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

MUSCATINE, Iowa--()--Iowa First Bancshares Corp. (OTC Pink: IOFB) today reported net income of $1,081,000 for the quarter ended June 30, 2016, compared to net income of $1,050,000 for the quarter ended June 30, 2015. The increase in second quarter net income year-over-year of $31,000 (3.0%) was primarily attributable to higher net interest income of $132,000 (3.7%). This increase in net interest income was augmented by a $32,000 (3.7%) increase in noninterest income. Noninterest expense increased $68,000 (2.4%) and provision for loan losses was raised $75,000 or (250%). This large percentage increase in the provision is the result of three primary factors: 1) comparison of this year’s number to a relatively small provision for loan losses recognized in the prior year; 2) an increase in loans outstanding of $20,820,000 (5.7%) from June 30, 2015 to June 30, 2016; and 3) a year-over-year increase of 94.2% in nonperforming assets, which totaled $3,342,000 at June 30, 2016. While higher than in the recent past, the nonperforming assets represent a very manageable .87% of gross loans outstanding. Income tax expense declined $10,000 or 1.8% when comparing the second quarter of 2016 to the same quarter in 2015.

The Company recorded net income of $2,081,000 for the six months ended June 30, 2016, compared with net income of $2,035,000 for the two quarters ended June 30, 2015, an increase of $46,000 (2.3%). The primary factors contributing to this earnings improvement included a $334,000 (4.7%) increase in net interest income and a $47,000 (2.8%) increase in noninterest income. Offsetting some of these income gains, noninterest expense increased $215,000 (3.9%) and provision for loan losses was raised $150,000 (250%). Income tax expense declined $30,000 (2.8%).

Basic and diluted earnings per share were $1.84 for the six months ended June 30, 2016, up $.04 or 2.2% from the same period in 2015. The Company’s annualized return on average assets for the first two quarters of 2016 and 2015 was .90% and .92%, respectively. The Company’s annualized return on average equity for the six months ended June 30, 2016 and June 30, 2015 was 9.1% and 9.5%, respectively.

Total assets at June 30, 2016 totaled $474,371,000, an increase of $29,249,000 (6.6%) from June 30, 2015. As noted above, gross loans outstanding increased $20,820,000 (5.7%), while total deposits increased $25,587,000 (6.8%) year-over-year. The allowance for loan losses totaled $4,625,000 at June 30, 2016, or 1.20% of gross loans outstanding.

The board of directors declared a $.285 per common share cash dividend to be paid on July 26, 2016, to shareholders of record July 1, 2016. On an annualized basis this dividend represents a return of 3.3% on the December 31, 2015 stock price.

Users of this press release are encouraged to read the Iowa First Bancshares Corp. 2015 Annual Report to Shareholders. Of particular note, page 37 of the aforementioned report discusses contingencies.

As stated in the contingency section of the 2015 Annual Report to Shareholders, during 2015 representatives of a previous loan customer of the Company filed a lawsuit which makes various claims and allegations relating to the previous lending relationship and requested a trial by jury. The suit is still in its early stages; currently in discovery. Although the Company continues to believe the claims are unwarranted and intends to vigorously defend itself against such claims, management believes the potential damages could have a material impact on future earnings and the consolidated financial statements if the plaintiff is successful in the litigation.

While the final outcome of any legal proceeding is inherently uncertain, based upon current information, including but not limited to the opinion of the Company’s legal counsel, the Company has concluded that in the specific matter discussed in the contingency section of the annual report a loss is neither probable nor estimable at this time. Consequently, no loss contingency has been established as of June 30, 2016.

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

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

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

       

For the Three

For the Three

For the Six

For the Six

Months Ended

Months Ended

Months Ended

Months Ended

June 30, 2016

June 30, 2015

June 30, 2016

June 30, 2015

 
Net Interest Income $ 3,690 $ 3,558 $ 7,379 $ 7,045
Provision for Loan Losses 105 30 210 60
Noninterest Income 907 875 1,715 1,668
Noninterest Expense 2,877 2,809 5,763 5,548
Income Tax Expense 534 544 1,040 1,070
Net Income after Income Taxes 1,081 1,050 2,081 2,035
 

Net Income Per Common Share, Basic and Diluted

$ .957 $ .931 $ 1.843 $ 1.804
 

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

1,129,898 1,128,557 1,129,424 1,127,938
 
 

As of

 

As of

 

As of

June 30, 2016

December 31, 2015

June 30, 2015

 
Gross Loans $ 384,496 $ 373,288 $ 363,676
Total Assets 474,371 456,784 445,122
Total Deposits 403,558 387,833 377,971
Tier 1 Capital 46,092 44,595 43,149
 
Return on Average Equity 9.1 % 9.4 % 9.5 %
Return on Average Assets .90 .92 .92
Net Interest Margin (tax equivalent) 3.46 3.49 3.49
Allowance as a Percent of Total Loans 1.20 1.22 1.27

Contacts

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

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