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, 1996
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 3, 1996.
7,495,170 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,
1996 1995
-------------- --------------
Assets:
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,162,137 71,159,078
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . 812,539 265,072
Federal funds sold and securities purchased
under agreements to resell . . . . . . . . . . . . . . . . . . . . . . 13,000,000 37,600,000
Investment securities:
Available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . 410,483,493 396,370,443
Held to maturity (approximate market value of
$106,472,000 and $109,131,000 at March 31, 1996,
and December 31, 1995, respectively) . . . . . . . . . . . . . . . . . 105,797,558 108,082,213
-------------- --------------
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 516,236,051 504,452,656
-------------- --------------
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,739,749 8,707,309
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 904,435,303 910,193,212
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . (11,209,801) (11,069,869)
-------------- --------------
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893,225,502 899,123,343
-------------- --------------
Bank premises and equipment . . . . . . . . . . . . . . . . . . . . . . . 32,412,738 32,849,842
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . 14,448,903 14,494,261
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,406,879 14,127,759
-------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,564,444,498 1,582,779,320
============== ==============
Liabilities and stockholders' equity:
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . $ 130,109,219 143,220,373
Interest-bearing:
Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402,075,470 399,308,392
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,388,345 215,488,846
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,011,215 603,925,104
-------------- --------------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,333,584,249 1,361,942,715
-------------- --------------
Federal funds purchased and securities sold
under agreements to repurchase . . . . . . . . . . . . . . . . . . . . 48,321,472 41,107,411
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . 6,000,000 2,500,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . 16,253,726 15,083,453
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 36,686,023 38,177,803
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,440,845,470 1,458,811,382
-------------- --------------
Minority interest in consolidated subsidiaries . . . . . . . . . . . . . 4,469,713 4,434,307
Redeemable preferred stock, $1 par; 500,000 shares
authorized; issuable in series, none issued . . . . . . . . . . . . . . -- --
Common stockholders' equity:
Common stock, $5 par; 25,000,000 shares authorized;
7,559,070 shares outstanding at March 31, 1996 and
7,653,252 shares outstanding at December 31, 1995 . . . . . . . . . . 37,795,350 38,266,260
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,145 2,020,518
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,551,149 77,888,451
Unrealized gains (losses) on assets
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 478,671 1,358,402
-------------- --------------
Total common stockholders' equity . . . . . . . . . . . . . . . . . . . . 119,129,315 119,533,631
-------------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . $1,564,444,498 1,582,779,320
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
PART 1 -- Item 1. Financial Statements
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31*
1996 1995
---------- -----------
Interest Income
Interest and fees on loans $19,563,503 20,053,953
Interest and dividends on investments:
Available for sale - taxable 4,538,527 3,261,539
Available for sale - tax-exempt 1,067,874 1,247,901
Held to maturity - taxable 987,597 752,048
Held to maturity - tax-exempt 799,277 755,755
----------- -----------
Total interest and dividends on investments 7,393,275 6,017,243
----------- -----------
Interest on federal funds sold and securities
purchased under agreements to resell 400,896 522,090
Other interest income 12,764 17,732
----------- -----------
Total interest income 27,370,438 26,611,018
----------- -----------
Interest Expense
Interest on deposits 12,552,495 12,437,422
Interest on federal funds purchased and securities
sold under agreements to repurchase 418,916 462,281
Interest on other short-term borrowings 65,882 104,279
Interest on long-term borrowings 664,183 592,982
----------- -----------
Total interest expense 13,701,476 13,596,964
----------- -----------
Net interest income 13,668,962 13,014,054
Provision for loan losses 700,000 459,925
----------- -----------
Net interest income after provision for loan losses 12,968,962 12,554,129
----------- -----------
Noninterest Income
Service charges on deposit accounts 1,591,661 1,210,728
Investment brokerage commission 1,019,276 621,037
Insurance commissions and fees 710,375 619,423
Mortgage banking fees 590,992 220,380
Other service charges, collection and exchange
charges, commissions and fees 654,552 672,903
Fiduciary income 611,889 617,169
Net gains (losses) from securities available for sale 174,525 --
Other operating income 198,438 309,192
----------- -----------
Total noninterest income 5,551,708 4,270,832
----------- -----------
Noninterest Expense
Salaries and wages 5,990,127 5,918,628
Employee benefits 1,163,490 1,318,038
Occupancy expense of premises, net 1,357,434 1,233,662
Furniture and equipment expense 945,430 952,526
Data processing expense 633,875 634,876
FDIC deposit insurance assessment 118,727 751,482
Advertising and promotion 450,951 443,307
Supplies 426,347 318,993
Other operating expense 2,268,658 2,109,742
----------- -----------
Total noninterest expense 13,355,039 13,681,254
----------- -----------
Income before income taxes and minority interest 5,165,631 3,143,707
Income taxes 1,445,697 573,134
----------- -----------
Income before minority interest 3,719,934 2,570,573
Minority interest 139,687 120,795
----------- -----------
Net income $ 3,580,247 2,449,778
=========== ===========
Per common and common equivalent share:
Net income $ 0.46 0.31
Cash dividends 0.12 0.11
==== ====
<FN>
*See accompanying notes to consolidated financial statements.
PART 1 -- Item 1. Financial Statements
Brenton Banks, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the 3 months ended March 31,
1996 1995
-------------- -------------
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,580,247 2,449,778
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses . . . . . . . . . . . . . . 700,000 459,925
Depreciation and amortization . . . . . . . . . . . . 1,117,312 1,028,939
Net gains from securities available for sale . . . . . (174,525) --
Net (increase) decrease in loans held for sale . . . . 1,967,560 (927,701)
(Increase) decrease in accrued interest receivable
and other assets . . . . . . . . . . . . . . . . 48,506 (110,554)
Increase in accrued expenses, other
liabilities and minority interest . . . . . . . . 1,209,237 939,992
-------------- --------------
Net cash provided by operating activities . . . . . . . . . . . 8,448,337 3,840,379
-------------- --------------
Investing Activities:
Investment securities available for sale:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (87,268,503) (46,490,526)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 49,165,561 53,686,092
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,930,374 --
Investment securities held to maturity:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . (25,680,748) (23,146,364)
Maturities . . . . . . . . . . . . . . . . . . . . . . . . 27,965,403 18,978,468
Net decrease in loans . . . . . . . . . . . . . . . . . . . . 5,197,841 19,109,693
Purchases of bank premises and equipment, net . . . . . . . . (566,722) (3,901,839)
-------------- --------------
Net cash used by investing activities . . . . . . . . . . . . . (8,256,794) 18,235,524
-------------- --------------
Financing Activities:
Net increase (decrease) in noninterest-bearing, interest-
bearing demand and savings deposits . . . . . . . . . . . . (11,444,577) 2,776,903
Net increase (decrease) in time deposits . . . . . . . . . . . (16,913,889) 9,621,180
Net increase (decrease) in federal funds purchased and
securities sold under agreements to repurchase . . . . . . 7,214,061 (30,191,353)
Net (increase) decrease in other short-term borrowings . . . . 3,500,000 (5,000,000)
Proceeds of long-term borrowings . . . . . . . . . . . . . . . 20,000 4,616,000
Repayment of long-term borrowings . . . . . . . . . . . . . . (1,511,780) (77,207)
Dividends on common stock . . . . . . . . . . . . . . . . . . (917,550) (864,594)
Proceeds from issuance of common stock under
the stock option plan . . . . . . . . . . . . . . . . . . . 21,439 --
Payment for shares acquired under common stock
repurchase plan . . . . . . . . . . . . . . . . . . . . . . (2,543,556) (970,887)
Proceeds from issuance of common stock under the
long-term stock compensation plan 334,835 361,602
Other -- 18,413
-------------- ---------------
Net cash provided (used) by financing activities . . . . . . . . (22,241,017) (19,709,943)
-------------- ---------------
Net increase (decrease) in cash and cash equivalents . . . . . . (22,049,474) 2,365,960
Cash and cash equivalents at the beginning of the year . . . . . 109,024,150 117,848,410
-------------- ---------------
Cash and cash equivalents at the end of the period . . . . . . . $ 86,974,676 120,214,370
============== ===============
Supplemental Cash Flow Information
(Unaudited)
Interest paid during the period . . . . . . . . . . . . . . . . $ 13,560,497 11,355,309
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 1995 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, 1996 and 1995, was computed using the consolidated
effective federal income tax rates.
For the first three months of 1996 and 1995, the Company also
recognized income tax expense pertaining to state franchise taxes
payable individually by the subsidiary banks.
5. Common Stock Transactions
During the first three months of 1996, options on 2,000 shares
of common stock were exercised under the Company's stock option
plans. The exercise price on these options was the fair market
value of the Company's common stock at the date of grant. These
transactions added $21,439 to the equity of the Company.
Part 1 -- Item 1
Page 2 of 2
5. Common Stock Transactions, cont.
In 1992, the Company originated a long-term stock compensation
plan for key management personnel. Compensation expense associated
with this plan for the first three months of 1996 and 1995 was
$287,040 and $142,112, respectively.
The Company issued 14,718 and 20,089 shares of common stock
under the long-term stock compensation plan for 1996 and 1995,
respectively. This transaction added $334,834 and $361,602 to the
equity of the Company for the years 1996 and 1995, respectively,
In 1994, the Board of Directors authorized a plan to
repurchase the Company's common stock. In January 1996, the Board
of Directors authorized the repurchase of up to $5 million of
common stock during 1996. Through March 31, 1996, 110,900 shares
had been repurchased at a cost of $2,543,556. Since the plan's
inception, the Company has repurchased 413,833 shares at a total
cost of $8,224,617.
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 1996 and 1995 were 7,705,574 and 7,902,063,
respectively, which include 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
Net income for the first quarter of 1996 was $3,580,247, up
from $2,449,778 one year ago. The Company's annualized return on
average assets (ROA) was .95 percent, compared to .65 percent for
the same period in 1995; the annualized return on average equity
(ROE) was 12.08 percent, compared to 8.73 percent one year ago.
Common stockholders' equity totaled $119,129,315 as of March
31, 1996, a .3 percent decrease from December 31, 1995. The
decrease was caused by the repurchase of common stock and a decline
in unrealized gains on assets available for sale, which decreased
by 64.8 percent from the end of the year.
As part of the Company's ongoing stock repurchase plan,
110,900 shares have been repurchased during the first quarter of
1996 at a cost of $2,543,556. The Board of Directors has approved
the repurchase of $5 million of Company stock during 1996. Since
the inception of the plan in 1994, the Company has repurchased
413,833 shares at a total cost of $8,224,617.
As previously mentioned, part of the decrease in stockholders'
equity was due to the equity adjustment required by Statement of
Financial Accounting Standard (SFAS) No. 115. Under this
accounting standard, which was adopted December 31, 1993, 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,
1996, aggregate unrealized gains on assets available for sale
totaled $478,671, a decrease of $879,731 from December 31, 1995.
The Company's risk-based core capital ratio was 11.90 percent
at March 31, 1996, and the total risk-based capital ratio was 13.03
percent. These exceeded the minimum regulatory requirements of
4.00 and 8.00 percent, respectively. The Company's tier 1 leverage
ratio, which measures capital excluding intangible assets, was 7.55
percent at March 31, 1996, exceeding the regulatory minimum
requirement range of 3.00 to 5.00 percent. Each of these capital
calculations exclude the unrealized gains on investments available
for sale.
Part 1 -- Item 2
Page 2 of 6
The Company paid a dividend of $.12 per common share in the
first quarter of 1996. This dividend is unchanged from the prior
quarter, but is an increase of 9.1 percent from the dividend one
year ago. The first quarter dividend of $.12 per share represented
a dividend payout ratio of 26.1 percent of earnings per share.
The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent
Company") was 10.4 percent at March 31, 1996. This percentage is
unchanged from December 31, 1995. In addition, the Parent Company
has a $2 million line of credit with a regional bank that was
unused at the end of March, 1996.
Brenton Banks, Inc. common stock closed March 1996 at $22.75
per share, which is 1.44 times the book value per share of $15.76
on the same date. This closing stock price represented a price-
to-trailing-12-months-earnings multiple of 15.3 times.
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 a fully integrated asset-liability management
system to assist in managing the balance sheet. This system
performs simulations of the effects of various interest rate
scenarios on net interest income and is used to project the results
of alternative investment decisions. Management performs analysis
of the simulations to manage interest rate risk, the net interest
margin and levels of net interest income.
The asset-liability simulations indicate that net interest
income will be maximized in a stable interest rate environment.
The Company currently believes that net interest income would fall
by less than 5 percent if interest rates immediately increased or
decreased by 300 basis points, which is within the Company policy
limit.
Many steps have been taken over the past year to restructure
the Company's balance sheet in a way that will lessen the impact of
interest rate fluctuations on net interest income. The Company has
increased its variable rate consumer loans by $39.4 million since
the inception of this product in December, 1994.
Part 1 -- Item 2
Page 3 of 6
The Company has also reduced its reliance on residential real
estate loans with long repricing periods. This was done by
securitizing approximately $56 million of these loans during 1995.
At March 31, 1996, $36 million of these loan pools had been sold at
a loss of approximately $230,000, and $20 million were held in the
Company's available for sale investment portfolio. In addition,
the residential real estate loan portfolio is down by $84 million
from March 31, 1995, or 28.5 percent.
In addition to normal balance sheet instruments, the Company
has utilized Federal Home Loan Bank borrowings and interest rate
swaps to reduce interest rate risk.
Liquidity
The Company actively monitors and manages its liquidity
position. The objective is to maintain sufficient cash flows to
fund operations and meet customer commitments. Federal funds sold,
loans held for sale and assets 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 asset-liability position. Federal funds sold and assets
available for sale comprised 27.5 percent of the Company's total
assets at March 31, 1996.
Net cash provided from Company operations is another major
source of liquidity. The net cash provided from operating
activities was $8,448,337 for the first quarter of 1996. The
Company's trend of strong cash flows from operations is expected to
continue into the foreseeable future.
The Company's stable deposit base and relatively low levels of
large deposits resulted in low dependence on volatile liabilities.
As of March 31, 1996, the Company had borrowings of $30,150,000
from the Federal Home Loan Bank of Des Moines as a means of
providing long-term fixed-rate funding for certain fixed-rate
assets and managing interest rate risk.
The combination of a high level of potentially liquid assets,
strong cash flows from operations and low dependence on volatile
liabilities provided sufficient liquidity for the Company at March
31, 1996.
Part 1 -- Item 2
Page 4 of 6
Results of Operations
The three months ended March 31, 1996, compared to the three months
ended March 31, 1995.
Net Income
For the three months ended March 31, 1996, Brenton recorded
net income of $3,580,247, which is an increase of 46.1 percent from
net income for the first three months of 1995, which totaled
$2,449,778. On a per common and common stock equivalent share
basis, net income was $.46 per share for the first quarter of 1996,
compared to $.31 per share for the first quarter of 1995. The
Company's total assets at March 31, 1996 were consistent with 1995
levels of $1.6 billion.
Net Interest Income
Net interest income increased 5.0 percent to $13,668,962,
compared to $13,014,054 for the first quarter of 1995. Net
interest margin increased 11 basis points from 3.88 percent for the
first three months of 1995 to 3.99 percent for the first quarter of
1996. This improvement in margin was the result of an increase in
the rate earned on average earning assets and a decrease in the
rate paid on interest-bearing liabilities.
Loan Quality
The Company's loan quality has remained solid through March
31, 1996. Nonperforming loans rose to $6,571,000, which was .73
percent of loans at March 31, 1996, while reserves remained strong
at 170.6 percent of nonperforming loans and 1.24 percent of total
loans. Nonperforming loans include loans on nonaccrual status,
loans that have been renegotiated to below market interest rates or
terms, and loans past due 90 days or more.
The provision for loan losses totaled $700,000 for the three
months ended March 31, 1996, compared to $459,925 for the same
period one year ago. The increase in the provision is related to
an increase in delinquencies and net charge-offs on consumer loans
during the first quarter of 1996 and the longer term desire to
increase the reserve as a percent of loans. Net charge-offs were
.26 percent of average loans for the first three months of 1996,
compared with .18 percent for the same period last year.
Beginning January 1, 1995, the Financial Accounting Standards
Board mandated a standard that fundamentally changed certain
accounting procedures for impaired loans, including the
determination of the allowance for loan losses and financial
disclosures. This new Standard has not had a material effect on
the financial statements of the Company.
Part 1 -- Item 2
Page 5 of 6
Noninterest Income
Noninterest income for the three months ended March 31, 1996
was $5,377,183 (excluding securities gains and losses), a 25.9
percent increase from $4,270,832 one year ago. Increases in
services charges on deposits, brokerage commissions, insurance
revenues and mortgage banking fees were all contributing factors.
Brokerage commissions rose 64.1 percent, reflecting a strong
market and substantially higher volumes. Insurance commissions and
fees grew 14.7 percent, due largely to contingency refunds from
carriers rewarding the higher volume and quality of our insurance
production.
Service charges on deposits increased 31.5 percent to
$1,591,661 from the first three months of 1995. This increase was
due to focusing on collecting a higher percentage of fees that are
assessed to customers. Mortgage banking fees totaled $590,992 for
the first three months of 1996, compared to $220,380 for the prior
year. This increase is attributed to a higher volume of real
estate mortgage loan originations and a larger loan servicing
portfolio.
Fiduciary income and other service charges, collection and
exchange charges, commissions and fees showed slight decreases from
the prior year. Other operating income decreased $110,755 from one
year ago. This decrease is largely due to recording gains on the
sale of loans in 1995, versus losses on loan sales in 1996.
Securities transactions created an additional increase in
noninterest income. Securities gains for the first quarter of 1996
totaled $174,525. The first quarter of 1995 did not have any
securities gains or losses.
Noninterest Expense
Noninterest expense totaled $13,355,039, a 2.4 percent
decrease from the first quarter of 1995. This improvement was
primarily due to savings in employee benefit expenses and
significantly lower FDIC premium assessments on deposits.
These savings were partially offset by increases in occupancy
and other operating expenses. The increase in occupancy expense is
primarily related to realizing full depreciation for the first
quarter of 1996 on new and renovated banking offices finished in
1995 for Ames, Ankeny, Cedar Rapids, Davenport and Iowa City.
Quarter to quarter data processing costs remained virtually
unchanged.
The Company continues to focus on cost management and
evaluates all major expense items in an effort to control the
growth rate of various noninterest expense categories.
Part 1 -- Item 2
Page 6 of 6
The Company's net noninterest margin, which measures operating
efficiency, was 2.04 percent, compared to 2.39 percent one year
ago. Another ratio that measures productivity is the efficiency
ratio. This ratio calculates how much expense it takes to produce
a dollar of revenue. The lower the percentage, the more efficient
a company has become. At March 31, 1996, the Company's efficiency
ratio was 67.12 percent, compared to 75.31 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 28.0 percent for the first three months
of 1996 compared to 18.2 percent for 1995.
In 1994, the Company established out-of-state investment
subsidiaries to manage the investment portfolios of each Brenton
bank. These subsidiaries provided an opportunity to lower the
amount of state franchise taxes paid by the Company. Effective
July 1, 1995, the state of Iowa enacted legislation that eliminated
the tax benefits derived from these subsidiaries. The Company
dissolved these subsidiaries on June 30, 1995.
Looking Ahead
While only a few months have passed since the Company
completed the merger of the 13 commercial banks into a single bank
and initiated the "Strategy for Success," management's new sales
initiatives and operating efficiencies have already produced very
satisfying results.
The development and implementation of the "Strategy for
Success" will continue throughout 1996. This plan includes the
development of a strong sales culture, cost management initiatives,
customer profitability systems and lines of business profitablility
systems. The Company will also focus on sources of noninterest
income.
This strategy continues to emphasize a strong commitment to
customer relationships and communities while providing
profitability for the shareholders.
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, 1996.
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)
Robert L. DeMeulenaere
Dated (Signature)
President
Steven T. Schuler
Dated (Signature)
Chief Financial Officer/
Treasurer/Secretary