UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

o	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. 1-31655

IBT Bancorp, Inc.

(Exact name of Registrant as specified in its charter)

Pennsylvania

25-1532164

(State or other jurisdiction 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

(Registrant’s telephone number, including area code)

(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 o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Number of shares of Common Stock outstanding as of November 5, 2007: 5,852,924

IBT BANCORP, INC.

Quarterly Report on Form 10Q

For Quarter Ended September 30, 2007

Contents

		Pages
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements		2

Consolidated balance sheets (unaudited) at September 30, 2007 and December 31, 2006		2

Consolidated statements of income (unaudited) for the three and nine months ended September 30, 2007 and 2006		3

Consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2007 and 2006		4

Notes to consolidated financial statements		5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		7

Item 3. Quantitative and Qualitative Disclosures About Market Risk		14

Item 4. Controls and Procedures		14

PART II - OTHER INFORMATION

Item 1. Legal Proceedings		15

Item 1A. Risk Factors		15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		15

Item 3. Defaults upon Senior Securities		16

Item 4. Submission of Matters to a Vote of Security-Holders		16

Item 5. Other Information		16

Item 6. Exhibits		17

Signatures		18

CONSOLIDATED BALANCE SHEETS

IBT BANCORP, INC. AND SUBSIDIARY

September 30, 2007

December 31, 2006

(unaudited)

ASSETS

Cash and due from banks

21,275,133

19,317,614

Interest-bearing deposits in banks

13,283

637,034

Certificates of deposit

100,000

100,000

Securities available for sale

238,693,255

221,249,369

Federal Home Loan Bank stock, at cost

5,128,300

5,196,800

Loans, net

480,714,634

467,720,508

Premises and equipment, net

5,211,537

5,281,385

Other assets

22,688,293

21,459,045

Total Assets

773,824,435

740,961,755

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities

Deposits

Non-interest bearing

84,272,058

85,553,753

Interest-bearing

496,236,491

486,918,461

Total deposits

580,508,549

572,472,214

Repurchase agreements

57,827,605

27,416,559

Accrued interest and other liabilities

5,846,828

6,082,279

FHLB advances

66,755,954

72,409,643

Total liabilities

710,938,936

678,380,695

Stockholders’ Equity

Capital stock, par value $1.25 per share, 50,000,000 shares authorized, 5,965,119 shares issued, 5,852,924 and 5,882,640 shares outstanding at September 30, 2007 and December 31, 2006, respectively

7,456,399

7,456,399

Retained earnings

60,541,824

58,970,791

Accumulated other comprehensive income (loss)

(1,605,344

)

(904,723

)

66,392,879

65,522,467

Less: Treasury stock, at cost

(3,507,380

)

(2,941,407

)

Total stockholders’ equity

62,885,499

62,581,060

Total Liabilities and Stockholders’ Equity

773,824,435

740,961,755

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME

IBT BANCORP, INC. AND SUBSIDIARY

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007		2006			2007			2006
	(unaudited)					(unaudited)
Interest Income
Loans, including fees	$	8,328,180	$	7,889,433		$	24,403,919		$	22,595,515
Investment securities		2,951,600		2,466,830			8,464,546			7,021,358
Federal funds sold		3,305		2,341			10,076			31,856

Total interest income		11,283,085		10,358,604			32,878,541			29,648,729

Interest Expense
Deposits		4,276,751		3,502,774			12,531,592			9,536,002
FHLB advances		817,102		840,009			2,417,292			2,469,687
Repurchase agreements		593,412		404,585			1,344,513			928,108
Federal funds purchased		-		105,795			-			322,972

Total interest expense		5,687,265		4,853,163			16,293,397			13,256,769
Net Interest Income		5,595,820		5,505,441			16,585,144			16,391,960
Provision for Loan Losses		250,000		350,000			750,000			1,200,000
Net Interest Income after Provision for Loan Losses		5,345,820		5,155,441			15,835,144			15,191,960

Other Income (losses)
Service fees		973,914		983,985			2,815,355			2,787,939
Investment security gains		-		316,949			1,361			896,791
Investment security losses		-		(62,898	)		(42,052	)		(119,998	)
Increase in cash surrender value of life insurance		120,696		119,572			357,617			333,205
Debit card fees		234,582		204,242			688,169			612,598
Trust fees		123,395		98,009			381,909			300,649
Other income		271,309		279,809			818,599			831,586

Total other income		1,723,896		1,939,668			5,020,958			5,642,770
Other Expenses
Salaries		1,591,615		1,578,087			4,766,406			4,711,455
Pension and other employee benefits		694,761		640,470			1,981,627			1,743,542
Occupancy expense		453,760		428,976			1,254,716			1,239,372
Data processing expense		239,101		277,117			749,941			817,909
Pennsylvania shares tax		157,534		164,355			478,017			479,494
Advertising expense		118,370		117,915			409,972			285,311
Debit card expense		152,457		149,855			449,872			433,043
Other expenses		1,054,428		918,683			3,018,054			2,820,527

Total other expenses		4,462,026		4,275,458			13,108,605			12,530,653
Income Before Income Taxes		2,607,690		2,819,651			7,747,497			8,304,077
Provision for Income Taxes		588,174		668,466			1,796,400			1,657,031
Net Income	$	2,019,516	$	2,151,185		$	5,951,097		$	6,647,046
Basic Earnings per Share	$	0.34	$	0.37		$	1.01		$	1.12
Diluted Earnings per Share	$	0.34	$	0.36		$	1.01		$	1.12
Dividends per Share	$	0.25	$	0.25		$	0.75		$	0.75

The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

IBT BANCORP, INC. AND SUBSIDIARY

	Nine Months Ended September 30,
	2007			2006
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	5,951,097		$	6,647,046
Adjustments to reconcile net cash from operating activities:
Depreciation		540,000			612,000
Increase in cash surrender value of insurance		(357,617	)		(333,205	)
Net accretion/amortization of premiums and discounts		(103,015	)		313,781
Investment security losses (gains)		40,691			(776,793	)
Provision for loan losses		750,000			1,200,000
Stock options granted		52,697			39,808
Increase (decrease) in cash due to changes in assets and liabilities:
Other assets		46,164			(368,636	)
Accrued interest and other liabilities		(235,451	)		912,962
Net Cash From Operating Activities		6,684,566			8,246,963

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificates of deposit		(100,000	)		(100,000	)
Proceeds from maturity of certificates of deposit		100,000			100,000
Proceeds from sales of securities available for sale		5,632,265			22,714,264
Proceeds from maturities of securities available for sale		24,466,591			14,999,214
Purchase of securities available for sale		(48,530,880	)		(47,715,554	)
Net increase in loans		(14,312,080	)		(23,336,684	)
Purchases of premises and equipment		(470,152	)		(369,136	)
Proceeds from sales of Federal Home Loan Bank stock		3,700,200			4,755,300
Purchase of Federal Home Loan Bank stock		(3,631,700	)		(4,517,100	)
Net Cash Used By Investing Activities		(33,145,756	)		(33,469,696	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		8,036,335			28,233,579
Net increase in securities sold under repurchase agreements		30,411,046			20,486,009
Dividends paid		(4,404,626	)		(4,425,730	)
Proceeds from FHLB advances		321,272,600			12,000,000
Repayment of FHLB advances		(326,926,289	)		(10,741,603	)
Federal funds purchased		-			(12,468,000	)
Exercised stock options		(28,135	)		(97,434	)
Purchase of treasury stock		(565,973	)		(640,150	)
Sale of treasury stock		-			95,624

Net Cash From Financing Activities		27,794,958			32,442,295

Net Change in Cash and Cash Equivalents		1,333,768			7,219,562

Cash and Cash Equivalents at Beginning of Period		19,954,648			15,499,940

Cash and Cash Equivalents at End of Period	$	21,288,416		$	22,719,502

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IBT BANCORP, INC. AND SUBSIDIARY

Period Ended September 30, 2007

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited 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 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 and nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007 or any future interim period. The interim financial statements should be read in conjunction with the financial statements and footnotes thereto included in the IBT Bancorp, Inc. and subsidiary Annual Report on Form 10-K for the year ended December 31, 2006.

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 were 5,858,265 and 5,873,975 for the three and nine months ended September 30, 2007 and 5,885,132 and 5,900,132 for the three and nine months ended September 30, 2006. The outstanding shares for the three and nine months ended September 30, 2006 have been restated for the 100% stock dividend paid on November 16, 2006.

NOTE C – COMPREHENSIVE INCOME

Total comprehensive income for the three months ended September 30, 2007 and 2006 was $3,905,416 and $4,388,272, respectively and for the nine months ended September 30, 2007 and 2006 was $5,250,476 and $6,465,424, respectively.

NOTE D – INVESTMENT SECURITIES

Investment securities available for sale consist of the following:

	September 30, 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Market Value

Obligations of U.S. Government Agencies	$	104,149,333	$	632,989	$	(633,277	)	$	104,149,045
Obligations of State and political sub-divisions		62,812,857		857,036		(492,118	)		63,177,775
Mortgage-backed securities		72,600,914		12,481		(1,506,493	)		71,106,902
Other securities		47,358		-		(2	)		47,356
Equity securities		250,220		1,474		(39,517	)		212,177

	$	239,860,682	$	1,503,980	$	(2,671,407	)	$	238,693,255

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IBT BANCORP, INC. AND SUBSIDIARY

Period Ended September 30, 2007

NOTE E – RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued Statement No. 159 the Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB 115. FASB No. 159 permits entities to choose to measure certain financial instruments at fair value. It was developed to improve financial reporting by reducing the volatility pertaining to the measurement of assets and liabilities without having to apply complex hedge accounting guidance. This statement is expected to expand the use of fair value measurement, which is consistent with FASB’s long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS No. 157, Fair Value Measurements. The Company is evaluating the effects of this statement on its financial statements and has not elected to adopt early.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. When used in this discussion, the words “believes”, “anticipates”, “contemplates”, “expects”, and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which include changes in interest rates, risks associated with the effect of opening new branches, the ability to control costs and expenses, and general economic conditions. IBT Bancorp, Inc. undertakes no obligation to update those forward-looking statements 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 (collectively, the “Company”). In the fall of 2006, the Company began a branding and market research initiative. As a result of this on-going endeavor, in February 2007, the Company developed a new logo for its banking subsidiary and shortened its name to “Irwin Bank”. The Company’s stock is traded on the American Stock Exchange under the symbol IRW. All historical per share amounts have been restated for the 100% stock dividend paid on November 16, 2006.

FINANCIAL CONDITION

At September 30, 2007 total assets increased $32.8 million to $773.8 million from $741.0 million at December 31, 2006. The asset growth was primarily due to increases in securities available for sale of $17.5 million and in net loans of $13.0 million.

At September 30, 2007, securities available for sale increased $17.5 million to $238.7 million from $221.2 million at December 31, 2006. This change was primarily due to increases in U.S. government agencies of $8.8 million and mortgage-backed securities of $10.1 million offset by net a decrease of $1.4 million in obligations of state and political sub-divisions. The Company evaluates the available-for-sale investment portfolio on an on-going basis to maximize yield, within board-approved risk thresholds, making purchasing and selling decisions accordingly.

Net loans at September 30, 2007 reached $480.7 million, a $13.0 million increase over the reported total of $467.7 million at December 31, 2006. Loan growth was concentrated in real estate secured mortgage and commercial loans, which increased $11.2 million and consumer installment loans, which increased $1.6 million. These increases were partially offset by decreases in consumer lines of credit and municipal loans of $1.2 million and $1.8 million, respectively. In June 2007, approximately $3.0 million in real estate secured commercial mortgages, previously included in non-performing accruing loans contractually past due 90 days or more, were transferred to non accrual status. The Company believes that these loans are sufficiently collateralized and does not anticipate any future losses.

At September 30, 2007, total liabilities increased $32.5 million to $710.9 million from $678.4 million at December 31, 2006. The changes in total liabilities were primarily due to increases in total deposits and repurchase agreements of $8.0 million and $30.4 million, respectively, offset by a $5.6 million decrease in FHLB advances.

Repurchase agreements increased $30.4 million to $57.8 million at September 30, 2007, from $27.4 million at December 31, 2006 as a result of an increase in customers with sweep arrangements as well as existing customers maintaining higher balances. The Company offers its corporate customers sweep accounts where unused deposit balances are swept into an overnight repurchase agreement yielding market rates.

FHLB advance totals dropped $5.6 million to $66.8 million at September 30, 2007, from $72.4 million at December 31, 2006. The decrease is due to the contractual maturity of $10.0 million in advances and principal payments on amortizing advances of $1.2 million. These decreases were offset by an increase of $5.6 million in the Company’s open line of credit, which is primarily used to meet daily liquidity needs.

Non-interest bearing deposit accounts decreased $1.3 million to $84.3 million at September 30, 2007, from $85.6 million at December 31, 2006. This change is attributed to normal fluctuations, which arise due to the timing of month-end pension and social security deposits.

Interest-bearing deposits increased $9.3 million to $496.2 million at September 30, 2007, from $486.9 million at December 31, 2006. The change was primarily due to increases in certificates of deposits and money market accounts of $9.0 million and $5.8 million, respectively. Offsetting the increases were decreases in savings and interest-bearing checking accounts of $3.6 million and $1.9 million, respectively. The competitive market rates paid on the certificate of deposit and money market accounts have contributed to the growth in these accounts.

At September 30, 2007, total stockholders’ equity increased $304,000 to $62.9 million from $62.6 million at December 31, 2006. The change was primarily due to net income of $6.0 million partially offset by an increase in accumulated other comprehensive loss (net of deferred income taxes) of $701,000, dividends paid of $4.4 million, and treasury stock purchased of $566,000. Accumulated other comprehensive loss increased as a result of changes in the net unrealized gains/losses on securities available for sale. Because of the effect of interest rate volatility on unrealized gains/losses on securities available for sale, the Company’s accumulated other comprehensive income could materially fluctuate for each interim period and year-end. See Note D to the consolidated financial statements.

RESULTS OF OPERATIONS

Net income. Net income for the three months ended September 30, 2007 decreased $131,000 to $2,020,000, or $.34 diluted earnings per share from $2,151,000, or $.36 diluted earnings per share, for the comparable three-month period in 2006. Net income for the nine months ended September 30, 2007 decreased $696,000 to $5,951,000 or $1.01 diluted earnings per share from $6,647,000, or $1.12 diluted earnings per share, for the comparable nine month period in 2006. The decrease for the three and nine months ended September 30, 2007 was primarily the result of a decrease in other income due mainly to a decrease in investment security gains, and an increase in other expense, which offset an improvement in net interest income.

Net interest income. Net interest income increased $91,000 to $5,596,000 for the three months ended September 30, 2007 compared to $5,505,000 for the three months ended September 30, 2006. Interest income increased 8.9% over the comparable 2006 quarter but was substantially offset by an increase in interest expense of 17.2%. This was due to rates paid for deposits increasing at a faster rate than rates charged for loans. As a result, the Company’s net interest spread tightened to 2.56% from 2.71% in the prior year period and its net interest margin narrowed to 3.11% from 3.24%. Net interest income increased $193,000 to $16,585,000 for the nine months ended September 30, 2007 compared to $16,392,000 for the nine months ended September 30, 2006. Despite the net interest income increase, the net interest spread narrowed to 2.56% from 2.76% for the comparable period in 2006 and the net interest margin tightened to 3.12% from 3.27%. The compression of the spread and margin reflect the current relatively flat yield curve environment in which short-term rates (off which we price our deposits) are the same as or slightly lower than long-term rates (off which we price our loans.)

Interest income. Interest income for the three months ended September 30, 2007 increased $924,000 to $11,283,000 from $10,359,000 for the comparable three-month period in 2006. The average balance of interest earning assets increased $39.7 million for the three months ended September 30, 2007, to $718.6 million from $678.9 million for the comparable period in 2006. The yield on these assets increased 18 basis points to 6.28%, for the three months ended September 30, 2007 from 6.10% for the comparable period in 2006. Interest income for the nine months ended September 30, 2007 increased $3,230,000 to $32,879,000 from $29,649,000 for the comparable nine month period in 2006. This change was supported by a $40.2 million increase in the average balance of interest earning assets and a 27 basis point increase in the yield, which reached 6.19% from 5.92% for the comparable period in 2006. See “Average Balance Sheet and Rate/Volume Analysis”.

Interest expense. Interest expense for the three months ended September 30, 2007 increased $834,000 to $5,687,000 from $4,853,000 for the comparable period in 2006. The change in interest expense was primarily attributed to the average cost of funds increasing 33 basis points to 3.72% for the three months ended September 30, 2007 from 3.39% for the comparable period in 2006, coupled with an increase of $39.2 million in the average balance of interest-bearing liabilities to $611.1 million from $571.9 million for the comparable period in 2006. Interest expense for the nine months ended September 30, 2007 increased $3,036,000 to $16,293,000 from $13,257,000 for the comparable period in 2006. This change was primarily the result of a 47 basis point increase in the average cost of funds to 3.63% from 3.16% for the comparable period in 2006 and a $38.1 million increase in the average balance of interest-bearing liabilities. See “Average Balance Sheet and Rate/Volume Analysis”.

Average Balance Sheet

The following table sets forth certain information relating to the Company for the periods indicated. The average yields and costs are derived by dividing income or expense on an annualized basis by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from average daily balances.

	Three Months Ended September 30,						Three Months Ended September 30,
	2007						2006
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(Dollars In Thousands)
Interest-earning assets:
Loans receivable(1)	$	481,917	$	8,328	6.91	%	$	466,203	$	7,889	6.77	%
Investment securities available for sale (2)		236,460		2,952	4.99	%		212,563		2,467	4.64	%
Federal funds sold		195		3	6.15	%		100		2	8.57	%
Total interest-earning assets		718,572		11,283	6.28	%		678,866		10,358	6.10	%
Non-interest-earning assets (3)		42,019						40,373
Total assets	$	760,591					$	719,239

Interest-bearing liabilities:
Money market accounts	$	60,567	$	470	3.11	%	$	50,183	$	342	2.73	%
Certificates of Deposit		305,343		3,622	4.76	%		277,488		2,998	4.32	%
Other liabilities (4)		245,151		1,595	2.60	%		244,230		1,513	2.48	%
Total interest-bearing liabilities		611,061		5,687	3.72	%		571,901		4,853	3.39	%
Non-interest-bearing liabilities (3)		89,288						87,760
Total liabilities		700,349						659,661
Stockholders’ equity (5)		60,242						59,578
Total liabilities and stockholders’ equity	$	760,591					$	719,239
Net interest income			$	5,596					$	5,505
Interest rate spread (6)					2.56	%					2.71	%
Net interest margin (7)					3.11	%					3.24	%
Ratio of average interest-earning assets to average interest-bearing liabilities					117.59	%					118.70	%

(1)	Average balances include non-accrual loans, and are net of deferred loan fees.
(2)	Includes investment securities, interest-bearing deposits in other financial institutions and FHLB stock.
(3)	Includes net deferred income taxes in excess of deferred tax benefits on AFS securities (SFAS 115), stock options (SFAS 123/148) and deferred fees (SFAS 109).
(4)	Includes other interest bearing checking accounts, FHLB advances and Federal funds purchased, and repurchase agreements.
(5)	Includes capital stock, surplus and unrealized holding gains on SFAS 115 AFS securities.
(6)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(7)	Net interest margin represents net interest income as a percentage of average interest earning assets.

Average Balance Sheet

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2007						2006
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(Dollars In Thousands)
Interest-earning assets:
Loans receivable (1)	$	476,334	$	24,404	6.83	%	$	458,683	$	22,596	6.57	%
Investment securities (2)		231,543		8,464	4.87	%		208,348		7,021	4.49	%
Federal funds sold		215		10	6.20	%		852		32	4.97	%
Total interest-earning assets		708,092		32,878	6.19	%		667,883		29,649	5.92	%
Non-interest-earning assets (3)		41,096						39,445
Total assets	$	749,188					$	707,328

Interest-bearing liabilities:
Money market accounts	$	59,057	$	1,350	3.05	%	$	52,730	$	951	2.40	%
Certificates of Deposit		303,789		10,625	4.66	%		265,666		8,015	4.02	%
Other liabilities (4)		235,825		4,318	2.44	%		242,153		4,291	2.36	%
Total interest-bearing liabilities		598,671		16,293	3.63	%		560,549		13,257	3.16	%
Non-interest-bearing liabilities (3)		89,363						86,206
Total liabilities		688,034						646,755
Stockholders’ equity (5)		61,154						60,573
Total liabilities and stockholders’ equity	$	749,188					$	707,328
Net interest income			$	16,585					$	16,392
Interest rate spread (6)					2.56	%					2.76	%
Net interest margin (7)					3.12	%					3.27	%
Ratio of average interest-earning assets to average interest-bearing liabilities					118.28	%					119.15	%

(1)	Average balances include non-accrual loans, and are net of deferred loan fees.
(2)	Includes investment securities, interest-bearing deposits in other financial institutions and FHLB stock.
(3)	Includes net deferred income taxes in excess of deferred tax benefits on AFS securities (SFAS 115), stock options (SFAS 123/148) and deferred fees (SFAS 109).
(4)	Includes other interest bearing checking accounts, FHLB advances and Federal funds purchased, and repurchase agreements.
(5)	Includes capital stock, surplus and unrealized holding gains on SFAS 115 AFS securities.
(6)	Interest-rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
(7)	Net interest margin represents net interest income as a percentage of average interest earning assets.

Rate / Volume Analysis

The following table shows the effect of changes in volumes and rates on interest income and interest expense. The changes in interest income and interest expense attributable to changes in both volume and rate have been allocated to the changes due to rate. Tax exempt income was not recalculated on a tax equivalent basis due to the immateriality of the change to the table resulting from a recalculation.

	Three Month Period Ended September 30,							Nine Month Period Ended September 30,
	2007 vs. 2006							2007 vs. 2006
	Increase (Decrease)							Increase (Decrease)
	Due to							Due to
	Volume		Rate			Net		Volume			Rate			Net
	(Dollars In Thousands)
Interest income:
Loans receivable	$	266	$	173		$	439	$	870		$	938		$	1,808
Investment securities available for sale		277		208			485		781			662			1,443
Other interest earning assets		2		(1	)		1		(23	)		1			(22	)
Total interest-earning assets		545		380			925		1,628			1,601			3,229

Interest expense:
Money market accounts		71		57			128		114			285			399
Certificates of deposit		301		323			624		1,150			1,460			2,610
Other liabilities		5		77			82		(112	)		139			27
Total interest-bearing liabilities		377		457			834		1,152			1,884			3,036

Net change in net interest income	$	168	$	(77	)	$	91	$	476		$	(283	)	$	193

Provision for loan losses. For the three and nine months ended September 30, 2007, $250,000 and $750,000 were taken as a provision for loan losses compared to $350,000 and $1,200,000 for the comparable periods in 2006. At September 30, 2007, the allowance for loan losses equaled 1.11% of gross loans outstanding compared to .97% at September 30, 2006. Net charge-offs as a percentage of average loans for the three and nine month period ended September 30, 2007 were .02% and .04%, respectively, compared to .05% and .03% for the comparable periods in 2006.

The provision for loan losses is charged to operations to bring the total allowance for loan losses to a level that represents management’s best estimate of the losses inherent in the portfolio, based on a monthly review by management of the following factors:

•

Historical experience

•

Volume

•

Type of lending conducted by the Bank

•

Industry standards

•

The level and status of past due and non-performing loans

•

The general economic conditions in the Bank’s lending area; and

•

Other factors affecting the collectability of the loans in the portfolio

Large groups of homogeneous loans, such as residential real estate, small commercial real estate loans and home equity and consumer loans are evaluated in the aggregate using historical loss factors and other data. The amount of loss reserve is calculated using historical loss rates, net of recoveries on a five year rolling weighted average, adjusted for environmental, and other qualitative factors such as industry, geographical, economic and political factors that can effect loss rates or loss measurements. Watch and classified loans are allocated additional reserves.

Large balance and/or more complex loans such as multi-family and commercial real estate loans may be evaluated on an individual basis and are also evaluated in the aggregate to determine adequate reserves. As specific loans are determined to be impaired, specific reserves are assigned based upon collateral value, market value, if determinable, or the present value of the estimated future cash flows of the loan.

The allowance is increased by a provision for loan loss which is charged to expense, and reduced by charge-offs, net of recoveries. Loans are placed on non-accrual status when they are 90 days past due.

The allowance for loan losses is maintained at a level that represents management’s best estimate of losses in the portfolio at the balance sheet date. However, there can be no assurance that the allowance for losses will be adequate to cover losses which may be realized in the future and that additional provisions for losses will not be required.

Other income. Total other income for the three months ended September 30, 2007 decreased $216,000 to $1,724,000 from $1,940,000 for the comparable three-month period in 2006. The decrease in other income for the three months ended September 30, 2007 was primarily due to a decrease in net investment security gains of $254,000. This decrease was partially offset by increases in debit card and trust fees of $30,000 and $25,000, respectively. Total other income for the nine months ended September 30, 2007 decreased $622,000 to $5,021,000 from $5,643,000 for the comparable nine-month period in 2006. This change was primarily due to a decrease in net investment security gains of $817,000 offset by increases in debit card and trust fees of $76,000 and $81,000, respectively. Income from debit card fees rose due to a growing deposit base and increased transactions from the comparable periods in 2006. Growth in the Trust Department’s assets under management contributed to the increase in fees collected from the comparable periods in 2006.

Other expenses. Total other expense for the three-month period ended September 30, 2007 increased $187,000 to $4,462,000 from $4,275,000 for the comparable three-month period in 2006. Increases in other expenses and pension and other employee benefits of $136,000 and $54,000, respectively, were partially offset by a decrease in data processing costs of $38,000. Total other expense for the nine-month period ended September 30, 2007 increased $578,000 to $13,109,000 from $12,531,000 for the comparable nine-month period in 2006. Increases in pension and other employee benefits, other expenses, and advertising of $238,000, $198,000, and $125,000, respectively, were offset by a decrease in data processing costs of $68,000. Increases, for the three and nine month period ended September 30, 2007, in employee benefits are related to a rise in health care costs while other expenses rose due primarily to increases in losses due to check fraud, legal fees related to loan collection, and various services the Company subscribes to with third party vendors. Advertising costs, for the nine months ended September 30, 2007, increased due to expenses related to the Company’s new logo and marketing campaign. A decrease in data processing costs is attributed to a new contract the Company signed with its core data processor.

Provision for income taxes. Income taxes, for the three months ended September 30, 2007, decreased $80,000 to $588,000 from $668,000 for the comparable period in 2006. The effective tax rate decreased to 22.6% for the three month period ended September 30, 2007, compared to 23.7% for the comparable period in 2006. Income taxes for the nine months ended September 30, 2007, increased $139,000 to $1,796,000 from $1,657,000 for the comparable period in 2006. The effective tax rate increased to 23.1% for the nine month period ended September 30, 2007, compared to 20.0% for the comparable period in 2006. The increase is primarily related to securities written down in December 2004 and sold in 2006. The gain realized in 2006 was not subject to federal taxation.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no significant changes for the three and nine months ended September 30, 2007 from the information presented in the Annual Report on Form 10K, under the caption Market Risk, for the year ended December 31, 2006.

Item 4.

CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

The Registrant is not party to any material legal proceedings at the present time. From time to time, the Bank is a party to routine 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 1A.

Risk Factors

There have been no material changes from the risk factors as previously disclosed in the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)

Unregistered Sales of Equity Securities. Not Applicable

(b)

Use of Proceeds. Not Applicable

(c)

Issuer Purchases of Equity Securities.

Period

(a) Total

Number

Of Shares (or

Units) Purchased

(b)

Average Price

Paid per Share

(or Unit)

(c) Total Number

Of Shares (or Units)

Purchased as Part

Of Publicly

Announced Plans

or Programs*

(d) Maximum Number

(or Approximate Dollar

Value) of Shares (or

Units) that May Yet Be

Purchased Under the

Plans or Programs

July 1 through 31

27,716

$18.98

111,795

39,305

August 1 through 31

400

$17.95

112,195

38,905

September 1 through 30

Total

28,116

$18.97

112,195

38,905

*	On November 18, 1999, the Registrant announced a stock repurchase plan for up to 151,100 shares.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.

Other Information

Not applicable

Item 6.

Exhibits

The following exhibits are either filed with or incorporated by reference in this Quarterly Report on Form 10-Q:

	3(i)	Articles of Incorporation of IBT Bancorp, Inc.*
	3(ii)	Amended Bylaws of IBT Bancorp, Inc.
	4	Rights Agreement, dated as of November 18, 2003, by and between IBT Bancorp, Inc. and Registrar and Transfer Company, as Rights Agent.**
	10	Change In Control Severance Agreement with Charles G. Urtin ***
	10.1	Deferred Compensation Plan For Bank Directors***
10.2			Death Benefit Only Deferred Compensation Plan For Bank Directors effective as of January 1, 1990***
10.3			Retirement and Death Benefit Deferred Compensation Plan For Bank Directors effective as of January 1, 1990***
10.4			2000 Stock Option Plan****
10.5			Irwin Bank & Trust Company Supplemental Pension Plan *****
10.6			Medical Insurance Continuation Agreement with Charles G. Urtin ******
10.7			Directors Change in Control Severance Plan *******
31.1			Rule 13a-14(a) Certification of Chief Executive Officer
31.2			Rule 13a-14(a) Certification of Chief Financial Officer
32			Section 1350 Certification

*			Incorporated by reference to the identically numbered exhibits of the Registrant’s Form 10 (File No. 0-25903) filed April 29, 1999.
**			Incorporated by reference to Exhibit 4 to Amendment No. 1 to Form 8-A (File No. 1-31655) filed November 20, 2003.
***			Incorporated by reference to the identically numbered exhibits of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
****			Incorporated by reference to Exhibit 4.1 the Registrant’s Registration Statement on Form S-8 (File No. 333-40398) filed September 29, 2000.
*****			Incorporated by reference to identically numbered exhibit to Registrant’s Annual Report on Form 10-K for fiscal year ended December 31, 2004.
******			Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed March 6, 2006.
*******			Incorporated by reference to the identically numbered exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.

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 5, 2007	By:	/s/ Charles G. Urtin
		Charles G. Urtin President, Chief Executive Officer (Duly authorized officer)
Date: November 5, 2007	By:	/s/ Raymond G. Suchta
		Raymond G. Suchta Chief Financial Officer (Principal Financial Officer)

IBT BANCORP INC 10-Q