Iowa First Bancshares Corp. (OTC Pink: IOFB) today reported financial results for both the fourth quarter and full year of 2015. Net income of $1,000,000 for the quarter ended December 31, 2015, compared to net income of $1,023,000 for the quarter ended December 31, 2014, a modest decrease of $23,000 or 2.3%. The decrease in fourth quarter net income year-over-year of $23,000 was primarily attributable to higher provision for loan losses which rose $100,000 and noninterest expense which grew $89,000. These higher expenses exceeded the increase in net interest income of $63,000, increase in noninterest income of $45,000, and reduction in income tax expense of $58,000.

Basic and diluted earnings per share were $.89 for the three months ended December 31, 2015, $.02 or 2.2% less than the same period in 2014.

The Company’s net income of $4,125,000 for the twelve months ended December 31, 2015, compared with record net income of $4,256,000 for the four quarters ended December 31, 2014, a modest decrease of $131,000 or 3.1%. The primary factors contributing to this earnings decrease included an increase of $556,000 (5.2%) in noninterest expense, a $130,000 (144.4%) increase in provision for loan losses, and a small $13,000 (0.4%) reduction in noninterest income. Largely offsetting the earnings reduction noted above was net interest income which increased $443,000 (3.2%) and $125,000 (5.5%) lower income tax expense.

Basic and diluted earnings per share were $3.66 for the twelve months ended December 31, 2015, a decrease of $.12 or 3.2% from the same period in 2014. The Company’s annualized return on average assets for 2015 and 2014 was .92% and .97%, respectively. The Company’s annualized return on average equity for the twelve months ended December 31, 2015 and December 31, 2014 was 9.4% and 10.5%, respectively.

The Company's assets at December 31, 2015 totaled $456,784,000, an increase of $17,013,000 (3.9%) from December 31, 2014. Gross loans outstanding increased $18,195,000 (5.1%) while total deposits increased $12,251,000 (3.3%) over the past year. The allowance for loan losses totaled $4,563,000 at December 31, 2015, or 1.22% of gross loans outstanding.

Capital increased during 2015, with year-end tier 1 capital of $44,595,000 representing 12.3% of risk-weighted assets, up from $41,696,000 and 12.1% at year-end 2014.

The board of directors declared a $.285 per common share cash dividend to be paid to shareholders of record January 4, 2016. Annualized, the dividends paid by the Company resulted in a yield of 3.3% on the December 31, 2014 common stock price.

In the normal course of business, the Banks are involved in various legal proceedings. The Banks also, from time to time, face disputes with customers and other counterparties, and in such cases, those disputes can pose both financial and reputational risk to the Company. The Company intends to vigorously pursue all available defenses related to legal matters, but will also consider other alternatives, including settlement, in situations where there is an opportunity to resolve such on terms that the Company considers to be favorable. Included in this determination is consideration of continued expense, reputational risk, as well as the distractions and inefficiencies inherent in defending such matters. Except as noted below, in the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the Company’s consolidated financial statements.

During the year ended December 31, 2013, representatives of a previous loan customer of the Company made certain allegations and threatened litigation against one of the subsidiary banks and certain officers thereof. During the year ended December 31, 2015, this party filed a suit regarding this matter. The petition makes various claims related to the previous lending relationship and requests a trial by jury, but it does not set out a specific amount of damage claimed. The suit is in its early stages; currently in discovery. Although the Company believes 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.

In the event a legal matter, such as the one discussed herein, presents loss contingencies that are both probable and estimable, accounting rules require the Company to establish an appropriate accrual. An event is considered probable if the future event is likely to occur. 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 matter discussed above a loss is neither probable nor estimable at this time. Consequently, no loss contingency has been established as of December 31, 2015 or 2014.

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, 2015

December 31, 2014

December 31, 2015

December 31, 2014

 
Net Interest Income $   3,632 $   3,569 $   14,329 $   13,886
Provision for Loan Losses 130 30 220 90
Noninterest Income 892 847 3,437 3,450
Noninterest Expense 2,904 2,815 11,282 10,726
Income Tax Expense 490 548 2,139 2,264
Net Income After Income Taxes 1,000 1,023 4,125 4,256
 
Net Income Per Common Share,
Basic and Diluted $ .89 $ .91 $ 3.66 $ 3.78
 

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

1,128,951 1,127,319 1,128,445 1,126,709
 
       

As of

        

As of

December 31, 2015

December 31, 2014

Gross Loans $   373,288 $   355,093
Total Assets 456,784 439,771
Total Deposits 387,833 375,582
Tier 1 Capital 44,595 41,696
 
Return on Average Equity 9.4 % 10.5 %
Return on Average Assets .92 .97
Net Interest Margin (tax equivalent) 3.49 3.45
Allowance as a Percent of Total Loans 1.22 1.30