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Iowa First Bancshares Corp. Posts 2013 Financial Results

February 4, 2014

Iowa First Bancshares Corp. on January 30 reported net income for the year ended December 31, 2013 exceeded budget, but fell short of the earnings of the prior year. In a release on January 30 , the Company noted 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 percent. 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. 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 percent, 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 percent 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 percent 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 percent 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 percent from 3.35 percent to 3.24 percent. Deposits declined during 2013 by $11,527,000 or 3 percent 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 percent. Consequently, total nonaccrual loans represented 1.5 percent of gross loans outstanding at year-end 2013 compared to 1.8 percent at year-end 2012. The December 31, 2013 allowance for loan losses of $4,276,000 represented 1.3 percent 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 percent, 11.5 percent and 8.9 percent, respectively. The Company's annualized return on average assets for 2013 and 2012 was .79 percent and .97 percent, respectively. The Company's annualized return on average equity for the twelve months ended December 31, 2013 and December 31, 2012 was 9.0 percent and 11.5 percent, respectively. During 2013, Iowa First paid dividends to shareholders of $1.14 per share which represented approximately 37 percent of net income per share. This dividend payout during the year equated to a dividend yield of approximately 3.8 percent based on the beginning of the year stock price. Iowa First Bancshares Corp. is a bank holding company. ((Comments on this story may be sent to ))

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