<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 June 30, 1997
-------------
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, 788,440 as of July 31, 1997
-------------------------------------------------------
<PAGE> 2
IBT BANCORP, INC.
Index to Form 10-Q
Part I Financial Information Page Number
Item 1 Financial Statements 3
Item 2 Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
Part II Other Information
Item 4 Submission of Matters to a Vote of
Security Holders 19
Item 6 Exhibits and Reports on Form 8-K 19
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IBT BANCORP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(in thousands) June 30 December 31
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and demand deposits due from banks..................................... $ 13,499 $ 11,945
Federal funds sold.......................................................... 4,800 3,175
--------- ---------
TOTAL CASH AND CASH EQUIVALENTS 18,299 15,120
Investment securities:
Securities available for sale (Amortized cost of
$47,903 in 1997 and $50,300 in 1996)..................................... 48,073 50,484
Securities held to maturity (Fair value --
$6,948 in 1996 and $9,059 in 1995)..................................... 7,218 9,495
--------- ---------
TOTAL INVESTMENT SECURITIES 55,291 59,979
Loans:
Commercial and agricultural.............................................. 40,738 40,068
Real estate mortgage..................................................... 137,078 137,998
Installment.............................................................. 37,937 37,388
--------- ---------
TOTAL LOANS 215,753 215,454
Less allowance for loan losses.............................................. 2,884 2,620
--------- ---------
NET LOANS 212,869 212,834
Other assets................................................................ 10,984 10,809
--------- ---------
TOTAL ASSETS $ 297,443 $ 298,742
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing...................................................... $ 39,059 $ 41,923
NOW accounts............................................................. 36,971 39,886
Certificates of deposit and other savings................................ 174,933 171,836
Certificates of deposit over $100,000.................................... 13,833 14,004
--------- ---------
TOTAL DEPOSITS 264,796 267,649
Accrued interest and other liabilities...................................... 3,071 3,093
--------- ---------
TOTAL LIABILITIES 267,867 270,742
Shareholders' Equity:
Common stock -- $6 par value............................................. 4,730 4,701
4,000,000 shares authorized; outstanding--
788,366 in 1997 (783,457 in 1996)
Capital surplus.......................................................... 13,472 13,262
Retained earnings........................................................ 11,262 9,916
Unrealized gain on securities available for
sale - net of taxes of $58,000 in 1997 and
$62,000 in 1996.......................................................... 112 121
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 29,576 28,000
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 297,443 $ 298,742
========= =========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands) Three Months Ended Six Months Ended
June 30 June 30
------- -------
1997 1996 1997 1996
------------------- --------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans.............................................................................. $4,702 $4,319 $ 9,250 $ 8,479
Investment securities:
Taxable.......................................................................... 699 740 1,399 1,520
Nontaxable....................................................................... 165 210 330 432
------ ------ ------- -------
TOTAL INTEREST ON INVESTMENT SECURITIES 864 950 1,729 1,952
Federal funds sold................................................................. 63 74 182 176
------ ------ ------- -------
TOTAL INTEREST INCOME 5,629 5,343 11,161 10,607
INTEREST EXPENSE ON DEPOSITS......................................................... 2,563 2,422 5,115 4,882
------ ------ ------- -------
NET INTEREST INCOME 3,066 2,921 6,046 5,725
Provision for loan losses............................................................ 129 123 252 240
------ ------ ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,937 2,798 5,794 5,485
NONINTEREST INCOME
Trust fees......................................................................... 87 75 174 153
Service charges on deposit accounts................................................ 71 73 142 145
Other service charges and fees..................................................... 214 279 432 535
Other.............................................................................. 102 119 239 217
Net realized (loss) gain on securities
available for sale............................................................... (2) 4 (11) 4
------ ------ ------- -------
TOTAL NONINTEREST INCOME 472 550 976 1,054
NONINTEREST EXPENSES
Salaries, wages and employee benefits.............................................. 1,195 1,158 2,388 2,290
Occupancy.......................................................................... 158 172 315 324
Furniture and equipment............................................................ 224 287 461 531
Other.............................................................................. 576 562 1,165 1,117
------ ------ ------- -------
TOTAL NONINTEREST EXPENSE 2,153 2,179 4,329 4,262
INCOME BEFORE FEDERAL INCOME TAXES 1,256 1,169 2,441 2,277
Federal income taxes................................................................. 365 322 703 618
------ ------ ------- -------
NET INCOME $ 891 $ 847 $ 1,738 $ 1,659
====== ====== ======= =======
Net income per share $ 1.13 $ 1.09 $ 2.21 $ 2.14
====== ====== ======= =======
Cash dividends per share $ 0.25 $ 0.24 $ 0.50 $ 0.48
====== ====== ======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands) Six Months Ended
June 30
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Interest and fees collected on loans
and investments..................................................................... $11,130 $10,502
Other fees and income received........................................................ 1,025 1,211
Interest paid......................................................................... (5,118) (4,888)
Cash paid to suppliers and employees.................................................. (3,964) (2,835)
Federal income taxes paid............................................................. (753) (655)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,320 3,335
INVESTING ACTIVITIES
Proceeds from maturities and sales of
securities available for sale....................................................... 10,066 15,554
Proceeds from maturities of
securities held to maturity......................................................... 2,297 2,650
Purchase of securities available for sale............................................. (7,576) (11,317)
Purchase of securities held to maturity............................................... (202) (1,018)
Net increase in loans................................................................. (287) (13,855)
Purchases of equipment and premises................................................... (434) (834)
------- -------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 3,864 (8,820)
FINANCING ACTIVITIES
Net decrease in noninterest bearing deposits.......................................... (2,864) (4,588)
Net increase in interest bearing deposits............................................. 12 7,280
Cash dividends........................................................................ (392) (377)
Proceeds from issuance of common stock................................................ 239 215
------- -------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (3,005) 2,530
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,179 (2,955)
Cash and cash equivalents at beginning of period 15,120 $21,699
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,299 $18,744
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
IBT BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
(dollars in thousands)
Six Month Period Ended June 30, 1996
-------------------------------------------------------------------------
Unrealized
Net Gain
(Loss) on
Number of Securities Total
Shares Common Capital Retained Available Shareholders'
Outstanding Stock Surplus Earnings For Sale Equity
----------- ----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 703,248 $4,220 $10,220 $10,856 $ 509 $25,805
Net income 1,659 1,659
Cash dividends paid - $0.24 (377) (377)
10% stock dividend 70,243 421 2,669 (3,090)
Issuance of common stock 5,213 31 184 215
Change in unrealized gain on
securities available for sale,
net of $203 tax benefits (619) (619)
------- ------ ------- ------- ----- -------
BALANCE AT JUNE 30, 1996 778,704 $4,672 $13,073 $ 9,048 $(110) $26,683
======= ====== ======= ======= ===== =======
<CAPTION>
Six Month Period Ended June 30, 1996
-------------------------------------------------------------------------
Unrealized
Net Gain
(Loss) on
Number of Securities Total
Shares Common Capital Retained Available Shareholders'
Outstanding Stock Surplus Earnings For Sale Equity
----------- ----- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 783,457 $4,701 $13,262 $ 9,916 $ 121 $28,000
Net income 1,738 1,738
Cash dividends paid - $0.25 (392) (392)
Issuance of common stock 4,879 29 210 239
Change in unrealized gain on
securities available for sale,
net of $65 tax benefit (9) (9)
------- ------ ------- ------- ----- -------
BALANCE AT JUNE 30, 1997 788,336 $4,730 $13,472 $11,262 $ 112 $29,576
======= ====== ======= ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
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 six month
period ended June 30, 1997 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. 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, 1996.
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 number of common shares outstanding
were 785,702 and 775,104 for the six month period ending June 30, 1997 and
1996, respectively.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
SFAS No. 128 simplifies the standards for computing earnings per share (EPS)
and makes them comparable to international EPS standards. It also replaces the
presentation of primary EPS with a presentation of basic EPS. Since the
Corporation has a simple capital structure, implementation of SFAS No. 128 is
not expected to have an impact on the Corporation's reporting of EPS. SFAS No.
128 is required to be implemented for periods ending after December 15, 1997.
7
<PAGE> 8
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 read
in conjunction with the Corporation's 1996 annual report and with the unaudited
financial statements and notes thereto, as set forth on pages 3 through 7 of
this report.
SIX MONTHS ENDING JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS
Net income equaled $1.74 million for the six month period ended June 30, 1997,
compared to $1.66 million for the same period in 1996, a 4.8% increase. The
$79,000 increase in net income is attributable to a $266,000 increase in FTE
net interest income due to increased assets, a $78,000 decrease in noninterest
income resulting from a decrease in ATM fees, and a $67,000 increase in
noninterest expense. Return on average assets, which measures the ability of
the Corporation to profitably and efficiently employ its resources, was 1.16%
for the first six months of 1997 and 1.17% in 1996. Return on average equity,
which indicates how effectively the Corporation is able to generate earnings on
shareholder invested capital, equaled 12.09% through June 30, 1997 versus
12.68% for the same period in 1996.
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) Year to Date
June 30
-------------------
1997 1996
-------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net interest income $6,046 $5,725
Provision for loan losses 252 240
Net income 1,738 1,659
PER SHARE DATA:
Net income per common share $ 2.21 $ 2.14
Cash dividends per common share 0.50 0.48
RATIOS:
Average primary capital to average assets 10.43% 10.01%
Net income to average assets 1.16 1.17
Net income to average equity 12.09 12.68
</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 Statement of
Accounting Financial Accounting Standards (SFAS) No. 91, "Accounting for Loan
Fees," interest income includes loan fees of $287,000 in 1997 versus $376,000
in 1996. 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 12)
8
<PAGE> 9
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>
Six Months Ending
June 30, 1997 June 30, 1996
Tax Average Tax Average
Average Equivalent Yield/ Average Equivalent Yield/
Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ----
INTEREST EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Loans $215,376 $ 9,298 8.63% $191,172 $ 8,529 8.92%
Taxable investment securities 43,258 1,350 6.24 49,073 1,510 6.15
Nontaxable investment securities 14,026 500 7.13 16,654 655 7.87
Federal funds sold 6,998 182 5.20 6,701 176 5.25
Other 1,416 49 6.92 336 10 5.95
-------- ------- ---- -------- ------- ----
Total Earning Assets 281,074 11,379 8.10% 263,936 10,880 8.24%
NONEARNING ASSETS:
Allowance for loan losses (2,785) (2,390)
Cash and due from banks 10,122 10,421
Premises and equipment 5,734 5,361
Accrued income and other assets 5,512 5,653
-------- --------
Total Assets $299,657 $282,981
======== ========
INTEREST BEARING LIABILITIES:
Interest bearing demand deposits $ 40,008 534 2.67% $ 40,411 605 2.99%
Savings deposits 71,147 1,144 3.22 68,225 1,015 2.98
Time deposits 119,254 3,437 5.76 111,300 3,262 5.86
-------- ------- ---- -------- ------- ----
Total Interest Bearing Liabilities 230,409 5,115 4.44% 219,936 4,882 4.44%
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS' EQUITY:
Demand deposits 37,234 33,775
Other 3,269 3,096
Shareholders' equity 28,745 26,174
-------- --------
Total Liabilities and Equity $299,657 $282,981
======== ========
Net interest income (FTE) $ 6,264 $ 5,998
======= =======
Net yield on interest earning assets (FTE) 4.46% 4.55%
==== ====
</TABLE>
9
<PAGE> 10
TABLE 2
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in Thousands)
The following table sets 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>
Six Month Period Ended June 30, 1997
Compared to
June 30, 1996
Increase (Decrease) Due to
--------------------------------
Volume Rate Net
------ ---- ---
<S> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans $1,052 $(283) $ 769
Taxable investment securities (181) 21 (160)
Nontaxable investment securities (98) (57) (155)
Federal funds sold 8 (2) 6
Other 37 2 39
---- ----- ----
Total changes in interest income 818 (319) 499
Total changes in interest expense 233 233
---- ----- ----
Net Change in Interest Margin (FTE) $585 $(319) $266
==== ===== ====
</TABLE>
10
<PAGE> 11
TABLE 3
IBT BANCORP, INC.
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year to Date
June 30
--------------------
1997 1996
---- ----
<S> <C> <C>
Summary of changes in allowance:
Allowance for loan losses - January 1 $ 2,621 $ 2,248
Loans charged off (174) (130)
Recoveries of charged off loans 185 125
-------- --------
Net loans recovered (charged off) 11 (5)
Provision charged to operations 252 240
-------- --------
Allowance for loan losses - June 30 $ 2,884 $ 2,483
======== ========
Allowance for loan losses as a % of loans 1.34% 1.24%
===== =====
</TABLE>
NONPERFORMING LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30
1997 1996
---- ----
<S> <C> <C>
Total amount of loans outstanding for
the period (net of unearned interest) $215,753 $199,845
======== ========
Nonaccrual loans $ 162 $ 143
Accruing loans past due 90 days or more 629 660
Restructured loans 0 0
-------- --------
Total $ 791 $ 803
======== ========
Loans classified as nonperforming as a
% of outstanding loans 0.37% 0.40%
===== =====
</TABLE>
To management's knowledge, there are 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
NET INTEREST INCOME, CONTINUED
As shown in Tables number 1 and 2, when comparing the six month period ending
June 30, 1997 to the same period in 1996, fully taxable equivalent (FTE) net
interest income increased $266,000 or 4.4%. An increase of 6.5% in average
interest earning assets provided $818,000 of FTE interest income. The majority
of this growth was funded by a 4.8% increase in interest bearing deposits,
resulting in $233,000 of additional FTE interest expense. Overall, changes in
volume resulted in $585,000 of additional FTE interest income. The average FTE
interest rate earned on assets decreased by 0.14%, decreasing FTE interest
income by $319,000. The average rate paid on deposits remained unchanged.
The Corporation's FTE net interest yield as a percentage of average earning
assets equaled 4.46% during the first six months of 1997 versus 4.55% in 1996.
The 0.09% decrease in the FTE net interest yield was primarily a result of an
$89,000 decrease in loan fees. The reduction in loan fees earned accounted for
0.05% of the total decrease. Another factor in the decline was average
mortgage loans outstanding as a percent of average loans increased from 62.5%
in 1996 to 64.5% in 1997. The yield on mortgage loans is 1.15% less than rates
earned on the combined average of other types of lending. The overall effect
of the increased position in mortgage loans was a 0.03% decrease in the
Corporation FTE interest yield.
PROVISION FOR LOAN LOSSES
The viability of any financial institution is ultimately determined by its
management of credit risk. Loans outstanding represent 73% of the
Corporation's total assets 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, overall economic conditions, and
other factors.
Comparing the year to date period of June 30, 1997 to June 30, 1996, the
provision for loan losses was increased 5.0% to $252,000. The increase in the
provision was due to the increase in outstanding loans of 8.0%. During the
first six months of 1997, the Corporation had a net recovery of loans
previously charged-off of $11,000. Loans classified as nonperforming were
0.37% of loans as of June 30, 1997 versus 0.40% for June 30, 1996. As of June
30, 1997, the allowance for loan losses as a percentage of loans equaled 1.34%.
In management's opinion, the allowance for loan losses is adequate as of June
30, 1997.
12
<PAGE> 13
NONINTEREST INCOME
Noninterest income consists of trust fees, deposit service charges, and fees
for other financial services and gains and losses on investment securities
available for sale. There was a $78,000 decrease in fees earned from these
sources during the first six months of 1997 when compared to the same period in
1996. Significant individual account changes during this period include a
$135,000 decrease in ATM fees earned, a $26,000 increase in brokerage
commissions, a $21,000 increase in trust income, a $14,000 increase in
overdraft fees, and a $15,000 decrease in gains/losses on the sale of
investment securities available for sale.
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 SFAS
125, 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 $52,000 gain from the sale of $7.6 million in mortgages
during the second quarter of 1997 versus a $48,000 gain on the sale of $6.8
million for the same period in 1996.
NONINTEREST EXPENSE
Noninterest expense increased $67,000 or 1.6% for the first six months of 1997
when compared to 1996. The largest component of noninterest expense is
salaries and employee benefits, which increased by $98,000. The majority of
this increase is related to an increase in staff and normal merit and
promotional salary increases. Occupancy and furniture and equipment expenses
decreased $79,000. The majority of this decrease is related to the operating
expenses associated with automatic teller machines. Other operating expenses
increased $48,000, with the most significant change attributable to increases
in printing and office supplies, postage, and FDIC insurance premiums.
QUARTER ENDED JUNE 30, 1997 AND 1996
RESULTS OF OPERATIONS
Net income equaled $891,000 for the second quarter in 1997 compared to $847,000
for the same period in 1996, a 5.2% increase. Return on average assets equaled
1.19% for the second quarters in both 1997 and 1996. Return on average equity
equaled 12.24% for the second quarter in 1997, versus 12.74% for the second
quarter in 1996.
SUMMARY OF SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Quarter Ended
June 30
-----------------
1997 1996
-----------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net interest income $2,563 $ 2,422
Provision for loan losses 129 123
Net income 891 847
PER SHARE DATA:
Net income per common share $ 1.13 $ 1.09
Cash dividend per common share 0.25 0.24
RATIOS:
Net income to average assets 1.19% 1.19%
Net income to average equity 12.24 12.74
</TABLE>
13
<PAGE> 14
NET INTEREST INCOME
When comparing the second quarter of 1997 to 1996, net FTE interest income
increased $120,000. An increase of 5.8% in average interest earning assets
provided $373,000 of FTE interest income. The asset growth was funded
primarily by a 4.3% increase in interest bearing deposits, resulting in
$116,000 of increased interest expense. Overall, increased volume provided
$257,000 of additional FTE interest income. During the second quarter of 1997,
the average FTE interest rate earned on assets decreased by 0.08% and the
average rate paid on deposits increased by 0.07%. The changes in interest
rates earned and paid resulted in a $137,000 decrease in FTE interest income.
PROVISION FOR LOAN LOSSES
The amount provided for loan losses in the second quarter of 1997 was $129,000
versus $123,000 in 1996. The 4.9% increase in the provision is due to the 8.0%
increase in net outstanding loans. The allowance for loan losses as a
percentage of total outstanding loans was 1.34% as of June 30, 1997 versus
1.24% in 1996.
NONINTEREST INCOME
Noninterest income earned in the second quarter of 1997, compared to the same
period in 1996, decreased $78,000. The most significant changes were a $77,000
decrease in ATM fees, a $19,000 decrease in gains on the sale of student loans,
a $12,000 increase in trust fees, and a $6,000 decrease in gains and losses
from the sale of investment securities available for sale.
NONINTEREST EXPENSE
Noninterest expense decreased $26,000 during the second quarter of 1997 when
compared to 1996. Noninterest expense includes salary and benefits, occupancy,
and other operating expenses. Salaries and employee benefits increased $37,000
due to an increase in staffing and normal merit and promotional salary
increases. Occupancy expense and furniture and equipment expense decreased
$77,000. The majority of this decrease is related to the operating expenses
associated with automatic teller machines. Other operating expenses increased
$14,000, the most significant change attributable to an increase in F.D.I.C.
insurance premiums of $8,000.
14
<PAGE> 15
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
June 30, 1997 June 30, 1996
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 $217,077 $4,725 8.71% $195,313 $4,343 8.89%
Taxable investment securities 43,037 674 6.26 47,563 735 6.18
Nontaxable investment securities 13,863 251 7.24 15,911 319 8.02
Federal funds sold 4,657 63 5.41 5,621 74 5.27
Other 1,463 25 6.84 336 5 5.95
-------- ------ ---- -------- ------ ----
Total Earning Assets 280,097 5,738 8.19% 264,744 5,476 8.27%
NONEARNING ASSETS:
Allowance for loan losses (2,848) (2,460)
Cash and due from banks 10,065 10,891
Premises and equipment 5,749 5,486
Accrued income and other assets 5,504 5,369
-------- --------
Total Assets $298,567 $284,030
======== ========
INTEREST BEARING LIABILITIES:
Interest bearing demand deposits $ 39,706 266 2.68% $ 39,434 312 3.16%
Savings deposits 70,212 566 3.22 67,284 469 2.79
Time deposits 119,125 1,732 5.82 112,828 1,641 5.82
-------- ------ ---- -------- ------ ----
Total Interest Bearing Liabilities 229,043 2,564 4.48% 219,546 2,422 4.41%
NONINTEREST BEARING LIABILITIES
AND SHAREHOLDERS EQUITY:
Demand deposits 37,164 34,756
Other 3,325 3,130
Shareholders' equity 29,125 26,598
-------- --------
Total Liabilities and Equity $298,567 $284,030
======== ========
Net interest income (FTE) $3,174 $3,054
====== ======
Net yield on interest earning assets (FTE) 4.53% 4.61%
===== =====
</TABLE>
15
<PAGE> 16
TABLE 5
IBT BANCORP, INC.
VOLUME AND RATE VARIANCE ANALYSIS
(Dollars in Thousands)
The following table sets 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 June 30, 1997
Compared to
June 30, 1996
Increase (Decrease) Due to
--------------------------------
Volume Rate Net
------ ---- ---
<S> <C> <C> <C>
CHANGES IN INTEREST INCOME:
Loans $476 $ (94) $382
Taxable investment securities (71) 10 (61)
Nontaxable investment securities (38) (30) (68)
Federal funds sold (13) 2 (11)
Other 19 1 20
---- ----- ----
Total changes in interest income 373 (111) 262
Total changes in interest expense 116 26 142
---- ----- ----
Net Change in Interest Margin (FTE) $257 $(137) $120
==== ===== ====
</TABLE>
16
<PAGE> 17
ANALYSIS OF CHANGES IN FINANCIAL CONDITION
Since December 31, 1996, total assets increased $1.3 million to $297.4 million.
As of June 30, 1997, the loan portfolio increased $299,000, fed funds sold
increased $1.6 million, and investment securities decreased $4.7 million when
compared to December 31, 1996. The decrease in assets was primarily due to a
$2.9 million decrease in noninterest bearing deposits.
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 June 30, 1997, cash and cash equivalents as a percentage of total assets
equaled 6.2%, versus 5.1% as of December 31, 1996. During the first six months
of 1997, $2.3 million in net cash was provided from operations, and $3.9
million was provided by investing activities. Financing activities used $3.0
million. The accumulated effect of the Corporation's operating, investing, and
financing activities was a $3.2 million increase in cash and cash equivalents
during the first six months of 1997.
In addition to cash and cash equivalents, investment securities available for
sale are another source of liquidity. Securities available for sale equaled
$48.1 million as of June 30, 1997 and $50.5 million as of December 31, 1996.
The Corporation's liquidity is considered adequate by management.
CAPITAL
The capital of the Corporation consists solely of common stock, surplus, and
retained earnings, and unrealized net gain on investment securities available
for sale; and increased approximately $1.6 million since December 31, 1996. As
of June 30, 1997, the Corporation's capital included $112,000 of unrealized
gains on securities available for sale.
There are no significant capital regulatory constraints placed on the
Corporation's capital. The Federal Reserve Board's current recommended minimum
tier 1 and tier 2 average assets requirement is 6.0%. The Corporation's tier 1
and tier 2 capital to assets, which consists of shareholder's equity plus the
allowance for loan losses, was 10.8% at June 30, 1997.
17
<PAGE> 18
CAPITAL, CONTINUED
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 June 30, 1997:
PERCENTAGE OF CAPITAL TO RISK ADJUSTED ASSETS:
<TABLE>
<CAPTION>
IBT Bancorp
Actual
Required 06/30/97
-------- --------
<S> <C> <C>
Equity Capital 4.00 15.98
Secondary Capital* 4.00 1.25
Total Capital 8.00 17.23
</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.
18
<PAGE> 19
PART II - OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant's annual meeting of shareholders was held on April
23, 1997. At that meeting the shareholders voted upon the election of
directors.
<TABLE>
<CAPTION>
VOTES CAST
Election of Directors For Withheld
--- --------
<S> <C> <C>
All nominees for director were elected:
James C. Fabiano 584,384 3,427
James R. Bigard 584,691 3,120
Frederick L. Bradford 583,031 4,780
Dean E. Walldorff 583,680 4,131
</TABLE>
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed or required to be filed
during the quarter ended June 30, 1997.
19
<PAGE> 20
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: August 5, 1997 /s/ David W. Hole
------------------ -----------------------------------------
David W. Hole, President/CEO
/s/ Dennis P. Angner
-----------------------------------------
Dennis P. Angner, Treasurer
(Principal Financial Officer)
20
<PAGE> 21
IBT BANCORP
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page Number
- ------- ----------------------- -----------
<S> <C> <C>
27 Financial Data Schedule 22
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,499
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,073
<INVESTMENTS-CARRYING> 7,218
<INVESTMENTS-MARKET> 6,948
<LOANS> 215,753
<ALLOWANCE> 2,884
<TOTAL-ASSETS> 297,433
<DEPOSITS> 264,796
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,071
<LONG-TERM> 0
0
0
<COMMON> 4,730
<OTHER-SE> 24,846
<TOTAL-LIABILITIES-AND-EQUITY> 297,433
<INTEREST-LOAN> 9,250
<INTEREST-INVEST> 1,729
<INTEREST-OTHER> 182
<INTEREST-TOTAL> 11,161
<INTEREST-DEPOSIT> 5,115
<INTEREST-EXPENSE> 5,115
<INTEREST-INCOME-NET> 6,046
<LOAN-LOSSES> 252
<SECURITIES-GAINS> (11)
<EXPENSE-OTHER> 4,329
<INCOME-PRETAX> 2,441
<INCOME-PRE-EXTRAORDINARY> 1,738
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,738
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
<YIELD-ACTUAL> 4.30
<LOANS-NON> 162
<LOANS-PAST> 629
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,621
<CHARGE-OFFS> 174
<RECOVERIES> 185
<ALLOWANCE-CLOSE> 2,884
<ALLOWANCE-DOMESTIC> 2,884
<ALLOWANCE-FOREIGN> 2,884
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
