10-Q 1 f10q_033104-0262.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 March 31, 2004 -------------- 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. 1-31655 IBT Bancorp, Inc. -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Pennsylvania 25-1532164 --------------------------------------- ------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 309 Main Street, Irwin, Pennsylvania 15642 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (724) 863-3100 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NA -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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. [X] Yes [ ] No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No Number of shares of Common Stock outstanding as of May 07, 2004: 2,977,655 IBT BANCORP, INC. Contents
Pages ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements.............................................................................1 Consolidated balance sheets at March 31, 2004 (unaudited) and December 31, 2003.............................................................. 1 Consolidated statements of income (unaudited) for the three months ended March 31, 2004 and 2003 .................................................................. 2 Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2004 and 2003................................................................... 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.............................................................................. 14 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities............... 14 Item 3. Defaults upon Senior Securities................................................................ 14 Item 4. Submission of Matters to a Vote of Security-Holders............................................ 14 Item 5. Other Information.............................................................................. 14 Item 6. Exhibits and Reports on Form 8-K............................................................... 14 Signatures..................................................................................................... 15
CONSOLIDATED BALANCE SHEETS IBT BANCORP, INC. AND SUBSIDIARY
March 31, 2004 December 31, 2003 -------------- ----------------- (unaudited) (unaudited) -------------- ----------------- ASSETS Cash and due from banks $ 14,352,877 $ 15,391,714 Interest-bearing deposits in banks 1,400,333 436,981 Certificates of deposit 100,000 100,000 Securities available for sale 179,492,635 167,907,113 Federal Home Loan Bank stock, at cost 5,190,400 4,540,500 Loans, net 419,817,554 416,286,455 Premises and equipment, net 6,274,426 6,468,749 Other assets 17,834,367 18,398,092 ------------- ------------- Total Assets $ 644,462,592 $ 629,529,604 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Non-interest bearing $ 77,810,135 $ 81,053,392 Interest-bearing 412,235,171 411,104,137 ------------- ------------- Total deposits 490,045,306 492,157,529 Federal funds purchased 10,200,000 7,900,000 Repurchase agreements 16,886,869 12,610,877 Accrued interest and other liabilities 4,911,196 3,947,390 FHLB advances 61,115,887 53,307,767 ------------- ------------- Total liabilities 583,159,258 569,923,563 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 March 31, 2004 and December 31, 2003 3,779,749 3,779,749 Surplus 1,393,763 1,684,258 Retained earnings 55,613,197 54,451,662 Accumulated other comprehensive income 1,859,891 1,033,638 ------------- ------------- 62,646,600 60,949,307 Less: Treasury stock, at cost (1,343,266) (1,343,266) ------------- ------------- Total stockholders' equity 61,303,334 59,606,041 ------------- ------------- Total Liabilities and Stockholders' Equity $ 644,462,592 $ 629,529,604 ============= =============
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 March 31, ---------------------------- 2004 2003 ---------- ---------- (unaudited) ---------------------------- Interest Income Loans, including fees $6,590,525 $6,437,445 Investment securities 1,719,582 2,046,119 Federal funds sold 457 9,992 ---------- ---------- Total interest income 8,310,564 8,493,556 Interest Expense Deposits 2,111,083 2,356,906 FHLB advances 693,020 573,969 Repurchase agreements 20,551 36,388 Federal funds purchased 27,690 6,528 ---------- ---------- Total interest expense 2,852,344 2,973,791 ---------- ---------- Net Interest Income 5,458,220 5,519,765 Provision for Loan Losses 125,000 150,000 ---------- ---------- Net Interest Income after Provision for Loan Losses 5,333,220 5,369,765 Other Income Service fees 550,802 570,236 Investment security gains 184,233 224,798 Debit card fees 128,803 154,046 Other income 484,217 491,460 ---------- ---------- Total other income 1,348,055 1,440,540 Other Expenses Salaries 1,329,624 1,215,430 Pension and other employee benefits 468,851 389,521 Occupancy expense 442,438 377,144 Data processing expense 220,187 194,410 Pennsylvania shares tax 125,430 105,804 Advertising expense 78,565 127,679 Other expenses 984,742 836,506 ---------- ---------- Total other expenses 3,649,837 3,246,494 ---------- ---------- Income Before Income Taxes 3,031,438 3,563,811 Provision for Income Taxes 678,843 934,406 ---------- ---------- Net Income $2,352,595 $2,629,405 ========== ========== Basic Earnings per Share $ 0.79 $ 0.88 ========== ========== Diluted Earnings per Share $ 0.78 $ 0.88 ========== ========== Dividends per Share $ 0.40 $ 0.35 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31, ------------------------------- 2004 2003 ------------ ------------ (unaudited) ------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,352,595 $ 2,629,405 Adjustments to reconcile net cash from operating activities: Depreciation 252,429 199,970 Increase in cash surrender value of insurance (112,918) (129,179) Net amortization/accretion of premiums and discounts 271,736 253,790 Investment security gains (184,233) (224,798) Provision for loan losses 125,000 150,000 Increase (decrease) in cash due to changes in assets and liabilities: Other assets 350,551 (968,028) Accrued interest and other liabilities 651,080 724,389 ------------ ------------ Net Cash From Operating Activities 3,706,240 2,635,549 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of securities available for sale 23,150,373 7,338,568 Proceeds from maturities of securities available for sale 9,579,468 17,143,080 Purchase of securities available for sale (43,150,969) (25,077,494) Net loans made to customers (3,442,925) (11,896,808) Purchases of premises and equipment (58,106) (519,192) Proceeds from sales of Federal Home Loan Bank stock 1,141,900 - Purchase of Federal Home Loan Bank stock (1,791,800) (1,301,100) ------------ ------------ Net Cash Used By Investing Activities (14,572,059) (14,312,946) CASH FLOWS FROM FINANCING ACTIVITIES Net decrease in deposits (2,112,223) (125,342) Net increase (decrease) in securities sold under repurchase agreements 4,275,994 (685) Dividends paid (1,191,062) (1,042,179) Proceeds from FHLB advances 8,000,000 14,000,000 Repayment of FHLB advances (191,880) (124,549) Federal funds purchased 2,300,000 - Exercised stock options (290,495) - ------------ ------------ Net Cash From Financing Activities 10,790,334 12,707,245 ------------ ------------ Net Change in Cash and Cash Equivalents (75,485) 1,029,848 Cash and Cash Equivalents at Beginning of Period 15,828,695 15,066,278 ------------ ------------ Cash and Cash Equivalents at End of Period $ 15,753,210 $ 16,096,126 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IBT BANCORP, INC. AND SUBSIDIARY Period Ended March 31, 2004 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 ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004 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, 2003. NOTE B - EARNINGS PER SHARE Earnings per share are calculated on the basis of the weighted average number of shares outstanding. The weighted average shares outstanding was 2,977,655 for the three months ended March 31, 2004 and 2003. NOTE C - COMPREHENSIVE INCOME Total comprehensive income for the three months ended March 31, 2004 and 2003 was $3,178,848 and $2,278,645, respectively. NOTE D - INVESTMENT SECURITIES Investment securities available for sale consist of the following:
March 31, 2004 -------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains Losses Value ------------- ------------- ------------- ------------- Obligations of U.S. Government Agencies $ 71,549,221 $ 1,103,399 $ (33,140) $ 72,619,480 Obligations of State and political sub-divisions 37,503,955 2,404,965 (86,196) 39,822,724 Mortgage-backed securities 56,617,697 1,024,948 (36,956) 57,605,689 Other securities 710,970 23,962 - 734,932 Equity securities 10,292,778 169,274 (1,752,242) 8,709,810 ------------- ------------- ------------- ------------- $ 176,674,621 $ 4,726,548 $ (1,908,534) $ 179,492,635 ============= ============= ============= =============
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"). On February 25, 2004, the Company announced plans to open a new office on Pennsylvania Avenue, Greensburg, Pennsylvania. The new office will be integrated into the Company's existing Trust Division office and will provide a full range of commercial and retail banking services. FINANCIAL CONDITION At March 31, 2004 total assets had increased $15.0 million, or 2.4%, to $644.5 million from $629.5 million at December 31, 2003. Asset growth was primarily due to increases of $11.5 million in securities available for sale and $3.5 million in net loans. Other growth in assets included a $700,000 increase in Federal Home Loan Bank stock. At March 31, 2004, securities available for sale reached $179.4 million from $167.9 million at December 31, 2003. The increase in available for sale securities was primarily attributable to increases of $19.9 million in mortgage backed securities and $1.9 million in obligations of state and political sub-divisions offset by a decrease of $10.3 million in obligations of U.S. government agencies. The monthly principal reductions associated with mortgage backed securities provide the Company with a constant source of cash flow that can be reinvested in instruments yielding current interest rates. Net loans reached $419.8 million at March 31, 2004 from $416.3 million at December 31, 2003. The increase in net loans is primarily attributed to a net increase of $3.8 million in tax-free loans made to local municipalities. At March 31, 2004, total liabilities increased $13.3 million, or 2.3%, to $583.2 million from $569.9 million at December 31, 2003. This increase was primarily the result of fixed-rate long-term and amortizing borrowings from the Federal Home Loan Bank, which had a net increase of $7.8 million reaching $61.1 million at March 31, 2004 from $53.3 million at December 31, 2003. These low-rate advances were used to fund the growth in available 6 for sale securities. Overnight Federal funds purchased increased $2.3 million to $10.2 million at March 31, 2004 from $7.9 million at December 31, 2003. The Company used these low-cost funds to meet the short-term liquidity needs of the Company. Repurchase agreements increased to $16.9 million at March 31, 2004, an increase of $4.3 million from December 31, 2003. The Company offers its corporate customers sweep accounts where unused deposit balances are swept into an overnight repurchase agreement yielding market rates. Interest-bearing deposits increased to $412.2 million at March 31, 2004, from $411.1 million at December 31, 2003. The increase of $1.1 million was primarily due to increases of $3.8 million in interest-bearing checking accounts and $2.7 million in savings accounts. Such increases were offset by decreases of $2.2 million and $3.0 million in money market and certificate of deposit accounts, respectively. Non-interest bearing deposit accounts decreased to $77.8 million at March 31, 2004, from $81.1 million at December 31, 2003. The decrease of $3.3 million is attributed to existing deposit customers maintaining a smaller balance on March 31, 2004. Balance fluctuations within this account from quarter to quarter are expected. At March 31, 2004, total stockholders' equity increased $1.7 million to $61.3 million from $59.6 million at December 31, 2003. The increase was due to net income of $2.4 million and accumulated other comprehensive income (net of income taxes) of $800,000 offset by dividends paid of $1.2 million. Accumulated other comprehensive income increased 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 D to the consolidated financial statements. RESULTS OF OPERATIONS Net income. Net income for the three months ended March 31, 2004 decreased $276,000, or 10.5%, to $2.4 million, or $.78 per diluted earnings per share from $2.6 million, or $.88 per diluted earnings per share, for the comparable three month period in 2003. The decrease for the three months ended March 31, 2004 was the result of increases in other expenses and a decrease in net interest income and other income. Interest income. Interest income for the three months ended March 31, 2004 decreased $183,000 to $8.3 million from $8.5 million for the comparable three month period in 2003. While the average balances of interest earning assets increased $36.6 million for the three months ended March 31, 2004, to $600.9 million from $564.3 million for the comparable period in 2003, the yield on these assets decreased 49 basis points to 5.53%, for the three months ended March 31, 2004 from 6.02% for the comparable period in 2003. The on-going low interest rate environment continues to put negative pressure on interest earning assets. See "Average Balance Sheet and Rate/Volume Analysis." 7 Interest expense. Interest expense for the three months ended March 31, 2004 decreased $122,000 to $2.9 million from $3.0 million for the comparable period in 2003. The decrease in interest expense was primarily attributed to a 28 basis point decrease in the average cost of funds to 2.31% for the three months ended March 31, 2004 from 2.59% for the comparable period in 2003, offset by a $33.7 million increase in the average balance of interest bearing liabilities. The reduction of average cost of funds for the three month period ended March 31, 2004 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 March 31, Three Months Ended March 31, ------------------------------------------------------------------------------------------------------------ 2004 2003 ---- ---- ------------------------------------------------------------------------------------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------------------------------------------------------------------------------------------------------------ (Dollars In Thousands) (Dollars In Thousands) ------------------------------------------------------------------------------------------------------------ Interest-earning assets: ------------------------------------------------------------------------------------------------------------ Loans receivable (1) $421,939 $ 6,590 6.25% $369,759 $ 6,437 6.96% ------------------------------------------------------------------------------------------------------------ Investment securities available for sale (2) 179,003 1,720 3.84% 190,972 2,046 4.29% ------------------------------------------------------------------------------------------------------------ Other interest-earning assets (3) 32 0 5.74% 3,545 10 1.13% ------------------------------------------------------------------------------------------------------------ Total interest earning assets $600,974 $ 8,310 5.53% $564,276 $ 8,493 6.02% -------------------------------------------------------=====================-------------=================== ------------------------------------------------------------------------------------------------------------ Non-interest earning assets 32,688 29,065 -------- -------- ------------------------------------------------------------------------------------------------------------ Total assets $633,662 $593,341 ---------------------------------------------========-------------------------========---------------------- ------------------------------------------------------------------------------------------------------------ Interest-bearing liabilities: ------------------------------------------------------------------------------------------------------------ Money market accounts $ 56,499 $ 118 0.84% $ 60,474 $ 216 1.43% ------------------------------------------------------------------------------------------------------------ Certificates of Deposit 239,120 1,857 3.11% 224,060 1,893 3.38% ------------------------------------------------------------------------------------------------------------ Other liabilities 197,411 877 1.78% 174,767 864 1.98% -------- -------- -------- ------- ------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities $493,030 $ 2,852 2.31% $459,301 $ 2,973 2.59% --------------------------------------------- ====================--------------=================== ------------------------------------------------------------------------------------------------------------ Non-interest-bearing liabilities 80,675 77,373 -------- ------- ------------------------------------------------------------------------------------------------------------ Total liabilities $ 573,705 $536,674 --------------------------------------------=========---------------------------==================---------- Stockholders' equity (4) 59,957 56,667 --------- -------- ------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 633,662 $593,341 -----------------------------------------------======-------------------------========---------------------- Net interest income $ 5,458 $ 5,520 -------------------------------------------------------========--------------------------=======------------ Interest rate spread (5) 3.22% 3.43% ---------------------------------------------------------------------======------------------------========= Net yield on interest-earning assets (6) 3.63% 3.91% ---------------------------------------------------------------------======------------------------========= Ratio of average interest-earning assets to average interest- bearing liabilities 121.89% 122.86% ---------------------------------------------------------------------======------------------------=========
8 (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. 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 March 31, 2004 --------------------------------------------------------------------------------------------------------- 2004 vs. 2003 --------------------------------------------------------------------------------------------------------- Increase (Decrease) Due to --------------------------------------------------------------------------------------------------------- Volume Rate Net ----------------------------------------------------------------------------------------------------- (In Thousands) ----------------------------------------------------------------------------------------------------- Interest income: ----------------------------------------------------------------------------------------------------- Loans receivable $ 908 $(755) $153 ----------------------------------------------------------------------------------------------------- Investment securities available for sale (128) (198) (326) ----------------------------------------------------------------------------------------------------- Other interest earning assets (10) 0 (10) ----------------------------------------------------------------------------------------------------- Total interest-earning assets $770 $(953) $(183) -----------------------------------------------------================================================ ----------------------------------------------------------------------------------------------------- Interest expense: ----------------------------------------------------------------------------------------------------- Money market accounts $(14) $ (84) $ (98) ----------------------------------------------------------------------------------------------------- Certificates of deposit 128 (164) (36) ----------------------------------------------------------------------------------------------------- Other liabilities 112 (99) 13 ----------------------------------------------------------------------------------------------------- Total interest-bearing liabilities $226 $(347) $(121) -----------------------------------------------------================================================ ----------------------------------------------------------------------------------------------------- Net change in net interest income $544 $(606) $ (62) -----------------------------------------------------================================================
Provision for loan losses. For the three months ended March 31, 2004 the provision for loan losses was $125,000 compared to $150,000 for the comparable 2003 period. The provision for loan losses is charged to operations to bring the total allowance for loan losses to a level that represents management's best estimate of the losses inherent in the portfolio, based on a monthly review by management of the following factors: 9 o Historical experience o Volume o Type of lending conducted by the Bank o Industry standards o The level and status of past due and non-performing loans o The general economic conditions in the Bank's lending area; and o Other factors affecting the collectability of the loans in the portfolio Large groups of homogeneous loans, such as residential real estate, small commercial real estate loans and home equity and consumer loans are evaluated in the aggregate using historical loss factors and other data. The amount of loss reserve is calculated using historical loss rates, net of recoveries on a five year rolling weighted average, adjusted for environmental, and other qualitative factors such as industry, geographical, economic and political factors that can effect loss rates or loss measurements. Large balance and/or more complex loans such as multi-family and commercial real estate loans may be evaluated on an individual basis and are also evaluated in the aggregate to determine adequate reserves. As specific loans are determined to be impaired, specific reserves are assigned based upon collateral value, market value, if determinable, or the present value of the estimated future cash flows of the loan. The allowance is increased by a provision for loan loss which is charged to expense, and reduced by charge-offs, net of recoveries. Loans are placed on non-accrual status when they are 90 days past due, unless they are adequately collateralized and in the process of collection. 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 losses will be adequate to cover losses which may be realized in the future and that additional provisions for losses will not be required. Other income. Total other income for the three months ended March 31, 2004 decreased $93,000 to $1.3 million from $1.4 million for the comparable three month period in 2003. The decrease in other income for the three months ended March 31, 2004 was primarily due to a reduction in gains recognized from the sale of available for sale securities of $41,000, to $184,000, compared to gains of $225,000 reported for the same 2003 period. The Company sold select securities in 2004, that were expected to be called, taking advantage of the steep yield curve and reducing maturity concentrations. Additional decreases in other income were mainly due to a decrease of $25,000 in debit card fees. This decrease was primarily the result of the agreement made between Master Card and Wal-Mart, which reduced processing charges on debit card transactions. Other expense. Total other expense for the three month period ended March 31, 2004 increased $404,000 to $3.6 million from $3.2 million for the comparable three month period in 2003. Salaries and benefits increased $194,000 at March 31, 2004 from the comparable period in 2003 due to annual salary increases, increased staff primarily for the new Greensburg branch, and increases in employee health care costs. Occupancy expense for the three months ended March 31, 2004 increased $65,000 to $442,000 from $377,000 for the comparable three month period in 2003. Such increases at March 31, 2004 were predominantly due to depreciation expense related to the opening of the Greensburg branch in November 2003 and equipment purchases for technological improvements. Other expenses increased $148,000 to $985,000, from $837,000 for the 10 comparable 2003 period. Costs related to maintenance agreements on various software and equipment increased $40,000 from the comparable period in 2003. The balance of the increase is due to normal increases in the cost of doing business. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no significant changes for the three months ended March 31, 2004 from the information presented in the 10K statement, under the caption Market Risk, for the year ended December 31, 2003. 11 Item 4. 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 party to any material legal proceedings at the present time. From time to time, the Bank is a party to routine 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, Use of Proceeds and Issuer Purchases of Equity Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders On April 20, 2004, the Registrant held its annual meeting of stockholders at which the following matters were voted on: PROPOSAL I - ELECTION OF DIRECTORS Nominee For Withheld ------- --- -------- John N. Brenzia 2,534,184 67,015 Robert Rebich, Jr. 2,562,201 39,998 Grant J. Shevchik 2,548,444 52,756 Charles G. Urtin 2,530,184 71,016 PROPOSAL II - RATIFICATION OF AUDITORS For Against Abstain --- ------- ------- 2,558,148 40,311 -0- There were no broker non-votes on any of the foregoing. 13 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.** 4 Rights Agreement, dated as of November 18, 2003, by and between IBT Bancorp, Inc. and Registrar and Transfer Company, as Rights Agent.*** 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) filed April 29, 1999. ** Incorporated by reference to the identically numbered exhibit of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. *** Incorporated by reference to Exhibit 4 to Amendment No. 1 to Form 8-A (File No. 1-31655) filed November 20, 2003. **** Incorporated by reference to the identically numbered exhibits of the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. ***** Incorporated by reference to Exhibit 4.1 the Registrant's Registration Statement on Form S-8 (File No. 333-40398) filed June 29, 2000. (b) Reports on Form 8-K ------------------- (i) On February 18, 2004, the registrant filed a Current Report on Form 8-K to report its announcement of earnings for the quarter and year ended December 31, 2003 under Item 12. No financial statements were filed as part of this report. 14 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: May 10, 2004 By: /s/Charles G. Urtin --------------------------------------- Charles G. Urtin President, Chief Executive Officer (Duly authorized officer) Date: May 10, 2004 By: /s/Raymond G. Suchta --------------------------------------- Raymond G. Suchta Vice President, Chief Financial Officer (Principal Financial Officer) 15