-----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, QgTtCiJnwjrWt1PbEr5rjL0lF3LhYA4VcINVJiNzdih7vtcd9ZXc4vBoFPkQCFC0 du0/v23K/paOCIrYusCjeA== 0000916131-98-000005.txt : 19980417 0000916131-98-000005.hdr.sgml : 19980417 ACCESSION NUMBER: 0000916131-98-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 40 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRENTON BANKS INC CENTRAL INDEX KEY: 0000014060 STANDARD INDUSTRIAL CLASSIFICATION: 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: 98577904 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, 1997 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 13, 1998, was $212,450,914. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the most recent practicable date, March 13, 1998. 17,340,626 shares Common Stock, $2.50 par value DOCUMENTS INCORPORATED BY REFERENCE The Appendix to the Proxy Statement for the 1997 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, 1997, is incorporated by reference into Part III hereof to the extent indicated in such Part. 1 of 216 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 . . . . . . . . . 7 (E) Executive Officers and Policymakers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 7 (F) Employees . . . . . . . . . . . . . . . . . . . . . . . . . 9 (G) Supervision and Regulation . . . . . . . . . . . . . . . . 9 (H) Governmental Monetary Policy and Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . 10 (I) Competition . . . . . . . . . . . . . . . . . . . . . . . . 10 (J) Statistical Disclosure . . . . . . . . . . . . . . . . . . 12 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 26 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . 26 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 26 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 26 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . 27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 27 3 PART III Item 10. Directors and Executive Officers of the Registrant . . . . . . . 27 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . 27 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 27 Item 13. Certain Relationships and Related Transactions . . . . . . . . . 27 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 27 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 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, 1997, 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 46 locations throughout Iowa. In connection with this banking industry segment, the Company provides the usual products and services of banking such as deposits, commercial loans, business loans, agribusiness loans, personal loans and trust services. The principal services provided by the Company are accepting deposits and making loans. The significant loan categories are commercial, business, commercial real estate, agribusiness and personal. Commercial and business loans are made to business enterprises principally to finance inventory, operations or other assets at terms generally up to 5 years. The principal risk involves the customers' management skills and general economic conditions. Commercial real estate mortgage loans are routinely made for terms up to 20 years for real property used in a borrower's business. Repayment primarily depends upon the financial performance and the cash flow of the business enterprise. Declines in commercial real estate values could ultimately affect the collectibility of these types of loans. Agribusiness loans are made to farmers for financing crop inputs, equipment, livestock and real property used in farming activities. Agribusiness loans are also made to businesses related to or that support the production and sale of agricultural products. Weather conditions and government policies have major influences on agricultural financial performance and ultimately the borrower's ability to repay loans. Personal loans are made to individuals primarily on a secured basis to finance such items as residential mortgages, home improvements, personal property, education and vehicles. Unsecured personal loans are made on a limited basis. The individual's credit worthiness and economic conditions affecting the job market are the primary risks associated with personal loans. Personal loans generally do not exceed 5 years. For all loan types, the primary criteria used in determining whether to make a loan is the borrower's ability to repay, which is based upon a cash flow analysis, and willingness to pay supported by a historical review of credit management. The principal markets for these loans are businesses and individuals. Iowa has two primary regional market segments. One market consists of selected metropolitan areas across the state which consist of 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 subsidiaries, 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. 5 (B) Recent Developments. New Director. In January 1998, the Board of Directors increased the number of directors from seven to eight and named Robert J. Currey to fill the position. Mr. Currey is the President of 21st Century Telecom Group, Inc. in Chicago, Illinois. Mr. Currey has no prior relationship or affiliation with the Company. 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 6, 1997, the Board of Directors declared a ten percent common stock dividend to stockholders of record on May 15, 1997. On October 7, 1996, the Board of Directors declared a ten percent common stock dividend to stockholders of record on October 17, 1996. Fractional shares resulting from both stock dividends were paid in cash. Stock Option Plan. On September 5, 1996, a special meeting of stockholders was held to approve the Brenton Banks, Inc. 1996 Stock Option Plan (the "Plan"). The Plan, which was approved, authorizes the granting of options on up to 1,210,000 shares (all share and per-share data have been restated for the 2-for-1 stock split and the ten percent common stock dividends) of the Company's common stock to key employees of the Company. The price at which options may be exercised cannot be less than the fair market value of the shares at the date the options are granted. The options are subject to certain performance vesting requirements and maximum exercise periods, as established by the Compensation Committee of the Board of Directors. During 1997 and 1996, 1,122,940 options have been granted under the Plan to 43 current employees of the Company with option prices ranging from $10.073 to $16.750 per share. Common Stock Repurchase Plan. As part of the Company's ongoing capital management and stock repurchase plan, in 1997 the Board of Directors authorized additional stock repurchases of $10,000,000 of the Company's common stock. For the years ended December 31, 1997, 1996 and 1995, the Company repurchased 695,480, 695,400 and 516,266 shares (restated for the 2-for-1 stock split), respectively, at total costs of $10,014,087, $8,248,331 and $4,830,111. Restructuring of Organization. Brenton Banks, Inc. completed its restructuring plan during 1995. The plan, authorized in December, 1994, included consolidating the Company's 13 commercial banks into one bank, reducing the Company's overall personnel levels and closing selected banking branches. During the third quarter of 1995, the Company completed the merger of its 13 commercial banks into a single, state chartered banking organization under the laws of the State of Iowa. As part of this merger process, Brenton Bank Services Corporation was liquidated and became part of the one bank, Brenton Bank. Brenton Mortgages, Inc., formerly a wholly-owned subsidiary of the holding company, is now a subsidiary of Brenton Savings Bank, FSB. The move of this subsidiary was made to accommodate the funding of residential real estate loans with borrowings from the Federal Home Loan Bank. Growth and Acquisitions. As part of management's strategic growth plans, Brenton Banks, Inc. investigates growth and expansion opportunities which strengthen the Company's presence in current or selected new market areas. The Company continues expansion of its traditional and non- traditional services. On October 1, 1992, Brenton Banks, Inc. merged with Ames Financial Corporation and acquired its wholly-owned subsidiary, Ames Savings Bank, FSB of Ames, Iowa whose name has since 6 been changed to Brenton Savings Bank, FSB. The institution continues to operate as a federal savings bank, requiring Brenton Banks, Inc. to also register as a savings and loan holding company. As a savings and loan holding company, Brenton Banks, Inc. is required to file certain reports with and be regulated by the Office of Thrift Supervision. See Item 1, Section (G), Supervision and Regulation. (C) Affiliated Banks. The 2 affiliated banks had 42 banking locations at December 31, 1997, located in 13 of Iowa's 99 counties. These banks serve both agricultural and metropolitan areas. The location and certain other information about the affiliated banks are given below. The main office of Brenton Bank is located in Des Moines, Iowa. Des Moines is the largest city in Iowa. In addition to its main banking location, Brenton Bank has 38 offices located throughout Iowa and provides services to customers in numerous counties across the state. Brenton Savings Bank, FSB is located in Ames, Iowa, and has offices in Ames and Story City. The savings bank serves customers in Story County. (D) Bank-Related Subsidiaries and Affiliates. Brenton Investments, Inc., a wholly owned subsidiary of Brenton Bank, was formed in 1992 and provides a full array of retail investment brokerage services to customers. The company is not involved with the direct issuance, flotation or underwriting of securities. At December 31, 1997, this subsidiary had 41 licensed brokers serving all Brenton banks. 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 Insurance, Inc. and Brenton Realty Services, Ltd. are wholly- owned subsidiaries of Brenton Bank. These subsidiaries operate real estate brokerage agencies and insurance brokerage agencies handling individual and group life, annuity, health, fire, crop, homeowner's, automobile and liability insurance. 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 13, 1998, the 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 ________________ ___ ______________________ _________ _______________ C. Robert Brenton 67 Chairman of the Board 1990 Chairman, Brenton Bank - Des Moines, Iowa Brenton Banks, Inc. October 1995 to November 1997
7
Company Position Name and Address Age Position or Subsidiary Commenced Other Positions ________________ ___ ______________________ _________ _______________ Robert L. DeMeulenaere 58 President and Chief 1994 President, Brenton Bank - January 1994 to Des Moines, Iowa Executive Officer November 1997; President/Treasurer, Brenton Brenton Banks, Inc. Mortgages, Inc. - August 1989 to July 1994; Chairman and Chief 1997 CEO, Brenton Bank and Trust Company of Executive Officer Cedar Rapids - August 1990 to January 1994; Brenton Bank Senior Vice President of the Parent Company - August 1990 to January 1994 Larry A. Mindrup 56 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; President, Trust Officer and Director, Brenton National Bank - Poweshiek County - January 1991 to March 1994 Phillip L. Risley 55 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., Cashier 1995 Des Moines - February 1990 to May 1995; Brenton Bank Vice President - Operations of the Parent Company - May 1984 to January 1992; Chairman of the Board, Brenton Bank Services Corporation - May 1992 to September 1995 Perry C. Atwood 43 Chief Sales Officer 1996 Des Moines, Iowa Brenton Bank Woodward G. Brenton 47 Chief Commercial 1995 President and CEO, Brenton First National Des Moines, Iowa Banking Officer Bank - January 1992 to October 1995; Executive Brenton Bank Vice President, Brenton First National Bank, Davenport - January 1991 to January 1992 Charles N. Funk 43 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 Steven T. Schuler 46 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 Norman D. Schuneman 55 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 Elizabeth M. Piper/Bach 45 Chief Financial Services 1997 Des Moines, Iowa Officer Brenton Bank President 1995 Brenton Investments, Inc. All of the foregoing individuals have been employed by the Company for the past five years, except for Perry C. Atwood, who was Senior Vice President at Valley National Bank (merged with Bank One) in Phoenix, Arizona from January 1992 to April 1996; also held positions of Director of Business Banking, Director of Sales and Regional Manager during that time period; and 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.
8 (F) Employees. On December 31, 1997, the Parent Company had 3 full-time employees and 2 part-time employees. On December 31, 1997, the Company had 591 full-time employees and 166 part-time employees. None of the employees of the Company are represented by unions. The relationship between management and employees of the Company is considered good. (G) Supervision and Regulation. The Company is restricted by various regulatory bodies as to the types of activities and businesses in which it may engage. References to the provisions of certain statutes and regulations are only brief summaries thereof and are qualified in their entirety by reference to those statutes and regulations. The Parent Company cannot predict what other legislation may be enacted or what regulations may be adopted, or, if enacted or adopted, the effect thereof. The Parent Company, as a bank holding company, is subject to regulation under the Bank Holding Company Act of 1956 (the "Act") and is registered with the Board of Governors of the Federal Reserve System. Under the Act, the Parent Company is prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any company which is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to its affiliated banks. However, the Parent Company may engage in and may own shares of companies engaged in certain businesses found by the Board of Governors to be so closely related to banking "as to be a proper incident thereto." The Act does not place territorial restrictions on the activities of bank-related subsidiaries of bank holding companies. The Parent Company is required by the Act to file periodic reports of its operations with the Board of Governors and is subject to examination by the Board of Governors. Under the Act and the regulations of the Board of Governors, bank holding companies and their subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services. As a savings and loan holding company, Brenton Banks, Inc. is subject to federal regulation and examination by the Office of Thrift Supervision (the "OTS"). The OTS has enforcement authority over the Company which permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Generally, the activities for a bank holding company are more limited than the authorized activities for a savings and loan holding company. The Parent Company, its affiliated banks and its bank-related subsidiaries are affiliates within the meaning of the Federal Reserve Act and OTS regulations. As affiliates, they are subject to certain restrictions on loans by an affiliated bank to the Parent Company, other affiliated banks or such other subsidiaries, on investments by an affiliated bank in their stock or securities and on an affiliated bank taking such stock and securities as collateral for loans to any borrower. The Company is also subject to certain restrictions with respect to direct issuance, flotation, underwriting, public sale or distribution of certain securities. 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. 9 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. As a savings institution, the savings bank is a member of the Federal Home Loan Bank of Des Moines, it 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, 1997, 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 amends certain provisions of the federal banking laws (including the Bank Holding Company Act) to permit the acquisition of banks by banks or bank holding companies domiciled outside of the home state of the acquired bank. The law became effective on June 1, 1997. The Interstate Banking Act seeks to provide a uniform interstate banking law for all 50 states. The provisions of the law allow states to impose certain "non- discriminatory" conditions upon interstate mergers, including limits on the concentration of deposits. According to Iowa's banking law, Iowa-based banks and bank holding companies can acquire banks and bank holding companies located in other states. Iowa law prohibits a bank holding company or bank controlled by a bank holding company from acquiring additional Iowa based banks or bank holding companies if the total deposits in Iowa of such bank holding company and its affiliates would exceed 10 percent of the total deposits of all banks and thrifts in the state. Generally, banks in Iowa are prohibited from operating offices in counties other than the county in which the bank's principal office is located and contiguous counties. However, certain banks located in the same or different municipalities or urban complexes may consolidate or merge and retain their existing banking locations by converting to a United Community Bank. The resulting bank would adopt one principal place of business, and would retain the remaining banking locations of the merged or consolidated banks as offices. The Company relied upon the United Community Bank law when it merged its 13 commercial banks into one state chartered bank in 1995. Generally, thrifts can operate offices in any county in Iowa and may, under certain circumstances, acquire or branch into thrifts in other states with the approval of the OTS. (H) Governmental Monetary Policy and Economic Conditions. The earnings of the Company are affected by the policies of regulatory authorities, including the Federal Reserve System. Federal Reserve System monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing conditions in the economy and in the money markets, as a result of actions by monetary and fiscal authorities, interest rates, credit availability and deposit levels may change due to circumstances beyond the control of the Company. Future policies of the Federal Reserve System and other authorities cannot be predicted, nor can their effect on future earnings be predicted. (I) Competition. The banking business in Iowa is highly competitive and the affiliated banks compete not only with banks and thrifts, but with sales, finance and personal loan companies; credit unions; and other financial institutions which are active in the areas in which the affiliated banks operate. In addition, the affiliated banks compete for customer funds with other investment alternatives available through investment brokers, insurance companies, finance companies and other institutions. The multi-bank holding companies which own banks in Iowa are in direct competition with one another. Brenton Banks, Inc. is the largest multi- bank holding company domiciled in Iowa. As of June 30, 1997, Brenton Banks, Inc.'s affiliated banks held approximately 3.3% of total Iowa bank and thrift deposits. There are seven other multi-bank holding companies which operate banks in Iowa, but 10 are domiciled in other states. The Iowa deposits of these holding companies are of similar size or greater when compared to Brenton Banks, Inc. Since December 31, 1997, two additional acquisitions by multi-bank holding companies domiciled outside of Iowa have been announced. Certain of the subsidiary banks of these multi-bank holding companies may compete with certain of the Parent Company's affiliated banks and any other affiliated financial institutions which may be acquired by the Parent Company. These multi-bank holding companies, other smaller bank holding companies, chain banking systems and others may compete with the Parent Company for the acquisition of additional banks. The Company has also expanded into the 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. 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 and average rates paid for each of the three years ending December 31:
1997 1996 1995 ______________________________ ______________________________ ______________________________ Interest Average Interest Average Interest Average Average Income or Yields or Average Income or Yields or Average Income or Yields or Balance Expense Rates Balance Expense Rates Balance Expense Rates _________ __________ _________ __________ _________ _________ __________ _________ _________ (Dollars in thousands) Assets: Interest-earning assets Loans (1,2) $ 970,115 $ 85,540 8.82% $ 919,578 $ 79,921 8.69% $ 945,724 $ 82,136 8.69% Investment securities held to maturity: Taxable investments: Securities of United States government agencies 7,925 485 6.11 38,596 2,362 6.12 27,381 1,570 5.73 Mortgage-backed and related securities 2,594 191 7.36 3,509 261 7.45 36,214 2,370 6.54 Other investments 2,181 136 6.25 4,166 255 6.12 2,364 130 5.49 Tax-exempt investments: Obligations of states and political subdivisions(2) 56,204 3,777 6.72 51,639 3,449 6.68 50,235 4,044 8.05 Investment securities available for sale: United States Treasury securities 45,459 2,748 6.05 36,582 2,109 5.76 42,416 2,271 5.35 Securities of United States government agencies 71,958 4,555 6.33 77,436 4,606 5.95 79,000 4,939 6.25 (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 in 1997 and 1996 and 34 percent in 1995 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.
1 Item 1(J) Business - Statistical Disclosure, Continued I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential, Continued
1997 1996 1995 ______________________________ ______________________________ ______________________________ Interest Average Interest Average Interest Average Average Income or Yields or Average Income or Yields or Average Income or Yields or Balance Expense Rates Balance Expense Rates Balance Expense Rates _________ __________ _________ __________ _________ _________ __________ _________ _________ (Dollars in thousands) Mortgage-backed and related securities 217,817 13,835 6.35 207,029 12,780 6.17 113,834 6,658 5.85 Other investments 12,998 832 6.40 8,955 568 6.34 9,536 710 7.44 Tax-exempt investments: Obligations of states and political subdivisions (1) 99,868 7,035 7.04 85,471 6,097 7.13 100,859 6,763 6.71 Loans held for sale 10,284 811 7.89 7,983 676 8.47 5,908 396 6.70 Federal funds sold and securities purchased under agreements to resell 31,472 1,742 5.54 26,188 1,417 5.41 39,763 2,264 5.69 Trading account securities 12 1 4.26 --- --- --- --- --- --- Interest-bearing deposits with banks 2,460 118 4.80 1,393 68 4.87 1,076 67 6.20 _________ _______ ____ _________ _______ ____ _________ _______ ____ Total interest-earning assets(1) 1,531,347 $121,806 7.95% 1,468,525 $114,569 7.80% 1,454,310 $114,318 7.86% Allowance for loan losses (12,171) _______ ____ (11,440) _______ ____ (11,166) _______ ____ Cash and due from banks 58,681 65,439 57,138 Premises and equipment 29,841 31,728 31,436 Other assets 41,771 28,642 29,508 _________ _________ _________ Total assets $1,649,469 $1,582,894 $1,561,226 (1) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35 percent in 1997 and 1996 and 34 percent in 1995 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.
Item 1(J) Business - Statistical Disclosure, Continued I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential, Continued
1997 1996 1995 ______________________________ ______________________________ ______________________________ Interest Average Interest Average Interest Average Average Income or Yields or Average Income or Yields or Average Income or Yields or Balance Expense Rates Balance Expense Rates Balance Expense Rates _________ __________ _________ __________ _________ _________ __________ _________ _________ (Dollars in thousands) Liabilities and stockholders' equity: Interest-bearing liabilities: Interest-bearing deposits: Demand $ 81,430 $ 2,332 2.86% $ 376,259 $11,194 2.98% $ 355,819 $11,842 3.33% Savings 551,509 15,903 2.88 241,250 6,134 2.54 231,633 6,638 2.87 Time 567,258 31,075 5.48 583,508 32,179 5.51 626,497 34,595 5.52 Federal funds purchased and securities sold under agreements to repurchase 78,234 3,413 4.36 59,276 2,470 4.17 40,237 1,641 4.08 Other short-term borrowings 53,223 3,183 5.98 17,294 1,015 5.87 6,536 371 5.67 Long-term borrowings 32,056 2,199 6.86 33,094 2,339 7.07 37,264 2,621 7.03 _________ ______ ____ _________ ______ ____ _________ ______ ____ Total interest-bearing liabilities 1,363,710 $58,105 4.26% 1,310,681 $55,331 4.22% 1,297,986 $57,708 4.45% Noninterest-bearing deposits 139,480 ______ ____ 131,051 ______ ____ 128,770 ______ ____ Accrued expenses and other liabilities 17,097 17,521 14,896 _________ _________ _________ Total liabilities 1,520,287 1,459,253 1,441,652 Minority interest 4,691 4,471 4,391 Common stockholders' equity 124,491 119,170 115,183 _________ _________ _________ Total liabilities and stockholders' equity $1,649,469 $1,582,894 $1,561,226 _________ _________ _________ Net interest spread (1) 3.69% 3.58% 3.41% ____ ____ ____ Net interest income/margin (1) $63,701 4.16% $59,238 4.03% $56,610 3.89% ______ ____ ______ ____ ______ ____ (1) Interest income and yields are stated on a tax-equivalent basis using a federal income tax rate of 35 percent in 1997 and 1996 and 34 percent in 1995 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.
14 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:
1997 vs. 1996 1996 vs. 1995 __________________________ __________________________ Variance Variance due to due to _______________ _______________ Variance Volume Rate Variance Volume Rate ________ ______ ____ ________ ______ ____ (In thousands) (In thousands) Interest Income: Loans (1,2) $ 5,619 4,443 1,176 $(2,215) (2,272) 57 Investment securities held to maturity: Taxable investments: Securities of United States government agencies (1,877) (1,874) (3) 792 680 112 Mortgage-backed and related securities (70) (67) (3) (2,109) (2,394) 285 Other investments (119) (124) 5 125 109 16 Tax-exempt investments: Obligations of states and political subdivisions (2) 328 306 22 (595) 110 (705) Investment securities available for sale: Taxable investments: United States Treasury securities 639 532 107 (162) (328) 166 Securities of United States government agencies (51) (337) 286 (333) (96) (237) Mortgage-backed and related securities 1,055 678 377 6,122 5,734 388 Other investments 264 259 5 (142) (42) (100) Tax-exempt investments: Obligations of states and political subdivisions (2) 938 1,015 (77) (666) (1,078) 412 Loans held for sale 135 184 (49) 280 160 120 Federal funds sold and securities purchased under agreements to resell 325 291 34 (847) (739) (108) Trading account securities 1 1 --- --- --- --- Interest-bearing deposits with banks 50 51 (1) 1 17 (16) _______ ______ ______ _______ ______ _____ 7,237 5,358 1,879 251 (139) 390 _______ ______ ______ _______ ______ _____ Interest Expense: Interest-bearing deposits: Demand (8,862) (8,458) (404) (648) 655 (1,303) Savings 9,769 8,847 922 (504) 267 (771) Time (1,104) (891) (213) (2,416) (2,371) (45) Federal funds purchased and securities sold under agreements to repurchase 943 822 121 829 793 36 Other short-term borrowings 2,168 2,148 20 644 631 13 Long-term borrowings (140) (72) (68) (282) (295) 13 _______ ______ ______ _______ ______ _____ 2,774 2,396 378 (2,377) (320) (2,057) _______ ______ ______ _______ ______ _____ Net interest income $ 4,463 2,962 1,501 2,628 181 2,447 _______ ______ ______ _______ ______ _____ 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 in 1997 and 1996 and 34 percent in 1995 and adjusted to reflect the effect of the nondeductible interest expense of owning tax-exempt investments.
15 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, 1997. 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 ---- ------ ------ ------ ----- ------- ----- (In thousands) Interest-earning assets: Loans (1)(3) $ 366,382 26,643 77,755 470,780 408,626 110,556 989,962 Trading account securities 77 --- --- 77 --- --- 77 Investment securities: Available for sale: Taxable investments (3) 41,734 40,766 63,772 146,272 198,304 32,764 377,340 Tax-exempt investments 6,836 5,502 7,427 19,765 61,044 28,505 109,314 Held to maturity: Taxable investments 1,327 6,261 867 8,455 361 90 8,906 Tax-exempt investments 3,903 6,635 13,814 24,352 27,074 8,747 60,173 ________ ______ ______ _______ _______ _______ _______ Total investment securities 53,800 59,164 85,880 198,844 286,783 70,106 555,733 Loans held for sale 19,304 --- --- 19,304 --- --- 19,304 Federal funds sold and securities purchased under agreements to resell 9,300 --- --- 9,300 --- --- 9,300 Interest-bearing deposits with banks 1,320 --- --- 1,320 --- --- 1,320 _________ _________ _________ _________ ________ _______ _________ Total interest-earning assets $ 450,183 85,807 163,635 699,625 695,409 180,662 1,575,696 _________ _________ _________ _________ ________ _______ _________ Interest-bearing liabilities: Interest-bearing deposits: Demand and savings deposits (2) $ 645,029 --- --- 645,029 --- --- 645,029 Time deposits 132,121 114,384 124,796 371,301 186,803 130 558,234 Federal funds purchased and securities sold under agreements to repurchase 92,633 --- --- 92,633 --- --- 92,633 Other short-term borrowings 7,700 38,000 28,000 73,700 --- --- 73,700 Long-term borrowings --- --- 1,090 1,090 31,056 4,516 36,662 _________ _________ _________ _________ ________ _______ _________ Total interest-bearing liabilities $ 877,483 152,384 153,886 1,183,753 217,859 4,646 1,406,258 _________ _________ _________ _________ ________ _______ _________ Interest sensitivity GAP $ (427,300) (66,577) 9,749 (484,128) 477,550 176,016 169,438 _________ _________ _________ _________ ________ _______ _________ Interest sensitivity GAP ratio .51:1 .56:1 1.06:1 .59:1 3.19:1 38.89:1 1.12:1 _________ _________ _________ _________ ________ _______ _________ Cumulative interest sensitivity GAP $ (427,300) (493,877) (484,128) (484,128) (6,578) 169,438 169,438 _________ _________ _________ _________ ________ _______ _________ Cumulative interest sensitivity GAP ratio .51:1 .52:1 .59:1 .59:1 1.00:1 1.12:1 1.12:1 _________ _________ _________ _________ ________ _______ _________ (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.
16 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:
December 31, ______________________________ 1997 1996 1995 ____ ____ ____ (In thousands) Investment securities available for sale (market value): Taxable investments: United States Treasury securities $ 38,790 41,351 27,775 Securities of United States government agencies 86,660 98,153 72,822 Mortgage-backed and related securities 230,933 219,447 191,028 Other investments 20,957 8,193 9,071 Tax-exempt investments: Obligations of states and political subdivisions 109,314 93,955 95,674 _______ _______ _______ 486,654 461,099 396,370 _______ _______ _______ Investment securities held to maturity (amortized cost): Taxable investments: Securities of United States government agencies 5,025 15,065 48,595 Mortgage-backed and related securities 2,363 3,041 3,653 Other investments 1,518 2,466 6,145 Tax-exempt investments: Obligations of states and political subdivisions 60,173 52,183 49,689 _______ _______ _______ 69,079 72,755 108,082 _______ _______ _______ Total investment securities $555,733 533,854 504,452 _______ _______ _______
17 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, 1997:
Investments by Maturity and Yields at December 31, 1997 ____________________________________________________________________________ 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 $ 23,723 6.08% $ 15,067 6.29% $ --- ----% $ -- ----% Securities of United States government agencies 17,094 5.42 29,803 6.24 36,636 6.67 3,127 7.89 Mortgage-backed and related securities 68,035 6.18 115,420 6.30 44,119 6.61 3,359 6.60 Other investments 15,767 6.09 2,690 5.77 --- ---- 2,500 6.57 Tax-exempt investments: Obligations of states and political subdivisions 19,766 6.35 61,044 6.91 13,972 7.71 14,532 7.98 _______ ____ _______ ____ _______ ____ ______ ____ 144,385 6.09 224,024 6.45 94,727 6.79 23,518 7.62 _______ ____ _______ ____ _______ ____ ______ ____ Investment securities held to maturity: Taxable investments: Securities of United States government agencies --- ---- --- ---- 5,025 6.21 --- ---- Mortgage-backed and related securities 690 7.33 1,428 7.33 245 7.36 --- ---- Other investments 1,068 6.11 359 6.77 91 7.58 --- ---- Tax-exempt investments: Obligations of states and political subdivisions 24,342 6.28 26,903 6.74 3,995 7.83 4,933 8.36 _______ ____ _______ ____ _______ ____ ______ ____ 26,100 6.30 28,690 6.77 9,356 6.95 4,933 8.36 _______ ____ _______ ____ _______ ____ ______ ____ Total investment securities $170,485 6.12% $252,714 6.49% $104,083 6.81% $28,451 7.75% _______ ____ _______ ____ _______ ____ ______ ____
NOTE: The weighted average yields are calculated on the basis of the cost and effective yields for each scheduled maturity group. The weighted average yields for tax-exempt obligations have been adjusted to a fully-taxable basis, assuming a 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, 1997 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. 18 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 ____________________________________________________ 1997 1996 1995 1994 1993 ____ ____ ____ ____ ____ (In thousands) 1. Real estate loans: a. Commercial construction and land development $ 30,007 42,693 38,123 26,549 24,189 b. Secured by 1-4 family residential property, including home equity loans 342,134 338,010 319,430 389,713 349,810 c. Other 161,989 150,395 163,739 143,960 129,574 2. Loans to financial institutions -- -- -- -- -- 3. Loans to farmers 79,036 69,660 68,543 71,853 66,574 4. Commercial and industrial loans 160,428 132,395 119,368 115,280 90,521 5. Loans to individuals for personal expenditures 217,405 207,197 199,489 221,627 214,401 6. All other loans 2,190 1,594 1,501 1,232 812 _______ _______ _______ _______ _______ $993,189 941,944 910,193 970,214 875,881 _______ _______ _______ _______ _______
19 Item 1(J) Business - Statistical Disclosure, Continued III. Loan Portfolio, Continued The following table shows the maturity distribution of loans as of December 31, 1997 (excluding real estate loans secured by 1-4 family residential property and loans to individuals for personal expenditures):
Loans by Maturity at December 31, 1997 ________________________________________ 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 $ 23,759 4,881 1,367 30,007 b. Other 41,832 60,692 59,465 161,989 2. Loans to financial institutions -- -- -- -- 3. Loans to farmers 51,429 24,629 2,978 79,036 4. Commercial and industrial loans 105,597 41,077 13,754 160,428 5. All other loans 1,116 702 372 2,190 _______ _______ ______ _______ $223,733 131,981 77,936 433,650 _______ _______ ______ _______
The above loans due after one year which have predetermined and floating interest rates follow: Predetermined interest rates $ 59,532 _______ Floating interest rates $150,385 _______ 20 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.
1997 1996 1995 1994 1993 ____ ____ ____ ____ ____ (In thousands) Nonaccrual $3,227 2,663 2,639 3,784 1,605 Restructured 513 568 178 298 323 Past due 90 days or more 2,972 2,936 2,802 940 2,085 _____ _____ _____ _____ _____ Nonperforming loans $6,712 6,167 5,619 5,022 4,013 _____ _____ _____ _____ _____
Interest income recorded during 1997 on nonaccrual and restructured loans amounted to $157,000. The amount of interest income which would have been recorded during 1997, if nonaccrual and restructured loans had been current in accordance with the original terms, was $402,000. The amounts scheduled above include the entire balance of any particular loan. Much of the scheduled amount is adequately collateralized, and thus does not represent the amount of anticipated charge-offs in the future. The loans scheduled are representative of the entire customer base of the Company and, therefore, are not concentrated in a specific industry or geographic area. Overdrafts are loans for which interest does not normally accrue. Since overdrafts are generally low volume, they were not included in the above schedule, unless there was serious doubt concerning collection. The accrual of interest income is stopped when the ultimate collection of a loan becomes doubtful. A loan is placed on nonaccrual status when it becomes 90 days past due, unless it is both well secured and in the process of collection. Once determined uncollectible, interest credited to income in the current year is reversed and interest accrued in prior years is charged to the allowance for loan losses. In addition to the loans scheduled above, management has identified other loans which, due to a change in economic circumstances or a deterioration in the financial position of the borrower, present serious concern as to the ability of the borrower to comply with present repayment terms. Additionally, management considers the identification of loans classified for regulatory or internal purposes as loss, doubtful, substandard or special mention. This serious concern may eventually result in certain of these loans being classified in one of the above-scheduled categories. At December 31, 1997, these loans amounted to less than $1 million. As of December 31, 1997, 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 $341,000 and $488,000 at December 31, 1997, and 1996, respectively. 21 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:
Year Ended December 31 _______________________________________________ 1997 1996 1995 1994 1993 ____ ____ ____ ____ ____ (In thousands) Total loans at the end of the year $993,189 941,944 910,193 970,214 875,881 _______ _______ _______ _______ _______ Average loans outstanding 970,115 919,578 945,724 936,370 802,088 _______ _______ _______ _______ _______ Allowance for loan losses - beginning of the year $ 11,328 11,070 10,913 9,818 9,006 _______ _______ _______ _______ _______ Amount of charge-offs during year: Real estate loans 299 479 41 83 109 Loans to financial institutions -- -- -- -- -- Loans to farmers 196 365 36 31 68 Commercial and industrial loans 890 594 340 337 54 Loans to individuals for personal expenditures 2,844 2,623 2,960 1,943 1,230 All other loans -- -- -- 48 70 _______ _______ _______ _______ _______ Total charge-offs 4,229 4,061 3,377 2,442 1,531 _______ _______ _______ _______ _______ Amount of recoveries during year: Real estate loans 217 68 66 101 101 Loans to financial institutions -- -- -- -- -- Loans to farmers 109 138 50 146 81 Commercial and industrial loans 184 95 400 334 248 Loans to individuals for personal expenditures 1,223 1,118 1,153 947 641 All other loans -- -- -- 21 20 _______ _______ _______ _______ _______ Total recoveries 1,733 1,419 1,669 1,549 1,091 _______ _______ _______ _______ _______ Net loans charged-off during year 2,496 2,642 1,708 893 440 _______ _______ _______ _______ _______ Additions to allowance charged to operating expense 3,900 2,900 1,865 1,988 1,252 _______ _______ _______ _______ _______ Allowance for loan losses - end of the year $ 12,732 11,328 11,070 10,913 9,818 _______ _______ _______ _______ _______ Ratio of allowance to loans outstanding at end of year 1.28% 1.20 1.22 1.12 1.12 ____ ____ ____ ____ ____ Ratio of net charge-offs to average loans outstanding .26% .29 .18 .10 .05 ___ ___ ___ ___ ___
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 potential 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. 22 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:
Year Ended December 31 __________________________________________________________________________________________ 1997 1996 1995 1994 1993 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 $ 2,400 53.8% 2,200 56.4% $ 2,400 57.3% $2,600 57.7% $2,400 57.5% Loans to financial institutions -- -- -- -- -- -- -- -- -- -- Loans to farmers 1,200 8.0 1,000 7.4 1,300 7.5 1,400 7.4 1,600 7.6 Commercial and industrial loans 3,800 16.1 3,200 14.0 2,900 13.1 2,800 11.9 2,700 10.3 Loans to individuals for personal expenditures 5,332 21.9 4,928 22.0 4,470 21.9 4,113 22.8 3,118 24.5 All other loans -- .2 -- .2 -- .2 -- .2 -- .1 ______ _____ ______ _____ ______ ______ ______ _____ _____ _____ $12,732 100.0% $11,328 100.0% $11,070 100.0% $10,913 100.0% $9,818 100.0% ______ _____ ______ _____ ______ _____ ______ _____ _____ _____
23 Item 1(J) Business - Statistical Disclosure, Continued V. Deposits A classification of the Company's average deposits and average rates paid for the years indicated follows:
Year Ended December 31 __________________________________________ 1997 1996 1995 ____________ ____________ ____________ Amount Rate Amount Rate Amount Rate ______ ____ ______ ____ ______ ____ (Dollars in thousands) Noninterest-bearing deposits $ 139,480 --% $ 131,051 --% $ 128,770 -- % Interest-bearing deposits: Demand 81,430 2.86 376,259 2.98 355,819 3.33 Savings 551,509 2.88 241,250 2.54 231,633 2.87 Time 567,258 5.48 583,508 5.51 626,497 5.52 _________ _________ _________ $1,339,677 $1,332,068 $1,342,719 _________ _________ _________
The following sets forth the maturity distribution of all time deposits of $100,000 or more as of December 31, 1997: Large Time Deposits by Maturity at Maturity Remaining December 31, 1997 __________________ ___________________ (In thousands) Less than 3 months $29,676 Over 3 through 6 months 20,770 Over 6 through 12 months 15,411 Over 12 months 15,039 ______ $80,896 ______ VI. Return on Equity and Assets Various operating and equity ratios for the years indicated are presented below:
Year Ended December 31 ________________________ 1997 1996 1995 ____ ____ ____ Return on average total assets: Net income before deduction of minority interest 1.14% .92% .71% Return on average equity 14.47 11.76 9.04 Common dividend payout ratio 27.03 27.24 33.82 Average equity to average assets 7.55 7.53 7.38 Equity to assets ratio 7.36 7.41 7.47 Tier 1 leverage capital ratio 7.63 7.62 7.45 Primary capital to assets 8.32 8.33 8.40
24 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:
1997 1996 1995 ____ ____ ____ (Dollars in thousands) Amount outstanding at December 31 $92,633 66,826 41,107 Weighted average interest rate at December 31 4.48% 3.74 4.14 Maximum amount outstanding at any quarter-end $92,633 73,359 41,107 Average amount outstanding during the year $78,234 59,276 40,237 Weighted average interest rate during the year 4.36% 4.17 4.08
Information relative to other short-term borrowings, which consist primarily of Federal Home Loan Bank borrowings, follows:
1997 1996 1995 ____ ____ ____ (Dollars in thousands) Amount outstanding at December 31 $73,700 34,150 2,500 Weighted average interest rate at December 31 6.02% 5.97 4.68 Maximum amount outstanding at any quarter-end $73,700 34,150 7,000 Average amount outstanding during the year $53,223 17,294 6,536 Weighted average interest rate during the year 5.98% 5.87 5.67
25 Item 2. Properties. At December 31, 1997, the affiliated banks and subsidiaries had 46 service locations with approximately 338,000 square feet, all located in Iowa. Of these locations, 32 were owned by the Company - approximately 264,000 square feet; 3 were owned buildings on leased land - approximately 30,000 square feet and 11 were operated under lease contracts with unaffiliated parties - - - approximately 44,000 square feet. The Company leases certain real estate and equipment under long-term and short-term leases. The Company owns certain real estate which is leased to unrelated persons. Item 3. 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 during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The information appearing on pages 25 and 32 of the Corporation's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, is incorporated herein by reference. There were approximately 1,550 holders of record of the Parent Company's $2.50 common stock as of March 13, 1998. The closing bid price of the Parent Company's common stock was $20.88 on March 13, 1998. The Parent Company increased dividends to common shareholders in 1997 to $.273 per share, a 31.9 percent increase over $.207 for 1996. Dividend declarations are evaluated and determined by the Board of Directors on a quarterly basis. In January 1998, the Board of Directors declared a dividend of $.085 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. 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. 26 Item 7A. Quantitative and Qualitative Disclosure About Market Risk. The information appearing on page 4 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 31 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 of 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, 1997, is incorporated herein by reference. See also Item 1(E) of this Form 10-K captioned "Executive Officers 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, 1997, 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, 1997, 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. 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: 27 (a) 1. Financial Statements: See the financial statements on pages 13 through 31 of the Company's Appendix to the Proxy Statement, filed as Exhibit 13 hereto, which are incorporated by reference herein. 2. Financial Statement Schedules: See Exhibits 11 and 12, for computation of earnings per share and ratios. 3. Exhibits (not covered by independent auditors' report). Exhibit 3 The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. 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 1,210,000 shares of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. Exhibit 10.3 Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995. Exhibit 10.4 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. This Employment Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.5 Non-Qualified Stock Option Plan, Administrative Rules and Agreement under which officers of the Company are eligible to receive options to purchase an aggregate of 726,000 shares of the Company's $2.50 par value common stock. 28 Exhibit 10.6 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.7 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1993. Exhibit 10.8 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1995, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. Exhibit 10.9 Standard Agreement for Advances, Pledge and Security Agreement between Brenton Banks 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, 1993. Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1997, setting forth the terms of the Parent Company's $2,000,000 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. 29 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 November 14, 1996. This Adoption Agreement #003 is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. 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, 1993. Exhibit 10.15 Indenture Agreement with respect to Capital Notes dated April 14, 1992. Exhibit 10.16 Indenture Agreement with respect to Capital Notes dated March 27, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. Exhibit 10.17 Indenture Agreement with respect to Capital Notes dated August 5, 1991. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. Exhibit 10.18 Indenture Agreement with respect to Capital Notes dated April 8, 1994. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.19 Indenture Agreement with respect to Capital Notes dated April 10, 1995. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. 30 Exhibit 10.20 Indenture Agreement with respect to Capital Notes dated April 10, 1996. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. Exhibit 10.21 Indenture Agreement with respect to Capital Notes dated April 23, 1997. Exhibit 10.22 Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.23 Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.24 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 10.25 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.26 Agreement between Larry A. Mindrup and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. Exhibit 10.27 Agreement between Norman D. Schuneman and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. 31 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. 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 11 Statement of computation of earnings per share. Exhibit 12 Statement of computation of ratios. Exhibit 13 The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1997 calendar year. Exhibit 21 Subsidiaries. Exhibit 23 Consent of KPMG Peat Marwick LLP to the incorporation of their report dated January 30, 1998, 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). Exhibit 27.1 Restated Financial Data Schedule (filed only with Electronic Transmission). Exhibit 27.2 Restated Financial Data Schedule (filed only with Electronic Transmission). 32 Exhibit 27.3 Restated 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 1997. 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRENTON BANKS, INC. By /s/ C. Robert Brenton Chairman of the Board of Directors C. ROBERT BRENTON Date: March 12, 1998 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/ C. Robert Brenton Chairman of the Board and Director C. ROBERT BRENTON Principal Executive Officer Date: March 12, 1998 By /s/ Robert L. DeMeulenaere President and Director ROBERT L. DEMEULENAERE Principal Executive Officer Date: March 12, 1998 34 By /s/ Steven T. Schuler Chief Financial Officer/Treasurer/Secretary STEVEN T. SCHULER Chief Financial Officer Chief Accounting Officer Date: March 12, 1998 BOARD OF DIRECTORS By /s/ William H. Brenton WILLIAM H. BRENTON Date: March 12, 1998 By /s/ Junius C. Brenton JUNIUS C. BRENTON Date: March 12, 1998 By /s/ R. Dean Duben R. DEAN DUBEN Date: March 12, 1998 By /s/ Hubert G. Ferguson HUBERT G. FERGUSON Date: March 12, 1998 By /s/ Gary M. Christensen GARY M. CHRISTENSEN Date: March 12, 1998 By ROBERT J. CURREY Date: 35 EXHIBIT INDEX Exhibits Page Exhibit 3 The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. . . . . . . . . . . . 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. . . . . . . . . . . . . . . . .101 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 1,210,000 shares of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. . . . . . . . . . . . . . . . . . . . 103 Exhibit 10.3 Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995.. . . . . . . . . . . . . . . . . . . . . . . . . . 104 Exhibit 10.4 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. This Employment Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . . . . . . . . . . . . . . . 105 Exhibit 10.5 Non-Qualified Stock Option Plan, Administrative Rules and Agreement under which officers of the Company are eligible to receive options to purchase an aggregate of 726,000 shares of the Company's $2.50 par value common stock.. . . . . . . . . . . . . . . . . . . . . . . . . 106 36 Exhibit 10.6 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . 120 Exhibit 10.7 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1993. . . . . . . . . . . .. 121 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 are eligible to receive shares of Brenton Banks, Inc. 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.. . . . . . . . . . . . . . . 122 Exhibit 10.9 Standard Agreement for Advances, Pledge and Security Agreement between Brenton Banks 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, 1993.. . . . . . . . . . . . . . . . . . . . 123 Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1997, setting forth the terms of the Parent Company's $2,000,000 short-term debt agreement. . . . . . . . . . . . . . . . . . . . .. 124 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. . . . 130 37 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. . . . . . . 131 Exhibit 10.13 Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing Plan, effective November 14, 1996. This Adoption Agreement #003 is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. . . . . . . . . . . . . . . . . . . . 132 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, 1993. . . . . . . . . . . . . . . 133 Exhibit 10.15 Indenture Agreement with respect to Capital Notes dated April 14, 1992.. . . . . . . . . . . . . . . . . . . . . . 134 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. . . . . . . . . . . . . . 152 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. . . . . 153 Exhibit 10.18 Indenture Agreement with respect to Capital Notes dated April 8, 1994. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . .. 154 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.. . . . 155 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. . . . 156 38 Exhibit 10.21 Indenture Agreement with respect to Capital Notes dated April 23, 1997. . . . . . . . . . . . . . . . . . . 157 Exhibit 10.22 Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994.. . . . . . . . . . . . . . . . . . . . 159 Exhibit 10.23 Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. . . . . . . . . . . . . . . . . . . . 160 Exhibit 10.24 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. . . . . . . . . . . . . . . . . . . 161 Exhibit 10.25 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. . . . . . . . . . . . . 162 Exhibit 10.26 Agreement between Larry A. Mindrup and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. . . . . . . . . . . . . . . 163 Exhibit 10.27 Agreement between Norman D. Schuneman and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. . . . . . . . . . . . . . . 164 39 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. . . . . . . . . . . 165 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 Thirteeneth Amendment to Data Processing Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. . . . . . . . . . . . . . . . . . . . . 166 Exhibit 11 Statement of computation of earnings per share. . . . . . 167 Exhibit 12 Statement of computation of ratios. . . . . . . . . . . . 169 Exhibit 13 The Appendix to the Proxy Statement for Brenton Banks, Inc. for the 1997 calendar year. . . . . . . . . . . . . 173 Exhibit 21 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . 209 Exhibit 23 Consent of KPMG Peat Marwick LLP to the incorporation of their report dated January 30, 1998, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. . . . . . . . . . . . . . . . . . 211 Exhibit 27 Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . . . . . . . . 213 Exhibit 27.1 Restated Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . . 214 Exhibit 27.2 Restated Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . . 215 Exhibit 27.3 Restated Financial Data Schedule (filed only with Electronic Transmission). . . . . . . . . . . . . . . 216 40 EX-3 2 Exhibit 3 The Articles of Incorporation, as amended, and Bylaws, as amended, of Brenton Banks, Inc. 41 RESTATED ARTICLES OF INCORPORATION OF BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: PURSUANT TO THE PROVISIONS OF SECTION 61 OF THE IOWA BUSINESS CORPORATION ACT, THE UNDERSIGNED CORPORATION ADOPTS THE FOLLOWING RESTATED ARTICLES OF INCORPORATION. ARTICLE I NAME AND PLACE OF BUSINESS SECTION 1. THE NAME OF THIS CORPORATION SHALL BE BRENTON Banks, Inc. Its name prior to the adoption of these Restated Articles of Incorporation was the same. Section 2. The principal place of business of this corporation shall be in the City of Des Moines, County of Polk, State of Iowa. Section 3. The corporation may establish branch offices and agencies in Iowa or in other states as the Board of Directors may deem necessary or expedient. Section 4. The address of the registered office of the corporation in the State of Iowa is: 2840 Ingersoll Avenue in the City of Des Moines, County of Polk, and the name of its registered agent at such address is Wm. H. Brenton. ARTICLE II Objects and Purposes Section 1. The general nature of the business to be conducted by this corporation shall be: (a) To acquire by purchase, subscription, contract or otherwise, and to hold, own, sell, assign, transfer, exchange, mortgage, pledge, or otherwise negotiate, or dispose of, and generally to deal in and with all forms of securities, including but not limited to, shares, stocks, bonds, debentures, notes, scrip, mortgages, warrants, contracts, choses in action, obligations, evidences of indebtedness, certificates of deposit, voting trust certificates, and certificates of interest issued or created, or to be issued or created, by corporations, associations, companies, partnerships, firms, trustees, syndicates, individuals, governments, states, municipalities, and other political and governmental divisions and subdivisions, or by any combinations, organizations, or entities whatsoever, irrespective of their form or the name by which they may be described, and all trust, participation, and other certificates of, and receipts evidencing interests in, any such securities; and to make payment therefore in cash or by the issuance of its stock, bonds, notes, debentures, other obligations or securities, or by any other lawful means of payment whatsoever; to receive, collect, and dispose of interest, dividends, and income upon, of, and from any and all such securities or evidences of interest therein; to exercise any and all rights, powers, and privileges of individual ownership or interest therein, including the right to vote thereon, and to consent and otherwise act with respect thereto; to do any and all acts and things for the preservation, protection, improvement, and enhancement in value of any and all such securities, or evidences of interest therein; to acquire and become interested in any such securities, or evidences of interest therein, as aforesaid, by original subscription, underwriting, participation in syndicates, or otherwise, and irrespective of whether or not such securities or evidences of interest therein be fully paid or subject to further payments; to make payments thereon as called for, or in advance of call, otherwise, and to underwrite or subscribe for the same, conditionally or otherwise, and with a view to investment, for resale, or for any other lawful purpose. (b) To undertake or aid any enterprise and carry out any transactions whatsoever that may be lawfully undertaken and carried out by capitalists; and to carry on a general financial business and general financial operations of all kinds, so far as the same are not prohibited by the laws of the State of Iowa against the exercise of banking powers by corporations, and to operate and maintain an investment service, as well as to act in the capacity of manager for, and/or consultant to, any persons, firms, corporations, or associations and to give advice to such persons, firms, corporations, or associations concerning their business activities, their investments, the conditions of the various stock and mercantile markets, and in general to aid and assist them in any manner that may be desired. (c) To acquire, own, maintain, and operate a statistical, informatory, and advisory service to banks, bankers, trust companies, financial institutions generally, investment companies, and investors generally; to enter into contracts with banks and bankers, trust companies, investment companies, financial institutions of all kinds, and investors generally, for the purpose of supplying and furnishing financial statistics, information, reports, and opinions concerning the value of corporate securities and the capital and earnings of corporations whose securities are dealt in over-the-counter and in the public exchange and markets. (d) To make investigations as to the business, affairs, and property of corporations, partnerships, and various forms of business enterprises; to make appraisals and valuations of all kinds; and to give financial advice relative to the methods of procuring additional capital for business extension, advice relative to the conversion of securities of one or more corporations into those of another, and generally to instruct and to aid corporations, partnerships, and individuals on matters pertaining to new capital structure. (e) To operate, manage, supervise, direct and control all or any part of the business and property of any corporation, association, partnership, combination, organization, entity, or individual, domestic or foreign, through stock organization, by contract, or otherwise, and for that purpose to appoint and remunerate any directors, accountants, or other experts or agents, and to receive for such service fixed or contingent compensation, or compensation in the form of commissions, management fees, shares in gross or net receipts or profits, or in any other manner or upon any other terms whatsoever, or so to act without direct compensation; and to promote, participate, or assist in any way in the business of any such corporation, association, partnership, combination, organization, entity, or individual. Section 2. in furtherance and not in limitation of the general powers conferred by the laws of the State of Iowa, and the purposes and objects hereinbefore stated, it is expressly provided that the corporation also shall have the following powers: (a) To purchase or otherwise acquire, own, hold, use, improve, manage, mortgage, charge, pledge, sell, convey, lease, exchange, transfer, dispose of and deal with in any manner whatsoever, any and all kinds of real and personal property including stock, securities, and other choses in action issued or created by this or any other corporation or by any association, firm, entity, individual or governmental authority. To allow or cause the legal estate and interest in any businesses or property acquired, established, or carried on by the corporation, to remain, or to be vested or registered in the name of, or to be carried on by, any individual or by any foreign or other corporation formed or to be formed, either upon trust for, or as agents or nominees of, this corporation, or upon any other terms or conditions which the board of directors may consider for the benefit of this corporation; to manage the affairs or take over and carry on the business of any such corporation either by acquiring the whole or part of the shares of stock or bonds, debentures, or other securities thereof, or otherwise; to exercise all or any of the powers of any such corporation or of holders of shares of stock, debentures, or securities thereof; and to receive and distribute as profits the dividends and interest on such shares, stock, debentures, or securities. All conveyances of real property by the corporation shall be executed by the chairman, president or any vice-president and counter-signed by the secretary or any assistant secretary with an impression of the corporate seal affixed; and all releases of mortgages, liens, judgments or other claims required by law to be made of record may be executed by the chairman, president, any vice-president, secretary or any assistant secretary. (b) To cause to be formed, to promote, and to aid in the formation of any corporation to association, domestic or foreign, and to cause or participate in the merger, consolidation, reorganization, liquidation or dissolution of any corporation or association, domestic or foreign, in which, or in the business of welfare of which, the corporation shall have, directly or indirectly, any interest. (c) To do everything necessary, proper, convenient, or incidental to the accomplishment of the purposes and objects of the corporation or which is calculated, directly or indirectly, to promote the welfare or interests of the corporation or enhance the value or render profitable any if its property or rights. (d) In general, to carry on any business not contrary to the laws of the State of Iowa, and to do any and all of the acts and things hereinbefore or hereinafter set forth to the same extent as natural persons could do as principal, factor, agent, contractor, trustee or otherwise, either alone or in company with any person or persons, entity, syndicate, partnership, association or corporation. Section 3. The foregoing clauses are to be construed both as purposes and powers; and it is hereby expressly provided that the enumeration herein of specific purposes, objects and powers shall not be held to limit or restrict in any manner the general powers of the corporation. It is the intention that the purposes, objects and powers specified in each of the paragraphs of this Article II shall, except as otherwise expressly provided, in no wise be limited or restricted by the references to or inferences from the terms of any other clause or paragraph of this Article or of any other Article in these Restated Articles of Incorporation. ARTICLE III Capital Stock Section 1. The aggregate number of shares which the corporation is authorized to issue is Two Million (2,000,000), consisting of one class of common shares. Such shares have a par value of Five Dollars ($5.00) per share. Section 2. No holder of the shares of stock of the corporation shall have any pre-emptive or preferential right of subscription to any class of stock of the corporation, whether now or hereafter authorized, or to any obligations convertible into stock of the corporation, issued or sold, and all such additional shares of stock or any obligations convertible into stock of the corporation may be issued and disposed of by the Board of Directors to such person or persons and upon such term and for such consideration as the Board of Directors in its absolute discretion may deem advisable; provided, however, that no stock shall be issued until the corporation shall have received its full par value in cash or property, as provided by the laws of the State of Iowa; and when issued, all shares shall be fully paid and forever nonassessable. Section 3. At all meetings of stockholders, each stockholder shall be entitled to one vote for each share of common capital stock held by him, which may be cast by the stockholder in person or by proxy, and which vote shall not be cumulative. Section 4. Upon the vote of a majority of the directors of this corporation, and of a majority of the votes then appertaining to the total number of shares of the common stock shares then issued and outstanding, this corporation may from time to time, by amendment to these Articles, increase the authorized capital stock of this corporation, or create one or more other classes of stock with such designations, preferences, voting powers, restrictions, or qualifications as may be determined by such vote, which may be the same or different from the designations, preferences, voting powers, restrictions or qualifications of the classes of stock of this corporation then authorized or issued, except that no new class of stock shall hereafter be created which is entitled to dividends or shares in distribution of assets in priority to or concurrent with, any preferential shares theretofore authorized and issued, unless the holders of not less than two-thirds (2/3) of any preferential shares outstanding and the holders of two-thirds (2/3) of the votes appertaining to each class of common stock shares shall consent thereto in writing, or by vote in person or by proxy, at a meeting duly called for that purpose. ARTICLE IV Commencement and Duration The corporate period of this corporation shall begin on the date the Secretary of State issues a Certificate of Incorporation, and this corporation shall have perpetual duration. ARTICLE V Directors and Officers Section 1. The affairs of this corporation shall be conducted by a Board of Directors consisting of not less than seven nor more than twenty-five members, who shall be elected by the stockholders at their annual meeting each year. A director is not required to be a stockholder in this corporation. Section 2. The Board of Directors may fill all vacancies occurring between annual elections in its membership by election of persons to hold office for the remainder of the term. Section 3. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolution or resolutions or in the Bylaws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, any may have power to authorize and seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the Bylaws of the corporation or as may be determined from time to time by resolution adopted by the Board of Directors. Section 4. Any resolution in writing signed by all the members of the Board of Directors (or any Committee thereof) shall be and constitute action by such Board (or committee) with the same force and effect as if the same had been duly passed by the same vote at a duly called meeting of such bodies. Section 5. The officers of this corporation shall be a Chairman, President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, and a Treasurer, and such other officers as shall be authorized by the Board of Directors, or provided for in the Bylaws. An officer may hold more than one office if the Board so decides. The officers shall be elected by the Board of Directors at the annual meeting to be held immediately following the annual meeting of stockholders or at a special meeting called for such purpose and shall hold office at the discretion of the Board. Section 6. An officer is not required to be a director or a stockholder in this corporation. Section 7. The duties of the officers shall be those usually performed by such officers in similar corporations, unless otherwise provided by resolution of the Board of Directors, or in the Bylaws, or by the stockholders at any annual or special meeting. ARTICLE VI Stockholders' Liability Section 1. Private property of the stockholders shall be exempt from corporate debts and liabilities. Section 2. This Article shall not be changed except by unanimous consent of all stockholders. ARTICLE VII Indemnification of Directors and Officers The corporation shall indemnify (1) every director or officer, or former director or former officer, his heirs, executors and administrators, and (2) at the discretion of the Board of Directors of the corporation, any person, or the heirs, executors and administrators of such person, who shall have served at its request as a director or officer of any other corporation of which it is a stockholder or creditor, and from which he is not entitled to be indemnified, against reasonable expenses actually incurred by him in connection with the defense of any action, suit or proceeding to which he may be made a party by reason of his being, or having been, a director or officer of the corporation or of such other corporation, except in relation to matters as to which he shall be finally adjudged in such action, suit or proceeding, to be liable for gross negligence or misconduct in the performance of his duties; in the event of a settlement, indemnification shall be provided only in connection with such matters covered by the settlement as to which the corporation is advised by independent counsel, selected by or in the manner designated by the Board of Directors, that the person to be indemnified did not commit such a breach of duty. The foregoing right of indemnification shall not be exclusive of other rights to which he may be entitled. ARTICLE VIII Bylaws The Board of Directors, at its first meeting, shall adopt Bylaws for the corporation and may alter such Bylaws at any regular or special meeting. ARTICLE IX Amendments Amendment to these Articles, excepting Article III and Article VI, may be made at any annual meeting of the stockholders, or at any special meeting called for that purpose, by a vote of the majority of the shares of the capital stock outstanding. ARTICLE X These Restated Articles of Incorporation set forth the provisions of the Articles of Incorporation as heretofore and hereby amended; have been duly adopted as required by law; and supersedes the original Articles of Incorporation and all amendments thereto. ARTICLE XI The number of shares of the corporation outstanding at the time of such adoption was 140,383; and the number of shares entitled to vote thereon was 140,383. ARTICLE XII The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: None. ARTICLE XIII The number of shares voted for such amendment was 136,288; and the number of shares voted against such amendment was none. ARTICLE XIV The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively, was: None. ARTICLE XV The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: These Restated Articles of Incorporation reclassify the common stock from 400,000 shares of common stock of Twenty-Five Dollars ($25.00) par value to 2,000,000 shares of common stock of Five Dollar ($5.00) par value. ARTICLE XVI The manner in which such amendment effects a change in the stated capital, and the amount of stated capital as changed by such amendment, are as follows: No change. Dated: May 5, 1972 BRENTON BANKS, Inc. By: /s/ C. Robert Brenton, President By: /s/ Betty L. Steel, Secretary STATE OF IOWA : : ss. COUNTY OF POLK : On this 5th day of May, 1972, before me, a Notary Public in and for the State of Iowa, personally appeared C. Robert Brenton and Betty L. Steel, to be personally known, who being by me duly sworn did say that they are the President and Secretary, respectively, of said corporation, that the seal affixed to said instrument is the seal of said corporation, and that said Restated Articles of Incorporation were signed and sealed on behalf of the said corporation by authority of its Board of Directors and the said C. Robert Brenton and Betty L. Steele acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it and by them voluntarily executed. /s/ Notary Public in and for the State of Iowa Seal. ARTICLES OF AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION OF BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to the provisions of Section 58 of the Iowa Business Corporation Act, Section 496A.58 of the Iowa Code, the undersigned corporation adopts the following Articles of Amendment to its Restated Articles of Incorporation: 1. The name of the corporation is Brenton Banks, Inc. The effective date of its incorporation was August 31, 1948. 2. The following amendment to the Restated Articles of Incorporation was adopted by the shareholders of the corporation on May 9, 1979, in the manner prescribed by the Iowa Business Corporation Act: Article III, Section 1 is amended to read as follows: ARTICLE III Capital Stock Section 1. Authorized Common Shares. The aggregate number of shares of common stock which the corporation is authorized to issue is Five Million (5,000,000), consisting of one class. Such shares shall have a par value of Five Dollars ($5.00) per share. Article III is amended by renumbering the existing Sections 2, 3, and 4 thereof as Sections 3, 4, and 5, respectively, and by adding the following section as Section 2: Section 2. Authorized Preferred Shares. The aggregate number of shares of preferred stock which the corporation is authorized to issue is Five Hundred Thousand (500,000) consisting of one class. Such shares shall have a par value of One Dollar ($l.00) per share. The preferred shares shall be senior to the common shares, and the common shares shall be subject to the rights and preferences of the preferred shares as hereinafter set forth. The preferred shares may be issued from time to time in one or more series in any manner permitted by law, as determined from time to time by the Board of Directors and stated in the resolution or resolutions providing for the issuance of such shares adopted by the Board of Directors pursuant to authority hereby vested in it, each series to be appropriately designated, prior to the issuance of any shares thereof, by some distinguishing letter, number, or title. All shares of each series of preferred shares shall be alike in every particular (except as to the dates from which dividends shall commence to accrue) and all preferred shares shall be of equal rank and have the same powers, preferences, and rights, and shall be subject to the same qualifications, limitations, and restrictions, without distinction between the shares of different series thereof, except only in regard to the following particulars, which may be different in different series: (a) the annual rate or rates of dividends payable on shares of such series and the dates from which such dividends shall commence to accrue; (b) the amount or amounts payable upon redemption thereof and the manner in which the same may be redeemed; (c) the amount or amounts payable to holders thereof upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation; (d) the provisions of the sinking fund, if any, with respect thereto; (e) the terms and rates of conversion or exchange thereof if convertible or exchangeable; and (f) the provision as to voting rights, if any. The shares of any series of preferred share having voting power shall not have more than one vote per share, and if the stated dividends and amounts payable on liquidation are not paid in full, the shares of all series of the preferred shares shall share ratably in the payment of dividends including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and in any distribution of assets other than by way of dividends in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full. The designation of each particular series of preferred shares and its terms in respect of the foregoing particulars shall be fixed and determined by the Board of Directors in any manner permitted by law and stated in the resolution or resolutions providing for the issuance of such shares adopted by the Board of Directors pursuant to authority hereby vested in it, before any shares of such series are issued, and shall be set forth in full or summarized on the certificates for such series. The Board of Directors may from time to time increase the number of shares of any series of preferred shares already created by providing that any unissued preferred shares shall constitute part of such series, or may decrease (but not below the number of shares thereof then outstanding) the number of shares of any series of preferred shares already created by providing that any unissued shares previously assigned to such series shall no longer constitute part thereof. The Board of Directors is hereby empowered to classify or reclassify any unissued preferred shares by fixing or altering the terms thereof in respect of the above mentioned particulars and by assigning the same to an existing or newly created series from time to time before the issuance of such shares. The holders of preferred shares of each series shall be entitled to receive, out of any funds legally available for the purpose, when and as declared by the Board of Directors, cash dividends thereon at such rate per annum as shall be fixed by resolution of the Board of Directors for such series, and no more, payable quarterly on the days fixed by the Board of Directors for the first series. Such dividends shall be cumulative, shall be deemed to accrue from day to day regardless of whether or not earned or declared, and shall commence to accrue on each preferred share from such date or dates as may be fixed by the Board of Directors prior to the issue thereof. The Corporation in making any dividend payment upon the preferred shares shall make dividend payments ratably upon all outstanding preferred shares in proportion to the amount of the dividends accrued thereon to the date of such dividend payment. In no event, so long as any preferred shares shall remain outstanding, shall any dividend whatsoever (other than a dividend payable in shares ranking junior to the preferred shares as to dividends and assets) be declared or paid upon, nor shall any distribution be made or ordered in respect of, the common shares or any other class of shares ranking junior to the preferred shares as to dividends or assets, nor shall any moneys other than the net proceeds received from the sale of shares ranking junior to the preferred shares as to dividends and assets be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of common shares or of any other class of shares ranking junior to the preferred shares as to dividends or assets, unless all dividends on the preferred shares of all series for past dividend periods shall have been paid and the full dividend on all outstanding preferred shares of all series for the then current dividend period shall have been paid or declared and set apart for payment; and the Corporation shall have set aside all amounts, if any, theretofore required to be set aside as and for sinking funds, if any, for the preferred shares of all series for the then current year, and all defaults, if any, in complying with any such sinking fund requirements in respect of previous years shall have been made good. The Corporation, at the option of the Board of Directors may at any time redeem the whole, or from time to time may redeem any part, of any series of preferred shares, by paying therefor in cash the amount which shall have been determined by the Board of Directors, in the resolution or resolutions authorizing such series, to be payable upon the redemption of such shares at such time. Redemption may be made of the whole or any part of the outstanding shares of any one or more series, in the discretion of the Board of Directors; if the redemption be a part of a series, the shares to be redeemed may be selected by lot, or all of the shares of such series may be redeemed pro rata, in such manner as may be prescribed by resolution of the Board of Directors. Subject to the foregoing provisions and to any qualifications, limitations, or restrictions applicable to any particular series of preferred shares which may be stated in the resolution or resolutions providing for the issuance of such series, the Board of Directors shall have authority to prescribe from time to time the manner in which any series of preferred shares shall be redeemed. Upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, the preferred shares of each series shall be entitled, before any distribution shall be made to the common shares or to any other class or shares junior to the preferred shares as to dividends or assets, to be paid the full preferential amount or amounts fixed by the Board of Directors for such series as herein authorized; but the preferred shares shall not be entitled to any further payment and any remaining net assets shall be distributed ratably to all outstanding common shares. If upon such liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, the net assets of the Corporation shall be insufficient to permit the payment to all outstanding preferred shares of all series of the full preferential amounts to which they are respectively entitled, then the entire net assets of the Corporation shall be distributed ratably to all outstanding preferred shares in proportion to the full preferential amount to which each such share is entitled. Neither a consolidation nor a merger of the Corporation with or into any other corporation or corporations nor the sale of all or substantially all of the assets of the Corporation shall be deemed to be a liquidation, dissolution, or winding up within the meaning of this clause. Article III is further amended by amending Article III, Section 4 (as redesignated; previously Article III, Section 3) to read as follows: Section 4. Subject to any voting restrictions or limitations placed upon preferred shares by the Board of Directors pursuant to such power granted to the Board in Article III, Section 2, at all meetings of stockholders each stockholder shall be entitled to one vote for each share of capital stock held by him, which vote may be cast by the stockholder in person or by proxy, and which vote shall not be cumulative. Article V, Section I is amended to read as follows: ARTICLE V Directors and Officers Section 1. The affairs of this corporation shall be conducted by a Board of Directors. The number of members of the Board of Directors shall be set forth in the Bylaws of the corporation. A director is not required to be a stockholder in this corporation. 3. The number of shares of the corporation outstanding at the time of such adoption was 1,107,898; and the number of shares entitled to vote thereon was 1,107,898. 4. The number of shares voted for the amendment set forth in paragraph 2 was 976,718, and the number of shares voted against such amendment was 5,700. 5. Such amendment does not provide for an exchange, reclassification or cancellation of issued shares. 6. Such amendment does not effect a change in the amount of stated capital. Dated this 14th day of May, 1979. BRENTON BANKS, INC. By /s/ C. Robert Brenton, President By /s/ Betty L. Steele, Secretary STATE OF IOWA : : ss COUNTY OF POLK : On this 14th day of May, 1979, before me, the undersigned, a Notary Public in and for said County and State, personally appeared C. Robert Brenton and Betty L. Steele, to me personally known, who being by me duly sworn did say that they are the President and Secretary of said corporation, respectively, of said corporation, that the seal affixed to said instrument is the seal of said corporation, and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and the said C. Robert Brenton and Betty L. Steele acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it and by them voluntarily executed. /s/ Claire Cole Notary Public in and for the County and State Seal. STATEMENT OF DIVISION OF PREFERRED STOCK INTO SERIES OF BRENTON BANKS, INC. STATE OF IOWA ) ) SS: COUNTY OF POLK ) TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to Section 15(2) of the Iowa Business Corporation Act, Chapter 496A of the Iowa Code (1979), Brenton Banks, Inc. does hereby submit for filing with the Iowa Secretary of State the following Statement: 1. The name of the corporation is Brenton Banks, Inc. 2. Attached hereto is a true and correct copy of a resolution adopted by the Board of Directors of said corporation establishing and designating the series, and fixing and determining the relative rights and preferences of a portion of the preferred stock of such corporation. 3. Such resolution was adopted by the Board of Directors of Brenton Banks, Inc. on October 18, 1979. 4. Such resolution was duly adopted by the Board of Directors of Brenton Banks, Inc. Dated this day 18th day of October, 1979. BRENTON BANKS, INC. By /s/ C. Robert Brenton, President By /s/ Betty L. Steele, Secretary Corporate Seal On this 18th day of October, 1979, before me, the undersigned, a Notary Public in and for said County and State, personally appeared C. Robert Brenton and Betty L. Steele, to me personally known, who being by me duly sworn did say that they are the President and Secretary, respectively, of said corporation, that the seal affixed to said instrument is the seal of said corporation, and that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors and the said C. Robert Brenton and Betty L. Steele acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it and by them voluntarily executed. /s/ Sandra S. Holan Notary Public in and for said County and State Seal. CERTIFICATE OF RESOLUTION ESTABLISHING AND DESIGNATING THE SERIES A $9.50 CUMULATIVE PREFERRED STOCK OF BRENTON BANKS, INC. BRENTON BANKS, INC., a corporation organized and existing under the laws of the State of Iowa (the "Company"), DOES HEREBY CERTIFY: That, pursuant to authority conferred upon the Board of Directors by the Restated Articles of Incorporation, as amended, of the Company (the "Restated Articles of Incorporation"), and pursuant to the provisions of I.C.A. Section 496A.15, said Board of Directors at a meeting thereof duly called, convened and held on October 18, 1979, duly adopted a resolution providing for the issuance of 60,000 shares of Series A $9.50 Cumulative Preferred Stock, par value $1.00 per share, which resolution is as follows: Be It Resolved that, pursuant to the authority vested in the Board of Directors (the "Board") of Brenton Banks, Inc., (the "Company") by the Restated Articles of Incorporation, as amended, of the Company, there is hereby established and authorized to be issued a series of the Company's Preferred Stock, $1.00 par value, consisting of 60,000 shares, which shall have the following voting powers, designation, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions: 1. Designation. The designation of said series of Preferred Stock shall be "Series A $9.50 Cumulative Preferred Stock" (the "Series A Preferred Stock"). 2. Dividends. The holders of the Series A Preferred Stock shall be entitled to cumulative cash dividends at the rate of $9.50 per share per annum (and no more) computed on the basis of a 360-day year of twelve 30-day months, when and as declared by the Board, out of any funds of the Company at the time legally available for the payment of cash dividends on shares of the Series A Preferred Stock, payable quarterly on the fifteenth day of each of the months of January, April, July and October Exhibit A of each calendar year commencing January 15, 1980 (each such day being hereinafter called a "dividend payment date"); provided, however, that dividends in arrears may be paid at any time. Such dividends on each share of Series A Preferred Stock shall accrue daily, and shall be cumulative, from the date on which such share of Series A Preferred Stock shall have been originally issued and shall so accrue and be accumulative whether or not the Company shall have had net profits or assets legally available for such dividends in any quarterly dividend payment period. Arrears of dividends shall not bear interest. 3. Optional Redemptions. (a) In addition to the requirements of the Redemption Fund set forth in paragraph 4 and to the rights of redemption set forth hereinafter, the Company may at any time and from time to time call for redemption and redeem all or any portion of the then outstanding shares of the Series A Preferred Stock (in units of 1000 shares or an integral multiple of 100 in excess thereof) at the then applicable redemption price per share set forth below, plus a sum of money equivalent to all accrued and unpaid cumulative dividends (whether or not declared or earned thereon to and including the date of redemption. Date of Redemption Applicable On or After and Prior to Redemption October 15, October 15, Price Per Share 1979 1980 $119.00 1980 1981 $119.00 1981 1982 $119.00 1982 1983 $105.00 1983 1984 $104.00 1984 1985 $103.00 1985 1886 $102.00 1986 1987 $101.00 1987 and thereafter $100.00 (b) In addition to the requirements of the Redemption Fund set forth in paragraph 4 and to the right of redemption pursuant to paragraph 3(a), on each Redemption Fund payment date specified in paragraph 4(a) (the "Redemption Fund Payment Date") the Company shall have the option (which shall not be cumulative) to redeem that number of shares of the Series A Preferred Stock equal to the number of such shares then required to be redeemed pursuant to paragraph 4, or any part thereof, at a price per share equal to $100, plus a sum of money equivalent to all accrued and unpaid cumulative dividends (whether or not declared or earned) thereof to and including the date of redemption. (c) In the event that the Company shall have requested the holders of the Series A Preferred Stock in writing to consent to a Prohibited Corporate Action, and the holder or holders of less than the greater of that percentage of the outstanding Series A Preferred Stock as would be required under either applicable law or the provisions of paragraph 6(a) to approve such Prohibited Corporate Action shall, within 30 days from the date of such request, have consented in writing to such Prohibited Corporate Action, then the Company may, within 120 days after such 30 day period (upon the notice and otherwise in the manner specified in paragraph 5), redeem all but not less than all of the shares of Series A Preferred Stock then outstanding. The request of the Company for such consent shall contain a reasonably detailed description of such transaction being proposed and the terms and provisions with respect thereto. In the event the Company shall have failed to obtain the requisite consent as described above, redemption of Series A Preferred Stock pursuant to the provisions of this paragraph 3(c) shall be made concurrently with the completion of such Prohibited Corporate Action and shall be made at a redemption price of $100 per share, plus, in each case, all accrued and unpaid cumulative dividends thereon (whether or not declared or earned) to the date fixed for redemption. 4. Redemption Fund for Series A Preferred Stock (a) On or before October 15, 1984, and on or before October 15 of each year thereafter, to and including October 15, 1989, the Company shall, so long as any shares of Series A Preferred Stock remain outstanding, set apart out of its funds lawfully available for the purpose (or to the extent the same are available therefor), as and for a Redemption Fund for the retirement of the Series A Preferred Stock (the "Redemption Fund"), that sum in cash which shall be sufficient to redeem, at a price per share equal to $100 plus all accrued and unpaid cumulative dividends thereon to the date fixed for such retirement the lesser of (i) 10,000 shares of Series A Preferred Stock; or (ii) the aggregate outstanding shares of Series A Preferred Stock. (b) The amounts so set apart for the Redemption Fund shall be applied by the Company, on October 15 in each of the years 1984 through 1989, inclusive to the redemption (in the manner and upon the notice specified in paragraph 5) of the maximum number of shares of Series A Preferred Stock redeemable from such amounts so set apart at said price. (c) The obligation of the Company to set apart such sum or sums specified in paragraph 4(a) shall be cumulative so that, if the full amount required to be set apart as aforesaid in each such year for the Redemption Fund shall not be so set apart, the deficiency shall be made good and shares of the Series A Preferred Stock shall be called for redemption and redeemed accordingly, at any time thereafter as soon a funds shall become lawfully available therefore, whether or not on a Redemption Fund Payment Date specified in paragraph 4(a). Optional redemptions pursuant to paragraph 3 or repurchases, directly or indirectly, by the Company of shares of the Series A Preferred Stock shall not affect the Company's obligations to make the Redemption Fund payments required by this paragraph 4; provided, however, that in the event of any redemption or repurchase of Series A Preferred Stock other than pursuant to the provisions of paragraphs 3(a), 3(b) or 4 which does not result in the redemption or repurchase of all of the outstanding shares of Series A Preferred Stock (a "Special Redemption"), then the redemptions required to be made pursuant to the provisions of this paragraph 4 shall, after the occurrence of such Special Redemption be reduced in the same proportions that the number of share of Series A Preferred Stock outstanding immediately preceding such Special Redemption has been reduced by such to the end that the remaining redemptions required to be made pursuant to this paragraph 4 on each of the shares of Series A Preferred Stock shall be the same as if shares of Series A Preferred Stock had not been redeemed or repurchased pursuant to a Special Redemption. 5. Manner and Effect of Redemptions (a) Notice of any proposed redemption of shares of Series A Preferred Stock shall be given by the Company by mailing, registered or certified mail, postage prepaid, such notice not less than thirty nor more than sixty days prior to the date fixed for such redemption to the holders of record of shares of Series A Preferred Stock to be redeemed or purchased, at their respective addresses appearing on the books of the Company. Said notice shall specify the shares called for redemption, the redemption price and the place at which and the date on which the shares called for redemption will, upon presentation and surrender of the certificates of stock evidencing such shares, be redeemed and the redemption price therefor paid. (b) If less than all of the shares of the Series A Preferred Stock are to be redeemed pursuant to the provisions of this Resolution, selection of shares to be redeemed shall be pro-rata in accordance with the number of shares of Series A Preferred Stock held by each holder thereof. (c) If the giving of notice of redemption shall have been completed as above provided and the deposit of funds shall have been made pursuant to subparagraph (d) below, the holders of shares of Series A Preferred Stock shall be entitled to receive the redemption price (including accrued dividends with respect to the shares called for redemption) on the date and at the place stated in such notice upon surrender of certificates for such shares, duly endorsed or accompanied by duly executed stock transfer powers. (d) On or prior to the date fixed for any redemption of shares of Series A Preferred Stock, the Company shall deposit as a trust fund with Brenton National Bank of Des Moines or any bank or trust company in good standing, organized under the laws of the United States of America or the State of Illinois and doing business in Chicago, Illinois with a capital and surplus of at least fifty million dollars, selected by the Board, a sum sufficient to redeem on the date fixed for redemption such shares called for redemption, with irrevocable instructions to said bank or trust company to pay said sum to the holders of the shares to be redeemed upon their surrender of their certificates pursuant to subparagraph (c) of this paragraph 5. From and after the date fixed for redemption, the shares so called for redemption shall be deemed to be redeemed and dividends on such stock shall cease to accrue. The holders of such shares shall cease to be shareholders with respect to such shares and shall have no rights with respect thereto, from and after the date fixed for redemption, except the right to receive from said bank or trust company payment of the redemption price, without interest thereon, upon the surrender of the certificates of certificates evidencing such shares. (e) All shares of series A Preferred Stock which shall have been redeemed, purchased or otherwise acquired by the Company may become additional authorized but unissued shares of Preferred Stock, but such shares shall not be reissued as shares of Series A Preferred Stock. 6. Certain Restrictions on Corporate Action So long as any shares of Series A Preferred Stock shall be outstanding, and in addition to any other approvals or consents required by law, without the prior written consent of the holders of not less than 66-2/3% of all shares of Series A Preferred Stock at the time outstanding: (a) Prohibited Corporate Actions. The Company shall not be a party to any Prohibited Corporate Action. (b) Dividends on or Redemption of Junior Stock. The Company shall not declare or pay any dividend or make any other distribution on any shares of Junior Stock or purchase, redeem or otherwise acquire for any consideration other than in exchange for or out of the net cash proceeds of the contemporaneous issue or sale of other shares of Junior stock), or set aside as a sinking fund or other fund for the redemption or repurchase of any shares of Junior Stock or any warrants, rights or options to purchase shares of Junior Stock (all such declarations, dividends, purchase payments or other distributions or allocations being herein called "Restricted Stock Payments"), unless at the time of making payment or declaration of the proposed Restricted Stock Payment (i) all dividend and Redemption Fund payments applicable to the Series A Preferred Stock have been currently satisfied, and (ii) after giving effect to the proposed Restricted Stock Payment the aggregate amount of Restricted Stock payments made during the period from and after January 1, 1979 to and including the date of the making of the proposed Restricted Stock Payment, would not exceed the sum of (x) $2,000,000 plus (y) Consolidated Net Income for such period, on a cumulative basis for said entire period. (c) Agreements Restricting Dividends on or Redemption of the Series A Preferred Stock. The Company shall not (i) enter into any agreement, indenture or other instrument containing express provisions restricting or limiting the obligation or right of the Company to make payment of dividends on shares of the Series A Preferred Stock or payments into the Redemption Fund described in paragraph 4 or the redemption of the Series A Preferred Stock therefrom nor (ii) will it permit any subsidiary to enter into any agreement, indenture or other instruments (other than with regulatory authorities having jurisdiction over such subsidiary) containing express provisions restricting or limiting the right of such Subsidiary to make, payments of dividends on the stock of such Subsidiary owned by the Company if such provisions are, at the time of entering into such agreement indenture or other instrument, more restrictive with respect to the payment of such dividends than the applicable provisions of any Federal or state statute rule or regulation to which such Subsidiary may at such time be subject. (d) Issuance of Parity Stock. The Company shall not create, authorize or issue any shares of any Parity Stock unless at the time of issuance thereof and after giving effect thereto and to the application of the proceeds thereof. Net Income Available for Fixed Charges of the Company for any period of 12 consecutive calendar months out of the 15 calendar months immediately proceeding the issuance of such Parity Stock shall have been at least equal to 200% of Pro Forma Fixed Charges for such period. (e) Redemptions of Preferred Stock. If and so long as any Redemption Fund payment or any quarterly dividend on the Series A Preferred Stock be in arrears, the Company shall not redeem, purchase or otherwise acquire, by way of sinking fund payments or purchase fund payments or otherwise, any other series of Preferred Stock unless funds shall simultaneously be set apart for the redemption Fund and for the sinking fund or analogous funds for the redemption of shares of all other series of Preferred Stock, ratably in accordance with the sums which would so be set apart if all Redemption Fund payments in arrears and all sinking or analogous fund payments in arrears for all other series of Preferred Stock were set aside in full, and the funds so set apart shall forthwith be applied to the redemption of the maximum number of shares of each series of Preferred Stock redeemable from the amounts so set apart at the respective prices applicable thereto. Whenever there shall be deposited or set aside the whole or any part of the funds required to be deposited or set aside by the Company as a sinking fund or purchase fund or other similar fund for the periodic retirement of shares of any other series of the Company's Preferred Stock, there shall also be deposited or set aside at the same time the full amount or the same proportionate part, as the case may be, of the funds, if any, then due to be deposited or set aside for the Redemption Fund for the periodic retirement of shares of Series A Preferred Stock then outstanding. (f) Issuance of Prior Stock. The Company shall not create, authorize or issue any shares of any Prior Stock. So long as any shares of Series A Preferred Stock shall be outstanding and in addition to any other approvals or consents required by law, without the prior written consent of the holders of 100% of all shares of Series A Preferred Stock at the time outstanding; (g) Certain Amendments. The company shall not amend, alter or repeal any of the provisions of its Restated Article of Incorporation or of this Resolution in any manner which adversely affects the rights, preferences or powers, or the qualification, limitations or restrictions of the Series A Preferred Stock or the holders thereof. 7. Preference on Liquidation, Dissolution or Winding Up. In the event of any complete or partial liquidation, dissolution or winding up of the affairs of the Company or any distribution of its assets to its shareholders, whether voluntary or involuntary, the holders of Series A Preferred Stock shall be entitled to be paid in full out of any legally available assets of the Company, before any distribution or payment shall be made to the holders of any Junior Stock, (i) is such liquidation, dissolution or winding up shall be voluntary, a sum in cash equal to (x) $105 per share if the Voluntary Liquidation Date shall be prior to October 15, 1982; or (y) if the Voluntary Liquidation Date shall be on or after October 15, 1982, the redemption price that would have been payable had the Company, instead, at its option redeemed the same pursuant to paragraph 3(a) on such Voluntary Liquidation Date, or (ii) if such liquidation, dissolution or winding up shall be involuntary, a sum in cash equal to $100 per share, plus in each case, full accrued, unpaid, cumulative dividends, if any, thereon (whether or not earned or declared) to the date of payment. As used in this paragraph 7, the term "Voluntary Liquidation Date" shall mean the date of commencement of the proceedings for any voluntary complete or partial liquidation, dissolution or winding up of the affairs of the Company or any voluntary distribution of its assets to its shareholders (which commencement date shall be deemed to be the earliest date on which the resolution shall be adopted by the Board or requisite holders of any series or class of capital stock proposing the voluntary liquidation concerned). A Prohibited Corporate Action shall not be regarded as a liquidation, dissolution or winding up of the affairs of the Company within the meaning of this paragraph 7. 8. Conversion Rights Shares of the Series A Preferred Stock shall not be convertible into shares of any other class of capital stock of the Company. 9. Stated Capital for the Series A Preferred Stock. The Series A Preferred Stock shall have a stated capital per share equal to its par value. 10. Voting Power. (a) The holders of the Series A Preferred Stock shall not be entitled to vote and shall not be entitled to notice of any shareholders' meeting except as otherwise provided by law or by the provision of paragraph 6. (b) If at any time either (i) dividends on the Series A Preferred Stock shall be in arrears (regardless of the cause of such arrearage) in respect of any four or more quarter-annual dividend payments (or the equivalent), in whole or in part, or (ii) the Company shall be in default (regardless of the cause of such default) in any annual (or the equivalent) redemption or sinking fund payment, in whole or in part, on the Series A Preferred Stock, then the holders of not less than 51% of all outstanding shares of Series A Preferred Stock, shall have the right by written instrument filed with the Secretary of the Company to appoint two observers who shall be entitled so long as any such event shall continue (w) to receive the same notice in respect of all meetings (both regular and special) of the Board and each committee thereof as are required to be furnished to members of the Board or such committee by law or by the Restated Article of Incorporation or By-laws of the Company, (x) to attend all meetings of the Board and each committee thereof and to receive minutes of all meetings of the Board, (y) to receive all information and reports which are furnished to members of the Board and each committee thereof and (z) to participate in all discussions conducted at meetings of the Board and each committee thereof; but such observers shall not constitute members of the Board or any committee thereof and shall not be entitled to vote on any matters presented to the Board or any committee thereof. 11. Definitions. As used herein the following terms shall have the following meanings: "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles. "Common Stock" shall include any class of capital stock of the Company now or hereafter authorized, the right of which to share in distributions either of earnings or assets of such corporation is without limit as to any amount or percentage. "Consolidated Net Income" for any period shall mean the gross revenues of the Company and its Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied and after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (i) any excess of gains over losses (but not any excess of losses over gains) on the sale or other disposition of investments (other than investments held in he ordinary course of the banking business) or fixed or capital assets and any taxes on such excluded gains; (ii) the proceeds of any life insurance policy; (iii) net earnings and losses of any Subsidiary of the Company accrued prior to the date it became a Subsidiary of the Company; (iv) net earnings and losses of any corporation (other than a Subsidiary of the Company), substantially all the assets of which have been acquired in any manner, realized by such other corporation prior to the date of such acquisition; (v) net earnings and losses of any corporation (other than a Subsidiary of the Company) with which the Company or a Subsidiary of the Company shall have consolidated or which shall have merged into or with the Company or a Subsidiary of the Company prior to the date of such consolidation or merger; (vi) net earnings of any business entity (other than a Subsidiary of the Company) in which the Company or any Subsidiary of the Company has an ownership interest unless such net earnings shall have actually been received by the Company or such Subsidiary in the form of cash distributions; (vii) any portion of the net earnings of any Subsidiary of the Company which for any reason is unavailable for payment of dividends to the company or any other Subsidiary of the Company; (viii) earnings resulting from any reappraisal, revaluation or write-up of assets (other than in the ordinary course of business of a financial institution); (ix) any deferred or other credit representing any excess of the equity in any Subsidiary of the Company at the date of acquisition thereof over the amount invested in such Subsidiary of the Company; (x) any gain arising from the acquisition of any securities of the Company or any Subsidiary of the Company; and (xi) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "Fixed Charges" for any period shall mean on a consolidated basis the sum of (i) all interest and all amortization of debt discount and expense in respect of all indebtedness of the Company and its Subsidiaries (including imputed interest on Capitalized Leases) other than indebtedness of Subsidiaries of the Company consisting of deposits included within the definitions contained in 12 C.F.R. 217.1 and (ii) 33-1/3% of all Rentals in respect of all leases other than Capitalized Leases payable during such period by the Company and its Subsidiaries. "Junior Stock" shall mean and include the Common Stock of the Company and all other shares of stock of any other class of the Company at any time created and issued ranking junior the Series A Preferred Stock with respect to the right to receive dividends and the right tot he distribution of assets upon liquidation, dissolution or winding up of the Company. "Minority Interests" shall mean any shares of stock of any class of a Subsidiary of the Company (other than directors' qualifying shares as required by law) that are not owned by the Company and/or one or more of its Subsidiaries, Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is great, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Net Income Available for Fixed Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any federal, state or other income taxes made by the Company and its Subsidiaries during such period and (iii) Fixed Charges during such period. "Parity Stock" shall mean stock of any other class of the Company ranking on a parity with the Series A Preferred Stock (including, without limitation, shares of Series A Preferred Stock which have been redeemed, purchased or otherwise acquired by the Company) with respect to the payment of dividends or the distribution of assets or any securities of any kind convertible into shares of such Parity Stock. "Preferred Stock" shall mean the preferred stock of the Company authorized to be issued pursuant to Section 2 of Article III of the Restated Articles of Incorporation of the Company. "Prior Stock" shall mean stock of any other class of the Company ranking prior to the Series A Preferred Stock with resect to the payment of dividends or the distribution of assets or any securities of any kind convertible into shares of such Prior Stock. "Pro Forma Fixed Charges" for any period shall mean, as of the date of any determination thereof, the sum of (i) the maximum aggregate amount of Fixed Charges which would have become payable by the Company and its subsidiaries in such period plus (ii) the total dividend requirements on all series and classes of Preferred stock of the Company, determined, in each case on a pro forma basis giving effect as of the beginning of such period to the issuance and sale of the Parity Stock then proposed to be issued and the application of the proceeds thereof. "Prohibited Corporate Action" shall mean any merger, consolidation or sale of all or substantially all of the assets of the Company. "Rentals" shall mean and include all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or any of its Subsidiaries, as lessee or sub-lessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or such Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Subsidiary" shall mean, as to any particular parent corporation, any corporation of which more than 50 percent (by number of votes) or the Voting Stock shall be owned, by such parent corporation and/or one or more corporations which are themselves subsidiaries of such parent corporation. "Voting Stock" shall mean securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or persons performing similar functions). IN WITNESS WHEREOF, said BRENTON BANKS, INC., has caused its corporate seal to be hereunto affixed and this certificate to be signed by C. Robert Brenton, its President and attested by Betty L. Steele, it Secretary, this 18th day of October 1979. BRENTON BANKS, INC. By: /s/ C. Robert Brenton Its President [Seal] Attest: By /s/ Betty L. Steele Secretary This page intentionally left blank. ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to the provisions of Section 58 of the Iowa Business Corporation Act, the undersigned adopts the following Articles of Amendment to its Articles of Incorporation: I The name of the corporation is Brenton Banks, Inc. The effective date of its Articles of Incorporation was the 31st day of August, 1948. II The following amendment to the Articles of Incorporation was adopted by the shareholders of the corporation on May 4, 1988, in the manner prescribed by the Iowa Business Corporation Act. ARTICLE VII DIRECTORS' NONLIABILITY AND INDEMNIFICATION 1. Nonliability. A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (iii) for any transaction from which the director derived an improper personal benefit, or (iv) under Section 496A.44 of the Iowa Business Corporation Act. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If Iowa law is hereafter changed to permit further elimination or limitation of the liability of directors for monetary damages to the corporation of its shareholders, then the liability of a director of this corporation shall be eliminated or limited to the full extent then permitted. The directors of this corporation have agreed to serve as directors in reliance upon the provisions of this Article. 2. Indemnification. The corporation shall indemnify a director of this corporation, and each director of this corporation who is serving or who has served, at the request of this corporation, as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan to the fullest extent possible against expenses, including attorneys' fees, judgments, penalties, fines, settlements and reasonable expenses, actually incurred by such director or person relating to his conduct as a director of this corporation or as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, except that the mandatory indemnification required by this sentence shall not apply (i) to a breach of a director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (iii) for a transaction from which a director derived an improper personal benefit, (iv) under Section 496A.44 of the Iowa Business Corporation Act, or (v) against judgments, penalties, fines and settlements arising from any proceeding by or in the right of the corporation, or against expenses in any such case where such director shall be adjudged liable to the corporation. III The number of shares of the corporation outstanding at the time of such adoption was 2,398,645, and the number of shares entitled to vote thereon was 2,398,645. IV The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows: None. V The number of shares voted for such amendment was 2,124,600, and the number of shares voted against such amendment was 13,103. VI The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively, was: None. VII The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows: No change. VIII The manner in which such amendment effects a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows: No change. Dated: May 5, 1988. BRENTON BANKS, INC. By: /s/ C. Robert Brenton, President By: /s/ Steven T. Schuler, Secretary Corporate Seal STATE OF IOWA : : SS. COUNTY OF POLK : On this 5th day of May, 1988, before me a Notary Public in and for the State of Iowa, personally appeared C. Robert Brenton, to me personally known, who being by me duly sworn did say that he is President of said corporation, that the seal affixed to said instrument is the seal of said corporation, and that said Articles of Amendment were signed and sealed on behalf of said corporation by authority of its Board of Directors and the said C. Robert Brenton acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed. /s/ Janice L. Thoman Notary Public in and for the State of Iowa Seal. STATEMENT OF CANCELLATION OF REDEEMABLE SHARES OF BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to the provisions of Section 64 of the Iowa Business Corporation Act, Chapter 496A, Code of Iowa, the undersigned corporation submits the following statement of cancellation by redemption of redeemable shares of the corporation. 1. The name of the corporation is Brenton Banks, Inc. 2. The effective date of incorporation was August 31, 1948. 3. Sixty thousand (60,000) shares of $9.50 Cumulative Preferred Series A stock were canceled through redemption. 4. The aggregate number of issued shares after giving effect to such cancellation is 2,398,645 common shares. 5. The original name of the corporation was Brenton Companies. 6. The amount of the stated capital of the corporation after giving effect to such cancellation is $12,226,725. Dated June 30, 1988. BRENTON BANKS, INC. By: /s/ C. Robert Brenton, President By: /s/ Steven T. Schuler, Secretary STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 5th day of July, 1988, before me, the undersigned a Notary Public in and for said County and State, personally appeared C. Robert Brenton and Steven T. Schuler, to me personally known, who, being by me duly sworn, did say that they are the President and Secretary, respectively, of said corporation executing the within and foregoing instrument, that the seal affixed hereto is the seal of said corporation; that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors; and that the said President and Secretary, as such officers, acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by them voluntarily executed. /s/ Janice L. Thoman Notary Public in and for said County and State Seal. This page intentionally left blank. ARTICLES OF AMENDMENT OF BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to Section 1002 or 1006 of the Iowa Business Corporation Act, the undersigned corporation adopts the following amendment to the corporation's Restated Articles of Incorporation. 1. The name of the corporation is Brenton Banks, Inc. 2. The following amendment was adopted by the shareholders of the corporation: RESOLVED, that Article III, Section 1 of the Restated Articles of Incorporation, is amended to read as follows: Section 1. Authorized Common Shares. The aggregate number of shares of common stock which the corporation is authorized to issue is Twenty Five Million (25,000,000), consisting of one class. Such shares shall have a par value of Five Dollars ($5.00) per share. 3. The date of adoption of the amendment was May 9, 1990. 4. The amendment was approved by the shareholders. The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and the number of votes of each voting group indisputably represented at the meeting is as follows: VOTES ENTITLED DESIGNATION SHARES TO BE CAST ON VOTES REPRESENTED OF GROUP OUTSTANDING AMENDMENT AT MEETING Common 4,797,290 4,797,290 4,196,958 4A. The total number of votes cast for and against the amendment by each Voting group entitled to vote separately on the amendment is as follows: VOTING VOTES VOTES GROUP FOR AGAINST Common 4,151,304 34,706 4B. The total number of undisputed votes cast for the amendment by each voting group was: VOTING VOTES GROUP FOR Common 4,151,304 The number of votes cast for the amendment by each voting group was sufficient for approval by that voting group. BRENTON BANKS, INC. By /s/ Junius C. Brenton, President ARTICLES OF MERGER MERGING AMES FINANCIAL CORPORATION WITH AND INTO BRENTON BANKS, INC. Pursuant to the provisions of Section 1105 of the Iowa Business Corporation Act, the undersigned corporation adopts the following Articles of Merger: 1. The Plan and Agreement of Merger (the "Plan") is attached hereto and by this reference is incorporated herein. 2. (a) The designation, number of outstanding shares and number of votes entitled to be cast by each voting group entitled to vote separately on the Plan as to each corporation is as follows: Number of Number of Name of Designation Outstanding Votes Entitled Corporation of Shares Shares to be Cast Ames Financial Corporation Common 273,624 273,624 The Plan was adopted by action of the Board of Directors of Brenton Banks, Inc. without a vote of the shareholders pursuant to the provisions of Section 1103(7) of the Iowa Business Corporation Act. (b) The total number undisputed votes cast for the Plan by the common stockholders of Ames Financial Corporation was 243,385, which number was sufficient for approval of the Plan by that voting group. The Plan was adopted by action of the Board of Directors of Brenton Banks, Inc. without a vote of the shareholders pursuant to the provisions of Section 1103(7) of the Iowa Business Corporation Act. 3. The merger shall take effect at 12:01 a.m. on October 1, 1992. Dated this 29th day of September, 1992. Attest: BRENTON BANKS, INC. /s/ Steven T. Schuler, Secretary /s/ J. C. Brenton, President Corporate Seal STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 29th day of September, 1992, before me, the undersigned, a Notary Public in and for the State of Iowa, personally appeared J. C. Brenton, to me personally known, who, being by me duly sworn, did say that he is the President of Brenton Banks, Inc., executing the within and foregoing instrument, that no seal has been procured by the said corporation; that said instrument was signed on behalf of said corporation by authority of is Board of Directors; and that the said J. C. Brenton, as such officer, acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by him voluntarily executed. /s/ Shirley Kirchner Notary Public in and for the State of lowa Seal. PLAN AND AGREEMENT OF MERGER OF AMES FINANCIAL CORPORATION WITH AND INTO BRENTON BANKS, INC. THIS PLAN AND AGREEMENT OF MERGER ("Agreement") dated as of September 29, 1992, by and between BRENTON BANKS, Inc. ("Brenton") and AMES FINANCIAL CORPORATION ("Ames Financial"). WITNESSETH WHEREAS, Brenton is a corporation duly organized and existing under the laws of the State or Iowa, with authorized capitalization at December 31, 1991 consisting of 25,000,000 shares of $5.00 par value common stock, of which 4,813,890 shares were duly authorized, fully paid, validly issued, nonassessable and outstanding and 500,000 shares of $1.00 par value preferred stock, of which no shares were outstanding; and WHEREAS, Ames Financial is a corporation duly organized and existing under the laws of the State of Delaware, with authorized capitalization at December 31, 1991 consisting of 5,000,000 shares of Ames Financial common stock, $.01 par value, of which 273,624 shares are duly authorized, validly issued. fully paid, nonassessable and currently outstanding and 1,000,000 shares of Ames Financial serial preferred stock, $.01 par value, of which no shares are outstanding; and WHEREAS, Brenton and Ames Financial are parties to that certain Merger Agreement (the "Merger Agreement") dated as of June 17, 1992 providing for the merger (the "Merger") of Ames Financial with and into Brenton in the manner and with the effect set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in the Merger Agreement, it is agreed that, in accordance with the applicable statutes of the States of Delaware and lowa, the parties hereto agree as follows: ARTICLE I The Merger Section 1. The Merger. On the Effective Date (as hereinafter defined) Ames Financial shall be merged with and into Brenton in accordance with the terms and provisions of this Agreement, the separate existence of Ames Financial shall cease and the merger shall in all respects have the effect provided for in Section 259 of the General Corporation Law of the State of Delaware and Section 1106 of the Iowa Business Corporation Act. The Merger shall be pursuant to the provisions of and with the effect provided in, the Merger Agreement and the Merger shall become effective on the date (the "Effective Date") upon which the Articles of Merger are filed with the lowa Secretary of State or at such later time and/or date as may be provided in the Articles of Merger. Section 2. Name. The name of the surviving corporation in the Merger ("Surviving Corporation") shall be 'BRENTON BANKS, INC. Section 3. Articles of Incorporation. The Articles of Incorporation of Brenton in effect immediately prior to the Effective Date shall be and remain the Articles of Incorporation of the Surviving Corporation until amended as provided by law and the terms thereof. Section 4. By-Laws. The By-Laws or Brenton in effect immediately prior to the Effective Date shall be and remain the By-Laws of the Surviving Corporation until amended as provided by law and the terms thereof. Section 5. Officers and Directors. From and after the Effective Date of the Merger, the directors and officers of the Surviving Corporation shall be those persons who are the directors and officers of Brenton at the Effective Date of the Merger, and they shall continue to hold office from and after the Effective Date of the Merger as provided in the Articles of Incorporation and Bylaws of the Surviving Corporation. ARTICLE II Conversion of Shares Section 1. Brenton Shares. The shares of capital stock of Brenton issued and outstanding as of the Effective Date of the Merger shall continue to be issued and outstanding shares of the Surviving Corporation. Section 2. Conversion of Ames Financial Shares. As of the Effective Date, by virtue of the Merger and without any action on the part of the holder of any common stock of Ames Financial ("Ames Financial Share" or "Ames Financial Shares"): a. Each outstanding Ames Financial Share (other than any shares as to which appraisal rights have been perfected) shall be converted into the right to receive 1.358 shares of the $5.00 par value common stock of Brenton ("Brenton Common Stock" or "Brenton Shares"). b. From and after the Effective Date, the holders of certificates formerly representing Ames Financial Shares shall cease to have any rights with respect thereto other than any appraisal rights perfected pursuant to Section 262 of the General Corporation Law of the State of Delaware. Section 3. Fractional Shares. No fractional shares of Brenton Common Stock shall be issued to any holder of Ames Financial Shares. In lieu thereof, each such holder who would be entitled to a fraction of a share of Brenton Common Stock shall receive, at the time of surrender of the certificate or certificates representing such holder's Ames Financial Shares, an amount in cash equal to the market value per share of the common stock of Brenton, calculated by taking the Average Bid Price for the last five trading dates preceding the Effective Date on which actual trades occurred multiplied by the fraction of a share of Brenton Common Stock to which such holder otherwise would be entitled. No such holder shall be entitled to dividends, voting rights, interest on the value of, or any other rights in respect of a fractional share. Section 4. Surrender of Ames Financial Shares. The following shall apply to the surrender of Ames Financial Shares. a. Prior to the Effective Date, Brenton shall appoint Harris Bank and Trust Company, Chicago, Illinois or its successor, or any other bank or trust company (having capital of at least $50 million) mutually acceptable to Ames Financial and Brenton, as exchange agent (the "Exchange Agent") for the purpose of exchanging some or all of the certificates representing the Brenton Shares. At the Effective Date, Brenton shall issue and deliver to the holders of Ames Financial Shares who have surrendered to Brenton for cancellation their certificates for Ames Financial Shares such cash and such certificates representing the Brenton Shares as shall be required by this Agreement to be delivered to the holders of such Ames Financial Shares. After the Effective Date Brenton shall Issue and deliver to the Exchange Agent such cash and such certificates representing the Brenton Shares as shall be required by this Agreement to be delivered to holders of Ames Financial Shares who have not surrendered to Brenton for cancellation their certificates for Ames Financial Shares as or the Effective Date. At or as soon as practicable after the Effective Date each holder of Ames Financial Shares converted pursuant to Section 2(a) of this Article II, upon surrender to Brenton or to the Exchange Agent, as the case may be, of one or more certificates for such Ames Financial Shares for cancellation, will be entitled to receive a certificate representing the number of Brenton Shares determined in accordance with Section 2(a) of this Article II and a payment in cash with respect to fractional shares, if any, determined in accordance with Section 3 of this Article II. Each certificate representing the Brenton Shares: (1) shall be dated as to the Effective Date; (2) may bear the Rule 144 Restrictive Legend (as that term is defined in section 8.4 of the Merger Agreement) and (3) may bear the Rule 145 Restrictive Legend (as that term is defined in Section 8.5 of the Merger Agreement). b. No dividends or other distributions of any kind which are declared payable to stockholders of record of the Brenton Shares after the Effective Date will be paid to persons entitled to receive such certificates for Brenton Shares until such persons surrender their certificates representing Ames Financial Shares. Upon surrender of such certificates representing Ames Financial Shares, the holder thereto shall be paid, without interest any dividends or other distributions with respect to the Brenton Shares as to which the record date and payment date occurred on or after the Effective Date and on or before the date of surrender. c. If any certificate for Brenton Shares is to be issued in a name other than that in which the certificate for Ames Financial Shares surrendered in exchange therefor is registered, it shall be a condition of such exchange that: (1) the person requesting such exchange shall pay to the Exchange Agent any transfer costs, taxes or other expenses required by reason of the issuance of certificates for such Brenton Shares in a name other than the registered holder of the certificate surrendered, or such persons shall establish that such costs, taxes and expenses have been paid or are not applicable and (2) the person requesting such exchange shall establish, to the satisfaction of Brenton and its counsel, that the requirements of Section 9.14 of the Merger Agreement, if applicable, have been complied with. d. All dividends or distributions, and any cash to be paid pursuant to Section 3 of this Article II in lieu of fractional shares, if held by the Exchange Agent for payment or delivery to the holders of unsurrendered certificates representing Ames Financial Shares and unclaimed at the end of one year from the Effective Date, shall together with any interest earned thereon) at such time be paid or redelivered by the Exchange Agent to Brenton, and after such time any holder of a certificate representing Ames Financial Shares who has not surrendered such certificate to the Exchange Agent shall, subject to applicable law, look as a general creditor only to Brenton for payment or delivery of such dividends or distributions or cash, as the case may be. Section 5. No Further Transfers of Ames Financial Shares. As of the Effective date the stock transfer books of Ames Financial shall be closed and no transfer of Ames Financial shares theretofore outstanding shall thereafter be made. Section 6. Adjustments. If, between the date of this Agreement and the Effective Date, the outstanding Brenton Common Stock shall have been changed into a different number of shares or a different class by reason of any reclassification, recapitalization, split up, combination, exchange of shares or readjustment, or a stock dividend thereon shall be declared with a record date within such period, the number of Brenton Shares to be issued and delivered in the Merger in exchange for each outstanding Ames Financial shall be correspondingly adjusted. Section 7. Treatment of Stock Options. Each person holding one or more options to purchase Ames Financial Shares pursuant to the Ames Financial Stock Option and Incentive Plan (the "Ames Option Plan") shall, subject to any adjustments under Section 16(b) of the Securities Exchange Act of 1934, exercise his or her option to acquire Ames Financial Shares prior to the Effective Date. If Ames Financial is not in receipt of funds from any such person in payment of the options exercised prior to the Effective Date, then such person shall be deemed to have allowed the options held by him or her under the Ames Option Plan to lapse and such options shall thereafter be null, void and of no further force or effect. ARTICLE III Miscellaneous Section 1. Governing Law. This Agreement, the Merger Agreement, the Merger and the Surviving Corporation shall be governed by the laws of the State of Iowa. Section 2. Conditions. The obligations of the parties to effect the Merger shall be subject to all of the terms and conditions contained in the Merger Agreement. Section 3. Termination. At any time prior to the filing of the Articles of Merger with the Iowa Secretary of State, this Agreement may be terminated by the mutual consent of the Boards of Directors of Ames Financial and Brenton or may be terminated as provided in the Merger Agreement. This Agreement shall terminate automatically upon the termination of the Merger Agreement. Section 4. Amendment. This Agreement and the Merger Agreement may be amended by the Boards of Directors of Brenton and Ames Financial at any time prior to the Effective Date without the approval of the shareholders of Ames Financial with respect to any of their terms except the terms relating to: (1) the amount or kind of consideration to be delivered to the Ames Financial shareholders in the Merger; (2) the Articles of Incorporation of Brenton or (3) the terms or conditions of this Agreement or the Merger Agreement if such amendment would adversely affect the shareholders of Ames Financial. Section 5. Shareholder Approval. This Agreement, the Merger Agreement and the Merger shall be subject to approval by the affirmative vote of a majority of the outstanding shares of Ames Financial common stock at a meeting of stockholders duly called and held. The consummation of the Merger shall be subject to the satisfaction, unless duly waived, of the conditions set forth in Sections 9 and 10 of the Merger Agreement. Section 6. Notices. Any notice or other communication required or permitted under this agreement shall be effective only if it is in writing and delivered personally, or by Federal Express, or by facsimile or sent by first class United States mail, postage prepaid, registered or, certified mail, address as follows: If to Brenton, to: Mr. J. C. Brenton, President Brenton Banks, Inc. Suite 300, Capital Square 400 Locust Street Des Moines. Iowa 50304-0961 Facsimile No. (515) 237-5221 with copy to: W. Kendall Brown, Esq. Brown, Winick, Graves, Donnelly, Baskerville & Schoenebaum Suite 1100, Two Ruan Center 601 Locust Street Des Moines, Iowa 50309 Facsimile No. (515) 283-0231 If to Ames Financial, to: Mr. Keith E. Dickson, Chairman Ames Financial Corporation 424 Main Street Ames, Iowa 50010 Facsimile No. (515) 232-3318 with copy to: Donald L. Smith, Esq. Smith, Nutty, Sharp, Benson & Jahn 618 Douglas Avenue Ames, Iowa 50010 Facsimile No. (515) 232-0137 or to such other address or facsimile number as either party may designate by notice to the other, and shall be deemed to have been given upon receipt. Section 7. Further Assurances. From time to time as and when required by the Surviving Corporation and to the extent permitted by law, the officers and directors of Ames Financial last in office shall execute and deliver such assignments, deeds and other instruments and shall take or cause to be taken such further or other action as shall be necessary in order to vest or perfect in or to confirm of record or otherwise to the Surviving Corporation title to, and possession of, all of the assets, rights, franchises and interests of Ames Financial in and of every type of property (real, personal and mixed) and chooses in action, and otherwise to carry out the purposes of this Agreement; and the proper officers and directors of the Surviving Corporation are fully authorized to take any and all such action in the name of Ames Financial or otherwise. IN WITNESS WHEREOF, Brenton and Ames Financial, pursuant to the approval and authority duly given by resolutions adopted by their respective Boards of Directors, have each caused this Plan and Agreement of Merger to be executed by its respective President or Chairman (and, if applicable, its corporate seal to be affixed hereto) and to be attested to by its Secretary. ATTEST BRENTON BANKS, INC. /s/ Steven T. Schuler, Secretary /s/ J. C. Brenton, President Corporate Seal ATTEST AMES FINANCIAL CORPORATION /s/ Karen Jacobson, Secretary /s/ Keith E. Dickson, Chairman Corporate Seal CERTIFICATE OF SECRETARY OF AMES FINANCIAL CORPORATION I, Karen Jacobson, Secretary of Ames Financial Corporation, a corporation organized and existing under the laws of the State of Delaware ("Ames Financial"), hereby certify, as such secretary (and under the seal of such corporation) that the Plan and Agreement of Merger dated June 17, 1992 between Ames Financial and Brenton Banks, Inc. to which this certificate is attached was duly submitted to the shareholders of Ames Financial at a special meeting of said shareholders called and held after at least twenty (20) days' notices by mail as provided in Section 251 of the General Corporation Law of the State of Delaware on the 16th day of September, 1992, for the purpose or considering and taking action upon the proposed Plan and Agreement of Merger; that 273,624 shares of common stock, with a par value of $.01, of Ames Financial were on said date issued and outstanding; that the proposed Plan and Agreement of Merger was approved by the affirmative vote of the holders of a majority of the total number of shares of the outstanding common stock of Ames Financial entitled to vote thereon, and that thereby the Plan and Agreement of Merger was at such meeting duly adopted as the act of the shareholders of Ames Financial and the duly adopted agreement of such corporation. WITNESS my hand (and the seal of Ames Financial) on this 30th day of September, 1992. /s/ Karen Jacobson, Secretary Ames Financial Corporation Corporate Seal CERTIFICATE OF SECRETARY OF BRENTON BANKS, INC. I, Steven T. Schuler, Secretary of Brenton Banks, Inc. a corporation organized and existing under the laws of the State of lowa ("Brenton"), hereby certify, as such secretary (and under the seal of such corporation) that the Plan and Agreement of Merger dated June 17, 1992 between Ames Financial and Brenton Banks, Inc. to which this certificate is attached was duly adopted pursuant to subsection (d) of Section 251 of the General Corporation Law of the State of Delaware and that the conditions specified in the first sentence of said subsection (d) of Section 251 of the General Corporation Law of the State of Delaware have been satisfied. WITNESS my hand (and the seal of Brenton) on this 30th day of September, 1992. /s/ Steven T. Schuler, Secretary Brenton Banks, Inc. Corporate Seal ARTICLES OF AMENDMENT of BRENTON BANKS, INC. TO THE SECRETARY OF STATE OF THE STATE OF IOWA: Pursuant to Section 1002 and 1006 of the Iowa Business Corporation Act, the undersigned corporation adopts the following amendment to the corporation's Restated Articles of Incorporation. 1. The name of the corporation is Brenton Banks, Inc. 2. Article III, Section 1 of the Restated Articles of Incorporation, is amended to read as follows: Section 1. Authorized Common Shares. The aggregate number of shares of common stock which the corporation is authorized to issue is Fifty Million (50,000,000), consisting of one class. Such shares shall have a par value of Two Dollars and Fifty Cents ($2.50) per share. 3. The date of adoption of the amendment was January 29, 1998. 4. The amendment was adopted by the board of directors without shareholder action. Shareholder action on the amendment is not required pursuant to Section 1002(4) of the Iowa Business Corporation Act which allows the board of directors to amend the articles of incorporation to change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the corporation has only shares of that class outstanding. Dated: March 17, 1998. BRENTON BANKS, INC. By: /s/ Robert DeMeulenaere, President By: /s/ Steven T. Schuler, Secretary 000472 STATE OF IOWA ) ) SS COUNTY OF POLK ) On this 17 day of March, 1998, before me, a Notary Public in and for said county and state, personally appeared Robert DeMeulenaere and Steven T. Schuler, to me personally known, who, being by me duly sworn, did say that they are the President and Secretary, respectively, of the corporation executing the within and foregoing instrument, that the seal affixed to said instrument is the seal of said corporation, that said instrument was signed and sealed on behalf of the corporation by the authority of its Board of Directors; and that Robert DeMeulenaere and Steven T. Schuler, as said officers, acknowledged the execution of said instrument to be the voluntary act and deed of the corporation, by it and by them voluntarily executed. /s/ Debbie A. Mitchell Exp. 3/2/01, Notary Public in and for the State of Iowa Filed Iowa Secretary of State 3-19-98 9:13 a.m. 000473 BRENTON BANKS, INC. BY-LAWS ARTICLE I. MEETINGS OF STOCKHOLDERS 1. All meetings of stockholders shall be held in Des Moines, Iowa. 2. Annual meetings of stockholders shall be held on the first Wednesday following the first Monday in May of each year. 3. Any stockholder proposal for action at the annual meeting, including nominations for the Board of Directors, must be submitted in writing to the Secretary of the Corporation at least five (5) days prior to the date of the annual meeting to be considered and voted upon at the meeting. Any such stockholder proposal or nomination for the Board of Directors must be accompanied by a written statement describing the purpose of the proposal or the qualifications of the nominee. Such a statement shall not exceed five hundred (500) words. 4. Special meetings of stockholders may be called by the Chairman, the Vice Chairman, the President, or by a majority of the Directors or by stockholders representing two-thirds of the outstanding stock of the corporation. 5. Written or printed notice stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting, either personally or by mail or at the direction of the Chairman, the Vice Chairman, the President, the secretary, or the officer or person calling the meeting to each shareholder of record entitled to vote at such meeting, but such notice may be waived in writing by any stockholder. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his/her address as it appears on the stock transfer books of the Corporation, with postage thereon prepaid. 6. At any meeting of stockholders, holders of a majority of the outstanding shares shall constitute a quorum for the transaction of business. 7. The Chairman, or in his absence the Vice Chairman, at any meeting of the stockholders, shall have the power and authority to prescribe appropriate rules and procedures for the maintenance of order and the conduct of the meeting; including, but not limited to, requirements for identification of speakers, limitation on the time allotted to questions, comments and debate, variance from the agenda, and procedures for dealing with disruptive individuals. ARTICLE II. DIRECTORS 1. The Board of Directors of the Corporation shall consist of not less than five, nor more than eleven members, who shall be elected by the stockholders at their annual meeting. The Board of Directors shall, from time to time, designate the number of directors of the Corporation within such range. Directors shall hold office for a term of one year, or until their successors are elected and qualified, but may be removed at any time by a majority vote of the stockholders. 2. Stockholder nominations for the Board of Directors shall be made in accordance with Article I, Section 3, of these ByLaws. 3. The Board of Directors shall have the general management and control of the business and affairs of the Corporation, and may exercise all the powers possessed by the Corporation. 4. The Board of Directors shall meet immediately after adjournment of the annual meeting of stockholders, and at such other times and places as the Board may determine and as called by the Chairman, the Vice Chairman or the President. 5. At all meetings of the Board it shall be necessary for a majority of all the Directors to be present to constitute a quorum for the transaction of business, but a lesser number may adjourn the meeting to a future time and convenient place. 6. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the Directors of the Corporation, which to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The committee or committees shall keep regular minutes of their proceedings and report the same to the Board when required. 7. The Board of Directors may appoint an Executive Committee. The Vice Chairman shall be a member of and chairman of the Executive Committee. The Board of Directors shall, from time to time, designate the number of Executive Committee members of the Corporation. The Executive Committee shall not have authority to alter or amend the By-Laws, but shall exercise all other powers of the Board of Directors between the meeting of said Board, except the power to fill vacancies in their own membership, which vacancy shall be filled by the Board of Directors. The Executive Committee shall meet at stated times or on notice to all by the Committee Chair. It shall fix its own rules of procedure. A majority shall constitute a quorum, but an affirmative vote of a majority of the whole committee shall be necessary in every case. The Executive Committee shall keep regular minutes of proceedings. 8. Any resolution in writing signed by all the members of the Board of Directors (or any Committee thereof) shall be and constitute action by such Board (or Committee) with the same force and effect as if the same had been duly passed by the same vote at a duly called meeting of such bodies. ARTICLE III. OFFICERS 1. The officers of the corporation shall be a Chairman, a Vice Chairman, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, and a Treasurer, and such other officers as shall be authorized by the Board of Directors. Officers shall be elected by the Board of Directors and shall hold office at the pleasure of the Board. One person may hold one or more offices, if the Board so determines. 2. The Chairman shall exercise the general supervision and direction of the affairs of the Company. He shall preside as Chairman of all meetings of the stockholders, of the Board of Directors, and, in the absence of the Vice Chairman, of the Executive Committee, or he may direct another officer to preside in his place. He may, with the Secretary, sign all certificates of stock and execute all contracts and instruments which the Board of Directors shall lawfully authorize and direct. 3. The Vice Chairman shall, in the absence of the Chairman, have all powers and duties of the Chairman. As Committee Chair, he shall preside at all meetings of the Executive Committee, or he may direct another officer to preside in his place. He shall have such other powers and duties as may be prescribed from time to time by the Board of Directors or the Chairman, including those prescribed in any employment agreement. 4. The President shall work with all business affairs incident to the activities and direction of the Company. He may, with the secretary, sign all certificates of stock and execute all contracts and instruments which the Board of Directors shall lawfully authorize and direct. 5. The Board of Directors may elect an Executive Vice President, who shall have the powers and duties incident to that office and shall have such other powers and duties as may be prescribed from time to time by the Chairman, the Vice Chairman or the President. He shall, in the incapacity of the Chairman, the Vice Chairman and of the President, perform such duties of the Chairman, the Vice Chairman and of the President as the Board of Directors or the Executive Committee shall prescribe. He may, with the Secretary, execute contracts and instruments which the Board of Directors shall lawfully authorize and direct. 6. Each Vice President shall have the powers and duties incident to that office and shall have such other powers and duties as may be prescribed from time to time by the Chairman, the Vice Chairman or the President. In the event of the inactivity of the Chairman, of the Vice Chairman and of the President, a Vice President designated by the Board of Directors or the Executive Committee shall perform such duties of the Chairman, of the Vice Chairman and of the President as the Board of Directors or the Executive Committee shall prescribe. Any Vice President may execute contracts in the name of the company. 7. The Secretary shall be ex-officio secretary of the Board of Directors and the Executive Committee. He shall keep the minutes of all meetings of the stockholders, the Board of Directors and the Executive Committee, and, when required, of all other standing committees; and attend to serving and giving all notices of the company. He shall have charge of the corporate seal, the stock certificate books and such other books, records, and papers as the Board of Directors and Executive Committee may direct; keep a stock book containing the names alphabetically arranged of all persons who are stockholders of the company, showing their place of residence, the number of shares of stock held by them respectively and the time when they respectively became owners thereof. 8. Each Assistant Secretary shall have the powers and duties incident to that office and shall have such other powers and duties as may be prescribed by the Secretary. In the event of the incapacity of the Secretary, an Assistant Secretary designated by the Board of Directors and/ or the Executive Committee shall perform such duties of the Secretary as the Board of Directors and/or the Executive Committee shall prescribe. 9. The Treasurer shall keep or cause to be kept full and accurate accounts of all receipts and disbursements in books belonging to the company, and shall have the care and custody of all funds and securities of the company and deposit such funds in the name of the company in such bank or banks as the Board of Directors and/or the Executive Committee or the Chairman or the Vice Chairman or the President may designate. The Treasurer is authorized to sign all checks, drafts, notes, bills of exchange, orders for the payment of money, and any negotiable instruments of the company, but no such instrument shall be signed in blank. He shall disburse the funds of the company as may be ordered by the Board of Directors, the Executive Committee, the Chairman, the Vice Chairman or the President. The Treasurer shall at all reasonable times exhibit the books and accounts to any directors, and he shall give such bonds for the faithful performance of his duties as the Board of Directors, the Executive Committee, the Chairman, the Vice Chairman or the President may determine, and he shall perform such other duties as may be incident to his office. ARTICLE IV. SEAL The corporate seal of the company shall be circular in shape, and shall be engraved with the name of the company and the state of incorporation around the margin, and the words "CORPORATE SEAL" across the center. ARTICLE V. CAPITAL STOCK 1. Certificates of stock shall be in a form adopted by the Board of Directors and shall be signed by the Chairman, the Vice Chairman or President and the Secretary or Assistant Secretary and be attested by the corporate seal. All certificates shall be numbered consecutively; and the name of the stockholder, his place of residence, the number of shares, and the dates of acquisition and transfer shall be entered by the Secretary upon the records of the company, and such record shall constitute the sole and exclusive evidence of who, as stockholders, shall have the right to receive dividends and to vote at stockholders' meetings. 2. Title to a certificate and to the shares represented thereby can be transferred only, (a) by delivery of the certificate endorsed either in blank or to a specified person by the person appearing by the certificate to be the owner of the shares represented thereby, or b) by delivery of the certificate and a separate document containing a written assignment of the certificate or a power of attorney to sell, assign, or transfer the same or the shares represented thereby, signed by the person appearing by the certificate to be the owner of the shares represented thereby. Such assignment or power of attorney may be either in blank or to a specified person. ARTICLE VI. EXECUTION OF INSTRUMENTS, LOANS 1. Execution of Instruments. Any checks, drafts, bills of exchange, acceptances, bonds, notes or other obligations or evidences of indebtedness of the company, and also all deeds, mortgages, indentures, bills of sale, conveyances, endorsements, assignments, transfers, stock powers, or other instruments of transfer, contracts, agreements, dividend and other orders, powers of attorney, proxies, waivers, consents, returns, reports, certificates, demands, notices of documents and other instruments of writing of any nature may be signed, executed, verified, acknowledged and delivered by such officers, agents, or employees of the company, or any of them, and in such manner, as shall be provided in the Articles of Incorporation or as from time to time may be determined by the Board of Directors. 2. Loans. When so authorized by the Board of Directors any officer or agent of the company may effect loans and advances at any time for the company secured by mortgage or pledge of the company's property or otherwise, and may do every act and thing necessary or proper in connection therewith. Such authority may be general or confined to specific instances. ARTICLE VII. DIVIDENDS The Board of Directors, in its discretion from time to time may declare dividends upon the capital stock from the surplus and net profits of the company, subject to all the provisions of the Articles of Incorporation. ARTICLE VIII. FISCAL YEAR The fiscal year of this corporation shall begin on the first day of January and terminate on the last day of December of each year, except that the first year shall begin on August 31, 1948. ARTICLE IX. OTHER OFFICERS AND THEIR DUTIES The Board of Directors, upon exercising any power to appoint additional officers, may prescribe their duties and compensation and determine as to the securities for the faithful performance of their duties to be given by them, which prescription as to duties and securities may be made in the form of By-Laws or by resolution of the Board, as it shall determine. ARTICLE X. INDEMNIFICATION OF DIRECTORS AND OFFICERS This corporation shall indemnify an officer of this corporation and each officer of this corporation who is serving or who has served, at the request of this corporation, as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, to the fullest extent possible against expenses, including attorneys' fees, judgments, penalties, fines, settlements, and reasonable expenses, actually incurred by such officer or person relating to his conduct as an officer of this corporation or as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, except that the mandatory indemnification required by this sentence shall not apply (i) to a breach of an officer's duty of loyalty to the corporation or its stockholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (iii) for a transaction from which the officer derived an improper personal benefit, (iv) under Section 496A.44 of the Iowa Business Corporation Act, or (v) against judgments, penalties, fines, and settlements arising from any proceeding by or in the right of the corporation, or against expenses in any such case where such officer shall be adjudged liable to the corporation. ARTICLE XI. OTHER INTERESTS-OF-OFFICERS OR DIRECTORS 1. No Director shall vote on a question in which he is interested, except the election of a President or other officer or employee, but in the absence of fraud, no contract or other transaction of the corporation shall be affected or invalidated in any way by the fact that any of the officers or Directors of the corporation are in any way interested in or connected with any other party to said contract or transaction or are themselves parties to said contract or transaction, provided that such interest shall be fully disclosed or otherwise known to the Board of Directors at the meeting of said Board at which such contract or transaction is authorized or confirmed, and provided further that at the meeting of the Board of Directors authorizing or confirming such contract or transaction there shall be present a quorum of Directors not so interested or connected and such contract or transaction shall be approved by a majority of such quorum, which majority shall consist of Directors not so interested or connected. The mere ownership of stock in another corporation by a Director shall not disqualify him to vote in respect of any transaction between this corporation and such other corporation. 2. Inasmuch as the officers and Directors of this corporation may be men of large and diversified business interest, and connected with other corporations with which, from time to time, this corporation may have business dealings, no contract or other transaction between this corporation and any other corporation shall be affected by the fact that any of the officers or directors of this corporation are interested in or are directors or officers of such other corporation, if such contract or transaction be made, authorized or confirmed by the Board of Directors in the manner provided in the preceding paragraph, or by any committee of this corporation having the requisite authority, by vote of a majority of the members of such committee not so interested; and any officer or director individually may be a party to or may be interested in any contract or transaction of this corporation, provided that such contract or transaction shall be approved or ratified by the Board of Directors or by any committee of this corporation having the requisite authority, in the manner herein set forth. ARTICLE XII. AMENDMENTS The Board of Directors may alter these By-Laws of the corporation at any regular or special meeting. AS AMENDED July 6, 1989. Resolved that the foregoing are adopted as the amended and substituted By-laws of the corporation as of the above date. /s/ C. Robert Brenton /s/ J.C. Brenton /s/ R. Dean Duben /s/ Thomas R. Smith /s/ William H. Brenton CONSTITUTING ALL OF THE MEMBERS OF THE BOARD OF DIRECTORS 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. 101 1997 BRENTON BANKS, INC. BONUS PLANS For 1997, the Company (Brenton Banks, Inc. and Subsidiaries) has bonus plans that cover executive officers, line of business managers, subsidiary presidents, 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): Executive officers 37.50% Line of business managers and subsidiary presidents 30.00% Market managers 30.00% Senior managers and other key personnel 10.00% to 30.00% Bonus threshold for executive officers: Bonus achievement is tied to a consolidated earnings threshold of $17,000,000 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 earnings bonus matrix provides for no bonus unless net income exceeds $17,000,000 and provides for 100% of bonus to be earned when net income exceeds $18,000,000. 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 net income Sales goals Growth in loans Growth in core deposits Fee income generation Non-interest income Non-interest expense Key personal objectives Bonus achievements: Bonus amounts are earned ratably based on actual results compared to a tiered bonus achievement matrix. 102 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 1,210,000 shares of the Company's $2.50 par value common stock. This 1996 Stock Option Plan, Administrative Rules and Agreement is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1996. 103 EX-10.3 5 Exhibit 10.3 Directors' Incentive Plan. This Directors' Incentive Plan is incorporated by reference from Form 10-Q of Brenton Banks, Inc. for the quarter ended September 30, 1995. 104 EX-10.4 6 Exhibit 10.4 Employment Agreement, dated July 6, 1989, between William H. Brenton and Brenton Banks, Inc. This Employment Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 105 EX-10.5 7 Exhibit 10.5 Non-Qualified Stock Option Plan, Administrative Rules and Agreement under which officers of the Company are eligible to receive options to purchase an aggregate of 726,000 shares of the Company's $2.50 par value common stock. 106 BRENTON BANKS, INC. NONQUALIFIED STOCK OPTION PLAN 1. Purpose. The Nonqualified Stock Option Plan (the "Plan") is intended to advance the interests of Brenton Banks, Inc. (the "Company"), its shareholders, and its subsidiaries 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. Options granted under the plan are intended to be options which do not meet the requirements of Section 422 of the Internal Revenue Code of 1954, as amended (the "Code"). 2. Definitions. (a) "Board" means the Board of Directors of the Company. (b) "Common Stock" means the Company's $5.00 par value Common Stock. (c) "Date of Grant" means the date on which an option is granted under the Plan. (d) "Option" means an option to acquire Common Stock granted under the Plan. (e) "Optionee" means a person to whom an option, which has not expired, has been granted under the Plan. (f) "Subsidiary" or "Subsidiaries" means a subsidiary corporation or corporations of the Company as defined in Section 425 of the Code. (g) "Successor" means the legal representative of the estate of a deceased Optionee or the person or persons who acquire the right to exercise an Option by bequest or inheritance or by reason of the death of any Optionee. (h) "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 granting, term, vesting and exercise of the Options and upon the issuance and transfer of Options and Stock issued pursuant to the exercise of Options. 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 chief executive office. 3. Administration of Plan. The Plan shall be administered by the Board. Options 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 options shall be granted and the number of shares and purchase price of Common Stock covered by each Option; to construe and interpret the Plan; to determine the terms and provisions of the respective option agreements, which need not be identical, including, but without limitation, terms covering the payment of the option price; 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. Common Stock Subject to Options. The aggregate number of shares of the Company's Common Stock which may be issued upon the exercise of Options granted under the Plan shall not exceed 100,000, subject to adjustment under the provisions of paragraph 9. The shares of Common Stock to be issued upon the exercise of Options 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 Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under the Plan. 5. Participants. Options may be granted under the Plan to officers of the Company or of any of its Subsidiaries who are residents of the State or Iowa when the Options are granted. 6. Terms and Conditions of Options. Any Option granted under the Plan shall be evidenced by an agreement executed by the Company and the applicable officer 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: (a) Option Price. The option price per share with respect to each Option shall be determined by the Board but shall in no instance be less than 100% of the fair market value of a share of the Common Stock on the Date of Grant. 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 Optionee. The Board may make such determination (i) in case the Common Stock shall not then be listed and traded upon a recognized securities exchange, upon the basis of the mean between the bid and asked quotations for such stock on the Date of Grant (as reported by The Wall Street Journal "NASDAQ Bid And Asked Quotations" for the Date of Grant) or, in the event that there shall be no bid or asked quotations on the Date of Grant, then upon the basis of the mean between the bid and asked quotations on the date nearest preceding the Date of Grant or (ii) in case the Common 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 the Common Stock were traded on such recognized securities exchange on the Date of Grant as reported in The Wall Street Journal or, if the Common Stock was not traded on said Date, upon the basis of the mean of such prices on the date nearest preceding the Date of Grant, and (iii) upon any other factors which the Board shall deem appropriate. (b) Period of Option. The expiration date of each Option shall be set by the Board. (c) Change in Duties or Position of Optionee. So long as the holder of an Option shall continue to be an employee of the Company or one or more of its Subsidiaries, his Option shall not be affected by any change of duties or position. (d) Restrictions on Options and Stock Issued Pursuant to Options. Administrative Rules may be adopted by the Board to interpret the provisions of the Plan or to impose other terms, conditions, and restrictions on the granting, term, vesting and exercise of Options and upon the issuance and transfer of Options and Stock issued pursuant to the exercise of Options. 7. Shareholder Rights. Neither an Optionee nor his Successor shall have any of the rights of a shareholder of the Company until the certificates evidencing the shares purchased are properly delivered to such Optionee or his Successor. 8. No Alteration of Employment Terms. The granting of an Option 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. 9. Adjustments. In the event that the outstanding shares of Common 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 Options may be granted under the Plan. In addition, there shall be appropriate adjustments made in the number and kind of shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the option price per share. 10. Restrictions on Issuing Shares. The exercise of each Option 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, such exercise or the delivery or purchase of shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 11. Use of Proceeds. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of Options granted under the Plan shall be added to the Company's general funds and used for general corporate purposes. 12. Suspension and/or Termination of Plan. The Board may at any time suspend or terminate the Plan. The Board cannot change any provisions under the Plan which would increase the cost of the Plan to the Company, or alter the allocation of benefits under the Plan without approval by the shareholders of the Company. Unless the Plan shall have been terminated by the Board, the Plan shall terminate ten years after the effective date of the Plan. No Option may be granted during any suspension or after the termination of the Plan. Except as provided in this paragraph, no suspension or termination of the Plan shall, without an Optionee's consent, alter or impair any of the rights or obligations under any Option theretofore granted to such Optionee under the Plan. 13. Effectiveness of the Plan. The Plan shall become effective only after the stockholders of the Company shall, by the affirmative vote of a majority in interest of the Common Stock, have approved the Plan. 13. Time of Granting Options. Neither anything contained in the Plan or 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 the granting of any Option. The granting of an Option shall take place only when a written Option Agreement is duly executed and delivered by or on behalf of the Company and the Optionee to whom such Option shall be granted. ADMINISTRATIVE RULES FOR BRENTON BANKS, INC. NONQUALIFIED STOCK OPTION PLAN 1. Purpose. The Purpose of the Administrative Rules as adopted and amended by the Board of Directors is to interpret the provisions of the Brenton Banks, Inc. "Nonqualified Stock Option Plan" (the "Plan") or to impose other terms, conditions, and restrictions on the granting, term, vesting and exercise of the options and upon the issuance and transfer of Options and stock issued pursuant to the exercise of Options. 2. Definitions. A. Those terms defined in the Plan shall have the same meaning when used in these Rules. B. "Disability" means an employee of the company who is disabled as defined under the Company's disability plan, if any, or under the Social Security Rules. 2. Expiration Date of Options Granted Under the Plan. Except as otherwise provided in Section 4(C)(1), the Options granted under the Plan shall expire 10 years and 30 days from the date of issuance. 3. Vesting of Option Rights. Unless otherwise provided, an option granted under this Plan shall become exercisable as follows: A. 20% of the number of shares originally covered thereby at any time after the Optionee has completed one (1) year of employment with the Company or any of its Subsidiaries following the date of granting of the Option. B. An additional 20% of the number of shares originally covered thereby at the end of the second, third, fourth and fifth years of the Optionee's employment with the Company or any Subsidiary thereof following the date of granting of the Option. Said installments shall be cumulative to the extent that the Optionee will be able to exercise 20, 40, 60, 80, or 100% of the stock option rights originally granted thereby following the completion of the first, second, third, fourth and fifth years of service, respectively, with the Company or any of its Subsidiaries following the date of the granting of the Option. To the extent not exercised, installments shall be exercisable, in whole or in part, in any subsequent period but not later than ten (10) years and 30 days from the date the Option is granted. C. Notwithstanding the foregoing: (1) Termination of Employment. Upon termination of an Optionee's employment with the Company or with any of its subsidiaries for reasons other than death, disability, retirement after age 60 or retirement before age 60 with Board approval, his Option privileges shall be limited to the shares which were immediately purchasable by him at the date of such termination and such Option privilege shall expire unless exercised by him within ninety (90) days after the date of such termination. In the case of the death, disability, retirement after age 60, or retirement before age 60 with approval of the Board, the provisions of the preceding sentence shall not apply, and an Option shall be vested as provided in Section 4(C)(2) and 4(C)(3) hereof and shall be exercisable for the remaining term thereof as provided in Section 3 hereof. (2) Death or Disability of Optionee. If an Optionee to whom an Option shall have been granted shall die or become disabled while he shall be employed by the Company or one or more of its Subsidiaries, such Option shall thereupon be 100% vested and may be exercised to the extent not previously exercised, as to all Common Shares which shall be covered by such Option by the Optionee, legatee or legatees of the Optionee under his last Will, or by his personal representatives or distributees. (3) Retirement of Optionee. In the event that an Optionee to whom an Option shall have been granted shall retire after the age of 60 any Option held by such retired Optionee shall thereupon be 100% vested and may be exercised, to the extent not previously exercised, as to all the shares which shall be covered by such Option. In the event Optionee retires prior to age 60, the Option may become 100% vested upon the approval of the Board in its sole discretion. If the Optionee retires prior to the age of 60 without the approval of the Board, the first sentence of Section 4(C)(1) shall control. 5. Nontransferability of Options. No option granted under the Plan shall be transferable otherwise than by will or by laws of descent and distribution, and during the lifetime of the Option only the Optionee (or his duly appointed legal representative) may exercise the Option. 6. Exercising Options. Unless written notice, identifying which options are being exercised, is given to the Company at the time the options are exercised, the options held by the option holder that have been exercisable for the longest period of time shall be deemed to be those exercised by the option holder. BRENTON BANKS, INC. 1987 STOCK OPTION PLAN STOCK OPTION AGREEMENT This Option Agreement is made this ____ day of _______________, 19___, by and between Brenton Banks, Inc., an Iowa corporation (the "Company") and _________________________, an employee of the Company or Subsidiary thereof (the "Employee"). The Company desires to carry out the purpose of its 1987 Stock Option Plan (the "Plan") by affording the Employee an opportunity to purchase shares of its common stock, par value Five Dollars ($5.00) per share (the "Common Stock"), as provided in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement and for other good and valuable consideration, the Company and the Employee have agreed, and do by this Agreement agree, as follows: 1. Grant of Option. The Company by this Agreement irrevocably grants to the Employee the right and option (the "Option") to purchase ______ shares of Common Stock (such number being subject to adjustment as provided in Paragraph 8 of this Agreement) on the terms and conditions set forth in this Agreement. 2. Purchase Price. The purchase price of the shares of the Common Stock covered by this Option shall be _____________ Dollars and _____/100 (__________________) per share. 3. Term of Option. The term of the Option shall be for a period of ten years and thirty days from the date of this Agreement subject to earlier termination as provided in Paragraph 4, of this Agreement. The Employee may exercise vested Options at any time or from time to time as to part or all of the shares of Common Stock covered by the Option. 4. Vesting of Option Rights. Unless otherwise provided, an option granted under this Plan shall become exercisable as follows: A. Twenty percent (20%) of the number of shares originally covered thereby at any time after the Optionee has completed one (1) year of employment with the Company or any of its Subsidiaries following the date of granting of the Option. B. An additional 20% of the number of shares originally covered thereby at the end of the second, third, fourth and fifth years of the Optionee's employment with the Company or any Subsidiary thereof following the date of granting of the Option. Said installments shall be cumulative to the extent that the Optionee will be able to exercise 20, 40, 60, 80, or 100% of the stock option rights originally granted thereby following the completion of the first, second, third, fourth and fifth years of service, respectively, with the Company or any of its subsidiaries following the date of the granting of the Option. To the extent not exercised, installments shall be exercisable, in whole or in part, in any subsequent period but not later than ten (10) years and 30 days from the date the Option in granted. C. Notwithstanding the foregoing: (1) Termination of Employment. Upon termination of an Optionee's employment with the Company or with any of its Subsidiaries for reasons other than death, disability, retirement after age 60 or retirement before age 60 with Board approval, his Option privileges shall be limited to the shares which were immediately purchasable by him at the date of such termination and such option privileges shall expire unless exercised by him within ninety (90) days after the date of such termination. In the case of the death, disability, retirement after age 60, or retirement before age 60 with approval of the Board of Directors of the Company, the provisions of the preceding sentence shall not apply, and an Option shall be vested as provided in Paragraph 4(C)(2)and 4(C)(3) hereof and shall be exercisable for the remaining term thereof as provided in Section 3 hereof. (2) Death or Disability of Optionee. If an Optionee to whom an Option shall have been granted shall die or become disabled while he shall be employed by the Company or one or more of its Subsidiaries, such Option shall thereupon be 100% vested and may be exercised to the extent not previously exercised, as to all Common Shares which shall be covered by such Option by the Optionee, legatee or legatees of the Optionee under his last Will, or by his personal representatives or distributees. (3) Retirement of Optionee. In the event that an Optionee to whom an Option shall have been granted shall retire after the age of 60 any Option held by such retired Optionee shall thereupon be 100% vested and may be exercised, to the extent not previously exercised, as to all the shares which shall be covered by such Option. In the event Optionee retires prior to age 60, the Option may become 100% vested upon the approval of the Board of Directors of the Company in its sole discretion. If the Optionee retires prior to the age of 60 without the approval of the Board of Directors of the Company, the first sentence of Section 4(C)(1) shall control. 5. Change in Duties or Position of Optionee. So long as the holder of an Option shall continue to be an employee of the Company or one or more of its Subsidiaries, his Option shall not be affected by any change of duties or position. 6. Nontransferability of Options. No option granted under the Plan shall be transferable otherwise than by will or by laws of descent and distribution, and during the lifetime of the Optionee only the Optionee (or his duly appointed legal representative) may exercise the Option. 7. Method of Exercising Option. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company. Such notice shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person who shall exercise the Option. Such notice shall either (a) be accompanied by payment of the full purchase price of such shares, in which event the Company shall deliver a certificate or certificates representing such shares as soon as practicable after notice shall be received; or (b) fix a date (not less than five (5) nor more than fifteen (15) business days from the date such notice shall be received by the Company) for the payment of the full purchase price of such shares against delivery of a certificate or certificates representing such shares. A certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the person who shall exercise the Option or in joint tenancy with the right of survivorship with another as directed by the Optionee, and shall be delivered as provided above to or upon the written order of the person who shall exercise the Option. 8. Presumption of Options Exercised. Unless written notice, identifying which options are being exercised, is given to the Company at the time the options are exercised, the options held by the option holder that have been exercisable for the longest period of time shall be deemed to be those exercised by the option holder. 9. Shareholder Rights. Neither an Optionee nor his Successor shall have any of the rights of a shareholder of the Company until the certificates evidencing the shares purchased are properly delivered to such Optionee or his Successor. 10. No Alteration of Employment Terms. The granting of an Option 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 Common 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 Options may be granted under the Plan. In addition, there shall be appropriate adjustments made in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extent practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of the option but with a corresponding adjustment in the option price per share. Nothing contained in this paragraph shall be construed as authorizing the issuance of fractional shares of stock.. The adjustments made pursuant to this paragraph shall be rounded downward to the nearest whole share. 12. Restrictions on Issuing Shares. The exercise of each Option 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, such exercise or the delivery or purchase of shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company. 13. Stock Legend. The employee hereby consents to the imposition of an appropriate stock transfer legend upon the stock issued pursuant to the exercise of the options in a form prescribed by the Company's legal counsel. 14. Covenant of Employee. The Employee hereby covenants that he is currently a bona fide resident of the State of Iowa. 15. 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, IA 50309. Notices sent to the Employee shall be addressed to the Employee at his address as it appears in the Company's regular records. 16. Terms. Those terms defined in the Brenton Banks, Inc. Non Qualified Stock Option Plan or the Administrative Rules adopted thereunder shall have the same meanings when used in this Agreement. 17. Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Employee with respect to this Agreement. 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 Employee. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. BRENTON BANKS, INC. By___________________________________ EMPLOYEE OPTION HOLDER _____________________________________ AMENDMENT NO. 1 TO 1987 STOCK OPTION PLAN STOCK OPTION AGREEMENT THIS AMENDMENT NO. 1 TO 1987 STOCK OPTION PLAN STOCK OPTION AGREEMENT ("Amendment") made and entered into as of this _____________________ day of _________________, 1988, by and between Brenton Banks, Inc., an Iowa corporation ("Company") and _____________________, an employee of the Company or of a subsidiary ("Employee"). RECITALS: The Company and the Employee entered into a Stock Option Agreement dated ____________________________ ("Agreement") and the Company and the Employee wish to amend the Agreement as set forth herein. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Paragraph 4 of the Agreement is hereby amended by adding the following subparagraph 4 to subparagraph C: "(4) Should the Company be sold, merged or consolidated with another company for whatever reason, and by whatever means, then all outstanding options which have not yet become exercisable, shall become immediately exercisable to the Optionee upon the date of such sale or merger transaction." 2. All other terms and conditions of the Agreement shall remain in full force and effect. Brenton Banks, Inc. By:____________________________ Employee Option Holder _______________________________ EX-10.6 8 Exhibit 10.6 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1994, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreement and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 120 EX-10.7 9 Exhibit 10.7 Long-Term Stock Compensation Plan, Agreements and related documents, effective for 1993, under which certain of the Company's senior officers and bank presidents are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1993. 121 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 are eligible to receive shares of Brenton Banks, Inc. stock based upon their service to the Company and Company performance. This Long-Term Stock Compensation Plan, Agreements and related documents are incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. 122 EX-10.9 11 Exhibit 10.9 Standard Agreement for Advances, Pledge and Security Agreement between Brenton Banks 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, 1993. 123 EX-10.10 12 Exhibit 10.10 Short-term note with American National Bank & Trust Company of Chicago as of April 30, 1997 setting forth the terms of the Parent Company's $2,000,000 short-term debt agreement. 124 American National Bank and Trust Company of Chicago 33 North LaSalle Street/Chicago, Illinois 60690/(312) 661-5000 April 30, 1997 Brenton Banks, Inc. Capital Square 400 Locust Des Moines, Iowa 50304 Gentlemen: This letter will replace the previous Letter Agreement regarding the negative pledge on Brenton Bank stock dated April 30, 1996. This letter is in reference to the certain Promissory Note (Unsecured) dated April 30, 1997, both by Brenton Banks, Inc. ("Brenton") in favor of American National Bank and Trust Company of Chicago ("ANB") in connection with a commitment in the amount of Two Million and 00/100 Dollars to be extended by ANB to Brenton and any subsequent renewals and modification ("Commitment"). In consideration of ANB providing the Commitment, Brenton hereby covenants that it will not create, assume or suffer to exist, any Lien upon the stock of a Subsidiary bank. For the purpose of this Letter Agreement, the following definitions shall apply: "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction). "Subsidiary" shall mean a corporation with respect to which more than 50% of the outstanding shares of stock of each class having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) is at the time owned by Brenton or by one or more Subsidiaries of Brenton. Page 2 If the foregoing correctly states your understanding of our agreement, please execute the enclosed copy of the Letter Agreement in the space indicated and return it to Pam Katsules, Officer of ANB. American National Bank and Trust Company of Chicago By: ____________________________ Its:____________________________ Accepted and agreed to this 30th day of April, 1997. Brenton Banks, Inc. an Iowa corporation By: /s/ Steven T. Schuler Its: CFO/Treasurer/Secretary American National Bank and Trust Company of Chicago PROMISSORY NOTE (UNSECURED) $2,000,000.00 Chicago, Illinois April 30, 1997 Due April 30, 1998 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 Two 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 ("Borrowers Liabilities") shall be due and payable on April 30, 1998. This Note restated and replaces a Promissory Note (Unsecured) in the principal amount of $2,000,000.00, dated April 30, 1996 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 0.00% per annum (computed on the basis of a 360-day year and actual days elapsed) in excess of 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 sum 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, 1997 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 Page 1 of 3 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 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 Page 2 of 3 IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 400 Locust, Box 961 Brenton Banks, Inc. Des Moines, Iowa 50304 an Iowa corporation By: /s/ Steven T. Schuler FEIN Its: CFO/Treasurer/Secretary Page 3 of 3 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. 130 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. 131 EX-10.13 15 Exhibit 10.13 Adoption Agreement #003 - Nonstandardized Code Section 401(k) Profit Sharing Plan, effective November 14, 1996. This Adoption Agreement #003 is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1996. 132 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, 1993. 133 EX-10.15 17 Exhibit 10.15 Indenture Agreement with respect to Capital Notes dated April 14, 1992. 134 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 1 4 , 1 9 9 2 INDENTURE AGREEMENT THIS INDENTURE AGREEMENT is made as of the 14th day of April, 1992, 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 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. 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 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: 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; 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. 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. 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 14th day of April, 1992. BRENTON BANKS, INC. BANKERS TRUST COMPANY By /s/ By /s/ Junius C. Brenton, Bryan Hall, Trust Officer President ATTEST: By /s/ Steven T. Schuler, Chief Financial Officer and Vice President/Treasurer/Secretary STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 21st day of April, 1992, before me, a Notary Public in and for Polk County, Iowa, personally appeared Junius C. Brenton, President, and Steven T. Schuler, Chief Financial Officer and Vice President/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/Vice President/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/ Judith L. Nichville, Notary Public in and for Polk County STATE OF IOWA ) ) ss. COUNTY OF POLK ) On this 13th day of April, 1992, 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/ Nancy J. Anderson, Notary Public in and for Polk County Seal. 6.00% Capital Notes Series G-20 through G-31 Due 1996 through 2007 6.25% Capital Notes Series Q-21 through Q-31 Due 1996 through 2007 6.50% Capital Notes Series J-20 through J-31 Due 1996 through 2007 6.75% Capital Notes Series K-20 through K-31 Due 1996 through 2007 7.00% Capital Notes Series M-20 through M-31 Due 1996 through 2007 7.25% Capital Notes Series N-20 through N-31 Due 1996 through 2007 7.50% Capital Notes Series R-20 through R-31 Due 1996 through 2007 7.75% Capital Notes Series T-20 through T-31 Due 1996 through 2007 8.00% Capital Notes Series U-20 through U-31 Due 1996 through 2007 8.25% Capital Notes Series V-20 through V-31 Due 1996 through 2007 8.50% Capital Notes Series W-20 through W-31 Due 1996 through 2007 8.75% Capital Notes Series X-20 through X-31 Due 1996 through 2007 9.00% Capital Notes Series Y-20 through Y-31 Due 1996 through 2007 9.25% Capital Notes Series B-20 through B-31 Due 1996 through 2007 9.50% Capital Notes Series A-20 through A-31 Due 1996 through 2007 9.75% Capital Notes Series C-20 through C-31 Due 1996 through 2007 10.00% Capital Notes Series D-20 through D-31 Due 1996 through 2007 10.25% Capital Notes Series E-20 through E-31 Due 1996 through 2007 10.50% Capital Notes Series F-20 through F-31 Due 1996 through 2007 10.75% Capital Notes Series H-20 through H-31 Due 1996 through 2007 11.00% Capital Notes Series I-20 through I-31 Due 1996 through 2007 11.25% Capital Notes Series L-20 through L-31 Due 1996 through 2007 11.50% Capital Notes Series O-20 through O-31 Due 1996 through 2007 11.75% Capital Notes Series S-20 through S-31 Due 1996 through 2007 12.00% Capital Notes Series Z-20 through Z-31 Due 1996 through 2007 12.25% Capital Notes Series P-20 through P-31 Due 1996 through 2007 12.50% Capital Notes Series SS-20 through SS-31 Due 1996 through 2007 12.75% Capital Notes Series AA-20 through AA-31 Due 1996 through 2007 13.00% Capital Notes Series BB-20 through BB-31 Due 1996 through 2007 13.25% Capital Notes Series CC-20 through CC-31 Due 1996 through 2007 13.50% Capital Notes Series DD-20 through DD-31 Due 1996 through 2007 13.75% Capital Notes Series EE-20 through EE-31 Due 1996 through 2007 14.00% Capital Notes Series FF-20 through FF-31 Due 1996 through 2007 M 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 14, 1992, 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 President, or other 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 or Vice Chairman or President) ATTEST: ______________________________________ (Secretary or Assistant Secretary or Treasurer or Assistant Treasurer) 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. 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. 152 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. 153 EX-10.18 20 Exhibit 10.18 Indenture Agreement with respect to Capital Notes dated April 8, 1994. This Indenture Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 154 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. 155 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. 156 EX-10.21 23 Exhibit 10.21 Indenture Agreement with respect to Capital Notes dated April 23, 1997. 157 This Indenture Agreement contains the same terms, conditions and provisions as set forth in the Indenture Agreement dated April 10, 1995 (Exhibit 10.21, which is incorporated by reference from Form 10-K of Brenton Banks, Inc., for the year ended December 31, 1995), except for series number, maturity date and date executed. 158 EX-10.22 24 Exhibit 10.22 Split Dollar Insurance Agreement between the Company, William H. Brenton Crummy Trust and William H. Brenton Crummy Trust II, dated November 23, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 159 EX-10.23 25 Exhibit 10.23 Split Dollar Insurance Agreement between the Company and Brenton Life Insurance Trust for the benefit of C. Robert Brenton, dated August 12, 1994. This Split Dollar Insurance Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for year ended December 31, 1994. 160 EX-10.24 26 Exhibit 10.24 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. 161 EX-10.25 27 Exhibit 10.25 Agreement between Robert L. DeMeulenaere and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 162 EX-10.26 28 Exhibit 10.26 Agreement between Larry A. Mindrup and the Company regarding the change in control arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1994. 163 EX-10.27 29 Exhibit 10.27 Agreement between Norman D. Schuneman and the Company regarding the change in control of arrangements, dated December 31, 1994. This Agreement is incorporated by reference from Form 10-K of Brenton Banks, Inc. for the year ended December 31, 1995. 164 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. 165 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. 166 EX-11 32 Exhibit 11 Statement of computation of earnings per share. 167 Statements re: Computation of Earnings Per Share Brenton Banks, Inc.
December 31, 1997 1996 1995 Basic EPS Computation Numerator: Net income $ 18,010,107 $ 14,015,430 $ 10,407,354 Denominator: Average common shares outstanding 17,504,716 18,091,614 18,569,224 Basic EPS $ 1.03 $ 0.78 $ 0.56 Diluted EPS Computation Numerator: Net income $ 18,010,107 $ 14,015,430 $ 10,407,354 Denominator: Average common shares outstanding 17,504,716 18,091,614 18,569,224 Average stock options 283,912 160,792 140,501 Average long-term stock compensation plan 140,154 195,527 192,854 17,928,782 18,447,933 18,902,579 Diluted EPS $ 1.01 $ 0.76 $ 0.55 Note: Amounts are restated for the 2-for-1 stock split effective February 1998 and the 10% common stock dividends effective in 1997 and 1996.
168 EX-12 33 Exhibit 12 Statement of computation of ratios. 169 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, 1997 1996 1995 Return on average total assets: Net income (before deduction of minority interest) $ 18,753 14,618 11,058 * divided by * Average assets $ 1,649,469 1,582,894 1,561,226 Ratio 1.14% 0.92% 0.71% Return on average common stockholders' equity: Net income $ 18,010 14,015 10,407 * divided by * Average common stockholders' equity $ 124,491 119,170 115,183 Ratio 14.47% 11.76% 9.04% Common dividend payout ratio: Cash dividends per share $ 0.273 0.207 0.186 * divided by * Net income per share - diluted $ 1.01 0.76 0.55 Ratio 27.03% 27.24% 33.82% Average equity to average assets: Average equity $ 124,491 119,170 115,183 * divided by * Average assets $ 1,649,469 1,582,894 1,561,226 Ratio 7.55% 7.53% 7.38% Equity to assets ratio: Common stockholders' equity excluding unrealized gains (losses) on assets available for sale $ 126,159 120,877 118,175 * divided by * Total assets excluding unrealized gains (losses) on assets available for sale $ 1,715,264 1,631,018 1,581,421 Ratio 7.36% 7.41% 7.47%
170
December 31, 1997 1996 1995 Tier 1 leverage capital ratio: Common stockholders' equity excluding unrealized gains (losses) on assets available for sale $ 126,159 120,877 118,175 Minority interest 4,859 4,615 4,434 Less: intangibles (2,087) (2,704) (5,282) Less: minimum MSR's to be deducted --- (115) --- Tier 1 capital $ 128,931 122,673 117,327 * divided by * Quarterly average total assets excluding unrealized gains (losses) on assets available for sale 1,692,176 1,613,223 1,582,779 Less: intangibles (2,087) (2,704) (5,282) Less: minimum MRS's to be deducted --- (115) --- Tier 1 assets $ 1,690,089 1,610,404 1,577,497 Ratio 7.63% 7.62% 7.45% Primary capital to assets: Common stockholders' equity excluding unrealized gains (losses) on assets available for sale $ 126,159 120,877 118,175 Minority interest 4,859 4,615 4,434 Allowance for loan losses 12,732 11,328 11,070 Primary capital $ 143,750 136,820 133,679 * divided by * Total assets excluding unrealized gains (losses) on assets available for sale $ 1,715,264 1,631,018 1,581,421 Allowance for loan losses 12,732 11,328 11,070 Allowable assets $ 1,727,996 1,642,346 1,592,491 Ratio 8.32% 8.33% 8.40% Net Noninterest Margin: Noninterest income $ 27,506 23,327 17,847 Less: Securities gains (losses) 494 321 (3) Less: Noninterest expense 57,699 56,091 55,051 Net noninterest income $ (30,687) (33,085) (37,201) * divided by * Year-to-date average assets $ 1,649,469 1,582,894 1,561,226 Ratio -1.86% -2.09% -2.38%
171
December 31, 1997 1996 1995 Efficiency Ratio: Noninterest expense $ 57,699 56,091 55,051 * divided by * Noninterest income 27,506 23,327 17,847 Less: Securities gains (losses) 494 321 (3) Less: Loan gains (losses) 78 84 (232) T.E. net interest income 63,701 59,238 56,610 Subtotal 90,635 82,160 74,692 Ratio 63.66% 68.27% 73.70%
172 EX-13 34 Exhibit 13 The Appendix to the Proxy for Brenton Banks, Inc. for the 1997 calendar year. 173 BRENTON BANKS, INC. APPENDIX TO THE PROXY STATEMENT FISCAL YEAR 1997 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 Notes to Consolidated Financial Statements 17 Management's Report 31 Independent Auditors' Report 31 Stock Information 32 Corporate Structure 33 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 46 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 our own proprietary mutual funds. The Company's stock trades on the NASDAQ national market under the symbol BRBK.
BRENTON BANKS, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS 1997 1996 1995 Operating Results Net interest income $ 60,133,764 56,052,142 53,332,143 Provision for loan losses 3,900,000 2,900,000 1,864,801 Total noninterest income 27,505,789 23,327,441 17,846,740 Total noninterest expense 57,698,564 56,090,571 55,051,267 Income before income taxes and minority interest 26,040,989 20,389,012 14,262,815 Net income 18,010,107 14,015,430 10,407,354 Per Common Share* Net income-basic $ 1.03 .78 .56 Net income-diluted 1.01 .76 .55 Cash dividends .273 .207 .186 Book value, including unrealized gains (losses)** 7.46 6.86 6.46 Book value, excluding unrealized gains (losses)*** 7.28 6.80 6.38 Closing bid price 19.63 12.56 8.78 At December 31 Assets $1,718,483,797 1,632,095,082 1,582,779,320 Loans 993,189,110 941,943,513 910,193,212 Nonperforming loans 6,712,000 6,167,000 5,619,000 Deposits 1,364,270,491 1,353,057,111 1,361,942,715 Common stockholders' equity** 129,379,299 121,954,229 119,533,631 Ratios Return on average common stockholders' equity (ROE)** 14.47% 11.76 9.04 Return on average assets (including minority interest) (ROA) 1.14 .92 .71 Net interest margin 4.16 4.03 3.89 Net noninterest margin (1.86) (2.09) (2.38) Efficiency ratio 63.66 68.27 73.70 Loan to deposit ratio 72.80 69.62 66.83 Allowance for loan losses to total loans 1.28 1.20 1.22 Primary capital to assets*** 8.32 8.33 8.40 Equity to assets*** 7.36 7.41 7.47 Tier 1 leverage capital ratio*** 7.63 7.62 7.45 Nonperforming loans as a percent of loans .68 .65 .62 Net charge-offs as a percent of average loans .26 .29 .18 Allowance for loan losses as a percent of nonperforming loans 189.69 183.69 197.01 * Restated for the 2-for-1 stock split effective February 1998 and the 10% common stock dividends effective in 1997 and 1996. ** Including unrealized gains (losses) on securities available for sale. *** Excluding unrealized gains (losses) on securities available for sale.
Management's Discussion and Analysis For 1997, Brenton Banks, Inc. and Subsidiaries (the "Company") reported net income of $18,010,107 compared to 1996 earnings of $14,015,430. Capital Resources Common stockholders' equity totaled $129,379,299 as of December 31, 1997, a 6.1 percent increase from the prior year. In January 1998, the Board of Directors (the "Board") declared a 2-for-1 stock split for holders of record as of February 10, 1998, payable February 20, 1998. As a result of this action, each shareholder received one additional share of common stock for each share outstanding. The par value of the stock was reduced from $5.00 to $2.50 and authorized shares were increased to 50 million. In May 1997, 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 and the 10 percent common stock dividend. Cash dividends for 1997 totaled $4,781,675, or $.273 per common share, which represents an increase of 31.9 percent over 1996 dividends of $.207 per share. The dividend payout ratio for 1997 was 27.0 percent of earnings per share. As part of the Company's ongoing stock repurchase plan, 695,480 shares of common stock (restated for the 2-for-1 stock split) were repurchased during 1997 at a cost of $10,014,087. Since the inception of the plan in 1994, the Company has repurchased 1,996,746 shares at a total cost of $23,943,479. The Board has extended this plan for 1998 by authorizing up to an additional $10 million for stock repurchase. 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, 1997, was 10.88 percent and the total risk-based capital ratio was 11.95 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 7.63 percent at December 31, 1997, 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 7.8 percent at December 31, 1997, compared to 9.2 percent at the end of 1996. The Parent Company's $2 million line of credit with a regional bank was unused throughout 1997. Long-term borrowings of the Parent Company at December 31, 1997, consisted entirely of $10,112,000 of capital notes. Brenton Banks, Inc. common stock closed on December 31, 1997, at a bid price of $19.63, an increase of 56.3 percent over the prior year-end. The closing price at December 31, 1997, was 263.1 percent of the book value per share of $7.46. The year-end stock price represented a price-to-1997-diluted- earnings multiple of 19.4 times. Brenton Banks, Inc. continues to pursue acquisition and expansion opportunities which will fit the strategic direction of the company and enhance the financial performance of the Company as well as strengthen the Company's presence in current and new markets. There are currently no pending acquisitions that would require Brenton Banks, Inc. to secure capital from public or private markets. Forward-Looking Information Forward-looking information relating to the financial results or strategies of the Company are 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, 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. 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 1997 changed when compared to 1996. 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 1997 net interest income) for projected hypothetical changes in market interest rates. As shown in the table, the Company's net interest income is more sensitive in a 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 at December 31, 1997 and assumed in the projection of net interest income are not material. The Company entered into an interest rate floor contract at the end of 1997 to mitigate the effect falling interest rates would have on certain deposit accounts with contracted minimum interest rates. 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.
Change in net interest income due to projected hypothetical changes in market interest rates: _________________________________________________________ Assumed changes in market rates 1998 1999 2000 _______________ ____ ____ ____ -300 bps -4.8% -10.8% -14.1% -200 bps -3.5% -8.3% -10.9% -100 bps -2.1% -4.6% -6.2% Flat -0.5% -1.4% -2.0% +100 bps 0.6% 1.6% 2.3% +200 bps -1.7% 0.3% 2.3% +300 bps -3.6% -0.4% 3.0% (Changes in hypothetical interest rates are assumed to be instantaneous and sustained parallel shifts in the yield curve.)
Asset/Liability Management The Company 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 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 net interest margin fluctuates in a narrow range during periods of changing interest rates. The Company currently believes that net interest income would fall by less than 5 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 LIBOR curve, the better the prospects for net interest income improvement. This curve is very flat at this time. 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 will consider securitization of real estate loans. The Company continues to focus on reducing interest rate risk by emphasizing growth in variable rate loans. In addition to normal balance sheet instruments, the Company has utilized Federal Home Loan Bank advances and interest rate swaps to reduce interest rate risk. Liquidity The Company actively monitors and manages its liquidity position with the objective of maintaining sufficient cash flows to fund operations and meet customer commitments. Federal funds sold, loans held for sale and 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. Federal funds sold and assets available for sale comprised 30.0 percent of the Company's total assets at December 31, 1997. Net cash provided from operations of the Company is another major source of liquidity and totaled $8,523,584 in 1997, $25,015,045 in 1996 and $8,388,374 in 1995. 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 result in a low dependence on volatile liabilities. At December 31, 1997, the Company had advances of $100,250,000 from the Federal Home Loan Bank ("FHLB") of Des Moines, of which $90,250,000 were used as a means of providing long-term, fixed-rate funding for certain fixed-rate assets and managing interest rate risk. The remaining $10,000,000 represents an advance on a variable rate, short-term $10,000,000 line of credit used to fund mortgage loans originated for sale. The Company had additional borrowing capacity available from the FHLB of approximately $22 million at December 31, 1997. 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, 1997. The Parent Company had sufficient cash flow and liquidity at December 31, 1997. The primary funding source for the Parent Company is dividends from its subsidiaries. Dividends of approximately $15 million were available to be paid to the Parent Company by subsidiary banks without reducing capital ratios below regulatory minimums. At the end of 1997, the Parent Company had $3.6 million of interest-bearing deposits with banks, a $2 million unused line of credit, as well as additional borrowing capacity. Results of Operations - 1997 Compared to 1996 Net Income For the year ended December 31, 1997, Brenton Banks, Inc. recorded net income of $18,010,107, an increase of 28.5 percent over 1996, which totaled $14,015,430. Diluted earnings per common share were $1.01 compared to $.76 for 1996. Return on average assets (ROA) was 1.14 percent in 1997, compared to .92 percent in 1996. The return on average equity (ROE) was 14.47 percent, compared to 11.76 percent one year earlier. Net Interest Income Net interest income rose 7.3 percent to $60,133,764 for 1997. The increase in net interest income is directly attributable to both favorable rate and volume variances. Average earning assets increased 4.3 percent over 1996 while average interest-bearing liabilities increased 4.0 percent. The average rate earned on earning assets increased 15 basis points, while the average rate paid on interest-bearing liabilities increased only 4 basis points. The net interest spread, which is the difference between the rate earned on assets and the rate paid on liabilities, rose to 3.69 percent from 3.58 percent last year. Net interest margin, which is tax equivalent net interest income as a percentage of average earning assets, averaged 4.16 percent in 1997 compared to 4.03 percent in 1996. To improve net interest margin and lessen interest rate risk, the Company continued its strategy of de-emphasizing portfolio real estate loans and developing more commercial, agricultural, business and consumer loans. Loan Quality Loan quality remains strong with nonperforming loans at December 31, 1997 totaling $6,712,000 or .68 percent of loans. This compares to .65 percent at December 31, 1996, or $6,167,000. Nonperforming loans include loans on nonaccrual status, loans that have been renegotiated to below market interest rates or terms, and loans past due 90 days or more. The allowance for loan losses, which totaled $12.7 million, represented 189.69 percent of nonperforming loans at the end of 1997, compared to 183.69 percent one year ago. The provision for loan losses totaled $3,900,000 for the year ended December 31, 1997, compared to $2,900,000 for 1996. The increase in the provision of $1,000,000 is primarily related to the $50.5 million increase in average loans outstanding during 1997 and projected future loan growth. The Company's net charge-offs as a percent of average loans were .26 percent for 1997 compared to .29 percent for 1996, both of which were better than historical industry peer group averages. Loan losses for 1997 were primarily concentrated in the consumer loan portfolio. Loan quality control and risk management are carefully 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 routinely by internal loan review personnel, as well as by regulatory examiners. The allowance for loan losses represents a reserve available to absorb estimated possible future loan losses within the loan portfolio. 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 lending officers and internal loan review personnel. Using the Company's standard evaluation process, individual loan officers evaluate loan characteristics, the borrower's financial condition and collateral values and rate all loans on a 1 to 8 rating scale. From these assessments, the Reserve Adequacy Committee performs quarterly reviews of the loan portfolio quality, quantifies the results and reviews the calculations of the required allowance for loan losses. In addition, the Reserve Adequacy Committee approves charge-offs and reviews subsequent collection action plans for problem credits. Management believes the allowance for loan losses at December 31, 1997, was sufficient to absorb potential loan losses within the portfolio. Net Noninterest Margin To measure operating efficiency, the Company 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 1997, the net noninterest margin improved to (1.86) percent compared to (2.09) percent in 1996. Another ratio that the Company utilizes to measure productivity is the efficiency ratio. This ratio divides noninterest expense by the sum of tax-equivalent net interest income plus noninterest income (excluding gains and losses on the sale of securities and loans). For the year ended December 31, 1997, the Company's efficiency ratio was 63.66 percent, compared to 68.27 percent one year ago. To enhance operating efficiency throughout the organization, the Company continues to focus on cost management and the development of strategic improvements in noninterest income and expense. Noninterest Income The Company achieved record levels of noninterest income in 1997. For 1997, total noninterest income (excluding securities transactions) increased 17.4 percent to $27,011,967 from $23,006,185 one year ago. Noninterest income (excluding securities gains and losses) for 1997 represented 1.6 percent of average assets and 31.0 percent of total operating income, which were the highest levels in the history of the Company. All categories of noninterest income, except insurance commissions and fees, reflect strong growth from the prior year. Service charges on deposit accounts increased 8.6 percent in 1997 to $7,290,765. This growth related to a continued focus on collecting a higher percentage of fees assessed and increased sales of fee-generating accounts, particularly commercial accounts. Investment brokerage commissions totaled $4,808,048 for 1997, an increase of 27.7 percent over the 1996 total of $3,766,436. Strong financial markets and successful new sales initiatives drove the increase in this category. Mortgage banking income totaled $3,274,215 for 1997 compared to $2,168,593 in 1996, an increase of 51.0 percent. This increase is attributable to a higher volume of real estate mortgage loan originations, which totaled $179.1 million compared to $110.8 million in 1996. Fiduciary revenues climbed 14.3 percent to $3,136,078 in 1997 compared to $2,744,530 in 1996. This increase in revenue is due to increased volumes of personal trusts, investment management fees and employee benefit plan fees. Insurance commissions and fees declined 3.8 percent to $2,803,983 in 1997 due to the sale of the Company's insurance agency in Marshalltown, Iowa. The Company is committed to the insurance business but desires to grow its insurance operations through other distribution channels. The decrease in property and casualty commission income due to the agency sale was largely off-set by a 68.8 percent increase in credit-related insurance commissions. The significant increase was due to the strong increase in direct consumer lending and increased sales efforts during 1997. Other service charges and fees increased 23.8 percent to $3,441,454 in 1997 compared to 1996 due to increases from letters of credit fees, fees received from purchased receivables and real estate commissions. Other operating income increased by $338,840 from one year ago. The increase was due to income from bank-owned life insurance policies which did not exist until December 1996 and a gain on the sale of the Company's insurance agency as discussed above. Several one-time revenue items also affected this category in 1996. Securities transactions produced an additional increase in noninterest income. Securities gains of $493,822 were recorded in 1997 versus gains of $321,256 in 1996. The growth in various noninterest income categories has enabled the Company to reach targeted levels of total income. The Company will continue to focus on generating fee income by providing a broad array of financial products and services to our clients. The continued growth rate of fee income could be vulnerable to future economic conditions and competition by other financial institutions that cannot be estimated by the Company. Noninterest Expense Total noninterest expense increased only 2.9 percent in 1997 to $57,698,564 from $56,090,571 one year ago. Exclusive of a one-time special assessment by the FDIC totaling $1,288,000 in 1996, noninterest expense increased 5.3 percent. Compensation, the largest component of noninterest expense, increased $1,363,843, or 5.4 percent, over 1996. This increase is primarily related to commissions and incentives paid on higher sales of the fee-related products discussed above, and expense tied to bonuses and a stock performance plan which were both directly related to higher 1997 earnings and the Company's advancing stock price. Fixed salaries, those that are not based on commissions, which comprised 67.5 percent of total compensation expense, actually decreased by 3.8 percent compared to 1996. The number of full-time equivalent employees decreased by .2 and 3.8 percent at December 31, 1997, and 1996, respectively. The total increase in compensation expense led to a proportionate increase in employee benefits. The Company has adopted a pay for performance philosophy and is focusing more on variable compensation tied to performance. Occupancy expense totaled $5,609,600 for 1997, compared to $5,502,904 for 1996, an increase of 1.9 percent. The increase was primarily related to building repairs and maintenance. Depreciation expense declined slightly and lease expense increased due to the sale and relocation of one facility in late 1996. Furniture and equipment expense declined to $3,634,336, a 2.4 percent reduction from the prior year. Decreases in furniture and equipment depreciation, repairs and maintenance, and furniture and equipment rentals more than offset an increase in depreciation expense for technology-related equipment. The Company continues to focus on using technology to improve efficiency and provide better service to our clients. Data processing expense increased $258,910, or 10.0 percent, due to increased costs during 1997 associated with contracted core processing. Expense related to the FDIC deposit assessments declined $1,520,230 from 1996 to $281,416. Last year's expense included the previously-discussed, one- time $1,288,000 special assessment to fully fund SAIF. The Company continues to pay the lowest premiums available under the FDIC's risk-based premium system. Marketing and supplies expenses declined 22.5 and 15.2 percent, respectively, for 1997. These cost reductions were the result of concerted efforts to minimize the growth of overall noninterest expense and renegotiating pricing with various vendors. Also, 1996 supplies expense included one-time charges related to the 1995 merger of the commercial banks. Other operating expenses increased by $2,040,604, or 21.3 percent, when comparing 1997 results to 1996. The increase was primarily due to increases in check processing expense, consulting and legal fees and miscellaneous losses. The "Year 2000 Issue", which has received much recent media coverage, is a top priority for Brenton. The Company's core loan and deposit applications are ALLTEL Information Services, Inc. ("ALLTEL") products and Brenton outsources the data processing function to ALLTEL. Brenton and ALLTEL are working in partnership to address the Year 2000 issues of the core application programs as well as all other computer software programs used in the Company. The incremental expense associated with becoming Year 2000 compliant is not anticipated to be material. However, there is an opportunity cost associated with this project in that the people involved are regular Brenton and ALLTEL employees who would normally be spending their time on other projects. There will be benefits as a result of this project because systems are being improved in addition to becoming Year 2000 compliant. The Company has a Year 2000 Committee and Plan in place and has been executing on that plan. The Company expects to have all core application systems Year 2000 compliant by the end of 1998 and all other software products compliant by early 1999, with further testing to take place throughout the remainder of 1999. The Company continues to focus on cost management and evaluates all major expense items in an effort to control the growth rate of noninterest expenses. Income Taxes The Company's income tax strategies include reducing income taxes by purchasing securities and originating loans that produce tax-exempt income. The goal is to maintain the maximum level of tax-exempt assets in order to benefit the Company on both a tax-equivalent yield basis and in income tax savings. The effective rate of income tax expense as a percent of income before income tax and minority interest was 28.0 percent for 1997 compared to 28.3 percent for 1996. Results of Operations - 1996 Compared to 1995 Net Income For the year ended December 31, 1996, Brenton Banks, Inc. recorded net income of $14,015,430, an increase of 34.7 percent over 1995, which totaled $10,407,354. Diluted earnings per common share were $.76 compared to $.55 for 1995. Return on average assets (ROA) was .92 percent in 1996, compared to .71 percent in 1995. The return on average equity (ROE) was 11.76 percent, compared to 9.04 percent one year earlier. Net Interest Income Net interest income rose 5.1 percent to $56,052,142 for 1996. Both average earning assets and average interest-bearing liabilities increased 1.0 percent from 1995. The Company experienced a favorable change in the mix of earning assets and interest-bearing liabilities which contributed to an increase in net interest margin of 14 basis points over 1995. The average rate earned on earning assets declined 6 basis points, while the average rate paid on interest-bearing liabilities declined 23 basis points. The net interest spread rose to 3.58 percent from 3.41 percent last year. Net interest margin averaged 4.03 percent in 1996 compared to 3.89 percent in 1995. Loan Quality Loan quality was strong in 1996 with nonperforming loans at December 31, 1996, totaling $6,167,000 or .65 percent of loans. This compares to .62 percent at December 31, 1995, or $5,619,000. The majority of the increase in nonperforming loans was related to two loans that were restructured within the commercial loan portfolio. The allowance for loan losses, which totaled $11.3 million, represented 183.69 percent of nonperforming loans at the end of 1996, compared to 197.01 percent one year earlier. The provision for loan losses totaled $2,900,000 for the year ended December 31, 1996, compared to $1,864,801 for 1995. The increase of $1,035,199 in provision is primarily related to a $933,535, or 54.7 percent, increase in net loan charge-offs during 1996. The Company's net charge-offs as a percent of average loans were .29 percent for 1996 compared to .18 percent for 1995. Loan losses for 1996 were concentrated in the consumer loan portfolio. Net Noninterest Margin For 1996, the net noninterest margin improved to (2.09) percent compared to (2.38) percent in 1995. At December 31, 1996, the Company's efficiency ratio was 68.27 percent, compared to 73.70 percent in 1995. Noninterest Income For 1996, total noninterest income (excluding securities transactions) increased 28.9 percent to $23,006,185 from $17,849,743 one year earlier. Noninterest income (excluding securities gains and losses) for 1996 represented 1.45 percent of average assets and 29.10 percent of total operating income. All categories of noninterest income reflect strong gains from the prior year. Service charges on deposit accounts rose 21.0 percent in 1996 compared to 1995. This growth related to full implementation of standardized service charges as well as a new focus on collecting a higher percentage of fees assessed. Investment brokerage commissions totaled $3,766,436 for 1996, an increase of 23.7 percent over the 1995 total of $3,044,107. Strong financial markets and successful new sales initiatives drove the increase in this category. Insurance commissions and fees increased 24.6 percent to $2,915,666 in 1996 due primarily to higher sales of both credit-related insurance and insurance agency operations. Mortgage banking income totaled $2,168,593 for 1996 compared to $1,427,342 in 1995, an increase of 51.9 percent. This increase was attributable to a higher volume of real estate mortgage loan originations, which totaled $110.8 million, and a greater percentage of loans being sold into the secondary market with the servicing rights being retained. Fiduciary income rose 13.2 percent to $2,744,530 in 1996 compared to $2,425,105 in 1995. This increase in revenue was related to increased volumes of personal trusts, investment management fees and employee benefit plans. Other operating income increased by $1,288,140 when comparing 1996 to 1995. Gains on the sale of loans of $83,440 were recorded in 1996 versus losses in 1995 of $232,454. Several one-time revenue items affected this category in both periods. Securities transactions produced an additional increase in noninterest income. Securities gains of $321,256 were recorded in 1996 versus losses of $3,003 in 1995. Noninterest Expense Total noninterest expense increased 1.9 percent in 1996 to $56,090,571 from $55,051,267 in 1995. Noninterest expense for 1996 included a nonrecurring charge for a special assessment by the FDIC. This assessment was based upon all deposits insured by the Savings Association Insurance Fund (SAIF) as of March 31, 1995, and equaled approximately 65.7 basis points per $100 of SAIF-insured deposits. Brenton's assessment was $1,288,000. Excluding this one-time assessment, noninterest expense would have actually decreased by .5 percent. Compensation, the largest component of noninterest expense, increased $2,645,244 or 11.6 percent over 1995. This increase was primarily related to commissions paid on higher sales of fee-related products, expense tied to a stock performance plan and severance costs. Fixed salaries actually decreased by 6.6 percent. The number of full-time equivalent employees decreased by 3.8 percent and 13.6 percent at December 31, 1996 and 1995, respectively. The total increase in compensation expense led to a proportionate increase in employee benefits. Several new facilities and remodeling projects were completed in 1996 and 1995, which explains the combined increase in the categories of occupancy and furniture and equipment expense. Occupancy expense totaled $5,502,904 for 1996, compared to $4,912,417 for 1995. Increases within the occupancy category were associated with rents, leases and depreciation expense related to these new facilities. Results for 1996 included the first full year of expense for these new facilities. Furniture and equipment expense decreased $21,871 from the prior year. Depreciation expense increased by $197,130 due to technology updates throughout the Company. Decreases in repairs and maintenance, and furniture and equipment rentals offset the increase in depreciation expense. During 1996, 62.8 percent of the Company's capital expenditures were in the technology area. Data processing expense totaled $2,591,485, an increase of 8.9 percent compared to 1995. This increase was related to new data servicing contracts in 1996 for mortgage loan processing and personal computer network maintenance and support. The expense associated with core main frame processing actually decreased which offset the cost of the new contracts. Expense related to the FDIC deposit assessments increased 1.0 percent in 1996 to $1,801,646, which includes the previously-discussed, one-time $1,288,000 special assessment to fully fund SAIF. This assessment related to the deposits insured by SAIF, which represented approximately 16.4 percent of the Company's total deposits at the end of 1996. Other operating expenses decreased $2.6 million, or 21.2 percent, when comparing 1996 results to 1995. This decline was the result of benefits derived in 1996 from the 1995 merger of the Company's 13 commercial banks into one bank charter, cost control measures and one time costs incurred in 1995. Income Taxes The Company's income tax strategies include 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 28.3 percent for 1996 compared to 22.5 percent for 1995.
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED AVERAGE BALANCES AND RATES Average Balances (In thousands) 1997 1996 1995 1994 1993 Assets: Cash and due from banks $ 58,681 65,439 57,138 46,301 46,025 Interest-bearing deposits with banks 2,460 1,393 1,076 124 762 Federal funds sold and securities purchased under agreements to resell 31,472 26,188 39,763 37,666 23,725 Trading account securities 12 --- --- 116 --- Investment securities: Available for sale-taxable 348,232 330,002 244,786 245,913 53,174 Available for sale-tax-exempt 99,868 85,471 100,859 132,040 --- Held to maturity-taxable 12,700 46,271 65,959 35,794 299,993 Held to maturity-tax-exempt 56,204 51,639 50,235 44,584 164,520 Loans held for sale 10,284 7,983 5,908 2,575 6,165 Loans 970,115 919,578 945,724 936,370 802,088 Allowance for loan losses (12,171) (11,440) (11,166) (10,502) (9,615) Premises and equipment 29,841 31,728 31,436 24,545 23,045 Other 41,771 28,642 29,508 25,663 26,543 __________ _________ _________ _________ _________ $ 1,649,469 1,582,894 1,561,226 1,521,189 1,436,425 Liabilities and Stockholders' Equity: Deposits Noninterest-bearing $ 139,480 131,051 128,770 127,464 119,322 Interest-bearing: Demand* 81,430 376,259 355,819 250,520 217,754 Savings* 551,509 241,250 231,633 294,715 299,640 Time 567,258 583,508 626,497 625,981 622,789 __________ _________ _________ _________ _________ Total deposits 1,339,677 1,332,068 1,342,719 1,298,680 1,228,525 Federal funds purchased and securities sold under agreements to repurchase 78,234 59,276 40,237 62,656 42,715 Other short-term borrowings 53,223 17,295 6,536 4,860 33 Accrued expenses and other liabilities 17,097 17,520 14,896 13,254 12,805 Long-term borrowings 32,056 33,094 37,264 26,500 14,077 __________ _________ _________ _________ _________ Total liabilities 1,520,287 1,459,253 1,441,652 1,404,950 1,329,135 Minority interest in consolidated subsidiaries 4,691 4,471 4,391 4,290 4,150 Common stockholders' equity 124,491 119,170 115,183 111,949 103,140 __________ _________ _________ _________ _________ $ 1,649,469 1,582,894 1,561,189 1,521,189 1,436,425 Summary of Average Interest Rates Average rates earned: Interest-bearing deposits with banks 4.80% 4.87 6.20 6.65 2.88 Trading account securities 4.26 --- --- 6.36 --- Federal funds sold and securities purchased under agreements to resell 5.54 5.41 5.69 4.53 2.05 Investment securities: Available for sale-taxable 6.31 6.08 5.96 5.30 5.28 Available for sale-tax exempt (tax equivalent basis) 7.04 7.13 6.71 6.37 --- Held to maturity-taxable 6.39 6.22 6.17 5.20 5.54 Held to maturity-tax-exempt (tax equivalent basis) 6.72 6.68 8.05 7.70 6.97 Loans held for sale 7.89 8.47 6.71 7.50 8.43 Loans 8.82 8.69 8.69 8.14 8.77 Average rates paid: Deposits 4.11% 4.12 4.37 3.55 3.70 Federal funds purchased and securities sold under agreements to repurchase 4.36 4.17 4.08 3.38 2.41 Other short-term borrowings 5.98 5.87 5.67 5.42 3.63 Long-term borrowings 6.86 7.07 7.03 6.86 8.60 Average yield on interest-earning assets 7.95% 7.80 7.86 7.31 7.57 Average rate paid on interest- bearing liabilities 4.26 4.22 4.45 3.62 3.71 Net interest spread 3.69 3.58 3.41 3.69 3.86 Net interest margin 4.16 4.03 3.89 4.12 4.28 * The variance in average balances between 1997 and 1996 is due to an internal reclassification in late 1996 of certain accounts. The reclassification was implemented to reduce Federal Reserve Bank reserve requirements.
BRENTON BANKS, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA Year-end Balances (In thousands) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 Total assets $1,718,484 $1,632,095 1,582,779 1,581,327 1,480,596 1,431,140 1,360,942 1,274,301 961,370 921,207 Interest-earning assets 1,578,923 1,497,600 1,461,218 475,473 1,400,709 1,323,252 1,267,402 1,181,172 883,721 845,571 Interest-bearing liabilities 1,406,258 1,335,609 1,300,508 1,315,378 1,224,951 1,181,013 1,141,008 1,052,597 769,717 733,133 Noninterest-bearing deposits 161,007 153,284 143,220 136,548 127,132 137,212 115,479 125,626 113,349 118,392 Long-term borrowings 36,662 34,860 38,178 28,939 20,055 13,284 13,634 12,675 14,701 16,215 Preferred stock --- --- --- --- --- --- --- --- --- --- Common stockholders' equity** 129,379 121,954 119,534 110,430 112,418 97,430 86,712 77,258 63,522 56,401 Results of operations (In thousands) Interest income $ 118,239 111,383 111,040 101,223 98,656 106,560 115,561 106,826 85,722 76,745 Interest expense 58,105 55,331 57,708 45,772 44,427 54,773 68,687 64,431 49,102 43,180 Net interest income 60,134 56,052 53,332 55,451 54,229 51,787 46,874 42,395 36,620 33,565 Provision for loan losses 3,900 2,900 1,865 1,988 1,252 1,411 799 869 760 1,214 Net interest income after provision for loan losses 56,234 53,152 51,467 53,463 52,977 50,376 46,075 41,526 35,860 32,351 Noninterest income 27,506 23,327 17,847 16,593 17,863 14,684 12,715 11,554 10,113 10,367 Noninterest expense 57,699 56,090 55,051 56,657 50,415 46,591 42,284 37,820 32,781 32,066 Income before income taxes and minority interest 26,041 20,389 14,263 13,399 20,425 18,469 16,506 15,260 13,192 10,652 Income taxes 7,288 5,771 3,205 2,701 5,508 4,884 4,308 4,388 4,016 2,527 Minority interest 743 603 651 591 667 632 539 533 472 422 Net income 18,010 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,703 Preferred stock dividend requirement --- --- --- --- --- --- --- --- --- 81 Net income available to common stockholders $ 18,010 14,015 10,407 10,107 14,250 12,953 11,659 10,339 8,704 7,622 Average common shares outstanding (In thousands)* 17,505 18,092 18,569 19,095 18,994 18,829 18,773 18,741 17,414 17,414 Per common share* Net income-basic $ 1.03 .78 .56 .53 .75 .69 .62 .55 .50 .44 Net income-diluted 1.01 .76 .55 .52 .74 .68 .61 .55 .49 .44 Cash dividends .273 .207 .186 .182 .165 .145 .134 .113 .091 .048 Common stockholders' equity*** 7.28 6.80 6.38 6.07 5.74 5.15 4.61 4.12 3.65 3.24 Selected operating ratios Return on average assets (including minority interest) 1.14% .92 .71 .70 1.04 .98 .93 .95 1.00 .90 Return on average common stockholders' equity** 14.47 11.76 9.04 9.03 13.82 14.13 14.27 14.39 14.50 14.34 Equity to assets*** 7.36 7.41 7.47 7.28 7.40 6.81 6.37 6.06 6.61 6.12 Common dividend payout 27.03 27.24 33.82 35.00 22.30 21.32 21.97 20.55 18.57 10.91 Allowance for loan losses as a percent of loans 1.28 1.20 1.22 1.12 1.12 1.20 1.14 1.25 1.55 1.60 Net charge-offs to average loans outstanding .26 .29 .18 .10 .05 .13 .15 .12 .08 .18 * Restated for 2-for-1 stock split, effective February 1998, 10% common stock dividends effective in 1997 and 1996, 3-for-2 stock split effective in 1994 and 2-for-1 stock split effective in 1990. ** Including unrealized gains (losses) on securities available for sale. *** Excluding unrealized gains (losses) on securities available for sale.
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION December 31 1997 1996 Assets: Cash and due from banks (note 2) $ 77,468,210 76,900,524 Interest-bearing deposits with banks 1,319,700 731,554 Federal funds sold and securities purchased under agreements to resell 9,300,000 15,200,000 Trading account securities 77,220 --- Investment securities: Available for sale (note 3) 486,653,872 461,099,272 Held to maturity (market value of $69,852,000 and $73,316,000 at December 31, 1997, and 1996, respectively) (note 3) 69,079,622 72,754,985 Investment securities 555,733,494 533,854,257 Loans held for sale 19,303,411 5,870,298 Loans (notes 4, 9 and 10) 993,189,110 941,943,513 Allowance for loan losses (note 5) (12,732,131) (11,328,359) Loans, net 980,456,979 930,615,154 Premises and equipment (notes 6 and 10) 28,898,589 30,379,446 Accrued interest receivable 15,233,682 14,417,786 Other assets (notes 4 and 8) 30,692,512 24,126,063 $ 1,718,483,797 1,632,095,082 Liabilities and Stockholders' Equity: Deposits (note 7): Noninterest-bearing $ 161,007,156 153,284,094 Interest-bearing: Demand 117,664,352 99,277,477 Savings 527,364,856 527,791,360 Time 558,234,127 572,704,180 Total deposits 1,364,270,491 1,353,057,111 Federal funds purchased and securities sold under agreements to repurchase 92,632,576 66,826,120 Other short-term borrowings (note 9) 73,700,000 34,150,000 Accrued expenses and other liabilities 16,980,763 16,633,068 Long-term borrowings (note 10) 36,662,000 34,860,024 Total liabilities 1,584,245,830 1,505,526,323 Minority interest in consolidated subsidiaries 4,858,668 4,614,530 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; 17,334,048 and 16,171,368 shares issued and outstanding at December 31, 1997, and 1996, respectively 43,335,120 40,428,420 Capital surplus --- --- Retained earnings 82,824,333 80,448,768 Unrealized gains on securities available for sale, net 3,219,846 1,077,041 Total common stockholders' equity 129,379,299 121,954,229 $ 1,718,483,797 1,632,095,082 Commitments and contingencies (notes 17 and 18). See accompanying notes to consolidated financial statements.
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31 1997 1996 1995 Interest Income: Interest and fees on loans (note 4) $ 86,020,464 80,301,707 82,525,850 Interest and dividends on investments: Available for sale-taxable 21,969,148 20,063,114 14,577,652 Available for sale-tax-exempt 4,929,898 4,250,463 4,446,824 Held to maturity-taxable 811,729 2,878,982 4,069,617 Held to maturity-tax-exempt 2,647,149 2,404,155 3,090,185 Interest on federal funds sold and securities purchased under agreements to resell 1,742,284 1,416,539 2,263,734 Other interest income 118,695 68,157 66,705 ___________ ___________ ___________ Total interest income 118,239,367 111,383,117 111,040,567 Interest Expense: Interest on deposits (note 7) 49,310,346 49,507,425 53,075,352 Interest on federal funds purchased and securities sold under agreements to repurchase 3,413,432 2,469,939 1,641,516 Interest on other short-term borrowings (note 9) 3,183,053 1,015,110 370,642 Interest on long-term borrowings (note 10) 2,198,772 2,338,501 2,620,914 ___________ ___________ ___________ Total interest expense 58,105,603 55,330,975 57,708,424 Net interest income 60,133,764 56,052,142 53,332,143 Provision for loan losses (note 5) 3,900,000 2,900,000 1,864,801 ___________ ___________ ___________ Net interest income after provision for loan losses 56,233,764 53,152,142 51,467,342 Noninterest Income: Service charges on deposit accounts 7,290,765 6,712,874 5,547,796 Investment brokerage commissions 4,808,048 3,766,436 3,044,107 Mortgage banking income 3,274,215 2,168,593 1,427,342 Fiduciary income 3,136,078 2,744,530 2,425,105 Insurance commissions and fees 2,803,983 2,915,666 2,339,817 Other service charges, collection and exchange charges, commissions and fees 3,441,454 2,779,502 2,435,132 Net realized gains (losses) from securities available for sale (note 3) 493,822 321,256 (3,003) Other operating income 2,257,424 1,918,584 630,444 ___________ ___________ ___________ Total noninterest income 27,505,789 23,327,441 17,846,740 Noninterest Expense: Compensation 26,824,307 25,460,464 22,815,220 Employee benefits (note 15) 4,303,104 4,245,682 4,158,580 Occupancy expense of premises, net (notes 6 and 17) 5,609,600 5,502,904 4,912,417 Furniture and equipment expense (notes 6 and 17) 3,634,336 3,725,150 3,747,021 Data processing expense (note 18) 2,850,395 2,591,485 2,379,920 Marketing 1,361,963 1,756,473 1,741,390 Supplies 1,195,762 1,409,690 1,326,928 FDIC deposit insurance assessment 281,416 1,801,646 1,783,213 Other operating expense 11,637,681 9,597,077 12,186,578 ___________ ___________ ___________ Total noninterest expense 57,698,564 56,090,571 55,051,267 Income before income taxes and minority interest 26,040,989 20,389,012 14,262,815 Income taxes (note 8) 7,287,628 5,770,600 3,204,687 ___________ ___________ ___________ Income before minority interest 18,753,361 14,618,412 11,058,128 Minority interest 743,254 602,982 650,774 ___________ ___________ ___________ Net income $ 18,010,107 14,015,430 10,407,354 Per common share (notes 1 and 13): Net income-basic $ 1.03 .78 .56 Net income-diluted 1.01 .76 .55 Cash dividends .273 .207 .186 See accompanying notes to consolidated financial statements.
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31 1997 1996 1995 Operating Activities: Net income $ 18,010,107 14,015,430 10,407,354 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 3,900,000 2,900,000 1,864,801 Depreciation and amortization 4,216,828 4,301,776 4,097,022 Deferred income taxes (685,223) 949,396 (25,181) Net realized (gains) losses from securities available for sale (493,822) (321,256) 3,003 Net (increase) decrease in loans held for sale (13,433,113) 2,837,011 (6,602,817) Net increase in accrued interest receivable and other assets (3,501,066) (1,402,881) (1,678,132) Net increase in accrued expenses, other liabilities and minority interest 509,873 1,735,569 322,324 _____________ ____________ ____________ Net cash provided by operating activities 8,523,584 25,015,045 8,388,374 Investing Activities: Investment securities available for sale: Purchases (304,725,316) (289,895,560) (242,871,379) Maturities 163,857,601 150,480,123 278,575,538 Sales 119,401,553 67,547,581 5,577,835 Investment securities held to maturity: Purchases (26,528,449) (45,046,248) (121,543,300) Maturities 30,203,812 79,614,914 59,896,255 Net (increase) decrease in loans (53,741,825) (26,364,596) 28,502,974 Purchase of other assets for investment (5,000,000) (10,017,329) --- Purchases of premises and equipment (2,526,958) (2,734,491) (9,733,181) Proceeds from sales of premises and equipment 225,080 1,356,634 360,470 _____________ ____________ ____________ Net cash used by investing activities (78,834,502) (75,058,972) (1,234,788) Financing Activities: Net increase in noninterest-bearing, interest-bearing demand and savings deposits 25,683,433 22,335,320 51,054,199 Net increase (decrease) in time deposits (14,470,053) (31,220,924) (29,394,594) Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 25,806,456 25,718,709 (29,596,325) Net increase (decrease) in other short-term borrowings 25,550,000 15,500,000 (9,500,000) Proceeds of long-term borrowings 17,806,000 14,604,000 12,429,000 Repayment of long-term borrowings (2,004,024) (1,771,779) (3,190,610) Dividends on common stock (4,781,675) (3,748,653) (3,498,220) Proceeds from issuance of common stock under the employee stock purchase plan 551,247 71,675 --- Proceeds from issuance of common stock under the stock option plan 1,286,157 290,748 187,213 Proceeds from issuance of common stock under the long-term stock compensation plan 246,915 334,834 361,602 Payment for shares reacquired under common stock repurchase plan (10,014,087) (8,248,331) (4,830,111) Payment for fractional shares resulting from common stock dividend (16,399) (13,744) --- _____________ ____________ ____________ Net cash provided (used) by financing activities 65,643,970 33,851,855 (15,977,846) _____________ ____________ ____________ Net decrease in cash and cash equivalents (4,666,948) (16,192,072) (8,824,260) Cash and cash equivalents at the beginning of the year 92,832,078 109,024,150 117,848,410 _____________ ____________ ____________ Cash and cash equivalents at the end of the year $ 88,165,130 92,832,078 109,024,150 See accompanying notes to consolidated financial statements.
BRENTON BANKS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY Common Capital Retained Unrealized Stock Surplus Earnings Gains (Losses) Total Balance, December 31, 1994 $39,357,730 5,210,344 70,979,317 (5,117,046) 110,430,345 Net income --- --- 10,407,354 --- 10,407,354 Net change in unrealized gains (losses) --- --- --- 6,475,448 6,475,448 Dividends on common stock $.186 per share* --- --- (3,498,220) --- (3,498,220) Issuance of shares of common stock under the stock option plan (note 16) 98,750 88,463 --- --- 187,213 Issuance of shares of common stock under the long-term stock compensation plan (note 16) 100,445 261,157 --- --- 361,602 Shares reacquired under the common stock repurchase plan (note 13) (1,290,665) (3,539,446) --- --- (4,830,111) Balance, December 31, 1995 38,266,260 2,020,518 77,888,451 1,358,402 119,533,631 Net income --- --- 14,015,430 --- 14,015,430 Net change in unrealized gains (losses) --- --- --- (281,361) (281,361) Dividends on common stock $.207 per share* --- --- (3,748,653) --- (3,748,653) 10% common stock dividend (note 13) 3,684,215 --- (3,684,215) --- --- Fractional shares resulting from common stock dividend --- --- (13,744) --- (13,744) Issuance of shares of common stock under the stock option plan (note 16) 128,000 162,748 --- --- 290,748 Issuance of shares of common stock under the long-term stock compensation plan (note 16) 73,590 261,244 --- --- 334,834 Issuance of shares of common stock under the employee stock purchase plan (note 16) 14,855 56,820 --- --- 71,675 Shares reacquired under the common stock repurchase plan (note 13) (1,738,500) (2,501,330) (4,008,501) --- (8,248,331) Balance, December 31, 1996 $40,428,420 --- 80,448,768 1,077,041 121,954,229 Net income --- --- 18,010,107 --- 18,010,107 Net change in unrealized gains (losses) --- --- --- 2,142,805 2,142,805 Dividends on common stock $.273 per share** --- --- (4,781,675) --- (4,781,675) 10% common stock dividend (note 13) 3,966,905 --- (3,966,905) --- --- Fractional shares resulting from common stock dividend --- --- (16,399) --- (16,399) Issuance of shares of common stock under the stock option plan (note 16) 501,760 784,397 --- --- 1,286,157 Issuance of shares of common stock under the long-term stock compensation plan (note 16) 82,945 163,970 --- --- 246,915 Issuance of shares of common stock under the employee stock purchase plan (note 16) 93,790 457,457 --- --- 551,247 Shares reacquired under the common stock repurchase plan (note 13) (1,738,700) (1,405,824) (6,869,563) --- (10,014,087) Balance, December 31, 1997 $43,335,120 --- 82,824,333 3,219,846 129,379,299 * Reflects the 2-for-1 stock split effective February 1998 and the 10% common stock dividends effective in 1997 and 1996. ** Reflects the 2-for-1 stock split effective February 1998 and the 10% common stock dividend effective in 1997. See accompanying notes to consolidated financial statements.
BRENTON BANKS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997, 1996 AND 1995 (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 46 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 being amortized over 10 to 40 years and are included in other assets in the consolidated statements of condition. Intangible assets totaled $3,795,000 and $4,696,000 at December 31, 1997, and 1996, respectively. 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 which the Company intends 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 common stockholders' equity. 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 are 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. Trading Account Securities Trading account securities are carried at market value and include securities purchased with the intent to resell in a relatively short period of time. Gains and losses on trading account activities, including market value adjustments, are reported in noninterest income in the consolidated statements of operations. 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, except on discounted loans where unearned income is recorded as income over the life of the loans based on the interest method. 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 potential losses in the loan portfolio. 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 8 to 40 years for buildings and leasehold improvements, and 3 to 25 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 $341,000 and $488,000 at December 31, 1997, and 1996, respectively. Such property is carried at the lower of cost or estimated fair value, less selling costs. Periodic 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, federal funds sold and securities purchased under agreements to resell and trading accounting securities. 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 1997 and October 1996, 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, 1997, 1996 and 1995:
(In thousands, except for EPS data) 1997 1996 1995 Basic EPS Computation Numerator: Net income $18,010 14,015 10,407 _______ ______ ______ Denominator: Average common shares outstanding 17,505 18,092 18,569 _______ ______ ______ Basic EPS $ 1.03 .78 .56 _______ ______ ______ _______ ______ ______ Diluted EPS Computation Numerator: Net income $18,010 14,015 10,407 _______ ______ ______ Denominator: Average common shares outstanding 17,505 18,092 18,569 Average stock options 284 161 141 Average long-term stock compensation plan 140 195 193 _______ ______ ______ 17,929 18,448 18,903 _______ ______ ______ _______ ______ ______ Diluted EPS $ 1.01 .76 .55 _______ ______ ______ _______ ______ ______
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 Swaps Amounts paid or received, related to outstanding swap contracts that are used in the asset/liability management process, are recognized into earnings as an adjustment to interest income over the estimated life of the related assets. Gains or losses associated with the termination of interest rate swap agreements for identified positions are deferred and amortized over the remaining lives of the related assets as an adjustment to yield. 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. 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 Servicing Rights Effective October 1, 1995, the Company adopted SFAS No. 122, "Accounting for Mortgage Servicing Rights." This statement requires capitalization of purchased mortgage servicing rights as well as internally originated mortgage servicing rights. These mortgage servicing rights are amortized over the estimated servicing period of the related loans. Accounting for Stock-Based Compensation Prior to January 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation expense would be recorded on the date of the grant only if the current market price of the underlying stock exceeded the exercise price. Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in 1995 and future years as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities Effective January 1, 1997, the Company adopted SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This statement requires that after a transfer of financial assets, the Company must recognize the financial and servicing assets controlled and liabilities incurred and derecognize financial assets and liabilities in which control is surrendered or debt is extinguished. In such a case, servicing assets are determined based upon estimated future revenues from contractually specified servicing fees and other ancillary revenues that are expected to compensate the Company for performing the servicing. The adoption of SFAS No. 125 did not have a material effect on the Company. Earnings per Share Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share." This statement replaces the primary earnings per share (EPS) disclosure with basic and diluted EPS disclosures to simplify the calculation and improve international comparability. The adoption of SFAS No. 128 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 $16,504,000 at December 31, 1997. (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.
Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 1997 (In thousands) Cost Gains Losses Value Investment securities available for sale: Taxable investments: U.S. Treasury securities $ 38,502 288 --- 38,790 Securities of U.S. government agencies 86,185 490 (15) 86,660 Mortgage-backed and related securities 229,334 1,778 (179) 230,933 Other investments 20,925 36 (4) 20,957 Tax-exempt investments: Obligations of states and political subdivisions 106,804 2,522 (12) 109,314 _______ _____ _____ _______ $481,750 5,114 (210) 486,654 Investment securities held to maturity: Taxable investments: Securities of U.S. government agencies $ 5,025 --- (6) 5,019 Mortgage-backed and related securities 2,363 74 --- 2,437 Other investments 1,518 9 (1) 1,526 Tax-exempt investments: Obligations of states and political subdivisions 60,173 773 (76) 60,870 _______ _____ _____ ______ $ 69,079 856 (83) 69,852
Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 1996 Cost Gains Losses Value Investment securities available for sale: Taxable investments: U.S. Treasury securities $ 41,330 76 (55) 41,351 Securities of U.S. government agencies 98,357 143 (347) 98,153 Mortgage-backed and related securities 218,865 1,398 (816) 219,447 Other investments 8,213 --- (20) 8,193 Tax-exempt investments: Obligations of states and political subdivisions 92,519 1,606 (170) 93,955 _______ _____ _____ $459,284 3,223 (1,408) 461,099 Investment securities held to maturity: Taxable investments: Securities of U.S. government agencies $ 15,065 63 (112) 15,016 Mortgage-backed and related securities 3,041 72 --- 3,113 Other investments 2,466 15 (6) 2,475 Tax-exempt investments: Obligations of states and political subdivisions 52,183 681 (152) 52,712 _______ _____ _____ ______ $ 72,755 831 (270) 73,316
Proceeds from the sale of available for sale securities were $119,402,000, $67,548,000 and $5,578,000 in 1997, 1996, and 1995, respectively. Gross gains of $874,000 in 1997, $558,000 in 1996 and $19,000 in 1995 and gross losses of $380,000 in 1997, $237,000 in 1996 and $22,000 in 1995 were realized on those sales. Other investments at December 31, 1997, and 1996, 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, 1997 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 $143,877 144,385 Due after one year through five years 221,832 224,024 Due after five years through ten years 93,418 94,727 Due after ten years 22,623 23,518 $481,750 486,654 Investment securities held to maturity: Due in one year or less $ 26,100 26,176 Due after one year through five years 28,690 28,909 Due after five years through ten years 9,356 9,553 Due after ten years 4,933 5,214 $ 69,079 69,852
Investment securities carried at $314,865,000 and $246,552,000 at December 31, 1997, and 1996, 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) 1997 1996 Real estate loans: Commercial construction and land development $ 30,007 42,693 Secured by 1-4 family residential property including home equity loans 342,134 338,010 Other 161,989 150,395 Loans to farmer 79,036 69,660 Commercial and industrial loans 160,428 132,395 Loans to individuals for personal expenditures 217,405 207,197 All other loans 2,190 1,594 $993,189 941,944
The Company originates commercial, business, real estate, agribusiness 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) 1997 1996 Impaired loans: Nonaccrual $3,227 2,663 Restructured 513 568 Total impaired loans 3,740 3,231 Loans past due 90 days or more 2,972 2,936 Total nonperforming loans 6,712 6,167 Other real estate owned 341 488 Total nonperforming assets $7,053 6,655
The average balances of impaired loans for the years ended December 31, 1997, and 1996, were $3,076,000 and $3,378,000, respectively. The allowance for loan losses related to impaired loans at December 31, 1997, and 1996, was $1,187,000 and $481,000, respectively. Impaired loans of $704,000 and $456,000 were not subject to a related allowance for loan losses at December 31, 1997, and 1996, 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) 1997 1996 1995 Interest income: As originally contracted $402 363 418 As recognized 157 174 136 Reduction of interest income $245 189 282
Loan customers 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, 1996 $ 5,680 Additional loans 3,364 Loan payments (3,114) Balance at December 31, 1997 $ 5,930
Mortgage Servicing Rights The fair market value of capitalized servicing rights at December 31, 1997 was approximately $2,548,000. To determine the fair value of the servicing rights, the Company used comparable market prices. There was a $5,000 charge to the impairment account for the year ended December 31, 1997. In determining the fair market value and potential impairment at the end of 1997, 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 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) 1997 1996 Beginning of year balance $1,026 252 Additions from originations 1,491 962 Amortization (238) (188) Impairment (5) --- Balance at end of year $2,274 1,026
(5) Allowance for Loan Losses A summary of activity in the allowance for loan losses follows:
(In thousands) 1997 1996 1995 Balance at beginning of year $11,328 11,070 10,913 Provision 3,900 2,900 1,865 Recoveries 1,733 1,419 1,669 Loans charged off (4,229) (4,061) (3,377) Balance at end of year $12,732 11,328 11,070
(6) Premises and Equipment A summary of premises and equipment as of December 31 follows:
(In thousands) 1997 1996 Land $ 2,919 2,952 Buildings and leasehold improvements 31,511 30,876 Furniture and equipment 25,047 23,463 Construction in progress 145 275 59,622 57,566 Less accumulated depreciation 30,723 27,187 $28,899 30,379
Depreciation expense included in operating expenses amounted to $3,783,000, $3,848,000 and $3,626,000 in 1997, 1996 and 1995, respectively. (7) Deposits Time deposits include deposits in denominations of $100,000 or more of $80,896,000 and $82,011,000 at December 31, 1997, and 1996, respectively. A summary of interest expense by deposit classification follows:
(In thousands) 1997 1996 1995 Demand $ 2,332 11,194 11,842 Savings 15,903 6,134 6,638 Time deposits of $100,000 or more 4,833 3,935 4,193 Other time deposits 26,242 28,244 30,402 $49,310 49,507 53,075
The Company made cash interest payments of $57,932,000, $55,455,000 and $55,229,000 on deposits and borrowings in 1997, 1996 and 1995, respectively. At December 31, 1997, the scheduled maturities of time deposits are as follows: (In thousands) 1998 $371,301 1999 134,459 2000 39,809 2001 9,981 2002 and thereafter 2,684 $558,234 (8) Income Taxes The current and deferred income tax provisions included in the consolidated statements of operations follow:
1997 (In thousands) Current Deferred Total Federal $6,562 (577) 5,985 State 1,411 (108) 1,303 $7,973 (685) 7,288 1996 Federal $3,754 894 4,648 State 1,067 56 1,123 $4,821 950 5,771 1995 Federal $2,728 (76) 2,652 State 502 51 553 $3,230 (25) 3,205
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 $6,100,000, $4,250,000 and $2,500,000 to the IRS, and $1,568,000, $435,000 and $737,000 to the state of Iowa in 1997, 1996 and 1995, 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. The reasons for the difference between the amount computed by applying the statutory federal income tax rate of 35 percent in 1997 and 1996 and 34 percent in 1995, and income tax expense follow:
(In thousands) 1997 1996 1995 At statutory rate $ 9,114 7,136 4,849 Increase (reduction) due to: Tax-exempt interest (2,916) (2,556) (2,566) State taxes, net of federal benefit 847 730 365 Nondeductible interest expense to own tax-exempts 536 426 431 Other, net (293) 35 126 $ 7,288 5,771 3,205
Accumulated deferred income tax assets are included in other assets in the consolidated statements of condition. There was no valuation allowance at December 31, 1997, or 1996. A summary of the temporary differences resulting in deferred income taxes and the related tax effect on each follows:
(In thousands) 1997 1996 Allowance for loan losses $4,575 3,962 Unrealized gains on securities available for sale (2,006) (670) Deposit base intangibles (489) (315) Premises and equipment (468) (588) Stock compensation plan 1,077 682 Real estate mortgage loan points deferred (283) (300) Other, net (536) (251) $1,870 2,520
(9) Other Short-Term Borrowings The Company had short-term borrowings with the Federal Home Loan Bank of Des Moines (FHLB) totaling $73,700,000 and $34,150,000 at December 31, 1997, and 1996, respectively. The average rate on these borrowings at December 31, 1997 was 6.02 percent. These borrowings were secured by residential mortgage loans equal to 150 percent of the borrowings and FHLB stock. The Parent Company has arranged an unsecured line of credit of $2,000,000 which was unused at December 31, 1997. 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) 1997 1996 Capital notes, 6.00% to 10.00% Total Parent Company $ 10,112 11,248 Borrowings from FHLB, average rate of 6.09% at December 31, 1997 26,550 23,550 Mortgage debt --- 62 $ 36,662 34,860
Borrowings from the FHLB were secured by residential mortgage loans equal to 150 percent of the borrowings and FHLB stock. The mortgage debt and borrowings from the FHLB were direct obligations of the individual subsidiaries. Scheduled maturities of long-term borrowings at December 31, 1997, follow:
Parent (In thousands) Company Consolidated 1998 $ 1,090 1,090 1999 1,417 23,467 2000 853 5,353 2001 1,383 1,383 2002 853 853 Thereafter 4,516 4,516 $10,112 36,662
(11) Fair Value of Financial Instruments The estimated fair values of the Company's financial instruments were as follows:
December 31, 1997 December 31, 1996 Recorded Fair Recorded Fair (In thousands) Amount Value Amount Value Financial assets: Cash and due from banks $ 77,468 77,468 76,901 76,901 Interest-bearing deposits with banks 1,320 1,320 732 732 Federal funds sold and securities purchased under agreements to resell 9,300 9,300 15,200 15,200 Trading account securities 77 77 --- --- Investment securities 555,733 556,506 533,854 534,415 Loans held for sale 19,303 19,303 5,870 5,870 Loans, net 980,457 981,664 930,615 929,113 Financial liabilities: Deposits $ 1,364,270 1,369,448 1,353,057 1,360,457 Federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings 166,333 166,333 100,976 100,976 Long-term borrowings 36,662 37,156 34,860 35,025 Off-balance-sheet assets (liabilities): Commitments to extend credit $ --- --- --- --- Letters of credit --- (111) --- (59) Interest rate swaps --- (34) --- (69) Interest rate floor 195 206 --- ---
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 swaps and the interest rate floor contract is the estimated amount that the Company would receive or pay to terminate the swap and floor agreements at the reporting date. (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. As of December 31, 1997, management believes the Company is well-capitalized, as defined under the regulatory framework for prompt corrective action. 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, 1997: Total Capital (to Risk Weighted Assets): Consolidated $141,688 11.95% $94,832 > 8.0% N/A _ Brenton Bank 132,756 11.87 89,443 > 8.0 $111,804 > 10.0% _ _ Tier 1 Capital (to Risk Weighted Assets): Consolidated 128,931 10.88 47,416 > 4.0 N/A _ Brenton Bank 120,887 10.81 44,722 > 4.0 67,082 > 6.0 _ _ Tier 1 Capital (to Average Assets): Consolidated 128,931 7.63 50,703 > 3.0 N/A _ Brenton Bank 120,887 7.69 62,852 > 4.0 78,565 > 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 1997, the Company declared a 10 percent common stock dividend. As a result of this action, 1,586,762 shares of common stock were issued and $3,966,905 was transferred from retained earnings to common stock. Fractional shares resulting from this stock dividend were paid in cash. In October 1996, the Company declared a 10 percent common stock dividend. This transaction resulted in the issuance of 1,473,686 shares of common stock and the transfer of $3,684,215 from retained earnings to common stock. Fractional shares resulting from this stock dividend 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, in 1997 the Board of Directors authorized additional common stock repurchases of $10 million in 1997. For the years ended December 31, 1997, 1996 and 1995, the Company repurchased 695,480, 695,400 and 516,266 shares (restated for the 2-for-1 stock split), respectively, at a total cost of $10,014,087, $8,248,331 and $4,830,111. (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 received. State and savings banks are subject to certain statutory and regulatory restrictions that affect dividend payments. Based on minimum regulatory capital guidelines as published by those regulators, the maximum dividends which could be paid by the subsidiary banks to the Parent Company at December 31, 1997, were approximately $15 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 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 percent of each employee's eligible compensation. Retirement plan costs charged to operating expenses in 1997, 1996 and 1995 amounted to $1,290,000, $1,284,000 and $1,263,000, 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. The Plan authorizes the granting of options on up to 1,210,000 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. The per-share weighted average fair value of stock options granted during 1997 was $4.11 based on the date of grant using the Company's option pricing model with the following weighted average assumptions: expected dividend yield of 2.05 percent, risk-free interest rate of 6.52 percent, expected life of 7.5 years and expected volatility of stock price of 18.5 percent. 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:
1997 1996 Net income: As reported $18,010,107 14,015,430 Pro forma 17,734,878 13,768,662 Basic earnings per share: As reported $1.03 .78 Pro forma 1.01 .76 Diluted earnings per share: As reported $1.01 .76 Pro forma .99 .74
Pro forma net income reflects only options granted in 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 life of 7.5 years. Changes in options outstanding during 1997 and 1996 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1997 and 1996):
Options Option Price Outstanding Per Share December 31, 1995 --- $ --- Granted - 1996 1,035,760 10.07-10.74 December 31, 1996 1,035,760 10.07-10.74 Granted - 1997 87,180 12.50-16.75 Forfeited - 1997 (36,300) 10.07 December 31, 1997 (123,360 shares available for grant) 1,086,640 $10.07-16.75
A total of 845,913 shares were granted to key management personnel under the Company's long-term stock compensation plan. Under provisions of the plan, no grants were made after 1995. Each grant of shares covers a three-year performance period, 35 percent of which vests upon completion of employment for the performance period and 65 percent of which vests 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 $1,731,000, $1,302,000 and $425,000 for 1997, 1996 and 1995, respectively. Changes in outstanding grant shares during 1997, 1996 and 1995 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1997 and 1996):
Performance 1992 to 1993 to 1994 to 1995 to Period 1994 1995 1996 1997 December 31, 1994 221,412 185,506 218,511 --- Granted - 1995 --- --- --- 215,673 Forfeited - 1995 --- (20,275) (32,393) (16,032) Expired - 1995 (143,919) --- --- --- Vested - 1995 (77,493) --- --- --- December 31, 1995 --- 165,231 186,118 199,641 Forfeited - 1996 --- --- (20,953) (22,812) Expired - 1996 --- (107,402) --- --- Vested - 1996 --- (57,829) --- --- December 31, 1996 --- --- 165,165 176,829 Forfeited - 1997 --- --- --- (23,713) Expired - 1997 --- --- (107,353) --- Vested - 1997 --- --- (57,812) --- Outstanding grant shares at December 31, 1997 --- --- --- 153,116
For the performance period 1995 to 1997, 153,116 shares vested on January 1, 1998. The Company's 1987 nonqualified stock option plan permits the Board of Directors to grant options to purchase up to 726,000 shares of the Company's $2.50 par value common stock. Under provisions of the plan, no further grants can be made and no grants were made in 1997. The options may be granted to officers 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 vesting requirements and maximum exercise periods, as established by the Board of Directors. Changes in options outstanding and exercisable during 1997, 1996 and 1995 were as follows (restated for the 2-for-1 stock split effective February 1998 and the 10 percent common stock dividends effective in 1997 and 1996):
Exercisable Outstanding Option Price Options Options Per Share December 31, 1994 339,889 377,641 $1.83-8.12 Vested - 1995 7,260 --- 3.63-3.91 Exercised - 1995 (47,795) (47,795) 1.83 Forfeited - 1995 --- (30,492) 3.63-8.12 December 31, 1995 299,354 299,354 1.83-3.91 Exercised - 1996 (58,960) (58,960) 1.83 December 31, 1996 240,394 240,394 1.83-3.91 Exercised - 1997 (204,094) (204,094) 1.83-3.91 December 31, 1997 36,300 36,300 $2.65
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 1997 and 1996, 37,516 and 33,224 shares (restated for the 2-for-1 stock split effective February 1998), 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 $1,963,000, $1,919,000 and $1,937,000 in 1997, 1996 and 1995, respectively. Future minimum rental commitments for all noncancelable leases with terms of one year or more total approximately $900,000 per year through 2002, $500,000 per year through 2007, $90,000 per year through 2012, and $40,000 per year through 2013, with a total commitment of $7,200,000. (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 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 party to an interest rate floor contract which is designated as a hedge 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. 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. The Company had outstanding commitments to extend credit of $245 million and $221 million at December 31, 1997, and 1996, respectively. Standby 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. Outstanding standby letters of credit totaled $22,150,000 and $11,770,000 at December 31, 1997, and 1996, respectively. The Company does not anticipate losses as a result of issuing commitments to extend credit or standby letters of credit. The Company enters into interest rate swap agreements as part of its asset/liability management strategy to manage interest-rate risk. The notional value of these agreements was $11,690,000 and $16,205,000 at December 31, 1997, and 1996, respectively. The interest rate swap agreements subject the Company to market risk associated with changes in interest rates, as well as the risk of default by the counterparty to the agreement. The credit worthiness of the counterparties was evaluated by the Company's loan committee prior to entering into the agreements. The agreements run through various dates in 1998. In December 1997, the Company entered into an interest rate floor agreement to manage interest-rate risk. The notional value of this agreement was $100,000,000 and expires on December 31, 1999. The interest rate floor agreement requires 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 amount. The credit worthiness of the counterparty was evaluated by the Company's loan committee prior to entering into the agreement. 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. The Company maintains a data processing agreement with ALLTEL Information Services, Inc. (ALLTEL), formerly Systematics, Inc., whereby ALLTEL manages and operates the Company's data processing facility. The contract involves fixed payments of $2,004,000 in 1998 through 2001 and $1,002,000 in 2002. These fixed payments will be adjusted for inflation and volume fluctuations. 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) 1997 1996 Assets Interest-bearing deposits with banks $ 3,596 5,638 Investments in: Bank subsidiaries 132,008 124,383 Bank-related subsidiaries --- 45 Excess cost over net assets 1,753 1,826 Premises and equipment 563 618 Other assets 5,103 3,168 ________ _______ $ 143,023 135,678 Liabilities and Stockholders' Equity Accrued expenses payable and other liabilities $ 3,532 2,476 Long-term borrowings 10,112 11,248 Common stockholders' equity 129,379 121,954 _______ _______ $ 143,023 135,678
Statements of Operations Years Ended December 31 (In thousands) 1997 1996 1995 Income Dividends from subsidiaries $ 14,850 10,766 8,997 Interest income 213 341 442 Management fees --- --- 1,634 Other operating income 119 43 2,644 ________ ______ ______ 15,182 11,150 13,717 Expense Compensation and benefits 2,331 1,884 4,021 Interest on long-term borrowings 849 970 1,046 Other operating expense 584 655 2,006 ________ ______ ______ 3,764 3,509 7,073 Income before income taxes and equity in undistributed earnings of subsidiaries 11,418 7,641 6,644 Income taxes (1,155) (1,040) (759) Income before equity in undistributed earnings of subsidiaries 12,573 8,681 7,403 Equity in undistributed earnings of subsidiaries 5,437 5,334 3,004 ________ ______ ______ Net income $ 18,010 14,015 10,407
(19) Brenton Banks, Inc. (Parent Company) Condensed Financial Information
Statements of Cash Flows Years Ended December 31 (In thousands) 1997 1996 1995 Operating Activities Net income $ 18,010 14,015 10,407 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (5,437) (5,334) (3,004) Depreciation and amortization 163 163 230 Net (increase) decrease in other assets (1,962) 18 49 Net increase (decrease) in accrued expenses payable and other liabilities 1,056 871 (148) ________ ______ ______ Net cash provided by operating activities 11,830 9,733 7,534 Investing Activities Decrease in short-term investments --- 7,500 1,000 Redemption (purchase) of subsidiary equity, net --- (7) 156 Principal collected from or (advances to) subsidiaries --- 115 (97) Purchase of premises and equipment, net (8) 669 (512) ________ ______ ______ Net cash provided (used) by investing activities (8) 8,277 547 Financing Activities Net repayment of long-term borrowings (1,136) (1,187) (209) Proceeds from issuance of common stock under the long-term stock compensation plan 247 335 362 Proceeds from issuance of common stock under the stock option plan 1,286 291 188 Proceeds from issuance of common stock under the employee stock purchase plan 551 72 --- Payment for shares reacquired under common stock repurchase plan (10,014) (8,248) (4,830) Payment for fractional shares from common stock (16) (14) --- dividends Dividends on common stock (4,782) (3,749) (3,498) ________ ______ ______ Net cash used by financing activities (13,864) (12,500) (7,987) Net increase (decrease) in cash and interest- bearing deposits (2,042) 5,510 94 Cash and interest-bearing deposits at the beginning of the year 5,638 128 34 Cash and interest-bearing deposits at the end of the year $ 3,596 5,638 128
(20) Unaudited Quarterly Financial Information The following is a summary of unaudited quarterly financial information (in thousands, except per common share data):
1997 Three months ended March 31 June 30 Sept. 30 Dec. 31 Interest income $ 28,473 29,182 30,168 30,416 Interest expense 13,855 14,448 14,631 15,171 _______ ______ ______ ______ Net interest income 14,618 14,734 15,537 15,245 Provision for loan losses 900 900 1,100 1,000 _______ ______ ______ ______ Net interest income after provision for loan losses 13,718 13,834 14,437 14,245 Noninterest income 6,449 6,239 7,839 6,979 Noninterest expense 14,036 13,674 14,881 15,108 _______ ______ ______ ______ Income before income taxes and minority interest 6,131 6,399 7,395 6,116 Income taxes 1,754 1,809 2,176 1,549 Minority interest 176 183 209 175 _______ ______ ______ ______ Net income $ 4,201 4,407 5,010 4,392 Per common share: Net income-basic $ .24 .25 .29 .25 Net income-diluted .23 .25 .28 .25
1996 Three months ended March 31 June 30 Sept. 30 Dec. 31 Interest income $ 27,370 27,512 27,923 28,578 Interest expense 13,701 13,645 13,813 14,172 _______ ______ ______ ______ Net interest income 13,669 13,867 14,110 14,406 Provision for loan losses 700 800 600 800 _______ ______ ______ ______ Net interest income after provision for loan losses 12,969 13,067 13,510 13,606 Noninterest income 5,552 5,622 5,776 6,377 Noninterest expense 13,355 13,471 14,685 14,579 _______ ______ ______ ______ Income before income taxes and minority interest 5,166 5,218 4,601 5,404 Income taxes 1,446 1,497 1,275 1,553 Minority interest 140 153 153 157 _______ ______ ______ ______ Net income $ 3,580 3,568 3,173 3,694 Per common share: Net income-basic $ .19 .20 .18 .21 Net income-diluted .19 .19 .18 .20
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. There were no matters considered to be reportable conditions under Statement of Auditing Standards No. 60 by the independent auditors. 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, 1997, and 1996, and the related consolidated statements of operations, changes in common stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. 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, 1997, and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Des Moines, Iowa January 30, 1998 STOCK INFORMATION Brenton Banks, Inc. common stock is traded on the NASDAQ National Market and quotations are furnished by the NASDAQ System. There were 1,571 common stockholders of record on December 31, 1997.
MARKET AND DIVIDEND INFORMATION 1997 High Low Dividends 1st quarter $12.96 12.39 .059 2nd quarter 13.75 12.56 .064 3rd quarter 16.50 13.56 .070 4th quarter 20.38 15.06 .080
1996 High Low Dividends 1st quarter $10.02 8.68 .050 2nd quarter 10.02 9.40 .050 3rd quarter 10.33 9.71 .053 4th quarter 12.73 10.23 .054
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 May 1997 and October 1996 10% 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 Chicago Corporation 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 SISTE 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 800/820-0088 Annual Shareholders' Meeting Wednesday, May 20, 1998, 5:00 p.m. West Des Moines Marriott Hotel 1250 74th Street West Des Moines, Iowa 50266 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 Peat Marwick LLP 2500 Ruan Center 666 Grand Avenue Des Moines, Iowa 50309 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. 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. R. Dean Duben Past Vice Chairman and President Brenton Bank - Davenport Hubert G. Ferguson Financial Services Consultant New Brighton, Minnesota BRENTON BANKS, INC. EXECUTIVE OFFICERS C. Robert Brenton Chairman of the Board Robert L. DeMeulenaere President and Chief Executive Officer Steven T. Schuler Chief Financial Officer/Treasurer/ Secretary BRENTON BANK SENIOR OFFICERS AND LINE OF BUSINESS MANAGERS Robert L. DeMeulenaere Chairman and Chief Executive Officer Larry A. Mindrup President Phillip L. Risley Executive Vice President Perry C. Atwood Chief Sales Officer Woodward G. Brenton Chief Commercial Banking Officer Elizabeth M. Piper/Bach Chief Financial Services Officer Steven T. Schuler Chief Financial Officer/Treasurer/ Secretary Norman D. Schuneman Chief Credit Officer Judy S. Bohrofen Director of Human Resources Gregory M. Cole Director of Credit Underwriting W. Bradley Cunningham Investment/ALCO Officer Marsha A. Findlay Senior Retail Banking Officer Charles N. Funk Regional President President, Des Moines Dennis H. Hanson Regional President President, Grinnell Mark J. Hoffschneider President, Brenton Mortgages Steven C. Hyland Senior Vice President, Brenton Insurance Ronald D. Larson Regional President President, Cedar Rapids Douglas F. Lenehan President, Diversified Commercial Services Division Marc J. Meyer Regional President President, Adel Catherine I. Reed Director of Marketing Allen W. Shafer President, Business Banking Division Thomas J. Vincent President, Agricultural Banking Division Steven D. Agan President, Knoxville John H. Anderson President, Davenport Thomas J. Friedman President, Ankeny Kevin Z. Geis President, Brenton Savings Bank, FSB Ames Robert L. German President, Dallas Center John M. Hand President, Emmetsburg Richard H. Jones President, Perry V. Blaine Lenz President, Eagle Grove James L. Lowrance President, Marshalltown Clay A. Miller President, Clarion Jeffrey J. Nolan President, Jefferson EX-21 35 Exhibit 21 Subsidiaries. 209 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 210 EX-23 36 Exhibit 23 Consent of KPMG Peat Marwick LLP to the incorporation of their report dated January 30, 1998, relating to certain consolidated financial statements of Brenton Banks, Inc. into the Registration Statement on Form S-8 of Brenton Banks, Inc. 211 AUDITORS' CONSENT The Board of Directors Brenton Banks, Inc.: We consent to incorporation by reference in the Registration Statement on Form S-8 of Brenton Banks, Inc. of our report dated January 30, 1998, relating to the consolidated statements of condition of Brenton Banks, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in common stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1997, which report appears in the December 31, 1997, annual report on Form 10-K of Brenton Banks, Inc. /s/ KPMG Peat Marwick LLP KPMG Peat Marwick LLP Des Moines, Iowa March 25, 1998 212 EX-27 37 1997 FDS SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1 12-MOS DEC-31-1997 DEC-31-1997 77,468,210 1,319,700 9,300,000 77,220 486,653,872 69,079,622 69,852,000 993,189,110 (12,732,131) 1,718,483,797 1,364,270,491 166,332,576 21,839,431 36,662,000 0 0 43,335,120 86,044,179 1,718,483,797 86,020,464 30,357,924 1,860,979 118,239,367 49,310,346 8,795,257 60,133,764 3,900,000 493,822 58,441,818 25,297,735 25,297,735 0 0 18,010,107 1.03 1.01 3.93 3,227,000 2,972,000 513,000 500,000 11,328,359 4,229,385 1,733,157 12,732,131 12,732,131 0 0 Restated for 2-for-1 stock split, effective February 1998.
EX-27.1 38 RESTATED QUARTERLY 1996 FDS SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY FINANCIAL STATEMENTS FOR 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1 9-MOS 6-MOS 3-MOS DEC-31-1996 DEC-31-1996 DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996 78,382,963 68,771,560 73,162,137 801,930 768,548 812,539 0 16,700,000 13,000,000 0 0 0 445,555,951 420,563,407 410,438,493 91,663,981 97,394,602 105,797,558 92,066,000 97,624,000 106,472,000 916,871,933 926,341,519 911,175,052 (11,528,313) (11,607,844) (11,209,801) 1,593,433,229 1,579,379,091 1,564,444,498 1,330,152,940 1,332,830,017 1,333,584,249 98,009,089 74,001,939 54,321,472 22,793,388 20,661,002 20,723,439 23,210,713 33,472,126 36,686,023 0 0 0 0 0 0 36,921,850 37,350,850 37,795,350 82,345,249 81,063,157 81,333,965 1,593,433,229 1,579,379,091 1,564,444,498 59,357,416 39,338,548 19,563,503 22,416,882 14,719,884 7,393,275 1,032,063 824,410 413,660 82,806,361 54,882,842 27,370,438 37,074,484 24,820,576 15,552,495 4,085,130 2,525,909 1,148,981 41,646,747 27,536,357 13,668,964 2,100,000 1,500,000 700,000 309,244 314,406 174,525 41,957,329 27,118,892 13,494,726 14,539,268 10,091,107 5,025,943 14,539,268 10,091,107 5,025,943 0 0 0 0 0 0 10,321,166 7,147,758 3,580,247 1.36 .93 .46 1.36 .93 .46 3.80 3.78 3.77 3,278,000 3,096,000 3,868,000 4,785,000 1,793,000 2,703,000 433,000 347,000 0 2,000,000 2,000,000 2,000,000 11,069,869 11,069,869 11,069,869 2,752,704 1,807,574 917,431 1,111,148 845,549 357,363 11,528,313 11,607,844 11,209,801 11,528,313 11,607,844 11,209,801 0 0 0 0 0 0 Restated to correctly set forth net yield. Restated to correctly set forth potential problem loans.
EX-27.2 39 RESTATED QUARTERLY 1997 FDS SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY FINANCIAL STATEMENTS FOR 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFEFENCE TO SUCH FINANCIAL STATEMENTS 1 9-MOS 6-MOS 3-MOS DEC-31-1997 DEC-31-1997 DEC-31-1997 SEP-30-1997 JUN-30-1997 MAR-31-1997 71,182,538 76,963,588 66,298,696 894,817 1,001,071 859,530 9,600,000 17,000,000 17,100,000 0 9,788 0 450,023,300 441,599,523 442,772,866 68,160,461 66,455,907 73,875,533 68,762,000 67,441,000 74,339,000 999,659,753 980,320,114 963,654,467 (12,416,151) (12,286,775) (11,963,805) 1,677,016,745 1,655,407,673 1,628,048,336 1,358,055,474 1,337,687,457 1,342,202,362 136,700,467 142,382,157 109,511,600 21,308,773 19,857,565 22,227,634 32,976,000 30,413,000 31,827,000 0 0 0 0 0 0 43,577,045 43,583,120 40,038,705 84,398,986 81,484,374 82,241,035 1,677,016,745 1,655,407,673 1,628,048,336 63,794,768 41,571,371 20,441,367 22,677,283 15,205,480 7,745,073 1,350,545 877,928 286,482 87,822,596 57,654,779 28,472,922 36,742,184 24,382,409 12,078,873 6,191,777 3,920,469 1,776,418 44,888,635 29,351,901 14,617,631 2,900,000 1,800,000 900,000 418,199 276,456 250,665 43,158,318 28,068,815 14,212,215 19,357,924 12,171,305 5,955,077 19,357,924 12,171,305 5,955,077 0 0 0 0 0 0 13,618,441 8,608,306 4,201,356 1.52 .95 .51 1.52 .95 .51 3.94 3.89 3.90 2,394,000 1,908,000 2,539,000 4,860,000 4,847,000 2,765,000 438,000 595,000 534,000 1,000,000 1,000,000 1,000,000 11,328,359 11,328,359 11,328,359 3,000,412 1,680,298 715,728 1,188,204 838,714 451,174 12,416,151 12,286,775 11,963,805 12,416,151 12,286,775 11,963,805 0 0 0 0 0 0 Restated to correctly set forth net yield. Restated to correctly set forth potential problem loans.
EX-27.3 40 RESTATED 1994, 1995 AND 1996 FDS SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL FINANCIAL STATEMENTS FOR THE YEARS 1994, 1995 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1 12-MOS 12-MOS 12-MOS DEC-31-1994 DEC-31-1995 DEC-31-1996 DEC-31-1994 DEC-31-1995 DEC-31-1996 58,387,727 71,159 76,900,524 64,255 265,000 731,554 59,396,428 37,600,000 15,200,000 0 0 0 349,208,773 396,370,000 461,099,272 94,484,134 108,082,000 72,754,985 92,284,000 109,131,000 73,316,000 972,318,990 918,901,000 941,943,513 10,913,043 11,070,000 (11,328,359) 1,581,326,849 1,582,779,000 1,632,095,082 1,340,283,110 1,361,943,000 1,353,057,111 82,703,736 43,607,000 100,976,120 18,970,245 19,518,000 21,247,598 28,939,413 38,178,000 34,860,024 0 0 0 0 0 0 39,357,730 38,266,000 40,428,420 71,072,615 81,267,000 81,525,809 1,581,326,849 1,582,779,000 1,632,095,082 76,456,964 82,526,000 80,301,707 23,044,637 26,184,000 29,596,714 1,721,353 2,330,000 1,484,696 101,222,954 111,040,000 111,383,117 41,609,766 53,075,000 49,507,425 45,772,428 4,633,000 5,823,550 55,450,526 53,332,000 56,052,142 1,987,909 1,865,000 2,900,000 (339,624) (3,000) 321,256 57,247,578 55,702,000 56,693,553 12,808,027 13,612,000 19,786,030 12,808,027 13,612,000 19,786,030 0 0 0 0 0 0 10,107,387 10,407,000 14,015,430 1.27 1.34 1.69 1.27 1.34 1.69 3.86 3.67 3.67 3,784,000 2,639,000 2,663,000 940,000 2,802,000 2,936,000 298,000 178,000 568,000 2,000,000 2,000,000 1,000,000 9,817,864 10,913,000 11,069,869 2,442,185 3,377,000 4,061,211 1,549,455 1,669,000 1,419,701 10,913,043 11,070,000 11,328,359 10,913,043 11,070,000 11,328,359 0 0 0 0 0 0 Restated to correctly set forth net yield. Restated to correctly set forth potential problem loans.
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