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, 2002

                              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 [  ]

At June 30, 2002 there were 1,437,416  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, 2002 and December 31, 2001                         3

                   Consolidated Condensed Statements of
                   Income, Three and Six Months Ended
                   June 30, 2002 and 2001                                      4

                   Consolidated Condensed Statements of
                   Cash Flows, Six Months Ended
                   June 30, 2002 and 2001                                      5

                   Notes to Consolidated Condensed
                   Financial Statements                                        6


         Item 2.   Management's Discussion and Analysis
                   of Financial Condition and Results of
                   Operations                                             7 - 13

PART II  Other Information

         Item 6.   Exhibits and Reports on Form 8-K                           14

Signatures                                                                    15


                                       2
<PAGE>


                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (In Thousands)
<TABLE>

                                                           (Unaudited)
                                                            June 30,   December 31,
                                                              2002        2001
                                                           ----------------------
<S>                                                        <C>         <C>

                    ASSETS
Cash and due from banks ................................   $  14,536    $  14,661

Interest-bearing deposits at financial institutions ....       2,148        1,620

Federal funds sold .....................................      25,585       31,000

Investment securities available for sale ...............      38,215       44,466

Loans, net of allowance for loan losses June 30, 2002,
  $3,314; December 31, 2001, $3,182 ....................     278,093      272,695

Bank premises and equipment, net .......................       4,903        5,055

Accrued interest receivable ............................       2,390        2,793

Life insurance contracts ...............................       3,854        3,361

Restricted investment securities .......................       3,911        3,868

Other assets ...........................................       1,172        1,078
                                                           ----------------------
        TOTAL ASSETS ...................................   $ 374,807    $ 380,597
                                                           ======================

LIABILITIES AND STOCKHOLDERS' EQUITY

   LIABILITIES
Noninterest bearing deposits ...........................   $  42,185    $  42,165
Interest bearing deposits ..............................     225,390      225,359
                                                           ----------------------
        TOTAL DEPOSITS .................................     267,575      267,524
Notes payable ..........................................       3,300        5,419
Securities sold under agreements to
  repurchase ...........................................       4,913        5,068
Federal Home Loan Bank advances ........................      66,057       70,706
Treasury tax and loan open note ........................         917          622
Company obligated mandatorily redeemable preferred
  securities of subsidiary trust .......................       4,000        4,000
Dividends payable ......................................         327          331
Other liabilities ......................................       1,654        1,645
                                                           ----------------------
        TOTAL LIABILITIES ..............................     348,743      355,315
                                                           ----------------------
Redeemable common stock held by employee stock
  ownership plan with 401(k) provisions (KSOP) .........       2,242        2,242
                                                           ----------------------
STOCKHOLDERS' EQUITY
Common stock ...........................................         200          200
Additional paid-in capital .............................       4,263        4,265
Retained earnings ......................................      33,010       31,944
Accumulated other comprehensive income .................         999          858
Less net cost of common shares acquired for the treasury     (12,408)     (11,985)
Less maximum cash obligation related to KSOP shares ....      (2,242)      (2,242)
                                                           ----------------------
        TOTAL STOCKHOLDERS' EQUITY .....................      23,822       23,040
                                                           ----------------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .....   $ 374,807    $ 380,597
                                                           ======================
</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,
                                                            2002       2001     2002       2001
                                                          --------------------------------------
<S>                                                        <C>       <C>       <C>       <C>
INTEREST INCOME:
   Interest and fees on loans:
     Taxable ...........................................   $ 4,950   $ 5,632   $ 9,827   $11,286
     Nontaxable ........................................        24        30        43        64
   Interest on investment securities available for sale:

     Taxable ...........................................       294       531       615     1,160
     Nontaxable ........................................       207       239       418       482
   Interest on federal funds sold ......................       128       201       277       360
   Dividends on restricted investment securities .......        31        45        57        98
   Other ...............................................        20        16        44        16
                                                           -------------------------------------
   Total interest income ...............................     5,654     6,694    11,281    13,466
                                                           -------------------------------------

INTEREST EXPENSE:
   Interest on deposits ................................     1,495     2,718     3,039     5,507
   Interest on notes payable ...........................        75       107       183       227
   Interest on other borrowed funds ....................     1,041     1,061     2,120     2,203
   Interest on company obligated mandatorily
     redeemable preferred securities of subsidiary trust       105       105       207       105
                                                           -------------------------------------
   Total interest expense ..............................     2,716     3,991     5,549     8,042
                                                           -------------------------------------

   Net interest income .................................     2,938     2,703     5,732     5,424
Provision for loan losses ..............................       167       139       235       178
                                                           -------------------------------------
   Net interest income after provision for
     loan losses .......................................     2,771     2,564     5,497     5,246
                                                           -------------------------------------
Other income:
   Trust department ....................................       103        93       207       186
   Service fees ........................................       372       343       706       653
   Investment securities gains, net ....................         8        38        80        99
   Other ...............................................       158       219       327       373
                                                           -------------------------------------
     Total other income ................................       641       693     1,320     1,311
                                                           -------------------------------------
Operating expenses:
   Salaries and employee benefits ......................     1,193     1,202     2,418     2,383
   Occupancy expenses, net .............................       170       179       337       379
   Equipment expenses ..................................       177       153       363       298
   Office supplies, printing, and postage ..............        95       101       191       208
   Computer processing .................................       130       111       266       222
   Advertising and business promotion ..................        40        41        81        78
   Other operating expenses ............................       349       278       674       554
                                                           -------------------------------------
    Total operating expenses ...........................     2,154     2,065     4,330     4,122
                                                           -------------------------------------

   Income before income taxes ..........................   $ 1,258   $ 1,192   $ 2,487   $ 2,435
Applicable income taxes ................................       389       365       763       756
                                                           -------------------------------------
Net income .............................................   $   869   $   827   $ 1,724   $ 1,679
                                                           =====================================

Net income per common share, basic and diluted .........   $  0.60   $  0.56   $  1.19   $  1.13
                                                           =====================================

Dividends declared per common share ....................   $  0.23   $  0.22   $  0.46   $  0.44
                                                           =====================================

Comprehensive income ...................................   $ 1,146   $   809   $ 1,865   $ 2,335
                                                           =====================================
</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, 2002 and 2001
                                 (In Thousands)
<TABLE>
                                                                                 2002        2001
                                                                               --------------------
<S>                                                                            <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .................................................................   $  1,724    $  1,679
Adjustments to  reconcile  net  income  to  net
   cash  provided  by  operating activities:
   Proceeds from real estate loans sold ....................................      3,970       3,029
   Real estate loans underwritten and sold .................................     (3,927)     (3,005)
   Gains on real estate loans sold .........................................        (43)        (24)
   Provision for loan losses ...............................................        235         178
   Investment securities gains, net ........................................        (80)        (99)
   Depreciation ............................................................        311         315
   Amortization of premiums and accretion of discounts
     on investment securities available for sale, net ......................         14         (11)
   Net decrease in other assets ............................................         56         267
   Net increase in other liabilities .......................................         77          91
                                                                               --------------------
Net cash provided by operating activities ..................................   $  2,337    $  2,420
                                                                               --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) in interest-bearing deposits at financial institution ....   $   (528)   $   (471)
   Net (increase) decrease in federal funds sold ...........................      5,415        (175)
   Proceeds from sales, maturities, calls and paydowns of available
     for sale securities ...................................................     14,534      13,476
   Purchases of available for sale securities ..............................     (7,990)     (4,552)
   Net (increase) in loans .................................................     (5,633)     (9,598)
   Purchases of bank premises and equipment ................................       (159)       (385)
   Increase in cash value of life insurance contracts ......................       (493)        (88)
   Purchases of restricted investment securities ...........................        (43)         (4)
                                                                               --------------------
   Net cash provided by (used in) investing activities .....................   $  5,103    $ (1,797)
                                                                               --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in noninterest bearing deposits .................   $     20    $ (9,749)
   Net increase in interest bearing deposits ...............................         31       8,215
   Net increase (decrease) in securities sold under
     agreements to repurchase ..............................................       (155)        241
   Repayment of notes payable ..............................................     (2,119)       (640)
   Net decrease in line of credit ..........................................         --        (125)
   Net increase in treasury tax and loan open note .........................        295       1,192
   Advances from Federal Home Loan Bank ....................................      1,000       5,650
   Payments of advances from Federal Home Loan Bank ........................     (5,649)    (13,306)
   Net proceeds from issuance of company obligated mandatorily
     redeemable preferred securities of subsidiary trust ...................         --       3,832
   Cash dividends paid .....................................................       (663)       (660)
   Purchases of common stock for the treasury ..............................       (430)       (476)
   Proceeds from issuance of common stock ..................................        105          --
                                                                               ---------------------
   Net cash (used in) financing activities .................................   $ (7,565)   $ (5,826)
                                                                               --------------------

   Net (decrease) in cash and due from banks ...............................       (125)     (5,203)

Cash and due from banks:
   Beginning ...............................................................   $ 14,661    $ 15,994
                                                                               --------------------
   Ending ..................................................................   $ 14,536    $ 10,791
                                                                               ====================
Supplemental Disclosures of Cash Flow Information, cash payments for:
      Interest .............................................................   $  5,669    $  8,152
      Income taxes .........................................................        721         739

Supplemental Schedule of Noncash Investing and Financing Activities,
  change in accumulated other comprehensive income, unrealized
  gains on investment securities available for sale, net ...................        141         656
</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 brokerage
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 2001 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, 2002 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2002.

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  first  six  months of 2002 and 2001 were
1,448,637 and 1,491,767, respectively. There were no common stock equivalents in
2002 or 2001.

                                       6
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Discussion and Analysis of Financial Condition

The Company's  total assets at June 30, 2002, were  $374,807,000,  a decrease of
$5,790,000 or 1.5% from December 31, 2001. As of June 30, 2002,  the Company had
$25,585,000  of federal funds sold compared to $31,000,000 at December 31, 2001.
Federal  funds  sold and  other  liquid  assets  have been  higher  the past few
quarters than the Company would historically consider normal. This is due to the
low interest rate  environment  coupled with  managements'  strategy to maintain
liquidity  for  future  loan  growth  and  purchases  of  investment  securities
available for sale when interest rates again rise.

Total available for sale securities  decreased  $6,251,000  during the first six
months  of 2002 to total  $38,215,000  at June 30,  2002.  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  experienced  during the
first six months of 2002, the banks purchased fewer securities than 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 during the current year of  $3,849,000  have
resulted in net gains recognized totaling $80,000.

Net loans  totaled  $278,093,000  at June 30, 2002, an increase of $5,398,000 or
2.0% from December 31, 2001. Competition for high-quality loans remains intense,
particularly in the small consumer and residential real estate loan categories.

Total  deposits at June 30, 2002,  were  $267,575,000,  nearly  identical to the
balance at December 31, 2001.  Certificates of deposit remain the largest single
category of deposits representing on average for the three months ended June 30,
2002,  approximately 42% of total deposits.  Securities sold under agreements to
repurchase  decreased  $155,000 to $4.9 million and advances  borrowed  from the
Federal Home Loan Bank  decreased  $4,649,000  to total $66.0 million at quarter
end.

Notes payable  totaled  $3,300,000 at June 30, 2002, or $2,119,000  less than at
December 31, 2001.  This decrease  resulted from regularly  scheduled  principal
payments as well as a  $1,522,000  payoff of one of the  Company's  loans at its
balloon date.

On March 28,  2001,  the Company  issued  4,000 shares  totaling  $4,000,000  of
Company  Obligated  Mandatorily  Redeemable  Preferred  Securities of Iowa First
Capital  Trust I. The  securities  provide  for  cumulative  cash  distributions
calculated at a 10.18% annual rate. The Company may, at one or more times, defer
interest payments on the capital securities for up to 10 consecutive semi-annual
periods,  but not beyond June 8, 2036.  At the end of the deferral  period,  all
accumulated and unpaid  distributions  will be paid. The capital securities will
be redeemed on June 8, 2031; however,  the Company has the option to shorten the
maturity  date to a date not earlier  than June 8, 2011.  The  redemption  price
begins at 105.09% to par and is reduced 51 basis  points each year until June 8,
2021 when the capital  securities can be redeemed at par. Holders of the capital
securities have no voting rights, are unsecured,  and rank junior in priority of
payment to all of the Company's indebtedness and senior to the Company's capital
stock. For regulatory  purposes,  the entire amount of the capital securities is
allowed  in the  calculation  of Tier 1  capital.  The  capital  securities  are
included  in the  balance  sheet as a  liability  with  the  cash  distributions
included in interest expense.

Results of Operations:

The Company recorded net income of $869,000 for the quarter ended June 30, 2002,
compared  with net income of $827,000 for the quarter  ended June 30,  2001,  an
increase of $42,000 or 5.1%.  The  increase in net income was  primarily  due to
improved  net  interest  income  which was  $235,000 or 8.7%  greater the second
quarter of 2002  compared to the second  quarter of 2001.  Diluted  earnings per
share were $.60 during the second  quarter of 2002 and $.56 for the same quarter
in 2001, an increase of $.04 or 7.1%. The Company's return on average assets for
the quarter  ended June 30, 2002 was .92% compared with a return of .87% for the
quarter ended June 30, 2001.  The Company's  return on average  equity was 14.6%
and  14.4%  for the  three  months  ended  June 30,  2002  and  June  30,  2001,
respectively.

                                       7
<PAGE>
Consolidated  net income was $1,724,000  for the first six months of 2002.  This
was $45,000 or 2.7% more than for the comparable period last year. However,  net
income  per share for the first six  months of 2002 was $1.19  which was $.06 or
5.3% greater than the comparable  period of the prior year. Net interest  income
increased  the first six months of 2002  compared  to the first two  quarters of
2001 by $308,000 (5.7%),  provision for loan losses  increased  $57,000 (32.0%),
securities gains decreased by $19,000 (19.2%), other income increased by $28,000
(2.3%),  operating  expenses  increased  $208,000 (5.0%), and income tax expense
increased  $7,000  (0.9%).  The Company's  return on average  assets for the six
months ended June 30, 2002 was .91%  compared  with a return of .89% for the six
months ended June 30, 2001. The Company's return on average equity was 14.7% and
14.5% for the six months ended June 30, 2002 and June 30, 2001, respectively.

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         Six Months Ended           Six Months Ended
                               June 30, 2002             June 30, 2001             June 30, 2002              June 30, 2001
                          ------------------------  ------------------------  -------------------------  ---------------------------
                                           Average                   Average                    Average                     Average
                          Balance  Interest  Rate   Balance  Interest  Rate   Balance   Interest  Rate   Balance   Interest  Rate
                          ----------------------------------------------------------------------------------------------------------
<S>                       <C>       <C>     <C>     <C>      <C>     <C>      <C>       <C>     <C>      <C>       <C>      <C>
Assets
  Taxable loans, net .... $276,891  $4,950   7.15%  $275,885  $5,632  8.17%   $273,617  $9,827   7.18%   $274,244  $11,266   8.23%
  Taxable investment
    securities available
    for sale ............   21,182     294   5.55%    34,908     531  6.08%     21,777     615   5.65%     38,331    1,160   6.05%
  Nontaxable investment
    securities and loans    19,319     350   7.25%    22,687     408  7.19%     19,379     698   7.21%     22,800      827   7.26%
  Federal funds sold ....   30,658     128   1.67%    19,265     201  4.17%     34,445     277   1.61%     15,277      360   4.71%
  Restricted investment
    securities ..........    3,890      31   3.19%     2,308      45  7.80%      3,879      57   2.94%      3,067       98   6.39%
  Interest-bearing
    deposits at financial
    institutions ........    2,188      20   3.66%     1,585      16  4.04%      2,662      44   3.31%        800       16   4.00%
                          ----------------          ----------------          ----------------          -----------------
        Total interest-
        earning assets ..  354,128   5,773   6.52%   356,638   6,833  7.66%    355,759  11,518   6.48%    354,519   13,747   7.76%
                                    ------                    ------                    ------                     ------
  Cash and due from banks   13,449                    11,957                    13,143                    11,821
  Bank premises and
    equipment, net ......    4,913                     5,071                     4,958                     5,021
  Life insurance
    contracts ...........    3,518                     3,250                     3,453                     3,228
  Other assets ..........    3,391                     5,094                     3,459                     4,523
                          --------                  --------                  --------                  --------
        Total ........... $379,399                  $382,010                  $380,772                  $379,112
                          ========                  ========                  ========                  ========
Liabilities
  Deposits:
    Interest-bearing
      deposits .......... $117,229  $  402   1.37%  $100,161  $  709  2.83%   $115,239  $  804   1.40%   $971,174   $1,464   3.01%
    Time ................  112,671   1,093   3.88%   136,969   2,009  5.87%    113,893   2,235   3.92%    136,073    4,043   5.94%
  Notes payable .........    4,050      75   7.36%     5,825     107  7.35%      4,950     183   7.37%      6,175      227   7.35%
  Other borrowings ......   73,237   1,041   5.69%    68,831   1,061  6.17%     74,930   2,120   5.66%     70,737    2,203   6.23%
  Company obligated
    mandatorily redeemable
    preferred securities     4,000     105  10.34%     4,000     105 10.34%      4,000     207  10.27%      2,050      105  10.18%
                          ----------------          ----------------          ----------------          -----------------
        Total ..........  311,187    2,716   3.49%   315,786   3,991  5.06%    313,012   5,549   3.55%    312,209    8,042   5.15%
  Noninterest-bearning
    deposits ...........   40,235                     38,670                    39,988                    39,165
  Other liabilities ....    1,958                      2,402                     2,034                     2,417
                         --------                   --------                  --------                   -------
        Total
        liabilities ....  353,380                    356,858                   355,034                   353,791
  Redeemable common
    stock held by
    KSOP ...............    2,242                      2,118                     2,242                     2,118
Stockholders' equity ...   23,777                     23,034                    23,496                    23,203
                         --------                   --------                  --------                  --------
        Total .......... $379,399                   $382,010                  $380,772                  $379,112
                         ========                   ========                  ========                  ========
Net interest earnings ..           $3,057                     $2,842                    $5,969                     $5,705
                                   ======                     ======                    ======                     ======
Net annualized yield (net
  interest earnings
  divided by total
  interest-earning
  assets) ..............                     3.45%                     3.19%                     3.36%                       3.22%
                                             =====                     =====                     =====                       =====
</TABLE>
Nonaccruing  loans  are  included  in the  average  balance.  Loan  fees are not
material.
                                       8
<PAGE>

The net interest  margin  increased  to 3.45% during the second  quarter of 2002
compared  to 3.19%  during  the second  quarter  of 2001.  The return on average
interest-earning  assets decreased 114 basis points (from 7.66% in 2001 to 6.52%
in 2002) and interest paid on average interest-bearing liabilities decreased 157
basis  points  (from 5.06% in 2001 to 3.49% in 2002).  The net  interest  margin
increased to 3.36% during the first six months of 2002  compared to 3.22% during
the same  period in 2001.  Over the same time  periods,  the  return on  average
interest-earning  assets decreased 128 basis points (from 7.76% in 2001 to 6.48%
in 2002) and interest paid on average interest-bearing liabilities decreased 160
basis points (from 5.15% in 2001 to 3.55% in 2002).

The  Federal  Reserve  Bank  Board and  Chairman  Greenspan  reduced  short-term
interest  rates an amazing  eleven times during 2001.  The prime  lending  rate,
which  began the year  2001 at 9.50%,  ended  2001 at only  4.75%;  where it has
remained  for the first six months of 2002.  During this period of low  interest
rates,  increased emphasis has been given to incorporating  interest rate floors
on selected commercial and agricultural loans. During the second quarter of 2002
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 loans falling less
than the rates paid on  interest-bearing  liabilities.  Eventually,  when market
interest rates again rise, rates paid on interest-bearing liabilities may, for a
time,  increase more than rates received on 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 investment  securities  available for sale have decreased less
than the rates paid on interest-bearing  liabilities.  This was due largely to a
longer average  duration for investment  securities  available for sale than the
average  duration  for  interest-bearing  liabilities.  Most  of the  investment
securities  available for sale were  purchased  when market  interest rates were
higher than rates currently available.

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 reduced its reliance on such
Federal Home Loan Bank  advances as a funding  source by  $4,649,000  during the
first two quarters of 2002. The interest  expense related to the  aforementioned
Company Obligated  Mandatorily  Redeemable Preferred Securities was incurred for
the entire first six months of 2002,  compared to such expense incurred for only
slightly  more than  ninety  days  during the first six months of 2001.  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  $167,000  for the three  months ended June 30,
2002.  This was  $28,000  more than the second  quarter  of 2001.  The first six
months of 2002 provisions for loan losses totaled  $235,000 or $57,000 more than
the same period last year.  Net loan  charge-offs  through June 30, 2002 totaled
$103,000  compared to net  charge-offs  of $263,000  for the first six months of
2001.  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  $1,414,000 at June 30, 2002, an increase of $718,000
from the first  quarter of 2002 and an increase of $815,000  from June 30, 2001.
Other real estate owned totaled $535,000, an increase of $284,000 from the prior
quarter and an increase of $359,000  from a year ago.  Loans past due 90 days or
more and still accruing totaled $145,000 which was $100,000 less than at the end
of the prior quarter and $366,000  less than a year  earlier.  The allowance for
possible  loan  losses of  $3,314,000  represents  1.2% of net loans and 158% of
total nonaccrual  loans,  other real estate owned, and loans past due 90 days or
more and still accruing.

                                       9
<PAGE>

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 2002 was $641,000 or 7.5% less than the second  quarter of 2001.  For
the first two quarters of 2002,  other income totaled  1,320,000 or 0.7% greater
than the same period last year.  Service fee income and trust department  income
were higher than the prior year while gains on investment  securities  available
for sale and miscellaneous income were less than last year.

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, 2002,  salaries and employee benefits expense decreased $9,000 or
0.7% as turnover resulted in some savings,  equipment expenses increased $24,000
or 15.7% as costs  associated with new computers and item  processing  equipment
were  incurred,  computer  processing  increased  $19,000 or 17.1% as additional
costs  associated  with digital  document  imaging as well as disaster  recovery
contracts were recognized.  Finally,  other operating expenses increased $71,000
or 25.5% largely due to the impact of payments for  consulting,  Federal Reserve
Bank processing,  and insurance as well as costs incurred carrying and disposing
of other real estate.

For the six  months  ended  June  30,  2002,  salaries  and  employees  benefits
increased  $35,000 or 1.5% due to normal  salary  adjustments  and higher health
care costs mitigated somewhat by employee turnover,  occupancy expense decreased
$42,000 or 11.1% due mainly to lower utility costs,  equipment expense increased
$65,000 or 21.8% as costs  associated  with new  computers  and item  processing
equipment were incurred, computer processing rose $44,000 or 19.8% as additional
costs  associated  with digital  document  imaging as well as disaster  recovery
contracts were recognized,  and other operating  expenses  increased $120,000 or
21.7% largely due to the impact of payments for consulting, Federal Reserve Bank
processing,  and insurance as well as costs  incurred  carrying and disposing of
other real estate.  Total operating  expenses  increased by $208,000 or 5.0% for
the six months ended June 30, 2002 compared to the same period last year.

Income tax expense for the quarter  ended June 30, 2002 of $389,000  represented
30.9% of income  before  taxes,  the  comparable  quarter last year was 30.6% of
income before tax. Year-to-date 2002 tax expense was 30.7% of income before tax.

The  efficiency  ratio,  defined  as  noninterest  expense  as a percent  of net
interest income plus noninterest  income,  was 60.2% and 61.4% for the three and
six months ended June 30, 2002,  respectively.  The efficiency  ratio for all of
2001 was 62.2%.  The primary reason for this improvement in 2002 is the increase
in net interest income.

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, 2002, 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.

                                       10
<PAGE>

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,  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.

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, 2002, were $267,575,000 or 71.4% of total liabilities and equity.

Federal funds sold overnight totaled $25,585,000 or 6.8% of June 30, 2002, 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 cost totaling  $36,621,000  at quarter-end
included net  unrealized  gains of $1,594,000.  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 $782,000 (3.4%) during the six months ended June
30, 2002.  This  increase  occurred  despite net  purchases  of treasury  shares
totaling $423,000 over the same period.

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, 2002 with the requirements
to be considered adequately capitalized and well capitalized is presented below.
<TABLE>
                                                                      To Be Well Capitalized
                                                     For Capital      Under Prompt Corrective
                                          Actual   Adequacy Purposes    Action Provisions
                                          ---------------------------------------------------
<S>                                       <C>      <C>                <C>
Total capital to risk-weighted assets     12.03%        8.00%                  10.00%
Tier 1 capital to risk-weighted assets    10.79%        4.00%                   6.00%
Tier 1 capital to average assets           7.57%        4.00%                   5.00%
</TABLE>

                                       11
<PAGE>

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.

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 has in the past purchased shares of its outstanding common stock for
the treasury as they become  available.  During the second  quarter of 2002, the
Board of Directors  rescinded the prior stock repurchase plan and approved a new
stock repurchase plan authorizing up to 75,000 shares of its outstanding  common
stock to be purchased for the  treasury.  During the first two quarters of 2002,
over 19,000  shares or 1.3% of the total shares  outstanding  as of December 31,
2001 were purchased for the treasury.

Current Accounting Developments

In July 2001, the Financial  Accounting  Standards  Board issued  Statement 141,
"Business  Combinations"  and  Statement  142,  "Goodwill  and Other  Intangible
Assets". Statement 141 eliminates the pooling method for accounting for business
combinations;  requires  that  intangible  assets that meet certain  criteria be
reported separately from goodwill; and requires negative goodwill arising from a
business  combination  to be recorded as an  extraordinary  gain.  Statement 142
eliminates  the  amortization  of  goodwill  and  other   intangibles  that  are
determined  to have an  indefinite  life;  and  requires,  at a minimum,  annual
impairment tests for goodwill and other intangible assets that are determined to
have an indefinite life. For the Company,  the provisions of the Statements were
generally  effective  January 1, 2002.  Implementation  of the Statements had no
impact on the financial  statements,  except that annual  goodwill  amortization
expense  of  $56,000  will no longer be  recorded.  For the three and six months
ended June 30, 2001 goodwill  amortization  of $14,000 and $28,000 was recorded,
respectively. This goodwill amortization resulted in a reduction of earnings per
share  for the  three  and six  months  ended  June 30,  2001 of $.01 and  $.02,
respectively.

                                       12
<PAGE>

"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.

                                       13
<PAGE>

                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                                OTHER INFORMATION



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

        (a)  Exhibits

             Exhibit 99.1 - Certification pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002

             Exhibit 99.2 - Certification pursuant to Section 906 of the
                            Sarbanes-Oxley Act of 2002

        (b)  Reports on Form 8-K.

             No Form 8-K has been filed for the quarter ended June 30, 2002.


                                       14
<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, 2002              /s/ D. Scott Ingstad
----------------             ---------------------------------------------------
Date                         D. Scott Ingstad, Vice Chairman of the Board
                             President and CEO


August 14, 2002              /s/ Kim K. Bartling
----------------             ---------------------------------------------------
Date                         Kim K. Bartling, Executive Vice
                             President, Chief Operating
                             Officer & Treasurer



                                       15