BRENTON BANKS, INC.
CAPITAL SQUARE, 400 LOCUST, DES MOINES, IOWA 50309
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 7, 1997
This proxy statement is being mailed to the shareholders of Brenton
Banks, Inc. on March 25, 1997. The proxy statement is furnished in
connection with the solicitation by the Board of Directors of Brenton Banks,
Inc. of proxies for use at the Annual Meeting of Stockholders of Brenton
Banks, Inc. to be held on May 7, 1997, and any adjournments thereof (the
"Proxy Statement").
The close of business on March 10, 1997, has been fixed as the record
date for determination of the stockholders of Brenton Banks, Inc., who are
entitled to notice of and to vote at the Annual Meeting. As of the record
date, there were 8,036,541 outstanding shares of Common Stock of Brenton
Banks, Inc. Each of these shares is entitled to one vote at the Annual
Meeting. Only stockholders of record on the books of Brenton Banks, Inc. as
of the record date will be entitled to vote at the Annual Meeting or any
adjournments thereof.
Any stockholder giving a proxy is empowered to revoke it at any time
before it is exercised. A proxy may be revoked by filing a written
revocation or a duly-executed proxy bearing a later date with the Secretary
of Brenton Banks, Inc. (the "Parent Company"). Any stockholder may still
attend the meeting and vote in person, regardless of whether the stockholder
has previously given a proxy, but presence at the meeting will not revoke the
stockholder's proxy unless the stockholder votes in person.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of March 10, 1997, information as to
(a) the only persons who were known by the Parent Company to own beneficially
more than 5 percent of the outstanding Common Stock (the only voting
securities) of the Parent Company, and (b) the number of shares of such
Common Stock beneficially owned by all executive officers and directors as a
group:
1
<PAGE>
<TABLE>
<CAPTION>
Of such beneficial ownership,
amounts to which the
Beneficial Ownership beneficial owner has:
__________________________________ ________________________________
Sole Voting Shared Voting
Name and Address of Shares Beneficially Percent and Investment and Investment
Beneficial Owner Owned (1)(2)(3) of Class Power Power
___________________ _______________ ________ _____ _____
<S> <C> <C> <C> <C>
William H. Brenton 1,566,992 (4) 19.26% 525,027 1,041,965
Capital Square
400 Locust
Des Moines, IA 50309
C. Robert Brenton 1,512,185 (4) 18.59% 419,904 1,092,281
Capital Square
400 Locust
Des Moines, IA 50309
Junius C. Brenton 1,629,885 20.04% 478,668 1,151,217
Capital Square
400 Locust
Des Moines, IA 50309
Jane Eddy 506,119 6.22% 174,966 331,153
2908 Forest Drive
Des Moines, IA 50312
Carolyn O'Brien 567,431 6.98% 180,783 386,648
301 Tonawanda Drive
Des Moines, IA 50312
All executive officers and directors 2,838,128 (4)(5) 34.89% 1,568,971 (4)(5) 1,269,157 (5)
as a group (19 persons including
William H. Brenton, C. Robert
Brenton and Junius C. Brenton)
<FN>
(1) For purposes of this proxy statement, beneficial ownership is deemed to include stock owned (a) personally by the
individual or as custodian for minor children; (b) by the spouse or children of the individual having the same home as
the individual or being supported by the individual; (c) by any trust in which the individual has or shares voting power
or investment power over the securities; and (d) by any foundation or corporation in which the individual has or shares
voting power or investment power over the securities.
(2) The number of shares which are beneficially owned by each of the individuals listed above and which are also listed
as beneficially owned by another person(s) listed in the above table are as follows: William H. Brenton - 1,020,177
shares; C. Robert Brenton - 1,020,177 shares; Junius C. Brenton - 1,020,177 shares; Jane Eddy - 314,710 shares; and
Carolyn O'Brien - 314,710 shares.
(3) The registrant knows of no shares with respect to which any listed individual or group has the right to acquire
beneficial ownership, except as noted in Footnote (4) below.
(4) Amount includes vested options for the purchase of the Parent Company's Common Stock pursuant to the 1987 Non-
Qualified Stock Option Plan in the following amounts: William H. Brenton - 6,600 shares, C. Robert Brenton - 23,100
shares and eight members of the executive officers and directors group (including William H. Brenton and C. Robert
Brenton) - 92,820 shares.
(5) Adjusted to eliminate multiple counting of shares beneficially owned by two or more persons. With respect to
shares beneficially owned by individual directors who are nominees, see "Election of Directors" (page 3).
</TABLE>
2
<PAGE>
I. ELECTION OF DIRECTORS
The Parent Company's Bylaws provide that the number of persons serving
on the Board of Directors shall not be less than five and not more than
eleven. The normal terms for persons elected as directors is until the next
Annual Meeting of Stockholders and until their successors are duly elected
and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED BELOW.
Proxies in the accompanying form will be voted FOR the election of these
individuals, unless authority to vote is withheld on the proxy. If any
nominee or nominees shall become unavailable for election, it is intended
that the proxies will be voted for the election of the substitute nominees as
the Board of Directors may propose. Any stockholder has the option to
withhold authority to vote for all nominees for directors, or to withhold
authority to vote for individual nominees for directors. The effect on the
election of directors of casting votes against nominees or of withholding
authority to vote for nominees is that the stockholder is considered present
at the meeting and considered for meeting quorum requirements, but the vote
is not a vote in favor of the nominee for purposes of determining whether the
nominee has received the favorable vote of a majority of shares present at
the meeting needed for election. Information about the nominees as of March
10, 1997, is set forth below:
<TABLE>
NOMINEES
<CAPTION>
Has Served Shares Beneficially
Position with the Parent Company as a Director Owned as of Percent
Name Age and/or Principal Occupation Since March 10, 1997 of Class
____ ___ ___________________________ _____ ______________ ________
<S> <C> <C> <C> <C> <C>
C. Robert Brenton 66 Chairman of the Board
Brenton Banks, Inc. 1960 1,512,185 (1)(2) 18.59%
William H. Brenton 72 Director
Brenton Banks, Inc. 1957 1,566,992 (1)(2) 19.26%
Junius C. Brenton 62 Director
Brenton Banks, Inc. 1969 1,629,885 (1) 20.04%
Robert L. DeMeulenaere 57 President
Brenton Banks, Inc. 1994 29,893 (2)(3) less than
1%
R. Dean Duben 70 Director
Brenton Banks, Inc. 1960 18,789 (4) less than
1%
Hubert G. Ferguson 68 Financial Services Consultant
New Brighton, Minnesota 1994 1,100 (5) less than
1%
Gary M. Christensen 53 President and Chief Executive
Officer, Pella Corporation 1995 -- --
<FN>
(1) See "Principal Holders of Voting Securities" (page 2). William H. Brenton, C. Robert Brenton and Junius C. Brenton
are control persons of Brenton Banks, Inc. by virtue of their stock ownership.
(2) Amount includes vested options for the purchase of the Parent Company's Common Stock pursuant to the 1987 Non-
Qualified Stock Option Plan in the following amounts: C. Robert Brenton - 23,100 shares, William H. Brenton - 6,600
shares, and Robert L. DeMeulenaere - 20,900 shares.
(3) Mr. DeMeulenaere has sole voting and investment power over 27,635 shares, and shared power over 2,258 shares.
(4) Mr. Duben has sole voting and investment power over 11,317 shares, and shared power over 7,472 shares.
(5) Mr. Ferguson has sole voting and investment power over all 1,100 shares.
</TABLE>
3
<PAGE>
In addition to the positions listed above, the nominees were employed in
the following capacities during the past five years. William H. Brenton
served as Chairman of Executive Committee and Vice Chairman of the Board of
the Parent Company through December 1994. Junius C. Brenton served as
President of the Parent Company from May 1990 to January 1994. Robert L.
DeMeulenaere served as Senior Vice President of the Parent Company and CEO of
Brenton Bank and Trust Company of Cedar Rapids from August 1990 through
January 1994. R. Dean Duben served as Senior Vice President of the Parent
Company and President of Brenton First National Bank, Davenport through
December 1991 and Vice Chairman of Brenton First National Bank, Davenport
through September 1995. Hubert G. Ferguson served as Senior Vice President
of Dain Bosworth, Minneapolis, Minnesota, through December 1992. Gary M.
Christensen served as Senior Vice President of Marketing and Sales for Pella
Corporation from November 1990 through December 1993 and President and Chief
Operating Officer for Pella Corporation through January 1996.
None of the nominees, current directors or executive officers of the
Parent Company are related except William H. Brenton, C. Robert Brenton and
Junius C. Brenton, who are brothers.
All loans made by the Parent Company's affiliated banks to directors,
nominees, executive officers and associates of such persons were made in the
ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with unaffiliated persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
None of the above nominees hold a directorship in any other company with
a class of securities registered pursuant to Section 12 or subject to Section
15(d) of the Securities Exchange Act or registered as an investment company
under the Investment Company Act of 1940 except C. Robert Brenton, who is a
director of Pioneer Hi-Bred International, Inc.
The Audit Committee was comprised of R. Dean Duben, Arlen D. Schrum and
Hubert G. Ferguson, with John C. Eddy and William H. Brenton as consulting
members. R. Dean Duben, Hubert G. Ferguson and William H. Brenton are also
members of the Board of Directors of Brenton Banks, Inc. Arlene D. Schrum is
a member of the regular Board of Directors of Brenton Bank and John C. Eddy
is a member of the advisory Board of Directors of the Des Moines market. The
Audit Committee oversees the functions of the internal audit department;
examines the services performed for Brenton Banks, Inc. and its subsidiaries
(the "Company") by the Company's independent auditors; approves or
disapproves their services and considers the effect of their services on the
independence of the auditors; and performs such other functions as the Board
of Directors shall from time to time assign to it. During 1996, the Audit
Committee met twice.
The Compensation Committee, which sets and/or confirms the salaries of
executive officers consisted of Gary M. Christensen, William H. Brenton, and
Junius C. Brenton for 1996. During 1996, the Compensation Committee met four
times. See the Compensation Committee Report on page 9.
Although the Board of Directors has no standing Nominating Committee,
the Board met once during January 1997, for the purpose of naming nominees
for the Board of Directors and has selected R. Dean Duben to report to the
stockholders at the Annual Meeting on the nominees recommended by the Board
of Directors. The Board will consider nominations for the Board of Directors
submitted by stockholders to the Secretary of the Parent Company at least one
hundred and twenty days prior to the Annual Meeting of Stockholders. In
accordance with the Parent Company's Bylaws, no nominations for the Board of
Directors will be considered or voted on at the Annual Meeting of
Stockholders unless submitted in writing to the Secretary of the Parent
Company at least five days prior to the Annual Meeting.
During 1996, the Board of Directors held twelve meetings, including six
regular meetings, four dividend declaration meetings and two special
meetings. During 1996, each of the incumbent directors who are nominees for
the Board of Directors attended at least 75 percent of the aggregate of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board on which the nominee served,
except Hubert G. Ferguson, who attended less than 75 percent of both Board of
Director meetings and committee meetings.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities and Exchange Act of 1934 requires the
officers, directors and shareholders holding more than ten percent of the
Company's common stock to file reports reflecting their ownership of stock
and any changes in ownership with the Securities and Exchange Commission.
Copies of the reports filed with the Securities and Exchange Commission are
delivered to the Company. Based upon the Company's review of the forms and
upon representations from the individuals that no year-end filings are
necessary, except as noted below, the Company believes that all filing
requirements under Section 16 were made by all of the Company's officers,
directors and shareholders holding more than ten percent of the Company's
common stock. During 1996, Marc J. Meyer timely reported all transactions
but inadvertently did not report his ownership of 63 shares of stock on his
initial Form 3 filing. Ronald D. Larson inadvertently did not report a gift
of 220 shares during 1996. These omissions have been corrected by the filing
of Form 5's reporting the omissions. Brenton Banks, Inc. undertakes to make
the filings on behalf of its executive officers and directors and has
procedures to assure that filing requirements are met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's stock repurchase plan, the Company
purchased from the Juliette Brenton Moen Trust 47,000 shares of the Company's
common stock for a purchase price of $1,128,000. The repurchase of the stock
was made on July 29, 1996, (42,000 shares) and August 1, 1996, (5,000 shares)
at the average of the bid and ask price of the stock as quoted by an
independent market maker. The Juliette Brenton Moen Trust is a trust which
is controlled by William H. Brenton, C. Robert Brenton and Junius C. Brenton,
who serve as Trustees of the Trust. William H. Brenton, C. Robert Brenton
and Junius C. Brenton are all Directors of the Company and C. Robert Brenton
is the Chief Executive Officer of the Company. None of the Trustees of the
Trust are beneficiaries of the Trust or will benefit monetarily from the sale
of the stock by the Trust. The terms of the transaction were approved by the
Company's Audit Committee and unanimously approved by the Board of Directors
(excluding William H. Brenton, C. Robert Brenton and Junius C. Brenton).
EXECUTIVE COMPENSATION
The following sets forth information on the annual and long-term
compensation paid or accrued by the Company for services rendered in 1996,
1995 and 1994 of those persons who are the Chairman of the Board, President,
and the three most highly compensated officers of the Company.
5
<PAGE>
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Annual Compensation Compensation
__________________________________________ ____________
Other Annual Restricted All Other
Name and Current Principal Compensation Stock Options/ Compensation
Position Year Salary ($) Bonus ($) ($) Award(s)($) SARS (#) $
________ ____ __________ _________ ____________ __________ ________ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
C. Robert Brenton 1996 189,800 45,903 -- -- 22,000 129,218(6)
Chairman of the Board 1995 172,388 -- 19,181(1) -- 137,147(7)
1994 172,388 -- -- -- 138,165(8)
Robert L. DeMeulenaere 1996 189,800 45,903 -- -- 77,000 10,062(9)
President 1995 150,000 -- -- 65,196(5) 9,948(9)
1994 150,000 -- 15,330(2) 67,544(5) 11,250(9)
Larry A. Mindrup 1996 165,800 41,066 -- -- 49,500 37,343(10)
Chief Banking Officer 1995 156,250 40,000 20,963(3) 47,071(5) 10,799(9)
Brenton Bank* 1994 124,299 40,000 26,428(3) 31,726(5) 11,250(9)
Phillip L. Risley 1996 156,100 37,753 -- -- 49,500 10,859(9)
Chief Administrative
Officer 1995 146,300 -- 16,305(4) 52,979(5) 11,150(9)
Brenton Bank* 1994 146,300 -- -- 54,383(5) 11,250(9)
Norman D. Schuneman 1996 137,600 33,811 -- -- 27,500 9,553(9)
Chief Credit Officer 1995 129,308 -- -- 47,852(5) 9,002(9)
Brenton Bank* 1994 126,313 -- -- 46,278(5) 10,791(9)
* A Subsidiary of the Parent Company
<FN>
(1) Includes payments of $10,181 and $4,800 for excess insurance coverage and automobile allowance.
(2) Includes a payment of $9,375 made to Mr. DeMeulenaere in connection with his relocation from Cedar Rapids, Iowa, to
Des Moines, Iowa.
(3) Includes a payment of $11,935 made to Mr. Mindrup in connection with his relocation from Ames, Iowa, to Des Moines,
Iowa in 1995, and a payment of $18,319 in connection with his relocation from Grinnell, Iowa, to Ames, Iowa in 1994.
(4) Includes payments of $7,178 and $7,555 to or on behalf of Mr. Risley for automobile allowance and club memberships.
(5) The restricted stock awards are a part of the Company's Long-Term Incentive Stock Compensation Plan. Under the
terms of the restricted stock grant, an individual receiving a grant must be continuously employed by the Company for
three fiscal years beginning in the year of the grant for the restricted stock to vest, unless vested prior to this date
due to death, disability, retirement or change in control of the Company. No dividends are paid on the restricted
stock. The market value per share of the restricted stock on the date of grant was $16.48 for the 1995 grant, $16.21
for the 1994 grant, after restatement for stock dividends. Robert L. DeMeulenaere was granted 3,956 and 4,166
restricted shares for the years 1995 and 1994, respectively. The market value of Mr. DeMeulenaere's restricted stock
holdings was $224,411 based on the closing price as of December 31, 1996. Larry A. Mindrup was granted 2,856 and 1,956
restricted shares for the years 1995 and 1994, respectively. The market value of Mr. Mindrup's restricted holdings was
$132,955 based on the closing price at December 31, 1996. Phillip L. Risley was granted 3,215 and 3,354 restricted
shares for the years 1995 and 1994, respectively. The market value of Mr. Risley's restricted holdings was $181,501
based on the closing price at December 31, 1996. Norman D. Schuneman was granted 2,842 and 2,854 restricted shares for
the years 1995 and 1994, respectively. The market value of Mr. Schuneman's restricted stock holdings was $157,380 based
on the closing price of December 31, 1996.
(6) Includes life insurance premium payments made on behalf of Mr. Brenton in the amount of $114,000, which will be
repaid to the Company upon the termination of such insurance policies. The Company expensed $29,211 in connection with
the payment of the premiums. This amount also includes contributions of $9,988 toward qualified retirement plans and
$5,230 of director fees paid by affiliated banks.
(7) Includes life insurance premium payments made on behalf of Mr. Brenton in the amount of $114,000, which will be
repaid to the Company upon the termination of such insurance policies. The Company expensed $29,211 in connection with
the payment of the premiums. This amount also includes contributions of $9,957 toward qualified retirement plans and
$13,190 of directors fees paid by affiliated banks.
(8) Includes life insurance premium payments made on behalf of Mr. Brenton in the amount of $114,000, which will be
repaid to the Company upon the termination of such insurance policies. The Company expensed $24,342 in connection with
the payment of the premiums. This amount also includes contributions of $11,250 toward qualified retirement plans and
$12,915 of directors fees paid by affiliated banks.
(9) Constitutes the entire amount contributed to qualified retirement plans, on behalf of the named individual.
(10) Includes $10,844 contributed toward qualified retirement plans and $26,499 discretionary payment to adjust the
total compensation among the Company's senior executive officers.
</TABLE>
6
<PAGE>
Option Exercises and Fiscal Year-End Values - The following table sets
forth information regarding the number of options exercised by the named
executive officers and the year-end values of options held by such
individuals pursuant to the Company's non-qualified stock option plan.
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and December 31, 1996, Option/SAR Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In the Money
Shares Options/SARs at Options/SARs at
Acquired on Value December 31, 1996 December 31, 1995
Name Exercise # Realized $ (Exercisable)/(Unexercisable)** (Exercisable)/(Unexercisable)**
____ __________ __________ ______________________________ ______________________________
<S> <C> <C> <C> <C>
C. Robert Brenton
Chairman of the Board -- -- 23,100/22,000 $545,500/$120,400
Robert L. DeMeulenaere
President 2,200 $39,407 20,900/77,000 $493,500/$421,300
Larry A. Mindrup
Chief Banking Officer
Brenton Bank* 2,500 $59,338 3,000/49,500 $70,800/$270,800
Phillip L. Risley
Chief Administrative
Officer
Brenton Bank* -- -- -0-/49,500 -0-/$270,800
Norman D. Schuneman
Chief Credit Officer
Brenton Bank* -- -- 16,500/27,500 $389,600/$150,500
* A Subsidiary of the Parent Company
** The unexercisable stock options become vested only upon achievement of an aggressive net income performance
vesting schedule or with continued employment through March, 2006.
</TABLE>
7
<PAGE>
Option/SAR Grants in Last Fiscal Year - The following table sets forth
information regarding the number of Option/SAR grants granted to the named
executive officers pursuant to the Company's 1996 Stock Option Plan that was
adopted in 1996. The Company does not offer any other long-term incentive
plans which would be included in this table.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants Grant Date Value
_________________ ________________
Percent of total
Options/SARs Exercise
granted to of Grant Date
Options/SARs employees in base price Expiration Present Value
Name Granted (#) fiscal year ($/SH) Date $6.60(2)
____ ___________ ___________ ______ ____ ________
<S> <C> <C> <C> <C> <C>
C. Robert Brenton
Chairman of the Board 22,000 4.67% $22.159 October 12, 2006 $145,200
Robert L. DeMeulenaere
President 77,000 16.36 $22.159 October 12, 2006 $508,200
Larry A. Mindrup
Chief Banking Officer
Brenton Bank* 49,500 10.51 $22.159 October 12, 2006 $326,700
Phillip L. Risley
Chief Administrative
Officer
Brenton Bank* 49,500 10.51 $22.159 October 12, 2006 $326,700
Norman D. Schuneman
Chief Credit Officer
Brenton Bank* 27,500 5.84 $22.159 October 12, 2006 $181,500
* A Subsidiary of the Parent Company
<FN>
(1) The options granted to the Executive Officers were options authorized pursuant to the 1996 Stock Option Plan. The
options will vest nine years and six months following their grant provided that the employee remains employed with the
Company since the date of grant. The options can also vest pursuant to performance vesting requirements tied to
cumulative net income for the periods 1996 through 1998, 1999 and 2000, which are set forth in the option agreements.
Plans provide for prorated vesting upon normal retirement after age 65, upon death or disability of the optionee or in
the event the Company is sold, merged or consolidated with another Company. If the optionee retires prior to age 65
without Committee approval or leaves the Company, the options that were exercisable will expire if not exercised within
ninety days. Subject to the discretion of the Committee, the option price may be paid in cash, shares already owned,
surrender of options or in such other manner as the Committee may establish.
(2) The value of the options is based upon the Company's use of a variation of the Black-Scholes option pricing model.
The per share fair value of stock options granted during 1996 was $6.60 based on the date of grant using the model with
the following weighted average assumptions: expected dividend yield of 2.15 percent, risk-free interest rate of 6.85
percent, expected life of 7.5 years and expected volatility of stock price of 18 percent. No adjustments have been made
for non-transferability or risk of forfeiture.
</TABLE>
<PAGE>
Shareholder Return Performance Presentation - Set forth on the following
page is a line graph comparing the yearly percentage change in the cumulative
total shareholder return on the Company's common stock against the cumulative
total return of the NASDAQ stock market index for U.S. companies, and SNL
Securities' Midwestern Bank Index for the five-year period ended December 31,
1996. Total return values for the Company, NASDAQ and SNL Securities'
Midwestern Bank Index were calculated based on cumulative total return values
assuming reinvestment of dividends. The graph represents a $100 investment
on December 31, 1991, and presents the current value, considering dividend
reinvestment and current market prices. The shareholder return shown on the
graph is not necessarily indicative of future performance of the Company.
8
<PAGE>
<TABLE>
Brenton Banks Inc., Stock Price Performance
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Brenton Bank Inc. 100 128 132 141 168 246
SNL Securities' Index for the NASDAQ
Stock Market (U.S. Companies)* 100 116 134 131 185 227
SNL Securities' Midwestern Bank Index* 100 129 135 130 193 262
</TABLE>
Compensation Committee Report - The Compensation Committee report has
been prepared by the following individuals who comprise the Compensation
Committee: Gary M. Christensen, Chairperson; Junius C. Brenton and William
H. Brenton.
The role of the Compensation Committee is to provide leadership by
effectively and appropriately using compensation to tie the financial
interests of the Company's executive officers to those of the shareholder.
The goal is to achieve the Company's vision and goals and thereby maximize
the return to shareholders.
The general responsibilities of the Compensation Committee are the
oversight of executive compensation for the Chief Executive Officer and
other senior officers of the Company who report to the Chief Executive
Officer; communicate with the full Board of Directors; and communicate with
shareholders of the Company.
The specific duties of the Compensation Committee include the
following:
1. Establish a total compensation philosophy and policy which fairly
rewards the executives for performance benefiting shareholders and which
effectively attracts and retains the executive resources necessary to
successfully lead and manage the Company.
9
<PAGE>
2. Determine the details of the Chief Executive Officer's total
compensation.
3. Review and approve the Chief Executive Officer's salary and bonus
recommendations for the other Senior Officers who report to the Chief
Executive Officer.
4. Approve and administer cash incentive compensation plans and deferred
compensation plans for the executives, including any modifications to such
plans, and annually establish the performance objectives for the incentive
plans.
5. Approve and administer all the stock incentive plans.
6. Prepare the committee's annual report to shareholders in the proxy
statement.
7. Oversee the Company's retirement and benefit programs involving
significant cost; periodically review executive supplementary benefits and
perquisites.
8. Such other duties as delegated by the Board of Directors.
The total compensation of the company's executive officers, including
C. Robert Brenton and Robert L. DeMeulenaere, is comprised of three
distinct components; base salary, annual incentive bonus and long-term
stock compensation. In addition to each of the foregoing, the executive
officers of the Company are allowed to participate in the Company's
Executive Savings Plan, Profit Sharing/401(k) Plan, Employee Stock Purchase
Plan and other employee benefit programs generally available to all Company
employees.
During 1996, the Compensation Committee engaged a recognized
consulting firm to review compensation programs of the Company. This
engagement included a review of base pay, incentive bonus and stock
compensation plans for the executive officers and senior officers of the
Company. The engagement also included a general review of the compensation
philosophy and compensation programs employed by the Company. The general
philosophy that resulted from the consulting work was to focus on the
following three items: competitive total compensation; a philosophy of pay
for performance; and on tying the financial interests of the executives to
those of the shareholders. As a result, compensation emphasis will shift
toward the variable components of incentive bonus and stock compensation.
Base Salaries - The Committee's policy is to set the base salary of
each of the Company's executive officers at levels that are comparable to
those paid by similar sized banks and bank holding companies located in the
midwestern region and throughout the United States, as documented by
independent survey companies. The Compensation Committee believes that the
base salary of C. Robert Brenton and Robert L. DeMeulenaere are set at
levels below average base salaries of Chief Executive Officers of other
comparable bank holding companies. The base salaries of the Company's
executive officers, including C. Robert Brenton and Robert L. DeMeulenaere,
are not directly related to the Company's stock performance. Except for
some unusual situations, there were no increases in base pay in 1995. In
1996, base pay was adjusted as a result of the consulting study to reflect
a salary closer to current market levels. There will be no increases in
base pay for executive officers in 1997.
Bonuses - The bonus plans utilized by the Company are designed to
promote the interest of the Company by tying the Company's financial goals
to each executive officer's bonus plan. For 1996, to create a unified
team, all executive officers of the Company had between 50 percent and 100
percent of their bonus plan tied to the consolidated net income goals of
the Company. The remaining portion of the bonus plan and the bonus plans
for other officers of the Company were tied to other financial goals or
personal objectives for which the officer had influence or control. A
bonus performance matrix was established for each bonus area. All
executive officers were eligible to earn a bonus of up to 30 percent of
base pay. All bonus plans were subject to achieving a threshold net income
level of $14,000,000.
For 1996, C. Robert Brenton and Robert L. DeMeulenaere were eligible
to receive a bonus of up to 30 percent of their base pay. The bonus plan
was tied 100 percent to the achievement of consolidated net income. This
plan was subject to an earnings threshold whereby no bonus would be paid if
consolidated net income was below $14,000,000. Based on the bonus
performance matrix both C. Robert Brenton and Robert L. DeMeulenaere earned
80.62 percent of their bonus potential.
Long-term Stock Compensation Plan - Long-term Incentive Stock
Compensation Plan - The purpose of the Company's Long-term Incentive Stock
Compensation Plan is to increase the stock held by the Company's executive
officers and key employees and to provide long-term incentives to
participants in the Plan. The long-term incentives are designed to closely
ally the interest of executive officers to the interests of the
shareholders of the Company. Stock was
10
<PAGE>
granted under the Plan to achieve value equal to a specific multiple of the
individual's base salary, with 35 percent designated as restricted stock
and 65 percent as performance stock. Executive officers granted restricted
and performance stock by the Board of Directors must remain employed by the
Company through the third calendar year following the grant, in order to
receive the stock without the restrictions. Performance criteria described
below must be met to earn performance stock. In the event of death,
disability or retirement after the age of 65 by the executive officer or a
change in control of the Company, up to 100 percent of the restricted or
performance stock granted to the executive officer will be transferred to
the participant without restrictions.
During 1996, there were no grants of options under this plan and no
further grants are anticipated. Based on financial results for 1996, the
executive officers as a group had 26,278 shares of restricted stock and no
shares of performance stock vest under this plan, including no shares for
C. Robert Brenton and 4,166 shares for Robert L. DeMeulenaere. These
shares were issued by February 15, 1997.
As of December 31, 1996, there remains outstanding under the 1995
grant a total of 28,133 shares of restricted stock and 52,243 shares of
performance stock to the executive officers as a group. The restricted
shares will vest upon completion of continued employment through December
31, 1997. The performance shares will vest based upon a performance
vesting schedule tied to the financial performance for the three-year
performance period ended December 31, 1997. Under this performance vesting
schedule, the performance stock grants awarded to the executive officers
will be transferable to the participants at the beginning of 1998, if the
Company's average annual increase in earnings per common and common
equivalent share reaches tiered levels for the three-year performance
period. The threshold, target and maximum average annual earnings per
share growth under the terms of the Plan are 7.50 percent, 10.00 to 11.99
percent, and greater than 16.00 percent, respectively; for example, none of
the performance shares will be earned if the average annual earnings per
share growth over the performance period is less than 7.50 percent, 100
percent will earned if the annual average earnings per share growth is
10.00 percent to 11.99 percent, and 150 percent will be earned if the
average annual earnings per share growth is 16.00 percent or more. The
maximum amount available to a participant granted performance stock is 150
percent of the performance stock granted. Amounts in excess of 100 percent
of the stock awarded are to be paid in cash to the participant. Assuming
the target performance levels are reached, the value of the performance
stock grants (based upon the value on the date of grant) will be 37.5
percent of the executive officer's anticipated average annual base salary
over the three year performance period.
When granting both the restricted and performance stock awards under
the Plan, the Board of Directors considered the position of the executive
officer, the executive officer's past and anticipated future contribution
to the Company's profitability and the executive officer's alliance with
the interests of shareholders. The Board of Directors did not award any
restricted or performance stock to C. Robert Brenton because Mr. Brenton's
interests already closely ally the interests of shareholders due to his
substantial stock holdings in the Company.
Long-Term Stock Compensation Plan - 1996 Stock Option Plan - In 1996,
the Company adopted the 1996 Stock Option Plan. The purpose of the Plan is
to support the creation of shareholder value. The Plan aligns the
interests of key employees with those of the shareholders of the Company
and encourages key employees of the Company to acquire equity interests in
the Company. The Plan is intended to attract, motivate and retain key
employees and to tie a significant portion of their compensation to the
long term success of the Company. The Plan authorizes the granting of
options on up to 550,000 shares of the Parent Company's $5 par value common
stock. The options are intended to be non-qualified options under the
Internal Revenue Code.
The Board of Directors granted 468,600 options on September 12, 1996
and 2,200 options on November 14, 1996. The options are exercisable at the
market price on the date of grant: $22.16 in September 1996 and $23.63 in
November 1996. See the table "Option/SAR Grants in Last Fiscal Year" for
information concerning named executive officers. The Compensation
Committee and the Board of Directors considered both the total number of
shares to include in the Plan as well as how shares should be allocated
among employee groups. To meet the overall goals of the Company's
compensation philosophy and the stock option plan, approximately 80 percent
of the shares will be allocated to the executive officer group and
approximately 20 percent will be allocated to other officers and key
personnel. When making specific grants the Compensation Committee
considers the position of the executive officer, the executive officer's
past and anticipated future contribution to the Company's profitability and
the executive officer's alliance with the interest of shareholders.
11
<PAGE>
To date a total of 392,700 option shares have been granted to the
executive officers as a group, with 22,000 granted to C. Robert Brenton and
77,000 granted to Robert L. DeMeulenaere. The smaller amount granted to C.
Robert Brenton is in recognition of the fact that his interests are already
closely allied with the interests of shareholders due to his substantial
stock holdings. The amounts granted to C. Robert Brenton and Robert L.
DeMeulenaere are in recognition of their past and future expected
contribution and impact on the financial results of the Company.
Under the provisions of the Stock Option Agreements granted to date,
the options will vest and may be exercised upon the earlier of nine years
and six months from the date of grant or upon the Company's achievement of
aggressive accumulative net income goals specified in the agreement. The
accumulative net income goals specified in the option agreement include
performance periods beginning January 1, 1996, and continuing through
December 31, 1998, 1999 and 2000. To the extent the Company's cumulative
net income meets or exceeds the thresholds set forth in the Performance
Vesting Schedule below, the options will become vested proportionately to
the extent that the amount of cumulative net income exceeds the minimum up
to the maximum level applicable to the performance period.
<TABLE>
<CAPTION>
Performance Vesting Schedule
% Total Vested Cumulative Net Income (in thousands) Starting 1/1/96 Through
12/31/98 12/31/99 12/31/00
<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>
The Plan also provides for prorated vesting upon normal retirement
after age 65, upon death or disability of the optionee, or in the event the
Company is sold, merged, or consolidated with another company. If the
optionee retires prior to age 65 without approval or leaves the Company,
the options that were exercisable by the optionee will expire if not
exercised within 90 days.
Long-Term Stock Compensation Plan - 1987 Non-Qualified Stock Option
Plan - The Company also maintains a 1987 Non-Qualified Stock Option Plan
which permits the Board of Directors to grant options to officers of the
Company (Brenton Banks, Inc. and its subsidiaries) through May 6, 1997.
There were no grants of options under this plan in 1996 and no further
grants are anticipated. The total aggregate amount of stock that can be
issued pursuant to the exercise of the options is 330,000 shares of the
Parent Company's $5 par value common stock. The options are intended to be
non-qualified options under the Internal Revenue Code.
The Board of Directors has adopted Administrative Rules ("Rules") for
the 1987 Non-Qualified Stock Option Plan. The Rules set the term of the
options at 10 years and 30 days after the date of grant and provide for a
ratable five (5) year vesting scheduled for the options. The Rules also
provide for full vesting upon normal retirement after age 60, upon the
death or disability of the optionee, or in the event the Company is sold,
merged, or consolidated with another company. If the optionee retires
prior to age 60 without the Board of Directors' approval or is terminated
by the Company, the options that were then exercisable by the optionee will
expire if not exercised within 90 days.
The Board of Directors granted 9,240 options on July 21, 1994; 16,500
options on June 28, 1990; 23,100 options on April 19, 1990; 16,500 options
on September 14, 1988; and 275,550 options on July 13, 1987. The options
are exercisable at the market price on the date of grant: $17.86 in July
1994, $8.60 in June 1990, $7.99 in April 1990; $5.83 in September 1988; and
$4.02 in July 1987. As of December 31, 1996, 206,870 options have been
exercised and 24,750 have been forfeited. The weighted average per share
exercise price of the 109,270 options currently outstanding is $4.98. All
of the outstanding options were vested and exercisable at the end of 1996.
At December 31, 1996, there were 13,860 shares still available for grant.
12
<PAGE>
Split Dollar Insurance - The Company has instituted a life insurance
program for the benefit of C. Robert Brenton to encourage his continued
participation in the Company following his retirement and to aid him with
his estate planning goals. The life insurance program provides up to
$3,500,000 of life insurance coverage to C. Robert Brenton and his spouse.
Pursuant to the terms of the program, the insurance policies are held in a
trust created for the benefit of the named executive officer and the
officer's spouse. The Company is obligated to pay $114,000 of the premiums
for a period of seven (7) years. Upon the termination of the policies, the
Company is repaid the premiums together with interest in excess of $300,000
on the premiums at the rate of 5.2 percent per annum. The amount of the
premiums paid for 1996 was $114,000. The Company expensed $29,211 in
connection with the payments made pursuant to the life insurance program.
The benefits payable pursuant to the life insurance program are not related
to the performance of the Company.
RESPECTFULLY SUBMITTED,
GARY M. CHRISTENSEN, WILLIAM H. BRENTON, AND JUNIUS C. BRENTON
Director Compensation - During 1996, directors William H. Brenton, R.
Dean Duben, Hubert G. Ferguson and Gary M. Christensen received directors'
fees for their service on the Board of Directors and directors C. Robert
Brenton, Junius C. Brenton and Robert L. DeMeulenaere did not receive
directors' fees for their service on the Board of Directors. For 1996, the
directors fees were $2,500 for regular Board of Directors' meetings, $750
for special Board of Directors' meetings and $500 for audit committee
meetings. One-half of the fees earned by a director for regular meetings
are credited toward the Director's Incentive Plan described below. During
1996, R. Dean Duben, Hubert G. Ferguson and Gary M. Christensen earned
$8,500, $6,000 and $9,000, respectively for their service as directors of
the Company. Hubert G. Ferguson earned $750 for consulting services.
Junius C. Brenton earned $1,500 for services as a director of certain of
the Company's affiliated banks. William H. Brenton earned $10,500 for
services as director of the Company and $1,050 for services as a director
of certain of the Company's affiliated banks.
William H. Brenton and Junius C. Brenton participate in the Company's
split dollar life insurance program. The plan is designed to encourage
their continued participation in the Company following their retirement and
to aid them with their estate planning goals. The life insurance program
provides up to $3,500,000 and $2,000,000 of life insurance coverage to
William H. Brenton and Junius C. Brenton and their spouses, respectively.
Pursuant to the terms of the program, the insurance policies are held in a
trust created for the benefit of the named Director and their spouse. The
Company is obligated to pay $114,000 of the premiums for a period of seven
(7) years for William H. Brenton and $48,314 of the premiums for a period
of six (6) years for Junius C. Brenton. Upon the termination of the
policies, the Company is repaid the premiums together with interest in
excess of $300,000 and $150,000 for William H. Brenton and Junius C.
Brenton, respectively, on the premiums at the rate of 5.2 percent per
annum. The amount of the premiums paid for 1996 was $114,000 for William
H. Brenton and $48,314 for Junius C. Brenton. The Company expensed $29,211
in connection with the payments made on behalf of William H. Brenton.
In the third quarter of 1995, the Company adopted the Directors'
Incentive Plan to attract, retain and compensate directors of the Company.
The Plan is a non-qualified phantom stock deferred compensation plan and
is administered by the Board of Directors. Pursuant to the plan's
provisions, one-half of the directors' fees payable to directors for
regular Board of Directors meetings are credited toward the Plan.
Participants are awarded common stock share credits to a special ledger
account maintained by the Company. Within six months following the
participant no longer being a director of the Company, the Company will pay
to the participant the value of the share credits, which are equated to the
fair market value of the Company's common stock (assuming the reinvestment
of dividends). During 1996, the values of the credits awarded to William
H. Brenton, Mr. Duben, Mr. Ferguson and Mr. Christensen were $7,577,
$7,641, $5,340 and $7,711, respectively.
Agreements with Executive Officers - The Company entered into
agreements with Robert L. DeMeulenaere, Larry A. Mindrup and Norman D.
Schuneman which provide these officers certain benefits upon a change in
control of the Company. A change in control occurs when there is a
transfer of substantially all of the Company's assets, when the
stockholders of the Company immediately preceding an event or transaction
control less than a majority of the voting
13
<PAGE>
power of the Company immediately following the event or transaction, or
when the Brenton family and their affiliates together, are no longer the
largest shareholder of the Company. Pursuant to the terms of these
contracts, Mr. DeMeulenaere, Mr. Mindrup and Mr. Schuneman may receive up
to $500,000, $350,000, and $375,000, respectively, if there is a change in
control of the Company and they are terminated or there is a substantial
reduction in their duties within three years following the change in
control. In the event of a change in control where their employment is not
terminated, their base salary for the three years following the change in
control shall not be less than the amount immediately prior to the change
in control. The maximum benefit payable to these individuals is limited to
the lessor of the amount deductible under the Internal Revenue Code Section
280G or the amounts set forth above. The benefits payable to
Mr. DeMeulenaere, Mr. Mindrup and Mr. Schuneman are subject to certain
phase-out adjustments beginning one year following the change in control.
The agreements for Mr. Mindrup and Mr. Schuneman expire on December 31,
1997.
II. APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP as
independent auditors for the Company for the year 1997. Such selection is
being submitted to the stockholders for approval. KPMG Peat Marwick LLP
has served for many years as the independent auditors for the Company,
including 1996, and was approved by the stockholders at the last Annual
Meeting of the Stockholders. Representatives of KPMG Peat Marwick LLP are
expected to be present at the meeting, will be given an opportunity to make
a statement, if they so desire, and are expected to be available to respond
to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF KPMG PEAT MARWICK
LLP AS INDEPENDENT AUDITORS FOR THE COMPANY.
III. OTHER MATTERS
The Board of Directors does not know of any matters to be presented at
the Annual Meeting other than the approval of minutes and those mentioned
above. However, if any other matters properly come before the meeting or
any adjournments thereof, it is the intention of the persons named in the
enclosed proxy to vote the shares represented by them in accordance with
their best judgment pursuant to the discretionary authority granted in the
proxy.
SUBMISSION OF SHAREHOLDER PROPOSALS
In accordance with the Parent Company's Bylaws, any stockholder
proposal for action at the Annual Meeting, including nominations for the
Board of Directors, must be submitted in writing to the Secretary of the
Parent Company at least five days prior to the date of the Annual Meeting
to be considered and voted upon at the meeting.
INCLUSION OF SHAREHOLDER PROPOSALS IN PROXY STATEMENT
Any stockholder may present a proposal for inclusion in the Parent
Company's proxy statement for the next Annual Meeting of the Stockholders
to be held on May 6, 1998, provided that at the time the proposal is
submitted the proponent is a record or beneficial owner of at least 1
percent or $1,000 in market value of shares entitled to be voted at the
meeting on a proposal and has held the shares for at least one year, and
provided that the proponent shall continue to own the shares through the
date of the meeting, May 6, 1998. The proponent shall notify Brenton
Banks, Inc. in writing of his or her intention to appear personally at the
meeting to present his or her proposal for action. Any proposal must be
received by Brenton Banks, Inc. no later than January 6, 1998, in order to
be included in the proxy statement of Brenton Banks, Inc. for the May 6,
1998, meeting.
14
<PAGE>
S.E.C. FORM 10-K AVAILABLE.
COPIES OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES, WILL BE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE
BY WRITTEN REQUEST ADDRESSED TO STEVEN T. SCHULER, SECRETARY, BRENTON
BANKS, INC., P.O. BOX 961, DES MOINES, IOWA 50304-0961.
The cost of soliciting proxies will be borne by Brenton Banks, Inc.
In addition to the solicitation of proxies by use of the mails, some of the
officers, directors and regular employees of Brenton Banks, Inc. or its
subsidiaries, none of whom will receive additional compensation therefor,
may solicit proxies by telephone, personal interview or other means.
Brenton Banks, Inc. will, upon request, reimburse nominees, custodians and
fiduciaries for expenses in forwarding proxy material to their principals.
Only stockholders of record at the close of business on March 10,
1997, will be entitled to notice of and to vote at the meeting.
Stockholders are urged to sign and date the enclosed proxy, which is
solicited on behalf of the Board of Directors, and return it as promptly as
possible. Proxies will be voted for or against the proposals presented at
the meeting, in accordance with the stockholder's specifications marked
thereon. If no specification is made, proxies will be voted on matters
presented at the meeting in accordance with the recommendations of the
Board of Directors set forth above in this Proxy Statement. The proxy does
not affect the right to vote in person at the meeting, and may be revoked
by appropriate notice to the Secretary of the Parent Company at any time
prior to the voting.
By order of the Board of Directors,
Steven T. Schuler
Secretary
15
<PAGE>
PROXY BRENTON BANKS, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING TO BE HELD ON MAY 7, 1997, DES MOINES, IOWA.
The undersigned hereby appoints William H. Brenton, C. Robert Brenton and
Junius C. Brenton, and each of them, with full powers of substitution,
attorney and proxy to represent the undersigned at the Annual Meeting of
Stockholders of Brenton Banks, Inc., to be held at the Convention Center,
Des Moines, Iowa, at 5:00 p.m., on May 7, 1997, and at any adjournments
thereof, and to vote the shares of Brenton Banks, Inc. standing in the name
of the undersigned with all powers which the undersigned would possess if
he, she or they were personally present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE LISTED ON THE
REVERSE SIDE IN PROPOSAL 1, AND FOR THE APPROVAL OF KPMG PEAT MARWICK LLP
AS INDEPENDENT AUDITORS IN PROPOSAL 2.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE OR IF
AUTHORITY TO VOTE FOR NOMINEES IS NOT WITHHELD, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED ON THE REVERSE SIDE IN PROPOSAL 1, AND FOR PROPOSAL
2.
PLEASE MARK, AND SIGN ON REVERSE SIDE, DATE AND RETURN IN THE ENCLOSED
ENVELOPE.
Will you attend this meeting in person? [ ] Yes [ ] No If yes, there will
be _____ person(s) attending.
(Continued and to be signed on the reverse side.)
<PAGE>
BRENTON BANKS, INC.
Please mark vote in oval in the following manner using dark ink only. [ ]
1. Election of Directors -
Nominees: William H. Brenton, C. Robert Brenton, Junius C. Brenton, Robert
L. DeMeulenaere, R. Dean Duben, Hubert G. Ferguson, and Gary M.
Christensen.
[ ] For [ ] Withhold [ ] For All Except _________________
Nominee Exception
2. Proposal to approve KPMG Peat Marwick LLP, Des Moines, Iowa, as
independent auditors for the Company for 1997.
[ ] For [ ] Against [ ] Abstain
3. Upon the approval of minutes and such other matters as may properly
come before the meeting, in such a manner as he or they determine to be in
the best interest of the Company. The Board of Directors is not presently
aware of any other matters to be presented for action at the meeting.
Dated _______________________, 1996
(Signatures)___________________________________
_______________________________________________
Joint owners must both sign exactly as shown hereon. Please sign and
return each proxy card you receive. If you are an administrator or other
fiduciary, please give your full title. Corporations should sign the full
corporation name by an authorized officer. A partnership should sign in
the partnership name by one of the partners.
<PAGE>
BRENTON BANKS, INC.
APPENDIX TO THE PROXY STATEMENT
FISCAL YEAR 1996
<PAGE>
TABLE OF CONTENTS
PAGE
General Information 1
Financial Highlights 2
Management's Discussion and Analysis 3
Consolidated Average Balances and Rates 9
Selected Financial Data 10
Consolidated Statements of Condition 11
Consolidated Statements of Operations 12
Consolidated Statements of Cash Flows 13
Consolidated Statements of Changes in
Common Stockholders' Equity 14
Notes to Consolidated Financial Statements 15
Management's Report 28
Independent Auditors' Report 28
Stock Information 29
Corporate Structure 30
<PAGE>
BRENTON BANKS, INC.
GENERAL INFORMATION
Brenton Banks, Inc. (the "Company") is a bank holding
company registered under the Bank Holding Company Act of 1956 and
a savings and loan holding company under the Savings and Loan
Holding Company Act. Brenton Banks, Inc. was organized as an
Iowa corporation under the name of Brenton Companies in 1948.
Subsequently, the Company's name was changed to its current name,
Brenton Banks, Inc.
Brenton Banks, Inc. is Iowa's largest, home-based bank
holding company, with 45 service locations in metropolitan
markets and regional economic centers across the state. The
Company offers a complete range of financial products and
services - including retail, agricultural and commercial banking;
trust and investment management services; investment, insurance
and real estate brokerage; mortgage banking; cash management and
international banking services as well as our own proprietary
mutual funds. The Company's stock trades on the NASDAQ national
market under the symbol BRBK or BrentB.
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
1996 1995 1994
<S> <C> <C> <C>
Operating Results
Net interest income $ 56,052,142 53,332,143 5,450,526
Provision for loan losses 2,900,000 1,864,801 1,987,909
Total noninterest income 23,327,441 17,846,740 16,592,988
Total noninterest expense 56,090,571 55,051,267 56,656,922
Income before income taxes
and minority interest 20,389,012 14,262,815 13,398,683
Net income 14,015,430 10,407,354 10,107,387
Per Common and Common
Equivalent Share***
Net income $ 1.69 1.22 1.15
Cash dividends .454 .409 .40
Book value, including
unrealized gains
(losses)* 15.08 14.20 12.75
Book value, excluding
unrealized gains
(losses)** 14.95 14.04 13.35
Closing bid price 27.63 19.32 16.59
At December 31
Assets $1,632,095,082 1,582,779,320 1,581,326,849
Loans 941,943,513 910,193,212 970,214,498
Nonperforming loans 6,167,000 5,619,000 5,022,000
Deposits 1,353,057,111 1,361,942,715 1,340,283,110
Common stockholders'
equity 121,954,229 119,533,631 110,430,345
Ratios
Return on average common
stockholders' equity
(ROE) 11.76% 9.04 9.03
Return on average assets
(including minority
interest) (ROA) .92 .71 .70
Net interest margin 4.03 3.89 4.12
Net noninterest margin (2.09) (2.38) (2.61)
Efficiency ratio 68.27 73.70 74.63
Loan to deposit ratio 69.62 66.83 72.39
Allowance for loan losses
to total loans 1.20 1.22 1.12
Primary capital to
assets** 8.33 8.40 8.18
Equity to assets** 7.41 7.47 7.28
Tier 1 leverage capital
ratio** 7.62 7.45 7.23
Nonperforming loans as a
percent of loans .65 .62 .52
Net charge-offs as a
percent of average loans .29 .18 .10
Allowance for loan losses
as a percent of
nonperforming loans 183.69 197.01 217.30
<FN>
* Including unrealized gains (losses) on securities
available for sale.
** Excluding unrealized gains (losses) on securities
available for sale.
*** Restated for the 10% common stock dividend effective in
1996.
</TABLE>
<PAGE>
Management's Discussion and Analysis
For 1996, Brenton Banks, Inc. and subsidiaries (the "Company")
reported net income of $14,015,430 compared to 1995 earnings of
$10,407,354.
Capital Resources
Common stockholders' equity totaled $121,954,229 as of
December 31, 1996, a 2.0 percent increase from the prior year.
In October 1996, the Board of Directors (the "Board") declared
a 10 percent common stock dividend. As a result of this action,
each shareholder received one additional share of common stock for
every 10 shares they owned. Fractional shares were paid in cash.
All per-share data has been restated to reflect the 10 percent
common stock dividend. Cash dividends for 1996 totaled $3,748,653
or $.454 per common share, which represents an increase of 11.0
percent over 1995 dividends of $.409 per share. The dividend
payout ratio for 1996 was 26.9 percent of earnings per share.
As part of the Company's ongoing stock repurchase plan,
347,700 shares of common stock were repurchased during 1996 at a
cost of $8,248,331. The Board had given the Company authorization
to repurchase up to $10 million during 1996. Since the inception
of the plan in 1994, the Company has repurchased 650,633 shares at
a total cost of $13,929,392. The Board has extended this plan for
1997 by authorizing up to an additional $10 million for stock
repurchase.
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 at December 31, 1996, was
11.57 percent and the total risk-based capital ratio was 12.64
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 7.62 percent at December 31, 1996, exceeding the
regulatory minimum requirement for well-capitalized institutions of
5.0 percent.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 9.2 percent at December 31, 1996, compared to 10.4
percent at the end of 1995. The Parent Company's $2 million line
of credit with a regional bank was unused throughout 1996. Long-
term borrowings of the Parent Company at December 31, 1996,
consisted entirely of $11,248,000 of capital notes.
Brenton Banks, Inc. common stock closed on December 31, 1996,
at a bid price of $27.63, an increase of 43.0 percent over the
prior year-end. The closing price at December 31, 1996, was 183
percent of the book value per share of $15.08. The year-end stock
price represented a price-to-1996-earnings multiple of 16.3 times.
Brenton Banks, Inc. continues to pursue acquisition and
expansion opportunities which will enhance the financial
performance of the Company as well as strengthen the Company's
presence in current and new markets. 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>
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.
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. Federal
funds sold and assets available for sale comprised 29.5 percent of
the Company's total assets at December 31, 1996.
Net cash provided from operations of the Company is another
major source of liquidity and totaled $14,997,716 in 1996,
$8,388,374 in 1995 and $18,524,837 in 1994. These strong cash
flows from operations are expected to continue in 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. At December 31, 1996, the
Company had borrowings of $57,700,000 from the Federal Home Loan
Bank ("FHLB") of Des Moines, of which $52,700,000 were used as a
means of providing long-term, fixed-rate funding for certain fixed-
rate assets and managing interest rate risk. The remaining
$5,000,000 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 $80 million at December 31, 1996.
The combination of high levels of potentially liquid assets,
strong cash flows from operations, low dependence on volatile
liabilities and additional borrowing capacity provided strong
liquidity for the Company at December 31, 1996.
The Parent Company had sufficient cash flow and liquidity at
December 31, 1996. The primary funding source for the Parent
Company is dividends from its subsidiaries. Dividends of
approximately $16 million were available to be paid to the Parent
Company by subsidiary banks without reducing capital ratios below
regulatory minimums. At the end of 1996, the Parent Company had
$5.6 million of interest-bearing deposits with banks, as well as
additional borrowing capacity.
Results of Operations - 1996 Compared to 1995
Net Income
For the year ended December 31, 1996, Brenton Banks, Inc.
recorded net income of $14,015,430, an increase of 34.7 percent
over 1995, which totaled $10,407,354. Earnings per common share
were $1.69 compared to $1.22 for 1995. Return on average assets
(ROA) was .92 percent in 1996, compared to .71 percent in 1995.
The return on average equity (ROE) was 11.76 percent, compared to
9.04 percent one year earlier.
Net Interest Income
Net interest income rose 5.1 percent to $56,052,142 for 1996.
Both average earning assets and average interest-bearing
liabilities increased 1.0 percent from 1995. The Company
experienced a favorable change in the mix of earning assets and
interest-bearing liabilities which contributed to an increase in
net interest margin of 14.1 basis points over 1995. The average
rate earned on earning assets declined 5.9 basis points, while the
average rate paid on interest-bearing liabilities declined 22.4
basis points.
The net interest spread, which is the difference between the
rate earned on assets and the rate paid on liabilities, rose to
3.58 percent from 3.41 percent last year. Net interest margin,
which is tax equivalent net interest income as a percentage of
average earning assets, averaged 4.03 percent in 1996 compared to
3.89 percent in 1995. To improve net interest margin and lessen
interest rate risk, the Company continued its strategy of de-
emphasizing portfolio real estate loans and developing more
commercial and consumer loan business.
Loan Quality
Loan quality remains strong with nonperforming loans at
December 31, 1996 totaling $6,167,000 or .65 percent of loans.
This compares to .62 percent at December 31, 1995, or $5,619,000.
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 majority of the increase in
nonperforming loans was related to two loans that were restructured
within the commercial loan portfolio.
<PAGE>
The allowance for loan losses, which totaled $11.3 million,
represented 183.69 percent of nonperforming loans at the end of
1996, compared to 197.01 percent one year ago. The provision for
loan losses totaled $2,900,000 for the year ended December 31,
1996, compared to $1,864,801 for 1995. The increase of $1,035,199
in provision is primarily related to a 933,535, or 54.7 percent,
increase in net loan charge-offs during 1996. The Company's net
charge-offs as a percent of average loans were .29 percent for 1996
compared to .18 percent for 1995. Loan losses for 1996 were
concentrated in the consumer loan portfolio.
Loan quality control and risk management are carefully
balanced with goals for loan growth. The Company has a formal
structure for reviewing and approving all loans. Documentation and
loan quality reviews are performed routinely by internal loan
review personnel, as well as by regulatory examiners.
The allowance for loan losses represents a reserve available
to absorb estimated possible future loan losses within the loan
portfolio. The allowance is based on management's judgment after
considering various factors such as the current and anticipated
economic environment, historical loan loss experience, and most
importantly, the evaluation of larger individual loans by lending
officers and internal loan review personnel.
Using the Company's standard evaluation process, individual
loan officers evaluate loan characteristics, the borrower's
financial condition and collateral values. From these assessments,
the Reserve Adequacy Committee performs quarterly reviews of the
loan portfolio quality, quantifies the results and reviews the
calculations of the required allowance for loan losses. In
addition, the Reserve Adequacy Committee approves charge-offs and
reviews subsequent collection action plans for problem credits.
Management believes the allowance for loan losses at December
31, 1996, was sufficient to absorb potential loan losses within the
portfolio.
Net Noninterest Margin
To measure operating efficiency, the Company uses the net
noninterest margin, which is the difference between noninterest
income and noninterest expense as a percent of average assets. For
1996, the net noninterest margin improved to (2.09) percent
compared to (2.38) percent in 1995. 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 December 31, 1996, the
Company's efficiency ratio was 68.27 percent, compared to 73.70
percent one year ago. To enhance operating efficiency throughout
the organization, the Company continues to focus on cost management
and the development of strategic improvements in noninterest income
and expense.
Noninterest Income
The Company achieved record levels of noninterest income in
1996. For 1996, total noninterest income (excluding securities
transactions) increased 28.9 percent to $23,006,185 from
$17,849,743 one year ago. Noninterest income (excluding securities
gains and losses) for 1996 represented 1.45 percent of average
assets and 41.04 percent of total operating income, which were the
highest levels in the history of the Company. All categories of
noninterest income reflect strong gains from the prior year.
Service charges on deposit accounts rose 21.0 percent in 1996
compared to one year ago. This growth related to full
implementation of standardized service charges as well as a new
focus on collecting a higher percentage of fees assessed.
Investment brokerage commissions totaled $3,766,436 for 1996,
an increase of 23.7 percent over the 1995 total of $3,044,107.
Strong financial markets and successful new sales initiatives drove
the increase in this category.
Insurance commissions and fees increased 24.6 percent to
$2,915,666 in 1996 due primarily to higher sales of both credit-
related insurance and insurance agency operations.
Mortgage banking income totaled $2,168,593 for 1996 compared
to $1,427,342 in 1995, an increase of 51.9 percent. This increase
is attributable to a higher volume of real estate mortgage loan
originations, which totaled $110.8 million, 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 $2,744,530 in 1996
compared to $2,425,105 in 1995. This increase in revenue is
related to increased volumes of personal trusts, investment
management fees and employee benefit plans.
Other operating income increased by $1,288,140 when comparing
1996 to 1995. Gains on the sale of loans of $83,440 were recorded
in 1996 versus losses in 1995 of $232,454.
Securities transactions produced an additional increase in
noninterest income. Securities gains of $321,256 were recorded in
1996 versus losses of $3,003 in 1995.
<PAGE>
The growth in various noninterest income categories has
enabled the Company to reach targeted levels of total income. The
Company will continue to focus on providing a broad array of
financial products and services to our customers that generate fee
income. The continued growth rate of fee income could be
vulnerable to future economic conditions and competition by other
financial institutions that cannot be estimated by the Company.
Noninterest Expense
Total noninterest expense increased 1.9 percent in 1996 to
$56,090,571 from $55,051,267 one year ago. Noninterest expense for
1996 includes a nonrecurring charge for a special assessment by the
FDIC. This assessment is based upon all deposits insured by the
Savings Association Insurance Fund (SAIF) as of March 31, 1995, and
equals approximately 65.7 basis points per $100 of SAIF-insured
deposits. Brenton's assessment was $1,288,000. Excluding this
one-time assessment, noninterest expense would have actually
decreased by .5 percent.
Salaries and wages, the largest component of noninterest
expense, increased $2,645,244 or 11.6 percent over 1995. This
increase is primarily related to commissions paid on higher sales
of fee-related products, expense tied to a stock performance plan
and severance costs. Fixed salaries, those that are not based on
commissions, actually decreased by 6.6 percent. The number of
full-time equivalent employees decreased by 3.8 percent and 13.6
percent at December 31, 1996 and 1995, respectively. The total
increase in salaries and wages led to a proportionate increase in
employee benefits.
Several new facilities and remodeling projects were completed
in the past two years, which explain the combined increase in the
categories of occupancy and furniture and equipment expense.
Occupancy expense totaled $5,502,904 for 1996, compared to
$4,912,417 for 1995. Increases within the occupancy category were
associated with rents, leases and depreciation expense related to
these new facilities. Results for 1996 include the first full year
of expense for these new facilities.
Furniture and equipment expense actually decreased $21,871
from the prior year. Depreciation expense increased by $197,130
due to technology updates throughout the Company. Decreases in
repairs and maintenance, and furniture and equipment rentals offset
the increase in depreciation expense. The Company continues to
focus on using technology to improve efficiency and provide better
service to our customers. During 1996, 62.8 percent of the
Company's capital expenditures were in the technology area.
Data processing expense totaled $2,591,485, an increase of 8.9
percent compared to 1995. This increase is related to new data
servicing contracts in 1996 for mortgage loan processing and
personal computer network maintenance and support. The expense
associated with core main frame processing actually decreased which
offset the cost of the new contracts.
Expense related to the FDIC deposit assessments increased 1.0
percent in 1996 to $1,801,646, which includes the previously
discussed one-time $1,288,000 assessment to fully fund SAIF. This
assessment related to the deposits insured by SAIF, which
represented approximately 16.4 percent of the Company's total
deposits at the end of 1996. The Company continues to pay the
lowest premiums available under the FDIC's risk-based premium
system.
Other operating expenses decreased $2.6 million or 21.2
percent when comparing 1996 results to 1995. This decline is the
result of benefits derived in 1996 from the 1995 merger of the
Company's 13 commercial banks into one bank charter, cost control
measures and one time costs incurred in 1995.
The Company continues to focus on cost management and
evaluates all major expense items in an effort to control the
growth rate of noninterest expenses.
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 28.3 percent for 1996 compared to 22.5
percent for 1995.
Results of Operations - 1995 Compared to 1994
Net Income
For the year ended December 31, 1995, Brenton recorded net
income of $10,407,354. Earnings per common share were $1.34
compared to $1.27 for 1994.
The Company's total assets were consistent with 1994 levels of
$1.6 billion on December 31, 1995. Return on average assets (ROA)
was .71 percent in 1995, compared to .70 percent in 1994. The
return on average equity (ROE) was 9.04 percent, compared to 9.03
percent one year earlier.
<PAGE>
Net Interest Income
Net interest income declined $2,118,383 or 3.8 percent to
$53,332,143 for 1995. Although average earning assets increased
1.3 percent from 1994, average interest-bearing liabilities
increased 2.7 percent. In addition, the average rate earned on
earning assets rose 55 basis points, while the average rate paid on
interest-bearing liabilities increased 83 basis points.
The net interest spread fell to 3.41 percent in 1995 from 3.69
percent in 1994. Net interest margin declined 23 basis points in
1995 and averaged 3.89 percent, compared to 4.12 percent in 1994.
Loan Quality
Brenton's loan quality remained strong in 1995. The Company's
nonperforming loans were a low .62 percent of loans or $5,619,000
at December 31, 1995, up from $5,022,000 and .52 percent from one
year earlier. The increase in nonperforming loans from one year
ago was due to an increase in commercial and consumer loans that
were 90 days or more past due. Nonaccrual and renegotiated loans
are below 1994 levels.
The allowance for loan losses, which totaled $11.1 million,
represented 197.01 percent of nonperforming loans at the end of
1995, compared to 217.3 percent for 1994. The provision for loan
losses totaled $1,864,801 for the year ended December 31, 1995,
compared to $1,987,909 for 1994. The Company's net charge-offs to
average loans were .18 percent for 1995 compared to .10 percent for
1994.
Beginning January 1, 1995, the Financial Accounting Standards
Boards mandated a standard that changed certain accounting
procedures for impaired loans, including the determination of the
allowance for loan losses and financial disclosures. This new
Standard has not had a material effect on the financial statements
of the Company.
Noninterest Income
For 1995, total noninterest income (excluding securities
transactions) increased 5.4 percent to $17,849,743 from $16,932,612
one year earlier. Noninterest income (excluding securities gains
and losses) for 1995 represented 1.14 percent of average assets and
33.47 percent of total operating income. Increases were seen in
substantially all noninterest income categories.
Service charges on deposit accounts rose 2.3 percent in 1995,
compared to one year earlier. This increase occurred in the fourth
quarter of 1995, when the Company implemented standardized service
charges and initiatives to reduce the amount of waived charges and
fees.
Insurance commissions and fees increased 10.6 percent to
$2,339,817 in 1995 primarily due to higher sales of both credit-
related insurance and insurance agency operations.
Fiduciary income rose 12.2 percent to $2,425,105 in 1995
compared to $2,160,492 in 1994. This increase was due to a growing
customer base in the areas of personal trusts, investment
management, employee benefit plans and the Brenton Family of Mutual
Funds.
Securities transactions produced an additional increase in
noninterest income. Securities losses for 1995 totaled $3,003
compared to 1994 losses of $339,624.
Offsetting the overall increase in noninterest income was a
20.6 percent decline in other operating income. The major cause
for the decline was $232,454 of net losses on the sale of loans in
1995 compared to 1994 gains of $167,519.
Noninterest Expense
Total noninterest expense decreased 2.8 percent in 1995 to
$55,051,267 from $56,656,922 one year ago. Included in 1994
expense was a one-time restructuring charge of $2,645,000. The
restructuring charge was taken to cover costs related to the
Company's strategic plan that included consolidating the Company's
13 commercial banks, reducing Brenton's overall personnel levels
and closing selected banking branches.
A summary of the estimated costs expensed in 1994 and the
actual costs incurred in 1995 follows:
<TABLE>
<CAPTION>
1994 Estimated 1995 Actual
Costs Costs
<S> <C> <C>
Salaries and wages $1,089,000 $ 565,263
Employee benefits 289,000 83,409
Occupancy expense 192,000 --
Data processing expense 527,500 389,432
Abandonment losses 267,000 164,945
Legal, regulatory and other 280,500 409,085
_________ _________
$2,645,000 $1,612,134
_________ _________
_________ _________
</TABLE>
<PAGE>
The difference between the estimated costs recorded in 1994
and the actual costs incurred was reversed, thereby reducing or
crediting the above expense categories in 1995. The major
restructuring charge reversals occurred in salaries and wages and
employee benefit categories. These actual costs were well below
original estimates due to employee attrition, which assisted in
meeting necessary salary reductions without incurring severance
costs. In addition, occupancy costs and abandonment losses were
lower than original estimates, due to a planned branch closing that
was estimated for 1995, but did not occur until 1996. Another
branch which was expected to be abandoned was sold, with the
Company incurring no loss.
Salary expense declined approximately $710,000 from one year
ago after eliminating the effects of the restructuring charge, due
to overall staff reductions. The number of full-time equivalent
employees decreased by 13.6 percent when comparing year-end 1995
personnel levels to year-end 1994. The decrease in salaries was
offset by increases in incentives, insurance sales commissions and
stock compensation plan expenses. The reductions in salaries and
wages led to a proportionate decline in employee benefits.
The increases in occupancy and furniture and equipment expense
were due primarily to rents and depreciation for new and renovated
banking offices in Ames, Ankeny, Cedar Rapids, Davenport and Iowa
City. The Company invested approximately $7 million in these new
facilities.
Data processing expenses were unchanged from last year after
eliminating the impact of the restructuring charge. Advertising
and promotion expenses were also unchanged from one year earlier.
In September 1995, the FDIC refunded assessments retroactively
to May 1995 and lowered deposit insurance premiums for all well-
capitalized banks. This was a result of the full funding of
reserves required by the FDIC to insure the deposits of the banking
industry. This reduced 1995 expenses by $1,124,169, in comparison
to 1994.
Other operating expenses rose $2.5 million or 22.6 percent
after eliminating the impact of the restructuring charge. A large
part of this increase relates to payments made to EDS, a management
consulting firm that was hired to re-engineer the retail and
commercial banking process and assist in developing a formalized
program for enhancing noninterest income. In addition, the Company
has contracted with other consultants to perform sales training and
develop management reporting systems.
Income Taxes
The Company's income tax strategies include reducing income
taxes by purchasing securities and originating loans that produce
tax-exempt income. The effective rate of income tax expense as a
percent of income before income tax and minority interest was 22.5
percent for 1995 compared to 20.2 percent for 1994.
In 1994, the Company established out-of-state investment
subsidiaries to manage the investment portfolios of each Brenton
bank. These subsidiaries provided an opportunity to lower the
amount of state franchise taxes paid by the Company. Effective
July 1, 1995, the state of Iowa enacted legislation that eliminated
the tax benefits derived from these subsidiaries. The Company
dissolved these subsidiaries on June 30, 1995.
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND RATES
Average Balances (In thousands) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 65,439 57,138 46,301 46,025 41,715
Interest-bearing deposits
with banks 1,393 1,076 124 762 6,240
Federal funds sold and
securities purchased under
agreements to resell 26,188 39,763 37,666 23,725 27,082
Trading account securities --- --- 116 --- ---
Investment securities:
Available for sale-taxable 330,002 244,786 245,913 53,174 6,512
Available for sale-tax-exempt 85,471 100,859 132,040 --- ---
Held to maturity-taxable 46,271 65,959 35,794 299,993 384,301
Held to maturity-tax-exempt 51,639 50,235 44,584 164,520 139,296
Loans held for sale 7,983 5,908 2,575 6,165 2,553
Loans 919,578 945,724 936,370 802,088 736,646
Allowance for loan losses (11,440) (11,166) (10,502) (9,615) (8,894)
Premises and equipment 31,728 31,436 24,545 23,045 21,400
Other 28,642 29,508 25,663 26,543 30,422
__________ _________ _________ _________ _________
$ 1,582,894 1,561,226 1,521,189 1,436,425 1,387,273
Liabilities and Stockholders'
Equity:
Deposits
Noninterest-bearing $ 131,051 128,770 127,464 119,322 112,054
Interest-bearing:
Demand 376,259 355,819 250,520 217,754 209,642
Savings 241,250 231,633 294,715 299,640 260,568
Time 583,508 626,497 625,981 622,789 646,261
__________ _________ _________ _________ _________
Total deposits 1,332,068 1,342,719 1,298,680 1,259,505 1,228,525
Federal funds purchased and
securities sold under agreements
to repurchase 59,276 40,237 61,656 42,715 33,240
Other short-term borrowings 17,295 6,536 4,860 33 2,170
Accrued expenses and other
liabilities 17,520 14,896 13,254 12,805 13,735
Long-term borrowings 33,094 37,264 26,500 14,077 14,067
__________ _________ _________ _________ _________
Total liabilities 1,459,253 1,441,652 1,404,950 1,329,135 1,291,737
Minority interest 4,471 4,391 4,290 4,150 3,845
Common stockholders' equity 119,170 115,183 111,949 103,140 91,691
__________ _________ _________ _________ _________
$ 1,582,894 1,561,226 1,521,189 1,436,425 1,387,273
Summary of Average Interest Rates
Average rates earned:
Interest-bearing deposits with
banks 4.87% 6.20 6.65 2.88 4.92
Trading account securities --- --- --- 6.36 ---
Federal funds sold and securities
purchased under agreements to
resell 5.41 5.69 4.53 2.05 2.41
Investment securities:
Available for sale-taxable 6.08 5.96 5.30 5.28 6.63
Available for sale-tax exempt
(tax equivalent basis) 7.13 6.71 6.37 --- ---
Held to maturity-taxable 6.22 6.17 5.20 5.54 6.88
Held to maturity-tax-exempt
(tax equivalent basis) 6.68 8.05 7.70 6.97 7.66
Loans held for sale 8.47 6.71 7.50 8.43 9.33
Loans 8.69 8.69 8.14 8.77 9.65
Average rates paid:
Deposits 4.12% 4.37 3.55 3.70 4.70
Federal funds purchased and
securities sold under agreements
to repurchase 4.17 4.08 3.38 2.41 2.78
Other short-term borrowings 5.87 5.67 5.42 3.63 5.57
Long-term borrowings 7.07 7.03 6.86 8.60 9.14
Average yield on interest-earning
assets 7.80% 7.86 7.31 7.57 8.43
Average rate paid on interest-
bearing liabilities 4.22 4.45 3.62 3.71 4.70
Net interest spread 3.58 3.41 3.69 3.86 3.73
Net interest margin 4.03 3.89 4.12 4.28 4.23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year-end Balances
(In thousands) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets $1,632,095 1,582,779 1,581,327 1,480,596 1,431,140 1,360,942 1,274,301 961,370 921,207 908,933
Interest-earning assets 1,497,600 1,461,218 475,473 1,400,709 1,323,252 1,267,402 1,181,172 883,721 845,571 836,029
Interest-bearing liabilities 1,335,609 1,300,508 1,315,378 1,224,951 1,181,013 1,141,008 1,052,597 769,717 733,133 728,597
Demand deposits 153,284 143,220 136,548 127,132 137,212 115,479 125,626 113,349 118,392 116,830
Long-term borrowings 34,860 38,178 28,939 20,055 13,284 13,634 12,675 14,701 16,215 17,509
Preferred stock --- --- --- --- --- --- --- --- --- 2,000
Common stockholders'
equity** 121,954 119,534 110,430 112,418 97,430 86,712 77,258 63,522 56,401 49,618
Results of operations
(In thousands)
Interest income $ 111,383 111,040 101,223 98,656 106,560 115,561 106,826 85,722 76,745 74,774
Interest expense 55,331 57,708 45,772 44,427 54,773 68,687 64,431 49,102 43,180 43,149
Net interest income 56,052 53,332 55,451 54,229 51,787 46,874 42,395 36,620 33,565 31,625
Provision for loan losses 2,900 1,865 1,988 1,252 1,411 799 869 760 1,214 2,132
Net interest income after
provision for loan losses 53,152 51,467 53,463 52,977 50,376 46,075 41,526 35,860 32,351 29,493
Noninterest income 23,327 17,847 16,593 17,863 14,684 12,715 11,554 10,113 10,367 9,064
Noninterest expense 56,090 55,051 56,657 50,415 46,591 42,284 37,820 32,781 32,066 32,952
Income before income
taxes and minority
interest 20,389 14,263 13,399 20,425 18,469 16,506 15,260 13,192 10,652 5,605
Income taxes 5,771 3,205 2,701 5,508 4,884 4,308 4,388 4,016 2,527 408
Minority interest 603 651 591 667 632 539 533 472 422 290
Net income 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,703 4,907
Preferred stock dividend
requirement --- --- --- --- --- --- --- --- 81 265
Net income available
to common stockholders $ 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,622 4,642
Average common shares
outstanding
(In thousands)* 8,312 8,528 8,747 8,711 8,561 8,534 8,520 7,916 7,916 7,916
Per common and common
equivalent share*
Net income $ 1.69 1.22 1.15 1.64 1.52 1.36 1.21 1.10 .96 .59
Cash dividends .454 .409 .400 .364 .318 .294 .248 .200 .106 .000
Common stockholders'
equity*** 14.95 14.04 13.35 12.62 11.34 10.15 9.06 8.03 7.13 6.26
Selected operating ratios
Return on average assets
(including minority
interest) .92% .71 .70 1.04 .98 .93 .95 1.00 .90 .57
Return on average common
stockholders' equity 11.76 9.04 9.03 13.82 14.13 14.27 14.39 14.50 14.34 9.78
Equity to assets*** 7.41 7.47 7.28 7.40 6.81 6.37 6.06 6.61 6.12 5.46
Common dividend payout 26.86 33.58 34.65 22.22 21.00 21.56 20.50 18.23 11.01 .00
Allowance for loan losses
as a percent of loans 1.20 1.22 1.12 1.12 1.20 1.14 1.25 1.55 1.60 1.75
Net charge-offs to average
loans outstanding .29 .18 .10 .05 .13 .15 .12 .08 .18 .75
<FN>
* Restated for 10% common stock dividend effective in 1996, 3-for-2 stock split effective in 1994 and 2-for-1 stock split
effective in 1990.
** Including unrealized gains (losses) on securities available for sale.
*** Excluding unrealized gains (losses) on securities available for sale
</table
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
December 31 1996 1995
<S> <C> <C>
Assets:
Cash and due from banks (note 2) $ 76,900,524 71,159,078
Interest-bearing deposits with banks 731,554 265,072
Federal funds sold and securities purchased
under agreements to resell 15,200,000 37,600,000
Investment securities:
Available for sale (note 3) 461,099,272 396,370,443
Held to maturity (market value of
$73,316,000 and $109,131,000
at December 31, 1996 and 1995,
respectively (note 3) 72,754,985 108,082,213
Investment securities 533,854,257 504,452,656
Loans held for sale 5,870,298 8,707,309
Loans (notes 4, 9 and 10) 941,943,513 910,193,212
Allowance for loan losses (note 5) (11,328,359) (11,069,869)
Loans, net 930,615,154 899,123,343
Premises and equipment (notes 6 and 10) 30,379,446 32,849,842
Accrued interest receivable 14,417,786 14,494,261
Other assets (note 8) 24,126,063 14,127,759
$ 1,632,095,082 1,582,779,320
Liabilities and Stockholders' Equity:
Deposits (note 7):
Noninterest-bearing $ 153,284,094 143,220,373
Interest-bearing:
Demand 99,277,477 399,308,392
Savings 527,791,360 215,488,846
Time 572,704,180 603,925,104
Total deposits 1,353,057,111 1,361,942,715
Federal funds purchased and securities sold
under agreements to repurchase 66,826,120 41,107,411
Other short-term borrowings (note 9) 34,150,000 2,500,000
Accrued expenses and other liabilities 16,633,068 15,083,453
Long-term borrowings (note 10) 34,860,024 38,177,803
Total liabilities 1,505,526,323 1,458,811,382
Minority interest in consolidated subsidiaries 4,614,530 4,434,307
Redeemable preferred stock, $1 par; 500,000
shares authorized; issuable in series, none
issued --- ---
Common stockholders' equity (notes 12, 13, 14
and 16):
Common stock, $5 par; 25,000,000 shares
authorized; 8,085,684 and 7,653,252 shares
issued and outstanding at December 31, 1996
and 1995, respectively 40,428,420 38,266,260
Capital surplus --- 2,020,518
Retained earnings 80,448,768 77,888,451
Unrealized gains on securities available for
sale 1,077,041 1,358,402
Total common stockholders' equity 121,954,229 119,533,631
$ 1,632,095,082 1,582,779,320
<FN>
Commitments and contingencies (notes 17 and 18).
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans (note 4) $ 80,301,707 82,525,850 76,456,964
Interest and dividends on investments:
Available for sale-taxable 20,063,114 14,577,652 13,032,050
Available for sale-tax-exempt 4,250,463 4,446,824 5,530,626
Held to maturity-taxable 2,878,982 4,069,617 1,862,628
Held to maturity-tax-exempt 2,404,155 3,090,185 2,619,333
Interest on federal funds sold and
securities purchased under agreements
to resell 1,416,539 2,263,734 1,705,717
Other interest income 68,157 66,705 15,636
___________ ___________ ___________
Total interest income 111,383,117 111,040,567 101,222,954
Interest Expense:
Interest on deposits (note 7) 49,507,425 53,075,352 41,609,766
Interest on federal funds purchased and
securities sold under agreements to
repurchase 2,469,939 1,641,516 2,082,077
Interest on other short-term borrowings
(note 9) 1,015,110 370,642 263,658
Interest on long-term borrowings (note 10) 2,338,501 2,620,914 1,816,927
___________ ___________ ___________
Total interest expense 55,330,975 57,708,424 45,772,428
Net interest income 56,052,142 53,332,143 55,450,526
Provision for loan losses (note 5) 2,900,000 1,864,801 1,987,909
___________ ___________ ___________
Net interest income after provision for
loan losses 53,152,142 51,467,342 53,462,617
Noninterest Income:
Service charges on deposit accounts 6,712,874 5,547,796 5,424,547
Investment brokerage commissions 3,766,436 3,044,107 2,879,401
Insurance commissions and fees 2,915,666 2,339,817 2,115,085
Fiduciary income 2,744,530 2,425,105 2,160,492
Mortgage banking income 2,168,593 1,427,342 1,216,690
Other service charges, collection and
exchange charges, commissions and fees 2,779,502 2,435,132 2,342,210
Net gains (losses) from securities
available for sale (note 3) 321,256 (3,003) (339,624)
Other operating income 1,918,584 630,444 794,187
___________ ___________ ___________
Total noninterest income 23,327,441 17,846,740 16,592,988
Noninterest Expense:
Salaries and wages 25,460,464 22,815,220 24,595,274
Employee benefits (note 15) 4,245,682 4,158,580 4,960,665
Occupancy expense of premises, net
(notes 6 and 17) 5,502,904 4,912,417 4,702,208
Furniture and equipment expense
(notes 6 and 17) 3,725,150 3,747,021 3,060,557
Data processing expense (note 18) 2,591,485 2,379,920 3,083,819
FDIC deposit insurance assessment 1,801,646 1,783,213 2,907,382
Advertising and promotion 1,756,473 1,741,390 1,772,852
Supplies 1,409,690 1,326,928 1,386,639
Other operating expense 9,597,077 12,186,578 10,187,526
___________ ___________ ___________
Total noninterest expense 56,090,571 55,051,267 56,656,922
Income before income taxes and
minority interest 20,389,012 14,262,815 13,398,683
Income taxes (note 8) 5,770,600 3,204,687 2,700,640
___________ ___________ ___________
Income before minority interest 14,618,412 11,058,128 10,698,043
Minority interest 602,982 650,774 590,656
___________ ___________ ___________
Net income $ 14,015,430 10,407,354 10,107,387
Per common and common equivalent share
(note 13):
Net income $ 1.69 1.22 1.15
Cash dividends .454 .409 .400
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 14,015,430 10,407,354 10,107,387
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for loan losses 2,900,000 1,864,801 1,987,909
Depreciation and amortization 4,301,776 4,097,022 3,387,034
Deferred income taxes 949,396 (25,181) (1,257,325)
Net (gains) losses from securities
available for sale (321,256) 3,003 339,624
Net (increase) decrease in loans held
for sale 2,837,011 (6,602,817) 2,244,930
Increase in accrued interest receivable
and other assets (11,420,210) (1,678,132) (1,477,154)
Increase in accrued expenses, other
liabilities and minority interest 1,735,569 322,324 3,192,432
_____________ ____________ ____________
Net cash provided by operating activities 14,997,716 8,388,374 18,524,837
Investing Activities:
Investment securities available for sale:
Purchases (289,895,560) (242,871,379) (122,339,026)
Maturities 150,480,123 278,575,538 154,659,319
Sales 67,547,581 5,577,835 21,484,178
Investment securities held to maturity:
Purchases (45,046,248) (121,543,300) (59,384,073)
Maturities 79,614,914 59,896,255 26,687,613
Net (increase) decrease in loans (26,364,596) 28,502,974 (95,225,841)
Purchases of premises and equipment (2,734,491) (9,733,181) (6,920,455)
Proceeds from sales of premises and
equipment 1,356,634 360,470 26,578
_____________ ____________ ____________
Net cash used by investing activities (65,041,643) (1,234,788) (81,011,707)
Financing Activities:
Net increase in noninterest-bearing,
interest-bearing demand and savings
deposits 22,335,320 51,054,199 40,210,540
Net increase (decrease) in time deposits (31,220,924) (29,394,594) 5,708,876
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase 25,718,709 (29,596,325) 33,039,408
Net increase (decrease) in other
short-term borrowings 15,500,000 (9,500,000) 12,000,000
Proceeds of long-term borrowings 14,604,000 12,429,000 22,176,030
Repayment of long-term borrowings (1,771,779) (3,190,610) (13,291,530)
Dividends on common stock (3,748,653) (3,498,220) (3,471,901)
Proceeds from issuance of common stock
under the employee stock purchase plan 71,675 --- ---
Proceeds from issuance of common stock
under the stock option plan 290,748 187,213 385,767
Proceeds from issuance of common stock
under the long-term stock compensation
plan 334,834 361,602 ---
Payment for shares acquired under common
stock repurchase plan (8,248,331) (4,830,111) (850,950)
Payment for fractional shares resulting
from stock dividend (13,744) --- (4,307)
_____________ ____________ ____________
Net cash provided (used) by financing
activities 33,851,855 (15,977,846) 95,901,933
_____________ ____________ ____________
Net increase (decrease) in cash and
cash equivalents (16,192,072) (8,824,260) 33,415,063
Cash and cash equivalents at the
beginning of the year 109,024,150 117,848,410 84,433,347
_____________ ____________ ____________
Cash and cash equivalents at the end
of the year $ 92,832,078 109,024,150 117,848,410
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Common Capital Retained Unrealized
Stock Surplus Earnings Gains (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993 $26,265,755 5,598,027 77,517,613 3,036,270 112,417,665
Net income --- --- 10,107,387 --- 10,107,387
Net change in
unrealized gains
(losses) --- --- --- (8,153,316) (8,153,316)
Dividends on common
stock
$.400 per share* --- --- (3,471,901) --- (3,471,901)
3-for-2 stock split
in the form of a
stock dividend
(note 13) 13,169,475 --- (13,169,475) --- ---
Fractional shares
resulting from
stock split --- --- (4,307) --- (4,307)
Issuance of shares of
common stock under
the stock option
plan (note 16) 146,500 239,267 --- --- 385,767
Shares reacquired
under stock
repurchase plan
(note 13) (224,000) (626,950) --- --- (850,950)
Balance, December 31,
1994 39,357,730 5,210,344 70,979,317 (5,117,046) 110,430,345
Net income --- --- 10,407,354 --- 10,407,354
Net change in
unrealized gains
(losses) --- --- --- 6,475,448 6,475,448
Dividends on common
stock
$.409 per share** --- --- (3,498,220) --- (3,498,220)
Issuance of shares of
common stock under
the stock option
plan (note 16) 98,750 88,463 --- --- 187,213
Issuance of shares of
common stock under
the stock compensation
plan (note 16) 100,445 261,157 --- --- 361,602
Shares reacquired under
stock repurchase plan
(note 13) (1,290,665) (3,539,446) --- --- (4,830,111)
Balance, December 31,
1995 38,266,260 2,020,518 77,888,451 1,358,402 119,533,631
Net income --- --- 14,015,430 --- 14,015,430
Net change in
unrealized gains
(losses) --- --- --- (281,361) (281,361)
Dividends on common
stock
$.454 per share** --- --- (3,748,653) --- (3,748,653)
10% common stock
dividend (note 13) 3,684,215 --- (3,684,215) --- ---
Fractional shares
resulting from
stock dividend --- --- (13,744) --- (13,744)
Issuance of shares of
common stock under
the stock option
plan (note 16) 128,000 162,748 --- --- 290,748
Issuance of shares of
common stock under
the stock compensation
plan (note 16) 73,590 261,244 --- --- 334,834
Issuance of shares
of common stock
under the employee
stock purchase plan
(note 16) 14,855 56,820 --- --- 71,675
Shares reacquired under
stock repurchase plan
(note 13) (1,738,500) (2,501,330) (4,008,501) --- (8,248,331)
Balance, December 31,
1996 $40,428,420 --- 80,448,768 1,077,041 121,954,229
<FN>
* Reflects the 10% common stock dividend effective in 1996 and the 3-for-2 stock
split effective in 1994.
** Reflects the 10% common stock dividend effective in 1996.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRENTON BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) Summary of Significant Accounting Policies and
Related Matters
Nature of Operations Brenton Banks, Inc. and subsidiaries (the
Company) engage in retail, commercial, and agricultural banking
and related financial services from 45 locations throughout the
state of Iowa. The Company provides the usual products and
services of banking such as deposits, commercial loans,
agribusiness loans, personal loans and trust services. The
Company also engages in activities that are closely related to
banking, including mortgage banking, insurance and investment
brokerage.
The accounting and reporting policies of the Company conform
with generally accepted accounting principles and general
practices within the banking industry. The following describe
the more significant accounting policies:
The Principles of Consolidation The consolidated financial
statements include the accounts of Brenton Banks, Inc. (the
Parent Company) and its subsidiaries. All material intercompany
accounts and transactions have been eliminated in the
consolidated financial statements. Certain reclassifications
were made in the financial statements to agree with the current
year presentation.
The excess cost over underlying net assets of consolidated
subsidiaries and other intangible assets are being amortized over
10 to 40 years and are included in other assets in the
consolidated statements of condition. Intangible assets totaled
$4,696,000 and $5,023,000 at December 31, 1996, and 1995,
respectively.
Investment Securities Investment securities are classified based
on the Company's intended holding period. Securities, which may
be sold prior to maturity to meet liquidity needs, to respond to
market changes or to adjust the Company's asset-liability
position, are classified as available for sale. Securities which
the Company intends to hold to maturity are classified as held to
maturity.
Investment securities available for sale are recorded at
fair value. The aggregate unrealized gains or losses, net of the
income tax and minority interest effect, are recorded as a
component of common stockholders' equity. Securities held to
maturity are recorded at cost, adjusted for amortization of
premiums and accretion of discounts. The timing of the
amortization and accretion of mortgage-backed securities are
adjusted for actual and projected prepayments.
Net gains or losses on the sale of securities are shown in
the statements of operations. Gains or losses are computed using
the specific security identification method.
Loans Loans are carried primarily at the unpaid principal
balance. Interest income on loans is accrued and recorded as
income based on contractual interest rates and daily outstanding
principal balances, except on discounted loans where unearned
income is recorded as income over the life of the loans based on
the interest method.
The accrual of interest income is stopped when the ultimate
collection of a loan becomes doubtful. A loan is placed on
nonaccrual status when it becomes 90 days past due, if it is
neither well secured or in the process of collection. Once
determined uncollectible, previously accrued interest is charged
to the allowance for loan losses.
Loans held for sale include real estate mortgage loans
originated with the intent to sell. These loans are carried at
the lower of aggregate cost or fair value.
Allowance for Loan Losses The allowance for loan losses is
maintained at a level necessary to support management's
evaluation of potential losses in the loan portfolio, after
considering various factors including prevailing and anticipated
economic conditions. Loan losses or recoveries are charged or
credited directly to the allowance account.
Premises and Equipment Premises and equipment are stated at cost
less accumulated depreciation. Depreciation is provided
predominantly by the straight-line method over estimated useful
lives of 8 to 40 years for buildings and leasehold improvements,
and 3 to 25 years for furniture and equipment.
Other Real Estate Owned Included in other assets is property
acquired through foreclosure, acceptance of deed in lieu of
foreclosure or other transfers in settlement of outstanding loans
and related contract sales of such property until the contract is
transferred to earning assets based upon sufficient equity in the
asset. Amounts totaled $488,000 and $869,000 at December 31,
1996, and 1995, respectively. Such property is carried at the
lower of cost or estimated fair value, less selling costs.
Periodic appraisals are obtained to support carrying values. Net
expense of ownership and declines in carrying values are charged
to operating expenses.
Employee Retirement Plan All employees of the Company are
eligible, after meeting certain requirements, for inclusion in
the defined contribution retirement plan. The plan is a
combination profit sharing and 401(k) plan. Retirement plan
costs are expensed as the Company contributes to the plan. The
Company does not provide any material post-retirement benefits.
Income Taxes The Company files a consolidated federal income tax
return. Federal income taxes are allocated to the Parent Company
and each subsidiary on the basis of its taxable income or loss
included in the consolidated return.
The effects of current or deferred taxes are recognized as a
current and deferred tax liability or asset based on current tax
laws. Accordingly, income tax expense in the consolidated
statements of operations includes charges or credits to properly
reflect the current and deferred tax asset or liability.
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, federal funds sold and securities
purchased under agreements to resell and trading accounting
securities.
<PAGE>
Income Per Common and Common Equivalent Share Income per common
and common equivalent share computations are based on the
weighted average number of common and common stock equivalent
shares outstanding. In October 1996, the Company declared a 10
percent common stock dividend and in May 1994, the Company
declared a 3-for-2 stock split in the form of a stock dividend.
The average number of shares, after considering stock plans and
the stock dividends, was 8,312,420 for 1996, 8,528,153 for 1995
and 8,747,053 for 1994.
Fair Value of Financial Instruments Fair value estimates are
made at a specific point in time, based on relevant market
information and information about the financial instrument.
These estimates do not reflect any premium or discount that could
result from offering the Company's entire holdings of a
particular financial instrument for sale at one time. Unless
included in assets available for sale, it is the Company's
general practice and intent to hold its financial instruments to
maturity and not to engage in trading or sales activities.
Fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
Estimated fair values have been determined by the Company
using the best available data and an estimation method suitable
for each category of financial instruments.
Interest Rate Swaps Amounts paid or received, related to
outstanding swap contracts that are used in the asset/liability
management process, are recognized into earnings as an adjustment
to interest income over the estimated life of the related assets.
Gains or losses associated with the termination of interest rate
swap agreements for identified positions are deferred and
amortized over the remaining lives of the related assets as an
adjustment to yield.
Use of Estimates in the Preparation of Financial Statements The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. A
significant estimate that is particularly sensitive to change
relates to the allowance for loan losses.
Changes in Accounting Policies:
Accounting by Creditors for Impairment of a Loan Effective
January 1, 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan," and its amendment SFAS No. 118 "Income
Recognition and Disclosures." The allowance for loan losses is
maintained at a level considered appropriate to support
management's evaluation of potential losses in the loan
portfolio. Management's evaluation is based upon several factors
including economic conditions, historical loss and collection
experience, risk characteristics of the portfolio, underlying
collateral values, industry risk and credit concentrations.
Under the Company's credit policies, all nonaccrual and
restructured commercial, agricultural, commercial real estate and
construction loans are considered to meet the definition of
impaired loans under SFAS 114 and 118. In determining when a
loan is impaired, management considers the delinquency status of
the borrower, the borrower's ability to generate cash and the
fair market value of the collateral. Specific allowances are
established for any impaired commercial, agricultural, commercial
real estate or construction loan where the recorded investment
exceeds the measured value of the loan. On a practical basis,
the measured value of a loan is obtained by using the observable
market price of a loan or the fair value of the collateral, if
the loan is collateral dependent. Otherwise, the measured value
of a loan is based upon the present value of expected future cash
flows discounted at the loan's effective interest rate. Impaired
loans are charged-off on the basis of management's ongoing
evaluation, but generally when it is deemed probable that the
borrower cannot generate sufficient funds to comply with
contractual terms in the normal course of business. Cash
received on impaired loans is applied to principal until
principal is satisfied or until the borrower demonstrates the
ability to perform according to agreed-upon terms.
SFAS 114 and 118 do not apply to smaller balance,
homogeneous loans which the Company has identified as loans to
consumers, such as home equity, installment and 1-4 family
residential loans. Delinquency status is used to identify risks
within the various consumer loan portfolios. Consumer loans are
generally charged-off when such loans are deemed to be
uncollectible or 90 days past due, whichever occurs first.
Accounting for Mortgage Servicing Rights Effective October 1,
1995, the Company adopted SFAS No. 122, "Accounting for Mortgage
Servicing Rights." This statement requires capitalization of
purchased mortgage servicing rights as well as internally
originated mortgage servicing rights. These mortgage servicing
rights are amortized over the estimated servicing period of the
related loans.
Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of Effective January 1, 1996, the
Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset is not recoverable. The adoption of SFAS No.
121 did not have a material effect on the Company.
Accounting for Stock-Based Compensation Prior to January 1,
1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. As such, compensation
expense would be recorded on the date of the grant only if the
current market price of the underlying stock exceeded the
exercise price. Effective January 1, 1996, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the
provisions of
<PAGE>
APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(2) Cash and Due From Banks
The subsidiary banks are required by federal banking regulations
to maintain certain cash and due from banks reserves. This
reserve requirement amounted to $5,538,000 at December 31, 1996.
(3) Investment Securities
The amortized cost and estimated fair value of investment
securities follow. The estimated fair value of investment
securities has been determined using available quoted market
prices for similar securities.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 (In thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
Investment securities available for sale:
Taxable investments:
U.S. Treasury securities $ 41,330 76 (55) 41,351
Securities of U.S. government agencies 98,357 143 (347) 98,153
Mortgage-backed and related securities 218,865 1,398 (816) 219,447
Other investments 8,213 --- (20) 8,193
Tax-exempt investments:
Obligations of states and political
subdivisions 92,519 1,606 (170) 93,955
_______ _____ _____
$459,284 3,223 (1,408) 461,099
Investment securities held to maturity:
Taxable investments:
Securities of U.S. government agencies $ 15,065 63 (112) 15,016
Mortgage-backed and related securities 3,041 72 --- 3,113
Other investments 2,466 15 (6) 2,475
Tax-exempt investments:
Obligations of states and political
subdivisions 52,183 681 (152) 52,712
_______ _____ _____ ______
$ 72,755 831 (270) 73,316
December 31, 1995
Investment securities available for sale:
Taxable investments:
U.S. Treasury securities $ 27,621 161 (7) 27,775
Securities of U.S. government agencies 72,705 214 (97) 72,822
Mortgage-backed and related securities 190,953 927 (852) 191,028
Other investments 9,089 (18) 9,071
Tax-exempt investments:
Obligations of states and political
subdivisions 94,014 1,893 (233) 95,674
_______ _____ _____ _______
$394,382 3,195 (1,207) 396,370
Investment securities held to maturity:
Taxable investments:
Securities of U.S. government agencies $ 48,595 375 (44) 48,926
Mortgage-backed and related securities 3,653 32 (2) 3,683
Other investments 6,145 25 (4) 6,166
Tax-exempt investments:
Obligations of states and political
subdivisions 49,689 794 (127) 50,356
_______ _____ _____ _______
$108,082 1,226 (177) 109,131
</TABLE>
<PAGE>
Proceeds from the sale of available for sale securities were
$67,548,000, $5,578,000 and $21,484,000 in 1996, 1995 and 1994,
respectively. Gross gains of $558,000 in 1996, $19,000 in 1995
and $68,000 in 1994 and gross losses of $237,000 in 1996, $22,000
in 1995 and $408,000 in 1994 were realized on those sales.
Other investments at December 31, 1996 and 1995, consisted
primarily of corporate bonds. U.S. government agencies originate
or guarantee primarily all of the mortgage-backed and related
securities. The amortized cost of obligations of states and
political subdivisions included industrial development revenue
bonds of $7,269,000 at December 31, 1995.
Under provisions of the Financial Accounting Standards Board
Special Report entitled "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity
Securities," the Company transferred securities with amortized
costs of $48,049,000 in December 1995 from held to maturity to
available for sale. Unrealized gains related to such securities
transferred were $315,000.
The scheduled maturities of investment securities at
December 31, 1996 follow. Actual maturities may differ from
scheduled maturities because issuers may have the right to call
obligations without penalties. The maturities of mortgage-backed
securities have been included in the period of anticipated
payment considering estimated prepayment rates.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
(In thousands) Cost Value
<S> <C> <C>
Investment securities available for
sale:
Due in one year or less $130,194 130,310
Due after one year through
five years 228,980 229,696
Due after five years through
ten years 73,354 73,716
Due after ten years 26,756 27,377
$459,284 461,099
Investment securities held to maturity:
Due in one year or less $ 22,244 22,264
Due after one year through
five years 28,606 28,691
Due after five years through
ten years 15,307 15,388
Due after ten years 6,598 6,973
$ 72,755 73,316
</TABLE>
Investment securities carried at $246,552,000 and $163,418,000 at
December 31, 1996 and 1995, respectively, were pledged to secure
public and other funds on deposit and for other purposes.
(4) Loans
A summary of loans follows:
<TABLE>
<CAPTION>
(In thousands) December 31, 1996 1995
<S> <C> <C>
Real estate loans:
Commercial construction
and land development $ 42,693 38,123
Secured by 1-4 family
residential property 338,010 319,430
Other 150,395 163,739
Loans to farmer 69,660 68,543
Commercial and industrial loans 132,395 119,368
Loans to individuals for personal
expenditures, net of unearned
income of $59 and $313
at December 31, 1996 and
1995, respectively 207,197 199,489
All other loans 1,594 1,501
$941,944 910,193
</TABLE>
The Company originates commercial, real estate, agribusiness and
personal loans with customers throughout Iowa. The portfolio has
unavoidable geographic risk as a result.
Total non-performing loans and assets at December 31 were:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Impaired loans and leases:
Non-accrual $2,663 2,639
Restructured 568 178
Total impaired loans and leases 3,231 2,817
Loans and leases past due 90 days
or more 2,936 2,802
Total non-performing loans 6,167 5,619
Other real estate owned 488 869
Total non-performing assets $6,655 6,488
</TABLE>
The average balances of impaired loans for the years ended
December 31, 1996 and 1995 were $3,378,000 and $3,353,000,
respectively. The allowance for loan losses related to impaired
loans at December 31, 1996 and 1995 was $481,000 and $425,000,
respectively. Impaired loans of $456,000 and $384,000 were not
subject to a related allowance for loan losses at December 31,
1996 and 1995, respectively, because of the net realizable value
of loan collateral, guarantees and other factors.
The effect of non-accrual and restructured loans on interest
income for each of the three years ended December 31 was:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Interest income
As originally contracted $363 418 537
As recognized 174 136 321
Reduction of interest income $189 282 216
</TABLE>
<PAGE>
Loan customers of the Company include certain executive
officers, directors and principal shareholders, and their related
interests and associates. All loans to this group were made in
the ordinary course of business at prevailing terms and
conditions. The aggregate indebtedness of all executive
officers, directors and principal shareholders of Brenton Banks,
Inc. and its significant subsidiaries, and indebtedness of
related interests and associates of this group (except where the
indebtedness of such persons was less than $60,000) included in
loans follows:
<TABLE>
<CAPTION>
(In thousands) Amount
<S> <C>
Balance at December 31, 1995 $ 4,824
Additional loans 2,488
Loan payments (1,475)
Balance at December 31, 1996 $ 5,837
</TABLE>
Mortgage Servicing Rights The fair market value of capitalized
servicing rights at December 31, 1996 was approximately
$1,145,000. To determine the fair value of the servicing rights,
the Company used comparable market prices. There were no charges
to the impairment account. In determining the fair market value
and potential impairment at the end of 1996, the Company
disaggregated the portfolio into its predominate risk factor;
that being interest rate. The fair value of the portfolio was
determined by calculating the present value of future cash flows.
The Company incorporated assumptions that market participants
would use in estimating future net servicing income which include
estimates of the cost of servicing per loan, the discount rate,
float value, an inflation rate, ancillary income per loan,
prepayment speeds and default rates.
Capitalized servicing rights on originated loan servicing is as
follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Beginning of year balance $ 252 ---
Additions from Originations 962 266
Amortization (188) (14)
Impairment --- ---
Balance at end of year $1,026 252
</TABLE>
(5) Allowance for Loan Losses
A summary of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $11,070 10,913 9,818
Provision 2,900 1,865 1,988
Recoveries 1,419 1,669 1,549
Loans charged off (4,061) (3,377) (2,442)
Balance at end of year $11,328 11,070 10,913
</TABLE>
(6) Premises and Equipment
A summary of premises and equipment follows:
<TABLE>
<CAPTION>
(In thousands) December 31, 1996 1995
<S> <C> <C>
Land $ 2,952 3,614
Buildings and leasehold
improvements 30,876 32,045
Furniture and equipment 23,463 21,756
Construction in progress 275 33
57,566 57,448
Less accumulated depreciation 27,187 24,598
$30,379 32,850
</TABLE>
Depreciation expense included in operating expenses amounted to
$3,848,000, $3,626,000 and $2,938,000 in 1996, 1995 and 1994,
respectively.
(7) Deposits
Time deposits include deposits in denominations of $100,000 or
more of $82,011,000 and $64,014,000 at December 31, 1996, and
1995, respectively.
A summary of interest expense by deposit classification
follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
Demand $11,194 11,842 5,418
Savings 6,134 6,638 6,878
Time deposits
of $100,000 or more 3,935 4,193 3,110
Other time deposits 28,244 30,402 26,204
$49,507 53,075 41,610
</TABLE>
The Company made cash interest payments of $55,455,000,
$55,229,000 and $46,850,000 on deposits and borrowings in 1996,
1995 and 1994, respectively.
At December 31, 1996, the scheduled maturities of time deposits
are as follows (in thousands):
1997 $335,530
1998 166,631
1999 42,068
2000 26,120
2001 and thereafter 2,355
$572,704
<PAGE>
(8) Income Taxes
The current and deferred income tax provisions included in the
consolidated statements of operations follow:
<TABLE>
<CAPTION>
1996 (In thousands) Current Deferred Total
<S> <C> <C> <C>
Federal $3,754 894 4,648
State 1,067 56 1,123
$4,821 950 5,771
1995
Federal $2,728 (76) 2,652
State 502 51 553
$3,230 (25) 3,205
1994
Federal $3,037 (1,099) 1,938
State 921 (158) 763
$3,958 (1,257) 2,701
</TABLE>
Since the income tax returns are filed after the issuance of the
financial statements, amounts reported are subject to revision
based on actual amounts used in the income tax returns. The
Company made cash income tax payments of $4,250,000, $2,500,000
and $2,671,000 to the IRS, and $435,000, $737,000 and $1,226,000
to the state of Iowa in 1996, 1995 and 1994, respectively. Cash
income tax payments for a year include estimated payments for
current year income taxes and final payments for prior year
income taxes. State income tax expense relates to state
franchise taxes payable individually by the subsidiary banks.
The reasons for the difference between the amount computed
by applying the statutory federal income tax rate of 35 percent
in 1996 and 34 percent in 1995 and 1994, and income tax expense
follow:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
<S> <C> <C> <C>
At statutory rate $ 7,136 4,849 4,556
Increase (reduction) due to:
Tax-exempt interest (2,556) (2,566) (2,768)
State taxes, net of
federal benefit 730 365 503
Nondeductible interest expense
to own tax-exempts 426 431 363
Other, net 35 126 47
$ 5,771 3,205 2,701
</TABLE>
Accumulated deferred income tax assets are included in other
assets in the consolidated statements of condition. There was no
valuation allowance at December 31, 1996, or 1995. A summary of
the temporary differences resulting in deferred income taxes and
the related tax effect on each follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
<S> <C> <C>
Allowance for loan losses $3,962 3,985
Unrealized (gains) losses on
securities available for sale (670) (694)
Deposit base intangibles (315) (259)
Premises and equipment (588) (452)
Stock compensation plan 682 372
Real estate mortgage
loan points deferred (300) (479)
Alternative minimum tax credit
carry-forward --- 442
Other, net (251) 531
$2,520 3,446
</TABLE>
(9) Other Short-Term Borrowings
The Company had short-term borrowings with the Federal Home Loan
Bank of Des Moines (FHLB) totaling $34,150,000 and $2,500,000 at
December 31, 1996, and 1995, respectively. The average rate on
these borrowings at December 31, 1996 was 5.97 percent. These
borrowings were secured by residential mortgage loans equal to
150 percent of the borrowings and FHLB stock.
The Parent Company has arranged an unsecured line of credit
of $2,000,000 which was unused at December 31, 1996. It is at
the prime interest rate and is subject to annual review and
renewal.
(10) Long-Term Borrowings
Long-term borrowings consisted of the following:
<TABLE>
<CAPTION>
(In thousands) December 31, 1996 1995
<S> <C> <C>
Capital notes, 6.00% to 10.00%
Total Parent Company $ 11,248 12,435
Borrowings from FHLB, average rate
of 6.18% at December 31, 1996 23,550 25,650
Mortgage debt, average rate of
6.75% at December 31, 1996 62 93
$ 34,860 38,178
</TABLE>
Mortgage debt was secured by real property with a carrying value
of $77,000 at December 31, 1996. Borrowings from the FHLB were
secured by residential mortgage loans equal to 150 percent of the
borrowings and FHLB stock.
The mortgage debt and borrowings from the FHLB were direct
obligations of the individual subsidiaries.
Scheduled maturities of long-term borrowings at December 31,
1996, follow:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Consolidated
<S> <C> <C>
1997 $ 1,457 1,464
1998 1,097 15,105
1999 1,671 11,268
2000 853 853
2001 1,396 1,396
Thereafter 4,774 4,774
$11,248 34,860
</TABLE>
<PAGE>
(11) Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments
were as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Recorded Fair Recorded Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 76,901 76,901 71,159 71,159
Interest-bearing deposits with
banks 732 732 265 265
Federal funds sold and securities
purchased under agreements to
resell 15,200 15,200 37,600 37,600
Investment securities 533,854 534,415 504,452 505,501
Loans held for sale 5,870 5,870 8,707 8,707
Loans, net 930,615 929,113 899,123 910,338
Financial liabilities:
Deposits $ 1,353,057 1,360,457 1,361,943 1,367,680
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 100,976 100,976 43,607 43,607
Long-term borrowings 34,860 35,025 38,178 40,610
Off-balance-sheet assets (liabilities):
Commitments to extend credit $ --- --- --- ---
Letters of credit --- (59) --- (63)
Interest rate swaps --- (69) --- (224)
</TABLE>
The recorded amount of cash and due from banks and interest-
bearing deposits with banks approximates fair value.
The recorded amount of federal funds sold and securities
purchased under agreements to resell approximates fair value as a
result of the short-term nature of the instruments.
The estimated fair value of investment securities has been
determined using available quoted market prices for similar
securities.
The estimated fair value of loans is net of an adjustment
for credit risk. For loans with floating interest rates, it is
presumed that estimated fair values generally approximate the
recorded book balances. Real estate loans secured by 1-4 family
residential property were valued using trading prices for similar
pools of mortgage-backed securities. Other fixed-rate loans were
valued using a present-value discounted cash flow with a discount
rate approximating the market for similar assets.
Deposit liabilities with no stated maturities have an
estimated fair value equal to the recorded balance. Deposits
with stated maturities have been valued using a present-value
discounted cash flow with a discount rate approximating the
current market for similar deposits. The fair-value estimate
does not include the benefit that results from the low-cost
funding provided by the deposit liabilities compared to the cost
of borrowing funds in the market. The Company believes the value
of these depositor relationships to be significant.
The recorded amount of the federal funds purchased,
securities sold under agreements to repurchase and short-term
borrowings approximates fair value as a result of the short-term
nature of these instruments.
The estimated fair value of long-term borrowings was
determined using a present-value discounted cash flow with a
discount rate approximating the current market for similar
borrowings.
The fair value of commitments to extend credit and standby
letters of credit are estimated using the fees currently charged
to enter into similar agreements.
The fair value of interest rate swaps (used for hedging
purposes) is the estimated amount that the Company would receive
or pay to terminate the swap agreements at the reporting date.
(12) Regulatory Capital
The Company is subject to various regulatory capital requirements
administered by both federal and state banking agencies. Failure
to comply with minimum capital requirements could result in
actions taken by regulators that could have a direct material
impact on the Company's financial statements. Under the capital
adequacy guidelines established by regulators, the Company must
meet specific capital guidelines that involve the measurement of
the Company's assets, liabilities and certain off-balance sheet
items. The Company's capital amounts and classification are also
subject to qualitative judgments by the regulators as it relates
to components, risk weightings and other factors.
Quantitative measures established by regulators to ensure
capital adequacy require the Company to maintain minimum amounts
and ratios (set forth in the following table) of total and tier 1
capital to risk weighted assets and of tier 1 capital to average
assets.
<PAGE>
As of December 31, 1996, management believes the Company is
well-capitalized, as defined under the regulatory framework for
prompt corrective action. To be categorized as well-capitalized,
the Company must maintain minimum total risk-based, tier 1 risk-
based and tier 1 leverage ratios as set forth in the table. The
Company's actual capital amounts and ratios are also presented in
the table.
<TABLE>
<CAPTION>
To Be Well-
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital
(to Risk Weighted Assets):
Consolidated $134,026 12.64% $84,816 > 8.0% N/A
_
Brenton Bank 128,138 12.80 80,099 > 8.0 $100,124 > 10.0%
_ _
Tier 1 Capital
(to Risk Weighted Assets):
Consolidated 122,673 11.57 42,408 > 4.0 N/A
_
Brenton Bank 117,476 11.73 40,050 > 4.0 60,075 > 6.0
_ _
Tier 1 Capital
(to Average Assets):
Consolidated 122,673 7.62 48,312 > 3.0 N/A
_
Brenton Bank 117,476 7.90 59,490 > 4.0 74,362 > 5.0
_ _
</TABLE>
(13) Common Stock Transactions
In October 1996, the Company declared a 10 percent common stock
dividend. This transaction resulted in the issuance of 736,843
shares of common stock and the transfer of $3,684,215 from
retained earnings to common stock. Fractional shares resulting
from this stock dividend were paid in cash. In May 1994, the
Company declared a 3-for-2 stock split in the form of a 100
percent stock dividend. This transaction resulted in the
issuance of 2,633,895 shares of common stock and the transfer of
$13,169,475 from retained earnings to common stock. Net income
and cash dividends per share information in the financial
statements have been retroactively restated to reflect these
transactions.
As part of the Company's ongoing stock repurchase plan, in
1996 the Board of Directors increased the amount authorized for
common stock repurchases in 1996 to $10 million. For the years
ended December 31, 1996, 1995 and 1994, the Company repurchased
347,700, 258,133 and 44,800 shares, respectively, at a total cost
of $8,248,331, $4,830,111 and $850,950.
(14) Dividend Restrictions
The Parent Company derives a substantial portion of its cash
flow, including that available for dividend payments to
stockholders, from the subsidiary banks in the form of dividends
received. State and savings banks are subject to certain
statutory and regulatory restrictions that affect dividend
payments.
Based on minimum regulatory capital guidelines as published
by those regulators, the maximum dividends which could be paid by
the subsidiary banks to the Parent Company at December 31, 1996,
were approximately $16 million.
(15) Employee Retirement Plan
The Company provides a defined contribution retirement plan for
the benefit of employees. The plan is a combination profit
sharing and 401(k) plan. All employees 21 years of age or older
and employed by the Company for at least one year are eligible
for the plan. The Company contributes 4 1/2 percent of eligible
compensation of all participants to the profit sharing portion of
the plan, and matches employee contributions to the 401(k)
portion of the plan up to a maximum of 3 percent of each
employee's eligible compensation. Retirement plan costs charged
to operating expenses in 1996, 1995 and 1994 amounted to
$1,284,000, $1,263,000 and $1,367,000, respectively. The Company
offers no material post-retirement benefits.
(16) Stock Plans
In 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"). The Plan authorizes the granting of options on up to
550,000 shares 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
performance vesting requirements, but if vesting is not achieved
from performance vesting, 100 percent vesting occurs nine years
and six months following the grant date. Options expire ten
years and one month following the grant date.
At December 31, 1996, there were 79,200 shares available for
grant under the Plan. The per-share weighted average fair value
of stock options granted during 1996 was $6.60 based on the date
of grant using the Company's option pricing model with the
following weighted average assumptions: expected dividend yield
of 2.15 percent, risk-free interest rate of 6.85 percent,
expected life of 7.5 years and expected volatility of stock price
of 18 percent.
The Company applies APB Opinion No. 25 in accounting for its
Plan and, accordingly, no compensation cost has been recognized
for its stock options in the financial statements. Had the
Company determined compensation cost based on the fair value at
the grant date for its stock options under SFAS No. 123, the
Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
1996
Net income As reported $14,015,430
Pro forma 13,768,662
Earnings per share As reported $1.69
Pro forma 1.66
Pro forma net income reflects only options granted in 1996.
Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro
forma net income amounts presented above because compensation
cost is reflected over the options' expected life of 7.5 years.
There were 470,800 shares granted under the Plan in 1996
with a weighted average exercise price of $22.166. At December
31, 1996, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $22.159 -
$23.625 and 9.7 years, respectively. No options were
exercisable at December 31, 1996.
A total of 349,551 shares were granted over the past four
years to key management personnel under the Company's long-term
stock compensation plan. Under provisions of the plan, no grants
were made after 1995. Each grant of shares covers a three-year
performance period, 35 percent of which vests upon completion of
employment for the performance period and 65 percent of which
vests based on a tiered achievement scale tied to financial
performance goals established by the Board of Directors. The
total stock compensation expense associated with this plan was
$1,302,000, $425,000 and $(102,000) for 1996, 1995 and 1994,
respectively and changes in outstanding grant shares during 1996
were as follows (restated for the 10 percent common stock
dividend effective in 1996 and the 3-for-2 stock split effective
in 1994):
<TABLE>
<CAPTION>
Performance 1992 to 1993 to 1994 to 1995 to
Period 1994 1995 1996 1997
<S> <C> <C> <C> <C>
December 31, 1993 100,642 86,509 --- ---
Granted - 1994 --- --- 99,323 ---
Forfeited - 1994 --- (2,188) --- ---
December 31, 1994 100,642 84,321 99,323 ---
Granted - 1995 --- --- --- 98,033
Forfeited - 1995 --- (9,216) (14,724) (7,287)
Expired - 1995 (65,418) --- --- ---
Vested - 1995 (35,224) --- --- ---
December 31, 1995 --- 75,105 84,599 90,746
Forfeited - 1996 --- --- (9,524) (10,369)
Expired - 1996 --- (48,819) --- ---
Vested - 1996 --- (26,286) --- ---
Outstanding grant
shares at
December 31, 1996 --- --- 75,075 80,377
</TABLE>
For the performance period 1994 to 1996, 26,278 shares vested and
48,797 shares expired on January 1, 1997.
The Company's 1987 nonqualified stock option plan permits
the Board of Directors to grant options to purchase up to 330,000
shares of the Company's $5 par value common stock. The options
may be granted to officers 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 Board of Directors.
Changes in options outstanding and exercisable during 1996,
1995 and 1994 were as follows (restated for the 10 percent common
stock dividend effective in 1996 and the 3-for-2 stock split
effective in 1994):
<TABLE>
<CAPTION>
Exercisable Outstanding Option Price
Options Options Per Share
<S> <C> <C> <C>
December 31, 1993 187,110 202,950 $4.02-8.60
Granted - 1994 --- 9,240 17.86
Vested - 1994 7,920 --- 7.99-8.60
Exercised - 1994 (40,535) (40,535) 4.02-7.99
December 31, 1994 154,495 171,655 4.02-17.86
Vested - 1995 3,300 --- 7.99-8.60
Exercised - 1995 (21,725) (21,725) 4.02
Forfeited - 1995 --- (13,860) 7.99-17.86
December 31, 1995 136,070 136,070 4.02-8.60
Exercised - 1996 (26,800) (26,800) 4.02
December 31, 1996
(13,860 shares available
for grant) 109,270 109,270 $4.02-8.60
</TABLE>
On May 6, 1997, the shares available for grant will expire.
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. During 1996, 16,612 shares of common stock were purchased
by employees under this plan.
<PAGE>
(17) Lease Commitments
Rental expense included in the consolidated statements of
operations amounted to $1,919,000, $1,937,000 and $1,799,000 in
1996, 1995 and 1994, respectively. Future minimum rental
commitments for all noncancelable leases with terms of one year
or more total approximately $1,200,000 per year through 2001,
$600,000 per year through 2006, $200,000 per year through 2011,
and $40,000 per year through 2013, with a total commitment of
$10,500,000.
(18) Commitments and Contingencies
In the normal course of business, the Company is party to
financial instruments necessary to meet the financial needs of
customers, which are not reflected on the consolidated statements
of condition. These financial instruments include commitments to
extend credit, standby letters of credit and interest rate swaps.
The Company's risk exposure in the event of nonperformance by
the other parties to these financial instruments is represented
by the contractual amount of these instruments. The Company uses
the same credit policies in making commitments as it does in
making loans.
Commitments to extend credit are legally binding agreements
to lend to customers. Commitments generally have fixed
expiration dates and may require payment of a fee. Based upon
management's credit assessment of the customer, collateral may be
obtained. The type and amount of collateral varies, but may
include real estate under construction, property, equipment and
other business assets. In many cases, commitments expire without
being drawn upon, so the total amount of commitments does not
necessarily represent future liquidity requirements. The Company
had outstanding commitments to extend credit of $221 million and
$166 million at December 31, 1996, and 1995, respectively.
Standby letters of credit are conditional commitments issued
by the Company guaranteeing the financial performance of a
customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in
extending loans. Outstanding standby letters of credit totaled
$11,770,000 and $20,513,000 at December 31, 1996, and 1995,
respectively. The Company does not anticipate losses as a result
of issuing commitments to extend credit or standby letters of
credit.
The Company enters into interest rate swap agreements as
part of its asset/liability management strategy to manage
interest-rate risk. The notional value of these agreements was
$16,205,000 and $10,960,000 at December 31, 1996, and 1995,
respectively. The interest rate swap agreements subject the
Company to market risk associated with changes in interest rates,
as well as the risk of default by the counterparty to the
agreement. The credit worthiness of the counterparties was
evaluated by the Company's loan committee prior to entering into
the agreements. The agreements run through 1998.
Brenton Savings Bank, FSB converted from a mutual savings
and loan association to a federal stock savings bank in 1990, at
which time a $4 million liquidation account was established.
Each eligible savings account holder who had maintained a deposit
account since the conversion would be entitled to a distribution
if the savings bank were completely liquidated. This distribution
to savers would have priority over distribution to the Parent
Company. The Company does not anticipate such a liquidation.
The Company maintains a data processing agreement with
ALLTEL Financial Information Services, Inc. (ALLTEL), formerly
Systematics, Inc., whereby ALLTEL manages and operates the
Company's data processing facility. The contract involves fixed
payments of $2,412,000 in 1997 and $2,389,000 in 1998 through
2001 and $1,194,000 in 2002. These fixed payments will be
adjusted for inflation and volume fluctuations.
The Company is involved with various claims and legal
actions arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters
will not have a material adverse effect on the Company's
financial statements.
(19) Restructuring Charge
During the fourth quarter of 1994, the Company finalized plans
for a strategic restructuring program. This plan resulted in a
special charge of $2.6 million ($1.7 million after tax or $.19
per share), in 1994. A summary of the estimated costs expensed
in 1994 and the actual costs incurred in 1995 follows:
<TABLE>
<CAPTION>
1994 Estimated 1995 Actual
Costs Costs
<S> <C> <C>
Salaries and wages $1,089,000 $ 565,263
Employee benefits 289,000 83,409
Occupancy expense 192,000 ---
Data processing expense 527,500 389,432
Abandonment losses 267,000 164,945
Legal, regulatory and other 280,500 409,085
$2,645,000 $ 1,612,134
</TABLE>
The difference between the estimated costs recorded in 1994 and
the actual costs incurred was credited or charged to the above
expense categories in the fourth quarter of 1995.
<PAGE>
(20) Brenton Banks, Inc. (Parent Company) Condensed Financial
Information
<TABLE>
<CAPTION>
Statements of Condition
December 31 (In thousands) 1996 1995
<S> <C> <C>
Assets
Interest-bearing deposits with banks $ 5,638 128
Short-term investments --- 7,500
Advances to bank subsidiaries --- 117
Investments in:
Bank subsidiaries 124,383 119,325
Bank-related subsidiaries 45 43
Excess cost over net assets 1,826 1,900
Premises and equipment 618 1,375
Other assets 3,168 3,186
________ _______
$ 135,678 133,574
Liabilities and Stockholders' Equity
Accrued expenses payable
and other liabilities $ 2,476 1,605
Long-term borrowings 11,248 12,435
Common stockholders' equity 121,954 119,534
_______ _______
$ 135,678 133,574
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Years Ended December 31 (In thousands) 1996 1995 1994
<S> <C> <C> <C>
Income
Dividends from subsidiaries $ 10,766 8,997 11,691
Interest income 341 442 317
Management fees --- 1,634 1,222
Other operating income 43 2,644 2,128
________ ______ ______
11,150 13,717 15,358
Expense
Salaries and benefits 1,884 4,021 3,466
Interest on long-term borrowings 970 1,046 1,044
Other operating expense 655 2,006 2,263
________ ______ ______
3,509 7,073 6,773
Income before income taxes and
equity in undistributed earnings
of subsidiaries 7,641 6,644 8,585
Income taxes (1,040) (759) (1,083)
Income before equity in undistributed
earnings of subsidiaries 8,681 7,403 9,668
Equity in undistributed earnings of subsidiaries 5,334 3,004 439
________ ______ ______
Net income $ 14,015 10,407 10,107
</table
<PAGE>
(20) Brenton Banks, Inc. (Parent Company) Condensed Financial
Information
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31 (In thousands) 1996 1995 1994
<S> <C> <C> <C>
Operating Activities
Net income $ 14,015 10,407 10,107
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (5,334) (3,004) (439)
Depreciation and amortization 163 230 230
(Increase) decrease in other assets 18 49 (370)
Increase (decrease) in accrued expenses
payable and other liabilities 871 (148) (373)
________ ______ ______
Net cash provided by operating activities 9,733 7,534 9,155
Investing Activities
(Increase) decrease in short-term investments 7,500 1,000 (5,000)
Redemption (purchase) of subsidiary equity, net (7) 156 (200)
Principal collected from or (advances to)
subsidiaries 115 (97) (270)
Purchase of premises and equipment, net 669 (512) (648)
________ ______ ______
Net cash provided (used) by investing activities 8,277 547 (6,118)
Financing Activities
Net proceeds (repayment) of long-term borrowings (1,187) (209) 622
Proceeds from issuance of common stock under the
long-term stock compensation plan 335 362 ---
Proceeds from issuance of common stock under the
stock option plan 291 188 386
Proceeds from issuance of common stock under the
employee stock purchase plan 72 --- ---
Payment for shares acquired under common stock
repurchase plan (8,248) (4,830) (851)
Payment for fractional shares in stock dividends (14) --- (4)
Dividends on common stock (3,749) (3,498) (3,472)
________ ______ ______
Net cash used by financing activities (12,500) (7,987) (3,319)
Net increase (decrease) in cash and interest-
bearing deposits 5,510 94 (282)
Cash and interest-bearing deposits at the
beginning of the year 128 34 316
Cash and interest-bearing deposits at the end
of the year $ 5,638 128 34
</TABLE>
<PAGE>
(21) Unaudited Quarterly Financial Information
The following is a summary of unaudited quarterly financial
information (in thousands, except per common and common
equivalent share data):
<TABLE>
<CAPTION>
1996
Three months ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Interest income $ 27,370 27,512 27,923 28,578
Interest expense 13,701 13,645 13,813 14,172
_______ ______ ______ ______
Net interest income 13,669 13,867 14,110 14,406
Provision for loan losses 700 800 600 800
_______ ______ ______ ______
Net interest income after
provision for loan losses 12,969 13,067 13,510 13,606
Noninterest income 5,552 5,622 5,776 6,377
Noninterest expense 13,355 13,471 14,685 14,579
_______ ______ ______ ______
Income before income taxes
and minority interest 5,166 5,218 4,601 5,404
Income taxes 1,446 1,497 1,275 1,553
Minority interest 140 153 153 157
_______ ______ ______ ______
Net income $ 3,580 3,568 3,173 3,694
Per common and common
equivalent share:
Net income $ .42 .43 .39 .45
</TABLE>
<TABLE>
<CAPTION>
1995
Three months ended March 31 June 30 Sept. 30 Dec. 31*
<S> <C> <C> <C> <C>
Interest income $ 26,611 27,852 28,442 28,135
Interest expense 13,597 14,807 14,670 14,634
_______ ______ ______ ______
Net interest income 13,014 13,045 13,772 13,501
Provision for loan losses 460 459 486 460
_______ ______ ______ ______
Net interest income after
provision for loan losses 12,554 12,586 13,286 13,041
Noninterest income 4,271 4,499 4,379 4,697
Noninterest expense 13,681 13,736 13,402 14,232
_______ ______ ______ ______
Income before income taxes
and minority interest 3,144 3,349 4,263 3,506
Income taxes 573 661 1,143 828
Minority interest 121 124 122 283
_______ ______ ______ ______
Net income $ 2,450 2,564 2,998 2,395
Per common and common
equivalent share:
Net income $ .28 .30 .36 .28
<FN>
* See footnote 19 regarding the restructure charge.
</TABLE>
<PAGE>
MANAGEMENT'S REPORT
The management of Brenton Banks, Inc. is responsible for the
content of the consolidated financial statements and other
information included in this annual report. Management believes
that the consolidated financial statements have been prepared in
conformity with generally accepted accounting principles
appropriate to reflect, in all material respects, the substance
of events and transactions that should be included. In preparing
the consolidated financial statements, management has made
judgments and estimates of the expected effects of events and
transactions that are accounted for or disclosed.
Management of the Company believes in the importance of
maintaining a strong internal accounting control system, which is
designed to provide reasonable assurance that assets are
safeguarded and transactions are appropriately authorized. The
Company maintains a staff of qualified internal auditors who
perform periodic reviews of the internal accounting control
system. Management believes that the internal accounting control
system provides reasonable assurance that errors or
irregularities that could be material to the consolidated
financial statements are prevented or detected and corrected on a
timely basis.
The Board of Directors has established an Audit Committee to
assist in assuring the maintenance of a strong internal
accounting control system. The Audit Committee meets
periodically with management, the internal auditors and the
independent auditors to discuss the internal accounting control
system and the related internal and external audit efforts. The
internal auditors and the independent auditors have free access
to the Audit Committee without management present. There were no
matters considered to be reportable conditions under Statement of
Auditing Standards No. 60 by the independent auditors.
The consolidated financial statements of Brenton Banks, Inc.
and subsidiaries are examined by independent auditors. Their
role is to render an opinion on the fairness of the consolidated
financial statements based upon audit procedures they consider
necessary in the circumstances.
Brenton Banks, Inc.
Robert L. DeMeulenaere
President
Steven T. Schuler
Chief Financial Officer/Treasurer/Secretary
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Brenton Banks, Inc:
We have audited the accompanying consolidated statements of
condition of Brenton Banks, Inc. and subsidiaries as of December
31, 1996, and 1995, and the related consolidated statements of
operations, changes in common stockholders' equity and cash flows
for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Brenton Banks, Inc. and subsidiaries at
December 31, 1996, and 1995, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
February 7, 1997
<PAGE>
STOCK INFORMATION
Brenton Banks, Inc. common stock is traded on the NASDAQ National
Market and quotations are furnished by the NASDAQ System. There
were 1,562 common stockholders of record on December 31, 1996.
<TABLE>
<CAPTION>
MARKET AND DIVIDEND INFORMATION
1996 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $22.05 19.09 .109
2nd quarter 22.05 20.68 .109
3rd quarter 22.73 21.36 .118
4th quarter 28.00 22.50 .118
</TABLE>
<TABLE>
<CAPTION>
1995 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $17.05 16.14 .10
2nd quarter 17.27 16.14 .10
3rd quarter 18.64 16.25 .10
4th quarter 20.68 17.50 .109
</TABLE>
The above table sets forth the high and low sales prices and cash
dividends per share for the Company's common stock, after
the effect of the October 1996 10% common stock dividend.
The market quotations, reported by NASDAQ, represent prices
between dealers and do not include retail markup, markdown
or commissions.
NASDAQ Symbol: BRBK
Wall Street Journal and
Other Newspapers: Brent B
Market Makers
ABN AMRO Chicago Corporation
Herzog, Heine, Geduld, Inc.
Howe, Barnes Investments, Inc.
Keefe, Bruyette & Woods, Inc.
Stifel, Nicolaus & Co., Inc.
Wedbush Morgan Securities, Inc.
FORM 10-K
COPIES OF BRENTON BANKS, INC. ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION FORM 10-K WILL BE MAILED
WHEN AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN
REQUEST TO STEVEN T. SCHULER, CHIEF FINANCIAL OFFICER/
TREASURER/SECRETARY, AT THE CORPORATE HEADQUARTERS.
STOCKHOLDER INFORMATION
Corporate Headquarters
Suite 200, Capital Square
400 Locust Street
Des Moines, Iowa 50309
Telephone 515/237-5100
Annual Shareholders' Meeting
Wednesday, May 7, 1997, 5:00 p.m.
Des Moines Convention Center
501 Grand Avenue
Des Moines, Iowa 50309
Transfer Agent/Registrar/
Dividend Disbursing Agent
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60690
Legal Counsel
Brown, Winick, Graves, Gross,
Baskerville and Schoenebaum, P.L.C.
Suite 1100, Two Ruan Center
601 Locust Street
Des Moines, Iowa 50309
Independent Auditors
KPMG Peat Marwick LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, Iowa 50309
<PAGE>
CORPORATE STRUCTURE
BRENTON BANKS, INC.
BOARD OF DIRECTORS
C. Robert Brenton
Chairman of the Board
Brenton Banks, Inc.
William H. Brenton
Past Chairman (21 Years)
Past Chairman,
Executive Committee (5 Years)
Past President (5 Years)
Brenton Banks, Inc.
J.C. Brenton
Past President
Brenton Banks, Inc.
Gary M. Christensen
President & CEO
Pella Corporation
Robert L. DeMeulenaere
President
Brenton Banks, Inc.
R. Dean Duben
Vice Chairman of the Board
Brenton Bank, Davenport
Hubert G. Ferguson
Financial Services Consultant
New Brighton, Minnesota
BRENTON BANKS, INC.
EXECUTIVE OFFICERS
C. Robert Brenton
Chairman of the Board
Robert L. DeMeulenaere
President
Steven T. Schuler
Chief Financial Officer/Treasurer/
Secretary
BRENTON BANK
SENIOR OFFICERS AND
LINE OF BUSINESS MANAGERS
C. Robert Brenton
Chairman of the Board
Robert L. DeMeulenaere
Chief Executive Officer/President
Larry A. Mindrup
Chief Banking Officer
President, Des Moines
Phillip L. Risley
Chief Administrative Officer/Cashier
Perry C. Atwood
Chief Sales Officer
Woodward G. Brenton
Chief Commercial Banking Officer
Charles N. Funk
Chief Investment/ALCO Officer
Ronald D. Larson
Regional President Eastern Iowa
Division
President, Cedar Rapids
Marc J. Meyer
Regional President Western Iowa
Division
President, Adel
Steven T. Schuler
Chief Financial Officer/Treasurer/
Secretary
Norman D. Schuneman
Chief Credit Officer
Steven D. Agan
President, Knoxville
John H. Anderson
President, Davenport
Thomas J. Friedman
President, Ankeny
Kevin Z. Geis
President, Brenton Savings Bank, FSB
Ames
Robert L. German
President, Dallas Center
John M. Hand
President, Emmetsburg
Dennis H. Hanson
President, Grinnell
Richard H. Jones
President, Perry
V. Blaine Lenz
President, Eagle Grove
James L. Lowrance
President, Marshalltown
Clay A. Miller
President, Clarion
Jeffrey J. Nolan
President, Jefferson
Clark H. Raney
President, Indianola
Gary D. Ernst
President, Trust Division
Marsha A. Findlay
Senior Vice President, Des Moines
Senior Retail Banking Officer
Mark J. Hoffschneider
President, Brenton Mortgages
Douglas F. Lenehan
President, Diversified Commercial
Services Division
Loras J. Neuroth
President, Brenton Insurance
Elizabeth M. Piper/Bach
President, Brenton Investments
Catherine Reed
Senior Marketing Officer
Thomas J. Vincent
President, Agricultural Banking
Division
Brenton Banks, Inc. Annual Report
Making A
Difference
1996 is center in the background in the middle of the page on top
of Making A Difference
1996 Financial Highlights 2 Letter to Shareholders 3
Financial Review 9
<PAGE>
Making a difference in the lives of our customers. Making a
difference in our communities. Making a difference in the spirit
and confidence of Brenton associates across Iowa. Making a
difference for our shareholders. Creating new partnerships,
discovering new efficiencies, seizing new opportunities - adding
value. In 1996, Brenton more than changed. By making a difference
in every area of our operations, we literally redefined our
ability to serve, to perform, to grow and to succeed.
Brenton Banks, Inc. is Iowa's largest, home-based bank holding
company, with 45 service locations in metropolitan markets and
regional economic centers across the state. The Company offers a
complete range of financial products and services - including
retail, agricultural and commercial banking; trust and investment
management services: investment, insurance and real estate
brokerage; mortgage banking; cash management and international
banking services; as well as our own proprietary mutual funds.
The Company's stock trades on the NASDAQ national market under
the symbol BRBK or BrentB.
1
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Brenton Banks, Inc. and Subsidiaries
1996 1995 1994
<S> <C> <C> <C>
Operating Results
Net interest income $ 56,052,142 53,332,143 5,450,526
Provision for loan losses 2,900,000 1,864,801 1,987,909
Total noninterest income 23,327,441 17,846,740 16,592,988
Total noninterest expense 56,090,571 55,051,267 56,656,922
Income before income taxes
and minority interest 20,389,012 14,262,815 13,398,683
Net income 14,015,430 10,407,354 10,107,387
Per Common and Common
Equivalent Share***
Net income $ 1.69 1.22 1.15
Cash dividends .454 .409 .40
Book value, including
unrealized gains
(losses)* 15.08 14.20 12.75
Book value, excluding
unrealized gains
(losses)** 14.95 14.04 13.35
Closing bid price 27.63 19.32 16.59
At December 31
Assets $1,632,095,082 1,582,779,320 1,581,326,849
Loans 941,943,513 910,193,212 970,214,498
Nonperforming loans 6,167,000 5,619,000 5,022,000
Deposits 1,353,057,111 1,361,942,715 1,340,283,110
Common stockholders'
equity 121,954,229 119,533,631 110,430,345
Ratios
Return on average common
stockholders' equity
(ROE) 11.76% 9.04 9.03
Return on average assets
(including minority
interest) (ROA) .92 .71 .70
Net interest margin 4.03 3.89 4.12
Net noninterest margin (2.09) (2.38) (2.61)
Efficiency ratio 68.27 73.70 74.63
Loan to deposit ratio 69.62 66.83 72.39
Allowance for loan losses
to total loans 1.20 1.22 1.12
Primary capital to
assets** 8.33 8.40 8.18
Equity to assets** 7.41 7.47 7.28
Tier 1 leverage capital
ratio** 7.62 7.45 7.23
Nonperforming loans as a
percent of loans .65 .62 .52
Net charge-offs as a
percent of average loans .29 .18 .10
Allowance for loan losses
as a percent of
nonperforming loans 183.69 197.01 217.30
<FN>
* Including unrealized gains (losses) on securities
available for sale.
** Excluding unrealized gains (losses) on securities
available for sale.
*** Restated for the 10% common stock dividend effective in
1996.
</TABLE>
Three bar graphs on the left hand side of the page:
Graph showing Common Stock Closing Bid Price (Restated for Stock
Split/Dividends) (1987-1996):
<TABLE>
<CAPTION>
87 88 89 90 91 92 93 94 95 96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3.64 5.99 9.24 8.18 12.58 15.76 15.91 16.59 19.32 27.63
</TABLE>
Dual Graph showing Net Income per Common Share Dividends per
Common Share (Restated for stock splits/dividends) (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
1.52 1.64 1.15 1.22 1.69
0.32 0.36 0.40 0.41 0.45
</TABLE>
Graph showing Return on Average Equity (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
14.13 13.82 9.03 9.04 11.76
</TABLE>
1996 Brenton Banks, Inc. Annual Report
2
<PAGE>
To Our Shareholders
To say that 1996 was a very important year for Brenton would be
an understatement. It was a defining year - a year in which our
significant investments in people, technology and new operating
efficiencies produced dramatic successes for shareholders,
customers and employees, alike. In 1996, Brenton's earnings
jumped 34.7 percent to $14.0 million, compared to net income of
$10.4 million in 1995. Earnings per common share advanced 38.5
percent to $1.69, adjusted for a 10 percent common stock dividend
which was distributed in October. Total assets grew 3.1 percent
to $1.6 billion. Shareholders' equity rose 2.0 percent to $122.0
million.
Thanks to the efforts of Brenton bankers across Iowa
Our focus on building new partnerships and generating greater
revenues produced outstanding results in 1996, as we realized
substantial gains in literally every category of fee-related
income.
During the year, noninterest income grew by 28.9 percent to
$23.0 million (excluding securities gains and losses). Successful
new sales initiatives and strong financial markets pushed
brokerage commissions up 23.7 percent. Insurance commissions and
fees jumped 24.6 percent, led by a 59.2 percent increase in
credit-related insurance. Fiduciary revenues were up 13.2
percent, thanks to increased volumes in personal trusts,
investment management fees and employee benefit plans. Mortgage
banking income increased 51.9 percent due to both increased
production, which totaled $110.8 million, and an improved margin
on the loans produced. Service charges on deposits grew
Picture of Chairman and President on right hand side of page -
reads as follows:
C. Robert Brenton, Chairman
Robert L. DeMeulenaere, President
3
<PAGE> 21.0 percent for the year, while securities transactions
produced gains of $321, 256, compared to 1995 losses of $3,003.
These dramatic revenue increases were offset by only modest
rises in noninterest expenses, which were up 1.9 percent to $56.1
million. While total compensation was up 11.6 percent over 1995,
salaries actually decreased by 6.6 percent. Variable
compensation, including commissions and incentives, increased by
40.4 percent as a result of higher sales of fee-related products
and services. Data processing expenses grew 8.9 percent. Other
operating expenses decreased 21.2 percent, due to the
implementation of cost control measures, the realization of
efficiencies related to the 1995 merger of the Company's
commercial banks, and the fact we experienced some one-time
expenses in 1995. The Company's FDIC deposit insurance assessment
increased 1.0 percent over 1995, as a result of a one-time $1.3
million assessment to fully finance the government's SAIF fund.
Without this special assessment, the FDIC expense would have
actually decreased by 71.2 percent.
Net interest income advanced 5.1 percent to $56.1 million in
1996, compared to $53.3 million in 1995. Net interest margin rose
to 4.03 percent, compared to 3.89 percent a year ago. Total loans
grew 3.5 percent to $941.9 million. Nonperforming loans rose 9.8
percent to $6.2 million, yet overall loan quality remained strong
at year-end with reserves standing at 183.7 percent of
nonperforming loans and 1.20 percent of total loans.
To improve net interest margin and lessen interest rate risk,
management continued its strategy of de-emphasizing fixed-rate
portfolio real estate loans and developing more commercial and
consumer business. One of the significant accomplishments of 1996
was a $40.9 million increase in direct consumer loans.
Making a difference in the way we see the future
Taken individually and as a whole, our 1996 accomplishments give
us great optimism for even greater success in the years ahead.
Our employees know that by sharing a common focus and commitment,
we can indeed become a high earning, high performing bank. We are
believers. Our growing income base is already enabling us to
provide customers with more and better products, faster response,
new delivery channels and superior service.
We are also pleased to reward the continuing confidence of our
shareholders with growing dividends and per share value. Cash
dividends for 1996 were $.454 per share, up 11.0 percent over
1995. During the year, the common stock market price per share
rose 43.0 percent, closing at $27.63 on December 31, 1996.
In 1997, we will continue focusing on revenue growth, rather
than balance sheet growth. We will continue to refine the
strategies that worked so well in the year just closed.
Text on the left hand side of the page:
While we're pleased to celebrate the many successes Brenton
produced in 1996, ours is a growing and dynamic business. As this
annual report goes to press, we are already pursuing a number of
1997 initiatives designed to help us build on the accomplishments
of the past year. We are intensifying our focus on growth in
loans, fee income and core deposits. We are working to expand our
convenience banking services - adding experienced insurance and
mortgage representatives to
Centered in a box in this text on the left hand side of the page:
THEN
______
NOW
our Brenton Direct telebanking team, enhancing our supermarket
offices and even exploring the development of a Web page. Through
the creation of a new Small Business Banking Division, we are
positioning Brenton to play a leading role in serving one of
Iowa's fastest growing market segments. We are also installing
technology that will enable us to quickly respond to customer
requests, while maintaining the personal touch that has always
been a Brenton tradition.
1996 Brenton Banks, Inc. Annual Report
The word Change is centered in the background over pages 3 and 4.
4
<PAGE>
Text on the right hand side of the page:
By making the promise of full-service telephone banking a
reality, Brenton Direct is not only helping us attract and serve
a growing number of customers, it is also enabling us to deliver
financial services with remarkable efficiency and effectiveness.
Customers appreciate the fact that they can handle much of their
financial business from their favorite easy chair - outside
traditional banking hours. But perhaps the most important benefit
Brenton Direct provides for customers is the opportunity to work
- - one on one - with experienced lenders,
Centered in a box in this text on the right hand side of the
page:
RING
______
RING
mortgage bankers, insurance professionals and investment
advisors. In 1996, we expanded staff, installed new call tracking
technology, established a Small Business Line, and began to
successfully integrate mortgage, brokerage and insurance
professionals into the team. We also began to use our outbound
calling capabilities to provide information to customers. In
1997, Brenton Direct will play an increasingly more active role
in the development of new customers, as well as the strengthening
of our relationships with current customers.
Text on the rest of page 5 in the middle of the page:
Making a difference in the lives of our customers
Building stronger, more accessible relationships with the people
we serve provides advantages for everyone involved in the
equation. Today, Brenton customers enjoy greater convenience -
not only because they can satisfy more of their financial needs
in one place, but also because they can personally speak to an
experienced financial professional before work, after dinner, on
the weekend, at the grocery store or over the phone. Brenton
employees enjoy the satisfaction of making meaningful differences
in customers' lives - helping them buy new homes at affordable
rates, invest successfully for the future, insure their lives and
property, and make the most of their good credit.
Redefining our retail banking culture
Approximately half of our personal bankers had never made a loan
prior to 1996, which makes what we accomplished last year even
more remarkable. Our goal on the retail side of the bank was to
grow direct consumer loans by $30 million. But through training,
support, motivation and individual effort, Brenton bankers
produced growth of more than $40 million in direct consumer loans
for the year. Admittedly, we borrowed a few ideas on how to build
an effective, service-oriented sales culture from the real estate
and insurance industries. We divided our company-wide growth
objective into specific monthly goals for each office and
individual banker. We conducted regular meetings to share ideas
and results. Our new, centralized credit-scoring system supported
local production by providing fast, consistent review of
applications and credit information. Back at the office, bankers
5
<PAGE>
could spend more time communicating with customers and
understanding their needs. As our confidence grew, we became more
proficient at asking customers for more of their financial
business (and seeking referrals from associates in other areas of
the bank). By the end of the year, 35 top loan producers had
become members of our new Million Dollar Club as we set our
sights on even greater performance in the year ahead.
Serving a greater share of our customers' financial needs
At the heart of our One Bank strategy has been the objective to
build our financial services infrastructure, so we could
concentrate less on transaction business, while devoting more
attention to developing investment, insurance, employee benefit,
trust and other fee-based services. Indeed, we believe that
future Brenton profitability hinges on our ability to strengthen
and expand customer relationships by successfully serving more of
their financial needs. In 1996, we made clear progress toward
achieving this goal. Through recruiting, advanced training and
educational conferences, we helped improve both the quality and
availability of Brenton investment brokerage representatives.
We also worked to develop quality partnerships among all lines of
business.
Supported by advertising, focused campaigns, strategic incentive
programs and a steadily growing stream of referrals, we produced
substantial increases in brokerage, trust, investment management
and insurance commissions and fees.
Growth in trust and investment management revenues reflected
our emerging leadership in serving the 401(k) needs of Iowa
businesses and employees. Beyond the competitive benefits of our
401(k) product, itself, customers appreciate our high standards
of service and dedication to employee education, as well as the
investment philosophies at work in our four proprietary Brenton
mutual funds. Good markets, coupled with good timing, research
and equity selection produced very satisfying returns for our
customers in 1996.
Aggressively improving our mortgage banking business
Residential mortgage loan production increased by nearly 20
percent in 1996. While part of this growth can be attributed to
systems put in place in 1995, much of the credit goes to Brenton
mortgage bankers who devoted considerable effort to calling on
builders, realtors and former customers. By refining our mortgage
product line, focusing on attractive portfolio products and
adding more secondary market outlets, we have become more
aggressive - both in terms of pricing and features. At the same
time, we have continued to improve the operational side of our
mortgage business, providing much faster underwriting and higher
quality services for customers.
1996 Brenton Banks, Inc. Annual Report
The word Growth is centered in the background over pages 5 and 6.
6
<PAGE>
Making a difference for farmers and businesses across Iowa
With large out-of-state banks entering the Iowa marketplace (and
familiar old banking names fading away), the value of the Brenton
brand continues to grow. As a well-known, well-respected
organization with a long history of serving Iowans' financial
needs, Brenton associates are discovering new opportunities to
build strong working relationships with farmers and businesses of
all sizes - all across the state. Through the development of new
services and partnerships, as well as new operating efficiencies,
we produced positive results in 1996. But more importantly, we
positioned the Company for significant growth in our ag and
commercial lines of business going forward. These are exciting
times for everyone associated with Brenton.
Capitalizing on our strong history in agriculture
From the day our Company was founded, more than 115 years ago,
Brenton has been known as an ag bank, which gives us a tremendous
advantage in this age of bank consolidations. We're here. We're
strong. And we know the Iowa agricultural market and communities
better than any of our competitors.
In 1996, we worked to strengthen our relationships with Iowa
farmers and agribusinesses by developing prototype alliances with
non-banking organizations that serve our customers. In July, more
than 200 farmers joined us for a day-long ag finance and
marketing conference at Iowa State University. Later in the year,
we co-sponsored an intensive, three-day ag financial management
seminar with the Iowa Farm Bureau and the Iowa Pork Producers
Association. More than 100 farm producers attended one of four
regional sessions conducted across the state.
7
<PAGE>
Through additional alliances with agricultural trade
organizations, such as the Farm Bureau, the Agribusiness
Association of Iowa and the Iowa-Nebraska Equipment Dealers
Association, we began to access certain agribusiness markets more
efficiently than in the past. These groups use Brenton products
and services to add value to the relationship they bring their
members. At the same time, their endorsements and combined
marketing efforts enable us to reach and serve a larger potential
audience.
Also in 1996, as our system-wide sales culture took root, we
made significant progress toward our goal of being a full service
financial provider for our farm customers.
Focusing on our commercial banking strengths
On the commercial side, 1996 was a satisfying year for Brenton,
as we continued to refine our capabilities to serve the growing
needs of Iowa businesses, large and small. While the Company
produced gains in commercial loans, average to average, we were
most pleased by the growth of such fee-based services as cash
management and international banking. Strong market demand,
combined with outstanding sales efforts, generated substantially
increased cash management fees for the year. The Company's
International Division also produced increased fee income during
1996.
During the year, we undertook a number of initiatives,
including the development of a commercial banking service team,
designed to centralize administrative operations so Brenton
commercial officers could devote more time to customer contact
and developing strong customer relationships. We are working to
significantly reduce turnaround time on all loan requests. As we
continue to invest in developing the skills and experience of our
people, supporting their efforts and rewarding their success, we
look for dramatic growth in the commercial line of business in
the years ahead.
Looking to the future with excitement and optimism
Taken as a whole, Brenton's performance in 1996 more than
validated management's strategy of reinventing our Company for
the future. We are stronger and more efficient than at any time
in our history. We have proven that by working together - in a
true spirit of partnership - we can truly make a difference for
our customers and our Company. We have embraced a philosophy that
focuses on customers and long-term relationships, rather than
transactions. And along the way, we have produced an improving
bottom line.
For shareholders, customers and employees alike, there's never
been a better time to be associated with Brenton. Together, we
are making a difference.
/s/
C. Robert Brenton
Chairman of the Board
/s/
Robert L. DeMeulenaere
President
Text on the right hand side of the page:
Iowa's ag economy continues to be strong. With the exception of
the cattle
market, all commodities performed well in 1996. And indicators
suggest continued positive performance in 1997. But with the
government transitioning out of the subsidy business, we are
devoting more time to helping our farm customers develop their
risk management and financial skills. In the future, as they
become more reliant on the forces of nature and the forces of the
market, they'll need to be well-equipped
Centered in a box in this text on the right hand side of the
page:
PAST
______
FUTURES
and well-informed to succeed. Brenton is committed to helping
them in that effort. Through our Company-wide focus on providing
a full range of financial services, on developing alliances, on
targeting specific market segments and on understanding the needs
of individual customers, we are already making progress.
Agriculture is fundamental to Iowa's past, present and future. It
is at the heart of Brenton's history. And we will continue being
a leader in serving the total financial needs of Iowa farmers and
agribusinesses.
1996 Brenton Banks, Inc. Annual Report
The word Innovate is centered in the background over pages 7 and
8.
8
<PAGE>
Financial Review Contents
Independent Auditors' Report 9
Selected Financial Data 10
Financial Review / Graphs 11
Consolidated Statements of Condition 15
Consolidated Statements of Operations 16
Consolidated Statements of Cash Flow 17
Consolidated Statements of Changes in Common Stockholders' Equity
18
Allowance for Loan Losses 18
Consolidated Average Balances and Rates 19
Stock Information 20
Corporate Structure 21
Brenton Service Locations 22
Independent Auditors' Report
The Board of Directors of Brenton Banks, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated statements of condition of Brenton
Banks, Inc. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1996 (not presented herein);
and in our report dated February 7, 1997, we expressed an
unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the condensed
consolidated financial information appearing on page 15 to 18 is
fairly presented, in all material respects, in relation to the
consolidated financial statements from which it has been derived.
/s/
KPMG Peat Marwick LLP
Des Moines, Iowa
February 7, 1997
9
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
Brenton Banks, Inc. and Subsidiaries
Year-end Balances
(In thousands) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets $1,632,095 1,582,779 1,581,327 1,480,596 1,431,140 1,360,942 1,274,301 961,370 961,207 908,933
Interest-earning assets 1,497,600 1,461,218 475,473 1,400,709 1,323,252 1,267,402 1,181,172 883,721 845,571 836,029
Interest-bearing liabilities 1,335,609 1,300,508 1,315,378 1,224,951 1,181,013 1,141,008 1,052,597 769,717 733,133 728,597
Demand deposits 153,284 143,220 136,548 127,132 137,212 115,479 125,626 113,349 118,392 116,830
Long-term borrowings 34,860 38,178 28,939 20,055 13,284 13,634 12,675 14,701 16,215 17,509
Preferred stock --- --- --- --- --- --- --- --- --- 2,000
Common stockholders'
equity** 121,954 119,534 110,430 112,418 97,430 86,712 77,258 63,522 56,401 49,618
Results of operations
(In thousands)
Interest income $ 111,383 111,040 101,223 98,656 106,560 115,561 106,826 85,722 76,745 74,774
Interest expense 55,331 57,708 45,772 44,427 54,773 68,687 64,431 49,102 43,180 43,149
Net interest income 56,052 53,332 55,451 54,229 51,787 46,874 42,395 36,620 33,565 31,625
Provision for loan losses 2,900 1,865 1,988 1,252 1,411 799 869 760 1,214 2,132
Net interest income after
provision for loan losses 53,152 51,467 53,463 52,977 50,376 46,075 41,526 35,860 32,351 29,493
Noninterest income 23,327 17,847 16,593 17,863 14,684 12,715 11,554 10,113 10,367 9,064
Noninterest expense 56,090 55,051 56,657 50,415 46,591 42,284 37,820 32,781 32,066 32,952
Income before income
taxes and minority
interest 20,389 14,263 13,399 20,425 18,469 16,506 15,260 13,192 10,652 5,605
Income taxes 5,771 3,205 2,701 5,508 4,884 4,308 4,388 4,016 2,527 408
Minority interest 603 651 591 667 632 539 533 472 422 290
Net income 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,703 4,907
Preferred stock dividend
requirement --- --- --- --- --- --- --- --- 81 265
Net income available
to common stockholders $ 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,622 4,642
Average common shares
outstanding
(In thousands)* 8,312 8,528 8,747 8,711 8,561 8,534 8,520 7,916 7,916 7,916
Per common and common
equivalent share*
Net income $ 1.69 1.22 1.15 1.64 1.52 1.36 1.21 1.10 .96 .59
Cash dividends .454 .409 .400 .364 .318 .294 .248 .200 .106 .000
Common stockholders'
equity*** 14.95 14.04 13.35 12.62 11.34 10.15 9.06 8.03 7.13 6.26
Selected operating ratios
Return on average assets
(including minority
interest) .92% .71 .70 1.04 .98 .93 .95 1.00 .90 .57
Return on average common
stockholders' equity 11.76 9.04 9.03 13.82 14.13 14.27 14.39 14.50 14.34 9.78
Equity to assets*** 7.41 7.47 7.28 7.40 6.81 6.37 6.06 6.61 6.12 5.46
Common dividend payout 26.86 33.58 34.65 22.22 21.00 21.56 20.50 18.23 11.01 .00
Allowance for loan losses
as a percent of loans 1.20 1.22 1.12 1.12 1.20 1.14 1.25 1.55 1.60 1.75
Net charge-offs to average
loans outstanding .29 .18 .10 .05 .13 .15 .12 .08 .18 .75
<FN>
* Restated for 10% common stock dividend effective in 1996, 3-for-2 stock split effective in 1994 and 2-for-1 stock split
effective in 1990.
** Including unrealized gains (losses) on securities available for sale.
*** Excluding unrealized gains (losses) on securities available for sale
</TABLE>
1996 Brenton Banks, Inc. Annual Report
10
<PAGE>
Brenton Banks, Inc. Financial Review
This summary annual report contains a condensed version of the
financial statements and a review of operations for Brenton
Banks, Inc. and subsidiaries (the "Company"). The full financial
statements and management's discussion and analysis are included
in the Appendix to the Proxy Statement filed with the Securities
and Exchange Commission, which has been provided to all
shareholders. Copies are available upon request.
Earnings Analysis
For the year ended December 31, 1996, Brenton Banks, Inc.
recorded net income of $14,015,430, an increase of 34.7 percent
over 1995, which totaled $10,407,354. The increase in earnings is
attributable to both increases in net interest income and
noninterest income. Earnings per common share were $1.69 compared
to $1.22 for 1995. Return on average assets (ROA) was .92 percent
in 1996, compared to .71 percent in 1995. The return on average
equity (ROE) was 11.76 percent, compared to 9.04 percent one year
earlier.
Net interest income rose 5.1 percent to $56,052,142 for 1996.
Both average earning assets and average interest-bearing
liabilities increased 1.0 percent from 1995. The Company
experienced a favorable change in the mix of earning assets and
interest-bearing liabilities which contributed to an increase in
net interest margin of 14.1 basis points over 1995. Net interest
margin, which is tax equivalent net interest income as a percent
of average earning assets, averaged 4.03 percent in 1996,
compared to 3.89 percent in 1995. The yield on average earning
assets decreased 5.9 basis points, while the average rate on
interest-bearing liabilities declined 22.4 basis points.
The Company achieved record levels of noninterest income in
1996. Several factors contributed to this accomplishment. Service
charges on deposits increased $1,165,078 or 21.0 percent. This
growth related to full implementation of standardized service
charges as well as a new focus on collecting a higher percentage
of fees assessed. Successful new sales initiatives and strong
financial markets drove brokerage commissions up 23.7 percent.
Insurance commissions and fees increased 24.6 percent due
primarily to higher sales of both credit-related insurance and
insurance agency operations. Mortgage banking income increased
51.9 percent due to both increased mortgage loan originations,
which totaled $110.8 million, and an improved margin on the loans
produced. Fiduciary revenues were up 13.2 percent due to
increased volumes of personal trusts, investment management fees
and employee benefit plans. The Company's continued focus on
sales and offering our customers the products they want was
rewarded with higher revenues in all of these areas. Noninterest
income (excluding securities gains and losses) for 1996
represented 1.45 percent of average assets and 41.04 percent of
total operating income, which were the highest levels in the
history of the Company.
While total noninterest income, excluding securities
transactions, increased 28.9 percent, noninterest expense for
1996 increased just 1.9 percent to $56,090,571, compared to
$55,051,267 for 1995. Noninterest expense for 1996 included a
nonre-
Two bar graphs on the left hand side of the page:
Graph showing Net Income (in thousands) (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
12,953 14,250 10,107 10,407 14,015
</TABLE>
Graph showing Return on Average Assets (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
0.98 1.04 0.70 0.71 0.92
</TABLE>
11
<PAGE>
curring charge for a special assessment by the FDIC totaling
$1,288,000. This assessment applied to all deposits insured by
the Savings Association Insurance Fund (SAIF) as of March 31,
1995, and equaled approximately 65.7 basis points per $100 of
SAIF-insured deposits. Excluding this one-time assessment,
noninterest expense would have actually decreased by .5 percent.
Salaries and wages, the largest component of noninterest
expense, increased $2,645,244 or 11.6 percent over 1995. This
increase is primarily related to commissions paid on higher sales
of the fee-related products discussed above, expense tied to a
stock performance plan and severance costs. Fixed salaries,
which comprised 73.9 percent of total salaries and wages,
actually decreased by 6.6 percent compared to 1995. The total
increase in salaries and wages led to a proportionate increase in
employee benefits.
Several new facilities and remodeling projects were completed
in the past two years, which explain the combined increase in the
categories of occupancy and furniture and equipment expense.
Occupancy expense totaled $5,502,904 for 1996, compared to
$4,912,417 for 1995. Increases within the occupancy category were
associated with rents, leases and depreciation expense related to
these new facilities. Results for 1996 include the first full
year of expense for these new facilities.
Furniture and equipment expense actually decreased $21,871
from the prior year. Depreciation expense increased by $197,130
due to technology updates throughout the Company. Decreases in
repairs and maintenance, and furniture and equipment rentals
offset the increase in depreciation expense. The Company
continues to focus on using technology to improve efficiency and
provide better service to our customers. During 1996, 62.8
percent of the capital expenditures were in the technology area.
Data processing expense totaled $2,591,485, an increase of 8.9
percent compared to 1995. This increase is related to new data
processing service contracts in 1996 for mortgage loan processing
and personal computer network maintenance and support. The
expense associated with core main frame data processing actually
decreased which offset the cost of the new contracts.
Expense related to the FDIC deposit insurance assessments
increased 1.0 percent in 1996 to $1,801,646, which includes the
previously discussed one-time $1,288,000 assessment to fully fund
SAIF. This assessment related to the deposits insured by SAIF,
which represented approximately 16.4 percent of the Company's
total deposits at the end of 1996. The Company continues to pay
the lowest premiums available under the FDIC's risk-based premium
system.
Other operating expenses decreased by $2,589,501 or 21.2
percent when comparing 1996 results to 1995. In 1996, the Company
began to realize the anticipated benefits of the 1995 merger of
the Company's 13 commercial banks into one bank charter. Results
for 1995 also included one-time consulting expenses along with
charges associated with the merger of the banks.
The Company's net noninterest margin, which measures operating
efficiency, was (2.09) percent for
Two bar graphs on the right hand side of the page:
Graph showing Net Interest Margin (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
4.23 4.28 4.12 3.89 4.03
</TABLE>
Graph showing Noninterest Income as a Percent of Total Operating
Income (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
28.20 31.84 30.54 33.47 41.04
</TABLE>
1996 Brenton Banks, Inc. Annual Report
12
<PAGE>
1996, compared to (2.38) percent in 1995. The Company's
efficiency ratio was 68.27 percent, compared to 73.70 percent one
year ago. To enhance operating efficiency throughout the
organization, the Company continues to focus on cost management
and the development of strategic improvements in noninterest
income and expense.
Balance Sheet Analysis
Total assets at December 31, 1996, were $1,632,095,000, an
increase of 3.1 percent over December 31, 1995. On average, total
assets had a modest increase of 1.4 percent. However, the change
in the mix of the assets contributed to a favorable increase in
the net interest margin for the Company (see previous
discussion).
Loans increased 3.5 percent over 1995 to reach a balance of
$941,944,000 at December 31, 1996. To improve net interest income
and lessen interest rate risk, management continued its strategy
of de-emphasizing fixed-rate portfolio real estate loans and
developing more commercial and consumer loan business. A
significant accomplishment in 1996 was the $40.9 million increase
in direct consumer loans. The Company continues to focus on
reducing interest rate risk by emphasizing growth in variable
rate loans.
Core customer funds, which are a source of stable and
relatively low-cost financing for the Company, increased 5.5
percent over the prior year. Core customer funds include
noninterest-bearing demand, interest-bearing demand and savings,
and securities sold under agreements to repurchase. The Company
also utilizes borrowings from the Federal Home Loan Bank as a
source of funding. At December 31, 1996, FHLB borrowings totaled
$57.7 million.
The balance of investment securities increased from December
31, 1995, by $29.4 million or 5.8 percent. This increase in
investments was offset by a corresponding $22.4 million decrease
in the balance of federal funds sold.
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 asset-liability management simulations indicate that net
interest income should not fluctuate significantly due to
interest rate changes in the market place. 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.
Loan Quality
Nonperforming loans at December 31, 1996, were $6,167,000, which
represented .65 percent
Two bar graphs on the left hand side of the page:
Graph showing Net Noninterest Margin (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
2.31 2.31 2.61 2.38 2.09
</TABLE>
Graph showing Total Assets (in millions) (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
1,431 1,481 1,581 1,583 1,632
</TABLE>
13
<PAGE>
of total loans. This was an increase of $548,000 from one year
ago, when the ratio was .62 percent of total loans. Loan quality
remained strong at December 31, 1996, with reserves standing at
183.7 percent of nonperforming loans and 1.20 percent of total
loans.
The provision for loan losses totaled $2,900,000 for the year
ended December 31, 1996, compared to $1,864,801 for 1995. The
increase of $1,035,199 or 55.5 percent over 1995 was related to a
54.7 percent increase in net charge-offs in 1996. The Company's
net charge-offs as a percent of average loans were .29 percent
for 1996 compared to .18 percent for 1995, both of which were
better than industry peer group averages.
Capital Resources
Common stockholders' equity totaled $121,954,229 at December 31,
1996, an increase of 2.0 percent over the prior year. As part of
a stock repurchase plan which originated in 1994, the Company
repurchased 347,700 shares of common stock during 1996 at a cost
of $8,248,331. The Company will continue the repurchase of stock
during 1997.
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 at December 31, 1996, was
11.57 percent and the total risk-based capital ratio was 12.64
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 7.62 percent at December 31,
1996, exceeding the regulatory minimum requirement for well-
capitalized institutions of 5.0 percent.
Dividends paid to common stockholders totaled $3,748,653 or
$.454 per share for 1996, an increase of 11.0 percent from the
prior year. In addition to these cash dividends, the Company
distributed a 10 percent common stock dividend in October 1996.
Brenton Banks, Inc. common stock closed on December 31, 1996
at $27.63, an increase of 43.0 percent over the prior year-end.
The closing price at December 31, 1996, was 183.2 percent of the
book value per share of $15.08 on the same date. The year-end
stock price represented a price-to-1996-earnings multiple of 16.3
times.
Brenton Banks, Inc. continues to pursue acquisition and
expansion opportunities which will enhance the financial
performance of the Company as well as strengthen the Company's
presence in current and new markets. There are currently no
pending acquisitions that would require Brenton Banks, Inc. to
secure capital from public or private markets.
Two bar graphs on the right hand side of the page:
Dual Bar Graph showing Primary Capital Ratio Tier 1 Leverage
Capital Ratio (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
7.67 8.31 8.18 8.40 8.33
6.71 7.36 7.23 7.45 7.62
</TABLE>
Dual Bar Graph showing Nonperforming Loans as a Percent of Loans
Net Charge-offs as a Percent of Average Loans (1992-1996):
<TABLE>
<CAPTION>
92 93 94 95 96
<S> <C> <C> <C> <C> <C>
0.61 0.46 0.46 0.52 0.62
0.13 0.05 0.10 0.18 0.29
</TABLE>
1996 Brenton Banks, Inc. Annual Report
14
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Condition
Brenton Banks, Inc. and Subsidiaries
December 31 1996 1995
<S> <C> <C>
Assets:
Cash and due from banks $ 76,900,524 71,159,078
Interest-bearing deposits with banks 731,554 265,072
Federal funds sold and securities purchased
under agreements to resell 15,200,000 37,600,000
Investment securities:
Available for sale 461,099,272 396,370,443
Held to maturity (market value of
$73,316,000 and $109,131,000
at December 31, 1996 and 1995,
respectively 72,754,985 108,082,213
Investment securities 533,854,257 504,452,656
Loans held for sale 5,870,298 8,707,309
Loans 941,943,513 910,193,212
Allowance for loan losses (11,328,359) (11,069,869)
Loans, net 930,615,154 899,123,343
Premises and equipment 30,379,446 32,849,842
Accrued interest receivable 14,417,786 14,494,261
Other assets 24,126,063 14,127,759
$ 1,632,095,082 1,582,779,320
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing $ 153,284,094 143,220,373
Interest-bearing:
Demand 99,277,477 399,308,392
Savings 527,791,360 215,488,846
Time 572,704,180 603,925,104
Total deposits 1,353,057,111 1,361,942,715
Federal funds purchased and securities sold
under agreements to repurchase 66,826,120 41,107,411
Other short-term borrowings 34,150,000 2,500,000
Accrued expenses and other liabilities 16,633,068 15,083,453
Long-term borrowings 34,860,024 38,177,803
Total liabilities 1,505,526,323 1,458,811,382
Minority interest in consolidated subsidiaries 4,614,530 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; 8,085,684 and 7,653,252 shares
issued and outstanding at December 31, 1996
and 1995, respectively 40,428,420 38,266,260
Capital surplus --- 2,020,518
Retained earnings 80,448,768 77,888,451
Unrealized gains on securities available for
sale 1,077,041 1,358,402
Total common stockholders' equity 121,954,229 119,533,631
$ 1,632,095,082 1,582,779,320
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Brenton Banks, Inc. and Subsidiaries
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $ 80,301,707 82,525,850 76,456,964
Interest and dividends on investments:
Available for sale-taxable 20,063,114 14,577,652 13,032,050
Available for sale-tax-exempt 4,250,463 4,446,824 5,530,626
Held to maturity-taxable 2,878,982 4,069,617 1,862,628
Held to maturity-tax-exempt 2,404,155 3,090,185 2,619,333
Interest on federal funds sold and
securities purchased under agreements
to resell 1,416,539 2,263,734 1,705,717
Other interest income 68,157 66,705 15,636
___________ ___________ ___________
Total interest income 111,383,117 111,040,567 101,222,954
Interest Expense:
Interest on deposits 49,507,425 53,075,352 41,609,766
Interest on federal funds purchased and
securities sold under agreements to
repurchase 2,469,939 1,641,516 2,082,077
Interest on other short-term borrowings 1,015,110 370,642 263,658
Interest on long-term borrowings 2,338,501 2,620,914 1,816,927
___________ ___________ ___________
Total interest expense 55,330,975 57,708,424 45,772,428
Net interest income 56,052,142 53,332,143 55,450,526
Provision for loan losses 2,900,000 1,864,801 1,987,909
___________ ___________ ___________
Net interest income after provision for
loan losses 53,152,142 51,467,342 53,462,617
Noninterest Income:
Service charges on deposit accounts 6,712,874 5,547,796 5,424,547
Investment brokerage commissions 3,766,436 3,044,107 2,879,401
Insurance commissions and fees 2,915,666 2,339,817 2,115,085
Fiduciary income 2,744,530 2,425,105 2,160,492
Mortgage banking income 2,168,593 1,427,342 1,216,690
Other service charges, collection and
exchange charges, commissions and fees 2,779,502 2,435,132 2,342,210
Net gains (losses) from securities
available for sale 321,256 (3,003) (339,624)
Other operating income 1,918,584 630,444 794,187
___________ ___________ ___________
Total noninterest income 23,327,441 17,846,740 16,592,988
Noninterest Expense:
Salaries and wages 25,460,464 22,815,220 24,595,274
Employee benefits 4,245,682 4,158,580 4,960,665
Occupancy expense of premises, net 5,502,904 4,912,417 4,702,208
Furniture and equipment expense 3,725,150 3,747,021 3,060,557
Data processing expense 2,591,485 2,379,920 3,083,819
FDIC deposit insurance assessment 1,801,646 1,783,213 2,907,382
Advertising and promotion 1,756,473 1,741,390 1,772,852
Supplies 1,409,690 1,326,928 1,386,639
Other operating expense 9,597,077 12,186,578 10,187,526
___________ ___________ ___________
Total noninterest expense 56,090,571 55,051,267 56,656,922
Income before income taxes and
minority interest 20,389,012 14,262,815 13,398,683
Income taxes 5,770,600 3,204,687 2,700,640
___________ ___________ ___________
Income before minority interest 14,618,412 11,058,128 10,698,043
Minority interest 602,982 650,774 590,656
___________ ___________ ___________
Net income $ 14,015,430 10,407,354 10,107,387
Per common and common equivalent share:*
Net income $ 1.69 1.22 1.15
Cash dividends .454 .409 .400
<FN>
*Restated for the 10% common stock dividend effective in 1996.
</TABLE>
1996 Brenton Banks, Inc. Annual Report
16
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Brenton Banks, Inc. and Subsidiaries
Years Ended December 31 1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net income $ 14,015,430 10,407,354 10,107,387
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for loan losses 2,900,000 1,864,801 1,987,909
Depreciation and amortization 4,301,776 4,097,022 3,387,034
Deferred income taxes 949,396 (25,181) (1,257,325)
Net (gains) losses from securities
available for sale (321,256) 3,003 339,624
Net (increase) decrease in loans held
for sale 2,837,011 (6,602,817) 2,244,930
Increase in accrued interest receivable
and other assets (11,420,210) (1,678,132) (1,477,154)
Increase in accrued expenses, other
liabilities and minority interest 1,735,569 322,324 3,192,432
_____________ ____________ ____________
Net cash provided by operating activities 14,997,716 8,388,374 18,524,837
Investing Activities:
Investment securities available for sale:
Purchases (289,895,560) (242,871,379) (122,339,026)
Maturities 150,480,123 278,575,538 154,659,319
Sales 67,547,581 5,577,835 21,484,178
Investment securities held to maturity:
Purchases (45,046,248) (121,543,300) (59,384,073)
Maturities 79,614,914 59,896,255 26,687,613
Net (increase) decrease in loans (26,364,596) 28,502,974 (95,225,841)
Purchases of premises and equipment (2,734,491) (9,733,181) (6,920,455)
Proceeds from sales of premises and
equipment 1,356,634 360,470 26,578
_____________ ____________ ____________
Net cash used by investing activities (65,041,643) (1,234,788) (81,011,707)
Financing Activities:
Net increase in noninterest-bearing,
interest-bearing demand and savings
deposits 22,335,320 51,054,199 40,210,540
Net increase (decrease) in time deposits (31,220,924) (29,394,594) 5,708,876
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase 25,718,709 (29,596,325) 33,039,408
Net increase (decrease) in other
short-term borrowings 15,500,000 (9,500,000) 12,000,000
Proceeds of long-term borrowings 14,604,000 12,429,000 22,176,030
Repayment of long-term borrowings (1,771,779) (3,190,610) (13,291,530)
Dividends on common stock (3,748,653) (3,498,220) (3,471,901)
Proceeds from issuance of common stock
under the employee stock purchase plan 71,675 --- ---
Proceeds from issuance of common stock
under the stock option plan 290,748 187,213 385,767
Proceeds from issuance of common stock
under the long-term stock compensation
plan 334,834 361,602 ---
Payment for shares acquired under common
stock repurchase plan (8,248,331) (4,830,111) (850,950)
Payment for fractional shares resulting
from stock dividend (13,744) --- (4,307)
_____________ ____________ ____________
Net cash provided (used) by financing
activities 33,851,855 (15,977,846) 95,901,933
_____________ ____________ ____________
Net increase (decrease) in cash and
cash equivalents (16,192,072) (8,824,260) 33,415,063
Cash and cash equivalents at the
beginning of the year 109,024,150 117,848,410 84,433,347
_____________ ____________ ____________
Cash and cash equivalents at the end
of the year $ 92,832,078 109,024,150 117,848,410
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Common Stockholders' Equity
Brenton Banks, Inc. and Subsidiaries
Common Capital Retained Unrealized
Stock Surplus Earnings Gains (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993 $26,265,755 5,598,027 77,517,613 3,036,270 112,417,665
Net income --- --- 10,107,387 --- 10,107,387
Net change in
unrealized gains
(losses) --- --- --- (8,153,316) (8,153,316)
Dividends on common
stock
$.400 per share* --- --- (3,471,901) --- (3,471,901)
3-for-2 stock split
in the form of a
stock dividend 13,169,475 --- (13,169,475) --- ---
Fractional shares
resulting from
stock split --- --- (4,307) --- (4,307)
Issuance of shares of
common stock under
the stock option
plan 146,500 239,267 --- --- 385,767
Shares reacquired
under stock
repurchase plan (224,000) (626,950) --- --- (850,950)
Balance, December 31,
1994 39,357,730 5,210,344 70,979,317 (5,117,046) 110,430,345
Net income --- --- 10,407,354 --- 10,407,354
Net change in
unrealized gains
(losses) --- --- --- 6,475,448 6,475,448
Dividends on common
stock
$.409 per share** --- --- (3,498,220) --- (3,498,220)
Issuance of shares of
common stock under
the stock option
plan 98,750 88,463 --- --- 187,213
Issuance of shares of
common stock under
the stock compensation
plan 100,445 261,157 --- --- 361,602
Shares reacquired under
stock repurchase plan (1,290,665) (3,539,446) --- --- (4,830,111)
Balance, December 31,
1995 38,266,260 2,020,518 77,888,451 1,358,402 119,533,631
Net income --- --- 14,015,430 --- 14,015,430
Net change in
unrealized gains
(losses) --- --- --- (281,361) (281,361)
Dividends on common
stock
$.454 per share** --- --- (3,748,653) --- (3,748,653)
10% common stock
dividend 3,684,215 --- (3,684,215) --- ---
Fractional shares
resulting from
stock dividend --- --- (13,744) --- (13,744)
Issuance of shares of
common stock under
the stock option
plan 128,000 162,748 --- --- 290,748
Issuance of shares of
common stock under
the stock compensation
plan 73,590 261,244 --- --- 334,834
Issuance of shares
of common stock
under the employee
stock purchase plan 14,855 56,820 --- --- 71,675
Shares reacquired under
stock repurchase plan (1,738,500) (2,501,330) (4,008,501) --- (8,248,331)
Balance, December 31,
1996 $40,428,420 --- 80,448,768 1,077,041 121,954,229
<FN>
* Reflects the 10% common stock dividend effective in 1996 and the 3-for-2 stock
split effective in 1994.
** Reflects the 10% common stock dividend effective in 1996.
</TABLE>
<TABLE>
<CAPTION>
Allowance for Loan Losses
Brenton Banks, Inc. and Subsidiaries
Years End December 31 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $11,069,869 10,913,043 9,817,864
Provision for loan losses 2,900,000 1,864,801 1,987,909
Loans charged off (4,061,211) (3,377,002) (2,442,185)
Loan loss recoveries 1,419,701 1,669,027 1,549,455
Balance at end of year $11,328,359 11,069,869 10,913,043
<FN>
The allowance for loan losses schedule is not covered by the
Independent Auditors' Report.
</TABLE>
1996 Brenton Banks, Inc. Annual Report
18
<PAGE>
<TABLE>
<CAPTION>
Consolidated Average Balances and Rates
Brenton Banks, Inc. and Subsidiaries
Average Balances (In thousands) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 65,439 57,138 46,301 46,025 41,715
Interest-bearing deposits
with banks 1,393 1,076 124 762 6,240
Federal funds sold and
securities purchased under
agreements to resell 26,188 39,763 37,666 23,725 27,082
Trading account securities --- --- 116 --- ---
Investment securities:
Available for sale-taxable 330,002 244,786 245,913 53,174 6,512
Available for sale-tax-exempt 85,471 100,859 132,040 --- ---
Held to maturity-taxable 46,271 65,959 35,794 299,993 384,301
Held to maturity-tax-exempt 51,639 50,235 44,584 164,520 139,296
Loans held for sale 7,983 5,908 2,575 6,165 2,553
Loans 919,578 945,724 936,370 802,088 736,646
Allowance for loan losses (11,440) (11,166) (10,502) (9,615) (8,894)
Premises and equipment 31,728 31,436 24,545 23,045 21,400
Other 28,642 29,508 25,663 26,543 30,422
__________ _________ _________ _________ _________
$ 1,582,894 1,561,226 1,521,189 1,436,425 1,387,273
Liabilities and Stockholders'
Equity:
Deposits
Noninterest-bearing $ 131,051 128,770 127,464 119,322 112,054
Interest-bearing:
Demand 376,259 355,819 250,520 217,754 209,642
Savings 241,250 231,633 294,715 299,640 260,568
Time 583,508 626,497 625,981 622,789 646,261
__________ _________ _________ _________ _________
Total deposits 1,332,068 1,342,719 1,298,680 1,259,505 1,228,525
Federal funds purchased and
securities sold under agreements
to repurchase 59,276 40,237 61,656 42,715 33,240
Other short-term borrowings 17,295 6,536 4,860 33 2,170
Accrued expenses and other
liabilities 17,520 14,896 13,254 12,805 13,735
Long-term borrowings 33,094 37,264 26,500 14,077 14,067
__________ _________ _________ _________ _________
Total liabilities 1,459,253 1,441,652 1,404,950 1,329,135 1,291,737
Minority interest 4,471 4,391 4,290 4,150 3,845
Common stockholders' equity 119,170 115,183 111,949 103,140 91,691
__________ _________ _________ _________ _________
$ 1,582,894 1,561,226 1,521,189 1,436,425 1,387,273
Summary of Average Interest Rates
Average rates earned:
Interest-bearing deposits with
banks 4.87% 6.20 6.65 2.88 4.92
Trading account securities --- --- --- 6.36 ---
Federal funds sold and securities
purchased under agreements to
resell 5.41 5.69 4.53 2.05 2.41
Investment securities:
Available for sale-taxable 6.08 5.96 5.30 5.28 6.63
Available for sale-tax exempt
(tax equivalent basis) 7.13 6.71 6.37 --- ---
Held to maturity-taxable 6.22 6.17 5.20 5.54 6.88
Held to maturity-tax-exempt
(tax equivalent basis) 6.68 8.05 7.70 6.97 7.66
Loans held for sale 8.47 6.71 7.50 8.43 9.33
Loans 8.69 8.69 8.14 8.77 9.65
Average rates paid:
Deposits 4.12% 4.37 3.55 3.70 4.70
Federal funds purchased and
securities sold under agreements
to repurchase 4.17 4.08 3.38 2.41 2.78
Other short-term borrowings 5.87 5.67 5.42 3.63 5.57
Long-term borrowings 7.07 7.03 6.86 8.60 9.14
Average yield on interest-earning
assets 7.80% 7.86 7.31 7.57 8.43
Average rate paid on interest-
bearing liabilities 4.22 4.45 3.62 3.71 4.70
Net interest spread 3.58 3.41 3.69 3.86 3.73
Net interest margin 4.03 3.89 4.12 4.28 4.23
</TABLE>
19
<PAGE>
Stock Information
Brenton Banks, Inc. common stock is traded on the Nasdaq National
Market and quotations are furnished by the Nasdaq System.
There were 1,562 common stockholders of record on December 31,
1996.
<TABLE>
<CAPTION>
Market and Dividend Information
1996 High Low Dividends
<S> <C> <C> <C>
1st quarter $22.05 19.09 .109
2nd quarter 22.05 20.68 .109
3rd quarter 22.73 21.36 .118
4th quarter 28.00 22.50 .118
</TABLE>
<TABLE>
<CAPTION>
1995 High Low Dividends
<S> <C> <C> <C>
1st quarter $17.05 16.14 .10
2nd quarter 17.27 16.14 .10
3rd quarter 18.64 16.25 .10
4th quarter 20.68 17.50 .109
</TABLE>
The above table sets forth the high and low sales prices and cash
dividends per share for the Company's common stock, after the
effect of the October 1996 10% common stock dividend. The market
quotations, reported by Nasdaq, represent prices between dealers
and do not include retail markup, markdown or commissions.
Nasdaq Symbol: BRBK
Wall Street Journal and
Other Newspapers: BrentB
Market Makers
ABN AMRO Chicago Corporation
Herzog, Heine, Geduld, Inc.
Howe, Barnes Investments, Inc.
Keefe, Bruyette & Woods, Inc.
Stifel, Nicolaus & Co., Inc.
Wedbush Morgan Securities, Inc.
FORM 10-K
COPIES OF BRENTON BANKS, INC. ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION FORM 10-K WILL BE MAILED WHEN AVAILABLE
WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST TO STEVEN T.
SCHULER, CHIEF FINANCIAL OFFICER/TREASURER/SECRETARY, AT THE
CORPORATE HEADQUARTERS.
Stockholder Information
Corporate Headquarters
Suite 200, Capital Square
400 Locust Street
Des Moines, Iowa 50309
Telephone 515/237-5100
Annual Shareholders' Meeting
Wednesday, May 7, 1997, 5:00 p.m.
Des Moines Convention Center
501 Grand Avenue
Des Moines, Iowa 50309
Transfer Agent/Registrar/
Dividend Disbursing Agent
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60690
Legal Counsel
Brown, Winick, Graves, Gross,
Baskerville and Schoenebaum, P.L.C.
Suite 1100, Two Ruan Center
601 Locust Street
Des Moines, Iowa 50309
Independent Auditors
KPMG Peat Marwick LLP
2500 Ruan Center
666 Grand Avenue
Des Moines, Iowa 50309
Design: Designgroup, Inc.
1996 Brenton Banks, Inc. Annual Report
20
<PAGE>
Corporate Structure
BRENTON BANKS, INC.
BOARD OF DIRECTORS
C. Robert Brenton
Chairman of the Board
Brenton Banks, Inc.
William H. Brenton
Past Chairman (21 Years)
Past Chairman,
Executive Committee (5 years)
Past President (5 Years)
Brenton Banks, Inc.
J.C. Brenton
Past President
Brenton Banks, Inc.
Gary M. Christensen
President & CEO
Pella Corporation
Robert L. DeMeulenaere
President
Brenton Banks, Inc.
R. Dean Duben
Vice Chairman of the Board
Brenton Bank, Davenport
Hubert G. Ferguson
Financial Services Consultant
New Brighton, Minnesota
BRENTON BANKS, INC.
Executive Officers
C. Robert Brenton
Chairman of the Board
Robert L. DeMeulenaere
President
Steven T. Schuler
Chief Financial Officer/Treasurer/Secretary
BRENTON BANK
SENIOR OFFICERS AND
LINE OF BUSINESS MANAGERS
C. Robert Brenton
Chairman of the Board
Robert L. DeMeulenaere
Chief Executive Officer/President
Larry A. Mindrup
Chief Banking Officer
President, Des Moines
Phillip L. Risley
Chief Administrative Officer/Cashier
Perry C. Atwood
Chief Sales Officer
Woodward G. Brenton
Chief Commercial Banking Officer
Charles N. Funk
Chief Investment/ALCO Officer
Ronald D. Larson
Regional President Eastern Iowa Division President, Cedar Rapids
Marc J. Meyer
Regional President Western Iowa Division President, Adel
Steven T. Schuler
Chief Financial Officer/Treasurer/Secretary
Norman D. Schuneman
Chief Credit Officer
Steven D. Agan
President, Knoxville
John H. Anderson
President, Davenport
Thomas J. Friedman
President, Ankeny
Kevin Z. Geis
President, Brenton Savings Bank, FSB
Ames
Robert L. German
President, Dallas Center
John M. Hand
President, Emmetsburg
Dennis H. Hanson
President, Grinnell
Richard H. Jones
President, Perry
V. Blaine Lenz
President, Eagle Grove
James L. Lowrance
President, Marshalltown
Clay A. Miller
President, Clarion
Jeffrey J. Nolan
President, Jefferson
Clark H. Raney
President, Indianola
Gary D. Ernst
President, Trust Division
Marsha A. Findlay
Senior Vice President, Des Moines
Senior Retail Banking Officer
Mark J. Hoffschneider
President, Brenton Mortgages
Douglas F. Lenehan
President, Diversified Commercial
Services Division
Loras J. Neuroth
President, Brenton Insurance
Elizabeth M. Piper/Bach
President, Brenton Investments
Catherine Reed
Senior Marketing Officer
Thomas J. Vincent
President, Agricultural Banking Division
21
<PAGE>
Brenton Service Locations - Iowa
Adel
Ames, 424 Main Street
Ames, North Grand Mall
Ankeny
Ayrshire
Cedar Rapids, 150 First Avenue, NE
Cedar Rapids, 3010 Williams Blvd., SW
Cedar Rapids, 1800 51st Street, NE
Cedar Rapids, 2300 Edgewood Road, SW
Clarion
Clive, 10101 University
Clive, 13631 University
Dallas Center
Davenport, 1618 N. Main Street
Davenport, Village Shopping Center
Davenport, West Third and Division
Davenport, 53rd and Utica Ridge
Des Moines, 400 Locust Street
Des Moines, 29th & Ingersoll
Des Moines, 2805 Beaver
Des Moines, S.W. 9th and McKinley
Dexter
Dubuque*
Eagle Grove
Emmetsburg
Granger
Grinnell
Indianola
Iowa City
Jefferson
Johnston
Knoxville
Mallard
Marion
Marshalltown, 102 South Center
Marshalltown, 1724 South Center
Newton*
Perry
Redfield
Story City
Toledo**
Urbandale
Van Meter
Waukee
Woodward
* Investment, insurance and mortgages services only.
** Investment and insurance services only.
On the bottom of the page is a map of Iowa with dots showing the
location of the above banks.
22
<PAGE>
Brenton Banks, Inc.
Suite 200, Capital Square
400 Locust Street
Des Moines, Iowa 50309
Telephone 515/237-5100
<PAGE>
Appendix to Annual Report
Referencing Graphic and Image Material
All graphic and image material has been described in text of the
annual
report. Set forth below is a list of such material.
1. Cover - first unnumbered page of the Annual Report.
2. Bar graphs, second page of the Annual Report, showing Common
Stock Closing Bid Price from 1987-1996; Net Income per Common
Shares from 1992-1996; and Return on Average Equity from 1992-
1996.
3. Two photgraphs on page 3 of the Annual Report.
4. Text, located on the right hand side, on page 4 of the Annual
Report.
5. Text, located on the left hand side, on page 5 of the Annual
Report.
6. Text, located on the right hand side, on page 8 of the Annual
Report.
7. Bar graphs showing the Net Income from 1992-1996 and the
Return on Average Assets from 1992-1996, on page 11 of the Annual
Report.
8. Bar graphs showing the Net Interest Margin from 1992-1996 and
the Noninterest Income as a Percent of Total Operating Income
from 1992-1996), on page 12 of the Annual Report.
9. Bar graphs showing the Net Noninterest Margin from 1992-1996
and the Total Assets from 1992-1996), on page 13 of the Annual
Report.
10. Bar graphs showing the Primary Capital Ratio from 1992-1996
and the Nonperforming Loans as a Percent of Loans from 1992-1996,
on page 14 of the Annual Report.
11. Map of Iowa on page 22 of the Annual Report.
