UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2007
--------------
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 No. 1-31655
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IBT Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1532164
- ---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
309 Main Street, Irwin, Pennsylvania 15642
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(724) 863-3100
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(Registrant's telephone number, including area code)
NA
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is 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 Exchange Act). [ ] Yes [X] No
Number of shares of Common Stock outstanding as of May 08, 2007: 5,882,040
IBT BANCORP, INC.
Contents
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Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..................................................................2
Consolidated balance sheets (unaudited) at March 31, 2007
and December 31, 2006............................................................2
Consolidated statements of income (unaudited) for the three months
ended March 31, 2007 and 2006 ...................................................3
Consolidated statements of cash flows (unaudited) for the three months
ended March 31, 2007 and 2006....................................................4
Notes to consolidated financial statements............................................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................12
Item 4. Controls and Procedures..............................................................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................................13
Item 1A. Risk Factors.........................................................................13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..........................13
Item 3. Defaults upon Senior Securities......................................................13
Item 4. Submission of Matters to a Vote of Security-Holders..................................13
Item 5. Other Information....................................................................13
Item 6. Exhibits.............................................................................14
Signatures...........................................................................................15
CONSOLIDATED BALANCE SHEETS
IBT BANCORP, INC. AND SUBSIDIARY
March 31, 2007 December 31, 2006
-------------- -----------------
(unaudited) (unaudited)
-------------- -----------------
ASSETS
Cash and due from banks $ 17,756,695 $ 19,317,614
Interest-bearing deposits in banks 744,134 637,034
Certificates of deposit 100,000 100,000
Securities available for sale 224,916,962 221,249,369
Federal Home Loan Bank stock, at cost 4,981,300 5,196,800
Loans, net 466,022,851 467,720,508
Premises and equipment, net 5,382,162 5,281,385
Other assets 21,579,332 21,459,045
------------- --------------
Total Assets $ 741,483,436 $ 740,961,755
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 85,347,626 $ 85,553,753
Interest-bearing 486,766,030 486,918,461
------------- --------------
Total deposits 572,113,656 572,472,214
Repurchase agreements 30,072,384 27,416,559
Accrued interest and other liabilities 6,256,473 6,082,279
FHLB advances 69,946,721 72,409,643
------------- --------------
Total liabilities 678,389,234 678,380,695
Stockholders' Equity
Capital stock, par value $1.25 per share,
50,000,000 shares authorized, 5,965,119
shares issued, 5,882,040 and 5,882,640 shares
outstanding at March 31, 2007 and
December 31, 2006, respectively 7,456,399 7,456,399
Retained earnings 59,367,736 58,970,791
Accumulated other comprehensive income (775,492) (904,723)
------------- --------------
66,048,643 65,522,467
Less: Treasury stock, at cost (2,954,441) (2,941,407)
------------- --------------
Total stockholders' equity 63,094,202 62,581,060
------------- --------------
Total Liabilities and Stockholders' Equity $ 741,483,436 $ 740,961,755
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF INCOME
IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
----------------------------
2007 2006
------------ ------------
(unaudited)
----------------------------
Interest Income
Loans, including fees $ 7,886,596 $ 7,214,485
Investment securities 2,724,157 2,202,385
Federal funds sold 5,037 1,472
------------ ------------
Total interest income 10,615,790 9,418,342
Interest Expense
Deposits 4,114,125 2,891,101
FHLB advances 788,930 757,706
Repurchase agreements 330,556 177,905
Federal funds purchased - 183,934
------------ ------------
Total interest expense 5,233,611 4,010,646
------------ ------------
Net Interest Income 5,382,179 5,407,696
Provision for Loan Losses 250,000 300,000
------------ ------------
Net Interest Income after Provision
for Loan Losses 5,132,179 5,107,696
Other Income
Service fees 886,851 872,154
Investment security gains 1,235 255,000
Investment security losses (2,500) -
Increase in cash surrender value of life insurance 120,696 110,287
Debit card fees 210,633 196,513
Trust fees 115,137 132,142
Other income 295,000 278,457
------------ ------------
Total other income 1,627,052 1,844,553
Other Expenses
Salaries 1,541,519 1,543,630
Pension and other employee benefits 647,399 577,611
Occupancy expense 403,939 413,466
Data processing expense 273,756 267,321
Pennsylvania shares tax 163,071 150,785
Advertising expense 145,633 62,929
Debit card expense 146,250 165,255
Other expenses 1,048,694 856,666
------------ ------------
Total other expenses 4,370,261 4,037,663
------------ ------------
Income Before Income Taxes 2,388,970 2,914,586
Provision for Income Taxes 521,365 604,147
------------ ------------
Net Income $ 1,867,605 $ 2,310,439
============ ============
Basic Earnings per Share $ 0.32 $ 0.39
============ ============
Diluted Earnings per Share $ 0.32 $ 0.39
============ ============
Dividends per Share $ 0.25 $ 0.25
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
----------------------------
2007 2006
------------ ------------
(unaudited)
----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,867,605 $ 2,310,439
Adjustments to reconcile net cash
from operating activities:
Depreciation 180,000 204,000
Increase in cash surrender value of insurance (120,696) (110,287)
Net amortization/accretion of
premiums and discounts (15,453) 111,912
Investment security losses (gains) 1,265 (255,000)
Provision for loan losses 250,000 300,000
Increase (decrease) in cash due
to changes in assets and liabilities:
Other assets (22,590) 13,097
Accrued interest and other liabilities 140,070 2,178,511
------------ ------------
Net Cash From Operating Activities 2,280,201 4,752,672
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities
available for sale 3,998,750 2,565,000
Proceeds from maturities of securities
available for sale 5,018,318 7,512,912
Purchase of securities available for sale (12,472,968) (14,776,895)
Net decrease (increase) in loans 1,436,506 (8,967,646)
Purchases of premises and equipment (280,777) (113,749)
Proceeds from sales of Federal Home Loan Bank stock 852,800 2,372,000
Purchase of Federal Home Loan Bank stock (637,300) (2,384,700)
------------ ------------
Net Cash Used By Investing Activities (2,084,671) (13,793,078)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (358,558) 6,218,241
Net increase in securities sold
under repurchase agreements 2,655,825 14,509,701
Dividends paid (1,470,660) (1,477,727)
Proceeds from FHLB advances 81,615,000 12,000,000
Repayment of FHLB advances (84,077,922) (1,660,883)
Federal funds purchased - (12,468,000)
Exercised stock options - (3,764)
Purchase of treasury stock (13,034) (52,760)
------------ ------------
Net Cash (Used By) From Financing Activities (1,649,349) 17,064,808
Net Change in Cash and Cash Equivalents (1,453,819) 8,024,402
Cash and Cash Equivalents at Beginning of Period 19,954,648 15,499,940
------------ ------------
Cash and Cash Equivalents at End of Period $ 18,500,829 $ 23,524,342
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended March 31, 2007
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
accruals considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2007 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2007 or any future interim period. The interim financial statements should be
read in conjunction with the financial statements and footnotes thereto included
in the IBT Bancorp, Inc. and subsidiary Annual Report on Form 10-K for the year
ended December 31, 2006.
NOTE B - EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding. The weighted average shares outstanding was 5,882,183 for
the three months ended March 31, 2007 and 5,909,844 for the three months ended
March 31, 2006. The outstanding shares for the three months ended March 31, 2006
have been restated for the 100% stock dividend paid on November 16, 2006
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended March 31, 2007 and 2006
was $1,996,836 and $1,962,513, respectively.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
March 31, 2007
---------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------- ------------- ------------- -------------
Obligations of
U.S. Government Agencies $ 98,613,974 $ 522,222 $ (531,085) $ 98,605,111
Obligations of State and
political sub-divisions 62,971,845 1,174,244 (80,872) 64,065,217
Mortgage-backed securities 62,953,570 71,394 (1,055,537) 61,969,427
Other securities 46,813 - (2) 46,811
Equity securities 250,220 3,569 (23,393) 230,396
------------- ------------- ------------- -------------
$ 224,836,422 $ 1,771,429 $ (1,690,889) $ 224,916,962
============= ============= ============= =============
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended March 31, 2007
NOTE E - RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued Statement No. 159 the Fair Value Option for
Financial Assets and Financial Liabilities - Including an Amendment of FASB 115.
FASB No. 159 permits entities to choose to measure certain financial instruments
at fair value. It was developed to improve financial reporting by reducing the
volatility pertaining to the measurement of assets and liabilities without
having to apply complex hedge accounting guidance. This statement is expected to
expand the use of fair value measurement, which is consistent with FASB's
long-term measurement objectives for accounting for financial instruments. This
statement is effective as of the beginning of an entity's first fiscal year
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of the fiscal year that begins on or before November 15, 2007,
provided the entity also elects to apply the provisions of FAS No. 157, Fair
Value Measurements. The Company is evaluating the effects of this statement on
its financial statements and has not elected to adopt early.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. When used in this
discussion, the words "believes", "anticipates", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which include changes
in interest rates, risks associated with the effect of opening new branches, the
ability to control costs and expenses, and general economic conditions. IBT
Bancorp, Inc. undertakes no obligation to update those forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
GENERAL
IBT Bancorp, Inc. is a bank holding company headquartered in Irwin,
Pennsylvania, which provides a full range of commercial and retail banking
services through its wholly owned banking subsidiary, Irwin Bank (collectively,
the "Company"). In the fall of 2006, the Company began a branding and market
research initiative. As a result of this on-going endeavor, in February 2007,
the Company developed a new logo for its banking subsidiary and shortened its
name to "Irwin Bank". The Company's stock is traded on the American Stock
Exchange under the symbol IRW. All historical per share amounts have been
restated for the 100% stock dividend paid on November 16, 2006.
FINANCIAL CONDITION
At March 31, 2007 total assets increased $522,000 to $741.5 million
from $741.0 million at December 31, 2006. Asset growth was primarily due to
increases in securities available for sale of $3.7 million offset by net loan
decreases of $1.7 million.
At March 31, 2007, securities available for sale increased $3.7 million
to $224.9 million from $221.2 million at December 31, 2006. This change was
primarily due to increases in U.S. government agencies of $3.3 million and in
mortgage-backed securities of $923,000 offset by a net decrease of $532,000 in
obligations of state and political sub-divisions. The Company evaluates the
investment portfolio on an on-going basis to maximize yield, within
board-approved risk thresholds, making purchasing and selling decisions
accordingly.
Net loans at March 31, 2007 were $466.0 million, $1.7 million below the
reported total of $467.7 million at December 31, 2006. This change was primarily
due to decreases in real estate secured mortgage and commercial loans of $1.4
million and in lines of credit of $1.3 million partially offset by an increase
of $821,000 in municipal loans. Contributing to the decrease was a decline in
first quarter loan originations following a seasonal drop in fourth quarter loan
applications.
7
At March 31, 2007, total liabilities remained relatively unchanged at
$678.4 million from the same reported total at December 31, 2006. Total
liabilities remained unchanged due to decreases in total deposits and FHLB
advances being offset by increases in repurchase agreements.
Repurchase agreements increased $2.7 million to $30.1 million at March
31, 2007, from $27.4 million at December 31, 2006 due to normal account
fluctations. The Company offers its corporate customers sweep accounts where
unused deposit balances are swept into an overnight repurchase agreement
yielding market rates.
FHLB advance totals dropped $2.5 million to $70.0 million at March 31,
2007, from $72.4 million at December 31, 2006. The decrease is due to the
maturity of a $2.0 million advance and principal payments of $463,000.
Non-interest bearing deposit accounts decreased to $85.3 million at
March 31, 2007, from $85.6 million at December 31, 2006. The decrease of
$206,000 is attributed to normal fluctuations, which arise due to the timing of
month-end pension and social security deposits.
Interest-bearing deposits decreased to $486.8 million at March 31,
2007, from $486.9 million at December 31, 2006. The decrease of $152,000 was
primarily in certificates of deposit, which decreased $9.7 million. The decrease
was offset by an increase of $5.6 million in money market accounts, $2.1 million
in interest bearing checking accounts, and $1.9 million in savings accounts.
Certificate of deposit decreases were primarily from short-term certificates
that the Company had not anticipated maintaining.
At March 31, 2007 total stockholders' equity increased $513,000 to
$63.1 million from $62.6 million at December 31, 2006. The increase was
primarily due to net income of $1.9 million and an increase in accumulated other
comprehensive income (net of deferred income taxes) of $130,000 offset by
dividends paid of $1.5 million and treasury stock purchased of $13,000.
Accumulated other comprehensive income increased as a result of changes in the
net unrealized gains/losses on securities available for sale. Because of the
effect of interest rate volatility on unrealized gains/losses on securities
available for sale, the Company's accumulated other comprehensive income could
materially fluctuate for each interim period and year-end. See Note D to the
consolidated financial statements.
RESULTS OF OPERATIONS
Net income. Net income for the three months ended March 31, 2007
decreased $443,000 to $1,868,000, or $.32 diluted earnings per share from
$2,310,000, or $.39 diluted earnings per share, for the comparable three-month
period in 2006. The decrease for the three months ended March 31, 2007 was
primarily the result of a decrease in net interest income due primarily to a
$254,000 decrease in investment security gains, a decrease in other income, and
an increase in other expense.
8
Net interest income. Net interest income declined to $5,382,000 for the
three months ended March 31, 2007 compared to $5,408,000 for the three months
ended March 31, 2006. While interest income increased 13% over the comparable
2006 quarter, interest expense increased 30%. This was due to rates paid for
deposits increasing at a faster rate than rates charged for loans. As a result,
the Company's net interest spread tightened to 2.52% from 2.82% in the prior
year period and its net interest margin narrowed to 3.08% from 3.31%. The
narrowing of the spread and margin reflect the current inverted yield curve
environment in which short-term rates (off which we price our deposits) are
higher than long-term rates (off which we price our loans.)
Interest income. Interest income for the three months ended March 31,
2007 increased $1,198,000 to $10,616,000 from $9,418,000 for the comparable
three-month period in 2006. The average balance of interest earning assets
increased $45.1 million for the three months ended March 31, 2007, to $698.9
million from $653.8 million for the comparable period in 2006. The yield on
these assets increased 32 basis points to 6.08%, for the three months ended
March 31, 2007 from 5.76% for the comparable period in 2006. See "Average
Balance Sheet and Rate/Volume Analysis".
Interest expense. Interest expense for the three months ended March 31,
2007 increased $1,224,000 to $5,234,000 from $4,010,000 for the comparable
period in 2006. The change in interest expense was primarily attributed to an
increase of $41.2 million in the average balance of interest-bearing liabilities
and a 62 basis point increase in the average cost of funds to 3.56% for the
three months ended March 31, 2007 from 2.94% for the comparable period in 2006.
See "Average Balance Sheet and Rate/Volume Analysis".
9
Average Balance Sheet
The following table sets forth certain information relating to the Company for
the periods indicated. The average yields and costs are derived by dividing
income or expense on an annualized basis by the average balance of assets or
liabilities, respectively, for the periods presented. Average balances are
derived from average daily balances.
Three Months Ended March 31, Three Months Ended March 31,
--------------------------------- ----------------------------------
2007 2006
--------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost
--------------------------------- ----------------------------------
(Dollars In Thousands) (Dollars In Thousands)
--------------------------------- ----------------------------------
Interest-earning assets:
Loans receivable (1) $ 469,997 $ 7,887 6.71% $ 449,608 $ 7,215 6.42%
Investment securities (2) 228,519 2,724 4.77% 204,026 2,202 4.32%
Federal funds sold 387 5 5.20% 171 1 3.44%
--------- -------- ---- --------- ------- ----
Total interest earning assets 698,903 $ 10,616 6.08% 653,805 $ 9,418 5.76%
Non-interest earning assets (3) 38,075 37,000
--------- ---------
Total assets $ 736,978 $ 690,805
========= =========
Interest-bearing liabilities:
Money market accounts $ 57,142 $ 426 2.98% $ 54,411 $ 279 2.05%
Certificates of Deposit 306,151 3,507 4.58% 256,989 2,426 3.78%
Other liabilities (4) 224,502 1,300 2.32% 235,152 1,305 2.22%
--------- -------- ---- --------- ------- ----
Total interest-bearing liabilities 587,795 $ 5,234 3.56% 546,552 $ 4,010 2.94%
-------- ---- ------- ----
Non-interest-bearing liabilities (3) 87,409 83,746
--------- ---------
Total liabilities 675,204 630,298
Stockholders' equity (5) 61,774 60,507
--------- ---------
Total liabilities and
stockholders' equity $ 736,978 $ 690,805
========= =========
Net interest income $ 5,382 $ 5,408
======== =======
Interest rate spread (6) 2.52% 2.82%
====== ======
Net interest margin (7) 3.08% 3.31%
====== ======
Ratio of average
interest-earning assets to
average interest-bearing liabilities 118.90% 119.62%
====== ======
- ---------------------
(1) Average balances include non-accrual loans, and are net of deferred loan
fees.
(2) Includes investment securities, interest-bearing deposits in other
financial institutions and FHLB stock.
(3) Includes net deferred income taxes in excess of deferred tax benefits on
AFS securities (SFAS 115), stock options (SFAS 123/148) and deferred fees
(SFAS 109). Non-interest bearing liabilities include demand deposit
accounts.
(4) Includes savings accounts, interest-bearing checking, FHLB advances,
Federal funds purchased, and repurchase agreements.
(5) Includes capital stock, surplus and other comprehensive income.
(6) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(7) Net interest margin represents net interest income as a percentage of
average interest earning assets.
10
Rate / Volume Analysis
The following table shows the effect of changes in volumes and rates on
interest income and interest expense. The changes in interest income and
interest expense attributable to changes in both volume and rate have been
allocated to the changes due to rate. Tax exempt income was not recalculated on
a tax equivalent basis due to the immateriality of the change to the table
resulting from a recalculation.
Three Month Period ended March 31, 2007
---------------------------------------
2007 vs. 2006
--------------------------------------
Increase (Decrease)
Due to
--------------------------------------
Volume Rate Net
------- ------- -------
(Dollars In Thousands)
Interest income:
Loans receivable $ 328 $ 344 $ 672
Investment securities available for sale 264 258 522
Other interest earning assets 1 3 4
------- ------- -------
Total interest-earning assets 593 605 1,198
------- ------- -------
Interest expense:
Money market accounts 14 133 147
Certificates of deposit 464 617 1,081
Other liabilities (59) 55 (4)
------- ------- -------
Total interest-bearing liabilities 419 805 1,224
------- ------- -------
Net change in net interest income $ 174 $ (200) $ (26)
======= ======= =======
Provision for loan losses. For the three months ended March 31, 2007
$250,000 was taken as a provision for loan losses compared to $300,000 for the
comparable quarter in 2006. At March 31, 2007, the allowance for loan losses
equaled 1.06% of gross loans outstanding compared to .82% at March 31, 2006. Net
charge-offs as a percentage of average loans for the respective periods were
..005% and .03%.
The provision for loan losses is charged to operations to bring the
total allowance for loan losses to a level that represents management's best
estimate of the losses inherent in the portfolio, based on a monthly review by
management of the following factors:
o Historical experience
o Volume
o Type of lending conducted by the Bank
o Industry standards
o The level and status of past due and non-performing loans
o The general economic conditions in the Bank's lending area; and
o Other factors affecting the collectability of the loans in the
portfolio
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. Watch and
classified loans are allocated additional reserves.
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.
11
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.
Other income. Total other income for the three months ended March 31,
2007 decreased $218,000 to $1,627,000 from $1,845,000 for the comparable three
month period in 2006. The decrease in other income for the three months ended
March 31, 2007 was primarily due to a decrease in investment security gains of
$254,000. This decrease was partially offset by increases in other income,
service fees and debit card fees of $17,000, $15,000, and $14,000, respectively.
Other income increased as a result of a gain realized from the sale of other
real estate while income from service fees and debit card fees collected rose
due to a growing deposit base and increased transactions from the comparable
period in 2006.
Other expense. Total other expense for the three month period ended
March 31, 2007 increased $332,000 to $4,370,000 from $4,038,000 for the
comparable three month period in 2006. Other expenses, advertising, and benefit
costs increased $192,000, $83,000, and $70,000, respectively, during the
three-month period ended March 31, 2007 from the comparable period in 2006. The
increase in other expenses was primarily related to increased donations and the
normal cost of doing business. Advertising costs rose due to expenses related to
the Company's new logo while the increase in benefit costs are directly related
to an increase in health care benefit costs. The balances of the increases are
due to normal increases in the cost of doing business.
Provision for income taxes. Income taxes decreased to $521,000 for the
three month period ended March 31, 2007 from $604,000 for the comparable quarter
in 2006 as a result of lower net income. Securities written down in December
2004 and sold in 2006 also reduced the recorded tax expense in 2006. The
effective tax rate increased to 22% for the first quarter of 2007 from 21% for
the comparable quarter in 2006.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes for the three months ended March 31,
2007 from the information presented in the 10K statement, under the caption
Market Risk, for the year ended December 31, 2006.
Item 4. 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.
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.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant is not party to any material legal proceedings at the
present time. From time to time, the Bank is a party to routine legal
proceedings within the normal course of business wherein it enforces
its security interest in loans made by it, and other matters of a like
kind.
Item 1A. Risk Factors
There have been no material changes from the risk factors as
previously disclosed in the Registrant's annual report on Form 10-K
for the year ended December 31, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities. Not Applicable
(b) Use of Proceeds. Not Applicable
(c) Issuer Purchases of Equity Securities.
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
(c) Total Number Of
Shares (or Units) (d) Maximum Number or
Purchased as Part Approximate Dollar Value)
(a) Total Number (b) Average Price Of Publicly (or Units that May Yet
Of (or Units) per Share Announced Plans Be Purchased Under the
Period Purchased (or Units) or Programs* Plans or Programs
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
January 1 through 31
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
February 1 through 28 600 $21.42 83,079 68,021
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
March 1 through 31
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
Total 600 $21.42 83,079 68,021
- --------------------------- -------------------- --------------------- ----------------------- -----------------------------
* On November 18, 1999, the Registrant announced a stock repurchase plan for
up to 151,100 shares.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable
13
Item 6. Exhibits
The following exhibits are either filed with or incorporated by
reference in this Quarterly Report on Form 10-Q:
3(i) Articles of Incorporation of IBT Bancorp, Inc.*
3(ii) Amended Bylaws of IBT Bancorp, Inc.**
4 Rights Agreement, dated as of November 18, 2003, by and between
IBT Bancorp, Inc. and Registrar and Transfer Company, as Rights Agent.***
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*******
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
- ------------------
* 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 exhibit of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.
*** Incorporated by reference to Exhibit 4 to Amendment No. 1 to Form 8-A
(File No. 1-31655) filed November 20, 2003.
**** 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, 1999.
***** Incorporated by reference to Exhibit 4.1 the Registrant's Registration
Statement on Form S-8 (File No. 333-40398) filed June 29, 2000.
****** Incorporated by reference to identically numbered exhibit to
Registrant's Annual Report on Form 10-K for 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.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IBT BANCORP, INC.
Date: May 7, 2007 By: /s/Charles G. Urtin
----------------------------------
Charles G. Urtin
President, Chief Executive Officer
(Duly authorized officer)
Date: May 7, 2007 By: /s/Raymond G. Suchta
----------------------------------
Raymond G. Suchta
Chief Financial Officer
(Principal Financial Officer)