Annual Report (Form 10-K), fiscal year 1994

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, 1994, the Parent Company had direct control of its 13 affiliated commercial 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, 1994, the affiliated banks were operating 44 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 audits; preparation of tax returns; and assistance with respect to accounting and operating systems and procedures, personnel, marketing, trust, investment brokerage services, cash management services and banking facilities and equipment. Charges for the services are based on the nature and extent of the services provided.
(B) Recent Developments.
New Directors. In July 1994, Thomas R. Smith retired from the Board and Hubert G. Ferguson was elected to fill the position. Prior to his retirement from active employment, Mr. Ferguson was the National Sales Manager for Dain Bosworth, headquartered in Minneapolis, Minnesota. In February 1995, the Board of Directors increased the number of directors from six to seven and named Gary M. Christensen to fill the position. Mr. Christensen is the President and Chief Operating Officer of Pella Corporation in Pella, Iowa.
Stock Split. In May 1994, the Company declared a 3-for-2 stock split in the form of a stock dividend. This transaction resulted in the issuance of 2,633,895 shares of common stock and the transfer of $13,169,475 from retained earnings to common stock.
Common Stock Repurchase Plan. In March 1994, the Board of Directors authorized a plan to repurchase $2,000,000 of the Company's common stock. As of December 31, 1994, the Company had repurchased 44,800 shares, at a total cost of $850,950.
Regulatory Developments. During 1994, the "Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" (the "Interstate Banking Act") was enacted. This law amends certain provisions of the federal banking laws (including the Bank Holding Company Act) to permit the acquisition of banks by banks or bank holding companies domiciled outside of the home state of the acquired bank. The law will become effective on June 1, 1997. The Interstate Banking Act seeks to provide a uniform interstate banking
law for all 50 states. Provisions of the law allow individual states to "opt-out" of the provisions of the Interstate Banking Act by expressly prohibiting merger transactions with out-of-state banks. Also, states are permitted to impose certain conditions upon interstate mergers. States electing to opt-out of the Interstate Banking Act must pass such a law prior to June 1, 1997. In addition, the Interstate Banking Act also permits certain affiliated financial institutions to act as agents for each other, establishes limits upon the maximum deposits that may be held by any one institution in the nation and in any one state and seeks to equalize the competitive opportunities between the United States and the foreign banks. Whether Iowa or other states surrounding Iowa will "opt-out" of the provisions of the Interstate Banking Act prior to June 1, 1997 is unknown. The full extent of the provisions of the Interstate Banking Act and its effect upon the Company is unknown at this time.
During the first quarter of 1995, the FDIC proposed a reduction in the Bank Insurance Fund (BIF) assessments. Under the proposed rate structure BIF rates would be reduced from current rates of $.23 to $.31 per $100 of deposits, to $.04 to $.31 per $100 of deposits based upon a risk based assessment schedule. Such a reduction in insurance premium rates, if enacted, could result in a 82% decrease in the Company's expense related to BIF insured deposits. The proposed regulation would not affect the insurance premiums on deposits insured by the Savings Association Insurance Fund (SAIF). See Item 1, Section (G), Supervision and Regulation.
Recently, Congress announced the introduction of legislation which could substantially change the regulatory framework in which banks and other financial institutions operate. At the present time, it is impossible for the Company to predict whether such legislation will be enacted and the nature of the effects on the Company, if enacted.
Growth and Acquisitions. As part of management's strategic growth plans, Brenton Banks, Inc. investigates growth and expansion opportunities which strengthen the Company's presence in current or selected new market areas. During 1995, the Company plans to continue expansion of its traditional and non-traditional services. There are plans to open a supermarket branch in Iowa City in 1995, as well as a telebanking center to be headquartered in Des Moines. In addition, a new savings bank branch facility in Ankeny will be completed in early 1995.
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 Item 1, Section (G), 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 received approval to open a banking office in Iowa City, Iowa. Both Ankeny and Iowa City are rapidly expanding markets not previously served by Brenton.
Restructuring of Organization. In December 1994, the Board of Directors authorized a restructuring plan, which included merging the Company's five national banks and eight state banks into a single, state chartered banking organization under the laws of the state of Iowa. In addition, the Board approved plans to consolidate banking facilities and reduce the Company's work force by approximately 10 percent in 1995. A restructuring charge was recorded in 1994 to cover the costs of implementing this plan.
Strategic Planning Coordinating Team. In order to facilitate the Company's strategic planning process, which included the restructuring plan, a Strategic Planning Coordinating Team was named to direct these efforts. That team is comprised of Robert L. DeMeulenaere, President, Brenton Banks, Inc.; Woodward G. Brenton, President & CEO, Brenton First National Bank, Davenport; Charles N. Funk, Vice President- Investments, Brenton Banks, Inc.; Ronald D. Larson, President & CEO, Brenton Bank and Trust Company of Cedar Rapids; Larry A. Mindrup, President & CEO, Brenton Savings Bank, FSB, Ames; Phillip L. Risley, President & CEO, Brenton Bank, N.A., Des Moines; Steven T. Schuler, Chief Financial Officer/Treasurer/
Secretary, Brenton Banks, Inc.; Norman D. Schuneman, Senior Vice President- Lending, Brenton Banks, Inc.; and Roger D. Winterhof, President & CEO, Brenton National Bank-Poweshiek County, Grinnell.
Other. The information appearing on pages 2 through 8 of the Company's Annual Report to Stockholders for the year ended December 31, 1994 (the "Annual Report") filed as Exhibit 13, is incorporated by reference.
(C) Affiliated Banks.
The 14 affiliated banks had 44 banking locations at December 31, 1994, 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 406,000. 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 cus- tomers 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.
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 357,000. The bank has four offices in the Davenport metropolitan area.
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 173,000. The bank has four 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 offices in Ames, Story City and Ankeny. The savings bank serves customers in Story and Polk Counties.
At December 31, 1994, 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 corporate subsidiaries 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.
During 1994, 13 of the Company's subsidiary banks (excluding the savings bank) established subsidiaries for the purpose of holding the respective bank's investment portfolio. These wholly-owned subsidiaries hold and manage the banks investment portfolios in Nevada and are not subject to state taxation, as Nevada imposes no corporate income taxes.
(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, flotation or underwriting of securities. At December 31, 1994, this subsidiary had 27 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 banking 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.
(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 13, 1995, 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:
(F) Employees.
On December 31, 1994, the Parent Company had 57 full-time employees and 5 part-time employees. On December 31, 1994, the Company had 686 full- time employees and 213 part-time employees. None of the employees of the Company are represented by unions. The relationship between management and employees of the Company is considered good.
(G) Supervision and Regulation.
The Company is restricted by various regulatory bodies as to the types of activities and businesses in which it may engage. References to the provisions of certain statutes and regulations are only brief summaries thereof and are qualified in their entirety by reference to those statutes and regulations. The Parent Company cannot predict what other legislation may be enacted or what regulations may be adopted, or, if enacted or adopted, the effect thereof. Furthermore, certain regulatory and legislative changes are discussed in Item 1, Section (B), Recent Developments.
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. However, the Parent Company may engage in and may own shares of companies engaged in certain businesses found by the Board of Governors to be so closely related to banking "as to be a proper incident thereto." The Act does not place territorial restrictions on the activities of bank-related subsidiaries of bank holding companies. The Parent Company is required by the Act to file periodic reports of its operations with the Board of Governors and is subject to examination by the Board of Governors. Under the Act and the regulations of the Board of Governors, bank holding companies and their subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services.
As a savings and loan holding company, Brenton Banks, Inc. is subject to federal regulation and examination by the Office of Thrift Supervision (the "OTS"). The OTS has enforcement authority over the Company. 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 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 ("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 of 1991 ("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, 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 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, 1994, 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 those changes occurring prior to 1994 follow. See Item 1, Section (B), Recent Developments, for those changes during 1994.
The FDIC Improvement Act of 1991 was primarily designed to recapitalize the FDIC's Bank Insurance Fund ("BIF") and Savings Association Insurance Fund ("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 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. FDICIA also imposed additional regulatory standards upon depository institutions and granted additional authority to the FDIC. FDICIA generally requires that all institutions be examined by the FDIC annually. Under the provisions of 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, 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.
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 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 change the base BIF and SAIF rates under certain circumstances that are set forth in the law. The FDIC has recently proposed to decrease the BIF insurance premiums assessed in 1995. See Item 1, Section (B), Recent Developments.
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. See Item 1, Section (B), Recent Developments, for information on the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
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 1994. 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, 1995.
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. The Company will also rely on this law when it merges its commercial banks in 1995. Generally, thrifts can operate offices in any county in Iowa and may, under certain circumstances, acquire or branch into thrifts in other states with the approval of the OTS.
(H) Governmental Monetary Policy and Economic Conditions.
The earnings of the Company are affected by the policies of regulatory authorities, including the Federal Reserve System. Federal Reserve System monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing conditions in the economy and in the money markets, as a result of actions by monetary and fiscal authorities, interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Company. Future policies of the Federal Reserve System and other authorities cannot be predicted, nor can their effect on future earnings be predicted.
(I) Competition.
The banking business in Iowa is highly competitive and the affiliated banks compete not only with banks and thrifts, but with sales, finance and personal loan companies; credit unions; and other financial institutions which are active in the areas in which the affiliated banks operate. In addition, the affiliated banks compete for customer funds with other investment alternatives available through investment brokers, insurance companies, finance companies and other institutions.
The multi-bank holding companies which own banks in Iowa are in direct competition with one another. 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 44 banking locations in various parts of Iowa. The total deposits of this company's affiliated banks located in Iowa are approximately 270 percent greater than the total deposits of the Company. Another multi-bank holding company, domiciled in Wisconsin, has 43 locations in Iowa, and another multi- bank holding company domiciled in Missouri, has 33 locations in Iowa.
Brenton Banks, Inc. is the second largest multi-bank holding company domiciled in Iowa. The largest Iowa-based bank holding company has 64 banking locations in the state and deposits approximately 25 percent greater than the deposits of the Company.
The third largest Iowa-based multi-bank holding company has 32 locations in Iowa and deposits approximately 29 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.
Item 1(J) Business - Statistical Disclosure
The following statistical disclosures relative to the consolidated operations of the Company have been prepared in accordance with Guide 3 of the Guides for the Preparation and Filing of Reports and Registration Statements under the Securities Exchange Act of 1934. Average balances were primarily calculated on a daily basis.
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential
The following summarizes the average consolidated statement of condition by major type of account, the interest earned and interest paid and the average yields and average rates paid for each of the three years ending December 31, 1994:
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential, Continued
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential, Continued
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential, Continued
The following shows the changes in interest earned and interest paid due to changes in volume and changes in rate for each of the two years ended December 31, 1994:
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities, and Stockholders' Equity; Interest Rates and Interest Differential, Continued
Interest Rate Sensitivity Analysis
The following schedule shows the matching of interest sensitive assets to interest sensitive liabilities by various maturity or repricing periods as of December 31, 1994. As the schedule shows, the Company is liability sensitive within the one-year time frame. Included in the three months or less sensitivity category are all interest-bearing demand and savings accounts. Although these deposits are contractually subject to immediate repricing, management believes a large portion of these accounts are not synchronized with overall market rate movements.
Item 1(J) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The carrying value of investment securities at December 31 for each of the past three years follows:
Item 1(J) Business - Statistical Disclosure, Continued
II. Investment Portfolio
The following table shows the maturity distribution and weighted average yields of investment securities at December 31, 1994:
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 34 percent federal income tax rate for 1994 and 1992 and a 35 percent rate for 1993, and are adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
As of December 31, 1994, 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.
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio
The following table shows the amount of loans outstanding by type as of December 31 for each of the past five years:
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio, Continued
The following table shows the maturity distribution of loans as of December 31, 1994 (excluding real estate loans secured by 1-4 family residential property and loans to individuals for personal expenditures):
The above loans due after one year which have predetermined and floating interest rates follow:
Predetermined interest rates $122,965 ______
Floating interest rates $ 59,147 ______
Item 1(J) Business - Statistical Disclosure, Continued
III. Loan Portfolio, Continued
The following schedule shows the dollar amount of loans at December 31 for each of the past five years which were either accounted for on a nonaccrual basis, had been restructured to below market terms to provide a reduction or deferral of interest or principal, or were 90 days or more past due as to interest or principal. Each particular loan has been included in only the most appropriate category.
Interest income recorded during 1994 on nonaccrual and restructured loans amounted to $321,000. The amount of interest income which would have been recorded during 1994 if nonaccrual and restructured loans had been current, in accordance with the original terms, was $537,000.
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, 1994, these loans amounted to approximately $2 million.
As of December 31, 1994, 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 $541,000 and $948,000 at December 31, 1994 and 1993, respectively.
Item 1(J) Business - Statistical Disclosure, Continued
IV. Summary of Loan Loss Experience
The following is an analysis of the allowance for loan losses for years ended December 31, for each of the past five years:
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.
Item 1(J) Business - Statistical Disclosure, Continued
IV. Summary of Loan Loss Experience, Continued
In the following summary, the Company has allocated the allowance for loan losses, according to the amount deemed to be reasonably necessary to provide for losses within each category of loans. The amount of the allowance applicable to each category and the percentage of loans in each category to total loans follows:
Item 1(J) Business - Statistical Disclosure, Continued
V. Deposits
A classification of the Company's average deposits and average rates paid for the years indicated follows:
The following sets forth the maturity distribution of all time deposits of $100,000 or more as of December 31, 1994:
Large Time Deposits by Maturity at Maturity Remaining December 31, 1994 (In thousands)
Less than 3 months $23,139 Over 3 through 6 months 10,191 Over 6 through 12 months 16,831 Over 12 months 23,188 ______
$73,349 ______
VI. Return on Equity and Assets
Various operating and equity ratios for the years indicated are presented below:
Item 1(J) Business - Statistical Disclosure, Continued
VII. Short-Term Borrowings
Information relative to federal funds purchased and securities sold under agreements to repurchase follows:
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:
Item 2.



Item 2. Properties.
At December 31, 1994, the affiliated banks had 44 banking locations with approximately 296,000 square feet, all located in Iowa. Of these banking locations, 33 were owned by the Company - approximately 229,000 square feet; 3 were owned buildings on leased land - approximately 30,000 square feet and 8 were operated under lease contracts with unaffiliated parties - approximately 37,000 square feet.
The Company leases certain real estate and equipment under long- term and short-term leases. The Company owns certain real estate which is leased to unrelated persons.
Item 3.

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.

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.

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 1,608 holders of record of the Parent Company's $5 common stock as of March 13, 1995. The closing bid price of the Parent Company's common stock was $17.75 on March 13, 1995.
The Parent Company increased dividends to common shareholders in 1993 to $.44 per share, a 10 percent increase over $.40 for 1993, after restatement for the May 1994 3-for-2 stock split. Dividend declarations are evaluated and determined by the Board of Directors on a quarterly basis. In January 1995, the Board of Directors declared a dividend of $.11 per common share. There are currently no restrictions on the Parent Company's present or future ability to pay dividends.
Item 6.

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.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information appearing on pages 12 through 17 of the Company's Annual Report, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 8.


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.

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.



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, 1994, is incorporated herein by reference. See also Item 1(E) of this Form 10-K captioned "Executive Officers of the Registrant."
Item 11.

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, 1994, is incorporated herein by reference.
Item 12.

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, 1994, is incorporated herein by reference.
Item 13.

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, 1994, is incorporated herein by reference.
PART IV
Item 14.

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.
3. Exhibits (not covered by independent auditors' report).
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. These Articles of Incorporation and Bylaws are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993.
Exhibit 10.1
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 10.2
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 10.3
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 10.4
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 10.5
Summary of the Employee Bonus Plan under which employees of the Company are eligible to receive a bonus each year.
Exhibit 10.6
Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc.
Exhibit 10.7
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 300,000 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.
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance.
Exhibit 10.9
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993.
Exhibit 10.10
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 10.11
Standard Agreement for Advances, Pledge and Security Agreement between Brenton banks and the Federal Home Loan Bank of Des Moines. These standard Agreement for Advances, Pledge and Security Agreement are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993.
Exhibit 10.12
Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1994, setting forth the terms of the Parent Company's $2,000,000 short-term debt agreement.
Exhibit 10.13
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 10.14
Item Processing Agreement dated December 1, 1991 between Brenton Bank Services Corporation 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 10.15
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.
Exhibit 10.16
Amendments to the Restated Trust Agreement for Brenton Banks, Inc. Retirement Plan, effective January 1, 1987, January 1, 1993 and January 1, 1994.
Exhibit 10.17
Indenture Agreement with respect to Capital Notes dated April 12, 1993. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993.
Exhibit 10.18
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 10.19
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 10.20
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 10.21
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 10.22
Indenture Agreement with respect to Capital Notes dated April 8, 1994.
Exhibit 10.23
Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994.
Exhibit 10.24
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994.
Exhibit 10.25
Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994.
Exhibit 10.26
Agreement between Larry A. Mindrup and the Company regarding the change in control arrangements, dated December 31, 1994.
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 1994 calendar year.
Exhibit 21
Subsidiaries.
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of their report dated February 17, 1995, relating to certain consolidated statements of condition of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc.
Exhibit 27
Financial Data Schedule (filed only with Electronic Transmission).
The Parent Company will furnish to any shareholder upon request a copy of any exhibit upon payment of a fee of $.50 per page. Requests for copies of exhibits should be directed to Steven T. Schuler, Chief Financial Officer/Treasurer/Secretary, at Brenton Banks, Inc., P.O. Box 961, Des Moines, Iowa 50304-0961.
(b) Reports on Form 8-K: No reports on Form 8-K were required to be filed during the last quarter of 1994.
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 9, 1995
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 9, 1995
By /s/ C. Robert Brenton Chairman of the Board and Director C. ROBERT BRENTON Principal Executive Officer
Date: March 9, 1995
By /s/ Robert L. DeMeulenaere President and Director ROBERT L. DEMEULENAERE Principal Executive Officer
Date: March 9, 1995
By /s/ Steven T. Schuler Chief Financial Officer/Treasurer/Secretary STEVEN T. SCHULER Chief Financial Officer
Date: March 9, 1995
By /s/ Jennifer Hixson Carney Controller JENNIFER HIXSON CARNEY
Date: March 9, 1995
BOARD OF DIRECTORS
By /s/ Junius C. Brenton JUNIUS C. BRENTON
Date: March 9, 1995
By /s/ R. Dean Duben R. DEAN DUBEN
Date: March 9, 1995
By /s/ Hubert G. Ferguson HUBERT G. FERGUSON
Date: March 9, 1995
By /s/ Gary M. Christensen GARY M. CHRISTENSEN
Date: March 9, 1995
EXHIBIT INDEX
Exhibits Page
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. These Articles of Incorporation and Bylaws are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993. . . . . . . . . . . . . . . . . . 39
Exhibit 10.1
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. . . . . . . . . . . . . . . . . 40
Exhibit 10.2
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. . . . . . . . . . . 42
Exhibit 10.3
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. . . . . . . . . . 44
Exhibit 10.4
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. . . . . . . . . . . 46
Exhibit 10.5
Summary of the Employee Bonus Plan under which employees of the Company are eligible to receive a bonus each year. . . . . . . . . . . . . . . . . . . . . . 48
Exhibit 10.6
Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. . . . . . . . . 50
Exhibit 10.7
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 300,000 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. . . . . 57
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. . . . . . . . . . . . . . 58
Exhibit 10.9
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993. . . . . . . . . . . . . . . . . . . . . 72
Exhibit 10.10
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. . . . . . . . . . . . 73
Exhibit 10.11
Standard Agreement for Advances, Pledge and Security Agreement between Brenton banks and the Federal Home Loan bank of Des Moines. These standard Agreement for Advances, Pledge and Security Agreement are incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993. . . . . 74
Exhibit 10.12
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. . . . . . . . . . . . . . . . . 75
Exhibit 10.13
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. . . . . . . . . . . . . . . . . . . . . 77
Exhibit 10.14
Item Processing Agreement dated December 1, 1991 between Brenton Bank Services Corporation 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. . . . . . . . . . . . . . . . . . . . . 78
Exhibit 10.15
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. . . . . . . . . . . 79
Exhibit 10.16
Amendments to the Restated Trust Agreement for Brenton Banks, Inc. Retirement Plan, effective January 1, 1987, January 1, 1993 and January 1, 1994. . . . 80
Exhibit 10.17
Indenture Agreement with respect to Capital Notes dated April 12, 1993. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1993. . . . . 112
Exhibit 10.18
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. . . . . 113
Exhibit 10.19
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. . . . . . 114
Exhibit 10.20
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. . . . . . 115
Exhibit 10.21
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. . . . . . 116
Exhibit 10.22
Indenture Agreement with respect to Capital Notes dated April 8, 1994. . . . . . . . . . . . . . . . . . . . 117
Exhibit 10.23
Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. . . . . . 132
Exhibit 10.24
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. . . . . . . . . . 174
Exhibit 10.25
Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. . . . . . . . . . . . . . . . . . 184
Exhibit 10.26
Agreement between Larry A. Mindrup and the Company regarding the change in control arrangements, dated December 31, 1994. . . . . . . . . . . . . . . . . . . . . 188
Exhibit 11
Statement of computation of earnings per share. . . . . . . 192
Exhibit 12
Statement of computation of ratios. . . . . . . . . . . . . 194
Exhibit 13
The Annual Report to Shareholders of Brenton Banks, Inc., for the 1994 calendar year. . . . . . . . . . . . . . 197
Exhibit 21
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 240
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of their report dated February 17, 1995, relating to certain consolidated statements of condition of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. . . . . . . . . . . . . . . . . . . 244
Exhibit 27
Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . . . . . . . . . 246