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, 1996
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 1, 1996.
8,111,312 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,
1996 1995
-------------- --------------
</CAPTION>
<S> <C> <C>
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,382,963 71,159,078
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . 801,930 265,072
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . . . . -- 37,600,000
Investment securities:
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . 445,555,951 396,370,443
Held to maturity (approximate market value of
$92,066,000 and $109,131,000 at September 30, 1996,
and December 31, 1995, respectively) . . . . . . . . . . . . . . . . . 91,663,981 108,082,213
-------------- --------------
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 537,219,932 504,452,656
-------------- --------------
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,799,712 8,707,309
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,871,933 910,193,212
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . (11,528,313) (11,069,869)
-------------- --------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905,343,620 899,123,343
-------------- --------------
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 30,853,155 32,849,842
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . 15,966,816 14,494,261
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,065,101 14,127,759
-------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,593,433,229 1,582,779,320
============== ==============
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 145,639,495 143,220,373
Interest-bearing:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418,352,728 399,308,392
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,524,502 215,488,846
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,636,215 603,925,104
-------------- --------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330,152,940 1,361,942,715
-------------- --------------
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . . . . . . . . . . . . . 73,359,089 41,107,411
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 24,650,000 2,500,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . 18,263,810 15,083,453
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 23,210,713 38,177,803
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,469,636,552 1,458,811,382
-------------- --------------
Minority interest in consolidated subsidiaries . . . . . . . . . . . . . 4,529,578 4,434,307
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;
7,384,370 shares outstanding at September 30, 1996 and
7,653,252 shares outstanding at December 31, 1995 . . . . . . . . . . 36,921,850 38,266,260
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 2,020,518
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,299,370 77,888,451
Unrealized gains (losses) on assets
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 45,879 1,358,402
-------------- --------------
Total common stockholders' equity . . . . . . . . . . . . . . . . . . . . 119,267,099 119,533,631
-------------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,593,433,229 1,582,779,320
============== ==============
<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
1996 1995 1996 1995
---------- ---------- ---------- ----------
</CAPTION>
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $59,357,416 61,983,238 20,018,868 21,297,032
Interest and dividends on investments:
Available for sale - taxable 14,591,053 10,686,650 5,273,388 3,686,537
Available for sale - tax-exempt 3,130,176 3,418,074 1,034,754 1,044,771
Held to maturity - taxable 2,408,450 2,790,642 645,878 1,187,794
Held to maturity - tax-exempt 2,287,203 2,309,793 742,978 780,842
----------- ---------- ----------- -----------
Total interest and dividends on investments 22,416,882 19,205,159 7,696,998 6,699,944
----------- ---------- ----------- -----------
Interest on federal funds sold and securities
purchased under agreements to resell 974,937 1,678,596 193,559 423,181
Other interest income 57,126 37,982 14,094 21,591
----------- ---------- ----------- -----------
Total interest income 82,806,361 82,904,975 27,923,519 28,441,748
----------- ---------- ----------- -----------
Interest Expense
Interest on deposits 37,074,484 39,609,621 12,253,908 13,422,216
Interest on federal funds purchased and securities
sold under agreements to repurchase 1,750,167 1,217,323 745,971 437,273
Interest on other short-term borrowings 510,084 307,445 283,456 100,320
Interest on long-term borrowings 1,824,879 1,939,973 529,794 711,014
----------- ---------- ----------- -----------
Total interest expense 41,159,614 43,074,362 13,813,129 14,670,823
----------- ---------- ----------- -----------
Net interest income 41,646,747 39,830,613 14,110,390 13,770,925
Provision for loan losses 2,100,000 1,404,675 600,000 486,125
----------- ---------- ----------- -----------
Net interest income after provision for loan losses 39,546,747 38,425,938 13,510,390 13,284,800
----------- ---------- ----------- -----------
Noninterest Income
Service charges on deposit accounts 4,945,145 3,876,014 1,676,737 1,312,976
Investment brokerage commissions 2,857,076 2,230,828 904,172 804,014
Insurance commissions and fees 2,197,294 1,858,890 755,464 591,374
Mortgage banking income 1,536,292 807,958 534,924 274,657
Other service charges, collection and exchange
charges, commissions and fees 2,046,335 2,038,558 720,503 727,887
Fiduciary income 2,055,384 1,815,172 678,349 601,397
Net gains (losses) from securities available for sale 309,244 (2,486) (5,162) 12
Other operating income 1,003,080 524,182 511,221 67,178
----------- ---------- ----------- -----------
Total noninterest income 16,949,850 13,149,116 5,776,208 4,379,495
----------- ---------- ----------- -----------
Noninterest Expense
Salaries and wages 18,384,847 17,596,544 6,163,180 5,871,063
Employee benefits 3,236,670 3,403,182 1,016,950 1,040,489
Occupancy expense of premises, net 4,093,186 3,780,918 1,426,231 1,282,485
Furniture and equipment expense 2,872,876 2,793,805 954,460 896,660
Data processing expense 1,937,834 1,891,496 657,408 622,383
FDIC deposit insurance assessment 1,649,610 1,550,221 1,399,723 47,256
Advertising and promotion 1,252,871 1,372,249 402,462 451,490
Supplies 1,090,741 884,607 349,047 286,184
Other operating expense 6,992,054 7,546,269 2,315,555 2,903,710
----------- ---------- ----------- -----------
Total noninterest expense 41,510,689 40,819,291 14,685,016 13,401,720
----------- ---------- ----------- -----------
Income before income taxes and minority interest 14,985,908 10,755,763 4,601,582 4,262,575
Income taxes 4,218,102 2,376,711 1,274,753 1,142,630
----------- ---------- ----------- -----------
Income before minority interest 10,767,806 8,379,052 3,326,829 3,119,945
Minority interest 446,640 367,419 153,421 122,330
----------- ---------- ----------- -----------
Net income $10,321,166 8,011,633 3,173,408 2,997,615
=========== ========== =========== ===========
Per common and common equivalent share before the 10%
common stock dividend:
Net income $ 1.36 1.03 .43 .39
Cash dividends .37 .33 .13 .11
==== ==== ==== ====
Per common and common equivalent share after the 10%
common stock dividend:
Net income $ 1.24 .94 .39 .35
Cash dividends .336 .30 .118 .10
==== ==== ==== ====
<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 Cash Flows
For the nine months ended September 30,
1996 1995
-------------- -------------
</CAPTION>
<S> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,321,166 8,011,633
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses . . . . . . . . . . . . . . 2,100,000 1,404,675
Depreciation and amortization . . . . . . . . . . . . 3,472,856 3,090,697
Net (gains) losses from securities available
for sale . . . . . . . . . . . . . . . . . . . . . . (309,244) 2,486
Net increase in loans held for sale . . . . . . . . . (1,092,403) (7,650,541)
Increase in accrued interest receivable
and other assets . . . . . . . . . . . . . . . . (2,284,431) (3,720,308)
Increase in accrued expenses, other
liabilities and minority interest . . . . . . . . 3,278,980 3,011,076
-------------- --------------
Net cash provided by operating activities . . . . . . . . . . . 15,486,924 4,149,718
-------------- --------------
Investing Activities:
Investment securities available for sale:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (225,882,799) (212,282,649)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 130,117,549 213,573,173
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,408,932 2,883,809
Investment securities held to maturity:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (36,731,780) (68,782,167)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 52,391,450 32,721,987
Net (increase) decrease in loans . . . . . . . . . . . . . . . (7,982,932) 31,886,765
Purchases of bank premises and equipment . . . . . . . . . . . (1,849,692) (8,967,634)
Proceeds from sale of bank premises and equipment . . . . . . 833,453 --
-------------- --------------
Net cash used by investing activities . . . . . . . . . . . . . (43,695,819) (8,966,716)
-------------- --------------
Financing Activities:
Net increase in noninterest-bearing, interest-
bearing demand and savings deposits . . . . . . . . . . . . 1,499,114 21,916,538
Net decrease in time deposits . . . . . . . . . . . . . . . . (33,288,889) (17,730,398)
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase . . . . . . 32,251,678 (29,700,232)
Net increase (decrease) in other short-term borrowings . . . . 8,000,000 (5,000,000)
Proceeds of long-term borrowings . . . . . . . . . . . . . . . 494,000 12,296,000
Repayment of long-term borrowings . . . . . . . . . . . . . . (1,311,090) (336,782)
Dividends on common stock . . . . . . . . . . . . . . . . . . (2,789,973) (2,575,774)
Proceeds from issuance of common stock under
the stock option plan . . . . . . . . . . . . . . . . . . . 132,832 179,975
Payment for shares acquired under common stock
repurchase plan . . . . . . . . . . . . . . . . . . . . . . (6,952,869) (3,846,823)
Proceeds from issuance of common stock under the
long-term stock compensation plan . . . . . . . . . . . . . 334,835 361,602
-------------- ---------------
Net cash provided (used) by financing activities . . . . . . . . (1,630,362) (24,435,894)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents . . . . . . (29,839,257) (29,252,892)
Cash and cash equivalents at the beginning of the year . . . . . 109,024,150 117,848,410
-------------- ---------------
Cash and cash equivalents at the end of the period . . . . . . . $ 79,184,893 88,595,518
============== ===============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Cash Flow Information
(Unaudited)
</CAPTION>
<S> <C> <C>
Interest paid during the period . . . . . . . . . . . . . . . . $ 39,657,506 38,114,867
Income taxes paid during the period . . . . . . . . . . . . . . 4,064,906 2,407,492
============== ==============
<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 1995 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, 1996 and 1995, was computed using the consolidated effective
federal income tax rates.
For the first nine months of 1996 and 1995, the Company also
recognized income tax expense pertaining to state franchise taxes
payable individually by the subsidiary banks.
5. Common Stock Transactions
On October 7, 1996, the Board of Directors declared a ten
percent common stock dividend for stockholders of record on October
17, 1996. The stock certificates were issued on October 29, 1996.
Fractional shares resulting from this stock dividend were paid in
cash.
<PAGE>
PART 1 -- Item 1
Page 2 of 2
5. Common Stock Transactions, cont.
On September 5, 1996, a special meeting of stockholders was
held to approve the Brenton Banks, Inc. 1996 Stock Option Plan (the
"Plan"). The Plan, which was approved, authorizes the granting of
options on up to 500,000 shares (550,000 shares as adjusted for the
ten percent common stock dividend) of the Company's common stock to
key employees of the Company. The price at which options may be
exercised cannot be less than the fair market value of the shares
at the date the options are granted. The options are subject to
certain vesting requirements and maximum exercise periods, as
established by the Compensation Committee of the Board of
Directors. On September 12, 1996, 426,000 options were granted to
35 employees of the Company at an option price of $24.375 per
share. As a result of the ten percent common stock dividend, the
number of options granted was adjusted to 468,600 and the option
price was adjusted to $22.16 per share.
During the first nine months of 1996, options on 12,000 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 $132,832 to the equity of the Company.
In 1992, the Company originated a long-term stock compensation
plan for key management personnel. Compensation expense associated
with this plan for the first nine months of 1996 and 1995 was
$901,343 and $340,811, respectively.
The Company issued 14,718 and 20,089 shares of common stock
under the long-term stock compensation plan for 1996 and 1995,
respectively. These transactions added $334,835 and $361,602 to the
equity of the Company for the years 1996 and 1995, respectively.
In 1994, the Board of Directors authorized a plan to
repurchase the Company's common stock. In May 1996, the Board of
Directors increased the amount authorized for common stock
repurchases in 1996 from $5 million to $10 million. Through
September 30, 1996, 295,600 shares had been repurchased at a cost
of $6,952,869. Since the plan's inception, the Company has
repurchased 598,533 shares at a total cost of $12,633,930.
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 1996 and 1995 was 7,595,939 and 7,780,501, 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
Brenton Banks, Inc. (the "Company") produced strong earnings
growth during the first nine months of 1996, with net income
increasing to $10,321,166, compared to $8,011,633 for the first
nine months of 1995, an increase of 28.8 percent. The Company's
annualized return on average assets (ROA) was .91 percent, compared
to .72 percent for the same period in 1995; the annualized return
on average equity (ROE) was 11.58 percent, compared to 9.27 percent
one year ago.
Common stockholders' equity totaled $119,267,099 as of
September 30, 1996, a .2 percent decrease from December 31, 1995.
This decrease was primarily caused by the repurchase of common
stock. As part of the Company's ongoing stock repurchase plan,
295,600 shares have been repurchased during the first nine months
of 1996 at a cost of $6,952,869. In May 1996, the Board of
Directors approved an increase from $5 million to $10 million in
the authorized amount for the common stock repurchase for calendar
year 1996. Since the inception of the plan in 1994, the Company
has repurchased 598,533 shares at a total cost of $12,633,930.
The aggregate amount of unrealized net gains or losses on
assets available for sale (including the income tax and minority
interest effect) is a component of stockholders' equity. At
September 30, 1996, aggregate unrealized gains from assets
available for sale totaled $45,879, compared to $1,358,402 at
December 31, 1995, a decrease of $1,312,523.
The Company continues to monitor its capital position to
balance the goals of maximizing return on average equity, while
maintaining adequate capital levels for regulatory purposes. The
Company's risk-based core capital ratio was 11.85 percent at
September 30, 1996, and the total risk-based capital ratio was
12.98 percent. These exceeded the minimum regulatory requirements
of 4.00 and 8.00 percent, respectively. The Company's tier 1
leverage ratio, which measures capital excluding intangible assets,
was 7.44 percent at September 30, 1996, exceeding the regulatory
minimum requirement range of 3.00 to 5.00 percent. Each of these
capital calculations exclude the unrealized gains on assets
available for sale.
<PAGE>
PART 1 -- Item 2
Page 2 of 9
The Company paid dividends of $.37 per common share in the
first nine months of 1996, compared to $.33 per common share for
the same period of 1995, an increase of 12.1 percent. Dividends
for the first three quarters totaled $2,789,972. In October 1996,
the Board of Directors declared a regular quarterly cash dividend
of $.13 per common share. In addition to the cash dividend, the
Board also declared a 10 percent common stock dividend. As a
result of this action, each shareholder will receive an additional
share of Brenton Banks, Inc. common stock for every 10 shares
currently owned. Fractional shares will be paid in cash.
Subsequent to the common stock dividend, cash dividends per share
will be restated to $.336 for the first three quarters of 1996 and
$.118 for the three months ended September 30, 1996. From this
point forward, all per share data will be restated to reflect the
10 percent common stock dividend.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 9.8 percent at September 30, 1996, compared to 10.4
percent at December 31, 1995. In addition, the Parent Company had
$5 million in cash and has a $2 million line of credit with a
regional bank that was unused at the end of September 1996.
Brenton Banks, Inc. common stock closed September 1996 at
$22.50 per share, which is 1.53 times the book value per share of
$14.68 on the same date. This closing stock price represented a
price-to-trailing-12-months-earnings multiple of 14.8 times.
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 has a fully integrated asset-liability management
system to assist in managing the balance sheet. The process
includes the development of simulations that reflect the effects of
various interest rate scenarios on net interest income and is used
to project the results of alternative investment decisions.
Management performs analysis of the simulations to manage interest
rate risk, the net interest margin and levels of net interest
income.
The asset-liability simulations indicate that net interest
income will be maximized in a stable interest rate environment.
The Company currently believes that net interest income would fall
by less than 5 percent if interest rates immediately increased or
decreased by 300 basis points, which is within the Company policy
limit.
<PAGE>
PART 1 -- Item 2
Page 3 of 9
Many steps have been taken over the past two years to
restructure the Company's balance sheet in a way that will lessen
the impact of interest rate fluctuations on net interest income.
The Company has increased its variable rate consumer loans by $58.2
million since the inception of this product in December, 1994.
The Company has also reduced its reliance on residential real
estate loans with long repricing periods. This was done by
securitizing approximately $56 million of these loans during 1995.
At September 30, 1996, $44 million of these loan pools had been
sold at a loss of approximately $25,500, and $10 million were held
in the Company's available for sale investment portfolio. The
residential real estate loan portfolio has declined $57 million
from September 30, 1995, or 22.1 percent.
In addition to normal balance sheet instruments, the Company
has utilized Federal Home Loan Bank borrowings and, to a limited
extent, interest rate swaps to reduce interest rate risk.
Liquidity
The Company actively monitors and manages its liquidity
position. The objective is to maintain sufficient cash flows to
fund operations and meet customer commitments. Federal funds sold,
loans held for sale and assets 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 asset-liability position. Federal funds sold and assets
available for sale comprised 28.6 percent of the Company's total
assets at September 30, 1996.
Net cash provided from Company operations is another major
source of liquidity. The net cash provided from operating
activities was $15,486,924 for the first three quarters of 1996.
The Company's trend of strong cash flows from operations is
expected to continue into the foreseeable future.
The Company's stable deposit base and relatively low levels of
large deposits resulted in low dependence on volatile liabilities.
As of September 30, 1996, the Company had borrowings of $36,150,000
from the Federal Home Loan Bank of Des Moines, of which $28,150,000
were used as a means of providing long-term fixed-rate funding for
certain fixed-rate assets and managing interest rate risk. The
remaining $8,000,000 of borrowings from the Federal Home Loan Bank
represents a variable rate, short-term line of credit used to fund
mortgage loans originated for sale.
<PAGE>
PART 1 -- Item 2
Page 4 of 9
The combination of a high level of potentially liquid assets,
strong cash flows from operations and low dependence on volatile
liabilities provided sufficient liquidity for the Company at
September 30, 1996.
RESULTS OF OPERATIONS
THE NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 1995.
Net Income
For the nine months ended September 30, 1996, the Company
recorded net income of $10,321,166, which is an increase of 28.8
percent from net income for the first nine months of 1995, which
totaled $8,011,633. On a per common and common stock equivalent
share basis, net income was $1.24 per share for the first three
quarters of 1996, compared to $.94 per share for the first three
quarters of 1995. The Company's total assets at September 30, 1996
were consistent with 1995 levels of $1.6 billion. Average total
assets grew $10 million or .7 percent over one year ago.
Net Interest Income
During the first nine months of 1996, net interest income grew
4.6 percent to $41,646,747, compared to $39,830,613 for the same
period a year ago. The increase was primarily due to improved net
interest margin, which increased 14 basis points from 3.88 percent
for the first nine months of 1995 to 4.02 percent for the first
nine months of 1996. This improvement in margin was primarily the
result of an 18 basis point drop in interest-bearing liability
costs.
Loan Quality
Nonperforming loans totaled $8,496,000 at September 30, 1996,
compared to $4,327,000 at September 30, 1995. Nonperforming loans
include loans on nonaccrual status, loans that have been
renegotiated to below market interest rates or terms, and loans
past due 90 days or more. The increase in nonperforming loans over
one year ago is concentrated in the category of past due 90 days or
more. Of the $3,583,000 increase in this category, $2,060,000 has
subsequently been paid off or is in the process of renewal.
Overall, asset quality remains strong, and reserves are considered
adequate at 1.26 percent of total loans.
<PAGE>
PART 1 -- Item 2
Page 5 of 9
The provision for loan losses totaled $2,100,000 for the nine
months ended September 30, 1996, compared to $1,404,675 for the
same period one year ago. The increase in the provision is related
both to an increase in net charges-offs and the Company's desire to
increase the reserve as a percent of loans over the next few years.
Net charge-offs were .24 percent of average loans for the first
nine months of 1996, compared with .17 percent for the same period
last year.
Noninterest Income
The Company has made a conscious effort to enhance fee-based
financial services. Noninterest income for the nine months ended
September 30, 1996 was $16,640,606 (excluding securities gains and
losses), a 26.5 percent increase from $13,151,602 one year ago.
All categories of noninterest income reflect strong gains from the
prior year.
Compared to the same period a year ago, service charges on
deposits were up 27.6 percent. This increase was due to both
focusing on collecting a higher percentage of fees that are
assessed and implementing a new commercial account analysis system.
Brokerage commissions rose 28.1 percent, reflecting a strong
market. Insurance commissions and fees advanced 18.2 percent, led
by a 40.2 percent increase in the sales of credit-related insurance
and an 11.8 percent increase in insurance agency commissions.
Mortgage banking fees totaled $1,536,292 for the first nine
months of 1996, compared to $807,958 for the prior year, an
increase of 90.1 percent. This increase is attributed to a higher
volume of real estate mortgage loan originations and a greater
percentage of loans being sold into the secondary market with the
servicing rights being retained.
Fiduciary income rose 13.2 percent to $2,055,384. Other
service charges, collection and exchange charges, commissions and
fees showed a moderate increase of 0.4 percent.
Other operating income increased by $478,898 for the nine
months ended September 30, 1996 compared to the same period of
1995. Gains on the sale of loans of $78,990 were recorded in 1996
versus losses of $284,111 in 1995. Several one-time revenue items
affected this category in both periods.
Securities transactions created an additional increase in
noninterest income. Securities gains for the first three quarters
of 1996 totaled $309,244 versus losses for the first three quarters
of 1995 of $2,486.
<PAGE>
PART 1 -- Item 2
Page 6 of 9
Noninterest income (excluding securities gains and losses) for
the nine months ended September 30, 1996 represented 1.41 percent
of average assets and 39.96 percent of total operating income,
which were the highest levels in the history of the Company. For
the nine months ended September 30, 1995, noninterest income
(excluding securities gains and losses) represented 1.13 percent of
average assets and 33.02 percent of total operating income.
Noninterest Expense
Noninterest expense for the first nine months of 1996
increased 1.7 percent to $41,510,689, compared to $40,819,291 for
the same period one year ago. Noninterest expense for 1996
includes a one-time special assessment of $1,263,000 imposed by the
FDIC. This assessment affects all deposits insured by the Savings
Association Insurance Fund (SAIF) as of March 31, 1995 and equals
65.7 basis points per $100 of SAIF-insured deposits. Excluding
this one-time insurance fund assessment, noninterest expenses would
have decreased by 1.4 percent over the prior year.
Salaries and wages increased 4.5 percent to $18,384,847 for
the first nine months of 1996, compared to $17,596,544 for 1995.
Fixed compensation expense was down from the prior year while
variable compensation expense grew due to higher sales of
insurance, mortgage and investment products. Employee benefits
expense decreased by 4.9 percent due to lower staffing levels in
1996.
Occupancy expense for the nine months ended September 30, 1996
totaled $4,093,186, compared to $3,780,918 for the prior year, an
increase of $312,268 or 8.3 percent. Increases in this category
are related to rents and leases and depreciation expense associated
with new facilities or remodeling projects completed in the past
two years.
Supplies expense increased by $206,134 or 23.3 percent over
same period of prior year. The majority of this increase was due
to increased check orders related to the 1995 merger of the
individual Brenton commercial banks. The Company provided check
reorders free of charge to customers who had duplicate account
numbers related to the merger.
Advertising and promotion and other operating expense declined
by $119,378 and 554,215, respectively. Advertising expense is
lower than the prior year primarily due to the timing of planned
marketing campaigns. It is anticipated that for the entire year,
advertising expense will be comparable to the amount incurred in
1995. The decline in other operating expenses is the result of
both cost control measures and benefits derived in 1996 related to
the merger of the commercial banks in 1995 into one bank charter.
<PAGE>
PART 1 -- Item 2
Page 7 of 9
Furniture and equipment and data processing expenses had
moderate increases over the prior year of 2.8 percent and 2.4
percent, respectively.
The Company continues to focus on cost management and
evaluates all major expense items in an effort to control the
growth rate of noninterest expense categories.
The Company's net noninterest margin, which measures operating
efficiency, was 2.11 percent, compared to 2.37 percent one year
ago. Another ratio that measures productivity is the efficiency
ratio. At September 30, 1996, the Company's efficiency ratio was
68.44 percent, compared to 73.30 percent one year ago. Excluding
the one-time insurance fund assessment, net noninterest margin and
the efficiency ratio for the first nine months of 1996 would have
been 2.00 percent and 66.35 percent, respectively.
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 a sufficient 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 28.1 percent for the first nine months of
1996 compared to 22.1 percent for 1995.
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THE THREE
MONTHS ENDED SEPTEMBER 30, 1995.
Net Income
For the three months ended September 30, 1996, net income
totaled $3,173,408, compared to $2,997,615, an increase of 5.9
percent. Earnings per common and common equivalent share totaled
$.39 for the third quarter of 1996, compared to $.35 for the third
quarter for 1995.
Net Interest Income
Net interest income for the quarter totaled $14,110,390, an
increase of $339,465 or 2.5 percent over the third quarter of the
prior year. The third quarter net interest margin was 4.08
percent, compared to 4.00 percent in 1995.
<PAGE>
PART 1 -- Item 2
Page 8 of 9
Provision for Loan Losses
The provision for loan losses for the third quarter of 1996
totaled $600,000, compared to $486,125 for the third quarter of
1995. Net charge-offs were .30 percent of average loans for the
third quarter of 1996, compared with .26 percent for the same
period last year. The increased provision relates to the higher
level of net charge-offs and the Company's desire to increase the
reserve as a percent of total loans.
Noninterest Income
Noninterest income increased by $1,396,713 or 31.9 percent,
when comparing the third quarter of 1996 to the third quarter of
1995. This increase demonstrates the Company's focus on growing
revenues from both traditional and other financial services.
Service charges on deposit accounts increased $363,761 or 27.7
percent. Mortgage banking income totaled $534,924 for the quarter,
an increase of 94.8 percent over the same quarter in 1995.
Insurance commissions and fees and investment brokerage commissions
increased by 27.7 percent and 12.5 percent, respectively. The
remaining category with a large variance when comparing the third
quarter of 1996 to 1995 is other operating income, which increased
by $444,043. Of this increase, $381,354 is due to gains and losses
on the sale of loans. The Company recorded gains on the sale of
loans of $55,958 during the third quarter of 1996, compared to
losses in the third quarter of 1995 of $325,396.
Noninterest Expense
Noninterest expense increased 9.6 percent when comparing the
third quarter of 1996 with the third quarter of 1995. This
increase is directly related to the one-time special assessment of
$1,263,000 by the FDIC to fully fund the SAIF fund. Excluding this
one-time insurance fund assessment, noninterest expense would have
increased by .2 percent over the same quarter of prior year.
Salary and related fringe benefit costs increased 3.9 percent.
This increase was due to the increase in variable compensation cost
related to increased financial services income discussed under
noninterest income. Fixed compensation expense actually showed a
decrease. Other operating expenses decreased by $588,155 or 20.3
percent when comparing the third quarter of 1996 to the third
quarter of 1995. As mentioned under the nine month results,
benefits are being realized due to cost control measures and from
the merger of the 13 commercial banks into one bank during 1995.
The Company's net noninterest margin was 2.25 percent for the third
quarter of 1996 compared to 2.29 percent for the third quarter of
1995.
<PAGE>
PART 1 -- Item 2
Page 9 of 9
Looking Ahead
The development and implementation of the "Strategy for
Success" continues throughout 1996. This plan called for several
changes that are now in place including greater customer focus, a
new line of business structure, the development of alternative
delivery systems and the merger of our 13 commercial banks. The
Company has experienced a number of new efficiencies with these
changes in place. As the plan continues, management is turning its
attention toward the development of successful sales initiatives,
particularly in the areas of direct consumer lending and fee-
producing services.
This strategy continues to emphasize a strong commitment to
customer relationships and the communities served while providing
profitability for the shareholders.
<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, 1996.
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
1996 Stock Option Plan
<PAGE>
Brenton Banks, Inc.
1996 Stock Option Plan
Plan Document
September 5, 1996
<PAGE>
Table of Contents
Section Page
1. Purpose . . . . . . . . . . . . . . . . . . . . . 3
2. Administration of Plan . . . . . . . . . . . . . . 3
3. Shares Subject to Plan . . . . . . . . . . . . . . 4
4. Eligibility . . . . . . . . . . . . . . . . . . . 5
5. Option Terms and Conditions . . . . . . . . . . . 5
6. No Right to Continued Employment . . . . . . . . . 6
7. Restrictions on Transferability. . . . . . . . . . 6
8. General Restriction . . . . . . . . . . . . . . . 7
9. Tax Withholding . . . . . . . . . . . . . . . . . 7
10. Change in Control. . . . . . . . . . . . . . . . . 7
11. Amendment and Termination. . . . . . . . . . . . . 8
<PAGE>
BRENTON BANKS, INC.
1996 STOCK OPTION PLAN
1. Purpose
1.1 The 1996 Stock Option Plan ("Plan") is established to
support the creation of shareholder value. Its purpose is to
further align the interests of key employees with those of
shareholders and to encourage key employees of Brenton Banks, Inc.
("Company") to acquire an equity interest in the Company. The Plan
is intended to attract, motivate, and retain key employees, and to
tie a significant portion of compensation for such employees to the
long-term success of the Company.
1.2 For purposes of this Plan, the Company means the Company
or entity in which Brenton Banks has a significant ownership
interest including but not limited to all subsidiaries and joint
ventures with Brenton Banks, Inc.
1.3 The Company intends to have Participants retain a
material portion of the Company's stock following the exercise of
the Options granted hereunder in order to further the purposes of
the Plan. It is the Company's expectation that Participants will
maintain and continue to hold 50% of the common stock granted
pursuant to the exercise of the Options, after payment of the
exercise price and the applicable income taxes. Appropriate
exceptions/adjustments shall be made for the personal circumstances
of each Participant including but not limited to educational and
medical situations.
2. Administration of Plan
2.1 The Plan will be administered by the Compensation
Committee ("Committee") of the Board of Directors ("Board").
2.2 The Committee will grant Options, prescribe the form of
the Option Agreements, interpret the Plan, establish any
administrative rules, and take such other actions as it deems
appropriate. The Committee retains the right to accelerate the
vesting of Options granted under the Plan in its sole and absolute
discretion. The Committee may rely upon the advice and assistance
of any individual it deems appropriate in administering the Plan.
2.3 Any determination or action made or taken by the
Committee will be final. No member of the Board will be
3
<PAGE>
liable for any action or determination taken or made in good faith
with respect to the Plan or any Options thereunder.
3. Shares Subject to Plan
3.1 The total number of "Shares" of Company Common Stock
($5.00 par value) reserved and available for Options under the Plan
will be 500,000, subject to adjustment under Section 3.5. The
total number of Shares granted to any Participant may not exceed
20% of the Shares reserved for Options.
3.2 The Shares to be issued upon the exercise of Options may
be authorized but unissued shares, shares issued and reacquired by
the Company, or shares bought on the market for purposes of the
Plan. No fractional shares shall be delivered under the Plan.
3.3 If an Option terminates or otherwise expires without the
issuance of Shares, the Shares subject to the Option will again be
available for Options under the Plan.
3.4 Any Shares issued by the Company in connection with the
assumption or substitution of outstanding Options from an acquired
entity will not reduce the Shares available for Options under the
Plan.
3.5 In the event that the outstanding shares of common stock
are hereinafter increased or decreased, exchanged into or exchanged
for a different number or kind of shares or other securities of the
Company or for another corporation, by reason of recapitalization,
reclassification, stock split up, combination of shares or dividend
or other distribution payable in capital stock, appropriate
adjustment shall be made by the Committee in the number and kind of
shares as to which the Options may be granted under the Plan. In
addition, there shall be appropriate adjustments made in the number
and kind of shares as to which outstanding Options, or portions
thereof then unexercised, shall be exercisable to the end that the
proportionate interest of the holder of such Option shall, to the
extent practicable, be maintained as before the occurrence of such
event. Such adjustment in outstanding Options shall be made
without change in the total price applicable to the unexercised
portion of the Options but with a corresponding adjustment in the
Option Price per share.
4
<PAGE>
4. Eligibility
4.1 Eligibility will be limited to officers and other key
employees of the Company who can most significantly influence the
longer-term performance of the Company. The Committee will decide
which of the Company's key employees meet this criterion and to
whom an Option will be granted ("Participant").
4.2 Participants may receive more than one Option, and the
terms and conditions of Options can vary among Participants and
from prior Options. Receipt of an Option does not entitle a
Participant to future Options.
5. Option Terms and Conditions
5.1 An Option gives a Participant the right to purchase
Shares, subject to various terms and conditions, at a stated price
for a specified period of time. An Option will be evidenced by a
Stock Option Agreement ("Agreement") containing such terms and
conditions as the Committee may establish, including (but not
limited to) the following:
5.1.1 Number of Shares. The Agreement will specify the
number of Shares covered by the Option.
5.1.2 Option Price. The Committee will determine the
price per share a Participant must pay to exercise an Option
("Option Price"). The Option Price will not be less than the "Fair
Market Value" of the Shares the date the Option is granted (the
term "Fair Market Value" is defined for all Plan purposes as the
average of the low and high bid prices on the applicable date or
the last prior date on which Shares traded).
5.1.3 Option Period. Each Option will expire ten years
and one month from the date the Option is granted. In no event
will an Option be exercisable after it is expired.
5.1.4 Vesting and Exercise of Option. Options may be
vested at such time or upon such conditions as determined by the
Committee. Upon vesting, a Participant may exercise part or all of
the Option.
5.1.5 Six (6) Month Holding Period. No Option granted
to a Participant may be exercised
5
<PAGE>
during the first six months of its term.
5.1.6 Termination of Employment. The Agreement will
specify the extent to which an Option may be exercised following
termination of employment, if at all.
5.1.7 Residency. Participants of the plan must be
residents of the State of Iowa when the Options are granted.
5.1.8 Grant Date. An Option granted pursuant to the
Plan shall be granted upon the date approved by the Compensation
Committee subject to an Option Agreement signed by the Chairman of
the Compensation Committee.
5.2 Subject to the discretion of the Committee and the Board,
a Participant may pay the Option price and/or tax withholding
requirements in cash, Shares already owned (based on the Shares'
Fair Market Value on the date the Option is exercised), the
surrender of Options or in such other manner as the Committee may
establish. Shares will not be issued until full payment is
received.
5.3 Participants have no rights as stockholders with respect
to any Shares covered by an Option until Shares are issued
following exercise of such Option and the Participant becomes a
holder of record.
6. No Right to Continued Employment
6.1 Neither participation in the Plan, nor receipt of an
Option under the Plan, will confer upon any Participant the right
to continued employment at the Company or affect in any way the
right of the Company to terminate at will the employment of a
Participant.
7. Restrictions on Transferability
7.1 No Option may be sold, exchanged, or otherwise
transferred in any manner other than by will or the laws of descent
and distribution. All rights to Options may be exercised during
the Participant's lifetime only by the Participant or the
Participant's guardian or legal representative.
6
<PAGE>
8. General Restriction
8.1 Each Option will be subject to the requirement that, if
at any time the Committee determines that the listing,
registration, or qualification of the Shares subject to such Option
upon any securities exchange or under any state or federal law, or
the consent or approval of any government regulatory body, is
necessary or desirable in connection with the exercising of such
Option or the issue or purchase of Shares thereunder, such Option
may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval will have been
effected or obtained free of any conditions not acceptable to the
Committee.
9. Tax Withholding
9.1 The exercise of an Option will be subject to withholding
tax purposes as may be required by law. The Company may take such
steps as needed to ensure withholding requirements are satisfied,
including withholding Shares covered by an Option. Shares withheld
or surrendered to satisfy tax withholding will be valued at Fair
Market Value on the relevant date.
10. Change in Control
10.1 The Committee may establish such terms or conditions, or
take such action, regarding the treatment of outstanding Options
upon a Change in Control of the Company as it deems appropriate.
10.2 For purposes of the Plan, "Change in Control" means a
transaction or series of transactions, the result of which is:
(a) a direct or indirect acquisition of all or substantially all of
the assets of the Company; (b) a change in ownership whereby the
stockholders of Company immediately prior to such transaction(s)
own less than a majority of the combined voting power of all issued
and outstanding securities of Company or its successor following
the transaction(s); or (c) a person and their affiliates own a
greater number of shares of the Company than the Brenton Family.
Transactions resulting in a Change in Control shall include but not
be limited to direct acquisitions of assets or securities or
indirect acquisitions by merger, consolidation, or other legal
reorganization of Company. The "Brenton Family" for purposes of
this section, shall include all descendants of Harold Brenton and
their spouses and affiliates including but not limited to any
shares owned by trusts,
7
<PAGE>
corporations or persons which the descendants of Harold Brenton
have control over or are for the benefit of said descendants or
their spouses.
11. Amendment and Termination
11.1 The Plan will become effective on the Date the Plan is
approved by stockholders of the Company. Options may be granted
under the Plan until ten years have elapsed from its effective date
or, if earlier, the termination of the Plan by the Board, but
Options may extend beyond that date.
11.2 The Plan may be amended, suspended, or discontinued in
whole or in part at any time and from time to time by the Committee
or Board. The Board of Directors may not, however, without further
approval of the Shareholder: (i) materialy increase the aggregate
number of options which may be granted under the Plan except as
designated above; (ii) materially increase the benefits accruing to
participants under the Plan; or (iii) change the designation of
employees eligible to receive the options.
11.3 No such action, however, may lessen the rights of a
Participant under an outstanding Option without the Participant's
written consent or as provided in the Option Agreement.
11.4 The Plan will be governed by the laws of the State of
Iowa.
8
1996 Stock Option Plan Agreement for C. Robert Brenton
<PAGE>
Brenton Banks, Inc.
Stock Option Agreement
Pursuant to the 1996 Stock Option Plan
Name: C. Robert Brenton
"Participant"
This agreement certifies your receipt of an option grant under the
Brenton Banks, Inc. 1996 Stock Option Plan. All aspects of this
grant shall be governed by the terms and conditions of this
agreement, in addition to those in the Plan document which has been
given to you along with this agreement. The terms and conditions
which apply to your option are contained in these documents.
This document shall constitute an agreement between you and Brenton
Banks, Inc. only if a copy signed by you is received by Brenton
Banks Inc.'s Compensation Committee within ninety days of the date
of this agreement. By signing this agreement, you acknowledge
receipt of the Plan document and acceptance and agreement with all
terms and conditions of the option grant and the Plan document.
The Company and Participant acknowledge that the purpose of the
grant of the option is designed to align the interests of the
Company's stockholders and Participant through the Participant's
ownership of the stock acquired through the exercise of the
options.
The Participant represents and warrants that they are bona fide
residents of the State of Iowa.
ACCEPTED and AGREED: Brenton Banks, Inc.
_________________________________
Robert L. DeMeulenaere, President
_____________________ _______ ______________________ _______
Participant Date Chairman--Compensation Date
Committee of the Board
<PAGE>
Stock Option Agreement
Terms and Conditions
Number of Shares: 20,000 Option Price: $24.375
Date of Grant: Sept. 12, 1996 Expiration Date: Oct. 12, 2006
Vesting: The Option becomes vested and may be exercised upon the
earlier of 9 1/2 years after grant or upon and to the extent that
the achievement of the Cumulative Net Income Goals as specified
below:
The Cumulative Net Income Goals of the Company are as set forth in
Table 1 below. The Cumulative Net Income of the Company
(hereinafter the "CNI") through each of the dates listed in Table
1 below shall mean the sum of the Company's Annual Net Income as
reported in the Company's Audited Financial Statements for each of
the years beginning January 1, 1996 through such dates. To the
extent that the Company fails to obtain the minimum CNI designated
for any performance period, no options shall become vested. To the
extent that CNI meets or exceeds the minimum CNI designated for any
performance period the amount of options vested shall be
proportionately equal to the amount that CNI exceeds the minimum to
the maximum set forth on Table 1. To the extent that the CNI
exceeds the maximum designated for any performance period, no
additional options in excess of the maximum shall vest. The amount
of shares vested throughout the term of the Option shall not exceed
the total number of Option shares granted. Once Option shares are
vested, such shares shall remain vested in subsequent years
notwithstanding the failure to meet subsequent performance
criteria. Notwithstanding the foregoing, no fractional shares
shall be required to be issued by the Company. Options shall
become vested upon certification by the Company's accountants of
the Company's Annual Net Income and the certification of CNI by the
Compensation Committee.
<TABLE>
TABLE 1:
<CAPTION>
% Total Cumulative Net Income (000) Starting 1/1/96 Through
Vested 12/31/98 12/31/99 12/31/00
</CAPTION>
<S> <C> <C> <C>
100% -- -- $93,900
75% -- -- 89,486
67% -- $70,900 88,073
50% -- 67,737 85,071
33% $50,000 64,574 --
25% 45,940 -- --
0% -- -- --
</TABLE>
Treatment Upon Termination: In the case of the Participant's
termination of employment from the Company, any of its subsidiaries
or joint ventures, the Options granted herein shall terminate as
provided in Table 2, below. For purposes of this Agreement,
"Termination for Cause" shall mean termination of employment for
theft or misappropriation of company's funds/assets, or the
Participant's conviction of a felony. Disability shall mean a
Participant who is disabled as defined under the Company's
Disability Plan, if any, or under the Social Security Rules.
<PAGE>
<TABLE>
TABLE 2:
<CAPTION>
Treatment of Post-Termination
Reason for Termination Unvested Options Exercise Period
</CAPTION>
<S> <C> <C>
Termination for cause All forfeited None
Voluntary quit or All forfeited 90 days
involuntary for any
reason other than for
cause
Death or disability Prorata vesting Remainder of option
over five years period
based on actual
service since date
of grant
Retirement from the Prorated vesting Remainder of option
Board of Directors at based on actual period
or after age 65 or, service since date
with Committee consent, of grant through
retirement prior to nine years and
age 65 six (6) months
Retirement from the All forfeited Ninety days
Board of Directors
prior to age 65 without
Committee consent
</TABLE>
Change in Control: Upon a Change in Control of the Company,
unvested options become vested depending on when the Change in
Control occurs. Upon a Change in Control Options granted
hereunder, to the extent not previously vested, shall become vested
to the extent set forth in Table 3. The amount vested upon a
Change in Control shall be determined by multiplying the percentage
set forth across from the year in which the Change in Control
occurs by the total number of unvested Options shares granted
herein.
TABLE 3:
In 1996 -- 0% vesting In 1998 -- 75% vesting
In 1997 -- 50% vesting In 1999 or thereafter -- 100% vesting
Committee Discretion: The Participant and Company acknowledge that
a material acquisition or divestiture of a business activity or
business unit (by merger, stock swap or other similar transactions)
by the Company may be a material change in the operations of the
Company that may justify an amendment to the performance vesting
schedule set forth in Table 1. The Participant and Company agree
that in such an event the Compensation Committee shall have the
right to make an appropriate adjustment to Table 1, as determined
in the good faith judgment of the Compensation Committee, provided
that any adjustment shall only be made prospectively and shall be
made within 120 days of the consummation of the transaction which
justifies the amendment.
Change in Duties or Position of Participant: So long as the holder
of an Option shall continue to be a Participant of the Company or
one or more of its subsidiaries his Option shall not be affected by
any change of duties or position.
1996 Stock Option Plan Agreement - Form used for all participants
except C. Robert Brenton
<PAGE>
Brenton Banks, Inc.
Stock Option Agreement
Pursuant to the 1996 Stock Option Plan
Name: "Participant"
This agreement certifies your receipt of an option grant under the
Brenton Banks, Inc. 1996 Stock Option Plan. All aspects of this
grant shall be governed by the terms and conditions of this
agreement, in addition to those in the Plan document which has been
given to you along with this agreement. The terms and conditions
which apply to your option are contained in these documents.
This document shall constitute an agreement between you and Brenton
Banks, Inc. only if a copy signed by you is received by Brenton
Banks Inc.'s Compensation Committee within ninety days of the date
of this agreement. By signing this agreement, you acknowledge
receipt of the Plan document and acceptance and agreement with all
terms and conditions of the option grant and the Plan document.
The Company and Participant acknowledge that the purpose of the
grant of the option is designed to align the interests of the
Company's stockholders and Participant through the Participant's
ownership of the stock acquired through the exercise of the
options.
The Participant represents and warrants that they are bona fide
residents of the State of Iowa.
ACCEPTED and AGREED: Brenton Banks, Inc.
_________________________________
Robert L. DeMeulenaere, President
_____________________ _______ ______________________ _______
Participant Date Chairman--Compensation Date
Committee of the Board
<PAGE>
Stock Option Agreement
Terms and Conditions
Number of Shares: _______ Option Price: $24.375
Date of Grant: Sept. 12, 1996 Expiration Date: Oct. 12, 2006
Vesting: The Option becomes vested and may be exercised upon the
earlier of 9 1/2 years after grant or upon and to the extent that
the achievement of the Cumulative Net Income Goals as specified
below:
The Cumulative Net Income Goals of the Company are as set forth in
Table 1 below. The Cumulative Net Income of the Company
(hereinafter the "CNI") through each of the dates listed in Table
1 below shall mean the sum of the Company's Annual Net Income as
reported in the Company's Audited Financial Statements for each of
the years beginning January 1, 1996 through such dates. To the
extent that the Company fails to obtain the minimum CNI designated
for any performance period, no options shall become vested. To the
extent that CNI meets or exceeds the minimum CNI designated for any
performance period the amount of options vested shall be
proportionately equal to the amount that CNI exceeds the minimum to
the maximum set forth on Table 1. To the extent that the CNI
exceeds the maximum designated for any performance period, no
additional options in excess of the maximum shall vest. The amount
of shares vested throughout the term of the Option shall not exceed
the total number of Option shares granted. Once Option shares are
vested, such shares shall remain vested in subsequent years
notwithstanding the failure to meet subsequent performance
criteria. Notwithstanding the foregoing, no fractional shares
shall be required to be issued by the Company. Options shall
become vested upon certification by the Company's accountants of
the Company's Annual Net Income and the certification of CNI by the
Compensation Committee.
<TABLE>
TABLE 1:
<CAPTION>
% Total Cumulative Net Income (000) Starting 1/1/96 Through
Vested 12/31/98 12/31/99 12/31/00
</CAPTION>
<S> <C> <C> <C>
100% -- -- $93,900
75% -- -- 89,486
67% -- $70,900 88,073
50% -- 67,737 85,071
33% $50,000 64,574 --
25% 45,940 -- --
0% -- -- --
</TABLE>
Treatment Upon Termination: In the case of the Participant's
termination of employment from the Company, any of its subsidiaries
or joint ventures, the Options granted herein shall terminate as
provided in Table 2, below. For purposes of this Agreement,
"Termination for Cause" shall mean termination of employment for
theft or misappropriation of company's funds/assets, or the
Participant's conviction of a felony. Disability shall mean a
Participant who is disabled as defined under the Company's
Disability Plan, if any, or under the Social Security Rules.
<PAGE>
<TABLE>
TABLE 2:
<CAPTION>
Treatment of Post-Termination
Reason for Termination Unvested Options Exercise Period
</CAPTION>
<S> <C> <C>
Termination for cause All forfeited None
Voluntary quit or All forfeited 90 days
involuntary for any
reason other than for
cause
Death or disability Prorata vesting Remainder of option
over five years period
based on actual
service since date
of grant
Retirement at or after Prorated vesting Remainder of option
age 65 or, with based on actual period
Committee consent, service since date
retirement prior to of grant through
age 65 nine years and
six (6) months
Retirement prior to All forfeited Ninety days
age 65 without
Committee consent
</TABLE>
Change in Control: Upon a Change in Control of the Company,
unvested options become vested depending on when the Change in
Control occurs. Upon a Change in Control Options granted
hereunder, to the extent not previously vested, shall become vested
to the extent set forth in Table 3. The amount vested upon a
Change in Control shall be determined by multiplying the percentage
set forth across from the year in which the Change in Control
occurs by the total number of unvested Options shares granted
herein.
TABLE 3:
In 1996 -- 0% vesting In 1998 -- 75% vesting
In 1997 -- 50% vesting In 1999 or thereafter -- 100% vesting
Committee Discretion: The Participant and Company acknowledge that
a material acquisition or divestiture of a business activity or
business unit (by merger, stock swap or other similar transactions)
by the Company may be a material change in the operations of the
Company that may justify an amendment to the performance vesting
schedule set forth in Table 1. The Participant and Company agree
that in such an event the Compensation Committee shall have the
right to make an appropriate adjustment to Table 1, as determined
in the good faith judgment of the Compensation Committee, provided
that any adjustment shall only be made prospectively and shall be
made within 120 days of the consummation of the transaction which
justifies the amendment.
Change in Duties or Position of Participant: So long as the holder
of an Option shall continue to be a Participant of the Company or
one or more of its subsidiaries his Option shall not be affected by
any change of duties or position.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 78,382,963
<INT-BEARING-DEPOSITS> 801,930
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 445,555,951
<INVESTMENTS-CARRYING> 91,663,981
<INVESTMENTS-MARKET> 92,066,000
<LOANS> 916,871,933
<ALLOWANCE> (11,528,313)
<TOTAL-ASSETS> 1,593,433,229
<DEPOSITS> 1,330,152,940
<SHORT-TERM> 98,009,089
<LIABILITIES-OTHER> 22,793,388
<LONG-TERM> 23,210,713
<COMMON> 36,921,850
0
0
<OTHER-SE> 82,345,249
<TOTAL-LIABILITIES-AND-EQUITY> 1,593,433,229
<INTEREST-LOAN> 59,357,416
<INTEREST-INVEST> 22,416,882
<INTEREST-OTHER> 1,032,063
<INTEREST-TOTAL> 82,806,361
<INTEREST-DEPOSIT> 37,074,484
<INTEREST-EXPENSE> 4,085,130
<INTEREST-INCOME-NET> 41,646,747
<LOAN-LOSSES> 2,100,000
<SECURITIES-GAINS> 309,244
<EXPENSE-OTHER> 41,957,329
<INCOME-PRETAX> 14,539,268
<INCOME-PRE-EXTRAORDINARY> 14,539,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,321,166
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
<YIELD-ACTUAL> 7.57
<LOANS-NON> 3,278,000
<LOANS-PAST> 4,785,000
<LOANS-TROUBLED> 433,000
<LOANS-PROBLEM> 8,496,000
<ALLOWANCE-OPEN> 11,069,869
<CHARGE-OFFS> 2,752,704
<RECOVERIES> 1,111,148
<ALLOWANCE-CLOSE> 11,528,313
<ALLOWANCE-DOMESTIC> 11,528,313
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
