<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549
                    ----------------------------------------

                                   FORM 10-Q

[Mark One]
[   X   ]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
           ACT OF 1934

     For the quarterly period ended September 30, 1997

[       ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE  EXCHANGE ACT

     For the transition period from ___________________________________ to
_____________________________________

                         Commission File Number 0-27672

                         NORTH CENTRAL BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)

                    Iowa                                 42-1449849
     ------------------------------------------------------------------
       (State or other jurisdiction of               (I. R. S. Employer
       incorporation or organization)              Identification Number)

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

       Registrant's telephone number, including area code #(515)576-7531

                                      None
     -------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the past 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes  X    No
                      -----    -----
     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

              Class                           Outstanding at November 13, 1997
-------------------------------------------------------------------------------

(Common Stock, $.01 par value)                                3,266,483
<PAGE>
 
                         NORTH CENTRAL BANCSHARES, INC.

                                     INDEX

 
                                                                    Page

Part I.  Financial Information
<TABLE>
<CAPTION>
 

<S>            <C>                                                <C> 
               Item 1.  Consolidated Condensed
               Financial Statements (unaudited)                     1 to 5
               Consolidated Condensed Statements of
               Financial Condition at September 30,
               1997 and December 31, 1996                              1
 
               Consolidated Condensed Statements of
               Income for the three and nine months ended
               September 30, 1997 and 1996                             2
 
               Consolidated Condensed Statements of
               Cash Flows for the nine months ended
               September 30, 1997 and 1996                             3
 
               Notes to Consolidated Condensed Financial
               Statements                                           4 to 6
 
               Item 2.  Management's Discussion and Analysis
               of Financial Condition and Results of
               Operations                                           7 to 14
 
               Item 3.  Quantitative and Qualitative Disclosures
               About Market Risk                                       14
 
Part II.    Other Information                                       15 & 16
 
               Items 1 through 6                                       15
 
               Signatures                                              16

               Exhibits
</TABLE>
 
<PAGE>
 
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
 
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
 
                                                                           September 30,    December 31,
ASSETS                                                                         1997            1996
                                                                           ------------    ------------
<S>                                                                       <C>             <C>
Cash:
     Interest-bearing                                                      $  3,674,325    $  2,973,490
     Noninterest-bearing                                                        846,228         963,325
Securities available for sale                                                22,241,637      23,103,614
Securities held to maturity                                                          --       3,499,528
Loans receivable, net                                                       181,119,869     165,831,040
Accrued interest receivable                                                   1,328,799       1,327,733
Foreclosed real estate                                                          231,814         128,471
Premises and equipment, net                                                   2,015,152       1,780,392
Rental real estate                                                            2,083,625       1,775,844
Title plant                                                                     925,256         968,747
Deferred taxes                                                                   74,000         198,000
Prepaid expenses and other assets                                               592,683         542,351
                                                                           ------------    ------------
 
     Total assets                                                          $215,133,388    $203,092,535
                                                                           ============    ============
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
LIABILITIES
     Deposits                                                              $139,254,875    $129,722,044
     Other borrowed funds                                                    25,550,000      22,335,000
     Advances from borrowers for taxes and insurance                            346,994         845,488
     Dividend payable                                                           203,624         230,344
     Income taxes payable                                                       118,930         182,826
     Accrued expenses and other liabilities                                     356,169         542,026
                                                                           ------------    ------------
       Total liabilities                                                    165,830,592     153,857,728
                                                                           ------------    ------------
 
COMMITMENTS
 
STOCKHOLDERS' EQUITY
     Preferred stock ($.01 par value, authorized 3,000,000 shares;
       issued and outstanding none)                                                  --              --
     Common Stock ($.01 par value, authorized 15,500,000 shares;
       issued and outstanding 4,011,057)                                         40,111          40,111
     Additional paid-in capital                                              37,895,518      37,796,611
     Retained earnings, substantially restricted                             22,760,386      20,531,604
     Unrealized gain on securities available for sale, net of
       income taxes                                                             364,532          73,097
     Treasury stock at cost (1997 753,074 shares; 1996 581,602 shares)      (10,496,411)     (7,789,661)
     Unearned shares, employee stock ownership plan                          (1,261,340)     (1,416,955)
                                                                           ------------    ------------
       Total stockholders' equity                                            49,302,796      49,234,807
                                                                           ------------    ------------
 
     Total liabilities and stockholders' equity                            $215,133,388    $203,092,535
                                                                           ============    ============
</TABLE> 
 
    See Notes to Consolidated Condensed Financial Statements.

                                      -1-
<PAGE>
 
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
 
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
                                                                     Three Months Ended       Nine Months Ended
                                                                         September 30,           September 30,
                                                                   1997         1996         1997         1996
                                                                ----------   ----------  -----------   -----------
<S>                                                            <C>          <C>          <C>          <C>
Interest Income:
     Loans receivable:
       First mortgage loans                                     $3,117,288   $2,823,390   $ 9,111,895  $ 8,241,977
       Consumer loans                                              562,520      521,388     1,623,475    1,472,851
Securities and cash deposits                                       419,857      479,904     1,200,805    1,421,624
                                                                ----------   ----------   -----------  -----------
                                                                 4,099,665    3,824,682    11,936,175   11,136,452
                                                                ----------   ----------   -----------  -----------
Interest expense:                                                                                    
     Deposits                                                    1,665,152    1,553,231     4,795,481    4,652,589
     Other borrowed funds                                          360,422      119,513       980,208      463,945
                                                                ----------   ----------   -----------  -----------
                                                                 2,025,574    1,672,744     5,775,689    5,116,534
                                                                ----------   ----------   -----------  -----------
                                                                                                     
     Net Interest Income                                         2,074,091    2,151,938     6,160,486    6,019,918
                                                                                                     
Provision for loan losses                                           60,000       60,000       180,000      180,000
                                                                ----------   ----------   -----------  -----------
                                                                                                     
Net interest income after provision for loan                                                         
     losses                                                      2,014,091    2,091,938     5,980,486    5,839,918
                                                                ----------   ----------   -----------  -----------
                                                                                                     
Noninterest income:                                                                                  
     Fees and service charges                                      163,074      166,355       472,074      415,458
     Abstract fees                                                 324,204      250,048       886,981      702,301
     Gain on sale of securities available for                                                        
        sale                                                            --           --            --       13,774
     Other income                                                  106,165       83,908       317,371      273,049
                                                                ----------   ----------   -----------  -----------
                                                                                                     
        Total noninterest income                                   593,443      500,311     1,676,426    1,404,582
                                                                ----------   ----------   -----------  -----------
                                                                                                     
Noninterest expense:                                                                                 
     Salaries and employee benefits                                551,866      466,115     1,607,769    1,495,268
     Premises and equipment                                        110,419       93,367       316,908      317,185
     Data processing                                                65,022       59,887       191,224      178,959
     SAIF deposit insurance premiums                                20,950      891,490        63,181    1,037,589
     Other expenses                                                362,813      320,913     1,160,676      843,321
                                                                ----------   ----------   -----------  -----------
                                                                                                     
        Total noninterest expense                                1,111,070    1,831,772     3,339,758    3,872,322
                                                                ----------   ----------   -----------  -----------
                                                                                                     
Income before income taxes                                       1,496,464      760,477     4,317,154    3,372,178
                                                                                                     
Provision for income taxes                                         523,347      260,216     1,495,563    1,209,599
                                                                ----------   ----------   -----------  -----------
                                                                                                     
Net Income                                                      $  973,117   $  500,261   $ 2,821,591  $ 2,162,579
                                                                ==========   ==========   ===========  ===========
                                                                                                     
Earnings per share                                              $     0.31   $     0.13   $      0.88  $      0.56
                                                                ==========   ==========   ===========  ===========
                                                                                                     
Dividends declared per common share                             $   0.0625   $   0.0625   $    0.1875  $    0.2250
                                                                ==========   ==========   ===========  ===========
</TABLE> 
 
  See Notes to Consolidated Condensed Financial Statements.

                                      -2-
<PAGE>
 
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                                                          Nine Months Ended
                                                                                            September 30,
                                                                                         1997           1996
                                                                                     ------------   ------------
<S>                                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 
Net income                                                                           $  2,821,591   $  2,162,579
Adjustments to reconcile net income to net cash provided by operating activities:
     Provision for loan losses                                                            180,000        180,000
     Depreciation, premises and equipment                                                 143,081        150,878
     Depreciation, rental real estate                                                      55,000             --
     Amortization and accretion                                                            73,508       (141,992)
     Deferred taxes                                                                       (57,825)      (125,964)
     Effect of contribution to employee stock ownership plan                              254,522        112,508
     (Gain) on sale of foreclosed real estate and loans, net                              (20,685)        (9,323)
     (Gain) on sale of securities available for sale                                           --        (13,774)
     Loss on disposal of equipment                                                          4,674         19,781
     Change in assets and liabilities:
       (Increase) decrease in accrued interest receivable                                  (1,066)        97,592
       (Increase) in income taxes receivable                                                   --        (89,199)
       (Increase) in prepaid expenses and other assets                                    (50,332)      (529,145)
       (Decrease) in income taxes payable                                                 (63,896)            --
       Increase (decrease) in accrued expenses and other liabilities                     (185,857)       766,841
                                                                                     ------------   ------------
 
           Net cash provided by operating activities                                    3,152,715      2,580,782
                                                                                     ------------   ------------ 
                                                                                                   
 
CASH FLOWS FROM INVESTING ACTIVITIES
     Net (increase) in loans                                                           (3,376,990)    (5,188,068)
     Purchase of loans                                                                (12,259,359)    (7,370,289)
     Proceeds from sale of loans                                                          161,381             --
     Proceeds from sales and maturities of securities available for sale                3,933,750         53,891
     Purchase of securities available for sale                                         (2,664,973)   (14,274,965)
     Proceeds from maturities of securities held to maturity                            3,500,000      9,500,000
     Purchase of premises and equipment                                                  (413,815)      (325,874)
     Proceeds from sale of equipment                                                       31,300            100
     Purchase of rental real estate                                                      (362,781)            --
     Proceeds from sale of title plant                                                     43,491             --
     Other                                                                                (84,039)        16,885
                                                                                     ------------   ------------
 
          Net cash (used in) investing activities                                     (11,492,035)   (17,588,320)
                                                                                     ------------   ------------
 
CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits                                                           9,532,831      2,786,339
     Increase in advances from borrowers for taxes and insurance                         (498,494)      (413,499)
     Net change in short term borrowings                                              (10,000,000)   (10,500,000)
     Proceeds from other borrowed funds                                                16,250,000             --
     Payments of other borrowings                                                      (3,035,000)      (892,000)
     Proceeds from issuance of common stock                                                    --     25,412,159
     Payments for expenses incurred relating to conversion to stock form                       --       (871,592)
     Purchase of treasury stock                                                        (2,706,750)            --
     Dividends paid                                                                      (619,529)      (479,295)
                                                                                     ------------   ------------
 
          Net cash provided by financing activities                                     8,923,058     15,042,112
                                                                                     ------------   ------------
 
          Net increase  in cash                                                           583,738         34,574
 
CASH
     Beginning                                                                          3,936,815      3,071,642
                                                                                     ------------   ------------
     Ending                                                                          $  4,520,553   $  3,106,216
                                                                                     ============   ============
 
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash payments for:
     Interest paid to depositors                                                     $  4,757,337   $  4,632,704
     Interest paid on borrowings                                                        1,052,379        455,175
     Income taxes                                                                       1,619,750      1,424,761
</TABLE> 
 
       See Notes to Consolidated Condensed Financial Statements.

                                      -3-
<PAGE>
 
ITEM 1.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NORTH CENTRAL BANCSHARES, INC. AND SUBSIDIARIES

1.   SIGNIFICANT ACCOUNTING POLICIES

The consolidated condensed financial statements for the three and nine month
periods ended September 30, 1997 and 1996 are unaudited.  In the opinion of the
management of North Central Bancshares, Inc. (the "Company" or the "Registrant")
these financial statements reflect all adjustments, consisting only of normal
recurring accruals, necessary to present fairly these consolidated financial
statements.  The results of operations for the interim periods are not
necessarily indicative of results which may be expected for an entire year.
Certain information and footnote disclosure normally included in complete
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the requirements for interim
financial statements.  The financial statements and notes thereto should be read
in conjunction with the Company's 1996 Annual Report on Form 10-K.

The consolidated condensed financial statements include the accounts of the
Company and its wholly-owned subsidiaries (See Note 2).  All significant
intercompany balances and transactions have been eliminated in consolidation.

2.   REORGANIZATION

The Company was organized on December 5, 1995 at the direction of the Board of
Directors of First Federal Savings Bank of Fort Dodge (the "Bank") for the
purpose of acquiring all of the capital stock of the Bank, in connection with
the conversion of the Bank, and North Central Bancshares, M.H.C. (the "Mutual
Holding Company" or "MHC") from the mutual to the stock holding company
structure (these transactions are collectively referred to as the
"Reorganization").  On March 20, 1996, upon completion of the Reorganization,
the Company issued an aggregate of 4,011,057 shares of its common stock,
1,385,590 shares of which were issued in exchange for all of the Bank's issued
and outstanding shares, except for shares owned by the MHC which were cancelled,
and 2,625,467 shares of which were sold in Subscription and Community Offerings
(the "Offering") at a price of $10.00 per share, with gross proceeds amounting
to $26,254,670.  In addition, the Company replaced the Bank as the issuer listed
on The Nasdaq Stock Market.

At this time, the Company conducts business as a unitary savings and loan
holding company and the principal business of the Company consists of the
operation of its wholly owned subsidiary, the Bank.

3.   EARNINGS PER SHARE

The earnings per share amounts were computed using the weighted average number
of shares outstanding during the periods presented.  In accordance with
Statement of Position No. 93-6, Employers' Accounting for Employee Stock
Ownership Plans, issued by the American Institute of Certified Public
Accountants, shares owned by the Bank's Employee Stock Ownership Plan that have
not been committed to be released are not considered to be outstanding for the
purpose of computing earnings per share.  For the three and nine month periods
ended September 30, 1997, the weighted average number of shares outstanding were
3,121,633 and 3,201,605, respectively.  For the three and nine month periods
ended September 30, 1996, the weighted average number of shares outstanding were
3,852,586 and 3,872,209, respectively.  The number of shares outstanding for the
nine month period ended September 30, 1996 was restated to reflect the
conversion ratio effected as part of the Reorganization.

4.   DIVIDENDS

On August 22, 1997, the Company declared a cash dividend on its common stock,
payable on October 6, 1997 to stockholders of record as of September 15, 1997,
equal to $0.0625 per share.
       
                                      -4-
<PAGE>
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5.   RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, FASB issued Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS No. 128").  SFAS No. 128 specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock or potential common stock.
This statement simplifies the standards for computing EPS previously found in
Accounting principles Board Opinion No. 15 ("APB No. 15").  It replaces the
presentation of primary EPS with a presentation of Basic EPS, and requires dual
presentation of basic and diluted EPS.  Basic EPS is computed by dividing net
income by the weighted average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997 and requires
restatement of all prior-period EPS data presented.  Upon adoption of SFAS No.
128, the change will not result in a material change in the Company's EPS
presentation from primary to basic EPS and from fully diluted to diluted EPS.

In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129 ("SFAS No. 129") "Disclosure of Information about Capital Structure."
SFAS No. 129 requires nonpublic entities to include disclosure requirements
regarding capital structure as specified in APB Opinion No. 15, "Earnings Per
Share." These disclosure requirements are effective for financial statements for
periods ending after December 15, 1997.  The adoption of SFAS No. 129 will have
no effect on the financial condition or results of operations.

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS No. 130").  SFAS No. 130 requires
that all items that are components of comprehensive income (defined as "the
change in equity [net assets] of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources.  It
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners"), be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Companies will be required to (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.  SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997, and requires reclassification of prior periods presented.  As
the requirements of SFAS No. 130 are disclosure-related, its implementation will
have no impact on the Company's financial condition or results of operations.

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information" ("SFAS
No. 131").  SFAS No. 131 requires that enterprises report certain financial and
descriptive information about operating segments in complete sets of financial
statements of the Company and in condensed financial statements of interim
periods issued to shareholders.  It also requires that a Company report certain
information about their products and services, geographic areas in which they
operate, and their major customers.  SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997.  As the requirements of SFAS No. 131 are
disclosure-related, its implementation will have no impact on the Company's
financial condition or results of operations.

6.  ACQUISITION OF VALLEY FINANCIAL CORP.

On September 18, 1997, the Company announced the execution of a definitive
agreement to acquire Valley Financial Corp., a privately held Iowa corporation
and parent company of Valley Savings Bank, FSB, Burlington, Iowa.

The acquisition is subject to approval by the shareholders of Valley, approval
of the appropriate regulatory authorities and the satisfaction of certain other
customary conditions.  The acquisition will be accounted for as a purchase and
is expected to close during the first quarter of 1998.
        
                                      -5-
<PAGE>
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)  (Continued)
    
Under the terms of the Agreement, North Central will acquire in a cash
transaction valued at $14.7 million, or $525.00 per share, all 28,050 shares
outstanding of Valley's common stock.  The pricing reflects 190.6% of Valley's
June 30, 1997 book value and 13.0 times Valley's earnings for the twelve months
ended June 30, 1997, as adjusted for the one-time SAIF charge.  Valley's $7.7
million of capital stood at 6.95% of assets as of June 30, 1997 and earnings
were $635,000 for the six months ended June 30, 1997.

Valley Savings Bank, FSB, a federally chartered savings bank, has two offices in
Burlington, Iowa and one office in Mount Pleasant, Iowa.  At June 30, 1997,
Valley Savings Bank, FSB had assets of $110.9 million, loans of $60.2 million
and deposits of $102.1 million.

                                      -6-
<PAGE>
         
ITEM 2.

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

EXPLANATORY NOTE

This Quarterly Report on Form 10-Q contains forward-looking statements
consisting of estimates with respect to the financial condition, results of
operations and business of the Company that are subject to various factors which
could cause actual results to differ materially from these estimates.  These
factors include, changes in general, economic and market, and legislative and
regulatory conditions, and the development of an adverse interest rate
environment that adversely affects the interest rate spread or other income
anticipated from the Company's operations and investments.

ACQUISITION OF VALLEY FINANCIAL CORP.

On September 18, 1997, the Company announced the execution of a definitive
agreement to acquire Valley Financial Corp., a privately held Iowa corporation
and parent company of Valley Savings Bank, FSB, Burlington, Iowa.

Under the terms of the Agreement, North Central will acquire in a cash
transaction valued at $14.7 million, or $525.00 per share, all 28,050 shares
outstanding of Valley's common stock. The pricing reflects 190.6% of Valley's
June 30, 1997 book value and 13.0 times Valley's earnings for the twelve months
ended June 30, 1997, as adjusted for the one-time assessment to recapitalize
the Savings Association Insurance Fund. Valley's $7.7 million of capital stood
at 6.95% of assets as of June 30, 1997 and earnings were $635,000 for the six
months ended June 30, 1997.

Valley Savings Bank, FSB, a federally chartered savings bank, has two offices in
Burlington, Iowa and one office in Mount Pleasant, Iowa.  At June 30, 1997,
Valley Savings Bank, FSB had assets of $110.9 million, loans of $60.2 million
and deposits of $102.1 million.

The acquisition of Valley will result in the merger of Valley Savings Bank with
and into First Federal, with the three Valley branches continuing to operate as
Valley Savings Bank, a division of First Federal.  Doyle Ruble, the current
President of Valley Savings Bank, will continue as President of the Valley
Savings Bank division.  The combined banking operation will have assets in
excess of $300 million.  The transaction, which will be accounted for as a
purchase, is expected to close in the first quarter of 1998.

The transaction has the unanimous approval of the boards of directors of North
Central and Valley.  The acquisition is subject to approval by the shareholders
of Valley, approval of the appropriate regulatory authorities and the
satisfaction of certain other customary conditions.  Each member of Valley's
Board of Directors, representing in excess of 25% of the voting power of Valley,
has individually agreed to vote such person's shares in favor of the
transaction.

FINANCIAL CONDITION

Total assets increased $12.0 million, or 5.9%, to $215.1 million at September
30, 1997 compared to $203.1 million at December 31, 1996. Securities available
for sale decreased $862,000, or 3.9%, primarily due to the maturities of several
U.S. Treasury Notes and the call of certain equity securities, partially offset
by the purchase of several U.S. Treasury Notes and the purchase of certain
equity securities. Securities held to maturity decreased $3.5 million, or
100.0%, due to the maturities of several U.S. Treasury Notes and the Company's
decision not to replace such securities at the present time, in order to allow
the Company greater flexibility in managing its portfolio of investment
securities. Total loans receivable, net, increased by $15.3 million, or 9.2%,
from December 31, 1996, due primarily to originations of $18.5 million of first
mortgage loans secured primarily by one-to-four family residences, purchases of
$12.3 million of first mortgage loans secured by one-to-four family and multi-
family residences and originations of $7.7 million of second mortgage loans,
which originations and purchases were offset in part by payments and prepayments
of loans (of 
      
                                      -7-
<PAGE>
 
approximately $26.4 million).  The increase in loans receivable reflects the
Company's strategy to leverage its balance sheet by increasing its loan
portfolio, which strategy includes purchasing loans. Deposits increased $9.5
million, or 7.3%, from $129.7 million at December 31, 1996 to $139.3 million at
September 30, 1997, reflecting an increases in certificates of deposit, NOW and
money market accounts. These increases were primarily due to increased
advertising by the Company to promote such products, the expansion of a branch
of the Bank in Ames, Iowa and fluctuations in market interest rates. Other
borrowings, primarily FHLB advances, increased by $3.2 million, to $25.6 million
at September 30, 1997 from $22.3 million at December 31, 1996, primarily to fund
asset growth which was not funded by deposit increases. Total stockholders'
equity increased $68,000, from $49.2 million at December 31, 1996 to $49.3
million at September 30, 1997, primarily due to earnings, which were offset in
part by stock repurchases and dividends declared. See "Capital".

CAPITAL

The Company's total stockholders' equity increased by $68,000 to $49.3 million
at September 30, 1997 from $49.2 million at December 31, 1996, primarily due to
earnings, which were offset in part by stock repurchases and dividends declared.
The changes in stockholders' equity were also due to the unrealized gain on
securities available for sale increased by $291,000 to $365,000 at September 30,
1997 from $73,000 at December 31, 1996.  The unearned shares from the Employee
Stock Ownership Plan (the "ESOP") decreased by $156,000 to $1.3 million at
September 30, 1997 from $1.4 million at December 31, 1996, due to the release of
shares by the ESOP to employees of the Bank.

The Office of Thrift Supervision (the "OTS") requires that the Bank meet minimum
tangible, leverage (core) and risk-based capital requirements.  As of September
30, 1997, the Bank exceeded all of its regulatory capital requirements.  The
Bank's required, actual and excess capital levels as of September 30, 1997 are
as follows:
<TABLE>
<CAPTION>
 
                        Amount   Percentage of Assets
                       --------  ---------------------
<S>                    <C>       <C>
                           (dollars in thousands)
Tangible capital:
    Capital level       $36,908                 17.43%
    Less Requirement      3,177                  1.50%
                        -------                 -----
    Excess              $33,731                 15.93%
                        =======                 =====

Core capital:
     Capital level      $36,908                 17.43%
     Less Requirement     6,354                  3.00%
                        -------                 -----
     Excess             $30,544                 14.43%
                        =======                 =====

Risk-based capital:
     Capital level      $38,385                 32.67%
     Less Requirement     9,401                  8.00%
                        -------                 -----     
     Excess             $28,984                 24.67%
                        =======                 =====

</TABLE>

LIQUIDITY

The Company's primary sources of funds are cash provided by operating activities
(including principal and interest payment on loans), certain financing
activities (including increases in deposits and proceeds from borrowings) and
certain investing activities (including maturities of securities and other
investments).  During the first nine months of 1997 and 1996, principal payments
and repayments on loans totalled $26.4 million and $23.3 million, respectively.
The net increases in deposits during the first nine months of 1997 and 1996
totalled $9.5 million and $2.8 million, respectively.  The proceeds from
borrowed funds during the first nine months of 1997 totalled $16.3 million.
During the first nine months of 1997 and 1996, the proceeds from the maturities
and sales of securities totalled $7.4  million and $9.6 million, respectively.
Cash provided from operating activities during the first nine months of 1997 and
1996 totalled $3.2 million and $2.6 million, respectively, of which $2.8 and
$2.2 million, respectively, represented net income of the Company.  In the first
nine months of 1996, the Company also received net proceeds from the
Reorganization of $24.5 million. The Company's primary use of funds is cash used
to originate and purchase loans, repayment of borrowed funds and other financing
activities.  During the first nine months of 1997 and 1996, the Company's gross

                                      -8-
<PAGE>
 
purchases and origination of loans totalled $42.8 million and $36.5 million,
respectively. The repayment of borrowed funds during the first nine months of
1997 and 1996 totalled $13.0 million and $11.4 million, respectively. For
additional information about cash flows from the Company's operating, financing
and investing activities, see Statements of Cash Flows in the Condensed
Consolidated Financial Statements.

OTS regulations require that thrift institutions such as the Bank maintain an
average daily balance of liquid assets (cash, certain time deposits, banker's
acceptances and specified U.S. government, state or federal agency obligations)
equal to a monthly average of not less than 5% of their net withdrawable
deposits, plus short term borrowings. At September 30, 1997, the Bank's
liquidity position was $11.8 million or 7.83% of liquid assets, compared to
$13.1 million or 9.11% at December 31, 1996.

OTS regulations also require that thrift institutions such as the Bank maintain
an average daily balance of short term liquid assets (cash, certain time
deposits, banker's acceptances and specified U.S. government, state or federal
agency obligations) equal to a monthly average of not less than 1% of their net
withdrawable deposits, plus short term borrowings. At September 30, 1997, the
Bank's short term liquidity position was $4.3 million or 2.85% of short term
liquid assets, compared to $4.1 million or 2.84% at December 31, 1996.

Stockholders' equity totaled $49.3 million at September 30, 1997 compared to
$49.2 million at December 31, 1996, reflecting the repurchase of the Company's
common stock, the Company's earnings for the quarter, the amortization of the
unallocated portion of shares held by the ESOP, dividends paid on common stock
and the change in the net unrealized gains on securities, net of taxes. The
Company repurchased 171,472 shares of its outstanding common stock at an
aggregate cost of $2,706,750 in open market purchases during the nine months
ended September 30, 1997.

On July 3, 1997, the Company paid a quarterly cash dividend equal to $0.0625 per
share on common stock outstanding as of the close of business on June 13, 1997,
aggregating $204,000. On August 22, 1997, the Company declared a quarterly cash
dividend of $0.0625 per share payable on October 6, 1997 to shareholders of
record as of the close of business on September 15, 1997 aggregating $204,000.

RESULTS OF OPERATIONS

Interest Income.  Interest income increased by $275,000 to $4.1 million for the
three months ended September 30, 1997 compared to $3.8 million for the three
months ended September 30, 1996. The increase in interest income was primarily
due to a $15.9 million increase in the average balance of interest earning
assets (primarily first mortgage and consumer loans) to $206.9 million for the
three months ended September 30, 1997, from $191.0 million for the comparable
1996 period. The increase in the average balance of first mortgage loans and
consumer loans (primarily second mortgage loans) generally reflects an increase
over the past twelve months in originations of first and second mortgage loans
and purchases of first mortgage loans secured by one-to-four family residences
and multi-family residences, which were offset, in part, by payments and
prepayments on such loans. See "Financial Condition." The impact of the increase
in the average balances of first mortgage and consumer loans was offset in part
by a decrease in the average yield on first mortgage loans, consumer loans and
securities available for sale. The average yield on first mortgage loans
decreased to 8.04% for the three months ended September 30, 1997 from 8.09% for
the three months ended September 30, 1996, primarily due to a general decrease
in market interest rates. The average yield on consumer loans decreased to 9.50%
for the three months ended September 30, 1997 from 9.56% for the three months
ended September 30, 1996, also primarily due to a general decrease in market
interest rates. The average balance of securities held to maturity decreased
$8.5 million, or 100.0%, and such securities were in part, replaced by lower
yielding securities available for sale. The lower rate on available for sale
securities is due to lower market interest rates for the nine months ended
September 30, 1997 and the call of certain equity securities whose rate were
higher than the Company's average rate on available-for-sale securities. The
average yield on interest earning assets decreased from 8.00% for the three
months ended September 30, 1996 to 7.91% for the three months ended September
30, 1997.

Interest income increased by $800,000 to $11.9 million for the nine months ended
September 30, 1997 compared to $11.1 million for the nine months ended September
30, 1996. The increase in interest income

                                      -9-
<PAGE>
 
RESULTS OF OPERATIONS (Continued)

was primarily due to a $16.3 million increase in the average balance of interest
earning assets (primarily first mortgage and consumer loans) to $201.6 million
for the nine months ended September 30, 1997, from $185.3 million for the
comparable 1996 period. The increase in the average balance of first mortgage
loans and consumer loans (primarily second mortgage loans) generally reflects an
increase over the past twelve months in originations of first and second
mortgage loans and purchases of first mortgage loans secured by one-to-four
family residences and multi-family residences, which were offset, in part, by
payments and prepayments on such loans. See "Financial Condition." The impact of
the increase in the average balances of first mortgage and consumer loans was
offset in part by a decrease in the average yield on first mortgage loans,
consumer loans and securities available for sale. The average yield on first
mortgage loans decreased to 8.06% for the nine months ended September 30, 1997
from 8.13% for the nine months ended September 30, 1996, primarily due to a
general decrease in market interest rates. The average yield on consumer loans
decreased to 9.49% for the nine months ended September 30, 1997 from 9.59% for
the nine months ended September 30, 1996, also primarily due to a general
decrease in market interest rates. The average balance of securities held to
maturity decreased $10.8 million, or 91.5%, and such securities were in part,
replaced by lower yielding securities available for sale. The average yield on
interest earning assets decreased from 8.02% for the nine months ended September
30, 1996 to 7.90% for the nine months ended September 30, 1997.

Interest Expense.  Interest expense increased by $353,000 to $2.0 million for
the three months ended September 30, 1997 compared to $1.7 million for the three
months ended September 30, 1996. The increase in interest expense was primarily
due to a $24.5 million increase in the average balance of interest bearing
liabilities (primarily borrowed funds and certificates of deposit) to $158.8
million for the three months ended September 30, 1997 from $134.3 million for
the comparable 1996 period. The increase in the average balance in borrowed
funds in 1997 reflects the repayment of borrowed funds with the proceeds of the
Reorganization in 1996 and the increase of borrowed funds subsequent to the
Reorganization in order to fund asset growth. The average cost of interest
bearing liabilities increased to 5.06% for the three months ended September 30,
1997 from 4.96% for the three months ended September 30, 1996, primarily due to
the increase in the average balance of borrowed funds and increases in the
average balance of certificates of deposit, each of which bears interest at a
rate greater than the average interest bearing liabilities.

Interest expense increased by $659,000 to $5.8 million for the nine months ended
September 30, 1997 compared to $5.1 million for the nine months ended September
30, 1996. The increase in interest expense was primarily due to a $16.8 million
increase in the average balance of interest bearing liabilities (primarily
borrowed funds and certificates of deposit) to $153.4 million for the nine
months ended September 30, 1997 from $136.6 million for the comparable 1996
period. The increase in the average balance in borrowed funds in 1997 reflects
the repayment of borrowed funds with the proceeds of the Reorganization in 1996
and the increase of borrowed funds subsequent to the Reorganization in order to
fund asset growth. The average cost of interest bearing liabilities increased to
5.03% for the nine months ended September 30, 1997 from 5.00% for the three
months ended September 30, 1996, primarily due to the increase in the average
balance of borrowed funds and increases in the average balance of certificates
of deposit, each of which bears interest at a rate greater than the average
interest bearing liabilities.

Net Interest Income.  Net interest income before the provision for loan losses
decreased by $78,000 to $2.1 million for the three months ended September 30,
1997 from $2.2 million for the three months ended September 30, 1996. The
decrease is primarily due to the decrease in the excess of average interest
earning assets over the average interest bearing liabilities. This net decrease
was also due in part to the decrease in the Company's interest rate spread
(i.e., the difference in the average yield on assets and average cost of
liabilities) from 3.04% for the three months ended September 30, 1996 to 2.85%
for the three months ended September 30, 1997. The decline in the spread
reflects the general decline in the overall yields on interest-earning assets
combined with the increase in the average balance of borrowed funds and
certificates of deposit which have higher average costs than other interest-
bearing liabilities.

Net interest income before provision for loan losses increased by $141,000 to
$6.2 million for the nine months ended September 30, 1997 from $6.0 million for
the nine months ended September 30, 1996. The increase is primarily due to
increases in the average interest earning assets and increased in the average
interest bearing

                                     -10-
<PAGE>
 
RESULTS OF OPERATIONS (Continued)

liabilities. This net increase was offset in part due to the decrease in the
Company's interest rate spread (i.e., the difference in the average yield on
assets and average cost of liabilities) from 3.02% for the nine months ended
September 30, 1996 to 2.87% for the nine months ended September 30, 1997. The
decline in the spread reflects the general decline in the overall yields on
interest-earning assets combined with the increase in the average balance of
borrowed funds and certificates of deposit which have higher average costs than
other interest-bearing liabilities.

The following tables set forth certain information relating to the Company's
average balance sheets and reflect the average yield on assets and average cost
of liabilities for the three and nine month periods ended September 30, 1997 and
1996.

                                     -11-
<PAGE>
 
RESULTS OF OPERATIONS (Continued)

<TABLE>
<CAPTION>
                                                             For Nine Months Ended September 30,
                                               ---------------------------------------------------------------
                                                            1997                             1996
                                               ------------------------------   ------------------------------
                                               Average              Average      Average              Average
                                               Balance   Interest  Yield/Cost    Balance  Interest  Yield/Cost
                                               --------  --------  ----------   --------  --------  ----------
<S>                                            <C>       <C>       <C>          <C>       <C>       <C>
                                                                    (Dollars in thousands)
Assets:
  Interest-earning assets:
    First mortgage loans.....................  $150,782  $ 9,112        8.06%   $135,109  $ 8,242        8.13%
    Consumer loans...........................    22,862    1,623        9.49      20,524    1,473        9.59
    Securities available for sale............    23,172    1,004        5.79      14,292      692        6.47
    Securities held to maturity..............     1,000       49        6.58      11,775      595        6.75
    Interest bearing cash....................     3,794      148        5.21       3,613      134        4.97
                                               --------  -------      ------    --------  -------      ------
      Total interest-earning assets..........   201,610  $11,936        7.90%    185,313  $11,136        8.02%
                                                         -------      ------              -------      ------
  Noninterest-earning assets.................     6,594                            4,574
                                               --------                         --------
      Total assets...........................  $208,204                         $189,887
                                               ========                         ========

Liabilities and Equity:
  Interest-bearing liabilities:
    NOW and money market savings.............  $ 21,540  $   466        2.89%   $ 18,538  $   394        2.84%
    Passbook savings.........................    17,521      295        2.25      19,361      330        2.28
    Certificates of deposit..................    92,122    4,035        5.86      88,270    3,928        5.94
    Borrowed funds...........................    22,215      980        5.90      10,392      464        5.96
                                               --------  -------      ------    --------  -------      ------
      Total interest-bearing liabilities.....   153,398  $ 5,776        5.03%    136,561  $ 5,116        5.00%
                                                         -------      ------              -------      ------

  Noninterest-bearing liabilities............     5,678                            5,094
                                               --------                         --------
      Total liabilities......................   159,076                          141,655
  Equity.....................................    49,128                           48,232
                                               --------                         --------
      Total liabilities and equity...........  $208,204                         $189,887
                                               ========                         ========

Net interest income..........................            $ 6,160                          $ 6,020
                                                         =======                          =======
Net interest rate spread.....................                           2.87%                            3.02%
                                                                      ======                           ======
Net interest margin..........................                           4.07%                            4.33%
                                                                      ======                           ======
Ratio of average interest-earning assets to..                         131.43%                          135.70%
  average interest-bearing liabilities.......                         ======                           ======
</TABLE>

<TABLE>
<CAPTION>
                                                             For Three Months Ended September 30,
                                               ---------------------------------------------------------------
                                                            1997                             1996
                                               ------------------------------   ------------------------------
                                               Average              Average      Average              Average
                                               Balance   Interest  Yield/Cost    Balance  Interest  Yield/Cost
                                               --------  --------  ----------   --------  --------  ----------
<S>                                            <C>       <C>       <C>          <C>       <C>       <C>
                                                                   (Dollars in thousands)
Assets:
  Interest-earning assets:
    First mortgage loans.....................  $155,005  $ 3,118        8.04%   $139,558  $ 2,823        8.09%
    Consumer loans...........................    23,493      563        9.50      21,701      521        9.56
    Securities available for sale............    22,438      340        6.02      18,917      304        6.38
    Securities held to maturity..............        --       --          --       8,498      148        6.92
    Interest bearing cash....................     5,954       79        5.29       2,307       29        4.93
                                               --------  -------      ------    --------  -------      ------
      Total interest-earning assets..........   206,890  $ 4,100        7.91%    190,981  $ 3,825        8.00%
                                                         -------      ------              -------      ------
  Noninterest-earning assets.................     6,695                            4,944
                                               --------                         --------
      Total assets...........................  $213,585                         $195,925
                                               ========                         ========

Liabilities and Equity:
  Interest-bearing liabilities:
    NOW and money market savings.............  $ 22,241  $   164        2.92%   $ 19,096  $   139        2.89%
    Passbook savings.........................    17,371       99        2.25      18,427      103        2.23
    Certificates of deposit..................    95,115    1,403        5.85      88,562    1,311        5.89
    Borrowed funds...........................    24,033      360        5.95       8,210      120        5.79
                                               --------  -------      ------    --------  -------      ------
      Total interest-bearing liabilities.....   158,760  $ 2,026        5.06%    134,295  $ 1,673        4.96%
                                                         -------      ------              -------      ------

  Noninterest-bearing liabilities............     5,961                            5,531
                                               --------                         --------
      Total liabilities......................   164,721                          139,826
  Equity.....................................    48,864                           56,099
                                               --------                         --------
      Total liabilities and equity...........  $213,585                         $195,925
                                               ========                         ========

Net interest income..........................            $ 2,074                          $ 2,152
                                                         =======                          =======
Net interest rate spread.....................                           2.85%                             3.04%
                                                                      ======                            ======
Net interest margin..........................                           4.01%                             4.51%
                                                                      ======                            ======
Ratio of average interest-earning assets to
  average interest-bearing liabilities.......                         130.32%                           142.21%
                                                                      ======                            ======
</TABLE>
                                     -12-

<PAGE>
 
RESULTS OF OPERATIONS (Continued)

Provision for Loan Losses. The Company's provision for loan losses was $60,000
for each of the three months ended September 30, 1997 and 1996. The Company's
provision for loan losses was $180,000 for each of the nine months ended
September 30, 1997 and 1996. The Company establishes provisions for loan losses,
which are charged to operations, in order to maintain the allowance for loan
losses at a level which is deemed to be appropriate based upon an assessment of
prior loss experience, industry standards, past due loans, economic conditions,
the volume and type of loans in the Bank's portfolio, which includes a
significant amount of multifamily loans, substantially all of which are
purchased and are collateralized by properties located outside of the Bank's
market area, and other factors related to the collectibility of the Bank's loan
portfolio. The net charge offs were $13,000 for the nine months ended September
30, 1997 as compared to net charge offs of $9,000 for the nine months ended
September 30, 1996. The resulting allowance for loan losses was $2.1 million at
September 30, 1997 as compared to $2.0 million at December 31, 1996 and $1.9
million at September 30, 1996. This increase in the allowance for the first nine
months of 1997 reflects the increase in total loans from $164.4 million at
September 30, 1996 to $185.0 million at September 30, 1997. The level of
nonperforming loans increased to $244,000 at September 30, 1997 from $184,000 at
December 31, 1996, yet reflected a decrease from $287,000 at September 30, 1996.
Management believes that the allowance for loan losses is adequate. While
management estimates loan losses using the best available information, such as
independent appraisals for significant collateral properties, no assurance can
be made that future adjustments to the allowance will not be necessary based on
changes in economic and real estate market conditions, further information
obtained regarding known problem loans, identification of additional problem
loans, and other factors, both within and outside of management's control.

Noninterest Income. Total noninterest income increased by $93,000 to $593,000
for the three months ended September 30, 1997 from $500,000 for the three months
ended September 30, 1996. The increase is due to increases in abstract fees and
other income. Abstract fees increased $74,000 due to increased sales volume,
which is in part attributable to the purchase of the assets of an abstract
company in December, 1996. Other income increased $22,000 primarily due to
increases in rental income from the Bank's investment in the Northridge
Apartments Limited Partnership, which owns and operates a 44-unit apartment
complex in Fort Dodge, Iowa, offset in part by decreases in annuity sales and
insurance sales. Other income for the three months ended September 30, 1996 also
reflects losses on the sale of equipment, while no such losses were recorded for
the corresponding three month period in 1997.

Total noninterest income increased by $272,000 to $1.7 million for the nine
months ended September 30, 1997 from $1.4 million for the nine months ended
September 30, 1996. The increase is due to increases in fees and service
charges, abstract fees and other income, offset by decreases in gain on sale of
securities available for sale. Fees and service charges increased $57,000,
primarily due to increases in overdraft fees and checking account service
charges. Abstract fees increased $185,000 due to increased sales volume, which
is in part attributable to the purchase of the assets of an abstract company in
December, 1996. Other income increased $44,000, primarily due to increases in
rental income from the Bank's investment in the Northridge Apartments Limited
Partnership, offset in part by decreases in annuity sales and insurance sales.
Other income for the nine months ended September 30, 1996 also reflects losses
on the sale of equipment, while no such losses were recorded for the
corresponding three month period in 1997. Noninterest income for the nine months
ended September 30, 1996 also reflects gains on sales of securities available
for sale of $14,000, while no such gains were recorded for the corresponding
nine month period in 1997.

Noninterest Expense.  Total noninterest expense decreased by $721,000 to $1.1
million for the three months ended September 30, 1997 from $1.8 million for the
three months ended September 30, 1996. The decrease is primarily due to the
$817,000 one-time special assessment to recapitalize the Savings Association
Insurance Fund ("SAIF"). Absent the one-time assessment, the noninterest expense
for the three months ended September 30, 1997 increased $96.000 over the
corresponding period in 1996. The increase is primarily due to increases in
salaries and employee benefits and other expenses, offset by decreases in SAIF
deposit insurance premiums. The increase in salaries and benefits was primarily
a result of the increased costs associated with the ESOP, normal salary
increases and an increase in the number of employees at the Ames office and at
First Iowa Title Services, Inc. The increase in other expenses is primarily a
result of higher expenditures for advertising, employee expenses and costs
associated with the Bank's investment in the Northridge Apartments Limited
Partnership, offset in part by decreases in professional fees. The decrease in
SAIF deposit insurance premiums, excluding the one-time assessment, was
primarily due to the enactment of legislation which decreased assessment rates
for institutions such as the Bank. The Company's efficiency ratio, excluding the
one-time SAIF assessment, for the three months ended September 30, 1997 and 1996
were 41.65% and 38.25%, respectively. The Company's ratio of noninterest expense

                                     -13-
<PAGE>
 
RESULTS OF OPERATIONS  (Continued)

to average assets, excluding the one-time SAIF assessment, for the three months
ended September 30, 1997 and 1996 were 2.08% and 2.07%, respectively.

Total noninterest expense decreased by $533,000 to $3.3 million for the nine
months ended September 30, 1997 from $3.9 million for the nine months ended
September 30, 1996. The decrease is primarily due to the $817,000 one-time
special SAIF assessment accrued during the third quarter of 1996. Absent the 
one-time assessment, noninterest expense for the nine months ended September 30,
1997 increased $284,000 over the corresponding period in 1996. The increase is
primarily due to increases in salaries and employee benefits and other expenses,
offset by decreases in SAIF deposit insurance premiums. The increase in salaries
and benefits was primarily a result of the increased costs associated with the
ESOP, normal salary increases and an increase in the number of employees at the
Ames office and at First Iowa Title Services, Inc., offset in part by the costs
incurred in the 1996 period related to the adoption of a retirement plan for the
benefit of the former chairman of the board. The increase in other expenses is
primarily a result of higher expenditures for professional fees, advertising and
costs associated with the Bank's investment in the Northridge Apartments Limited
Partnership. The decrease in SAIF deposit insurance premiums, excluding the one-
time assessment, was primarily due to the enactment of legislation which
decreased assessment rates for institutions such as the Bank. The Company's
efficiency ratio, excluding the one-time SAIF assessment, for the nine months
ended September 30, 1997 and 1996 were 42.62% and 41.15%, respectively. The
Company's ratio of noninterest expense to average assets, excluding the one-time
SAIF assessment, for the nine months ended September 30, 1997 and 1996 were
2.14% and 2.15%, respectively.

Income Taxes.  Income taxes increased by $263,000 to $523,000 for the three
months ended September 30, 1997 as compared to $260,000 for the three months
ended September 30, 1996. The increase was primarily due to an increase in pre-
tax earnings during the 1997 period as compared to the corresponding 1996
period, offset in part by the tax credits recognized from the Bank's investment
in the Northridge Apartments Limited Partnership in 1997.

Income taxes increased by $286,000 to $1.5 million for the nine months ended
September 30, 1997 as compared to $1.2 million for the nine months ended
September 30, 1996. The increase was primarily due to an increase in pre-tax
earnings during the 1997 period as compared to the corresponding 1996 period,
offset in part by tax credits recognized from the Bank's investment in the
Northridge Apartments Limited Partnership in 1997.

Net Income.  Net income totaled $973,000 for the three months ended September
30, 1997, compared to $500,000 for the same period in 1996.

Net income totaled $2.8 million for the nine months ended September 30, 1997,
compared to $2.2 million for the same period in 1996.

Year 2000 Compliance.  Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Year 2000 issue affects virtually all companies and
organizations.

The Company, working with its outside service providers, has initiated a project
to ensure that its computer systems are year 2000 compliant. The Company
believes that the costs associated with insuring year 2000 compliance will not
materially affect the Company's future operating results or financial condition.


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

                                     -14-
<PAGE>
 
PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

  Not applicable

Item 2.  Changes in Securities and Use of Proceeds

  Not applicable

Item 3.  Defaults Upon Senior Securities

  Not applicable

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

  Not applicable

Item 5.  Other Information

  Not applicable

Item 6.  Exhibits and Reports on Form 8-K

Exhibit 27.  Financial data schedule. (Only submitted with filing in
electronic format.)

Exhibit 99.1 Press Release (regarding the declaration of a dividend).

Exhibit 99.2 Press Release (regarding the execution of a definitive agreement
for North Central Bancshares, Inc. to acquire Valley Financial Corp. and its
wholly-owned subsidiary, Valley Savings Bank, FSB, Burlington, Iowa)

Exhibit 99.3  Press Release (regarding the issuance of limited financial
information for the quarter ended September 30, 1997).

(b)Reports on Form 8-K

A Form 8-K was filed on September 18, 1997 to report, pursuant to Item 5, the
execution of a definitive agreement for North Central Bancshares, Inc. to
acquire Valley Financial Corp.

                                     -15-
<PAGE>
 
                                  SIGNATURES

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


                                   NORTH CENTRAL BANCSHARES, INC.

DATE:  November 13, 1997           BY: /s/ David M. Bradley



                                   David M. Bradley, CPA
                                   Chairman, President and
                                   Chief Executive Officer

DATE:  November 13, 1997           BY:  /s/ John L. Pierschbacher



                                   John L. Pierschbacher, CPA
                                   Principal Financial Officer



                                     -16-