FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 0-6216
BRENTON BANKS, INC.
(Exact name of registrant as specified in its charter)
Incorporated in Iowa No. 42-0658989
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 200, Capital Square, 400 Locust, Des Moines, Iowa 50309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 515-237-5100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 par value
(Title of class)
1
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 13, 1998, was $212,450,914.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date, March 13, 1998.
17,340,626 shares Common Stock, $2.50 par value
DOCUMENTS INCORPORATED BY REFERENCE
The Appendix to the Proxy Statement for the 1997 calendar year is
incorporated by reference into Part I, Part II and Part IV hereof to the
extent indicated in such Parts.
The definitive proxy statement of Brenton Banks, Inc., which will be filed
not later than 120 days after the close of the Company's fiscal year ending
December 31, 1997, is incorporated by reference into Part III hereof to the
extent indicated in such Part.
1 of 216 Total Pages
2
<PAGE>
TABLE OF CONTENTS
PART I
Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(A) General Description . . . . . . . . . . . . . . . . . . . . 5
(B) Recent Developments . . . . . . . . . . . . . . . . . . . . 6
(C) Affiliated Banks . . . . . . . . . . . . . . . . . . . . . 7
(D) Bank-Related Subsidiaries and Affiliates . . . . . . . . . 7
(E) Executive Officers and Policymakers of the
Registrant . . . . . . . . . . . . . . . . . . . . . . . . 7
(F) Employees . . . . . . . . . . . . . . . . . . . . . . . . . 9
(G) Supervision and Regulation . . . . . . . . . . . . . . . . 9
(H) Governmental Monetary Policy and Economic
Conditions . . . . . . . . . . . . . . . . . . . . . . . . 10
(I) Competition . . . . . . . . . . . . . . . . . . . . . . . . 10
(J) Statistical Disclosure . . . . . . . . . . . . . . . . . . 12
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 26
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . 26
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 26
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . 27
3
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 27
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . 27
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 27
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 27
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4
<PAGE>
PART I
Item 1. Business.
(A) General Description.
Brenton Banks, Inc. (the "Parent 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
Brenton Companies in 1948. Subsequently, the Parent Company changed its
corporate name to its current name, Brenton Banks, Inc. On December 31,
1997, the Parent Company had direct control of its commercial and savings
bank (hereinafter the "affiliated banks"), both located in Iowa. The
commercial bank is a state bank incorporated under the laws of the State of
Iowa and the savings bank is a federal savings bank organized under the
laws of the United States. Both of the affiliated banks are members of the
Federal Deposit Insurance Corporation.
Brenton Banks, Inc. and its subsidiaries (the "Company") engage in
retail, commercial, business and agricultural banking and related financial
services from 46 locations throughout Iowa. In connection with this
banking industry segment, the Company provides the usual products and
services of banking such as deposits, commercial loans, business loans,
agribusiness loans, personal loans and trust services.
The principal services provided by the Company are accepting deposits
and making loans. The significant loan categories are commercial, business,
commercial real estate, agribusiness and personal. Commercial and business
loans are made to business enterprises principally to finance inventory,
operations or other assets at terms generally up to 5 years. The principal
risk involves the customers' management skills and general economic
conditions. Commercial real estate mortgage loans are routinely made for
terms up to 20 years for real property used in a borrower's business.
Repayment primarily depends upon the financial performance and the cash
flow of the business enterprise. Declines in commercial real estate values
could ultimately affect the collectibility of these types of loans.
Agribusiness loans are made to farmers for financing crop inputs,
equipment, livestock and real property used in farming activities.
Agribusiness loans are also made to businesses related to or that support
the production and sale of agricultural products. Weather conditions and
government policies have major influences on agricultural financial
performance and ultimately the borrower's ability to repay loans. Personal
loans are made to individuals primarily on a secured basis to finance such
items as residential mortgages, home improvements, personal property,
education and vehicles. Unsecured personal loans are made on a limited
basis. The individual's credit worthiness and economic conditions
affecting the job market are the primary risks associated with personal
loans. Personal loans generally do not exceed 5 years. For all loan
types, the primary criteria used in determining whether to make a loan is
the borrower's ability to repay, which is based upon a cash flow analysis,
and willingness to pay supported by a historical review of credit
management.
The principal markets for these loans are businesses and individuals.
Iowa has two primary regional market segments. One market consists of
selected metropolitan areas across the state which consist of service and
manufacturing industries. The other market involves rural areas which are
predominately agricultural in nature. These loans are made by the
affiliated banks and subsidiaries, and some are sold on the secondary
market. The Company also engages in activities that are closely related to
banking, including mortgage banking, investment, insurance and real estate
brokerage.
5
<PAGE>
(B) Recent Developments.
New Director. In January 1998, the Board of Directors increased the
number of directors from seven to eight and named Robert J. Currey to fill
the position. Mr. Currey is the President of 21st Century Telecom Group,
Inc. in Chicago, Illinois. Mr. Currey has no prior relationship or
affiliation with the Company.
Stock Split. In January 1998, the Board of Directors declared a 2-
for-1 stock split for stockholders of record as of February 10, 1998,
payable February 20, 1998. As a result, the par value of the Company's
common stock was reduced from $5.00 to $2.50 per share and authorized
shares were increased to 50 million.
Common Stock Dividends. On May 6, 1997, the Board of Directors
declared a ten percent common stock dividend to stockholders of record on
May 15, 1997. On October 7, 1996, the Board of Directors declared a ten
percent common stock dividend to stockholders of record on October 17,
1996. Fractional shares resulting from both stock dividends were paid in
cash.
Stock Option Plan. On September 5, 1996, a special meeting of
stockholders was held to approve the Brenton Banks, Inc. 1996 Stock Option
Plan (the "Plan"). The Plan, which was approved, authorizes the granting
of options on up to 1,210,000 shares (all share and per-share data have
been restated for the 2-for-1 stock split and the ten percent common stock
dividends) 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 and maximum
exercise periods, as established by the Compensation Committee of the Board
of Directors. During 1997 and 1996, 1,122,940 options have been granted
under the Plan to 43 current employees of the Company with option prices
ranging from $10.073 to $16.750 per share.
Common Stock Repurchase Plan. As part of the Company's ongoing
capital management and stock repurchase plan, in 1997 the Board of
Directors authorized additional stock repurchases of $10,000,000 of the
Company's common stock. For the years ended December 31, 1997, 1996 and
1995, the Company repurchased 695,480, 695,400 and 516,266 shares (restated
for the 2-for-1 stock split), respectively, at total costs of $10,014,087,
$8,248,331 and $4,830,111.
Restructuring of Organization. Brenton Banks, Inc. completed its
restructuring plan during 1995. The plan, authorized in December, 1994,
included consolidating the Company's 13 commercial banks into one bank,
reducing the Company's overall personnel levels and closing selected
banking branches. During the third quarter of 1995, the Company completed
the merger of its 13 commercial banks into a single, state chartered
banking organization under the laws of the State of Iowa.
As part of this merger process, Brenton Bank Services Corporation was
liquidated and became part of the one bank, Brenton Bank. Brenton
Mortgages, Inc., formerly a wholly-owned subsidiary of the holding company,
is now a subsidiary of Brenton Savings Bank, FSB. The move of this
subsidiary was made to accommodate the funding of residential real estate
loans with borrowings from the Federal Home Loan Bank.
Growth and Acquisitions. As part of management's strategic growth
plans, Brenton Banks, Inc. investigates growth and expansion opportunities
which strengthen the Company's presence in current or selected new market
areas. The Company continues expansion of its traditional and non-
traditional services.
On October 1, 1992, Brenton Banks, Inc. merged with Ames Financial
Corporation and acquired its wholly-owned subsidiary, Ames Savings Bank,
FSB of Ames, Iowa whose name has since
6
<PAGE>
been changed to Brenton Savings Bank, FSB. The institution continues to
operate as a federal savings bank, requiring Brenton Banks, Inc. to also
register as a savings and loan holding company. As a savings and loan
holding company, Brenton Banks, Inc. is required to file certain reports
with and be regulated by the Office of Thrift Supervision. See Item 1,
Section (G), Supervision and Regulation.
(C) Affiliated Banks.
The 2 affiliated banks had 42 banking locations at December 31, 1997,
located in 13 of Iowa's 99 counties. These banks serve both agricultural
and metropolitan areas. The location and certain other information about
the affiliated banks are given below.
The main office of Brenton Bank is located in Des Moines, Iowa.
Des Moines is the largest city in Iowa. In addition to its main banking
location, Brenton Bank has 38 offices located throughout Iowa and provides
services to customers in numerous counties across the state.
Brenton Savings Bank, FSB is located in Ames, Iowa, and has offices in
Ames and Story City. The savings bank serves customers in Story County.
(D) Bank-Related Subsidiaries and Affiliates.
Brenton Investments, Inc., a wholly owned subsidiary of Brenton Bank,
was formed in 1992 and provides a full array of retail investment brokerage
services to customers. The company is not involved with the direct
issuance, flotation or underwriting of securities. At December 31, 1997,
this subsidiary had 41 licensed brokers serving all Brenton banks.
Brenton Mortgages, Inc., a wholly-owned subsidiary of Brenton Savings
Bank, FSB, engages in the mortgage banking business. This subsidiary
originates and services mortgage loans sold to institutional investors and
the mortgage loan portfolios of the affiliated banks.
Brenton Insurance, Inc. and Brenton Realty Services, Ltd. are wholly-
owned subsidiaries of Brenton Bank. These subsidiaries operate real estate
brokerage agencies and insurance brokerage agencies handling individual and
group life, annuity, health, fire, crop, homeowner's, automobile and
liability insurance.
Brenton Insurance Services, Inc., a wholly-owned subsidiary of the
Parent Company, is currently inactive.
(E) Executive Officers and Policymakers of the Registrant.
The term of office for the executive officers and policymakers of the
Company is from the date of election until the next Annual Organizational
Meeting of the Board of Directors. The names and ages of the executive
officers and policymakers of the Company as of March 13, 1998, the offices
held by these executive officers and policymakers on that date, the period
during which the officers have served as such and the other positions held
with the Company by these officers during the past five years are set forth
below and on the following page:
<TABLE>
<CAPTION>
Company Position
Name and Address Age Position or Subsidiary Commenced Other Positions
________________ ___ ______________________ _________ _______________
<S> <C> <C> <C> <C>
C. Robert Brenton 67 Chairman of the Board 1990 Chairman, Brenton Bank -
Des Moines, Iowa Brenton Banks, Inc. October 1995 to November 1997
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Company Position
Name and Address Age Position or Subsidiary Commenced Other Positions
________________ ___ ______________________ _________ _______________
<S> <C> <C> <C> <C>
Robert L. DeMeulenaere 58 President and Chief 1994 President, Brenton Bank - January 1994 to
Des Moines, Iowa Executive Officer November 1997; President/Treasurer, Brenton
Brenton Banks, Inc. Mortgages, Inc. - August 1989 to July 1994;
Chairman and Chief 1997 CEO, Brenton Bank and Trust Company of
Executive Officer Cedar Rapids - August 1990 to January 1994;
Brenton Bank Senior Vice President of the Parent Company -
August 1990 to January 1994
Larry A. Mindrup 56 President 1997 CEO, Brenton Savings Bank, FSB; Ames - April
Des Moines, Iowa Chief Banking Officer 1995 1994 to March 1996; President, Brenton Bank,
Brenton Bank N.A., Des Moines - May 1995 to September
1995; President, Brenton Savings Bank, FSB,
Ames - April 1994 to April 1995; President,
Trust Officer and Director, Brenton National
Bank - Poweshiek County - January 1991 to
March 1994
Phillip L. Risley 55 Executive Vice President/ 1997 Executive Vice President of the Parent
Des Moines, Iowa Chief Administrative 1995 Company - January 1992 to December 1995;
Officer/ President and CEO, Brenton Bank, N.A.,
Cashier 1995 Des Moines - February 1990 to May 1995;
Brenton Bank Vice President - Operations of the Parent
Company - May 1984 to January 1992;
Chairman of the Board, Brenton Bank
Services Corporation - May 1992 to
September 1995
Perry C. Atwood 43 Chief Sales Officer 1996
Des Moines, Iowa Brenton Bank
Woodward G. Brenton 47 Chief Commercial 1995 President and CEO, Brenton First National
Des Moines, Iowa Banking Officer Bank - January 1992 to October 1995; Executive
Brenton Bank Vice President, Brenton First National Bank,
Davenport - January 1991 to January 1992
Charles N. Funk 43 Regional President 1997 Chief Investment/ALCO Officer - October 1995
Des Moines, Iowa President, Des Moines 1997 to September 1997; Vice President -
Brenton Bank Investments, Brenton Banks, Inc. - December
1991 to October 1995
Steven T. Schuler 46 Chief Financial Officer/ 1990 Executive Vice President, Brenton Bank
Des Moines, Iowa Treasurer/Secretary 1986 Services Corporation - May 1992 to
Brenton Banks, Inc. and September 1995
Brenton Bank
Norman D. Schuneman 55 Chief Credit Officer 1995 Senior Vice President - Lending of the
Des Moines, Iowa Brenton Bank Parent Company - January 1990 to
December 1995; Executive Vice President,
Brenton Bank, N.A., Des Moines - July
1985 to October 1995
Elizabeth M. Piper/Bach 45 Chief Financial Services 1997
Des Moines, Iowa Officer
Brenton Bank
President 1995
Brenton Investments, Inc.
<FN>
All of the foregoing individuals have been employed by the Company for the
past five years, except for Perry C. Atwood, who was Senior Vice President
at Valley National Bank (merged with Bank One) in Phoenix, Arizona from
January 1992 to April 1996; also held positions of Director of Business
Banking, Director of Sales and Regional Manager during that time period;
and Elizabeth M. Piper/Bach, who was Vice President and Director of
Investment Management Consulting and Training for John G. Kinnard & Co.
from 1993 to 1995 and Vice President and Director of the Investment
Management Group of Dain Bosworth in Minneapolis, Minnesota, prior to 1993.
</TABLE>
8
<PAGE>
(F) Employees.
On December 31, 1997, the Parent Company had 3 full-time employees and
2 part-time employees. On December 31, 1997, the Company had 591 full-time
employees and 166 part-time employees. None of the employees of the
Company are represented by unions. The relationship between management and
employees of the Company is considered good.
(G) Supervision and Regulation.
The Company is restricted by various regulatory bodies as to the types
of activities and businesses in which it may engage. References to the
provisions of certain statutes and regulations are only brief summaries
thereof and are qualified in their entirety by reference to those statutes
and regulations. The Parent Company cannot predict what other legislation
may be enacted or what regulations may be adopted, or, if enacted or
adopted, the effect thereof.
The Parent Company, as a bank holding company, is subject to
regulation under the Bank Holding Company Act of 1956 (the "Act") and is
registered with the Board of Governors of the Federal Reserve System.
Under the Act, the Parent Company is prohibited, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5
percent of the voting shares of any company which is not a bank and from
engaging in any business other than that of banking, managing and
controlling banks or furnishing services to its affiliated banks. However,
the Parent Company may engage in and may own shares of companies engaged in
certain businesses found by the Board of Governors to be so closely related
to banking "as to be a proper incident thereto." The Act does not place
territorial restrictions on the activities of bank-related subsidiaries of
bank holding companies. The Parent Company is required by the Act to file
periodic reports of its operations with the Board of Governors and is
subject to examination by the Board of Governors. Under the Act and the
regulations of the Board of Governors, bank holding companies and their
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of any property or
services.
As a savings and loan holding company, Brenton Banks, Inc. is subject
to federal regulation and examination by the Office of Thrift Supervision
(the "OTS"). The OTS has enforcement authority over the Company which
permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings institution. Generally, the
activities for a bank holding company are more limited than the authorized
activities for a savings and loan holding company.
The Parent Company, its affiliated banks and its bank-related
subsidiaries are affiliates within the meaning of the Federal Reserve Act
and OTS regulations. As affiliates, they are subject to certain
restrictions on loans by an affiliated bank to the Parent Company, other
affiliated banks or such other subsidiaries, on investments by an
affiliated bank in their stock or securities and on an affiliated bank
taking such stock and securities as collateral for loans to any borrower.
The Company is also subject to certain restrictions with respect to direct
issuance, flotation, underwriting, public sale or distribution of certain
securities.
Brenton Bank is a state chartered bank subject to the supervision of
and regular examination by the Iowa Superintendent of Banking and, because
of its membership in the Federal Deposit Insurance Corporation ("FDIC"), is
subject to examination by the FDIC. Brenton Bank is required to maintain
certain minimum capital ratios established by its primary regulator. The
provisions of the FDIC Act restrict the activities that insured state
chartered banks may engage in to those activities that are permissible for
national banks, except where the FDIC determines that the activity poses no
significant risk to the deposit insurance fund and the bank remains
adequately capitalized. Furthermore, the FDIC Act grants the FDIC the
power to take prompt regulatory action against certain undercapitalized and
seriously undercapitalized institutions in order to preserve the deposit
insurance fund.
9
<PAGE>
The affiliated savings bank is subject to the supervision of and
regular examination by the OTS and FDIC. In addition to the fees charged
by the FDIC, the savings bank is assessed fees by the OTS based upon the
savings bank's total assets. As a savings institution, the savings bank is
a member of the Federal Home Loan Bank of Des Moines, it is required to
maintain certain minimum capital ratios established by the OTS and must
meet a qualified thrift lender test (the "QTL") to avoid certain
restrictions upon its operations. On December 31, 1997, Brenton Savings
Bank, FSB complied with the current minimum capital guidelines and met the
QTL test, which it has always met since the test was implemented.
During 1994, the "Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994" (the "Interstate Banking Act") was enacted. This
law amends certain provisions of the federal banking laws (including the
Bank Holding Company Act) to permit the acquisition of banks by banks or
bank holding companies domiciled outside of the home state of the acquired
bank. The law became effective on June 1, 1997. The Interstate Banking
Act seeks to provide a uniform interstate banking law for all 50 states.
The provisions of the law allow states to impose certain "non-
discriminatory" conditions upon interstate mergers, including limits on the
concentration of deposits. According to Iowa's banking law, Iowa-based
banks and bank holding companies can acquire banks and bank holding
companies located in other states. Iowa law prohibits a bank holding
company or bank controlled by a bank holding company from acquiring
additional Iowa based banks or bank holding companies if the total deposits
in Iowa of such bank holding company and its affiliates would exceed 10
percent of the total deposits of all banks and thrifts in the state.
Generally, banks in Iowa are prohibited from operating offices in
counties other than the county in which the bank's principal office is
located and contiguous counties. However, certain banks located in the
same or different municipalities or urban complexes may consolidate or
merge and retain their existing banking locations by converting to a United
Community Bank. The resulting bank would adopt one principal place of
business, and would retain the remaining banking locations of the merged or
consolidated banks as offices. The Company relied upon the United
Community Bank law when it merged its 13 commercial banks into one state
chartered bank in 1995. Generally, thrifts can operate offices in any
county in Iowa and may, under certain circumstances, acquire or branch into
thrifts in other states with the approval of the OTS.
(H) Governmental Monetary Policy and Economic Conditions.
The earnings of the Company are affected by the policies of regulatory
authorities, including the Federal Reserve System. Federal Reserve System
monetary policies have had a significant effect on the operating results of
commercial banks in the past and are expected to continue to do so in the
future. Because of changing conditions in the economy and in the money
markets, as a result of actions by monetary and fiscal authorities,
interest rates, credit availability and deposit levels may change due to
circumstances beyond the control of the Company. Future policies of the
Federal Reserve System and other authorities cannot be predicted, nor can
their effect on future earnings be predicted.
(I) Competition.
The banking business in Iowa is highly competitive and the affiliated
banks compete not only with banks and thrifts, but with sales, finance and
personal loan companies; credit unions; and other financial institutions
which are active in the areas in which the affiliated banks operate. In
addition, the affiliated banks compete for customer funds with other
investment alternatives available through investment brokers, insurance
companies, finance companies and other institutions.
The multi-bank holding companies which own banks in Iowa are in direct
competition with one another. Brenton Banks, Inc. is the largest multi-
bank holding company domiciled in Iowa. As of June 30, 1997, Brenton
Banks, Inc.'s affiliated banks held approximately 3.3% of total Iowa bank
and thrift deposits. There are seven other multi-bank holding companies
which operate banks in Iowa, but
10
<PAGE>
are domiciled in other states. The Iowa deposits of these holding
companies are of similar size or greater when compared to Brenton Banks,
Inc. Since December 31, 1997, two additional acquisitions by multi-bank
holding companies domiciled outside of Iowa have been announced.
Certain of the subsidiary banks of these multi-bank holding companies
may compete with certain of the Parent Company's affiliated banks and any
other affiliated financial institutions which may be acquired by the Parent
Company. These multi-bank holding companies, other smaller bank holding
companies, chain banking systems and others may compete with the Parent
Company for the acquisition of additional banks.
The Company has also expanded into the investment brokerage business
in the last several years, placing brokers in many Brenton bank locations
as well as individual brokerage offices. The Brenton brokers compete with
brokers from regional and national investment brokerage firms.
11
<PAGE>
Item 1(J) Business - Statistical Disclosure
The following statistical disclosures relative to the consolidated
operations of the Company have been prepared in accordance with Guide 3 of
the Guides for the Preparation and Filing of Reports and Registration
Statements under the Securities Exchange Act of 1934. Average balances were
primarily calculated on a daily basis.
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
The following summarizes the average consolidated statement of
condition by major type of account, the interest earned and interest paid and
the average yields and average rates paid for each of the three years ending
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
______________________________ ______________________________ ______________________________
Interest Average Interest Average Interest Average
Average Income or Yields or Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates Balance Expense Rates
_________ __________ _________ __________ _________ _________ __________ _________ _________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Interest-earning assets
Loans (1,2) $ 970,115 $ 85,540 8.82% $ 919,578 $ 79,921 8.69% $ 945,724 $ 82,136 8.69%
Investment securities held to
maturity:
Taxable investments:
Securities of United States
government agencies 7,925 485 6.11 38,596 2,362 6.12 27,381 1,570 5.73
Mortgage-backed and related
securities 2,594 191 7.36 3,509 261 7.45 36,214 2,370 6.54
Other investments 2,181 136 6.25 4,166 255 6.12 2,364 130 5.49
Tax-exempt investments:
Obligations of states and
political subdivisions(2) 56,204 3,777 6.72 51,639 3,449 6.68 50,235 4,044 8.05
Investment securities available
for sale:
United States Treasury
securities 45,459 2,748 6.05 36,582 2,109 5.76 42,416 2,271 5.35
Securities of United States
government agencies 71,958 4,555 6.33 77,436 4,606 5.95 79,000 4,939 6.25
<FN>
(1) The average outstanding balance is net of unearned income and includes nonaccrual loans.
(2) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35 percent in
1997 and 1996 and 34 percent in 1995 and are adjusted to reflect the effect of the nondeductible interest expense
of owning tax-exempt investments. The standard federal income tax rate is used for consistency of presentation.
</TABLE>
1
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential, Continued
<TABLE>
<CAPTION>
1997 1996 1995
______________________________ ______________________________ ______________________________
Interest Average Interest Average Interest Average
Average Income or Yields or Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates Balance Expense Rates
_________ __________ _________ __________ _________ _________ __________ _________ _________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed and related
securities 217,817 13,835 6.35 207,029 12,780 6.17 113,834 6,658 5.85
Other investments 12,998 832 6.40 8,955 568 6.34 9,536 710 7.44
Tax-exempt investments:
Obligations of states and
political subdivisions (1) 99,868 7,035 7.04 85,471 6,097 7.13 100,859 6,763 6.71
Loans held for sale 10,284 811 7.89 7,983 676 8.47 5,908 396 6.70
Federal funds sold and
securities purchased under
agreements to resell 31,472 1,742 5.54 26,188 1,417 5.41 39,763 2,264 5.69
Trading account securities 12 1 4.26 --- --- --- --- --- ---
Interest-bearing deposits
with banks 2,460 118 4.80 1,393 68 4.87 1,076 67 6.20
_________ _______ ____ _________ _______ ____ _________ _______ ____
Total interest-earning assets(1) 1,531,347 $121,806 7.95% 1,468,525 $114,569 7.80% 1,454,310 $114,318 7.86%
Allowance for loan losses (12,171) _______ ____ (11,440) _______ ____ (11,166) _______ ____
Cash and due from banks 58,681 65,439 57,138
Premises and equipment 29,841 31,728 31,436
Other assets 41,771 28,642 29,508
_________ _________ _________
Total assets $1,649,469 $1,582,894 $1,561,226
<FN>
(1) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35
percent in 1997 and 1996 and 34 percent in 1995 and are adjusted to reflect the effect of the
nondeductible interest expense of owning tax-exempt investments. The standard federal income tax rate
is used for consistency of presentation.
</table
13
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential, Continued
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
______________________________ ______________________________ ______________________________
Interest Average Interest Average Interest Average
Average Income or Yields or Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates Balance Expense Rates
_________ __________ _________ __________ _________ _________ __________ _________ _________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities and stockholders'
equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand $ 81,430 $ 2,332 2.86% $ 376,259 $11,194 2.98% $ 355,819 $11,842 3.33%
Savings 551,509 15,903 2.88 241,250 6,134 2.54 231,633 6,638 2.87
Time 567,258 31,075 5.48 583,508 32,179 5.51 626,497 34,595 5.52
Federal funds purchased and
securities sold under
agreements to repurchase 78,234 3,413 4.36 59,276 2,470 4.17 40,237 1,641 4.08
Other short-term borrowings 53,223 3,183 5.98 17,294 1,015 5.87 6,536 371 5.67
Long-term borrowings 32,056 2,199 6.86 33,094 2,339 7.07 37,264 2,621 7.03
_________ ______ ____ _________ ______ ____ _________ ______ ____
Total interest-bearing
liabilities 1,363,710 $58,105 4.26% 1,310,681 $55,331 4.22% 1,297,986 $57,708 4.45%
Noninterest-bearing deposits 139,480 ______ ____ 131,051 ______ ____ 128,770 ______ ____
Accrued expenses and other
liabilities 17,097 17,521 14,896
_________ _________ _________
Total liabilities 1,520,287 1,459,253 1,441,652
Minority interest 4,691 4,471 4,391
Common stockholders' equity 124,491 119,170 115,183
_________ _________ _________
Total liabilities and
stockholders' equity $1,649,469 $1,582,894 $1,561,226
_________ _________ _________
Net interest spread (1) 3.69% 3.58% 3.41%
____ ____ ____
Net interest income/margin (1) $63,701 4.16% $59,238 4.03% $56,610 3.89%
______ ____ ______ ____ ______ ____
<FN>
(1) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35 percent in 1997
and 1996 and 34 percent in 1995 and are adjusted to reflect the effect of the nondeductible interest expense of owning
tax-exempt investments. The standard federal income tax rate is used for consistency of presentation.
</TABLE>
14
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential, Continued
The following shows the changes in interest earned and interest
paid due to changes in volume and changes in rate for each of the two years
ended December 31:
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
__________________________ __________________________
Variance Variance
due to due to
_______________ _______________
Variance Volume Rate Variance Volume Rate
________ ______ ____ ________ ______ ____
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans (1,2) $ 5,619 4,443 1,176 $(2,215) (2,272) 57
Investment securities held
to maturity:
Taxable investments:
Securities of United States government
agencies (1,877) (1,874) (3) 792 680 112
Mortgage-backed and related
securities (70) (67) (3) (2,109) (2,394) 285
Other investments (119) (124) 5 125 109 16
Tax-exempt investments:
Obligations of states and political
subdivisions (2) 328 306 22 (595) 110 (705)
Investment securities available
for sale:
Taxable investments:
United States Treasury securities 639 532 107 (162) (328) 166
Securities of United States government
agencies (51) (337) 286 (333) (96) (237)
Mortgage-backed and related securities 1,055 678 377 6,122 5,734 388
Other investments 264 259 5 (142) (42) (100)
Tax-exempt investments:
Obligations of states and political
subdivisions (2) 938 1,015 (77) (666) (1,078) 412
Loans held for sale 135 184 (49) 280 160 120
Federal funds sold and securities purchased
under agreements to resell 325 291 34 (847) (739) (108)
Trading account securities 1 1 --- --- --- ---
Interest-bearing deposits with banks 50 51 (1) 1 17 (16)
_______ ______ ______ _______ ______ _____
7,237 5,358 1,879 251 (139) 390
_______ ______ ______ _______ ______ _____
Interest Expense:
Interest-bearing deposits:
Demand (8,862) (8,458) (404) (648) 655 (1,303)
Savings 9,769 8,847 922 (504) 267 (771)
Time (1,104) (891) (213) (2,416) (2,371) (45)
Federal funds purchased and securities sold
under agreements to repurchase 943 822 121 829 793 36
Other short-term borrowings 2,168 2,148 20 644 631 13
Long-term borrowings (140) (72) (68) (282) (295) 13
_______ ______ ______ _______ ______ _____
2,774 2,396 378 (2,377) (320) (2,057)
_______ ______ ______ _______ ______ _____
Net interest income $ 4,463 2,962 1,501 2,628 181 2,447
_______ ______ ______ _______ ______ _____
Note: The change in interest due to both rate and volume has been allocated
to change due to volume and rate in proportion to the relationship of
the absolute dollar amounts of the change in each.
<FN>
(1) Nonaccrual loans have been included in the analysis of volume and rate variances.
(2) Computed on a tax-equivalent basis using a federal income tax rate of 35 percent
in 1997 and 1996 and 34 percent in 1995 and adjusted to reflect the effect of
the nondeductible interest expense of owning tax-exempt investments.
</TABLE>
15
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential, Continued
Interest Rate Sensitivity Analysis
The following schedule shows the matching of interest sensitive
assets to interest sensitive liabilities by various maturity or repricing
periods as of December 31, 1997. As the schedule shows, the Company is
liability sensitive within the one-year time frame. Included in the three
months or less sensitivity category are all interest-bearing demand and
savings accounts. Although these deposits are contractually subject to
immediate repricing, management believes a large portion of these accounts
are not synchronized with overall market rate movements.
<TABLE>
<CAPTION>
3 Months Over 3 Over 6 Total Over 1
or through 6 through 12 within through 5 Over
Less Months Months 1 Year Years 5 Years Total
---- ------ ------ ------ ----- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1)(3) $ 366,382 26,643 77,755 470,780 408,626 110,556 989,962
Trading account securities 77 --- --- 77 --- --- 77
Investment securities:
Available for sale:
Taxable investments (3) 41,734 40,766 63,772 146,272 198,304 32,764 377,340
Tax-exempt investments 6,836 5,502 7,427 19,765 61,044 28,505 109,314
Held to maturity:
Taxable investments 1,327 6,261 867 8,455 361 90 8,906
Tax-exempt investments 3,903 6,635 13,814 24,352 27,074 8,747 60,173
________ ______ ______ _______ _______ _______ _______
Total investment securities 53,800 59,164 85,880 198,844 286,783 70,106 555,733
Loans held for sale 19,304 --- --- 19,304 --- --- 19,304
Federal funds sold and securities purchased under
agreements to resell 9,300 --- --- 9,300 --- --- 9,300
Interest-bearing deposits with banks 1,320 --- --- 1,320 --- --- 1,320
_________ _________ _________ _________ ________ _______ _________
Total interest-earning assets $ 450,183 85,807 163,635 699,625 695,409 180,662 1,575,696
_________ _________ _________ _________ ________ _______ _________
Interest-bearing liabilities:
Interest-bearing deposits:
Demand and savings deposits (2) $ 645,029 --- --- 645,029 --- --- 645,029
Time deposits 132,121 114,384 124,796 371,301 186,803 130 558,234
Federal funds purchased and securities sold
under agreements to repurchase 92,633 --- --- 92,633 --- --- 92,633
Other short-term borrowings 7,700 38,000 28,000 73,700 --- --- 73,700
Long-term borrowings --- --- 1,090 1,090 31,056 4,516 36,662
_________ _________ _________ _________ ________ _______ _________
Total interest-bearing liabilities $ 877,483 152,384 153,886 1,183,753 217,859 4,646 1,406,258
_________ _________ _________ _________ ________ _______ _________
Interest sensitivity GAP $ (427,300) (66,577) 9,749 (484,128) 477,550 176,016 169,438
_________ _________ _________ _________ ________ _______ _________
Interest sensitivity GAP ratio .51:1 .56:1 1.06:1 .59:1 3.19:1 38.89:1 1.12:1
_________ _________ _________ _________ ________ _______ _________
Cumulative interest sensitivity GAP $ (427,300) (493,877) (484,128) (484,128) (6,578) 169,438 169,438
_________ _________ _________ _________ ________ _______ _________
Cumulative interest sensitivity GAP ratio .51:1 .52:1 .59:1 .59:1 1.00:1 1.12:1 1.12:1
_________ _________ _________ _________ ________ _______ _________
<FN>
(1) Nonaccrual loans have been excluded from the interest rate sensitivity analysis.
(2) Interest-bearing demand and savings deposits are included in the 3 months or less
sensitivity category.
(3) Assumed repayments on mortgage-related loans and investments are based upon projected
prepayment speeds which are determined by considering Wall Street estimates.
</TABLE>
16
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The carrying value of investment securities at December 31 for each
of the past three years follows:
<TABLE>
<CAPTION>
December 31,
______________________________
1997 1996 1995
____ ____ ____
(In thousands)
<S> <C> <C> <C>
Investment securities available for sale
(market value):
Taxable investments:
United States Treasury securities $ 38,790 41,351 27,775
Securities of United States government agencies 86,660 98,153 72,822
Mortgage-backed and related securities 230,933 219,447 191,028
Other investments 20,957 8,193 9,071
Tax-exempt investments:
Obligations of states and political subdivisions 109,314 93,955 95,674
_______ _______ _______
486,654 461,099 396,370
_______ _______ _______
Investment securities held to maturity
(amortized cost):
Taxable investments:
Securities of United States government agencies 5,025 15,065 48,595
Mortgage-backed and related securities 2,363 3,041 3,653
Other investments 1,518 2,466 6,145
Tax-exempt investments:
Obligations of states and political subdivisions 60,173 52,183 49,689
_______ _______ _______
69,079 72,755 108,082
_______ _______ _______
Total investment securities $555,733 533,854 504,452
_______ _______ _______
</TABLE>
17
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The following table shows the maturity distribution and weighted
average yields of investment securities at December 31, 1997:
<TABLE>
<CAPTION>
Investments by Maturity and Yields at December 31, 1997
____________________________________________________________________________
After One After Five
Within but through but through After
One Year Five Years Ten Years Ten Years
_______________ _______________ _______________ _______________
Amount Yield Amount Yield Amount Yield Amount Yield
______ _____ ______ _____ ______ _____ ______ _____
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities
available for sale:
Taxable investments:
United States Treasury
securities $ 23,723 6.08% $ 15,067 6.29% $ --- ----% $ -- ----%
Securities of United States
government agencies 17,094 5.42 29,803 6.24 36,636 6.67 3,127 7.89
Mortgage-backed and
related securities 68,035 6.18 115,420 6.30 44,119 6.61 3,359 6.60
Other investments 15,767 6.09 2,690 5.77 --- ---- 2,500 6.57
Tax-exempt investments:
Obligations of states and
political subdivisions 19,766 6.35 61,044 6.91 13,972 7.71 14,532 7.98
_______ ____ _______ ____ _______ ____ ______ ____
144,385 6.09 224,024 6.45 94,727 6.79 23,518 7.62
_______ ____ _______ ____ _______ ____ ______ ____
Investment securities held
to maturity:
Taxable investments:
Securities of United States
government agencies --- ---- --- ---- 5,025 6.21 --- ----
Mortgage-backed and
related securities 690 7.33 1,428 7.33 245 7.36 --- ----
Other investments 1,068 6.11 359 6.77 91 7.58 --- ----
Tax-exempt investments:
Obligations of states and
political subdivisions 24,342 6.28 26,903 6.74 3,995 7.83 4,933 8.36
_______ ____ _______ ____ _______ ____ ______ ____
26,100 6.30 28,690 6.77 9,356 6.95 4,933 8.36
_______ ____ _______ ____ _______ ____ ______ ____
Total investment securities $170,485 6.12% $252,714 6.49% $104,083 6.81% $28,451 7.75%
_______ ____ _______ ____ _______ ____ ______ ____
</TABLE>
NOTE: The weighted average yields are calculated on the basis of the cost
and effective yields for each scheduled maturity group. The weighted average
yields for tax-exempt obligations have been adjusted to a fully-taxable
basis, assuming a 35 percent federal income tax rate and are adjusted to
reflect the effect of the nondeductible interest expense of owning tax-exempt
investments.
As of December 31, 1997 the Company did not have securities from a single
issuer, other than the United States Government or its agencies, which
exceeded 10 percent of consolidated common stockholders' equity.
Maturities of all investment securities are managed to meet the Company's
normal liquidity needs. Investment securities available for sale may be sold
prior to maturity to meet liquidity needs, to respond to market changes or to
adjust the Company's asset/liability position.
18
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio
The following table shows the amount of loans outstanding by type
as of December 31 for each of the past five years:
<TABLE>
<CAPTION>
December 31
____________________________________________________
1997 1996 1995 1994 1993
____ ____ ____ ____ ____
(In thousands)
<S> <C> <C> <C> <C> <C>
1. Real estate loans:
a. Commercial construction and land development $ 30,007 42,693 38,123 26,549 24,189
b. Secured by 1-4 family residential property,
including home equity loans 342,134 338,010 319,430 389,713 349,810
c. Other 161,989 150,395 163,739 143,960 129,574
2. Loans to financial institutions -- -- -- -- --
3. Loans to farmers 79,036 69,660 68,543 71,853 66,574
4. Commercial and industrial loans 160,428 132,395 119,368 115,280 90,521
5. Loans to individuals for personal expenditures 217,405 207,197 199,489 221,627 214,401
6. All other loans 2,190 1,594 1,501 1,232 812
_______ _______ _______ _______ _______
$993,189 941,944 910,193 970,214 875,881
_______ _______ _______ _______ _______
</TABLE>
19
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio, Continued
The following table shows the maturity distribution of loans as of
December 31, 1997 (excluding real estate loans secured by 1-4 family
residential property and loans to individuals for personal expenditures):
<TABLE>
<CAPTION>
Loans by Maturity at December 31, 1997
________________________________________
After One
Year
Within through After Five
One Year Five Years Years Total
________ __________ _____ _____
(In thousands)
<S> <C> <C> <C> <C>
1. Real estate loans:
a. Commercial construction and land development $ 23,759 4,881 1,367 30,007
b. Other 41,832 60,692 59,465 161,989
2. Loans to financial institutions -- -- -- --
3. Loans to farmers 51,429 24,629 2,978 79,036
4. Commercial and industrial loans 105,597 41,077 13,754 160,428
5. All other loans 1,116 702 372 2,190
_______ _______ ______ _______
$223,733 131,981 77,936 433,650
_______ _______ ______ _______
</TABLE>
The above loans due after one year which have predetermined and
floating interest rates follow:
Predetermined interest rates $ 59,532
_______
Floating interest rates $150,385
_______
20
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio, Continued
The following schedule shows the dollar amount of loans at December
31 for each of the past five years which were either accounted for on a
nonaccrual basis, had been restructured to below market terms to provide a
reduction or deferral of interest or principal, or were 90 days or more past
due as to interest or principal. Each particular loan has been included in
only the most appropriate category.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
____ ____ ____ ____ ____
(In thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual $3,227 2,663 2,639 3,784 1,605
Restructured 513 568 178 298 323
Past due 90 days or more 2,972 2,936 2,802 940 2,085
_____ _____ _____ _____ _____
Nonperforming loans $6,712 6,167 5,619 5,022 4,013
_____ _____ _____ _____ _____
</TABLE>
Interest income recorded during 1997 on nonaccrual and restructured
loans amounted to $157,000. The amount of interest income which would have
been recorded during 1997, if nonaccrual and restructured loans had been
current in accordance with the original terms, was $402,000.
The amounts scheduled above include the entire balance of any
particular loan. Much of the scheduled amount is adequately collateralized,
and thus does not represent the amount of anticipated charge-offs in the
future. The loans scheduled are representative of the entire customer base
of the Company and, therefore, are not concentrated in a specific industry or
geographic area. Overdrafts are loans for which interest does not normally
accrue. Since overdrafts are generally low volume, they were not included in
the above schedule, unless there was serious doubt concerning collection.
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, unless it is both well secured and in the
process of collection. Once determined uncollectible, interest credited to
income in the current year is reversed and interest accrued in prior years is
charged to the allowance for loan losses.
In addition to the loans scheduled above, management has identified
other loans which, due to a change in economic circumstances or a
deterioration in the financial position of the borrower, present serious
concern as to the ability of the borrower to comply with present repayment
terms. Additionally, management considers the identification of loans
classified for regulatory or internal purposes as loss, doubtful, substandard
or special mention. This serious concern may eventually result in certain of
these loans being classified in one of the above-scheduled categories. At
December 31, 1997, these loans amounted to less than $1 million.
As of December 31, 1997, management is unaware of any other
material interest-earning assets which have been placed on a nonaccrual
basis, have been restructured, or are 90 days or more past due. The amount
of other real estate owned, which has been received in lieu of loan
repayment, amounted to $341,000 and $488,000 at December 31, 1997, and 1996,
respectively.
21
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
IV. Summary of Loan Loss Experience
The following is an analysis of the allowance for loan losses for
years ended December 31, for each of the past five years:
<TABLE>
<CAPTION>
Year Ended December 31
_______________________________________________
1997 1996 1995 1994 1993
____ ____ ____ ____ ____
(In thousands)
<S> <C> <C> <C> <C> <C>
Total loans at the end of the year $993,189 941,944 910,193 970,214 875,881
_______ _______ _______ _______ _______
Average loans outstanding 970,115 919,578 945,724 936,370 802,088
_______ _______ _______ _______ _______
Allowance for loan losses -
beginning of the year $ 11,328 11,070 10,913 9,818 9,006
_______ _______ _______ _______ _______
Amount of charge-offs during year:
Real estate loans 299 479 41 83 109
Loans to financial institutions -- -- -- -- --
Loans to farmers 196 365 36 31 68
Commercial and industrial loans 890 594 340 337 54
Loans to individuals for personal expenditures 2,844 2,623 2,960 1,943 1,230
All other loans -- -- -- 48 70
_______ _______ _______ _______ _______
Total charge-offs 4,229 4,061 3,377 2,442 1,531
_______ _______ _______ _______ _______
Amount of recoveries during year:
Real estate loans 217 68 66 101 101
Loans to financial institutions -- -- -- -- --
Loans to farmers 109 138 50 146 81
Commercial and industrial loans 184 95 400 334 248
Loans to individuals for personal expenditures 1,223 1,118 1,153 947 641
All other loans -- -- -- 21 20
_______ _______ _______ _______ _______
Total recoveries 1,733 1,419 1,669 1,549 1,091
_______ _______ _______ _______ _______
Net loans charged-off during year 2,496 2,642 1,708 893 440
_______ _______ _______ _______ _______
Additions to allowance charged to operating expense 3,900 2,900 1,865 1,988 1,252
_______ _______ _______ _______ _______
Allowance for loan losses - end of the year $ 12,732 11,328 11,070 10,913 9,818
_______ _______ _______ _______ _______
Ratio of allowance to loans outstanding at end of year 1.28% 1.20 1.22 1.12 1.12
____ ____ ____ ____ ____
Ratio of net charge-offs to average loans outstanding .26% .29 .18 .10 .05
___ ___ ___ ___ ___
</TABLE>
NOTE: The provision for loan losses charged to operating expenses is based
upon management's evaluation of the loan portfolio, past loan loss experience
and the level of the allowance for loan losses necessary to support
management's evaluation of potential losses in the loan portfolio.
Management's evaluation of the allowance for loan losses is based upon
several factors including economic conditions, historical loss and collection
experience, risk characteristics of the loan portfolio, underlying collateral
values, industry risk and credit concentrations.
22
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
IV. Summary of Loan Loss Experience, Continued
In the following summary, the Company has allocated the allowance
for loan losses according to the amount deemed to be reasonably necessary to
provide for losses within each category of loans. The amount of the
allowance applicable to each category and the percentage of loans in each
category to total loans follows:
<TABLE>
<CAPTION>
Year Ended December 31
__________________________________________________________________________________________
1997 1996 1995 1994 1993
Allowance Percent Allowance Percent Allowance Percent Allowance Percent Allowance Percent
for of Loans for of Loans for of Loans for of Loans for of Loans
Loan to Total Loan to Total Loan to Total Loan to Total Loan to Total
Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans
______ _____ ______ _____ ______ _____ ______ _____ _____ _____
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans $ 2,400 53.8% 2,200 56.4% $ 2,400 57.3% $2,600 57.7% $2,400 57.5%
Loans to financial institutions -- -- -- -- -- -- -- -- -- --
Loans to farmers 1,200 8.0 1,000 7.4 1,300 7.5 1,400 7.4 1,600 7.6
Commercial and industrial loans 3,800 16.1 3,200 14.0 2,900 13.1 2,800 11.9 2,700 10.3
Loans to individuals for personal
expenditures 5,332 21.9 4,928 22.0 4,470 21.9 4,113 22.8 3,118 24.5
All other loans -- .2 -- .2 -- .2 -- .2 -- .1
______ _____ ______ _____ ______ ______ ______ _____ _____ _____
$12,732 100.0% $11,328 100.0% $11,070 100.0% $10,913 100.0% $9,818 100.0%
______ _____ ______ _____ ______ _____ ______ _____ _____ _____
</TABLE>
23
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
V. Deposits
A classification of the Company's average deposits and
average rates paid for the years indicated follows:
<TABLE>
<CAPTION>
Year Ended December 31
__________________________________________
1997 1996 1995
____________ ____________ ____________
Amount Rate Amount Rate Amount Rate
______ ____ ______ ____ ______ ____
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits $ 139,480 --% $ 131,051 --% $ 128,770 --
%
Interest-bearing deposits:
Demand 81,430 2.86 376,259 2.98 355,819 3.33
Savings 551,509 2.88 241,250 2.54 231,633 2.87
Time 567,258 5.48 583,508 5.51 626,497 5.52
_________ _________ _________
$1,339,677 $1,332,068 $1,342,719
_________ _________ _________
</TABLE>
The following sets forth the maturity distribution of all
time deposits of $100,000 or more as of December 31, 1997:
Large Time Deposits
by Maturity at
Maturity Remaining December 31, 1997
__________________ ___________________
(In thousands)
Less than 3 months $29,676
Over 3 through 6 months 20,770
Over 6 through 12 months 15,411
Over 12 months 15,039
______
$80,896
______
VI. Return on Equity and Assets
Various operating and equity ratios for the years
indicated are presented below:
<TABLE>
<CAPTION>
Year Ended December 31
________________________
1997 1996 1995
____ ____ ____
<S> <C> <C> <C>
Return on average total assets:
Net income before deduction of minority interest 1.14% .92% .71%
Return on average equity 14.47 11.76 9.04
Common dividend payout ratio 27.03 27.24 33.82
Average equity to average assets 7.55 7.53 7.38
Equity to assets ratio 7.36 7.41 7.47
Tier 1 leverage capital ratio 7.63 7.62 7.45
Primary capital to assets 8.32 8.33 8.40
</TABLE>
24
<PAGE>
Item 1(J) Business - Statistical Disclosure, Continued
VII. Short-Term Borrowings
Information relative to federal funds purchased and
securities sold under agreements to repurchase follows:
<TABLE>
<CAPTION>
1997 1996 1995
____ ____ ____
(Dollars in thousands)
<S> <C> <C> <C>
Amount outstanding at December 31 $92,633 66,826 41,107
Weighted average interest rate at
December 31 4.48% 3.74 4.14
Maximum amount outstanding at any
quarter-end $92,633 73,359 41,107
Average amount outstanding during
the year $78,234 59,276 40,237
Weighted average interest rate during
the year 4.36% 4.17 4.08
</TABLE>
Information relative to other short-term borrowings,
which consist primarily of Federal Home Loan Bank borrowings,
follows:
<TABLE>
<CAPTION>
1997 1996 1995
____ ____ ____
(Dollars in thousands)
<S> <C> <C> <C>
Amount outstanding at December 31 $73,700 34,150 2,500
Weighted average interest rate at
December 31 6.02% 5.97 4.68
Maximum amount outstanding at any
quarter-end $73,700 34,150 7,000
Average amount outstanding during
the year $53,223 17,294 6,536
Weighted average interest rate during
the year 5.98% 5.87 5.67
</TABLE>
25
<PAGE>
Item 2. Properties.
At December 31, 1997, the affiliated banks and subsidiaries
had 46 service locations with approximately 338,000 square feet,
all located in Iowa. Of these locations, 32 were owned by the
Company - approximately 264,000 square feet; 3 were owned
buildings on leased land - approximately 30,000 square feet and
11 were operated under lease contracts with unaffiliated parties
- - - approximately 44,000 square feet.
The Company leases certain real estate and equipment under
long-term and short-term leases. The Company owns certain real
estate which is leased to unrelated persons.
Item 3. Legal Proceedings.
The Company (Brenton Banks, Inc. and its subsidiaries) is
involved in 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 position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted during the fourth quarter of
the fiscal year covered by this report to a vote of security
holders, through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The information appearing on pages 25 and 32 of the
Corporation's Appendix to the Proxy Statement, filed as Exhibit
13 hereto, is incorporated herein by reference.
There were approximately 1,550 holders of record of the
Parent Company's $2.50 common stock as of March 13, 1998. The
closing bid price of the Parent Company's common stock was $20.88
on March 13, 1998.
The Parent Company increased dividends to common
shareholders in 1997 to $.273 per share, a 31.9 percent increase
over $.207 for 1996. Dividend declarations are evaluated and
determined by the Board of Directors on a quarterly basis. In
January 1998, the Board of Directors declared a dividend of $.085
per common share. There are currently no restrictions on the
Parent Company's present or future ability to pay dividends.
Item 6. Selected Financial Data.
The information appearing on page 12 of the Company's
Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The information appearing on pages 3 through 10 of the Company's
Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is
incorporated herein by reference.
26
<PAGE>
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk.
The information appearing on page 4 of the Company's
Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The information appearing on pages 13 through 31 of the
Company's Appendix to the Proxy Statement, filed as Exhibit 13
hereto, is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Within the twenty-four months prior to the date of the most
recent financial statements, there has been no change of
accountants of the Company.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The definitive proxy statement of Brenton Banks, Inc., which
will be filed not later than 120 days following the close of the
Company's fiscal year ending December 31, 1997, is incorporated
herein by reference. See also Item 1(E) of this Form 10-K
captioned "Executive Officers of the Registrant."
Item 11. Executive Compensation.
The definitive proxy statement of Brenton Banks, Inc., which
will be filed not later than 120 days following the close of the
Company's fiscal year ended December 31, 1997, is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The definitive proxy statement of Brenton Banks, Inc., which
will be filed not later than 120 days following the close of the
Company's fiscal year ending December 31, 1997, is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
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 of comparable
transactions with unaffiliated persons, and did not involve more
than the normal risk of collectibility or present other
unfavorable features. There were no other reportable
transactions.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
The following exhibits and financial statement schedules
are filed as part of this report:
27
<PAGE>
(a) 1. Financial Statements: See the financial statements on
pages 13 through 31 of the Company's Appendix to the
Proxy Statement, filed as Exhibit 13 hereto, which are
incorporated by reference herein.
2. Financial Statement Schedules: See Exhibits 11 and 12,
for computation of earnings per share and ratios.
3. Exhibits (not covered by independent auditors' report).
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws,
as amended, of Brenton Banks, Inc.
Exhibit 10.1
Summary of the Company's Bonus Plans under which
some of the executive officers of the Company
and certain other personnel of the subsidiaries
are eligible to receive a bonus each year.
Exhibit 10.2
1996 Stock Option Plan, Administrative Rules
and Agreement under which officers of the Company
are eligible to receive options to purchase
an aggregate of 1,210,000 shares of the Company's
$2.50 par value common stock. This 1996 Stock
Option Plan, Administrative Rules and Agreement
is incorporated by reference from Form 10-Q of
Brenton Banks, Inc. for the quarter ended
September 30, 1996.
Exhibit 10.3
Directors' Incentive Plan. This Directors' Incentive
Plan is incorporated by reference from Form 10-Q of
Brenton Banks, Inc. for the quarter ended
September 30, 1995.
Exhibit 10.4
Employment Agreement, dated July 6, 1989, between
William H. Brenton and Brenton Banks, Inc.
This Employment Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1994.
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative
Rules and Agreement under which officers of
the Company are eligible to receive options
to purchase an aggregate of 726,000 shares of
the Company's $2.50 par value common stock.
28
<PAGE>
Exhibit 10.6
Long-Term Stock Compensation Plan, Agreements
and related documents, effective for 1994, under
which certain of the Company's senior officers
and bank presidents are eligible to receive shares
of Brenton Banks, Inc. stock based upon their
service to the Company and Company performance.
This Long-Term Stock Compensation Plan, Agreements
and related documents are incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1994.
Exhibit 10.7
Long-Term Stock Compensation Plan, Agreements
and related documents, effective for 1993, under
which certain of the Company's senior officers
and bank presidents are eligible to receive shares of
Brenton Banks, Inc. stock based upon their service
to the Company and Company performance. This
Long-Term Stock Compensation Plan, Agreements
and related documents are incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1993.
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements
and related documents, effective for 1995, under
which certain of the Company's senior officers
and bank presidents are eligible to receive shares
of Brenton Banks, Inc. stock based upon their
service to the Company and Company performance.
This Long-Term Stock Compensation Plan, Agreements
and related documents are incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1995.
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security
Agreement between Brenton Banks and the Federal Home
Loan Bank of Des Moines. This Standard Agreement
for Advances, Pledge and Security Agreement
is incorporated by reference from Form 10-K of
Brenton Banks, Inc. for the year ended December 31,
1993.
Exhibit 10.10
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1997, setting
forth the terms of the Parent Company's
$2,000,000 short-term debt agreement.
Exhibit 10.11
Data Processing Agreement dated December 1, 1991
by and between ALLTEL Information Services,
Inc., (formerly Systematics, Inc.) and Brenton
Bank (formerly Brenton Information Systems, Inc.).
This Data Processing Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc.
for the year ended December 31, 1996.
29
<PAGE>
Exhibit 10.12
Correspondent Services Agreement dated
November 13, 1996 between Brenton Bank and the
Federal Home Loan Bank of Des Moines.
This Correspondent Services Agreement is
incorporated by reference from Form 10-K
of Brenton Banks, Inc. for the year ended
December 31, 1996.
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code
Section 401(k) Profit Sharing Plan, effective
November 14, 1996. This Adoption Agreement
#003 is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year ended
December 31, 1996.
Exhibit 10.14
Indenture Agreement with respect to Capital
Notes dated April 12, 1993. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1993.
Exhibit 10.15
Indenture Agreement with respect to Capital
Notes dated April 14, 1992.
Exhibit 10.16
Indenture Agreement with respect to Capital
Notes dated March 27, 1991. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1996.
Exhibit 10.17
Indenture Agreement with respect to Capital
Notes dated August 5, 1991. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1996.
Exhibit 10.18
Indenture Agreement with respect to Capital
Notes dated April 8, 1994. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1994.
Exhibit 10.19
Indenture Agreement with respect to Capital
Notes dated April 10, 1995. This Indenture
Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year
ended December 31, 1995.
30
<PAGE>
Exhibit 10.20
Indenture Agreement with respect to Capital
Notes dated April 10, 1996. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1996.
Exhibit 10.21
Indenture Agreement with respect to Capital
Notes dated April 23, 1997.
Exhibit 10.22
Split Dollar Insurance Agreement between the
Company, William H. Brenton Crummy Trust and
William H. Brenton Crummy Trust II, dated November
23, 1994. This Split Dollar Insurance Agreement
is incorporated by reference from Form 10-K of
Brenton Banks, Inc. for the year ended December
31, 1994.
Exhibit 10.23
Split Dollar Insurance Agreement between the
Company and Brenton Life Insurance Trust for
the benefit of C. Robert Brenton, dated August
12, 1994. This Split Dollar Insurance Agreement
is incorporated by reference from Form 10-K of
Brenton Banks, Inc. for the year ended December
31, 1994.
Exhibit 10.24
Split Dollar Insurance Agreement between the
Company and Brenton Life Insurance Trust
for the benefit of Junius C. Brenton, dated
January 12, 1997. This Split Dollar Insurance
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1996.
Exhibit 10.25
Agreement between Robert L. DeMeulenaere and
the Company regarding the change in
control arrangements, dated December 31, 1994.
This Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1994.
Exhibit 10.26
Agreement between Larry A. Mindrup and the
Company regarding the change in control
arrangements, dated December 31, 1994. This
Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year
ended December 31, 1994.
Exhibit 10.27
Agreement between Norman D. Schuneman and the
Company regarding the change in control arrangements,
dated December 31, 1994. This Agreement
is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1995.
31
<PAGE>
Exhibit 10.28
Twelfth Amendment to Data Processing Agreement
dated July 1, 1995, by and between ALLTEL
Information Services, Inc. (formerly Systematics, Inc.
and Systematics Financial Services, Inc.) and Brenton
Bank (formerly Brenton Bank Services Corporation).
This Twelfth Amendment to Data Processing Agreement is
incorporated by reference from Form 10-Q of Brenton
Banks, Inc. for the quarter ended September 30, 1995.
Exhibit 10.29
Thirteenth Amendment to Data Processing
Agreement dated December 1, 1995, by and
between ALLTEL Information Services, Inc. (formerly
Systematics Financial Services, Inc.) and Brenton
Bank (formerly Brenton Bank Services Corporation).
This Thirteenth Amendment to Data Processing Agreement
is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1995.
Exhibit 11
Statement of computation of earnings per share.
Exhibit 12
Statement of computation of ratios.
Exhibit 13
The Appendix to the Proxy Statement for Brenton Banks,
Inc. for the 1997 calendar year.
Exhibit 21
Subsidiaries.
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation
of their report dated January 30, 1998, relating to
certain consolidated financial statements of Brenton
Banks, Inc. into the Registration Statement on Form S-8
of Brenton Banks, Inc.
Exhibit 27
Financial Data Schedule (filed only with Electronic
Transmission).
Exhibit 27.1
Restated Financial Data Schedule (filed only with
Electronic Transmission).
Exhibit 27.2
Restated Financial Data Schedule (filed only with
Electronic Transmission).
32
<PAGE>
Exhibit 27.3
Restated Financial Data Schedule (filed only with
Electronic Transmission).
The Parent Company will furnish to any shareholder upon
request a copy of any exhibit upon payment of a fee of $.50 per
page. Requests for copies of exhibits should be directed to Steven
T. Schuler, Chief Financial Officer/Treasurer/Secretary, at Brenton
Banks, Inc., P.O. Box 961, Des Moines, Iowa 50304-0961.
(b) Reports on Form 8-K: No reports on Form 8-K were
required to be filed during the last quarter of 1997.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BRENTON BANKS, INC.
By /s/ C. Robert Brenton
Chairman of the Board of Directors
C. ROBERT BRENTON
Date: March 12, 1998
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ C. Robert Brenton
Chairman of the Board and Director
C. ROBERT BRENTON
Principal Executive Officer
Date: March 12, 1998
By /s/ Robert L. DeMeulenaere
President and Director
ROBERT L. DEMEULENAERE
Principal Executive Officer
Date: March 12, 1998
34
<PAGE>
By /s/ Steven T. Schuler
Chief Financial Officer/Treasurer/Secretary
STEVEN T. SCHULER
Chief Financial Officer
Chief Accounting Officer
Date: March 12, 1998
BOARD OF DIRECTORS
By /s/ William H. Brenton
WILLIAM H. BRENTON
Date: March 12, 1998
By /s/ Junius C. Brenton
JUNIUS C. BRENTON
Date: March 12, 1998
By /s/ R. Dean Duben
R. DEAN DUBEN
Date: March 12, 1998
By /s/ Hubert G. Ferguson
HUBERT G. FERGUSON
Date: March 12, 1998
By /s/ Gary M. Christensen
GARY M. CHRISTENSEN
Date: March 12, 1998
By
ROBERT J. CURREY
Date:
35
<PAGE>
EXHIBIT INDEX
Exhibits Page
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws,
as amended, of Brenton Banks, Inc. . . . . . . . . . . . 41
Exhibit 10.1
Summary of the Company's Bonus Plans under which some
of the executive officers of the Company and certain
other personnel of the subsidiaries are eligible to
receive a bonus each year. . . . . . . . . . . . . . . . .101
Exhibit 10.2
1996 Stock Option Plan, Administrative Rules and
Agreement under which officers of the Company are
eligible to receive options to purchase an aggregate
of 1,210,000 shares of the Company's $2.50 par value
common stock. This 1996 Stock Option Plan, Administrative
Rules and Agreement is incorporated by reference from
Form 10-Q of Brenton Banks, Inc. for the quarter ended
September 30, 1996. . . . . . . . . . . . . . . . . . . . 103
Exhibit 10.3
Directors' Incentive Plan. This Directors' Incentive
Plan is incorporated by reference from Form 10-Q of
Brenton Banks, Inc. for the quarter ended September 30,
1995.. . . . . . . . . . . . . . . . . . . . . . . . . . 104
Exhibit 10.4
Employment Agreement, dated July 6, 1989, between William
H. Brenton and Brenton Banks, Inc. This Employment
Agreement is incorporated by reference from Form 10-K of
Brenton Banks, Inc. for the year ended December 31,
1994.. . . . . . . . . . . . . . . . . . . . . . . . . . 105
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules
and Agreement under which officers of the Company are
eligible to receive options to purchase an aggregate of
726,000 shares of the Company's $2.50 par value common
stock.. . . . . . . . . . . . . . . . . . . . . . . . . 106
36
<PAGE>
Exhibit 10.6
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1994, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton Banks,
Inc. stock based upon their service to the Company and
Company performance. This Long-Term Stock Compensation
Plan, Agreements and related documents are incorporated
by reference from Form 10-K of Brenton Banks, Inc. for
the year ended December 31, 1994.. . . . . . . . . . . . 120
Exhibit 10.7
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1993, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton Banks,
Inc. stock based upon their service to the Company and
Company performance. This Long-Term Stock Compensation
Plan, Agreements and related documents are incorporated
by reference from Form 10-K of Brenton Banks, Inc. for
the year ended December 31, 1993. . . . . . . . . . . .. 121
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1995, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton
Banks, Inc. This Long-Term Stock Compensation Plan,
Agreements and related documents are incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1995.. . . . . . . . . . . . . . . 122
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security
Agreement between Brenton Banks and the Federal Home Loan
Bank of Des Moines. This Standard Agreement for Advances,
Pledge and Security Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1993.. . . . . . . . . . . . . . . . . . . . 123
Exhibit 10.10
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1997, setting forth
the terms of the Parent Company's $2,000,000 short-term
debt agreement. . . . . . . . . . . . . . . . . . . . .. 124
Exhibit 10.11
Data Processing Agreement dated December 1, 1991 by and
between ALLTEL Information Services, Inc., (formerly
Systematics, Inc.) and Brenton Bank (formerly Brenton
Information Systems, Inc.). This Data Processing Agreement
is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996. . . . 130
37
<PAGE>
Exhibit 10.12
Correspondent Services Agreement dated November 13, 1996
between Brenton Bank and the Federal Home Loan Bank of
Des Moines. This Correspondent Services Agreement is
incorporated by reference from Form 10-K of Brenton Banks,
Inc. for the year ended December 31, 1996. . . . . . . 131
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section
401(k) Profit Sharing Plan, effective November 14, 1996.
This Adoption Agreement #003 is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1996. . . . . . . . . . . . . . . . . . . . 132
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated
April 12, 1993. This Indenture Agreement is incorporated
by reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1993. . . . . . . . . . . . . . . 133
Exhibit 10.15
Indenture Agreement with respect to Capital Notes dated
April 14, 1992.. . . . . . . . . . . . . . . . . . . . . . 134
Exhibit 10.16
Indenture Agreement with respect to Capital Notes dated
March 27, 1991. This Indenture Agreement is incorporated
by reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1996. . . . . . . . . . . . . . 152
Exhibit 10.17
Indenture Agreement with respect to Capital Notes
dated August 5, 1991. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996. . . . . 153
Exhibit 10.18
Indenture Agreement with respect to Capital Notes
dated April 8, 1994. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1994.. . . .. 154
Exhibit 10.19
Indenture Agreement with respect to Capital Notes
dated April 10, 1995. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1995.. . . . 155
Exhibit 10.20
Indenture Agreement with respect to Capital Notes
dated April 10, 1996. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996. . . . 156
38
<PAGE>
Exhibit 10.21
Indenture Agreement with respect to Capital Notes
dated April 23, 1997. . . . . . . . . . . . . . . . . . . 157
Exhibit 10.22
Split Dollar Insurance Agreement between the Company,
William H. Brenton Crummy Trust and William H. Brenton
Crummy Trust II, dated November 23, 1994. This Split
Dollar Insurance Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1994.. . . . . . . . . . . . . . . . . . . . 159
Exhibit 10.23
Split Dollar Insurance Agreement between the Company and
Brenton Life Insurance Trust for the benefit of C.
Robert Brenton, dated August 12, 1994. This Split
Dollar Insurance Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . 160
Exhibit 10.24
Split Dollar Insurance Agreement between the Company
and Brenton Life Insurance Trust for the benefit of
Junius C. Brenton, dated January 12, 1997..This Split
Dollar Insurance Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1996. . . . . . . . . . . . . . . . . . . 161
Exhibit 10.25
Agreement between Robert L. DeMeulenaere and the
Company regarding the change in control arrangements,
dated December 31, 1994. This Agreement is incorporated
by reference from Form 10-K of Brenton Banks, Inc. for
the year ended December 31, 1994. . . . . . . . . . . . . 162
Exhibit 10.26
Agreement between Larry A. Mindrup and the Company
regarding the change in control arrangements, dated
December 31, 1994. This Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1994. . . . . . . . . . . . . . . 163
Exhibit 10.27
Agreement between Norman D. Schuneman and the Company
regarding the change in control arrangements, dated
December 31, 1994. This Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1995. . . . . . . . . . . . . . . 164
39
<PAGE>
Exhibit 10.28
Twelfth Amendment to Data Processing Agreement dated
July 1, 1995, by and between ALLTEL Information
Services, Inc. (formerly Systematics, Inc. and Systematics
Financial Services, Inc.) and Brenton Bank (formerly
Brenton Bank Services Corporation). This Twelfth
Amendment to Data Processing Agreement is incorporated
by reference from Form 10-Q of Brenton Banks, Inc. for
the quarter ended September 30, 1995. . . . . . . . . . . 165
Exhibit 10.29
Thirteenth Amendment to Data Processing Agreement dated
December 1, 1995, by and between ALLTEL Information
Services, Inc. (formerly Systematics Financial Services,
Inc.) and Brenton Bank (formerly Brenton Bank Services
Corporation). This Thirteeneth Amendment to Data
Processing Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1995. . . . . . . . . . . . . . . . . . . . . 166
Exhibit 11
Statement of computation of earnings per share. . . . . . 167
Exhibit 12
Statement of computation of ratios. . . . . . . . . . . . 169
Exhibit 13
The Appendix to the Proxy Statement for Brenton Banks,
Inc. for the 1997 calendar year. . . . . . . . . . . . . 173
Exhibit 21
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 209
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation
of their report dated January 30, 1998, relating to
certain consolidated financial statements of Brenton
Banks, Inc. into the Registration Statement on Form S-8
of Brenton Banks, Inc. . . . . . . . . . . . . . . . . . 211
Exhibit 27
Financial Data Schedule (filed only with Electronic
Transmission). . . . . . . . . . . . . . . . . . . . . . 213
Exhibit 27.1
Restated Financial Data Schedule (filed only with
Electronic Transmission). . . . . . . . . . . . . . . . 214
Exhibit 27.2
Restated Financial Data Schedule (filed only with
Electronic Transmission). . . . . . . . . . . . . . . . 215
Exhibit 27.3
Restated Financial Data Schedule (filed only with
Electronic Transmission). . . . . . . . . . . . . . . 216
40
<PAGE>
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended,
of Brenton Banks, Inc.
41
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
BRENTON BANKS, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
PURSUANT TO THE PROVISIONS OF SECTION 61 OF THE IOWA BUSINESS CORPORATION
ACT, THE UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING RESTATED ARTICLES OF
INCORPORATION.
ARTICLE I
NAME AND PLACE OF BUSINESS
SECTION 1. THE NAME OF THIS CORPORATION SHALL BE BRENTON Banks, Inc. Its
name prior to the adoption of these Restated Articles of Incorporation was the
same.
Section 2. The principal place of business of this corporation shall be
in the City of Des Moines, County of Polk, State of Iowa.
Section 3. The corporation may establish branch offices and agencies in
Iowa or in other states as the Board of Directors may deem necessary or
expedient.
Section 4. The address of the registered office of the corporation in the
State of Iowa is: 2840 Ingersoll Avenue in the City of Des Moines, County of
Polk, and the name of its registered agent at such address is Wm. H. Brenton.
ARTICLE II
Objects and Purposes
Section 1. The general nature of the business to be conducted by this
corporation shall be:
(a) To acquire by purchase, subscription, contract or otherwise,
and to hold, own, sell, assign, transfer, exchange, mortgage, pledge, or
otherwise negotiate, or dispose of, and generally to deal in and with
all forms of securities,
<PAGE>
including but not limited to, shares, stocks, bonds, debentures, notes,
scrip, mortgages, warrants, contracts, choses in action, obligations,
evidences of indebtedness, certificates of deposit, voting trust
certificates, and certificates of interest issued or created, or to be
issued or created, by corporations, associations, companies,
partnerships, firms, trustees, syndicates, individuals, governments,
states, municipalities, and other political and governmental divisions
and subdivisions, or by any combinations, organizations, or entities
whatsoever, irrespective of their form or the name by which they may be
described, and all trust, participation, and other certificates of, and
receipts evidencing interests in, any such securities; and to make
payment therefore in cash or by the issuance of its stock, bonds, notes,
debentures, other obligations or securities, or by any other lawful
means of payment whatsoever; to receive, collect, and dispose of
interest, dividends, and income upon, of, and from any and all such
securities or evidences of interest therein; to exercise any and all
rights, powers, and privileges of individual ownership or interest
therein, including the right to vote thereon, and to consent and
otherwise act with respect thereto; to do any and all acts and things
for the preservation, protection, improvement, and enhancement in value
of any and all such securities, or evidences of interest therein; to
acquire and become interested in any such securities, or evidences of
interest therein, as aforesaid, by original subscription, underwriting,
participation in syndicates, or otherwise, and irrespective of whether
or not such securities or evidences of interest therein be fully paid or
subject to further payments; to make payments thereon as called for, or
in advance of call, otherwise, and to underwrite or subscribe for the
same, conditionally or otherwise, and with a view to investment, for
resale, or for any other lawful purpose.
(b) To undertake or aid any enterprise and carry out any
transactions whatsoever that may be lawfully undertaken and carried out
by capitalists; and to carry on a general financial business and general
financial operations of all kinds, so far as the same are not prohibited
by the laws of the State of Iowa against the exercise of banking powers
by
<PAGE>
corporations, and to operate and maintain an investment service, as well
as to act in the capacity of manager for, and/or consultant to, any
persons, firms, corporations, or associations and to give advice to such
persons, firms, corporations, or associations concerning their business
activities, their investments, the conditions of the various stock and
mercantile markets, and in general to aid and assist them in any manner
that may be desired.
(c) To acquire, own, maintain, and operate a statistical,
informatory, and advisory service to banks, bankers, trust companies,
financial institutions generally, investment companies, and investors
generally; to enter into contracts with banks and bankers, trust
companies, investment companies, financial institutions of all kinds,
and investors generally, for the purpose of supplying and furnishing
financial statistics, information, reports, and opinions concerning the
value of corporate securities and the capital and earnings of
corporations whose securities are dealt in over-the-counter and in the
public exchange and markets.
(d) To make investigations as to the business, affairs, and
property of corporations, partnerships, and various forms of business
enterprises; to make appraisals and valuations of all kinds; and to give
financial advice relative to the methods of procuring additional capital
for business extension, advice relative to the conversion of securities
of one or more corporations into those of another, and generally to
instruct and to aid corporations, partnerships, and individuals on
matters pertaining to new capital structure.
(e) To operate, manage, supervise, direct and control all or any
part of the business and property of any corporation, association,
partnership, combination, organization, entity, or individual, domestic
or foreign, through stock organization, by contract, or otherwise, and
for that purpose to appoint and remunerate any directors, accountants,
or other experts or agents, and to receive for such service fixed or
contingent compensation, or compensation in the form of commissions,
management fees, shares in gross or net receipts or profits, or in any
other manner or upon any other
<PAGE>
terms whatsoever, or so to act without direct compensation; and to
promote, participate, or assist in any way in the business of any such
corporation, association, partnership, combination, organization,
entity, or individual.
Section 2. in furtherance and not in limitation of the general powers
conferred by the laws of the State of Iowa, and the purposes and objects
hereinbefore stated, it is expressly provided that the corporation also shall
have the following powers:
(a) To purchase or otherwise acquire, own, hold, use, improve,
manage, mortgage, charge, pledge, sell, convey, lease, exchange,
transfer, dispose of and deal with in any manner whatsoever, any and all
kinds of real and personal property including stock, securities, and
other choses in action issued or created by this or any other
corporation or by any association, firm, entity, individual or
governmental authority. To allow or cause the legal estate and interest
in any businesses or property acquired, established, or carried on by
the corporation, to remain, or to be vested or registered in the name
of, or to be carried on by, any individual or by any foreign or other
corporation formed or to be formed, either upon trust for, or as agents
or nominees of, this corporation, or upon any other terms or conditions
which the board of directors may consider for the benefit of this
corporation; to manage the affairs or take over and carry on the
business of any such corporation either by acquiring the whole or part
of the shares of stock or bonds, debentures, or other securities
thereof, or otherwise; to exercise all or any of the powers of any such
corporation or of holders of shares of stock, debentures, or securities
thereof; and to receive and distribute as profits the dividends and
interest on such shares, stock, debentures, or securities. All
conveyances of real property by the corporation shall be executed by the
chairman, president or any vice-president and counter-signed by the
secretary or any assistant secretary with an impression of the corporate
seal affixed; and all releases of mortgages, liens, judgments or other
claims required by law to be made of record may be executed by the
chairman, president, any vice-president, secretary or any assistant
secretary.
(b) To cause to be formed, to promote, and to aid in the formation
of any corporation to association, domestic or foreign, and to cause or
participate in the merger, consolidation, reorganization, liquidation or
dissolution of any corporation or
<PAGE>
association, domestic or foreign, in which, or in the business of
welfare of which, the corporation shall have, directly or indirectly,
any interest.
(c) To do everything necessary, proper, convenient, or incidental
to the accomplishment of the purposes and objects of the corporation or
which is calculated, directly or indirectly, to promote the welfare or
interests of the corporation or enhance the value or render profitable
any if its property or rights.
(d) In general, to carry on any business not contrary to the laws
of the State of Iowa, and to do any and all of the acts and things
hereinbefore or hereinafter set forth to the same extent as natural
persons could do as principal, factor, agent, contractor, trustee or
otherwise, either alone or in company with any person or persons,
entity, syndicate, partnership, association or corporation.
Section 3. The foregoing clauses are to be construed both as purposes and
powers; and it is hereby expressly provided that the enumeration herein of
specific purposes, objects and powers shall not be held to limit or restrict in
any manner the general powers of the corporation. It is the intention that the
purposes, objects and powers specified in each of the paragraphs of this
Article II shall, except as otherwise expressly provided, in no wise be limited
or restricted by the references to or inferences from the terms of any other
clause or paragraph of this Article or of any other Article in these Restated
Articles of Incorporation.
ARTICLE III
Capital Stock
Section 1. The aggregate number of shares which the corporation is
authorized to issue is Two Million (2,000,000), consisting of one class of
common shares. Such shares have a par value of Five Dollars ($5.00) per share.
Section 2. No holder of the shares of stock of the corporation shall have
any pre-emptive or preferential right of subscription to
<PAGE>
any class of stock of the corporation, whether now or hereafter authorized, or
to any obligations convertible into stock of the corporation, issued or sold,
and all such additional shares of stock or any obligations convertible into
stock of the corporation may be issued and disposed of by the Board of
Directors to such person or persons and upon such term and for such
consideration as the Board of Directors in its absolute discretion may deem
advisable; provided, however, that no stock shall be issued until the
corporation shall have received its full par value in cash or property, as
provided by the laws of the State of Iowa; and when issued, all shares shall be
fully paid and forever nonassessable.
Section 3. At all meetings of stockholders, each stockholder shall be
entitled to one vote for each share of common capital stock held by him, which
may be cast by the stockholder in person or by proxy, and which vote shall not
be cumulative.
Section 4. Upon the vote of a majority of the directors of this
corporation, and of a majority of the votes then appertaining to the total
number of shares of the common stock shares then issued and outstanding, this
corporation may from time to time, by amendment to these Articles, increase the
authorized capital stock of this corporation, or create one or more other
classes of stock with such designations, preferences, voting powers,
restrictions, or qualifications as may be determined by such vote, which may be
the same or different from the designations, preferences, voting powers,
restrictions or qualifications of the classes of stock of this corporation then
authorized or issued, except that no new class of stock shall hereafter be
created which is entitled to dividends or shares in distribution of assets in
priority to or concurrent with, any preferential shares theretofore authorized
and issued, unless the holders of not less than two-thirds (2/3) of any
preferential shares outstanding and the holders of two-thirds (2/3) of the
votes appertaining to each class of common stock shares shall consent thereto
in writing, or by vote in person or by proxy, at a meeting duly called for that
purpose.
ARTICLE IV
Commencement and Duration
The corporate period of this corporation shall begin on the date the
Secretary of State issues a Certificate of Incorporation, and this corporation
shall have perpetual duration.
<PAGE>
ARTICLE V
Directors and Officers
Section 1. The affairs of this corporation shall be conducted by a Board
of Directors consisting of not less than seven nor more than twenty-five
members, who shall be elected by the stockholders at their annual meeting each
year. A director is not required to be a stockholder in this corporation.
Section 2. The Board of Directors may fill all vacancies occurring
between annual elections in its membership by election of persons to hold
office for the remainder of the term.
Section 3. The Board of Directors may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation, which,
to the extent provided in said resolution or resolutions or in the Bylaws of
the corporation, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation, any
may have power to authorize and seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the Bylaws of the corporation or as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 4. Any resolution in writing signed by all the members of the
Board of Directors (or any Committee thereof) shall be and constitute action by
such Board (or committee) with the same force and effect as if the same had
been duly passed by the same vote at a duly called meeting of such bodies.
Section 5. The officers of this corporation shall be a Chairman,
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, and a Treasurer, and such other officers as shall be authorized
by the Board of Directors, or provided for in the Bylaws. An officer may hold
more than one office if the Board so decides. The officers shall be elected
by the Board of Directors at the annual meeting to be held immediately
following the annual meeting of stockholders or at a special meeting called
for such purpose and shall hold office at the discretion of the Board.
<PAGE>
Section 6. An officer is not required to be a director or a stockholder
in this corporation.
Section 7. The duties of the officers shall be those usually performed by
such officers in similar corporations, unless otherwise provided by resolution
of the Board of Directors, or in the Bylaws, or by the stockholders at any
annual or special meeting.
ARTICLE VI
Stockholders' Liability
Section 1. Private property of the stockholders shall be exempt from
corporate debts and liabilities.
Section 2. This Article shall not be changed except by unanimous consent
of all stockholders.
ARTICLE VII
Indemnification of Directors and Officers
The corporation shall indemnify
(1) every director or officer, or former director or former
officer, his heirs, executors and administrators, and
(2) at the discretion of the Board of Directors of the
corporation, any person, or the heirs, executors and administrators of
such person, who shall have served at its request as a director or
officer of any other corporation of which it is a stockholder or
creditor, and from which he is not entitled to be indemnified,
against reasonable expenses actually incurred by him in connection with the
defense of any action, suit or proceeding to which he may be made a party by
reason of his being, or having been, a director or officer of the corporation
or of such other corporation, except in relation to matters as to which he
shall be finally adjudged in such action, suit or proceeding, to be liable for
gross negligence or misconduct in the performance of his duties; in the event
of a settlement, indemnification
<PAGE>
shall be provided only in connection with such matters covered by the
settlement as to which the corporation is advised by independent counsel,
selected by or in the manner designated by the Board of Directors, that the
person to be indemnified did not commit such a breach of duty. The foregoing
right of indemnification shall not be exclusive of other rights to which he
may be entitled.
ARTICLE VIII
Bylaws
The Board of Directors, at its first meeting, shall adopt Bylaws for the
corporation and may alter such Bylaws at any regular or special meeting.
ARTICLE IX
Amendments
Amendment to these Articles, excepting Article III and Article VI, may be
made at any annual meeting of the stockholders, or at any special meeting
called for that purpose, by a vote of the majority of the shares of the
capital stock outstanding.
ARTICLE X
These Restated Articles of Incorporation set forth the provisions of the
Articles of Incorporation as heretofore and hereby amended; have been duly
adopted as required by law; and supersedes the original Articles of
Incorporation and all amendments thereto.
ARTICLE XI
The number of shares of the corporation outstanding at the time of such
adoption was 140,383; and the number of shares entitled to vote thereon was
140,383.
<PAGE>
ARTICLE XII
The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows: None.
ARTICLE XIII
The number of shares voted for such amendment was 136,288; and the
number of shares voted against such amendment was none.
ARTICLE XIV
The number of shares of each class entitled to vote thereon as a class
voted for and against such amendment, respectively, was: None.
ARTICLE XV
The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: These Restated Articles of
Incorporation reclassify the common stock from 400,000 shares of common stock
of Twenty-Five Dollars ($25.00) par value to 2,000,000 shares of common stock
of Five Dollar ($5.00) par value.
ARTICLE XVI
The manner in which such amendment effects a change in the stated capital,
and the amount of stated capital as changed by such amendment, are as follows:
No change.
Dated: May 5, 1972
BRENTON BANKS, Inc.
By: /s/ C. Robert Brenton, President
By: /s/ Betty L. Steel, Secretary
<PAGE>
STATE OF IOWA :
: ss.
COUNTY OF POLK :
On this 5th day of May, 1972, before me, a Notary Public in and for the
State of Iowa, personally appeared C. Robert Brenton and Betty L. Steel, to be
personally known, who being by me duly sworn did say that they are the
President and Secretary, respectively, of said corporation, that the seal
affixed to said instrument is the seal of said corporation, and that said
Restated Articles of Incorporation were signed and sealed on behalf of the
said corporation by authority of its Board of Directors and the said C. Robert
Brenton and Betty L. Steele acknowledged the execution of said instrument to
be the voluntary act and deed of said corporation by it and by them voluntarily
executed.
/s/ Notary Public in and for the
State of Iowa
Seal.
<PAGE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF BRENTON BANKS, INC.
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to the provisions of Section 58 of the Iowa Business Corporation
Act, Section 496A.58 of the Iowa Code, the undersigned corporation adopts the
following Articles of Amendment to its Restated Articles of Incorporation:
1. The name of the corporation is Brenton Banks, Inc. The effective date
of its incorporation was August 31, 1948.
2. The following amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the corporation on May 9, 1979, in the manner
prescribed by the Iowa Business Corporation Act:
Article III, Section 1 is amended to read as follows:
ARTICLE III
Capital Stock
Section 1. Authorized Common Shares. The aggregate number of shares of
common stock which the corporation is authorized to issue is Five Million
(5,000,000), consisting of one class. Such shares shall have a par value of
Five Dollars ($5.00) per share.
Article III is amended by renumbering the existing Sections 2, 3, and 4
thereof as Sections 3, 4, and 5, respectively, and by adding the following
section as Section 2:
<PAGE>
Section 2. Authorized Preferred Shares. The aggregate number of shares of
preferred stock which the corporation is authorized to issue is Five Hundred
Thousand (500,000) consisting of one class. Such shares shall have a par value
of One Dollar ($l.00) per share.
The preferred shares shall be senior to the common shares, and the common
shares shall be subject to the rights and preferences of the preferred shares
as hereinafter set forth.
The preferred shares may be issued from time to time in one or more series
in any manner permitted by law, as determined from time to time by the Board of
Directors and stated in the resolution or resolutions providing for the
issuance of such shares adopted by the Board of Directors pursuant to authority
hereby vested in it, each series to be appropriately designated, prior to the
issuance of any shares thereof, by some distinguishing letter, number, or
title. All shares of each series of preferred shares shall be alike in every
particular (except as to the dates from which dividends shall commence to
accrue) and all preferred shares shall be of equal rank and have the same
powers, preferences, and rights, and shall be subject to the same
qualifications, limitations, and restrictions, without distinction between the
shares of different series thereof, except only in regard to the following
particulars, which may be different in different series:
(a) the annual rate or rates of dividends payable on shares of such
series and the dates from which such dividends shall commence to accrue;
(b) the amount or amounts payable upon redemption thereof and the manner
in which the same may be redeemed;
(c) the amount or amounts payable to holders thereof upon any voluntary
or involuntary liquidation, dissolution, or winding up of the Corporation;
(d) the provisions of the sinking fund, if any, with respect thereto;
(e) the terms and rates of conversion or exchange thereof if
convertible or exchangeable; and
(f) the provision as to voting rights, if any.
The shares of any series of preferred share having voting power shall not
have more than one vote per share, and if the stated dividends and amounts
payable on liquidation are not paid in full, the shares of all
series of the preferred
<PAGE>
shares shall share ratably in the payment of dividends including accumulations,
if any, in accordance with the sums which would be payable on such shares if
all dividends were declared and paid in full, and in any distribution of assets
other than by way of dividends in accordance with the sums which would be
payable on such distribution if all sums payable were discharged in full.
The designation of each particular series of preferred shares and its
terms in respect of the foregoing particulars shall be fixed and determined
by the Board of Directors in any manner permitted by law and stated in the
resolution or resolutions providing for the issuance of such shares adopted
by the Board of Directors pursuant to authority hereby vested in it, before
any shares of such series are issued, and shall be set forth in full or
summarized on the certificates for such series. The Board of Directors may
from time to time increase the number of shares of any series of preferred
shares already created by providing that any unissued preferred shares shall
constitute part of such series, or may decrease (but not below the number of
shares thereof then outstanding) the number of shares of any series of
preferred shares already created by providing that any unissued shares
previously assigned to such series shall no longer constitute part thereof.
The Board of Directors is hereby empowered to classify or reclassify any
unissued preferred shares by fixing or altering the terms thereof in respect
of the above mentioned particulars and by assigning the same to an existing or
newly created series from time to time before the issuance of such shares.
The holders of preferred shares of each series shall be entitled to
receive, out of any funds legally available for the purpose, when and as
declared by the Board of Directors, cash dividends thereon at such rate per
annum as shall be fixed by resolution of the Board of Directors for such
series, and no more, payable quarterly on the days fixed by the Board of
Directors for the first series. Such dividends shall be cumulative, shall be
deemed to accrue from day to day regardless of whether or not earned or
declared, and shall commence to accrue on each preferred share from such date
or dates as may be fixed by the Board of Directors prior to the issue thereof.
The Corporation in making any dividend payment upon the preferred shares shall
make dividend payments ratably upon all outstanding preferred shares in
proportion to the amount of the dividends accrued thereon to the date of such
dividend payment.
In no event, so long as any preferred shares shall remain outstanding,
shall any dividend whatsoever (other than a dividend payable in shares ranking
junior to the preferred shares as to dividends and assets) be declared or
<PAGE>
paid upon, nor shall any distribution be made or ordered in respect of, the
common shares or any other class of shares ranking junior to the preferred
shares as to dividends or assets, nor shall any moneys other than the net
proceeds received from the sale of shares ranking junior to the preferred
shares as to dividends and assets be set aside for or applied to the purchase
or redemption (through a sinking fund or otherwise) of common shares or of any
other class of shares ranking junior to the preferred shares as to dividends
or assets, unless all dividends on the preferred shares of all series for past
dividend periods shall have been paid and the full dividend on all outstanding
preferred shares of all series for the then current dividend period shall have
been paid or declared and set apart for payment; and the Corporation shall have
set aside all amounts, if any, theretofore required to be set aside as and for
sinking funds, if any, for the preferred shares of all series for the then
current year, and all defaults, if any, in complying with any such sinking
fund requirements in respect of previous years shall have been made good.
The Corporation, at the option of the Board of Directors may at any time
redeem the whole, or from time to time may redeem any part, of any series of
preferred shares, by paying therefor in cash the amount which shall have been
determined by the Board of Directors, in the resolution or resolutions
authorizing such series, to be payable upon the redemption of such shares at
such time. Redemption may be made of the whole or any part of the outstanding
shares of any one or more series, in the discretion of the Board of Directors;
if the redemption be a part of a series, the shares to be redeemed may be
selected by lot, or all of the shares of such series may be redeemed pro rata,
in such manner as may be prescribed by resolution of the Board of Directors.
Subject to the foregoing provisions and to any qualifications,
limitations, or restrictions applicable to any particular series of preferred
shares which may be stated in the resolution or resolutions providing for the
issuance of such series, the Board of Directors shall have authority to
prescribe from time to time the manner in which any series of preferred shares
shall be redeemed.
Upon any liquidation, dissolution, or winding up of the Corporation,
whether voluntary or involuntary, the preferred shares of each series shall be
entitled, before any distribution shall be made to the common shares or to any
other class or shares junior to the preferred shares as to dividends or assets,
to be paid the full preferential amount or amounts fixed by the Board of
Directors for such series as herein authorized; but the preferred shares shall
not be entitled
<PAGE>
to any further payment and any remaining net assets shall be distributed
ratably to all outstanding common shares. If upon such liquidation,
dissolution, or winding up of the Corporation, whether voluntary or
involuntary, the net assets of the Corporation shall be insufficient to permit
the payment to all outstanding preferred shares of all series of the full
preferential amounts to which they are respectively entitled, then the entire
net assets of the Corporation shall be distributed ratably to all outstanding
preferred shares in proportion to the full preferential amount to which each
such share is entitled. Neither a consolidation nor a merger of the Corporation
with or into any other corporation or corporations nor the sale of all or
substantially all of the assets of the Corporation shall be deemed to be a
liquidation, dissolution, or winding up within the meaning of this clause.
Article III is further amended by amending Article III, Section 4 (as
redesignated; previously Article III, Section 3) to read as follows:
Section 4. Subject to any voting restrictions or limitations placed upon
preferred shares by the Board of Directors pursuant to such power granted to
the Board in Article III, Section 2, at all meetings of stockholders each
stockholder shall be entitled to one vote for each share of capital stock
held by him, which vote may be cast by the stockholder in person or by proxy,
and which vote shall not be cumulative.
Article V, Section I is amended to read as follows:
ARTICLE V
Directors and Officers
Section 1. The affairs of this corporation shall be conducted by a Board
of Directors. The number of members of the Board of Directors shall be set
forth in the Bylaws of the corporation. A director is not required to be a
stockholder in this corporation.
3. The number of shares of the corporation outstanding at the time of
such adoption was 1,107,898; and the number of shares entitled to vote thereon
was 1,107,898.
4. The number of shares voted for the amendment set forth in paragraph 2
was 976,718, and the number of shares voted against such amendment was 5,700.
<PAGE>
5. Such amendment does not provide for an exchange, reclassification or
cancellation of issued shares.
6. Such amendment does not effect a change in the amount of stated
capital.
Dated this 14th day of May, 1979.
BRENTON BANKS, INC.
By /s/ C. Robert Brenton, President
By /s/ Betty L. Steele, Secretary
STATE OF IOWA :
: ss
COUNTY OF POLK :
On this 14th day of May, 1979, before me, the undersigned, a Notary Public
in and for said County and State, personally appeared C. Robert Brenton and
Betty L. Steele, to me personally known, who being by me duly sworn did say
that they are the President and Secretary of said corporation, respectively,
of said corporation, that the seal affixed to said instrument is the seal of
said corporation, and that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors and the said C. Robert
Brenton and Betty L. Steele acknowledged the execution of said instrument to
be the voluntary act and deed of said corporation by it and by them voluntarily
executed.
/s/ Claire Cole
Notary Public
in and for the County and State
Seal.
<PAGE>
STATEMENT OF DIVISION OF
PREFERRED STOCK INTO SERIES
OF BRENTON BANKS, INC.
STATE OF IOWA )
) SS:
COUNTY OF POLK )
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 15(2) of the Iowa Business Corporation Act, Chapter
496A of the Iowa Code (1979), Brenton Banks, Inc. does hereby submit for filing
with the Iowa Secretary of State the following Statement:
1. The name of the corporation is Brenton Banks, Inc.
2. Attached hereto is a true and correct copy of a resolution adopted by
the Board of Directors of said corporation establishing and designating the
series, and fixing and determining the relative rights and preferences of a
portion of the preferred stock of such corporation.
3. Such resolution was adopted by the Board of Directors of Brenton
Banks, Inc. on October 18, 1979.
4. Such resolution was duly adopted by the Board of Directors of Brenton
Banks, Inc.
Dated this day 18th day of October, 1979.
BRENTON BANKS, INC.
By /s/ C. Robert Brenton, President
By /s/ Betty L. Steele, Secretary
Corporate Seal
<PAGE>
On this 18th day of October, 1979, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared C. Robert Brenton
and Betty L. Steele, to me personally known, who being by me duly sworn did say
that they are the President and Secretary, respectively, of said corporation,
that the seal affixed to said instrument is the seal of said corporation, and
that said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors and the said C. Robert Brenton and Betty L.
Steele acknowledged the execution of said instrument to be the voluntary act
and deed of said corporation by it and by them voluntarily executed.
/s/ Sandra S. Holan
Notary Public in and for said County
and State
Seal.
<PAGE>
CERTIFICATE OF RESOLUTION ESTABLISHING AND
DESIGNATING THE SERIES A $9.50 CUMULATIVE
PREFERRED STOCK OF
BRENTON BANKS, INC.
BRENTON BANKS, INC., a corporation organized and existing under the laws
of the State of Iowa (the "Company"),
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Restated Articles of Incorporation, as amended, of the Company (the "Restated
Articles of Incorporation"), and pursuant to the provisions of I.C.A. Section
496A.15, said Board of Directors at a meeting thereof duly called, convened
and held on October 18, 1979, duly adopted a resolution providing for the
issuance of 60,000 shares of Series A $9.50 Cumulative Preferred Stock, par
value $1.00 per share, which resolution is as follows:
Be It Resolved that, pursuant to the authority vested in the Board of
Directors (the "Board") of Brenton Banks, Inc., (the "Company") by the Restated
Articles of Incorporation, as amended, of the Company, there is hereby
established and authorized to be issued a series of the Company's Preferred
Stock, $1.00 par value, consisting of 60,000 shares, which shall have the
following voting powers, designation, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions:
1. Designation.
The designation of said series of Preferred Stock shall be "Series A $9.50
Cumulative Preferred Stock" (the "Series A Preferred Stock").
2. Dividends.
The holders of the Series A Preferred Stock shall be entitled to
cumulative cash dividends at the rate of $9.50 per share per annum (and no
more) computed on the basis of a 360-day year of twelve 30-day months, when
and as declared by the Board, out of any funds of the Company at the time
legally available for the payment of cash dividends on shares of the Series A
Preferred Stock, payable quarterly on the fifteenth day of each of the months
of January, April, July and October
Exhibit A
<PAGE>
of each calendar year commencing January 15, 1980 (each such day being
hereinafter called a "dividend payment date"); provided, however, that
dividends in arrears may be paid at any time. Such dividends on each share of
Series A Preferred Stock shall accrue daily, and shall be cumulative, from the
date on which such share of Series A Preferred Stock shall have been originally
issued and shall so accrue and be accumulative whether or not the Company shall
have had net profits or assets legally available for such dividends in any
quarterly dividend payment period. Arrears of dividends shall not bear
interest.
3. Optional Redemptions.
(a) In addition to the requirements of the Redemption Fund set
forth in paragraph 4 and to the rights of redemption set forth
hereinafter, the Company may at any time and from time to time call for
redemption and redeem all or any portion of the then outstanding shares
of the Series A Preferred Stock (in units of 1000 shares or an integral
multiple of 100 in excess thereof) at the then applicable redemption
price per share set forth below, plus a sum of money equivalent to all
accrued and unpaid cumulative dividends (whether or not declared or
earned thereon to and including the date of redemption.
Date of Redemption
Applicable
On or After and Prior to Redemption
October 15, October 15, Price Per Share
1979 1980 $119.00
1980 1981 $119.00
1981 1982 $119.00
1982 1983 $105.00
1983 1984 $104.00
1984 1985 $103.00
1985 1886 $102.00
1986 1987 $101.00
1987 and thereafter $100.00
(b) In addition to the requirements of the Redemption Fund set
forth in paragraph 4 and to the right of redemption pursuant to paragraph
3(a), on each Redemption Fund payment date specified in paragraph 4(a)
(the "Redemption Fund Payment Date") the Company shall have the option
(which shall not be cumulative) to redeem that number of shares of the
Series A Preferred Stock equal to the number of such shares then required
to be redeemed pursuant to paragraph 4, or any part thereof, at a price
per share equal to $100, plus a sum of money equivalent to all accrued
and unpaid cumulative dividends (whether or not declared or earned)
thereof to and including the date of redemption.
<PAGE>
(c) In the event that the Company shall have requested the holders
of the Series A Preferred Stock in writing to consent to a Prohibited
Corporate Action, and the holder or holders of less than the greater of
that percentage of the outstanding Series A Preferred Stock as would be
required under either applicable law or the provisions of paragraph 6(a)
to approve such Prohibited Corporate Action shall, within 30 days from
the date of such request, have consented in writing to such Prohibited
Corporate Action, then the Company may, within 120 days after such 30 day
period (upon the notice and otherwise in the manner specified in
paragraph 5), redeem all but not less than all of the shares of Series A
Preferred Stock then outstanding. The request of the Company for such
consent shall contain a reasonably detailed description of such
transaction being proposed and the terms and provisions with respect
thereto.
In the event the Company shall have failed to obtain the requisite
consent as described above, redemption of Series A Preferred Stock
pursuant to the provisions of this paragraph 3(c) shall be made
concurrently with the completion of such Prohibited Corporate Action and
shall be made at a redemption price of $100 per share, plus, in each
case, all accrued and unpaid cumulative dividends thereon (whether or not
declared or earned) to the date fixed for redemption.
4. Redemption Fund for Series A Preferred Stock
(a) On or before October 15, 1984, and on or before October 15 of
each year thereafter, to and including October 15, 1989, the Company
shall, so long as any shares of Series A Preferred Stock remain
outstanding, set apart out of its funds lawfully available for the
purpose (or to the extent the same are available therefor), as and for a
Redemption Fund for the retirement of the Series A Preferred Stock (the
"Redemption Fund"), that sum in cash which shall be sufficient to redeem,
at a price per share equal to $100 plus all accrued and unpaid cumulative
dividends thereon to the date fixed for such retirement the lesser of (i)
10,000 shares of Series A Preferred Stock; or (ii) the aggregate
outstanding shares of Series A Preferred Stock.
(b) The amounts so set apart for the Redemption Fund shall be
applied by the Company, on October 15 in each of the years 1984 through
1989, inclusive to the redemption (in the manner and upon the notice
specified in paragraph 5) of the maximum number of shares of Series A
Preferred Stock redeemable from such amounts so set apart at said price.
(c) The obligation of the Company to set apart such sum or sums
specified in paragraph 4(a) shall be cumulative so that, if the full
amount required to be set apart as
<PAGE>
aforesaid in each such year for the Redemption Fund shall not be so set
apart, the deficiency shall be made good and shares of the Series A
Preferred Stock shall be called for redemption and redeemed accordingly,
at any time thereafter as soon a funds shall become lawfully available
therefore, whether or not on a Redemption Fund Payment Date specified in
paragraph 4(a). Optional redemptions pursuant to paragraph 3 or
repurchases, directly or indirectly, by the Company of shares of the
Series A Preferred Stock shall not affect the Company's obligations to
make the Redemption Fund payments required by this paragraph 4; provided,
however, that in the event of any redemption or repurchase of Series A
Preferred Stock other than pursuant to the provisions of paragraphs 3(a),
3(b) or 4 which does not result in the redemption or repurchase of all of
the outstanding shares of Series A Preferred Stock (a "Special
Redemption"), then the redemptions required to be made pursuant to the
provisions of this paragraph 4 shall, after the occurrence of such
Special Redemption be reduced in the same proportions that the number of
share of Series A Preferred Stock outstanding immediately preceding such
Special Redemption has been reduced by such to the end that the remaining
redemptions required to be made pursuant to this paragraph 4 on each of
the shares of Series A Preferred Stock shall be the same as if shares of
Series A Preferred Stock had not been redeemed or repurchased pursuant to
a Special Redemption.
5. Manner and Effect of Redemptions
(a) Notice of any proposed redemption of shares of Series A
Preferred Stock shall be given by the Company by mailing, registered or
certified mail, postage prepaid, such notice not less than thirty nor
more than sixty days prior to the date fixed for such redemption to the
holders of record of shares of Series A Preferred Stock to be redeemed or
purchased, at their respective addresses appearing on the books of the
Company. Said notice shall specify the shares called for redemption, the
redemption price and the place at which and the date on which the shares
called for redemption will, upon presentation and surrender of the
certificates of stock evidencing such shares, be redeemed and the
redemption price therefor paid.
(b) If less than all of the shares of the Series A Preferred Stock
are to be redeemed pursuant to the provisions of this Resolution,
selection of shares to be redeemed shall be pro-rata in accordance with
the number of shares of Series A Preferred Stock held by each holder
thereof.
<PAGE>
(c) If the giving of notice of redemption shall have been completed
as above provided and the deposit of funds shall have been made pursuant
to subparagraph (d) below, the holders of shares of Series A Preferred
Stock shall be entitled to receive the redemption price (including
accrued dividends with respect to the shares called for redemption) on
the date and at the place stated in such notice upon surrender of
certificates for such shares, duly endorsed or accompanied by duly
executed stock transfer powers.
(d) On or prior to the date fixed for any redemption of shares of
Series A Preferred Stock, the Company shall deposit as a trust fund with
Brenton National Bank of Des Moines or any bank or trust company in good
standing, organized under the laws of the United States of America or the
State of Illinois and doing business in Chicago, Illinois with a capital
and surplus of at least fifty million dollars, selected by the Board, a
sum sufficient to redeem on the date fixed for redemption such shares
called for redemption, with irrevocable instructions to said bank or
trust company to pay said sum to the holders of the shares to be redeemed
upon their surrender of their certificates pursuant to subparagraph (c)
of this paragraph 5. From and after the date fixed for redemption, the
shares so called for redemption shall be deemed to be redeemed and
dividends on such stock shall cease to accrue. The holders of such
shares shall cease to be shareholders with respect to such shares and
shall have no rights with respect thereto, from and after the date fixed
for redemption, except the right to receive from said bank or trust
company payment of the redemption price, without interest thereon, upon
the surrender of the certificates of certificates evidencing such shares.
(e) All shares of series A Preferred Stock which shall have been
redeemed, purchased or otherwise acquired by the Company may become
additional authorized but unissued shares of Preferred Stock, but such
shares shall not be reissued as shares of Series A Preferred Stock.
6. Certain Restrictions on Corporate Action
So long as any shares of Series A Preferred Stock shall be outstanding, and
in addition to any other approvals or consents required by law, without the
prior written consent of the holders of not less than 66-2/3% of all shares of
Series A Preferred Stock at the time outstanding:
(a) Prohibited Corporate Actions. The Company shall not be a party
to any Prohibited Corporate Action.
<PAGE>
(b) Dividends on or Redemption of Junior Stock. The Company shall
not declare or pay any dividend or make any other distribution on any
shares of Junior Stock or purchase, redeem or otherwise acquire for any
consideration other than in exchange for or out of the net cash proceeds
of the contemporaneous issue or sale of other shares of Junior stock), or
set aside as a sinking fund or other fund for the redemption or
repurchase of any shares of Junior Stock or any warrants, rights or
options to purchase shares of Junior Stock (all such declarations,
dividends, purchase payments or other distributions or allocations being
herein called "Restricted Stock Payments"), unless at the time of making
payment or declaration of the proposed Restricted Stock Payment (i) all
dividend and Redemption Fund payments applicable to the Series A
Preferred Stock have been currently satisfied, and (ii) after giving
effect to the proposed Restricted Stock Payment the aggregate amount of
Restricted Stock payments made during the period from and after January
1, 1979 to and including the date of the making of the proposed
Restricted Stock Payment, would not exceed the sum of (x) $2,000,000 plus
(y) Consolidated Net Income for such period, on a cumulative basis for
said entire period.
(c) Agreements Restricting Dividends on or Redemption of the Series
A Preferred Stock. The Company shall not (i) enter into any agreement,
indenture or other instrument containing express provisions restricting
or limiting the obligation or right of the Company to make payment of
dividends on shares of the Series A Preferred Stock or payments into the
Redemption Fund described in paragraph 4 or the redemption of the Series
A Preferred Stock therefrom nor (ii) will it permit any subsidiary to
enter into any agreement, indenture or other instruments (other than with
regulatory authorities having jurisdiction over such subsidiary)
containing express provisions restricting or limiting the right of such
Subsidiary to make, payments of dividends on the stock of such Subsidiary
owned by the Company if such provisions are, at the time of entering into
such agreement indenture or other instrument, more restrictive with
respect to the payment of such dividends than the applicable provisions
of any Federal or state statute rule or regulation to which such
Subsidiary may at such time be subject.
(d) Issuance of Parity Stock. The Company shall not create,
authorize or issue any shares of any Parity Stock unless at the time of
issuance thereof and after giving effect thereto and to the application
of the proceeds thereof. Net Income Available for Fixed Charges of the
Company for any period of 12 consecutive calendar months out of the 15
calendar months immediately proceeding the issuance of such Parity Stock
shall have been at least equal to 200% of Pro Forma Fixed Charges for
such period.
<PAGE>
(e) Redemptions of Preferred Stock. If and so long as any
Redemption Fund payment or any quarterly dividend on the Series A
Preferred Stock be in arrears, the Company shall not redeem, purchase or
otherwise acquire, by way of sinking fund payments or purchase fund
payments or otherwise, any other series of Preferred Stock unless funds
shall simultaneously be set apart for the redemption Fund and for the
sinking fund or analogous funds for the redemption of shares of all other
series of Preferred Stock, ratably in accordance with the sums which
would so be set apart if all Redemption Fund payments in arrears and all
sinking or analogous fund payments in arrears for all other series of
Preferred Stock were set aside in full, and the funds so set apart shall
forthwith be applied to the redemption of the maximum number of shares of
each series of Preferred Stock redeemable from the amounts so set apart
at the respective prices applicable thereto. Whenever there shall be
deposited or set aside the whole or any part of the funds required to be
deposited or set aside by the Company as a sinking fund or purchase fund
or other similar fund for the periodic retirement of shares of any other
series of the Company's Preferred Stock, there shall also be deposited or
set aside at the same time the full amount or the same proportionate
part, as the case may be, of the funds, if any, then due to be deposited
or set aside for the Redemption Fund for the periodic retirement of
shares of Series A Preferred Stock then outstanding.
(f) Issuance of Prior Stock. The Company shall not create,
authorize or issue any shares of any Prior Stock.
So long as any shares of Series A Preferred Stock shall be outstanding
and in addition to any other approvals or consents required by law, without the
prior written consent of the holders of 100% of all shares of Series A
Preferred Stock at the time outstanding;
(g) Certain Amendments. The company shall not amend, alter or
repeal any of the provisions of its Restated Article of Incorporation or
of this Resolution in any manner which adversely affects the rights,
preferences or powers, or the qualification, limitations or restrictions
of the Series A Preferred Stock or the holders thereof.
7. Preference on Liquidation, Dissolution or Winding Up.
In the event of any complete or partial liquidation, dissolution or winding
up of the affairs of the Company or any distribution of its assets to its
shareholders, whether voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to be paid in full out of any legally
available assets of the Company, before any distribution or payment shall be
<PAGE>
made to the holders of any Junior Stock, (i) is such liquidation, dissolution
or winding up shall be voluntary, a sum in cash equal to
(x) $105 per share if the Voluntary Liquidation Date shall be prior
to October 15, 1982; or
(y) if the Voluntary Liquidation Date shall be on or after October
15, 1982, the redemption price that would have been payable had the
Company, instead, at its option redeemed the same pursuant to paragraph
3(a) on such Voluntary Liquidation Date,
or (ii) if such liquidation, dissolution or winding up shall be involuntary, a
sum in cash equal to $100 per share, plus in each case, full accrued, unpaid,
cumulative dividends, if any, thereon (whether or not earned or declared) to
the date of payment.
As used in this paragraph 7, the term "Voluntary Liquidation Date" shall
mean the date of commencement of the proceedings for any voluntary complete
or partial liquidation, dissolution or winding up of the affairs of the
Company or any voluntary distribution of its assets to its shareholders
(which commencement date shall be deemed to be the earliest date on which the
resolution shall be adopted by the Board or requisite holders of any series
or class of capital stock proposing the voluntary liquidation concerned).
A Prohibited Corporate Action shall not be regarded as a liquidation,
dissolution or winding up of the affairs of the Company within the meaning of
this paragraph 7.
8. Conversion Rights
Shares of the Series A Preferred Stock shall not be convertible into shares
of any other class of capital stock of the Company.
9. Stated Capital for the Series A Preferred Stock.
The Series A Preferred Stock shall have a stated capital per share equal to
its par value.
10. Voting Power.
(a) The holders of the Series A Preferred Stock shall not be
entitled to vote and shall not be entitled to notice of any shareholders'
meeting except as otherwise provided by law or by the provision of
paragraph 6.
(b) If at any time either (i) dividends on the Series A Preferred
Stock shall be in arrears (regardless of the cause of such arrearage) in
respect of any four or more
<PAGE>
quarter-annual dividend payments (or the equivalent), in whole or in
part, or (ii) the Company shall be in default (regardless of the cause of
such default) in any annual (or the equivalent) redemption or sinking
fund payment, in whole or in part, on the Series A Preferred Stock, then
the holders of not less than 51% of all outstanding shares of Series A
Preferred Stock, shall have the right by written instrument filed with
the Secretary of the Company to appoint two observers who shall be
entitled so long as any such event shall continue (w) to receive the same
notice in respect of all meetings (both regular and special) of the Board
and each committee thereof as are required to be furnished to members of
the Board or such committee by law or by the Restated Article of
Incorporation or By-laws of the Company, (x) to attend all meetings of
the Board and each committee thereof and to receive minutes of all
meetings of the Board, (y) to receive all information and reports which
are furnished to members of the Board and each committee thereof and (z)
to participate in all discussions conducted at meetings of the Board and
each committee thereof; but such observers shall not constitute members
of the Board or any committee thereof and shall not be entitled to vote
on any matters presented to the Board or any committee thereof.
11. Definitions.
As used herein the following terms shall have the following meanings:
"Capitalized Lease" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with generally accepted accounting principles.
"Common Stock" shall include any class of capital stock of the Company now
or hereafter authorized, the right of which to share in distributions either of
earnings or assets of such corporation is without limit as to any amount or
percentage.
"Consolidated Net Income" for any period shall mean the gross revenues of
the Company and its Subsidiaries for such period less all expenses and other
proper charges (including taxes on income), determined on a consolidated basis
in accordance with generally accepted accounting principles consistently
applied and after eliminating earnings or losses attributable to outstanding
Minority Interests, but excluding in any event:
(i) any excess of gains over losses (but not any excess of losses
over gains) on the sale or other disposition of investments (other than
investments
<PAGE>
held in he ordinary course of the banking business) or fixed or capital
assets and any taxes on such excluded gains;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any Subsidiary of the Company
accrued prior to the date it became a Subsidiary of the Company;
(iv) net earnings and losses of any corporation (other than a
Subsidiary of the Company), substantially all the assets of which have
been acquired in any manner, realized by such other corporation prior to
the date of such acquisition;
(v) net earnings and losses of any corporation (other than a
Subsidiary of the Company) with which the Company or a Subsidiary of the
Company shall have consolidated or which shall have merged into or with
the Company or a Subsidiary of the Company prior to the date of such
consolidation or merger;
(vi) net earnings of any business entity (other than a Subsidiary of
the Company) in which the Company or any Subsidiary of the Company has an
ownership interest unless such net earnings shall have actually been
received by the Company or such Subsidiary in the form of cash
distributions;
(vii) any portion of the net earnings of any Subsidiary of the
Company which for any reason is unavailable for payment of dividends to
the company or any other Subsidiary of the Company;
(viii) earnings resulting from any reappraisal, revaluation or
write-up of assets (other than in the ordinary course of business of a
financial institution);
(ix) any deferred or other credit representing any excess of the
equity in any Subsidiary of the Company at the date of acquisition
thereof over the amount invested in such Subsidiary of the Company;
(x) any gain arising from the acquisition of any securities of the
Company or any Subsidiary of the Company; and
<PAGE>
(xi) any reversal of any contingency reserve, except to the extent
that provision for such contingency reserve shall have been made from
income arising during such period.
"Fixed Charges" for any period shall mean on a consolidated basis the sum
of (i) all interest and all amortization of debt discount and expense in
respect of all indebtedness of the Company and its Subsidiaries (including
imputed interest on Capitalized Leases) other than indebtedness of
Subsidiaries of the Company consisting of deposits included within the
definitions contained in 12 C.F.R. 217.1 and (ii) 33-1/3% of all Rentals in
respect of all leases other than Capitalized Leases payable during such period
by the Company and its Subsidiaries.
"Junior Stock" shall mean and include the Common Stock of the Company and
all other shares of stock of any other class of the Company at any time created
and issued ranking junior the Series A Preferred Stock with respect to the
right to receive dividends and the right tot he distribution of assets upon
liquidation, dissolution or winding up of the Company.
"Minority Interests" shall mean any shares of stock of any class of a
Subsidiary of the Company (other than directors' qualifying shares as required
by law) that are not owned by the Company and/or one or more of its
Subsidiaries, Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is great, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority
Interests in preferred stock.
"Net Income Available for Fixed Charges" for any period shall mean the sum
of (i) Consolidated Net Income during such period plus (to the extent deducted
in determining Consolidated Net Income), (ii) all provisions for any federal,
state or other income taxes made by the Company and its Subsidiaries during
such period and (iii) Fixed Charges during such period.
"Parity Stock" shall mean stock of any other class of the Company ranking
on a parity with the Series A Preferred Stock (including, without limitation,
shares of Series A Preferred Stock which have been redeemed, purchased
<PAGE>
or otherwise acquired by the Company) with respect to the payment of dividends
or the distribution of assets or any securities of any kind convertible into
shares of such Parity Stock.
"Preferred Stock" shall mean the preferred stock of the Company authorized
to be issued pursuant to Section 2 of Article III of the Restated Articles of
Incorporation of the Company.
"Prior Stock" shall mean stock of any other class of the Company ranking
prior to the Series A Preferred Stock with resect to the payment of dividends
or the distribution of assets or any securities of any kind convertible into
shares of such Prior Stock.
"Pro Forma Fixed Charges" for any period shall mean, as of the date of any
determination thereof, the sum of (i) the maximum aggregate amount of Fixed
Charges which would have become payable by the Company and its subsidiaries in
such period plus (ii) the total dividend requirements on all series and classes
of Preferred stock of the Company, determined, in each case on a pro forma
basis giving effect as of the beginning of such period to the issuance and
sale of the Parity Stock then proposed to be issued and the application of the
proceeds thereof.
"Prohibited Corporate Action" shall mean any merger, consolidation or sale
of all or substantially all of the assets of the Company.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by the Company or any of its
Subsidiaries, as lessee or sub-lessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by the
Company or such Subsidiary (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"Subsidiary" shall mean, as to any particular parent corporation, any
corporation of which more than 50 percent (by number of votes) or the Voting
Stock shall be owned, by such parent corporation and/or one or more
corporations which are themselves subsidiaries of such parent corporation.
<PAGE>
"Voting Stock" shall mean securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or persons performing similar functions).
IN WITNESS WHEREOF, said BRENTON BANKS, INC., has caused its corporate seal
to be hereunto affixed and this certificate to be signed by C. Robert Brenton,
its President and attested by Betty L. Steele, it Secretary, this 18th day of
October 1979.
BRENTON BANKS, INC.
By: /s/ C. Robert Brenton
Its President
[Seal]
Attest:
By /s/ Betty L. Steele
Secretary
<PAGE>
This page intentionally left blank.
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF BRENTON BANKS, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 58 of the Iowa Business Corporation
Act, the undersigned adopts the following Articles of Amendment to its Articles
of Incorporation:
I
The name of the corporation is Brenton Banks, Inc. The effective date of
its Articles of Incorporation was the 31st day of August, 1948.
II
The following amendment to the Articles of Incorporation was adopted by
the shareholders of the corporation on May 4, 1988, in the manner prescribed
by the Iowa Business Corporation Act.
ARTICLE VII
DIRECTORS' NONLIABILITY AND INDEMNIFICATION
1. Nonliability. A director of this corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or
knowing violation of the law, (iii) for any transaction from which
the director derived an improper personal benefit, or (iv) under
Section 496A.44 of the Iowa Business Corporation Act. No amendment
to or repeal of this Article shall apply to or have any effect on
the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal. If Iowa law
is hereafter changed to permit further elimination or
<PAGE>
limitation of the liability of directors for monetary damages to
the corporation of its shareholders, then the liability of a
director of this corporation shall be eliminated or limited to the
full extent then permitted. The directors of this corporation have
agreed to serve as directors in reliance upon the provisions of
this Article.
2. Indemnification. The corporation shall indemnify a director of
this corporation, and each director of this corporation who is
serving or who has served, at the request of this corporation, as
a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan to the fullest extent possible against
expenses, including attorneys' fees, judgments, penalties, fines,
settlements and reasonable expenses, actually incurred by such
director or person relating to his conduct as a director of this
corporation or as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan, except that the
mandatory indemnification required by this sentence shall not apply
(i) to a breach of a director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or knowing violation of the
law, (iii) for a transaction from which a director derived an
improper personal benefit, (iv) under Section 496A.44 of the Iowa
Business Corporation Act, or (v) against judgments, penalties,
fines and settlements arising from any proceeding by or in the
right of the corporation, or against expenses in any such case
where such director shall be adjudged liable to the corporation.
III
The number of shares of the corporation outstanding at the time of such
adoption was 2,398,645, and the number of shares entitled to vote thereon was
2,398,645.
<PAGE>
IV
The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows: None.
V
The number of shares voted for such amendment was 2,124,600, and
the number of shares voted against such amendment was 13,103.
VI
The number of shares of each class entitled to vote thereon as a class
voted for and against such amendment, respectively, was: None.
VII
The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: No change.
VIII
The manner in which such amendment effects a change in the amount of
stated capital, and the amount of stated capital as changed by such amendment,
are as follows: No change.
Dated: May 5, 1988.
BRENTON BANKS, INC.
By: /s/ C. Robert Brenton, President
By: /s/ Steven T. Schuler, Secretary
Corporate Seal
<PAGE>
STATE OF IOWA :
: SS.
COUNTY OF POLK :
On this 5th day of May, 1988, before me a Notary Public in and for the
State of Iowa, personally appeared C. Robert Brenton, to me personally known,
who being by me duly sworn did say that he is President of said corporation,
that the seal affixed to said instrument is the seal of said corporation, and
that said Articles of Amendment were signed and sealed on behalf of said
corporation by authority of its Board of Directors and the said C. Robert
Brenton acknowledged the execution of said instrument to be the voluntary act
and deed of said corporation by it voluntarily executed.
/s/ Janice L. Thoman
Notary Public in and for the
State of Iowa
Seal.
<PAGE>
STATEMENT OF CANCELLATION OF REDEEMABLE SHARES
OF
BRENTON BANKS, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to the provisions of Section 64 of the Iowa Business Corporation
Act, Chapter 496A, Code of Iowa, the undersigned corporation submits the
following statement of cancellation by redemption of redeemable shares of the
corporation.
1. The name of the corporation is Brenton Banks, Inc.
2. The effective date of incorporation was August 31, 1948.
3. Sixty thousand (60,000) shares of $9.50 Cumulative Preferred Series A
stock were canceled through redemption.
4. The aggregate number of issued shares after giving effect to such
cancellation is 2,398,645 common shares.
5. The original name of the corporation was Brenton Companies.
6. The amount of the stated capital of the corporation after giving
effect to such cancellation is $12,226,725.
Dated June 30, 1988.
BRENTON BANKS, INC.
By: /s/ C. Robert Brenton, President
By: /s/ Steven T. Schuler, Secretary
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 5th day of July, 1988, before me, the undersigned a Notary Public
in and for said County and State, personally appeared C. Robert Brenton and
Steven T. Schuler, to me personally known, who, being by me duly sworn, did
say that they are the President and Secretary, respectively, of said
corporation executing the within and foregoing instrument, that the seal
affixed hereto is the seal of said corporation; that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors; and that the said President and Secretary, as such officers,
acknowledged the execution of said instrument to be the voluntary act and
deed of said corporation, by it and by them voluntarily executed.
/s/ Janice L. Thoman
Notary Public
in and for said County and State
Seal.
<PAGE>
This page intentionally left blank.
<PAGE>
ARTICLES OF AMENDMENT
OF BRENTON BANKS, INC.
TO THE SECRETARY OF STATE OF THE STATE OF IOWA:
Pursuant to Section 1002 or 1006 of the Iowa Business Corporation Act, the
undersigned corporation adopts the following amendment to the corporation's
Restated Articles of Incorporation.
1. The name of the corporation is Brenton Banks, Inc.
2. The following amendment was adopted by the shareholders of the
corporation:
RESOLVED, that Article III, Section 1 of the Restated
Articles of Incorporation, is amended to read as follows:
Section 1. Authorized Common Shares. The aggregate
number of shares of common stock which the corporation is
authorized to issue is Twenty Five Million (25,000,000),
consisting of one class. Such shares shall have a par value
of Five Dollars ($5.00) per share.
3. The date of adoption of the amendment was May 9, 1990.
4. The amendment was approved by the shareholders. The designation,
number of outstanding shares, number of votes entitled to be cast by each
voting group entitled to vote separately on the amendment, and the number of
votes of each voting group indisputably represented at the meeting is as
follows:
VOTES ENTITLED
DESIGNATION SHARES TO BE CAST ON VOTES REPRESENTED
OF GROUP OUTSTANDING AMENDMENT AT MEETING
Common 4,797,290 4,797,290 4,196,958
4A. The total number of votes cast for and against the amendment by
each Voting group entitled to vote separately on the amendment
is as follows:
<PAGE>
VOTING VOTES VOTES
GROUP FOR AGAINST
Common 4,151,304 34,706
4B. The total number of undisputed votes cast for the amendment by
each voting group was:
VOTING VOTES
GROUP FOR
Common 4,151,304
The number of votes cast for the amendment by each voting group was
sufficient for approval by that voting group.
BRENTON BANKS, INC.
By /s/ Junius C. Brenton, President
<PAGE>
ARTICLES OF MERGER
MERGING
AMES FINANCIAL CORPORATION
WITH AND INTO
BRENTON BANKS, INC.
Pursuant to the provisions of Section 1105 of the Iowa Business
Corporation Act, the undersigned corporation adopts the following Articles of
Merger:
1. The Plan and Agreement of Merger (the "Plan") is attached hereto and
by this reference is incorporated herein.
2. (a) The designation, number of outstanding shares and number of votes
entitled to be cast by each voting group entitled to vote separately on the
Plan as to each corporation is as follows:
Number of Number of
Name of Designation Outstanding Votes Entitled
Corporation of Shares Shares to be Cast
Ames Financial
Corporation Common 273,624 273,624
The Plan was adopted by action of the Board of Directors of
Brenton Banks, Inc. without a vote of the shareholders pursuant to the
provisions of Section 1103(7) of the Iowa Business Corporation Act.
(b) The total number undisputed votes cast for the Plan by the common
stockholders of Ames Financial Corporation was 243,385, which number was
sufficient for approval of the Plan by that voting group. The Plan was adopted
by action of the Board of Directors of Brenton Banks, Inc. without a vote of
the shareholders pursuant to the provisions of Section 1103(7) of the Iowa
Business Corporation Act.
3. The merger shall take effect at 12:01 a.m. on October 1,
1992.
Dated this 29th day of September, 1992.
Attest: BRENTON BANKS, INC.
/s/ Steven T. Schuler, Secretary /s/ J. C. Brenton, President
Corporate Seal
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 29th day of September, 1992, before me, the undersigned, a Notary
Public in and for the State of Iowa, personally appeared J. C. Brenton, to me
personally known, who, being by me duly sworn, did say that he is the President
of Brenton Banks, Inc., executing the within and foregoing instrument, that no
seal has been procured by the said corporation; that said instrument was signed
on behalf of said corporation by authority of is Board of Directors; and that
the said J. C. Brenton, as such officer, acknowledged the execution of said
instrument to be the voluntary act and deed of said corporation, by it and
by him voluntarily executed.
/s/ Shirley Kirchner
Notary Public in
and for the State of lowa
Seal.
<PAGE>
PLAN AND AGREEMENT OF MERGER
OF
AMES FINANCIAL CORPORATION
WITH AND INTO
BRENTON BANKS, INC.
THIS PLAN AND AGREEMENT OF MERGER ("Agreement") dated as of September 29,
1992, by and between BRENTON BANKS, Inc. ("Brenton") and AMES FINANCIAL
CORPORATION ("Ames Financial").
WITNESSETH
WHEREAS, Brenton is a corporation duly organized and existing under the
laws of the State or Iowa, with authorized capitalization at December 31, 1991
consisting of 25,000,000 shares of $5.00 par value common stock, of which
4,813,890 shares were duly authorized, fully paid, validly issued,
nonassessable and outstanding and 500,000 shares of $1.00 par value preferred
stock, of which no shares were outstanding; and
WHEREAS, Ames Financial is a corporation duly organized and existing under
the laws of the State of Delaware, with authorized capitalization at December
31, 1991 consisting of 5,000,000 shares of Ames Financial common stock, $.01
par value, of which 273,624 shares are duly authorized, validly issued. fully
paid, nonassessable and currently outstanding and 1,000,000 shares of Ames
Financial serial preferred stock, $.01 par value, of which no shares are
outstanding; and
WHEREAS, Brenton and Ames Financial are parties to that certain Merger
Agreement (the "Merger Agreement") dated as of June 17, 1992 providing for the
merger (the "Merger") of Ames Financial with and into Brenton in the manner
and with the effect set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and in the Merger Agreement, it is agreed that, in accordance
with the applicable statutes of the States of Delaware and lowa, the parties
hereto agree as follows:
ARTICLE I
The Merger
Section 1. The Merger. On the Effective Date (as hereinafter defined)
Ames Financial shall be merged with and into Brenton in accordance with the
terms and provisions of this Agreement, the separate existence of Ames
Financial shall cease and the merger shall in all respects have the effect
provided for in Section 259 of the General Corporation Law of the State of
Delaware and Section 1106 of the Iowa Business Corporation Act. The Merger
shall be pursuant to the provisions of and with the effect provided in, the
Merger Agreement and the Merger shall become effective on the date (the
"Effective Date") upon which the Articles of Merger are filed with the lowa
Secretary of State or at such later time and/or date as may be provided in the
Articles of Merger.
<PAGE>
Section 2. Name. The name of the surviving corporation in the Merger
("Surviving Corporation") shall be 'BRENTON BANKS, INC.
Section 3. Articles of Incorporation. The Articles of Incorporation of
Brenton in effect immediately prior to the Effective Date shall be and remain
the Articles of Incorporation of the Surviving Corporation until amended as
provided by law and the terms thereof.
Section 4. By-Laws. The By-Laws or Brenton in effect immediately prior to
the Effective Date shall be and remain the By-Laws of the Surviving Corporation
until amended as provided by law and the terms thereof.
Section 5. Officers and Directors. From and after the Effective Date of
the Merger, the directors and officers of the Surviving Corporation shall be
those persons who are the directors and officers of Brenton at the Effective
Date of the Merger, and they shall continue to hold office from and after the
Effective Date of the Merger as provided in the Articles of Incorporation and
Bylaws of the Surviving Corporation.
ARTICLE II
Conversion of Shares
Section 1. Brenton Shares. The shares of capital stock of Brenton issued
and outstanding as of the Effective Date of the Merger shall continue to be
issued and outstanding shares of the Surviving Corporation.
Section 2. Conversion of Ames Financial Shares. As of the Effective
Date, by virtue of the Merger and without any action on the part of the holder
of any common stock of Ames Financial ("Ames Financial Share" or "Ames
Financial Shares"):
a. Each outstanding Ames Financial Share (other than any shares as to
which appraisal rights have been perfected) shall be converted into the right
to receive 1.358 shares of the $5.00 par value common stock of Brenton
("Brenton Common Stock" or "Brenton Shares").
b. From and after the Effective Date, the holders of certificates
formerly representing Ames Financial Shares shall cease to have any rights with
respect thereto other than any appraisal rights perfected pursuant to Section
262 of the General Corporation Law of the State of Delaware.
Section 3. Fractional Shares. No fractional shares of Brenton Common
Stock shall be issued to any holder of Ames Financial Shares. In lieu thereof,
each such holder who would be entitled to a fraction of a share of Brenton
Common Stock shall receive, at the time of surrender of the certificate or
certificates representing such holder's Ames Financial Shares, an amount in
cash equal to the market value per share of the common stock of Brenton,
calculated by taking the Average Bid Price for the last five trading dates
preceding the Effective Date on which actual trades occurred multiplied by the
fraction of a share of Brenton Common Stock to which such holder otherwise
would be entitled. No such holder shall be entitled to dividends, voting
rights, interest on the value of, or any other rights in respect of a
fractional share.
Section 4. Surrender of Ames Financial Shares. The following shall apply
to the surrender of Ames Financial Shares.
<PAGE>
a. Prior to the Effective Date, Brenton shall appoint Harris Bank and
Trust Company, Chicago, Illinois or its successor, or any other bank or trust
company (having capital of at least $50 million) mutually acceptable to Ames
Financial and Brenton, as exchange agent (the "Exchange Agent") for the
purpose of exchanging some or all of the certificates representing the
Brenton Shares. At the Effective Date, Brenton shall issue and deliver to the
holders of Ames Financial Shares who have surrendered to Brenton for
cancellation their certificates for Ames Financial Shares such cash and such
certificates representing the Brenton Shares as shall be required by this
Agreement to be delivered to the holders of such Ames Financial Shares. After
the Effective Date Brenton shall Issue and deliver to the Exchange Agent such
cash and such certificates representing the Brenton Shares as shall be required
by this Agreement to be delivered to holders of Ames Financial Shares who have
not surrendered to Brenton for cancellation their certificates for Ames
Financial Shares as or the Effective Date. At or as soon as practicable after
the Effective Date each holder of Ames Financial Shares converted pursuant to
Section 2(a) of this Article II, upon surrender to Brenton or to the Exchange
Agent, as the case may be, of one or more certificates for such Ames Financial
Shares for cancellation, will be entitled to receive a certificate representing
the number of Brenton Shares determined in accordance with Section 2(a) of
this Article II and a payment in cash with respect to fractional shares, if
any, determined in accordance with Section 3 of this Article II. Each
certificate representing the Brenton Shares: (1) shall be dated as to the
Effective Date; (2) may bear the Rule 144 Restrictive Legend (as that term
is defined in section 8.4 of the Merger Agreement) and (3) may bear the Rule
145 Restrictive Legend (as that term is defined in Section 8.5 of the Merger
Agreement).
b. No dividends or other distributions of any kind which are declared
payable to stockholders of record of the Brenton Shares after the Effective
Date will be paid to persons entitled to receive such certificates for Brenton
Shares until such persons surrender their certificates representing Ames
Financial Shares. Upon surrender of such certificates representing Ames
Financial Shares, the holder thereto shall be paid, without interest any
dividends or other distributions with respect to the Brenton Shares as to
which the record date and payment date occurred on or after the Effective Date
and on or before the date of surrender.
c. If any certificate for Brenton Shares is to be issued in a name other
than that in which the certificate for Ames Financial Shares surrendered in
exchange therefor is registered, it shall be a condition of such exchange that:
(1) the person requesting such exchange shall pay to the Exchange Agent any
transfer costs, taxes or other expenses required by reason of the issuance of
certificates for such Brenton Shares in a name other than the registered holder
of the certificate surrendered, or such persons shall establish that such
costs, taxes and expenses have been paid or are not applicable and (2) the
person requesting such exchange shall establish, to the satisfaction of
Brenton and its counsel, that the requirements of Section 9.14 of the Merger
Agreement, if applicable, have been complied with.
d. All dividends or distributions, and any cash to be paid pursuant to
Section 3 of this Article II in lieu of fractional shares, if held by the
Exchange Agent for payment or delivery to the holders of unsurrendered
certificates representing Ames Financial Shares and unclaimed at the end of one
year from the Effective Date, shall together with any interest earned thereon)
at such time be paid or redelivered by the Exchange Agent to Brenton, and after
such time any holder of a certificate representing Ames Financial Shares who
has not surrendered such certificate to the Exchange Agent shall, subject to
applicable law, look as a general creditor only to Brenton for payment or
delivery of such dividends or distributions or cash, as the case may be.
Section 5. No Further Transfers of Ames Financial Shares. As of the
Effective date the stock transfer books of Ames Financial shall be closed and
no transfer of Ames Financial shares theretofore outstanding shall thereafter
be made.
<PAGE>
Section 6. Adjustments. If, between the date of this Agreement and the
Effective Date, the outstanding Brenton Common Stock shall have been changed
into a different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of shares
or readjustment, or a stock dividend thereon shall be declared with a record
date within such period, the number of Brenton Shares to be issued and
delivered in the Merger in exchange for each outstanding Ames Financial shall
be correspondingly adjusted.
Section 7. Treatment of Stock Options. Each person holding one or more
options to purchase Ames Financial Shares pursuant to the Ames Financial Stock
Option and Incentive Plan (the "Ames Option Plan") shall, subject to any
adjustments under Section 16(b) of the Securities Exchange Act of 1934,
exercise his or her option to acquire Ames Financial Shares prior to the
Effective Date.
If Ames Financial is not in receipt of funds from any such person in payment of
the options exercised prior to the Effective Date, then such person shall be
deemed to have allowed the options held by him or her under the Ames Option
Plan to lapse and such options shall thereafter be null, void and of no further
force or effect.
ARTICLE III
Miscellaneous
Section 1. Governing Law. This Agreement, the Merger Agreement, the
Merger and the Surviving Corporation shall be governed by the laws of the State
of Iowa.
Section 2. Conditions. The obligations of the parties to effect the
Merger shall be subject to all of the terms and conditions contained in the
Merger Agreement.
Section 3. Termination. At any time prior to the filing of the
Articles of Merger with the Iowa Secretary of State, this Agreement may be
terminated by the mutual consent of the Boards of Directors of Ames Financial
and Brenton or may be terminated as provided in the Merger Agreement. This
Agreement shall terminate automatically upon the termination of the Merger
Agreement.
Section 4. Amendment. This Agreement and the Merger Agreement may be
amended by the Boards of Directors of Brenton and Ames Financial at any time
prior to the Effective Date without the approval of the shareholders of Ames
Financial with respect to any of their terms except the terms relating to: (1)
the amount or kind of consideration to be delivered to the Ames Financial
shareholders in the Merger; (2) the Articles of Incorporation of Brenton or (3)
the terms or conditions of this Agreement or the Merger Agreement if such
amendment would adversely affect the shareholders of Ames Financial.
Section 5. Shareholder Approval. This Agreement, the Merger Agreement
and the Merger shall be subject to approval by the affirmative vote of a
majority of the outstanding shares of Ames Financial common stock at a
meeting of stockholders duly called and held. The consummation of the Merger
shall be subject to the satisfaction, unless duly waived, of the conditions
set forth in Sections 9 and 10 of the Merger Agreement.
Section 6. Notices. Any notice or other communication required or
permitted under this agreement shall be effective only if it is in writing and
delivered personally, or by Federal Express, or by facsimile or sent by first
class United States mail, postage prepaid, registered or, certified mail,
address as follows:
<PAGE>
If to Brenton, to:
Mr. J. C. Brenton, President
Brenton Banks, Inc.
Suite 300, Capital Square
400 Locust Street
Des Moines. Iowa 50304-0961
Facsimile No. (515) 237-5221
with copy to:
W. Kendall Brown, Esq.
Brown, Winick, Graves, Donnelly,
Baskerville & Schoenebaum
Suite 1100, Two Ruan Center
601 Locust Street
Des Moines, Iowa 50309
Facsimile No. (515) 283-0231
If to Ames Financial, to:
Mr. Keith E. Dickson, Chairman
Ames Financial Corporation
424 Main Street
Ames, Iowa 50010
Facsimile No. (515) 232-3318
with copy to:
Donald L. Smith, Esq.
Smith, Nutty, Sharp, Benson & Jahn
618 Douglas Avenue
Ames, Iowa 50010
Facsimile No. (515) 232-0137
or to such other address or facsimile number as either party may designate by
notice to the other, and shall be deemed to have been given upon receipt.
Section 7. Further Assurances. From time to time as and when required by
the Surviving Corporation and to the extent permitted by law, the officers and
directors of Ames Financial last in office shall execute and deliver such
assignments, deeds and other instruments and shall take or cause to be taken
such further or other action as shall be necessary in order to vest or perfect
in or to confirm of record or otherwise to the Surviving Corporation title to,
and possession of, all of the assets, rights, franchises and interests of Ames
Financial in and of every type of property (real, personal and mixed) and
chooses in action, and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of the Surviving Corporation are fully
authorized to take any and all such action in the name of Ames Financial or
otherwise.
<PAGE>
IN WITNESS WHEREOF, Brenton and Ames Financial, pursuant to the approval
and authority duly given by resolutions adopted by their respective Boards
of Directors, have each caused this Plan and Agreement of Merger to be
executed by its respective President or Chairman (and, if applicable, its
corporate seal to be affixed hereto) and to be attested to by its Secretary.
ATTEST BRENTON BANKS, INC.
/s/ Steven T. Schuler, Secretary /s/ J. C. Brenton, President
Corporate Seal
ATTEST
AMES FINANCIAL CORPORATION
/s/ Karen Jacobson, Secretary /s/ Keith E. Dickson, Chairman
Corporate Seal
<PAGE>
CERTIFICATE OF SECRETARY OF AMES FINANCIAL CORPORATION
I, Karen Jacobson, Secretary of Ames Financial Corporation, a corporation
organized and existing under the laws of the State of Delaware ("Ames
Financial"), hereby certify, as such secretary (and under the seal of such
corporation) that the Plan and Agreement of Merger dated June 17, 1992 between
Ames Financial and Brenton Banks, Inc. to which this certificate is attached
was duly submitted to the shareholders of Ames Financial at a special meeting
of said shareholders called and held after at least twenty (20) days' notices
by mail as provided in Section 251 of the General Corporation Law of the State
of Delaware on the 16th day of September, 1992, for the purpose or considering
and taking action upon the proposed Plan and Agreement of Merger; that 273,624
shares of common stock, with a par value of $.01, of Ames Financial were on
said date issued and outstanding; that the proposed Plan and Agreement of
Merger was approved by the affirmative vote of the holders of a majority of
the total number of shares of the outstanding common stock of Ames Financial
entitled to vote thereon, and that thereby the Plan and Agreement of Merger
was at such meeting duly adopted as the act of the shareholders of Ames
Financial and the duly adopted agreement of such corporation.
WITNESS my hand (and the seal of Ames Financial) on this 30th day of
September, 1992.
/s/ Karen Jacobson, Secretary
Ames Financial Corporation
Corporate Seal
CERTIFICATE OF SECRETARY OF BRENTON BANKS, INC.
I, Steven T. Schuler, Secretary of Brenton Banks, Inc. a corporation
organized and existing under the laws of the State of lowa ("Brenton"), hereby
certify, as such secretary (and under the seal of such corporation) that the
Plan and Agreement of Merger dated June 17, 1992 between Ames Financial and
Brenton Banks, Inc. to which this certificate is attached was duly adopted
pursuant to subsection (d) of Section 251 of the General Corporation Law of
the State of Delaware and that the conditions specified in the first sentence
of said subsection (d) of Section 251 of the General Corporation Law of the
State of Delaware have been satisfied.
WITNESS my hand (and the seal of Brenton) on this 30th day of September,
1992.
/s/ Steven T. Schuler, Secretary
Brenton Banks, Inc.
Corporate Seal
<PAGE>
ARTICLES OF AMENDMENT
of
BRENTON BANKS, INC.
TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:
Pursuant to Section 1002 and 1006 of the Iowa Business Corporation Act,
the undersigned corporation adopts the following amendment to the
corporation's Restated Articles of Incorporation.
1. The name of the corporation is Brenton Banks, Inc.
2. Article III, Section 1 of the Restated Articles of Incorporation, is
amended to read as follows:
Section 1. Authorized Common Shares. The aggregate number of
shares of common stock which the corporation is authorized to issue
is Fifty Million (50,000,000), consisting of one class. Such shares
shall have a par value of Two Dollars and Fifty Cents ($2.50) per
share.
3. The date of adoption of the amendment was January 29, 1998.
4. The amendment was adopted by the board of directors without
shareholder action. Shareholder action on the amendment is not
required pursuant to Section 1002(4) of the Iowa Business Corporation
Act which allows the board of directors to amend the articles of
incorporation to change each issued and unissued authorized share of
an outstanding class into a greater number of whole shares if the
corporation has only shares of that class outstanding.
Dated: March 17, 1998.
BRENTON BANKS, INC.
By: /s/
Robert DeMeulenaere, President
By: /s/
Steven T. Schuler, Secretary
000472
<PAGE>
STATE OF IOWA )
) SS
COUNTY OF POLK )
On this 17 day of March, 1998, before me, a Notary Public in and for said
county and state, personally appeared Robert DeMeulenaere and Steven T.
Schuler, to me personally known, who, being by me duly sworn, did say that
they are the President and Secretary, respectively, of the corporation
executing the within and foregoing instrument, that the seal affixed to said
instrument is the seal of said corporation, that said instrument was signed
and sealed on behalf of the corporation by the authority of its Board of
Directors; and that Robert DeMeulenaere and Steven T. Schuler, as said
officers, acknowledged the execution of said instrument to be the voluntary
act and deed of the corporation, by it and by them voluntarily executed.
/s/ Debbie A. Mitchell
Exp. 3/2/01, Notary Public
in and for the State of Iowa
Filed Iowa Secretary of State
3-19-98
9:13 a.m.
000473
<PAGE>
BRENTON BANKS, INC.
BY-LAWS
ARTICLE I. MEETINGS OF STOCKHOLDERS
1. All meetings of stockholders shall be held in Des Moines, Iowa.
2. Annual meetings of stockholders shall be held on the first Wednesday
following the first Monday in May of each year.
3. 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 Corporation at least five (5) days prior to the date of the
annual meeting to be considered and voted upon at the meeting. Any such
stockholder proposal or nomination for the Board of Directors must be
accompanied by a written statement describing the purpose of the proposal or
the qualifications of the nominee. Such a statement shall not exceed five
hundred (500) words.
4. Special meetings of stockholders may be called by the Chairman, the Vice
Chairman, the President, or by a majority of the Directors or by stockholders
representing two-thirds of the outstanding stock of the corporation.
5. Written or printed notice stating the place, day, and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty
days before the date of the meeting, either personally or by mail or at the
direction of the Chairman, the Vice Chairman, the President, the secretary, or
the officer or person calling the meeting to each shareholder of record
entitled to vote at such meeting, but such notice may be waived in writing by
any stockholder. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his/her
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid.
6. At any meeting of stockholders, holders of a majority of the outstanding
shares shall constitute a quorum for the transaction of business.
7. The Chairman, or in his absence the Vice Chairman, at any meeting of the
stockholders, shall have the power and authority to prescribe appropriate rules
and procedures for the maintenance of order and the conduct of the meeting;
including, but not limited to, requirements for identification of speakers,
limitation on the time allotted to questions, comments and debate, variance
from the agenda, and procedures for dealing with disruptive individuals.
ARTICLE II. DIRECTORS
1. The Board of Directors of the Corporation shall consist of not less than
five, nor more than eleven members, who shall be elected by the stockholders at
their annual meeting. The Board of Directors shall, from time to time,
designate the number of directors of the Corporation within such range.
Directors shall hold office for a term of one year, or until their successors
are elected and qualified, but may be removed at any time by a majority vote
of the stockholders.
<PAGE>
2. Stockholder nominations for the Board of Directors shall be made in
accordance with Article I, Section 3, of these ByLaws.
3. The Board of Directors shall have the general management and control of the
business and affairs of the Corporation, and may exercise all the powers
possessed by the Corporation.
4. The Board of Directors shall meet immediately after adjournment of the
annual meeting of stockholders, and at such other times and places as the
Board may determine and as called by the Chairman, the Vice Chairman or the
President.
5. At all meetings of the Board it shall be necessary for a majority of all
the Directors to be present to constitute a quorum for the transaction of
business, but a lesser number may adjourn the meeting to a future time and
convenient place.
6. The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of two or more of the Directors of the Corporation, which to the
extent provided in said resolution or resolutions, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be determined from time
to time by resolution adopted by the Board of Directors. The committee or
committees shall keep regular minutes of their proceedings and report the
same to the Board when required.
7. The Board of Directors may appoint an Executive Committee. The Vice
Chairman shall be a member of and chairman of the Executive Committee. The
Board of Directors shall, from time to time, designate the number of Executive
Committee members of the Corporation. The Executive Committee shall not have
authority to alter or amend the By-Laws, but shall exercise all other powers
of the Board of Directors between the meeting of said Board, except the power
to fill vacancies in their own membership, which vacancy shall be filled by
the Board of Directors.
The Executive Committee shall meet at stated times or on notice to all by the
Committee Chair. It shall fix its own rules of procedure. A majority shall
constitute a quorum, but an affirmative vote of a majority of the whole
committee shall be necessary in every case. The Executive Committee shall
keep regular minutes of proceedings.
8. Any resolution in writing signed by all the members of the Board of
Directors (or any Committee thereof) shall be and constitute action by such
Board (or Committee) with the same force and effect as if the same had been
duly passed by the same vote at a duly called meeting of such bodies.
ARTICLE III. OFFICERS
1. The officers of the corporation shall be a Chairman, a Vice Chairman, a
President, one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, and a Treasurer, and such other officers as shall be authorized by
the Board of Directors. Officers shall be elected by the Board of Directors and
shall hold office at the pleasure of the Board. One person may hold one or more
offices, if the Board so determines.
2. The Chairman shall exercise the general supervision and direction of the
affairs of the Company. He shall preside as Chairman of all meetings of the
stockholders,
<PAGE>
of the Board of Directors, and, in the absence of the Vice Chairman, of the
Executive Committee, or he may direct another officer to preside in his place.
He may, with the Secretary, sign all certificates of stock and execute all
contracts and instruments which the Board of Directors shall lawfully
authorize and direct.
3. The Vice Chairman shall, in the absence of the Chairman, have all powers
and duties of the Chairman. As Committee Chair, he shall preside at all
meetings of the Executive Committee, or he may direct another officer to
preside in his place. He shall have such other powers and duties as may be
prescribed from time to time by the Board of Directors or the Chairman,
including those prescribed in any employment agreement.
4. The President shall work with all business affairs incident to the
activities and direction of the Company. He may, with the secretary, sign all
certificates of stock and execute all contracts and instruments which the
Board of Directors shall lawfully authorize and direct.
5. The Board of Directors may elect an Executive Vice President, who shall
have the powers and duties incident to that office and shall have such other
powers and duties as may be prescribed from time to time by the Chairman, the
Vice Chairman or the President. He shall, in the incapacity of the Chairman,
the Vice Chairman and of the President, perform such duties of the Chairman,
the Vice Chairman and of the President as the Board of Directors or the
Executive Committee shall prescribe. He may, with the Secretary, execute
contracts and instruments which the Board of Directors shall lawfully
authorize and direct.
6. Each Vice President shall have the powers and duties incident to that
office and shall have such other powers and duties as may be prescribed from
time to time by the Chairman, the Vice Chairman or the President. In the event
of the inactivity of the Chairman, of the Vice Chairman and of the President,
a Vice President designated by the Board of Directors or the Executive
Committee shall perform such duties of the Chairman, of the Vice Chairman and
of the President as the Board of Directors or the Executive Committee shall
prescribe. Any Vice President may execute contracts in the name of the
company.
7. The Secretary shall be ex-officio secretary of the Board of Directors and
the Executive Committee. He shall keep the minutes of all meetings of the
stockholders, the Board of Directors and the Executive Committee, and, when
required, of all other standing committees; and attend to serving and giving
all notices of the company. He shall have charge of the corporate seal, the
stock certificate books and such other books, records, and papers as the
Board of Directors and Executive Committee may direct; keep a stock book
containing the names alphabetically arranged of all persons who are
stockholders of the company, showing their place of residence, the number of
shares of stock held by them respectively and the time when they respectively
became owners thereof.
8. Each Assistant Secretary shall have the powers and duties incident to that
office and shall have such other powers and duties as may be prescribed by the
Secretary. In the event of the incapacity of the Secretary, an Assistant
Secretary designated by the Board of Directors and/ or the Executive Committee
shall perform such duties of the Secretary as the Board of Directors and/or the
Executive Committee shall prescribe.
9. The Treasurer shall keep or cause to be kept full and accurate accounts of
all receipts and disbursements in books belonging to the company, and shall
have the
<PAGE>
care and custody of all funds and securities of the company and deposit such
funds in the name of the company in such bank or banks as the Board of
Directors and/or the Executive Committee or the Chairman or the Vice Chairman
or the President may designate. The Treasurer is authorized to sign all checks,
drafts, notes, bills of exchange, orders for the payment of money, and any
negotiable instruments of the company, but no such instrument shall be signed
in blank. He shall disburse the funds of the company as may be ordered by the
Board of Directors, the Executive Committee, the Chairman, the Vice Chairman
or the President. The Treasurer shall at all reasonable times exhibit the
books and accounts to any directors, and he shall give such bonds for the
faithful performance of his duties as the Board of Directors, the Executive
Committee, the Chairman, the Vice Chairman or the President may determine, and
he shall perform such other duties as may be incident to his office.
ARTICLE IV. SEAL
The corporate seal of the company shall be circular in shape, and shall be
engraved with the name of the company and the state of incorporation around the
margin, and the words "CORPORATE SEAL" across the center.
ARTICLE V. CAPITAL STOCK
1. Certificates of stock shall be in a form adopted by the Board of Directors
and shall be signed by the Chairman, the Vice Chairman or President and the
Secretary or Assistant Secretary and be attested by the corporate seal. All
certificates shall be numbered consecutively; and the name of the stockholder,
his place of residence, the number of shares, and the dates of acquisition and
transfer shall be entered by the Secretary upon the records of the company, and
such record shall constitute the sole and exclusive evidence of who, as
stockholders, shall have the right to receive dividends and to vote at
stockholders' meetings.
2. Title to a certificate and to the shares represented thereby can be
transferred only, (a) by delivery of the certificate endorsed either in blank
or to a specified person by the person appearing by the certificate to be the
owner of the shares represented thereby, or b) by delivery of the certificate
and a separate document containing a written assignment of the certificate or
a power of attorney to sell, assign, or transfer the same or the shares
represented thereby, signed by the person appearing by the certificate to be
the owner of the shares represented thereby. Such assignment or power of
attorney may be either in blank or to a specified person.
ARTICLE VI. EXECUTION OF INSTRUMENTS, LOANS
1. Execution of Instruments. Any checks, drafts, bills of exchange,
acceptances, bonds, notes or other obligations or evidences of indebtedness
of the company, and also all deeds, mortgages, indentures, bills of sale,
conveyances, endorsements, assignments, transfers, stock powers, or other
instruments of transfer, contracts, agreements, dividend and other orders,
powers of attorney, proxies, waivers, consents, returns, reports, certificates,
demands, notices of documents and other instruments of writing of any nature
may be signed, executed, verified, acknowledged and delivered by such officers,
agents, or employees of the company, or any of them, and in such manner, as
shall be provided in the Articles of Incorporation or as from time to time may
be determined by the Board of Directors.
2. Loans. When so authorized by the Board of Directors any officer or agent of
the company may effect loans and advances at any time for the company secured by
<PAGE>
mortgage or pledge of the company's property or otherwise, and may do every act
and thing necessary or proper in connection therewith. Such authority may be
general or confined to specific instances.
ARTICLE VII. DIVIDENDS
The Board of Directors, in its discretion from time to time may declare
dividends upon the capital stock from the surplus and net profits of the
company, subject to all the provisions of the Articles of Incorporation.
ARTICLE VIII. FISCAL YEAR
The fiscal year of this corporation shall begin on the first day of January and
terminate on the last day of December of each year, except that the first year
shall begin on August 31, 1948.
ARTICLE IX. OTHER OFFICERS AND THEIR DUTIES
The Board of Directors, upon exercising any power to appoint additional
officers, may prescribe their duties and compensation and determine as to
the securities for the faithful performance of their duties to be given by
them, which prescription as to duties and securities may be made in the form
of By-Laws or by resolution of the Board, as it shall determine.
ARTICLE X. INDEMNIFICATION OF DIRECTORS AND OFFICERS
This corporation shall indemnify an officer of this corporation and each
officer of this corporation who is serving or who has served, at the request
of this corporation, as a director, officer, partner, trustee, employee, or
agent of another corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan, to the fullest extent possible against
expenses, including attorneys' fees, judgments, penalties, fines, settlements,
and reasonable expenses, actually incurred by such officer or person relating
to his conduct as an officer of this corporation or as a director, officer,
partner, trustee, employee or agent of another corporation, partnership,
joint venture, trust, other enterprise or employee benefit plan, except that
the mandatory indemnification required by this sentence shall not apply (i)
to a breach of an officer's duty of loyalty to the corporation or its
stockholders, (ii) for acts of omissions not in good faith or which involve
intentional misconduct or knowing violation of the law, (iii) for a
transaction from which the officer derived an improper personal benefit, (iv)
under Section 496A.44 of the Iowa Business Corporation Act, or (v) against
judgments, penalties, fines, and settlements arising from any proceeding by
or in the right of the corporation, or against expenses in any such case
where such officer shall be adjudged liable to the corporation.
ARTICLE XI. OTHER INTERESTS-OF-OFFICERS OR DIRECTORS
1. No Director shall vote on a question in which he is interested, except the
election of a President or other officer or employee, but in the absence of
fraud, no contract or other transaction of the corporation shall be affected or
invalidated in any way by the fact that any of the officers or Directors of the
corporation are in any way interested in or connected with any other party to
said contract or transaction or are themselves parties to said contract or
transaction, provided that such interest shall be fully disclosed or otherwise
known to the Board of Directors at the meeting of said Board at which such
contract or transaction is authorized or confirmed, and provided further that
at the meeting of the Board of Directors authorizing or
<PAGE>
confirming such contract or transaction there shall be present a quorum of
Directors not so interested or connected and such contract or transaction shall
be approved by a majority of such quorum, which majority shall consist of
Directors not so interested or connected. The mere ownership of stock in
another corporation by a Director shall not disqualify him to vote in respect
of any transaction between this corporation and such other corporation.
2. Inasmuch as the officers and Directors of this corporation may be men of
large and diversified business interest, and connected with other corporations
with which, from time to time, this corporation may have business dealings, no
contract or other transaction between this corporation and any other
corporation shall be affected by the fact that any of the officers or
directors of this corporation are interested in or are directors or officers
of such other corporation, if such contract or transaction be made,
authorized or confirmed by the Board of Directors in the manner provided in
the preceding paragraph, or by any committee of this corporation having the
requisite authority, by vote of a majority of the members of such committee
not so interested; and any officer or director individually may be a party
to or may be interested in any contract or transaction of this corporation,
provided that such contract or transaction shall be approved or ratified by
the Board of Directors or by any committee of this corporation having the
requisite authority, in the manner herein set forth.
ARTICLE XII. AMENDMENTS
The Board of Directors may alter these By-Laws of the corporation at any
regular or special meeting.
AS AMENDED July 6, 1989.
Resolved that the foregoing are adopted as the amended and substituted
By-laws of the corporation as of the above date.
/s/ C. Robert Brenton /s/ J.C. Brenton
/s/ R. Dean Duben /s/ Thomas R. Smith
/s/ William H. Brenton
CONSTITUTING ALL OF THE MEMBERS OF THE BOARD OF DIRECTORS
<PAGE>
Exhibit 10.1
Summary of the Company's Bonus Plans under which some of the executive
officers of the Company and certain other personnel of the subsidiaries are
eligible to receive a bonus each year.
101
<PAGE>
1997 BRENTON BANKS, INC. BONUS PLANS
For 1997, the Company (Brenton Banks, Inc. and Subsidiaries) has bonus plans
that cover executive officers, line of business managers, subsidiary
presidents, senior managers, market managers, and other key personnel. The
following chart summarizes the main features of these bonus plans:
Bonus potential (as percent of base pay):
Executive officers 37.50%
Line of business managers and
subsidiary presidents 30.00%
Market managers 30.00%
Senior managers and other key personnel 10.00% to 30.00%
Bonus threshold for executive officers:
Bonus achievement is tied to a consolidated earnings threshold of
$17,000,000 whereby no bonus will be paid if this earnings threshold is not
achieved. For executive officers 50% to 100% of bonus is tied to consolidated
net income. The same tiered earnings bonus matrix applies to all employees
who have a portion of their bonus tied to consolidated net income. The tiered
earnings bonus matrix provides for no bonus unless net income exceeds
$17,000,000 and provides for 100% of bonus to be earned when net income
exceeds $18,000,000.
Bonus criteria:
Bonus amounts are paid for achievement of certain pre-established
financial and personal goals, the most significant of which are as follows:
Consolidated net income
Subsidiary or line of business net income
Sales goals
Growth in loans
Growth in core deposits
Fee income generation
Non-interest income
Non-interest expense
Key personal objectives
Bonus achievements:
Bonus amounts are earned ratably based on actual results compared to a
tiered bonus achievement matrix.
102
<PAGE>
Exhibit 10.2
1996 Stock Option Plan, Administrative Rules and Agreement under which
officers of the Company are eligible to receive options to purchase an
aggregate of 1,210,000 shares of the Company's $2.50 par value common stock.
This 1996 Stock Option Plan, Administrative Rules and Agreement is
incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the
quarter ended September 30, 1996.
103
<PAGE>
Exhibit 10.3
Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by
reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended
September 30, 1995.
104
<PAGE>
Exhibit 10.4
Employment Agreement, dated July 6, 1989, between William H. Brenton and
Brenton Banks, Inc. This Employment Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
105
<PAGE>
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules and Agreement under
which officers of the Company are eligible to receive options to purchase an
aggregate of 726,000 shares of the Company's $2.50 par value common stock.
106
<PAGE>
BRENTON BANKS, INC.
NONQUALIFIED STOCK OPTION PLAN
1. Purpose. The Nonqualified Stock Option Plan (the "Plan") is intended
to advance the interests of Brenton Banks, Inc. (the "Company"), its
shareholders, and its subsidiaries by encouraging and enabling selected
officers and other key employees upon whose judgment, initiative and effort
the Company is largely dependent for the successful conduct of its business,
to acquire and retain a proprietary interest in the Company by ownership of
its stock. Options granted under the plan are intended to be options which do
not meet the requirements of Section 422 of the Internal Revenue Code of 1954,
as amended (the "Code").
2. Definitions.
(a) "Board" means the Board of Directors of the Company.
(b) "Common Stock" means the Company's $5.00 par value Common Stock.
(c) "Date of Grant" means the date on which an option is granted
under the Plan.
(d) "Option" means an option to acquire Common Stock granted under
the Plan.
(e) "Optionee" means a person to whom an option, which has not
expired, has been granted under the Plan.
(f) "Subsidiary" or "Subsidiaries" means a subsidiary corporation or
corporations of the Company as defined in Section 425 of the Code.
(g) "Successor" means the legal representative of the estate of a
deceased Optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any Optionee.
(h) "Administrative Rules" means Rules adopted by a majority vote of
the Board to interpret the provisions of the Plan or to impose other terms,
conditions and restrictions on the granting, term, vesting and exercise of the
Options and upon the issuance and transfer of Options and Stock issued pursuant
to the exercise of Options. Administrative Rules shall, upon adoption, become
part of this Plan as if originally stated herein. The Rules adopted by the
Board shall be passed by resolution and kept at the Company's chief executive
office.
<PAGE>
3. Administration of Plan. The Plan shall be administered by the Board.
Options to members of the Board may be granted only by a majority of the
disinterested members of the Board. The Board shall have full and final
authority in its discretion, subject to the provisions of the Plan, to
determine the individuals to whom and the time or times at which options shall
be granted and the number of shares and purchase price of Common Stock covered
by each Option; to construe and interpret the Plan; to determine the terms
and provisions of the respective option agreements, which need not be
identical, including, but without limitation, terms covering the payment of
the option price; and to make all other determinations and take all other
actions deemed necessary or advisable for the proper administration of the
Plan. All such actions and determinations shall be conclusively binding for
all purposes and upon all persons.
4. Common Stock Subject to Options. The aggregate number of shares of
the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 100,000, subject to adjustment under
the provisions of paragraph 9. The shares of Common Stock to be issued upon
the exercise of Options may be authorized but unissued shares, shares issued
and reacquired by the Company or shares bought on the market for the purposes
of the Plan. In the event any Option shall, for any reason, terminate or
expire or be surrendered without having been exercised in full, the shares
subject to such Option but not purchased thereunder shall again be available
for Options to be granted under the Plan.
5. Participants. Options may be granted under the Plan to officers of
the Company or of any of its Subsidiaries who are residents of the State or
Iowa when the Options are granted.
6. Terms and Conditions of Options. Any Option granted under the Plan
shall be evidenced by an agreement executed by the Company and the applicable
officer and shall contain such terms and be in such form as the Board may from
time to time approve, subject to the following limitations and conditions:
(a) Option Price. The option price per share with respect to each
Option shall be determined by the Board but shall in no instance be less than
100% of the fair market value of a share of the Common Stock on the Date of
Grant. For the purposes hereof, fair market value shall be as determined by the
Board and such determination shall be binding upon the Company and upon the
Optionee. The Board may make such determination (i) in case the Common Stock
shall not then be listed and traded upon a recognized securities exchange, upon
the basis of the mean between the bid and asked quotations for such stock on
the Date of Grant (as reported by The Wall
<PAGE>
Street Journal "NASDAQ Bid And Asked Quotations" for the Date of Grant) or, in
the event that there shall be no bid or asked quotations on the Date of Grant,
then upon the basis of the mean between the bid and asked quotations on the
date nearest preceding the Date of Grant or (ii) in case the Common Stock
shall then be listed and traded upon a recognized securities exchange, upon
the basis of the mean between the highest and lowest selling prices at which
shares of the Common Stock were traded on such recognized securities exchange
on the Date of Grant as reported in The Wall Street Journal or, if the Common
Stock was not traded on said Date, upon the basis of the mean of such prices
on the date nearest preceding the Date of Grant, and (iii) upon any other
factors which the Board shall deem appropriate.
(b) Period of Option. The expiration date of each Option shall be
set by the Board.
(c) Change in Duties or Position of Optionee. So long as the
holder of an Option shall continue to be an employee of the Company or one or
more of its Subsidiaries, his Option shall not be affected by any change of
duties or position.
(d) Restrictions on Options and Stock Issued Pursuant to Options.
Administrative Rules may be adopted by the Board to interpret the provisions of
the Plan or to impose other terms, conditions, and restrictions on the
granting, term, vesting and exercise of Options and upon the issuance and
transfer of Options and Stock issued pursuant to the exercise of Options.
7. Shareholder Rights. Neither an Optionee nor his Successor shall have
any of the rights of a shareholder of the Company until the certificates
evidencing the shares purchased are properly delivered to such Optionee or his
Successor.
8. No Alteration of Employment Terms. The granting of an Option to an
eligible person does not alter in any way the Company's or the relevant
Subsidiary's existing rights to terminate such person's employment at any time
for any reason, nor does it confer upon such person any rights or privileges
except as specifically provided for in the Plan.
9. Adjustments. In the event that the outstanding shares of Common Stock
of the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation, by reason of a recapitalization,
reclassification, stock split-up, combination of shares, or dividend or other
distribution payable in capital stock, appropriate adjustment shall be made by
the Board in the number and kind of shares as to which
<PAGE>
Options may be granted under the Plan. In addition, there shall be appropriate
adjustments made in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable, to the end
that the proportionate interest of the holder of the Option shall, to the
extent practicable, be maintained as before the occurrence of such event.
Such adjustment in outstanding Options shall be made without change in the
total price applicable to the unexercised portion of the Option but with a
corresponding adjustment in the option price per share.
10. Restrictions on Issuing Shares. The exercise of each Option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with,
such exercise or the delivery or purchase of shares pursuant thereto, then
in any such event, such exercise shall not be effective unless such
withholding, listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
11. Use of Proceeds. The proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of Options granted under the Plan
shall be added to the Company's general funds and used for general corporate
purposes.
12. Suspension and/or Termination of Plan. The Board may at any time
suspend or terminate the Plan. The Board cannot change any provisions under the
Plan which would increase the cost of the Plan to the Company, or alter the
allocation of benefits under the Plan without approval by the shareholders of
the Company. Unless the Plan shall have been terminated by the Board, the Plan
shall terminate ten years after the effective date of the Plan. No Option may
be granted during any suspension or after the termination of the Plan. Except
as provided in this paragraph, no suspension or termination of the Plan shall,
without an Optionee's consent, alter or impair any of the rights or obligations
under any Option theretofore granted to such Optionee under the Plan.
13. Effectiveness of the Plan. The Plan shall become effective only
after the stockholders of the Company shall, by the affirmative vote of a
majority in interest of the Common Stock, have approved the Plan.
13. Time of Granting Options. Neither anything contained in the Plan or
in any resolution adopted or to be adopted by the Board of Directors or the
stockholders of the Company nor any action
<PAGE>
taken by the Board shall constitute the granting of any Option. The granting of
an Option shall take place only when a written Option Agreement is duly
executed and delivered by or on behalf of the Company and the Optionee to
whom such Option shall be granted.
<PAGE>
ADMINISTRATIVE RULES
FOR BRENTON BANKS, INC.
NONQUALIFIED STOCK OPTION PLAN
1. Purpose. The Purpose of the Administrative Rules as adopted and
amended by the Board of Directors is to interpret the provisions of the
Brenton Banks, Inc. "Nonqualified Stock Option Plan" (the "Plan") or to
impose other terms, conditions, and restrictions on the granting, term,
vesting and exercise of the options and upon the issuance and transfer of
Options and stock issued pursuant to the exercise of Options.
2. Definitions.
A. Those terms defined in the Plan shall have the same meaning when
used in these Rules.
B. "Disability" means an employee of the company who is disabled as
defined under the Company's disability plan, if any, or under the Social
Security Rules.
2. Expiration Date of Options Granted Under the Plan. Except as
otherwise provided in Section 4(C)(1), the Options granted under the Plan
shall expire 10 years and 30 days from the date of issuance.
3. Vesting of Option Rights. Unless otherwise provided, an option
granted under this Plan shall become exercisable as follows:
A. 20% of the number of shares originally covered thereby at any time
after the Optionee has completed one (1) year of employment with the Company or
any of its Subsidiaries following the date of granting of the Option.
B. An additional 20% of the number of shares originally covered
thereby at the end of the second, third, fourth and fifth years of the
Optionee's employment with the Company or any Subsidiary thereof following
the date of granting of the Option. Said installments shall be cumulative to
the extent that the Optionee will be able to exercise 20, 40, 60, 80, or 100%
of the stock option rights originally granted thereby following the
completion of the first, second, third, fourth and fifth years of service,
respectively, with the Company or any of its Subsidiaries following the date
of the granting of the Option. To the extent not exercised, installments
shall be exercisable, in whole or in part, in any subsequent period but not
later than ten (10) years and 30 days from the date the Option is granted.
<PAGE>
C. Notwithstanding the foregoing:
(1) Termination of Employment. Upon termination of an Optionee's
employment with the Company or with any of its subsidiaries for reasons other
than death, disability, retirement after age 60 or retirement before age 60
with Board approval, his Option privileges shall be limited to the shares
which were immediately purchasable by him at the date of such termination
and such Option privilege shall expire unless exercised by him within ninety
(90) days after the date of such termination. In the case of the death,
disability, retirement after age 60, or retirement before age 60 with
approval of the Board, the provisions of the preceding sentence shall not
apply, and an Option shall be vested as provided in Section 4(C)(2) and
4(C)(3) hereof and shall be exercisable for the remaining term thereof as
provided in Section 3 hereof.
(2) Death or Disability of Optionee. If an Optionee to whom an
Option shall have been granted shall die or become disabled while he shall be
employed by the Company or one or more of its Subsidiaries, such Option shall
thereupon be 100% vested and may be exercised to the extent not previously
exercised, as to all Common Shares which shall be covered by such Option by the
Optionee, legatee or legatees of the Optionee under his last Will, or by his
personal representatives or distributees.
(3) Retirement of Optionee. In the event that an Optionee to
whom an Option shall have been granted shall retire after the age of 60 any
Option held by such retired Optionee shall thereupon be 100% vested and may
be exercised, to the extent not previously exercised, as to all the shares
which shall be covered by such Option. In the event Optionee retires prior
to age 60, the Option may become 100% vested upon the approval of the Board
in its sole discretion. If the Optionee retires prior to the age of 60
without the approval of the Board, the first sentence of Section 4(C)(1)
shall control.
5. Nontransferability of Options. No option granted under the Plan shall
be transferable otherwise than by will or by laws of descent and distribution,
and during the lifetime of the Option only the Optionee (or his duly appointed
legal representative) may exercise the Option.
6. Exercising Options. Unless written notice, identifying which options
are being exercised, is given to the Company at the time the options are
exercised, the options held by the option holder that have been exercisable for
the longest period of time shall be deemed to be those exercised by the option
holder.
<PAGE>
BRENTON BANKS, INC.
1987 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Option Agreement is made this ____ day of _______________, 19___, by
and between Brenton Banks, Inc., an Iowa corporation (the "Company") and
_________________________, an employee of the Company or Subsidiary thereof
(the "Employee").
The Company desires to carry out the purpose of its 1987 Stock Option
Plan (the "Plan") by affording the Employee an opportunity to purchase shares
of its common stock, par value Five Dollars ($5.00) per share (the "Common
Stock"), as provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement and for other good and valuable consideration, the Company and
the Employee have agreed, and do by this Agreement agree, as follows:
1. Grant of Option. The Company by this Agreement irrevocably grants to
the Employee the right and option (the "Option") to purchase ______ shares of
Common Stock (such number being subject to adjustment as provided in Paragraph
8 of this Agreement) on the terms and conditions set forth in this Agreement.
2. Purchase Price. The purchase price of the shares of the Common Stock
covered by this Option shall be _____________ Dollars and _____/100
(__________________) per share.
3. Term of Option. The term of the Option shall be for a period of ten
years and thirty days from the date of this Agreement subject to earlier
termination as provided in Paragraph 4, of this Agreement. The Employee may
exercise vested Options at any time or from time to time as to part or all of
the shares of Common Stock covered by the Option.
4. Vesting of Option Rights. Unless otherwise provided, an option
granted under this Plan shall become exercisable as follows:
A. Twenty percent (20%) of the number of shares originally covered
thereby at any time after the Optionee has completed one (1) year of
employment with the Company or any of its Subsidiaries following the date of
granting of the Option.
<PAGE>
B. An additional 20% of the number of shares originally covered thereby
at the end of the second, third, fourth and fifth years of the Optionee's
employment with the Company or any Subsidiary thereof following the date of
granting of the Option. Said installments shall be cumulative to the extent
that the Optionee will be able to exercise 20, 40, 60, 80, or 100% of the
stock option rights originally granted thereby following the completion of the
first, second, third, fourth and fifth years of service, respectively, with
the Company or any of its subsidiaries following the date of the granting of
the Option. To the extent not exercised, installments shall be exercisable,
in whole or in part, in any subsequent period but not later than ten (10)
years and 30 days from the date the Option in granted.
C. Notwithstanding the foregoing:
(1) Termination of Employment. Upon termination of an Optionee's
employment with the Company or with any of its Subsidiaries for reasons other
than death, disability, retirement after age 60 or retirement before age 60
with Board approval, his Option privileges shall be limited to the shares
which were immediately purchasable by him at the date of such termination and
such option privileges shall expire unless exercised by him within ninety (90)
days after the date of such termination. In the case of the death,
disability, retirement after age 60, or retirement before age 60 with approval
of the Board of Directors of the Company, the provisions of the preceding
sentence shall not apply, and an Option shall be vested as provided in
Paragraph 4(C)(2)and 4(C)(3) hereof and shall be exercisable for the remaining
term thereof as provided in Section 3 hereof.
(2) Death or Disability of Optionee. If an Optionee to whom an Option
shall have been granted shall die or become disabled while he shall be
employed by the Company or one or more of its Subsidiaries, such Option shall
thereupon be 100% vested and may be exercised to the extent not previously
exercised, as to all Common Shares which shall be covered by such Option by
the Optionee, legatee or legatees of the Optionee under his last Will, or by
his personal representatives or distributees.
(3) Retirement of Optionee. In the event that an Optionee to whom an
Option shall have been granted shall retire after the age of 60 any Option
held by such retired Optionee shall thereupon be 100% vested and may be
exercised, to the extent not previously exercised, as to all the shares which
shall be covered by such Option. In the
<PAGE>
event Optionee retires prior to age 60, the Option may become 100% vested upon
the approval of the Board of Directors of the Company in its sole discretion.
If the Optionee retires prior to the age of 60 without the approval of the
Board of Directors of the Company, the first sentence of Section 4(C)(1) shall
control.
5. Change in Duties or Position of Optionee. So long as the holder of
an Option shall continue to be an employee of the Company or one or more of
its Subsidiaries, his Option shall not be affected by any change of duties or
position.
6. Nontransferability of Options. No option granted under the Plan
shall be transferable otherwise than by will or by laws of descent and
distribution, and during the lifetime of the Optionee only the Optionee (or
his duly appointed legal representative) may exercise the Option.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may be exercised by written notice to the Company.
Such notice shall state the election to exercise the Option and the number of
shares in respect of which it is being exercised and shall be signed by the
person who shall exercise the Option. Such notice shall either (a) be
accompanied by payment of the full purchase price of such shares, in which
event the Company shall deliver a certificate or certificates representing
such shares as soon as practicable after notice shall be received; or (b) fix
a date (not less than five (5) nor more than fifteen (15) business days from
the date such notice shall be received by the Company) for the payment of the
full purchase price of such shares against delivery of a certificate or
certificates representing such shares. A certificate or certificates for the
shares as to which the Option shall have been so exercised shall be registered
in the name of the person who shall exercise the Option or in joint tenancy
with the right of survivorship with another as directed by the Optionee, and
shall be delivered as provided above to or upon the written order of the
person who shall exercise the Option.
8. Presumption of Options Exercised. Unless written notice, identifying
which options are being exercised, is given to the Company at the time the
options are exercised, the options held by the option holder that have been
exercisable for the longest period of time shall be deemed to be those
exercised by the option holder.
9. Shareholder Rights. Neither an Optionee nor his Successor shall have
any of the rights of a shareholder of the Company until the certificates
evidencing the shares purchased are properly delivered to such Optionee or his
Successor.
<PAGE>
10. No Alteration of Employment Terms. The granting of an Option to an
eligible person does not alter in any way the Company's or the relevant
Subsidiary's existing rights to terminate such person's employment at any time
for any reason, nor does it confer upon such person any rights or privileges
except as specifically provided for in the Plan.
11. Adjustments. In the event that the outstanding shares of Common
Stock of the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation, by reason of a recapitalization,
reclassification, stock split-up, combination of shares, or dividend or other
distribution payable in capital stock, appropriate adjustment shall be made by
the Board. in the number and kind of shares as to which Options may be granted
under the Plan. In addition, there shall be appropriate adjustments made in
the number and kind of shares as to which outstanding options, or portions
thereof then unexercised, shall be exercisable, to the end that the
proportionate interest of the holder of the Option shall, to the extent
practicable, be maintained as before the occurrence of such event. Such
adjustment in outstanding Options shall be made without change in the total
price applicable to the unexercised portion of the option but with a
corresponding adjustment in the option price per share. Nothing contained in
this paragraph shall be construed as authorizing the issuance of fractional
shares of stock.. The adjustments made pursuant to this paragraph shall be
rounded downward to the nearest whole share.
12. Restrictions on Issuing Shares. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
13. Stock Legend. The employee hereby consents to the imposition of an
appropriate stock transfer legend upon the stock issued pursuant to the
exercise of the options in a form prescribed by the Company's legal counsel.
<PAGE>
14. Covenant of Employee. The Employee hereby covenants that he is
currently a bona fide resident of the State of Iowa.
15. Notices. Any notices provided for under this Agreement shall be in
writing and shall be delivered in person to the party to be notified or sent
by certified mail. Notices sent to the Company shall be addressed to Brenton
Banks, Inc., 300 Capital Square, Des Moines, IA 50309. Notices sent to the
Employee shall be addressed to the Employee at his address as it appears in
the Company's regular records.
16. Terms. Those terms defined in the Brenton Banks, Inc. Non Qualified
Stock Option Plan or the Administrative Rules adopted thereunder shall have
the same meanings when used in this Agreement.
17. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Employee with respect to this Agreement. No
waiver, modification or amendment of any of the terms of this Agreement shall
be effective unless set forth in a written agreement signed by the Company and
the Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
BRENTON BANKS, INC.
By___________________________________
EMPLOYEE OPTION HOLDER
_____________________________________
<PAGE>
AMENDMENT NO. 1 TO 1987 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
THIS AMENDMENT NO. 1 TO 1987 STOCK OPTION PLAN STOCK OPTION AGREEMENT
("Amendment") made and entered into as of this _____________________ day of
_________________, 1988, by and between Brenton Banks, Inc., an Iowa
corporation ("Company") and _____________________, an employee of the Company
or of a subsidiary ("Employee").
RECITALS:
The Company and the Employee entered into a Stock Option Agreement dated
____________________________ ("Agreement") and the Company and the Employee
wish to amend the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Paragraph 4 of the Agreement is hereby amended by adding the following
subparagraph 4 to subparagraph C:
"(4) Should the Company be sold, merged or consolidated with another
company for whatever reason, and by whatever means, then all outstanding
options which have not yet become exercisable, shall become immediately
exercisable to the Optionee upon the date of such sale or merger transaction."
2. All other terms and conditions of the Agreement shall remain in full force
and effect.
Brenton Banks, Inc.
By:____________________________
Employee Option Holder
_______________________________
<PAGE>
Exhibit 10.6
Long-Term Stock Compensation Plan, Agreements and related documents, effective
for 1994, under which certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton Banks, Inc. stock based
upon their service to the Company and Company performance. This Long-Term
Stock Compensation Plan, Agreement and related documents are incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the year ended December
31, 1994.
120
<PAGE>
Exhibit 10.7
Long-Term Stock Compensation Plan, Agreements and related documents, effective
for 1993, under which certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton Banks, Inc. stock based
upon their service to the Company and Company performance. This Long-Term
Stock Compensation Plan, Agreements and related documents are incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the year ended December
31, 1993.
121
<PAGE>
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and related documents, effective
for 1995, under which certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton Banks, Inc. stock based
upon their service to the Company and Company performance. This Long-Term
Stock Compensation Plan, Agreements and related documents are incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the year ended December
31, 1995.
122
<PAGE>
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security Agreement between Brenton
Banks and the Federal Home Loan Bank of Des Moines. This Standard Agreement
for Advances, Pledge and Security Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1993.
123
<PAGE>
Exhibit 10.10
Short-term note with American National Bank & Trust Company of Chicago as of
April 30, 1997 setting forth the terms of the Parent Company's $2,000,000
short-term debt agreement.
124
<PAGE>
American National Bank
and Trust Company of Chicago
33 North LaSalle Street/Chicago, Illinois 60690/(312) 661-5000
April 30, 1997
Brenton Banks, Inc.
Capital Square
400 Locust
Des Moines, Iowa 50304
Gentlemen:
This letter will replace the previous Letter Agreement regarding the negative
pledge on Brenton Bank stock dated April 30, 1996. This letter is in reference
to the certain Promissory Note (Unsecured) dated April 30, 1997, both by
Brenton Banks, Inc. ("Brenton") in favor of American National Bank and Trust
Company of Chicago ("ANB") in connection with a commitment in the amount of
Two Million and 00/100 Dollars to be extended by ANB to Brenton and any
subsequent renewals and modification ("Commitment").
In consideration of ANB providing the Commitment, Brenton hereby covenants that
it will not create, assume or suffer to exist, any Lien upon the stock of a
Subsidiary bank.
For the purpose of this Letter Agreement, the following definitions shall apply:
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, and
the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction).
"Subsidiary" shall mean a corporation with respect to which more than
50% of the outstanding shares of stock of each class having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by Brenton or by one or
more Subsidiaries of Brenton.
<PAGE>
Page 2
If the foregoing correctly states your understanding of our agreement, please
execute the enclosed copy of the Letter Agreement in the space indicated and
return it to Pam Katsules, Officer of ANB.
American National Bank and Trust
Company of Chicago
By: ____________________________
Its:____________________________
Accepted and agreed to this 30th day of April, 1997.
Brenton Banks, Inc.
an Iowa corporation
By: /s/ Steven T. Schuler
Its: CFO/Treasurer/Secretary
<PAGE>
American National Bank
and Trust Company of Chicago
PROMISSORY NOTE (UNSECURED)
$2,000,000.00
Chicago, Illinois April 30, 1997
Due April 30, 1998
FOR VALUE RECEIVED the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of Two Million and 00/100 Dollars, or such lesser
principal sum as may then be owed by Borrower to Bank hereunder.
Borrower's obligations and liabilities to Bank under this Note ("Borrowers
Liabilities") shall be due and payable on April 30, 1998.
This Note restated and replaces a Promissory Note (Unsecured) in the
principal amount of $2,000,000.00, dated April 30, 1996 executed by Borrower in
favor of Bank (the "Prior Note") and is not a repayment or novation of the
Prior Note.
The unpaid principal balance of Borrower's Liabilities due hereunder shall
bear interest from the date of disbursement until paid, computed at a daily
rate equal to the daily rate equivalent of 0.00% per annum (computed on the
basis of a 360-day year and actual days elapsed) in excess of the rate of
interest announced or published publicly from time to time by Bank as its
prime or base rate of interest (the "Base Rate"); provided, however, that in
the event that any of Borrower's Liabilities are not paid when due, the
unpaid amount of Borrower's Liabilities shall bear interest after the due
date until paid at a rate equal to the sum of the rate that would otherwise
be in effect plus 3%.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day of
each month, and at maturity, commencing with the last day of May, 1997 or as
billed by Bank to Borrower, at Bank's principal place of business, or at such
other place as Bank may designate from time to time hereafter. After maturity,
accrued interest on all of Borrower's Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
Any deposits or other sums at any time credited by or payable or due from
Bank to Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the possession or
control of Bank or its bailee for any purpose, may be reduced to cash and
applied by Bank to or setoff by Bank against Borrower's Liabilities.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable or declared
due and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's
Liabilities fails or neglects to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Note; (c)
occurrence of a default or an event of default under any agreement, instrument
or document heretofore, now or at any time hereafter delivered by or on behalf
of Borrower to Bank; (d) occurrence of a default or an event of default under
any agreement, instrument or document heretofore, now or at any time
hereafter delivered to Bank by any guarantor of Borrower's Liabilities or by
any person or entity which has granted to Bank a security interest or lien in
and to some or all such person's or entity's real or personal property to
secure the payment of Borrower's Liabilities; (e) if any of Borrower's assets
are attached, seized, subjected to a writ, or are levied upon or become
subject to any lien or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors; (f) if a notice of lien,
levy or assessment is filed of record or given to Borrower with respect to
all or any of Borrower's assets by any federal, state or local department
or agency; (g) if Borrower or any guarantor of Borrower's Liabilities becomes
insolvent or generally fails to pay or admits in writing its inability to pay
debts as they become due, if a petition under Title 11 of the United States
Code or any similar law or regulation is filed by or against Borrower or
any such guarantor, if
Page 1 of 3
<PAGE>
Borrower or any such guarantor shall make an assignment for the benefit of
creditors, if any case or proceeding is filed by or against Borrower or any
such guarantor for its dissolution or liquidation, or if Borrower or any such
guarantor is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs; (h) the death or
incompetency of Borrower or any guarantor of Borrower's Liabilities, or the
appointment of a conservator for all or any portion of Borrower's assets; (i)
the revocation, termination or cancellation of any guaranty of Borrower's
Liabilities without written consent of Bank; (j) if a contribution failure
occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of a
controlled group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986
or Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended, "ERISA") sufficient to give rise to a lien under Section 302(f) of
ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities is in
default in the payment of any obligations, indebtedness or other liabilities
to any third party and such default is declared and is not cured within the
time, if any, specified therefor in any agreement governing the same; (l) if
any material statement, report or certificate made or delivered by Borrower,
any of Borrower's partners, officers, employees or agents or any guarantor of
Borrower's Liabilities is not true and correct; or (m) if Bank is reasonably
insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower, all of Borrower's Liabilities
shall be immediately due and payable.
All of Bank's rights and remedies under this Note are cumulative and non-
exclusive. The acceptance by Bank of any partial payment made hereunder after
the time when any of Borrower's Liabilities become due and payable will not
establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver
of an Event of Default hereunder shall not suspend, waive or affect any
other Event of Default hereunder. Borrower and every endorser waive
presentment, demand and protest and notice of presentment, protest, default,
non-payment, maturity, release, compromise, settlement, extension or renewal
of this Note, and hereby ratify and confirm whatever Bank may do in this
regard. Borrower further waives any and all notice or demand to which
Borrower might be entitled with respect to this Note by virtue of any
applicable statute or law (to the extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any and all
costs, fees and expenses (including reasonable attorneys' fees, costs and
expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder,
and (ii) in representing Bank in any litigation, contest, suit or dispute,
or to commence, defend or intervene or to take any action with respect to
any litigation, contest, suit or dispute (whether instituted by Bank,
Borrower or any other person) in any way relating to this Note or Borrower's
Liabilities, and to the extent not paid the same shall become part of
Borrower's Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank and
to have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Advances under this Note may be made by Bank upon oral or written request
of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which
Bank in good faith believes to be made by an Authorized Person, regardless of
whether such requests are in fact made by an Authorized Person. Any such
advance shall be conclusively presumed to have been made by Bank to or for
the benefit of Borrower. Borrower does hereby irrevocably confirm, ratify
and approve all such advances by Bank and agrees to indemnify Bank against
any and all losses and expenses (including reasonable attorneys' fees) and
shall hold Bank harmless with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL
BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF
ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER
OR IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY
Page 2 of 3
<PAGE>
IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
400 Locust, Box 961 Brenton Banks, Inc.
Des Moines, Iowa 50304 an Iowa corporation
By: /s/ Steven T. Schuler
FEIN Its: CFO/Treasurer/Secretary
Page 3 of 3
<PAGE>
Exhibit 10.11
Data Processing Agreement dated December 1, 1991 by and between ALLTEL
Information Services, Inc., (formerly Systematics, Inc.) and Brenton Bank
(formerly Brenton Information Systems, Inc.). This Data Processing Agreement
is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1996.
130
<PAGE>
Exhibit 10.12
Correspondent Services Agreement dated November 13, 1996 between Brenton Bank
and the Federal Home Loan Bank of Des Moines. This Correspondent Services
Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc.
for the year ended December 31, 1996.
131
<PAGE>
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing
Plan, effective November 14, 1996. This Adoption Agreement #003 is
incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1996.
132
<PAGE>
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated April 12, 1993. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1993.
133
<PAGE>
Exhibit 10.15
Indenture Agreement with respect to Capital Notes dated April 14, 1992.
134
<PAGE>
I N D E N T U R E A G R E E M E N T
W I T H R E S P E C T
T O C A P I T A L N O T E S
D A T E D A P R I L 1 4 , 1 9 9 2
<PAGE>
INDENTURE AGREEMENT
THIS INDENTURE AGREEMENT is made as of the 14th day of April, 1992,
between BRENTON BANKS, INC., a corporation organized and existing under the
laws of Iowa with its principal place of business in the City of Des Moines,
Iowa, hereinafter called the "Company," and BANKERS TRUST COMPANY, a state
banking corporation organized under the laws of the State of Iowa, with its
principal place of business in the City of Des Moines, Iowa, hereinafter
called the "Trustee."
W I T N E S S E T H:
WHEREAS, Company is duly authorized by its Articles of Incorporation and
By-Laws to borrow money for its corporate purposes; and,
WHEREAS, Company was heretofore duly authorized by a unanimous affirmative
vote of its directors at a meeting duly called and held for such purpose to
borrow the sum of $5,000,000 for use in connection with its ordinary operations
and to issue its Capital Notes in the total sum of $5,000,000, with the same to
be secured by an appropriate Indenture Agreement with Bankers Trust Company,
Des Moines, Iowa, as Trustee for the Capital Note holders.
NOW, THEREFORE, in consideration of One Dollar ($1.00) in hand paid to
Trustee, and in consideration of the purchase and acceptance of Capital Notes
of Company by various purchasers, Company hereby covenants and declares that
its Capital Notes in the maximum principal sum of $5,000,000, and hereinafter
more fully described, shall be issued by it upon and subject to the following
terms, conditions, and covenants, and Trustee by its execution hereof agrees
to act as Trustee for all such Capital Note holders under and pursuant to the
terms of this Agreement.
ARTICLE I
Capital Notes
1.01 Company shall issue its Capital Notes, in the maximum total
principal sum of $5,000,000 with the same being in the series, maturing on the
dates, and bearing interest at the rates enumerated on Exhibit A attached
hereto, which said Capital Notes shall constitute those issued under and
pursuant to this Indenture. Such Capital Notes shall be issued in
denominations of multiples of $1,000.
1.02 The Capital Notes to be issued under and pursuant to the terms
hereof shall be in the form attached hereto as Exhibit B.
<PAGE>
1.03 All Capital Notes issued pursuant to this Indenture shall be issued
directly to the registered owners as to principal and interest, and shall be
transferable by the registered owner in person or by duly authorized attorney
at the office of the Company upon surrender and cancellation of the original
Capital Note, at which time a new registered Capital Note(s) shall be executed
and delivered by Company in lieu thereof with the same registered in the name
of the transferee or transferees. Each Capital Note issued in consummation of
an assignment and transfer of an original issue, or any subsequent Capital
Notes issued and outstanding under the terms hereof, shall be appropriately
recorded by both Company and by Trustee.
1.04 All Capital Notes issued under and pursuant to this Indenture shall
be certified by Trustee and shall not be valid for any purpose until so
certified. Whenever a Capital Note is surrendered for transfer or assignment
and a new Capital Note issued in lieu thereof, the same shall be certified at
that time by Trustee prior to its delivery to the registered owner or owners.
1.05 All Capital Notes issued under the terms hereof shall have equal
priority as to principal. Upon the happening of an "event of default," all
interest due and unpaid on that date on all Capital Notes issued and
outstanding shall have priority over any principal amounts of such Capital
Notes, and shall be paid ratably either in money or property among the Capital
Note holders to whom the said unpaid interest is due and owing, and no payment
of principal shall be made until all said unpaid interest has been paid and
discharged in full. Following payment of the interest, the principal sums
due and unpaid on all Capital Notes issued and outstanding as of that date
shall then be paid. For the purpose of principal payment, whether by virtue
of distribution of money or property, priority with respect thereto shall be
equal between all such outstanding Capital Notes.
1.06 Any Capital Note issued under the terms hereof which has been lost,
destroyed, or stolen shall be replaced by Company with an identical new Capital
Note, certified by Trustee, upon proof of loss, destruction, or theft
satisfactory to Company and Trustee and the giving of a bond to secure Company
and Trustee from loss, if and to the extent required by Company and Trustee.
1.07 Any Capital Note surrendered to Company by the holder thereof on
payment or redemption shall be promptly cancelled by Company and after
cancellation delivered to Trustee for recordation and return to Company. A
Capital Note surrendered upon an assignment or transfer shall also be so
cancelled by Company and delivered to Trustee for recordation and return to
Company.
<PAGE>
1.08 All Capital Notes issued pursuant to the terms hereof shall bear
interest, payable semi-annually on June 1 and December 1 of each year prior to
maturity, call for redemption or redemption pursuant to Section 1.11 hereof.
No payment of principal shall be made until all unpaid interest has been paid
and discharged in full. Following payment of the interest, the principal sums
due and unpaid on all Capital Notes issued and outstanding as of that date
shall be paid. For the purpose of principal payments, whether by virtue of
distribution of money or property, priority with respect thereto shall be
equal in all respects between all such outstanding Capital Notes.
1.09 Capital Notes issued and outstanding under the terms hereof shall
be paid on maturity to the extent that payment is not prohibited by the
terms hereof, and after payment of all interest due and payable on any such
outstanding Capital Notes at that time.
1.10 Any Capital Note issued pursuant to this Indenture may be redeemed
in whole or in part by Company, on any interest payment date after eight (8)
years from the date of issuance of such Capital Note, in advance of maturity
at any time thirty (30) days after notice by Company of its election to do so
by paying all interest due thereon together with the principal amount thereof.
1.11 Upon the death of an individual registered holder or of an
individual bearing a certain designated relationship to the registered holder,
a Capital Note will be redeemed by the Company at the option of certain
designated person(s) exercised as provided herein at face plus all interest
accrued on the Capital Note to the date of redemption. An option shall arise
upon the death of an individual who is (i) sole registered holder, (ii) a
joint tenant registered holder, (iii) a tenant in common registered holder,
(iv) a life tenant registered holder, (v) the sole grantor of a revocable
trust which is a registered holder, (vi) a participant in an IRA or other
retirement plan solely for the benefit of one participant which is a
registered holder, or (vii) the ward of a conservatorship or custodianship
which is a registered holder. No option to require redemption of a Capital
Note shall arise except as specifically set forth above.
Upon the death of an individual who is the sole registered holder of a
Capital Note, such option shall be exercisable by the deceased holder's
personal representative(s). Upon the death of a registered holder who holds
a Capital Note in joint tenancy, such option shall be exercisable by the
surviving joint tenant(s). Upon the death of a registered holder who holds a
Capital Note in tenancy in common, such option shall be exercisable jointly by
the personal representative(s) of the deceased holder and by the remaining
tenant(s) in common. Upon the death of a registered
<PAGE>
holder who has a life estate in a Capital Note, such option shall be
exercisable by the remainderman(men). Upon the death of an individual who
is the sole grantor of a revocable trust which is a registered holder, such
option shall be exercisable by the trustee(s) of the trust. Upon the death
of the participant in an IRA or other retirement plan solely for the benefit
of one participant which is a registered holder, such option shall be
exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon the
death of a ward of a conservatorship or custodianship which is a registered
holder, such option shall be exercisable by the personal representative(s)
of such ward's estate. In the event more than one person is entitled to
exercise the option, such option shall be exercisable only with the
concurrence of all persons entitled to exercise the option.
The option shall be exercisable for a period of 9 months following the
date of death of the individual whose death gives rise to the option. The
option shall be exercised by the person(s) entitled to exercise the option
giving written notice to the Company of the exercise of the option at the
Company's principal executive offices. Prior to the redemption of the Capital
Note, the person(s) entitled to exercise the option shall furnish the Company
with such documentation or evidence as the Company shall require to establish
such person's(s') entitlement to exercise the redemption option. The Company
shall be under no duty to notify the person(s) entitled to exercise the
option of the existence of this redemption option or of any facts which come
to the attention of the Company which would give any person the right to
exercise the option.
1.12 In the event any Capital Note is not presented for surrender and
cancellation on maturity or when called for redemption by Company, Company
shall deposit a sum equal to the amount due thereon, with Trustee in trust
for payment thereof, and no interest shall be due and payable to the holder
of such Capital Note from and after its maturity or redemption date. Such
payment by Company to Trustee shall be made within thirty (30) days after the
due date. Thereafter, Trustee shall pay over said sum to the owner upon
delivery and surrender of the pertinent Capital Note(s) for redemption and
cancellation.
1.13 Nothing contained in this Indenture or in any of the Capital Notes
shall be construed to cause the Capital Notes issued hereunder to become
immediately due and payable in the event of any consolidation or merger of the
Company with or into any other corporation or corporations (whether or not
affiliated with the Company), or successive consolidations or mergers in which
the Company or its successor or successors shall be a party or parties, or any
sale or conveyance of the property of the Company as an
<PAGE>
entirety or substantially as an entirety, to any other corporation (whether or
not affiliated with the Company) or the purchase of stock and subsequent
liquidation of the assets into the purchasing entity (hereinafter "purchase and
liquidation") authorized to acquire and operate the same if the following are
delivered to the Trustee: (1) an opinion by a certified public accountant
appointed by the successor corporation or entity opining that the net worth of
the successor corporation or entity following the acquisition, merger,
consolidation, sale of assets, or purchase and liquidation determined on a pro
forma basis using the successor corporation's or entity's and the Company's
most recent year-end financial statements preceding the date of the
acquisition, merger, consolidation, sale of assets, or purchase and
liquidation is in excess of the net worth of the Company as reflected on the
Company's most recent year-end financial statements preceding the date of the
acquisition, merger, consolidation, sale of assets, or purchase and
liquidation; (2) an Assumption Agreement in which the successor corporation
or entity expressly assumes the due and punctual performance and observance
of all of the covenants and conditions of this Indenture to be performed by
the Company; and (3) an opinion of counsel appointed by the successor
corporation or entity that the Assumption Agreement is a valid and binding
obligation of such successor corporation or entity enforceable in accordance
with its terms and the Capital Notes are valid and binding obligations of
the successor corporation or entity.
In case of any such consolidation, merger, sale, conveyance, or purchase
and liquidation and upon the assumption by the successor corporation, such
successor corporation shall succeed to and be substituted for the Company,
with the same effect as if it had been named herein as the Company.
1.14 Any notices which Company is required to give under the terms of
this Indenture, or which are deemed necessary or proper by Company, shall be
given by first class mail with postage prepaid addressed to each Capital Note
holder at the address shown for him on the books and records of Company, and
notices so given shall be deemed given upon the date of the mailing thereof.
ARTICLE II
Covenants of Company
2.01 Company covenants and agrees to pay all principal and interest as
the same becomes due and payable upon any Capital Notes issued and outstanding
under the terms of this Indenture; provided, however, that principal shall
only be paid by it upon surrender of the appropriate Capital Notes for
cancellation, or if not surrendered, by payment to Trustee as provided in
this Indenture.
<PAGE>
2.02 Subject to the provisions of Section 1.13 hereof, Company covenants
to continue the operation of its business, all as required and permitted by its
Articles of Incorporation and By-Laws, and to at all times maintain sufficient
assets and property to continue such general operations so long as any of its
Capital Notes remain issued and outstanding under the terms hereof.
2.03 Company covenants to meet all requirements relative to issuance of
said Capital Notes, payment of principal and interest thereon from the sources
specified, and all other conditions relating thereto as provided in Article I
hereof.
2.04 Company further covenants to furnish Trustee true copies of all
quarterly and annual reports normally prepared by Company.
2.05 On an annual basis Company covenants to furnish trustee with a
certificate indicating whether there has been an "event of default", as defined
in Article III hereof, on the Capital Notes. Said statement shall be certified
by an officer of the Company that it is true and accurate according to the
Company's best knowledge and belief. The Company shall deliver the
certificate to the Trustee within ninety (90) days of the Company's fiscal
year end.
2.06. The Company further covenants to furnish Trustee a quarterly
statement listing the current capital noteholders. Said statement shall be
certified by an officer of the Company to be true and accurate according to the
Company's best knowledge and belief.
ARTICLE III
Defaults: Rights, Remedies, and Duties of
Trustee and Capital Note Holders
3.01 An "event of default" shall constitute any one of the following:
a. Failure of Company to pay interest or principal or any part
thereof, within thirty (30) days after due;
b. Failure of Company to fully perform any other covenant or
obligation made and to be kept or performed by Company by virtue of this
Indenture which is not remedied within sixty (60) days after notice of such
failure from Trustee or from the holders of twenty-five percent (25%) of the
principal amount of all
<PAGE>
Capital Notes issued and outstanding under the terms hereof at that time.
c. Adjudication of Company as a bankrupt or insolvent in any
state or federal court, or appointment by any court of a receiver to take
over and conduct the business, affairs, and property of Company, or
commencement of liquidation of Company, either voluntary or involuntary,
pursuant to any bankruptcy, insolvency or receivership.
3.02 Subject to the provisions of Section 4.01(e), upon the happening of
an "event of default," Trustee shall declare all principal and interest on all
Capital Notes of Company then issued and outstanding under the terms hereof due
and payable at once by written notice to Company, and thereafter, Trustee may
sue at law or in equity or proceed in any other manner authorized by law to
enforce payment of all sums due on any such outstanding Capital Notes and to
establish and enforce all rights and priorities of every kind and nature of
the holders of all such Capital Notes and of such Trustee.
3.03 Subject to the provisions of Section 4.01(e), upon the occurrence
of an "event of default" as defined in this Indenture, Trustee, within thirty
(30) days after knowledge thereof, shall give written notice thereof to all
registered owners of Capital Notes outstanding under the terms of this
Indenture at that time, said notice to be by ordinary first class mail
addressed to each owner at the address shown on Trustee's records. Failure to
give notices under the terms hereof, however, shall not make Trustee liable
for any claim resulting therefrom.
3.04 In any action or proceeding in which rights of Capital Note holders
in and to the assets and property of Company are or may be affected, or to
enforce payment of interest or principal due under this Indenture or any of the
Capital Notes issued pursuant to the same, or to otherwise enforce performance
by Company of any obligations made or to be performed by it under the terms
hereof or of Capital Notes issued pursuant to this Indenture, Trustee shall
act for and on behalf of all Capital Note Holders, and shall file and make
proof of debts, claims, petitions, pleadings, and all other instruments, and
may take all action and steps deemed necessary or proper to enforce, protect,
and preserve all rights and properties of the holders of outstanding Capital
Notes.
3.05 Trustee may employ counsel as in its discretion deemed proper in
the case of any "event of default" of Company, or any other actions as in this
Indenture described or provided for with respect to Trustee either in its own
right or for and on behalf of
<PAGE>
Capital Note holders, and Company shall pay all fees and expenses of such
counsel and of Trustee in any such acts, actions, or proceedings taken by
Trustee under terms hereof.
3.06 All moneys collected or received by Trustee by virtue of any act,
action, or proceeding taken under the terms hereof or received by Trustee for
and on behalf of Capital Note holders shall be disbursed as follows:
a. In payment of all costs, expenses, charges, and fees of
Trustee, including counsel and attorney's fees;
b. In payment of all principal and interest due and unpaid on the
Capital Notes issued and outstanding at that time. If there are insufficient
funds to fully pay all such principal and interest, the funds available shall
be applied and paid first ratably to the payment of unpaid interest and then
ratably to the payment of principal;
c. The remainder, if any, to Company.
3.07 In case of an "event of default" by Company by virtue of which the
Trustee may elect to institute an action or proceeding on behalf of the Capital
Note holders against Company, if Trustee does not institute an action within
thirty (30) days after its elective right to so do has accrued, the holders of
Capital Notes totaling twenty-five percent (25%) of the principal amount of all
such Capital Notes then issued and outstanding by written demand given to
Trustee may require Trustee to institute any action or proceeding which they
direct Trustee to initiate, provided however, that Trustee, before bringing
any such action, may, as is hereinafter more fully spelled out, require
adequate security from such Capital Note holders to protect it against any
loss by virtue of expenses, charges, and fees incident to any action so
required. In the event that two or more groups of holders of Capital Notes
each of which holds Capital Notes totaling twenty-five percent (25%) of the
principal amount of all such Capital Notes then issued and outstanding direct
the trustee to proceed in a conflicting manner(s), the trustee may interplead
the funds into or may seek a declaratory determination of the conflict(s)
from the District Court for Polk County, Iowa.
3.08 No holder of any Capital Note issued hereunder shall have the right
to institute any suit, action, or proceeding in equity or at law for the
execution of any trust or power hereof or for the endorsement or any remedy
under this Indenture or any Capital Note issued hereunder unless:
<PAGE>
a. Such holder shall have previously given the Trustee written
notice of some existing "event of default" and of the continuance thereof;
b. The holders of twenty-five percent (25%) in principal amount
of the Capital Notes at the time outstanding shall have requested the Trustee
to exercise such power or right of action after the right to do so has accrued
hereunder and have afforded the Trustee a reasonable opportunity to proceed
upon such request;
c. Such holders shall have offered to Trustee indemnity
satisfactory to it against the costs, expenses, and liabilities to be incurred
thereby; and
d. The Trustee shall have failed or refused to comply with such
request within a period of sixty (60) days. Compliance with the foregoing
conditions shall at the option of the Trustee be a condition precedent to the
exercise of the powers and trusts of this Indenture and to any action or
proceeding for the enforcement of any remedy hereunder, and no holder of any
Capital Note shall have any right to enforce any right on account of this
Indenture or his Capital Note, except in the manner herein provided, and in any
event all proceedings hereunder at law or in equity shall be instituted and
maintained for the ratable benefit of all holders of outstanding Capital Notes
in the manner and with the interest priority provided for in Section 1.05 and
Section 3.06, and any other applicable provisions hereof.
ARTICLE IV
Trustee, Its Rights and Duties,
and Successor Trustees
4.01 The Trustee, for itself and its successors, hereby accepts the
trust created by this Indenture and assumes the duties imposed, but upon the
following terms and conditions:
a. Trustee shall be entitled to reasonable compensation for all
services from time to time rendered by it under and by virtue of the terms of
this Indenture including an acceptance fee, together with all expenses from
time to time incurred by it, including fees paid for counsel and for legal
services. The parties hereto shall agree upon Trustee's fees for ordinary
services from time to time hereunder. In the event the parties
<PAGE>
do not agree, or in the event of extraordinary services by virtue of events of
default or liquidation of Company, or any other matter which may require
extraordinary services from Trustee, Trustee's compensation may be fixed by an
appropriate court. Company covenants to pay all compensation to which Trustee
may be entitled, including expenses and fees from time to time, promptly upon
demand.
b. Trustee shall not be responsible for the correctness of any
recitals in this Indenture of any Capital Notes issued under and pursuant to
the same (except certificates and authentications by Trustee).
c. Trustee may employ and consult with counsel whenever deemed
necessary, and the opinion of such counsel shall be full and complete
authorization and protection to and for Trustee in respect of any action taken
or suffered by it in good faith and in accordance with the opinion of such
counsel.
d. Trustee may rely upon the correctness of any certificate
or statement, of the President or a Vice President of Company furnished from
time to time under the terms hereof and shall not be liable in any way for any
act done or any omission to act in reliance on any such certificate or
statement.
e. Trustee hereunder shall have no responsibility for determining
when or whether an "Event of Default" has occurred except for those events of
default which would come to its knowledge and attention in the ordinary course
of business under this form of Trust Indenture.
4.02 Trustee shall not be liable for any act of commission or omission
on its part in connection with the discharge and performance of its duties and
obligations under this Indenture and any Capital Notes issued pursuant hereto,
except to the extent that any such act or omission shall constitute willful
misconduct or negligence, and reliance upon certificates and statements of
Company, the President or a Vice President thereof, opinions of counsel
(whether counsel for Company or not), and good faith errors in judgment by a
responsible officer or officers of Trustee shall not be held to be negligent
in any case.
4.03 Trustee shall keep at all times a current list of the names and
addresses of registered Capital Note holders, issued and outstanding under the
terms of this Indenture. Company shall
<PAGE>
promptly notify Trustee of all changes in names or addresses of Capital Note
holders known to it.
4.04 Trustee may resign whenever it may elect to so do, sixty (60) days
after a written notice of its intention to so do has been served on Company and
on all Capital Note owners shown by the records of Trustee (notices in all
cases to be by ordinary, first class mail with the date of service thereof),
and in the event Trustee shall resign, or in the event Trustee shall be
dissolved and cease to do business as a bank or trust company, Company shall
designate by an appropriate written instrument a successor Trustee which
shall be a state or national bank or trust company with its principal office
in the state of Iowa. Any successor trustee appointed by Company under the
terms hereof shall have all rights, powers, and duties of the original
Trustee as herein provided, and whenever in this Indenture the word "Trustee"
appears or the Trustee is referred to, it shall mean and includes any and all
successor Trustees who may be appointed hereunder.
4.05 Trustee shall not be in any manner precluded from buying, selling,
owning, or dealing in Capital Notes issued pursuant to this agreement, either
in its own right or as agent for others, as fully and completely as any other
individual, firm, or corporation could do.
4.06 Trustee or Company may (and on written request of owners of twenty-
five percent (25%) in principal amount of outstanding Capital Notes shall) call
a meeting of all Capital Note owners for any appropriate purpose. Such meeting
shall be called by giving a written notice of the time and place thereof by
ordinary, first class mail to all Capital Note owners whose names and addresses
are first shown in the records of Trustee, mailed not less than five (5) days
prior to the date fixed for such meeting. The Company shall pay for the costs
of calling and holding said meeting.
4.07 In any case in which Trustee is required or may deem it proper or
advisable to give a notice to Company, a Capital Note holder or any other
person, firm, or agency, such notice shall be given by ordinary, first class
mail, addressed to the last known post office address of any such person, firm,
or agency, and the time of service thereof shall be the time of mailing thereof.
ARTICLE V
5.01 The Company and Trustee may make arrangements varying, amending or
changing this Indenture as Company and Trustee shall from time to time deem
proper without the approval of the noteholders, provided only that no such
amendment shall adversely affect
<PAGE>
any rights or interests of owners of Capital Notes then issued and outstanding
under and pursuant to this Indenture.
5.02 Upon the execution of any Supplemental Indenture pursuant to the
provisions of this Article V, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties, and immunities under this Indenture
of the Trustee, the Company, and the holders of Capital Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
Supplemental Indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
IN WITNESS WHEREOF, Brenton Banks, Inc. has caused this Indenture to be
executed in its name and on its behalf by its President, duly attested by its
Secretary, with its corporate seal hereto attached, and Bankers Trust Company,
Des Moines, Iowa, to evidence its acceptance of the trusts hereby created, has
caused this instrument to be signed in its name and on its behalf by a duly
authorized officer, all on or as of this 14th day of April, 1992.
BRENTON BANKS, INC. BANKERS TRUST COMPANY
By /s/ By /s/
Junius C. Brenton, Bryan Hall, Trust Officer
President
ATTEST:
By /s/
Steven T. Schuler,
Chief Financial Officer and
Vice President/Treasurer/Secretary
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 21st day of April, 1992, before me, a Notary Public in and for
Polk County, Iowa, personally appeared Junius C. Brenton, President, and
Steven T. Schuler, Chief Financial Officer and Vice President/Treasurer/
Secretary, of Brenton Banks,
<PAGE>
Inc., the corporation which executed the above and foregoing instrument, who
being to me known as the identical persons who signed the foregoing instrument,
and by me duly sworn, each for himself, did say that they are respectively the
President and the Chief Financial Officer/Vice President/Secretary/Treasurer of
said corporation, and that said instrument was by them signed and sealed on
behalf of the said corporation by authority of its Board of Directors, and each
of them acknowledged the execution of said instrument to be the voluntary act
and deed of said corporation, by it and each of them voluntarily executed.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial
Seal the day and year last above written.
/s/
Judith L. Nichville, Notary Public in
and for Polk County
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 13th day of April, 1992, before me, a Notary Public in and for
Polk County, Iowa, personally appeared Bryan Hall, of Bankers Trust Company,
the corporation which executed the above and foregoing instrument, who being
to me known as the identical person who signed the foregoing instrument, and
by me duly sworn, did say that he is the Trust Officer of said corporation,
and that said instrument was by him signed and sealed on behalf of the said
corporation by authority of its Board of Directors, and he acknowledged the
execution of said instrument to be the voluntary act and deed of said
corporation, by it and by him voluntarily executed.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial
Seal the day and year last above written.
/s/
Nancy J. Anderson, Notary Public in
and for Polk County
Seal.
<PAGE>
6.00% Capital Notes
Series G-20 through G-31
Due 1996 through 2007
6.25% Capital Notes
Series Q-21 through Q-31
Due 1996 through 2007
6.50% Capital Notes
Series J-20 through J-31
Due 1996 through 2007
6.75% Capital Notes
Series K-20 through K-31
Due 1996 through 2007
7.00% Capital Notes
Series M-20 through M-31
Due 1996 through 2007
7.25% Capital Notes
Series N-20 through N-31
Due 1996 through 2007
7.50% Capital Notes
Series R-20 through R-31
Due 1996 through 2007
7.75% Capital Notes
Series T-20 through T-31
Due 1996 through 2007
8.00% Capital Notes
Series U-20 through U-31
Due 1996 through 2007
8.25% Capital Notes
Series V-20 through V-31
Due 1996 through 2007
8.50% Capital Notes
Series W-20 through W-31
Due 1996 through 2007
8.75% Capital Notes
Series X-20 through X-31
Due 1996 through 2007
9.00% Capital Notes
Series Y-20 through Y-31
Due 1996 through 2007
9.25% Capital Notes
Series B-20 through B-31
Due 1996 through 2007
9.50% Capital Notes
Series A-20 through A-31
Due 1996 through 2007
9.75% Capital Notes
Series C-20 through C-31
Due 1996 through 2007
10.00% Capital Notes
Series D-20 through D-31
Due 1996 through 2007
10.25% Capital Notes
Series E-20 through E-31
Due 1996 through 2007
10.50% Capital Notes
Series F-20 through F-31
Due 1996 through 2007
10.75% Capital Notes
Series H-20 through H-31
Due 1996 through 2007
11.00% Capital Notes
Series I-20 through I-31
Due 1996 through 2007
11.25% Capital Notes
Series L-20 through L-31
Due 1996 through 2007
11.50% Capital Notes
Series O-20 through O-31
Due 1996 through 2007
11.75% Capital Notes
Series S-20 through S-31
Due 1996 through 2007
12.00% Capital Notes
Series Z-20 through Z-31
Due 1996 through 2007
12.25% Capital Notes
Series P-20 through P-31
Due 1996 through 2007
12.50% Capital Notes
Series SS-20 through SS-31
Due 1996 through 2007
12.75% Capital Notes
Series AA-20 through AA-31
Due 1996 through 2007
13.00% Capital Notes
Series BB-20 through BB-31
Due 1996 through 2007
13.25% Capital Notes
Series CC-20 through CC-31
Due 1996 through 2007
13.50% Capital Notes
Series DD-20 through DD-31
Due 1996 through 2007
13.75% Capital Notes
Series EE-20 through EE-31
Due 1996 through 2007
14.00% Capital Notes
Series FF-20 through FF-31
Due 1996 through 2007
<PAGE>
M
No. _______________
BRENTON BANKS, INC.
DES MOINES, IOWA
$__________________
REGISTERED CAPITAL NOTE (SERIES ___________________ CALLABLE)
Brenton Banks, Inc., a corporation organized and existing under the laws
of the State of Iowa, hereinafter referred to as the Corporation, for value
received hereby promises to pay to the registered holder hereof, upon
presentation of this Capital Note, the sum of $___________________ on the 1st
day of June, ______________, at the main office of the Corporation in the City
of Des Moines, Iowa. The Corporation further agrees to pay interest on the
principal amount from the __________ day of ____________________, until paid,
at the rate of _______% per annum, payable semi-annually on the first day of
June and December of each year.
The Corporation shall, upon request of the registered holder hereof, mail a
check representing the interest hereon, or the principal when due, to the
registered holder at his address appearing on the books of registration.
The Capital Note is subject to being called on any interest payment date
occurring more than eight (8) years after the date of issuance hereof, at the
option of the Corporation on not less than thirty (30) days' prior written
notice given by the Corporation by ordinary mail to the holder of the Capital
Note at such holder's address appearing on the books of registration, at 100%
of the principal amount of this Capital Note, together with interest accrued
and unpaid on this Capital Note, to the date fixed for such call.
Upon the death of an individual registered holder or of an individual
bearing a certain designated relationship to the registered holder, a Capital
Note will be redeemed by the Company at the option of certain designated
person(s) exercised as provided herein at face plus all interest accrued on
the Capital Note to the date of redemption. An option shall arise upon the
death of an individual who is (i) sole registered holder, (ii) a joint tenant
registered holder, (iii) a tenant in common registered holder, (iv) a life
tenant registered holder, (v) the sole grantor of a revocable trust which is
a registered holder, (vi) a participant in an IRA or other retirement plan
solely for the benefit of one participant which is a registered holder, or
(vii) the ward of a conservatorship or custodianship which is a registered
holder. No option to require redemption of a Capital Note shall arise
except as specifically set forth above.
Upon the death of an individual who is the sole registered holder of a
Capital Note, such option shall be exercisable by the deceased holder's
personal representative(s). Upon the death of a registered holder who holds a
Capital Note in joint tenancy, such option shall be exercisable by the
surviving joint tenant(s). Upon the death of a registered holder who holds a
Capital Note in tenancy in common, such option shall be exercisable jointly
by the personal representative(s) of the deceased holder and by the remaining
tenant(s) in common. Upon the death of a registered holder who has a life
estate in a Capital Note, such option shall be exercisable by the
remainderman(men). Upon the death of an individual who is the sole grantor
of a revocable trust which is a registered holder, such option shall be
exercisable by the trustee(s) of the trust. Upon the death of the
participant in an IRA or other retirement plan solely for the benefit of
one participant which is a registered holder, such option shall be
exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon
the death of a ward of a conservatorship or custodianship which is a
registered holder, such option shall be exercisable by the personal
representative(s) of such ward's estate. In the event more than one person is
entitled to exercise the option, such option shall be exercisable only with the
concurrence of all persons entitled to exercise the option.
The option shall be exercisable for a period of 9 months following the date
of death of the individual whose death gives rise to the option. The option
shall be exercised by the person(s) entitled to exercise the option giving
written notice to the Company of the exercise of the option at the Company's
principal executive offices. Prior to the redemption of the Capital Note,
the person(s) entitled to exercise the option shall furnish the Company with
such documentation or evidence as the Company shall require to establish
such person's(s') entitlement to exercise the redemption option. The Company
shall be under no duty to notify the person(s) entitled to exercise the
option of the existence of this redemption option or of any facts which come
to the attention of the Company which would give any person the right to
exercise the option.
This Capital Note is one of an authorized issue of fully registered Capital
Notes of Brenton Banks, Inc., issued in multiples of $1,000 and limited to the
aggregate principal amount of $5,000,000 at any one time outstanding, all
issued pursuant to an Indenture dated April 14, 1992, executed and delivered
by the Corporation to the Trustee, to which Indenture reference is hereby
made for a description of rights, duties and obligations thereunder of the
Corporation, the Trustee and the Owners of the Capital Notes.
In the event of default in the payment of principal of, or interest on, this
Capital Note, the total principal amount of this Capital Note, and all interest
hereof, shall become due and payable and the Corporation shall immediately pay
the same.
Books for the registry hereof are maintained at the office of the
Corporation or at the agency of the Corporation established for that purpose
in the city of Des Moines, Iowa. This Capital Note is transferable by the
registered holder hereof in person, or by his duly authorized attorney, at
the office or agency of the Corporation for such purpose in the city of
Des Moines, Iowa, upon surrender for cancellation of this Capital Note at
said office or agency. Thereupon, a new Capital Note for a like principal
amount, or new Capital Notes in such authorized denominations and registered
in such name or names, as shall have been requested, shall be issued and
delivered.
No transfer hereof shall be valid unless made on the Corporation's books, at
the office of the Corporation or the agency established for that purpose, in
accordance with the provisions of the foregoing paragraph. The Corporation and
its agents may deem and treat the person in whose name this Capital Note is
registered as the absolute owner of the Capital Note for the purpose of
receiving payment hereof and interest due hereon, but the Corporation may, at
any time, require the presentation hereof as a condition precedent to such
payment.
No recourse shall be had for the payment of the principal of, or interest
upon, this Capital Note, against any shareholder, officer, or director of the
Corporation, by reason of any matter prior to the delivery of this Note, or
otherwise, all such liability, by the acceptance hereof, and as a part of the
consideration of this issue hereof, being expressly waived.
In the event any Capital Note is not presented for payment when due or when
called by the Corporation, the Corporation shall deposit a sum equal to the
amount due thereon with Trustee in trust for payment thereof and neither the
Corporation nor Trustee shall thereafter be liable for any interest thereon.
This Capital Note and any subsequent Capital Note issued on transfer and
surrender hereunder shall not be valid for any purpose until duly certified by
the Trustee under the Indenture supporting the name.
This Capital Note is not a deposit and is not insured by the Federal Deposit
Insurance Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Capital Note to be
executed by its President, or other authorized officer, and its corporate seal
affixed hereto, at Des Moines, Iowa, on the day and year appearing below.
Corporate Seal:
Date: ________________________________
BRENTON BANKS, INC.
By: __________________________________
(Chairman or Vice Chairman or President)
ATTEST:
______________________________________
(Secretary or Assistant Secretary or Treasurer
or Assistant Treasurer)
<PAGE>
REGISTRATION
(No writing on this registered Capital Note except by an officer or agent of
the Corporation)
Date of In Whose Registry
Registration Name Registered Address Officer
_________ ________________ _______________ ________________
_________ ________________ _______________ ________________
_________ ________________ _______________ ________________
_________ ________________ _______________ ________________
TRUSTEE'S CERTIFICATE
The foregoing Capital Note is hereby certified by the undersigned Bank as
Trustee as one of the series of Capital Notes of Brenton Banks, Inc.,
described in the Indenture referred to therein, made between the Corporation
and this Bank as Trustee.
Dated as of this _______ day of ____________________, ______.
_______________________________
(Trustee)
By_____________________________
Its____________________________
(Title)
ASSIGNMENT
For value received I hereby assign to __________________________________ the
within registered Capital Note and hereby irrevocably appoint _____________
____________________________________ attorney to transfer the registered
Capital Note on the books of the within named Corporation with full power of
substitution in the premises.
Dated:_________________________
Signatures guaranteed by the ______________________________
Signature (in whose name
registered
_______________________________
(Bank)
_______________________________ ______________________________
Signature Signature (in whose name
registered
_______________________________
Date Office & Title
The transfer of any notes represented by this certificate to any person who
is not then a bona fide resident of the State of Iowa purchasing such notes
for the purpose of investment and not for resale is restricted pursuant to
the terms of a subscription form executed by the original holder of such
notes.
<PAGE>
Exhibit 10.16
Indenture Agreement with respect to Capital Notes dated March 27, 1991. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996.
152
<PAGE>
Exhibit 10.17
Indenture Agreement with respect to Capital Notes dated August 5, 1991. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996.
153
<PAGE>
Exhibit 10.18
Indenture Agreement with respect to Capital Notes dated April 8, 1994. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1994.
154
<PAGE>
Exhibit 10.19
Indenture Agreement with respect to Capital Notes dated April 10, 1995. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc., for the year ended December 31, 1995.
155
<PAGE>
Exhibit 10.20
Indenture Agreement with respect to Capital Notes dated April 10, 1996. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1996.
156
<PAGE>
Exhibit 10.21
Indenture Agreement with respect to Capital Notes dated April 23, 1997.
157
<PAGE>
This Indenture Agreement contains the same terms, conditions and provisions as
set forth in the Indenture Agreement dated April 10, 1995 (Exhibit 10.21,
which is incorporated by reference from Form 10-K of Brenton Banks, Inc., for
the year ended December 31, 1995), except for series number, maturity date and
date executed.
158
<PAGE>
Exhibit 10.22
Split Dollar Insurance Agreement between the Company, William H. Brenton
Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994.
This Split Dollar Insurance Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
159
<PAGE>
Exhibit 10.23
Split Dollar Insurance Agreement between the Company and Brenton Life
Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994.
This Split Dollar Insurance Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc. for year ended December 31, 1994.
160
<PAGE>
Exhibit 10.24
Split Dollar Insurance Agreement between the Company and Brenton Life
Insurance Trust for the benefit of Junius C. Brenton, dated January 12, 1997.
This Split Dollar Insurance Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
161
<PAGE>
Exhibit 10.25
Agreement between Robert L. DeMeulenaere and the Company regarding the change
in control arrangements, dated December 31, 1994. This Agreement is
incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1994.
162
<PAGE>
Exhibit 10.26
Agreement between Larry A. Mindrup and the Company regarding the change in
control arrangements, dated December 31, 1994. This Agreement is incorporated
by reference from Form 10-K of Brenton Banks, Inc. for the year ended December
31, 1994.
163
<PAGE>
Exhibit 10.27
Agreement between Norman D. Schuneman and the Company regarding the change in
control of arrangements, dated December 31, 1994. This Agreement is
incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1995.
164
<PAGE>
Exhibit 10.28
Twelfth Amendment to Data Processing Agreement dated July 1, 1995, by and
between ALLTEL Information Services, Inc. (formerly Systematics, Inc. and
Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank
Services Corporation). This Twelfth Amendment to Data Processing Agreement is
incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the
quarter ended September 30, 1995.
165
<PAGE>
Exhibit 10.29
Thirteenth Amendment to Data Processing Agreement dated December 1, 1995, by
and between ALLTEL Information Services, Inc. (formerly Systematics Financial
Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation).
This Thirteenth Amendment to Data Processing Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the year ended
December 31, 1995.
166
<PAGE>
Exhibit 11
Statement of computation of earnings per share.
167
<PAGE>
<TABLE>
Statements re: Computation of Earnings Per Share
Brenton Banks, Inc.
<CAPTION>
December 31, 1997 1996 1995
<S> <C> <C> <C>
Basic EPS Computation
Numerator:
Net income $ 18,010,107 $ 14,015,430 $ 10,407,354
Denominator:
Average common shares
outstanding 17,504,716 18,091,614 18,569,224
Basic EPS $ 1.03 $ 0.78 $ 0.56
Diluted EPS Computation
Numerator:
Net income $ 18,010,107 $ 14,015,430 $ 10,407,354
Denominator:
Average common shares
outstanding 17,504,716 18,091,614 18,569,224
Average stock options 283,912 160,792 140,501
Average long-term stock
compensation plan 140,154 195,527 192,854
17,928,782 18,447,933 18,902,579
Diluted EPS $ 1.01 $ 0.76 $ 0.55
<FN>
Note: Amounts are restated for the 2-for-1 stock split effective February
1998 and the 10% common stock dividends effective in 1997 and 1996.
</TABLE>
168
<PAGE>
Exhibit 12
Statement of computation of ratios.
169
<PAGE>
<TABLE>
Statements re: Computation of Ratios
Item 1(l) Business - Statistical Disclosure VI. Return on Equity and Assets
Brenton Banks, Inc.
<CAPTION>
(Dollars in thousands)
December 31, 1997 1996 1995
<S> <C> <C> <C>
Return on average total assets:
Net income (before deduction
of minority interest) $ 18,753 14,618 11,058
* divided by *
Average assets $ 1,649,469 1,582,894 1,561,226
Ratio 1.14% 0.92% 0.71%
Return on average common
stockholders' equity:
Net income $ 18,010 14,015 10,407
* divided by *
Average common stockholders'
equity $ 124,491 119,170 115,183
Ratio 14.47% 11.76% 9.04%
Common dividend payout ratio:
Cash dividends per share $ 0.273 0.207 0.186
* divided by *
Net income per share - diluted $ 1.01 0.76 0.55
Ratio 27.03% 27.24% 33.82%
Average equity to average
assets:
Average equity $ 124,491 119,170 115,183
* divided by *
Average assets $ 1,649,469 1,582,894 1,561,226
Ratio 7.55% 7.53% 7.38%
Equity to assets ratio:
Common stockholders' equity
excluding unrealized gains
(losses) on assets available
for sale $ 126,159 120,877 118,175
* divided by *
Total assets excluding
unrealized gains (losses)
on assets available for sale $ 1,715,264 1,631,018 1,581,421
Ratio 7.36% 7.41% 7.47%
</TABLE>
170
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 1996 1995
<S> <C> <C> <C>
Tier 1 leverage capital ratio:
Common stockholders' equity
excluding unrealized gains
(losses) on assets available
for sale $ 126,159 120,877 118,175
Minority interest 4,859 4,615 4,434
Less: intangibles (2,087) (2,704) (5,282)
Less: minimum MSR's to be
deducted --- (115) ---
Tier 1 capital $ 128,931 122,673 117,327
* divided by *
Quarterly average total
assets excluding
unrealized gains (losses)
on assets available for sale 1,692,176 1,613,223 1,582,779
Less: intangibles (2,087) (2,704) (5,282)
Less: minimum MRS's to be
deducted --- (115) ---
Tier 1 assets $ 1,690,089 1,610,404 1,577,497
Ratio 7.63% 7.62% 7.45%
Primary capital to assets:
Common stockholders' equity
excluding unrealized gains
(losses) on assets
available for sale $ 126,159 120,877 118,175
Minority interest 4,859 4,615 4,434
Allowance for loan losses 12,732 11,328 11,070
Primary capital $ 143,750 136,820 133,679
* divided by *
Total assets excluding
unrealized gains (losses)
on assets available for
sale $ 1,715,264 1,631,018 1,581,421
Allowance for loan losses 12,732 11,328 11,070
Allowable assets $ 1,727,996 1,642,346 1,592,491
Ratio 8.32% 8.33% 8.40%
Net Noninterest Margin:
Noninterest income $ 27,506 23,327 17,847
Less: Securities gains
(losses) 494 321 (3)
Less: Noninterest expense 57,699 56,091 55,051
Net noninterest income $ (30,687) (33,085) (37,201)
* divided by *
Year-to-date average assets $ 1,649,469 1,582,894 1,561,226
Ratio -1.86% -2.09% -2.38%
</TABLE>
171
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997 1996 1995
<S> <C> <C> <C>
Efficiency Ratio:
Noninterest expense $ 57,699 56,091 55,051
* divided by *
Noninterest income 27,506 23,327 17,847
Less: Securities gains (losses) 494 321 (3)
Less: Loan gains (losses) 78 84 (232)
T.E. net interest income 63,701 59,238 56,610
Subtotal 90,635 82,160 74,692
Ratio 63.66% 68.27% 73.70%
</TABLE>
172
<PAGE>
Exhibit 13
The Appendix to the Proxy for Brenton Banks, Inc. for the 1997 calendar year.
173
<PAGE>
BRENTON BANKS, INC.
APPENDIX TO THE PROXY STATEMENT
FISCAL YEAR 1997
<PAGE>
TABLE OF CONTENTS
PAGE
General Information 1
Financial Highlights 2
Management's Discussion and Analysis 3
Consolidated Average Balances and Rates 11
Selected Financial Data 12
Consolidated Statements of Condition 13
Consolidated Statements of Operations 14
Consolidated Statements of Cash Flows 15
Consolidated Statements of Changes in
Common Stockholders' Equity 16
Notes to Consolidated Financial Statements 17
Management's Report 31
Independent Auditors' Report 31
Stock Information 32
Corporate Structure 33
<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 the largest, Iowa-based bank holding company, with
46 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, commercial and business
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.
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
1997 1996 1995
<S> <C> <C> <C>
Operating Results
Net interest income $ 60,133,764 56,052,142 53,332,143
Provision for loan losses 3,900,000 2,900,000 1,864,801
Total noninterest income 27,505,789 23,327,441 17,846,740
Total noninterest expense 57,698,564 56,090,571 55,051,267
Income before income
taxes and minority
interest 26,040,989 20,389,012 14,262,815
Net income 18,010,107 14,015,430 10,407,354
Per Common Share*
Net income-basic $ 1.03 .78 .56
Net income-diluted 1.01 .76 .55
Cash dividends .273 .207 .186
Book value, including
unrealized gains
(losses)** 7.46 6.86 6.46
Book value, excluding
unrealized gains
(losses)*** 7.28 6.80 6.38
Closing bid price 19.63 12.56 8.78
At December 31
Assets $1,718,483,797 1,632,095,082 1,582,779,320
Loans 993,189,110 941,943,513 910,193,212
Nonperforming loans 6,712,000 6,167,000 5,619,000
Deposits 1,364,270,491 1,353,057,111 1,361,942,715
Common stockholders'
equity** 129,379,299 121,954,229 119,533,631
Ratios
Return on average common
stockholders' equity
(ROE)** 14.47% 11.76 9.04
Return on average assets
(including minority
interest) (ROA) 1.14 .92 .71
Net interest margin 4.16 4.03 3.89
Net noninterest margin (1.86) (2.09) (2.38)
Efficiency ratio 63.66 68.27 73.70
Loan to deposit ratio 72.80 69.62 66.83
Allowance for loan losses
to total loans 1.28 1.20 1.22
Primary capital to
assets*** 8.32 8.33 8.40
Equity to assets*** 7.36 7.41 7.47
Tier 1 leverage capital
ratio*** 7.63 7.62 7.45
Nonperforming loans as a
percent of loans .68 .65 .62
Net charge-offs as a
percent of average loans .26 .29 .18
Allowance for loan losses
as a percent of
nonperforming loans 189.69 183.69 197.01
<FN>
* Restated for the 2-for-1 stock split effective
February 1998 and the 10% common stock dividends
effective in 1997 and 1996.
** Including unrealized gains (losses) on securities
available for sale.
*** Excluding unrealized gains (losses) on securities
available for sale.
</TABLE>
<PAGE>
Management's Discussion and Analysis
For 1997, Brenton Banks, Inc. and Subsidiaries (the "Company") reported
net income of $18,010,107 compared to 1996 earnings of $14,015,430.
Capital Resources
Common stockholders' equity totaled $129,379,299 as of December 31, 1997,
a 6.1 percent increase from the prior year.
In January 1998, the Board of Directors (the "Board") declared a 2-for-1
stock split for holders of record as of February 10, 1998, payable February 20,
1998. As a result of this action, each shareholder received one additional
share of common stock for each share outstanding. The par value of the stock
was reduced from $5.00 to $2.50 and authorized shares were increased to 50
million.
In May 1997, 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 2-for-1 stock split
and the 10 percent common stock dividend. Cash dividends for 1997 totaled
$4,781,675, or $.273 per common share, which represents an increase of 31.9
percent over 1996 dividends of $.207 per share. The dividend payout ratio for
1997 was 27.0 percent of earnings per share.
As part of the Company's ongoing stock repurchase plan, 695,480 shares of
common stock (restated for the 2-for-1 stock split) were repurchased during
1997 at a cost of $10,014,087. Since the inception of the plan in 1994, the
Company has repurchased 1,996,746 shares at a total cost of $23,943,479. The
Board has extended this plan for 1998 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, 1997, was 10.88 percent and the total risk-based capital ratio
was 11.95 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 7.63
percent at December 31, 1997, 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
7.8 percent at December 31, 1997, compared to 9.2 percent at the end of 1996.
The Parent Company's $2 million line of credit with a regional bank was unused
throughout 1997. Long-term borrowings of the Parent Company at December 31,
1997, consisted entirely of $10,112,000 of capital notes.
Brenton Banks, Inc. common stock closed on December 31, 1997, at a bid
price of $19.63, an increase of 56.3 percent over the prior year-end. The
closing price at December 31, 1997, was 263.1 percent of the book value per
share of $7.46. The year-end stock price represented a price-to-1997-diluted-
earnings multiple of 19.4 times.
Brenton Banks, Inc. continues to pursue acquisition and expansion
opportunities which will fit the strategic direction of the company and 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
federal and state regulators. These risks, which are not all inclusive,
cannot be estimated.
<PAGE>
Market Risk Management
Market risk is the risk of earnings volatility that results from adverse
changes in interest rates and market prices. The Company's market risk is
comprised primarily of interest rate risk arising from its core banking
activities of lending and deposit taking. Interest rate risk is the risk that
changes in market interest rates may adversely affect the Company's net
interest income. Management continually develops and applies strategies to
mitigate this risk. Management does not believe that the Company's primary
market risk exposures and how those exposures were managed in 1997 changed
when compared to 1996.
The Company uses a third-party computer software simulation modeling
program to measure its exposure to potential interest rate changes. For
various assumed hypothetical changes in market interest rates, numerous
other assumptions are made such as prepayment speeds on loans and securities
backed by mortgages, the slope of the Treasury yield curve, the rates and
volumes on the Company's deposit products and the rates and volumes on the
Company's loan production.
The following table sets forth the estimated changes in net interest
income (expressed as a percent of 1997 net interest income) for projected
hypothetical changes in market interest rates. As shown in the table, the
Company's net interest income is more sensitive in a falling rate scenario
than in a rising rate scenario. As market rates decline, the assumed speed
of fixed rate loan repayments increases, causing the funds received to be
reinvested at lower rates. Current interest rates on certain liabilities
are at a level that does not allow for significant downward repricing should
market interest rates decline significantly. As market rates increase, fixed
rate loans are less likely to prepay, therefore slowing the opportunity to
reinvest at the assumed higher rates. In either a rising or falling interest
rate environment, the Company believes it has taken actions to minimize the
actual impact on net interest income. Those actions include the origination
of variable-rate consumer and commercial loans, the use of fixed rate Federal
Home Loan Bank advances as alternatives to certificates of deposit and active
management of the investment securities portfolio to provide for cash flows
that will facilitate interest rate risk management. In selected cases, the
Company may enter into interest rate swaps, however, the amount of swaps at
December 31, 1997 and assumed in the projection of net interest income are
not material. The Company entered into an interest rate floor contract at
the end of 1997 to mitigate the effect falling interest rates would have on
certain deposit accounts with contracted minimum interest rates. Actual
changes in net interest income may differ from estimated changes set forth
in this table due to various risks and uncertainties concerning how actual
repricing opportunities will differ from assumed repricing opportunities.
<TABLE>
<CAPTION>
Change in net interest income due to projected
hypothetical changes in market interest rates:
_________________________________________________________
Assumed changes
in market rates 1998 1999 2000
_______________ ____ ____ ____
<S> <C> <C> <C>
-300 bps -4.8% -10.8% -14.1%
-200 bps -3.5% -8.3% -10.9%
-100 bps -2.1% -4.6% -6.2%
Flat -0.5% -1.4% -2.0%
+100 bps 0.6% 1.6% 2.3%
+200 bps -1.7% 0.3% 2.3%
+300 bps -3.6% -0.4% 3.0%
<FN>
(Changes in hypothetical interest rates are assumed to be instantaneous and
sustained parallel shifts in the yield curve.)
</TABLE>
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 utilizes the simulations to manage interest rate
risk, the net interest margin and levels of net interest income.
The goal of asset/liability management 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 5 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.
The slope of the yield curve is also a major determinant in the net
interest income of the Company. Generally, the
<PAGE>
steeper the intermediate treasury to LIBOR curve, the better the prospects for
net interest income improvement. This curve is very flat at this time.
To improve net interest income and lessen interest rate risk, management
continued its strategy of de-emphasizing fixed-rate portfolio residential real
estate loans with long repricing periods. When appropriate for interest rate
management purposes, the Company will consider securitization of real estate
loans. The Company continues to focus on reducing interest rate risk by
emphasizing growth in variable rate loans.
In addition to normal balance sheet instruments, the Company has utilized
Federal Home Loan Bank advances 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 30.0 percent of the Company's total assets at
December 31, 1997.
Net cash provided from operations of the Company is another major source
of liquidity and totaled $8,523,584 in 1997, $25,015,045 in 1996 and
$8,388,374 in 1995. 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, 1997, the Company had advances of
$100,250,000 from the Federal Home Loan Bank ("FHLB") of Des Moines, of which
$90,250,000 were used as a means of providing long-term, fixed-rate funding for
certain fixed-rate assets and managing interest rate risk. The remaining
$10,000,000 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
$22 million at December 31, 1997.
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,
1997.
The Parent Company had sufficient cash flow and liquidity at December 31,
1997. The primary funding source for the Parent Company is dividends from its
subsidiaries. Dividends of approximately $15 million were available to be paid
to the Parent Company by subsidiary banks without reducing capital ratios below
regulatory minimums. At the end of 1997, the Parent Company had $3.6 million
of interest-bearing deposits with banks, a $2 million unused line of credit,
as well as additional borrowing capacity.
Results of Operations - 1997 Compared to 1996
Net Income
For the year ended December 31, 1997, Brenton Banks, Inc. recorded net
income of $18,010,107, an increase of 28.5 percent over 1996, which totaled
$14,015,430. Diluted earnings per common share were $1.01 compared to $.76 for
1996. Return on average assets (ROA) was 1.14 percent in 1997, compared to .92
percent in 1996. The return on average equity (ROE) was 14.47 percent,
compared to 11.76 percent one year earlier.
Net Interest Income
Net interest income rose 7.3 percent to $60,133,764 for 1997. The
increase in net interest income is directly attributable to both favorable
rate and volume variances. Average earning assets increased 4.3 percent over
1996 while average interest-bearing liabilities increased 4.0 percent. The
average rate earned on earning assets increased 15 basis points, while the
average rate paid on interest-bearing liabilities increased only 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 3.69 percent from 3.58
percent last year. Net interest margin, which is tax equivalent net interest
income as a percentage of
<PAGE>
average earning assets, averaged 4.16 percent in 1997 compared to 4.03 percent
in 1996. 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, agricultural, business and consumer loans.
Loan Quality
Loan quality remains strong with nonperforming loans at December 31, 1997
totaling $6,712,000 or .68 percent of loans. This compares to .65 percent at
December 31, 1996, or $6,167,000. 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 allowance for loan losses, which totaled $12.7 million, represented
189.69 percent of nonperforming loans at the end of 1997, compared to 183.69
percent one year ago. The provision for loan losses totaled $3,900,000 for the
year ended December 31, 1997, compared to $2,900,000 for 1996. The increase in
the provision of $1,000,000 is primarily related to the $50.5 million increase
in average loans outstanding during 1997 and projected future loan growth. The
Company's net charge-offs as a percent of average loans were .26 percent for
1997 compared to .29 percent for 1996, both of which were better than
historical industry peer group averages. Loan losses for 1997 were primarily
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 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 and rate all loans on a 1 to 8 rating scale. 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, 1997,
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 (excluding security
gains or losses) and noninterest expense as a percent of average assets. For
1997, the net noninterest margin improved to (1.86) percent compared to (2.09)
percent in 1996. 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). For the
year ended December 31, 1997, the Company's efficiency ratio was 63.66
percent, compared to 68.27 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 1997. For
1997, total noninterest income (excluding securities transactions) increased
17.4 percent to $27,011,967 from $23,006,185 one year ago. Noninterest income
(excluding securities gains and losses) for 1997 represented 1.6 percent of
average assets and 31.0 percent of total operating income, which were the
highest levels in the history of the Company. All categories of noninterest
income, except insurance commissions and fees, reflect strong growth from the
prior year.
Service charges on deposit accounts increased 8.6 percent in 1997 to
$7,290,765. This growth related to a continued focus on collecting a higher
percentage of fees assessed and increased sales of fee-generating accounts,
particularly commercial accounts.
<PAGE>
Investment brokerage commissions totaled $4,808,048 for 1997, an increase
of 27.7 percent over the 1996 total of $3,766,436. Strong financial markets
and successful new sales initiatives drove the increase in this category.
Mortgage banking income totaled $3,274,215 for 1997 compared to $2,168,593
in 1996, an increase of 51.0 percent. This increase is attributable to a
higher volume of real estate mortgage loan originations, which totaled $179.1
million compared to $110.8 million in 1996.
Fiduciary revenues climbed 14.3 percent to $3,136,078 in 1997 compared to
$2,744,530 in 1996. This increase in revenue is due to increased volumes of
personal trusts, investment management fees and employee benefit plan fees.
Insurance commissions and fees declined 3.8 percent to $2,803,983 in 1997
due to the sale of the Company's insurance agency in Marshalltown, Iowa. The
Company is committed to the insurance business but desires to grow its
insurance operations through other distribution channels. The decrease in
property and casualty commission income due to the agency sale was largely
off-set by a 68.8 percent increase in credit-related insurance commissions.
The significant increase was due to the strong increase in direct consumer
lending and increased sales efforts during 1997.
Other service charges and fees increased 23.8 percent to $3,441,454 in
1997 compared to 1996 due to increases from letters of credit fees, fees
received from purchased receivables and real estate commissions.
Other operating income increased by $338,840 from one year ago. The
increase was due to income from bank-owned life insurance policies which did
not exist until December 1996 and a gain on the sale of the Company's insurance
agency as discussed above. Several one-time revenue items also affected this
category in 1996.
Securities transactions produced an additional increase in noninterest
income. Securities gains of $493,822 were recorded in 1997 versus gains of
$321,256 in 1996.
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 generating fee income by providing a broad array of financial
products and services to our clients. 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 only 2.9 percent in 1997 to
$57,698,564 from $56,090,571 one year ago. Exclusive of a one-time special
assessment by the FDIC totaling $1,288,000 in 1996, noninterest expense
increased 5.3 percent.
Compensation, the largest component of noninterest expense, increased
$1,363,843, or 5.4 percent, over 1996. This increase is primarily related to
commissions and incentives paid on higher sales of the fee-related products
discussed above, and expense tied to bonuses and a stock performance plan which
were both directly related to higher 1997 earnings and the Company's advancing
stock price. Fixed salaries, those that are not based on commissions, which
comprised 67.5 percent of total compensation expense, actually decreased by 3.8
percent compared to 1996. The number of full-time equivalent employees
decreased by .2 and 3.8 percent at December 31, 1997, and 1996, respectively.
The total increase in compensation expense led to a proportionate increase in
employee benefits. The Company has adopted a pay for performance philosophy
and is focusing more on variable compensation tied to performance.
Occupancy expense totaled $5,609,600 for 1997, compared to $5,502,904 for
1996, an increase of 1.9 percent. The increase was primarily related to
building repairs and maintenance. Depreciation expense declined slightly and
lease expense increased due to the sale and relocation of one facility in
late 1996.
Furniture and equipment expense declined to $3,634,336, a 2.4 percent
reduction from the prior year. Decreases in furniture and equipment
depreciation, repairs and maintenance, and furniture and equipment rentals more
than offset an increase in depreciation expense for technology-related
equipment. The Company continues to focus on using technology to improve
efficiency and provide better service to our clients.
Data processing expense increased $258,910, or 10.0 percent, due to
increased costs during 1997 associated with contracted core processing.
<PAGE>
Expense related to the FDIC deposit assessments declined $1,520,230 from
1996 to $281,416. Last year's expense included the previously-discussed, one-
time $1,288,000 special assessment to fully fund SAIF. The Company continues
to pay the lowest premiums available under the FDIC's risk-based premium system.
Marketing and supplies expenses declined 22.5 and 15.2 percent,
respectively, for 1997. These cost reductions were the result of concerted
efforts to minimize the growth of overall noninterest expense and renegotiating
pricing with various vendors. Also, 1996 supplies expense included one-time
charges related to the 1995 merger of the commercial banks.
Other operating expenses increased by $2,040,604, or 21.3 percent, when
comparing 1997 results to 1996. The increase was primarily due to increases in
check processing expense, consulting and legal fees and miscellaneous losses.
The "Year 2000 Issue", which has received much recent media coverage, is a
top priority for Brenton. The Company's core loan and deposit applications are
ALLTEL Information Services, Inc. ("ALLTEL") products and Brenton outsources
the data processing function to ALLTEL. Brenton and ALLTEL are working in
partnership to address the Year 2000 issues of the core application programs as
well as all other computer software programs used in the Company. The
incremental expense associated with becoming Year 2000 compliant is not
anticipated to be material. However, there is an opportunity cost associated
with this project in that the people involved are regular Brenton and ALLTEL
employees who would normally be spending their time on other projects. There
will be benefits as a result of this project because systems are being improved
in addition to becoming Year 2000 compliant.
The Company has a Year 2000 Committee and Plan in place and has been
executing on that plan. The Company expects to have all core application
systems Year 2000 compliant by the end of 1998 and all other software products
compliant by early 1999, with further testing to take place throughout the
remainder of 1999.
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 28.0 percent for 1997 compared to
28.3 percent for 1996.
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. Diluted earnings per common share were $.76 compared to $.55 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 basis points over 1995. The
average rate earned on earning assets declined 6 basis points, while the
average rate paid on interest-bearing liabilities declined 23 basis points.
The net interest spread rose to 3.58 percent from 3.41 percent last year.
Net interest margin averaged 4.03 percent in 1996 compared to 3.89 percent in
1995.
Loan Quality
Loan quality was strong in 1996 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. The majority of the increase
in nonperforming
<PAGE>
loans was related to two loans that were restructured within the commercial
loan portfolio.
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 earlier. 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.
Net Noninterest Margin
For 1996, the net noninterest margin improved to (2.09) percent compared
to (2.38) percent in 1995. At December 31, 1996, the Company's efficiency
ratio was 68.27 percent, compared to 73.70 percent in 1995.
Noninterest Income
For 1996, total noninterest income (excluding securities transactions)
increased 28.9 percent to $23,006,185 from $17,849,743 one year earlier.
Noninterest income (excluding securities gains and losses) for 1996 represented
1.45 percent of average assets and 29.10 percent of total operating income.
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
1995. 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 was 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 was 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. Several one-time revenue items affected this
category in both periods.
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.
Noninterest Expense
Total noninterest expense increased 1.9 percent in 1996 to $56,090,571
from $55,051,267 in 1995. Noninterest expense for 1996 included a
nonrecurring charge for a special assessment by the FDIC. This assessment
was based upon 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. Brenton's assessment was
$1,288,000. Excluding this one-time assessment, noninterest expense would
have actually decreased by .5 percent.
Compensation, the largest component of noninterest expense, increased
$2,645,244 or 11.6 percent over 1995. This increase was primarily related to
commissions paid on higher sales of fee-related products, expense tied to a
stock performance plan and severance costs. Fixed salaries 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 compensation expense led to a proportionate increase
in employee benefits.
<PAGE>
Several new facilities and remodeling projects were completed in 1996 and
1995, which explains 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 included the first full year of
expense for these new facilities.
Furniture and equipment expense 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. 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 was 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 special 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.
Other operating expenses decreased $2.6 million, or 21.2 percent, when
comparing 1996 results to 1995. This decline was 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.
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 28.3 percent for 1996 compared to 22.5 percent
for 1995.
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND RATES
Average Balances (In thousands) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 58,681 65,439 57,138 46,301 46,025
Interest-bearing deposits
with banks 2,460 1,393 1,076 124 762
Federal funds sold and
securities purchased under
agreements to resell 31,472 26,188 39,763 37,666 23,725
Trading account securities 12 --- --- 116 ---
Investment securities:
Available for sale-taxable 348,232 330,002 244,786 245,913 53,174
Available for sale-tax-exempt 99,868 85,471 100,859 132,040 ---
Held to maturity-taxable 12,700 46,271 65,959 35,794 299,993
Held to maturity-tax-exempt 56,204 51,639 50,235 44,584 164,520
Loans held for sale 10,284 7,983 5,908 2,575 6,165
Loans 970,115 919,578 945,724 936,370 802,088
Allowance for loan losses (12,171) (11,440) (11,166) (10,502) (9,615)
Premises and equipment 29,841 31,728 31,436 24,545 23,045
Other 41,771 28,642 29,508 25,663 26,543
__________ _________ _________ _________ _________
$ 1,649,469 1,582,894 1,561,226 1,521,189 1,436,425
Liabilities and Stockholders'
Equity:
Deposits
Noninterest-bearing $ 139,480 131,051 128,770 127,464 119,322
Interest-bearing:
Demand* 81,430 376,259 355,819 250,520 217,754
Savings* 551,509 241,250 231,633 294,715 299,640
Time 567,258 583,508 626,497 625,981 622,789
__________ _________ _________ _________ _________
Total deposits 1,339,677 1,332,068 1,342,719 1,298,680 1,228,525
Federal funds purchased and
securities sold under agreements
to repurchase 78,234 59,276 40,237 62,656 42,715
Other short-term borrowings 53,223 17,295 6,536 4,860 33
Accrued expenses and other
liabilities 17,097 17,520 14,896 13,254 12,805
Long-term borrowings 32,056 33,094 37,264 26,500 14,077
__________ _________ _________ _________ _________
Total liabilities 1,520,287 1,459,253 1,441,652 1,404,950 1,329,135
Minority interest in consolidated
subsidiaries 4,691 4,471 4,391 4,290 4,150
Common stockholders' equity 124,491 119,170 115,183 111,949 103,140
__________ _________ _________ _________ _________
$ 1,649,469 1,582,894 1,561,189 1,521,189 1,436,425
Summary of Average Interest Rates
Average rates earned:
Interest-bearing deposits with
banks 4.80% 4.87 6.20 6.65 2.88
Trading account securities 4.26 --- --- 6.36 ---
Federal funds sold and securities
purchased under agreements to
resell 5.54 5.41 5.69 4.53 2.05
Investment securities:
Available for sale-taxable 6.31 6.08 5.96 5.30 5.28
Available for sale-tax exempt
(tax equivalent basis) 7.04 7.13 6.71 6.37 ---
Held to maturity-taxable 6.39 6.22 6.17 5.20 5.54
Held to maturity-tax-exempt
(tax equivalent basis) 6.72 6.68 8.05 7.70 6.97
Loans held for sale 7.89 8.47 6.71 7.50 8.43
Loans 8.82 8.69 8.69 8.14 8.77
Average rates paid:
Deposits 4.11% 4.12 4.37 3.55 3.70
Federal funds purchased and
securities sold under agreements
to repurchase 4.36 4.17 4.08 3.38 2.41
Other short-term borrowings 5.98 5.87 5.67 5.42 3.63
Long-term borrowings 6.86 7.07 7.03 6.86 8.60
Average yield on interest-earning
assets 7.95% 7.80 7.86 7.31 7.57
Average rate paid on interest-
bearing liabilities 4.26 4.22 4.45 3.62 3.71
Net interest spread 3.69 3.58 3.41 3.69 3.86
Net interest margin 4.16 4.03 3.89 4.12 4.28
<FN>
* The variance in average balances between 1997 and 1996 is due to an internal
reclassification in late 1996 of certain accounts. The reclassification was
implemented to reduce Federal Reserve Bank reserve requirements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year-end Balances
(In thousands) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets $1,718,484 $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
Interest-earning assets 1,578,923 1,497,600 1,461,218 475,473 1,400,709 1,323,252 1,267,402 1,181,172 883,721 845,571
Interest-bearing liabilities 1,406,258 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
Noninterest-bearing
deposits 161,007 153,284 143,220 136,548 127,132 137,212 115,479 125,626 113,349 118,392
Long-term borrowings 36,662 34,860 38,178 28,939 20,055 13,284 13,634 12,675 14,701 16,215
Preferred stock --- --- --- --- --- --- --- --- --- ---
Common stockholders'
equity** 129,379 121,954 119,534 110,430 112,418 97,430 86,712 77,258 63,522 56,401
Results of operations
(In thousands)
Interest income $ 118,239 111,383 111,040 101,223 98,656 106,560 115,561 106,826 85,722 76,745
Interest expense 58,105 55,331 57,708 45,772 44,427 54,773 68,687 64,431 49,102 43,180
Net interest income 60,134 56,052 53,332 55,451 54,229 51,787 46,874 42,395 36,620 33,565
Provision for loan losses 3,900 2,900 1,865 1,988 1,252 1,411 799 869 760 1,214
Net interest income after
provision for loan losses 56,234 53,152 51,467 53,463 52,977 50,376 46,075 41,526 35,860 32,351
Noninterest income 27,506 23,327 17,847 16,593 17,863 14,684 12,715 11,554 10,113 10,367
Noninterest expense 57,699 56,090 55,051 56,657 50,415 46,591 42,284 37,820 32,781 32,066
Income before income
taxes and minority
interest 26,041 20,389 14,263 13,399 20,425 18,469 16,506 15,260 13,192 10,652
Income taxes 7,288 5,771 3,205 2,701 5,508 4,884 4,308 4,388 4,016 2,527
Minority interest 743 603 651 591 667 632 539 533 472 422
Net income 18,010 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,703
Preferred stock dividend
requirement --- --- --- --- --- --- --- --- --- 81
Net income available
to common stockholders $ 18,010 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,622
Average common shares
outstanding
(In thousands)* 17,505 18,092 18,569 19,095 18,994 18,829 18,773 18,741 17,414 17,414
Per common share*
Net income-basic $ 1.03 .78 .56 .53 .75 .69 .62 .55 .50 .44
Net income-diluted 1.01 .76 .55 .52 .74 .68 .61 .55 .49 .44
Cash dividends .273 .207 .186 .182 .165 .145 .134 .113 .091 .048
Common stockholders'
equity*** 7.28 6.80 6.38 6.07 5.74 5.15 4.61 4.12 3.65 3.24
Selected operating ratios
Return on average assets
(including minority
interest) 1.14% .92 .71 .70 1.04 .98 .93 .95 1.00 .90
Return on average common
stockholders' equity** 14.47 11.76 9.04 9.03 13.82 14.13 14.27 14.39 14.50 14.34
Equity to assets*** 7.36 7.41 7.47 7.28 7.40 6.81 6.37 6.06 6.61 6.12
Common dividend payout 27.03 27.24 33.82 35.00 22.30 21.32 21.97 20.55 18.57 10.91
Allowance for loan losses
as a percent of loans 1.28 1.20 1.22 1.12 1.12 1.20 1.14 1.25 1.55 1.60
Net charge-offs to average
loans outstanding .26 .29 .18 .10 .05 .13 .15 .12 .08 .18
<FN>
* Restated for 2-for-1 stock split, effective February 1998, 10% common stock
dividends effective in 1997 and 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 1997 1996
<S> <C> <C>
Assets:
Cash and due from banks (note 2) $ 77,468,210 76,900,524
Interest-bearing deposits with banks 1,319,700 731,554
Federal funds sold and securities purchased
under agreements to resell 9,300,000 15,200,000
Trading account securities 77,220 ---
Investment securities:
Available for sale (note 3) 486,653,872 461,099,272
Held to maturity (market value of
$69,852,000 and $73,316,000
at December 31, 1997, and 1996,
respectively) (note 3) 69,079,622 72,754,985
Investment securities 555,733,494 533,854,257
Loans held for sale 19,303,411 5,870,298
Loans (notes 4, 9 and 10) 993,189,110 941,943,513
Allowance for loan losses (note 5) (12,732,131) (11,328,359)
Loans, net 980,456,979 930,615,154
Premises and equipment (notes 6 and 10) 28,898,589 30,379,446
Accrued interest receivable 15,233,682 14,417,786
Other assets (notes 4 and 8) 30,692,512 24,126,063
$ 1,718,483,797 1,632,095,082
Liabilities and Stockholders' Equity:
Deposits (note 7):
Noninterest-bearing $ 161,007,156 153,284,094
Interest-bearing:
Demand 117,664,352 99,277,477
Savings 527,364,856 527,791,360
Time 558,234,127 572,704,180
Total deposits 1,364,270,491 1,353,057,111
Federal funds purchased and securities sold
under agreements to repurchase 92,632,576 66,826,120
Other short-term borrowings (note 9) 73,700,000 34,150,000
Accrued expenses and other liabilities 16,980,763 16,633,068
Long-term borrowings (note 10) 36,662,000 34,860,024
Total liabilities 1,584,245,830 1,505,526,323
Minority interest in consolidated subsidiaries 4,858,668 4,614,530
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, $2.50 par; 50,000,000 shares
authorized; 17,334,048 and 16,171,368 shares
issued and outstanding at December 31, 1997,
and 1996, respectively 43,335,120 40,428,420
Capital surplus --- ---
Retained earnings 82,824,333 80,448,768
Unrealized gains on securities available for
sale, net 3,219,846 1,077,041
Total common stockholders' equity 129,379,299 121,954,229
$ 1,718,483,797 1,632,095,082
<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 1997 1996 1995
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans (note 4) $ 86,020,464 80,301,707 82,525,850
Interest and dividends on investments:
Available for sale-taxable 21,969,148 20,063,114 14,577,652
Available for sale-tax-exempt 4,929,898 4,250,463 4,446,824
Held to maturity-taxable 811,729 2,878,982 4,069,617
Held to maturity-tax-exempt 2,647,149 2,404,155 3,090,185
Interest on federal funds sold and
securities purchased under agreements
to resell 1,742,284 1,416,539 2,263,734
Other interest income 118,695 68,157 66,705
___________ ___________ ___________
Total interest income 118,239,367 111,383,117 111,040,567
Interest Expense:
Interest on deposits (note 7) 49,310,346 49,507,425 53,075,352
Interest on federal funds purchased and
securities sold under agreements to
repurchase 3,413,432 2,469,939 1,641,516
Interest on other short-term borrowings
(note 9) 3,183,053 1,015,110 370,642
Interest on long-term borrowings (note 10) 2,198,772 2,338,501 2,620,914
___________ ___________ ___________
Total interest expense 58,105,603 55,330,975 57,708,424
Net interest income 60,133,764 56,052,142 53,332,143
Provision for loan losses (note 5) 3,900,000 2,900,000 1,864,801
___________ ___________ ___________
Net interest income after provision for
loan losses 56,233,764 53,152,142 51,467,342
Noninterest Income:
Service charges on deposit accounts 7,290,765 6,712,874 5,547,796
Investment brokerage commissions 4,808,048 3,766,436 3,044,107
Mortgage banking income 3,274,215 2,168,593 1,427,342
Fiduciary income 3,136,078 2,744,530 2,425,105
Insurance commissions and fees 2,803,983 2,915,666 2,339,817
Other service charges, collection and
exchange charges, commissions and fees 3,441,454 2,779,502 2,435,132
Net realized gains (losses) from
securities available for sale (note 3) 493,822 321,256 (3,003)
Other operating income 2,257,424 1,918,584 630,444
___________ ___________ ___________
Total noninterest income 27,505,789 23,327,441 17,846,740
Noninterest Expense:
Compensation 26,824,307 25,460,464 22,815,220
Employee benefits (note 15) 4,303,104 4,245,682 4,158,580
Occupancy expense of premises, net
(notes 6 and 17) 5,609,600 5,502,904 4,912,417
Furniture and equipment expense
(notes 6 and 17) 3,634,336 3,725,150 3,747,021
Data processing expense (note 18) 2,850,395 2,591,485 2,379,920
Marketing 1,361,963 1,756,473 1,741,390
Supplies 1,195,762 1,409,690 1,326,928
FDIC deposit insurance assessment 281,416 1,801,646 1,783,213
Other operating expense 11,637,681 9,597,077 12,186,578
___________ ___________ ___________
Total noninterest expense 57,698,564 56,090,571 55,051,267
Income before income taxes and
minority interest 26,040,989 20,389,012 14,262,815
Income taxes (note 8) 7,287,628 5,770,600 3,204,687
___________ ___________ ___________
Income before minority interest 18,753,361 14,618,412 11,058,128
Minority interest 743,254 602,982 650,774
___________ ___________ ___________
Net income $ 18,010,107 14,015,430 10,407,354
Per common share (notes 1 and 13):
Net income-basic $ 1.03 .78 .56
Net income-diluted 1.01 .76 .55
Cash dividends .273 .207 .186
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 1997 1996 1995
<S> <C> <C> <C>
Operating Activities:
Net income $ 18,010,107 14,015,430 10,407,354
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for loan losses 3,900,000 2,900,000 1,864,801
Depreciation and amortization 4,216,828 4,301,776 4,097,022
Deferred income taxes (685,223) 949,396 (25,181)
Net realized (gains) losses from
securities available for sale (493,822) (321,256) 3,003
Net (increase) decrease in loans held
for sale (13,433,113) 2,837,011 (6,602,817)
Net increase in accrued interest
receivable and other assets (3,501,066) (1,402,881) (1,678,132)
Net increase in accrued expenses, other
liabilities and minority interest 509,873 1,735,569 322,324
_____________ ____________ ____________
Net cash provided by operating activities 8,523,584 25,015,045 8,388,374
Investing Activities:
Investment securities available for sale:
Purchases (304,725,316) (289,895,560) (242,871,379)
Maturities 163,857,601 150,480,123 278,575,538
Sales 119,401,553 67,547,581 5,577,835
Investment securities held to maturity:
Purchases (26,528,449) (45,046,248) (121,543,300)
Maturities 30,203,812 79,614,914 59,896,255
Net (increase) decrease in loans (53,741,825) (26,364,596) 28,502,974
Purchase of other assets for
investment (5,000,000) (10,017,329) ---
Purchases of premises and equipment (2,526,958) (2,734,491) (9,733,181)
Proceeds from sales of premises and
equipment 225,080 1,356,634 360,470
_____________ ____________ ____________
Net cash used by investing activities (78,834,502) (75,058,972) (1,234,788)
Financing Activities:
Net increase in noninterest-bearing,
interest-bearing demand and savings
deposits 25,683,433 22,335,320 51,054,199
Net increase (decrease) in time deposits (14,470,053) (31,220,924) (29,394,594)
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase 25,806,456 25,718,709 (29,596,325)
Net increase (decrease) in other
short-term borrowings 25,550,000 15,500,000 (9,500,000)
Proceeds of long-term borrowings 17,806,000 14,604,000 12,429,000
Repayment of long-term borrowings (2,004,024) (1,771,779) (3,190,610)
Dividends on common stock (4,781,675) (3,748,653) (3,498,220)
Proceeds from issuance of common stock
under the employee stock purchase plan 551,247 71,675 ---
Proceeds from issuance of common stock
under the stock option plan 1,286,157 290,748 187,213
Proceeds from issuance of common stock
under the long-term stock compensation
plan 246,915 334,834 361,602
Payment for shares reacquired under common
stock repurchase plan (10,014,087) (8,248,331) (4,830,111)
Payment for fractional shares resulting
from common stock dividend (16,399) (13,744) ---
_____________ ____________ ____________
Net cash provided (used) by financing
activities 65,643,970 33,851,855 (15,977,846)
_____________ ____________ ____________
Net decrease in cash and
cash equivalents (4,666,948) (16,192,072) (8,824,260)
Cash and cash equivalents at the
beginning of the year 92,832,078 109,024,150 117,848,410
_____________ ____________ ____________
Cash and cash equivalents at the end
of the year $ 88,165,130 92,832,078 109,024,150
<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,
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
$.186 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 long-term stock
compensation plan
(note 16) 100,445 261,157 --- --- 361,602
Shares reacquired under
the common 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
$.207 per share* --- --- (3,748,653) --- (3,748,653)
10% common stock
dividend (note 13) 3,684,215 --- (3,684,215) --- ---
Fractional shares
resulting from common
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 long-term 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
the common 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
Net income --- --- 18,010,107 --- 18,010,107
Net change in
unrealized gains
(losses) --- --- --- 2,142,805 2,142,805
Dividends on common
stock
$.273 per share** --- --- (4,781,675) --- (4,781,675)
10% common stock
dividend (note 13) 3,966,905 --- (3,966,905) --- ---
Fractional shares
resulting from common
stock dividend --- --- (16,399) --- (16,399)
Issuance of shares of
common stock under
the stock option
plan (note 16) 501,760 784,397 --- --- 1,286,157
Issuance of shares of
common stock under
the long-term stock
compensation plan
(note 16) 82,945 163,970 --- --- 246,915
Issuance of shares
of common stock
under the employee
stock purchase plan
(note 16) 93,790 457,457 --- --- 551,247
Shares reacquired under
the common stock
repurchase plan
(note 13) (1,738,700) (1,405,824) (6,869,563) --- (10,014,087)
Balance, December 31,
1997 $43,335,120 --- 82,824,333 3,219,846 129,379,299
<FN>
* Reflects the 2-for-1 stock split effective February 1998 and the 10% common stock
dividends effective in 1997 and 1996.
** Reflects the 2-for-1 stock split effective February 1998 and the 10% common stock
dividend effective in 1997.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BRENTON BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) Summary of Significant Accounting Policies and
Related Matters
Nature of Operations Brenton Banks, Inc. and subsidiaries (the
Company) engage in retail, commercial, business, and agricultural
banking and related financial services from 46 locations
throughout the state of Iowa. The Company provides the usual
products and services of banking such as deposits, commercial
loans, business loans, agribusiness loans, personal loans and
trust and investment management services. The Company also
engages in activities that are closely related to banking,
including mortgage banking, investment, insurance and real estate
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
$3,795,000 and $4,696,000 at December 31, 1997, and 1996,
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 realized 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.
Trading Account Securities Trading account securities are
carried at market value and include securities purchased with the
intent to resell in a relatively short period of time. Gains and
losses on trading account activities, including market value
adjustments, are reported in noninterest income in the
consolidated statements of operations.
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, interest credited to income in the
current year is reversed and interest accrued in prior years is
charged to the allowance for loan losses.
Under the Company's credit policies, all nonaccrual and
restructured commercial, business, agricultural, commercial real
estate and construction loans are considered to be impaired
loans. 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, business, 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.
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 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. 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
<PAGE>
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 $341,000 and $488,000 at December 31,
1997, and 1996, 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.
Income Per Common Share Basic net income per common share
amounts are computed by dividing net income by the weighted
average number of common shares outstanding during the year.
Diluted net income per common share amounts are computed by
dividing net income by the weighted average number of common
shares and all dilutive potential common shares outstanding
during the year. In January 1998, the Company declared a 2-for-1
stock split effective February 10, 1998 and in May 1997 and
October 1996, the Company declared 10 percent common stock
dividends. The average number of common shares and dilutive
potential common shares have been restated for the stock split
and stock dividends.
The following information was used in the computation of net
income per common share on both a basic and diluted basis for the
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
(In thousands, except for EPS data) 1997 1996 1995
<S> <C> <C> <C>
Basic EPS Computation
Numerator:
Net income $18,010 14,015 10,407
_______ ______ ______
Denominator:
Average common shares
outstanding 17,505 18,092 18,569
_______ ______ ______
Basic EPS $ 1.03 .78 .56
_______ ______ ______
_______ ______ ______
Diluted EPS Computation
Numerator:
Net income $18,010 14,015 10,407
_______ ______ ______
Denominator:
Average common shares
outstanding 17,505 18,092 18,569
Average stock options 284 161 141
Average long-term stock
compensation plan 140 195 193
_______ ______ ______
17,929 18,448 18,903
_______ ______ ______
_______ ______ ______
Diluted EPS $ 1.01 .76 .55
_______ ______ ______
_______ ______ ______
</TABLE>
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.
Interest Rate Floor An interest rate floor requires the seller
to pay the purchaser, at specified dates, the amount, if any, by
which the market interest rate falls below the agreed-upon floor,
applied to a notional principal amount. Initial cash amounts
paid on positions accounted for as hedges are deferred and
amortized over the instrument's contractual life.
<PAGE>
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 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 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 APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities Effective January 1, 1997, the
Company adopted SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities." This statement requires that after a transfer of
financial assets, the Company must recognize the financial and
servicing assets controlled and liabilities incurred and
derecognize financial assets and liabilities in which control is
surrendered or debt is extinguished. In such a case, servicing
assets are determined based upon estimated future revenues from
contractually specified servicing fees and other ancillary
revenues that are expected to compensate the Company for
performing the servicing. The adoption of SFAS No. 125 did not
have a material effect on the Company.
Earnings per Share Effective December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share." This statement
replaces the primary earnings per share (EPS) disclosure with
basic and diluted EPS disclosures to simplify the calculation and
improve international comparability. The adoption of SFAS No.
128 did not have a material effect on the Company.
(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 $16,504,000 at December 31, 1997.
(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.
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1997 (In thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
Investment securities available for sale:
Taxable investments:
U.S. Treasury securities $ 38,502 288 --- 38,790
Securities of U.S. government agencies 86,185 490 (15) 86,660
Mortgage-backed and related securities 229,334 1,778 (179) 230,933
Other investments 20,925 36 (4) 20,957
Tax-exempt investments:
Obligations of states and political
subdivisions 106,804 2,522 (12) 109,314
_______ _____ _____ _______
$481,750 5,114 (210) 486,654
Investment securities held to maturity:
Taxable investments:
Securities of U.S. government agencies $ 5,025 --- (6) 5,019
Mortgage-backed and related securities 2,363 74 --- 2,437
Other investments 1,518 9 (1) 1,526
Tax-exempt investments:
Obligations of states and political
subdivisions 60,173 773 (76) 60,870
_______ _____ _____ ______
$ 69,079 856 (83) 69,852
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 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
</TABLE>
<PAGE>
Proceeds from the sale of available for sale securities were
$119,402,000, $67,548,000 and $5,578,000 in 1997, 1996, and 1995,
respectively. Gross gains of $874,000 in 1997, $558,000 in 1996
and $19,000 in 1995 and gross losses of $380,000 in 1997,
$237,000 in 1996 and $22,000 in 1995 were realized on those
sales.
Other investments at December 31, 1997, and 1996, consisted
primarily of corporate bonds and Federal Home Loan Bank stock.
U.S. government agencies originate or guarantee primarily all of
the mortgage-backed and related securities.
The scheduled maturities of investment securities at
December 31, 1997 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 $143,877 144,385
Due after one year through
five years 221,832 224,024
Due after five years through
ten years 93,418 94,727
Due after ten years 22,623 23,518
$481,750 486,654
Investment securities held to
maturity:
Due in one year or less $ 26,100 26,176
Due after one year through
five years 28,690 28,909
Due after five years through
ten years 9,356 9,553
Due after ten years 4,933 5,214
$ 69,079 69,852
</TABLE>
Investment securities carried at $314,865,000 and $246,552,000 at
December 31, 1997, and 1996, respectively, were pledged to secure
public and other funds on deposit and for other purposes.
(4) Loans
A summary of loans at December 31 follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Real estate loans:
Commercial construction
and land development $ 30,007 42,693
Secured by 1-4 family
residential property
including home equity loans 342,134 338,010
Other 161,989 150,395
Loans to farmer 79,036 69,660
Commercial and industrial loans 160,428 132,395
Loans to individuals for personal
expenditures 217,405 207,197
All other loans 2,190 1,594
$993,189 941,944
</TABLE>
The Company originates commercial, business, real estate,
agribusiness and personal loans with clients throughout Iowa.
The portfolio has unavoidable geographic risk as a result.
Total nonperforming loans and assets at December 31 were:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Impaired loans:
Nonaccrual $3,227 2,663
Restructured 513 568
Total impaired loans 3,740 3,231
Loans past due 90 days
or more 2,972 2,936
Total nonperforming loans 6,712 6,167
Other real estate owned 341 488
Total nonperforming assets $7,053 6,655
</TABLE>
The average balances of impaired loans for the years ended
December 31, 1997, and 1996, were $3,076,000 and $3,378,000,
respectively. The allowance for loan losses related to impaired
loans at December 31, 1997, and 1996, was $1,187,000 and
$481,000, respectively. Impaired loans of $704,000 and $456,000
were not subject to a related allowance for loan losses at
December 31, 1997, and 1996, respectively, because of the net
realizable value of loan collateral, guarantees and other
factors.
The effect of nonaccrual and restructured loans on interest
income for each of the three years ended December 31 was:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Interest income:
As originally contracted $402 363 418
As recognized 157 174 136
Reduction of interest income $245 189 282
</TABLE>
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, 1996 $ 5,680
Additional loans 3,364
Loan payments (3,114)
Balance at December 31, 1997 $ 5,930
</TABLE>
Mortgage Servicing Rights The fair market value of capitalized
servicing rights at December 31, 1997 was approximately
$2,548,000. To determine the fair value of the servicing rights,
the Company used comparable market prices. There was a $5,000
charge to the impairment account for the year ended December 31,
1997. In determining the fair market value and potential
impairment at the end of 1997, the Company disaggregated the
portfolio by its predominate risk factor, interest rate. The
fair value
<PAGE>
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,
included in other assets, as of December 31 follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Beginning of year balance $1,026 252
Additions from originations 1,491 962
Amortization (238) (188)
Impairment (5) ---
Balance at end of year $2,274 1,026
</TABLE>
(5) Allowance for Loan Losses
A summary of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $11,328 11,070 10,913
Provision 3,900 2,900 1,865
Recoveries 1,733 1,419 1,669
Loans charged off (4,229) (4,061) (3,377)
Balance at end of year $12,732 11,328 11,070
</TABLE>
(6) Premises and Equipment
A summary of premises and equipment as of December 31 follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Land $ 2,919 2,952
Buildings and leasehold
improvements 31,511 30,876
Furniture and equipment 25,047 23,463
Construction in progress 145 275
59,622 57,566
Less accumulated depreciation 30,723 27,187
$28,899 30,379
</TABLE>
Depreciation expense included in operating expenses amounted to
$3,783,000, $3,848,000 and $3,626,000 in 1997, 1996 and 1995,
respectively.
(7) Deposits
Time deposits include deposits in denominations of $100,000 or
more of $80,896,000 and $82,011,000 at December 31, 1997, and
1996, respectively.
A summary of interest expense by deposit classification
follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Demand $ 2,332 11,194 11,842
Savings 15,903 6,134 6,638
Time deposits
of $100,000 or more 4,833 3,935 4,193
Other time deposits 26,242 28,244 30,402
$49,310 49,507 53,075
</TABLE>
The Company made cash interest payments of $57,932,000,
$55,455,000 and $55,229,000 on deposits and borrowings in 1997,
1996 and 1995, respectively.
At December 31, 1997, the scheduled maturities of time deposits
are as follows:
(In thousands)
1998 $371,301
1999 134,459
2000 39,809
2001 9,981
2002 and thereafter 2,684
$558,234
(8) Income Taxes
The current and deferred income tax provisions included in the
consolidated statements of operations follow:
<TABLE>
<CAPTION>
1997 (In thousands) Current Deferred Total
<S> <C> <C> <C>
Federal $6,562 (577) 5,985
State 1,411 (108) 1,303
$7,973 (685) 7,288
1996
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
</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 $6,100,000, $4,250,000
and $2,500,000 to the IRS, and $1,568,000, $435,000 and $737,000
to the state of Iowa in 1997, 1996 and 1995, 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.
<PAGE>
The reasons for the difference between the amount computed
by applying the statutory federal income tax rate of 35 percent
in 1997 and 1996 and 34 percent in 1995, and income tax expense
follow:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
At statutory rate $ 9,114 7,136 4,849
Increase (reduction) due to:
Tax-exempt interest (2,916) (2,556) (2,566)
State taxes, net of
federal benefit 847 730 365
Nondeductible interest expense
to own tax-exempts 536 426 431
Other, net (293) 35 126
$ 7,288 5,771 3,205
</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, 1997, or 1996. A summary of
the temporary differences resulting in deferred income taxes and
the related tax effect on each follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Allowance for loan losses $4,575 3,962
Unrealized gains on
securities available for sale (2,006) (670)
Deposit base intangibles (489) (315)
Premises and equipment (468) (588)
Stock compensation plan 1,077 682
Real estate mortgage
loan points deferred (283) (300)
Other, net (536) (251)
$1,870 2,520
</TABLE>
(9) Other Short-Term Borrowings
The Company had short-term borrowings with the Federal Home Loan
Bank of Des Moines (FHLB) totaling $73,700,000 and $34,150,000 at
December 31, 1997, and 1996, respectively. The average rate on
these borrowings at December 31, 1997 was 6.02 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, 1997. 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 at December 31:
<TABLE>
<CAPTION>
(In thousands) 1997 1996
<S> <C> <C>
Capital notes, 6.00% to 10.00%
Total Parent Company $ 10,112 11,248
Borrowings from FHLB, average rate
of 6.09% at December 31, 1997 26,550 23,550
Mortgage debt --- 62
$ 36,662 34,860
</TABLE>
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,
1997, follow:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Consolidated
<S> <C> <C>
1998 $ 1,090 1,090
1999 1,417 23,467
2000 853 5,353
2001 1,383 1,383
2002 853 853
Thereafter 4,516 4,516
$10,112 36,662
</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, 1997 December 31, 1996
Recorded Fair Recorded Fair
(In thousands) Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 77,468 77,468 76,901 76,901
Interest-bearing deposits with
banks 1,320 1,320 732 732
Federal funds sold and securities
purchased under agreements to
resell 9,300 9,300 15,200 15,200
Trading account securities 77 77 --- ---
Investment securities 555,733 556,506 533,854 534,415
Loans held for sale 19,303 19,303 5,870 5,870
Loans, net 980,457 981,664 930,615 929,113
Financial liabilities:
Deposits $ 1,364,270 1,369,448 1,353,057 1,360,457
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 166,333 166,333 100,976 100,976
Long-term borrowings 36,662 37,156 34,860 35,025
Off-balance-sheet assets (liabilities):
Commitments to extend credit $ --- --- --- ---
Letters of credit --- (111) --- (59)
Interest rate swaps --- (34) --- (69)
Interest rate floor 195 206 --- ---
</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 and trading account
securities 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 and the interest rate
floor contract is the estimated amount that the Company would
receive or pay to terminate the swap and floor agreements at the
reporting date.
<PAGE>
(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.
As of December 31, 1997, 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, 1997:
Total Capital
(to Risk Weighted Assets):
Consolidated $141,688 11.95% $94,832 > 8.0% N/A
_
Brenton Bank 132,756 11.87 89,443 > 8.0 $111,804 > 10.0%
_ _
Tier 1 Capital
(to Risk Weighted Assets):
Consolidated 128,931 10.88 47,416 > 4.0 N/A
_
Brenton Bank 120,887 10.81 44,722 > 4.0 67,082 > 6.0
_ _
Tier 1 Capital
(to Average Assets):
Consolidated 128,931 7.63 50,703 > 3.0 N/A
_
Brenton Bank 120,887 7.69 62,852 > 4.0 78,565 > 5.0
_ _
</TABLE>
(13) Common Stock Transactions
In January 1998, the Company declared a 2-for-1 stock split for
holders of record as of February 10, 1998. As a result, the par
value of the Company's common stock was changed from $5.00 to
$2.50 per share, the number of outstanding shares doubled and
authorized shares were increased to 50 million. In May 1997, the
Company declared a 10 percent common stock dividend. As a result
of this action, 1,586,762 shares of common stock were issued and
$3,966,905 was transferred from retained earnings to common
stock. Fractional shares resulting from this stock dividend were
paid in cash. In October 1996, the Company declared a 10 percent
common stock dividend. This transaction resulted in the issuance
of 1,473,686 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. 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
1997 the Board of Directors authorized additional common stock
repurchases of $10 million in 1997. For the years ended December
31, 1997, 1996 and 1995, the Company repurchased 695,480, 695,400
and 516,266 shares (restated for the 2-for-1 stock split),
respectively, at a total cost of $10,014,087, $8,248,331 and
$4,830,111.
(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, 1997,
were approximately $15 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
<PAGE>
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 1997, 1996 and 1995 amounted to
$1,290,000, $1,284,000 and $1,263,000, respectively. The Company
offers no material post-retirement benefits.
(16) Stock Plans
In 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"), which was approved by a vote of stockholders. The Plan
authorizes the granting of options on up to 1,210,000 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.
The per-share weighted average fair value of stock options
granted during 1997 was $4.11 based on the date of grant using
the Company's option pricing model with the following weighted
average assumptions: expected dividend yield of 2.05 percent,
risk-free interest rate of 6.52 percent, expected life of 7.5
years and expected volatility of stock price of 18.5 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:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net income:
As reported $18,010,107 14,015,430
Pro forma 17,734,878 13,768,662
Basic earnings per share:
As reported $1.03 .78
Pro forma 1.01 .76
Diluted earnings per share:
As reported $1.01 .76
Pro forma .99 .74
</TABLE>
Pro forma net income reflects only options granted in 1997
and 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.
Changes in options outstanding during 1997 and 1996 were as
follows (restated for the 2-for-1 stock split effective February
1998 and the 10 percent common stock dividends effective in 1997
and 1996):
<TABLE>
<CAPTION>
Options Option Price
Outstanding Per Share
<S> <C> <C>
December 31, 1995 --- $ ---
Granted - 1996 1,035,760 10.07-10.74
December 31, 1996 1,035,760 10.07-10.74
Granted - 1997 87,180 12.50-16.75
Forfeited - 1997 (36,300) 10.07
December 31, 1997
(123,360 shares available
for grant) 1,086,640 $10.07-16.75
</TABLE>
A total of 845,913 shares were granted 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 $1,731,000,
$1,302,000 and $425,000 for 1997, 1996 and 1995, respectively.
Changes in outstanding grant shares during 1997, 1996 and 1995
were as follows (restated for the 2-for-1 stock split effective
February 1998 and the 10 percent common stock dividends effective
in 1997 and 1996):
<TABLE>
<CAPTION>
Performance 1992 to 1993 to 1994 to 1995 to
Period 1994 1995 1996 1997
<S> <C> <C> <C> <C>
December 31, 1994 221,412 185,506 218,511 ---
Granted - 1995 --- --- --- 215,673
Forfeited - 1995 --- (20,275) (32,393) (16,032)
Expired - 1995 (143,919) --- --- ---
Vested - 1995 (77,493) --- --- ---
December 31, 1995 --- 165,231 186,118 199,641
Forfeited - 1996 --- --- (20,953) (22,812)
Expired - 1996 --- (107,402) --- ---
Vested - 1996 --- (57,829) --- ---
December 31, 1996 --- --- 165,165 176,829
Forfeited - 1997 --- --- --- (23,713)
Expired - 1997 --- --- (107,353) ---
Vested - 1997 --- --- (57,812) ---
Outstanding grant
shares at
December 31, 1997 --- --- --- 153,116
</TABLE>
For the performance period 1995 to 1997, 153,116 shares vested on
January 1, 1998.
The Company's 1987 nonqualified stock option plan permits
the Board of Directors to grant options to purchase up to 726,000
shares of the Company's $2.50 par value common stock. Under
provisions of the plan, no further grants can be made and no
grants were made in 1997. 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.
<PAGE>
Changes in options outstanding and exercisable during 1997,
1996 and 1995 were as follows (restated for the 2-for-1 stock
split effective February 1998 and the 10 percent common stock
dividends effective in 1997 and 1996):
<TABLE>
<CAPTION>
Exercisable Outstanding Option Price
Options Options Per Share
<S> <C> <C> <C>
December 31, 1994 339,889 377,641 $1.83-8.12
Vested - 1995 7,260 --- 3.63-3.91
Exercised - 1995 (47,795) (47,795) 1.83
Forfeited - 1995 --- (30,492) 3.63-8.12
December 31, 1995 299,354 299,354 1.83-3.91
Exercised - 1996 (58,960) (58,960) 1.83
December 31, 1996 240,394 240,394 1.83-3.91
Exercised - 1997 (204,094) (204,094) 1.83-3.91
December 31, 1997 36,300 36,300 $2.65
</TABLE>
The Company's Employee Stock Purchase Plan allows qualifying
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 1997 and 1996, 37,516 and 33,224 shares
(restated for the 2-for-1 stock split effective February 1998),
respectively, of common stock were purchased by employees under
this plan.
(17) Lease Commitments
Rental expense included in the consolidated statements of
operations amounted to $1,963,000, $1,919,000 and $1,937,000 in
1997, 1996 and 1995, respectively. Future minimum rental
commitments for all noncancelable leases with terms of one year
or more total approximately $900,000 per year through 2002,
$500,000 per year through 2007, $90,000 per year through 2012,
and $40,000 per year through 2013, with a total commitment of
$7,200,000.
(18) Commitments and Contingencies
In the normal course of business, the Company is party to
financial instruments necessary to meet the financial needs of
clients, 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 is
also party to an interest rate floor contract which is designated
as a hedge of certain client deposit accounts with contracted
minimum interest rates. The notional amount for an interest rate
floor does not represent the amount at risk because the notional
amount will not be exchanged. 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 clients. Commitments generally have fixed expiration
dates and may require payment of a fee. Based upon management's
credit assessment of the client, 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 $245 million and $221
million at December 31, 1997, and 1996, respectively.
Standby letters of credit are conditional commitments issued
by the Company guaranteeing the financial performance of a client
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 $22,150,000
and $11,770,000 at December 31, 1997, and 1996, 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
$11,690,000 and $16,205,000 at December 31, 1997, and 1996,
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 various dates in
1998.
In December 1997, the Company entered into an interest rate
floor agreement to manage interest-rate risk. The notional value
of this agreement was $100,000,000 and expires on December 31,
1999. The interest rate floor agreement requires the
counterparty to pay the Company, at specified dates, the amount,
if any, by which the market interest rate falls below the agreed-
upon floor, applied to the notional principal amount. The credit
worthiness of the counterparty was evaluated by the Company's
loan committee prior to entering into the agreement.
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 Information Services, Inc. (ALLTEL), formerly Systematics,
Inc., whereby ALLTEL manages and operates the Company's data
processing facility. The contract involves fixed payments of
$2,004,000 in 1998 through 2001 and $1,002,000 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.
<PAGE>
(19) Brenton Banks, Inc. (Parent Company) Condensed Financial
Information
<TABLE>
<CAPTION>
Statements of Condition
December 31 (In thousands) 1997 1996
<S> <C> <C>
Assets
Interest-bearing deposits with banks $ 3,596 5,638
Investments in:
Bank subsidiaries 132,008 124,383
Bank-related subsidiaries --- 45
Excess cost over net assets 1,753 1,826
Premises and equipment 563 618
Other assets 5,103 3,168
________ _______
$ 143,023 135,678
Liabilities and Stockholders' Equity
Accrued expenses payable
and other liabilities $ 3,532 2,476
Long-term borrowings 10,112 11,248
Common stockholders' equity 129,379 121,954
_______ _______
$ 143,023 135,678
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Years Ended December 31 (In thousands) 1997 1996 1995
<S> <C> <C> <C>
Income
Dividends from subsidiaries $ 14,850 10,766 8,997
Interest income 213 341 442
Management fees --- --- 1,634
Other operating income 119 43 2,644
________ ______ ______
15,182 11,150 13,717
Expense
Compensation and benefits 2,331 1,884 4,021
Interest on long-term borrowings 849 970 1,046
Other operating expense 584 655 2,006
________ ______ ______
3,764 3,509 7,073
Income before income taxes and
equity in undistributed earnings
of subsidiaries 11,418 7,641 6,644
Income taxes (1,155) (1,040) (759)
Income before equity in undistributed
earnings of subsidiaries 12,573 8,681 7,403
Equity in undistributed earnings of subsidiaries 5,437 5,334 3,004
________ ______ ______
Net income $ 18,010 14,015 10,407
</table
<PAGE>
(19) Brenton Banks, Inc. (Parent Company) Condensed Financial
Information
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31 (In thousands) 1997 1996 1995
<S> <C> <C> <C>
Operating Activities
Net income $ 18,010 14,015 10,407
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (5,437) (5,334) (3,004)
Depreciation and amortization 163 163 230
Net (increase) decrease in other assets (1,962) 18 49
Net increase (decrease) in accrued expenses
payable and other liabilities 1,056 871 (148)
________ ______ ______
Net cash provided by operating activities 11,830 9,733 7,534
Investing Activities
Decrease in short-term investments --- 7,500 1,000
Redemption (purchase) of subsidiary equity, net --- (7) 156
Principal collected from or (advances to)
subsidiaries --- 115 (97)
Purchase of premises and equipment, net (8) 669 (512)
________ ______ ______
Net cash provided (used) by investing activities (8) 8,277 547
Financing Activities
Net repayment of long-term borrowings (1,136) (1,187) (209)
Proceeds from issuance of common stock under the
long-term stock compensation plan 247 335 362
Proceeds from issuance of common stock under the
stock option plan 1,286 291 188
Proceeds from issuance of common stock under the
employee stock purchase plan 551 72 ---
Payment for shares reacquired under common stock
repurchase plan (10,014) (8,248) (4,830)
Payment for fractional shares from common stock (16) (14) ---
dividends
Dividends on common stock (4,782) (3,749) (3,498)
________ ______ ______
Net cash used by financing activities (13,864) (12,500) (7,987)
Net increase (decrease) in cash and interest-
bearing deposits (2,042) 5,510 94
Cash and interest-bearing deposits at the
beginning of the year 5,638 128 34
Cash and interest-bearing deposits at the end
of the year $ 3,596 5,638 128
</TABLE>
<PAGE>
(20) Unaudited Quarterly Financial Information
The following is a summary of unaudited quarterly financial
information (in thousands, except per common share data):
<TABLE>
<CAPTION>
1997
Three months ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Interest income $ 28,473 29,182 30,168 30,416
Interest expense 13,855 14,448 14,631 15,171
_______ ______ ______ ______
Net interest income 14,618 14,734 15,537 15,245
Provision for loan losses 900 900 1,100 1,000
_______ ______ ______ ______
Net interest income after
provision for loan losses 13,718 13,834 14,437 14,245
Noninterest income 6,449 6,239 7,839 6,979
Noninterest expense 14,036 13,674 14,881 15,108
_______ ______ ______ ______
Income before income taxes
and minority interest 6,131 6,399 7,395 6,116
Income taxes 1,754 1,809 2,176 1,549
Minority interest 176 183 209 175
_______ ______ ______ ______
Net income $ 4,201 4,407 5,010 4,392
Per common share:
Net income-basic $ .24 .25 .29 .25
Net income-diluted .23 .25 .28 .25
</TABLE>
<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 share:
Net income-basic $ .19 .20 .18 .21
Net income-diluted .19 .19 .18 .20
</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 and Chief Executive Officer
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, 1997, and 1996,
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, 1997. 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, 1997, and 1996, and
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
January 30, 1998
<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 1,571 common
stockholders of record on December 31, 1997.
<TABLE>
<CAPTION>
MARKET AND DIVIDEND INFORMATION
1997 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $12.96 12.39 .059
2nd quarter 13.75 12.56 .064
3rd quarter 16.50 13.56 .070
4th quarter 20.38 15.06 .080
</TABLE>
<TABLE>
<CAPTION>
1996 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $10.02 8.68 .050
2nd quarter 10.02 9.40 .050
3rd quarter 10.33 9.71 .053
4th quarter 12.73 10.23 .054
</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
February 1998 2-for-1 stock split and May 1997 and October 1996 10%
common stock dividends.
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.
Sandler, O'Neill & Partners, L.P.
Stifel, Nicolaus & Co., 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. IT IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE
COMMISSION'S INTERNET WEB SISTE AT HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-
EDGAR.
STOCKHOLDER INFORMATION
Corporate Headquarters
Suite 200, Capital Square
400 Locust Street
Des Moines, Iowa 50309
Telephone 800/820-0088
Annual Shareholders' Meeting
Wednesday, May 20, 1998, 5:00 p.m.
West Des Moines Marriott Hotel
1250 74th Street
West Des Moines, Iowa 50266
Transfer Agent/Registrar/
Dividend Disbursing Agent
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
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 and President
Brenton Banks, Inc.
J.C. Brenton
Past President
Brenton Banks, Inc.
Gary M. Christensen
President & CEO
Pella Corporation
Robert J. Currey
President
21st Century Telecom Group, Inc.
Robert L. DeMeulenaere
President and Chief Executive Officer
Brenton Banks, Inc.
R. Dean Duben
Past Vice Chairman and President
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 and Chief Executive Officer
Steven T. Schuler
Chief Financial Officer/Treasurer/
Secretary
BRENTON BANK
SENIOR OFFICERS AND
LINE OF BUSINESS MANAGERS
Robert L. DeMeulenaere
Chairman and Chief Executive Officer
Larry A. Mindrup
President
Phillip L. Risley
Executive Vice President
Perry C. Atwood
Chief Sales Officer
Woodward G. Brenton
Chief Commercial Banking Officer
Elizabeth M. Piper/Bach
Chief Financial Services Officer
Steven T. Schuler
Chief Financial Officer/Treasurer/
Secretary
Norman D. Schuneman
Chief Credit Officer
Judy S. Bohrofen
Director of Human Resources
Gregory M. Cole
Director of Credit Underwriting
W. Bradley Cunningham
Investment/ALCO Officer
Marsha A. Findlay
Senior Retail Banking Officer
Charles N. Funk
Regional President
President, Des Moines
Dennis H. Hanson
Regional President
President, Grinnell
Mark J. Hoffschneider
President, Brenton Mortgages
Steven C. Hyland
Senior Vice President,
Brenton Insurance
Ronald D. Larson
Regional President
President, Cedar Rapids
Douglas F. Lenehan
President, Diversified Commercial
Services Division
Marc J. Meyer
Regional President
President, Adel
Catherine I. Reed
Director of Marketing
Allen W. Shafer
President, Business Banking Division
Thomas J. Vincent
President, Agricultural Banking
Division
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
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
<PAGE>
Exhibit 21
Subsidiaries.
209
<PAGE>
Subsidiaries
The subsidiaries of Brenton Banks, Inc., their location, the
jurisdiction in which they are incorporated or organized, and the names under
which subsidiaries do business are:
Name Under which Subsidiary Jurisdiction in
Does Business and Location which Incorporated or
of Subsidiary Organized
Banks
Brenton Savings Bank, FSB United States
Ames, Iowa
Brenton Bank Iowa
Des Moines, Iowa
Non-Bank Subsidiaries
Brenton Investments, Inc. Iowa
Des Moines, Iowa
Brenton Insurance Services, Inc. Iowa
Des Moines, Iowa
Brenton Mortgages, Inc. Iowa
Des Moines, Iowa
Brenton Insurance Inc. Iowa
Adel, Iowa
Brenton Realty Services, Ltd. Iowa
Marshalltown, Iowa
Brenton Savings Financial Services, Inc. Iowa
Ames, Iowa
210
<PAGE>
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of
their report dated January 30, 1998, relating to certain
consolidated financial statements of Brenton Banks, Inc.
into the Registration Statement on Form S-8 of Brenton
Banks, Inc.
211
<PAGE>
AUDITORS' CONSENT
The Board of Directors
Brenton Banks, Inc.:
We consent to incorporation by reference in the Registration Statement on
Form S-8 of Brenton Banks, Inc. of our report dated January 30, 1998,
relating to the consolidated statements of condition of Brenton Banks, Inc.
and subsidiaries as of December 31, 1997 and 1996, 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, 1997, which report appears in the December 31, 1997, annual
report on Form 10-K of Brenton Banks, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
March 25, 1998
212
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 77,468,210
<INT-BEARING-DEPOSITS> 1,319,700
<FED-FUNDS-SOLD> 9,300,000
<TRADING-ASSETS> 77,220
<INVESTMENTS-HELD-FOR-SALE> 486,653,872
<INVESTMENTS-CARRYING> 69,079,622
<INVESTMENTS-MARKET> 69,852,000
<LOANS> 993,189,110
<ALLOWANCE> (12,732,131)
<TOTAL-ASSETS> 1,718,483,797
<DEPOSITS> 1,364,270,491
<SHORT-TERM> 166,332,576
<LIABILITIES-OTHER> 21,839,431
<LONG-TERM> 36,662,000
0
0
<COMMON> 43,335,120
<OTHER-SE> 86,044,179
<TOTAL-LIABILITIES-AND-EQUITY> 1,718,483,797
<INTEREST-LOAN> 86,020,464
<INTEREST-INVEST> 30,357,924
<INTEREST-OTHER> 1,860,979
<INTEREST-TOTAL> 118,239,367
<INTEREST-DEPOSIT> 49,310,346
<INTEREST-EXPENSE> 8,795,257
<INTEREST-INCOME-NET> 60,133,764
<LOAN-LOSSES> 3,900,000
<SECURITIES-GAINS> 493,822
<EXPENSE-OTHER> 58,441,818
<INCOME-PRETAX> 25,297,735
<INCOME-PRE-EXTRAORDINARY> 25,297,735
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,010,107
<EPS-PRIMARY> 1.03<F1>
<EPS-DILUTED> 1.01<F1>
<YIELD-ACTUAL> 3.93
<LOANS-NON> 3,227,000
<LOANS-PAST> 2,972,000
<LOANS-TROUBLED> 513,000
<LOANS-PROBLEM> 500,000
<ALLOWANCE-OPEN> 11,328,359
<CHARGE-OFFS> 4,229,385
<RECOVERIES> 1,733,157
<ALLOWANCE-CLOSE> 12,732,131
<ALLOWANCE-DOMESTIC> 12,732,131
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Restated for 2-for-1 stock split, effective February 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-30-1996 JUN-30-1996 MAR-31-1996
<CASH> 78,382,963 68,771,560 73,162,137
<INT-BEARING-DEPOSITS> 801,930 768,548 812,539
<FED-FUNDS-SOLD> 0 16,700,000 13,000,000
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 445,555,951 420,563,407 410,438,493
<INVESTMENTS-CARRYING> 91,663,981 97,394,602 105,797,558
<INVESTMENTS-MARKET> 92,066,000 97,624,000 106,472,000
<LOANS> 916,871,933 926,341,519 911,175,052
<ALLOWANCE> (11,528,313) (11,607,844) (11,209,801)
<TOTAL-ASSETS> 1,593,433,229 1,579,379,091 1,564,444,498
<DEPOSITS> 1,330,152,940 1,332,830,017 1,333,584,249
<SHORT-TERM> 98,009,089 74,001,939 54,321,472
<LIABILITIES-OTHER> 22,793,388 20,661,002 20,723,439
<LONG-TERM> 23,210,713 33,472,126 36,686,023
0 0 0
0 0 0
<COMMON> 36,921,850 37,350,850 37,795,350
<OTHER-SE> 82,345,249 81,063,157 81,333,965
<TOTAL-LIABILITIES-AND-EQUITY> 1,593,433,229 1,579,379,091 1,564,444,498
<INTEREST-LOAN> 59,357,416 39,338,548 19,563,503
<INTEREST-INVEST> 22,416,882 14,719,884 7,393,275
<INTEREST-OTHER> 1,032,063 824,410 413,660
<INTEREST-TOTAL> 82,806,361 54,882,842 27,370,438
<INTEREST-DEPOSIT> 37,074,484 24,820,576 15,552,495
<INTEREST-EXPENSE> 4,085,130 2,525,909 1,148,981
<INTEREST-INCOME-NET> 41,646,747 27,536,357 13,668,964
<LOAN-LOSSES> 2,100,000 1,500,000 700,000
<SECURITIES-GAINS> 309,244 314,406 174,525
<EXPENSE-OTHER> 41,957,329 27,118,892 13,494,726
<INCOME-PRETAX> 14,539,268 10,091,107 5,025,943
<INCOME-PRE-EXTRAORDINARY> 14,539,268 10,091,107 5,025,943
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 10,321,166 7,147,758 3,580,247
<EPS-PRIMARY> 1.36 .93 .46
<EPS-DILUTED> 1.36 .93 .46
<YIELD-ACTUAL> 3.80<F1> 3.78<F1> 3.77<F1>
<LOANS-NON> 3,278,000 3,096,000 3,868,000
<LOANS-PAST> 4,785,000 1,793,000 2,703,000
<LOANS-TROUBLED> 433,000 347,000 0
<LOANS-PROBLEM> 2,000,000<F2> 2,000,000<F2> 2,000,000<F2>
<ALLOWANCE-OPEN> 11,069,869 11,069,869 11,069,869
<CHARGE-OFFS> 2,752,704 1,807,574 917,431
<RECOVERIES> 1,111,148 845,549 357,363
<ALLOWANCE-CLOSE> 11,528,313 11,607,844 11,209,801
<ALLOWANCE-DOMESTIC> 11,528,313 11,607,844 11,209,801
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
<FN>
<F1>Restated to correctly set forth net yield.
<F2>Restated to correctly set forth potential problem loans.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY FINANCIAL STATEMENTS FOR 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFEFENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> SEP-30-1997 JUN-30-1997 MAR-31-1997
<CASH> 71,182,538 76,963,588 66,298,696
<INT-BEARING-DEPOSITS> 894,817 1,001,071 859,530
<FED-FUNDS-SOLD> 9,600,000 17,000,000 17,100,000
<TRADING-ASSETS> 0 9,788 0
<INVESTMENTS-HELD-FOR-SALE> 450,023,300 441,599,523 442,772,866
<INVESTMENTS-CARRYING> 68,160,461 66,455,907 73,875,533
<INVESTMENTS-MARKET> 68,762,000 67,441,000 74,339,000
<LOANS> 999,659,753 980,320,114 963,654,467
<ALLOWANCE> (12,416,151) (12,286,775) (11,963,805)
<TOTAL-ASSETS> 1,677,016,745 1,655,407,673 1,628,048,336
<DEPOSITS> 1,358,055,474 1,337,687,457 1,342,202,362
<SHORT-TERM> 136,700,467 142,382,157 109,511,600
<LIABILITIES-OTHER> 21,308,773 19,857,565 22,227,634
<LONG-TERM> 32,976,000 30,413,000 31,827,000
0 0 0
0 0 0
<COMMON> 43,577,045 43,583,120 40,038,705
<OTHER-SE> 84,398,986 81,484,374 82,241,035
<TOTAL-LIABILITIES-AND-EQUITY> 1,677,016,745 1,655,407,673 1,628,048,336
<INTEREST-LOAN> 63,794,768 41,571,371 20,441,367
<INTEREST-INVEST> 22,677,283 15,205,480 7,745,073
<INTEREST-OTHER> 1,350,545 877,928 286,482
<INTEREST-TOTAL> 87,822,596 57,654,779 28,472,922
<INTEREST-DEPOSIT> 36,742,184 24,382,409 12,078,873
<INTEREST-EXPENSE> 6,191,777 3,920,469 1,776,418
<INTEREST-INCOME-NET> 44,888,635 29,351,901 14,617,631
<LOAN-LOSSES> 2,900,000 1,800,000 900,000
<SECURITIES-GAINS> 418,199 276,456 250,665
<EXPENSE-OTHER> 43,158,318 28,068,815 14,212,215
<INCOME-PRETAX> 19,357,924 12,171,305 5,955,077
<INCOME-PRE-EXTRAORDINARY> 19,357,924 12,171,305 5,955,077
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 13,618,441 8,608,306 4,201,356
<EPS-PRIMARY> 1.52 .95 .51
<EPS-DILUTED> 1.52 .95 .51
<YIELD-ACTUAL> 3.94<F1> 3.89<F1> 3.90<F1>
<LOANS-NON> 2,394,000 1,908,000 2,539,000
<LOANS-PAST> 4,860,000 4,847,000 2,765,000
<LOANS-TROUBLED> 438,000 595,000 534,000
<LOANS-PROBLEM> 1,000,000<F2> 1,000,000<F2> 1,000,000<F2>
<ALLOWANCE-OPEN> 11,328,359 11,328,359 11,328,359
<CHARGE-OFFS> 3,000,412 1,680,298 715,728
<RECOVERIES> 1,188,204 838,714 451,174
<ALLOWANCE-CLOSE> 12,416,151 12,286,775 11,963,805
<ALLOWANCE-DOMESTIC> 12,416,151 12,286,775 11,963,805
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
<FN>
<F1>Restated to correctly set forth net yield.
<F2>Restated to correctly set forth potential problem loans.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
FINANCIAL STATEMENTS FOR THE YEARS 1994, 1995 AND 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<CASH> 58,387,727 71,159 76,900,524
<INT-BEARING-DEPOSITS> 64,255 265,000 731,554
<FED-FUNDS-SOLD> 59,396,428 37,600,000 15,200,000
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 349,208,773 396,370,000 461,099,272
<INVESTMENTS-CARRYING> 94,484,134 108,082,000 72,754,985
<INVESTMENTS-MARKET> 92,284,000 109,131,000 73,316,000
<LOANS> 972,318,990 918,901,000 941,943,513
<ALLOWANCE> 10,913,043 11,070,000 (11,328,359)
<TOTAL-ASSETS> 1,581,326,849 1,582,779,000 1,632,095,082
<DEPOSITS> 1,340,283,110 1,361,943,000 1,353,057,111
<SHORT-TERM> 82,703,736 43,607,000 100,976,120
<LIABILITIES-OTHER> 18,970,245 19,518,000 21,247,598
<LONG-TERM> 28,939,413 38,178,000 34,860,024
0 0 0
0 0 0
<COMMON> 39,357,730 38,266,000 40,428,420
<OTHER-SE> 71,072,615 81,267,000 81,525,809
<TOTAL-LIABILITIES-AND-EQUITY> 1,581,326,849 1,582,779,000 1,632,095,082
<INTEREST-LOAN> 76,456,964 82,526,000 80,301,707
<INTEREST-INVEST> 23,044,637 26,184,000 29,596,714
<INTEREST-OTHER> 1,721,353 2,330,000 1,484,696
<INTEREST-TOTAL> 101,222,954 111,040,000 111,383,117
<INTEREST-DEPOSIT> 41,609,766 53,075,000 49,507,425
<INTEREST-EXPENSE> 45,772,428 4,633,000 5,823,550
<INTEREST-INCOME-NET> 55,450,526 53,332,000 56,052,142
<LOAN-LOSSES> 1,987,909 1,865,000 2,900,000
<SECURITIES-GAINS> (339,624) (3,000) 321,256
<EXPENSE-OTHER> 57,247,578 55,702,000 56,693,553
<INCOME-PRETAX> 12,808,027 13,612,000 19,786,030
<INCOME-PRE-EXTRAORDINARY> 12,808,027 13,612,000 19,786,030
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 10,107,387 10,407,000 14,015,430
<EPS-PRIMARY> 1.27 1.34 1.69
<EPS-DILUTED> 1.27 1.34 1.69
<YIELD-ACTUAL> 3.86<F1> 3.67<F1> 3.67<F1>
<LOANS-NON> 3,784,000 2,639,000 2,663,000
<LOANS-PAST> 940,000 2,802,000 2,936,000
<LOANS-TROUBLED> 298,000 178,000 568,000
<LOANS-PROBLEM> 2,000,000<F2> 2,000,000<F2> 1,000,000<F2>
<ALLOWANCE-OPEN> 9,817,864 10,913,000 11,069,869
<CHARGE-OFFS> 2,442,185 3,377,000 4,061,211
<RECOVERIES> 1,549,455 1,669,000 1,419,701
<ALLOWANCE-CLOSE> 10,913,043 11,070,000 11,328,359
<ALLOWANCE-DOMESTIC> 10,913,043 11,070,000 11,328,359
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 0 0 0
<FN>
<F1>Restated to correctly set forth net yield.
<F2>Restated to correctly set forth potential problem loans.
</FN>
</TABLE>
