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
September 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, November
7, 1994.
7,904,646 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)
September 30, December 31,
1994 1993
-------------- --------------
</CAPTION>
<S> <C> <C>
Assets
Cash and due from banks $ 50,044,584 42,548,497
Interest-bearing deposits with banks 89,050 --
Federal funds sold and securities purchased under
agreements to resell 36,600,000 41,875,000
Trading account securities 152,520 9,850
Investment securities:
Available for sale 356,545,407 412,209,721
Held to maturity (approximate market value of
$85,343,000 and $66,892,000 at September 30, 1994,
and December 31, 1993, respectively) 86,526,707 66,384,042
- - --------------------------------------------------------------------------------------
Investment securities 443,072,114 478,593,763
- - --------------------------------------------------------------------------------------
Loans held for sale 2,505,000 4,349,422
Loans 965,575,537 875,881,387
Allowance for loan losses (10,583,707) (9,817,864)
- - --------------------------------------------------------------------------------------
Loans, net 954,991,830 866,063,523
- - --------------------------------------------------------------------------------------
Bank premises and equipment 25,224,140 23,147,521
Accrued interest receivable 14,505,413 12,815,884
Other assets 16,215,339 11,192,586
- - --------------------------------------------------------------------------------------
Total assets $ 1,543,399,990 1,480,596,046
======================================================================================
Liabilities and stockholders' equity:
Deposits:
Noninterest-bearing $ 134,359,029 127,131,654
Interest-bearing:
Demand 265,679,721 232,005,404
Savings 279,188,707 307,615,814
Time 628,504,745 627,610,822
- - --------------------------------------------------------------------------------------
Total deposits 1,307,732,202 1,294,363,694
- - --------------------------------------------------------------------------------------
Federal funds purchased and securities sold under
agreements to repurchase 63,994,175 37,664,328
Other short-term borrowings -- --
Accrued expenses and other liabilities 13,948,133 11,688,256
Long-term borrowings 40,842,972 20,054,913
- - --------------------------------------------------------------------------------------
Total liabilities 1,426,517,482 1,363,771,191
- - --------------------------------------------------------------------------------------
Minority interest in consolidated subsidiaries 4,256,416 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;
7,891,166 shares issued at September 30, 1994 and
5,253,151 shares issued at December 31, 1993 39,455,830 26,265,755
Capital surplus 5,577,840 5,598,027
Retained earnings 70,547,548 77,517,613
Unrealized gains (losses) on assets available for sale (2,955,126) 3,036,270
- - --------------------------------------------------------------------------------------
Total common stockholders' equity 112,626,092 112,417,665
- - --------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,543,399,990 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)
Nine Months Ended Three Months Ended
September 30* September 30*
1994 1993 1994 1993
------------- ------------- ------------- -------------
</CAPTION>
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 56,548,698 52,268,181 19,720,368 17,792,401
Interest and dividends on investments:
Available for sale - taxable 9,738,281 1,499,948 3,082,185 714,115
Available for sale - tax-exempt 4,220,675 -- 1,323,151 --
Held to maturity - taxable 1,203,333 14,187,779 499,826 3,980,585
Held to maturity - tax-exempt 1,942,355 5,804,645 633,415 2,062,540
- - -------------------------------------------------------------------------------------------------------------
Total interest and dividends on investments 17,104,644 21,492,372 5,538,577 6,757,240
- - -------------------------------------------------------------------------------------------------------------
Interest on federal funds sold and securities
purchased under agreements to resell 742,408 335,724 420,775 136,334
Other interest income 10,642 18,266 2,689 1,912
- - -------------------------------------------------------------------------------------------------------------
Total interest income 74,406,392 74,114,543 25,682,409 24,687,887
=============================================================================================================
Interest Expense
Interest on deposits 30,253,638 31,741,957 10,487,193 10,422,939
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,193,747 777,474 553,082 366,911
Interest on other short-term borrowings 17,698 1,200 10,881 -
Interest on long-term borrowings 1,387,690 897,571 559,008 273,740
- - -------------------------------------------------------------------------------------------------------------
Total interest expense 32,852,773 33,418,202 11,610,164 11,063,590
=============================================================================================================
Net interest income 41,553,619 40,696,341 14,072,245 13,624,297
Provision for loan losses 1,269,494 1,028,827 440,332 290,000
- - -------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 40,284,125 39,667,514 13,631,913 13,334,297
=============================================================================================================
Noninterest Income
Service charges on deposit accounts 4,110,788 4,335,292 1,351,390 1,498,932
Insurance commissions and fees 1,580,985 1,349,371 569,249 445,956
Other service charges, collection and exchange
charges, commissions and fees 2,706,778 2,742,240 933,985 985,780
Investment brokerage commissions 2,129,798 2,139,676 615,361 758,565
Fiduciary income 1,671,182 1,452,095 553,387 482,746
Net gains (losses) from securities
available for sale (261,229) 462,740 (298,173) 210,383
Other operating income 611,516 531,394 232,930 126,818
- - -------------------------------------------------------------------------------------------------------------
Total noninterest income 12,549,818 13,012,808 3,958,129 4,509,180
=============================================================================================================
Noninterest Expense
Salaries and wages 17,945,066 17,002,458 6,053,102 5,860,090
Employee benefits 3,625,907 3,192,301 1,088,042 969,185
Occupancy expense of premises, net 3,399,869 3,081,283 1,126,112 1,025,195
Furniture and equipment expense 2,347,274 2,026,041 833,481 658,803
Data processing expense 1,956,777 1,950,874 646,695 695,009
FDIC deposit insurance assessment 2,178,668 2,050,796 728,713 699,658
Advertising and promotion 1,275,853 1,101,011 470,905 392,736
Other operating expense 7,965,025 7,270,514 2,730,191 2,192,987
- - -------------------------------------------------------------------------------------------------------------
Total noninterest expense 40,694,439 37,675,278 13,677,241 12,493,663
=============================================================================================================
Income before income taxes and minority interest 12,139,504 15,005,044 3,912,801 5,349,814
Income taxes 2,901,714 4,038,814 958,530 1,465,442
- - -------------------------------------------------------------------------------------------------------------
Income before minority interest 9,237,790 10,966,230 2,954,271 3,884,372
Minority interest 428,763 484,345 145,635 175,722
- - -------------------------------------------------------------------------------------------------------------
Net income $ 8,809,027 10,481,885 2,808,636 3,708,650
=============================================================================================================
Per common and common equivalent share**:
Net income $ 1.11 1.33 0.35 0.47
Cash dividends 0.33 0.29 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 9 months ended September 30,
1994 1993
----------------- --------------
</CAPTION>
<S> <C> <C>
Operating Activities:
Net income $ 8,809,027 10,481,885
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses 1,269,494 1,028,827
Depreciation and amortization 2,744,625 2,387,166
Net (gains) losses from securities available for sale 261,229 (462,740)
Net (increase) decrease in loans held for sale 1,844,422 (2,516,502)
Increase in accrued interest receivable
and other assets (3,455,757) (75,659)
Decrease in accrued expenses, other liabilities
and minority interest 2,342,846 1,106,124
- - ------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 13,815,886 11,949,101
- - ------------------------------------------------------------------------------------------------------------
Investing Activities:
Investment securities available for sale:
Purchases (80,749,881) (13,287,522)
Maturities 110,970,989 19,615,983
Sales 19,396,510 43,462,085
Investment securities held to maturity:
Purchases (42,149,626) (198,030,227)
Maturities 17,932,906 178,487,351
Net increase in loans (90,197,801) (95,048,096)
Purchases of bank premises and equipment, net (4,443,386) (2,695,478)
Purchase of common stock under repurchase plan (264,775) -
- - ------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (69,505,064) (67,495,904)
- - ------------------------------------------------------------------------------------------------------------
Financing Activities:
Net increase (decrease) in noninterest-bearing, interest-bearing
demand and savings deposits 12,474,585 (4,271,289)
Net increase in time deposits 893,923 1,410,800
Net increase in federal funds purchased and
securities sold under agreements to repurchase 26,329,847 31,858,000
Net decrease in other short-term borrowings - (119,784)
Proceeds of long-term borrowings 22,045,030 1,292,000
Repayment of long-term borrowings (1,256,971) (2,095,587)
Dividends on common stock (2,605,216) (2,299,919)
Proceeds from issuance of common stock under
the employee stock purchase plan -- 261,951
Proceeds from issuance of common stock under
the stock option plan 265,088 328,731
Payment for fractional shares in 3-for-2 stock split (4,301) --
- - ------------------------------------------------------------------------------------------------------------
Net cash provided from financing activities 58,141,985 26,364,903
- - ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2,452,807 (29,181,900)
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 $ 86,886,154 61,726,049
============================================================================================================
Supplemental Cash Flow Information
(Unaudited)
Interest paid during the period $ 29,807,052 31,740,772
Income taxes paid during the period 3,511,137 4,384,377
Transfers from investment securities to assets held for sale 4,074,055 83,167,422
============================================================================================================
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 nine months ended
September 30, 1994 and 1993, was computed using the consolidated
effective federal income tax rates.
For the first nine 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 nine months of 1994, options on 37,725
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 360,000 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, 91,493 shares were granted covering the performance
period from 1992 through 1994; 78,644 shares were granted covering
the performance period from 1993 through 1995; and 90,292 shares
were granted covering the performance period from 1994 through
1996. Compensation expense associated with this plan for the first
nine months of 1994 and 1993 was $0 and $433,126, respectively.
On May 16, 1994, the Board of Directors authorized the
repurchase of $2,000,000 of the Company's common stock. As of
September 30, 1994, 13,500 shares had been repurchased at a cost of
$264,775.
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 7,952,453 and 7,880,379,
respectively, which included shares related to the Long-Term Stock
Compensation Plan.
<PAGE>
PART I -- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Capital Resources
As of September 30, 1994 the Company's tier one leverage
capital ratio, which measures capital excluding intangible assets,
was 7.23% 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 11.11% at September 30, 1994 and the total risk
base capital ratio was 12.17%. These exceed the minimum regulatory
requirements of 4.0% and 8.0%, respectively.
Total common stockholders' equity totaled a $112,626,091 as of
September 30, 1994, which is a slight increase from December 31,
1993. Effective December 31, 1993 the Company adopted 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 September 30,
1994 aggregate unrealized losses from assets available for sale
totaled $2,955,126 while at December 31, 1993 aggregate unrealized
gains totaled $3,036,270. This results in a net decline of
$5,991,396 for the first nine months of 1994.
Net income for the first nine months of 1994 totaled
$8,809,027. The Company's annualized return on average assets was
.82% compared to 1.03% for the same period of 1993. The Company's
annualized return on average equity was 10.53% compared to 13.76%
one year ago.
The Company paid a dividend of $.33 per common share in the
first nine months of 1994 compared to $.29 per common share for the
same period of 1993, a 13.8% increase. Dividends for the first
nine months of 1994 totaled $2,605,216. In October of 1994, the
Board declared a dividend of $.11 per share compared to a dividend
of $.10 paid in the fourth 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 September 30, 1994 the Company had purchased
13,500 shares for a total of $264,775. Also during the first three
quarters 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 8
The debt-to-equity ratio of Brenton Banks, Inc. (the Parent
Company) was 11.1% at September 30, 1994. The Parent Company also
had $8,001,000 of cash and short-term investments at September 30,
1994. In addition, the Parent Company has a $2 million line of
credit with a regional bank that was unused at the end of
September. The Parent Company has sufficient liquid assets and
additional borrowing capacity should an acquisition or expansion
opportunity arise.
Brenton Banks, Inc. common stock closed September of 1994 at
$20.25 per share, which is 142% of book value per share of $14.26.
This closing stock price represents a price to trailing twelve
months earnings multiple of 12.8 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 September 30, 1994 comprised 25.6% of
the Company's total assets.
Another general indicator of liquidity is the loan-to-deposit
ratio. At September 30, 1994 the loan-to-deposit ratio was 73.8%,
up from 66.9% at September 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 has a stable deposit base and relatively low
levels of large deposits which results in a low dependence on
volatile liabilities. The combination of a high level of
marketable assets and the low dependence on volatile liabilities
provides sufficient liquidity for the Company at September 30,
1994.
<PAGE>
Part I -- Item 2
Page 3 of 8
Results of Operations
THE NINE MONTHS ENDED SEPTEMBER 30, 1994, COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1993.
Net Income
Brenton Banks, Inc. recorded net income for the first nine
months of 1994 of $8,809,027, which is a decline of 16.0% from net
income for the first nine months of 1993 of $10,481,855. On a per
common and common equivalent share basis, net income was $1.11 per
share for the first three quarters of 1994 compared to $1.33 one
year ago.
Earnings performance was negatively impacted by several
factors, including a lower net interest margin; securities losses
versus 1993 securities gains; and higher expenses. While earnings
have not met 1993 record levels, the Company moved forward with
several initiatives designed to enhance future earnings growth of
the Company. These initiatives include the following:
- New investment brokerage offices were opened in Des
Moines and Newton. The Company currently has 28 brokers working at
19 of the Brenton bank offices throughout the state.
- Continued expansion of new distribution channels. The
Company continued working toward the fourth quarter opening of a
loan production office in Newton and the Company's first bank
office located in a major supermarket in Cedar Rapids.
- Expansion of the franchise in key growth communities
within the state. Brenton opened a savings bank office in Ankeny,
Iowa. Plans are underway to open another savings bank office in
Iowa City in 1995. Additionally, a new banking office will be
opened in a developing area in Davenport, Iowa in late 1994.
- Expansion of cash management services to all Brenton
bank locations. These services allow us to effectively compete for
commercial customers, as well as providing a competitive advantage
in smaller communities, where these services are not typically
available.
- Enlarged the Brenton Mortgage distribution network by
adding originators and appraisers to service many of the Brenton
banks.
<PAGE>
Part I -- Item 2
Page 4 of 8
Net Interest Income
Average earnings assets increased 6.2% from the first half of
1993 to the first half of 1994. However, this growth was offset by
a decline in the net interest margin, which fell from 4.31% for the
first three quarters of 1993 to 4.16% for 1994. The decline in the
margin was primarily due to lower interest rates on earning assets
which fell further than the rates on interest-bearing liabilities.
The combination of earning asset growth and the interest margin
decline resulted in a modest 2.1% growth in net interest income.
Anticipating a tightened net interest margin, the Company focused
on growth in loans. This emphasis produced a 18.3% increase in
average loans compared to one year ago. However, due to the
interest rate environment the average yield of the loan portfolio
declined by 72 basis points from the previous year. The net
interest margin for the third quarter of 1994 was 4.15%, compared
to 4.22% for the second 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 assess and manage interest rate
risk and the Company's net interest margin.
At the end of September 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 asset/liability simulations tend to verify the fact
that net interest income will improve in a flat to falling rate
environment and decline in a rising rate environment.
Provision for Loan Loss and Asset Quality
Brenton's solid loan quality was demonstrated as nonperforming
loans dropped to $3,824,000 at September 30, 1994 from $4,584,000
one year ago. This low level of nonperforming loans is reflected
in the nonperforming loan to total loan ratio of .40% at September
30, 1994, compared to .54% 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
276.8% at the end of September 1994, and represented 1.10% of total
loans at that date. For the first nine months of 1994, the
provision for loan losses expense was $1,269,494, compared to
$1,028,827 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.
<PAGE>
Part I -- Item 2
Page 5 of 8
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 three quarters of 1994 total noninterest income (excluding
securities transactions) rose modestly to $12,811,047 from
$12,550,068 one year ago. Contributing to this improvement was a
17.2% growth in insurance commissions and a 15.1% rise in fiduciary
income.
Two noteworthy declines in noninterest income were experienced
in the first nine months of 1994. The first was service charges on
deposit accounts which declined about $225,000 or 5.2%. This
decline is a result of lower fees associated with checking
accounts. This is a trend that will continue in the future and is
being experienced throughout the industry. The second was a
significant decline in secondary market real estate loan fees. The
rise in interest rates over the past year has caused real estate
mortgage activity, particularly re-financings, to decline from
levels experienced in 1993 when mortgage rates hit a twenty-five
year low. Fees associated with secondary market loan activity
declined 61.2% from one year ago, and totaled $799,936 versus
$1,289,426 for the same period of 1993.
Noninterest Expense
For the first three quarters of 1994 noninterest expense
totaled $40,694,439, an increase of 8.0% from one year ago.
Salaries and related benefits comprise 45.6% of this total due
partially to increased 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 12.5% over
one year ago due primarily to banking office remodeling associated
with our mission to provide premier facilities for our banking
customers, as well as significant investments in new technology.
Initial start-up cost related to new initiatives totalling $600,000
for the first nine months of 1994, also impacted non-interest
income.
The Company's net noninterest margin, which measures operating
efficiency was 2.47% for the first three quarters of 1994, compared
to 2.36% one year ago.
<PAGE>
Part I -- Item 2
Page 6 of 8
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 23.9% for the first nine
months of 1994 compared to 26.9% one year ago.
Economy
After Iowa's rapid economic rebound from the Floods of 1993,
state analysts say that Iowa's economic growth is leveling off to
a steady 2% to 3% per year -- a trend that is expected to continue
well into the future. The Des Moines Register's Economic Index
published September 18, 1994 supports this claim: For the month of
August:
- Iowa's unemployment rate fell from 3.9% in August 1993
to 3.3%, which compares to a national unemployment rate of 6.1%;
- Average sales tax receipts, an indicator of consumer
confidence, rose $5.4 million from a year earlier to $96.6 million;
- Non-farm employment grew to 1.3 million, compared to
1.27 million one year earlier;
- For the first eight months of 1994, the total value of
building permits in the state's major communities was $395 million
- - -- 23 percent higher than during the same period of 1993.
In the agricultural sector, the state anticipates record
soybean and corn crop harvests. Although this will drive down
market prices, the net result will be a positive impact on farm
cash flows and on the state's economy.
<PAGE>
Part I -- Item 2
Page 7 of 8
Results of Operations
THE THREE MONTHS ENDEDD SEPTEMBER 30, 1994 COMPARED TO THE
THREE MONTHS ENDED SEPTEMBER 30, 1993.
Net Income
For the three months ended September 30, 1994, net income
totaled $2,808,636 compared to $3,708,650 one year ago. Earnings
per common and common equivalent share totaled $.35 for the third
quarter of 1994 compared to $.47 for the third quarter of 1993. In
analyzing the results of operations, there is much similarity in
the analysis of the third quarter and the first nine months.
Primary factors for the earnings decline include modest growth in
net interest income, a lack of growth in noninterest income,
securities losses in 1994 compared to gains in 1993, and normal
growth in noninterest expense.
Net Interest Income
Net interest income for the third quarter of 1994 grew 3.3%
compared to third quarter of 1993. Net interest income for the
quarter totaled $14,072,245. Growth in earning assets was offset
by a decline in the net interest margin, which was 4.15% in 1994
compared to 4.24% 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 third quarter of 1994
totaled $440,332, an increase of 51.8% 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.
Noninterest Income
Noninterest income in total declined by $551,051 from the
third quarter of 1993 to the second quarter of 1994. The major
cause of this was securities losses in 1994 compared to securities
gains in 1993. Securities losses of $298,173 were taken in the
third quarter of 1994 compared to gains of $210,383 in the third
quarter of 1993. The trends mentioned above in the results of the
first nine months of the year were true for the third quarter.
Service charges on deposit accounts declined by 9.8% and fees on
secondary market real estate loans were down 59.8% or $302,863 from
third quarter of 1993. Insurance commissions and fees increased
27.6% from the prior year quarter and fiduciary income was up
16.6%.
<PAGE>
Part I -- Item 2
Page 8 of 8
Noninterest Expense
As with the results of the first three quarters of the year,
noninterest expense grew 9.5% from the prior year quarter. Salary
and related fringe benefit costs were up 4.6% and comprised 26.3%
of the total noninterest expense increase. Occupancy expense and
furniture and equipment expense were up a combined 16.4%, 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 2.46% for the third quarter of
1994 compared to 2.30% for the third quarter of 1993.
Looking Ahead
Brenton Banks, Inc. is confident that strategies to diversify
financial products, services and delivery systems are sound
investments in the future. As another avenue toward future growth,
the Company is continuing to pursue acquisition opportunities in
economic centers of Iowa and surrounding states that fit into our
growth strategies.
<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 nine months ended September 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)
_________________________________________________________________
Dated Robert L. DeMeulenaere
President
_________________________________________________________________
Dated Steven T. Schuler
Chief Financial Officer and
Vice President/Treasurer/Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE SEPTEMBER 30, 1994 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 50,044,584
<INT-BEARING-DEPOSITS> 89,050
<FED-FUNDS-SOLD> 36,600,000
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<SHORT-TERM> 63,994,175
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<OTHER-SE> 73,170,262
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