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 September 30, 2000
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 0-25903
IBT Bancorp, Inc.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1532164
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(State of incorporation or organization) (I.R.S. employer identification no.)
309 Main Street, Irwin, Pennsylvania 15642
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(Address of principal executive offices) (zip code)
(724) 863-3100
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Issuer's telephone number, including area code
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
YES X NO
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Number of shares of Common Stock outstanding as of November 1, 2000: 3,001,923
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IBT BANCORP, INC.
Contents
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Pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..............................................................................
Consolidated balance sheets at September 30, 2000
(unaudited) and December 31, 1999.............................................................. 1
Consolidated statements of income (unaudited) for the three and nine months
ended September 30, 2000 and 1999............................................................... 2
Consolidated statements of cash flows (unaudited) for the nine months
ended September 30, 2000 and 1999............................................................... 3
Notes to condensed consolidated financial statements (unaudited)................................ 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................................... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. 10
Item 2. Changes in Securities and Use of Records....................................................... 10
Item 3. Defaults upon Senior Securities................................................................ 10
Item 4. Submission of Matters to a Vote of Security-Holders............................................ 10
Item 5. Other Information.............................................................................. 10
Item 6. Exhibits and Reports on Form 8-K............................................................... 10
Signatures..................................................................................................... 11
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CONSOLIDATED BALANCE SHEETS
IBT BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
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(unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 14,371,603 $ 19,171,977
Interest-bearing deposits in banks 553,292 92,590
Federal funds sold 11,637,000 -
Certificates of deposit 100,000 3,000,000
Securities available for sale 161,190,085 149,098,906
Federal Home Loan Bank stock, at cost 1,964,300 1,964,300
Loans, net 288,375,433 260,502,270
Premises and equipment, net 4,653,413 4,728,702
Other assets 7,209,320 7,162,670
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Total Assets $ 490,054,446 $ 445,721,415
======================= ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 62,474,200 $ 57,097,999
Interest-bearing 343,933,307 311,582,486
----------------------- --------------------
Total deposits 406,407,507 368,680,485
Repurchase agreements 9,066,727 6,456,597
Federal funds purchased - 7,000,000
Accrued interest and other liabilities 4,196,460 3,679,053
Long-term debt 29,000,000 22,000,000
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Total liabilities 448,670,694 407,816,135
Stockholders' Equity
Capital stock, par value $1.25, 50,000,000 shares authorized,
3,023,799 shares issued, 3,001,923 and 3,021,174
shares outstanding at September 30, 2000 and
December 31, 1999, respectively 3,779,749 3,779,749
Surplus 2,073,102 2,073,102
Retained earnings 38,285,500 35,318,637
Accumulated other comprehensive income (2,065,123) (3,178,596)
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42,073,228 37,992,892
Less: Treasury stock, at cost (689,476) (87,612)
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Total stockholders' equity 41,383,752 37,905,280
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Total Liabilities and Stockholders' Equity $ 490,054,446 $ 445,721,415
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</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME
IBT BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
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(unaudited) (unaudited)
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Interest Income
Loans $ 5,890,379 $ 5,065,722 $16,795,571 $14,811,131
Investment securities 2,642,988 2,376,310 7,774,220 6,609,582
Federal funds sold 94,783 172,135 232,617 423,961
------------ ------------ ------------ ------------
Total interest income 8,628,150 7,614,167 24,802,408 21,844,674
Interest Expense
Deposits 3,823,228 3,196,223 10,446,969 9,206,211
Long-term debt 402,284 284,222 1,126,498 648,969
Repurchase agreements 92,694 66,892 249,181 110,330
------------ ------------ ------------ ------------
Total interest expense 4,318,206 3,547,337 11,822,648 9,965,510
------------ ------------ ------------ ------------
Net Interest Income 4,309,944 4,066,830 12,979,760 11,879,164
Provision for Loan Losses 75,000 105,000 225,000 195,000
------------ ------------ ------------ ------------
Net Interest Income after Provision 4,234,944 3,961,830 12,754,760 11,684,164
for Loan Losses
Other Income (Losses)
Service fees 431,788 389,609 1,228,787 1,062,517
Investment security gains - 19,268 - 24,057
Investment security losses - - (106,974) -
Other income 332,779 322,051 1,054,100 925,877
------------ ------------ ------------ ------------
Total other income 764,567 730,928 2,175,913 2,012,451
Other Expenses
Salaries 961,235 870,431 2,950,028 2,529,701
Pension and other employee benefits 274,982 266,297 850,472 767,533
Occupancy expense 266,758 246,442 783,297 740,157
Data processing expense 148,500 134,681 439,263 399,484
ATM expense 100,609 103,176 284,376 251,862
FDIC insurance 18,788 9,800 59,522 29,863
Other expenses 758,179 699,014 2,198,925 1,968,530
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Total other expenses 2,529,051 2,329,841 7,565,883 6,687,130
------------ ------------ ------------ ------------
Income Before Income Taxes 2,470,460 2,362,917 7,364,790 7,009,485
Provision for Income Taxes 740,248 760,121 2,326,352 2,248,727
------------ ------------ ------------ ------------
Net Income $ 1,730,212 $ 1,602,796 $ 5,038,438 $ 4,760,758
============ ============ ============ ============
Basic Earnings per Share $ 0.58 $ 0.53 $ 1.68 $ 1.57
============ ============ ============ ============
Diluted Earnings per Share $ 0.58 $ 0.53 $ 1.68 $ 1.57
============ ============ ============ ============
Dividends per Share $ 0.23 $ 0.20 $ 0.69 $ 0.60
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
IBT BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Nine Months ended September 30,
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2000 1999
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(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income $ 5,038,438 $ 4,760,758
Adjustments to reconcile net cash
from operating activities:
Depreciation 414,743 400,500
Net amortization/accretion of
premiums and discounts 3,974 17,235
Net investment security losses/(gains) 106,974 (24,057)
Provision for loan losses 225,000 195,000
Increase (decrease) in cash due to
changes in assets and liabilities:
Other assets (620,258) (386,354)
Accrued interest and other
liabilities 517,407 89,099
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Net Cash From Operating Activities 5,686,278 5,052,181
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificates of deposit (100,000) -
Proceeds from maturity of certificates
forofadeposit 3,000,000 -
Proceeds from sales of securities
available for sale 5,285,333 6,502,031
Proceeds from maturities of securities held
to maturity - 2,569,215
Proceeds from maturities of securities
available for sale 6,105,573 41,406,716
Purchase of securities available for sale (21,905,952) (85,097,520)
Net loans made to customers (28,098,163) (18,109,754)
Purchases of premises and equipment (339,454) (219,379)
Purchase of Federal Home Loan Bank stock - (656,200)
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Net Cash Used By Investing
Activities (36,052,663) (53,604,891)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 37,727,022 18,564,802
Net increase in securities sold
under repurchase agreements 2,610,130 7,495,613
Dividends (2,071,575) (1,814,280)
Federal funds purchased (7,000,000) -
Proceeds from long-term debt 7,000,000 10,000,000
Payments on long-term debt - (2,000,000)
Purchase of treasury stock (601,864) -
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Net Cash From (Used By)
Financing Activities 37,663,713 32,246,135
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Net Change in Cash and Cash
Equivalents 7,297,328 (16,306,575)
Cash and Cash Equivalents at
Beginning of Period 19,264,567 43,396,314
------------ ---------------
Cash and Cash Equivalents at
End of Period 26,561,895 $ 27,089,739
============ ===============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended September 30, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 of 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 and nine months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000 or any future interim period. The interim financial
statements should be read in conjunction with the financial statements and
footnotes thereto included in IBT Bancorp, Inc. and subsidiary Annual Report or
Form 10-K for the year ended December 31, 1999. Certain previously reported
items have been reclassified to conform to the current period's classifications.
The reclassifications have no effect on total assets, total liabilities and
stockholders' equity, or net income.
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 3,001,923 and
3,003,807 for the three and nine months ended September 30, 2000, respectively
and 3,023,799 for the three and nine months ended September 30, 1999.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended September 30, 2000 and
1999 was $2,760,938 and $1,003,237 respectively and for the nine months ended
September 30, 2000 and 1999 was $6,151,911 and $1,630,960, respectively.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
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September 30, 2000
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Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
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Obligations of
U.S. Government Agencies $ 99,265,535 $101,083 ($1,681,370) $ 97,685,248
Obligations of State and
political sub-divisions 14,979,669 227,062 (206,177) 15,000,554
Mortgage-backed securities 45,728,422 15,099 (1,646,826) 44,096,695
Other securities 185,281 5,562 - 190,843
Equity securities 4,160,153 59,835 (3,243) 4,216,745
------------ -------- ----------- ------------
$164,319,060 $408,641 ($3,537,616) $161,190,085
============ ======== =========== ============
</TABLE>
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
IBT BANCORP, INC. AND SUBSIDIARY
Period Ended September 30, 2000
NOTE E - JOINT VENTURES
During the second quarter of 2000, IBT Bancorp, Inc. (the Bancorp) formed a new
subsidiary, IBT Financial Services, LLC. The newly formed subsidiary commenced
operations in June 2000 and offers a full range of investment and insurance
services to customers and the general public. The Bancorp owns fifty percent of
the newly formed company and is recording their investment using the equity
method. The Bancorp's initial investment was $125,000.
During the third quarter of 2000, the Bancorp formed a new partnership, T.A. of
Irwin, L.P. This newly formed partnership will commence operations in October
2000 and will provide title insurance to the general public. The Bancorp's
capital contribution was $13,231 representing and 85% limited partnership
interest.
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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", "anticipate", "contemplates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Those risks and
uncertainties include changes in interest rates, risks associated with the
effect of opening a new branch, the ability to control costs and expenses, and
general economic conditions. IBT Bancorp, Inc. undertakes no obligation to
publicly release the results of any revisions to those forward looking
statements which may be made 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 & Trust Co.
(collectively, the "Company").
IB&T Financial Services, LLC ("IB&T Financial") commenced operations on
June 26, 2000. IB&T Financial, a subsidiary of IBT Bancorp, Inc., offers
insurance and investment services to customers and the general public. For
further information see Note E to the condensed consolidated financial
statements.
T.A. of Irwin, L.P. ("T.A. of Irwin), formed during the third quarter,
commenced operations in October, 2000. T.A. of Irwin, an investment of IBT
Bancorp, Inc., will offer title insurance to customers and the general public.
For further information see Note E to the condensed consolidated financial
statements.
FINANCIAL CONDITION
At September 30, 2000, total assets increased $44.4 million to $490.1
million from $445.7 million at December 31, 1999. Of this increase, net loans
receivable increased $27.9 million, securities available for sale increased
$12.1 million, and federal funds sold increased $11.6 million. Such increases
were offset by a $4.8 million decrease in cash & due from banks and a $2.9
million decrease in certificates of deposit. Such funds were primarily used to
pay down the outstanding federal funds purchased of $7.0 million in the first
quarter.
The growth in total deposits of $37.7 million was used to fund the
growth in the loan portfolio and increase the federal funds sold. The increase
in the loan portfolio was primarily due to the growth of the fixed rate one- to
four- family residential mortgage loans
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of $8.9 million and growth of the adjustable rate real estate secured commercial
loans of $6.5 million. Such increases were offset by the sale of the credit card
portfolio of $1.6 million in the second quarter. The Company's loan portfolio
continues to grow due to the Company's offering of competitive market interest
rates. Federal funds sold during the quarter increased in order to meet
anticipated future loan demand. Additionally, management took advantage of
higher interest rates during the quarter and purchased $6.6 million of available
for sale securities.
Non-interest bearing deposits increased $5.4 million to $62.5 million
at September 30, 2000 from $57.1 million at December 31, 1999. Interest-bearing
deposits increased $32.4 million from $311.6 million at December 31, 1999. The
growth is primarily the result of increases in certificate of deposit accounts,
which rose $31.0 million to $199.9 million at September 30, 2000 from $168.9
million at December 31, 1999. This growth was primarily attributed to the
competitive interest rates paid for these products.
At September 30, 2000, total stockholders' equity increased $3.5
million to $41.4 million from $37.9 million at December 31, 1999. The increase
was due to net income of $5.0 million for the period and an increase of $1.1
million in accumulated other comprehensive income, offset by the purchase of
$602,000 of Company stock, and dividends paid of $2.1 million. As previously
reported, the Company plans to purchase up to 151,100 shares of the Company's
common stock. As of September 30, 2000 the Company repurchased 21,876 shares.
Accumulated other comprehensive income increased as a result of changes
in the net unrealized loss on the available for sale securities due to
fluctuations in interest rates. Pursuant to generally accepted accounting
principles, securities available for sale are recorded at current market value
and net unrealized gains or losses on such securities are excluded from current
earnings and reported net of income taxes, as part of comprehensive income,
until realized. Because of interest rate volatility, the Company's accumulated
other comprehensive income could materially fluctuate for each interim period
and year-end. The majority of the accumulated unrealized loss resulted from the
Company's investment in U.S. government agencies and mortgage backed securities.
The change in market value of the investment securities available for sale will
not affect the Company's net income until the securities are sold. See Note D to
the condensed consolidated financial statements.
RESULTS OF OPERATIONS
Net income. Net income for the three months ended September 30, 2000
increased $127,000 to $1.7 million from $1.6 million for the comparable three
month period in 1999. Net income for the nine months ended September 30, 2000
increased $277,000 to $5.0 million from $4.8 million for the comparable nine
months 1999 period. Such increases for the three and nine months ended September
30, 2000 were the result of higher net interest income and other income offset
by increases in other expenses.
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Interest income. Interest income for the three months ended September
30, 2000 increased $1.0 million to $8.6 million from $7.6 million for the
comparable three month period in 1999. Interest income for the nine months ended
September 30, 2000 increased $2.9 million to $24.8 million from $21.9 million
for the comparable nine months 1999 period. The increases in the current three
and nine month periods were primarily due to the increases in the average loan
receivables and the average available for sale securities portfolio.
Interest expense. Interest expense for the three months ended September
30, 2000 increased $771,000 to $4.3 million from $3.5 million for the comparable
three month period in 1999. Interest expense for the nine months ended September
30, 2000 increased $1.8 million to $11.8 million from $10.0 million for the
comparable nine months 1999 period. Increased interest expense for the current
three and nine month periods were primarily due to the increase in FHLB
advances, corporate repurchase agreement deposits, and interest earning
deposits.
Provision for loan losses. For the three and nine months ended
September 30, 2000, provision for loan losses were $75,000 and $225,000
respectively compared to $105,000 and $195,000 for the comparable 1999 periods.
The evaluation for determining the provision includes evaluations of
concentrations of credit, past loss experience, current economic conditions,
amount and composition of the loan portfolio (including loans being specifically
monitored by management), estimated fair value of underlying collateral, loan
commitments outstanding, delinquencies, and other information available at such
times.
The Company will continue to monitor its allowance for loan losses and
make future adjustments to the allowance through the provision for loan losses
as economic conditions dictate. Management continues to offer a wider variety of
loan products coupled with the continued success of changing the mix of the
products offered in the loan portfolio from lower yielding loans (i.e., one- to
four-family loans) to higher yielding loans (i.e., equity loans, multi-family
(five or more units) buildings, and commercial (nonresidential) mortgages).
Although the Company maintains its allowance for loan losses at a level that it
considers to be adequate to provide for the inherent risk of loss in its loan
portfolio, there can be no assurance that future losses will not exceed
estimated amounts or that additional provisions for loan losses will not be
required in future periods due to the higher degree of credit risk which might
result from the change in the mix of the loan portfolio.
Other income. Total other income for the three months ended September
30, 2000 increased $34,000 to $765,000 from $731,000 for the comparable three
month period in 1999. Such increases were due to increased service fees
resulting primarily from the increase in overdraft fees. Other income for the
nine months ended September 30, 2000 increased $163,000 to $2.2 million from
$2.0 million for the comparable period in 1999. The total increases for the nine
months ended September 30, 2000 were due to the increase in service fees and a
gain of $115,000 resulting from the sale of the credit card
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portfolio offset by a loss of $106,000 on the sale of available for sale
securities. The increase in service fees resulted primarily from the increase in
overdraft fees.
Other expense. Total other expense for the three months ended September
30, 2000 increased $199,000 to $2.5 million from $2.3 million for the comparable
three month period in 1999. Other expense for the nine months ended September
30, 2000 increased $879,000 to $7.6 million from $6.7 million for the comparable
period in 1999. While virtually all other expenses increased during the current
three month and nine month periods, salaries, pension and other employee
benefits, ATM expenses, and FDIC insurance were the most significant. As
previously disclosed, effective January 1, 2000, the Bank Insurance Fund ("BIF")
increased its assessments on deposits for all banks insured by the BIF and the
Company instituted an across the board salary increase to all non-officer
employees and eliminated the bonus reward program in January 2000. Also, health
insurance premiums increased causing increases in pension and other employee
benefits. ATM expense increased for the current three and nine month periods due
to increased fees from the Company's processor.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes for the three and nine months ended
September 30, 2000 from the information presented in the 10K statement, under
the caption Market Risk, for the year ended December 31, 1999.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The registrant is not engaged in any legal proceedings at the
present time. From time to time, the Bank is a party to 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 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Exhibits
3(i) Articles of Incorporation of IBT Bancorp, Inc.*
3(ii) Bylaws of IBT Bancorp, Inc.*
10 Change In Control Severance Agreement with Charles G. Urtin **
10.1 Deferred Compensation Plan For Bank Directors**
10.2 Retirement Agreement Between Irwin Bank & Trust Co. And
J. Curt Gardner**
10.3 Death Benefit Only Deferred Compensation Plan For Bank Directors
effective as of January 1, 1990**
10.4 Retirement and Death Benefit Deferred Compensation Plan For Bank
Directors effective as of January
1, 1990**
10.5 2000 Stock Option Plan***
27 Financial Data Schedule (electronic filing only)
-------------------------
* Incorporated by reference to the identically numbered exhibits of the
Registrant's Form 10 (file no. 0-25903)
** Incorporated by reference to the identically numbered exhibits of the
Registrant's Form 10Ks for December 31, 1999.
*** Incorporated by reference to the definitive proxy statement of the
registrant filed on March 17, 2000.
(b) None.
</TABLE>
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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: November 3, 2000 By: /s/Charles G. Urtin
---------------------------------------
Charles G. Urtin
President, Chief Executive Officer
And Chief Accounting Officer
(Duly authorized officer)
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