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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 September 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
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IBT Bancorp, Inc.
- ------------------------------------------------------------------------------
(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 Mt. Pleasant, MI 48858
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(Address of principal executive offices) (Zip code)
(989) 772-9471
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(Registrant's telephone number, including area code)
N/A
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(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, 4,378,052 as of October 22, 2003
-----------------------------------------------------------
IBT BANCORP, INC.
Index to Form 10-Q
Part I Financial Information Page Numbers
Item 1 Financial Statements and Notes 3-9
Item 2 Management's Discussion and 9-21
Analysis of Financial Condition
and Results of Operations
Item 3 Quantitative and Qualitative 22-24
Disclosures About Market Risk
Item 4 Controls and Procedures 25
Signatures 25
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 26-31
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IBT BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands) September 30 December 31
2003 2002
---- ----
(Unaudited)
ASSETS
Cash and demand deposits due from banks $ 28,121 $ 28,587
Federal funds sold 1,350 25,850
-------- --------
CASH AND CASH EQUIVALENTS 29,471 54,437
Investment securities
Securities available for sale (amortized cost of
$179,551 in 2003 and $153,499 in 2002) 183,040 157,909
Securities held to maturity (fair value --
$1,392 in 2003 and $1,803 in 2002) 1,350 1,736
-------- --------
TOTAL INVESTMENT SECURITIES 184,390 159,645
Mortgage loans available for sale 3,707 13,392
Loans
Agricultural 55,234 53,223
Commercial 141,475 143,957
Residential real estate mortgage 165,225 139,386
Installment 52,432 54,522
-------- --------
TOTAL LOANS 414,366 391,088
Less allowance for loan losses 6,033 5,593
-------- --------
NET LOANS 408,333 385,495
Other assets 42,384 39,748
-------- --------
TOTAL ASSETS $668,285 $652,717
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 65,965 $ 63,106
NOW accounts 105,632 111,195
Certificates of deposit and other savings 316,162 316,845
Certificates of deposit over $100 66,774 70,310
-------- --------
TOTAL DEPOSITS 554,533 561,456
Other borrowed funds 35,791 17,793
Accrued interest and other liabilities 9,545 10,011
-------- --------
TOTAL LIABILITIES 599,869 589,260
Shareholders' Equity
Common stock -- no par value
10,000,000 shares authorized, issued, and
outstanding-- 4,378,055 in 2003
(4,336,283 in 2002) 46,629 45,610
Retained earnings 20,846 16,299
Accumulated other comprehensive income 941 1,548
-------- --------
TOTAL SHAREHOLDERS' EQUITY 68,416 63,457
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $668,285 $652,717
======== ========
See notes to consolidated financial statements.
3
IBT BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(dollars in thousands)
Nine Months Ended
September 30
---------------------------
2003 2002
---- ----
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
Balance at beginning of period 4,336,283 3,884,985
Stock dividend --- 388,756
Issuance of common stock 45,158 56,573
Stock repurchased (3,386) (18,726)
----------- -----------
BALANCE END OF PERIOD 4,378,055 4,311,588
=========== ===========
COMMON STOCK
Balance at beginning of period $ 45,610 $ 31,017
Stock dividend --- 12,829
Issuance of common stock 1,146 1,641
Stock repurchased (127) (617)
----------- -----------
BALANCE END OF PERIOD 46,629 44,870
RETAINED EARNINGS
Balance at beginning of period 16,299 24,788
Net income 5,983 5,426
Stock dividend --- (12,829)
Cash dividends ($0.30 per share
in 2003 and $0.30 in 2002) (1,436) (1,291)
----------- -----------
BALANCE END OF PERIOD 20,846 16,094
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance at beginning of period 1,548 1,023
Unrealized gains (LOSSES) on securities available for sale,
net of income taxes and reclassification adjustment (607) 2,092
----------- -----------
BALANCE END OF PERIOD 941 3,115
----------- -----------
TOTAL SHAREHOLDERS' EQUITY END OF PERIOD $ 68,416 $ 64,079
=========== ===========
See notes to consolidated financial statements.
4
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2003 2002 2003 2002
---------------- ---------------
INTEREST INCOME
Loans $ 7,321 $ 8,020 $22,198 $23,671
Investment securities
Taxable 1,194 1,136 3,542 3,248
Nontaxable 509 501 1,498 1,349
Federal funds sold and other 11 74 180 363
------- ------- ------- -------
TOTAL INTEREST INCOME 9,035 9,731 27,418 28,631
INTEREST EXPENSES
Deposits 2,846 3,626 9,016 11,193
Short term borrowings 224 128 615 482
------- ------- ------- -------
TOTAL INTEREST EXPENSE 3,070 3,754 9,631 11,675
------- ------- ------- -------
NET INTEREST INCOME 5,965 5,977 17,787 16,956
Provision for loan losses 222 188 767 538
------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
5,743 5,789 17,020 16,418
NONINTEREST INCOME
Trust fees 146 156 460 432
Service charges on deposit accounts 62 70 189 211
Other service charges and fees 1,113 537 3,147 1,572
Gain on sale of mortgage loans 481 467 1,964 887
Title insurance revenue 758 734 2,127 1,489
Net realized gain on securities available for sale 15 1 15 1
Other 316 248 916 761
------- ------- ------- -------
TOTAL NONINTEREST INCOME 2,891 2,213 8,818 5,353
NONINTEREST EXPENSES
Salaries, wages and employee benefits 3,528 2,840 9,888 8,124
Occupancy 398 361 1,132 1,022
Furniture and equipment 855 635 1,969 1,715
Amortization of acquisition intangibles and goodwill 23 23 70 70
Other 1,005 1,368 4,700 3,562
------- ------- ------- -------
TOTAL NONINTEREST EXPENSES 5,809 5,227 17,759 14,493
INCOME BEFORE FEDERAL INCOME TAXES 2,825 2,775 8,079 7,278
Federal income taxes and minority interest 740 712 2,096 1,852
------- ------- ------- -------
NET INCOME $ 2,085 $ 2,063 $ 5,983 $ 5,426
======= ======= ======= =======
Basic net income per share $ 0.47 $ 0.48 $ 1.37 $ 1.27
======= ======= ======= =======
Cash dividends per share $ 0.11 $ 0.10 $ 0.33 $ 0.30
======= ======= ======= =======
See notes to consolidated financial statements.
5
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2003 2002 2003 2002
-------------------- --------------------
NET INCOME $ 2,085 $ 2,063 $ 5,983 $ 5,426
Other comprehensive income before income taxes
Unrealized (losses) gains on securities available for sale:
Unrealized holding (losses) gains arising during period (2,143) 2,098 (906) 3,171
Reclassification adjustment for realized
gains included in net income (15) (1) (15) (1)
------- ------- ------- -------
Other comprehensive (loss) gain before income taxes (2,158) 2,097 (921) 3,170
Income tax benefit (expense) related to other
comprehensive income 734 (713) 314 (1,078)
------- ------- ------- -------
OTHER COMPREHENSIVE INCOME (1,424) 1,384 (607) 2,092
------- ------- ------- -------
COMPREHENSIVE INCOME $ 661 $ 3,447 $ 5,376 $ 7,518
======= ======= ======= =======
See notes to consolidated financial statements.
6
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands) Nine Months Ended
September 30
2003 2002
---- ----
OPERATING ACTIVITIES
Net income $ 5,983 $ 5,426
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 767 538
Provision for depreciation 1,441 1,120
Net amortization of securities 1,172 722
Increase in cash value of life insurance (350) (350)
Amortization of intangibles and goodwill 70 70
Amortization of mortgage servicing rights 462 185
Gain on sale of mortgage loans (1,964) (887)
Proceeds from sales of mortgage loans 191,999 107,710
Mortgage loans originated for sale (180,350) (114,334)
Increase in interest receivable (61) (293)
Increase in other assets (2,097) (436)
(Decrease) increase in accrued interest and other expenses (466) 1,332
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,606 803
INVESTING ACTIVITIES
Activity in available for sale securities
Maturities calls, and sales 31,242 30,214
Purchases (58,699) (76,904)
Activity in held to maturity securities
Maturities calls, and sales 620 1,386
Net increase in loans (23,605) (1,636)
Increase in cash value of life insurance 25 (300)
Acquisition of Title Office --- (25)
Purchases of equipment and premises (1,813) (1,855)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (52,230) (49,120)
FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 2,859 1,904
Net (decrease) increase in interest bearing deposits (9,782) 29,388
Net increase in borrowings 17,998 4,724
Cash dividends (1,436) (1,291)
Proceeds from issuance of common stock 1,146 841
Common stock repurchased (127) (617)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,658 34,949
DECREASE IN CASH AND CASH EQUIVALENTS (24,966) (13,368)
Cash and cash equivalents at beginning of period 54,437 55,462
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,471 $ 42,094
========= =========
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 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 accounting principles generally accepted in the United States of
America 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 three and
nine month periods ended September 30, 2003 are not necessarily indicative of
the results that may be expected for the year ending 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 4,360,900 and 4,285,644 for the nine month periods ending
September 30, 2003 and 2002, respectively.
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
applies to the first interim or annual reporting period beginning after December
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 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
8
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, results of operations or cash flows 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, results of operations or cash flows
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 consolidated financial statements and notes thereto, as set forth
on pages 3 through 9 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 determination of the allowance for loan losses and carrying values
of 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.
Mortgage servicing rights (MSR's) are assets which 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 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 evaluates servicing assets for impairment.
For purposes of measuring
9
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.
NINE MONTHS ENDING SEPTEMBER 30, 2003 AND 2002
RESULTS OF OPERATIONS
Net income equaled $5.98 million for the nine month period ended
September 30, 2003, compared to $5.43 million for the same period in 2002, a
10.3% increase. Return on average assets, which measures the ability of the
Corporation to profitably and efficiently employ its resources, equaled 1.21%
for the first nine months of 2003 and 1.17% in 2002. Return on average equity,
which indicates how effectively the Corporation is able to generate earnings on
shareholder invested capital, equaled 12.56% through September 30, 2003 versus
12.39% through September 30, 2002.
REVISED SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands except per share data) Year to Date
September 30
------------
2003 2002
---------------------------------
INCOME STATEMENT DATA
Net interest income $ 17,787 $ 16,956
Provision for loan losses 767 538
Net income 5,983 5,426
PER SHARE DATA
Net income per common share $ 1.37 $ 1.27
Cash dividends per common share 0.33 0.30
RATIOS
Average primary capital to average assets 10.47% 10.28%
Net income to average assets 1.21 1.17
Net income to average equity 12.56 12.39
10
IBT BANCORP, INC.
TABLE 1
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 equity holdings are included in other
investments.
Nine Months Ending
September 30, 2003 September 30, 2002
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
-------- ---------- ------- -------- ---------- -------
INTEREST EARNING ASSETS
Loans $398,641 $ 22,199 7.42% $392,606 $ 23,677 8.04%
Taxable investment securities 125,428 3,466 3.68 91,708 3,125 4.54
Nontaxable investment securities 48,965 2,407 6.55 44,487 2,183 6.54
Federal funds sold 20,243 180 1.19 29,075 364 1.67
Other investments 2,839 106 4.98 2,731 123 6.01
-------- -------- ---- -------- -------- ----
TOTAL EARNING ASSETS 596,116 28,358 6.34 560,607 29,472 7.01
NONEARNING ASSETS
Allowance for loan losses (5,931) (5,617)
Cash and due from banks 27,039 23,210
Premises and equipment 15,511 14,814
Accrued income and other assets 24,918 24,163
-------- --------
TOTAL ASSETS $657,653 $617,177
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $113,455 834 0.98 $ 97,339 1,091 1.49
Savings deposits 140,569 1,085 1.03 135,652 1,728 1.70
Time deposits 249,518 7,096 3.79 246,736 8,374 4.53
Borrowed funds 17,621 615 4.65 12,843 482 5.00
-------- -------- ---- -------- -------- ----
TOTAL INTEREST BEARING LIABILITIES 521,163 9,630 2.46 492,570 11,675 3.16
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 60,318 57,873
Other 12,652 8,356
Shareholders' equity 63,520 58,378
-------- --------
TOTAL LIABILITIES AND EQUITY $657,653 $617,177
======== ========
NET INTEREST INCOME (FTE) $ 18,728 $ 17,797
======== ========
NET YIELD ON INTEREST EARNING ASSETS (FTE) 4.19% 4.23%
==== ====
11
IBT BANCORP, INC.
TABLE 2
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.
Nine Month Period Ended September 30, 2003
Compared to
September 30, 2002
Increase (Decrease) Due to
------------------------------------------
Volume Rate Net
------ ------- -------
Changes in Interest Income
Loans $ 359 $(1,837) $(1,478)
Taxable investment securities 1,006 (665) 341
Nontaxable investment securities 220 4 224
Federal funds sold (94) (90) (184)
Other investments 5 (22) (17)
------ ------- -------
Total changes in interest income 1,496 (2,610) (1,114)
Total changes in interest expense 484 (2,529) (2,045)
------ ------- -------
NET CHANGE IN INTEREST MARGIN (FTE) $1,012 $ (81) $ 931
====== ======= =======
12
IBT BANCORP, INC.
TABLE 3
SUMMARY OF LOAN LOSS EXPERIENCE
- -----------------------------------------------------------
(Dollars in Thousands)
Year to Date
September 30
------------------------------
2003 2002
--------- ---------
Summary of changes in allowance:
Allowance for loan losses - January 1 $ 5,593 $ 5,471
Loans charged off (571) (522)
Recoveries of charged off loans 244 230
--------- ---------
Net loans charged off (327) (292)
Provision charged to operations 767 538
--------- ---------
Allowance for loan losses - September 30 $ 6,033 $ 5,717
========= =========
Allowance for loan losses as a % of loans 1.44% 1.41%
========= =========
NONPERFORMING LOANS
- -------------------------------
(Dollars in thousands)
September 30
2003 2002
--------- ---------
Total amount of loans outstanding at the
end of period $ 418,073 $ 406,719
========= =========
Nonaccrual loans $ 1,260 $ 3,180
Accruing loans past due 90 days or more 2,163 2,078
Restructured loans 135 739
--------- ---------
Total $ 3,558 $ 5,997
========= =========
Loans classified as nonperforming as
a % of outstanding loans 0.85% 1.47%
========= =========
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.
13
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
$1.65 million in the first nine months of 2003 versus $1.18 million for the same
period 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.
As shown in Tables number 1 and 2, when comparing the nine month period ending
September 30, 2003 to the same period in 2002, fully taxable equivalent (FTE)
net interest income increased $931,000 or 5.2%. An increase of 6.3% in average
interest earning assets provided $1.5 million of FTE interest income. The
majority of this increase was funded by a 5.8% increase in interest bearing
deposits and borrowed funds, resulting in $484,000 of additional interest
expense. Overall, changes in volume resulted in $1.0 million of additional FTE
interest income. The average FTE interest rate earned on assets decreased by
0.67%, decreasing FTE interest income by $2.6 million and the average rate paid
on deposits and other borrowings decreased by .70%, decreasing interest expense
by $2.5 million. The change in interest rates earned and paid decreased FTE net
interest income by $81,000.
The Corporation's FTE net interest yield as a percentage of average earning
assets equaled 4.19% during 2003 versus 4.23% in 2002. The .04% decrease in the
FTE net interest margin was primarily a result of a change in the mix of assets
and funding sources. Average loans outstanding declined from 70% of average
earning assets in the first nine months of 2002 to 66.9% in 2003. The change in
asset mix from higher yielding loans to other investments resulted in the loss
of approximately $450,000 in FTE interest income.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Net loans outstanding represent 62% 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 loans, overall economic conditions, and other factors.
Comparing the year to date period of September 30, 2003 to September 30, 2002,
the provision for loan losses was increased by $229,000 to $767,000. Year to
date, the Corporation had net charge-offs of loans of $327,000 compared to
$292,000 in 2002. Loans classified as nonperforming were 0.85% of loans as of
September 30, 2003 versus 1.47% for September 30, 2002. The Corporation's peer
group, which includes 255 holding companies with assets between $500 million and
$1.0 billion, had on average a nonperforming loans to total loans ratio of 1.23%
as of June 30, 2003. As of September 30, 2003 the allowance for loan losses was
$6.0 million or 1.44% of total loans. Based on management's internal analysis,
the allowance for loan losses is believed to be adequate as of September 30,
2003.
14
NONINTEREST INCOME
Noninterest income consists of trust fees, deposit service charges, fees for
other financial services, gains on sale of mortgage loans sold, title insurance
revenue, and gains and losses on investment securities available for sale. There
was a $3.5 million increase in fees earned from these sources during the nine
months of 2003 when compared to the same period in 2002. Significant individual
account changes during this period include a $1.1 million increase in title
insurance revenue and related services, $615,000 in NSF and overdraft fees, a
$1.1 million increase in gains on the sale of mortgage loans, and a $996,000
increase in mortgage servicing income. Of the $1.1 million in title insurance
revenue, $443,000 is a result of the IBT Title and Insurance, Inc. purchase of
Benchmark Title of Greenville on July 1, 2002.
The Corporation has established a policy that all 30 year amortized fixed rate
mortgage loans will be sold. The calculation of gains on the sale of mortgages
excludes at least 25 basis points allocated to the value of servicing rights on
these loans. Included in other operating income is a $2.0 million gain from the
sale of $192 million in mortgages during the first nine months of 2003 versus a
$887,000 gain on the sale of $107.7 million in mortgages for the same period in
2002.
NONINTEREST EXPENSE
Noninterest expense increased $3.3 million or 23% during the first nine months
of 2003 when compared to 2002. The largest component of noninterest expense is
salaries and employee benefits, which increased $1.8 million or 22%. Normal
merit and promotional salary adjustments account for half of the increase with
the remainder of the increase resulting from increased staffing due to the
purchase of Benchmark Title in Greenville, Michigan by IBT Title, an increase in
support staff to handle the increase in mortgage volume, and a 30% increase in
healthcare benefits and pension expenses.
Occupancy and furniture and equipment expenses increased $364,000 or 13% in
2003. The majority of this increase is related to depreciation due to the
write-off of disposed and/or obsolete assets. Other expenses increased by $1.1
million or 32%. Of this amount, $1.0 million is related to a charitable donation
to Isabella Bank and Trust's Community Foundation.
15
QUARTER ENDED SEPTEMBER 30, 2003 AND 2002
RESULTS OF OPERATIONS
Net income equaled $2.09 million for the third quarter in 2003 compared to $2.06
million for the same period in 2002, a 1.10% increase. Return on average assets
equaled 1.26% for the third quarter in 2003 compared to 1.31% for the same
period in 2002. Return on average equity equaled 13.30% for the third quarter in
2003 versus 13.73% for the third quarter in 2002.
REVISED SUMMARY OF SELECTED FINANCIAL DATA
- --------------------------------------------
(Dollars in thousands except per share data)
Quarter Ended
September 30
--------------
2003 2002
--------- ---------
INCOME STATEMENT DATA
Net interest income $ 5,965 $ 5,977
Provision for loan losses 222 188
Net income 2,085 2,063
PER SHARE DATA
Net income per common share $ 0.47 $ 0.48
Cash dividends per common share 0.11 0.10
RATIOS
Average primary capital to average assets 10.28% 10.32%
Net income to average assets 1.26 1.31
Net income to average equity 13.30 13.73
Net Interest Income
NET INTEREST INCOME
When comparing net interest income for the third quarter of 2003 to the same
period in 2002, a 4.9% increase in average interest-earning assets provided
$446,000 of additional FTE interest income. The average rate of interest-earning
assets decreased 0.77%, resulting in a $1.1 million decrease in FTE interest
income. The changes in average balances and the rates earned resulted in a
decrease of $666,000 of FTE interest income. The growth of earning assets was
funded primarily by growth in interest bearing liabilities, which increased by
4.1% in 2003. The average cost of these funds decreased by 0.64%. The changes in
the average balances and rate paid on interest-bearing deposits resulted in a
decline of $684,000 of interest expense. Overall, the changes in interest rates
earned and paid and the change in average balances resulted in additional net
interest income of $18,000 in the third quarter of 2003 when compared to the
same period in 2002. The Corporation's FTE net interest yield decreased by 0.19%
to 4.2% in the third quarter of 2003. The decrease was a result of a larger
decrease in rates earned on earning assets than the decline in rates paid on
deposits, and also from the change in asset mix from higher yielding loans to
other investments.
16
PROVISION FOR LOAN LOSSES
The amount provided for loan losses in the third quarter of 2003 was $222,000
versus $188,000 in 2002. During the third quarter of 2003, the Corporation had
net charge-offs of $233,000 versus $111,000 during the same period of 2002. The
allowance for loan losses as a percentage of total outstanding loans was 1.44%
as of September 30, 2003 and 1.41% in 2002.
IBT BANCORP, INC.
TABLE 4
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.
Quarter Ended
September 30, 2003 September 30, 2002
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
-------- ---------- ------- -------- ---------- -------
INTEREST EARNING ASSETS
Loans $ 410,183 $ 7,320 7.14% $ 403,258 $ 8,021 7.96%
Taxable investment securities 132,634 1,170 3.53 99,719 1,093 4.38
Nontaxable investment securities 50,573 817 6.46 48,244 806 6.68
Federal funds sold 3,699 11 1.19 17,967 76 1.69
Other investments 2,883 54 7.49 2,748 42 6.11
-------- --------- ------ --------- --------- -------
TOTAL EARNING ASSETS 599,972 9,372 6.25 571,936 10,038 7.02
NONEARNING ASSETS
Allowance for loan losses (6,083) (5,676)
Cash and due from banks 28,319 25,095
Premises and equipment 15,645 14,738
Accrued income and other assets 25,274 25,974
--------- ---------
TOTAL ASSETS $ 663,127 $ 632,067
========= =========
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 113,229 244 0.86 $ 105,501 374 1.42
Savings deposits 141,543 333 0.94 133,407 519 1.56
Time deposits 245,538 2,269 3.70 247,934 2,693 4.34
Borrowed funds 20,805 224 4.31 13,789 168 4.87
-------- --------- ------ --------- --------- -------
TOTAL INTEREST BEARING LIABILITIES 521,115 3,070 2.36 500,631 3,754 3.00
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY
Demand deposits 62,502 61,144
Other 16,810 10,169
Shareholders' equity 62,700 60,123
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 663,127 $ 632,067
========= =========
NET INTEREST INCOME (FTE) $ 6,302 $ 6,284
========= =========
NET YIELD ON INTEREST EARNING ASSETS (FTE) 4.20% 4.39%
==== ====
17
IBT BANCORP, INC.
TABLE 5
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 September 30, 2003
Compared to
September 30, 2002
Increase (Decrease) Due to
---------------------------------
Volume Rate Net
------ ------- -------
CHANGES IN INTEREST INCOME
Loans $ 136 $(837) $(701)
Taxable investment securities 317 (240) 77
Nontaxable investment securities 38 (27) 11
Federal funds sold (47) (18) (65)
Other Investments 2 10 12
----- ----- -----
Total changes in interest income 446 (1112) (666)
Total changes in interest expense (108) (792) (684)
----- ----- -----
Net Change in Interest Margin (FTE) $ 338 $(320) $ 18
===== ===== =====
NONINTEREST INCOME
Noninterest income earned in the third quarter of 2003 compared to the same
period in 2002, increased $678,000 or 30.6%. The most significant changes were a
$383,000 increase in mortgage servicing income, an increase of $24,000 in title
and abstract revenue, and an increase of $211,000 in NSF and overdraft fees.
18
NONINTEREST EXPENSE
Noninterest expense increased $582,000 or 11.1% during the third quarter of 2003
when compared to 2002. Noninterest expense includes salary and benefits,
occupancy, and other operating expenses. Comparing 2003 to 2002, salaries and
employee benefits increased $688,000, occupancy expense and furniture and
equipment expense increased $257,000, and other operating expenses decreased
$363,000. The primary reason for the decrease in other operating expenses is the
change in accrual to Isabella Bank & Trust's Community Foundation.
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
Since December 31, 2002, total assets increased $15.6 million to $668 million.
During this period the loan portfolio increased $13.6 million, fed funds sold
decreased $24.5 million, investment securities increased $24.7 million, and
other assets increased $2.6 million. Changes in funding sources include a $2.9
million increase in noninterest bearing deposits, a decrease in interest bearing
deposits of $9.8 million, an increase in borrowings of $18 million, and a $5.0
million increase in shareholders' equity.
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 the payment
of cash dividends. The primary sources of the Corporation's liquidity are cash,
cash equivalents, and investment securities available for sale.
As of September 30, 2003, cash and cash equivalents as a percentage of total
assets equaled 4.4%, versus 8.3% as of December 31, 2002. During the first nine
months of 2003, $16.6 million in net cash was provided from operations, and
$10.7 million was provided by financing activities. Investing activities used
$52.2 million. The accumulated effect of the Corporation's operating, investing,
and financing activities was a $25.0 million decrease in cash and cash
equivalents during the first nine months of 2003.
In addition to cash and cash equivalents, investment securities available for
sale are another source of liquidity. Securities available for sale equaled $183
million as of September 30, 2003 and $157.9 million as of December 31, 2002. The
Corporation's liquidity is considered adequate by the management of the
Corporation.
CAPITAL
The capital of the Corporation consists solely of common stock, surplus,
retained earnings, and accumulated other comprehensive income; and increased
approximately $5.0 million since December 31, 2002.
There are significant capital regulatory constraints placed on the Corporation's
capital. The Federal Reserve Board's current recommended minimum tier 1 and tier
2 capital to average assets requirement is 6.0%. The Corporation's tier 1 and
tier 2 capital to average assets, which consists
19
of shareholders' equity plus the allowance for loan losses, less unamortized
acquisition intangible, was 10.2% at September 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 September 30, 2003:
PERCENTAGE OF CAPITAL TO RISK ADJUSTED ASSETS
IBT Bancorp
Actual
Required 09/30/03
-------- ----------
Equity Capital 4.00% 14.69%
Secondary Capital* 4.00 1.25
------ --------
Total Capital 8.00% 15.94%
* 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 $56.0 million at September 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 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.
20
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 September 30,
2003, the Corporation had a total of $580,000 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 September 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.
21
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 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 is 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.
22
The following table provides information about the Corporation's assets and
liabilities that are sensitive to changes in interest rates as of September 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.
23
Quantitative Disclosures of Market Risk
September 30 Fair Value
---------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 Thereafter Total 09/30/03
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets $ 1,450 $ 99 -- -- -- -- $ 1,549 $ 1,549
Average interest rates 1.26% 2.67% -- -- -- -- 1.26%
Fixed interest rate securities $ 65,459 $ 34,077 $ 21,948 $ 13,648 $ 6,017 $ 43,241 $ 184,390 $184,432
Average interest rates 4.00% 3.77% 3.32% 4.06% 4.17% 4.76% 4.01%
Fixed interest rate loans $ 97,017 $ 76,034 $ 66,618 $ 24,177 $ 38,806 $ 27,972 $ 330,624 $329,445
Average interest rates 6.83% 7.06% 6.47% 6.77% 6.27% 5.11% 6.60%
Variable interest rate loans $ 60,061 $ 7,481 $ 6,388 $ 4,052 $ 7,548 $ 1,919 $ 87,449 $ 87,449
Average interest rates 5.60% 5.57% 5.50% 5.58% 5.23% 4.85% 5.54%
Rate sensitive liabilities
Borrowed funds $ 19,313 $ 1,080 $ 5,084 $ 90 $ 33 $ 10,191 $ 35,791 $ 35,445
Average interest rates 1.24% 5.05% 5.08% 5.08% 6.62% 5.02% 2.99%
Savings and NOW accounts $148,441 $ 21,010 $ 17,090 $ 14,052 $ 13,018 $ 34,563 $ 248,173 $248,173
Average interest rates 0.90% 1.10% 1.25% 1.13% 0.82% 0.72% 0.92%
Fixed interest rate time deposits $116,200 $ 46,090 $ 30,672 $ 30,656 $ 14,498 $ 129 $ 238,245 $236,861
Average interest rates 2.66% 4.86% 4.77% 4.53% 4.02% 7.90% 3.68%
Variable interest rate time deposits $ 958 $ 545 -- $ 128 $ 519 -- $ 2,150 $ 2,150
Average interest rates 1.24% 1.24% -- -- 3.57% -- 1.73%
Quantitative Disclosures of Market Risk
September 30 Fair Value
---------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 Thereafter Total 09/30/02
- ------------------------------------------------------------------------------------------------------------------------------------
Rate sensitive assets
Other interest bearing assets $ 6,700 -- -- -- -- -- $ 6,700 $ 6,700
Average interest rates 1.75% -- -- -- -- -- 1.75%
Fixed interest rate securities $ 11,287 $ 28,695 $ 45,407 $ 18,383 $ 7,615 $ 42,337 $153,724 $153,800
Average interest rates 4.15% 4.33% 3.97% 4.05% 4.40% 4.69% 4.28%
Fixed interest rate loans $ 95,992 $ 77,595 $ 92,605 $ 26,674 $ 25,277 $ 22,030 $340,173 $345,915
Average interest rates 8.19% 8.24% 8.01% 8.03% 7.94% 7.55% 8.08%
Variable interest rate loans $ 43,277 $ 12,836 $ 4,472 $ 3,032 $ 2,022 $ 907 $ 66,546 $ 66,546
Average interest rates 7.24% 3.36% 6.25% 6.21% 4.85% 4.07% 6.26%
Rate sensitive liabilities
Borrowed funds $ 3,027 $1,053 $ 53 $ 53 $ 5,053 $ 7,381 $ 16,620 $17,381
Average interest rates 1.11% 5.01% 4.16% 4.16% 5.08% 5.50% 4.53%
Savings and NOW accounts $143,310 $ 19,340 $ 15,733 $ 12,937 $ 11,987 $ 31,816 $235,123 $235,123
Average interest rates 1.71% 1.69% 1.79% 2.32% 1.46% 1.12% 1.65%
Fixed interest rate time deposits $133,797 $ 35,054 $ 31,766 $ 23,365 $226,632 $ 228 $246,843 $253,631
Average interest rates 5.03% 5.82% 5.74% 5.61% 6.25% 3.77% 5.40%
Variable interest rate time deposits $ 902 $484 $ 9 -- $ 248 -- $ 1,643 $ 1,643
Average interest rates 3.38% 4.09% -- -- -- -- 3.06%
24
ITEM 4 -- CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures -- Dennis P. Angner, the
Corporation's Principal Executive Officer and Peggy L. Wheeler, the
Corporation's Principal Financial Officer, have 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 their evaluation they have concluded
that the Corporation's disclosure controls and procedures are effective,
providing them 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 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits
(b) Current Report on Form 8-K dated July 24, 2003, filed
with the SEC on July 25, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IBT Bancorp, Inc.
Date: November 7, 2003 /s/ Dennis P. Angner
---------------------- -------------------------------------
Dennis P. Angner
President and CEO
/s/ Peggy L. Wheeler
-------------------------------------
Peggy L. Wheeler
Principal Financial Officer
25
INDEX TO EXHIBITS
FOR FORM 10-Q
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.
31.1* Section 302 -- Certification of CEO
31.2* Section 302 -- Certification of CFO
32* Section 906 -- Certification Pursuant to 18 U.S.C. Section 1350
*Filed herein
26