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, 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 November 01, 2002: 2,977,655
---------
IBT BANCORP, INC.
Contents
Pages
-----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................................
Consolidated balance sheets at September 30, 2002
(unaudited) and December 31, 2001.............................. 1
Consolidated statements of income (unaudited) for
the three months ended September 30, 2002 and 2001 ............ 2
Consolidated statements of cash flows (unaudited)
for the three months ended September 30, 2002 and 2001......... 3
Notes to consolidated financial statements..................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.................................................... 12
Item 4. Controls and Procedures........................................ 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes in Securities and Use of 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
September 30, 2002 December 31, 2001
------------------ -----------------
(unaudited) (unaudited)
------------------ -----------------
ASSETS
Cash and due from banks $ 15,173,359 $ 16,751,407
Interest-bearing deposits in banks 1,348,638 7,373,528
Federal funds sold 13,153,000 1,094,000
Certificates of deposit 100,000 100,000
Securities available for sale 166,364,262 160,866,698
Federal Home Loan Bank stock, at cost 2,362,400 2,101,800
Loans, net 354,966,019 315,131,774
Premises and equipment, net 4,733,710 4,655,510
Other assets 16,766,756 15,969,430
------------- -------------
Total Assets $ 574,968,144 $ 524,044,147
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 73,222,657 $ 70,121,716
Interest-bearing 380,079,700 352,340,377
------------- -------------
Total deposits 453,302,357 422,462,093
Repurchase agreements 20,639,145 11,207,072
Accrued interest and other liabilities 5,470,923 5,650,276
FHLB advances 40,000,000 35,000,000
------------- -------------
Total liabilities 519,412,425 474,319,441
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 September 30, 2002
and December 31, 2001, respectively 3,779,749 3,779,749
Surplus 2,073,102 2,073,102
Retained earnings 47,795,515 43,613,936
Accumulated other comprehensive income 3,250,619 1,342,672
------------- -------------
56,898,985 50,809,459
Less: Treasury stock, at cost (1,343,266) (1,084,753)
------------- -------------
Total stockholders' equity 55,555,719 49,724,706
------------- -------------
Total Liabilities and Stockholders' Equity $ 574,968,144 $ 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 Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ -------------
(unaudited) (unaudited)
---------------------------- ----------------------------
Interest Income
Loans, including fees $ 6,340,002 $ 6,090,559 $ 18,310,509 $ 18,241,857
Investment securities 2,114,968 2,615,809 6,567,712 7,905,044
Federal funds sold 68,499 157,796 196,724 474,580
------------ ----------- ------------ ------------
Total interest income 8,523,469 8,864,164 25,074,945 26,621,481
Interest Expense
Deposits 2,655,506 3,667,390 7,880,519 11,482,032
FHLB advances 530,947 470,547 1,586,297 1,349,431
Repurchase agreements 47,563 99,697 135,604 302,914
------------ ----------- ------------ ------------
Total interest expense 3,234,016 4,237,634 9,602,420 13,134,377
------------ ----------- ------------ ------------
Net Interest Income 5,289,453 4,626,530 15,472,525 13,487,104
Provision for Loan Losses 300,000 90,000 800,000 265,000
------------ ----------- ------------ ------------
Net Interest Income after Provision
for Loan Losses 4,989,453 4,536,530 14,672,525 13,222,104
Other Income (Losses)
Service fees 590,644 428,143 1,758,378 1,266,989
Investment security gains 64,315 155,207 195,840 391,338
Investment security losses (37,169) -- (62,094) (2,188)
Other income 689,936 458,415 2,004,848 1,211,402
------------ ----------- ------------ ------------
Total other income 1,307,726 1,041,765 3,896,972 2,867,541
Other Expenses
Salaries 1,280,647 1,025,592 3,818,825 3,126,987
Pension and other employee benefits 326,248 287,141 951,212 870,955
Occupancy expense 349,741 289,717 984,785 852,736
Data processing expense 191,354 188,001 534,919 543,866
ATM expense 88,266 97,906 267,179 296,816
Other expenses 934,999 897,472 2,728,101 2,471,989
------------ ----------- ------------ ------------
Total other expenses 3,171,255 2,785,829 9,285,021 8,163,349
------------ ----------- ------------ ------------
Income Before Income Taxes 3,125,924 2,792,466 9,284,476 7,926,296
Provision for Income Taxes 834,259 808,084 2,419,096 2,293,375
------------ ----------- ------------ ------------
Net Income $ 2,291,665 $ 1,984,382 $ 6,865,380 $ 5,632,921
============ =========== ============ ============
Basic Earnings per Share $ 0.77 $ 0.66 $ 2.30 $ 1.88
============ =========== ============ ============
Diluted Earnings per Share $ 0.77 $ 0.66 $ 2.29 $ 1.88
============ =========== ============ ============
Dividends per Share $ 0.30 $ 0.26 $ 0.90 $ 0.78
============ =========== ============ ============
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,
--------------------------------
2002 2001
------------- --------------
(unaudited)
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,865,380 $ 5,632,921
Adjustments to reconcile net cash
from operating activities:
Depreciation 506,565 445,365
Net amortization/accretion of
premiums and discounts 233,950 45,764
Net investment security gains (133,746) (389,150)
Provision for loan losses 800,000 265,000
Increase (decrease) in cash due
to changes in assets and liabilities:
Other assets (599,702) 1,420,690
Accrued interest and other liabilities (1,162,283) (972,895)
------------- -------------
Net Cash From Operating Activities 6,510,164 6,447,695
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificates of deposit -- (2,606,400)
Proceeds from maturity of certificates
of deposit -- 4,100,000
Proceeds from sales of securities
available for sale 31,728,943 7,117,010
Proceeds from maturities of securities
available for sale 60,940,626 69,206,086
Purchase of securities available for sale (95,376,460) (85,744,534)
Net loans made to customers (40,831,869) (13,429,065)
Purchases of premises and equipment (584,765) (220,842)
Purchase of Federal Home Loan Bank stock (260,600) (137,500)
------------- ------------
Net Cash (Used By) From Investing Activities (44,384,125) (21,715,245)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 30,840,264 19,218,623
Net increase in securities sold
under repurchase agreement 9,432,073 1,520,365
Dividends paid (2,683,801) (2,336,996)
Proceeds from FHLB advances 5,000,000 9,000,000
Repayment of long-term debt -- (2,000,000)
Purchase of treasury stock (258,513) (395,278)
------------- -------------
Net Cash From Financing Activities 42,330,023 25,006,714
------------- -------------
Net Change in Cash and Cash Equivalents 4,456,062 9,739,164
Cash and Cash Equivalents at Beginning of Period 25,218,935 21,746,395
------------- -------------
Cash and Cash Equivalents at End of Period $ 29,674,997 $ 31,485,559
============= =============
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, 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 nine months ended September 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 2,981,167 and
2,977,655 for the three and nine months ended September 30, 2002, respectively
and 2,990,469 and 2,996,389 for the three and nine months ended September 30,
2001, respectively.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended September 30, 2002 and
2001 was $3,366,157 and $3,193,880, respectively and for the nine months ended
September 30, 2002 and 2001 was $8,773,327 and $8,001,882, respectively.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
September 30, 2002
------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------ ------------ -------------
Obligations of
U.S. Government Agencies $ 68,547,254 $ 1,620,130 $ (539,964) $ 69,627,420
Obligations of State and
political sub-divisions 37,003,626 2,144,952 (1,017) 39,147,561
Mortgage-backed securities 54,872,781 1,599,939 (27,629) 56,445,091
Other securities 519,428 43,312 -- 562,740
Equity securities 495,994 85,456 -- 581,450
------------- ------------ ----------- -------------
$ 161,439,083 $ 5,493,789 $ (568,610) $ 166,364,262
============= ============ =========== =============
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended September 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 September 30, 2002, 129,500 stock options have been
granted, of which 60,166 are exercisable as follows: 44,000 are exercisable at
$24.50 per share and 16,166 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.
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").
FINANCIAL CONDITION
On September 30, 2002, total assets increased $51.0 million, or 9.7%, to
$575.0 million from $524.0 million at December 31, 2001. Asset growth resulted
primarily from the increase of $39.9 in net loans coupled with increases in cash
and cash equivalents and securities available for sale of $4.65 million and $5.5
million, respectively.
At September 30, 2002, increases in the loan portfolio were mainly
attributed to growth in real estate secured mortgage loans of $30.5 million,
which consisted primarily of $12.5 million in five or more family residential
loans, $10.7 million in commercial real estate loans and $7.8 million in one to
four family real estate loans offset by a $500,000 decrease in one to four
family real estate loans held for sale. Loans to municipalities also increased
$6.5 million.
At September 30, 2002, total liabilities increased $45.1 million, or 9.5%,
to $519.4 million from $474.3 million at December 31, 2001. This increase was
primarily the result of interest-bearing deposits, which rose $27.8 million to
$380.1 million from $352.3 million at December 31, 2001. The growth was mainly
the result of increases in certificate of deposit accounts of $16.1 million and
savings accounts (including money market accounts) of $10.3 million. Total
interest bearing deposit growth was attributed to depositors maintaining higher
balances and an increase in the number of deposit accounts.
6
Repurchase agreements increased $9.4 million to $20.6 million at September
30, 2002 from $11.2 million at December 31, 2001. Under the terms of the
repurchase agreements, deposits in designated demand accounts of the customer
are put into an investment vehicle which is used daily to purchase an interest
in designated U.S. Government and agencies' securities. In turn, the Company
agrees to repurchase these investments on a daily basis and pay the customer the
daily interest earned based on the current market rate. Fluctuations in this
account are caused by nature of the changes in daily interest rates and daily
investments.
At September 30, 2002, total stockholders' equity increased $5.9 million to
$55.6 million from $49.7 million at December 31, 2001. The increase was due to
net income of $6.9 million for the period and an increase of $1.9 million in
accumulated other comprehensive income (net of income taxes), offset by the
purchase of $258,000 of Company stock, and dividends paid of $2.7 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 September 30, 2002
increased $300,000, or 15.0%, to $2.3 million from $2.0 million for the
comparable three month period in 2001. Net income for the nine months ended
September 30, 2002 increased $1.3 million to $6.9 million from $5.6 million for
the comparable nine month period in 2001. The increases for the three and nine
months ended September 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 September 30,
2002 decreased $400,000 to $8.5 million from $8.9 million for the comparable
three month period in 2001. While the average balances of interest earning
assets increased $31.4 million for the three months ended September 30, 2002, to
$536.8 million from $505.4 million for the comparable period in 2001, the yield
on these assets decreased 67 basis points to 6.35%, for the three months ended
September 30, 2002 from 7.02% for the comparable period in 2001. Interest income
for the nine months ended September 30, 2002 decreased $1.5 million to $25.1
million from $26.6 million for the comparable period in 2001. The average
balance of interest earning assets increased $26.9 million to $518.3 million,
for the nine months ended September 30, 2002 from $491.4 million for the
comparable 2001 period. However, the average yield on these assets decreased 77
basis points to 6.45% for the nine months ended September 30, 2002, from 7.22%
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 nine month periods in 2002. See "Average Balance Sheet and Rate/Volume
Analysis."
Interest expense. Interest expense for the three months ended September 30,
2002 decreased $1.0 million to $3.2 million from $4.2 million for the comparable
period in 2001. The change was primarily attributed to a 121 basis point
decrease in the average cost of funds to 2.97% for the three months ended
September 30, 2002 from 4.18% for the comparable period in 2001 offset by a
$30.0 million increase in the average balance of interest bearing liabilities.
Interest expense for the nine months ended September 30, 2002 decreased $3.5
million to $9.6 million from $13.1 million for the comparable 2001 period. Such
change was primarily the result of a 138 basis point decrease in the average
cost of funds to 3.05% for the nine months ended September 30, 2002 from 4.43%
for the comparable nine month period in 2001 offset by a $24.7 million increase
in the average balance of interest bearing liabilities. The reduction of average
cost of funds for the three and nine month periods ended September 30, 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."
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,
----------------------------------- -----------------------------------
2002 2001
----------------------------------- -----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
----------------------------------- -----------------------------------
(In Thousands) (In Thousands)
Interest-earning assets:
Loans receivable (1) $ 350,146 $ 6,340 7.24% $ 305,154 $ 6,090 7.98%
Investment securities available for sale (2) 171,804 2,115 4.92% 183,299 2,616 5.71%
Other interest-earning assets (5) 14,811 68 1.85% 16,960 158 3.72%
Total interest earning assets $ 536,761 $ 8,523 6.35% $ 505,413 $ 8,864 7.02%
======== ======= ======== =======
Non-interest earning assets 29,856 18,504
---------- ----------
Total assets $ 566,617 $ 523,917
========== ==========
Interest-bearing liabilities:
Money market accounts 62,349 323 2.08% 55,045 408 2.96%
Certificates of Deposit 213,186 1,975 3.71% 207,625 2,824 5.44%
Other liabilities 160,116 936 2.34% 143,047 1,005 2.81%
---------- -------- ---------- --------
Total interest-bearing liabilities $ 435,651 $ 3,234 2.97% $ 405,717 $ 4,237 4.18%
======== ======= ======== =======
Non-interest-bearing liabilities 77,278 69,926
---------- ----------
Total liabilities $ 512,929 $ 475,643
========== ==========
Retained Earnings (6) 53,688 48,274
---------- ----------
Total liabilities and stockholders' equity $ 566,617 $ 523,917
========== ==========
Net interest income $ 5,289 $ 4,627
======== =========
Interest rate spread (3) 3.38% 2.84%
======= =======
Net yield on interest-earning assets (4) 3.94% 3.66%
======= =======
Ratio of average interest-earning
assets to average interest-bearing
liabilities 123.21% 124.57%
======= =======
(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.
Nine Months Ended September 30, Nine Months Ended September 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) $ 332,252 $ 18,310 7.35% $ 301,360 $ 18,242 8.07%
Investment securities available for sale (2) 171,328 6,568 5.11% 174,883 7,905 6.03%
Other interest-earning assets (5) 14,698 197 1.78% 15,114 474 4.18%
Total interest earning assets $ 518,278 $ 25,075 6.45% $ 491,357 $ 26,621 7.22%
======== ======= ======== =======
Non-interest earning assets 29,611 18,986
---------- ----------
Total assets $ 547,889 $510,343
========== ==========
Interest-bearing liabilities:
Money market accounts 60,441 935 2.06% 55,132 1,374 3.32%
Certificates of Deposit 202,648 5,902 3.88% 204,288 8,775 5.73%
Other liabilities 156,896 2,765 2.35% 135,927 2,985 2.93%
---------- -------- ---------- --------
Total interest-bearing liabilities $ 419,985 $ 9,602 3.05% $ 395,347 $ 13,134 4.43%
======== ======= ======== =======
Non-interest-bearing liabilities 76,441 68,063
---------- ----------
Total liabilities $ 496,426 $ 463,410
========== ==========
Retained Earnings (6) 51,463 46,933
--------- ----------
Total liabilities and stockholders' equity $ 547,889 $ 510,343
========== ==========
Net interest income $ 15,473 $ 13,487
======== ========
Interest rate spread (3) 3.40% 2.79%
======= =======
Net yield on interest-earning assets (4) 3.98% 3.66%
======= =======
Ratio of average interest-earning
assets to average interest-bearing
liabilities 123.40% 124.29%
======= =======
(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 September 30, 2002 Nine Month Period ended September 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 898 (648) 250 1,872 (1,804) 68
Investment securities available
for sale (164) (337) (501) (161) (1,176) (1,337)
Other interest earning assets (20) (70) (90) (13) (264) (277)
Total interest-earning assets 714 (1,055) (341) 1,698 (3,244) (1,546)
==== ======= ======= ======= ======= =======
Interest expense:
Money market accounts 54 (139) (85) 132 (571) (439)
Certificates of deposit 76 (925) (849) (70) (2,803) (2,873)
Other liabilities 120 (189) (69) 460 (680) (220)
Total interest-bearing liabilities 250 (1,253) (1,003) 522 (4,054) (3,532)
==== ======= ======= ======= ======= =======
Net change in net interest income 464 198 662 1,176 810 1,986
==== ======= ======= ======= ======= =======
Provision for loan losses. For the three and nine months ended September
30, 2002 the provision for loan losses was $300,000 and $800,000, respectively,
compared to $90,000 and $265,000, respectively, for the comparable 2001 periods.
The increases in the provision for loan losses for the three months ended
September 30, 2002 were due to an increase of $22.5 million in net loans
compared to an $8.3 million increase for the same period in 2001 and increases
in additional aggregate loans classified as watch and substandard of $500,000
and $1.4 million, respectively. Increases in the provision for loan losses for
the nine months ended September 30, 2002 were due to an increase in net loans of
$50.0 million to $355.0 million from $305.0 million at September 30, 2001, net
charge offs of $330,000, and increases in additional aggregate loans classified
as watch and substandard of $9.6 million and $3.6 million, respectively.
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
10
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 September 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 nine months ended
September 30, 2002 increased $1.0 million to $3.9 million from $2.9 million for
the comparable period in 2001. The increase in other income for the three and
nine months ended September 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 nine months ended September 30, 2002
increased $200,000 and $500,000, respectively as a result of net fees from rate
modifications on existing loans and an increase in the amount charged for and
volume of returned checks. Other income for the three months ended September 30,
2002 increased $200,000 from the comparable 2001 period primarily as a result of
increased income recorded on bank owned life insurance, originally purchased by
the Bank in December 2001, of $141,000 and income generated from the use of the
Bank's debit card and ATM usage which increased $35,000. Other income for the
nine months ended September 30, 2002 increased $800,000 from the comparable 2001
period as a result of increased income recorded on bank owned life insurance of
$413,000, income generated from the use of the Bank's debit card and ATM usage
which increased $126,000, and commissions received from Uvest investment
services which increased $14,000. Additionally, for the nine months ended
September 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 nine months ended September 30, 2002 fell
$100,000 and $300,000, respectively, from the comparable period in 2001.
Other expense. Total other expense for the three and nine month period
ended September 30, 2002 increased $400,000 and $1.1 million, respectively to
$3.2 million and $9.3 million from $2.8 million and $8.2 million, respectively
for the comparable three and nine month period in 2001. Salaries and benefits
increased $300,000 and $700,000, respectively from the comparable periods in
2001 due to increases in salaries and benefits and additional staffing.
Occupancy expense for the three and nine months ended September 30, 2002
increased $60,000 and $132,000, respectively, to $350,000 and $985,000 from
$290,000 and $853,000, respectively, for the comparable three and nine month
periods in 2001. Such increases for the three and nine month periods were
predominantly due to depreciation expense related to equipment purchases for
technological improvements. ATM expenses for the three and nine month periods
ended September 30, 2002 decreased $10,000 and $30,000, respectively due to
savings realized from a new service contract. Other expenses for the three and
nine month periods ended September 30, 2002 increased $38,000 and $256,000,
respectively, to $935,000 and $2.7
11
million from $897,000 and $2.5 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 nine months ended September 30, 2002
from the information presented in the 10K statement, under the caption Market
Risk, for the year ended December 31, 2001.
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures Based on their evaluation
- -----------------------------------------------------
as of a date within 90 days of the filing of this Quarterly Report on Form 10-Q,
the Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures (as
defined in Rules 13a - 14(c) and 15d - 14(c) under the Securities Exchange Act
of 1934 (the "Exchange Act")) are effective to ensure that information required
to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
(b) Changes in internal controls There were no significant changes in the
- ------------------------------------
Registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not engaged in any legal proceedings at the present
time. From time to time, the Bank is a party to legal proceedings
within the normal course of business wherein it enforces its security
interest in loans made by it, and other matters of a like kind.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Disclosed in March 31, 2002 Form 10-Q.
Item 5. Other Information
Not applicable.
13
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.
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 12, 2002 By: /s/ Charles G. Urtin
----------------------------------------
Charles G. Urtin
President, Chief Executive Officer
(Duly authorized officer)
Date: November 12, 2002 By: /s/ Raymond G. Suchta
----------------------------------------
Raymond G. Suchta
Vice President, Chief Financial Officer
(Duly authorized officer)
15
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 quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 12, 2002 /s/ Charles G. Urtin
----------------------------- ---------------------------------------
Charles G. Urtin
President and Chief Executive Officer
SECTION 302 CERTIFICATION
I, Raymond Suchta, certify that:
1. I have reviewed this quarterly report on Form 10-Q of IBT Bancorp, Inc ;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 12, 2002 /s/ Raymond Suchta
----------------------------- ----------------------------------------
Raymond Suchta
Chief Financial Officer