-----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, PAzj6X49J23FNV/PaCeVSHErH2Txio6sVBt8ozedOwpnKOHpbzHnUTgF05fDixv4 MJLdso53aGC6NXK4x7vCUw== 0000946275-04-001038.txt : 20041108 0000946275-04-001038.hdr.sgml : 20041108 20041108163514 ACCESSION NUMBER: 0000946275-04-001038 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041108 DATE AS OF CHANGE: 20041108 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: 041126138 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_093004-0262.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, 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 November 05, 2004: 2,955,455 IBT BANCORP, INC. Contents --------
Pages ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements.............................................................................1 Consolidated balance sheets at September 30, 2004 (unaudited) and December 31, 2003.............................................................. 1 Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2004 and 2003 .............................................................. 2 Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 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. Unregistered Sales of Equity Securities and Use of Proceeds.................................... 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....................................................................................... 14 Signatures..................................................................................................... 15
CONSOLIDATED BALANCE SHEETS IBT BANCORP, INC. AND SUBSIDIARY
September 30, 2004 December 31, 2003 ------------------ ----------------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 14,307,522 $ 15,391,714 Interest-bearing deposits in banks 277,518 436,981 Certificate of deposit 100,000 100,000 Securities available for sale 199,096,399 167,907,113 Federal Home Loan Bank stock, at cost 5,684,200 4,540,500 Loans, net 432,475,014 416,286,455 Premises and equipment, net 6,155,002 6,468,749 Other assets 18,830,245 18,398,092 ------------- ------------- Total Assets $ 676,925,900 $ 629,529,604 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Non-interest bearing $ 80,686,396 $ 81,053,392 Interest-bearing 432,003,175 411,104,137 ------------- ------------- Total deposits 512,689,571 492,157,529 Federal funds purchased 4,912,000 7,900,000 Repurchase agreements 24,682,342 12,610,877 Accrued interest and other liabilities 3,351,370 3,947,390 FHLB advances 70,661,630 53,307,767 ------------- ------------- Total liabilities 616,296,913 569,923,563 Stockholders' Equity Capital stock, par value $1.25 per share, 50,000,000 shares authorized, 3,023,799 shares issued, 2,955,455 and 2,977,655 shares outstanding at September 30, 2004 and December 31, 2003, respectively 3,779,749 3,779,749 Surplus 1,428,264 1,684,258 Retained earnings 57,489,563 54,451,662 Accumulated other comprehensive income 280,812 1,033,638 ------------- ------------- 62,978,388 60,949,307 Less: Treasury stock, at cost (2,349,401) (1,343,266) ------------- ------------- Total stockholders' equity 60,628,987 59,606,041 ------------- ------------- Total Liabilities and Stockholders' Equity $ 676,925,900 $ 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 Nine Months Ended September 30, September 30, --------------------------------- ----------------------------------- 2004 2003 2004 2003 ---------------- --------------- --------------- ------------------ (unaudited) (unaudited) (unaudited) (unaudited) Interest Income Loans, including fees $ 6,530,267 $ 6,654,228 $ 19,665,680 $ 19,554,699 Investment securities 1,867,440 1,712,744 5,414,001 5,624,396 Federal funds sold 3,665 14,906 4,275 35,196 ---------------- --------------- --------------- ------------------ Total interest income 8,401,372 8,381,878 25,083,956 25,214,291 Interest Expense Deposits 2,195,734 2,054,194 6,430,078 6,555,209 FHLB advances 712,164 642,870 2,110,718 1,853,655 Repurchase agreements 46,915 31,782 92,955 104,140 Federal funds purchased 14,884 7,773 66,178 23,487 ---------------- --------------- --------------- ------------------ Total interest expense 2,969,697 2,736,619 8,699,929 8,536,491 ---------------- --------------- --------------- ------------------ Net Interest Income 5,431,675 5,645,259 16,384,027 16,677,800 Provision for Loan Losses 40,000 150,000 290,000 450,000 ---------------- --------------- --------------- ------------------ Net Interest Income after Provision for Loan Losses 5,391,675 5,495,259 16,094,027 16,227,800 Other Income (Losses) Service fees 646,690 541,862 1,806,403 1,758,916 Investment security gains 19,870 243,938 269,710 480,620 Investment security losses (19,287) (37,449) (19,287) (37,449) Debit card fees 178,638 146,653 488,239 475,835 Other income 444,000 686,932 1,409,840 2,030,683 ---------------- --------------- ------------------ ---------------- Total other income 1,269,911 1,581,936 3,954,905 4,708,605 Other Expenses Salaries 1,407,306 1,421,999 4,287,579 4,270,713 Pension and other employee benefits 426,753 404,736 1,363,631 1,190,299 Occupancy expense 441,356 365,300 1,310,691 1,128,434 Data processing expense 230,167 207,232 673,200 614,137 Pennsylvania shares tax 123,791 113,412 373,011 332,629 Advertising expense 73,977 89,919 224,110 291,954 Other expenses 1,011,257 979,264 2,999,842 2,744,246 ---------------- --------------- --------------- ---------------- Total other expenses 3,714,607 3,581,862 11,232,064 10,572,412 ---------------- --------------- --------------- ---------------- Income Before Income Taxes 2,946,978 3,495,333 8,816,868 10,363,993 Provision for Income Taxes 785,605 933,405 2,214,665 2,717,080 ---------------- --------------- --------------- ---------------- Net Income $ 2,161,373 $ 2,561,928 $ 6,602,203 $ 7,646,913 ================ =============== =============== ================ Basic Earnings per Share $ 0.73 $ 0.86 $ 2.23 $ 2.57 ================ =============== =============== ================ Diluted Earnings per Share $ 0.72 $ 0.85 $ 2.20 $ 2.57 ================ =============== =============== ================ Dividends per Share $ 0.40 $ 0.35 $ 1.20 $ 1.05 ================ =============== =============== ================
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, 2004 2003 ----------------- ----------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 6,602,203 $ 7,646,913 Adjustments to reconcile net cash from operating activities: Depreciation 757,287 595,880 Increase in cash surrender value of insurance (330,879) (396,727) Net amortization/accretion premiums and discounts 808,761 832,367 Net investment security gains (250,423) (443,171) Provision for loan losses 290,000 450,000 Stock options granted 59,142 102,154 Increase (decrease) in cash due to changes in assets and liabilities: Other assets 1,065,180 (653,625) Accrued interest and other liabilities (208,202) (298,057) ----------------- ----------------- Net Cash From Operating Activities 8,793,069 7,835,734 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of certificates of deposit (100,000) (100,000) Proceeds from maturity of certificates of deposit 100,000 100,000 Proceeds from sales of securities available for sale 34,485,026 29,937,923 Proceeds from maturities of securities available for sale 19,762,750 42,594,796 Purchase of securities available for sale (87,136,043) (50,153,363) Net loans made to customers (17,645,010) (50,347,265) Purchases of premises and equipment (443,540) (1,227,298) Proceeds from sales of Federal Home Loan Bank stock 2,407,400 - Purchase of Federal Home Loan Bank stock (3,551,100) (1,447,100) ----------------- ----------------- Net Cash Used By Investing Activities (52,120,517) (30,642,307) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits 20,532,042 8,002,003 Net increase in securities sold under repurchase agreements 12,071,465 7,685,958 Dividends paid (3,564,306) (3,126,537) Proceeds from FHLB advances 28,000,000 16,000,000 Repayment of FHLB advances (10,646,137) (501,684) Federal funds purchased (2,988,000) - Exercised stock options (315,136) (277,464) Purchase of treasury stock (1,006,135) - ----------------- ----------------- Net Cash From Financing Activities 42,083,793 27,782,276 ----------------- ----------------- Net Change in Cash and Cash Equivalents (1,243,655) 4,975,703 Cash and Cash Equivalents at Beginning of Period 15,828,695 15,066,278 ----------------- ----------------- Cash and Cash Equivalents at End of Period $ 14,585,040 $ 20,041,981 ================= =================
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, 2004 NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed 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, 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 were 2,977,115 and 2,977,385 for the three and nine months ended September 30, 2004, respectively and 2,977,655 for both the three and nine months ended September 30, 2003. NOTE C - COMPREHENSIVE INCOME Total comprehensive income for the three months ended September 30, 2004 and 2003 were $4,256,054 and $987,553 respectively and for the nine months ended September 30, 2004 and 2003 were $5,849,377 and $6,201,071 respectively. NOTE D - INVESTMENT SECURITIES Investment securities available for sale consist of the following:
September 30, 2004 ---------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains Losses Value ----------------- ---------------- ----------------- ---------------- Obligations of U.S. Government Agencies $ 85,513,151 $ 502,801 $ (158,008) $ 85,857,944 Obligations of State and political sub-divisions 42,607,170 1,995,167 (160,506) 44,441,831 Mortgage-backed securities 59,574,730 558,778 (230,017) 59,903,491 Other securities 712,904 8,460 - 721,364 Equity securities 10,262,970 156,151 (2,247,352) 8,171,769 ----------------- ---------------- ----------------- ---------------- $ 198,670,925 $ 3,221,357 $ (2,795,883) $ 199,096,399 ================= ================ ================= ================
4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IBT BANCORP, INC. AND SUBSIDIARY Period Ended September 30, 2004 NOTE E - STOCK OPTION PLAN As of September 30, 2004, 150,000 stock options have been granted, of which 84,721 are vested and are exercisable as follows: 36,750 are exercisable at $24.50 per share, 20,701 at $23.00 per share, 18,503 at $32.88 per share, and 8,767 at $52.40 per share. 17,035 shares are not yet vested, 38,710 shares have been exercised and 9,534 shares have been forfeited. No stock options were granted during the nine months ended September 30, 2004. 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 new branches, 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 newest branch location opened on September 15, 2004, in downtown Greensburg. This full service branch is located in the Pennsylvania Commons building at 20 North Pennsylvania Avenue. FINANCIAL CONDITION At September 30, 2004, total assets had increased $47.4 million, or 7.5%, to $676.9 million from $629.5 million at December 31, 2003. Asset growth was primarily due to increases of $31.2 million in securities available for sale and $16.2 million in net loans. At September 30, 2004, securities available for sale reached $199.1 million from $167.9 million at December 31, 2003. The increase in available for sale securities was primarily attributable to increases of $22.2 million in mortgage-backed securities, $6.5 million in obligations of state and political sub-divisions, and $2.9 million in obligations of U.S. Government agencies. The Company invests in mortgage-backed securities which provide a constant source of cash flow, in the form of monthly principle reductions, which can be reinvested in instruments yielding current interest rates or to meet future loan demand. Net loans reached $432.5 million at September 30, 2004 from $416.3 million at December 31, 2003. The increase in net loans is primarily attributed to a net increase of $7.4 million in consumer term loans, a $5.3 million increase in commercial loans, and a $4.2 million increase in loans made to municipalities. The Company attributes its loan growth to its competitive loan rates. At September 30, 2004, total liabilities increased $46.4 million, or 8.1%, to $616.3 million from $569.9 million at December 31, 2003. The increase was primarily the result of a net increase in interest-bearing deposits of $20.9 million. Supporting this change was a net increase of $6.4 million in interest bearing checking accounts and $11.8 million in certificates of deposit. The Company attributes the balance increases to new product promotions and attractive interest rates offered to deposit customers. The net increase of Federal Home Loan Bank advances was $17.4 million, which consisted of fixed-rate and amortizing advances with maturities ranging between two and ten years at an average cost of 3.8%. These advances were used to fund the growth in and the loan portfolio. Repurchase agreements increased to $24.7 million at September 30, 2004, an increase of $12.1 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. At September 30, 2004, total stockholders' equity increased $1.0 million to $60.6 million from $59.6 million at December 31, 2003. The change was primarily due to net income of $6.6 million offset by a decrease in accumulated 6 other comprehensive income of $750,000, dividends paid of $3.6 million, and an increase in treasury stock purchased of $1.0 million. Accumulated other comprehensive income decreased as a result of changes in the net unrealized gain on securities available for sale which have been affected by increases in short-term interest rates. Since June 30, 2003, the Federal Open Market Committee has raised its target Federal Funds rate three times to 1.75% from 1.00%. 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 September 30, 2004 decreased $400,000, or 15.6%, to $2.2 million, or $.72 per diluted earnings per share from $2.6 million, or $.85 per diluted earnings per share, for the comparable three month period in 2003. Net income for the nine months ended September 30, 2004 decreased $1.0 million to $6.6 million or $2.20 diluted earnings per share from $7.6 million or $2.57 diluted earnings per share for the comparable nine month period in 2003. The decrease for the three and nine months ended September 30, 2004 was the result of increases in other expenses and a decrease in net interest income and other income. Net interest income. Net interest income declined $214,000, or 3.78%, for the quarter and declined $298,000, or 1.76%, for the nine-month period. The declines in net interest income reflect a narrowing of the Company's interest rate spread to 3.08% and 3.15%, respectively, for the three and nine months ended September 30, 2004 compared to 3.44% and 3.42%, respectively, for the comparable prior year periods. Net interest margin narrowed to 3.46% and 3.55%, respectively, for the three and nine months ended September 30, 2004 compared to 3.89% and 3.88%, respectively, in the prior year periods. The historically low interest rate environment continues to put pressure on the Company's margin as rates on interest-earning assets have fallen faster than the average cost of the Company's interest-bearing liabilities. The Company has been able to offset the narrowing of its margin to some extent through balance sheet growth. Net interest income, however, has been negatively affected by an increase in the relative proportion of interest-bearing liabilities. The average ratio of interest-bearing assets to average interest-bearing liabilities declined to 120.08% and 121.11%, respectively, for the three and nine months ended September 30, 2004 compared to 123.94% and 123.48%, respectively, for the prior year periods due to faster growth in liabilities. Interest income. Interest income for the three months ended September 30, 2004 and 2003 remained relatively flat at $8.4 million. The average balances of interest earning assets increased $48.0 million for the three months ended September 30, 2004, to $628.4 million from $580.4 million for the comparable period in 2003. This increase was offset by a decrease in the yield of 43 basis points to 5.35%, for the three months ended September 30, 2004 from 5.78% for the comparable period in 2003. Interest income for the nine months ended September 30, 2004 decreased $130,000 to $25.1 million from $25.2 million for the comparable nine month period in 2003. The average balance of interest earning assets increased $43.0 million to $615.6 million from $572.6 million for the comparable period in 2003, but was offset by a 44 basis point decrease in the yield to 5.43% from 5.87% for the comparable period in 2003. The on-going historically low interest rate environment continued to put negative pressure on the interest earning assets in both the three and nine month periods ended September 30, 2004. See "Average Balance Sheet and Rate/Volume Analysis" Interest expense. Interest expense for the three months ended September 30, 2004 increased $233,000 to $3.0 million from $2.7 million for the comparable period in 2003. The increase in interest expense was primarily attributed to a $55.0 million increase in the average balance of interest bearing liabilities offset by a 7 basis point decrease in the average cost of funds to 2.27% for the three months ended September 30, 2004 from 2.34% for the comparable period in 2003. Interest expense for the nine months ended September 30, 2004 increased $163,000 to $8.7 million from $8.5 million for the comparable period in 2003. The increase in interest expense was primarily attributed to a $44.6 million increase in the average balance of interest bearing liabilities offset by a 17 basis point decrease in the average cost of funds to 2.28% for the nine months ended September 30, 2004 from 2.45% for the comparable period in 2003. The reduction of average cost of funds for the three and nine month periods ended September 30, 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" 7 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, 2004 2003 -------------------------------------------- --------------------------------------------- Average Average Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost -------------------------------------------- --------------------------------------------- (Dollars In Thousands) (Dollars In Thousands) Interest-earning assets: Loans receivable (1) $ 433,240 $ 6,530 6.03% $ 402,611 $ 6,654 6.61% Investment securities available for sale (2) 194,088 1,868 3.85% 173,561 1,713 3.95% Other interest-earning assets (3) 1,054 4 1.39% 4,193 15 1.42% ------------- ------------ ------------- ------------ Total interest earning assets $ 628,382 $ 8,402 5.35% $ 580,365 $ 8,382 5.78% =========================== =========================== Non-interest earning assets 37,532 32,135 ------------- ------------- Total assets $ 665,914 $ 612,500 ============= ============= Interest-bearing liabilities: Money market accounts $ 60,118 $ 129 0.86% $ 62,417 $ 135 0.86% Certificates of Deposit 247,358 1,915 3.10% 216,184 1,786 3.31% Other liabilities 215,831 926 1.72% 189,671 816 1.72% ------------- ------------ ------------- ------------ Total interest-bearing liabilities $ 523,307 $ 2,970 2.27% $ 468,272 $ 2,737 2.34% =========================== =========================== Non-interest-bearing liabilities 85,738 84,606 ------------- ------------- Total liabilities $ 609,045 $ 552,878 ============= ============= Stockholders' equity (4) 56,869 59,622 ------------- ------------- Total liabilities and stockholders' equity $ 665,914 $ 612,500 ============= ============= Net interest income $ 5,432 $ 5,645 ============ ============ Interest rate spread (5) 3.08% 3.44% ============== =============== Net interest margin (6) 3.46% 3.89% ============== =============== Ratio of average interest-earning assets to average interest-bearning liabilities 120.08% 123.94% ============== ===============
(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 interest margin 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, 2004 2003 -------------------------------------------- -------------------------------------------- Average Average Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost -------------------------------------------- -------------------------------------------- (Dollars In Thousands) (Dollars In Thousands) Interest-earning assets: Loans receivable (1) $ 428,195 $ 19,666 6.12% $ 387,055 $ 19,555 6.74% Investment securities available for sale (2) 187,008 5,414 3.86% 181,840 5,624 4.12% Other interest-earning assets (3) 387 4 1.47% 3,680 35 1.28% ------------- ------------ ------------- ------------ Total interest earning assets $ 615,590 $ 25,084 5.43% $ 572,575 $ 25,214 5.87% ========================== =========================== Non-interest earning assets 36,149 30,930 ------------- ------------- Total assets $ 651,739 $ 603,505 ============= ============= Interest-bearing liabilities: Money market accounts $ 58,213 $ 368 0.84% $ 61,835 $ 518 1.12% Certificates of Deposit 243,057 5,627 3.09% 217,532 5,455 3.34% Other liabilities 207,001 2,705 1.74% 184,344 2,563 1.85% ------------- ------------ ------------- ------------ Total interest-bearing liabilities $ 508,271 $ 8,700 2.28% $ 463,711 $ 8,536 2.45% ========================== =========================== Non-interest-bearing liabilities 83,673 81,772 ------------- ------------- Total liabilities $ 591,944 $ 545,483 ============= ============= Stockholders' equity (4) 59,795 58,022 ------------- ------------- Total liabilities and stockholders' equity $ 651,739 $ 603,505 ============= ============= Net interest income $ 16,384 $ 16,678 ============ ============ Interest rate spread (5) 3.15% 3.42% ============= ============= Net interest margin (6) 3.55% 3.88% ============= ============= Ratio of average interest-earning assets to average interest-bearning liabilities 121.11% 123.48% ============= =============
(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 interest margin 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 September 30, Nine Month Period ended September 30, 2004 vs. 2003 2004 vs. 2003 ------------------------------------------- ----------------------------------------- Increase (Decrease) Increase (Decrease) Due to Due to ------------------------------------------- ----------------------------------------- Volume Rate Net Volume Rate Net ------ ---- --- ------ ---- --- (Dollars In Thousands) (Dollars In Thousands) Interest income: Loans receivable $506 $(630) $(124) $2,078 $(1,967) $ 111 Investment securities available for sale 203 (48) 155 160 (370) (210) Other interest earning assets (11) 0 (11) (31) 0 (31) ------------------------------------------ ------------------------------------------ Total interest-earning assets $698 $(678) $ 20 $2,207 $(2,337) $(130) ========================================== ========================================== Interest expense: Money market accounts $ (5) $ (1) $ (6) $ (30) $ (120) $(150) Certificates of deposit 258 (129) 129 640 (468) 172 Other liabilities 113 (3) 110 315 (173) 142 ------------------------------------------ ------------------------------------------ Total interest-bearing liabilities $366 $(133) $ 233 $ 925 $ (761) $ 164 ========================================== ========================================== Net change in net interest income $332 $(545) $(213) $1,282 $(1,576) $(294) =========================================== ===========================================
10 Provision for loan losses. For the three months ended September 30, 2004 the provision for loan losses was $40,000 compared to $150,000 for the comparable 2003 period. For the nine months ended September 30, 2004 the provision for loan losses was $290,000 compared to $450,000 for the comparable 2003 period. The lower provision for the three and nine months ended September 30, 2004 as compared to the prior year periods is due to the Company's internal loan loss assessment which is explained below. 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: 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 September 30, 2004 decreased $312,000 to $1.3 million from $1.6 million for the comparable three month period in 2003. This change was primarily due to a net decrease of $206,000 in investment security gains and $133,000 on gains recorded from the sales of mortgage loans. Total other income for the nine months ended September 30, 2004 decreased $754,000 to $4.0 million from $4.7 million for the comparable period in 2003. The decrease in other income for the nine months ended September 30, 2004 was primarily due to a net decrease of $193,000 in investment security gains, $221,000 on gains recorded from the sales of mortgage loans, and a $346,000 gain recognized in 2003 from the sale of property held in other real estate. Other expense. Total other expenses for the three month period ended September 30, 2004 increased $133,000 to $3.7 million from $3.6 million for the comparable three month period in 2003. For the nine months ended September 30, 2004, total other expenses increased $660,000 to $11.2 million from $10.6 million for the comparable 2003 period. For the three and nine month periods ended September 30, 2004 pension and employee benefit costs increased $22,000 and $173,000, respectively compared to the same periods in 2003. This increase was primarily due to an increase in health care insurance costs and increased pension costs. Occupancy expense increased $76,000 and $182,000 for the 11 three and nine months ended September 30, 2004, respectively, compared to the same periods in 2003. These increases were due to increased depreciation costs related to the Company's investments in new branches and technology. The increases in other expenses of $32,000 and $256,000 for the three and nine month periods in 2004, respectively is primarily contributed to increased computer hardware maintenance costs, which rose $30,000 and $89,000, respectively from the comparable periods in 2003. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no significant changes for the three and nine months ended September 30, 2004 from the information presented in the 10K statement, under the caption Market Risk, for the year ended December 31, 2003. 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. Unregistered Sales of Equity Securities and Use of Proceeds (a) Unregistered Sales of Equity Securities. Not Applicable (b) Use of Proceeds. Not Applicable (c) Issuer Purchases of Equity Securities.
- ------------------------ -------------------- ------------------- ------------------------- -------------------------- (c) Total Number (d) Maximum Number Of Shares (or Units) (or Approximate Dollar (b) Purchased as Part Value) of Shares (or (a) Total Number Average Price Of Publicly Units) that May Yet Be Of Shares (or Paid per Share Announced Plans Purchased Under the Period Units) Purchased (or Unit) or Programs* Plans or Programs - ------------------------ ------------------------ ------------------- ------------------------- -------------------------- July 1 through 31 5,100 $45.68 92,956 58,144 - ------------------------ ------------------------ ------------------- ------------------------- -------------------------- August 1 through 31 0 $0 92,956 58,144 - ------------------------ ------------------------ ------------------- ------------------------- -------------------------- September 1 through 30 0 $0 92,956 58,144 - ------------------------ ------------------------ ------------------- ------------------------- -------------------------- Total 5,100 $45.68 92,956 58,144 - ------------------------ ------------------------ ------------------- ------------------------- --------------------------
* On November 18, 1999, the Registrant announced a stock repurchase plan for up to 151,100 shares. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 13 Item 5. Other Information Not applicable Item 6. Exhibits The following exhibits are either filed with or incorporated by reference in this Quarterly Report on Form 10-Q:
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. 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: November 5, 2004 By: /s/Charles G. Urtin --------------------------------------- Charles G. Urtin President, Chief Executive Officer (Duly authorized officer) Date: November 5, 2004 By: /s/Raymond G. Suchta --------------------------------------- Raymond G. Suchta Vice President, Chief Financial Officer (Principal Financial Officer) 15 EX-31 2 ex31-1.txt CERTIFICATION - SECTION 302 CERTIFICATION I, Charles G. Urtin, certify that: 1. I have reviewed this Quarterly Report on 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-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; (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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 5, 2004 /s/Charles G. Urtin ----------------------------------- Charles G. Urtin Chief Executive Officer EX-31 3 ex31-2.txt CERTIFICATION - SECITON 302 CERTIFICATION I, Raymond A. Suchta, certify that: 1. I have reviewed this Quarterly Report on 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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-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; (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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 5, 2004 /s/Raymond A. Suchta ---------------------------- Raymond A. Suchta Chief Financial Officer EX-32 4 ex-32.txt CERTIFICATION - SECTION 906 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 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 period ending September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof, we, Charles G. Urtin, Chief Executive Officer, and Raymond A. Suchta, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 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) or 15(d) 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. /s/Charles G. Urtin /s/Raymond A. Suchta - -------------------------------- ---------------------------------- Charles G. Urtin Raymond A. Suchta Chief Executive Officer Chief Financial Officer November 5, 2004 -----END PRIVACY-ENHANCED MESSAGE-----