UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549





FORM
10-Q





(Mark
One)





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


For
      the quarterly period ended
                  March 31,
2009





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




For the
transition period from __________________ to __________________.




Commission
      File Number:
              0-27672







NORTH CENTRAL BANCSHARES, INC.





(Exact
name of registrant as specified in its charter)







Iowa
            42-1449849(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





825 Central Avenue,   Fort Dodge,
      Iowa
            50501(Address
      of principal executive offices)
            (Zip
      Code)





515-576-7531





(Registrant’s
telephone number, including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes  þ  No   ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes   ̈  No   ̈




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




Large
      accelerated filer  ̈
            Accelerated
      filer   ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
            Smaller
      reporting company þ




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


Yes   ̈  No þ




Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





Class
                
                Outstanding at May 1,
  2009Common
      Stock, $.01 par value
                
                1,343,448





NORTH
CENTRAL BANCSHARES, INC.





INDEX





PagePart
      I.  Financial InformationItem
      1.  Financial Statements (Unaudited)
                                              1Consolidated
      Condensed Statements ofFinancial
      Condition at March 31, 2009and
      December 31, 2008
                                              1Consolidated
      Condensed Statements ofIncome
      for the Three Months EndedMarch
      31, 2009 and 2008
                                              2Consolidated
      Condensed Statements ofCash
      Flows for the Three Months EndedMarch
      31, 2009 and 2008
                                              3Notes
      to Consolidated Condensed FinancialStatements
                                              5Item
      2.  Management’s Discussion and Analysisof
      Financial Condition and Results of Operations
                                              8Item
      3.  Quantitative and Qualitative DisclosureAbout
      Market Risk
                                              15Item
      4T.  Controls and Procedures
                                              15Part
      II. Other
      InformationItem
      1.    Legal Proceedings
                                              16Item
      4.    Submission of Matters to a Vote of Security
      Holders
                                              16Item
      6.    Exhibits
                                              17Signatures
                                              18





PART
I.  FINANCIAL INFORMATION





Item
1.  Financial Statements (Unaudited)




NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES







CONSOLIDATED
CONDENSED STATEMENTS OF FINANCIAL CONDITION


(Unaudited)


March
      31,
                      
                      
                      December
      31,ASSETS
                      
                      2009
                      
                      
                      2008Cash
      and due from banks:
                        Interest-bearing
                      
                      $
                      17,046,875
                      
                      
                      $
                      6,563,494Noninterest-bearing
                      
                      
                      9,103,461
                      
                      
                      
                      9,718,150Total
      cash and cash equivalents
                      
                      
                      26,150,336
                      
                      
                      
                      16,281,644Securities
      available-for-sale
                      
                      
                      25,229,660
                      
                      
                      
                      22,837,968Federal
      Home Loan Bank stock, at cost
                      
                      
                      4,739,000
                      
                      
                      
                      4,692,400Loans
      receivable, net
                      
                      
                      394,285,065
                      
                      
                      
                      400,786,505Loans
      held for sale
                      
                      
                      350,427
                      
                      
                      
                      730,466Accrued
      interest receivable
                      
                      
                      2,039,731
                      
                      
                      
                      2,096,784Foreclosed
      real estate
                      
                      
                      1,046,638
                      
                      
                      
                      1,182,917Premises
      and equipment, net
                      
                      
                      12,144,894
                      
                      
                      
                      12,113,092Rental
      real estate
                      
                      
                      2,328,705
                      
                      
                      
                      2,358,688Title
      plant
                      
                      
                      671,704
                      
                      
                      
                      671,704Deferred
      taxes
                      
                      
                      2,443,976
                      
                      
                      
                      3,003,565Bank-owned
      life insurance
                      
                      
                      5,354,636
                      
                      
                      
                      5,293,871Prepaid
      expenses and other assets
                      
                      
                      1,771,526
                      
                      
                      
                      1,248,232Total
      assets
                      
                      $
                      478,556,298
                      
                      
                      $
                      473,297,836




LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESDeposits
                          
                          $
                          350,474,852
                          
                          
                          $
                          350,169,925Borrowed funds
                          
                          
                          77,841,264
                          
                          
                          
                          82,348,915Advances from borrowers for
      taxes and insurance
                          
                          
                          1,088,749
                          
                          
                          
                          1,923,758Dividends
    payable
                          
                          
                          13,434
                          
                          
                          
                          13,434Accrued expenses and other
      liabilities
                          
                          
                          2,845,553
                          
                          
                          
                          3,629,661Total
      liabilities
                          
                          
                          432,263,852
                          
                          
                          
                          438,085,693STOCKHOLDERS'
      EQUITYPreferred stock ($.01 par
      value, authorized 3,000,000
                            shares; at
      March 31, 2009 10,200 shares issued and   outstanding; at
      December 31, 2008 none issued and outstanding)
                          
                          
                          10,105,108
                          
                          
                          
                          -Common stock ($.01 par value,
      authorized 15,500,000
                            shares;
      at March 31, 2009 1,343,448 shares issued and
                            outstanding;
      at December 31, 2008, 1,343,448 shares
                            issued
      and outstanding)
                          
                          
                          13,428
                          
                          
                          
                          13,421Additional paid-in
      capital
                          
                          
                          17,950,390
                          
                          
                          
                          17,819,096Retained earnings,
      substantially restricted
                          
                          
                          17,953,616
                          
                          
                          
                          17,240,779Accumulated other
      comprehensive income
                          
                          
                          269,904
                          
                          
                          
                          138,847Total stockholders'
      equity
                          
                          
                          46,292,446
                          
                          
                          
                          35,212,143Total
      liabilities and stockholders' equity
                          
                          $
                          478,556,298
                          
                          
                          $
                          473,297,836





See Notes
to Consolidated Condensed Financial Statements




1




NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES







CONSOLIDATED
CONDENSED STATEMENTS OF INCOME


(Unaudited)


Three
      Months EndedMarch
      31,2009
                        
                        
                        2008Interest
      income:Loans
receivable
                        
                        $
                        6,185,217
                        
                        
                        $
                        7,171,375Securities and cash
      deposits
                        
                        
                        280,578
                        
                        
                        
                        317,0116,465,795
                        
                        
                        
                        7,488,386Interest
      expense:Deposits
                        
                        
                        2,069,556
                        
                        
                        
                        3,091,651Borrowed funds
                        
                        
                        998,437
                        
                        
                        
                        1,201,9853,067,993
                        
                        
                        
                        4,293,636Net
      interest income
                        
                        
                        3,397,802
                        
                        
                        
                        3,194,750Provision
      for loan losses
                        
                        
                        160,000
                        
                        
                        
                        60,000Net
      interest income after provision for
                          loan losses
                        
                        
                        3,237,802
                        
                        
                        
                        3,134,750Noninterest
      income:Fees and service
      charges
                        
                        
                        939,695
                        
                        
                        
                        1,010,503Abstract fees
                        
                        
                        216,752
                        
                        
                        
                        264,257Mortgage banking
      income
                        
                        
                        314,743
                        
                        
                        
                        160,899Loan
      prepayment fees
                        
                        
                        12,654
                        
                        
                        
                        4,631Loss
      on sale of investments
                        
                        
                        (10,342
                        )
                        
                        
                        -Other income
                        
                        
                        371,239
                        
                        
                        
                        263,648Total
      noninterest income
                        
                        
                        1,844,741
                        
                        
                        
                        1,703,938Noninterest
      expense:Compensation and employee
      benefits
                        
                        
                        1,867,385
                        
                        
                        
                        1,974,124Premises and
      equipment
                        
                        
                        486,632
                        
                        
                        
                        441,614Data processing
                        
                        
                        208,673
                        
                        
                        
                        242,882Other expenses
                        
                        
                        1,383,905
                        
                        
                        
                        1,084,958Total
      noninterest expense
                        
                        
                        3,946,595
                        
                        
                        
                        3,743,578Income
      before income taxes
                        
                        
                        1,135,948
                        
                        
                        
                        1,095,110Provision
      for income taxes
                        
                        
                        354,300
                        
                        
                        
                        291,600Net
      income
                        
                        $
                        781,648
                        
                        
                        $
                        803,510Preferred
      stock dividends and accretion of discount
                        
                        $
                        119,126
                        
                        
                        $
                        -Net
      income available to common shareholders
                        
                        $
                        662,522
                        
                        
                        $
                        803,510Basic
      earnings per common share
                        
                        $
                        0.49
                        
                        
                        $
                        0.60Diluted
      earnings per common share
                        
                        $
                        0.49
                        
                        
                        $
                        0.60Dividends
      declared per common share
                        
                        $
                        0.01
                        
                        
                        $
                        0.35Comprehensive
      income
                        
                        $
                        912,705
                        
                        
                        $
                        646,907





See Notes
to Consolidated Condensed Financial Statements.




2




NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS


(Unaudited)


Three
      Months Ended
                      March
      31,2009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                    
                    $
                    781,648
                    
                    
                    $
                    803,510Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision for loan
      losses
                    
                    
                    160,000
                    
                    
                    
                    60,000Depreciation
                    
                    
                    225,087
                    
                    
                    
                    215,364Amortization and
      accretion
                    
                    
                    98,861
                    
                    
                    
                    6,649Deferred taxes
                    
                    
                    459,500
                    
                    
                    
                    (5,717
                    )Stock-based
      compensation
                    
                    
                    32,032
                    
                    
                    
                    29,848Excess tax benefit related to
      stock-based compensation
                    
                    
                    -
                    
                    
                    
                    (10,587
                    )(Gain) on sale of foreclosed
      real estate and loans, net
                    
                    
                    (336,735
                    )
                    
                    
                    (154,756
                    )Write-down of other real estate
      owned
                    
                    
                    84,463
                    
                    
                    
                    158,203Loss on sale of
      investments
                    
                    
                    10,342
                    
                    
                    
                    -Proceeds from sales of loans
      held-for-sale
                    
                    
                    24,847,944
                    
                    
                    
                    13,264,446Originations of loans
      held-for-sale
                    
                    
                    (24,153,162
                    )
                    
                    
                    (13,268,523
                    )Change in assets and
      liabilities:Accrued
      interest receivable
                    
                    
                    57,053
                    
                    
                    
                    30,039Prepaid
      expenses and other assets
                    
                    
                    (584,059
                    )
                    
                    
                    56,484Accrued
      expenses and other liabilities
                    
                    
                    (784,108
                    )
                    
                    
                    386,718Net
      cash provided by operating activities
                    
                    
                    898,866
                    
                    
                    
                    1,571,678CASH
      FLOWS FROM INVESTING ACTIVITIESNet change in
    loans
                    
                    
                    7,043,206
                    
                    
                    
                    17,673,791Purchase of
    loans
                    
                    
                    (855,519
                    )
                    
                    
                    (11,585,821
                    )Purchase of securities
      available-for-sale
                    
                    
                    (3,824,364
                    )
                    
                    
                    (3,085,496
                    )Proceeds from sale of
      securities available-for-sale
                    
                    
                    332,000
                    
                    
                    
                    -Proceeds from maturities and
      calls of securities available-for-sale
                    
                    
                    1,317,165
                    
                    
                    
                    270,050Proceeds from redemption of
      Federal Home Loan Bank stock
                    
                    
                    -
                    
                    
                    
                    245,900Purchase of Federal Home Loan
      Bank stock
                    
                    
                    (46,600
                    )
                    
                    
                    -Purchase of premises, equipment
      and rental real estate
                    
                    
                    (226,906
                    )
                    
                    
                    (85,303
                    )Net proceeds from sale of
      foreclosed real estate
                    
                    
                    133,012
                    
                    
                    
                    45,162Net
      cash provided by investing activities
                    
                    
                    3,871,994
                    
                    
                    
                    3,478,283CASH
      FLOWS FROM FINANCING ACTIVITIESNet increase in
      deposits
                    
                    
                    304,927
                    
                    
                    
                    2,093,133Net decrease in advances from
      borrowers for taxes and insurance
                    
                    
                    (835,009
                    )
                    
                    
                    (855,203
                    )Net increase in short-term
      borrowings
                    
                    
                    -
                    
                    
                    
                    2,000,000Payments of other borrowed
      funds
                    
                    
                    (4,507,651
                    )
                    
                    
                    (5,507,365
                    )Proceeds from issuance of
      preferred stock and common stock warrant
                    
                    
                    10,200,000
                    
                    
                    
                    -Excess tax benefit related to
      stock-based compensation
                    
                    
                    -
                    
                    
                    
                    10,587Common and preferred dividends
      paid
                    
                    
                    (64,435
                    )
                    
                    
                    (468,981
                    )Net
      cash provided by (used in) financing activities
                    
                    
                    5,097,832
                    
                    
                    
                    (2,727,829
                    )Net increase in
      cash
                    
                    
                    9,868,692
                    
                    
                    
                    2,322,132CASH
      AND DUE FROM BANKSBeginning
                    
                    
                    16,281,644
                    
                    
                    
                    12,526,707Ending
                    
                    $
                    26,150,336
                    
                    
                    $
                    14,848,839




3




CONSOLIDATED CONDENSED
      STATEMENTS OF CASH FLOWS-Continued
                        (Unaudited)Three
      Months Ended
                        March
      31,2009
                      
                      
                      2008SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      payments for:Interest paid to
      depositors
                      
                      $
                      2,180,233
                      
                      
                      $
                      3,199,765Interest paid on
      borrowings
                      
                      
                      998,437
                      
                      
                      
                      1,201,985SUPPLEMENTAL
      DISCLOSURE OF NONCASH OPERATING,
                        INVESTING
      AND FINANCING ACTIVITIESTransfers
      from loans to other real estate owned
                      
                      $
                      59,204
                      
                      
                      $
                      595,987





See Notes
to Consolidated Condensed Financial Statements.




4





NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)





1.           BASIS
OF PRESENTATION





The
consolidated condensed financial statements for the three month periods ended
March 31, 2009 and 2008 are unaudited.  In the opinion of the
management of North Central Bancshares, Inc. (the “Company”), these financial
statements reflect all adjustments, consisting only of normal recurring
accruals, necessary to present fairly these consolidated financial
statements.  The results of operations for the interim periods are not
necessarily indicative of results that may be expected for an entire
year.  Certain information and footnote disclosures normally included
in complete financial statements prepared in accordance with generally accepted
accounting principles have been omitted in accordance with the requirements for
interim financial statements.  The financial statements and notes
thereto should be read in conjunction with the Company’s Annual Report on Form
10-K for the year ended December 31, 2008.





The
consolidated condensed financial statements include the accounts of the Company
and its wholly owned subsidiaries.  All significant intercompany
balances and transactions have been eliminated in consolidation.





2.           EARNINGS
PER COMMON SHARE





The
earnings per common share amounts were computed using the weighted-average
number of shares of common stock outstanding during the periods
presented.  For the three month period ended March 31, 2009, the
weighted-average number of shares of common stock outstanding for the
computation of basic and diluted earnings per common share were 1,340,148 and
1,343,448, respectively.  For the three month period ended March 31,
2008, the weighted-average number of shares of common stock outstanding for the
computation of basic and diluted earnings per common share were 1,337,848 and
1,349,232, respectively.





3.           DIVIDENDS





On
February 27, 2009, the Company declared a cash dividend on its common stock,
payable on April 3, 2009 to stockholders of record as of March 13, 2009, equal
to $0.01 per share.  On February 15, 2009, the Company paid an
aggregate cash dividend of $51,000 on the Fixed Rate Cumulative Perpetual
Preferred Stock, Series A issued to the United States Department of the
Treasury.





4.           GOODWILL





As of
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and
Other Intangible Assets that eliminated the amortization and required a
goodwill impairment test.  The Company completed the goodwill
impairment test for the year ended December 31, 2008 and determined that the
Company’s enterprise value and the value of the Company’s assets and liabilities
did not support any level of goodwill.  Therefore the entire goodwill
amount of $4,946,960 was written off as of December 31, 2008.  The
goodwill impairment was due to the extreme volatility in the banking industry
and the impact that it has had on the Company’s trading price.  For
purposes of the 2008 goodwill impairment testing, the Company’s enterprise value
was derived from a combination of trading price information for its common stock
and market data regarding comparable public financial
institutions.  This goodwill impairment has no impact on the Company’s
liquidity, cash flows or tangible capital ratios and a negligible impact on the
Company’s other regulatory capital ratios.





5.           OPERATING
SEGMENTS





An
operating segment is generally defined as a component of a business for which
discrete financial information is available and whose results are reviewed by
the chief operating decision-maker.  The Company has determined that
it has two reportable segments:  a traditional banking segment and a
nonbank segment.  The traditional banking segment consists of the
Company’s banking subsidiary, First Federal Savings Bank of Iowa (the “Bank”),
and the holding company.  The Bank 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 nonbank segment, which is set forth under the caption
“All Others” below, consists of the operations of the subsidiaries under the
Bank, and includes real estate abstracting services, insurance and investment
services, and ownership of low-income housing tax credit apartment
complexes.




5





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





Three
      Months Ended March 31, 2009TraditionalBanking
                
                
                All
      Others
                
                
                TotalInterest
      income
                
                $
                6,465,795
                
                
                $
                -
                
                
                $
                6,465,795Interest
      expense
                
                
                3,067,993
                
                
                
                -
                
                
                
                3,067,993Net
      interest income
                
                
                3,397,802
                
                
                
                -
                
                
                
                3,397,802Provision
      for loan losses
                
                
                160,000
                
                
                
                -
                
                
                
                160,000Net
      interest income after
                  provision
      for loan losses
                
                
                3,237,802
                
                
                
                -
                
                
                
                3,237,802Noninterest
      income
                
                
                1,324,977
                
                
                
                519,764
                
                
                
                1,844,741Noninterest
      expense
                
                
                3,610,993
                
                
                
                335,602
                
                
                
                3,946,595Income
      before income taxes
                
                
                951,786
                
                
                
                184,162
                
                
                
                1,135,948Provision
      for income taxes
                
                
                339,700
                
                
                
                14,600
                
                
                
                354,300Net income
                
                $
                612,086
                
                
                $
                169,562
                
                
                $
                781,648Inter-segment
      revenue (expense)
                
                $
                195,194
                
                
                $
                (195,194
                )
                
                $
                -Total
      assets
                
                $
                475,291,134
                
                
                $
                3,265,164
                
                
                $
                478,556,298Total
      deposits
                
                $
                350,474,852
                
                
                $
                -
                
                
                $
                350,474,852








Three
      Months Ended March 31, 2008TraditionalBanking
                  
                  
                  All
      Others
                  
                  
                  TotalInterest
      income
                  
                  $
                  7,488,386
                  
                  
                  $
                  -
                  
                  
                  $
                  7,488,386Interest
      expense
                  
                  
                  4,293,636
                  
                  
                  
                  -
                  
                  
                  
                  4,293,636Net
      interest income
                  
                  
                  3,194,750
                  
                  
                  
                  -
                  
                  
                  
                  3,194,750Provision
      for loan losses
                  
                  
                  60,000
                  
                  
                  
                  -
                  
                  
                  
                  60,000Net
      interest income after
                    provision
      for loan losses
                  
                  
                  3,134,750
                  
                  
                  
                  -
                  
                  
                  
                  3,134,750Noninterest
      income
                  
                  
                  1,182,731
                  
                  
                  
                  521,207
                  
                  
                  
                  1,703,938Noninterest
      expense
                  
                  
                  3,428,881
                  
                  
                  
                  314,697
                  
                  
                  
                  3,743,578Income
      before income taxes
                  
                  
                  888,600
                  
                  
                  
                  206,510
                  
                  
                  
                  1,095,110Provision
      for income taxes
                  
                  
                  264,000
                  
                  
                  
                  27,600
                  
                  
                  
                  291,600Net income
                  
                  $
                  624,600
                  
                  
                  $
                  178,910
                  
                  
                  $
                  803,510Inter-segment
      revenue (expense)
                  
                  $
                  193,885
                  
                  
                  $
                  (193,885
                  )
                  
                  $
                  -Total
      assets
                  
                  $
                  505,031,310
                  
                  
                  $
                  3,485,371
                  
                  
                  $
                  508,516,681Total
      deposits
                  
                  $
                  368,040,989
                  
                  
                  $
                  -
                  
                  
                  $
                  368,040,989





6.           RECENT
ACCOUNTING PRONOUNCEMENTS





In April
2009, the FASB issued FSP FAS 115−2 and FAS 124−2, “Recognition and Presentation
of Other−Than−Temporary Impairments” (“FSP FAS 115−2/124−2”). FSP FAS
115−2/124−2 requires entities to separate an other−than−temporary impairment of
a debt security into two components when there are credit related losses
associated with the impaired debt security for which management asserts that it
does not have the intent to sell the security, and it is more likely than not
that it will not be required to sell the security before recovery of its cost
basis. The amount of the other−than−temporary impairment related to a credit
loss is recognized in earnings, and the amount of the other−than−temporary
impairment related to other factors is recorded in other comprehensive loss. FSP
FAS 115−2/124−2 is effective for periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company has
elected to adopt FSP FAS 115−2/124−2 effective for the quarter ending June 30,
2009. The Company is currently evaluating the impact that the adoption of this
statement will have on its financial position and results of
operations.





In April
2009, the FASB issued FSP FAS 157−4, “Determining Fair Value When Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions that are Not Orderly” (“FSP FAS 157−4”). Under FSP FAS
157−4, if an entity determines that there has been a significant decrease in the
volume and level of activity for the asset or the liability in relation to the
normal market activity for the asset or liability (or similar assets or
liabilities), then transactions or quoted prices may not accurately reflect fair
value. In addition, if there is evidence that the transaction for the asset or
liability is not orderly, the entity shall place little, if any weight on that
transaction price as an indicator of fair value. FSP FAS 157−4
is effective for periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. The Company has elected to
adopt FSP FAS 157−4 effective for the quarter ending June 30, 2009. The Company
is currently evaluating the impact that the adoption of this statement will have
on its financial position and results of operations.




6





In April
2009, the FASB issued FSP FAS 107−1 and APB 28−1, “Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS 107−1 and APB 28−1”). FSP FAS
107−1 and APB 28−1 require disclosures about fair value of financial instruments
in interim and annual financial statements. FSP FAS 107−1 and APB 28−1 is
effective for periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. The Company has elected to adopt FSP
FAS 107−1 and APB 28−1 effective for the quarter ending June 30, 2009. The
Company is currently evaluating the impact that the adoption of this statement
will have on its financial position and results of operation.





7.
            FAIR
      VALUE





The
Company adopted SFAS 157 Fair
Value Measurements on January 1, 2009 in its entirety. SFAS No. 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value. It also establishes a hierarchy for determining
fair value measurement. The hierarchy includes three levels and is based upon
the valuation techniques used to measure assets and liabilities. The three
levels are as follows:





1.
            
            Level 1 – Inputs to the valuation
      methodology are quoted prices (unadjusted) for identical assets or
      liabilities in markets;2.
            
            Level 2 – Inputs to the valuation
      methodology include quoted prices for similar assets and liabilities in
      active markets and inputs that are observable for the asset or liability,
      either directly or indirectly, for substantially the full term of the
      financial instrument; and3.
            
            Level 3 – Inputs to the valuation
      methodology are unobservable and significant to the fair value
      measurement





Fair
value measurements for items measured at fair value at March 31, 2009
included:





Fair Value Measurements at Reporting Date
      Using
                  ($
      in 000s)Quoted Prices in Active Markets for Identical
      Assets (Level 1)
                Significant Other Observable
      Inputs
                  (Level 2)
                Significant Unobservable
Inputs
                  (Level 3)
                Total
                  March 31, 2009DescriptionSecurities
      available-for-sale
                  (Excluding
      equity securities)
                _
                24,297
                _
                24,297Securities
      available-for-sale
                  (Equity
      securities)
                932
                _
                _
                932Total
      Securities available-for-sale
                932
                24,297
                _
                25,229





A portion
of the securities available-for-sale portfolio is an equity security consisting
of a mortgage bond mutual fund investment.  The fair values used by
the Company are obtained from an independent pricing service, which represent
quoted market prices for the identical securities (Level 1 inputs).




7





Securities
available-for-sale (excluding equity securities) portfolio consists of
mortgage-backed securities and municipal bond investments whereby the Company
obtains fair values from an independent pricing service.  The fair
values are determined by pricing models that consider observable market data,
such as interest rate volatilities, LIBOR yield curve, credit spreads and prices
from market makers and live trading systems (Level 2 inputs).





Certain
assets are measured at fair value on a nonrecurring basis; that is, they are
subject to fair value adjustments in certain circumstances (for example, when
there is evidence of impairment).  The following table presents the
assets carried on the balance sheet by level with the SFAS No. 157 valuation
hierarchy as of March 31, 2009:





Fair Value Measurements at Reporting Date
      Using
                                ($
      in 000s)Description
                              
                              Quoted
      Prices
                                in
      Active Markets
                                for
      Identical Assets
                                (Level
      1)
                              
                              
                              Significant
      Other
                                Observable
      Inputs
                                (Level
      2)
                              
                              
                              Significant
                                Unobservable
      Inputs
                                (Level
      3)
                              
                              
                              TotalAssets:Loans
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              3,033
                              
                              
                              $
                              3,033Other
      real estate owned
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              1,047
                              
                              
                              $
                              1,047





Impaired
loans are evaluated and valued at the time the loan is identified as impaired,
at the lower of cost or fair value.  Fair value is measured based on
the value of the collateral securing these loans and is classified at a Level 3
in the fair value hierarchy.  Collateral may be real estate and/or
business assets including equipment, inventory and/or accounts
receivable.  Such collateral’s fair value is determined based on
appraisals by qualified licensed appraisers hired by the valuation, and/or
management’s expertise and knowledge of the client and client’s
business.





8.           RECLASSIFICATIONS





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





9.         SUBSEQUENT
EVENTS





On April
13, 2009, Haskell Homes, Inc., Guy M. Haskell and Klyn R. Haskell (collectively,
the “Plaintiffs”) filed a complaint in the Fifth Judicial District Court for
Washington County, State of Utah against the Bank, as successor in interest to
ANB Financial N.A. (“ANB”), in connection with certain loans originally
made by ANB to the Plaintiffs for the development of certain real estate located
in Washington County, Utah.  Following ANB's failure in May 2008, the
Bank became the sole holder of one of such loans.  The complaint
includes claims for damages in excess of $16 million and recoupment
of certain amounts due under the loans as well as a temporary
restraining order and/or preliminary injunction.  While the proceeding
is in its early stages, the Bank does not believe the complaint has merit and
intends to vigorously defend this action.  In connection with the
filing of the complaint, the Court granted a temporary restraining order to the
Plaintiffs.  At a preliminary hearing, the Court dissolved
the temporary restraining order because the Plaintiffs had not met the
applicable standards.  On May 13, 2009, the Bank filed a notice of
removal pursuant to which the case will be removed to the U.S. District Court
for the District of Utah.





Item
2.  Management’s Discussion and Analysis Of Financial Condition and
Results Of Operations





This
Quarterly Report on Form 10-Q contains forward-looking statements consisting of
estimates with respect to the consolidated financial condition, results of
operations and business of the Company and its subsidiaries, including the Bank,
that are subject to various factors which could cause actual results to differ
materially from these estimates, including those set forth in Part I,
Item 1A — Risk Factors of the Company’s 2008 Annual Report on Form
10-K.  These factors include changes in general, economic, market,
legislative and regulatory conditions, and the development of an interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company’s operations and investments.  The
Company’s actual results may differ from the results discussed in the
forward-looking statements.  The Company disclaims any obligation to
publicly announce future events or developments that may affect the
forward-looking financial statements contained herein.




8





Executive
Overview





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 business and shareholder value strategies. The Company’s
business strategy is to operate the Bank as a well-capitalized, profitable and
independent community oriented savings bank.  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 were important factors in the Company’s performance
during the quarter ended March 31, 2009:




•
            The
      credit crisis affecting the financial markets and residential housing that
      began in 2007 turned out to be just the flashpoint for what appears to be
      the worst economic downturn since the Great Depression.•
            The
      Company has taken significant steps to reduce the risk of additional loan
      losses.  During the quarter ended March 31, 2009 the Company
      increased its provision for loan losses to $160,000 compared to the
      $60,000 during the quarter ended March 31, 2008.  The Company
      continues to monitor its loan portfolio with the objective of avoiding
      defaults or write-downs.  Despite these actions, the possibility
      of additional losses can not be eliminated, but the Board of Directors and
      all employees continue to work hard to make the best of these currently
      challenging conditions.•
            The
      Company continues its focus on earnings through management of net interest
      margin, successfully increasing the margin to 3.04% as of March 31, 2009
      from 2.68% as of March 31, 2008.•
            On
      January 9, 2009, the Company completed the sale of $10.2 million of our
      Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Series A
      Preferred Stock”) and a warrant to purchase 99,157 shares of our common
      stock at an exercise price of $15.43 per share (the “Warrant”) to the
      United States Department of the Treasury  (the “Treasury”)
      through the Troubled Asset Relief Program (“TARP”) Capital Purchase
      Program (“CPP”).  The Series A Preferred Stock bears an
      annualized dividend rate of 5 percent for the first five years it is
      outstanding, after which the dividend will increase to 9
      percent.  Although the Bank would have remained “well
      capitalized” without these funds, this new equity investment further
      increases the capacity to support economic activity and growth in each of
      the communities served by the Bank through responsible
      lending.•
            Effective
      February 17, 2009, the American Recovery and Reinvestment Act of 2009
      (“ARRA”) eliminates the restrictions on the source of repayment and the
      waiting period formerly applicable to TARP-CPP
      participants.  The ARRA provides the Company with the option to
      repay the funds received under the TARP-CPP without regard to whether the
      Company has replaced the funds from other sources or any waiting period,
      subject to consultation with the Federal Reserve and the
FDIC.•
            As
      a result of participating in the TARP-CPP, the Company is subject to
      limitations and restrictions on executive compensation and corporate
      governance included in the ARRA as long as any obligation arising from
      financial assistance provided under the statute remains
      outstanding.  In addition, the terms of the TARP-CPP require the
      Series A Preferred Stock to be senior to any future new debt incurred by
      the Company.  The Congress and Treasury may create additional
      provisions that could become retroactively applicable to the Series A
      Preferred Stock.•
            The
      Bank may be required to pay significantly higher FDIC premiums in the
      future because market developments have significantly depleted the Deposit
      Insurance Fund and reduced the ratio of reserves to insured
      deposits.  On February 27, 2009, the FDIC adopted an interim
      rule to impose a 20 basis point emergency special assessment on insured
      institutions.  The assessment will be based on deposits as of
      June 30, 2009 and collected on September 30, 2009.  After June
      30, 2009, the FDIC may impose an additional assessment of up to 10 basis
      points if the condition of the banking industry continues to
      decline.•
            The
      volume of originations of residential mortgages in the first quarter of
      2009 doubled compared to the first quarter of 2008.  The growth
      of this line of business is expected to continue as historically low
      interest rates cause consumers to refinance existing mortgages in order to
      reduce their monthly costs.  Despite the decline in volume of
      home sales, consumers are selectively purchasing real estate while locking
      in relatively low long-term mortgage interest rates.




9




CRITICAL
ACCOUNTING POLICIES




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





The
Company’s accounting policies are described in the “Notes to Consolidated
Financial Statements” of the Company’s 2008 Annual Report on Form
10-K.  Based on its consideration of accounting policies that involve
the most complex and subjective estimates and judgments, management has
identified its most critical accounting policies to be those related to the
allowance for loan losses and asset impairment judgments.





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.





FINANCIAL
CONDITION





Total
assets increased $5.3 million, or 1.1%, to $478.6 million at March 31, 2009,
from $473.3 million at December 31, 2008.  The increase in assets was
primarily due to an increase in cash and cash equivalents and securities
available-for-sale.  Cash and cash equivalents increased $9.9 million,
or 60.6%, to $26.2 million at March 31, 2009, compared to $16.3 million at
December 31, 2008.  The increase in cash and cash equivalents was
primarily due to the sale of the Series A Preferred Stock and Warrant to the
Treasury through the TARP-CPP.  The increase in securities
available-for-sale was primarily due to the purchase of $3.8 million of mortgage
backed securities during the quarter ended March 31, 2009.





Net loans
receivable decreased by $6.5 million, or 1.6%, to $394.3 million at March 31,
2009, from $400.8 million at December 31, 2008, primarily due to payments and
prepayments of $23.0 million and loan sales of $24.7 million during the three
months ended March 31, 2009. These payments, prepayments, and loan sales were
offset in part by the origination of $33.0 million of first mortgage loans
primarily secured by one-to four-family residences and commercial real estate
and the origination of $4.5 million of second mortgage loans during the three
months ended March 31, 2009. The Company sells most fixed-rate residential loans
originated with maturities of 15 years or more in the secondary mortgage market
in order to reduce interest rate risk.




10





Deposits
increased $300,000, or 0.09%, to $350.5 million at March 31, 2009, from $350.2
million at December 31, 2008, primarily reflecting increases in NOW, money
market and savings account balances, offset in part by a decrease in
certificates of deposit.  When excluding brokered deposits, deposits
increased $11.1 million, or 3.17% at March 31, 2009 compared to December 31,
2008.  Borrowings, primarily FHLB advances, decreased $4.5 million, or
5.5%, to $77.8 million at March 31, 2009, from $82.3 million at December 31,
2008. This decrease is due to the normal repayment of borrowings due to calls or
maturities.





Total
stockholders’ equity increased $11.1 million, or 31.5%, to $46.3 million at
March 31, 2009, from $35.2 million at December 31, 2008, primarily due to the
sale of the Series A Preferred Stock and the Warrant to the Treasury through the
Capital Purchase Program in January and earnings in the first quarter of
2009.





The
Office of Thrift Supervision (the “OTS”) requires the Bank to meet minimum
tangible, leverage (core) and risk-based capital requirements.  As of
March 31, 2009, the Bank exceeded all of its regulatory capital
requirements.  The Bank’s required, actual and excess capital levels
as of March 31, 2009 were as follows:





Amount
                  
                  
                  Percentage of Assets(Dollars
      in thousands)Tangible
      capital:Capital level
                  
                  $
                  41,941
                  
                  
                  
                  8.78
                  %Less
    Requirement
                  
                  
                  7,169
                  
                  
                  
                  1.50
                  %Excess
                  
                  $
                  34,772
                  
                  
                  
                  7.28
                  %Core
      capital:Capital level
                  
                  $
                  41,941
                  
                  
                  
                  8.78
                  %Less
    Requirement
                  
                  
                  19,116
                  
                  
                  
                  4.00
                  %Excess
                  
                  $
                  22,825
                  
                  
                  
                  4.78
                  %Risk-based
      capital:Capital level
                  
                  $
                  45,391
                  
                  
                  
                  13.42
                  %Less
    Requirement
                  
                  
                  27,056
                  
                  
                  
                  8.00
                  %Excess
                  
                  $
                  18,335
                  
                  
                  
                  5.42
                  %





RESULTS
OF OPERATIONS





Three
months ended March 31, 2009 compared to the three months ended March 31,
2008





Net
Income.  Net income
decreased by $22,000 to $782,000 for the quarter ended March 31, 2009, compared
to $804,000 million for the quarter ended March 31, 2008.  Net income
is an aggregate of net interest income, noninterest income, noninterest expense
and income tax expense.  The decrease in earnings was primarily due to
an increase in other expenses and provision for loan losses, offset in part by
an increase in net interest income.





Net Interest
Income.  Net interest income before provision for loan losses
increased by $203,000 to $3.40 million for the quarter ended March 31, 2009,
from $3.19 million for the quarter ended March 31, 2008.  The increase
is due to an increase in net interest rate spread (i.e., the difference in the
average yield on assets and average cost of liabilities) and a decrease in the
average balance of interest-bearing liabilities, offset in part by a decrease in
the average balance of interest-earning assets.  The interest rate
spread increased to 2.81% for the quarter ended March 31, 2009, from 2.46% for
the quarter ended March 31, 2008.  The increase in interest rate
spread reflects a decrease in cost of funds, offset in part by a decrease in the
yield on interest-earning assets.





Interest
Income.  Interest income decreased by $1.0 million to $6.47
million for the quarter ended March 31, 2009, compared to $7.49 million for the
quarter ended March 31, 2008.  The decrease in interest income was due
to a decrease in the average balance of interest-earning assets and a decrease
in the yield on interest-earning assets.  The average balance of
interest-earning assets decreased $29.4 million to $445.6 million for the
quarter ended March 31, 2009, from $475.0 million for the quarter ended March
31, 2008.  The average yield on interest-earning assets decreased to
5.83% for the quarter ended March 31, 2009, from 6.31% for the quarter ended
March 31, 2008, primarily due to a decrease in market rates on first mortgage
loans secured by one-to four-family real estate, commercial real estate, and
multifamily residences and consumer loans.  The decrease in the
average balance of interest-earning assets primarily reflects decreases in the
average balances of first mortgage loans, offset in part by an increase in the
average balance of consumer loans, securities available-for-sale, and
interest-bearing cash.  The decrease in the average balance of first
mortgage loans was derived from payments, prepayments, and sales of loans,
offset in part by the origination and purchases of first mortgage loans secured
by one-to four-family real estate and commercial real estate during the three
months ended March 31, 2009.  The increase in the average balance of
securities available-for-sale was primarily due to the purchases of
mortgage-backed securities, offset in part by payments, maturities, and sale of
securities.




11





Interest
Expense.  Interest expense decreased by $1.2 million to $3.1
million for the quarter ended March 31, 2009, compared to $4.29 million for the
quarter ended March 31, 2008.  The average balance of interest-bearing
liabilities decreased $36.4 million to $411.5 million for the quarter ended
March 31, 2009, from $447.9 million for the quarter ended March 31,
2008.  The decrease in the average balance of interest-bearing
liabilities primarily reflects a decrease in borrowed funds and certificates of
deposit, offset in part by an increase in NOW, money market, and savings account
balances.  The decrease in the average balance of borrowed funds was
primarily due to normal repayments of borrowings due to
maturities.  The average cost of funds was 3.02% for the quarter ended
March 31, 2009, compared to 3.85% for the quarter ended March 31,
2008.





The
following table sets forth certain information relating to the Company’s average
balance sheets and reflects the average yield on assets and average cost of
liabilities for the three months ended March 31, 2009 and 2008,
respectively.





For
      the Three Months Ended March 31,2009
                    
                    
                    2008Average
                      Balance
                    
                    
                    Interest
                    
                    
                    Average
                      Yield/Cost
                    
                    
                    Average
                      Balance
                    
                    
                    Interest
                    
                    
                    Average
                      Yield/Cost(Dollars
      in thousands)Assets:Interest-earning
      assets:Loans
                    
                    $
                    403,973
                    
                    
                    $
                    6,185
                    
                    
                    
                    6.15
                    %
                    
                    $
                    443,627
                    
                    
                    $
                    7,171
                    
                    
                    
                    6.47
                    %Securities
      available-for-sale
                    
                    
                    27,627
                    
                    
                    
                    274
                    
                    
                    
                    3.97
                    
                    
                    
                    18,090
                    
                    
                    
                    228
                    
                    
                    
                    5.03Interest-bearing
      cash
                    
                    
                    13,965
                    
                    
                    
                    7
                    
                    
                    
                    0.19
                    
                    
                    
                    13,328
                    
                    
                    
                    89
                    
                    
                    
                    2.69Total
      interest-earning assets
                    
                    
                    445,565
                    
                    
                    $
                    6,466
                    
                    
                    
                    5.83
                    %
                    
                    
                    475,045
                    
                    
                    $
                    7,488
                    
                    
                    
                    6.31
                    %Noninterest-earning
      assets
                    
                    
                    33,124
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    35,930Total
      assets
                    
                    $
                    478,689
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    510,975Liabilities
      and Equity:Interest-bearing
      liabilities:NOW and money
      market savings
                    
                    $
                    93,556
                    
                    
                    $
                    137
                    
                    
                    
                    0.59
                    %
                    
                    $
                    91,499
                    
                    
                    $
                    274
                    
                    
                    
                    1.20
                    %Savings
                    
                    
                    27,046
                    
                    
                    
                    16
                    
                    
                    
                    0.24
                    
                    
                    
                    24,905
                    
                    
                    
                    22
                    
                    
                    
                    0.35Certificates of
      deposit
                    
                    
                    209,813
                    
                    
                    
                    1,917
                    
                    
                    
                    3.70
                    
                    
                    
                    236,129
                    
                    
                    
                    2,795
                    
                    
                    
                    4.75Borrowed
      funds
                    
                    
                    81,052
                    
                    
                    
                    998
                    
                    
                    
                    5.00
                    
                    
                    
                    95,332
                    
                    
                    
                    1,202
                    
                    
                    
                    5.06Total interest-bearing
      liabilities
                    
                    
                    411,467
                    
                    
                    $
                    3,068
                    
                    
                    
                    3.02
                    %
                    
                    
                    447,865
                    
                    
                    $
                    4,293
                    
                    
                    
                    3.85
                    %Noninterest-bearing
      liabilities
                    
                    
                    22,216
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    21,826Total
      liabilities
                    
                    
                    433,683
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    469,691Equity
                    
                    
                    45,006
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    41,284Total
      liabilities and equity
                    
                    $
                    478,689
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    510,975Net interest
    income
                    
                    
                    
                    
                    
                    $
                    3,398
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    3,195Net interest rate
      spread
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2.81
                    %
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2.46
                    %Net interest
    margin
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3.04
                    %
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2.68
                    %Ratio of average
      interest-earning assets   to average interest-bearing
      liabilities
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    108.29
                    %
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    106.07
                    %





Provision for
Loan Losses.  The Company’s provision for loan losses was
$160,000 and $60,000 for the quarters ended March 31, 2009 and 2008,
respectively.  The increase in provision for loan losses for the
quarter ended March 31, 2009 compared to the same period in 2008 was related to
the increase in nonperforming loans outstanding.  The Company
establishes provisions for loan losses, which are charged to operations, in
order to maintain the allowance for loan losses at a level which is deemed to be
appropriate based upon an assessment of prior loss experience, industry
standards, past due loans, economic conditions, the volume and type of loans in
the Company’s portfolio, and other factors related to the collectibility of the
Company’s loan portfolio.  The Company’s total loan portfolio
decreased $44.6 million, or 10.0% from March 31, 2008 to March 31,
2009.  This decrease primarily consisted of decreases in one-to
four-family residential loans.  Net charge-offs were $114,000 for the
three months ended March 31, 2009, compared to $35,000 for the three months
ended March 31, 2008.The resulting
allowance for loan loss was $5.4 million at March 31, 2009, compared to $3.5
million at March 31, 2008.




12





The
allowance for loan losses as a percentage of total loans receivable increased to
1.36% at March 31, 2009 from 0.79% at March 31, 2008.  The level of
nonperforming loans increased to $9.59 million at March 31, 2009 from $1.69
million at March 31, 2008.  This change, along with the increase in
the allowance for loan loss as a percentage of total loans receivable is
primarily a reflection of the deterioration in the economy since the first
quarter of 2008.  The nonperforming asset ratio increased to 2.23% of
total assets as of March 31, 2009 from 0.91% of total assets at March 31,
2008.  Foreclosed real estate decreased to $1.05 million at March 31,
2009 from $2.96 million at March 31, 2008.  The level of special
mention loans increased to $4.32 million at March 31, 2009 from $2.27 million at
March 31, 2008.  Total nonperforming assets increased 15.7% in the
first quarter of 2009 with such increase consisting of one-to-four family
residential loans and one-to-four construction loans, as these sectors of the
economy continued to experience difficulties.





Management
believes that the allowance for loan losses was adequate as of March 31,
2009.  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 $141,000, or 8.3%, to $1.84 million for the
quarter ended March 31, 2009, from $1.70 million for the quarter ended March 31,
2008.  The increase in noninterest income was primarily due to
increases in mortgage banking income and other income, offset in part by
decreases in fees and service charges, abstract fees and loss on sale of
investments.  Mortgage banking income increased $154,000 for the
quarter ended March 31, 2009 compared to the same period of 2008 due to an
increase in loans originated for the secondary market.  Other income,
which primarily includes annuity, securities, insurance sales, and other real
estate owned net earnings, increased $108,000 for the quarter ended March 31,
2009 compared to the same period of 2008 primarily due to an increase in income
from the sale of annuities and a decrease in other real estate owned
expenses.  Fees and service charges decreased $71,000 for the quarter
ended March 31, 2009 compared to the same period of 2008 primarily due to a
decrease in fees associated with checking accounts, including overdraft
fees.  During the quarter ended March 31, 2009, the Company recorded
$13,000 in loan prepayment fees, compared to $5,000 for the quarter ended March
31, 2008.  Abstract fees decreased $48,000 for the quarter ended March
31, 2009 compared to the same period of 2008. Loss on sale of investments
increased by $10,000 for the quarter ended March 31, 2009 compared to the same
period of 2008 due to the partial sale of a mortgage bond mutual fund
investment.





Noninterest
Expense.  Total
noninterest expense increased by $203,000, or 5.4%, to $3.95 million for the
quarter ended March 31, 2009, from $3.74 million for the quarter ended March 31,
2008.  The increase in noninterest expense was primarily due to
increases in premises and equipment and other expenses, offset in part by
decreases in salaries and employee benefits and data processing. The increase in
premises and equipment of $45,000 was primarily due to increases in information
technology enhancements and property taxes. Other expenses increased $299,000
for the quarter ended March 31, 2009 compared to the same period of 2008
primarily due to an increase in legal fees, other professional fees, and FDIC
insurance expense.  The Company’s efficiency ratio for the quarter
ended March 31, 2009 and 2008 was 75.13% and 76.42%,
respectively.  The Company’s ratio of noninterest expense to average
assets for the quarters ended March 31, 2009 and 2008 was 3.30% and 2.93%,
respectively.





Income
Taxes.Provision for
income taxes increased by $63,000 to $354,000 for the quarter ended March 31,
2009, compared to $292,000 for the quarter ended March 31, 2008.  The
increase in income taxes was primarily due to the increase in the income before
income taxes and an increase in the Company’s effective tax rate due to a
decrease in tax exempt earnings.




13




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.  During the first three months of 2009 and 2008,
principal payments, prepayments, and proceeds from the sale of loans totaled
$47.7 million and $46.1, respectively.  The net increase in deposits
during the first three months of 2009 and 2008 totaled $305,000 and $2.1
million, respectively.  There was no change in net short term
borrowings during the three months ended March 31, 2009 and an increase in net
short term borrowings of $2.0 million during the three months ended March 31,
2008.  During the first three months of 2009 and 2008, the proceeds
from the maturities, calls and sales of securities totaled $1.6 million and
$516,000, respectively.  Cash provided from operating activities
during the first three months of 2009 and 2008 totaled $899,000 and $1.6
million, respectively.  The Company’s primary use of funds is to
originate and purchase loans, purchase securities available-for-sale, repay
borrowed funds and other financing activities.  During the first three
months of 2009 and 2008, the Company’s gross purchases and origination of loans
totaled $41.0 million and $38.9 million, respectively.  The purchase
of securities available-for-sale for the three months ended March 31, 2009
totaled $3.8 million compared to $3.1 million for the three months ended March
31, 2008. The repayment of borrowed funds during the first three months of 2009
and 2008 totaled $4.5 million and $5.5 million, respectively.  OTS
regulations require the Company to maintain sufficient liquidity to ensure its
safe and sound operation.  For additional information about cash flows
from the Company’s operating, financing and investing activities, see the
Consolidated Condensed Statements of Cash Flows in the Company’s financial
statements included in Part I, Item 1 of this report.





On
January 9, 2009, we completed the issuance of $10.2 million of our Series A
Preferred Stock and the Warrant under the TARP-CPP. Although the Bank would have
remained “well capitalized” without these funds, this new equity investment
further increases the capacity to support economic activity and growth in each
of the communities served by the Bank through responsible lending.





On
January 5, 2009, the Company paid a quarterly cash dividend of $0.01 per share
of common stock to its shareholders as of the close of business on December 15,
2008.  This dividend payment totaled $13,000.  On February
15, 2009, the Company paid an aggregate cash dividend of $51,000 on the Series A
Preferred Stock.  On February 27, 2009, the Company declared a
quarterly cash dividend of $0.01 per share, payable on April 3, 2009 to
shareholders of record as of the close of business on March 13,
2009.  This dividend payment totaled $13,000.





During
the first quarter of 2009, macro-economic conditions and the ongoing recession
continued to impact liquidity and credit quality across the financial
markets.  While the recession has impacted the local economies in
which we operate and purchase out-of-state real estate loans, our liquidity
position and capital resources remain strong and the Company anticipates that it
will have sufficient funds to meet its current funding commitments.





MODIFICATION
TO THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008




On February 17, 2009, the American Recovery and Reinvestment Act of
2009 (“ARRA”) went into effect and amended certain provisions of EESA, including
replacing Section 111 of EESA in its entirety.  The new Section 111
allows a participant in the TARP-CPP, such as the Company, to repay any
assistance previously received pursuant to the TARP-CPP without regard to the
source of replacement funds or any waiting period subject to consultation with
the appropriate Federal banking agency.  In addition, the new Section
111 set forth in ARRA includes standards and requirements regarding executive
compensation and corporate governance, including the following:




·
            Limits
      on compensation that exclude incentives for the Company’s Senior Executive
      Officers to take unnecessary and excessive risks that threaten the value
      of the Company;


·
            A
      provision for the recovery of any bonus, retention award, or incentive
      compensation paid to the Company’s Senior Executive Officers or to any of
      the Company’s next twenty most highly compensated employees based on
      certain financial statements or other criteria that are later found to be
      materially inaccurate;


·
            A
      prohibition on the Company from making any payments to the Senior
      Executive Officers or to any of the next five most highly compensated
      employees for departure from the Company for any reason, except for
      payments for services performed or benefits
  accrued;




14




·
            A
      prohibition on the Company’s ability to pay bonuses and certain other
      compensation to the Company’s Chief Executive Officer, except with respect
      to certain restricted stock awards or to the extent that a bonus is
      required by a valid employment
contract;


·
            A
      prohibition on any compensation plan that would encourage manipulation of
      the Company’s reported earnings for the purposes of enhancing employee
      compensation;


·
            A
      requirement for the Company’s Chief Executive Officer and Chief Financial
      Officer to provide certain certifications regarding the
      foregoing;


·
            Certain
      requirements with respect to the Company’s Personnel and Compensation
      Committee;


·
            A
      requirement to adopt a company-wide policy regarding excessive or luxury
      expenditures;


·
            A
      requirement to permit a nonbinding “say on pay” shareholder vote to be
      included in the Company’s proxy statement with respect to an annual
      meeting of stockholders; and


·
            Authorizing
      the Secretary of the Treasury to review certain compensation paid to the
      Company’s Senior Executive Officers and the next 20 most
      highly-compensated employees to determine whether any such payments were
      inconsistent with the purposes of the
foregoing.




The new
Section 111 set forth in ARRA provides that the Secretary of the Treasury and/or
the Securities and Exchange Commission shall promulgate regulations to implement
the foregoing requirements and restrictions.  In light of the
amendments to Section 111 of EESA included in ARRA, the Company intends to
evaluate and amend any employment agreements, benefit plans and other
arrangements, and take any other action necessary to ensure compliance with the
applicable requirements.





OFF-BALANCE
SHEET ARRANGEMENTS





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





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





No
material changes in the Company’s off-statement of financial condition
arrangements occurred during the three months ended March 31, 2009.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





In
management’s opinion, there has not been a material change in the Company’s
market risk profile during the three months ended March 31,
2009.  Please see the Company’s 2008 Annual Report on Form 10-K for a
more detailed discussion of the Company’s interest rate sensitivity
analysis.





Item
4T.  Controls and Procedures





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




15





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





PART
II.  OTHER INFORMATION





Item
1.  Legal Proceedings





Except
for the proceedings described in Note 9 to the Notes to Consolidated Condensed
Financial Statements which is incorporated herein by reference, the Company is
not involved in any pending legal proceedings other than routine legal
proceedings occurring in the ordinary course of business.  While no
assurance can be given regarding the outcome of these matters, based on
information currently available, we believe that the resolution of these matters
will not have a material adverse effect on our financial position or results of
our future operations. However, because of the nature and inherent uncertainties
of litigation, should the outcome of these actions be unfavorable, our business,
financial condition, results of operations and cash flows could be materially
adversely affected.




Item
4.  Submission of Matters to a Vote of Security Holders




The
Company held its annual meeting of shareholders on May 5, 2009.  All
proposals submitted to stockholders at the meeting were approved.  At
the meeting, the stockholders of the Company considered and voted upon the
election of the following individuals as directors for a three-year
term:





David M.
Bradley


Robert H.
Singer, Jr.





The
results of the election of directors were as follows:


FOR
                  WITHELDDavid
      M. Bradley
                  1,047,299
                  101,055Robert
      H. Singer, Jr.
                  1,027,144
                  121,210





There
were no broker non-votes or abstentions on this proposal.





In
addition, the following directors’ terms of office continued after the
meeting:





Paul F.
Bognanno


C. Thomas
Chalstrom


Randall
L. Minear


Melvin R.
Schroeder


Mark M.
Thompson.





The
stockholders of the Company also voted on a nonbinding advisory proposal on the
Company’s executive pay policies and procedures.  A majority of the
stockholders who voted on this proposal approved of the Company’s pay
practices.  The results of the voting on this proposal were as
follows:





FOR
              AGAINST
              ABSTAIN982,388
              118,108
              47,857





There
were no broker non-votes on this proposal.





16





Item
6.  Exhibits





Exhibit
      No.
            Description
            
            Reference
      No.3.1
            Articles
      of Incorporation of North Central Bancshares, Inc.
            
            (1)3.2
            Bylaws
      of North Central Bancshares, Inc., as amended
            
            (2)3.3
            Articles
      of Amendment to the Articles of Incorporation establishing Series A
      Preferred Stock
            
            (3)4.1
            Specimen
      of stock certificate representing Series A Preferred
Stock.
            
            (4)4.1
            Warrant
      to Purchase up to 99,157 shares of Common Stock.
            
            (4)10.1
            Letter
      Agreement, dated January 9, 2009, including the Securities Purchase
      Agreement – Standard Terms incorporated by reference therein, between the
      Company and the United States Department of the Treasury.
            
            (4)10.2
            Form
      of Waiver, executed by each of David M. Bradley, Kyle C. Cook, C. Thomas
      Chalstrom, and Kirk A. Yung.
            
            (4)10.3
            Form
      of Omnibus Amendment Agreement, executed by each of David M. Bradley, Kyle
      C. Cook, C. Thomas Chalstrom, and Kirk A. Yung.
            
            (4)31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer
            
            *31.2
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer
            
            *32.1
            Section
      1350 Certification of Chief Executive Officer
            
            *32.2
            Section
      1350 Certificate of Chief Financial Officer
            
            *





*
            Filed
      herewith





(1)
            Incorporated
      herein by reference to Registration Statement No. 33-80493 on Form S-1
      filed with the SEC on December 18, 1995, as
  amended.





(2)
            Incorporated
      herein by reference to the Annual Report on Form 10-K filed with the SEC
      on March 29, 2004.





(3)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed with the SEC
      on January 7, 2009.





(4)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed with the SEC
      on January 15, 2009.




17




SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.


NORTH
      CENTRAL BANCSHARES, INC.Date:
      May 14, 2009
                      BY:
                      /s/ David
      M. BradleyDavid
      M. Bradley, Chairman, President & CEODate:
      May 14, 2009
                      BY:
                      /s/
      Kyle C. CookKyle
      C. Cook, Chief Financial Officer and Treasurer




18