-----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, HoEruYATQIoAG5bfzbAQh3VVbk4csfp0X3LaY9NlohG0XX16A/ZBYBeyF8oCpCVS XRMDEpvUOPMGIjgOKkLpuA== 0000946275-06-000611.txt : 20060807 0000946275-06-000611.hdr.sgml : 20060807 20060807153317 ACCESSION NUMBER: 0000946275-06-000611 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060807 DATE AS OF CHANGE: 20060807 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: 061008835 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_063006-0262.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 June 30, 2006 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No Number of shares of Common Stock outstanding as of August 03, 2006: 2,941,920 IBT BANCORP, INC. Contents --------
Pages ----- PART I - FINANCIAL INFORMATION Item 1. Financial Statements............................................................. 2 Consolidated balance sheets (unaudited) at June 30, 2006 and December 31, 2005............................................................ 2 Consolidated statements of income (unaudited) for the three and six months ended June 30, 2006 and 2005 .................................................... 3 Consolidated statements of cash flows (unaudited) for the six months ended June 30, 2006 and 2005..................................................... 4 Notes to consolidated financial statements....................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk....................... 14 Item 4. Controls and Procedures.......................................................... 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings................................................................ 15 Item 1A. Risk Factors..................................................................... 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds...................... 15 Item 3. Defaults upon Senior Securities.................................................. 16 Item 4. Submission of Matters to a Vote of Security-Holders.............................. 16 Item 5. Other Information................................................................ 16 Item 6. Exhibits......................................................................... 16 Signatures....................................................................................... 18
CONSOLIDATED BALANCE SHEETS IBT BANCORP, INC. AND SUBSIDIARY
June 30, 2006 December 31, 2005 ------------- ----------------- (unaudited) (unaudited) ------------- ------------- ASSETS Cash and due from banks $ 18,549,291 $ 15,063,970 Interest-bearing deposits in banks 336,448 435,970 Federal funds sold - - Certificates of deposit 100,000 100,000 Securities available for sale 206,003,575 195,993,449 Federal Home Loan Bank stock, at cost 5,810,400 5,469,600 Loans, net 459,119,172 442,225,344 Premises and equipment, net 5,461,487 5,624,572 Other assets 21,625,794 20,237,792 ------------- ------------- Total Assets $ 717,006,167 $ 685,150,697 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Deposits Non-interest bearing $ 83,599,366 $ 83,846,681 Interest-bearing 451,649,235 436,639,077 ------------- ------------- Total deposits 535,248,601 520,485,758 Repurchase agreements 31,384,499 18,442,703 Accrued interest and other liabilities 4,877,102 4,022,118 Federal funds purchased 7,224,000 12,468,000 FHLB advances 78,576,381 68,651,125 ------------- ------------- Total liabilities 657,310,583 624,069,704 Stockholders' Equity Capital stock, par value $1.25 per share, 50,000,000 shares authorized, 3,023,799 shares issued, 2,941,920 and 2,955,455 shares outstanding at June 30, 2006 and December 31, 2005, respectively 3,779,749 3,779,749 Surplus 1,267,488 1,231,444 Retained earnings 60,472,321 58,931,230 Accumulated other comprehensive income (2,930,738) (512,029) ------------- ------------- 62,588,820 63,430,394 Less: Treasury stock, at cost (2,893,236) (2,349,401) ------------- ------------- Total stockholders' equity 59,695,584 61,080,993 ------------- ------------- Total Liabilities and Stockholders' Equity $ 717,006,167 $ 685,150,697 ============= =============
The accompanying notes are an integral part of these consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF INCOME IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended June 30, Six Months Ended June 30, ---------------------------- --------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ (unaudited) (unaudited) ---------------------------- ---------------------------- Interest Income Loans, including fees $ 7,491,597 $ 6,680,995 $ 14,706,082 $ 13,405,227 Investment securities 2,352,143 2,098,145 4,554,528 4,103,724 Federal funds sold 28,043 35,204 29,515 43,424 ------------ ------------ ------------ ------------ Total interest income 9,871,783 8,814,344 19,290,125 17,552,375 Interest Expense Deposits 3,142,129 2,419,635 6,033,230 4,736,796 FHLB advances 871,972 734,406 1,629,678 1,463,913 Repurchase agreements 345,618 122,339 523,523 187,285 Federal funds purchased 33,242 4,046 217,176 19,056 ------------ ------------ ------------ ------------ Total interest expense 4,392,961 3,280,426 8,403,607 6,407,050 ------------ ------------ ------------ ------------ Net Interest Income 5,478,822 5,533,918 10,886,518 11,145,325 Provision for Loan Losses 550,000 300,000 850,000 600,000 ------------ ------------ ------------ ------------ Net Interest Income after Provision for Loan Losses 4,928,822 5,233,918 10,036,518 10,545,325 Other Income (losses) Service fees 931,800 902,136 1,803,954 1,750,357 Investment security gains 324,843 39,633 579,843 120,744 Investment security losses (57,100) - (57,100) - Increase in cash surrender value of life insurance 103,346 102,199 213,633 209,714 Debit card fees 211,843 200,645 408,356 375,720 Other income 343,819 533,008 754,418 945,756 ------------ ------------ ------------ ------------ Total other income 1,858,551 1,777,621 3,703,104 3,402,291 Other Expenses Salaries 1,589,739 1,661,772 3,133,369 3,068,779 Pension and other employee benefits 525,461 429,653 1,103,072 901,157 Occupancy expense 396,930 436,457 810,396 870,206 Data processing expense 273,470 241,722 540,791 477,729 Pennsylvania shares tax 164,355 142,928 315,140 274,571 Advertising expense 104,466 101,600 167,395 161,175 Other expenses 1,163,113 1,049,879 2,185,034 2,020,555 ------------ ------------ ------------ ------------ Total other expenses 4,217,534 4,064,011 8,255,197 7,774,172 ------------ ------------ ------------ ------------ Income Before Income Taxes 2,569,839 2,947,528 5,484,425 6,173,444 Provision for Income Taxes 384,418 621,685 988,565 1,523,455 ------------ ------------ ------------ ------------ Net Income $ 2,185,421 $ 2,325,843 $ 4,495,860 $ 4,649,989 ============ ============ ============ ============ Basic Earnings per Share $ 0.74 $ 0.79 $ 1.52 $ 1.58 ============ ============ ============ ============ Diluted Earnings per Share $ 0.73 $ 0.78 $ 1.51 $ 1.56 ============ ============ ============ ============ Dividends per Share $ 0.50 $ 0.46 $ 1.00 $ 0.92 ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS IBT BANCORP, INC. AND SUBSIDIARY
Six Months Ended June 30, ---------------------------- 2006 2005 ------------ ------------ (unaudited) ---------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,495,860 $ 4,649,989 Adjustments to reconcile net cash from operating activities: Depreciation 408,000 489,096 Increase in cash surrender value of insurance (213,633) (209,714) Net amortization/accretion of premiums and discounts 214,309 441,694 Investment security gains (522,743) (120,744) Provision for loan losses 850,000 600,000 Stock options granted 39,808 - Increase (decrease) in cash due to changes in assets and liabilities: Other assets (68,073) 1,160,272 Accrued interest and other liabilities 854,984 (398,746) ------------ ------------ Net Cash From Operating Activities 6,058,512 6,611,847 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 10,273,866 - Proceeds from maturities of securities available for sale 10,694,738 16,156,449 Purchase of securities available for sale (34,267,874) (31,804,190) Net (increase) decrease in loans (17,671,255) 7,787,133 Purchases of premises and equipment (244,915) (273,095) Proceeds from sales of Federal Home Loan Bank stock 3,476,500 2,916,500 Purchase of Federal Home Loan Bank stock (3,817,300) (2,327,400) ------------ ------------ Net Cash Used By Investing Activities (31,556,240) (7,544,603) CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits 14,762,843 (9,028,586) Net increase in securities sold under repurchase agreements 12,941,796 9,466,613 Dividends paid (2,954,769) (2,719,017) Proceeds from FHLB advances 12,000,000 - Repayment of FHLB advances (2,074,744) (666,919) Net (decrease) increase in federal funds purchased (5,244,000) 4,612,000 Exercised stock options (3,764) (138,193) Purchase treasury stock (543,835) - ------------ ------------ Net Cash From Financing Activities 28,883,527 1,525,898 ------------ ------------ Net Change in Cash and Cash Equivalents 3,385,799 593,142 Cash and Cash Equivalents at Beginning of Period 15,499,940 16,187,171 ------------ ------------ Cash and Cash Equivalents at End of Period $ 18,885,739 $ 16,780,313 ============ ============
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 June 30, 2006 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 and 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 and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006 or any future interim period. The interim financial statements should be read in conjunction with the financial statements and footnotes thereto included in the IBT Bancorp, Inc. and subsidiary Annual Report on Form 10-K for the year ended December 31, 2005. 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 2,952,649 and 2,953,796 for the three and six months ended June 30, 2006 and 2,955,455 for the three and six months ended June 30, 2005. NOTE C - COMPREHENSIVE INCOME Total comprehensive income for the three months ended June 30, 2006 and 2005 was $114,638 and $3,269,976, respectively and for the six months ended June 30, 2006 and 2005 was $2,077,151 and $4,349,763, respectively. NOTE D - INVESTMENT SECURITIES Investment securities available for sale consist of the following:
June 30, 2006 --------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Market Cost Gains Losses Value ------------- ------------- ------------- ------------- Obligations of U.S. Government Agencies $ 83,514,188 $ - $ (2,203,037) $ 81,311,151 Obligations of States and political sub-divisions 61,151,185 951,564 (858,395) 61,244,354 Mortgage-backed securities 61,884,232 - (2,964,741) 58,919,491 Other securities 95,287 - (3) 95,284 Equity securities 4,014,789 446,400 (27,894) 4,433,295 ------------- ------------- ------------- ------------- $ 210,659,681 $ 1,397,964 $ (6,054,070) $ 206,003,575 ============= ============= ============= =============
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IBT BANCORP, INC. AND SUBSIDIARY Period Ended June 30, 2006 NOTE E - STOCK OPTION PLAN In April 2006, an additional 40,250 stock options were granted to employees and directors under the 2000 Stock Option Plan at an exercise price of $39.97 per share. Compensation expense of $39,808 was recorded in the second quarter regarding those options. As of June 30, 2006, 190,250 stock options have been granted, of which 81,902 are vested and are exercisable as follows: 31,250 are exercisable at $24.50 per share, 16,678 are exercisable at $23.00 per share, 20,443 are exercisable at $32.88, and 13,531 are exercisable at $52.40 per share; 8,000 are vested and exercisable at $39.97 in October 2006, 37,019 have not vested, 54,128 shares have been exercised and 9,201 have been forfeited. 6 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", "anticipates", "contemplates", "expects", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which 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. IBT Bancorp, Inc. undertakes no obligation to update those forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. GENERAL IBT Bancorp, Inc. is a bank holding company headquartered in Irwin, Pennsylvania, which provides a full range of commercial and retail banking and trust 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. FINANCIAL CONDITION At June 30, 2006 total assets increased $31.8 million to $717.0 million from $685.2 million at December 31, 2005. Asset growth was primarily due to increases in net loans, securities available for sale, and cash and due from banks of $16.9 million, $10.0 million, and $3.4 million, respectively. Net loans increased to $459.1 million at June 30, 2006 from $442.2 million at December 31, 2005. This change was primarily due to an increase in real estate secured mortgage and commercial loans of $17.4 million and consumer term loans of $4.7 million. Offsetting these increases was a decrease in consumer lines of credit of $2.0 million and loans made to municipalities of $2.5 million. At June 30, 2006, securities available for sale increased $10.0 million to $206.0 million from $196.0 million at December 31, 2005. This change was primarily due to increases in obligations of states and political sub-divisions, mortgage-backed securities, and obligations of U.S. government agencies, which posted net increases of $6.4 million, $5.1 million, and $2.4 million, respectively offset by a net decrease in equity securities of $3.9 million. The Company evaluates the available-for-sale investment portfolio on an on-going basis to maximize yield, within established risk thresholds, making purchasing and selling decisions accordingly. At June 30, 2006, total liabilities increased $33.2 million to $657.3 million from $624.1 million at December 31, 2005. This increase was primarily the result of increases in interest-bearing deposits, repurchase agreements, and FHLB advances of $15.0 million, $13.0 million, and $9.9 million, respectively offset by a $5.2 million decrease in federal funds purchased. Interest-bearing deposits increased to $451.6 million at June 30, 2006, from $436.6 million at December 31, 2005. The increase of $15.0 million was primarily in certificates of 7 deposit and interest-bearing checking accounts, which increased $17.8 million and $2.8 million, respectively. The increases were offset primarily by a decrease in money market accounts and savings accounts of $4.3 million and $2.1 million, respectively. The interest rates offered on certificates of deposit and the services and benefits bundled into the interest-bearing checking products have been responsible for the overall growth in interest-bearing deposits. Repurchase agreements increased to $31.4 million at June 30, 2006, from $18.4 million at December 31, 2005. Growth in this account is attributed to additional repurchase agreement accounts as well existing customers maintaining higher balances. The Company offers its corporate customers sweep accounts where unused deposit balances are swept into an overnight repurchase agreement yielding market rates. FHLB advances reached $78.6 million at June 30, 2006, from $68.7 million at December 31, 2005. The increase is due to $12.0 million in additional advances with terms ranging from six months to eighteen months and an average cost of 5.26%. These advances will be used to fund loan demand. Offsetting the increase were re-payments of $2.1million. At June 30, 2006 total stockholders' equity decreased $1.4 million to $59.7 million from $61.1 million at December 31, 2005. The decrease was primarily due to dividends paid of $3.0 million, a decrease in accumulated other comprehensive income (net of deferred income taxes) of $2.4 million, and treasury stock purchased of $600,000 offset by net income of $4.5 million. Accumulated other comprehensive income decreased as a result of changes in the net unrealized gains/losses 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 June 30, 2006 decreased $140,000, or 6.04%, to $2,185,000, or $.73 diluted earnings per share from $2,326,000, or $.78 diluted earnings per share, for the comparable three month period in 2005. Net income for the six months ended June 30, 2006 decreased $154,000, or 3.31%, to $4,496,000, or $1.51 diluted earnings per share from $4,650,000, or $1.56 diluted earnings per share, for the comparable six month period in 2006. The decrease for the three and six months ended June 30, 2006 was primarily the result of a decrease in net interest income and increases in other expense and provision for loan losses, offset by an increase in other income and lower income tax expense. Net interest income. Net interest income declined to $5,479,000 for the three months ended June 30, 2006 compared to $5,534,000 for the three months ended June 30, 2005. The decrease was a result of $1,113,000 in additional interest expense partially offset by an increase in interest income of $1,057,000. Rates paid on deposit accounts have increased faster than rates charged for loans resulting in a tightening of the net interest spread to 2.76% from 3.05% for the comparable quarter in 2005 and a narrowing of the net interest margin to 3.26% from 3.47%. Net interest income declined to $10,887,000 for the six months ended June 30, 2006 compared to $11,145,000 for the six months ended June 30, 2005. Interest expense, for this 8 period, increased $1,997,000 offset by additional interest income of $1,738,000. The net interest spread narrowed to 2.79% from 3.10% for the comparable period in 2005 and the net interest margin dropped to 3.29% from 3.50%. The narrowing of the spread and margin reflect the flattening of the yield curve between periods, which has seen a steady increase in short-term rates while long-term rates have remained stable. Because the loan portfolio is primarily fixed rate, earning asset yields have not adjusted as quickly to the rate environment as funding costs. Interest income. Interest income for the three months ended June 30, 2006 increased $1,057,000 to $9,872,000 from $8,814,000 for the comparable three month period in 2005. The average balance of interest earning assets increased $33.9 million for the three months ended June 30, 2006, to $672.1 million from $638.2 million for the comparable period in 2005, the yield on these assets increased 36 basis points to 5.88%, for the three months ended June 30, 2006 from 5.52% for the comparable period in 2005. Interest income for the six months ended June 30, 2006 increased $1,738,000 to $19,290,000 from $17,552,000 for the comparable six month period in 2005. This change was supported by an increase in the average balance of interest earning assets of $26,420,000 and a 30 basis point increase in the yield which reached 5.82% from 5.52% for the comparable period in 2005. The increases in earning asset yields for the three and six months ended June 30, 2006 reflects increases in higher yielding commercial and consumer loans as well as improved yields on investment securities. See "Average Balance Sheet and Rate/Volume Analysis" Interest expense. Interest expense for the three months ended June 30, 2006 increased $1,113,000 to $4,393,000 from $3,280,000 for the comparable period in 2005. The change in interest expense was primarily attributed to an increase of $32.4 million the average balance of interest-bearing liabilities and a 65 basis point increase in the average cost of funds to 3.12% for the three months ended June 30, 2006 from 2.47% for the comparable period in 2005. Interest expense for the six months ended June 30, 2006 increased $1,997,000 to $8,404,000 and the yield increased 61 basis points to 3.03% from 2.42% for the comparable period in 2005. The increase in cost of funds reflects year-over-year increases in short-term rates and increased competition for deposits in the Company's market area. 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 June 30, Three Months Ended June 30, --------------------------------------- ------------------------------------------ 2006 2005 --------------------------------------- ------------------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------------- --------------------------------------------------------------------- (Dollars In Thousands) (Dollars In Thousands) ------------------------------------------------------------------------------------- 9 Interest-earning assets: Loans receivable (1) $ 460,152 $ 7,492 6.51% $ 433,151 $ 6,681 6.17% Investment securities available for sale (2) 209,640 2,352 4.49% 200,313 2,098 4.19% Federal funds sold 2,290 28 4.89% 4,712 35 2.99% ---------- -------- ------ ---------- -------- ------ Total interest earning assets $ 672,082 $ 9,872 5.88% $ 638,176 $ 8,814 5.52% Non-interest earning assets (3) 39,597 39,079 ---------- ---------- Total assets $ 711,679 $ 677,255 ========== ========== Interest-bearing liabilities: Money market accounts $ 53,627 $ 331 2.47% $ 63,995 $ 258 1.61% Certificates of Deposit 262,399 2,591 3.95% 243,864 1,977 3.24% Other liabilities (4) 246,843 1,471 2.38% 222,631 1,045 1.88% ---------- -------- ------ ---------- --------- ------ Total interest-bearing liabilities $ 562,869 4,393 3.12% $ 530,490 $ 3,280 2.47% -------- ------ --------- ------ Non-interest-bearing liabilities (3) 87,206 87,194 ---------- ---------- Total liabilities $ 650,075 $ 617,684 Stockholders' equity (5) 61,604 59,571 ---------- ---------- Total liabilities and stockholders' equity $ 711,679 $ 677,255 ========== ========== Net interest income $ 5,479 $ 5,534 ======== ========= Interest rate spread (6) 2.76% 3.05% ====== ====== Net interest margin (7) 3.26% 3.47% ====== ====== Ratio of average interest-earning assets to average interest-bearing liabilities 119.40% 120.30% ====== ======
- ---------------- (1) Average balances include non-accrual loans, and are net of deferred loan fees. (2) Includes investment securities, interest-bearing deposits in other financial institutions and FHLB stock. (3) Includes net deferred income taxes in excess of deferred tax benefits on AFS securities (SFAS 115), stock options (SFAS 123/148) and deferred fees (SFAS 109). (4) Includes FHLB advances and Federal funds purchased, and repurchase agreements. (5) Includes capital stock, surplus and unrealized holding gains on SFAS 115 AFS securities. (6) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (7) Net interest margin represents net interest income as a percentage of average interest earning assets. 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. 10
------------------------------------------------------------------------------------- Six Months Ended June 30, Six Months Ended June 30, --------------------------------------- ------------------------------------------ 2006 2005 --------------------------------------- ------------------------------------------ Average Average Average Average Balance Interest Yield/Cost Balance Interest Yield/Cost ------------- --------------------------------------------------------------------- (Dollars In Thousands) (Dollars In Thousands) ------------------------------------------------------------------------------------- Interest-earning assets: Loans receivable (1) $ 454,992 $ 14,706 6.46% $ 434,628 $ 13,405 6.17% Investment securities (2) 206,437 4,555 4.41% 198,489 4,104 4.13% Federal funds sold 1,235 29 4.78% 3,127 43 2.78% ---------- -------- ------ ---------- -------- ------ Total interest earning assets $ 662,664 $ 19,290 5.82% $ 636,244 $ 17,552 5.52% Non-interest earning assets (3) 38,843 41,035 ---------- ---------- Total assets $ 701,507 $ 677,279 ========== ========== Interest-bearing liabilities: Money market accounts $ 54,019 609 2.25% $ 63,099 $ 471 1.49% Certificates of Deposit 259,706 5,017 3.86% 246,528 3,909 3.17% Other liabilities (4) 241,032 2,778 2.30% 219,559 2,027 1.85% ---------- -------- ------ ---------- -------- ------ Total interest-bearing liabilities $ 554,757 $ 8,404 3.03% $ 529,186 $ 6,407 2.42% -------- ------ -------- ------ Non-interest-bearing liabilities (3) 85,565 86,759 ---------- ---------- Total liabilities $ 640,322 $ 615,945 Stockholders' equity (5) 61,185 61,334 ---------- ---------- Total liabilities and stockholders' equity $ 701,507 $ 677,279 ========== ========== Net interest income $ 10,886 $ 11,145 ========= ======== Interest rate spread (6) 2.79% 3.10% ====== ====== Net interest margin (7) 3.29% 3.50% ====== ====== Ratio of average interest-earning assets to average interest-bearing liabilities 119.45% 120.23% ====== ======
- ---------------------- (1) Average balances include non-accrual loans, and are net of deferred loan fees. (2) Includes investment securities, interest-bearing deposits in other financial institutions and FHLB stock. (3) Includes net deferred income taxes in excess of deferred tax benefits on AFS securities (SFAS 115), stock options (SFAS 123/148) and deferred fees (SFAS 109). (4) Includes FHLB advances and Federal funds purchased, and repurchase agreements. (5) Includes capital stock, surplus and unrealized holding gains on SFAS 115 AFS securities. (6) Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities. (7) Net interest margin represents 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 11 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 June 30, 2006 Six Month Period ended June 30, 2006 -------------------------------------- ------------------------------------ 2006 vs. 2005 2006 vs. 2005 -------------------------------------- ------------------------------------ Increase (Decrease) Increase (Decrease) Due to Due to -------------------------------------- ------------------------------------ Volume Rate Net Volume Rate Net -------------------------------------- ------------------------------------ (Dollars In Thousands) (Dollars In Thousands) -------------------------------------- ------------------------------------ Interest income: Loans receivable $ 417 $ 394 $ 811 $ 628 $ 673 $1,301 Investment securities available for sale 98 156 254 165 286 451 Other interest earning assets (18) 11 (7) (27) 13 (14) ------ ----- ------ ----- ------ ------ Total interest-earning assets 497 561 1,058 766 972 1,738 ------ ----- ------ ----- ------ ------ Interest expense: Money market accounts (41) 114 73 (68) 206 138 Certificates of deposit 151 463 614 209 899 1,108 Other liabilities 113 313 426 199 552 751 ------ ----- ------ ----- ------ ------ Total interest-bearing liabilities 223 890 1,113 340 1,657 1,997 ------ ----- ------ ----- ------ ------ Net change in net interest income $ 274 $(329) $ (55) $ 426 $ (685) $ (259) ====== ===== ====== ===== ====== ======
Provision for loan losses. For the three and six months ended June 30, 2006, the provision for loan losses was $550,000 and $850,000, respectively, compared to $300,000 and $600,000 for the comparable 2005 periods. At June 30, 2006, the allowance for loan losses equaled .91% of total loans outstanding compared to ..72% at June 30, 2005. Net charge-offs as a percentage of average loans for the respective periods were .05% and .03%. 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 12 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 Watch and classified loans are allocated additional reserves. 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 composition of the loan portfolio is being restructured in an effort to increase the yield on the portfolio. However, increases in yields have been accompanied by increases in classified loans. Commercial loans classified as watch increased to $47,994,000 at June 30 2006, from $21,093,000 at June 30, 2005. For the same time period commercial loans classified as substandard reached $10,878,000, up from $5,888,000 a year earlier. These changes in the classification of the portfolio resulted in increases in the provision for loan losses. 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 June 30, 2006 increased $81,000 to $1,859,000 from $1,778,000 for the comparable three month period in 2005. The increase in other income for the three months ended June 30, 2006 was primarily due to a net increase in investment security gains of $228,000. Account service fees and debit card fees collected also increased $30,000 and $11,000, respectively, from the comparable period in 2005. Total other income for the six months ended June 30, 2006 increased $301,000 to $3,703,000 from $3,402,000 for the comparable period in 2005. This increase is primarily due to a net increase in investment security gains, account service fees, and debit card fees of $402,000, $54,000, and $33,000, respectively. The change in security gains was primarily due 13 to the sale of equity securities, written down for other-than-temporary declines in December 2004. A growing deposit base and increased transactions supported the additional fees collected. Other expense. Total other expense for the three month period ended June 30, 2006 increased $154,000 to $4,218,000 from $4,064,000 for the comparable three month period in 2005. Total other expense for the six month period ended June 30, 2006 increased $481,000 to $8,255,000 from $7,774,000 from the comparable six month period in 2006. Pension and other employee benefit costs increased $96,000 and $202,000, respectively for the three and six months ended June 30, 2006 from the comparable periods in 2005. The change in pension and other employee benefits and salaries is attributed to increased pension and employee medical costs and merit increases and additions to staff. The balance of the increases are due to normal increases in the cost of doing business. Provision for income taxes. For the three and six month periods ended June 30, 2006, income taxes decreased $237,000 and $535,000, respectively, from the comparable periods in 2005. This is a result of non-taxable security gains recorded from the sale of equity securities and the net increase in tax free obligations of states and political sub-divisions of $8.8 million. Although the securities were written down, for financial reporting purposes, in December 2004, their tax basis did not change. Due to these factors, the effective tax rate decreased to 15.0% and 18.0% for the three and six month periods ended June 30, 2006 from 21.1% and 24.7% for the comparable periods in 2005. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There were no significant changes for the three and six months ended June 30, 2006 from the information presented in the 10K statement, under the caption Market Risk, for the year ended December 31, 2005. 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. 14 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 1A. Not applicable 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 Purchased as Part Value) of Shares (or (a) Total Number (b) 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 - --------------------- ---------------- ---------------- --------------------- ----------------------- April 1 through 30 - --------------------- ---------------- ---------------- --------------------- ----------------------- May 1 through 31 525 $39.95 525 80,856 - --------------------- ---------------- ---------------- --------------------- ----------------------- June 1 through 30 11,635 $40.15 11,635 69,221 - --------------------- ---------------- ---------------- --------------------- ----------------------- Total 12,160 $40.14 12,160 69,221 - --------------------- ---------------- ---------------- --------------------- -----------------------
* On November 18, 1999, the Registrant announced a stock repurchase plan for up to 151,000 shares. 15 Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders On April 18, 2006, the Company held its annual meeting of shareholders at which the following matters were voted on. (1) Election of Directors NOMINEE FOR WITHHELD ------- --- -------- Thomas E. Deger 2,159,175 28,504 Richard J. Hoffman 2,125,070 62,609 John N. Brenzia 2,149,595 38,084 There were no abstentions or broker non-votes in the election of directors. (2) Ratification of Auditors FOR AGAINST ABSTAIN ------- ------- ------- 2,151,588 27,758 - There were no broker non-votes in the ratification of auditors 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**** 16 10.2 Death Benefit Only Deferred Compensation Plan For Bank Directors effective as of January 1, 1990**** 10.3 Retirement and Death Benefit Deferred Compensation Plan For Bank Directors effective as of January 1, 1990**** 10.4 2000 Stock Option Plan***** 10.5 Irwin Bank & Trust Company Supplemental Pension Plan ****** 10.6 Medical Insurance Continuation Agreement with Charles G. Urtin ****** 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. ****** Incorporated by reference to identically numbered exhibit to Registrant's Annual Report on Form 10-K for fiscal year ended December 31, 2004. ****** Incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed March 6, 2006. 17 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: August 7, 2006 By: /s/Charles G. Urtin ---------------------------------- Charles G. Urtin President, Chief Executive Officer (Duly authorized officer) Date: August 7, 2006 By: /s/Raymond G. Suchta ---------------------------------- Raymond G. Suchta Chief Financial Officer (Principal Financial Officer) 18 EX-31 2 ex31-1.txt CERTIFICATION 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-12(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. (c) 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 (d) 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: August 7, 2006 /s/ Charles G. Urtin ----------------------- Charles G. Urtin Chief Executive Officer EX-31 3 ex31-2.txt CERTIFICATION CERTIFICATION I, Raymond G. 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-12(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. (c) 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 (d) 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: August 7, 2006 /s/Raymond G. Suchta ----------------------- Raymond G. Suchta Chief Financial Officer EX-32 4 ex32.txt CERTIFICATION 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 June 30, 2006 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 G. Suchta - ----------------------- ----------------------- Charles G. Urtin Raymond G. Suchta Chief Executive Officer Chief Financial Officer August 7, 2006 -----END PRIVACY-ENHANCED MESSAGE-----