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, 2000
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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
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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, 2000 there were 1,516,888 shares of the registrant's common
stock outstanding.
<PAGE>
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE NO.
PART 1 Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
September 30, 2000 and December 31, 1999
Consolidated Condensed Statements of
Operations, Three and Nine Months Ended
September 30, 2000 and 1999
Consolidated Condensed Statements of
Cash Flows, Nine Months Ended
September 30, 2000 and 1999
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,
2000 1999
--------------------------
<S> <C> <C>
ASSETS
Cash and due from banks ................................ $ 13,851 $ 15,304
Investment securities available for sale ............... 67,144 62,950
Federal funds sold and securities
purchased under resale agreements .................... 5,850 15,800
Loans, net of allowance for possible loan
losses September 30, 2000, $3,252;
December 31, 1999, $3,091 ............................ 271,525 266,992
Bank premises and equipment, net ....................... 5,080 5,456
Other assets ........................................... 7,962 4,527
--------- ---------
TOTAL ASSETS .................................... $ 371,412 $ 371,029
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits ........................... $ 40,543 $ 47,175
Interest bearing deposits .............................. 225,634 222,397
--------- ---------
TOTAL DEPOSITS ................................. $ 266,177 $ 269,572
Notes payable .......................................... 6,218 6,869
Securities sold under agreements to
repurchase ........................................... 4,173 4,626
Federal Home Loan Bank advances ........................ 67,874 64,621
Treasury tax and loan open note ........................ 1,930 2,211
Other liabilities ...................................... 2,134 1,937
--------- ---------
TOTAL LIABILITIES ............................... $ 348,506 $ 349,836
STOCKHOLDERS' EQUITY
Common stock ........................................... $ 200 $ 200
Surplus ................................................ 4,349 4,349
Retained earnings ...................................... 29,326 27,585
--------- ---------
$ 33,875 $ 32,134
Accumulated other comprehensive (loss) ................. (221) (649)
Less net cost of common shares acquired for the treasury (10,748) (10,292)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY .................... $ 22,906 $ 21,193
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 371,412 $ 371,029
========= =========
</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,
------------------ ----------------
2000 1999 2000 1999
----------------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans .................. $ 5,840 $ 5,437 $17,079 $15,667
Interest on investment securities ........... 1,011 941 2,963 2,696
Interest on federal funds sold and securities
purchased under resale agreements ......... 22 6 193 245
------- ------- ------- -------
Total interest income ....................... $ 6,873 $ 6,384 $20,235 $18,608
------- ------- ------- -------
INTEREST EXPENSE:
Interest on deposits ........................ $ 2,674 $ 2,326 $ 7,715 $ 7,020
Interest on other borrowed funds ............ 1,276 1,030 3,475 2,742
Interest on notes payable ................... 117 131 365 395
------- ------- ------- -------
Total interest expense ...................... $ 4,067 $ 3,487 $11,555 $10,157
------- ------- ------- -------
Net interest income ......................... $ 2,806 $ 2,897 $ 8,680 $ 8,451
Provision for possible loan losses ............. 125 90 284 256
------- ------- ------- -------
Net interest income after provision for
possible loan losses ...................... $ 2,681 $ 2,807 $ 8,396 $ 8,195
Investment securities gains .................... -- 4 8 4
Other income ................................... 543 529 1,623 1,474
Other expense .................................. 2,082 2,053 6,100 5,938
------- ------- ------- -------
Income before income taxes .................. $ 1,142 $ 1,287 $ 3,927 $ 3,735
Applicable income taxes ........................ 340 408 1,225 1,172
------- ------- ------- -------
Net income ..................................... $ 802 $ 879 $ 2,702 $ 2,563
======= ======= ======= =======
Net income per common share :
Basic ........................................ $ 0.53 $ 0.57 $ 1.77 $ 1.67
======= ======= ======= =======
Diluted ...................................... $ 0.53 $ 0.57 $ 1.77 $ 1.67
======= ======= ======= =======
Dividends declared per common share ............ $ 0.21 $ 0.21 $ 0.63 $ 0.63
======= ======= ======= =======
Comprehensive income ........................... $ 1,242 $ 644 $ 3,130 $ 1,559
======= ======= ======= =======
</TABLE>
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, 2000 and 1999
(In Thousands)
<TABLE>
2000 1999
---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................................ $ 2,702 $ 2,563
Adjustments to reconcile net income to net
cash provided by operating activities:
Proceeds from sale of loans .................................... 1,192 1,936
Loans underwritten for sale .................................... (1,185) (1,922)
Gains on loans sold ............................................ (7) (14)
Provision for possible loan losses ............................. 284 256
Investment securities (gains), net ............................. (8) (4)
Depreciation ................................................... 479 478
Amortization of premiums and accretion of discounts
on investment securities, net ................................ 5 86
(Increase) in other assets ...................................... (550) (1,069)
(Decrease) increase in other liabilities ........................ 201 (263)
--------- --------
Net cash provided by operating activities ......................... $ 3,113 $ 2,047
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in federal funds sold ............................. $ 9,950 $ 12,555
Proceeds from sales, maturities, calls and paydowns of available
for sale securities .......................................... 8,654 17,472
Purchases of available for sale securities ..................... (12,163) (25,555)
Net (increase) in loans ........................................ (4,817) (21,080)
Purchases of bank premises and equipment ....................... (103) (177)
Increase in cash surrender value of life insurance ............. (3,139) --
-------- --------
Net cash provided by (used in) investing activities ............ $ (1,618) $(16,785)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in noninterest bearing deposits ................. $ (6,632) $ (5,881)
Net increase (decrease) in interest bearing deposits ........... 3,237 (1,315)
Net (decrease) in securities sold under
agreements to repurchase ..................................... (453) (664)
Payments of advances from Federal Home Loan Bank ............... (12,097) (271)
Advances from Federal Home Loan Bank ........................... 15,350 16,289
Net increase (decrease) in treasury tax and loan open note ..... (281) 2,388
Proceeds from notes payable .................................... 25 --
Repayments of notes payable .................................... (676) (339)
Net increase in federal funds purchased ........................ -- 2,500
Cash dividends paid ............................................ (965) (964)
Purchases of common stock for the treasury ..................... (456) (85)
-------- --------
Net cash provided by (used in) financing activities ............ $ (2,948) $ 11,658
-------- --------
Net (decrease) in cash and due from banks ...................... (1,453) (3,080)
Cash and due from banks:
Beginning ...................................................... $ 15,304 $ 14,408
-------- --------
Ending ......................................................... $ 13,851 $ 11,328
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for: Interest .................................. $ 11,064 $ 10,064
Income taxes .............................. $ 1,390 $ 1,182
</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. (the "Company") is a bank holding company
headquartered in Muscatine, Iowa. The Company owns the outstanding stock of two
national banks, First National Bank of Muscatine (Muscatine) and First National
Bank in Fairfield (Fairfield). First National Bank of Muscatine has a total of
five locations in Muscatine, Iowa. First National Bank in Fairfield has two
locations in Fairfield, Iowa. Each bank is engaged in the general commercial
banking business and provides full service banking to individuals and
businesses, including checking, savings and other deposit accounts, commercial
loans, consumer loans, real estate loans, safe deposit facilities, transmitting
of funds, trust services, and such other banking services as are usual and
customary for commercial banks.
Significant accounting policies:
Accounting Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. A
significant estimate which is particularly susceptible to change in a short
period of time relates to the determination of the allowance for loan losses.
Actual results could differ from those estimates.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, First National Bank of Muscatine and
First National Bank in Fairfield (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 includes cash
on-hand, amounts due from banks, and cash items in process of clearing. Cash
flows from federal funds sold and other overnight investments, loans, deposits,
securities sold under agreements to repurchase, and treasury tax and loan open
note are reported net.
Investment securities available for sale:
Securities available for sale are accounted for at fair value and the unrealized
holding gains or losses are presented as a separate component of stockholders'
equity, net of their deferred income tax effect.
Realized gains or losses, determined using the specific-identification method,
are included in earnings.
Declines in the fair value of individual available-for-sale securities below
their cost that are other than temporary would result in write-downs of the
individual securities to their fair value. The related write-downs would be
included in earnings as realized losses.
Premiums and discounts are recognized in interest income using the interest
method over the period to maturity. There were no investments held to maturity
or for trading purposes at quarter-end.
<PAGE>
Loans:
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 Banks recognize interest income on impaired loans on a cash
basis.
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 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. Subsequent write-downs to fair value are charged to
earnings.
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.
<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 and preferred stock authorized total 6,000,000 and 500,000 shares,
respectively. Basic earnings per share is arrived at by dividing net income by
the weighted average number of shares of common stock outstanding for the
respective period. Diluted earnings per share is arrived at by dividing net
income by the weighted average number of common stock and common stock
equivalents outstanding for the respective period. The average number of shares
of common stock outstanding for the third quarter of 2000 and 1999 were
1,520,679 and 1,531,341, respectively. The average number of shares of common
stock outstanding for the first nine months of 2000 and 1999 were 1,529,158 and
1,532,063, respectively. There were no common stock equivalents in 2000 or 1999.
<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, 2000, were $371,412,000. Muscatine's
total assets were $273,958,000 which reflects a $1,558,000 (0.6%) increase from
December 31, 1999, total assets. Fairfield's total assets were $96,915,000 at
September 30, 2000, which is a decrease of $733,000 (0.8%) when compared to
December 31, 1999, total assets. Total consolidated assets increased by 0.1%
during the first nine months of 2000.
Net loans totaled 271,525,000 at September 30, 2000. Net loans at Muscatine
increased by $5,893,000 (3.0%) during the first nine months. Net loans decreased
at Fairfield by $1,360,000 (1.9%) during the first nine months. Consolidated net
loans increased by $4,533,000 (1.7%) year-to-date.
Total available for sale securities increased $4,194,000 during the first nine
months of 2000 while federal funds sold decreased $9,950,000. The Banks
emphasize purchase of securities with maturities of five years and less as such
purchases offer reasonable yields with 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, 2000, less than 45% of
investment securities mature in more than five years and less than 15% mature in
more than ten years. One security has been sold during the year with proceeds
totaling $18,000. A gain of $8,000 was recognized on this sale.
Total deposits at September 30, 2000, were $266,177,000. Deposits at Muscatine
decreased $1,819,000 (1.0%) from the prior year end. Fairfield's total deposits
decreased $1,586,000 (2.0%) during the same period. This represents a combined
deposit decrease of 1.3% for the Company during the first nine months of 2000.
Additionally, securities sold under agreements to repurchase decreased $453,000
and advances borrowed from the Federal Home Loan Bank increased $3,253,000 to
total $67.9 million at quarter end.
During the three months ended September 30, 2000, the Company entered into
deferred compensation agreements with various directors and executive officers.
As of September 30, 2000 the Company has accrued approximately $200,000 for the
agreements. Related to the agreements, the Company has purchased various life
insurance contracts. The cash value of these life insurance contracts is
$3,139,000 as of September 30, 2000 and is included with other assets in the
consolidated balance sheet.
Results of Operations
Consolidated net income was 802,000, or $.53 per share, for the third quarter of
2000. This was $77,000 or 8.8% less than the same period last year. For the
first nine months, net income totaled $2,702,000 or $1.77 per share compared to
$2,563,000 or $1.67 per share last year. Net interest income declined from the
third quarter of 1999 to the third quarter of 2000 by $91,000 (3.1%), other
income increased over the same period by $14,000 (2.6%), and operating expenses
increased $29,000 or only 1.4%. For the nine month period ended September 30,
2000 compared to the same nine month period in 1999, net interest margin
increased $229,000 (2.7%), other income increased $149,000 (10.1%), and
operating expenses rose $162,000 (2.7%).
<PAGE>
The Company has been able to expand net interest income year-to-date, as
compared to the prior year by actively managing asset quality, growth of the
loan portfolio, and yields on assets and liabilities. Management has expressed
concern for several quarters, however, as to the ability to continue increasing
net interest income each successive quarter. This concern became reality during
the third quarter of 2000 as the Company's cost of funds grew faster than the
rates earned on assets. The increased usage of wholesale funding sources, while
mitigating intermediate and long-term interest rate risk, increases interest
expense. The interest expense associated with the debt incurred to purchase
treasury shares also adds pressure to the net interest income. Finally, the
intense competition for all types of loans and deposits does not afford the
Company a great deal of pricing power when dealing with customers.
Provisions for loan losses were $125,000 and $284,000 for the three and nine
months ended September 30, 2000. This was $28,000 more than the nine month
period ended September 30, 1999. Net loan charge-offs totaled $123,000 during
the first nine months of 2000. This represents only 0.05% of quarter-end net
loans.
Nonaccrual loans totaled $511,000 at September 30, 2000. Other real estate owned
totaled $418,000, and loans past due 90 days or more and still accruing totaled
$469,000. The reserve for loan losses of $3,252,000 represents 1.2% of net loans
and 233% 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 59.2% for the first nine months of
2000 compared to 59.7% for all of 1999. A lower efficiency ratio signifies a
more efficiently operated organization.
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.
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, 2000, rate sensitive liabilities
exceeded rate sensitive assets within a one year maturity range and, thus, the
Company is theoretically 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.
The stability of the Company's funding, and thus its ability to manage
liquidity, is greatly enhanced by its consumer deposit base. Consumer deposits
tend to be small in size, diversified across a large base of individuals, and
are government insured to the extent permitted by law. Total deposits at
September 30, 2000, were $266,177,000 or 72% of total liabilities and equity.
Securities available for sale with a cost totaling $67,497,000 at quarter-end
included net unrealized losses of $353,000. 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
Retained earnings increased $484,000 during the three months, and $1,741,000
during the nine months, ended September 30, 2000.
The Company has repurchased during the first nine months of the year 19,813
shares of its common stock for a total cost of $456,000.
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, 2000 with the
requirements to be considered adequately capitalized is presented below.
For Capital
Actual Adequacy Purposes
--------------------------------------------------------------------------------
Tier 1 risk-based capital ...................... 8.70% 4.00%
Total risk-based capital ....................... 9.95% 8.00%
Tier 1 leverage ratio .......................... 6.16% 4.00%
<PAGE>
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.
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.
<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, 2000.
<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)
11/14/00 /s/ George A. Shepley
---------------- -------------------------------
Date George A. Shepley, Chairman of
the Board and Chief Executive Officer
11/14/00 /s/ Kim K. Bartling
---------------- -------------------------------
Date Kim K. Bartling, Executive Vice
President, Chief Operating
Officer & Treasurer
