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 March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 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 200, 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, May 1,
1997.
7,979,741 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)
March 31, December 31,
1997 1996
______________ ____________
</CAPTION>
<S> <C> <C>
Assets:
Cash and due from banks $ 66,298,696 76,900,524
Interest-bearing deposits with banks 859,530 731,554
Federal funds sold and securities purchased
under agreements to resell 17,100,000 15,200,000
Investment securities:
Available for sale 442,772,866 461,099,272
Held to maturity (approximate market value of
$74,339,000 and $73,316,000 at March 31, 1997,
and December 31, 1996, respectively) 73,875,533 72,754,985
_____________ _____________
Investment securities 516,648,399 533,854,257
_____________ _____________
Loans held for sale 5,213,992 5,870,298
Loans 963,654,467 941,943,513
Allowance for loan losses (11,963,805) (11,328,359)
_____________ _____________
Loans, net 951,690,662 930,615,154
_____________ _____________
Premises and equipment 30,251,163 30,379,446
Accrued interest receivable 14,285,389 14,417,786
Other assets 25,700,505 24,126,063
_____________ _____________
Total assets $1,628,048,336 1,632,095,082
============== =============
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 137,121,226 153,284,094
Interest-bearing:
Demand 92,453,545 99,277,477
Savings 541,505,740 527,791,360
Time 571,121,851 572,704,180
_____________ _____________
Total deposits 1,342,202,362 1,353,057,111
_____________ _____________
Federal funds purchased and securities sold
under agreements to repurchase 75,361,600 66,826,120
Other short-term borrowings 34,150,000 34,150,000
Accrued expenses and other liabilities 17,571,318 16,633,068
Long-term borrowings 31,827,000 34,860,024
_____________ _____________
Total liabilities 1,501,112,280 1,505,526,323
_____________ _____________
Minority interest in consolidated subsidiaries 4,656,316 4,614,530
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;
8,007,741 and 8,085,684 shares issued and outstanding
at March 31, 1995 and December 31, 1996, respectively 40,038,705 40,428,420
Capital surplus ---- ----
Retained earnings 81,651,182 80,448,768
Unrealized gains on securities available for sale 589,853 1,077,041
_____________ _____________
Total common stockholders' equity 122,279,740 121,954,229
_____________ _____________
Total liabilities and stockholders' equity $1,628,048,336 1,632,095,082
============= =============
<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)
Three Months Ended
March 31,
1997 1996
______________ ____________
</CAPTION>
<S> <C> <C>
Interest Income
Interest and fees on loans $20,441,367 19,563,503
Interest and dividends on investments:
Available for sale - taxable 5,648,122 4,538,527
Available for sale - tax-exempt 1,163,010 1,067,874
Held to maturity - taxable 314,181 987,597
Held to maturity - tax-exempt 619,760 799,277
__________ __________
Total interest and dividends on investments 7,745,073 7,393,275
__________ __________
Interest on federal funds sold and securities
purchased under agreements to resell 277,144 400,896
Other interest income 9,338 12,764
__________ __________
Total interest income 28,472,922 27,370,438
__________ __________
Interest Expense
Interest on deposits 12,078,873 12,552,495
Interest on federal funds purchased and securities
sold under agreements to repurchase 710,599 418,916
Interest on other short-term borrowings 527,244 65,882
Interest on long-term borrowings 538,575 664,183
__________ __________
Total interest expense 13,855,291 13,701,476
__________ __________
Net interest income 14,617,631 13,668,962
Provision for loan losses 900,000 700,000
__________ __________
Net interest income after provision for loan losses 13,717,631 12,968,962
__________ __________
Noninterest Income
Service charges on deposit accounts 1,710,458 1,591,661
Investment brokerage commissions 1,015,603 1,019,276
Insurance commissions and fees 959,549 710,375
Fiduciary income 809,137 611,889
Mortgage banking income 550,272 521,207
Other service charges, collection and exchange
charges, commissions and fees 738,874 654,552
Net gains (losses) from securities available for sale 250,665 174,525
Other operating income 415,103 268,223
__________ __________
Total noninterest income 6,449,661 5,551,708
__________ __________
Noninterest Expense
Salaries and wages 6,282,594 5,990,127
Employee benefits 1,294,553 1,163,490
Occupancy expense of premises, net 1,466,058 1,357,434
Furniture and equipment expense 968,768 945,430
Data processing expense 723,907 633,875
FDIC deposit insurance assessment 71,287 118,727
Advertising and promotion 344,979 450,951
Supplies 273,788 426,347
Other operating expense 2,610,240 2,268,658
__________ __________
Total noninterest expense 14,036,174 13,355,039
__________ __________
Income before income taxes and minority interest 6,131,118 5,165,631
Income taxes 1,753,721 1,445,697
__________ __________
Income before minority interest 4,377,397 3,719,934
Minority interest 176,041 139,687
__________ __________
Net income $ 4,201,356 3,580,247
========== ==========
Per common and common equivalent share before the
10% common stock dividend::
Net income $ .51 .42
Cash dividends .13 .109
Per common and common equivalent share after the
10% common stock dividend:
Net income $ .46 .38
Cash dividends .118 .099
<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
(Unaudited)
For the three months ended March 31,
1997 1996
_______________ _______________
</CAPTION>
<S> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,201,356 3,580,247
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses . . . . . . . . . . . . . . 900,000 700,000
Depreciation and amortization . . . . . . . . . . . . 1,152,131 1,117,312
Net gains from securities available
for sale . . . . . . . . . . . . . . . . . . . . . . (250,665) (174,525)
Net decrease in loans held for sale . . . . . . . . . 656,306 1,967,560
Net (increase) decrease in accrued interest
receivable and other assets (1,252,928) 48,506
Increase in accrued expenses, other
liabilities and minority interest . . . . . . . . 996,675 1,209,237
__________ ___________
Net cash provided by operating activities 6,402,875 8,448,337
__________ ___________
Investing Activities:
Investment securities available for sale:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (57,744,171) (87,268,503)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 43,153,910 49,165,561
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,361,209 22,930,374
Investment securities held to maturity:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (5,310,740) (25,680,748)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 4,190,192 27,965,403
Net (increase) decrease in loans . . . . . . . . . . . . . . . (21,975,508) 5,197,841
Purchases of premises and equipment . . . . . . . . . . . (885,368) (566,722)
Proceeds from sale of premises and equipment . . . . . . (25,300) ----
___________ __________
Net cash used by investing activities . . . . . . . . . . . . . (6,235,776) (8,256,794)
___________ __________
Financing Activities:
Net decrease in noninterest-bearing, interest-
bearing demand and savings deposits . . . . . . . . . . . (9,272,420) (11,444,577)
Net decrease in time deposits . . . . . . . . . . . . . . . . (1,582,329) (16,913,889)
Net increase in federal funds purchased and
securities sold under agreements to repurchase . . . . . . 8,535,480 7,214,061
Net increase (decrease) in other short-term borrowings . . . . (3,000,000) 3,500,000
Proceeds of long-term borrowings . . . . . . . . . . . . . . . 66,000 20,000
Repayment of long-term borrowings . . . . . . . . . . . . . . (99,024) (1,511,780)
Dividends on common stock . . . . . . . . . . . . . . . . . . (1,050,544) (917,550)
Proceeds from issuance of common stock under
the employee stock purchase plan . . . . . . . . . . . . . . 188,631 ----
Proceeds from issuance of common stock under
the stock option plan 131,832 21,439
Proceeds from issuance of common stock under
the long-term stock compensation plan 457,561 334,835
Payment for shares acquired under common stock
repurchase plan . . . . . . . . . . . . . . . . . . . . . . (3,116,138) (2,543,556)
__________ ___________
Net cash used by financing activities (8,740,951) (22,241,017)
__________ ___________
Net decrease in cash and cash equivalents (8,573,852) (22,049,474)
Cash and cash equivalents at the beginning of the year . . . . . 92,832,078 109,024,150
__________ ___________
Cash and cash equivalents at the end of the period $84,258,226 86,974,676
========== ===========
</TABLE>
<TABLE>
<CAPTION>
Supplemental Cash Flow Information
(Unaudited)
</CAPTION>
<S> <C> <C>
Interest paid during the period . . . . . . . . . . . . . . . . $ 13,632,710 13,560,497
Income taxes paid during the period . . . . . . . . . . . . . . ---- ----
=========== ==========
<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 1996 Appendix to the Proxy Statement 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. Changes in Accounting Policies
Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share," was issued in February 1997 and will be
effective for the Company for periods ending after December 15,
1997 and may not be adopted prior to such date. This statement
establishes standards for computing and presenting earnings per
share. The Company expects to adopt SFAS No. 128 when required,
and management anticipates adoption of this statement will not have
a material effect on earnings per share disclosures.
5. Income Taxes
Federal income tax expense for the three months ended
March 31, 1997 and 1996, was computed using the consolidated
effective federal income tax rates.
For the first three months of 1997 and 1996, the Company
also recognized income tax expense pertaining to state franchise
taxes payable individually by the subsidiary banks.
<PAGE>
Part 1 -- Item 1
Page 2 of 2
6. Common Stock Transactions
On May 6, 1997, the Board of Directors declared a ten
percent common stock dividend for stockholders of record on May 15,
1997. The stock certificates will be issued on May 28, 1997.
Fractional shares resulting from this stock dividend will be paid
in cash.
During the first three months of 1997, options on 10,950
shares of common stock were exercised under the Company's 1987
stock option plan. 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 $131,832 to the equity of the
Company.
In 1992, the Company instituted a long-term stock
compensation plan for key management personnel. Compensation
expense associated with this plan for the first three months of
1997 and 1996 was $300,000 and $287,040, respectively.
The Company issued 16,589 and 14,718 shares of
common stock under the long-term stock compensation plan for
1997 and 1996, respectively, adding $457,561 and $334,834,
respectively, to the equity of the Company.
As part of the Company's on-going stock repurchase plan,
in January 1997, the Board of Directors approved the repurchase of
up to $10 million of the Company's common stock for 1997. Through
March 31, 1997, 112,300 shares had been repurchased at a cost of
$3,116,138.
The Company's Employee Stock Purchase Plan allows
employees to purchase the Company's common stock at 85 percent of
the current market price on four defined purchase dates during the
year. The Company issued 6,818 shares of common stock under this
plan during the first three months of 1997. This transaction added
$188,631 to the equity of the Company.
7. 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 1997 and 1996 was 8,223,867 and 8,476,131,
respectively, which included common stock equivalent shares related
to the long-term stock compensation plan and the 1996 stock option
plan.
<PAGE>
Part 1 -- Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Capital Resources
Net income for the first quarter of 1997 was $4,201,356, up
17.3 percent from $3,580,247 one year ago. The Company's
annualized return on average assets (ROA) was 1.09 percent,
compared to .95 percent for the same period in 1996; the annualized
return on average equity (ROE) was 13.75 percent, compared to 12.08
percent one year ago.
Common stockholders' equity totaled $122,279,740 as of March
31, 1997, a .3 percent increase from December 31, 1996. The
Company continues to monitor its capital position to balance the
goals of maximizing return on average equity, while maintaining
adequate capital levels for business risk and regulatory purposes.
The Company's risk-based core capital ratio at March 31, 1997, was
11.49 percent and the total risk-based capital ratio was 12.60
percent. These ratios exceeded the minimum regulatory requirements
of 4.00 and 8.00 percent, respectively. The Company's tier 1
leverage capital ratio, which measures capital excluding intangible
assets, was 7.70 percent at March 31, 1997, exceeding the
regulatory minimum requirement for well-capitalized institutions of
5.0 percent.
As part of the Company's ongoing stock repurchase plan,
112,300 shares have been repurchased during the first quarter of
1997 at a cost of $3,116,138. The Board of Directors has approved
the repurchase of $10 million of Company stock during 1997. Since
the inception of the plan in 1994, the Company has repurchased
762,933 shares at a total cost of $17,045,530.
On May 6, 1997, the Board of Directors 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 owned. Fractional shares will be
paid in cash.
The Company paid a dividend of $.13 per common share in the
first quarter of 1997, which represents an increase of 19.3 percent
over $.109 per share for the first quarter of 1996. The dividend
payout ratio for the first quarter of 1997 was 25.5 percent of
earnings per share. Dividends per common share, restated for the
May 1997, 10 percent common stock dividend, would be $.118 and
$.099 for the three months ended March 31, 1997 and 1996,
respectively.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 9.2 percent at March 31, 1997. This percentage is
unchanged from December 31, 1996. In addition, the Parent Company
has a $2 million line of credit with a regional bank that was
unused at the end of March, 1997. Long-term borrowings of the
Parent Company at March 31, 1997, consisted entirely of capital
notes totaling $11,277,000.
<PAGE>
Part 1 -- Item 2
Page 2 of 7
Brenton Banks, Inc. common stock closed on March 31, 1997 at a
bid price of $27.75 per share ($25.23 after restating for the
common stock dividend), an increase of 34.2 percent over the prior
year. The closing price at March 31, 1997, was 182 percent of the
book value per share of $15.27 ($13.88 after restating for the
common stock dividend). This closing stock price represented a
price-to-trailing-12-months-earnings multiple of 15.7 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.
Forward-looking Information
Forward-looking information relating to the financial results
or strategies of the Company are referenced throughout Management's
Discussion and Analysis. The following paragraphs identify
forward-looking statements and the risks that need to be considered
when reading those statements.
Forward-looking statements include such words as believe,
expect, anticipate, target, goal, objective or other words with
similar meaning. The Company is under no obligation to update such
forward-looking information statements.
The risks involved in the operations and strategies of the
Company include competition from other financial institutions,
changes in interest rates, changes in economic or market conditions
and changes in regulations from the federal and state regulators.
These risks, which are not all inclusive, cannot be estimated.
Asset-Liability Management
The Company has a fully-integrated asset-liability management
system to assist in managing the balance sheet. The process, which
is used to project the results of alternative investment decisions,
includes the development of simulations that reflect the effects of
various interest rate scenarios on net interest income. Management
analyzes the simulations to manage interest rate risk, the net
interest margin and levels of net interest income.
The goal is to structure the balance sheet so net interest
margin fluctuates in a narrow range during periods of changing
interest rates. The Company currently believes that net interest
income would fall by less than 4 percent if interest rates
increased or decreased by 300 basis points over a one-year time
horizon. This is within the Company's policy limits.
<PAGE>
Part 1 -- Item 2
Page 3 of 7
The slope of the yield curve is also a major determinant in
the net interest income of the Company. Generally, the steeper the
intermediate treasury to LIBOR curve, the better the prospects for
net interest income improvement.
The Company continues to reduce its reliance on residential
real estate loans with long repricing periods. When appropriate
for interest rate management purposes, the Company will consider
securitization of real estate loans. Another key to interest rate
risk management is continuing to increase variable rate loans as a
percent of total earning assets. Progress continues to be made in
this area.
In addition to normal balance sheet instruments, the Company
has utilized Federal Home Loan Bank borrowings and interest rate
swaps to reduce interest rate risk.
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 investment securities 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. Readily
marketable assets, as defined above, comprised 28.6 percent of the
Company's total assets at March 31, 1997.
Net cash provided from Company operations is another major
source of liquidity. The net cash provided from operating
activities was $6,402,875 for the first quarter of 1997. The
Company's trend of strong cash flows from operations is expected to
continue into the foreseeable future.
The Company has historically maintained a stable deposit base
and a relatively low level of large deposits which result in a low
dependence on volatile liabilities. As of March 31, 1997, the
Company had borrowings of $54,700,000 from the Federal Home Loan
Bank ("FHLB") of Des Moines, of which $51,200,000 were used as a
means of providing long-term fixed-rate funding for certain fixed-
rate assets and managing interest rate risk. The remaining
$3,500,000 represents an advance on a variable rate, short-term
$10,000,000 line of credit used to fund mortgage loans originated
for sale. The Company had additional borrowing capacity available
from the FHLB of approximately $78 million at March 31, 1997.
<PAGE>
Part 1 -- Item 2
Page 4 of 7
The combination of high levels of potentially liquid assets,
strong cash flows from operations, low dependence on volatile
liabilities and additional borrowing capacity provided sufficient
liquidity for the Company at March 31, 1997.
Results of Operations
The three months ended March 31, 1997, compared to the three months
ended March 31, 1996.
Net Income
For the three months ended March 31, 1997, Brenton recorded
net income of $4,201,356, which is an increase of 17.3 percent from
net income for the first three months of 1996, which totaled
$3,580,247. On a per common and common stock equivalent share
basis, net income was $.51 per share for the first quarter of 1997,
compared to $.42 per share for the first quarter of 1996, an
increase of 21.4 percent. Net income per common share, restated
for the May 1997, 10 percent common stock dividend, would be $.46
and $.38 for the three months ended March 31, 1997 and 1996,
respectively.
Net Interest Income
Average earning assets rose 3.3 percent from the first three
months of 1996 to the first three months of 1997. Net interest
income increased 6.9 percent to $14,617,631, compared to
$13,668,962 for the first quarter of 1996. Net interest margin
increased 13 basis points from 3.99 percent for the first three
months of 1996 to 4.12 percent for the first quarter of 1997. The
Company continues to experience a favorable change in the mix of
earning assets and interest-bearing liabilities, which contributed
to the improved net interest margin. The average rate earned on
earning assets increased 8.2 basis points, while the rate paid on
interest-bearing liabilities declined 5.2 basis points.
Loan Quality
Nonperforming loans totaled $5,838,000 at March 31, 1997,
compared to $6,571,000 at March 31, 1996, a decrease of 11.2
percent. 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. Loan quality remained
strong with reserves covering nonperforming loans by more than two
to one. On March 31, 1997, reserves stood at 1.24 percent of total
loans.
<PAGE>
Part 1 -- Item 2
Page 5 of 7
The provision for loan losses totaled $900,000 for the three
months ended March 31, 1997, compared to $700,000 for the same
period one year ago. The increase in the provision is related to
recent and projected growth in the loan portfolio. The Company
desires to build the reserve balance over time to safeguard against
future losses related to loan growth. Net charge-offs were .11
percent of average loans for the first three months of 1997,
compared with .25 percent for the same period last year.
Noninterest Income
Noninterest income for the three months ended March 31, 1997
was $6,198,996 (excluding securities gains and losses), a 15.3
percent increase from $5,377,183 one year ago.
Compared to the same period a year ago, service charges on
deposits were up $118,797 or 7.5 percent. This growth is due to
the continued focus of collecting a higher percentage of fees. The
amount of fees collected as a percent of fees assessed was 94.1
percent for the first quarter of 1997, compared to 79.9 percent for
the first quarter of 1996.
Led by significant growth in credit insurance sales, insurance
commissions and fees were up 35.1 percent. Insurance commissions
and fees totaled $959,549 for the first three months of 1997,
compared to $710,375 for the same period of 1996.
First quarter fiduciary income increased 32.2 percent, due to
increased volumes in personal trusts, investment management fees
and employee benefit plans.
Investment brokerage commissions decreased by $3,673 or .4
percent. Mortgage banking revenues rose 5.6 percent to total
$550,272 for the first quarter of 1997. The increase in mortgage
banking revenues is the result of increased volumes of loans closed
and sold on the secondary market compared to the same period of
last year.
Other service charges, collection and exchange charges,
commissions and fees increased $84,321 from the prior year due to
increased fees from ATM/debit cards and also fees received from
purchased receivables.
Other operating income increased $146,881 from one year ago.
Income from bank-owned life insurance policies, which did not exist
during the first quarter of 1996, accounted for $143,748 of this
increase.
In addition, securities transactions produced gains of
$250,665, up 43.6 percent over gains of $174,525 for the same
period in 1996.
<PAGE>
Part 1 -- Item 2
Page 6 of 7
Noninterest Expense
Noninterest expense totaled $14,036,174 at March 31, 1997, a
5.1 percent increase from the first quarter of 1996.
Salaries and wages, the largest component of noninterest
expense, increased 4.9 percent over the prior year. Fixed
salaries, those that are not based on commissions, rose a modest .7
percent. Variable compensation, which is related to the sales of
fee products, increased 19.3 percent. The Company is moving to
more of a variable performance-based incentive compensation
philosophy versus fixed based compensation. The number of full-
time equivalent employees decreased by 2.0 percent over 1996.
Benefit expense increased 11.3 percent, due to increased
compensation expense, as well as benefits on year-end incentive and
bonus payouts. This item is historically higher in the first
quarter of the year than the remaining quarters.
Occupancy expense totaled $1,466,058 for the three months
ended March 31, 1997, compared to $1,357,434 for the same period of
1996. Increases within this category were associated with rents,
leases and building repairs and maintenance.
The Company's FDIC deposit insurance assessment expense
decreased 40.0 percent from the prior year, primarily as a result
of a reduced assessment rate in 1997 related to the SAIF fund being
fully funded in September 1996 through a federally mandated
assessment.
The categories of advertising and promotion and supplies were
down $105,972 and $152,559, respectively, from the prior year. Data
processing expense increased $90,032 or 14.2 percent due to
increased costs during 1997 associated with core processing. Other
operating expense increased by $341,582, partially due to the
timing of expenditures for consulting and legal services.
The Company continues to focus on cost management and
evaluates all major expense items in an effort to control the
growth rate of various noninterest expense categories.
The Company's net noninterest margin, which measures operating
efficiency, was 1.94 percent, compared to 2.04 percent one year
ago. Another ratio that the Company utilizes to measure
productivity is the efficiency ratio. This ratio divides
noninterest expense by the sum of tax-equivalent net interest
income plus noninterest income (excluding gains and losses on the
sale of securities and loans). At March 31, 1997, the Company's
efficiency ratio was 64.92 percent, compared to 67.12 percent one
year ago.
<PAGE>
Part 1 -- Item 2
Page 7 of 7
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 28.6 percent for the first three months
of 1997 compared to 28.0 percent for 1996.
Looking Ahead
The Company is focusing on creating a sales-oriented culture
throughout the organization. Extensive training sessions will be
held during the coming months. The objective is to provide tools
to Brenton bankers to enable them to be more focused and proactive
in their sales efforts. The desired results are increased
relationships with existing clients as well as obtaining new
clients. The Company believes the expansion of existing
relationships and the attraction of new relationships is the long-
term key to continuing our success.
<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 three months ended March 31, 1997.
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)
May 12, 1997 /s/ Robert L. DeMeulenaere
- -----------------------------------------------------------------
Dated Robert L. DeMeulenaere
President
May 12, 1997 /s/ Steven T. Schuler
- ----------------------------------------------------------------
Dated Steven T. Schuler
Chief Financial Officer/
Treasurer/Secretary and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 66,298,696
<INT-BEARING-DEPOSITS> 859,530
<FED-FUNDS-SOLD> 17,100,000
<TRADING-ASSETS> 0
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<SHORT-TERM> 109,511,600
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0
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<OTHER-SE> 82,241,035
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