Market Overview

Iowa First Bancshares Corp. Reports Second Quarter Financial Results and Dividend Payment

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Iowa First Bancshares Corp. (OTC:IOFB) today reported net income
of $961,000 for the quarter ended June 30, 2018, compared to record net
income of $1,140,000 for the quarter ended June 30, 2017. The decrease
in second quarter net income year-over-year of $179,000 (15.7%) was
primarily attributable to lower net interest income of $175,000 (4.5%),
higher provision for loan losses of $210,000 (100.0%), and higher
noninterest expense of $90,000 (3.1%). Noninterest income increased
$7,000 (0.8%) and income tax expense decreased $289,000 (51.5%) when
comparing the second quarter of 2018 to the same quarter in 2017. The
decline in income tax expense was mainly a result of the lower federal
income tax rates which became effective at the beginning of 2018.

The Company recorded net income of $1,694,000 for the six months ended
June 30, 2018, compared with net income of $1,533,000 for the two
quarters ended June 30, 2017, an increase of $161,000 (10.5%). Over that
time period, net interest income decreased $204,000 (2.7%), noninterest
income decreased $15,000 (0.9%), and noninterest expense increased
$209,000 (3.6%). Over the same period, however, provision for loan
losses decreased $330,000 (25.6%) and income tax expense decreased
$259,000 (34.6%).

Basic and diluted earnings per share were $1.50 for the six months ended
June 30, 2018, up $.14 or 10.3% from the same period in 2017. The
Company's annualized return on average assets for the first two quarters
of 2018 and 2017 was .72% and .64%, respectively. The Company's
annualized return on average equity for the six months ended June 30,
2018 and June 30, 2017 was 7.3% and 6.8%, respectively.

Total assets at June 30, 2018 were $475,965,000, a decrease of
$10,112,000 (2.1%) from June 30, 2017. Gross loans outstanding decreased
$12,557,000 (3.1%), while total deposits decreased $7,171,000 (1.7%)
year-over-year. The allowance for loan losses totaled $6,032,000 at June
30, 2018, or 1.52% of gross loans outstanding. Nonaccrual loans totaled
$6.4 million or 1.6% of gross loans outstanding on June 30, 2018, a
reduction of $1.2 million from March 31, 2018, but significantly higher
than the $2.3 million or .6% of gross loans that were on nonaccrual on
June 30, 2007. The heightened level of nonaccrual loans during 2018
helps explain the decline in consolidated net interest margin from 3.47%
for the year ended December 31, 2017 to 3.40% during the first two
quarters of 2018. As the increase in nonaccrual loans has come primarily
from our Fairfield subsidiary bank, the newer leadership team at that
bank remains extremely focused on improving the quality of the overall
loan portfolio and reducing the amount of nonaccrual loans. The Iowa
First Bancshares Board of Directors and senior management both support
and encourage those efforts, realizing that it may take several quarters
of hard work to accomplish the significant goals that are expected.

The board of directors declared a $.29 per common share cash dividend to
be paid on July 31, 2018, to shareholders of record July 2, 2018. On an
annualized basis this dividend represents a return of 2.6% on the
December 31, 2017 stock price. Iowa First Bancshares Corp. has paid a
cash dividend to shareholders every year since 1989.

Iowa First Bancshares Corp. is a bank holding company headquartered in
Muscatine, Iowa. The Company provides a wide array of banking and other
financial services to individuals, businesses and governmental
organizations through its two wholly-owned national banks located in
Muscatine and Fairfield, Iowa.

This press release may contain forward-looking statements. Investors are
cautioned that all forward-looking statements involve risks and
uncertainties, and many factors could cause actual results to differ
materially from the results anticipated or projected. Our ability to
predict results, or the actual effect of future plans or strategies, is
inherently uncertain. Factors that could cause actual results to differ
materially from those set forth in the forward-looking statements or
that could have a material effect on the operations and future prospects
of the Company include, but are not limited to: (1) credit quality
deterioration or pronounced and sustained reduction in real estate or
other collateral values could cause an increase in the allowance for
loan losses and a reduction in net income; (2) our management's ability
to reduce and effectively manage interest rate risk and the impact of
interest rates in general on the level and volatility of our net
interest income; (3) changes in the economic environment, competition,
or other factors that may affect our ability to acquire loans or
influence the anticipated growth rate of loans and deposits and the
quality of the loan portfolio and loan and deposit pricing; (4)
fluctuations in the value of our investment securities; (5) governmental
monetary and fiscal policies; (6) legislative, regulatory and tax law
changes as well as changes in the scope and cost of Federal Deposit
Insurance Corporation insurance and other fees; (7) the ability to
attract and retain key executives and employees; (8) the sufficiency of
the allowance for loan losses to absorb the amount of actual losses
inherent in our loan portfolio; (9) our ability to adapt successfully to
technological changes; (10) credit risks and risks from concentrations
(by geographic area and by industry) within our loan portfolio; (11) the
effects of competition from numerous sources; (12) the failure of
assumptions underlying the establishment of allowances for loan losses
and estimation of values of collateral and various other financial
assets and liabilities; (13) volatility, duration and matching risks of
rate-sensitive assets and liabilities as well as liquidity risk; (14)
operational risks, including data processing system failure or fraud;
(15) the costs, effects and outcomes of existing or future litigation;
(16) changes in general economic or industry conditions, nationally or
in the communities in which we conduct business; (17) changes in
accounting policies and practices; and (18) other risks.

 
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollar amounts in thousands, except share and per share data)
(unaudited)
               

For the Three

For the Three

For the Six

For the Six

Months Ended

Months Ended

Months Ended

Months Ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

 
Net Interest Income $ 3,759 $ 3,934 $ 7,503 $ 7,707
Provision for Loan Losses 420 210 960 1,290
Noninterest Income 890 883 1,723 1,738
Noninterest Expense 2,996 2,906 6,082 5,873
Income Tax Expense 272 561 490 749
Net Income after Income Taxes 961 1,140 1,694 1,533
 
Net Income Per Common Share,
Basic and Diluted $ 0.85 $ 1.01 $ 1.50 $ 1.36
 

Average year-to-date common shares outstanding, basic and diluted

1,131,847 1,131,630 1,131,84 7 1,131,033
 
   

As of

   

As of

   

As of

June 30, 2018

December 31, 2017

June 30, 2017

 
Gross Loans $ 395,554 $ 406,367 $ 408,111
Total Assets 475,965 482,158 486,077
Total Deposits 406,960

 

410,752 414,131
Tier 1 Capital 47,115 45,942 45,734
 
Return on Average Equity 7.3 % 5.2 % 6.8 %
Return on Average Assets .72 .50 .64
Net Interest Margin (tax equivalent) 3.40 3.47 3.47
Allowance as a Percent of Total Loans 1.52 1.40 1.17
 

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