-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IAVr4iFt/U7A8aq21dK68PCSFKSojM2wyJsyl+h2FgNqdssVGLUENZ15mQYlnrBq 4pdi6VcvQpDti7gIFfbeBA== 0000916131-00-000009.txt : 20000411 0000916131-00-000009.hdr.sgml : 20000411 ACCESSION NUMBER: 0000916131-00-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 43 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRENTON BANKS INC CENTRAL INDEX KEY: 0000014060 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 420658989 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-06216 FILM NUMBER: 582254 BUSINESS ADDRESS: STREET 1: 400 LOCUST ST STREET 2: STE 300 CAPITAL SQ CITY: DES MOINES STATE: IA ZIP: 50309 BUSINESS PHONE: 5152375100 MAIL ADDRESS: STREET 1: 400 LOCUST ST STREET 2: SUITE 300 CAPITAL SQ CITY: DES MOINES STATE: IA ZIP: 50309 10-K 1 BRENTON BANKS, INC. FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to _____________________ Commission file number 0-6216 BRENTON BANKS, INC. (Exact name of registrant as specified in its charter) Incorporated in Iowa No. 42-0658989 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 200, Capital Square, 400 Locust, Des Moines, Iowa 50309 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 515-237-5100 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $2.50 par value (Title of class) 1 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 6, 2000, was $108,342,752. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the most recent practicable date, March 6, 2000. 20,357,371 shares Common Stock, $2.50 par value DOCUMENTS INCORPORATED BY REFERENCE The Appendix to the Proxy Statement for the 1999 calendar year is incorporated by reference into Part I, Part II and Part IV hereof to the extent indicated in such Parts. The definitive proxy statement of Brenton Banks, Inc., which will be filed not later than 120 days after the close of the Company's fiscal year ending December 31, 1999, is incorporated by reference into Part III hereof to the extent indicated in such Part. 1 of 284 Total Pages 2 TABLE OF CONTENTS PART I Page Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (A) General Description . . . . . . . . . . . . . . . . . . . . 5 (B) Recent Developments . . . . . . . . . . . . . . . . . . . . 6 (C) Affiliated Banks . . . . . . . . . . . . . . . . . . . . . 7 (D) Bank-Related Subsidiaries and Affiliates . . . . . . . . . 8 (E) Executive Officers and Policymakers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 8 (F) Employees . . . . . . . . . . . . . . . . . . . . . . . . . 9 (G) Supervision and Regulation . . . . . . . . . . . . . . . . 9 (H) Governmental Monetary Policy and Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . 11 (I) Competition . . . . . . . . . . . . . . . . . . . . . . . . 11 (J) Statistical Disclosure . . . . . . . . . . . . . . . . . . 12 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 25 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . 25 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 26 3 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . 26 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 26 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 26 Item 13. Certain Relationships and Related Transactions . . . . . . . . . 26 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 27 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4 PART I Item 1. Business. (A) General Description. Brenton Banks, Inc. (the "Parent Company") is a bank holding company registered under the Bank Holding Company Act of 1956 and a savings and loan holding company under the Savings and Loan Holding Company Act. Brenton Banks, Inc. was organized as an Iowa corporation under the name Brenton Companies in 1948. Subsequently, the Parent Company changed its corporate name to its current name, Brenton Banks, Inc. On December 31, 1999, 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 44 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, agri-business 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, agri-business and personal. Commercial and business loans are made to business enterprises principally to finance inventory, operations or other assets at terms generally up to five 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. Agri-business loans are made to farmers for financing crop inputs, equipment, livestock and real property used in farming activities. Agri-business 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 five 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. The segment information appearing on page 31 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference. 5 (B) Recent Developments. 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 24, 1999, the Board of Directors declared a ten percent common stock dividend to stockholders of record on June 1, 1999. On May 21, 1998, the Board of Directors declared a ten percent common stock dividend to stockholders of record on June 1, 1998. Fractional shares resulting from both stock dividends were paid in cash. Common Stock Repurchase Plan. As part of the Company's ongoing capital management and stock repurchase plan, in 1999, the Board of Directors authorized additional stock repurchases of $4,000,000 of the Company's common stock. For the years ended December 31, 1999, 1998 and 1997, the Company repurchased 300,624, 563,915 and 886,494 shares (restated for the 2-for-1 stock split and 10 percent common stock dividends), respectively, at total costs of $4,004,426, $10,000,900 and $10,014,087. At this time, the Board has decided not to extend this plan for 2000. 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 also continues expansion of its traditional and non- traditional products and services. On September 24, 1999, the Company completed the acquisition of two U.S. Bank offices in Pella and Knoxville, with deposits totaling approximately $53 million. In November 1999, a new full- service office was opened in Coralville, a suburb of Iowa City. In the third quarter of 2000, the Company, which currently has four full-service offices in the Quad Cities, plans to expand into Moline, Illinois. It will mark the first time Brenton has crossed into another state with a full-service banking office. Regulatory approval for this location has been obtained. During the fourth quarter of 1999, an underperforming grocery store facility in Cedar Rapids was closed. During the first quarter of 2000, another of the Company's grocery store facilities in Iowa City was closed due to the closing of the grocery store at the election of the chain store management. 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 four 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. In late 1998, the Company began a strategic growth initiative called "Quantum Leap." The objective is to grow the Company's client base at a rate significantly above Iowa's population and economic growth rates. The initiative is designed to further evolve the Company's growing sales culture by increasing the sales staff over the next three years, by creating opportunities for additional sales from the existing sales staff and by strengthening partnerships with the sales support staff. The net after-tax cost of the initiative in 1999 was $1,035,000. Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act of 1999 (the "Act") that has been passed by Congress and was signed into law by the President on November 12, 1999 represents sweeping reform of federal regulation of financial services. This Act relaxes the previous limitations upon 6 banks affiliating with insurance and securities firms and generally allows banks and bank holding companies to engage is a broader range of financial services. Among other provisions, this Act: Repeals the restrictions on banks affiliating with securities firms contained in the Glass-Steagall Act. Permits a qualifying bank holding company to become a "financial holding company." A financial holding company may engage in certain listed financial activities (including insurance underwriting and agency activities, security underwriting and brokerage activities, merchant banking, and insurance company portfolio investment activities) as well as "complementary" financial activities. These complementary activities are to be defined by regulation promulgated by the federal regulators, but are generally broader than those activities currently permitted under the Bank Holding Company Act. Provides a system of functional regulation under which certain securities activities of banks will come under the supervision by the Securities and Exchange Commission, eliminating an exemption banks previously enjoyed. Reaffirms the traditional authority of states to regulate insurance companies and insurance agencies, but prohibits discrimination against bank affiliates that conduct those activities. Eliminates the unitary thrift holding company formation in the future. Provides consumers new protections against the transfer and use of certain financial information by financial institutions including banks and there affiliates and requires banks to disclose there financial privacy policies to customers. Makes certain changes to the FHLB structure, provides for ATM fee disclosures and modifies the Community Reinvestment Act to provide for the disclosure of certain agreements between banks and community groups. Congress authorized the Federal Reserve Board, the Securities and Exchange Commission, and other relevant federal agencies to adopt rules to implement the provision of the Act. These regulations have not been adopted and therefore the Company cannot predict their effect upon the Company. A bank holding company that elects to become a financial holding company, must have each of its banks meet certain regulatory standards for being "well capitalized", "well-managed", and "satisfactory" in its Community Reinvestment Act compliance. A bank holding company that fails to maintain these standards may be required to cease engaging in certain activities or restrict its futures activities. Any bank holding company that does not elect to become a financial holding company will remain subject to the current restrictions under the Bank Holding Company Act. It is anticipated that the Act will alter the competitive landscape in which the Company operates. Companies that are presently engaged primarily in insurance activities or securities activities will be permitted to acquire banks and bank holding companies. (C) Affiliated Banks. The two affiliated banks have 41 banking locations, 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 36 offices located throughout Iowa and provides services to clients in numerous counties across the state. 7 Brenton Savings Bank, FSB is located in Ames, Iowa, and has four offices in Ames and Story City. The savings bank primarily serves clients in Story County, however, the facility to be opened in Moline, Illinois, will be an office of Brenton Savings Bank, FSB. (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, 1999, this subsidiary had 29 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 6, 2000, 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:
Company Position Name and Address Age Position or Subsidiary Commenced Other Positions ________________ ___ ______________________ _________ _______________ Robert L. DeMeulenaere 60 President and Chief 1994 President, Brenton Bank - January 1994 to Des Moines, Iowa Executive Officer November 1997 Brenton Banks, Inc. Chairman and Chief 1997 Executive Officer Brenton Bank Larry A. Mindrup 58 President 1997 CEO, Brenton Savings Bank, FSB; Ames - April Des Moines, Iowa Chief Banking Officer 1995 1994 to March 1996; President, Brenton Bank, Brenton Bank N.A., Des Moines - May 1995 to September 1995; President, Brenton Savings Bank, FSB, Ames - April 1994 to April 1995 Phillip L. Risley 57 Executive Vice President/ 1997 Executive Vice President of the Parent Des Moines, Iowa Chief Administrative 1995 Company - January 1992 to December 1995; Officer/ President and CEO, Brenton Bank, N.A., Brenton Bank Des Moines - February 1990 to May 1995; Chairman of the Board, Brenton Bank Services Corporation - May 1992 to September 1995 8
Company Position Name and Address Age Position or Subsidiary Commenced Other Positions ________________ ___ ______________________ _________ _______________ Steven T. Schuler 48 Chief Financial Officer/ 1990 Executive Vice President, Brenton Bank Des Moines, Iowa Treasurer/Secretary 1986 Services Corporation - May 1992 to Brenton Banks, Inc. and September 1995 Brenton Bank Woodward G. Brenton 49 Chief Commercial 1995 President and CEO, Brenton First National Des Moines, Iowa Banking Officer Bank - January 1992 to October 1995 Brenton Bank Charles N. Funk 45 Regional President 1997 Chief Investment/ALCO Officer - October 1995 Des Moines, Iowa President, Des Moines 1997 to September 1997; Vice President - Brenton Bank Investments, Brenton Banks, Inc. - December 1991 to October 1995 Douglas F. Lenehan 51 Chief Sales and 1999 Vice President - Cash Management, Brenton Des Moines, Iowa Marketing Officer Bank, Des Moines - June 1993 to May 1997 President, Diversified 1997 Commercial Services Brenton Bank Elizabeth M. Piper/Bach 47 Chief Financial Services 1997 Des Moines, Iowa Officer Brenton Bank President 1995 Brenton Investments, Inc. Norman D. Schuneman 57 Chief Credit Officer 1995 Senior Vice President - Lending of the Des Moines, Iowa Brenton Bank Parent Company - January 1990 to December 1995; Executive Vice President, Brenton Bank, N.A., Des Moines - July 1985 to October 1995 All of the foregoing individuals have been employed by the Company for the past five years, except for Elizabeth M. Piper/Bach, who was Vice President and Director of Investment Management Consulting and Training for John G. Kinnard & Co. from 1993 to 1995 and Vice President and Director of the Investment Management Group of Dain Bosworth in Minneapolis, Minnesota, prior to 1993.
(F) Employees. On December 31, 1999, the Company had 669 full-time employees and 134 part-time employees. The number of full-time equivalent employees at year-end was 739. On December 31, 1999, 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 five 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 9 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. The Bank Holding Company Act has recently been amended pursuant to the Gramm-Leach-Bliley Act of 1999. See "Recent Developments." 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 that 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, 1999, 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. 10 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; Internet banks; and other financial services companies that 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, 1999, Brenton Banks, Inc.'s affiliated banks held approximately 3.5 percent of total Iowa bank and thrift deposits. There were seven other multi-bank holding companies that operated banks in Iowa, but are domiciled in other states. During 1999, two of these holding companies merged. The Iowa deposits of three of these holding companies are of similar size or greater when compared to Brenton Banks, Inc. The Iowa deposits of all six of the other multi-bank holding companies have declined from the same date a year earlier. The Company considers the ownership/name changes of these out-of-state holding companies during the past two years 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 1999 was $431 million compared to $513 million in 1998. The volume of loan closings declined in 1999 as a result of higher mortgage rates in the market place. 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. 11 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:
1999 (dollars in thousands) ___________________________________________ Interest Average Average Income or Yields or Balance Expense Rates _______ _________ _________ Assets: Interest-earning assets: Interest-bearing deposits with banks $ 3,526 $ 173 4.90% Federal funds sold and securities purchased under agreements to resell 7,118 349 4.91 Trading account securities - - - Investment securities available for sale: Taxable investments: United States Treasury securities 45,191 2,151 4.76 Securities of United States government Agencies 156,054 9,112 5.84 Mortgage-backed and related securities 197,088 11,966 6.07 Other investments 32,407 1,897 5.85 Tax-exempt investments: Obligations of states and political subdivisions (2) 155,558 10,056 6.46 Investment securities held to maturity: Taxable investments: Securities of United States government Agencies - - - Mortgage-backed and related securities 1,128 75 6.62 Other investments 386 27 7.01 Tax-exempt investments: Obligations of states and political subdivisions (2) 33,982 2,390 7.03 Loans held for sale 56,218 3,977 7.07 Loans (1,2) 1,098,732 90,782 8.26 _________________________________________________________________________________________ Total interest-earning assets (2) 1,787,388 $ 132,955 7.44% Allowance for loan losses (14,519) _________________________ Cash and due from banks 72,186 Premises and equipment 36,010 Other assets 62,761 _________________________________________________________________________________________ Total assets $1,943,826 _________________________________________________________________________________________ Liabilities and stockholders' equity: Interest-bearing liabilities: Interest-bearing deposits: Demand $ 109,535 $ 3,481 3.18% Savings 641,308 19,289 3.01 Time 546,868 28,561 5.22 Federal funds purchased and securities sold under agreements to repurchase 150,387 6,631 4.41 Other short-term borrowings 117,377 6,403 5.46 Long-term borrowings 31,330 2,015 6.43 ________________________________________________________________________________________ Total interest-bearing liabilities 1,596,805 $ 66,380 4.16% Noninterest-bearing deposits 192,211 ________________________ Accrued expenses and other liabilities 15,940 _________________________________________________________________________________________ Total liabilities 1,804,956 Minority interest 4,734 Common stockholders' equity 134,136 _________________________________________________________________________________________ Total liabilities and stockholders' equity $1,943,826 _________________________________________________________________________________________ Net interest spread (2) 3.28% _________________________________________________________________________________________ Net interest income/margin (2) $ 66,575 3.73% _________________________________________________________________________________________ (1) The average outstanding balance is net of unearned income and includes nonaccrual loans. (2) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35 percent and are adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments. The standard federal income tax rate is used for consistency of presentation. is used for consistency of presentation.
12
1998 1997 ___________________________________________ ___________________________________ Interest Average Interest Average Average Income or Yields or Average Income or Yields or Balance Expense Rates Balance Expense Rates _______ _________ _________ _______ _________ _________ $ 3,706 $ 176 4.74% $ 2,460 $ 118 4.80% 31,048 1,659 5.35 31,472 1,742 5.54 - - - 12 1 4.26 40,898 2,319 5.67 45,459 2,748 6.05 97,770 5,955 6.09 71,958 4,555 6.33 236,280 14,545 6.16 217,817 13,835 6.35 15,643 952 6.09 12,998 832 6.40 125,237 8,382 6.69 99,868 7,035 7.04 1,402 89 6.33 7,925 485 6.11 1,869 140 7.48 2,594 191 7.36 727 48 6.68 2,181 136 6.25 53,130 3,623 6.82 56,204 3,777 6.72 37,841 2,690 7.11 10,284 811 7.89 999,232 87,339 8.74 970,115 85,540 8.82 ________________________________________________________________________________________ 1,644,783 $127,917 7.78% 1,531,347 $121,806 7.95% (13,738) __________________________ (12,171) 65,874 58,681 31,883 29,841 51,318 41,771 ________________________________________________________________________________________ $1,780,120 $1,649,469 ________________________________________________________________________________________ $ 90,589 $ 2,800 3.09% $ 81,430 $ 2,332 2.86% 585,598 17,429 2.98 551,509 15,903 2.88 556,056 30,543 5.49 567,258 31,075 5.48 116,388 5,092 4.38 78,234 3,413 4.36 65,205 3,757 5.76 53,223 3,183 5.98 47,605 3,017 6.34 32,056 2,199 6.86 ________________________________________________________________________________________ 1,461,441 $ 62,638 4.29% 1,363,710 $ 58,105 4.26% 164,403 __________________________ 139,480 17,020 17,097 ________________________________________________________________________________________ 1,642,864 1,520,287 4,834 4,691 132,422 124,491 ________________________________________________________________________________________ 1,780,120 1,649,469 ________________________________________________________________________________________ 3.49% 3.69% ________________________________________________________________________________________ $ 65,279 3.97% $ 53,701 4.16% ________________________________________________________________________________________
13 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:
1999 vs. 1998 1998 vs. 1997 __________________________ __________________________ Variance Variance due to due to _______________ _______________ Variance Volume Rate Variance Volume Rate ________ ______ ____ ________ ______ ____ (in thousands) (in thousands) Interest Income: Interest-bearing deposits with banks $ (3) (9) 6 $ 58 59 (1) Federal funds sold and securities purchased under agreements to resell (1,310) (1,184) (126) (83) (23) (60) Trading account securities - - - (1) 1 (2) Investment securities available for sale: Taxable investments: United States Treasury securities (168) 228 (396) (429) (265) (164) Securities of United States government Agencies 3,157 3,413 (256) 1,400 1,578 (178) Mortgage-backed and related securities (2,579) (2,382) (197) 710 1,147 (437) Other investments 945 983 (38) 120 163 (43) Tax-exempt investments: Obligations of states and political subdivisions (2) 1,674 1,969 (295) 1,347 1,713 (366) Investment securities held to maturity: Taxable investments: Securities of United States government Agencies (89) (44) (45) (396) (412) 16 Mortgage-backed and related securities (65) (50) (15) (51) (54) 3 Other investments (21) (24) 3 (88) (96) 8 Tax-exempt investments: Obligations of states and political subdivisions (2) (1,233) (1,344) 111 (154) (208) 54 Loans held for sale 1,287 1,351 (64) 1,879 1,950 (71) Loans (1,2) 3,443 8,390 (4,947) 1,799 2,550 (751) ______ ______ ______ _____ _____ ______ 5,038 11,297 (6,259) 6,111 8,103 (1,992) Interest Expense: Interest-bearing deposits: Demand 681 600 81 468 274 194 Savings 1,860 1,673 187 1,526 1,003 523 Time (1,982) (499) (1,483) (532) (616) 84 Federal funds purchased and securities sold under agreements to repurchase 1,539 1,499 40 1,679 1,670 9 Other short-term borrowings 2,646 2,856 (210) 574 695 (121) Long-term borrowings (1,002) (1,046) 44 818 996 (178) ______ ______ ______ _____ _____ ______ 3,742 5,083 (1,341) 4,533 4,022 511 ______ ______ ______ _____ _____ ______ Net interest income $ 1,296 6,214 (4,918) $ 1,578 4,081 (2,503) Note: The change in interest due to both rate and volume has been allocated to change due to volume and rate in proportion to the relationship of the absolute dollar amounts of the change in each. (1) Nonaccrual loans have been included in the analysis of volume and rate variances. (2) Computed on a tax-equivalent basis using a federal income tax rate of 35 percent and adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
14 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, 1999. 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.
3 Months Over 3 Over 6 Total Over 1 or through 6 through 12 within through 5 Over Less Months Months 1 Year Years 5 Years Total ---- ------ ------ ------ ----- ------- ----- (dollars in thousands) Interest-earning assets: Interest-bearing deposits with banks $ 2,362 - - 2,362 - - 2,362 Investment securities: Available for sale: Taxable investments (3) 32,651 17,427 41,593 91,671 272,265 36,802 400,738 Tax-exempt investments 5,792 14,445 11,713 31,950 61,601 61,902 155,453 Held to maturity: Taxable investments - 130 8 138 163 696 997 Tax-exempt investments 648 3,059 3,185 6,892 9,975 7,338 24,205 _________ _______ _______ _________ _______ _______ _________ Total investment securities 39,091 35,061 56,499 130,651 344,004 106,738 581,393 Loans held for sale 26,201 - - 26,201 - - 26,201 Loans (1)(3) 402,252 17,785 44,150 464,187 535,294 189,247 1,188,728 _________ _______ _______ _________ _______ _______ _________ Total interest-earning assets $ 469,906 52,846 100,649 623,401 879,298 295,985 1,798,684 Interest-bearing liabilities: Interest-bearing deposits: Demand and savings deposits (2) $ 786,094 - - 786,094 - - 786,094 Time deposits 125,387 88,303 150,639 364,329 189,524 803 554,656 Federal funds purchased and securities sold under agreements to repurchase 166,806 - - 166,806 - - 166,806 Other short-term borrowings 71,924 20,500 18,000 110,424 - - 110,424 Long-term borrowings - - 793 793 23,978 2,933 27,704 _________ _______ _______ _________ _______ _______ _________ Total interest-bearing liabilities $1,150,211 108,803 169,432 1,428,446 213,502 3,736 1,645,684 _________ _______ _______ _________ _______ _______ _________ Interest sensitivity GAP $ (680,305) (55,957) (68,783) (805,045) 665,796 292,249 153,000 _________ _______ _______ _________ _______ _______ _________ Interest sensitivity GAP ratio .41:1 .49:1 .59:1 .44:1 4.12:1 79.23:1 1.09:1 _________ _______ _______ _________ _______ _______ _________ Cumulative interest sensitivity GAP $ (680,305) (736,262) (805,045) (805,045) (139,249) 153,000 153,000 _________ _______ _______ _________ _______ _______ _________ Cumulative interest sensitivity GAP ratio .41:1 .42:1 .44:1 .44:1 .92:1 1.09:1 1.09:1 (1) Nonaccrual loans have been excluded from the interest rate sensitivity analysis. (2) Interest-bearing demand and savings deposits are included in the 3 months or less sensitivity category. (3) Assumed repayments on mortgage-related loans and investments are based upon projected prepayment speeds which are determined by considering Wall Street estimates.
15 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:
1999 1998 1997 ____ ____ ____ (in thousands) Investment securities available for sale (fair value): Taxable investments: United States Treasury securities $ 32,412 43,292 38,790 Securities of United States government agencies 152,214 140,417 86,660 Mortgage-backed and related securities 184,245 233,055 230,933 Other investments 31,867 26,984 20,957 Tax-exempt investments: Obligations of states and political Subdivisions 155,453 161,436 109,314 _______ _______ _______ 556,191 605,184 486,654 Investment securities held to maturity (amortized cost): Taxable investments: Securities of United States government agencies - - 5,025 Mortgage-backed and related securities 662 1,529 2,363 Other investments 335 450 1,518 Tax-exempt investments: Obligations of states and political Subdivisions 24,205 41,048 60,173 _______ _______ _______ 25,202 43,027 69,079 _______ _______ _______ Total investment securities $581,393 648,211 555,733
16 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, 1999:
After One After Five Within but through but through After One Year Five Years Ten Years Ten Years _______________ _______________ _______________ _______________ Amount Yield Amount Yield Amount Yield Amount Yield ______ _____ ______ _____ ______ _____ ______ _____ (dollars in thousands) Investment securities available for sale: Taxable investments: United States Treasury Securities $ 19,972 4.34% $ 12,440 5.41% $ - -% $ - -% Securities of United States government agencies 5,001 5.89 128,968 5.62 18,245 6.21 - - Mortgage-backed and related securities 50,681 6.11 111,992 6.29 21,572 6.80 - - Other investments 10,473 6.25 21,394 5.67 - - - - Tax-exempt investments: Obligations of states and political subdivisions 31,950 6.38 61,601 6.25 46,161 6.71 15,741 7.41 _______ ____ _______ ____ ______ ____ ______ ____ 118,077 5.89 336,395 5.95 85,978 6.63 15,741 7.41 _______ ____ _______ ____ ______ ____ ______ ____ Investment securities held to maturity: Taxable investments: Mortgage-backed and related securities 98 6.36 333 6.36 231 6.36 - - Other investments 138 6.43 163 7.39 15 8.25 19 7.38 Tax-exempt investments: Obligations of states and political subdivisions 6,892 6.62 9,975 7.09 6,293 8.15 1,045 8.38 _______ ____ _______ ____ ______ ____ ______ ____ 7,128 6.62 10,471 7.08 6,539 8.09 1,064 8.36 _______ ____ _______ ____ ______ ____ ______ ____ Total investment securities $125,205 5.93% $346,866 5.99% $92,517 6.73% $16,805 7.47% 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, 1999, the Company did not have securities from a single issuer, other than the United States Government or its agencies, which exceeded 10 percent of consolidated common stockholders' equity. Maturities of all investment securities are managed to meet the Company's normal liquidity needs. Investment securities available for sale may be sold prior to maturity to meet liquidity needs, to respond to market changes or to adjust the Company's asset/liability position.
17 Item 1(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:
December 31 ____________________________________________________ 1999 1998 1997 1996 1995 ____ ____ ____ ____ ____ (in thousands) 1. Real estate loans: a. Commercial construction and land development $ 86,725 54,941 30,007 42,693 38,123 b. Secured by 1-4 family residential property, including home equity loans 356,548 302,731 342,134 338,010 319,430 c. Other 163,202 151,995 161,989 150,395 163,739 2. Loans to financial institutions - - - - - 3. Loans to farmers 75,624 84,554 79,036 69,660 68,543 4. Commercial and industrial loans 193,690 179,414 160,428 132,395 119,368 5. Loans to individuals for personal expenditures 306,689 251,636 217,405 207,197 199,489 6. All other loans 13,509 8,284 2,190 1,594 1,501 $1,195,987 1,033,555 993,189 941,944 910,193
18 Item 1(J) Business - Statistical Disclosure, Continued III. Loan Portfolio, Continued The following table shows the maturity distribution of loans as of December 31, 1999 (excluding real estate loans secured by 1-4 family residential property and loans to individuals for personal expenditures):
After One Year Within through After Five One Year Five Years Years Total ________ __________ _____ _____ (in thousands) 1. Real estate loans: a. Commercial construction and land development $ 85,517 264 944 86,725 b. Other 16,821 81,456 64,925 163,202 2. Loans to financial institutions - - - - 3. Loans to farmers 53,554 20,155 1,915 75,624 4. Commercial and industrial loans 134,137 43,959 15,594 193,690 5. All other loans 4,967 5,268 3,274 13,509 $294,996 151,102 86,652 532,750 The above loans due after one year which have predetermined and floating interest rates follow: Predetermined interest rates $ 92,776 Floating interest rates $144,978
19 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.
1999 1998 1997 1996 1995 ____ ____ ____ ____ ____ (in thousands) Nonaccrual $ 7,259 8,099 3,227 2,663 2,639 Restructured 399 289 513 568 178 Past due 90 days or more 1,794 2,901 2,972 2,936 2,802 Nonperforming loans $ 9,452 11,289 6,712 6,167 5,619
Interest income recorded during 1999 on nonaccrual and restructured loans amounted to $212,000. The amount of interest income which would have been recorded during 1999, if nonaccrual and restructured loans had been current in accordance with the original terms, was $973,000. 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 future anticipated charge-offs. The loans scheduled above from 1997 through 1999 contain one sizable loan of $2.9 million, which represents a concentration. A partial charge-off of $500,000 was taken on this loan in 1999, to reduce the loan balance to estimated collateral value. Resolution is expected in the year 2000." The other loans scheduled above are not concentrated in a specific industry or geographic area, other than the fact they are all located within the state of 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, 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, 1999, these loans amounted to less than $1 million. As of December 31, 1999, 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 $1,186,000 and $389,000 at December 31, 1999, and 1998, respectively. 20 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:
1999 1998 1997 1996 1995 ____ ____ ____ ____ ____ (dollars in thousands) Total loans at the end of the year $1,195,987 1,033,555 993,189 941,944 910,193 _________ _________ _______ _______ _______ Average loans outstanding $1,098,732 999,232 970,115 919,578 945,724 _________ _________ _______ _______ _______ Allowance for loan losses - beginning of the year $ 14,172 12,732 11,328 11,070 10,913 _________ _________ _______ _______ _______ Amount of charge-offs during year: Real estate loans 1,561 478 299 479 41 Loans to financial institutions - - - - - Loans to farmers 988 261 196 365 36 Commercial and industrial loans 518 592 890 594 340 Loans to individuals for personal expenditures 3,270 2,997 2,844 2,623 2,960 All other loans 67 79 - - - _________ _________ _______ _______ _______ Total charge-offs 6,404 4,407 4,229 4,061 3,377 _________ _________ _______ _______ _______ Amount of recoveries during year: Real estate loans 265 133 217 68 66 Loans to financial institutions - - - - - Loans to farmers 269 37 109 138 50 Commercial and industrial loans 488 268 184 95 400 Loans to individuals for personal expenditures 1,347 1,198 1,223 1,118 1,153 All other loans 26 11 - - - _________ _________ _______ _______ _______ Total recoveries 2,395 1,647 1,733 1,419 1,669 _________ _________ _______ _______ _______ Net loans charged-off during year 4,009 2,760 2,496 2,642 1,708 _________ _________ _______ _______ _______ Additions to allowance charged to operating expense 4,250 4,200 3,900 2,900 1,865 _________ _________ _______ _______ _______ Allowance for loan losses - end of the year $ 14,413 14,172 12,732 11,328 11,070 _________ _________ _______ _______ _______ Ratio of allowance to loans outstanding at end of year 1.21 1.37 1.28 1.20 1.22 _________ _________ _______ _______ _______ Ratio of net charge-offs to average loans Outstanding .36 .28 .26 .29 .18 _________ _________ _______ _______ _______ NOTE: The provision for loan losses charged to operating expenses is based upon management's evaluation of the loan portfolio, past loan loss experience and the level of the allowance for loan losses necessary to support management's evaluation of probable losses in the loan portfolio. Management's evaluation of the allowance for loan losses is based upon several factors including economic conditions, historical loss and collection experience, risk characteristics of the loan portfolio, underlying collateral values, industry risk and credit concentrations.
21 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:
December 31 ___________________________________________________________________________________________________________________________ 1999 1998 1997 1996 1995 Allowance Percent Allowance Percent Allowance Percent Allowance Percent Allowance Percent for of Loans for of Loans for of Loans for of Loans for of Loans Loan to Total Loan to Total Loan to Total Loan to Total Loan to Total Losses Loans Losses Loans Losses Loans Losses Loans Losses Loans ______ _____ ______ _____ ______ _____ ______ _____ _____ _____ (dollars in thousands) Real estate loans $ 2,800 50.7% $ 3,000 49.3% $ 2,400 53.8% $ 2,200 56.4% $ 2,400 57.3% Loans to financial institutions - - - - - - - - - - Loans to farmers 1,900 6.3 1,600 8.2 1,200 8.0 1,000 7.4 1,300 7.5 Commercial and industrial loans 4,200 16.2 4,100 17.4 3,800 16.1 3,200 14.0 2,900 13.1 Loans to individuals for personal Expenditures 5,513 25.7 5,472 24.3 5,332 21.9 4,928 22.0 4,470 21.9 All other loans - 1.1 - .8 - .2 - .2 - .2 ______________ ______________ ______________ _____________ ______________ $14,413 100.0% $14,172 100.0% $12,732 100.0% $11,328 100.0% $11,070 100.0% ______________ ______________ ______________ _____________ ______________
22 Item 1(J) Business - Statistical Disclosure, Continued V. Deposits A classification of the Company's average deposits and average rates paid for the three years ended December 31 follow:
1999 1998 1997 ____________ ____________ ____________ Amount Rate Amount Rate Amount Rate ______ ____ ______ ____ ______ ____ (dollars in thousands) Noninterest-bearing deposits $ 192,211 -% $ 164,403 -% $ 139,480 -% Interest-bearing deposits: Demand 109,535 3.18 90,589 3.09 81,430 2.86 Savings 641,308 3.01 585,598 2.98 551,509 2.88 Time 546,868 5.22 556,056 5.49 567,258 5.48 ______________ ______________ ______________ $1,489,922 $1,396,646 $1,339,677 ______________ ______________ ______________
The following sets forth the maturity distribution of all time deposits of $100,000 or more as of December 31, 1999: Maturity Remaining Amount (in thousands) Less than 3 months $ 17,886 Over 3 through 6 months 14,190 Over 6 through 12 months 31,150 Over 12 months 15,892 _______ $ 79,118 VI. Return on Equity and Assets Various operating and equity ratios for the three years ended December 31 are presented below:
1999 1998 1997 Return on average total assets: (Net income before deduction of minority interest) .89% 1.18% 1.14% Return on average equity: (Including unrealized gains (losses) on securities available for sale) 12.35 15.37 14.47 Return on average equity: (Excluding unrealized gains (losses) on securities available for sale) 12.31 15.77 14.68 Common dividend payout ratio 43.25 33.02 27.11 Average equity to average assets 6.90 7.4 7.55 Equity to assets ratio 6.91 6.81 7.36 Tier 1 leverage capital ratio 6.80 7.17 7.63
23 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:
1999 1998 1997 ____ ____ ____ (dollars in thousands) Amount outstanding at December 31 $166,806 155,847 92,633 Weighted average interest rate at December 31 4.58% 4.24 4.48 Maximum amount outstanding at any month-end $211,978 155,847 92,633 Average amount outstanding during the year $150,387 116,388 78,234 Weighted average interest rate during the year 4.41% 4.38 4.36
Information relative to other short-term borrowings, which consist primarily of Federal Home Loan Bank advances, follows:
1999 1998 1997 ____ ____ ____ (dollars in thousands) Amount outstanding at December 31 $110,424 87,050 73,700 Weighted average interest rate at December 31 5.04% 5.38 6.02 Maximum amount outstanding at any month-end $157,352 87,050 73,700 Average amount outstanding during the year $117,377 65,205 53,223 Weighted average interest rate during the year 5.46% 5.76 5.98
24 Item 2. Properties. The affiliated banks and subsidiaries have 44 service locations with approximately 344,000 square feet, all located in Iowa. Of these locations, 30 were owned by the Company -- approximately 267,000 square feet; three were owned buildings on leased land -- approximately 30,000 square feet and 11 were operated under lease contracts with unaffiliated parties -- approximately 47,000 square feet. The Company has entered into agreements for construction of a new operations and sales support facility in Clive, Iowa. The estimated total cost of the land and building is $12.5 million. Groundbreaking occurred in October 1999, construction has begun and completion is expected in the fourth quarter of 2000. The new building will replace space that 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. Legal Proceedings. The Company (Brenton Banks, Inc. and its subsidiaries) is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted 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. 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 2,271 holders of record of the Parent Company's $2.50 common stock as of March 6, 2000. The closing price of the Parent Company's common stock was $8.94 on March 6, 2000. The Parent Company increased dividends to common shareholders in 1999 to $.346 per share, a 9.2 percent increase over $.317 for 1998. Dividend declarations are evaluated and determined by the Board of Directors on a quarterly basis. In January 2000, the Board of Directors declared a dividend of $.087 per common share. There are currently no restrictions on the Parent Company's present or future ability to pay dividends. 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. 25 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. 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. 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. 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. 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, 1999, 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. 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, 1999, is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The definitive proxy statement of Brenton Banks, Inc., which will be filed not later than 120 days following the close of the Company's fiscal year ending December 31, 1999, is incorporated herein by reference 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. 26 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. The following exhibits and financial statement schedules are filed as part of this report: (a) 1. Financial Statements: See the financial statements on pages 13 through 33 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, which are incorporated herein by reference. 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 1,607,100 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. Exhibit 10.3 Form of the 1999 Stock Option Agreement, under which certain officers of the Company are eligible to receive options pursuant to the 1996 Stock Option Plan. Exhibit 10.4 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 10.5 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. 27 Exhibit 10.6 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 878,460 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This Non- Qualified Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. Exhibit 10.7 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. 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 Bank and the Federal Home Loan Bank of Des Moines. This Standard Agreement for Advances, Pledge and Security Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1999, 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. 28 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 January 1, 1999. Exhibit 10.14 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, 1998. 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. 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. 29 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. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.23 Indenture Agreement with respect to Capital Notes dated April 19, 1999. Exhibit 10.24 Split-Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. Exhibit 10.25 Split-Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. Exhibit 10.26 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 10.27 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangement, dated December 31, 1994. Exhibit 10.28 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. 30 Exhibit 10.29 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 10.30 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). This Fourteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.31 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). This Fifteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.32 Purchase Agreement dated December 31, 1998, by and between West Lakes Development Company and Brenton Bank. This Purchase Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.33 Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc. and Brenton Bank. This Purchase Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. Exhibit 10.34 Agreement between The Weitz Company, Inc. and Brenton Bank dated June 15, 1999. This Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. Exhibit 10.35 Agreement between Savage-Ver Ploeg & Associates, Inc. and Brenton Bank dated March 19, 1999. This Agreement is incorporated from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. Exhibit 11 Statement of computation of earnings per share. 31 Exhibit 12 Statement of computation of ratios. Exhibit 13 The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1999 calendar year. Exhibit 21 Subsidiaries. Exhibit 23 Consent of KPMG LLP to the incorporation of their report dated January 28, 2000, 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 1999. 32 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 9, 2000 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 9, 2000 By /s/ Steven T. Schuler Chief Financial Officer/Treasurer/Secretary STEVEN T. SCHULER Chief Financial Officer Chief Accounting Officer Date: March 9, 2000 33 BOARD OF DIRECTORS By: /s/ C. Robert Brenton C. ROBERT BRENTON Chairman of the Board Date: March 9, 2000 By /s/ William H. Brenton WILLIAM H. BRENTON Date: March 9, 2000 By /s/ Junius C. Brenton JUNIUS C. BRENTON Date: March 9, 2000 By: /s/ Robert C. Carr ROBERT C. CARR Date: March 9, 2000 By /s/ Gary M. Christensen GARY M. CHRISTENSEN Date: March 9, 2000 By /s/ Robert J. Currey ROBERT J. CURREY Date: March 9, 2000 34 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. ........................ 41 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. ............................... 42 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 1,607,100 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. ...................................... 44 Exhibit 10.3 Form of the 1999 Stock Option Agreement, under which certain officers of the Company are eligible to receive options pursuant to the 1996 Stock Option Plan. ........... 45 Exhibit 10.4 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. .................................................... 49 Exhibit 10.5 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. ............... 50 Exhibit 10.6 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 878,460 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This Non-Qualified Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. .................... 57 35 Exhibit 10.7 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. .................. 58 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. ....................................... 72 Exhibit 10.9 Standard Agreement for Advances, Pledge and Security Agreement between Brenton Bank and the Federal Home Loan Bank of Des Moines. This Standard Agreement for Advances, Pledge and Security Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ........ 73 Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1999, setting forth the terms of the Parent Company's $5,000,000 short-term debt agreement. ............................... 74 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. ............... 78 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. ....................................... 79 Exhibit 10.13 Adoption Agreement #003 -- Nonstandardized Code Section 401(k) Profit Sharing Plan, effective January 1, 1999. ......................................... 80 36 Exhibit 10.14 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, 1998. ........ 129 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. ........ 130 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. ........ 131 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. ........ 132 Exhibit 10.18 Indenture Agreement with respect to Capital Notes dated April 8, 1994. ..................................... 133 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. ........ 148 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. ........ 149 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. ........ 150 Exhibit 10.22 Indenture Agreement with respect to Capital Notes dated April 16, 1998. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ........ 151 37 Exhibit 10.23 Indenture Agreement with respect to Capital Notes dated April 19, 1999. .................................... 152 Exhibit 10.24 Split-Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. ................ 171 Exhibit 10.25 Split-Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. ................ 213 Exhibit 10.26 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. ........................ 223 Exhibit 10.27 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangement, dated December 31, 1994. ................................. 224 Exhibit 10.28 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. .... 228 Exhibit 10.29 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. ....................................... 229 Exhibit 10.30 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). This Fourteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ....................................... 230 38 Exhibit 10.31 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). This Fifteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ....................................... 231 Exhibit 10.32 Purchase Agreement dated December 31, 1998, by and between West Lakes Development Company and Brenton Bank. This Purchase Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ....................................... 232 Exhibit 10.33 Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc. and Brenton Bank. This Purchase Agreement is Incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. ....................................... 233 Exhibit 10.34 Agreement between The Weitz Company, Inc. and Brenton Bank dated June 15, 1999. This Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. ................................ 234 Exhibit 10.35 Agreement between Savage-Ver Ploeg & Associates, Inc. and Brenton Bank dated March 19, 1999. This Agreement is incorporated from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. .................................................... 235 Exhibit 11 Statement of computation of earnings per share. .......... 236 Exhibit 12 Statement of computation of ratios. ...................... 238 Exhibit 13 The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1999 calendar year. .................. 242 Exhibit 21 Subsidiaries. ............................................ 280 Exhibit 23 Consent of KPMG LLP to the incorporation of their report dated January 28, 2000, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. ................................... 282 39 Exhibit 27 Financial Data Schedule (filed only with Electronic Transmission). ........................................... 284 40 EX-3 2 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. 41 EX-10.1 3 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. 42 1999 BRENTON BANKS, INC. BONUS PLANS For 1999, the Company (Brenton Banks, Inc. and Subsidiaries) has bonus plans that cover executive officers, line of business managers, senior managers, market managers, and other key personnel. The following chart summarizes the main features of these bonus plans: Bonus potential (as percent of base pay): Chief Executive Officer 60.00% Other Executive Officers 45.00% to 50.00% Line of business managers 40.00% Market managers 30.00% to 40.00% Senior managers and other key personnel 10.00% to 37.50% Bonus threshold for executive officers: Bonus achievement is tied to a consolidated earnings threshold of $19,500,000 whereby no bonus will be paid if this earnings threshold is not achieved. For executive officers 50% to 100% of bonus is tied to consolidated net income. The same tiered earnings bonus matrix applies to all employees who have a portion of their bonus tied to consolidated net income. The tiered bonus matrix, for that portion of the bonus tied to net income, provides for no bonus unless net income exceeds $19,500,000 and provides for 100% of bonus to be earned when net income exceeds $22,500,000. Bonus criteria: Bonus amounts are paid for achievement of certain pre-established financial and personal goals, the most significant of which are as follows: Consolidated net income Subsidiary or line of business controllable net income Sales goals Growth in loans Growth in core deposits Fee income generation Noninterest income Noninterest expense Customer portfolio profitability Key personal objectives Bonus achievements: Bonus amounts are earned ratably based on actual results compared to a tiered bonus achievement matrix. 43 EX-10.2 4 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 1,607,100 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. 44 EX-10.3 5 Exhibit 10.3 Form of the 1999 Stock Option Agreement, under which certain officers of the Company are eligible to receive options pursuant to the 1996 Stock Option Plan. 45 Brenton Banks, Inc. Stock Option Agreement Pursuant to the 1996 Stock Option Plan Name: [NAME] "Participant" This agreement certifies your receipt of an option grant under the Brenton Banks, Inc. 1996 Stock Option Plan. All aspects of this grant shall be governed by the terms and conditions of this agreement, in addition to those in the Plan document which has been given to you along with this agreement. The terms and conditions which apply to your option are contained in these documents. This document shall constitute an agreement between you and Brenton Banks, Inc. only if a copy signed by you is received by Brenton Banks Inc.'s Compensation Committee within ninety days of the date of this agreement. By signing this agreement, you acknowledge receipt of the Plan document and acceptance and agreement with all terms and conditions of the option grant and the Plan document. The Company and Participant acknowledge that the purpose of the grant of the option is designed to align the interests of the Company's stockholders and Participant through the Participant's ownership of the stock acquired through the exercise of the options. The Participant represents and warrants that they are bona fide residents of the State of Iowa. ACCEPTED and AGREED: Brenton Banks, Inc. _______________________________ Robert L. DeMeulenaere, President _____________________ _______ _______________________ ______ Participant Date Chairman--Compensation Date Committee of the Board 46 Stock Option Agreement Terms and Conditions Number of Shares: Option Price: [PRICE-PER-SHARE] Date of Grant: [DATE] Expiration Date: [EXPIRATION] Vesting: The Option becomes vested and may be exercised upon the earlier of 9 1/2 years after grant or upon and to the extent that the achievement of the Cumulative Net Income Goals as specified below: The Cumulative Net Income Goals of the Company are as set forth in Table 1 below. The Cumulative Net Income of the Company (hereinafter the "CNI") through each of the dates listed in Table 1 below shall mean the sum of the Company's Annual Net Income as reported in the Company's Audited Financial Statements for each of the years beginning January 1, 1996 through such dates. To the extent that the Company fails to obtain the minimum CNI designated for any performance period, no options shall become vested. To the extent that CNI meets or exceeds the minimum CNI designated for any performance period the amount of options vested shall be proportionately equal to the amount that CNI exceeds the minimum to the maximum set forth on Table 1. To the extent that the CNI exceeds the maximum designated for any performance period, no additional options in excess of the maximum shall vest. The amount of shares vested throughout the term of the Option shall not exceed the total number of Option shares granted. Once Option shares are vested, such shares shall remain vested in subsequent years notwithstanding the failure to meet subsequent performance criteria. Notwithstanding the foregoing, no fractional shares shall be required to be issued by the Company. Options shall become vested upon certification by the Company's accountants of the Company's Annual Net Income and the certification of CNI by the Compensation Committee.
TABLE 1: % Total Vested Cumulative Net Income (000) Starting 1/1/96 Through 12/31/98 12/31/99 12/31/00 12/31/01 100% -- -- -- $118,376,000 75% -- -- -- 113,640,960 67% -- -- $93,900,000 110,681,560 50% -- -- 89,486,000 107,130,280 33% -- $70,900,000 88,073,000 102,987,120 25% -- 67,737,000 85,071,000 -- 0% $50,000,000 64,574,000 -- -- 45,940,000 -- -- -- -- -- -- --
47 Treatment Upon Termination: In the case of the Participant's termination of employment from the Company, any of its subsidiaries or joint ventures, the Options granted herein shall terminate as provided in Table 2, below. For purposes of this Agreement, "Termination for Cause" shall mean termination of employment for theft or misappropriation of company's funds/assets, or the Participant's conviction of a felony. Disability shall mean a Participant who is disabled as defined under the Company's Disability Plan, if any, or under the Social Security Rules.
TABLE 2: Treatment of Post-Termination Reason for Termination Unvested Options Exercise Period Termination for cause All forfeited None Voluntary quit or All forfeited 90 days involuntary for any reason other than for cause Death or disability Prorata vesting over five Remainder of years based on actual option period service since date of grant Retirement at or after Prorated vesting based on Remainder of age 65 or, with Committee actual service since date option period consent, retirement prior of grant through nine to age 65 years and six (6) months Retirement prior to age All forfeited Ninety days 65 without Committee consent
Change in Control: Upon a Change in Control of the Company, unvested options become vested depending on when the Change in Control occurs. Upon a Change in Control Options granted hereunder, to the extent not previously vested, shall become vested to the extent set forth in Table 3. The amount vested upon a Change in Control shall be determined by multiplying the percentage set forth across from the year in which the Change in Control occurs by the total number of unvested Options shares granted herein. TABLE 3: In 1996 -- 0% vesting In 1998 -- 75% vesting In 1997 -- 50% vesting In 1999 or thereafter -- 100% vesting Committee Discretion: The Participant and Company acknowledge that a material acquisition or divestiture of a business activity or business unit (by merger, stock swap or other similar transactions) by the Company may be a material change in the operations of the Company that may justify an amendment to the performance vesting schedule set forth in Table 1. The Participant and Company agree that in such an event the Compensation Committee shall have the right to make an appropriate adjustment to Table 1, as determined in the good faith judgment of the Compensation Committee, provided that any adjustment shall only be made prospectively and shall be made within 120 days of the consummation of the transaction which justifies the amendment. Change in Duties or Position of Participant: So long as the holder of an Option shall continue to be a Participant of the Company or one or more of its subsidiaries his Option shall not be affected by any change of duties or position. 48 EX-10.4 6 Exhibit 10.4 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. 49 EX-10.5 7 Exhibit 10.5 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. 50 Employment Agreement This Agreement is made this sixth day of July, 1989 by and between Brenton Banks, Inc., an Iowa corporation (Company) and William H. Brenton(Employee). Witnesseth: Whereas, Employee is currently a key employee of the Company holding the office of Chairman of the Company and serving on significant committees of the Company and on boards of directors and significant committees of subsidiaries of the Company, and Whereas, the retention of Employee's services for and on behalf of the Company is of material importance to the preservation and enhancement of the Company's business, and Whereas, Employee has agreed to remain in the employ of the Company in return for the Company's promises stated in this Agreement. Now, Therefore, in consideration of the mutual covenants set forth in this Agreement the Company and Employee agree as follows: 1. Term of Employment. Company hereby employs Employee on the terms and conditions set forth in this Agreement and Employee hereby accepts such employment and agrees to render services to the Company on the terms and conditions set forth in this Agreement. The term of employment shall continue until December 31, 1994 unless sooner terminated as provided in subsequent paragraphs of this Agreement. During the term of employment Employee shall perform such executive services for the Company as may be consistent with his title and from time to time assigned to him by the Board of Directors of the Company. The services of Employee shall be performed principally in Des Moines, Iowa. 2. Duties and Offices. Until the annual stockholders meeting in May 1990, Employee shall hold his present office of Chairman of the Company and, subject to the rights of the stockholders, shall be a member of and Chairman of the Board of Directors of Company. Unless otherwise agreed between Employee and the Company, Employee while Chairman shall serve on such committees and subsidiary boards of directors and hold such subsidiary offices as has been customary for the Chairman of the Company and receive customary compensation for all such service. From the annual stockholders meeting in May 1990 until December 31, 1994 Employee shall hold the office of Vice Chairman of the Company. Unless otherwise agreed between Employee and the Company, Employee while Vice Chairman shall, if Employee so desires, serve on subsidiary boards of directors and on committees on which he now serves or on which Employee desires to serve or on which the Chairman or the President then serves and, subject to the rights of the stockholders, shall be a member of the Board of Directors of the Company and receive customary compensation for all such service. While Vice Chairman and a member of the Board of Directors he shall serve as Chairman of the Executive Committee of the Board of Directors. While Vice Chairman, Employee may perform consulting services for outside companies and individuals provided each engagement is disclosed to the Company and presents no conflict of interest with the Company. The Company recognizes that the duties of Vice Chairman will not require as much time commitment as the duties of Chairman. 51 3. Compensation. Employee's base salary through December 31, 1994 shall be not less than the greater of (a) Employee's base salary for 1989 or (b) the higher of the base salaries in effect from time to time for C. Robert Brenton or J. C. Brenton. Employee's base salary shall be increased commensurate with general increases in the base salaries of other senior executives. The base salary may be increased from time to time by the Board of Directors. In addition to base salary, Employee shall be entitled to participate in bonus, stock option, pension, profit sharing and other programs available to other senior executives and shall be entitled to other benefits, expense reimbursement and allowances now or in the future available to other senior executives, all on a basis not less favorable than the best available to C. Robert Brenton or J. C. Brenton. 4. Retirement. Employee shall retire on December 31, 1994. Employee may retire earlier if Employee so desires. Upon retirement, the Company shall pay Employee $50,000 as a lump sum retirement benefit. In addition, upon retirement, the Company shall pay Employee as an additional lump sum retirement benefit the amount, if any, by which $160,000 multiplied by Employee's years (or fractional years) of service from January 1, 1990, through the date of retirement exceeds the amount of base salary and bonuses paid to Employee for such period. After retirement, the Company shall make an office (with reasonable secretarial help) available for use by Employee during his lifetime; however, this obligation shall cease at such time as there is a change in control of the Company as defined in Section 280G of the Internal Revenue Code. After retirement Employee may serve as a member of the boards of directors of subsidiary banks as Employee desires and, subject to the rights of the stockholders, shall, if Employee desires, be a member of the Board of Directors of the Company and shall receive customary compensation for all such service. 5. Supplemental Retirement Income. Commencing with Employee's retirement, the Company shall pay to Employee $50,000 per year in equal monthly installments, subject to adjustment as provided below. If Employee dies, such payments shall continue to Employee's spouse. Such payments shall continue from the date of commencement until December 31, 2004, or, if earlier, the date on which both Employee and his spouse are deceased. The amount of such payments shall be adjusted as of the commencement date of the payments and as of each fifth anniversary of the commencement date to reflect increases in the Consumers Price Index (or other appropriate index) which have occurred since the date of this Agreement, but in no event shall the amount of increase due to such adjustment exceed one-half of the amount of such payments prior to the adjustment. (For example, if payments commence on January 1, 1995, and if the Consumer Price Index in December 1994 is 110% of the Consumer Price Index on the date of this Agreement and in December 1999 is 120% of the Consumer Price Index on the date of this Agreement, then the amount of such payments would be $55,000 per year for 1995 through 1999 and $60,000 per year for 2000 through 2004). 6. Death Before Retirement. If Employee dies before retirement and is survived by his spouse, the payments set forth in paragraph 5 shall be made to his spouse commencing upon Employee's death but not beyond his spouse's death, and his spouse shall receive the benefits provided in paragraphs 13 and 15, and shall receive the benefits provided in paragraph 4 as though Employee had retired upon his date of death. 7. Disability. In the event Employee becomes permanently disabled prior to retirement, Employee shall retire upon the date of determination of permanent disability and shall receive the benefits provided in paragraphs 4, 5, 12, 13 and 15. 52 Employee shall be deemed permanently disabled if Employee has been absent from his duties for three consecutive months and a licensed physician chosen by the Company determines that Employee has a physical or mental condition which renders him incapable of performing his usual and customary employment with the Company. In the event of temporary disability while employed, Employee shall receive disability benefits pursuant to disability plans applicable to other senior executives. 8. Termination for Just Cause by Company. The Board of Directors of the Company shall have the right to terminate Employee's employment for just cause. Upon termination for just cause, Employee shall be deemed to have retired upon the date of termination and shall receive the benefits provided in paragraphs 4, 5, 12, 13 and 15. Termination for just cause by the Company shall mean and be limited to termination for (a) personal dishonesty, breach of fiduciary duty involving personal profit, conviction of a felony involving moral turpitude, or (b) the willful and continued failure by Employee to substantially perform his duties hereunder (other than any such failure resulting from Employee's incapacity due to physical or mental illness) after demand for substantial performance is delivered by the Company that specifically identifies the manner in which the Company believes Employee has not substantially performed his duties and that gives Employee a reasonable time to conform his performance of duties to those required under this Agreement. For purposes of this paragraph, no act or failure to act on Employee's part shall be considered "willful" unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. After termination pursuant to this paragraph, Employee shall be entitled to compete with the Company without limitation, except that Employee shall make no use of confidential information learned during his employment with the Company. 9. Termination For Just Cause by Employee. Employee shall have the right to terminate his employment for just cause. Commencing upon the effective date of termination for just cause by the Employee, the Company shall pay Employee in equal monthly installments until December 31, 1994, the amounts to which Employee would have been entitled under paragraph 3 if he had remained employed by the Company under this Agreement, including participation, or amounts equivalent to participation, in the Company's qualified pension plan. Commencing January 1, 1995, the Company shall pay to Employee or his spouse the benefits under paragraph 4, 5, 12, 13 and 15 as though Employee had retired on December 31, 1994. If Employee dies prior to December 31, 1994, he shall be deemed to have died before retirement and the provisions of paragraph 6 shall apply. Termination for just cause by Employee shall mean and be limited to termination within three months following (a) the assignment to Employee of any duties inconsistent with Employee's positions, duties, responsibilities or status within the Company in effect on the date of this Agreement or as provided in paragraph 2, (b) a material change in Employee's responsibilities, titles or offices as in effect on the date of this Agreement or as provided in paragraph 2, (c) the requirement that Employee perform his services principally at a location other than Des Moines, Iowa, or (d) a material default by the Company in the performance of its obligations under this Agreement. After termination pursuant to this paragraph, Employee shall be entitled to compete with the Company without limitations, except that Employee shall make no use of confidential information learned during his employment with the Company. 10. Termination Without Just Cause. The Company shall have the right to terminate Employee's employment without just cause by giving Employee six months advance notice of such termination, or in lieu of such notice, by paying Employee an amount equal to six months base salary then in effect. In addition, commencing upon 53 the effective date of termination, the Company shall pay Employee in equal monthly installments until December 31, 1994, the amounts to which Employee would have been entitled under paragraph 3 if he had remained employed by the Company under this Agreement including participation, or amounts equivalent to participation, in the Company's qualified pension plan. Commencing January 1, 1995, the Company shall pay to Employee or his spouse the benefits under paragraphs 4, 5, 12, 13 and 15 as though Employee had retired on December 31, 1994. If Employee dies prior to December 31, 1994, he shall be deemed to have died before retirement and the provisions of paragraph 6 shall apply. After termination pursuant to this paragraph, Employee shall be entitled to compete with the Company without limitation, except that Employee shall make no use of confidential information during his employment with the Company. 11. Unfunded Agreement. Supplemental retirement benefits to be provided under this Agreement are unfunded obligations of the Company. Company shall not be required to segregate any monies from its general funds, to create any trust, to make any special deposits or to purchase any policies of insurance with respect to its obligations under this Agreement. 12. Life Insurance. Until Employee reaches age 70, the Company shall continue in force the present life insurance policy on the life of Employee. After Employee reaches age 70, the Company shall until December 31, 2004, or Employee's death, contribute $7,500 per year towards life insurance premiums under a policy on Employee's life to be selected by Employee. 13. Medical Insurance. Until the completion of payment of the supplemental retirement income pursuant to paragraph 5, the Company shall pay for Employee's and Employee's spouse medical insurance under a policy which, when combined with Medicare benefits, provides coverage not less favorable than now in effect, subject to requirements of the insuror based upon age. 14. Limitation. In the event of termination for just cause by Employee pursuant to paragraph 9 or termination without just cause by the Company pursuant to paragraph 10, if such termination is contingent upon a change in control as provided in section 28OG of the Internal Revenue Code, and if the payments provided in paragraph 15, the second sentence of paragraph 9 or the second sentence in paragraph 10 would constitute an "excess parachute payment" as defined in section 28OG of the Internal Revenue Code, then in lieu of such payments the Company shall pay the Employee within 30 days after such termination an amount equal to 2.9 times the average aggregate annual compensation paid to Employee by the Company and includible in his gross income for federal income tax purposes during the five calendar years preceding the taxable year in which change in control occurs. The determination whether termination is contingent upon a change in control and whether such payments would constitute an "excess parachute payment" shall be made jointly by an independent certified public accountant selected by Employee and the independent certified public accountants responsible for preparing the Company's federal income tax return for the year in which such lump sum payment is made. 15. Additional Benefits. If the Company (a) prior to January 1, 1995, or 54 (b) after December 31, 1994 and prior to January 1, 2000, incident to or in anticipation of an acquisition of control of the Company as defined in 12 CFR 225.41, provides or agrees to provide post employment, severance payments or retirement benefits to C. Robert Brenton or J. C. Brenton other than payments pursuant to a qualified plan which are more favorable than those provided under this Agreement, then Employee, at his option, or his spouse, at her option if Employee is deceased, may elect to receive payments and benefits pursuant to the arrangement between the Company and C. Robert Brenton or J. C. Brenton, including retroactive adjustment in payments and benefits received by Employee or his spouse prior to the time the Company made such arrangement. If such arrangement between the Company and C. Robert Brenton or J. C. Brenton is made on or before December 31, 1994, the Employee or his spouse may elect to receive payments and benefits fully commensurate with such arrangement. If such arrangement between the Company and C. Robert Brenton or J. C. Brenton is made after December 31, 1994, then Employee or his spouse may elect to receive payments and benefits partially adjusted to be commensurate with such arrangement; if such arrangement is made during 1995 then the payments and benefits shall be 100% adjusted; during 1996, 80% adjusted; during 1997, 60% adjusted; during 1998, 40% adjusted, during 1999, 20% adjusted. If any determination under this paragraph requires determination of actuarial equivalency, such determination shall be made jointly by an independent certified public accountant selected by Employee or his spouse if Employee is then deceased and the independent certified public accountant responsible for preparing the Company's federal income tax return. As used in this paragraph, "the Company" shall include any entity providing payments or benefits in connection with any such employment, severance or retirement. For Example: If, incident to the acquisition of control, the Company during 1997 agrees with C. Robert Brenton to pay him a lump sum retirement benefit of $100,000 and the amount received by Employee upon his retirement on December 31, 1994, under paragraph 4 was $75,000, then the Company in 1997 would pay Employee 60% of $25,000, or $15,000 (subject to decrease by the estimators to reflect inflation from 1994 to 1997 and subject to increase by the estimators to reflect the time value of money from 1994 to 1997). If the Company during 1997 agreed with C. Robert Brenton to pay him supplemental retirement income of $60,000 per year until age 85, then the Company would (a) continue payments to Employee under paragraph 5 of this Agreement until Employee reaches age 85, (b) beginning in 1997 increase such payments from $50,000 to $56,000 (60% of the difference between $60,000 and $50,000), and (c) pay Employee in 1997 $18,000 (subject to adjustment for inflation and the time value of money) which is $6,000 for each of the three years from Employee's retirement date of December 31, 1994 to the beginning of 1997. 16. General Provisions. Benefits under this Agreement shall not be subject in any manner to alienation sale, transfer, assignment, pledge, or encumbrance of any kind unless approved by the Board of Directors of the Company. Any attempt to alienate, sell, transfer, assign, pledge, or otherwise encumber any benefit, whether presently or hereafter payable, shall be void unless so approved. Except as required by law, no benefit shall in any manner be subject to garnishment, attachment, execution, or other legal process, or be liable for or subject to the debts or liability of Employee or his spouse. In the event of litigation regarding this Agreement, the Company shall reimburse Employee or his spouse for all reasonable attorney fees and expenses incident to such 55 litigation, if Employee or his spouse is the prevailing party. Employee shall not be required to mitigate the amount of any payment under this Agreement, by seeking other employment or otherwise. This agreement may not be amended or otherwise modified without the consent of Employee or, after his death, his spouse. No waiver of any provision of this Agreement shall be effective unless in writing signed by the party sought to be charged with such waiver; the waiver of a provision upon one occasion shall not constitute the waiver of the same provision on a different occasion. This Agreement shall be binding upon the successors and assigns of the Company; a successor of the Company shall include any entity which succeeds to substantially all the assets of the Company, whether by merger, purchase or otherwise. This Agreement or the termination of employment pursuant to this Agreement shall have no adverse effect upon Employee's participation or rights under pension, profit sharing, stock, option or other plan of the Company. 17. Notices. Notices under this Agreement shall be effective if hand delivered to Employee or to the Chairman (other than Employee) or Secretary of the Company, or if sent certified mail, return receipt requested to Employee at his then current place of residence or to the Chairman (other than Employee) or Secretary at the principal offices of the Company. In Witness Whereof, the parties have executed this Agreement effective the day and year first above written. /s/ William H. Brenton William H. Brenton, Employee Brenton Banks, Inc. By /s/ C. Robert Brenton C. Robert Brenton, President Approval of Board of Directors The undersigned, constituting all of the members of the Board of Directors of Brenton Banks, Inc., hereby approve the foregoing Employment Agreement. /s/ C. Robert Brenton C. Robert Brenton /s/ J. C. Brenton J. C. Brenton /s/ R. Dean Duben R. Dean Duben /s/ Thomas R. Smith Thomas R. Smith /s/ William H. Brenton William H. Brenton (signing but abstaining) /s/ Steven T. Schuler Steven T. Schuler ATTEST 56 EX-10.6 8 Exhibit 10.6 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 878,460 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996) of the Company's $2.50 par value common stock. This Non-Qualified Stock Option Plan, Administrative Rules and Agreement are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1997. 57 EX-10.7 9 Exhibit 10.7 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. 58 BRENTON BANKS, INC. Long-Term Stock Compensation Plan Grant Agreement This Grant Agreement made on the date set forth below, by and between Brenton Banks, Inc., an Iowa Corporation (the "Company") and Phillip L. Risley, an employee of the Company or a Subsidiary thereof (the "Grantee"). The Company desires to carry out the purpose of its Long-Term Stock Compensation Plan by awarding Restricted Stock Grants and Incentive Stock Grants to the Grantee pursuant to the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement and for good and valuable consideration, the Company and the Employee have agreed, and do by this Agreement agree, as follows: 1. Terms. Those terms defined in the Brenton Banks, Inc., Long- Term Stock Compensation Plan or in the Administrative Rules adopted thereunder shall have the same meaning when used in this Agreement. 2. Restricted Stock Grant. The Company by this Agreement irrevocably awards the Grantee the rights to acquire 2,033 shares of the Company's Stock pursuant to the terms of a Restricted Stock Grant, set forth in the provisions of the Plan (a copy of which is attached hereto as Exhibit A), the Administrative Rules adopted pursuant to the Plan (a copy of which are attached hereto as Exhibit B), and the Resolution of the Company's Board of Directors (a copy of which is attached hereto as Exhibit C). 3. Incentive Stock Grant. The Company by this Agreement irrevocably awards the Grantee the rights to acquire 3775 shares of the Company's Stock pursuant to the terms of a Incentive Stock Grant, set forth in the provisions of the Plan (a copy of which is attached hereto as Exhibit A), the Administrative Rules adopted pursuant to the Plan (a copy of which are attached hereto as Exhibit B), the Resolution of the Company's Board of Directors (a copy of which is attached hereto as Exhibit C) and the Performance Criteria adopted by the Board (a copy of which is attached hereto as Exhibit D). 4. Terms. All of the terms, conditions and provisions contained in the Plan, Administrative Rules, Resolutions of the Board and Performance Criteria set forth in Exhibits A, B, C, and D shall be incorporated herein by this reference, and shall govern the provisions of awards set forth in this Agreement. 5. Stock Legend. The Grantee hereby consents to the imposition of an appropriate legend upon the Stock issued pursuant to the Grants. The legend shall be in the form prescribed by the Company's legal counsel if said counsel deems it necessary. 6. Notices. Any notices provided for under this Agreement shall be in writing and shall be delivered in person to the party to be notified or sent by certified mail. Notices sent to the Company shall be addressed to Brenton Banks, Inc., 300 Capital Square, Des Moines, Iowa, 50309. Notices sent to the Grantee shall be sent to the Grantee's address as it appears in the Company's regular records. 59 7. Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Grantee. No waiver, modification or amendment of any of the terms of this Agreement shall be effective unless set forth in a written agreement signed by the Company and the Grantee. In Witness Whereof, the parties have executed this Agreement on the 8th day of February, 1994. BRENTON BANKS, INC. By_____________________________________ Its____________________________________ COMPANY _______________________________________ Phillip L. Risley GRANTEE 60 BRENTON BANKS, INC. Long-Term Stock Compensation Plan 1. Purpose. The Long-Term Stock Compensation Plan (the "Plan") is intended to advance the interests of Brenton Banks, Inc. (the "Company"), it shareholders, and its subsidiaries by providing financial incentives to key management personnel and by encouraging and enabling selected officers and other key employees upon whose judgment, initiative and effort the Company is largely dependent for the successful conduct of its business, to acquire and retain a proprietary interest in the Company by ownership of its stock. 2. Definitions. 2.1 "Board" means the Board of Directors of the Company. 2.2 "Stock" means the Company's $5.00 par value Common Stock or, in the event that the Company issues a different class of stock with the same or higher dividend and liquidation rights as the Company's $5.00 Common Stock but with lesser voting rights, such stock. 2.3 "Date of Grant" means the date on which the Board authorizes a grant under the Plan. 2.4 "Grant" means the right to acquire Common Stock and/or cash awarded under the Plan (including both Incentive Stock Grants and Restricted Stock Grants). 2.5 "Incentive Stock Grant" means a Grant of Stock pursuant to the provisions of Section 6.2. 2.6 "Restricted Stock Grant" means a Grant of Stock pursuant to the provisions of Section 6.1. 2.7 "Grantee" means a person to whom a Grant has been awarded under the Plan. 2.8 "Disability" or "Disabled" shall be as defined under the Company's disability plan, if any, or under the Social Security Rules. 2.9 "Subsidiary" or "Subsidiaries" means a subsidiary corporation or corporations of the Company as defined in Section 425 of the Internal Revenue Code. 2.10 "Successor" means the legal representative of the estate of a deceased Grantee or the person or persons who acquire the right to exercise a Grant by bequest or inheritance or otherwise by reason of the death or disability of any Grantee. 2.11 "Administrative Rules" means Rules adopted by a majority vote of the Board to interpret the provisions of the Plan or to impose other terms, conditions and restrictions on the Grant, issuance and transfer of Grants and Stock issued pursuant to the award of Grants. Administrative Rules shall, upon adoption, become part of this Plan as if originally stated herein. The Rules adopted by the Board shall be passed by resolution and kept at the Company's main office. 2.12 "Change in Control" shall mean a change in the ownership of 50% or more of the Company's par Value $5.00 Common Stock as certified by the Secretary of the Company. 2.13 "Performance Criteria" shall mean the criteria established by the Board pursuant to Section 6.2.3 of the Plan. 61 2.14 "Qualified Contingent Vesting Event" shall mean an event described in Sections 6.2.4.2, 6.2.4.3, and 6.2.4.4. 3. Administration of Plan. The Plan shall be administered by the Board. Grants to members of the Board may be granted only by a majority of the disinterested members of the Board. The Board shall have full and final authority in its discretion, subject to the provisions of the Plan, to determine the individuals to whom and the time or times at which Grants shall be made and the number of shares of Stock covered by each Grant; to determine the Performance Criteria with respect to Incentive Stock Grants; to construe and interpret the Plan; to determine the terms and provisions of the respective Grant agreements and to make all other determinations and take all other actions deemed necessary or advisable for the proper administration of the Plan. All such actions and determinations shall be conclusively binding for all purposes and upon all persons. 4. Stock Subject to Grant. The aggregate number of shares of the Company's Stock which may be issued upon the exercise of Grants made under the Plan shall not exceed 240,000, subject to adjustment under the provisions of Section 11. The shares of Stock to be granted may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan. In the event any Grant shall, for any reason, terminate or expire or be surrendered to the Company, the shares subject to such Grant shall again be available to be awarded under the Plan. 5. Participants. Grants may be awarded under the Plan to officers, directors and key employees of the Company or of any of its Subsidiaries. 6. Terms and Conditions of Grants. Any Grant under the Plan shall be evidenced by an agreement executed by the Company and the applicable Grantee and shall contain such terms and be in such form as the Board may from time to time approve, subject to the following limitations and conditions: 6.1 Restricted Stock Grants. 6.1.1 Authorized Shares. The aggregate number of shares that may be awarded to employees under the Plan pursuant to Restricted Stock Grants shall not exceed 84,000 shares of Stock. In the event any Restricted Stock Grant shall, for any reason, be forfeited, terminated, expire or be surrendered to the Company, the shares subject to such Restricted Stock Grant shall again be available to be awarded as a Restricted Stock Grant under the Plan. 6.1.2 Restricted Stock Grants. Restricted Stock may be awarded by the Board to participants of the Company chosen by the Board in its sole discretion. The amount of each award shall be subject to the terms and conditions set forth in an agreement between the Company and the Grantee containing the terms and conditions of the award, which shall be consistent with the provisions set forth in this Plan and the Administrative Rules adopted by the Board. All Restricted Stock Grants that do not vest pursuant to the provisions of Section 6.1.3 shall be forfeited. 6.1.3 Vesting of Restricted Stock Grants. Restricted Stock Grants shall vest with the Grantee following the Grantee's completion of three (3) successive calendar years of employment with the Company or any Subsidiary, with said years being specified by the Board. The Restricted Stock Grants awarded to Grantees shall be considered vested or forfeited on the January 1st following completion of the third successive calendar year of employment with the Company or any Subsidiary. 62 6.1.4 Notwithstanding the foregoing: 6.1.5 Termination of Employment. Upon termination of a Grantee's employment with the Company or with any of its Subsidiaries for reasons other than death, disability, retirement after age 65 or retirement before age 65 with Board approval, the Grantee's and the Company's rights, duties and obligations under the Restricted Stock Grant shall be terminated and the Restricted Stock Grants shall be forfeited. 6.1.6 Death or Disability of Grantee. If a Grantee to whom a Restricted Stock Grant shall have been awarded, shall die or become disabled while the Grantee is employed by the Company or one or more of its Subsidiaries, such Restricted Stock Grant shall thereupon be 100% vested. 6.1.7 Retirement of Grantee. In the event that a Grantee to whom a Restricted Stock Grant shall have been awarded shall retire upon or after the age of 65, any Restricted Stock Grant held by such retired Grantee shall thereupon be 100% vested. In the event Grantee retires prior to age 65, with the approval of the Board in its sole discretion, the Restricted Stock Grant will become (i) one-third (1/3) vested if the retirement occurs after the completion of the first calendar year specified by the Board but prior to the completion of the second calendar year specified by the Board and (ii) 100% vested if the retirement occurs after the completion of the second calendar year specified by the Board. If the Grantee retires prior to the age of 65 without the approval of the Board, the provisions of Section 6.1.4.1 shall control. 6.1.8 Change in Control of the Company. In the event of a Change in Control of the Company, the outstanding Restricted Stock Grants shall thereupon be 100% vested, and, to the extent permitted by law, the Grantees shall be permitted to participate in the sale or merger resulting in the Change in Control. 6.1.9 Incentive Stock Grants. 6.1.10 Authorized Shares. The aggregate number of shares that may be awarded to employees under the Plan pursuant to Incentive Stock Grants shall not exceed 156,000 shares of Stock. In the event any Incentive Stock Grant shall, for any reason, be forfeited, terminate or expire or be surrendered to the Company, the shares subject to such Incentive Stock Grant shall again be available to be awarded as a Incentive Stock Grant under the Plan. 6.1.11 Incentive Stock Grants. Incentive Stock Grants may be awarded by the Board to participants of the Company chosen by the Board in its sole discretion. The amount of each award shall be subject to the terms and conditions set forth in an agreement between the Company and the Grantee containing the terms and conditions of the award, which shall be consistent with the provisions set forth in this Plan and the Administrative Rules adopted by the Board. All Incentive Stock Grants that do not vest pursuant to the provisions of Section 6.2.3 shall be forfeited. 6.1.12 Vesting of Incentive Stock Grants. Incentive Stock Grants shall vest with the Grantee following: (a) the Grantee's completion of three (3) successive calendar years of employment, with said years specified by the Board; and (b) the Company achieving the Performance Criteria specified by the Board on the Grant Date. The number of shares vested pursuant to any Grant, if any, shall be determined pursuant to the Performance Criteria set by the Board. The Stock awarded pursuant to Incentive Stock Grant shall be considered vested or forfeited on the January 1st following completion of the third successive calendar year specified by the Board. 63 6.1.13 Performance Criteria. The Performance Criteria shall be set by the Board. The Performance Criteria shall be the same for each Grantee receiving a Grant on a particular Grant Date, provided that the Performance Criteria set with respect to a particular Grant Date may be different from Performance Criteria set for prior or subsequent Grant Dates. The Board shall determine the Performance Criteria prior to or during the first year of the performance period specified by the Board. 6.1.14 Performance in Excess of 100% of Incentive Stock Grant. The Board may establish Performance Criteria in amounts that exceed 100% of the Performance Stock Granted to the Grantees. In the event that the Performance Criteria set by the Board exceed 100% of the Stock to be awarded by a Grant, any and all amounts in excess of 100% shall be paid in cash to the Grantee based upon the Fair Market Value of the Stock on the date Incentive Stock Grant Vests. For the purposes hereof, "Fair Market Value" shall be as determined by the Board and such determination shall be binding upon the Company and upon the Grantee. The Board may make such determination: (i) in the case of Stock not then listed and traded upon a recognized securities exchange, upon the basis of the mean between the closing bid and asked quotations for such stock on the date the Incentive Stock Grants vest (as reported by the Wall Street Journal "NASDAQ Bid and Asked Quotations" National Market Listings or as reported by NASDAQ if not reported in the Wall Street Journal) or in the event that there shall be no bid or asked quotations on such date, then upon the basis of the bid and asked quotations nearest preceding such date, or (ii) in the case the Stock shall then be listed and traded upon a recognized securities exchange, upon the basis of the mean between the highest and lowest selling prices at which shares of Stock were traded on such recognized securities exchange on the date the Incentive Stock Grants vest, as reported in the Wall Street Journal or, if the Stock was not traded on said date, the date nearest preceding such date, and (iii) upon any other factors which the Board shall deem appropriate. 6.1.15 Notwithstanding the foregoing: 6.1.16 Termination of Employment. Upon termination of a Grantee's employment with the Company or with any of its Subsidiaries for reasons other than death, disability, retirement after age 65 or retirement before age 65 with Board approval, the Grantee's and the Company's rights, duties and obligations under the Incentive Stock Grant shall be terminated and the Incentive Stock Grant shall be forfeited. 6.1.17 Death or Disability of Grantee. If a Grantee to whom an Incentive Stock Grant shall have been awarded shall die or become disabled while he shall be employed by the Company or one or more of its Subsidiaries, such Incentive Stock Grant shall thereupon be vested in accordance with the provisions of Section 6.2.5 and said death or disability shall be deemed to be a Qualified Contingent Vesting Event. 6.1.18 Retirement of Grantee. In the event that a Grantee to whom an Incentive Stock Grant shall have been awarded shall retire upon or after the age of 65, such Incentive Stock Grant held by such retired Grantee shall thereupon be vested in accordance with the provisions of Section 6.2.5 and said retirement shall be deemed to be a Qualified Contingent Vesting Event. In the event Grantee retires prior to age 65, the Incentive Stock Grant may become vested in accordance with the provisions of Section 6.2.5 upon the approval of the Board in its sole discretion; and upon such approval by the Board said retirement shall be deemed to be a Qualified Contingent Vesting Event. If the Grantee retires prior to the age of 65 without the approval of the Board, the provisions of Section 6.2.4.1 shall control. 64 6.1.19 Change in Control of the Company. In the event of a Change in Control of the Company, such Incentive Stock Grants shall thereupon be vested in accordance with the provisions of Section 6.2.5, and said Change in Control shall be deemed to be a Qualified Contingent Vesting Event. Furthermore, to the extent permitted by law, the Grantees shall be permitted to participate in the sale or merger resulting in the Change in Control. 6.1.20 Contingent Vesting Rules. Pursuant to the provisions of Sections 6.2.4.2, 6.2.4.3, and 6.2.4.4 the Incentive Stock Grants shall vest upon the occurrence of a Qualified Contingent Vesting Event, in accordance with the terms set forth below. 6.1.21 If a Qualified Contingent Vesting Event occurs prior to the completion of the first year of the performance period specified by the Board, all of the Incentive Stock Grants shall be forfeited and none of the Incentive Stock Grants shall thereafter become vested in the Grantee. 6.1.22 If a Qualified Contingent Vesting Event occurs after the completion of the first year of the performance period specified by the Board but prior to the completion of the second year of the performance period specified by the Board, the Grantee shall be entitled to receive one-third (1/3) of the Incentive Stock Grant that would vest if the Performance Criteria was applied to the financial results of the Company for the first fiscal year of the performance period. All other Incentive Stock Grants not vested pursuant to the provisions of the preceding sentence shall be forfeited. 6.1.23 If a Qualified Contingent Vesting Event occurs after the completion of the second year of the performance period specified by the Board, but prior to the completion of the third year of the performance period specified by the Board, the Grantee shall be entitled to receive 100% of the Incentive Stock Grant that would vest if the Performance Criteria was applied to the financial results of the Company for the first and second fiscal years of the performance period. All other Incentive Stock Grants not vested pursuant to the provisions of the preceding sentence shall be forfeited. 7. Delivery of Stock. Stock and any cash payments (if applicable) to be delivered to a Grantee pursuant to the vesting of a Grant, shall be delivered to the Grantee within 90 days of the date the Grant vests. In the event that a Grantee is unable to accept the Stock due to death, disability or otherwise, the Stock and any cash payments (if applicable) shall be delivered to the Grantee's Successor. 8. Fractional Shares. No factional shares of Stock shall be issued to any participant pursuant to the terms of the Plan. The vesting of any Grant shall be rounded to the nearest whole share. In the event that 50% or more of a share shall vest pursuant to the terms of the Plan, the Participant shall be vested with the next whole share; to the extent that less than 50% of a share shall vest, the participant shall rounded down to the next whole share and the percentage of the share shall be disregarded. 9. Shareholder Rights. Neither a Grantee nor his Successor shall have any of the rights of a shareholder (including but not limited to voting or dividend rights) of the Company until the Grants have vested and the stock certificates evidencing the shares awarded by the Grants are properly delivered to such Grantee or his Successor; provided, however, that the Grantee shall be entitled to receive a cash payment (in the form of a bonus or death benefit) from the Company equal to the amount of any dividends which would have been payable on the Stock if the Stock had been issued to the Grantee on the date the Grant vested. 65 10. No Alteration of Employment Terms. The Grant to an eligible person does not alter in any way the Company's or the relevant Subsidiary's existing rights to terminate such person's employment at any time for any reason, nor does it confer upon such person any rights or privileges except as specifically provided for in the Plan. 11. Adjustments. In the event that the outstanding shares of Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Board in the number and kind of shares as to which Grants may be made under the Plan. In addition, there shall be appropriate adjustments made in the number and kind of shares of Stock as to which outstanding Grants shall be issued, to the end that the proportionate interest of the holder of the Grant shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Grants shall be made through a change in the total number or kind of shares awarded in the Grant. 12. Restrictions on Issuing Shares. The issuance of Stock pursuant to the vesting of a Grant shall be subject to the condition that, if at any time the Company shall determine in its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration, or qualification of any shares otherwise deliverable upon such exercise upon any securities exchange or under any state or federal law, or that the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, the delivery of the Stock pursuant thereto, then in any such event, such delivery shall be deferred until such time as such withholding, listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 13. Suspension and/or Termination of Plan. The Board may at any time suspend or terminate the Plan. Unless previously terminated by the Board, no further Grants shall be awarded under the Plan after December 31, 1995. No Grants may be awarded during any suspension or termination of the Plan. No suspension or termination of the Plan shall, without a Grantee's consent, alter or impair any of the rights or obligations under any Grant theretofore awarded to such Grantee under the Plan. 14. Nontransferability of Grants. No Grant awarded under the Plan shall be transferable otherwise than by bequest or by laws of descent and distribution, and during the lifetime of the Grant only the Grantee or Grantee's Successor may receive stock or cash from the Grant. 15. Effectiveness of the Plan. The Plan shall become effective only after the Board shall, by the affirmative vote of a majority of its members, have approved the Plan. 16. Time of Awarding Grants. Nothing contained in the Plan nor in any resolution adopted or to be adopted by the Board of Directors or the stockholders of the Company nor any action taken by the Board shall constitute a Grant. A Grant shall take place only when a written Agreement is duly executed by the Company and the Grantee to whom such Grant shall be awarded. 66 ADMINISTRATIVE RULES FOR BRENTON BANKS, INC. LONG-TERM STOCK COMPENSATION PLAN 1. Definitions. Those terms defined in the Plan shall have the same meaning when used in these Rules. 2. Withholding Taxes. Prior to issuing any Stock pursuant to the terms of a Grant, a Grantee shall be required to make adequate provisions for the withholding of any and all applicable State, Federal and local taxes (hereinafter "Withholding Taxes"). The manner in which Withholding Taxes shall be remitted to the appropriate taxing authorities shall be by a cash payment to the Company from the Grantee in an amount equal to the amount of Withholding Taxes that must be remitted to the respective taxing authorities unless the Grantee elects to pay the withholding taxes pursuant to an alternative method described in either Section 2.1 or 2.2 hereof. After the Grantee determines whether the alternative method will apply, the Board, in its sole discretion, shall determine which alternative method is applied to the particular Grantee. 2.1 Loan. The Grantee may obtain a loan from the Company or one of the Company's subsidiaries in an amount equal to the amount of Withholding Taxes that must be remitted to the respective taxing authorities. Any loan to a Grantee must be made with interest payable at prime and the loan being due and payable on December 31 of the year in which the withholding taxes are due and payable. All loans made to a Grantee must comply with all federal and applicable state banking laws. Nothing contained in this paragraph shall require any subsidiary of the Company to make a loan to a Grantee. 2.2 Exchange of Stock. The Grantee may exchange the right to receive a portion of the Stock issuable pursuant to a Grant for an amount of cash equal in value to the amount of Withholding Taxes that must be remitted to the respective taxing authorities based upon the Fair Market Value of the Stock at the time of withholding. 3. Performance Criteria. The performance criteria established by the Board shall have the following meanings and shall be interpreted in accordance with the following rules. 3.1 "Average Annual Earnings Per Share Growth (EPS)" shall be determined by dividing the sum of the "Annual Percentage Growth Rates in EPS" for each of the years contained in the performance period by the total number of years in the performance period. 3.2 "Annual Percentage Growth Rates in EPS" shall mean annual percentage growth in the Company's Earnings Per Share (for consolidated financial reporting purposes) after the effect of adjusting earnings for the financial statement expense of Grants under the Plan pursuant to Generally Accepted Accounting Principles. 3.3 "Earnings Per Share" shall be the primary earnings per share of the Company for consolidated financial reporting purposes. The following example shall illustrate the definitions set forth above: 67 During the years 1991, 1992, 1993 and 1994 the Company's Earnings Per Share are $1.80, $2.10, $2.31 and $2.60 respectively. After adjustment for the financial statement expense of Grants under the Plan, the Company's earnings per share are $1.80, $1.90, $2.20 and $2.40 for 1991, 1992, 1993 and 1994 respectively. The Annual Percentage Growth Rate in EPS for 1992 is computed by subtracting the 1991 adjusted earning per share ($1.80) from the adjusted 1992 earning per share ($1.90) and dividing that number by the 1991 adjusted earning per share ($1.80). Therefore, the Annual Percentage Growth Rate in EPS for 1992 is 5.55%. The Annual Percentage Growth Rate in EPS for 1993 and 1994 (computed in the same manner) is 15.78% and 9.09% respectively. The Average Annual Earning Per Share Growth for the years 1992, 1993 and 1994 is 10.13% ((5.55 + 15.78 + 9.09)/3). 4. Restricted Stock Grants - Vesting and Forfeiture Rules. The following examples are intended to act as an illustration of the Board's intentions with respect to Restrictive Stock Grant awards pursuant to the Plan. All of the examples set forth below are based upon the following facts: Employee X is granted a restricted stock Grant in 1992. The terms of the Grant entitle the employee to receive 100 shares of Stock if the X is employed with the Company or any Subsidiary on January 1, 1995. 4.1 Death or Disability. On June 15, 1992, Employee X becomes disabled or dies. Employee X becomes fully vested in the 100 shares of Stock. 4.2 Termination. On November 15, 1994, Employee X is terminated by the Company. Because Employee X is not employed by the Company on January 1, 1995 and has not been continuously employed by Company the for three consecutive years, none of the Restricted Stock Grants shall vest. 5. Incentive Stock Grants - Vesting and Forfeiture Rules. The following examples are intended to act as an illustration of the Board's intentions with respect to Incentive Stock Grants awarded pursuant to the Plan. All of the examples set forth below are based upon the following facts: Employee X is granted an Incentive Stock Grant in 1992. The terms of the Grant entitle the employee to receive up to 100 shares of Stock if (1) X is employed with the Company or any Subsidiary on January 1, 1995; and (2) the Company meets or exceeds certain Performance Criteria. The Performance Criteria adopted by the Board specify that if the Average Earnings Per Share Growth of the Company's Stock is below 7.50% - none of the Incentive Stock Grants will vest; if the Average Earnings Per Share Growth of the Company's Stock is from 7.50% to 8.74% - 50% of the Incentive Stock Grants will vest; if the Average Earnings Per Share Growth of the Company's Stock is from 8.75% to 9.99% - 75% of the Incentive Stock Grants will vest; if the Average Earnings Per Share Growth of the Company's Stock is from 10.00% to 11.99% - 100% of the Incentive Stock Grants will vest. The Company's Earnings Per Share Growth for the years 1992, 1993 and 1994 are 10.00%, 9.25% and 7.25% respectively. 5.1 Achievement of Company performance goals. Employee X continues to work for the Company through January 1, 1995. The Average Earnings Per Share is 8.83% ((10% + 9.25% + 7.25%)/3). Therefore, in January of 1995, Employee X will have 75% of the Stock granted pursuant to the Incentive Stock Grant vested. The number of shares that will be delivered to Employee X is determined by multiplying the percentage of vested Incentive Stock Grants by the total number of shares Granted in the Incentive Stock Grant (75% X 100 shares = 75 shares). 68 5.2 Qualified Contingent Vesting Event - Year Two of the Performance Period. Employee X continues to be employed by the Company through June 1, 1993, at which time a Qualified Contingent Vesting Event occurs. On June 1, 1993, the Company would apply the performance criteria to the financial results of the Company for the first fiscal year - 1992. The Average Earning Per Share as of December 31, 1992 would be 10% (10%/1). A 10% Average Earnings Per Share will result in 100% of the Incentive Stock Grant vesting. However, pursuant to Section 6.2.5.2. of the Plan, only one-third (1/3) of the Incentive Stock Grants will vest if the Qualified Contingent Vesting Event occurs during the second year of performance period. Therefore, the number of shares that will be delivered to Employee X is determined by multiplying the percentage of vested Incentive Stock Grants pursuant to measurement via Performance Criteria by the total number of shares Granted in the Incentive Stock Grant and by one-third (100% X 100 shares X 1/3 = 33 shares). 5.3 Qualified Contingent Vesting Event - Year Three of the Performance Period. Employee X continues to be employed by the Company through June 1, 1994, at which time a Qualified Contingent Vesting Event occurs. On June 1, 1994, the Company would apply the performance criteria to the financial results of the Company for the first and second fiscal years - 1992 and 1993. The Average Earning Per Share would be 9.625% ((10% + 9.25%)/2). A 9.625% Average Earnings Per Share will result in 75% of the Incentive Stock Grant vesting. Pursuant to Section 6.2.5.3. of the Plan, 100% of the Incentive Stock Grants will vest if the Qualified Contingent Vesting Event occurs during the third year of the performance period. Therefore, the number of shares that will be delivered to Employee X is determined by multiplying the percentage of vested Incentive Stock Grants pursuant to measurement via Performance Criteria by the total number of shares Granted in the Incentive Stock Grant (75% X 100 shares = 75 shares). 69 RESOLUTIONS ADOPTED BY THE BRENTON BANKS, INC. BOARD OF DIRECTORS At a regular meeting of the Board of Directors of the Company the following resolutions were unanimously adopted by the Board of Directors. Resolved, that pursuant to the provisions of the Company's Long-Term Stock Compensation Plan, the Board approves the awarding of Grants to the employees of the Company upon the terms and conditions set forth below. 1. That Restricted Stock Grants are to be awarded to those employees listed on Exhibit A attached hereto, in the amounts set forth in the column titled "Restricted Shares". The Restricted Stock Grants shall be subject to the terms and conditions set forth in the Plan. The Board further specifies that the three successive calendar years of employment, the completion of which the Restricted Stock Grants are conditioned upon, are 1994, 1995 and 1996. All Grants shall vest or be forfeited, pursuant to the provisions of the Plan, on or before January 1, 1997. 2. That Incentive Stock Grants are to be awarded to those employees listed on Exhibit A attached hereto, in the amounts set forth in the column titled "Performance Shares". The Incentive Stock Grants shall be subject to the terms and conditions set forth in the Plan, Administrative Rules and those set forth below. a. The Board hereby specifies that the three successive calendar years of employment (the "Performance Period"), the completion of which the Incentive Stock Grants are conditioned upon, are 1994, 1995 and 1996. All Incentive Stock Grants shall vest or be forfeited, pursuant to the provisions of the Plan, on or before March 15, 1997. b. The Board further specifies that the Performance Criteria that the Company must achieve prior to the vesting of any of the Incentive Stock Grants shall be as set forth on Exhibit B attached hereto. To the extent that a Grant fails to vest, the shares shall be deemed to be forfeited pursuant to the terms of the Plan. Those terms defined in the Company's Long Term Stock Compensation Plan or Rules adopted thereunder by the Board shall have the same meaning when used in this Resolution. 71 EXHIBIT B Average Annual Earnings Per Share Growth over the Tiered Achievement Three Year Performance Period Scale Less than 7.5% . . . . . . . . . . . . . 0% vested 7.50% to 8.74% . . . . . . . . . . .. . 50% vested 8.75% to 9.99% . . . . . . . . . .. . . 75% vested 10.00% to 11.99% . . . . . . . .. . . . 100% vested 12.00% to 13.99% . . . . . . . . . . . 115% vested 14.00% to 15.99% . . . . . . . . . . . 130% vested Greater than 16.00% . . . .. . . . . . 150% vested 71 EX-10.8 10 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. 72 EX-10.9 11 Exhibit 10.9 Standard Agreement for Advances, Pledge and Security Agreement between Brenton Bank and the Federal Home Loan Bank of Des Moines. This Standard Agreement for Advances, Pledge and Security Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 73 EX-10.10 12 Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1999, setting forth the terms of the Parent Company's $5,000,000 short-term debt agreement. 74 American National Bank And Trust Company of Chicago PROMISSORY NOTE (UNSECURED) $5,000,000.00 Chicago, Illinois April 30, 1999 Due April 30, 2000 FOR VALUE RECEIVED, the undersigned (jointly and severally if more than one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in Chicago, Illinois or such other place as Bank may designate from time to time hereafter, the principal sum of FIVE MILLION AND 00/100 DOLLARS, or such lesser principal sum as may then be owed by Borrower to Bank hereunder. Borrower's obligations and liabilities to Bank under this Note ("Borrower's Liabilities") shall be due and payable on April 30, 2000. This Note restates and replaces a Promissory Note (Unsecured) in the principal amount of $5,000,000.00, dated April 30, 1998 executed by Borrower in favor of Bank (the "Prior Note") and is not a repayment or novation of the Prior Note. The unpaid principal balance of Borrower's Liabilities due hereunder shall bear interest from the date of disbursement until paid, computed at a daily rate equal to the daily rate equivalent of 1.00% per annum (computed on the basis of a 360-day year and actual days elapsed) minus the rate of interest announced or published publicly from time to time by Bank as its prime or base rate of interest (the "Base Rate"); provided, however, that in the event that any of Borrower's Liabilities are not paid when due, the unpaid amount of Borrower's Liabilities shall bear interest after the due date until paid at a rate equal to the stun of the rate that would otherwise be in effect plus 3%. The rate of interest to be charged by Bank to Borrower shall fluctuate hereafter from time to time concurrently with, and in an amount equal to, each increase or decrease in the Base Rate, whichever is applicable. Accrued interest shall be payable by Borrower to Bank on the same day of each month, and at maturity, commencing with the last day of May, 1999 or as billed by Bank to Borrower, at Bank's principal place of business, or at such other place as Bank may designate from time to time hereafter. After maturity, accrued interest on all of Borrower's Liabilities shall be payable on demand. Borrower warrants and represents to Bank that Borrower shall use the proceeds represented by this Note solely for proper business purposes and consistently with all applicable laws and statutes. Any deposits or other sums at any time credited by or payable or due from Bank to Borrower, or any monies, cash, cash equivalents, securities, instruments, documents or other assets of Borrower in the possession or control of Bank or its bailee for any purpose, may be reduced to cash and applied by Bank to or setoff by Bank against Borrower's Liabilities. The occurrence of any one of the following events shall constitute a default by the Borrower ("Event of Default") under this Note: (a) if Borrower fails to pay any of Borrower's Liabilities when due and payable or declared due and payable (whether by scheduled maturity, required payment, acceleration, demand or otherwise); (b) if Borrower or any guarantor of any of Borrower's Liabilities fails or neglects to perform, keep or observe any term, provision, condition, covenant, warranty or representation contained in this Note; (c) occurrence of a default or an event of default under any agreement, instrument or document heretofore, now or at any time hereafter delivered by or on behalf of Borrower to Bank; (d) occurrence of a default or an event of default under any agreement, instrument or document heretofore, now or at any time hereafter delivered to Bank by any guarantor of Borrower's Liabilities or by any person or entity which has granted to Bank a security interest or lien in and to some or all such person's or entity's real or personal property to secure the payment of Borrower's Liabilities; (e) if any of Borrower's assets are attached, seized, subjected to a writ, or are levied upon or become subject to any lien or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors; (f) if a notice of lien, levy or assessment is filed of record or given to Borrower with respect to all or any of Borrower's assets by any federal, state or local department or agency; (g) if Borrower or any guarantor of Borrower's Liabilities becomes insolvent or generally fails to pay or admits in writing its inability to pay debts as they become due, if a petition under Title 11 of the United States Code or any similar law or regulation is filed by or against Borrower or any such guarantor, if Borrower or any such guarantor shall make an assignment for the benefit of creditors, if any case or proceeding is filed by or against Borrower or any such guarantor 75 for its dissolution or liquidation, or if Borrower or any such guarantor is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs; (h) the death or incompetency of Borrower or any guarantor of Borrower's Liabilities, or the appointment of a conservator for all or any portion of Borrower's assets; (i) the revocation, termination or cancellation of any guaranty of Borrower's Liabilities without written consent of Bank; (j) if a contribution failure occurs with respect to any pension plan maintained by Borrower or any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses (as described in Sections 414(b) and (c) of the Internal Revenue Code of 1986 or Section 4001 of the Employee Retirement Income Security Act of 1974, as amended, "ERISA") sufficient to give rise to a lien under Section 302(f) of ERISA; (k) if Borrower or any guarantor of Borrower's Liabilities is in default in the payment of any obligations, indebtedness or other liabilities to any third party and such default is declared and is not cured within the time, if any, specified therefor in any agreement governing the same; (l) if any material statement, report or certificate made or delivered by Borrower, any of Borrower's partners, officers, employees or agents or any guarantor of Borrower's Liabilities is not true and correct; or (m) if Bank is reasonably insecure. Upon the occurrence of an Event of Default, at Bank's option, without notice by Bank to or demand by Bank of Borrower, all of Borrower's Liabilities shall be immediately due and payable. All of Bank's rights and remedies under this Note are cumulative and non-exclusive. The acceptance by Bank of any partial payment made hereunder after the time when any of Borrower's Liabilities become due and payable will not establish a custom or waive any rights of Bank to enforce prompt payment hereof. Bank's failure to require strict performance by Borrower of any provision of this Note shall not waive, affect or diminish any right of Bank thereafter to demand strict compliance and performance therewith. Any waiver of an Event of Default hereunder shall not suspend, waive or affect any other Event of Default hereunder. Borrower and every endorser waive presentment, demand and protest and notice of presentment, protest, default, non- payment, maturity, release, compromise, settlement, extension or renewal of this Note, and hereby ratify and confirm whatever Bank may do in this regard. Borrower further waives any and all notice or demand to which Borrower might be entitled with respect to this Note by virtue of any applicable statute or law (to the extent permitted by law). Borrower agrees to pay, immediately upon demand by Bank, any and all costs, fees and expenses (including reasonable attorneys' fees, costs and expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and (ii) in representing Bank in any litigation, contest, suit or dispute, or to commence, defend or intervene or to take any action with respect to any litigation, contest, suit or dispute (whether instituted by Bank, Borrower or any other person) in any way relating to this Note or Borrower's Liabilities, and to the extent not paid the same shall become part of Borrower's Liabilities. This Note shall be deemed to have been submitted by Borrower to Bank and to have been made at Bank's principal place of business. This Note shall be governed and controlled by the internal laws of the State of Illinois and not the law of conflicts. Advances under this Note may be made by Bank upon oral or written request of any person authorized to make such requests on behalf of Borrower ("Authorized Person"). Borrower agrees that Bank may act on requests which Bank in good faith believes to be made by an Authorized Person, regardless of whether such requests are in fact made by an Authorized Person. Any such advance shall be conclusively presumed to have been made by Bank to or for the benefit of Borrower. Borrower does hereby irrevocably confirm, ratify and approve all such advances by Bank and agrees to indemnify Bank against any and all losses and expenses (including reasonable attorneys' fees) and shall hold Bank harmless with respect thereto. TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR 76 AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 400 Locust BRENTON BANKS, INC. Des Moines, Iowa 50304 an Iowa corporation By: /s/ Steven T. Schuler FEIN: 42-0658989 Steven T. Schuler, CFO/Treasurer/Secretary 77 EX-10.11 13 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. 78 EX-10.12 14 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. 79 EX-10.13 15 Exhibit 10.13 Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing Plan, effective January 1, 1999. 80 ADOPTION AGREEMENT #003 NONSTANDARDIZED CODE SECTION 401(k) PROFIT SHARING PLAN The undersigned, BRENTON BANKS, INC. ("Employer"), by executing this Adoption Agreement, elects to become a participating Employer in the BRENTON BANK Defined Contribution Master Plan (basic plan document #01) by adopting the accompanying Plan and Trust in full as if the Employer were a signatory to that Agreement. The Employer makes the following elections granted under the provisions of the Master Plan. ARTICLE I DEFINITIONS 1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose (a) or (b)) [ ] (a) A discretionary Trustee. See Section 10.03[A] of the Plan. [ X ] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan. [Note: The Employer may not elect Option (b) if a Custodian executes the Adoption Agreement.] 1.03 PLAN. The name of the Plan as adopted by the Employer is BRENTON BANKS, INC. EMPLOYEES' RETIREMENT PLAN. 1.07 EMPLOYEE. The following Employees are not eligible to participate in the Plan: (Choose (a) or at least one of (b) through (g)) [ X ] (a) No exclusions. [ ] (b) Collective bargaining employees (as defined in Section 1.07 of the Plan). [Note: If the Employer excludes union employees from the Plan, the Employer must be able to provide evidence that retirement benefits were the subject of good faith bargaining.] [ ] (c) Nonresident aliens who do not receive any earned income (as defined in Code Section 911(d)(2)) from the Employer which constitutes United States source income (as defined in Code Section 861(a)(3)). [ ] (d) Commission Salesmen. [ ] (e) Any Employee compensated on a salaried basis. [ ] (f) Any Employee compensated on an hourly basis. [ ] (g) (Specify) _________________________. Leased Employees. Any Leased Employee treated as an Employee under Section 1.31 of the Plan, is: (Choose (h) or (i)) [ X ] (h) Not eligible to participate in the Plan. [ ] (i) Eligible to participate in the Plan, unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07. 81 Related Employers. If any member of the Employer's related group (as defined in Section 1.30 of the Plan) executes a Participation Agreement to this Adoption Agreement, such member's Employees are eligible to participate in this Plan, unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07. In addition: (Choose (j) or (k)) [ X ] (j) No other related group member's Employees are eligible to participate in the Plan. [ ] (k) The following nonparticipating related group member's Employees are eligible to participate in the Plan unless excluded by reason of an exclusion classification elected under this Adoption Agreement Section 1.07: __________________. 1.12 COMPENSATION. Treatment of elective contributions. (Choose (a) or (b)) [ X ] (a) "Compensation" includes elective contributions made by the Employer on the Employee's behalf. [ ] (b) "Compensation" does not include elective contributions. Modifications to Compensation definition. (Choose (c) or at least one of (d) through (j)) [ ] (c) No modifications other than as elected under Options (a) or (b). [ ] (d) The Plan excludes Compensation in excess of $_____________. [ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation means any earnings reportable as W-2 wages for Federal income tax withholding purposes, subject to any other election under this Adoption Agreement Section 1.12. [ ] (f) The Plan excludes bonuses. [ ] (g) The Plan excludes overtime. [ ] (h) The Plan excludes Commissions. [ ] (i) Compensation will not include Compensation from a related employer (as defined in Section 1.30 of the Plan) that has not executed a Participation Agreement in this Plan unless, pursuant to Adoption Agreement Section 1.07, the Employees of that related employer are eligible to participate in this Plan. [ X ] (j) (Specify) The term "Compensation" shall mean all wages, salaries, and other payments for personal services actually rendered in the course of employment with the Employer, including bonuses, commissions, overtime pay, incentive pay, benefit payments under the Company's short-term disability plan and salary reduction contributions voluntarily authorized as contributions to this Plan, Brenton Banks, Inc. Executive Savings Plan, or to the Employer's Cafeteria Plan by eligible employees. This definition of compensation does not include: stock options, club dues, automobile, educational assistance, moving expenses, split dollar life insurance, severance pay, or benefits under the Employer's employee stock purchase program, long term stock compensation program, group term life insurance plan, employee P.C. purchase plan, or other similar fringe benefits. For any self employed individual, "Compensation" shall mean Earned Income. 82 If, for any Plan Year, the Plan uses permitted disparity in the contribution or allocation formula elected under Article III, any election of Options (f), (g), (h) or (j) is ineffective for such Plan Year with respect to any Nonhighly Compensated Employee. Special definition for matching contributions. "Compensation" for purposes of any matching contribution formula under Article III means: (Choose (k) or (l) only if applicable) [ x ] (k) Compensation as defined in this Adoption Agreement Section 1.12. [ ] (l) (Specify)______________________________. Special definition for salary reduction contributions. An Employee's salary reduction agreement applies to his Compensation determined prior to the reduction authorized by that salary reduction agreement, with the following exceptions: (Choose (m) or at least one of (n) or (o), if applicable) [ X ] (m) No exceptions. [ ] (n) If the Employee makes elective contributions to another plan maintained by the Employer, the Advisory Committee will determine the amount of the Employee's salary reduction contribution for the withholding period: (Choose (1) or (2)) [ ] (1) After the reduction for such period of elective contributions to the other plan(s). [ ] (2) Prior to the reduction for such period of elective contributions to the other plan(s). [ ] (o) (Specify)_____________________________. 1.17 PLAN YEAR/LIMITATION YEAR. Plan Year. Plan Year means: (Choose (a) or (b)) [ X ] (a) The 12 consecutive month period ending every 12/31. [ ] (b) (Specify)__________________________. Limitation Year. The Limitation Year is: (Choose (c) or (d)) [ x ] (c) The Plan Year. [ ] (d) The 12 consecutive month period ending every _____. 1.18 EFFECTIVE DATE. New Plan. The "Effective Date" of the Plan is _____. Restated Plan. The restated Effective Date is January 1, 1999. This Plan is a substitution and amendment of an existing retirement plan(s) originally established December 22, 1986. [Note: See the Effective Date Addendum.] 83 1.27 HOUR OF SERVICE. The crediting method for Hours of Service is: (Choose (a) or (b)) [ x ] (a) The actual method. [ ] (b) The ____________ equivalency method, except: [ ] (1) No exceptions. [ ] (2) The actual method applies for purposes of: (Choose at least one) [ ] (i) Participation under Article II. [ ] (ii) Vesting under Article V. [ ] (iii) Accrual of benefits under Section 3.06. [Note: On the blank line, insert "daily," "weekly," "semi-monthly payroll periods" or "monthly."] 1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor service the Plan must credit by reason of Section 1.29 of the Plan, the Plan credits Service with the following predecessor employer(s): Ames Savings Bank, FSB and ALLTEL Information Services, Inc., US Bank, N.A., 106 E. Main, Knoxville, Iowa, and US Bank, N.A., 712 Washington Street, Pella, Iowa. Service with the designated predecessor employer(s) applies: (Choose at least one of (a) or (b); (c) is available only in addition to (a) or (b)) [ x ] (a) For purposes of participation under Article II. [ x ] (b) For purposes of vesting under Article V. [ ] (c) Except the following Service: ________________________. [Note: If the Plan does not credit any predecessor service under this provision, insert "N/A" in the first blank line. The Employer may attach a schedule to this Adoption Agreement, in the same format as this Section 1.29, designating additional predecessor employers and the applicable service crediting elections.] 1.31 LEASED EMPLOYEES. If a Leased Employee is a Participant in the Plan and also participates in a plan maintained by the leasing organization: (Choose (a) or (b)) [ X ] (a) The Advisory Committee will determine the Leased Employee's allocation of Employer contributions under Article III without taking into account the Leased Employee's allocation, if any, under the leasing organization's plan. [ ] (b) The Advisory Committee will reduce a Leased Employee's allocation of Employer nonelective contributions (other than designated qualified nonelective contributions) under this Plan by the Leased Employee's allocation under the leasing organization's plan, but only to the extent that allocation is attributable to the Leased Employee's service provided to the Employer. The leasing organization's plan: [ ] (1) Must be a money purchase plan which would satisfy the definition under Section 1.31 of a safe harbor plan, irrespective of whether the safe harbor exception applies. 84 [ ] (2) Must satisfy the features and, if a defined benefit plan, the method of reduction described in an addendum to this Adoption Agreement, numbered 1.31. ARTICLE II EMPLOYEE PARTICIPANTS 2.01 ELIGIBILITY. Eligibility conditions. To become a Participant in the Plan, an Employee must satisfy the following eligibility conditions: (Choose (a) or (b) or both; (c) is optional as an additional election) [ X ] (a) Attainment of age 21 (specify age, not exceeding 21). [ X ] (b) Service requirement. (Choose one of (1) through (3)) [ ] (1) One Year of Service. [ ] (2) Months (not exceeding 12) following the Employee's Employment Commencement Date. [ X ] (3) One Hour of Service. [ X ] (c) Special requirements for non-401(k) portion of plan. (Make elections under (1) and under (2)) (1) The requirements of this Option (c) apply to participation in: (Choose at least one of (i) through (iii)) [ X ] (i) The allocation of Employer nonelective contributions and Participant forfeitures. [ X ] (ii) The allocation of Employer matching contributions (including forfeitures allocated as matching contributions). [ X ] (iii) The allocation of Employer qualified nonelective contributions. (2) For participation in the allocations described in (1), the eligibility conditions are: (Choose at least one of (i) through (iv)) [ X ] (i) 1 (one or two) Year(s) of Service, without an intervening Break in Service (as described in Section 2.03(A) of the Plan) if the requirement is two Years of Service. [ ] (ii) ____ months (not exceeding 24) following the Employee's Employment Commencement Date. [ ] (iii) One Hour of Service. [ X ] (iv) Attainment of age 21 (Specify age, not exceeding 21). 85 Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose (d), (e) or (f)) [ ] (d) Semi-annual Entry Dates. The first day of the Plan Year and the first day of the seventh month of the Plan Year. [ ] (e) The first day of the Plan Year. [ X ] (f) (Specify entry dates) For (k) portion of plan - first day of the month following 30th calendar day of employment; For non- 401(k) portion of plan - the first day of the Plan Year and the first day of the seventh month of the Plan Year. Time of Participation. An Employee will become a Participant (and, if applicable, will participate in the allocations described in Option (c)(1)), unless excluded under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on that date): (Choose (g), (h) or (i)) [ X ] (g) immediately following [ ] (h) immediately preceding [ ] (i) nearest the date the Employee completes the eligibility conditions described in Options (a) and (b) (or in Option (c)(2) if applicable) of this Adoption Agreement Section 2.01. [Note: The Employer must coordinate the selection of (g), (h) or (i) with the "Plan Entry Date" selection in (d), (e) or (f). Unless otherwise excluded under Section 1.07, the Employee must become a Participant by the earlier of: (1) the first day of the Plan Year beginning after the date the Employee completes the age and service requirements of Code Section 410(a); or (2) 6 months after the date the Employee completes those requirements.] Dual eligibility. The eligibility conditions of this Section 2.01 apply to: (Choose (j) or (k)) [ X ] (j) All Employees of the Employer, except: (Choose (1) or (2)) [ X ] (1) No exceptions. [ ] (2) Employees who are Participants in the Plan as of the Effective Date. [ ] (k) Solely to an Employee employed by the Employer after _______. If the Employee was employed by the Employer on or before the specified date, the Employee will become a Participant: (Choose (1), (2) or (3)) [ ] (1) On the latest of the Effective Date, his Employment Commencement Date or the date he attains age ____ (not to exceed 21). [ ] (2) Under the eligibility conditions in effect under the Plan prior to the restated Effective Date. If the restated Plan required more than one Year of Service to participate, the eligibility condition under this Option (2) for participation in the Code Section 401(k) arrangement under this Plan is one Year of Service for Plan Years beginning after December 31, 1988. [For restated plans only] [ ] (3) (Specify) __________________. 86 2.02 YEAR OF SERVICE - PARTICIPATION. Hours of Service. An Employee must complete: (Choose (a) or (b)) [ X ] (a) 1,000 Hours of Service [ ] (b) _____ Hours of Service during an eligibility computation period to receive credit for a Year of Service. [Note: The Hours of Service requirement may not exceed 1,000.] Eligibility computation period. After the initial eligibility computation period described in Section 2.02 of the Plan, the Plan measures the eligibility computation period as: (Choose (c) or (d)) [ ] (c) The 12 consecutive month period beginning with each anniversary of an Employee's Employment Commencement Date. [ x ] (d) The Plan Year, beginning with the Plan Year which includes the first anniversary of the Employee's Employment Commencement Date. 2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described in Section 2.03(B) of the Plan: (Choose (a) or (b)) [ x ] (a) Does not apply to the Employer's Plan. [ ] (b) Applies to the Employer's Plan. 2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b)) [ x ] (a) Does not permit an eligible Employee or a Participant to elect not to participate. [ ] (b) Does permit an eligible Employee or a Participant to elect not to participate in accordance with Section 2.06 and with the following rules: (Complete (1), (2), (3) and (4)) (1) An election is effective for a Plan Year if filed no later than ______. (2) An election not to participate must be effective for at least ____ Plan Year(s). (3) Following a re-election to participate, the Employee or Participant: [ ] (i) May not again elect not to participate for any subsequent Plan Year. [ ] (ii) May again elect not to participate, but not earlier than the _____ Plan Year following the Plan Year in which the re-election first was effective. (4) (Specify)_________________. [Insert "N/A" if no other rules apply]. 87 ARTICLE III EMPLOYER CONTRIBUTIONS AND FORFEITURES 3.01 AMOUNT. Part I. [Options (a) through (g)] Amount of Employer's contribution. The Employer's annual contribution to the Trust will equal the total amount of deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions, as determined under this Section 3.01. (Choose any combination of (a), (b), (c) and (d), or choose (e)) [ x ] (a) Deferral contributions (Code Section 401(k) arrangement). (Choose (1) or (2) or both) [ x ] (1) Salary reduction arrangement. The Employer must contribute the amount by which the Participants have reduced their Compensation for the Plan Year, pursuant to their salary reduction agreements on file with the Advisory Committee. A reference in the Plan to salary reduction contributions is a reference to these amounts. [ ] (2) Cash or deferred arrangement. The Employer will contribute on behalf of each Participant the portion of the Participant's proportionate share of the cash or deferred contribution which he has not elected to receive in cash. See Section 14.02 of the Plan. The Employer's cash or deferred contribution is the amount the Employer may from time to time deem advisable which the Employer designates as a cash or deferred contribution prior to making that contribution to the Trust. [ x ] (b) Matching contributions. The Employer will make matching contributions in accordance with the formula(s) elected in Part II of this Adoption Agreement Section 3.01. [ x ] (c) Designated qualified nonelective contributions. The Employer, in its sole discretion, may contribute an amount which it designates as a qualified nonelective contribution. [ x ] (d) Nonelective contributions. (Choose any combination of (1) through (4)) [ x ] (1) Discretionary contribution. The amount (or additional amount) the Employer may from time to time deem advisable. [ ] (2) The amount (or additional amount) the Employer may from time to time deem advisable, separately determined for each of the following classifications of Participants: (Choose (i) or (ii)) [ ] (i) Nonhighly Compensated Employees and Highly Compensated Employees. [ ] (ii) (Specify classifications) ___________. Under this Option (2), the Advisory Committee will allocate the amount contributed for each Participant classification in accordance with Part II of Adoption Agreement Section 3.04, as if the Participants in that classification were the only Participants in the Plan. [ x ] (3) 4.5% of the Compensation of all Participants under the Plan, determined for the Employer's taxable year for which it makes the contribution. [Note: The percentage selected may not exceed 15%.] 88 [ ] (4) _____% of Net Profits but not more than $_______. [ ] (e) Frozen Plan. This Plan is a frozen Plan effective _____. The Employer will not contribute to the Plan with respect to any period following the stated date. Net Profits. The Employer: (Choose (f) or (g)) [ x ] (f) Need not have Net Profits to make its annual contribution under this Plan. [ ] (g) Must have current or accumulated Net Profits exceeding $_____ to make the following contributions: (Choose at least one) [ ] (1) Cash or deferred contributions described in Option (a)(2). [ ] (2) Matching contributions described in Option (b), except: _____. [ ] (3) Qualified nonelective contributions described in Option (c). [ ] (4) Nonelective contributions described in Option (d). The term "Net Profits" means the Employer's net income or profits for any taxable year determined by the Employer upon the basis of its books of account in accordance with generally accepted accounting practices consistently applied without any deductions for Federal and state taxes upon income or for contributions made by the Employer under this Plan or under any other employee benefit plan the Employer maintains. The term "Net Profits" specifically excludes ___________________. [Note: Enter "N/A" if no exclusions apply.] If the Employer requires Net Profits for matching contributions and the Employer does not have sufficient Net Profits under Option (g), it will reduce the matching contribution under a fixed formula on a prorata basis for all Participants. A Participant's share of the reduced contribution will bear the same ratio as the matching contribution the Participant would have received if Net Profits were sufficient bears to the total matching contribution all Participants would have received if Net Profits were sufficient. If more than one member of a related group (as defined in Section 1.30) execute this Adoption Agreement, each participating member will determine Net Profits separately but will not apply this reduction unless, after combining the separately determined Net Profits, the aggregate Net Profits are insufficient to satisfy the matching contribution liability. "Net Profits" includes both current and accumulated Net Profits. Part II. [Options (h) through (j)] Matching contribution formula. [Note: If the Employer elected Option (b), complete Options (h), (i) and (j).] [ x ] (h) Amount of matching contributions. For each Plan Year, the Employer's matching contribution is: (Choose any combination of (1), (2), (3), (4) and (5)) [ ] (1) An amount equal to _____% of each Participant's eligible contributions for the Plan Year. [ x ] (2) An amount equal to 100% of each Participant's first tier of eligible contributions for the Plan Year, plus the following matching percentage(s) for the following subsequent tiers of eligible contributions for the Plan 50% for the second tier. 89 [ ] (3) Discretionary formula. [ ] (i) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of the Participant's eligible contributions for the Plan Year. [ ] (ii) An amount (or additional amount) equal to a matching percentage the Employer from time to time may deem advisable of each tier of the Participant's eligible contributions for the Plan Year. [ ] (4) An amount equal to the following percentage of each Participant's eligible contributions for the Plan Year, based on the Participant's Years of Service: Number of Years of Service Matching Percentage _____ _____% _____ _____% _____ _____% _____ _____% The Advisory Committee will apply this formula by determining Years of Service as follows: ____________________. [ ] (5) A Participant's matching contributions may not: (Choose (i) or (ii)) [ ] (i) Exceed ___________________. [ ] (ii) Be less than _____________. Related Employers. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the related employers may elect different matching contribution formulas by attaching to the Adoption Agreement a separately completed copy of this Part II. Note: Separate matching contribution formulas create separate current benefit structures that must satisfy the minimum participation test of Code Section 401(a)(26).] [ x ] (i) Definition of eligible contributions. Subject to the requirements of Option (j), the term "eligible contributions" means: (Choose any combination of (1) through (3)) [ x ] (1) Salary reduction contributions. [ ] (2) Cash or deferred contributions (including any part of the Participant's proportionate share of the cash or deferred contribution which the Employer defers without the Participant's election). [ ] (3) Participant mandatory contributions, as designated in Adoption Agreement Section 4.01. See Section 14.04 of the Plan. 90 [ x ] (j) Amount of eligible contributions taken into account. When determining a Participant's eligible contributions taken into account under the matching contributions formula(s), the following rules apply: (Choose any combination of (1) through (4)) [ ] (1) The Advisory Committee will take into account all eligible contributions credited for the Plan Year. [ ] (2) The Advisory Committee will disregard eligible contributions exceeding ____________. [ x ] (3) The Advisory Committee will treat as the first tier of eligible contributions, an amount not exceeding: 3%. The subsequent tiers of eligible contributions are: 1%. [ ] (4) (Specify) __________. Part III. [Options (k) and (l)]. Special rules for Code Section 401(k) Arrangement. (Choose (k) or (l), or both, as applicable) [ x ] (k) Salary Reduction Agreements. The following rules and restrictions apply to an Employee's salary reduction agreement: (Make a selection under (1), (2), (3) and (4)) (1) Limitation on amount. The Employee's salary reduction contributions: (Choose (i) or at least one of (ii) or (iii)) [ ] (i) No maximum limitation other than as provided in the Plan. [ x ] (ii) May not exceed 20% of Compensation for the Plan Year, subject to the annual additions limitation described in Part 2 of Article III and the 402(g) limitation described in Section 14.07 of the Plan. [ ] (iii) Based on percentages of Compensation must equal at least _____. (2) An Employee may revoke, on a prospective basis, a salary reduction agreement: (Choose (i), (ii), (iii) or (iv)) [ ] (i) Once during any Plan Year but not later than _____ of the Plan Year. [ ] (ii) As of any Plan Entry Date. [ x ] (iii) As of the first day of any month. [ ] (iv) (Specify, but must be at least once per Plan Year) _____. 91 (3) An Employee who revokes his salary reduction agreement may file a new salary reduction agreement with an effective date: (Choose (i), (ii), (iii) or (iv)) [ ] (i) No earlier than the first day of the next Plan Year. [ x ] (ii) As of any subsequent Plan Entry Date. [ ] (iii) As of the first day of any month subsequent to the month in which he revoked an Agreement. [ ] (iv) (Specify, but must be at least once per Plan Year following the Plan Year of revocation) as of the first day of any calendar quarter. (4) A Participant may increase or may decrease, on a prospective basis, his salary reduction percentage or dollar amount: (Choose (i), (ii), (iii) or (iv)) [ ] (i) As of the beginning of each payroll period. [ ] (ii) As of the first day of each month. [ x ] (iii) As of any Plan Entry Date. [ ] (iv) (Specify, but must permit an increase or a decrease at least once per Plan Year) as of the first day of any calendar quarter. [ ] (l) Cash or deferred contributions. For each Plan Year for which the Employer makes a designated cash or deferred contribution, a Participant may elect to receive directly in cash not more than the following portion (or, if less, the 402(g) limitation described in Section 14.07 of the Plan) of his proportionate share of that cash or deferred contribution: (Choose (1) or (2)) [ ] (1) All or any portion. [ ] (2) _____%. 3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate deferral contributions, matching contributions, qualified nonelective contributions and nonelective contributions in accordance with Section 14.06 and the elections under this Adoption Agreement Section 3.04. Part I. [Options (a) through (d)]. Special Accounting Elections. (Choose whichever elections are applicable to the Employer's Plan) [ x ] (a) Matching Contributions Account. The Advisory Committee will allocate matching contributions to a Participant's: (Choose (1) or (2); (3) is available only in addition to (1)) [ x ] (1) Regular Matching Contributions Account. [ ] (2) Qualified Matching Contributions Account. [ ] (3) Except, matching contributions under Option(s) _____ of Adoption Agreement Section 3.01 are allocable to the Qualified Matching Contributions Account. 92 [ x ] (b) Special Allocation Dates for Salary Reduction Contributions. The Advisory Committee will allocate salary reduction contributions as of the Accounting Date and as of the following additional allocation dates: March 31, June 30, September 30. [ x ] (c) Special Allocation Dates for Matching Contributions. The Advisory Committee will allocate matching contributions as of the Accounting Date and as of the following additional allocation dates: March 31, June 30, September 30. [ x ] (d) Designated Qualified Nonelective Contributions - Definition of Participant. For purposes of allocating the designated qualified nonelective contribution, "Participant" means: (Choose (1), (2) or (3)) [ ] (1) All Participants. [ x ] (2) Participants who are Nonhighly Compensated Employees for the Plan Year. [ ] (3) (Specify) __________. Part II. Method of Allocation - Nonelective Contribution. Subject to any restoration allocation required under Section 5.04, the Advisory Committee will allocate and credit each annual nonelective contribution (and Participant forfeitures treated as nonelective contributions) to the Employer Contributions Account of each Participant who satisfies the conditions of Section 3.06, in accordance with the allocation method selected under this Section 3.04. If the Employer elects Option (e)(2), Option (g)(2) or Option (h), for the first 3% of Compensation allocated to all Participants, "Compensation" does not include any exclusions elected under Adoption Agreement Section 1.12 (other than the exclusion of elective contributions), and the Advisory Committee must take into account the Participant's Compensation for the entire Plan Year. (Choose an allocation method under (e), (f), (g) or (h); (i) is mandatory if the Employer elects (f), (g) or (h); (j) is optional in addition to any other election.) [ ] (e) Nonintegrated Allocation Formula. (Choose (1) or (2)) [ ] (1) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [ ] (2) The Advisory Committee will allocate the annual nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. For purposes of this Option (2), "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation will not exceed 3% of his Compensation for the Plan Year. [ x ] (f) Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). 93 The Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [ ] (g) Three-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation may not exceed the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table following Option (i). Solely for purposes of the allocation in this first paragraph, "Participant" means, in addition to a Participant who satisfies the requirements of Section 3.06 for the Plan Year: (Choose (1) or (2)) [ ] (1) No other Participant. [ ] (2) Any other Participant entitled to a top heavy minimum allocation under Section 3.04(B), but such Participant's allocation under this Option (g) will not exceed 3% of his Compensation for the Plan Year. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Excess Compensation, may not exceed the allocation percentage in the first paragraph. Finally, the Advisory Committee will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. [ ] (h) Four-Tiered Integrated Allocation Formula. First, the Advisory Committee will allocate the annual Employer nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Compensation. Solely for purposes of this first tier allocation, a "Participant" means, in addition to any Participant who satisfies the requirements of Section 3.06 for the Plan Year, any other Participant entitled to a top heavy minimum allocation under Section 3.04(B) of the Plan. As a second tier allocation, the Advisory Committee will allocate the nonelective contributions in the same ratio that each Participant's Excess Compensation for the Plan Year bears to the total Excess Compensation of all Participants for the Plan Year, but not exceeding 3% of each Participant's Excess Compensation. As a third tier allocation, the Advisory Committee will allocate the annual Employer contributions in the same ratio that each Participant's Compensation plus Excess Compensation for the Plan Year bears to the total Compensation plus Excess Compensation of all Participants for the Plan Year. The allocation under this paragraph, as a percentage of each Participant's Compensation plus Excess Compensation, must not exceed the applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum Disparity Table following Option (i). The Advisory Committee then will allocate any remaining nonelective contributions in the same ratio that each Participant's Compensation for the Plan Year bears to the total Compensation of all Participants for the Plan Year. 94 [ x ] (i) Excess Compensation. For purposes of Option (f), (g) or (h), "Excess Compensation" means Compensation in excess of the following Integration Level: (Choose (1) or (2)) [ x ] (1) 100% (not exceeding 100%) of the taxable wage base, as determined under Section 230 of the Social Security Act, in effect on the first day of the Plan Year: (Choose any combination of (i) and (ii) or choose (iii)) [ ] (i) Rounded to _____ (but not exceeding the taxable wage base). [ ] (ii) But not greater than $_____. [ x ] (iii) Without any further adjustment or limitation. [ ] (2) $_____ [Note: Not exceeding the taxable wage base for the Plan Year in which this Adoption Agreement first is effective.] Maximum Disparity Table. For purposes of Options (f), (g) and (h), the applicable percentage is:
Integration Level (as Applicable Percentages for Applicable percentage percentage of taxable Option (f) or Option (g) for Option (h) wage base) _____________________ __________________________ ________________________ 100% 5.7% 2.7% More than 80% but less than 100% 5.4% 2.4% More than 20% (but not less than $10,001) and not more than 80% 4.3% 1.3% 20% (or $10,000, if greater) or less 5.7% 2.7%
[ ] (j) Allocation offset. The Advisory Committee will reduce a Participant's allocation otherwise made under Part II of this Section 3.04 by the Participant's allocation under the following qualified plan(s) maintained by the Employer: _____________________. The Advisory Committee will determine this allocation reduction: (Choose (1) or (2)) [ ] (1) By treating the term "nonelective contribution" as including all amounts paid or accrued by the Employer during the Plan Year to the qualified plan(s) referenced under this Option (j). If a Participant under this Plan also participates in that other plan, the Advisory Committee will treat the amount the Employer contributes for or during a Plan Year on behalf of a particular Participant under such other plan as an amount allocated under this Plan to that Participant's Account for that Plan Year. The Advisory Committee will make the computation of allocation required under the immediately preceding sentence before making any allocation of nonelective contributions under this Section 3.04. [ ] (2) In accordance with the formula provided in an addendum to this Adoption Agreement, numbered 3.04(j). 95 Top Heavy Minimum Allocation - Method of Compliance. If a Participant's allocation under this Section 3.04 is less than the top heavy minimum allocation to which he is entitled under Section 3.04(B): (Choose (k) or (l)) [ x ] (k) The Employer will make any necessary additional contribution to the Participant's Account, as described in Section 3.04(B)(7)(a) of the Plan. [ ] (l) The Employer will satisfy the top heavy minimum allocation under the following plan(s) it maintains: ___________. However, the Employer will make any necessary additional contribution to satisfy the top heavy minimum allocation for an Employee covered only under this Plan and not under the other plan(s) designated in this Option (l). See Section 3.04(B)(7)(b) of the Plan. If the Employer maintains another plan, the Employer may provide in an addendum to this Adoption Agreement, numbered Section 3.04, any modifications to the Plan necessary to satisfy the top heavy requirements under Code Section 416. Related employers. If two or more related employers (as defined in Section 1.30) contribute to this Plan, the Advisory Committee must allocate all Employer nonelective contributions (and forfeitures treated as nonelective contributions) to each Participant in the Plan, in accordance with the elections in this Adoption Agreement Section 3.04: (Choose (m) or (n)) [ X ] (m) Without regard to which contributing related group member employs the Participant. [ ] (n) Only to the Participants directly employed by the contributing Employer. If a Participant receives Compensation from more than one contributing Employer, the Advisory Committee will determine the allocations under this Adoption Agreement Section 3.04 by prorating among the participating Employers the Participant's Compensation and, if applicable, the Participant's Integration Level under Option (i). 3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation required under Sections 5.04 or 9.14, the Advisory Committee will allocate a Participant forfeiture in accordance with Section 3.04: (Choose (a) or (b); (c) and (d) are optional in addition to (a) or (b)) [ x ] (a) As an Employer nonelective contribution for the Plan Year in which the forfeiture occurs, as if the Participant forfeiture were an additional nonelective contribution for that Plan Year. [ ] (b) To reduce the Employer matching contributions and nonelective contributions for the Plan Year: (Choose (1) or (2)) [ ] (1) in which the forfeiture occurs. [ ] (2) immediately following the Plan Year in which the forfeiture occurs. [ ] (c) To the extent attributable to matching contributions: (Choose (1), (2) or (3)) [ ] (1) In the manner elected under Options (a) or (b). [ ] (2) First to reduce Employer matching contributions for the Plan Year: (Choose (i) or (ii)) [ ] (i) in which the forfeiture occurs, 96 [ ] (ii) immediately following the Plan Year in which the forfeiture occurs, then as elected in Options (a) or (b). [ ] (3) As a discretionary matching contribution for the Plan Year in which the forfeiture occurs, in lieu of the manner elected under Options (a) or (b). [ ] (d) First to reduce the Plan's ordinary and necessary administrative expenses for the Plan Year and then will allocate any remaining forfeitures in the manner described in Options (a), (b) or (c), whichever applies. If the Employer elects Option (c), the forfeitures used to reduce Plan expenses: (Choose (1) or (2)) [ ] (1) relate proportionately to forfeitures described in Option (c) and to forfeitures described in Options (a) or (b). [ ] (2) relate first to forfeitures described in Option ____. Allocation of forfeited excess aggregate contributions. The Advisory Committee will allocate any forfeited excess aggregate contributions (as described in Section 14.09): (Choose (e), (f) or (g)) [ ] (e) To reduce Employer matching contributions for the Plan Year: (Choose (1) or (2)) [ ] (1) in which the forfeiture occurs. [ ] (2) immediately following the Plan Year in which the forfeiture occurs. [ ] (f) As Employer discretionary matching contributions for the Plan Year in which forfeited, except the Advisory Committee will not allocate these forfeitures to the Highly Compensated Employees who incurred the forfeitures. [ x ] (g) In accordance with Options (a) through (d), whichever applies, except the Advisory Committee will not allocate these forfeitures under Option (a) or under Option (c)(3) to the Highly Compensated Employees who incurred the forfeitures. 3.06 ACCRUAL OF BENEFIT. Compensation taken into account. For the Plan Year in which the Employee first becomes a Participant, the Advisory Committee will determine the allocation of any cash or deferred contribution, designated qualified nonelective contribution or nonelective contribution by taking into account: (Choose (a) or (b)) [ ] (a) The Employee's Compensation for the entire Plan Year. [ x ] (b) The Employee's Compensation for the portion of the Plan Year in which the Employee actually is a Participant in the Plan. 97 Accrual Requirements. Subject to the suspension of accrual requirements of Section 3.06(E) of the Plan, to receive an allocation of cash or deferred contributions, matching contributions, designated qualified nonelective contributions, nonelective contributions and Participant forfeitures, if any, for the Plan Year, a Participant must satisfy the conditions described in the following elections: (Choose (c) or at least one of (d) through (f)) [ ] (c) Safe harbor rule. If the Participant is employed by the Employer on the last day of the Plan Year, the Participant must complete at least one Hour of Service for that Plan Year. If the Participant is not employed by the Employer on the last day of the Plan Year, the Participant must complete at least 501 Hours of Service during the Plan Year. [ x ] (d) Hours of Service condition. The Participant must complete the following minimum number of Hours of Service during the Plan Year: (Choose at least one of (1) through (5)) [ x ] (1) 1,000 Hours of Service. [ ] (2) (Specify, but the number of Hours of Service may not exceed 1,000) ____________. [ x ] (3) No Hour of Service requirement if the Participant terminates employment during the Plan Year on account of: (Choose (i), (ii) or (iii)) [ x ] (i) Death. [ x ] (ii) Disability. [ x ] (iii) Attainment of Normal Retirement Age in the current Plan Year or in a prior Plan Year. [ ] (4) _____ Hours of Service (not exceeding 1,000) if the Participant terminates employment with the Employer during the Plan Year, subject to any election in Option (3). [ x ] (5) No Hour of Service requirement for an allocation of the following contributions: Employer match and employee salary deferral. [ x ] (e) Employment condition. The Participant must be employed by the Employer on the last day of the Plan Year, irrespective of whether he satisfies any Hours of Service condition under Option (d), with the following exceptions: (Choose (1) or at least one of (2) through (5)) [ ] (1) No exceptions. [ x ] (2) Termination of employment because of death. [ x ] (3) Termination of employment because of disability. [ x ] (4) Termination of employment following attainment of Normal Retirement Age. [ x ] (5) No employment condition for the following contributions: Employer Match and Employee Salary Deferral. 98 [ ] (f) (Specify other conditions, if applicable):_________. Suspension of Accrual Requirements. The suspension of accrual requirements of Section 3.06(E) of the Plan: (Choose (g), (h) or (i)) [ x ] (g) Applies to the Employer's Plan. [ ] (h) Does not apply to the Employer's Plan. [ ] (i) Applies in modified form to the Employer's Plan, as described in an addendum to this Adoption Agreement, numbered Section 3.06(E). Special accrual requirements for matching contributions. If the Plan allocates matching contributions on two or more allocation dates for a Plan Year, the Advisory Committee, unless otherwise specified in Option (l), will apply any Hours of Service condition by dividing the required Hours of Service on a prorata basis to the allocation periods included in that Plan Year. Furthermore, a Participant who satisfies the conditions described in this Adoption Agreement Section 3.06 will receive an allocation of matching contributions (and forfeitures treated as matching contributions) only if the Participant satisfies the following additional condition(s): (Choose (j) or at least one of (k) or (l)) [ x ] (j) No additional conditions. [ ] (k) The Participant is not a Highly Compensated Employee for the Plan Year. This Option (k) applies to: (Choose (1) or (2)) [ ] (1) All matching contributions. [ ] (2) Matching contributions described in Option(s) _____ of Adoption Agreement Section 3.01. [ ] (l) (Specify) __________________. 3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15 apply, the Excess Amount attributed to this Plan equals: (Choose (a), (b) or (c)) [ ] (a) The product of: (i) the total Excess Amount allocated as of such date (including any amount which the Advisory Committee would have allocated but for the limitations of Code Section 415), times (ii) the ratio of (1) the amount allocated to the Participant as of such date under this Plan divided by (2) the total amount allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Code Section 415). [ x ] (b) The total Excess Amount. [ ] (c) None of the Excess Amount. 99 3.18 DEFINED BENEFIT PLAN LIMITATION. Application of limitation. The limitation under Section 3.18 of the Plan: (Choose (a) or (b)) [ ] (a) Does not apply to the Employer's Plan because the Employer does not maintain and never has maintained a defined benefit plan covering any Participant in this Plan. [ x ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy the limitation under Section 3.18, the Employer will reduce: (Choose (1) or (2)) [ ] (1) The Participant's projected annual benefit under the defined benefit plan under which the Participant participates. [ x ] (2) Its contribution or allocation on behalf of the Participant to the defined contribution plan under which the Participant participates and then, if necessary, the Participant's projected annual benefit under the defined benefit plan under which the Participant participates. [Note: If the Employer selects (a), the remaining options in this Section 3.18 do not apply to the Employer's Plan.] Coordination with top heavy minimum allocation. The Advisory Committee will apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan with the following modifications: (Choose (c) or at least one of (d) or (e)) [ x ] (c) No modifications. [ ] (d) For Non-Key Employees participating only in this Plan, the top heavy minimum allocation is the minimum allocation described in Section 3.04(B) determined by substituting ____% (not less than 4%) for "3%," except: (Choose (i) or (ii)) [ ] (i) No exceptions. [ ] (ii) Plan Years in which the top heavy ratio exceeds 90%. [ ] (e) For Non-Key Employees also participating in the defined benefit plan, the top heavy minimum is: (Choose (1) or (2)) [ ] (1) 5% of Compensation (as determined under Section 3.04(B) or the Plan) irrespective of the contribution rate of any Key Employee, except: (Choose (i) or (ii)) [ ] (i) No exceptions. [ ] (ii) Substituting "7 1/2%" for "5%" if the top heavy ratio does not exceed 90%. [ ] (2) 0%. [Note: The Employer may not select this Option (2) unless the defined benefit plan satisfies the top heavy minimum benefit requirements of Code Section 416 for these Non-Key Employees.] Actuarial Assumptions for Top Heavy Calculation. To determine the top heavy ratio, the Advisory Committee will use the following interest rate and mortality assumptions to value accrued benefits under a defined benefit plan: N/A. 100 If the elections under this Section 3.18 are not appropriate to satisfy the limitations of Section 3.18, or the top heavy requirements under Code Section 416, the Employer must provide the appropriate provisions in an addendum to this Adoption Agreement. ARTICLE IV PARTICIPANT CONTRIBUTIONS 4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan: (Choose (a) or (b); (c) is available only with (b)) [ x ] (a) Does not permit Participant nondeductible contributions. [ ] (b) Permits Participant nondeductible contributions, pursuant to Section 14.04 of the Plan. [ ] (c) The following portion of the Participant's nondeductible contributions for the Plan Year are mandatory contributions under Option (i)(3) of Adoption Agreement Section 3.01: (Choose (1) or (2)) [ ] (1) The amount which is not less than: ________________. [ ] (2) The amount which is not greater than: _____________. Allocation dates. The Advisory Committee will allocate nondeductible contributions for each Plan Year as of the Accounting Date and the following additional allocation dates: (Choose (d) or (e)) [ ] (d) No other allocation dates. [ ] (e) (Specify) ___________________. As of an allocation date, the Advisory Committee will credit all nondeductible contributions made for the relevant allocation period. Unless otherwise specified in (e), a nondeductible contribution relates to an allocation period only if actually made to the Trust no later than 30 days after that allocation period ends. 4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Mandatory Contributions Account, if any, prior to his Separation from Service: (Choose (a) or at least one of (b) through (d)) [ X ] (a) No distribution options prior to Separation from Service. [ ] (b) The same distribution options applicable to the Deferral Contributions Account prior to the Participant's Separation from Service, as elected in Adoption Agreement Section 6.03. [ ] (c) Until he retires, the Participant has a continuing election to receive all or any portion of his Mandatory Contributions Account if: (Choose (1) or at least one of (2) through (4)) [ ] (1) No conditions. [ ] (2) The mandatory contributions have accumulated for at least _____ Plan Years since the Plan Year for which contributed. 101 [ ] (3) The Participant suspends making nondeductible contributions for a period of ___ months. [ ] (4) (Specify) ____________. [ ] (d) (Specify) _____________. ARTICLE V TERMINATION OF SERVICE - PARTICIPANT VESTING 5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is: (Choose (a) or (b)) [ x ] (a) 62 [State age, but may not exceed age 65]. [ ] (b) The later of the date the Participant attains _____ years of age or the _____ anniversary of the first day of the Plan Year in which the Participant commenced participation in the Plan. [The age selected may not exceed age 65 and the anniversary selected may not exceed the 5th.] 5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section 5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c)) [ ] (a) Does not apply. [ x ] (b) Applies to death. [ x ] (c) Applies to disability. 5.03 VESTING SCHEDULE. Deferral Contributions Account/Qualified Matching Contributions Account/Qualified Nonelective Contributions Account/Mandatory Contributions Account. A Participant has a 100% Nonforfeitable interest at all times in his Deferral Contributions Account, his Qualified Matching Contributions Account, his Qualified Nonelective Contributions Account and in his Mandatory Contributions Account. Regular Matching Contributions Account/Employer Contributions Account. With respect to a Participant's Regular Matching Contributions Account and Employer Contributions Account, the Employer elects the following vesting schedule: (Choose (a) or (b); (c) and (d) are available only as additional options) [ ] (a) Immediate vesting. 100% Nonforfeitable at all times. [Note: The Employer must elect Option (a) if the eligibility conditions under Adoption Agreement Section 2.01(c) require 2 years of service or more than 12 months of employment.] [ x ] (b) Graduated Vesting Schedules. 102 Top Heavy Schedule (Mandatory) Years of Nonforfeitable Service Percentage _______ ______________ Less than 1 0% 1 0% 2 25% 3 50% 4 75% 5 or more 100% Non Top Heavy Schedule (Optional) Years of Nonforfeitable Service Percentage _______ ______________ Less than 1 0% 1 0% 2 25% 3 50% 4 75% 5 or more 100% [ x ] (c) Special vesting election for Regular Matching Contributions Account. In lieu of the election under Options (a) or (b), the Employer elects the following vesting schedule for a Participant's Regular Matching Contributions Account: (Choose (1) or (2)) [ x ] (1) 100% Nonforfeitable at all times. [ ] (2) In accordance with the vesting schedule described in the addendum to this Adoption Agreement, numbered 5.03(c). [Note: If the Employer elects this Option (c)(2), the addendum must designate the applicable vesting schedule(s) using the same format as used in Option (b).] [Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy Schedule which satisfies Code Section 416. The Employer, at its option, may complete a Non Top Heavy Schedule. The Non Top Heavy Schedule must satisfy Code Section 411(a)(2). Also see Section 7.05 of the Plan.] [ x ] (d) The Top Heavy Schedule under Option (b) (and, if applicable, under Option (c)(2)) applies: (Choose (1) or (2)) [ ] (1) Only in a Plan Year for which the Plan is top heavy. [ x ] (2) In the Plan Year for which the Plan first is top heavy and then in all subsequent Plan Years. [Note: The Employer may not elect Option (d) unless it has completed a Non Top Heavy Schedule.] Minimum vesting. (Choose (e) or (f)) [ x ] (e) The Plan does not apply a minimum vesting rule. [ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less than the lesser of $_____ or his entire Accrued Benefit, even if the application of a graduated vesting schedule under Options (b) or (c) would result in a smaller Nonforfeitable Accrued Benefit. Life Insurance Investments. The Participant's Accrued Benefit attributable to insurance contracts purchased on his behalf under Article XI is: (Choose (g) or (h)) [ X ] (g) Subject to the vesting election under Options (a), (b) or (c). 103 [ ] (h) 100% Nonforfeitable at all times, irrespective of the vesting election under Options (b) or (c)(2). 5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule described in Section 5.04(C) of the Plan: (Choose (a) or (b)) [ x ] (a) Does not apply. [ ] (b) Will apply to determine the timing of forfeitures for 0% vested Participants. A Participant is not a 0% vested Participant if he has a Deferral Contributions Account. 5.06 YEAR OF SERVICE - VESTING. Vesting computation period. The Plan measures a Year of Service on the basis of the following 12 consecutive month periods: (Choose (a) or (b)) [ x ] (a) Plan Years. [ ] (b) Employment Years. An Employment Year is the 12 consecutive month period measured from the Employee's Employment Commencement Date and each successive 12 consecutive month period measured from each anniversary of that Employment Commencement Date. Hours of Service. The minimum number of Hours of Service an Employee must complete during a vesting computation period to receive credit for a Year of Service is: (Choose (c) or (d)) [ x ] (c) 1,000 Hours of Service. [ ] (d) _____ Hours of Service. [Note: The Hours of Service requirement may not exceed 1,000.] 5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically excludes the following Years of Service: (Choose (a) or at least one of (b) through (e)) [ x ] (a) None other than as specified in Section 5.08(a) of the Plan. [ ] (b) Any Year of Service before the Participant attained the age of ___. [Note: The age selected may not exceed age 18.] [ ] (c) Any Year of Service during the period the Employer did not maintain this Plan or a predecessor plan. [ ] (d) Any Year of Service before a Break in Service if the number of consecutive Breaks in Service equals or exceeds the greater of 5 or the aggregate number of the Years of Service prior to the Break. This exception applies only if the Participant is 0% vested in his Accrued Benefit derived from Employer contributions at the time he has a Break in Service. Furthermore, the aggregate number of Years of Service before a Break in Service do not include any Years of Service not required to be taken into account under this exception by reason of any prior Break in Service. [ ] (e) Any Year of Service earned prior to the effective date of ERISA if the Plan would have disregarded that Year of Service on account of an Employee's Separation from Service under a Plan provision in effect and adopted before January 1, 1974. 104 ARTICLE VI TIME AND METHOD OF PAYMENTS OF BENEFITS Code Section 411(d)(6) Protected Benefits. The elections under this Article VI may not eliminate Code Section 411(d)(6) protected benefits. To the extent the elections would eliminate a Code Section 411(d)(6) protected benefit, see Section 13.02 of the Plan. Furthermore, if the elections liberalize the optional forms of benefit under the Plan, the more liberal options apply on the later of the adoption date or the Effective Date of this Adoption Agreement. 6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Distribution date. A distribution date under the Plan means 30 days following a participant's separation from service. [Note: The Employer must specify the appropriate date(s). The specified distribution dates primarily establish annuity starting dates and the notice and consent periods prescribed by the Plan. The Plan allows the Trustee an administratively practicable period of time to make the actual distribution relating to a particular distribution date.] Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject to the limitations of Section 6.01(A)(1), the distribution date for distribution of a Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c), (d) or (e)) [ ] (a) ___________ of the _________ Plan Year beginning after the Participant's Separation from Service. [ x ] (b) the first distribution date following the Participant's Separation from Service. [ ] (c) __________ of the Plan Year after the Participant incurs _____ Break(s) in Service (as defined in Article V). [ ] (d) _________ following the Participant's attainment of Normal Retirement Age, but not earlier than __________ days following his Separation from Service. [ ] (e) (Specify) __________. Nonforfeitable Accrued Benefit Exceeds $3,500. See the elections under Section 6.03. Disability. The distribution date, subject to Section 6.01(A)(3), is: (Choose (f), (g) or (h)) [ ] (f) __________ after the Participant terminates employment because of disability. [ x ] (g) The same as if the Participant had terminated employment without disability. [ ] (h) (Specify) ________. Hardship. (Choose (i) or (j)) [ x ] (i) The Plan does not permit a hardship distribution to a Participant who has separated from Service. 105 [ ] (j) The Plan permits a hardship distribution to a Participant who has separated from Service in accordance with the hardship distribution policy stated in: (Choose (1), (2) or (3)) [ ] (1) Section 6.01(A)(4) of the Plan. [ ] (2) Section 14.11 of the Plan. [ ] (3) The addendum to this Adoption Agreement, numbered Section 6.01. Default on a Loan. If a Participant or Beneficiary defaults on a loan made pursuant to a loan policy adopted by the Advisory Committee pursuant to Section 9.04, the Plan: (Choose (k), (l) or (m)) [ ] (k) Treats the default as a distributable event. The Trustee, at the time of the default, will reduce the Participant's Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit. To the extent the loan is attributable to the Participant's Deferral Contributions Account, Qualified Matching Contributions Account or Qualified Nonelective Contributions Account, the Trustee will not reduce the Participant's Nonforfeitable Accrued Benefit unless the Participant has separated from Service or unless the Participant has attained age 59 1/2. [ x ] (l) Does not treat the default as a distributable event. When an otherwise distributable event first occurs pursuant to Section 6.01 or Section 6.03 of the Plan, the Trustee will reduce the Participant's Nonforfeitable Accrued Benefit by the lesser of the amount in default (plus accrued interest) or the Plan's security interest in that Nonforfeitable Accrued Benefit. [ ] (m) (Specify) __________. 6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will apply Section 6.02 of the Plan with the following modifications: (Choose (a) or at least one of (b), (c), (d) and (e)) [ ] (a) No modifications. [ ] (b) Except as required under Section 6.01 of the Plan, a lump sum distribution is not available: ___________. [ x ] (c) An installment distribution: (Choose (1) or at least one of (2) or (3)) [ ] (1) Is not available under the Plan. [ ] (2) May not exceed the lesser of _____ years or the maximum period permitted under Section 6.02. [ x ] (3) (Specify) option is available in which a participant may elect to take a partial distribution on a semi annual basis with a $1,000 minimum per semi-annual distribution. [ x ] (d) The Plan permits the following annuity options: purchase and delivery of a single premium annuity contract. 106 Any Participant who elects a life annuity option is subject to the requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See Section 6.04(E). [Note: The Employer may specify additional annuity options in an addendum to this Adoption Agreement, numbered 6.02(d).] [ x ] (e) If the Plan invests in qualifying Employer securities, as described in Section 10.03(F), a Participant eligible to elect distribution under Section 6.03 may elect to receive that distribution in Employer securities only in accordance with the provisions of the addendum to this Adoption Agreement, numbered 6.02(e). 6.03 BENEFIT PAYMENT ELECTIONS. Participant Elections After Separation from Service. A Participant who is eligible to make distribution elections under Section 6.03 of the Plan may elect to commence distribution of his Nonforfeitable Accrued Benefit: (Choose at least one of (a) through (c)) [ ] (a) As of any distribution date, but not earlier than __________ of the _________ Plan Year beginning after the Participant's Separation from Service. [ x ] (b) As of the following date(s): (Choose at least one of Options (1) through (6)) [ ] (1) Any distribution date after the close of the Plan Year in which the Participant attains Normal Retirement Age. [ x ] (2) Any distribution date following his Separation from Service with the Employer. [ ] (3) Any distribution date in the __________ Plan Year(s) beginning after his Separation from Service. [ ] (4) Any distribution date in the Plan Year after the Participant incurs _____ Break(s) in Service (as defined in Article V). [ ] (5) Any distribution date following attainment of age _____ and completion of at least _____ Years of Service (as defined in Article V). [ ] (6) (Specify) ___________. [ ] (c) (Specify) __________. The distribution events described in the election(s) made under Options (a), (b) or (c) apply equally to all Accounts maintained for the Participant unless otherwise specified in Option (c). Participant Elections Prior to Separation from Service - Regular Matching Contributions Account and Employer Contributions Account. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Regular Matching Contributions Account and Employer Contributions Account prior to his Separation from Service: (Choose (d) or at least one of (e) through (h)) [ x ] (d) No distribution options prior to Separation from Service. 107 [ ] (e) Attainment of Specified Age. Until he retires, the Participant has a continuing election to receive all or any portion of his Nonforfeitable interest in these Accounts after he attains: (Choose (1) or (2)) [ ] (1) Normal Retirement Age. [ ] (2) _____ years of age and is at least ____% vested in these Accounts. [Note: If the percentage is less than 100%, see the special vesting formula in Section 5.03.] [ ] (f) After a Participant has participated in the Plan for a period of not less than _____ years and he is 100% vested in these Accounts, until he retires, the Participant has a continuing election to receive all or any portion of the Accounts. [Note: The number in the blank space may not be less than 5.] [ ] (g) Hardship. A Participant may elect a hardship distribution prior to his Separation from Service in accordance with the hardship distribution policy: (Choose (1), (2) or (3); (4) is available only as an additional option) [ ] (1) Under Section 6.01(A)(4) of the Plan. [ ] (2) Under Section 14.11 of the Plan. [ ] (3) Provided in the addendum to this Adoption Agreement, numbered Section 6.03. [ ] (4) In no event may a Participant receive a hardship distribution before he is at least _____% vested in these Accounts. [Note: If the percentage in the blank is less than 100%, see the special vesting formula in Section 5.03.] [ ] (h) (Specify) ___________. [Note: The Employer may use an addendum, numbered 6.03, to provide additional language authorized by Options (b)(6), (c), (g)(3) or (h) of this Adoption Agreement Section 6.03.] Participant Elections Prior to Separation from Service - Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account. Subject to the restrictions of Article VI, the following distribution options apply to a Participant's Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account prior to his Separation from Service: (Choose (i) or at least one of (j) through (l)) [ x ] (i) No distribution options prior to Separation from Service. [ ] (j) Until he retires, the Participant has a continuing election to receive all or any portion of these Accounts after he attains: (Choose (1) or (2)) [ ] (1) The later of Normal Retirement Age or age 59 1/2. [ ] (2) Age _____ (at least 59 1/2). [ ] (k) Hardship. A Participant, prior to this Separation from Service, may elect a hardship distribution from his Deferral Contributions Account in accordance with the hardship distribution policy under Section 14.11 of the Plan. 108 [ ] (l) (Specify) _____________. [Note: Option (l) may not permit in service distributions prior to age 59 1/2 (other than hardship) and may not modify the hardship policy described in Section 14.11.] Sale of trade or business/subsidiary. If the Employer sells substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business or sells a subsidiary (within the meaning of Code Section 409(d)(3)), a Participant who continues employment with the acquiring corporation is eligible for distribution from his Deferral Contributions Account, Qualified Matching Contributions Account and Qualified Nonelective Contributions Account: (Choose (m) or (n)) [ x ] (m) Only as described in this Adoption Agreement Section 6.03 for distributions prior to Separation from Service. [ ] (n) As if he has a Separation from Service. After March 31, 1988, a distribution authorized solely by reason of this Option (n) must constitute a lump sum distribution, determined in a manner consistent with Code Section 401(k)(10) and the applicable Treasury regulations. 6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The annuity distribution requirements of Section 6.04: (Choose (a) or (b)) [ x ] (a) Apply only to a Participant described in Section 6.04(E) of the Plan (relating to the profit sharing exception to the joint and survivor requirements). [ ] (b) Apply to all Participants. ARTICLE IX ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS 9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than a distribution from a segregated Account and other than a corrective distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more than 90 days after the most recent valuation date, the distribution will include interest at: (Choose (a), (b) or (c)) [ x ] (a) 0% per annum. [Note: The percentage may equal 0%.] [ ] (b) The 90 day Treasury bill rate in effect at the beginning of the current valuation period. [ ] (c) (Specify) ___________________________________. 9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to Section 14.12, to determine the allocation of net income, gain or loss: (Complete only those items, if any, which are applicable to the Employer's Plan) [ x ] (a) For salary reduction contributions, the Advisory Committee will: (Choose (1), (2), (3), (4) or (5)) [ x ] (1) Apply Section 9.11 without modification. [ ] (2) Use the segregated account approach described in Section 14.12. 109 [ ] (3) Use the weighted average method described in Section 14.12, based on a _____ weighting period. [ ] (4) Treat as part of the relevant Account at the beginning of the valuation period ___% of the salary reduction contributions: (Choose (i) or (ii)) [ x ] (i) made during that valuation period. [ ] (ii) made by the following specified time: __________. [ ] (5) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(a). [ x ] (b) For matching contributions, the Advisory Committee will: (Choose (1), (2), (3) or (4)) [ X ] (1) Apply Section 9.11 without modification. [ ] (2) Use the weighted average method described in Section 14.12, based on a __________ weighting period. [ ] (3) Treat as part of the relevant Account at the beginning of the valuation period ___% of the matching contributions allocated during the valuation period. [ ] (4) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(b). [ ] (c) For Participant nondeductible contributions, the Advisory Committee will: (Choose (1), (2), (3), (4) or (5)) [ ] (1) Apply Section 9.11 without modification. [ ] (2) Use the segregated account approach described in Section 14.12. [ ] (3) Use the weighted average method described in Section 14.12, based on a __________ weighting period. [ ] (4) Treat as part of the relevant Account at the beginning of the valuation period _____% of the Participant nondeductible contributions: (Choose (i) or (ii)) [ ] (i) made during that valuation period. [ ] (ii) made by the following specified time: __________. [ ] (5) Apply the allocation method described in the addendum to this Adoption Agreement numbered 9.11(c). 110 ARTICLE X TRUSTEE AND CUSTODIAN, POWERS AND DUTIES 10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of the Plan, the aggregate investments in qualifying Employer securities and in qualifying Employer real property: (Choose (a) or (b)) [ x ] (a) May not exceed 10% of Plan assets. [ ] (b) May not exceed _____% of Plan assets. [Note: The percentage may not exceed 100%.] 10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee must value the Trust Fund on the following valuation date(s): (Choose (a) or (b)) [ ] (a) No other mandatory valuation dates. [ x ] (b) (Specify) every day the New York Stock Exchange is open. 111 EFFECTIVE DATE ADDENDUM (Restated Plans Only) The Employer must complete this addendum only if the restated Effective Date specified in Adoption Agreement Section 1.18 is different than the restated effective date for at least one of the provisions listed in this addendum. In lieu of the restated Effective Date in Adoption Agreement Section 1.18, the following special effective dates apply: (Choose whichever elections apply) [ ] (a) Compensation definition. The Compensation definition of Section 1.12 (other than the $200,000 limitation) is effective for Plan Years beginning after _________. [Note: May not be effective later than the first day of the first Plan Year beginning after the Employer executes this Adoption Agreement to restate the Plan for the Tax Reform Act of 1986, if applicable.] [ x ] (b) Eligibility conditions. The eligibility conditions specified in Adoption Agreement Section 2.01 are effective for Plan Years beginning after December 31, 1996. [ ] (c) Suspension of Years of Service. The suspension of Years of Service rule elected under Adoption Agreement Section 2.03 is effective for Plan Years beginning after _____. [ ] (d) Contribution/allocation formula. The contribution formula elected under Adoption Agreement Section 3.01 and the method of allocation elected under Adoption Agreement Section 3.04 is effective for Plan Years beginning after _____. [ ] (e) Accrual requirements. The accrual requirements of Section 3.06 are effective for Plan Years beginning after _____. [ ] (f) Employment condition. The employment condition of Section 3.06 is effective for Plan Years beginning after _____. [ ] (g) Elimination of Net Profits. The requirement for the Employer not to have net profits to contribute to this Plan is effective for Plan Years beginning after _____. [Note: The date specified may not be earlier than December 31, 1985.] [ ] (h) Vesting Schedule. The vesting schedule elected under Adoption Agreement Section 5.03 is effective for Plan Years beginning after _____. [ ] (i) Allocation of Earnings. The special allocation provisions elected under Adoption Agreement Section 9.11 are effective for Plan Years beginning after _____. [ x ] (j) (Specify) The vesting schedule will be effective for all participants who complete one hour of service after the effective date of January, 1998. For Plan Years prior to the special Effective Date, the terms of the Plan prior to its restatement under this Adoption Agreement will control for purposes of the designated provisions. A special Effective Date may not result in the delay of a Plan provision beyond the permissible Effective Date under any applicable law requirements. 112 ADDENDUM 6.02(e) Effective January 1, 1999 Brenton Banks, Inc. Employees' Retirement Plan A participant eligible to elect distribution under Section 6.03 may elect to receive the portion of the distributable amount that is vested in Employer securities as an in-kind transfer as directed by the participant. The Employer securities will be distributed in- kind in full shares at the bid price on the date of distribution. Any fractional shares of the Employer securities remaining will be distributed in cash. 113 APPENDIX B TO GENERAL INSTRUCTIONS CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS The Prototype Plan permits the adopting employer (or the Advisory Committee) to make certain administrative elections not reflected in the adoption agreement. This form lists those administrative elections and provides a means of recording your decision. 1. Section 1.09 - Definition of highly compensated employee. The plan permits the employer to make a calendar year election for purposes of identifying highly compensated employees. [ x ] The plan will use the calendar year election. [ ] The plan will not use the calendar year election. 2. Section 1.12(B) - Nondiscrimination definition of compensation. When testing discrimination under the plan, the plan permits the employer to elect to "gross up" an employees compensation by the amount of his elective contributions for the year. [ x ] The plan will "gross up" compensation for elective contributions. [ ] The plan will exclude elective contributions. [Note: This election solely is for purposes of testing discrimination. The election does not affect the employer's election under Option (a) or (b) of Adoption Agreement Section 1.12. The elections under Adoption Agreement Section 1.12 apply to the definition of compensation for purposes of making allocations of employer contributions and participant forfeitures.] 3. Section 4.03. Rollover contributions. [ x ] The plan accepts rollover contributions. [ ] The plan does not accept rollover contributions. 4. Section 7.04. If your plan has a discretionary trustee, Section 7.04 authorizes the employer to enter into a written agreement with the trustee permitting the employer to direct investments. Legal counsel should assist you in this arrangement. 5. Section 8.10. If the trustee agrees, the plan authorizes participant direction of investment. The adopting employer, the Advisory Committee and the trustee should agree to the conditions and limitations of participant direction of investment. Legal counsel should assist you with this election. [ x ] The plan will permit participant direction of investment. [ ] The plan will not permit participant direction of investment. 6. Section 9.04. The plan authorizes the Advisory committee to adopt a written loan policy to permit participant loans. [ x ] The plan will permit participant loans. [ ] The plan will not permit participant loans. 7. Section 11.01. The plan may invest in life insurance on behalf of a participant's account, subject to participant consent. [ ] The plan will invest in life insurance contracts. [ x ] The plan will not invest in life insurance contracts. 114 Execution Page The Trustee (and Custodian, if applicable), by executing this Adoption Agreement, accepts its position and agrees to all of the obligations, responsibilities and duties imposed upon the Trustee (or Custodian) under the Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan and Trust, and in witness of its agreement, the Employer by its duly authorized officers, has executed this Adoption Agreement, and the Trustee (and Custodian, if applicable) signified its acceptance, on this 19th day of October, 1999. Name and EIN of Employer: BRENTON BANKS, INC. 42-0658989 Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Signed: /s/ Mary Chiodo Name of Custodian: N/A Signed: N/A [Note: A Trustee is mandatory, but a Custodian is optional. See Section 10.03 of the Plan.] Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA reporting purposes (Form 5500 Series) is: 002. Use of Adoption Agreement. Failure to complete properly the elections in this Adoption Agreement may result in disqualification of the Employer's Plan. The 3-digit number assigned to this Adoption Agreement (see page 1) is solely for the Master Plan Sponsor's recordkeeping purposes and does not necessarily correspond to the plan number the Employer designated in the prior paragraph. Master Plan Sponsor. The Master Plan Sponsor identified on the first page of the basic plan document will notify all adopting employers of any amendment of this Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor of its maintenance of this Master Plan. For inquiries regarding the adoption of the Master Plan, the Master Plan Sponsor's intended meaning of any plan provisions or the effect of the opinion letter issued to the Master Plan Sponsor, please contact the Master Plan Sponsor at the following address and telephone number: P.O. BOX 10478 DES MOINES, IA 50306-0478 (515) 237-5160. Reliance on Opinion Letter. The Employer may not rely on the Master Plan Sponsor's opinion letter covering this Adoption Agreement. For reliance on the Plan's qualification, the Employer must obtain a determination letter from the applicable IRS Key District office. 115 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 22 day of October, 1999. Name of Participating Employer: Brenton Bank Signed: /s/ Steven T. Schuler Participating Employer's EIN: 42-0994231 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 116 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 22 day of October, 1999. Name of Participating Employer: Brenton Insurance Services, Inc. Signed: /s/ Steven T. Schuler Participating Employer's EIN: 42-1012438 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 117 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 21 day of October, 1999. Name of Participating Employer: Brenton Savings Bank, FSB Signed: /s/ Kevin Z. Geis Participating Employer's EIN: 42-0114100 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 118 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 21 day of October, 1999. Name of Participating Employer: Brenton Savings Financial Services, Inc. Signed: /s/ Kevin Z. Geis Participating Employer's EIN: 42-1206701 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 119 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 21st day of October, 1999. Name of Participating Employer: Brenton Realty Services, Ltd. Signed: /s/ James L. Lowrance James L. Lowrance Participating Employer's EIN: 42-1231886 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 120 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 10/19/99 day of ___________, 1999. Name of Participating Employer: Brenton Mortgages, Inc. Signed: /s/ , President Participating Employer's EIN: 42-1014357 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: Oct. 19, 1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 121 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 19 day of October, 1999. Name of Participating Employer: Brenton Insurance, Inc. Signed: /s/ Elizabeth Piper/Bach Elizabeth Piper/Bach Participating Employer's EIN: 42-1231828 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: 10-19-99 [Date] Signed: /s/ Elizabeth Piper/Bach /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 122 PARTICIPATION AGREEMENT For Participation by Related Group Members (Plan Section 1.30) The undersigned Employer, by executing this Participation Agreement, elects to become a Participating Employer in the Plan identified in Section 1.03 of the accompanying Adoption Agreement, as if the Participating Employer were a signatory to that Agreement. The Participating Employer accepts, and agrees to be bound by, all of the elections granted under the provisions of the Master Plan as made by BRENTON BANKS, INC., the Signatory Employer to the Execution Page of the Adoption Agreement. 1. The Effective Date of the undersigned Employer's participation in the designated Plan is: January 1, 1999. 2. The undersigned Employer's adoption of this Plan constitutes: [ ] (a) The adoption of a new plan by the Participating Employer. [ x ] (b) The adoption of an amendment and restatement of a plan currently maintained by the Employer, identified as Brenton Banks, Inc. Employees' Retirement Plan, and having an original effective date of January 1, 1986. Dated this 19 day of October, 1999. Name of Participating Employer: Brenton Investments, Inc. Signed: /s/ Elizabeth Piper/Bach Elizabeth Piper/Bach Participating Employer's EIN: 42-1378382 Acceptance by the Signatory Employer to the Execution Page of the Adoption Agreement and by the Trustee. Name of Signatory Employer: BRENTON BANKS, INC. Accepted: 10-19-1999 [Date] Signed: /s/ Phillip L. Risley Name(s) of Trustee: Brenton Bank Accepted: [Date] Signed: [Note: Each Participating Employer must execute a separate Participation Agreement. See the Execution Page of the Adoption Agreement for important Master Plan information.] 123 APPENDIX B TO GENERAL INSTRUCTIONS CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS The Prototype Plan permits the adopting employer (or the Advisory Committee) to make certain administrative elections not reflected in the adoption agreement. This form lists those administrative elections and provides a means of recording your decision. 1. Section 1.09 - Definition of highly compensated employee. The plan permits the employer to make a calendar year election for purposes of identifying highly compensated employees. [ x ] The plan will use the calendar year election. [ ] The plan will not use the calendar year election. 2. Section 1.12(B) - Nondiscrimination definition of compensation. When testing discrimination under the plan, the plan permits the employer to elect to "gross up" an employees compensation by the amount of his elective contributions for the year. [ x ] The plan will "gross up" compensation for elective contributions. [ ] The plan will exclude elective contributions. [Note: This election solely is for purposes of testing discrimination. The election does not affect the employer's election under Option (a) or (b) of Adoption Agreement Section 1.12. The elections under Adoption Agreement Section 1.12 apply to the definition of compensation for purposes of making allocations of employer contributions and participant forfeitures.] 3. Section 4.03. Rollover contributions. [ x ] The plan accepts rollover contributions. [ ] The plan does not accept rollover contributions. 4. Section 7.04. If you plan has a discretionary trustee, Section 7.04 authorizes the employer to enter into a written agreement with the trustee permitting the employer to direct investments. Legal counsel should assist you in this arrangement. 5. Section 8.10. If the trustee agrees, the plan authorizes participant direction of investment. The adopting employer, the Advisory Committee and the trustee should agree to the conditions and limitations of participant direction of investment. Legal counsel should assist you with this election. [ x ] The plan will permit participant direction of investment. [ ] The plan will not permit participant direction of investment. 6. Section 9.04. The plan authorizes the Advisory Committee to adopt a written loan policy to permit participant loans. [ x ] The plan will permit participant loans. [ ] The plan will not permit participant loans. 7. Section 11.01. The plan may invest in life insurance on behalf of a participant's account, subject to participant consent. [ ] The plan will invest in life insurance contracts. [ x ] The plan will not invest in life insurance contracts. 124 LOAN POLICY The Committee of the retirement plan ("Plan") sponsored by BRENTON BANKS, INC. EMPLOYEES' RETIREMENT PLAN adopts the following loan policy pursuant to the terms of the Plan. As a participant or beneficiary under the Plan, you may receive a loan only as permitted by this loan policy. 1. Loan Application. Any Plan participant may apply for a loan from the Plan. For purposes of this loan policy, the term "participant" means any participant who is an employee of the employer with respect to the Plan. A participant must apply for each loan in writing with an application which specifies the amount of the loan desired, the requested duration for the loan and the source of security for the loan. [The Committee will not approve any loan if a participant is not creditworthy. In order to be creditworthy, the participant must have established in his or her community, a reputation which would entitle him or her to a similar loan from a commercial or business lender. In applying for the loan from the Plan, each participant must give fully authority to investigate his or her creditworthiness.] 2. Limitation on Loan Amount/Purpose of Loan. The Committee will not approve any loan to a participant in an amount which exceeds 50% of his or her nonforfeitable accrued benefit (account balances), as reflected by the books and records of the Plan. The maximum aggregate dollar amount of loans outstanding to any participant may not exceed $50,000, reduced by the excess of the participant's highest outstanding participant loan balance during the 12-month period ending on the date of the loan over the participant's current outstanding participant loan balance on the date of the loan. A participant may not request a loan for less than $1,000. A participant loan may be for the purpose of one or any combination of the following reasons: (1) the purchase, construction or improvement of a resident (2) tuition and other educational expenses; (3) medical and dental expenses. The advisory committee reserves the right to request documentation supporting the above purposes. 3. Evidence and Terms of Loan. The Committee will document every loan in the form of a promissory note signed by the participant for the face amount of the loan, together with a commercially reasonable rate of interest. The Committee must reevaluate interest rates for loans made more than one month since the last loan made by the Plan. A loan will provide a fixed rate of interest equal to the current prime interest rate as published from time to time in the Money section of USA Today, plus one percent (1%). The Committee will determine whether the interest rate is commercially reasonable at the time it approves the loan. The loan must provide for monthly payments under a level amortization schedule with payments deducted via a monthly debit to the participant's bank account with the first payment deducted no later than 30 days after the date of the note. [The Committee will suspend payments for a period not exceeding one year which occurs during an approved leave of absence.] The Committee will fix the term for repayments of any loan. However, in no instance may the term of repayment be greater than five years. The committee may fix the term for repayment of a home loan for a period not to exceed five years. A "home loan" is a loan used to acquire a dwelling unit which, within a reasonable time, the participant will use as a principal residence. Participants should note the law treats the amount of any loan not repaid five years after the date of the loan as a taxable distribution on the last day of the five year period or, if sooner, at the time the loan is in default. If a participant extends a non-home loan having a five year or less repayment term beyond five years, the balance of the loan at the time of the extension is a taxable distribution to the participant. 4. Security for Loan. A participant must secure each loan with an irrevocable pledge and assignment of 50% of the nonforfeitable amount of the borrowing participant's accrued benefit under the Plan. 125 5. Form of Pledge. The pledge and assignment of a participant's account balances will be in the form prescribed by the Committee. 6. Military Service. If a participant separates from service (or takes a leave of absence) from the Employer because of service in the military and does not receive a distribution of his/her account balances, the Plan suspends loan repayments until the participant's completion of military service or until the participant's fifth anniversary of commencement of military service, if earlier. The Employer will provide the participant with a written explanation of the effect of the participant's military service upon his/her Plan loan. 7. Default/Risk of Loss. The Committee will treat a Plan loan in default if: (a) any scheduled payment remains unpaid beyond the last day of the calendar quarter following the calendar quarter in which the participant missed the scheduled payment; or 90 days. (b) there is the making or furnishing of any representation or statement to the Plan by or on behalf of the participant which proves to have been false in any material respect when made or furnished; (c) loss, theft, damage, destruction, sale or encumbrance to or of any of the collateral, or the making of any levy seizure or attachment thereof or thereon; (d) death, dissolution, insolvency, business failure, appointment of receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against the participant. (E) termination of employment occurs for any reason, and the principal balance is not paid within 90 days after employment has ended. The participant will have the opportunity to repay the loan, resume current status of the loan by paying any missed payment plus interest or, if distribution is available under the Plan, request distribution of the note. If the loan remains in default, the Committee will offset the participant's vested account balances by the outstanding balance of the loan. The Committee will treat the note as repaid to the extent of any permissible offset. Pending final disposition of the note, the participant remains obligated for any unpaid principal and accrued interest. The Committee intends this loan program not to place other participants at risk with respect to their interest in the Plan. In this regard, the Committee will administer any participant loan as a participant directed investment of that portion of the participant's vested account balance equal to the outstanding principal balance of the loan. Any loan fees relating to a participant's plan loan will be deducted from the participant's account balance. The Plan will credit that portion of the participant's account balances with the interest earned on the note and with principal payments received by the participant. The Plan also will charge that portion of the participant's account balances with expenses directly related to the organization, maintenance and collection of the note. Dated this 28th day of July, 1999 /s/ Phillip L. Risley /s/ Betsy Piper/Bach /s/ Charles N. Funk /s/ Judy Bohrofen /s/ Steven T. Schuler "Plan Committee" 126 LOAN POLICY The Committee of the retirement plan ("Plan") sponsored by BRENTON BANKS, INC. EMPLOYEES' RETIREMENT PLAN adopts the following loan policy pursuant to the terms of the Plan. As a participant or beneficiary under the Plan, you may receive a loan only as permitted by this loan policy. 1. Loan Application. Any Plan participant may apply for a loan from the Plan. For purposes of this loan policy, the term "participant" means any participant who is an employee of the employer with respect to the Plan. A participant must apply for each loan in writing with an application which specifies the amount of the loan desired, the requested duration for the loan and the source of security for the loan. [The Committee will not approve any loan if a participant is not creditworthy. In order to be creditworthy, the participant must have established in his or her community, a reputation which would entitle him or her to a similar loan from a commercial or business lender. In applying for the loan from the Plan, each participant must give full authority to investigate his or her creditworthiness.] 2. Limitation on Loan Amount/Purpose of Loan. The Committee will not approve any loan to a participant in an amount which exceeds 50% of his or her nonforfeitable accrued benefit (account balances), as reflected by the books and records of the Plan. The maximum aggregate dollar amount of loans outstanding to any participant may not exceed $50,000, reduced by the excess of the participant's highest outstanding participant loan balance during the 12-month period ending on the date of the loan over the participant's current outstanding participant loan balance on the date of the loan. A participant may not request a loan for less than $1,000. A participant loan may be for the purpose of one or any combination of the following reasons: (1) the purchase, construction or improvement of a residence (2) tuition and other educational expenses; (3) medical and dental expenses. The advisory committee reserves the right to request documentation supporting the above purposes. 3. Evidence and terms of Loan. The Committee will document every loan in the form of a promissory note signed by the participant for the face amount of the loan, together with a commercially reasonable rate of interest. The Committee must reevaluate interest rates for loans made more than one month since the last loan made by the Plan. A loan will provide a fixed rate of interest equal to the current prime interest rate as published from time to time in the Money section of USA Today, plus one percent (1%). The Committee will determine whether the interest rate is commercially reasonable at the time it approves the loan. The loan must provide for monthly payments under a level amortization schedule with payments deducted via a monthly debit to the participant's bank account with the first payment deducted no later than 30 days after the date of the note. [The Committee will suspend payments for a period not exceeding one year which occurs during an approved leave of absence.] The Committee will fix the term for repayments of any loan. However, in no instance may the term of repayment be greater than five years. The Committee may fix the term for repayment of a home loan for a period not to exceed five years. A "home loan" is a loan used to acquire a dwelling unit which, within a reasonable time, the participant will use as a principal residence. Participants should note the law treats the amount of any loan not repaid give years after the date of the loan as a taxable distribution on the last day of the five year period or, if sooner, at the time the loan is in default. If a participant extends a non-home loan having a five year or less repayment term beyond five years, the balance of the loan at the time of the extension is a taxable distribution to the participant. 4. Security for Loans. A participant must secure each loan with an irrevocable pledge and assignment of 50% of the nonforfeitable amount of the borrowing participant's accrued benefit under the Plan. 127 5. Form of Pledge. The pledge and assignment of a participant's account balances will be in the form prescribed by the Committee. 6. Military Service. If a participant separates from service (or takes a leave of absence) from the Employer because of service in the military and does not receive a distribution of his/her account balances, the Plan suspends loan repayments until the participant's completion of military service or until the participant's fifth anniversary of commencement of military service, if earlier. The Employer will provide the participant with a written explanation of the effect of the participant's military service upon his/her Plan loan. 7. Default\Risk of Loss. The Committee will treat a Plan loan in default if: (a) any scheduled payment remains unpaid beyond the last day of the calendar quarter following the calendar quarter in which the participant missed the scheduled payment; or 90 days. (b) there is the making or furnishings of any representation or statement to the Plan by or on behalf of the participant which proves to have been false in any material respect when made or furnished; (c) loss, theft, damage, destruction, sale or encumbrance to or of any of the collateral, or the making of any levy seizure or attachment thereof or thereon; (d) death, dissolution, insolvency, business failure, appointment of receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against the participant. (E) termination of employment occurs for any reason, and the principal balance is not paid within 90 days after employment has ended. The participant will have the opportunity to repay the loan, resume current status of the loan by paying any missed payment plus interest or, if distribution is available under the Plan, request distribution of the note. If the loan remains in default, the Committee will offset the participant's vested account balances by the outstanding balance of the loan. The Committee will treat the note as repaid to the extent of any permissible offset. Pending final disposition of the note, the participant remains obligated for any unpaid principal and accrued interest. The Committee intends this loan program not to place other participants at risk with respect to their interests in the Plan. In this regard, the Committee will administer any participant loan as a participant directed investment of that portion of the participant's vested account balance equal to the outstanding principal balance of the loan. Any loan fees relating to a participant's plan loan will be deducted from the participant's account balance. The Plan will credit that portion of the participant's account balances with the interest earned on the note and with principal payments received by the participant. The Plan also will charge that portion of the participant's account balances with expenses directly related to the organization, maintenance and collection of the note. Dated this 28th day of July, 1999. /s/ Phillip L. Risley /s/ Betsy Piper/Bach /s/ Charles N. Funk /s/ Judy Bohrofen /s/ Steven T. Schuler "Plan Committee" 128 EX-10.14 16 Exhibit 10.14 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, 1998. 129 EX-10.15 17 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. 130 EX-10.16 18 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. 131 EX-10.17 19 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. 132 EX-10.18 20 Exhibit 10.18 Indenture Agreement with respect to Capital Notes dated April 8, 1994. I N D E N T U R E A G R E E M E N T W I T H R E S P E C T T O C A P I T A L N O T E S D A T E D A P R I L 8 , 1 9 9 4 134 INDENTURE AGREEMENT THIS INDENTURE AGREEMENT is made as of the 8th day of April, 1994, between BRENTON BANKS, INC., a corporation organized and existing under the laws of Iowa with its principal place of business in the City of Des Moines, Iowa, hereinafter called the "Company," and BANKERS TRUST COMPANY, a state banking corporation organized under the laws of the State of Iowa, with its principal place of business in the City of Des Moines, Iowa, hereinafter called the "Trustee." W I T N E S S E T H: WHEREAS, Company is duly authorized by its Articles of Incorporation and By-Laws to borrow money for its corporate purposes; and, WHEREAS, Company was heretofore duly authorized by a unanimous affirmative vote of its directors at a meeting duly called and held for such purpose to borrow the sum of $5,000,000 for use in connection with its ordinary operations and to issue its Capital Notes in the total sum of $5,000,000, with the same to be secured by an appropriate Indenture Agreement with Bankers Trust Company, Des Moines, Iowa, as Trustee for the Capital Note holders. NOW, THEREFORE, in consideration of One Dollar ($1.00) in hand paid to Trustee, and in consideration of the purchase and acceptance of Capital Notes of Company by various purchasers, Company hereby covenants and declares that its Capital Notes in the maximum principal sum of $5,000,000, and hereinafter more fully described, shall be issued by it upon and subject to the following terms, conditions, and covenants, and Trustee by its execution hereof agrees to act as Trustee for all such Capital Note holders under and pursuant to the terms of this Agreement. ARTICLE I Capital Notes 1.01 Company shall issue its Capital Notes, in the maximum total principal sum of $5,000,000 with the same being in the series, maturing on the dates, and bearing interest at the rates enumerated on Exhibit A attached hereto, which said Capital Notes shall constitute those issued under and pursuant to this Indenture. Such Capital Notes shall be issued in denominations of multiples of $1,000. 1.02 The Capital Notes to be issued under and pursuant to the terms hereof shall be in the form attached hereto as Exhibit B. 1.03 All Capital Notes issued pursuant to this Indenture shall be issued directly to the registered owners as to principal and interest, and shall be transferable by the registered owner in person or by duly authorized attorney at the office of the Company upon surrender and cancellation of the original Capital Note, at which time a new registered Capital Note(s) shall be executed and delivered by Company in lieu thereof with the same registered in the name of the transferee or transferees. Each Capital Note issued in consummation of an assignment and transfer of an original issue, or any subsequent Capital Notes issued and outstanding under the terms hereof, shall be appropriately recorded by both Company and by Trustee. 1.04 All Capital Notes issued under and pursuant to this Indenture shall be certified by Trustee and shall not be valid for any purpose until so certified. Whenever a Capital Note is surrendered for transfer 135 or assignment and a new Capital Note issued in lieu thereof, the same shall be certified at that time by Trustee prior to its delivery to the registered owner or owners. 1.05 All Capital Notes issued under the terms hereof shall have equal priority as to principal. Upon the happening of an "event of default," all interest due and unpaid on that date on all Capital Notes issued and outstanding shall have priority over any principal amounts of such Capital Notes, and shall be paid ratably either in money or property among the Capital Note holders to whom the said unpaid interest is due and owing, and no payment of principal shall be made until all said unpaid interest has been paid and discharged in full. Following payment of the interest, the principal sums due and unpaid on all Capital Notes issued and outstanding as of that date shall then be paid. For the purpose of principal payment, whether by virtue of distribution of money or property, priority with respect thereto shall be equal between all such outstanding Capital Notes. 1.06 Any Capital Note issued under the terms hereof which has been lost, destroyed, or stolen shall be replaced by Company with an identical new Capital Note, certified by Trustee, upon proof of loss, destruction, or theft satisfactory to Company and Trustee and the giving of a bond to secure Company and Trustee from loss, if and to the extent required by Company and Trustee. 1.07 Any Capital Note surrendered to Company by the holder thereof on payment or redemption shall be promptly cancelled by Company and after cancellation delivered to Trustee for recordation and return to Company. A Capital Note surrendered upon an assignment or transfer shall also be so cancelled by Company and delivered to Trustee for recordation and return to Company. 1.08 All Capital Notes issued pursuant to the terms hereof shall bear interest, payable semi-annually on June 1 and December 1 of each year prior to maturity, call for redemption or redemption pursuant to Section 1.11 hereof. No payment of principal shall be made until all unpaid interest has been paid and discharged in full. Following payment of the interest, the principal sums due and unpaid on all Capital Notes issued and outstanding as of that date shall be paid. For the purpose of principal payments, whether by virtue of distribution of money or property, priority with respect thereto shall be equal in all respects between all such outstanding Capital Notes. 1.09 Capital Notes issued and outstanding under the terms hereof shall be paid on maturity to the extent that payment is not prohibited by the terms hereof, and after payment of all interest due and payable on any such outstanding Capital Notes at that time. 1.10 Any Capital Note issued pursuant to this Indenture may be redeemed in whole or in part by Company, on any interest payment date after eight (8) years from the date of issuance of such Capital Note, in advance of maturity at any time thirty (30) days after notice by Company of its election to do so by paying all interest due thereon together with the principal amount thereof. 1.11 Upon the death of an individual registered holder or of an individual bearing a certain designated relationship to the registered holder, a Capital Note will be redeemed by the Company at the option of certain designated person(s) exercised as provided herein at face plus all interest accrued on the Capital Note to the date of redemption. An option shall arise upon the death of an individual who is (i) sole registered holder, (ii) a joint tenant registered holder, (iii) a tenant in common registered holder, (iv) a life tenant registered holder, (v) the sole grantor of a revocable trust which is a registered holder, (vi) a participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, or (vii) the ward of a conservatorship or custodianship which is a registered holder. No option to require redemption of a Capital Note shall arise except as specifically set forth above. 136 Upon the death of an individual who is the sole registered holder of a Capital Note, such option shall be exercisable by the deceased holder's personal representative(s). Upon the death of a registered holder who holds a Capital Note in joint tenancy, such option shall be exercisable by the surviving joint tenant(s). Upon the death of a registered holder who holds a Capital Note in tenancy in common, such option shall be exercisable jointly by the personal representative(s) of the deceased holder and by the remaining tenant(s) in common. Upon the death of a registered holder who has a life estate in a Capital Note, such option shall be exercisable by the remainderman(men). Upon the death of an individual who is the sole grantor of a revocable trust which is a registered holder, such option shall be exercisable by the trustee(s) of the trust. Upon the death of the participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, such option shall be exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon the death of a ward of a conservatorship or custodianship which is a registered holder, such option shall be exercisable by the personal representative(s) of such ward's estate. In the event more than one person is entitled to exercise the option, such option shall be exercisable only with the concurrence of all persons entitled to exercise the option. The option shall be exercisable for a period of 9 months following the date of death of the individual whose death gives rise to the option. The option shall be exercised by the person(s) entitled to exercise the option giving written notice to the Company of the exercise of the option at the Company's principal executive offices. Prior to the redemption of the Capital Note, the person(s) entitled to exercise the option shall furnish the Company with such documentation or evidence as the Company shall require to establish such person's(s') entitlement to exercise the redemption option. The Company shall be under no duty to notify the person(s) entitled to exercise the option of the existence of this redemption option or of any facts which come to the attention of the Company which would give any person the right to exercise the option. 1.12 In the event any Capital Note is not presented for surrender and cancellation on maturity or when called for redemption by Company, Company shall deposit a sum equal to the amount due thereon, with Trustee in trust for payment thereof, and no interest shall be due and payable to the holder of such Capital Note from and after its maturity or redemption date. Such payment by Company to Trustee shall be made within thirty (30) days after the due date. Thereafter, Trustee shall pay over said sum to the owner upon delivery and surrender of the pertinent Capital Note(s) for redemption and cancellation. 1.13 Nothing contained in this Indenture or in any of the Capital Notes shall be construed to cause the Capital Notes issued hereunder to become immediately due and payable in the event of any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety, to any other corporation (whether or not affiliated with the Company) or the purchase of stock and subsequent liquidation of the assets into the purchasing entity (hereinafter "purchase and liquidation") authorized to acquire and operate the same if the following are delivered to the Trustee: (1) an opinion by a certified public accountant appointed by the successor corporation or entity opining that the net worth of the successor corporation or entity following the acquisition, merger, consolidation, sale of assets, or purchase and liquidation determined on a pro forma basis using the successor corporation's or entity's and the Company's most recent year-end financial statements preceding the date of the acquisition, merger, consolidation, sale of assets, or purchase and liquidation is in excess of the net worth of the Company as reflected on the Company's most recent year-end financial statements preceding the date of the acquisition, merger, consolidation, sale of assets, or purchase and liquidation; (2) an Assumption Agreement in which the successor corporation or entity expressly assumes the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company; and (3) an opinion of counsel appointed by the successor corporation or entity that the Assumption Agreement is a valid and binding obligation of such 137 successor corporation or entity enforceable in accordance with its terms and the Capital Notes are valid and binding obligations of the successor corporation or entity. In case of any such consolidation, merger, sale, conveyance, or purchase and liquidation and upon the assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company. 1.14 Any notices which Company is required to give under the terms of this Indenture, or which are deemed necessary or proper by Company, shall be given by first class mail with postage prepaid addressed to each Capital Note holder at the address shown for him on the books and records of Company, and notices so given shall be deemed given upon the date of the mailing thereof. ARTICLE II Covenants of Company 2.01 Company covenants and agrees to pay all principal and interest as the same becomes due and payable upon any Capital Notes issued and outstanding under the terms of this Indenture; provided, however, that principal shall only be paid by it upon surrender of the appropriate Capital Notes for cancellation, or if not surrendered, by payment to Trustee as provided in this Indenture. 2.02 Subject to the provisions of Section 1.13 hereof, Company covenants to continue the operation of its business, all as required and permitted by its Articles of Incorporation and By- Laws, and to at all times maintain sufficient assets and property to continue such general operations so long as any of its Capital Notes remain issued and outstanding under the terms hereof. 2.03 Company covenants to meet all requirements relative to issuance of said Capital Notes, payment of principal and interest thereon from the sources specified, and all other conditions relating thereto as provided in Article I hereof. 2.04 Company further covenants to furnish Trustee true copies of all quarterly and annual reports normally prepared by Company. 2.05 On an annual basis Company covenants to furnish trustee with a certificate indicating whether there has been an "event of default", as defined in Article III hereof, on the Capital Notes. Said statement shall be certified by an officer of the Company that it is true and accurate according to the Company's best knowledge and belief. The Company shall deliver the certificate to the Trustee within ninety (90) days of the Company's fiscal year end. 2.06. The Company further covenants to furnish Trustee a quarterly statement listing the current capital noteholders. Said statement shall be certified by an officer of the Company to be true and accurate according to the Company's best knowledge and belief. ARTICLE III Defaults: Rights, Remedies, and Duties of Trustee and Capital Note Holders 3.01 An "event of default" shall constitute any one of the following: 138 a. Failure of Company to pay interest or principal or any part thereof, within thirty (30) days after due; b. Failure of Company to fully perform any other covenant or obligation made and to be kept or performed by Company by virtue of this Indenture which is not remedied within sixty (60) days after notice of such failure from Trustee or from the holders of twenty-five percent (25%) of the principal amount of all Capital Notes issued and outstanding under the terms hereof at that time. c. Adjudication of Company as a bankrupt or insolvent in any state or federal court, or appointment by any court of a receiver to take over and conduct the business, affairs, and property of Company, or commencement of liquidation of Company, either voluntary or involuntary, pursuant to any bankruptcy, insolvency or receivership. 3.02 Subject to the provisions of Section 4.01(e), upon the happening of an "event of default," Trustee shall declare all principal and interest on all Capital Notes of Company then issued and outstanding under the terms hereof due and payable at once by written notice to Company, and thereafter, Trustee may sue at law or in equity or proceed in any other manner authorized by law to enforce payment of all sums due on any such outstanding Capital Notes and to establish and enforce all rights and priorities of every kind and nature of the holders of all such Capital Notes and of such Trustee. 3.03 Subject to the provisions of Section 4.01(e), upon the occurrence of an "event of default" as defined in this Indenture, Trustee, within thirty (30) days after knowledge thereof, shall give written notice thereof to all registered owners of Capital Notes outstanding under the terms of this Indenture at that time, said notice to be by ordinary first class mail addressed to each owner at the address shown on Trustee's records. Failure to give notices under the terms hereof, however, shall not make Trustee liable for any claim resulting therefrom. 3.04 In any action or proceeding in which rights of Capital Note holders in and to the assets and property of Company are or may be affected, or to enforce payment of interest or principal due under this Indenture or any of the Capital Notes issued pursuant to the same, or to otherwise enforce performance by Company of any obligations made or to be performed by it under the terms hereof or of Capital Notes issued pursuant to this Indenture, Trustee shall act for and on behalf of all Capital Note Holders, and shall file and make proof of debts, claims, petitions, pleadings, and all other instruments, and may take all action and steps deemed necessary or proper to enforce, protect, and preserve all rights and properties of the holders of outstanding Capital Notes. 3.05 Trustee may employ counsel as in its discretion deemed proper in the case of any "event of default" of Company, or any other actions as in this Indenture described or provided for with respect to Trustee either in its own right or for and on behalf of Capital Note holders, and Company shall pay all fees and expenses of such counsel and of Trustee in any such acts, actions, or proceedings taken by Trustee under terms hereof. 3.06 All moneys collected or received by Trustee by virtue of any act, action, or proceeding taken under the terms hereof or received by Trustee for and on behalf of Capital Note holders shall be disbursed as follows: a. In payment of all costs, expenses, charges, and fees of Trustee, including counsel and attorney's fees; 139 b. In payment of all principal and interest due and unpaid on the Capital Notes issued and outstanding at that time. If there are insufficient funds to fully pay all such principal and interest, the funds available shall be applied and paid first ratably to the payment of unpaid interest and then ratably to the payment of principal; c. The remainder, if any, to Company. 3.07 In case of an "event of default" by Company by virtue of which the Trustee may elect to institute an action or proceeding on behalf of the Capital Note holders against Company, if Trustee does not institute an action within thirty (30) days after its elective right to so do has accrued, the holders of Capital Notes totaling twenty-five percent (25%) of the principal amount of all such Capital Notes then issued and outstanding by written demand given to Trustee may require Trustee to institute any action or proceeding which they direct Trustee to initiate, provided however, that Trustee, before bringing any such action, may, as is hereinafter more fully spelled out, require adequate security from such Capital Note holders to protect it against any loss by virtue of expenses, charges, and fees incident to any action so required. In the event that two or more groups of holders of Capital Notes each of which holds Capital Notes totaling twenty-five percent (25%) of the principal amount of all such Capital Notes then issued and outstanding direct the trustee to proceed in a conflicting manner(s), the trustee may interplead the funds into or may seek a declaratory determination of the conflict(s) from the District Court for Polk County, Iowa. 3.08 No holder of any Capital Note issued hereunder shall have the right to institute any suit, action, or proceeding in equity or at law for the execution of any trust or power hereof or for the endorsement or any remedy under this Indenture or any Capital Note issued hereunder unless: a. Such holder shall have previously given the Trustee written notice of some existing "event of default" and of the continuance thereof; b. The holders of twenty-five percent (25%) in principal amount of the Capital Notes at the time outstanding shall have requested the Trustee to exercise such power or right of action after the right to do so has accrued hereunder and have afforded the Trustee a reasonable opportunity to proceed upon such request; c. Such holders shall have offered to Trustee indemnity satisfactory to it against the costs, expenses, and liabilities to be incurred thereby; and d. The Trustee shall have failed or refused to comply with such request within a period of sixty (60) days. Compliance with the foregoing conditions shall at the option of the Trustee be a condition precedent to the exercise of the powers and trusts of this Indenture and to any action or proceeding for the enforcement of any remedy hereunder, and no holder of any Capital Note shall have any right to enforce any right on account of this Indenture or his Capital Note, except in the manner herein provided, and in any event all proceedings hereunder at law or in equity shall be instituted and maintained for the ratable benefit of all holders of outstanding Capital Notes in the manner and with the interest priority provided for in Section 1.05 and Section 3.06, and any other applicable provisions hereof. 140 ARTICLE IV Trustee, Its Rights and Duties, and Successor Trustees 4.01 The Trustee, for itself and its successors, hereby accepts the trust created by this Indenture and assumes the duties imposed, but upon the following terms and conditions: a. Trustee shall be entitled to reasonable compensation for all services from time to time rendered by it under and by virtue of the terms of this Indenture including an acceptance fee, together with all expenses from time to time incurred by it, including fees paid for counsel and for legal services. The parties hereto shall agree upon Trustee's fees for ordinary services from time to time hereunder. In the event the parties do not agree, or in the event of extraordinary services by virtue of events of default or liquidation of Company, or any other matter which may require extraordinary services from Trustee, Trustee's compensation may be fixed by an appropriate court. Company covenants to pay all compensation to which Trustee may be entitled, including expenses and fees from time to time, promptly upon demand. b. Trustee shall not be responsible for the correctness of any recitals in this Indenture of any Capital Notes issued under and pursuant to the same (except certificates and authentications by Trustee). c. Trustee may employ and consult with counsel whenever deemed necessary, and the opinion of such counsel shall be full and complete authorization and protection to and for Trustee in respect of any action taken or suffered by it in good faith and in accordance with the opinion of such counsel. d. Trustee may rely upon the correctness of any certificate or statement, of the President or a Vice President of Company furnished from time to time under the terms hereof and shall not be liable in any way for any act done or any omission to act in reliance on any such certificate or statement. e. Trustee hereunder shall have no responsibility for determining when or whether an "Event of Default" has occurred except for those events of default which would come to its knowledge and attention in the ordinary course of business under this form of Trust Indenture. 4.02 Trustee shall not be liable for any act of commission or omission on its part in connection with the discharge and performance of its duties and obligations under this Indenture and any Capital Notes issued pursuant hereto, except to the extent that any such act or omission shall constitute willful misconduct or negligence, and reliance upon certificates and statements of Company, the President or a Vice President thereof, opinions of counsel (whether counsel for Company or not), and good faith errors in judgment by a responsible officer or officers of Trustee shall not be held to be negligent in any case. 4.03 Trustee shall keep at all times a current list of the names and addresses of registered Capital Note holders, issued and outstanding under the terms of this Indenture. Company shall promptly notify Trustee of all changes in names or addresses of Capital Note holders known to it. 141 4.04 Trustee may resign whenever it may elect to so do, sixty (60) days after a written notice of its intention to so do has been served on Company and on all Capital Note owners shown by the records of Trustee (notices in all cases to be by ordinary, first class mail with the date of service thereof), and in the event Trustee shall resign, or in the event Trustee shall be dissolved and cease to do business as a bank or trust company, Company shall designate by an appropriate written instrument a successor Trustee which shall be a state or national bank or trust company with its principal office in the state of Iowa. Any successor trustee appointed by Company under the terms hereof shall have all rights, powers, and duties of the original Trustee as herein provided, and whenever in this Indenture the word "Trustee" appears or the Trustee is referred to, it shall mean and includes any and all successor Trustees who may be appointed hereunder. 4.05 Trustee shall not be in any manner precluded from buying, selling, owning, or dealing in Capital Notes issued pursuant to this agreement, either in its own right or as agent for others, as fully and completely as any other individual, firm, or corporation could do. 4.06 Trustee or Company may (and on written request of owners of twenty-five percent (25%) in principal amount of outstanding Capital Notes shall) call a meeting of all Capital Note owners for any appropriate purpose. Such meeting shall be called by giving a written notice of the time and place thereof by ordinary, first class mail to all Capital Note owners whose names and addresses are first shown in the records of Trustee, mailed not less than five (5) days prior to the date fixed for such meeting. The Company shall pay for the costs of calling and holding said meeting. 4.07 In any case in which Trustee is required or may deem it proper or advisable to give a notice to Company, a Capital Note holder or any other person, firm, or agency, such notice shall be given by ordinary, first class mail, addressed to the last known post office address of any such person, firm, or agency, and the time of service thereof shall be the time of mailing thereof. ARTICLE V 5.01 The Company and Trustee may make arrangements varying, amending or changing this Indenture as Company and Trustee shall from time to time deem proper without the approval of the noteholders, provided only that no such amendment shall adversely affect any rights or interests of owners of Capital Notes then issued and outstanding under and pursuant to this Indenture. 5.02 Upon the execution of any Supplemental Indenture pursuant to the provisions of this Article V, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties, and immunities under this Indenture of the Trustee, the Company, and the holders of Capital Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. IN WITNESS WHEREOF, Brenton Banks, Inc. has caused this Indenture to be executed in its name and on its behalf by its President, duly attested by its Secretary, with its corporate seal hereto attached, and Bankers Trust Company, Des Moines, Iowa, to evidence its acceptance of the trusts hereby created, has caused this instrument to be signed in its name and on its behalf by a duly authorized officer, all on or as of this 8th day of April, 1994. 142 BRENTON BANKS, INC. BANKERS TRUST COMPANY By____________________________ By___________________________ Robert L. DeMeulenaere, Bryan Hall, Trust Officer President ATTEST: By_______________________________ Steven T. Schuler, Chief Financial Officer and Treasurer/Secretary STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this ___ day of ___________________, 1994, before me, a Notary Public in and for Polk County, Iowa, personally appeared Robert L. DeMeulenaere, President, and Steven T. Schuler, Chief Financial Officer and Treasurer/Secretary, of Brenton Banks, Inc., the corporation which executed the above and foregoing instrument, who being to me known as the identical persons who signed the foregoing instrument, and by me duly sworn, each for himself, did say that they are respectively the President and the Chief Financial Officer/Secretary/Treasurer of said corporation, and that said instrument was by them signed and sealed on behalf of the said corporation by authority of its Board of Directors, and each of them acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and each of them voluntarily executed. IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial Seal the day and year last above written. ___________________________ ______________, Notary Public in and for Polk County STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this ____ day of _____________________, 1994, before me, a Notary Public in and for Polk County, Iowa, personally appeared Bryan Hall, of Bankers Trust Company, the corporation which executed the above and foregoing instrument, who being to me known as the identical person who signed the foregoing 143 instrument, and by me duly sworn, did say that he is the Trust Officer of said corporation, and that said instrument was by him signed and sealed on behalf of the said corporation by authority of its Board of Directors, and he acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed. IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial Seal the day and year last above written. _____________________ ______________, Notary Public in and for Polk County 144 5.00% Capital Notes Series SS-22 through SS-33 Due 1998 through 2009 5.25% Capital Notes Series TT-22 through TT-33 Due 1998 through 2009 5.50% Capital Notes Series UU-22 through UU-33 Due 1998 through 2009 5.75% Capital Notes Series VV-22 through VV-33 Due 1998 through 2009 6.00% Capital Notes Series G-22 through G-33 Due 1998 through 2009 6.25% Capital Notes Series Q-22 through Q-33 Due 1998 through 2009 6.50% Capital Notes Series J-22 through J-33 Due 1998 through 2009 6.75% Capital Notes Series K-22 through K-33 Due 1998 through 2009 7.00% Capital Notes Series M-22 through M-33 Due 1998 through 2009 7.25% Capital Notes Series N-22 through N-33 Due 1998 through 2009 7.50% Capital Notes Series R-22 through R-33 Due 1998 through 2009 7.75% Capital Notes Series T-22 through T-33 Due 1998 through 2009 8.00% Capital Notes Series U-22 through U-33 Due 1998 through 2009 8.25% Capital Notes Series V-22 through V-33 Due 1998 through 2009 8.50% Capital Notes Series W-22 through W-33 Due 1998 through 2009 8.75% Capital Notes Series X-22 through X-33 Due 1998 through 2009 9.00% Capital Notes Series Y-22 through Y-33 Due 1998 through 2009 9.25% Capital Notes Series B-22 through B-33 Due 1998 through 2009 9.50% Capital Notes Series A-22 through A-33 Due 1998 through 2009 9.75% Capital Notes Series C-22 through C-33 Due 1998 through 2009 10.00% Capital Notes Series D-22 through D-33 Due 1998 through 2009 10.25% Capital Notes Series E-22 through E-33 Due 1998 through 2009 10.50% Capital Notes Series F-22 through F-33 Due 1998 through 2009 10.75% Capital Notes Series H-22 through H-33 Due 1998 through 2009 11.00% Capital Notes Series I-22 through I-33 Due 1998 through 2009 11.25% Capital Notes Series L-22 through L-33 Due 1998 through 2009 11.50% Capital Notes Series O-22 through O-33 Due 1998 through 2009 11.75% Capital Notes Series S-22 through S-33 Due 1998 through 2009 12.00% Capital Notes Series Z-22 through Z-33 Due 1998 through 2009 12.25% Capital Notes Series P-22 through P-33 Due 1998 through 2009 12.50% Capital Notes Series SS-22 through SS-33 Due 1998 through 2009 12.75% Capital Notes Series AA-22 through AA-33 Due 1998 through 2009 13.00% Capital Notes Series BB-22 through BB-33 Due 1998 through 2009 145 O No. _______________ BRENTON BANKS, INC. DES MOINES, IOWA $__________________ REGISTERED CAPITAL NOTE (SERIES _______________________ CALLABLE) Brenton Banks, Inc., a corporation organized and existing under the laws of the State of Iowa, hereinafter referred to as the Corporation, for value received hereby promises to pay to the registered holder hereof, upon presentation of this Capital Note, the sum of $___________________ on the 1st day of June,______________, at the main office of the Corporation in the City of Des Moines, Iowa. The Corporation further agrees to pay interest on the principal amount from the __________ day of ____________________, until paid, at the rate of _______% per annum, payable semi-annually on the first day of June and December of each year. The Corporation shall, upon request of the registered holder hereof, mail a check representing the interest hereon, or the principal when due, to the registered holder at his address appearing on the books of registration. The Capital Note is subject to being called on any interest payment date occurring more than eight (8) years after the date of issuance hereof, at the option of the Corporation on not less than thirty (30) days' prior written notice given by the Corporation by ordinary mail to the holder of the Capital Note at such holder's address appearing on the books of registration, at 100% of the principal amount of this Capital Note, together with interest accrued and unpaid on this Capital Note, to the date fixed for such call. Upon the death of an individual registered holder or of an individual bearing a certain designated relationship to the registered holder, a Capital Note will be redeemed by the Company at the option of certain designated person(s) exercised as provided herein at face plus all interest accrued on the Capital Note to the date of redemption. An option shall arise upon the death of an individual who is (i) sole registered holder, (ii) a joint tenant registered holder, (iii) a tenant in common registered holder, (iv) a life tenant registered holder, (v) the sole grantor of a revocable trust which is a registered holder, (vi) a participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, or (vii) the ward of a conservatorship or custodianship which is a registered holder. No option to require redemption of a Capital Note shall arise except as specifically set forth above. Upon the death of an individual who is the sole registered holder of a Capital Note, such option shall be exercisable by the deceased holder's personal representative(s). Upon the death of a registered holder who holds a Capital Note in joint tenancy, such option shall be exercisable by the surviving joint tenant(s). Upon the death of a registered holder who holds a Capital Note in tenancy in common, such option shall be exercisable jointly by the personal representative(s) of the deceased holder and by the remaining tenant(s) in common. Upon the death of a registered holder who has a life estate in a Capital Note, such option shall be exercisable by the remainderman(men). Upon the death of an individual who is the sole grantor of a revocable trust which is a registered holder, such option shall be exercisable by the trustee(s) of the trust. Upon the death of the participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, such option shall be exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon the death of a ward of a conservatorship or custodianship which is a registered holder, such option shall be exercisable by the personal representative(s) of such ward's estate. In the event more than one person is entitled to exercise the option, such option shall be exercisable only with the concurrence of all persons entitled to exercise the option. The option shall be exercisable for a period of 9 months following the date of death of the individual whose death gives rise to the option. The option shall be exercised by the person(s) entitled to exercise the option giving written notice to the Company of the exercise of the option at the Company's principal executive offices. Prior to the redemption of the Capital Note, the person(s) entitled to exercise the option shall furnish the Company with such documentation or evidence as the Company shall require to establish such person's(s') entitlement to exercise the redemption option. The Company shall be under no duty to notify the person(s) entitled to exercise the option of the existence of this redemption option or of any facts which come to the attention of the Company which would give any person the right to exercise the option. This Capital Note is one of an authorized issue of fully registered Capital Notes of Brenton Banks, Inc., issued in multiples of $1,000 and limited to the aggregate principal amount of $5,000,000 at any one time outstanding, all issued pursuant to an Indenture dated April 8, 1994,executed and delivered by the Corporation to the Trustee, to which Indenture reference is hereby made for a description of rights, duties and obligations thereunder of the Corporation, the Trustee and the Owners of the Capital Notes. In the event of default in the payment of principal of, or interest on, this Capital Note, the total principal amount of this Capital Note, and all interest hereof, shall become due and payable and the Corporation shall immediately pay the same. Books for the registry hereof are maintained at the office of the Corporation or at the agency of the Corporation established for that purpose in the city of Des Moines, Iowa. This Capital Note is transferable by the registered holder hereof in person, or by his duly authorized attorney, at the office or agency of the Corporation for such purpose in the city of Des Moines, Iowa, upon surrender for cancellation of this Capital Note at said office or agency. Thereupon, a new Capital Note for a like principal amount, or new Capital Notes in such authorized denominations and registered in such name or names, as shall have been requested, shall be issued and delivered. No transfer hereof shall be valid unless made on the Corporation's books, at the office of the Corporation or the agency established for that purpose, in accordance with the provisions of the foregoing paragraph. The Corporation and its agents may deem and treat the person in whose name this Capital Note is registered as the absolute owner of the Capital Note for the purpose of receiving payment hereof and interest due hereon, but the Corporation may, at any time, require the presentation hereof as a condition precedent to such payment. No recourse shall be had for the payment of the principal of, or interest upon, this Capital Note, against any shareholder, officer, or director of the Corporation, by reason of any matter prior to the delivery of this Note, or otherwise, all such liability, by the acceptance hereof, and as a part of the consideration of this issue hereof, being expressly waived. In the event any Capital Note is not presented for payment when due or when called by the Corporation, the Corporation shall deposit a sum equal to the amount due thereon with Trustee in trust for payment thereof and neither the Corporation nor Trustee shall thereafter be liable for any interest thereon. This Capital Note and any subsequent Capital Note issued on transfer and surrender hereunder shall not be valid for any purpose until duly certified by the Trustee under the Indenture supporting the name. This Capital Note is not a deposit and is not insured by the Federal Deposit Insurance Corporation. IN WITNESS WHEREOF, the Corporation has caused this Capital Note to be executed by its Chairman, Vice Chairman, President, or Treasurer, and attested to by another authorized officer, and its corporate seal affixed hereto, at Des Moines, Iowa, on the day and year appearing below. Corporate Seal: Date: ________________________________ BRENTON BANKS, INC. By: __________________________________ (Chairman, Vice Chairman, President or Treasurer) ATTEST: ______________________________________ (Secretary, Asst. Secretary Treasurer, Asst. Treasurer, Controller or Asst. Controller) 146 REGISTRATION (No writing on this registered Capital Note except by an officer or agent of the Corporation) Date of In Whose Registry Registration Name Registered Address Officer ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ TRUSTEE'S CERTIFICATE The foregoing Capital Note is hereby certified by the undersigned Bank as Trustee as one of the series of Capital Notes of Brenton Banks, Inc., described in the Indenture referred to therein, made between the Corporation and this Bank as Trustee. Dated as of this _______ day of ____________________, ______. _______________________________ (Trustee) By_____________________________ Its____________________________ (Title) ASSIGNMENT For value received I hereby assign to __________________________________ the within registered Capital Note and hereby irrevocably appoint _________________________________________________ attorney to transfer the registered Capital Note on the books of the within named Corporation with full power of substitution in the premises. Dated:_________________________ Signatures guaranteed by the ____________________________________ Signature (in whose name registered) _______________________________ (Bank) _______________________________ ____________________________________ Signature Signature (in whose name registered) _______________________________ Date Office & Title The transfer of any notes represented by this certificate to any person who is not then a bona fide resident of the State of Iowa purchasing such notes for the purpose of investment and not for resale is restricted pursuant to the terms of a subscription form executed by the original holder of such notes. 147 EX-10.19 21 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. 148 EX-10.20 22 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. 149 EX-10.21 23 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. 150 EX-10.22 24 Exhibit 10.22 Indenture Agreement with respect to Capital Notes dated April 16, 1998. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 151 EX-10.23 25 Indenture Agreement with respect to Capital Notes dated April 19, 1999. 152 I N D E N T U R E A G R E E M E N T W I T H R E S P E C T T O C A P I T A L N O T E S D A T E D A P R I L 19, 1 9 9 9 153 INDENTURE AGREEMENT THIS INDENTURE AGREEMENT is made as of the 19th day of April, 1999, between BRENTON BANKS, INC., a corporation organized and existing under the laws of Iowa with its principal place of business in the City of Des Moines, Iowa, hereinafter called the "Company," and BANKERS TRUST COMPANY, a state banking corporation organized under the laws of the State of Iowa, with its principal place of business in the City of Des Moines, Iowa, hereinafter called the "Trustee." W I T N E S S E T H: WHEREAS, Company is duly authorized by its Articles of Incorporation and By-Laws to borrow money for its corporate purposes; and, WHEREAS, Company was heretofore duly authorized by a unanimous affirmative vote of its directors at a meeting duly called and held for such purpose to borrow the sum of $5,000,000 for use in connection with its ordinary operations and to issue its Capital Notes in the total sum of $5,000,000, with the same to be secured by an appropriate Indenture Agreement with Bankers Trust Company, Des Moines, Iowa, as Trustee for the Capital Note holders. NOW, THEREFORE, in consideration of One Dollar ($1.00) in hand paid to Trustee, and in consideration of the purchase and accep- tance of Capital Notes of Company by various purchasers, Company hereby covenants and declares that its Capital Notes in the maximum principal sum of $5,000,000, and hereinafter more fully described, shall be issued by it upon and subject to the following terms, conditions, and covenants, and Trustee by its execution hereof agrees to act as Trustee for all such Capital Note holders under and pursuant to the terms of this Agreement. ARTICLE I Capital Notes 1.01 Company shall issue its Capital Notes, in the maximum total principal sum of $5,000,000 with the same being in the series, maturing on the dates, and bearing interest at the rates enumerated on Exhibit A attached hereto, which said Capital Notes shall constitute those issued under and pursuant to this Indenture. Such Capital Notes shall be issued in denominations of multiples of $1,000. 1.02 The Capital Notes to be issued under and pursuant to the terms hereof shall be in the form attached hereto as Exhibit B. 154 1.03 All Capital Notes issued pursuant to this Indenture shall be issued directly to the registered owners as to principal and interest, and shall be transferable by the registered owner in person or by duly authorized attorney at the office of the Company upon surrender and cancellation of the original Capital Note, at which time a new registered Capital Note(s) shall be executed and delivered by Company in lieu thereof with the same registered in the name of the transferee or transferees. Each Capital Note issued in consummation of an assignment and transfer of an original issue, or any subsequent Capital Notes issued and outstanding under the terms hereof, shall be appropriately recorded by both Company and by Trustee. 1.04 All Capital Notes issued under and pursuant to this Indenture shall be certified by Trustee and shall not be valid for any purpose until so certified. Whenever a Capital Note is surren- dered for transfer or assignment and a new Capital Note issued in lieu thereof, the same shall be certified at that time by Trustee prior to its delivery to the registered owner or owners. 1.05 All Capital Notes issued under the terms hereof shall have equal priority as to principal. Upon the happening of an "event of default," all interest due and unpaid on that date on all Capital Notes issued and outstanding shall have priority over any principal amounts of such Capital Notes, and shall be paid ratably either in money or property among the Capital Note holders to whom the said unpaid interest is due and owing, and no payment of principal shall be made until all said unpaid interest has been paid and discharged in full. Following payment of the interest, the principal sums due and unpaid on all Capital Notes issued and outstanding as of that date shall then be paid. For the purpose of principal payment, whether by virtue of distribution of money or property, priority with respect thereto shall be equal between all such outstanding Capital Notes. 1.06 Any Capital Note issued under the terms hereof which has been lost, destroyed, or stolen shall be replaced by Company with an identical new Capital Note, certified by Trustee, upon proof of loss, destruction, or theft satisfactory to Company and Trustee and the giving of a bond to secure Company and Trustee from loss, if and to the extent required by Company and Trustee. 1.07 Any Capital Note surrendered to Company by the holder thereof on payment or redemption shall be promptly cancelled by Company and after cancellation delivered to Trustee for recordation and return to Company. A Capital Note surrendered upon an 155 assignment or transfer shall also be so cancelled by Company and delivered to Trustee for recordation and return to Company. 1.08 All Capital Notes issued pursuant to the terms hereof shall bear interest, payable semi-annually on June 1 and December 1 of each year prior to maturity, call for redemption or redemption pursuant to Section 1.11 hereof. No payment of principal shall be made until all unpaid interest has been paid and discharged in full. Following payment of the interest, the principal sums due and unpaid on all Capital Notes issued and outstanding as of that date shall be paid. For the purpose of principal payments, whether by virtue of distribution of money or property, priority with respect thereto shall be equal in all respects between all such outstanding Capital Notes. 1.09 Capital Notes issued and outstanding under the terms hereof shall be paid on maturity to the extent that payment is not prohibited by the terms hereof, and after payment of all interest due and payable on any such outstanding Capital Notes at that time. 1.10 Any Capital Note issued pursuant to this Indenture may be redeemed in advance of maturity in whole or in part by Company, on any interest payment date occurring on or after the midpoint between the date of issuance and the stated maturity date of such Capital Note, at any time after thirty (30) days notice by Company of its election to do so by paying all interest due thereon together with the principal amount thereof. 1.11 Upon the death of an individual registered holder or of an individual bearing a certain designated relationship to the registered holder, a Capital Note will be redeemed by the Company at the option of certain designated person(s) exercised as provided herein at face plus all interest accrued on the Capital Note to the date of redemption. An option shall arise upon the death of an individual who is (i) sole registered holder, (ii) a joint tenant registered holder, (iii) a tenant in common registered holder, (iv) a life tenant registered holder, (v) the sole grantor of a revocable trust which is a registered holder, (vi) a participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, or (vii) the ward of a conservatorship or custodianship which is a registered holder. No option to require redemption of a Capital Note shall arise except as specifically set forth above. Upon the death of an individual who is the sole registered holder of a Capital Note, such option shall be exercisable by the deceased holder's personal representative(s). Upon the death of a registered holder who holds a Capital Note in joint tenancy, such 156 option shall be exercisable by the surviving joint tenant(s). Upon the death of a registered holder who holds a Capital Note in tenancy in common, such option shall be exercisable jointly by the personal representative(s) of the deceased holder and by the remaining tenant(s) in common. Upon the death of a registered holder who has a life estate in a Capital Note, such option shall be exercisable by the remainderman(men). Upon the death of an individual who is the sole grantor of a revocable trust which is a registered holder, such option shall be exercisable by the trustee(s) of the trust. Upon the death of the participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, such option shall be exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon the death of a ward of a conservatorship or custodianship which is a registered holder, such option shall be exercisable by the personal representative(s) of such ward's estate. In the event more than one person is entitled to exercise the option, such option shall be exercisable only with the concurrence of all persons entitled to exercise the option. The option shall be exercisable for a period of 9 months following the date of death of the individual whose death gives rise to the option. The option shall be exercised by the person(s) entitled to exercise the option giving written notice to the Company of the exercise of the option at the Company's principal executive offices. Prior to the redemption of the Capital Note, the person(s) entitled to exercise the option shall furnish the Company with such documentation or evidence as the Company shall require to establish such person's(s') entitlement to exercise the redemption option. The Company shall be under no duty to notify the person(s) entitled to exercise the option of the existence of this redemption option or of any facts which come to the attention of the Company which would give any person the right to exercise the option. 1.12 In the event any Capital Note is not presented for sur- render and cancellation on maturity or when called for redemption by Company, Company shall deposit a sum equal to the amount due thereon, with Trustee in trust for payment thereof, and no interest shall be due and payable to the holder of such Capital Note from and after its maturity or redemption date. Such payment by Company to Trustee shall be made within thirty (30) days after the due date. Thereafter, Trustee shall pay over said sum to the owner upon delivery and surrender of the pertinent Capital Note(s) for redemption and cancellation. 1.13 Nothing contained in this Indenture or in any of the Capital Notes shall be construed to cause the Capital Notes issued 157 hereunder to become immediately due and payable in the event of any consolidation or merger of the Company with or into any other corporation or corporations (whether or not affiliated with the Company), or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or any sale or conveyance of the property of the Company as an entirety or substantially as an entirety, to any other corporation (whether or not affiliated with the Company) or the purchase of stock and subsequent liquidation of the assets into the purchasing entity (hereinafter "purchase and liquidation") authorized to acquire and operate the same if the following are delivered to the Trustee: (1) an opinion by a certified public accountant appointed by the successor corporation or entity opining that the net worth of the successor corporation or entity following the acquisition, merger, consolidation, sale of assets, or purchase and liquidation determined on a pro forma basis using the successor corporation's or entity's and the Company's most recent year-end financial statements preceding the date of the acquisition, merger, consolidation, sale of assets, or purchase and liquidation is in excess of the net worth of the Company as reflected on the Company's most recent year-end financial statements preceding the date of the acquisition, merger, consolidation, sale of assets, or purchase and liquidation; (2) an Assumption Agreement in which the successor corporation or entity expressly assumes the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company; and (3) an opinion of counsel appointed by the successor corporation or entity that the Assumption Agreement is a valid and binding obligation of such successor corporation or entity enforceable in accordance with its terms and the Capital Notes are valid and binding obligations of the successor corporation or entity. In case of any such consolidation, merger, sale, conveyance, or purchase and liquidation and upon the assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company. 1.14 Any notices which Company is required to give under the terms of this Indenture, or which are deemed necessary or proper by Company, shall be given by first class mail with postage prepaid addressed to each Capital Note holder at the address shown for him on the books and records of Company, and notices so given shall be deemed given upon the date of the mailing thereof. 158 ARTICLE II Covenants of Company 2.01 Company covenants and agrees to pay all principal and interest as the same becomes due and payable upon any Capital Notes issued and outstanding under the terms of this Indenture; provided, however, that principal shall only be paid by it upon surrender of the appropriate Capital Notes for cancellation, or if not surrendered, by payment to Trustee as provided in this Indenture. 2.02 Subject to the provisions of Section 1.13 hereof, Company covenants to continue the operation of its business, all as required and permitted by its Articles of Incorporation and By- Laws, and to at all times maintain sufficient assets and property to continue such general operations so long as any of its Capital Notes remain issued and outstanding under the terms hereof. 2.03 Company covenants to meet all requirements relative to issuance of said Capital Notes, payment of principal and interest thereon from the sources specified, and all other conditions relating thereto as provided in Article I hereof. 2.04 Company further covenants to furnish Trustee true copies of all quarterly and annual reports normally prepared by Company. 2.05 On an annual basis Company covenants to furnish trustee with a certificate indicating whether there has been an "event of default", as defined in Article III hereof, on the Capital Notes. Said statement shall be certified by an officer of the Company that it is true and accurate according to the Company's best knowledge and belief. The Company shall deliver the certificate to the Trustee within ninety (90) days of the Company's fiscal year end. 2.06 The Company further covenants to furnish Trustee a quarterly statement listing the current capital noteholders. Said statement shall be certified by an officer of the Company to be true and accurate according to the Company's best knowledge and belief. 159 ARTICLE III Defaults: Rights, Remedies, and Duties of Trustee and Capital Note Holders 3.01 An "event of default" shall constitute any one of the following: a. Failure of Company to pay interest or principal or any part thereof, within thirty (30) days after due; b. Failure of Company to fully perform any other covenant or obligation made and to be kept or performed by Company by virtue of this Indenture which is not remedied within sixty (60) days after notice of such failure from Trustee or from the holders of twenty- five percent (25%) of the principal amount of all Capital Notes issued and outstanding under the terms hereof at that time. c. Adjudication of Company as a bankrupt or insolvent in any state or federal court, or appointment by any court of a receiver to take over and conduct the business, affairs, and property of Company, or commencement of liquidation of Company, either voluntary or involuntary, pursuant to any bankruptcy, insolvency or receivership. 3.02 Subject to the provisions of Section 4.01(e), upon the happening of an "event of default," Trustee shall declare all prin- cipal and interest on all Capital Notes of Company then issued and outstanding under the terms hereof due and payable at once by written notice to Company, and thereafter, Trustee may sue at law or in equity or proceed in any other manner authorized by law to enforce payment of all sums due on any such outstanding Capital Notes and to establish and enforce all rights and priorities of every kind and nature of the holders of all such Capital Notes and of such Trustee. 3.03 Subject to the provisions of Section 4.01(e), upon the occurrence of an "event of default" as defined in this Indenture, Trustee, within thirty (30) days after knowledge thereof, shall give written notice thereof to all registered owners of Capital Notes outstanding under the terms of this Indenture at that time, said notice to be by ordinary first class mail addressed to each owner at the address shown on Trustee's records. Failure to give notices 160 under the terms hereof, however, shall not make Trustee liable for any claim resulting therefrom. 3.04 In any action or proceeding in which rights of Capital Note holders in and to the assets and property of Company are or may be affected, or to enforce payment of interest or principal due under this Indenture or any of the Capital Notes issued pursuant to the same, or to otherwise enforce performance by Company of any obligations made or to be performed by it under the terms hereof or of Capital Notes issued pursuant to this Indenture, Trustee shall act for and on behalf of all Capital Note Holders, and shall file and make proof of debts, claims, petitions, pleadings, and all other instruments, and may take all action and steps deemed necessary or proper to enforce, protect, and preserve all rights and properties of the holders of outstanding Capital Notes. 3.05 Trustee may employ counsel as in its discretion deemed proper in the case of any "event of default" of Company, or any other actions as in this Indenture described or provided for with respect to Trustee either in its own right or for and on behalf of Capital Note holders, and Company shall pay all fees and expenses of such counsel and of Trustee in any such acts, actions, or proceedings taken by Trustee under terms hereof. 3.06 All moneys collected or received by Trustee by virtue of any act, action, or proceeding taken under the terms hereof or received by Trustee for and on behalf of Capital Note holders shall be disbursed as follows: a. In payment of all costs, expenses, charges, and fees of Trustee, including counsel and attorney's fees; b. In payment of all principal and interest due and unpaid on the Capital Notes issued and outstanding at that time. If there are insufficient funds to fully pay all such principal and interest, the funds available shall be applied and paid first ratably to the payment of unpaid interest and then ratably to the payment of principal; c. The remainder, if any, to Company. 3.07 In case of an "event of default" by Company by virtue of which the Trustee may elect to institute an action or proceeding on behalf of the Capital Note holders against Company, if Trustee does not institute an action within thirty (30) days after its elective right to so do has accrued, the holders of Capital Notes totaling 161 twenty-five percent (25%) of the principal amount of all such Capital Notes then issued and outstanding by written demand given to Trustee may require Trustee to institute any action or proceeding which they direct Trustee to initiate, provided however, that Trustee, before bringing any such action, may, as is hereinafter more fully spelled out, require adequate security from such Capital Note holders to protect it against any loss by virtue of expenses, charges, and fees incident to any action so required. In the event that two or more groups of holders of Capital Notes each of which holds Capital Notes totaling twenty-five percent (25%) of the principal amount of all such Capital Notes then issued and outstanding direct the trustee to proceed in a conflicting manner(s), the trustee may interplead the funds into or may seek a declaratory determination of the conflict(s) from the District Court for Polk County, Iowa. 3.08 No holder of any Capital Note issued hereunder shall have the right to institute any suit, action, or proceeding in equity or at law for the execution of any trust or power hereof or for the endorsement or any remedy under this Indenture or any Capital Note issued hereunder unless: a. Such holder shall have previously given the Trustee written notice of some existing "event of default" and of the continuance thereof; b. The holders of twenty-five percent (25%) in principal amount of the Capital Notes at the time outstanding shall have requested the Trustee to exercise such power or right of action after the right to do so has accrued hereunder and have afforded the Trustee a reasonable opportunity to proceed upon such request; c. Such holders shall have offered to Trustee indemnity satisfactory to it against the costs, expenses, and liabilities to be incurred thereby; and d. The Trustee shall have failed or refused to comply with such request within a period of sixty (60) days. Compliance with the foregoing conditions shall at the option of the Trustee be a condition precedent to the exercise of the powers and trusts of this Indenture and to any action or proceeding for the enforcement of any remedy hereunder, and no holder of any Capital Note shall have any right to enforce any right on account of this Indenture or his Capital Note, except in the manner herein provided, and in any event 162 all proceedings hereunder at law or in equity shall be instituted and maintained for the ratable benefit of all holders of outstanding Capital Notes in the manner and with the interest priority provided for in Section 1.05 and Section 3.06, and any other applicable provisions hereof. ARTICLE IV Trustee, Its Rights and Duties, and Successor Trustees 4.01 The Trustee, for itself and its successors, hereby accepts the trust created by this Indenture and assumes the duties imposed, but upon the following terms and conditions: a. Trustee shall be entitled to reasonable compensation for all services from time to time rendered by it under and by virtue of the terms of this Indenture including an acceptance fee, together with all expenses from time to time incurred by it, including fees paid for counsel and for legal services. The parties hereto shall agree upon Trustee's fees for ordinary services from time to time hereunder. In the event the parties do not agree, or in the event of extraordinary services by virtue of events of default or liquidation of Company, or any other matter which may require extraordinary services from Trustee, Trustee's compensation may be fixed by an appropriate court. Company covenants to pay all compensation to which Trustee may be entitled, including expenses and fees from time to time, promptly upon demand. b. Trustee shall not be responsible for the correctness of any recitals in this Indenture of any Capital Notes issued under and pursuant to the same (except certificates and authentications by Trustee). c. Trustee may employ and consult with counsel whenever deemed necessary, and the opinion of such counsel shall be full and complete authorization and protection to and for Trustee in respect of any action taken or suffered by it in good faith and in accordance with the opinion of such counsel. d. Trustee may rely upon the correctness of any certificate or statement, of the President or a Vice President of Company furnished from time to time 163 under the terms hereof and shall not be liable in any way for any act done or any omission to act in reliance on any such certificate or statement. e. Trustee hereunder shall have no responsibility for determining when or whether an "Event of Default" has occurred except for those events of default which would come to its knowledge and attention in the ordinary course of business under this form of Trust Indenture. 4.02 Trustee shall not be liable for any act of commission or omission on its part in connection with the discharge and perfor- mance of its duties and obligations under this Indenture and any Capital Notes issued pursuant hereto, except to the extent that any such act or omission shall constitute willful misconduct or negli- gence, and reliance upon certificates and statements of Company, the President or a Vice President thereof, opinions of counsel (whether counsel for Company or not), and good faith errors in judgment by a responsible officer or officers of Trustee shall not be held to be negligent in any case. 4.03 Trustee shall keep at all times a current list of the names and addresses of registered Capital Note holders, issued and outstanding under the terms of this Indenture. Company shall promptly notify Trustee of all changes in names or addresses of Capital Note holders known to it. 4.04 Trustee may resign whenever it may elect to so do, sixty (60) days after a written notice of its intention to so do has been served on Company and on all Capital Note owners shown by the records of Trustee (notices in all cases to be by ordinary, first class mail with the date of service thereof), and in the event Trustee shall resign, or in the event Trustee shall be dissolved and cease to do business as a bank or trust company, Company shall designate by an appropriate written instrument a successor Trustee which shall be a state or national bank or trust company with its principal office in the state of Iowa. Any successor trustee appointed by Company under the terms hereof shall have all rights, powers, and duties of the original Trustee as herein provided, and whenever in this Indenture the word "Trustee" appears or the Trustee is referred to, it shall mean and includes any and all successor Trustees who may be appointed hereunder. 4.05 Trustee shall not be in any manner precluded from buying, selling, owning, or dealing in Capital Notes issued pursuant to this agreement, either in its own right or as agent for others, 164 as fully and completely as any other individual, firm, or corporation could do. 4.06 Trustee or Company may (and on written request of owners of twenty-five percent (25%) in principal amount of outstanding Capital Notes shall) call a meeting of all Capital Note owners for any appropriate purpose. Such meeting shall be called by giving a written notice of the time and place thereof by ordinary, first class mail to all Capital Note owners whose names and addresses are first shown in the records of Trustee, mailed not less than five (5) days prior to the date fixed for such meeting. The Company shall pay for the costs of calling and holding said meeting. 4.07 In any case in which Trustee is required or may deem it proper or advisable to give a notice to Company, a Capital Note holder or any other person, firm, or agency, such notice shall be given by ordinary, first class mail, addressed to the last known post office address of any such person, firm, or agency, and the time of service thereof shall be the time of mailing thereof. ARTICLE V 5.01 The Company and Trustee may make arrangements varying, amending or changing this Indenture as Company and Trustee shall from time to time deem proper without the approval of the noteholders, provided only that no such amendment shall adversely affect any rights or interests of owners of Capital Notes then issued and outstanding under and pursuant to this Indenture. 5.02 Upon the execution of any Supplemental Indenture pursuant to the provisions of this Article V, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties, and immunities under this Indenture of the Trustee, the Company, and the holders of Capital Notes shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. IN WITNESS WHEREOF, Brenton Banks, Inc. has caused this Indenture to be executed in its name and on its behalf by its President, duly attested by its Secretary, with its corporate seal hereto attached, and Bankers Trust Company, Des Moines, Iowa, to evidence its acceptance of the trusts hereby created, has caused this instrument to be signed in its name and on its behalf by a duly authorized officer, all on or as of this 19th day of April, 1999. 165 BRENTON BANKS, INC. BANKERS TRUST COMPANY By /s/ Robert L. DeMeulenaere By /s/ Bryan Hall Robert L. DeMeulenaere Bryan Hall, Trust Officer President ATTEST: By /s/ Steven T. Schuler Steven T. Schuler, Chief Financial Officer and Treasurer/Secretary STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 19th day of April, 1999, before me, a Notary Public in and for Polk County, Iowa, personally appeared Robert L. DeMeulenaere, President, and Steven T. Schuler, Chief Financial Officer and Treasurer/Secretary, of Brenton Banks, Inc., the corporation which executed the above and foregoing instrument, who being to me known as the identical persons who signed the foregoing instrument, and by me duly sworn, each for himself, did say that they are respectively the President and the Chief Financial Officer/Secretary/Treasurer of said corporation, and that said instrument was by them signed and sealed on behalf of the said corporation by authority of its Board of Directors, and each of them acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and each of them voluntarily executed. IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial Seal the day and year last above written. /s/ Pamela J. Slippy , Notary Public in and for Polk County Seal 166 STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 21 day of April, 1999, before me, a Notary Public in and for Polk County, Iowa, personally appeared Bryan Hall, of Bankers Trust Company, the corporation which executed the above and foregoing instrument, who being to me known as the identical person who signed the foregoing instrument, and by me duly sworn, did say that he is the Trust Officer of said corporation, and that said instrument was by him signed and sealed on behalf of the said corporation by authority of its Board of Directors, and he acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed. IN WITNESS WHEREOF, I have hereunto signed my name and affixed my Notarial Seal the day and year last above written. /s/ Pamela J. Slippy , Notary Public in and for Polk County Seal 167 Exhibit A 5.00% Capital Notes Series RR-27 through RR-38 Due 2003 through 2014 5.25% Capital Notes Series TT-27 through TT-38 Due 2003 through 2014 5.50% Capital Notes Series UU-27 through UU-38 Due 2003 through 2014 5.75% Capital Notes Series VV-27 through VV-38 Due 2003 through 2014 6.00% Capital Notes Series G-27 through G-38 Due 2003 through 2014 6.25% Capital Notes Series Q-27 through Q-38 Due 2003 through 2014 6.50% Capital Notes Series J-27 through J-38 Due 2003 through 2014 6.75% Capital Notes Series K-27 through K-38 Due 2003 through 2014 7.00% Capital Notes Series M-27 through M-38 Due 2003 through 2014 7.25% Capital Notes Series N-27 through N-38 Due 2003 through 2014 7.50% Capital Notes Series R-27 through R-38 Due 2003 through 2014 7.75% Capital Notes Series T-27 through T-38 Due 2003 through 2014 8.00% Capital Notes Series U-27 through U-38 Due 2003 through 2014 8.25% Capital Notes Series V-27 through V-38 Due 2003 through 2014 8.50% Capital Notes Series W-27 through W-38 Due 2003 through 2014 8.75% Capital Notes Series X-27 through X-38 Due 2003 through 2014 9.00% Capital Notes Series Y-27 through Y-38 Due 2003 through 2014 9.25% Capital Notes Series B-27 through B-38 Due 2003 through 2014 9.50% Capital Notes Series A-27 through A-38 Due 2003 through 2014 9.75% Capital Notes Series C-27 through C-38 Due 2003 through 2014 10.00% Capital Notes Series D-27 through D-38 Due 2003 through 2014 10.25% Capital Notes Series E-27 through E-38 Due 2003 through 2014 10.50% Capital Notes Series F-27 through F-38 Due 2003 through 2014 10.75% Capital Notes Series H-27 through H-38 Due 2003 through 2014 11.00% Capital Notes Series I-27 through I-38 Due 2003 through 2014 11.25% Capital Notes Series L-27 through L-38 Due 2003 through 2014 11.50% Capital Notes Series O-27 through O-38 Due 2003 through 2014 11.75% Capital Notes Series S-27 through S-38 Due 2003 through 2014 12.00% Capital Notes Series Z-27 through Z-38 Due 2003 through 2014 12.25% Capital Notes Series P-27 through P-38 Due 2003 through 2014 12.50% Capital Notes Series SS-27 through SS-38 Due 2003 through 2014 12.75% Capital Notes Series AA-27 through AA-38 Due 2003 through 2014 13.00% Capital Notes Series BB-27 through BB-38 Due 2003 through 2014 168 T No. _______________ BRENTON BANKS, INC. DES MOINES, IOWA $__________________ REGISTERED CAPITAL NOTE (SERIES _______________________ CALLABLE) Brenton Banks, Inc., a corporation organized and existing under the laws of the State of Iowa, hereinafter referred to as the Corporation, for value received hereby promises to pay to the registered holder hereof, upon presentation of this Capital Note, the sum of $___________________ on the 1st day of June, ______________, at the main office of the Corporation in the City of Des Moines, Iowa. The Corporation further agrees to pay interest on the principal amount from the __________ day of ____________________, until paid, at the rate of _______% per annum, payable semi-annually on the first day of June and December of each year. The Corporation shall, upon request of the registered holder hereof, mail a check representing the interest hereon, or the principal when due, to the registered holder at his address appearing on the books of registration. The Capital Note is subject to being called on any interest payment date occurring on or after the date that is the midpoint between the original issuance date and the stated maturity date, at the option of the Corporation on not less than thirty (30) days' prior written notice given by the Corporation by ordinary mail to the holder of the Capital Note at such holder's address appearing on the books of registration, at 100% of the principal amount of this Capital Note, together with interest accrued and unpaid on this Capital Note, to the date fixed for such call. Upon the death of an individual registered holder or of an individual bearing a certain designated relationship to the registered holder, a Capital Note will be redeemed by the Company at the option of certain designated person(s) exercised as provided herein at face plus all interest accrued on the Capital Note to the date of redemption. An option shall arise upon the death of an individual who is (i) sole registered holder, (ii) a joint tenant registered holder, (iii) a tenant in common registered holder, (iv) a life tenant registered holder, (v) the sole grantor of a revocable trust which is a registered holder, (vi) a participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, or (vii) the ward of a conservatorship or custodianship which is a registered holder. No option to require redemption of a Capital Note shall arise except as specifically set forth above. Upon the death of an individual who is the sole registered holder of a Capital Note, such option shall be exercisable by the deceased holder's personal representative(s). Upon the death of a registered holder who holds a Capital Note in joint tenancy, such option shall be exercisable by the surviving joint tenant(s). Upon the death of a registered holder who holds a Capital Note in tenancy in common, such option shall be exercisable jointly by the personal representative(s) of the deceased holder and by the remaining tenant(s) in common. Upon the death of a registered holder who has a life estate in a Capital Note, such option shall be exercisable by the remainderman(men). Upon the death of an individual who is the sole grantor of a revocable trust which is a registered holder, such option shall be exercisable by the trustee(s) of the trust. Upon the death of the participant in an IRA or other retirement plan solely for the benefit of one participant which is a registered holder, such option shall be exercisable by the beneficiary(ies) of such IRA or retirement plan. Upon the death of a ward of a conservatorship or custodianship which is a registered holder, such option shall be exercisable by the personal representative(s) of such ward's estate. In the event more than one person is entitled to exercise the option, such option shall be exercisable only with the concurrence of all persons entitled to exercise the option. The option shall be exercisable for a period of 9 months following the date of death of the individual whose death gives rise to the option. The option shall be exercised by the person(s) entitled to exercise the option giving written notice to the Company of the exercise of the option at the Company's principal executive offices. Prior to the redemption of the Capital Note, the person(s) entitled to exercise the option shall furnish the Company with such documentation or evidence as the Company shall require to establish such person's(s') entitlement to exercise the redemption option. The Company shall be under no duty to notify the person(s) entitled to exercise the option of the existence of this redemption option or of any facts which come to the attention of the Company which would give any person the right to exercise the option. This Capital Note is one of an authorized issue of fully registered Capital Notes of Brenton Banks, Inc., issued in multiples of $1,000 and limited to the aggregate principal amount of $5,000,000 at any one time outstanding, all issued pursuant to an Indenture dated April 19, 1999, executed and delivered by the Corporation to the Trustee, to which Indenture reference is hereby made for a description of rights, duties and obligations thereunder of the Corporation, the Trustee and the Owners of the Capital Notes. In the event of default in the payment of principal of, or interest on, this Capital Note, the total principal amount of this Capital Note, and all interest hereof, shall become due and payable and the Corporation shall immediately pay the same. Books for the registry hereof are maintained at the office of the Corporation or at the agency of the Corporation established for that purpose in the city of Des Moines, Iowa. This Capital Note is transferable by the registered holder hereof in person, or by his duly authorized attorney, at the office or agency of the Corporation for such purpose in the city of Des Moines, Iowa, upon surrender for cancellation of this Capital Note at said office or agency. Thereupon, a new Capital Note for a like principal amount, or new Capital Notes in such authorized denominations and registered in such name or names, as shall have been requested, shall be issued and delivered. No transfer hereof shall be valid unless made on the Corporation's books, at the office of the Corporation or the agency established for that purpose, in accordance with the provisions of the foregoing paragraph. The Corporation and its agents may deem and treat the person in whose name this Capital Note is registered as the absolute owner of the Capital Note for the purpose of receiving payment hereof and interest due hereon, but the Corporation may, at any time, require the presentation hereof as a condition precedent to such payment. No recourse shall be had for the payment of the principal of, or interest upon, this Capital Note, against any shareholder, officer, or director of the Corporation, by reason of any matter prior to the delivery of this Note, or otherwise, all such liability, by the acceptance hereof, and as a part of the consideration of this issue hereof, being expressly waived. In the event any Capital Note is not presented for payment when due or when called by the Corporation, the Corporation shall deposit a sum equal to the amount due thereon with Trustee in trust for payment thereof and neither the Corporation nor Trustee shall thereafter be liable for any interest thereon. This Capital Note and any subsequent Capital Note issued on transfer and surrender hereunder shall not be valid for any purpose until duly certified by the Trustee under the Indenture supporting the name. This Capital Note is not a deposit and is not insured by the Federal Deposit Insurance Corporation. IN WITNESS WHEREOF, the Corporation has caused this Capital Note to be executed by its Chairman, President or Treasurer, and attested to by another authorized individual, and its corporate seal affixed hereto, at Des Moines, Iowa, on the day and year appearing below. Brenton Banks, Inc. Corporate Seal Iowa Date: ________________________________ BRENTON BANKS, INC. By: __________________________________ (Chairman, President or Treasurer) ATTEST: ______________________________________ (Secretary, Asst. Secretary Treasurer, or other authorized individual) 169 REGISTRATION (No writing on this registered Capital Note except by an officer or agent of the Corporation) Date of In Whose Registry Registration Name Registered Address Officer/Agent ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ ______________ ________________ _______________ ________________ TRUSTEE'S CERTIFICATE The foregoing Capital Note is hereby certified by the undersigned Bank as Trustee as one of the series of Capital Notes of Brenton Banks, Inc., described in the Indenture referred to therein, made between the Corporation and this Bank as Trustee. Dated as of this _______ day of ____________________, ______. _______________________________ (Trustee) By_____________________________ Its____________________________ (Title) ASSIGNMENT For value received I hereby assign to ___________________________ the within registered Capital Note and hereby irrevocably appoint _________________________________________________ attorney to transfer the registered Capital Note on the books of the within named Corporation with full power of substitution in the premises. Dated:____________________ Signatures guaranteed by the ____________________________________ Signature (in whose name registered) __________________________ (Bank) __________________________ ____________________________________ Signature Signature (in whose name registered) __________________________ Date Office & Title The transfer of any notes represented by this certificate to any person who is not then a bona fide resident of the State of Iowa purchasing such notes for the purpose of investment and not for resale is restricted pursuant to the terms of a subscription form executed by the original holder of such notes. 170 EX-10.24 26 Exhibit 10.24 Split-Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. 171 Split Dollar Insurance Agreement Collateral Assignment AGREEMENT, made and entered into this 23rd day of November, 1994, by and between Brenton Banks, Inc., Des Moines, Iowa ("Company"), and the William H. Brenton Crummey Trust and the William H. Brenton Crummey Trust II, irrevocable trusts, for the benefit of William H. Brenton and William H. Brenton ("Owner"), Des Moines, Iowa. WHEREAS, William H. Brenton is a valued Employee of the Company, and Company wishes to provide additional inducement for William H. Brenton's continued involvement with the Company, and as additional compensation, Company wishes to assist William H. Brenton with respect to a personal life insurance program by entering into this Split Dollar Insurance Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties hereto agree as follows: 1. Policy. The life insurance policy (the "Policy") with which this Agreement deals is identified in Exhibit "A" attached hereto and by this reference incorporated herein. In the event that this Agreement deals with multiple life insurance policies, each policy shall be identified in a separate Exhibit "A" attached hereto, and all references herein to the Policy shall include all policies with respect to which a separate Exhibit "A" is attached hereto. 2. Ownership. The Owner shall at all times be the owner of the Policy, and shall have the sole right to exercise all ownership rights granted to the owner by the terms of the Policy. It is the express intention of the parties hereto to reserve to the Owner all rights in the Policy granted by the terms of the Policy, including, but not limited to, the right to borrow against the Policy, the right to assign the Owner's interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, and the right to surrender or cancel the Policy (in whole or in part). The Company shall not have nor exercise any right in and to the Policy which could in any way endanger, defeat or impair any of the rights of the Owner in the Policy. The only rights in and to the Policy granted to the Company shall be its security interest in the cash value of the Policy and its right to receive a portion of the death benefit of the Policy, all as provided herein. 3. Premiums. Premiums on the Policy shall be paid by the parties hereto as set forth in Exhibit "B" attached hereto and by this reference incorporate herein. 4. Interest of Company in the Policy. The Company's interest in the Policy shall be limited to the following rights in the cash value and to a portion of the death benefit of the Policy as set forth below: a. In the event the Policy is totally surrendered or canceled by the Owner, the Company shall receive from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company"). b. Upon the death of William H. Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of William H. Brenton and William H. Brenton's spouse, while the Policy remains in force, the Company shall receive from the death benefit proceeds of the Policy the Amount Due Company. 172 c. In the event of the termination of this Agreement, the Company shall be repaid by the Owner the Amount Due Company. d. In the event the Owner obtains a policy loan with respect to the Policy or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company, the Owner will repay to the Company a portion of any Policy loan proceeds or partial surrender proceeds to the Company so as to cause the net cash surrender value of the Policy following the policy loan or partial surrender to be equal to or exceed the Amount Due Company. As used in this Agreement, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Agreement, the term "the aggregate amount of cumulative premiums paid by the Company" shall mean the aggregate amount of premiums paid by the Company net of any repayment to the Company of such amount. 5. Collateral Assignment. Contemporaneously herewith the Owner has assigned the Policy as collateral security to secure payment of the amounts payable to Company identified herein under a form of Collateral Assignment which has been filed with the insurance company issuing the Policy. In the event of a total or partial surrender of the Policy, termination of this Agreement or upon the death of William H. Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of William H. Brenton and William H. Brenton's spouse, the amounts payable to the Company identified herein shall be paid to the Company in accordance with the terms of such Collateral Assignment. 6. Death of William H. Brenton. Upon the death of William H. Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of William H. Brenton and William H. Brenton's spouse, the balance of the death benefit under the Policy in excess of the amount payable to the Company under the provisions hereof, if any, shall be paid directly to the beneficiary or beneficiaries designated by the Owner in the manner and in the amounts provided by the beneficiary designation of the Policy filed with the insurance company issuing the Policy. 7. Termination. This Agreement may be terminated at any time upon the mutual agreement of the parties hereto. 8. Assignment by Owner. In the event the Owner shall transfer all interest in the Policy to a transferee, then all of the Owner's interest in the Policy and in this Agreement shall be vested in the transferee, who shall become a substituted party hereto and who shall become bound by the provisions hereof, and the Owner shall have no further interest in the Policy or in this Agreement. 9. Assignment by Company. The Company shall not assign any of its rights in the Policy or in this Agreement to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred its rights in the Policy) without the prior written consent of the Owner (or the Owner's transferee, if the Owner has transferred its rights in the Policy). Any attempted assignment or transfer by the Company in violation of this paragraph shall be null and void and of no force and effect. 10. Insurer Liability. The insurance company which issues the Policy shall not be deemed to be bound by the provisions of this Agreement nor to have notice of the terms of this Agreement. Any and all liability of the insurance company issuing the Policy shall be determined solely by reference to the terms of the Policy, any applicable riders to the Policy, the beneficiary designation with respect to the Policy, the Collateral Assignment with respect to the Policy and any other documents filed with the insurance company and accepted and acknowledged by the insurance company. 173 11. Split Dollar Plan. This Agreement is intended to qualify the ownership of the Policy as a collateral assignment method split dollar life insurance employee benefit plan as described in Revenue Ruling 64-328, and shall be administered so as to qualify as such a plan. 12. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and cannot be amended, altered, modified, except by a written instrument signed by each of the parties hereto. 13. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving the notice, and shall be given either by delivery to the other party personally, or by mailing, by United States certified mail, postage prepaid, to the other party, addressed to the other party's last known mailing address as shown on the records of the Company. In the event such notice is given by mailing, the date of mailing shall be deemed the date of the giving of such notice, consent or demand. 14. Binding on Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties and their respective heirs, successors and assigns. 15. Governing Law. This Agreement shall be deemed made in the state of Iowa Business Corporation Act, the this Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the state of Iowa Business Corporation Act. 16. Severability. In the event a particular provision of this Agreement is held to be invalid under applicable law, effect shall nevertheless be given to all valid provisions hereof to further the objectives of this Agreement. 17. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural, and words used in the masculine or neuter shall include the feminine. 18. Named Fiduciary and Plan Administrator. For the purposes of the Employee Retirement Security Act of 1974 (ERISA), the Company shall be the "Named Fiduciary" and Plan Administrator of the split dollar insurance plan for which this Agreement is hereby designated the written plan instrument. The Company, as Named Fiduciary, shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. Any decision by the Company denying a claim for benefits under this Agreement shall be stated in writing, set forth specific reasons for the denial, and be delivered or mailed to the claimant. All claim procedures under this split dollar insurance plan shall be performed in compliance with the requirements of ERISA. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the year and date first above written. Brenton Banks, Inc. Company By /s/ Steven T. Schuler Its CFO/Treasurer/Sec. 174 Brenton Bank, N. A., Trustee of the William H. Brenton Crummy Trust Owner By /s/ Gary Ernst Its Vice Pres. Sr. Trust Officer Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust II Owner By /s/ Gary Ernst Its Vice Pres. Sr. Trust Officer William H. Brenton Owner /s/ William H. Brenton 175 EXHIBIT "A" Policy Number: 117215X Issued by: EMC Insurance Companies Providing for initial death benefit proceeds of $ 300,000 This policy is a life insurance policy on the life of William H. Brenton. The policy also provides a death benefit on the life of Natalie G. Brenton in the amount of $150,000. 176 EXHIBIT "A" Policy Number: 119921 Issued by: EMC Insurance Companies Providing for initial death benefit proceeds of $ 400,000 This policy is a life insurance policy on the life of William H. Brenton. 177 EXHIBIT "A" Policy Number: 137577 Issued by: EMC Insurance Companies Providing for initial death benefit proceeds of $ 400,000 This policy is a life insurance policy on the life of William H. Brenton. 178 EXHIBIT "A" Policy Number: 121476 Issued by: EMC Insurance Companies Providing for initial death benefit proceeds of $ 450,000 This policy is a life insurance policy on the life of William H. Brenton. The policy also provides a death benefit on the life of Natalie G. Brenton in the amount of $350,000. 179 EXHIBIT "A" Policy Number: 146078 Issued by: EMC Insurance Companies Providing for initial death benefit proceeds of $ 500,000 This policy is a life insurance policy on the life of William H. Brenton. 180 EXHIBIT "A" Policy Number: 7890362 Issued by: Penn Mutual Life Insurance Company Providing for initial death benefit proceeds of $ 500,000 This policy is a survivorship life insurance policy on the lives of William H. Brenton and Natalie G. Brenton, William H. Brenton's wife, which pays a death benefit only upon the death of the survivor of William H. Brenton and Natalie G. Brenton. 181 EXHIBIT "A" Policy Number: 4239293 Issued by: Principal Mutual Life Insurance Company Providing for initial death benefit proceeds of $ 500,000 This policy is a life insurance policy on the life of William H. Brenton. 182 EXHIBIT "A" Policy Number: 4239294 Issued by: Principal Mutual Life Insurance Company Providing for initial death benefit proceeds of $ 500,000 This policy is a life insurance policy on the life of Natalie G. Brenton. 183 EXHIBIT "A" Policy Number: 44243450 Issued by: Equitable Variable Life Insurance Company Providing for initial death benefit proceeds of $ 750,000 This policy is a life insurance policy on the life of William H. Brenton. 184 EXHIBIT "B" Premiums The Company shall pay the following premiums due on each Policy.
Policy Number Premiums Paid EMC Insurance Companies 117215X $ 3,700 119921 7,758 137577 9,120 121476 11,390 146078 20,300 Penn Mutual Life Insurance Company 7890362 6,532 Principal Mutual Life Insurance Company 4239293 6,300 4239294 5,100 Equitable Variable Life Insurance Company 44243450 43,800 ________ Total premiums paid $114,000 ________ ________
185 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 117215X (the "Policy") issued by EMC Insurance Companies (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 186 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. William H. Brenton Owner ___________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 187 ACCEPTED: EMC Insurance Companies Insurer By_________________________________________ Its________________________________________ 188 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 119921 (the "Policy") issued by EMC Insurance Companies (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 189 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 190 ACCEPTED: EMC Insurance Companies Insurer By________________________________________ Its_______________________________________ 191 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 137577 (the "Policy") issued by EMC Insurance Companies (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 192 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 193 ACCEPTED: EMC Insurance Companies Insurer By________________________________________ Its_______________________________________ 194 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 121476 (the "Policy") issued by EMC Insurance Companies (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 195 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. William H. Brenton Owner ___________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 196 ACCEPTED: EMC Insurance Companies Insurer By_________________________________________ Its________________________________________ 197 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 146078 (the "Policy") issued by EMC Insurance Companies (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 198 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 199 ACCEPTED: EMC Insurance Companies Insurer By_________________________________________ Its________________________________________ 200 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 4239293 (the "Policy") issued by Principal Mutual Life Insurance Company (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 201 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 202 ACCEPTED: Principal Mutual Life Insurance Company Insurer By_________________________________________ Its________________________________________ 203 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 4239294 (the "Policy") issued by Principal Mutual Life Insurance Company (the "Insurer") upon the life of Natalie G. Brenton, wife of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 204 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 205 ACCEPTED: Principal Mutual Life Insurance Company Insurer By_________________________________________ Its________________________________________ 206 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of December, 1994, by the undersigned as owner (the "Owner") of a certain life insurance policy number 44243450 (the "Policy") issued by Equitable Variable Life Insurance Company (the "Insurer") upon the life of William H. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 207 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 208 ACCEPTED: Equitable Variable Life Insurance Company Insurer By_________________________________________ Its________________________________________ 209 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of ________________________, ________, by the undersigned as owner (the "Owner") of a certain life insurance policy number 7890362 (the "Policy") issued by Penn Mutual Life Insurance Company (the "Insurer") upon the lives of William H. Brenton and Natalie G. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, William H. Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 210 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the William H. Brenton Crummy Trust Owner By_________________________________________ Its________________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 211 ACCEPTED: Penn Mutual Life Insurance Company Insurer By_________________________________________ Its________________________________________ 212 EX-10.25 27 Exhibit 10.25 Split-Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. 213 Split Dollar Insurance Agreement Collateral Assignment AGREEMENT, made and entered into this 12th day of August, 1994, by and between Brenton Banks, Inc., Des Moines, Iowa ("Company"), and Brenton Life Insurance Trust, an irrevocable trust, ("Owner") for the benefit of C. Robert Brenton, Des Moines, Iowa. WHEREAS, C. Robert Brenton is a valued Employee of the Company, and Company wishes to provide additional inducement for C. Robert Brenton's continued involvement with the Company, and as additional compensation, Company wishes to assist C. Robert Brenton with respect to a personal life insurance program by entering into this Split Dollar Insurance Agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties hereto agree as follows: 1. Policy. The life insurance policy (the "Policy") with which this Agreement deals is identified in Exhibit "A" attached hereto and by this reference incorporated herein. In the event that this Agreement deals with multiple life insurance policies, each policy shall be identified in a separate Exhibit "A" attached hereto, and all references herein to the Policy shall include all policies with respect to which a separate Exhibit "A" is attached hereto. 2. Ownership. The Owner shall at all times be the owner of the Policy, and shall have the sole right to exercise all ownership rights granted to the owner by the terms of the Policy. It is the express intention of the parties hereto to reserve to the Owner all rights in the Policy granted by the terms of the Policy, including, but not limited to, the right to borrow against the Policy, the right to assign the Owner's interest in the Policy, the right to change the beneficiary of the Policy, the right to exercise settlement options, and the right to surrender or cancel the Policy (in whole or in part). The Company shall not have nor exercise any right in and to the Policy which could in any way endanger, defeat or impair any of the rights of the Owner in the Policy. The only rights in and to the Policy granted to the Company shall be its security interest in the cash value of the Policy and its right to receive a portion of the death benefit of the Policy, all as provided herein. 3. Premiums. Premiums on the Policy shall be paid by the parties hereto as set forth in Exhibit "B" attached hereto and by this reference incorporate herein. 4. Interest of Company in the Policy. The Company's interest in the Policy shall be limited to the following rights in the cash value and to a portion of the death benefit of the Policy as set forth below: a. In the event the Policy is totally surrendered or canceled by the Owner, the Company shall receive from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company"). b. Upon the death of C. Robert Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of C. Robert Brenton and C. Robert Brenton's spouse, while the Policy remains in force, the Company shall receive from the death benefit proceeds of the Policy the Amount Due Company. 214 c. In the event of the termination of this Agreement, the Company shall be repaid by the Owner the Amount Due Company. d. In the event the Owner obtains a policy loan with respect to the Policy or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company, the Owner will repay to the Company a portion of any Policy loan proceeds or partial surrender proceeds to the Company so as to cause the net cash surrender value of the Policy following the policy loan or partial surrender to be equal to or exceed the Amount Due Company. As used in this Agreement, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Agreement, the term "the aggregate amount of cumulative premiums paid by the Company" shall mean the aggregate amount of premiums paid by the Company net of any repayment to the Company of such amount. 5. Collateral Assignment. Contemporaneously herewith the Owner has assigned the Policy as collateral security to secure payment of the amounts payable to Company identified herein under a form of Collateral Assignment which has been filed with the insurance company issuing the Policy. In the event of a total or partial surrender of the Policy, termination of this Agreement or upon the death of C. Robert Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of C. Robert Brenton and C. Robert Brenton's spouse, the amounts payable to the Company identified herein shall be paid to the Company in accordance with the terms of such Collateral Assignment. 6. Death of C. Robert Brenton. Upon the death of C. Robert Brenton, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of C. Robert Brenton and C. Robert Brenton's spouse, the balance of the death benefit under the Policy in excess of the amount payable to the Company under the provisions hereof, if any, shall be paid directly to the beneficiary or beneficiaries designated by the Owner in the manner and in the amounts provided by the beneficiary designation of the Policy filed with the insurance company issuing the Policy. 7. Termination. This Agreement may be terminated at any time upon the mutual agreement of the parties hereto. 8. Assignment by Owner. In the event the Owner shall transfer all interest in the Policy to a transferee, then all of the Owner's interest in the Policy and in this Agreement shall be vested in the transferee, who shall become a substituted party hereto and who shall become bound by the provisions hereof, and the Owner shall have no further interest in the Policy or in this Agreement. 9. Assignment by Company. The Company shall not assign any of its rights in the Policy or in this Agreement to anyone other than the Owner (or the Owner's transferee, if the Owner has transferred its rights in the Policy) without the prior written consent of the Owner (or the Owner's transferee, if the Owner has transferred its rights in the Policy). Any attempted assignment or transfer by the Company in violation of this paragraph shall be null and void and of no force and effect. 10. Insurer Liability. The insurance company which issues the Policy shall not be deemed to be bound by the provisions of this Agreement nor to have notice of the terms of this Agreement. Any and all liability of the insurance company issuing the Policy shall be determined solely by reference to the terms of the Policy, any applicable riders to the Policy, the beneficiary designation with respect to the Policy, the Collateral Assignment with respect to the Policy and any other documents filed with the insurance company and accepted and acknowledged by the insurance company. 215 11. Split Dollar Plan. This Agreement is intended to qualify the ownership of the Policy as a collateral assignment method split dollar life insurance employee benefit plan as described in Revenue Ruling 64-328, and shall be administered so as to qualify as such a plan. 12. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and cannot be amended, altered, modified, except by a written instrument signed by each of the parties hereto. 13. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement by one party to another shall be in writing, shall be signed by the party giving the notice, and shall be given either by delivery to the other party personally, or by mailing, by United States certified mail, postage prepaid, to the other party, addressed to the other party's last known mailing address as shown on the records of the Company. In the event such notice is given by mailing, the date of mailing shall be deemed the date of the giving of such notice, consent or demand. 14. Binding on Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties and their respective heirs, successors and assigns. 15. Governing Law. This Agreement shall be deemed made in the state of Iowa Business Corporation Act, the this Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the state of Iowa Business Corporation Act. 16. Severability. In the event a particular provision of this Agreement is held to be invalid under applicable law, effect shall nevertheless be given to all valid provisions hereof to further the objectives of this Agreement. 17. Interpretation. Where appropriate in this Agreement, words used in the singular shall include the plural, and words used in the masculine or neuter shall include the feminine. 18. Named Fiduciary and Plan Administrator. For the purposes of the Employee Retirement Security Act of 1974 (ERISA), the Company shall be the "Named Fiduciary" and Plan Administrator of the split dollar insurance plan for which this Agreement is hereby designated the written plan instrument. The Company, as Named Fiduciary, shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. Any decision by the Company denying a claim for benefits under this Agreement shall be stated in writing, set forth specific reasons for the denial, and be delivered or mailed to the claimant. All claim procedures under this split dollar insurance plan shall be performed in compliance with the requirements of ERISA. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the year and date first above written. Brenton Banks, Inc. Company By /s/ Steven T. Schuler Its CFO/Treasurer/Sec. 216 Brenton Bank, N. A., Trustee of the Brenton Life Insurance Trust Owner By /s/ Gary Ernst Its Vice Pres. Sr. Trust Officer 217 EXHIBIT "A" Policy Number: 44209399 Issued by: Equitable Variable Life Insurance Company Providing for initial death benefit proceeds of $3,500,000. This policy is a survivorship life insurance policy on the lives of C. Robert Brenton and Babette C. Brenton, C. Robert Brenton's wife, which pays a death benefit only upon the death of the survivor of C. Robert Brenton and Babette C. Brenton. 218 EXHIBIT "B" Premiums The Company shall pay all of the premiums due on the Policy. 219 Collateral Assignment THIS ASSIGNMENT is made and entered into this ________ day of ________________________, ________, by the undersigned as owner (the "Owner") of a certain life insurance policy number 44209399 (the "Policy") issued by Equitable Variable Life Insurance Company (the "Insurer") upon the lives of C. Robert Brenton and Babette C. Brenton, and Brenton Bank, Inc. (the "Assignee"). WHEREAS, C. Robert Brenton ("Employee") is a valued Employee of the Assignee, and WHEREAS, Owner has entered into a Split Dollar Agreement with the Assignee (the "Agreement"), and WHEREAS, in consideration of the Assignee agreeing to make certain premium payments, the Owner agrees to grant the Assignee a security interest in the Policy as collateral security for the repayment of the cumulative premiums paid by the Assignee. NOW, THEREFORE, the undersigned Owner hereby assigns, transfers and sets over to the Assignee the following specific rights in the Policy subject to the following terms and conditions: 1. This Assignment is made, and the Policy is to be held, as collateral security for all liabilities of the Owner to the Assignee, either now existing or that may hereafter arise, pursuant to the terms of the Agreement. 2. The Assignee's interest in the Policy shall be strictly limited to: a. The right to be repaid from the surrender proceeds of the Policy: (i) the aggregate amount of cumulative premiums paid by the Company, plus (ii) an amount, not less than zero, which is calculated by taking 5.2 percent per annum of the total amount of cumulative premiums paid by the Company to date less $300,000.00 ("Amount Due Company") in the event the Policy is totally surrendered or canceled by the Owner. b. The right to be repaid from the death benefit proceeds of the Policy the Amount Due Company upon the death of the Employee, or, if the Policy is a survivorship life insurance product, upon the death of the survivor of the Employee and the Employee's spouse, while the Policy remains in force. c. The right to be repaid the Amount Due Company in the event of the termination of the Agreement. d. The right to be repaid a portion of any Policy loan proceeds or partial surrender proceeds paid to the Assignee so as to cause the net cash surrender value of the Policy to be equal to or exceed the Amount Due Company in the event the Owner obtains a Policy loan or in the event the Policy is partially surrendered and such loan or partial surrender causes the net cash surrender value of the Policy to be a sum less than the Amount Due Company. As used in this Assignment, the term "net cash surrender value" shall mean the cash surrender value of the Policy, less the amount of any then existing loans or withdrawals against the Policy obtained by the Owner. As used in this Assignment, the term "the aggregate amount of cumulative premiums paid by the Assignee" shall mean the aggregate amount of premiums paid by the Assignee net of any repayment to the Assignee of such amount. 220 3. The Owner shall retain all incidents of ownership in the Policy, including, but not limited to, the sole and exclusive rights to: borrow against the Policy; make withdrawals from the Policy; assign Owner interest in the Policy; change the beneficiary of the Policy; exercise settlement options; and, surrender or cancel the Policy (in whole or in part). All of these incidents of ownership shall be exercisable by the Owner unilaterally and without the consent of any other person. 4. The Assignee shall, upon request, if the Policy is in the possession of the Assignee, forward the Policy to the Insurer, without unreasonable delay, for change of beneficiary, any election of optional mode of settlement, or the exercise of any other right reserved by the Owner. 5. The Insurer is hereby authorized to recognize the Assignee's claims, including the validity or the amount of any liabilities of the Owner to the Assignee under the Agreement, the existence of any default therein, the giving of any notice required therein or herein, or the application to be made by the Assignee of any amounts to be paid to the Assignee. Upon the Insurer giving prior written notice to Owner of the proposed payment of amounts to the Assignee, the receipt of the Assignee for any sums received by it shall be a full discharge and release therefore to the Insurer. 6. The Insurer shall be fully protected in recognizing a request made by the Owner for surrender or cancellation of the Policy, in whole or in part, or in recognizing a request made by the Owner for any loans against the Policy permitted by the terms of the Policy. In the event this request is made, upon prior written notice thereof to the Assignee the Insurer may pay the proceeds of any surrender, cancellation, or loan to the sole order of the Owner, or as the Owner shall direct. 7. Upon the full payment of the liabilities of the Owner to the Assignee pursuant to the Agreement, the Assignee shall execute an appropriate release of this Collateral Assignment. 8. It is the express intention of the Owner to assign a limited interest in the Policy to the Assignee as security for certain premium payments made by the Assignee, without giving the Assignee any incidents of ownership in the Policy within the meaning of section 2042 of the Internal Revenue Code (and regulations thereunder), or any similar provision of subsequent law. All provisions of this Collateral Assignment (and of the Agreement) shall be construed and exercised so as to effect this intention. IN WITNESS WHEREOF, the Owner and Assignee have executed this Assignment and the Insurer has acknowledged its acceptance of this Assignment effective the day and year first above written. Brenton Bank, N.A. Trustee of the Brenton Life Insurance Trust Owner By ________________________________________ Its _______________________________________ Brenton Banks, Inc. Assignee By ________________________________________ Its _______________________________________ 221 ACCEPTED: Equitable Variable Life Insurance Company Insurer By ________________________________________ Its _______________________________________ 222 EX-10.26 28 Exhibit 10.26 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. 223 EX-10.27 29 Exhibit 10.27 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangement, dated December 31, 1994. 224 AGREEMENT This Agreement ("Agreement") effective this 31st day of December, 1994, by and between Brenton Banks, Inc., an Iowa bank holding company with its principal place of business in Des Moines, Iowa ("Employer") and Robert L. DeMeulenaere ("Employee"). Whereas, Employer desires to provide certain employment security to Employee, a key employee of Employer, to induce Employee to continue his employment with Employer and enhance his ability to perform effectively without undue distraction should Employer become a target of an attempted acquisition, takeover or merger; and Whereas, in an effort to induce Employee to remain in the employ of Employer and in consideration of his continuing employment, Employer desires to enter into this Agreement for the payment of certain benefits in the event that Employee employment is terminated or subject to a significant change as provided herein, following a change of control of Employer. Now, therefore, in consideration of the promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Term. Except as otherwise provided, this Agreement shall remain in full force and effect until the earlier of the death or disability of Employee, or the expiration of the Employee's rights to receive any benefits payable pursuant to this Agreement. 2. Entitlement to Benefits. Employee shall be entitled to benefits if the Employee is employed by Employer when a Change in Control of Employer occurs and, within three years thereafter, there is a Termination of Existing Employment of Employee. 3. Change of Control. For purposes of this Agreement, a Change of Control of Employer shall mean any transaction or series of transactions, the result of which is: (a) a direct or indirect acquisition of all or substantially all of the assets of the Employer; (b) a change in ownership whereby the stockholders of Employer immediately prior to such transaction(s) own less than a majority of the combined voting power of all issued and outstanding securities of Employer or its successor following the transaction(s); or (c) a person and their affiliates own a greater number of shares of the Company than the Brenton Family. Transactions resulting in a Change of Control shall include but not be limited to direct acquisitions of assets or securities or indirect acquisitions by merger, consolidation, or other legal reorganization of Employer. The "Brenton Family" for purposes of this section, shall include all descendants of Harold Brenton and their spouses and affiliates including but not limited to any shares owned by trusts, corporations or persons which the descendants of Harold Brenton have control over or are for the benefit of said descendants or their spouses. 225 4. Termination of Existing Employment. For purposes of this Agreement, a Termination of Existing Employment shall occur if there is a substantial reduction in duties in Employee's employment or such employment is terminated by Employer, Employer's subsidiary, a successor to Employer or such successor's subsidiary. 5. Calculation of Benefits. Upon a Termination of Existing Employment within one year of a Change in Control, Employee shall be entitled to receive Benefits in the amount of Five Hundred Thousand Dollars ($500,000); upon a Termination of Existing Employment more than one year but prior to three years following a Change in Control, the Benefits to be received by the Employee shall be reduced by $10,417 for each full month the Employee remains employed by the Company beyond the 12th month following the change in control. No benefits shall accrue to the Employee if there is a Termination of Existing Employment more than three years following a Change in Control. For example, if the Employee is terminated during the 17th month following the change in control, the Employee will receive $458,332 ($500,000 - ((16-12) x $10417)). The benefits payable hereunder shall be paid to the Employee within 10 days following the event causing the payment to become due. 6. Ratable Decrease in Benefits with Age. The Benefits calculated under Paragraph 5 above shall remain unchanged for any Change of Control that occurs before Employee reaches age 61. In the event that a Change of Control occurs after Employee turns 61, the Benefits calculated thereunder shall be reduced by 20% during the year Employee is age 61, reduced by 40% during the year Employee is age 62, reduced by 60% during the year Employee is age 63, reduced by 80% during the year Employee is age 64, and Employee shall no longer be entitled to receive benefits if a Change in Control occurs after Employee turns age 65. For example, a Change of Control and Termination of Existing Employment occurs when Employee is age 62 and the Benefits calculated in accordance with Paragraph 5 above are $500,000, the Benefits are decreased by 40% to $300,000. In the preceding example, if the Termination of Existing Employment occurred during the twenty-fifth month following the Change of Control and the Employee is age 64, the Benefits in the amount of $374,996 calculated in accordance with Paragraph 5 would be decreased by 80% to $74,999.20. 7. Limitation on Benefits. Notwithstanding the foregoing, in the event that the amount of Benefits payable to Employee exceeds 2.9 times the Employee's "base amount" allocated to the payment hereunder as determined under I.R.C. Section 280G(b)(3)(B), the Benefits payable to Employee shall be limited to 2.9 times the Employee's "base amount" allocated to the payment hereunder as determined under I.R.C. Section 280G(b)(3)(B). 8. No Reduction in Salary. If, following a Change in Control, the Employee remains employed by Employer or its successor, the Employer or its successor may not, for a period of three years following the Change of Control, reduce the Employee's salary below the salary level paid immediately prior to the Change in Control. 226 9. No Contract of Employment. The rights and obligations created hereunder shall have no effect on Employee's status as an employee at will of Employer. Employee acknowledges that this Agreement creates no right to be employed by Employer and shall be construed solely as creating additional financial security in the event of a Change of Control of Employer. 10. Binding Agreement. This Agreement shall be binding on Employer, its successors and assigns. 11. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Iowa. 12. Waiver. Following a Change of Control, no successor to Employer shall request or require Employee to release, modify, waive or discharge his rights hereunder. Failure of Employee to enforce his rights hereunder at the time of any breach or non- compliance with any condition or provision of this Agreement by Employer, its successors or assigns, shall not be deemed to be a waiver of such provision and shall have no effect on the enforcement of the same or any other condition herein contained. 13. Severability. In the event that any provision of this Agreement is deemed to be invalid or unenforceable, such invalid or unenforceable provision shall be deemed to be modified in such a manner as to make it valid and enforceable and shall have no affect on the validity or enforceability of any other provision of this Agreement. 14. Prior Agreements. This Agreement shall supersede all prior agreements between the parties relating to Change of Control of Employer, and all such prior agreements, whether oral or written, are hereby canceled, terminated, and revoked. Wherefore, the parties hereto have caused this Agreement to be executed as of the day and year first above written. Brenton Banks, Inc., Employee By__________________________ _________________________ C. Robert Brenton, Robert L. DeMeulenaere Chairman ofthe Board 227 EX-10.28 30 Exhibit 10.28 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. 228 EX-10.29 31 Exhibit 10.29 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. 229 EX-10.30 32 Exhibit 10.30 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). This Fourteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 230 EX-10.31 33 Exhibit 10.31 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). This Fifteenth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 231 EX-10.32 34 Exhibit 10.32 Purchase Agreement dated December 31, 1998, by and between West Lakes Development Company and Brenton Bank. This Purchase Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 232 EX-10.33 35 Exhibit 10.33 Purchase Agreement dated December 31, 1998, by and between West End Diner, Inc. and Brenton Bank. This Purchase Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1998. 233 EX-10.34 36 Exhibit 10.34 Agreement between The Weitz Company, Inc. and Brenton Bank dated June 15, 1999. This Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. 234 EX-10.35 37 Exhibit 10.35 Agreement between Savage-Ver Ploeg & Associates, Inc. and Brenton Bank dated March 19, 1999. This Agreement is incorporated from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1999. 235 EX-11 38 Exhibit 11 Statement of computation of earnings per share. 236
Statements re: Computation of Earnings Per Share Brenton Banks, Inc. December 31, 1999 1998 1997 Basic EPS Computation Numerator: Net income $ 16,560,117 $ 20,350,921 $ 18,010,107 Denominator: Average common shares Outstanding 20,498,366 20,853,194 21,180,706 Basic EPS $ 0.81 $ 0.98 $ 0.85 Diluted EPS Computation Numerator: Net income $ 16,560,117 $ 20,350,921 $ 18,010,107 Denominator: Average common shares Outstanding 20,498,366 20,853,194 21,180,706 Average stock options 302,913 428,511 343,534 Average long-term stock compensation plan --- --- 169,586 20,801,279 21,281,705 21,693,826 Diluted EPS $ 0.80 $ 0.96 $ 0.83 Note: Amounts are restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999 and 1998.
237 EX-12 39 Exhibit 12 Statement of computation of ratios. 238
Statements re: Computation of Ratios Item 1(l) Business - Statistical Disclosure VI. Return on Equity and Assets Brenton Banks, Inc. (Dollars in thousands) December 31, 1999 1998 1997 Return on average total assets: Net income (before deduction of minority interest) $ 17,204 21,071 18,753 * divided by * Average assets $ 1,943,826 1,780,120 1,649,469 Ratio 0.89% 1.18% 1.14% Return on average common stockholders' equity: Net income $ 16,560 20,351 18,010 * divided by * Average common stockholders' equity $ 134,136 132,422 124,491 Ratio 12.35% 15.37% 14.47% Return on average common stockholders' equity excluding unrealized gains (losses) on assets available for sale: Net income $ 16,560 20,351 18,010 * divided by * Average common stockholders' equity excluding unrealized gains (losses) on assets available for sale 134,569 129,055 122,685 Ratio 12.31% 15.77% 14.68% Common dividend payout ratio: Cash dividends per share $ 0.346 0.317 0.225 * divided by * Net income per share-diluted $ 0.80 0.96 0.83 Ratio 43.25% 33.02% 27.11%
239
Statements re: Computation of Ratios Item 1(l) Business - Statistical Disclosure VI. Return on Equity and Assets Brenton Banks, Inc. (Dollars in thousands) December 31, 1999 1998 1997 Average equity to average assets: Average equity $ 134,136 132,422 124,491 * divided by * Average assets $ 1,943,826 1,780,120 1,649,469 Ratio 6.90% 7.44% 7.55% Equity to assets ratio: Common stockholders' equity excluding unrealized gains (losses) on assets available for sale $ 137,568 131,891 126,159 * divided by * Total assets excluding unrealized gains (losses) on assets available for sale $ 1,991,090 1,936,238 1,715,264 Ratio 6.91% 6.81% 7.36% Tier 1 leverage capital ratio: Common stockholders' equity excluding unrealized gains (losses) on assets available for sale $ 137,568 131,891 126,159 Minority interest 4,608 4,913 4,859 Less: intangibles (6,984) (1,970) (2,087) Less: minimum MSR's to be Deducted 0 (388) --- Tier 1 capital $ 135,192 134,446 128,931 * divided by * Quarterly average total assets excluding unrealized gains (losses) on assets available for sale 1,994,057 1,878,074 1,692,176 Less: intangibles (6,984) (1,970) (2,087) Less: minimum MRS's to be Deducted 0 (388) --- Tier 1 assets $ 1,987,073 1,875,716 1,690,089 Ratio 6.80% 7.17% 7.63%
240
Statements re: Computation of Ratios Item 1(l) Business - Statistical Disclosure VI. Return on Equity and Assets Brenton Banks, Inc. (Dollars in thousands) December 31, 1999 1998 1997 Net Noninterest Margin: Noninterest income $ 29,794 33,358 27,506 Less: Securities gains (losses) 216 665 494 Less: Noninterest expense 65,374 61,392 57,699 Net noninterest income $ (35,796) (28,699) (30,687) * divided by * Year-to-date average assets $ 1,943,826 1,780,120 1,649,469 Ratio -1.84% -1.61% -1.86% Efficiency Ratio: Noninterest expense $ 65,374 61,392 57,699 * divided by * Noninterest income 29,794 33,358 27,506 Less: Securities gains (losses) 216 665 494 Less: Loan gains (losses) 7 81 78 T.E. net interest income 66,575 65,279 63,701 Subtotal 96,146 97,891 90,635 Ratio 67.99% 62.71% 63.66%
241 EX-13 40 Exhibit 13 The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1999 calendar year. 242 BRENTON BANKS, INC. APPENDIX TO THE PROXY STATEMENT FISCAL YEAR 1999 243 TABLE OF CONTENTS PAGE General Information 1 Financial Highlights 2 Management's Discussion and Analysis 3 Consolidated Average Balances and Rates 11 Selected Financial Data 12 Consolidated Statements of Condition 13 Consolidated Statements of Operations 14 Consolidated Statements of Cash Flows 15 Consolidated Statements of Changes in Common Stockholders' Equity 16 Consolidated Statements of Comprehensive Income 17 Notes to Consolidated Financial Statements 18 Management's Report 33 Independent Auditors' Report 33 Stock Information 34 Corporate Structure 35 244 BRENTON BANKS, INC. GENERAL INFORMATION Brenton Banks, Inc. (the "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 of Brenton Companies in 1948. Subsequently, the Company's name was changed to its current name, Brenton Banks, Inc. Brenton Banks, Inc. is the largest, Iowa-based bank holding company, with 44 service locations in metropolitan markets and regional economic centers across the state. The Company offers a complete range of financial products and services - including retail, agricultural, commercial and business banking; trust and investment management services; investment, insurance and real estate brokerage; mortgage banking; cash management and international banking services; as well as proprietary mutual funds. The Company's stock trades on the NASDAQ stock market under the symbol BRBK. 1 245
BRENTON BANKS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS 1999 1998 1997 Operating Results Net interest income $ 62,599,137 61,387,326 60,133,764 Provision for loan losses 4,250,000 4,200,000 3,900,000 Total noninterest income 29,793,656 33,357,827 27,505,789 Total noninterest expense 65,374,270 61,391,528 57,698,564 Income before income taxes and minority interest 22,768,523 29,153,625 26,040,989 Net income 16,560,117 20,350,921 18,010,107 Per Common Share* Net income-basic $ .81 .98 .85 Net income-diluted .80 .96 .83 Cash dividends .346 .317 .225 Book value, including unrealized gains (losses)** 6.48 6.55 6.17 Book value, excluding unrealized gains (losses)*** 6.76 6.39 6.02 Closing price 10.13 15.23 16.53 At December 31 Assets $1,985,454,701 1,939,556,765 1,718,483,797 Loans 1,195,986,791 1,033,554,556 993,189,110 Nonperforming loans 9,452,000 11,289,000 6,712,000 Deposits 1,530,083,303 1,496,675,131 1,364,270,491 Realized common stockholders' equity*** 137,568,254 131,891,522 126,159,453 Total common stockholders' equity** 131,933,451 135,210,319 129,379,299 Market capitalization of common stock 206,088,847 314,102,382 346,646,292 Ratios Return on average total common stockholders' equity (ROE)** 12.35% 15.37 14.47 Return on average realized common stockholders' equity (ROE)*** 12.31 15.77 14.68 Return on average assets (including minority interest) (ROA) .89 1.18 1.14 Net interest margin 3.73 3.97 4.16 Net noninterest margin (1.84) (1.61) (1.86) Efficiency ratio 67.99 62.71 63.66 Loan to deposit ratio 78.16 69.06 72.80 Allowance for loan losses to total loans 1.21 1.37 1.28 Equity to assets*** 6.91 6.81 7.36 Risk-based capital ratio 10.18 11.37 11.95 Tier 1 leverage capital ratio*** 6.80 7.17 7.63 Nonperforming loans as a percent of loans .79 1.09 .68 Net charge-offs as a percent of average loans .36 .28 .26 Allowance for loan losses as a percent of nonperforming loans 152.49 125.54 189.69 * Restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999 and 1998. ** Including unrealized gains (losses) on securities available for sale. *** Excluding unrealized gains (losses) on securities available for sale.
2 246 Management's Discussion and Analysis Introduction The following presentation describes Brenton Banks, Inc. and Subsidiaries' ("Brenton" or the "Company") results of operations for the three-year period ended December 31, 1999, capital resources, market risk management, asset/liability management, liquidity, year 2000 results and the impact of recently issued accounting standards. This discussion should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto which are included elsewhere in this report. Forward-Looking Information Forward-looking information relating to the financial results or strategies of the Company is referenced throughout Management's Discussion and Analysis. The following paragraphs identify forward-looking statements and the risks that need to be considered when reading those statements. Forward-looking statements include such words as believe, expect, anticipate, target, goal, objective or other words with similar meaning. The Company is under no obligation to update such forward-looking information statements. The risks involved in the operations and strategies of the Company include competition from other financial institutions and other financial service providers, changes in interest rates, changes in economic or market conditions and changes in regulations from federal and state regulators. These risks, which are not all inclusive, cannot be estimated. Results of Operations - 1999 Compared to 1998 Net Income For the year ended December 31, 1999, Brenton recorded net income of $16,560,117, a decline of 18.6 percent from net income of $20,350,921 in 1998. Lower mortgage banking revenues and investment brokerage commissions, along with normal expense growth including costs associated with the Company's growth initiatives contributed to the reduction. Continued compression of the net interest margin held the growth in net interest income to a modest amount. Diluted earnings per common share were $.80 compared to $.96 for 1998. The Company's return on average assets (ROA) was .89 percent in 1999, compared to 1.18 percent in 1998. The return on average equity (ROE), including unrealized gains (losses) on securities available for sale, was 12.35 percent, compared to 15.37 percent one year earlier. Net Interest Income Net interest income rose 2.0 percent to $62,599,137 for 1999 as favorable volume variances were tempered by tighter interest spreads. The growth of net interest income was limited because of compression of the net interest margin due to Iowa's highly competitive banking environment. Average earning assets increased 8.7 percent over 1998 while average interest-bearing liabilities increased 9.3 percent. The net interest spread, which is the difference between the yield earned on assets and the rate paid on liabilities, declined to 3.28 percent from 3.49 percent a year earlier. The average yield on earning assets declined 34 basis points while the rate on interest-bearing liabilities declined 13 basis points. Net interest margin, which is tax-equivalent net interest income as a percent of average earning assets, was 3.73 percent in 1999 compared to 3.97 percent in 1998. Loan Growth/Loan Quality At December 31, 1999, total loans had grown 15.7 percent to $1,196.0 million from $1,033.6 million a year earlier. The areas of significant growth included indirect consumer loans, direct consumer loans which were primarily home equity loans and commercial construction loans. Loan quality remained good with nonperforming loans at December 31, 1999, totaling $9,452,000, or .79 percent of loans. This compares to $11,289,000 at December 31, 1998, or 1.09 percent of loans. Nonperforming loans include loans on nonaccrual status, loans that have been renegotiated to below market interest rates or terms, and loans past due 90 days or more. Loan quality control and risk management is continually balanced with goals for loan growth. The Company has a formal structure for reviewing and approving all loans. Documentation and loan quality reviews are performed systematically by internal loan review personnel and external third party loan review professionals, as well as by regulatory personnel. 3 247 The allowance for loan losses, which totaled $14.4 million, represented 152.49 percent of nonperforming loans at the end of 1999, compared to 125.54 percent one year ago. The provision for loan losses totaled $4,250,000 for 1999 and $4,200,000 in 1998. The Company's net charge-offs as a percent of average loans were .36 percent for 1999 compared to .28 percent for 1998, both of which were better than historical industry averages. Loan losses for both years were primarily concentrated in the indirect and direct consumer loan portfolio. The allowance for loan losses represents a reserve available to absorb probable loan losses within the loan portfolio as of December 31, 1999. The allowance is based on management's judgment after considering various factors such as the current and anticipated economic environment, historical loan loss experience, and most importantly, the evaluation of individual loans by loan officers, loan administration officers and loan review personnel. Using the Company's loan grading process, each loan is evaluated based on its specific characteristics, the borrower's financial condition and collateral values. All loans are rated on a 1-to-9 rating scale. From these assessments, the Reserve Adequacy Committee performs quarterly reviews of the loan portfolio, quantifies the results and reviews the calculations of the allowance for loan losses. Management considered the allowance for loan losses at December 31, 1999, as sufficient to absorb probable loan losses within the portfolio. Net Noninterest Margin/Efficiency Ratio To measure operating efficiency, Brenton uses the net noninterest margin, which is the difference between noninterest income (excluding security gains or losses) and noninterest expense as a percent of average assets. For 1999, the net noninterest margin was (1.84) percent compared to (1.61) percent in 1998. Another ratio the Company utilizes to measure productivity is the efficiency ratio. This ratio is computed by dividing noninterest expense by the sum of tax-equivalent net interest income plus noninterest income (excluding gains and losses on the sale of securities). For the year ended December 31, 1999, the Company's efficiency ratio was 67.99 percent, compared to 62.71 percent one year ago. To enhance operating efficiency throughout the organization, the Company continues to focus on cost management and the development of strategic sources and improvements in noninterest income. Noninterest Income Noninterest income (excluding securities transactions) for 1999 was $29,578,016, a 9.5 percent decline from $32,692,377 in 1998. Noninterest income (excluding securities gains and losses) for 1999 represented 1.52 percent of average assets and 32.1 percent of total operating income. All categories of noninterest income, except mortgage banking, investment brokerage commissions and other income reflected strong growth from the prior year. Service charges on deposit accounts increased 18.9 percent in 1999 to $9,372,840. This growth related to increased account analysis charges on commercial and business deposit accounts due to a higher number of clients and revised fee schedules for deposit products. Fiduciary revenues climbed 5.4 percent to $3,685,449 in 1999 compared to $3,497,030 in 1998. This revenue improvement was due to increased trust assets. Insurance commissions and fees rose 16.3 percent to $1,608,661 in 1999 due to a 42.4 percent increase in credit-related insurance commissions. Other service charges and fees increased 3.4 percent to $4,791,432 in 1999 compared to 1998 as a result of improvements in merchant credit card fees, ATM/debit card fees, official check commissions and international fees. These increases were somewhat offset by declines in real estate sales commissions and purchased receivable fees. Mortgage banking revenue declined 45.8 percent to total $4,225,351 for 1999 compared to a record level of $7,797,577 in 1998. Rising mortgage interest rates during 1999 led to higher than anticipated losses on sales of originated loans. Residential real estate loan closings for 1999 totaled $430.6 million compared to $513.4 million in 1998. Investment brokerage commissions totaled $4,160,138 for 1999, a reduction of 22.0 percent from 1998. The decline was due to lower transaction volume as a result of broker turnover early in 1999. Despite higher levels of income from bank-owned life insurance policies in 1999, other operating income declined by $426,357 from one year ago. Several miscellaneous one-time items were recorded in 1998. 4 248 Securities transactions also contributed to the decrease in noninterest income. Securities gains of $215,640 were recorded in 1999 versus gains of $665,450 in 1998. The Company will continue to focus on generating fee income by providing a broad array of financial products and services to existing and new clients. The Company has become a proactive sales organization by developing a partnership culture. Referrals are made between lines of business in an effort to meet all of the financial needs of our clients'. The growth rate of fee income could be vulnerable to future economic conditions and competition from other financial institutions and other financial service providers that cannot be estimated by the Company. Noninterest Expense Total noninterest expense increased 6.5 percent in 1999 to $65,374,270 from $61,391,528 one year ago. Compensation, the largest component of noninterest expense, increased $1,083,876, or 3.7 percent, over 1998 as a result of normal salary adjustments and the Company's growth initiatives. Included in compensation is variable compensation, which declined 12.7 percent as a result of lower sales of mortgage and investment products and services. The number of full-time equivalent employees at December 31, 1999, declined 1.5 percent compared to the end of 1998 as a result of continued focus on staffing levels and improvements in efficiency in various operating areas. Benefit expense increased 13.4 percent due to increased compensation expense, higher health insurance premiums and an award of Brenton stock to most employees during the first quarter of 1999. Occupancy expense rose 4.4 percent, or $256,425, in 1999 as a result of increases in depreciation expense and real estate taxes, and an 11 percent decline in rental income from outside tenants. Furniture and equipment expense grew to $5,295,734, a 27.2 percent increase from the prior year. The increase was due to depreciation on technology upgrades and higher costs for software maintenance agreements. Data processing expense increased $249,692, or 9.5 percent. This increase was driven by contractual terms based on growth in the number of loan and deposit accounts. Marketing expense rose $311,842 to $1,784,474 because of expanded marketing efforts for various lines of business and costs related to revising the Company's deposit products. Supplies expense increased 14.5 percent to $1,404,316 from $1,226,212 last year. The increase was primarily due to a higher volume of debit cards issued and a higher volume of new account checks and deposit slips provided as a result of new accounts opened, including the acquisition of deposit accounts in Pella and Knoxville from U.S. Bank. Other operating expenses increased only $118,380, or 1.0 percent, when comparing 1999 results to 1998. Increases in legal fees, check processing fees, bank operational losses and Year 2000 related expenses exceeded reductions in personnel recruitment costs and consulting fees. In late 1998, the Company began a strategic growth process called "Quantum Leap." The objective is to attract profitable clients at a rate significantly above Iowa's population and economic growth rates. The initiative is designed to further evolve the Company's growing sales culture by substantially increasing the sales staff over the next three years, by creating opportunities for additional sales from the existing sales staff and by strengthening partnerships with the sales support staff. The Company's substantial investment and commitment to this initiative will provide revenue growth in the years to come. The net after-tax cost of the initiative in 1999 was $1,035,000. While the Company's growth initiatives have caused and will continue to cause some components of expense to increase, the Company continues to carefully focus on cost management and evaluates all major expense items in an effort to control the growth rate of noninterest expenses. Income Taxes Brenton's income tax strategies include reducing income taxes by purchasing securities and originating loans that produce tax-exempt income. The goal is to maintain the maximum level of tax-exempt assets in order to benefit the Company on both a tax-equivalent yield basis and in income tax savings. The effective rate of income tax expense as a percent of income before income tax and minority interest was 24.4 percent for 1999 compared to 27.7 percent for 1998. Results of Operations - 1998 Compared to 1997 Net Income For the year ended December 31, 1998, Brenton recorded net income of $20,350,921, an increase of 13.0 percent over 1997, which 5 249 totaled $18,010,107. Diluted earnings per common share were $.96 compared to $.83 for 1997. Return on average assets (ROA) was 1.18 percent in 1998, compared to 1.14 percent in 1997. The return on average equity (ROE) was 15.37 percent, compared to 14.47 percent one year earlier. Net Interest Income Net interest income rose 2.1 percent to $61,387,326 for 1998 as favorable volume variances exceeded unfavorable rate variances. Average earning assets increased 7.4 percent over 1997 while average interest-bearing liabilities increased 7.2 percent. The average yield earned on earning assets declined 17 basis points, due to the declining interest rate environment. Meanwhile, the average rate paid on interest-bearing liabilities increased three basis points as a result of an aggressive effort to gain new client relationships, which resulted in the sale of higher-priced transaction deposit products. The net interest spread declined to 3.49 percent from 3.69 percent a year earlier. Net interest margin averaged 3.97 percent in 1998 compared to 4.16 percent in 1997. Loan Growth/Loan Quality At December 31, 1998, total loans had grown 4.1 percent to $1,033.6 million from $993.2 million a year earlier. Loan quality remained good with nonperforming loans at December 31, 1998, totaling $11,289,000, or 1.09 percent of loans. This compared to $6,712,000 at December 31, 1997, or .68 percent of loans. The allowance for loan losses, which totaled $14.2 million, represented 125.54 percent of nonperforming loans at the end of 1998, compared to 189.69 percent one year earlier. The provision for loan losses totaled $4,200,000 for the year ended December 31, 1998, compared to $3,900,000 for 1997. The increase in the provision was related to the $29.1 million increase in average loans outstanding during 1998. The Company's net charge-offs as a percent of average loans was .28 percent for 1998 compared to .26 percent for 1997. Loan losses for both years were primarily concentrated in the consumer loan portfolio. Net Noninterest Margin/Efficiency Ratio For 1998, the net noninterest margin improved to (1.61) percent compared to (1.86) percent in 1997. For the year ended December 31, 1998, the Company's efficiency ratio improved to 62.71 percent, compared to 63.66 percent in 1997. Noninterest Income Brenton achieved record levels of noninterest income in 1998. For 1998, total noninterest income (excluding securities transactions) increased 21.0 percent to $32,692,377 from $27,011,967 one year earlier. Noninterest income (excluding securities gains and losses) for 1998 represented 1.84 percent of average assets and 34.8 percent of total operating income. All categories of noninterest income, except insurance commissions and fees, reflected strong growth from the prior year. Service charges on deposit accounts increased 8.2 percent in 1998 to $7,885,513. This growth related to increased account analysis charges on commercial and business deposit accounts due to a higher number of clients. Mortgage banking revenue rose 138.2 percent to $7,797,577 for 1998 compared to $3,274,215 in 1997. This revenue growth was the result of a significantly higher volume of mortgage loan originations and the favorable interest rate environment. Residential real estate loan closings for 1998 totaled $513.4 million compared to $179.1 million in 1997. Refinancings represented 58.7 percent of the closings in 1998 and 41.6 percent in 1997. Investment brokerage commissions totaled $5,334,309 for 1998, an increase of 11.0 percent over 1997 due to greater broker productivity and active financial markets. Fiduciary revenues climbed 11.5 percent to $3,497,030 in 1998 compared to $3,136,078 in 1997. This revenue improvement was due to increased assets from existing trust accounts and new business. Insurance commissions and fees declined 50.7 percent to $1,382,917 in 1998 due to the third quarter 1997 sale of one of the Company's insurance agencies and a 44.7 percent decline in credit-related insurance commissions. 6 250 Other service charges, commissions and fees increased 22.3 percent to $4,208,330 in 1998 compared to 1997 as a result of increases from real estate sales commissions, ATM/debit card fees, international fees and commercial line of credit fees. Other operating income increased by $329,277 from 1997. The increase was primarily due to higher levels of income from bank-owned life insurance policies and miscellaneous one-time items, which exceeded a 1997 gain on the sale of one of the Company's insurance agencies, as discussed above. Securities transactions also contributed to the increase in noninterest income. Securities gains of $665,450 were recorded in 1998 versus gains of $493,822 in 1997. Noninterest Expense Total noninterest expense increased 6.4 percent in 1998 to $61,391,528 from $57,698,564 in 1997. Compensation expense increased $2,317,134, or 8.6 percent, over 1997. Standard salaries, which comprised 69.3 percent of total compensation expense, increased by 11.6 percent compared to 1997 due to an increase in the number of full-time equivalent employees and normal annual salary increases. Variable compensation increased 43.3 percent as a result of higher sales of fee-related products and services. Other compensation decreased $1,917,090 because of the expiration of a long-term stock compensation plan. The number of full-time equivalent employees increased 9.8 percent at December 31, 1998, compared to the end of 1997 as a result of filling a number of open positions. Benefit expense increased 13.3 percent due to increased compensation, higher health insurance premiums and increased retirement plan contributions. Occupancy expense rose 3.5 percent, or $197,959, in 1998 as a result of increases in depreciation expense, repairs and maintenance and utility costs. Furniture and equipment expense grew to $4,163,137, a 14.6 percent increase from 1997. The increase was due to depreciation on technology upgrades and increased repairs and maintenance expense. Transferring the personal computer "help desk" function to an internal operation reduced data processing expense $226,668, or 8.0 percent. Other operating expenses increased $173,054, or 1.5 percent, when comparing 1998 results to 1997. Increases in consulting fees, personnel recruitment expenses, check processing fees and correspondent bank service charges exceeded reductions in legal fees, bank operational losses, miscellaneous expense and loss on sale of fixed assets. Income Taxes Brenton's income tax strategies included reducing income taxes by purchasing securities and originating loans that produce tax-exempt income. The effective rate of income tax expense as a percent of income before income tax and minority interest was 27.7 percent for 1998 compared to 28.0 percent for 1997. Capital Resources Common stockholders' equity totaled $131,933,451 as of December 31, 1999, a 2.4 percent decline from the prior year. Excluding the change in accumulated other comprehensive income (loss), realized stockholders' equity increased 4.3 percent compared to year-end 1998 and totaled $137,568,254. In May 1999, the Board declared a 10 percent common stock dividend. As a result of this action, each shareholder received one additional share of common stock for every 10 shares they owned. Fractional shares were paid in cash. All per-share data has been restated to reflect the 2-for-1 stock split in 1998 and the 10 percent common stock dividends in 1999 and 1998. Cash dividends for 1999 totaled $7,112,542, or $.346 per common share, which represents an increase of 9.2 percent over 1998 dividends of $.317 per share. The dividend payout ratio for 1999 was 43.25 percent of earnings per share. As part of Brenton's ongoing stock repurchase plan, 300,624 shares of common stock (adjusted for the 10 percent common stock dividend) were repurchased during 1999 at a cost of $4,004,426. Since the inception of the plan in 1994, the Company has repurchased 3,644,983 shares (adjusted for the 2- for-1 stock split and 10 percent common stock dividends) at a total cost of $37,948,804. At this time, the Board has decided not to extend this plan for 2000. 7 251 The Company continues to monitor its capital position to balance the goals of maximizing return on average equity, while maintaining adequate capital levels for regulatory purposes. The Company's risk-based core capital ratio at December 31, 1999, was 9.20 percent and the total risk-based capital ratio was 10.18 percent. These ratios exceeded the minimum regulatory requirements of 4.00 and 8.00 percent, respectively. The Company's tier 1 leverage capital ratio, which measures capital excluding intangible assets, was 6.80 percent at December 31, 1999, exceeding the regulatory minimum requirement for well- capitalized institutions of 5.0 percent. The debt-to-equity ratio of Brenton Banks, Inc. (the "Parent Company") was 4.9 percent at December 31, 1999, compared to 6.7 percent at the end of 1998. The Parent Company's $5 million line of credit with a regional bank was unused at the end of the year. Long-term borrowings of the Parent Company at December 31, 1999, consisted entirely of capital notes totaling $6,454,000. Brenton Banks, Inc. common stock closed on December 31, 1999, at $10.13, a decline of 33.5 percent from the prior year-end. The closing price at December 31, 1999, was 156.4 percent of the book value per share of $6.48. The year-end stock price represented a price-to-1999-diluted-earnings multiple of 12.7 times. Brenton Banks, Inc. continues to pursue acquisition and expansion opportunities, which fit the strategic direction and enhance the financial performance of the Company, as well as strengthen the Company's presence in current and new markets. On September 24, 1999, the Company completed the acquisition of two U.S. Bank offices in Pella and Knoxville, with deposits totaling approximately $53 million. There are currently no pending acquisitions that would require Brenton Banks, Inc. to secure capital from public or private markets. Market Risk Management Market risk is the risk of earnings volatility that results from adverse changes in interest rates and market prices. The Company's market risk is comprised primarily of interest rate risk arising from its core banking activities of lending and deposit taking. Interest rate risk is the risk that changes in market interest rates may adversely affect the Company's net interest income. Management continually develops and applies strategies to mitigate this risk. Management does not believe that the Company's primary market risk exposures and how those exposures were managed in 1999 changed when compared to 1998. The Company uses a third-party computer software simulation modeling program to measure its exposure to potential interest rate changes. For various assumed hypothetical changes in market interest rates, numerous other assumptions are made such as prepayment speeds on loans and securities backed by mortgages, the slope of the Treasury yield curve, the rates and volumes on the Company's deposit products and the rates and volumes on the Company's loan production. The following table sets forth the estimated changes in net interest income (expressed as a percent of base net interest income) for projected hypothetical changes in market interest rates. Base net interest income is the projected net interest income assuming no change in interest rates. As shown in the table, the Company's net interest income is more sensitive in a prolonged falling rate scenario than in a rising rate scenario. As market rates decline, the assumed speed of fixed-rate loan repayments increases, causing the funds received to be reinvested at lower rates. Current interest rates on certain liabilities are at a level that does not allow for significant downward repricing should market interest rates decline significantly. As market rates increase, fixed-rate loans are less likely to prepay, therefore, slowing the opportunity to reinvest at the assumed higher rates. In either a rising or falling interest rate environment, the Company believes it has taken actions to minimize the actual impact on net interest income. Those actions include the origination of variable-rate consumer and commercial loans, the use of fixed-rate Federal Home Loan Bank advances as alternatives to certificates of deposit and active management of the investment securities portfolio to provide for cash flows that will facilitate interest rate risk management. In selected cases, the Company may enter into interest rate swaps, however, the amount of swaps assumed in the projection of net interest income are not material. The Company has entered into interest rate floor contracts to mitigate the effect falling interest rates would have when certain deposit categories could not be priced proportionately lower. Actual changes in net interest income may differ from estimated changes set forth in this table due to various risks and uncertainties concerning how actual repricing opportunities will differ from assumed repricing opportunities.
Changes in net interest income due to projected hypothetical changes in market interest rates _____________________________________________ Assumed changes in market rates 2000 2001 2002 _______________ _____ _____ _____ - -300 bps 1.9% -1.6% -6.7% - -200 bps 1.8% 0.3% -3.7% - -100 bps 1.3% 2.1% 0.2% +100 bps -0.8% -0.4% 1.6% +200 bps -1.5% -2.8% 1.7% +300 bps -2.5% -5.5% 1.2% (Changes in hypothetical interest rates are assumed to be instantaneous and sustained parallel shifts in the yield curve.)
8 252 Asset/Liability Management Brenton has a fully-integrated asset/liability management system to assist in managing the balance sheet. The process, which is used to project the results of alternative investment decisions, includes the development of simulations, as previously discussed, that reflect the effects of various interest rate scenarios on net interest income. Management utilizes the simulations to manage interest rate risk, the net interest margin and levels of net interest income. The goal of asset/liability management is to structure the balance sheet so that net interest income and net interest margin fluctuate in a narrow range during periods of changing interest rates. The Company currently believes that net interest income would fall by less than five percent if interest rates increased or decreased by 300 basis points over a one-year time horizon. This is within the Company's policy limits. The slope of the yield curve is also a major determinant in the net interest income of the Company. Generally, the steeper the intermediate treasury to the one-week LIBOR rate, the better the prospects for net interest income improvement. To improve net interest income and lessen interest rate risk, management continued its strategy of de-emphasizing fixed-rate portfolio residential real estate loans with long repricing periods. When appropriate for interest rate management purposes, the Company securitizes residential real estate loans. The Company continues to focus on reducing interest rate risk by emphasizing growth in variable-rate commercial and consumer loans. In addition to normal balance sheet instruments, the Company has utilized Federal Home Loan Bank advances and, in selected cases, interest rate swaps and interest rate floor contracts to reduce interest rate risk. Other actions taken to minimize interest rate risk were previously discussed under the heading "Market Risk Management." Liquidity Management Brenton actively monitors and manages its liquidity position with the objective of maintaining sufficient cash flows to fund operations, meet client commitments, take advantage of market opportunities and provide a margin against unforeseeable liquidity needs. Federal funds sold, loans held for sale and investment securities available for sale are readily marketable assets. Maturities of all investment securities are managed to meet the Company's normal liquidity needs. Investment securities available for sale may be sold prior to maturity to meet liquidity needs, to respond to market changes or to adjust the Company's interest rate risk position. Readily marketable assets, as defined above, comprised 29.3 percent of the Company's total assets at December 31, 1999. Net cash provided from operations (exclusive of increases or decreases in loans held for sale) of the Company is another major source of liquidity and totaled $20,729,000 in 1999, $24,749,000 in 1998 and $23,303,000 in 1997. These strong cash flows from operations are expected to continue in the foreseeable future. The Company has historically maintained a stable deposit base and a relatively low level of large deposits, which results in a low dependence on volatile liabilities. At December 31, 1999, the Company had advances of $131,674,000 from the Federal Home Loan Bank ("FHLB") of Des Moines, of which $52,200,000 represents a variable-rate line of credit used to fund mortgage lending operations. The remaining balance was used as a means of providing both long-term, fixed-rate funding for certain assets and managing interest rate risk. The Company had additional borrowing capacity available from the FHLB of approximately $7 million at December 31, 1999. The combination of high levels of potentially liquid assets, strong cash flows from operations, low dependence on volatile liabilities and additional borrowing capacity provided strong liquidity for the Company at December 31, 1999. The Company has entered into agreements for the construction of an operations and sales support facility with an estimated total cost, exclusive of land, of $10.3 million. Groundbreaking occurred in October 1999, construction has begun and completion is expected in the fourth quarter of 2000. The building will replace currently leased space and will also allow for additional growth. The Parent Company had sufficient cash flow and liquidity at December 31, 1999. The primary funding source for the Parent Company is dividends from its subsidiaries. Dividends of approximately $28 million were available to be paid to the Parent Company by subsidiary banks without reducing capital ratios below regulatory minimums. At the end of 1999 the Parent Company had $3.4 million of interest-bearing deposits with banks, a $5 million unused line of credit and additional borrowing capacity. Year 2000 The "Year 2000" issue was a top priority for Brenton since the establishment of a Year 2000 Committee and a formal plan in August 1997. The purpose of the committee and the formal plan was to minimize the risk of potential disruption related to computers or other equipment with date- sensitive software. Based on the Company's assessment of operations through February 2000, we have not 9 253 experienced any significant year 2000 issues. The Company has surveyed our larger clients, vendors and significant third parties and believes they have experienced no significant year 2000 issues, which could adversely affect the Company. The Company will continue to monitor year 2000 issues. The incremental expense associated with becoming Year 2000 compliant totaled approximately $325,000 in 1999 and $530,000 overall, which was not material to the Company's financial position. There were additional benefits that resulted from this project, because in addition to becoming Year 2000 compliant, systems were improved. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", which originally was scheduled to be effective for the Company for the year beginning January 1, 2000. The effective date has been postponed until January 1, 2001. This statement requires recognition of all derivative instruments as either assets or liabilities in the statement of financial position measured at fair value. This statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows gains and losses from derivatives to offset related results on the hedged item in the income statement, and requires a company to formally document, designate and assess the effectiveness of transactions for which hedge accounting is applied. The impact the adoption of SFAS No. 133 will have on the Company's financial statements has not been determined. The Company expects to adopt SFAS No. 133 when required. 10 254
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCES AND RATES Average Balances (in thousands) 1999 1998 1997 1996 1995 Assets: Cash and due from banks $ 72,186 65,874 58,681 65,439 57,138 Interest-bearing deposits with banks 3,526 3,706 2,460 1,393 1,076 Federal funds sold and securities purchased under agreements to resell 7,118 31,048 31,472 26,188 39,763 Trading account securities - - 12 - - Investment securities: Available for sale--taxable 430,740 390,591 348,232 330,002 244,786 Available for sale--tax-exempt 155,558 125,237 99,868 85,471 100,859 Held to maturity--taxable 1,514 3,998 12,700 46,271 65,959 Held to maturity--tax-exempt 33,982 53,130 56,204 51,639 50,235 Loans held for sale 56,218 37,841 10,284 7,983 5,908 Loans 1,098,732 999,232 970,115 919,578 945,724 Allowance for loan losses (14,519) (13,738) (12,171) (11,440) (11,166) Premises and equipment 36,010 31,883 29,841 31,728 31,436 Other assets 62,761 51,318 41,771 28,642 29,508 $ 1,943,826 1,780,120 1,649,469 1,582,894 1,561,226 Liabilities and Stockholders' Equity: Deposits: Noninterest-bearing $ 192,211 164,403 139,480 131,051 128,770 Interest-bearing: Demand 109,535 90,589 81,430 376,259 355,819 Savings 641,308 585,598 551,509 241,250 231,633 Time 546,868 556,056 567,258 583,508 626,497 Total deposits 1,489,922 1,396,646 1,339,677 1,332,068 1,342,719 Federal funds purchased and securities sold under agreements to repurchase 150,387 116,388 78,234 59,276 40,237 Other short-term borrowings 117,377 65,205 53,223 17,295 6,536 Accrued expenses and other liabilities 15,940 17,020 17,097 17,520 14,896 Long-term borrowings 31,330 47,605 32,056 33,094 37,264 Total liabilities 1,804,956 1,642,864 1,520,287 1,459,253 1,441,652 Minority interest in consolidated subsidiaries 4,734 4,834 4,691 4,471 4,391 Common stockholders' equity 134,136 132,422 124,491 119,170 115,183 $ 1,943,826 1,780,120 1,649,469 1,582,894 1,561,226 Summary of Average Interest Rates: Average yields earned: Interest-bearing deposits with banks 4.90% 4.74 4.80 4.87 6.20 Trading account securities - - 4.26 - - Federal funds sold and securities purchased under agreements to resell 4.91 5.35 5.54 5.41 5.69 Investment securities: Available for sale--taxable 5.83 6.09 6.31 6.08 5.96 Available for sale--tax-exempt (tax equivalent basis) 6.46 6.69 7.04 7.13 6.71 Held to maturity--taxable 6.72 6.93 6.39 6.22 6.17 Held to maturity--tax-exempt (tax equivalent basis) 7.03 6.82 6.72 6.68 8.05 Loans held for sale 7.07 7.11 7.89 8.47 6.71 Loans 8.26 8.74 8.82 8.69 8.69 Average rates paid: Deposits 3.96% 4.12 4.11 4.12 4.37 Federal funds purchased and securities sold under agreements to repurchase 4.41 4.38 4.36 4.17 4.08 Other short-term borrowings 5.46 5.76 5.98 5.87 5.67 Long-term borrowings 6.43 6.34 6.86 7.07 7.03 Average yield on interest- earning assets 7.44% 7.78 7.95 7.80 7.86 Average rate paid on interest- bearing liabilities 4.16 4.29 4.26 4.22 4.45 Net interest spread 3.28 3.49 3.69 3.58 3.41 Net interest margin 3.73 3.97 4.16 4.03 3.89
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BRENTON BANKS, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA Year-end Balances (in thousands) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Total assets $ 1,985,455 1,939,557 1,718,484 1,632,095 1,582,779 1,581,327 1,480,596 1,431,140 1,360,942 1,274,301 Interest-earning assets 1,805,943 1,788,081 1,578,923 1,497,600 1,461,218 1,475,473 1,400,709 1,323,252 1,267,402 1,181,172 Interest-bearing liabilities 1,645,684 1,590,493 1,406,258 1,335,609 1,300,508 1,315,378 1,224,951 1,181,013 1,141,008 1,052,597 Noninterest-bearing deposits 189,333 190,625 161,007 153,284 143,220 136,548 127,132 137,212 115,479 125,626 Long-term borrowings 27,704 41,546 36,662 34,860 38,178 28,939 20,055 13,284 13,634 12,675 Common stockholders' equity** 131,933 135,210 129,379 121,954 119,534 110,430 112,418 97,430 86,712 77,258 Results of Operations (in thousands) Interest income $ 128,979 124,026 118,239 111,383 111,040 101,223 98,656 106,560 115,561 106,826 Interest expense 66,380 62,639 58,105 55,331 57,708 45,772 44,427 54,773 68,687 64,431 Net interest income 62,599 61,387 60,134 56,052 53,332 55,451 54,229 51,787 46,874 42,395 Provision for loan losses 4,250 4,200 3,900 2,900 1,865 1,988 1,252 1,411 799 869 Net interest income after provision for loan losses 58,349 57,187 56,234 53,152 51,467 53,463 52,977 50,376 46,075 41,526 Noninterest income 29,794 33,358 27,506 23,327 17,847 16,593 17,863 14,684 12,715 11,554 Noninterest expense 65,374 61,392 57,699 56,090 55,051 56,657 50,415 46,591 42,284 37,820 Income before income taxes and minority interest 22,769 29,153 26,041 20,389 14,263 13,399 20,425 18,469 16,506 15,260 Income taxes 5,565 8,082 7,288 5,771 3,205 2,701 5,508 4,884 4,308 4,388 Minority interest 644 720 743 603 651 591 667 632 539 533 Net income $ 16,560 20,351 18,010 14,015 10,407 10,107 14,250 12,953 11,659 10,339 Average common shares outstanding (in thousands)* 20,498 20,853 21,181 21,891 22,469 23,105 22,983 22,782 22,716 22,677 Per Common Share* Net income-basic $ .81 .98 .85 .64 .46 .44 .62 .57 .51 .46 Net income-diluted .80 .96 .83 .63 .46 .43 .61 .56 .51 .45 Cash dividends .346 .317 .225 .171 .154 .150 .137 .120 .110 .093 Common stockholders' equity*** 6.76 6.39 6.02 5.62 5.27 5.01 4.74 4.26 3.81 3.40 Closing price 10.13 15.23 16.53 10.38 7.26 6.23 5.98 5.92 4.72 3.07 Selected Operating Ratios Return on total average common stockholders' equity** 12.35% 15.37 14.47 11.76 9.04 9.03 13.82 14.13 14.27 14.39 Return on average realized common stockholders' equity*** 12.31 15.77 14.68 11.79 8.91 8.99 13.82 14.12 14.26 14.39 Return on average assets (including minority interest) .89 1.18 1.14 .92 .71 .70 1.04 .98 .93 .95 Equity to assets*** 6.91 6.81 7.36 7.41 7.47 7.28 7.40 6.81 6.37 6.06 Common dividend payout 43.25 33.02 27.11 27.14 33.48 34.88 22.46 21.43 21.57 20.67 Allowance for loan losses as a percent of loans 1.21 1.37 1.28 1.20 1.22 1.12 1.12 1.20 1.14 1.25 Net charge-offs as a percent of average loans .36 .28 .26 .29 .18 .10 .05 .13 .15 .12 * Restated for 2-for-1 stock split effective February 1998, 10 percent common stock dividends effective in 1999, 1998, 1997 and 1996 and 3-for-2 stock split effective in 1994. ** Including unrealized gains (losses) on securities available for sale. *** Excluding unrealized gains (losses) on securities available for sale.
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BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION December 31 1999 1998 Assets: Cash and due from banks (note 2) $ 85,064,053 76,460,049 Interest-bearing deposits with banks 2,361,784 2,167,288 Federal funds sold and securities purchased under agreements to resell - 6,000,000 Investment securities: Available for sale (note 3) 556,191,355 605,183,788 Held to maturity (market value of $25,351,000 and $44,011,000 at December 31, 1999, and 1998, respectively) (note 3) 25,201,876 43,027,501 Investment securities 581,393,231 648,211,289 Loans held for sale 26,201,221 98,147,391 Loans (notes 4, 9 and 10) 1,195,986,791 1,033,554,556 Allowance for loan losses (note 5) (14,413,104) (14,172,264) Loans, net 1,181,573,687 1,019,382,292 Premises and equipment (note 6) 37,978,240 32,523,113 Accrued interest receivable 15,856,895 16,458,066 Other assets (notes 4 and 8) 55,025,590 40,207,277 1,985,454,701 1,939,556,765 Liabilities and Stockholders' Equity: Deposits (note 7): Noninterest-bearing 189,333,019 190,625,140 Interest-bearing: Demand 145,131,184 131,602,358 Savings 640,963,380 603,367,340 Time 554,655,720 571,080,293 Total deposits 1,530,083,303 1,496,675,131 Federal funds purchased and securities sold under agreements to repurchase 166,806,442 155,847,300 Other short-term borrowings (note 9) 110,423,584 87,050,000 Accrued expenses and other liabilities 13,896,056 18,315,348 Long-term borrowings (note 10) 27,704,000 41,546,000 Total liabilities 1,848,913,385 1,799,433,779 Minority interest in consolidated subsidiaries 4,607,865 4,912,667 Redeemable preferred stock, $1 par; 500,000 shares authorized; issuable in series, none issued - - Common stockholders' equity (notes 12, 13, 14 and 16): Common stock, $2.50 par; 50,000,000 shares authorized; 20,354,454 and 18,752,381 shares issued and outstanding at December 31, 1999, and 1998, respectively 50,886,135 46,880,953 Capital surplus - - Retained earnings 86,682,119 85,010,569 Accumulated other comprehensive income (loss)-- unrealized gains (losses) on securities available for sale (5,634,803) 3,318,797 Total common stockholders' equity 131,933,451 135,210,319 $ 1,985,454,701 1,939,556,765 Commitments and contingencies (notes 17 and 18). See accompanying notes to consolidated financial statements.
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BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31 1999 1998 1997 Interest Income: Interest and fees on loans (note 4) $ 94,493,565 89,739,711 86,020,464 Interest and dividends on investments: Available for sale--taxable 25,125,818 23,770,870 21,969,148 Available for sale--tax-exempt 7,058,222 5,866,972 4,929,898 Held to maturity--taxable 101,816 277,075 811,729 Held to maturity--tax-exempt 1,677,406 2,536,082 2,647,149 Interest on federal funds sold and securities purchased under agreements to resell 349,298 1,659,405 1,742,284 Other interest income 172,918 175,678 118,695 Total interest income 128,979,043 124,025,793 118,239,367 Interest Expense: Interest on deposits (note 7) 51,330,450 50,772,501 49,310,346 Interest on federal funds purchased and securities sold under agreements to repurchase 6,630,927 5,092,162 3,413,432 Interest on other short-term borrowings (note 9) 6,403,143 3,756,817 3,183,053 Interest on long-term borrowings (note 10) 2,015,386 3,016,987 2,198,772 Total interest expense 66,379,906 62,638,467 58,105,603 Net interest income 62,599,137 61,387,326 60,133,764 Provision for loan losses (note 5) 4,250,000 4,200,000 3,900,000 Net interest income after provision for loan losses 58,349,137 57,187,326 56,233,764 Noninterest Income: Service charges on deposit accounts 9,372,840 7,885,513 7,290,765 Mortgage banking income 4,225,351 7,797,577 3,274,215 Investment brokerage commissions 4,160,138 5,334,309 4,808,048 Fiduciary income 3,685,449 3,497,030 3,136,078 Insurance commissions and fees 1,608,661 1,382,917 2,803,983 Other service charges, collection and exchange charges, commissions and fees 4,791,432 4,634,529 3,879,609 Net realized gains from securities available for sale (note 3) 215,640 665,450 493,822 Other operating income 1,734,145 2,160,502 1,819,269 Total noninterest income 29,793,656 33,357,827 27,505,789 Noninterest Expense: Compensation 30,225,317 29,141,441 26,824,307 Employee benefits (note 15) 5,525,097 4,873,271 4,303,104 Occupancy expense of premises, net (notes 6 and 17) 6,063,984 5,807,559 5,609,600 Furniture and equipment expense (notes 6 and 17) 5,295,734 4,163,137 3,634,336 Data processing expense (note 18) 2,873,419 2,623,727 2,850,395 Marketing 1,784,474 1,472,632 1,361,963 Supplies 1,404,316 1,226,212 1,195,762 Other operating expense 12,201,929 12,083,549 11,919,097 Total noninterest expense 65,374,270 61,391,528 57,698,564 Income before income taxes and minority interest 22,768,523 29,153,625 26,040,989 Income taxes (note 8) 5,564,805 8,082,355 7,287,628 Income before minority interest 17,203,718 21,071,270 18,753,361 Minority interest 643,601 720,349 743,254 Net income $ 16,560,117 20,350,921 18,010,107 Per common share (notes 1 and 13): Net income-basic $ .81 .98 .85 Net income-diluted .80 .96 .83 Cash dividends .346 .317 .225 See accompanying notes to consolidated financial statements.
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BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 1999 1998 1997 Operating Activities: Net income $ 16,560,117 20,350,921 18,010,107 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 4,250,000 4,200,000 3,900,000 Depreciation and amortization 5,916,858 4,683,179 4,216,828 Deferred income taxes (242,812) 1,396,220 (685,223) Net realized gains from securities available for sale (215,640) (665,450) (493,822) Investment securities amortization and accretion 2,386,752 1,043,735 1,346,704 Net (increase) decrease in loans held for sale 71,946,170 (78,843,980) (13,433,113) Net increase in accrued interest receivable and other assets (3,540,983) (7,644,451) (3,501,066) Net increase (decrease) in accrued expenses, other liabilities and minority interest (4,385,521) 1,384,709 509,873 Net cash provided (used) by operating activities 92,674,941 (54,095,117) 9,870,288 Investing Activities: Investment securities available for sale: Purchases (135,073,603) (461,159,506) (303,699,052) Maturities 129,035,932 252,551,601 161,716,090 Sales 38,067,415 89,996,385 119,401,553 Investment securities held to maturity: Purchases (975,625) (6,166,526) (26,324,353) Maturities 18,678,932 32,130,525 29,768,259 Net increase in loans (164,147,009) (43,125,313) (53,741,825) Acquisition of deposits and loans, net 46,120,354 - - Purchase of other assets for investment - (5,000,000) (5,000,000) Purchases of premises and equipment (10,856,360) (7,911,645) (2,526,958) Proceeds from sales of premises and equipment 8,274 7,291 225,080 Net cash used by investing activities (79,141,690) (148,677,188) (80,181,206) Financing Activities: Net increase in noninterest-bearing, interest-bearing demand and savings deposits 33,567,260 119,558,474 25,683,433 Net increase (decrease) in time deposits (53,909,352) 12,846,166 (14,470,053) Net increase in federal funds purchased and securities sold under agreements to repurchase 10,959,142 63,214,724 25,806,456 Net increase (decrease) in other short-term borrowings (2,126,416) (9,700,000) 25,550,000 Proceeds of long-term borrowings 14,663,000 29,394,000 17,806,000 Repayment of long-term borrowings (3,005,000) (1,460,000) (2,004,024) Dividends on common stock (7,112,542) (6,622,340) (4,781,675) Proceeds from issuance of common stock under the employee stock purchase plan 243,573 758,090 551,247 Proceeds from issuance of common stock under the stock option plan 4,013 290,039 1,286,157 Proceeds from issuance of common stock under the long-term stock compensation plan - 970,220 246,915 Payment for shares reacquired under common stock repurchase plan (4,004,426) (10,000,900) (10,014,087) Payment for fractional shares resulting from common stock dividend (14,003) (13,961) (16,399) Net cash provided (used) by financing activities (10,734,751) 199,234,512 65,643,970 Net increase (decrease) in cash and cash equivalents 2,798,500 (3,537,793) (4,666,948) Cash and cash equivalents at the beginning of the year 84,627,337 88,165,130 92,832,078 Cash and cash equivalents at the end of the year $ 87,425,837 84,627,337 88,165,130 See accompanying notes to consolidated financial statements.
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BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY Years Ended December 31 1999 1998 1997 Common Stock Beginning of year balance $ 46,880,953 43,335,120 40,428,420 Ten percent common stock dividend (note 13) 4,655,915 4,315,398 3,966,905 Issuance of shares of common stock under the stock option plan (note 16) 33,680 99,825 501,760 Issuance of shares of common stock under the long-term stock compensation plan (note 16) - 268,960 82,945 Issuance of shares of common stock under the employee stock purchase plan (note 16) 33,647 94,150 93,790 Shares reacquired under the common stock repurchase plan (note 13) (718,060) (1,232,500) (1,738,700) End of year balance 50,886,135 46,880,953 43,335,120 Capital Surplus Beginning of year balance - - - Ten percent common stock dividend (note 13) - (78,529) - Issuance of shares of common stock under the stock option plan (note 16) (29,667) 190,214 784,397 Issuance of shares of common stock under the long-term stock compensation plan (note 16) - 842,685 163,970 Issuance of shares of common stock under the employee stock purchase plan (note 16) 209,926 664,018 457,457 Shares reacquired under the common stock repurchase plan (note 13) (180,259) (1,618,388) (1,405,824) End of year balance - - - Retained Earnings Beginning of year balance 85,010,569 82,824,333 80,448,768 Net income 16,560,117 20,350,921 18,010,107 Dividends on common stock ($.346, $.317, and $.225 per share, respectively) (7,112,542) (6,622,340) (4,781,675) Ten percent common stock dividend (note 13) (4,655,915) (4,236,869) (3,966,905) Fractional shares resulting from common stock dividend (14,003) (13,961) (16,399) Issuance of shares of common stock under the long-term stock compensation plan (note 16) - (141,425) - Issuance of shares of common stock under the employee stock purchase plan (note 16) - (78) - Shares reacquired under the common stock repurchase plan (note 13) (3,106,107) (7,150,012) (6,869,563) End of year balance 86,682,119 85,010,569 82,824,333 Total Stockholders' Equity before Accumulated Other Comprehensive Income (Loss) 137,568,254 131,891,522 126,159,453 Accumulated Other Comprehensive Income (Loss) Beginning of year balance 3,318,797 3,219,846 1,077,041 Change in unrealized holding gains (losses) on securities available for sale (8,953,600) 98,951 2,142,805 End of year balance (5,634,803) 3,318,797 3,219,846 Total Stockholders' Equity $ 131,933,451 135,210,319 129,379,299 See accompanying notes to consolidated financial statements.
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BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 1999 1998 1997 Net income $ 16,560,117 20,350,921 18,010,107 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities available for sale: Unrealized holding gains (losses) arising during the period (net of deferred tax of $5,291,295, $(311,674) and $(1,470,886), respectively) (8,818,825) 512,861 2,451,444 Less: reclassification adjustment for net realized gains included in net income (net of tax expense of $80,865, $251,540 and $185,183, respectively) (134,775) (413,910) (308,639) Other comprehensive income (loss), net of tax (8,953,600) 98,951 2,142,805 Comprehensive income $ 7,606,517 20,449,872 20,152,912 See accompanying notes to consolidated financial statements.
17 261 BRENTON BANKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999, 1998 AND 1997 (1) Summary of Significant Accounting Policies and Related Matters ______________________________________________________________________________ Nature of Operations Brenton Banks, Inc. and subsidiaries (the Company) engage in retail, commercial, business, and agricultural banking and related financial services from 44 locations throughout the state of Iowa. The Company provides the usual products and services of banking such as deposits, commercial loans, business loans, agribusiness loans, personal loans and trust and investment management services. The Company also engages in activities that are closely related to banking, including mortgage banking, investment, insurance and real estate brokerage. The accounting and reporting policies of the Company conform with generally accepted accounting principles and general practices within the banking industry. The following describe the more significant accounting policies: The Principles of Consolidation The consolidated financial statements include the accounts of Brenton Banks, Inc. (the Parent Company) and its subsidiaries. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain reclassifications were made in the financial statements to agree with the current year presentation. The excess cost over underlying net assets of consolidated subsidiaries and other intangible assets are generally being amortized over 10 to 15 years and are included in other assets in the consolidated statements of condition. Intangible assets totaled $8,125,000 and $3,395,000 at December 31, 1999, and 1998, respectively. Acquisition On September 24, 1999, the Company completed the acquisition of two branch offices in Pella and Knoxville, Iowa from U.S. Bank. The two offices had deposits totaling approximately $53 million. The acquisition was accounted for by the purchase method. Intangible assets of $5.3 million, including $4.3 million of goodwill, were created in the transaction. Goodwill is being amortized to other operating expense on a straight-line basis over 15 years. Investment Securities Investment securities are classified based on the Company's intended holding period. Securities, which may be sold prior to maturity to meet liquidity needs, to respond to market changes or to adjust the Company's asset-liability position, are classified as available for sale. Securities that the Company has the ability and intent to hold to maturity are classified as held to maturity. Investment securities available for sale are recorded at fair value. The aggregate unrealized gains or losses, net of the income tax and minority interest effect, are recorded as a component of other comprehensive income until realized. Securities held to maturity are recorded at cost, adjusted for amortization of premiums and accretion of discounts. The timing of the amortization and accretion of mortgage-backed securities is adjusted for actual and projected prepayments. Net realized gains or losses on the sale of securities are shown in the statements of operations. Gains or losses are computed using the specific security identification method on the trade date. Loans Loans are carried primarily at the unpaid principal balance. Interest income on loans is accrued and recorded as income based on contractual interest rates and daily outstanding principal balances. 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, if it is neither well secured or 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. Under the Company's credit policies, all nonaccrual and restructured commercial, business, agricultural, commercial real estate and construction loans are considered to be impaired loans. In determining when a loan is impaired, management considers the delinquency status of the borrower, the borrower's ability to generate cash and the fair market value of the collateral. Specific allowances are established for any impaired commercial, business, agricultural, commercial real estate or construction loan where the recorded investment exceeds the measured value of the loan. On a practical basis, the measured value of a loan is obtained by using the observable market price of a loan or the fair value of the collateral, if the loan is collateral dependent. Otherwise, the measured value of a loan is based upon the present value of expected future cash flows discounted at the loan's effective interest rate. Impaired loans are charged-off on the basis of management's ongoing evaluation, but generally when it is deemed probable that the borrower cannot generate sufficient funds to comply with contractual terms in the normal course of business. Cash received on impaired loans is applied to principal until principal is satisfied or until the borrower demonstrates the ability to perform according to agreed-upon terms. Loans held for sale include real estate mortgage loans originated with the intent to sell. These loans are carried at the lower of aggregate cost or fair value. Allowance for Loan Losses The allowance for loan losses is maintained at a level considered appropriate to support management's evaluation of probable losses in the loan portfolio as of the balance sheet date. Management's evaluation is based upon several factors including economic conditions, historical loss and collection experience, risk characteristics of the portfolio, underlying collateral values, industry risk and credit concentrations. Loan losses or recoveries are charged or credited directly to the allowance account. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Depreciation is provided predominantly by the straight-line method over estimated useful lives of 5 to 40 years for buildings and leasehold improvements, and 3 to 20 years for furniture and equipment. Other Real Estate Owned Included in other assets is property acquired through foreclosure, acceptance of deed in lieu of foreclosure or other transfers in settlement of outstanding loans and related contract sales of such property until the contract is transferred to earning assets based upon sufficient equity in the asset. Amounts totaled $1,186,000 and $389,000 at December 31, 1999, and 1998, respectively. Such property is carried at the lower of cost or estimated fair value, less estimated selling costs. Periodic 18 262 appraisals are obtained to support carrying values. Net expense of ownership and declines in carrying values are charged to operating expenses. Employee Retirement Plan All employees of the Company are eligible, after meeting certain requirements, for inclusion in the defined contribution retirement plan. The plan is a combination profit sharing and 401(k) plan. Retirement plan costs are expensed as the Company contributes to the plan. The Company does not provide any material post-retirement benefits. Income Taxes The Company files a consolidated federal income tax return. Federal income taxes are allocated to the Parent Company and each subsidiary on the basis of its taxable income or loss included in the consolidated return. The effects of current or deferred taxes are recognized as a current and deferred tax liability or asset based on current tax laws. Accordingly, income tax expense in the consolidated statements of operations includes charges or credits to properly reflect the current and deferred tax asset or liability. Statements of Cash Flows In the statements of cash flows, cash and cash equivalents include cash and due from banks, interest-bearing deposits with banks and federal funds sold and securities purchased under agreements to resell. Income Per Common Share Basic net income per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding during the year. Diluted net income per common share amounts are computed by dividing net income by the weighted average number of common shares and all dilutive potential common shares outstanding during the year. In January 1998, the Company declared a 2-for-1 stock split effective February 10, 1998 and in May 1999, June 1998, and May 1997, the Company declared 10 percent common stock dividends. The average number of common shares and dilutive potential common shares have been restated for the stock split and stock dividends. The following information was used in the computation of net income per common share on both a basic and diluted basis for the years ended December 31, 1999, 1998 and 1997:
(in thousands, except for EPS data) 1999 1998 1997 _____________________________________________________________________________ Basic EPS Computation Numerator: Net income $16,560 20,351 18,010 ______ ______ ______ Denominator: Average common shares outstanding 20,498 20,853 21,181 ______ ______ ______ Basic EPS $ .81 .98 .85 ______ ______ ______ ______ ______ ______ Diluted EPS Computation Numerator: Net income $16,560 20,351 18,010 ______ ______ ______ Denominator: Average common shares outstanding 20,498 20,853 21,181 Average stock options 303 429 343 Average long-term stock compensation plan --- --- 170 ______ ______ ______ 20,801 21,282 21,694 ______ ______ ______ Diluted EPS $ .80 .96 .83 ______ ______ ______ ______ ______ ______
Fair Value of Financial Instruments Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering the Company's entire holdings of a particular financial instrument for sale at one time. Unless included in assets available for sale, it is the Company's general practice and intent to hold its financial instruments to maturity and not to engage in trading or sales activities. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Estimated fair values have been determined by the Company using the best available data and an estimation method suitable for each category of financial instruments. Interest Rate Floor An interest rate floor requires the seller to pay the purchaser, at specified dates, the amount, if any, by which the market interest rate falls below the agreed-upon floor, applied to a notional principal amount. Initial cash amounts paid on positions accounted for as hedges are deferred and amortized over the instrument's contractual life. Subsequent payments received are recognized into earnings as an adjustment to interest on deposits. 19 263 Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A significant estimate that is particularly sensitive to change relates to the allowance for loan losses. Changes in Accounting Policies: Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise Effective January 1, 1999, the Company adopted SFAS No. 134, "Accounting for Mortgage- Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This statement requires that after the securitization of mortgage loans held for sale, an entity engaged in mortgage banking activities classify the resulting mortgage-backed securities or other retained interests based on its ability and intent to sell or hold those investments. The adoption of SFAS no. 134 did not have a material effect on the Company. (2) Cash and Due From Banks ______________________________________________________________________________ The subsidiary banks are required by federal banking regulations to maintain certain cash and due from banks reserves. This reserve requirement amounted to $27,301,000 at December 31, 1999. (3) Investment Securities ______________________________________________________________________________ The amortized cost and estimated fair value of investment securities follow. The estimated fair value of investment securities has been determined using available quoted market prices for similar securities. 20 264
Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 1999 (in thousands) Cost Gains Losses Value Investment securities available for sale: Taxable investments: U.S. Treasury securities $ 32,730 22 (340) 32,412 Securities of U.S. government agencies 157,098 6 (4,890) 152,214 Mortgage-backed and related securities 186,940 113 (2,808) 184,245 Other investments 32,224 --- (357) 31,867 Tax-exempt investments: Obligations of states and political subdivisions 156,564 1,402 (2,513) 155,453 _______ _____ ______ _______ $565,556 1,543 (10,908) 556,191 Investment securities held to maturity: Taxable investments: Mortgage-backed and related securities $ 662 3 --- 665 Other investments 335 2 (1) 336 Tax-exempt investments: Obligations of states and political subdivisions 24,205 249 (104) 24,350 _______ _____ ______ _______ $ 25,202 254 (105) 25,351 December 31, 1998 (in thousands) Investment securities available for sale: Taxable investments: U.S. Treasury securities $ 43,076 360 (144) 43,292 Securities of U.S. government agencies 139,372 1,293 (248) 140,417 Mortgage-backed and related securities 231,955 1,497 (397) 233,055 Other investments 26,948 61 (25) 26,984 Tax-exempt investments: Obligations of states and political subdivisions 158,283 3,344 (191) 161,436 _______ _____ ______ _______ $599,634 6,555 (1,005) 605,184 Investment securities held to maturity: Taxable investments: Mortgage-backed and related securities $ 1,529 12 --- 1,541 Other investments 450 11 --- 461 Tax-exempt investments: Obligations of states and political subdivisions 41,048 964 (3) 42,009 _______ _____ ______ _______ $ 43,027 987 (3) 44,011
21 265 Proceeds from the sale of available for sale securities were $38,067,000, $89,996,000 and $119,402,000 in 1999, 1998, and 1997, respectively. Gross gains of $337,000 in 1999, $667,000 in 1998 and $874,000 in 1997 and gross losses of $121,000 in 1999, $2,000 in 1998 and $380,000 in 1997 were realized on those sales. Other investments at December 31, 1999, and 1998, consisted primarily of corporate bonds and Federal Home Loan Bank stock. U.S. government agencies originate or guarantee primarily all of the mortgage-backed and related securities. The scheduled maturities of investment securities at December 31, 1999 follow. Actual maturities may differ from scheduled maturities because issuers may have the right to call obligations without penalties. The maturities of mortgage-backed securities have been included in the period of anticipated payment considering estimated prepayment rates.
Estimated Amortized Fair (in thousands) Cost Value Investment securities available for sale: Due in one year or less $118,891 118,077 Due after one year through five years 343,631 336,395 Due after five years through ten years 87,744 85,978 Due after ten years 15,290 15,741 $565,556 556,191 Investment securities held to maturity: Due in one year or less $ 7,128 7,127 Due after one year through five years 10,471 10,519 Due after five years through ten years 6,539 6,629 Due after ten years 1,064 1,076 $ 25,202 25,351
Investment securities carried at $237,586,000 and $265,405,000 at December 31, 1999, and 1998, respectively, were pledged to secure public and other funds on deposit and for other purposes. (4) Loans ______________________________________________________________________________ A summary of loans at December 31 follows:
(in thousands) 1999 1998 Real estate loans: Commercial construction and land development $ 86,725 54,941 Secured by 1-4 family residential property 158,755 127,351 Home equity 197,793 175,380 Commercial and other 163,202 151,995 Loans to farmers 75,624 84,554 Commercial and industrial loans 193,690 179,414 Loans to individuals for personal expenditures: Direct 68,025 69,452 Indirect 238,664 182,184 All other loans 13,509 8,284 $1,195,987 1,033,555
The Company originates commercial, business, real estate, agricultural and personal loans with clients throughout Iowa. The portfolio has unavoidable geographic risk as a result. Total nonperforming loans and assets at December 31 were:
(in thousands) 1999 1998 Impaired loans: Nonaccrual $ 7,259 8,099 Restructured 399 289 Total impaired loans 7,658 8,388 Loans past due 90 days or more 1,794 2,901 Total nonperforming loans 9,452 11,289 Other real estate owned 1,186 389 Total nonperforming assets $10,638 11,678
The average balances of impaired loans for the years ended December 31, 1999, and 1998, were $8,610,000 and $5,901,000, respectively. The allowance for loan losses related to impaired loans at December 31, 1999, and 1998, was $2,827,000 and $2,506,000, respectively. Impaired loans of $0 and $311,000 were not subject to a related allowance for loan losses at December 31, 1999, and 1998, respectively, because of the net realizable value of loan collateral, guarantees and other factors. The effect of nonaccrual and restructured loans on interest income for each of the three years ended December 31 was:
(in thousands) 1999 1998 1997 Interest income: As originally contracted $973 827 402 As recognized 212 215 157 Reduction of interest income $761 612 245
Loan clients of the Company include certain executive officers, directors and principal shareholders, and their related interests and associates. All loans to this group were made in the ordinary course of business at prevailing terms and conditions. The aggregate indebtedness of all executive officers, directors and principal shareholders of Brenton Banks, Inc. and its significant subsidiaries, and indebtedness of related interests and associates of this group (except where the indebtedness of such persons was less than $60,000) included in loans follows:
(in thousands) Amount Balance at December 31, 1998 $ 4,691 Additional loans 20,605 Loan payments (957) Balance at December 31, 1999 $ 24,339
Mortgage Servicing Rights The fair market value of capitalized servicing rights at December 31, 1999 was approximately $8,168,000. To determine the fair value of the servicing rights, the Company used comparable market prices. In determining the fair market value and potential impairment, the Company disaggregated the portfolio by its predominate risk factor, interest rate. The fair value of the portfolio was determined by calculating the present value of future cash flows. The Company incorporated assumptions that market participants would use in estimating future 22 266 net servicing income which include estimates of the cost of servicing per loan, the discount rate, float value, an inflation rate, ancillary income per loan, prepayment speeds and default rates. Capitalized servicing rights on originated loan servicing, included in other assets, as of December 31 follows:
(in thousands) 1999 1998 Balance at beginning of year $ 5,775 2,274 Additions from originations 4,580 4,186 Amortization (1,083) (685) Sale of servicing (2,012) --- Impairment --- --- Balance at end of year $ 7,260 5,775
(5) Allowance for Loan Losses ______________________________________________________________________________ A summary of activity in the allowance for loan losses follows:
(in thousands) 1999 1998 1997 Balance at beginning of year $14,172 12,732 11,328 Provision 4,250 4,200 3,900 Recoveries 2,395 1,647 1,733 Loans charged off (6,404) (4,407) (4,229) Balance at end of year $14,413 14,172 12,732
(6) Premises and Equipment A summary of premises and equipment as of December 31 follows:
(in thousands) 1999 1998 Land $ 5,428 3,338 Buildings and leasehold improvements 34,765 33,881 Furniture and equipment 33,991 29,853 Construction in progress 1,578 324 75,762 67,396 Less accumulated depreciation 37,784 34,873 $37,978 32,523
Depreciation expense included in operating expenses amounted to $5,393,000, $4,282,000 and $3,783,000 in 1999, 1998 and 1997, respectively. (7) Deposits Time deposits include deposits in denominations of $100,000 or more of $79,118,000 and $97,665,000 at December 31, 1999, and 1998, respectively. A summary of interest expense by deposit classification follows:
(in thousands) 1999 1998 1997 Demand $ 3,481 2,800 2,332 Savings 19,289 17,429 15,903 Time deposits of $100,000 or more 4,561 4,835 4,833 Other time deposits 24,000 25,708 26,242 $51,331 50,772 49,310
The Company made cash interest payments of $67,684,000, $61,964,000 and $57,932,000 on deposits and borrowings in 1999, 1998 and 1997, respectively. At December 31, 1999, the scheduled maturities of time deposits are as follows: (in thousands) 2000 $364,329 2001 92,105 2002 73,316 2003 19,805 2004 and thereafter 5,101 $554,656 (8) Income Taxes The current and deferred income tax provisions included in the consolidated statements of operations follow:
1999 (in thousands) Current Deferred Total Federal $4,641 (203) 4,438 State 1,167 (40) 1,127 $5,808 (243) 5,565 ______________________________________________________________________________ 1998 Federal $5,301 1,512 6,813 State 1,385 (116) 1,269 $6,686 1,396 8,082 1997 Federal $6,562 (577) 5,985 State 1,411 (108) 1,303 $7,973 (685) 7,288
Since the income tax returns are filed after the issuance of the financial statements, amounts reported are subject to revision based on actual amounts used in the income tax returns. The Company made cash income tax payments of $3,500,000, $6,000,000 and $6,100,000 to the IRS, and $990,000, $1,510,000 and $1,568,000 to the state of Iowa in 1999, 1998 and 1997, respectively. Cash income tax payments for a year include estimated payments for current year income taxes and final payments for prior year income taxes. State income tax expense relates to state franchise taxes payable individually by the subsidiary banks. 23 267 The reasons for the difference between the amount computed by applying the statutory federal income tax rate of 35 percent and income tax expense follow:
(in thousands) 1999 1998 1997 At statutory rate $ 7,969 10,204 9,114 Increase (reduction) due to: Tax-exempt interest (3,268) (3,169) (2,916) State taxes, net of federal benefit 733 825 847 Nondeductible interest expense to own tax-exempts 635 572 536 Income on life insurance Policies (421) (368) (252) Other, net (83) 18 (41) $ 5,565 8,082 7,288
Accumulated deferred income tax assets are included in other assets in the consolidated statements of condition. There was no valuation allowance at December 31, 1999, or 1998. A summary of the temporary differences resulting in deferred income taxes and the related tax effect on each follow:
(in thousands) 1999 1998 Allowance for loan losses $ 5,959 5,576 Unrealized gains (losses) on securities available for sale 3,512 (2,157) Deposit base intangibles (373) (458) Premises and equipment (308) (366) Executive savings plan 690 386 Mortgage servicing rights (3,038) (2,348) Real estate mortgage, loan points deferred (166) (257) Other, net (42) (53) $ 6,234 323
(9) Other Short-Term Borrowings The Company had short-term borrowings with the Federal Home Loan Bank of Des Moines (FHLB) totaling $110,424,000 and $87,050,000 at December 31, 1999, and 1998, respectively. The average rate on these borrowings at December 31, 1999 was 5.04 percent. These borrowings were secured by FHLB stock and residential mortgage loans equal to 130 percent of the borrowings. The Parent Company has arranged an unsecured line of credit of $5,000,000, which was unused at December 31, 1999. It is at the prime interest rate and is subject to annual review and renewal. (10) Long-Term Borrowings Long-term borrowings consisted of the following at December 31:
(in thousands) 1999 1998 Capital notes, 5.50% to 10.00% Total Parent Company $ 6,454 9,046 Borrowings from FHLB, average rate of 5.80% at December 31, 1999 21,250 32,500 $ 27,704 41,546
Borrowings from the FHLB were secured by FHLB stock and residential mortgage loans equal to 130 percent of the borrowings and were direct obligations of the individual subsidiaries. Scheduled maturities of long-term borrowings at December 31, 1999 follow:
Parent (in thousands) Company Consolidated 2000 $ 793 793 2001 812 8,062 2002 446 446 2003 142 14,142 2004 1,328 1,328 Thereafter 2,933 2,933 $ 6,454 27,704
24 268 (11) Fair Value of Financial Instruments The estimated fair values of the Company's financial instruments were as follows:
December 31, 1999 December 31, 1998 _________________ _________________ Recorded Fair Recorded Fair (in thousands) Amount Value Amount Value _______________________________________________________________________________________ Financial assets: Cash and due from banks $ 85,064 85,064 $ 76,460 76,460 Interest-bearing deposits with banks 2,362 2,362 2,167 2,167 Federal funds sold and securities purchased under agreements to resell --- --- 6,000 6,000 Investment securities 581,393 581,542 648,211 649,195 Loans held for sale 26,201 26,201 98,147 98,147 Loans, net 1,181,574 1,176,790 1,019,382 1,029,536 Financial liabilities: Deposits $ 1,530,083 1,537,292 $1,496,675 1,504,006 Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings 277,230 277,230 242,897 242,897 Long-term borrowings 27,704 27,259 41,546 42,912 Off-balance-sheet assets (liabilities): Commitments to extend credit $ --- --- $ --- --- Letters of credit --- (96) --- (100) Interest rate floors 314 7 98 400
The recorded amount of cash and due from banks and interest- bearing deposits with banks approximates fair value. The recorded amount of federal funds sold and securities purchased under agreements to resell and trading account securities approximates fair value as a result of the short-term nature of the instruments. The estimated fair value of investment securities has been determined using available quoted market prices for similar securities. The estimated fair value of loans is net of an adjustment for credit risk. For loans with floating interest rates, it is presumed that estimated fair values generally approximate the recorded book balances. Real estate loans secured by 1-4 family residential property were valued using trading prices for similar pools of mortgage-backed securities. Other fixed-rate loans were valued using a present-value discounted cash flow with a discount rate approximating the market for similar assets. Deposit liabilities with no stated maturities have an estimated fair value equal to the recorded balance. Deposits with stated maturities have been valued using a present-value discounted cash flow with a discount rate approximating the current market for similar deposits. The fair-value estimate does not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. The Company believes the value of these depositor relationships to be significant. The recorded amount of the federal funds purchased, securities sold under agreements to repurchase and short-term borrowings approximates fair value as a result of the short-term nature of these instruments. The estimated fair value of long-term borrowings was determined using a present-value discounted cash flow with a discount rate approximating the current market for similar borrowings. The fair value of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements. The fair value of interest rate floor contracts is the estimated amount that the Company would receive or pay to terminate the floor agreements at the reporting date. 25 269 (12) Regulatory Capital The Company is subject to various regulatory capital requirements administered by both federal and state banking agencies. Failure to comply with minimum capital requirements could result in actions taken by regulators that could have a direct material impact on the Company's financial statements. Under the capital adequacy guidelines established by regulators, the Company must meet specific capital guidelines that involve the measurement of the Company's assets, liabilities and certain off-balance sheet items. The Company's capital amounts and classification are also subject to qualitative judgments by the regulators as it relates to components, risk weightings and other factors. Quantitative measures established by regulators to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the following table) of total and tier 1 capital to risk weighted assets and of tier 1 capital to average assets. To be categorized as well- capitalized, the Company must maintain minimum total risk-based, tier 1 risk- based and tier 1 leverage ratios as set forth in the table. The Company's actual capital amounts and ratios are also presented in the table.
To Be Well- Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions ________________________________________________________________________________________ Amount Ratio Amount Ratio Amount Ratio (dollar amounts in thousands) As of December 31, 1999: Total Capital (to Risk Weighted Assets): Consolidated $149,630 10.18% $117,592 > 8.0% N/A _ Brenton Bank 132,639 9.77 108,613 > 8.0 $135,766 > 10.0% _ _ Tier 1 Capital (to Risk Weighted Assets): Consolidated 135,192 9.20 58,796 > 4.0 N/A _ Brenton Bank 119,316 8.79 54,307 > 4.0 81,460 > 6.0 _ _ Tier 1 Capital (to Average Assets): Consolidated 135,192 6.80 59,612 > 3.0 N/A _ Brenton Bank 119,316 6.59 72,474 > 4.0 90,592 > 5.0 _ _
(13) Common Stock Transactions In January 1998, the Company declared a 2-for-1 stock split for holders of record as of February 10, 1998. As a result, the par value of the Company's common stock was changed from $5.00 to $2.50 per share, the number of outstanding shares doubled and authorized shares were increased to 50 million. In May 1999, the Company declared a 10 percent common stock dividend. This transaction resulted in the issuance of 1,862,366 shares of common stock and the transfer of $4,655,915 from retained earnings to common stock. In June 1998, the Company declared a 10 percent common stock dividend. As a result of this action, 1,726,159 shares of common stock were issued and $4,236,869 was transferred from retained earnings to common stock. Fractional shares resulting from both 10 percent common stock dividends were paid in cash. Net income and cash dividends per share information in the financial statements have been retroactively restated to reflect these transactions. As part of the Company's ongoing stock repurchase plan, the Board of Directors authorized additional common stock repurchases of $4 million in 1999. For the years ended December 31, 1999, 1998 and 1997, the Company repurchased 300,624, 563,915 and 886,494 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998 and 1997), respectively, at a total cost of $4,004,426, $10,000,900 and $10,014,087. (14) Dividend Restrictions The Parent Company derives a substantial portion of its cash flow, including that available for dividend payments to stockholders, from the subsidiary banks in the form of dividends. State and federal savings banks are subject to certain statutory and regulatory restrictions that affect dividend payments. Based on minimum regulatory risk-based capital guidelines as published by those regulators, the maximum dividends that could be paid by the subsidiary banks to the Parent Company at December 31, 1999, were approximately $28 million. (15) Employee Retirement Plan The Company provides a defined contribution retirement plan for the benefit of employees. The plan is a combination profit sharing 26 270 and 401(k) plan. All employees 21 years of age or older and employed by the Company for at least one year are eligible for the plan. The Company contributes 4 1/2 percent of eligible compensation of all participants to the profit sharing portion of the plan, and matches employee contributions to the 401(k) portion of the plan up to a maximum of 3 1/2 percent of each employee's eligible compensation. Retirement plan costs charged to operating expenses in 1999, 1998 and 1997 amounted to $1,636,000, $1,506,000 and $1,290,000, respectively. The Company offers no material post-retirement benefits. (16) Stock Plans In 1996, the Company adopted the 1996 Stock Option Plan (the "Plan"), which was approved by a vote of stockholders. During 1999, the Board of Directors authorized a ten percent expansion of the Plan. The Plan authorizes the granting of options on up to 1,607,100 shares 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, but if vesting is not achieved from performance vesting, 100 percent vesting occurs nine years and six months following the grant date. Options expire ten years and one month following the grant date. As of December 31, 1999, 59 percent of the outstanding options have vested. For purposes of estimating the fair value of the Company's stock options at the grant-date, the Company's option pricing model was used with the following weighted average assumptions for 1999, 1998 and 1997, respectively: expected dividend yields of 2.20%, 2.06% and 2.05%; risk-free interest rates of 6.26%, 5.55% and 6.52%; volatility factors of the expected market price of the Company's common stock of 26.1%, 19.6% and 18.5%; and weighted average expected life of the options of 6 years. The weighted average fair value of options granted in 1999, 1998 and 1997, respectively, was $3.40, $4.22 and $3.40. The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:
1999 1998 1997 Net income (in thousands): As reported $16,560 20,351 18,010 Pro forma 16,207 19,732 17,735 Basic earnings per share: As reported $.81 .98 .85 Pro forma .79 .95 .83 Diluted earnings per share: As reported $.80 .96 .83 Pro forma .78 .94 .82
Pro forma net income reflects only options granted in 1999, 1998, 1997 and 1996. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net income amounts presented above because compensation cost is reflected over the options' expected vesting period. Changes in options outstanding during 1999, 1998 and 1997 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998 and 1997):
Exercisable Outstanding Option Price Options Options Per Share December 31, 1996 --- 1,253,270 $ 8.32-8.87 Granted - 1997 --- 105,488 10.33-13.84 Forfeited - 1997 --- (43,923) 8.32 December 31, 1997 --- 1,314,835 8.32-13.84 Granted - 1998 --- 148,940 15.00-18.81 Forfeited - 1998 --- (27,758) 8.32-16.66 Vested - 1998 473,866 --- 8.32-18.81 December 31, 1998 473,866 1,436,017 8.32-18.81 Granted - 1999 --- 120,250 10.19-14.43 Exercised - 1999 (46,072) (46,072) 8.32-11.31 Forfeited - 1999 --- (56,684) 8.32-16.66 Expired - 1999 (5,481) (5,481) 10.85-16.66 Vested - 1999 430,192 --- 8.32-18.81 December 31, 1999 (112,998 shares available for grant) 852,505 1,448,030 $ 8.32-18.81
A total of 1,023,554 shares were granted to key management personnel under a long-term stock compensation plan. Under provisions of the plan, no grants were made after 1995. Each grant of shares covered a three-year performance period, 35 percent of which vested upon completion of employment for the performance period and 65 percent of which vested based on a tiered achievement scale tied to financial performance goals established by the Board of Directors. The total stock compensation expense associated with this plan was $0, $0, and $1,731,000 for 1999, 1998 and 1997, respectively. Changes in outstanding grant shares during 1999, 1998 and 1997 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998 and 1997):
Performance 1994 to 1995 to Period 1996 1997 December 31, 1996 199,850 213,963 Forfeited - 1997 --- (28,692) Expired - 1997 (129,897) --- Vested and Issued - 1997 (69,953) --- December 31, 1997 --- 185,271 Vested and Issued - 1998 --- (185,271) December 31, 1998 --- --- Vested and Issued - 1999 --- --- ______________________________________________________________________________ Outstanding grant shares at December 31, 1999 --- ---
The Company's 1987 nonqualified stock option plan permitted the Board of Directors to grant options on up to 878,460 shares of the Company's common stock to officers of the Company. Under provisions of the plan, no further grants can be made and no grants 27 271 were made in 1999 or 1998. The price at which options were exercisable was not less than the fair market value of the shares at the date the options were granted. The options were subject to certain vesting requirements and maximum exercise periods, as established by the Board of Directors. Changes in options outstanding and exercisable during 1999, 1998 and 1997 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998 and 1997):
Exercisable Outstanding Option Price Options Options Per Share December 31, 1996 290,876 290,876 $1.51-3.23 Exercised - 1997 (246,953) (246,953) 1.51-3.23 December 31, 1997 43,923 43,923 2.19 Exercised - 1998 (43,923) (43,923) 2.19 December 31, 1998 --- --- $ --- Exercised - 1999 --- --- --- ______________________________________________________________________________ December 31, 1999 --- --- $ ---
The Company's Employee Stock Purchase Plan allows qualifying employees to purchase the Company's common stock at 85 percent of the current market price on four defined purchase dates during the year. During 1999, 1998 and 1997, 37,132, 43,985 and 47,045 shares (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1999, 1998 and 1997), respectively, of common stock were purchased by employees under this plan. (17) Lease Commitments Rental expense included in the consolidated statements of operations amounted to $1,861,000, $1,849,000 and $1,963,000 in 1999, 1998 and 1997, respectively. Future minimum rental commitments for all noncancelable leases with terms of one year or more total approximately $1,128,000 for 2000, $612,000 per year through 2004, $502,000 per year through 2009 and $43,000 per year through 2013, with a total commitment of $6,260,000. (18) Commitments and Contingencies In the normal course of business, the Company is party to financial instruments necessary to meet the financial needs of clients, which are not reflected on the consolidated statements of condition. These financial instruments include commitments to extend credit, standby letters of credit, commercial letters of credit, commitments to sell residential real estate mortgage loans and interest rate swaps. The Company's risk exposure in the event of nonperformance by the other parties to these financial instruments is represented by the contractual amount of these instruments. The Company is also a party to interest rate floor contracts, which are designated as hedges of certain client deposit accounts with contracted minimum interest rates. The notional amount for an interest rate floor does not represent the amount at risk because the notional amount will not be exchanged. The Company uses the same credit policies in making commitments as it does in making loans. A summary of commitments outstanding at December 31 follows:
(in thousands) 1999 1998 _____________________________________________________________________________ Commitments to extend credit $ 377,610 274,945 Standby letters of credit 19,262 19,956 Commercial letters of credit 4,048 1,751 Commitments to sell residential real estate mortgage loans 19,375 70,690
Commitments to extend credit are legally binding agreements to lend to clients. Commitments generally have fixed expiration dates and may require payment of a fee. Based upon management's credit assessment of the client, collateral may be obtained. The type and amount of collateral varies, but may include real estate under construction, property, equipment and other business assets. In many cases, commitments expire without being drawn upon, so the total amount of commitments does not necessarily represent future liquidity requirements. Standby and commercial letters of credit are conditional commitments issued by the Company guaranteeing the financial performance of a client to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans. The Company does not anticipate losses as a result of issuing commitments to extend credit, standby letters of credit or commercial letters of credit. The Company enters into forward contracts for future delivery of residential mortgage loans at specified yields to reduce the interest rate risk associated with fixed-rate residential mortgages held for sale and commitments to sell residential mortgages. Credit risk arises from the possible inability of the other parties to comply with the contract terms. The majority of the Company's contracts are with government-sponsored agencies (FNMA, FHLMC). The Company has entered into interest rate floor agreements to manage interest-rate risk. The notional value of agreements at December 31, 1999 was $120,000,000 and they expire in 2002. The interest rate floor agreements require the counterparty to pay the Company, at specified dates, the amount, if any, by which the market interest rate falls below the agreed-upon floor, applied to the notional principal amounts. The credit worthiness of the counterparty was evaluated by the Company's loan committee prior to entering into the agreements. Brenton Savings Bank, FSB converted from a mutual savings and loan association to a federal stock savings bank in 1990, at which time a $4 million liquidation account was established. Each eligible savings account holder who had maintained a deposit account since the conversion would be entitled to a distribution if the savings bank were completely liquidated. This distribution to savers would have priority over distribution to the Parent Company. The Company does not anticipate such a liquidation. 28 272 The Company maintains a data processing agreement with ALLTEL Information Services, Inc. (ALLTEL), whereby ALLTEL manages and operates the Company's data processing facility. The contract involves fixed payments of $2,190,000 in 2000, $2,190,000 in 2001 and $1,095,000 in 2002. These fixed payments will be adjusted for inflation and volume fluctuations. The Company has entered into agreements totaling approximately $10.3 million for the construction of a new operations and sales support center. The Company is involved with 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 statements. (19) Brenton Banks, Inc. (Parent Company) Condensed Financial Information
Statements of Condition December 31 (in thousands) 1999 1998 Assets Interest-bearing deposits with banks $ 3,350 1,088 Investments in: Bank subsidiaries 129,017 136,687 Excess cost over net assets 1,606 1,679 Premises and equipment 446 503 Other assets 4,318 4,722 ________ _______ $ 138,737 144,679 Liabilities and Stockholders' Equity Accrued expenses payable and other liabilities $ 350 423 Long-term borrowings 6,454 9,046 Common stockholders' equity 131,933 135,210 _______ _______ $ 138,737 144,679
Statements of Operations Years Ended December 31 (in thousands) 1999 1998 1997 Income Dividends from subsidiaries $ 16,218 16,869 14,850 Interest income 143 93 213 Other operating income 97 103 119 ________ ______ ______ 16,458 17,065 15,182 Expense Compensation and benefits 526 439 2,331 Interest on borrowings 597 735 849 Other operating expense 502 613 584 ________ ______ ______ 1,625 1,787 3,764 Income before income taxes and equity in undistributed earnings of subsidiaries 14,833 15,278 11,418 Income taxes (443) (519) (1,155) Income before equity in undistributed earnings of subsidiaries 15,276 15,797 12,573 Equity in undistributed earnings of subsidiaries 1,284 4,554 5,437 ________ ______ ______ Net income $ 16,560 20,351 18,010
29 273 (19) Brenton Banks, Inc. (Parent Company) Condensed Financial Information
Statements of Cash Flows Years Ended December 31 (in thousands) 1999 1998 1997 Operating Activities Net income $ 16,560 20,351 18,010 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (1,284) (4,554) (5,437) Depreciation and amortization 158 161 163 Net (increase) decrease in other assets 376 354 (1,962) Net increase (decrease) in accrued expenses payable and other liabilities (73) (3,109) 1,056 ________ ______ ______ Net cash provided by operating activities 15,737 13,203 11,830 Investing Activities Purchase of subsidiary equity, net --- (26) --- Purchase of premises and equipment, net --- --- (8) ________ ______ ______ Net cash used by investing activities --- (26) (8) Financing Activities Net repayment of long-term borrowings (2,592) (1,066) (1,136) Proceeds from issuance of common stock under the long-term stock compensation plan --- 970 247 Proceeds from issuance of common stock under the stock option plan 4 290 1,286 Proceeds from issuance of common stock under the employee stock purchase plan 244 758 551 Payment for shares reacquired under common stock repurchase plan (4,004) (10,001) (10,014) Payment for fractional shares from common stock dividends (14) (14) (16) Dividends on common stock (7,113) (6,622) (4,782) ________ ______ ______ Net cash used by financing activities (13,475) (15,685) (13,864) Net increase (decrease) in cash and interest- bearing deposits 2,262 (2,508) (2,042) Cash and interest-bearing deposits at the beginning of the year 1,088 3,596 5,638 Cash and interest-bearing deposits at the end of the year $ 3,350 1,088 3,596
30 274 (20) Segment Information ______________________________________________________________________________ The Company has one reportable operating segment: banking. The banking segment generates revenues through personal, business, agricultural and commercial lending, management of the investment securities portfolio, providing deposit account services and providing trust services. The Company evaluates the banking segment's performance on the basis of profit. Included in all other in the table below are mortgage banking, investment brokerage, insurance sales and real estate brokerage. All operations are concentrated in the state of Iowa. The Company accounts for intercompany sales and transactions as if they were to third parties and attempts to set fees consistent with those that would apply in an arm's length transaction with a nonaffiliate. There can be no assurance the rates charged reflect those that would have been agreed upon following an arm's length transaction. The following table presents a summary of the Company's operating segments for the three years ended December 31, 1999:
All Parent Intersegment Reported Banking Other Company Eliminations Balances (in thousands) _________________________________________________________________________________________ 1999 _________________________________________________________________________________________ Net income income $ 61,418 1,635 (454) --- 62,599 Noninterest income from nonaffiliates 19,017 10,685 92 --- 29,794 Noninterest income from affiliates 155 --- 16,223 (16,378) --- Income before income taxes and minority interest 23,536 618 14,833 (16,218) 22,769 Income taxes 5,789 219 (443) --- 5,565 Depreciation & amortization 5,438 326 158 (5) 5,917 Capital expenditures 10,316 540 --- --- 10,856 Segment assets 1,923,822 66,064 138,737 (143,168) 1,985,455
1998 _________________________________________________________________________________________ Net income income $ 61,112 917 (642) --- 61,387 Noninterest income from nonaffiliates 17,649 15,621 103 (15) 33,358 Noninterest income from affiliates 296 --- 16,869 (17,165) --- Income before income taxes and minority interest 26,227 4,517 15,278 (16,869) 29,153 Income taxes 7,030 1,571 (519) --- 8,082 Depreciation & amortization 4,274 254 161 (6) 4,683 Capital expenditures 7,311 601 --- --- 7,912 Segment assets 1,885,617 117,268 144,679 (208,007) 1,939,557
1997 _________________________________________________________________________________________ Net income income $ 60,333 437 (636) --- 60,134 Noninterest income from nonaffiliates 15,864 11,560 119 (37) 27,506 Noninterest income from affiliates 286 67 14,850 (15,203) --- Income before income taxes and minority interest 26,534 2,939 11,418 (14,850) 26,041 Income taxes 7,420 1,023 (1,155) --- 7,288 Depreciation & amortization 3,803 255 163 (4) 4,217 Capital expenditures 2,407 112 8 --- 2,527 Segment assets 1,701,495 24,933 143,023 (150,967) 1,718,484 __________________________________________________________________________________________
The following table shows the detail of intersegement eliminations for segment assets shown in the previous table:
1999 1998 1997 _____________________________________________________ (in thousands) Investment in subsidiaries $130,869 138,539 133,860 Other consolidating adjustments 12,299 69,468 17,107 _______ _______ _______ $143,168 208,007 150,967
31 275 (21) Unaudited Quarterly Financial Information The following is a summary of unaudited quarterly financial information (in thousands, except per common share data):
1999 Three months ended March 31 June 30 Sept. 30 Dec. 31 Interest income $ 31,271 31,425 32,511 33,772 Interest expense 16,020 16,094 16,912 17,354 _______ ______ ______ ______ Net interest income 15,251 15,331 15,599 16,418 Provision for loan losses 1,050 1,050 1,050 1,100 _______ ______ ______ ______ Net interest income after provision for loan losses 14,201 14,281 14,549 15,318 Noninterest income 7,795 8,247 6,744 7,008 Noninterest expense 15,661 16,712 16,577 16,424 _______ ______ ______ ______ Income before income taxes and minority interest 6,335 5,816 4,716 5,902 Income taxes 1,589 1,430 1,062 1,484 Minority interest 168 157 152 167 _______ ______ ______ ______ Net income $ 4,578 4,229 3,502 4,251 Per common share: Net income-basic $ .22 .21 .17 .21 Net income-diluted .22 .20 .17 .21
1998 Three months ended March 31 June 30 Sept. 30 Dec. 31 Interest income $ 30,320 30,693 31,190 31,823 Interest expense 15,056 15,428 15,930 16,225 _______ ______ ______ ______ Net interest income 15,264 15,265 15,260 15,598 Provision for loan losses 1,050 1,050 1,050 1,050 _______ ______ ______ ______ Net interest income after provision for loan losses 14,214 14,215 14,210 14,548 Noninterest income 7,487 8,106 8,549 9,216 Noninterest expense 14,908 15,154 15,172 16,158 _______ ______ ______ ______ Income before income taxes and minority interest 6,793 7,167 7,587 7,606 Income taxes 1,907 1,994 2,101 2,080 Minority interest 167 178 190 185 _______ ______ ______ ______ Net income $ 4,719 4,995 5,296 5,341 Per common share: Net income-basic $ .22 .24 .26 .26 Net income-diluted .22 .23 .25 .26
32 276 MANAGEMENT'S REPORT The management of Brenton Banks, Inc. is responsible for the content of the consolidated financial statements and other information included in this annual report. Management believes that the consolidated financial statements have been prepared in conformity with generally accepted accounting principles appropriate to reflect, in all material respects, the substance of events and transactions that should be included. In preparing the consolidated financial statements, management has made judgments and estimates of the expected effects of events and transactions that are accounted for or disclosed. Management of the Company believes in the importance of maintaining a strong internal accounting control system, which is designed to provide reasonable assurance that assets are safeguarded and transactions are appropriately authorized. The Company maintains a staff of qualified internal auditors who perform periodic reviews of the internal accounting control system. Management believes that the internal accounting control system provides reasonable assurance that errors or irregularities that could be material to the consolidated financial statements are prevented or detected and corrected on a timely basis. The Board of Directors has established an Audit Committee to assist in assuring the maintenance of a strong internal accounting control system. The Audit Committee meets periodically with management, the internal auditors and the independent auditors to discuss the internal accounting control system and the related internal and external audit efforts. The internal auditors and the independent auditors have free access to the Audit Committee without management present. The consolidated financial statements of Brenton Banks, Inc. and subsidiaries are examined by independent auditors. Their role is to render an opinion on the fairness of the consolidated financial statements based upon audit procedures they consider necessary in the circumstances. Brenton Banks, Inc. Robert L. DeMeulenaere President and Chief Executive Officer Steven T. Schuler Chief Financial Officer/Treasurer/Secretary INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of Brenton Banks, Inc: We have audited the accompanying consolidated statements of condition of Brenton Banks, Inc. and subsidiaries as of December 31, 1999, and 1998, and the related consolidated statements of operations, cash flows, changes in common stockholders' equity and comprehensive income for each of the years in the three-year period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Brenton Banks, Inc. and subsidiaries at December 31, 1999, and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. KPMG LLP Des Moines, Iowa January 28, 2000 33 277 STOCK INFORMATION Brenton Banks, Inc. common stock is traded on the NASDAQ Stock Market and quotations are furnished by the NASDAQ System. There were 2,095 common stockholders of record on December 31, 1999.
MARKET AND DIVIDEND INFORMATION 1999 High Low Dividends 1st quarter $15.91 11.82 .086 2nd quarter 17.25 12.55 .086 3rd quarter 17.00 11.63 .087 4th quarter 15.00 9.00 .087
1998 High Low Dividends 1st quarter $18.18 14.87 .070 2nd quarter 19.09 16.74 .079 3rd quarter 22.05 16.59 .082 4th quarter 17.39 14.32 .086
The above table sets forth the high and low sales prices and cash dividends per share for the Company's common stock, after the effect of the February 1998 2-for-1 stock split and June 1999 and June 1998 ten percent common stock dividends. The market quotations, reported by NASDAQ, represent prices between dealers and do not include retail markup, markdown or commissions. NASDAQ Symbol: BRBK Wall Street Journal and Other Newspapers: BrentB Market Makers ABN AMRO Incorporated Herzog, Heine, Geduld, Inc. Howe, Barnes Investments, Inc. Keefe, Bruyette & Woods, Inc. Sandler, O'Neill & Partners, L.P. Stifel, Nicolaus & Co., Inc. FORM 10-K COPIES OF BRENTON BANKS, INC. ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION FORM 10-K WILL BE MAILED WHEN AVAILABLE WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST TO STEVEN T. SCHULER, CHIEF FINANCIAL OFFICER/TREASURER/SECRETARY, AT THE CORPORATE HEADQUARTERS. IT IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S INTERNET WEB SITE AT HTTP://WWW.SEC.GOV/CGI-BIN/SRCH-EDGAR. STOCKHOLDER INFORMATION Corporate Headquarters Suite 200, Capital Square 400 Locust Street Des Moines, Iowa 50309 Telephone 800/627-3686 Annual Shareholders' Meeting Wednesday, May 17, 2000, 5:00 p.m. Polk County Convention Complex 501 Grand Avenue Des Moines, Iowa 50309 Transfer Agent/Registrar/ Dividend Disbursing Agent Harris Trust and Savings Bank 311 West Monroe Street Chicago, Illinois 60606 Legal Counsel Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, P.L.C. Suite 1100, Two Ruan Center 601 Locust Street Des Moines, Iowa 50309 Independent Auditors KPMG LLP 2500 Ruan Center 666 Grand Avenue Des Moines, Iowa 50309 34 278 CORPORATE STRUCTURE BRENTON BANKS, INC. BOARD OF DIRECTORS C. Robert Brenton Chairman of the Board Brenton Banks, Inc. William H. Brenton Past Chairman and President Brenton Banks, Inc. J.C. Brenton Past President Brenton Banks, Inc. Robert C. Carr Retired Gary M. Christensen President & CEO Pella Corporation Robert J. Currey President 21st Century Telecom Group, Inc. Robert L. DeMeulenaere President and Chief Executive Officer Brenton Banks, Inc. BRENTON BANKS, INC. EXECUTIVE OFFICERS C. Robert Brenton Chairman of the Board Robert L. DeMeulenaere President and Chief Executive Officer Steven T. Schuler CFO/Treasurer/Secretary BRENTON BANK SENIOR SALES SUPPORT OFFICERS Robert L. DeMeulenaere Chairman and Chief Executive Officer Larry A. Mindrup President Phillip L. Risley Executive Vice President Steven T. Schuler CFO/Treasurer/Secretary Judy S. Bohrofen Human Resources Director Woodward G. Brenton Chief Commercial Banking Officer Gregory M. Cole Loan Development Center Director W. Bradley Cunningham Investment/ALCO Director Marsha A. Findlay Professional Development Director Douglas R. Gulling Corporate Controller/Cashier Monica L. Haun Operations and Technology Director Douglas F. Lenehan Chief Sales Officer Catherine I. Reed Marketing Director Norman D. Schuneman Chief Credit Officer BRENTON LINE OF BUSINESS AND REGIONAL BANK MANAGERS Woodward G. Brenton Mortgage Banking Douglas F. Lenehan Diversified Commercial Services David W. Mackaman Commercial Banking Larry A. Mindrup Retail Banking Elizabeth M. Piper/Bach Financial Services Allen W. Shafer Business Banking Thomas J. Vincent Agricultural Banking Charles N. Funk Central Regional Manager Dennis H. Hanson East Central Regional Manager G. Darryl Harmon Davenport/Moline Regional Manager Ronald D. Larson Cedar Rapids/Iowa City Regional Manager Marc J. Meyer Western Regional Manager 35 279 EX-21 41 Exhibit 21 Subsidiaries. 280 Subsidiaries The subsidiaries of Brenton Banks, Inc., their location, the jurisdiction in which they are incorporated or organized, and the names under which subsidiaries do business are: Name Under which Subsidiary Jurisdiction in Does Business and Location which Incorporated or of Subsidiary Organized Banks Brenton Savings Bank, FSB United States Ames, Iowa Brenton Bank Iowa Des Moines, Iowa Non-Bank Subsidiaries Brenton Investments, Inc. Iowa Des Moines, Iowa Brenton Insurance Services, Inc. Iowa Des Moines, Iowa Brenton Mortgages, Inc. Iowa Des Moines, Iowa Brenton Insurance Inc. Iowa Adel, Iowa Brenton Realty Services, Ltd. Iowa Marshalltown, Iowa Brenton Savings Financial Services, Inc. Iowa Ames, Iowa 281 EX-23 42 Exhibit 23 Consent of KPMG LLP to the incorporation of their report dated January 28, 2000, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. 282 INDEPENDENT AUDITORS' CONSENT The Board of Directors Brenton Banks, Inc.: We consent to incorporation by reference in the registration statement No. 333-71331 on Form S-8 of Brenton Banks, Inc. of our report dated January 28, 2000, relating to the consolidated statements of condition of Brenton Banks, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, comprehensive income, changes in common stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999, which report appears in the December 31, 1999, annual report on Form 10-K of Brenton Banks, Inc. /s/ KPMG LLP KPMG LLP Des Moines, Iowa March 28, 2000 283 EX-27 43 1999 FDS SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1 12-MOS DEC-31-1999 DEC-31-1999 85,064,053 2,361,784 0 0 556,191,355 25,201,876 25,351,000 1,195,986,791 (14,413,104) 1,985,454,701 1,530,083,303 277,230,026 18,503,921 27,704,000 0 0 50,886,135 81,047,316 1,985,454,701 94,493,565 33,963,262 522,216 128,979,043 51,330,450 66,379,906 62,599,137 4,250,000 215,640 66,017,871 22,124,922 22,124,922 0 0 16,560,117 .81 .80 3.50 7,259,000 1,794,000 399,000 950,000 14,172,264 6,404,068 2,394,908 14,413,104 14,413,104 0 0
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