Iowa First Bancshares Corp. (OTCQB:IOFB) today reported net income for the year ended December 31, 2013 exceeded budget, but fell short of the record-breaking earnings of the prior year. Net income for the twelve months ended December 31, 2013 totaled $3,480,000 compared with net income of $4,106,000 for 2012, a decrease of $626,000 or 15.3%. Prior to 2013, the Company had enjoyed four consecutive years of rising net income. Earnings per share of $3.09 in 2013 compared to the prior year's record high of $3.66. The decline in earnings for 2013 versus 2012 was largely anticipated as discussed below.

There were four significant areas which contributed to the Company's year-over-year decrease in net income: (1) Income from mortgage origination and loan servicing fees declined $438,000 in 2013 due to a marked decrease in the number of real estate loan refinancings. As was the case throughout the entire mortgage loan industry, the uptick in interest rates in mid-year, plus the shrinking number of qualified borrowers eligible to refinance their houses contributed to the reduced level of refinancing activity; (2) In 2012 the Company experienced a one-time nearly $200,000 gain from the sale of premises and equipment; (3) In 2013 our Company redeemed approximately $4,000,000 of mandatorily redeemable preferred securities incurring a one-time cost of $285,000. These securities had a scheduled redemption date of 2031 and carried an interest rate of 10.18%, and by redeeming them early, at today's interest rates the recurring annual pretax savings to Iowa First would be approximately equal to the one-time cost incurred to redeem the securities; (4) Net interest income of $12,872,000 was $173,000 or 1.3% less than in 2012 which is due to the fact that the yield on the loan portfolio has declined by a greater amount than the decline in rates paid on deposits at the subsidiary banks.

Controlling noninterest expense has remained a primary focus. Excluding the non-recurring $285,000 early redemption expense discussed above, total noninterest expense of $10,685,000 would have been $119,000 or 1.1% lower in 2013 than 2012. Another benefit experienced in 2013 was a second consecutive year of making no provision for loan losses.

The positive result from having no required loan loss provision expense is enhanced by the fact that year-over-year gross loans increased by $30,686,000 or 10% to $338,368,000. While intense competition for loans exerted downward pressure on interest rates as mentioned previously, the Company's net interest margin declined by a fairly modest .11% from 3.35% to 3.24%. Deposits declined during 2013 by $11,527,000 or 3% as the Company necessarily lowered rates paid on certain deposit products in a concerted effort to maintain the best net interest margin possible, while still retaining the vast majority of our key client relationships.

Asset quality improved during 2013, with nonaccrual loans totaling $5,094,000 at December 31, 2013 compared to $5,427,000 at December 31, 2012, an improvement of $333,000 or 6.1%. Consequently, total nonaccrual loans represented 1.5% of gross loans outstanding at year-end 2013 compared to 1.8% at year-end 2012.

The December 31, 2013 allowance for loan losses of $4,276,000 represented 1.3% of gross loans outstanding. Net loans charged-off during 2013 totaled only $165,000 compared to $1,200,000 the previous year. The management of both subsidiary banks has continued to place a key emphasis on evaluating credit risk both at the initial point that a loan relationship is established, as well as throughout the entire term that the loan remains on our books.

Despite the early redemption of the mandatorily redeemable preferred securities which had counted as regulatory capital, the Company maintained reasonably strong capital ratios at year-end 2013. At December 31, 2013 total capital to risk-weighted assets, tier 1 capital to risk-weighted assets and tier 1 capital to average assets were 12.8%, 11.5% and 8.9%, respectively.

The Company's annualized return on average assets for 2013 and 2012 was .79% and .97%, respectively. The Company's annualized return on average equity for the twelve months ended December 31, 2013 and December 31, 2012 was 9.0% and 11.5%, respectively.

During 2013, Iowa First paid dividends to shareholders of $1.14 per share which represented approximately 37% of net income per share. This dividend payout during the year equated to a dividend yield of approximately 3.8% based on the beginning of the year stock price.

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 per share data)

(unaudited)

               

For the Three

For the Three

For the Twelve

For the Twelve

Months Ended

Months Ended

Months Ended

Months Ended

December 31, 2013

December 31, 2012

December 31, 2013

December 31, 2012

 
Net Interest Income $ 3,391 $ 3,009 $ 12,872 $ 13,045
Provision for Loan Losses 0 0 0 0
Noninterest Income 790 1,126 3,349 3,991

Early Redemption of Trust Preferred Securities

0 0 285 0
Noninterest Expense 2,747 2,749 10,685 10,804
Income Tax Expense 503 521 1,771 2,126
Net Income after Income Taxes 931 865 3,480 4,106
 

Net Income per Common Share, Basic and Diluted

$ 0.82 $ 0.78 $ 3.09 $ 3.66
 
 
 
 

As of

As of

December 31, 2013

December 31, 2012

 
Gross Loans $ 338,368 $ 307,682
Total Assets 433,925 444,229
Total Deposits 375,728 387,255
Tier 1 Capital 38,665 40,407
 
Return on Average Equity 9.0 % 11.5 %
Return on Average Assets .79 .97
Net Interest Margin (tax equivalent) 3.24 3.35
Allowance as a Percent of Total Loans 1.3 1.4
 

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