================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2005
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: 1-31655
-------
IBT BANCORP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1532164
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
309 Main Street, Irwin, Pennsylvania 15642
- -------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (724) 863-3100
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $1.25 par value American Stock Exchange
Stock Purchase Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] YES [X] NO
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ] YES [X] NO
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). [ ] YES [X] NO
Based on the closing sales price of $40.65 per share of the registrant's common
stock on June 30, 2005, as reported on the American Stock Exchange, the
aggregate market value of voting and non-voting common equity held by
non-affiliates of the registrant was approximately $108.6 million. Solely for
purposes of this calculation, directors and executive officers are deemed
affiliates.
As of March 1, 2006, there were 2,954,455 shares of the Registrant's common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of 2005 Annual Report to Stockholders (Parts II and IV)
2. Portions of Proxy Statement for the 2006 Annual Meeting of
Stockholders. (Part III)
================================================================================
IBT BANCORP, INC.
ANNUAL REPORT ON FORM 10-K
for the fiscal year ended December 31, 2005
INDEX
PART I
Page
----
Item 1. Business................................................................ 1
Item 1A. Risk Factors............................................................ 22
Item 1B. Unresolved Staff Comments............................................... 25
Item 2. Properties.............................................................. 25
Item 3. Legal Proceedings....................................................... 25
Item 4. Submission of Matters to a Vote of Security Holders..................... 25
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities............................ 26
Item 6. Selected Financial Data................................................. 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation............................................ 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.............. 26
Item 8. Financial Statements and Supplementary Data............................. 27
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................ 27
Item 9A. Controls and Procedures................................................. 27
Item 9B. Other Information....................................................... 27
PART III
Item 10. Directors and Executive Officers of the Registrant...................... 27
Item 11. Executive Compensation.................................................. 28
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters..................................... 28
Item 13. Certain Relationships and Related Transactions.......................... 28
Item 14. Principal Accounting Fees and Services.................................. 29
PART IV
Item 15. Exhibits, Financial Statement Schedules................................. 29
SIGNATURES ........................................................................ 31
PART I
Forward-Looking Statements
IBT Bancorp, Inc. (the "Company" or "Registrant") may from time to time
make written or oral "forward-looking statements," including statements
contained in the Company's filings with the Securities and Exchange Commission
(including this Annual Report on Form 10-K and the exhibits thereto), in its
reports to stockholders and in other communications by the Company, which are
made in good faith by the Company pursuant to the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control including those discussed under Item
1A. Risk Factors). The following factors, among others, could also cause the
Company's financial performance to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward-looking
statements: the strength of the United States economy in general and the
strength of the local economies in which the Company conducts operations; the
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rate, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the Company
and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute competitors' products and
services for the Company's products and services; the success of the Company in
gaining regulatory approval of its products and services, when required; the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological changes,
acquisitions; changes in consumer spending and saving habits; and the success of
the Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
Item 1. Business
- -----------------
General
IBT Bancorp, Inc. is a Pennsylvania corporation headquartered in Irwin,
Pennsylvania, which provides a full range of commercial and retail banking and
trust services through its wholly-owned banking subsidiary, Irwin Bank & Trust
Co. (collectively, the "Company").
Irwin Bank & Trust Co. (the "Bank") was incorporated in 1922 under the
laws of Pennsylvania as a commercial bank under the name "Irwin Savings and
Trust Company." The Bank engages in a full-service mortgage, commercial and
consumer banking business, as well as trust and a variety of deposit services
provided to its customers. At December 31, 2005, the Bank operated through its
main office, six branch offices, two loan centers, and a trust office as well as
through four supermarket branches under the name "Irwin Bank Extra." The Bank's
main office, full service branch offices, loan centers, trust office and
supermarket branches are located in the Pennsylvania counties of Westmoreland
and Allegheny. The Bank's web site is located at "www.myirwinbank.com."
-------------------
1
References to the Company or Registrant used throughout this document
generally refers to the consolidated entity which includes the main operating
company, the Bank, unless the context indicates otherwise.
Competition
The Registrant's primary market area consists of Westmoreland and
Allegheny counties, Pennsylvania, which are part of the Pittsburgh Metropolitan
Statistical Area ("Pittsburgh MSA") and it is one of many financial institutions
serving this market area. Based on data compiled by the FDIC as of June 30, 2005
(the latest date for which such data is available), the Bank was ranked sixth of
21 FDIC-insured institutions in Westmoreland County with a 6.74% deposit market
share and 19th out of 38 institutions in Allegheny County with a 0.36% deposit
market share. The Bank was ranked 13th out of 64 institutions serving the
Pittsburgh MSA with a 0.91% market share. Such data does not reflect deposits
held by credit unions with which the Bank also competes. The competition for
deposit products comes from other insured financial institutions such as
commercial banks, thrift institutions and credit unions in the Registrant's
market area as well as with out-of-market financial institutions that offer
deposits over the internet and through other delivery channels. Deposit
competition also includes a number of insurance products such as annuities sold
by local agents and investment products such as mutual funds and other
securities sold by local and regional brokers. Loan competition comes from other
insured financial institutions such as commercial banks, thrift institutions and
credit unions.
Lending Activities
The Bank's principal lending activity is the origination of loans
secured primarily by first mortgage liens on properties in the Pittsburgh MSA.
At December 31, 2005, the Bank's loan portfolio included $78.8 million of
residential first mortgage loans, $1.9 million of residential construction
loans, $168.0 million of commercial and multi-family real estate loans, and $4.0
million of commercial construction loans. In addition, the Bank's loan portfolio
includes $19.7 million in home equity lines of credit which are also secured by
liens on residential real estate. The Bank also offers commercial loans which
are generally secured by non-real estate collateral and had $63.5 million in
such loans in portfolio at December 31, 2005. The Bank lends to municipalities
and other governmental entities and had $9.1 million of such loans in portfolio
at December 31, 2005. The Bank also engages in consumer installment lending
primarily in the form of home equity term loans and automobile loans. At
December 31, 2005, the Bank had $92.7 million in home equity term loans and
$757,000 in automobile loans in portfolio. In addition, the Bank originates
education loans guaranteed by the Pennsylvania Higher Education Assistance
Agency ("PHEAA") and held $6.8 million in such loans at December 31, 2005.
Substantially all of the Bank's borrowers are located in the Pittsburgh MSA and
would be expected to be affected by economic and other conditions in this area.
The Company does not believe that there are any other concentrations of loans or
borrowers exceeding 10% of total loans.
2
Loan Portfolio Composition. The following table sets forth the
composition of the Registrant's loan portfolio in dollar amounts and in
percentages of the respective portfolios at the dates indicated.
At December 31,
--------------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
---------------- ------------------ ----------------- --------------- ---------------
$ % $ % $ % $ % $ %
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
(Dollars in Thousands)
Mortgage..................... $252,699 56.65% $252,114 57.37% $244,923 58.33% $210,244 57.87% $173,214 54.55%
Installment.................. 93,428 20.95 84,673 19.27 78,327 18.65 59,321 16.33 64,053 20.17
Commercial................... 63,508 14.24 61,140 13.91 59,591 14.19 58,634 16.14 55,185 17.38
Home equity lines of credit.. 19,684 4.41 23,201 5.28 21,963 5.23 15,832 4.36 11,001 3.47
PHEAA........................ 6,781 1.52 7,355 1.67 7,834 1.87 6,900 1.90 6,950 2.19
Municipal.................... 9,149 2.05 10,050 2.29 6,268 1.49 11,190 3.08 5,369 1.69
Credit cards................. 62 0.01 45 0.01 38 0.01 32 0.01 32 0.01
Other........................ 744 0.17 855 0.20 965 0.23 1,148 0.31 1,715 0.54
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans............ 446,055 100.00% 439,433 100.00% 419,909 100.00% 363,301 100.00% 317,519 100.00%
====== ====== ====== ====== ======
Less:
Unearned discount.......... -- -- -- -- --
Deferred loan origination
fees and costs........... 266 291 338 557 273
Allowance for loan losses.. 3,564 2,594 3,285 2,873 2,114
-------- -------- -------- -------- --------
Total loans, net....... $442,225 $436,548 $416,286 $359,871 $315,132
======== ======== ======== ======== ========
3
Loan Maturity Table. The following table sets forth maturities and
interest rate sensitivity for all categories of loans as of December 31, 2005.
Scheduled repayments are reported in the maturity category in which payment is
due.
Home
equity
lines of Credit
Mortgage credit(2) Installment Commercial PHEAA(1) Municipal Cards(2) Other Total
-------- --------- ----------- ---------- -------- --------- -------- ----- -----
(In Thousands)
1 year or less............ $ 12,382 $19,684 $12,108 $ 6,704 $ -- $9,149 $ 62 $744 $ 60,833
After 1 year:
1 to 5 years............ 59,994 -- 40,682 19,531 6,781 -- -- -- 126,988
After 5 years........... 180,323 -- 40,638 37,273 -- -- -- -- 258,234
------- ---------- ------ ------ -------- --------- ------- ------ -------
Total due after one year.. 240,317 -- 81,320 56,804 6,781 -- -- -- 385,222
------- ----------- ------ ------ ----- --------- ------ ----- -------
Total amount due.......... $252,699 $19,684 $93,428 $63,508 $6,781 $9,149 $ 62 $744 $446,055
======= ====== ====== ====== ===== ====== ===== === =======
- ----------------------
(1) PHEAA loans are sold when repayment begins; assumption is that all PHEAA
loans will mature in 1 to 5 years.
(2) Home equity credit lines and credit card loans have no stated maturities;
therefore they are classified as due in one year or less.
Loan Sensitivity Table. The following table sets forth, as of December
31, 2005, the dollar amount of all loans due after December 31, 2006, based upon
fixed rates of interest or floating or adjustable interest rates.
Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In Thousands)
Mortgage(1) ...... $216,158 $24,159 $240,317
Installment........ 79,652 1,668 81,320
Commercial......... 28,772 28,032 56,804
PHEAA.............. -- 6,781 6,781
-------- ------- --------
Total......... $324,582 $60,640 $385,222
======== ======= ========
- --------------------------
(1) Included in the mortgage loans portfolio are commercial real estate loans.
Commercial real estate loans are fixed-rate loans that are primarily
callable loans, which reprice every three, five or ten years, based upon
the interest rate on similar loans at the time of repricing. See "Mortgage
Loans."
Mortgage Loans. The Registrant's primary lending activity consists of
the origination of residential and commercial mortgage loans secured by property
in its primary market area. The mortgage loan portfolio consists of one-to-four
family residential mortgage loans, commercial real estate loans, and
construction loans.
The Registrant had approximately $78.8 million of one-to-four family
residential mortgage loans in its mortgage loan portfolio at December 31, 2005.
The Registrant generally originates one-to-four family residential mortgage
loans in amounts of up to 80% of the appraised value of the mortgaged property
without requiring mortgage insurance. The Registrant will originate residential
mortgage loans in an amount up to 95% of the appraised value of a mortgaged
property; however, the borrower is required to obtain mortgage insurance for the
amount in excess of 80%. The Registrant offers residential fixed-rate loans and
adjustable-rate loans with amortization periods ranging from 15 to 30 years.
Interest rates for residential adjustable-rate loans residences adjust every 12
months based upon the weekly average yield on the one-year U.S. Treasury
securities, plus a margin of 2.75 percentage points. These adjustable-rate loans
have an interest rate cap of two percentage points per year and six percentage
points over the life of the loan, and are originated for retention in the
portfolio.
4
Fixed-rate residential mortgage loans are underwritten in accordance
with FannieMae guidelines. Currently, loans underwritten in accordance with
FannieMae guidelines are generally sold in the secondary market. However, the
number of saleable loans could vary materially as a result of market conditions.
The Registrant generally charges a higher interest rate if loans are not
saleable under FannieMae guidelines. At December 31, 2005, $218.6 million of the
Registrant's mortgage portfolio consisted of long-term, fixed-rate mortgage
loans of which $300,000 were classified as held-for-sale. The Registrant does
not service any loans that are sold and the Registrant is generally not liable
for these loans (i.e., "nonrecourse loans").
Substantially all of the Registrant's one-to-four family mortgages
include "due on sale" clauses, which are provisions giving the Registrant the
right to declare a loan immediately payable if the borrower sells or otherwise
transfers an interest in the property to a third party.
Property appraisals on real estate securing the Registrant's
one-to-four family residential loans over $250,000 are made by appraisers
approved by the Board of Directors. Appraisals are performed in accordance with
applicable regulations and policies. The Registrant obtains title insurance
policies on all purchase money first mortgage real estate loans originated.
The Registrant's commercial real estate mortgage loans are long-term
loans secured primarily by multi-family dwelling units and commercial real
estate. Essentially all originated commercial real estate loans are within its
market area. Commercial real estate loans are originated at adjustable rates of
interest.
Adjustable-rate commercial mortgage loans have interest rates that
reprice every 3, 5 or 10 years and are based on the corresponding FHLB advance
rate plus up to 2.75 percentage points. Adjustable-rate commercial mortgage
loans generally have terms of up to 20 years and no maximum interest rate.
As of December 31, 2005, the Registrant's commercial real estate loans
totaled $118.8 million of the mortgage portfolio. Typically, commercial real
estate loans are originated in amounts up to 80% of the appraised value of the
mortgaged property.
The Registrant also originates loans to finance the construction of
one-to-four family dwellings and commercial real estate. The Registrant makes
construction loans both to individuals constructing their own residence and to
developers constructing homes for resale. Generally, the Registrant only makes
interim construction loans to individuals if it also makes the permanent
mortgage loan on the property. Interim construction loans generally have terms
of up to 12 months with fixed rates of interest. At December 31, 2005,
construction loans totaled $19.4 million with $13.5 million of that total yet to
be disbursed.
Construction financing is generally considered to involve a higher
degree of risk of loss than long- term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction and the estimated cost (including interest) of construction. During
the construction phase, a number of factors could result in delays and cost
overruns. If the estimate of construction costs proves to be inaccurate, the
Registrant may be required to advance funds beyond the amount originally
committed to permit completion. If the estimate of value proves to be
inaccurate, the Registrant may be confronted, at or prior to the maturity of the
loan, with a project having a value which is insufficient to assure full
repayment.
Installment Loans. Installment loans primarily consist of home equity
term loans and to a lesser extent automobile loans. Home equity loans are
secured primarily by one-to-four family residences. The Registrant originates
these loans with fixed rates with terms of up to 20 years. These loans are
subject to 90% combined loan-to-value limitation, including any outstanding
mortgages or liens, without requiring mortgage insurance. The Registrant will
originate home equity loans in an amount up 100% of the appraised value,
5
however, mortgage insurance for the borrower may be required. The Registrant
originates automobile loans with fixed rates of interest and terms of up to five
years. At December 31, 2005, home equity term loans totaled $92.7 million.
Commercial Loans. Commercial loans consist of loans secured by
equipment, accounts receivables, inventory, and other business purpose loans.
Such loans are generally secured by either the underlying collateral and/or by
the personal guarantees of the borrower.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business loans may be substantially dependent on the success of the business
itself and the general economic environment.
Home Equity Lines of Credit. Revolving home equity lines of credit are
secured primarily by one- to-four family residences. The lines of credit are
generally subject to an 80% combined loan-to-value limitation, including all
outstanding mortgages and liens.
PHEAA. The Bank originates education loans under the PHEAA Keystone
Stafford and Plus programs. These programs are open to residents of Pennsylvania
and parents of students at Pennsylvania post-secondary schools. Interest rates
on these loans are currently equal to the 91-day U.S. Treasury bill rate plus a
margin of 3.1 percentage points. Borrowers may defer and capitalize interest
during periods of educational enrollment, unemployment or economic hardship. The
Bank generally sells these loans to the PHEAA when repayment begins. Payments of
principal and interest on these loans are guaranteed by the PHEAA and reinsured
by the U.S. Department of Education under the Federal Family Education Loan
Program.
Municipal Loans. The Bank makes loans to various local municipalities.
Such loans are generally unsecured and are obtained through competitive bidding.
Municipal loans have terms of between 1 and 15 years and provide for payments of
principal and interest during their terms. The interest earned on these loans is
tax-exempt.
Loan Approval Authority and Underwriting. The Registrant establishes
various lending limits for its officers and maintains an officer review
committee. Certain officers generally have authority to approve loans up to
$500,000. Loans up to $1,000,000 are approved by an officer review committee
("ORC"). The ORC consists of the President and at least four other officers
appointed by the President. All loans over $1,000,000 are approved by the Board
of Directors.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are performed by
independent appraisers.
Title insurance is generally required on all purchase money real estate
mortgage loans. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property that is located in a
flood zone.
Loans to One Borrower Limits. By statute, the maximum amount of
indebtedness that the Bank may have from any one customer may not exceed 15% of
the Bank's capital accounts. Pursuant to the national bank parity provisions of
the Pennsylvania Banking Code, the Bank may also lend up to the
6
maximum amounts permissible for national banks which are allowed to make loans
to one borrower of up to 25% of capital and surplus in certain limited
circumstances. At December 31, 2005, the Bank's loans-to- one-borrower limit was
$10 million and the largest amount of indebtedness from any single customer was
$9.2 million. This indebtedness consisted of 26 loans to one borrower secured by
multi-unit apartment buildings and one-to-four family dwellings.
Loan Commitments. Written commitments are given to prospective
borrowers on all approved mortgage loans. Generally, the commitment requires
acceptance within 7 days of the date of issuance. At December 31, 2005,
commitments to cover originations of loans totaled $9.9 million.
Classified Assets. Federal bank regulators require insured depository
institutions to regularly review their loan portfolios and to assign ratings to
weak loans according to a prescribed asset classification system. Under this
classification system, problem assets of insured institutions are classified as
"substandard," "doubtful" or "loss." An asset is considered "substandard" if it
is inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the insured institution will
sustain "some loss" if the deficiencies are not corrected. Assets classified as
"doubtful" have all the weaknesses inherent in those classified "substandard,"
with the added characteristic that the weaknesses present make "collection of
principal in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified as "loss" are
those considered "uncollectible" and of such little value that their continuance
as assets without the establishment of a specific loss reserve is not warranted.
Assets that do not expose the Registrant to risk sufficient to warrant
classification in one of the above categories, but which possess some weakness,
are required to be designated "special mention" by management.
When an insured institution classifies problem assets as either
"substandard" or "doubtful," it may establish allowances for loan losses in an
amount deemed prudent by management. When an insured institution classifies
problem assets as "loss," it is required either to establish an allowance for
losses equal to 100% of that portion of the assets so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its allowances is subject to review by the Federal
Deposit Insurance Corporation ("FDIC") which may order the establishment of
additional loss allowances.
The following table sets forth the Registrant's classified assets in
accordance with its classification system at the dates indicated.
At December 31
---------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
(In Thousands)
Special Mention ......... $43,069 $24,770 $19,022 $13,044 $12,885
Substandard ............. 7,798 3,940 8,756 9,518 3,174
Doubtful ................ 240 259 668 9 --
Loss .................... -- -- -- -- --
------- ------- ------- ------- -------
Total ............. $51,107 $28,969 $28,446 $22,571 $16,032
======= ======= ======= ======= =======
The increases in special mention and substandard assets are due to the
addition of commercial loans secured by real estate, which were classified due
to either the financial condition of the individual borrower or the lack of
current financial information on the borrower.
Other Real Estate Owned. Real estate acquired by the Registrant as a
result of foreclosure or by deed in lieu of foreclosure is classified as other
real estate owned until such time as it is sold. When other
7
real estate owned is acquired, it is recorded at the lower of the unpaid balance
of the related loan or its fair value less disposal costs. Any write-down of
other real estate owned is charged to operations.
Nonperforming and Problem Assets
Loan Delinquencies. When a loan becomes 16 days past due, a notice of
nonpayment is sent to the borrower. Telephone collection calls, letters and/or
visits to the borrower are initiated at or after 16 days of the due date missed
in an effort to resolve the delinquency. Generally, if the loan continues in a
delinquent status for 90 days past due and no repayment plan has been reached,
foreclosure, liquidation or other legal proceedings may be initiated.
Loans are reviewed on a monthly basis and are placed on a non-accrual
status when the loan becomes more than 90 days delinquent and when, in our
opinion, the collection of additional interest is doubtful. Normally, interest
accrued and unpaid at the time a loan is placed on nonaccrual status is charged
against interest income. Subsequent interest payments, if any, are either
applied to the outstanding principal balance or recorded as interest income,
depending on the assessment of the ultimate collectibility of the loan.
Nonperforming Assets. The following table sets forth information
regarding nonaccrual loans and real estate owned, as of the dates indicated. As
of the dates indicated, no loans were categorized as troubled debt
restructurings within the meaning of Statement of Financial Accounting Standards
("SFAS") No. 15 and there were no impaired loans within the meaning of SFAS No.
114, as amended by SFAS 118.
At December 31,
-----------------------------------------------------------
2005 2004 2003 2002 2001
---- ---- ---- ---- ----
(Dollars In Thousands)
Loans accounted for on a non-accrual basis:
Mortgage........................................... $ 111 $ 120 $ 567 $ 446 $ 940
Home equity lines of credit........................ -- -- -- -- --
Installment........................................ 26 -- -- 77 27
Commercial......................................... -- -- -- 96 60
PHEAA.............................................. -- -- -- -- --
Municipal.......................................... -- -- -- -- --
Credit cards....................................... -- -- -- -- --
Other.............................................. -- -- -- -- --
------ ------ ------ ------ ------
Total........................................... $ 137 $ 120 $ 567 $ 619 $1,027
------ ------ ------ ------ ------
Accruing loans which are contractually past
due 90 days or more:
Mortgage........................................... 541 3,618 704 728 559
Installment........................................ 14 9 10 -- 3
Commercial......................................... 161 954 14 41 7
Home equity lines of credit........................ -- -- -- -- --
PHEAA.............................................. -- -- -- -- --
Municipal.......................................... -- -- -- -- --
Credit cards....................................... -- -- -- -- --
Other.............................................. -- -- -- -- --
------ ------ ------ ------ ------
Total........................................... 716 4,581 728 769 569
------ ------ ------ ------ ------
Total non-accrual and 90-day past due loans.......... 853 4,701 1,295 1,388 1,596
------ ------ ------ ------ ------
Other real estate owned.............................. 48 1,767 254 637 239
------ ------ ------ ------ ------
Total non-performing assets.......................... $ 901 $6,468 $1,549 $2,025 $1,835
====== ====== ====== ====== ======
Total non-accrual and accrual loans to net loans..... 0.19% 1.08% 0.31% 0.39% 0.51%
====== ====== ====== ====== ======
Total non-accrual and accrual loans to total assets.. 0.12% 0.70% 0.21% 0.24% 0.30%
====== ====== ====== ====== ======
Total non-performing assets to total assets.......... 0.13% 0.96% 0.25% 0.35% 0.35%
====== ====== ====== ====== ======
8
As of December 31, 2005, there were no loans not reflected in the above
as to which management had serious doubts as to the ability of borrowers to
comply with present loan repayment loans.
Allowance for Loan Losses. The Company maintains an allowance for loan
losses to absorb potential losses inherent in the loan portfolio. The allowance
is reviewed monthly and a provision for loan losses is charged against
operations to bring the allowance to a level which, in management's judgment, is
adequate in light of the nature of the portfolio, credit concentrations, trends
in historical loss experience, specific impaired loans, and economic conditions.
Large groups of homogeneous loans, such as residential real estate,
small commercial real estate loans and home equity and consumer loans are
evaluated in the aggregate using historical loss factors and other data. The
amount of loss reserve is calculated using historical loss rates, net of
recoveries on a five year rolling weighted average, adjusted for environmental,
and other qualitative factors such as industry, geographical, economic and
political factors that can effect loss rates or loss measurements.
Large balance and/or more complex loans such as multi-family and
commercial real estate loans may be evaluated on an individual basis and are
also evaluated in the aggregate to determine adequate reserves. As specific
loans are determined to be impaired specific reserves are assigned based upon
collateral value, market value, if determinable, or the present value of the
estimated future cash flows of the loan.
The allowance is increased by a provision for loan loss which is
charged to expense, and reduced by charge-offs, net of recoveries. Loans are
placed on non-accrual status when they are 90 days past due, unless they are
adequately collateralized and in the process of collection.
The allowance for loan losses is maintained at a level that represents
management's best estimate of losses in the portfolio at the balance sheet date.
However, there can be no assurance that the allowance for losses will be
adequate to cover losses which may be realized in the future and that additional
provisions for losses will not be required.
9
Activity in the Allowance for Loan Losses. The following table sets
forth information with respect to the Registrant's allowance for loan losses at
the dates indicated:
December 31,
---------------------------------------------------------------------
2005 2004 2003 2002 2001
-------- -------- -------- -------- --------
(Dollars in Thousands)
Total loans outstanding........................ $445,789 $439,142 $419,571 $362,744 $317,246
======== ======== ======== ======== ========
Average loans outstanding...................... $436,906 $430,543 $393,743 $337,600 $304,080
======== ======== ======== ======== ========
Allowance balance (at beginning of period).... $ 2,594 $ 3,285 $ 2,873 $ 2,114 $ 1,919
-------- -------- -------- -------- --------
Provision...................................... 1,200 600 600 1,100 500
Charge-Offs:
Mortgage.................................... (64) (1,204) (11) (219) (203)
Installment................................. (188) (127) (84) (68) (92)
Commercial.................................. (19) (8) (148) (154) (50)
Home equity lines of credit................. -- -- -- -- --
PHEAA....................................... -- -- -- -- --
Municipal................................... -- -- -- -- --
Credit cards................................ -- -- -- -- --
Other....................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total charge-offs........................ (271) (1,339) (243) (441) (345)
Recoveries:
Mortgage..................................... 7 -- -- -- --
Installment.................................. 21 3 20 9 2
Commercial................................... 13 45 35 91 45
Home equity lines of credit.................. -- -- -- -- --
PHEAA........................................ -- -- -- -- --
Municipal.................................... -- -- -- -- --
Credit cards................................. -- -- -- -- 2
Other........................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total recoveries......................... 41 48 55 100 39
Net charge-offs................................ (230) (1,291) (188) (341) (306)
-------- -------- -------- -------- --------
Allowance balance (at end of period)........... $ 3,564 $ 2,594 $ 3,285 $ 2,873 $ 2,114
======== ======== ======== ======== ========
Allowance for loan losses as a percent
of total loans outstanding................... 0.80% 0.59% 0.78% 0.79% 0.67%
======== ======== ======== ======== ========
Net loans charged off as a percent of
average loans outstanding.................... 0.05% 0.30% 0.05% 0.10% 0.10%
======== ======== ======== ======== ========
10
Allocation of the Allowance For Loan Losses. The following table shows
the allocation of the Registrant's allowance for loan losses by loan category
and the percentage of total loans represented by each loan category at the date
indicated.
At December 31,
------------------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
------------------ ------------------ ----------------- ----------------- ------------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
At end of period allocated to:
Mortgage....................... $1,853 56.65% $1,110 57.37% $ 806 58.33% $ 515 57.87% $1,120 54.55%
Installment.................... 282 29.95 338 19.27 109 18.65 188 16.33 409 20.17
Commercial..................... 1,395 14.24 889 13.91 2,217 14.19 2,100 16.14 501 17.38
Home equity lines of credit.... 32 4.41 43 5.28 138 5.23 64 4.36 60 3.47
PHEAA.......................... 1 1.52 4 1.67 5 1.87 2 1.90 11 2.19
Municipal...................... 1 2.05 210 2.29 9 1.49 4 3.08 8 1.69
Credit cards................... -- 0.01 -- 0.01 -- 0.01 -- 0.01 -- 0.01
Other.......................... -- 0.17 -- 0.20 1 0.23 -- 0.31 5 0.54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total...................... $3,564 100.00% $2,594 100.00% $3,285 100.00% $2,873 100.00% $2,114 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
11
Investment Activities
The Registrant maintains a level of liquid assets, including short-term
securities and certain other investments, which varies depending upon several
factors, including: (i) the yields on investment alternatives; (ii) management's
judgment as to the attractiveness of the yields then available in relation to
other opportunities; (iii) expectation of future yield levels; and (iv)
management's projections as to the short- term demand for funds to be used in
loan origination and other activities. Investment securities, including
mortgage-backed securities, are classified at the time of purchase, based upon
management's intentions and abilities, as securities held-to-maturity or
securities available-for-sale. Debt securities acquired with the intent and
ability to hold to maturity are classified as held-to-maturity and are stated at
cost and adjusted for amortization of premium and accretion of discount, which
are computed using the level yield method and recognized as adjustments of
interest income. All other debt securities are classified as available-for-sale
to serve principally as a source of liquidity.
Current accounting standards regarding investment securities (including
mortgage backed securities) require the Registrant to categorize securities as
"held to maturity," "available-for-sale" which included FHLB stock or "trading."
As of December 31, 2005, the Registrant had securities classified as
"available-for- sale" (which included FHLB stock) in the amount of $201.5
million and had no securities classified as "held- to-maturity" or "trading."
Securities classified as "available-for-sale" are reported for financial
reporting purposes at the fair market value with net changes in the market value
from period to period included as a separate component of stockholders' equity,
net of income taxes. At December 31, 2005, the Registrant's securities
available-for-sale had an amortized cost of $202.5 million and market value of
$201.5 million. Changes in the market value of securities available-for-sale do
not affect the Company's income. In addition, changes in the market value of
securities available-for-sale do not affect the Bank's regulatory capital
requirements or its loan-to-one borrower limit.
At December 31, 2005, the Registrant's investment portfolio policy
allowed investments in instruments such as: (i) U.S. Treasury obligations; (ii)
U.S. federal agency or federally sponsored agency obligations; (iii)
mortgage-backed securities; (iv) municipal obligations; (v) banker's
acceptances; (vi) certificates of deposit; and (vii) investment-grade corporate
bonds, and commercial paper. The board of directors may authorize additional
investments.
As a source of liquidity and to supplement the Registrant's lending
activities, the Registrant has invested in residential mortgage-backed
securities. Mortgage-backed securities can serve as collateral for borrowings
and, through repayments, as a source of liquidity. Mortgage-backed securities
represent a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the participation interests in the form of securities. The
quasi-governmental agencies guarantee the payment of principal and interest to
investors and include FreddieMac, Government National Mortgage Association
("GinnieMae"), and FannieMae.
Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the
12
right to call or prepay obligations with or without prepayment penalties.
Mortgage-backed securities issued by FreddieMac, GinnieMae, and FannieMae make
up a majority of the pass-through certificates market.
Investment Portfolio. The following table sets forth the carrying value
of the Registrant's investment securities portfolio at the dates indicated:
At December 31
------------------------------
2005 2004 2003
-------- -------- --------
(In Thousands)
Securities available-for-sale:
Obligations of U.S. government agencies .......... $ 78,874 $ 71,103 $ 82,969
Mortgage-backed securities ....................... 53,827 65,004 37,656
Obligations of state and political subdivisions... 54,808 46,446 37,921
Federal Home Loan Bank stock ..................... 5,470 5,683 4,541
Equity securities ................................ 8,288 7,940 8,621
Other securities ................................. 196 716 740
-------- -------- --------
Total securities available-for-sale ........... $201,463 $196,892 $172,448
======== ======== ========
13
Investment Portfolio Maturities. The following table sets forth certain
information regarding carrying values, weighted average yields, and maturities
of the Registrant's investment securities portfolio as of December 31, 2005.
Actual maturities may differ from contractual maturities as certain instruments
have call features which allow prepayment of obligations.
As of December 31, 2005
----------------------------------------------------------------------------------------------------
After Five More than Total
One Year or Less One to Five Years to Ten Years Ten Years Investment Securities
----------------- ----------------- ----------------- ----------------- ------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------
(Dollars in Thousands)
Obligations of U.S.
government agencies......... $ -- --% $3,006 5.31% $69,788 4.20% $ 6,080 4.06% $ 78,874 4.23% $78,874
Mortgage-backed securities...... -- -- 3,731 3.68 14,312 4.11 35,784 4.87 53,827 4.59 53,827
Obligations of state and
political subdivisions (1).. -- -- 1,887 5.01 10,710 4.90 42,211 4.45 54,808 4.56 54,808
Federal Home Loan Bank stock.... -- -- -- -- -- -- 5,470 2.45 5,470 2.45 5,470
Equity securities............... -- -- -- -- -- -- 8,288 2.66 8,288 2.66 8,288
Other securities .............. -- -- 25 4.25 -- -- 171 2.66 196 2.86 196
------ ------ ------- ------- -------- --------
Total...................... $ -- --% $8,649 4.54% $94,810 4.27% $98,004 4.32% $201,463 4.30% $201,463
====== ====== ======= ======= ======== ========
- --------------------
(1) Average yields have not been computed on a tax-equivalent basis.
14
Sources of Funds
General. Deposits are the major source of the Registrant's funds for
lending and other investment purposes. In addition to deposits, the Registrant
derives funds from the amortization, prepayment or sale of loans, maturities of
investment securities and operations. Scheduled loan principal repayments are a
relatively stable source of funds, while deposit inflows and outflows and loan
prepayments are significantly influenced by general interest rates and market
conditions. The Registrant can also borrow from the Federal Home Loan Bank
("FHLB") of Pittsburgh.
Deposits. Consumer and commercial deposits are attracted principally
from within the Registrant's primary market area through the offering of a broad
selection of deposit instruments including checking, regular savings, money
market deposits, term certificate accounts and individual retirement accounts.
Deposit account terms vary according to the minimum balance required, the time
periods the funds must remain on deposit and the interest rate, among other
factors. The Registrant regularly evaluates the internal cost of funds, surveys
rates offered by competing institutions, reviews the Registrant's cash flow
requirements for lending and liquidity and executes rate changes when deemed
appropriate. The Registrant does not obtain funds through brokers, nor does it
solicit funds outside the Commonwealth of Pennsylvania.
At December 31,
------------------------------------------------------------ ----
2005 2004 2003
------------------ ----------------- ------------------ ----
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
(Dollars in thousands)
Checking accounts:
Non-interest-bearing....... $ 81,926 --% $ 80,423 --% $ 77,862 --%
Interest-bearing........... 51,881 0.60 45,791 0.39 54,788 0.58
Passbook and club accounts.... 75,734 0.52 76,356 0.51 76,641 0.70
Money market accounts......... 62,225 1.67 58,103 0.89 61,138 1.05
Certificate accounts.......... 245,654 3.31 245,881 3.09 221,186 3.30
-------- ---- ------- ---- ------- ----
Total................ $517,420 1.91% $506,554 1.71% $491,615 1.79%
======== ==== ======== ==== ======== ====
The following table indicates the amount of certificates of deposit of
$100,000 or more by time remaining at December 31, 2005 (in thousands).
Certificates of
Maturity Periods Deposit
---------------- ---------------
Three months or less...................... $15,718
Over three through six months............. 11,934
Over six through twelve months............ 17,750
Over twelve months........................ 19,283
-------
Total............................... $64,685
=======
Borrowings. Deposits are the primary source of funds for the
Registrant's lending and investment activities as well as for general business
purposes. Should the need arise, the Registrant has a maximum borrowing capacity
with the FHLB of $301.9 million. At December 31, 2005, there were outstanding
$68.7 million of long-term FHLB borrowings.
15
The following table sets forth certain information regarding the Bank's
repurchase agreements which were the only category of short-term borrowings (due
within one year or less) whose average balance for the past fiscal year exceeded
30% of stockholders equity at December 31, 2005.
At or for the Year Ended December 31,
-------------------------------------
2005 2004 2003
------- ------- -------
(Dollars in Thousands)
Average balance outstanding ...................... $20,209 $15,205 $15,999
Maximum amount outstanding at any
month-end during the period .................... $38,686 $24,682 $22,212
Weighted average interest rate during the period.. 2.79% 1.01% 0.84%
Balance outstanding at end of period ............. $18,443 $15,157 $12,611
Weighted average interest rate at end of period... 3.51% 1.51% 0.75%
Trust Services
The Bank offers a variety of trust services including trust management,
estate planning and administration, investment counseling and management and
retirement planning. The Bank serves as trustee for testamentary, living,
irrevocable and charitable trusts, administers investment agencies, employee
benefit plans, guardianships, special needs trusts and offers separately managed
accounts. The Bank's fees for these services are generally a percentage of the
assets under management. As of December 31, 2005, the Bank had $115.1 million in
assets under management compared to $110.0 million at December 31, 2004. The
increase in assets under management in 2005 was primarily due to increase in
401(k) plans. For the year ended December 31, 2005, the Bank had income of
$455,000 from its trust services.
Personnel
As of December 31, 2005, the Registrant had 186 full-time and 53
part-time employees. None of the Registrant's employees are represented by a
collective bargaining group.
16
SUPERVISION AND REGULATION
Regulation of the Company
Set forth below is a brief description of certain laws which related to
the regulation of the Company and the Bank. The description does not purport to
be complete and is qualified in its entirety by reference to applicable laws and
regulations.
General. The Company, as a bank holding company registered under the
Bank Holding Company Act of 1956, as amended, is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System and by the Pennsylvania Department of Banking. The Company is also
required to file annually a report of its operations with the Federal Reserve
and the Pennsylvania Department of Banking. This regulation and oversight is
generally intended to ensure that the Company limits its activities to those
allowed by law and that it operates in a safe and sound manner without
endangering the financial health of the Bank.
Under the Bank Holding Company Act, the Company must obtain the prior
approval of the Federal Reserve before it may acquire control of another bank or
bank holding company, merge or consolidate with another bank holding company,
acquire all or substantially all of the assets of another bank or bank holding
company, or acquire direct or indirect ownership or control of any voting shares
of any bank or bank holding company if, after such acquisition, the Company
would directly or indirectly own or control more than 5% of such shares.
Federal statutes impose restrictions on the ability of a bank holding
company and its nonbank subsidiaries to obtain extensions of credit from its
subsidiary bank, on the subsidiary bank's investments in the stock or securities
of the holding company, and on the subsidiary bank's taking of the holding
company's stock or securities as collateral for loans to any borrower. A bank
holding company and its subsidiaries are also prevented from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale of
property, or furnishing of services by the subsidiary bank.
A bank holding company is required to serve as a source of financial
and managerial strength to its subsidiary banks and may not conduct its
operations in an unsafe or unsound manner. In addition, it is the Federal
Reserve policy that a bank holding company should stand ready to use available
resources to provide adequate capital to its subsidiary banks during periods of
financial stress or adversity and should maintain the financial flexibility and
capital-raising capacity to obtain additional resources for assisting its
subsidiary banks. A bank holding company's failure to meet its obligations to
serve as a source of strength to its subsidiary banks will generally be
considered by the Federal Reserve to be an unsafe and unsound banking practice
or a violation of the Federal Reserve regulations, or both.
Non-Banking Activities. The business activities of the Company, as a
bank holding company, are restricted by the Bank Holding Company Act. Under the
Bank Holding Company Act and the Federal Reserve's bank holding company
regulations, the Company may only engage in, or acquire or control voting
securities or assets of a company engaged in, (1) banking or managing or
controlling banks and other subsidiaries authorized under the Bank Holding
Company Act and (2) any non-banking activity the Federal Reserve has determined
to be so closely related to banking or managing or controlling banks to be a
proper incident thereto. These include any incidental activities necessary to
carry on those activities, as well as a
17
lengthy list of activities that the Federal Reserve has determined to be so
closely related to the business of banking as to be a proper incident thereto.
Financial Modernization. The Gramm-Leach-Bliley Act permits greater
affiliation among banks, securities firms, insurance companies, and other
companies under a new type of financial services company known as a "financial
holding company." A financial holding company essentially is a bank holding
company with significantly expanded powers. Financial holding companies are
authorized by statute to engage in a number of financial activities previously
impermissible for bank holding companies, including securities underwriting,
dealing and market making; sponsoring mutual funds and investment companies;
insurance underwriting and agency; and merchant banking activities. The Act also
permits the Federal Reserve and the Treasury Department to authorize additional
activities for financial holding companies if they are "financial in nature" or
"incidental" to financial activities. A bank holding company may become a
financial holding company if each of its subsidiary banks is well capitalized,
well managed, and has at least a "satisfactory" CRA rating. A financial holding
company must provide notice to the Federal Reserve within 30 days after
commencing activities previously determined by statute or by the Federal Reserve
and Department of the Treasury to be permissible. In fiscal 2000, the Company
submitted the required notice to the Federal Reserve and became a financial
holding company.
Regulatory Capital Requirements. The Federal Reserve has adopted
capital adequacy guidelines under which it assesses the adequacy of capital in
examining and supervising a bank holding company and in analyzing applications
to it under the Bank Holding Company Act. The Federal Reserve's capital adequacy
guidelines are similar to those imposed on the Bank by the Federal Deposit
Insurance Corporation.
See "Regulation of the Bank - Regulatory Capital Requirements."
Restrictions on Dividends. The Pennsylvania Banking Code states, in
part, that dividends may be declared and paid only out of accumulated net
earnings and may not be declared or paid unless surplus (retained earnings) is
at least equal to contributed capital. The Bank has not declared or paid any
dividends that have caused its retained earnings to be reduced below the amount
required. Finally, dividends may not be declared or paid if the Bank is in
default in payment of any assessment due the Federal Deposit Insurance
Corporation.
The Federal Reserve has issued a policy statement on the payment of
cash dividends by bank holding companies, which expresses the Federal Reserve's
view that a bank holding company should pay cash dividends only to the extent
that the holding company's net income for the past year is sufficient to cover
both the cash dividends and a rate of earnings retention that is consistent with
the holding company's capital needs, asset quality and overall financial
condition. The Federal Reserve also indicated that it would be inappropriate for
a company experiencing serious financial problems to borrow funds to pay
dividends. Furthermore, under the federal prompt corrective action regulations,
the Federal Reserve may prohibit a bank holding company from paying any
dividends if the holding company's bank subsidiary is classified as
"undercapitalized."
Regulation of the Bank
General. As a Pennsylvania-chartered commercial bank with deposits
insured by the Federal Deposit Insurance Corporation which is not a member of
the Federal Reserve, the Bank is subject to extensive regulation and examination
by the Pennsylvania Department of Banking and by the Federal Deposit Insurance
Corporation, which insures its deposits to the maximum extent permitted by law.
The federal and state laws and regulations applicable to banks regulate, among
other things, the scope of their business, their investments, the reserves
required to be kept against deposits, the timing of the availability of
deposited funds
18
and the nature and amount of and collateral for certain loans. The laws and
regulations governing the Bank generally have been promulgated to protect
depositors and not for the purpose of protecting stockholders. This regulatory
structure also gives the federal and state banking agencies extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulation, whether by the Pennsylvania Department of Banking,
the Federal Deposit Insurance Corporation or the United States Congress, could
have a material impact on the Company and its operations.
Federal law provides the federal banking regulators, including the
Federal Deposit Insurance Corporation and the Federal Reserve, with substantial
enforcement powers. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease-and-desist or removal
orders, and to initiate injunctive actions against banking organizations and
institution-affiliated parties, as defined. In general, these enforcement
actions may be initiated for violations of laws and regulations and unsafe or
unsound practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with
regulatory authorities.
Pennsylvania Banking Law. The Pennsylvania Banking Code ("Code")
contains detailed provisions governing the organization, location of offices,
rights and responsibilities of trustees, officers, and employees, as well as
corporate powers, savings and investment operations and other aspects of the
Bank and its affairs. The Code delegates extensive rule-making power and
administrative discretion to the Pennsylvania Department of Banking so that the
supervision and regulation of state chartered commercial banks may be flexible
and readily responsive to changes in economic conditions and in savings and
lending practices.
The Code also provides state-chartered commercial banks with the powers
to make certain leeway investments, subject to regulation by the Pennsylvania
Department of Banking. The Federal Deposit Insurance Corporation Act, however,
prohibits a state-chartered bank from making new investments, loans, or becoming
involved in activities as principal and equity investments which are not
permitted for national banks unless (1) the Federal Deposit Insurance
Corporation determines the activity or investment does not pose a significant
risk of loss to the appropriate deposit insurance fund and (2) the bank meets
all applicable federal capital requirements. Accordingly, the additional
operating authority provided to the Bank by the Code is significantly restricted
by the Federal Deposit Insurance Act.
Federal Deposit Insurance. The Federal Deposit Insurance Corporation is
an independent federal agency that insures the deposits, up to prescribed
statutory limits, of federally insured banks and savings institutions and
safeguards the safety and soundness of the banking and savings industries. The
Federal Deposit Insurance Corporation administers two separate insurance funds,
the Bank Insurance Fund, which generally insures commercial bank and state
savings bank deposits, and the Savings Association Insurance Fund, which
generally insures savings association deposits. The Bank is a member of the Bank
Insurance Fund and its deposit accounts are insured by the Federal Deposit
Insurance Corporation, up to prescribed limits.
The Federal Deposit Insurance Corporation is authorized to establish
separate annual deposit insurance assessment rates for members of the Bank
Insurance Fund and the Savings Association Insurance Fund, and to increase
assessment rates if it determines such increases are appropriate to maintain the
reserves of either insurance fund. In addition, the Federal Deposit Insurance
Corporation is authorized to levy emergency special assessments on Bank
Insurance Fund and Savings Association Insurance Fund members. The Federal
Deposit Insurance Corporation's deposit insurance premiums are assessed through
a risk-based
19
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation, with the assessment rate for most
institutions set at 0%.
In addition, all institutions with deposits insured by the Federal
Deposit Insurance Corporation are required to pay assessments to fund interest
payments on bonds issued by the Financing Corporation, an agency of the Federal
government established to recapitalize the predecessor to the Savings
Association Insurance Fund. The current quarterly assessment rate is
approximately 0.0146% of insured deposits. These assessments will continue until
the Financing Corporation bonds mature in 2017.
Under the Federal Deposit Insurance Reform Act of 2005, which was
signed into law on February 15, 2006: (i) the Bank Insurance Fund and the
Savings Association Insurance Fund will be merged into a new combined fund, to
be called the Deposit Insurance Fund effective July 1, 2006, (ii) the current
$100,000 deposit insurance coverage will be indexed for inflation (with
adjustments every five years, commencing January 1, 2011); and (iii) deposit
insurance coverage for retirement accounts will be increased to $250,000 per
participant subject to adjustment for inflation. The FDIC will be given greater
latitude in setting the assessment rates for insured depository institutions
which could be used to impose minimum assessments.
The FDIC will be authorized to set the reserve ratio for the Deposit
Insurance Fund annually at between 1.15% and 1.5% of estimated insured deposits.
If the Deposit Insurance Fund's reserves exceed the designated reserve ratio,
the FDIC is required to pay out all or, if the reserve ratio is less than 1.5%,
a portion of the excess as a dividend to insured depository institutions based
on the percentage of insured deposits held on December 31, 1996 adjusted for
subsequently paid premiums. Insured depository institutions that were in
existence on December 31, 1996 and paid assessments prior to that date (or their
successors) are entitled to a one-time credit against future assessments based
on their past contributions to the BIF or SAIF.
Regulatory Capital Requirements. The Federal Deposit Insurance
Corporation has promulgated capital adequacy requirements for state-chartered
banks that, like the Bank are not members of the Federal Reserve System. At
December 31, 2005, the Bank exceeded all regulatory capital requirements and was
classified as "well capitalized."
The Federal Deposit Insurance Corporation's capital regulations
establish a minimum 3% Tier 1 leverage capital requirement for the most highly
rated state-chartered, non-member banks, with an additional cushion of at least
100 to 200 basis points for all other state-chartered, non-member banks, which
effectively increases the minimum Tier 1 leverage ratio for such other banks to
4% to 5% or more. Under the Federal Deposit Insurance Corporation's regulation,
the highest-rated banks are those that the Federal Deposit Insurance Corporation
determines are not anticipating or experiencing significant growth and have well
diversified risk, including no undue interest rate risk exposure, excellent
asset quality, high liquidity, good earnings and, in general, which are
considered a strong banking organization, rated composite 1 under the Uniform
Financial Institutions Rating System. Tier 1 or core capital is defined as the
sum of common stockholders' equity (including retained earnings), noncumulative
perpetual preferred stock and related surplus, and minority interests in
consolidated subsidiaries, minus all intangible assets other than certain
mortgage and non-mortgage servicing assets and purchased credit card
relationships.
The Federal Deposit Insurance Corporation's regulations also require
that state-chartered, non- member banks meet a risk-based capital standard. The
risk-based capital standard requires the maintenance of total capital (which is
defined as Tier 1 capital and supplementary (Tier 2) capital) to risk weighted
assets of 8%. In determining the amount of risk-weighted assets, all assets,
plus certain off balance sheet assets,
20
are multiplied by a risk-weight of 0% to 100%, based on the risks the Federal
Deposit Insurance Corporation believes are inherent in the type of asset or
item. The components of Tier 1 capital for the risk-based standards are the same
as those for the leverage capital requirement. The components of supplementary
(Tier 2) capital include cumulative perpetual preferred stock, mandatory
subordinated debt, perpetual subordinated debt, intermediate-term preferred
stock, up to 45% of unrealized gains on equity securities and a bank's allowance
for loan and lease losses. Allowance for loan and lease losses includable in
supplementary capital is limited to a maximum of 1.25% of risk-weighted assets.
Overall, the amount of supplementary capital that may be included in total
capital is limited to 100% of Tier 1 capital.
A bank that has less than the minimum leverage capital requirement is
subject to various capital plan and activities restriction requirements. The
Federal Deposit Insurance Corporation's regulations also provide that any
insured depository institution with a ratio of Tier 1 capital to total assets
that is less than 2.0% is deemed to be operating in an unsafe or unsound
condition pursuant to Section 8(a) of the Federal Deposit Insurance Act and
could be subject to termination of deposit insurance.
The Bank is also subject to minimum capital requirements imposed by the
Pennsylvania Department of Banking on Pennsylvania-chartered depository
institutions. Under the Pennsylvania Department of Banking's capital
regulations, a Pennsylvania bank or savings bank must maintain a minimum
leverage ratio of Tier 1 capital (as defined under the Federal Deposit Insurance
Corporation's capital regulations) to total assets of 4%. In addition, the
Pennsylvania Department of Banking has the supervisory discretion to require a
higher leverage ratio for any institutions based on the institution's
substandard performance in any of a number of areas. The Bank was in compliance
with both the Federal Deposit Insurance Corporation and the Pennsylvania
Department of Banking capital requirements as of December 31, 2005.
Affiliate Transaction Restrictions. Federal laws strictly limit the
ability of banks to engage in transactions with their affiliates, including
their bank holding companies. In particular, loans by a subsidiary bank to its
parent company or the nonbank subsidiaries of the bank holding company are
limited to 10% of a bank subsidiary's capital and surplus and, with respect to
such parent company and all such nonbank subsidiaries, to an aggregate of 20% of
the bank subsidiary's capital and surplus. Further, loans and other extensions
of credit generally are required to be secured by eligible collateral in
specified amounts. Federal law also requires that all transactions between a
bank and its affiliates be on terms as favorable to the bank as transactions
with non-affiliates.
Federal Home Loan Bank System. The Bank is a member of the Federal Home
Loan Bank of Pittsburgh, which is one of 12 regional Federal Home Loan Banks.
Each Federal Home Loan Bank serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from funds deposited by
member institutions and proceeds from the sale of consolidated obligations of
the Federal Home Loan Bank system. It makes loans to members (i.e., advances) in
accordance with policies and procedures established by the board of directors of
the Federal Home Loan Bank.
As a member, it is required to purchase and maintain stock in the
Federal Home Loan Bank of Pittsburgh in an amount equal to 4.55% of its
outstanding residential mortgage loans plus 0.55% of its unused maximum
borrowing capacity. At December 31, 2005, the Bank was in compliance with this
requirement.
Federal Reserve System. The Federal Reserve requires all depository
institutions to maintain non- interest bearing reserves at specified levels
against their transaction accounts (primarily checking and NOW accounts) and
non-personal time deposits. The balances maintained to meet the reserve
requirements
21
imposed by the Federal Reserve may be used to satisfy the liquidity requirements
that are imposed by the Department. At December 31, 2005, the Bank met its
reserve requirements.
Item 1A. Risk Factors
- ---------------------
Investing in our securities may involve certain risks, including the
risks described below. You should carefully consider these risk factors together
with all other available information and data before you decide to invest in our
securities.
Our loan portfolio includes a substantial amount of commercial and commercial
real estate loans.
Our commercial loan portfolio, including real estate and non-real
estate loans, was $146.9 million at December 31, 2005, comprising 32.9% of total
loans. Commercial loans generally involve a greater degree of risk of nonpayment
or late payment than home equity loans or residential mortgage loans. Any
significant failure to pay or late payments by our customers would hurt our
earnings. The increased credit risk associated with these types of loans is a
result of several factors, including the concentration of principal in a limited
number of loans and borrowers, the size of loan balances, the effects of general
economic conditions on income-producing properties and the increased difficulty
of evaluating and monitoring these types of loans. A number of factors may
affect a borrower's ability to make or refinance a balloon payment, including
the financial condition of the borrower, the prevailing local economic
conditions and the prevailing interest rate environment.
Furthermore, the repayment of loans secured by commercial real estate
is typically dependent upon the successful operation of the related real estate
or commercial project. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired. This cash flow shortage
may result in the failure to make loan payments. In such cases, we may be
compelled to modify the terms of the loan. In addition, the nature of these
loans is such that they are generally less predictable and more difficult to
evaluate and monitor. As a result, repayment of these loans may to a greater
extent than residential loans be subject to adverse conditions in the real
estate market or economy.
Our concentration of loans in the Pittsburgh area exposes us to the risk of a
possible economic downturn affecting that area.
Because our loans are concentrated in the Pittsburgh area, a decline in
the general economic conditions of this area could have a material adverse
effect on our financial condition, results of operations and cash flows. In
recent years, Pittsburgh has experienced the loss of several major employers and
is expected to experience additional job losses as the result of the U.S.
Airways merger and a decline in population. The Pittsburgh area is characterized
by an aging population and household incomes below the national average. These
factors may tend to limit economic growth and business opportunities.
If we have failed to provide an adequate allowance for loan losses, there could
be a significant negative impact on our earnings.
The risk of loan losses varies with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the value of the collateral for the loan. Based upon factors such as historical
experience, an evaluation of economic conditions and a regular review of
delinquencies and loan portfolio quality, our management makes various
assumptions and judgments about the ultimate collectibility of the loan
portfolio and provides
22
an allowance for loan losses. At December 31, 2005, our allowance for loan
losses was $3.6 million which represented 0.80% of total loans and 400% of
nonperforming loans. If our management's assumptions and judgments prove to be
incorrect and the allowance for loan losses is inadequate to absorb future
credit losses, or if the bank regulatory authorities require the Bank to
increase its allowance for loan losses, our earnings could be significantly and
adversely affected.
As our loan portfolio has increased, we have increased our allowance
for loan losses. Future additions to the allowance in the form of provisions for
loan losses may be necessary due to changes in economic conditions or growth of
our loan portfolio. As a result of the recent growth in our lending practices, a
significant portion of our total loan portfolio may be considered unseasoned.
Accordingly, specific payment and loss experience for this portion of the
portfolio has not yet been fully established, and there is the potential for
additional loan losses.
Future changes in interest rates may reduce our profits.
Our ability to make a profit largely depends on our net interest
income, which could be negatively affected by changes in interest rates. Net
interest income is the difference between:
o the interest income we earn on interest-earning assets, such as
loans and investment securities; and
o the interest expense we pay on our interest-bearing liabilities,
such as deposits and amounts we borrow.
If more interest-earning assets than interest-bearing liabilities re-price or
mature during a time when interest rates are declining, then our net interest
income may be reduced. If more interest-bearing liabilities than
interest-earning assets re-price or mature during a time when interest rates are
rising, then our net interest income may be reduced. At December 31, 2005, our
interest-earning liabilities maturing or repricing within one year exceeded our
interest-bearing assets maturing or repricing within one year by $71.8 million.
As a result, the yield on our interest-earning assets should adjust to changes
in interest rates at a faster rate than the cost of our interest-bearing
liabilities and our net interest income may be reduced when interest rates
decrease significantly for long periods of time.
The loss of any of our executive officers could hurt our operations
We rely heavily on our executive management team, the loss of any one
of whom could have an adverse effect on our operations. As a community bank, our
executive officers have more responsibility than would be typical at a larger
financial institution with more employees. In addition, we have fewer senior
level managers who would are in a position to succeed and assume the
responsibilities of our executive officers. The loss of their business
experience and relationships could affect our ability to generate loans and
deposits.
Our shareholder rights plan could have the effect of deterring accumulations of
our common stock.
The Company has adopted a shareholder rights plan pursuant to which the
Company has distributed to each shareholder of record one right for each share
held. The rights do not become exercisable until a person (other than an exempt
person) acquires beneficial ownership of 10% or more of the Company's
outstanding common stock or commences a tender or exchange offer that would
result in the person
23
becoming a 10% or greater beneficial owner (an "Acquiring Person"). In that
event, each rights holder other than the Acquiring Person will be entitled to
purchase shares of the Company's common stock having value equal to twice the
exercise price of the rights. In the event the Company merges with an Acquiring
Person or an affiliate or associate of the Acquiring Person, the rights entitle
holders other than the Acquiring Person to purchase a similar amount of that
entity's stock at half price. The effect of the shareholder rights plan would be
to significantly dilute the ownership of an Acquiring Person which may deter
persons from accumulating large positions in our common stock.
Various other provisions in our governing documents could have the effect on
insulating management from a hostile takeover.
The Company's Articles of Incorporation and Bylaws contain various
other provisions that could have the effect of deterring changes in control
which are not approved in advance by our Board of Directors, including:
o Supermajority Vote Required for Business Combinations;
o Consideration of Non-Monetary Factors in Evaluating Tender Offers;
o Classified Board of Directors;
o Restriction on Number of Directors and Filling Board Vacancies;
o Additional Shares of Authorized Common Stock; and
o Supermajority Vote Required for Charter Amendments.
These provisions could have the effect of deterring a change in control
of the Company. As a result, shareholders who wish to participate in a change in
control transaction may not have the opportunity to do so.
Item 1B. Unresolved Staff Comments
- -----------------------------------
Not applicable.
Item 2. Properties
- -------------------
At December 31, 2005, the Registrant operated from its main office, six
branch offices and four supermarket branch offices and two loan offices and a
trust office, all located in southwestern Pennsylvania. The total net book value
of the Registrant's investment in premises and equipment at December 31, 2005,
was approximately $5.6 million. The main office of the Company and of the Bank
and three branch offices are owned by the Bank and the remaining three branch
offices, four supermarket branch offices, and the Bank's trust division and a
loan center, are leased by the Bank. These leases have initial terms of one to
twenty years, and all leases contain renewal options for additional periods of 1
to 5 years.
Item 3. Legal Proceedings
- --------------------------
The Registrant is periodically involved as a plaintiff or defendant in
various legal actions, such as actions to enforce liens, condemnation
proceedings on properties in which the Registrant holds mortgage interests,
matters involving the making and servicing of mortgage loans and other matters
incident to the Registrant's business. In the opinion of management, none of
these actions individually or in the aggregate is believed to be material to the
financial condition or results of operations of the Registrant.
24
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 2005.
Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
- --------------------------------------------------------------------------------
and Issuer Purchases of Equity Securities
- -----------------------------------------
(a) Market for Common Equity. The information contained under the
section captioned "Stock Market Information" in the 2005 Annual Report to
Stockholders (the "Annual Report") is incorporated herein by reference. The
Registrant did not sell any equity securities that were not registered under the
Securities Act of 1933 during the period under report.
(b) Use of Proceeds. Not applicable
(c) Issuer Purchase of Equity Securities. Not applicable.
Item 6. Selected Financial Data
- --------------------------------
The information contained in the table captioned "Financial Highlights"
in the Annual Report is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- --------------------------------------------------------------------
The information contained in the section captioned "Market Risk" in the
Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The Registrant's financial statements listed in Item 15 herein are
incorporated herein by reference from the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not applicable.
25
Item 9A. Controls and Procedures
- ---------------------------------
(a) Disclosure Controls and Procedures
The Company's management evaluated, with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, the effectiveness
of the Company's disclosure controls and procedures, as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
(b) Internal Control Over Financial Reporting
Management's Report on Internal Control Over Financial Reporting and
the Attestation Report of its Independent Registered Public Accounting Firm are
incorporated herein by reference from the Annual Report.
There were no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Item 9B. Other Information
- ---------------------------
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The information contained under the sections captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal I -- Election of
Directors" and "-- Biographical Information" in the definitive Proxy Statement
for the 2006 Annual Meeting of Stockholders ("Proxy Statement") is incorporated
herein by reference.
The Company has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions. A copy of the Company's Code
of Ethics will be furnished, without charge, to any person who requests such
copy by writing to the Secretary, IBT Bancorp, Inc., 309 Main Street, Irwin,
Pennsylvania 15642.
Item 11. Executive Compensation
- --------------------------------
The information contained under the section captioned "Director and
Executive Compensation" in the Proxy Statement is incorporated herein by
reference.
26
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the Section captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of Certain
Beneficial Owners" of the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the sections captioned "Voting Securities and
Principal Holders Thereof -- Security Ownership of Certain
Beneficial Owners" and "Proposal I -- Election of Directors"
of the Proxy Statement.
(c) Changes in Control
Management of the Company knows of no arrangements, including
any pledge by any person of securities of the Company, the
operation of which may at a subsequent date result in a change
in control of the registrant.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
Set forth below is information as of December 31, 2005 with respect to
compensation plans under which equity securities of the Registrant are
authorized for issuance.
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
Number of securities
Number of securities Weighted-average remaining available for
to be issued upon exercise price of future issuance under
exercise of outstanding equity compensation plans
outstanding options, options, warrants (excluding securities
warrants and rights and rights reflected in column (a))
-------------------- ---------- ------------------------
Equity compensation plans
approved by shareholders:
2000 Stock Option Plan........... 87,271 $30.86 150,000
Equity compensation plans
not approved by shareholders..... -- -- --
------ ------ -------
TOTAL....................... 87,271 $30.86 150,000
====== ====== =======
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors --
Certain Relationships and Related Transactions" of the Proxy Statement.
Item 14. Principal Accounting Fees and Services
- ------------------------------------------------
The information called for by this item is incorporated herein by
reference to the section entitled "Ratification of Appointment of Accountants"
in the Proxy Statement.
Part IV
Item 15. Exhibits, Financial Statements
(a) Listed below are all financial statements and exhibits filed
as part of this report, and are incorporated by reference.
1. The consolidated statements of financial condition of
IBT Bancorp, Inc. and subsidiary as of December 31,
2005 and 2004, and the related consolidated
statements of income, changes in stockholders' equity
and cash flows for each of the years in the
three-year period ended December 31, 2005, together
with the related notes and the independent auditors'
report of Edwards Sauer & Owens, P.C., independent
registered public accounting firm.
2. Schedules omitted as they are not applicable.
3. Exhibits
3(i) Articles of Incorporation of IBT Bancorp, Inc.*
3(ii) Amended Bylaws of IBT Bancorp, Inc.**
4.1 Rights Agreement, dated as of November 18, 2003 by and between IBT
Bancorp, Inc. and Registrar and Transfer Company***
10 + Change In Control Severance Agreement with Charles G. Urtin****
10.1 + Deferred Compensation Plan For Bank Directors****
10.2 + Death Benefit Only Deferred Compensation Plan For Bank Directors
effective as of January 1, 1990****
10.3 + Retirement and Death Benefit Deferred Compensation Plan For
Bank Directors effective as of January 1, 1990****
10.4 + 2000 Stock Option Plan*****
10.5 + Irwin Bank & Trust Company Supplemental Pension Plan******
10.6 + Medical Insurance Continuation Agreement with Charles G. Urtin*******
13 Portions of the 2005 Annual Report to Shareholders
21 Subsidiaries
23 Consent of Edwards, Sauer & Owens, P.C.
28
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
32 Section 1350 Certification
-------------------------
+ Management contract or compensatory plan or arrangement.
* Incorporated by reference to the identically numbered exhibits of the
Registrant's Form 10 (File No. 0-25903) filed April 29, 1999.
** Incorporated by reference to the identically numbered exhibits of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
*** Incorporated by reference to Amendment No. 1 to Form 8-A Registration
Statement (File No. 001-31655) filed with the SEC on November 20,
2003.
**** Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
***** Incorporated by reference to the Registration Statement on Form S-8
(File No. 333-40398) filed with the SEC on June 29, 2000.
****** Incorporated by reference to identically numbered exhibit in
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2004.
******* Incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8-K filed March 6, 2006.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 as of March 8, 2006.
IBT BANCORP, INC.
By: /s/Charles G. Urtin
-------------------------------
Charles G. Urtin, President and
Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below as of March 8, 2006 by the following persons
on behalf of the registrant and in the capacities indicated.
/s/Charles G. Urtin /s/Thomas E. Deger
- -------------------------------------------- -----------------------------------
Charles G. Urtin, President, Chief Executive Thomas E. Deger
Officer, and Director Director
(Principal Executive Officer)
/s/Richard L. Ryan /s/John N. Brenzia
- -------------------------------------------- -----------------------------------
Richard L. Ryan John N. Brenzia
Director Director
/s/Charles W. Hengenroeder /s/Robert C. Whisner
- -------------------------------------------- -----------------------------------
Charles W. Hengenroeder Robert C. Whisner
Director Director
/s/Grant J. Shevchik /s/Robert Rebich, Jr.
- -------------------------------------------- -----------------------------------
Grant J. Shevchik Robert Rebich, Jr.
Director Director
/s/Raymond G. Suchta
- -------------------------------------------- -----------------------------------
Raymond G. Suchta Richard J. Hoffman
Senior Vice President and Chief Financial Officer Director
(Principal Financial and Accounting Officer)