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, 2002
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
---------- ----------
Commission File No. 0-25903
IBT Bancorp, Inc.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1532164
- --------------------------------------- -----------------------------------
(State of incorporation or organization) (I.R.S. employer identification no.)
309 Main Street, Irwin, Pennsylvania 15642
- ----------------------------------------- -----------------
(Address of principal executive offices) (zip code)
(724) 863-3100
- -------------------------------------------------------------------------------
Issuer's telephone number, including area code
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
------- ------
Number of shares of Common Stock outstanding as of August 01, 2002: 2,977,655
---------
IBT BANCORP, INC.
Contents
--------
Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................................................
Consolidated statements of financial condition at June 30, 2002
(unaudited) and December 31, 2001........................................... 1
Consolidated statements of operations (unaudited) for the three months
ended June 30, 2002 and 2001 ................................................ 2
Consolidated statements of cash flows (unaudited) for the three months
ended June 30, 2002 and 2001................................................. 3
Notes to 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
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................................ 13
Item 2. Changes in Securities and Use of Records..................................... 13
Item 3. Defaults upon Senior Securities.............................................. 13
Item 4. Submission of Matters to a Vote of Security-Holders.......................... 13
Item 5. Other Information............................................................ 13
Item 6. Exhibits and Reports on Form 8-K............................................. 14
Signatures................................................................................... 15
CONSOLIDATED BALANCE SHEETS
IBT BANCORP, INC. AND SUBSIDIARY
June 30, 2002 December 31, 2001
----------------- ------------------
(unaudited) (unaudited)
---------------- ------------------
ASSETS
Cash and due from banks $ 13,954,139 $ 16,751,407
Interest-bearing deposits in banks 1,576,907 7,373,528
Federal funds sold 22,878,000 1,094,000
Certificates of deposit 100,000 100,000
Securities available for sale 165,075,724 160,866,698
Federal Home Loan Bank stock, at cost 2,362,400 2,101,800
Loans, net 332,486,687 315,131,774
Premises and equipment, net 4,657,558 4,655,510
Other assets 17,178,429 15,969,430
---------------- ------------------
Total Assets $ 560,269,844 $ 524,044,147
================ ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 75,516,356 $ 70,121,716
Interest-bearing 374,702,393 352,340,377
---------------- ------------------
Total deposits 450,218,749 422,462,093
Repurchase agreements 12,784,868 11,207,072
Accrued interest and other liabilities 4,183,368 5,650,276
FHLB advances 40,000,000 35,000,000
---------------- ------------------
Total liabilities 507,186,985 474,319,441
Stockholders' Equity
Capital stock, par value $1.25 per share, 50,000,000
shares authorized, 3,023,799 shares issued, 2,977,655
and 2,985,695 shares outstanding at June 30, 2002 and
December 31, 2001, respectively 3,779,749 3,779,749
Surplus 2,073,102 2,073,102
Retained earnings 46,397,147 43,613,936
Accumulated other comprehensive income 2,176,127 1,342,672
---------------- ------------------
54,426,125 50,809,459
Less: Treasury stock, at cost (1,343,266) (1,084,753)
---------------- ------------------
Total stockholders' equity 53,082,859 49,724,706
---------------- ------------------
Total Liabilities and Stockholders' Equity $ 560,269,844 $ 524,044,147
================ ==================
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 June 30, Six Months Ended June 30,
--------------------------------------- -----------------------------------
2002 2001 2002 2001
------------------ -------------- -----------------------------------
(unaudited) (unaudited
--------------------------------------- -----------------------------------
Interest Income
Loans, including fees $ 6,079,964 $ 6,098,737 $ 11,970,508 $ 12,151,299
Investment securities 2,177,716 2,547,678 4,452,745 5,289,235
Federal funds sold 85,826 239,447 128,225 316,784
----------------- ---------------- --------------- ---------------
Total interest income 8,343,506 8,885,862 16,551,478 17,757,318
Interest Expense
Deposits 2,576,140 3,864,434 5,225,013 7,814,642
FHLB advances 538,948 454,656 1,055,351 878,884
Repurchase agreements 45,940 106,968 88,041 203,217
----------------- ---------------- --------------- ---------------
Total interest expense 3,161,028 4,426,058 6,368,405 8,896,743
----------------- ---------------- --------------- ---------------
Net Interest Income 5,182,478 4,459,804 10,183,073 8,860,575
Provision for Loan Losses 250,000 100,000 500,000 175,000
----------------- ---------------- --------------- ---------------
Net Interest Income after Provision
for Loan Losses 4,932,478 4,359,804 9,683,073 8,685,575
Other Income (Losses)
Service fees 575,131 456,510 1,167,734 838,846
Investment security gains 84,602 160,486 131,525 236,132
Investment security losses (24,925) -- (24,925) (2,188)
Other income 619,098 409,351 1,314,911 752,986
----------------- ---------------- --------------- ---------------
Total other income 1,253,906 1,026,347 2,589,245 1,825,776
Other Expenses
Salaries 1,422,855 1,134,140 2,538,177 2,101,394
Pension and other employee benefits 321,169 291,302 624,964 583,814
Occupancy expense 318,943 283,922 635,044 563,019
Data processing expense 176,682 192,041 343,565 355,866
ATM expense 94,805 102,766 178,912 198,909
Other expenses 929,603 772,553 1,793,103 1,574,518
----------------- ---------------- --------------- ---------------
Total other expenses 3,264,057 2,776,724 6,113,765 5,377,520
----------------- ---------------- --------------- ---------------
Income Before Income Taxes 2,922,327 2,609,427 6,158,553 5,133,831
Provision for Income Taxes 779,597 726,053 1,584,837 1,485,292
----------------- ---------------- --------------- ---------------
Net Income $ 2,142,730 $ 1,883,374 $ 4,573,716 $ 3,648,539
================= ================ =============== ===============
Basic Earnings per Share $ 0.72 $ 0.63 $ 1.53 $ 1.22
================= ================ =============== ===============
Diluted Earnings per Share $ 0.72 $ 0.63 $ 1.53 $ 1.22
================= ================ =============== ===============
Dividends per Share $ 0.30 $ 0.26 $ 0.60 $ 0.52
================= ================ =============== ===============
The accompanying notes are an integral part of these
consolidated financial statements.
-2-
CONSOLIDATED STATEMENTS OF CASH FLOWS
IBT BANCORP, INC. AND SUBSIDIARY
Six Months Ended June 30,
---------------------------------------
2002 2001
--------------- ----------------
(unaudited)
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,573,716 $ 3,648,539
Adjustments to reconcile net cash
from operating activities:
Depreciation 337,710 296,910
Net amortization/accretion of
premiums and discounts 128,264 18,283
Net investment security gains (106,600) (233,943)
Provision for loan losses 500,000 175,000
Increase (decrease) in cash due
to changes in assets and liabilities:
Other assets (1,011,375) 1,389,665
Accrued interest and other liabilities (1,896,312) (674,924)
--------------- ----------------
Net Cash From Operating Activities 2,525,403 4,619,530
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificates of deposit - (1,500,000)
Proceeds from maturity of certificates
of deposit - 4,100,000
Proceeds from sales of securities
available for sale 25,712,380 6,322,942
Proceeds from maturities of securities
available for sale 30,819,565 50,946,736
Purchase of securities available for sale (59,499,776) (50,292,040)
Net loans made to customers (18,052,537) (5,086,058)
Purchases of premises and equipment (339,758) (157,420)
Purchase of Federal Home Loan Bank stock (260,600) (137,500)
--------------- ----------------
Net Cash (Used By) From Investing Activities (21,620,726) 4,196,660
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 27,756,656 12,969,704
Net increase in securities sold
under repurchase agreement 1,577,796 2,208,640
Dividends paid (1,790,505) (1,559,824)
Proceeds from FHLB advances 5,000,000 4,000,000
Purchase of treasury stock (258,513) (231,839)
--------------- ----------------
Net Cash From Financing Activities 32,285,434 17,386,681
--------------- ----------------
Net Change in Cash and Cash Equivalents 13,190,111 26,202,871
Cash and Cash Equivalents at Beginning of Period 25,218,935 21,746,395
--------------- ----------------
Cash and Cash Equivalents at End of Period $ 38,409,046 $ 47,949,266
=============== ================
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 June 30, 2002
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
accruals considered necessary for a fair presentation have been included.
Operating results for the three months and six months ended June 30, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002 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, 2001.
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 2,980,842 and
2,982,953 for the three and six months ended June 30, 2002, respectively and
2,996,943 and 2,999,397 for the three and six months ended June 30, 2001,
respectively.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended June 30, 2002 and 2001 was
$4,110,928 and $1,516,357, respectively and for the six months ended June 30,
2002 and 2001 was $5,407,171 and $4,808,002, respectively.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
June 30, 2002
------------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------------ ----------------- ----------------- ------------------
Obligations of
U.S. Government Agencies $ 78,916,280 $ 1,417,757 $ (571,670) $ 79,762,367
Obligations of State and
political sub-divisions 37,408,710 1,267,114 (13,273) 38,662,551
Mortgage-backed securities 44,491,395 1,071,483 - 45,562,878
Other securities 518,824 37,069 - 555,893
Equity securities 443,353 88,682 - 532,035
----------------- ---------------- ---------------- ------------------
$ 161,778,562 $ 3,882,105 $ (584,943) $ 165,075,724
================= ================ ================ ==================
-4-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended June 30, 2002
NOTE E - STOCK OPTION PLAN
In May 2002, 35,500 additional stock options were granted to employees and
directors under the 2000 Stock Option Plan at an exercise price of $32.88 per
share. Stock options granted to directors become exercisable six months after
the grant date and employee stock options become exercisable as vested over a
three-year period. As of June 30, 2002, 129,500 stock options have been granted,
of which 63,666 are exercisable as follows: 46,666 are exercisable at $24.50 per
share and 17,000 are exercisable at $23.00 per share.
-5-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipate", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, risks associated with the
effect of opening a new branch, the ability to control costs and expenses, and
general economic conditions.
OVERVIEW
On July 30, 2002 the President signed into law the Sarbanes-Oxley Act
of 2002 (the "Act"), following an investigative order proposed by the SEC on
chief financial officers and chief executive officers of 947 large public
companies on June 27, 2002. Additional regulations are expected to be
promulgated by the SEC. As a result of the accounting restatements by large
public companies, the passage of the Act and regulations expected to be
implemented by the SEC, publicly-registered companies, such as the Company, will
be subject to additional reporting regulations and disclosure. These new
regulations, which are intended to curtail corporate fraud, will require certain
officers to personally certify certain SEC filings and financial statements and
may require additional measures to be taken by our outside auditors, officers
and directors. The loss of investor confidence in the stock market and the new
laws and regulations will increase non-interest expenses of the Company and
could adversely affect the prices of publicly-traded stocks, such as the
Company.
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").
FINANCIAL CONDITION
On June 30, 2002, total assets increased $36.3 million, or 6.9%, to
$560.3 million from $524.0 million at December 31, 2001. The growth in assets
resulted primarily from the net increase of $13.2 million in cash and cash
equivalents (primarily federal funds sold) and $17.4 million in net loans.
The increase in federal funds sold at June 30, 2002 was mainly the
result of increases in deposit accounts, loan repayments, and proceeds from
sales and maturities of securities available for sale. The Company expects to
use these funds to meet anticipated future loan demand.
At June 30, 2002, increases in the loan portfolio were mainly
attributed to growth in real estate secured mortgage loans of $24.0 million,
which consisted primarily of $15.2 million in commercial real estate loans and
$6.5 million in one to four family real estate loans. Such increases in loans
were primarily offset by decreases of $2.7 million in commercial loans and $2.6
million in installment loans.
At June 30, 2002, total liabilities increased $32.9 million, or 6.9%,
to $507.2 million from $474.3 million at December 31, 2001. This increase was
primarily the result of interest-bearing deposits, which rose $22.4 million to
$374.7 million from $352.3 million at December 31, 2001. The growth was mainly
the result of increases in savings accounts (including money market accounts) of
$13.4 million, certificate of deposit accounts of $4.6 million, and interest
bearing checking accounts of $4.4 million. Total interest bearing deposit growth
was attributed to depositors maintaining higher balances and an increase in the
number of deposit accounts.
-6-
Non-interest bearing deposits (including repurchase agreements)
increased $7.0 million to $88.3 million at June 30, 2002 from $81.3 million at
December 31, 2001.
At June 30, 2002, total stockholders' equity increased $3.4 million to
$53.1 million from $49.7 million at December 31, 2001. The increase was due to
net income of $4.5 million for the period and an increase of $900,000 in
accumulated other comprehensive income (net of income taxes), offset by the
purchase of $200,000 of Company stock, and dividends paid of $1.8 million.
Accumulated other comprehensive income increased as a result of changes in the
net unrealized gain on the available for sale securities due to fluctuations in
interest rates. 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, 2002
increased $200,000, or 13.8%, to $2.1 million from $1.9 million for the
comparable three month period in 2001. Net income for the six months ended June
30, 2002 increased $1.0 million to $4.6 million from $3.6 million for the
comparable six month period in 2001. The increases for the three and six months
ended June 30, 2002 was the result of higher net interest income and other
income offset by increases in other expenses.
Interest income. Interest income for the three months ended June 30,
2002 decreased $600,000 to $8.3 million from $8.9 million for the comparable
three month period in 2001. While the average balances of interest earning
assets increased $20.6 million for the three months ended June 30, 2002, to
$513.8 million from $493.2 million for the comparable period in 2001, the yield
on these assets decreased 71 basis points to 6.50%, for the three months ended
June 30, 2002 from 7.21% for the comparable period in 2001. Interest income for
the six months ended June 30, 2002 decreased $1.2 million to $16.6 million from
$17.8 million for the comparable period in 2001. The average balance of interest
earning assets increased $24.1 million to $508.5 million, for the six months
ended June 30, 2002 from $484.4 million for the comparable 2001 period. However,
the average yield on these assets decreased 82 basis points to 6.51% for the six
months ended June 30, 2002, from 7.33% for the comparable 2001 period. The
reduction in short term interest rates by the Federal Reserve contributed to the
decline in average yields in both the three and six month periods in 2002. See
"Average Balance Sheet and Rate/Volume Analysis"
Interest expense. Interest expense for the three months ended June 30,
2002 decreased $1.2 million to $3.2 million from $4.4 million for the comparable
period in 2001. The change was primarily attributed to a 144 basis point
decrease in the average cost of
-7-
funds to 3.03% for the three months ended June 30, 2002 from 4.47% for the
comparable period in 2001 offset by a $21.4 million increase in the average
balance of interest bearing liabilities. Interest expense for the six months
ended June 30, 2002 decreased $2.5 million to $6.4 million from $8.9 million for
the comparable 2001 period. Such change was primarily the result of a 147 basis
point decrease in the average cost of funds to 3.09% for the six months ended
June 30, 2002 from 4.56% for the comparable six month period in 2001 offset by a
$21.9 million increase in the average balance of interest bearing liabilities.
The reduction of average cost of funds for the three and six month periods ended
June 30, 2002 is reflective of the significant decrease in interest rates over
the past year by the Federal Reserve. 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,
-----------------------------------------------------------------------
2002 2001
---- ----
-----------------------------------------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-----------------------------------------------------------------------
(In Thousands) (In Thousands)
-----------------------------------------------------------------------
Interest-earning assets:
Loans receivable (1) $327,080 $6,080 7.44% $301,070 6,099 8.10%
Investment securities
available for sale (2) 167,417 2,178 5.20% 169,792 2,548 6.00%
Other interest-earning assets (5) 19,299 86 1.78% 22,346 239 4.29%
-------- ------ -------- ------
Total interest earning assets $513,796 $8,344 6.50% $493,208 $8,886 7.21%
======== ====== ==== ======== ====== ====
Non-interest earning assets 30,504 19,096
-------- --------
Total assets $544,300 $512,304
======== ========
Interest-bearing liabilities:
Money market accounts 61,025 314 2.06% 56,039 464 3.31%
Certificates of Deposit 196,367 1,910 3.89% 202,563 2,936 5.80%
Other liabilities 160,011 937 2.34% 137,396 1,026 2.99%
-------- ------ -------- ------
Total interest-bearing liabilities $417,403 $3,161 3.03% $395,998 $4,426 4.47%
======== ====== ==== ======== ====== ====
Non-interest-bearing liabilities 76,353 68,844
-------- --------
Total liabilities $493,756 $464,842
======== ========
Retained Earnings (6) 50,544 47,462
-------- --------
Total liabilities and stockholders'
equity $544,300 $512,304
======== ========
Net interest income $5,183 $4,460
====== ======
Interest rate spread (3) 3.47% 2.74%
==== ====
Net yield on interest-earning assets (4) 4.03% 3.62%
==== ====
Ratio of average interest-earning
assets to average interest-bearing
liabilities 123.09% 124.55%
====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan
fees.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents annualized net interest
income as a percentage of average interest earning assets.
(5) Consists of federal funds sold.
(6) Includes capital stock, surplus and accumulated other comprehensive income,
less treasury stock
-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.
Six Months Ended June 30, Six Months Ended June 30,
2002 2001
------------------------------------ ----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
-------- -------- ---------- --------- -------- ----------
(In Thousands) (In Thousands)
Interest-earning assets:
Loans receivable(1) $322,097 $ 11,970 7.43% $ 299,518 $ 12,151 8.11%
Investment securities available for
sale (2) 171,819 4,453 5.18 170,778 5,289 6.19
Other interest-earning assets(5) 14,621 128 1.75 14,148 317 4.48
--------- -------- --------- --------
Total interest earning assets $ 508,537 $ 16,551 6.51% $ 484,444 $ 17,757 7.33%
========= ======== ====== ========= ======== ======
Non-interest earning assets 28,725 18,928
--------- ---------
Total assets $ 537,262 $ 503,372
========= =========
Interest-bearing liabilities:
Money market accounts 59,471 612 2.06% 55,168 967 3.50%
Certificates of Deposit 197,296 3,928 3.98% 202,607 5,951 5.87%
Other liabilities 155,269 1,828 2.36% 132,320 1,979 2.99%
--------- -------- --------- --------
Total interest-bearing liabilities $ 412,036 $ 6,368 3.09% $ 390,095 $ 8,897 4.56%
========= ======== ====== ========= ======== ======
Non-interest-bearing liabilities 74,945 67,182
--------- ---------
Total liabilities $ 486,981 $ 457,277
========= =========
Retained Earnings (6) $ 50,281 $ 46,095
========= =========
Total liabilities and stockholder's
equity $ 537,262 $ 503,372
========= =========
Net interest income $ 10,183 $ 8,860
========= ========
Interest rate spread (3) 3.42% 2.77%
====== ======
Net yield on interest-earning assets (4) 4.00% 3.66%
====== ======
Ratio of average interest-earning
assets to average interest-bearing
liabilities 123.42% 124.19%
====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan
fees.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on interest-earning assets represents annualized net interest
income as a percentage of average interest earning assets.
(5) Consists of federal funds sold.
(6) Includes capital stock, surplus and accumulated other comprehensive income,
less treasury stock.
-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 June 30, 2002 Six Month Period ended June 30, 2002
-----------------------------------------------------------------------------------
2002 vs. 2001 2002 vs. 2001
------------- -------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------ ------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(In Thousands) (In Thousands)
Interest income:
Loans receivable 527 (546) (19) 916 (1,097) (181)
Investment securities available for sale (35) (335) (370) 32 (868) (836)
Other interest earning assets (32) (121) (153) 11 (200) (189)
Total interest-earning assets 460 (1,002) (542) 959 (2,165) (1,206)
=== ====== ==== === ====== ======
Interest expense:
Money market accounts 42 (193) (151) 75 (430) (355)
Certificates of deposit (90) (936) (1,026) (156) (1,867) (2,023)
Other liabilities 168 (256) (88) 343 (494) (151)
Total interest-bearing liabilities 120 (1,385) (1,265) 262 (2,791) (2,529)
=== ====== ====== === ====== ======
Net change in interest income 340 383 723 697 626 1,323
=== === === === === =====
-10-
Provision for loan losses. For the three and six months ended June 30,
2002 the provision for loan losses was $250,000 and $500,000, respectively,
compared to $100,000 and $175,000, respectively, for the comparable 2001
periods. The $150,000 increase for the three months ended June 30, 2002 was
precipitated by net charge offs to the allowance for loan losses of $341,000.
Such charge-offs relate primarily to two commercial loans of which one was
charged down to 90% of its appraised value prior to being taken into the
Company's other real estate and the other charged-off in its entirety based on
the Company's evaluation. The $325,000 increase for the six months ended June
30, 2002 was also the result of increases to the commercial real estate
portfolio.
The evaluation for determining the provision includes evaluations of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being specifically
monitored by management), estimated fair value of underlying collateral, loan
commitments outstanding, delinquencies, and other information available at such
time. The Company continues to monitor its allowance for loan losses and make
future adjustments to the allowance through the provision for loan losses as
economic conditions dictate. Management continues to offer a wider variety of
loan products coupled with the continued success of changing the mix of the
products offered in the loan portfolio from lower yielding loans (i.e., one- to
four-family loans) to higher yielding loans (i.e., equity loans, multi-family
(five or more units) buildings, and commercial (nonresidential mortgages).
Although the Company maintains its allowance for loan losses at a level that it
considers to be adequate at the balance sheet date to provide for the inherent
risk of loss in its loan portfolio, there can be no assurance that losses will
not exceed estimated amounts or that additional provisions for loan losses will
not be required in future periods due to the higher degree of credit risk which
might result from the change in the mix of the loan portfolio.
Other income. Total other income for the three months ended June 30,
2002 increased $300,000 to $1.3 million from $1.0 million for the comparable
three month period in 2001. Total other income for the six months ended June 30,
2002 increased $800,000
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to $2.6 million from $1.8 million for the comparable period in 2001. The
increase in other income for the three and six months ended June 30, 2002 is
mostly due to an increase in service fees and other income offset by a decrease
in gains on securities available for sale. Service fees for the three and six
months ended June 30, 2002 increased $118,000 and $400,000, respectively as a
result of fees collected for rate modifications on existing loans and an
increase in the charge and volume of returned checks. Other income for the three
months ended June 30, 2002 increased $210,000 from the comparable 2001 period as
a result of increased income recorded on bank owned life insurance, originally
purchased by the Bank in December 2001, of $138,000, income generated from the
use of the Bank's debit card and ATM usage which increased $42,000, and
insurance revenues from the Company's title insurance company which increased
$13,000, respectively. Other income for the six months ended June 30, 2002
increased $500,000 from the comparable 2001 period as a result of increased
income recorded on bank owned life insurance of $272,000, income generated from
the use of the Bank's debit card and ATM usage which increased $72,000, and
insurance revenues from the Company's title insurance company which increased
$26,000, respectively. Additionally, for the six months ended June 30, 2002
other income increased $102,000, from the comparable period in 2001, due to a
gain on the sale of foreclosed property. Net Investment security gains for the
three and six months ended June 30, 2002 fell $100,000 and $127,000,
respectively, from the comparable period in 2001.
Other expense. Total other expense for the three and six month period
ended June 30, 2002 increased $500,000 and $700,000, respectively to $3.3
million and $6.1 million from $2.8 million and $5.4 million, respectively for
the comparable three and six month period in 2001. Salaries and benefits
increased $300,000 and $400,000, respectively from the comparable periods in
2001 due to increases in salaries and benefits and additional staffing.
Occupancy expense for the three and six months ended June 30, 2002 increased
$35,000 and $72,000, respectively, to $319,000 and $635,000 from $284,000 and
$563,000, respectively, for the comparable three and six month periods in 2001.
Such an increase for the three and six month period was mostly due to
depreciation expense related to equipment purchases for technological
improvements. Other expenses for the three and six month periods ended June 30,
2002 increased $157,000 and $200,000, respectively, to $930,000 and $1.8 million
from $773,000 and $1.6 million for the comparable periods in 2001. Such
increases were related to the normal cost of doing business.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes for the six months ended June 30,
2002 from the information presented in the 10K statement, under the caption
Market Risk, for the year ended December 31, 2001.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not engaged in any legal proceedings at the
present time. From time to time, the Bank is a party to legal
proceedings within the normal course of business wherein it
enforces its security interest in loans made by it, and other
matters of a like kind.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Disclosed in March 31, 2002 Form 10-Q.
Item 5. Other Information
Not applicable.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(i) Articles of Incorporation of IBT Bancorp, Inc.*
3(ii) Bylaws of IBT Bancorp, Inc.*
10 Change In Control Severance Agreement with Charles G. Urtin **
10.1 Deferred Compensation Plan For Bank Directors**
10.2 Retirement Agreement Between Irwin Bank & Trust Co. And
J. Curt Gardner**
10.3 Death Benefit Only Deferred Compensation Plan For Bank Directors effective as of January 1, 1990**
10.4 Retirement and Death Benefit Deferred Compensation Plan For Bank Directors effective as of January
1, 1990**
10.5 2000 Stock Option Plan***
99.0 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
-------------------------
* Incorporated by reference to the identically
numbered exhibits of the Registrant's Form
10 (file no. 0-25903)
** Incorporated by reference to the identically
numbered exhibits of the Registrant's Form
10K for December 31, 1999.
*** Incorporated by reference to the definitive
proxy statement of the registrant filed on
March 17, 2000.
(b) None.
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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 12, 2002 By: /s/Charles G. Urtin
----------------------------------
Charles G. Urtin
President, Chief Executive Officer
And Chief Accounting Officer
(Duly authorized officer)
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