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 September 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 September 30, 1996 there were 1,723,098 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, September 30, 1996 and
December 31, 1995
Consolidated Condensed Statements of Operations, Three and
Nine months Ended September 30, 1996 and 1995
Consolidated Condensed Statements of Cash Flows, Nine months
Ended September 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>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks ....................................... $ 14,235 $ 10,963
Investment securities available for sale (cost September 30, . 68,763 60,728
1996, $69,046; December 31, 1995, $60,364)
Federal funds sold and securities
purchased under resale agreements .......................... 8,500 24,700
Loans, net of allowance for possible loan
losses September 30, 1996, $2,737; December 31, 1995,
$2,309 ..................................................... 175,895 169,342
Bank premises and equipment, net .............................. 4,280 4,342
Other assets .................................................. 3,355 2,755
--------- ---------
TOTAL ASSETS ............................................... $ 275,028 $ 272,830
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits .................................. $ 37,447 $ 35,076
Interest bearing deposits ..................................... 198,845 200,877
--------- ---------
TOTAL DEPOSITS ............................................. $ 236,292 $ 235,953
Securities sold under agreements to
repurchase ................................................. 5,791 6,814
Federal Home Loan Bank advances ............................... 4,132 3,398
Treasury tax and loan open note ............................... 2,474 1,525
Other liabilities ............................................. 2,041 2,107
--------- ---------
TOTAL LIABILITIES .......................................... $ 250,730 $ 249,797
--------- ---------
STOCKHOLDERS' EQUITY
Common Stock .................................................. $ 200 $ 200
Surplus ....................................................... 3,861 3,800
Retained earnings ............................................. 21,137 19,326
--------- ---------
$ 25,198 $ 23,326
Unrealized gains (losses) on securities available for sale, net (178) 229
Less net cost of common shares acquired for the treasury ...... 722 522
--------- ---------
TOTAL STOCKHOLDERS' EQUITY ................................. $ 24,298 $ 23,033
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 275,028 $ 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 Nine Months Ended
September 30, September 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans .................. $ 3,803 $ 3,744 $ 11,372 $ 10,828
Interest on investment securities ........... 1,015 927 2,904 2,828
Interest on federal funds sold and securities
purchased under resale agreements ......... 134 109 711 300
-------- -------- -------- ---------
Total interest income ....................... $ 4,952 $ 4,780 $ 14,987 $ 13,956
-------- -------- -------- ---------
INTEREST EXPENSE:
Interest on deposits ........................ $ 2,194 $ 2,224 $ 6,772 $ 6,409
Interest on repurchase agreements and
other borrowings .......................... 147 83 442 195
-------- -------- -------- ---------
Total interest expense ...................... $ 2,341 $ 2,307 $ 7,214 $ 6,604
-------- -------- -------- ---------
Net interest income ......................... $ 2,611 $ 2,473 $ 7,773 $ 7,352
Provision for possible loan losses ............. 60 0 100 30
-------- -------- -------- ---------
Net interest income after provision for
possible loan losses ...................... $ 2,551 $ 2,473 $ 7,673 $ 7,322
Investment securities gains (losses) ........... 4 (9) 4 (3)
Other income ................................... 449 405 1,319 1,135
Other expense .................................. 1,685 1,617 5,018 5,108
-------- -------- -------- ---------
Income before income taxes .................. $ 1,319 $ 1,252 $ 3,978 $ 3,346
Applicable income taxes ........................ 436 400 1,328 1,046
-------- -------- -------- ---------
Net income ..................................... $ 883 $ 852 $ 2,650 $ 2,300
======== ======== ======== =========
Per share data:
Net earnings per common share ................ $ 0.50 $ 0.47 $ 1.50 $ 1.29
========= ======== ======== =========
Dividends declared per common share ............ 0.1800 0.1367 0.4900 0.3900
========= ======== ======== =========
</TABLE>
All per share information has been adjusted to reflect a three-for-one stock
split effected as July 26, 1996.
See notes to Consolidated Condensed Financial Statements.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For The Nine Months Ended September 30, 1996 and 1995
(In Thousands)
<TABLE>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...................................................... $ 2,650 $ 2,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Proceeds from FHLMC ......................................... 4,678 1,405
Loans underwritten for FHLMC ................................. (4,673) (1,400)
Gains on loans sold to FHLMC ................................. (5) (5)
Provision for loan losses .................................... 100 30
Investment securities (gains) losses, net .................... (4) 3
Depreciation ................................................. 282 324
Deferred income taxes ........................................ (396) --
Amortization of premiums and accretion of discounts
on loans and investment securities, net .................... 158 138
(Increase) in other assets ................................... (600) (429)
Increase (decrease) in other liabilities ..................... (129) 50
-------- --------
Net cash provided by operating activities ....................... $ 2,061 $ 2,416
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold ................ $ 16,200 $ (3,738)
Proceeds from maturities of investment securities ............ 12,635 11,430
Proceeds from sales of investment securities ................. 1,505 3,968
Purchases of investment securities ........................... (22,337) (9,773)
Net (increase) in loans ...................................... (6,653) (8,029)
Purchases of bank premises and equipment ..................... (220) (209)
-------- --------
Net cash (used in) investing activities ...................... $ 1,130 $ (6,351)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in noninterest bearing deposits ...... $ 2,371 $ (2,923)
Net increase (decrease) in interest bearing deposits ......... (2,032) 4,605
Net increase (decrease) in securities sold under
agreements to repurchase ................................... (1,023) 1,469
Net increase in other borrowings ............................. 1,683 2,600
Cash dividends paid .......................................... (778) (837)
Reissuance of treasury stock ................................. 256 27
Purchases of common stock for the treasury ................... (396) (261)
-------- --------
Net cash provided by financing activities .................... $ 81 $ 4,680
-------- --------
Net increase in cash and due from banks ...................... 3,272 745
Cash and due from banks:
Beginning .................................................... 10,963 11,720
-------- --------
Ending ....................................................... $ 14,235 $ 12,465
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest .................................................. $ 7,303 $ 7,614
Income taxes .............................................. $ 1,310 $ 757
</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.
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.
<PAGE>
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.
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.
<PAGE>
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 third quarter
and year-to-date through September 30, 1996 was 1,761,343 and
1,770,223, 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 September 30, 1996, were $275,028,000. Muscatine's
total assets were $187,963,000 which reflects a $338,000 (0.2%) decrease from
December 31, 1995, total assets. Fairfield's total assets were $84,683,000 at
September 30, 1996, which is an increase of $2,218,000 (2.9%) when compared to
December 31, 1995, total assets. Total consolidated assets increased
$2,198,000(.8%)during the first nine months of 1996.
Net loans totaled $175,895,000 at September 30, 1996. Net loans at Muscatine
increased by $5,523,000 (4.8%) during the first nine months. Net loans increased
at Fairfield by $1,030,000 (1.9%) during the first nine months. Consolidated net
loans increased by $6,553,000 (3.9%) year-to-date.
Total available for sale securities increased $8.0 million during the first nine
months of 1996 while federal funds sold decreased $16 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 September 30, 1996, less than
10% of investment securities mature in more than five years and less than 2%
mature in more than ten years. Securities totaling approximately $1.5 million
have been sold during the year, generating gains of $4,000.
Total deposits at September 30, 1996, were $236,292,000. Deposits at Muscatine
decreased .2% from the prior year end. Fairfield's total deposits increased
approximately 1.0% during the same period. This represents a combined deposit
increase of $339,000 for the Company during the first nine months of 1996.
Additionally, securities sold under agreements to repurchase decreased $1.0
million to total $5.8 million. Intermediate to long term advances borrowed from
the Federal Home Loan Bank totaled $4.1 million at quarter end.
Results of Operations
Consolidated net income was $883,000, or $.50 per share, for the third quarter
of 1996, a $31,000 or 3.6% increase from the same period last year. However, a
major factor in the third quarter's performance in 1995 was a $130,000 ($85,000
after-tax) nonrecurring refund from the Federal Deposit Insurance Corporation
(FDIC). Without this refund, net income for the third quarter of 1996 exceeded
the same quarter of 1995 by $116,000.
Net income for the nine months ended September 30, 1996 was $2,650,000 compared
to $2,300,000 in 1995 for a 15.2% increase. This improvement included $188,000
of nonrecurring income primarily from recovery of interest on loans which had
been on nonaccrual of interest status for quite some time. These loans were paid
off and the Company's position in certain leases were sold during 1996,
resulting in the aforementioned $188,000 additional income. Factoring out these
unusual increases to net income this year and the FDIC refunds last year, the
year-to-date 1996 net income exceeded 1995 by 11%.
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.
Provisions for loan losses were $100,000 for the nine months ended September 30,
1996, which is $70,000 greater than the same period in 1995. The third quarter
provision of $60,000 compared to $0 in 1995. Net loan recoveries totaled
$328,000 compared to net recoveries of $20,000 for the first nine months of
1995.
Nonaccrual loans were reduced during the past twelve months totaling $902,000 at
September 30, 1996, $293,000 less than at September 30, 1995. Other real estate
owned totaled $49,000, and loans past due 90 days or more and still accruing
totaled $205,000. The reserve for loan losses of $2,737,000 represents 1.6% of
net loans and 237% 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 55.2% for the first nine months of
1996 compared to 60% for all of 1995.
<PAGE>
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):
Repricing Maturities at September 30, 1996
<TABLE>
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 ..................................... $ 60,477 $ 29,100 $ 73,809 $ 14,344 $ 902 $ 178,632
Investment securities ..................... 8,541 10,699 42,142 7,371 10 68,763
Other earning assets ...................... 8,500 -- -- -- -- 8,500
Nonearning assets ......................... -- -- -- -- 9,133 19,133
-------- -------- -------- -------- --------- ---------
Total assets ........................... $ 77,518 $ 39,799 $115,951 $ 21,715 $ 20,045 $ 275,028
======== ======== ======== ======== ========= =========
Liabilities and Equity:
Deposits .................................. $ 46,223 $ 93,246 $ 59,377 $ -- $ 37,446 $ 236,292
Other purchased funds ..................... 5,766 2,500 2,700 1,432 -- 12,398
Other liabilities ......................... -- -- -- -- 2,040 2,040
Equity .................................... -- -- -- -- 24,298 24,298
-------- -------- -------- -------- --------- ---------
Total liabilities and equity .......... $ 51,989 $ 95,746 $ 62,077 $ 1,432 $ 63,784 $ 275,028
======== ======== ======== ======== ========= =========
Repricing gap ............................... $ 25,529 $(55,947) $ 53,874 $ 20,283 $(43,739) $ --
Cumulative repricing gap .................... $ 25,529 $(30,418) $ 23,456 $ 43,739 $ -- $ --
</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.
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 September 30, 1996, rate sensitive liabilities
exceeded rate sensitive assets within a one year maturity range by $30.4 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.
<PAGE>
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 $69,046,000 at quarter-end
included net unrealized losses of $283,000. 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 $1,265,000 (5.5%) during the nine months ended
September 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.
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 September 30, 1996 with the minimum
requirements is presented below.
Minimum
Actual Requirements
------ ------------
Tier 1 risk-based capital ..................... 13.02% 4.00%
Total risk-based capital ...................... 14.27% 8.00%
Tier 1 leverage ratio ......................... 8.74% 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.
<PAGE>
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 September 30, 1996, more than 4% 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 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 September 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)
11/13/96 /s/ George A. Shepley
- ---------------- -------------------------------
Date George A. Shepley, Chairman of
the Board, President & Chief
Executive Officer
11/13/96 /s/ Kim K. Bartling
- ---------------- -------------------------------
Date Kim K. Bartling, Senior Vice
President, Chief Financial
Officer & Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFROMATION EXTRACTED FROM
THE SEPTEMBER 30, 1996 10-Q FOR IOWA FIRST BANCSHARES CORP AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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0
0
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