Exhibit 99.1
April 30, 2007
Dear Shareholder:
IBT Bancorp, Inc. (IBT) is pleased to announce first quarter 2007
earnings of $1.8 million, a 49% increase over first quarter of 2006. Total
assets at March 31, 2007 were $928.0 million, a 2.0% increase since December 31,
2006. Total assets under management, which include trust assets, brokerage
assets and mortgage loans sold and serviced, were $ 1.43 billion as of March 31,
2007.
The board of directors declared a first quarter cash dividend of $0.12
per share, a 9.1% increase over the dividend paid in the first quarter of 2006.
IBT common stock price is currently $44.00 per share.
Also during the quarter, the board approved the repurchase of up to
$6.6 million (150,000 shares at our current market price) of IBT's common stock.
The corporation enjoys a strong capital ratio and a tremendous rate of dividend
reinvestment that allows it to retire these shares. This stock repurchase
authorization assures an orderly market for trading our stock, as we grow and
expand our shareholder base.
The increase in net income was due to solid improvements in our core
operations, the acquisition of Farwell State Savings Bank on October 3, 2006 and
the early adoption of Statement of Financial Accounting Standards (SFAS) No. 159
The Fair Value Option for Financial Assets and Financial Liabilities.
The adoption of SFAS No. 159 resulted in a reclassification of net
unrealized losses on investments and Federal Home Loan Borrowings of $1.05
million, as a cumulative effect adjustment, to Retained Earnings as of January
1, 2007. The new standard resulted in the recognition of an unrealized after tax
gain of $227,000 in the Consolidated Statement of Income for the three month
period ending March 31, 2007. The adoption of SFAS 159 affords management the
opportunity to
April 30, 2007
Page 2
accelerate the restructuring of IBT's balance sheet to better manage interest
rate risk. Attached is a disclosure included with IBT Bancorp's first quarter
report to the Securities and Exchange Commission.
If you have any comments or questions, please feel free to call me at
989-779-6234. I look forward to seeing many of you at our Annual Meeting at the
Mt. Pleasant Holiday Inn on May 15, 2007 at 5:00 pm.
Sincerely,
Dennis P Angner
President & CEO
Enclosures
IBT ADOPTS FASB NO. 159
IBT Bancorp, Inc. (IBT) has elected early adoption of Statement of Financial
Accounting Standards ("SFAS") No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, and SFAS No. 157, Fair Value Measurements.
SFAS No. 159, which was issued in February 2007, generally permits the
measurement of selected eligible financial instruments at fair value at
specified election dates. The issuance of SFAS No. 159 led to a review of assets
and liabilities that fluctuate in value based on changes in market interest
rates by the IBT Audit Committee, Board of Directors, management, and investment
advisors as to the potential impact of early adoption of the new standard. As a
result of their considerations, IBT has elected early adoption of the new
accounting standard effective January 1, 2007. The purpose of the early adoption
of this standard was to provide IBT an opportunity to accelerate the
restructuring of its balance sheet to better manage interest rate risk now and
in the future.
Upon adoption, IBT selected the fair value option for certain investment
securities with lower yields from the available-for-sale portfolio totaling
approximately $79.2 million and certain long term higher cost Federal Home Loan
Bank borrowings (FHLB) of $7.3 million Prior to the adoption of SFAS No. 159,
IBT had the ability and intent to hold the investment securities until the
market price recovered or to maturity. The result of the application of the
standard is that these securities will be reported as trading securities and the
liabilities as trading liabilities in the balance sheet. The initial fair value
measurement of these items resulted in an approximate cumulative-effect
adjustment, net of tax in the amount of $1.05 million recorded as a reduction in
undivided profits as of January 1, 2007. In accordance with early adoption
provisions of SFAS No. 159, the impact will not be recognized in current
earnings. The transfer of investment securities to the trading account had no
overall impact on total shareholders' equity because the fair value adjustment
for these available for sale securities had previously been included as a
component of shareholders' equity in accumulated other comprehensive loss
account. As of January 1, 2007 the after tax charge to undivided profits related
to the transfer of the FHLB borrowings to the trading account was $ 153,000.
As a result of IBT's fair value measurement election for the selected investment
securities and borrowings, IBT will recognize as income $227,000 of pretax
unrealized appreciation in its first quarter earnings for the change in fair
value of such instruments from the election date of January 1, 2007 to the
reporting date of March 31, 2007. While early adoption of SFAS No. 159 had a
modest impact on reported earnings for the first quarter of 2007, IBT does not
portray the effects to net income during the first quarter from early adoption
of the new accounting standard as adding economic value. The primary benefit to
shareholders' will be achieved by accelerating IBT's ongoing balance sheet
restructuring and enhancing our ability to manage future interest rate risk.
IBT also adopted SFAS No. 157, Fair Value Measurement, in the first quarter of
2007. This accounting standard did not have a significant impact on IBT's
consolidated financial statements.
TO THE EXTENT THAT THE FOREGOING INFORMATION REFERS TO MATTERS THAT MAY OCCUR IN
THE FUTURE, PLEASE BE AWARE THAT SUCH FORWARD-LOOKING STATEMENTS MAY DIFFER
MATERIALLY FROM ACTUAL RESULTS. ADDITIONAL INFORMATION CONCERNING SOME OF THE
FACTORS THAT COULD CAUSE MATERIALLY DIFFERENT RESULTS IS INCLUDED IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2006, AND
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2007, WHICH ARE OR WILL BE AVAILABLE
FROM THE SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE FACILITIES AND
FROM ITS WEBSITE AT WWW.SEC.GOV.