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.