UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For
      the quarterly period ended
                  March
      31, 2010





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




For the
transition period from __________________ to __________________.




Commission File Number:
                  0-27672





NORTH CENTRAL BANCSHARES, INC.





(Exact
name of registrant as specified in its charter)





Iowa
              
              42-1449849(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)825 Central Avenue, Fort Dodge,
      Iowa
              
              50501(Address
      of principal executive offices)
              
              (Zip
      Code)





515-576-7531





(Registrant’s
telephone number, including area code)




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


Yes  þ  No   ̈




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


Yes   ̈  No   ̈




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




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





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


Yes   ̈  No þ




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





Class
              
              Outstanding at May 14,
  2010Common
      Stock, $.01 par value
              
              1,351,448









NORTH
CENTRAL BANCSHARES, INC.





INDEX





PagePart
      I.  Financial InformationItem
      1.  Financial Statements (Unaudited)
                  
                  1Consolidated
      Condensed Statements of Financial Condition at March 31, 2010 and December
      31, 2009
                  
                  1Consolidated
      Condensed Statements of Income for the Three Months Ended March 31, 2010
      and 2009
                  
                  2Consolidated
      Condensed Statements of Stockholders’ Equity for the Three Months Ended
      March 31, 2010 and 2009
                  
                  3Consolidated
      Condensed Statements of Cash Flows for the Three Months Ended March 31,
      2010 and 2009
                  
                  4Notes
      to Consolidated Condensed Financial Statements
                  
                  6Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                  
                  15Item
      3.  Quantitative and Qualitative Disclosure About Market
      Risk
                  
                  25Item
      4T.  Controls and Procedures
                  
                  25Part
      II. Other InformationItem
      1. Legal Proceedings
                  
                  25Item
      1A. Risk Factors
                  
                  25Item
      6. Exhibits
                  
                  25Signatures
                  
                  27







PART
I.  FINANCIAL INFORMATION





Item
1.  Financial Statements (Unaudited)





NORTH CENTRAL BANCSHARES, INC. AND
SUBSIDIARIES


CONSOLIDATED
CONDENSED STATEMENTS OF FINANCIAL CONDITION





March 31,
                  
                  
                  December 31,2010
                  
                  
                  2009(Unaudited)ASSETSCash
      and due from banks:Interest-bearing
                  
                  $
                  17,053,043
                  
                  
                  $
                  12,804,849Noninterest-bearing
                  
                  
                  5,891,892
                  
                  
                  
                  8,961,321Total
      cash and cash equivalents
                  
                  
                  22,944,935
                  
                  
                  
                  21,766,170Investments
      in certificates of deposit
                  
                  
                  4,176,000
                  
                  
                  
                  -Securities
      available-for-sale
                  
                  
                  29,464,870
                  
                  
                  
                  23,175,201Federal
      Home Loan Bank stock, at cost
                  
                  
                  3,549,100
                  
                  
                  
                  3,924,700Loans
      receivable, (net of allowance for loan loss of $7,760,897 and $7,170,595
      respectively)
                  
                  
                  362,167,774
                  
                  
                  
                  374,854,993Loans
      held for sale
                  
                  
                  515,765
                  
                  
                  
                  1,333,933Accrued
      interest receivable
                  
                  
                  1,872,586
                  
                  
                  
                  1,867,970Foreclosed
      real estate
                  
                  
                  1,471,345
                  
                  
                  
                  1,709,128Premises
      and equipment, net
                  
                  
                  11,778,821
                  
                  
                  
                  11,882,839Rental
      real estate
                  
                  
                  2,213,413
                  
                  
                  
                  2,243,704Title
      plant
                  
                  
                  671,704
                  
                  
                  
                  671,704Deferred
      taxes
                  
                  
                  2,491,676
                  
                  
                  
                  2,230,971Bank-owned
      life insurance
                  
                  
                  5,603,424
                  
                  
                  
                  5,543,681Prepaid
      FDIC assessment
                  
                  
                  1,742,922
                  
                  
                  
                  1,877,699Prepaid
      expenses and other assets
                  
                  
                  1,763,655
                  
                  
                  
                  1,928,266Total
      assets
                  
                  $
                  452,427,990
                  
                  
                  $
                  455,010,959LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESDeposits
                  
                  $
                  342,107,213
                  
                  
                  $
                  334,813,060Borrowed
      funds
                  
                  
                  57,500,000
                  
                  
                  
                  66,500,000Advances
      from borrowers for taxes and insurance
                  
                  
                  991,944
                  
                  
                  
                  1,792,790Accrued
      expenses and other liabilities
                  
                  
                  3,094,242
                  
                  
                  
                  3,626,291Total
      liabilities
                  
                  
                  403,693,399
                  
                  
                  
                  406,732,141STOCKHOLDERS'
      EQUITYPreferred
      stock ($.01 par value, authorized 3,000,000 shares; at March 31, 2010 and
      at December 31, 2009 10,200 shares were issued and
    outstanding
                  
                  
                  10,123,190
                  
                  
                  
                  10,118,581Common
      stock ($.01 par value, authorized 15,500,000 shares; at March 31, 2010 and
      at December 31, 2009 1,348,448 shares were issued and
      outstanding
                  
                  
                  13,479
                  
                  
                  
                  13,471Additional
      paid-in capital
                  
                  
                  18,022,575
                  
                  
                  
                  18,009,468Retained
      earnings, substantially restricted
                  
                  
                  20,407,813
                  
                  
                  
                  19,924,798Accumulated
      other comprehensive gain
                  
                  
                  167,534
                  
                  
                  
                  212,500Total
      stockholders' equity
                  
                  
                  48,734,591
                  
                  
                  
                  48,278,818Total
      liabilities and stockholders' equity
                  
                  $
                  452,427,990
                  
                  
                  $
                  455,010,959





See Notes
to Consolidated Condensed Financial Statements.


1


NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES


CONSOLIDATED CONDENSED STATEMENTS OF
INCOME(Unaudited)





Three Months EndedMarch 31,2010
                        
                        
                        2009Interest
      income:Loans
      receivable
                        
                        $
                        5,553,110
                        
                        
                        $
                        6,185,217Securities
      and cash deposits
                        
                        
                        234,676
                        
                        
                        
                        280,5785,787,786
                        
                        
                        
                        6,465,795Interest
      expense:Deposits
                        
                        
                        1,327,510
                        
                        
                        
                        2,069,556Borrowed
      funds
                        
                        
                        694,595
                        
                        
                        
                        998,4372,022,105
                        
                        
                        
                        3,067,993Net
      interest income
                        
                        
                        3,765,681
                        
                        
                        
                        3,397,802Provision
      for loan losses
                        
                        
                        800,000
                        
                        
                        
                        160,000Net
      interest income after provision for loan losses
                        
                        
                        2,965,681
                        
                        
                        
                        3,237,802Noninterest
      income:Fees
      and service charges
                        
                        
                        1,076,762
                        
                        
                        
                        1,048,400Abstract
      fees
                        
                        
                        142,621
                        
                        
                        
                        216,752Mortgage
      banking income
                        
                        
                        112,187
                        
                        
                        
                        314,743Loan
      prepayment fees
                        
                        
                        10,079
                        
                        
                        
                        12,654Other
      income
                        
                        
                        322,948
                        
                        
                        
                        371,239Total
      noninterest income
                        
                        
                        1,664,597
                        
                        
                        
                        1,963,788Investment
      securities gains (losses), net:Total
      other-than-temporary impairment losses
                        
                        
                        -
                        
                        
                        
                        -Portion
      of loss recognized in other comprehensive income (loss) before
      taxes
                        
                        
                        -
                        
                        
                        
                        -Net
      impairment losses recognized in earnings
                        
                        
                        -
                        
                        
                        
                        -Realized
      securities gains (losses), net
                        
                        
                        7,652
                        
                        
                        
                        (10,342
                        )Total
      securities gains (losses), net
                        
                        
                        7,652
                        
                        
                        
                        (10,342
                        )Noninterest
      expense:Compensation
      and employee benefits
                        
                        
                        1,889,859
                        
                        
                        
                        1,867,385Premises
      and equipment
                        
                        
                        501,090
                        
                        
                        
                        486,632Data
      processing
                        
                        
                        213,123
                        
                        
                        
                        208,673FDIC
      insurance expense
                        
                        
                        143,817
                        
                        
                        
                        99,219Other
      expenses
                        
                        
                        1,004,933
                        
                        
                        
                        1,393,391Total
      noninterest expense
                        
                        
                        3,752,822
                        
                        
                        
                        4,055,300Income
      before income taxes
                        
                        
                        885,108
                        
                        
                        
                        1,135,948Provision
      for income taxes
                        
                        
                        256,500
                        
                        
                        
                        354,300Net
      income
                        
                        $
                        628,608
                        
                        
                        $
                        781,648Preferred
      stock dividends and accretion of discount
                        
                        $
                        132,109
                        
                        
                        $
                        119,126Net
      income available to common stockholders
                        
                        $
                        496,499
                        
                        
                        $
                        662,522Basic
      earnings per share
                        
                        $
                        0.37
                        
                        
                        $
                        0.49Dilluted
      earnings per share
                        
                        $
                        0.37
                        
                        
                        $
                        0.49Dividends
      declared per common share
                        
                        $
                        0.01
                        
                        
                        $
                        0.01





See Notes
to Consolidated Condensed Financial Statements.


2


NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





CONSOLIDATED
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY


Three
Months Ended March 31, 2009 and 2010


(Unaudited)





AccumulatedAdditional
                                
                                
                                
                                
                                
                                Other
                                
                                
                                TotalComprehensive
                                
                                
                                Preferred
                                
                                
                                Common
                                
                                
                                Paid-in
                                
                                
                                Retained
                                
                                
                                Comprehensive
                                
                                
                                Stockholders'Income
                                
                                
                                Stock
                                
                                
                                Stock
                                
                                
                                Capital
                                
                                
                                Earnings
                                
                                
                                Income
                                
                                
                                EquityBalance,
      January 1, 2009
                                
                                
                                
                                
                                $
                                -
                                
                                
                                $
                                13,421
                                
                                
                                $
                                17,819,096
                                
                                
                                $
                                17,240,779
                                
                                
                                $
                                138,847
                                
                                
                                $
                                35,212,143Comprehensive
      income:Net
      income
                                
                                $
                                781,648
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                781,648
                                
                                
                                
                                -
                                
                                
                                
                                781,648Other
      comprehensive income, net of reclassification adjustment and
      tax
                                
                                
                                131,057
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                131,057
                                
                                
                                
                                131,057Total
      comprehensive income
                                
                                $
                                912,705Dividends
      on preferred stock
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (51,000
                                )
                                
                                
                                -
                                
                                
                                
                                (51,000
                                )Dividends
      on common stock
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (13,435
                                )
                                
                                
                                -
                                
                                
                                
                                (13,435
                                )Employee
      stock-based compensation
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                7
                                
                                
                                
                                32,025
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                32,032Issuance
      of preferred stock and common stock warrant
                                
                                
                                
                                
                                
                                
                                10,100,732
                                
                                
                                
                                -
                                
                                
                                
                                99,268
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10,200,000Accretion
      of discount on preferred stock
                                
                                
                                
                                
                                
                                
                                4,376
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (4,376
                                )
                                
                                
                                -
                                
                                
                                
                                -Balance,
      March 31, 2009
                                
                                
                                
                                
                                
                                $
                                10,105,108
                                
                                
                                $
                                13,428
                                
                                
                                $
                                17,950,389
                                
                                
                                $
                                17,953,616
                                
                                
                                $
                                269,904
                                
                                
                                $
                                46,292,445Balance,
      January 1, 2010
                                
                                
                                
                                
                                
                                $
                                10,118,581
                                
                                
                                $
                                13,471
                                
                                
                                $
                                18,009,468
                                
                                
                                $
                                19,924,798
                                
                                
                                $
                                212,500
                                
                                
                                $
                                48,278,818Comprehensive
      income:Net
      income
                                
                                $
                                628,608
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                628,608
                                
                                
                                
                                -
                                
                                
                                
                                628,608Other
      comprehensive (loss), net of reclassification adjustment and
      tax
                                
                                
                                (44,966
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (44,966
                                )
                                
                                
                                (44,966
                                )Total
      comprehensive income
                                
                                $
                                583,642Dividends
      on preferred stock
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (127,500
                                )
                                
                                
                                -
                                
                                
                                
                                (127,500
                                )Dividends
      on common stock
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (13,484
                                )
                                
                                
                                -
                                
                                
                                
                                (13,484
                                )Employee
      stock-based compensation
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                8
                                
                                
                                
                                13,107
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                13,115Accretion
      of discount on preferred stock
                                
                                
                                
                                
                                
                                
                                4,609
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (4,609
                                )
                                
                                
                                -
                                
                                
                                
                                -Balance,
      March 31, 2010
                                
                                
                                
                                
                                
                                $
                                10,123,190
                                
                                
                                $
                                13,479
                                
                                
                                $
                                18,022,575
                                
                                
                                $
                                20,407,813
                                
                                
                                $
                                167,534
                                
                                
                                $
                                48,734,591





See Notes
to Consolidated Condensed Financial Statements


3


NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS


(Unaudited)
                  
                  Three Months EndedMarch 31,2010
                  
                  
                  2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                  
                  $
                  628,608
                  
                  
                  $
                  781,648Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision
      for loan losses
                  
                  
                  800,000
                  
                  
                  
                  160,000Depreciation
                  
                  
                  236,067
                  
                  
                  
                  225,087Amortization
      and accretion
                  
                  
                  45,866
                  
                  
                  
                  98,861Deferred
      taxes
                  
                  
                  (238,000
                  )
                  
                  
                  459,500Stock-based
      compensation
                  
                  
                  13,115
                  
                  
                  
                  32,032(Gain)
      on sale of foreclosed real estate and loans, net
                  
                  
                  (82,580
                  )
                  
                  
                  (336,735
                  )Write-down
      of other real estate owned
                  
                  
                  9,958
                  
                  
                  
                  84,463(Gain)
      loss on sale of investments
                  
                  
                  (7,652
                  )
                  
                  
                  10,342Increase
      in value of bank-owned life insurance
                  
                  
                  (59,743
                  )
                  
                  
                  (60,765
                  )Proceeds
      from sales of loans held-for-sale
                  
                  
                  6,333,825
                  
                  
                  
                  24,847,944Originations
      of loans held-for-sale
                  
                  
                  (5,403,470
                  )
                  
                  
                  (24,153,162
                  )Change
      in assets and liabilities:Accrued
      interest receivable
                  
                  
                  (4,616
                  )
                  
                  
                  57,053Prepaid
      expenses and other assets
                  
                  
                  330,085
                  
                  
                  
                  (523,294
                  )Accrued
      expenses and other liabilities
                  
                  
                  (516,380
                  )
                  
                  
                  (784,108
                  )Net
      cash provided by operating activities
                  
                  
                  2,085,083
                  
                  
                  
                  898,866CASH
      FLOWS FROM INVESTING ACTIVITIESNet
      change in loans
                  
                  
                  11,500,458
                  
                  
                  
                  7,043,206Purchase
      of loans
                  
                  
                  -
                  
                  
                  
                  (855,519
                  )Purchase
      of investments in certificates of deposit
                  
                  
                  (4,176,000
                  )
                  
                  
                  -Purchase
      of securities available-for-sale
                  
                  
                  (7,523,828
                  )
                  
                  
                  (3,824,364
                  )Proceeds
      from sale of securities available-for-sale
                  
                  
                  207,732
                  
                  
                  
                  332,000Proceeds
      from maturities and calls of securities available-for-sale
                  
                  
                  925,066
                  
                  
                  
                  1,317,165Proceeds
      from redemption of Federal Home Loan Bank stock
                  
                  
                  375,600
                  
                  
                  
                  -Purchase
      of Federal Home Loan Bank stock
                  
                  
                  -
                  
                  
                  
                  (46,600
                  )Purchase
      of premises, equipment and rental real estate
                  
                  
                  (101,758
                  )
                  
                  
                  (226,906
                  )Net
      proceeds from sale of foreclosed real estate
                  
                  
                  547,574
                  
                  
                  
                  133,012Net
      cash provided by investing activities
                  
                  
                  1,754,844
                  
                  
                  
                  3,871,994CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      increase in deposits
                  
                  
                  7,294,153
                  
                  
                  
                  304,927Net
      (decrease) in advances from borrowers for taxes and
    insurance
                  
                  
                  (800,846
                  )
                  
                  
                  (835,009
                  )Payments
      of other borrowed funds
                  
                  
                  (9,000,000
                  )
                  
                  
                  (4,507,651
                  )Proceeds
      from issuance of preferred stock and common stock warrant
                  
                  
                  -
                  
                  
                  
                  10,200,000Common
      and preferred dividends paid
                  
                  
                  (154,469
                  )
                  
                  
                  (64,435
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  (2,661,162
                  )
                  
                  
                  5,097,832Net
      increase in cash
                  
                  
                  1,178,765
                  
                  
                  
                  9,868,692CASH
      AND DUE FROM BANKSBeginning
                  
                  
                  21,766,170
                  
                  
                  
                  16,281,644Ending
                  
                  $
                  22,944,935
                  
                  
                  $
                  26,150,336


4


NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS -Continued


(Unaudited)
                
                Three Months EndedMarch 31,2010
                
                
                2009SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      payments for:Interest
      paid to depositors
                
                $
                1,324,824
                
                
                $
                2,180,233Interest
      paid on borrowings
                
                
                694,595
                
                
                
                998,437Income
      taxes
                
                
                184,591
                
                
                
                (7,727
                )SUPPLEMENTAL
      DISCLOSURE OF NONCASH OPERATING, INVESTING AND FINANCING
      ACTIVITIESTransfers
      from loans to other real estate owned
                
                $
                362,092
                
                
                $
                59,204





See Notes
to Consolidated Condensed Financial Statements.


5


NORTH
CENTRAL BANCSHARES, INC. AND SUBSIDIARIES





NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)





1.           BASIS
OF PRESENTATION





The
consolidated condensed financial statements for the three month periods ended
March 31, 2010 and 2009 are unaudited.  In the opinion of the
management of North Central Bancshares, Inc. (the “Company”), these financial
statements reflect all adjustments, including 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, 2009.





In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expense during the reporting
periods.  Significant estimates include the determination of the
allowance for loan losses, other-than-temporary declines in the fair value of
securities, and fair value measurements.  Actual results could differ
from those estimates.





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





2.           EARNINGS
PER COMMON SHARE





Basic
earnings per common share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period.  Income available to common stockholders is net income less
preferred stock dividends and accretion of discount on preferred stock, treated
as preferred stock dividends.  Diluted earnings per common share
reflects the potential dilution that would occur if the Company’s outstanding
stock options and warrant were exercised and converted into common stock and the
Company’s outstanding restricted stock was vested.  The dilutive
effect is computed using the treasury stock method, which assumes all
outstanding stock options and warrants are exercised.  The incremental
shares issuable upon exercise of the stock options and warrant, to the extent
they would have been dilutive, are included in the denominator of the diluted
earnings per common share calculation.  The calculation of earnings
per common share and diluted earnings per common share for the three months
ended March 31, 2010 and 2009 is presented below.


6





Three Months Ended March 31,2010
                          
                          
                          2009Basic
      earnings per common share:Net
      Income
                          
                          $
                          628,608
                          
                          
                          $
                          781,648Preferred
      stock dividends and accretion of discount
                          
                          
                          132,109
                          
                          
                          
                          119,126Net
      income available to common stockholders
                          
                          $
                          496,499
                          
                          
                          $
                          662,522Weighted
      average common shares outstanding - basic
                          
                          
                          1,344,948
                          
                          
                          
                          1,340,148Basic
      earnings per common share
                          
                          $
                          0.37
                          
                          
                          $
                          0.49Diluted
      earnings per common share:Net
      income available to common stockholders
                          
                          
                          496,499
                          
                          
                          
                          662,522Weighted
      average common shares outstanding - basic
                          
                          
                          1,344,948
                          
                          
                          
                          1,340,148Effect
      of dilutive securities:Stock
      Options1
                          
                          
                          -
                          
                          
                          
                          -Restricted
      Stock
                          
                          
                          3,500
                          
                          
                          
                          3,300Common
      stock warrant2
                          
                          
                          -
                          
                          
                          
                          -Total
      diluted average common shares issued and outstanding
                          
                          
                          1,348,448
                          
                          
                          
                          1,343,448Diluted
      earnings per common share
                          
                          $
                          0.37
                          
                          
                          $
                          0.49





1For the
periods ending March 31, 2010 and 2009, the stock options to purchase common
stock totaled 65,200 shares and 73,400 shares respectively.
These remaining shares were not dilutive due to the exercise price of the
options exceeding the average closing price of the Company's
common stock.


2The
average closing price of the Company's common stock for the three months ended
March 31, 2010 and 2009 was $14.98 and $10.73, respectively.  This
was less than the $15.43 exercise price of the common stock warrant to purchase
99,157 shares of common stock, therefore, the
warrant was not dilutive.





3.           SECURITIES





Securities
available-for-sale as of March 31, 2010 were as follows:





Gross
                  
                  
                  GrossAmortized
                  
                  
                  Unrealized
                  
                  
                  UnrealizedCost
                  
                  
                  Gains
                  
                  
                  (Losses)
                  
                  
                  Fair ValueDebt
      securities:State
      and local obligations
                  
                  $
                  4,085,529
                  
                  
                  $
                  82,180
                  
                  
                  $
                  (1,726
                  )
                  
                  $
                  4,165,983Mortgage-backed
      securities(1)
                  
                  
                  12,569,857
                  
                  
                  
                  281,456
                  
                  
                  
                  (28,006
                  )
                  
                  
                  12,823,307U.S.
      Government agencies
                  
                  
                  12,542,284
                  
                  
                  
                  12,489
                  
                  
                  
                  (79,193
                  )
                  
                  
                  12,475,580Total
                  
                  $
                  29,197,670
                  
                  
                  $
                  376,125
                  
                  
                  $
                  (108,925
                  )
                  
                  $
                  29,464,870





Securities
available-for-sale as of December 31, 2009 were as follows:





Gross
                  
                  
                  GrossAmortized
                  
                  
                  Unrealized
                  
                  
                  UnrealizedCost
                  
                  
                  Gains
                  
                  
                  (Losses)
                  
                  
                  Fair ValueEquity
      securities, mutual fund
                  
                  $
                  200,080
                  
                  
                  $
                  6,801
                  
                  
                  $
                  -
                  
                  
                  $
                  206,881Debt
      securities:State
      and local obligations
                  
                  
                  4,215,913
                  
                  
                  
                  112,114
                  
                  
                  
                  (1,530
                  )
                  
                  
                  4,326,497Mortgage-backed
      securities (1)
                  
                  
                  10,872,331
                  
                  
                  
                  302,038
                  
                  
                  
                  (9,056
                  )
                  
                  
                  11,165,313U.S.
      Government agencies
                  
                  
                  7,552,007
                  
                  
                  
                  5,163
                  
                  
                  
                  (80,660
                  )
                  
                  
                  7,476,51022,640,251
                  
                  
                  
                  419,315
                  
                  
                  
                  (91,246
                  )
                  
                  
                  22,968,320Total
                  
                  $
                  22,840,331
                  
                  
                  $
                  426,116
                  
                  
                  $
                  (91,246
                  )
                  
                  $
                  23,175,201





(1) All
mortgage backed securities consist of securities issued by FNMA, FHLMC or
GNMA.


7


Gross
unrealized losses and estimated fair value, aggregated by investment category
and length of time that individual securities have been in a continuous
unrealized loss position, as of March 31, 2010 and December 31, 2009, are
summarized as follows:





March 31, 2010Less than 12 Months
                  
                  
                  12 Months or More
                  
                  
                  TotalUnrealized
                  
                  
                  
                  
                  
                  Unrealized
                  
                  
                  
                  
                  
                  UnrealizedFair Value
                  
                  
                  Losses
                  
                  
                  Fair Value
                  
                  
                  Losses
                  
                  
                  Fair Value
                  
                  
                  LossesDebt
      securities:State
      and local obligations
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  223,274
                  
                  
                  $
                  (1,726
                  )
                  
                  $
                  223,274
                  
                  
                  $
                  (1,726
                  )Mortgage-backed
      securities
                  
                  
                  1,984,983
                  
                  
                  
                  (28,006
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,984,983
                  
                  
                  
                  (28,006
                  )U.S.
      Government agencies
                  
                  
                  11,421,867
                  
                  
                  
                  (79,193
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11,421,867
                  
                  
                  
                  (79,193
                  )Total
                  
                  $
                  13,406,850
                  
                  
                  $
                  (107,199
                  )
                  
                  $
                  223,274
                  
                  
                  $
                  (1,726
                  )
                  
                  $
                  13,630,124
                  
                  
                  $
                  (108,925
                  )





December
      31, 2009Less
      than 12 Months
                  
                  
                  12
      Months or More
                  
                  
                  TotalUnrealized
                  
                  
                  
                  
                  
                  Unrealized
                  
                  
                  
                  
                  
                  UnrealizedFair
      Value
                  
                  
                  Losses
                  
                  
                  Fair
      Value
                  
                  
                  Losses
                  
                  
                  Fair
      Value
                  
                  
                  LossesDebt
      securities:State
      and local obligations
                  
                  $
                  353,470
                  
                  
                  $
                  (1,530
                  )
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  353,470
                  
                  
                  $
                  (1,530
                  )Mortgage-backed
      securities
                  
                  
                  1,013,063
                  
                  
                  
                  (9,056
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,013,063
                  
                  
                  
                  (9,056
                  )U.S.
      Government agencies
                  
                  
                  3,919,340
                  
                  
                  
                  (80,660
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,919,340
                  
                  
                  
                  (80,660
                  )Total
                  
                  $
                  5,285,873
                  
                  
                  $
                  (91,246
                  )
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  5,285,873
                  
                  
                  $
                  (91,246
                  )





The
unrealized losses for the above investment securities are generally due to
changes in interest rates and, as such, are considered to be temporary by the
Company.  In addition, the Company does not have the intent to sell
these investment securities and it is not more likely than not that the Company
will be required to sell the securities before their anticipated
recovery.





The
amortized cost and fair value of debt securities as of March 31, 2010 by
contractual maturity is shown below.  Certain securities have call
features, which allow the issuer to call the security prior to
maturity.  Maturities may differ from contractual maturities in
mortgage-backed securities because the mortgages underlying the securities may
be called or repaid without any penalties.  Therefore, these
securities are not included in the maturity categories in the following maturity
summary:





Debt Securities Available-for-SaleMarch 31, 2010AmortizedCost
                        
                        
                        Fair ValueDue
      in one year or less
                        
                        $
                        225,000
                        
                        
                        $
                        223,274Due
      from one to five years
                        
                        
                        5,751,503
                        
                        
                        
                        5,721,948Due
      from five to ten years
                        
                        
                        9,112,175
                        
                        
                        
                        9,132,708Due
      over 10 years
                        
                        
                        1,539,135
                        
                        
                        
                        1,563,633Mortgage-backed
      securities
                        
                        
                        12,569,857
                        
                        
                        
                        12,823,307$
                        29,197,670
                        
                        
                        $
                        29,464,870


8


The
following is a summary of securities sold, excluding the sale of Federal Home
Loan Bank (“FHLB”) stock:





Three Months Ended March 31,2010
                  
                  
                  2009Net Proceeds
                  
                  
                  
                  
                  
                  
                  
                  
                  Net Proceedsfrom Sale
                  
                  
                  Gain
                  
                  
                  (Loss)
                  
                  
                  from Sale
                  
                  
                  Gain
                  
                  
                  (Loss)Equity
      securities:Mutual
      funds
                  
                  $
                  207,732
                  
                  
                  $
                  7,652
                  
                  
                  $
                  -
                  
                  
                  $
                  250,000
                  
                  
                  $
                  -
                  
                  
                  $
                  (10,342
                  )FHLMC
      preferred stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  82,000
                  
                  
                  
                  -
                  
                  
                  
                  -$
                  207,732
                  
                  
                  $
                  7,652
                  
                  
                  $
                  -
                  
                  
                  $
                  332,000
                  
                  
                  
                  -
                  
                  
                  $
                  (10,342
                  )





4.           OTHER
COMPREHENSIVE INCOME (LOSS)





Under
FASB guidance on other than temporary impairment (OTTI), credit-related losses
on debt securities with OTTI are recorded in current earnings, while the
noncredit-related portion of the reduction in fair value is recorded in other
comprehensive income (loss).  The Company’s other component of other
comprehensive income (loss) consists of the unrealized holding gains and losses
on available for sale investment securities which are considered temporary in
nature.





The
components of other comprehensive income (loss), presented net of taxes for the
three months ended March 31, 2010 and 2009, are as follows:





Three Months Ended March 31,2010
                    
                    
                    2009Other
      comprehensive income:Securities
      for which a portion of an other-than-temporary impairment has been
      recorded in earnings:Unrealized
      holding gain/(loss) arising during the period
                    
                    $
                    851
                    
                    
                    $
                    (47,533
                    )(Gain)/loss
      recognized in earnings
                    
                    
                    (7,652
                    )
                    
                    
                    10,342Net
      unrealized gain on securities with other-than-temporary impairment before
      tax expense
                    
                    
                    (6,801
                    )
                    
                    
                    (37,191
                    )Tax
      expense
                    
                    
                    -
                    
                    
                    
                    -Net
      unrealized (losses) on securities with other-than-temporary impairment,
      net of tax in other comprehensive income (loss)
                    
                    
                    (6,801
                    )
                    
                    
                    (37,191
                    )Other
      securities:Unrealized
      holding gains (losses) arising during the period
                    
                    
                    (60,870
                    )
                    
                    
                    268,337Realized
      net (gains) losses recognized into net income (loss)
                    
                    
                    -
                    
                    
                    
                    -Net
      unrealized gains (losses) on other securities before tax (expense)
      benefit
                    
                    
                    (60,870
                    )
                    
                    
                    268,337Tax
      (expense) benefit
                    
                    
                    22,705
                    
                    
                    
                    (100,089
                    )Net
      unrealized gains (losses) on other securities, net of tax in other
      comprehensive income (loss)
                    
                    
                    (38,165
                    )
                    
                    
                    168,248Total
      comprehensive income (loss)
                    
                    $
                    (44,966
                    )
                    
                    $
                    131,057


9


The
components of accumulated other comprehensive income, presented net of taxes,
are shown in the following table:





March 31, 2010
                              
                              
                              December 31, 2009Accumulated
      other comprehensive income:Unrealized
      gains on available for sale securities for which a port of other-
      than-temporary impairment has been recorded in earnings, net of tax of $0
      at March 31, 2010 and December 31, 2009
                              
                              $
                              -
                              
                              
                              $
                              6,801Unrealized
      gains on available for sale securities which are not other-than-
      temporarily impaired, net of tax of $99,665 and $122,370 at
                              
                              
                              167,534
                              
                              
                              
                              205,699March
      31, 2010 and December 31, 2009, respectively
                              
                              $
                              167,534
                              
                              
                              $
                              212,500





5.           FAIR
VALUE





Fair
Value Measurements





ASC 820,
Fair Value Measurements and Disclosures, defines fair value, establishes a
framework for measuring fair value and expand disclosures about fair value
measurements.  The Company uses fair value measurements to record fair
value adjustments to certain assets and to determine fair value
disclosures.  The Company did not have any liabilities that were
measured at fair value at March 31, 2010.  The Company’s securities
available for sale are recorded at fair value on a recurring
basis.  Additionally, from time to time, the Company may be required
to record at fair value other assets or liabilities on a non-recurring basis,
such as other real estate owned and impaired loans.  These
non-recurring fair value adjustments involve the application of
lower-of-cost-or-fair value accounting or write-downs of individual
assets.





In
accordance with ASC 820, the Company groups its assets at fair value in three
levels, based on the markets in which the assets are traded and the reliability
of the assumptions used to determine fair value.  These levels
are:





·
            Level
      1 – Valuation is based upon quoted prices for identical instruments traded
      in active markets.





·
            Level
      2 – Valuation is based upon quoted prices for similar instruments in
      active markets, quoted prices for identical or similar instruments in
      markets that are not active, and model-based valuation techniques for
      which all significant assumptions are observable in the
      market.





·
            Level
      3 – Valuation is generated from model-based techniques that use
      significant assumptions not observable in the market.  These
      unobservable assumptions reflect the Company’s own estimates of
      assumptions that market participants would use in pricing the asset or
      liability.  Valuation techniques include the use of option
      pricing models, discounted cash flow models, and similar
      techniques.  The results cannot be determined with precision and
      may not be realized in an actual sale or immediate settlement of the asset
      or liability.


10


Fair
value measurements for assets measured at fair value on a recurring basis are as
follows:





Fair Value Measurements at March 31, 2010(dollars in thousands)Quoted Pricesin Active Markets
                    
                    
                    Significant Other
                    
                    
                    Significantfor Identical Assets
                    
                    
                    Observable Inputs
                    
                    
                    Unobservable InputsDescription
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)
                    
                    
                    TotalSecurities
      available-for-saleState
      and local obligations
                    
                    $
                    -
                    
                    
                    $
                    4,166
                    
                    
                    $
                    -
                    
                    
                    $
                    4,166Mortgage-backed
      securities
                    
                    
                    -
                    
                    
                    
                    12,823
                    
                    
                    
                    -
                    
                    
                    
                    12,823U.S.
      Government agencies
                    
                    
                    -
                    
                    
                    
                    12,476
                    
                    
                    
                    -
                    
                    
                    
                    12,476Total
      securities available-for-sale
                    
                    $
                    -
                    
                    
                    $
                    29,465
                    
                    
                    $
                    -
                    
                    
                    $
                    29,465





Fair Value Measurements at December 31, 2009(dollars in thousands)Quoted Pricesin Active Markets
                    
                    
                    Significant Other
                    
                    
                    Significantfor Identical Assets
                    
                    
                    Observable Inputs
                    
                    
                    Unobservable InputsDescription
                    
                    (Level 1)
                    
                    
                    (Level 2)
                    
                    
                    (Level 3)
                    
                    
                    TotalSecurities
      available-for-saleEquity
      securities, mutual fund
                    
                    $
                    207
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    207State
      and local obligations
                    
                    
                    -
                    
                    
                    
                    4,326
                    
                    
                    
                    -
                    
                    
                    
                    4,326Mortgage-backed
      securities
                    
                    
                    -
                    
                    
                    
                    11,165
                    
                    
                    
                    -
                    
                    
                    
                    11,165U.S.
      Government agencies
                    
                    
                    -
                    
                    
                    
                    7,477
                    
                    
                    
                    -
                    
                    
                    
                    7,477Total
      securities available-for-sale
                    
                    $
                    207
                    
                    
                    
                    22,968
                    
                    
                    
                    -
                    
                    
                    
                    23,175





At
December 31, 2009, a portion of the securities available-for-sale portfolio was
an equity security consisting of a mortgage bond mutual fund
investment.  The fair value used by the Company represents quoted
market prices for the identical securities (Level 1 inputs).  This
security was sold during the first quarter of 2010.





The
securities available-for-sale (excluding equity securities) portfolio consists
of mortgage-backed securities, government bonds, 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).


11


Fair
value measurements for assets measured at fair value on a non recurring basis
are as follows:





Fair
      Value Measurements at March 31, 2010(dollars
      in thousands)Quoted Pricesin
      Active Markets
                      
                      
                      Significant
      Other
                      
                      
                      Significantfor
      Identical Assets
                      
                      
                      Observable
      Inputs
                      
                      
                      Unobservable
      InputsDescription
                      
                      (Level
      1)
                      
                      
                      (Level
      2)
                      
                      
                      (Level
      3)
                      
                      
                      TotalAssets:Impaired
      loans
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      9,746
                      
                      
                      $
                      9,746Foreclosed
      real estate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,471
                      
                      
                      
                      1,471Total
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      11,217
                      
                      
                      $
                      11,217





Fair Value Measurements at December 31, 2009(dollars in thousands)Quoted Pricesin Active Markets
                      
                      
                      Significant Other
                      
                      
                      Significantfor Identical Assets
                      
                      
                      Observable Inputs
                      
                      
                      Unobservable InputsDescription
                      
                      (Level 1)
                      
                      
                      (Level 2)
                      
                      
                      (Level 3)
                      
                      
                      TotalAssets:Impaired
      loans
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      8,435
                      
                      
                      $
                      8,435Foreclosed
      real estate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,709
                      
                      
                      
                      1,709Total
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      10,144
                      
                      
                      $
                      10,144





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





Foreclosed
real estate is initially recorded at fair value less estimated selling
costs.  Subsequently it is carried at the lower of cost or fair value
less estimated selling costs.  Fair value is estimated through current
appraisals or listing prices.  Estimated fair values may be adjusted
by management to reflect current economic and market conditions and, as such,
are classified as Level 3.





Fair
Value Disclosures





Generally
accepted accounting principles require disclosure of the fair value of financial
assets and financial liabilities, including those financial assets and financial
liabilities that are not measured and reported at fair value on a recurring
basis or non-recurring basis.  The methodologies for estimating the
fair value of financial assets and financial liabilities that are measured at
fair value on a recurring or non-recurring basis are discussed
above.  The methodologies for other financial assets and financial
liabilities are discussed below:





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





Investments
in certificates of deposit:  The carrying amount of investments in
certificates of deposit represents the fair value due to the short term nature
of the investments.





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





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


12


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





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





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





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





Commitments
to extend credit:  The fair values of commitments to extend credit are
based on fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and creditworthiness of the
counterparties.  At March 31, 2010 and December 31, 2009 the carrying
amount and fair value of the commitments were not significant.





March 31, 2010
                  
                  
                  December 31, 2009Carrying
                  
                  
                  Fair
                  
                  
                  Carrying
                  
                  
                  FairAmount
                  
                  
                  Value
                  
                  
                  Amount
                  
                  
                  Value(nearest 000)
                  
                  
                  
                  
                  
                  (nearest 000)Financial
      assets:Cash
      and due from banks
                  
                  $
                  22,944,935
                  
                  
                  $
                  22,945,000
                  
                  
                  $
                  21,766,170
                  
                  
                  $
                  21,766,000Investments
      in certificates of deposit
                  
                  
                  4,176,000
                  
                  
                  
                  4,176,000
                  
                  
                  
                  -
                  
                  
                  
                  -Securities
      available-for-sale
                  
                  
                  29,464,870
                  
                  
                  
                  29,465,000
                  
                  
                  
                  23,175,201
                  
                  
                  
                  23,175,000FHLB
      stock
                  
                  
                  3,549,100
                  
                  
                  
                  3,549,000
                  
                  
                  
                  3,924,700
                  
                  
                  
                  3,925,000Loans,
      net
                  
                  
                  362,167,774
                  
                  
                  
                  371,512,000
                  
                  
                  
                  374,854,993
                  
                  
                  
                  384,950,000Loans
      held for sale
                  
                  
                  515,765
                  
                  
                  
                  516,000
                  
                  
                  
                  1,333,933
                  
                  
                  
                  1,334,000Accrued
      interest receivable
                  
                  
                  1,872,586
                  
                  
                  
                  1,873,000
                  
                  
                  
                  1,867,970
                  
                  
                  
                  1,868,000Financial
      liabilities:Deposits
                  
                  
                  342,107,213
                  
                  
                  
                  345,787,000
                  
                  
                  
                  334,813,060
                  
                  
                  
                  338,105,000Borrowed
      funds
                  
                  
                  57,500,000
                  
                  
                  
                  59,576,000
                  
                  
                  
                  66,500,000
                  
                  
                  
                  69,132,000Accrued
      interest payable
                  
                  
                  333,490
                  
                  
                  
                  333,000
                  
                  
                  
                  330,804
                  
                  
                  
                  331,000





6.           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 and its banking subsidiary, First Federal Savings Bank of Iowa (the
“Bank”).  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.





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.


13





Three
      Months Ended March 31, 2010
                      
                      
                      Three
      Months Ended March 31, 2009Traditional
                      
                      
                      
                      
                      
                      
                      
                      
                      TraditionalBanking
                      
                      
                      All
      Others
                      
                      
                      Total
                      
                      
                      Banking
                      
                      
                      All
      Others
                      
                      
                      TotalInterest
      income
                      
                      $
                      5,787,786
                      
                      
                      $
                      -
                      
                      
                      $
                      5,787,786
                      
                      
                      $
                      6,465,795
                      
                      
                      $
                      -
                      
                      
                      $
                      6,465,795Interest
      expense
                      
                      
                      1,994,037
                      
                      
                      
                      28,068
                      
                      
                      
                      2,022,105
                      
                      
                      
                      3,038,694
                      
                      
                      
                      29,299
                      
                      
                      
                      3,067,993Net
      interest income (loss)
                      
                      
                      3,793,749
                      
                      
                      
                      (28,068
                      )
                      
                      
                      3,765,681
                      
                      
                      
                      3,427,101
                      
                      
                      
                      (29,299
                      )
                      
                      
                      3,397,802Provision
      for loan losses
                      
                      
                      800,000
                      
                      
                      
                      -
                      
                      
                      
                      800,000
                      
                      
                      
                      160,000
                      
                      
                      
                      -
                      
                      
                      
                      160,000Net
      interest income (loss) afterprovision
      for loan losses
                      
                      
                      2,993,749
                      
                      
                      
                      (28,068
                      )
                      
                      
                      2,965,681
                      
                      
                      
                      3,267,101
                      
                      
                      
                      (29,299
                      )
                      
                      
                      3,237,802Noninterest
      income
                      
                      
                      1,240,943
                      
                      
                      
                      423,654
                      
                      
                      
                      1,664,597
                      
                      
                      
                      1,442,974
                      
                      
                      
                      520,814
                      
                      
                      
                      1,963,788Securities
      gains (losses), net
                      
                      
                      7,652
                      
                      
                      
                      -
                      
                      
                      
                      7,652
                      
                      
                      
                      (10,342
                      )
                      
                      
                      -
                      
                      
                      
                      (10,342
                      )Noninterest
      expense
                      
                      
                      3,323,797
                      
                      
                      
                      429,025
                      
                      
                      
                      3,752,822
                      
                      
                      
                      3,574,135
                      
                      
                      
                      481,165
                      
                      
                      
                      4,055,300Income
      (loss) before income taxes
                      
                      
                      918,547
                      
                      
                      
                      (33,439
                      )
                      
                      
                      885,108
                      
                      
                      
                      1,125,598
                      
                      
                      
                      10,350
                      
                      
                      
                      1,135,948Provision
      for income taxes
                      
                      
                      263,700
                      
                      
                      
                      (7,200
                      )
                      
                      
                      256,500
                      
                      
                      
                      339,700
                      
                      
                      
                      14,600
                      
                      
                      
                      354,300Net
      income (loss)
                      
                      $
                      654,847
                      
                      
                      $
                      (26,239
                      )
                      
                      $
                      628,608
                      
                      
                      $
                      785,898
                      
                      
                      $
                      (4,250
                      )
                      
                      $
                      781,648Inter-segment
      revenue (expense)
                      
                      $
                      175,274
                      
                      
                      $
                      (175,274
                      )
                      
                      $
                      -
                      
                      
                      $
                      195,194
                      
                      
                      $
                      (195,194
                      )
                      
                      $
                      -Total
      assets
                      
                      $
                      448,802,731
                      
                      
                      $
                      3,625,259
                      
                      
                      $
                      452,427,990
                      
                      
                      $
                      474,690,621
                      
                      
                      $
                      3,865,677
                      
                      
                      $
                      478,556,298Total
      deposits
                      
                      $
                      342,107,213
                      
                      
                      $
                      -
                      
                      
                      $
                      342,107,213
                      
                      
                      $
                      350,474,852
                      
                      
                      $
                      -
                      
                      
                      $
                      350,474,852





7.           DIVIDENDS





On
February 26, 2010, the Company declared a cash dividend on its common stock,
payable on April 2, 2010 to stockholders of record as of March 12, 2010, equal
to $0.01 per share.  On February 15, 2010, the Company paid an
aggregate cash dividend of $127,500 on the Fixed Rate Cumulative Perpetual
Preferred Stock, Series A issued to the United States Department of the
Treasury.





8.           CURRENT
ACCOUNTING DEVELOPMENTS





In June
2009, the FASB issued guidance on Accounting for Transfers of Financial
Asset,to improve the
reporting for the transfers of financial assets resulting from (1) practices
that have developed that are not consistent with the original intent and key
requirements of prior FASB guidance and (2) concerns of financial statement
users that many of the financial assets (and related obligations) that have been
derecognized should continue to be reported in the financial statements of
transferors.  The Company adopted this standard effective January 1,
2010.  The adoption of this standard did not have a material impact on
the Company’s financial position or results of operations.





In
January 2010, the FASB issued guidance requiring increased fair value
disclosures.  There are two components to the increased disclosure
requirements set forth in the update:  (1) a description of, as well
as the disclosure of, the dollar amount of transfers in or out of level one or
level two (2) in the reconciliation for fair value measurements using
significant unobservable input (level 3), a reporting entity should present
separately information about purchases, sales, issuances and settlements (that
is, gross amounts shall be disclosed as opposed to a single net
figure).  Increased disclosures regarding the transfers in/out of
level one and two are required for interim and annual periods beginning after
December 15, 2009.  The adoption of this portion of the standard did
not have a material impact on the Company’s consolidated financial position,
results of operations or cash flows.  Increased disclosures regarding
the level three fair value reconciliation are required for fiscal years
beginning after December 15, 2010.  The adoption of this portion of
the standard is not expected to have a material impact on the Company’s
consolidated financial position, results of operations or cash flows.





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.


14


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 included in the Company’s 2009 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 its success in
implementing its 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.  The Company’s
shareholder value strategy has three major themes: (1) enhancing shareholders’
value; (2) making its retail banking franchise more valuable; and (3)
efficiently utilizing its capital.





Management
believes the following were important factors in the Company’s performance
during the quarter ended March 31, 2010:




•
            The
      credit crisis affecting the financial markets and residential housing that
      began in 2007 turned out to be just the flashpoint for a severe and
      prolonged recession.  While recently published economic data
      indicates that the downturn may be easing, the current economic
      environment continues to affect the Company, the Bank, and the financial
      industry generally, and it is not clear when or at what speed the economy
      will recover.





•
            The
      Company has taken significant steps to reduce the risk of additional loan
      losses.  Specifically, a senior credit administration position
      has been added to actively manage and monitor asset quality and problem
      loans.  During the quarter ended March 31, 2010 the Company
      increased its provision for loan losses to $800,000 compared to $160,000
      in the quarter ended March 31, 2009.  The Company continues to
      monitor its loan portfolio with the objective of avoiding defaults or
      write-downs.  Despite these actions, the possibility of
      additional losses can not be eliminated.  The Board of Directors
      and all employees continue to work hard to make the best of these
      continuing challenging conditions.





•
            The
      level of non-performing assets as a percentage of total assets increased
      to 3.58% as of March 31, 2010 from 3.54% as of December 31,
      2009.  The Company remains focused on credit quality and
      continues to take a pro-active approach to addressing and minimizing the
      financial impact of these assets.





•
            The
      Company continues its focus on earnings through management of net interest
      margin, successfully increasing the margin to 3.53% for the quarter ended
      March 31, 2010 from 3.04% for the quarter ended March 31,
      2009.





•
            Capital
      remains strong, with stockholders’ equity as a percentage of total assets
      increasing to 10.77% at March 31, 2010 from 10.61% at December 31,
      2009.  The Bank continues to be considered “well capitalized”
      under regulatory capital requirements with a total risk based capital
      ratio of 15.6% at March 31,
2010.


15




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 2009 Annual Report on Form
10-K.  Based on its consideration of accounting policies that involve
the most complex and subjective estimates and judgments, management has
identified its most critical accounting policies to be those related to the
allowance for loan losses and asset impairment judgments.





The
allowance for loan losses is established through a provision for loan losses
charged to expense.  Loans are charged off 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 trends 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 OTTI 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 of the
Company to not sell the security and whether it is more-likely-than-not that the
Company will be required to sell the security before its anticipated
recovery.





FINANCIAL
CONDITION





Total
assets decreased $2.6 million, or 0.6%, to $452.4 million at March 31, 2010,
from $455.0 million at December 31, 2009.  The decrease in assets was
primarily due to a decrease in net loans receivable, offset in part by an
increase in securities available-for-sale and investments in certificates of
deposits.  The increase in investments in certificates of deposits was
due to the purchase of $4.2 million of certificates of deposit of other
financial institutions during the three months ended December 31,
2010.  The increase in securities available-for-sale was primarily due
to the purchase of $7.5 million of securities for the three months ended March
31, 2010, offset in part by payments, maturities and the sale of securities in
the 2010 period.  The increases in securities available for sale and
investments in certificates of deposit were primarily funded by loan repayments
and increases in deposits.





Net loans
receivable decreased by $12.7 million, or 3.4%, to $362.2 million at March 31,
2010, from $374.9 million at December 31, 2009, primarily due to payments and
prepayments of $23.2 million and loan sales of $6.3 million during the three
months ended March 31, 2010. These payments, prepayments, and loan sales were
offset in part by the origination of $11.8 million of first mortgage loans
primarily secured by one-to-four family residences and commercial real estate,
and the origination of $5.8 million of consumer loans during the three months
ended March 31, 2010. The Company generally sells all fixed-rate residential
loans originated with maturities of 15 years or more in the secondary mortgage
market in order to reduce interest rate risk.





At March
31, 2010, net loans consisted of (i) $150.1 million of one-to-four family real
estate representing a decrease of $1.9 million from December 31, 2009, (ii)
$82.2 million of commercial real estate loans representing a decrease of $3.5
million for December 31, 2009, (iii) $58.5 million of multi-family real estate
loans representing a decrease of $4.4 million from December 31, 2009, and (iv)
$71.4 million of consumer loans representing a decrease of $2.9 million from
December 31, 2009.  The decrease in the loan portfolio is primarily
due to general decreases in demand for new loans and the Company’s curtailment
of out of state lending.


16


At March
31, 2010, the Company’s loan portfolio included $104.0 million of loans secured
by out of state properties, compared to $111.8 at December 31,
2009.  These loans represented 28.1% of the Company’s total loan
portfolio at March 31, 2010 compared to 29.2% at December 31, 2009 and are
primarily multifamily and commercial real estate loans.  There were no
originations or purchase of loans secured by out of state properties during the
three months ended March 31, 2010.  The Company has curtailed its out
of state lending in the current economic environment.





The
following table provides information regarding nonaccrual loans and
nonperforming assets as of the dates indicated.





March 31,
                    
                    
                    December 31,2010
                    
                    
                    2009(Dollars
      in thousands)First
      mortgage loans:One-
      to four-family residential
                    
                    $
                    4,290
                    
                    
                    $
                    4,323Multifamily
      and commercial properties
                    
                    
                    9,440
                    
                    
                    
                    9,033Consumer
      loans
                    
                    
                    980
                    
                    
                    
                    993Total
      nonaccrual loans
                    
                    
                    14,710
                    
                    
                    
                    14,34990
      days past due loans (still accruing interest)
                    
                    
                    -
                    
                    
                    
                    -Other
      nonperforming loans
                    
                    
                    -
                    
                    
                    
                    -Total
      nonperforming loans
                    
                    
                    14,710
                    
                    
                    
                    14,349Total
      foreclosed real estate
                    
                    
                    1,471
                    
                    
                    
                    1,709Other
      nonperforming assets
                    
                    
                    36
                    
                    
                    
                    42Total
      nonperforming assets
                    
                    $
                    16,217
                    
                    
                    $
                    16,100Total
      nonaccrual loans to net loans receivable
                    
                    
                    4.06
                    %
                    
                    
                    3.83
                    %Total
      nonaccrual loans to total assets
                    
                    
                    3.25
                    %
                    
                    
                    3.15
                    %Total
      nonperforming assets to total assets
                    
                    
                    3.58
                    %
                    
                    
                    3.54
                    %




The
allowance for loan loss was $7.8 million at March 31, 2010, compared to $7.2
million at December 31, 2009.  The allowance for loan losses at March
31, 2010 was 2.09% of loans and 52.76% of nonperforming loans, compared to 1.87%
of loans and 49.97% of nonperforming loans at December 31, 2009, and 1.36% of
loans and 56.31% of nonperforming loans at March 31, 2009.  Additions
to the allowance for loan loss in the three months ended March 31, 2010 were due
to a deterioration of economic conditions, downgrades in internal risk ratings,
primarily in certain land and land development loans, reductions in appraised
values, and higher levels of charge-offs.  Further deterioration in an
impaired real estate development loan located in Florida contributed to the
provision in the current quarter.  Nonperforming loans were $14.71
million, or 3.96% of total loans, at March 31, 2010, compared to $14.35 million,
or 3.75% of total loans, at December 31, 2009, and $9.59 million or 2.40% of
total loans at March 31, 2009. Foreclosed real estate increased to $1.47 million
at March 31, 2010 from $1.05 million at March 31, 2009.


17


The
following table summarizes the activity in the allowance for loan losses for the
three months ended March 31, 2010 and 2009, as well as other common ratios
related to the allowance for loan losses.





Three
      Months Ended March 31,2010
                    
                    
                    2009
                    
                    
                    Change(Dollars
      in thousands)Balance
      at beginning of period
                    
                    $
                    7,171
                    
                    
                    $
                    5,379
                    
                    
                    $
                    1,792Charge-offs
                    
                    
                    (214
                    )
                    
                    
                    (117
                    )
                    
                    $
                    (97
                    )Recoveries
                    
                    
                    4
                    
                    
                    
                    3
                    
                    
                    $
                    1Net
      charge-offs
                    
                    
                    (210
                    )
                    
                    
                    (114
                    )
                    
                    $
                    (96
                    )Provision
      charged to operations
                    
                    
                    800
                    
                    
                    
                    160
                    
                    
                    
                    640Balance
      at end of period
                    
                    $
                    7,761
                    
                    
                    $
                    5,425
                    
                    
                    $
                    2,336Average
      loans outstanding
                    
                    $
                    376,160
                    
                    
                    $
                    403,973Ratio
      of net charge-offs during the period to average loans
      outstanding
                    
                    
                    0.06
                    %
                    
                    
                    0.03
                    %




The
following table sets forth information with respect to the Company’s loan
delinquencies.





March
      31, 2010
                  
                  
                  December
      31, 2009Iowa
                  
                  
                  Out
      of State
                  
                  
                  Total
                  
                  
                  Iowa
                  
                  
                  Out
      of State
                  
                  
                  Total(Dollars
      in thousands)One-to-four
      family mortgage loans:Loans
      60 to 89 days delinquent
                  
                  $
                  1,038
                  
                  
                  $
                  -
                  
                  
                  $
                  1,038
                  
                  
                  $
                  1,555
                  
                  
                  $
                  -
                  
                  
                  $
                  1,555Loans
      90 days or more delinquent
                  
                  
                  2,676
                  
                  
                  
                  -
                  
                  
                  
                  2,676
                  
                  
                  
                  2,823
                  
                  
                  
                  -
                  
                  
                  
                  2,823Multifamily
      and commercial first mortgage loans:Loans
      60 to 89 days delinquent
                  
                  
                  -
                  
                  
                  
                  593
                  
                  
                  
                  593
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Loans
      90 days or more delinquent
                  
                  
                  5,344
                  
                  
                  
                  2,394
                  
                  
                  
                  7,738
                  
                  
                  
                  5,873
                  
                  
                  
                  4,660
                  
                  
                  
                  10,533Consumer
      loans:Loans
      60 to 89 days delinquent
                  
                  
                  208
                  
                  
                  
                  -
                  
                  
                  
                  208
                  
                  
                  
                  292
                  
                  
                  
                  -
                  
                  
                  
                  292Loans
      90 days or more delinquent
                  
                  
                  942
                  
                  
                  
                  -
                  
                  
                  
                  942
                  
                  
                  
                  993
                  
                  
                  
                  -
                  
                  
                  
                  993





The
following table sets forth information with respect to the Company’s classified
assets which include nonperforming loans, impaired loans and foreclosed real
estate.





March 31, 2010
                  
                  
                  December 31, 2009(Dollar
      In thousands)Substandard
      assets
                  
                  $
                  21,834
                  
                  
                  $
                  21,224Doubtful
      assets
                  
                  
                  3,673
                  
                  
                  
                  3,029Loss
      assets
                  
                  
                  20
                  
                  
                  
                  129Total
      classified assets
                  
                  $
                  25,527
                  
                  
                  $
                  24,382





Management
believes that the allowance for loan losses was adequate as of March 31,
2010.  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.


18


Deposits
increased $7.3 million, or 2.2%, to $342.1 million at March 31, 2010, from
$334.8 million at December 31, 2009, primarily reflecting increases in NOW and
savings account balances of $7.3 million and $2.1 million, offset in part by
decreases in noninterest bearing, money market and certificates of deposits
balances of $600,000, $600,000 and $900,000, respectively.  NOW
deposits increased primarily due to the Company’s promotion of F1Rst Perks which
is a new deposit account introduced in late 2009 that offers a higher interest
rate based on certain transactional activity.  Borrowings, primarily
FHLB advances, decreased $9.0 million, or 13.5%, to $57.5 million at March 31,
2010, from $66.5 million at December 31, 2009. This decrease was due to the
normal repayment of borrowings due to maturities which were not replaced because
of growth in deposits and the decline in demand for new loans.





Total
stockholders’ equity increased $400,000, or 0.8%, to $48.7 million at March 31,
2010, from $48.3 million at December 31, 2009, primarily due to earnings in the
2010 quarter, offset in part by dividends paid to stockholders.





The
Office of Thrift Supervision (the “OTS”) requires the Bank to meet minimum
tangible, leverage (core) and risk-based capital requirements.  As of
March 31, 2010, the Bank exceeded all of its regulatory capital
requirements.  The Bank’s required and actual capital levels as of
March 31, 2010 and December 31, 2009 were as follows:





To Be Well-CapitalizedFor Capital
                  
                  
                  Under Prompt CorrectiveActual
                  
                  
                  Adequacy Purposes
                  
                  
                  Action ProvisionsAmount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio
                  
                  
                  Amount
                  
                  
                  Ratio(000's)
                  
                  
                  
                  
                  
                  (000's)
                  
                  
                  
                  
                  
                  (000's)As
      of March 31, 2010:Total
      Capital (to risk-weighted assets)
                  
                  $
                  48,989
                  
                  
                  
                  15.6
                  %
                  
                  $
                  25,087
                  
                  
                  
                  8.0
                  %
                  
                  $
                  31,359
                  
                  
                  
                  10.0
                  %Tier
      I Capital (to risk-weighted assets)
                  
                  
                  45,104
                  
                  
                  
                  14.4
                  
                  
                  
                  12,543
                  
                  
                  
                  4.0
                  
                  
                  
                  18,815
                  
                  
                  
                  6.0Tier
      I (Core) Capital (to adjusted assets)
                  
                  
                  45,104
                  
                  
                  
                  10.0
                  
                  
                  
                  13,565
                  
                  
                  
                  3.0
                  
                  
                  
                  22,608
                  
                  
                  
                  5.0Tangible
      Capital (to adjusted assets)
                  
                  
                  45,104
                  
                  
                  
                  10.0
                  
                  
                  
                  6,782
                  
                  
                  
                  1.5
                  
                  
                  
                  -
                  
                  
                  
                  -As
      of December 31, 2009:Total
      Capital (to risk-weighted assets)
                  
                  $
                  48,429
                  
                  
                  
                  14.9
                  %
                  
                  $
                  26,080
                  
                  
                  
                  8.0
                  %
                  
                  $
                  32,600
                  
                  
                  
                  10.0
                  %Tier
      I Capital (to risk-weighted assets)
                  
                  
                  44,450
                  
                  
                  
                  13.6
                  
                  
                  
                  13,040
                  
                  
                  
                  4.0
                  
                  
                  
                  19,560
                  
                  
                  
                  6.0Tier
      I (Core) Capital (to adjusted assets)
                  
                  
                  44,450
                  
                  
                  
                  9.8
                  
                  
                  
                  13,636
                  
                  
                  
                  3.0
                  
                  
                  
                  22,727
                  
                  
                  
                  5.0Tangible
      Capital (to adjusted assets)
                  
                  
                  44,450
                  
                  
                  
                  9.8
                  
                  
                  
                  6,818
                  
                  
                  
                  1.5
                  
                  
                  
                  -
                  
                  
                  
                  -




19


RESULTS
OF OPERATIONS





The
following table shows selected financial results and measures for the three
months ended March 31, 2010, compared with the same periods in
2009.





Three
      Months Ended March 31,2010
                      
                      
                      2009Net
      income
                      
                      $
                      628,608
                      
                      
                      $
                      781,648Average
      assets
                      
                      
                      456,276,867
                      
                      
                      
                      478,688,772Average
      stockholders equity
                      
                      
                      48,640,617
                      
                      
                      
                      44,995,388Return
      on assets
                      
                      
                      0.55
                      %
                      
                      
                      0.65
                      %Return
      on equity
                      
                      
                      5.17
                      %
                      
                      
                      6.95
                      %Efficiency
      ratio
                      
                      
                      69.11
                      %
                      
                      
                      75.63
                      %


Definitions
of ratios:


Return on
assets - annualized net income divided by average assets.


Return on
equity - annualized net income divided by average stockholders
equity.


Efficiency
ratio - noninterest expense divided by the sum of noninterest income plus net
interest income.





Net
Income.  Net income
decreased by $153,000 to $629,000 for the quarter ended March 31, 2010, compared
to $782,000 for the quarter ended March 31, 2009.  The decrease in net
income was primarily due to an increase in provision for loan losses and
decreases in noninterest income, offset in part by an increase in net interest
income and a decrease in noninterest expense.


20


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




Data for
the three months ended March 31:


Average
      Balance
                      
                      
                      Interest
      Income/Expense
                      
                      
                      Yield/Rate2010
                      
                      
                      2009
                      
                      
                      Change
                      
                      
                      Change-%
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      Change
                      
                      
                      Change-%
                      
                      
                      2010
                      
                      
                      2009
                      
                      
                      ChangeAssets:Interest-earning
      assets:Loans
                      
                      
                      376,160,171
                      
                      
                      
                      403,972,899
                      
                      
                      
                      (27,812,728
                      )
                      
                      
                      -6.88
                      %
                      
                      
                      5,553,110
                      
                      
                      
                      6,185,217
                      
                      
                      
                      (632,107
                      )
                      
                      
                      -10.22
                      %
                      
                      
                      5.94
                      %
                      
                      
                      6.15
                      %
                      
                      
                      -0.21
                      %Securities
      available-for-sale
                      
                      
                      27,979,694
                      
                      
                      
                      27,626,894
                      
                      
                      
                      352,800
                      
                      
                      
                      1.28
                      %
                      
                      
                      221,556
                      
                      
                      
                      274,024
                      
                      
                      
                      (52,468
                      )
                      
                      
                      -19.15
                      %
                      
                      
                      3.17
                      %
                      
                      
                      3.97
                      %
                      
                      
                      -0.80
                      %Investments
      in certificates of deposit
                      
                      
                      644,710
                      
                      
                      
                      -
                      
                      
                      
                      644,710
                      
                      
                      
                      100
                      %
                      
                      
                      2,248
                      
                      
                      
                      -
                      
                      
                      
                      2,248
                      
                      
                      
                      100
                      %
                      
                      
                      1.41
                      %
                      
                      
                      0.00
                      %
                      
                      
                      100
                      %Interest-bearing
      cash
                      
                      
                      21,922,317
                      
                      
                      
                      13,964,690
                      
                      
                      
                      7,957,627
                      
                      
                      
                      56.98
                      %
                      
                      
                      10,872
                      
                      
                      
                      6,554
                      
                      
                      
                      4,318
                      
                      
                      
                      65.88
                      %
                      
                      
                      0.20
                      %
                      
                      
                      0.19
                      %
                      
                      
                      0.01
                      %Total
      interest-earning assets
                      
                      
                      426,706,892
                      
                      
                      
                      445,564,483
                      
                      
                      
                      (18,857,591
                      )
                      
                      
                      -4.23
                      %
                      
                      
                      5,787,786
                      
                      
                      
                      6,465,795
                      
                      
                      
                      (678,009
                      )
                      
                      
                      -10.49
                      %
                      
                      
                      5.45
                      %
                      
                      
                      5.83
                      %
                      
                      
                      -0.38
                      %Noninterest-earning
      assets
                      
                      
                      29,569,975
                      
                      
                      
                      33,124,289
                      
                      
                      
                      (3,554,314
                      )
                      
                      
                      -10.73
                      %Total
      assets
                      
                      
                      456,276,867
                      
                      
                      
                      478,688,772
                      
                      
                      
                      (22,411,905
                      )
                      
                      
                      -4.68
                      %Liabilities
      and Equity:Interest-bearing
      liabilities:NOW
      and money market savings
                      
                      
                      117,147,812
                      
                      
                      
                      93,556,212
                      
                      
                      
                      23,591,600
                      
                      
                      
                      25.22
                      %
                      
                      
                      179,352
                      
                      
                      
                      136,872
                      
                      
                      
                      42,480
                      
                      
                      
                      31.04
                      %
                      
                      
                      0.62
                      %
                      
                      
                      0.59
                      %
                      
                      
                      0.03
                      %Savings
                      
                      
                      29,851,447
                      
                      
                      
                      27,045,661
                      
                      
                      
                      2,805,786
                      
                      
                      
                      10.37
                      %
                      
                      
                      14,760
                      
                      
                      
                      15,943
                      
                      
                      
                      (1,183
                      )
                      
                      
                      -7.42
                      %
                      
                      
                      0.20
                      %
                      
                      
                      0.24
                      %
                      
                      
                      -0.04
                      %Certificates
      of Deposit
                      
                      
                      174,797,944
                      
                      
                      
                      209,812,863
                      
                      
                      
                      (35,014,919
                      )
                      
                      
                      -16.69
                      %
                      
                      
                      1,133,398
                      
                      
                      
                      1,916,741
                      
                      
                      
                      (783,343
                      )
                      
                      
                      -40.87
                      %
                      
                      
                      2.63
                      %
                      
                      
                      3.70
                      %
                      
                      
                      -1.07
                      %Borrowed
      funds
                      
                      
                      63,001,854
                      
                      
                      
                      81,052,122
                      
                      
                      
                      (18,050,268
                      )
                      
                      
                      -22.27
                      %
                      
                      
                      694,595
                      
                      
                      
                      998,437
                      
                      
                      
                      (303,842
                      )
                      
                      
                      -30.43
                      %
                      
                      
                      4.47
                      %
                      
                      
                      5.00
                      %
                      
                      
                      -0.53
                      %Total
      interest-bearing liabilities
                      
                      
                      384,799,057
                      
                      
                      
                      411,466,858
                      
                      
                      
                      (26,667,801
                      )
                      
                      
                      -6.48
                      %
                      
                      
                      2,022,105
                      
                      
                      
                      3,067,993
                      
                      
                      
                      (1,045,888
                      )
                      
                      
                      -34.09
                      %
                      
                      
                      2.13
                      %
                      
                      
                      3.02
                      %
                      
                      
                      -0.89
                      %Noninterest-bearing
      liabilities
                      
                      
                      22,837,193
                      
                      
                      
                      22,226,526
                      
                      
                      
                      610,667
                      
                      
                      
                      2.75
                      %Total
      liabilities
                      
                      
                      407,636,250
                      
                      
                      
                      433,693,384
                      
                      
                      
                      (26,057,134
                      )
                      
                      
                      -6.01
                      %Equity
                      
                      
                      48,640,617
                      
                      
                      
                      44,995,388
                      
                      
                      
                      3,645,229
                      
                      
                      
                      8.10
                      %Total
      liabilities and equity
                      
                      
                      456,276,867
                      
                      
                      
                      478,688,772
                      
                      
                      
                      (22,411,905
                      )
                      
                      
                      -4.68
                      %Net
      interest income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      3,765,681
                      
                      
                      
                      3,397,802
                      
                      
                      
                      367,879
                      
                      
                      
                      10.83
                      %Net
      interest rate spread
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      3.32
                      %
                      
                      
                      2.81
                      %
                      
                      
                      0.51
                      %Net
      interest margin
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      3.53
                      %
                      
                      
                      3.04
                      %
                      
                      
                      0.49
                      %Ratio
      of average interest-earnings assets to average interest-bearing
      liabilities
                      
                      
                      110.89
                      %
                      
                      
                      108.29
                      %





Net Interest
Income.  Fluctuations in net interest income can result from
the combination of changes in the balances of asset and liability categories and
changes in interest rates.  Interest rates earned and paid are also
affected by general economic conditions, particularly changes in market interest
rates, and by competitive factors, government policies, and the actions of
regulatory authorities.  Net interest income before provision for loan
losses increased by $368,000, or 10.8%, to $3.77 million for the quarter ended
March 31, 2010, from $3.40 million for the quarter ended March 31,
2009.  The increase was primarily due to an increase in net interest
rate spread (i.e., the difference in the average yield on assets and average
cost of liabilities) and a decrease in the average balance of interest-bearing
liabilities, offset in part by a decrease in the average balance of
interest-earning assets.  The interest rate spread increased to 3.32%
for the quarter ended March 31, 2010, from 2.81% for the quarter ended March 31,
2009.  The increase in interest rate spread reflects a decrease in
cost of funds, offset in part by a decrease in the yield on interest-earning
assets.





Interest
Income.  Interest income decreased by $678,000, or 10.5%, to
$5.79 million for the quarter ended March 31, 2010, compared to $6.47 million
for the quarter ended March 31, 2009.  The decrease in interest income
was due to a decrease in the average balance of interest-earning assets and a
decrease in the yield on interest-earning assets.  The average balance
of interest-earning assets decreased $18.9 million to $426.7 million for the
quarter ended March 31, 2010, from $445.6 million for the quarter ended March
31, 2009.  The average yield on interest-earning assets decreased to
5.45% for the quarter ended March 31, 2010, from 5.83% for the quarter ended
March 31, 2009, primarily due to a decrease in market rates on first mortgage
loans secured by one-to-four family real estate, commercial real estate, and
multifamily residences and consumer loans and securities
available-for-sale.  The decrease in the average balance of
interest-earning assets primarily reflects decreases in the average balances of
first mortgage loans secured by one-to-four family real estate and commercial
real estate and consumer loans, offset in part by an increase in the average
balance of multifamily residences, securities available-for-sale, investments in
certificates of deposit and interest-bearing cash.  The decrease in
the average balance of first mortgage loans was derived from payments,
prepayments, and sales of loans offset in part by the origination and purchases
of first mortgage loans secured by one-to-four family real estate and commercial
real estate during the three months ended March 31, 2010.  The
increase in the average balance of securities available-for-sale was primarily
due to the purchases of securities available-for-sale, offset in part by
payments, maturities, and sale of securities.


21


Interest
Expense.  Interest expense decreased by $1.05 million, or
34.1%, to $2.02 million for the quarter ended March 31, 2010, compared to $3.07
million for the quarter ended March 31, 2009.  The decrease in
interest expense was due to a decrease in the average balance of
interest-bearing liabilities and a decrease in the cost of funds on
interest-bearing liabilities. The average balance of interest-bearing
liabilities decreased $26.7 million to $384.8 million for the quarter ended
March 31, 2010, from $411.5 million for the quarter ended March 31,
2009.  The decrease in the average balance of interest-bearing
liabilities primarily reflects a decrease in borrowed funds and certificates of
deposit, offset in part by an increase in NOW, money market and savings account
balances.  The decrease in the average balance of borrowed funds was
primarily due to normal repayments of borrowings due to
maturities.  The average cost of funds was 2.13% for the quarter ended
March 31, 2010, compared to 3.02% for the quarter ended March 31,
2009.





Provision for
Loan Losses.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, a review of
classified loans, a realistic determination of value and adequacy of underlying
collateral, levels and trends of loan categories, 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 provision for loan losses was $800,000 and
$160,000 for the quarters ended March 31, 2010 and 2009, respectively,
representing an increase of $640,000, or 400%.  The increase in
provision for loan losses for the 2010 quarter was primarily a result of
continuing recessionary conditions negatively impacting the construction and
real estate development, commercial real estate, and consumer sectors. Further
deterioration in an impaired real estate development loan located in Florida
contributed to the provision in the current quarter.  Net charge-offs
were $210,000 for the quarter ended March 31, 2010, compared to $114,000 for the
quarter ended March 31, 2009.





Noninterest
Income.The following table shows the changes in the
noninterest income categories shown in the Consolidated Condensed Statements of
Income for the periods presented.





Three Months Ended March 31,2010
                      
                      
                      2009
                      
                      
                      Change
                      
                      
                      Change %Noninterest
      income:Fees
      and service charges
                      
                      $
                      1,076,762
                      
                      
                      $
                      1,048,400
                      
                      
                      $
                      28,362
                      
                      
                      
                      2.7
                      %Abstract
      fees
                      
                      
                      142,621
                      
                      
                      
                      216,752
                      
                      
                      
                      (74,131
                      )
                      
                      
                      -34.2
                      %Mortgage
      banking income
                      
                      
                      112,187
                      
                      
                      
                      314,743
                      
                      
                      
                      (202,556
                      )
                      
                      
                      -64.4
                      %Loan
      prepayment fees
                      
                      
                      10,079
                      
                      
                      
                      12,654
                      
                      
                      
                      (2,575
                      )
                      
                      
                      -20.3
                      %Other
      income:Increase
      in CSV – BOLI
                      
                      
                      59,743
                      
                      
                      
                      60,765
                      
                      
                      
                      (1,022
                      )
                      
                      
                      -1.7
                      %Investment
      and Insurance sales
                      
                      
                      170,895
                      
                      
                      
                      206,933
                      
                      
                      
                      (36,038
                      )
                      
                      
                      -17.4
                      %Foreclosed
      real estate net earnings
                      
                      
                      (41,060
                      )
                      
                      
                      (18,026
                      )
                      
                      
                      (23,034
                      )
                      
                      
                      127.8
                      %Rental
      income
                      
                      
                      121,657
                      
                      
                      
                      118,298
                      
                      
                      
                      3,359
                      
                      
                      
                      2.8
                      %All
      other
                      
                      
                      11,713
                      
                      
                      
                      3,269
                      
                      
                      
                      8,444
                      
                      
                      
                      258.3
                      %Total
      other income
                      
                      $
                      322,948
                      
                      
                      $
                      371,239
                      
                      
                      $
                      (48,291
                      )
                      
                      
                      -13.0
                      %Total
      noninterest income
                      
                      $
                      1,664,597
                      
                      
                      $
                      1,963,788
                      
                      
                      $
                      (299,191
                      )
                      
                      
                      -15.2
                      %





Total
noninterest income decreased by $299,000, or 15.2%, to $1.66 million for the
quarter ended March 31, 2010, from $1.96 million for the quarter ended March 31,
2009.  The decrease in noninterest income was primarily due to
decreases in mortgage banking income, loan prepayment fees, abstract fees, and
other income, offset in part by an increase in fees and service
charges.  Mortgage banking income decreased $203,000 for the quarter
ended March 31, 2010 compared to the same period of 2009 due to a decrease in
loans originated for the secondary market.  Abstract fees decreased
$74,000 for the quarter ended March 31, 2010 compared to the same period of 2009
due to the decline in mortgage loan demand.  Other income, which
primarily includes investment and insurance sales and foreclosed real estate net
earnings, decreased $48,000 for the quarter ended March 31, 2010 compared to the
same period of 2009 primarily due to a decrease in the volume of sales of
annuities and securities and an increase in losses and expenses related to
foreclosed real estate.  Fees and service charges increased $28,000
for the quarter ended March 31, 2010 compared to the same period of 2009
primarily due to an increase in interchange fees associated with demand deposit
accounts, offset by a decrease in overdraft fees.


22


Securities
Gains/(Losses). Net gains on securities increased $18,000 to
$8,000 for the quarter end March 31, 2010 compared to a net loss of $10,000 for
the same period in 2009. The increase in net gain on securities was due to the
sale of a mortgage bond mutual fund investment.





Noninterest
Expense.The following
table shows the changes in the noninterest expense categories shown in the
Consolidated Condensed Statements of income for the periods
presented.





Three Months Ended March 31,2010
                    
                    
                    2009
                    
                    
                    Change
                    
                    
                    Change %Noninterest
      expense:Compensation
      and employee benefits
                    
                    $
                    1,889,859
                    
                    
                    $
                    1,867,385
                    
                    
                    $
                    22,474
                    
                    
                    
                    1.2
                    %Premises
      and equipment
                    
                    
                    501,090
                    
                    
                    
                    486,632
                    
                    
                    
                    14,458
                    
                    
                    
                    3.0
                    %Data
      processing
                    
                    
                    213,123
                    
                    
                    
                    208,673
                    
                    
                    
                    4,450
                    
                    
                    
                    2.1
                    %FDIC
      insurance expense
                    
                    
                    143,817
                    
                    
                    
                    99,219
                    
                    
                    
                    44,598
                    
                    
                    
                    44.9
                    %Other
      expense:Advertising
      and promotions
                    
                    
                    66,508
                    
                    
                    
                    117,151
                    
                    
                    
                    (50,643
                    )
                    
                    
                    -43.2
                    %Professional
      fees
                    
                    
                    142,050
                    
                    
                    
                    301,805
                    
                    
                    
                    (159,755
                    )
                    
                    
                    -52.9
                    %Printing,
      postage, and supplies
                    
                    
                    92,798
                    
                    
                    
                    101,756
                    
                    
                    
                    (8,958
                    )
                    
                    
                    -8.8
                    %Checking
      account charges
                    
                    
                    82,914
                    
                    
                    
                    85,966
                    
                    
                    
                    (3,052
                    )
                    
                    
                    -3.6
                    %Insurance
                    
                    
                    42,750
                    
                    
                    
                    40,655
                    
                    
                    
                    2,095
                    
                    
                    
                    5.2
                    %OTS
      general assessment
                    
                    
                    34,329
                    
                    
                    
                    34,465
                    
                    
                    
                    (136
                    )
                    
                    
                    -0.4
                    %Telephone
                    
                    
                    32,571
                    
                    
                    
                    38,816
                    
                    
                    
                    (6,245
                    )
                    
                    
                    -16.1
                    %Apartment
      operating costs
                    
                    
                    89,836
                    
                    
                    
                    87,108
                    
                    
                    
                    2,728
                    
                    
                    
                    3.1
                    %Employee
      costs
                    
                    
                    42,622
                    
                    
                    
                    47,634
                    
                    
                    
                    (5,012
                    )
                    
                    
                    -10.5
                    %ATM
      expense
                    
                    
                    145,842
                    
                    
                    
                    137,831
                    
                    
                    
                    8,011
                    
                    
                    
                    5.8
                    %Foreclosed
      real estate impairment
                    
                    
                    9,958
                    
                    
                    
                    84,463
                    
                    
                    
                    (74,505
                    )
                    
                    
                    -88.2
                    %All
      other
                    
                    
                    222,755
                    
                    
                    
                    315,741
                    
                    
                    
                    (92,986
                    )
                    
                    
                    -29.5
                    %Total
      other expense
                    
                    $
                    1,004,933
                    
                    
                    $
                    1,393,391
                    
                    
                    $
                    (388,458
                    )
                    
                    
                    -27.9
                    %Total
      noninterest expense
                    
                    $
                    3,752,822
                    
                    
                    $
                    4,055,300
                    
                    
                    $
                    (302,478
                    )
                    
                    
                    -7.5
                    %





Total
noninterest expense decreased by $302,000, or 7.5%, to $3.75 million for the
quarter ended March 31, 2010, from $4.06 million for the quarter ended March 31,
2009.  The decrease in noninterest expense was primarily due to
decreases in other expenses, offset in part by increases in compensation and
employee benefits, FDIC insurance expense, premises and equipment and data
processing expenses. Compensation and employee benefits increased $22,000 for
the quarter ended March 31, 2010 compared to the same period of 2009 due to an
increase in the number of full time equivalent employees, normal salary
increases and increased pension plan expenses.  FDIC insurance expense
increased $45,000 for the quarter ended March 31, 2010 compared to the same
period of 2009 due to an increase in assessment fees. The increase in premises
and equipment of $14,000 was primarily due to increases in information
technology enhancements and property taxes.  Other expenses decreased
$388,000 for the quarter ended March 31, 2010 compared to the same period of
2009 primarily due to a decrease in legal and other professional fees,
foreclosed real estate impairment, and advertising and promotions. The Company’s
efficiency ratio for the quarter ended March 31, 2010 and 2009 was 69.11% and
75.63%, respectively.





Income
Taxes.Provision for
income taxes decreased by $98,000, or 27.7%, to $256,000 for the quarter ended
March 31, 2010, compared to $354,000 for the quarter ended March 31,
2009.  The decrease in income taxes was primarily due to a decrease in
income before income taxes.


23


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 quarter of 2010 and 2009, principal
payments, prepayments, and proceeds from the sale of loans totaled $29.4 million
and $47.7 million, respectively.  The net increase in deposits during
the first quarter of 2010 and 2009 totaled $7.3 million and $305,000,
respectively.  During the first quarter of 2010 and 2009, the proceeds
from the maturities, calls and sales of securities totaled $1.5 million and $1.6
million, respectively.  Cash provided from operating activities during
the first quarter of 2010 and 2009 totaled $2.1 million and $899,000,
respectively.  The Company’s primary use of funds is to originate and
purchase loans, purchase securities available-for-sale and investments in
certificates of deposit, repay borrowed funds and other financing
activities.  During the first quarter of 2010 and 2009, the Company’s
gross purchases and origination of loans totaled $17.8 million and $41.0
million, respectively.  The purchase of securities available-for-sale
for the three months ended March 31, 2010 totaled $7.5 million compared to $3.8
million for the three months ended March 31, 2009. The purchase of investments
in certificates of deposit for the three months ended March 31, 2010 totaled
$4.2 million compared to none for 2009.  The repayment of borrowed
funds during the first three months of 2010 and 2009 totaled $9.0 million and
$4.5 million, respectively.  The Company has borrowing capacity
available from the Federal Home Loan Bank of approximately $92 million at March
31, 2010.  OTS regulations require the Company to maintain sufficient
liquidity to ensure its safe and sound operation.  For additional
information about cash flows from the Company’s operating, financing and
investing activities, see the Consolidated Condensed Statements of Cash Flows in
the Company’s financial statements included in Part I, Item 1 of this
report.





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





On
January 8, 2010, the Company paid a quarterly cash dividend of $0.01 per share
of common stock to its shareholders as of the close of business on December 18,
2009.  This dividend payment totaled $13,000.  On February
15, 2010, the Company paid an aggregate cash dividend of $127,500 on the Series
A Preferred Stock.  On February 26, 2010, the Company declared a
quarterly cash dividend of $0.01 per share, payable on April 2, 2010 to
shareholders of record as of the close of business on March 12,
2010.





During
the first quarter of 2010, macro-economic conditions and the challenging
economic environment continued to impact liquidity and credit quality across the
financial markets.  While the recession has impacted the local
economies in which the Company operates and purchases out-of-state real estate
loans, our liquidity position and capital resources remain strong and the
Company anticipates that it will have sufficient funds to meet its current
funding commitments.





OFF-BALANCE
SHEET ARRANGEMENTS





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





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





No
material changes in the Company’s off-statement of financial condition
arrangements occurred during the three months ended March 31,
2010.


24


Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





In
management’s opinion, there has been no material changes in the quantitative and
qualitative information about market risk provided in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009.  Please see
the Company’s 2009 Annual Report on Form 10-K for a more detailed discussion of
the Company’s interest rate sensitivity analysis.





Item
4T.  Controls and Procedures





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





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
1A.  Risk Factors





There
have been no material changes to our risk factors since the filing of our Annual
Report on Form 10-K for the year ended December 31, 2009.  For a
summary of other risk factors relevant to our operations, see Part I, Item 1A in
our 2009 Annual Report on Form 10-K.





Item
6.  Exhibits





Exhibit No.
              
              Description
              
              Reference No.3.1
              
              Articles
      of Incorporation of North Central Bancshares, Inc.
              
              (1)3.2
              
              Bylaws
      of North Central Bancshares, Inc., as amended
              
              (2)3.3
              
              Articles
      of Amendment to the Articles of Incorporation establishing Series A
      Preferred Stock
              
              (3)31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer
              
              *31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer
              
              *32.1
              
              Section
      1350 Certification of Chief Executive Officer
              
              *32.2
              
              Section
      1350 Certificate of Chief Financial Officer
              
              *





(1)
            Incorporated
      herein by reference to the Quarterly Report on Form 10-Q filed with the
      SEC on August 12, 2009.


25


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





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


26


SIGNATURES





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





NORTH
      CENTRAL BANCSHARES, INC.Date:
      May 14, 2010
              BY:
              /s/ David M. BradleyDavid
      M. Bradley, Chairman, President & CEODate:
      May 14, 2010
              BY:
              /s/ Jane M. FunkJane
      M. Funk, Chief Financial Officer and
Treasurer




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