UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-6216
BRENTON BANKS, INC.
(Exact name of registrant as specified in its charter)
Incorporated in Iowa No. 42-0658989
State or other jurisdiction of I.R.S. Employer Identification
incorporation or organization
Suite 300, Capital Square, 400 Locust, Des Moines, Iowa 50309
(Address of principle executive offices) (zip code)
515-237-5100
(Registrant's telephone number, including area code)
Not applicable
Former name, former address and former fiscal year, if changed
since last report
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 3, 1995.
7,687,052 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,
1995 1994
-------------- --------------
</CAPTION>
<S> <C> <C>
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,600,371 58,387,727
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . 495,147 64,255
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . . . . 18,500,000 59,396,428
Investment securities:
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . 354,732,388 349,208,773
Held to maturity (approximate market value of
$131,240,000 and $92,284,000 at September 30, 1995,
and December 31, 1994, respectively) . . . . . . . . . . . . . . . . . 130,544,314 94,484,134
-------------- --------------
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 485,276,702 443,692,907
-------------- --------------
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,755,033 2,104,492
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 937,084,849 970,214,498
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . (11,074,834) (10,913,043)
-------------- --------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 926,010,015 959,301,455
-------------- --------------
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 33,335,320 27,103,630
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . 16,611,851 13,064,921
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,392,361 18,211,034
-------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,573,976,800 1,581,326,849
============== ==============
Liabilities and stockholders' equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 137,439,343 136,547,995
Interest-bearing:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374,428,899 315,369,233
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,011,708 255,046,184
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,589,300 633,319,698
-------------- --------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344,469,250 1,340,283,110
-------------- --------------
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . . . . . . . . . . . . . 41,003,504 70,703,736
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 7,000,000 12,000,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . 17,714,604 14,749,917
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 40,898,631 28,939,413
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451,085,989 1,466,676,176
-------------- --------------
Minority interest in consolidated subsidiaries . . . . . . . . . . . . . 4,496,953 4,220,328
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;
7,700,002 shares issued at September 30, 1995 and
7,871,546 shares issued at December 31, 1994 . . . . . . . . . . . . 38,504,010 39,357,730
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,758,818 5,210,344
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,415,172 70,979,317
Unrealized gains (losses) on assets
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 715,858 (5,117,046)
-------------- --------------
Total common stockholders' equity . . . . . . . . . . . . . . . . . . . . 118,393,858 110,430,345
-------------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,573,976,800 1,581,326,849
============== ==============
<FN>
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*
1995 1994 1995 1994
---------- ---------- ---------- -----------
</CAPTION>
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 61,983,238 56,548,698 21,297,032 19,720,368
Interest and dividends on investments:
Available for sale - taxable 10,686,650 9,738,281 3,686,537 3,082,185
Available for sale - tax-exempt 3,418,074 4,220,675 1,044,771 1,323,151
Held to maturity - taxable 2,790,642 1,203,333 1,187,794 499,826
Held to maturity - tax-exempt 2,309,793 1,942,355 780,842 633,415
------------ ----------- ----------- -----------
Total interest and dividends on investments 19,205,159 17,104,644 6,699,944 5,538,577
------------ ----------- ----------- -----------
Interest on federal funds sold and securities
purchased under agreements to resell 1,678,596 742,408 423,181 420,775
Other interest income 37,982 10,642 21,591 2,689
------------ ----------- ----------- -----------
Total interest income 82,904,975 74,406,392 28,441,748 25,682,409
------------ ----------- ----------- -----------
Interest Expense
Interest on deposits 39,609,621 30,253,638 13,422,216 10,487,193
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,217,323 1,193,747 437,273 553,082
Interest on other short-term borrowings 307,445 17,698 100,320 10,881
Interest on long-term borrowings 1,939,973 1,387,690 711,014 559,008
------------ ----------- ----------- -----------
Total interest expense 43,074,362 32,852,773 14,670,823 11,610,164
------------ ----------- ----------- -----------
Net interest income 39,830,613 41,553,619 13,770,925 14,072,245
Provision for loan losses 1,404,675 1,269,494 486,125 440,332
------------ ----------- ----------- -----------
Net interest income after provision for loan losses 38,425,938 40,284,125 13,284,800 13,631,913
------------ ----------- ----------- -----------
Noninterest Income
Service charges on deposit accounts 3,876,014 4,110,788 1,312,976 1,351,390
Insurance commissions and fees 1,858,890 1,580,985 591,374 569,249
Other service charges, collection and exchange
charges, commissions and fees 2,846,516 2,706,778 1,002,544 933,985
Investment brokerage commissions 2,230,828 2,129,798 804,014 615,361
Fiduciary income 1,815,172 1,671,182 601,397 553,387
Net gains (losses) from securities available for sale (2,486) (261,229) 12 (298,173)
Other operating income 524,182 611,516 67,178 232,930
------------ ----------- ----------- -----------
Total noninterest income 13,149,116 12,549,818 4,379,495 3,958,129
------------ ----------- ----------- -----------
Noninterest Expense
Salaries and wages 17,596,544 17,945,066 5,871,063 6,053,102
Employee benefits 3,403,182 3,625,907 1,040,489 1,088,042
Occupancy expense of premises, net 3,780,918 3,399,869 1,282,485 1,126,112
Furniture and equipment expense 2,793,805 2,347,274 896,660 833,481
Data processing expense 1,891,496 1,956,777 622,383 646,695
FDIC deposit insurance assessment 1,550,221 2,178,668 47,256 728,713
Advertising and promotion 1,372,249 1,275,853 451,490 470,905
Other operating expense 8,430,876 7,965,025 3,189,894 2,730,191
------------ ----------- ----------- -----------
Total noninterest expense 40,819,291 40,694,439 13,401,720 13,677,241
------------ ----------- ----------- -----------
Income before income taxes and minority interest 10,755,763 12,139,504 4,262,575 3,912,801
Income taxes 2,376,711 2,901,714 1,142,630 958,530
------------ ----------- ----------- -----------
Income before minority interest 8,379,052 9,237,790 3,119,945 2,954,271
Minority interest 367,419 428,763 122,330 145,635
------------ ----------- ----------- -----------
Net income $ 8,011,633 8,809,027 2,997,615 2,808,636
============ =========== =========== ===========
Per common and common equivalent share**:
Net income $ 1.03 1.11 0.39 0.35
Cash dividends 0.33 0.33 0.11 0.11
==== ==== ==== ====
<FN>
*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,
1995 1994
-------------- --------------
</CAPTION>
<S> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,011,633 8,809,027
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses . . . . . . . . . . . . . . 1,404,675 1,269,494
Depreciation and amortization . . . . . . . . . . . . 3,090,697 2,744,625
Net losses from securities available for sale . . . . 2,486 261,229
Net (increase) decrease in loans held for sale . . . . (7,650,541) 1,844,422
Increase in accrued interest receivable
and other assets . . . . . . . . . . . . . . . . (3,720,308) (3,455,757)
Increase in accrued expenses, other
liabilities and minority interest . . . . . . . . 3,011,076 2,342,846
-------------- --------------
Net cash provided from operating activities . . . . . . . . . . 4,149,718 13,815,886
-------------- --------------
Investing Activities:
Investment securities available for sale:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (212,282,649) (80,749,881)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 213,573,173 110,970,989
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,883,809 19,396,510
Investment securities held to maturity:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (68,782,167) (42,149,626)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 32,721,987 17,932,906
Net (increase) decrease in loans . . . . . . . . . . . . . . . 31,886,765 (90,197,801)
Purchases of bank premises and equipment, net . . . . . . . . (8,967,634) (4,443,386)
-------------- --------------
Net cash used by investing activities . . . . . . . . . . . . . (8,966,716) (69,240,289)
-------------- --------------
Financing Activities:
Net increase in noninterest-bearing, interest-
bearing demand and savings deposits . . . . . . . . . . . . 21,916,538 12,474,585
Net increase (decrease) in time deposits . . . . . . . . . . . (17,730,398) 893,923
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase . . . . . . (29,700,232) 26,329,847
Net decrease in other short-term borrowings . . . . . . . . . (5,000,000) --
Proceeds of long-term borrowings . . . . . . . . . . . . . . . 12,296,000 22,045,030
Repayment of long-term borrowings . . . . . . . . . . . . . . (336,782) (1,256,971)
Dividends on common stock . . . . . . . . . . . . . . . . . . (2,575,774) (2,605,216)
Proceeds from issuance of common stock under
the stock option plan . . . . . . . . . . . . . . . . . . . 179,975 265,088
Payment for shares acquired under common stock
repurchase plan . . . . . . . . . . . . . . . . . . . . . . (3,846,823) (264,775)
Issuance of common stock under the long-term
stock compensation plan . . . . . . . . . . . . . . . . . . 361,602 --
Payment for fractional shares in 3-for-2 stock split . . . . . -- (4,301)
-------------- ---------------
Net cash provided from (used by) financing activities . . . . . (24,435,894) 57,877,210
-------------- ---------------
Net increase (decrease) in cash and cash equivalents . . . . . . (29,252,892) 2,452,807
Cash and cash equivalents at the beginning of the year . . . . . 117,848,410 84,433,347
-------------- ---------------
Cash and cash equivalents at the end of the period . . . . . . . $ 88,595,518 86,886,154
============== ===============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Cash Flow Information
(Unaudited)
</CAPTION>
<S> <C> <C>
Interest paid during the period . . . . . . . . . . . . . . . . $ 38,114,867 29,807,052
Income taxes paid during the period . . . . . . . . . . . . . . 2,407,492 3,511,137
Transfers from investment securities to
assets held for sale . . . . . . . . . . . . . . . . . . . . . -- 4,074,055
============== ==============
<FN>
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 1994 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, 1995 and 1994, was computed using the consolidated
effective federal income tax rates.
For the first nine months of 1995 and 1994, the Company also
recognized income tax expense pertaining to state franchise taxes
payable individually by the subsidiary banks.
5. Common Stock Transactions
During the first nine months of 1995, options on 19,000 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. These
transactions added $179,975 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 finanical
performance goals established by the Board of Directors. Under
the plan, 91,490 shares were granted covering the performance
period from 1992 through 1994; 78,644 shares were granted covering
the performance period from 1993 through 1995; 90,292 shares were
granted covering the performance period from 1994 through 1996; and
87,808 shares were granted covering the performance period from
1995 through 1997. Compensation expense associated with this plan
for the first nine months of 1994 and 1995 was $0 and $340,811,
respectively.
In 1995, 31,108 shares of common stock were issued under the
long-term stock compensation plan. This transaction added $361,602
to the equity of the Company.
In 1994, the Board of Directors authorized a plan to
repurchase the Company's common stock. In 1995, 209,833 shares had
been repurchased at a cost of $3,846,823. Since the plans
inception, the Company has repurchased 254,633 shares at a total
cost of $4,697,773. In July 1995, the Board of Directors
authorized the repurchase of $6 million of stock for 1995.
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 1995 and 1994 were 7,789,468 and 7,952,453,
respectively, which include 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.
Financial Summary
For the first nine months of 1995, Brenton Banks, Inc. and
subsidiaries (the "Company") recorded net income of $8,011,633,
compared to $8,809,027 for the same period of 1994. The lower
earnings reflect a $1,723,006 reduction in net interest income,
attributed to a lower net interest margin.
In the third quarter of 1995, earnings were $433,375 higher
than the second quarter of 1995 and $188,979 higher than the same
period one year ago. The increase from 1994 was due to higher
noninterest income, especially in investment brokerage, insurance
and real estate brokerage. In addition, the Company received a
refund of FDIC deposit insurance premiums totalling approximately
$700,000. These increases in net income were offset by a loss of
$400,000 on the sale of real estate loans, which was taken to
reduce the interest rate risk position within the Company's balance
sheet.
The Company's annualized return on average assets was .72
percent compared to .82 percent for the same period of 1994. The
Company's annualized return on average equity was 9.27 percent
compared to 10.53 percent one year ago. The Company's total assets
grew 2.0 percent from one year ago to $1.6 billion at September 30,
1995.
Strategic Planning
The Company is continuing to work on implementing its
strategic plan. "Strategy for Success" was developed in 1994 with
the goals of creating a strong sales culture, developing non-branch
delivery systems, managing costs and establishing a corporate
structure that supports implementation of the plan. This strategy,
which led to the September 30, 1995 consolidation of Brenton's 13
commercial banks into one statewide banking organization, continues
to emphasize a strong commitment to customer relationships and
communities. Brenton bank branches operate in diverse economic
environments, including metropolitan, agricultural and industrial
areas, and all have differing needs. Recognizing this, the Company
is making changes designed to provide bankers the time and
resources necessary to effectively serve their customers and
communities.
COST MANAGEMENT The Company continues to right-size operations
to bring compensation expenses in line with industry peers.
Between December 31, 1994 and the end of September 1995, salary and
benefits expenses have been reduced, on an annualized basis,
approximately $3 million. Over half of this was realized through
attrition.
<PAGE>
PART I -- ITEM 2
Page 2 of 8
In addition, the Company's cost management team continues to
evaluate all major expense items in an effort to identify and gain
savings in the areas of supplies, record retention and storage, and
occupancy expenses.
RETAIL BANKING A key goal of the Company's Retail Banking
Division is to improve customer service and sales. This includes
working with personal bankers as their roles expand to include
consumer lending, in addition to handling consumer deposit
activity. To accomplish this, all personal bankers will attend
product and sales training, which will enhance their ability to
recommend the best products to suit individual customer needs.
AGRIBUSINESS BANKING The Company has historically had strong
agribusiness banking relationships in its community banks. Because
of this, there is an effort underway to capitalize on the expertise
of Brenton employees and make a renewed commitment to this area by
establishing the Agricultural Banking Division. This group will
focus on sales and service to traditional farm operations and
ag-related businesses. To date, marketing efforts have been
directed toward generating loans. However, evidence suggests there
is strong demand for fee-based products and services, such as cash
management, farm management and employee benefits plans. This
division will be working to expand these services to all
agribusiness customers.
RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1995, COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1994.
Net Income
For the nine months ended September 30, 1995, Brenton recorded
net income of $8,011,633, which is a decline of 9.1 percent from
the first nine months of 1994 which totalled $8,809,027. On a per
common and common stock equivalent share basis, net income was
$1.03 per share for the first three quarters of 1995 compared to
$1.11 one year ago.
Net Interest Income
Average earning assets rose 2.3 percent from the first nine
months of 1994 to the first nine months of 1995. This growth was
offset by a decline in the net interest margin, which fell from
4.16 percent for the first nine months of 1994 to 3.88 percent for
1995. This resulted in a decrease in net interest income of
$1,723,006 from one year ago.
<PAGE>
PART I -- ITEM 2
Page 3 of 8
Many steps have been taken to restructure our balance sheet in
a way that will lessen net interest income's dependence on the
direction of interest rates. For example, variable rate commercial
and consumer loans have been increasing, and $26 million of fixed-
rate real estate loans were sold during the third quarter.
Although this sale resulted in a loss of approximately $400,000, it
should allow for higher and more stable interest margins in the
future.
In addition, since June 1994, the Company has increased
Federal Home Loan Bank borrowings, and brought in a large
commercial deposit account relationship. While these transactions
have increased total assets and net interest income, the spread
earned has been relatively small.
Loan Quality
Brenton's loan quality remains outstanding. For the first
nine months, nonperforming loans were a low .48 percent of total
loans, and the reserve for loan losses was a solid 245.73 percent
of nonperforming loans and 1.18 percent of total loans.
While overall loan quality remains exceptional, the level of
consumer loan delinquencies and charge-offs have been higher than
one year ago, a trend which is being experienced throughout the
industry. Net charge-offs were .17% of average loans for the first
nine months of 1995 compared with .07% for the same period last
year. Underwriting standards have been reviewed and modified in
light of this trend.
For the first nine months of 1995, the Company's average loans
grew 2.8 percent over one year ago. The majority of this increase
related to commercial loans, which rose on average, 14.2 percent
from September 30, 1994. The Company's loan growth led to a 10.6
percent increase in the provision for loan losses expense, which
was $1,404,675 for the nine months ended September 30, 1995,
compared to $1,269,494 one year ago.
January 1, 1995 was the effective date for Financial
Accounting Standards Board Statement 114, "Accounting by Creditors
for Impairment of a Loan". This standard made fundamental changes
in certain accounting procedures for impaired loans, including the
determination of the allowance for loan losses and financial
disclosures. This new Standard has not had a material effect on
the financial statements of the Company.
Noninterest Income
Year-to-date noninterest income was $13,151,602 (excluding
securities gains and losses), a 2.7 percent increase from
$12,811,047 one year ago. Higher insurance revenues, brokerage
commissions, fiduciary income and real estate commissions and fees
were all contributing factors.
<PAGE>
PART I -- ITEM 2
Page 4 of 8
Insurance commissions increased 17.6 percent, due primarily to
sales from credit related insurance. Brokerage revenues for the
year were up 4.7 percent and totalled $2,230,828. The first nine
months of 1995 saw increased fiduciary income of 8.6 percent or
$1,815,172 and revenues from real estate brokerage activities
increased 20.2 percent from one year ago.
These improvements offset declines in other noninterest income
categories. While service charge revenues fell 5.7 percent to
$3,876,014 for the first three quarters of 1995, the third quarter
reflected slight improvement over previous quarters.
One-time revenues and charges further impacted third-quarter
noninterest income. There was a $215,718 gain on the sale of a
building and loan recoveries and gains totalling approximately
$146,000, as well as the $400,000 loss on the sale of real estate
loans.
Securities transactions also influenced the increase in
noninterest income. In 1994, the Company realized losses of
$261,229, compared to $2,486 in 1995. This resulted in increased
noninterest income of $258,743 from 1994 to 1995.
Noninterest Expense
Noninterest expense totalled $40,819,291, only $124,852 or .31
percent higher than the first nine months of 1994. Salaries and
benefits expenses declined 2.6 percent to $20,999,726 from the
first three quarters of 1994. Occupancy and furniture and
equipment expenses rose $827,580 from 1994, due to costs associated
with new facilities in Ames, Ankeny, Davenport and Iowa City,
office remodelings and technology upgrades.
In September 1995, the FDIC refunded approximately $700,000 of
deposit insurance assessments. This was a result of the full
funding of reserves required by the FDIC to insure the deposits of
the banking industry. In future quarters, the Company's FDIC
premium expense will decline approximately 68 percent. The Company
continues to pay the lowest rates available under the FDIC's
risk-based premium system.
Other operating expense rose $465,851 from 1994 levels, due in
part to payments made to EDS, a management consulting group that
was hired to reengineer the retail and commercial banking areas and
assist in developing a formalized process of enhancing noninterest
income.
The net noninterest margin, which measures operating
efficiency, was 2.37 percent compared to 2.47 percent one year ago,
a reflection of the Company's commitment to expense reduction and
noninterest income enhancement.
<PAGE>
PART I -- ITEM 2
Page 5 of 8
Income Taxes
The Company's income tax strategies include reducing income
taxes by purchasing securities and originating loans that 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 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 22.1 percent for the first six
months of 1995 compared to 23.9 percent for 1994. This decline in
effective rate was due to lower overall Company earnings and
reduced state franchise taxes.
In 1994, the Company established out-of-state investment
subsidiaries to manage the investment portfolios for each Brenton
bank. These subsidiaries provided an opportunity to lower the
amount of state franchise taxes paid by the Company. The State of
Iowa enacted legislation that eliminated the tax benefits derived
from these subsidiaries, effective July 1, 1995. The Company
dissolved its subsidiaries on June 30, 1995.
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1994.
Net Income
For the three months ended September 30, 1995, net income
totalled $2,997,615 compared to $2,808,636 one year ago, an
increase of 6.7%. Earnings per common and common equivalent share
totalled $.39 for the third quarter of 1995 compared to $.35 for
the third quarter of 1994. In comparing the results of operations,
there is much similarity in the analysis of the third quarter and
the first nine months. The primary factor in the earnings increase
was the refund of FDIC deposit insurance premiums and higher
noninterest income. This was partially offset by moderate growth
in other noninterest expenses.
Net Interest Income
Net interest income for the quarter totalled $13,770,925 and
declined 2.1 percent from the third quarter of 1994. The net
interest margin was 4.00 percent in 1995 compared to 4.15 percent
in 1994. The decline in margin was due primarily to interest-
earning assets repricing at a slower pace than rates on interest-
bearing liabilities.
<PAGE>
PART I -- ITEM 2
Page 6 of 8
Provisions for Loan Losses
The provision for loan losses for the third quarter of 1995
totalled $486,125, an increase of 10.4 percent over the same period
of 1994.
Noninterest Income
Noninterest income increased by $421,366 or 10.6 percent, from
the third quarter of 1994 to the third quarter of 1995. The
majority of this increase is due to brokerage commissions which
rebounded from slower sales earlier in the year, producing a 30.7
percent increase in revenue from the third quarter one year ago.
A gain on the sale of real estate led to increased operating income
of $259,214 for the third quarter of 1995, compared to one year
ago. In addition, third quarter 1994 securities losses totalled
$298,173, compared to 1995 gains of $12.
Offsetting these increases, service charges on deposit
accounts totalled $1,312,976, a declined of 2.8 percent and other
operating income decreased $165,752 due to losses on the sale of
real estate loans.
Noninterest Expense
Noninterest expense declined $275,521 to $13,401,720 for the
first nine months of 1995 compared to $13,677,241 for the prior
year quarter. Salary and related fringe benefit costs declined 3.2
percent. Occupancy expense and furniture and equipment expense
were up a combined 11.2 percent, relating to new facilities,
facility remodeling and technology upgrades. The Company's net
noninterest margin was 2.29 percent for the third quarter of 1995
compared to 2.62 percent for the third quarter of 1994.
Capital Resources
Common stockholders' equity totalled $118,393,858 as of
September 30, 1995, a 7.2 percent increase from December 31, 1994.
This increase was primarily due to current earnings coupled with
the equity adjustment required by Statement of Financial Accounting
Standard (FAS) No. 115. Under this accounting standard which was
adopted December 31, 1993, the method of classifying investment
securities is based on the Company's intended holding period.
Accordingly, securities that 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, 1995, aggregate unrealized
gains from assets available for sale totalled $715,858, while at
December 31, 1994, aggregate unrealized losses totalled $5,117,046.
This resulted in a net increase of $5,832,904 in common
stockholders' equity in 1995.
<PAGE>
PART I -- ITEM 2
Page 7 of 8
The Company's risk-based core capital ratio was 11.74 percent
at September 30, 1995 and the total risk-based capital ratio was
12.85 percent. These exceeded the minimum regulatory requirements
of 4.00 percent and 8.00 percent, respectively. The Company's tier
1 leverage ratio, which measures capital excluding intangible
assets, was 7.50 percent at September 30, 1995, exceeding the
regulatory minimum requirement range of 3.00 to 5.00 percent. Each
of these capital calculations exclude unrealized gains or losses on
assets available for sale.
The Company paid a dividend of $.11 per common share in the
third quarter of 1995. This dividend was unchanged from the prior
quarter and one year ago, resulting in a third quarter dividend
payout ratio of 28.2 percent of earnings per share and a nine month
dividend payout ratio of 32.0 percent. The fourth quarter 1995
dividend was increased 9.1% to $.12 per common share.
As part of the Company's ongoing stock repurchase plan,
209,833 shares have been purchased in 1995 at a cost of $3,846,823.
The Board of Directors has approved the repurchase of $6 million in
the Company's stock for the current year. Since the inception of
the plan, 254,633 shares have been repurchased at a total cost of
$4,697,773. These shares are expected to be used for the issuance
of shares under the Company's long-term stock compensation plan and
stock option plan.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 10.7 percent at September 30, 1995. In addition, the
Parent Company has a $2 million line of credit with a regional bank
that was unused at the end of September.
Brenton Banks, Inc. common stock closed September of 1995 at
a bid price of $20.125 per share, which is 131 percent of the book
value per share of $15.37 on the same date. This closing stock
price represented a price-to-trailing 12 months earnings multiple
of 17.1 times. Excluding the December 1994 restructuring charge
from earnings, the price-to-earnings ratio was a multiple of 15.1.
Brenton Banks, Inc. continues to pursue acquisition and
expansion opportunities that fit the Company's strategic business
and financial plans. There are currently no pending acquisitions
that would require Brenton Banks, Inc. to secure capital from
public or private markets.
Asset-Liability Management
The Company utilizes a computer simulation-based asset-
liability management system. This system simulates the effect of
various interest rate scenarios and the impact of balance sheet
management decisions on net interest income. Management utilizes
this system to manage interest rate risk, the net interest margin
and the level of total net interest income.
<PAGE>
PART I -- ITEM 2
Page 8 of 8
In late 1994 and 1995, the Company implemented policies to
assist in reducing interest rate risk. Many decisions regarding
loan, investment, and deposit strategies have been made with the
intent of reducing net interest income fluctuations caused by
changes in interest rates.
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,
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. Investment
securities available for sale may be sold prior to maturity to meet
liquidity needs, to respond to market changes or to adjust the
Company's interest rate risk position. Federal funds sold and
assets available for sale comprised 24.3 percent of the Company's
total assets at September 30, 1995.
The Company's stable deposit base and relatively low levels of
large deposits resulted in low dependence on volatile liabilities.
As of September 30, 1995, the Company had borrowings of $35,150,000
from the Federal Home Loan Bank of Des Moines as a means of
providing long-term, fixed-rate funding for specific transactions
and assisting in controlling interest rate risk.
The combination of a high level of potentially liquid assets,
strong cash flow from operations, and low dependence on volatile
liabilities provides strong liquidity for the Company at September
30, 1995.
<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, 1995.
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)
Robert L. DeMeulenaere
Dated (Signature)
President
Steven T. Schuler
Dated (Signature)
Chief Financial Officer/
Treasurer/Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANICAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 69,600,371
<INT-BEARING-DEPOSITS> 495,147
<FED-FUNDS-SOLD> 18,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 354,732,388
<INVESTMENTS-CARRYING> 130,544,314
<INVESTMENTS-MARKET> 131,240,000
<LOANS> 946,839,882
<ALLOWANCE> (11,074,834)
<TOTAL-ASSETS> 1,573,976,800
<DEPOSITS> 1,344,469,250
<SHORT-TERM> 48,003,504
<LIABILITIES-OTHER> 22,211,557
<LONG-TERM> 40,898,631
<COMMON> 38,504,010
0
0
<OTHER-SE> 79,889,848
<TOTAL-LIABILITIES-AND-EQUITY> 1,573,976,800
<INTEREST-LOAN> 61,983,238
<INTEREST-INVEST> 19,205,159
<INTEREST-OTHER> 1,716,578
<INTEREST-TOTAL> 82,904,975
<INTEREST-DEPOSIT> 39,609,621
<INTEREST-EXPENSE> 3,464,741
<INTEREST-INCOME-NET> 39,830,613
<LOAN-LOSSES> 1,404,675
<SECURITIES-GAINS> (2,486)
<EXPENSE-OTHER> 41,186,710
<INCOME-PRETAX> 10,388,344
<INCOME-PRE-EXTRAORDINARY> 10,388,344
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,011,633
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<YIELD-ACTUAL> 7.62
<LOANS-NON> 3,205,000
<LOANS-PAST> 1,029,000
<LOANS-TROUBLED> 273,000
<LOANS-PROBLEM> 4,507,000
<ALLOWANCE-OPEN> 10,913,043
<CHARGE-OFFS> 2,562,000
<RECOVERIES> 1,319,000
<ALLOWANCE-CLOSE> 11,074,834
<ALLOWANCE-DOMESTIC> 11,074,834
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
DIRECTOR'S INCENTIVE PLAN
1. Purpose. The purpose of this Plan is to enable the
Company to attract into and retain as Directors persons of
outstanding competence, and to promote the shareholder point of
view among Directors of the Company.
2. Definitions.
a. "Company" means Brenton Banks, Inc., or any company
successor thereto by merger, consolidation, liquidation, or other
reorganization which has made provision for adoption of this Plan
and the assumption of the Company's obligation's thereunder.
b. "Common Stock" means shares of Common Stock of Brenton
Banks, Inc.
c. "Administrative Committee" means the committee
established by the Board of Directors of the Company pursuant to
paragraph 3 hereof.
d. "Director" means any person who is a Director of the
Company.
e. "Participant" means a Director who is awarded Deferred
Compensation Units hereunder by the Administrative Committee.
f. "Termination Date" shall mean the date benefits are to
be paid to a Participant under paragraph 6 hereof.
g. "Fair Market Value" of the Common Stock shall be the
price at which the last sale of Common Stock was made on the date
in question. If there is no transaction in the Common Stock on
that day, then the Fair Market Value shall be the last bid price
for the Common Stock on that day.
3. Administration.
a. The Board of Directors of the Company shall establish
an Administrative Committee consisting of two or more members of
the Board, and who shall serve at the pleasure of the Board of
Directors, to administer, construe, and interpret this Plan. No
member of the Administrative Committee shall be liable for any
act done or determination made in good faith.
<PAGE>
b. The construction and interpretation by the
Administrative Committee of any provision of this Plan shall be
final and conclusive. It shall determine, subject to the
provisions of this Plan:
i. The Directors who shall participate in the Plan
from time to time; and
ii. The number of Deferred Compensation Units
(sometimes hereinafter called ''Units''), to be set aside for
each Participant.
c. The Administration Committee may, in its discretion,
delegate its duties to an officer or employee, or a committee
composed of officers or employees of the Company, but may not
delegate its authority to construe and interpret this Plan, or to
make the determinations specified in items (i) and (ii) of
subparagraph (b) of this paragraph 3.
4. Establishment of Deferred Compensation Units. The Company
shall set up an appropriate record (hereinafter called the
"Special Ledger"), and thereafter from time to time enter therein
the name of each Participant, the number of Units awarded to such
Participant by the Administrative Committee and the number of
Units credited to such Participant's account pursuant to
paragraph 5 hereof.
5. Credits to Account of Participants. So long as this Plan
remains in effect and until a Participant's Termination Date, the
Company shall credit to such Participant's account in the Special
Ledger, a number of Units equal to: (i) the amount of dividend,
payable in cash or property, which the Participant would have
received had the Participant been the owner of the number of
shares of Common Stock equal to the number of Units in
Participant's account divided by (ii) the Fair Market Value of
the Common Stock on the date of payment of such dividend. No
such credit shall be made with respect to any dividend paid after
a Participant's Termination Date or after the termination of this
Plan, even though the record date is prior thereto.
6. Payment of Benefits.
a. Upon any Participant no longer being a Director of the
Company, there shall be paid to such Participant, or in the event
of Participant's death, to the person or persons designated under
the provisions of subparagraph (b) of this paragraph 6, an amount
equal to: (i) the number of Units then standing to such
Participant's credit in the Special Ledger multiplied by (ii) the
Fair Market Value of the Common Stock on the Participant's
Termination Date. Such amounts shall be payable
<PAGE>
within six months immediately following the Participant's
Termination Date.
b. Each Director upon becoming a Participant shall file
with the Secretary of the Company a notice in writing designating
one or more Beneficiaries to whom payments otherwise due the
Participant shall be made in the event of Participant's death
while a Director of the Company. The Participant shall have the
right to change the Beneficiary or Beneficiaries from time to
time; provided, however, that any change shall not become
effective until received in writing by the Secretary of the
Company.
7. Limitation of Rights.
a. Nothing in this Plan contained shall be construed to:
i. Give any Director of the Company any right to be
awarded any Units other than in the sole discretion of the
Administrative Committee, which authority of the Administrative
Committee is limited by the provisions of this plan;
ii. Give a Participant any rights whatsoever with
respect to shares of Common Stock of the Company; or
iii. Limit in any way the right of the Company to
terminate a Participant's Directorship with the Company at any
time.
8. Adjustment in Number of Units. In the event of any stock
dividend on the Common Stock or any split-up or combination of
shares of the Common Stock, appropriate adjustment shall be made
by the Administrative Committee in the number of Units standing
to the credit of each Participant in the Special Ledger.
9. Nonalienation of Benefits. No right or benefit under this
Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge
the same shall be void. No right or benefit hereunder shall in
any manner be liable for or subject to the debts, contracts,
liabilities, or torts of the person entitled to such benefits.
If any Participant or Beneficiary hereunder should become
bankrupt or attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge any right or benefit hereunder, then
such right or benefit shall, in the discretion of the
Administrative Committee, cease, and in such event, the Company
may hold or apply the same or any part thereof for the benefit of
the Participant or Beneficiary, his or her
<PAGE>
spouse, children, or other dependents, or any of them, in such
manner and in such proportion as the Administrative Committee may
deem proper.
10. Amendment or Termination of Plan.
a. The Board of Directors may terminate this Plan at any
time.
b. The Board of Directors may amend this Plan at any
time.
c. Any amendment or termination of this Plan shall not
affect the rights of Participants or Beneficiaries to payments in
accordance with paragraph 6 of Units standing to the credit of
Participants in the Special Ledger at the time of such amendment
or termination.
11. Gender. As used herein, the masculine pronoun shall
include the feminine gender.
12. Effective Date. This Plan shall become operative and in
effect on such date as shall be fixed by the Board of Directors
of the Company, in its discretion.
TWELFTH AMENDMENT
TO
DATA PROCESSING AGREEMENT
This Twelfth Amendment ("Twelfth Amendment") is effective as
of the first day of July, 1995 ("Twelfth Amendment Effective Date")
and amends and supplements that certain Data Processing Agreement
("Agreement") dated as of the first day of December, 1991 by and
between Brenton Banks Services Corp. (formerly Brenton Information
Services, Inc.) ("Client") and ALLTEL Financial Information
Services, Inc. (formerly Systematics, Inc. and Systematics
Financial Services, Inc.) ("ALLTEL Financial").
W I T N E S S E T H:
WHEREAS, Client desires to extend the term of the Agreement
and provide for other changes; and
WHEREAS, ALLTEL Financial is willing to extend the term and
make such changes pursuant to the terms and conditions contained
herein.
NOW, THEREFORE, in considerations of the mutual promises and
covenants contained herein, the parties agree as follows:
1. Section 2 of the Agreement is amended in its entirety
as follows:
"2. Term.
The term of this Agreement will begin on December
1, 1991 ("Effective Date") and continue through
June 30, 2002 ("Expiration Date"). At least nine
(9) months prior to the Expiration Date, ALLTEL
Financial will submit to Client a written
proposal for renewal of this Agreement. Client
will respond to such proposal within ninety (90)
days following receipt thereof."
2. Section 10.4 of the Agreement is amended in its
entirety as follows:
"10.4 Early Termination. Client may terminate this
Agreement, effective on or after two (2) years
from the Twelfth Amendment Effective Date, upon
satisfaction of each of the following conditions:
(a) Client shall have been acquired (as defined
herein); (b) within six months after it is
acquired Client shall have notified ALLTEL
Financial in writing of its intention to
terminate, with such notice providing for a
Termination Date not less than twelve (12) months
thereafter; and (c) Client shall have paid ALLTEL
Financial a fee, which shall accompany the
foregoing termination notice, equal to twenty
percent (20%) of the sum of the fees payable
pursuant to this Agreement in respect of the
period following the early Termination Date
reflected in the foregoing notice, through and
including the Expiration Date, with such amount
discounted to present value using a discount rate
of eight percent (8%) per annum. This fee shall
also include termination of the Disaster Recovery
Agreement (see Exhibit H). Client and ALLTEL
Financial agree that this fee may be subject to
negotiation if special circumstances exist at the
time of termination. For the purposes of this
Section, Client shall be deemed to have been
acquired if Brenton Banks, Inc. sells all of the
capital stock or substantially all of the assets
of its commercial banks and savings banks, who
aggregately own Client, to an unaffiliated third
party in a bona fide, arms length transaction
which does not have as its principal purpose the
invoking of this Section."
3. The Agreement is amended by adding the following
Section 10.5:
"10.5 Termination for Convenience. Client may
terminate this Agreement prior to the Expiration
Date, without cause, upon satisfaction of each of
the following conditions: (a) Client shall give
written notice to ALLTEL Financial of Client's
intent to terminate pursuant to this Section;
(b) such written notice may not be given before
thirty-six (36) months have expired after the
Twelfth Amendment Effective Date and shall
specify a termination date at least twelve (12)
months after such notice is received by ALLTEL
Financial; and (c) Client shall pay a fee,
calculated as set out below, which shall
accompany the above described termination notice.
The above described termination fee shall be
equal to fifty percent (50%) of the fees payable
hereunder between the early termination date and
the Expiration Date if the early termination
occurs prior to the expiration of sixty (60)
months after the Twelfth Amendment Effective Date
and forty percent (40%) of such fees if the early
termination occurs after the expiration of sixty
(60) months after the Twelfth Amendment Effective
Date."
4. Section 1 of Exhibit C to the Agreement is amended in
its entirety as follows:
"1. Fee Schedule.
Client will pay ALLTEL Financial a fee in monthly
installments as set forth in the following table:
AMOUNT
OF
APPLICABLE PERIOD MONTHLY
PAYMENT
MONTHS 1 - 12 (Dec. 91 - Nov. 92) $181,091
MONTHS 13 - 24 (Dec. 92 - Nov. 93) $179,280
MONTHS 25 - 36 (Dec. 93 - Nov. 94) $177,487
MONTHS 37 - 43 (Dec. 94 - June 95) $175,712
MONTHS 44 - 49 (July 95 - Dec. 95) $197,000
MONTHS 50 - 61 (Jan. 96 - Dec. 96) $149,500
MONTHS 62 - 127 (Jan. 97 -
Expiration Date) $167,000
All fees set out in the table above shall be
adjusted in accordance with the provisions of
Section 7 of Exhibit C, as amended, provided,
however, that after the Twelfth Amendment
Effective Date the next adjustment shall occur
for the month of January, 1998 and thereafter
shall be adjusted annually in January of each
year. Provided, further, that the percentage
increase in the ECI and in the CPI used in
computing the fees to become effective in
January, 1998 shall be the percentage increase in
those indices over the period beginning January,
1997 and ending December, 1997. The percentage
increases in those indices used in computing the
fees that are to become effective in the
subsequent annual periods shall be the respective
percentage increases in the indices over the
twelve month periods ending in December of the
year immediately before the January in which the
adjustments are made."
The fees set out above include all fees for
services to be performed pursuant to the
Agreements and this Twelfth Amendment and all
prior amendments.
5. Section 3.1 of Exhibit C is amended in its entirety as
follows:
"3.1 Definitions.
As used herein, the term "Core Accounts" shall
mean the number of open accounts on the master
file at month-end with respect to the
applications marked with an asterisk (*) in
Section 3.2 of this Exhibit C."
6. Section 3.3 of Exhibit C is amended in its entirety as
follows:
"3.3 Base Volumes and Additional Volume Charges.
Client and ALLTEL Financial agree that the volume
of Core Accounts for Client and its service
bureau customers, if any, as of the Twelfth
Amendment Effective Date was 291,000 Core
Accounts ("Base Volume of Core Accounts").
If the sum of the Core Accounts for Client and
its service bureau customers exceeds the volumes
listed for the applicable time period as set out
in the table below, processed for the Base Fee as
set out in Section 1 of Exhibit C, Client will
pay ALLTEL Financial a monthly amount equal to
the product of the number of Core Accounts in
excess of such volumes multiplied by $.21 per
account.
APPLICABLE TIME PERIOD
(measured from Twelfth Amendment)
Effective Date VOLUME
Months 1 through 12 349,200
Months 13 through 24 349,200
Months 15 through 36 349,200
Months 37 through 48 349,200
Months 49 through 60 392,850
Months 61 through 72 392,850
Months 73 through Expiration Date 392,850
Actual volumes of Core Accounts will be measured
on the last day of each month. If actual volume
is less than the appropriate volumes listed
above, no additional volume charge will apply; no
shortfall shall be cumulative; nor shall any
credit apply to any other charge under this
Agreement.
Client may request ALLTEL Financial to quote the
incremental fee for processing additional volumes
resulting from acquisitions and may, at its
option, pay either the incremental fee or $.21
per account. Should an acquisition occur that
causes Core Accounts to increase more than fifty
percent (50%) of the Base Volume of Core
Accounts, Client and ALLTEL Financial will
promptly negotiate in good faith to establish a
revised Additional Volume Charge not to exceed
$.21 per account.
Additional volume charges do not cover fees or
expenses, if any, which may be applicable to
conversions resulting from acquisitions by Client
or its service bureau customers. ALLTEL
Financial will provide conversion assistance
related to such acquisitions pursuant to Section
7 of the Agreement.
Volume reductions by Client shall not result in
a reduction of fees below the monthly fees set
out in Section 1 of this Exhibit C; however, if
volumes are reduced to a level less than seventy-
five percent (75%) of the Base Volume of Core
Accounts, ALLTEL Financial and Client will
negotiate in good faith to establish a new base
monthly fee.
In addition, Client-requested changes in the
output schedule, in third-party software, copies
made (laser printer, etc.) or storage media
(optical disc, etc.) may require personnel and/or
equipment additions. If any such Client
requested change is expected to have such an
impact, ALLTEL Financial will advise Client in
writing, and the parties will negotiate in good
faith a mutually agreeable additional charge."
7. Section 5 of Exhibit C to the Agreement shall be
amended in its entirety as follows:
"5. Resident Staff.
ALLTEL Financial agrees to provide the following
Resident Staff during the term of the Agreement:
Resident Minimum
Discretionary Programming 3 FTE 1 FTE
Business Analyst 1 FTE 0
PC Help Desk 1 FTE 0"
8. Beginning upon the Twelfth Amendment Effective Date and
continuing thereafter until the Agreement expires or is
terminated, ALLTEL Financial shall assume the
responsibility for implementing all updates and
enhancements to the Systematics Software used in
Client's data center and shall retrofit the custom code
associated with such updates and enhancements. Unless
the parties mutually agree, ALLTEL Financial and Client
shall keep the Systematics Software current to within
one release of the latest release of such software.
9. In addition, beginning upon the Twelfth Amendment
Effective Date and continuing thereafter until the
Agreement expires or is terminated, ALLTEL Financial
will provide the following services:
a. Conduct a Training Assessment for Client and
deliver a Training Plan designed to meet Client's
needs as determined by the Training Assessment;
b. Install and operate the Hamilton and Sullivan
Account Analysis System, (Client shall be
responsible for all fees and expenses charged by
Hamilton and Sullivan in providing any support and
implementation services);
c. Install and operate the SSI Safe Deposit
Accounting System, (Client shall be responsible
for all fees and expenses charged by SSI in
providing any support and implementation
services);
d. Perform a Network Review and evaluation to define
the current Network and provide recommendations
for network enhancements;
e. Provide Client's executive management with an
annual technology briefing at Client's premises in
Des Moines, Iowa; and
f. Provide Client with one session for a systems
applications review per year.
g. Provide Client with resources for conversion
services for financial institutions acquired by
Client during the term of this Agreement at ALLTEL
Financial's costs.
10. At Client's option, during the term of this Agreement,
Client may direct ALLTEL Financial to provide and
install the following ALLTEL Financial systems:
Information warehouse facility/Executive Notebook,
Customer Service Workstation, Customer Information
System and Branch Automation Platform (SalesView) (for
up to 44 branches). Such systems shall be provided at
no additional license fee but Client shall be
responsible for maintenance or usage fees for such
systems at ALLTEL Financial's then current fees. In
the event that Client needs installation support for
such systems in excess of Client's discretionary hours,
ALLTEL Financial shall provide such installation
support at ALLTEL Financial's costs.
11. All references in the Agreement to SI or Systematics
shall be deemed to refer to ALLTEL Financial.
12. All terms and conditions of the Agreement not amended
herein remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Twelfth
Amendment by their duly authorized representatives as of the
Twelfth Amendment Effective Date.
ALLTEL Financial Information Brenton Banks Services Corp.
Services, Inc.
BY: ____________________________ BY: ___________________________
NAME: __________________________ NAME: _________________________
TITLE: _________________________ TITLE: ________________________
