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, 2004
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File No. 1-31655
IBT Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1532164
- ------------------------------------ ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
309 Main Street, Irwin, Pennsylvania 15642
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(724) 863-3100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NA
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
Number of shares of Common Stock outstanding as of August 04, 2004: 2,955,455
IBT BANCORP, INC.
Contents
--------
Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.............................................................................1
Consolidated balance sheets at June 30, 2004
(unaudited) and December 31, 2003.............................................................. 1
Consolidated statements of income (unaudited) for the three and six months
ended June 30, 2004 and 2003 ................................................................... 2
Consolidated statements of cash flows (unaudited) for the six months
ended June 30, 2004 and 2003.................................................................... 3
Notes to consolidated financial statements...................................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................................... 12
Item 4. Controls and Procedures......................................................................... 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 14
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities................................................................................. 14
Item 3. Defaults upon Senior Securities................................................................ 14
Item 4. Submission of Matters to a Vote of Security-Holders............................................ 14
Item 5. Other Information.............................................................................. 14
Item 6. Exhibits and Reports on Form 8-K............................................................... 14
Signatures..................................................................................................... 15
CONSOLIDATED BALANCE SHEETS
IBT BANCORP, INC. AND SUBSIDIARY
June 30, 2004 December 31, 2003
------------- -----------------
(unaudited) (unaudited)
------------- -----------------
ASSETS
Cash and due from banks $ 16,470,720 $ 15,391,714
Interest-bearing deposits in banks 1,509,233 436,981
Certificate of deposit 100,000 100,000
Securities available for sale 180,687,235 167,907,113
Federal Home Loan Bank stock, at cost 5,254,000 4,540,500
Loans, net 428,522,074 416,286,455
Premises and equipment, net 6,148,347 6,468,749
Other assets 20,388,574 18,398,092
------------- -------------
Total Assets $ 659,080,183 $ 629,529,604
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 81,484,458 $ 81,053,392
Interest-bearing 430,911,042 411,104,137
------------- -------------
Total deposits 512,395,500 492,157,529
Federal funds purchased 7,907,000 7,900,000
Repurchase agreements 16,245,566 12,610,877
Accrued interest and other liabilities 3,867,252 3,947,390
FHLB advances 60,922,666 53,307,767
------------- -------------
Total liabilities 601,337,984 569,923,563
Stockholders' Equity
Capital stock, par value $1.25 per share,
50,000,000 shares authorized, 3,023,799
shares issued, 2,960,555 and 2,977,655
shares outstanding at June 30, 2004 and
December 31, 2003, respectively 3,779,749 3,779,749
Surplus 1,382,130 1,684,258
Retained earnings 56,510,372 54,451,662
Accumulated other comprehensive income (1,813,869) 1,033,638
------------- -------------
59,858,382 60,949,307
Less: Treasury stock, at cost (2,116,183) (1,343,266)
------------- -------------
Total stockholders' equity 57,742,199 59,606,041
------------- -------------
Total Liabilities and Stockholders' Equity $ 659,080,183 $ 629,529,604
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
1
CONSOLIDATED STATEMENTS OF INCOME
IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- -----------
Interest Income
Loans, including fees $ 6,544,889 $ 6,463,026 $13,135,413 $12,900,471
Investment securities 1,826,977 1,865,533 3,546,561 3,911,652
Federal funds sold 152 10,299 609 20,291
----------- ----------- ----------- -----------
Total interest income 8,372,018 8,338,858 16,682,583 16,832,414
Interest Expense
Deposits 2,123,261 2,144,109 4,234,344 4,501,015
FHLB advances 705,534 636,817 1,398,554 1,210,786
Repurchase agreements 25,489 35,970 46,040 72,358
Federal funds purchased 23,604 9,186 51,294 15,714
----------- ----------- ----------- -----------
Total interest expense 2,877,888 2,826,082 5,730,232 5,799,873
----------- ----------- ----------- -----------
Net Interest Income 5,494,130 5,512,776 10,952,351 11,032,541
Provision for Loan Losses 125,000 150,000 250,000 300,000
----------- ----------- ----------- -----------
Net Interest Income after Provision
for Loan Losses 5,369,130 5,362,776 10,702,351 10,732,541
Other Income
Service fees 608,912 646,818 1,159,714 1,217,054
Investment security gains 65,607 11,883 249,840 236,681
Debit card fees 180,798 175,136 309,601 329,181
Other income 481,623 852,291 965,841 1,343,752
----------- ----------- ----------- -----------
Total other income 1,336,940 1,686,128 2,684,996 3,126,668
Other Expenses
Salaries 1,550,648 1,633,284 2,880,273 2,848,714
Pension and other employee benefits 468,027 396,042 936,878 785,563
Occupancy expense 426,896 385,990 869,335 763,134
Data processing expense 222,845 212,495 443,033 406,905
Pennsylvania shares tax 123,791 113,412 249,220 219,216
Advertising expense 71,567 99,236 145,957 196,808
Other expenses 1,003,844 903,596 1,992,761 1,770,209
----------- ----------- ----------- -----------
Total other expenses 3,867,618 3,744,055 7,517,457 6,990,549
----------- ----------- ----------- -----------
Income Before Income Taxes 2,838,452 3,304,849 5,869,890 6,868,660
Provision for Income Taxes 750,216 849,268 1,429,059 1,783,675
----------- ----------- ----------- -----------
Net Income $ 2,088,236 $ 2,455,581 $ 4,440,831 $ 5,084,985
=========== =========== =========== ===========
Basic Earnings per Share $ 0.70 $ 0.82 $ 1.49 $ 1.71
=========== =========== =========== ===========
Diluted Earnings per Share $ 0.69 $ 0.82 $ 1.47 $ 1.69
=========== =========== =========== ===========
Dividends per Share $ 0.40 $ 0.35 $ 0.80 $ 0.70
=========== =========== =========== ===========
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,
----------------------------
2004 2003
------------ ------------
(unaudited) (unaudited)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,440,831 $ 5,084,985
Adjustments to reconcile net cash
from operating activities:
Depreciation 504,858 397,925
Increase in cash surrender value of insurance (221,142) (261,397)
Net amortization/accretion of
premiums and discounts 519,229 555,506
Investment security gains (249,840) (236,681)
Provision for loan losses 250,000 300,000
Increase (decrease) in cash due
to changes in assets and liabilities:
Other assets 304,602 (635,769)
Accrued interest and other liabilities 418,145 (960,254)
------------ ------------
Net Cash From Operating Activities 5,966,683 4,244,315
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 23,266,581 14,480,708
Proceeds from maturities of securities
available for sale 14,818,358 31,736,099
Purchase of securities available for sale (55,448,853) (27,805,800)
Net loans made to customers (13,590,945) (24,003,451)
Purchases of premises and equipment (184,456) (628,859)
Proceeds from sales of Federal Home Loan Bank stock 2,407,400 -
Purchase of Federal Home Loan Bank stock (3,120,900) (1,447,100)
------------ ------------
Net Cash Used By Investing Activities (31,852,815) (7,668,403)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 20,237,971 9,464,905
Net increase (decrease) in securities sold
under repurchase agreements 3,634,689 (690,079)
Dividends paid (2,382,124) (2,084,357)
Proceeds from FHLB advances 8,000,000 14,000,000
Repayment of FHLB advances (385,101) (312,460)
Federal funds purchased 7,000 -
Exercised stock options (302,128) (277,464)
Purchase of treasury stock (772,917) -
------------ ------------
Net Cash From Financing Activities 28,037,390 20,100,545
------------ ------------
Net Change in Cash and Cash Equivalents 2,151,258 16,676,457
Cash and Cash Equivalents at Beginning of Period 15,828,695 15,066,278
------------ ------------
Cash and Cash Equivalents at End of Period $ 17,979,953 $ 31,742,735
============ ============
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, 2004
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
accruals considered necessary for a fair presentation have been included.
Operating results for the three months and six months ended June 30, 2004 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2004 or any future interim period. The interim financial
statements should be read in conjunction with the financial statements and
footnotes thereto included in IBT Bancorp, Inc. and subsidiary Annual Report on
Form 10-K for the year ended December 31, 2003.
NOTE B - EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding. The weighted average shares outstanding were 2,977,115 and
2,977,385 for the three and six months ended June 30, 2004 and 2,977,655 for
both the three and six months ended June 30, 2003.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended June 30, 2004 and 2003
were ($1,585,523) and $2,934,874, respectively and for the six months ended June
30, 2004 and 2003 were $1,593,324 and $5,213,518 respectively.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
June 30, 2004
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
Obligations of
U.S. Government Agencies $ 82,673,432 $ 301,258 $ (1,321,101) $ 81,653,589
Obligations of State and
political sub-divisions 37,368,609 1,072,996 (146,062) 38,295,543
Mortgage-backed securities 52,439,296 401,852 (1,200,230) 51,640,918
Other securities 711,947 14,726 -- 726,673
Equity securities 10,242,238 100,576 (1,972,302) 8,370,512
------------- ------------- ------------- -------------
$ 183,435,522 $ 1,891,408 $ (4,639,695) $ 180,687,235
============= ============= ============= =============
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended June 30, 2004
NOTE E - STOCK OPTION PLAN
As of June 30, 2004, 150,000 stock options have been granted, of which 81,253
are vested and are exercisable as follows: 37,050 are exercisable at $24.50 per
share, 20,869 are exercisable at $23.00 per share, 19,334 are exercisable at
$32.88 per share, and 4,000 are exercisable at $51.40 per share; 23,000 are not
yet vested, 37,414 shares have been exercised and 8,334 have been forfeited. No
stock options were granted during the six months ended June 30, 2004.
NOTE F - COMMITTMENTS
As of June 30, 2004, the Bancorp was committed to a $10,000,000 Federal Home
Loan Bank advance to be funded on July 22, 2004. This advance is a five-year,
non-amortizing term loan with a rate of 4.06%. After one year and on a quarterly
basis thereafter, if the three-month LIBOR rate exceeds 8.0%, the loan rate can
be increased. If such an increase is implemented, the Bancorp can repay the
advance without penalty. This advance replaces a $10,000,000 advance maturing in
July 2004.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipate", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, risks associated with the
effect of opening 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
At June 30, 2004 total assets had increased $29.6 million, or 4.7%, to
$659.1 million from $629.5 million at December 31, 2003. Asset growth was
primarily due to increases of $12.8 million in securities available for sale and
$12.2 million in net loans.
At June 30, 2004, securities available for sale reached $180.7 million
from $167.9 million at December 31, 2003. The increase in available for sale
securities was primarily attributable to increases of $13.9 million in mortgage
backed securities offset by a decrease of $1.3 million in obligations of U.S.
government agencies. The monthly principal reductions associated with mortgage
backed securities provide the Company with a constant source of cash flow that
can be reinvested in instruments yielding current interest rates and to meet
future loan demand.
Net loans reached $428.5 million at June 30, 2004 from $416.3 million
at December 31, 2003. The increase in net loans is primarily attributed to a net
increase of $7.7 million in consumer term loans and a $5.3 million increase in
commercial loans offset by a $1.9 million non-performing commercial real estate
loan which was transferred to other real estate owned. A hotel secures this
property. The Company has engaged a hotel management company to operate the
hotel until a buyer can be located. See discussion related to "Provision for
loan losses." Increases in the loan portfolio were fueled by additional
borrowings at competitive rates.
At June 30, 2004, total liabilities increased $31.4 million, or 5.5%,
to $601.3 million from $569.9 million at December 31, 2003. This increase was
primarily the result of fixed-rate long-term and amortizing advances from the
Federal Home Loan Bank, which had a net increase of $7.6 million reaching $60.9
million at June 30, 2004 from $53.3 million at December 31, 2003. These low-rate
advances were used to fund the growth in available for sale securities and the
loan portfolio. The Company is committed to a $10.0 million 4.06% advance from
the Federal
6
Home Loan Bank, which will be funded in July 2004. This advance will replace an
existing $10.0 million 5.86% advance scheduled to mature in July 2004. See Note
F to the consolidated financial statements. The Company borrowed funds, on an
overnight basis, from the Federal Home Loan Bank totaling $7.9 million at June
30, 2004. This is consistent with the funds borrowed at December 31,2003. These
short term funds are borrowed on an as needed basis to meet the immediate
liquidity needs of the Company.
Repurchase agreements increased to $16.2 million at June 30, 2004, an
increase of $3.6 million from December 31, 2003. The Company offers its
corporate customers sweep accounts where unused deposit balances are swept into
an overnight repurchase agreement yielding market rates.
Total deposits increased $20.2 million or 4.1% to $512.4 million at
June 30, 2004 from $492.2 million at December 31, 2003. This increase was
primarily in interest-bearing deposits, which increased to $430.9 million at
June 30, 2004, from $411.1 million at December 31, 2003. The increase of $19.8
million was primarily due to increases of $7.0 million in interest-bearing
checking accounts, $6.1 million in certificate of deposit accounts, $3.6 million
in money market accounts, and $3.0 million in savings accounts.
Non-interest bearing deposit accounts increased to $81.5 million at
June 30, 2004, from $81.1 million at December 31, 2003. The increase of $400,000
is attributed to expected balance fluctuations within individual deposit
accounts which occur on a daily basis.
At June 30, 2004, total stockholders' equity decreased $1.9 million to
$57.7 million from $59.6 million at December 31, 2003. The decrease was due to
the change in accumulated other comprehensive income of $2.8 million, dividends
paid of $2.4 million, treasury stock purchased of $773,000, and employee stock
options exercised of $300,000 offset by net income of $4.4 million. Accumulated
other comprehensive income decreased as a result of changes in the net
unrealized gain on securities available for sale. Because of interest rate
volatility, the Company's accumulated other comprehensive income could
materially fluctuate for each interim period and year-end. See Note D to the
consolidated financial statements.
RESULTS OF OPERATIONS
Net income. Net income for the three months ended June 30, 2004
decreased $367,000, or 15.0%, to $2.1 million, or $.69 per diluted earnings per
share from $2.5 million, or $.82 per diluted earnings per share, for the
comparable three month period in 2003. Net income for the six months ended June
30, 2004 decreased $644,000 to $4.4 million or $1.47 diluted earnings per share
from $5.1 million or $1.69 diluted earnings per share for the comparable six
month period in 2003. The decrease for the three and six months ended June 30,
2004 was the result of increases in other expenses and a decrease in net
interest income and other income.
Interest income. Interest income for the three months ended June 30,
2004 increased $33,000 to $8.4 million from $8.3 million for the comparable
three month period in 2003. While
7
the average balances of interest earning assets increased $47.4 million for the
three months ended June 30, 2004, to $620.4 million from $573.0 million for the
comparable period in 2003, the yield on these assets decreased 43 basis points
to 5.39%, for the three months ended June 30, 2004 from 5.82% for the comparable
period in 2003. Interest income for the six months ended June 30, 2004 decreased
$149,000 to $16.7 million from $16.8 million for the comparable six month period
in 2003. The average balance of interest earning assets increased $42.1 million
to $610.4 million from $568.3 million for the comparable period in 2003, but was
offset by the decrease in the yield of 45 basis points to 5.47% from 5.92% for
the comparable period in 2003. The on-going low interest rate environment
continues to put negative pressure on interest earning assets in both the three
and six month periods ended June 30, 2004. See "Average Balance Sheet and
Rate/Volume Analysis"
Interest expense. Interest expense for the three months ended June 30,
2004 increased $52,000 to $2.9 million from $2.8 million for the comparable
period in 2003. The increase in interest expense was primarily attributed to a
$44.9 million increase in the average balance of interest bearing liabilities
offset by a 18 basis point decrease in the average cost of funds to 2.26% for
the three months ended June 30, 2004 from 2.44% for the comparable period in
2003. Interest expense for the six months ended June 30, 2004 decreased $70,000
to $5.7 million from $5.8 million for the comparable period in 2003. The
decrease in interest expense was primarily attributed to a 22 basis point
decrease in the average cost of funds to 2.29% for the six months ended June 30,
2004 from 2.51% for the comparable period in 2003. The reduction of average cost
of funds for the three and six month periods ended June 30, 2004 is reflective
of the continued historically low interest rates paid on deposits and borrowings
over the past year. See "Average Balance Sheet and Rate/Volume Analysis"
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.
Three Months Ended June 30, Three Months Ended June 30,
--------------------------- ---------------------------
2004 2003
--------------------------- ---------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars In Thousands) (Dollars In Thousands)
Interest-earning assets:
Loans receivable (1) $ 429,003 $ 6,545 6.10% $ 387,790 $ 6,463 6.67%
Investment securities
available for sale (2) 191,366 11,827 3.82% 181,937 1,866 4.10%
Other interest-earning assets (3) 63 0 0.96% 3,276 10 1.26%
--------- -------------------- --------- -------------------
Total interest earning assets $ 620,432 $ 8,372 5.39% $ 573,003 $ 8,339 5.82%
==================== ===================
Non-interest earning assets 34,207 30,972
--------- ---------
Total assets $ 654,639 $ 603,975
========= =========
Interest-bearing liabilities:
Money market accounts $ 58,003 $ 121 0.83% $ 62,578 $ 168 1.07%
Certificates of Deposit 242,657 1,855 3.06% 212,461 1,776 3.34%
Other liabilities 207,697 902 1.74% 188,485 882 1.87%
--------- -------------------- --------- -------------------
Total interest-bearing
liabilities $ 508,357 $ 2,878 2.26% $ 463,524 $ 2,826 2.44%
==================== ===================
Non-interest-bearing liabilities 84,628 82,509
--------- ---------
Total liabilities $ 592,986 $ 546,033
Stockholders' equity (4) 61,654 57,942
--------- ---------
Total liabilities and
stockholders' equity $ 654,639 $ 603,975
========= =========
Net interest income $ 5,494 $ 5,513
======== ========
Interest rate spread (5) 3.13% 3.38%
====== ======
Net yield on interest-earning assets (6) 3.54% 3.85%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 122.05% 123.62%
====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan
fees.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Consists of federal funds sold.
(4) Includes capital stock, surplus and accumulated other comprehensive income,
less treasury stock.
(5) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(6) Net yield on interest-earning assets represents annualized net interest
income as a percentage of average interest earning assets.
9
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,
--------------------------- ---------------------------
2004 2003
--------------------------- ---------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
------- -------- ---------- ------- -------- ----------
(Dollars In Thousands) (Dollars In Thousands)
Interest-earning assets:
Loans receivable (1) $ 425,543 $ 13,135 6.17% $ 378,947 $ 12,900 6.81%
Investment securities
available for sale (2) 184,794 3,546 3.84% 185,928 3,912 4.21%
Other interest-earning assets (3) 47 1 2.58% 3,396 20 1.20%
--------- -------------------- --------- -------------------
Total interest earning assets $ 610,384 $ 16,682 5.47% $ 568,271 $ 16,832 5.92%
==================== ===================
Non-interest earning assets 35,124 30,428
--------- ---------
Total assets $ 645,508 $ 598,699
========= =========
Interest-bearing liabilities:
Money market accounts $ 57,250 $ 239 0.83% $ 61,534 $ 383 1.25%
Certificates of Deposit 240,896 3,712 3.08% 218,219 3,669 3.36%
Other liabilities 202,558 1,779 1.76% 181,674 1,747 1.92%
--------- -------------------- --------- -------------------
Total interest-bearing
liabilities $ 500,704 $ 5,730 2.29% $ 461,427 $ 5,799 2.51%
==================== ===================
Non-interest-bearing liabilities 82,913 80,076
--------- ---------
Total liabilities $ 583,617 $ 541,503
Stockholders' equity (4) 61,891 57,196
--------- ---------
Total liabilities and
stockholders' equity $ 645,508 $ 598,699
========= =========
Net interest income $ 10,952 $ 11,033
======== ========
Interest rate spread (5) 3.18% 3.41%
====== ======
Net yield on interest-earning assets (6) 3.59% 3.88%
====== ======
Ratio of average interest-earning assets
to average interest-bearing liabilities 121.91% 123.15%
====== ======
(1) Average balances include non-accrual loans, and are net of deferred loan
fees.
(2) Includes interest-bearing deposits in other financial institutions.
(3) Consists of federal funds sold.
(4) Includes capital stock, surplus and accumulated other comprehensive income,
less treasury stock.
(5) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(6) Net yield on interest-earning assets represents annualized net interest
income as a percentage of average interest earning assets.
10
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, 2004 Six Month Period ended June 30, 2004
-------------------------------------- ------------------------------------
2004 vs. 2003 2004 vs. 2003
------------- -------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------ ------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(Dollars In Thousands) (Dollars In Thousands)
Interest income:
Loans receivable $687 $(605) $ 82 $1,586 $(1,351) $ 235
Investment securities available
for sale 97 (136) (39) (24) (342) (366)
Other interest-earning assets (10) 0 (10) (19) 0 (19)
---- ----- --- ------ ------- -----
Total interest-earning assets $774 $(741) $ 33 $1,543 $(1,693) $(150)
==== ===== ==== ====== ======= =====
Interest expense:
Money market accounts $(12) $ (35) $(47) $ (27) $ (117) $(144)
Certificates of deposit 252 (173) 79 381 (338) 43
Other liabilities 90 (70) 20 201 (169) 32
---- ----- ---- ------ ------- -----
Total interest-bearing liabilities $330 $(278) $ 52 $ 555 $ (624) $ (69)
==== ===== ==== ====== == ==== =====
Net change in net interest income $444 $(463) $(19) $ 988 $(1,069) $ (81)
==== ===== ==== ====== ======= =====
Provision for loan losses. For the three months ended June 30, 2004 the
provision for loan losses was $125,000 compared to $150,000 for the comparable
2003 period. For the six months ended June 30, 2004 the provision for loan
losses was $250,000 compared to $300,000 for the comparable 2003 period.
A non-performing commercial real estate loan was added to other real
estate owned. The reclassification necessitated a charge of $700,000 to the
allowance for loan and lease losses.
11
The provision for loan losses is charged to operations to bring the
total allowance for loan losses to a level that represents management's best
estimate of the losses inherent in the portfolio, based on a monthly review by
management of the following factors:
o Historical experience
o Volume
o Type of lending conducted by the Bank
o Industry standards
o The level and status of past due and non-performing loans
o The general economic conditions in the Bank's lending area; and
o Other factors affecting the collectability of the loans in the portfolio
Large groups of homogeneous loans, such as residential real estate,
small commercial real estate loans and home equity and consumer loans are
evaluated in the aggregate using historical loss factors and other data. The
amount of loss reserve is calculated using historical loss rates, net of
recoveries on a five year rolling weighted average, adjusted for environmental,
and other qualitative factors such as industry, geographical, economic and
political factors that can effect loss rates or loss measurements.
Large balance and/or more complex loans such as multi-family and
commercial real estate loans may be evaluated on an individual basis and are
also evaluated in the aggregate to determine adequate reserves. As specific
loans are determined to be impaired, specific reserves are assigned based upon
collateral value, market value, if determinable, or the present value of the
estimated future cash flows of the loan.
The allowance is increased by a provision for loan loss which is charged to
expense, and reduced by charge-offs, net of recoveries. Loans are placed on
non-accrual status when they are 90 days past due, unless they are adequately
collateralized and in the process of collection.
The allowance for loan losses is maintained at a level that represents
management's best estimate of losses in the portfolio at the balance sheet date.
However, there can be no assurance that the allowance for losses will be
adequate to cover losses which may be realized in the future and that additional
provisions for losses will not be required.
Other income. Total other income for the three months ended June 30,
2004 decreased $349,000 to $1.3 million from $1.7 million for the comparable
three month period in 2003. Total other income for the six months ended June 30,
2004 decreased $442,000 to $2.7 million from $3.1million for the comparable
period in 2003. The decrease in other income for the three and six months ended
June 30, 2004 was primarily due to a $346,000 gain recognized in 2003 from the
sale of property held in other real estate. Also contributing to the decline in
other income was a decline in service fees, which decreased $38,000 and $57,000,
respectively, from the comparable 2003 periods. This reduction was primarily in
loan related fees.
12
Other expense. Total other expenses for the three month period ended
June 30, 2004 increased $124,000 to $3.9 million from $3.7 million for the
comparable three month period in 2003. For the six months ended June 30, 2004,
total other expenses increased $527,000 to $7.5 million from $7.0 million for
the comparable 2003 period. Salary expense for the three month period decreased
$83,000 but increased $32,000 for the six month period ended June 30, 2004
compared to the same periods in 2003.These changes were the result of less
commissions paid to commission based lenders, whose loan production has been
impacted by the current rate environment. Increases in pension and employee
benefit costs for the three and six month periods in 2004 of $72,000 and
$151,000, respectively compared to the same periods in 2003, arose primarily
from increases in health care costs. Occupancy expense increased for the three
and six month periods in 2004 by $41,000 and $106,000, respectively compared to
the same periods in 2003 primarily due to the Company's investment in the
Greensburg branch and depreciation costs related to investments in technology.
The increases in other expenses of $100,000 and $223,000 for the three and six
month periods in 2004, respectively is primarily contributed to increased
hardware and software maintenance costs, which rose $54,000 and $92,000,
respectively from the comparable periods in 2003.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes for the three months ended June 30,
2004 from the information presented in the 10K statement, under the caption
Market Risk, for the year ended December 31, 2003.
Item 4. CONTROLS AND PROCEDURES
The Company's management evaluated, with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
There were no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant is not party to any material legal proceedings at the
present time. From time to time, the Bank is a party to routine legal
proceedings within the normal course of business wherein it enforces
its security interest in loans made by it, and other matters of a like
kind.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
ISSUER PURCHASES OF EQUITY SECURITIES
- ------------------------------------------------------------------------------------------------------------
(c) Total Number (d) Maximum Number
Of Shares (or Units) (or Approximate Dollar
(b) Purchased as Part Value) of Shares (or
(a) Total Number Average Price Of Publicly Units) that May Yet Be
Of Shares (or Paid per Share Announced Plans Purchased Under the
Period Units) Purchased (or Unit) or Programs Plans or Programs
- ------------------------------------------------------------------------------------------------------------
April 1 through 30
- ------------------------------------------------------------------------------------------------------------
May 1 through 31
- ------------------------------------------------------------------------------------------------------------
June 1 through 30 17,100 $45.20 17,100 87,856
- ------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable
14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
3(i) Articles of Incorporation of IBT Bancorp, Inc.*
3(ii) Amended Bylaws of IBT Bancorp, Inc.**
4 Rights Agreement, dated as of November 18, 2003, by and
between IBT Bancorp, Inc. and Registrar and Transfer
Company, as Rights Agent.***
10 Change In Control Severance Agreement with Charles G. Urtin****
10.1 Deferred Compensation Plan For Bank Directors****
10.2 Retirement Agreement Between Irwin Bank & Trust Co. And J.
Curt Gardner****
10.3 Death Benefit Only Deferred Compensation Plan For Bank
Directors effective as of January 1, 1990****
10.4 Retirement and Death Benefit Deferred Compensation Plan For
Bank Directors effective as of January 1, 1990****
10.5 2000 Stock Option Plan*****
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
32 Section 1350 Certification
-------------------------
* Incorporated by reference to the identically numbered
exhibits of the Registrant's Form 10 (File No. 0-25903)
filed April 29, 1999.
** Incorporated by reference to the identically numbered
exhibit of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002.
*** Incorporated by reference to Exhibit 4 to Amendment No. 1 to
Form 8-A (File No. 1-31655) filed November 20, 2003.
**** Incorporated by reference to the identically numbered
exhibits of the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
*****Incorporated by reference to Exhibit 4.1 the Registrant's
Registration Statement on Form S-8 (File No. 333-40398)
filed June 29, 2000.
(b) Reports on Form 8-K
-------------------
(i) On April 27, 2004, the registrant filed a Current Report on
Form 8-K to report its announcement of earnings for the
quarter ended March 31, 2004 under Item 12.
(ii) On June 17, 2004, the Registrant filed a Current Report on
Form 8-K to report the retirement of Edwin A. Paulone from
the Board of Directors effective as of September 22, 2004
under Item 5.
(iii)No financial statements were filed as part of these
reports.
15
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 4, 2004 By: /s/Charles G. Urtin
---------------------------------------
President, Chief Executive Officer
(Duly authorized officer)
Date: August 4, 2004 By: /s/Raymond G. Suchta
---------------------------------------
Raymond G. Suchta
Vice President, Chief Financial Officer
(Principal Financial Officer)