Item 1. Business.
(A) General Description.
Brenton Banks, Inc. (the "Parent Company") is a bank holding company registered under the Bank Holding Company Act of 1956 and a savings and loan holding company under the Savings and Loan Holding Company Act. Brenton Banks, Inc. was organized as an Iowa corporation under the name Brenton Companies in 1948. Subsequently, the Parent Company changed its corporate name to its current name, Brenton Banks, Inc. On December 31, 1998, the Parent Company had direct control of its commercial and savings bank (hereinafter the "affiliated banks"), both located in Iowa. The commercial bank is a state bank incorporated under the laws of the State of Iowa and the savings bank is a federal savings bank organized under the laws of the United States. Both of the affiliated banks are members of the Federal Deposit Insurance Corporation.
Brenton Banks, Inc. and its subsidiaries (the "Company") engage in retail, commercial, business and agricultural banking and related financial services from 47 locations throughout Iowa. In connection with this banking industry segment, the Company provides the usual products and services of banking such as deposits, commercial loans, business loans, agribusiness loans, personal loans, cash management services, international banking services, investment management and trust services.
The principal services provided by the Company are accepting deposits and making loans. The significant loan categories are commercial, business, commercial real estate, agribusiness and personal. Commercial and business loans are made to business enterprises principally to finance inventory, operations or other assets at terms generally up to 5 years. The principal risk involves the customers' management skills and general economic conditions. Commercial real estate mortgage loans are routinely made for terms up to 20 years for real property used in a borrower's business. Repayment primarily depends upon the financial performance and the cash flow of the business enterprise. Declines in commercial real estate values could ultimately affect the collectibility of these types of loans. Agribusiness loans are made to farmers for financing crop inputs, equipment, livestock and real property used in farming activities. Agribusiness loans are also made to businesses related to or that support the production and sale of agricultural products. Weather conditions and government policies have major influences on agricultural financial performance and ultimately the borrower's ability to repay loans. Personal loans are made to individuals primarily on a secured basis to finance such items as residential mortgages, home improvements, personal property, education and vehicles. Unsecured personal loans are made on a limited basis. The individual's credit worthiness and economic conditions affecting the job market are the primary risks associated with personal loans. Personal loans generally do not exceed 5 years. For all loan types, the primary criteria used in determining whether to make a loan is the borrower's ability to repay, which is based upon a cash flow analysis, and willingness to pay supported by a historical review of credit performance.
The principal markets for these loans are businesses and individuals in Iowa. Iowa has two primary regional market segments. One market consists of selected metropolitan areas across the state, which includes service and manufacturing industries. The other market involves rural areas which are predominately agricultural in nature. These loans are made by the affiliated banks, and some are sold on the secondary market. The Company also engages in activities that are closely related to banking, including mortgage banking, investment, insurance and real estate brokerage.
(B) Recent Developments.
Director Retirements. After many years of distinguished service, R. Dean Duben and Hubert G. Ferguson retired from the Board of Directors in May 1998.
New Directors. In January 1998, the Board of Directors increased the number of directors by one and named Robert J. Currey to fill the position. Mr. Currey is the President of 21st Century Telecom Group, Inc. in Chicago, Illinois. Mr. Currey has no prior relationship or affiliation with the Company. In September 1998, the Board of Directors increased the number of directors from six to seven and named Robert C. Carr to fill the position. Mr. Carr is Vice President of Amoco Corporation in Chicago, Illinois. Mr. Carr has no prior relationship or affiliation with the Company.
Stock Split. In January 1998, the Board of Directors declared a 2-for- 1 stock split for stockholders of record as of February 10, 1998, payable February 20, 1998. As a result, the par value of the Company's common stock was reduced from $5.00 to $2.50 per share and authorized shares were increased to 50 million.
Common Stock Dividends. On May 21, 1998, the Board of Directors declared a ten percent common stock dividend to stockholders of record on June 1, 1998. On May 6, 1997, the Board of Directors declared a ten percent common stock dividend to stockholders of record on May 15, 1997. Fractional shares resulting from both stock dividends were paid in cash.
Stock Option Plan. On September 5, 1996, a special meeting of stockholders was held to approve the Brenton Banks, Inc. 1996 Stock Option Plan (the "Plan"). The Plan, which was approved, authorizes the granting of options on up to 1,331,000 shares (all share and per-share data have been restated for the 2-for-1 stock split and the ten percent common stock dividends) of the Company's common stock to key employees of the Company. The price at which options may be exercised cannot be less than the fair market value of the shares at the date the options are granted. The options are subject to certain performance vesting requirements and maximum exercise periods, as established by the Compensation Committee of the Board of Directors. In accordance with the performance vesting schedule, 33 percent of outstanding options have vested based upon cumulative net income for the period January 1, 1996, through December 31, 1998. During 1998, 1997 and 1996, 1,301,470 options have been granted and are outstanding under the Plan to 67 current employees of the Company with option prices ranging from $9.157 to $20.688 per share.
Common Stock Repurchase Plan. As part of the Company's ongoing capital management and stock repurchase plan, in 1998 the Board of Directors authorized additional stock repurchases of $10,000,000 of the Company's common stock. For the years ended December 31, 1998, 1997 and 1996, the Company repurchased 512,650, 805,904 and 915,365 shares (restated for the 2- for-1 stock split and 10 percent common stock dividends), respectively, at total costs of $10,000,900, $10,014,087 and $8,248,331.
Growth and Acquisitions. As part of management's strategic growth plans, Brenton Banks, Inc. investigates growth and expansion opportunities which would strengthen the Company's presence in current or selected new market areas. The Company continues expansion of its traditional and non- traditional products and services. In December 1998, the Company opened a branch office in a convenience store in Ames, Iowa, thus increasing the number of service locations to 47.
Year 2000. The information appearing on pages 9 and 10 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
Sales Culture. In the past three years the Company has intensified its company-wide commitment to making Brenton a proactive sales organization. The Company has also emphasized promoting partnering across business units to better serve our clients' total financial needs. The objective is to provide tools to Brenton bankers to enable them to take a proactive role in understanding their clients'
needs and goals and then to develop custom-tailored financial strategies and solutions. The desired results are to strengthen existing and new relationships with clients across Iowa and to provide them with lifetime financial solutions.
(C) Affiliated Banks.
The two affiliated banks had 43 banking locations at December 31, 1998, located in 11 of Iowa's 99 counties. These banks serve both metropolitan and agricultural areas. The location and certain other information about the affiliated banks are given below.
The main office of Brenton Bank is located in Des Moines, Iowa. Des Moines is the largest city in Iowa. In addition to its main banking location, Brenton Bank has 38 offices located throughout Iowa and provides services to clients in numerous counties across the state.
Brenton Savings Bank, FSB is located in Ames, Iowa, and has offices in Ames and Story City. The savings bank primarily serves clients in Story County.
(D) Bank-Related Subsidiaries and Affiliates.
Brenton Investments, Inc., a wholly-owned subsidiary of Brenton Bank, provides a full array of retail investment brokerage products and services to clients. The company is not involved with the direct issuance, flotation or underwriting of securities. At December 31, 1998, this subsidiary had 33 licensed brokers serving all Brenton banking locations.
Brenton Mortgages, Inc., a wholly-owned subsidiary of Brenton Savings Bank, FSB, engages in the mortgage banking business. This subsidiary originates and services mortgage loans sold to institutional investors and the mortgage loan portfolios of the affiliated banks.
Brenton Realty Services, Ltd. and Brenton Insurance, Inc. are wholly- owned subsidiaries of Brenton Bank. Brenton Realty Services, Ltd. operates two real estate brokerage agencies. Brenton Insurance, Inc. provides individual and group life, annuity, health, fire, crop, homeowner's, automobile and liability insurance products to Brenton clients.
Brenton Insurance Services, Inc., a wholly-owned subsidiary of the Parent Company, is currently inactive.
(E) Executive Officers and Policymakers of the Registrant.
The term of office for the executive officers and policymakers of the Company is from the date of election until the next Annual Organizational Meeting of the Board of Directors. The names and ages of the executive officers and policymakers of the Company as of March 8, 1999, the primary offices held by these executive officers and policymakers on that date, the period during which the officers have served as such and the other positions held with the Company by these officers during the past five years are set forth below and on the following page:
(F) Employees.
On December 31, 1998, the Company had 661 full-time employees and 157 part-time employees. On December 31, 1998, the Parent Company had five employees. None of the employees of the Company are represented by unions. The relationship between management and employees of the Company is considered good.
(G) Supervision and Regulation.
The Company is restricted by various regulatory bodies as to the types of activities and businesses in which it may engage. References to the provisions of certain statutes and regulations are only brief summaries thereof and are qualified in their entirety by reference to those statutes and regulations. The Company cannot predict what other legislation may be enacted or what regulations may be adopted, or, if enacted or adopted, the effect thereof.
The Parent Company, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956 (the "Act") and is registered with the Board of Governors of the Federal Reserve System. Under the Act, the Parent Company is prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to its affiliated banks. However, the Parent Company may engage in and may own shares of companies engaged in certain businesses found by the Board of Governors to be so closely related to banking "as to be a proper incident thereto." The Act does not place territorial restrictions on the activities of bank-related subsidiaries of bank holding companies. The Parent Company is required by the Act to file periodic reports of its operations with the Board of Governors and is subject to examination by the Board of Governors. Under the Act and the regulations of the Board of Governors, bank holding companies and their subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services.
As a savings and loan holding company, Brenton Banks, Inc. is subject to federal regulation and examination by the Office of Thrift Supervision (the "OTS"). The OTS has enforcement authority over the Company which permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Generally, the activities for a bank holding company are more limited than the authorized activities for a savings and loan holding company.
The Parent Company, its affiliated banks and its bank-related subsidiaries are affiliates within the meaning of the Federal Reserve Act and OTS regulations. As affiliates, they are subject to certain restrictions on loans by an affiliated bank to the Parent Company, other affiliated banks or bank-related subsidiaries, on investments by an affiliated bank in their stock or securities and on an affiliated bank taking such stock and securities as collateral for loans to any borrower. The Company is also subject to certain restrictions with respect to direct issuance, flotation, underwriting, public sale or distribution of certain securities.
Brenton Bank is a state-chartered bank subject to the supervision of and regular examination by the Iowa Superintendent of Banking and, because of its membership in the Federal Deposit Insurance Corporation ("FDIC"), is subject to examination by the FDIC. Brenton Bank is required to maintain certain minimum capital ratios established by its primary regulator. The provisions of the FDIC Act restrict the activities that insured state- chartered banks may engage in to those activities that are permissible for national banks, except where the FDIC determines that the activity poses no significant risk to the deposit insurance fund and the bank remains adequately capitalized. Furthermore, the FDIC Act grants the FDIC the power to take prompt regulatory action against certain undercapitalized and seriously undercapitalized institutions in order to preserve the deposit insurance fund.
The affiliated savings bank is subject to the supervision of and regular examination by the OTS and FDIC. In addition to the fees charged by the FDIC, the savings bank is assessed fees by the OTS based upon the savings bank's total assets. The savings bank is required to maintain certain minimum capital ratios established by the OTS and must meet a qualified thrift lender test (the "QTL") to avoid certain restrictions upon its operations. On December 31, 1998, Brenton Savings Bank, FSB complied with the current minimum capital guidelines and met the QTL test, which it has always met since the test was implemented.
During 1994, the "Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" (the "Interstate Banking Act") was enacted. This law amended certain provisions of the federal banking laws (including the Bank Holding Company Act) to permit the acquisition of banks by banks or bank holding companies domiciled outside of the home state of the acquired bank. The Interstate Banking Act seeks to provide a uniform interstate banking law for all 50 states. The provisions of the law allow states to impose certain "non-discriminatory" conditions upon interstate mergers, including limits on the concentration of deposits. According to Iowa's banking law, Iowa-based banks and bank holding companies can acquire banks and bank holding companies located in other states. Iowa law prohibits a bank holding company or bank controlled by a bank holding company from acquiring additional Iowa-based banks or bank holding companies if the total deposits in Iowa of such bank holding company and its affiliates would exceed 10 percent of the total deposits of all banks and thrifts in the state.
Generally, banks in Iowa are prohibited from operating offices in counties other than the county in which the bank's principal office is located and contiguous counties. However, certain banks located in the same or different municipalities or urban complexes may consolidate or merge and retain their existing banking locations by converting to a United Community Bank. The resulting bank would adopt one principal place of business, and would retain the remaining banking locations of the merged or consolidated banks as offices. The Company relied upon the United Community Bank law when it merged its 13 commercial banks into one state-chartered bank in 1995. Generally, thrifts can operate offices in any county in Iowa and may, under certain circumstances, acquire or branch into thrifts in other states with the approval of the OTS.
(H) Governmental Monetary Policy and Economic Conditions.
The earnings of the Company are affected by the policies of regulatory authorities, including the Federal Reserve System. Federal Reserve System monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing conditions in the economy and in the money markets, as a result of actions by monetary and fiscal authorities, interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Company. Future policies of the Federal Reserve System and other authorities cannot be predicted, nor can their effect on future earnings.
(I) Competition.
The banking business in Iowa is highly competitive and the affiliated banks compete not only with banks and thrifts, but with sales, finance and personal loan companies; credit unions; and other financial services companies which are active in the areas in which the affiliated banks operate. In addition, the affiliated banks compete for customer funds with other investment alternatives available through investment banking companies, insurance companies, finance companies and other institutions.
The multi-bank holding companies, which own banks in Iowa, are in direct competition with one another. Brenton Banks, Inc. is the largest multi-bank holding company domiciled in Iowa. As of June 30, 1998, Brenton Banks, Inc.'s affiliated banks held approximately 3.3% of total Iowa bank and thrift deposits. There are seven other multi-bank holding companies that operate banks in Iowa, but are domiciled in other states. During 1998, the five largest of these holding companies changed ownership and/or names. The Iowa deposits of five of these holding companies are of similar size or greater when compared to Brenton
Banks, Inc. The Company considers the ownership/name changes of these out- of-state holding companies to be a competitive advantage to the Company.
Certain of the subsidiary banks of these multi-bank holding companies may compete with certain of the Parent Company's affiliated banks and any other affiliated financial institutions, which may be acquired by the Parent Company. These multi-bank holding companies, other smaller bank holding companies, chain banking systems and others may compete with the Parent Company for the acquisition of additional banks.
The Company has expanded the mortgage banking business in the past few years by increasing the number of mortgage loan originators and by expanding the number of locations where mortgage banking services are offered. The volume of loan closings in 1998 increased over 180 percent compared to 1997.
The Company has also expanded the investment brokerage business in the last several years, placing brokers in many Brenton bank locations as well as individual brokerage offices. The Brenton brokers compete with brokers from regional and national investment brokerage firms as well as internet trading services.
Item 1(J) Business - Statistical Disclosure
The following statistical disclosures relative to the consolidated operations of the Company have been prepared in accordance with Guide 3 of the Guides for the Preparation and Filing of Reports and Registration Statements under the Securities Exchange Act of 1934. Average balances were primarily calculated on a daily basis.
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential
The following summarizes the average consolidated statement of condition by major type of account, the interest earned and interest paid and the average yields earned and average rates paid for each of the three years ending December 31:
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:
Item 1(J) Business - Statistical Disclosure, Continued
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential, Continued
Interest Rate Sensitivity Analysis
The following schedule shows the matching of interest sensitive assets to interest sensitive liabilities by various maturity or repricing periods as of December 31, 1998. As the schedule shows, the Company is liability sensitive within the one-year time frame. Included in the three months or less sensitivity category are all interest-bearing demand and savings accounts. Although these deposits are contractually subject to immediate repricing, management believes a large portion of these accounts are not synchronized with overall market rate movements.
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, 1998:
NOTE: The weighted average yields are calculated on the basis of the cost and effective yields for each scheduled maturity group. The maturities of mortgage-backed securities have been included in the period of anticipated payment considering estimated prepayment rates. The weighted average yields for tax-exempt obligations have been adjusted to a fully-taxable basis, assuming a 35 percent federal income tax rate and are adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
As of December 31, 1998, the Company did not have securities from a single issuer, other than the United States Government or its agencies, which exceeded 10 percent of consolidated common stockholders' equity.
Maturities of all investment securities are managed to meet the Company's normal liquidity needs. Investment securities available for sale may be sold prior to maturity to meet liquidity needs, to respond to market changes or to adjust the Company's asset/liability position.
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, 1998 (excluding real estate loans secured by 1-4 family residential property and loans to individuals for personal expenditures):
Interest income recorded during 1998 on nonaccrual and restructured loans amounted to $215,000. The amount of interest income which would have been recorded during 1998, if nonaccrual and restructured loans had been current in accordance with the original terms, was $827,000.
The amounts scheduled above include the entire balance of any particular loan. Much of the scheduled amount is adequately collateralized, and thus does not represent the amount of anticipated charge-offs in the future. The loans scheduled are representative of the entire customer base of the Company and, therefore, are not concentrated in a specific industry or geographic area. Overdrafts are loans for which interest does not normally accrue. Since overdrafts are generally low volume, they were not included in the above schedule, unless there was serious doubt concerning collection.
The accrual of interest income is stopped when the ultimate collection of a loan becomes doubtful. A loan is placed on nonaccrual status when it becomes 90 days past due, unless it is both well secured and in the process of collection. Once determined uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan losses.
In addition to the loans scheduled above, management has identified other loans which, due to a change in economic circumstances or a deterioration in the financial position of the borrower, present some concern as to the ability of the borrower to comply with present repayment terms. Additionally, management considers the identification of loans classified for regulatory or internal purposes as loss, doubtful, substandard or special mention. This concern may eventually result in certain of these loans being classified in one of the above-scheduled categories. At December 31, 1998, these loans amounted to less than $1 million.
As of December 31, 1998, management is unaware of any other material interest-earning assets which have been placed on a nonaccrual basis, have been restructured, or are 90 days or more past due. The amount of other real estate owned, which has been received in lieu of loan repayment, amounted to $389,000 and $341,000 at December 31, 1998, and 1997, respectively.
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:
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, 1998:
Maturity Remaining Amount __________________ ________ (in thousands)
Less than 3 months $25,056 Over 3 through 6 months 35,466 Over 6 through 12 months 14,691 Over 12 months 22,452 ______
$97,665 ______
VI. Return on Equity and Assets
Various operating and equity ratios for the years indicated are presented below:
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 Federal Home Loan Bank advances, follows:
Item 2.
Item 2. Properties.
At December 31, 1998, the affiliated banks and subsidiaries had 47 service locations with approximately 338,000 square feet, all located in Iowa. Of these locations, 32 were owned by the Company - approximately 262,000 square feet; three were owned buildings on leased land - approximately 30,000 square feet and 12 were operated under lease contracts with unaffiliated parties - approximately 46,000 square feet.
In December 1998, the Company entered into an agreement to purchase a parcel of land for $2.1 million in Clive, Iowa. The land will be utilized for construction of a new operations and sales support facility. The new building is in the planning stages and is expected to be completed in the third quarter of 2000. The new building will replace space, which the Company currently leases, and will include room for future growth.
The Company leases certain real estate and equipment under long-term and short-term leases. The Company owns certain real estate that is leased to unrelated persons.
Item 3.
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 to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
The information appearing on pages 26 and 34 of the Corporation's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
There were approximately 2,057 holders of record of the Parent Company's $2.50 common stock as of March 8, 1999. The closing price of the Parent Company's common stock was $15.06 on March 8, 1999.
The Parent Company increased dividends to common shareholders in 1998 to $.349 per share, a 40.7 percent increase over $.248 for 1997. Dividend declarations are evaluated and determined by the Board of Directors on a quarterly basis. In January 1999, the Board of Directors declared a dividend of $.095 per common share. There are currently no restrictions on the Parent Company's present or future ability to pay dividends.
Item 6.
Item 6. Selected Financial Data.
The information appearing on page 12 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information appearing on pages 3 through 10 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
The information appearing on page 8 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The information appearing on pages 13 through 33 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Within the twenty-four months prior to the date of the most recent financial statements, there has been no change in or disagreements with accountants of the Company.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The definitive proxy statement of Brenton Banks, Inc., which will be filed not later than 120 days following the close of the Company's fiscal year ending December 31, 1998, is incorporated herein by reference. See also Item 1(E) of this Form 10-K captioned "Executive Officers and Policymakers of the Registrant."
Item 11.
Item 11. Executive Compensation.
The definitive proxy statement of Brenton Banks, Inc., which will be filed not later than 120 days following the close of the Company's fiscal year ended December 31, 1998, is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The definitive proxy statement of Brenton Banks, Inc., which will be filed not later than 120 days following the close of the Company's fiscal year ending December 31, 1998, is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions.
All loans made by the Parent Company's affiliated banks to directors, nominees, executive officers and associates of such persons were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with unaffiliated persons, and did not involve more than the normal risk of collectibility or present other unfavorable features. There were no other reportable transactions.
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 13 through 33 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, which are incorporated by reference herein.
2. Financial Statement Schedules: See Exhibits 11 and 12, for computation of earnings per share and ratios.
3. Exhibits (not covered by independent auditors' report).
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. These Articles of Incorporation, as amended, and Bylaws are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997.
Exhibit 10.1
Summary of the Company's Bonus Plans under which some of the executive officers of the Company and certain other personnel of the subsidiaries are eligible to receive a bonus each year.
Exhibit 10.2
1996 Stock Option Plan, Administrative Rules and Agreement under which officers of the Company are eligible to receive options to purchase an aggregate of 1,331,000 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996.
Exhibit 10.3
Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995.
Exhibit 10.4
Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. This Employment Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules and Agreement under which officers of the Company were eligible to receive options to purchase an aggregate of 798,600 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This Non-Qualified Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997.
Exhibit 10.6
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.7
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance.
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1995, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995.
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security Agreement between Brenton Banks and the Federal Home Loan Bank of Des Moines.
Exhibit 10.10
Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1998, setting forth the terms of the Parent Company's $5,000,000 short-term debt agreement.
Exhibit 10.11
Data Processing Agreement dated December 1, 1991, by and between ALLTEL Information Services, Inc., (formerly Systematics, Inc.) and Brenton Bank (formerly Brenton Information Systems, Inc.). This Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.12
Correspondent Services Agreement dated November 13, 1996, between Brenton Bank and the Federal Home Loan Bank of Des Moines. This Correspondent Services Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing Plan, effective July 1, 1998.
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated April 12, 1993.
Exhibit 10.15
Indenture Agreement with respect to Capital Notes dated April 14, 1992. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year Ended December 31, 1997.
Exhibit 10.16
Indenture Agreement with respect to Capital Notes dated March 27, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.17
Indenture Agreement with respect to Capital Notes dated August 5, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.18
Indenture Agreement with respect to Capital Notes dated April 8, 1994. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.19
Indenture Agreement with respect to Capital Notes dated April 10, 1995. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995.
Exhibit 10.20
Indenture Agreement with respect to Capital Notes dated April 10, 1996. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.21
Indenture Agreement with respect to Capital Notes dated April 23, 1997. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997.
Exhibit 10.22
Indenture Agreement with respect to Capital Notes dated April 16, 1998.
Exhibit 10.23
Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.24
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.25
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of Junius C. Brenton, dated January 12, 1997. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996.
Exhibit 10.26
Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.
Exhibit 10.27
Twelfth Amendment to Data Processing Agreement dated July 1, 1995, by and between ALLTEL Information Services, Inc. (formerly Systematics, Inc. and Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation). This Twelfth Amendment to Data Processing Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995.
Exhibit 10.28
Thirteenth Amendment to Data Processing Agreement dated December 1, 1995, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation). This Thirteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995.
Exhibit 10.29
Fourteenth Amendment to Data Processing Agreement dated January 1, 1998, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation).
Exhibit 10.30
Fifteenth Amendment to Data Processing Agreement dated January 1, 1998, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation).
Exhibit 10.31
Purchase Agreement dated December 31, 1998, by and between West Lakes Development Company and Brenton Bank.
Exhibit 10.32
Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc. and Brenton Bank.
Exhibit 11
Statement of computation of earnings per share.
Exhibit 12
Statement of computation of ratios.
Exhibit 13
The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1998 calendar year.
Exhibit 21
Subsidiaries.
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of their report dated January 29, 1999, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc.
Exhibit 27
Financial Data Schedule (filed only with Electronic Transmission).
The Parent Company will furnish to any shareholder upon request a copy of any exhibit upon payment of a fee of $.50 per page. Requests for copies of exhibits should be directed to Steven T. Schuler, Chief Financial Officer/Treasurer/Secretary, at Brenton Banks, Inc., P.O. Box 961, Des Moines, Iowa 50304-0961.
(b) Reports on Form 8-K: No reports on Form 8-K were required to be filed during the last quarter of 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BRENTON BANKS, INC.
By /s/ Robert L. DeMeulenaere President and Director ROBERT L. DEMEULENAERE
Date: March 11, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Robert L. DeMeulenaere President and Director ROBERT L. DEMEULENAERE Principal Executive Officer
Date: March 11, 1999
By /s/ Steven T. Schuler Chief Financial Officer/Treasurer/Secretary STEVEN T. SCHULER Chief Financial Officer Chief Accounting Officer
Date: March 11, 1999
BOARD OF DIRECTORS
By: /s/ C. Robert Brenton C. ROBERT BRENTON Chairman of the Board
Date: March 11, 1999
By /s/ William H. Brenton WILLIAM H. BRENTON
Date: March 11, 1999
By /s/ Junius C. Brenton JUNIUS C. BRENTON
Date: March 11, 1999
By: /s/ Robert C. Carr ROBERT C. CARR
Date: March 11, 1999
By /s/ Gary M. Christensen GARY M. CHRISTENSEN
Date: March 11, 1999
By /s/ Robert J. Currey ROBERT J. CURREY
Date: March 11, 1999
EXHIBIT INDEX
Exhibits Page
Exhibit 3
The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. These Articles of Incorporation, as amended, and Bylaws are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. . . . . . . . . . . . . . 40
Exhibit 10.1
Summary of the Company's Bonus Plans under which some of the executive officers of the Company and certain other personnel of the subsidiaries are eligible to receive a bonus each year. . . . . . . . . . . . . . . . . 41
Exhibit 10.2
1996 Stock Option Plan, Administrative Rules and Agreement under which officers of the Company are eligible to receive options to purchase an aggregate of 1,331,000 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. . . . . . . . . . . . . . . . . . . . 43
Exhibit 10.3
Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Exhibit 10.4
Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. This Employment Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exhibit 10.5
Non-Qualified Stock Option Plan, Administrative Rules and Agreement under which officers of the Company were eligible to receive options to purchase an aggregate of 798,600 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This Non-Qualified Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997.. . . . . . . . ... 46
Exhibit 10.6
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . . 47
Exhibit 10.7
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. . . . . . . . . . . . . . . . . . 48
Exhibit 10.8
Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1995, under which certain of the Company's senior officers and bank presidents were eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995... . . . 63
Exhibit 10.9
Standard Agreement for Advances, Pledge and Security Agreement between Brenton Bank and the Federal Home Loan Bank of Des Moines.. . . . . . . . . . . . . . . . . . . . 64
Exhibit 10.10
Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1998, setting forth the terms of the Parent Company's $5,000,000 short-term debt agreement. . . . . . . . . . . . . . . . . . . . . . . 69
Exhibit 10.11
Data Processing Agreement dated December 1, 1991, by and between ALLTEL Information Services, Inc., (formerly Systematics, Inc.) and Brenton Bank (formerly Brenton Information Systems, Inc.). This Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . 75
Exhibit 10.12
Correspondent Services Agreement dated November 13, 1996, between Brenton Bank and the Federal Home Loan Bank of Des Moines. This Correspondent Services Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . . . . . 76
Exhibit 10.13
Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing Plan, effective July 1, 1998. . . . 77
Exhibit 10.14
Indenture Agreement with respect to Capital Notes dated April 12, 1993. . . . . . . . .. . . . . . . . . . . . . 121
Exhibit 10.15
Indenture Agreement with respect to Capital Notes dated April 14, 1992. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. . . . . . . . . . . . 140
Exhibit 10.16
Indenture Agreement with respect to Capital Notes dated March 27, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . . . . . . . . . . 141
Exhibit 10.17
Indenture Agreement with respect to Capital Notes dated August 5, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . 142
Exhibit 10.18
Indenture Agreement with respect to Capital Notes dated April 8, 1994. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . .. 143
Exhibit 10.19
Indenture Agreement with respect to Capital Notes dated April 10, 1995. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995.. . . . 144
Exhibit 10.20
Indenture Agreement with respect to Capital Notes dated April 10, 1996. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . 145
Exhibit 10.21
Indenture Agreement with respect to Capital Notes dated April 23, 1997. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. . . . . 146
Exhibit 10.22
Indenture Agreement with respect to Capital Notes dated April 16, 1998. . . . . . . . . . . . . . . . . . . . 147
Exhibit 10.23
Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . . . . . . . . . 166
Exhibit 10.24
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. . . . . . . . . . . . . . . . . . . . 167
Exhibit 10.25
Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of Junius C. Brenton, dated January 12, 1997. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . . . . . . . . . . . . . . . 168
Exhibit 10.26
Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. . . . . . . . . . . . . 169
Exhibit 10.27
Twelfth Amendment to Data Processing Agreement dated July 1, 1995, by and between ALLTEL Information Services, Inc. (formerly Systematics, Inc. and Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation). This Twelfth Amendment to Data Processing Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995. . . . . . . . . . . 170
Exhibit 10.28
Thirteenth Amendment to Data Processing Agreement dated December 1, 1995, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Banks Services Corporation). This Thirteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . 171
Exhibit 10.29
Fourteenth Amendment to Data Processing Agreement dated January 1, 1998, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation). . . . . . . . . . . . . 172
Exhibit 10.30
Fifteenth Amendment to Data Processing Agreement dated January 1, 1998, by and between ALLTEL Information Services, Inc. (formerly Systematics Financial Services, Inc.) and Brenton Bank (formerly Brenton Bank Services Corporation). . . . . . . . . . . . . 176
Exhibit 10.31
Purchase Agreement dated December 31, 1998, by and between West Lakes Development Company and Brenton Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Exhibit 10.32
Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc. and Brenton Bank. . . . . . . 187
Exhibit 11
Statement of computation of earnings per share. . . . . . . 194
Exhibit 12
Statement of computation of ratios. . . . . . . . . . . . . 196
Exhibit 13
The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1998 calendar year. . . . . . . . . . . . . . 200
Exhibit 21
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 238
Exhibit 23
Consent of KPMG Peat Marwick LLP to the incorporation of their report dated January 29, 1999, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. . . . . . . . . . . . . . . . . . . 240
Exhibit 27
Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . . . . . . . . . 242