UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON D.C. 20549

                                    FORM 10-Q



X         QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
          EXCHANGE ACT OF 1934.

          For the quarterly period ended June 30, 2003
                                         -------------

                              OR

_____     TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934.

          For the transition period from _________________ to __________________

          Commission file number 2-89283
                                 -------


                           IOWA FIRST BANCSHARES CORP.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


       STATE  OF  IOWA                                           42-1211285
--------------------------------------------------------------------------------
(State  or  other  jurisdiction                               (IRS Employer of
 incorporation or organization)                              Identification No.)

                             300 East Second Street
                             Muscatine, Iowa 52761
                    ----------------------------------------
                    (Address of principal executive offices)

                                  563-263-4221
                        -------------------------------
                        (Registrant's telephone number)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.      Yes [X]   No [ ]


Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

At June 30, 2003 there were 1,420,445  shares of the  registrant's  common stock
outstanding.

                                       1
<PAGE>


                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES

                               INDEX TO FORM 10-Q

                                                                        PAGE NO.

PART 1    Financial Information

          Item 1.   Financial Statements

                    Consolidated Condensed Balance Sheets,
                    June 30, 2003 and December 31, 2002                        1

                    Consolidated Condensed Statements of
                    Income, Three and Six Months Ended
                    June 30, 2003 and 2002                                     2

                    Consolidated Condensed Statements of
                    Cash Flows, Six Months Ended
                    June 30, 2003 and 2002                                     3

                    Notes to Consolidated Condensed
                    Financial Statements                                     4-5


         Item 2.    Management's Discussion and Analysis
                    of Financial Condition and Results of
                    Operations                                              6-16

         Item 4.    Controls and Procedures                                   17

PART II   Other Information

         Item 6.    Exhibits and Reports on Form 8-K                          17


Signatures                                                                    18


                                       2
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
<TABLE>
                                                         (Unaudited)
                                                           June 30,    December 31,
                                                             2003         2002
                                                         --------------------------
<S>                                                      <C>           <C>
               ASSETS
Cash and due from banks ................................   $ 13,653     $ 17,283

Interest-bearing deposits at financial institutions ....      6,641        1,791

Federal funds sold .....................................     47,035       30,600

Investment securities available for sale ...............     37,415       38,095

Loans, net of allowance for loan losses June 30,
  2003, $3,355; December 31, 2002, $3,304 ..............    271,383      273,922

Bank premises and equipment, net .......................      6,659        5,303

Accrued interest receivable ............................      2,180        2,672

Life insurance contracts ...............................      4,053        3,953

Restricted investment securities .......................      3,957        3,957

Other assets ...........................................      1,102        1,129
                                                           ---------------------
   TOTAL ASSETS ........................................   $394,078     $378,705
                                                           =====================

LIABILITIES AND STOCKHOLDERS' EQUITY
            LIABILITIES
Noninterest bearing deposits ...........................   $ 46,146     $ 45,293
Interest bearing deposits ..............................    245,231      225,129
                                                           ---------------------
   TOTAL DEPOSITS ......................................    291,377      270,422
Note payable ...........................................      3,300        3,300
Securities sold under agreements to repurchase .........      5,003        6,591
Federal Home Loan Bank advances ........................     59,752       64,609
Treasury tax and loan open note ........................        697          785
Company obligated mandatorily redeemable preferred
  securities of subsidiary trust .......................      4,000        4,000
Dividends payable ......................................        334          335
Other liabilities ......................................      1,724        1,633
                                                           ---------------------
   TOTAL LIABILITIES ...................................    366,187      351,675
                                                           ---------------------
Redeemable common stock held by employee stock
ownership plan with 401(k) provisions (KSOP) ...........      2,717        2,717
                                                           ---------------------

STOCKHOLDERS' EQUITY
Common stock ...........................................        200          200
Additional paid-in capital .............................      4,254        4,254
Retained earnings ......................................     35,087       34,195
Accumulated other comprehensive income .................      1,177        1,101
Less net cost of common shares acquired for the treasury    (12,827)     (12,720)
Less maximum cash obligation related to KSOP shares ....     (2,717)      (2,717)
                                                           ---------------------
   TOTAL STOCKHOLDERS' EQUITY ..........................     25,174       24,313
                                                           ---------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............   $394,078     $378,705
                                                           =====================
</TABLE>

See notes to Consolidated Condensed Financial Statements.

                                       3
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                      (In Thousands, Except Per Share Data)
                                   (Unaudited)
<TABLE>
                                                Three Months Ended   Six Months Ended
                                                     June  30,           June 30,
                                                --------------------------------------
                                                   2003     2002      2003      2002
                                                --------------------------------------
<S>                                             <C>        <C>       <C>       <C>
INTEREST AND DIVIDEND INCOME:
   Loans, including fees:
     Taxable .................................   $ 4,435   $ 4,950   $ 8,917   $ 9,827
     Nontaxable ..............................        25        24        59        43
   Investment securities available for sale:
     Taxable .................................       247       294       503       615
     Nontaxable ..............................       183       207       376       418
   Federal funds sold ........................       141       128       258       277
   Restricted investment securities ..........        30        31        61        57
   Other .....................................        29        20        51        44
                                                 -------------------------------------
      Total interest income ..................     5,090     5,654    10,225    11,281
                                                 -------------------------------------

INTEREST EXPENSE:
   Deposits ..................................     1,229     1,495     2,486     3,039
   Note payable ..............................        39        75       100       183
   Other borrowed funds ......................       880     1,043     1,813     2,121
   Company obligated mandatorily redeemable
      preferred securities ...................       103       103       206       206
                                                 -------------------------------------
     Total interest expense ..................     2,251     2,716     4,605     5,549
                                                 -------------------------------------

   Net interest income .......................     2,839     2,938     5,620     5,732
Provision for loan losses ....................        90       167       460       235
                                                 -------------------------------------
   Net interest income after provision for
     loan losses .............................     2,749     2,771     5,160     5,497
                                                 -------------------------------------
Other income:
   Trust department ..........................        95       103       190       207
   Service fees ..............................       415       375       763       706
   Investment securities gains, net ..........        12         8        22        80
   Other .....................................       243       133       437       282
                                                 -------------------------------------
     Total other income ......................       765       619     1,412     1,275
                                                 -------------------------------------
Operating expenses:
   Salaries and employee benefits ............     1,218     1,193     2,484     2,418
   Occupancy expenses, net ...................       164       167       342       331
   Equipment expenses ........................       179       177       332       363
   Office supplies, printing, and postage ....        85        90       192       181
   Computer processing .......................       135       116       265       237
   Advertising and business promotion ........        49        41        79        81
   Other operating expenses ..................       350       348       686       674
                                                 -------------------------------------
    Total operating expenses .................     2,180     2,132     4,380     4,285
                                                 -------------------------------------
   Income before income taxes ................   $ 1,334   $ 1,258   $ 2,192   $ 2,487
Applicable income taxes ......................       390       389       631       763
                                                 -------------------------------------
Net income ...................................   $   944   $   869   $ 1,561   $ 1,724
                                                 =====================================

Net income per common share, basic and diluted   $  0.67   $  0.60   $  1.10   $  1.19
                                                 =====================================

Dividends declared per common share ..........   $  0.24   $  0.23   $  0.47   $  0.46
                                                 =====================================

Comprehensive income .........................   $ 1,015   $ 1,146   $ 1,637   $ 1,865
                                                 ====================================
</TABLE>
See notes to Consolidated Condensed Financial Statements.

                                       4
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 For The Six Months Ended June 30, 2003 and 2002
                                 (In Thousands)
                                   (Unaudited)

<TABLE>
                                                                            2003       2002
                                                                         --------------------
<S>                                                                      <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ...........................................................   $  1,561    $  1,724
Adjustments to reconcile net income to net cash
  provided  by  operating activities:
   Proceeds from loans sold ..........................................      9,800       3,970
   Loans underwritten ................................................    (10,268)     (3,927)
   Gains on  loans sold ..............................................       (145)        (43)
   Provision for loan losses .........................................        460         235
   Investment securities gains, net ..................................        (22)        (80)
   Depreciation ......................................................        259         311
   Amortization of premiums and accretion of discounts
     on investment securities available for sale, net ................         95          14
   Net decrease in accrued interest receivable .......................        492         403
   Net (increase) decrease in other assets ...........................         27        (347)
   Net increase  in other liabilities ................................         44          77
                                                                          --------------------
Net cash provided by operating activities ............................    $ 2,303    $  2,337
                                                                          --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net increase in interest-bearing deposits at financial institut$ons     (4,850)   $   (528)
   Net (increase) decrease in federal funds sold .....................    (16,435)      5,415
   Proceeds from sales, maturities, calls and paydowns of available
   for sale securities ...............................................      4,767      14,534
   Purchases of available for sale securities ........................     (4,037)     (7,990)
   Net (increase) decrease in loans ..................................      2,692      (5,633)
   Purchases of bank premises and equipment ..........................     (1,615)       (159)
   Purchases of life insurance contracts .............................         --        (405)
   Increase in cash value of life insurance contracts ................       (100)        (88)
   Purchases of restricted investment securities .....................         --         (43)
                                                                         --------------------
   Net cash provided by (used in) investing activities ...............   $(19,578)   $  5,103
                                                                         --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in noninterest bearing deposits ......................   $    853    $     20
   Net increase in interest bearing deposits .........................     20,102          31
   Net (decrease) in securities sold under
     agreements to repurchase ........................................     (1,588)       (155)
   Repayment of note payable .........................................     (3,324)     (2,119)
   Proceeds from note payable ........................................      3,324          --
   Net increase (decrease) in treasury tax and loan open note ........        (88)        295
   Advances from Federal Home Loan Bank ..............................      9,550       1,000
   Payments of advances from Federal Home Loan Bank ..................    (14,407)     (5,649)
   Cash dividends paid ...............................................       (670)       (663)
   Purchases of common stock for the treasury ........................       (107)       (430)
   Proceeds from issuance of common stock ............................         --         105
                                                                         --------------------
   Net cash provided by (used in)financing activities ................   $ 13,645    $ (7,565)
                                                                         --------------------

   Net (decrease) in cash and due from banks .........................     (3,630)       (125)

Cash and due from banks:
   Beginning .........................................................   $ 17,283    $ 14,661
                                                                         --------------------
   Ending ............................................................   $ 13,653    $ 14,536
                                                                         ====================

Supplemental Disclosures of Cash Flow Information, cash payments for:
      Interest .......................................................   $  4,676    $  5,669
      Income taxes ...................................................        697         721
Supplemental Schedule of Noncash Investing and Financing Activities:
  Change in accumulated other comprehensive income, unrealized
  gains on investment securities available for sale, net .............         76         141
</TABLE>
See notes to Consolidated Condensed Financial Statements.

                                       5
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



Note 1.  Nature of Business and Significant Accounting Policies

Nature of business:

Iowa  First   Bancshares  Corp.  (the  "Company")  is  a  bank  holding  company
headquartered in Muscatine,  Iowa. The Company owns the outstanding stock of two
national banks, First National Bank of Muscatine  (Muscatine) and First National
Bank in Fairfield  (Fairfield).  First National Bank of Muscatine has a total of
five  locations in  Muscatine,  Iowa.  First  National Bank in Fairfield has two
locations in  Fairfield,  Iowa.  Each bank is engaged in the general  commercial
banking   business  and  provides  full  service   banking  to  individuals  and
businesses, including checking, savings, money market and time deposit accounts,
commercial loans,  consumer loans,  real estate loans, safe deposit  facilities,
transmitting of funds,  trust services,  and such other banking  services as are
usual and customary for commercial  banks.  Some of these other services include
sweep  accounts,  lock-box  deposits,  debit  cards,  credit-related  insurance,
internet  banking,  automated teller machines,  telephone banking and investment
services  through  a  third-party   arrangement.   The  Company  also  owns  the
outstanding  stock of Iowa First Capital Trust I, which was capitalized in March
2001  for the  purpose  of  issuing  Company  Obligated  Mandatorily  Redeemable
Preferred Securities.

Basis of Presentation:

The  consolidated  financial  statements of the Company and its subsidiaries are
unaudited  and should be read in  conjunction  with the  consolidated  financial
statements  contained in the 2002 Annual Report on Form 10-K.  The  consolidated
financial statements have been prepared in accordance with accounting principles
generally  accepted in the United  States of America and conform to  predominant
practices  within the  banking  industry.  Management  of the Company has made a
number of  estimates  and  assumptions  relating to the  reporting of assets and
liabilities  and the disclosure of contingent  assets and liabilities to prepare
the  consolidated  financial  statements.  In the  opinion  of  management,  all
adjustments  and  normal  recurring  accruals  considered  necessary  for a fair
presentation  of the results of  operations  for the interim  periods  presented
herein have been included.  Operating results for the three and six months ended
June 30, 2003 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2003.

Reclassifications:

Certain amounts in the prior year financial  statements have been  reclassified,
with no effect on net income or stockholders' equity, to conform to current year
presentations.

Note 2.  Capital Stock and Earnings Per Share

Common shares and preferred stock  authorized total 6,000,000 shares and 500,000
shares,  respectively.  Basic  earnings  per share is arrived at by dividing net
income by the weighted average number of shares of common stock  outstanding for
the respective period.  Diluted earnings per share is arrived at by dividing net
income  by the  weighted  average  number  of  common  stock  and  common  stock
equivalents  outstanding for the respective period. The average number of shares
of common  stock  outstanding  for the three and six months  ended June 30, 2003
were  1,418,983 and  1,423,214,  respectively.  The average  number of shares of
common stock  outstanding  for the three and six months ended June 30, 2002 were
1,440,800 and 1,448,637, respectively. There were no common stock equivalents in
2003 or 2002.

Note 3.   Commitments and Contingencies

The Banks are parties to financial instruments with  off-balance-sheet risk made
in the normal course of business to meet the financing needs of their customers.
These  financial  instruments  include  commitments to extend credit and standby
letters of credit.  These instruments  involve, to varying degrees,  elements of
credit and interest rate risk in excess of the amount  recognized in the balance
sheets.

                                       6
<PAGE>

The Banks' exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters  of  credit  is  represented  by  the   contractual   amounts  of  those
instruments.  The Banks use the same credit  policies in making  commitments and
conditional obligations as they do for on-balance-sheet instruments.

                                                        June 30,    December 31,
                                                          2003          2002
                                                      --------------------------
Financial instruments whose contract
  amounts represent credit risk:
  Commitments to extend credit ...................    $35,667,000   $44,521,000
  Standby letters of credit ......................      1,677,000     2,539,000

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon  and some of the  commitments  will be sold to other
financial  intermediaries  if drawn upon,  the total  commitment  amounts do not
necessarily  represent  future  cash  requirements.   The  Banks  evaluate  each
customer's creditworthiness on a case-by-case basis.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements  and,
generally,  have terms of one year, or less. The credit risk involved in issuing
letters of credit is  essentially  the same as that  involved in extending  loan
facilities to customers.  The Banks hold collateral,  which may include accounts
receivable,  inventory,  property,  equipment, and income-producing  properties,
supporting those commitments if deemed necessary. In the event the customer does
not perform in accordance  with the terms of the agreement with the third party,
the Banks would be required to fund the commitment. The maximum potential amount
of future  payments  the Banks could be required to make is  represented  by the
contractual  amount shown in the summary above. If the commitment is funded, the
Banks would be entitled to seek recovery from the customer. At June 30, 2003 and
December 31, 2002 no amounts have been  recorded as  liabilities  for the Banks'
potential obligations under these guarantees.

The Company has also executed  contracts  for the sale of mortgage  loans in the
secondary  market in the amount of  $1,003,000  and $390,000 as of June 30, 2003
and December 31, 2002, respectively.  These amounts are included in loans at the
respective balance sheet dates.

Results of Operations:

Quarter ended June 30, 2003 compared with quarter ended June 30, 2002:

The Company recorded net income of $944,000 for the quarter ended June 30, 2003,
compared  with net income of $869,000 for the quarter  ended June 30,  2002,  an
increase of $75,000 or 8.6%.  This increase in net income,  despite a decline in
net interest  income,  resulted from lower  provision for loan losses during the
second   quarter  of  2003  than   experienced   the  second  quarter  of  2002.
Additionally,  noninterest income was substantially  higher in the quarter ended
June 30, 2003 than the quarter ended June 30, 2002.

Basic and diluted  earnings  per share were $.67 for the three months ended June
30,  2003,  $.07 or 11.7%  greater than the same period in 2002.  The  Company's
annualized  return on average  assets  for the  second  quarter of 2003 was .95%
compared to .92%  during the second  quarter of the prior  year.  The  Company's
annualized return on average equity for the three months ended June 30, 2003 and
June 30, 2002 was 15.2% and 14.7%, respectively.

                                       7
<PAGE>

The  distribution of average assets,  liabilities and  stockholders'  equity and
intrest rates, as well as interest  differential  was as follows (dollar amounts
in  thousands  and income and rates on a fully  taxable  equivalent  basis using
staturory tax rates in effect for the year presented):
<TABLE>
                             Three Months Ended       Three Months Ended
                               June 30, 2003             June 30, 2002
                          ------------------------  ------------------------
                                           Average                   Average
                          Balance  Interest  Rate   Balance  Interest  Rate
                          --------------------------------------------------
<S>                       <C>       <C>     <C>     <C>      <C>     <C>
Assets
  Taxable loans, net .... $270,395  $4,435   6.56%  $276,891  $4,950  7.15%
  Taxable investment
    securities available
    for sale ............   21,903     247   4.51%    21,182     294  5.55%
  Nontaxable investment
    securities and loans    18,131     315   6.95%    19,319     350  7.25%
  Federal funds sold ....   51,271     141   1.10%    30,658     128  1.67%
  Restricted investment
    securities ..........    3,957      30   3.03%     3,890      31  3.19%
  Interest-bearing
    deposits at financial
    institutions ........    5,166      29   2.25%     2,188      20  3.66%
                          ----------------          ----------------
        Total interest-
        earning assets ..  370,823   5,197   5.61%   354,128   5,773  6.52%
                                    ------                    ------
  Cash and due from banks   13,845                    13,449
  Bank premises and
    equipment, net ......    6,498                     4,913
  Life insurance
    contracts ...........    4,031                     3,518
  Other assets ..........    3,498                     3,391
                          --------                  --------
        Total ........... $398,695                  $379,399
                          ========                  ========
Liabilities
  Deposits:
    Interest-bearing
      demand.. .......... $134,976  $  274   0.81%  $117,229  $  402  1.37%
    Time ................  114,833     955   3.34%   112,671   1,093  3.89%
  Note payable ..........    3,300      39   4.73%     4,050      75  7.41%
  Other borrowings ......   69,102     880   5.11%    73,237   1,043  5.71%
  Company obligated
    mandatorily redeemable
    preferred securities     4,000     103  10.30%     4,000     103 10.30%
                          ----------------          ----------------
        Total interest-
          bearing
          liabilities....   326,211   2,251  2.77%   311,187   2,716  3.49%
  Noninterest-bearing
    deposits   ..........    42,811                   40,235
  Other liabilities .....     2,020                    1,958
                           --------                  -------
        Total
        liabilities ....    371,042                  353,380
  Redeemable common
    stock held by
    KSOP ...............      2,717                    2,242
Stockholders' Equity ...     24,936                   23,777
                           --------                 --------
        Total ..........   $398,695                 $379,399
                           ========                 ========
Net interest earnings ..             $2,946                    $3,057
                                     ======                    ======
Net Annualized Yield (net
  interest earnings
  divided by total
  interest-earning
  assets) .............                      3.18%                     3.45%
                                             =====                     =====
</TABLE>

Nonaccruing  loans  are  included  in the  average  balance.  Loan  fees are not
material.

                                       8
<PAGE>

The net interest margin  continues to be pressured as evidenced by a decrease to
3.18%  during the second  quarter of 2003  compared  to 3.45%  during the second
quarter of 2002.  The return on average  interest-earning  assets  decreased  91
basis points (from 6.52% in 2002 to 5.61% in 2003) and interest  paid on average
interest-bearing  liabilities  decreased  72 basis points (from 3.49% in 2002 to
2.77% in 2003).

The prime  lending  rate  began the year 2002 at 4.75% and ended  2002  lower at
4.25%; it subsequently dropped to 4.00% as of late June 2003. This is the lowest
prime lending rate in several  decades.  During this period of historically  low
interest rates, increased emphasis has been given to incorporating interest rate
floors on  selected  commercial  and  agricultural  loans.  During the first two
quarters of 2003 most, if not all, of such loans subject to interest rate floors
were  actually  paying the floor rate.  This  resulted in the rates  received on
taxable loans during the second quarter of 2003,  compared to the second quarter
of  2002,  falling  somewhat  less  than  the  rates  paid  on  interest-bearing
liabilities  (59 basis points versus 72 basis points).  Eventually,  when market
interest rates again rise, rates paid on interest-bearing liabilities may, for a
time,  increase  more than rates  received  on taxable  loans.  This  outcome is
possible due to the loans which are subject to floor rate pricing lagging market
interest rate increases until such time as the floor rate has been exceeded. The
extent of this impact  will  depend on the amount and timing of eventual  market
interest rate hikes.

Rates  received  on  taxable  investment  securities  available  for  sale  have
decreased during the second quarter of 2003 versus the second quarter of 2002 at
a faster pace than the rates paid on interest-bearing  liabilities (decreases of
104 basis  points and 72 basis  points,  respectively).  This is largely  due to
maturities  and  early  calls of  taxable  investment  securities  coupled  with
reinvestment at appreciably lower interest rates. This portfolio,  however, with
an average  maturity of less than four years, had an interest rate return during
the quarter similar to that of thirty year treasury securities.

Rates  received  during the quarter  ended June 30, 2003 compared to the quarter
ended June 30, 2002 on nontaxable  investment  securities available for sale and
loans  decreased  at a much slower pace than the rates paid on  interest-bearing
liabilities  (decreases of 30 basis points and 72 basis  points,  respectively).
This was due largely to a longer  average  duration  for  nontaxable  investment
securities   available  for  sale  and  loans  than  the  average  duration  for
interest-bearing  liabilities.  Most  of the  nontaxable  investment  securities
available for sale were  purchased  when market  interest rates were higher than
rates  currently  available.  In the current  interest  rate  environment,  when
taxable and nontaxable  investment  securities  mature or are sold,  called,  or
otherwise paid down, the reinvestment rate available is nearly always lower than
the yield of the liquidating security.

The  usage of  wholesale  funding  sources  (primarily  Federal  Home  Loan Bank
advances), while mitigating intermediate and long-term interest rate risk, tends
to increase overall interest  expense.  The Company's average rate paid for such
Federal Home Loan Bank  advances  was reduced by 60 basis points when  comparing
the second quarter of 2003 with the second quarter of 2002.

Intense  competition  for all  types of loans  and  deposits  tends to limit the
Company's  ability  to  control  pricing  and  other  terms  when  dealing  with
customers.

Provisions  for loan losses were  $90,000  for the three  months  ended June 30,
2003.  This  was  $77,000  less  than  the  second  quarter  of  2002.  Net loan
charge-offs for the quarter ended June 30, 2003 totaled $54,000  compared to net
charge-offs of $74,000 for the same quarter in 2002.

Loan quality has been negatively impacted by a variety of factors including, but
not necessarily  limited to, a generally  sluggish  economy.  Specifically,  the
quality of the agricultural loan portfolio at the Company's Fairfield subsidiary
bank has declined,  resulting in larger than normal first quarter 2003 provision
for loan losses.

Various  strategies are being  implemented by management in an effort to improve
the  loan  quality  of the  portfolio  in  question.  These  strategies  include
obtaining  government  guarantees  for  portions  of certain  identified  loans,
increasing  monitoring  efforts over the loan  portfolio in general and past due
loans in particular, as well as a renewed focus on taking appropriate corrective
actions with borrowers who are not  fulfilling  their  contractual  obligations.
While cautiously  optimistic as to the likelihood of positive results  emanating
from the  strategies  being  employed,  management  realizes that  significantly
improving loan quality is not normally a quick process.

                                       9
<PAGE>

The allowance  for possible  loan losses is  maintained at the level  considered
adequate  by  management  of the Banks to  provide  for  probable  losses in the
existing loan  portfolio.  The  allowance is increased by provisions  charged to
operating expense and reduced by net charge-offs. In determining the adequacy of
the  allowance  balance  the  Banks  make  continuous  evaluations  of the  loan
portfolio and related  off-balance sheet commitments,  consider current economic
conditions,  the  composition  of  the  loan  portfolio,  historical  loan  loss
experience, review of specific problem loans, the estimated net realizable value
or the fair value of the underlying collateral, and other factors.

Nonaccrual loans totaled $2,182,000 at June 30, 2003, an increase of $768,000 or
54.3% from June 30, 2002. Other real estate owned totaled  $391,000,  a decrease
of $144,000  or 26.9% from a year ago.  Loans past due 90 days or more and still
accruing totaled $592,000,  which was $447,000 or 308% more than a year earlier.
The allowance for possible loan losses of $3,355,000  represented  1.2% of gross
loans and 106% of total  nonaccrual  loans,  other real estate owned,  and loans
past due 90 days or more and still accruing.

Other income results from the charges and fees collected by the Company from its
customers  for  various  services  performed,  gross trust  department  revenue,
miscellaneous  other  income and gains (or losses)  from the sale of  investment
securities in the available for sale category. Total other income for the second
quarter of 2003, without gains on investment securities, was $753,000;  $142,000
or 23.2% more than the second quarter of 2002.

Operating  expenses include all the costs incurred to operate the Company except
for interest expense,  the loan loss provision and income taxes. For the quarter
ended June 30, 2003, salaries and employee benefits expense increased $25,000 or
2.1% due  principally  to normal cost of living and merit raises,  training time
for new employees and rising health care cost.  Occupancy and equipment expenses
decreased $1,000 or 0.3%. Office supplies and related expenses  decreased $5,000
or 5.6%.  Computer  processing  increased  $19,000 or 16.4% as additional  costs
associated with enhanced  communications,  marketing  applications  and disaster
recovery contracts were recognized.  Finally, other operating expenses increased
only $2,000 or 0.6% due largely to management's focus on controlling noninterest
operating expenses.  Total operating expenses increased a modest $48,000 or 2.3%
during the second quarter of 2003 versus the same quarter last year.

Income tax expense for the quarter  ended June 30, 2003 of $390,000  represented
29.2% of income  before  taxes.  The  comparable  quarter last year was 30.9% of
income before tax.

The efficiency ratio,  defined as noninterest  expense,  excluding the provision
for loan losses,  as a percent of net interest income plus  noninterest  income,
was  60.5%  and  59.9%  for the  three  months  ended  June 30,  2003 and  2002,
respectively.  The primary  reasons for this change in the efficiency  ratio are
discussed above.

Results of Operations:

Six months ended June 30, 2003 compared with six months ended June 30, 2002:

The Company  recorded net income of $1,561,000 for the six months ended June 30,
2003,  compared  with net income of  $1,724,000  for the same period in 2002,  a
decrease  of  $163,000  or 9.5%.  This  decrease  in net  income  was  primarily
attributable to higher  provision for loan losses during the first six months of
2003 than experienced in 2002.  Additionally,  net interest income for the first
two quarters of 2003 was lower than the comparable period in 2002.

Basic and diluted  earnings  per share were $1.10 for the six months  ended June
30,  2003,  $.09 or 7.6%  less  than the same  period  in  2002.  The  Company's
annualized  return on average assets for the first two quarters of 2003 was .80%
compared to .91%  during the same  quarters  of the prior  year.  The  Company's
annualized  return on average  equity for the six months ended June 30, 2003 and
June 30, 2002 was 12.7% and 14.8%, respectively.
                                       10
<PAGE>

The  distribution of average assets,  liabilities and  stockholders'  equity and
intrest rates, as well as interest  differential  was as follows (dollar amounts
in  thousands  and income and rates on a fully  taxable  equivalent  basis using
staturory tax rates in effect for the year presented):
<TABLE>
                              Six Months Ended         Six Months Ended
                               June 30, 2003             June 30, 2002
                          ------------------------  ------------------------
                                           Average                   Average
                          Balance  Interest  Rate   Balance  Interest  Rate
                          --------------------------------------------------
<S>                       <C>       <C>     <C>     <C>      <C>     <C>
Assets
  Taxable loans, net .... $269,522  $8,917   6.62%  $273,617  $9,827  7.18%
  Taxable investment
    securities available
    for sale ............   21,616     503   4.65%    21,777     615  5.65%
  Nontaxable investment
    securities and loans    18,750     659   7.03%    19,379     698  7.20%
  Federal funds sold ....   47,207     258   1.09%    34,445     277  1.61%
  Restricted investment
    securities ..........    3,957      61   3.08%     3,879      57  2.94%
  Interest-bearing
    deposits at financial
    institutions ........    4,490      51   2.27%     2,662      44  3.31%
                          ----------------          ----------------
        Total interest-
        earning assets ..  365,542  10,449   5.72%   355,759  11,518  6.48%
                                    ------                    ------
  Cash and due from banks   14,027                    13,143
  Bank premises and
    equipment, net ......    6,129                     4,958
  Life insurance
    contracts ...........    4,005                     3,453
  Other assets ..........    3,744                     3,459
                          --------                  --------
        Total ........... $393,447                  $380,772
                          ========                  ========
Liabilities
  Deposits:
    Interest-bearing
      demand............. $126,382  $  542   0.86%  $115,239  $  805  1.40%
    Time ................  115,666   1,944   3.39%   113,893   2,235  3.96%
  Note payable ..........    3,300     100   6.06%     4,950     183  7.39%
  Other borrowings ......   70,825   1,813   5.16%    74,930   2,120  5.71%
  Company obligated
    mandatorily redeemable
    preferred securities     4,000     206  10.30%     4,000     206 10.30%
                          ----------------          ----------------
        Total interest-
          bearing
          liabilities...   320,173   4,605   2.90%   313,012   5,549  3.58%
  Noninterest-bearing
    deposits ...........    43,720                    39,988
  Other liabilities ....     2,021                     2,034
                          --------                  --------
        Total
        liabilities ....   365,914                   355,034
  Redeemable common
    stock held by
    KSOP ...............     2,717                     2,242
Stockholders' Equity ...    24,816                    23,496
                          --------                  --------
        Total ..........  $393,447                  $380,772
                          ========                  ========
Net interest earnings ..            $5,844                    $5,969
                                    ======                    ======
Net Annualized Yield (net
  interest earnings
  divided by total
  interest-earning
  assets) ..............                     3.20%                     3.36%
                                             =====                     =====
</TABLE>

                                       11
<PAGE>

The net interest  margin  declined to 3.20% from 3.36% for the six month periods
ended  June 30,  2003 and June 30,  2002,  respectively.  The  return on average
interest-earning  assets  decreased 76 basis points (from 6.48% in 2002 to 5.72%
in 2003) and interest paid on average interest-bearing  liabilities decreased 65
basis points (from 3.55% in 2002 to 2.90% in 2003).

The rates  received  on  taxable  loans  during  the  first six  months of 2003,
compared to the first six months of 2002,  declined somewhat less than the rates
paid on  interest-bearing  liabilities (56 basis points versus 65 basis points).
Eventually,   when   market   interest   rates   again   rise,   rates  paid  on
interest-bearing  liabilities may, for a time, increase more than rates received
on taxable loans. This outcome is possible due to the loans which are subject to
floor rate pricing lagging market interest rate increases until such time as the
floor rate has been  exceeded.  The  extent of this  impact  will  depend on the
amount and timing of eventual market interest rate hikes.

Rates  received  on  taxable  investment  securities  available  for  sale  have
decreased during the first two quarters of 2003 versus the same quarters in 2002
at a faster pace than the rates paid on interest-bearing  liabilities (decreases
of 100 basis points and 65 basis points,  respectively).  This is largely due to
maturities  and  early  calls of  taxable  investment  securities  coupled  with
reinvestment at appreciably lower interest rates.

Rates  received  during the quarter  ended June 30, 2003 compared to the quarter
ended June 30, 2002 on nontaxable  investment  securities available for sale and
loans  decreased  at a much slower pace than the rates paid on  interest-bearing
liabilities  (decreases of 17 basis points and 65 basis  points,  respectively).
This was due largely to a longer  average  duration  for  nontaxable  investment
securities   available  for  sale  and  loans  than  the  average  duration  for
interest-bearing  liabilities.  Most  of the  nontaxable  investment  securities
available for sale were  purchased  when market  interest rates were higher than
rates  currently  available.  In the current  interest  rate  environment,  when
taxable and nontaxable  investment  securities  mature or are sold,  called,  or
otherwise paid down, the reinvestment rate available is nearly always lower than
the yield of the liquidating security.

The  usage of  wholesale  funding  sources  (primarily  Federal  Home  Loan Bank
advances), while mitigating intermediate and long-term interest rate risk, tends
to increase overall interest  expense.  The Company's average rate paid for such
Federal Home Loan Bank  advances  was reduced by 50 basis points when  comparing
the first two quarters of 2003 with 2002.

Intense  competition  for all  types of loans  and  deposits  tends to limit the
Company's  ability  to  control  pricing  and  other  terms  when  dealing  with
customers.

Provisions for loan losses were $460,000 for the six months ended June 30, 2003.
This was $225,000  more than the  provision for loan losses during the first six
months of 2002.  Net loan  charge-offs  for the six month  period ended June 30,
2003 totaled $409,000  compared to net charge-offs of $103,000 for the same time
frame in 2002.

As previously discussed,  various strategies are being implemented by management
in an effort  to  improve  loan  quality.  These  strategies  include  obtaining
government  guarantees  for  portions of certain  identified  loans,  increasing
monitoring  efforts  over the loan  portfolio  in general  and past due loans in
particular,  as well as a renewed focus on taking appropriate corrective actions
with  borrowers who are not  fulfilling  their  contractual  obligations.  While
cautiously  optimistic as to the likelihood of positive  results  emanating from
the strategies being employed,  management realizes that significantly improving
loan quality is not normally a quick process.

Other income results from the charges and fees collected by the Company from its
customers  for  various  services  performed,  gross trust  department  revenue,
miscellaneous  other  income and gains (or losses)  from the sale of  investment
securities in the available for sale category.  Total other income for the first
six months of 2003,  without gains on  investment  securities,  was  $1,390,000;
$195,000 or 16.3% more than the same period in 2002.

                                       12
<PAGE>

Operating  expenses include all the costs incurred to operate the Company except
for interest  expense,  the loan loss  provision and income  taxes.  For the two
quarters  ended June 30, 2003 compared to the two quarters  ended June 30, 2002,
salaries and employee benefits expense increased $66,000 or 2.7% due principally
to normal cost of living and merit  raises,  training time for new employees and
rising health care cost.  Occupancy and equipment  expenses decreased $20,000 or
2.9%.  Office  supplies  and  related  expenses  increased  $11,000  or 6.1% and
computer  processing  increased  $28,000  or  11.8%.  Finally,  other  operating
expenses  increased  only $12,000 or 1.8% due largely to  management's  focus on
controlling  noninterest operating expenses.  Total operating expenses increased
$95,000 or 2.2% during the first two quarters of 2003 versus the same time frame
last year.

Income tax  expense  for the six  months  ended June 30,  2003 of  $631,000  was
$132,000  or 17.3%  less  than the  prior  year.  This  decrease  was  primarily
attributable  to  decreased  net  income  generated  in 2003  than  2002,  and a
reduction in the effective tax rate for 2003 of 28.8% versus 30.7% in 2002.

The efficiency ratio,  defined as noninterest  expense,  excluding the provision
for loan losses,  as a percent of net interest income plus  noninterest  income,
was  62.3%  and  61.2%  for the  six  months  ended  June  30,  2003  and  2002,
respectively.  The primary  reasons for this change in the efficiency  ratio are
discussed above.

Discussion and Analysis of Financial Condition

The  Company's  assets at June 30,  2003  totaled  $394,078,000,  an increase of
$15,373,000 or 4.1% from December 31, 2002. As of June 30, 2003, the Company had
$47,035,000  of federal funds sold compared to $30,600,000 at December 31, 2002.
Additionally,  interest-bearing  deposits at financial  institutions  (primarily
fully FDIC insured  certificates  of deposit with  original  maturities of three
years  or  less  and   interest-bearing   demand  accounts  at  various  banking
institutions)  totaled  $6,641,000  versus $1,791,000 at December 31, 2002. This
increase  was  primarily   the  result  of  higher  yields   available  on  such
certificates of deposit than could be obtained in the federal funds and treasury
securities markets.  Federal funds sold and other liquid assets have been higher
the past several quarters than the Company would  historically  consider normal.
These  liquid  assets may be used to fund future loan  growth,  deposit or other
liability outflows,  purchases of investment  securities available for sale when
interest   rates  again  rise,  or  various  other  purposes  as  identified  by
management.

Total available for sale securities  decreased $680,000 or 1.8% during the first
six months of 2003 to total  $37,415,000 at June 30, 2003.  The Banks  emphasize
purchase of securities  with maturities of five years and less as such purchases
typically  offer  reasonable  yields with limited credit risk as well as limited
interest rate risk. Additionally, selected securities with longer maturities are
owned  in  order  to  enhance  overall  portfolio  yield  without  significantly
increasing risk. In the low interest rate environment which continued during the
first six months of 2003,  the banks  limited  their  purchases of securities to
approximately the total of securities that were sold,  matured,  called, or paid
down.  Furthermore,  most of the  securities  that were purchased had relatively
short  maturities or likely early call dates.  Securities  sold thus far in 2003
totaled $516,000 and resulted in net gains recognized of $22,000.

Net loans  totaled  $271,383,000  at June 30, 2003, a decrease of  $2,539,000 or
0.9% from December 31, 2002. Competition for high-quality loans remains intense,
particularly in the small consumer and residential  real estate loan categories.
Refinancing of home loans, fueled by historically low interest rates,  continues
at a rapid pace. The Company sells many of these loans in the secondary  market.
However,  the  loans  which  are sold,  as well as the  loans  remaining  in the
Company's  portfolio  but  refinance at lower rates,  combine to put pressure on
loan yields and the volume of home loans on the balance sheet.

Total deposits at June 30, 2003, were  $291,377,000,  an increase of $20,955,000
or 7.8%  from  the  balance  at  December  31,  2002.  Certificates  of  deposit
represented on average for the six months ended June 30, 2003, approximately 41%
of total deposits. Interest-bearing demand deposits, comprised of savings, money
market and NOW accounts,  represented another 44% of average deposits. The final
15% of average deposits were in  noninterest-bearing  accounts.  Securities sold
under agreements to repurchase decreased $1,588,000 to $5,003,000,  and advances
borrowed from the Federal Home Loan Bank  declined by  $4,857,000  from year-end
2002, totaling $59,752,000 at quarter end.

The note payable  balance of $3,300,000  at June 30, 2003,  was identical to the
December 31, 2002 balance. This note was refinanced during the second quarter of
2003.  The new variable rate  revolving  five-year  term note is priced at Prime
less one  percent,  with a floor of 3.25% and a ceiling  of 5.25%,  considerably
lower than the prior fixed rate of over 7.35%.

                                       13
<PAGE>


Interest Rate Sensitivity

The Company  manages its balance  sheet to minimize the impact of interest  rate
movements on its earnings.  The term "rate sensitive" refers to those assets and
liabilities  which are  "sensitive" to  fluctuations  in rates and yields.  When
interest  rates move,  earnings may be affected in many ways.  Interest rates on
assets and liabilities  may change at different  times or by different  amounts.
Maintaining a proper  balance  between rate  sensitive  earning  assets and rate
sensitive   liabilities  is  the  principal  function  of  asset  and  liability
management of a banking organization.

A positive  repricing gap for a given period exists when total  interest-earning
assets exceed total interest-bearing  liabilities and a negative gap exists when
total  interest-bearing  liabilities are in excess of  interest-earning  assets.
Generally a positive  repricing gap will result in increased net interest income
in a rising rate environment and decreased net interest income in a falling rate
environment.  A negative  repricing gap tends to produce  increased net interest
income in a falling rate  environment  and  decreased  net interest  income in a
rising rate environment.  At June 30, 2003, rate sensitive  liabilities exceeded
rate sensitive assets within a one year maturity range and, thus, the Company is
theoretically  positioned to benefit from a decline in interest rates within the
next year.

The Company's  repricing gap position is useful for measuring  general  relative
risk  levels.  However,  even with  perfectly  matched  repricing  of assets and
liabilities,  interest rate risk cannot be avoided entirely.  Interest rate risk
remains in the form of prepayment risk of assets and liabilities, timing lags in
adjusting  certain assets and  liabilities  that have varying  sensitivities  to
market interest rates, and basis risk. Basis risk refers to the possibility that
the repricing  behavior of variable-rate  assets could differ from the repricing
characteristics  of  liabilities  which  reprice in the same time  period.  Even
though  these  assets are  match-funded,  the spread  between  asset  yields and
funding costs could change.

Because the  repricing  gap position  does not capture  these risks,  Management
utilizes simulation modeling to measure and manage the rate sensitivity exposure
of earnings.  The Company's simulation model provides a projection of the effect
on net interest  income of various  interest  rate  scenarios  and balance sheet
strategies.

Liquidity

For  banks,  liquidity  represents  ability  to meet both loan  commitments  and
deposit withdrawals.  Factors which influence the need for liquidity are varied,
but include general economic  conditions,  asset/liability mix, bank reputation,
future  FDIC  funding  needs,  changes  in  regulatory  environment,  and credit
standing.  Assets which provide liquidity consist principally of loans, cash and
due from banks, interest-bearing deposits at financial institutions,  investment
securities,  and short-term  investments  such as federal  funds.  Maturities of
securities  held for  investment  purposes and loan payments  provide a constant
flow of funds available for cash needs. Additionally, liquidity can be gained by
the sale of loans or securities  prior to maturity if such assets had previously
been designated as available for sale. Interest rates, relative to the rate paid
by the  security or loan sold,  along with the maturity of the security or loan,
are the major determinates of the price which can be realized upon sale.

                                       14
<PAGE>

The  stability  of the  Company's  funding,  and  thus  its  ability  to  manage
liquidity,  is greatly enhanced by its consumer deposit base.  Consumer deposits
tend to be small in size,  diversified  across a large base of individuals,  and
are  government  insured to the extent  permitted by law. Total deposits at June
30, 2003, were $291,377,000 or 73.9% of total liabilities and equity.

Federal funds sold overnight totaled $47,035,000 or 11.9% of June 30, 2003 total
assets.  These  federal  funds sold may be used to fund loans as well as deposit
withdrawals, or for other purposes as defined by management.

Securities  available  for  sale  with  a fair  value  totaling  $37,415,000  at
quarter-end included net unrealized gains of $1,879,000. These securities may be
sold in whole or in part to increase  liquid  assets,  reposition the investment
portfolio, or for other purposes as defined by management.

Capital

Stockholders'  equity  increased  $574,000 (2.3%) and $861,000 (3.6%) during the
three  and six  months  ended  June 30,  2003,  respectively.  The  year-to-date
increase  included net income of  $1,561,000,  growth of $76,000 in  accumulated
other comprehensive income, $669,000 of dividends declared to shareholders,  and
$107,000 of treasury share purchases.

Federal regulatory agencies have adopted various capital standards for financial
institutions,  including risk-based capital standards. The primary objectives of
the  risk-based  capital  framework  are to  provide  a  consistent  system  for
comparing capital  positions of financial  institutions and to take into account
the  different   inherent  risks  among  financial   institutions'   assets  and
off-balance-sheet items.

Risk-based  capital  standards have been  supplemented  with  requirements for a
minimum Tier 1 capital to assets ratio (leverage ratio). In addition, regulatory
agencies consider the published capital levels as minimum levels and may require
a financial institution to maintain capital at higher levels.

A comparison of the Company's  capital as of June 30, 2003 with the requirements
to be considered adequately capitalized is presented below.

                                                                  For Capital
                                                   Actual      Adequacy Purposes
                                                   -----------------------------
Total capital to risk-weighted assets .....        12.5%             8.00%
Tier 1 capital to risk-weighted assets ....        11.3%             4.00%
Tier 1 capital to average assets ..........         7.6%             4.00%

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with accounting principles generally accepted in the United States of
America,  which  require the  measurement  of financial  position and  operating
results  in terms of  historical  dollars  without  considering  changes  in the
relative  purchasing  power of money  over time due to  inflation.  Unlike  most
industrial companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature.

As a result,  interest  rates  have a more  significant  impact  on a  financial
institution's  performance  than the  effects  of general  levels of  inflation.
Interest  rates do not  necessarily  move in the same  direction  or in the same
magnitude  as the price of goods and  services.  In the  current  interest  rate
environment,  liquidity and the maturity  structure of the Company's  assets and
liabilities are critical to the maintenance of acceptable performance levels.

Trends, Events or Uncertainties

Officers  and  Directors of the Company and its  subsidiaries  have had, and may
have in the future,  banking  transactions in the ordinary course of business of
the Company's subsidiaries.  All such transactions are on substantially the same
terms, including interest rates on loans and collateral,  as those prevailing at
the time for comparable  transactions  with others,  involve no more than normal
risk of collectibility, and present no other unfavorable features.

                                       15
<PAGE>

In the normal  course of  business,  the Banks are  involved  in  various  legal
proceedings.  In the current opinion of management, any liability resulting from
such  proceedings  would not have a material  effect on the Company's  financial
statements.

The Company,  during the second quarter of 2003, completed construction of a new
branch in Muscatine,  Iowa. This branch is located on a major  thoroughfare  and
retail area, Highway 61, on the northeast side of Muscatine. The branch offers a
wide variety of banking  services in its 3,000 square feet of space. In addition
to deposit products, the new branch also offers consumer and real estate lending
services.  A traditional inside four person teller line and four drive-up teller
lanes are complemented by freestanding twenty-four hour ATM services.

The Company has in the past purchased, and is authorized under an existing stock
repurchase plan to buy in the future, shares of its outstanding common stock for
the treasury as they become  available.  Pursuant to the stock  repurchase  plan
approved by the Board of Directors,  4,000 shares were  purchased by the Company
during the first two quarters of 2003.

Current Accounting Developments

The Financial Accounting Standards Board has issued Statement 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging".  This Statement amends and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging activities under Statement 133. The Statement is effective for contracts
entered  into or  modified  after June 30,  2003 and for  hedging  relationships
designated after June 30, 2003.  Implementation of the Statement is not expected
to have a material impact on the consolidated financial statements.

The Financial  Accounting  Standards Board has issued Statement 150, "Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity".  This Statement  establishes standards for how an issuer classifies and
measures certain financial  instruments with characteristics of both liabilities
and equity and  requires  that certain  freestanding  financial  instruments  be
reported as liabilities in the balance sheet. Depending on the type of financial
instrument,  it is  required  to be  accounted  for at either  fair value or the
present  value of future cash flows  determined  at each balance sheet date with
the change in that value reported as interest  expense in the income  statement.
Prior  to  the   application  of  Statement  No.  150,  either  those  financial
instruments  were not required to be recognized,  or if recognized were reported
in the  balance  sheet as equity and  changes in the value of those  instruments
were normally not  recognized in net income.  For the Company,  the Statement is
effective July 1, 2003, and management is currently in the process of evaluating
the  impact  that  implementation  will  have  on  the  consolidated   financial
statements.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT

With the exception of the historical  information  contained in this report, the
matters described herein contain certain forward-looking statements with respect
to the Company's financial condition,  results of operations and business. These
forward-looking  statements are subject to certain risks and uncertainties,  not
all of which can be  predicted  or  anticipated.  Factors  that may cause actual
results to differ  materially  from those  contemplated  by the  forward-looking
statements herein include market conditions as well as conditions  affecting the
banking industry  generally and factors having a specific impact on the Company,
including but limited to fluctuations in interest rates and in the economy;  the
impact of laws and  regulations  applicable to the Company and changes  therein;
the impact of  accounting  pronouncements  applicable to the Company and changes
therein;  competitive  conditions in the markets in which the Company  operates,
including  competition from banking and non-banking companies with substantially
greater resources;  the Company's ability to control the composition of its loan
portfolio without adversely affecting interest income; the Company's  dependence
on third party  suppliers;  and the  Company's  ability to respond to changes in
technology.  Readers of this Form 10-Q should therefore not place undue reliance
on forward-looking statements.

Item 4 - Disclosure Controls and Procedures

As of the end of the period  covered by this  report,  the Company  conducted an
evaluation,  under the supervision and with the  participation  of the principal
executive  officer  (Chairman  of the Board,  President  and CEO) and  principal
financial  officer   (Executive  Vice  President,   Chief  Operating  Officer  &
Treasurer),  of the Company's  disclosure controls and procedures (as defined in
Rules  13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of 1934 (the
"Exchange Act")). Based on this evaluation,  the principal executive officer and
principal financial officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information  required to be disclosed by
the  Company  in  reports  that it files or submits  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in Securities and Exchange  Commission  rules and forms.  There was no change in
the Company's  internal  control over financial  reporting  during the Company's
most recently  completed  fiscal  quarter that has  materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

                                       16
<PAGE>

                            Part II OTHER INFORMATION

ITEM 6.  Exhibits and Reports on Form 8-K.

         (a)  Exhibits

              Exhibit 31.1 - Certification pursuant to Rule 13a-15(e) and
                             15d-15(e)

              Exhibit 31.2 - Certification pursuant to Rule 13a-15(e) and
                             15d-15(e)

              Exhibit 32.1 - Certification pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002

              Exhibit 32.2 - Certification pursuant to Section 906 of the
                             Sarbanes-Oxley Act of 2002

         (b)  Reports on Form 8-K.

              A Form 8-K was filed on April 18,  2003 and  consisted  of a press
              release  discussing  financial  results  of the  Company  for  the
              quarter ended March 31, 2003 as well as the  shareholder  dividend
              payable in April 2003 and the retirement of the Company's Chairman
              of the Board and announcement of his successor.

                                       17
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES

                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                             IOWA FIRST BANCSHARES CORP.

                                 (Registrant)




August 14, 2003                                  /s/ D. Scott Ingstad
---------------                                  -------------------------------
Date                                             D. Scott Ingstad, Chairman of
                                                 the Board, President and CEO

August 14, 2003                                  /s/ Kim K. Bartling
---------------                                  -------------------------------
Date                                             Kim K. Bartling, Executive Vice
                                                 President, Chief Operating
                                                 Officer & Treasurer

                                       18