Isabella Bank Corporation Reports First Quarter 2025 Results

News provided by

Isabella Bank Corporation

Apr 17, 2025, 16:15 ET

MT. PLEASANT, Mich., April 17, 2025 /PRNewswire/ -- Isabella Bank Corporation (OTCQX: ISBA) (the "Company" or "we") reported first quarter 2025 net income of $3.9 million, or $0.53 per diluted share, compared to $3.1 million, or $0.42 per diluted share in the same quarter of 2024. The non-GAAP measure of core earnings in the first quarter 2025 totaled $4.3 million, or $0.57 per diluted share, compared to $3.1 million, or $0.41 per diluted share for the same quarter of 2024.

FIRST QUARTER 2025 HIGHLIGHTS (compared to first quarter 2024, unless otherwise stated)

  • Return on assets (ROA) of 0.77%, up from 0.61%
  • Commercial & industrial loan growth of 7%, annualized
  • Non-maturity deposit growth of 14%, annualized
  • Net interest margin of 3.06%, up from 2.79%
  • Annualized net loan recoveries to average loans of 0.02%, compared to net charge-offs of 0.01%

"The Company had a strong first quarter as we expanded net interest margin (NIM), increased fee-based income and continued to improve credit quality," said Jerome Schwind, Chief Executive Officer. "NIM has continued an upward trend since the first quarter of 2024 because of earning asset repricing and a lower cost of funds.

"In addition, our credit quality remains strong, and we have a successful history of collecting even when loans are charged off. In the first quarter, we recovered a significant amount of contractual interest related to nonperforming loans, which improved NIM by four basis points. Additionally, in the first week of April, we fully recovered a $1.6 million overdraft charge that was incurred in the third quarter of 2024. All loans to the overdrawn customer have been paid in full. Our ability to recover funds is a testament to our disciplined approach to credit quality and the strong relationships that we build in the communities we serve."

Schwind said the company also executed a strategy during the quarter to restructure a large portion of our bank-owned life insurance policies into a higher-yielding separate account. "While some new policies were added and accretive in the first quarter," he said, "the full transition and impact is expected by the third quarter 2025. We also have completed a study of all other components of fee-based income, and revenue enhancements are expected to launch by the end of the third quarter 2025.

"We are pleased with our start to 2025," Schwind added. "Our team is committed to our customers and communities, and we continue to focus on our fee businesses, balance sheet management, and credit performance. These strategic priorities drive all areas of revenue and expense control, expanding both return on assets and return on capital for the long term."

FINANCIAL CONDITION (March 31, 2025 compared to December 31, 2024, unless otherwise noted)
Total assets were $2.1 billion, up $16.3 million, primarily due to an increase of $38.7 million in interest bearing cash, $19.0 million in gross securities, and $11.0 million increase in bank-owned life insurance (BOLI) assets, offset by a $60.1 million decrease in advances to mortgage brokers.

Available-for-sale (AFS) securities at fair value were $513.0 million, growing $24.0 million at the end of first quarter 2025. The increase was driven by $40.4 million in purchases of collateralized mortgage obligation securities with a weighted-average yield of 4.56%. Amortization and maturities of $21.1 million partially offset the increase from purchases. Net unrealized losses on securities totaled $21.5 million and $26.5 million at the end of the first and fourth quarters, respectively. Net unrealized losses as a percentage of total AFS securities decreased to 4% from 5% at the end of the fourth quarter of 2024 due to the treasury portfolio rapidly approaching maturity and a decrease in market yields. The par value and corresponding book yields that are estimated to mature or pay off by year include: $54.5 million in principal with a weighted-average book yield of 2.34% over the remainder of 2025; $217.4 million at 1.17% in 2026; and $63.4 million at 1.86% in 2027.  Some of these securities amortize so the actual principal paydown may differ from these estimates.

Total loans were $1.4 billion at the end of the first quarter, down $55.8 million mostly due to a $60.1 million decrease in advances to mortgage brokers. However, the decline in this non-core loan product has provided liquidity and the opportunity to refocus on loans that can be recorded on our balance sheet for longer terms and help to mitigate interest rate risk.

Core loans, which excludes advances to mortgage brokers, grew $4.2 million, driven by the commercial real estate (CRE) and commercial and industrial loan portfolios of $4.8 million and $4.3 million, respectively. Loan growth during the first quarter primarily was in the construction, real estate, and hospitality industries. The commercial pipeline is robust, with some anticipated loan closings in the first quarter extended into the second quarter 2025. Residential mortgages increased $6.5 million. Customers are favoring adjustable-rate loans, which are put on the balance sheet rather than sold in the secondary market. Core loan growth during the quarter was offset by a decline in the agricultural and consumer loan portfolios that continue to roll off amid decreasing demand, competition and our adherence to credit quality standards.

The allowance for credit losses decreased $160 thousand to $12.7 million at the end of the first quarter of 2025. The decline mostly reflects improvement in historical loss experience, driven by recoveries from three previously charged-off loans in the quarter totaling $136 thousand, which led to an $88 thousand reduction in the allowance. Nonaccrual loan balances decreased $109 thousand to $173 thousand. Past due and accruing accounts between 30 to 89 days, as a percentage of total loans, was 0.41% compared to 0.40% at the end of fourth quarter 2024.

BOLI assets increased by $11.0 million from December, mostly due to a $10.6 million investment of new policies in a separate account product at the beginning of January. The investment transaction included a surrender of $5.4 million of existing general account policies and redeployment into a separate account BOLI. As part of BOLI restructuring, another $9 million of general account policies will be exchanged for separate account BOLI, which is expected to be completed by the end of third quarter. The separate account BOLI currently yields 5.4%, compared to a weighted-average yield of 2.9% from existing general account policies.

Total deposits were $1.80 billion, increasing $50.8 million, at the end of the first quarter. The growth was driven by the interest-bearing demand, money market, and savings deposits, collectively increasing $60.4 million as we continue to deepen customer relationships. Certificates of Deposit accounts were up $2.6 million, driven by the rate environment.

Tangible book value per share was $22.58 as of March 31, 2025, compared to $21.82. Net unrealized losses on AFS securities reduced tangible book value per share by $2.30 and $2.82 for the respective periods. Share repurchases totaled 45,582 during the first quarter for a value of $1.1 million at an average price of $25.12.

RESULTS OF OPERATIONS (March 31, 2025 to March 31, 2024 quarterly comparison, unless otherwise noted)
NIM was 3.06%, an increase from 2.98% in the fourth quarter 2024 and from 2.79% in the first quarter of 2024. During the first quarter, we recovered the full contractual interest from nonaccruing loans that paid off, which contributed four basis points to NIM. The book yield from securities was 2.20% and 2.25% during the first quarters of 2025 and 2024, respectively. The yield on loans expanded to 5.71% in the first quarter, up from 5.38% in the same quarter of 2024. Excluding loan recoveries, the yield on loans was 5.65%. The expansion in loan yields was a result of higher rates on new loans and variable rate commercial loans that have, and continue to, reprice. At the end of the first quarter, approximately 39% of commercial loans were fixed at rates lower than current market rates, but the majority will contractually reprice to variable rates over the next four years. Cost of interest-bearing liabilities was 2.26%, decreasing from 2.28% in the first quarter of 2024, and 2.38% in the previous quarter, due to reductions to rates in the money market and certificate of deposit products.

The provision for credit losses in the first quarter 2025 was a credit of $107 thousand, which reflects the $160 thousand change in the allowance for credit losses on loans and net recoveries totaling $52 thousand, offset by an increase in the reserve for unfunded commitments. The provision for loan losses in the same period of 2024 was $392 thousand reflecting $265 thousand for specific reserves and $46 thousand in net charge-offs.

Noninterest income was $3.5 million in the first quarter of 2025, the same as in the first quarter of 2024. Wealth management income increased $40 thousand on relatively flat assets under management (AUM) as compared to AUM in the first quarter of 2024. AUM in the first quarter 2025 decreased 0.22% while the S&P 500 declined 4.6% in the same period. Earnings on BOLI policies increased $129 thousand over the prior year quarter due to new investments in a separate account BOLI. Other noninterest income in the first quarter 2025 included a $55 thousand loss on foreclosed assets, compared to a $69 thousand gain in the first quarter 2024.

Noninterest expenses were $13.3 million in the first quarter 2025 compared to $12.7 million in same quarter of 2024. The change mostly was due to higher compensation and benefit expenses totaling $368 thousand, which reflect annual merit increases in 2025 and more medical insurance claims compared to the first quarter of 2024. Professional services included $121 thousand in legal fees related to our previously announced Nasdaq uplisting application.

Income tax expense was $912 thousand, compared to $511 thousand in the first quarter of 2024 and the effective tax rate (ETR) was 19% and 14%, respectively. The ETR in the first quarter 2025 included a one-time expense totaling $166 thousand due to the taxes owed from the lifetime earnings on BOLI policies that were surrendered during the quarter. Excluding the one-time charge, the ETR was 15%, which is higher than the prior year quarter on higher pretax income.

About the Corporation
Isabella Bank Corporation (OTCQX: ISBA) is the parent holding company of Isabella Bank, a state-chartered community bank headquartered in Mt. Pleasant, Michigan. Isabella Bank was established in 1903 and has been committed to serving its customers' and communities' local banking needs for over 120 years. The Bank offers personal and commercial lending and deposit products, as well as investment, trust, and estate planning services. The Bank has locations throughout eight Mid-Michigan counties: Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw.

For more information about Isabella Bank Corporation, visit the Investor Relations link at www.isabellabank.com. Isabella Bank Corporation common stock is quoted on the OTCQX tier of the OTC Markets Group, Inc.'s electronic quotation system (www.otcmarkets.com) under the symbol "ISBA." The Corporation's investor relations firm is Stonegate Capital Partners, Inc. (www.stonegateinc.com).

Forward-Looking Statements
Information in this release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward-looking statements generally relate to losses, impact of events, financial condition, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Company and its future business and operations. Forward-looking statements are typically identified by words or phrases such as "will likely result", "expect", "plan", "believe", "estimate", "anticipate", "strategy", "trend", "forecast", "outlook", "project", "intend", "assume", "outcome", "continue", "remain", "potential", "opportunity", "comfortable", "current", "position", "maintain", "sustain", "seek", "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, or included in any subsequent filing by the Company with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations, and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Non-GAAP Financial Measures
This document contains certain non-GAAP financial measures in addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. Because non-GAAP financial measures presented in this document are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies. A reconciliation of non-GAAP financial measures to GAAP measures is provided in this release.

Table Index

Consolidated Financial Schedules (Unaudited)

A

Selected Financial Data

B

Consolidated Balance Sheets - Quarterly Trend

C

Consolidated Statements of Income

D

Consolidated Statements of Income - Quarterly Trend

E

Average Yields and Costs

F

Average Balances

G

Asset Quality Analysis

H

Consolidated Loan and Deposit Analysis

I

Reconciliation of Non-GAAP Financial Measures

SELECTED FINANCIAL DATA (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)



Three Months Ended


March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

PER SHARE










Basic earnings

$        0.53


$        0.54


$        0.44


$        0.47


$        0.42

Diluted earnings

0.53


0.54


0.44


0.46


0.42

Core diluted earnings (1)

0.57


0.52


0.61


0.46


0.41

Dividends

0.28


0.28


0.28


0.28


0.28

Book value (2)

29.10


28.32


28.63


27.06


26.80

Tangible book value (2)

22.58


21.82


22.14


20.60


20.35

Market price (2)

23.59


25.99


21.21


18.20


19.40

Common shares outstanding (2) (3)

7,408,010


7,424,893


7,438,720


7,474,016


7,488,101

Average number of diluted common shares outstanding (3)

7,432,162


7,451,718


7,473,184


7,494,828


7,507,739

PERFORMANCE RATIOS










Return on average total assets

0.77 %


0.76 %


0.62 %


0.68 %


0.61 %

Core return on average total assets (1)

0.83 %


0.74 %


0.87 %


0.68 %


0.60 %

Return on average shareholders' equity

7.48 %


7.47 %


6.26 %


6.97 %


6.19 %

Core return on average shareholders' equity (1)

8.05 %


7.29 %


8.70 %


6.96 %


6.08 %

Return on average tangible shareholders' equity

9.65 %


9.66 %


8.15 %


9.19 %


8.12 %

Core return on average tangible shareholders' equity (1)

10.40 %


9.43 %


11.32 %


9.17 %


7.97 %

Net interest margin yield (fully taxable equivalent) (1)

3.06 %


2.98 %


2.96 %


2.82 %


2.79 %

Efficiency ratio (1)

72.39 %


71.20 %


72.30 %


73.93 %


74.84 %

Gross loan to deposit ratio (2)

76.07 %


81.48 %


79.93 %


80.22 %


77.22 %

Shareholders' equity to total assets (2)

10.25 %


10.08 %


10.11 %


9.82 %


9.75 %

Tangible shareholders' equity to tangible assets (2)

8.14 %


7.95 %


8.00 %


7.65 %


7.58 %

ASSETS UNDER MANAGEMENT










Wealth assets under management (2)

656,617


658,042


679,858


647,850


660,645

ASSET QUALITY










Nonaccrual loans (2)

173


282


547


994


1,283

Foreclosed assets (2)

649


544


546


629


579

Net loan charge-offs (recoveries)

(52)


102


1,359


393


46

Net loan charge-offs (recoveries) to average loans outstanding

0.00 %


0.01 %


0.10 %


0.03 %


0.00 %

Nonperforming loans to gross loans (2)

0.01 %


0.02 %


0.04 %


0.07 %


0.09 %

Nonperforming assets to total assets (2)

0.04 %


0.04 %


0.06 %


0.08 %


0.09 %

Allowance for credit losses to gross loans (2)

0.93 %


0.91 %


0.89 %


0.95 %


0.98 %

CAPITAL RATIOS (2)










Tier 1 leverage

8.96 %


8.86 %


8.77 %


8.83 %


8.80 %

Common equity tier 1 capital

12.48 %


12.21 %


12.08 %


12.37 %


12.36 %

Tier 1 risk-based capital

12.48 %


12.21 %


12.08 %


12.37 %


12.36 %

Total risk-based capital

15.37 %


15.06 %


14.90 %


15.29 %


15.31 %

(1)

Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

(2)

At end of period

(3)

Whole shares

A

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)



March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

ASSETS










Cash and demand deposits due from banks

$         28,786


$         22,830


$         27,019


$         22,690


$         22,987

Fed Funds sold and interest bearing balances due from banks

40,393


1,712


359


869


2,231

Total cash and cash equivalents

69,179


24,542


27,378


23,559


25,218











Available-for-sale securities, at fair value

513,040


489,029


506,806


505,646


517,585

Federal Home Loan Bank stock

5,600


12,762


12,762


12,762


12,762

Mortgage loans held-for-sale

127


242


504


637


366











Loans

1,367,724


1,423,571


1,424,283


1,381,636


1,365,508

Less allowance for credit losses

12,735


12,895


12,635


13,095


13,390

Net loans

1,354,989


1,410,676


1,411,648


1,368,541


1,352,118











Premises and equipment

28,108


27,659


27,674


27,843


27,951

Cash surrender value of bank-owned life insurance policies

45,833


34,882


34,625


34,382


34,131

Goodwill and other intangible assets

48,282


48,283


48,283


48,283


48,284

Other assets

37,429


38,166


37,221


38,486


39,161

Total assets

$    2,102,587


$    2,086,241


$    2,106,901


$    2,060,139


$    2,057,576

LIABILITIES AND SHAREHOLDERS' EQUITY









Liabilities










Demand deposits

$       404,194


$       416,373


$       421,493


$       412,193


$       413,272

Interest bearing demand deposits

243,939


237,548


228,902


232,660


250,314

Money market deposits

473,138


423,883


471,745


429,150


453,014

Savings

286,399


281,665


276,095


279,847


285,564

Certificates of deposit

390,239


387,591


383,597


368,449


366,143

Total deposits

1,797,909


1,747,060


1,781,832


1,722,299


1,768,307

Short-term borrowings

47,310


53,567


52,434


44,194


42,998

Federal Home Loan Bank advances

—


30,000


15,000


45,000


—

Subordinated debt, net of unamortized issuance costs

29,447


29,424


29,402


29,380


29,357

Total borrowed funds

76,757


112,991


96,836


118,574


72,355











Other liabilities

12,365


15,914


15,248


17,017


16,240

Total liabilities

1,887,031


1,875,965


1,893,916


1,857,890


1,856,902

Shareholders' equity










Common stock

125,547


126,224


125,218


126,126


126,656

Shares to be issued for deferred compensation obligations

2,508


2,383


3,981


3,951


3,890

Retained earnings

104,940


103,024


101,065


99,808


98,318

Accumulated other comprehensive income (loss)

(17,439)


(21,355)


(17,279)


(27,636)


(28,190)

Total shareholders' equity

215,556


210,276


212,985


202,249


200,674

Total liabilities and shareholders' equity

$    2,102,587


$    2,086,241


$    2,106,901


$    2,060,139


$    2,057,576

B

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)



Three Months Ended 

 March 31


2025


2024

Interest income




Loans

$         19,348


$         18,057

Available-for-sale securities

2,643


2,884

Federal Home Loan Bank stock

160


146

Federal funds sold and other

482


293

Total interest income

22,633


21,380

Interest expense




Deposits

7,463


7,163

Short-term borrowings

341


321

Federal Home Loan Bank advances

38


388

Subordinated debt

266


266

Total interest expense

8,108


8,138

Net interest income

14,525


13,242

Provision for credit losses

(107)


392

Net interest income after provision for credit losses

14,632


12,850

Noninterest income




Service charges and fees

1,974


1,933

Wealth management fees

979


939

Earnings on bank-owned life insurance policies

372


243

Net gain on sale of mortgage loans

30


34

Other

173


319

Total noninterest income

3,528


3,468

Noninterest expenses




Compensation and benefits

7,383


7,015

Occupancy and equipment

2,600


2,706

Other professional services

711


513

ATM and debit card fees

486


469

Marketing

459


426

FDIC insurance premiums

303


252

Other

1,357


1,295

Total noninterest expenses

13,299


12,676

Income before income tax expense

4,861


3,642

Income tax expense

912


511

Net income

$           3,949


$           3,131

Earnings per common share




Basic

$              0.53


$              0.42

Diluted

0.53


0.42

Cash dividends per common share

0.28


0.28

C

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)



Three Months Ended


March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

Interest income










Loans

$         19,348


$         20,145


$         20,230


$         18,863


18,057

Available-for-sale securities

2,643


2,656


2,749


2,804


2,884

Federal Home Loan Bank stock

160


168


168


158


146

Federal funds sold and other

482


200


194


263


293

Total interest income

22,633


23,169


23,341


22,088


21,380

Interest expense










Deposits

7,463


7,583


7,631


7,313


7,163

Short-term borrowings

341


413


384


321


321

Federal Home Loan Bank advances

38


352


571


638


388

Subordinated debt

266


266


267


266


266

Total interest expense

8,108


8,614


8,853


8,538


8,138

Net interest income

14,525


14,555


14,488


13,550


13,242

Provision for credit losses

(107)


376


946


170


392

Net interest income after provision for credit losses

14,632


14,179


13,542


13,380


12,850

Noninterest income










Service charges and fees

1,974


2,186


2,133


2,023


1,933

Wealth management fees

979


1,051


1,003


1,048


939

Earnings on bank-owned life insurance policies

372


259


252


253


243

Net gain on sale of mortgage loans

30


75


37


67


34

Other

173


401


103


217


319

Total noninterest income

3,528


3,972


3,528


3,608


3,468

Noninterest expenses










Compensation and benefits

7,383


7,340


7,251


6,970


7,015

Occupancy and equipment

2,600


2,554


2,645


2,619


2,706

Other professional services

711


584


588


527


513

ATM and debit card fees

486


516


503


487


469

Marketing

459


458


403


425


426

FDIC insurance premiums

303


309


291


280


252

Other

1,357


1,569


1,547


1,587


1,295

Total noninterest expenses

13,299


13,330


13,228


12,895


12,676

Income before income tax expense

4,861


4,821


3,842


4,093


3,642

Income tax expense

912


825


561


612


511

Net income

$           3,949


$           3,996


$           3,281


$           3,481


$           3,131

Earnings per common share










Basic

$              0.53


$              0.54


$              0.44


$              0.47


$              0.42

Diluted

0.53


0.54


0.44


0.46


0.42

Cash dividends per common share

0.28


0.28


0.28


0.28


0.28

D

AVERAGE YIELDS AND COSTS (UNAUDITED)


The following schedules present yield and daily average amounts outstanding for each major category of interest earning assets, 

nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. For analytical purposes, interest income is reported

on a fully taxable equivalent (FTE) basis using a federal income tax rate of 21%.  Federal Reserve Bank restricted equity holdings

are included in other interest earning assets.



Three Months Ended


March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

INTEREST EARNING ASSETS









Loans (1)

5.71 %


5.66 %


5.72 %


5.50 %


5.38 %

Available-for-sale securities

2.20 %


2.15 %


2.17 %


2.17 %


2.25 %

Federal Home Loan Bank stock

5.82 %


5.25 %


5.26 %


4.97 %


4.57 %

Fed funds sold

4.32 %


4.54 %


5.36 %


5.30 %


5.43 %

Other

4.06 %


4.94 %


5.18 %


7.38 %


4.66 %

Total interest earning assets

4.75 %


4.72 %


4.75 %


4.59 %


4.47 %

INTEREST BEARING LIABILITIES










Interest bearing demand deposits

0.41 %


0.36 %


0.28 %


0.30 %


0.33 %

Money market deposits

2.58 %


2.71 %


2.77 %


2.85 %


2.86 %

Savings

0.76 %


0.64 %


0.61 %


0.56 %


0.47 %

Certificates of deposit

3.93 %


4.07 %


4.13 %


4.01 %


3.84 %

Short-term borrowings

3.18 %


3.22 %


3.17 %


3.18 %


3.17 %

Federal Home Loan Bank advances

4.53 %


4.88 %


5.52 %


5.55 %


5.54 %

Subordinated debt, net of unamortized issuance costs

3.62 %


3.62 %


3.62 %


3.63 %


3.63 %

Total interest bearing liabilities

2.26 %


2.38 %


2.42 %


2.38 %


2.28 %

Net yield on interest earning assets (FTE) (2)

3.06 %


2.98 %


2.96 %


2.82 %


2.79 %











Net interest spread

2.49 %


2.34 %


2.33 %


2.21 %


2.19 %

(1)

Includes loans held-for-sale and nonaccrual loans

(2)

Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

E

AVERAGE BALANCES (UNAUDITED)

(Dollars in thousands)



Three Months Ended


March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

INTEREST EARNING ASSETS








Loans (1)

$    1,370,765


$    1,412,578


$    1,403,810


$    1,375,523


$    1,348,749

Available-for-sale securities (2)

514,479


522,733


536,379


545,827


557,030

Federal Home Loan Bank stock

11,011


12,762


12,762


12,762


12,762

Fed funds sold

4


8


4


7


7

Other (3)

47,374


15,905


14,597


14,054


25,210

Total interest earning assets

1,943,633


1,963,986


1,967,552


1,948,173


1,943,758

NONEARNING ASSETS










Allowance for credit losses

(12,884)


(12,598)


(13,125)


(13,431)


(13,100)

Cash and demand deposits due from banks

23,899


22,800


25,903


23,931


24,018

Premises and equipment

27,962


27,773


27,868


27,999


28,022

Other assets

102,927


92,608


87,002


80,539


84,059

Total assets

$    2,085,537


$    2,094,569


$    2,095,200


$    2,067,211


$    2,066,757

INTEREST BEARING LIABILITIES










Interest bearing demand deposits

$       240,860


$       232,271


$       232,018


$       238,866


$       245,299

Money market deposits

460,663


436,235


451,216


434,061


451,476

Savings

286,364


276,856


274,828


283,605


282,971

Certificates of deposit

387,820


386,871


375,936


366,440


357,541

Short-term borrowings

43,563


50,862


48,304


40,609


40,623

Federal Home Loan Bank advances

3,333


28,261


40,435


45,494


27,692

Subordinated debt, net of unamortized issuance costs

29,433


29,410


29,388


29,365


29,342

Total interest bearing liabilities

1,452,036


1,440,766


1,452,125


1,438,440


1,434,944

NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY

Demand deposits

403,024


425,116


418,973


411,282


412,228

Other liabilities

16,265


15,775


15,658


16,755


16,151

Shareholders' equity

214,212


212,912


208,444


200,734


203,434

Total liabilities and shareholders' equity

$    2,085,537


$    2,094,569


$    2,095,200


$    2,067,211


$    2,066,757

(1)

Includes loans held-for-sale and nonaccrual loans

(2)

Average balances for available-for-sale securities are based on amortized cost

(3)

Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter

F

ASSET QUALITY ANALYSIS (UNAUDITED)

(Dollars in thousands)


The following table outlines our quarter-to-date asset quality analysis as of, and for the three-month periods ended:



March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

NONPERFORMING ASSETS










Commercial and industrial

$               —


$               —


$             120


$             271


$             567

Commercial real estate

—


—


—


—


234

Agricultural

—


—


—


167


189

Residential real estate

173


282


427


556


293

Consumer

—


—


—


—


—

Total nonaccrual loans

173


282


547


994


1,283

Accruing loans past due 90 days or more

26


19


64


15


—

Total nonperforming loans

199


301


611


1,009


1,283

Foreclosed assets

649


544


546


629


579

Debt securities

—


—


12


12


12

Total nonperforming assets

$             848


$             845


$          1,169


$          1,650


$          1,874

Nonperforming loans to gross loans

0.01 %


0.02 %


0.04 %


0.07 %


0.09 %

Nonperforming assets to total assets

0.04 %


0.04 %


0.06 %


0.08 %


0.09 %

Allowance for credit losses as a % of nonaccrual loans (1)

N/M


N/M


N/M


N/M


N/M

ALLOWANCE FOR CREDIT LOSSES










Allowance at beginning of period

$        12,895


$        12,635


$        13,095


$        13,390


$        13,108

Charge-offs

172


299


1,767


527


191

Recoveries

224


197


408


134


145

Net loan charge-offs (recoveries)

(52)


102


1,359


393


46

Provision for credit losses - loans

(212)


362


899


98


328

Allowance at end of period

$        12,735


$        12,895


$        12,635


$        13,095


$        13,390

Allowance for credit losses to gross loans

0.93 %


0.91 %


0.89 %


0.95 %


0.98 %

Reserve for unfunded commitments

617


512


498


450


379

Provision for credit losses - unfunded commitments

105


14


47


72


64

Reserve to unfunded commitments

0.14 %


0.15 %


0.15 %


0.14 %


0.11 %

NET LOAN CHARGE-OFFS (RECOVERIES)










Commercial and industrial

$             (80)


$               13


$               (6)


$             334


$               (2)

Commercial real estate

(2)


(2)


(318)


(29)


(6)

Agricultural

—


(4)


—


—


(2)

Residential real estate

(13)


(16)


(20)


(19)


(63)

Consumer

43


111


1,703


107


119

Total

$             (52)


$             102


$          1,359


$             393


$               46

Net (recoveries) charge-offs (Quarter to Date annualized to average loans)

(0.02) %


0.03 %


0.39 %


0.11 %


0.01 %

Net (recoveries) charge-offs (Year to Date annualized to average loans)

(0.02) %


0.14 %


0.17 %


0.00 %


0.01 %

DELINQUENT AND NONACCRUAL LOANS










Accruing loans 30-89 days past due

$          5,555


$          5,682


$          2,226


$          1,484


$          7,938

Accruing loans past due 90 days or more

26


19


64


15


—

Total accruing past due loans

5,581


5,701


2,290


1,499


7,938

Nonaccrual loans

173


282


547


994


1,283

Total past due and nonaccrual loans

$          5,754


$          5,983


$          2,837


$          2,493


$          9,221

(1)

N/M:  Not meaningful

G

CONSOLIDATED LOAN AND DEPOSIT ANALYSIS (UNAUDITED)

(Dollars in thousands)


Loan Analysis



March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024


Annualized Growth %
Quarter to Date

Commercial and industrial

$       249,220


$       244,894


$       240,589


$       238,245


$       226,281


7.07 %

Commercial real estate

552,234


547,447


547,038


547,005


561,123


3.50 %

Advances to mortgage brokers

3,015


63,080


76,187


39,300


29,688


N/M

Agricultural

94,359


99,694


96,794


94,996


93,695


(21.41) %

Total commercial loans

898,828


955,115


960,608


919,546


910,787


(23.57) %

Residential real estate

387,348


380,872


369,846


365,188


356,658


6.80 %

Consumer

81,548


87,584


93,829


96,902


98,063


(27.57) %

Gross loans

$    1,367,724


$    1,423,571


$    1,424,283


$    1,381,636


$    1,365,508


(15.69) %



Deposit Analysis



March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024


Annualized Growth %
Quarter to Date

Noninterest bearing demand deposits

$       404,194


$       416,373


$       421,493


$       412,193


$       413,272


(11.70) %

Interest bearing demand deposits

243,939


237,548


228,902


232,660


250,314


10.76 %

Money market deposits

473,138


423,883


471,745


429,150


453,014


46.48 %

Savings

286,399


281,665


276,095


279,847


285,564


6.72 %

Certificates of deposit

390,239


387,591


383,597


368,449


366,143


2.73 %

Total deposits

$    1,797,909


$    1,747,060


$    1,781,832


$    1,722,299


$    1,768,307


11.64 %

H

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)




Three Months Ended



March 31
2025


December 31
2024


September 30
2024


June 30
2024


March 31
2024

Net income


$        3,949


$        3,996


$        3,281


$        3,481


$        3,131

Nonrecurring items











Net gains (losses) on foreclosed assets


(55)


74


4


6


69

Overdraft (charge-off) recoveries (1)


—


66


(1,622)


—


—

Profitability initiative cost


—


(23)


—


—


—

Legal fees related to Nasdaq (2)


(121)


—


—


—


—

Income tax impact


37


(25)


340


(1)


(14)

Tax expense on bank-owned life insurance surrender (3)


(166)


—


—


—


—

Total nonrecurring items


(305)


92


(1,278)


5


55

Core net income

(A)

$        4,254


$        3,904


$        4,559


$        3,476


$        3,076












Noninterest expenses


$     13,299


$     13,330


$     13,228


$     12,895


$     12,676

Amortization of acquisition intangibles


1


1


—


1


—

Core noninterest expense

(B)

$     13,298


$     13,329


$     13,228


$     12,894


$     12,676












Net interest income


$     14,525


$     14,555


$     14,488


$     13,550


$     13,242

Tax equivalent adjustment for net interest margin


184


213


232


237


246

Net interest income (FTE)

(C)

14,709


14,768


14,720


13,787


13,488

Noninterest income


3,528


3,972


3,528


3,608


3,468

Tax equivalent adjustment for efficiency ratio


78


54


53


53


51

Core revenue (FTE)


18,315


18,794


18,301


17,448


17,007

Nonrecurring items











Net gains (losses) on foreclosed assets


(55)


74


4


6


69

Total nonrecurring items


(55)


74


4


6


69

Core revenue

(D)

$     18,370


$     18,720


$     18,297


$     17,442


$     16,938

Efficiency ratio

(B/D)

72.39 %


71.20 %


72.30 %


73.93 %


74.84 %












Average earning assets

(E)

1,943,633


1,963,986


1,967,552


1,948,173


1,943,758

Net yield on interest earning assets (FTE)

(C/E)

3.06 %


2.98 %


2.96 %


2.82 %


2.79 %












Average assets

(F)

2,085,537


2,094,569


2,095,200


2,067,211


2,066,757

Average shareholders' equity

(G)

214,212


212,912


208,444


200,734


203,434

Average tangible shareholders' equity

(H)

165,929


164,629


160,161


152,451


155,150

Average diluted shares outstanding (4)

(I)

7,432,162


7,451,718


7,473,184


7,494,828


7,507,739












Core diluted earnings per share

(A/I)

$          0.57


$          0.52


$          0.61


$          0.46


$          0.41

Core return on average assets

(A/F)

0.83 %


0.74 %


0.87 %


0.68 %


0.60 %

Core return on average shareholders' equity

(A/G)

8.05 %


7.29 %


8.70 %


6.96 %


6.08 %

Core return on average tangible shareholders' equity

(A/H)

10.40 %


9.43 %


11.32 %


9.17 %


7.97 %


(1) Includes provision for credit losses related to overdrawn deposit accounts from a single customer in the third quarter of 2024

(2) Included in Other professional services in the consolidated statements of income

(3) Surrender fees related to transition from general to separate bank-owned life insurance policies

(4) Whole shares

SOURCE Isabella Bank Corporation