EXHIBIT 99.4
IBT BANCORP INC.
AND
THE FARWELL STATE SAVINGS BANK
UNAUDITED COMBINED PRO FORMA FINANCIAL INFORMATION
IBT BANCORP, INC.
AND
FARWELL STATE SAVINGS BANK
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BASIS OF PRESENTATION
The following unaudited pro forma combined balance sheet and income statements
give effect to the merger. This pro forma financial information is based on the
historical consolidated financial statements of IBT Bancorp Inc. (IBT) and The
Farwell State Savings Bank (Farwell) under the assumptions, and including the
adjustments, set forth in the accompanying notes to unaudited pro forma combined
financial statements. The unaudited pro forma consolidated combined balance
sheet present combined financial information as of September 30, 2006, and the
unaudited pro forma consolidated combined statements of income presents combined
financial information for the nine month period ended September 30, 2006, and
for the year ended December 31, 2005. The unaudited pro forma consolidated
combined balance sheet assumes the merger was consummated on September 30, 2006,
and the unaudited pro forma consolidated combined statements of income give
effect to the merger as if the merger occurred at the beginning of each period
covered by such pro forma statements of income. Pro forma per share amounts are
based on total merger consideration of $145 per share of Farwell common stock.
IBT will account for the acquisition under the purchase method of accounting.
Accordingly, IBT will establish a new basis for Farwell's assets and liabilities
based upon the fair values thereof and the IBT purchase price, including direct
and incremental costs of the acquisition. The purchase accounting adjustments
made in connection with the development of the unaudited combined pro forma
financial statements are preliminary and have been made solely for the purpose
of developing such pro forma financial information and are based on the
assumptions described in the notes thereto.
The unaudited pro forma consolidated combined financial statements reflect the
restructuring and other merger related expenses disclosed in the notes to such
statements but do not reflect anticipated cost savings that may be achieved with
respect to the combined businesses nor any adjustment to expenses for any future
operating changes. IBT may incur integration related expenses not reflected in
the pro forma financial statements, such as operational realignment. As a result
of this and other factors, the pro forma consolidated combined financial
condition and results of operations of IBT as of and after the effective time of
the merger may not be indicative of the results that actually would have
occurred if the merger had been in effect during the periods presented nor of
the results that may be attained in the future. IBT is unaware of events that
would require a material change to the preliminary purchase price allocation.
IBT BANCORP, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET (A)
AS OF SEPTEMBER 30, 2006
(Dollars in thousands)
Pro Forma
IBT Bancorp Farwell -------------------------
Historical Historical Adjustments Combined
----------- ---------- ----------- --------
ASSETS
Cash and demand deposits due from banks $ 25,693 $ 1,917 $ -- $ 27,610
Federal funds sold -- 2,418 -- 2,418
-------- ------- ------- --------
TOTAL CASH AND CASH EQUIVALENTS 25,693 4,335 -- 30,028
Investment securities available for sale 193,268 17,165 -- 210,433
Mortgage loans available for sale 656 -- -- 656
Loans (net of the allowance for loan losses) 516,018 63,910 115(C) 580,043
Premises and equipment 20,040 307 600(C) 20,947
Bank-owned life insurance 11,337 1,320 -- 12,657
Accrued interest receivable 5,468 413 -- 5,881
Acquisition intangibles and goodwill, net 3,673 -- 23,147(D)(G) 26,820
Other assets 13,019 655 -- 13,674
-------- ------- ------- --------
TOTAL ASSETS $789,172 $88,105 $23,862 $901,139
======== ======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest bearing $ 74,031 $10,195 $ -- $ 84,226
Interest-bearing 559,121 62,600 (332)(C) 621,389
-------- ------- ------- --------
TOTAL DEPOSITS 633,152 72,795 (332) 705,615
Other borrowed funds 58,515 -- 24,194(B)(H)(J) 82,709
Escrow funds payable 5,692 -- -- 5,692
Accrued interest and other liabilities 5,330 1,062 -- 6,392
-------- ------- ------- --------
TOTAL LIABILITIES 702,689 73,857 23,862 800,408
Shareholders' Equity
Common stock 83,070 5,250 8,998(E)(F) 97,318
Retained earnings 4,446 9,026 (9,026)(E)(F) 4,446
Accumulated other comprehensive loss (1,033) (28) 28(E)(F) (1,033)
-------- ------- ------- --------
TOTAL SHAREHOLDERS' EQUITY 86,483 14,248 -- 100,731
-------- ------- ------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $789,172 $88,105 $23,862 $901,139
======== ======= ======= ========
See notes to unaudited pro forma combined financial statements
IBT BANCORP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (A)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006
(Dollars in thousands)
Pro Forma
IBT Bancorp Farwell ------------------------
Historical Historical Adjustments Combined
----------- ---------- ----------- ----------
INTEREST INCOME
Loans, including fees $ 26,129 $ 3,177 $ (43)(H) $ 29,263
Investment securities --
Taxable 3,572 320 -- 3,892
Nontaxable 2,018 155 -- 2,173
Federal funds sold and other 236 131 -- 367
---------- -------- -------- ----------
TOTAL INTEREST INCOME 31,955 3,783 (43) 35,695
INTEREST EXPENSE
Deposits 11,874 1,261 125(H) 13,260
Borrowings 1,878 -- 55(H) 1,933
---------- -------- -------- ----------
TOTAL INTEREST EXPENSE 13,752 1,261 180 15,193
---------- -------- -------- ----------
NET INTEREST INCOME 18,203 2,522 (223) 20,502
Provision for loan losses 628 -- -- 628
---------- -------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 17,575 2,522 (223) 19,874
NONINTEREST INCOME
Service charges and fees 4,051 204 -- 4,255
Title insurance revenue 1,826 21 -- 1,847
Gain on sale of mortgage loans 164 -- -- 164
Other 702 2 -- 704
---------- -------- -------- ----------
TOTAL NONINTEREST INCOME 6,743 227 -- 6,970
NONINTEREST EXPENSES
Compensation and benefits 10,161 726 -- 10,887
Occupancy 1,325 60 10(K) 1,395
Furniture and equipment 2,113 146 -- 2,259
Charitable donations 45 7 -- 52
Other 4,292 340 197(D) 4,829
---------- -------- -------- ----------
TOTAL NONINTEREST EXPENSES 17,936 1,279 207 19,422
INCOME BEFORE FEDERAL INCOME TAXES 6,382 1,470 (430) 7,422
Federal income taxes 1,343 446 (146)(L) 1,643
---------- -------- -------- ----------
NET INCOME $ 5,039 $ 1,024 $ (284) $ 5,779
========== ======== ======== ==========
EARNINGS PER SHARE
BASIC $ 0.92 $ 3.90 $ 0.92
========== ======== ==========
DILUTED $ 0.89 $ 3.90 $ 0.90
========== ======== ==========
Average shares outstanding - basic 5,491,180 262,500 534,975(I) 6,288,655
Effect of shares earned in the Deferred Director
Fee Plan 163,179 -- -- 163,179
---------- -------- -------- ----------
Average shares outstanding - diluted 5,654,359 262,500 534,975 6,451,834
========== ======== ======== ==========
See notes to unaudited pro forma combined financial statements
IBT BANCORP, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME (A)
FOR THE YEAR ENDED DECEMBER 31, 2005
(Dollars in thousands)
Pro Forma
IBT Bancorp Farwell ------------------------
Historical Historical Adjustments Combined
----------- ---------- ----------- ----------
INTEREST INCOME
Loans, including fees $ 30,682 $ 4,204 $ (58)(H) $ 34,828
Investment securities --
Taxable 3,487 339 -- 3,826
Nontaxable 2,398 202 -- 2,600
Federal funds sold and other 315 164 -- 479
---------- -------- -------- ----------
TOTAL INTEREST INCOME 36,882 4,909 (58) 41,733
INTEREST EXPENSE
Deposits 11,374 1,447 166(H) 12,987
Borrowings 1,599 -- 37(H) 1,636
---------- -------- -------- ----------
TOTAL INTEREST EXPENSE 12,973 1,447 203 14,623
---------- -------- -------- ----------
NET INTEREST INCOME 23,909 3,462 (261) 27,110
Provision for loan losses 777 -- -- 777
---------- -------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 23,132 3,462 (261) 26,333
NONINTEREST INCOME
Service charges and fees 4,928 270 -- 5,198
Title insurance revenue 2,351 31 -- 2,382
Gain on sale of mortgage loans 270 -- -- 270
Other 927 27 -- 954
---------- -------- -------- ----------
TOTAL NONINTEREST INCOME 8,476 328 -- 8,804
NONINTEREST EXPENSES
Compensation and benefits 13,548 970 -- 14,518
Occupancy 1,553 71 13(K) 1,637
Furniture and equipment 2,657 185 -- 2,842
Charitable donations 79 8 -- 87
Other 5,047 388 262(D) 5,697
---------- -------- -------- ----------
TOTAL NONINTEREST EXPENSES 22,884 1,622 275 24,781
INCOME BEFORE FEDERAL INCOME TAXES 8,724 2,168 (536) 10,356
Federal income taxes 1,948 621 (182)(L) 2,387
---------- -------- -------- ----------
NET INCOME $ 6,776 $ 1,547 $ (354) $ 7,969
========== ======== ======== ==========
EARNINGS PER SHARE
BASIC $ 1.25 $ 5.89 $ 1.28
========== ======== ==========
DILUTED $ 1.25 $ 5.89 $ 1.28
========== ======== ==========
Average shares outstanding - basic 5,416,961 262,500 534,975(I) 6,214,436
Effect of shares earned in the Deferred Director
Fee Plan -- -- -- --
---------- -------- -------- ----------
Average shares outstanding - diluted 5,416,961 262,500 534,975 6,214,436
========== ======== ======== ==========
See notes to unaudited pro forma combined financial statements
IBT BANCORP, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA BALANCE SHEET AND STATEMENTS OF INCOME
NOTE 1 - PURCHASE PRICE ALLOCATION
On October 3, 2006, Farwell State Savings Bank (FSSB) merged with and into The
Farmers State Bank of Breckenridge (Farmers), a wholly owned subsidiary of IBT
Bancorp, Inc. (IBT) pursuant to the Amended and Restated Agreement and Plan of
Merger dated May 2, 2006 by and between FSSB, Farmers and IBT (the "Merger
Agreement"). Under the terms of the Merger Agreement, IBT issued an aggregate of
797,475 shares of its common stock and paid in cash a total of $7,612,000 to
FSSB shareholders.
The unaudited pro forma combined financial information gives effect to the
acquisition under the purchase method of accounting, and the unaudited combined
balance sheet assumes the transaction occurred on September 30, 2006 reflecting
the purchase consideration noted above.
Described below is the pro forma estimate of the total purchase price of the
transaction as well as adjustments to allocate the purchase price based on
preliminary estimates of fair values of the assets and liabilities of FSSB (in
thousands):
Estimated fair value of shares issued $30,448
Cash paid to shareholders 7,612
Estimated transaction costs 382
-------
Total purchase price 38,442
-------
Net assets based on carrying amounts at
September 30, 2006 14,248
Increase in net assets to reflect estimated fair
value adjustments under the purchase method of
accounting:
Loans held for investment 115
Premises and equipment 600
Time deposits 332
-------
Fair value of net assets acquired 15,295
-------
Total purchase price in excess of fair value of
net assets acquired 23,147
Identifiable intangible assets:
Core deposits (1,442)
-------
Goodwill $21,705
=======
IBT BANCORP, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA BALANCE SHEET AND STATEMENTS OF INCOME
NOTE 2 - PRO FORMA NOTES
(A) Assumptions relating to the pro forma adjustments set forth in the
unaudited pro forma combined financial statements are summarized as
follows:
1) Estimated fair values - The estimated fair value and resulting
net premium on loans for purposes of these pro forma financial
statements are being amortized to interest income over the
remaining estimated lives of two years, using the level yield
method.
2) The resulting adjustment to deposits is being amortized to
interest expense over the remaining estimated lives of two years.
(B) The cash portion of the acquisition assumes funding through available cash
on deposit with affiliate banks. For purposes of this pro forma
presentation, it is assumed that the affiliated banks will offset the loss
in deposits by borrowing from established lines of credit.
(C) Purchase accounting fair value adjustments are estimated as follows.
Loans $ 115
Land, building, and equipment 600
Time deposits 332
------
Total $1,047
======
(D) To record core deposit intangible created, which is $1,442 and is 3.9% of
Farwell's non-contractual deposits. The core deposit intangible is assumed
to be amortized on a 10 year sum of years' digits amortization schedule.
(E) Elimination of Farwell's equity.
IBT BANCORP, INC.
NOTES TO UNAUDITED COMBINED PRO FORMA BALANCE SHEET AND STATEMENTS OF INCOME
(F) To record common stock issued (80%) and cash paid (20%) for each share of
Farwell common stock.
COMMON
TOTAL STOCK CASH
----------- ----------- ----------
Purchase price (1) $38,059,586 $30,447,596 $7,611,990
Farwell shares outstanding (2) 262,500
Price paid per share $ 145.00
Estimated IBT stock price (3) $ 38.18
Total IBT common shares issued 797,475
(1) The cash portion of the purchase price is expected to be funded with
proceeds from internal sources and borrowing.
(2) Outstanding at September 30, 2006
(3) Estimate based on the price on the acquisition date taking into
consideration the 10% stock dividend known on the day the definitive
agreement was signed
NOTE: The value of the stock issued was obtained from the 8-K filed as of
10/3/2006
(G) Goodwill resulting from the total purchase price less Farwell's total
equity and the fair market value adjustment.
(H) Pro forma adjustments to interest income and interest expense were
calculated as follows:
Nine Months Year
Ended Ended
September 30, December 31,
2006 2005
------------- ------------
Amortization of premium on loans
(2 years straight line) $(43) $(58)
==== ====
Amortization of adjustment on deposits
(2 years straight line) 125 166
Interest expense on borrowed funds 55 37
---- ----
Total adjustments - interest expense $180 $203
==== ====
(I) Basic and fully diluted weighted average number of common stock and common
stock equivalents utilized for the calculation of earnings per share for
the periods presented were calculated using Farwell's historical weighted
average basic and diluted shares of 797,475, the total common shares
estimated to be issued to Farwell shareholders under the terms of the
Merger Agreement. The shares to be issued were assumed to be issued at the
beginning of the periods presented.
(J) To record additional borrowed funds that will be required to fund a portion
of the cash paid in the transaction.
(K) The annual depreciation associated with the fair market value adjustment of
the building and equipment, over estimated lives of thirty years, using the
straight line basis.
(L) Income taxes calculated at 34% of pretax income.