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, 1995
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _______ to _______
Commission file number 2-89283
IOWA FIRST BANCSHARES CORP.
(Exact name of registrant as specified in its charter)
STATE OF IOWA 42-1211285 (State or other jurisdiction (IRS Employer of
incorporation or organization) Identification No.)
300 East Second Street
Muscatine, Iowa 52761
(Address of principal executive offices)
319-263-4221
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO_____
At September 30, 1995 there were 571,921 shares of the registrant's common stock
outstanding.
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
(Unaudited)
September December
30, 31,
1995 1994
--------- --------
ASSETS
Cash and due from banks .............................. $ 12,465 $ 11,720
Investment securities held to maturity (fair value
September 30, 1995, $44,994; December 31,
1994, $52,022)...................................... 44,829 53,659
Investment securities available for sale (cost
September 30, 1995, $19,121; December 31, 1994,
$16,160)............................................ 19,232 15,791
Federal funds sold and securities
purchased under resale agreements ................. 7,075 3,337
Loans, net of allowance for possible loan
losses September 30, 1995, $2,576;
December 31, 1994, $2,526 ......................... 170,014 162,015
Bank premises and equipment, net ..................... 4,430 4,545
Other assets ......................................... 3,162 2,733
-------- --------
TOTAL ASSETS ...................................... $261,207 $253,800
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits ........................ $ 32,413 $ 35,336
Interest bearing deposits ........................... 198,292 193,687
-------- --------
TOTAL DEPOSITS ................................... 230,705 229,023
Other borrowings .................................... 2,600 0
-------- --------
Securities sold under agreements to repurchase ...... 3,717 2,248
Other liabilities ................................... 1,815 1,857
-------- --------
TOTAL LIABILITIES ................................ 238,837 233,128
-------- --------
STOCKHOLDERS' EQUITY
Common Stock ........................................ 200 200
Surplus ............................................. 3,800 3,800
Retained earnings ................................... 18,822 17,193
-------- --------
22,822 21,193
Unrealized gains (losses) on securities
available for sale, net ........................... 70 (233)
Less net cost of common shares acquired for
the treasury ...................................... 522 288
-------- --------
TOTAL STOCKHOLDERS' EQUITY ....................... 22,370 20,672
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $261,207 $253,800
======== ========
See notes to Consolidated Condensed Financial Statements.
IOWA FIRST BANCSHARES CORP. AND
SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(In Thousands, Except Per
Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1995 1994 1995 1994
------- ------- ------- -------
INTEREST INCOME:
Interest and fees on loans ............................ $ 3,744 $ 3,306 $10,828 $ 9,498
Interest on investment securities ..................... 927 1,020 2,828 2,995
Interest on federal funds sold and securities
purchased under resale agreements ................... 109 29 300 233
Other interest ........................................ 0 4 0 15
------- ------- ------- -------
Total interest income ................................. 4,780 4,359 13,956 12,741
------- ------- ------- -------
INTEREST EXPENSE:
Interest on deposits, securities sold under repurchase
agreements and other borrowings...................... 2,307 1,869 6,604 5,447
Interest on note payable .............................. 0 9 0 49
------- ------- ------- -------
Total interest expense ................................ 2,307 1,878 6,604 5,496
------- ------- ------- -------
Net interest income ................................... 2,473 2,481 7,352 7,245
Provision for loan losses ................................ 0 15 30 45
------- ------- ------- -------
Net interest income after provision for
loan losses ........................................ 2,473 2,466 7,322 7,200
Investment securities gains (losses) ..................... (9) 5 (3) 55
Other income ............................................. 405 462 1,135 1,275
Other expense ............................................ 1,617 1,810 5,108 5,353
------- ------- ------- -------
Income before income taxes ............................ 1,252 1,123 3,346 3,177
Applicable income taxes .................................. 400 336 1,046 972
------- ------- ------- -------
Net income ............................................... $ 852 $ 787 $ 2,300 $ 2,205
======= ======= ======= =======
Per share data:
Net earnings per common share .......................... $ 1.42 $ 1.34 $ 3.87 $ 3.78
======= ======= ======= =======
Dividends declared per common share (declared semi-
annually until quarterly dividend declarations
began first quarter of 1995) $ 0.41 $ 0.00 $ 1.17 $ 0.65
======= ======= ======= =======
See Notes to Consolidated Condensed Financial Statements.
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
For The Nine Months
Ended September 30, 1995 and 1994
(In Thousands)
1995 1994
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................... $ 2,300 $ 2,205
Adjustments to reconcile net income to net
cash provided by operating activities:
Proceeds from FHLMC .............................. 1,405 2,916
Loans underwritten for FHLMC ...................... (1,400) (2,891)
Gains on loans sold to FHLMC ...................... (5) (25)
Provision for loan losses ......................... 30 45
Investment securities (gains) losses, net ......... 3 (55)
Depreciation ...................................... 324 348
Deferred income taxes ............................. (150)
------- -------
Amortization of premiums and accretion of
discounts on loans and investment securities,
net ............................................. 138 247
(Increase) decrease in other assets ............... (429) (543)
Increase (decrease) in other liabilities .......... 50 (302)
------- -------
Net cash provided by operating activities ............ 2,416 $ 1,795
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold ..... (3,738) 10,530
Proceeds from maturities of investment
securities....................................... 11,430 11,921
Proceeds from sales of investment securities ...... 3,968 9,660
Purchases of investment securities ................ (9,773) (18,258)
Net (increase) in loans ........................... (8,029) (7,493)
Purchases of bank premises and equipment .......... (209) (242)
-------- --------
Net cash (used in) investing activities ........... (6,351) 6,118
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) in noninterest bearing deposits .... (2,923) (1,949)
Net increase (decrease) in interest bearing
deposits ........................................ 4,605 (1,085)
Net increase in securities sold under
agreements to repurchase ........................ 1,469 1,457
Net increase in other borrowings .................. 2,600
-------- --------
Principal payments on notes payable ............... 0 (1,300)
-------- --------
Cash dividends paid ............................... (837) (715)
Purchases of common stock for the treasury,
net of sales .................................... (234) 104
-------- --------
Net cash provided by financing activities ......... 4,680 (3,488)
-------- ---------
Net increase in cash and due from banks ........... 745 4,425
Cash and due from banks:
Beginning ......................................... 11,720 9,100
-------- --------
Ending ............................................ $ 12,465 $ 13,525
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 7,614 $ 5,392
Income taxes $ 757 $ 446
See notes to Consolidated Condensed Financial Statements.
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
Iowa First Bancshares Corp. is a bank holding company providing bank and
bank related services through it's subsidiaries.
Significant accounting policies:
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, First
National Bank of Muscatine (Muscatine) and First National Bank in
Fairfield (Fairfield), collectively referred to herein as (Banks). All
material intercompany accounts and transactions have been eliminated
in consolidation. The unaudited interim financial statements presented
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim periods.
All such adjustments are of a normal recurring nature.
Presentation of cash flows:
For purposes of reporting cash flows, cash and due from banks
include cash on-hand and amounts due from banks. Cash flows from
demand deposits, NOW accounts, savings accounts, and federal funds
sold are reported net, since their original maturities are less than
three months. Cash flows are also reported net for other borrowings,
securities sold under agreements to repurchase, certificates of
deposits, and loans.
Investment securities:
Investment securities held to maturity are those debt securities
that the Banks have the ability and intent to hold until maturity
regardless of changes in market conditions, liquidity needs or changes
in general economic conditions. Such securities are carried at cost
adjusted for amortization of premiums and accretion of discounts. If
the ability or intent to hold to maturity is not present for certain
specified securities, such securities are considered available for
sale as the Banks intend to hold them for an indefinite period of time
but not necessarily to maturity. Any decision to sell a security
classified as available for sale would be based on various factors,
including significant movements in interest rates, changes in the
maturity mix of the Banks' assets and liabilities, liquidity needs,
regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized
gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. There
are no securities held for trading purposes. Realized gains or losses,
determined on the basis of the cost of specific securities sold, are
included in earnings.
Loans and direct lease financing:
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. The 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 llowance balance, the Banks make continuous credit
reviews of the loan portfolio and 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.
Financial Accounting Standards Board (FASB) Statement No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by FASB
Statement No. 118, was adopted as of January 1, 1995. Under these
standards, loans considered to be impaired are reduced to the present
value of expected future cash flows or to the fair value of
collateral, by allocating a portion of the allowance for loan losses
to such loans. If these allocations cause the allowance for loan
losses to require increase, such increase is reported as bad debt
expense. Cash interest payments collected on impaired loans are
recorded as interest income. The effect of adopting these standards
was not material.
The leasing operations consist principally of the leasing of
various types of medical and transportation equipment. All of the
leases are classified and accounted for as direct financing leases.
Under the direct financing method of accounting for leases, the total
net rentals receivable under the lease contracts and the estimated
unguaranteed residual value of the leased equipment, net of unearned
income, are recorded as a net investment in direct financing leases
and the unearned income is recognized each month as it is earned so as
to provide a constant periodic rate of return on the unrecovered
investment.
Direct loan and lease origination fees and costs are generally
being deferred and the net amount amortized as an adjustment of the
related loan's or lease's yield. The Banks generally amortize these
amounts over the contractual life. Commitment fees based upon a
percentage of customers' unused lines of credit and fees related to
standby letters of credit are not significant.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed primarily by the straight-line
method based on estimated useful lives.
Other assets:
Other real estate (ORE), which is included in other assets,
represents properties acquired through foreclosure, in-substance
foreclosure or other proceedings. ORE is recorded at the lower of the
amount of the loan or fair market value of the properties. Any
write-down to fair market value at the time of transfer to ORE is
charged to the allowance for loan losses. Property is evaluated
regularly to ensure that the recorded amount is supported by the
current fair market value.
Income taxes:
The Company files its tax return on a consolidated basis with its
subsidiary banks. The entities follow the direct reimbursement method
of accounting for income taxes under which income taxes or credits
which result from the subsidiary banks' inclusion in the consolidated
tax return are paid to or received from the parent company.
Statement of Financial Accounting Standard No. 109 ("FAS 109"),
Accounting for Income Taxes, was adopted in 1993. Under the asset and
liability method of accounting for income taxes prescribed by FAS 109,
deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered
or settled. Under FAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Deferred income taxes have not been provided on the equity in
undistributed net income of the subsidiaries as the entities file a
consolidated income tax return.
Trust assets:
Trust assets (other than cash deposits) held by the Banks in
fiduciary or agency capacities for its customers are not included in
the accompanying consolidated balance sheets since such items are not
assets of the Banks.
Fair value of financial instruments:
FAS No. 107, Disclosures about Fair Market Value of Financial
Instruments, requires disclosure of fair value information about
financial instruments, whether or not recognized in the balance sheet,
for which it is practicable to estimate that value. Interim condensed
financial statements are not required to include the disclosures
outlined by FAS 107 and, accordingly, are not included herein.
Note 2. Capital Stock and Earnings Per Share
Common shares and preferred stock authorized total 2,000,000 shares and
500,000 shares, respectively. Primary earnings per share are arrived at by
dividing net income by the weighted average number of shares of common stock and
common stock equivalents outstanding for the respective period. The weighted
average number of shares of common stock and common stock equivalents
outstanding for the first nine months of 1995 was 594,368.
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, 1995, were $261,207,000. Muscatine's
total assets were $176,373,000 which reflects a $4,442,000 (2.6%) increase from
December 31, 1994, total assets. Fairfield's total assets were $83,048,000 at
September 30, 1995, which is an increase of $2,841,000 (3.5%) when compared to
December 31, 1994, total assets. Total consolidated assets increased by 2.9%
during the first nine months of 1995.
Net loans totaled $170,014,000 at September 30, 1995. Net loans at Muscatine
increased by $5,459,000 (4.9%) during the first nine months. Net loans increased
at Fairfield by $2,557,000 (5.0%) during the first nine months. Consolidated net
loans increased by $7,999,000 (4.9%) year-to-date with $3,053,000 of the
increase occurring during the third quarter of 1995.
Total held to maturity and available for sale securities decreased over $5
million during the first nine months of 1995 due to maturities and sales
utilized to generate funds primarily for loan growth. The Banks continue to
emphasize purchase of securities with maturities of five years and less as such
purchases offer reasonable yields with very little credit risk as well as
limited interest rate risk. Additionally, selected securities with longer
maturities have been purchased in order to enhance overall portfolio yield
without significantly increasing risk. At September 30, 1995, less than 10% of
investment securities mature in more than five years and less than 2% mature in
more than ten years. Securities totaling approximately $4 million were sold from
the available for sale securities portfolio during the year with net losses
before tax on these sales of approximately $3,000.
Total deposits at September 30, 1995, were $230,705,000. Deposits at Muscatine
decreased less than .1% from the prior year end. Fairfield's total deposits
increased approximately $1.5 million (2.1%) during the same period. This
represents a combined deposit increase of .7% for the Company during the first
nine months of 1995. Additionally, securities sold under agreements to
repurchase increased $1.5 million and intermediate term advances were borrowed
from the Federal Home Loan Bank totaling $2.6 million.
IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Consolidated net income from continuing operations was $852,000, or $1.42 per
share, for the third quarter of 1995, a $65,000 increase from the same period
last year. Consolidated net income for the first nine months of 1995 was
$2,300,000, or $3.87 per share. This is $95,000 (4.3%) higher than the same
period in 1994. This improvement resulted primarily from increased net interest
margin and reduced expenses. A major positive factor in the financial
performance of the third quarter occurred when the FDIC refunded to the banking
industry, including our subsidiary banks, overpayments of previously submitted
deposit insurance premiums to the Bank Insurance Fund (BIF). The refunds to our
subsidiaries totalled over $130,000 before income tax consequences.
Additionally, future BIF premium rates were reduced approximately 80% for our
banks.
The Company has been able to expand the net interest margin, as compared to the
prior year by actively managing asset quality, growth of the loan portfolio, and
rates paid on assets and liabilities. Management expressed doubts as to the
sustainability of these levels of net interest margin as the Federal Reserve
Bank raised short-term interest rates over the past several quarters, and,
indeed, the net interest margin for the third quarter of 1995 was a modest
$8,000 less than the same period in 1994.
Provisions for loan losses were $30,000 for the nine months ended September 30,
1995, $15,000 less than 1994. Net loan recoveries totaled $20,000 compared to
net loan charge-offs of $74,000 for the first three quarters of 1995 and 1994,
respectively.
Nonaccrual loans were reduced during the past twelve months totaling $1.195
million at September 30, 1995, $353,000 less than the end of the third quarter
in 1994. Other real estate owned totaled $107,000, and loans past due 90 days or
more and still accruing totaled $138,000. The reserve for loan losses of
$2,576,000 represents 1.5% of net loans and 179% 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 60.5% for the first nine months of
1995 compared to 63% for all of 1994.
Interest Rate Sensitivity
- -------------------------
The Company manages its balance sheet to minimize the impact of interest rate
movements on its earnings. The term "rate sensitive" refers to those assets and
liabilities which are "sensitive" to fluctuations in rates and yields. When
interest rates move, earnings may be affected in many ways. Interest rates on
assets and liabilities may change at different times or by different amounts.
Maintaining a proper balance between rate sensitive earning assets and rate
sensitive liabilities is the principal function of asset and liability
management of a banking organization.
The following table shows the interest rate sensitivity position at several
repricing intervals (dollar amounts in thousands):
Repricing Maturities at September 30, 1995
Repricing Maturities at September 30, 1995
Less Than 3-12 1-5 More Than Noninterest
3 Months Months Years 5 Years Bearing Total
--------- -------- -------- --------- ----------- --------
Assets:
Loans ......................................... $ 55,426 $ 29,943 $ 70,625 $ 12,825 $ 1,195 $170,014
Investment securities ......................... 10,365 10,274 38,516 4,896 10 64,061
Other earning assets .......................... 0 0 0 0 7,075 7,075
Nonearning assets ............................. 0 0 0 0 20,057 20,057
-------- -------- -------- -------- -------- --------
Total assets ........................... $ 72,866 $ 40,217 $109,141 $ 17,721 $ 21,262 $261,207
======== ======== ======== ======== ======== ========
Liabilities and Equity:
Deposits ...................................... $ 51,130 $ 86,455 $ 60,707 $ 0 $ 32,413 $230,705
Other purchased fund .......................... 3,000 717 2,200 400 0 6,317
Other liabilities ............................. 0 0 0 0 1,815 1,815
Equity ........................................ 0 0 0 0 22,370 22,370
-------- -------- -------- -------- -------- --------
Total liabilities and equity ................ $ 54,130 $ 87,172 $ 62,907 $ 400 $ 56,598 $261,207
======== ======== ======== ======== ======== ========
Repricing gap ................................... $ 18,736 $(46,955) $ 46,235 $ 17,321 $(35,336) $ 0
Cumulative repricing gap ........................ $ 18,736 $(28,220) $ 18,015 $ 35,336 $ 0 $ 0
The data in this table incorporates the contractual characteristics as well as
an estimate of the actual repricing characteristics of the Company's assets and
liabilities. Based on the estimate, twenty percent of the savings and NOW
accounts are reflected in the less than three months category, 30% in the three
month to one year category, with the remaining 50% in the 1-5 year time frame.
Money market accounts are estimated as 25% in the less than three months
category and 75% in the three months to one year time frame.
A positive repricing gap for a given period exists when total interest-earning
assets exceed total interest-bearing liabilities and a negative gap exists when
total interest-bearing liabilities are in excess of interest-earning assets.
Generally a positive repricing gap will result in increased net interest income
in a rising rate environment and decreased net interest income in a falling rate
environment. A negative repricing gap tends to produce increased net interest
income in a falling rate environment and decreased net interest income in a
rising rate environment. At September 30, 1995, rate sensitive liabilities
exceeded rate sensitive assets within a one year maturity range by $28 million
and, thus, the Company is positioned to benefit from a decline in interest rates
within the next year.
The Company's repricing gap position is useful for measuring general relative
risk levels. However, even with perfectly matched repricing of assets and
liabilities, interest rate risk cannot be avoided entirely. Interest rate risk
remains in the form of prepayment risk of assets and liabilities, timing lags in
adjusting certain assets and liabilities that have varying sensitivities to
market interest rates, and basis risk. Basis risk refers to the possibility that
the repricing behavior of variable-rate assets could differ from the repricing
characteristics of liabilities which reprice in the same time period. Even
though these assets are match-funded, the spread between asset yields and
funding costs could change.
Because the repricing gap position does not capture these risks, Management
utilizes simulation modeling to measure and manage the rate sensitivity exposure
of earnings. The Company's simulation model provides a projection of the effect
on net interest income of various interest rate scenarios and balance sheet
strategies.
Liquidity
- ---------
For banks, liquidity represents ability to meet both loan commitments and
deposit withdrawals. Factors which influence the need for liquidity are varied,
but include general economic conditions, asset/liability mix, bank reputation,
future FDIC funding needs, changes in regulatory environment, and credit
standing. Assets which provide liquidity consist principally of loans, cash and
due from banks, investment securities, and short-term investments such as
federal funds. Maturities of securities held for investment purposes and loan
payments provide a constant flow of funds available for cash needs.
Additionally, liquidity can be gained by the sale of loans or securities prior
to maturity if such assets had previously been designated as available for sale.
Interest rates, relative to the rate paid by the security or loan sold, along
with the maturity of the security or loan, are the major determinates of the
price which can be realized upon sale.
The subsidiary banks do not have brokered deposits.
At September 30, 1995, the held to maturity investment portfolio had a book
value of $44,829 compared to a fair value of $44,994 for a net unrealized gain
of $165,000. Such amounts are not expected to have a material effect on future
earnings beyond the usual amortization of acquisition premium or discount,
because no significant sale of such investments is anticipated. Securities
available for sale with a cost totaling $19,121,000 at quarter-end included net
unrealized gains of $111,000. These securities may be sold in whole or in part
to increase liquid assets, reposition the investment portfolio, or for other
purposes as defined by Management.
Capital
- -------
Stockholders' equity increased $651,000 and $1,698,000 during the three and nine
months ended September 30, 1995, respectively.
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, 1995 with the minimum
requirements is presented below.
Minimum
Actual Requirements
------ ------------
Tier 1 risk-based capital ..................... 12.83% 4.00%
Total risk-based capital ...................... 14.58% 8.00%
Tier 1 leverage ratio ......................... 8.22% 3.00%
Impact of Inflation and Changing Prices
- ---------------------------------------
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities of
a financial institution are monetary in nature. As a result, interest rates have
a more significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or in the same magnitude as the price of goods and
services. In the current interest rate environment, liquidity and the maturity
structure of the Company's assets and liabilities are critical to the
maintenance of acceptable performance levels.
Trends, Events or Uncertainties
- -------------------------------
Officers and Directors of the Company and its subsidiaries have had, and may
have in the future, banking transactions in the ordinary course of business of
the Company's subsidiaries. All such transactions are on substantially the same
terms, including interest rates on loans and collateral, as those prevailing at
the time for comparable transactions with others, involve no more than normal
risk of collectibility, and present no other unfavorable features.
At its meeting on June 15, 1989, the Company's Board of Directors authorized a
stock repurchase program, to repurchase up to 10 percent of the Company's shares
or 60,000 shares. Through September 30, 1995, approximately 28,000 shares of
common stock have been purchased under the program, net of sales to the
Company's Employee Stock Ownership Plan. The Company expects to continue
repurchase of its common stock from time to time under the repurchase program.
In the normal course of business, the Banks are involved in various legal
proceedings. In the current opinion of management, any liability resulting from
such proceedings would not have a material effect on the Company's financial
statements.
The Company has incurred legal and engineering fees, and performed various tests
on a bank-owned vacant lot to determine if the lot contains environmental damage
or a potential for environmental damage liability. As a result of the testing,
the Company has submitted a Site Clean-Up Report with the Iowa Department of
Natural Resources (IADNR). The Company intends to work with the IADNR, as well
as its own engineers and attorneys, to determine the nature and scope of this
environmental concern, to ascertain the need for a monitoring and/or remediation
program and to consider the costs and allocations of responsibility with respect
to any expenses incurred under such a program. In the event that on-going
monitoring or remediation is required, investigation into the potential for
reimbursement by predecessor owners or insurers is in process. No conclusions
have been reached at this time about a final plan of monitoring and/or
remediation, if any, and the costs that may be associated with such a plan.
Besides those previously discussed, management is not aware of any trends,
events, or uncertainties that will have or that are reasonably likely to have
material effect on the Company's liquidity, capital resources or operations.
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, 1995.
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)
11/14/95 /s/ George A. Shepley
- ---------------- ------------------------------
Date George A. Shepley, Chairman of
the Board, President & Chief
Executive Officer
11/14/95 /s/ Kim K. Bartling
- ---------------- ------------------------------
Date Kim K. Bartling, Senior Vice
President, Chief Financial
Officer & Treasurer