IOWA FIRST BANCSHARES CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21,2005
To the shareholders:
The annual meeting of the shareholders of Iowa First Bancshares Corp. will be
held on Thursday, April 21, 2005, at 2:00 p.m. at 300 East Second Street,
Muscatine, Iowa, for the following purposes:
1. to elect four members of the board of directors;
2. to ratify the appointment of McGladrey & Pullen, LLP as independent
registered public accounting firm for the fiscal year ending December
31,2005; and
3. to transact such other business as may properly be brought before the
meeting and any adjournments or postponements of the meeting.
Only shareholders of record on our books at the close of business on March
11,2005, the record date for the annual meeting, will be entitled to vote at the
annual meeting. In the event there are an insufficient number of votes for a
quorum or to approve or ratify any of the foregoing proposals at the time of the
annual meeting, the meeting may be adjourned or postponed in order to permit us
to further solicit proxies.
By order of the board of directors.
/s/ D. Scott Ingstad
--------------------------------------
D. Scott Ingstad Chairman of the Board
President and CEO
Muscatine, Iowa
March 18, 2005
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
IN PERSON. WE HOPE THAT YOU WILL BE ABLE TO ATTEND THE MEETING, AND IF YOU DO
YOU MAY VOTE YOUR STOCK IN PERSON IF YOU WISH. YOU MAY REVOKE THE PROXY CARD AT
ANY TIME PRIOR TO ITS EXERCISE.
IOWA FIRST BANCSHARES CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 21, 2005
Iowa First Bancshares Corp. (Iowa First), an Iowa corporation with its principal
executive offices located in Muscatine, Iowa, is the holding company for the
First National Bank of Muscatine, headquartered in Muscatine, Iowa and the First
National Bank in Fairfield, headquartered in Fairfield, Iowa.
This proxy statement is being furnished to shareholders in connection with the
solicitation by our board of directors of proxies to be used at the annual
meeting to be held at our corporate headquarters at 300 East Second Street,
Muscatine, Iowa 52761 on Thursday, April 21, 2005 at 2:00 p.m., or at any
adjournments or postponements of the meeting. Our annual report to shareholders,
including the consolidated financial statements for the fiscal year ended
December 31, 2004 and a copy of our 2004 Form 10-K that we filed with the
Securities and Exchange Commission, accompanies this proxy statement, which is
first being mailed to shareholders on or about March 18, 2005.
The following is information regarding the meeting and the voting process,
presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us because on March
11,2005, the record date for the annual meeting, you owned shares of our common
stock. This proxy statement describes the matters that will be presented for
consideration by the shareholders at the annual meeting. It also gives you
information concerning the matters to assist you in making an informed decision.
When you sign the enclosed proxy card or vote by telephone, you appoint the
proxy holder as your representative at the meeting. The proxy holder will vote
your shares as you have instructed in the proxy card, thereby ensuring that your
shares will be voted whether or not you attend the meeting. Even if you plan to
attend the meeting, you should complete, sign and return your proxy card or vote
by telephone in advance of the meeting just in case your plans change.
If you have signed and returned the proxy card or voted by telephone and an
issue comes up for a vote at the meeting that is not identified on the card, the
proxy holder will vote your shares, pursuant to your proxy, in accordance with
his or her judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of four directors of Iowa First for
a term expiring in 2008 and the ratification of McGladrey & Pullen, LLP as our
independent registered public accounting firm for the 2005 fiscal year. These
matters are more fully described in this proxy statement.
How do I vote?
If you are a record holder of shares, you may vote by telephone, mail or in
person at the meeting. If you are a beneficial owner and a broker or other
fiduciary is the record holder (or in what is usually referred to as "street
name"), then you received this proxy statement from the record holder. The
broker should have given you instructions for directing how your broker should
vote your shares. It will then be your broker's responsibility to vote your
shares for you in the manner you direct.
Toll-free telephone. You may vote by telephone by calling the toll-free number
included on the proxy card and following the instructions given to you over the
telephone. Votes made by telephone must be received by 11 :59 p.m. on April 20,
2005.
Mail. You may also complete and sign the enclosed proxy card and mail it in the
enclosed pre-addressed envelope. No postage is required if mailed in the United
States. If you mark your proxy card to indicate how you want your shares voted,
your shares will be voted as you instruct.
If you sign and return your proxy card but do not mark the card to provide
voting instructions, the shares represented by your proxy card will be voted
"for" all four nominees named in this proxy statement and "for" the ratification
of our auditors.
At the meeting. If you want to vote in person, please come to the meeting. We
will distribute written ballots to anyone who wants to vote at the meeting.
Please note, however, that if your shares are held in the name of your broker,
you will need to arrange to obtain a proxy from your broker in order to vote in
person at the meeting. Even if you plan to attend the annual meeting, you should
complete and return your proxy card in advance of the annual meeting in case
your plans change.
If I hold shares in the name of a broker, who votes my shares?
Under the rules of various national and regional securities exchanges, brokers
may generally vote on routine matters, such as the election of directors and the
ratification of independent auditors, but cannot vote on non-routine matters,
such as an amendment to the articles of incorporation or the adoption of a stock
incentive plan, unless they have received voting instructions from the person
for whom they are holding shares. If there is a non-routine matter presented to
shareholders at a meeting and your broker does not receive instructions from you
on how to vote on that matter, your broker will return the proxy card to us,
indicating that he or she does not have the authority to vote on that matter.
This is generally referred to as a "broker non-vote" and may affect the outcome
of the voting on those matters. While the matters to be voted upon at the 2005
annual meeting should be within the brokers' discretion to vote, whether or not
you give your broker direction, we encourage you to provide directions to your
broker as to how you want your shares voted on all matters to be brought before
the meeting. You should do this by carefully following the instructions your
broker gives you concerning its procedures. This ensures that your shares will
be voted at the meeting.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our stock transfer records
and/or in accounts with stockbrokers. Please sign and return ALL proxy cards to
ensure that all your shares are voted.
What if I change my mind after I return my proxy card?
If you hold your shares in your own name, you may revoke your proxy and change
your vote at any time before the polls close at the meeting. You may do this by:
o signing another proxy card with a later date and returning that proxy card
to our transfer agent at:
UMB Bank, NA
928 Grand Boulevard
P.O. Box 410064
Kansas City, Missouri 64141-0064;
o timely submitting another proxy via the telephone;
o sending notice to us that you are revoking your proxy; or
o voting in person at the meeting.
If you hold your shares in the name of your broker and desire to revoke your
proxy, you will need to contact your broker to revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to vote as of the
record date must be present in person or by proxy at the meeting in order to
hold the meeting and conduct business.
Shares are counted as present at the meeting if the shareholder either:
o is present and votes in person at the meeting; or
o has properly submitted a signed proxy card or other form of proxy or
submitted his or her vote over the telephone.
On March 11, 2005, the record date, there were 1,382,669 shares of common stock
issued and outstanding. Therefore, at least 691 ,335 shares need to be present
at the annual meeting.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of directors or
designate a substitute nominee. In the latter case, shares represented by
proxies may be voted for a substitute nominee. Proxies cannot be voted for more
than four nominees. We have no reason to believe any nominee will be unable to
stand for re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each nominee for
director. You may vote "for," "against" or "abstain" on any other proposal that
may properly be brought before the meeting.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share of stock you owned
on the record date. The proxy card included with this proxy statement indicates
the number of shares owned by an account attributable to you.
How many votes are needed for each proposal?
The four individuals receiving the highest number of votes cast "for" their
election will be elected as directors of Iowa First.
The ratification of our auditors and all other matters must receive the
affirmative vote of a majority of the shares outstanding and entitled to vote.
Broker nonvotes will not be counted as entitled to vote, but will count for
purposes of determining whether or not a quorum is present on the matter.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting results will also be
disclosed in our Form 10-Q for the quarter ended March 31, 2005.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to solicitations by
mail, officers, directors or employees of Iowa First or its subsidiaries may
solicit proxies in person or by telephone. These persons will not receive any
special or additional compensation for soliciting proxies. We may reimburse
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for forwarding proxy and solicitation
materials to shareholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of our common stock at February 11, 2005, by each person
known by us to be the beneficial owner of more than 5% of the outstanding common
stock, by each director or nominee, by each executive officer named in the
summary compensation table which can be found later in this proxy statement, and
by all directors and executive officers of Iowa First as a group. Beneficial
ownership has been determined for this purpose in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
under which a person is deemed to be the beneficial owner of securities if he or
she has or shares voting power or investment power with respect to such
securities or has the right to acquire beneficial ownership of securities within
60 days of February 11, 2005. Unless otherwise noted, each person has sole
voting and investment power over the shares reported.
Name of Individual or Amount and Nature of Percent
Number of Individuals in Group Beneficial Ownership of Class
- --------------------------------------------------------------------------------
5% Shareholders
- ---------------
George A. Shepley 117,596 (1) 8.51%
401 Hogan Court
Muscatine, Iowa 52761
Iowa First Bancshares Corp. 97,562 (2) 7.06%
Employee Stock Ownership
Plan (with 401(k) provisions)
("KSOP")
Muscatine, Iowa 52761
Directors and Nominees
- ----------------------
Kim K. Bartling 23,316 (3) 1.69%
Roy J. Carver, Jr. 17,400 1.26%
Stephen R. Cracker 12,708 (4) *
Larry L. Emmert 25,766 1.86%
Craig R. Foss 3,360 *
Donald R. Heckman 26,060 1.88%
David R. Housley 5,710 *
D. Scott Ingstad 17,145 (5) 1.24%
Dr. Victor G. McAvoy 7,500 *
John "Jay" S. McKee 1,886 *
Richard L. Shepley 18,219 (6) 1.32%
Beverly J. White 15,808 1.14%
Other Named Executive Officer
- -----------------------------
Tim M. Nelson 6,726 (7) *
All directors and executive officers
as a group
(13 persons) 181,604 13.13%
* Indicates that the individual or entity owns less than one percent of Iowa
First's common stock.
(1) As reported by Iowa First's stock transfer agent and review of
non-objecting shareholders reports.
(2) This plan holds shares of our common stock pursuant to the terms of the
plan's governing document. The Retirement Plan Committee, the
administrators of the KSOP, has the power to dispose of shares in
accordance with the terms of the plan and votes any shares held by the
plan, except in the case of adoption of motions regarding changes in voting
rights, removal of directors, amendments to the articles of incorporation,
and approval of mergers, consolidations, or partial liquidations. In these
instances, shares allocated to participants' accounts are voted by the
respective participants. The amount of beneficial ownership shown for the
plan includes those shares allocated to accounts of executive officers of
Iowa First, which are also reflected in the individual's respective
beneficial ownership as listed in the table.
(3) Includes 5,406 shares held through the KSOP, pursuant to which Mr. Bartling
has shared voting and investment power.
(4) Includes 4,808 shares held through the KSOP, pursuant to which Mr. Cracker
has shared voting and investment power.
(5) Includes 7,545 shares held through the KSOP, pursuant to which Mr. Ingstad
has shared voting and investment power.
(6) The amount shown for Richard L. Shepley includes 11,319 shares of common
stock which are owned by trusts over which Mr. Shepley shares voting and
investment power. Mr. Shepley disclaims beneficial ownership of such
shares.
(7) Includes 5,426 shares held through the KSOP, pursuant to which Mr. Nelson
has shared voting and investment power.
ELECTION OF DIRECTORS
Shareholders will be entitled to elect four directors for a term expiring in
2008 at the annual meeting. Our board is divided into three classes of directors
having staggered terms of three years. We have no knowledge that any nominee
will refuse or be unable to serve, but if any of the nominees is unavailable for
election, the holders of the proxies reserve the right to substitute another
person of their choice as a nominee when voting at the meeting. Set forth below
is information concerning the nominees for election and for each of Iowa First's
other directors, whose terms of office will continue after the meeting,
including the age, the year first elected as a director and the other positions
held by the person at Iowa First and at our subsidiaries, First National Bank of
Muscatine and First National Bank in Fairfield. The nominees, if elected at the
annual meeting, will serve as directors for a three-year term expiring in 2008,
except as noted below. We recommend that shareholders vote "FOR" each of the
nominees for director. Unless authority to vote for the nominees is withheld,
the shares represented by the enclosed proxy card, if executed and returned,
will be voted "FOR" the election of the nominees.
NOMINEES
Positions with Iowa First, First National Bank of
Name (Age) Director Since Muscatine and First National Bank in Fairfield
- ---------------------------------------------------------------------------------------------------------
Term Expires 2008
- -----------------
Craig R. Foss (age 55) 1994 Director of Iowa First; Director and Chairman of the
Board of First National/Fairfield
Donald R. Heckman (age 66) 1984 Director of Iowa First and First National/Muscatine
D. Scott Ingstad (age 54) 1990 Chairman of the Board
President and Chief Executive Officer of Iowa
First and First National/Muscatine
Beverly J. White (age 65) 1988 Director of Iowa First and First National/Muscatine
CONTINUING DIRECTORS
Term Expires 2006
- -----------------
Kim K. Bartling (age 47) 1994 Director of Iowa First, First National/Muscatine and
First National/Fairfield; Executive Vice President,
Chief Operating Officer and Treasurer of Iowa First;
Executive Vice President and Chief Financial Officer
of First National/Muscatine
Larry L. Emmert (age 63) 1993 Director of Iowa First and First National/Muscatine
David R. Housley (age 53) 1999 Director of Iowa First and First National/Muscatine
Richard L. Shepley (age 59) 2003 Director of Iowa First and First National/Muscatine
Term Expires 2007
- -----------------
Roy J. Carver, Jr. (age 61) 1989 Director of Iowa First
Stephen R. Cracker (age 59) 2002 Director of Iowa First and First National/Fairfield;
President and Chief Executive Officer of
First National/Fairfield
Dr. Victor G. McAvoy (age 61) 1994 Director of Iowa First and First National/Muscatine
John "Jay" S. McKee (age 51) 1999 Director of Iowa First and First National/Muscatine
All directors will hold office for the terms indicated, or until their earlier
death, resignation, removal or disqualification, and until their respective
successors are duly elected and qualified. There are no arrangements or
understandings between any of the nominees, directors or executive officers and
any other person pursuant to which any of our nominees, directors or executive
officers have been selected for their respective positions. No nominee, member
of the board of directors or executive officer is related to any other nominee,
member of the board of directors or executive officer.
The business experience of each of the nominees and continuing directors for the
past five years is as follows:
Kim K. Bartling. Mr. Bartling has been Executive Vice President, Chief Operating
Officer and Treasurer of Iowa First since December 1996. He has served as
Executive Vice President and Chief Financial Officer of First National Bank of
Muscatine since February 1997. Mr. Bartling served as Senior Vice President,
Chief Financial Officer and Treasurer of Iowa First and First National Bank of
Muscatine beginning in 1988. Prior to serving in these positions, he served as
Vice President/Finance of Iowa First and First National Bank of Muscatine since
1987.
Roy J. Carver, Jr. Mr. Carver has been Chairman of Carver Pump Company, a
manufacturer of industrial pumps used in military and civilian applications,
since 1981. Mr. Carver is also a director of Bandag, Incorporated, which is
subject to the reporting requirements of the Securities and Exchange Commission.
Mr. Carver is also President of Carver Aero, Inc., which operates fixed base
operations at airports in Muscatine and Davenport, Iowa. He also is owner of
several other private businesses involved in manufacturing, retailing and real
estate development.
Stephen R. Cracker. Mr. Cracker has served as President and Chief Executive
Officer of First National Bank in Fairfield since January 1, 2002, prior to
which he served as Executive Vice President and Chief Operating Officer from
1985 through 2001.
Larry L. Emmert. Mr. Emmert has been President of Hoffmann, Inc., a general
building contractor located in Muscatine since 1981.
Craig R. Foss. Mr. Foss has been President and a shareholder of the law firm of
Foss, Kuiken, Gookin & Cochran, P.C., Fairfield since 1979.
Donald R. Heckman. Mr. Heckman is a private investor. Prior to his retirement in
1995, Mr. Heckman had been Factory Manager of the H. J. Heinz Co. plant located
in Muscatine since 1973. This plant produced and warehoused various consumer
products including ketchup, gravy and various sauces.
David R. Housley. Mr. Housley has served over nineteen years as President of
Doran and Ward Printing Co., a commercial printing company specializing in the
printing of packaging products. Mr. Housley has served since 2001 as President
of Simpson Security Papers, Inc., a manufacturer and wholesaler of
safety/security paper used primarily by printing companies for documents,
checks, certificates, licenses, etc. He was President of Master Muffler and
Brake, Inc. for more than fifteen years through December 2001, and of Automart
Undercar Distributors for approximately five years ending in January 2002. These
companies are retail and wholesale suppliers of mufflers and various other
replacement parts for the underside of automobiles.
D. Scott Ingstad. Mr. Ingstad has held the positions of President, since
December 1996, and Chief Executive Officer since January 2001, of Iowa First.
Mr. Ingstad also has served since April 2003 as Iowa First's Chairman of the
Board. He served as Vice Chairman of Iowa First from October 1999 to April 2003.
Additionally, he has served as First National Bank of Muscatine's Chairman of
the Board since April 2003, Vice Chairman of the Board October 1999 to April
2003, and director, President and Chief Executive Officer since 1990.
Victor G. McAvoy. Dr. McAvoy is President of Muscatine Community College and
Vice-Chancellor of the Eastern Iowa Community College District, and has served
in each position since 1986.
John "Jay" S. McKee. Mr. McKee has served as Vice President of Finance of McKee
Button Company, a manufacturer of buttons emphasizing the men's dress shirt
market, since 1982.
Richard L. Shepley. Mr. Shepley has been an independent bank consultant since
2000. From 1997 until 2000, Mr. Shepley was Chief Investment Officer for
Marshall Ventures, LLC, a private equity fund specializing in financial
services. From 1990 until 1997, Mr. Shepley held various executive management
and board of directors positions with several companies in the commercial
banking, merchant banking, specialty finance and mortgage banking businesses.
For the period 1969 until 1990, he worked at First Bank System, Inc.,
Minneapolis, Minnesota, (now U.S. Bancorp, Inc.) where he attained the position
of Chief Credit Officer and served on the boards of The First National Bank of
Saint Paul and First National Bank of Minneapolis. He currently serves on the
board of directors of Franklin National Bank, Minneapolis, Minnesota, First
Eldorado Bancshares, Inc., Eldorado, Illinois, American Bank, Grand Rapids,
Minnesota, and The Lake Bank N.A., Two Harbors, Minnesota
Beverly J. White. Ms. White has served as Vice President and director of BJWJ,
LLC since 2002, as well as QFC2 since 2001. These two organizations are real
estate investment and holding companies. Ms. White served as a director from
1993 to 2002, and Vice President from 1996 to 2002, of Quality Foundry Co.
Quality Foundry Co. was a landlord to a business operating a grey iron foundry
specializing in semi-steel castings.
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
General
There are currently twelve directors serving on our board of directors.
Generally, the board oversees our business and monitors the performance of our
management. In accordance with our corporate governance procedures, the board
does not involve itself in the day-to-day operations of Iowa First, which is
monitored by our executive officers and management. Our directors fulfill their
duties and responsibilities by attending regular meetings of the board, which
are held on a monthly basis, and through committee membership, which is
discussed below. Our directors also discuss business and other matters with D.
Scott Ingstad, our President and Chief Executive Officer, other key executives
and our principal external advisers (legal counsel and auditors).
All of our current directors are "independent" as defined by the Nasdaq Stock
Market, Inc. with the exception of Messrs. Ingstad, Bartling and Cracker, who
are not "independent" as a result of serving as executive officers of Iowa
First. Additionally, Mr. Shepley is not currently considered independent as his
father was Iowa First's Chairman of the Board until April 2003. We anticipate
that Mr. Shepley could be considered independent in 2006, assuming that he is
not a party to any other material relationships with Iowa First, besides his
membership on the board, prior to that time. Although we are not subject to the
Nasdaq rules, we believe that the principles set forth by Nasdaq's corporate
governance reforms are important and we have voluntarily complied with many of
them, including Nasdaq's definition of independence.
The board of directors has established an Audit Committee, a Nominating and
Corporate Governance Committee and a Human Resource and Compensation Committee,
among other committees. The current charters of each of these committees are
available on our website at www.fnbmusc.com. Also posted on the web site is a
general description regarding our company, many of our corporate polices, and
links to our filings with the Securities and Exchange Commission.
Our board of directors held 12 meetings during 2004. All of the directors
attended at least 75% of the board meetings and meetings of committees of which
they were members. While we do not have a specific policy regarding attendance
at the annual shareholder meeting, all directors are encouraged and expected to
attend the meeting. Last year's annual meeting was attended by all twelve
incumbent directors.
Audit Committee
In 2004, the Audit Committee was comprised of Mr. Heckman, Mr. McKee and Ms.
White, each of whom is expected to serve on the committee through 2005. Each of
the members is considered "independent" according to the Nasdaq listing
requirements and the regulations of the Securities and Exchange Commission. The
board of directors has determined, in its business judgment, that Mr. Heckman
qualifies as an "audit committee financial expert" under the regulations of the
Securities and Exchange Commission. The board based this decision primarily on
Mr. Heckman's work experience. The board determined that all of the members are
financially literate and are otherwise qualified to serve on the Audit
Committee.
The functions performed by the Audit Committee include, among other things, the
following:
o overseeing our accounting and financial reporting;
o selecting, appointing and overseeing our independent auditors;
o reviewing actions by management on recommendations of the independent
auditors and internal auditors;
o meeting with management, the internal auditors and the independent auditors
to review the effectiveness of our system of internal control and internal
audit procedures; and
o reviewing periodic filings with regulatory agencies.
To promote independence of the audit function, the committee consults separately
and jointly with the independent auditors, the internal auditors and management.
The Audit Committee has adopted a written charter, which sets forth the
committee's duties and responsibilities. Our current charter is available on our
website at www.fnbmusc. com. In 2004, the committee met eight times.
Human Resource and Compensation Committee
During 2004, the Human Resource and Compensation Committee was comprised of Ms.
White (Chairperson), Messrs. Emmert, Housley and McAvoy, each of whom is
expected to serve on the committee through 2005. Each of the members is
considered "independent" according to the Nasdaq listing requirements. The
purpose of the committee is to determine the salary and bonus to be paid to Mr.
Ingstad, our Chief Executive Officer, and to approve the salaries and bonuses
for our other executive officers. The committee's responsibilities and functions
are further described in its charter which is available on our website at
www.fnbmusc.com 2004, the committee met one time.
The Retirement Plan Committee, comprised of the same members as the Human
Resources and Compensation Committee, but chaired by Mr. McAvoy, administers the
KSOP.
Nominating and Corporate Governance Committee
The members of the Nominating and Corporate Governance Committee in 2004 were
Mr. Heckman (Chairman), Mr. Emmert and Ms. White, each of whom was considered
"independent" according to the Nasdaq listing requirements. Effective January 1,
2005 the Nominating and Corporate Governance Committee was comprised of Mr.
Emmert (Chairman), Mr. McAvoy and Mr. Housley, each of whom are also considered
"independent" according to the Nasdaq listing requirements. The Nominating and
Corporate Governance Committee is responsible for recommending to the full board
of directors nominees to stand for election as directors and to fill any
vacancies which may occur from time to time. In addition, the committee is
responsible for considering any nominations for director submitted by
shareholders and for reviewing the size and composition of the board and the
criteria for selecting nominees to the board. The committee also recommends to
the full board of directors the chairmanship and composition of all board
committees. Additionally, the committee is responsible for reviewing our
policies, procedures and structure as they relate to corporate governance. The
committee's responsibilities and functions are further described in its charter,
which is available on our website at www.fnbmusc.com. The committee met two
times in 2004 and once in January 2005.
Director Nominations and Qualifications
For the 2005 annual meeting of shareholders, the Nominating and Corporate
Governance Committee nominated for re-election to the board the four incumbent
directors whose terms are set to expire in 2005. These nominations were approved
and ratified by the full board of directors. We did not receive any shareholder
nominations for director for the 2005 annual meeting.
The Nominating Committee evaluates all potential nominees for election,
including incumbent directors, potential board nominees and those shareholder
nominees included in the proxy statement, in the same manner. Generally, the
committee believes that, at a minimum, directors should possess certain
qualities, including the highest personal and professional ethics and integrity,
a sufficient educational and professional background, sound judgment, a strong
sense of service to the communities which we serve and an ability to meet the
standards and duties set forth in our Code of Business Conduct and Ethics for
employees and directors. The committee also evaluates potential nominees to
determine if they have any conflicts of interest that may interfere with their
ability to serve as effective board members and to determine whether they are
"independent" in accordance with Nasdaq rules (to ensure that at least a
majority of the directors will, at all times, be independent). The committee has
not, in the past, retained any third party to assist it in identifying
candidates.
Director Fees
In 2004, each non-employee director received an annual retainer of $5,750, plus
$150 for each committee meeting attended. During 2004, each director of Iowa
First served as a director and member of committees for subsidiary boards and
committees, with the exception of Mr. Carver who served only as a director of
Iowa First. The annual retainer fee paid to each non-employee subsidiary
director was $4,500, plus $100 to $250 for attendance at each committee meeting.
Executive officers who also serve on the board of directors do not receive
retainers or committee fees. In 2004, we paid Mr. Shepley an additional $1,800
to cover travel expenses in recognition of the distance he must travel to attend
board and committee meetings. We expect that these fees will be comparable in
2005.
We offer the option to the directors to defer receipt of a portion of the cash
that would have been paid as directors' fees. We invest the deferred fees and
the director is an unsecured general creditor of Iowa First or its subsidiary
bank(s). At the time the deferral election is made, the director specifies the
amount of the fees to be deferred and the duration of the deferral. The deferred
fees are credited with interest computed at an annual rate equal to the taxable
equivalent rate (determined using Iowa First's highest marginal tax bracket) of
the highest yielding investment purchased by Iowa First related to the deferred
fee agreements.
Shareholder Communication with the Board, Nomination and Proposal Procedures
General Communications with the Board. Shareholders may contact Iowa First's
board of directors by contacting Ms. Patricia R. Thirtyacre, our Corporate
Secretary, at Iowa First Bancshares Corp., 300 East Second Street, Muscatine,
Iowa 52761 or (563) 263-4221. All comments will be forwarded directly to the
Chairman of the Board.
Nominations of Directors. In accordance with our bylaws, a shareholder may
nominate a director for election to the board at an annual meeting of
shareholders by delivering written notice of the nomination to our headquarters
at least 120 days prior to the date the previous year's proxy statement was
mailed to shareholders. Nominations must include the full name, age, business
address and resident address of the proposed nominee and a brief description of
the proposed nominee's business experience for at least the previous five years.
All submissions must be accompanied by the written consent of the proposed
nominee to be named as a nominee and to serve as a director if elected. The
committee may request additional information in order to make a determination as
to whether to nominate the person for director.
Other Shareholder Proposals. For all other shareholder proposals, to be
considered for inclusion in our proxy statement and form of proxy relating to
our annual meeting of shareholders to be held in 2006, shareholder proposals
must be received by our Corporate Secretary, at the above address, no later than
November 18, 2005, and must otherwise comply with our bylaws.
CODE OF ETHICS
We have adopted a Code of Ethical Conduct for Principal Officers and Financial
Managers. The board of directors believes these executives must set an exemplary
standard of conduct for the employees, particularly in the areas of accounting,
internal accounting control, auditing and finance. The full text of the Code of
Ethical Conduct for Principal Officers and Financial Managers is on our website
at www.fnbmusc.com, We have also adopted a Code of Business Conduct and Ethics
for employees and directors. That code provides guidance to the board,
management and employees in areas of ethical business conduct and risk and
assists them in recognizing and dealing with ethical issues including conflicts
of interest, corporate opportunities, confidentiality, fair dealing, protection
of corporate assets, compliance with rules and regulations, and reporting of
unethical behavior. The full text of the Code of Business Conduct and Ethics is
also on our website at www.fnbmusc.com. These codes of conduct serve to inform
and reinforce to all employees our strong commitment, as a corporate family, to
high ethical standards and compliance with the law. We intend to satisfy the
disclosure requirements under Item 10 of Form 8-K regarding any amendment to or
waiver of the codes with respect to our Chief Executive Officer and Chief
Financial Officer, and persons performing similar functions, by posting such
information on our website.
EXECUTIVE COMPENSATION
The following table shows the compensation earned for the last three fiscal
years by the Chief Executive Officer and our other most highly paid executive
officers whose 2004 compensation exceeded $100,000:
Annual Compensation
----------------------------
(a) (b) (c) (d) (i)
All
Other
Name and Compensation
Principal Position Year Salary($) Bonus($) ($)(1)
--------------------------------------------------------------------------------------------------------------
D. Scott Ingstad 2004 $181,000 $19,007 $33,949
Chairman, President and Chief 2003 179,100 120,313 36,681
Executive Officer of Iowa First 2002 175,000 23,406 29,868
--------------------------------------------------------------------------------------------------------------
Kim K. Bartling 2004 $142,000 $15,265 $25,090
Executive Vice President, Chief 2003 140,595 9,139 26,015
Operating Officer and Treasurer of 2002 136,500 18,428 22,490
Iowa First
--------------------------------------------------------------------------------------------------------------
Stephen R. Cracker 2004 $104,000 $5,980 $14,320
President and Chief Executive 2003 104,000 --- 13,983
Officer of First National Bank in 2002 100,000 5,000 13,698
Fairfield
--------------------------------------------------------------------------------------------------------------
Tim M. Nelson 2004 $117,800 $12,960 $18,599
Executive Vice President 2003 113,467 9,645 17,097
and Senior Loan Officer of First 2002 109,333 13,940 14,033
National Bank of Muscatine
--------------------------------------------------------------------------------------------------------------
<FN>
(1) The amounts set forth in column (i) include contributions to the employee
stock ownership plan with 401 (k) provisions. Also included is matching
contributions under our deferred compensation plan. Additionally, included
for 2004, is interest earnings in excess of 120% of the long-term federal
rate at the beginning of the plan year under our deferred compensation
plan. For 2003 and 2002, included is the total amount of interest earnings
under our deferred compensation plan. The following table shows the
contributions and interest earnings under these plans for each of our
executive officers:
</FN>
Employee Stock Ownership Plan with 401 (k) Provisions
Mr. Ingstad Mr. Bartling Mr. Cracker Mr. Nelson
- --------------------------------------------------------------------------------
2004 $ 20,000 $ 15,863 $ 11,016 $ 13,028
2003 $ 22,981 $ 17,247 $ 11,699 $ 13,598
2002 $ 18,382 $ 15,139 $ 10,017 $ 11,621
Deferred Compensation Plan
Mr. Ingstad Mr. Bartling Mr. Cracker Mr. Nelson
- --------------------------------------------------------------------------------
2004 $ 13,949 $ 9,227 $ 3,304 $ 5,571
2003 $ 13,700 $ 8,768 $ 2,284 $ 3,499
2002 $ 11,486 $ 7,351 $ 3,681 $ 2,412
Employee Stock Ownership Plan with 401(k) Provisions
We sponsor an employee stock ownership plan with 401 (k) provisions for all
eligible employees meeting certain age and service requirements. We match
employee contributions up to 6% of total compensation per employee, at a rate of
50% of the employee contributed amount. Additionally, we may make discretionary
profit-sharing contributions to the plan. Total annual contributions, however,
cannot exceed the amount that can be deducted for federal income tax purposes.
Participants may direct investment of the funds they have contributed to their
individual accounts under the plan utilizing several fixed income and equity
investment options. A portion of the discretionary profit-sharing contributions
we make may be directed for investment in shares of our common stock.
Our 2004 matching and profit-sharing contributions for the employees totaled
$327,040. The specific amounts contributed for the benefit of the executive
officers are included in the Summary Compensation Table above.
Performance Incentive Plans
Performance Incentive Plan for Executive Officers and Senior Management. In
2004, the Compensation and Corporate Governance Committee approved a performance
incentive plan for our executive and senior officers. Under the plan, each
executive and senior officer is eligible for a year-end cash performance
incentive bonus equal to 10% of his or her salary if we achieve specific annual
performance goals. The maximum annual payment under this cash performance
incentive plan is 15% of salary for substantially exceeding the established
goals. Amounts paid or accrued under this incentive plan totaled $84,645 for
2004, including an aggregate of $53,212 for executive officers.
Performance Incentive Plans for Officers and Other Employees. We also have
performance incentive plans covering our officer level employees as well as
other specific employees. These plans encourage improved efficiency and
effectiveness of employees by increasing remuneration as a result of attaining
individual and organizational goals. Payments made or accrued under these
performance incentive plans (separate from the performance incentive plan for
executive officers and senior management) totaled $190,913 for 2004.
Executive Employment Agreements
Employment Agreements. Since 1996, we have had employment agreements with our
key executive officers. We believe that these agreements help advance our
interests by enabling us to attract and retain the services of key executives.
We entered into such employment agreements with Messrs. Ingstad, Bartling and
Nelson.
Each of the agreements are for a base term of two years and automatically renew
for additional two year terms unless 90 days notice of non-renewal is provided
to the other party at the end of each term. If an executive's employment is
terminated prior to the expiration of the agreement, such executive's employment
agreement is not renewed, or if such executive is constructively discharged, the
executive is entitled to a severance benefit of: (1) twelve months base salary;
(2) any vacation pay accrued but not yet taken; (3) an amount equal to the
average amount paid to the executive during the last three years under the
performance incentive plan described above; and (4) reimbursement of a portion
of medical premiums paid by the executive such that the same "cost-sharing"
basis provided at the date of termination is maintained for a one-year period.
Under each of the employment agreements, we will pay supplemental compensation
to mitigate the effects of any excise taxes applicable to executive employment
payments. Additionally, the agreements include a covenant limiting the
executives' ability to compete with us within an area encompassing a 50-mile
radius of any of our offices for a period of two years after the executive's
employment.
Change in Control Agreements. Since 1996, we have also had change in control
agreements with Mr. Ingstad and Mr. Bartling. Upon a change in control, the
agreements provide that we must retain the executive for three years after the
effective date or until the executive's normal retirement date, whichever is
earlier. If an executive is terminated or constructively discharged following a
change in control, the executive is entitled to the following for the remainder
of the employment term: (1) base salary; (2) payments under the performance
incentive plan; (3) perquisites to which the executive was entitled on the date
of the change in control; (4) continued coverage under the health, life,
disability and other plans available to employees on the date of the change in
control; (5) accrued and unpaid vacation pay; (6) contributions for benefits
expected to be made to our retirement plans; and (7) full vesting under our
compensation or benefit plans. If the change in control agreements were
triggered as of the date of this proxy statement and the executives were
terminated we would owe Mr. Ingstad approximately $735,000 and Mr. Bartling
approximately $580,000 pursuant to the agreements. This is in addition to
amounts we may owe pursuant to other agreements or plans.
The agreements define a change in control to be when a third party becomes the
beneficial owner of at least 35% of our common stock; at least two-thirds of the
members of the board of directors, as of the date the change in control
agreement was entered into, cease to be directors (unless such other directors
are approved with a vote of at least 75% of shareholders); or a change in
control occurs that would have to be reported on a Current Report on Form 8-K
under the rules of the Securities Exchange Act of 1934.
Deferred Compensation Agreements
We have also entered into deferred compensation agreements with many of our
directors and all of our executive officers listed in the Executive Compensation
section of this proxy statement. Pursuant to the agreements, directors and
executive officers may defer a portion of their compensation each year.
Additionally, we have historically matched up to 50% of an executive officer's
deferral if the officer meets certain performance goals established annually by
the board. In 2004, based on our record financial performance, the Human
Resource and Compensation Committee approved a 60% match of each executive
officer's deferral amount. We have purchased various life insurance contracts to
partially fund the liabilities created by the agreements. Interest on deferrals
is computed at an annual rate equal to the taxable equivalent rate (determined
using Iowa First's highest marginal tax bracket) of the highest yielding
insurance contracts we purchased to fund the deferred compensation agreements.
At December 31,2004 the rate was 9.00%. Under the agreements, the director or
officer will receive the deferral balance in 180 equal monthly installments.
During the year ended December 31, 2004, we expensed $175,000 related to the
agreements. As of December 31,2004, the liability related to the agreements
totaled $669,000.
Stock Incentive Plans
We do not maintain any stock incentive plans, and, accordingly, we do not issue
any options, shares of restricted stock, stock appreciation rights or other
stock based incentives other than our employee stock ownership plan with 401 (k)
provisions.
Report of the Human Resource and Compensation Committee on Executive
Compensation
The report of the Human Resource and Compensation Committee below shall not be
deemed incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent Iowa First
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
General. The Human Resource and Compensation Committee is responsible for
setting the salaries and overall compensation of the Chief Executive Officer, as
well as the other executive officers. Ms. White was the chairperson of the
committee and Messrs. Emmert, Housley and McAvoy were members in 2004 and each
is expected to remain on the committee through 2005. Each of the members is
considered to be "independent" according to the Nasdaq listing requirements. The
committee's responsibilities and functions are further described in its charter,
which is available on our website at www.fnbmusc.com
Compensation Overview. We are committed to providing a total compensation
program that supports our long-term business strategy and performance culture.
In establishing executive compensation, we generally divide compensation into
three separate components - salary, cash bonus and deferred compensation. These
components are intended to work together to compensate the executive fairly for
his or her services and reward the executive officer based upon our overall
performance during the year. In reviewing and establishing an executive's
compensation, the committee considers and evaluates all components of the
executive officer's total compensation package. This involves reviewing the
executive's salary, bonus, perquisites, participation in our employee stock
ownership plan with 401 (k) provisions, payments due upon retirement or a
change in control, if any, and all other payments and awards that the executive
officer earns. We do not offer stock-based incentive compensation other than our
employee stock ownership plan with 401 (k) provisions.
The general philosophy in making decisions regarding the compensation of the
executive officers, after taking into account an examination of compensation at
other similarly situated financial institutions, is as follows:
o to provide incentives for executive officers to work toward achieving
successful annual results and strategic objectives;
o to provide reward for achievement of superior performance;
o to provide market based compensation to help recruit and retain
professionals of exceptional quality;
o to link executive compensation rewards to increases in shareholder value,
as measured by favorable long-term results and continued strengthening of
Iowa First's financial condition; and
o to provide flexibility to recognize, differentiate, and reward individual
performance.
Base Salary. The committee reviews each executive officer's base salary on an
annual basis. Generally, the executive officers' salaries may be adjusted,
either up or down, to reflect the individual's performance as well as Iowa
First's financial performance, including net income, return on average equity,
earnings per share, total shareholder return asset quality, and asset growth.
However, Mr. Ingstad, Mr. Bartling and Mr. Nelson have employment agreements
that provide their salaries may be increased, but not decreased, after our
review. Additionally, base salaries are determined by examining, among other
things, the executive officer's level of responsibility, prior experience and
time as an employee with us. When measuring individual performance, the
committee considers the individual's efforts in achieving established financial
and business objectives, managing and developing employees and enhancing
long-term relationships with customers. All of the factors are considered on a
subjective basis in the aggregate, and none of the factors is accorded a
specific weight. In selected cases, other factors may also be considered.
Cash Bonus. We also believe that providing bonuses based on corporate and
individual performance is an effective way to incent our employees as well as to
retain them for the future. Executive officer bonuses paid in 2004 were based
upon a combination of organization wide and individual performance criteria. As
described in this proxy statement, we maintain performance incentive plans, one
of which is formula driven, covers executive and senior officers, and is based
upon meeting certain predetermined financial goals, including goals for net
income, shareholder return, asset quality, efficiency, and asset growth. The
other performance incentive plans are intended to reward officers and selected
other employees for attaining individual and company goals.
Deferred Compensation. Each executive officer also is a party to deferred
compensation agreements that allow them to defer a portion of their compensation
each year. As described above, we may match a portion of the amount deferred by
the executive officer if the officer meets certain performance goals. We believe
that this deferred compensation feature provides a reasonable reward for
individual performance as well as serves as a tool to retain high quality
executives.
We also maintain an employee stock ownership plan with 401 (k) provisions. This
allows participants to redirect a portion of their regular basic compensation
into a tax-deferred trust, subject to limitations imposed by the Internal
Revenue Code. We match 50% of a participant's deferrals into the plan, limited
up to 6% of each participant's salary. Additionally, we may make discretionary
profit sharing contributions into the plan. The primary factor determining
whether we will make profit sharing contributions for a year is the financial
performance of Iowa First. A portion of these profit sharing contributions may
be directed for investment in shares of our common stock.
Chief Executive Officer's Compensation. Scott Ingstad, our President and Chief
Executive Officer, is a party to an employment agreement that was approved in
1996 by our board of directors. The terms of the employment agreement were
established through negotiations with Mr. Ingstad and reflect our belief and
confidence in Mr. Ingstad's skill and expertise in serving as our Chief
Executive Officer. During its review of Mr. Ingstad's compensation for 2004, the
committee reviewed Iowa First's general performance, including earnings per
share, return on average equity, strength of the balance sheet, as well as the
overall return to shareholders, including dividends paid and changes in the fair
market value of our common stock. The committee also assessed Mr. Ingstad's
effectiveness in leadership and communication skills, as demonstrated by the
level at which the subsidiary banks attained their targets for earnings and
asset quality, and the effectiveness of the strategic and operating planning
process. During 2003, our earnings per share decreased 8.5%, cash dividends
declared per share resulted in a yield on beginning of the year price of 3.6%,
total average assets grew 1.4%, total shareholder return was over 13.5% and
return on average equity was 12.9%.
As a result of Mr. Ingstad's individual performance as well as our financial
results, the committee approved a base salary of $181,000 for Mr. Ingstad in
2004. Additionally, Mr. Ingstad also received other compensation of $33,949,
which included our matching and profit sharing contributions of $20,000 pursuant
to the KSOP. Also included was $13,949 for matching and interest earnings in
excess of 120% of the long-term federal funds rate at the beginning of the plan
year pursuant to his deferred compensation agreement. Because we met our
financial performance goals, Mr. Ingstad also received a bonus of $19,007 under
our performance incentive plan.
Additionally, the committee monitors the change in control payments that
executives may be entitled to receive. As of the date of this proxy statement,
in the event of a change in control resulting in Mr. Ingstad's termination of
employment, he would be entitled to receive approximately $735,000 from us as a
result of the provisions under his change in control agreement.
Compliance with Section 162(m) of the Internal Revenue Code of 1986. Section
162(m) of the Internal Revenue Code limits the deductibility of annual
compensation in excess of $1.0 million paid to our Chief Executive Officer and
any of the four other highest paid officers, to the extent they are listed
officers on the last day of any given tax year. However, compensation is exempt
from this limit if it qualifies as "performance based compensation." Performance
based compensation generally includes only payments that are contingent on
achievement of performance objectives, and excludes fixed or guaranteed
payments. We believe performance based compensation is an important tool to
provide incentive to senior executives, matching their compensation levels to
our performance. Accordingly, performance based compensation comprises a portion
of the compensation package for our senior executives. This also has the effect
of preserving the deduction that might otherwise be affected by the $1.0 million
limit.
Although we will consider deductibility under Section 162(m) with respect to the
compensation arrangements for executive officers, deductibility will not be the
sole factor used in determining appropriate levels or methods of compensation.
Since our objectives may not always be consistent with the requirements for full
deductibility, we may enter into compensation arrangements under which payments
would not be deductible under Section 162(m).
Conclusion. The committee believes these executive compensation policies and
programs described above effectively serve the interests of shareholders of Iowa
First. The committee believes these policies motivate executives to contribute
to our overall future success, thereby enhancing the value of Iowa First for the
benefit of all shareholders. The committee believes that the benefits provided
through the performance incentive plans more closely align the interest of the
officers and the shareholders and provide additional incentives for the officers
which directly benefit the shareholders.
Human Resources and Compensation Committee:
Beverly J. White (Chairperson)
Larry L. Emmert
David R. Housley
Victor G. McAvoy
Compensation Committee Interlocks and Insider Participation
During 2004, none of the directors serving on the Human Resource and
Compensation Committee was an officer or employee of Iowa First or its
subsidiaries, and none of these individuals was a former officer or employee of
either organization. In addition, during 2004 no executive officer served on the
board of directors or compensation committee of any other corporation with
respect to which any member of our compensation committee was engaged as an
executive officer.
STOCK PRICE PERFORMANCE GRAPH
The stock price performance graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Iowa First specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
The graph below compares cumulative total return of Iowa First's common stock
with the Russell 2000 Stock Index and a peer group index. The peer group index
is comprised of the CoreData Financial Index for the stocks of banks and bank
holding companies selected by Iowa First as a peer group (representing
twenty-one companies each with total assets under, or slightly over, one billion
dollars). In our opinion, this index, which includes mainly smaller, thinly
traded banking companies, affords a representative and meaningful comparison
with Iowa First. Our common stock is thinly traded on the over-the-counter
bulletin board and is not listed on any stock market exchange. The price used
for our common stock in the chart is the greater of the year-end bid price
supplied by one of the brokerage firms which acts as a market maker for Iowa
First or the annual appraisal price supplied by an independent appraiser. The
chart assumes an investment of $100 on January 1, 2000, in the common stock of
Iowa First, the Russell 2000 Stock Index and the peer group index described
above. Each year's performance is for the twelve months ended December 31. The
overall performance assumes dividend reinvestment throughout the period. The
data points used in the omitted graph are as follows:
Comparison of Five Year Cumulative Total Return
Among the Company, the Russell 2000 Index and
a Small Bank Index
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
------------------------------------------------------------------------------
Iowa First Bancshares Corp. $100.00 $ 84.59 $ 88.94 $109.56 $124.41 $157.99
Peer Group Index Small
Banks .................. 100.00 80.09 100.28 120.74 156.68 182.81
Russell 2000 Index ........ 100.00 95.68 96.66 75.80 110.19 129.47
AUDIT COMMITTEE REPORT
The report of the Audit Committee below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent Iowa First specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
In accordance with its written charter adopted by the board of directors, the
Audit Committee assists the board of directors in fulfilling its
responsibilities to stockholders concerning Iowa First's financial reporting and
internal controls, and facilitates open communication among the Audit Committee,
board of directors, outside auditors, and management. In discharging its
oversight role, the Audit Committee reviewed and discussed the audited financial
statements contained in the 2004 Annual Report on Form 10-K with Iowa First's
management and independent auditor. Management is responsible for the financial
statements and the reporting process, including the system of internal controls.
The independent auditor is responsible for expressing an opinion on the
conformity of those financial statements with accounting principles generally
accepted in the United States of America.
In connection with the audited financial statements for 2004, the committee met
with the independent auditor, and discussed issues deemed significant by the
auditor, including those required by Statement on Auditing Standards No. 61
(Communications with Audit Committees). In addition, the committee discussed
with the independent auditor its independence from Iowa First and its
management, including the matters in the written disclosures required by
Independence Standards Board Standard No.1 (Independence Discussions with Audit
Committees), and considered whether the provision of non-audit services was
compatible with maintaining the auditor's independence.
In reliance on the reviews and discussions outlined above, the Audit Committee
has recommended to the board of directors that the audited financial statements
be included in Iowa First's Annual Report on Form 1O-K for the year ended
December 31,2004, for filing with the Securities and Exchange Commission.
As discussed under "Corporate Governance and the Board of Directors" in this
proxy statement, the board has determined that each member of the Audit
Committee is financially literate and "independent" under the regulations set
forth by Nasdaq Stock Market, Inc. Also, Mr. Heckman has been determined by the
board to be an "audit committee financial expert" under the rules of the
Securities and Exchange Commission.
This report submitted by the Audit Committee:
Donald R. Heckman (Chairman)
John "Jay" S. McKee
Beverly J. White
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2004, the First National Bank of Muscatine and First National Bank in
Fairfield had extended, and we expect to continue to extend, loans to our
directors and officers and to their related interests. Such loans were, and will
continue to be, made only upon the same terms, conditions, interest rates, and
collateral requirements as those prevailing at the same time for comparable
loans extended from time to time to other, unrelated borrowers. Loans to
directors and officers do not and will not involve greater risks of
collectibility, or present other unfavorable features, than loans to other
borrowers.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders are also being asked to ratify the appointment of McGladrey &
Pullen, LLP as our independent registered public accounting firm for the year
ending December 31, 2005. If the appointment of McGladrey & Pullen, LLP is not
ratified by shareholders, the matter of the appointment of an independent
registered public accounting firm will be considered by the Audit Committee and
board of directors. A representative of McGladrey & Pullen, LLP is expected to
be present at the annual meeting.
Following is a summary of fees for professional services billed by McGladrey &
Pullen, LLP and RSM McGladrey, Inc. (an affiliate of McGladrey & Pullen, LLP).
Accountant Fees
Audit Fees. The aggregate amounts of fees billed by McGladrey & Pullen, LLP for
its audit of Iowa First's annual financial statements for 2004 and 2003 and for
its required reviews of our unaudited interim financial statements included in
our Form 10-0s filed during fiscal 2004 and 2003 were $99,270 and $83,722.
Audit Related Fees. The aggregate amounts of audit related fees billed by
McGladrey & Pullen, LLP for 2004 and 2003 were $6,370 and $5,714. The majority
of these services were related to professional services rendered for the audit
of the employee benefit plan (KSOP).
Tax Fees. The aggregate amounts of tax related services billed by RSM McGladrey,
Inc. for 2004 and 2003 were $22,500 and $6,999, for professional services
rendered for tax compliance, tax consulting and tax planning. The services
provided included assistance with the preparation of Iowa First's original and
amended tax returns.
All Other Fees. The aggregate amounts of all other fees billed by RSM McGladrey,
Inc. and McGladrey & Pullen, LLP for 2004 and 2003 were $185,887 and $39,093.
Other services consisted primarily of consulting services related to network
administration support and consulting related to internal controls.
The Audit Committee, after consideration of the matter, does not believe the
rendering of these services by McGladrey & Pullen, LLP and RSM McGladrey, Inc.
to be incompatible with maintaining McGladrey & Pullen, LLP's independence as
our independent registered public accounting firm.
Audit Committee Pre-Approval Policy
Among other things, the Audit Committee is responsible for appointing, setting
compensation for and overseeing the work of the independent registered public
accounting firm. The Audit Committee's policy is to pre-approve all audit and
permissible non-audit services provided by McGladrey & Pullen, LLP and RSM
McGladrey, Inc. These services include audit and audit-related services, tax
services, and other services. McGladrey & Pullen, LLP and management are
required to periodically report to the Audit Committee regarding the extent of
services provided by McGladrey & Pullen, LLP and RSM McGladrey, Inc. in
accordance with this pre-approval, and the fees for the services performed to
date. The Audit Committee may also pre-approve particular services on a
case-by-case basis that the committee had not already specifically approved.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of our Annual Report to Shareholders for the 2004 fiscal year, which also
includes the majority of our Annual Report on Form 1O-K for the fiscal year
ended December 31, 2004 (including financial statements), accompanies this Proxy
Statement.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
The Securities and Exchange Commission has adopted rules that allow us to
deliver a single annual report and proxy statement to a household at which two
or more security holders reside and whom we believe are members of the same
family. Accordingly, such households will receive only one copy of the Annual
Report to Shareholders and Proxy Statement or any other information statement
unless we receive instructions that you prefer multiple mailings. However, these
households will continue to receive individual proxy cards for each registered
shareholder account. If you prefer to receive copies of the above documents for
each registered shareholder account, please contact our stock transfer agent,
UMB Bank, NA, toll-free at: 1-800-884-4225. It may take up to 30 days for you to
begin receiving separate mailings if you choose that alternative.
/s/ D. Scott Ingstad
-------------------------------------
D. Scott Ingstad
Chairman of the Board
President and Chief Executive Officer
March 18,2005
Muscatine, Iowa
ALL SHAREHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY