<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended September 30, 1995
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 Number: 0-18415
--------------------------------------------------------
IBT Bancorp, Inc.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2830092
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
200 East Broadway 48858
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(517) 772-9471
- - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- - -------------------------------------------------------------------------------
(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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $6 par value, 701,007 as of October 31, 1995
<PAGE> 2
IBT BANCORP, INC.
Index to Form 10-Q
Part I Financial Information Page Number
Item 1 Financial Statements (Unaudited) 3
Item 2 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 18
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(in thousands) September 30 December 31
1995 1994
------------ -----------
<S> <C> <C>
ASSETS (Unaudited)
Cash and demand deposits due from banks............... $ 10,294 $ 16,410
Federal funds sold.................................... 7,100 1,600
---------- ----------
TOTAL CASH AND CASH EQUIVALENTS 17,394 18,010
Investment securities:
Securities available for sale....................... 52,430 57,263
Securities held to maturity (Market value --
$7,942 in 1995 and $6,455 in 1994) 7,893 6,522
---------- ----------
TOTAL INVESTMENT SECURITIES 60,323 63,785
Loans:
Commercial and agricultural......................... 32,900 33,062
Real estate mortgage................................ 113,353 105,953
Installment......................................... 36,369 34,923
---------- ----------
TOTAL LOANS 182,622 173,938
Less allowance for loan losses........................ 2,311 2,083
---------- ----------
NET LOANS 180,311 171,855
Other Assets.......................................... 9,857 9,553
---------- ----------
TOTAL ASSETS $ 267,885 $ 263,203
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing................................. $ 31,349 $ 35,545
NOW accounts........................................ 40,696 45,946
Certificates of deposit and other savings........... 159,675 149,081
Certificates of deposit over $100,000............... 7,902 7,831
---------- ----------
TOTAL DEPOSITS 239,622 238,403
Accrued interest and other liabilities................ 2,978 2,276
---------- ----------
TOTAL LIABILITIES 242,600 240,679
Shareholders' Equity:
Common stock -- $6 par value........................ 4,206 4,166
1,000,000 authorized; outstanding--
700,975 in 1995 (694,247 in 1994)
Capital Surplus..................................... 10,137 9,905
Retained Earnings................................... 10,558 8,912
Unrealized gain (loss) on securities available for
sale - net of income tax.......................... 384 (459)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 25,285 22,524
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 267,885 $ 263,203
========== ==========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(in thousands) September 30 September 30
---------------------- -------------------
1995 1994 1995 1994
---------------------- -------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................. $ 4,098 $ 3,541 $11,752 $10,327
Interest on investment securities:
Taxable.............................................. 678 721 1,951 2,130
Nontaxable........................................... 200 235 656 667
------- ------- ------- -------
TOTAL INTEREST ON INVESTMENT SECURITIES 878 956 2,607 2,797
Interest on fed funds sold............................. 117 58 318 205
------- ------- ------- -------
Total interest income 5,093 4,555 14,677 13,329
INTEREST ON DEPOSITS..................................... 2,305 1,927 6,595 5,732
------- ------- ------- -------
NET INTEREST INCOME 2,788 2,628 8,082 7,597
Provision for loan losses................................ 121 100 351 300
------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,667 2,528 7,731 7,297
OTHER INCOME
Trust Department income................................ 92 89 260 251
Service charges on deposit accounts.................... 75 68 224 215
Other service charges and fees......................... 265 225 756 626
Other.................................................. 82 56 208 200
Gain (loss) on the sale of.............................
securities available for sale.......................... (5) (7) (16) (4)
------- ------- ------- -------
TOTAL OTHER INCOME 509 431 1,432 1,288
OPERATING EXPENSES
Salaries, wages and employee benefits.................. 1,068 994 3,191 2,964
Net occupancy expense.................................. 145 141 442 423
Furniture and equipment expense........................ 272 198 695 578
Other.................................................. 563 655 1,939 1,946
------- ------- ------- -------
TOTAL OPERATING EXPENSE 2,048 1,988 6,267 5,911
INCOME BEFORE FEDERAL INCOME TAX 1,128 971 2,896 2,674
Federal income tax..................................... 307 251 749 677
------- ------- ------- -------
NET INCOME $ 821 $ 720 $ 2,147 $ 1,997
======= ======= ======== =======
Net income per share $1.18 $1.04 $3.08 $2.90
======= ======= ======== =======
Cash dividends $0.24 $0.22 $0.72 $0.66
======= ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months
September 30
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Interest and fees collected on loans..............................
and investments................................................. $ 14,331 $ 13,486
Other fees and income received.................................... 1,457 1,347
Interest paid..................................................... (6,427) (5,671)
Cash paid to suppliers and employees.............................. (5,579) (5,436)
Income taxes paid................................................. (726) (676)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,056 3,050
INVESTING ACTIVITIES
Proceeds from maturities and sale of investment
securities available for sale................................... 22,399 26,295
Proceeds from maturities of investment
securities held to maturity..................................... 3,154 739
Purchase of investments securities
available for sale.............................................. (14,981) (17,456)
Purchase of investments securities
held to maturity................................................ (5,829) (4,714)
Net increase in loans............................................. (8,806) (11,870)
Purchases of equipment and premises............................... (599) (433)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (4,662) (7,439)
FINANCING ACTIVITIES
Net (increase) decrease in non-interest bearing deposits.......... (4,196) 1,533
Net increase in interest bearing deposits......................... 5,415 3,837
Cash dividends.................................................... (502) (459)
Sale of common stock.............................................. 273 237
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 990 5,148
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (616) 759
Cash and cash equivalents at beginning of year $ 18,010 $ 16,017
-------- --------
CASH AND CASH EQUIVALENTS AT PERIOD END $ 17,394 $ 16,776
======== ========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
IBT BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 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 and
Article 10 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 month
and nine month periods ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1995. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report for the year
ended December 31, 1994.
NOTE 2 COMPUTATION OF EARNINGS PER SHARE
The net income per share amounts are based on the weighted average number of
common shares outstanding. The weighted year to date average number of common
shares outstanding were 696,778 as of September 30, 1995 and 687,695 as of
September 30, 1994. The weighted average number of shares for the third
quarter were 698,695 in 1995 and 690,179 in 1994.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the major
factors that influenced IBT Bancorp's financial performance. This analysis
should be used in conjunction with the Corporation's 1994 annual report and
with the unaudited financial statements and notes, as set forth on pages 3
through 6 of this report.
NINE MONTHS ENDING SEPTEMBER 30, 1995 AND 1994
RESULTS OF OPERATIONS
Net income equaled $2.15 million as of September 30, 1995, compared to
$2.0 million for the same period in 1994, a 7.5% increase. The increase in net
income was due primarily to higher net interest income. Return on average
assets, which measures the ability of the Corporation to profitably and
efficiently employ its resources, equaled 1.09% for the period ending September
30, 1995 versus 1.05% in 1994. Return on average equity, which indicates how
effectively the Corporation is able to generate earnings on shareholder
invested capital, equaled 11.95% through September 30, 1995 versus 12.15% for
the same period in 1994.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Year to Date
September 30
---------------------------------
1995 1994
---------------------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net interest income $ 8,082 $ 7,597
Provision for loan losses 351 300
Net income 2,147 1,997
PER SHARE DATA:
Net income per common share $ 3.08 $ 2.90
Cash dividend per common share 0.72 0.66
RATIOS:
Average primary capital to average assets 9.87% 9.37%
Net income to average assets 1.09 1.05
Net income to average equity 11.95 12.15
</TABLE>
NET INTEREST INCOME
Net interest income equals interest income less interest expense and is the
primary source of income for IBT Bancorp. In accordance with Financial
Accounting Standards Board Statement No. 91, Accounting for Loan Fees, interest
income includes loan fees of $430,000 in 1995 versus $503,000 in 1994. For
analytical purposes, net interest income is adjusted to a "taxable equivalent"
basis by adding the income tax savings from interest on tax-exempt loans and
securities, thus making year-to-year comparisons more meaningful.
(continued on page 11)
7
<PAGE> 8
TABLE 1
IBT BANCORP, INC.
AVERAGE BALANCES; INTEREST RATE AND NET INTEREST INCOME
(Dollars in Thousands)
The following schedules present the daily average amount outstanding
for each major category of interest earning assets, nonearning assets, interest
bearing liabilities, and noninterest bearing liabilities. This schedule also
presents an analysis of interest income and interest expense for the periods
indicated. All interest income is reported on a fully taxable equivalent (FTE)
basis using a 34% tax rate. Nonaccruing loans, for the purpose of the
following computations, are included in the average loan amounts outstanding.
<TABLE>
<CAPTION>
Nine Months Ending
September 30, 1995 September 30, 1994
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
------- ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans $ 177,464 $ 11,831 8.89 % $ 159,014 $ 10,385 8.71 %
Taxable investment securities 42,670 1,951 6.10 53,597 2,103 5.23
Nontaxable investment securities 16,321 994 8.12 16,099 937 7.76
Federal funds sold 7,197 303 5.61 7,209 205 3.79
Other 336 15 5.95 611 27 5.89
--------- -------- ---- --------- -------- ----
Total Earning Assets 243,988 15,094 8.25 % 236,530 13,657 7.70 %
NONEARNING ASSETS:
Allowance for loan losses (2,223) (2,092)
Cash and due from banks 10,971 10,321
Premises and equipment 5,223 4,765
Accrued income and other assets 5,079 4,576
--------- ---------
Total Assets $ 263,038 $ 254,100
========= =========
INTEREST BEARING LIABILITIES:
Interest bearing demand deposits 42,399 973 3.06 % 39,893 757 2.53 %
Savings deposits 63,361 1,385 2.91 71,596 1,396 2.60
Time deposits 98,329 4,250 5.76 88,277 3,579 5.41
--------- -------- ---- --------- -------- -----
Total Interest Bearing Liabilities 204,089 6,608 4.32 % 199,766 5,732 3.83 %
NONINTEREST BEARING LIABILITIES:
Demand deposits 32,256 29,979
Other 2,732 2,443
Shareholders' equity 23,961 21,912
--------- ---------
Total Liabilities and Equity $ 263,038 $ 254,100
========= =========
Net interest income (FTE) $ 8,486 $ 7,925
======== ========
Net yield on interest earning
assets (FTE) 4.64% 4.47%
==== ====
</TABLE>
8
<PAGE> 9
TABLE 2
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in Thousands)
The following tables set forth the effect of volume and rate changes on
interest income and expense for the periods indicated. For the purpose of this
table, changes in interest due to volume and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's rate.
Rate Variance - change in the fully taxable equivalent (FTE) rate
multiplied by the prior year's volume.
The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
<TABLE>
<CAPTION>
Year to Date September 30, 1995
Compared to
September 30, 1994
Increase (Decrease) Due to
------------------------------------
Volume Rate Net
------ ---- -----
<S> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans $ 1,226 $ 220 $ 1,446
Taxable investment securities (468) 316 (152)
Nontaxable investment securities 13 44 57
Federal funds sold 0 98 98
Other investments (12) 0 (12)
------- ------ -------
Total changes in interest income 759 678 1,437
Total changes in interest expense 304 572 876
------- ------ -------
Net Change in Interest Margin (FTE) $ 455 $ 106 $ 561
======= ====== =======
</TABLE>
9
<PAGE> 10
NET INTEREST INCOME (CONTINUED)
As shown in Tables number 1 and 2, when comparing the nine month period ending
September 30, 1995 to the same period in 1994, fully taxable equivalent (FTE)
net interest income increased $561,000 or 7.1%. An increase of 3.2% in average
interest earning assets provided $759,000 of FTE interest income. The majority
of this growth was funded by a 2.2% increase in interest bearing deposits,
resulting in $304,000 of additional interest expense. Overall, changes in
volume resulted in $455,000 of additional interest income. The average FTE
interest rate earned on assets increased by 0.55%, increasing FTE interest
income by $678,000 and the average rate paid on deposits increased by 0.49%,
increasing interest expense by $572,000. The net result of increased interest
rate earned and paid increased FTE net interest income by $106,000.
The Corporation's FTE net interest yield as a percentage of average earning
assets equaled 4.64% during the first nine months of 1995 versus 4.47% for the
same period in 1994. The 0.17% increase in the net interest yield was
primarily a result of a shift in invested dollars from taxable investment
securities to loans. The following table shows this shift:
<TABLE>
<CAPTION>
Year to Date
1995 1994 Change
---- ---- ------
<S> <C> <C> <C>
As a percentage of average assets:
Loans 68.23% 63.26% 4.97%
Taxable investment securities 16.06 20.49 (4.44)
</TABLE>
The average rate earned on loans is 2.79% higher than on taxable investment
securities. Management estimates that the changes in asset mix provided an
additional $269,000 of interest income and added 15 basis points to the average
net yield on interest earning assets.
In addition to changes in asset and liability mix, changes in rates have an
impact on the Corporation's interest income. Management expects interest rates
to decrease moderately during the remainder of 1995. Based on this expectation
and the Corporation's assets and liability repricing characteristics,
management calculates that the Corporation's FTE net interest margin as a
percentage of average assets will decrease steadily through the remainder of
1995. Due to the many factors that can affect net interest income, the overall
effect of changing interest rates on interest income earned cannot be predicted
with any certainty.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Net loans outstanding represent 75% of the
Corporation's total deposits and is the Corporation's single largest
concentration of risk. The allowance for loan losses is management's
estimation of potential future losses inherent in the existing loan portfolio.
Factors used to evaluate the loan portfolio, and thus to determine the current
charge to expense, include recent loan loss history, financial condition of
borrowers, amount of nonperforming loans, and overall economic conditions.
Comparing the year to date period of September 30, 1995 to September 30, 1994,
average loans outstanding increased 11.3%. The provision for loan losses was
increased 17.0% to $351,000 (continued on page 12)
10
<PAGE> 11
TABLE 3
IBT BANCORP, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year to Date
September 30
------------------------------
1995 1994
-------- --------
<S> <C> <C>
Summary of changes in allowance:
Allowance for loan losses - January 1 $ 2,083 $ 1,854
Loans charged off (280) (282)
Recoveries of charged off loans 157 295
------- -------
Net loans (charged off) recoveries (123) 13
Provision charged to operations 351 300
------- -------
Allowance for loan losses - September 30 $ 2,311 $ 2,167
======= =======
Allowance to loan losses as a % of loans 1.30% 1.36%
====== =======
</TABLE>
NONPERFORMING LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30 September 30
1995 1994
------------ -----------
<S> <C> <C>
Total amount of loans outstanding for
the period (net of unearned interest) $ 182,622 $ 166,491
========= =========
Nonaccrual loans $ 861 $ 17
Accruing loans past due 90 days or more 1,011 423
Restructured loans 0 95
---------- ---------
Total $ 1,872 $ 535
========== =========
Loans classified as nonperforming to
outstanding loans 1.03% 0.32%
====== ======
Loans classified as substandard to
Allowance for loan losses - September 30 81.00% 24.69%
====== ======
</TABLE>
There are, to management's knowledge, no other loans which cause management
to have serious doubts as to the ability of a borrower to comply with their
loan repayment terms.
11
<PAGE> 12
PROVISION FOR LOAN LOSSES (continued)
in the first nine months of 1995 when compared to the same period in 1994. The
increase in the provision is due to lower recoveries on loans previously
charged off. As shows in Table 3, loans classified as nonperforming were 1.03%
of loans as of September 30, 1995 versus 0.32% for September 30, 1994. The
majority of this increase is attributable to a single commercial loan borrower
who filed for bankruptcy protection. The loans to this borrower are on a
nonaccrual basis, and are considered impaired and thus recorded using the
provisions of FASB 114, "Accounting by Creditors for Impairment of a Loan."
As of September 30, 1995 the allowance for loan losses as a percentage of loans
equaled 1.30% compared to 1.36% for the same period in 1994. In management's
opinion, the allowance for loan losses is adequate as of September 30, 1995.
NONINTEREST INCOME
Noninterest income consists of trust fees, deposit service charges, and fees
for other financial services. The income earned from these sources increased
$144,000 for the nine month period ending September 30, 1995, compared to the
same period in 1994. The most significant changes were an $83,000 increase in
ATM fees, a $42,000 increase in overdraft fees, a $31,000 increase in brokerage
commissions, a $12,000 increase from revenue earned on the sale of credit
insurance products, and a decrease of $27,000 in income earned on bank owned
life insurance.
The Corporation has established a policy that all 30 year amortized fixed rate
mortgage loans will be sold. These loans are accounted for according to
Financial Accounting Standard Number 65, "Accounting for Certain Mortgage
Banking Activities", and are sold without recourse. The Corporation retains
the servicing of these loans. The calculation of gains on the sale of
mortgages exclude at least 25 basis points for the servicing of these loans.
Included in other operating income is a $48,000 gain from the sale of $4.5
million in mortgages during the first nine months of 1995 versus a $51,000 gain
from the sale of $10.8 million in the same period in 1994.
NONINTEREST EXPENSE
Noninterest expense increased $356,000 or 6.0% for the first nine months of
1995 when compared to the same period in 1994. The largest component of
noninterest expense is salaries and employee benefits, which increased $227,000
or 7.7%. The majority of this increase is related to normal merit and
promotional salary increases, employee benefits, and the addition of the
brokerage subsidiary. Occupancy and furniture and equipment expenses increased
$136,000 or 13.6% in 1995. The majority of this increase was associated with
automatic teller machine operating costs, computer operations, depreciation,
and real estate property taxes. Other noninterest expenses decreased $7,000, a
0.4% decrease. The most significant change was a decrease in FDIC insurance
premiums effective June 1, 1995 from 23 cents per hundred dollars in deposits
to 4 cents. FDIC expense decreased $126,000 in 1995. Significant increases in
other operating expenses include legal expenses, consultant fees, and armored
car services.
12
<PAGE> 13
QUARTER ENDED SEPTEMBER 30, 1995 AND 1994
RESULTS OF OPERATIONS
Net income equaled $821,000 for the third quarter in 1995 compared to $720,000
for the same period in 1994, a 14.0% increase. The increase in net income was
due primarily to higher net interest income. Return on average assets equaled
1.23% for the third quarter in 1995 compared to 1.12% for the same period in
1994. Return on average equity equaled 13.34% for the third quarter in 1995,
versus 12.89% for the third quarter in 1994.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Quarter Ended
September 30
---------------------------------
1995 1994
---------------------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net interest income $ 2,788 $ 2,628
Provision for loan losses 121 100
Net income 821 720
PER SHARE DATA:
Net income per common share $ 1.18 $ 1.04
Cash dividend per common share 0.24 0.22
RATIOS:
Net income to average assets 1.23% 1.12%
Net income to average equity 13.34 12.89
</TABLE>
NET INTEREST INCOME
As shown in Table 4 and 5, when comparing the third quarter of 1995 to the same
period in 1994, a 3.3% increase in average interest-earning assets provided
$242,000 of additional FTE interest income. The average rate of
interest-earning assets increased 0.66%, increasing FTE interest income by
$323,000. The increase in average balances and rates provided an additional
$565,000 of FTE interest income. The growth of interest-earning assets was
funded primarily by growth in interest-bearing deposits which increased by 2.6%
in 1995. The average cost of these deposits increased by 0.66%. The increase
in the average balance and rate paid on interest-bearing deposits resulted in
$391,000 of additional interest expense. Overall, the changes in interest rate
earned and paid and average balances resulted in additional net interest income
of $174,000 in the third quarter of 1995 when compared to the same period in
1994.
PROVISION FOR LOAN LOSSES
Comparing the quarter ended September 30, 1995 and 1994, average total loans
outstanding increased 11.3%. The allowance for loan losses as a percentage of
total outstanding loans was 1.30% as of September 30, 1995 versus 1.36% as of
September 30, 1994. Net loans charged off in the third quarter of 1995 was
$30,000 compared to $104,000 in 1994. The amount provided for loan losses in
the third quarter of 1995 was $121,000 versus $100,000 in 1994.
13
<PAGE> 14
TABLE 4
IBT BANCORP, INC.
AVERAGE BALANCES; INTEREST RATE AND NET INTEREST INCOME
(Dollars in Thousands)
The following schedules present the daily average amount outstanding
for each major category of interest earning assets, nonearning assets, interest
bearing liabilities, and noninterest bearing liabilities. This schedule also
presents an analysis of interest income and interest expense for the periods
indicated. All interest income is reported on a fully taxable equivalent (FTE)
basis using a 34% tax rate. Nonaccruing loans, for the purpose of the
following computations, are included in the average loan amounts outstanding.
<TABLE>
<CAPTION>
Quarter Ending
September 30, 1995 September 30, 1994
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
------- ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans $ 181,581 $ 4,128 9.09 % $163,211 $ 3,557 8.72 %
Taxable investment securities 42,726 678 6.35 52,863 709 5.36
Nontaxable investment securities 14,759 303 8.21 17,440 315 7.22
Federal funds sold 8,039 102 5.08 5,101 58 4.55
Other 336 5 5.95 835 12 5.75
--------- -------- ---- -------- ------- ----
Total Earning Assets 247,441 5,216 8.43 % 239,450 4,651 7.77 %
NONEARNING ASSETS:
Allowance for loan losses (2,275) (2,220)
Cash and due from banks 10,442 11,219
Premises and equipment 5,279 4,790
Accrued income and other assets 5,228 4,748
--------- ---------
Total Assets $ 266,115 $ 257,987
========= =========
INTEREST BEARING LIABILITIES:
Interest bearing demand deposits $ 40,434 309 3.06 % $ 40,237 273 2.71 %
Savings deposits 63,941 499 3.12 72,150 475 2.63
Time deposits 101,790 1,510 5.93 88,460 1,179 5.33
--------- ------- ------ --------- ------- -----
Total Interest Bearing Liabilities 206,165 2,318 4.50 % 200,847 1,927 3.84 %
NONINTEREST BEARING LIABILITIES:
Demand deposits 32,452 32,287
Other 2,882 2,502
Shareholders' equity 24,616 22,351
--------- ---------
Total Liabilities and Equity $ 266,115 $ 257,987
========= =========
Net interest income (FTE) $ 2,898 $ 2,724
======== =======
Net yield on interest earning
assets (FTE) 4.68 % 4.55 %
======= =======
</TABLE>
14
<PAGE> 15
TABLE 5
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in Thousands)
The following tables set forth the effect of volume and rate changes on
interest income and expense for the periods indicated. For the purpose of this
table, changes in interest due to volume and rate were determined as follows:
Volume Variance - change in volume multiplied by the previous year's rate.
Rate Variance - change in the fully taxable equivalent (FTE) rate
multiplied by the prior year's volume.
The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute dollar
amounts of the change in each.
<TABLE>
<CAPTION>
Quarter Ended September 30, 1995
Compared to
September 30, 1994
Increase (Decrease) Due to
-------------------------------------
Volume Rate Net
------ ---- -----
<S> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans $ 413 $ 158 $ 571
Taxable investment securities (149) 118 (31)
Nontaxable investment securities (52) 40 (12)
Federal funds sold 37 7 44
Other investments (7) 0 (7)
------ ----- ------
Total changes in interest income 242 323 565
Total changes in interest expense 133 258 391
------ ----- ------
Net Change in Interest Margin (FTE) $ 109 $ 65 $ 174
======= ===== ======
</TABLE>
15
<PAGE> 16
NONINTEREST INCOME
Noninterest income earned in the third quarter of 1995, compared to the same
period in 1994, increased $78,000 or 18.1%. The most significant changes were
a $31,000 increase in ATM fees, a $10,000 increase in overdraft fees, a $16,000
increase in gains on the sale of fixed rate real estate mortgages, a $13,000
increase in brokerage commissions, and a $9,000 decrease from income earned on
bank owned life insurance.
NONINTEREST EXPENSE
Noninterest expense increased $60,000 for the third quarter of 1995 when
compared to the same period in 1994. Noninterest expense includes salary and
benefits, occupancy, and other operating expenses. Salaries and employee
benefits increased $74,000 due to normal merit and promotional salary increases
and the addition of the brokerage subsidiary. Occupancy expense and furniture
and equipment expense increased $78,000. The majority of this increase is
related to increases in computer operating expenses, equipment depreciation,
and ATM operating expenses. Other operating expenses decreased $92,000 due to
a decrease in F.D.I.C. deposit insurance expense of $140,000. Increases in
other operating expenses include consultant fees, other losses, and legal
expenses.
CHANGES IN FINANCIAL POSITION
Since December 31, 1994, total assets increased $4.7 million to $267.9 million.
Year to date average assets increased 3.5% in 1995 when compared to 1994. As
of September 30, 1995, the loan portfolio increased $8.7 million, fed funds
sold increased $5.5 million, and investment securities decreased $3.5 million
when compared to December 31, 1994. Asset growth was funded primarily by a
$1.2 million increase in deposits and a $2.8 million increase in shareholders'
equity. Interest bearing deposits increased $5.4 million and
noninterest-bearing deposits decreased $4.2 million.
LIQUIDITY
Liquidity management is designed to have adequate resources available to meet
depositor and borrower discretionary demands for funds. Liquidity is also
required to fund expanding operations, investment opportunities, and payment of
cash dividends. The primary sources of the Corporation's liquidity are cash,
cash equivalents, and investment securities available for sale.
As of September 30, 1995, cash and cash equivalents as a percentage of total
assets equaled 6.5%, versus 5.2% as of December 31, 1994. During the first
nine months of 1995, $3.1 million in net cash was provided from operations,
$1.0 million was provided by financing activities, and investing activities
used $4.7 million. The accumulated effect of the Corporation's operating,
investing, and financing activities was a $616,000 decrease in cash and cash
equivalents during the first nine months of 1995.
In addition to cash and cash equivalents, investment securities available for
sale are another source of liquidity. Securities available for sale equaled
$52.4 million as of September 30, 1995 and $57.3 million as of December 31,
1994. The Corporation's liquidity is considered adequate by the management of
the Corporation.
16
<PAGE> 17
CAPITAL
The capital of the Corporation consists solely of common stock, surplus,
retained earnings, and unrealized gain/(loss) on securities available for sale,
and increased $2.8 million since December 31, 1994. As of September 30, 1995,
the Corporation's capital included $384,000 of unrealized gain on securities
available for sale. There are no commitments for significant capital
expenditures; however, there are regulatory constraints placed on the
Corporation's capital. The Federal Reserve Board's current recommended minimum
primary capital requirement is 6.0%. The Corporation's primary capital, which
consists of shareholder's equity plus the allowance for loan losses, was 10.2%
as of September 30, 1995.
The Federal Reserve Board has established a minimum risk based capital
standard. Under this standard, a framework has been established that assigns
risk weights to each category of on- and off-balance sheet items to arrive at
risk adjusted total assets. Regulatory capital is divided by the risk adjusted
assets with the resulting ratio compared to the minimum standard to determine
whether a bank has adequate capital. The minimum standard is 8%, of which at
least 4% must consist of equity capital net of goodwill. The following table
sets forth the percentages required under the Risk Based Capital guidelines and
the Corporation's ratios as of September 30, 1995.
PERCENTAGE OF CAPITAL TO RISK ADJUSTED ASSETS:
<TABLE>
<CAPTION>
IBT Bancorp
Required 09/30/95
------------ ------------
<S> <C> <C>
Equity Capital 4.00 15.96
Secondary Capital* 4.00 1.25
Total Capital 8.00 17.21
</TABLE>
* IBT Bancorp's secondary capital consists solely of the allowance for
loan losses. The percentage for the secondary capital under the
required column is the maximum allowed from all sources.
17
<PAGE> 18
PART II - OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Not Applicable
(b) No reports on Form 8-K were filed or required to be filed during
the quarter ended September 30, 1995.
(c) Exhibit 27 - Financial Data Schedule
18
<PAGE> 19
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 9, 1995 /s/ David W. Hole
---------------- ------------------------------
David W. Hole, President/CEO
/s/ Dennis P. Angner
------------------------------
Dennis P. Angner, Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- - ------- ----------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,294
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 7,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 52,430
<INVESTMENTS-CARRYING> 7,893
<INVESTMENTS-MARKET> 7,942
<LOANS> 182,622
<ALLOWANCE> 2,311
<TOTAL-ASSETS> 267,885
<DEPOSITS> 239,622
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,978
<LONG-TERM> 0
<COMMON> 4,206
0
0
<OTHER-SE> 21,079
<TOTAL-LIABILITIES-AND-EQUITY> 267,885
<INTEREST-LOAN> 11,752
<INTEREST-INVEST> 2,607
<INTEREST-OTHER> 318
<INTEREST-TOTAL> 14,677
<INTEREST-DEPOSIT> 6,595
<INTEREST-EXPENSE> 6,595
<INTEREST-INCOME-NET> 8,082
<LOAN-LOSSES> 351
<SECURITIES-GAINS> (16)
<EXPENSE-OTHER> 6,267
<INCOME-PRETAX> 2,896
<INCOME-PRE-EXTRAORDINARY> 2,896
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,147
<EPS-PRIMARY> 3.08
<EPS-DILUTED> 3.08
<YIELD-ACTUAL> 4.64
<LOANS-NON> 861
<LOANS-PAST> 1,011
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,083
<CHARGE-OFFS> 280
<RECOVERIES> 157
<ALLOWANCE-CLOSE> 2,311
<ALLOWANCE-DOMESTIC> 2,311
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
