UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-6216
BRENTON BANKS, INC.
(Exact name of registrant as specified in its charter)
Incorporated in Iowa No. 42-0658989
State or other jurisdiction of I.R.S. Employer Identification
incorporation or organization
Suite 300, Capital Square, 400 Locust, Des Moines, Iowa 50309
(Address of principle executive offices) (zip code)
515-237-5100
(Registrant's telephone number, including area code)
Not applicable
Former name, former address and former fiscal year, if changed
since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date, May 5,
1995.
7,818,136 shares of Common Stock, $5.00 par value
PART 1 -- Item 1. Financial Statements
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Condition
(Unaudited)
March 31, December 31,
1995 1994
-------------- --------------
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,899,438 58,387,727
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . 221,060 64,255
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . 62,093,872 59,396,428
Investment securities:
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,699,800 349,208,773
Held to maturity (approximate market value of
$97,138,000 and $92,284,000 at March 31, 1995,
and December 31, 1994, respectively) . . . . . . . . . . . . . . . . . . 97,811,878 94,484,134
-------------- --------------
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 445,511,678 443,692,907
-------------- --------------
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032,193 2,104,492
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 950,771,545 970,214,498
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . (11,039,708) (10,913,043)
-------------- --------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939,731,837 959,301,455
-------------- --------------
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . 30,092,196 27,103,630
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . 12,845,300 13,064,921
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,608,494 18,211,034
-------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,568,036,068 1,581,326,849
============== ==============
Liabilities and stockholders' equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,042,841 136,547,995
Interest-bearing:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,670,279 315,369,233
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,027,195 255,046,184
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642,940,878 633,319,698
-------------- --------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,352,681,193 1,340,283,110
-------------- --------------
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . 40,512,383 70,703,736
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 12,000,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . 15,677,219 14,749,917
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,478,206 28,939,413
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,449,349,001 1,466,676,176
-------------- --------------
Minority interest in consolidated subsidiaries . . . . . . . . . . . . . . 4,350,937 4,220,328
Redeemable preferred stock, $1 par; 500,000 shares
authorized; issuable in series, none issued . . . . . . . . . . . . . . . -- --
Common stockholders' equity:
Common stock, $5 par; 25,000,000 shares authorized;
7,838,135 shares issued at March 31, 1995, and
7,871,546 shares issued at December 31, 1994 . . . . . . . . . . . . . 39,190,675 39,357,730
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,768,114 5,210,344
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,582,914 70,979,317
Unrealized gains (losses) on assets
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . (2,205,573) (5,117,046)
-------------- --------------
Total common stockholders' equity . . . . . . . . . . . . . . . . . . . . . 114,336,130 110,430,345
-------------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . $ 1,568,036,068 1,581,326,849
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
PART 1 -- Item 1. Financial Statements
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the 3 months ended March 31,
1995 1994
--------------- ----------------
Interest Income
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . $ 20,053,953 17,895,259
Interest and dividends on investments:
Available for sale - taxable . . . . . . . . . . . . . . . . . . . . 3,261,539 3,363,579
Available for sale - tax-exempt . . . . . . . . . . . . . . . . . . 1,247,901 1,483,278
Held to maturity - taxable . . . . . . . . . . . . . . . . . . . . . 752,048 334,933
Held to maturity - tax-exempt . . . . . . . . . . . . . . . . . . . 755,755 668,035
--------------- ----------------
Total interest and dividends on investments . . . . . . . . . . . . . 6,017,243 5,849,825
--------------- ----------------
Interest on federal funds sold and securities
purchased under agreements to resell . . . . . . . . . . . . . . . . 522,090 107,021
Other interest income . . . . . . . . . . . . . . . . . . . . . . . . 17,732 4,522
--------------- ----------------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . 26,611,018 23,856,627
--------------- ----------------
Interest Expense
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . 12,437,422 9,850,568
Interest on federal funds purchased and securities
sold under agreements to repurchase . . . . . . . . . . . . . . . . 462,281 218,781
Interest on other short-term borrowings . . . . . . . . . . . . . . . 104,279 --
Interest on long-term borrowings . . . . . . . . . . . . . . . . . . . 592,982 358,354
--------------- ----------------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . 13,596,964 10,427,703
--------------- ----------------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 13,014,054 13,428,924
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . 459,925 402,413
--------------- ----------------
Net interest income after provision for loan losses . . . . . . . . . . 12,554,129 13,026,511
--------------- ----------------
Noninterest Income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . 1,210,728 1,384,546
Insurance commissions and fees . . . . . . . . . . . . . . . . . . . . 619,423 505,668
Other service charges, collection and exchange
charges, commissions and fees . . . . . . . . . . . . . . . . . . . 893,283 891,174
Investment brokerage commissions . . . . . . . . . . . . . . . . . . . 621,037 820,856
Fiduciary income . . . . . . . . . . . . . . . . . . . . . . . . . . . 617,169 560,248
Net gains (losses) from securities
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . -- 43,561
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . 309,192 200,265
--------------- ----------------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . 4,270,832 4,406,318
--------------- ----------------
Noninterest Expense
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . 5,918,628 5,956,143
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,318,038 1,400,548
Occupancy expense of premises, net . . . . . . . . . . . . . . . . . . 1,233,662 1,140,974
Furniture and equipment expense . . . . . . . . . . . . . . . . . . . 952,526 752,634
Data processing expense . . . . . . . . . . . . . . . . . . . . . . . 634,876 673,327
FDIC deposit insurance assessment . . . . . . . . . . . . . . . . . . 751,482 724,977
Advertising and promotion . . . . . . . . . . . . . . . . . . . . . . 443,307 384,034
Other operating expense . . . . . . . . . . . . . . . . . . . . . . . 2,428,735 2,482,475
--------------- ----------------
Total noninterest expense . . . . . . . . . . . . . . . . . . . . . . . 13,681,254 13,515,112
--------------- ----------------
Income before income taxes and minority interest . . . . . . . . . . . . 3,143,707 3,917,717
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573,134 888,411
--------------- ----------------
Income before minority interest . . . . . . . . . . . . . . . . . . . . 2,570,573 3,029,306
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,795 135,728
--------------- ----------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,449,778 2,893,578
=============== ================
Per common and common equivalent share **:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.31 0.37
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.11 0.11
============== ===============
<FN>
*See accompanying notes to consolidated financial statements.
**Restated for the 3-for-2 stock split in the form of a stock dividend effective May, 1994.
PART 1 -- Item 1. Financial Statements
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the 3 months ended March 31,
1995 1994
-------------- --------------
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,449,778 2,893,578
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses . . . . . . . . . . . . . . 459,925 402,413
Depreciation and amortization . . . . . . . . . . . . 1,028,939 900,975
Net (gains) losses from securities available
for sale . . . . . . . . . . . . . . . . . . . . . -- (43,561)
Net (increase) decrease in loans held for sale . . . . (927,701) 832,761
Increase in accrued interest receivable
and other assets . . . . . . . . . . . . . . . . (110,554) (1,897,454)
Decrease in accrued expenses, other
liabilities and minority interest . . . . . . . . 939,992 635,507
-------------- --------------
Net cash provided from operating activities . . . . . . . . . . 3,840,379 3,724,219
-------------- --------------
Investing Activities:
Investment securities available for sale:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (46,490,526) (37,746,081)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 53,686,092 39,574,079
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 4,860,285
Investment securities held to maturity:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (23,146,364) (13,777,225)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 18,978,468 5,148,277
Net increase in loans . . . . . . . . . . . . . . . .. . . . . 19,109,693 (35,046,967)
Purchases of bank premises and equipment, net . . . . . . . . (3,901,839) (980,080)
-------------- --------------
Net cash used by investing activities . . . . . . . . . . . . . 18,235,524 (37,967,712)
-------------- --------------
Financing Activities:
Net increase (decrease) in noninterest-bearing, interest-bearing
demand and savings deposits . . . . . . . . . . . . . . . . 2,776,903 1,777,014
Net increase in time deposits . . . . . . . . . . . .. . . . . 9,621,180 (10,922,117)
Net increase in federal funds purchased and
securities sold under agreements to repurchase . . . . . . (30,191,353) 18,594,026
Net decrease in other short-term borrowings . . . . . . . . . (5,000,000) --
Proceeds of long-term borrowings . . . . . . . . . . . . . . . 4,616,000 908,632
Repayment of long-term borrowings . . . . . . . . . . . . . . (77,207) (114,651)
Dividends on common stock . . . . . . . . . . . . . . . . . . (864,594) (866,772)
Proceeds from issuance of common stock under
the stock option plan . . . . . . . . . . . . . . . . . . . -- 193,643
Payment for shares acquired under common stock
repurchase plan . . . . . . . . . . . . . . . . . . . . . . (970,887) --
Issuance of common stock under the long-term
stock compensation plan . . . . . . . . . . . . . . . . . . 361,602 --
Payment for fractional shares in 3-for-2 stock split . . . . . -- --
Other 18,413 --
-------------- ---------------
Net cash provided from financing activities . . . . . . . . . . (19,709,943) 9,569,775
-------------- ---------------
Net increase (decrease) in cash and cash equivalents . . . . . . 2,365,960 (24,673,718)
Cash and cash equivalents at the beginning of the year . . . . . 117,848,410 84,433,347
-------------- ---------------
Cash and cash equivalents at the end of the period . . . . . . . $ 120,214,370 59,759,629
============== ===============
Supplemental Cash Flow Information
(Unaudited)
Interest paid during the period . . . . . . . . . . . . . . . . $ 11,355,309 9,498,543
Income taxes paid during the period . . . . . . . . . . . . . . -- --
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
PART 1 -- Item 1. Financial Statements
BRENTON BANKS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. Adjustments and Reclassifications
The accompanying financial statements for the interim
periods were prepared without audit. In the opinion of management,
all adjustments which were necessary for a fair presentation of
financial position and results of operations, have been made.
These adjustments were of a normal recurring nature.
2. Additional Footnote Information
In reviewing these financial statements, reference should
be made to the 1994 Annual Report to Shareholders for more detailed
footnote information.
3. Statements of Cash Flows
In the statements of cash flows, cash and cash
equivalents include cash and due from banks, interest-bearing
deposits with banks, and federal funds sold and securities
purchased under agreements to resell.
4. Income Taxes
Federal income tax expense for the three months ended
March 31, 1995 and 1994, was computed using the consolidated
effective federal income tax rates.
For the first three months of 1995 and 1994, the Company
also recognized income tax expense pertaining to state franchise
taxes payable individually by the subsidiary banks.
5. Common Stock Transactions
In 1992, the Company originated a long-term stock
compensation plan for key management personnel. The plan provides
for 360,000 shares of the Company's common stock to be reserved for
grant over a four year period. Each grant of shares will cover a
three year performance period, 35 percent of which will vest upon
completion of employment for the performance period and 65 percent
of which will vest based on a tiered achievement scale tied to
financial performance goals established by the Board of Directors.
Under the plan, 91,490 shares were granted covering the performance
period from 1992 through 1994; 78,644 shares were granted covering
the performance period from 1993 through 1995; 90,292 shares were
granted covering the performance period from 1994 through 1996; and
87,808 shares were granted covering the performance period from
1995 through 1997. Compensation expense associated with this plan
for the first three months of 1995 and 1994 was $142,112 and $0,
respectively.
PART 1 -- Item 1.
Page 2 of 2
5. Common Stock Transactions, continued
In 1995, 31,108 shares of common stock were issued under
the long-term stock compensation plan. This transaction added
$361,602 to the equity of the Company.
In May 1994, the Board of Directors authorized a plan to
repurchase the Company's common stock. In 1995, 53,500 shares had
been repurchased at a cost of $970,887. Since the plans inception,
the Company has repurchased 98,300 shares at a total cost of
$1,821,827.
6. Income Per Share
Income per common and common equivalent share
computations are based on the weighted average number of shares of
common stock outstanding during the period. The weighted average
number of shares for 1995 and 1994 were 7,902,063 and 7,942,697,
respectively, which included shares related to the Long-Term Stock
Compensation Plan.
PART I -- Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Capital Resources
For the first three months of 1995, Brenton Banks, Inc. and
subsidiaries (the "Company") recorded net income totalling
$2,449,778. The Company's annualized return on average assets was
.65 percent compared to .82 percent for the same period of 1994.
The Company's annualized return on average equity was 8.73 percent
compared to 10.38 percent one year ago.
Common stockholders' equity totalled $114,336,130 as of
March 31, 1995, a 3.5 percent increase from December 31, 1994. The
Company's risk-based core capital ratio was 11.7 percent at
March 31, 1995 and the total risk-based capital ratio was 12.8
percent. These exceeded the minimum regulatory requirements of
4.00 percent and 8.00 percent, respectively. The Company's tier 1
leverage ratio, which measures capital excluding intangible assets,
was 7.38 percent at March 31, 1995, exceeding the regulatory
minimum requirement range of 3.00 to 5.00 percent. Each of these
capital calculations exclude unrealized gains or losses on assets
available for sale.
In 1993, the Company adopted Statement of Financial Accounting
Standard (FAS) No. 115. Under this accounting standard, the method
of classifying investment securities is based on the company's
intended holding period. Accordingly, securities that the Company
may sell at its discretion prior to maturity are recorded at their
fair value. The aggregate unrealized net gains or losses
(including the income tax and minority interest effect) are
recorded as a component of stockholders' equity. At March 31,
1995, aggregate unrealized losses from assets available for sale
totalled $2,205,573, compared to $5,117,046 at December 31, 1994.
The Company paid a dividend of $.11 per common share in the
first quarter of 1995. This dividend is unchanged from the prior
quarter and one year ago, resulting in a first quarter dividend
payout ratio of 35.5 percent of earnings per share.
In May 1994, the Board of Directors authorized a plan to
repurchase the Company's common stock. In 1995, 53,500 shares had
been repurchased at a cost of $970,887. Since the inception of the
plan, 98,300 shares have been repurchased at a total cost of
$1,821,827.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 10.9 percent at March 31, 1995, excluding unrealized
losses on assets available for sale. This percentage is unchanged
from December 31, 1994. In addition, the Parent Company has a $2
million line of credit with a regional bank that was unused at the
end of March.
Brenton Banks, Inc. common stock closed March of 1995 at a bid
price of $18.00 per share, which is 123 percent of the book value
per share of $14.62 on the same date. This closing stock price
represented a price-to-trailing 12 months earnings multiple of 14.8
times. Excluding the December 1994 restructuring charge from
earnings per share, the price-to-earnings ratio was a multiple of
12.7.
Brenton Banks, Inc. continues to pursue acquisition and
expansion opportunities that fit the Company's strategic business
and financial plans. There are currently no pending acquisitions
that would require Brenton Banks, Inc. to secure capital from
public or private markets.
Asset-Liability Management
The Company has fully implemented an asset-liability management
system. This system simulates the effect of various interest rate
scenarios on net income and is used to project the results of
alternative investment decisions. Management performs in-depth
analyses of the simulations to manage interest rate risk and the
Company's net interest margin.
The Company's static one-year GAP position continued to be
negative at March 31, 1995, meaning fewer assets are scheduled to
reprice within one year than liabilities. The Company does not
rely on GAP management to control interest rate risk, instead
preferring simulation as a better management tool. The
asset-liability simulations indicate that over the next 12 months,
net interest income will improve in a declining interest rate
environment and decrease in a rising rate environment.
Liquidity
The Company actively monitors and manages its liquidity
position with the objective of maintaining sufficient cash flows to
fund operations and meet customer commitments. Federal funds sold,
loans held for sale, and investments available for sale are readily
marketable assets. Maturities of all investment securities are
managed to meet the Company's normal liquidity needs. Investment
securities available for sale may be sold prior to maturity to meet
liquidity needs, to respond to market changes or to adjust the
Company's interest rate risk position. Federal funds sold and
assets available for sale comprised 26.3 percent of the Company's
total assets at March 31, 1995.
The Company's stable deposit base and relatively low levels of
large deposits resulted in low dependence on volatile liabilities.
As of March 31, 1995, the Company had borrowings of $27,650,000
from the Federal Home Loan Bank of Des Moines as a means of
providing long-term, fixed-rate funding and assisting in
controlling interest rate risk.
The combination of a high level of potentially liquid assets,
strong cash from operations, and low dependence on volatile
liabilities provides strong liquidity for the Company at March 31,
1995.
Results of Operations
THE THREE MONTHS ENDED MARCH 31, 1995, COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1994.
Net Income
For the three months ended March 31, 1995, Brenton recorded
net income of $2,449,778, which is a decline of 15.3 percent from
net income for the first three months of 1994 which totaled
$2,893,578. On a per common and common stock equivalent share
basis, net income was $.31 per share for the first quarter of 1995
compared to $.37 one year ago. The Company's total assets grew 5.2
percent to $1.6 billion at March 31, 1995 from one year ago.
Net Interest Income
Average earning assets rose 2.9 percent from the first quarter
of 1994 to the first quarter of 1995. This growth was offset by a
decline in the net interest margin, which fell from 4.10 percent
for the first quarter of 1994 to 3.88 percent for 1995. This
resulted in a decrease in net interest income of $414,870 from one
year ago.
Since February 1994, the Federal Reserve increased short-term
interest rates six times. These rate increases led to higher costs
for deposits, Federal funds purchased, and short-term borrowings.
Assets, however, have not repriced at the same pace, causing the
net interest margin to narrow.
In addition, since March 1994 the Company has increased
Federal Home Loan Bank borrowings and brought in a large
commercial deposit account relationship. While this has increased
total assets and net interest income in total, the spread earned
has been relatively small. If these transactions are excluded from
March 1995 results, the net interest margin would be approximately
4.03 percent.
With a tightened net interest margin and a need to generate
more interest rate sensitive assets, the Company is limiting growth
of fixed-rate consumer and real estate loans and focusing on
variable rate loan products.
Loan Quality
Brenton's loan quality remains exceptional. For the first
quarter, nonperforming loans were a low .45 percent of total loans,
and the reserve for loan losses was a solid 258.48 percent of
nonperforming loans and 1.16 percent of total loans.
For the first quarter of 1995, the Company's average loans
grew 8.1 percent over one year ago. The majority of this increase
related to commercial loans, which rose 13.2 percent from March 31,
1994. The Company's loan growth led to a 14.3 percent increase in
the provision for loan losses expense, which was $459,925 for the
quarter ended March 31, 1995, compared to $402,413 one year ago.
January 1, 1995 was the effective date for Financial
Accounting Standards Board Statement 114, "Accounting by Creditors
for Impairment of a Loan". This standard made fundamental changes
in certain accounting procedures for impaired loans, including the
determination of the allowance for loan losses and financial
disclosures. This new Standard has not had a material effect on
the financial statements of the Company.
Noninterest Income
Noninterest income was $4,270,832 for the first quarter,
compared to $4,406,318 one year ago. Lower brokerage commissions,
service charges on checking accounts, and secondary market real
estate loan fees contributed to the decline.
While dollars invested by brokerage customers increased,
mutual fund sales declined, leading to a 24.3% decrease in
commission income. Although commercial checking account balances
remained steady, lower service charges resulted from an increase in
the earnings credit rate (which is used to offset commercial
account service charges). Additionally, higher interest rates
slowed mortgage loan origination and refinancing activity from 1994
levels, reducing secondary market real estate loan fees $216,000
from one year ago.
These declines were partially offset by a 22.5% increase in
insurance commissions and fees over the first quarter of 1994.
This increase reflects higher sales of insurance products,
especially credit life insurance sales.
Noninterest Expense
With lower net interest income and noninterest income, the
Company is focusing heavily on cost control and cost reduction.
Total noninterest expense grew a modest 1.2% during the first
quarter of 1995 to $13,681,254 from one year ago. Salaries and
benefits expense declined 1.6% from one year ago. Occupancy,
furniture and equipment expense rose 15.5% from one year ago,
reflecting upgraded technology, remodeled facilities and new
branches. Other expenses remained relatively constant with one
year ago.
The Company's net noninterest margin, which measures operating
efficiency, was 2.39 percent compared to 2.49 percent one year ago.
Income Taxes
The Company's income tax strategies include reducing income
taxes by purchasing securities and originating loans that produce
tax-exempt income. The goal is to maintain the maximum level of
tax-exempt assets in order to benefit the Company on both a tax
equivalent yield basis and in income tax savings. The effective
rate of income tax expense as a percent of income, before income
tax and minority interest, was 18.2 percent for the first three
months of 1995 compared to 22.7 percent for 1994. This decline in
effective rate was due to lower overall Company earnings and
reduced state franchise taxes.
In 1994, the Company established out-of-state investment
subsidiaries to manage the investment portfolios for each Brenton
bank. These subsidiaries provide an opportunity to lower the
amount of state franchise taxes paid by the Company. The State of
Iowa has recently enacted legislation that eliminated the tax
benefits derived from these subsidiaries, and is effective July 1,
1995.
Looking Ahead
In December 1994, the Board of Directors approved the
"Strategy for Success", which is the Company's strategic plan,
developed with broad-based employee participation during 1994. The
key components of the plan include:
Development of a strong sales environment throughout the
Company.
Realignment of the organizational structure to match
natural market areas.
Development of a customer profitability measurement
system.
Re-engineering significant business functions.
The structure which best supports this plan is the consolidation of
the Company's 13 commercial banks into a single, statewide bank.
Much work has been done to implement this strategic vision. We
anticipate that the one-bank merger will be completed in the fourth
quarter of 1995.
PART 2 -- Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
for the three months ended March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BRENTON BANKS, INC.
___________________________________
(Registrant)
____________________________ ___________________________________
Dated Robert L. DeMeulenaere
President
____________________________ ___________________________________
Dated Steven T. Schuler
Chief Financial Officer/
Treasurer/Secretary