carries a higher level of risk than other loans in the portfolio. The Company
      purchased $40.4 million of loans in 2006, compared to $24.0 million of loans
      in
      2005. The properties securing the loans purchased are primarily out of state
      and
      constitute a higher rate of risk than originated loans due to the size,
      locations and type of collateral securing such loans. The Company’s out of state
      loans decreased by $7.8 million, or 5.4% during 2006. The economic conditions
      in
      the Bank’s primary market areas remain generally stable. The net charge-offs
      were $73,000 for the year ended December 31, 2006 and $170,000 for the year
      ended December 31, 2005. The charge-offs were primarily due to losses on
      automobile and second mortgage loans. The resulting allowance for loan loss
      was
      $3.5 million and $3.3 million at December 31, 2006 and December 31, 2005,
      respectively.





The
      allowance for loan losses as a percentage of total loans receivable increased
      to
      0.77% at December 31, 2006 from 0.76% at December 31, 2005. The level of
      nonperforming loans was $579,000 at December 31, 2006 and $585,000 at December
      31, 2005.





Management
      believes that the allowance for loan losses is adequate as of December 31,
      2006.
      While management estimates loan losses using the best available information,
      such as independent appraisals for significant collateral properties, no
      assurance can be made that future adjustments to the allowance will not be
      necessary based on changes in economic and real estate market conditions,
      further information obtained regarding problem loans, identification of
      additional problem loans, and other factors, both within and outside of
      management's control.





*Noninterest
      Income.* Total
      noninterest income increased by $563,000, or 8.6%, to $7.1 million for the
      year
      ended December 31, 2006 from $6.5 million for the year ended December 31, 2005.
      The increase in noninterest income was primarily due to an impairment of
      securities available-for-sale recognized during the year ended December 31,
      2005. During 2005, the Company recorded an other-than-temporary impairment
      of
      $679,500 related to three Freddie Mac adjustable rate, perpetual preferred
      stocks with a face value of $3.5 million, due to the facts and circumstances
      surrounding these securities at the time, including the duration and amount
      of
      the unrealized loss in the securities, as well as the prospect for a change
      in
      market value within a reasonable period of time. These perpetual preferred
      stock
      issues are investment grade securities that are held in the Company’s
      available-for-sale securities portfolio. The increase in 2006 was offset in
      part
      by decreases in fees and service charges, including loan prepayment fees,
      abstract fees, and mortgage banking income. Fees and service charges decreased
      $102,000 primarily due to a decrease in loan prepayment fees, offset in part
      by
      an increase in fees associated with checking accounts, including overdraft
      fees.
      During the year ended December 31, 2006, the Company recorded $569,000 in loan
      prepayment fees, compared to $1.0 million for the year ended December 31, 2005.
      Abstract fees decreased $66,000 due in part to the sale of one of the Company’s
      three abstract offices at the end of the second quarter of 2006. Mortgage
      banking income decreased $43,000 due to a decline in loans originated for the
      secondary market.





*Noninterest
      Expense.* Total
      noninterest expense increased by $680,000, or 5.5%, to $13.1 million for the
      year ended December 31, 2006 from $12.4 million for the year ended December
      31,
      2005. The increase is primarily due to increases in salaries and employee
      benefits and data processing expenses. Salaries and employee benefits increased
      $563,000 primarily due to normal salary increases, additions to staff, an
      increase in the Company’s contribution to its defined contribution retirement
      plan, and an increase in option expense due to the Company’s adoption of FAS
      123(R) in 2006. Data processing expense increased $72,000 primarily due to
      outsourcing of certain data processing support functions during the year. The
      Company's efficiency ratio for the years ended December 31, 2006 and 2005 was
      64.84% and 61.54%, respectively. The Company's ratio of noninterest expense
      to
      average assets for the years ended December 31, 2006 and 2005 was 2.63% and
      2.61%, respectively.





*Income
      Taxes.* The
      Company’s provision for income taxes was $2.1 million and $2.5 million for the
      years ended December 31, 2006 and 2005, respectively. The decrease in the
      provision for income taxes was primarily due to the lower 2006 income before
      income taxes and the limited deductibility of the other-than-temporary
      impairment of securities available-for-sale in 2005.





**Comparison
      of Results of Operations for the Years Ended December 31, 2005 and
      2004**





*Net
      Income.* Net
      income decreased by $384,000, or 7.1%, to $5.0 million for the year ended
      December 31, 2005 compared to $5.4 million for the year ended December 31,
      2004.
      Net income is primarily dependent on net interest income, noninterest income,
      noninterest expense and income tax expense. The decrease in net income was
      primarily due to an increase in noninterest expense, offset in part by increases
      in net interest income and noninterest income.





*Net
      Interest Income* .
      Net
      interest income before provision for loan losses increased by $275,000, or
      2.1%,
      to $13.7 million for the year ended December 31, 2005 from $13.4 million for
      the
      year ended December 31, 2004. The increase is primarily due to an increase
      in
      the average balance of interest-earning assets, offset in part by a decrease
      in
      the yield on interest-earning assets, an increase in the average balance of
      interest-bearing liabilities, and an increase in the average cost of funds.
      The
      interest rate spread (i.e., the difference in the average yield on assets and
      average cost of liabilities) decreased to 2.83% for the year ended December
      31,
      2005 from 3.02% for the year ended December 31, 2004. The decrease in interest
      rate spread reflects the general decrease in the yield on interest-earning
      assets and the increase in the overall cost of interest-bearing liabilities.
      The
      decrease in the yield on interest-earning assets primarily reflects loan growth
      at rates generally lower than portfolio rates. The increase in the cost of
      interest-bearing liabilities reflects repricing of interest-bearing liabilities
      at generally higher current market interest rates.





*Interest
      Income* .
      Interest income increased by $1.5 million, or 6.1%, to $26.3 million for the
      year ended December 31, 2005 compared to $24.8 million for the year ended
      December 31, 2004. The increase in interest income was primarily due to an
      increase in the average balance of interest-earning assets, offset in part
      by a
      decrease in the average yield on interest-earning assets. The average balance
      of
      interest-earning assets increased $32.0 million, or 7.7%, to $448.4 million
      for
      the year ended December 31, 2005, from $416.4 million for 2004. The increase
      in
      the average balances of interest-earning assets primarily reflects increases
      in
      the average balances of first mortgage loans and consumer loans. The increases
      in first mortgage loans were primarily derived from originations of $74.6
      million of first mortgage loans secured by one- to four-family residences,
      originations of $8.5 million of first mortgage loans secured by commercial
      real
      estate, purchases of first mortgage loans secured by one- to four-family
      residences, multifamily residences and commercial real estate of $24.0 million,
      and originations of $24.8 million of second mortgage loans, which originations
      and purchases were offset in part by payments and prepayments of $103.0 million
      and sales of loans of $19.5 million during the year ended December 31, 2005.
      This reflects the Company's continued emphasis on residential lending. See
      “-Business Strategy.” The average yield on interest-earning assets decreased to
      5.86% for the year ended December 31, 2005 from 5.95% for the year ended
      December 31, 2004, primarily due to loan growth at rates generally lower than
      portfolio rates.





*Interest
      Expense* .
      Interest expense increased by $1.2 million, or 10.9%, to $12.6 million for
      the
      year ended December 31, 2005, compared to $11.4 million for the year ended
      December 31, 2004. The increase in interest expense was primarily due to
      increases in the average cost of funds and in the average balance of
      interest-bearing liabilities. The average cost of funds increased to 3.03%
      for
      the year ended December 31, 2005 from 2.93% for the year ended December 31,
      2004, primarily due to a general increase in market interest rates. The average
      balance of interest-bearing liabilities increased $28.3 million, or 7.3%, to
      $416.6 million for the year ended December 31, 2005 from $388.3 million for
      2004. The increase in the average balance of interest-bearing liabilities
      primarily reflects an increase in the average balances of checking and money
      market accounts, certificates of deposit and borrowed funds, offset in part
      by a
      decrease in the average balance of savings accounts. The increase in average
      interest-bearing deposits was primarily due to the Company’s pricing strategies
      and continued marketing efforts. The increase in interest-bearing liabilities
      was used to fund asset growth.





*Provision
      for Loan Losses* .
      The
      Company's provision for loan losses was $260,000 and $240,000 for the years
      ended December 31, 2005 and December 31, 2004, respectively. The Company
      establishes provisions for loan losses, which are charged to operations, in
      order to maintain the allowance for loan losses at a level which is deemed
      to be
      appropriate based upon an assessment of prior loss experience, industry
      standards, past due loans, economic conditions, the volume and type of loans
      in
      the Company's portfolio, which includes a significant amount of multifamily
      and
      commercial real estate loans, substantially all of which are purchased and
      are
      secured by properties located out of state, and other factors related to the
      collectibility of the Company's loan portfolio. During 2005, the Company’s total
      loan portfolio increased $19.8 million, or 4.7%. This increase primarily
      consisted of increases in the one- to four-family first mortgage real estate
      loans, which carries a lower level of risk than other loans in the portfolio.
      The Company purchased $24.0 million of loans in 2005, compared to $52.7 million
      of loans in 2004. The properties securing the loans purchased are primarily
      out
      of state and constitute a higher rate of risk than originated loans due to
      the
      size, locations and type of collateral securing such loans. The Company’s out of
      state loans decreased by $15.0 million, or 9.5% during 2005. The economic
      conditions in the Bank’s primary market areas remain generally stable. The net
      charge-offs were $170,000 for both of the years ended December 31, 2005 and
      2004. The charge-offs were primarily due to losses on automobile and second
      mortgage loans. The resulting allowance for loan loss was $3.3 million and
      $3.2
      million at December 31, 2005 and December 31, 2004, respectively.





The
      allowance for loan losses as a percentage of total loans receivable decreased
      to
      0.76% at December 31, 2005 from 0.77% at December 31, 2004. The level of
      nonperforming loans was $585,000 at December 31, 2005 and $634,000 at December
      31, 2004.





Management
      believes that the allowance for loan losses is adequate as of December 31,
      2005.
      While management estimates loan losses using the best available information,
      such as independent appraisals for significant collateral properties, no
      assurance can be made that future adjustments to the allowance will not be
      necessary based on changes in economic and real estate market conditions,
      further information obtained regarding problem loans, identification of
      additional problem loans, and other factors, both within and outside of
      management's control.





*Noninterest
      Income.* Total
      noninterest income increased by $489,000, or 8.1%, to $6.5 million for the
      year
      ended December 31, 2005 from $6.0 million for the year ended December 31, 2004.
      The increase is primarily due to increases in fees and service charges and
      mortgage banking income (gain on sale of loans), offset in part by a provision
      for impairment on securities available-for-sale and decreases in abstract fees
      and other income. Fees and service charges increased $1.36 million due primarily
      to an increase in loan prepayment fees of $644,000 and fees associated with
      checking accounts, including overdraft fees, of $328,000. Mortgage banking
      income increased $34,000 due in part to an increase in loan originations of
      loans held for sale. During 2005, the Company recognized an other-than-temporary
      impairment of $680,000 on three Freddie Mac adjustable rate, perpetual preferred
      stocks that had declined in value, reducing noninterest income for the year.
      The
      securities are investment grade securities that are held in the Company’s
      available-for-sale portfolio. The Company recognized an other-than-temporary
      impairment on the securities based on the facts and circumstances surrounding
      each of the securities at the time, including the duration and amount of the
      unrealized loss, as well as the prospect for the recovery of market value within
      a reasonable period of time. Abstract fees decreased $171,000 due to decreased
      sales volume as a result of a general decrease in real estate activity, such
      as
      loan originations, in Webster, Boone and Jasper Counties. Other income, which
      primarily includes insurance, annuity, and mutual fund sales, rent income,
      and
      income associated with foreclosed real estate decreased $54,000 due in part
      to
      decreases in annuity sales.





*Noninterest
      Expense.* Total
      noninterest expense increased by $1.1 million, or 9.9%, to $12.4 million for
      the
      year ended December 31, 2005 from $11.3 million for the year ended December
      31,
      2004. The increase is primarily due to an increase in salaries and employee
      benefits and other expenses. Salaries and employee benefits increased $467,000
      primarily due to normal salary increases, additions to staff, and an increase
      in
      the Company’s contribution to its defined benefit retirement plan. Other
      expenses increased $603,000 due primarily to the write-down of other real estate
      owned and an increase in professional fees. The Company's efficiency ratio
      for
      the years ended December 31, 2005 and 2004 was 61.54% and 58.18%, respectively.
      The Company's ratio of noninterest expense to average assets for the years
      ended
      December 31, 2005 and 2004 was 2.61% and 2.54%, respectively.





*Income
      Taxes.* The
      Company’s provision for income taxes was $2.5 million for both of the years
      ended December 31, 2005 and 2004. The provision for income taxes remained steady
      primarily due to the decrease in income before income taxes, offset in part
      by
      the limited deductibility of the other-than-temporary impairment of securities
      available-for-sale.





**Impact
      of Inflation and Changing Prices**





The
      consolidated financial statements of the Company and notes thereto, presented
      elsewhere herein, have been prepared in accordance with accounting principles
      generally accepted in the United States of America, which require the
      measurement of financial position and operating results in terms of historical
      dollars without considering the change in the relative purchasing power of
      money
      over time and due to inflation. The impact of inflation is reflected in the
      increased cost of the Company's operations. Unlike most industrial companies,
      nearly all the assets and liabilities are monetary. As a result, interest rates
      have a greater impact on the Company's performance than do the effects of
      general levels of inflation. Interest rates do not necessarily move in the
      same
      direction or to the same extent as the price of goods and services.





**Off-Balance
      Sheet Arrangements**





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





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





For
      additional information regarding off-balance sheet arrangements, see Note 14
      to
      the Consolidated Financial Statements.





**Contractual
      Obligations**





**Payments
                due by period****Total**
            
            **Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than**
              **5
                years****(In
                thousands)**Borrowings
                (1)
            
            $
            107,908
            
            $
            26,500
            
            $
            44,500
            
            $
            36,500
            
            $
            408Loan
                commitments
            
            
            3,750
            
            
            3,750
            
            
            -
            
            
            -
            
            
            -Available
                home equity andunadvanced
                lines of credit
            
            
            6,600
            
            
            6,600
            
            
            -
            
            
            -
            
            
            -**Total**
            
            $
            118,258
            
            $
            36,850
            
            $
            44,500
            
            $
            36,500
            
            $
            408




(1)
      Callable advances are included in the category in which the advances
      mature







NORTH
      CENTRAL BANCSHARES, INC.


AND
      SUBSIDIARIES








INDEX
      TO
      FINANCIAL STATEMENTS








________________________________________________________





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


________________________________________________________







FINANCIAL
      STATEMENTS


Consolidated
      statements of financial condition


Consolidated
      statements of income


Consolidated
      statements of stockholders' equity


Consolidated
      statements of cash flows


Notes
      to
      consolidated financial statements


______________________________


















**Report
      of Independent Registered Public Accounting Firm**








To
      the
      Board of Directors


North
      Central Bancshares, Inc.


Fort
      Dodge, Iowa





We
      have
      audited the consolidated statements of financial condition of North Central
      Bancshares, Inc. and subsidiaries as of December 31, 2006 and 2005, and the
      related consolidated statements of income, stockholders’ equity and cash flows
      for each of the three years in the period ended December 31, 2006. These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of North Central Bancshares,
      Inc. and subsidiaries as of December 31, 2006 and 2005 and the results of their
      operations and their cash flows for each of the three years in the period ended
      December 31, 2006, in conformity with U.S. generally accepted accounting
      principles.





As
      described in Note 1 to the consolidated financial statements, the Company
      changed its method of accounting for stock-based compensation in
      2006.








Des
      Moines, Iowa


March
      12,
      2007





















































**North
      Central Bancshares, Inc. and Subsidiaries**




**NOTES
              TO CONSOLIDATED FINANCIAL
              STATEMENTS**


**Note
      1.**  **Significant
      Accounting Policies**




Organization,
      nature of business and basis of presentation :
      North
      Central Bancshares, Inc. (the Company), an Iowa corporation, is a unitary
      savings and loan holding company that owns 100% of the outstanding stock of
      First Federal Savings Bank of Iowa (the Bank), which is a federally chartered
      stock savings bank that conducts its operations from its main office located
      in
      Fort Dodge, Iowa, and ten branch offices located in Fort Dodge, Nevada, Ames,
      Perry, Ankeny, Clive, West Des Moines, Burlington and Mt. Pleasant,
      Iowa.





Principles
      of consolidation :
      The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiaries,
      First Federal Investment Services, Inc. (which sells insurance, annuity products
      and mutual funds), First Iowa Title Services, Inc. (which provides real estate
      abstracting services) and Northridge Apartments Limited Partnership and
      Northridge Apartments Limited Partnership II (which own multifamily apartment
      buildings). All significant intercompany balances and transactions have been
      eliminated in consolidation.





Accounting
      estimates and assumptions :
      The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates. Material estimates that are
      particularly susceptible to significant change in the near term relate to the
      determination of the allowance for loan losses, valuation of goodwill,
      unrealized gains and losses on securities available-for-sale and fair value
      of
      financial instruments.





Revenue
      recognition :
      Interest income and expense is recognized on the accrual method based on the
      respective outstanding balances. Other revenue is recognized at the time the
      service is rendered.





Cash
      and cash equivalents and cash flows :
      For
      purposes of the consolidated statements of cash flows, cash and cash equivalents
      includes cash and balances due from banks. Cash flows from loans, deposits
      and
      short-term borrowings are reported net.





Securities
      available-for-sale :
      Securities classified as available-for-sale are those debt and equity securities
      the Company intends to hold for an indefinite period of time, but not
      necessarily to maturity. Any decision to sell a security classified as
      available-for-sale would be based on various factors, including significant
      movements in interest rates, changes in the maturity mix of the Company’s assets
      and liabilities, liquidity needs, regulatory capital considerations and other
      similar factors.





Securities
      available-for-sale are reported at fair value with unrealized gains or losses
      reported as a separate component of other comprehensive income (loss), net
      of
      the related deferred tax effect. The amortization of premiums and accretion
      of
      discounts, computed by the interest method over their contractual lives, are
      recognized in interest income.





Realized
      gains or losses, determined on the basis of the amortized cost of specific
      securities sold, are included in earnings.




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





Loans
      held for sale :
      Residential real estate loans, which are originated and intended for resale
      in
      the secondary market in the foreseeable future, are classified as held-for-sale.
      These loans are carried at the lower of cost or estimated market value in the
      aggregate. As assets specifically acquired for resale, the origination of,
      disposition of, and gain/loss on these loans are classified as operating
      activities in the statement of cash flows.





Loans
      receivable :
      Loans
      that management has the intent and ability to hold for the foreseeable future,
      or until pay-off or maturity occurs, are classified as held for investment.
      These loans are stated at the amount of unpaid principal adjusted for
      charge-offs, the allowance for estimated losses on loans, any net deferred
      fees
      and/or costs on originated loans and net unearned premiums (discounts). Interest
      is credited to earnings as earned based on the principal amount outstanding.
      Deferred bank loan origination fees and/or costs are amortized as an adjustment
      of the related loan’s yield. As assets held for and used in the production of
      services, the origination and collection of these loans are classified as
      investing activities in the statement of cash flows.





The
      allowance for loan losses is increased by provisions charged to income and
      reduced by charge-offs, net of recoveries. Management’s periodic evaluation of
      the adequacy of the allowance is based on the Bank’s past loan loss experience,
      known and inherent risks in the portfolio, adverse situations that may affect
      the borrower’s ability to repay, estimated value of any underlying collateral
      and current economic conditions. While management uses the best information
      available to make its evaluation, future adjustments to the allowance may be
      necessary if there are significant changes in economic conditions.





Uncollectible
      interest on loans that are contractually past due is charged off or an allowance
      is established based on management’s periodic evaluation, generally when loans
      become 90 days past due. The allowance is established by a charge to interest
      income equal to all interest previously accrued, and income is subsequently
      recognized only to the extent that cash payments are received until, in
      management’s judgment, the borrower’s ability to make periodic interest and
      principal payments is no longer in doubt, in which case the loan is returned
      to
      accrual status.





A
      loan is
      considered impaired when, based on current information and events, it is
      probable that a creditor will be unable to collect the scheduled payments of
      principal or interest when due according to the contractual terms of the loan
      agreement. Factors considered by management in determining impairment include
      payment status, collateral value and the probability of collecting scheduled
      principal and interest payments when due. Impairment is measured by either
      the
      present value of expected future cash flows discounted at the loan’s effective
      interest rate, the loan’s obtainable market price or the fair value of the
      collateral if the loan is collateral-dependent.





Loan
      fees
      and certain direct loan origination costs are deferred, and the net fee or
      cost
      is recognized as an adjustment to interest income using the interest method
      over
      the contractual life of the loans, adjusted for estimated prepayments based
      on
      the Bank’s historical prepayment experience.





Premiums
      (discounts) on first mortgage loans purchased are amortized to income using
      the
      interest method over the remaining period to contractual maturity, adjusted
      for
      anticipated prepayments.





Transfers
      of financial assets :
      Transfers of financial assets are accounted for as sales when control over
      the
      assets has been surrendered. Control over transferred assets is deemed to be
      surrendered when (1) the assets have been isolated from the Company, (2) the
      transferee obtains the right (free of conditions that constrain it from taking
      advantage of that right) to pledge or exchange the transferred assets and (3)
      the Company does not maintain effective control over the transferred assets
      through an agreement to repurchase them before their maturity.





Foreclosed
      real estate :
      Real
      estate properties acquired through loan foreclosure are initially recorded
      at
      the lower of cost or fair value less selling costs at the date of foreclosure.
      Costs relating to development and improvement of property are capitalized,
      whereas costs relating to the holding of property are expensed.





Valuations
      are periodically performed by management, and an allowance for losses is
      established by a charge to income if the carrying value of a property exceeds
      its fair value less estimated selling costs.





Premises
      and equipment :
      Premises and equipment are stated at cost, net of accumulated depreciation.
      Depreciation is computed primarily by straight-line and double-declining balance
      methods over the following estimated useful lives:











Rental
      real estate :
      Rental
      real estate is comprised of two low-income housing, multifamily apartment
      buildings and equipment which is stated at cost, net of accumulated depreciation
      of approximately $1,256,000 and $1,044,000 for the years ended December 31,
      2006
      and 2005, respectively. Depreciation is computed primarily by the straight-line
      and double-declining balance methods over the estimated useful lives of the
      assets. Useful lives are the same as used for premises and
      equipment.





Title
      plant :
      Title
      plant is carried at cost and, in accordance with Statement No. 61, is not
      depreciated. Costs incurred to maintain and update the title plant are expensed
      as incurred. During the year ended December 31, 2006, title plant was reduced
      by
      $253,552 due to the sale of a branch of First Iowa Title Services.





Goodwill :
      Under
      the provisions of SFAS 142, goodwill is not amortized but is subject to an
      annual impairment test, or more often if conditions indicate a possible
      impairment. The Company has completed its annual goodwill impairment test and
      has determined that there has been no impairment of goodwill. During the year
      ended December 31, 2006, goodwill was reduced by $23,840 due to the sale of
      a
      branch of First Iowa Title Services.





Income
      taxes :
      Deferred taxes are provided on a liability method whereby deferred tax assets
      are recognized for deductible temporary differences and operating loss and
      tax
      credit carryforwards, and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between the
      reported amounts of assets and liabilities and their income tax basis. Income
      taxes are allocated to the Company and its subsidiaries based on each entity’s
      income tax liability as if it filed a separate return.





Deferred
      tax assets are reduced by a valuation allowance when, in the opinion of
      management, it is more likely than not that some portion or all of the deferred
      tax assets will not be realized. Deferred tax assets and liabilities are
      adjusted for the effects of changes in tax laws and rates on the date of
      enactment.




Comprehensive
      income :
      Accounting principles generally require that recognized revenue, expenses,
      gains
      and losses be included in net income. Although certain changes in assets and
      liabilities, such as unrealized gains and losses on available-for-sale
      securities, are reported as a separate component of the equity section of the
      balance sheet, such items, along with net income, are components of
      comprehensive income or loss. Gains and losses on available-for-sale securities
      are reclassified to net income as the gains or losses are realized upon sale
      of
      the securities. Other-than-temporary impairment charges are reclassified to
      net
      income at the time of the charge.





Earnings
      per share :
      Basic
      earnings per common share represents income available to common stockholders
      divided by the weighted average number of common shares outstanding during
      the
      periods presented. The earnings per common share amounts - assuming dilution
      were computed using the weighted average number of shares outstanding during
      the
      periods presented, adjusted for the effect of dilutive potential common shares
      outstanding, which consists of stock options granted. In accordance with
      Statement of Position 93-6, shares owned by the ESOP that have not been
      committed to be released are not considered to be outstanding for the purpose
      of
      computing earnings per share.





Operating
      segments :
      The
      Company uses the “management approach” for reporting information about segments
      in annual and interim financial statements. The management approach is based
      on
      the way the chief operating decision-maker organizes segments within a company
      for making operating decisions and assessing performance. Reportable segments
      are based on products and services, geography, legal structure, management
      structure and any other manner in which management disaggregates a company.
      Based on the “management approach” model, the Company has determined that its
      business is comprised of two reporting segments. The Company operates primarily
      in the banking industry, which accounts for the majority of its revenues,
      operating income and assets, with the remaining operations consisting of real
      estate abstracting services, insurance and investment services, and ownership
      of
      low-income housing tax credit apartment complexes. The primary source of income
      for the Company is interest from the origination or purchase of residential
      real
      estate, commercial real estate, and consumer loans. The Company accepts deposits
      from customers in the normal course of business primarily in north central,
      central and southeastern Iowa.





Stock
      compensation :
      Effective January 1, 2006, the Company adopted SFAS No. 123(R), *Shared-Based
      Payments* ,
      using
      the modified prospective transition method. Prior to that date the Company
      accounted for stock option awards under APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      In
      accordance with SFAS No. 123(R), compensation expense for stock-based awards
      is
      recorded over the vesting period at the fair value of the award at the time
      of
      grant. The recording of such compensation began on January 1, 2006 for shares
      not yet vested as of that date and for all new grants subsequent to that date.
      Prior years’ results have not been restated. The exercise price of options
      granted under the Company’s incentive plans is equal to the fair market value of
      the underlying stock at the grant date. The Company assumes no projected
      forfeitures on its stock-based compensation, since actual historical forfeiture
      rates on its stock-based incentive awards have been negligible.





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




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





In
      June
      2006, the FASB issued FASB Interpretation No. 48 (FIN 48), *Accounting
      for Uncertainty in Income Taxes* .
      This
      interpretation applies to all tax positions accounted for in accordance with
      SFAS No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      clarifies the application of SFAS No. 109 by defining the criteria that an
      individual tax position must meet in order for the position to be recognized
      within the financial statements and provides guidance
      on measurement, de-recognition, classification, interest and penalties,
      accounting in interim periods, disclosure and transition for tax positions.
      This
      interpretation is effective for fiscal years beginning after December 15, 2006,
      with earlier adoption permitted. The Company is currently evaluating
      the impact
      that the adoption of this interpretation will have on its financial position,
      results of operation and cash flows.





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





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




Fair
      value of financial instruments :
      The
      fair value of a financial instrument is the current amount that would be
      exchanged between willing parties, other than in a forced liquidation. Fair
      value is best determined based upon quoted market prices. In cases where quoted
      market prices are not available, fair values are based on estimates using
      present value or other valuation techniques. Those techniques are significantly
      affected by the assumptions used, including the discount rate and estimates
      of
      future cash flows. In that regard, the derived fair value estimates cannot
      be
      substantiated by comparison to independent markets and, in many cases, could
      not
      be realized in immediate settlement of the instruments. FASB Statement No.
      107
      excludes certain financial instruments and all nonfinancial instruments from
      its
      disclosure requirements. Accordingly, the aggregate fair value amounts presented
      do not represent the underlying value of the Company.





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





The
      following methods and assumptions were used by the Company in estimating the
      fair value of its financial instruments:





Cash
      and due from banks :
      The
      carrying amount of cash and due from banks represents the fair
      value.





Securities :
      Fair
      values for all securities are based on quoted market prices, where available.
      If
      quoted market prices are not available, fair values are based on quoted market
      prices of comparable instruments.





Federal
      Home Loan Bank stock :
      The
      fair value of this untraded stock is estimated at its carrying value because
      the
      Company is able to redeem the stock with the Federal Home Loan Bank at par
      value.





Loans
      held for sale :
      Fair
      values are based on quoted market prices of similar loans sold on the secondary
      market.





Loans :
      For
      variable-rate loans that reprice frequently and have experienced no significant
      change in credit risk, fair values are based on carrying values. Fair values
      for
      all other loans are estimated based on discounted cash flows, using interest
      rates currently being offered for loans with similar terms to borrowers with
      similar credit quality.





Deposits :
      Fair
      values disclosed for demand, NOW, savings and money market savings deposits
      equal their carrying amounts, which represent the amount payable on demand.
      Fair
      values for certificates of deposit are estimated using a discounted cash flow
      calculation that applies interest rates currently being offered on certificates
      to a schedule of aggregate expected monthly maturities on time
      deposits.




Borrowed
      funds :
      The
      fair value of borrowed funds is estimated based on discounted cash flows using
      currently available borrowing rates.





Accrued
      interest receivable and payable :
      The
      fair values of both accrued interest receivable and payable are their carrying
      amounts.





Commitments
      to extend credit :
      The
      fair values of commitments to extend credit are based on fees currently charged
      to enter into similar agreements, taking into account the remaining terms of
      the
      agreements and creditworthiness of the counterparties. At December 31, 2006 and
      2005, the carrying amount and fair value of the commitments were not
      significant.





**Note
      2.**  **Restrictions
      on Cash and Due from Banks**




The
      Bank
      is required to maintain reserve balances in cash or on deposit with the Federal
      Reserve Bank, based on a percentage of deposits. Those reserve balances totaled
      approximately $2,055,000 and $2,220,000 at December 31, 2006 and 2005,
      respectively.





**Note
      3.** **Securities**


Securities
      available-for-sale as of December 31, 2006 were as follows:











Securities
      available-for-sale as of December 31, 2005 were as follows:








Securities
      available-for-sale with carrying amounts of approximately $126,000 and $205,000
      at December 31, 2006 and 2005, respectively, were pledged on deposit accounts.
      Securities available-for-sale with carrying amounts of approximately $2,372,000
      and $3,452,000 at December 31, 2006 and 2005, respectively, were pledged as
      collateral on Federal Home Loan Bank advances.




Gross
      unrealized losses and gross estimated fair value, aggregated by investment
      category and length of time that individual securities have been in a continuous
      unrealized loss position, as of December 31, 2006 and 2005, are summarized
      as
      follows:









For
      all
      of the above investment securities, the unrealized losses are generally due
      to
      changes in interest rates and, as such, are considered to be temporary by the
      Company. In addition, the Company has the intent and ability to hold these
      investment securities for a period of time sufficient to allow for an
      anticipated recovery. During 2005, the Company determined that the unrealized
      losses related to the FHLMC preferred stock issues were other-than-temporary.
      Accordingly, an impairment loss of $679,500 was recorded and the cost basis
      of
      the securities was reduced by the same amount.




The
      amortized cost and fair value of debt securities as of December 31, 2006 by
      contractual maturity are shown below. Certain securities have call features,
      which allow the issuer to call the security prior to maturity. Maturities may
      differ from contractual maturities in mortgage-backed securities because the
      mortgages underlying the securities may be called or repaid without any
      penalties. Therefore, these securities are not included in the maturity
      categories in the following maturity summary:








There
      were no securities sold during 2006, 2005 or 2004 except for FHLB
      stock.





Included
      in the interest income on securities and cash deposits was dividend income
      of
      $537,166, $434,251 and $371,519 for the years ended December 31, 2006, 2005
      and
      2004, respectively.





The
      components of other comprehensive income (loss) - net unrealized gains (losses)
      on available-for-sale securities for the years ended December 31, 2006, 2005
      and
      2004 were as follows:








**Note
      4.**  **Loans
      Receivable**




Loans
      receivable at December 31, 2006 and 2005 are summarized as follows:





Activity
      in the allowance for loan losses is summarized as follows for the years ended
      December 31:







The
      following is a summary of information pertaining to impaired loans:





The
      average investment in impaired loans during the years ended December 31, 2006,
      2005 and 2004 totaled $739,601, $589,756 and $578,180, respectively. Interest
      income recognized on impaired loans is insignificant.





The
      Bank
      has had, and may be expected to have in the future, banking transactions in
      the
      ordinary course of business with directors, executive officers and their
      immediate families (commonly referred to as related parties), all of which
      have
      been, in the opinion of management, on the same terms, including interest rates
      and collateral, as those prevailing at the time for comparable transactions
      with
      others.





Activity
      in loans receivable from certain executive officers and directors of the Company
      consisted of the following for the years ended December 31, 2006 and
      2005:


**Note
        5.**  **Loan
        Servicing**




Mortgage
      loans serviced for FHLMC and other banks are not included in the accompanying
      consolidated statements of financial condition. The unpaid principal balances
      of
      these loans at December 31, 2006 and 2005 are $51,348,477 and $45,422,224,
      respectively. Included in deposits are custodial escrow balances maintained
      in
      connection with the foregoing loan servicing of $432,143 and $373,477 at
      December 31, 2006 and 2005, respectively.





**Note
      6.**  **Premises
      and Equipment**




Premises
      and equipment consisted of the following at December 31:











**Note
      7.**  **Deposits**




Deposits
      at December 31 were as follows:








At
      December 31, 2006, scheduled maturities of certificates of deposit were as
      follows:








Interest
      expense on deposits consisted of the following:











The
      aggregate amounts of certificates of deposit in excess of $100,000 were
      $55,694,178 and $28,247,725 as of December 31, 2006 and 2005, respectively.
      Certificates of deposit include approximately $30,400,000 and $4,000,000 of
      brokered certificates of deposit as of December 31, 2006 and 2005,
      respectively.





**Note
      8.**  **Borrowed
      Funds**




Borrowed
      funds at December 31, 2006 consists of borrowings from the Federal Home Loan
      Bank of Des Moines (FHLB) as follows:










At
      December 31, 2006, the Company had an unsecured $3,000,000 line of credit
      agreement with a bank. The line of credit bears interest at LIBOR plus 1.85%
      (7.20% at December 31, 2006) and matures October 1, 2007. There were no
      borrowings outstanding at December 31, 2006.





Borrowed
      funds at December 31, 2005 included miscellaneous borrowings of $8,495 and
      borrowings from the FHLB of $102,435,248. Such borrowings carried a
      weighted-average interest rate of 4.64% with maturities ranging from 2006
      through 2018.





The
      FHLB
      borrowings are collateralized by FHLB stock and qualifying first and second
      mortgage loans representing various percentages of the total borrowings
      outstanding.




**Note
      9.**  **Income
      Taxes and Retained Earnings**




Under
      previous law, the provisions of the IRS and similar sections of Iowa law
      permitted the Bank to deduct from taxable income an allowance for bad debts
      based on 8% of taxable income before such deduction or actual loss experience.
      Legislation passed in 1996 eliminated the percentage of taxable income method
      as
      an option for computing bad debt deductions for 1996 and in all future years.





Deferred
      taxes have been provided for the difference between tax bad debt reserves and
      the loan loss allowances recorded in the financial statements subsequent to
      December 31, 1987. However, at December 31, 2006, retained earnings
      contains certain historical additions to bad debt reserves for income tax
      purposes of approximately $2,445,000 as of December 31, 1987, for which no
      deferred taxes have been provided because the Bank does not intend to use these
      reserves for purposes other than to absorb losses. If these amounts which
      qualified as bad debt deductions are used for purposes other than to absorb
      bad
      debt losses or adjustments arising from the carryback of net operating losses,
      income taxes may be imposed at the then existing rates. The approximate amount
      of unrecognized tax liability associated with these historical additions is
      $929,000.





Income
      tax expense is summarized as follows:











Deferred
      tax assets and liabilities consisted of the following components as of December
      31, 2006 and 2005:











The
      valuation allowance for deferred tax assets at December 31, 2006 and 2005,
      respectively, was $236,000 and $231,000. The net change in the valuation
      allowance for the year ended December 31, 2006 was an increase of
      $5,000.





Total
      income tax expense differed from the amounts computed by applying the U.S.
      federal income tax rate of 34% to income before income taxes as a result of
      the
      following:










**Note
      10.**  **Employee
      Benefit Plans**




Retirement
      plans :
      The
      Bank participates in a multiemployer defined benefit pension plan covering
      substantially all full-time employees. This is a multiemployer plan, and
      information as to actuarial valuations and net assets available for benefits
      by
      participating institutions is not available. The Bank recognized $614,000,
      $566,000 and $404,000 pension expense for the years ended December 31, 2006,
      2005 and 2004, respectively.




The
      Bank
      has a defined contribution plan covering substantially all employees.
      Contribution expense for the years ended December 31, 2006, 2005 and 2004 was
      $127,450, none and none, respectively.





Employee
      Stock Ownership Plan (ESOP) :
      In
      conjunction with the Bank’s conversion to stock ownership, the Bank established
      an ESOP for eligible employees. All employees of the Bank as of January 1,
      1994
      were eligible to participate immediately, and employees of the Bank hired after
      January 1, 1994 are eligible to participate after they attain age 21 and
      complete one year of service during which they work at least 1,000 hours. The
      ESOP borrowed funds in the amount of $960,000 to purchase 104,075 shares of
      common stock issued in the conversion in 1994 and $840,000 to purchase 84,000
      shares of common stock issued in the reorganization and conversion in 1996.
      These funds were borrowed from the Company.





The
      Bank
      makes contributions to the ESOP equal to the ESOP’s debt service less dividends
      received by the ESOP. Dividends on unallocated ESOP shares are used to pay
      debt
      service. Contributions to the ESOP and shares released from the suspense account
      in an amount proportional to the repayment of the ESOP loan are allocated among
      ESOP participants on the basis of compensation in the year of allocation.
      Benefits generally become 100% vested after five years of credited service.
      Forfeitures will be reallocated among remaining participating employees, in
      the
      same proportion as contributions. Benefits may be payable in the form of stock
      or cash upon termination of employment. If the Company’s stock is not traded on
      an established market at the time of an ESOP participant’s termination, the
      terminated ESOP participant has the right to require the Bank to purchase the
      stock at its current fair market value. Bank management believes there is an
      established market for the Company’s stock and therefore the Bank believes there
      is no potential repurchase obligation at December 31, 2006 and
      2005.





As
      shares
      are released, the Bank reports compensation expense equal to the current market
      price of the shares. Dividends on allocated ESOP shares are recorded as a
      reduction of retained earnings. Dividends on unallocated ESOP shares are
      recorded as a reduction of debt and accrued interest. ESOP compensation expense
      was $62,953, $254,711 and $328,075 for the years ended December 31, 2006, 2005
      and 2004, respectively.





Shares
      of
      the Company’s common stock held by the ESOP at December 31, 2006 and 2005 are as
      follows:





Employment
      agreements :
      The
      Company and the Bank have entered into employment agreements with key officers.
      Under the terms of the agreements, the officers are entitled to additional
      compensation in the event of certain conditions of involuntary termination.
      The
      agreements extend for up to 36 months.





The
      Bank
      has entered into certain employment retention agreements with key officers.
      Under the terms of the agreements, the employees are entitled to additional
      compensation in the event of a change of control of the Bank or the Company,
      and
      the employees are involuntarily terminated within the remaining unexpired
      employment period, up to 36 months. A change in control is generally triggered
      by the acquisition or control of 20% or more of the common stock.




**Note
      11.**  **Stock
      Based Compensation Plans**




In
      1996,
      the shareholders of the Company ratified the 1996 Incentive Stock Option Plan
      (the Plan), which permitted the grant of 441,105 shares of common stock to
      its
      directors and employees. The Plan was intended to promote stock ownership by
      directors and selected officers of the Company to increase their proprietary
      interest in the success of the Company and to encourage them to remain in the
      employment of the Company or its subsidiaries. The Plan provided for the grant
      of options at an exercise price equal to the market price of the Company’s stock
      on the date of grant. The option awards have a 10-year contractual term. Options
      granted to officers vest in five equal annual installments commencing on the
      first anniversary of the grant date and continuing each anniversary date
      thereafter. The options granted to officers expire ten years from the date
      of
      grant unless an earlier expiration date is triggered by death, disability,
      retirement or termination, as described in the Plan. Options granted to
      directors are vested immediately and expire ten years from the date of grant,
      unless an earlier expiration date is triggered by removal for cause. All awards
      were nonqualified stock options. Effective April 2006, upon shareholder approval
      of the North Central Bancshares, Inc. 2006 Stock Incentive Plan, no further
      awards under the Plan may be granted.





On
      April
      28, 2006, the shareholders of the Company approved the Company’s adoption of the
      North Central Bancshares, Inc. 2006 Stock Incentive Plan (the “2006 Plan”),
      which permits the grant of 125,000 shares of common stock to its directors
      and
      officers. The 2006 Plan is intended to promote growth and profitability, to
      provide certain key officers and non-employee directors of the Company with
      an
      incentive to achieve corporate objectives, to attract and retain individuals
      of
      outstanding competence, and to provide such individuals with an equity interest
      in the Company. Awards granted under the 2006 Plan may include stock options,
      restricted stock options and stock appreciation rights. The 2006 Plan provides
      for the grant of options at an exercise price no less than the market price
      of
      the Company’s stock on the date of grant. The option awards may have a
      contractual term up to 10 years. The 2006 Plan will be administered by the
      Compensation Committee of the Board of Directors, including determining the
      type
      of awards made and establishing other terms and conditions applicable to the
      award.





Effective
      January 1, 2006, the Company adopted SFAS No. 123(R), *Share-Based
      Payments* ,
      using
      the modified prospective transition method. Prior to that date the Company
      accounted for stock option awards under APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      In
      accordance with SFAS No. 123(R), compensation expense for stock-based awards
      is
      recorded over the vesting period at the fair value of the award at the time
      of
      grant. The recording of such compensation began on January 1, 2006 for shares
      not yet vested as of that date and for all new grants subsequent to that date.
      Prior years’ results have not been restated. The exercise price of options
      granted under the Company’s incentive plans is equal to the fair market value of
      the underlying stock at the grant date. The Company assumes no projected
      forfeitures on its stock-based compensation, since actual historical forfeiture
      rates on its stock-based incentive awards have been negligible.





Total
      employee stock-based compensation was as follows as of December 31:








The
      following table presents the effects on net income and earnings per share had
      stock-based compensation expense been recorded for the years ended December
      31,
      2005 and 2004 based on the fair value method under FAS 123(R):











As
      of
      December 31, 2006, stock-based compensation expense not yet recognized in income
      totaled $191,478, which is expected to be recognized over a weighted average
      remaining period of 6.3 years.





At
      grant
      date, the fair value of options awarded to recipients is estimated using a
      Black-Scholes valuation model. The exercise price of stock options equals the
      fair market value of the underlying stock at the date of grant. The following
      table shows the key valuation assumptions used for options granted during the
      years ended December 31, 2006, 2005 and 2004, and other information. Options
      are
      issued for 10-year periods with 100% vesting generally occurring either at
      grant
      date or over a five-year period.








The
      table
      below reflects option activity for the period indicated:








**Note
      12.** **Stockholders’
      Equity**




Regulatory
      capital requirements :
      The
      Bank is subject to various regulatory capital requirements administered by
      the
      federal banking agencies. Failure to meet minimum capital requirements can
      initiate certain mandatory - and possible additional discretionary - actions
      by
      regulators that, if undertaken, could have a direct material effect on the
      Bank’s financial statements. Under capital adequacy guidelines and the
      regulatory framework for prompt corrective action, the Bank must meet specific
      capital guidelines that involve quantitative measures of the Bank’s assets,
      liabilities and certain off-balance-sheet items as calculated under regulatory
      accounting practices. The Bank’s capital amounts and classification are also
      subject to qualitative judgments by the regulators about components, risk
      weightings and other factors.





Quantitative
      measures established by regulation to ensure capital adequacy require the Bank
      to maintain minimum amounts and ratios (set forth in the table below) of total
      and Tier I capital (as defined in the regulations) to risk-weighted assets
      (as
      defined), of Tier I capital (as defined) to adjusted average assets (as defined)
      and tangible capital to adjusted assets. Management believes, as of December
      31,
      2006, the Bank meets all capital adequacy requirements to which it is
      subject.





The
      most
      recent notification from the federal regulatory agency categorizes the Bank
      as
      well-capitalized under the regulatory framework for prompt corrective action.
      To
      be categorized as well-capitalized, the Bank must maintain minimum total
      risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
      following table. There are no conditions or events since those notifications
      that management believes have changed the Bank’s category.





The
      Bank’s actual capital amounts and ratios are also presented in the following
      table:








Limitations
      on dividends and other capital distributions :
      Office
      of Thrift Supervision (OTS) imposes limitations upon all capital distributions
      by savings institutions, including cash dividends. An institution that exceeds
      all fully phased-in capital requirements before and after a proposed capital
      distribution (Tier 1 Association) and has not been advised by the OTS that
      it is
      in need of more than normal supervision could, after prior notice but without
      the approval of the OTS, make capital distributions during a calendar year
      provided the total amount of capital distributions (including the proposed
      capital distribution) for the applicable calendar year does not exceed the
      institution’s year-to-date net income plus retained net income for the preceding
      two years. Any additional capital distributions would require prior regulatory
      approval.





**Note
      13.**  **Other
      Noninterest Expense**




Other
      noninterest expense amounts are summarized as follows for the years ended
      December 31:








**Note
      14.**  **Financial
      Instruments with Off-Statement of Financial Condition Risk**




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





The
      Bank
      uses the same credit policies in making commitments and conditional obligations
      as it does for on-statement of financial condition instruments.





The
      Bank
      does require collateral, or other security, to support financial instruments
      with credit risk.




A
      summary
      of the contract amount of the Bank’s exposure to off-statement of financial
      condition risk for commitments to extend credit is as follows:








At
      December 31, 2006, the mortgage loan commitments above were comprised of
      variable-rate commitments carrying a weighted-average interest rate of 7.00%
      and
      fixed-rate commitments carrying a weighted-average interest rate of
      6.18%.





Commitments
      to extend credit are agreements to lend to a customer as long as there is no
      violation of any condition established in the contract. Commitments generally
      have fixed expiration dates or other termination clauses and may require payment
      of a fee. Since some of the commitments are expected to expire without being
      drawn upon, the total commitment amounts above do not necessarily represent
      future cash requirements. The Bank evaluates each customer’s creditworthiness on
      a case-by-case basis. The amount of collateral obtained, if deemed necessary
      by
      the Bank, upon extension of credit, is based on management’s credit evaluation
      of the counterparty. Collateral held varies but normally includes real estate
      and personal property.





**Note
      15.** **Lending
      Activities and Concentrations of Credit Risk**




The
      Bank
      generally originates single family residential loans within its primary lending
      area of Webster, Story, Des Moines, Dallas, Polk and Henry counties in Iowa.
      The
      Bank’s underwriting policies require such loans to be 80% loan-to-value based
      upon appraised values unless private mortgage insurance is obtained.
      Approximately $135,309,000 of the Bank’s first mortgage loan portfolio at
      December 31, 2006 consisted of loans purchased or originated outside the state
      of Iowa. At December 31, 2006, concentrations by state include California with
      $20,077,000, Washington with $19,876,000 and South Carolina with $13,686,000.
      These are generally one- to four-family, multifamily residential and commercial
      real estate loans secured by the underlying properties. The loans are subject
      to
      the same underwriting guidelines as loans originated locally. The Bank is also
      active in originating secured consumer loans to its customers, primarily
      automobile and second mortgage loans. Collateral for substantially all consumer
      loans are security agreements and/or Uniform Commercial Code filings on the
      purchased asset.





**Note
      16.**  **Fair
      Values of Financial Instruments**




The
      carrying amounts and fair values of the Company’s financial instruments as of
      December 31, 2006 and 2005 were as follows:










**Note
      17.**  **Restriction
      on Stockholders’ Equity** ****




In
      1996,
      the Company completed a Plan of Conversion and Reorganization, whereby the
      Company became a publicly traded Iowa corporation, and the previous mutual
      organization ceased to exist. The Plan provided that when the conversion was
      completed, a “Liquidation Account” would be established in an amount equal to
      the amount of any dividends waived by the previous mutual holding company
      (totaling approximately $1,897,000), plus 65.5% of the Bank’s total
      stockholders’ equity, as reflected in its latest statement of financial
      condition in the final prospectus utilized in the conversion. The Liquidation
      Account is established to provide a limited priority claim to the assets of
      the
      Bank to qualifying depositors as of specified dates (Eligible Account Holders
      and Supplemental Eligible Account Holders) who continue to maintain deposits
      in
      the Bank after the conversion. In the unlikely event of a complete liquidation
      of the Bank, and only in such an event, Eligible Account Holders and
      Supplemental Eligible Account Holders would receive from the Liquidation Account
      a liquidation distribution based on their proportionate share of the then total
      remaining qualifying deposits.




**Note
      18.**  **Earnings
      Per Common Share**




Presented
      below is the reconciliation of the numerators and denominators of the
      computations for earnings per common share and earnings per common share -
      diluted, for the years ended December 31:











**Note
      19.**  **North
      Central Bancshares, Inc. (Parent Company Only) Condensed Financial
      Statements**































**Note
      20.**  **Quarterly
      Results of Operations (Unaudited)**














**Note
      21.**  **Segment
      Reporting**




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





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
































**MANAGEMENT
      OF THE HOLDING COMPANY AND THE BANK**





The
      Board
      of Directors of the Company is divided into three classes, each of which
      contains approximately one-third of the Board. The Bylaws of the Company
      currently authorize seven directors. Currently, all directors of the Company
      are
      also directors of the Bank.





**Continuing
      Directors**




*David
      M. Bradley* is
      currently Chairman of the Board, President
      and Chief Executive Officer of the
      Company and
      Chief
      Executive Officer of the Bank .
      Effective July 1, 2007, Mr. Bradley will serve as Chairman of the Board of
      the
      Company and of the Bank in an executive officer position.




*Paul
      F. Bognanno* has been
      employed with the Company since February 2007 and is currently Senior Executive
      Vice President of the Company. Effective July 1, 2007, Mr. Bognanno will succeed
      Mr. Bradley as President and Chief Executive Officer of the Company and Chief
      Executive Officer of the Bank .
      From
      1993 to 2004, he was the President and Chief Executive Officer of Principal
      Residential Mortgage, a wholly-owned subsidiary of the Principal Financial
      Group. From 2000 to 2003, Mr. Bognanno also served as Chairman of the Board
      of
      Principal Bank, an OTS regulated savings bank wholly owned by the Principal
      Financial Group.




*Robert
      H. Singer, Jr.* is
      Executive Director of the Fort Dodge Area Chamber of Commerce. Mr. Singer was
      formerly the co-owner of Calvert, Singer & Kelley Insurance Services, Inc.,
      an insurance agency, in Fort Dodge, Iowa.




*Mark
      Thompson* is
      the
      owner of Mark Thompson, CPA, P.C., in Fort Dodge, Iowa and has been a certified
      public accountant since 1978.





**Nominees
      for Election as Directors**





*C.
      Thomas Chalstrom* is
      Executive Vice President of the Company and President of the Bank and has been
      employed with the Bank since 1985. He was Executive Vice President of the Bank
      from 1994 until 2004. Mr. Chalstrom was named Chief Operating Officer of the
      Bank in December 1998. He became President of the Bank in April
      2004.





*Randall
      L. Minear* is
      President of Terrus Real Estate Group, located in Des Moines, Iowa. He formerly
      served as the Director of Corporate Real Estate for The Principal Financial
      Group and as President of Principal Real Estate Services, a subsidiary of The
      Principal Financial Group.





*Melvin
      R. Schroeder* was
      formerly the Vice President of Instruction at Iowa Central Community College
      in
      Fort Dodge, Iowa. Mr. Schroeder retired in 2001.





**Executive
      Officers Who are Not Directors or Nominees**





*Jean
      L. Lake* is
      Secretary of the Company and the Bank.





*David
      W. Edge, CPA* is Chief
      Financial Officer and Treasurer of the Company and the Bank.





*Kirk
      A. Yung* is
      Senior Vice President of the Company and the Bank.







**SHAREHOLDER
      INFORMATION**





**Price
      Range of the Company's Common Stock**





The
      Company's common stock trades on the Nasdaq Global Market under the symbol
      "FFFD." The following table shows the high and low per share sales prices of
      the
      Company's common stock as reported by Nasdaq, and the dividends declared per
      share during the periods indicated. Such quotations reflect inter-dealer prices,
      without retail markup, markdown or commission and may not necessarily represent
      actual transactions.





**Price
                Range ($)****Quarter
                Ended**
            **High**
            **Low**
            **Dividends**
              **Declared**
              **Per
                Share**2006First
                Quarter
            39.52
            37.25
            0.33Second
                Quarter
            40.12
            38.30
            0.33Third
                Quarter
            41.23
            38.95
            0.33Fourth
                Quarter
            41.33
            39.22
            0.332005First
                Quarter
            41.98
            38.93
            0.29Second
                Quarter
            40.95
            37.30
            0.29Third
                Quarter
            39.50
            37.60
            0.29Fourth
                Quarter
            39.12
            37.70
            0.29




The
      Company’s Common Stock was traded at $39.92 **** as
      of
      March 5, 2007.





**Performance
      Graph**





Pursuant
      to the regulations of the SEC, the graph below compares the performance of
      the
      Company with that of the Nasdaq Composite Index (U.S. Companies) and the Nasdaq
      Bank Composite Index (banks and bank holding companies, over 99% of which are
      based in the United States) from December 31, 2001 through December 31,
      2006.





The
      following graph compares the Company’s total cumulative shareholder return by an
      investor who invested $100.00 on December 31, 2001, to December 31, 2006, to
      the
      total return by an investor who invested $100.00 in each of the Nasdaq Stock
      Market Index and the Nasdaq Financial Stocks Index for the same
      period.











**Information
      Relating to the Company's Common Stock**





As
      of
      March 5, 2007, the Company had 1,192 shareholders of record, which includes
      the
      number of persons or entities who hold their Common Stock in nominee or "street"
      name through various brokerage firms. As of such date 1,364,653 shares of the
      Common Stock were outstanding.





The
      Company's current quarterly dividend is $0.35 per share. The Board of Directors
      of the Company plans to maintain a regular quarterly dividend in the future
      and
      will continue to review the dividend payment amount in relation to the Company's
      earnings, financial condition and other relevant factors (such as regulatory
      requirements).





The
      Bank
      will not be permitted to pay dividends to the Company on its capital stock
      if
      its shareholders' equity would be reduced below the amount required for the
      liquidation account. For information concerning federal regulations which apply
      to the Bank in determining the amount of proceeds which may be retained by
      the
      Company and regarding a savings institution's ability to make capital
      distributions including payment of dividends to its holding company, see Note
      12
      to the Consolidated Financial Statements.





Unlike
      the Bank, the Company is not subject to OTS regulatory restrictions on the
      payment of dividends to its shareholders, although the source of such dividends
      will be dependent primarily upon the dividends from the Bank. The Company is
      subject to the requirements of Iowa law, which prohibit the Company from paying
      a dividend if, after giving it effect, either of the following would result:
      (a)
      the Company would not be able to pay its debts as they become due in the usual
      course of business; or (b) the Company's total assets would be less than the
      sum
      of its total liabilities plus the amount that would be needed, if the Company
      were to be dissolved at the time of the distribution, to satisfy the
      preferential rights upon dissolution of shareholders whose preferential rights
      are superior to those receiving the distribution.





**Annual
      Meeting**





The
      Annual Meeting of Shareholders of the Company will be held at 10:00 a.m.,
      Central Time, Friday, April 27, 2007 at the Boston Centre, Suite 100, located
      at
      809 Central Avenue, Fort Dodge, Iowa 50501.





**Stockholders
              and General Inquiries**
            **Stock
              Exchange**David
                M. Bradley
              North
                Central Bancshares, Inc.
              c/o
                First Federal Savings Bank of Iowa
              825
                Central Avenue
              Fort
                Dodge, Iowa 50501
              (515)
                576-7531
              www.firstfederaliowa.com
            The
                Company’s Common Shares are listed under the symbol “FFFD” on the Nasdaq
                Global Market**General
                Counsel**
              The
                Law Office of Eric J. Eide, P.L.C.
              805
                Central Avenue, Suite 619
              Fort
                Dodge, Iowa 50501
              
              **Special
                Counsel**
              Thacher
                Proffitt & WoodLLP
              1700
                Pennsylvania Avenue, N.W., Suite 800
              Washington,
                D.C. 20006
              www.tpw.com
            **Independent
                Auditor**
              McGladrey
                & Pullen, LLP
              400
                Locust Street, Suite 640
              Des
                Moines, Iowa 50309
              
              **Transfer
                Agent**
              Computershare
                Investor Services
              350
                Indiana Street, Suite 800
              Golden,
                Colorado 80401
              (303)
                262-0600 or 800-962-4284
              e-mail:
                inquire@computershare.com
              www.computershare.com





**Publications
      - Annual Report on Form 10-K**





A
      copy of
      the Company's Annual Report Form 10-K (without exhibits) for the fiscal year
      ended December 31, 2006 will be furnished without charge to shareholders of
      record as of March 5, 2007 upon written request to Jean L. Lake, Corporate
      Secretary, North Central Bancshares, Inc., c/o First Federal Savings Bank of
      Iowa, 825 Central Avenue, Fort Dodge, Iowa 50501. The Annual Report Form 10-K
      report is available online at www.sec.gov or via
      the Bank’s website at www.firstfederaliowa.com.





**Dividend
      Reinvestment and Stock Purchase Plan**





This
      plan
      provides shareholders with the ability to reinvest automatically their cash
      dividends in additional shares of North Central Bancshares, Inc. common stock.
      This plan also provides shareholders the opportunity to make quarterly cash
      purchases of additional shares of the Company’s common stock.





For
      more
      information, contact Computershare Investor Services (see address above) or
      visit Computershare’s website at www.computershare.com .