SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 0-6216
December 31, 1993
BRENTON BANKS, INC.
Incorporated in Iowa I.R.S. Employer Identification
No. 42-0658989
SUITE 300, CAPITAL SQUARE, 400 LOCUST, DES MOINES, IOWA 50309
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, $5 PAR VALUE
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 [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 14, 1994, was $85,120,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date, March 14, 1994.
5,254,351 shares Common Stock, $5 par value
DOCUMENTS INCORPORATED BY REFERENCE
The Annual Report to Shareholders for the 1993 calendar year is incorporated
by reference into Part I and Part II 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, 1993, is incorporated by reference into Part III hereof to the
extent indicated in such Part.
32 Total Pages
1
TABLE OF CONTENTS
PART I
Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . 4
(A) General Description . . . . . . . . . . . . . . . . 4
(B) Recent Developments . . . . . . . . . . . . . . . . 4
(C) Affiliated Banks . . . . . . . . . . . . . . . . . 5
(D) Bank-Related Subsidiaries and Affiliates . . . . . 6
(E) Executive Officers of the Registrant . . . . . . . 7
(F) Employees . . . . . . . . . . . . . . . . . . . . . 8
(G) Supervision and Regulation . . . . . . . . . . . . 8
(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 . . . . . . . . . . 25
Item 8. Financial Statements and Supplementary Data . . . . . . 26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . 26
2
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 . . . . . . . . . . . . . . . . . . 26
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3
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,
1993, the Parent Company had direct control of its 13 affiliated banks and 1
savings bank (hereinafter the "affiliated banks"), all of which are located
in Iowa, 5 of which are national banks organized under the laws of the United
States, 8 of which are state banks incorporated under the laws of the State
of Iowa, and 1 of which is a federal savings bank organized under the laws of
the United States. On December 31, 1993, the affiliated banks were operating
42 banking locations in Iowa. All of the affiliated banks are members of the
Federal Deposit Insurance Corporation and all of the affiliated national
banks are members of the Federal Reserve System.
Brenton Banks, Inc. and its subsidiaries (the "Company") engages in
retail and commercial banking and related financial services. In connection
with this banking industry segment, the Company renders the usual products
and services of retail and commercial banking such as deposits, commercial
loans, personal loans, and trust services. The principal service rendered by
the Company consists of making loans. The principal markets for these loans
are businesses and individuals. These loans are made at the offices of the
affiliated banks and subsidiaries, and some are sold on the secondary market.
The Company also engages in activities that are closely related to banking,
including mortgage banking and investment brokerage.
The Parent Company furnishes specialized services to its affiliated
banks and subsidiaries including supervision, administration and review of
loan portfolios; administration of investment portfolios, insurance programs
and employee benefit plans; performance of examinations and audits;
preparation of tax returns; and assistance with respect to accounting and
operating systems and procedures, personnel, marketing, trust, investment
brokerage services and banking facilities and equipment. Charges for the
services are based on the nature and extent of the services provided.
(B) Recent Developments.
Management Changes. Robert L. DeMeulenaere was elected President
and Director of Brenton Banks, Inc. at the January 19, 1994 Board of
Director's meeting. He succeeds J.C. Brenton as President. J.C. Brenton
continues as Director of Brenton Banks, Inc. Robert L. DeMeulenaere joined
the organization in 1964 at the Davenport bank. In 1972, he moved to the
Cedar Rapids bank as Executive Vice President and in 1982 became President.
In 1985, he moved to Des Moines as Senior Vice President-Metro Bank Division,
and also became President of Brenton Mortgages, Inc. in 1988. He returned to
Cedar Rapids in 1990 as CEO of the Cedar Rapids bank as a result of a major
acquisition. In 1994, he returned to Des Moines to assume his new
responsibilities as President of Brenton Banks, Inc.
Accounting Standards. Effective December 31, 1993, the Company
adopted the Statement of Financial Accounting Standards No. 115. Under this
new accounting standard, the method of classifying investment securities is
based on the Company's intended holding period. Accordingly, securities
which the Company may sell at its discretion prior to maturity are recorded
at their fair value. Additionally, the aggregate unrealized net gains or
losses, including the effect of income tax and minority interest, are
recorded as a component of common stockholders' equity. At December 31,
1993, aggregate unrealized gains totaled $3,036,270.
Weather-Related Concerns. Parts of Iowa experienced record
flooding during the summer of 1993, but the state's economy did not falter
and most Iowans rebounded quickly. The flood had a varied impact in both
metropolitan and agricultural areas of the state. Only a few of the
businesses served by Brenton
4
were affected by the flood. In some areas, crop production was reduced 25 to
35 percent from flooding, as well as excessive rainfall and fewer days of
sunshine; other areas were less severely impacted. Due to the strength of
Brenton's borrowers, multi-peril crop insurance, disaster assistance, and
government guarantees, Brenton anticipates that the flood will have very
little impact on its loan portfolio quality.
Growth and Acquisitions. As part of management's strategic growth
plans, Brenton Banks, Inc. investigates acquisition opportunities which
strengthen the Company's presence in current or selected new market areas.
During 1994, the Company intends to continue to expand both its
traditional and non-traditional services. Brenton intends to expand its
mortgage banking business in 1994, by expanding mortgage origination and
centralizing secondary market operations. Also in early 1994, Brenton
purchased an insurance agency in the Tama/Toledo, Iowa area. The intention
is to expand the Tama/Toledo location to include a loan production office.
The Company also intends to open a loan production and investment brokerage
office in Newton, Iowa, as well as a retail Brokerage location in downtown
Des Moines.
On October 1, 1992, Brenton Banks, Inc. merged with Ames Financial
Corporation and acquired its wholly-owned subsidiary, Ames Savings Bank, FSB,
of Ames, Iowa whose name has since been changed to Brenton Savings Bank, FSB.
The institution continues to operate as a federal savings bank, requiring
Brenton Banks, Inc. to also register as a savings and loan holding company.
As a savings and loan holding company, Brenton Banks, Inc. is required to
file certain reports with and be regulated by the Office of Thrift
Supervision. See Supervision and Regulation. Late in 1993, Brenton Savings
Bank received approval to open a new banking office in Ankeny, Iowa. In
addition, the Brenton Savings Bank, FSB has applied to open a banking office
in Iowa City, Iowa. Both Ankeny and Iowa City are rapidly expanding markets
not presently served by Brenton.
Other. The information appearing on pages 2 through 8 of the
Company's Annual Report to Stockholders for the year ended December 31, 1993
(the "Annual Report") filed as Exhibit 13, is incorporated by reference.
(C) Affiliated Banks.
The 14 affiliated banks had 42 banking locations at December 31,
1993, located in 12 of Iowa's 99 counties. These banks serve both
agricultural and metropolitan areas. The location and certain other
information about the affiliated banks are given below:
Brenton Bank, N.A., Des Moines is located in the Des Moines, Iowa,
metropolitan area. Des Moines is the largest city in Iowa and the population
of the metropolitan area is approximately 393,000. In addition to their main
banking office, Brenton Bank, N.A., Des Moines has eight offices. All of
these offices are located in the Des Moines metropolitan area.
Brenton Bank and Trust Company, Adel, is located in Adel, Iowa.
The bank has offices in Dexter, Redfield and Van Meter, Iowa. Brenton State
Bank, Dallas Center, is located in Dallas Center, Iowa and has offices in
Granger, Woodward and Waukee, Iowa. These two affiliated banks service
customers in parts of Polk, Dallas, Madison, Adair, Guthrie, and Boone
counties.
Warren County Brenton Bank and Trust is located in Indianola, Iowa,
and services customers in parts of Polk, Warren, Madison, Marion, Lucas and
Clarke counties.
Brenton National Bank of Perry is located in Perry, Iowa and
services parts of Dallas, Boone, Guthrie and Greene counties.
Brenton State Bank of Jefferson is located in Jefferson, Iowa.
This affiliated bank services customers in Greene County.
5
Brenton Bank of Palo Alto County is located in Emmetsburg, Iowa and
has offices in Mallard and Ayrshire, Iowa. This affiliated bank services
Palo Alto County.
Brenton Bank and Trust Company, Clarion, is located in Clarion,
Iowa, and has offices in Eagle Grove and Rowan, Iowa. This affiliated bank
services customers in parts of Wright, Humboldt and Webster counties.
Brenton First National Bank, Davenport, is located in Davenport,
Iowa and services customers in the Quad-Cities metropolitan area with a
population of approximately 351,000. The bank has four offices in Davenport.
Brenton National Bank-Poweshiek County is located in Grinnell, Iowa
and services parts of Poweshiek and Jasper counties.
Brenton Bank and Trust Company, Marshalltown, Iowa is located in
Marshalltown, Iowa and has one office in Marshalltown and one office in
Albion, Iowa. The bank services customers in Marshall County.
Brenton Bank and Trust Company of Cedar Rapids is located in Cedar
Rapids, Iowa and services customers in Linn County, population of
approximately 169,000. The bank has three offices in Cedar Rapids and one
office in Marion, Iowa.
Brenton Bank, N.A. Knoxville is located in Knoxville, Iowa. The
bank services customers of Marion County south of the Des Moines river.
Brenton Savings Bank, FSB is located in Ames, Iowa and has one
office in Ames and one office in Story City. The savings bank serves
customers in Story County.
At December 31, 1993, four of the affiliated banks owned and
operated insurance agencies handling group, fire, crop, homeowner's,
automobile and liability insurance. One of the affiliated banks operates
insurance agency activities through a corporate subsidiary and three of the
affiliated banks conduct the activities directly. In addition, two of the
affiliated banks own and operate real estate agencies. One of the affiliated
banks operates real estate agency activities through a corporate subsidiary,
while the other bank conducts the activities directly. The total commissions
from the insurance and real estate agencies are not substantial in relation
to total other receipts of any of the affiliated banks owning these agencies.
(D) Bank-Related Subsidiaries and Affiliates.
Brenton Brokerage Services, Inc., a wholly owned subsidiary of
Brenton Bank, N.A., Des Moines, was formed in 1992 and provides a full array
of retail investment brokerage services to customers. The company is not
involved with the direct issuance, floatation, underwriting or public sale of
securities. At December 31, 1993, this subsidiary had 25 licensed brokers
serving all Brenton banks.
Brenton Bank Services Corporation, a bank services company owned by
the affiliated banks, provides centralized accounting, operations and
financial reporting services; and coordinates centralized proof services and
the computer processing services for the Company.
Brenton Mortgages, Inc., a wholly-owned subsidiary of the Parent
Company, engages in the mortgage servicing business. This subsidiary
services numerous mortgage loans sold to institutional investors and the
mortgage loan portfolios of the affiliated banks.
Brenton Insurance Services, Inc., a wholly-owned subsidiary of the
Parent Company, provides insurance risk management services for the Company.
Brenton Properties, Inc., a wholly-owned subsidiary of the Parent
Company, owned an office building in Cedar Rapids, Iowa, part of which was
leased to Brenton Bank and Trust Company of Cedar
6
Rapids for its main banking facility. Brenton Properties, Inc. was dissolved
in 1993, when the building was sold to Brenton Bank and Trust Company of
Cedar Rapids.
(E) Executive Officers of the Registrant.
The term of office for the executive officers of the Parent 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 of the
Parent Company as of March 14, 1994, the Parent Company offices held by these
executive officers on that date, the period during which the executive
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:
Parent Company Position
Name and Address Age Position Commenced Other Positions
________________ ___ ________ _________ _______________
C. Robert Brenton 63 Chairman of the Board 1990 President of the Parent Company - prior to
Des Moines, Iowa May 1990
William H. Brenton 69 Chairman of the 1990 Chairman of the Board of the Parent Company -
Des Moines, Iowa Executive Committee prior to May 1990
and Vice Chairman of
the Board
Robert L. DeMeulenaere 54 President 1994 President/Treasurer, Brenton Mortgages, Inc.
Des Moines, Iowa - August 1989 to present; CEO, Brenton Bank
and Trust Company of Cedar Rapids - August
1990 to January 1994; Senior Vice President
of the Parent Company - August 1990 to
January 1994; Senior Vice President-Metro
Bank Division of the Parent Company -
February 1986 to January 1990.
Phillip L. Risley 51 Executive Vice 1992 President and CEO, Brenton Bank, N.A.,
Des Moines, Iowa President Des Moines - February 1990 to present; Vice
President - Operations of the Parent
Company - May 1984 to January 1992;
Chairman of the Board, Brenton Bank
Services Corporation - May 1992 to present;
Executive Vice President/Treasurer, Brenton
Information Systems, Inc. - April 1990 to May
1992; President, Brenton Information
Systems, Inc. - prior to April 1990; President,
Brenton Bank, N.A., Des Moines - April 1988
to February 1990
Roger D. Winterhof 48 Senior Vice President - 1984
Des Moines, Iowa Community Bank
Division
Norman D. Schuneman 51 Senior Vice President - 1990 Executive Vice President, Brenton Bank, N.A.,
Des Moines, Iowa Lending Des Moines - July 1985 to present; Vice
President - Loans of the Parent Company -
January 1988 to January 1990
Saulene M. Richer 47 Senior Vice President - 1990 President, Brenton Information Systems, Inc. -
Des Moines, Iowa Marketing/Technology April 1990 to May 1992
John R. Amatangelo 44 Senior Vice President - 1991 President, Brenton Bank Services Corporation
Des Moines, Iowa Operations - May 1992 to present
Steven T. Schuler 42 Chief Financial Officer 1990 Executive Vice President, Brenton Bank
Des Moines, Iowa and Vice President/ 1983 Services Corporation - May 1992 to present
Treasurer/Secretary 1986
7
Parent Company Position
Name and Address Age Position Commenced Other Positions
________________ ___ ________ _________ _______________
Gary D. Ernst 50 Vice President - Trust 1990
Des Moines, Iowa
Steven F. Schneider 40 Vice President- 1990 President, Brenton Brokerage Services, Inc. -
Des Moines, Iowa Brokerage Services April 1993 to present
All of the foregoing individuals have been employed by the Company for the
past five years, except for Steven F. Schneider, who was an Investment
Representative of A.G. Edwards & Sons, Inc., Des Moines, Iowa, prior to
February 1990; John R. Amatangelo, who was Senior Vice President and Director
of Operations of Ameritrust Indiana Corporation, Indianapolis, Indiana, from
May 1989 to August 1991, Senior Vice President and General Manager, Banking
Office Support and ATM Administration of MCorp, Dallas, Taxes from September
1988 to May 1989, and Executive Vice President of MBank Brownsville, N.A.,
Brownsville, Texas, prior to September 1988; Saulene M. Richer, who was the
Opportunity Development Director of I.B.M Corporation, Chicago, Illinois from
February 1989 to March 1990, and Branch Manager of I.B.M. Corporation, Des
Moines, Iowa, prior to February 1989; and Gary D. Ernst, who was Senior Vice
President/Senior Trust Officer of First National Bank, Iowa City, Iowa, from
November 1989 to June 1990, President of Massachusetts Fidelity Trust
Company, Cedar Rapids, Iowa from May 1988 to November 1989, and Senior Vice
President/Senior Trust Officer of Peoples Bank and Trust Company, Cedar
Rapids, Iowa, prior to May 1988.
(F) Employees.
On December 31, 1993, the Parent Company had 47 full-time employees
and 4 part-time employees. On December 31, 1993, the Company had 661 full-
time employees and 187 part-time employees. None of the employees of the
Company are represented by unions. The relationship between management and
employees of the Company is considered good.
(G) Supervision and Regulation.
The Company (Brenton Banks, Inc. and its subsidiaries) is
restricted by various regulatory bodies as to the types of activities and
businesses in which it may engage. References to the provisions of certain
statutes and regulations are only brief summaries thereof and are qualified
in their entirety by reference to those statutes and regulations. The Parent
Company cannot predict what other legislation may be enacted or what
regulations may be adopted, or, if enacted or adopted, the effect thereof.
The Parent Company, as a bank holding company, is subject to
regulation under the Bank Holding Company Act of 1956 (the "Act") and is
registered with the Board of Governors of the Federal Reserve System. Under
the Act, the Parent Company is prohibited, with certain exceptions, from
acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to its affiliated banks, except that 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.
This authority permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the subsidiary savings institution.
Generally, the activities for a bank holding company are more limited than
the authorized activities for a savings and loan holding company.
The Parent Company, its affiliated banks and its bank-related
subsidiaries are affiliates within the meaning of the Federal Reserve Act and
OTS regulations. As affiliates, they are subject to certain restrictions on
loans by an affiliated bank to the Parent Company, other affiliated banks or
such other
8
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.
The five affiliated banks which are national banks are subject to
the supervision of and are regularly examined by the Comptroller of the
Currency. All other affiliated state banks are subject to the supervision of
and are regularly examined by the Iowa Superintendent of Banking and, because
of their membership in the Federal Deposit Insurance Corporation (the
"FDIC"), are subject to examination by the FDIC. All banks are required to
maintain certain minimum capital ratios established by their primary
regulators. The provisions of the FDIC Improvement Act (the "FDICA")
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
FDICIA 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.
The affiliated savings bank is subject to the supervision of and is
regularly examined by the OTS and FDIC. In addition to the fees charged to
by the FDIC, the savings bank is assessed fees by the OTS based upon the
savings bank's total assets. As a savings institution, the savings bank is
a member of the Federal Home Loan Bank of Des Moines, must maintain certain
minimum capital ratios established by the OTS and is required to meet a
qualified thrift lender test (the "QTL") to avoid certain restrictions upon
its operations. On December 31, 1993, 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.
The Company operates within a regulatory structure that
continuously evolves. In the last several years, significant changes have
occurred that affect the Company. The material provisions of these changes
follow.
The FDIC Improvement Act of 1991 (the "FDICIA") was primarily
designed to recapitalize the FDIC's Bank Insurance Fund (the "BIF") and
Savings Association Insurance Fund (the "SAIF"). To accomplish this purpose
the FDIC was: (1) granted additional borrowing authority; (2) granted the
power to levy emergency special assessments on all insured depository
institutions; (3) granted the right to change the BIF and SAIF rates on
deposits on a semiannual basis; and (4) directed to draft regulations that
would provide for "Risk-Based Assessment System" by January 1994. The FDICIA
also imposed additional regulatory standards upon depository institutions and
granted additional authority to the FDIC. The FDICIA generally requires that
all institutions be examined by the FDIC annually. Under the provisions of
the FDICIA, all regulatory authorities are required to examine their
regulatory accounting standards and, to the extent possible, are required to
conform to Generally Accepted Accounting Principles. Finally, the FDICIA
granted to the FDIC, under certain circumstances, the authority to seek
regulatory orders against banks where necessary and when the banks' primary
bank regulatory agency has refused to act. Certain provisions of the FDICIA
were implemented during 1993; therefore, the full extent of the provisions of
the new law and its effect upon the Company are not currently known but are
not expected to have a significant impact upon the Company.
The Company's affiliated banks are assessed fees based on the
banks' deposits by the FDIC, to insure the funds of customers on deposit with
the banks. The deposits acquired from the Resolution Trust Corporation and
the deposits of the savings bank are insured by SAIF, while deposits of the
Company's subsidiary banks are insured by the BIF. The FDIC has implemented
the "Risk-Based Assessment System" which is a system designed to assess
higher FDIC insurance premiums to those institutions that are more likely to
result in a loss to the deposit insurance fund. Currently, both BIF and SAIF
insured institutions are assessed premiums from $.23 to $.31 per $100 of
deposits. All Brenton banks currently pay an FDIC insurance premium rate of
$.23 per $100 of deposits, the lowest rate under the "Risk-Based Assessment
System". The FDIC has authority to increase the base BIF and SAIF rates
under certain circumstances that are set forth in the law.
9
According to Iowa's regional interstate banking law, Iowa-based
banks and bank holding companies can acquire banks and bank holding companies
located in certain other states. Additionally, certain non-Iowa based banks
and bank holding companies can acquire Iowa banks and bank holding companies,
provided that the total deposits of all banks and savings and loan
associations (hereinafter "thrifts") controlled by out of state bank holding
companies does not exceed thirty-five percent of the total deposits of all
banks and thrifts in the state. The law allows regional interstate banking
between Iowa and Illinois, Minnesota, Missouri, Nebraska, South Dakota and
Wisconsin.
Bank holding companies and banks may acquire thrifts in any state,
regardless of whether the acquiror can operate a bank in that state. Such
thrifts must conform their activities to those that are permissible for banks
or bank holding companies and their subsidiaries.
In the first quarter of 1990, an Iowa law was enacted suspending
the application of Iowa Banking Law prohibitions against branch banking with
respect to the acquisition of troubled thrifts. This law was extended during
the second quarter of 1993. The suspension of these prohibitions allows
Iowa-based banks and bank holding companies to acquire thrifts in
contravention of existing branch banking restrictions until July 1, 1994.
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 Brenton National Bank, Des Moines and Brenton Bank and Trust,
Urbandale to form Brenton Bank, N.A., Des Moines. Generally, thrifts can
operate offices in any county in Iowa and may, under certain circumstances,
acquire thrifts in other states with the approval of the OTS.
(H) Governmental Monetary Policy and Economic Conditions.
The earnings of the Company are affected by the policies of
regulatory authorities, including the Federal Reserve System. Federal
Reserve System monetary policies have had a significant effect on the
operating results of commercial banks in the past and are expected to
continue to do so in the future. Because of changing conditions in the
economy and in the money markets, as a result of actions by monetary and
fiscal authorities, interest rates, credit availability and deposit levels
may change due to circumstances beyond the control of the Company. Future
policies of the Federal Reserve System and other authorities cannot be
predicted, nor can their effect on future earnings be predicted.
(I) Competition.
The banking business in Iowa is highly competitive and the
affiliated banks compete not only with banks and thrifts, but with sales,
finance and personal loan companies; credit unions; and other financial
institutions which are active in the areas in which the affiliated banks
operate. In addition, the affiliated banks compete for customer funds with
other investment alternatives available through investment brokers, insurance
companies, finance companies and other institutions.
The multi-bank holding companies which own banks in Iowa are in
direct competition with one another. The Company is one of the largest
multi-bank holding companies operating in Iowa based on deposit size. The
largest multi-bank holding company, which is domiciled in Minnesota, has 41
banking locations in various parts of Iowa. The total deposits of this
company's affiliated banks located in Iowa are approximately 208 percent
greater than the total deposits of the Company. Another multi-bank holding
company, domiciled in Wisconsin, has 42 locations in Iowa, and another multi-
bank holding company domiciled in Missouri, has 36 locations in Iowa.
10
Brenton Banks, Inc. is the second largest multi-bank holding
company domiciled in Iowa. The largest Iowa-based bank holding company has
63 banking locations in the state and deposits approximately 27 percent
greater than the deposits of the Company.
The third largest Iowa-based multi-bank holding company has 24
locations in Iowa and deposits approximately 45 percent less than those of
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 also expanded into the related investment brokerage
business in the last several years, placing brokers in many Brenton bank
locations. The Brenton brokers in small communities compete with brokers
from regional and national investment brokerage firms.
11
Item 1(I) Business - Statistical Disclosure
The following statistical disclosures relative to the consolidated
operations of the Company have been prepared in accordance with Guide 3 of
the Guides for the Preparation and Filing of Reports and Registration
Statements under the Securities Exchange Act of 1934. Average balances were
primarily calculated on a daily basis.
I. Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential
The following summarizes the average consolidated statement of
condition by major type of account, the interest earned and interest paid and
the average yields and average rates paid for each of the three years ending
December 31, 1993:
1993 1992 1991
______________________________ ______________________________ ______________________________
Interest Average Interest Average Interest Average
Average Income or Yields or Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates Balance Interest Rates
__________ _________ _________ __________ _________ _________ __________ _________ _________
(Dollars in thousands)
Assets:
Interest-earning assets
Loans (1,2) $ 802,088 $ 70,310 8.77% $ 736,646 $ 71,077 9.65% $ 727,870 $ 76,563 10.52%
Investment securities held to
maturity:
Taxable investments:
United States Treasury
securities 24,598 1,290 5.24 81,606 5,282 6.47 75,413 5,985 7.94
Securities of United States
government agencies 58,522 3,410 5.83 102,196 7,128 6.98 101,661 9,385 9.23
Mortgage-backed and related
securities 204,130 10,857 5.32 170,480 11,931 7.00 136,559 11,838 8.67
Other investments 12,743 1,071 8.41 30,019 2,098 6.99 28,833 1,909 6.62
Tax-exempt investments:
Obligations of states and
political subdivisions(2) 164,520 11,471 6.97 139,296 10,665 7.66 106,658 9,441 8.85
Investment securities available
for sale 53,174 2,809 5.28 6,512 459 7.05 -- -- --
Loans held for sale 6,165 520 8.43 2,553 238 9.33 -- -- --
Federal funds sold and
securities purchased under
agreements to resell 23,725 486 2.05 27,082 654 2.41 35,154 2,028 5.77
Interest-bearing deposits
with banks 762 22 2.88 6,240 307 4.92 18,335 1,302 7.10
_________ _______ ____ _________ _______ ____ _________ _______ ____
Total interest-earning assets(2) 1,350,427 $102,246 7.57% 1,302,630 $109,839 8.43% 1,230,483 $118,451 9.62%
Allowance for loan losses (9,615) (8,894) (8,819)
Cash and due from banks 46,025 41,715 35,656
Bank premises and equipment 23,045 21,400 18,876
Other assets 26,543 30,422 32,243
_________ _________ _________
Total assets $1,436,425 $1,387,273 $1,308,439
<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 35 percent federal income tax rate for 1993, and
a 34 percent rate for 1992 and 1991, 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.
12
Item 1(I) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential, Continued
1993 1992 1991
______________________________ ______________________________ ______________________________
Interest Average Interest Average Interest Average
Average Income or Yields or Average Income or Yields or Average Income or Yields or
Balance Expense Rates Balance Expense Rates Balance Expense Rates
_________ __________ _________ __________ _________ _________ __________ _________ _________
(Dollars in thousands)
Liabilities and stockholders'
equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand $ 217,754 $ 4,552 2.09% $ 209,642 $ 5,277 2.52% $ 175,595 $ 7,531 4.29%
Savings 299,640 7,697 2.57 260,568 9,385 3.60 235,894 11,521 4.88
Time 622,789 29,940 4.81 646,261 37,781 5.85 654,776 46,903 7.16
Federal funds purchased and
securities sold under
agreements to repurchase 42,715 1,027 2.41 33,240 924 2.78 20,340 963 4.74
Other short-term borrowings 33 1 3.62 2,170 121 5.57 5,361 466 8.70
Long-term borrowings 14,077 1,210 8.60 14,067 1,285 9.14 13,619 1,303 9.57
_________ ______ ____ _________ ______ ____ _________ ______ ____
Total interest-bearing
liabilities 1,197,008 $44,427 3.71% 1,165,948 $54,773 4.70% 1,105,585 $68,687 6.21%
Noninterest-bearing deposits 119,322 112,054 102,795
Accrued expenses and other
liabilities 12,805 13,735 14,739
_________ _________ _________
Total liabilities 1,329,135 1,291,737 1,223,119
Minority interest 4,150 3,845 3,589
Common stockholders' equity 103,140 91,691 81,731
_________ _________ _________
Total liabilities and
stockholders' equity $1,436,425 $1,387,273 $1,308,439
Net interest spread (1) 3.86% 3.73% 3.41%
Net interest income/margin (1) $57,819 4.28% $55,066 4.23% $49,764 4.04%
<FN>
(1) Interest income and yields are stated on a tax equivalent basis using a 35 percent federal income tax rate for 1993 and a
34 percent rate for 1992 and 1991, 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.
13
Item 1(I) 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, 1993:
1993 vs. 1992 1992 vs. 1991
__________________________ __________________________
Variance Variance
due to due to
_______________ _______________
Variance Volume Rate Variance Volume Rate
________ ______ ____ ________ ______ ____
(In thousands) (In thousands)
Interest Income:
Loans (1,2) $ (767) 6,030 (6,797) (5,486) 913 (6,399)
Investment securities held
to maturity:
Taxable investments:
United States Treasury securities (3,992) (3,139) (853) (703) 464 (1,167)
Securities of United States government
agencies (3,718) (2,684) (1,034) (2,257) 49 (2,306)
Mortgage-backed and related
securities (1,074) 2,100 (3,174) 93 2,621 (2,528)
Other investments (1,027) (1,388) 361 189 80 109
Tax-exempt investments:
Obligations of states and political
subdivisions (2) 806 1,816 (1,010) 1,224 2,618 (1,394)
Investment securities available
for sale 2,350 2,493 (143) 459 459 --
Loans held for sale 282 307 (25) 238 238 --
Federal funds sold and securities purchased
under agreements to resell (168) (76) (92) (1,374) (389) (985)
Interest-bearing deposits with banks (285) (194) (91) (995) (679) (316)
______ _____ ______ ______ _____ ______
(7,593) 5,265 (12,858) (8,612) 6,374 (14,986)
_____ _____ ______ ______ _____ ______
Interest expense:
Interest-bearing deposits:
Demand (725) 198 (923) (2,254) 1,268 (3,522)
Savings (1,688) 1,269 (2,957) (2,136) 1,115 (3,251)
Time (7,841) (1,331) (6,510) (9,122) (603) (8,519)
Federal funds purchased and securities sold
under agreements to repurchase 103 239 (136) (39) 458 (497)
Other short-term borrowings (120) (82) (38) (345) (215) (130)
Long-term borrowings (75) 1 (76) (18) 42 (60)
______ _____ ______ ______ _____ ______
(10,346) 294 (10,640) (13,914) 2,065 (15,979)
______ _____ ______ ______ _____ ______
Net interest income (expense) $ 2,753 4,971 (2,218) $ 5,302 4,309 993
______ _____ ______ ______ _____ ______
Note: The change in interest due to both rate and volume has been allocated
to change due to volume and change due to rate in proportion to the
relationship of the absolute dollar amounts of the change in each.
<FN>
(1) Nonaccrual loans have been included in the analysis of volume and rate variances.
(2) Computed on tax equivalent basis using a 35 percent federal income tax rate for 1993 and a 34 percent rate for 1992
and 1991, and adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
14
Item 1(I) 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, 1993. As the schedule shows, the Company is
liability sensitive within the six-month and 1-year time frames. 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, they typically are not synchronized with overall market
rate movements.
3 Months Over 3 Over 6 Total Over 1
or through 6 through 12 within through 5 Over
Less Months Months 1 Year Years 5 Years Total
---- ------ ------ ------ ----- ------- -----
(In thousands)
Interest-earning assets:
Loans (1) $ 191,031 25,744 49,878 266,653 400,540 207,083 874,276
Investment securities:
Available for sale:
Taxable investments 61,395 32,570 39,841 133,806 128,896 4,935 267,637
Tax-exempt investments 11,351 13,454 6,138 30,943 76,394 37,246 144,583
Held to maturity:
Taxable investments 20,129 2,096 4,503 26,728 1,612 2,105 30,445
Tax-exempt investments 700 3,483 12,335 16,518 14,157 5,264 35,939
Loans held for sale 4,349 -- -- 4,349 -- -- 4,349
Federal funds sold and securities purchased under
agreements to resell 41,875 -- -- 41,875 -- -- 41,875
Interest-bearing deposits with banks -- -- -- -- -- -- --
_______ _______ _______ _______ _______ _______ _________
Total interest-earning assets $ 330,830 77,347 112,695 520,872 621,599 256,633 1,399,104
_______ _______ _______ _______ _______ _______ _________
Interest-bearing liabilities:
Interest-bearing deposits:
Demand and savings deposits (2) $ 539,621 -- -- 539,621 -- -- 539,621
Time deposits 119,258 126,591 121,749 367,598 260,013 -- 627,611
Federal funds purchased and securities sold under
agreements to repurchase 37,664 -- -- 37,664 -- -- 37,664
Other short-term borrowings -- -- -- -- -- -- --
Long-term borrowings -- -- 1,000 1,000 13,053 6,002 20,055
_______ _______ _______ _______ _______ _______ _________
Total interest-bearing liabilities $ 696,543 126,591 122,749 945,883 273,066 6,002 1,224,951
_______ _______ _______ _______ _______ _______ _________
Interest sensitivity GAP $(365,713) (49,244) (10,054) (425,011) 348,533 250,631 174,153
_______ _______ _______ _______ _______ _______ _________
Interest sensitivity GAP ratio .47:1 .61:1 .92:1 .55:1 2.28:1 42.76:1 1.14:1
_______ _______ _______ _______ _______ _______ _________
Cumulative interest sensitivity GAP $(365,713) (414,957) (425,011) (425,011) (76,478) 174,153 174,153
_______ _______ _______ _______ _______ _______ _________
Cumulative interest sensitivity GAP ratio .47:1 .50:1 .55:1 .55:1 .94:1 1.14:1 1.14:1
_______ _______ _______ _______ _______ _______ _________
<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.
15
Item 1(I) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The carrying value of investment securities at December 31 for each
of the past three years follows:
Amortized Cost at December 31,
______________________________
1993 1992 1991
____ ____ ____
(In thousands)
<s)
Investment securities available for sale:
Taxable investments:
United States Treasury securities $ 63,777 28,878 --
Securities of United States government agencies 59,181 -- --
Mortgage-backed and related securities 138,744 1,166 --
Other investments 5,925 -- --
Tax-exempt investments:
Obligations of states and political subdivisions 144,583 -- --
_______ _______ _______
412,210 30,044 --
_______ _______ _______
Investment securities held to maturity:
Taxable investments:
United States Treasury securities -- 55,586 59,297
Securities of United States government agencies -- 67,324 52,478
Mortgage-backed and related securities 24,882 225,659 200,339
Other investments 5,563 11,769 23,271
Tax-exempt investments:
Obligations of states and political subdivisions 35,939 150,639 118,952
_______ _______ _______
66,384 510,977 454,337
_______ _______ _______
Total investment securities $478,594 541,021 454,337
_______ _______ _______
16
Item 1(I) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The following table shows the maturity distribution and weighted
average yields of investment securities at December 31, 1993:
(caption>
Investments by Maturity and Yields at December 31, 1993
____________________________________________________________________________
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)
Investment securities available for sale:
Taxable investments:
United States Treasury
securities $ 23,935 4.77% $ 38,777 4.49% $ 1,065 4.29% $ -- --%
Securities of United States
government agencies 10,039 7.32 35,060 4.50 13,311 5.01 771 4.50
Mortgage-backed and
related securities 52,012 5.23 79,918 5.10 5,350 6.83 1,464 5.94
Other investments 1,506 4.89 4,419 4.77 -- -- -- --
Tax-exempt investments:
Obligations of states and
political subdivisions 33,762 6.75 65,327 6.30 21,195 9.66 24,299 9.05
_______ ____ _______ ____ ______ ____ ______ ____
121,254 5.73 223,501 5.24 40,921 7.64 26,534 8.74
_______ ____ _______ ____ ______ ____ ______ ____
Investment securities held to maturity:
Taxable investments:
Mortgage-backed and
related securities 9,789 3.96 13,864 4.00 1,229 4.21 -- --
Other investments -- -- 787 4.78 152 6.21 4,624 7.20
Tax-exempt investments:
Obligations of states and
political subdivisions 12,476 5.05 17,463 6.14 3,886 8.47 2,114 8.19
_______ ____ _______ ____ ______ ____ ______ ____
22,265 4.57 32,114 5.18 5,267 7.41 6,738 7.51
_______ ____ _______ ____ ______ ____ ______
Total investment securities $143,519 5.55% $255,615 5.24% $46,188 7.61% $33,272 8.49%
_______ ____ _______ ____ ______ ____ ______ ____
NOTE: The weighted average yields are calculated on the basis of the cost
and effective yields for each scheduled maturity group. The weighted average
yields for tax-exempt obligations have been adjusted to a fully taxable
basis, assuming a 35 percent federal income tax rate for 1993 and a 34
percent rate for 1992 and 1991, and are adjusted to reflect the effect of the
nondeductible interest expense of owning tax-exempt investments.
As of December 31, 1993, 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
Item 1(I) 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:
December 31
____________________________________________________
1993 1992 1991 1990 1989
____ ____ ____ ____ ____
(In thousands)
1. Real estate loans:
a. Commercial construction and land development $ 24,189 25,180 16,155 16,319 12,309
b. Secured by 1-4 family residential property 349,810 324,124 321,721 315,934 182,227
c. Other 129,574 101,418 96,805 88,572 88,237
2. Loans to financial institutions (primarily bankers'
acceptances) -- 393 4,785 9,969 4,875
3. Loans to farmers 66,574 62,471 60,898 55,856 52,699
4. Commercial and industrial loans 90,521 75,062 93,180 67,575 63,677
5. Loans to individuals for personal expenditures,
net of unearned income 214,401 163,876 151,529 151,261 134,240
6. All other loans 812 930 6,837 1,832 1,294
_______ _______ _______ _______ _______
$875,881 753,454 751,910 707,318 539,558
_______ _______ _______ _______ _______
18
Item 1(I) Business - Statistical Disclosure, Continued
III. Loan Portfolio, Continued
The following table shows the maturity distribution of loans as of
December 31, 1993 (excluding real estate loans secured by 1-4 family
residential property and loans to individuals for personal expenditures):
Loans by Maturity at December 31, 1993
________________________________________
After One
Year
Within through After Five
One Year Five Years Years Total
________ __________ _____ _____
(In thousands)
1. Real estate loans:
a. Commercial construction and land development $ 20,439 3,087 663 24,189
b. Other 34,849 56,101 38,624 129,574
2. Loans to financial institutions -- -- -- --
3. Loans to farmers 47,607 16,225 2,742 66,574
4. Commercial and industrial loans 55,403 29,197 5,921 90,521
5. All other loans 771 41 -- 812
_______ _______ ______ _______
$159,069 104,651 47,950 311,670
_______ _______ ______ _______
The above loans due after one year which have predetermined and
floating interest rates follow:
Predetermined interest rates $ 94,874
______
Floating interest rates $ 57,727
______
19
Item 1(I) 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.
1993 1992 1991 1990 1989
____ ____ ____ ____ ____
(In thousands)
Nonaccrual $1,605 1,884 2,931 2,391 3,289
Restructured 323 448 1,019 1,063 1,359
Past due 90 days or more 2,085 2,261 1,672 2,006 2,070
_____ _____ _____ _____ _____
Nonperforming loans $4,013 4,593 5,622 5,460 6,718
_____ _____ _____ _____ _____
Interest income recorded during 1993 on nonaccrual and restructured
loans amounted to $191,000. The amount of interest income which would have
been recorded during 1993 if nonaccrual and restructured loans had been
current, in accordance with the original terms, was $359,000.
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 other than the loans to farmers in Iowa. 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, previously accrued
interest is charged to the allowance for loan losses.
In addition to the loans scheduled above, management has identified
other loans which, due to a change in economic circumstances or a
deterioration in the financial position of the borrower, present serious
concern as to the ability of the borrower to comply with present repayment
terms. Additionally, management considers the identification of loans
classified for regulatory or internal purposes as loss, doubtful, substandard
or special mention. This serious concern may eventually result in certain of
these loans being classified in one of the above scheduled categories. At
December 31, 1993, these loans amounted to approximately $2 million.
As of December 31, 1993, 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 $948,000 and $1,935,000 at December 31, 1993 and 1992,
respectively.
20
Item 1(I) 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:
Year Ended December 31
_______________________________________________
1993 1992 1991 1990 1989
____ ____ ____ ____ ____
(In thousands)
Total loans at the end of the year $875,881 753,454 751,910 707,318 539,558
Average loans outstanding 802,088 736,646 727,870 659,283 512,822
_______ _______ _______ _______ _______
Allowance for loan losses -
beginning of the year $ 9,006 8,548 8,871 8,431 7,999
_______ _______ _______ _______ _______
Amount of charge-offs during year:
Real estate loans 109 276 110 203 126
Loans to financial institutions -- -- -- -- --
Loans to farmers 68 45 48 90 55
Commercial and industrial loans 54 252 769 455 468
Loans to individuals for personal expenditures 1,230 1,304 1,404 1,011 563
All other loans 70 67 5 8 105
_______ _______ _______ _______ _______
Total charge-offs 1,531 1,944 2,336 1,767 1,317
_______ _______ _______ _______ _______
Amount of recoveries during year:
Real estate loans 101 32 60 38 121
Loans to financial institutions -- -- -- -- --
Loans to farmers 81 179 135 130 258
Commercial and industrial loans 248 125 303 505 376
Loans to individuals for personal expenditures 641 635 716 280 158
All other loans 20 20 -- -- 3
_______ _______ _______ _______ _______
Total recoveries 1,091 991 1,214 953 916
_______ _______ _______ _______ _______
Net loans charged off during year 440 953 1,122 814 401
_______ _______ _______ _______ _______
Additions to allowance charged to operating expense 1,252 1,411 799 869 760
_______ _______ _______ _______ _______
Allowance of acquisitions -- -- -- 385 73
_______ _______ _______ _______ _______
Allowance for loan losses - end of the year $ 9,818 9,006 8,548 8,871 8,431
_______ _______ _______ _______ _______
Ratio of allowance to loans outstanding at end of year 1.12% 1.20 1.14 1.25 1.56
____ ____ ____ ____ ____
Ratio of net charge-offs to average loans outstanding .05% .13 .15 .12 .08
___ ___ ___ ___ ___
NOTE: The provision for loan losses charged to operating expenses is based
on management's evaluation of the loan portfolio, past loan loss experience
and other factors that deserve current recognition in estimating loan losses.
The allowance for loan losses is maintained at a level necessary to support
management's evaluation of potential losses in the loan portfolio, after
considering various factors including prevailing and anticipated economic
conditions.
21
Item 1(I) 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:
Year Ended December 31
__________________________________________________________________________________________
1993 1992 1991 1990 1989
_________________ _________________ _________________ _________________ __________________
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)
Real estate loans $2,400 57.5% $2,200 59.8% $2,002 57.8% $1,967 59.5% $1,373 52.4%
Loans to financial institutions -- -- -- .1 -- .6 -- 1.4 -- .9
Loans to farmers 1,400 7.6 1,200 8.3 1,500 8.1 1,900 7.9 2,300 9.8
Commercial and industrial loans 2,700 10.3 2,700 10.0 2,600 12.4 3,000 9.6 3,300 11.8
Loans to individuals for personal
expenditures 3,318 24.5 2,906 21.3 2,446 20.2 2,004 21.4 1,458 24.9
All other loans -- .1 -- .5 -- .9 -- .2 -- .2
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
$9,818 100.0% $9,006 100.0% $8,548 100.0% $8,871 100.0% $8,431 100.0%
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____
22
Item 1(I) Business - Statistical Disclosure, Continued
V. Deposits
A classification of the Company's average deposits and average
rates paid for the years indicated follows:
Year Ended December 31
1993 1992 1991
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
Noninterest-bearing deposits $ 119,322 --% $ 112,054 --% $ 102,795 --%
Interest-bearing deposits:
Demand 217,754 2.09 209,642 2.52 175,595 4.29
Savings 299,640 2.57 260,568 3.60 235,894 4.88
Time 622,789 4.81 646,261 5.85 654,776 7.16
_________ ____ _________ ____ _________ ____
$1,259,505 $1,228,525 $1,169,060
_________ _________ _________
The following sets forth the maturity distribution of all time
deposits of $100,000 or more as of December 31, 1993:
Large Time Deposits
by Maturity at
Maturity Remaining December 31, 1993
(In thousands)
Less than 3 months $29,155
Over 3 through 6 months 12,652
Over 6 through 12 months 7,927
Over 12 months 12,993
______
$62,727
______
VI. Return on Equity and Assets
Various operating and equity ratios for the years indicated are
presented below:
Year Ended December 31,
________________________
1993 1992 1991
____ ____ ____
Return on average total assets:
Net income before deduction of minority interest 1.04% .98% .93%
Return on average equity 13.82 14.13 14.27
Common dividend payout ratio 22.22 21.00 21.56
Average equity to average assets 7.18 6.61 6.25
Equity to assets ratio 7.59 6.81 6.37
Tier 1 leverage capital ratio 7.55 6.71 6.21
Primary capital ratio 8.50 7.67 7.23
____ ____ ____
23
Item 1(I) Business - Statistical Disclosure, Continued
VII. Short-Term Borrowings
Information relative to federal funds purchased and securities sold
under agreements to repurchase follows:
1993 1992 1991
____ ____ ____
(Dollars in thousands)
Amount outstanding at December 31 $37,981 34,882 23,590
Weighted average interest rate at
December 31 2.31% 2.34 3.84
Maximum amount outstanding at any
quarter-end $66,740 49,125 25,541
Average amount outstanding during
the year $42,715 33,240 20,340
Weighted average interest rate during
the year 2.41% 2.78 4.74
____ ____ ____
Information relative to other short-term borrowings, which consist
primarily of notes payable by the Parent Company, Federal Reserve Bank
borrowings and U.S. Treasury - tax depository note options, follows:
1993 1992 1991
____ ____ ____
(Dollars in thousands)
Amount outstanding at December 31 $ -- 120 4,174
Weighted average interest rate at
December 31 --% 3.15 6.44
Maximum amount outstanding at any
quarter-end $ -- 2,840 6,659
Average amount outstanding during
the year $ 33 2,170 5,361
Weighted average interest rate during
the year 3.62% 5.57 8.70
____ ____ ____
24
Item 2. Properties.
At December 31, 1993, the affiliated banks had 42 banking locations
with approximately 281,000 square feet, all located in Iowa. Of these
banking locations, 32 were owned by the Company - approximately 223,000
square feet; 3 were owned buildings on leased land - approximately 30,000
square feet and 7 were operated under lease contracts with unaffiliated
parties - approximately 28,000 square feet. The Company has recently
redesigned most of its banking facilities to enhance the overall appearance
and stimulate marketing and selling of products.
The Company leases certain real estate and equipment under long-
term and short-term leases. The Company owns certain real estate which is
leased to unrelated persons.
Item 3. Legal Proceedings.
The Company (Brenton Banks, Inc. and its subsidiaries) is involved
in various claims and legal actions arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
The information appearing on pages 30 and 37 of the Corporation's
Annual Report, filed as Exhibit 13 hereto, is incorporated herein by
reference.
There were approximately 1,563 holders of record of the Parent
Company's $5 common stock as of March 14, 1994. The closing bid price of the
Parent Company's common stock was $26.75 on March 14, 1994.
The Parent Company increased dividends to common shareholders in
1993 to $.60 per share, a 14.3 percent increase over $.525 for 1992.
Dividend declarations are evaluated and determined by the Board of Directors
on a quarterly basis. In January 1994, the Board of Directors declared a
dividend of $.165 per common share. There are no restrictions on the Parent
Company's present or future ability to pay dividends.
Item 6. Selected Financial Data.
The information appearing on page 19 of the Company's Annual
Report, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information appearing on pages 10 through 17 of the Company's
Annual Report, filed as Exhibit 13 hereto, is incorporated herein by
reference.
25
Item 8. Financial Statements and Supplementary Data.
The information appearing on pages 20 through 36 of the Company's
Annual Report, filed as Exhibit 13 hereto, is incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Within the twenty-four months prior to the date of the most recent
financial statements, there has been no change of accountants of the Company.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The definitive proxy statement of Brenton Banks, Inc., which will
be filed not later than 120 days following the close of the Company's fiscal
year ending December 31, 1993, is incorporated herein by reference. See also
Item 1(E) of this Form 10-K captioned "Executive Officers of the Registrant."
Item 11. Executive Compensation.
The definitive proxy statement of Brenton Banks, Inc., which will
be filed not later than 120 days following the close of the Company's fiscal
year ended December 31, 1993, 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, 1993, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
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, 1993, is incorporated herein by reference.
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 20 through 36 of the Company's Annual Report,
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.
26
3. Exhibits (not covered by independent auditors' report).
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws,
as amended, of Brenton Banks, Inc.
Exhibit 10
Summary of the Bank Bonus Plans under which some of the
executive officers of the Parent Company and certain
other personnel of the subsidiaries are eligible to
receive a bonus each year.
Exhibit 10(i)
Summary of the Executive Bonus Plan under which some of
the executive officers of the Parent Company are
eligible to receive a bonus each year.
Exhibit 10(ii)
Summary of the Trust Division Bonus Plan under which
one of the executive officers of the Parent Company is
eligible to receive a bonus each year.
Exhibit 10(iii)
Summary of the Brokerage Bonus Plan under which one of
the executive officers of the Parent Company is
eligible to receive a bonus each year.
Exhibit 10(iv)
Summary of the Employee Bonus Plan under which
employees of the Company are eligible to receive a
bonus each year.
Exhibit 10(v)
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, 1989.
Exhibit 10(vi)
Non-Qualified Stock Option Plan, Administrative Rules
and Agreement under which officers of the Company are
eligible to receive options to purchase an aggregate of
200,000 shares of the Company's $5 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, 1992.
27
Exhibit 10(vii)
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1993, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton
Banks, Inc. stock based upon their service to the
Company and Company performance.
Exhibit 10(viii)
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1992, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton
Banks, Inc. stock based upon their service to the
Company and Company performance. This Long-Term Stock
Compensation Plan, Agreements and related documents,
effective for 1992, are incorporated by reference from
Form 10-K of Brenton Banks, Inc., for the year ended
December 31, 1992.
Exhibit 10(ix)
Merger Agreement between Brenton Banks, Inc. and Ames
Financial Corporation, dated June 17, 1992. This
Merger Agreement is incorporated by reference from Form
S-4 of Brenton Banks, Inc. filed on August 13, 1992.
Exhibit 10(x)
Standard Agreement for Advances, Pledge and Security
Agreement between Brenton banks and the Federal Home
Loan Bank of Des Moines.
Exhibit 10(xi)
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1993, setting forth
the terms of the Parent Company's $2,000,000 short-term
debt agreement.
Exhibit 10(xii)
Data Processing Agreement dated December 1, 1991 by and
between Systematics, Inc. and 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, 1991.
Exhibit 10(xiii)
Item Processing Agreement dated December 1, 1991
between Brenton Bank Services, Inc. and the Federal
Home Loan Bank of Des Moines. This Item Processing
Agreement is incorporated by reference from Form 10-K
of Brenton Banks, Inc., for the year ended December 31,
1992.
Exhibit 10(xiv)
Restated Trust Agreement for Brenton Banks, Inc.
Retirement Plan, effective January 1, 1986. This
Restated Trust Agreement is incorporated by reference
from Form 10-K of Brenton Banks, Inc., for the year
ended December 31, 1991.
28
Exhibit 10(xv)
Amendment to the Restated Trust Agreement for Brenton
Banks, Inc. Retirement Plan, effective May 31, 1989.
The Amendment is incorporated by reference from Form
10-K of Brenton Banks, Inc. for the year ended December
31, 1989.
Exhibit 10(xvi)
Indenture Agreement with respect to Capital Notes dated
April 12, 1993.
Exhibit 10(xvii)
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, 1992.
Exhibit 10(xviii)
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, 1991.
Exhibit 10(xix)
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, 1991.
Exhibit 10(xx)
Indenture Agreement with respect to Capital Notes dated
April 5, 1985. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1991.
Exhibit 11
Statement of computation of earnings per share.
Exhibit 12
Statement of computation of ratios.
Exhibit 13
The Annual Report to Shareholders of Brenton Banks,
Inc., for the 1993 calendar year.
Exhibit 22
Subsidiaries.
Exhibit 24
Consent of KPMG Peat Marwick to the incorporation of
their report dated January 31, 1994, relating to
certain consolidated statements of condition of Brenton
Banks, Inc. into the Registration Statement on Form S-8
of Brenton Banks, Inc.
29
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 and Vice President/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 1993.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
BRENTON BANKS, INC.
By /s/ C. Robert Brenton
Chairman of the Board of Directors
C. ROBERT BRENTON
Date: March 16, 1994
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/ William H. Brenton
Chairman of the Executive Committee,
Vice Chairman of the Board of Directors and Director
WILLIAM H. BRENTON
Principal Executive Officer
Date: March 16, 1994
By /s/ C. Robert Brenton
Chairman of the Board and Director
C. ROBERT BRENTON
Principal Executive Officer
Date: March 16, 1994
31
By /s/ Junius C. Brenton
President (1990-1993) and Director
JUNIUS C. BRENTON
Principal Executive Officer
Date: March 16, 1994
By /s/ Robert L. DeMeulenaere
President and Director
ROBERT L. DEMEULENAERE
Date: March 16, 1994
By /s/ Steven T. Schuler
Vice President/Treasurer/Secretary
STEVEN T. SCHULER
Chief Financial Officer
Date: March 16, 1994
By /s/ Thea H. Oberlander
Corporate Controller
THEA H. OBERLANDER
Date: March 16, 1994
BOARD OF DIRECTORS
By /s/ R. Dean Duben
R. DEAN DUBEN
Date: March 16, 1994
By /s/ Thomas R. Smith
THOMAS R. SMITH
Date: March 16, 1994
32
EXHIBIT INDEX
Exhibits Page
Exhibit 3
The Articles of Incorporation, as amended, and
Bylaws, as amended, of Brenton Banks, Inc. . . . . . . . . 37
Exhibit 10
Summary of the Bank Bonus Plans under which some
of the executive officers of the Parent Company
and certain other personnel of the subsidiaries
are eligible to receive a bonus each year. . . . . . . . . 95
Exhibit 10(i)
Summary of the Executive Bonus Plan under which
some of the executive officers of the Parent Company
are eligible to receive a bonus each year. . . . . . . . . 97
Exhibit 10(ii)
Summary of the Trust Division Bonus Plan under
which one of the executive officers of the Parent
Company is eligible to receive a bonus each year. . . . . . 99
Exhibit 10(iii)
Summary of the Brokerage Bonus Plan under which
one of the executive officers of the Parent Company
is eligible to receive a bonus each year. . . . . . . . . . 101
Exhibit 10(iv)
Summary of the Employee Bonus Plan under which
employees of the Company are eligible to receive
a bonus each year. . . . . . . . . . . . . . . . . . . . . 103
Exhibit 10(v)
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, 1989. . . . . . . . . . . . . . . . 105
Exhibit 10(vi)
Non-Qualified Stock Option Plan, Administrative
Rules and Agreement under which officers of the
Company are eligible to receive options to purchase
an aggregate of 200,000 shares of the Company's
$5 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, 1992. . . . . 106
33
Exhibit 10(vii)
Long-Term Stock Compensation Plan, Agreements
and related documents, effective for 1993, under
which certain of the Company's senior officers and
bank presidents are eligible to receive shares of
Brenton Banks, Inc. stock based upon their service
to the Company and Company performance. . . . . . . . . . . 107
Exhibit 10(viii)
Long-Term Stock Compensation Plan, Agreements and
related documents, effective for 1992, under which
certain of the Company's senior officers and bank
presidents are eligible to receive shares of Brenton
Banks, Inc. stock based upon their service to the
Company and Company performance. This Long-Term
Stock Compensation Plan, Agreements and related
documents, effective for 1992, are incorporated by
reference from Form 10-K of Brenton Banks, Inc.,
for the year ended December 31, 1992. . . . . . . . . . . . 121
Exhibit 10(ix)
Merger Agreement between Brenton Banks, Inc. and
Ames Financial Corporation, dated June 17, 1992.
This Merger Agreement is incorporated by reference
from Form S-4 of Brenton Banks, Inc. filed on
August 13, 1992. . . . . . . . . . . . . . . . . . . . . . 122
Exhibit 10(x)
Standard Agreement for Advances, Pledge and Security
Agreement between Brenton banks and the Federal Home
Loan bank of Des Moines. . . . . . . . . . . . . . . . . . 123
Exhibit 10(xi)
Short-term note with American National Bank & Trust
Company of Chicago as of April 30, 1993, setting forth
the terms of the Parent Company's $2,000,000 short-term
debt agreement. . . . . . . . . . . . . . . . . . . . . . . 128
Exhibit 10(xii)
Data Processing Agreement dated December 1, 1991 by
and between Systematics, Inc. and 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, 1991. . . . . 130
Exhibit 10(xiii)
Item Processing Agreement dated December 1, 1991
between Brenton Bank Services, Inc. and the Federal
Home Loan Bank of Des Moines. This Item Processing
Agreement is incorporated by reference from Form
10-K of Brenton Banks, Inc., for the year ended
December 31, 1992. . . . . . . . . . . . . . . . . . . . . 131
Exhibit 10(xiv)
Restated Trust Agreement for Brenton Banks, Inc.
Retirement Plan, effective January 1, 1986. This
Restated Trust Agreement is incorporated by
reference from Form 10-K of Brenton Banks, Inc.,
for the year ended December 31, 1991. . . . . . . . . . . . 132
34
Exhibit 10(xv)
Amendment to the Restated Trust Agreement for
Brenton Banks, Inc. Retirement Plan, effective
May 31, 1989. The Amendment is incorporated by
reference from Form 10-K of Brenton Banks, Inc.
for the year ended December 31, 1989. . . . . . . . . . . . 133
Exhibit 10(xvi)
Indenture Agreement with respect to Capital Notes
dated April 12, 1993. . . . . . . . . . . . . . . . . . . . 134
Exhibit 10(xvii)
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, 1992. . . . . 149
Exhibit 10(xviii)
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, 1991. . . . . . 150
Exhibit 10(xix)
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, 1991. . . . . . 151
Exhibit 10(xx)
Indenture Agreement with respect to Capital Notes
dated April 5, 1985. This Indenture Agreement is
incorporated by reference from Form 10-K of Brenton
Banks, Inc. for the year ended December 31, 1991. . . . . . 152
Exhibit 11
Statement of computation of earnings per share. . . . . . . 153
Exhibit 12
Statement of computation of ratios. . . . . . . . . . . . . 155
Exhibit 13
The Annual Report to Shareholders of Brenton Banks,
Inc., for the 1993 calendar year. . . . . . . . . . . . . . 158
Exhibit 22
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 201
35
Exhibit 24
Consent of KPMG Peat Marwick to the incorporation of
their report dated January 31, 1994, relating to
certain consolidated statements of condition of
Brenton Banks, Inc. into the Registration Statement
on Form S-8 of Brenton Banks, Inc. . . . . . . . . . . . . 204
36