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Iowa First Bancshares Corp. Reports 2012 Financial Results

  Iowa First Bancshares Corp. Reports 2012 Financial Results

Business Wire

MUSCATINE, Iowa -- January 24, 2013

Iowa First Bancshares Corp. (OTCQB: IOFB) today reported record-breaking
financial results for the year ended December 31, 2012. Net income for the
twelve months ended December 31, 2012 totaled $4,106,000 compared with net
income of $3,530,000 for 2011, an increase of $576,000 or 16.3%. Earnings per
share of $3.66 also reached a new record high in 2012. This was an increase of
$.53 per share, or 16.9%, in 2012 compared to 2011.

“The excellent financial performance of Iowa First during 2012 is a direct
result of the dedication of our team of talented bankers and their daily
efforts to not only meet, but exceed, the expectations of our customers. Their
emphasis on superior customer service and relationship banking is the backbone
supporting the financial results of the organization,” said Chairman,
President and CEO Scott Ingstad.

Kim Bartling, Executive Vice President, COO and Treasurer, added, “The
Company’s outstanding results in 2012 were driven by improved credit quality,
robust revenues generated by our secondary market real estate activities, and
continued emphasis on controlling noninterest expenses.”

The increase in net income for the entire year of 2012 compared to the prior
year was primarily attributable to a reduction in provision for loan losses;
no such provision was necessary in 2012 compared to $945,000 in 2011. Also
positively impacting net income was an increase of $426,000 (11.8%) in
noninterest income. These improvements were partially offset by a modest
reduction in net interest income of $32,000 (0.2%), an increase in noninterest
expense of $286,000 (2.7%), and a $477,000 (28.9%) increase in income tax
expense.

Net income for the fourth quarter of 2012 totaled $865,000 compared to net
income of $832,000 for the fourth quarter of 2011, an increase of $33,000 or
4.0%.

As noted above, net interest income in 2012 declined slightly from the level
achieved the prior year. This decrease of $32,000 to $13,045,000 in 2012 was
influenced by subdued overall loan demand and strong deposit growth.
Year-over-year, gross loans declined $8,433,000, or 2.7%, and deposits grew
$29,102,000 or 8.1%. This larger than usual inflow of deposits caused the
Company’s balances held in low-yielding cash and short-term interest-bearing
accounts at other financial institutions to increase. The ultimate effect of
these incremental deposits was a dilution of the Company’s net interest
margin. Overall, the net interest margin decreased to 3.35% in 2012 from 3.40%
in 2011.

Noninterest income sources totaled $4,033,000, which was $426,000 or 11.8%
more than the prior year. This increase was heavily influenced by income from
mortgage origination and loan servicing fees which increased to $736,000 in
2012 from $393,000 in 2011, an improvement of 87.3%. This is an all-time high
for Iowa First in this income category. Also positively impacting noninterest
income was a non-recurring gain on sale of premises and equipment totaling
nearly $200,000 in 2012.

Noninterest expense increased $286,000 or 2.7% year-over-year. However,
excluding a one-time expense of $200,000, noninterest expense increased only
$86,000 or 0.8%.

Nonaccrual loans totaled $5,427,000 at December 31, 2012 compared to
$8,382,000 at December 31, 2011, an improvement of $2,955,000 or 35.3%.
Consequently, total nonaccrual loans represented 1.8% of gross loans
outstanding at year-end 2012, compared to 2.7% at year-end 2011.

The December 31, 2012 allowance for loan losses of $4,441,000 represented 1.4%
of gross loans outstanding. Net loans charged-off during 2012 totaled
$1,200,000 compared to $477,000 the previous year. No provision for loan
losses was recognized in 2012 compared to $945,000 which was recognized in
2011.

Basic and diluted earnings per share totaled $3.66 for the twelve months ended
December 31, 2012, which was $.53 or 16.9% more than the same period in 2011.
The Company’s annualized return on average assets for 2012 and 2011 was .97%
and .83%, respectively. The Company’s annualized return on average equity for
the twelve months ended December 31, 2012 and December 31, 2011 was 11.5% and
10.6%, respectively.

Capital increased during 2012, with year-end Tier 1 capital of $40,407,000 or
13.4% of risk-weighted assets, up from $37,564,000 and 12.4% at year-end 2011.

During 2012, Iowa First paid dividends to shareholders of $1.14 per share
which represented approximately 31% of net income. Additionally, the board of
directors declared a $.285 per common share cash dividend to be paid in late
January 2013 to shareholders of record January 2, 2013.

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 several factors could cause actual results to differ materially from those
in the forward-looking statements. 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 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) the strength of the local and national economy; (2) changes in
interest rates, legislative or regulatory changes, monetary and fiscal
policies of the U.S. government, including policies of the U. S. Treasury and
the Federal Reserve Board, and changes in the scope and cost of Federal
Deposit Insurance Corporation insurance and fees; (3) the loss of key
executives or employees; (4) changes in the quality and composition of the
Company’s loan and securities portfolios, demand for loan products and deposit
flows; (5) changes in the assumptions and estimates underlying the
establishment of reserves for possible loan losses and other estimates; (6)
the effects of competition and the overall demand for financial services in
the Company’s market areas; (7) our ability to implement new technologies and
develop and maintain secure and reliable electronic systems; (8) changes in
accounting principles, policies, and guidelines; and (9) other risk factors.

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

                                                           
                     For the Three   For the      For the        For the
                                     Three        Twelve         Twelve
                     Months Ended    Months       Months Ended   Months Ended
                                     Ended
                     December 31,    December     December 31,   December 31,
                     2012            31, 2011     2012           2011
                                                                            
Net Interest         $   3,009       $  3,283     $   13,045     $  13,077
Income
Provision for        0                  405       0                 945
Loan Losses
Noninterest              1,168          985           4,033         3,607
Income
Noninterest              2,791          2,637         10,846        10,560
Expense
Net Income after         865            832           4,106         3,530
Income Taxes
                                                                            
Net Income per
Common Share,
Basic and            $   0.78        $  0.75      $   3.66       $  3.13
Diluted
                                                                            

                                                    
                                   As of                     As of
                                   December 31, 2012         December 31, 2011
                                                                            
Gross Loans                        $    307,682              $    316,115
Total Assets                            444,229                   414,574
Total Deposits                          387,255                   358,153
Tier 1 Capital                          40,407                    37,564
                                                                            
Return on Average Equity                11.5   %                  10.6   %
Return on Average Assets                .97                       .83
Net Interest Margin (tax                3.35                      3.40
equivalent)
Allowance as a Percent of               1.4                      1.8
Total Loans
                                                                            

Contact:

Iowa First Bancshares Corp.
D. Scott Ingstad, 563-262-4202
Chairman, President and CEO
Or
Kim K. Bartling, 563-262-4216
Executive Vice President, Chief Operating Officer & Treasurer