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, 2000
--------------
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. 0-25903
IBT Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1532164
- ---------------------------------------- ------------------------------------
(State of incorporation or organization) (I.R.S. employer identification no.)
309 Main Street, Irwin, Pennsylvania 15642
- -------------------------------------------- ------------------------------
(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
---------- ----------
Number of shares of Common Stock outstanding as of May 1, 2000: 3,001,923
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<PAGE>
IBT BANCORP, INC.
Contents
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Pages
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PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements........................................................................
Consolidated statements of financial condition at March 31, 2000
(unaudited) and December 31, 1999........................................................... 1
Consolidated statements of operations (unaudited) for the three
months ended March 31, 2000 and 1999 ....................................................... 2
Consolidated statements of cash flows (unaudited) for the three months
ended March 31, 2000 and 1999............................................................... 3
Notes to financial statements............................................................... 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.................................. 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................................... 9
Item 2. Changes in Securities and Use of Records.................................................... 9
Item 3. Defaults upon Senior Securities............................................................. 9
Item 4. Submission of Matters to a Vote of Security-Holders......................................... 9
Item 5. Other Information........................................................................... 9
Item 6. Exhibits and Reports on Form 8-K............................................................ 9
Signatures.................................................................................................. 10
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<PAGE>
CONSOLIDATED BALANCE SHEETS
IBT BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
March 31, 2000 December 31,
----------------- --------------
(unaudited) 1999
----------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,772,020 $ 19,171,977
Interest-bearing deposits in banks 84,183 92,590
Federal funds sold 7,120,000 -
Certificates of deposit - 3,000,000
Securities available for sale 152,017,924 149,098,906
Federal Home Loan Bank stock, at cost 1,964,300 1,964,300
Loans, net 265,423,539 260,502,270
Premises and equipment, net 4,641,663 4,728,702
Other assets 7,554,506 7,162,670
------------- -------------
Total Assets $ 451,578,135 $ 445,721,415
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $ 63,251,109 $ 57,097,999
Interest-bearing 312,444,917 311,582,486
------------- -------------
Total deposits 375,696,026 368,680,485
Repurchase agreements 6,810,695 6,456,597
Federal funds purchased - 7,000,000
Accrued interest and other liabilities 3,903,793 3,679,053
Long-term debt 27,000,000 22,000,000
------------- -------------
Total liabilities 413,410,514 407,816,135
Stockholders' Equity
Capital stock, par value $1.25, 50,000,000 shares
authorized, 3,023,799 shares issued, 3,001,923 and
3,031,174 shares outstanding at March 31, 2000
and December 31, 1999, respectively 3,779,749 3,779,749
Surplus 2,073,102 2,073,102
Retained earnings 36,279,923 35,318,637
Accumulated other comprehensive income (3,275,677) (3,178,596)
------------- -------------
38,857,097 37,992,892
Less: Treasury stock, at cost (689,476) (87,612)
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Total stockholders' equity 38,167,621 37,905,280
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Total Liabilities and Stockholders' Equity $ 451,578,135 $ 445,721,415
============= =============
</TABLE>
1
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
IBT BANCORP, INC. AND SUBSIDIARY
Three Months Ended March 31,
----------------------------
2000 1999
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(unaudited)
--------- --------------
Interest Income
Loans $5,244,519 $4,773,554
Investment securities 2,540,463 2,115,162
Federal funds sold 13,138 131,523
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Total interest income 7,798,120 7,020,239
Interest Expense
Deposits 3,233,483 3,045,263
Long-term debt 333,405 183,356
Repurchase agreements 71,626 -
---------- ----------
Total interest expense 3,638,514 3,228,619
---------- ----------
Net Interest Income 4,159,606 3,791,620
Provision for Loan Losses 75,000 45,000
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Net Interest Income after Provision 4,084,606 3,746,620
for Loan Losses
Other Income
Service fees 485,905 372,022
Net investment security gains - 1,170
Other income 294,045 287,827
---------- ----------
Total other income 779,950 661,019
Other Expenses
Salaries 909,579 752,605
Pension and other employee benefits 291,617 241,965
Occupancy expense 258,687 247,007
Data processing expense 143,911 131,351
ATM expense 86,739 71,416
FDIC insurance 19,370 9,873
Other expenses 721,484 645,538
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Total other expenses 2,431,387 2,099,755
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Income Before Income Taxes 2,433,169 2,307,884
Provision for Income Taxes 781,192 741,114
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Net income $1,651,977 $1,566,770
========== ==========
Net Income per Share of Capital Stock $ 0.55 $ 0.52
========== ==========
Dividends per Share of Capital Stock $ 0.23 $ 0.20
========== ==========
2
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
IBT BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Three Months ended March 31,
-----------------------------
2000 1999
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(unaudited)
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,651,977 $ 1,566,770
Adjustments to reconcile net cash
from operating activities:
Depreciation 136,343 133,500
Net amortization/accretion of
premiums and discounts 5,163 16,072
Net investment security gains - (1,170)
Provision for loan losses 75,000 45,000
Increase (decrease) in cash due to
changes in assets and liabilities:
Other assets (341,825) (471,297)
Accrued interest and other
liabilities 224,740 194,259
------------ ------------
Net Cash From Operating Activities 1,751,398 1,483,134
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of certificates
of deposit 3,000,000 -
Proceeds from maturities of securities held
to maturity - 69,215
Proceeds from maturities of securities
available for sale 2,972,717 10,830,075
Purchase of securities available for sale (6,043,990) (27,072,672)
Net loans made to customers (4,996,269) (4,239,472)
Purchases of premises and equipment (49,304) (152,348)
Purchase of Federal Home Loan Bank stock - (4,400)
------------ ------------
Net Cash Used By Investing
Activities (5,116,846) (20,569,602)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 7,015,541 (6,043,399)
Net increase in securities sold
under repurchase agreements 354,098 -
Dividends (690,691) (604,760)
Federal funds purchased (7,000,000) -
Proceeds from long-term debt 5,000,000 -
Purchase of treasury stock (601,864) -
------------ ------------
Net Cash From (Used By)
Financing Activities 4,077,084 (6,648,159)
------------ ------------
Net Change in Cash and Cash
Equivalents 711,636 (25,734,627)
Cash and Cash Equivalents at
Beginning of Period 19,264,567 43,396,314
------------ ------------
Cash and Cash Equivalents at
End of Period $ 19,976,203 $ 17,661,687
============ ============
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3
<PAGE>
IBT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 ended March 31, 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 on
Form 10-K for the year ended December 31, 1999.
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
3,007,597 and 3,023,799 for the three months ended March 31, 2000 and 1999,
respectively.
NOTE C - COMPREHENSIVE INCOME
Total comprehensive income for the three months ended March 31, 2000 and
1999 was $1,554,896 and $757,488, respectively.
4
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IBT BANCORP, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Cont.
NOTE D - INVESTMENT SECURITIES
Investment securities available for sale consist of the following:
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<CAPTION>
March 31, 2000
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Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
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<S> <C> <C> <C> <C>
Obligations of
U.S. Government Agencies $ 94,089,757 $ 4,631 $ (2,407,363) $ 91,687,025
Obligations of State and
political sub-divisions 13,425,214 63,792 (279,811) 13,209,195
Mortgage-backed securities 48,220,926 20,919 (2,442,914) 45,798,931
Other securities 90,765 5,497 - 96,262
Equity securities 1,154,410 72,101 - 1,226,511
------------------------------------------------------------------------
$ 156,981,072 $ 166,940 $ (5,130,088) $ 152,017,924
========================================================================
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NOTE E - REPURCHASE AGREEMENTS
During 1999, the Bank began offering its corporate customers an
investment product fashioned in the form of a repurchase agreement. Under the
terms of the agreement, deposits in designated demand accounts of the customer
are put into an investment vehicle which is used daily to purchase an interest
in designated U. S. Government or Agencies' securities owned by the Bank. The
Bank in turn agrees to repurchase these investments on a daily basis and pay the
customer the daily interest earned on them. At March 31, 2000, the amount of
repurchase agreements was $6,810,695.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 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").
As previously disclosed, IBT Bancorp, Inc. and a third party plan to
form Irwin Bank Financial Services, LLC, which offers insurance and investment
services to customers and the general public. Operations are expected to
commence on or about June 1, 2000.
FINANCIAL CONDITION
At March 31, 2000, total assets increased $5.9 million to $451.6
million from $445.7 million at December 31, 1999. Of this increase, federal
funds sold increased $7.1 million, net loans receivable increased $4.9 million,
and securities available for sale increased $2.9 million. Such increases were
offset by a $6.4 million decrease in cash & due from banks and a $3.0 million
decrease in certificates of deposit. Such funds were primarily used to pay down
the outstanding federal funds purchased of $7.0 million. Additionally, at March
31, 2000, securities available for sale increased approximately $6.0 million
offset by market value declines of approximately $3.1 million.
The growth in total deposits of $7.0 million was used primarily to fund
the growth in the loan portfolio. The increase in the loan portfolio was
primarily due to the growth of the fixed rate one- to four- family mortgage
loans of $1.4 million, growth of the adjustable rate real estate secured
commercial loans of $1.5 million, and growth of the commercial loans of $1.8
million. The Company's loan portfolio continues to grow due to the Company's
offering of competitive market interest rates.
Non-interest bearing deposits increased $6.2 million to $63.3 million
at March 31, 2000 from $57.1 million at December 31, 1999. This growth is
primarily the result of increases in the number of deposit accounts. During the
period, long-term debt which consisted of borrowings with the Federal Home Loan
Bank ("FHLB") increased $5.0 million. During the period, the Company continued
to take advantage of the lower interest rate environment for borrowings and used
such advances to purchase higher yielding available for sale securities.
6
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At March 31, 2000, total stockholders' equity increased $262,000 to
$38.2 million from $37.9 million at December 31, 1999. The increase was due to
net income of $1.7 million for the period, offset by the purchase of $602,000 of
Company stock, $97,000 loss in accumulated other comprehensive income and
dividends paid of $691,000. As previously reported, the Company plans to
purchase up to 151,100 shares of the Companies common stock. As of March 31,
2000 the Company had repurchased 21,876 shares.
Accumulated other comprehensive income decreased 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 decrease in market value of the investment securities available for sale is
considered temporary in nature and 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 March 31, 2000
increased $85,000 to $1.7 million from $1.6 million for the comparable three
month period in 1999. Such increase to net income were the result of higher net
interest and other income offset by increases to the provision for loan losses
and operating expenses.
Interest income. Interest income for the three months ended March 31,
2000 increased $778,000 to $7.8 million from $7.0 million for the comparable
three month period in 1999. The increases were primarily due to the growth in
the loan portfolio and the increase in the available for sale securities.
Interest expense. Interest expense for the three months ended March 31,
2000 increased $410,000 to $3.6 million from $3.2 million for the comparable
three month period in 1999. The increase was primarily due to the increase in
FHLB advances, corporate repurchase agreement deposits, and interest earning
deposits.
Provision for loan losses. For the three months ended March 31, 2000,
provision for loan losses were $75,000 compared to $45,000 for the three months
ended March 31, 1999. 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.
7
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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 March 31,
2000 increased $119,000 to $780,000 from $661,000 for the comparable three month
period in 1999. The total increases for the three months ended March 31, 2000
were due to the increase in service fees and other income. The increase in
service fees resulted primarily from the increase in overdraft fees.
Other expense. Total other expense for the three months ended March 31,
2000 increased $332,000 to $2.4 million from $2.1 million for the comparable
three month period in 1999. While virtually all other expenses increased during
the period, salaries, pension and other employee benefits, ATM expenses, and
FDIC insurance were the most significant. The deposits of the bank are insured
by the Bank Insurance Fund ("BIF"). Effective January 1, 2000, the BIF increased
its assessments on deposits for all banks insured by the BIF. ATM expense
increased due to increased operating costs. During the current year three month
period salaries increased approximately $157,000 to $910,000 from the same
period in 1999. The Company instituted an across the board salary increase to
all non-officer employees and eliminated the bonus reward program. Officers of
the Company are still eligible for the bonus reward program which is calculated
based upon the prior years performance. Pension and other employee benefits
increased approximately $50,000 to $259,000 for the current year three month
period. Such increase was primarily related to increased health insurance
premiums.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes for the three months ended March 31,
2000 from the information presented in the 10K statement, under the caption
Market Risk, for the year ended December 31, 1999.
8
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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
(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**
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.
(b) None.
9
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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: May 15, 2000 By: /s/Charles G. Urtin
--------------------------------------
Charles G. Urtin
President, Chief Executive Officer
And Chief Accounting Officer
(Duly authorized officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,916
<INT-BEARING-DEPOSITS> 84
<FED-FUNDS-SOLD> 7,120
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 153,982
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 267,661
<ALLOWANCE> 2,237
<TOTAL-ASSETS> 451,578
<DEPOSITS> 375,696
<SHORT-TERM> 0
<LIABILITIES-OTHER> 10,715
<LONG-TERM> 27,000
0
0
<COMMON> 3,780
<OTHER-SE> 34,388
<TOTAL-LIABILITIES-AND-EQUITY> 451,578
<INTEREST-LOAN> 5,245
<INTEREST-INVEST> 2,540
<INTEREST-OTHER> 13
<INTEREST-TOTAL> 7,798
<INTEREST-DEPOSIT> 3,233
<INTEREST-EXPENSE> 405
<INTEREST-INCOME-NET> 4,160
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,431
<INCOME-PRETAX> 2,433
<INCOME-PRE-EXTRAORDINARY> 2,433
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,652
<EPS-BASIC> .55
<EPS-DILUTED> .55
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 1,656
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,366
<CHARGE-OFFS> 209
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 2,237
<ALLOWANCE-DOMESTIC> 2,237
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
