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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the fiscal year ended December 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
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Commission File Number: 0-18415
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IBT BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Michigan 38-2830092
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
200 East Broadway Street, Mt. Pleasant, Michigan 48858
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (517) 772-9471
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock -- $0.00 Par Value
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(Title of Class)
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $119,856,000 as of March 20, 2001.
The number of shares outstanding of the registrant's Common Stock ($0 par value)
was 3,866,619 as of March 20, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
(Such documents are incorporated herein only to the extent specifically set
forth in response to an item herein.)
Documents Part of Form 10-K Incorporated into
--------- ------------------------------------
IBT Bancorp, Inc. Proxy Statement
for its Annual Meeting of Part III
Shareholders to be held
May 8, 2001
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PART I
ITEM 1. BUSINESS
GENERAL
IBT Bancorp, Inc. (the Corporation) is a registered financial services holding
company incorporated in September 1988 under Michigan law. The Corporation has
five subsidiaries: Isabella Bank and Trust, Farmers State Bank, IBT Financial
Services, IBT Title, and IBT Loan Production. Isabella Bank and Trust has
fifteen banking offices located throughout Isabella County, northeastern
Montcalm County, and southern Clare County, all of which are located in central
Michigan. Farmers State Bank has three offices located in Gratiot and Saginaw
Counties. IBT Financial Services is a full service retail brokerage and
insurance agency offering stocks, bonds, mutual funds, life insurance, casualty
insurance, and fixed and variable annuities. IBT Title provides title insurance,
abstract searches, and closes loans in Isabella County and Mecosta County. IBT
Loan Production originates residential real estate mortgages. Its principle
products are 15 and 30 year fixed rate loans. All loans originated are sold with
servicing to Isabella Bank and Trust. The principal city in which the
Corporation operates is Mount Pleasant, which has a population of approximately
24,000. Markets served include Isabella, Gratiot, Mecosta, southwest Midland,
western Saginaw, northern Montcalm, and southern Clare. The area includes
significant agricultural production, light manufacturing, retail, gaming and
tourism, and two universities with enrollment of approximately 30,000 students.
The area unemployment rate is approximately 3.5% and average household income is
$35,000.
COMPETITION
The Corporation competes with other commercial banks, many of which are
subsidiaries of other bank holding companies, savings and loan associations,
finance companies, credit unions, and retail brokerage firms. Its subsidiary
banks are community banks and focus on providing high-quality, personalized
service at a fair price. The banks offer a broad array of banking services to
businesses, institutions, and individuals. Deposit services offered include
checking accounts, savings accounts, certificates of deposit, and direct
deposits. Lending activity includes loans made pursuant to lines of credit, real
estate loans, consumer loans, student loans, and charge card loans. Other
financial related products include trust services, title insurance, stocks,
investment securities, bonds, mutual fund sales, 24 hour banking service locally
and nationally through shared automatic teller machines, and safe deposit box
rentals.
LENDING
The subsidiary banks limit lending activities to local markets and have not
purchased any loans from the secondary market. They do not make loans to fund
leveraged buyouts, have no foreign corporate or government loans, and limited
corporate debt securities. The general lending philosophy is to avoid
concentrations to individuals and business segments. The following table sets
forth the composition of the banks loan portfolio, as of December 31, 2000.
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LOANS BY MAJOR LENDING CATEGORY
(in thousands) Amount %
-------- -----
Residential real estate
One to four family residential $176,688 43.8
Construction & land development 19,122 4.7
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Total 195,810 48.5
Commercial
Commercial and real estate 74,658 18.5
Farmland & agricultural production 49,221 12.2
Commercial and other 36,423 9.0
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Total 160,302 39.7
Other individual
Other personal 45,239 11.2
Credit cards 2,328 0.6
-------- ------
Total 47,566 11.8
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TOTAL $403,679 100.0%
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First and second residential mortgages are the single largest category of loans
(43.8% of total loans). The Corporation, through its subsidiary banks, offers 3
and 5 year fixed rate balloon mortgages with a maximum 30 year amortization, and
15 and 30 year amortized fixed rate loans. Fixed rate loans with an amortization
greater than 15 years are sold upon origination to the Federal Home Loan
Mortgage Association. Fixed rate residential mortgage loans with an amortization
of 15 years or less may be held for future sale or sold upon origination.
Factors used in determining when to sell these mortgages include management's
judgement about the direction of interest rates, the Corporation's need for
fixed rate assets in the management of its interest rate sensitivity, and
overall loan demand. Currently all loans with a fixed maturity over 7 years are
sold. The Corporation has a policy that these loans may not exceed 5% of its
total assets.
Lending policies generally limit the maximum loan-to-value ratio on residential
mortgages to 95% of the lower of appraised value of the property or the purchase
price, with the condition that private mortgage insurance is required on loans
with loan-to-value ratios in excess of 80%. The majority of the loans have a
loan-to-value ratio of less than 80%. Underwriting criteria for residential real
estate loans include: evaluation of the borrower's ability to make monthly
payments, the value of the property securing the loan, the payment of principal,
interest, taxes, and hazard insurance does not exceed 28% of a borrower's gross
income, all debt servicing does not exceed 36% of income, acceptable credit
reports, (verification of employment, income, and financial information).
Appraisals are performed by independent appraisers. Escrow accounts for taxes
and insurance are required on all loans with loan-to-value in excess of 80%. All
mortgage loan requests are reviewed by a mortgage loan committee; loans in
excess of $250,000 require the approval of either the subsidiary bank's Board of
Directors or its loan committee.
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Construction and land development loans consist mostly of 1 to 4 family
residential properties. These loans have a 6 to 9 month maturity and are made
using the same underwriting criteria as residential mortgages. Loan proceeds are
disbursed in increments as construction progresses and as inspections warrant.
Construction loans are either converted to permanent loans at the completion of
construction or are paid off from financing through another financial
institution.
Commercial lending, which includes loans for farmland and agricultural
production, state and political subdivisions, commercial real estate, and
commercial operating loans equaled 39.7% of the Corporation's loan portfolio at
December 31, 2000. Repayment of commercial loans is often dependent upon the
successful operation and management of a business; thus, these loans generally
involve greater risk than other types of lending. The Corporation minimizes its
risk by generally limiting the amount of loans to any one borrower to $4.5
million in the aggregate at its subsidiary banks. Borrowers with credit needs of
more than $4.5 million are serviced through the use of loan participations with
other commercial banks. All commercial real estate loans require loan-to-value
limits of less than 80%. Depending upon the type of loan, past credit history,
and current operating results, the Corporation may require the borrower to
pledge accounts receivable, inventory, and fixed assets. Personal guarantees are
generally required from the owners of closely held corporations, partnerships,
and proprietorships. In addition, the Corporation requires annual financial
statements, prepares cash flow analysis, and reviews credit reports.
Consumer loans granted include automobile loans, secured and unsecured personal
loans, credit cards, student loans, and overdraft protection. Loan amortization
is generally for a period of up to 5 years; except home improvement loans, which
are amortized for up to 10 years. The underwriting emphasis is on a borrower's
ability to pay rather than collateral value. Except for student loans, no
installment loans are sold in the secondary market. All student loans are sold
in the secondary market upon reaching a payout status.
SUPERVISION AND REGULATION
The Corporation is subject to supervision and regulation by the Federal Reserve
Board under the Financial Services Holding Company Act of 2000. A bank holding
company and its subsidiaries are able to conduct only the business of commercial
banking and activities closely related or incidental to it. (See Regulation
below.)
Isabella Bank and Trust and Farmers State Bank are chartered by the State of
Michigan. The banks are members of the Federal Reserve System, their deposits
are insured by the Federal Deposit Insurance Corporation to the extent provided
by law, and are members of the Federal Home Loan Bank of Indianapolis. The banks
and IBT Loan Production are supervised and regulated by the Office of Financial
and Insurance Services and the Federal Reserve Board. (See Regulation below)
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IBT Financial Services, Inc., is a registered broker-dealer and insurance agency
and subject to regulation by the Securities and Exchange Commission under
federal securities laws. This subsidiary is also subject to regulation under
state securities laws and regulation by the Office of Financial and Insurance
Services.
The Bank's non-banking subsidiary, IBT Title, is a licensed insurance agency and
is subject to regulation by the Office of Financial and Insurance Services.
PERSONNEL
As of December 31, 2000, the Corporation had one full-time employee, Isabella
Bank and Trust had 180, Farmers State Bank had 49, IBT Financial Services had
four, IBT Title had ten, and IBT Loan Production had one. The Corporation and
the Bank provide group life, health, accident, disability and other insurance
programs for employees and a number of other employee benefit programs. The
Corporation believes its relationship with its employees to be good.
LEGAL PROCEEDINGS
There are various claims and lawsuits in which the Corporation's subsidiary
banks are periodically involved, such as claims to enforce liens, condemnation
proceedings on making and servicing of real property loans and other issues
incidental to the Bank's business. However, neither the Corporation nor the
banks are involved in any material pending litigation.
REGULATION
The earnings and growth of the banking industry and therefore the earnings of
the Corporation and the earnings of the Bank are affected by the credit policies
of monetary authorities, including the Federal Reserve System. An important
function of the Federal Reserve System is to regulate the national supply of
bank credit in order to combat recession and curb inflationary pressures. Among
the instruments of monetary policy used by the Federal Reserve to implement
these objectives are open market operations in U.S. Treasury securities, changes
in the discount rate on member bank borrowing, and changes in reserve
requirements against member bank deposits. These methods are used in varying
combinations to influence overall growth of bank loans, investments and deposits
and may also affect interest rates charged on loans or paid for deposits. The
monetary policies of the Federal Reserve System have had a significant effect on
the operating results of commercial banks and related financial service
providers in the past and are expected to continue to do so in the future. The
effect of such policies upon the future business and earnings of the Corporation
and the Bank cannot be predicted.
THE CORPORATION
The Corporation, as a financial services holding company, is regulated under the
Bank Holding Company Act of 1956, as amended ("BHC Act"), and is subject to the
supervision of the Board of Governors of the Federal Reserve System ("Federal
Reserve
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Board"). The Corporation is registered as a financial services holding company
with the Federal Reserve Board and is required to file with the Federal Reserve
Board an annual report and such additional information as the Federal Reserve
Board requires. The Federal Reserve Board may also make inspections and
examinations of the Corporation and its subsidiaries.
Prior to March 13, 2000, a bank holding company generally was prohibited under
the BHC Act from acquiring the beneficial ownership or control of more than 5%
of the voting shares or substantially all the assets of any company, including a
bank, without the Federal Reserve Board's prior approval. Also, prior to March
13, 2000, a bank holding company generally was limited to engaging in banking
and such other activities as determined by the Federal Reserve Board to be
closely related to banking.
Under the Gramm-Leach-Bliley Act of 1999 ("GLB Act"), beginning March 13, 2000,
an eligible bank holding company may elect to become a financial holding company
and thereafter affiliate with securities firms and insurance companies and
engage in other activities that are financial in nature. The GLB Act defines
"financial in nature" to include securities underwriting, dealing and market
making; sponsoring mutual funds and investment companies; insurance underwriting
and agency; merchant banking activities; activities that the Federal Reserve
Board has determined to be closely related to banking; and other activities that
the Federal Reserve Board, after consultation with the Secretary of the
Treasury, determines by regulation or order to be financial in nature or
incidental to a financial activity. No Federal Reserve Board approval is
required for a financial holding company to acquire a company, other than a bank
holding company, bank or savings association, engaged in activities that are
financial in nature or incidental to activities that are financial in nature, as
defined in the GLB Act or as determined by the Federal Reserve Board.
A bank holding company is eligible to become a financial holding company if each
of its subsidiary banks and savings associations is well capitalized under the
prompt corrective action provisions of the Federal Deposit Insurance Act ("FDI
Act"), is well managed and has a rating under the Community Reinvestment Act
(CRA) of satisfactory or better. If any bank or savings association subsidiary
of a financial holding company ceases to be well capitalized or well managed,
the Federal Reserve Board may require the financial holding company to divest
the subsidiary. Alternatively, the financial holding company may elect to
conform its activities to those permissible for bank holding companies that do
not elect to become financial holding companies. If any bank or savings
association subsidiary of a financial holding company receives a CRA rating of
less than satisfactory, the financial holding company will be prohibited from
engaging in new activities or acquiring companies other than bank holding
companies, banks or savings associations.
The Corporation became a financial holding company effective March 13, 2000. It
continues to maintain its status as a bank holding company for purposes of other
Federal Reserve Board regulations.
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Under Federal Reserve Board policy, the Corporation is expected to act as a
source of financing strength to its subsidiary banks and to commit resources to
support its subsidiaries. This support may be required at times when, in the
absence of such Federal Reserve Board policy, the Corporation would not
otherwise be required to provide it.
Under Michigan law, if the capital of a Michigan state chartered bank (such as
the Corporation's bank subsidiaries) has become impaired by losses or otherwise,
the Commissioner of the Office of Financial and Insurance Services may require
that the deficiency in capital be met by assessment upon the Bank's stockholders
pro rata on the amount of capital stock held by each, and if any such assessment
is not paid by any stockholder within 30 days of the date of mailing of notice
thereof to such stockholder, cause the sale of the stock of such stockholder to
pay such assessment and the costs of sale of such stock.
Any capital loans by a bank holding company to any of its subsidiary banks are
subordinate in right of payment to deposits and to certain other indebtedness of
such subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment. This priority would apparently
apply to guarantees of capital plans under the Federal Deposit Insurance
Corporation Improvement Act of 1991.
Certain additional information concerning regulatory guidelines for capital
adequacy and other regulatory matters is presented herein under the caption
"Capital" on page 24 and "Note I -- Commitments and Other Matters" and
"Note M -- Regulatory Capital Matters" on pages 46, 48, and 49, respectively.
SUBSIDIARY BANKS
The banks are subject to regulation and examination primarily by the Office of
Financial and Insurance Services. As insured state banks, which are members of
the Federal Reserve Bank of Chicago, the subsidiaries are also subject to
regulation and examination by the FDIC and the Federal Reserve.
The agencies and federal and state law extensively regulate various aspects of
the banking business including, among other things, permissible types and
amounts of loans, investments and other activities, capital adequacy, branching,
interest rates on loans and on deposits and the safety and soundness of banking
practices.
Banking laws and regulations also restrict transactions by insured banks owned
by a bank holding company, including loans to and certain purchases from the
parent holding company, non-bank and bank subsidiaries of the parent holding
company, principal shareholders, officers, directors and their affiliates, and
investments by the subsidiary banks in the shares or securities of the parent
holding company (or any of the other non-bank or bank affiliates), acceptance of
such share or securities as collateral security for loans to any borrower.
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The banks are also subject to legal limitations on the frequency and amount of
dividends that can be paid to the Corporation. For example, a Michigan state
bank may not declare a cash dividend or a dividend in kind except out of net
profits then on hand after deducting all losses and bad debts, and then only if
it will have a surplus amounting to not less than 20% of its capital after the
payment of the dividend. Moreover, a Michigan state bank may not declare or pay
any cash dividend or dividend in kind until the cumulative dividends on its
preferred stock, if any, have been paid in full. Further, if the surplus of a
Michigan state bank is at any time less than the amount of its capital, before
the declaration of a cash dividend or dividend in kind, it must transfer to
surplus not less than 10% of its net profits for the preceding half-year (in the
case of quarterly or semi-annual dividends) or the preceding two consecutive
half-year periods (in the case of annual dividends).
The payment of dividends by the Corporation and the banks is also affected by
various regulatory requirements and policies, such as the requirement to
maintain adequate capital above regulatory guidelines. Recently enacted
legislation will impose further restrictions on the payment of dividends by
insured banks which fail to meet specified capital levels. The FDIC may prevent
an insured bank from paying dividends if the bank is in default of payment of
any assessment due to the FDIC. In addition, payment of dividends by a bank may
be prevented by the applicable federal regulatory authority if such payment is
determined, by reason of the financial condition of such bank, to be an unsafe
and unsound banking practice. The Federal Reserve Board and the FDIC have issued
policy statements providing that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
These regulations and restrictions may limit the Corporation's ability to obtain
funds from its subsidiary banks for its cash needs, including payment of
dividends and operating expenses.
The activities and operations of the banks are also subject to other federal and
state laws and regulations, including usury and consumer credit laws, the
Federal Trust-in-Lending Act, Truth-in-Saving and Regulation Z of the Federal
Reserve Board and the Federal Bank Merger Act.
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ITEM 2. PROPERTIES
The Corporation's offices are located in the main office building of the
Isabella Bank and Trust. Isabella Bank and Trust owns 15 branches and leases one
and Farmers State Bank owns three branches. IBT Title owns one office, and
leases one. The Corporation's facilities current, planned, and best use is for
conducting its current activities with the exception of approximately 8% of the
main office, and 45% of the Clare office, which is leased to tenants. In
management's opinion, each facility has excess capacity and is in good
condition. The following table sets forth the location of the Corporation's
offices, as well as certain additional information relating to those offices as
of December 31, 2000.
Year Approximate Net
Facility Square Book Value
Opened Footage 12/31/00 (1)
-------- ----------- -----------
Isabella Bank and Trust
Main Office
200 East Broadway (2)
Mt. Pleasant, Michigan 1903 27,640 $ 201,950
Main Office Extension
Customer Service Center
139 East Broadway
Mt. Pleasant, Michigan 1985 16,736 461,259
Operations Center (7)
2750 Three Leaves Drive
Mt. Pleasant, Michigan 2001 15,000 1,065,100
Isabella County Branch Offices
1416 East Pickard (3)
Mt. Pleasant, Michigan 1983 1,450 488,200
2133 South Mission (6)
Mt. Pleasant, Michigan 1976 1,560 382,127
200 South University (4)
Mt. Pleasant, Michigan 1964 1,795 56,300
1402 West High
Mt. Pleasant, Michigan 1973 2,150 49,734
401 East Main Street (5)
Blanchard, Michigan 1911 6,561 14,060
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Year Net
Facility Approximate Book Value
Opened Sq. Footage 12/31/00 (1)
-------- ----------- ------------
500 East Wright Avenue
Shepherd, Michigan 1980 1,830 $176,453
3388 N. Woodruff Road
Weidman, Michigan 1975 5,400 66,777
1867 Winn Road
Beal City, Michigan 1977 1,100 48,612
Montcalm County Branch Office
313 W. Bridge Street (6)
Six Lakes, Michigan 1966 1,527 404,993
Clare County Branch Offices
532 N. McEwan Street
Clare, Michigan 1993 7,300 361,718
1125 N. McEwan Street
Clare, Michigan 1997 525 406,156
Mecosta County Branch Offices
220 W. Wheatland Street
Remus, Michigan 1998 4,273 307,513
240 E. Northern Avenue
Barryton, Michigan 1998 4,273 253,874
8529 - 100th Avenue
Stanwood, Michigan 1998 2,665 16,937
IBT Title
Isabella County
209 E. Broadway
Mt. Pleasant, Michigan 1998 2,640 209,445
Mecosta County
119 Michigan Avenue
Big Rapids, Michigan 1999 1,700 53,397
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Year Net
Facility Approximate Book Value
Opened Sq. Footage 12/31/00 (1)
-------- ----------- ------------
Farmers State Bank
Main Office (8) 1967 13,700 $312,800
316 E. Saginaw
Breckenridge, Michigan
Ithaca Branch
1402 E. Center
Ithaca,Michigan 1991 2,387 197,700
Hemlock Branch
16490 Gratiot
Hemlock, Michigan 1994 1,840 200,140
(1) includes land and buildings
(2) substantially remodeled in 1986
(3) substantially remodeled in 1990
(4) partially remodeled in 1986 and 1988
(5) substantially remodeled in 1976 and partially remodeled in 1986
(6) substantially remodeled in 1992 and 1996
(7) work-in-process, completed 2-10-01
(8) substantially remodeled in 1985 and 1993
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ITEM 3. LEGAL PROCEEDINGS
The Corporation and its banks are not involved in any material pending legal
proceedings. The banks, because of the nature of their business, are at times
subject to numerous pending and threatened legal actions which arises out of the
normal course of their business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 2000 to a vote of
security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF REGISTRANT
Pursuant to instruction G(3), the following information is included as an
unnumbered item under Part I of this report in lieu of being included in the
Proxy Statement for the Annual Shareholders Meeting to be held on May 8, 2001.
The names, ages, corporate positions, and years of service of the executive
officers of the Corporation are as follows:
YEARS OF
NAME AGE POSITION SERVICE
---- --- -------- --------
David W. Hole 63 President and CEO 41
Mary Ann Breuer 61 Secretary 41
Dennis P. Angner 45 Exec. VP/Treasurer 17
Richard J. Barz 52 Vice President 28
Herbert C. Wybenga 65 Vice President 15
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS' MATTERS
COMMON STOCK AND DIVIDEND INFORMATION
There is no established market for the Corporation's common stock or public
information with respect to its market price. There are occasional sales by
shareholders of which the management of the Corporation is aware. From January
1, 1999 through December 31, 2000 there were, so far as management knows,123
sales of the Corporation's common stock. These sales involved 97,156 shares, as
adjusted for a 3.3 for 1 stock split declared in December 1999 paid in February
2000. The prices were reported to management in only some of the transactions,
and management cannot confirm the prices which were reported during this period.
The highest known price paid for the Bank's stock was $30.00 per share in 2000,
and the lowest price was $23.33 per share in the first quarter of 1999. The
following is a summary of all known transfers since January 1, 1999. All of the
information has been adjusted to reflect the stock dividend referred to above.
Number of Number of Low High
Date Sales Shares Bid Bid
---- --------- --------- ------ ------
1999
First Quarter 12 27,430 $23.33 $24.85
Second Quarter 7 4,376 23.79 25.76
Third Quarter 18 4,704 24.24 27.27
Fourth Quarter 15 3,704 27.27 27.27
2000
First Quarter 17 4,859 $30.00 $30.00
Second Quarter 18 16,116 30.00 30.00
Third Quarter 18 22,288 30.00 30.00
Fourth Quarter 18 13,679 30.00 30.00
The following table sets forth the cash dividends paid for the following
quarters, adjusted for the 3.3 for 1 stock split.
2000 1999
----- -----
First Quarter $0.09 $0.08
Second Quarter 0.09 0.08
Third Quarter 0.09 0.08
Fourth Quarter 0.27 0.24
----- -----
TOTAL $0.54 $0.50
===== =====
IBT Bancorp's authorized common stock consists of 10,000,000 shares, of which
3,871,552 shares are issued and outstanding as of December 31, 2000 (as adjusted
for the stock split paid February 18, 2000). As of year end 2000, there were
1,440 shareholders of record.
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ITEM 6. SELECTED FINANCIAL DATA
SUMMARY OF SELECTED FINANCIAL DATA (1)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
INCOME STATEMENT DATA
Total interest income $ 38,754 $ 35,445 $ 33,651 $ 30,397 $ 29,171
Net interest income 20,352 19,224 17,601 16,197 15,563
Provision for loan losses 565 509 531 476 560
Net income 5,431 5,244 4,701 4,649 4,349
BALANCE SHEET DATA
End of year assets $540,897 $503,596 $485,983 $414,095 $389,508
Daily average assets 516,145 493,606 451,668 396,153 378,948
Daily average deposits 452,664 441,566 405,291 346,845 333,567
Daily average loans/net 380,392 332,083 300,794 278,293 253,884
Daily average equity 50,506 45,482 41,670 38,095 34,762
PER SHARE DATA (2)
Net income $ 1.41 $ 1.38 $ 1.25 $ 1.25 $ 1.19
Cash dividends 0.54 0.50 0.48 0.45 0.42
Book value (at year end) 13.41 12.24 11.82 10.67 9.80
FINANCIAL RATIOS
Shareholders' equity to assets 9.60% 9.35% 9.09% 10.05% 9.50%
Net income to average equity 10.75 11.53 11.28 12.20 12.51
Cash dividend payout to net income 38.30 36.80 37.94 36.07 35.60
Net income to average assets 1.05 1.06 1.04 1.17 1.15
2000 1999
---------------------------------------- -----------------------------------------
Quarterly Operating Results: 4th 3rd 2nd 1st 4th 3rd 2nd 1st
------- ------- ------- ------- ------- ------- ------- -------
Total interest income $10,212 $ 9,931 $ 9,448 $ 9,163 $ 8,899 $ 9,020 $ 8,873 $ 8,652
Interest expense 5,023 4,834 4,417 4,128 4,019 4,139 4,042 4,021
Net interest income 5,189 5,097 5,031 5,035 4,900 4,881 4,831 4,632
Provision for loan losses 75 186 179 125 65 162 158 124
Noninterest income 1,084 1,128 1,165 1,028 1,129 1,200 1,026 1,035
Noninterest expenses 4,214 4,239 4,127 4,097 4,107 4,052 3,834 3,825
Net income 1,427 1,302 1,363 1,339 1,313 1,348 1,338 1,245
Per Share of Common Stock: (2)
Net income $ 0.37 $ 0.34 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.35 $ 0.33
Cash dividend 0.27 0.09 0.09 0.09 0.26 0.08 0.08 0.08
Book value 13.41 13.18 12.72 12.64 12.24 12.29 12.06 11.87
(1) Restated for the merger in August 2000 with FSB Bancorp, which was
accounted for as a pooling of interests. See Note B of Notes to
Consolidated Financial Statements.
(2) Retroactively restated for the 3.3 for 1 stock split declared on
December 14, 1999, paid February 18, 2000.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of the financial condition
and results of operations for IBT Bancorp (the Corporation). This discussion and
analysis is intended to provide a better understanding of the financial
statements and statistical data included elsewhere in the Annual Report.
TABLE 1. DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY;
INTEREST RATE AND INTEREST DIFFERENTIAL
(Dollars in thousands)
The following schedules present the daily average amount outstanding for each
major category (at historical cost) of interest earning assets, nonearning
assets, interest bearing liabilities, and noninterest bearing liabilities. This
schedule also presents an analysis of interest income and interest expense for
the periods indicated. All interest income is reported on a fully taxable
equivalent (FTE) basis using a 34% tax rate. Nonaccruing loans, for the purpose
of the following computations, are included in the average loan amounts
outstanding.
2000 1999 1998
----------------------------- ---------------------------- ----------------------------
Tax Average Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
INTEREST EARNING ASSETS
Loans $380,392 $33,333 8.76% $332,083 $28,612 8.62% $300,794 $26,981 8.97%
Taxable investment securities 62,581 3,666 5.86 83,984 4,927 5.87 83,090 5,000 6.02
Nontaxable investment securities 29,914 2,194 7.33 24,710 1,729 7.00 21,753 1,530 7.03
Federal funds sold 2,731 170 6.22 15,177 734 4.84 12,033 644 5.35
Other 2,256 173 7.67 2,266 153 6.75 1,972 144 7.30
-------- ------- ---- -------- ------- ---- -------- ------- ----
TOTAL EARNING ASSETS 477,874 39,536 8.27 458,220 36,155 7.89 419,642 34,299 8.17
NONEARNING ASSETS
Allowance for loan losses (4,939) (4,589) (4,405)
Cash and due from banks 18,253 17,006 15,633
Premises and equipment 10,385 9,640 8,338
Accrued income and other assets 14,572 13,329 12,460
-------- -------- --------
TOTAL ASSETS $516,145 $493,606 $451,668
======== ======== ========
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 68,017 1,987 2.92 $ 62,713 1,485 2.37 $ 53,679 1,399 2.61
Savings deposits 122,610 3,908 3.19 127,259 3,870 3.04 110,819 3,596 3.24
Time deposits 206,849 12,032 5.82 199,373 10,808 5.42 190,986 11,049 5.79
Borrowed funds 7,158 475 6.64 1,224 64 5.23 383 21 5.48
-------- ------- ---- -------- ------- ---- -------- ------- ----
TOTAL INTEREST BEARING
LIABILITIES 404,634 18,402 4.55 390,569 16,227 4.15 355,867 16,065 4.51
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 55,188 52,221 49,807
Other 5,817 5,334 4,324
Shareholders' equity 50,506 45,482 41,670
-------- -------- --------
TOTAL LIABILITIES AND
EQUITY $516,145 $493,606 $451,668
======== ======== ========
NET INTEREST INCOME (FTE) $21,134 $19,928 $18,234
======= ======= =======
NET YIELD ON INTEREST EARNING
ASSETS (FTE) 4.42% 4.35% 4.35%
===== ===== =====
15
16
RESULTS OF OPERATIONS
The Corporation achieved record net income for the fourteenth consecutive year
in 2000 with earnings of $5,431,000 versus $5,244,000 in 1999. Earnings per
share was $1.41, an increase of $0.03 from 1999.
Two key measures of earnings performance commonly used in the banking industry
are return on average assets and return on average shareholders' equity. Return
on average assets measures the ability of a corporation to profitably and
efficiently employ its resources. The Corporation's return on average assets
equaled 1.05% in 2000, 1.06% in 1999, and 1.04% in 1998. Return on average
equity indicates how effectively a corporation is able to generate earnings on
capital invested by its shareholders. The Corporation's return on average
shareholders' equity equaled 10.75% in 2000, 11.53% in 1999, and 11.28% in 1998.
The Corporation's subsidiary bank, Isabella Bank and Trust, completed the
purchase of three branches from Old Kent Bank on March 31, 1998. The purchase
included approximately $43.1 million in deposits and $233,000 in loans. IBT
Title, a wholly owned subsidiary of IBT Bancorp, acquired Isabella County
Abstract Company on July 31, 1998 and Mecosta County Abstract and Title on June
30, 1999. The acquisitions included premises, equipment, and abstract title
plants. The purchase prices were less than 1% of the Corporation's assets. The
Results of Operations and Changes in Financial Position include the operating
results from the dates of purchase. On August 10, 2000 the Corporation merged
with FSB Bancorp of Breckenridge, Michigan. The merger was accounted for as a
pooling of interests resulting in the restatement of all financial information
for all periods presented.
NET INTEREST INCOME
The Corporation derives the majority of its income from interest earned on loans
and investments, while its most significant expense is the interest cost
incurred for funds used. Net interest income is the amount by which interest
income on earning assets exceeds the interest cost of deposits. Net interest
income is influenced by changes in the balance and mix of assets and liabilities
and market interest rates. Management exerts some control over these factors,
however, Federal Reserve monetary policy and competition have a significant
impact. Interest income includes loan fees of $957,000 in 2000; $1.2 million in
1999; and $1.3 million in 1998. For analytical purposes, net interest income is
adjusted to a "taxable equivalent" basis by adding the income tax savings from
interest on tax-exempt loans and securities, thus making year-to-year
comparisons more meaningful.
TABLE 2. VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in thousands)
The following table details the dollar amount of changes in FTE net interest
income for each major category of interest earning assets and interest bearing
liabilities and the amount of change attributable to changes in average balances
(volume) or average rates. The change in interest due to both volume and rate
has been allocated to volume and rate changes in proportion to the relationship
of the absolute dollar amounts of the change in each.
2000 Compared to 1999 1999 Compared to 1998
Increase (Decrease) Due to Increase (Decrease) Due to
-------------------------- --------------------------
Volume Rate Net Volume Rate Net
------- ------ ------- ------ ------- ------
CHANGES IN INTEREST INCOME
Loans $ 4,226 $ 495 $ 4,721 $2,708 $(1,077) $1,631
Taxable investment securities (1,254) (7) (1,261) 59 (132) (73)
Nontaxable investment securities 378 87 465 207 (8) 199
Federal funds sold (730) 166 (564) 153 (63) 90
Other (1) 21 20 21 (12) 9
------- ------ ------- ------ ------- ------
TOTAL CHANGES IN INTEREST INCOME 2,619 762 3,381 3,148 (1,292) 1,856
CHANGES IN INTEREST EXPENSE
Interest bearing demand deposits 133 369 502 223 (137) 86
Savings deposits (144) 182 38 509 (235) 274
Time deposits 415 809 1,224 470 (711) (241)
Federal funds purchased 389 22 411 43 -- 43
------- ------ ------- ------ ------- ------
TOTAL CHANGES IN INTEREST EXPENSE 793 1,382 2,175 1,245 (1,083) 162
NET CHANGE IN FTE NET INTEREST INCOME $1,826 $ (620) $ 1,206 $1,903 $ (209) $1,694
======= ====== ======= ====== ======= ======
16
17
As shown in Tables 1 and 2, when comparing year ending December 31, 2000 to
1999, fully taxable equivalent (FTE) net interest income increased $1.21 million
or 6.1%. An increase of 4.3% in average interest earning assets provided $2.62
million of FTE interest income. The majority of this growth was funded by a 3.6%
increase in interest bearing liabilities, resulting in $793,000 of additional
interest expense. Overall, changes in volume resulted in $1.83 million in
additional FTE interest income. The average FTE interest rate earned on assets
increased by 0.38%, increasing FTE interest income by $762,000, and the average
rate paid on deposits increased by 0.40%, increasing interest expense by $1.38
million. The net change related to interest rates earned and paid was a $620,000
decrease in FTE net interest income.
The Corporation's FTE net yield as a percentage of average earning assets
increased 0.07%. The increase was primarily a result of an increase in average
loans to total average earning assets. The ratio in 2000 was 79.6% versus 72.5%
in 1999. The increase in this ratio represents a $33.9 million shift from lower
yielding investments to loans. The shift resulted in approximately $500,000 of
FTE interest income or 0.10% increase in the net yield. Other factors negatively
affecting the Corporation's net interest margin are the increasing reliance on
higher cost deposits such as certificates of deposit and money market accounts
to fund asset growth, and intense rate competition for new commercial and
installment loans. Management expects the Corporation's reliance on higher cost
deposits to fund asset growth to continue and for rates charged for loans in
relation to deposit costs to continue declining.
Net interest income increased $1.7 million to $19.9 million in 1999 from $18.2
million in 1998. As shown in Tables 1 and 2, in 1999 (FTE) interest income
increased $3.1 million, from a 9.2% increase in the volume of average earning
assets. The growth of interest earning assets was funded primarily by a 9.8%
increase in interest bearing liabilities that resulted in additional interest
expense of $1.2 million. Overall, the Corporation earned an additional $1.9
million in FTE interest income as a result of volume. The average rate earned in
1999 decreased by 0.28%, decreasing FTE interest income by $1.3 million, and the
average rate paid on deposits decreased by 0.36%, decreasing interest expense by
$1.1 million. The net result of decreased interest rates earned and paid
decreased FTE net interest income by $200,000.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Total loans outstanding represent 84.7% of the
Corporation's total year end deposits, and is the Corporation's single largest
concentration of risk. Inevitably, poor operating performance may result from
the failure to control credit risk. Given the importance of maintaining sound
underwriting practices, both the Board of Directors and senior management spend
a large portion of their time and effort in loan review. The provision for loan
losses is the amount added to the allowance for loan losses on a monthly basis.
The allowance for loan losses is management's estimation of potential future
losses inherent in the loan portfolio, and is maintained at a level considered
by management to be adequate to absorb potential future losses. Evaluation of
the allowance for loan losses and the provision for loan losses is based on a
continuous review of the changes in the type and volume of the loan portfolio,
reviews of specific loans to evaluate their collectibility, recent loan loss
history, financial condition of borrowers, the amount of impaired loans, overall
economic conditions, and other factors. This evaluation is inherently subjective
as it requires material estimates, including the amounts and timing of future
cash flows expected to be received on impaired loans that may be subject to
significant change.
As shown in Table 3, total loans outstanding increased 13.4% in 2000 and 11.6%
in 1999. The provision for loan losses in 2000 was $565,000, a $56,000 increase
from 1999 and a $34,000 increase from 1998. The allowance for loan losses as a
percentage of total outstanding loans at year end 2000 was 1.28% compared to
1.30% at December 31, 1999. The Corporation's net charged off loans as a
percentage of average loans was 0.01% in 2000 and 0.09% in 1999.
17
18
TABLE 3. SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
The following is a summary of loan balances at the end of each period and their
daily average balances, changes in the allowance for possible loan losses
arising from loans charged off and recoveries on loans previously charged off,
and additions to the allowance which have been expensed.
December 31
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Amount of loans outstanding
at the end of year $403,679 $355,846 $318,914 $286,525 $279,731
======== ======== ======== ======== ========
Average amount of gross loans
outstanding for the year $380,392 $332,083 $300,794 $281,148 $256,378
======== ======== ======== ======== ========
Summary of changes in allowance
Allowance for loan losses -- January 1 $ 4,622 $ 4,412 $ 4,112 $ 4,028 $ 3,637
Loans charged off
Commercial and agricultural 65 221 252 299 251
Real estate mortgage 58 78 70 181 36
Personal 295 347 297 227 239
--------- -------- -------- --------- ---------
TOTAL LOANS CHARGED OFF 418 646 619 707 526
Recoveries
Commercial and agricultural 172 86 255 169 220
Real estate mortgage 64 92 13 2 1
Personal 157 169 120 144 136
--------- -------- -------- --------- ---------
TOTAL RECOVERIES 393 347 388 315 357
Net charge offs 25 299 231 392 169
Provision charged to income 565 509 531 476 560
--------- -------- -------- --------- ---------
ALLOWANCE FOR LOAN LOSSES -- DECEMBER 31 $ 5,162 $ 4,622 $ 4,412 $ 4,112 $ 4,028
========= ======== ======== ========= =========
Ratio of net charge offs during the
year to average loans outstanding 0.01% 0.09% 0.08% 0.14% 0.07%
===== ===== ===== ===== =====
Ratio of the allowance for loan losses
to loans outstanding at year end 1.28% 1.30% 1.38% 1.44% 1.44%
===== ===== ===== ===== =====
As shown in Table 4, the percentage of loans classified as nonperforming by the
Corporation as of December 31, 2000 and 1999 equaled 0.46% and 0.44% of total
loans, respectively. The peer group analysis as of September 30, 2000 (the peer
group is a composite of financial information of all bank holding companies with
assets between $500 million and $1 billion; there were 258 holding companies in
the Corporation's peer group for the period indicated) showed on average
nonperforming loans were 0.43%. The Banks' policies, including a loan considered
impaired under SFAS No. 118, are to transfer a loan to nonaccrual status
whenever it is determined that interest should be recorded on the cash basis
instead of the accrual basis because of a deterioration in the financial
position of the borrower, it is determined that payment in full of interest or
principal cannot be expected, or the loan has been in default for a period of 90
days or more, unless it is both well secured and in the process of collection.
Restructured loans are loans whose terms have been renegotiated to provide a
reduction or deferral of interest or principal because of a deterioration in the
financial position of the borrower.
18
19
TABLE 4. NONPERFORMING LOANS
(Dollars in thousands)
The following loans are all the credits which require classification for state
or federal regulatory purposes.
December 31
----------------------------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ----
Nonaccrual loans $ 382 $ 945 $ 274 $ 824 $181
Accruing loans past due 90 days or more 1,484 618 1,130 504 662
------ ------ ------ ------ ----
TOTAL NONPERFORMING LOANS $1,866 $1,563 $1,404 $1,328 $843
====== ====== ====== ====== ====
NONPERFORMING LOANS AS % OF LOANS 0.46% 0.44% 0.44% 0.46% 0.30%
===== ===== ===== ===== =====
As of December 31, 2000, there were no other interest bearing assets which
required classification. Management is not aware of any recommendations by
regulatory agencies which, if implemented, would have a material impact on the
Corporation's liquidity, capital, or operations.
In management's opinion, the allowance for loan losses is adequate as of
December 31, 2000. Management has allocated, as shown in Table 5, the allowance
for loan losses to the following categories: 25.2% to commercial and
agricultural loans; 30.2% to real estate loans; 37.3% to installment loans; and
7.3% unallocated. When analyzing the adequacy of the allowance for loan losses
at December 31, 2000, management reclassified commercial installment loans from
the installment category to the commercial category, resulting in a shift of
allocated allowance from installment to commercial and agricultural loans. The
above allocation is not intended to imply limitations on usage of the allowance.
The entire allowance is available for any future loans without regard to loan
type.
TABLE 5. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
The allowance for loan losses has been allocated according to the amount deemed
to be reasonably necessary to provide for the possibility of losses being
incurred within the following categories:
December 31
--------------------------------------------------------------------------------------
2000 1999 1998 1997
-------------------- -------------------- -------------------- --------------------
% of Each % of Each % of Each % of Each
Category Category Category Category
Allowance to Total Allowance to Total Allowance to Total Allowance to Total
Amount Loans Amount Loans Amount Loans Amount Loans
--------- --------- --------- --------- --------- --------- --------- ---------
Commercial and agricultural $1,301 26.65% $1,502 26.1% $1,473 27.3% $1,515 26.9%
Real estate mortgage 1,559 59.96 1,232 59.8 1,171 58.4 911 55.7
Installment 1,923 13.39 1,555 14.1 1,467 14.3 1,391 17.4
Unallocated 379 333 301 295
------ ----- ------ ----- ------ ----- ------ -----
TOTAL $5,162 100.0% $4,622 100.0% $4,412 100.0% $4,112 100.0%
====== ===== ====== ===== ====== ===== ====== =====
December 31
-------------------
1996
-------------------
% of Each
Category
Allowance to Total
Amount Loans
--------- ---------
Commercial and agricultural $1,524 27.8%
Real estate mortgage 705 54.8
Installment 1,525 17.4
Unallocated 274
------ ----
TOTAL $4,028 100.0%
====== =====
19
20
NONINTEREST INCOME
Noninterest income consists of trust fees, deposit service charges, fees for
other financial services, gain on the sale of mortgage loans, title insurance
revenue, and gains and losses on investment securities available for sale. There
was a $15,000 increase in fees earned from these sources during 2000.
Significant changes during 2000 include a $51,000 increase from the sale of
title insurance and related services, a $22,000 increase in brokerage
commissions, a $44,000 increase in overdraft fees, a $103,000 increase in
mortgage servicing fees, a $99,000 increase in trust fees, a $199,000 decline in
gains on the sale of real estate mortgages, a $16,000 decline in gains on the
sale of investment securities available for sale, and an $18,000 decrease in
service charges on deposit accounts.
Included in noninterest income is a $98,000 gain from the sale of $12.3 million
in mortgages during 2000 versus a $297,000 gain on the sale of $37.8 million for
1999. The Corporation has established a policy that all 30-year fixed rate
mortgage loans will be sold. During 2000, most 15 and 30 year fixed rate
mortgage loans granted were sold on the secondary market. These loans were sold
without recourse, with servicing retained.
Noninterest income increased $961,000 or 28.0% in 1999 when compared to 1998.
Significant changes in 1999 include $670,000 increase in revenue from IBT Title,
a $26,000 increase in brokerage commissions, a $27,000 increase in trust fees, a
$37,000 decline in gains on the sale of investment securities available for
sale, a $48,000 decline in gains on the sale of residential real estate
mortgages, and a $112,000 increase in ATM access fees.
NONINTEREST EXPENSES
Noninterest expense increased $859,000 or 5.4% during 2000. Net noninterest
expense less noninterest income divided by average total assets equalled 2.38%
in 2000, 2.32% in 1999, and 2.32% in 1998. The increase in the 2000 ratio was
primarily a result of the $199,000 decline in the gains on the sale of real
estate mortgages.
The largest component of noninterest expense is salaries and employee benefits,
which increased $385,000 or 4.7%. Salary expense related to the acquisition of
Mecosta County Abstract in July 1999 was $64,000. The remaining increase is
related to normal merit and promotional salary increases and additional
staffing.
Occupancy and furniture and equipment expenses increased $180,000 or 6.5% in
2000. The majority of the increase is related to depreciation, service
contracts, computer operating costs, property taxes, and utilities. All other
operating expenses and the amortization of deposit intangibles increased
$294,000, a 6.1% increase. The expenses associated with the merger of the
Corporation with FSB Bancorp were $268,000. Increases in FDIC insurance expense
and marketing costs were the most significant other increases. During 2000, the
amortization of deposit based intangibles declined by $45,000.
Noninterest expense increased $1.90 million or 13.6% in 1999. The additional
expenses related to the acquisition of three branches in March 1998, Isabella
County Abstract in July 1998, and Mecosta County Abstract in June 1999 were
approximately $1.3 million. During 1999, salaries and benefits increased
$775,000, occupancy and furniture and equipment expenses increased $322,000 and
all other operating expenses increased $791,000.
FEDERAL INCOME TAXES
Federal income tax expense for 2000 was $2.08 million or 27.7% of pre-tax income
compared to $2.04 million or 28.0% of pre-tax income in 1999 and $1.87 million
or 28.4% in 1998. The decrease in income tax expense as a percentage of income
in 2000 is attributable to an increase in non taxable municipal income as a
percentage of the Corporation's pretax net income. A reconcilement of federal
income tax expense and the amount computed at the federal statutory rate of 34%
is found in Note F, Federal Income Taxes, in the accompanying consolidated
financial statements.
20
21
ANALYSIS OF CHANGES IN THE STATEMENT OF CONDITION
Total assets were $540.9 million at December 31, 2000, an increase of $37.3
million or 7.4% over year end 1999. Asset growth was primarily funded by a $31.7
million increase in deposits, a $0.3 million increase in borrowing, and a $4.8
million increase in shareholders' equity. A discussion of changes in balance
sheet amounts by major categories follows.
INVESTMENT SECURITIES
The primary objective of the Corporation's investing activities is to provide
for safety of the principal invested. Secondary considerations include the need
for earnings, liquidity, and the Corporation's overall exposure to changes in
interest rates. During 2000, the Corporation's net holding of investment
securities decreased $12.9 million. Table 6 shows the carrying value of
investment securities available for sale and held to maturity. Securities held
to maturity, which are stated at amortized cost, consist mostly of local
municipal bond issues, U.S. Agencies, and restricted securities. Securities not
classified by management as held to maturity are classified as available for
sale and are stated at fair value.
TABLE 6. INVESTMENT PORTFOLIO
(Dollars in thousands)
The following is a schedule of the carrying value of investment securities
available for sale and held to maturity:
December 31
-----------------------------------------
Available for sale 2000 1999 1998
------- ------- -------
Available for sale
U.S. Treasury and U.S. government agencies $40,978 $55,033 $65,943
States and political subdivisions 36,186 30,974 27,842
Commercial paper 350 349 2,014
------- ------- -------
TOTAL $77,514 $86,356 $95,799
======= ======= =======
Held to maturity
U.S. Treasury and U.S. government agencies $ 1,060 $ 928 $ 1,813
States and political subdivisions 6,637 9,080 8,719
Other securities 2,963 4,758 5,698
------- ------- -------
TOTAL $10,660 $14,766 $16,230
======= ======= =======
Excluding those holdings of the investment portfolio in U.S. Treasury and U.S.
government agency securities, there were no investments in securities of any one
issuer which exceeded 10% of shareholders' equity. Restricted securities consist
solely of Federal Reserve Bank and Federal Home Loan Bank stock, which have no
contractual maturity. The Corporation has a policy prohibiting investments in
securities that it deems are unsuitable due to their inherent credit or market
risks. Prohibited investments include stripped mortgage backed securities, zero
coupon bonds, nongovernment agency asset backed securities, and structured
notes.
21
22
The following is a schedule of maturities of each category of investment
securities (at carrying value) and their weighted average yield as of December
31, 2000.
TABLE 7. SCHEDULE OF MATURITIES OF INVESTMENT SECURITIES AND
WEIGHTED AVERAGE YIELDS
(Dollars in Thousands)
Maturing
--------------------------------------------------------------------------------------
After One After Five After Ten
Year But Years But Years
Within Within Within Investments with No
One Year Five Years Ten Years Contractual Maturity
----------------- ----------------- ----------------- --------------------
Amount Yield Amount Yield Amount Yield Amount Yield
------- ----- ------- ----- ------- ----- ------ -----
Available for sale
U.S. Treasury and U.S.
government agencies $12,897 5.90% $23,714 5.74% $ -- --% $ -- --%
States and political
subdivisions 8,227 5.28 14,423 5.32 10,329 4.75 3,207 5.85
Mortgage backed 799 6.38 3,568 6.04 -- -- -- --
Corporate & other
securities 350 5.76 -- -- -- -- -- --
------- ----- ------- ----- ------- ------ ------ -----
TOTAL $22,273 5.69% $41,705 5.62% $10,329 4.75% $3,207 5.85%
======= ===== ======= ===== ======= ====== ====== =====
Held to maturity
States and political
subdivisions $ 3,304 5.21% $ 2,613 4.79% $ -- --% $ 720 3.83%
Mortgage backed 334 5.89 193 5.83 40 7.46 493 5.48
Corporate and other
securities 502 5.64 100 4.85 -- -- 2,361 7.66
------- ----- ------- ----- ------- ----- ------ -----
TOTAL $ 4,140 5.32% $ 2,906 4.86% $ 40 7.46% $3,574 6.59%
======= ===== ======= ===== ======= ===== ====== =====
LOANS
The largest component of earning assets is loans. The proper management of
credit and market risk inherent in loans is critical to the financial well-being
of the Corporation. To control these risks, the Corporation has adopted strict
underwriting standards. The standards include prohibitions against lending
outside the Corporation's defined market area, lending limits to a single
borrower, and strict loan to collateral value limits. The Corporation also
monitors and limits loan concentrations extended to volatile industries. The
Corporation has no foreign loans and there were no concentrations greater than
10% of total loans that are not disclosed as a separate category in Table 8.
TABLE 8. LOAN PORTFOLIO
(Dollars in thousands)
December 31
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
------- -------- -------- --------- --------
Commercial $ 60,301 $ 55,247 $ 48,204 $ 41,497 $ 43,707
Agricultural 47,298 40,449 38,766 35,538 34,169
Real estate mortgage 242,042 212,724 186,413 159,757 153,168
Installment 54,038 47,426 45,531 49,733 48,688
-------- -------- -------- -------- --------
TOTAL LOANS $403,679 $355,846 $318,914 $286,525 $279,732
======== ======== ======== ======== ========
Total loans increased $47.8 million in 2000. The increase was primarily in
residential real estate mortgages. As of December 31,2000 commercial loans, as a
percentage of total loans were 14.9%, agricultural 11.7%, real estate mortgages
60.0%, and installments 13.4%.
22
23
DEPOSITS
Total deposits increased $31.7 million and were $476.8 million at year end 2000,
a 7.1% increase over 1999. Average deposits increased 2.5% in 2000 and 9.0% in
1999. During 2000, average noninterest bearing deposits increased 5.7%, interest
bearing demand deposits increased 8.5%, savings deposits decreased 3.7%, and
time deposits increased 3.7%. Time deposits over $100,000 as a percentage of
total deposits equaled 8.1% and 6.2% as of December 31, 2000 and 1999,
respectively.
TABLE 9. AVERAGE DEPOSITS
(Dollars in thousands)
2000 1999 1998
-------------------- ------------------- --------------------
Amount Rate Amount Rate Amount Rate
-------- ----- -------- ----- -------- -----
Noninterest bearing demand deposits $ 55,188 $ 52,221 $ 49,807
Interest bearing demand deposits 68,017 2.92% 62,713 2.37% 53,679 2.61%
Savings deposits 122,610 3.19 127,259 3.04 110,819 3.24
Time deposits 206,849 5.82 199,373 5.42 190,986 5.79
-------- -------- --------
TOTAL $452,664 $441,566 $405,291
======== ======== ========
TABLE 10. MATURITIES OF TIME CERTIFICATES OF DEPOSIT OVER $100,000
(Dollars in thousands)
December 31
----------------------------------------------------------
2000 1999 1998
------- ------- -------
Maturity
Within 3 months $13,217 $ 9,728 $ 6,327
Within 3 to 6 months 7,250 4,391 7,661
Within 6 to 12 months 7,418 5,360 4,757
Over 12 months 10,627 8,096 5,103
------- ------- -------
TOTAL $38,512 $27,575 $23,848
======= ======= =======
Within the banking industry there is agreement that competition from mutual
funds and annuities has had a significant impact on deposit growth. In response,
the Corporation's subsidiaries now offer mutual funds and annuities to its
customers. The Corporation's trust department also offers a variety of financial
products in addition to traditional estate services.
23
24
CAPITAL
The capital of the Corporation consists solely of common stock, capital surplus,
retained earnings, and accumulated other comprehensive income. Total capital
increased approximately $4.8 million in 2000. The Corporation offers a dividend
reinvestment and employee stock purchase plan. Under the provisions of these
Plans, the Corporation issued 23,304 shares of common stock generating $492,000
of capital during 2000, and 25,066 shares of common stock generating $548,000 of
capital in 1999. An additional 47,328 shares were issued in conjunction with the
acquisition of Mecosta County Abstract and Title Company. These shares were
valued at $1.13 million. Total capital increased $1.10 million due to unrealized
gains on investment securities available for sale in 2000.
The Federal Reserve Board's current recommended minimum primary capital to
assets requirement is 6.0%. The Corporation's primary capital to assets, which
consists of shareholders' equity plus the allowance for loan losses less
acquisition intangibles, was 9.90% at year end 2000. There are no commitments
for significant capital expenditures.
The Federal Reserve Board has established a minimum risk based capital standard.
Under this standard, a framework has been established that assigns risk weights
to each category of on and off-balance-sheet items to arrive at risk adjusted
total assets. Regulatory capital is divided by the risk adjusted assets with the
resulting ratio compared to the minimum standard to determine whether a
corporation has adequate capital. The minimum standard is 8%, of which at least
4% must consist of equity capital net of goodwill. The following table sets
forth the percentages required under the Risk Based Capital guidelines and the
Corporation's values at December 31, 2000:
Percentage of Capital to Risk Adjusted Assets:
Required IBT Bancorp
-------- -----------
Equity Capital 4.00% 13.43%
Secondary Capital 4.00 1.25
----- ------
Total Capital 8.00% 14.69%
===== ======
IBT Bancorp's secondary capital includes only the allowance for loan losses. The
percentage for the secondary capital under the required column is the maximum
amount allowed from all sources.
The Federal Reserve also prescribes minimum capital requirements for the
Corporation's subsidiary Banks. At December 31, 2000, the Banks exceeded these
minimums. For further information regarding the Banks' capital requirements,
refer to Note M of the Financial Statements, Regulatory Capital Matters.
LIQUIDITY
Liquidity management is designed to have adequate resources available to meet
depositor and borrower discretionary demands for funds. Liquidity is also
required to fund expanding operations, investment opportunities, and payment of
cash dividends. The primary sources of the Corporation's liquidity are cash and
cash equivalents and available for sale investment securities.
As of December 31, 2000 and 1999, cash and cash equivalents equaled 5.3% of
total assets. Net cash provided from operations was $6.8 million in 2000 and
$11.5 million in 1999. Net cash provided by financing activities equaled $30.4
million in 2000 and $13.0 million in 1999. The Corporation's investing
activities used $35.5 million in 2000 and $34.9 million in 1999. The accumulated
effect of the Corporation's operating, investing, and financing activities on
cash and cash equivalents was a $1.7 million increase in 2000 and a $10.4
million decrease in 1999.
In addition to cash and cash equivalents, investment securities available for
sale are another source of liquidity. Securities available for sale equaled
$77.5 million as of December 31, 2000 and $86.4 million as of December 31, 1999.
In addition to these primary sources of liquidity, the Corporation has the
ability to borrow in the federal funds market and at both the Federal Reserve
Bank and the Federal Home Loan Bank. The Corporation's liquidity is considered
adequate by the management of the Corporation.
24
25
INTEREST RATE SENSITIVITY
Interest rate sensitivity management aims at achieving reasonable stability in
the net interest margin through periods of changing interest rates. Interest
rate sensitivity is determined by the amount of earning assets and interest
bearing liabilities repricing within a specific time period, and their relative
sensitivity to a change in interest rates. One tool used by management to
measure interest rate sensitivity is gap analysis. As shown in Table 11, the gap
analysis depicts the Corporation's position for specific time periods and the
cumulative gap as a percentage of total assets.
Investment securities and other investments are scheduled according to their
contractual maturity. Nonvariable rate loans are included in the appropriate
time frame based on their scheduled amortization. Variable rate loans are
included in the time frame of their earliest repricing. Of the $403.7 million in
total loans, $43.3 million are variable rate loans. Time deposit liabilities are
scheduled based on their contractual maturity except for variable rate time
deposits in the amount of $1.1 million which are included in the 0 to 3 month
time frame. Money market accounts reprice monthly and are included in the 0 to 3
month time frame.
Passbook savings, statement savings, and NOW accounts have no contractual
maturity date and are believed to be predominantly noninterest rate sensitive by
management. These accounts have been classified in the gap table according to
their estimated withdrawal rates based upon management's analysis of deposit
runoff over the past five years. Management believes this runoff experience is
consistent with its expectation for the future. As of December 31, 2000, the
Corporation had $63.9 million more in liabilities than assets maturing within
one year. A negative gap position results when more liabilities, within a
specified time frame, mature or reprice than assets.
TABLE 11. INTEREST RATE SENSITIVITY
(Dollars in thousands)
The following table shows the time periods and the amount of assets and
liabilities available for interest rate repricing as of December 31, 2000. For
purposes of this analysis, nonaccrual loans and the allowance for loan losses
are excluded.
0 to 3 4 to 12 1 to 5 Over 5
Months Months Years Years
-------- -------- -------- -------
Interest Sensitive Assets
Fed funds sold $ 900 $ -- $ -- $ --
Investment securities 5,930 20,483 44,611 17,150
Loans 81,883 72,566 237,130 11,718
------- -------- -------- -------
TOTAL $88,713 $ 93,049 $281,741 $28,868
======= ======== ======== =======
Interest Sensitive Liabilities
Borrowed funds $ 1,044 $ 3,000 $ -- $ 2,400
Time deposits 39,871 83,654 92,090 --
Savings 72,009 3,579 22,255 18,781
Interest bearing demand 36,273 6,194 32,430 8,882
-------- -------- -------- -------
TOTAL $149,197 $ 96,427 $146,775 $30,063
======== ======== ======== =======
Cumulative gap $(60,484) $(63,862) $71,104 $69,909
Cumulative gap as a % of assets (11.18)% (11.81)% 13.15% 12.92%
25
26
TABLE 12. LOAN MATURITY AND INTEREST RATE SENSITIVITY
(Dollars in thousands)
The following table shows the maturity of commercial and agricultural loans
outstanding at December 31, 2000. Also provided are the amounts due after one
year, classified according to the sensitivity to changes in interest rates.
Due in
1 Year 1 to 5 Over 5
or Less Years Years Total
------- ------- ------ --------
Commercial and agricultural $62,445 $44,865 $289 $107,599
======= ======= ==== ========
Interest Sensitivity:
Loans maturing after one year which have:
Fixed interest rates $44,546 $289
Variable interest rates 319 --
------- ----
TOTAL $44,865 $289
======= ====
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's primary market risks are interest rate risk and, to a lesser
extent, liquidity risk. The Corporation has no foreign exchange risk, holds
limited loans outstanding to oil and gas concerns, holds no trading account
assets, nor does it utilize interest rate swaps or derivatives in the management
of its interest rate risk. Any changes in foreign exchange rates or commodity
prices would have an insignificant impact, if any, on the Corporation's interest
income and cash flows.
Interest rate risk ("IRR") is the exposure of the Corporation's net interest
income, its primary source of income, to changes in interest rates. IRR results
from the difference in the maturity or repricing frequency of a financial
institution's interest earning assets and its interest bearing liabilities. IRR
is the fundamental method in which financial institutions earn income and create
shareholder value. Excessive exposure to IRR could pose a significant risk to
the Corporation's earnings and capital.
The Federal Reserve, the Corporation's primary Federal regulator, has adopted a
policy requiring the Board of Directors and senior management to effectively
manage the various risks that can have a material impact on the safety and
soundness of the Corporation. The risks include credit, interest rate,
liquidity, operational, and reputational. The Corporation has policies,
procedures and internal controls for measuring and managing these risks.
Specifically, the IRR policy and procedures include defining acceptable types
and terms of investments and funding sources, liquidity requirements, limits on
investments in long term assets, limiting the mismatch in repricing opportunity
of assets and liabilities, and the frequency of measuring and reporting to the
Board of Directors.
The Corporation uses several techniques to manage IRR. The first method is gap
analysis. Gap analysis measures the cash flows and/or the earliest repricing of
the Corporation's interest bearing assets and liabilities. This analysis is
useful for measuring trends in the repricing characteristics of the balance
sheet. Significant assumptions are required in this process because of the
imbedded repricing options contained in assets and liabilities. A substantial
portion of the Corporation's assets are invested in loans and mortgage backed
securities. These assets have imbedded options that allow the borrower to repay
the balance prior to maturity without penalty. The amount of prepayments is
dependent upon many factors, including the interest rate of a given loan in
comparison to the current interest rate for residential mortgages, the level of
sales of used homes, and the overall availability of credit in the market place.
Generally, a decrease in interest rates will result in an increase in the
Corporation's cash flows from these assets. Investment securities, other than
those that are callable, do not have any significant imbedded options. Saving
and checking deposits may generally be withdrawn on request without prior
notice. The timing of cash flow from these deposits are estimated based on
historical experience. Time deposits have penalties which discourage early
withdrawals.
26
27
The second technique used in the management of IRR is to combine the projected
cash flows and repricing characteristics generated by the gap analysis, the
interest rates associated with those cash flows to project future interest
income. By changing the amount and timing of the cash flows and the repricing
interest rates of those cash flows, the Corporation can project the effect of
changing interest rates on its interest income. Based on the projections
prepared for the year ended December 31, 2000 the Corporation's net interest
income would increase during a period of decreasing interest rates.
The following tables provide information about the Corporation's assets and
liabilities that are sensitive to changes in interest rates as of December 31,
2000 and 1999. The Corporation has no interest rate swaps, futures contracts, or
other derivative financial options. The principal amounts of assets and time
deposits maturing were calculated based on the contractual maturity dates.
Savings and NOW accounts are based on management's estimate of their future cash
flows.
QUANTITATIVE DISCLOSURES OF MARKET RISK
Fair Value
2001 2002 2003 2004 2005 Thereafter Total 12/31/00
------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets $900 -- -- -- -- -- $900 $900
Average interest rates 5.75% -- -- -- -- -- 5.75%
Fixed interest rate securities $26,258 $25,464 $12,656 $5,908 $1,458 $16,430 $88,175 $88,208
Average interest rates 5.62% 5.53% 5.71% 5.36% 4.96% 5.43% 5.55%
Fixed interest rate loans $110,804 $68,175 $84,985 $57,695 $29,148 $9,430 $360,237 $359,584
Average interest rates 8.66% 8.22% 8.42% 8.04% 8.44% 8.12% 8.39%
Variable interest rate loans $41,398 $1,863 $167 $14 -- -- $43,442 $43,442
Average interest rates 10.80% 10.96% 9.71% 10.49% -- -- 10.80%
Rate sensitive liabilities
Borrowed funds $4,044 -- -- -- -- $2,400 $6,444 $6,444
Average interest rates 5.36% -- -- -- -- 6.65% 5.84%
Savings and NOW accounts $115,198 $18,690 $14,598 $13,083 $11,262 $27,493 $200,324 $200,324
Average interest rates 3.96% 2.12% 2.12% 2.13% 2.13% 2.15% 3.18%
Fixed interest rate time deposits $122,409 $37,250 $20,911 $15,100 $18,831 -- $214,501 $214,775
Average interest rates 5.70% 6.21% 6.04% 5.76% 6.60% -- 5.91%
Variable interest rate time deposits $911 $282 -- -- -- -- $1,193 $1,193
Average interest rates 6.01% 6.01% -- -- -- -- 6.01%
Fair Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets $4,550 -- -- -- -- -- $ 4,550 $4,550
Average interest rates 5.20% -- -- -- -- -- 5.20%
Fixed interest rate securities $22,471 $22,071 $25,318 $11,477 $6,401 $13,337 $101,122 $101,013
Average interest rates 5.53% 5.78% 5.59% 5.76% 5.43% 5.42% 5.61%
Fixed interest rate loans $91,011 $67,107 $62,833 $46,859 $37,179 $10,540 $315,529 $315,807
Average interest rates 8.13% 8.05% 8.06% 7.99% 7.77% 7.68% 8.02%
Variable interest rate loans $38,191 $1,826 $249 $51 -- -- $40,317 $40,317
Average interest rates 10.02% 10.55% 8.89% 9.27% -- -- 10.04%
Rate sensitive liabilities
Borrowed funds $6,110 -- -- -- -- -- $6,110 $6,110
Average interest rates 5.50% -- -- -- -- -- 5.50%
Savings and NOW accounts $108,842 $17,554 $13,777 $12,388 $10,755 $27,442 $190,758 $190,758
Average interest rates 3.34% 2.21% 2.21% 2.21% 2.21% 2.20% 2.84%
Fixed interest rate time deposits $108,571 $32,710 $24,094 $16,345 $11,493 $5 $193,218 $193,258
Average interest rates 5.37% 5.94% 6.21% 6.14% 5.78% 6.38% 5.65%
Variable interest rate time deposits $770 $319 $5 -- -- -- $1,215 $1,215
Average interest rates 5.29% 5.29% 5.29% -- -- -- 5.29%
27
28
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Corporation intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking contained in the Private Securities Reform Act of 1995, and is
including this statement for purposes of these safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Corporation, are generally
identifiable by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Corporation's ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the operations
and future prospects of the Corporation and the subsidiaries include, but are
not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Corporation's market area, and accounting principles, policies and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Corporation and its business,
including additional factors that could materially affect the Corporation's
financial results, is included in the Corporation's filings with the Securities
and Exchange Commission.
28
29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and reports of
independent auditors are set forth on pages 30 through 50 of this report:
Reports of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The supplementary data regarding quarterly results of operations set forth under
the table named "Summary of Selected Financial Data" on Page 14 of this report.
29
30
Report of Independent Auditors
Board of Directors and Shareholders
IBT Bancorp
We have audited the accompanying consolidated balance sheets of IBT Bancorp,
Inc. and subsidiaries as of December 31, 2000, and the related consolidated
statements of changes in shareholders' equity, income, comprehensive income, and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of IBT
Bancorp, Inc. and subsidiaries as of December 31, 2000, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
We previously audited and reported on the consolidated balance sheet at December
31, 1999, and the related consolidated statements of changes in shareholders'
equity, income, comprehensive income, and cash flows of IBT Bancorp and
subsidiaries for each of the two years in the period ended December 31, 1999
prior to their restatement for the 2000 pooling of interests described in Note
B. The contribution of IBT Bancorp to total assets, interest income, and net
income represented 80%, 78%, and 77% of the 1999 restated totals and the
contribution to interest income and net income represented 77% of the 1998
restated totals. Separate financial statements of FSB Bancorp, Inc. included in
the 1999 and 1998 restated consolidated financial statements were audited and
reported on separately by other auditors. We also have audited, as to
combination only, the accompanying consolidated balance sheet as of December 31,
1999, and the related consolidated statements of changes in shareholders'
equity, income, comprehensive income, and cash flows for each of the two years
in the period ended December 31, 1999, after restatement for the 2000 pooling of
interests; in our opinion, such consolidated financial statements have been
properly combined on the basis described in the notes to the consolidated
financial statements.
Rehmann Robson P.C.
Saginaw, Michigan
February 2, 2001
30
31
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31
----------------------
2000 1999
-------- --------
ASSETS
Cash and demand deposits due from banks $ 27,525 $ 22,159
Federal funds sold 900 4,550
-------- --------
CASH AND CASH EQUIVALENTS 28,425 26,709
Investment securities
Securities available for sale (amortized cost of
$77,412 in 2000 and $87,919 in 1999) 77,514 86,356
Securities held to maturity (fair value of
$10,687 in 2000 and $14,704 in 1999) 10,660 14,766
-------- --------
TOTAL INVESTMENT SECURITIES 88,174 101,122
Loans
Agricultural 47,298 40,449
Commercial 129,302 118,561
Residential real estate mortgage 173,041 149,410
Installment 54,038 47,426
-------- --------
TOTAL LOANS 403,679 355,846
Less allowance for loan losses 5,162 4,622
-------- --------
NET LOANS 398,517 351,224
Premises and equipment 11,079 10,209
Accrued interest receivable, net 5,053 4,312
Acquisition intangibles, net 3,365 3,933
Other assets 6,284 6,087
-------- --------
TOTAL ASSETS $540,897 $503,596
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 60,798 $ 59,885
NOW accounts 83,779 62,902
Certificates of deposit and other savings 293,727 294,714
Certificates of deposit over $100 38,512 27,575
-------- --------
TOTAL DEPOSITS 476,816 445,076
Other borrowed funds 6,444 6,110
Accrued interest and other liabilities 5,707 5,303
-------- --------
TOTAL LIABILITIES 488,967 456,489
Shareholders' equity
Common stock -- no par value:
10,000,000 shares authorized;
3,871,552 shares issued and outstanding
(3,848,248 shares at December 31, 1999) 30,814 30,322
Retained earnings 21,049 17,816
Accumulated other comprehensive income (loss) 67 (1,031)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 51,930 47,107
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $540,897 $503,596
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
31
32
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
YEAR ENDED DECEMBER 31
---------------------------------------------
2000 1999 1998
---------- ---------- -----------
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of year 3,848,248 3,734,711 3,394,839
10% stock dividend -- 41,143 300,175
Issuance of common stock 23,304 72,394 39,697
---------- ---------- ----------
BALANCE END OF YEAR 3,871,552 3,848,248 3,734,711
COMMON STOCK
Balance at beginning of year $ 30,322 $ 27,833 $ 21,307
10% stock dividend -- 841 5,820
Issuance of common stock 492 1,648 706
---------- ---------- ----------
BALANCE END OF YEAR 30,814 30,322 27,833
RETAINED EARNINGS
Balance at beginning of year 17,816 15,343 18,246
Net income 5,431 5,244 4,701
10% stock dividend -- (841) (5,820)
Cash dividends ($0.54 per share in 2000,
$0.50 in 1999, and $0.48 in 1998) (2,198) (1,930) (1,784)
---------- ---------- ----------
BALANCE END OF YEAR 21,049 17,816 15,343
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of year (1,031) 998 276
Unrealized gains (losses) on securities available
for sale, net of income taxes and reclassification
adjustment 1,098 (2,029) 722
---------- ---------- ----------
BALANCE END OF YEAR 67 (1,031) 998
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY END OF YEAR $ 51,930 $ 47,107 $ 44,174
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
32
33
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
YEAR ENDED DECEMBER 31
---------------------------------
2000 1999 1998
------- ------- -------
INTEREST INCOME
Loans, including fees $33,470 $28,488 $26,853
Investment securities
Taxable 3,839 5,000 5,024
Tax exempt 1,275 1,222 1,130
Federal funds sold and other 170 735 644
------- ------- -------
TOTAL INTEREST INCOME 38,754 35,445 $33,651
------- ------- -------
INTEREST EXPENSE
Deposits 17,927 16,157 16,029
Short term borrowings 475 64 21
------- ------- -------
TOTAL INTEREST EXPENSE 18,402 16,221 16,050
-------- ------- --------
NET INTEREST INCOME 20,352 19,224 17,601
Provision for loan losses 565 509 531
------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 19,787 18,715 17,070
NONINTEREST INCOME
Trust fees 535 436 409
Service charges on deposit accounts 327 345 342
Other service charges and fees 1,530 1,456 1,324
Gain on sale of mortgage loans 98 297 345
Title insurance revenue 1,039 988 318
Other 876 868 691
------- ------- -------
TOTAL NONINTEREST INCOME 4,405 4,390 3,429
NONINTEREST EXPENSES
Salaries, wages, and employee benefits 8,594 8,209 7,434
Occupancy 1,025 957 875
Furniture and equipment 1,943 1,831 1,591
Amortization of acquisition intangibles 568 613 472
Other 4,547 4,208 3,558
------- ------- -------
TOTAL NONINTEREST EXPENSES 16,677 15,818 13,930
------- ------- -------
INCOME BEFORE FEDERAL INCOME TAXES 7,515 7,287 6,569
Federal income taxes 2,084 2,043 1,868
------- ------- -------
NET INCOME $ 5,431 $ 5,244 $ 4,701
======= ======= =======
Net income per basic share of common stock $1.41 $1.38 $1.25
===== ===== =====
The accompanying notes are an integral part of these consolidated financial
statements.
33
34
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
YEAR ENDED DECEMBER 31
----------------------------
2000 1999 1998
------ ------ ------
NET INCOME $5,431 $5,244 $4,701
Other comprehensive income (loss) before income taxes
Unrealized gains (losses) on securities available for sale
Unrealized holding gains (losses) arising during year 1,661 (3,088) 1,143
Reclassification adjustment for realized loss (gain)
included in net income 4 (12) (49)
------ ------ ------
Other comprehensive income (loss) before income taxes 1,665 (3,076) 1,094
Income tax expense (benefit) related to other
comprehensive income (loss) 566 (1,047) 372
------ ------ ------
OTHER COMPREHENSIVE INCOME (LOSS) 1,098 (2,029) 722
------ ------ ------
COMPREHENSIVE INCOME $6,529 $3,215 $5,423
====== ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
34
35
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
YEAR ENDED DECEMBER 31
----------------------------------
2000 1999 1998
-------- -------- --------
OPERATING ACTIVITIES
Net income $ 5,431 $ 5,244 $ 4,701
Reconciliation of net income to net cash provided
by operations
Provision for loan losses 565 509 531
Provision for depreciation 1,155 1,147 1,036
Net amortization on investment securities 211 431 356
Amortization of acquisition intangibles 568 575 433
Deferred income tax benefit (272) (254) (331)
Gain on sale of mortgage loans (98) (297) (345)
Proceeds from sale of mortgage loans 12,360 37,753 55,808
Loans originated for sale (12,261) (33,464) (59,495)
Increase in:
Accrued interest receivable (741) -- (810)
Other assets (490) (560) (840)
Accrued interest and other liabilities 404 449 949
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,832 11,533 1,993
INVESTING ACTIVITIES
Activity in available-for-sale securities
Maturities, calls, and sales 23,341 32,690 35,929
Purchases (9,702) (27,583) (66,581)
Activity in held-to-maturity securities
Maturities and calls 5,832 4,393 5,889
Purchases (2,355) (2,100) (6,350)
Net increase in loans (50,575) (41,223) (28,356)
Purchases of premises and equipment (2,025) (1,074) (1,072)
Acquisition of branch offices, less cash received -- -- 37,874
Acquisition of title office -- -- (1,471)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (35,484) (34,897) (24,138)
FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 913 4,930 880
Net increase in interest bearing deposits 30,827 3,406 22,462
Net increase in borrowings 334 6,000 --
Cash dividends (2,198) (1,930) (1,784)
Proceeds from issuance of common stock 492 548 706
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,368 12,954 22,264
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,716 (10,410) 119
Cash and cash equivalents beginning of year 26,709 37,119 37,000
-------- -------- --------
CASH AND CASH EQUIVALENTS END OF YEAR $ 28,425 $ 26,709 $ 37,119
======== ======== ========
Supplemental cash flow information:
Federal income taxes paid $ 2,254 $ 2,592 $ 1,898
Interest paid 18,228 16,290 16,082
The accompanying notes are an integral part of these consolidated financial
statements.
35
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE A -- BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION: The consolidated financial statements
include the accounts of IBT Bancorp (the "Corporation"), a Financial Services
Holding company, and its wholly owned subsidiaries, Isabella Bank and Trust,
Farmers State Bank of Breckenridge (See Note B), IBT Title, IBT Financial
Services, and IBT Loan Production. All intercompany transactions and accounts
have been eliminated.
NATURE OF OPERATIONS: IBT Bancorp is a Financial Service Holding Company
offering a wide array of financial products and services in mid Michigan. Its
banking subsidiaries, Isabella Bank and Trust and Farmers State Bank of
Breckenridge, offer banking services through 18 locations to businesses,
institutions, and individuals. Lending services offered include commercial real
estate loans and lines of credit, residential real estate loans, consumer loans,
student loans, and credit cards. Deposit services include interest and
noninterest bearing checking accounts, savings accounts, money market accounts,
and certificates of deposit. Other related financial products include trust
services, 24-hour banking services locally and nationally through shared
automatic teller machines, safe deposit box rentals, credit life insurance, and
direct deposits. Active competition, principally from other commercial banks,
savings banks and credit unions, exists in all of the Banks' principal markets.
The Corporation's results of operations can be significantly affected by changes
in interest rates or changes in the local economic environment.
IBT Title does business under the names Isabella County Abstract and Title, and
Mecosta County Abstract and Title. IBT Title provides title insurance, abstract
searches, and closes real estate loans. The Corporation purchased the assets of
Mecosta County Abstract and Title in a non-cash transaction for $1.1 million
(14,014 shares) of IBT Bancorp common stock on June 30, 1999.
IBT Financial Services is a full service retail brokerage offering stocks,
bonds, and mutual fund sales to individuals.
IBT Loan Production is a mortgage loan origination company. Principal loan
products include 15 and 30 year fixed rate mortgage loans. All loans originated
are sold to Isabella Bank and Trust.
USE OF ESTIMATES: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses and
the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of the allowance for
loan losses and foreclosed real estate, management obtains independent
appraisals for significant properties.
SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK. Most of the Corporation's
activities are with customers located within the central Michigan area. A
significant amount of its outstanding loans are secured by real estate and to
finance agricultural production. Other than these type loans, there is no
significant concentration to any other industry or customer.
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37
CASH AND CASH EQUIVALENTS: For purposes of the statement of cash flows, the
Corporation considers cash, demand deposits due from banks, and federal funds
sold as cash and cash equivalents. Generally, federal funds are sold for a one
day period. The Corporation maintains deposit accounts in various financial
institutions which at times may exceed FDIC insured limits or not be insured.
Management believes the Corporation is not exposed to any significant interest
rate or other financial risk on these deposits.
SECURITIES: Management determines the appropriate classification of debt
securities at the time of purchase. Debt securities are classified as held to
maturity when the Corporation has the positive intent and ability to hold the
securities to maturity. Securities held to maturity are stated at amortized
cost. Debt securities not classified as held to maturity are classified as
available for sale and are stated at fair value, with the unrealized gains and
losses, net of taxes, reported in other comprehensive income.
The amortized cost of debt securities classified as either held to maturity or
available for sale is adjusted for amortization of premiums and accretion of
discounts to maturity, and is computed using a method that approximates the
level yield method. Gains or losses on the sale of securities available for sale
are calculated using the adjusted cost for the specific securities sold.
ALLOWANCE FOR LOAN LOSSES: Management determines the adequacy of the allowance
for loan losses based on evaluation of the loan portfolio, past and recent loan
loss experience, current economic conditions and other pertinent factors. The
allowance is increased by a charge to income for provisions for loan losses.
Loans deemed to be uncollectible are charged against the allowance for loan
losses, and subsequent recoveries, if any, are credited to the allowance. The
allowance for loan losses on loans classified as impaired is based on discounted
cash flows using the loans initial interest rate or the fair value of the
collateral for certain collateral dependent loans.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost less
accumulated depreciation. For financial reporting purposes, the provision for
depreciation is computed principally by the straight line method based upon the
useful lives of the assets which generally range from 5 to 30 years. Maintenance
repairs and minor alterations are charged to current operations as expenditures
occur and major improvements are capitalized. Management annually reviews these
assets to determine whether carrying values have been impaired.
A summary of premises and equipment at December 31 follows:
2000 1999
------- -------
Premises $10,020 $ 8,484
Equipment 11,485 11,040
------- -------
21,505 19,524
Less accumulated depreciation 10,426 9,315
------- -------
NET PREMISES AND EQUIPMENT $11,079 $10,209
======= =======
LOANS AND RELATED INCOME: Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or payoff are
reported at their outstanding principal adjusted for any charge offs, the
allowance for loans losses, and any deferred fees or costs on originated loans.
Interest on loans is accrued over the term of the loan based on the principal
amount outstanding. The accrual of interest on impaired loans is discontinued
when, in the opinion of management, the borrower may be unable to meet payments
as scheduled. When the accrual of interest is discontinued, all uncollected
accrued interest is reversed. Interest income on such loans is subsequently
recognized only to the extent cash payment is received. For impaired loans not
classified as nonaccrual, interest income continues to be accrued over the term
of the loan based on the principal amount outstanding.
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38
Loan origination fees and certain direct loan origination costs are capitalized
and recognized as a component of interest income over the term of the loan using
the constant yield method.
CREDIT RELATED FINANCIAL INSTRUMENTS: In the ordinary course of business, the
Corporation has entered into commitments to extend credit, including credit card
arrangements, home equity lines of credit, commercial letters of credit, and
standby letters of credit. Such instruments are recorded when funded.
MORTGAGE BANKING ACTIVITIES: Mortgage loans originated and intended for sale in
the secondary market are carried at the lower of cost or estimated market value
in the aggregate. Gains or losses on sales of such loans are recognized at the
time of sale and are determined by the difference between the net sales proceeds
and the unpaid principal balance of the loans sold, adjusted for any yield
differential, servicing fees, and servicing costs applicable to future years.
Net unrealized losses are recognized in a valuation allowance by charges to
income. Mortgage servicing rights ("MSR") are amortized in proportion to, and
over the period of, estimated net servicing income. To determine the fair value
of MSR, the Corporation estimates the present value of future cash flows
incorporating a number of assumptions including servicing income, cost of
servicing, discount rates, and prepayment rates.
The Corporation has established a valuation allowance for the excess of book
value of the capitalized MSR over estimated fair value. For purposes of
measuring impairment, the rights are stratified based on their predominant risk
characteristics, primarily period of origination, interest rate, and current
prepayment rates.
FEDERAL INCOME TAXES: Federal income taxes have been provided based on amounts
reported in the consolidated statements of income (after the exclusion of
nontaxable interest income) and include deferred federal income taxes on
temporary differences between financial statement and income tax reporting. The
Corporation and its subsidiaries file a consolidated federal income tax return
on a calendar year basis.
PER SHARE AMOUNTS: Net income per share amounts were computed by dividing net
income by the weighted average number of shares outstanding. All shares and per
share amounts have been adjusted for the 3.3-for-1 stock split declared on
December 14, 1999 and paid February 18, 2000. The weighted average number of
common shares outstanding were 3,860,975 in 2000, 3,811,859 in 1999; and
3,752,837 in 1998.
ACQUISITION INTANGIBLES: Isabella Bank and Trust acquired branch facilities and
related deposits in a business combination accounted for as a purchase. The
acquisition of the branches included amounts related to the valuation of
customer deposit relationships (core deposit intangibles). The deposit
intangible is being amortized on the straight line basis over nine years, the
expected life of the acquired relationship.
NEW ACCOUNTING STANDARDS: The Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, for an entity that has
not adopted Statement No. 133 before June 15, 2000. This statement shall be
adopted concurrently with Statement No. 133. These statements require companies
to record derivatives on the balance sheet as assets and liabilities measured at
fair value. The accounting for changes in value of derivatives will depend upon
the use of derivatives and whether they qualify for hedge accounting.
This statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000 with earlier applications allowed and is to be applied
prospectively. The Corporation does not use interest rate swaps or other
derivatives in its management of risk and accordingly this statement is not
expected to have a material impact on financial position or results of
operations.
FASB issued Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities. The statement is generally
effective for transfers of financial assets occurring after March 31, 2001, and
is effective for disclosures about securitizations and for reclassifications and
disclosure about collateral in financial statements for fiscal years ending
after December 15, 2000.
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39
Statement No. 140, provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities and criteria for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. It is not expected that adoption of this Statement will
have a material impact on the Corporation's financial position or results of
operations.
RECLASSIFICATIONS: Certain amounts reported in the 1999 and 1998 consolidated
financial statements have been reclassified to conform with the 2000
presentation.
NOTE B -- BUSINESS COMBINATION
On August 10, 2000 the Corporation merged with FSB Bancorp of Breckenridge,
Michigan. As part of the merger, IBT issued 871,941 shares of its common stock
in a tax free exchange for all of the outstanding shares of FSB Bancorp, the
parent company of Farmers State Bank of Breckenridge. The merger was accounted
for as a pooling of interests resulting in the restatement of all financial
information for the periods presented. The following presents the separate
results of operations for the six month period ending June 30, 2000 (the latest
available quarterly information immediately preceding the merger) and the year
ending December 30, 1999 for FSB Bancorp and IBT Bancorp.
(Unaudited)
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------- -----------------
NET INTEREST INCOME
IBT Bancorp $ 7,453 $14,603
FSB Bancorp 2,613 4,621
------- -------
Combined $10,066 $19,224
======= =======
NET INCOME
IBT Bancorp $ 2,016 $ 4,051
FSB Bancorp 686 1,193
------- -------
Combined $ 2,702 $ 5,244
======= =======
EARNINGS PER SHARE
IBT Bancorp $ 0.68 $ 1.38
FSB Bancorp 1.68 2.94
Combined 0.70 1.38
In the third quarter of 2000, a special charge of $243 ($160 after tax) related
to the merger was recorded. The charge consisted of merger-related legal,
accounting, consulting, and printing costs.
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NOTE C -- INVESTMENT SECURITIES
The following is a summary of securities available for sale and held to
maturity. Restricted securities include only the stock of the Federal Reserve
Bank and the Federal Home Loan Bank, which have no contractual maturities.
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
DECEMBER 31, 2000
Securities available for sale
U.S. Treasury and U.S.
government agencies $41,003 $ 97 $ (122) $40,978
Corporate 351 -- (1) 350
States and political
subdivisions 36,058 245 (117) 36,186
------- ---- ------- -------
TOTAL $77,412 $342 $ (240) $77,514
======= ==== ======= =======
Securities held to maturity
U.S. Treasury and U.S.
government agencies $ 412 $ -- $ (2) $ 410
Corporate 1,250 -- (7) 1,243
States and political
subdivisions 6,637 44 (8) 6,673
Restricted investments 2,361 -- -- 2,361
------- ---- ------- -------
TOTAL $10,660 $ 44 $ (17) $10,687
======= ==== ======= =======
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
DECEMBER 31,1999
Securities available for sale
U.S. Treasury and U.S.
government agencies $56,197 $ 17 $(1,181) $55,033
States and political
subdivisions 31,368 38 (432) 30,974
Commercial paper 354 -- (5) 349
------- ---- ------- -------
TOTAL $87,919 $ 55 $(1,618) $86,356
======= ==== ======= =======
Securities held to maturity
U.S. Treasury and U.S.
government agencies $ 656 $ -- $ (21) $ 635
States and political
subdivisions 9,080 39 (51) 9,068
Corporate & other securities 1,851 -- (12) 1,839
Collateralized mortgage
obligations 1,072 -- (17) 1,055
Restricted investments 2,107 -- -- 2,107
------- ---- ------- -------
TOTAL $14,766 $ 39 $ (101) $14,704
======= ==== ======= =======
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The following table summarizes the fair value, realized gains, and realized
losses on sales of securities available for sale.
2000 1999 1998
------ ------ ------
Fair value of securities sold at the date of sale $4,354 $8,372 $11,055
Gross realized gains
U.S. Treasury and U.S. government agencies -- 23 54
Municipals 1 -- --
Gross realized losses
U.S. Treasury and U.S. government agencies 5 11 5
The following table shows the amortized cost and estimated fair value of
securities owned at December 31, 2000 by contractual maturity. Expected
maturities will differ from contractual maturities because the issuers of
securities may have the right to prepay obligations without prepayment penalty.
Available for Sale Held to Maturity
----------------------------- ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------- --------- -------
Due within one year or less $18,215 $18,222 $ 3,806 $ 3,816
Due after 1 year thru 5 years 37,346 37,329 2,713 2,738
Due after 5 years thru 10 years 16,061 16,196 -- --
Due after 10 years 1,400 1,400 720 719
------- ------- ------- -------
73,022 73,147 7,239 7,273
Restricted investments -- -- 2,361 2,361
Mortgage backed securities 4,390 4,367 1,060 1,053
------- ------- ------- -------
TOTAL $77,412 $77,514 $10,660 $10,687
======= ======= ======= =======
Investment securities with a carrying value of approximately $10,079 and $10,515
were pledged to secure public deposits and for other purposes as necessary or
required by law at December 31, 2000 and 1999, respectively.
NOTE D -- LOANS
An analysis of changes in the allowance for loan losses follows:
2000 1999 1998
------ ------ ------
Balance at beginning of year $4,622 $4,412 $4,112
Loans charged off (418) (646) (619)
Recoveries 393 347 388
Provision charged to income 565 509 531
------ ------ ------
BALANCE AT END OF YEAR $5,162 $4,622 $4,412
====== ====== ======
At December 31, 2000 and 1999, nonaccrual and other impaired loans were not
significant. Based on collateral values, no specific allowance for loan losses
has been allocated to these loans.
Certain directors and executive officers (including their families and companies
in which they have 10% or more ownership) of the Corporation and the Banks were
loan customers of the Banks. Total loans to these customers aggregated $8,399
and $6,021 at December 31, 2000 and 1999, respectively. During 2000, $5,747 of
new loans were made and repayments totalled $3,369. All such loans and
commitments were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions and
in the opinion of management do not involve more than normal risk of
collectibility.
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Residential mortgage loans serviced for others are not included in the
accompanying consolidated balance sheets. The unpaid principal balances of
mortgages serviced for others was $104,473 and $104,979 at December 31, 2000 and
1999, respectively. Servicing loans for others generally consists of collecting
mortgage payments, maintaining escrow accounts, disbursing payments to investors
and taxing authorities, and foreclosure processing.
The following table summarizes the fair value of mortgage servicing rights
included in other assets as of December 31:
2000 1999 1998
----- ----- -----
Balance at beginning of year $140 $100 $ 50
Mortgage servicing rights capitalized 270 237 210
Amortization (139) (99) (64)
Impairment valuation allowance -- (98) (96)
---- ---- -----
BALANCE AT END OF YEAR $271 $140 $100
==== ==== ====
Residential mortgages committed for sale were $1,089 as of December 31, 2000 and
$951 as of December 31, 1999.
NOTE E -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation utilizes quoted market prices, where available, to compute the
fair value of its financial instruments. In cases where quoted market prices are
not available, fair values are based on estimates using present value or other
techniques. Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Certain financial instruments and all nonfinancial
instruments are excluded from the disclosure requirements. Accordingly, the
aggregate of the fair value amounts presented are not necessarily indicative of
the underlying value of the Corporation.
The following methods and assumptions were used by the Corporation in estimating
fair value disclosures for financial instruments.
Cash and cash equivalents: The carrying amounts reported in the balance sheets
for cash and demand deposits due from banks and federal funds sold approximate
those assets' fair value.
Investment securities: Fair values for investment securities are based on quoted
market prices, where available. If quoted market prices are unavailable, fair
values are based on quoted market prices of comparable instruments.
Loans: Fair values for variable rate loans that reprice at least quarterly and
have no significant change in credit risk are assumed to equal recorded book
value. Fixed rate loans are valued using present value discounted cash flow
techniques. The discount rate used in these calculations was the U.S. government
bond rate for securities with similar maturities adjusted for servicing costs,
credit loss, and prepayment risk.
Deposit liabilities: Demand, savings, and money market deposits have no stated
maturities and are payable on demand; thus their estimated fair value is equal
to their recorded book balance. Fair values for variable rate certificates of
deposit approximate their recorded book balance. Fair values for fixed rate
certificates of deposit are determined using discounted cash flow techniques
that apply interest rates currently being offered on certificates to a schedule
of aggregated expected monthly maturities on time deposits.
Off balance sheet instruments: Fair values for off balance sheet lending
commitments are based on fees currently charged to enter into similar
agreements, taking into consideration the remaining terms of the agreements and
the counterparties' credit standings. The Corporation does not charge fees for
lending commitments; thus it is not practicable to estimate the fair value of
these instruments.
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The following sets forth the estimated fair value and recorded book balance of
the Corporation's financial instruments as of December 31.
2000 1999
------------------------------------ ------------------------------------
Estimated Fair Recorded Book Estimated Fair Recorded Book
Value Balance Value Balance
--------------- --------------- -------------- -------------
Cash and demand deposits due
from banks $ 27,525 $ 27,525 $ 22,159 $ 22,159
Federal funds sold 900 900 4,550 4,550
Investment securities 88,201 88,174 101,060 101,122
Net loans 397,864 398,517 354,712 351,224
Accrued interest receivable 5,053 5,053 4,312 4,312
Deposits with no stated
maturities 261,201 261,201 250,642 250,642
Deposits with stated maturities 215,889 215,615 194,473 194,434
Borrowed funds 6,444 6,444 6,110 6,110
Accrued interest payable 1,190 1,190 1,013 1,013
NOTE F -- FEDERAL INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Corporation's deferred tax assets and liabilities, included in other assets,
as of December 31 are as follows:
2000 1999
------ ------
Deferred tax assets
Allowance for loan losses $1,037 $ 841
Deferred directors' fees 479 426
Employee benefit plans 429 387
Core deposit premium and acquisition expenses 256 157
Net unrealized loss on available for sale securities -- 531
Other 77 83
------ ------
TOTAL DEFERRED TAX ASSETS 2,278 2,425
Deferred tax liabilities
Premises and equipment 266 304
Accretion on securities 53 38
Prepaid pension expense 565 418
Net unrealized gain on available for sale securities 35 --
Other 44 56
------ ------
TOTAL DEFERRED TAX LIABILITIES 963 816
------ ------
NET DEFERRED TAX ASSETS $1,315 $1,609
====== ======
Components of the consolidated provision for income taxes are as follows:
2000 1999 1998
------ ------ ------
Current $2,356 $2,297 $2,199
Deferred benefit (272) (254) (331)
------ ------ ------
PROVISION FOR FEDERAL INCOME TAXES $2,084 $2,043 $1,868
====== ====== ======
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44
The reconciliation of the provision for federal income taxes and the amount
computed at the federal statutory tax rate of 34% of income before federal
income taxes is as follows.
2000 1999 1998
------ ------ ------
Income tax on pretax income $2,555 $2,478 $2,233
Effect of nontaxable interest income (514) (459) (418)
Other 43 24 53
------ ------ ------
PROVISION FOR FEDERAL INCOME TAXES $2,084 $2,043 $1,868
====== ====== ======
The income tax effects on realized securities gains or (losses) were $(1) in
2000, $4 in 1999, and $17 in 1998.
NOTE G -- BENEFIT PLANS
The Corporation has a defined benefit pension plan covering substantially all of
its employees. The benefits are based on years of service and the employees'
average compensation over their last five years of service. The funding policy
is to contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for benefits
attributed to services to date but also for those expected to be earned in the
future. The defined pension plan's assets are invested primarily in common
stocks.
Changes in the projected benefit obligation and plan assets during each year,
the funded status of the plan and a reconciliation to the amount recognized in
the Corporation's consolidated balance sheets are summarized as follows at
December 31:
2000 1999 1998
------ ------ ------
Change in projected benefit obligation
Benefit obligation January 1 $4,839 $4,952 $4,392
Service cost 188 189 145
Interest cost 352 337 310
Actuarial (gain) loss (34) (419) 320
Benefits paid (215) (220) (215)
------ ------ ------
BENEFIT OBLIGATION, DECEMBER 31 $5,130 $4,839 $4,952
====== ====== ======
Change in plan assets
Fair value of plan assets, January 1 $5,230 $4,590 $4,001
Investment (loss) return (112) 436 433
Corporation contribution 543 424 371
Benefits paid (215) (220) (215)
------ ------ ------
FAIR VALUE OF PLAN ASSETS, DECEMBER 31 $5,446 $5,230 $4,590
====== ====== ======
Reconciliation of funded status
Funded status $ 316 $ 390 $ (362)
Unrecognized net transition asset (66) (88) (111)
Unrecognized prior service cost 143 161 179
Unrecognized net loss from experience
different than that assumed and
effects of changes in assumptions 1,268 766 1,288
------ ------ ------
PREPAID PENSION COST $1,661 $1,229 $ 994
====== ====== ======
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Net pension expense consists of the following components for the year ended
December 31:
2000 1999 1998
------ ------ ------
Service cost on benefits earned for
services rendered during the year $188 $189 $145
Interest cost on projected benefit
obligation 352 337 310
Expected return on plan assets (436) (381) (329)
Amortization of unrecognized transition asset (22) (23) (22)
Amortization of unrecognized prior service cost 18 18 18
Amortization of unrecognized actuarial net loss 12 48 43
---- ---- ----
NET PENSION EXPENSE $112 $188 $165
==== ==== ====
Actuarial assumptions used in determining the projected benefit obligation and
the net periodic pension cost are as follows:
2000 1999 1998
------ ------ ------
Weighted average discount rate 7.50% 7.50% 6.75%
Rate of increase in future compensation 4.50% 4.50% 4.50%
Expected long-term rate of return 8.00% 8.00% 8.00%
The Corporation maintains a nonqualified supplementary retirement plan for
officers to provide supplemental retirement benefits and preretirement death
benefits to each participant. Insurance policies, designed primarily to fund
preretirement benefits, have been purchased on the life of each participant with
the Corporation as the sole owner and beneficiary of the policies. Expenses
related to this program for 2000, 1999, and 1998 were $20, $37, and $48,
respectively, and are being recognized over the participants' expected years of
service.
The Corporation maintains an employee stock ownership plan (ESOP) and profit
sharing plan which cover substantially all of its employees. Contributions to
the Plans are discretionary and are approved by the Board of Directors and
recorded as compensation expense. Compensation expense related to the Plans for
2000, 1999, and 1998 was $200, $195, and $115 respectively. Total shares
outstanding related to the ESOP at December 31, 2000 and 1999 were 152,958 and
164,399 respectively, and were included in the computation of dividends and
earnings per share in each of the respective years.
NOTE H -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is party to financial instruments with off-balance-sheet risk.
These instruments are entered into in the normal course of business to meet the
financing needs of its customers. These financial instruments, which include
commitments to extend credit and standby letters of credit, involve, to varying
degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the consolidated balance sheets. The contract or notional amounts
of these instruments reflect the extent of involvement the Corporation has in a
particular class of financial instruments.
The Corporation's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Corporation uses the same credit policies in deciding to
make these commitments as it does for extending loans to customers.
Commitments to extend credit, which totalled $46,145 at December 31, 2000, are
agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require the payment of a
fee. Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements.
Standby letters of credit are conditional commitments issued by the Corporation
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. At December 31,
2000, the Corporation had a total of $567 in outstanding standby letters of
credit.
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Generally, these commitments to extend credit and letters of credit mature
within one year. The credit risk involved in these transactions is essentially
the same as that involved in extending loans to customers. The Corporation
evaluates each customer's credit worthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Corporation upon the
extension of credit, is based on management's credit evaluation of the borrower.
Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment, and other income producing commercial properties.
NOTE I -- COMMITMENTS AND OTHER MATTERS
There were no material noncancelable lease commitments outstanding at
December 31, 2000.
Banking regulations require banks to maintain cash reserve balances in currency
or as deposits with the Federal Reserve Bank. The Corporation's requirement was
approximately $8,334 at December 31, 2000, and $6,515 at December 31, 1999.
Banking regulations also limit the transfer of assets in the form of dividends,
loans, or advances from the subsidiary banks to the Corporation. At December 31,
2000, substantially all of the subsidiary banks' assets were restricted from
transfer to the Corporation in the form of loans or advances. Consequently, bank
dividends are the principal source of funds for the Corporation. Payment of
dividends without regulatory approval is limited to the current year's retained
net income plus retained net income for the preceding two years, less any
required transfers to capital surplus. At January 1, 2001, the amount available
for dividends without regulatory approval was approximately $3,023.
The Corporation maintains a self-funded medical plan under which the Corporation
is responsible for the first $30 per year of claims made by a covered individual
with a maximum of $620. Claims in excess of these amounts are insured through an
"excess loss" policy up to $1,000. Medical claims are subject to a lifetime
maximum of $2,000 per covered individual. Expenses are accrued based on
estimates of the aggregate liability for claims incurred and the Corporation's
experience. Expenses were $634 in 2000, $565 in 1999 and $619 in 1998.
The Corporation offers a dividend reinvestment and employee stock purchase plan.
The dividend reinvestment plan allows shareholders to purchase previously
unissued IBT Bancorp common shares. The employee stock purchase plan allows
employees to purchase IBT Bancorp common stock through payroll deduction. The
number of shares authorized for issuance under these plans are 155,000 with
91,899 shares unissued at December 31, 2000. During 2000, 1999 and 1998, 23,304
shares were issued for $492, 25,066 shares were issued for $548, and 32,878
shares were issued for $597, respectively, pursuant to these plans.
The subsidiary Banks of the Corporation have obtained approval to borrow up to
$34,000 from the Federal Home Loan Bank (FHLB) of Indianapolis. Under the terms
of the agreement, the Banks may obtain advances at the stated rate at the time
of the borrowings. The Banks have agreed to pledge eligible mortgage loans and
U.S. Treasury and governmental agencies as collateral for any such borrowings.
Certain directors and executive officers (including their families and companies
in which they have 10% or more ownership) of the Corporation and the Banks were
deposit customers of the Banks. Total deposits of these customers aggregates
approximately $3,742 and $5,863 at December 31, 2000 and December 31, 1999,
respectively.
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NOTE J -- DEPOSITS
At December 31, 2000, the scheduled maturities of time deposits were as follows:
YEAR AMOUNT
---- --------
2001 $123,217
2002 37,559
2003 20,909
2004 15,099
2005 18,831
NOTE K -- BORROWED FUNDS
Borrowed funds at December 31, 2000 consists of the following obligations:
2000 1999
------ ------
Federal Home Loan Bank advances $6,400 $1,000
Securities sold under agreement to repurchase 44 110
Federal funds purchased -- 5,000
------ ------
$6,444 $6,110
====== ======
The Federal Home Loan Bank borrowings are collateralized by a blanket lien on
all qualified 1 to 4 family and U.S. Treasury and government agency securities
equal to at least 145% of outstanding advances. Advances are also secured by
FHLB stock owned by the Banks.
Securities sold under agreement to repurchase, which are classified as secured
borrowing, generally mature within one to four days from the transaction date.
Securities sold under agreement to repurchase are reflected at the amount of
cash received in connection with the transaction. The U.S. government agency
securities underlying the agreements have a carrying value and a fair value of
approximately $1,016 and $1,000 at December 31, 2000 and 1999, respectively.
Such securities remain under the control of the Corporation. The Corporation may
be required to pledge additional collateral based on the fair value of the
underlying securities.
The maturity and weighted average interest rates of FHLB advances at December 31
follow:
2000
----------------
AMOUNT RATE
------ ------
Fixed rate advance due 2010 $2,400 6.62%
One year putable advance due 2010 3,000 4.98
One year fixed rate advance due 2001 1,000 6.75
------ ----
Total advances $6,400 5.88%
====== =====
1999
---------------
AMOUNT RATE
------ ------
One year fixed rate advance due 2000 $1,000 5.87%
47
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NOTE L -- OPERATING SEGMENTS
The Corporation's reportable segments are based on legal entities that account
for at least 10% of operating results. The accounting policies are the same as
those discussed in Note A to the Consolidated Financial Statements. The
Corporation evaluates performance based principally on net income and asset
quality of the respective segments. A summary of selected financial information
for the Corporation's reportable segments follows:
Isabella Bank Farmers All
and Trust State Bank Others Total
------------- ---------- ------- -------
2000
Total assets $430,060 $106,699 $4,138 $540,897
Interest income 29,554 9,135 65 38,754
Net interest income 15,002 5,199 151 20,352
Provision for loan losses 265 300 -- 565
Net income (loss) 4,223 1,439 (231) 5,431
1999
Total assets $400,366 $101,579 $1,651 $503,596
Interest income 27,417 7,944 84 35,445
Net interest income 14,473 4,615 136 19,224
Provision for loan losses 309 200 -- 509
Net income 3,988 1,194 62 5,244
1998
Total assets $388,105 $ 97,200 $ 678 $485,983
Interest income 25,762 7,853 36 33,651
Net interest income 13,236 4,270 95 17,601
Provision for loan losses 321 210 -- 531
Net income 3,640 1,067 (6) 4,701
NOTE M -- REGULATORY CAPITAL MATTERS
The Corporation (on a consolidated basis) and its subsidiary banks, Isabella
Bank and Trust and Farmers State Bank of Breckenridge ("Banks") are subject to
various regulatory capital requirements administered by their primary regulator,
the Federal Reserve Bank. Failure to meet minimum capital requirements can
initiate mandatory and/or discretionary actions by the Federal Reserve. These
actions could have a material effect on the Corporation's and Banks' financial
statements. Under the Federal Reserve's capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Corporation and the Banks
must meet specific capital guidelines that include quantitative measures of
their assets, certain off-balance-sheet items, and capital, as calculated under
regulatory accounting standards. The Banks' required capital is also subject to
regulatory qualitative judgement regarding the Banks' interest rate risk
exposure and credit risk. Prompt corrective action provisions are not applicable
to bank holding companies.
Measurements established by regulation to ensure capital adequacy require the
Corporation and the Banks to maintain minimum total capital to risk weighted
assets (as defined in the regulations), Tier 1 capital to risk weighted assets
(as defined), and Tier 1 capital to average assets (as defined). Management
believes, as of December 31, 2000, that the Corporation and the Banks meet all
capital adequacy requirements to which they are subject.
As of December 31, 2000, the most recent notifications from the Federal Reserve
Banks categorized the Banks as well capitalized. To be categorized as well
capitalized, a bank must maintain total risk based capital, Tier 1 risk based,
and Tier 1 leverage ratios as set forth in the following table. There have been
no conditions or events since the notifications that management believes has
changed the Banks' category.
48
49
The Corporation's and each Bank's actual capital amounts (in thousands) and
ratios are also presented in the table.
Minimum
To Be Well Capitalized
Minimum Capital Under Prompt Corrective
Actual Requirements Action Provisions
------------------- -------------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- -------- -------
AS OF DECEMBER 31, 2000
Total capital to risk weighted assets
Isabella Bank and Trust $33,974 12.2% $22,364 8.0% $27,955 10.0%
Farmers State Bank of Breckenridge 11,525 14.8 6,230 8.0 7,788 10.0
Consolidated 52,985 14.7 28,859 8.0 N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank and Trust 30,479 10.9 11,182 4.0 16,773 6.0
Farmers State Bank of Breckenridge 10,544 13.5 3,115 4.0 4,673 6.0
Consolidated 48,468 13.4 14,430 4.0 N/A N/A
Tier 1 capital to average assets
Isabella Bank and Trust 30,479 7.5 16,201 4.0 20,251 5.0
Farmers State Bank of Breckenridge 10,544 10.2 4,118 4.0 5,147 5.0
Consolidated 48,468 9.1 21,228 4.0 N/A N/A
AS OF DECEMBER 31, 1999:
Total capital to risk weighted assets
Isabella Bank and Trust $32,210 12.7% $20,349 8.0% $25,436 10.0%
Farmers State Bank of Breckenridge 11,174 15.5 5,771 8.0 7,214 10.0
Consolidated 48,285 14.8 26,160 8.0 N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank and Trust 29,030 11.4 10,175 4.0 15,262 6.0
Farmers State Bank of Breckenridge 10,266 14.2 2,886 4.0 4,328 6.0
Consolidated 44,191 13.5 13,081 4.0 N/A N/A
Tier 1 capital to average assets
Isabella Bank and Trust 29,030 7.4 15,687 4.0 19,608 5.0
Farmers State Bank of Breckenridge 10,266 10.4 3,933 4.0 4,917 5.0
Consolidated 44,191 9.0 19,796 4.0 N/A N/A
NOTE N -- PARENT COMPANY ONLY FINANCIAL INFORMATION
CONDENSED BALANCE SHEET
December 31
---------------------
2000 1999
------- -------
ASSETS
Cash on deposit at subsidiary Banks' $ 4,279 $ 2,674
Securities available for sale 653 1,511
Investments in subsidiaries 47,834 42,802
Premises and equipment 93 93
Other assets 521 36
------- -------
TOTAL ASSETS $53,380 $47,116
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities $ 1,450 $ 9
Shareholders' equity 51,930 47,107
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $53,380 $47,116
======= =======
49
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CONDENSED STATEMENTS OF INCOME
Year Ended December 31
-----------------------------------
2000 1999 1998
------- ------- -------
Income
Dividends from subsidiaries $ 4,700 $ 3,255 $ 1,815
Interest income 105 82 78
Other 6 6 6
------- ------- -------
TOTAL INCOME 4,811 3,343 1,899
Expenses 563 203 191
------- ------- -------
Income before income tax benefit and equity in
undistributed earnings of subsidiaries 4,248 3,140 1,708
Federal income tax benefit 166 56 48
------- ------- -------
4,414 3,196 1,756
Undistributed earnings of subsidiaries 1,017 2,048 2,945
------- ------- -------
NET INCOME $ 5,431 $ 5,244 $ 4,701
======= ======= =======
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2000 1999 1998
------- ------- -------
OPERATING ACTIVITIES
Net income $ 5,431 $ 5,244 $ 4,701
Adjustments to reconcile net income
to cash provided by operations
Undistributed earnings of subsidiaries (1,017) (2,048) (2,945)
Net amortization of securities 3 11 1
Decrease (increase) in interest receivable 20 (21) 34
Decrease (increase) in other assets 3 19 (19)
Increase in accrued expenses 1,440 1 1
Provision for depreciation 19 21 23
Deferred income tax benefit (512) -- --
------- ------- -------
NET CASH PROVIDED BY OPERATIONS 5,387 3,227 1,796
INVESTING ACTIVITIES
Proceeds from the maturities of investments
available for sale 867 650 1,500
Purchases of investment securities available for sale -- (1,678) (101)
Investment in subsidiaries (2,924) (550) (3,000)
Purchases of equipment and premises (19) --
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,076) (1,578) (1,601)
FINANCING ACTIVITIES
Cash dividends (2,198) (1,930) (1,784)
Issuance of common stock 492 1,648 707
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,706) (282) (1,077)
------- ------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,605 1,367 (882)
Cash and cash equivalents at beginning of year 2,674 1,307 2,189
------- ------- -------
CASH AND CASH EQUIVALENTS AT YEAR END $ 4,279 $ 2,674 $ 1,307
======= ======= =======
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51
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
Part III incorporated by reference from the Corporation's Definitive Proxy
Statement pursuant to instruction G(3). The Corporation will file with the SEC a
definitive Proxy Statement pursuant to Schedule 14A involving the election of
directors no later than 120 days after the close of the calendar year (April 30,
2001).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of IBT Bancorp are
incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Balance Sheets
Consolidated Statements of Changes in Shareholders'
Equity
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
All schedules are omitted because they are neither applicable nor
required, or because the required information is either included in the
consolidated financial statements or related notes.
3. Exhibits:
3(a) Amended Articles of Incorporation*
3(b) Amendment to the Articles of Incorporation***
3(c) Amendment to the Articles of Incorporation*****
3(d) Amendment to the Articles of Incorporation
3(e) Amended Bylaws*
3(f) Amendment to the Bylaws**
3(g) Amendment to the Bylaws***
3(h) Amendment to the Bylaws
10(a) Isabella Bank & Trust Executive Supplemental Income
Agreement***(1)
10(b) Isabella Bank & Trust Deferred Compensation Plan****(1)
10(c) IBT Bancorp, Inc. and Related Companies Deferred
Compensation Plan for Directors (1)
21 Subsidiaries of the Registrant
51
52
ITEM 14 (CONTINUED)
23 Consent of Rehmann Robson, P.C., Independent Certified
Public Accountants
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter ended
December 31, 2000.
(c) The index to exhibits is on page 51 of this report.
(d) There are no financial statement schedules filed with this
report.
* Previously filed as an Exhibit to the IBT Bancorp, Inc. Form 10-K, dated
March 12, 1991, and incorporated herein by reference.
** Previously filed as an Exhibit to the IBT Bancorp, Inc. Form 10-K, dated
March 13, 1990, and incorporated herein by reference.
*** Previously filed as an Exhibit to IBT Bancorp, Inc. Form 10-K, dated
March 26, 1994, and incorporated herein by reference.
**** Previously filed as an Exhibit to IBT Bancorp, Inc. Form 10-K, dated
March 26, 1996, and incorporated herein.
***** Previously filed as an Exhibit to IBT Bancorp, Inc. Form 10-K, dated
March 22, 2000, and incorporated herein.
(1) Management's Contract or Compensatory Plan or Arrangement.
52
53
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IBT BANCORP, INC.
(Registrant)
by:/s/David W. Hole Date: March 20, 2001
------------------------------------ ---------------------
David W. Hole
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signatures Capacity Date
---------- -------- ----
/s/L. A. Johns Chairman of the Board March 20, 2001
- --------------------------------------- and Director
L. A. Johns
/s/Frederick L. Bradford Director March 20, 2001
- ---------------------------------------
Frederick L. Bradford
/s/Gerald D. Cassel Director March 20, 2001
- ---------------------------------------
Gerald D. Cassel
/s/James C. Fabiano Director March 20, 2001
- ---------------------------------------
James C. Fabiano
/s/Ronald E. Schumacher Director March 20, 2001
- ---------------------------------------
Ronald E. Schumacher
53
54
Signatures Capacity Date
---------- -------- ----
/s/Robert O. Smith Director March 20, 2001
- ---------------------------------------
Robert O. Smith
/s/Dean Walldorff Director March 20, 2001
- ---------------------------------------
Dean Walldorff
/s/David W. Hole President March 20, 2001
- --------------------------------------- Chief Executive Officer
David W. Hole and Director
(Principal Executive Officer)
/s/Herbert C. Wybenga Vice President and March 20, 2001
- --------------------------------------- Director
Herbert C. Wybenga
/s/Dale Weburg Director March 20, 2001
- ---------------------------------------
Dale Weburg
/s/Dennis P. Angner Executive Vice President, March 20, 2001
- --------------------------------------- Treasurer, and Director
Dennis P. Angner (Principal Financial Officer)
54
55
IBT Bancorp
FORM 10-K
Index to Exhibits
Exhibit Form 10-K
Number Exhibit Page Number
- ------- ------- -----------
3(d) Amendment to the Articles of Incorporation 56
3(h) Amendment to the Bylaws 57
10(c) IBT Bancorp, Inc. and Related Companies 58
Deferred Compensation Plan for Directors
21 Subsidiaries of the Registrant 66
23 Consent of Rehmann Robson P.C. 67
Independent Certified Public Accountants
55