-----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, SRWTK/YWnvSLbUR3jKEVfajnB1lxJ/WnEB+oetAyeC0yHr2bEeInzCpn7mSeqCMr ngbM9Ol7MxypnqIQXNW6Ng== 0000946275-03-000809.txt : 20031113 0000946275-03-000809.hdr.sgml : 20031113 20031113151708 ACCESSION NUMBER: 0000946275-03-000809 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IBT BANCORP INC CENTRAL INDEX KEY: 0000801122 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 251532164 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31655 FILM NUMBER: 03997770 BUSINESS ADDRESS: STREET 1: 309 MAIN ST CITY: IRWIN STATE: PA ZIP: 15642 BUSINESS PHONE: 7248633100 MAIL ADDRESS: STREET 1: IBT BANCORP INC STREET 2: 309 MAIN ST CITY: IRWIN STATE: PA ZIP: 15642 10-Q 1 f10q_093003-0262.txt FORM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 ------------------ OR | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________. Commission File No. 0-25903 IBT Bancorp, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Pennsylvania 25-1532164 ----------------------------------- ------------------------------ (State of incorporation or organization) (I.R.S. employer identification no.) 309 Main Street, Irwin, Pennsylvania 15642 - -------------------------------------------- ------------------------------ (Address of principal executive offices) (zip code) (724) 863-3100 - -------------------------------------------------------------------------------- Issuer's telephone number, including area code Check 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES X NO ------------ ------------ Number of shares of Common Stock outstanding as of November 10, 2003: 2,977,655 --------- IBT BANCORP, INC. Contents --------
Pages ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements.............................................................................. Consolidated balance sheets at September 30, 2003 (unaudited) and December 31, 2002.............................................................. 1 Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2003 and 2002 .............................................................. 2 Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2003 and 2002............................................................... 3 Notes to consolidated financial statements...................................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................................... 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk...................................... 12 Item 4. Controls and Procedures........................................................................ 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings.............................................................................. 13 Item 2. Changes in Securities and Use of Proceeds...................................................... 13 Item 3. Defaults upon Senior Securities................................................................ 13 Item 4. Submission of Matters to a Vote of Security-Holders............................................ 13 Item 5. Other Information.............................................................................. 13 Item 6. Exhibits and Reports on Form 8-K............................................................... 13 Signatures..................................................................................................... 14
CONSOLIDATED BALANCE SHEETS IBT BANCORP, INC. AND SUBSIDIARY
September 30, 2003 December 31, 2002 ------------------ ----------------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 18,788,662 $ 12,677,160 Interest-bearing deposits in banks 1,253,319 760,118 Federal funds sold - 1,629,000 Certificate of deposit 100,000 100,000 Securities available for sale 158,605,739 183,564,960 Federal Home Loan Bank stock, at cost 4,599,700 3,152,600 Loans, net 410,335,176 359,871,514 Premises and equipment, net 5,390,433 4,759,015 Other assets 17,607,582 17,520,354 ------------- ------------- Total Assets $ 616,680,611 $ 584,034,721 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Non-interest bearing $ 84,171,601 $ 74,339,035 Interest-bearing 392,087,729 393,918,292 ------------- ------------- Total deposits 476,259,330 468,257,327 Repurchase agreements 22,211,794 14,525,836 Accrued interest and other liabilities 3,660,769 5,100,380 FHLB advances 55,498,316 40,000,000 ------------- ------------- Total liabilities 557,630,209 527,883,543 Stockholders' Equity Capital stock, par value $1.25 per share, 50,000,000 shares authorized, 3,023,799 shares issued, 2,977,655 shares outstanding at September 30, 2003 and December 31, 2002 3,779,749 3,779,749 Surplus 1,897,792 2,073,102 Retained earnings 53,494,513 48,974,137 Accumulated other comprehensive income 1,221,614 2,667,456 ------------- ------------- 60,393,668 57,494,444 Less: Treasury stock, at cost (1,343,266) (1,343,266) ------------- ------------- Total stockholders' equity 59,050,402 56,151,178 ------------- ------------- Total Liabilities and Stockholders' Equity $ 616,680,611 $ 584,034,721 ============= ============= The accompanying notes are an integral part of these consolidated financial statements.
1 CONSOLIDATED STATEMENTS OF INCOME IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ (unaudited) (unaudited) (unaudited) (unaudited) Interest Income Loans, including fees $ 6,654,228 $ 6,340,002 $ 19,554,699 $ 18,310,509 Investment securities 1,712,744 2,114,968 5,624,396 6,567,712 Federal funds sold 14,906 68,499 35,196 196,724 ------------ ------------ ------------ ------------ Total interest income 8,381,878 8,523,469 25,214,291 25,074,945 Interest Expense Deposits 2,061,967 2,655,506 6,578,696 7,880,519 FHLB advances 642,870 530,947 1,853,655 1,586,297 Repurchase agreements 31,782 47,563 104,140 135,604 ------------ ------------ ------------ ------------ Total interest expense 2,736,619 3,234,016 8,536,491 9,602,420 ------------ ------------ ------------ ------------ Net Interest Income 5,645,259 5,289,453 16,677,800 15,472,525 Provision for Loan Losses 150,000 300,000 450,000 800,000 ------------ ------------ ------------ ------------ Net Interest Income after Provision for Loan Losses 5,495,259 4,989,453 16,227,800 14,672,525 Other Income (Losses) Service fee 541,862 590,644 1,758,916 1,758,378 Investment security gains 243,938 64,315 480,620 195,840 Investment security losses (37,449) (37,169) (37,449) (62,094) Other income 833,585 689,936 2,506,518 2,004,848 ------------ ------------ ------------ ------------ Total other income 1,581,936 1,307,726 4,708,605 3,896,972 Other Expenses Salaries 1,421,999 1,280,647 4,270,713 3,818,825 Pension and other employee benefits 404,736 326,248 1,190,299 951,212 Occupancy expense 365,300 349,741 1,128,434 984,785 Data processing expense 207,232 191,354 614,137 534,919 ATM expense 85,892 88,266 241,708 267,179 Other expenses 1,096,703 934,999 3,127,121 2,728,101 ------------ ------------ ------------ ------------ Total other expenses 3,581,862 3,171,255 10,572,412 9,285,021 ------------ ------------ ------------ ------------ Income Before Income Taxes 3,495,333 3,125,924 10,363,993 9,284,476 Provision for Income Taxes 933,405 834,259 2,717,080 2,419,096 ------------ ------------ ------------ ------------ Net Income $ 2,561,928 $ 2,291,665 $ 7,646,913 $ 6,865,380 ============ ============ ============ ============ Basic Earnings per Share $ 0.86 $ 0.77 $ 2.57 $ 2.30 ============ ============ ============ ============ Diluted Earnings per Share $ 0.85 $ 0.77 $ 2.57 $ 2.29 ============ ============ ============ ============ Dividends per Share $ 0.35 $ 0.30 $ 1.05 $ 0.90 ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
2 CONSOLIDATED STATEMENTS OF CASH FLOWS IBT BANCORP, INC. AND SUBSIDIARY
Nine Months Ended September 30, ------------------------------- 2003 2002 ------------ ------------ (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 7,646,913 $ 6,865,380 Adjustments to reconcile net cash from operating activities: Depreciation 595,880 506,565 Increase in cash surrender value of insurance (396,727) (413,119) Net amortization/accretion of premiums and discounts 832,367 233,950 Net investment security gains (443,171) (133,746) Provision for loan losses 450,000 800,000 Stock options granted 102,154 - Increase (decrease) in cash due to changes in assets and liabilities: Other assets (653,625) (599,702) Accrued interest and other liabilities (298,057) (749,164) ------------ ------------ Net Cash From Operating Activities 7,835,734 6,510,164 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of certificates of deposit (100,000) - Proceeds from maturity of certificates of deposit 100,000 - Proceeds from sales of securities available for sale 29,937,923 31,728,943 Proceeds from maturities of securities available for sale 42,594,796 60,940,626 Purchase of securities available for sale (50,153,363) (95,376,460) Net loans made to customers (50,347,265) (40,831,869) Purchases of premises and equipment (1,227,298) (584,765) Purchase of Federal Home Loan Bank stock (1,447,100) (260,600) ------------ ------------ Net Cash Used By Investing Activities (30,642,307) (44,384,125) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 8,002,003 30,840,264 Net increase in securities sold under repurchase agreement 7,685,958 9,432,073 Dividends paid (3,126,537) (2,683,801) Proceeds from FHLB advances 16,000,000 5,000,000 Payments on FHLB advances (501,684) - Exercise of stock options (277,464) - Purchase of treasury stock - (258,513) ------------ ------------ Net Cash From Financing Activities 27,782,276 42,330,023 ------------ ------------ Net Change in Cash and Cash Equivalents 4,975,703 4,456,062 Cash and Cash Equivalents at Beginning of Period 15,066,278 25,218,935 ------------ ------------ Cash and Cash Equivalents at End of Period $ 20,041,981 $ 29,674,997 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IBT BANCORP, INC. AND SUBSIDIARY Period Ended September 30, 2003 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included. Operating results for the three months and nine months ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003 or any future interim period. The interim financial statements should be read in conjunction with the financial statements and footnotes thereto included in IBT Bancorp, Inc. and subsidiary Annual Report on Form 10-K for the year ended December 31, 2002. NOTE B - ADOPTION OF NEW ACCOUNTING STANDARD During the second quarter of 2003, the Bancorp adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation (as permitted by FASB Statement No. 148), prospectively to all employee awards granted, modified or settled after January 1, 2003. Awards under the plan vest over periods ranging from six months to three years. Therefore, the cost related to stock-based employee compensation included in the determination of net income for 2003 is less then that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of Statement 123. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period.
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------- ------------------------------ 2003 2002 2003 2002 --------------- ---------------- ------------- ------------- Net income, as reported $ 2,561,928 $ 2,291,665 $ 7,646,913 $ 6,865,380 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects 67,422 - 67,422 - Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (67,422) - (151,518) (147,629) --------------- ---------------- ------------- ------------- Pro forma net income $ 2,561,928 $ 2,291,665 $ 7,562,817 $ 6,717,751 =============== ================ ============ ================ Earnings per share: Basic-as reported $ 0.86 $ 0.77 $ 2.57 $ 2.30 =============== ================ ============ ================ Basic-pro forma $ 0.86 $ 0.77 $ 2.54 $ 2.25 =============== ================ ============ ================ Diluted-as reported $ 0.85 $ 0.76 $ 2.53 $ 2.28 =============== ================ ============ ================ Diluted-pro forma $ 0.85 $ 0.76 $ 2.50 $ 2.24 =============== ================ ============ ================
4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IBT BANCORP, INC. AND SUBSIDIARY Period Ended September 30, 2003 NOTE C- EARNINGS PER SHARE Earnings per share are calculated on the basis of the weighted average number of shares outstanding. The weighted average shares outstanding were 2,977,655 for both the three and nine months ended September 30, 2003 and 2,981,167 and 2,977,655 for the three and nine months ended September 30, 2002, respectively. NOTE D - COMPREHENSIVE INCOME Total comprehensive income for the three months ended September 30, 2003 and 2002 were $987,553 and $3,366,157 respectively and for the nine months ended September 30, 2003 and 2002 were $6,201,071 and $8,773,327 respectively. NOTE E - INVESTMENT SECURITIES Investment securities available for sale consist of the following:
September 30, 2003 --------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains Losses Value ------------- ------------- ------------- ------------- Obligations of U.S. Government Agencies $ 68,259,241 $ 958,104 $ (406,105) $ 68,811,240 Obligations of State and political sub-divisions 36,142,734 1,864,945 - 38,007,679 Mortgage-backed securities 41,350,902 755,413 (143,064) 41,963,251 Other securities 709,283 36,049 -- 745,332 Equity securities 10,292,648 137,701 (1,352,112) 9,078,237 ------------- ------------- ------------- ------------- $ 156,754,808 $ 3,752,212 $ (1,901,281) $ 158,605,739 ============= ============= ============= =============
NOTE F - STOCK OPTION PLAN In September 2003, an additional 20,500 stock options were granted to employees and directors under the 2000 Stock Option Plan at an exercise price of $51.40 per share. As of September 30, 2003, 150,000 stock options have been granted, of which 75,449 are vested and are exercisable as follows: 44,500 are exercisable at $24.50 per share, 18,463 are exercisable at $23.00 per share, and 12,486 are exercisable at $32.88; 44,206 have not vested, 26,179 shares have been exercised and 4,166 have been forfeited. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words "believes", "anticipate", "contemplates", "expects", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. Those risks and uncertainties include changes in interest rates, risks associated with the effect of opening a new branch, the ability to control costs and expenses, and general economic conditions. GENERAL IBT Bancorp, Inc. is a bank holding company headquartered in Irwin, Pennsylvania, which provides a full range of commercial and retail banking services through its wholly owned banking subsidiary, Irwin Bank & Trust Co. (collectively, the "Company"). The Company's stock is traded on the American Stock Exchange under the symbol IRW. The grand opening of the Company's next full service branch office, located in the central Greensburg area of Westmoreland county, is scheduled for the fourth quarter of this year. The Company currently has a main office, five branch offices, a loan center, a trust office, and five supermarket branches located in the Pennsylvania counties of Westmoreland and Allegheny. FINANCIAL CONDITION At September 30, 2003, total assets increased $32.7 million, or 5.6%, to $616.7 million from $584.0 million at December 31, 2002. Asset growth was primarily due to an increase of $50.4 million in net loans and $5.0 million in cash and cash equivalents. Such increases were offset by a $25.0 million decrease in securities available for sale. At September 30, 2003, net loans reached $410.3 million from $359.9 million at December 31, 2002. The change in net loans was primarily attributable to the increase of $33.3 million in the real estate secured loan portfolio, including a $28.9 million increase in commercial real estate loans and an $13.3 million increase in multi-family real estate loans, offset, in part, by a $8.3 million decrease in one-to-four family residential mortgages. Given the historically low interest rate environment the Company has chosen to sell many of the one-to-four family residential mortgages made through out the year. The Company does not feel that it is prudent to maintain a large portfolio of thirty-year loans at the current low interest rates preferring to invest in shorter term higher yielding commercial based real estate loans. At September 30, 2003, total liabilities increased $29.7 million, or 5.6%, to $557.6 million from $527.9 million at December 31, 2002. This increase was primarily the result of borrowings from the Federal Home Loan Bank, which had a net increase of $15.5 million reaching $55.5 million at September 30, 2003 from $40.0 million at December 31, 2002. The advances are 6 primarily a combination of fixed and variable rate long-term loans with interest rates that compare favorably to rates currently being paid by the Company for certificates of deposits with similar terms. These advances were used to fund the growth in the loan portfolio. Non-interest bearing deposits reached $84.2 million at September 30, 2003, from $74.3 million at December 31, 2002. The increase of $9.9 million is attributed to higher balances in deposit accounts and an increase in the number of demand deposit accounts. Interest-bearing deposits decreased $1.8 million to $392.1 million at September 30,2003 from $393.9 million at December 31,2002. This change was primarily attributable to increases in savings accounts and interest bearing checking accounts of $3.4 million and $4.1 million, respectively. These increases were offset by a $9.8 million decrease in certificate of deposit accounts resulting primarily from expected deposit reductions of local public entities. At September 30, 2003, total stockholders' equity increased $2.9 million to $59.1 million from $56.2 million at December 31, 2002. The increase was due to net income of $7.6 million offset by a decrease of $1.4 million in accumulated other comprehensive income (net of income taxes), and by dividends paid of $3.1 million. In addition, surplus (additional paid in capital) was decreased $277,000 due to stock options exercised and increased $102,000 due to stock options granted in accordance with the adoption of FASB 123, as amended by FASB 148. See Note F to the consolidated financial statements. Accumulated other comprehensive income decreased as a result of changes in the net unrealized gain on securities available for sale. Because of interest rate volatility, the Company's accumulated other comprehensive income could materially fluctuate for each interim period and year-end. See Note E to the consolidated financial statements. RESULTS OF OPERATIONS Net income. Net income for the three months ended September 30, 2003 increased $270,000, or 11.8%, to $2.6 million, or $.85 per diluted earnings per share, from $2.3 million, or $.77 per diluted earnings per share, for the comparable three month period in 2002. Net income for the nine months ended September 30, 2003 increased $782,000 to $7.6 million, or $2.57 per diluted earnings per share from $6.9 million, or $2.29 per diluted earnings per share for the comparable nine month period in 2002. The increase for the three and nine months ended September 30, 2003 was the result of higher net interest income and other income partially offset by increases in other expenses. Interest income. Interest income for the three months ended September 30, 2003 decreased $142,000 to $8.4 million from $8.5 million compared to the three month period in 2002. The average balances of interest-earning assets increased $43.6 million for the three months ended September 30, 2003, to $580.4 million from $536.8 million for the comparable period in 2002. This increase was offset by a decrease in the yield on these assets of 57 basis points to 5.78%, for the three months ended September 30, 2003 from 6.35% for the comparable period in 2002. Interest income for the nine months ended September 30, 2003 increased $139,000 to $25.2 million from $25.1 million for the comparable period in 2002. The average balance of interest-earning assets increased $54.3 million to $572.6 million for the nine months ended September 30, 2003 from $518.3 million for the comparable 2002 period. This increase was offset by a decrease in the yield on these assets of 58 basis points to 5.87% for the nine months ended September 30, 2003 from 6.45% for the comparable period in 2002. The increases in the average balances of interest-earning assets for the three and nine month periods were driven by the growth in the loan portfolio as discussed under Financial Condition. The reduction of interest rates in the market contributed to the decline in average yields in both the three and nine month periods ended in September 2003. See "Average Balance Sheet and Rate/Volume Analysis" 7 Interest expense. Interest expense for the three months ended September 30, 2003 decreased $497,000 to $2.7 million from $3.2 million for the comparable period in 2002. The decrease in interest expense was primarily attributed to a 63 basis point decrease in the average cost of funds to 2.34% for the three months ended September 30, 2003 from 2.97% for the comparable period in 2002, offset by a $32.6 million increase in the average balance of interest-bearing liabilities. Interest expense for the nine months ended September 30, 2003 decreased $1.1 million to $8.5 million from $9.6 million for the comparable 2002 period. This decrease was primarily the result of a 60 basis point reduction in the average cost of funds to 2.45% for the nine months ended September 30, 2003 from 3.05% for the comparable nine month period in 2002, offset by a $43.7 million increase in the average balance of interest-bearing liabilities. The reduction of average cost of funds for the three and nine month periods ended September 30, 2003 is reflective of the continued historically low interest rates paid on deposits and borrowings over the past year. See "Average Balance Sheet and Rate/Volume Analysis." Average Balance Sheet The following table sets forth certain information relating to the company for the periods indicated. The average yields and costs are derived by dividing income or expense on an annualized basis by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from average daily balances.
------------------------------------------------------------------- Three Months Ended September 30, Three Months Ended September 30, ------------------------------------------------------------------- 2003 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------- -------- ---------- ------- -------- ---------- (Dollars In Thousands) (Dollars In Thousands) Interest-earning assets: Loans receivable (1) $402,611 $ 6,654 6.61% $350,146 $ 6,340 7.24% Investment securities available for sale (2) 173,561 1,713 3.95% 171,804 2,115 4.92% Other interest-earning assets (3) 4,193 15 1.42% 14,811 68 1.85% Total interest-earning assets $580,365 $ 8,382 5.78% $536,761 $ 8,523 6.35% ======= ====== ======= ====== Non-interest-earning assets 32,135 29,856 -------- -------- Total assets $612,500 $566,617 ======== ======== Interest-bearing liabilities: Money market accounts $ 62,417 $ 135 0.86% $ 62,349 $ 323 2.08% Certificates of Deposit 216,184 1,786 3.31% 213,186 1,975 3.71% Other liabilities 189,671 816 1.72% 160,116 936 2.34% -------- ------- -------- ------- Total interest-bearing liabilities $468,272 2,737 2.34% $435,651 $ 3,234 2.97% ======= ====== ======= ====== Non-interest-bearing liabilities 84,606 77,278 -------- ------- Total liabilities $552,878 $512,929 ======== ======== Retained Earnings (4) 59,622 53,688 -------- -------- Total liabilities and stockholders' equity $612,500 $566,617 ======== ======== Net interest income $ 5,645 $ 5,289 ======= ======= Interest rate spread (5) 3.44% 3.38% ====== ====== Net yield on interest-earning assets (6) 3.89% 3.94% ====== ====== Ratio of average interest-earning assets to average interest-bearing liabilities 123.94% 123.21% ====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan fees. (2) Includes interest-bearing deposits in other financial institutions. (3) Consists of federal funds sold. (4) Includes capital stock, surplus and accumulated other comprehensive income, less treasury stock. (5) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (6) Net yield on interest-earning assets represents annualized net interest income as a percentage of average interest-earning assets. 8 Average Balance Sheet The following table sets forth certain information relating to the company for the periods indicated. The average yields and costs are derived by dividing income or expense on an annualized basis by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from average daily balances.
------------------------------------------------------------------- Nine Months Ended September 30, Nine Months Ended September 30, ------------------------------------------------------------------- 2003 2002 ------------------------------ ------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------- -------- ---------- ------- -------- ---------- (Dollars In Thousands) (Dollars In Thousands) Interest-earning assets: Loans receivable (1) $387,055 $19,555 6.74% $332,252 $ 18,310 7.35% Investment securities available for sale (2) 181,840 5,624 4.12% 171,328 6,568 5.11% Other interest-earning assets (3) 3,680 35 1.28% 14,698 197 1.78% ------- ------ Total interest earning assets $572,575 $25,214 5.87% $518,278 $ 25,075 6.45% ======= ==== ======== ======= Non-interest earning assets 30,930 29,611 -------- -------- Total assets $603,505 $547,889 ======== ======== Interest-bearing liabilities: Money market accounts $ 61,835 $ 518 1.12% $ 60,441 $ 935 2.06% Certificates of Deposit 217,532 5,455 3.34% 202,648 5,902 3.88% Other liabilities 184,344 2,563 1.85% 156,896 2,765 2.35% -------- ------- ------ -------- -------- Total interest-bearing liabilities $463,711 $ 8,536 2.45% $419,985 $ 9,602 3.05% ======= ====== ======== ======= Non-interest-bearing liabilities 81,772 76,441 -------- -------- Total liabilities $545,483 $496,426 ======== ======== Retained Earnings (4) 58,022 51,463 -------- -------- Total liabilities and stockholders' equity $603,505 $547,889 ======== ======== Net interest income $16,678 $ 15,473 ======= ======== Interest rate spread (5) 3.42% 3.40% ====== ======= Net yield on interest-earning assets (6) 3.88% 3.98% ====== ====== Ratio of average interest-earning assets to average interest-bearing liabilities 123.48% 123.40% ====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan fees. (2) Includes interest-bearing deposits in other financial institutions. (3) Consists of federal funds sold. (4) Includes capital stock, surplus and accumulated other comprehensive income, less treasury stock. (5) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (6) Net yield on interest-earning assets represents annualized net interest income as a percentage of average interest earning assets. 9 Rate / Volume Analysis The following table shows the effect of changes in volumes and rates on interest income and interest expense. The changes in interest income and interest expense attributable to changes in both volume and rate have been allocated to the changes due to rate. Tax exempt income was not recalculated on a tax equivalent basis due to the immateriality of the change to the table resulting from a recalculation.
Three Month Period ended Nine Month Period ended September 30, 2003 September 30, 2003 ------------------------- ------------------------- 2003 vs. 2002 2003 vs. 2002 ------------------------- ------------------------- Increase (Decrease) Increase (Decrease) ------------------------- ------------------------- Due to Due to ------------------------- ------------------------- Volume Rate Net Volume Rate Net ------ ---- --- ------ ---- --- (Dollars In Thousands) (Dollars In Thousands) Interest income: Loans receivable 950 (636) 314 (3,020) (1,775) 1,245 Investment securities available for sale 22 (424) (402) 403 (1,347) (944) Other interest earning assets (49) (4) (53) (148) (14) (162) Total interest-earning assets 923 (1,064) (141) (3,275) (3,136) 139 ===== ====== ===== ======= ======= ======= Interest expense: Money market accounts 0 (188) (188) 22 (439) (417) Certificates of deposit 28 (217) (189) 433 (880) (447) Other liabilities 173 (293) (120) 484 (686) (202) Total interest-bearing liabilities 201 (698) (497) 939 (2,005) (1,066) ===== ====== ===== ======= ======= ======= Net change in net interest income 722 (366) 356 2,336 (1,131) 1,205 ===== ====== ===== ======= ======= =======
Provision for loan losses. For the three and nine months ended September 30, 2003, the provision for loan losses was $150,000 and $450,000, respectively, compared to $300,000 and $800,000, respectively, for the comparable 2002 periods. At September 30, 2003, loan loss reserves represent ..76% of the entire loan portfolio compared to .73% for the comparable 2002 period. The evaluation for determining the provision includes evaluations of concentrations of credit, past loss experience, current economic conditions, amount and composition of fair value of underlying collateral, loan commitments outstanding, delinquencies, and other information available at such time. The Company continues to monitor its allowance for loan losses as economic conditions dictate. Management continues to offer a wider variety of loan products coupled with the continued success of changing the mix of the products offered in the loan portfolio from lower yielding loans (i.e., one-to-four family loans) to higher yielding loans (i.e., equity loans, multi-family (five or more units) buildings, and commercial (nonresidential mortgages). Management periodically estimates the likely level of losses on loans to determine whether the allowance for loan losses is adequate to absorb losses in the existing portfolio for unidentified loans as well as classified loans. Based on these estimates, a provision for loan losses is charged to operations in order to adjust the allowance to a level determined to be adequate to absorb anticipated future losses. The allowance is based on management's evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Large groups of smaller balance homogenous loans are valued collectively for impairment. The amount of loss reserve is calculated using historical loss rates, net of recoveries, adjusted for environmental, and other qualitative factors such as industry, geographical, economic and political factors that can affect loss rates or loss measurements. Allowances for losses on specifically identified loans that are determined to be impaired are calculated based upon collateral value, market value, if determinable, or the present value of estimated future cash flows. The allowance is increased by a charge to operations, and reduced by charge-offs, net of recoveries. The allowance for loan losses is maintained at a level that represents management's best estimate of losses in the portfolio at the balance sheet date. However, there can be no assurance that the allowance for loan losses will be adequate to cover losses, which may be realized in the future, and that additional provisions for losses on loans will not be required. 10 Other income. Total other income for the three months ended September 30, 2003 increased $274,000 to $1.6 million from $1.3 million for the comparable three month period in 2002. Total other income for the nine months ended September 30, 2003 increased $812,000 to $4.7 million from $3.9 million for the comparable period in 2002. The increases in other income primarily due to net security gains of $206,000 and $443,000 for the three and nine month periods ended September 30, 2003, respectively and a $351,000 gain from the sale of other real estate property for the nine months ended September 30, 2003 Other expense. Total other expense for the three and nine month periods ended September 30, 2003 increased $411,000 and $1.3 million, respectively, to $3.6 million and $10.6 million from $3.2 million and $9.3 million, respectively, for the comparable three and nine month period in 2002. Salaries and benefits increased $220,000 and $691,000, respectively, from the comparable periods in 2002 due to merit salary increases, increased pension and health insurance costs, and additional staffing. Occupancy expense for the three and nine months ended September 30, 2003 increased $16,000 and $144,000, respectively, to $365,000 and $1.1 million from $350,000 and $985,000, respectively, for the comparable three and nine month periods in 2002. Such increases at September 30, 2003 were primarily due to depreciation expense related to equipment purchases for technological improvements and increased rental expense due to the relocation of the Company's item processing department. Other expenses for the three and nine month periods ended September 30, 2003 increased $162,000 and $399,000, respectively, to $1.1 million and $3.1 million from $935,000 and $2.7 million, respectively, for the comparable three and nine month periods in 2002. Included in this increase is $46,000 in costs associated with the Company's listing on the American Stock Exchange and a variety of increases in other expenses associated with the normal cost of doing business. Liquidity and capital resources. The Company's primary sources of funds include savings, deposits, loan repayments and prepayments, cash from operations and borrowings from the Federal Home Loan Bank. The Company uses its capital resources principally to fund loan originations and purchases, to repay maturing borrowings, to purchase investments, and for short-term liquidity needs. The Company's liquid assets consist of cash and cash equivalents, which include short-term investments. The levels of these assets are dependent on the Company's operating, financing, and investment activities during any given period. At September 30, 2003 cash and cash equivalents totaled $20.0 million. Net cash from operating activities at September 30, 2003 totaled $7.8 million, as compared to net cash from operating activities of $6.5 million at September 30, 2002. The increase in cash was primarily due to a $782,000 increase in net income offset by a decrease of $451,000 in accrued interest and other liabilities. Net cash used by investing activities at September 30, 2003 totaled $30.6 million, compared to cash used of $44.4 million for the same period in 2002. The $13.8 million decrease was primarily due to a decrease of $20.1 million in the proceeds from the sales and maturities of securities available for sale offset by an increase in the net loans made to customers of $9.4 million. Net cash from financing activities totaled $27.8 million at September 30, 2003, a decrease of $14.5 million from September 30, 2002 reported amount of $42.3 million. This change was mainly the result of a change in net deposits of $22.8 million offset by an increase in FHLB advances of $11.0 million. Liquidity may be adversely affected by unexpected outflows, excessive interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable, based in part on the Company's commitment to make loans and management's assessment of the Company's ability to generate funds. The Company is also subject to federal regulations that impose certain minimum capital requirements. At September 30, 2003, the Company was in compliance with federal regulations. 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no significant changes for the three and nine months ended September 30, 2003 from the information presented in the annual report on form 10K, under the caption Market Risk, for the year ended December 31, 2002. CONTROLS AND PROCEDURES The Company's management evaluated, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. There were no changes in the Company's internal control over financial reporting that occurred during the Company's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings The registrant is not engaged in any legal proceedings at the present time. From time to time, the Bank is a party to legal proceedings within the normal course of business wherein it enforces its security interest in loans made by it, and other matters of a like kind. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 3(i) Articles of Incorporation of IBT Bancorp, Inc.* 3(ii) Amended Bylaws of IBT Bancorp, Inc.** 10 Change In Control Severance Agreement with Charles G. Urtin *** 10.1 Deferred Compensation Plan For Bank Directors*** 10.2 Retirement Agreement Between Irwin Bank & Trust Co. And J. Curt Gardner*** 10.3 Death Benefit Only Deferred Compensation Plan For Bank Directors effective as of January 1, 1990*** 10.4 Retirement and Death Benefit Deferred Compensation Plan For Bank Directors effective as of January 1, 1990*** 10.5 2000 Stock Option Plan**** 31.1 Rule 13a-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a) Certification of Chief Financial Officer 32 Section 1350 Certification
------------------------- * Incorporated by reference to the identically numbered exhibits of the Registrant's Form 10 (file no. 0-25903) ** Incorporated by reference to the identically numbered exhibit of the Registrants Form 10-K for December 31, 2002. *** Incorporated by reference to the identically numbered exhibits of the Registrant's Form 10K for December 31, 1999. **** Incorporated by reference to the definitive proxy statement of the registrant filed on March 17, 2000. (b) Reports on Form 8-K (i) The registrant filed a Form 8-K on July 22, 2003 to report results of operations for the quarter ended June 30, 2003. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IBT BANCORP, INC. Date: November 12, 2003 By: /s/Charles G. Urtin ---------------------------------------- Charles G. Urtin President, Chief Executive Officer (Duly authorized officer) Date: November 12, 2003 By: /s/Raymond G. Suchta ---------------------------------------- Raymond G. Suchta Vice President, Chief Financial Officer (Duly authorized officer) 14 EX-31 3 ex-31.txt CERTIFICATIONS - SECTION 302 I, Charles G. Urtin, certify that: 1. I have reviewed this Form 10-Q of IBT Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)), to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Charles G. Urtin ------------------------------------- Charles G. Urtin President and Chief Executive Officer I, Raymond B. Suchta, certify that: 1. I have reviewed this Form 10-Q of IBT Bancorp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)), to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 12, 2003 /s/Raymond B. Suchta ------------------------------------- Raymond B. Suchta Chief Financial Officer EX-32 4 ex-32.txt CERTIFICATION - SECTION 906 CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of IBT Bancorp, Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2003 (the "Report") as filed with the Securities and Exchange Commission on the date hereof, we, Charles G. Urtin, Chief Executive Officer, and Raymond G. Suchta, Chief Financial Officer certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2003 /s/Charles G. Urtin /s/Raymond G. Suchta - ----------------------- ----------------------- Charles G. Urtin Raymond G. Suchta President and Chief Executive Officer Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----