SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission file number 0-6216
June 30, 1994
BRENTON BANKS, INC.
Incorporated in Iowa I.R.S. Employers Identification
No. 42-0658989
Suite 300, Capital Square, 400 Locust, Des Moines, Iowa 50309
Registrant's telephone number, including area code: 515-237-5100
Former name, former address and former fiscal year, if changed
since last report: Not applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date,
August 5, 1994.
7,895,146 shares of Common Stock, $5.00 par value
<PAGE>
<TABLE>
PART 1 -- Item 1. Financial Statements
<CAPTION>
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Condition
(Unaudited)
June 30, December 31,
1994 1993
-------------- --------------
</CAPTION>
<S> <C> <C>
Assets
Cash and due from banks $ 49,698,933 42,548,497
Interest-bearing deposits with banks 3,134,628 --
Federal funds sold and securities purchased
under agreements to resell 11,025,000 41,875,000
Trading account securities 26,633 9,850
Investment securities:
Available for sale 365,753,705 412,209,721
Held to maturity (approximate market value of
$77,152,000 and $66,892,000 at June 31, 1994,
and December 31, 1993, respectively 77,832,014 66,384,042
______________ _____________
Investment securities 443,585,719 478,593,763
______________ _____________
Loans held for sale 2,489,530 4,349,422
Loans 952,043,847 875,881,387
Allowance for loan losses (10,643,393) (9,817,864)
______________ _____________
Loans, net 941,400,454 866,063,523
______________ _____________
Bank premises and equipment 24,836,473 23,147,521
Accrued interest receivable 12,459,552 12,815,884
Other assets 14,071,711 11,192,586
______________ _____________
Total assets $ 1,502,728,633 1,480,596,046
============== =============
Liabilities and stockholders' Equity:
Deposits:
Noninterest-bearing $ 125,784,276 127,131,654
Interest-bearing:
Demand 224,969,002 232,005,404
Savings 300,954,684 307,615,814
Time 628,531,619 627,610,822
______________ _____________
Total deposits 1,280,239,581 1,294,363,694
______________ _____________
Federal funds purchased and securities sold
under agreements to repurchase 58,685,848 37,664,328
Other short-term borrowings 4,000,000 --
Accrued expenses and other liabilities 13,251,667 11,688,256
Long-term borrowings 30,518,000 20,054,913
______________ _____________
Total liabilities 1,386,695,096 1,363,771,191
______________ _____________
Minority interest in consolidated subsidiaries 4,264,806 4,407,190
Redeemable preferred stock, $1 par; 500,000
shares authorized; issuable in series, none
issued -- --
Common stockholders' equity:
Common stock, $5 par; 25,000,000 shares
authorized; 7,899,166 shares issued at
June 30, 1994 and 5,253,151 shares issued
at December 31, 1993 39,495,830 26,265,755
Capital surplus 5,694,590 5,598,027
Retained earnings 68,608,093 77,517,613
Unrealized gains (losses) on assets available
for sale (2,029,782) 3,036,270
______________ _____________
Total common stockholders' equity 111,768,731 112,417,665
______________ _____________
Total liabilities and stockholders' equity $ 1,502,728,633 1,480,596,046
============== =============
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
PART 1 -- Item 1. Financial Statements
<CAPTION>
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Six Months Ended Three Months Ended
June 30* June 30*
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
</CAPTION> <C> <C> <C> <C>
<S>
Interest Income
Interest and fees on loans $ 36,828,330 34,475,780 18,933,071 17,515,680
Interest and dividends on investments:
Available for sale - taxable 6,656,096 785,833 3,292,517 394,255
Available for sale - tax-exempt 2,897,524 - 1,414,246 -
Held to maturity - taxable 703,507 10,185,027 368,574 4,921,553
Held to maturity - tax-exempt 1,308,940 3,742,105 640,905 1,864,315
______________ __________ __________ __________
Total interest and dividends on investments 11,566,067 14,712,965 5,716,242 7,180,123
______________ __________ __________ __________
Interest on federal funds sold and securities
purchased under agreements to resell 321,633 199,390 214,612 95,536
Other interest income 7,953 38,521 3,431 38,494
______________ __________ __________ __________
Total interest income 48,723,983 49,426,656 24,867,356 24,829,833
============== ========== ========== ==========
Interest Expense
Interest on deposits 19,766,445 21,319,018 9,915,877 10,558,228
Interest on federal funds purchased and securities
sold under agreements to repurchase 640,665 410,563 421,884 196,637
Interest on other short-term borrowings 6,817 1,200 6,817 175
Interest on long-term borrowings 828,682 623,831 470,328 312,477
______________ __________ __________ __________
Total interest expense 21,242,609 22,354,612 10,814,906 11,067,517
============== ========== ========== ==========
Net interest income 27,481,374 27,072,044 14,052,450 13,762,316
Provision for loan losses 829,162 738,827 426,749 295,001
______________ __________ __________ __________
Net interest income after provision for loan losses 26,652,212 26,333,217 13,625,701 13,467,315
============== ========== ========== ==========
Noninterest Income
Service charges on deposit accounts 2,759,398 2,836,360 1,374,852 1,455,519
Insurance commissions and fees 1,011,736 903,415 506,068 448,070
Other service charges, collection and exchange
charges, commissions and fees 1,772,793 1,756,460 881,619 1,017,526
Investment brokerage commissions 1,514,437 1,381,111 693,581 720,142
Fiduciary income 1,117,795 969,349 557,547 480,612
Net gains (losses) from securities available for
sale 36,944 252,357 (6,617) 206,185
Other operating income 378,586 404,576 178,321 90,314
______________ __________ __________ __________
Total noninterest income 8,591,689 8,503,628 4,185,371 4,418,368
============== ========== ========== ==========
Noninterest Expense
Salaries and wages 11,891,964 11,142,368 5,935,821 5,700,736
Employee benefits 2,537,865 2,223,116 1,137,317 980,126
Occupancy expense of premises, net 2,273,757 2,056,088 1,132,783 998,829
Furniture and equipment expense 1,513,793 1,367,238 761,159 712,831
Data processing expense 1,310,082 1,255,865 636,755 560,735
FDIC deposit insurance assessment 1,449,955 1,351,138 724,978 674,388
Advertising and promotion 804,948 708,275 420,914 370,964
Other operating expense 5,234,834 5,077,527 2,752,359 2,602,428
______________ __________ __________ __________
Total noninterest expense 27,017,198 25,181,615 13,502,086 12,601,037
============== ========== ========== ==========
Income before income taxes and minority interest 8,226,703 9,655,230 4,308,986 5,284,646
Income taxes 1,943,184 2,573,372 1,054,773 1,451,348
______________ __________ __________ __________
Income before minority interest 6,283,519 7,081,858 3,254,213 3,833,298
Minority interest 283,128 308,623 147,400 169,129
______________ __________ __________ __________
Net income $ 6,000,391 6,773,235 3,106,813 3,664,169
============== ========== ========== ==========
Per common and common equivalent share**:
Net income $ 0.76 0.86 0.39 0.46
Cash dividends 0.22 0.19 0.11 0.10
============== ========== ========== ==========
*See accompanying notes to consolidated financial
statements.
**Restated for the 3-for-2 stock split in the form
of a stock dividend effective May 1994.
</TABLE>
<PAGE>
<TABLE>
PART 1 -- Item 1. Financial Statements
<CAPTION>
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the 6 months ended June 30
1994 1993
------------- --------------
</CAPTION> <C> <C>
<S>
Operating Activities:
Net income $ 6,000,391 6,773,235
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 829,162 738,827
Depreciation and amortization 1,806,772 1,602,378
Net gains from securities available
for sale (36,944) (252,357)
Net decrease in loans held for sale 1,859,892 (1,229,947)
Increase in accrued interest receivable
and other assets 280,457 2,195,627
Decrease in accrued expenses, other
liabilities and minority interest 1,614,365 (218,482)
____________ ____________
Net cash provided from operating activities 12,354,095 9,609,281
============ ============
Investing Activities:
Investment securities available for sale:
Purchases (52,751,708) (2,944,802)
Maturities 84,475,315 19,615,983
Sales 10,529,096 26,752,738
Investment securities held to maturity:
Purchases (26,264,479) (147,854,941)
Maturities 10,742,452 124,159,433
Net increase in loans (76,166,093) (47,987,892)
Purchases of bank premises and equipment,
net (3,244,052) (2,159,470)
Purchase of common stock under repurchase
plan (108,025) --
____________ ____________
Net cash used by investing activities (52,787,494) (30,418,951)
============ ============
Financing Activities:
Net increase (decrease) in noninterest-
bearing, interest-bearing demand and
savings deposits (15,044,910) (28,050,273)
Net increase (decrease) in time deposits 920,797 (5,944,033)
Net increase in federal funds purchased and
securities sold under agreements to
repurchase 21,021,520 15,367,790
Net increase (decrease) in other short-term
borrowings 4,000,000 (119,784)
Proceeds of long-term borrowings 11,660,000 1,012,000
Repayment of long-term borrowings (1,196,913) (1,838,679)
Dividends on common stock (1,736,035) (1,514,099)
Proceeds from issuance of common stock under
the employee stock purchase plan -- 177,384
Proceeds from issuance of common stock under
the stock option plan 265,088 314,818
Payment for fractional shares in 3-for-2
stock (4,301) --
____________ ____________
Net cash provided from financing activities 19,885,246 (20,594,876)
============ ============
Net decrease in cash and cash equivalents (20,548,153) (41,404,546)
Cash and cash equivalents at the beginning of
the year 84,433,347 90,907,949
____________ ____________
Cash and cash equivalents at the end of the
period $ 63,885,194 49,503,403
============ ============
<CAPTION>
Supplemental Cash Flow Information
(Unaudited)
</CAPTION>
<S> <C> <C>
Interest paid during the period $ 19,651,394 21,603,893
Income taxes paid during the period 2,309,137 2,647,877
Transfers from investment securities to assets
held for sale 4,074,055 38,709,041
============ ============
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE>
PART 1 -- Item 1. Financial Statements
BRENTON BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Adjustments and Reclassifications
The accompanying financial statements for the interim
periods were prepared without audit. In the opinion of
management, all adjustments which were necessary for a fair
presentation of financial position and results of
operations, have been made. These adjustments were of a
normal recurring nature.
2. Additional Footnote Information
In reviewing these financial statements, reference
should be made to the 1993 Annual Report to Shareholders for
more detailed footnote information.
3. Statements of Cash Flows
In the statements of cash flows, cash and cash
equivalents include cash and due from banks, interest
bearing deposits with banks, and federal funds sold and
securities purchased under agreements to resell.
4. Income Taxes
Federal income tax expense for the six months ended
June 30, 1994 and 1993, was computed using the consolidated
effective federal income tax rates.
For the first six months of 1994 and 1993, the Company
also recognized income tax expense pertaining to state
franchise taxes payable individually by the subsidiary
banks.
5. Common Stock Transactions
On April 11, 1994, the Board of Directors declared a
3-for-2 stock split in the form of a stock dividend, for
shareholders of record on April 21, 1994. The stock
certificates were issued on May 3, 1994.
During the first six months of 1994, options on 25,150
shares of common stock were exercised under the Company's
stock option plans. The exercise price on these options was
the fair market value of the Company's common stock at the
date of grant. This transaction added $265,088 to the
equity of the Company.
<PAGE>
Part 1 -- Item 1
Page 2 of 2
5. Common Stock Transaction, cont.
In 1992, the Company originated a long-term stock
compensation plan for key management personnel. The plan
provides for 240,000 shares of the Company's common stock to
be reserved for grant over a four year period. Each grant
of shares will cover a three year performance period, 35
percent of which will vest upon completion of employment for
the performance period and 65 percent of which will vest
based on a tiered achievement scale tied to financial
performance goals established by the Board of Directors.
Under the plan, 60,995 shares were granted covering the
performance period from 1992 through 1994; 52,429 shares
were granted covering the performance period from 1993
through 1995; and 60,195 shares were granted covering the
performance period from 1994 through 1996. Compensation
expense associated with this plan for the first six months
of 1994 and 1993 was $0 and $193,202, respectively.
6. Income Per Share
Income per common and common equivalent share
computations are based on the weighted average number of
shares of common stock outstanding during the period. The
weighted average number of shares for 1994 and 1993 were
7,951,423 and 7,884,745, respectively, which included shares
related to the Long-Term Stock Compensation Plan.
<PAGE>
Part 1 -- Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Capital Resources
As of June 30, 1994 the Company's tier one leverage capital
ratio, which measures capital excluding intangible assets, was
7.37% exceeding the regulatory minimum requirement range of 3.0% to
5.0%. This capital calculation includes unrealized losses on
assets available for sale. The Company's risk based core capital
ratio was 11.63% at June 30, 1994 and the total risk base capital
ratio was 12.75%. These exceed the minimum regulatory requirements
of 4.0% and 8.0%, respectively.
Total common stockholders' equity totaled $111,768,731 as of
June 30, 1994. This is down slightly from December 31, 1993, due
primarily to the FASB 115 adjustment. Effective December 31, 1993
the Company adopted this Statement of Financial Accounting
Standards No. 115. Under this new accounting standard, the method
of classifying investment securities is based on the Company's
intended holding period. Accordingly, securities which the Company
may sell at its discretion prior to maturity are recorded at their
fair value. The aggregate unrealized net gains or losses including
the income tax and minority interest effect are recorded as a
component of stockholders' equity. At June 30, 1994 aggregate
unrealized losses from assets available for sale totaled
$2,029,782, while at December 31, 1993 aggregate unrealized gains
totaled $3,036,270, resulting in a net decline of $5,066,052 for
the first six months of 1994.
Net income for the first six months of 1994 totaled
$6,000,391. The Company's annualized return on average assets was
.84% compared to 1.01% for the same period of 1993. The Company's
annualized return on average equity was 10.77% compared to 13.79%
one year ago.
The Company paid a dividend of $.22 per common share in the
first half of 1994 compared to $.19 per common share for the first
half of 1993, a 15.8% increase. Dividends for the first half of
1994 totaled $1,736,035. In July of 1994, the Board declared a
dividend of $.11 per share compared to a dividend of $.10 per share
paid in the third quarter of 1993.
During the second quarter of 1994, the Board of Directors
authorized a plan to repurchase up to $2 million of the Company's
common stock. As of June 30, 1994 the Company had purchased 5,500
shares for a total of $108,025. Also during the first half of
1994, the Company had an increase in common stockholders' equity of
$265,088 relating to the exercise of outstanding options on 25,150
shares of common stock.
<PAGE>
Part I -- Item 2
Page 2 of 7
The debt-to-equity ratio of Brenton Banks, Inc. (the Parent
Company) was 11.2% at June 30, 1994. The Parent Company also had
$7,246,000 of cash and short-term investments at the end of June
1994. In addition, the Parent Company has a $2 million line of
credit with a regional bank that was unused at the end of June.
The Parent Company has sufficient liquid assets and additional
borrowing capacity should an acquisition or expansion opportunity
arise.
Brenton Banks, Inc. common stock closed June 1994 at $19.75
per share, which is 140% of book value per share of $14.15. This
closing stock price represents a price to trailing twelve months
earnings multiple of 11.6 times.
Liquidity
The Company actively monitors and manages its liquidity
position with the objective of maintaining sufficient cash flows to
fund operations and meet customer commitments. Federal funds sold,
trading account securities, loans held for sale, and investments
available for sale are readily marketable assets. Maturities of
all investment securities are managed to meet the Company's normal
liquidity needs. Other marketable assets may be sold prior to
maturity to meet liquidity needs, to respond to market conditions
or to adjust the Company's asset/liability management position.
Readily marketable assets at June 30, 1994 comprised 25.2% of the
Company's total assets.
Another general indicator of liquidity is the loan-to-deposit
ratio. At June 30, 1994 the loan-to-deposit ratio was 74.4%, up
from 64.8% at June 30, 1993. While this is a significant increase
in loans and does tighten the liquidity position, it is not high
enough to cause liquidity concerns.
The Company also has a stable deposit base and relatively low
levels of large deposits which results in a low dependence on
volatile liabilities. The combination of the high level of
marketable assets and the low dependence on volatile liabilities
provides sufficient liquidity for the Company at June 30, 1994.
Results of Operations
The six months ended June 30, 1994, compared to the six months
ended June 30, 1993.
Net Income
Brenton Banks, Inc. recorded net income for the first six
months of 1994 of $6,000,391, which is a decline of 11.4% from net
<PAGE>
Part I -- Item 2
Page 3 of 7
income for the first half of 1993 of $6,773,235. On a per common
and common equivalent share basis, net income was $.76 per share
for the first half of 1994 compared to $.86 one year ago.
This decline was caused primarily by low growth in net
interest income as a result of a decline in the net interest
margin, modest growth in noninterest income, coupled with normal
growth of operating expense. While the results of the first half
of 1994 are disappointing, a number of positive actions occurred
that will provide future earnings growth for the Company. These
include the following:
- Strong loan growth which totaled 19.1% growth in average
loans. This was due mainly to growth in the consumer and
commercial loan portfolios. The Company continues to
expand efforts to provide loan origination throughout the
state of Iowa.
- Continued focus on nontraditional sources of noninterest
income. The Company is committed to continued expansion of
investment brokerage and insurance activities. In the
first half of 1994 the Company opened an additional
investment brokerage office in Des Moines and Newton. At
June 30, 1994, the Company had 29 on-site brokers at 19 of
the Brenton Bank offices throughout the state.
- Expansion in key growth communities within the state.
Through the Brenton Savings Bank, FSB an office was opened
in Ankeny, Iowa during the first half of 1994. Plans are
underway to open an additional office in Iowa City within
the next six months.
- Additional office locations. Brenton announced plans to
open our first banking office in a major supermarket to be
located in Cedar Rapids. This is a pilot project looking
at other distribution systems for Brenton products and
services. In addition, a new banking office will be opened
in a developing area in Davenport, Iowa.
- Expansion of Brenton's corporate and cash management
services. In the past year Brenton has expanded its
corporate and cash management services dramatically. Sale
activities of these products are expanding and have been
well received by customers.
Net Interest Income
Average earnings assets increased 6.4% from the first half of
1993 to the first half of 1994. However, this growth was off
set by a decline in the net interest margin, which fell from 4.34%
for the first half of 1993 to 4.16% for 1994. The decline in the
<PAGE>
Part I -- Item 2
Page 4 of 7
margin was primarily due to lower interest rates on earning assets
which fell further than the rates on interest-bearing liabilities.
Anticipating a tightened net interest margin, the Company focused
on growth in loans. This emphasis produced a 19.1% increase in
average loans compared to one year ago. However, due to the
interest environment the average yield of the loan portfolio
declined by 93 basis points from the previous year.
The net interest margin for the second quarter of 1994 was
4.22% compared to 4.10% for the first quarter of 1994.
During the last two years the Company has improved the
sophistication of its asset/liability management system. This
simulation process is used to project the results of various
interest rate scenarios and alternative investment decisions.
Management performs analysis to manage interest rate risk and the
Company's net interest margin.
At the end of June 1994 the Company's static gap position was
negative, meaning that fewer assets are scheduled to reprice within
one year than liabilities. This situation would suggest that a
decline in interest rates would benefit the Company and that a rise
in interest rates would negatively impact net interest margin. The
Company believes that this negative impact could partly be
neutralized by controlling the timing of rate change on interest-
bearing liabilities. This would be more difficult if interest
rates rose quickly over a short period of time.
Provision for Loan Losses and Asset Quality
Brenton's solid loan quality was again demonstrated as
nonperforming loans dropped to $3,688,000 at June 30, 1994 from
$4,271,000 one year ago. This low level of nonperforming loans is
reflected in the nonperforming loan to total loan ratio of .39% at
June 30, 1994 compared to .53% one year ago. In comparing to
industry averages these ratios are both very good. The Company's
reserve for loan losses as a percentage of nonperforming loans was
a strong 288.6% at the end of June 1994, and represented 1.12% of
total loans at that date. For the first six months of 1994, the
provision for loan losses expense was $829,162 compared to $738,827
for the same period one year ago. These provisions are quite low
given the size of the loan portfolio and are indicative of the high
quality within the portfolio.
Noninterest Income
Generating noninterest income is crucial to the Company's
earning performance, particularly when compressed net interest
margins cause modest growth in net interest earnings. For the
first half of 1994 total noninterest income (excluding securities
transactions) rose to $8,554,745 from $8,251,271 one year ago.
Contributing to this improvement were a 9.7% increase in investment
<PAGE>
Part I -- Item 2
Page 5 of 7
brokerage commissions, a 12.0% growth in insurance commissions and
a 15.3% rise in fiduciary income.
Two noteworthy declines in noninterest income were experienced
in the first half of 1994. The first was service charges on
deposit accounts which declined about $77,000 or 2.7%. This
decline is a result of lower fees associated with checking
accounts. This may be a trend that will continue in the future and
is being recognized throughout the industry. The second was a
significant decline in secondary market real estate loan fees. The
rise in interest rates over the past six months has caused real
estate mortgage activity to decline from levels experienced in 1993
when mortgage rates hit a twenty-five year low. Fees associated
with secondary market loan activity declined 23.8% from one year
ago or $187,000. Over the last two years the Company has expanded
its real estate loan origination capability and despite the recent
decline in activity, the Company is originating four times the
volume of secondary market loans as it did four years ago. The
Company will continue to focus on expansion of real estate mortgage
banking activities.
Noninterest Expense
For the first half of 1994 noninterest expense totaled
$27,017,198, an increase of 7.3% from one year ago. Salaries and
related benefits comprise 58.0% of this total increase due partly
to commissions related to increased investment brokerage, insurance
and real estate sales activities. In addition, normal salary
increases and related fringe benefits added in this increase.
Another component of the increase in noninterest expense was
occupancy and furniture and equipment expense which rose 10.6% over
one year ago due primarily to banking office remodeling associated
with our mission to provide premier facilities for our banking
customers.
The Company's net noninterest margin, which measures operating
efficiency, and is a major improvement goal of the Company was
2.48% for the first half of 1994 compared to 2.41% one year ago.
Income Taxes
The Company's income tax strategies include reducing income
taxes by purchasing securities and originating loans which produce
tax exempt income. The goal is to maintain the maximum level of
tax exempt assets in order to benefit the Company on both a tax
equivalent interest yield basis and in income tax savings. The
effective rate of income tax expense as a percent of income before
income tax and minority interest was 23.6% for the first half of
1994 compared to 26.7% one year ago.
<PAGE>
Part I -- Item 2
Page 6 of 7
Economy
At the end of May 1994 and for the third consecutive month,
Iowa's unemployment rate remained a low 3.6%. For the month of
May, non-farm employment grew to 1.32 million from 1.29 million one
year ago. Additionally, the average manufacturing work week topped
41 hours for the 10th straight month. Iowa's hearty economy was
also revealed in May when the value of housing permits issued in
major Iowa communities spiraled to $57.8 million, a dramatic
increase from the $43.6 million one year earlier. Further,
consumer spending was up with sales tax receipts growing to $88.3
million from $87.7 million one year ago. Additional good news came
in Iowa's agriculture front as record crops were predicted for both
corn and soybeans. This should create a positive attitude towards
purchases among Iowa's farmers and ag related businesses.
Results of Operations
The three months ended June 30, 1994 Compared to the three
months ended June 30, 1993.
Net Income
For the three months ended June 30, 1994, net income totaled
$3,106,813 compared to $3,664,169 one year ago. Earnings per
common and common equivalent share totaled $.39 for the second
quarter of 1994 compared to $.46 for the second quarter of 1993.
In analyzing the results of operation there is much similarity in
the analysis of the second quarter and the first six months.
Primary factors for the earnings decline include modest growth in
net interest income, a lack of growth in noninterest income,
coupled with normal growth in noninterest expense.
Net Interest Income
Net interest income for the second quarter of 1994 grew a
modest 2.1% compared to second quarter of 1993. Net interest
income for the quarter totaled $14,052,450. Growth in earning
assets was offset by a decline in the net interest margin, which
was 4.22% in 1994 compared to 4.38% in 1993. The decline in the
interest margin was due primarily to yields on earning assets
falling further than rates paid on interest-bearing liabilities.
Provision for Loan Losses
The provision for loan losses for the second quarter of 1994
totaled $426,749 an increase of 44.7% over the same period of 1993.
While this appears to be a significant increase, provisions for
both years are modest in light of the high quality of the loan
portfolio.
<PAGE>
Part I -- Item 2
Page 7 of 7
Noninterest Income
Noninterest income in total declined by $232,997 from the
second quarter of 1993 to the second quarter of 1994. The major
cause of this was a decrease in securities gains in 1994 compared
to 1993. In 1994 securities losses of $6,617 were taken in the
second quarter compared to gains of $206,185 in the second quarter
of 1993. The trends mentioned above in the results of the first
half of the year were true for the second quarter. Service charges
on deposit accounts declined by 5.5% and fees on secondary market
real estate loans were down $202,000 from the second quarter of
1993. Insurance commission and fees increased 12.9% from the prior
year's quarter and fiduciary income was up 16.0%.
Noninterest Expense
As with the results of the first half of the year, noninterest
expense grew 7.2% from the prior year's quarter. Salary and
related fringe benefit costs were up 5.9% and comprised 43.5% of
the total noninterest expense increase. Occupancy expense and
furniture and equipment expense were up a combined 10.6%, again
relating to new facilities and facility remodeling as part of our
mission to provide premier facilities for Brenton customers. The
Company's net noninterest margin was 2.49% for the second quarter
of 1994 compared to 2.38% for the second quarter of 1993.
Looking Ahead
Diversifying financial products and services remains a key
Company strategy to increase noninterest income, compliment
traditional banking products and services and better serve Brenton
customers. Management is committed to expanding the financial
products and services to include new and emerging financial
services. In addition, the Company continues to investigate
acquisition opportunities in economic centers throughout Iowa and
surrounding states that fit into our growth strategy.
<PAGE>
PART 2 -- Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
for the six months ended June 30, 1994.
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.
BRENTON BANKS, INC.
-----------------------------------
(Registrant)
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Dated /s/ Robert L. DeMeulenaere
President
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Dated /s/ Steven T. Schuler
Chief Financial Officer and
Vice President/Treasurer/Secretary
