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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended June 30, 2003
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the transition period from to
--------------------- ------------------------
Commission File Number: 0-18415
---------------------------------------------------------
IBT Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2830092
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
200 East Broadway 48858
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(989) 772-9471
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock no par value, 4,370,267 as of July 24, 2003
--------------------------------------------------------
IBT BANCORP, INC.
Index to Form 10-Q
Part I Financial Information PAGE NUMBERS
Item 1 Consolidated Financial Statements 3-8
Item 2 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9-21
Item 3 Quantitative and Qualitative
Disclosures About Market Risk 21-23
Item 4 Controls and Procedures 24
Part II Other Information
Item 4 Submission of Matters to a Vote of
Securities Holders 24
Item 6 Exhibits and Reports on Form 8-K 27
Signature 25
Exhibit 31, Section 302 25
Certification of CEO and CFO
Exhibit 32, Section 906 28
Certification
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IBT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30 December 31
2003 2002
---- ----
(Unaudited)
ASSETS
Cash and demand deposits due from banks $ 33,980 $ 28,587
Federal funds sold 4,650 25,850
-------- --------
TOTAL CASH AND CASH EQUIVALENTS 38,630 54,437
Investment securities
Securities available for sale (Amortized cost of
$185,105 in 2003 and $153,499 in 2002) 190,752 157,909
Securities held to maturity (Fair value --
$1,336 in 2003 and $1,803 in 2002) 1,279 1,736
-------- --------
TOTAL INVESTMENT SECURITIES 192,031 159,645
Mortgage loans available for sale 13,261 13,392
Loans
Agricultural 54,535 53,223
Commercial 130,359 143,957
Real estate mortgage 143,409 139,386
Installment 57,864 54,522
-------- --------
TOTAL LOANS 386,167 391,088
Less allowance for loan losses 6,044 5,593
-------- --------
NET LOANS 380,123 385,495
Other assets 40,644 39,748
-------- --------
TOTAL ASSETS $664,689 $652,717
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 70,231 $ 63,106
NOW accounts 107,448 111,195
Certificates of deposit and other savings 306,509 316,845
Certificates of deposit over $100 83,123 70,310
-------- --------
TOTAL DEPOSITS 567,311 561,456
Other borrowed funds 17,291 17,793
Accrued interest and other liabilities 12,335 10,011
-------- --------
TOTAL LIABILITIES 596,937 589,260
Shareholders' Equity
Common stock -- no par value,
10,000,000 shares authorized; outstanding--
4,353,298 in 2003 (4,336,283 in 2002) 46,146 45,610
Retained earnings 19,241 16,299
Accumulated other comprehensive income 2,365 1,548
-------- --------
TOTAL SHAREHOLDERS' EQUITY 67,752 63,457
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $664,689 $652,717
======== ========
See notes to consolidated financial statements.
3
IBT BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(dollars in thousands)
Six Months Ended
June 30
-----------------
2003 2002
---- ----
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period 4,336,283 3,884,985
Stock dividend --- 388,757
Issuance of common stock 19,151 22,762
Common stock repurchased (2,136) (18,706)
----------- -----------
BALANCE END OF PERIOD 4,353,298 4,277,798
=========== ===========
COMMON STOCK
Balance at beginning of period $ 45,610 $ 31,017
Stock dividend --- 12,829
Issuance of common stock 613 569
Stock repurchased (77) (617)
----------- -----------
BALANCE END OF PERIOD 46,146 43,798
RETAINED EARNINGS
Balance at beginning of period 16,299 24,788
Net income 3,898 3,363
Stock dividend --- (12,829)
Cash dividends ($0.11 per share in 2003 and $0.10 in 2002) (956) (861)
----------- -----------
BALANCE END OF PERIOD 19,241 14,461
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period 1,548 1,023
Unrealized gains on securities available for sale, net
of income taxes and reclassification adjustment 817 708
----------- -----------
BALANCE END OF PERIOD 2,365 1,731
----------- -----------
TOTAL SHAREHOLDERS EQUITY END OF PERIOD $ 67,752 $ 59,990
=========== ===========
See notes to consolidated financial statements.
4
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
(in thousands) June 30 June 30
--------- --------
2003 2002 2003 2002
-------------------- ------------------
INTEREST INCOME
Loans $ 7,360 $ 7,708 $14,877 $15,651
Investment securities
Taxable 1,191 1,167 2,348 2,112
Nontaxable 495 441 989 848
Federal funds sold 73 117 169 289
------- ------- ------- -------
TOTAL INTEREST INCOME 9,119 9,433 18,383 18,900
INTEREST EXPENSE
Deposits 3,034 3,671 6,170 7,567
Federal funds purchased 204 179 391 354
------- ------- ------- -------
TOTAL INTEREST EXPENSE 3,238 3,850 6,561 7,921
------- ------- ------- -------
NET INTEREST INCOME 5,881 5,583 11,822 10,979
Provision for loan losses 333 162 545 350
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,548 5,421 11,277 10,629
Noninterest income
Trust fees 155 147 314 276
Service charges on deposit accounts 63 72 127 141
Other service charges and fees 864 526 2,034 1,035
Gain on sale of mortgage loans 819 162 1,483 420
Title insurance revenue 756 409 1,369 755
Other 316 256 600 513
------- ------- ------- -------
TOTAL NONINTEREST INCOME 2,973 1,572 5,927 3,140
Noninterest expenses
Salaries, wages and employee benefits 3,366 2,617 6,635 5,284
Occupancy 363 333 734 661
Furniture and equipment 574 556 1,114 1,080
Other 1,576 1,142 3,467 2,241
------- ------- ------- -------
TOTAL NONINTEREST EXPENSES 5,879 4,648 11,950 9,266
INCOME BEFORE FEDERAL INCOME TAXES 2,642 2,345 5,254 4,503
Federal income taxes 686 596 1,356 1,140
------- ------- ------- -------
NET INCOME $ 1,956 $ 1,749 $ 3,898 $ 3,363
======= ======= ======= =======
Basic net income per share 0.45 $ 0.41 $ 0.90 $ 0.79
======= ======= ======= =======
Cash dividends per share $ 0.11 $ 0.10 $ 0.22 $ 0.20
======= ======= ======= =======
See notes to consolidated financial statements.
5
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands)
Three Months Ended Six Months Ended
June 30 June 30
-------- --------
2003 2002 2003 2002
--------------- ---------------
NET INCOME $1,956 $1,749 $3,898 $3,363
Other comprehensive income before income taxes:
Unrealized gains on securities available for sale:
Unrealized holding gains arising during period 824 1,691 1,238 1,073
Income taxes related to other comprehensive
income 280 575 421 365
------ ------ ------ ------
OTHER COMPREHENSIVE INCOME 544 1,116 817 708
------ ------ ------ ------
COMPREHENSIVE INCOME $2,500 $2,865 $4,715 $4,071
====== ====== ====== ======
See notes to consolidated financial statements.
6
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands) Six Months Ended
June 30
2003 2002
---- ----
OPERATING ACTIVITIES
Net income $ 3,898 $ 3,363
Adjustments to reconcile net income to cash
provided by operations:
Provision for loan losses 545 350
Provision for depreciation 772 672
Net amortization of securities 734 470
Increase in cash value of life insurance (235) (233)
Amortization of intangibles 47 47
Gain on sales of mortgage loans (1,483) (420)
Proceeds from sales of mortgage loans 140,107 55,403
Mortgage loans originated for sale (138,493) (49,354)
Decrease in interest receivable 237 304
Increase in other assets (964) (782)
Increase in accrued interest and other expenses 2,324 904
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,489 10,724
INVESTING ACTIVITIES
Activity in available for sale securities
Maturities, calls, and sales 13,975 19,123
Purchases (46,428) (65,365)
Activity in held to maturity securities
Maturities, calls, and sales 570 754
Net decrease (increase) in loans 4,827 (3,541)
Purchase of cash value life insurance --- (414)
Purchases of equipment and premises (1,173) (1,435)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (28,229) (50,878)
FINANCING ACTIVITIES
Net increase (decrease) in noninterest bearing deposits 7,125 (4,327)
Net (decrease) increase in interest bearing deposits (1,270) 28,449
Net (decrease) increase in other borrowed funds (502) 1,251
Cash dividends (956) (861)
Proceeds from the issuance of common stock 613 569
Common stock repurchased (77) (617)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,933 24,464
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (15,807) (15,690)
Cash and cash equivalents at beginning of period 54,437 55,462
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 38,630 $ 39,772
========= =========
See notes to consolidated financial statements.
7
IBT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six month period ended June 30,
2003 are not necessarily indicative of the results that may be expected for the
year ended December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Corporation's annual
report for the year ended December 31, 2002.
NOTE 2 COMPUTATION OF EARNINGS PER SHARE
The net income per share amounts are based on the weighted average number of
common shares outstanding. The weighted average number of common shares
outstanding were 4,349,692 and 4,276,788 for the six month periods ending June
30, 2003 and 2002, respectively. The Corporation has no common stock equivalents
and, accordingly, presents only basic earnings per share.
NOTE 3 RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board (FASB) issued
Financial Interpretation (FIN) No. 46, "Consolidation of Variable Interest
Entities." This standard clarifies the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," and addresses
consolidation by business enterprises of variable interest entities (more
commonly known as Special Purpose Entities or SPE's). FIN No. 46 requires
existing unconsolidated variable interest entities to be consolidated by their
primary beneficiaries if the entities do not effectively disperse risk among the
parties involved. FIN No. 46 also enhances the disclosure requirements related
to variable interest entities. The Interpretation is effective for interests in
variable interest entities created after January 31, 2003. For interests in
variable interest entities created before February 1, 2003, the Interpretation
shall apply to the first interim or annual reporting period beginning after June
15, 2003. While the precise impact of adoption of FIN No. 46 on consolidated
results of operations, financial position and cash flows has not been
determined, its effect is not expected to be material.
In April 2003 the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 149 which amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement clarifies under
what circumstances a contract with an initial net investment meets the
characteristic of a derivative discussed in paragraph 6(b) of SFAS No. 133,
clarifies when a derivative contains a
8
financing component, amends the definition of an underlying to conform to
language used in FASB Interpretation No. 45, and amends certain other existing
pronouncements. This statement is effective for contracts entered into or
modified after June 30, 2003. It is not expected that the provisions of
Statement No. 149 will have a material impact on the financial position or
results of operations of the Corporation.
In May 2003 the FASB issued SFAS No. 150, which establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). This statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. It is to be implemented by reporting the cumulative effect of a change in
accounting principle for financial instruments created before the issuance date
of the Statement and still existing at the beginning of the interim period of
adoption. It is not expected that provisions of Statement No. 150 will have a
material impact on the financial position or results of operations of the
Corporation.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the major factors that
influenced IBT Bancorp's financial performance. This analysis should be read in
conjunction with the Corporation's 2002 annual report and with the unaudited
financial statements and notes, as set forth on pages 3 through 8 of this
report.
CRITICAL ACCOUNTING POLICIES: The Corporation's significant accounting policies
are set forth in Note 1 of the Consolidated Financial Statements included in the
Corporation's Annual Report for the year ended December 31, 2002. Of these
significant accounting policies, the Corporation considers its policies
regarding the allowance for loan losses and servicing assets to be its most
critical accounting policies.
The allowance for loan losses requires management's most subjective and complex
judgment. Changes in economic conditions can have a significant impact on the
allowance for loan losses and therefore the provision for loan losses and
results of operations. The Corporation has developed appropriate policies and
procedures for assessing the adequacy of the allowance for loan losses,
recognizing that this process requires a number of assumptions and estimates
with respect to its loan portfolio. The Corporation's assessments may be
impacted in future grace periods by changes in economic conditions, the impact
of regulatory examinations, and the discovery of information with respect to
borrowers which is not known to management at the time of the issuance of the
consolidated financial statements. For additional discussion concerning the
Corporation's allowance for loan losses and related matters, see Provision for
Loan Losses and Allowance for Loan Losses in the Corporation's Annual Report and
herein.
Servicing assets are recognized when loans are sold with servicing retained.
Servicing assets are amortized in proportion to and over the period of estimated
future net servicing income. The fair value of servicing assets is estimated by
discounting the future cash flows at estimated future current market rates for
the expected life of the loans. The Corporation uses industry prepayment
statistics in estimating the expected life of the loan. Management periodically
9
evaluates servicing assets for impairment. For purposes of measuring impairment,
the rights are stratified based on original term to maturity. The amount of
impairment recognized is the amount by which the servicing asset for a stratum
exceeds its fair value.
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
RESULTS OF OPERATIONS
Net income equaled $3.90 million for the six month period ended June 30, 2003
versus $3.36 million in 2002. Return on average assets, which measures the
ability of the Corporation to profitably and efficiently employ its resources,
was 1.19% for the first six months of 2003 and 1.10% in 2002. Return on average
equity, which indicates how effectively the Corporation is able to generate
earnings on shareholder invested capital, equaled 12.19% through June 30, 2003
versus 11.70% for the same period in 2002.
SUMMARY OF SELECTED FINANCIAL DATA
- ----------------------------------
(Dollars in thousands except per share data)
Six Months Ended
June 30
2003 2002
----------------
INCOME STATEMENT DATA
Net interest income $11,822 $10,979
Provision for loan losses 545 350
Net income 3,898 3,363
PER SHARE DATA
Net income per common share 0.90 0.79
Cash dividends per common share 0.22 0.20
RATIOS
Average primary capital to average assets 10.56% 10.25%
Net income to average assets 1.19 1.10
Net income to average equity 12.19 11.70
NET INTEREST INCOME
Net interest income equals interest income less interest expense and is the
primary source of income for IBT Bancorp. Interest income includes loan fees of
$897,000 in 2003 versus $747,000 in 2002. 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.
(Continued on page 13)
10
TABLE 1
IBT BANCORP, INC.
AVERAGE BALANCES; INTEREST RATE AND NET INTEREST INCOME
- -------------------------------------------------------
(Dollars in Thousands)
The following schedules present the daily average amount outstanding
for each major category 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. Federal
Reserve and Federal Home Loan Bank restricted equity holdings are included in
Other Investments.
Six Months Ended
June 30, 2003 June 30, 2002
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
---------- ---------- ------- --------- ---------- --------
INTEREST EARNING ASSETS
Loans $ 392,870 $14,879 7.57% $ 387,281 $15,656 8.09%
Taxable investment securities 121,825 2,296 3.77 87,703 2,032 4.63
Nontaxable investment securities 48,161 1,590 6.60 42,608 1,285 6.03
Federal funds sold 28,515 169 1.19 34,629 288 1.66
Other investments 2,817 52 3.69 2,722 81 5.95
--------- ------- ----- --------- ------- ------
Total Earning Assets 594,188 18,986 6.39 554,943 19,342 6.97
NONEARNING ASSETS
Allowance for loan losses (5,855) (5,587)
Cash and due from banks 26,399 22,267
Premises and equipment 15,444 14,852
Accrued income and other assets 24,740 23,260
--------- ---------
TOTAL ASSETS $ 654,916 $ 609,735
========= =========
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 113,568 590 1.04 $ 93,259 717 1.54
Savings deposits 140,082 752 1.07 136,775 1,209 1.77
Time deposits 251,508 4,827 3.84 246,138 5,681 4.62
Borrowed funds 16,029 391 4.88 12,370 314 5.08
--------- ------- ----- --------- ------- ------
Total Interest Bearing Liabilities 521,187 6,560 2.52 488,542 7,921 3.24
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 59,226 56,238
Other 10,573 7,450
Shareholders' equity 63,930 57,505
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 654,916 $ 609,735
========= =========
------- -------
Net interest income (FTE) $12,426 $11,421
======= =======
----- ------
Net yield on interest earning assets (FTE) 4.18% 4.12%
===== ======
11
TABLE 2
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
- ---------------------------------
(Dollars in Thousands)
The following table sets forth the effect of volume and rate changes on
interest income and expense for the periods indicated. For the purpose of this
table, changes in interest due to volume and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's rate.
Rate Variance - change in the fully taxable equivalent (FTE) rate
multiplied by the prior year's volume.
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.
Six Month Period Ended June 30, 2003
Compared to
June 30, 2002
Increase (Decrease) Due to
-------------------------------------------
Volume Rate Net
------ ---- ----
CHANGES IN INTEREST INCOME
Loans $ 224 $ (1001) $ (777)
Taxable investment securities 691 (427) 264
Nontaxable investment securities 177 128 305
Federal funds sold (46) (73) (119)
Other investments 2 (31) (29)
------- ------- -------
Total changes in interest income 1,048 (1,404) (356)
Total changes in interest expense 374 (1,735) (1,361)
------- ------- -------
NET CHANGE IN INTEREST MARGINS (FTE) $ 674 $ 331 $ 1,005
======= ======= =======
12
NET INTEREST INCOME, CONTINUED
As shown in Tables number 1 and 2, when comparing the six month period ending
June 30, 2003 to the same period in 2002, fully taxable equivalent (FTE) net
interest income increased $1.01 million or 8.8%. An increase of 7.1% in average
interest earning assets provided $1.05 million of FTE interest income. The
majority of this growth was funded by a 6.7% increase in interest bearing
liabilities, resulting in $374,000 of additional interest expense. Overall,
changes in volume resulted in $674,000 of additional FTE interest income. The
average FTE interest rate earned on assets decreased by 0.58%, while the amount
of interest earned as a result of changes in rate decreased $1.40 million. The
average rate paid on deposits decreased by 0.72%, decreasing interest expense by
$1.74 million. The net change related to interest rates earned and paid was a
$331,000 increase in FTE net interest income.
The Corporation's FTE net interest yield as a percentage of average earning
assets equaled 4.18% during the first six months of 2003 versus 4.12% for the
same period in 2002. The 0.06% increase in the FTE interest margin was primarily
a result of a shift in the funding of earning assets from higher cost time
deposits and borrowing to lower cost saving and demand deposits. Time deposits
and borrowing as a percentage of average earning assets for the six month
periods ending June 30, 2003 and 2002 were 45.0% and 46.6%, or a 1.6% decline.
Another factor in the increase in the Corporation's net interest margin was
aggressively repricing deposits as interest rates continued their decline.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Net loans outstanding represent 59% of the
Corporation's total assets and is the Corporation's single largest concentration
of risk. The allowance for loan losses is management's estimation of potential
future losses inherent in the existing loan portfolio. Factors used to evaluate
the loan portfolio, and thus to determine the current charge to expense, include
recent loan loss history, financial condition of borrowers, amount of
nonperforming and impaired loans, overall economic conditions, and other
factors.
Comparing the year to date period of June 30, 2003 to June 30, 2002, the
provision for loan losses was increased $195,000 to $545,000. Year to date 2003,
the Corporation had net charge-offs of $94,000 in 2003 versus $181,000 in 2002.
Loans classified as nonperforming were 1.23% of loans as of June 30, 2003 versus
1.21% for June 30, 2002. The Corporation's peer group, which includes 255
holding companies with assets between $500 million and $1.0 billion,
nonperforming loans to total loans ratio was 0.84% as of March 31, 2003. As of
June 30, 2003, the allowance for loan losses as a percentage of loans equaled
1.51%. In management's opinion, the allowance for loan losses is adequate as of
June 30, 2003.
13
TABLE 3
IBT BANCORP, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
- -------------------------------
(Dollars in Thousands)
Six Months Ended
June 30
------------------------------
2003 2002
------- -------
Summary of changes in allowance
Allowance for loan losses - January 1 $ 5,593 $ 5,471
Loans charged off (296) (354)
Recoveries of charged off loans 202 173
------- -------
Net loans charged off (94) (181)
Provision charged to operations 545 350
------- -------
ALLOWANCE FOR LOAN LOSSES - JUNE 30 $ 6,044 $ 5,640
======= =======
ALLOWANCE FOR LOAN LOSSES AS A % OF LOANS 1.51% 1.43%
======= =======
NONPERFORMING LOANS
----------------------
(Dollars in thousands)
June 30
-----------------------------
2003 2002
------- -------
Total amount of loans outstanding for
the period $399,428 $395,595
======== ========
Nonaccrual loans $ 1,724 $ 2,848
Accruing loans past due 90 days or more 3,181 1,939
-------- --------
Total $ 4,905 $ 4,787
======== ========
Loans classified as nonperforming as a
% of outstanding loans 1.23% 1.21%
======== ========
To management's knowledge, there are no other loans which cause management
to have serious doubts as to the ability of a borrower to comply with their loan
repayment terms.
14
NONINTEREST INCOME
Noninterest income consists of trust fees, deposit service charges, fees for
other financial services, gains on the sale of mortgage loans, title insurance
revenue, and other. There was a $2.8 million increase in fees earned from these
sources during the first six months of 2003 when compared to the same period in
2002. Significant individual account changes during this period include a
$614,000 increase from the sale of title insurance and related services, a $1.1
million increase in gains on the sale of mortgage loans, a $385,000 increase in
NSF and overdraft fees, and a $513,000 increase in sold mortgage servicing
income. Of the $614,000 in title insurance revenue, $497,000 is a result of IBT
Title and Insurance purchase of Benchmark Title of Greenville on July 1, 2002.
The Corporation has established a policy that all 15 and 30 year amortized fixed
rate mortgage loans will be sold. The calculation of gains on the sale of
mortgages exclude at least 25 basis points allocated to the value of servicing
rights on these loans. Included in other operating income is a $1.5 million gain
from the sale of $140.1 million in mortgages during the first six months of 2003
versus a $420,000 gain on the sale of $55.4 million in mortgages for the same
period in 2002.
NONINTEREST EXPENSES
Noninterest expenses increased $2.7 million or 29.0% during the first six months
of 2003 when compared to 2002. The largest component of noninterest expense is
salaries and employee benefits, which increased $1.35 million or 25.6%. In
addition to increases resulting from additional staffing and normal merit and
promotional salary adjustments, the Corporation incurred $208,000 of salary and
benefit expense as a result of its acquisition of Benchmark Title and a 30%
increase in medical and pension expense costs.
Occupancy and furniture and equipment expenses increased $107,000 or 6.1% in
2003. The majority of this increase is related to equipment and building
depreciation, service contracts, and property tax expense. Other expenses
increased by $1.2 million or 54.7%. Of this amount, $1.0 million is related to
an accrual for a charitable donation to Isabella Bank and Trust's Community
Foundation.
QUARTER ENDED JUNE 30, 2003 AND 2002
RESULTS OF OPERATIONS
Net income equaled $1.96 million for the second quarter in 2003 versus $1.75
million in 2002. Return on average assets equaled 1.19% for the second quarter
of 2003 versus 1.13% for the same period in 2002. Return on average equity
equaled 11.98% for the second quarter in 2003, versus 12.08% for the second
quarter in 2002.
15
SUMMARY OF SELECTED FINANCIAL DATA
- ----------------------------------
(Dollars in thousands except per share data)
Three Months Ended
June 30
------------------------------
2003 2002
------------------------------
INCOME STATEMENT DATA
Net interest income $5,881 $5,583
Provision for loan losses 333 162
Net income 1,956 1,749
PER SHARE DATA
Net income per common share $ 0.45 $ 0.41
Cash dividend per common share 0.11 .10
RATIOS
Average primary capital to average assets 10.75% 10.20%
Net income to average assets 1.19 1.13
Net income to average equity 11.98 12.08
NET INTEREST INCOME
When comparing the second quarter of 2003 to 2002, net FTE interest income
increased $331,000. An increase of 6.0% in interest earning assets provided
$404,000 of FTE interest income. The asset growth was funded primarily by a 5.2%
increase in interest bearing liabilities, resulting in $145,000 of increased
interest expense. Overall, increased volume resulted in $259,000 of additional
FTE interest income. During the second quarter of 2003, the average FTE interest
rate earned on assets decreased by 0.58% and the average rate paid on deposits
decreased by 0.62%. The changes in interest rates earned and paid resulted in a
$72,000 increase in FTE interest income. The Corporation's FTE net interest
yield as a percentage of average earning assets decreased 0.01% to 4.12% in the
second quarter of 2003. The primary factor for the decrease was a substantial
shift of earning assets from loans to taxable investment securities. As a
percentage of average assets, loans to total earning assets declined from 68.8%
in the second quarter of 2002 to 65.6% in 2003 with approximately a similar
increase in lower yielding taxable investments.
PROVISION FOR LOAN LOSSES
The amount provided for loan losses in the second quarter of 2003 was $333,000
versus $162,000 in 2002. During the second quarter of 2003 the Corporation had
net charge-offs of $158,000 versus $117,000 during the same period of 2002. The
allowance for loan losses as a percent of loans was 1.51% as of June 30, 2003, a
0.08% increase since June 30, 2002.
NONINTEREST INCOME
Noninterest income earned in the second quarter of 2003, when compared to the
same period in 2002, increased $1.40 million or 89.1%. The most significant
changes were a $347,000 increase from the sale of title insurance and related
services, a $657,000 increase in gains on the sale of mortgage loans, an $85,000
increase in mortgage servicing income, and a $196,000 increase in overdraft
fees.
16
TABLE 4
IBT BANCORP, INC.
AVERAGE BALANCES; INTEREST RATE AND NET INTEREST INCOME
- -------------------------------------------------------
(Dollars in Thousands)
The following schedules present the daily average amount outstanding for
each major category 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. Federal
Reserve and Federal Home Loan Bank restricted stock is included in other
investments.
Quarter Ended
June 30, 2003 June 30, 2002
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
INTEREST EARNING ASSETS
Loans $ 391,112 $ 7,361 7.53% $ 386,763 $ 7,708 7.97%
Taxable investment securities 128,505 1,139 3.55 100,127 1,125 4.49
Nontaxable investment securities 48,360 792 6.55 45,373 668 5.89
Federal funds sold 25,087 77 1.23 27,370 116 1.70
Other 2,852 9 1.26 2,748 43 6.26
--------- ------- ----- --------- --------- ----
TOTAL EARNING ASSETS 595,916 9,378 6.29 562,381 9,660 6.87
NONEARNING ASSETS
Allowance for loan losses (5,976) (5,647)
Cash and due from banks 27,009 22,326
Premises and equipment 15,422 14,716
Accrued income and other assets 24,951 23,976
--------- ---------
TOTAL ASSETS $ 657,322 $ 617,752
========= =========
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 110,300 283 1.03 $ 95,029 338 1.42
Savings deposits 141,983 369 1.04 138,447 587 1.70
Time deposits 252,295 2,381 3.77 249,050 2,786 4.47
Borrowed funds 16,257 204 5.02 12,494 139 4.45
--------- ------- ----- --------- --------- ----
TOTAL INTEREST BEARING LIABILITIES 520,835 3,237 2.49 $ 495,020 3,850 3.11
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS EQUITY
Demand deposits 60,023 56,915
Other 11,158 7,897
Shareholders' equity 65,306 57,920
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 657,322 $ 617,752
========= =========
------- ---------
NET INTEREST INCOME (FTE) $ 6,141 $ 5,810
======= =========
----- ----
NET YIELD ON INTEREST EARNING ASSETS (FTE) 4.12% 4.13%
===== ====
17
TABLE 5
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
- ---------------------------------
(Dollars in Thousands)
The following table sets forth the effect of volume and rate changes on interest
income and expense for the periods indicated. For the purpose of this table,
changes in interest due to volume and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's rate.
Rate Variance - change in the fully taxable equivalent (FTE) rate
multiplied by the prior year's volume.
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.
Quarter Ended June 30, 2003
Compared to
June 30, 2002
Increase (Decrease) Due to
---------------------------
Volume Rate Net
------ ---- ---
CHANGES IN INTEREST INCOME
Loans $ 86 $(433) $(347)
Taxable investment securities 280 (266) 14
Nontaxable investment securities 46 78 124
Federal funds sold (9) (30) (39)
Other 1 (35) (34)
----- ----- -----
Total changes in interest income 404 (686) (282)
Total changes in interest expense 145 (758) (613)
----- ----- -----
Net Change in Interest Margin (FTE) $ 259 $ 72 $ 331
===== ===== =====
18
NONINTEREST EXPENSES
Noninterest expenses increased $1.23 million or 26.5% during the second
quarter of 2003 when compared to 2002. Noninterest expense includes salary
and benefits, occupancy, and other operating expenses. The largest
component of noninterest expense is salaries and employee benefits, which
increased $749,000 or 28.6%. The increase is related to normal merit and
promotional salary increases, increases in medical and pension expenses,
and the addition of Benchmark Title in the third quarter of 2002.
Occupancy and furniture and equipment expenses increased $48,000 or 5.4%.
The majority of this increase is associated with increased building and
equipment depreciation. Other operating expenses increased $434,000 or
62.1%. The most significant changes include a $55,000 increase in title
insurance expense and a $340,000 increase in donation expense. For
additional information regarding the increased donation expense, please see
page 15 under the caption Noninterest Expense.
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
Since December 31, 2002, total assets increased $12.0 million to $664.7
million. As of June 30, 2003, total loans decreased $5.1 million, cash and
demand deposits due from bank increased $5.4 million, federal funds sold
decreased $21.2 million, and investment securities increased $32.4 million
when compared to December 31, 2002. Deposits during this period increased
$5.9 million, and shareholders' equity increased $4.3 million.
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, cash equivalents, and investment securities available
for sale.
As of June 30, 2003, cash and cash equivalents as a percentage of total
assets equaled 5.8%, versus 8.3% as of December 31, 2002. During the first
six months of 2003, $7.5 million in net cash was provided from operations
and $4.9 million was provided from financing activities. Investing
activities used $28.2 million. The accumulated effect of the Corporation's
operating, investing and financing activities was a $15.8 million decrease
in cash and cash equivalents during the first six months of 2003.
In addition to cash and cash equivalents, investment securities available
for sale are another source of liquidity. Securities available for sale
were $190.8 million as of June 30, 2003 and $157.9 million as of December
31, 2002. The Corporation's liquidity is considered adequate by management.
CAPITAL
The capital of the Corporation consists solely of common stock and retained
earnings, increased by accumulated other comprehensive income; and
increased approximately $4.3 million since December 31, 2002.
19
CAPITAL, CONTINUED
There are no significant capital regulatory constraints placed on the
Corporation's capital. The Federal Reserve Board's current recommended
minimum tier 1 and tier 2 average assets requirement is 6.0%. The
Corporation's tier 1 and tier 2 capital to assets, which consists of
shareholder's equity plus the allowance for loan losses less unamortized
acquisition intangibles, was 10.5% as of June 30, 2003.
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 bank 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 ratios as of June 30,
2003:
PERCENTAGE OF CAPITAL TO RISK ADJUSTED ASSETS
IBT Bancorp
Actual
Required 06/30/03
-------- --------
Equity Capital 4.00% 14.70%
Secondary Capital* 4.00 1.25
----- ------
Total Capital 8.00% 15.95%
===== ======
o IBT Bancorp's secondary capital consists solely of the allowance for loan
losses. The percentage for the secondary capital under the required
column is the maximum allowed from all sources.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET ARRANGEMENTS
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 totaled $55.0 million at June 30, 2003,
are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have variable
interest rates, fixed expiration dates, or other termination clauses and may
require the payment
20
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 June
30, 2003, the Corporation had a total of $613,000 in outstanding standby
letters of credit.
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.
The Corporation sponsors the IBT Foundation (the "Foundation"), which is a
nonprofit entity formed for the purpose of distributing charitable donations
to recipient organizations generally located in the communities serviced by
Isabella Bank and Trust. The Corporation periodically makes charitable
contributions in the form of cash transfers to the Foundation. The Foundation
is administered by members of the Corporation's Board of Directors. The assets
and transactions of the Foundation are not included in the consolidated
financial statements of IBT Bancorp, Inc. The assets of the Foundation as of
June 30, 2003 approximated $1.0 million.
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 statements 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.
ITEM 3 - 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, and holds no
21
trading account assets. 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 to 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. Interest rate risk is the fundamental method in which financial
institutions earn income and create shareholder value. Excessive exposure to
interest rate risk 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 interest rate risk. 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 rates, 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.
The second technique used in the management of interest rate risk is to
combine the projected cash flows and repricing characteristics generated by
the gap analysis and the interest rates associated with those cash flows and
projected 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.
The following table provides information about the Corporation's assets and
liabilities that are sensitive to changes in interest rates as of June 30,
2003. 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.
22
Quantitative Disclosures of Market Risk
June 30, 2003 Fair Value
-----------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 Thereafter Total 06/30/03
-----------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets --- --- --- --- --- --- $ 4,650 $ 4,650
Average interest rates 1.25% --- --- --- --- --- 1.25%
Fixed interest rate securities $ 25,647 $ 54,645 $ 35,438 $ 16,389 $ 10,718 $ 49,194 $ 192,031 $192,088
Average interest rates 3.75% 3.61% 2.95% 3.13% 3.52% 3.81% 3.51%
Fixed interest rate loans $ 90,415 $ 85,887 $ 62,757 $ 25,205 $ 30,166 $ 23,317 $ 317,747 $319,610
Average interest rates 6.99% 7.20% 6.77% 6.32% 6.50% 7.95% 6.97%
Variable interest rate loans $ 58,906 $ 7,077 $ 5,739 $ 3,363 $ 5,772 $ 824 $ 81,681 $ 81,681
Average interest rates 5.66% 5.62% 5.91% 5.67% 5.33% 12.08% 5.72%
Rate sensitive liabilities
Borrowed funds $ 733 $ 1,077 $ 5,081 $ 85 $ 89 $ 10,226 $ 17,291 $ 18,194
Average interest rates 1.13% 5.01% 5.07% 4.62% 4.65% 5.05% 4.88%
Savings and NOW accounts $ 151,634 $ 20,007 $ 16,276 $ 13,439 $ 12,461 $ 33,681 $ 247,498 $247,498
Average interest rates 1.07% 0.98% 1.36% 1.24% 0.81% 0.72% 1.03%
Fixed interest rate time deposits $ 126,141 $ 34,786 $ 39,339 $ 29,141 $ 18,021 $ 122 $ 247,550 $253,784
Average interest rates 2.61% 4.80% 5.11% 4.53% 4.32% 7.98% 3.67%
Variable interest rate time deposits $ 938 $ 527 --- $ 23 $ 544 --- $ 2,032 $ 2,032
Average interest rates 1.34% 1.34% --- 2.27% 2.27% --- 1.89%
Quantitative Disclosures of Market Risk
June 30, 2003 Fair Value
-----------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 Thereafter Total 06/30/03
-----------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets $ 13,900 --- --- --- --- --- $ 13,900 $ 13,900
Average interest rates 1.75% --- --- --- --- --- 1.75%
Fixed interest rate securities $ 19,188 $ 27,738 $ 41,582 $14,937 $ 6,961 $ 41,656 $ 152,062 $152,130
Average interest rates 4.40% 4.43% 4.07% 4.42% 4.52% 4.81% 4.32%
Fixed interest rate loans $ 100,614 $ 76,577 $ 97,687 $24,884 $ 26,798 $ 12,738 $ 339,298 $341,228
Average interest rates 8.08% 8.28% 8.02% 8.11% 8.01% 10.34% 8.19%
Variable interest rate loans $ 40,629 $ 6,412 $ 4,428 $ 2,462 $ 1,787 $ 579 $ 56,297 $ 56,297
Average interest rates 7.20% 7.22% 6.34% 6.17% 6.05% 6.65% 7.05%
Rate sensitive liabilities
Other borrowed funds $ 1,502 $ 1,000 --- --- $ 5,000 $ 5,381 $ 12,883 $ 13,082
Average interest rates 0.94% 5.05% --- --- 5.08% 5.72% 4.86%
Savings and NOW accounts $ 145,128 $ 18,820 $ 15,309 $12,590 $ 11,663 $ 30,939 $ 234,449 $234,449
Average interest rates 1.25% 1.81% 1.64% 2.53% 1.52% 1.19% 1.40%
Fixed interest rate time deposits $ 143,009 $ 34,755 $ 21,775 27,615 $ 19,398 $ 21 246,573 $248,858
Average interest rates 5.22% 5.81% 5.88% 5.78% 6.20% 5.83% 5.50%
Variable interest rate time deposits $ 1,044 $ 401 $ 9 --- $ 195 --- $ 1,649 $ 1,649
Average interest rates 3.52% 3.52% 3.52% --- 3.52% --- 3.52%
23
Item 4 -- Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures -- Dennis P.
Angner, the Corporate Principal Executive and Principal Financial
Officer, has reviewed and evaluated the effectiveness of the
Corporation's disclosure controls and procedures [as defined in Rules
240.13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(the "Exchange Act")] as of a date within ninety days before the filing
date of this quarterly report. Based on that evaluation he has concluded
that the Corporation's disclosure controls and procedures are effective,
providing him with material information relating to the Corporation as
required to be disclosed in the reports the Corporation files or submits
under the Exchange Act on a timely basis.
(b) Changes in Internal Controls -- There were no significant changes in
the Corporation's internal controls or in other factors that could
significantly affect the Corporation's disclosure controls and
procedures subsequent to the date of the evaluation, nor were there any
significant deficiencies or material weaknesses in the Corporation's
internal controls.
PART II - OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The registrant's annual meeting of shareholders was held on
April 29, 2003. At the meeting the shareholders voted upon the
following matters:
Election of Directors to terms ending 2006:
For Withheld
--- --------
Dennis Angner 3,050,323 1,927
Frederick Bradford 3,022,712 29,539
William Strickler 3,050,591 1,659
Dean Walldorff 3,049,983 2,268
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits
(b) Reports on Form 8-K
Current report on Form 8-K dated May 4, 2003, filed
with the SEC on May 6, 2003
24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IBT Bancorp, Inc.
-------------------
Date: August 8, 2003 /s/ Dennis P. Angner
------------------- --------------------------------------
Dennis P. Angner
President and CEO
(Principal Executive Financial Officer)
25
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
3.1 Amended Articles of Incorporation incorporated by
reference to Form 10-K, dated March 12, 1991.
3.2 Amendment to the Articles of Incorporation incorporated
by reference to Form 10-K, dated March 27, 1995.
3.3 Amendment to the Articles of Incorporation incorporated
by reference to Form 10-K, dated March 22, 2000.
3.4 Amendment to the Articles of Incorporation incorporated
by reference to Form 10-K, dated March 27, 2001.
3.5 Amended Bylaws incorporated by reference to Form 10-K,
dated March 13, 1990.
3.6 Amendment to the Bylaws incorporated by reference to
Form 10-K, dated March 26, 1994.
3.7 Amendment to the Bylaws incorporated by reference to
Form 10-K, dated March 27, 1995.
3.8 Amendment to the Bylaws incorporated by reference to
Form 10-K, dated March 27, 2001.
3.9 Amendment to the Bylaws incorporated by reference to
Form 10-K, dated March 25, 2002.
3.10 Amendment to the Bylaws incorporated by reference to
Form 10-K, dated March 24, 2003.
31* Section 302 -- Certification of CEO and CFO
32* Section 906 -- Certification
*Filed herein