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

Iowa First Bancshares Corp. (OTCQB: IOFB) today reported operating results for the three month period ended March 31, 2014. Consolidated net income totaled $1,016,000 compared to net income of $650,000 for the same period last year. The increase in first quarter net income year-over-year of $366,000 or 56.3% was primarily attributable to: 1) higher net interest income in the current year, and 2) a non-recurring transaction last year, the early redemption of company obligated mandatorily redeemable preferred securities (“trust preferred securities”). More specifically, net interest income increased $303,000 or 9.9% during the quarter ended March 31, 2014, compared with the quarter ended March 31, 2013. Furthermore, the $285,000 loss associated with the early redemption of trust preferred securities during the first quarter of 2013 was a one-time event and, therefore, had no additional negative financial consequences in 2014.

No provision for loan losses was required during the first quarter of either 2014 or 2013. Noninterest income during the first three months of 2014 increased $42,000 or 5.2% from the total during the first three months of 2013. Noninterest expense, net of the aforementioned 2013 cost of the early redemption of trust preferred securities, increased $56,000 or 2.2%. Due mainly to substantially elevated pretax income and, to a lesser extent, a higher effective tax rate, the income tax expense increased $208,000 or 62.7% year-over-year.

The tax equivalent net interest margin of 3.40% during the first quarter of 2014 compared quite favorably to 3.09% during the first quarter of 2013. Basic and diluted earnings per share were $.90 for the three months ended March 31, 2014, an increase of $.32 or 55.2% from the same period in 2013. The Company’s annualized return on average assets for the first quarter of 2014 and 2013 was .94% and .59%, respectively. The Company’s annualized return on average equity for the first quarter of 2014 and 2013 was 10.4% and 7.0%, respectively. “In this challenging low interest rate environment, we are especially pleased to report improvement in many of our key performance ratios including net interest margin, earnings per share, return on average assets and return on average equity,” stated Chairman, President and Chief Executive Officer, D. Scott Ingstad.

Total assets of over $438 million increased approximately $2.2 million (0.5%) and deposits totaling over $379 million remained fairly constant when comparing the end of the first quarter of 2014 to 2013. Importantly, however, gross loans outstanding at March 31, 2014, increased $29.1 million (9.4%), compared to March 31, 2013. The allowance for loan losses totaled $4.147 million at March 31, 2014, or 1.2% of gross loans outstanding compared to 1.4% of gross loans at March 31, 2013. Net loans charged-off during the first quarter of 2014 and 2013 totaled $129,000 and $55,000, respectively. Asset quality continued to improve as evidenced by a reduction of $666,000 or 11.6% in nonaccrual loans during the past twelve months. Nonaccrual loans totaled $5.087 million or 1.5% of gross outstanding loans at March 31, 2014, versus $5.753 million or 1.8% of loans at March 31, 2013.

The board of directors declared a $.285 per share cash dividend to be paid on April 29, 2014, to shareholders of record April 1, 2014. On an annualized basis this dividend represents a return of 3.8% on the December 31, 2013 stock price.

At the annual shareholders meeting held April 17, 2014, the shareholders voted in favor of the election of all four incumbent directors.

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

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