**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   June
      30, 2008





** ̈**
            **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 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 o
              Accelerated
                  filer oNon-accelerated
                  filer o(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 July 31, 2008Common
                  Stock, $.01 par value
              1,343,448





NORTH
      CENTRAL BANCSHARES, INC.





INDEX


PagePart
                  I. Financial InformationItem
                  1. Financial Statements (Unaudited)
              1Consolidated
                  Condensed Statements of Financial Condition at June 30, 2008 and
                  December
                  31, 2007
              1Consolidated
                  Condensed Statements of Income for the Three Months and Six Months
                  Ended
                  June 30, 2008 and 2007
              2Consolidated
                  Condensed Statements of Cash Flows for the Six Months Ended June
                  30, 2008
                  and 2007
              3Notes
                  to Consolidated Condensed Financial Statements
              5Item
                  2. Management’s Discussion and Analysis of Financial Condition and Results
                  of Operations
              10Item
                  3. Quantitative and Qualitative Disclosure About Market
                  Risk
              17Item
                  4T. Controls and Procedures
              18Part
                  II. Other InformationItem
                  1. Legal Proceedings
              18Item
                  4. Submission of Matters to a Vote of Security Holders
              18Item
                  6. Exhibits
              19Signatures
              20











PART
      I.
      FINANCIAL INFORMATION




**Item
      1. Financial Statements (Unaudited)**




**NORTH
      CENTRAL BANCSHARES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      CONDENSED STATEMENTS OF FINANCIAL CONDITION**


(Unaudited)




**June 30,**
            
            **December 31,****2008**
            
            **2007****ASSETS**Cash
                and due from banks:Interest-bearing
            
            $
            2,912,470
            
            $
            3,132,298Noninterest-bearing
            
            
            8,726,468
            
            
            9,394,409Securities
                available-for-sale
            
            
            19,544,089
            
            
            11,534,942Federal
                Home Loan Bank stock, at cost
            
            
            4,761,300
            
            
            5,064,200Loans
                receivable, net
            
            
            425,578,023
            
            
            446,857,436Loans
                held for sale
            
            
            846,774
            
            
            1,402,488Accrued
                interest receivable
            
            
            2,102,551
            
            
            2,278,635Foreclosed
                real estate
            
            
            2,773,490
            
            
            2,569,314Premises
                and equipment, net
            
            
            12,331,998
            
            
            12,466,305Rental
                real estate
            
            
            2,413,726
            
            
            2,473,633Title
                plant
            
            
            671,704
            
            
            671,704Goodwill
            
            
            4,946,960
            
            
            4,946,960Deferred
                taxes
            
            
            1,177,175
            
            
            1,110,306Bank-owned
                life insurance
            
            
            5,168,584
            
            
            5,044,601Prepaid
                expenses and other assets
            
            
            1,069,503
            
            
            1,245,733**Total
                assets**
            
            $
            495,024,815
            
            $
            510,192,964




**LIABILITIES
      AND STOCKHOLDERS' EQUITY**




**LIABILITIES**Deposits
            
            $
            356,462,706
            
            $
            365,947,856Borrowed
                funds
            
            
            91,364,001
            
            
            97,378,800Advances
                from borrowers for taxes and insurance
            
            
            1,909,174
            
            
            2,016,809Dividends
                payable
            
            
            470,032
            
            
            468,981Accrued
                expenses and other liabilities
            
            
            3,785,566
            
            
            3,403,808**Total
                liabilities**
            
            
            453,991,479
            
            
            469,216,254**STOCKHOLDERS'
                EQUITY**Preferred
                stock ($.01 par value, authorized3,000,000
                shares; none issued and outstanding)
            
            
            -
            
            
            -Common
                stock ($.01 par value, authorized 15,500,000shares;
                at June 30, 2008 1,343,448 shares issued andoutstanding;
                at December 31, 2007, 1,340,948 sharesissued
                and outstanding)
            
            
            13,406
            
            
            13,392Additional
                paid-in capital
            
            
            17,755,852
            
            
            17,686,444Retained
                earnings, substantially restricted
            
            
            23,390,359
            
            
            24,483,022Accumulated
                other comprehensive income (loss)
            
            
            (126,281
            )
            
            (1,206,148
            )**Total
                stockholders' equity**
            
            
            41,033,336
            
            
            40,976,710**Total
                liabilities and stockholders' equity**
            
            $
            495,024,815
            
            $
            510,192,964





See
      Notes
      to Consolidated Condensed Financial Statements


1




**NORTH
      CENTRAL BANCSHARES, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      CONDENSED STATEMENTS OF INCOME**


(Unaudited)




**Three Months Ended**
            
            **Six Months Ended****June 30,**
            
            **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Interest
                income:Loans
                receivable
            
            $
            6,879,895
            
            $
            7,542,094
            
            $
            14,051,270
            
            $
            14,677,723Securities
                and cash deposits
            
            
            274,886
            
            
            339,591
            
            
            591,897
            
            
            756,9337,154,781
            
            
            7,881,685
            
            
            14,643,167
            
            
            15,434,656Interest
                expense:Deposits
            
            
            2,743,649
            
            
            3,195,558
            
            
            5,835,300
            
            
            6,219,966Borrowed
                funds
            
            
            1,150,932
            
            
            1,361,041
            
            
            2,352,917
            
            
            2,614,3463,894,581
            
            
            4,556,599
            
            
            8,188,217
            
            
            8,834,312Net
                interest income
            
            
            3,260,200
            
            
            3,325,086
            
            
            6,454,950
            
            
            6,600,344Provision
                for loan losses
            
            
            160,000
            
            
            60,000
            
            
            220,000
            
            
            90,000Net
                interest income after provision forloan
                losses
            
            
            3,100,200
            
            
            3,265,086
            
            
            6,234,950
            
            
            6,510,344Noninterest
                income:Fees
                and service charges
            
            
            1,113,156
            
            
            1,077,402
            
            
            2,128,290
            
            
            2,084,525Abstract
                fees
            
            
            284,892
            
            
            266,420
            
            
            549,149
            
            
            504,257Provision
                for impairment oninvestments
            
            
            (1,959,911
            )
            
            -
            
            
            (1,959,911
            )
            
            -Mortgage
                banking income
            
            
            150,150
            
            
            112,233
            
            
            311,049
            
            
            169,298Other
                income
            
            
            355,755
            
            
            300,031
            
            
            619,403
            
            
            639,551Total
                noninterest income (loss)
            
            
            (55,958
            )
            
            1,756,086
            
            
            1,647,980
            
            
            3,397,631Noninterest
                expense:Compensation
                and employee benefits
            
            
            1,860,797
            
            
            1,956,151
            
            
            3,834,921
            
            
            3,911,091Premises
                and equipment
            
            
            414,567
            
            
            389,027
            
            
            856,181
            
            
            776,027Data
                processing
            
            
            243,402
            
            
            181,172
            
            
            486,284
            
            
            348,247Other
                expenses
            
            
            1,116,386
            
            
            1,015,831
            
            
            2,201,344
            
            
            1,938,054Total
                noninterest expense
            
            
            3,635,152
            
            
            3,542,181
            
            
            7,378,730
            
            
            6,973,419Income
                (loss) before income taxes
            
            
            (590,910
            )
            
            1,478,991
            
            
            504,200
            
            
            2,934,556Provision
                for income taxes
            
            
            365,900
            
            
            443,500
            
            
            657,500
            
            
            864,800Net
                income (loss)
            
            $
            (956,810
            )
            $
            1,035,491
            
            $
            (153,300
            )
            $
            2,069,756Basic
                earnings (loss) per common share
            
            $
            (0.71
            )
            $
            0.76
            
            $
            (0.11
            )
            $
            1.51Diluted
                earnings (loss) per common share
            
            $
            (0.71
            )
            $
            0.75
            
            $
            (0.11
            )
            $
            1.50Dividends
                declared per common share
            
            $
            0.35
            
            $
            0.35
            
            $
            0.70
            
            $
            0.70Comprehensive
                income
            
            $
            279,660
            
            $
            953,620
            
            $
            926,567
            
            $
            2,082,799





See
      Notes
      to Consolidated Condensed Financial Statements.


2


**NORTH
      CENTRAL BANCSHARES, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS**


(Unaudited)




**Six
                Months Ended**
              **June
                30,****2008**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income (loss)
            
            $
            (153,300
            )
            $
            2,069,756Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:Provision
                for loan losses
            
            
            220,000
            
            
            90,000Depreciation
            
            
            435,874
            
            
            406,388Amortization
                and accretion
            
            
            36,582
            
            
            136,396Deferred
                taxes
            
            
            (5,219
            )
            
            9,664Stock-based
                compensation
            
            
            53,185
            
            
            40,747Excess
                benefit related to stock-based compensation
            
            
            (2,268
            )
            
            (89,126
            )(Gain)
                on sale of foreclosed real estate and loans, net
            
            
            (339,099
            )
            
            (174,068
            )Provision
                for impairment on investments
            
            
            1,959,911
            
            
            -Write-down
                of foreclosed real estate
            
            
            267,090
            
            
            -Loss
                on sale or disposal of equipment and other assets, net
            
            
            -
            
            
            632Proceeds
                from sales of loans held-for-sale
            
            
            26,116,575
            
            
            13,794,103Originations
                of loans held-for-sale
            
            
            (25,249,812
            )
            
            (14,858,605
            )Change
                in assets and liabilities:Accrued
                interest receivable
            
            
            176,084
            
            
            (90,831
            )Prepaid
                expenses and other assets
            
            
            (49,111
            )
            
            272,700Accrued
                expenses and other liabilities
            
            
            394,831
            
            
            365,537Net
                cash provided by operating activities
            
            
            3,861,323
            
            
            1,973,293**CASH
                FLOWS FROM INVESTING ACTIVITIES**Net
                change in loans
            
            
            36,902,186
            
            
            11,454,449Purchase
                of loans
            
            
            (18,303,699
            )
            
            (31,269,271
            )Purchase
                of securities available-for-sale
            
            
            (9,815,998
            )
            
            -Proceeds
                from maturities and calls of securities available-for-sale
            
            
            962,419
            
            
            886,658Proceeds
                from redemption of Federal Home Loan Bank stock
            
            
            459,900
            
            
            367,800Purchase
                of Federal Home Loan Bank stock
            
            
            (157,000
            )
            
            (581,300
            )Purchase
                of premises, equipment and rental real estate
            
            
            (242,041
            )
            
            (278,080
            )Proceeds
                from sale of premises and equipment
            
            
            381
            
            
            305Net
                proceeds from sale of foreclosed real estate
            
            
            1,983,884
            
            
            54,226Net
                cash provided by (used in) investing activities
            
            
            11,790,032
            
            
            (19,365,213
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Net
                increase (decrease) in deposits
            
            
            (9,485,150
            )
            
            10,874,897Net
                increase (decrease) in advances from borrowers for taxes and
                insurance
            
            
            (107,635
            )
            
            52,763Proceeds
                from other borrowed funds
            
            
            8,500,000
            
            
            17,000,000Payments
                of other borrowed funds
            
            
            (14,514,799
            )
            
            (12,514,244
            )Purchase
                of common stock for retirement
            
            
            -
            
            
            (1,776,740
            )Proceeds
                from issuance of common stock
            
            
            4,504
            
            
            251,010Excess
                benefit related to stock-based compensation
            
            
            2,268
            
            
            89,126Dividends
                paid
            
            
            (938,312
            )
            
            (933,244
            )Net
                cash provided by (used in) financing activities
            
            
            (16,539,124
            )
            
            13,043,568Net
                (decrease) in cash
            
            
            (887,769
            )
            
            (4,348,352
            )**CASH
                AND DUE FROM BANKS**Beginning
            
            
            12,526,707
            
            
            20,022,276Ending
            
            $
            11,638,938
            
            $
            15,673,924


3




**CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS-** Continued


(Unaudited)





**Six
                Months Ended**
              **June
                30,********2008**
            
            ******2007****SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION**Cash
                payments for:Interest
                paid to depositors
            
            $
            6,140,390
            
            $
            5,947,776Interest
                paid on borrowings
            
            
            2,352,917
            
            
            2,614,346Income
                taxes
            
            
            234,411
            
            
            655,064**SUPPLEMENTAL
                DISCLOSURE OF NONCASH OPERATING,****INVESTING
                AND FINANCING ACTIVITIES**Transfers
                from loans to foreclosed real estate
            
            $
            2,427,100
            
            $
            151,237Cumulative
                effect of adoption of FIN 48
            
            
            -
            
            
            200,000





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 and six months period
      ended June 30, 2008 and 2007 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, 2007.





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
      (LOSS) PER SHARE**





The
      earnings (loss) 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
      First
      Federal Savings Bank of Iowa’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 (loss) per share. For the three-month period ended June
      30,
      2008, the weighted-average number of shares outstanding for the computation
      of
      basic and diluted earnings (loss) per share were 1,339,390 and 1,350,344,
      respectively. For the six-month period ended June 30, 2008, the weighted-average
      number of shares outstanding for basic and diluted earnings (loss) per share
      computation were 1,338,619 and 1,350,732, respectively. For the three-month
      period ended June 30, 2007, the weighted-average number of shares outstanding
      for the computation of basic and diluted earnings (loss) per share were
      1,362,186 and 1,374,974, respectively. For the six-month period ended June
      30,
      2007, the weighted average number of shares outstanding for the basic and
      diluted earnings (loss) per share computations were 1,366,771 and 1,381,410,
      respectively.





**3.**  **DIVIDENDS**





On
      May
      30, 2008, the Company declared a cash dividend on its common stock, payable on
      July 3, 2008 to stockholders of record as of June 13, 2008, equal to $0.35
      per
      share.





**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 during the year ended December 31, 2007
      and determined there has been no impairment of goodwill.





As
      of
      June 30, 2008 and December 31, 2007, the Company had goodwill of $4,946,960.
      There was no goodwill impairment loss or amortization related to goodwill during
      the three months ended June 30, 2008 or June 30, 2007.





**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 June 30, 2008**
            
            **Six Months Ended June 30, 2008****Traditional**
            
            
            
            
            
            **Traditional****Banking**
            
            **All Others**
            
            **Total**
            
            **Banking**
            
            **All Others**
            
            **Total**Interest
                income
            
            $
            7,154,781
            
            $
            -
            
            $
            7,154,781
            
            $
            14,643,167
            
            $
            -
            
            $
            14,643,167Interest
                expense
            
            
            3,894,581
            
            
            -
            
            
            3,894,581
            
            
            8,188,217
            
            
            -
            
            
            8,188,217**Net
                interest income**
            
            
            3,260,200
            
            
            -
            
            
            3,260,200
            
            
            6,454,950
            
            
            -
            
            
            6,454,950Provision
                for loan losses
            
            
            160,000
            
            
            -
            
            
            160,000
            
            
            220,000
            
            
            -
            
            
            220,000**Net
                interest income after****provision
                for loan losses**
            
            
            3,100,200
            
            
            -
            
            
            3,100,200
            
            
            6,234,950
            
            
            -
            
            
            6,234,950Noninterest
                income
            
            
            (605,227
            )
            
            549,269
            
            
            (55,958
            )
            
            577,504
            
            
            1,070,476
            
            
            1,647,980Noninterest
                expense
            
            
            3,322,988
            
            
            312,164
            
            
            3,635,152
            
            
            6,751,869
            
            
            626,861
            
            
            7,378,730**Income
                (loss) before income****taxes**
            
            
            (828,015
            )
            
            237,105
            
            
            (590,910
            )
            
            60,585
            
            
            443,615
            
            
            504,200Provision
                for income taxes
            
            
            331,500
            
            
            34,400
            
            
            365,900
            
            
            595,500
            
            
            62,000
            
            
            657,500**Net
                income (loss)**
            
            $
            (1,159,515
            )
            $
            202,705
            
            $
            (956,810
            )
            $
            (534,915
            )
            $
            381,615
            
            $
            (153,300
            )Inter-segment
                revenue (expense)
            
            $
            200,129
            
            $
            (200,129
            )
            $
            -
            
            $
            394,014
            
            $
            (394,014
            )
            $
            -Total
                assets
            
            $
            491,585,477
            
            $
            3,439,338
            
            $
            495,024,815
            
            $
            491,585,477
            
            $
            3,439,338
            
            $
            495,024,815Total
                deposits
            
            $
            356,462,706
            
            $
            -
            
            $
            356,462,706
            
            $
            356,462,706
            
            $
            -
            
            $
            356,462,706





**Three
                Months Ended June 30, 2007**
            
            **Six
                Months Ended June 30, 2007****Traditional**
            
            
            
            
            
            **Traditional****Banking**
            
            **All
                Others**
            
            **Total**
            
            **Banking**
            
            **All
                Others**
            
            **Total**Interest
                income
            
            $
            7,881,685
            
            $
            -
            
            $
            7,881,685
            
            $
            15,434,656
            
            $
            -
            
            $
            15,434,656Interest
                expense
            
            
            4,556,599
            
            
            -
            
            
            4,556,599
            
            
            8,834,312
            
            
            -
            
            
            8,834,312**Net
                interest income**
            
            
            3,325,086
            
            
            -
            
            
            3,325,086
            
            
            6,600,344
            
            
            -
            
            
            6,600,344Provision
                for loan losses
            
            
            60,000
            
            
            -
            
            
            60,000
            
            
            90,000
            
            
            -
            
            
            90,000**Net
                interest income after****provision
                for loan losses**
            
            
            3,265,086
            
            
            -
            
            
            3,265,086
            
            
            6,510,344
            
            
            -
            
            
            6,510,344Noninterest
                income
            
            
            1,232,774
            
            
            523,312
            
            
            1,756,086
            
            
            2,348,136
            
            
            1,049,495
            
            
            3,397,631Noninterest
                expense
            
            
            3,248,449
            
            
            293,732
            
            
            3,542,181
            
            
            6,343,558
            
            
            629,861
            
            
            6,973,419**Income
                before income****taxes**
            
            
            1,249,411
            
            
            229,580
            
            
            1,478,991
            
            
            2,514,922
            
            
            419,634
            
            
            2,934,556Provision
                for income taxes
            
            
            426,300
            
            
            17,200
            
            
            443,500
            
            
            845,900
            
            
            18,900
            
            
            864,800**Net
                income**
            
            $
            823,111
            
            $
            212,380
            
            $
            1,035,491
            
            $
            1,669,022
            
            $
            400,734
            
            $
            2,069,756Inter-segment
                revenue (expense)
            
            $
            227,064
            
            $
            (227,064
            )
            $
            -
            
            $
            458,428
            
            $
            (458,428
            )
            $
            -Total
                assets
            
            $
            527,332,387
            
            $
            3,607,589
            
            $
            530,939,976
            
            $
            527,332,387
            
            $
            3,607,589
            
            $
            530,939,976Total
                deposits
            
            $
            371,204,707
            
            $
            -
            
            $
            371,204,707
            
            $
            371,204,707
            
            $
            -
            
            $
            371,204,707





**6.**  **RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      September 2006, the Financial Accounting Standards Board (FASB) issued No.
      157, *Fair
      Value*  *Measurements* (SFAS
      157). The Company adopted SFAS 157 as of January 1, 2008. SFAS 157 defines
      fair
      value, establishes a consistent framework for measuring fair value and expands
      disclosure requirements about fair value measurements. SFAS 157 requires, among
      other things, the Company’s valuation techniques used to measure fair value to
      maximize the use of observable inputs and minimize the use of unobservable
      inputs. The adoption of SFAS 157 resulted in no changes to the Company’s
      financial statements as of January 1, 2008. See Note 7 for additional
      information.


6


In
      February 2007, the FASB issued FASB Statement No. 159. In conjunction with
      the
      adoption of SFAS 157, the Company adopted SFAS 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* (SFAS
      159), as of January 1, 2008. SFAS 159 provides an option for most financial
      assets and liabilities to be reported at fair value on an
      instrument-by-instrument basis with changes in fair value reported in earnings.
      After the initial adoption, the election is made at the acquisition of a
      financial asset, financial liability, or a firm commitment and it may not be
      revoked. No items were selected for the fair value option at the time of
      adoption of SFAS 159.





In
      December 2007, the FASB issued SFAS No. 141 (revised), *Business
      Combinations* .
      SFAS
      No. 141 replaces the original SFAS. This Statement applies to all transactions
      in which an entity obtains control of one or more businesses. SFAS No. 141
      requires an acquirer to recognize the assets acquired, the liabilities assumed,
      and any noncontrolling interest in the acquiree at their fair values, with
      limited exceptions, as of the acquisition date. Goodwill is to be recognized
      as
      a residual. If the acquisition-date fair value exceeds the consideration
      transferred, a gain is to be recognized. The Statement generally requires that
      acquisition costs be expensed. This Statement is effective for the Company
      for
      business combinations for which the acquisition date is on or after January
      1,
      2009. The Company does not expect the adoption of this Statement will have
      a
      material impact on its financial position or results of operations.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements* .
      SFAS
      No. 160 requires companies to report ownership interest in subsidiaries held
      by
      other parties (minority interest) be clearly identified, labeled and presented
      in the consolidated statement of financial condition separately within the
      equity section. The amount of consolidated net income attributable to the parent
      company and to the noncontrolling interest is to be clearly identified and
      presented on the face of the consolidated statement of income. The statement
      also requires changes in a parent’s ownership interest be accounted for on a
      consistent basis. This statement is effective for the Company beginning January
      1, 2009. The Company does not expect the adoption of this statement will have
      a
      material impact on its financial position or results of operations.





In
      March
      2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities. SFAS No.* 161
      requires enhanced disclosures about how and why an entity uses derivative
      instruments; how derivative instruments are accounted for under SFAS No. 133
      and
      its related interpretations; and how derivative instruments and related hedged
      items affect an entity’s financial position, results of operations, and cash
      flows. This statement is effective for the Company beginning on January 1,
      2009.
      Earlier application is permitted, but is not required. The Company does not
      expect the adoption of this statement to have a material impact on its financial
      position or results of operations.


7


**7.**
            **FAIR
                VALUE**





As
      mentioned in Note 6, the Company adopted SFAS 157 *Fair
      Value Measurements* on
      January 1, 2008. 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 June 30, 2008
      included:





**($
                  in 000s)**
              
              **Fair
                  Value Measurements at Reporting Date Using****Quoted Prices in**
                **Active Markets**
                **for Identical**
                **Assets (Level 1)**
              
              **Significant**
                **Other**
                **Observable**
                **Inputs**
                **(Level 2)**
              
              **Significant**
                **Unobservable**
                **Inputs**
                **(Level 3)**
              
              **Total**
                **06/30/08****Description**Securities
                  available-for-sale
                (Excluding
                  equity securities)
              
              
              _
              
              
              13,594
              
              
              _
              
              
              13,594Securities
                  available-for-sale
                (Equity
                  securities)
              
              
              5,950
              
              
              _
              
              
              _
              
              
              5,950Total
                  Securities available-for-sale
              
              
              5,950
              
              
              13,594
              
              
              _
              
              
              19,544





A
      portion
      of the securities available-for-sale portfolio are equity securities and
      consists of preferred stocks issued by Freddie Mac and Fannie Mae and mortgage
      bond mutual fund investments. 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).





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
      financial assets are measured at fair value on a non-recurring basis; that
      is,
      the instruments are not measured at fair value on an ongoing basis but are
      subject to fair value adjustments in certain circumstances (for example, when
      there is evidence of impairment). Financial assets measured at fair value on
      a
      non-recurring basis where not significant at June 30, 2008.





During
      the second quarter 2008 the Company’s noninterest income decreased by $1.96
      million due to non-cash impairment charges in the investment portfolio. The
      carrying values of Freddie Mac and Fannie Mae preferred stock and the investment
      in the AMF Ultra Short Mortgage Fund have been written down to their fair market
      value of $4,157,000 and $1,793,000, respectively, as of June 30, 2008. Sharp
      declines in the market valuations of these investments, coupled with uncertainty
      about future market conditions, led to the determination that these investments
      had become “other than temporarily impaired” under GAAP. Additional impairment
      charges may be necessary on investment securities in future quarters if
      financial and economic conditions do not improve.


8




**8.**  **INCOME
        TAXES**
 
 The
        Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), *Accounting
        for Uncertainty in Income Taxes* ,
        an
        interpretation of FASB Statement No. 109, effective as of January 1, 2007.
        As a
        result of the implementation of FIN 48, the Company recognized an increase
        of
        $200,000 in income tax liability for uncertain income tax expense. This increase
        was accounted for as an adjustment reducing the beginning balance of retained
        earnings on the Statement of Financial Condition by $200,000 which was comprised
        of $170,000 in taxes and $30,000 in interest. The Company recognizes interest
        and penalties related to uncertain tax positions in income tax expense. There
        was no adjustment to these amounts during the three months ended June 30,
        2008.
 
 The
        2005-2007 tax years remain open to examination by the major taxing jurisdictions
        to which we are subject.
 
 **9.**  **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


**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 2007 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.





**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 June 30, 2008:




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




•
            Consistent
                with the Bank’s emphasis on attracting and retaining core deposits, growth
                in deposit fees, including overdraft fees, continued a strong positive
                trend. This is evidenced by noninterest income (excluding the provision
                for impairment on investments) increasing to $1.90 million at the
                quarter
                ended June 30, 2008 from $1.76 million for the quarter ended June
                30,
                2007.




•
            Consistent
                with the Company’s focus on attracting and retaining talented employees,
                the Board of Directors has approved changes in the employee benefits
                program including a freeze to the defined benefit pension plan and
                enhancements to the 401(k) plan which became effective July 1,
                2008.





•
            The
                Company is actively managing the nonperforming assets with a decrease
                in
                the nonperforming asset ratio to 0.70% of total assets as of June
                30, 2008
                from 0.97% at December 31, 2007.





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





•
            Earnings
                were negatively impacted in the second quarter 2008 by a provision
                for
                impairment on investments of $1.96
                million.




10




•
            Earnings
                before the provision for impairment on investments (a non-GAAP measure)
                remains strong evidenced by the chart
                below.





**Three Months Ended**
            
            **Six Months Ended****June 30, 2008**
            
            **June 30, 2008**Diluted per
            
            
            
            Diluted per*(dollars in thousands, except
                per share data)*
            
            Amount
            
            share
            
            Amount
            
            shareReported
                net loss
            
            $
            (957
            )
            
            (0.71
            )
            $
            (153
            )
            
            (0.11
            )Provision
                for impairment (net)
            
            
            1,926
            
            
            1.43
            
            
            1,926
            
            
            1.43Net
                earnings before the provision for impairment
            
            $
            969
            
            
            0.72
            
            $
            1,773
            
            
            1.32




•
            The
                Company continues its focus on earnings through management of net
                interest
                margin, successfully increasing the margin to 2.74% at June 30, 2008
                from
                2.65% at December 31, 2007.





The
      general economy is slowing. Based upon increasing numbers of foreclosures and
      slower sales of one- to four-family residences, it is generally agreed that
      the
      real estate market is in a slowdown. The Federal Reserve reduced the targeted
      fed funds rate and the discount rate by 325 basis points between September
      2007
      and April 2008, indicating its concern about the slowing economy. It is
      uncertain when this slowdown will turn around and the ripple effect it could
      have on other parts of the economy. The duration and magnitude of any near-term
      economic difficulties are not known.




**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 2007 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 that related to the allowance for loan losses and
      asset impairment judgments, including the recoverability of
      goodwill.





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





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




11




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


**FINANCIAL
      CONDITION**





Total
      assets decreased $15.2 million, or 3.0%, to $495.0 million at June 30, 2008,
      from $510.2 million at December 31, 2007. The decrease in assets was primarily
      due to a decrease in net loans receivable, offset in part by increases in cash
      and cash equivalents and securities available-for-sale.





Net loans
      receivable decreased by $21.3 million, or 4.8%, to $425.6 million at June 30,
      2008, from $446.9 million at December 31, 2007, primarily due to payments and
      prepayments of $71.8 million and loan sales of $25.8 million during the six
      months ended June 30, 2008. These payments, prepayments, and loan sales were
      offset in part by the origination of $33.6 million of first mortgage loans
      primarily secured by one-to four-family residences and commercial real estate;
      the purchase of $18.3 million of first mortgage loans secured by commercial
      real
      estate and multifamily residential real estate; and the origination of $16.8
      million of second mortgage loans during the six months ended June 30, 2008.
      The
      Company sells substantially all fixed-rate residential loans originated with
      maturities of 15 years or more in the secondary mortgage market in order to
      reduced interest rate risk





Deposits
      decreased $9.4 million, or 2.6%, to $356.5 million at June 30, 2008, from $365.9
      million at December 31, 2007, primarily reflecting a decrease in certificates
      of
      deposits, offset in part by increases in NOW, money market and savings balances.
      The decrease in deposits was primarily due to a decrease in brokered deposits
      of
      $8.8 million. Borrowings, primarily FHLB advances, decreased $6.0 million,
      or
      6.2%, to $91.4 million at June 30, 2008, from $97.4 million at December 31,
      2007. This decrease is due to the normal repayment of borrowings due to calls
      or
      maturities.





Total
      stockholders’ equity was at $41.0 million at June 30, 2008 and December 31,
      2007.





The
      Office of Thrift Supervision (the “OTS”) requires that the Bank meet minimum
      tangible, leverage (core) and risk-based capital requirements. As of June 30,
      2008, the Bank exceeded all of its regulatory capital requirements. The Bank’s
      required, actual and excess capital levels as of June 30, 2008 were as
      follows:





**Amount**
            
            **Percentage of Assets**(Dollars in thousands)Tangible capital:Capital
                level
            
            $
            35,403
            
            
            7.22
            %Less
                Requirement
            
            
            7,355
            
            
            1.50
            %Excess
            
            $
            28,048
            
            
            5.72
            %Core
                capital:Capital
                level
            
            $
            35,403
            
            
            7.22
            %Less
                Requirement
            
            
            19,614
            
            
            4.00
            %Excess
            
            $
            15,789
            
            
            3.22
            %Risk-based
                capital:Capital
                level
            
            $
            38,770
            
            
            10.81
            %Less
                Requirement
            
            
            28,696
            
            
            8.00
            %Excess
            
            $
            10,074
            
            
            2.81
            %




**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 six months of 2008 and 2007, principal
      payments, prepayments, and proceeds from the sale of loans totaled $97.6 million
      and $69.3 million, respectively. Deposits decreased by $9.4 million during
      the
      first six months of 2008 compared to an increase in deposits of $10.9 million
      during the first six months of 2007. The proceeds from borrowed funds during
      the
      six months ended June 30, 2008 and 2007 totaled $8.5 million and $17.0 million.
      During the first six months of 2008 and 2007, the proceeds from the maturities,
      calls and sales of securities totaled $1.4 million and $1.3 million,
      respectively. Cash provided from operating activities during the first six
      months of 2008 and 2007 totaled $3.9 million and $2.0 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 six months of 2008 and 2007, the Company’s gross
      purchases and origination of loans totaled $77.6 million and $91.9 million,
      respectively. The purchase of securities available-for-sale for the six months
      ended June 30, 2008 and 2007 totaled $10.0 million and $581,000, respectively.
      The repayment of borrowed funds during the first six months of 2008 and 2007
      totaled $14.5 million and $12.5 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 Item
      1 of this report.


12


The
      Company has a line of credit agreement in the amount of $3.0 million with an
      unaffiliated bank. As of June 30, 2008, there were no borrowings outstanding
      on
      this line of credit. The Company may use this line of credit to fund stock
      repurchases in the future and for general corporate purposes.





On
      April
      4, 2008, the Company paid a quarterly cash dividend of $0.35 per share of common
      stock to its shareholders as of the close of business on March 14, 2008. This
      dividend payment totaled $469,000. On May 30, 2008, the Company declared a
      quarterly cash dividend of $0.35 per share, payable on July 3, 2008 to
      shareholders of record as of the close on June 13, 2008. This dividend payment
      totaled $470,000.





**RESULTS
      OF OPERATIONS**





***Net
      Income (Loss)*** *.* Net
      income (loss) decreased by $1.99 million to a net loss of $957,000 for the
      quarter ended June 30, 2008, compared to net income of $1.04 million for the
      quarter ended June 30, 2007. Net income (loss) is an aggregate of net interest
      income, noninterest income (loss), noninterest expense and income tax expense.
      The decrease in earnings was primarily due to a non-cash provision
      for impairment on investments and an increase in other expenses including
      write downs of value on foreclosed real estate.





Net
      income (loss) decreased by $2.22 million to a net loss of $153,000 for the
      six
      months ended June 30, 2008, compared to net income of $2.07 million for the
      six
      months ended June 30, 2007. The decrease in earnings was primarily due to a
      non-cash provision for impairment on investments and an increase in other
      expenses including write downs of value on foreclosed real estate, offset in
      part by a decrease in income tax expense.




***Net
      Interest Income*** .
      Net
      interest income before provision for loan losses decreased by $65,000 to $3.26
      million for the quarter ended June 30, 2008, from $3.33 million for the quarter
      ended June 30, 2007. The decrease is due to a decrease in the average balance
      of
      interest-earning assets, offset in part by an increase in the yield on
      interest-earning assets and a decrease in the average balance of
      interest-bearing liabilities. The interest rate spread (i.e., the difference
      in
      the average yield on assets and average cost of liabilities) increased to 2.59%
      for the quarter ended June 30, 2008, from 2.44% for the quarter ended June
      30,
      2007. The increase in interest rate spread primarily reflects a decrease in
      cost
      of funds, offset in part by a decrease in the yield on interest-earning assets.





Net
      interest income before provision for loan losses decreased by $145,000 to $6.5
      million for the six months ended June 30, 2008, from $6.60 million for the
      six
      months ended June 30, 2007. The decrease is due to a decrease in the average
      balance of interest-earning assets, offset in part by an increase in the yield
      on interest-earning assets and a decrease in the average balance of
      interest-bearing liabilities. The interest rate spread (i.e., the difference
      in
      the average yield on assets and average cost of liabilities) increased to 2.53%
      for the six months ended June 30, 2008, from 2.44% for the six months ended
      June
      30, 2007. The increase in interest rate spread primarily 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 $727,000 to $7.15 million for the quarter ended
      June 30, 2008, compared to $7.88 million for the quarter ended June 30, 2007.
      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-earnings assets.
      The average balance of interest-earning assets decreased $28.4 million to $464.4
      million for the quarter ended June 30, 2008, from $492.8 million for the quarter
      ended June 30, 2007. The average yield on interest-earning assets decreased
      to
      6.16% for the quarter ended June 30, 2008, from 6.40% for the quarter ended
      June
      30, 2007, primarily due to a decrease in market interest rates on first mortgage
      loans secured by on-to four-family real estate, commercial real estate, and
      multifamily residences. The decrease in the average balance of interest-earning
      assets primarily reflects decreases in the average balances of first mortgage
      loans and interest-bearing cash, offset in part by an increase in the average
      balance of consumer loans and securities available-for sale. 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, commercial real
      estate, and multifamily residences during the three months ended June 30, 2008.
      The increase in the average balance of securities available-for-sale was derived
      from purchases of mortgage-backed securities, offset in part by payments,
      maturities, and write downs due to the other-than-temporary impairment
      of investments during the three months ended June 30,
      2008.


13


Interest
      income decreased by $791,000 to $14.64 million for the six months ended June
      30,
      2008, compared to $15.43 million for the six months ended June 30, 2007. 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-earnings assets.
      The average balance of interest-earning assets decreased $18.2 million to $469.7
      million for the six months ended June 30, 2008, from $487.9 million for 2007.
      The average yield on interest-earning assets decreased to 6.24% for the six
      months ended June 30, 2008, from 6.34% for the six months ended June 30, 2007,
      primarily due to a decrease in market interest rates on first mortgage loans
      secured by on-to four-family real estate, commercial real estate, and
      multifamily residences. The decrease in the average balance of interest-earning
      assets primarily reflects decreases in the average balances of first mortgage
      loans and interest-bearing cash, offset in part by an increase in the average
      balance of consumer loans and securities available-for sale. 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, commercial real
      estate, and multifamily residences during the six months ended June 30, 2008.
      The increase in the average balance of securities available-for-sale was derived
      from purchases of mortgage-backed securities, offset in part by payments,
      maturities, and write downs due to other-than-temporary impairment of
      investments during the six months ended June 30, 2008.





***Interest
      Expense*** .
      Interest expense decreased by $662,000 to $3.89 million for the quarter ended
      June 30, 2008, compared to $4.56 million for the quarter ended June 30, 2007.
      The average balance of interest-bearing liabilities decreased $23.7 million
      to
      $437.7 million for the quarter ended June 30, 2008, from $461.4 million for
      the
      quarter ended June 30, 2007. The decrease in the average balance of
      interest-bearing liabilities primarily reflects a decrease in borrowed funds,
      certificates of deposit, and savings account balances, offset in part by an
      increase in NOW and money market 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 3.57% for the quarter ended
      June 30, 2008 and 3.96% for quarter ended June 30, 2007, respectively.





Interest
      expense decreased by $646,000 to $8.19 million for the six months ended June
      30,
      2008, compared to $8.83 million for the six months ended June 30, 2008. The
      average balance of interest-bearing liabilities decreased $13.2 million to
      $442.8 million for the six months ended June 30, 2008, from $456.0 million
      for
      the six months ended June 30, 2007. The decrease in the average balance of
      interest-bearing liabilities primarily reflects a decrease in borrowed funds,
      certificates of deposit, money market and savings account balances, offset
      in
      part by an increase in NOW 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 3.71% for the six months ended June
      30, 2008 and 3.91% for six months ended June 30, 2007,
      respectively.




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 and six months ended June 30, 2008 and 2007,
      respectively.


14





**For the Three Months Ended June 30,****2008**
            
            **2007****Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/Cost**
            
            **Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/Cost**(Dollars in thousands)Assets:Interest-earning
                assets:Loans
            
            $
            437,069
            
            $
            6,880
            
            
            6.30
            %
            $
            464,859
            
            $
            7,542
            
            
            6.49
            %Securities
                available-for-sale
            
            
            22,998
            
            
            255
            
            
            4.44
            
            
            19,487
            
            
            234
            
            
            4.79Interest-bearing
                cash
            
            
            4,301
            
            
            20
            
            
            1.84
            
            
            8,490
            
            
            106
            
            
            5.01Total
                interest-earning
                assets
            
            
            464,368
            
            $
            7,155
            
            
            6.16
            %
            
            492,836
            
            $
            7,882
            
            
            6.40
            %Noninterest-earning
                assets
            
            
            36,186
            
            
            
            
            
            
            
            
            29,263Total
                assets
            
            $
            500,554
            
            
            
            
            
            
            
            $
            522,099Liabilities
                and Equity:Interest-bearing
                liabilities:NOW
                and money market
                savings
            
            $
            96,940
            
            $
            223
            
            
            0.92
            %
            $
            83,705
            
            $
            268
            
            
            1.28
            %Passbook
                savings
            
            
            26,173
            
            
            17
            
            
            0.27
            
            
            26,474
            
            
            36
            
            
            0.55Certificates
                of
                deposit
            
            
            223,321
            
            
            2,504
            
            
            4.50
            
            
            240,014
            
            
            2,890
            
            
            4.83Borrowed
                funds
            
            
            91,312
            
            
            1,151
            
            
            5.06
            
            
            111,203
            
            
            1,363
            
            
            4.92Total
                interest-bearing
                liabilities
            
            
            437,746
            
            $
            3,895
            
            
            3.57
            %
            
            461,396
            
            $
            4,557
            
            
            3.96
            %Noninterest-bearing
                liabilities
            
            
            21,291
            
            
            
            
            
            
            
            
            18,613Total
                liabilities
            
            
            459,037
            
            
            
            
            
            
            
            
            480,009Equity
            
            
            41,517
            
            
            
            
            
            
            
            
            42,090Total
                liabilities and equity
            
            $
            500,554
            
            
            
            
            
            
            
            $
            522,099Net
                interest
                income
            
            
            
            
            $
            3,260
            
            
            
            
            
            
            
            $
            3,325Net
                interest rate
                spread
            
            
            
            
            
            
            
            
            2.59
            %
            
            
            
            
            
            
            
            2.44
            %Net
                interest
                margin
            
            
            
            
            
            
            
            
            2.80
            %
            
            
            
            
            
            
            
            2.69
            %Ratio
                of average interest-earning
                assets   to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            106.08
            %
            
            
            
            
            
            
            
            106.81
            %




**For the Six Months Ended June 30,****2008**
            
            **2007****Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/Cost**
            
            **Average**
              **Balance**
            
            **Interest**
            
            **Average**
              **Yield/Cost**(Dollars in thousands)Assets:Interest-earning
                assets:Loans
            
            $
            440,348
            
            $
            14,051
            
            
            6.38
            %
            $
            456,778
            
            $
            14,678
            
            
            6.43
            %Securities
                available-for-sale
            
            
            20,544
            
            
            483
            
            
            4.70
            
            
            19,542
            
            
            469
            
            
            4.80Interest-bearing
                cash
            
            
            8,815
            
            
            109
            
            
            2.48
            
            
            11,582
            
            
            288
            
            
            5.02Total
                interest-earning
                assets
            
            
            469,707
            
            $
            14,643
            
            
            6.24
            %
            
            487,902
            
            $
            15,435
            
            
            6.34
            %Noninterest-earning
                assets
            
            
            36,057
            
            
            
            
            
            
            
            
            29,195Total
                assets
            
            $
            505,764
            
            
            
            
            
            
            
            $
            517,097Liabilities
                and Equity:Interest-bearing
                liabilities:NOW
                and money market
                savings
            
            $
            94,220
            
            $
            497
            
            
            1.06
            %
            $
            83,395
            
            $
            525
            
            
            1.27
            %Passbook
                savings
            
            
            25,539
            
            
            39
            
            
            0.31
            
            
            26,335
            
            
            62
            
            
            0.47Certificates
                of
                deposit
            
            
            229,725
            
            
            5,299
            
            
            4.63
            
            
            238,329
            
            
            5,631
            
            
            4.76Borrowed
                funds
            
            
            93,322
            
            
            2,353
            
            
            5.06
            
            
            107,973
            
            
            2,617
            
            
            4.89Total
                interest-bearing liabilities
            
            
            442,806
            
            $
            8,188
            
            
            3.71
            %
            
            456,032
            
            $
            8,835
            
            
            3.91
            %Noninterest-bearing
                liabilities
            
            
            21,558
            
            
            
            
            
            
            
            
            19,073Total
                liabilities
            
            
            464,364
            
            
            
            
            
            
            
            
            475,105Equity
            
            
            41,400
            
            
            
            
            
            
            
            
            41,992Total
                liabilities and equity
            
            $
            505,764
            
            
            
            
            
            
            
            $
            517,097Net
                interest
                income
            
            
            
            
            $
            6,455
            
            
            
            
            
            
            
            $
            6,600Net
                interest rate
                spread
            
            
            
            
            
            
            
            
            2.53
            %
            
            
            
            
            
            
            
            2.44
            %Net
                interest
                margin
            
            
            
            
            
            
            
            
            2.74
            %
            
            
            
            
            
            
            
            2.69
            %Ratio
                of average interest-earning
                assets   to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            106.08
            %
            
            
            
            
            
            
            
            107.17
            %





***Provision
      for Loan Losses*** .
      The
      Company’s provision for loan losses was $160,000 and $60,000 for the quarters
      ended June 30, 2008 and 2007, respectively. The increase in provision for loan
      losses for the quarter ended June 30, 2008 compared to the same period in 2007
      was related to the increase in nonperforming assets and special mention 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 $45.7 million, or 9.6% from June 30, 2008 to June 30, 2007.
      This decrease primarily consisted of decreases of $32.8 million in one-to
      four-family residential loans and $20.8 million in the Company’s out-of-state
      real estate loans offset by an increase of $7.1 million in consumer loans.
      Purchased out-of-state real estate loans generally constitute a higher rate
      of
      risk than originated loans due to the size, location and type of collateral
      securing such loans. Net charge-offs were $244,000 for the six months ended
      June
      30, 2008, compared to $24,000 for the six months ended June 30, 2007 **.** The
      resulting allowance for loan loss was $3.5 million and $3.6 million at June
      30,
      2008 and June 30, 2007, respectively.


15


The
      allowance for loan losses as a percentage of total loans receivable increased
      to
      0.81% at June 30, 2008 from 0.75% at June 30, 2007. Management believes the
      increase in the allowance for loan loss reflects a shift in the economy in
      some
      of the markets in which the Company operates, specifically the Des Moines,
      Iowa
      metropolitan area. However, the level of nonperforming loans have decreased
      to
      $703,000 at June 30, 2008 from $1.14 million at June 30, 2007. This decrease
      is
      primarily due to active management of the nonperforming loan portfolio. This
      change however, was accompanied by an increase in foreclosed real estate of
      $2.23 million. The increase in foreclosed real estate is a reflection of the
      weaker housing market, with 85% of the change coming from residential
      construction projects. Management continues to focus on all nonperforming assets
      which is reflected by the decrease in the nonperforming asset ratio to 0.70%
      of
      total assets as of June 30, 2008 from 0.97% of total assets at December 31,
      2007. The level of special mention loans increased to $5.73 million at June
      30,
      2008 from $527,000 at June 30, 2007.





Management
      believes that the allowance for loan losses was adequate as of June 30, 2008.
      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 (Loss)*** *.* Total
      noninterest income (loss) decreased by $1.81 million, or 103.2%, to a loss
      of
      $56,000 for the quarter ended June 30, 2008, from income of $1.76 million for
      the quarter ended June 30, 2007. The decrease in noninterest income was
      primarily due to the provision for impairment on investments as discussed below,
      offset in part by increases in fees and services charges, mortgage banking
      income, abstract fees, and other income. Fees and service charges increased
      $36,000 primarily due to an increase in fees associated with checking accounts,
      including overdraft fees, offset in part by a decrease in loan prepayment fees.
      Mortgage banking income increased $38,000 for the quarter ended June 30, 2008
      compared to the same period of 2007 due to an increase in loans originated
      for
      the secondary market. Abstract fees increased $18,000 for the quarter ended
      June
      30, 2008 compared to the same period of 2007 due to an increase in real estate
      activity. Other income, which primarily includes annuity, securities, insurance
      sales, cash surrender value of bank-owned life insurance, and foreclosed real
      estate net earnings, increased $56,000 for the quarter ended June 30, 2008
      compared to the same period of 2007 primarily due to an increase in the cash
      surrender value of bank-owned life insurance, offset in part by an increase
      foreclosed real estate expenses.





Total
      noninterest income decreased by $1.75 million, or 51.5%, to $1.65 million for
      the six months ended June 30, 2008, from $3.40 million for the six months ended
      June 30, 2007. The decrease in noninterest incomes was primarily due to an
      increase in the provision for impairment on investments as discussed below
      and a
      decrease in other income, offset in part by increases in fees and services
      charges, mortgage banking income, and abstract fees. Fees and service charges
      increased $44,000 primarily due to an increase in fees associated with checking
      accounts, including overdraft fees, offset in part by a decrease in loan
      prepayment fees. Mortgage banking income increased $142,000 for the six months
      ended June 30, 2008 compared to the same period of 2007 due to an increase
      in
      loans originated for the secondary market. Abstract fees increased $45,000
      for
      the six months ended June 30, 2008 compared to the same period of 2007 due
      to an
      increase in real estate activity. Other income, which primarily includes
      annuity, securities, insurance sales, cash surrender value of bank-owned life
      insurance, and foreclosed real estate net earnings, decreased $20,000 for the
      six months ended June 30, 2008 compared to the same period of 2007 primarily
      due
      to an increase in foreclosed real estate expenses, offset in part by an increase
      in the cash surrender value of bank-owned life insurance.


16


During
      the second quarter 2008 the Company’s noninterest income decreased by $1.96
      million due to non-cash impairment charges in the investment portfolio. The
      carrying values of Freddie Mac and Fannie Mae preferred stock and the investment
      in the AMF Ultra Short Mortgage Fund have been written down to their fair market
      value of $4,157,000 and $1,793,000, respectively, as of June 30, 2008. Although
      these charges are required by generally accepted accounting principles (GAAP),
      they do not change the Company’s regulatory capital position of “well
      capitalized”. Sharp declines in the market valuations of these investments,
      coupled with uncertainty about future market conditions, led to the
      determination that these investments had become “other than temporarily
      impaired” under GAAP. Additional impairment charges may be necessary on
      investment securities in future quarters if financial and economic conditions
      do
      not improve.





***Noninterest
      Expense*** *.* Total
      noninterest expense increased by $93,000, or 2.6%, to $3.64 million for the
      quarter ended June 30, 2008, from $3.54 million for the quarter ended June
      30,
      2007. The increase was primarily due to increases for information technology
      enhancements of $62,000 and increases on write downs of foreclosed real estate
      of $109,000, offset in part by decreases in salaries and employee benefits
      of
      $95,000. The Company’s ratio of noninterest expense to average assets for the
      quarters ended June 30, 2008 and 2007 was 2.90% and 2.71%,
      respectively.





Total
      noninterest expense increased by $405,000, or 5.8%, to $7.38 million for the
      six
      months ended June 30, 2008, from $6.97 million for the six months ended June
      30,
      2007. The increase was primarily due to increases for information technology
      enhancements of $138,000 and increases on write downs of foreclosed real estate
      of $267,000, offset in part by decreases in salaries and employee benefits
      of
      $76,000 and decrease in professional services of $91,000. The Company’s ratio of
      noninterest expense to average assets for the six months ended June 30, 2008
      and
      2007 was 2.92% and 2.70%, respectively.





***Income
      Taxes*** *.* Provision
      for income taxes decreased by $78,000 to $366,000 for the quarter ended June
      30,
      2008, compared to $444,000 for the quarter ended June 30, 2007. The decrease
      in
      income taxes was primarily due to the decrease in the income before income
      taxes, offset in part by the limited deductibility of the provision for
      impairment on investments and a reduction of income tax credits
      available.





Provision
      for income taxes decreased by $207,000 to $658,000 for the six months ended
      June
      30, 2008, compared to $865,000 for the six months ended June 30, 2007. The
      decrease in income taxes was primarily due to the decrease in the income before
      income taxes, offset in part by the limited deductibility of the provision
      for
      impairment on investments and a reduction of income tax credits
      available.





**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 June 30,
      2008.





**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 June 30, 2008. Please see
      the
      Company’s 2007 Annual Report on Form 10-K for a more detailed discussion of the
      Company’s interest rate sensitivity analysis.


17


**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.





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**





The
      Company is not involved in any pending legal proceedings other than routine
      legal proceedings occurring in the ordinary course of business. Such routine
      legal proceedings, in the aggregate, are believed by management to be immaterial
      to the Company’s financial condition and results of operations.





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





The
      Company held its annual meeting of shareholders on April 25,
      2008.  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:





Mark
      M.
      Thompson


Paul
      F.
      Bognanno





The
      results of the election of directors were as follows:





FOR
            
            WITHELDMark
                M. Thompson
            
            
            1,195,293
            
            
            23,551Paul
                F. Bognanno
            
            
            1,133,749
            
            
            85,095





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





The
      following directors’ terms of office continued after the meeting:





David
      M.
      Bradley


Robert
      H.
      Singer, Jr.


C.
      Thomas
      Chalstrom


Randall
      L. Minear


Melvin
      R.
      Schroeder


18


**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)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
            
            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.




19


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:
                August 14, 2008
            BY:
            /s/
                David M. BradleyDavid
                M. Bradley, Chairman, President & CEODate:
                August 14, 2008
            BY:
            /s/
                Kyle C. CookKyle
                C. Cook, Chief Financial Officer and
                Treasurer




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