UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996
OR
_____ 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 2-89283
IOWA FIRST BANCSHARES CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF IOWA 42-1211285
- ------------------------------- -------------------
(State or other jurisdiction (IRS Employer of
incorporation or organization) Identification No.)
300 East Second Street
Muscatine, Iowa 52761
----------------------------------------
(Address of principal executive offices)
319-263-4221
-------------------------------
(Registrant's telephone number)
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 [ X ] NO
At June 30, 1996 there were 566,241 shares of the registrant's common stock
outstanding.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART 1 Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
June 30, 1996 and December 31, 1995
Consolidated Condensed Statements of
Operations, Six Months Ended
June 30, 1996 and 1995
Consolidated Condensed Statements of
Cash Flows, Six months Ended
June 30, 1996 and 1995
Notes to Consolidated Condensed
Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks ....................................... $ 11,660 $ 10,963
Investment securities available for sale (cost June 30, ...... 70,431 60,728
1996, $70,876; December 31, 1995, $60,364)
Federal funds sold and securities
purchased under resale agreements .......................... 11,660 24,700
Loans, net of allowance for possible loan June 30, 1996,
$2,716; December 31, 1995, $2,309 .......................... 172,059 169,342
Bank premises and equipment, net .............................. 4,243 4,342
Other assets .................................................. 2,969 2,755
--------- ---------
TOTAL ASSETS ............................................... $ 273,022 $ 272,830
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits .................................. $ 34,206 $ 35,076
Interest bearing deposits ..................................... 201,644 200,877
--------- ---------
TOTAL DEPOSITS ............................................. $ 235,850 $ 235,953
Securities sold under agreements to
repurchase ................................................. 5,129 6,814
Federal Home Loan Bank advances ............................... 3,887 3,398
Treasury tax and loan open note ............................... 2,500 1,525
Other liabilities ............................................. 2,254 2,107
--------- ---------
TOTAL LIABILITIES .......................................... $ 249,620 $ 249,797
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock .................................................. $ 200 $ 200
Surplus ....................................................... 3,870 3,800
Retained earnings ............................................. 20,561 19,326
--------- ---------
$ 24,631 $ 23,326
Unrealized gains (losses) on securities available for sale, net (278) 229
Less net cost of common shares acquired for the treasury ...... 951 522
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ................................. $ 23,402 $ 23,033
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 273,022 $ 272,830
========= =========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans .................. $ 3,879 $ 3,622 $ 7,569 $ 7,084
Interest on investment securities ........... 970 919 1,889 1,901
Interest on federal funds sold and securities
purchased under resale agreements ......... 284 175 577 191
------- ------- ------- -------
Total interest income ....................... $ 5,133 $ 4,716 $10,035 $ 9,176
------- ------- ------- -------
INTEREST EXPENSE:
Interest on deposits ........................ $ 2,304 $ 2,206 $ 4,578 $ 4,185
Interest on repurchase agreements and
other borrowings .......................... 140 53 295 112
------- ------- ------- -------
Total interest expense ...................... $ 2,444 $ 2,259 $ 4,873 $ 4,297
------- ------- ------- -------
Net interest income ......................... $ 2,689 $ 2,457 $ 5,162 $ 4,879
Provision for possible loan losses ............. 25 15 40 30
------- ------- ------- -------
Net interest income after provision for
possible loan losses ...................... $ 2,664 $ 2,442 $ 5,122 $ 4,849
Investment securities gains (losses) ........... 0 4 0 6
Other income ................................... 483 360 870 730
Other expense .................................. 1,662 1,744 3,333 3,491
------- ------- ------- -------
Income before income taxes .................. $ 1,485 $ 1,062 $ 2,659 $ 2,094
Applicable income taxes ........................ 510 317 892 646
------- ------- ------- -------
Net income ..................................... $ 975 $ 745 $ 1,767 $ 1,448
======= ======= ======= =======
Per share data:
Net earnings per common share ................ $ 1.63 $ 1.26 $ 2.97 $ 2.45
======= ======= ======= =======
Dividends declared per common share ............ $ 0.48 $ 0.39 $ 0.93 $ 0.76
======= ======= ======= =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 1996 and 1995
(In Thousands)
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 1,767 $ 1,448
Adjustments to reconcile net income to net cash provided
by operating activities:
Proceeds from FHLMC ......................................... 3,565 391
Loans underwritten for FHLMC ................................. (3,562) (390)
Gains on loans sold to FHLMC ................................. (3) (1)
Provision for loan losses .................................... 40 30
Investment securities (gains) losses, net .................... 0 (6)
Depreciation ................................................. 190 220
Deferred income taxes ........................................ (537) 0
Amortization of premiums and accretion of discounts
on loans and investment securities, net .................... 121 113
(Increase) decrease in other assets .......................... 100 229
Increase (decrease) in other liabilities ..................... (166) (116)
-------- --------
Net cash provided by operating activities ....................... $ 1,515 $ 1,918
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold ................ $ 13,040 $ (5,723)
Proceeds from maturities of investment securities ............ 10,064 9,728
Proceeds from sales of investment securities ................. 0 2,472
Purchases of investment securities ........................... (19,888) (4,809)
Net (increase) in loans ...................................... (2,757) (4,976)
Purchases of bank premises and equipment ..................... (91) (154)
-------- --------
Net cash (used in) investing activities ...................... $ 368 $ (3,462)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in noninterest bearing deposits ............... $ (870) $ (2,091)
Net increase in interest bearing deposits .................... 767 1,471
Net increase (decrease) in securities sold under
agreements to repurchase ................................... (1,685) 2,211
Net increase in other borrowings ............................. 1,464 1,450
Cash dividends paid .......................................... (503) (614)
Reissuance of treasury stock ................................. 37 0
Purchases of common stock for the treasury ................... (396) (227)
-------- --------
Net cash provided by financing activities .................... $ (1,186) $ 2,200
-------- --------
Net increase in cash and due from banks ...................... $ 697 $ 656
Cash and due from banks:
Beginning .................................................... 10,963 11,720
-------- --------
Ending ....................................................... $ 11,660 $ 12,376
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest ................................................... $ 4,845 $ 4,982
Income taxes ............................................... $ 635 $ 455
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
Iowa First Bancshares Corp. is a bank holding company providing bank
and bank related services through its subsidiaries.
Significant accounting policies:
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, First
National Bank of Muscatine (Muscatine) and First National Bank in
Fairfield (Fairfield), collectively referred to herein as
(Banks). All material intercompany accounts and transactions have
been eliminated in consolidation. The unaudited interim financial
statements presented reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the
results for the interim periods. All such adjustments are of a
normal recurring nature.
Presentation of cash flows:
For purposes of reporting cash flows, cash and due from banks
include cash on-hand and amounts due from banks. Cash flows from
demand deposits, NOW accounts, savings accounts, and federal
funds sold are reported net, since their original maturities are
less than three months. Cash flows are also reported net for
securities sold under agreements to repurchase, Federal Home Loan
Bank advances, TT&L open note, certificates of deposits, and
loans.
Investment securities:
Investment securities held to maturity are those debt securities
that the Banks have the ability and intent to hold until maturity
regardless of changes in market conditions, liquidity needs or
changes in general economic conditions. Such securities are
carried at cost adjusted for amortization of premiums and
accretion of discounts. If the ability or intent to hold to
maturity is not present for certain specified securities, such
securities are considered available for sale as the Banks intend
to hold them for an indefinite period of time but not necessarily
to maturity. Any decision to sell a security classified as
available for sale would be based on various factors, including
significant movements in interest rates, changes in the maturity
mix of the Banks' assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases
in stockholders' equity, net of the related deferred tax effect.
There are no securities held for trading purposes. Realized gains
or losses, determined on the basis of the cost of specific
securities sold, are included in earnings.
Pursuant to a FASB Special Report "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities" the Company transferred at fair value all
investment securities from held to maturity to available for sale
prior to December 31, 1995.
<PAGE>
Loans and direct lease financing:
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. The Banks
record impaired loans at the present value of expected future
cash flows discounted at the loan's effective interest rate, or
as an expedient, at the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
A loan is impaired when it is probable the creditor will be
unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement.
The allowance for loan losses is maintained at the level
considered adequate by management of the Banks to provide for
losses that can be reasonably anticipated. The allowance is
increased by provisions charged to operating expense and reduced
by net charge-offs. In determining the adequacy of the allowance
balance, the Banks make continuous credit reviews of the loan
portfolio and related off-balance sheet commitments, consider
current economic conditions, historical loan loss experience,
review of specific problem loans and other factors.
Unearned interest on discounted loans is amortized to income over
the life of the loans using the interest method. For all other
loans, interest is accrued daily on the outstanding balances.
Accrual of interest is discontinued on a loan when management
believes, after considering collection efforts and other factors,
that the borrower's financial condition is such that collection
of interest is doubtful. Generally this occurs when the
collection of interest or principal has become 90 days past due.
Direct loan and lease origination fees and costs are generally
being deferred and the net amount amortized as an adjustment of
the related loan's or lease's yield. The Banks generally amortize
these amounts over the contractual life. Commitment fees based
upon a percentage of customers' unused lines of credit and fees
related to standby letters of credit are not significant.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed primarily by the
straight-line method based on estimated useful lives.
Other assets:
Other real estate (ORE), which is included in other assets,
represents properties acquired through foreclosure, in-substance
foreclosure or other proceedings. ORE is recorded at the lower of
the amount of the loan or fair market value of the properties.
Any write-down to fair market value at the time of transfer to
ORE is charged to the allowance for loan losses. Property is
evaluated regularly to ensure that the recorded amount is
supported by the current fair market value.
Income taxes:
The Company files its tax return on a consolidated basis with its
subsidiary banks. The entities follow the direct reimbursement
method of accounting for income taxes under which income taxes or
credits which result from the subsidiary banks' inclusion in the
consolidated tax return are paid to or received from the parent
company.
Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and
deferred liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not
that some portion or all of the deferred assets will not be
realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of
enactment.
Deferred income taxes have not been provided on the equity in
undistributed net income of the subsidiaries as the entities file
a consolidated income tax return.
<PAGE>
Trust assets:
Trust assets (other than cash deposits) held by the Banks in
fiduciary or agency capacities for its customers are not included
in the accompanying consolidated balance sheets since such items
are not assets of the Banks.
Fair value of financial instruments:
FAS No. 107, Disclosures about Fair Market Value of Financial
Instruments, requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance
sheet, for which it is practicable to estimate that value.
Interim condensed financial statements are not required to
include the disclosures outlined by FAS 107 and, accordingly, are
not included herein.
Note 2. Capital Stock and Earnings Per Share
Common shares and preferred stock authorized total 2,000,000 shares and
500,000 shares, respectively. Primary earnings per share are arrived at
by dividing net income by the weighted average number of shares of
common stock and common stock equivalents outstanding for the
respective period. The weighted average number of shares of common
stock and common stock equivalents outstanding for the second quarter
and year-to-date through June 30, 1996 was 596,345 and 595,900,
respectively. Fully diluted earnings per share are not shown as the
dilutive effect of common stock equivalents was less than three
percent.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion and Analysis of Financial Condition
The Company's total assets at June 30, 1996, were $273,022,000. Muscatine's
total assets were $188,522,000 which reflects a $221,000 (0.1%) increase from
December 31, 1995, total assets. Fairfield's total assets were $82,440,000 at
June 30, 1996, which is a decrease of $25,000 when compared to December 31,
1995, total assets. Total consolidated assets increased only $192,000 during the
first six months of 1996.
Net loans totaled $172,059,000 at June 30, 1996. Net loans at Muscatine
increased by $3,476,000 (3.0%) during the first six months. Net loans decreased
at Fairfield by $759,000 (1.4%) during the first six months. Consolidated net
loans increased by $2,717,000 (1.6%) year-to-date with nearly all of the
increase occurring during the second quarter.
Total available for sale securities increased $9.7 million during the first six
months of 1996 while federal funds sold decreased $13 million. The Banks
continue to emphasize purchase of securities with maturities of five years and
less as such purchases offer reasonable yields with very little credit risk as
well as limited interest rate risk. Additionally, selected securities with
longer maturities have been purchased in order to enhance overall portfolio
yield without significantly increasing risk. At June 30, 1996, less than 10% of
investment securities mature in more than five years and less than 2% mature in
more than ten years. No securities have been sold during the year.
Total deposits at June 30, 1996, were $235,850,000. Deposits at Muscatine
increased .8% from the prior year end. Fairfield's total deposits decreased
approximately 1.8% during the same period. This represents a combined deposit
decrease of $103,000 for the Company during the first six months of 1996.
Additionally, securities sold under agreements to repurchase decreased $1.7
million to total $5.1 million. Intermediate term advances borrowed from the
Federal Home Loan Bank totaled $3.9 million at quarter end.
Results of Operations
Consolidated net income was $975,000, or $1.63 per share, for the second quarter
of 1996, a $230,000 or 30.9% increase from the same period last year. This
improvement included $150,000 of nonrecurring income primarily from recovery of
interest on two loans which had been on nonaccrual of interest status for quite
some time. These loans were paid off and our position in certain leases were
sold during the second quarter resulting in the aforementioned $150,000
additional income. Without these unusual increases to net income, the second
quarter 1996 earnings were $825,000 compared to $745,000 for the same period in
1995, an increase of $80,000 or 10.7%.
Net income for the six months ended June 30, 1996 was $1,767,000 compared to
$1,448,000 in 1995 for a 22% increase. Without the nonrecurring income discussed
above this increase was 11.7%.
The Company has been able to expand the net interest margin, as compared to the
prior year by actively managing asset quality, growth of the loan portfolio, and
rates paid on assets and liabilities. Management has expressed concern, however,
as to the ability to continue increasing the net interest margin each quarter if
short-term interest rates climb.
<PAGE>
Provisions for loan losses were $40,000 for the six months ended June 30, 1996,
which is $10,000 greater than the same period in 1995. Net loan recoveries
totaled $367,000 compared to net recoveries of $53,000 for the first six months
of 1995.
Nonaccrual loans were reduced during the past twelve months totaling $758,000 at
June 30, 1996, over $450,000 less than at June 30, 1995. Other real estate owned
totaled $107,000, and loans past due 90 days or more and still accruing totaled
$152,000. The reserve for loan losses of $2,716,000 represents 1.6% of net loans
and 267% of total nonaccrual loans, other real estate owned, and loans past due
90 days or more and still accruing.
The efficiency ratio, defined as noninterest expense as a percent of net
interest income plus noninterest income, was 55.3% for the first six months of
1996 compared to 60% for all of 1995.
Interest Rate Sensitivity
The Company manages its balance sheet to minimize the impact of interest rate
movements on its earnings. The term "rate sensitive" refers to those assets and
liabilities which are "sensitive" to fluctuations in rates and yields. When
interest rates move, earnings may be affected in many ways. Interest rates on
assets and liabilities may change at different times or by different amounts.
Maintaining a proper balance between rate sensitive earning assets and rate
sensitive liabilities is the principal function of asset and liability
management of a banking organization.
The following table shows the interest rate sensitivity position at several
repricing intervals (dollar amounts in thousands):
<TABLE>
Repricing Maturities at June 30, 1996
Less Than 3-12 1-5 More Than Noninterest
3 Months Months Years 5 Years Bearing Total
-------- -------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans ..................................... $ 60,263 $ 31,958 $ 67,148 $ 14,648 $ 758 $ 174,775
Investment securities ..................... 8,689 12,226 42,071 7,435 10 70,431
Other earning assets ...................... 11,660 0 0 0 0 11,660
Nonearning assets ......................... 0 0 0 0 16,156 16,156
-------- -------- -------- -------- -------- ---------
Total assets ........................... $ 80,612 $ 44,184 $109,219 $ 22,083 $ 16,924 $ 273,022
======== ======== ======== ======== ======== =========
Liabilities and Equity:
Deposits .................................. $ 54,414 $ 88,240 $ 58,990 $ 0 $ 34,206 $235,850
Other purchased funds ..................... 6,129 1,500 2,450 1,437 0 11,516
Other liabilities ......................... 0 0 0 0 2,254 2,254
Equity .................................... 0 0 0 0 23,402 23,402
-------- -------- -------- -------- -------- --------
Total liabilities and equity .......... $ 60,543 $ 89,740 $ 61,440 $ 1,437 $ 59,862 $273,022
======== ======== ========= ======== ======== ========
Repricing gap ............................... $ 20,069 $(45,556) $ 47,780 $ 20,646 $(42,938) $ 0
Cumulative repricing gap .................... $ 20,069 $(25,488) $ 22,292 $ 42,938 $ 0 $ 0
</TABLE>
The data in this table incorporates the contractual characteristics as well as
an estimate of the actual repricing characteristics of the Company's assets and
liabilities. Based on the estimate, twenty percent of the savings and NOW
accounts are reflected in the less than three months category, 30% in the three
month to one year category, with the remaining 50% in the 1-5 year time frame.
Money market accounts are estimated as 25% in the less than three months
category and 75% in the three months to one year time frame.
<PAGE>
A positive repricing gap for a given period exists when total interest-earning
assets exceed total interest-bearing liabilities and a negative gap exists when
total interest-bearing liabilities are in excess of interest-earning assets.
Generally a positive repricing gap will result in increased net interest income
in a rising rate environment and decreased net interest income in a falling rate
environment. A negative repricing gap tends to produce increased net interest
income in a falling rate environment and decreased net interest income in a
rising rate environment. At June 30, 1996, rate sensitive liabilities exceeded
rate sensitive assets within a one year maturity range by $25.5 million and,
thus, the Company is positioned to benefit from a decline in interest rates
within the next year.
The Company's repricing gap position is useful for measuring general relative
risk levels. However, even with perfectly matched repricing of assets and
liabilities, interest rate risk cannot be avoided entirely. Interest rate risk
remains in the form of prepayment risk of assets and liabilities, timing lags in
adjusting certain assets and liabilities that have varying sensitivities to
market interest rates, and basis risk. Basis risk refers to the possibility that
the repricing behavior of variable-rate assets could differ from the repricing
characteristics of liabilities which reprice in the same time period. Even
though these assets are match-funded, the spread between asset yields and
funding costs could change.
Because the repricing gap position does not capture these risks, Management
utilizes simulation modeling to measure and manage the rate sensitivity exposure
of earnings. The Company's simulation model provides a projection of the effect
on net interest income of various interest rate scenarios and balance sheet
strategies.
Liquidity
For banks, liquidity represents ability to meet both loan commitments and
deposit withdrawals. Factors which influence the need for liquidity are varied,
but include general economic conditions, asset/liability mix, bank reputation,
future FDIC funding needs, changes in regulatory environment, and credit
standing. Assets which provide liquidity consist principally of loans, cash and
due from banks, investment securities, and short-term investments such as
federal funds. Maturities of securities held for investment purposes and loan
payments provide a constant flow of funds available for cash needs.
Additionally, liquidity can be gained by the sale of loans or securities prior
to maturity if such assets had previously been designated as available for sale.
Interest rates, relative to the rate paid by the security or loan sold, along
with the maturity of the security or loan, are the major determinates of the
price which can be realized upon sale.
The subsidiary banks do not have brokered deposits.
Securities available for sale with a cost totaling $70,876,000 at quarter-end
included net unrealized losses of $445,000. These securities may be sold in
whole or in part to increase liquid assets, reposition the investment portfolio,
or for other purposes as defined by Management.
Capital
Stockholders' equity increased $369,000 during the six months ended June 30,
1996.
Federal regulatory agencies have adopted various capital standards for financial
institutions, including risk-based capital standards. The primary objectives of
the risk-based capital framework are to provide a more consistent system for
comparing capital positions of financial institutions and to take into account
the different inherent risks among financial institutions' assets and
off-balance-sheet items.
<PAGE>
Risk-based capital standards have been supplemented with requirements for a
minimum Tier 1 capital to assets ratio (leverage ratio). In addition, regulatory
agencies consider the published capital levels as minimum levels and may require
a Financial Institution to maintain capital at higher levels.
A comparison of the Company's capital as of June 30, 1996 with the minimum
requirements is presented below.
Minimum
Actual Requirements
------ ------------
Tier 1 risk-based capital ..................... 13.71% 4.00%
Total risk-based capital ...................... 15.29% 8.00%
Tier 1 leverage ratio ......................... 8.67% 3.00%
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature.
As a result, interest rates have a more significant impact on a financial
institution's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the price of goods and services. In the current interest rate
environment, liquidity and the maturity structure of the Company's assets and
liabilities are critical to the maintenance of acceptable performance levels.
Trends, Events or Uncertainties
Officers and Directors of the Company and its subsidiaries have had, and may
have in the future, banking transactions in the ordinary course of business of
the Company's subsidiaries. All such transactions are on substantially the same
terms, including interest rates on loans and collateral, as those prevailing at
the time for comparable transactions with others, involve no more than normal
risk of collectibility, and present no other unfavorable features.
At its meeting on June 15, 1989, the Company's Board of Directors authorized a
stock repurchase program, to repurchase up to 10 percent of the Company's
shares. Through June 30, 1996, slightly over 5.5% of the common stock had been
purchased under the program, net of sales to the Company's Employee Stock
Ownership Plan and shares issued pursuant to the Company's stock option plan.
The Company expects to continue repurchase of its common stock from time to time
under the repurchase program.
During June the Board of Directors authorized a three-for-one stock split
effected as a stock dividend payable to common stockholders on record as of July
2, 1996, with such shares to be issued on July 26, 1996.
In the normal course of business, the Banks are involved in various legal
proceedings. In the current opinion of management, any liability resulting from
such proceedings would not have a material effect on the Company's financial
statements.
The Company has incurred legal and engineering fees, and performed various tests
on a bank-owned vacant lot to determine if the lot contains environmental damage
or a potential for environmental damage liability. As a result of the testing,
the Company has submitted a Site Clean-Up Report with the Iowa Department of
Natural Resources (IADNR). The Company intends to work with the IADNR, as well
as its own engineers and attorneys, to determine the nature and scope of this
environmental concern, to ascertain the need for a monitoring and/or remediation
program and to consider the costs and allocations of responsibility with respect
to any expenses incurred under such a program. In the event that on-going
monitoring or remediation is required, reimbursement by predecessor owners or
insurers is likely. No conclusions have been reached at this time about a final
plan of monitoring and/or remediation, if any, however costs that may be
associated with such a plan will also most likely be covered by predecessor
owners or insurers. Besides those previously discussed, management is not aware
of any trends, events, or uncertainties that will have or that are reasonably
likely to have material effect on the Company's liquidity, capital resources or
operations.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K.
Reports on Form 8-K. No Form 8-K has been filed for
the quarter ended June 30, 1996.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
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.
IOWA FIRST BANCSHARES CORP.
(Registrant)
Aug 13, 1996 /s/ George A. Shepley
- ---------------- -------------------------------
Date George A. Shepley, Chairman of
the Board, President & Chief
Executive Officer
Aug 13, 1996 /s/ Kim K. Bartling
- ---------------- -------------------------------
Date Kim K. Bartling, Senior Vice
President, Chief Financial
Officer & Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 10-Q OF IOWA FIRST BANCSHARES CORP. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,660
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,660
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,431
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 174,775
<ALLOWANCE> 2,716
<TOTAL-ASSETS> 273,022
<DEPOSITS> 235,850
<SHORT-TERM> 9,016
<LIABILITIES-OTHER> 2,254
<LONG-TERM> 2,500
0
0
<COMMON> 200
<OTHER-SE> 23,202
<TOTAL-LIABILITIES-AND-EQUITY> 273,022
<INTEREST-LOAN> 7,569
<INTEREST-INVEST> 1,889
<INTEREST-OTHER> 577
<INTEREST-TOTAL> 10,035
<INTEREST-DEPOSIT> 4,578
<INTEREST-EXPENSE> 4,873
<INTEREST-INCOME-NET> 5,162
<LOAN-LOSSES> 40
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,333
<INCOME-PRETAX> 2,659
<INCOME-PRE-EXTRAORDINARY> 1,767
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,767
<EPS-PRIMARY> 2.97
<EPS-DILUTED> 2.97
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,309
<CHARGE-OFFS> 0
<RECOVERIES> 367
<ALLOWANCE-CLOSE> 2,716
<ALLOWANCE-DOMESTIC> 2,716
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
