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, 1998
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)
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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 8, 1999, was $163,219,238.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date, March 8, 1999.
18,730,840 shares Common Stock, $2.50 par value
DOCUMENTS INCORPORATED BY REFERENCE
The Appendix to the Proxy Statement for the 1998 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, 1998, is incorporated by reference into Part III hereof to the
extent indicated in such Part.
1 of 242 Total Pages
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 25
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . 25
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . 26
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PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . 26
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 13. Certain Relationships and Related Transactions . . . . . . . . . 26
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 27
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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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, 1998, 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 47 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, cash management services, international banking
services, investment management 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 performance.
The principal markets for these loans are businesses and individuals in
Iowa. Iowa has two primary regional market segments. One market consists
of selected metropolitan areas across the state, which includes 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 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.
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(B) Recent Developments.
Director Retirements. After many years of distinguished service, R.
Dean Duben and Hubert G. Ferguson retired from the Board of Directors in May
1998.
New Directors. In January 1998, the Board of Directors increased the
number of directors by one 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. In September 1998, the Board of Directors increased the number of
directors from six to seven and named Robert C. Carr to fill the position.
Mr. Carr is Vice President of Amoco Corporation in Chicago, Illinois. Mr.
Carr 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 21, 1998, the Board of Directors
declared a ten percent common stock dividend to stockholders of record on
June 1, 1998. On May 6, 1997, the Board of Directors declared a ten percent
common stock dividend to stockholders of record on May 15, 1997. 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 1,331,000 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. In accordance with the performance vesting schedule, 33 percent
of outstanding options have vested based upon cumulative net income for the
period January 1, 1996, through December 31, 1998. During 1998, 1997 and
1996, 1,301,470 options have been granted and are outstanding under the Plan
to 67 current employees of the Company with option prices ranging from
$9.157 to $20.688 per share.
Common Stock Repurchase Plan. As part of the Company's ongoing capital
management and stock repurchase plan, in 1998 the Board of Directors
authorized additional stock repurchases of $10,000,000 of the Company's
common stock. For the years ended December 31, 1998, 1997 and 1996, the
Company repurchased 512,650, 805,904 and 915,365 shares (restated for the 2-
for-1 stock split and 10 percent common stock dividends), respectively, at
total costs of $10,000,900, $10,014,087 and $8,248,331.
Growth and Acquisitions. As part of management's strategic growth
plans, Brenton Banks, Inc. investigates growth and expansion opportunities
which would strengthen the Company's presence in current or selected new
market areas. The Company continues expansion of its traditional and non-
traditional products and services. In December 1998, the Company opened a
branch office in a convenience store in Ames, Iowa, thus increasing the
number of service locations to 47.
Year 2000. The information appearing on pages 9 and 10 of the
Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is
incorporated herein by reference.
Sales Culture. In the past three years the Company has intensified
its company-wide commitment to making Brenton a proactive sales
organization. The Company has also emphasized promoting partnering across
business units to better serve our clients' total financial needs. The
objective is to provide tools to Brenton bankers to enable them to take a
proactive role in understanding their clients'
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needs and goals and then to develop custom-tailored financial strategies
and solutions. The desired results are to strengthen existing and new
relationships with clients across Iowa and to provide them with lifetime
financial solutions.
(C) Affiliated Banks.
The two affiliated banks had 43 banking locations at December 31, 1998,
located in 11 of Iowa's 99 counties. These banks serve both metropolitan
and agricultural 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 clients 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 primarily serves clients in Story
County.
(D) Bank-Related Subsidiaries and Affiliates.
Brenton Investments, Inc., a wholly-owned subsidiary of Brenton Bank,
provides a full array of retail investment brokerage products and services
to clients. The company is not involved with the direct issuance, flotation
or underwriting of securities. At December 31, 1998, this subsidiary had 33
licensed brokers serving all Brenton banking locations.
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 Realty Services, Ltd. and Brenton Insurance, Inc. are wholly-
owned subsidiaries of Brenton Bank. Brenton Realty Services, Ltd. operates
two real estate brokerage agencies. Brenton Insurance, Inc. provides
individual and group life, annuity, health, fire, crop, homeowner's,
automobile and liability insurance products to Brenton clients.
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 8, 1999, the primary
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 68 Chairman of the Board 1990 Chairman, Brenton Bank -
Des Moines, Iowa Brenton Banks, Inc. October 1995 to November 1997
</TABLE>
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<TABLE>
<CAPTION>
Company Position
Name and Address Age Position or Subsidiary Commenced Other Positions
________________ ___ ______________________ _________ _______________
<S> <C> <C> <C> <C>
Robert L. DeMeulenaere 59 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 57 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 56 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.,
Brenton Bank Des Moines - February 1990 to May 1995;
Chairman of the Board, Brenton Bank
Services Corporation - May 1992 to
September 1995
Steven T. Schuler 47 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
Perry C. Atwood 44 Chief Sales Officer 1996
Des Moines, Iowa Brenton Bank
Elizabeth M. Piper/Bach 46 Chief Financial Services 1997
Des Moines, Iowa Officer
Brenton Bank
President 1995
Brenton Investments, Inc.
Woodward G. Brenton 48 Chief Commercial 1995 President and CEO, Brenton First National
Des Moines, Iowa Banking Officer Bank - January 1992 to October 1995
Brenton Bank
Charles N. Funk 44 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
Norman D. Schuneman 56 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
<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 and 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>
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(F) Employees.
On December 31, 1998, the Company had 661 full-time employees and 157
part-time employees. On December 31, 1998, the Parent Company had five
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 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 that 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 bank-related 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.
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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. The savings bank 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, 1998, 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 amended 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 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.
(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 services
companies 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 banking
companies, 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, 1998, 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 that
operate banks in Iowa, but are domiciled in other states. During 1998, the
five largest of these holding companies changed ownership and/or names. The
Iowa deposits of five of these holding companies are of similar size or
greater when compared to Brenton
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Banks, Inc. The Company considers the ownership/name changes of these out-
of-state holding companies to be a competitive advantage to the Company.
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 expanded the mortgage banking business in the past few
years by increasing the number of mortgage loan originators and by expanding
the number of locations where mortgage banking services are offered. The
volume of loan closings in 1998 increased over 180 percent compared to 1997.
The Company has also expanded 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 as well as internet
trading services.
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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 earned and average rates paid for each of the three years
ending December 31:
<TABLE>
<CAPTION>
1998
(dollars in thousands) ___________________________________________
Interest Average
Average Income or Yields or
Balance Expense Rates
_______ _________ _________
<S> <C> <C> <C>
Assets:
Interest-earning assets:
Interest-bearing deposits with banks $ 3,706 $ 176 4.74%
Federal funds sold and securities
purchased under agreements to resell 31,048 1,659 5.35
Trading account securitites --- --- ---
Investment securities available for sale:
Taxable investments:
United States Treasury securities 40,898 2,319 5.67
Securities of United States government
agencies 97,770 5,955 6.09
Mortgage-backed and related securities 236,280 14,545 6.16
Other investments 15,643 952 6.09
Tax-exempt investments:
Obligations of states and political
subdivisions(2) 125,237 8,382 6.69
Investment securities held to maturity:
Taxable investments:
Securities of United States government
agencies 1,402 89 6.33
Mortgage-backed and related securities 1,869 140 7.48
Other investments 727 48 6.68
Tax-exempt investments:
Obligations of states and political
subdivisions(2) 53,130 3,623 6.82
Loans held for sale 37,841 2,690 7.11
Loans (1,2) 999,232 87,339 8.74
_________ _______ ____
Total interest-earning assets (2) 1,644,783 $127,917 7.78%
_______ ____
Allowance for loan losses (13,738)
Cash and due from banks 65,874
Premises and equipment 31,883
Other assets 51,318
_________
Total assets $1,780,120
_________
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand $ 90,589 $ 2,800 3.09%
Savings 585,598 17,429 2.98
Time 556,056 30,543 5.49
Federal funds purchased and securities
sold under agreements to repurchase 116,388 5,092 4.38
Other short-term borrowings 65,205 3,757 5.76
Long-term borrowings 47,605 3,017 6.34
_________ _______ ____
Total interest-bearing liabilities 1,461,441 $ 62,638 4.29%
_______ ____
Noninterest-bearing deposits 164,403
Accrued expenses and other liabilities 17,020
_________
Total liabilities 1,642,864
Minority interest 4,834
Common stockholders' equity 132,422
_________
Total liabilities and stockholders' equity $1,780,120
_________
Net interest spread (2) 3.49%
____
Net interest income/margin (2) $ 65,279 3.97%
_______ ____
<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 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>
12
<PAGE>
<TABLE>
<CAPTION>
1997 1996
___________________________________________ ___________________________________
Interest Average Interest Average
Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates
_______ _________ _________ _______ _________ _________
<S> <C> <C> <C> <C> <C> <C>
$ 2,460 $ 118 4.80% $ 1,393 $ 68 4.87%
31,472 1,742 5.54 26,188 1,417 5.41
12 1 4.26 --- --- ---
45,459 2,748 6.05 36,582 2,109 5.76
71,958 4,555 6.33 77,436 4,606 5.95
217,817 13,835 6.35 207,029 12,780 6.17
12,998 832 6.40 8,955 568 6.34
99,868 7,035 7.04 85,471 6,097 7.13
7,925 485 6.11 38,596 2,362 6.12
2,594 191 7.36 3,509 261 7.45
2,181 136 6.25 4,166 255 6.12
56,204 3,777 6.72 51,639 3,449 6.68
10,284 811 7.89 7,983 676 8.47
970,115 85,540 8.82 919,578 79,921 8.69
_________ _______ ____ _________ _______ ____
1,531,347 $121,806 7.95% 1,468,525 $114,569 7.80%
_______ ____ _______ ____
(12,171) (11,440)
58,681 65,439
29,841 31,728
41,771 28,642
_________ _________
$1,649,469 $1,582,894
_________ _________
$ 81,430 $ 2,332 2.86% $ 376,259 $ 11,194 2.98%
551,509 15,903 2.88 241,250 6,134 2.54
567,258 31,075 5.48 583,508 32,179 5.51
78,234 3,413 4.36 59,276 2,470 4.17
53,223 3,183 5.98 17,294 1,015 5.87
32,056 2,199 6.86 33,094 2,339 7.07
_________ _______ ____ _________ _______ ____
1,363,710 $ 58,105 4.26% 1,310,681 $ 55,331 4.22%
_______ ____ _______ ____
139,480 131,051
17,097 17,521
_________ _________
1,520,287 1,459,253
4,691 4,471
124,491 119,170
_________ _________
1,649,469 1,582,894
_________ _________
3.69% 3.58%
____ ____
$ 63,701 4.16% $ 59,238 4.03%
_______ ____ _______ ____
</TABLE>
13
<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>
1998 vs. 1997 1997 vs. 1996
__________________________ __________________________
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:
Interest-bearing deposits with banks $ 50 59 (1) $ 50 51 (1)
Federal funds sold and securities purchased
under agreements to resell (83) (23) (60) 325 291 34
Trading account securities (1) 1 (2) 1 1 ---
Investment securities available for sale:
Taxable investments:
United States Treasury securities (429) (265) (164) 639 532 107
Securities of United States government
agencies 1,400 1,578 (178) (51) (337) 286
Mortgage-backed and related securities 710 1,147 (437) 1,055 678 377
Other investments 120 163 (43) 264 259 5
Tax-exempt investments:
Obligations of states and political
subdivisions (2) 1,347 1,713 (366) 938 1,015 (77)
Investment securities held to maturity:
Taxable investments:
Securities of United States government
agencies (396) (412) 16 (1,877) (1,874) (3)
Mortgage-backed and related securities (51) (54) 3 (70) (67) (3)
Other investments (88) (96) 8 (119) (124) 5
Tax-exempt investments:
Obligations of states and political
subdivisions (2) (154) (208) 54 328 306 22
Loans held for sale 1,879 1,950 (71) 135 184 (49)
Loans (1,2) 1,799 2,550 (751) 5,619 4,443 1,176
______ _____ _____ ______ ______ _____
6,111 8,103 (1,992) 7,237 5,358 1,879
______ _____ _____ ______ ______ _____
Interest Expense:
Interest-bearing deposits:
Demand 468 274 194 (8,862) (8,458) (404)
Savings 1,526 1,003 523 9,769 8,847 922
Time (532) (616) 84 (1,104) (891) (213)
Federal funds purchased and securities sold
under agreements to repurchase 1,679 1,670 9 943 822 121
Other short-term borrowings 574 695 (121) 2,168 2,148 20
Long-term borrowings 818 996 (178) (140) (72) (68)
______ _____ _____ ______ ______ _____
4,533 4,022 511 2,774 2,396 378
______ _____ _____ ______ ______ _____
Net interest income $ 1,578 4,081 (2,503) $ 4,463 2,962 1,501
______ _____ _____ ______ ______ _____
<FN>
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.
(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 and adjusted to
reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
</TABLE>
14
<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, 1998. 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
---- ------ ------ ------ ----- ------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits with banks $ 2,167 --- --- 2,167 --- --- 2,167
Federal funds sold and securities purchased
Under agreements to resell 6,000 --- --- 6,000 --- --- 6,000
Investment securities:
Available for sale:
Taxable investments (3) 19,663 26,611 79,511 125,785 298,357 19,606 443,748
Tax-exempt investments 4,678 7,309 8,380 20,367 74,720 66,349 161,436
Held to maturity:
Taxable investments 429 183 1,033 1,645 295 39 1,979
Tax-exempt investments 2,160 5,072 7,902 15,134 16,960 8,954 41,048
_________ ________ _________ _________ ________ _______ _________
Total investment securities 26,930 39,175 96,826 162,931 390,332 94,948 648,211
Loans held for sale 98,147 --- --- 98,147 --- --- 98,147
Loans (1)(3) 389,017 26,539 58,116 473,672 427,928 123,856 1,025,456
_________ ________ _________ _________ ________ _______ _________
Total interest-earning assets $ 522,261 65,714 154,942 742,917 818,260 218,804 1,779,981
_________ ________ _________ _________ ________ _______ _________
Interest-bearing liabilities:
Interest-bearing deposits:
Demand and savings deposits (2) $ 734,970 --- --- 734,970 --- --- 734,970
Time deposits 98,882 114,673 150,024 363,579 207,416 85 571,080
Federal funds purchased and securities sold
under agreements to repurchase 155,847 --- --- 155,847 --- --- 155,847
Other short-term borrowings --- 27,000 60,050 87,050 --- --- 87,050
Long-term borrowings --- --- 1,263 1,263 36,362 3,921 41,546
_________ ________ _________ _________ ________ _______ _________
Total interest-bearing liabilities $ 989,699 141,673 211,337 1,342,709 243,778 4,006 1,590,493
_________ ________ _________ _________ ________ _______ _________
Interest sensitivity GAP $ (467,438) (75,959) (56,395) (599,792) 574,482 214,798 189,488
_________ _________ _________ _________ ________ _______ _________
Interest sensitivity GAP ratio .53:1 .46:1 .73:1 .55:1 3.36:1 54.62:1 1.12:1
_________ _________ _________ _________ ________ _______ _________
Cumulative interest sensitivity GAP $ (467,438) (543,397) (599,792) (599,792) (25,310) 189,488 189,488
_________ _________ _________ _________ ________ _______ _________
Cumulative interest sensitivity GAP ratio .53:1 .52:1 .55:1 .55:1 .98:1 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>
15
<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>
1998 1997 1996
____ ____ ____
(in thousands)
<S> <C> <C> <C>
Investment securities available for sale
(fair value):
Taxable investments:
United States Treasury securities $ 43,292 38,790 41,351
Securities of United States government agencies 140,417 86,660 98,153
Mortgage-backed and related securities 233,055 230,933 219,447
Other investments 26,984 20,957 8,193
Tax-exempt investments:
Obligations of states and political subdivisions 161,436 109,314 93,955
_______ _______ _______
605,184 486,654 461,099
_______ _______ _______
Investment securities held to maturity
(amortized cost):
Taxable investments:
Securities of United States government agencies --- 5,025 15,065
Mortgage-backed and related securities 1,529 2,363 3,041
Other investments 450 1,518 2,466
Tax-exempt investments:
Obligations of states and political subdivisions 41,048 60,173 52,183
_______ _______ _______
43,027 69,079 72,755
_______ _______ _______
Total investment securities $648,211 555,733 533,854
_______ _______ _______
</TABLE>
16
<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, 1998:
<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 $ 15,224 4.43% $ 28,068 4.77% $ --- ----% $ -- ----%
Securities of United
States government
agencies --- --- 118,538 5.63 18,821 6.40 3,058 7.88
Mortgage-backed and
related securities 63,948 6.36 142,861 6.38 22,689 6.34 3,557 6.13
Other investments 9,493 6.00 16,565 5.77 --- --- 926 6.56
Tax-exempt investments:
Obligations of states and
political subdivisions 20,527 6.79 75,170 6.34 52,124 6.51 13,615 7.70
_______ ____ _______ ____ _______ ____ ______ ____
109,192 6.14 381,202 5.99 93,634 6.45 21,156 7.41
_______ ____ _______ ____ _______ ____ ______ ____
Investment securities held
to maturity:
Taxable investments:
Mortgage-backed and
related securities 227 7.54 770 7.54 532 7.54 --- ----
Other investments 115 6.60 312 6.93 23 8.24 --- ----
Tax-exempt investments:
Obligations of states and
political subdivisions 16,176 5.99 15,926 6.87 5,287 7.87 3,659 8.47
_______ ____ _______ ____ _______ ____ ______ ____
16,518 6.01 17,008 6.90 5,842 7.84 3,659 8.47
_______ ____ _______ ____ _______ ____ ______ ____
Total investment securities $125,710 6.12% $398,210 6.03% $ 99,476 6.53% $24,815 7.57%
_______ ____ _______ ____ _______ ____ ______ ____
</TABLE>
NOTE: The weighted average yields are calculated on the basis of the cost
and effective yields for each scheduled maturity group. The maturities of
mortgage-backed securities have been included in the period of anticipated
payment considering estimated prepayment rates. 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, 1998, 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.
17
<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
____________________________________________________
1998 1997 1996 1995 1994
____ ____ ____ ____ ____
(in thousands)
<S> <C> <C> <C> <C> <C>
1. Real estate loans:
a. Commercial construction and land development $ 54,941 30,007 42,693 38,123 26,549
b. Secured by 1-4 family residential property,
including home equity loans 302,731 342,134 338,010 319,430 389,713
c. Other 151,995 161,989 150,395 163,739 143,960
2. Loans to financial institutions --- --- --- --- ---
3. Loans to farmers 84,554 79,036 69,660 68,543 71,853
4. Commercial and industrial loans 179,414 160,428 132,395 119,368 115,280
5. Loans to individuals for personal expenditures 251,636 217,405 207,197 199,489 221,627
6. All other loans 8,284 2,190 1,594 1,501 1,232
_________ _______ _______ _______ _______
$1,033,555 993,189 941,944 910,193 970,214
_________ _______ _______ _______ _______
</TABLE>
18
<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, 1998 (excluding real estate loans secured by 1-4 family
residential property and loans to individuals for personal expenditures):
<TABLE>
<CAPTION>
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 $ 49,856 4,086 999 54,941
b. Other 37,495 59,570 54,930 151,995
2. Loans to financial institutions --- --- --- ---
3. Loans to farmers 47,864 34,465 2,225 84,554
4. Commercial and industrial loans 107,717 57,142 14,555 179,414
5. All other loans 1,718 22 6,544 8,284
_______ _______ ______ _______
$244,650 155,285 79,253 479,188
_______ _______ ______ _______
</table
The above loans due after one year which have predetermined and
floating interest rates follow:
Predetermined interest rates $ 74,889
_______
Floating interest rates $159,649
_______
19
<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>
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
____ ____ ____ ____ ____
(in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual $ 8,099 3,227 2,663 2,639 3,784
Restructured 289 513 568 178 298
Past due 90 days or more 2,901 2,972 2,936 2,802 940
______ _____ _____ _____ _____
Nonperforming loans $11,289 6,712 6,167 5,619 5,022
______ _____ _____ _____ _____
</TABLE>
Interest income recorded during 1998 on nonaccrual and
restructured loans amounted to $215,000. The amount of interest income
which would have been recorded during 1998, if nonaccrual and restructured
loans had been current in accordance with the original terms, was $827,000.
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 some
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 concern may eventually result in
certain of these loans being classified in one of the above-scheduled
categories. At December 31, 1998, these loans amounted to less than $1
million.
As of December 31, 1998, 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 $389,000 and $341,000 at December 31, 1998, and 1997,
respectively.
20
<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>
1998 1997 1996 1995 1994
____ ____ ____ ____ ____
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total loans at the end of the year $1,033,555 993,189 941,944 910,193 970,214
_________ _______ _______ _______ _______
Average loans outstanding 999,232 970,115 919,578 945,724 936,370
_________ _______ _______ _______ _______
Allowance for loan losses -
beginning of the year $ 12,732 11,328 11,070 10,913 9,818
_________ _______ _______ _______ _______
Amount of charge-offs during year:
Real estate loans 478 299 479 41 83
Loans to financial institutions -- -- -- -- --
Loans to farmers 261 196 365 36 31
Commercial and industrial loans 592 890 594 340 337
Loans to individuals for personal expenditures 2,997 2,844 2,623 2,960 1,943
All other loans 79 -- -- -- 48
_________ _______ _______ _______ _______
Total charge-offs 4,407 4,229 4,061 3,377 2,442
_________ _______ _______ _______ _______
Amount of recoveries during year:
Real estate loans 133 217 68 66 101
Loans to financial institutions -- -- -- -- --
Loans to farmers 37 109 138 50 146
Commercial and industrial loans 268 184 95 400 334
Loans to individuals for personal expenditures 1,198 1,223 1,118 1,153 947
All other loans 11 -- -- -- 21
_________ _______ _______ _______ _______
Total recoveries 1,647 1,733 1,419 1,669 1,549
_________ _______ _______ _______ _______
Net loans charged-off during year 2,760 2,496 2,642 1,708 893
_________ _______ _______ _______ _______
Additions to allowance charged to operating expense 4,200 3,900 2,900 1,865 1,988
_________ _______ _______ _______ _______
Allowance for loan losses - end of the year $ 14,172 12,732 11,328 11,070 10,913
_________ _______ _______ _______ _______
Ratio of allowance to loans outstanding at end of year 1.37% 1.28 1.20 1.22 1.12
____ ____ ____ ____ ____
Ratio of net charge-offs to average loans outstanding .28% .26 .29 .18 .10
___ ___ ___ ___ ___
</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.
21
<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>
<TABLE>
<CAPTION>
December 31
___________________________________________________________________________________________________________________________
1998 1997 1996 1995 1994
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 $ 3,000 49.3% $ 2,400 53.8% $ 2,200 56.4% $ 2,400 57.3% $ 2,600 57.7%
Loans to financial institutions -- -- -- -- -- -- -- -- -- --
Loans to farmers 1,600 8.2 1,200 8.0 1,000 7.4 1,300 7.5 1,400 7.4
Commercial and industrial loans 4,100 17.4 3,800 16.1 3,200 14.0 2,900 13.1 2,800 11.9
Loans to individuals for personal
expenditures 5,472 24.3 5,332 21.9 4,928 22.0 4,470 21.9 4,113 22.8
All other loans -- .8 -- .2 -- .2 -- .2 -- .2
______ _____ ______ _____ ______ _____ ______ _____ ______ _____
$14,172 100.0% 12,732 100.0% $11,328 100.0% $11,070 100.0% $10,913 100.0%
______ _____ ______ _____ ______ _____ ______ _____ _____ _____
</TABLE>
22
<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
__________________________________________
1998 1997 1996
____________ ____________ ____________
Amount Rate Amount Rate Amount Rate
______ ____ ______ ____ ______ ____
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing deposits $ 164,403 --% $ 139,480 --% $ 131,051 --%
$
Interest-bearing deposits:
Demand 90,589 3.09 81,430 2.86 376,259 2.98
Savings 585,598 2.98 551,509 2.88 241,250 2.54
Time 556,056 5.49 567,258 5.48 583,508 5.51
_________ _________ _________
$1,396,646 $1,339,677 $1,332,068
_________ _________ _________
</TABLE>
The following sets forth the maturity distribution of
all time deposits of $100,000 or more as of December 31, 1998:
Maturity Remaining Amount
__________________ ________
(in thousands)
Less than 3 months $25,056
Over 3 through 6 months 35,466
Over 6 through 12 months 14,691
Over 12 months 22,452
______
$97,665
______
VI. Return on Equity and Assets
Various operating and equity ratios for the years
indicated are presented below:
<TABLE>
<CAPTION>
Year Ended December 31
________________________
1998 1997 1996
____ ____ ____
<S> <C> <C> <C>
Return on average total assets:
(Net income before deduction of minority
interest) 1.18% 1.14% .92%
Return on average equity:
(Including unrealized gains (losses) on
securities available for sale 15.37 14.47 11.76
Common dividend payout ratio 33.24 27.25 27.25
Average equity to average assets 7.44 7.55 7.53
Equity to assets ratio 6.81 7.36 7.41
Tier 1 leverage capital ratio 7.17 7.63 7.62
Primary capital to assets 7.74 8.32 8.33
</TABLE>
23
<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>
1998 1997 1996
____ ____ ____
(dollars in thousands)
<S> <C> <C> <C>
Amount outstanding at December 31 $155,847 92,633 66,826
Weighted average interest rate at
December 31 4.24% 4.48 3.74
Maximum amount outstanding at any
month-end $155,847 92,633 73,359
Average amount outstanding during
the year $116,388 78,234 59,276
Weighted average interest rate during
the year 4.38% 4.36 4.17
</TABLE>
Information relative to other short-term borrowings,
which consist primarily of Federal Home Loan Bank advances,
follows:
<TABLE>
<CAPTION>
1998 1997 1996
____ ____ ____
(dollars in thousands)
<S> <C> <C> <C>
Amount outstanding at December 31 $ 87,050 73,700 34,150
Weighted average interest rate at
December 31 5.38% 6.02 5.97
Maximum amount outstanding at any
Month-end $ 87,050 73,700 34,150
Average amount outstanding during
the year $ 65,205 53,223 17,294
Weighted average interest rate during
the year 5.76% 5.98 5.87
</TABLE>
24
<PAGE>
Item 2. Properties.
At December 31, 1998, the affiliated banks and subsidiaries
had 47 service locations with approximately 338,000 square feet,
all located in Iowa. Of these locations, 32 were owned by the
Company - approximately 262,000 square feet; three were owned
buildings on leased land - approximately 30,000 square feet and 12
were operated under lease contracts with unaffiliated parties -
approximately 46,000 square feet.
In December 1998, the Company entered into an agreement to
purchase a parcel of land for $2.1 million in Clive, Iowa. The
land will be utilized for construction of a new operations and
sales support facility. The new building is in the planning
stages and is expected to be completed in the third quarter of
2000. The new building will replace space, which the Company
currently leases, and will include room for future growth.
The Company leases certain real estate and equipment under
long-term and short-term leases. The Company owns certain real
estate that 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 to a vote of security
holders, through the solicitation of proxies or otherwise, during
the fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The information appearing on pages 26 and 34 of the
Corporation's Appendix to the Proxy Statement, filed as Exhibit 13
hereto, is incorporated herein by reference.
There were approximately 2,057 holders of record of the
Parent Company's $2.50 common stock as of March 8, 1999. The
closing price of the Parent Company's common stock was $15.06 on
March 8, 1999.
The Parent Company increased dividends to common shareholders
in 1998 to $.349 per share, a 40.7 percent increase over $.248 for
1997. Dividend declarations are evaluated and determined by the
Board of Directors on a quarterly basis. In January 1999, the
Board of Directors declared a dividend of $.095 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.
25
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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.
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk.
The information appearing on page 8 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 33 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 in or
disagreements with 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, 1998, is incorporated
herein by reference. See also Item 1(E) of this Form 10-K
captioned "Executive Officers and Policymakers 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, 1998, 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, 1998, 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.
26
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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:
(a) 1. Financial Statements: See the financial statements on
pages 13 through 33 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. These Articles of
Incorporation, as amended, and Bylaws are incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the
year ended December 31, 1997.
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 1,331,000 shares (restated for the
2-for-1 stock split effective February 1998 and
the 10 percent common stock dividends effective in
1998, 1997 and 1996) 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.
27
<PAGE>
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative
Rules and Agreement under which officers of
the Company were eligible to receive options
to purchase an aggregate of 798,600 shares
(restated for the 2-for-1 stock split effective
February 1998 and the 10 percent common stock
dividends effective in 1998, 1997 and 1996) of
the Company's $2.50 par value common stock. This
Non-Qualified Stock Option Plan, Administrative
Rules and Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1997.
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 were 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 were eligible to receive shares of
Brenton Banks, Inc. stock based upon their service
to the Company and Company performance.
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 were 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.
Exhibit 10.10
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1998, setting
forth the terms of the Parent Company's $5,000,000
short-term debt agreement.
28
<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.
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
July 1, 1998.
Exhibit 10.14
Indenture Agreement with respect to Capital
Notes dated April 12, 1993.
Exhibit 10.15
Indenture Agreement with respect to Capital
Notes dated April 14, 1992. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
Ended December 31, 1997.
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.
29
<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. This Indenture
Agreement is incorporated by reference from
Form 10-K of Brenton Banks, Inc. for the year
ended December 31, 1997.
Exhibit 10.22
Indenture Agreement with respect to Capital
Notes dated April 16, 1998.
Exhibit 10.23
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 10.24
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 10.25
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 10.26
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.
30
<PAGE>
Exhibit 10.27
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 10.28
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 10.29
Fourteenth Amendment to Data Processing Agreement
dated January 1, 1998, by and between ALLTEL
Information Services, Inc. (formerly Systematics
Financial Services, Inc.) and Brenton Bank
(formerly Brenton Bank Services Corporation).
Exhibit 10.30
Fifteenth Amendment to Data Processing Agreement
dated January 1, 1998, by and between ALLTEL
Information Services, Inc. (formerly Systematics
Financial Services, Inc.) and Brenton Bank
(formerly Brenton Bank Services Corporation).
Exhibit 10.31
Purchase Agreement dated December 31, 1998, by and
between West Lakes Development Company and Brenton
Bank.
Exhibit 10.32
Purchase Agreement dated December 31, 1998, by and
between West End Diner, Inc. and Brenton Bank.
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 1998 calendar year.
31
<PAGE>
Exhibit 21
Subsidiaries.
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation
of their report dated January 29, 1999, 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).
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 1998.
32
<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/ Robert L. DeMeulenaere
President and Director
ROBERT L. DEMEULENAERE
Date: March 11, 1999
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/ Robert L. DeMeulenaere
President and Director
ROBERT L. DEMEULENAERE
Principal Executive Officer
Date: March 11, 1999
By /s/ Steven T. Schuler
Chief Financial Officer/Treasurer/Secretary
STEVEN T. SCHULER
Chief Financial Officer
Chief Accounting Officer
Date: March 11, 1999
33
<PAGE>
BOARD OF DIRECTORS
By: /s/ C. Robert Brenton
C. ROBERT BRENTON
Chairman of the Board
Date: March 11, 1999
By /s/ William H. Brenton
WILLIAM H. BRENTON
Date: March 11, 1999
By /s/ Junius C. Brenton
JUNIUS C. BRENTON
Date: March 11, 1999
By: /s/ Robert C. Carr
ROBERT C. CARR
Date: March 11, 1999
By /s/ Gary M. Christensen
GARY M. CHRISTENSEN
Date: March 11, 1999
By /s/ Robert J. Currey
ROBERT J. CURREY
Date: March 11, 1999
34
<PAGE>
EXHIBIT INDEX
Exhibits Page
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws,
as amended, of Brenton Banks, Inc. These Articles of
Incorporation, as amended, and Bylaws are incorporated
by reference from Form 10-K of Brenton Banks, Inc. for
the year ended December 31, 1997. . . . . . . . . . . . . . 40
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. . . . . . . . . . . . . . . . . 41
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 1,331,000 shares (restated for the 2-for-1 stock
split effective February 1998 and the 10 percent
common stock dividends effective in 1998, 1997 and
1996) 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. . . . . . . . . . . . . . . . . . . . 43
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.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules
and Agreement under which officers of the Company were
eligible to receive options to purchase an aggregate of
798,600 shares (restated for the 2-for-1 stock split
effective February 1998 and the 10 percent common stock
dividends effective in 1998, 1997 and 1996) of the
Company's $2.50 par value common stock. This Non-Qualified
Stock Option Plan, Administrative Rules and Agreement is
incorporated by reference from Form 10-K of Brenton Banks,
Inc. for the year ended December 31, 1997.. . . . . . . . ... 46
35
<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 were 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.. . . . . . . . . . . . . 47
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 were eligible to receive shares of Brenton
Banks, Inc. stock based upon their service to the Company
and Company performance. . . . . . . . . . . . . . . . . . 48
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 were 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... . . . 63
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security
Agreement between Brenton Bank and the Federal Home Loan
Bank of Des Moines.. . . . . . . . . . . . . . . . . . . . 64
Exhibit 10.10
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1998, setting forth
the terms of the Parent Company's $5,000,000 short-term
debt agreement. . . . . . . . . . . . . . . . . . . . . . . 69
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. . . . . 75
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. . . . . . . . . 76
36
<PAGE>
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section
401(k) Profit Sharing Plan, effective July 1, 1998. . . . 77
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated
April 12, 1993. . . . . . . . .. . . . . . . . . . . . . 121
Exhibit 10.15
Indenture Agreement with respect to Capital Notes dated
April 14, 1992. This Indenture Agreement is incorporated
by reference from Form 10-K of Brenton Banks, Inc. for
the year ended December 31, 1997. . . . . . . . . . . . 140
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. . . . . . . . . . . . . . 141
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. . . . . 142
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.. . . .. 143
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.. . . . 144
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. . . . 145
Exhibit 10.21
Indenture Agreement with respect to Capital Notes
dated April 23, 1997. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1997. . . . . 146
37
<PAGE>
Exhibit 10.22
Indenture Agreement with respect to Capital Notes
dated April 16, 1998. . . . . . . . . . . . . . . . . . . . 147
Exhibit 10.23
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.. . . . . . . . . . . . . . . . . . . . 166
Exhibit 10.24
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. . . . . . . . . . . . . . . . . . . . 167
Exhibit 10.25
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. . . . . . . . . . . . . . . . . . . 168
Exhibit 10.26
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. . . . . . . . . . . . . 169
Exhibit 10.27
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. . . . . . . . . . . 170
Exhibit 10.28
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 Banks 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. . . . . . . . . . . . . . . . . . . . . 171
38
<PAGE>
Exhibit 10.29
Fourteenth Amendment to Data Processing Agreement
dated January 1, 1998, by and between ALLTEL
Information Services, Inc. (formerly Systematics
Financial Services, Inc.) and Brenton Bank (formerly
Brenton Bank Services Corporation). . . . . . . . . . . . . 172
Exhibit 10.30
Fifteenth Amendment to Data Processing Agreement
dated January 1, 1998, by and between ALLTEL
Information Services, Inc. (formerly Systematics
Financial Services, Inc.) and Brenton Bank (formerly
Brenton Bank Services Corporation). . . . . . . . . . . . . 176
Exhibit 10.31
Purchase Agreement dated December 31, 1998, by and
between West Lakes Development Company and Brenton
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Exhibit 10.32
Purchase Agreement dated December 31, 1998, by and
between West End Diner, Inc. and Brenton Bank. . . . . . . 187
Exhibit 11
Statement of computation of earnings per share. . . . . . . 194
Exhibit 12
Statement of computation of ratios. . . . . . . . . . . . . 196
Exhibit 13
The Appendix to the Proxy Statement for Brenton Banks,
Inc. for the 1998 calendar year. . . . . . . . . . . . . . 200
Exhibit 21
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 238
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation
of their report dated January 29, 1999, relating to
certain consolidated financial statements of Brenton
Banks, Inc. into the Registration Statement on Form S-8
of Brenton Banks, Inc. . . . . . . . . . . . . . . . . . . 240
Exhibit 27
Financial Data Schedule (filed only with Electronic
Transmission). . . . . . . . . . . . . . . . . . . . . . . 242
39
<PAGE>
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended,
of Brenton Banks, Inc. These Articles of Incorporation, as amended,
and Bylaws are incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1997.
40
<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.
41
<PAGE>
1998 BRENTON BANKS, INC. BONUS PLANS
For 1998, the Company (Brenton Banks, Inc. and Subsidiaries) has bonus plans
that cover executive officers, line of business managers, 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% to 45.00%
Line of business managers 30.00% to 35.00%
Market managers 30.00% to 40.00%
Senior managers and other key personnel 10.00% to 37.50%
Bonus threshold for executive officers:
Bonus achievement is tied to a consolidated earnings threshold of
$20,000,000 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
bonus matrix, for that portion of the bonus tired to net income, provides for
no bonus unless net income exceeds $20,000,000 and provides for 100% of bonus
to be earned when net income exceeds $21,000,000.
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 controllable net income
Sales goals
Growth in loans
Growth in core deposits
Fee income generation
Noninterest income
Noninterest expense
Customer portfolio profitability
Key personal objectives
Bonus achievements:
Bonus amounts are earned ratably based on actual results compared to a tiered
bonus achievement matrix.
42
<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
1,331,000 shares (restated for the 2-for-1 stock split effective February 1998
and the 10 percent common stock dividends effective in 1998, 1997 and 1996) 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.
43
<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.
44
<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.
45
<PAGE>
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules and Agreement under
which officers of the Company were eligible to receive options to purchase an
aggregate of 798,600 shares (restated for the 2-for-1 stock split effective
February 1998 and the 10 percent common stock dividends effective in 1998, 1997
and 1996) of the Company's $2.50 par value common stock. This Non-Qualified
Stock Option Plan, Administrative Rules and Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31,
1997.
46
<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 were 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.
47
<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 were eligible to receive shares of Brenton Banks, Inc. stock based
upon their service to the Company and Company performance.
48
<PAGE>
BRENTON BANKS, INC.
Long-Term Stock Compensation Plan
Grant Agreement
This Grant Agreement made on the date set forth below, by and between
Brenton Banks, Inc., an Iowa Corporation (the "Company") and Phillip L. Risley,
an employee of the Company or a Subsidiary thereof (the "Grantee").
The Company desires to carry out the purpose of its Long-Term Stock
Compensation Plan by awarding Restricted Stock Grants and Incentive Stock
Grants to the Grantee pursuant to the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement and for good and valuable consideration, the Company and the Employee
have agreed, and do by this Agreement agree, as follows:
1. Terms. Those terms defined in the Brenton Banks, Inc., Long-Term Stock
Compensation Plan or in the Administrative Rules adopted thereunder
shall have the same meaning when used in this Agreement.
2. Restricted Stock Grant. The Company by this Agreement irrevocably
awards the Grantee the rights to acquire 2,033 shares of the Company's
Stock pursuant to the terms of a Restricted Stock Grant, set forth in
the provisions of the Plan (a copy of which is attached hereto as
Exhibit A), the Administrative Rules adopted pursuant to the Plan (a
copy of which are attached hereto as Exhibit B), and the Resolution of
the Company's Board of Directors (a copy of which is attached hereto as
Exhibit C).
3. Incentive Stock Grant. The Company by this Agreement irrevocably awards
the Grantee the rights to acquire 3775 shares of the Company's Stock
pursuant to the terms of a Incentive Stock Grant, set forth in the
provisions of the Plan (a copy of which is attached hereto as Exhibit
A), the Administrative Rules adopted pursuant to the Plan (a copy of
which are attached hereto as Exhibit B), the Resolution of the Company's
Board of Directors (a copy of which is attached hereto as Exhibit C) and
the Performance Criteria adopted by the Board (a copy of which is
attached hereto as Exhibit D).
4. Terms. All of the terms, conditions and provisions contained in the
Plan, Administrative Rules, Resolutions of the Board and Performance
Criteria set forth in Exhibits A, B, C, and D shall be incorporated
herein by this reference, and shall govern the provisions of awards set
forth in this Agreement.
5. Stock Legend. The Grantee hereby consents to the imposition of an
appropriate legend upon the Stock issued pursuant to the Grants. The
legend shall be in the form prescribed by the Company's legal counsel if
said counsel deems it necessary.
6. 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
<PAGE>
Company shall be addressed to Brenton Banks, Inc., 300 Capital Square,
Des Moines, Iowa, 50309. Notices sent to the Grantee shall be sent to
the Grantee's address as it appears in the Company's regular records.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Grantee. 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
Grantee.
In Witness Whereof, the parties have executed this Agreement on the 8th
day of February, 1994.
BRENTON BANKS, INC.
By_____________________________________
Its____________________________________
COMPANY
_______________________________________
Phillip L. Risley
GRANTEE
<PAGE>
BRENTON BANKS, INC.
Long-Term Stock Compensation Plan
1. Purpose. The Long-Term Stock Compensation Plan (the "Plan") is intended
to advance the interests of Brenton Banks, Inc. (the "Company"), it
shareholders, and its subsidiaries by providing financial incentives to key
management personnel and 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.
2. Definitions.
2.1 "Board" means the Board of Directors of the Company.
2.2 "Stock" means the Company's $5.00 par value Common Stock or, in the
event that the Company issues a different class of stock with the same or
higher dividend and liquidation rights as the Company's $5.00 Common Stock but
with lesser voting rights, such stock.
2.3 "Date of Grant" means the date on which the Board authorizes a grant
under the Plan.
2.4 "Grant" means the right to acquire Common Stock and/or cash awarded
under the Plan (including both Incentive Stock Grants and Restricted Stock
Grants).
2.5 "Incentive Stock Grant" means a Grant of Stock pursuant to the
provisions of Section 6.2.
2.6 "Restricted Stock Grant" means a Grant of Stock pursuant to the
provisions of Section 6.1.
2.7 "Grantee" means a person to whom a Grant has been awarded under the
Plan.
2.8 "Disability" or "Disabled" shall be as defined under the Company's
disability plan, if any, or under the Social Security Rules.
2.9 "Subsidiary" or "Subsidiaries" means a subsidiary corporation or
corporations of the Company as defined in Section 425 of the Internal Revenue
Code.
2.10 "Successor" means the legal representative of the estate of a
deceased Grantee or the person or persons who acquire the right to exercise a
Grant by bequest or inheritance or otherwise by reason of the death or
disability of any Grantee.
2.11 "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 Grant, issuance and transfer of Grants and
Stock issued pursuant to the award of Grants. Administrative Rules shall, upon
adoption, become part of this Plan as if originally stated herein.
<PAGE>
The Rules adopted by the Board shall be passed by resolution and kept at the
Company's main office.
2.12 "Change in Control" shall mean a change in the ownership of 50% or
more of the Company's par Value $5.00 Common Stock as certified by the
Secretary of the Company.
2.13 "Performance Criteria" shall mean the criteria established by the
Board pursuant to Section 6.2.3 of the Plan.
2.14 "Qualified Contingent Vesting Event" shall mean an event described
in Sections 6.2.4.2, 6.2.4.3, and 6.2.4.4.
3. Administration of Plan. The Plan shall be administered by the Board.
Grants 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 Grants shall
be made and the number of shares of Stock covered by each Grant; to determine
the Performance Criteria with respect to Incentive Stock Grants; to construe
and interpret the Plan; to determine the terms and provisions of the respective
Grant agreements 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. Stock Subject to Grant. The aggregate number of shares of the Company's
Stock which may be issued upon the exercise of Grants made under the Plan shall
not exceed 240,000, subject to adjustment under the provisions of Section 11.
The shares of Stock to be granted 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 Grant shall, for any reason, terminate
or expire or be surrendered to the Company, the shares subject to such Grant
shall again be available to be awarded under the Plan.
5. Participants. Grants may be awarded under the Plan to officers, directors
and key employees of the Company or of any of its Subsidiaries.
6. Terms and Conditions of Grants. Any Grant under the Plan shall be
evidenced by an agreement executed by the Company and the applicable Grantee
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:
6.1 Restricted Stock Grants.
6.1.1 Authorized Shares. The aggregate number of shares that
may be awarded to employees under the Plan pursuant to Restricted Stock
Grants shall not exceed 84,000 shares of Stock. In the event any
Restricted Stock Grant shall, for any reason, be forfeited, terminated,
expire or be surrendered to the Company, the shares subject to such
Restricted Stock Grant shall again be available to be awarded as a
Restricted Stock Grant under the Plan.
<PAGE>
6.1.2 Restricted Stock Grants. Restricted Stock may be awarded
by the Board to participants of the Company chosen by the Board in its
sole discretion. The amount of each award shall be subject to the terms
and conditions set forth in an agreement between the Company and the
Grantee containing the terms and conditions of the award, which shall be
consistent with the provisions set forth in this Plan and the
Administrative Rules adopted by the Board. All Restricted Stock Grants
that do not vest pursuant to the provisions of Section 6.1.3 shall be
forfeited.
6.1.3 Vesting of Restricted Stock Grants. Restricted Stock
Grants shall vest with the Grantee following the Grantee's completion of
three (3) successive calendar years of employment with the Company or
any Subsidiary, with said years being specified by the Board. The
Restricted Stock Grants awarded to Grantees shall be considered vested
or forfeited on the January 1st following completion of the third
successive calendar year of employment with the Company or any
Subsidiary.
6.1.4 Notwithstanding the foregoing:
6.1.5 Termination of Employment. Upon termination of a
Grantee's employment with the Company or with any of its Subsidiaries
for reasons other than death, disability, retirement after age 65 or
retirement before age 65 with Board approval, the Grantee's and the
Company's rights, duties and obligations under the Restricted Stock
Grant shall be terminated and the Restricted Stock Grants shall be
forfeited.
6.1.6 Death or Disability of Grantee. If a Grantee to whom a
Restricted Stock Grant shall have been awarded, shall die or become
disabled while the Grantee is employed by the Company or one or more of
its Subsidiaries, such Restricted Stock Grant shall thereupon be 100%
vested.
6.1.7 Retirement of Grantee. In the event that a Grantee to
whom a Restricted Stock Grant shall have been awarded shall retire upon
or after the age of 65, any Restricted Stock Grant held by such retired
Grantee shall thereupon be 100% vested. In the event Grantee retires
prior to age 65, with the approval of the Board in its sole discretion,
the Restricted Stock Grant will become (i) one-third (1/3) vested if the
retirement occurs after the completion of the first calendar year
specified by the Board but prior to the completion of the second
calendar year specified by the Board and (ii) 100% vested if the
retirement occurs after the completion of the second calendar year
specified by the Board. If the Grantee retires prior to the age of 65
without the approval of the Board, the provisions of Section 6.1.4.1
shall control.
6.1.8 Change in Control of the Company. In the event of a
Change in Control of the Company, the outstanding Restricted Stock
Grants shall thereupon be 100% vested, and, to the extent permitted by
law, the Grantees shall be permitted to participate in the sale or
merger resulting in the Change in Control.
6.1.9 Incentive Stock Grants.
<PAGE>
6.1.10 Authorized Shares. The aggregate number of shares that
may be awarded to employees under the Plan pursuant to Incentive Stock
Grants shall not exceed 156,000 shares of Stock. In the event any
Incentive Stock Grant shall, for any reason, be forfeited, terminate or
expire or be surrendered to the Company, the shares subject to such
Incentive Stock Grant shall again be available to be awarded as a
Incentive Stock Grant under the Plan.
6.1.11 Incentive Stock Grants. Incentive Stock Grants may be
awarded by the Board to participants of the Company chosen by the Board
in its sole discretion. The amount of each award shall be subject to
the terms and conditions set forth in an agreement between the Company
and the Grantee containing the terms and conditions of the award, which
shall be consistent with the provisions set forth in this Plan and the
Administrative Rules adopted by the Board. All Incentive Stock Grants
that do not vest pursuant to the provisions of Section 6.2.3 shall be
forfeited.
6.1.12 Vesting of Incentive Stock Grants. Incentive Stock Grants
shall vest with the Grantee following: (a) the Grantee's completion of
three (3) successive calendar years of employment, with said years
specified by the Board; and (b) the Company achieving the Performance
Criteria specified by the Board on the Grant Date. The number of
shares vested pursuant to any Grant, if any, shall be determined
pursuant to the Performance Criteria set by the Board. The Stock
awarded pursuant to Incentive Stock Grant shall be considered vested or
forfeited on the January 1st following completion of the third
successive calendar year specified by the Board.
6.1.13 Performance Criteria. The Performance Criteria shall be
set by the Board. The Performance Criteria shall be the same for each
Grantee receiving a Grant on a particular Grant Date, provided that the
Performance Criteria set with respect to a particular Grant Date may be
different from Performance Criteria set for prior or subsequent Grant
Dates. The Board shall determine the Performance Criteria prior to or
during the first year of the performance period specified by the Board.
6.1.14 Performance in Excess of 100% of Incentive Stock Grant.
The Board may establish Performance Criteria in amounts that exceed 100%
of the Performance Stock Granted to the Grantees. In the event that the
Performance Criteria set by the Board exceed 100% of the Stock to be
awarded by a Grant, any and all amounts in excess of 100% shall be paid
in cash to the Grantee based upon the Fair Market Value of the Stock on
the date Incentive Stock Grant Vests. 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 Grantee. The Board may
make such determination: (i) in the case of Stock not then listed and
traded upon a recognized securities exchange, upon the basis of the mean
between the closing bid and asked quotations for such stock on the date
the Incentive Stock Grants vest (as reported by the Wall Street Journal
"NASDAQ Bid and Asked Quotations" National Market Listings or as
reported by NASDAQ if not reported in the Wall Street Journal) or in the
event that there shall be no bid or asked quotations on such date, then
upon the basis of the bid and asked quotations nearest preceding such
<PAGE>
date, or (ii) in the case the 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 Stock were traded
on such recognized securities exchange on the date the Incentive Stock
Grants vest, as reported in the Wall Street Journal or, if the Stock was
not traded on said date, the date nearest preceding such date, and (iii)
upon any other factors which the Board shall deem appropriate.
6.1.15 Notwithstanding the foregoing:
6.1.16 Termination of Employment. Upon termination of a
Grantee's employment with the Company or with any of its Subsidiaries
for reasons other than death, disability, retirement after age 65 or
retirement before age 65 with Board approval, the Grantee's and the
Company's rights, duties and obligations under the Incentive Stock Grant
shall be terminated and the Incentive Stock Grant shall be forfeited.
6.1.17 Death or Disability of Grantee. If a Grantee to whom an
Incentive Stock Grant shall have been awarded shall die or become
disabled while he shall be employed by the Company or one or more of its
Subsidiaries, such Incentive Stock Grant shall thereupon be vested in
accordance with the provisions of Section 6.2.5 and said death or
disability shall be deemed to be a Qualified Contingent Vesting Event.
6.1.18 Retirement of Grantee. In the event that a Grantee to
whom an Incentive Stock Grant shall have been awarded shall retire upon
or after the age of 65, such Incentive Stock Grant held by such retired
Grantee shall thereupon be vested in accordance with the provisions of
Section 6.2.5 and said retirement shall be deemed to be a Qualified
Contingent Vesting Event. In the event Grantee retires prior to age 65,
the Incentive Stock Grant may become vested in accordance with the
provisions of Section 6.2.5 upon the approval of the Board in its sole
discretion; and upon such approval by the Board said retirement shall be
deemed to be a Qualified Contingent Vesting Event. If the Grantee
retires prior to the age of 65 without the approval of the Board, the
provisions of Section 6.2.4.1 shall control.
6.1.19 Change in Control of the Company. In the event of a
Change in Control of the Company, such Incentive Stock Grants shall
thereupon be vested in accordance with the provisions of Section 6.2.5,
and said Change in Control shall be deemed to be a Qualified Contingent
Vesting Event. Furthermore, to the extent permitted by law, the
Grantees shall be permitted to participate in the sale or merger
resulting in the Change in Control.
6.1.20 Contingent Vesting Rules. Pursuant to the provisions of
Sections 6.2.4.2, 6.2.4.3, and 6.2.4.4 the Incentive Stock Grants shall
vest upon the occurrence of a Qualified Contingent Vesting Event, in
accordance with the terms set forth below.
6.1.21 If a Qualified Contingent Vesting Event occurs prior to
the completion of the first year of the performance period specified by
the Board, all of the Incentive Stock
<PAGE>
Grants shall be forfeited and none of the Incentive Stock Grants
shall thereafter become vested in the Grantee.
6.1.22 If a Qualified Contingent Vesting Event occurs after the
completion of the first year of the performance period specified by the
Board but prior to the completion of the second year of the performance
period specified by the Board, the Grantee shall be entitled to receive
one-third (1/3) of the Incentive Stock Grant that would vest if the
Performance Criteria was applied to the financial results of the Company
for the first fiscal year of the performance period. All other
Incentive Stock Grants not vested pursuant to the provisions of the
preceding sentence shall be forfeited.
6.1.23 If a Qualified Contingent Vesting Event occurs after the
completion of the second year of the performance period specified by the
Board, but prior to the completion of the third year of the performance
period specified by the Board, the Grantee shall be entitled to receive
100% of the Incentive Stock Grant that would vest if the Performance
Criteria was applied to the financial results of the Company for the
first and second fiscal years of the performance period. All other
Incentive Stock Grants not vested pursuant to the provisions of the
preceding sentence shall be forfeited.
7. Delivery of Stock. Stock and any cash payments (if applicable) to be
delivered to a Grantee pursuant to the vesting of a Grant, shall be delivered
to the Grantee within 90 days of the date the Grant vests. In the event that a
Grantee is unable to accept the Stock due to death, disability or otherwise,
the Stock and any cash payments (if applicable) shall be delivered to the
Grantee's Successor.
8. Fractional Shares. No factional shares of Stock shall be issued to any
participant pursuant to the terms of the Plan. The vesting of any Grant shall
be rounded to the nearest whole share. In the event that 50% or more of a
share shall vest pursuant to the terms of the Plan, the Participant shall be
vested with the next whole share; to the extent that less than 50% of a share
shall vest, the participant shall rounded down to the next whole share and the
percentage of the share shall be disregarded.
9. Shareholder Rights. Neither a Grantee nor his Successor shall have any of
the rights of a shareholder (including but not limited to voting or dividend
rights) of the Company until the Grants have vested and the stock certificates
evidencing the shares awarded by the Grants are properly delivered to such
Grantee or his Successor; provided, however, that the Grantee shall be entitled
to receive a cash payment (in the form of a bonus or death benefit) from the
Company equal to the amount of any dividends which would have been payable on
the Stock if the Stock had been issued to the Grantee on the date the Grant
vested.
10. No Alteration of Employment Terms. The Grant 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.
<PAGE>
11. Adjustments. In the event that the outstanding shares of 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 Grants may be made under the Plan. In addition,
there shall be appropriate adjustments made in the number and kind of shares of
Stock as to which outstanding Grants shall be issued, to the end that the
proportionate interest of the holder of the Grant shall, to the extent
practicable, be maintained as before the occurrence of such event. Such
adjustment in outstanding Grants shall be made through a change in the total
number or kind of shares awarded in the Grant.
12. Restrictions on Issuing Shares. The issuance of Stock pursuant to the
vesting of a Grant 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, the delivery of the Stock pursuant thereto, then in any
such event, such delivery shall be deferred until such time as such
withholding, listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company.
13. Suspension and/or Termination of Plan. The Board may at any time suspend
or terminate the Plan. Unless previously terminated by the Board, no further
Grants shall be awarded under the Plan after December 31, 1995. No Grants may
be awarded during any suspension or termination of the Plan. No suspension or
termination of the Plan shall, without a Grantee's consent, alter or impair any
of the rights or obligations under any Grant theretofore awarded to such
Grantee under the Plan.
14. Nontransferability of Grants. No Grant awarded under the Plan shall be
transferable otherwise than by bequest or by laws of descent and distribution,
and during the lifetime of the Grant only the Grantee or Grantee's Successor
may receive stock or cash from the Grant.
15. Effectiveness of the Plan. The Plan shall become effective only after the
Board shall, by the affirmative vote of a majority of its members, have
approved the Plan.
16. Time of Awarding Grants. Nothing contained in the Plan nor in any
resolution adopted or to be adopted by the Board of Directors or the
stockholders of the Company nor any action taken by the Board shall constitute
a Grant. A Grant shall take place only when a written Agreement is duly
executed by the Company and the Grantee to whom such Grant shall be awarded.
<PAGE>
ADMINISTRATIVE RULES
FOR BRENTON BANKS, INC.
LONG-TERM STOCK COMPENSATION PLAN
1. Definitions. Those terms defined in the Plan shall have the same meaning
when used in these Rules.
2. Withholding Taxes. Prior to issuing any Stock pursuant to the terms of a
Grant, a Grantee shall be required to make adequate provisions for the
withholding of any and all applicable State, Federal and local taxes
(hereinafter "Withholding Taxes"). The manner in which Withholding Taxes shall
be remitted to the appropriate taxing authorities shall be by a cash payment to
the Company from the Grantee in an amount equal to the amount of Withholding
Taxes that must be remitted to the respective taxing authorities unless the
Grantee elects to pay the withholding taxes pursuant to an alternative method
described in either Section 2.1 or 2.2 hereof. After the Grantee determines
whether the alternative method will apply, the Board, in its sole discretion,
shall determine which alternative method is applied to the particular Grantee.
2.1 Loan. The Grantee may obtain a loan from the Company or one of the
Company's subsidiaries in an amount equal to the amount of Withholding Taxes
that must be remitted to the respective taxing authorities. Any loan to a
Grantee must be made with interest payable at prime and the loan being due and
payable on December 31 of the year in which the withholding taxes are due and
payable. All loans made to a Grantee must comply with all federal and
applicable state banking laws. Nothing contained in this paragraph shall
require any subsidiary of the Company to make a loan to a Grantee.
2.2 Exchange of Stock. The Grantee may exchange the right to receive a
portion of the Stock issuable pursuant to a Grant for an amount of cash equal
in value to the amount of Withholding Taxes that must be remitted to the
respective taxing authorities based upon the Fair Market Value of the Stock at
the time of withholding.
3. Performance Criteria. The performance criteria established by the Board
shall have the following meanings and shall be interpreted in accordance with
the following rules.
3.1 "Average Annual Earnings Per Share Growth (EPS)" shall be determined
by dividing the sum of the "Annual Percentage Growth Rates in EPS" for each of
the years contained in the performance period by the total number of years in
the performance period.
3.2 "Annual Percentage Growth Rates in EPS" shall mean annual percentage
growth in the Company's Earnings Per Share (for consolidated financial
reporting purposes) after the effect of adjusting earnings for the financial
statement expense of Grants under the Plan pursuant to Generally Accepted
Accounting Principles.
3.3 "Earnings Per Share" shall be the primary earnings per share of the
Company for consolidated financial reporting purposes.
The following example shall illustrate the definitions set forth above:
<PAGE>
During the years 1991, 1992, 1993 and 1994 the Company's Earnings Per
Share are $1.80, $2.10, $2.31 and $2.60 respectively. After adjustment
for the financial statement expense of Grants under the Plan, the
Company's earnings per share are $1.80, $1.90, $2.20 and $2.40 for 1991,
1992, 1993 and 1994 respectively. The Annual Percentage Growth Rate in
EPS for 1992 is computed by subtracting the 1991 adjusted earning per
share ($1.80) from the adjusted 1992 earning per share ($1.90) and
dividing that number by the 1991 adjusted earning per share ($1.80).
Therefore, the Annual Percentage Growth Rate in EPS for 1992 is 5.55%.
The Annual Percentage Growth Rate in EPS for 1993 and 1994 (computed in
the same manner) is 15.78% and 9.09% respectively. The Average Annual
Earning Per Share Growth for the years 1992, 1993 and 1994 is 10.13%
((5.55 + 15.78 + 9.09)/3)
4. Restricted Stock Grants - Vesting and Forfeiture Rules. The following
examples are intended to act as an illustration of the Board's intentions with
respect to Restrictive Stock Grant awards pursuant to the Plan. All of the
examples set forth below are based upon the following facts:
Employee X is granted a restricted stock Grant in 1992. The terms of
the Grant entitle the employee to receive 100 shares of Stock if the X
is employed with the Company or any Subsidiary on January 1, 1995.
4.1 Death or Disability. On June 15, 1992, Employee X becomes disabled
or dies. Employee X becomes fully vested in the 100 shares of Stock.
4.2 Termination. On November 15, 1994, Employee X is terminated by the
Company. Because Employee X is not employed by the Company on January 1, 1995
and has not been continuously employed by Company the for three consecutive
years, none of the Restricted Stock Grants shall vest.
5. Incentive Stock Grants - Vesting and Forfeiture Rules. The following
examples are intended to act as an illustration of the Board's intentions with
respect to Incentive Stock Grants awarded pursuant to the Plan. All of the
examples set forth below are based upon the following facts:
Employee X is granted an Incentive Stock Grant in 1992. The terms of
the Grant entitle the employee to receive up to 100 shares of Stock if
(1) X is employed with the Company or any Subsidiary on January 1, 1995;
and (2) the Company meets or exceeds certain Performance Criteria. The
Performance Criteria adopted by the Board specify that if the Average
Earnings Per Share Growth of the Company's Stock is below 7.50% - none
of the Incentive Stock Grants will vest; if the Average Earnings Per
Share Growth of the Company's Stock is from 7.50% to 8.74% - 50% of the
Incentive Stock Grants will vest; if the Average Earnings Per Share
Growth of the Company's Stock is from 8.75% to 9.99% - 75% of the
Incentive Stock Grants will vest; if the Average Earnings Per Share
Growth of the Company's Stock is from 10.00% to 11.99% - 100% of the
Incentive Stock
<PAGE>
Grants will vest. The Company's Earnings Per Share Growth for the
years 1992, 1993 and 1994 are 10.00%, 9.25% and 7.25% respectively.
5.1 Achievement of Company performance goals. Employee X continues to
work for the Company through January 1, 1995. The Average Earnings Per Share is
8.83% ((10% + 9.25% + 7.25%)/3). Therefore, in January of 1995, Employee X
will have 75% of the Stock granted pursuant to the Incentive Stock Grant
vested. The number of shares that will be delivered to Employee X is
determined by multiplying the percentage of vested Incentive Stock Grants by
the total number of shares Granted in the Incentive Stock Grant (75% X 100
shares = 75 shares).
5.2 Qualified Contingent Vesting Event - Year Two of the Performance
Period. Employee X continues to be employed by the Company through June 1,
1993, at which time a Qualified Contingent Vesting Event occurs. On June 1,
1993, the Company would apply the performance criteria to the financial results
of the Company for the first fiscal year - 1992. The Average Earning Per Share
as of December 31, 1992 would be 10% (10%/1). A 10% Average Earnings Per Share
will result in 100% of the Incentive Stock Grant vesting. However, pursuant to
Section 6.2.5.2. of the Plan, only one-third (1/3) of the Incentive Stock
Grants will vest if the Qualified Contingent Vesting Event occurs during the
second year of performance period. Therefore, the number of shares that will
be delivered to Employee X is determined by multiplying the percentage of
vested Incentive Stock Grants pursuant to measurement via Performance Criteria
by the total number of shares Granted in the Incentive Stock Grant and by one-
third (100% X 100 shares X 1/3 = 33 shares).
5.3 Qualified Contingent Vesting Event - Year Three of the Performance
Period. Employee X continues to be employed by the Company through June 1,
1994, at which time a Qualified Contingent Vesting Event occurs. On June 1,
1994, the Company would apply the performance criteria to the financial results
of the Company for the first and second fiscal years - 1992 and 1993. The
Average Earning Per Share would be 9.625% ((10% + 9.25%)/2). A 9.625% Average
Earnings Per Share will result in 75% of the Incentive Stock Grant vesting.
Pursuant to Section 6.2.5.3. of the Plan, 100% of the Incentive Stock Grants
will vest if the Qualified Contingent Vesting Event occurs during the third
year of the performance period. Therefore, the number of shares that will be
delivered to Employee X is determined by multiplying the percentage of vested
Incentive Stock Grants pursuant to measurement via Performance Criteria by the
total number of shares Granted in the Incentive Stock Grant (75% X 100 shares =
75 shares).
<PAGE>
RESOLUTIONS ADOPTED
BY THE
BRENTON BANKS, INC.
BOARD OF DIRECTORS
At a regular meeting of the Board of Directors of the Company the
following resolutions were unanimously adopted by the Board of Directors.
Resolved, that pursuant to the provisions of the Company's Long-Term Stock
Compensation Plan, the Board approves the awarding of Grants to the employees
of the Company upon the terms and conditions set forth below.
1. That Restricted Stock Grants are to be awarded to those employees
listed on Exhibit A attached hereto, in the amounts set forth in the
column titled "Restricted Shares". The Restricted Stock Grants shall be
subject to the terms and conditions set forth in the Plan. The Board
further specifies that the three successive calendar years of
employment, the completion of which the Restricted Stock Grants are
conditioned upon, are 1994, 1995 and 1996. All Grants shall vest or be
forfeited, pursuant to the provisions of the Plan, on or before January
1, 1997.
2. That Incentive Stock Grants are to be awarded to those employees
listed on Exhibit A attached hereto, in the amounts set forth in the
column titled "Performance Shares". The Incentive Stock Grants shall be
subject to the terms and conditions set forth in the Plan,
Administrative Rules and those set forth below.
a. The Board hereby specifies that the three successive calendar
years of employment (the "Performance Period"), the completion of
which the Incentive Stock Grants are conditioned upon, are 1994,
1995 and 1996. All Incentive Stock Grants shall vest or be
forfeited, pursuant to the provisions of the Plan, on or before
March 15, 1997.
b. The Board further specifies that the Performance Criteria that
the Company must achieve prior to the vesting of any of the
Incentive Stock Grants shall be as set forth on Exhibit B attached
hereto.
To the extent that a Grant fails to vest, the shares shall be deemed to be
forfeited pursuant to the terms of the Plan.
Those terms defined in the Company's Long Term Stock Compensation Plan or
Rules adopted thereunder by the Board shall have the same meaning when used in
this Resolution.
<PAGE>
EXHIBIT B
Average Annual Earnings
Per Share Growth over the Tiered Achievement
Three Year Performance Period Scale
Less than 7.5% . . . . . . . . . . . . . . . . . . . . . . . . 0% vested
7.50% to 8.74% . . . . . . . . . . . . . . . . . . . . . . . . 50% vested
8.75% to 9.99% . . . . . . . . . . . . . . . . . . . . . . . . 75% vested
10.00% to 11.99% . . . . . . . . . . . . . . . . . . . . . . . 100% vested
12.00% to 13.99% . . . . . . . . . . . . . . . . . . . . . . . 115% vested
14.00% to 15.99% . . . . . . . . . . . . . . . . . . . . . . . 130% vested
Greater than 16.00% . . . . . . . . . . . . . . . . . . . . . 150% vested
<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 were 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.
63
<PAGE>
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security Agreement between Brenton
Bank and the Federal Home Loan Bank of Des Moines.
64
<PAGE>
FEDERAL HOME LOAN BANK OF DES MOINES
Des Moines, Iowa
AGREEMENT FOR ADVANCES, PLEDGE AND SECURITY AGREEMENT
Blanket Pledge
This Agreement for Advances, Pledge and Security Agreement
("Agreement"), effective the 16th day of DECEMBER 1993, is entered
between BRENTON FIRST NATIONAL BANK ("Member"), with principal
offices at 1606 BRADY, DAVENPORT, IA 52803 and the Federal Home
Loan Bank of Des Moines ("Bank"), with principal offices at 907
Walnut, Des Moines, Iowa 50309.
WHEREAS, The Bank in accordance with the Federal Home Loan
Bank Act, regulations and directives of the Federal Housing
Finance Board, and policies promulgated by its own Board, makes
available advances to its members. The available advances are set
forth by the Bank in a statement of "Credit Policy," as may be
amended from time to time.
WHEREAS, The Member may, from time to time, apply for an
advance or advances which may be available to it.
NOW THEREFORE, For valuable consideration and with respect to
each and every such advance, the Parties agree as follows:
SECTION 1. CONFIRMATION OF ADVANCE. To be bound by the terms
and conditions set forth herein, in the confirmation of advance
issued with respect to each advance, and in the Bank's Credit
Policy as may be amended from time to time. A confirmation of
advance shall mean a writing or machine readable electronic
transmission in such form or forms as may be determined by the
Bank from time to time.
SECTION 2. PAYMENT TO THE BANK. To repay each and any advance
together with interest thereon according to the confirmation of
each such advance communicated to the Member by the Bank, together
with any unpaid costs and expenses in connection therewith. Such
payment shall be made at the office of the Bank in Des Moines,
Iowa, or at such other place as the Bank, or its successors or
assigns, may from time to time appoint in writing.
The default rate on past due principal and interest may, at
the option of the Bank, be at a rate 1% per annum higher than the
then current rate being charged by the Bank for advances.
SECTION 3. ASSIGNMENT TO BANK OF SECURITY INTEREST IN BANK
STOCK. The Member hereby assigns, transfers and pledges to the
Bank, its successors or assigns, all stock of the Federal Home
Loan Bank of Des Moines owned by the Member as collateral security
for payment of any and all indebtedness, whether in the nature of
an advance or otherwise, of the Member to the Bank, its successors
and assigns.
SECTION 4. ASSIGNMENT OF SECURITY INTEREST IN OTHER
COLLATERAL. As additional collateral security for any and all such
advances, Member assigns, transfers, and pledges to the Bank, its
successors or assigns, each and every note or other instrument
evidencing a debt and any mortgage, deed of trust, title, or
document of title securing it; all securities (including, but not
limited to mortgage-backed securities issued or guaranteed by the
Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association, obligations of or guaranteed by the United
States or an agency thereof, share certificates or other
participation interests in any securities trust, mortgage loan
participation certificates); all contract for deeds, all chattel
paper; any chose in action; all general intangibles; all deposit
accounts; certificates of deposit; and proceeds from any of the
above (hereinafter "Collateral"). With respect to such Collateral,
Member undertakes and agrees as follows:
A. That such security interest shall extend to after acquired
Collateral of a similar nature;
<PAGE>
B. That the Member shall be at liberty to use, commingle, and
dispose of all or part of the Collateral, and to collect,
compromise, and dispose of the proceeds of the Collateral without
being required to account for the proceeds or replace the
Collateral subject only to its obligation to maintain the
Collateral as herein provided;
C. To keep and maintain such Collateral free and clear of
pledges, liens, and encumbrances to others at the required
collateral maintenance level. The "required collateral maintenance
level" means the amount of collateral the member is required to
maintain free and clear of pledge, liens, and encumbrances to
others as set forth from time to time in the Credit Policy;
D. To assemble and deliver Collateral to the Bank or its
authorized agents immediately upon demand of the Bank, and as
specified by the Bank in its Credit Policy from time to time, and
to pay for the safekeeping collateral as established by the Bank;
E. To make, execute, and deliver to the Bank such
assignments, endorsements, listings, powers, financing statements
or other instruments as the Bank may reasonably request respecting
such Collateral.
SECTION 5. DUTY TO USE REASONABLE CARE. In the event Member
delivers security to Bank or its Agent pursuant to paragraph 4
above, the duty of the Bank with respect to said security shall be
solely to use reasonable care in the custody and preservation of
the security in its possession.
SECTION 6. ADDITIONAL SECURITY. Member shall assign
additional or substituted Collateral for such advances at any time
the Bank shall deem it necessary for the Bank's protection.
SECTION 7. EVENTS OF DEFAULT. The Bank may consider the
Member in default hereunder upon the occurrence of any of the
following events or conditions:
A. Failure of the Member to pay any interest, or repay any
principal, of any advances as herein required; or
B. Breach or failure to perform by the Member of any
covenant, promise, condition, obligation or liability contained or
referred to herein, or any other agreement to which the Member and
the Bank are parties; or
C. Proof being made that any representations, statements or
warranty made or furnished in any manner to the Bank by or on
behalf of the Member in connection with all or part of any advance
was false in any material respect when made or furnished; or
D. Loss, theft, damage, destruction, sale or encumbrance to
or of any of the Collateral except as herein permitted, or the
making of any levy, seizure or attachment thereof or therein; or
E. Any tax levy, attachment, garnishment, levy of execution
or other process issued against the Member or the Collateral; or
F. Any suspension of payment by the Member to any creditor or
any events which result in acceleration to the maturity of any
indebtedness of the Member to others under any indenture,
agreement or undertaking, or
G. Application for, or appointment of, a receiver of any part
of the property of the Member, or in case of adjudication of
insolvency, or assignment for benefit of creditors, or general
transfer of assets by the Member, of if management of the Member
is taken over by any supervisory authority, or in case of any
other form of liquidation, merger, sale of assets or voluntary
dissolution, or upon termination of the membership of the Member
in the Federal Home Loan Bank of Des Moines, or in the case of
advances made under the provisions of 12 U.S.C. Section
1431(g)(4), if at any time thereafter the creditor liabilities of
the Member, excepting its liabilities to the Bank, are increased
in any manner to an amount exceeding 5% of its net assets; or
H. Determination by the Bank that a material adverse change
has occurred in the financial condition of the Member from that
disclosed at the time of the making of any advance, or from the
condition of the Member as theretofore most recently disclosed to
the Bank in any manner; or
I. If the Bank reasonably and in good faith deems itself
insecure even though the Member is not otherwise in default.
<PAGE>
SECTION 8. BANK REMEDIES IN THE EVENT OF DEFAULT. At any time
after any default as herein before provided, the Bank may, at its
option, declare the entire amount of any and all advances to be
immediately due and payable. The Bank shall have all of the
remedies of a secured party under the Uniform Commercial Code of
the State of Iowa. In addition thereto, the Bank may take
immediate possession of any of the Collateral or any part thereof
wherever the same may be found. The Member agrees to pay all the
costs and expenses of the Bank in the collection of the secured
indebtedness and enforcement of the Bank's rights hereunder
including, without limitation, reasonable attorney's fees. The
Bank may sell the Collateral or any part thereof in such manner
and for such price as the Bank deems appropriate without any
liability for any loss due to decrease in the market value of the
Collateral during the period held. The Bank shall have the right
to purchase all or part of the Collateral at public or private
sale. If any notification of intended disposition of any of the
Collateral is required by law, such notification shall be deemed
reasonable and properly given if mailed, postage prepaid, at least
five days before any such disposition to the address of the Member
appearing on the records of the Bank. The proceeds of any sale
shall be applied in the following order: First, to pay all costs
and expenses of every kind for the care, collection, safekeeping,
sale, foreclosure, delivery or otherwise respecting the Collateral
(including expenses incurred in the protection of the Bank's title
to or lien upon or right in any of the Collateral, expenses for
legal services of any kind in connection therewith or in making
any such sale or sales, insurance, commission for sales and
guaranty); then to interest on all indebtedness of the Member to
the Bank; then to the principal amount of any such indebtedness
whether or not such indebtedness is due or accrued. The Bank, at
its discretion, may apply any surplus to indebtedness of Member to
third parties claiming a secondary security interest in the
Collateral. Any remaining surplus shall be paid to the Member.
SECTION 9. APPOINTMENT OF BANK AS ATTORNEY-IN-FACT. In the
event of default, and without limiting any other rights the Bank
might have as a secured party under the Uniform Commercial Code of
Iowa, or the laws of any jurisdiction under which Bank might be
exercising rights hereunder, and under this Agreement, Member does
hereby make, constitute and appoint Bank its true and lawful
attorney-in-fact to deal with the Collateral and, in its name and
stead to release, collect, compromise, settle and release or
record any mortgage of deed or trust which is a part of such
Collateral as fully as the Member could do if acting for itself.
The powers herein granted are coupled with an interest, and are
irrevocable, and full power of substitution is granted to the Bank
in the premises.
SECTION 10. AUDIT AND VERIFICATION OF COLLATERAL. In
extension and not in limitation of all requirements of law
respecting examination of the Member by or on behalf of the Bank,
the Member agrees that all Collateral pledged hereunder shall
always be subject to audit and verification by or on behalf of the
Bank in its corporate capacity.
SECTION 11. RESOLUTION TO BE FURNISHED BY MEMBER. Member
agrees to furnish to the Bank from time to time a certified copy
of resolution of its Board of Directors or other governing body
authorizing such of the Member's officers, as the Member shall
select, to apply for advances from the Bank. Unless the Bank shall
be otherwise notified in writing, the Bank may honor applications
made by such officers other than in writing; but, in such event
the Member shall confirm such application for advance in writing
on forms furnished by the Bank. But the Member shall forever be
estopped to deny its obligation to repay such advance whether or
not an application in writing is ever received by the Bank so long
only as the advance is made in good faith by the Bank on the
request of an officer or employee so authorized by the Member.
SECTION 12. APPLICABILITY OF BANK ACT. In addition to the
terms and conditions herein specifically set forth, all advances
are subject to the rights, powers, privileges and duties conferred
upon the Federal Housing Finance Board, the Federal Home Loan
Banks, and on member institutions by the Act of Congress entitled,
"Federal Home Loan Bank Act, as amended."
SECTION 13. JURISDICTION. In any action or proceeding brought
by the Bank or the Member in order to enforce any right or remedy
under this Agreement, Member will submit to the jurisdiction of
the United States District Court for the Southern District of
Iowa, or if such action or proceeding may not be brought in
Federal Court, the jurisdiction of the Iowa District Court in Polk
County.
If any action or proceeding is brought by the Member seeking
to obtain relief against the Bank arising out of this Agreement
and such relief is not granted by a court of competent
jurisdiction, the Member will pay all attorney's fees and court
costs incurred by the Bank in connection therewith.
<PAGE>
SECTION 14. CHOICE OF LAW. This Agreement shall be construed
and enforced according to the laws of the State of Iowa, except
that the rate of interest on advances hereunder shall be governed
by the provisions of 12 U.S.C. Section 1430 (as amended).
SECTION 15. AGREEMENT CONSTITUTES ENTIRE AGREEMENT. This
Agreement embodies the entire Agreement and understanding between
the parties hereto relating to the subject matter hereof and
supersedes all prior agreements between such parties that relate
to the subject matter except that: The Credit Policy as duly
adopted by the Bank's Board of Directors from time to time shall
be incorporated herein, unless agreed to in writing by both
parties. Advances made by the Bank to Member prior to the
execution of this Agreement shall continue to be governed
exclusively by the terms of the prior agreements pursuant to which
such advances were made, except that (i) any default thereunder
shall constitute default hereunder, (ii) Collateral furnished as
security hereunder shall also secure such prior advances and (iii)
the rights and obligations with respect to such Collateral shall
be governed by the terms of this Agreement.
SECTION 16. SECTION HEADINGS. Section headings are not to be
considered part of this Agreement. Section headings are solely for
convenience of reference, and shall not effect the meaning or
interpretation of this Agreement or any of its provisions.
SECTION 17. SEVERABILITY OF SECTIONS. If any section or
portion thereof is deemed void in any legal proceeding, the
remainder of the Agreement shall remain in full force and effect.
SECTION 18. The person signing this document on behalf of the
Member represents that its execution was authorized by appropriate
action of the directors of the Member which was completed on the
19th day of NOVEMBER, 1993, and that such action is duly reflected
in the records of the Member.
BRENTON FIRST NATIONAL BANK FEDERAL HOME LOAN BANK OF
DES MOINES
(Full Corporate Name of Member)
By: /s/ Marsha A. Findlay By:
Title: Executive Vice President Title:
& COO
Date:. December 16, 1993 Date:
By: /s/ Nicholas E. Heisdorffer By:
Title:. Assistant Vice President Title:
Date: December 16, 1993 Date:
Revised 5/91
<PAGE>
Exhibit 10.10
Short-term note with American National Bank & Trust Company of Chicago as of
April 30, 1998, setting forth the terms of the Parent Company's $5,000,000
short-term debt agreement.
69
<PAGE>
April 30, 1998
Brenton Banks, Inc.
Capital Square, Suite 300
P.O. Box 961
Des Moines, Iowa 50304
Gentlemen:
This letter will replace the previous Letter Agreement regarding
the negative pledge on Brenton Bank stock dated April 30, 1997.
This letter is in reference to the certain Promissory Note
(Unsecured) dated April 30, 1998, 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 Five 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 Tim Ruby,
Officer of ANB.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
BY: /s/
ITS: Correspondent Banking Officer
Accepted and agreed to this 30th day of April, 1998.
BRENTON BANKS, INC.
an Iowa corporation
BY: /s/ Steven T. Schuler (written) Steven T. Schuler
(printed)
ITS: CFO/Treasurer/Secretary
<PAGE>
American National Bank
And Trust Company of Chicago
PROMISSORY NOTE (UNSECURED)
$5,000,000.00
Chicago, Illinois
April 30, 1998
Due April 30, 1999
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 FIVE 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 ("Borrower's Liabilities") shall be due and payable on April
30, 1999.
This Note restates and replaces a Promissory Note (Unsecured)
in the principal amount of $2,000,000.00, dated April 30, 1997
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 1.00% per annum (computed on the basis of a 360-day year and
actual days elapsed) below 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 stun 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, 1998 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 Borrower or any such guarantor
Page l of 3
<PAGE>
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 IN CONNECTION WITH OR RELATED TO THIS
NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
Page 2 of 3
<PAGE>
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Capital Square, Suite 300 BRENTON BANKS, INC.
P.O. Box 961 an Iowa corporation
Des Moines, Iowa 50304
42-06558989 By: /s/ Steven T. Schuler
FEIN Steven T. Schuler,
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.
75
<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.
76
<PAGE>
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing
Plan, effective July 1, 1998.
77
<PAGE>
ADOPTION AGREEMENT #003
NONSTANDARDIZED CODE SECTION 401(k) PROFIT SHARING PLAN
The undersigned, BRENTON BANKS, INC. ("Employer"), by executing this
Adoption Agreement, elects to become a participating Employer in the
BRENTON BANK Defined Contribution Master Plan (basic plan document #01) by
adopting the accompanying Plan and Trust in full as if the Employer were a
signatory to that Agreement. The Employer makes the following elections
granted under the provisions of the Master Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose (a) or
(b))
[ ] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[ X ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan.
[Note: The Employer may not elect Option (b) if a Custodian executes the
Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the Employer is BRENTON BANKS,
INC. EMPLOYEES' RETIREMENT PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate in the
Plan: (Choose (a) or at least one of (b) through (g))
[ X ] (a) No exclusions.
[ ] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the Plan, the
Employer must be able to provide evidence that retirement benefits were the
subject of good faith bargaining.]
[ ] (c) Nonresident aliens who do not receive any earned income (as defined
in Code Section 911(d)(2)) from the Employer which constitutes United States
source income (as defined in Code Section 861(a)(3)).
[ ] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[ ] (g) (Specify) _________________________.
Leased Employees. Any Leased Employee treated as an Employee under Section
1.31 of the Plan, is: (Choose (h) or (i))
[ X ] (h) Not eligible to participate in the Plan.
[ ] (i) Eligible to participate in the Plan, unless excluded by reason of
an exclusion classification elected under this Adoption Agreement Section 1.07.
<PAGE>
Related Employers. If any member of the Employer's related group (as defined
in Section 1.30 of the Plan) executes a Participation Agreement to this
Adoption Agreement, such member's Employees are eligible to participate in this
Plan, unless excluded by reason of an exclusion classification elected under
this Adoption Agreement Section 1.07. In addition: (Choose (j) or (k))
[ X ] (j) No other related group member's Employees are eligible to
participate in the Plan.
[ ] (k) The following nonparticipating related group member's Employees are
eligible to participate in the Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement Section 1.07:
__________________.
1.12 COMPENSATION.
Treatment of elective contributions. (Choose (a) or (b))
[ X ] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
[ ] (b) "Compensation" does not include elective contributions.
Modifications to Compensation definition. (Choose (c) or at least one of (d)
through (j))
[ ] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $_____________.
[ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax withholding
purposes, subject to any other election under this Adoption Agreement Section
1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
[ ] (i) Compensation will not include Compensation from a related employer
(as defined in Section 1.30 of the Plan) that has not executed a Participation
Agreement in this Plan unless, pursuant to Adoption Agreement Section 1.07, the
Employees of that related employer are eligible to participate in this Plan.
<PAGE>
[ X ] (j) (Specify) The term "Compensation" shall mean all wages, salaries,
and other payments for personal services actually rendered in the course of
employment with the Employer, including bonuses, commissions, overtime pay,
incentive pay, benefit payments under the Company's short-term disability plan
and salary reduction contributions voluntarily authorized as contributions to
this Plan, Brenton Banks, Inc. Executive Savings Plan, or to the Employer's
Cafeteria Plan by eligible employees. This definition of compensation does not
include: stock options, club dues, automobile, educational assistance, moving
expenses, split dollar life insurance, severance pay, or benefits under the
Employer's employee stock purchase program, long term stock compensation
program, group term life insurance plan, employee P.C. purchase plan, or other
similar fringe benefits. For any self employed individual, "Compensation" shall
mean Earned Income.
If, for any Plan Year, the Plan uses permitted disparity in the contribution or
allocation formula elected under Article III, any election of Options (f), (g),
(h) or (j) is ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
Special definition for matching contributions. "Compensation" for purposes of
any matching contribution formula under Article III means: (Choose (k) or (l)
only if applicable)
[ x ] (k) Compensation as defined in this Adoption Agreement Section 1.12.
[ ] (l) (Specify)______________________________.
Special definition for salary reduction contributions. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (Choose (m) or at least one of (n) or (o), if applicable)
[ X ] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the amount of
the Employee's salary reduction contribution for the withholding period:
(Choose (1) or (2))
[ ] (1) After the reduction for such period of elective contributions to
the other plan(s).
[ ] (2) Prior to the reduction for such period of elective contributions to
the other plan(s).
[ ] (o) (Specify)_____________________________.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
[ X ] (a) The 12 consecutive month period ending every 12/31.
[ ] (b) (Specify)__________________________.
Limitation Year. The Limitation Year is: (Choose (c) or (d))
[ x ] (c) The Plan Year.
<PAGE>
[ ] (d) The 12 consecutive month period ending every _____.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is _____.
Restated Plan. The restated Effective Date is July 1, 1998.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established December 22, 1986. [Note: See the Effective Date
Addendum.]
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is: (Choose
(a) or (b))
[ x ] (a) The actual method.
[ ] (b) The ____________ equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (Choose at least one)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll
periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor service
the Plan must credit by reason of Section 1.29 of the Plan, the Plan credits
Service with the following predecessor employer(s): Ames Savings Bank, FSB and
ALLTEL Information Services, Inc.. Service with the designated predecessor
employer(s) applies: (Choose at least one of (a) or (b); (c) is available only
in addition to (a) or (b))
[ x ] (a) For purposes of participation under Article II.
[ x ] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service: ________________________.
[Note: If the Plan does not credit any predecessor service under this
provision, insert "N/A" in the first blank line. The Employer may attach a
schedule to this Adoption Agreement, in the same format as this Section 1.29,
designating additional predecessor employers and the applicable service
crediting elections.]
<PAGE>
1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan and
also participates in a plan maintained by the leasing organization: (Choose (a)
or (b))
[ X ] (a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without taking into
account the Leased Employee's allocation, if any, under the leasing
organization's plan.
[ ] (b) The Advisory Committee will reduce a Leased Employee's allocation
of Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's allocation
under the leasing organization's plan, but only to the extent that allocation
is attributable to the Leased Employee's service provided to the Employer. The
leasing organization's plan:
[ ] (1) Must be a money purchase plan which would satisfy the definition
under Section 1.31 of a safe harbor plan, irrespective of whether the safe
harbor exception applies.
[ ] (2) Must satisfy the features and, if a defined benefit plan, the
method of reduction described in an addendum to this Adoption Agreement,
numbered 1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose (a) or (b) or both; (c)
is optional as an additional election)
[ X ] (a) Attainment of age 21 (specify age, not exceeding 21).
[ X ] (b) Service requirement. (Choose one of (1) through (3))
[ ] (1) One Year of Service.
[ ] (2) Months (not exceeding 12) following the Employee's Employment
Commencement Date.
[ X ] (3) One Hour of Service.
[ X ] (c) Special requirements for non-401(k) portion of plan. (Make
elections under (1) and under (2))
(1) The requirements of this Option (c) apply to participation in: (Choose at
least one of (i) through (iii))
[ X ] (i) The allocation of Employer nonelective contributions and
Participant forfeitures.
[ X ] (ii) The allocation of Employer matching contributions (including
forfeitures allocated as matching contributions).
[ X ] (iii) The allocation of Employer qualified nonelective contributions.
<PAGE>
(2) For participation in the allocations described in (1), the eligibility
conditions are: (Choose at least one of (i) through (iv))
[ X ] (i) 1 (one or two) Year(s) of Service, without an intervening Break in
Service (as described in Section 2.03(A) of the Plan) if the requirement is two
Years of Service.
[ ] (ii) ____ months (not exceeding 24) following the Employee's Employment
Commencement Date.
[ ] (iii) One Hour of Service.
[ X ] (iv) Attainment of age 21 (Specify age, not exceeding 21).
Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose (d),
(e) or (f))
[ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the
first day of the seventh month of the Plan Year.
[ ] (e) The first day of the Plan Year.
[ X ] (f) (Specify entry dates) For (k) portion of plan - first day of the
month following 30th calendar day of employment; For non-401(k) portion of plan
- - - the first day of the Plan Year and the first day of the seventh month of the
Plan Year.
Time of Participation. An Employee will become a Participant (and, if
applicable, will participate in the allocations described in Option (c)(1)),
unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date
(if employed on that date): (Choose (g), (h) or (i))
[ X ] (g) immediately following
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement
Section 2.01. [Note: The Employer must coordinate the selection of (g), (h) or
(i) with the "Plan Entry Date" selection in (d), (e) or (f). Unless otherwise
excluded under Section 1.07, the Employee must become a Participant by the
earlier of: (1) the first day of the Plan Year beginning after the date the
Employee completes the age and service requirements of Code Section 410(a); or
(2) 6 months after the date the Employee completes those requirements.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (j) or (k))
[ X ] (j) All Employees of the Employer, except: (Choose (1) or (2))
[ X ] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the Effective
Date.
<PAGE>
[ ] (k) Solely to an Employee employed by the Employer after _______. If
the Employee was employed by the Employer on or before the specified date, the
Employee will become a Participant: (Choose (1), (2) or (3))
[ ] (1) On the latest of the Effective Date, his Employment Commencement
Date or the date he attains age ____ (not to exceed 21).
[ ] (2) Under the eligibility conditions in effect under the Plan prior to
the restated Effective Date. If the restated Plan required more than one Year
of Service to participate, the eligibility condition under this Option (2) for
participation in the Code Section 401(k) arrangement under this Plan is one
Year of Service for Plan Years beginning after December 31, 1988. [For
restated plans only]
[ ] (3) (Specify) __________________.
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or (b))
[ X ] (a) 1,000 Hours of Service
[ ] (b) _____ Hours of Service
during an eligibility computation period to receive credit for a Year of
Service. [Note: The Hours of Service requirement may not exceed 1,000.]
Eligibility computation period. After the initial eligibility computation
period described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (Choose (c) or (d))
[ ] (c) The 12 consecutive month period beginning with each anniversary of
an Employee's Employment Commencement Date.
[ x ] (d) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described in
Section 2.03(B) of the Plan: (Choose (a) or (b))
[ x ] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
[ x ] (a) Does not permit an eligible Employee or a Participant to elect not
to participate.
<PAGE>
[ ] (b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
(Complete (1), (2), (3) and (4))
(1) An election is effective for a Plan Year if filed no later than ______.
(2) An election not to participate must be effective for at least ____ Plan
Year(s).
(3) Following a re-election to participate, the Employee or Participant:
[ ] (i) May not again elect not to participate for any subsequent Plan
Year.
[ ] (ii) May again elect not to participate, but not earlier than the
_____ Plan Year following the Plan Year in which the re-election first was
effective.
(4) (Specify)_________________. [Insert "N/A" if no other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's contribution. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e))
[ x ] (a) Deferral contributions (Code Section 401(k) arrangement). (Choose
(1) or (2) or both)
[ x ] (1) Salary reduction arrangement. The Employer must contribute the
amount by which the Participants have reduced their Compensation for the Plan
Year, pursuant to their salary reduction agreements on file with the Advisory
Committee. A reference in the Plan to salary reduction contributions is a
reference to these amounts.
[ ] (2) Cash or deferred arrangement. The Employer will contribute on
behalf of each Participant the portion of the Participant's proportionate share
of the cash or deferred contribution which he has not elected to receive in
cash. See Section 14.02 of the Plan. The Employer's cash or deferred
contribution is the amount the Employer may from time to time deem advisable
which the Employer designates as a cash or deferred contribution prior to
making that contribution to the Trust.
[ x ] (b) Matching contributions. The Employer will make matching
contributions in accordance with the formula(s) elected in Part II of this
Adoption Agreement Section 3.01.
[ x ] (c) Designated qualified nonelective contributions. The Employer, in
its sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[ x ] (d) Nonelective contributions. (Choose any combination of (1) through
(4))
[ x ] (1) Discretionary contribution. The amount (or additional amount) the
Employer may from time to time deem advisable.
<PAGE>
[ ] (2) The amount (or additional amount) the Employer may from time to
time deem advisable, separately determined for each of the following
classifications of Participants: (Choose (i) or (ii))
[ ] (i) Nonhighly Compensated Employees and Highly Compensated Employees.
[ ] (ii) (Specify classifications) ___________.
Under this Option (2), the Advisory Committee will allocate the amount
contributed for each Participant classification in accordance with Part II of
Adoption Agreement Section 3.04, as if the Participants in that classification
were the only Participants in the Plan.
[ x ] (3) 4.5% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the contribution.
[Note: The percentage selected may not exceed 15%.]
[ ] (4) _____% of Net Profits but not more than $_______.
[ ] (e) Frozen Plan. This Plan is a frozen Plan effective _____. The
Employer will not contribute to the Plan with respect to any period following
the stated date.
Net Profits. The Employer: (Choose (f) or (g))
[ x ] (f) Need not have Net Profits to make its annual contribution under
this Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $_____ to
make the following contributions: (Choose at least one)
[ ] (1) Cash or deferred contributions described in Option (a)(2).
[ ] (2) Matching contributions described in Option (b), except: _____.
[ ] (3) Qualified nonelective contributions described in Option (c).
[ ] (4) Nonelective contributions described in Option (d).
The term "Net Profits" means the Employer's net income or profits for any
taxable year determined by the Employer upon the basis of its books of account
in accordance with generally accepted accounting practices consistently applied
without any deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under any other employee
benefit plan the Employer maintains. The term "Net Profits" specifically
excludes ___________________. [Note: Enter "N/A" if no exclusions apply.]
<PAGE>
If the Employer requires Net Profits for matching contributions and the
Employer does not have sufficient Net Profits under Option (g), it will reduce
the matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this
Adoption Agreement, each participating member will determine Net Profits
separately but will not apply this reduction unless, after combining the
separately determined Net Profits, the aggregate Net Profits are insufficient
to satisfy the matching contribution liability. "Net Profits" includes both
current and accumulated Net Profits.
Part II. [Options (h) through (j)] Matching contribution formula. [Note: If
the Employer elected Option (b), complete Options (h), (i) and (j).]
[ x ] (h) Amount of matching contributions. For each Plan Year, the
Employer's matching contribution is: (Choose any combination of (1), (2), (3),
(4) and (5))
[ ] (1) An amount equal to _____% of each Participant's eligible
contributions for the Plan Year.
[ x ] (2) An amount equal to 100% of each Participant's first tier of
eligible contributions for the Plan Year, plus the following matching
percentage(s) for the following subsequent tiers of eligible contributions for
the Plan 50% for the second tier.
[ ] (3) Discretionary formula.
[ ] (i) An amount (or additional amount) equal to a matching percentage the
Employer from time to time may deem advisable of the Participant's eligible
contributions for the Plan Year.
[ ] (ii) An amount (or additional amount) equal to a matching percentage
the Employer from time to time may deem advisable of each tier of the
Participant's eligible contributions for the Plan Year.
[ ] (4) An amount equal to the following percentage of each Participant's
eligible contributions for the Plan Year, based on the Participant's Years of
Service:
Number of Years of Service Matching Percentage
_____ _____%
_____ _____%
_____ _____%
_____ _____%
The Advisory Committee will apply this formula by determining Years of Service
as follows: ____________________.
[ ] (5) A Participant's matching contributions may not: (Choose (i) or
(ii))
[ ] (i) Exceed ___________________.
[ ] (ii) Be less than _____________.
<PAGE>
Related Employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the related employers may elect different
matching contribution formulas by attaching to the Adoption Agreement a
separately completed copy of this Part II. Note: Separate matching
contribution formulas create separate current benefit structures that must
satisfy the minimum participation test of Code Section 401(a)(26).]
[ x ] (i) Definition of eligible contributions. Subject to the requirements
of Option (j), the term "eligible contributions" means: (Choose any combination
of (1) through (3))
[ x ] (1) Salary reduction contributions.
[ ] (2) Cash or deferred contributions (including any part of the
Participant's proportionate share of the cash or deferred contribution which
the Employer defers without the Participant's election).
[ ] (3) Participant mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
[ x ] (j) Amount of eligible contributions taken into account. When
determining a Participant's eligible contributions taken into account under the
matching contributions formula(s), the following rules apply: (Choose any
combination of (1) through (4))
[ ] (1) The Advisory Committee will take into account all eligible
contributions credited for the Plan Year.
[ ] (2) The Advisory Committee will disregard eligible contributions
exceeding ____________.
[ x ] (3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not exceeding: 3%.
The subsequent tiers of eligible contributions are: 1%.
[ ] (4) (Specify) __________.
Part III. [Options (k) and (l)]. Special rules for Code Section 401(k)
Arrangement. (Choose (k) or (l), or both, as applicable)
[ x ] (k) Salary Reduction Agreements. The following rules and restrictions
apply to an Employee's salary reduction agreement: (Make a selection under (1),
(2), (3) and (4))
(1) Limitation on amount. The Employee's salary reduction contributions:
(Choose (i) or at least one of (ii) or (iii))
[ ] (i) No maximum limitation other than as provided in the Plan.
[ x ] (ii) May not exceed 13% of Compensation for the Plan Year, subject to
the annual additions limitation described in Part 2 of Article III and the
402(g) limitation described in Section 14.07 of the Plan.
<PAGE>
[ ] (iii) Based on percentages of Compensation must equal at least _____.
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (Choose (i), (ii), (iii) or (iv))
[ ] i) Once during any Plan Year but not later than _____ of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ x ] (iii) As of the first day of any month.
[ ] (iv) (Specify, but must be at least once per Plan Year) _____.
(3) An Employee who revokes his salary reduction agreement may file a new
salary reduction agreement with an effective date: (Choose (i), (ii), (iii) or
(iv))
[ ] (i) No earlier than the first day of the next Plan Year.
[ x ] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the month in which
he revoked an Agreement.
[ ] (iv) (Specify, but must be at least once per Plan Year following the
Plan Year of revocation) _______________.
(4) A Participant may increase or may decrease, on a prospective basis, his
salary reduction percentage or dollar amount: (Choose (i), (ii), (iii) or (iv))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[ x ] (iii) As of any Plan Entry Date.
[ ] (iv) (Specify, but must permit an increase or a decrease at least once
per Plan Year) __________.
[ ] (l) Cash or deferred contributions. For each Plan Year for which the
Employer makes a designated cash or deferred contribution, a Participant may
elect to receive directly in cash not more than the following portion (or, if
less, the 402(g) limitation described in Section 14.07 of the Plan) of his
proportionate share of that cash or deferred contribution: (Choose (1) or (2))
[ ] (1) All or any portion.
[ ] (2) _____%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral
contributions, matching contributions, qualified nonelective contributions and
nonelective contributions in accordance with Section 14.06 and the elections
under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose
whichever elections are applicable to the Employer's Plan)
[ x ] (a) Matching Contributions Account. The Advisory Committee will
allocate matching contributions to a Participant's: (Choose (1) or (2); (3) is
available only in addition to (1))
[ x ] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Option(s) _____ of Adoption
Agreement Section 3.01 are allocable to the Qualified Matching Contributions
Account.
[ x ] (b) Special Allocation Dates for Salary Reduction Contributions. The
Advisory Committee will allocate salary reduction contributions as of the
Accounting Date and as of the following additional allocation dates: June 30.
[ x ] (c) Special Allocation Dates for Matching Contributions. The Advisory
Committee will allocate matching contributions as of the Accounting Date and as
of the following additional allocation dates: June 30.
[ x ] (d) Designated Qualified Nonelective Contributions - Definition of
Participant. For purposes of allocating the designated qualified nonelective
contribution, "Participant" means: (Choose (1), (2) or (3))
[ ] (1) All Participants.
[ x ] (2) Participants who are Nonhighly Compensated Employees for the Plan
Year.
[ ] (3) (Specify) __________.
Part II. Method of Allocation - Nonelective Contribution. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit each annual nonelective contribution (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the allocation method selected under this Section 3.04. If the
Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of
Compensation allocated to all Participants, "Compensation" does not include any
exclusions elected under Adoption Agreement Section 1.12 (other than the
exclusion of elective contributions), and the Advisory Committee must take into
account the Participant's Compensation for the entire Plan Year. (Choose an
allocation method under (e), (f), (g) or (h); (i) is mandatory if the Employer
elects (f), (g) or (h); (j) is optional in addition to any other election.)
<PAGE>
[ ] (e) Nonintegrated Allocation Formula. (Choose (1) or (2))
[ ] (1) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
[ ] (2) The Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year. For purposes of this Option (2), "Participant" means, in addition to a
Participant who satisfies the requirements of Section 3.06 for the Plan Year,
any other Participant entitled to a top heavy minimum allocation under Section
3.04(B), but such Participant's allocation will not exceed 3% of his
Compensation for the Plan Year.
[ x ] (f) Two-Tiered Integrated Allocation Formula - Maximum Disparity.
First, the Advisory Committee will allocate the annual Employer nonelective
contributions in the same ratio that each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation plus Excess
Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
[ ] (g) Three-Tiered Integrated Allocation Formula. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation may not
exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum
Disparity Table following Option (i). Solely for purposes of the allocation in
this first paragraph, "Participant" means, in addition to a Participant who
satisfies the requirements of Section 3.06 for the Plan Year: (Choose (1) or
(2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a top heavy minimum allocation
under Section 3.04(B), but such Participant's allocation under this Option (g)
will not exceed 3% of his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year. The allocation under this paragraph, as a
percentage of each Participant's Excess Compensation, may not exceed the
allocation percentage in the first paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
<PAGE>
[ ] (h) Four-Tiered Integrated Allocation Formula. First, the Advisory
Committee will allocate the annual Employer nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year, but not exceeding 3%
of each Participant's Compensation. Solely for purposes of this first tier
allocation, a "Participant" means, in addition to any Participant who satisfies
the requirements of Section 3.06 for the Plan Year, any other Participant
entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's Excess
Compensation for the Plan Year bears to the total Excess Compensation of all
Participants for the Plan Year, but not exceeding 3% of each Participant's
Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
Employer contributions in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total Compensation plus
Excess Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Compensation plus
Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or
1.3%) listed under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
[ x ] (i) Excess Compensation. For purposes of Option (f), (g) or (h),
"Excess Compensation" means Compensation in excess of the following Integration
Level: (Choose (1) or (2))
[ x ] (1) 100% (not exceeding 100%) of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the first day of the
Plan Year: (Choose any combination of (i) and (ii) or choose (iii))
[ ] (i) Rounded to _____ (but not exceeding the taxable wage base).
[ ] (ii) But not greater than $_____.
[ x ] (iii) Without any further adjustment or limitation.
[ ] (2) $_____ [Note: Not exceeding the taxable wage base for the Plan Year
in which this Adoption Agreement first is effective.]
<PAGE>
Maximum Disparity Table. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level (as Applicable Percentages for Applicable percentage of
percentage of taxable Option (f) or Option (g) for Option (h)
wage base)
_____________________ __________________________ ________________________
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than
$10,001) and not more than 80% 4.3% 1.3%
20% (or $10,000, if greater)
or less 5.7% 2.7%
</TABLE>
[ ] (j) Allocation offset. The Advisory Committee will reduce a
Participant's allocation otherwise made under Part II of this Section 3.04 by
the Participant's allocation under the following qualified plan(s) maintained
by the Employer: _____________________.
The Advisory Committee will determine this allocation reduction: (Choose (1) or
(2))
[ ] (1) By treating the term "nonelective contribution" as including all
amounts paid or accrued by the Employer during the Plan Year to the qualified
plan(s) referenced under this Option (j). If a Participant under this Plan
also participates in that other plan, the Advisory Committee will treat the
amount the Employer contributes for or during a Plan Year on behalf of a
particular Participant under such other plan as an amount allocated under this
Plan to that Participant's Account for that Plan Year. The Advisory Committee
will make the computation of allocation required under the immediately
preceding sentence before making any allocation of nonelective contributions
under this Section 3.04.
[ ] (2) In accordance with the formula provided in an addendum to this
Adoption Agreement, numbered 3.04(j).
Top Heavy Minimum Allocation - Method of Compliance. If a Participants
allocation under this Section 3.04 is less than the top heavy minimum
allocation to which he is entitled under Section 3.04(B): (Choose (k) or (l))
[ x ] (k) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum allocation under
the following plan(s) it maintains: ___________. However, the Employer will
make any necessary additional contribution to satisfy the top heavy minimum
allocation for an Employee covered only under this Plan and not under the other
plan(s) designated in this Option (l). See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan, the Employer may provide in an addendum
to this Adoption Agreement, numbered Section 3.04, any modifications to the
Plan necessary to satisfy the top heavy requirements under Code Section 416.
<PAGE>
Related employers. If two or more related employers (as defined in Section
1.30) contribute to this Plan, the Advisory Committee must allocate all
Employer nonelective contributions (and forfeitures treated as nonelective
contributions) to each Participant in the Plan, in accordance with the
elections in this Adoption Agreement Section 3.04: (Choose (m) or (n))
[ X ] (m) Without regard to which contributing related group member employs
the Participant.
[ ] (n) Only to the Participants directly employed by the contributing
Employer. If a Participant receives Compensation from more than one
contributing Employer, the Advisory Committee will determine the allocations
under this Adoption Agreement Section 3.04 by prorating among the participating
Employers the Participant's Compensation and, if applicable, the Participant's
Integration Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required
under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant
forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b))
[ x ] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an additional
nonelective contribution for that Plan Year.
[ ] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (Choose (1) or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture occurs.
[ ] (c) To the extent attributable to matching contributions: (Choose (1),
(2) or (3))
[ ] (1) In the manner elected under Options (a) or (b).
[ ] (2) First to reduce Employer matching contributions for the Plan Year:
(Choose (i) or (ii))
[ ] (i) in which the forfeiture occurs,
[ ] (ii) immediately following the Plan Year in which the forfeiture
occurs, then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution for the Plan Year in which
the forfeiture occurs, in lieu of the manner elected under Options (a) or (b).
[ ] (d) First to reduce the Plans ordinary and necessary administrative
expenses for the Plan Year and then will allocate any remaining forfeitures in
the manner described in Options (a), (b) or (c), whichever applies. If the
Employer elects Option (c), the forfeitures used to reduce Plan expenses:
(Choose (1) or (2))
[ ] (1) relate proportionately to forfeitures described in Option (c) and
to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Option .
<PAGE>
Allocation of forfeited excess aggregate contributions. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (Choose (e), (f) or (g))
[ ] (e) To reduce Employer matching contributions for the Plan Year:
(Choose (1) or (2))
[ ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in which the forfeiture occurs.
[ ] (f) As Employer discretionary matching contributions for the Plan Year
in which forfeited, except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who incurred the forfeitures.
[ x ] (g) In accordance with Options (a) through (d), whichever applies,
except the Advisory Committee will not allocate these forfeitures under Option
(a) or under Option (c)(3) to the Highly Compensated Employees who incurred the
forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which the Employee first
becomes a Participant, the Advisory Committee will determine the allocation of
any cash or deferred contribution, designated qualified nonelective
contribution or nonelective contribution by taking into account: (Choose (a) or
(b))
[ ] (a) The Employees Compensation for the entire Plan Year.
[ x ] (b) The Employees Compensation for the portion of the Plan Year in
which the Employee actually is a Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual requirements of
Section 3.06(E) of the Plan, to receive an allocation of cash or deferred
contributions, matching contributions, designated qualified nonelective
contributions, nonelective contributions and Participant forfeitures, if any,
for the Plan Year, a Participant must satisfy the conditions described in the
following elections: (Choose (c) or at least one of (d) through (f))
[ ] (c) Safe harbor rule. If the Participant is employed by the Employer
on the last day of the Plan Year, the Participant must complete at least one
Hour of Service for that Plan Year. If the Participant is not employed by the
Employer on the last day of the Plan Year, the Participant must complete at
least 501 Hours of Service during the Plan Year.
[ x ] (d) Hours of Service condition. The Participant must complete the
following minimum number of Hours of Service during the Plan Year: (Choose at
least one of (1) through (5))
[ x ] (1) 1,000 Hours of Service.
[ ] (2) (Specify, but the number of Hours of Service may not exceed 1,000)
____________.
<PAGE>
[ x ] (3) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (Choose (i), (ii) or (iii))
[ x ] (i) Death.
[ x ] (ii) Disability.
[ x ] (iii) Attainment of Normal Retirement Age in the current Plan Year or
in a prior Plan Year.
[ ] (4) _____ Hours of Service (not exceeding 1,000) if the Participant
terminates employment with the Employer during the Plan Year, subject to any
election in Option (3).
[ x ] (5) No Hour of Service requirement for an allocation of the
following contributions: Employer match and employee salary deferral.
[ x ] (e) Employment condition. The Participant must be employed by the
Employer on the last day of the Plan Year, irrespective of whether he satisfies
any Hours of Service condition under Option (d), with the following exceptions:
(Choose (1) or at least one of (2) through (5))
[ ] (1) No exceptions.
[ x ] (2) Termination of employment because of death.
[ x ] (3) Termination of employment because of disability.
[ x ] (4) Termination of employment following attainment of Normal Retirement
Age.
[ x ] (5) No employment condition for the following contributions: Employer
match and employee salary deferral.
[ ] (f) (Specify other conditions, if applicable):_________________.
Suspension of Accrual Requirements. The suspension of accrual requirements of
Section 3.06(E) of the Plan: (Choose (g), (h) or (i))
[ x ] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's Plan, as described in an
addendum to this Adoption Agreement, numbered Section 3.06(E).
<PAGE>
Special accrual requirements for matching contributions. If the Plan allocates
matching contributions on two or more allocation dates for a Plan Year, the
Advisory Committee, unless otherwise specified in Option (l), will apply any
Hours of Service condition by dividing the required Hours of Service on a
prorata basis to the allocation periods included in that Plan Year.
Furthermore, a Participant who satisfies the conditions described in this
Adoption Agreement Section 3.06 will receive an allocation of matching
contributions (and forfeitures treated as matching contributions) only if the
Participant satisfies the following additional condition(s): (Choose (j) or at
least one of (k) or (l))
[ x ] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (k) applies to: (Choose (1) or (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s) _____ of Adoption
Agreement Section 3.01.
[ ] (l) (Specify) __________________.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply,
the Excess Amount attributed to this Plan equals: (Choose (a), (b) or (c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date (including any amount
which the Advisory Committee would have allocated but for the limitations of
Code Section 415), times
(ii) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such date
under all qualified defined contribution plans (determined without regard to
the limitations of Code Section 415).
[ x ] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18 of the Plan:
(Choose (a) or (b))
[ ] (a) Does not apply to the Employer's Plan because the Employer does not
maintain and never has maintained a defined benefit plan covering any
Participant in this Plan.
[ x ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy
the limitation under Section 3.18, the Employer will reduce: (Choose (1) or
(2))
[ ] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[ x ] (2) Its contribution or allocation on behalf of the Participant to the
defined contribution plan under which the Participant participates and then, if
necessary, the Participant's projected annual benefit under the defined benefit
plan under which the Participant participates.
[Note: If the Employer selects (a), the remaining options in this Section 3.18
do not apply to the Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the
Plan with the following modifications: (Choose (c) or at least one of (d) or
(e))
[ x ] (c) No modifications.
[ ] (d) For Non-Key Employees participating only in this Plan, the top
heavy minimum allocation is the minimum allocation described in Section 3.04(B)
determined by substituting ____% (not less than 4%) for "3%," except: (Choose
(i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the defined benefit
plan, the top heavy minimum is: (Choose (1) or (2))
[ ] (1) 5% of Compensation (as determined under Section 3.04(B) or the
Plan) irrespective of the contribution rate of any Key Employee, except:
(Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy ratio does not
exceed 90%.
[ ] (2) 0%. [Note: The Employer may not select this Option (2) unless the
defined benefit plan satisfies the top heavy minimum benefit requirements of
Code Section 416 for these Non-Key Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine the top heavy
ratio, the Advisory Committee will use the following interest rate and
mortality assumptions to value accrued benefits under a defined benefit plan:
N/A.
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code Section
416, the Employer must provide the appropriate provisions in an addendum to
this Adoption Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or
(b); (c) is available only with (b))
[ x ] (a) Does not permit Participant nondeductible contributions.
[ ] (b) Permits Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
[ ] (c) The following portion of the Participant's nondeductible
contributions for the Plan Year are mandatory contributions under Option (i)(3)
of Adoption Agreement Section 3.01: (Choose (1) or (2))
[ ] (1) The amount which is not less than: ________________.
[ ] (2) The amount which is not greater than: _____________.
Allocation dates. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (Choose (d) or (e))
[ ] (d) No other allocation dates.
[ ] (e) (Specify) ___________________.
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (e), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Mandatory Contributions Account, if any, prior to his Separation
from Service: (Choose (a) or at least one of (b) through (d))
[ X ] (a) No distribution options prior to Separation from Service.
[ ] (b) The same distribution options applicable to the Deferral
Contributions Account prior to the Participant's Separation from Service, as
elected in Adoption Agreement Section 6.03.
[ ] (c) Until he retires, the Participant has a continuing election to
receive all or any portion of his Mandatory Contributions Account if: (Choose
(1) or at least one of (2) through (4))
[ ] (1) No conditions.
[ ] (2) The mandatory contributions have accumulated for at least _____
Plan Years since the Plan Year for which contributed.
[ ] (3) The Participant suspends making nondeductible contributions
for a period of ___ months.
[ ] (4) (Specify) ____________.
[ ] (d) (Specify) _____________.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (Choose (a)
or (b))
[ x ] (a) 62 [State age, but may not exceed age 65].
[ ] (b) The later of the date the Participant attains _____ years of age or
the _____ anniversary of the first day of the Plan Year in which the
Participant commenced participation in the Plan. [The age selected may not
exceed age 65 and the anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section 5.02
of the Plan: (Choose (a) or choose one or both of (b) and (c))
[ ] (a) Does not apply.
[ x ] (b) Applies to death.
[ x ] (c) Applies to disability.
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Qualified Matching Contributions
Account/Qualified Nonelective Contributions Account/Mandatory Contributions
Account. A Participant has a 100% Nonforfeitable interest at all times in his
Deferral Contributions Account, his Qualified Matching Contributions Account,
his Qualified Nonelective Contributions Account and in his Mandatory
Contributions Account.
Regular Matching Contributions Account/Employer Contributions Account. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only as additional options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [Note: The
Employer must elect Option (a) if the eligibility conditions under Adoption
Agreement Section 2.01(c) require 2 years of service or more than 12 months of
employment.]
[ x ] (b) Graduated Vesting Schedules.
Top Heavy Schedule
(Mandatory)
Years of Nonforfeitable
Service Percentage
_______ ______________
Less than 1 0%
1 0%
2 20%
3 50%
4 75%
5 100%
6 or more 100%
Non Top Heavy Schedule
(Optional)
Years of Nonforfeitable
Service Percentage
_______ ______________
Less than 1 0%
1 0%
2 25%
3 50%
4 75%
5 100%
6 100%
7 or more 100%
[ x ] (c) Special vesting election for Regular Matching Contributions
Account. In lieu of the election under Options (a) or (b), the Employer elects
the following vesting schedule for a Participant's Regular Matching
Contributions Account: (Choose (1) or (2))
[ x ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule described in the addendum
to this Adoption Agreement, numbered 5.03(c). [Note: If the Employer elects
this Option (c)(2), the addendum must designate the applicable vesting
schedule(s) using the same format as used in Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy
Schedule which satisfies Code Section 416. The Employer, at its option, may
complete a Non Top Heavy Schedule. The Non Top Heavy Schedule must satisfy
Code Section 411(a)(2). Also see Section 7.05 of the Plan.]
[ x ] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under
Option (c)(2)) applies: (Choose (1) or (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[ x ] (2) In the Plan Year for which the Plan first is top heavy and then in
all subsequent Plan Years. [Note: The Employer may not elect Option (d) unless
it has completed a Non Top Heavy Schedule.]
Minimum vesting. (Choose (e) or (f))
[ x ] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be
less than the lesser of $_____ or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c) would
result in a smaller Nonforfeitable Accrued Benefit.
Life Insurance Investments. The Participant's Accrued Benefit attributable to
insurance contracts purchased on his behalf under Article XI is: (Choose (g) or
(h))
[ X ] (g) Subject to the vesting election under Options (a), (b) or (c).
<PAGE>
[ ] (h) 100% Nonforfeitable at all times, irrespective of the vesting
election under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/
RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described
in Section 5.04(C) of the Plan: (Choose (a) or (b))
[ x ] (a) Does not apply.
[ ] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0% vested Participant if he has a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis
of the following 12 consecutive month periods: (Choose (a) or (b))
[ x ] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and each
successive 12 consecutive month period measured from each anniversary of that
Employment Commencement Date.
Hours of Service. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (Choose (c) or (d))
[ x ] (c) 1,000 Hours of Service.
[ ] (d) _____ Hours of Service. [Note: The Hours of Service requirement
may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically excludes
the following Years of Service: (Choose (a) or at least one of (b) through (e))
[ x ] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of ___.
[Note: The age selected may not exceed age 18.]
[ ] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This exception
applies only if the Participant is 0% vested in his Accrued Benefit derived
from Employer contributions at the time he has a Break in Service.
Furthermore, the aggregate number of Years of Service before a Break in Service
do not include any Years of Service not required to be taken into account under
this exception by reason of any prior Break in Service.
<PAGE>
[ ] (e) Any Year of Service earned prior to the effective date of ERISA if
the Plan would have disregarded that Year of Service on account of an
Employee's Separation from Service under a Plan provision in effect and adopted
before January 1, 1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code Section 411(d)(6) Protected Benefits. The elections under this Article VI
may not eliminate Code Section 411(d)(6) protected benefits. To the extent the
elections would eliminate a Code Section 411(d)(6) protected benefit, see
Section 13.02 of the Plan. Furthermore, if the elections liberalize the
optional forms of benefit under the Plan, the more liberal options apply on the
later of the adoption date or the Effective Date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means the 60th day
following each semi-annual valuation date . [Note: The Employer must specify
the appropriate date(s). The specified distribution dates primarily establish
annuity starting dates and the notice and consent periods prescribed by the
Plan. The Plan allows the Trustee an administratively practicable period of
time to make the actual distribution relating to a particular distribution
date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the
limitations of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c),
(d) or (e))
[ ] (a) ___________ of the _________ Plan Year beginning after the
Participant's Separation from Service.
[ x ] (b) the first distribution date following the Participant's Separation
from Service.
[ ] (c) __________ of the Plan Year after the Participant incurs _____
Break(s) in Service (as defined in Article V).
[ ] (d) _________ following the Participant's attainment of Normal
Retirement Age, but not earlier than __________ days following his Separation
from Service.
[ ] (e) (Specify) __________.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under Section
6.03.
Disability. The distribution date, subject to Section 6.01(A)(3), is: (Choose
(f), (g) or (h))
[ ] (f) __________ after the Participant terminates employment because of
disability.
[ x ] (g) The same as if the Participant had terminated employment without
disability.
[ ] (h) (Specify) ________.
<PAGE>
Hardship. (Choose (i) or (j))
[ x ] (i) The Plan does not permit a hardship distribution to a Participant
who has separated from Service.
[ ] (j) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution policy
stated in: (Choose (1), (2) or (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01.
Default on a Loan. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (k), (l) or (m))
[ x ] (k) Treats the default as a distributable event. The Trustee, at the
time of the default, will reduce the Participant's Nonforfeitable Accrued
Benefit by the lesser of the amount in default (plus accrued interest) or the
Plan's security interest in that Nonforfeitable Accrued Benefit. To the extent
the loan is attributable to the Participant's Deferral Contributions Account,
Qualified Matching Contributions Account or Qualified Nonelective Contributions
Account, the Trustee will not reduce the Participant's Nonforfeitable Accrued
Benefit unless the Participant has separated from Service or unless the
Participant has attained age 59 1/2.
[ ] (l) Does not treat the default as a distributable event. When an
otherwise distributable event first occurs pursuant to Section 6.01 or Section
6.03 of the Plan, the Trustee will reduce the Participant's Nonforfeitable
Accrued Benefit by the lesser of the amount in default (plus accrued interest)
or the Plan's security interest in that Nonforfeitable Accrued Benefit.
[ ] (m) (Specify) __________.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (Choose (a) or
at least one of (b), (c), (d) and (e))
[ ] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the Plan, a lump sum
distribution is not available: ___________.
[ x ] (c) An installment distribution: (Choose (1) or at least one of (2) or
(3))
[ ] (1) Is not available under the Plan.
[ ] (2) May not exceed the lesser of _____ years or the maximum period
permitted under Section 6.02.
[ x ] (3) (Specify) option is available in which a participant may elect to
take a partial distribution on a semi annual basis with a $1,000 minimum per
semi-annual distribution.
<PAGE>
[ x ] (d) The Plan permits the following annuity options: purchase and
delivery of a single premium annuity contract.
Any Participant who elects a life annuity option is subject to the requirements
of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section 6.04(E).
[Note: The Employer may specify additional annuity options in an addendum to
this Adoption Agreement, numbered 6.02(d).]
[ ] (e) If the Plan invests in qualifying Employer securities, as described
in Section 10.03(F), a Participant eligible to elect distribution under Section
6.03 may elect to receive that distribution in Employer securities only in
accordance with the provisions of the addendum to this Adoption Agreement,
numbered 6.02(e).
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may
elect to commence distribution of his Nonforfeitable Accrued Benefit: (Choose
at least one of (a) through (c))
[ ] (a) As of any distribution date, but not earlier than __________ of the
_________ Plan Year beginning after the Participant's Separation from Service.
[ x ] (b) As of the following date(s): (Choose at least one of Options (1)
through (6))
[ ] (1) Any distribution date after the close of the Plan Year in which the
Participant attains Normal Retirement Age.
[ x ] (2) Any distribution date following his Separation from Service with
the Employer.
[ ] (3) Any distribution date in the __________ Plan Year(s) beginning
after his Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the Participant incurs
_____ Break(s) in Service (as defined in Article V).
[ ] (5) Any distribution date following attainment of age _____ and
completion of at least _____ Years of Service (as defined in Article V).
[ ] (6) (Specify) ___________.
[ ] (c) (Specify) __________.
The distribution events described in the election(s) made under Options (a),
(b) or (c) apply equally to all Accounts maintained for the Participant unless
otherwise specified in Option (c).
<PAGE>
Participant Elections Prior to Separation from Service - Regular Matching
Contributions Account and Employer Contributions Account. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (d) or at least one of
(e) through (h))
[ x ] (d) No distribution options prior to Separation from Service.
[ ] (e) Attainment of Specified Age. Until he retires, the Participant has
a continuing election to receive all or any portion of his Nonforfeitable
interest in these Accounts after he attains: (Choose (1) or (2))
[ ] (1) Normal Retirement Age.
[ ] (2) _____ years of age and is at least ____% vested in these Accounts.
[Note: If the percentage is less than 100%, see the special vesting formula in
Section 5.03.]
[ ] (f) After a Participant has participated in the Plan for a period of
not less than _____ years and he is 100% vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or any
portion of the Accounts. [Note: The number in the blank space may not be less
than 5.]
[ ] (g) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship distribution
policy: (Choose (1), (2) or (3); (4) is available only as an additional option)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[ ] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this Adoption Agreement, numbered
Section 6.03.
[ ] (4) In no event may a Participant receive a hardship distribution
before he is at least _____% vested in these Accounts. [Note: If the
percentage in the blank is less than 100%, see the special vesting formula in
Section 5.03.]
[ ] (h) (Specify) ___________.
[Note: The Employer may use an addendum, numbered 6.03, to provide additional
language authorized by Options (b)(6), (c), (g)(3) or (h) of this Adoption
Agreement Section 6.03.]
Participant Elections Prior to Separation from Service - Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account. Subject to the restrictions of Article VI, the
following distribution options apply to a Participant's Deferral Contributions
Account, Qualified Matching Contributions Account and Qualified Nonelective
Contributions Account prior to his Separation from Service: (Choose (i) or at
least one of (j) through (l))
[ x ] (i) No distribution options prior to Separation from Service.
<PAGE>
[ ] (j) Until he retires, the Participant has a continuing election to
receive all or any portion of these Accounts after he attains: (Choose (1) or
(2))
[ ] (1) The later of Normal Retirement Age or age 59 1/2.
[ ] (2) Age _____ (at least 59 1/2).
[ ] (k) Hardship. A Participant, prior to this Separation from Service,
may elect a hardship distribution from his Deferral Contributions Account in
accordance with the hardship distribution policy under Section 14.11 of the
Plan.
[ ] (l) (Specify) _____________. [Note: Option (l) may not permit in
service distributions prior to age 59 1/2 (other than hardship) and may not
modify the hardship policy described in Section 14.11.]
Sale of trade or business/subsidiary. If the Employer sells substantially all
of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or
business or sells a subsidiary (within the meaning of Code Section 409(d)(3)),
a Participant who continues employment with the acquiring corporation is
eligible for distribution from his Deferral Contributions Account, Qualified
Matching Contributions Account and Qualified Nonelective Contributions Account:
(Choose (m) or (n))
[ x ] (m) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[ ] (n) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this Option (n) must constitute a
lump sum distribution, determined in a manner consistent with Code Section
401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (Choose (a) or (b))
[ x ] (a) Apply only to a Participant described in Section 6.04(E) of the
Plan (relating to the profit sharing exception to the joint and survivor
requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a
distribution from a segregated Account and other than a corrective distribution
described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more
than 90 days after the most recent valuation date, the distribution will
include interest at: (Choose (a), (b) or (c))
[ ] (a) _____% per annum. [Note: The percentage may equal 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
<PAGE>
[ x ] (c) (Specify) Distributions will include interest at money market
rates.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant
to Section 14.12, to determine the allocation of net income, gain or loss:
(Complete only those items, if any, which are applicable to the Employer's
Plan)
[ x ] (a) For salary reduction contributions, the Advisory Committee will:
(Choose (1), (2), (3), (4) or (5))
[ x ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12, based
on a _____ weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period ___% of the salary reduction contributions: (Choose (i) or
(ii))
[ x ] (i) made during that valuation period.
[ ] (ii) made by the following specified time: __________.
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(a).
[ x ] (b) For matching contributions, the Advisory Committee will: (Choose
(1), (2), (3) or (4))
[ X ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method described in Section 14.12, based
on a __________ weighting period.
[ ] (3) Treat as part of the relevant Account at the beginning of the
valuation period ___% of the matching contributions allocated during the
valuation period.
[ ] (4) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(b).
[ ] (c) For Participant nondeductible contributions, the Advisory Committee
will: (Choose (1), (2), (3), (4) or (5))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12, based
on a __________ weighting period.
<PAGE>
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period _____% of the Participant nondeductible contributions: (Choose
(i) or (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified time: __________.
[ ] (5) Apply the allocation method described in the addendum to this
Adoption Agreement numbered 9.11(c).
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the
aggregate investments in qualifying Employer securities and in qualifying
Employer real property: (Choose (a) or (b))
[ x ] (a) May not exceed 10% of Plan assets.
[ ] (b) May not exceed _____% of Plan assets. [Note: The percentage may
not exceed 100%.]
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee
must value the Trust Fund on the following valuation date(s): (Choose (a) or
(b))
[ ] (a) No other mandatory valuation dates.
[ x ] (b) (Specify) June 30.
<PAGE>
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (Choose whichever elections apply)
[ ] (a) Compensation definition. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan Years beginning
after _________. [Note: May not be effective later than the first day of the
first Plan Year beginning after the Employer executes this Adoption Agreement
to restate the Plan for the Tax Reform Act of 1986, if applicable.]
[ x ] (b) Eligibility conditions. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning after
December 31, 1996.
[ ] (c) Suspension of Years of Service. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for Plan Years
beginning after _____.
[ ] (d) Contribution/allocation formula. The contribution formula elected
under Adoption Agreement Section 3.01 and the method of allocation elected
under Adoption Agreement Section 3.04 is effective for Plan Years beginning
after _____.
[ ] (e) Accrual requirements. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after _____.
[ ] (f) Employment condition. The employment condition of Section 3.06 is
effective for Plan Years beginning after _____.
[ ] (g) Elimination of Net Profits. The requirement for the Employer not
to have net profits to contribute to this Plan is effective for Plan Years
beginning after _____. [Note: The date specified may not be earlier than
December 31, 1985.]
[ ] (h) Vesting Schedule. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after _____.
[ ] (i) Allocation of Earnings. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years beginning
after _____.
[ x ] (j) (Specify) The vesting schedule will be effective for all
participants who complete one hour of service after the effective date of
January, 1998.
For Plan Years prior to the special Effective Date, the terms of the Plan prior
to its restatement under this Adoption Agreement will control for purposes of
the designated provisions. A special Effective Date may not result in the
delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
<PAGE>
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee
(and Custodian, if applicable) signified its acceptance, on this 18th day of
December, 1998.
Name and EIN of Employer: BRENTON BANKS, INC. 42-0658989
Signed: /s/ Steven T. Schuler CFO/Treasurer/Secretary
Name(s) of Trustee: Brenton Bank
Signed: /s/
Name of Custodian: N/A
Signed: _______________________________
[Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03
of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 002.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of
the basic plan document will notify all adopting employers of any amendment of
this Master Plan or of any abandonment or discontinuance by the Master Plan
Sponsor of its maintenance of this Master Plan. For inquiries regarding the
adoption of the Master Plan, the Master Plan Sponsor's intended meaning of any
plan provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact the Master Plan Sponsor at the following
address and telephone number: P.O. BOX 10478 DES MOINES, IA 50306-0478 (515)
237-5160.
Reliance on Opinion Letter. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District office.
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Bank
Signed: /s/ Steven T. Schuler
CFO/Treasurer/Secretary
Participating Employer's EIN: 42-0994231
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-18-98
[Date] Signed: /s/ Steven T. Schuler
CFO/Treasurer/Secretary
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Insurance Services, Inc.
Signed: /s/ Steven T. Schuler
Director/Secretary
Participating Employer's EIN: 42-1012438
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-18-98
[Date] Signed: /s/ Steven T. Schuler
CFO/Treasurer/Secretary
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 22nd day of December, 1998.
Name of Participating Employer: Brenton Savings Bank, FSB
Signed: /s/ Kevin Z. Geis
Participating Employer's EIN: 42-0114100
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 22nd day of December, 1998.
Name of Participating Employer: Brenton Savings Financial Services, Inc.
Signed: /s/ Kevin Z. Geis
Participating Employer's EIN: 42-1206701
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/ /TO
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Realty Services, Ltd.
Signed: /s/
Participating Employer's EIN: 42-1231886
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Mortgages, Inc.
Signed: /s/ , President
Participating Employer's EIN: 42-1014357
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/ VP/TO
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Insurance, Inc.
Signed: /s/ Elizabeth Piper/Bach
Participating Employer's EIN: 42-1231828
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 18th day of December, 1998.
Name of Participating Employer: Brenton Investments, Inc.
Signed: /s/ Elizabeth Piper/Bach
Participating Employer's EIN: 42-1378382
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted: 12-30-98
[Date] Signed: /s/ Steven T. Schuler
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section 1.30)
The undersigned Employer, by executing this Participation Agreement, elects to
become a Participating Employer in the Plan identified in Section 1.03 of the
accompanying Adoption Agreement, as if the Participating Employer were a
signatory to that Agreement. The Participating Employer accepts, and agrees to
be bound by, all of the elections granted under the provisions of the Master
Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 1, 1998.
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[ x ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Brenton Banks, Inc. Employees'
Retirement Plan, and having an original effective date of January 1, 1986.
Dated this 30th day of December, 1998.
Name of Participating Employer: Brenton Brothers Inc.
Signed: /s/ C. Robert Brenton
Participating Employer's EIN: 42-1385118
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: BRENTON BANKS, INC.
Accepted:
[Date] Signed: /s/
Name(s) of Trustee: Brenton Bank
Accepted: 12-30-98
[Date] Signed: /s/
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information.]
<PAGE>
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated April 12, 1993.
121
<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 2, 1 9 9 3
<PAGE>
INDENTURE AGREEMENT
THIS INDENTURE AGREEMENT is made as of the 12th day of April, 1993,
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 12th day of April, 1993.
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 9th day of April, 1993, 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, 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/ Pamela J. Slippy
Notary Public in and for Polk County
Seal
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 16 day of April, 1993, 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/ John D. Hunter
Notary Public in and for Polk County
Seal
<PAGE>
EXHIBIT A
5.00% Capital Notes
Series SS-21 through SS-32
Due 1997 through 2008
5.25% Capital Notes
Series TT-21 through TT-32
Due 1997 through 2008
5.50% Capital Notes
Series UU-21 through UU-32
Due 1997 through 2008
5.75% Capital Notes
Series VV-21 through VV-32
Due 1997 through 2008
6.00% Capital Notes
Series G-21 through G-32
Due 1997 through 2008
6.25% Capital Notes
Series Q-21 through Q-32
Due 1997 through 2008
6.50% Capital Notes
Series J-21 through J-32
Due 1997 through 2008
6.75% Capital Notes
Series K-21 through K-32
Due 1997 through 2008
7.00% Capital Notes
Series M-21 through M-32
Due 1997 through 2008
7.25% Capital Notes
Series N-21 through N-32
Due 1997 through 2008
7.50% Capital Notes
Series R-21 through R-32
Due 1997 through 2008
7.75% Capital Notes
Series T-21 through T-32
Due 1997 through 2008
8.00% Capital Notes
Series U-21 through U-32
Due 1997 through 2008
8.25% Capital Notes
Series V-21 through V-32
Due 1997 through 2008
8.50% Capital Notes
Series W-21 through W-32
Due 1997 through 2008
8.75% Capital Notes
Series X-21 through X-32
Due 1997 through 2008
9.00% Capital Notes
Series Y-21 through Y-32
Due 1997 through 2008
9.25% Capital Notes
Series B-21 through B-32
Due 1997 through 2008
9.50% Capital Notes
Series A-21 through A-32
Due 1997 through 2008
9.75% Capital Notes
Series C-21 through C-32
Due 1997 through 2008
10.00% Capital Notes
Series D-21 through D-32
Due 1997 through 2008
10.25% Capital Notes
Series E-21 through E-32
Due 1997 through 2008
10.50% Capital Notes
Series F-21 through F-32
Due 1997 through 2008
10.75% Capital Notes
Series H-21 through H-32
Due 1997 through 2008
11.00% Capital Notes
Series I-21 through I-32
Due 1997 through 2008
11.25% Capital Notes
Series L-21 through L-32
Due 1997 through 2008
11.50% Capital Notes
Series 0-21 through 0-32
Due 1997 through 2008
11.75% Capital Notes
Series S-21 through S-32
Due 1997 through 2008
12.00% Capital Notes
Series Z-21 through Z-32
Due 1997 through 2008
12.25% Capital Notes
Series P-21 THROUGH P-32
Due 1997 through 2008
12.50% Capital Notes
Series SS-21 through SS-32
Due 1997 through 2008
12.75% Capital Notes
Series AA-21 through AA-32
Due 1997 through 2008
13.00% Capital Notes
Series BB-21 through BB-32
Due 1997 through 2008
<PAGE>
EXHIBIT "B"
KNo. _______________
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 12, 1993, 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 Chairman, Vice president, President or Treasurer, and attested
by another 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, Vice Chairman, President or Treasurer)
ATTEST:
______________________________________
(Secretary, Asst. Secretary, Treasurer, Asst. Treasurer,
Controller or Asst. Controller)
<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 (in whose name
Signature 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 10.15
Indenture Agreement with respect to Capital Notes dated April 14, 1992. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1997.
140
<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.
141
<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.
142
<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.
143
<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.
144
<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.
145
<PAGE>
Exhibit 10.21
Indenture Agreement with respect to Capital Notes dated April 23, 1997. This
Indenture Agreement is incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1997.
146
<PAGE>
Exhibit 10.22
Indenture Agreement with respect to Capital Notes dated April 16, 1998.
<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 16, 1 9 9 8
<PAGE>
INDENTURE AGREEMENT
THIS INDENTURE AGREEMENT is made as of the 16th day of April, 1998,
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
<PAGE>
assignment or transfer shall also be so cancelled by Company and delivered to
Trustee for recordation and return to Company.
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 advance of maturity in whole or in part by Company, on any interest payment
date occurring on or after the midpoint between the date of issuance and the
stated maturity date of such Capital Note, at any time after thirty (30) days
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
<PAGE>
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.
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
<PAGE>
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 entirety or substantially as an entirety, to any other corpora-
tion (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.
<PAGE>
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.
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.
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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:
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
<PAGE>
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 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
<PAGE>
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 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,
<PAGE>
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 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 16th day of April, 1998.
<PAGE>
BRENTON BANKS, INC. BANKERS TRUST COMPANY
By /s/ By /s/
Robert L. DeMeulenaere Bryan Hall, Trust Officer
President
ATTEST:
By /s/
Steven T. Schuler,
Chief Financial Officer and
Treasurer/Secretary
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 16th day of April, 1998, before me, a Notary Public in and for
Polk County, Iowa, personally appeared Robert L. DeMeulenaere, President, and
Steven T. Schuler, Chief Financial Officer and Treasurer/Secretary, of Brenton
Banks, 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/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/ Pamela J. Slippy
, Notary Public in
and for Polk County
Seal
<PAGE>
STATE OF IOWA )
) ss.
COUNTY OF POLK )
On this 16th day of April, 1998, 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/ John D. Hunter
, Notary Public in
and for Polk County
Seal.
<PAGE>
Exhibit A
5.00% Capital Notes
Series RR-26 through RR-37
Due 2002 through 2013
5.25% Capital Notes
Series TT-26 through TT-37
Due 2002 through 2013
5.50% Capital Notes
Series UU-26 through UU-37
Due 2002 through 2013
5.75% Capital Notes
Series VV-26 through VV-37
Due 2002 through 2013
6.00% Capital Notes
Series G-26 through G-37
Due 2002 through 2013
6.25% Capital Notes
Series Q-26 through Q-37
Due 2002 through 2013
6.50% Capital Notes
Series J-26 through J-37
Due 2002 through 2013
6.75% Capital Notes
Series K-26 through K-37
Due 2002 through 2013
7.00% Capital Notes
Series M-26 through M-37
Due 2002 through 2013
7.25% Capital Notes
Series N-26 through N-37
Due 2002 through 2013
7.50% Capital Notes
Series R-26 through R-37
Due 2002 through 2013
7.75% Capital Notes
Series T-26 through T-37
Due 2002 through 2013
8.00% Capital Notes
Series U-26 through U-37
Due 2002 through 2013
8.25% Capital Notes
Series V-26 through V-37
Due 2002 through 2013
8.50% Capital Notes
Series W-26 through W-37
Due 2002 through 2013
8.75% Capital Notes
Series X-26 through X-37
Due 2002 through 2013
9.00% Capital Notes
Series Y-26 through Y-37
Due 2002 through 2013
9.25% Capital Notes
Series B-26 through B-37
Due 2002 through 2013
9.50% Capital Notes
Series A-26 through A-37
Due 2002 through 2013
9.75% Capital Notes
Series C-26 through C-37
Due 2002 through 2013
10.00% Capital Notes
Series D-26 through D-37
Due 2002 through 2013
10.25% Capital Notes
Series E-26 through E-37
Due 2002 through 2013
10.50% Capital Notes
Series F-26 through F-37
Due 2002 through 2013
10.75% Capital Notes
Series H-26 through H-37
Due 2002 through 2013
11.00% Capital Notes
Series I-26 through I-37
Due 2002 through 2013
11.25% Capital Notes
Series L-26 through L-37
Due 2002 through 2013
11.50% Capital Notes
Series O-26 through O-37
Due 2002 through 2013
11.75% Capital Notes
Series S-26 through S-37
Due 2002 through 2013
12.00% Capital Notes
Series Z-26 through Z-37
Due 2002 through 2013
12.25% Capital Notes
Series P-26 through P-37
Due 2002 through 2013
12.50% Capital Notes
Series SS-26 through SS-37
Due 2002 through 2013
12.75% Capital Notes
Series AA-26 through AA-37
Due 2002 through 2013
13.00% Capital Notes
Series BB-26 through BB-37
Due 2002 through 2013
<PAGE>
EXHIBIT "B"
S 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 on or after the date that is the midpoint between the original
issuance date and the stated maturity date, 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 16, 1998, 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 Chairman, President or Treasurer, and attested to by another
authorized individual, 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, Vice Chairman or President)
ATTEST:
______________________________________
(Secretary, Asst. Secretary Treasurer, or other authorized individual)
<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 (in whose name
Signature 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 10.23
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.
166
<PAGE>
Exhibit 10.24
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.
167
<PAGE>
Exhibit 10.25
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.
168
<PAGE>
Exhibit 10.26
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.
169
<PAGE>
Exhibit 10.27
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.
170
<PAGE>
Exhibit 10.28
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.
171
<PAGE>
Exhibit 10.29
Fourteenth Amendment to Data Processing Agreement dated January 1, 1998, by and
between ALLTEL Information Services, Inc. (formerly Systematics Financial
Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation).
172
<PAGE>
Exhibit 10.30
Fifteenth Amendment to Data Processing Agreement dated January 1, 1998, by and
between ALLTEL Information Services, Inc. (formerly Systematics Financial
Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation).
176
<PAGE>
Exhibit 10.31
Purchase Agreement dated December 31, 1998, by and between West Lakes
Development Company and Brenton Bank.
180
<PAGE>
Exhibit 10.32
Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc.
and Brenton Bank.
187
<PAGE>
Exhibit 11
Statement of computation of earnings per share.
194
<PAGE>
<TABLE>
Statements re: Computation of Earnings Per Share
Brenton Banks, Inc.
<CAPTION>
December 31, 1998 1997 1996
<S> <C> <C> <C>
Basic EPS Computation
Numerator:
Net income $ 20,350,921 $ 18,010,107 $ 14,015,430
Denominator:
Average common shares
outstanding 18,957,449 19,255,188 19,900,974
Basic EPS $ 1.07 $ 0.94 $ 0.70
Diluted EPS Computation
Numerator:
Net income $ 20,350,921 $ 18,010,107 $ 14,015,430
Denominator:
Average common shares
outstanding 18,957,449 19,255,188 19,900,974
Average stock options 389,555 312,303 176,873
Average long-term stock
compensation plan --- 154,169 215,082
19,347,004 19,721,660 20,292,929
Diluted EPS $ 1.05 $ 0.91 $ 0.69
<FN>
Note: Amounts are restated for the 2-for-1 stock split effective February 1998
and the 10 percent common stock dividends effective in 1998 and 1997.
</TABLE>
195
<PAGE>
Exhibit 12
Statement of computation of ratios.
196
<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, 1998 1997 1996
<S> <C> <C> <C>
Return on average total assets:
Net income (before deduction
of minority interest) $ 21,071 18,753 14,618
* divided by *
Average assets $ 1,780,120 1,649,469 1,582,894
Ratio 1.18% 1.14% 0.92%
Return on average common
stockholders' equity:
Net income $ 20,351 18,010 14,015
* divided by *
Average common stockholders'
equity $ 132,422 124,491 119,170
Ratio 15.37% 14.47% 11.76%
Common dividend payout ratio:
Cash dividends per share $ 0.349 0.248 0.188
* divided by *
Net income per share - diluted $ 1.05 0.91 0.69
Ratio 33.24% 27.25% 27.25%
Average equity to average
assets:
Average equity $ 132,422 124,491 119,170
* divided by *
Average assets $ 1,780,120 1,649,469 1,582,894
Ratio 7.44% 7.55% 7.53%
Equity to assets ratio:
Common stockholders' equity
excluding unrealized gains
(losses) on assets available
for sale $ 131,892 126,159 120,877
* divided by *
Total assets excluding
unrealized gains (losses)
on assets available for sale $ 1,936,238 1,715,264 1,631,018
Ratio 6.81% 7.36% 7.41%
</TABLE>
197
<PAGE>
<TABLE>
<CAPTION>
December 31, 1998 1997 1996
<S> <C> <C> <C>
Tier 1 leverage capital ratio:
Common stockholders' equity
excluding unrealized gains
(losses) on assets available
for sale $ 131,891 126,159 120,877
Minority interest 4,931 4,859 4,615
Less: intangibles (1,970) (2,087) (2,704)
Less: minimum MSR's to be
deducted (388) --- (115)
Tier 1 capital $ 134,446 128,931 122,673
* divided by *
Quarterly average total
assets excluding
unrealized gains (losses)
on assets available for sale 1,878,074 1,692,176 1,613,223
Less: intangibles (1,970) (2,087) (2,704)
Less: minimum MRS's to be
deducted (388) --- (115)
Tier 1 assets $ 1,875,716 1,690,089 1,610,404
Ratio 7.17% 7.63% 7.62%
Primary capital to assets:
Common stockholders' equity
excluding unrealized gains
(losses) on assets
available for sale $ 131,892 126,159 120,877
Minority interest 4,913 4,859 4,615
Allowance for loan losses 14,172 12,732 11,328
Primary capital $ 150,977 143,750 136,820
* divided by *
Total assets excluding
unrealized gains (losses)
on assets available for
sale $ 1,936,238 1,715,264 1,631,018
Allowance for loan losses 14,172 12,732 11,328
Allowable assets $ 1,950,410 1,727,996 1,642,346
Ratio 7.74% 8.32% 8.33%
</TABLE>
198
<PAGE>
<TABLE>
<CAPTION>
December 31, 1998 1997 1996
<S> <C> <C> <C>
Net Noninterest Margin:
Noninterest income $ 33,358 27,506 23,327
Less: Securities gains
(losses) 665 494 321
Less: Noninterest expense 61,392 57,699 56,091
Net noninterest income $ (28,699) (30,687) (33,085)
* divided by *
Year-to-date average assets $ 1,780,120 1,649,469 1,582,894
Ratio -1.61% -1.86% -2.09%
Efficiency Ratio:
Noninterest expense $ 61,392 57,699 56,091
* divided by *
Noninterest income 33,358 27,506 23,327
Less: Securities gains (losses) 665 494 321
Less: Loan gains (losses) 81 78 84
T.E. net interest income 65,279 63,701 59,238
Subtotal 97,891 90,635 82,160
Ratio 62.71% 63.66% 68.27%
</TABLE>
199
<PAGE>
Exhibit 13
The Appendix to the Proxy for Brenton Banks, Inc. for the 1998 calendar year.
200
<PAGE>
BRENTON BANKS, INC.
APPENDIX TO THE PROXY STATEMENT
FISCAL YEAR 1998
<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
Consolidated Statements of Comprehensive
Income 17
Notes to Consolidated Financial Statements 18
Management's Report 33
Independent Auditors' Report 33
Stock Information 34
Corporate Structure 35
<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
47 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.
1
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
1998 1997 1996
<S> <C> <C> <C>
Operating Results
Net interest income $ 61,387,326 60,133,764 56,052,142
Provision for loan losses 4,200,000 3,900,000 2,900,000
Total noninterest income 33,357,827 27,505,789 23,327,441
Total noninterest expense 61,391,528 57,698,564 56,090,571
Income before income
taxes and minority
interest 29,153,625 26,040,989 20,389,012
Net income 20,350,921 18,010,107 14,015,430
Per Common Share*
Net income-basic $ 1.07 .94 .70
Net income-diluted 1.05 .91 .69
Cash dividends .349 .248 .188
Book value, including
unrealized gains
(losses)** 7.21 6.79 6.23
Book value, excluding
unrealized gains
(losses)*** 7.03 6.62 6.18
Closing price 16.75 18.18 11.42
At December 31
Assets $1,939,556,765 1,718,483,797 1,632,095,082
Loans 1,033,554,556 993,189,110 941,943,513
Nonperforming loans 11,289,000 6,712,000 6,167,000
Deposits 1,496,675,131 1,364,270,491 1,353,057,111
Common stockholders'
equity** 135,210,319 129,379,299 121,954,229
Market capitalization of
common stock 314,102,382 346,646,292 223,367,021
Ratios
Return on average common
stockholders' equity
(ROE)** 15.37% 14.47 11.76
Return on average assets
(including minority
interest) (ROA) 1.18 1.14 .92
Net interest margin 3.97 4.16 4.03
Net noninterest margin (1.61) (1.86) (2.09)
Efficiency ratio 62.71 63.66 68.27
Loan to deposit ratio 69.06 72.80 69.62
Allowance for loan losses
to total loans 1.37 1.28 1.20
Primary capital to
assets*** 7.74 8.32 8.33
Equity to assets*** 6.81 7.36 7.41
Tier 1 leverage capital
ratio*** 7.17 7.63 7.62
Nonperforming loans as a
percent of loans 1.09 .68 .65
Net charge-offs as a
percent of average loans .28 .26 .29
Allowance for loan losses
as a percent of
nonperforming loans 125.54 189.69 183.69
<FN>
* Restated for the 2-for-1 stock split effective
February 1998 and the 10 percent common stock
dividends effective in 1998 and 1997.
** Including unrealized gains (losses) on securities
available for sale.
*** Excluding unrealized gains (losses) on securities
available for sale.
</TABLE>
2
<PAGE>
Management's Discussion and Analysis
Introduction
The following presentation describes Brenton Banks, Inc. and Subsidiaries'
("Brenton" or the "Company") results of operations for the three-year period
ended December 31, 1998, capital resources, market risk management,
asset/liability management, liquidity, Year 2000 efforts and the impact of
recently issued accounting standards. This discussion should be read in
conjunction with the Consolidated Financial Statements of the Company and the
notes thereto which are included elsewhere in this report.
Forward-Looking Information
Forward-looking information relating to the financial results or
strategies of the Company is 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 and other financial service
providers, 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.
Results of Operations - 1998 Compared to 1997
Net Income
For the year ended December 31, 1998, Brenton recorded net income of
$20,350,921, an increase of 13.0 percent over 1997, which totaled $18,010,107.
Diluted earnings per common share were $1.05 compared to $.91 for 1997.
Return on average assets (ROA) was 1.18 percent in 1998, compared to 1.14
percent in 1997. The return on average equity (ROE) was 15.37 percent,
compared to 14.47 percent one year earlier. Both the ROA and ROE were the
highest ever achieved by the Company.
Net Interest Income
Net interest income rose 2.1 percent to $61,387,326 for 1998 as favorable
volume variances exceeded unfavorable rate variances. Average earning assets
increased 7.4 percent over 1997 while average interest-bearing liabilities
increased 7.2 percent. The average yield earned on earning assets declined 17
basis points, due to the declining interest rate environment. Meanwhile, the
average rate paid on interest-bearing liabilities increased three basis points
as a result of an aggressive effort to gain new client relationships, which
resulted in the sale of higher-priced transaction deposit products.
The net interest spread, which is the difference between the yield earned
on assets and the rate paid on liabilities, declined to 3.49 percent from 3.69
percent a year earlier. Net interest margin, which is tax-equivalent net
interest income as a percent of average earning assets, averaged 3.97 percent
in 1998 compared to 4.16 percent in 1997.
Loan Growth/Loan Quality
At December 31, 1998, total loans had grown 4.1 percent to $1,033.6
million from $993.2 million a year earlier. This $40.4 million increase was
achieved despite a $39.4 million decline in the residential real estate loan
portfolio, which resulted from increased refinancings as borrowers took
advantage of the lower long-term fixed-rate interest environment. Loan quality
remained good with nonperforming loans at December 31, 1998, totaling
$11,289,000, or 1.09 percent of loans. This compares to $6,712,000 at December
31, 1997, or .68 percent of loans. The increase was primarily due to a small
number of commercial loans for which collateral exists; however, worst case
analysis suggests losses of less than $500,000 for which a specific reserve has
been established. Nonperforming loans include loans on nonaccrual status,
loans that have been renegotiated to below market interest rates or terms, and
loans past due 90 days or more.
Loan quality control and risk management is cautiously 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 and external third party loan
review professionals, as well as by regulatory examiners.
3
<PAGE>
The allowance for loan losses, which totaled $14.2 million, represented
125.54 percent of nonperforming loans at the end of 1998, compared to 189.69
percent one year ago. The provision for loan losses totaled $4,200,000 for the
year ended December 31, 1998, compared to $3,900,000 for 1997. The increase in
the provision is related to the $29.1 million increase in average loans
outstanding during 1998 and projected future loan growth. The Company's net
charge-offs as a percent of average loans was .28 percent for 1998 compared to
.26 percent for 1997, both of which were better than historical industry peer
group averages. Loan losses for both years were primarily concentrated in the
consumer loan portfolio.
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 loan officers, loan
administration officers and internal loan review personnel.
Using the Company's standard evaluation process, each loan is evaluated
based on its specific characteristics, the borrower's financial condition and
collateral values. All loans are rated 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 allowance for loan losses. In addition, the Reserve Adequacy Committee
approves charge-offs and reviews subsequent collection action plans for problem
loans.
Management believes the allowance for loan losses at December 31, 1998,
was sufficient to absorb potential loan losses within the portfolio.
Net Noninterest Margin/Efficiency Ratio
To measure operating efficiency, Brenton 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 1998, the
net noninterest margin improved to (1.61) percent compared to (1.86) percent in
1997. Another ratio the Company utilizes to measure productivity is the
efficiency ratio. This ratio is computed by dividing noninterest expense by
the sum of tax-equivalent net interest income plus noninterest income
(excluding gains and losses on the sale of securities). For the year ended
December 31, 1998, the Company's efficiency ratio improved to 62.71 percent,
compared to 63.66 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.
Noninterest Income
Brenton achieved record levels of noninterest income in 1998. For 1998,
total noninterest income (excluding securities transactions) increased 21.0
percent to $32,692,377 from $27,011,967 one year ago. Noninterest income
(excluding securities gains and losses) for 1998 represented 1.84 percent of
average assets and 34.8 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, reflected strong growth from the
prior year.
Service charges on deposit accounts increased 8.2 percent in 1998 to
$7,885,513. This growth related to increased account analysis charges on
commercial and business deposit accounts due to a higher number of clients.
Mortgage banking revenue rose 138.2 percent to $7,797,577 for 1998
compared to $3,274,215 in 1997. This revenue growth was the result of a
significantly higher volume of mortgage loan originations produced by a growing
staff of mortgage loan originators and the favorable interest rate environment.
Residential real estate loan closings for 1998 totaled $513.4 million compared
to $179.1 million in 1997. Refinancings represented 58.7 percent of the
closings in 1998 and 41.6 percent in 1997.
Investment brokerage commissions totaled $5,334,309 for 1998, an increase
of 11.0 percent over 1997 due to greater broker productivity and active
financial markets.
Fiduciary revenues climbed 11.5 percent to $3,497,030 in 1998 compared to
$3,136,078 in 1997. This revenue improvement was due to increased assets from
existing trust accounts and new business.
Insurance commissions and fees declined 50.7 percent to $1,382,917 in 1998
due to the third quarter 1997 sale of one of the Company's insurance agencies
and a 44.7 percent decline in credit-related insurance commissions.
Other service charges, commissions and fees increased 22.3 percent to
$4,208,330 in 1998 compared to 1997 as a result of increases from real estate
sales commissions, ATM/debit card fees, international fees and commercial line
of credit fees.
4
<PAGE>
Other operating income increased by $329,277 from one year ago. The
increase was primarily due to higher levels of income from bank-owned life
insurance policies and miscellaneous one-time items, which exceeded a 1997 gain
on the sale of one of the Company's insurance agencies as discussed above.
Securities transactions also contributed to the increase in noninterest
income. Securities gains of $665,450 were recorded in 1998 versus gains of
$493,822 in 1997.
The growth in various noninterest income categories has enabled Brenton 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 existing and new clients. The continued growth rate of fee income
could be vulnerable to future economic conditions and competition from other
financial institutions and other financial service providers that cannot be
estimated by the Company.
Noninterest Expense
Total noninterest expense increased 6.4 percent in 1998 to $61,391,528
from $57,698,564 one year ago.
Compensation, the largest component of noninterest expense, increased
$2,317,134, or 8.6 percent, over 1997. Standard salaries, which comprised 69.3
percent of total compensation expense, increased by 11.6 percent compared to
1997 due to an increase in the number of full-time equivalent employees and
normal annual salary increases. Variable compensation increased 43.3 percent
as a result of higher sales of fee-related products and services. Other
compensation decreased $1,917,090 because of the expiration of a long-term
stock compensation plan. The number of full-time equivalent employees
increased 9.8 percent at December 31, 1998, compared to the end of 1997 as a
result of filling a number of open positions. Benefit expense increased 13.3
percent due to increased compensation, higher health insurance premiums and
increased retirement plan contributions.
Occupancy expense rose 3.5 percent, or $197,959, in 1998 as a result of
increases in depreciation expense, repairs and maintenance and utility costs.
Furniture and equipment expense grew to $4,163,137, a 14.6 percent
increase from the prior year. The increase was due to depreciation on
technology upgrades and increased repairs and maintenance expense.
Transferring the personal computer "help desk" function to an internal
operation reduced data processing expense $226,668, or 8.0 percent.
Other operating expenses increased $173,054, or 1.5 percent, when
comparing 1998 results to 1997. Increases in consulting fees, personnel
recruitment expenses, check processing fees and correspondent bank service
charges exceeded reductions in legal fees, bank operational losses,
miscellaneous expense and loss on sale of fixed assets.
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
Brenton'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 27.7 percent for 1998 compared to
28.0 percent for 1997.
Results of Operations - 1997 Compared to 1996
Net Income
For the year ended December 31, 1997, Brenton recorded net income of
$18,010,107, an increase of 28.5 percent over 1996 net income of $14,015,430.
Diluted earnings per common share were $.91 compared to $.69 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.
5
<PAGE>
Net Interest Income
Net interest income rose 7.3 percent to $60,133,764 for 1997. The increase
in net interest income was 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 yield
earned on earning assets increased 15 basis points, while the average rate paid
on interest-bearing liabilities increased 4 basis points.
The net interest spread rose to 3.69 percent from 3.58 percent in 1996.
Net interest margin averaged 4.16 percent in 1997 compared to 4.03 percent in
1996.
Loan Quality
Loan quality was strong in 1997 with nonperforming loans at December 31,
1997, totaling $6,712,000 or .68 percent of loans. This compared to .65 percent
at December 31, 1996, or $6,167,000.
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 earlier. 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 was primarily related to the $50.5
million increase in average loans outstanding during 1997. The Company's net
charge-offs as a percent of average loans were .26 percent for 1997 compared to
.29 percent for 1996. Loan losses for both years were primarily concentrated
in the consumer loan portfolio.
Net Noninterest Margin/Efficiency Ratio
For 1997, the net noninterest margin improved to (1.86) percent compared
to (2.09) percent in 1996. For the year ended December 31, 1997, the Company's
efficiency ratio was 63.66 percent, compared to 68.27 percent in 1996.
Noninterest Income
For 1997, total noninterest income (excluding securities transactions)
increased 17.4 percent to $27,011,967 from $23,006,185 one year earlier.
Noninterest income (excluding securities gains and losses) for 1997 represented
1.64 percent of average assets and 31.0 percent of total operating income. All
categories of noninterest income, except insurance commissions and fees,
reflected strong growth from the prior year.
Service charges on deposit accounts increased 8.6 percent in 1997 to
$7,290,765. The growth related to a continued focus on collecting a higher
percentage of fees assessed and increased sales of fee generating accounts,
particularly commercial accounts.
Mortgage banking income totaled $3,274,215 for 1997 compared to $2,168,593
in 1996, an increase of 51.0 percent. The increase was attributable to a
higher volume of real estate mortgage loan originations, which totaled $179.1
million compared to $110.8 million in 1996.
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 sales initiatives drove the increase in this category.
Fiduciary revenues climbed 14.3 percent to $3,136,078 in 1997 compared to
$2,744,530 in 1996. The increase in revenue was 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 one of the Company's insurance agencies. The decrease in
property and casualty commission income due to the agency sale was largely
offset by a 68.8 percent increase in credit-related insurance commissions. The
significant increase in credit-related insurance was due to the strong increase
in direct consumer lending and increased sales efforts during 1997.
Other service charges, commissions and fees increased 23.8 percent to
$3,441,454 in 1997 compared to 1996 due to increases from letter of credit
fees, fees received from purchased receivables and real estate sales
commissions.
Other operating income increased by $338,840 from one year earlier. The
increase was due to income from bank-owned life insurance policies that 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.
6
<PAGE>
Noninterest Expense
Total noninterest expense increased only 2.9 percent in 1997 to
$57,698,564 from $56,090,571 in 1996. Exclusive of a one-time special
assessment by the FDIC totaling $1,288,000 in 1996, noninterest expense
increased 5.3 percent.
Compensation increased $1,363,843, or 5.4 percent, over 1996. The increase
was primarily related to commissions and incentives paid on higher sales of
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. Standard salaries, which comprised 67.5
percent of total compensation expense, decreased by 3.8 percent compared to
1996. The number of full-time equivalent employees declined by .2 percent at
December 31, 1997 compared to year-end 1996. The total increase in
compensation expense led to a proportionate increase in employee benefits.
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.
Data processing expense increased $258,910, or 10.0 percent, due to
increased costs during 1997 associated with contracted core processing.
Expense related to the FDIC deposit assessments declined $1,520,230 from
1996 to $281,416. Prior year's expense included the previously discussed, one-
time $1,288,000 special assessment to fully fund SAIF.
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 fees, consulting and legal fees and miscellaneous losses.
Income Taxes
The Company's income tax strategies included 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 28.0 percent for 1997 compared to 28.3 percent
for 1996.
Capital Resources
Common stockholders' equity totaled $135,210,319 as of December 31, 1998,
a 4.5 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 1998, 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 1998 totaled
$6,622,340, or $.349 per common share, which represents an increase of 40.7
percent over 1997 dividends of $.248 per share. The dividend payout ratio for
1998 was 33.24 percent of earnings per share.
As part of Brenton's ongoing stock repurchase plan, 512,650 shares of
common stock (adjusted for the 2-for-1 stock split and the 10 percent common
stock dividend) were repurchased during 1998 at a cost of $10,000,900. Since
the inception of the plan in 1994, the Company has repurchased 3,040,327 shares
(adjusted for the 2-for-1 stock split and 10 percent common stock dividends) at
a total cost of $33,944,378. The Board has extended this plan for 1999 by
authorizing up to an additional $4 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, 1998, was 10.29 percent and the total risk-based capital ratio was
11.37 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 7.17 percent at
December 31, 1998, exceeding the regulatory minimum requirement for well-
capitalized institutions of 5.0 percent.
7
<PAGE>
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent Company") was
6.7 percent at December 31, 1998, compared to 7.8 percent at the end of 1997.
The Parent Company's $5 million line of credit with a regional bank was unused
at the end of the year. Long-term borrowings of the Parent Company at December
31, 1998, consisted entirely of capital notes totaling $9,046,000.
Brenton Banks, Inc. common stock closed on December 31, 1998, at $16.75, a
decrease of 7.9 percent from the prior year-end. The closing price at December
31, 1998, was 232.3 percent of the book value per share of $7.21. The year-end
stock price represented a price-to-1998-diluted-earnings multiple of 16.0
times.
Brenton Banks, Inc. continues to pursue acquisition and expansion
opportunities, which fit the strategic direction of 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.
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 1998 changed when
compared to 1997.
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 base net interest income) for projected
hypothetical changes in market interest rates. Base net interest income is the
projected net income assuming no change in interest rates. As shown in the
table, the Company's net interest income is more sensitive in a prolonged
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, 1998, 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>
Changes in net interest income due to projected
hypothetical changes in market interest rates
_____________________________________________
Assumed changes
in market rates 1999 2000 2001
_______________ _____ _____ _____
<S> <C> <C> <C>
- - -300 bps -0.6% -9.7% -19.9%
- - -200 bps 0.3% -6.6% -14.6%
- - -100 bps 1.8% 0.8% -2.1%
+100 bps -0.3% 0.4% 3.5%
+200 bps -2.4% -3.1% 3.5%
+300 bps -4.5% -6.0% 3.9%
<FN>
(Changes in hypothetical interest rates are assumed to be instantaneous and
sustained parallel shifts in the yield curve.)
</TABLE>
8
<PAGE>
Asset/Liability Management
Brenton 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, as previously discussed, 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 that net interest income and net interest margin fluctuate 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 steeper the intermediate
treasury curve to the one-week LIBOR rate, the better the prospects for net
interest income improvement. This curve was inverted at December 31, 1998.
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. Other actions taken to minimize interest rate risk were previously
discussed under the heading "Market Risk Management."
Liquidity Management
Brenton actively monitors and manages its liquidity position with the
objective of maintaining sufficient cash flows to fund operations, meet client
commitments, take advantage of market opportunities and provide a margin
against unforeseeable liquidity needs. Federal funds sold, loans held for sale
and investment securities available for sale are readily marketable assets.
Maturities of all investment securities are managed to meet the Company's
normal liquidity needs. Investment securities available for sale may be sold
prior to maturity to meet liquidity needs, to respond to market changes or to
adjust the Company's interest rate risk position. Readily marketable assets,
as defined above, comprised 36.6 percent of the Company's total assets at
December 31, 1998.
Net cash provided from operations (exclusive of increases or decreases in
loans held for sale) of the Company is another major source of liquidity and
totaled $24,749,000 in 1998, $23,303,000 in 1997 and $23,889,000 in 1996.
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 results in a low dependence on
volatile liabilities. At December 31, 1998, the Company had advances of
$119,550,000 from the Federal Home Loan Bank ("FHLB") of Des Moines, of which
$75,550,000 were used as a means of providing both long-term, fixed-rate
funding for certain assets and managing interest rate risk. The remaining
$44,000,000 represents an advance on a variable-rate, short-term line of credit
used to fund mortgage loans originated for sale. The Company had additional
borrowing capacity available from the FHLB of approximately $52 million at
December 31, 1998.
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,
1998.
On December 31, 1998, Brenton entered into an agreement to purchase a
parcel of land for $2.1 million. The land will be utilized for the
construction of an operations and sales support facility. The building, which
is in the planning stage, will replace currently leased space and will also
allow for additional growth.
The Parent Company had sufficient cash flow and liquidity at December 31,
1998. The primary funding source for the Parent Company is dividends from its
subsidiaries. Dividends of approximately $6 million were available to be paid
to the Parent Company by subsidiary banks without reducing capital ratios below
regulatory minimums. At the end of 1998, the Parent Company had $1.1 million
of interest-bearing deposits with banks, a $5 million unused line of credit and
additional borrowing capacity.
Year 2000
The "Year 2000" issue is a top priority for Brenton. The Company's
critical core loan and deposit applications are ALLTEL Information Services,
Inc. ("ALLTEL") software programs and Brenton outsources the data processing
function to ALLTEL. Brenton and
9
<PAGE>
ALLTEL are working in partnership to resolve the Year 2000 issues of the
critical core application programs as well as all other computer software
programs used in the Company. Also considered has been the readiness of
vendors and other third parties with which the Company does business, and an
assessment of significant clients is underway.
The Company could be faced with severe consequences if Year 2000 issues
are not identified and resolved in a timely manner by the Company and
significant third parties, which include public utilities and various
governmental agencies. A worst case scenario would result in the short-term
inability to update client financial records due to unforeseen processing
issues. This would result in clients being unable to receive timely
information regarding their balances.
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. The incremental direct costs associated with this project were
approximately $350,000 in 1998. It is estimated these costs will approach
$500,000 in 1999. There are additional benefits that result from this project
because in addition to becoming Year 2000 compliant, systems are being
improved.
The Company has a Year 2000 committee and a formal plan in place and has
been executing on that plan. The Company completed substantially all Year 2000
work associated with its critical core application systems in 1998 and
remediation of all other critical software products will take place in early
1999, with testing to take place in March and April of 1999. The committee is
also developing contingency plans for unforeseen difficulties related to the
Year 2000 issue. It is anticipated that those plans will be complete by June
30, 1999. As a result of modifications and upgrades to existing systems,
management believes the Year 2000 issue will not be a significant operational
matter for the Company.
The Company has also contracted with an outside consultant to monitor the
progress of Year 2000 efforts and provide reports to management. Management
periodically reports on the status of the Year 2000 project to the Board of
Directors and its Audit Committee. The Company is also subject to review by
various banking regulatory agencies. Those agencies prescribe very strict
guidelines that must be adhered to by financial institutions.
The preceding paragraphs include forward-looking statements that involve
inherent risks and uncertainties. A number of important factors could result
in the actual costs of Year 2000 compliance and impact of Year 2000 issues to
differ from what is anticipated. Those uncertainties include incomplete
inventory and assessment results, higher than anticipated costs to update
software and hardware, and the lack of ability of vendors, significant
customers and other third parties to effectively address the Year 2000 issue.
Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which will be effective for the
Company for the year beginning January 1, 2000. This statement requires
recognition of all derivative instruments as either assets or liabilities in
the statement of financial position measured at fair value. This statement
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows gains and losses from derivatives to
offset related results on the hedged item in the income statement, and
requires a company to formally document, designate and assess the
effectiveness of transactions for which hedge accounting is applied.
Management is evaluating the impact adoption of SFAS No. 133 will have on the
Company's financial statements. The Company expects to adopt SFAS No. 133
when required.
In October 1998, the FASB issued Statement of Financial Accounting
Standards No. 134, "Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise." This statement requires that after the securitization of
mortgage loans held for sale, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed securities or other retained interests
based on its ability and intent to sell or hold those investments. This
statement conforms the subsequent accounting for securities retained after the
securitization of mortgage loans by a mortgage banking enterprise with that of
nonmortgage enterprises. The Company will adopt SFAS No. 134 in the first
quarter of 1999. Adoption is not expected to have a material effect on the
Company.
10
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND RATES
Average Balances (in thousands) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 65,874 58,681 65,439 57,138 46,301
Interest-bearing deposits
with banks 3,706 2,460 1,393 1,076 124
Federal funds sold and
securities purchased under
agreements to resell 31,048 31,472 26,188 39,763 37,666
Trading account securities --- 12 --- --- 116
Investment securities:
Available for sale--taxable 390,591 348,232 330,002 244,786 245,913
Available for sale--tax-exempt 125,237 99,868 85,471 100,859 132,040
Held to maturity--taxable 3,998 12,700 46,271 65,959 35,794
Held to maturity--tax-exempt 53,130 56,204 51,639 50,235 44,584
Loans held for sale 37,841 10,284 7,983 5,908 2,575
Loans 999,232 970,115 919,578 945,724 936,370
Allowance for loan losses (13,738) (12,171) (11,440) (11,166) (10,502)
Premises and equipment 31,883 29,841 31,728 31,436 24,545
Other assets 51,318 41,771 28,642 29,508 25,663
__________ _________ _________ _________ _________
$ 1,780,120 1,649,469 1,582,894 1,561,226 1,521,189
Liabilities and Stockholders'
Equity:
Deposits:
Noninterest-bearing $ 164,403 139,480 131,051 128,770 127,464
Interest-bearing:
Demand 90,589 81,430 376,259 355,819 250,520
Savings 585,598 551,509 241,250 231,633 294,715
Time 556,056 567,258 583,508 626,497 625,981
__________ ________ _________ _________ _________
Total deposits 1,396,646 1,339,677 1,332,068 1,342,719 1,298,680
Federal funds purchased and
securities sold under
agreements to repurchase 116,388 78,234 59,276 40,237 61,656
Other short-term borrowings 65,205 53,223 17,295 6,536 4,860
Accrued expenses and other
liabilities 17,020 17,097 17,520 14,896 13,254
Long-term borrowings 47,605 32,056 33,094 37,264 26,500
__________ _________ _________ _________ _________
Total liabilities 1,642,864 1,520,287 1,459,253 1,441,652 1,404,950
Minority interest in
Consolidated subsidiaries 4,834 4,691 4,471 4,391 4,290
Common stockholders' equity 132,422 124,491 119,170 115,183 111,949
__________ _________ _________ _________ __________
$ 1,780,120 1,649,469 1,582,894 1,561,226 1,521,189
Summary of Average Interest
Rates:
Average yields earned:
Interest-bearing deposits with
banks 4.74% 4.80 4.87 6.20 6.65
Trading account securities --- 4.26 --- --- 6.36
Federal funds sold and securities
purchased under agreements to
resell 5.35 5.54 5.41 5.69 4.53
Investment securities:
Available for sale--taxable 6.09 6.31 6.08 5.96 5.30
Available for sale--tax exempt
(tax equivalent basis) 6.69 7.04 7.13 6.71 6.37
Held to maturity--taxable 6.93 6.39 6.22 6.17 5.20
Held to maturity--tax-exempt
(tax equivalent basis) 6.82 6.72 6.68 8.05 7.70
Loans held for sale 7.11 7.89 8.47 6.71 7.50
Loans 8.74 8.82 8.69 8.69 8.14
Average rates paid:
Deposits 4.12% 4.11 4.12 4.37 3.55
Federal funds purchased and
securities sold under
agreements to repurchase 4.38 4.36 4.17 4.08 3.38
Other short-term borrowings 5.76 5.98 5.87 5.67 5.42
Long-term borrowings 6.34 6.86 7.07 7.03 6.86
Average yield on interest-earning
assets 7.78% 7.95 7.80 7.86 7.31
Average rate paid on interest-
bearing liabilities 4.29 4.26 4.22 4.45 3.62
Net interest spread 3.49 3.69 3.58 3.41 3.69
Net interest margin 3.97 4.16 4.03 3.89 4.12
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Year-end Balances
(in thousands) 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total assets $1,939,557 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
Interest-earning assets 1,788,081 1,578,923 1,497,600 1,461,218 1,475,473 1,400,709 1,323,252 1,267,402 1,181,172 883,721
Interest-bearing liabilities 1,590,493 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
Noninterest-bearing
deposits 190,625 161,007 153,284 143,220 136,548 127,132 137,212 115,479 125,626 113,349
Long-term borrowings 41,546 36,662 34,860 38,178 28,939 20,055 13,284 13,634 12,675 14,701
Common stockholders'
equity** 135,210 129,379 121,954 119,534 110,430 112,418 97,430 86,712 77,258 63,522
Results of Operations
(in thousands)
Interest income $ 124,026 118,239 111,383 111,040 101,223 98,656 106,560 115,561 106,826 85,722
Interest expense 62,639 58,105 55,331 57,708 45,772 44,427 54,773 68,687 64,431 49,102
Net interest income 61,387 60,134 56,052 53,332 55,451 54,229 51,787 46,874 42,395 36,620
Provision for loan losses 4,200 3,900 2,900 1,865 1,988 1,252 1,411 799 869 760
Net interest income after
provision for loan losses 57,187 56,234 53,152 51,467 53,463 52,977 50,376 46,075 41,526 35,860
Noninterest income 33,358 27,506 23,327 17,847 16,593 17,863 14,684 12,715 11,554 10,113
Noninterest expense 61,392 57,699 56,090 55,051 56,657 50,415 46,591 42,284 37,820 32,781
Income before income
taxes and minority
interest 29,153 26,041 20,389 14,263 13,399 20,425 18,469 16,506 15,260 13,192
Income taxes 8,082 7,288 5,771 3,205 2,701 5,508 4,884 4,308 4,388 4,016
Minority interest 720 743 603 651 591 667 632 539 533 472
Net income 20,351 18,010 14,015 10,407 10,107 24,250 12,953 11,659 10,339 8,704
Average common shares
outstanding
(in thousands)* 18,957 19,255 19,901 20,426 21,004 20,893 20,711 20,650 20,615 19,156
Per Common Share*
Net income-basic $ 1.07 .94 .70 .51 .48 .68 .63 .56 .50 .45
Net income-diluted 1.05 .91 .69 .50 .47 .67 .62 .56 .50 .45
Cash dividends .349 .248 .188 .169 .165 .150 .131 .121 .103 .083
Common stockholders'
equity*** 7.03 6.62 6.18 5.80 5.52 5.21 4.69 4.19 3.74 3.32
Closing price 16.75 18.18 11.42 7.98 6.86 6.57 6.51 5.20 3.38 3.82
Selected Operating Ratios
Return on average assets
(including minority
interest) 1.18% 1.14 .92 .71 .70 1.04 .98 .93 .95 1.00
Return on average common
stockholders' equity** 15.37 14.47 11.76 9.04 9.03 13.82 14.13 14.27 14.39 14.50
Equity to assets*** 6.81 7.36 7.41 7.47 7.28 7.40 6.81 6.37 6.06 6.61
Common dividend payout 33.24 27.25 27.25 33.80 35.11 22.39 21.13 21.61 20.60 18.44
Allowance for loan losses
as a percent of loans 1.37 1.28 1.20 1.22 1.12 1.12 1.20 1.14 1.25 1.55
Net charge-offs as a
percent of average
loans .28 .26 .29 .18 .10 .05 .13 .15 .12 .08
<FN>
* Restated for 2-for-1 stock split effective February 1998, 10 percent
common stock dividends effective in 1998, 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>
12
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
December 31 1998 1997
<S> <C> <C>
Assets:
Cash and due from banks (note 2) $ 76,460,049 77,468,210
Interest-bearing deposits with banks 2,167,288 1,319,700
Federal funds sold and securities purchased
under agreements to resell 6,000,000 9,300,000
Trading account securities --- 77,220
Investment securities:
Available for sale (note 3) 605,183,788 486,653,872
Held to maturity (market value of
$44,011,000 and $69,852,000
at December 31, 1998, and 1997,
respectively) (note 3) 43,027,501 69,079,622
Investment securities 648,211,289 555,733,494
Loans held for sale 98,147,391 19,303,411
Loans (notes 4, 9 and 10) 1,033,554,556 993,189,110
Allowance for loan losses (note 5) (14,172,264) (12,732,131)
Loans, net 1,019,382,292 980,456,979
Premises and equipment (notes 6) 32,523,113 28,898,589
Accrued interest receivable 16,458,066 15,233,682
Other assets (notes 4 and 8) 40,207,277 30,692,512
$ 1,939,556,765 1,718,483,797
Liabilities and Stockholders' Equity:
Deposits (note 7):
Noninterest-bearing $ 190,625,140 161,007,156
Interest-bearing:
Demand 131,602,358 117,664,352
Savings 603,367,340 527,364,856
Time 571,080,293 558,234,127
Total deposits 1,496,675,131 1,364,270,491
Federal funds purchased and securities sold
under agreements to repurchase 155,847,300 92,632,576
Other short-term borrowings (note 9) 87,050,000 73,700,000
Accrued expenses and other liabilities 18,315,348 16,980,763
Long-term borrowings (note 10) 41,546,000 36,662,000
Total liabilities 1,799,433,779 1,584,245,830
Minority interest in consolidated subsidiaries 4,912,667 4,858,668
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; 18,752,381 and 17,334,048 shares
issued and outstanding at December 31, 1998,
and 1997, respectively 46,880,953 43,335,120
Capital surplus --- ---
Retained earnings 85,010,569 82,824,333
Accumulated other comprehensive income --
unrealized gains on securities available for
sale, net 3,318,797 3,219,846
Total common stockholders' equity 135,210,319 129,379,299
$ 1,939,556,765 1,718,483,797
<FN>
Commitments and contingencies (notes 17 and 18).
See accompanying notes to consolidated financial statements.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31 1998 1997 1996
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans (note 4) $ 89,739,711 86,020,464 80,301,707
Interest and dividends on investments:
Available for sale--taxable 23,770,870 21,969,148 20,063,114
Available for sale--tax-exempt 5,866,972 4,929,898 4,250,463
Held to maturity--taxable 277,075 811,729 2,878,982
Held to maturity--tax-exempt 2,536,082 2,647,149 2,404,155
Interest on federal funds sold and
securities purchased under agreements
to resell 1,659,405 1,742,284 1,416,539
Other interest income 175,678 118,695 68,157
___________ ___________ ___________
Total interest income 124,025,793 118,239,367 111,383,117
Interest Expense:
Interest on deposits (note 7) 50,772,501 49,310,346 49,507,425
Interest on federal funds purchased and
securities sold under agreements to
repurchase 5,092,162 3,413,432 2,469,939
Interest on other short-term borrowings
(note 9) 3,756,817 3,183,053 1,015,110
Interest on long-term borrowings (note 10) 3,016,987 2,198,772 2,338,501
___________ ___________ ___________
Total interest expense 62,638,467 58,105,603 55,330,975
Net interest income 61,387,326 60,133,764 56,052,142
Provision for loan losses (note 5) 4,200,000 3,900,000 2,900,000
___________ ___________ ___________
Net interest income after provision for
loan losses 57,187,326 56,233,764 53,152,142
Noninterest Income:
Service charges on deposit accounts 7,885,513 7,290,765 6,712,874
Mortgage banking income 7,797,577 3,274,215 2,168,593
Investment brokerage commissions 5,334,309 4,808,048 3,766,436
Fiduciary income 3,497,030 3,136,078 2,744,530
Insurance commissions and fees 1,382,917 2,803,983 2,915,666
Other service charges, collection and
exchange charges, commissions and fees 4,208,330 3,441,454 2,779,502
Net realized gains from
securities available for sale (note 3) 665,450 493,822 321,256
Other operating income 2,586,701 2,257,424 1,918,584
___________ ___________ ___________
Total noninterest income 33,357,827 27,505,789 23,327,441
Noninterest Expense:
Compensation 29,141,441 26,824,307 25,460,464
Employee benefits (note 15) 4,873,271 4,303,104 4,245,682
Occupancy expense of premises, net
(notes 6 and 17) 5,807,559 5,609,600 5,502,904
Furniture and equipment expense
(notes 6 and 17) 4,163,137 3,634,336 3,725,150
Data processing expense (note 18) 2,623,727 2,850,395 2,591,485
Marketing 1,472,632 1,361,963 1,756,473
Supplies 1,226,212 1,195,762 1,409,690
FDIC deposit insurance assessment 272,814 281,416 1,801,646
Other operating expense 11,810,735 11,637,681 9,597,077
___________ ___________ ___________
Total noninterest expense 61,391,528 57,698,564 56,090,571
Income before income taxes and
minority interest 29,153,625 26,040,989 20,389,012
Income taxes (note 8) 8,082,355 7,287,628 5,770,600
___________ ___________ ___________
Income before minority interest 21,071,270 18,753,361 14,618,412
Minority interest 720,349 743,254 602,982
___________ ___________ ___________
Net income $ 20,350,921 18,010,107 14,015,430
Per common share (notes 1 and 13):
Net income-basic $ 1.07 .94 .70
Net income-diluted 1.05 .91 .69
Cash dividends .349 .248 .188
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 1998 1997 1996
<S> <C> <C> <C>
Operating Activities:
Net income $ 20,350,921 18,010,107 14,015,430
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Provision for loan losses 4,200,000 3,900,000 2,900,000
Depreciation and amortization 4,683,179 4,216,828 4,301,776
Deferred income taxes 1,396,220 (685,223) 949,396
Net realized gains from
securities available for sale (665,450) (493,822) (321,256)
Investment securities amortization and
accretion 1,043,735 1,346,704 1,710,902
Net (increase) decrease in loans held
for sale (78,843,980) (13,433,113) 2,837,011
Net increase in accrued interest
receivable and other assets (7,644,451) (3,501,066) (1,402,881)
Net increase in accrued expenses, other
liabilities and minority interest 1,384,709 509,873 1,735,569
___________ ___________ ___________
Net cash provided (used) by operating
activities (54,095,117) 9,870,288 26,725,947
Investing Activities:
Investment securities available for sale:
Purchases (461,159,506) (303,699,052) (289,154,999)
Maturities 252,551,601 161,716,090 148,785,952
Sales 89,996,385 119,401,553 67,547,581
Investment securities held to maturity:
Purchases (6,166,526) (26,324,353) (45,015,563)
Maturities 32,130,525 29,768,259 78,826,937
Net increase in loans (43,125,313) (53,741,825) (26,364,596)
Purchase of other assets for
investment (5,000,000) (5,000,000) (10,017,329)
Purchases of premises and equipment (7,911,645) (2,526,958) (2,734,491)
Proceeds from sales of premises and
equipment 7,291 225,080 1,356,634
_____________ ___________ ___________
Net cash used by investing activities (148,677,188) (80,181,206) (76,769,874)
Financing Activities:
Net increase in noninterest-bearing,
interest-bearing demand and savings
deposits 119,558,474 25,683,433 22,335,320
Net increase (decrease) in time deposits 12,846,166 (14,470,053) (31,220,924)
Net increase in federal funds
purchased and securities sold under
agreements to repurchase 63,214,724 25,806,456 25,718,709
Net increase (decrease) in other
short-term borrowings (9,700,000) 25,550,000 15,500,000
Proceeds of long-term borrowings 29,394,000 17,806,000 14,604,000
Repayment of long-term borrowings (1,460,000) (2,004,024) (1,771,779)
Dividends on common stock (6,622,340) (4,781,675) (3,748,653)
Proceeds from issuance of common stock
under the employee stock purchase plan 758,090 551,247 71,675
Proceeds from issuance of common stock
under the stock option plan 290,039 1,286,157 290,748
Proceeds from issuance of common stock
under the long-term stock compensation
plan 970,220 246,915 334,834
Payment for shares reacquired under common
stock repurchase plan (10,000,900) (10,014,087) (8,248,331)
Payment for fractional shares resulting
from common stock dividend (13,961) (16,399) (13,744)
_____________ ___________ ___________
Net cash provided by financing
activities 199,234,512 65,643,970 33,851,855
_____________ ___________ ___________
Net decrease in cash and
cash equivalents (3,537,793) (4,666,948) (16,192,072)
Cash and cash equivalents at the
beginning of the year 88,165,130 92,832,078 109,024,150
_____________ ____________ ___________
Cash and cash equivalents at the end
of the year $ 84,627,337 88,165,130 92,832,078
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
Years Ended December 31 1998 1997 1996
<S> <C> <C> <C>
Common Stock
Beginning of year balance $ 43,335,120 40,428,420 38,266,260
Ten percent common stock
dividend (note 13) 4,315,398 3,966,905 3,684,215
Issuance of shares of common
stock under the stock option
plan (note 16) 99,825 501,760 128,000
Issuance of shares of common
stock under the long-term stock
compensation plan (note 16) 268,960 82,945 73,590
Issuance of shares of common
stock under the employee stock
purchase plan (note 16) 94,150 93,790 14,855
Shares reacquired under the common
stock repurchase plan (note 13) (1,232,500) (1,738,700) (1,738,500)
_____________ ___________ ___________
End of year balance 46,880,953 43,335,120 40,428,420
Capital Surplus
Beginning of year balance --- --- 2,020,518
Ten percent common stock
dividend (note 13) (78,529) --- ---
Issuance of shares of common
stock under the stock option
plan (note 16) 190,214 784,397 162,748
Issuance of shares of common
stock under the long-term stock
compensation plan (note 16) 842,685 163,970 261,244
Issuance of shares of common
stock under the employee stock
purchase plan (note 16) 664,018 457,457 56,820
Shares reacquired under the common
stock repurchase plan (note 13) (1,618,388) (1,405,824) (2,501,330)
_____________ ___________ ___________
End of year balance --- --- ---
Retained Earnings
Beginning of year balance 82,824,333 80,448,768 77,888,451
Net income 20,350,921 18,010,107 14,015,430
Dividends on common stock
($.349, $.248, and $.188
per share, respectively*) (6,622,340) (4,781,675) (3,748,653)
Ten percent common stock
dividend (note 13) (4,236,869) (3,966,905) (3,684,215)
Fractional shares resulting from
common stock dividend (13,961) (16,399) (13,744)
Issuance of shares of common
stock under the long-term stock
compensation plan (note 16) (141,425) --- ---
Issuance of shares of common
stock under the employee stock
purchase plan (note 16) (78) --- ---
Shares reacquired under the common
stock repurchase plan (note 13) (7,150,012) (6,869,563) (4,008,501)
_____________ ___________ ___________
End of year balance 85,010,569 82,824,333 80,448,768
Accumulated Other Comprehensive Income
Beginning of year balance 3,219,846 1,077,041 1,358,402
Change in unrealized holding gains
(losses) on securities, net 98,951 2,142,805 (281,361)
_____________ ___________ ___________
End of year balance 3,318,797 3,219,846 1,077,041
_____________ ___________ ___________
Total Stockholder's Equity $ 135,210,319 129,379,299 121,954,229
<FN>
* Reflects the 2-for-1 stock split effective February 1998 and the 10 percent common
stock dividends effective in 1998 and 1997.
See accompanying notes to consolidated financial statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
BRENTON BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31 1998 1997 1996
<S> <C> <C> <C>
Net income $ 20,350,921 18,010,107 14,015,430
Other comprehensive income (loss),
net of tax:
Unrealized gains (losses) on
securities available for sale:
Unrealized holding gains (losses)
arising during the period (net
Of deferred tax of $(311,674),
$(1,470,886) and $48,346,
respectively) 512,861 2,451,444 (80,576)
Less: reclassification adjustment
for net realized gains included
in net income (net of tax expense
of $251,540, $185,183 and $120,471,
respectively) (413,910) (308,639) (200,785)
_____________ __________ __________
Other comprehensive income (loss),
net of tax 98,951 2,142,805 (281,361)
_____________ __________ __________
Comprehensive income $ 20,449,872 20,152,912 13,734,069
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
17
<PAGE>
BRENTON BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(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 47 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 15 to 40 years and are
included in other assets in the consolidated statements of condition.
Intangible assets totaled $3,395,000 and $3,795,000 at December 31, 1998, and
1997, 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 that the Company has the ability and intent 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 other comprehensive income
until realized. 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 is 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 5 to 40 years for
buildings and leasehold improvements, and 3 to 20 years for furniture and
equipment.
Other Real Estate Owned Included in other assets is property acquired through
foreclosure, acceptance of deed in lieu of foreclosure or other transfers in
settlement of outstanding loans and related contract sales of such property
until the contract is transferred to earning assets based upon sufficient
equity in the asset. Amounts totaled $389,000 and $341,000 at December 31,
1998, and 1997, respectively. Such property is carried at the lower of cost
or estimated fair value, less estimated selling costs. Periodic appraisals are
obtained to support carrying values. Net expense of
18
<PAGE>
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 and federal funds sold and securities purchased under agreements to
resell.
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 June 1998, 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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
(in thousands, except for EPS data) 1998 1997 1996
_____________________________________________________________________________
<S> <C> <C> <C>
Basic EPS Computation
Numerator:
Net income $20,351 18,010 14,015
______ ______ ______
Denominator:
Average common shares
outstanding 18,957 19,255 19,901
______ ______ ______
Basic EPS $ 1.07 .94 .70
______ ______ ______
______ ______ ______
Diluted EPS Computation
Numerator:
Net income $20,351 18,010 14,015
______ ______ ______
Denominator:
Average common shares
outstanding 18,957 19,255 19,901
Average stock options 390 313 177
Average long-term stock
compensation plan --- 154 215
______ ______ ______
19,347 19,722 20,293
______ ______ ______
______ ______ ______
Diluted EPS $ 1.05 .91 .69
______ ______ ______
______ ______ ______
</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
19
<PAGE>
instrument's contractual life. Subsequent payments received are recognized
into earnings as an adjustment to interest on deposits.
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 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.
Reporting Comprehensive Income Effective January 1, 1998, the Company adopted
SFAS No. 130, "Reporting Comprehensive Income." This statement establishes
standards for reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of financial staements.
The adoption of SFAS No. 130 did not have a material effect on the Company.
Segment Reporting Effective December 31, 1998, the Company adopted SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information."
This statement requires disclosure about operating segments that are
components of the Company that engage in business activities that generate
revenue and incur expenses. A segment is further defined as a component whose
operating results are reviewed by the chief operating decision-maker in the
determination of resource allocation and performance. The statement also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The adoption of SFAS No. 131 did not
have any impact on the Company's financial position other than additional
financial disclosures.
(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 $15,308,000 at December 31, 1998.
(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.
20
<PAGE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1998 (in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
Investment securities available for sale:
Taxable investments:
U.S. Treasury securities $ 43,076 360 (144) 43,292
Securities of U.S. government agencies 139,372 1,293 (248) 140,417
Mortgage-backed and related securities 231,955 1,497 (397) 233,055
Other investments 26,948 61 (25) 26,984
Tax-exempt investments:
Obligations of states and political
subdivisions 158,283 3,344 (191) 161,436
_______ _____ _____ _______
$599,634 6,555 (1,005) 605,184
Investment securities held to maturity:
Taxable investments:
Mortgage-backed and related securities $ 1,529 12 --- 1,541
Other investments 450 11 --- 461
Tax-exempt investments:
Obligations of states and political
subdivisions 41,048 964 (3) 42,009
_______ _____ _____ ______
$ 43,027 987 (3) 44,011
</TABLE>
<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>
21
<PAGE>
Proceeds from the sale of available for sale securities were $89,996,000,
$119,402,000 and $67,548,000 in 1998, 1997, and 1996, respectively. Gross
gains of $667,000 in 1998, $874,000 in 1997 and $558,000 in 1996 and gross
losses of $2,000 in 1998, $380,000 in 1997 and $237,000 in 1996 were realized
on those sales.
Other investments at December 31, 1998, and 1997, 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, 1998
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 $108,758 109,192
Due after one year through
five years 378,352 381,202
Due after five years through
ten years 92,176 93,634
Due after ten years 20,348 21,156
$599,634 605,184
Investment securities held to
maturity:
Due in one year or less $ 16,518 16,613
Due after one year through
five years 17,008 17,288
Due after five years through
ten years 5,842 6,150
Due after ten years 3,659 3,960
$ 43,027 44,011
</TABLE>
Investment securities carried at $265,405,000 and $314,865,000 at December 31,
1998, and 1997, 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) 1998 1997
<S> <C> <C>
Real estate loans:
Commercial construction
and land development $ 54,941 30,007
Secured by 1-4 family
residential property 127,351 194,055
Home equity 175,380 148,079
Other 151,995 161,989
Loans to farmers 84,554 79,036
Commercial and industrial loans 179,414 160,428
Loans to individuals for personal
expenditures:
Direct 69,452 66,252
Indirect 182,184 151,153
All other loans 8,284 2,190
$1,033,555 993,189
</TABLE>
The Company originates commercial, business, real estate, agricultural 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) 1998 1997
<S> <C> <C>
Impaired loans:
Nonaccrual $ 8,099 3,227
Restructured 289 513
Total impaired loans 8,388 3,740
Loans past due 90 days
or more 2,901 2,972
Total nonperforming loans 11,289 6,712
Other real estate owned 389 341
Total nonperforming assets $11,678 7,053
</TABLE>
The average balances of impaired loans for the years ended December 31, 1998,
and 1997, were $5,901,000 and $3,076,000, respectively. The allowance for
loan losses related to impaired loans at December 31, 1998, and 1997, was
$2,506,000 and $1,187,000, respectively. Impaired loans of $311,000 and
$704,000 were not subject to a related allowance for loan losses at
December 31, 1998, and 1997, 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) 1998 1997 1996
<S> <C> <C> <C>
Interest income:
As originally contracted $827 402 363
As recognized 215 157 174
Reduction of interest income $612 245 189
</TABLE>
Loan clients 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, 1997 $ 5,918
Additional loans 2,090
Loan payments (3,237)
Balance at December 31, 1998 $ 4,771
</TABLE>
Mortgage Servicing Rights The fair market value of capitalized servicing
rights at December 31, 1998 was approximately $5,986,000. To determine the
fair value of the servicing rights, the Company used comparable market prices.
In determining the fair market value and potential impairment at the end of
1998, the Company disaggregated the portfolio by its predominate risk factor,
interest rate. The fair value of the portfolio was determined by
22
<PAGE>
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) 1998 1997
<S> <C> <C>
Balance at beginning of year $2,274 1,026
Additions from originations 4,186 1,491
Amortization (685) (238)
Impairment --- (5)
Balance at end of year $5,775 2,274
</TABLE>
(5) Allowance for Loan Losses
______________________________________________________________________________
A summary of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
<S> <C> <C> <C>
Balance at beginning of year $12,732 11,328 11,070
Provision 4,200 3,900 2,900
Recoveries 1,647 1,733 1,419
Loans charged off (4,407) (4,229) (4,061)
Balance at end of year $14,172 12,732 11,328
</TABLE>
(6) Premises and Equipment
_____________________________________________________________________________
A summary of premises and equipment as of December 31 follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
<S> <C> <C>
Land $ 3,338 2,919
Buildings and leasehold
improvements 33,881 31,511
Furniture and equipment 29,853 25,047
Construction in progress 324 145
67,396 59,622
Less accumulated depreciation 34,873 30,723
$32,523 28,899
</TABLE>
Depreciation expense included in operating expenses amounted to $4,282,000,
$3,783,000 and $3,848,000 in 1998, 1997 and 1996, respectively.
(7) Deposits
_____________________________________________________________________________
Time deposits include deposits in denominations of $100,000 or more of
$97,665,000 and $80,896,000 at December 31, 1998, and 1997, respectively.
A summary of interest expense by deposit classification follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
<S> <C> <C> <C>
Demand $ 2,800 2,332 11,194
Savings 17,429 15,903 6,134
Time deposits
of $100,000 or more 4,835 4,833 3,935
Other time deposits 25,708 26,242 28,244
$50,772 49,310 49,507
</TABLE>
The Company made cash interest payments of $61,964,000, $57,932,000 and
$55,455,000 on deposits and borrowings in 1998, 1997 and 1996, respectively.
At December 31, 1998, the scheduled maturities of time deposits are as
follows:
(in thousands)
1999 $363,579
2000 146,791
2001 30,402
2002 17,238
2003 and thereafter 13,070
$571,080
(8) Income Taxes
_____________________________________________________________________________
The current and deferred income tax provisions included in the consolidated
statements of operations follow:
<TABLE>
<CAPTION>
1998 (in thousands) Current Deferred Total
<S> <C> <C> <C>
Federal $5,301 1,512 6,813
State 1,385 (116) 1,269
$6,686 1,396 8,082
1997
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
</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
$6,000,000, $6,100,000 and $4,250,000 to the IRS, and $1,510,000, $1,568,000
and $435,000 to the state of Iowa in 1998, 1997 and 1996, 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.
23
<PAGE>
The reasons for the difference between the amount computed by applying the
statutory federal income tax rate of 35 percent and income tax expense follow:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
<S> <C> <C> <C>
At statutory rate $ 10,204 9,114 7,136
Increase (reduction) due to:
Tax-exempt interest (3,169) (2,916) (2,556)
State taxes, net of
federal benefit 825 847 730
Nondeductible interest expense
to own tax-exempts 572 536 426
Other, net (350) (293) 35
$ 8,082 7,288 5,771
</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, 1998, or 1997. A summary of the temporary differences resulting
in deferred income taxes and the related tax effect on each follow:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
<S> <C> <C>
Allowance for loan losses $5,576 4,575
Unrealized gains on
securities available for sale (2,157) (2,006)
Deposit base intangibles (458) (489)
Premises and equipment (366) (468)
Stock compensation plan --- 1,077
Mortgage servicing rights (2,348) (852)
Real estate mortgage,
loan points deferred (257) (283)
Other, net 333 316
$ 323 1,870
</TABLE>
(9) Other Short-Term Borrowings
_____________________________________________________________________________
The Company had short-term borrowings with the Federal Home Loan Bank of Des
Moines (FHLB) totaling $87,050,000 and $73,700,000 at December 31, 1998, and
1997, respectively. The average rate on these borrowings at December 31, 1998
was 5.38 percent. These borrowings were secured by FHLB stock and residential
mortgage loans equal to 130 percent of the borrowings.
The Parent Company has arranged an unsecured line of credit of
$5,000,000, which was unused at December 31, 1998. 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) 1998 1997
<S> <C> <C>
Capital notes, 6.00% to 10.00%
Total Parent Company $ 9,046 10,112
Borrowings from FHLB, average rate
of 5.74% at December 31, 1998 32,500 26,550
$ 41,546 36,662
</TABLE>
Borrowings from the FHLB were secured by FHLB stock and residential mortgage
loans equal to 130 percent of the borrowings and were direct obligations of
the individual subsidiaries.
Scheduled maturities of long-term borrowings at December 31, 1998 follow:
<TABLE>
<CAPTION>
Parent
(in thousands) Company Consolidated
<S> <C> <C>
1999 $ 1,263 1,263
2000 803 19,303
2001 1,358 15,358
2002 757 757
2003 944 944
Thereafter 3,921 3,921
$ 9,046 41,546
</TABLE>
24
<PAGE>
(11) Fair Value of Financial Instruments
_____________________________________________________________________________
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
_________________ _________________
Recorded Fair Recorded Fair
(in thousands) Amount Value Amount Value
_______________________________________________________________________________________
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks $ 76,460 76,460 $ 77,468 77,468
Interest-bearing deposits with
banks 2,167 2,167 1,320 1,320
Federal funds sold and securities
purchased under agreements to
resell 6,000 6,000 9,300 9,300
Trading account securities --- --- 77 77
Investment securities 648,211 649,195 555,733 556,506
Loans held for sale 98,147 98,147 19,303 19,303
Loans, net 1,019,382 1,029,536 980,457 981,664
Financial liabilities:
Deposits $ 1,496,675 1,504,006 $1,364,270 1,369,448
Federal funds purchased, securities
sold under agreements to repurchase
and other short-term borrowings 242,897 242,897 166,333 166,333
Long-term borrowings 41,546 42,912 36,662 37,156
Off-balance-sheet assets (liabilities):
Commitments to extend credit $ --- --- $ --- ---
Letters of credit --- (100) --- (111)
Interest rate swaps --- --- --- (34)
Interest rate floor 98 400 195 206
</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.
25
<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, 1998, 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, 1998:
Total Capital
(to Risk Weighted Assets):
Consolidated $148,644 11.37% $104,548 > 8.0% N/A
_
Brenton Bank 136,371 11.04 98,842 > 8.0 $123,553 > 10.0%
_ _
Tier 1 Capital
(to Risk Weighted Assets):
Consolidated 134,446 10.29 52,274 > 4.0 N/A
_
Brenton Bank 123,087 9.96 49,421 > 4.0 74,132 > 6.0
_ _
Tier 1 Capital
(to Average Assets):
Consolidated 134,446 7.17 56,271 > 3.0 N/A
_
Brenton Bank 123,087 7.64 64,429 > 4.0 80,536 > 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 June 1998, the Company declared a 10 percent common stock dividend. This
transaction resulted in the issuance of 1,726,159 shares of common stock and
the transfer of $4,236,869 from retained earnings to common stock. 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 both 10 percent common stock dividends 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, the Board of
Directors authorized additional common stock repurchases of $10 million in
1998. For the years ended December 31, 1998, 1997 and 1996, the Company
repurchased 512,650, 805,904 and 915,365 shares (restated for the 2-for-1
stock split effective February 1998 and the 10 percent common stock dividends
effective in 1998, 1997 and 1996), respectively, at a total cost of
$10,000,900, $10,014,087 and $8,248,331.
(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. 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 that could be paid by the subsidiary banks
to the Parent Company at December 31, 1998, were approximately $6 million.
(15) Employee Retirement Plan
_____________________________________________________________________________
The Company provides a defined contribution retirement plan for the benefit of
employees. The plan is a combination profit sharing and 401(k) plan. All
employees 21 years of age or older and
26
<PAGE>
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 1/2 percent of each
employee's eligible compensation. Retirement plan costs charged to operating
expenses in 1998, 1997 and 1996 amounted to $1,506,000, $1,290,000 and
$1,284,000, 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 1,331,000 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. As of December 31, 1998, 33
percent of the outstanding options vested.
For purposes of estimating the fair value of the Company's stock options
at the grant-date, the Company's option pricing model was used with the
following weighted average assumptions for 1998, 1997 and 1996, respectively:
expected dividend yields of 2.06, 2.05 and 2.15 percent; risk-free interest
rates of 5.55%, 6.52% and 6.85%; volatility factors of the expected market
price of the Company's common stock of 19.6%, 18.5% and 18.0%; and weighted
average expected life of the options of 6 years. The weighted average fair
value of options granted in 1998, 1997 and 1996, respectively, was $4.64,
$3.74 and $2.73.
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>
1998 1997 1996
<S> <C> <C> <C>
Net income (in thousands):
As reported $20,351 18,010 14,015
Pro forma 19,732 17,735 13,769
Basic earnings per share:
As reported $1.07 .94 .70
Pro forma 1.04 .92 .69
Diluted earnings per share:
As reported $1.05 .91 .69
Pro forma 1.03 .90 .68
</TABLE>
Pro forma net income reflects only options granted in 1998, 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 vesting period.
Changes in options outstanding during 1998, 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 1998, 1997 and 1996):
<TABLE>
<CAPTION>
Exercisable Outstanding Option Price
Options Options Per Share
<S> <C> <C> <C>
December 31, 1995 --- --- $ ---
Granted - 1996 --- 1,139,336 9.16-9.76
December 31, 1996 --- 1,139,336 9.16-9.76
Granted - 1997 --- 95,898 11.36-15.23
Forfeited - 1997 --- (39,930) 9.16
December 31, 1997 --- 1,195,304 9.16-15.23
Granted - 1998 --- 131,400 16.69-20.69
Forfeited - 1998 --- (25,234) 9.16-18.33
Vested - 1998 429,467 --- 9.16-20.69
December 31, 1998
(29,530 shares available
for grant) 429,467 1,301,470 $ 9.16-20.69
</TABLE>
A total of 930,504 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 covered a three-year
performance period, 35 percent of which vested upon completion of employment
for the performance period and 65 percent of which vested 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 $0, $1,731,000, and $1,302,000 for 1998, 1997 and 1996, respectively.
Changes in outstanding grant shares during 1998, 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 1998, 1997 and 1996):
<TABLE>
<CAPTION>
Performance 1993 to 1994 to 1995 to
Period 1995 1996 1997
<S> <C> <C> <C>
December 31, 1995 181,754 204,730 219,605
Forfeited - 1996 --- (23,048) (25,093)
Expired - 1996 (118,142) --- ---
Vested and Issued - 1996 (63,612) --- ---
December 31, 1996 --- 181,682 194,512
Forfeited - 1997 --- --- (26,084)
Expired - 1997 --- (118,088) ---
Vested and Issued - 1997 --- (63,594) ---
December 31, 1997 --- --- 168,428
Vested and Issued - 1998 --- --- (168,428)
Outstanding grant shares
At December 31, 1998 --- --- ---
</TABLE>
The Company's 1987 nonqualified stock option plan permitted the Board of
Directors to grant options on up to 798,600 shares of the Company's common
stock to officers of the Company. Under provisions of the plan, no further
grants can be made and no grants were made in 1998. The price at which
options were exercisable
27
<PAGE>
was not less than the fair market value of the shares at the date the options
were granted. The options were subject to certain vesting requirements and
maximum exercise periods, as established by the Board of Directors.
Changes in options outstanding and exercisable during 1998, 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 1998, 1997 and 1996):
<TABLE>
<CAPTION>
Exercisable Outstanding Option Price
Options Options Per Share
<S> <C> <C> <C>
December 31, 1995 329,289 329,289 $1.66-3.55
Exercised - 1996 (64,856) (64,856) 1.66
December 31, 1996 264,433 264,433 1.66-3.55
Exercised - 1997 (224,503) (224,503) 1.66-3.55
December 31, 1997 39,930 39,930 2.41
Exercised - 1998 (39,930) (39,930) 2.41
December 31, 1998 --- --- $ ---
</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 1998, 1997 and 1996,
39,986, 42,768 and 43,502 shares (restated for the 2-for-1 stock split
effective February 1998 and the 10 percent common stock dividends effective in
1998, 1997 and 1996), 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 $1,849,000, $1,963,000 and $1,919,000 in 1998, 1997 and 1996, respectively.
Future minimum rental commitments for all noncancelable leases with terms of
one year or more total approximately $1,030,000 per year through 2000,
$545,000 per year through 2003, $420,000 per year through 2008 and $40,000 per
year through 2013, with a total commitment of $5,980,000.
(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,
commercial letters of credit, commitments to sell residential real estate
mortgage loans 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 a 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. A summary of commitments outstanding at December 31 follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
_____________________________________________________________________________
<S> <C> <C>
Commitments to extend credit $ 274,945 245,356
Standby letters of credit 19,956 22,150
Commercial letters of credit 1,751 1,748
Commitments to sell residential
real estate mortgage loans 70,690 15,397
</TABLE>
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.
Standby and commercial 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. The Company does
not anticipate losses as a result of issuing commitments to extend credit,
standby letters of credit or commercial letters of credit.
The Company enters into forward contracts for future delivery of
residential mortgage loans at specified yields to reduce the interest rate
risk associated with fixed-rate residential mortgages held for sale and
commitments to sell residential mortgages. Credit risk arises from the
possible inability of the other parties to comply with the contract terms.
The majority of the Company's contracts are with government-sponsored agencies
(FNMA, FHLMC).
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 $0 and $11,690,000 at December 31,
1998, and 1997, 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.
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.
28
<PAGE>
The Company maintains a data processing agreement with ALLTEL Information
Services, Inc. (ALLTEL), whereby ALLTEL manages and operates the Company's
data processing facility. The contract involves fixed payments of $2,298,000
in 1999, $2,190,000 through 2001 and $1,095,000 in 2002. These fixed payments
will be adjusted for inflation and volume fluctuations.
On December 31, 1998, the Company entered into an agreement to purchase a
parcel of land for $2.1 million. The land will be utilized for a new
operations and sales support center.
The Company is involved with various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial statements.
(19) Brenton Banks, Inc. (Parent Company) Condensed Financial Information
_____________________________________________________________________________
<TABLE>
<CAPTION>
Statements of Condition
December 31 (in thousands) 1998 1997
<S> <C> <C>
Assets
Interest-bearing deposits with banks $ 1,088 3,596
Investments in:
Bank subsidiaries 136,687 132,008
Excess cost over net assets 1,679 1,753
Premises and equipment 503 563
Other assets 4,722 5,103
________ _______
$ 144,679 143,023
Liabilities and Stockholders' Equity
Accrued expenses payable
and other liabilities $ 423 3,532
Long-term borrowings 9,046 10,112
Common stockholders' equity 135,210 129,379
_______ _______
$ 144,679 143,023
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations
Years Ended December 31 (in thousands) 1998 1997 1996
<S> <C> <C> <C>
Income
Dividends from subsidiaries $ 16,869 14,850 10,766
Interest income 93 213 341
Other operating income 103 119 43
________ ______ ______
17,065 15,182 11,150
Expense
Compensation and benefits 439 2,331 1,884
Interest on borrowings 735 849 970
Other operating expense 613 584 655
________ ______ ______
1,787 3,764 3,509
Income before income taxes and
equity in undistributed earnings
of subsidiaries 15,278 11,418 7,641
Income taxes (519) (1,155) (1,040)
Income before equity in undistributed
earnings of subsidiaries 15,797 12,573 8,681
Equity in undistributed earnings of subsidiaries 4,554 5,437 5,334
________ ______ ______
Net income $ 20,351 18,010 14,015
</TABLE>
29
<PAGE>
(19) Brenton Banks, Inc. (Parent Company) Condensed Financial Information
_____________________________________________________________________________
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31 (in thousands) 1998 1997 1996
<S> <C> <C> <C>
Operating Activities
Net income $ 20,351 18,010 14,015
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries (4,554) (5,437) (5,334)
Depreciation and amortization 161 163 163
Net (increase) decrease in other assets 354 (1,962) 18
Net increase (decrease) in accrued expenses
payable and other liabilities (3,109) 1,056 871
________ ______ ______
Net cash provided by operating activities 13,203 11,830 9,733
Investing Activities
Decrease in short-term investments --- --- 7,500
Purchase of subsidiary equity, net (26) --- (7)
Principal collected from subsidiaries --- --- 115
Purchase of premises and equipment, net --- (8) 669
________ ______ ______
Net cash provided (used) by investing activities (26) (8) 8,277
Financing Activities
Net repayment of long-term borrowings (1,066) (1,136) (1,187)
Proceeds from issuance of common stock under the
long-term stock compensation plan 970 247 335
Proceeds from issuance of common stock under the
stock option plan 290 1,286 291
Proceeds from issuance of common stock under the
employee stock purchase plan 758 551 72
Payment for shares reacquired under common stock
repurchase plan (10,001) (10,014) (8,248)
Payment for fractional shares from common stock (14) (16) (14)
dividends
Dividends on common stock (6,622) (4,782) (3,749)
________ ______ ______
Net cash used by financing activities (15,685) (13,864) (12,500)
Net increase (decrease) in cash and interest-
bearing deposits (2,508) (2,042) 5,510
Cash and interest-bearing deposits at the
beginning of the year 3,596 5,638 128
Cash and interest-bearing deposits at the end
of the year $ 1,088 3,596 5,638
</TABLE>
30
<PAGE>
(20) Segment Information
______________________________________________________________________________
The Company has one reportable operating segment: banking. The banking segment
generates revenues through personal, business, agricultural and commercial
lending, management of the investment securities portfolio, providing deposit
account services and providing trust services. The Company evaluates the
banking segment's performance on the basis of profit.
Included in all other in the table below are mortgage banking, investment
brokerage, insurance sales and real estate brokerage. All operations are
concentrated in the state of Iowa.
The Company accounts for intercompany sales and transactions as if they
were to third parties and attempts to set fees consistent with those that
would apply in an arm's length transaction with a nonaffiliate. There can be
no assurance the rates charged reflect those that would have been agreed upon
following an arm's length transaction.
The following table presents a summary of the Company's operating
segments for the three years ended December 31, 1998:
<TABLE>
<CAPTION>
All Parent Intersegment Reported
Banking Other Company Eliminations Balances
(in thousands)
_________________________________________________________________________________________
1998
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net income income $ 61,112 917 (642) --- 61,387
Noninterest income from
nonaffiliates 17,649 15,621 103 (15) 33,358
Noninterest income from
affiliates 296 --- 16,869 (17,165) ---
Income before income taxes
and minority interest 26,227 4,517 15,278 (16,869) 29,153
Income taxes 7,030 1,571 (519) --- 8,082
Depreciation & amortization 4,274 254 161 (6) 4,683
Capital expenditures 7,311 601 --- --- 7,912
Segment assets 1,885,617 117,268 144,679 (208,007) 1,939,557
</TABLE>
<TABLE>
<CAPTION>
1997
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net income income $ 60,333 437 (636) --- 60,134
Noninterest income from
nonaffiliates 15,864 11,560 119 (37) 27,506
Noninterest income from
affiliates 286 67 14,850 (15,203) ---
Income before income taxes
and minority interest 26,534 2,939 11,418 (14,850) 26,041
Income taxes 7,420 1,023 (1,155) --- 7,288
Depreciation & amortization 3,803 255 163 (4) 4,217
Capital expenditures 2,407 112 8 --- 2,527
Segment assets 1,701,495 24,933 143,023 (150,967) 1,718,484
</TABLE>
<TABLE>
<CAPTION>
1996
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net income income $ 56,314 367 (629) --- 56,052
Noninterest income from
nonaffiliates 14,239 9,391 43 (346) 23,327
Noninterest income from
affiliates 359 49 10,766 (11,174) ---
Income before income taxes
and minority interest 22,217 1,296 7,641 (10,765) 20,389
Income taxes 6,358 453 (1,040) --- 5,771
Depreciation & amortization 3,912 232 163 (5) 4,302
Capital expenditures 2,409 282 43 --- 2,734
Segment assets 1,622,678 12,407 135,678 (138,668) 1,632,095
__________________________________________________________________________________________
</TABLE>
The following table shows the detail of intersegement eliminations for segment
assets shown in the previous
table:
<TABLE>
<CAPTION>
1998 1997 1996
_____________________________________________________
(in thousands)
<S> <C> <C> <C>
Investment in subsidiaries $138,539 133,860 126,893
Other consolidating adjustments 69,468 17,107 11,775
_______ _______ _______
$208,007 150,967 138,668
</TABLE>
31
<PAGE>
(21) Unaudited Quarterly Financial Information
_____________________________________________________________________________
The following is a summary of unaudited quarterly financial information
(in thousands, except per common share data):
<TABLE>
<CAPTION>
1998
Three months ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Interest income $ 30,320 30,693 31,190 31,823
Interest expense 15,056 15,428 15,930 16,225
_______ ______ ______ ______
Net interest income 15,264 15,265 15,260 15,598
Provision for loan losses 1,050 1,050 1,050 1,050
_______ ______ ______ ______
Net interest income after
provision for loan losses 14,214 14,215 14,210 14,548
Noninterest income 7,487 8,106 8,549 9,216
Noninterest expense 14,908 15,154 15,172 16,158
_______ ______ ______ ______
Income before income taxes
and minority interest 6,793 7,167 7,587 7,606
Income taxes 1,907 1,994 2,101 2,080
Minority interest 167 178 190 185
_______ ______ ______ ______
Net income $ 4,719 4,995 5,296 5,341
Per common share:
Net income-basic $ .25 .26 .28 .28
Net income-diluted .24 .26 .27 .28
</TABLE>
<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 $ .22 .23 .26 .23
Net income-diluted .21 .22 .26 .22
</TABLE>
32
<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, 1998, and 1997, and
the related consolidated statements of operations, comprehensive income,
changes in common stockholders' equity and cash flows for each of the years in
the three-year period ended December 31, 1998. 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, 1998, and 1997, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Des Moines, Iowa
January 29, 1999
33
<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 1,704 common
stockholders of record on December 31, 1998.
<TABLE>
<CAPTION>
MARKET AND DIVIDEND INFORMATION
1998 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $20.00 16.36 .077
2nd quarter 21.00 18.41 .087
3rd quarter 24.25 18.25 .090
4th quarter 19.13 15.75 .095
</TABLE>
<TABLE>
<CAPTION>
1997 High Low Dividends
<S> <C> <C> <C> <C>
1st quarter $11.78 11.26 .054
2nd quarter 12.50 11.42 .058
3rd quarter 15.00 12.33 .063
4th quarter 18.53 13.69 .073
</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 June 1998 and May 1997 10 percent
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 Incorporated
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 SITE 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 800/627-3686
Annual Shareholders' Meeting
Wednesday, May 19, 1999, 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
34
<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.
Robert C. Carr
Vice President
Amoco Corporation
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.
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 MANAGEMENT TEAM
Robert L. DeMeulenaere
Chairman and Chief Executive Officer
Larry A. Mindrup
President
Phillip L. Risley
Executive Vice President and
Operations & Technology Center
President
Steven T. Schuler
Chief Financial Officer/Treasurer/
Secretary
Perry C. Atwood
Chief Sales Officer
Elizabeth M. Piper/Bach
Chief Financial Services Officer
SALES SUPPORT MANAGERS
Judy S. Bohrofen
Human Resources Director
Gregory M. Cole
Loan Development Center Director
W. Bradley Cunningham
Investment/ALCO Director
Marsha A. Findlay
Retail Manager
Douglas R. Gulling
Corporate Controller/Cashier
Monica L. Haun
Operations and Technology Manager
Catherine I. Reed
Marketing Director
Norman D. Schuneman
Chief Credit Officer
LINE OF BUSINESS MANAGERS
AND REGIONAL BANK
PRESIDENTS
Woodward G. Brenton
Commercial Banking
Chief Commercial Banking Officer
Mark J. Hoffschneider
Mortgage Banking
Division President
Douglas F. Lenehan
Diversified Commercial Services
Division President
David W. Mackaman
Commercial Banking
Division Manager
Larry A. Mindrup
Retail Banking
President
Elizabeth M. Piper/Bach
Financial Services
Chief Financial Services Officer
Allen W. Shafer
Business Banking
Division President
Thomas J. Vincent
Agricultural Banking
Division President
Charles N. Funk
Central Region President
Dennis H. Hanson
East Central Region President
Ronald D. Larson
East Region President
Marc J. Meyer
West Region President
<PAGE>
Exhibit 21
Subsidiaries.
238
<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
239
<PAGE>
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of
their report dated January 29, 1999, relating to certain
consolidated financial statements of Brenton Banks, Inc.
into the Registration Statement on Form S-8 of Brenton
Banks, Inc.
240
<PAGE>
INDEPENDENT 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 29, 1999,
relating to the consolidated statements of condition of Brenton Banks, Inc.
and subsidiaries as of December 31, 1998 and 1997, 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, 1998, which report appears in the December 31, 1998, annual
report on Form 10-K of Brenton Banks, Inc.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
March 29, 1999
241
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1998 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 76,460,049
<INT-BEARING-DEPOSITS> 2,167,288
<FED-FUNDS-SOLD> 6,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 605,183,788
<INVESTMENTS-CARRYING> 43,027,501
<INVESTMENTS-MARKET> 44,011,000
<LOANS> 1,033,554,556
<ALLOWANCE> (14,172,264)
<TOTAL-ASSETS> 1,939,556,765
<DEPOSITS> 1,496,675,131
<SHORT-TERM> 242,897,300
<LIABILITIES-OTHER> 23,228,015
<LONG-TERM> 41,546,000
0
0
<COMMON> 46,880,953
<OTHER-SE> 88,329,366
<TOTAL-LIABILITIES-AND-EQUITY> 1,939,556,765
<INTEREST-LOAN> 89,739,711
<INTEREST-INVEST> 32,450,999
<INTEREST-OTHER> 1,835,083
<INTEREST-TOTAL> 124,025,793
<INTEREST-DEPOSIT> 50,772,501
<INTEREST-EXPENSE> 11,865,966
<INTEREST-INCOME-NET> 61,387,326
<LOAN-LOSSES> 4,200,000
<SECURITIES-GAINS> 665,450
<EXPENSE-OTHER> 62,111,877
<INCOME-PRETAX> 28,433,276
<INCOME-PRE-EXTRAORDINARY> 28,433,276
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,350,921
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 3.73
<LOANS-NON> 8,099,000
<LOANS-PAST> 2,901,000
<LOANS-TROUBLED> 289,000
<LOANS-PROBLEM> 900,000
<ALLOWANCE-OPEN> 12,732,131
<CHARGE-OFFS> 4,407,372
<RECOVERIES> 1,647,505
<ALLOWANCE-CLOSE> 14,172,264
<ALLOWANCE-DOMESTIC> 14,172,264
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
