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, 1999

                              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)

319-263-4221
-------------------------------
(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, 1999 there were 1,532,424  shares of the  registrant's  common stock
outstanding.
<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, 1999 and December 31, 1998

                    Consolidated  Condensed Statements of Operations,
                    Three and Six Months Ended June 30, 1999 and 1998

                    Consolidated  Condensed Statements of Cash Flows,
                    Six Months Ended June 30, 1999 and 1998

                    Notes to Consolidated Condensed Financial Statements


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

PART II  Other Information


         Item 6.   Exhibits and Reports on Form 8-K


         Signatures

<PAGE>


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

                                                            June 30,   December 31,
                                                               1999       1998
                                                           ------------------------
<S>                                                        <C>         <C>
               ASSETS

Cash and due from banks ................................   $  10,470    $  14,408

Investment securities available for sale (cost June 30,
  1999,  $66,886; December 31, 1998, $57,581) ..........      66,789       58,711

Federal funds sold and securities
   purchased under resale agreements ...................         900       12,555

Loans, net of allowance for possible loan
   losses June 30, 1999, $2,913; December 31, 1998,
   $2,787 ..............................................     264,146      250,318

Bank premises and equipment, net .......................       5,675        5,858

Other assets ...........................................       4,188        3,561
                                                           ---------    ---------

   TOTAL ASSETS ........................................   $ 352,168    $ 345,411
                                                           =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
            LIABILITIES

Noninterest bearing deposits ...........................   $  40,508    $  44,430
Interest bearing deposits ..............................     220,606      217,416
                                                           ---------    ---------
   TOTAL DEPOSITS ......................................   $ 261,114    $ 261,846
Notes payable ..........................................       6,950        7,250
Securities sold under agreements to
   repurchase ..........................................       4,180        5,645
Federal Home Loan Bank advances ........................      53,052       47,973
Treasury tax and loan open note ........................       2,483          163
Other liabilities ......................................       1,934        2,225
Federal Funds Purchased ................................       1,875            0
                                                           ---------    ---------
   TOTAL LIABILITIES ...................................   $ 331,588    $ 325,102

STOCKHOLDERS' EQUITY

Common stock ...........................................   $     200    $     200
Surplus ................................................       4,408        4,408
Retained earnings ......................................      26,500       25,460
                                                           ---------    ---------
                                                           $  31,108    $  30,068
Accumulated other comprehensive income (loss) ..........         (61)         708
Less net cost of common shares acquired for the treasury     (10,467)     (10,467)
                                                           ---------    ---------
   TOTAL STOCKHOLDERS' EQUITY ..........................   $  20,580    $  20,309
                                                           ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............   $ 352,168    $ 345,411
                                                           =========    =========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE>


                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                      (In Thousands, Except Per Share Data)
                                   (Unaudited)
<TABLE>
                                                                               Three Months Ended               Six Months Ended
                                                                                     June 30,                        June 30,
                                                                             -----------------------         -----------------------
                                                                               1999            1998            1999           1998
                                                                             --------        -------         -------         -------
<S>                                                                          <C>             <C>             <C>             <C>
INTEREST INCOME:
   Interest and fees on loans ......................................         $ 5,169         $ 4,731         $10,230         $ 9,156
   Interest on investment securities ...............................             921             917           1,755           1,837
   Interest on federal funds sold and securities
     purchased under resale agreements .............................             112             285             239             511
                                                                             -------         -------         -------         -------
   Total interest income ...........................................         $ 6,202         $ 5,933         $12,224         $11,504
                                                                             -------         -------         -------         -------

INTEREST EXPENSE:
   Interest on deposits ............................................         $ 2,394         $ 2,507         $ 4,694         $ 4,847
   Interest on other borrowed funds ................................             877             679           1,712           1,238
   Interest on notes payable .......................................             131              96             264              96
                                                                             -------         -------         -------         -------
   Total interest expense ..........................................         $ 3,402         $ 3,282         $ 6,670         $ 6,181
                                                                             -------         -------         -------         -------

   Net interest income .............................................         $ 2,800         $ 2,651         $ 5,554         $ 5,323
Provision for possible loan losses .................................             112              26             166              44
                                                                             -------         -------         -------         -------
   Net interest income after provision for
     possible loan losses ..........................................         $ 2,688         $ 2,625         $ 5,388         $ 5,279

Investment securities gains (losses) ...............................            --              --              --                 4
Other income .......................................................             490             465             945             877
Other expense ......................................................           1,913           1,882           3,885           3,715
                                                                             -------         -------         -------         -------

   Income before income taxes ......................................         $ 1,265         $ 1,208         $ 2,448         $ 2,445
Applicable income taxes ............................................             390             368             764             765
                                                                             -------         -------         -------         -------
Net income .........................................................         $   875         $   840         $ 1,684         $ 1,680
                                                                             =======         =======         =======         =======

Net income per common share :
  Basic ............................................................         $  0.57         $  0.51         $  1.10         $  0.97
                                                                             =======         =======         =======         =======

  Diluted ..........................................................         $  0.57         $  0.51         $  1.10         $  0.97
                                                                             =======         =======         =======         =======


Dividends declared per common share ................................         $  0.21         $  0.21         $  0.42         $  0.42
                                                                             =======         =======         =======         =======

Comprehensive income ...............................................         $   337         $   806         $   915         $ 1,654
                                                                             =======         =======         =======         =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE>


                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 For The Six Months Ended June 30, 1999 and 1998
                                 (In Thousands)
<TABLE>

                                                                         1999        1998
                                                                      --------    --------
<S>                                                                   <C>         <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ........................................................   $  1,684    $  1,680
Adjustments to  reconcile  net  income  to  net
  cash  provided  by  operating activities:
   Proceeds from  FHLMC ...........................................      1,737         295
   Loans underwritten for FHLMC ...................................     (1,724)       (295)
   Gains on loans sold to FHLMC ...................................        (13)         --
   Provision for loan losses ......................................        166          44
   Investment securities (gains) losses, net ......................         --          (4)
   Depreciation ...................................................        319         312
   Amortization of premiums and accretion of discounts
     on loans and investment securities, net ......................         66          67
  (Increase) in other assets ......................................       (627)       (559)
  (Decrease) increase in other liabilities ........................       (291)         (9)
                                                                      --------    --------
Net cash provided by operating activities .........................   $  1,317    $  1,531
                                                                      --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) decrease in federal funds sold ..................   $ 11,655    $ (2,905)
   Proceeds from sales, maturities, calls and paydowns of available
     for sale securities ..........................................     10,144      14,707
   Purchases of available for sale securities .....................    (19,059)    (10,827)
   Net (increase) in loans ........................................    (13,994)    (24,954)
   Purchases of bank premises and equipment .......................       (136)       (327)
                                                                      --------    --------
   Net cash (used in) investing activities ........................   $(11,390)   $(24,306)
                                                                      --------    --------


CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in noninterest bearing deposits ........   $ (3,922)   $  1,209
   Net increase in interest bearing deposits ......................      3,190      10,324
   Net increase (decrease) in securities sold under
     agreements to repurchase .....................................     (1,465)      1,470
   Net increase in other borrowings ...............................      9,274      18,988
   Net increase (decrease) in notes payable .......................       (300)      7,250
   Cash dividends paid ............................................       (642)       (758)
   Reissuance of treasury stock ...................................         --          --
   Purchases of common stock for the treasury .....................         --     (10,750)
                                                                      --------    --------
   Net cash provided by financing activities ......................   $  6,135    $ 27,733
                                                                      --------    --------

   Net increase in cash and due from banks ........................     (3,938)      4,958

Cash and due from banks:
   Beginning ......................................................   $ 14,408    $ 12,726
                                                                      --------    --------
   Ending .........................................................   $ 10,470    $ 17,684
                                                                      ========    ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash payments for:
     Interest .....................................................   $  6,582    $  6,167

     Income taxes .................................................   $    634    $    628
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<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 and other 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.

Significant accounting policies:

Accounting Estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amount  of  assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported  amounts of revenues and expenses  during the reporting  period.  A
significant  estimate  which is  particularly  susceptible  to change in a short
period of time relates to the  determination  of the  allowance for loan losses.
Actual results could differ from those estimates.

Principles of consolidation:

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly-owned subsidiaries,  First National Bank of Muscatine and
First National Bank in Fairfield (Banks). All material intercompany accounts and
transactions  have been  eliminated  in  consolidation.  The  unaudited  interim
financial statements presented reflect all adjustments which are, in the opinion
of  management,  necessary  to a fair  statement  of the results for the interim
periods. All such adjustments are of a normal recurring nature.

Presentation of cash flows:

For  purposes of reporting  cash flows,  cash and due from banks  includes  cash
on-hand,  amounts due from banks,  and cash items in process of  clearing.  Cash
flows from demand deposits, NOW accounts,  savings accounts, federal funds sold,
securities sold under agreements to repurchase, Federal Home Loan Bank advances,
TT&L open note, certificates of deposits, and loans are reported net.

Investment securities available for sale:

Securities available for sale are accounted for at fair value and the unrealized
holding gains or losses are presented as a separate  component of  stockholders'
equity, net of their deferred income tax effect.

Realized gains or losses, determined using the  specific-identification  method,
are included in earnings.

Declines in the fair value of  individual  available-for-sale  securities  below
their cost that are other than  temporary  would  result in  write-downs  of the
individual  securities  to their fair value.  The related  write-downs  would be
included in earnings as realized losses.

Premiums and  discounts  are  recognized  in interest  income using the interest
method over the period to maturity.  There were no investments  held to maturity
or for trading purposes at quarter-end.
<PAGE>


Loans:

Loans are stated at the amount of unpaid principal, reduced by unearned discount
and an allowance for loan losses. The Banks record impaired loans at the present
value of expected future cash flows discounted at the loan's effective  interest
rate,  or as an  expedient,  at the loan's  observable  market price or the fair
value of the collateral if the loan is collateral dependent.  A loan is impaired
when it is  probable  the  creditor  will be unable to collect  all  contractual
principal  and interest  payments due in  accordance  with the terms of the loan
agreement.  The Banks  recognize  interest  income on  impaired  loans on a cash
basis.

The allowance for loan losses is maintained at the level considered  adequate by
management   of  the  Banks  to  provide  for  losses  that  can  be  reasonably
anticipated.  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  credit  reviews  of the  loan
portfolio and related  off-balance sheet commitments,  consider current economic
conditions,  historical loan loss  experience,  review of specific problem loans
and other factors.

Unearned  interest on  discounted  loans is amortized to income over the life of
the loans using the interest  method.  For all other loans,  interest is accrued
daily on the outstanding balances. Accrual of interest is discontinued on a loan
when  management  believes,  after  considering  collection  efforts  and  other
factors,  that the  borrower's  financial  condition is such that  collection of
interest is doubtful.  Generally  this occurs when the collection of interest or
principal has become 90 days past due.

Direct loan and lease  origination  fees and costs are generally  being deferred
and the net amount  amortized as an adjustment of the related loan's yield.  The
Banks  generally  amortize these amounts over the contractual  life.  Commitment
fees based  upon a  percentage  of  customers'  unused  lines of credit and fees
related to standby letters of credit are not significant.

Bank premises and equipment:

Bank premises and equipment  are stated at cost less  accumulated  depreciation.
Depreciation  is  computed  primarily  by  the  straight-line  method  based  on
estimated useful lives.

Other assets:

Other  real  estate  (ORE),  which  is  included  in  other  assets,  represents
properties  acquired  through  foreclosure,  in-substance  foreclosure  or other
proceedings.  ORE is  recorded  at the  lower of the  amount of the loan or fair
market value of the properties.  Any write-down to fair market value at the time
of  transfer to ORE is charged to the  allowance  for loan  losses.  Property is
evaluated  regularly  to ensure that the  recorded  amount is  supported  by the
current fair market value.  Subsequent  write-downs to fair value are charged to
earnings.

Income taxes:

The Company  files its tax return on a  consolidated  basis with its  subsidiary
banks.  The entities  follow the direct  reimbursement  method of accounting for
income  taxes  under  which  income  taxes  or  credits  which  result  from the
subsidiary  banks'  inclusion  in the  consolidated  tax  return  are paid to or
received from the parent company.

Deferred taxes are provided on a liability  method  whereby  deferred tax assets
are recognized for deductible  temporary  differences and operating loss and tax
credit  carryforwards  and  deferred  liabilities  are  recognized  for  taxable
temporary  differences.  Temporary  differences are the differences  between the
reported  amounts of assets and  liabilities  and their tax bases.  Deferred tax
assets are reduced by a valuation  allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred  assets will
not be  realized.  Deferred  tax assets and  liabilities  are  adjusted  for the
effects of changes in tax laws and rates on the date of enactment.
<PAGE>


Trust assets:

Trust assets (other than cash deposits) held by the Banks in fiduciary or agency
capacities for its customers are not included in the  accompanying  consolidated
balance sheets since such items are not assets of the Banks.

Fair value of financial instruments:

FAS No. 107,  Disclosures  about Fair  Market  Value of  Financial  Instruments,
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate that value.  Interim condensed financial statements are not required to
include the disclosures outlined by FAS 107 and,  accordingly,  are not included
herein.


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  second  quarter  of 1999 and 1998  were
1,532,424 and  1,637,200,  respectively.  The average number of shares of common
stock  outstanding  for the first six months of 1999 and 1998 were 1,532,424 and
1,732,000, respectively. There were no common stock equivalents in 1999 or 1998.

<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, 1999,  were  $352,168,000.  Muscatine's
total assets were $259,791,000 which reflects a $12,724,000 (5.2%) increase from
December 31, 1998,  total assets.  Fairfield's  total assets were $91,334,000 at
June 30,  1999,  which is a decrease  of  $5,933,000  (6.1%)  when  compared  to
December 31, 1998,  total assets.  Total  consolidated  assets increased by 2.0%
during the first six months of 1999.

Net loans totaled 264,146,000 at June 30, 1999. Net loans at Muscatine increased
by  $13,566,000  (7.4%)  during the first six  months.  Net loans  increased  at
Fairfield by $262,000 (0.4%) during the first six months. Consolidated net loans
increased by $13,828,000 (5.5%) year-to-date.

Total available for sale securities  increased  $8,078,000  during the first six
months of 1999 while  federal  funds sold  decreased  $11.7  million.  The Banks
emphasize  purchase of securities with maturities of five years and less as such
purchases  offer  reasonable  yields with little  credit risk as well as limited
interest rate risk.  Additionally,  selected  securities with longer  maturities
have  been  purchased  in order  to  enhance  overall  portfolio  yield  without
significantly  increasing  risk.  At June 30, 1999,  less than 40% of investment
securities  mature in more than five years and less than 15% mature in more than
ten years. No securities have been sold during the year.

Total  deposits at June 30,  1999,  were  $261,114,000.  Deposits  at  Muscatine
increased  $7,215,000 (4.0%) from the prior year end. Fairfield's total deposits
decreased  $7,982,000 (9.9%) during the same period.  This represents a combined
deposit  decrease of slightly more than $700,000  (0.3%) for the Company  during
the first six months of 1999. Additionally,  securities sold under agreements to
repurchase decreased $1,465,000 and advances borrowed from the Federal Home Loan
Bank increased $5,079,000 to total $53.1 million at quarter end.

Results of Operations

Consolidated net income was $875,000,  or $.57 per share, for the second quarter
of 1999.  This was $35,000 or 4.2% more than the same period last year.  For the
first six months,  net income totaled  $1,684,000 or $1.10 per share compared to
$1,680,000  or $.97 per  share  last  year.  Interest  expense  on debt  used to
purchase treasury shares is the primary reason year-to-date net income is nearly
identical  to the  previous  year  while  earnings  per share over the same time
period  increased  13.4%.  This interest expense totaled $264,000 before tax for
the first six months of 1999 compared to only $96,000 in 1998. Due in large part
to the purchase of the treasury  shares,  return on equity for the first half of
1999 was 16.5%,  appreciably  greater  than the 13.0% for the same  period  last
year.

The  Company  has been able to expand net  interest  income,  as compared to the
prior year by actively managing asset quality, growth of the loan portfolio, and
rates paid on assets and  liabilities.  Management  has  expressed  concern  for
several quarters, however, as to the ability to continue increasing net interest
income  each  successive  quarter.  The  increased  usage of  wholesale  funding
sources,  while  mitigating  intermediate  and  long-term  interest  rate  risk,
increases  interest  expense.  The  interest  expense  associated  with the debt
incurred to purchase  treasury  shares  also adds  pressure to the net  interest
income.  Finally, the intense competition for all types of loans does not afford
the Company much pricing power when dealing with borrowers.

Provisions  for loan losses were  $112,000  and  $166,000  for the three and six
months  ended June 30, 1999.  This was $86,000 and  $122,000  more than the same
periods in 1998. Net loan charge-offs  totaled only $39,000 during the first six
months of 1999.  However,  due to low farm commodity prices in 1998 and thus far
in 1999,  and the  resultant  pressure  on cash  flow and  equity  of some  farm
borrowers,  our bank in Fairfield  increased  its  provisions  for possible loan
losses.  While no  significant  loan  charge-offs  have  yet  been  specifically
identified,  prudent management dictated strengthening our reserves for possible
loan losses as the financial  picture of selected farm borrowers  weakened.  The
market  prices of farm  commodities,  coupled with the level of success our farm
customers  have in the  production  and  marketing of their current year output,
will help determine the actual required loan loss reserves.
<PAGE>



Nonaccrual loans totaled  $599,000 at June 30, 1999,  $263,000 less than the end
of the second  quarter in 1998.  Other real estate owned totaled  $723,000,  and
loans past due 90 days or more and still accruing totaled $749,000.  The reserve
for loan  losses of  $2,913,000  represents  1.1% of net loans and 141% of total
nonaccrual  loans,  other real estate owned,  and loans past due 90 days or more
and still accruing.

The  efficiency  ratio,  defined  as  noninterest  expense  as a percent  of net
interest income plus noninterest  income,  was 59.8% for the first six months of
1999 compared to 59.4% for all of 1998.

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, 1999, rate sensitive  liabilities exceeded
rate sensitive assets within a one year maturity range by  approximately  20% of
total assets 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,  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 subsidiary banks do not have brokered deposits.

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, 1999, were $261,114,000 or 74% of total liabilities and equity.

Securities  available for sale with a cost totaling  $66,886,000  at quarter-end
included net unrealized losses of $97,000. 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.
<PAGE>



Capital

Retained  earnings  increased  $553,000 during the three months,  and $1,040,000
during the six months, ended June 30, 1999.

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 more  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, 1999 with the requirements
to be considered adequately capitalized is presented below.

                                                                  For Capital
                                                      Actual   Adequacy Purposes
                                                      --------------------------

Tier 1 risk-based capital ......................       8.02%           4.00%
Total risk-based capital .......................       9.19%           8.00%
Tier 1 leverage ratio ..........................       5.64%           4.00%


Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance  with generally  accepted  accounting  principles,  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.

Year 2000

The Year 2000 Issue is the result of computer programs using two-digits  instead
of four-digits to represent the year. These computer systems,  if not renovated,
will be unable to interpret dates past 1999 which could cause computer  problems
leading to a  disruption  in  operations.  The Company  developed  a  five-phase
program  for  year  2000  compliance,  as  outlined  by  the  Federal  Financial
Institutions  Examination Council (FFIEC)in a supervisory  letter.  These phases
are Awareness, Assessment, Renovation, Validation, and Implementation.

The Awareness phase is intended to define the problem and obtain executive level
support for the resources  necessary to perform  compliance work. This phase was
completed with the formation of a Year 2000  Committee and the  appointment of a
Year 2000 Project  Manager.  The goal of the  Assessment  phase is to assess the
size and complexity of the problem,  including  identifying all systems that may
be affected by the year 2000. The Year 2000 Committee identified any system that
might be affected with emphasis on high risk and mission critical systems.  This
assessment included hardware,  software, vendor services and computer-controlled
devices  such as alarms,  elevators,  and heating and cooling  systems.  Through
correspondence with vendors,  the Company has determined the year 2000 status of
these systems and has made determinations regarding replacement,  upgrades, etc.
In the Renovation  phase, the goal is to undertake code  enhancements,  hardware
and  software  upgrades,  system  replacements  and vendor  correspondence.  The
Company does not perform any of its own programming and is reliant on vendors to
provide updates. All needed upgrades or replacements of mission critical systems
have been completed as of June 30, 1999. The Validation  phase  encompasses  the
testing and  verification  of changes to systems and  coordination  with outside
parties.   The  Company  has  finished  testing  mission  critical  systems  and
applications.  By the  Implementation  phase, all systems should be certified as
year 2000  compliant  and should be in use. The Company has  completed  the vast
majority of this phase as of June 30, 1999. The remaining Implementation will be
completed by September 30, 1999.  Because  there remains so many unknowns  about
the potential  issues with the year 2000, the Company has updated and tested its
disaster recovery plan which now includes  specific  provisions for dealing with
potential year 2000 related disaster recovery situations.
<PAGE>


The  Company  believes it will incur a total of  approximately  $300,000 in year
2000  related  costs,  although  this number could  change  significantly.  This
estimate  includes hardware and software upgrades in addition to human resources
costs and consulting fees.

The federal banking regulators have issued several statements providing guidance
to  financial   institutions  on  the  steps  the  regulators  expect  financial
institutions  to take  to  become  year  2000  compliant.  The  federal  banking
regulators   are  also   examining  the  financial   institutions   under  their
jurisdiction  to  assess  each  institution's  compliance  with the  outstanding
guidance.  Failure to  satisfactorily  address  the Year 2000 Issue may expose a
financial  institution to various forms of  enforcement  action that its primary
federal   regulator  deems  appropriate  to  address  the  deficiencies  in  the
institution's year 2000 remediation program.  Management currently has no reason
to believe the Company will be subjected to any such regulatory actions.

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.
<PAGE>


                  IOWA FIRST BANCSHARES CORP. AND SUBSIDIARIES
                                OTHER INFORMATION





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


         Reports                   on Form 8-K.  No Form 8-K has been  filed for
                                   the quarter ended June 30, 1999.

<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)


8/11/99                       /s/ George A. Shepley
----------------             -------------------------------------
Date                         George A. Shepley, Chairman of
                             the Board and Chief Executive Officer





8/11/99                       /s/ Kim K. Bartling
----------------             -------------------------------------
Date                         Kim K. Bartling, Executive Vice
                             President, Chief Operating
                             Officer & Treasurer