Iowa First Bancshares Corp. publicizes fourth quarter and full yr 2020 monetary outcomes

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MUSCATINE, Iowa – (BUSINESS WIRE) – Iowa First Bancshares Corp. (OTC Pink: IOFB) (“Iowa First” or the “Company”), the holding company of First National Bank of Muscatine and First National Bank of Fairfield, today announced financial results for both fourth quarter and full year 2020. Net income for for the quarter ended December 31, 2020 was $ 84,000 compared to net income of $ 974,000 for the quarter ended December 31, 2019, a decrease of $ 890,000, or 91.4%. The $ 890,000 year-over-year decrease in net income for the fourth quarter was primarily due to higher loan loss provisions, which increased $ 1,145,000. In December 2020, First National Bank in Fairfield, the smaller of the two subsidiary banks, posted a provision charge of $ 875,000 related to a specific problem loan, resulting in a net loss of $ 547,000 for the bank in 2020. Other factors affecting Iowa First’s fourth quarter earnings were a decrease in net interest income of $ 31,000, an increase in noninterest expenses of $ 162,000, an increase in noninterest income of $ 204,000, and a decrease in income tax expense of $ 244,000.

Basic and diluted earnings per share for the three months ended December 31, 2020 were $ 0.08, $ 0.79, or 91% less than the same period in 2019.

The company’s consolidated net income of $ 2,327,000 for the twelve months ended December 31, 2020 was $ 1,149,000, or 33.1%, lower than the prior year. The decrease in consolidated net income was primarily driven by an increase in loan loss provisions of $ 950,000 (82.3%), a decrease in net interest income of $ 988,000 (6.8%) and an increase in noninterest expense of $ 474,000 (3.9%) This was offset by an increase in noninterest income of $ 923,000, (26.6%) and a decrease in income tax expense of $ 340,000, (32.8%). The year-over-year increase in noninterest income was mainly due to income from service fees and profits earned by the First National Bank of Muscatine on residential mortgages sold to the secondary market as consumers refinanced their home loans at the historically high level low interest take advantage of rates.

Iowa First continues to have a strong capital position, as evidenced by the total risk-based capital ratio of 17.4% as of December 31, 2020. Basic and diluted earnings per share for the twelve months ended December 31, 2020 were $ 2.07, down $ 1.01, or 33%, over the same period in 2019. The company’s annualized return on average assets for 2020 and 2019 were 0.47% and $ 0.75%, respectively. The company’s annualized return on equity for the twelve months ended December 31, 2020 and December 31, 2019 were 4.6% and 7.2%, respectively.

Total assets as of December 31, 2020 were $ 511,522,000, an increase of $ 40,987,000, or 8.7%, from year-end 2019. Gross loans outstanding decreased by $ 30,968,000, or 8.7%, while deposits were up $ 40,083,000, or 9.9%, year over year. Loan loss provisions as of December 31, 2020 were $ 6,107,000, or 1.88% of gross loans outstanding.

As a result of First National Bank’s decline in Fairfield’s equity position in December due to its provisioning costs, Iowa First completed a capital injection of $ 450,000 into the bank to enable it to maintain a tier 1 to average assets ratio of 9.0%. This injection was funded by holding cash on hand.

The need to move this significant amount of money to our affiliated bank came with concerns that the economic impact of the coronavirus pandemic could adversely affect certain of our borrowers. In order to maintain sufficient reserves in a time of challenging profits, the Board of Directors has decided to suspend the dividend to be paid in January 2021.

Regardless of the decision to suspend the dividend, the directors, management and employees of Iowa First continue to be committed to our long tradition of providing our local communities with the valuable financial services and guidance they have come to expect for many years. Our company is again playing an active role in helping our small business customers obtain the funding they need through the use of the SBA paycheck protection program.

about us

Iowa First Bancshares Corp. is a bank holding company headquartered in Muscatine, Iowa. The company provides a wide range of banking and other financial services to individuals, corporations and government organizations through its two wholly owned national banks in Muscatine and Fairfield, Iowa.

Special note on forward-looking statements

This press release contains and future verbal and written statements by the company and its management may contain forward-looking statements regarding the company’s financial condition, results of operations, plans, goals, future performance and business. Investors are cautioned that all forward-looking statements involve risks and uncertainties and that many factors could cause actual results to differ materially from those expected or projected. Our ability to predict results or the actual effects of future plans or strategies is inherently uncertain. In addition, all statements in this document, including forward-looking statements, speak only as of the date they are made. The company undertakes no obligation to update statements in light of new information or future events. Factors that could cause actual results to differ materially from those set out in the forward-looking statements, or that could have a material impact on the company’s business and future prospects, include, but are not limited to: (1) the effects of the COVID 19 Pandemic, including its potential impact on the economic environment, the Company’s customers and its business operations, and changes in federal, state or local government laws, regulations or orders in connection with the pandemic; (2) A deterioration in credit quality or a pronounced and persistent decrease in the value of real estate or other collateral could lead to an increase in loan loss provisions and a decrease in net income. (3) the ability of our management 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 (including the effects of the LIBOR exit); (4) changes in economic conditions, competition or other factors that may affect our ability to acquire credit or affect the expected rate of growth of credits and deposits, the quality of the credit portfolio and pricing for credits and deposits; (5) fluctuations in the value of our securities; (6) state monetary and fiscal policy; (7) legal, regulatory and tax law changes; (8) the ability to attract and retain key managers and employees; (9) Adequate allowance for credit losses to offset actual losses on our credit portfolio; (10) our ability to adapt successfully to changes in technology; (11) Credit exposure from concentrations (by geographic area and industry) within our credit portfolio; (12) the effects of competition from multiple sources; (13) volatility, duration and matching risks of interest rate sensitive assets and liabilities as well as liquidity risk; (14) operational risks, including failure or fraud of the data processing system; (15) costs, effects and results of existing or future litigation; (16) changes in general economic or industrial conditions at the national level or in the communities in which we do business; and (17) changes in accounting policies and practices (including as a result of the future implementation of the current expected impairment standards for expected credit losses (CECL) that will change the entity’s estimate of credit losses).

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Dollar amounts in thousands, excluding share and per share data)

(unaudited 2020; audited 2019)

For the three

Months ended

December 31, 2020

For the three

Months ended

December 31, 2019

For the twelve

Months ended

December 31, 2020

For the twelve

Months ended

December 31, 2019

Net interest income

$

3.425

$

3.456

$

13,489

$

14,477

Provision for credit losses

1,260

115

2.105

1,155

Non-interest income

1,144

940

4,389

3.466

Non-interest-related costs

3.183

3.021

12,750

12.276

Income tax expense

42

286

696

1,036

Result after taxes

84

974

2.327

3.476

Earnings per ordinary share, basic and diluted

$

.08

$

.87

$

2.07

$

3.08

Average ordinary shares outstanding since the beginning of the year, basic and diluted

1,123,944

1,126,253

1,124,833

1,129,352

From

December 31, 2020

From

December 31, 2019

Gross credits

$

324,356

$

355,324

Total assets

511,522

470,535

Total deposits

445,952

405.869

Core capital

50.216

49.006

Return on average equity

4.6

%.

7.2

%.

Return on average wealth

.47

.75

Net interest margin (tax equivalent)

2.93

3.29

Allowance as a percentage of the total loan

1.88

1.69