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, 1997

                              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, 1997 there were 1,755,192  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, 
            1997 and December 31, 1996

            Consolidated Condensed Statements of Operations,  
            Three and Six Months Ended June 30, 1997 and 1996 

            Consolidated Condensed Statements of Cash Flows, 
            Six months Ended June 30, 1997 and 1996 

            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,
                                                                    1997      1996
                                                                  ---------------------
<S>                                                               <C>        <C>   
              ASSETS

Cash and due from banks .......................................   $ 13,799   $ 14,914
Investment securities available for sale (cost June 30, .......     69,326     67,622
  1997, $69,122; December 31, 1996, $67,492)
Federal funds sold and securities
   purchased under resale agreements ..........................      8,100      7,263
Loans, net of allowance for possible loan
   losses June 30, 1997, $2,739;
   December 31, 1996, $2,803 ..................................    191,687    183,438
Bank premises and equipment, net ..............................      5,369      4,526
Other assets ..................................................      3,029      2,698
                                                                  -------------------
   TOTAL ASSETS ...............................................   $291,310   $280,461
                                                                  ===================

LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES

Noninterest bearing deposits ..................................   $ 37,902   $ 43,445
Interest bearing deposits .....................................    202,251    194,907
                                                                  -------------------
   TOTAL DEPOSITS .............................................   $240,153   $238,352
Securities sold under agreements to repurchase ................      3,002      5,453
Federal Home Loan Bank advances ...............................     17,169      7,473
Treasury tax and loan open note ...............................      2,500      1,944
Other liabilities .............................................      2,035      2,041
                                                                  -------------------
   TOTAL LIABILITIES ..........................................   $264,859   $255,263
                                                                  -------------------

STOCKHOLDERS' EQUITY

Common Stock ..................................................   $    200   $    200
Surplus .......................................................      3,916      3,872
Retained earnings .............................................     22,665     21,621
                                                                  -------------------
                                                                  $ 26,781   $ 25,693
Unrealized gains (losses) on securities available for sale, net        128         81
Less net cost of common shares acquired for the treasury ......        458        576
                                                                  -------------------
   TOTAL STOCKHOLDERS' EQUITY .................................   $ 26,451   $ 25,198
                                                                  -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................   $291,310   $280,461
                                                                  ===================
</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,
                                                   ------------------------------------------
                                                     1997        1996       1997       1996
                                                   --------------------   -------------------
<S>                                                <C>         <C>        <C>         <C>    
INTEREST INCOME:
   Interest and fees on loans ..................   $  4,076    $  3,879   $  7,989   $  7,569
   Interest on investment securities ...........      1,017         970      1,990      1,889
   Interest on federal funds sold and securities
     purchased under resale agreements .........        154         284        250        577
                                                   ------------------------------------------
   Total interest income .......................   $  5,247    $  5,133   $ 10,229   $ 10,035
                                                   ------------------------------------------

INTEREST EXPENSE:
   Interest on deposits ........................   $  2,273    $  2,304   $  4,410   $  4,578
   Interest on repurchase agreements and
     other borrowings ..........................        319         140        565        295
                                                   ------------------------------------------
   Total interest expense ......................   $  2,592    $  2,444   $  4,975   $  4,873
                                                   ------------------------------------------

   Net interest income .........................   $  2,655    $  2,689   $  5,254   $  5,162

Provision for possible loan losses .............          1          25          4         40
                                                   ------------------------------------------

   Net interest income after provision for
     possible loan losses ......................   $  2,654    $  2,664   $  5,250   $  5,122

Investment securities gains (losses) ...........        (15)         --        (4)         --
Other income ...................................        437         483        831        870
Other expense ..................................      1,840       1,662      3,561      3,333
                                                    ------------------------------------------

   Income before income taxes ..................   $  1,236    $  1,485   $  2,516   $  2,659
Applicable income taxes ........................        399         510        805        892
                                                   ------------------------------------------

Net income .....................................   $    837    $    975   $  1,711   $  1,767
                                                   ==========================================
Per share data:
  Net earnings per common share ................   $   0.46       $0.54   $   0.95   $   0.99
                                                   ==========================================

Dividends declared per common share ............   $   0.19    $   0.16   $   0.38   $   0.31
                                                   ==========================================
</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, 1997 and 1996
                                 (In Thousands)
<TABLE>
                                                                  1997        1996
                                                                --------------------
<S>                                                             <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ..................................................   $  1,711    $  1,767

Adjustments to reconcile net income to net cash
provided by operating activities:

   Proceeds from  FHLMC .....................................         49       3,565
   Loans underwritten for FHLMC .............................        (49)     (3,562)
   Gains on loans sold to FHLMC .............................         --          (3)
   Provision for loan losses ................................          4          40
   Investment securities (gains) losses, net ................          4          --
   Depreciation .............................................        201         190
   Amortization of premiums and accretion of discounts
     on loans and investment securities, net ................         85         121
  (Increase) in other assets ................................       (331)       (437)
  (Decrease) increase in other liabilities ..................         73        (166)
                                                                --------------------
Net cash provided by operating activities ...................   $  1,747    $  1,515
                                                                --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net (increase) decrease in federal funds sold ............   $   (837)   $ 13,040
   Proceeds from maturities of investment securities ........      7,388      10,064
   Proceeds from sales of investment securities .............      4,936          --
   Purchases of investment securities .......................    (14,109)    (19,888)
   Net (increase) in loans ..................................     (8,253)     (2,757)
   Purchases of bank premises and equipment .................     (1,044)        (91)
                                                                --------------------
   Net cash (used in) investing activities ..................   $(11,919)   $    368
                                                                --------------------


CASH FLOWS FROM FINANCING ACTIVITIES
   Net (decrease) in noninterest bearing deposits ...........   $ (5,543)   $   (870)
   Net increase in interest bearing deposits ................      7,344         767
   Net (decrease) in securities sold under
     agreements to repurchase ...............................     (2,451)     (1,685)
   Net increase in other borrowings .........................     10,252       1,464
   Cash dividends paid ......................................       (664)       (503)
   Reissuance of treasury stock .............................        280          37
   Purchases of common stock for the treasury ...............       (161)       (396)
                                                                --------------------
   Net cash provided by financing activities ................   $  9,057    $ (1,186)
                                                                --------------------

   Net increase in cash and due from banks ..................     (1,115)        697

Cash and due from banks:
   Beginning ................................................   $ 14,914    $ 10,963
                                                                --------------------
   Ending ...................................................   $ 13,799    $ 11,660
                                                                ====================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

   Cash payments for: 
     Interest ...............................................   $  4,947    $  4,845

     Income taxes ...........................................   $    566    $    635
</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. is a bank holding company  providing bank and bank
related services through its subsidiaries.

Significant accounting policies:  

  Principles of consolidation:

  The accompanying consolidated financial statements include the accounts of the
  Company and its  wholly-owned  subsidiaries,  First National Bank of Muscatine
  (Muscatine)  and First  National Bank in Fairfield  (Fairfield),  collectively
  referred  to  herein  as  (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  include cash
  on-hand  and  amounts  due from  banks,  including  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:

  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 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 as of June 30, 1997.

  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 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.
<PAGE>


  Direct loan  origination  fees and costs are generally  being deferred and the
  net amount  amortized as an adjustment of the related loan's or lease'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.

  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.

  Deferred  income taxes have not been  provided on the equity in  undistributed
  net income of the subsidiaries as the entities file a consolidated  income tax
  return.

  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. Earnings per share is arrived at by dividing net income by
the  weighted  average  number  of  shares of  common  stock  and  common  stock
equivalents  outstanding for the respective  period. The weighted average number
of shares of common  stock and  common  stock  equivalents  outstanding  for the
second  quarter  and  year-to-date  through  June  30,  1997 was  1,801,019  and
1,795,806,  respectively.  Fully diluted earnings per share are not shown as the
dilutive effect of common stock equivalents was less than three percent.
<PAGE>


Note 3.  Pending Accounting Changes

In February  1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement #128,  "Earnings Per Share." This Statement simplifies the computation
of earnings per share and makes the  computation  more  consistent with those of
International  Accounting  Standards.  The  Statement is  effective  for periods
ending after December15,  1997. The Company does not expect the adoption of this
new standard to significantly  impact previously  reported earnings per share or
earnings per share trends.

In June 1997, the FASB issued Statement #130, "Reporting  Comprehensive Income,"
and Statement  #131,  "Disclosures  About  Segments of an Enterprise and Related
Information."  Statement #130 establishes standards for reporting  comprehensive
income in financial  statements.  Statement #131 expands  certain  reporting and
disclosure requirements for segments from current standards.  The Statements are
effective  for fiscal years  beginning  after  December 15, 1997 and the Company
does not  expect  the  adoption  of these new  standards  to result in  material
changes to previously reported amounts or disclosures


<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, 1997,  were  $291,310,000.  Muscatine's
total assets were  $204,574,000  which reflects an $11,036,000  (5.7%)  increase
from December 31, 1996, total assets.  Fairfield's total assets were $83,793,000
at June 30, 1997,  which is a decrease of $303,000 when compared to December 31,
1995,  total assets.  Total  consolidated  assets increased  $10,849,000  (3.9%)
during the first six months of 1997.

Net  loans  totaled  $191,687,000  at June 30,  1997.  Net  loans  at  Muscatine
increased by $9,146,000 (7.3%) during the first six months.  Net loans decreased
at Fairfield by $897,000  (1.6%) during the first six months.  Consolidated  net
loans increased by $8,249,000 (4.5%)  year-to-date with approximately $5 million
of the increase occurring during the second quarter.

Total available for sale securities  increased $1.7 million during the first six
months of 1997 and federal funds sold increased $837,000.  The Banks continue to
emphasize  purchase of securities with maturities of five years and less as such
purchases  offer  reasonable  yields  with very  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,  1997,  less  than 20% of
investment  securities mature in more than five years and less than 5% mature in
more than ten years.  Securities totaling $4.9 million have been sold during the
year, generating net losses of $4,000.

Total  deposits at June 30,  1997,  were  $240,153,000.  Deposits  at  Muscatine
increased 1.8% from the prior year end.  Fairfield's  total  deposits  decreased
approximately  1.7% during the same period.  This represents a combined  deposit
increase of $1.8  million  (.8%) for the Company  during the first six months of
1997.  Additionally,  securities sold under  agreements to repurchase  decreased
$2.5 million to total $3.0 million. Intermediate term advances borrowed from the
Federal  Home Loan Bank  totaled  $17.2  million at quarter  end, a 9.7  million
increase from year-end 1996.

Results of Operations

Consolidated net income was $837,000,  or $.46 per share, for the second quarter
of 1997,  compared to $975,000 for the same period last year. The net income for
the second quarter of 1996 included  $150,000 of nonrecurring  income  primarily
from  recovery of interest on two loans which had been on nonaccrual of interest
status for quite  some  time.  These  loans  were paid off and our  position  in
certain  leases were sold  during the second  quarter of 1996  resulting  in the
aforementioned  $150,000  additional income.  Excluding that income, 1997 second
quarter earnings of $837,000 were $12,000 or 1.5% higher than 1996.

Net income for the six months  ended June 30,  1997 was  $1,711,000  compared to
$1,767,000  in  1996  for a  3.2%  decrease.  Without  the  nonrecurring  income
discussed above, net income for the first half of 1997 increased $94,000 or 5.8%
over 1996.

The  Company  has been able to expand the  dollars of net  interest  margin,  as
compared to the prior  year-to-date  figures 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 the net interest margin each successive quarter.
The increased usage of wholesale funding sources, while mitigating  intermediate
and  long-term  interest rate risk,  increases  interest  expense.  As a result,
margins are put under pressure with the goal of increasing  volume  sufficiently
to more than offset the margin reduction, thus, increasing earnings over time.

Provisions  for loan losses were $4,000 for the six months  ended June 30, 1997,
which is $36,000 less than the same period in 1996. Net loan charge-offs totaled
$67,000 compared to net recoveries of $367,000 for the first six months of 1996.

Nonaccrual loans rose during the past twelve months totaling  $1,034,000 at June
30, 1997;  $276,000 more than at June 30, 1996.  Other real estate owned totaled
only  $24,000,  and loans  past due 90 days or more and still  accruing  totaled
$483,000. The reserve for loan losses of $2,739,000 represents 1.4% of net loans
and 178% of total nonaccrual loans,  other real estate owned, and loans past due
90 days or more and still accruing.
<PAGE>
The  efficiency  ratio,  defined  as  noninterest  expense  as a percent  of net
interest income plus noninterest  income,  was 58.5% for the first six months of
1997 compared to 56.2% for all of 1996. This increase is due in large measure to
the following  expenditures thus far in 1997: opening a new full-service  branch
in  Fairfield,  Iowa;  opening  a  full-service  branch  inside  a new  Wal-Mart
Superstore in Muscatine, Iowa; upgrading computer hardware,  software,  networks
and training;  and breaking ground on a new,  primarily  drive-through  downtown
Muscatine,  Iowa,  branch  facility.  These costs were  incurred to maintain and
enhance the  competitiveness  of the organizations  service and product delivery
system now as well as in the future.  However,  such decisions increase overhead
expenses in the near term which results in a less favorable efficiency ratio.

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.  The  following  table shows the interest
rate  sensitivity  position at several  repricing  intervals  (dollar amounts in
thousands):
                      Repricing Maturities at June 30, 1997
<TABLE>
                                                 Less Than       1-5      More Than  Noninterest
                                                 One Year       Years      5 Years     Bearing         Total
                                                 -------------------------------------------------------------
<S>                                              <C>          <C>         <C>         <C>            <C>   
Assets:
  Loans ......................................   $  78,163    $  82,817   $  32,412   $   1,034      $ 194,426
  Investment securities ......................      17,976       38,478      12,862          10         69,326
  Other earning assets .......................       8,100           --          --          --          8,100
  Nonearning assets ..........................          --           --          --      19,458         19,458 
                                                 -------------------------------------------------------------
     Total assets ............................   $ 104,239    $ 121,295   $  45,274      20,502      $ 291,310
                                                 =============================================================
Liabilities and Equity:
   Deposits ..................................   $ 143,586    $  58,665   $     --    $  37,902      $ 240,153
   Other purchased funds .....................       5,985       10,265      6,421           --         22,671
   Other liabilities .........................          --           --         --        2,035          2,035
Equity .......................................          --           --         --       26,451         26,451
                                                 -------------------------------------------------------------
      Total liabilities and equity ...........   $ 149,571    $  68,930   $   6,421   $  66,388      $ 291,310
                                                 =============================================================

Repricing gap ................................   $ (45,332)   $  52,365   $  38,853   $ (45,886)     $      -- 

Cumulative repricing gap .....................   $ (45,332)   $   7,033   $  45,886   $      --      $      --
</TABLE>

The data in this table  incorporates the contractual  characteristics as well as
an estimate of the actual repricing  characteristics of the Company's assets and
liabilities.  Based  on the  estimate,  fifty  percent  of the  savings  and NOW
accounts are  reflected in the less than one year  category,  with the remaining
50% in the 1-5 year time frame.  Money market  accounts are estimated as 100% in
the less than one year category.

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, 1997, rate sensitive  liabilities exceeded
rate  sensitive  assets within a one year  maturity  range by $45.3 million and,
thus,  the Company is  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.
<PAGE>


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, 1997, were $240,153,000 or 82% of total liabilities and equity.

Securities  available for sale with a cost totaling  $69,122,000  at quarter-end
included net unrealized gains of $204,000. 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  $1,253,000 during the six months ended June 30,
1997.

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,  1997 with the  minimum
requirements is presented below.
                                                                 Minimum
                                                  Actual       Requirements
                                                  ------       ------------

Tier 1 risk-based capital                         13.08%           4.00%
Total risk-based capital                          14.34%           8.00%
Tier 1 leverage ratio                              8.95%           3.00%

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.
<PAGE>


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.

At its meeting on June 15, 1989, the Company's  Board of Directors  authorized a
stock  repurchase  program,  to  repurchase  up to 10 percent  of the  Company's
shares.  Through June 30, 1997,  approximately 44,000 shares of common stock had
been purchased under the program,  net of sales to the Company's  Employee Stock
Ownership  Plan and shares issued  pursuant to the Company's  stock option plan.
The Company expects to continue repurchase of its common stock from time to time
under the repurchase program.

Management  anticipates  costs  during the third  quarter of 1997  relating to a
problem  loan  which will  likely  not be  considered  material  to the  overall
financial results for the year. Nonetheless, these expenses will exceed $100,000
and may be  recovered  in whole  or in part in  subsequent  accounting  periods,
however, such recovery is not certain.

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, 1997.

<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 13, 1997              /s/ George A. Shepley
----------------             -------------------------------
Date                         George A. Shepley, Chairman of
                             the Board and Chief Executive Officer






August 13, 1997              /s/ Kim K. Bartling
----------------             -------------------------------
Date                         Kim K. Bartling, Senior Vice
                             President, Chief Operating
                             Officer & Treasurer