IBT BANCORP, INC. - ---------------------------------------------------------------------- [LOGO] BY FACSIMILE AND EDGAR - ---------------------- July 15, 2005 Mr. Don Walker Senior Assistant Chief Accountant Securities and Exchange Commission 100 F Street, N.E. Mail Stop 4561 Washington D.C. 20549 Dear Mr. Walker, I am writing on behalf of IBT Bancorp, Inc. (the "Registrant") in response to the staff's letter of comment dated July 1, 2005. Our responses are numbered so as to correspond with the numbering in the comment letter. Form 10-K - --------- Our methodology for calculating our reserve for loan losses is as follows: o Our portfolio is segmented according to collateral. o Loans are classified as acceptable, watch, substandard, doubtful, loss or special review. o Homogeneous groups of loans classified as acceptable or watch are provided reserves according to a five year rolling average of net charge offs, adjusted for nonqualitative factors. o Homogeneous groups of loans classified as substandard or doubtful are provided reserves according to percentages required by the FDIC. o Loans classified as loss are written off. o Impaired loans (all of which are collateral dependent) are provided reserves equal to the difference between the loan balance and the value of the collateral (fair value less estimated selling costs), except non-accrual loans which are provided reserves at 50% of the loan balance. As loans change in classification the portion of the loans loss reserve assigned to those classified loans changes. A summary of our work papers for the calculation of the adequacy of the reserves for December 31, 2004 and 2003 is attached. - -------------------------------------------------------------------------------- 309 Main Street - Irwin, PA 15642 o (724) 863-3100 Mr. Don WQalker July 15, 2005 Page 2. Note 3-2004 Financial Statements - -------------------------------- Total recorded for impaired loans: 2003-Non accrual loans $567,564, specific reserves $283,781 (see w/p's attached) 2004-Borrower A $903,530, specific reserves $204,430 (see w/p's attached) Borrower B 511,775, specific reserves $147,775 (see w/p's attached) Non accrual loans 120,529, specific reserves $ 60,265 (see w/p's attached) ---------- -------- Totals 2004 $1,535,834 $417,470 ========== ======== The loans that were charged off in 2004 were not included in the above calculations. We are pleased to be able to provide the information you requested. If you require anything further regarding this matter, please do not hesitate to call. Sincerely, /s/ Charles G. Urtin Charles G. Urtin President and CEO cc: James C. Stewart, Malizia Spidi & Fisch (Fax) David Cabala, Federal Reserve Bank of Cleveland Page 2 Loan Loss Reserve Analysis Summary of determination of Adequacy LOAN TYPE: Loan Loan Loan Balance Loss Loss 12/31/2004 Percentage Reserve ------------- ---------- ------- COMMERCIAL: Classified as Acceptable Commercial real estate $ 178,817,877 0.17194% (1) $ 307,459 Multifamily real estate 5,544,372 0.14788% 8,199 Secured by assets other than real estate 21,614,411 0.90013% 194,558 Unsecured commercial loans - Business Manager 1,578,007 7.15994% 112,984 ------------- ---------- 207,554,667 $ 623,201 Classified as Watch: Commercial real estate 18,675,663 1.17194% (2) 218,868 Multifamily real estate 3,323,162 1.14788% 38,146 Secured by assets other than real estate 1,810,399 1.90013% 34,400 Unsecured commercial loans - - Business Manager 14,445 8.15994% 1,179 ------------- ---------- 23,823,669 292,592 Classified as Substandard Commercial real estate 865,374 15% (3) 129,806 Multifamily real estate 540,461 15% 81,069 Secured by assets other than real estate 2,324,744 15% 348,712 Unsecured commercial loans - 15% - Business Manager - 15% - ------------- ---------- 3,730,579 559,587 Classified as Doubtful Commercial real estate - 50% (3) - Multifamily real estate - 50% - Secured by assets other than real estate - 50% - Unsecured commercial loans - 50% - Business Manager - 50% - - - ------------- ---------- Commercial loans selected for further review 6,753,642 0.00000% - Commercial loans selected for review for which an impairment has been determined 511,775 See W/P's 147,775 ------------- ---------- TOTAL COMMERCIAL LOANS $ 242,374,332 $1,623,155 ============= ========== 1 to 4 FAMILY MORTGAGE LOANS: Classified as Acceptable $ 68,562,887 0.14788% (1) 101,391 Classifed as Watch 631,261 1.14788% (2) 7,246 Classified as Substandard - 15% - Classified as Doubtful 71,293 50% 35,647 1 to 4 family mortgage loans selected for review for which an impairment has been determined (detailed list attached) - n/a - ------------- ---------- TOTAL SINGLE FAMILY MORTGAGE LOANS $ 69,265,441 $ 144,284 ============= ========== MUNICIPAL LOANS: Classified as Acceptable $ 10,050,266 0% - Classified as Watch - - Classified as Substandard - - Classified as Doubtful - - Municipal loans selected for review for which an impairment has been determined (detailed list attached) 903,530 see w/p's 204,430 ------------- ---------- TOTAL MUNICIPAL LOANS $ 10,953,796 $ 204,430 ============= ========== CONSUMER LOANS: Classified as Acceptable: Secured by real estate $ 102,291,398 0.13142% (1) 134,428 Secured by other than real estate 5,356,348 1.03149% (1) 55,250 Unsecured - - ------------- ---------- 107,647,746 189,678 Classified as Watch: Secured by real estate - 1.13142% (2) - Secured by other than real estate 314,845 2.03149% 6,396 Unsecured - - ------------- ---------- 314,845 6,396 Classified as Substandard: Secured by real estate 193,175 15% 28,976 Secured by other than real estate 16,254 15% 2,438 Unsecured - 15% - ------------- ---------- 209,429 31,414 Classified as Doubtful: Secured by real estate - 50% - Secured by other than real estate 188,494 50% 94,247 Unsecured - 50% - ------------- ---------- 188,494 94,247 PHEAA Loans: 7,354,534 - Consumer loans selected for review for which an impairment has been determined (detailed list attached) - n/a - ------------- ---------- TOTAL CONSUMER LOANS $ 115,715,048 $ 321,735 ============= ========== NON ACCRUAL LOANS (Classified as doubtful) $ 120,529 50% 60,265 ============= TOTAL PORTFOLIO $ 438,429,146 $2,353,868 ============= ========== REQUIRED RESERVE Required reserve at 12/31/04 $ 2,353,868 ============= G/L Balance at 12/31/04 $ 2,593,642 ============= Overage $ 239,774 ============= Max overage per policy $ 235,387 ============= Loss Reserve to total loans 0.59% LOAN TYPE: Loan Loan Loan Balance Loss Loss 12/31/2003 Percentage Reserve ------------ ---------- ------- COMMERCIAL: Classified as Acceptable Commercial real estate $ 169,022,110 0.17194% $ 290,616 Multifamily real estate 15,337,259 0.14788% 22,681 Secured by assets other than real estate 22,968,902 0.90013% 206,750 Unsecured commercial loans Business Manager 1,325,693 7.15994% 94,919 ------------- ---------- 208,653,964 $ 614,966 Classified as Watch: Commercial real estate 13,182,200 1.17194% 154,487 Multifamily real estate 986,400 1.14788% 11,323 Secured by assets other than real estate 4,406,198 1.90013% 83,724 Unsecured commercial loans - - Business Manager 15,791 8.15994% 1,289 ------------- ---------- 18,590,589 250,822 Classified as Substandard Commercial real estate 7,132,700 15% 1,069,905 Multifamily real estate 645,000 15% 96,750 Secured by assets other than real estate 931,482 15% 139,722 Unsecured commercial loans - 15% - Business Manager - 15% - ------------- ---------- 8,709,182 1,306,377 Classified as Doubtful Commercial real estate - 50% Multifamily real estate - 50% - Secured by assets other than real estate - 50% - Unsecured commercial loans - 50% - Business Manager - 50% - - - ------------- ---------- Commercial loans selected for further review Commercial loans selected for review for which an impairment has been determined n/a ------------- ---------- TOTAL COMMERCIAL LOANS $ 235,953,735 $2,172,166 ============= ========== 1 to 4 FAMILY MORTGAGE LOANS: Classified as Acceptable $ 67,079,643 0.14788% $ 99,198 Classifed as Watch 136,269 1.14788% 1,564 Classified as Substandard - 15% - Classified as Doubtful 518,147 50% 259,074 1 to 4 family mortgage loans selected for review for which an impairment has been determined (detailed list attached) - n/a ------------- ---------- TOTAL SINGLE FAMILY MORTGAGE LOANS $ 67,734,059 $ 359,835 ============= ========== MUNICIPAL LOANS: Classified as Acceptable $ 6,267,974 0% $ - Classified as Watch - Classified as Substandard - Classified as Doubtful - Municipal loans selected for review for which an impairment has been determined (detailed list attached) - - ------------- ---------- TOTAL MUNICIPAL LOANS $ 6,267,974 $ - ============= ========== CONSUMER LOANS: Classified as Acceptable: Secured by real estate $ 95,466,165 0.13142% 125,458 Secured by other than real estate 4,878,418 1.03149% 50,320 Unsecured - ------------- ---------- 100,344,583 175,779 Classified as Watch: Secured by real estate 15,114 1.13142% 171 Secured by other than real estate 280,244 2.03149% 5,693 Unsecured - ------------- ---------- 295,358 5,864 Classified as Substandard: Secured by real estate - 15% - Secured by other than real estate 47,215 15% 7,082 Unsecured - 15% - ------------- ---------- 47,215 7,082 Classified as Doubtful: Secured by real estate - 50% - Secured by other than real estate 114,613 50% 57,332 Unsecured - 50% - ------------- ---------- 114,613 57,332 PHEAA Loans: 7,833,861 - Consumer loans selected for review for which an impairment has been determined (detailed list attached) - n/a ------------- ---------- TOTAL CONSUMER LOANS $ 108,635,630 $ 246,057 ============= ========== NON ACCRUAL LOANS (Classified as doubtful) $ 567,613 50% 283,781 ============= TOTAL PORTFOLIO $ 419,159,011 $ 3,061,839 ============= ========== REQUIRED RESERVE Required reserve at 12/31/03 $ 3,061,839 =========== G/L Balance at 12/31/03 $ 3,284,830 =========== Overage $ 222,991 =========== Max overage per policy $ 306,184 =========== Loss Reserve to total loans 0.78% ____________ (1) Rolling 5 year average of net charge offs, plus 10 basis points. Calculated number in Jan '04 and used for '03 and '04 calculations. (2) Rolling 5 yr. average plus 1%. (3) Supplied by FDIC. Borrower G- transferred to OREO at 90% of appraised value at 12/31/04 Loans selected for review: Balance Collateral Reserve ------------ ---------- ------- Impaired Loans: Borrower A 0197430-9027 to 9030 $ 903,530 $ 699,100 $ 204,430 Municipal Loans =========== ========= Borrower B 6100357000 314,004 Real estate $299,000 15,004 Commercial loans Borrower B 46249500101 99,435 assets/vehicles $50,000 49,435 Commercial loans Borrower B 46249509002 98,336 Lic. Lisc./all assets $15,000 83,336 Commercial loans ----------- --------- Sub total commecial loans $ 511,775 $ 147,775 =========== ========= Borrower C 6100194800 354,378 Real estate $500,000 - Adequate collateral Borrower D 6100251600 2,661,054 Real estate $4,100,000 - Adequate collateral Borrower D 33600860301 837,250 Secured by above - Adequate collateral Borrower E 6100140500 1,791,779 Real estate $3,000,000 - Adequate collateral Borrower E 6100164000 69,953 Secured by above - Adequate collateral Borrower E 3594389-9001 9,843 Secured by above Adequate collateral Borrower F 6100325600 222,925 Real estate $1,500,000 - Adequate collateral Borrower F 6100334400 495,595 Secured by above - Adequate collateral Borrower F 64347519026 - CD $42,200 Adequate collateral Borrower F 0000005558 35,157 Vehicle $43,000 Adequate collateral Borrower F 6100325300 275,708 Various $415,500 - Adequate collateral ----------- ------------------- ----------- Sub total adequate collateral $ 6,753,642 =========== $ 8,168,947 $10,663,800 $ 352,205 =========== =========== ========= * Although there were years in which there were only recoveries which result in negative charge offs, no negative numbers are shown.