Isabella Bank Corporation Reports Third Quarter 2024 Results

News provided by

Isabella Bank Corporation

Oct 24, 2024, 16:15 ET

MT. PLEASANT, Mich., Oct. 24, 2024 /PRNewswire/ -- Isabella Bank Corporation (OTCQX: ISBA) (the "Company" or "we") reported third quarter 2024 net income of $3.3 million, or $0.44 per diluted share, compared to $4.4 million or $0.58 per diluted share in the same quarter of 2023. The non-GAAP measure of core earnings in the third quarter 2024 totaled $4.6 million, or $0.61 per diluted share, compared to $4.4 million or $0.58 per diluted share for the same quarter of 2023.

THIRD QUARTER 2024 HIGHLIGHTS

  • Return on assets of 0.62%, core return on assets of 0.87% (non-GAAP measure)
  • Loan growth of 12% annualized
  • Deposit growth of 14% annualized
  • Net interest margin of 2.98%
  • Nonaccrual loans to total loans ratio of 0.04%

"Profitability from operations improved during the third quarter as we delivered quarter-over-quarter expansion in net interest income with strong growth on both sides of the balance sheet while maintaining our disciplined approach to credit quality," said Isabella Bank Corporation's Chief Executive Officer Jerome Schwind. "Core earnings increased 31% over the second quarter 2024. That benefit was offset by a $1.6 million charge, as previously announced, related to overdrawn deposit accounts from a customer.

"Along with higher loan yields, our quarterly results include the benefit of recovering two previously charged-off commercial loans," he added. "With continued improvement in our top-line results, our focus is on opportunities to boost return on assets and lower the efficiency ratio. I am proud of our teamwork, dedication to risk management, and our commitment to provide consistent, sustainable long-term earnings."

FINANCIAL CONDITION (September 30, 2024 compared to June 30, 2024)

Total assets grew $46.8 million to $2.1 billion primarily due to loan growth funded by growth in deposits during the third quarter. Excess cash generated during the quarter was used to pay off wholesale borrowings totaling $24.7 million.

Securities available-for-sale increased $1.2 million to $506.8 million at the end of third quarter 2024. The increase was due to a $13.1 million improvement in the net unrealized loss, which was offset by $11.9 million of principal paydowns on mortgage-related securities and municipal security maturities. Net unrealized losses on securities totaled $21 million and $34 million at the end of the third and second quarters, respectively. Net unrealized losses as a percentage of total available-for-sale securities improved to 4% from 6% at the end of the second quarter of 2024 mostly due to a decrease in short-term bond yields. While bond rates may vary from quarter to quarter, we expect unrealized losses will continue to decrease as the bonds approach their maturity dates over the next three years.

Total loans grew $42.6 million to $1.42 billion at the end of the third quarter, led by a $36.9 million increase in advances to mortgage brokers. Residential loans increased $4.7 million on steady new volume and continued slowing of prepayments. Excluding advances to mortgage brokers, commercial loans increased $4.2 million due to continued growth in commercial and industrial loans and agricultural loans. At the end of September, $12.6 million of additional commercial real estate construction loans closed and the majority are expected to be funded early in the fourth quarter.

The allowance for credit losses decreased $460,000 to $12.6 million at the end of third quarter of 2024. Most of the decrease is due to improvement in historical loss experience, driven by the recovery of two previously charged-off loans in the quarter totaling $314,000. Nonaccrual loan balances decreased by $447,000 to $547,000 at the end of the third quarter of 2024. Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.16% compared to 0.05% at the end of third quarter of 2023. The increase is mostly the result of one agricultural loan with a balance of $1.1 million that is now current.

Total deposits were up $59.5 million to $1.78 billion at the end of the third quarter. The increase is consistent with normal seasonal patterns at the end of the third quarter that are generally experienced in money market accounts due to an inflow from businesses and municipalities. Certificates of Deposit accounts (CDs) were up $15.1 million, attributed to new accounts and customers' anticipation of lower deposit rates going into the fourth quarter 2024. Demand for retail CDs continues because of the rate environment.

Tangible book value per share was $22.14 as of September 30, 2024, compared to $20.60 on June 30, 2024. Net unrealized losses on available-for-sale securities reduced tangible book value per share by $2.23 and $3.60 for the respective periods. Share repurchases totaled 53,000 during the third quarter for a value of $1.0 million at an average price of $19.23.

RESULTS OF OPERATIONS (September 30, 2024 to September 30, 2023 quarterly comparison, unless otherwise noted)

Net interest margin as a percentage of earning assets (NIM) was 2.98%, compared to 2.85% last quarter and 2.99% in the third quarter of 2023. During the third quarter, we recovered the full contractual interest from two commercial loans that previously were charged off, which contributed 6 basis points to NIM. The book yield from securities was 2.21% and 2.23% during third quarters of 2024 and 2023, respectively. The weighted average maturity of our U.S. Treasury portfolio is less than 2 years, and the proceeds are expected to be reinvested in market rate loans and securities, or to pay off borrowed funds. The yield on loans expanded to 5.73% in third quarter, up from 5.17% in the same quarter of 2023. Excluding loan recoveries, the yield on loans was 5.65%. The expansion in loan yields is a result of higher rates on new loans and fixed rate commercial loans that have and continue repricing to variable rates. At the end of the third quarter, approximately 41% of commercial loans are fixed at rates that are lower than current market rates, but the majority will contractually reprice to variable rates over the next three to five years. Cost of interest-bearing liabilities increased to 2.43% from 1.77% in the third quarter of 2023, but have stabilized compared to the cost in the previous quarter of 2.39%.

The provision for credit losses was $946,000 in the third quarter, compared to a credit of $292,000 for the same period in 2023. The current year quarter includes the impact from the recovery of the contractual principal of two previously charged-off commercial loans totaling $314,000. That benefit was offset by a $1.6 million charge related to overdrawn deposit accounts from a single customer. The loans to the customer and related parties are well collateralized, and no additional credit provisioning was necessary in the third quarter. The credit in the prior year quarter mostly reflects loan recoveries in excess of charge-off activity.

Noninterest income was $3.5 million compared to $3.4 million in the third quarter of 2023. Customer service fees grew $99,000 based on a higher number of transactional accounts. Wealth management income increased $145,000, or 17%, due to higher assets under management (AUM). AUM increased $89.2 million over the prior year quarter driven by growth in new accounts and higher security valuations.

Noninterest expenses were $13.2 million in the third quarter 2024 compared to $12.7 million in same quarter of 2023. Compensation and benefit expenses increased $612,000 reflecting annual merit increases in 2024, and higher incentive compensation as compared to the third quarter of 2023.

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, 2023, 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


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

PER SHARE










Basic earnings

$        0.44


$       0.47


$       0.42


$       0.51


$       0.59

Diluted earnings

0.44


0.46


0.42


0.51


0.58

Core diluted earnings (2)

0.61


0.46


0.41


0.50


0.58

Dividends

0.28


0.28


0.28


0.28


0.28

Book value (1)

28.63


27.06


26.80


27.04


24.71

Tangible book value (1)

22.14


20.60


20.35


20.59


18.27

Market price (1)

21.21


18.20


19.40


21.50


21.05

Common shares outstanding (1) (3)

7,438,720


7,474,016


7,488,101


7,485,889


7,490,557

Average number of diluted common shares outstanding (3)

7,473,184


7,494,828


7,507,739


7,526,514


7,570,374

PERFORMANCE RATIOS










Return on average total assets

0.62 %


0.68 %


0.61 %


0.73 %


0.86 %

Core return on average total assets (2)

0.87 %


0.68 %


0.60 %


0.73 %


0.85 %

Return on average shareholders' equity

6.26 %


6.97 %


6.19 %


7.98 %


9.17 %

Core return on average shareholders' equity (2)

8.70 %


6.96 %


6.08 %


7.97 %


9.05 %

Return on average tangible shareholders' equity

8.15 %


9.19 %


8.12 %


10.73 %


12.27 %

Core return on average tangible shareholders' equity (2)

11.32 %


9.17 %


7.97 %


10.71 %


12.11 %

Net interest margin yield (fully taxable equivalent) (2)

2.98 %


2.85 %


2.79 %


2.83 %


2.99 %

Efficiency ratio (2)

72.30 %


73.93 %


74.84 %


68.41 %


70.56 %

Gross loan to deposit ratio (1)

79.93 %


80.22 %


77.22 %


78.29 %


75.43 %

Shareholders' equity to total assets (1)

10.11 %


9.82 %


9.75 %


9.83 %


8.74 %

Tangible shareholders' equity to tangible assets (1)

8.00 %


7.65 %


7.58 %


7.66 %


6.61 %

ASSETS UNDER MANAGEMENT










Wealth assets under management (1)

679,858


647,850


660,645


641,027


590,666

ASSET QUALITY










Nonaccrual loans (1)

547


994


1,283


982


520

Foreclosed assets (1)

546


629


579


406


509

Net loan charge-offs (recoveries)

1,359


393


46


381


(254)

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

0.10 %


0.03 %


0.00 %


0.03 %


(0.02) %

Nonperforming loans to gross loans (1)

0.04 %


0.07 %


0.09 %


0.08 %


0.04 %

Nonperforming assets to total assets (1)

0.06 %


0.08 %


0.09 %


0.07 %


0.05 %

Allowance for credit losses to gross loans (1)

0.89 %


0.95 %


0.98 %


0.97 %


0.96 %

CAPITAL RATIOS (1)










Tier 1 leverage

8.77 %


8.83 %


8.80 %


8.76 %


8.77 %

Common equity tier 1 capital

12.08 %


12.37 %


12.36 %


12.54 %


12.43 %

Tier 1 risk-based capital

12.08 %


12.37 %


12.36 %


12.54 %


12.43 %

Total risk-based capital

14.90 %


15.29 %


15.31 %


15.52 %


15.39 %


(1) At end of period

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

(3) Whole shares

A

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)



September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

ASSETS










Cash and demand deposits due from banks

$         27,019


$         22,690


$         22,987


$         25,628


$         48,862

Fed Funds sold and interest bearing balances due from banks

359


869


2,231


8,044


67,017

Total cash and cash equivalents

27,378


23,559


25,218


33,672


115,879











Available-for-sale securities, at fair value

506,806


505,646


517,585


528,148


516,897

Federal Home Loan Bank stock

12,762


12,762


12,762


12,762


12,762

Mortgage loans held-for-sale

504


637


366


—


105











Loans

1,424,283


1,381,636


1,365,508


1,349,463


1,334,674

Less allowance for credit losses

12,635


13,095


13,390


13,108


12,767

Net loans

1,411,648


1,368,541


1,352,118


1,336,355


1,321,907











Premises and equipment

27,674


27,843


27,951


27,639


26,960

Bank-owned life insurance policies

34,625


34,382


34,131


33,892


33,654

Goodwill and other intangible assets

48,283


48,283


48,284


48,284


48,285

Other assets

37,221


38,486


39,161


38,216


42,041

Total assets

$    2,106,901


$    2,060,139


$    2,057,576


$    2,058,968


$    2,118,490

LIABILITIES AND SHAREHOLDERS' EQUITY










Liabilities










Demand deposits

$       421,493


$       412,193


$       413,272


$       428,505


$       445,043

Interest bearing demand deposits

376,592


338,329


349,401


320,737


363,558

Savings

600,150


603,328


639,491


628,079


628,795

Certificates of deposit

383,597


368,449


366,143


346,374


332,078

Total deposits

1,781,832


1,722,299


1,768,307


1,723,695


1,769,474

Short-term borrowings

52,434


44,194


42,998


46,801


52,330

Federal Home Loan Bank advances

15,000


45,000


—


40,000


65,000

Subordinated debt, net of unamortized issuance costs

29,402


29,380


29,357


29,335


29,312

Total borrowed funds

96,836


118,574


72,355


116,136


146,642











Other liabilities

15,248


17,017


16,240


16,735


17,251

Total liabilities

1,893,916


1,857,890


1,856,902


1,856,566


1,933,367

Shareholders' equity










Common stock

125,218


126,126


126,656


127,323


127,680

Shares to be issued for deferred compensation obligations

3,981


3,951


3,890


3,693


3,641

Retained earnings

101,065


99,808


98,318


97,282


95,533

Accumulated other comprehensive income (loss)

(17,279)


(27,636)


(28,190)


(25,896)


(41,731)

Total shareholders' equity

212,985


202,249


200,674


202,402


185,123

Total liabilities and shareholders' equity

$    2,106,901


$    2,060,139


$    2,057,576


$    2,058,968


$    2,118,490

B

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)



Nine Months Ended 

 September 30


2024


2023

Interest income




Loans

$         57,150


$         48,090

Available-for-sale securities

8,437


9,230

Federal Home Loan Bank stock

472


226

Federal funds sold and other

750


1,029

Total interest income

66,809


58,575

Interest expense




Deposits

22,107


11,953

Short-term borrowings

1,026


604

Federal Home Loan Bank advances

1,597


887

Subordinated debt, net of unamortized issuance costs

799


799

Total interest expense

25,529


14,243

Net interest income

41,280


44,332

Provision for credit losses

1,508


(55)

Net interest income after provision for credit losses

39,772


44,387

Noninterest income




Service charges and fees

6,333


6,085

Wealth management fees

2,990


2,625

Earnings on bank-owned life insurance policies

748


681

Net gain on sale of mortgage loans

138


232

Other

395


688

Total noninterest income

10,604


10,311

Noninterest expenses




Compensation and benefits

21,236


19,789

Occupancy and equipment

7,970


7,743

Other professional services

1,628


1,764

ATM and debit card fees

1,459


1,280

FDIC insurance premiums

823


689

Other

5,683


6,130

Total noninterest expenses

38,799


37,395

Income before income tax expense

11,577


17,303

Income tax expense

1,684


2,939

Net income

$           9,893


$         14,364

Earnings per common share




Basic

$              1.32


$              1.91

Diluted

1.32


1.89

Cash dividends per common share

0.84


0.84

C

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)



Three Months Ended


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

Interest income










Loans

$         20,230


$         18,863


$         18,057


$         17,580


$         17,270

Available-for-sale securities

2,749


2,804


2,884


2,926


2,963

Federal Home Loan Bank stock

168


158


146


129


91

Federal funds sold and other

194


263


293


421


161

Total interest income

23,341


22,088


21,380


21,056


20,485

Interest expense










Deposits

7,631


7,313


7,163


6,399


5,015

Short-term borrowings

384


321


321


357


284

Federal Home Loan Bank advances

571


638


388


422


617

Subordinated debt, net of unamortized issuance costs

267


266


266


266


267

Total interest expense

8,853


8,538


8,138


7,444


6,183

Net interest income

14,488


13,550


13,242


13,612


14,302

Provision for credit losses

946


170


392


684


(292)

Net interest income after provision for credit losses

13,542


13,380


12,850


12,928


14,594

Noninterest income










Service charges and fees

2,159


2,128


2,046


2,212


2,060

Wealth management fees

1,003


1,048


939


932


858

Earnings on bank-owned life insurance policies

252


253


243


239


229

Net gain on sale of mortgage loans

37


67


34


85


109

Other

77


112


206


48


158

Total noninterest income

3,528


3,608


3,468


3,516


3,414

Noninterest expenses










Compensation and benefits

7,251


6,970


7,015


6,116


6,639

Occupancy and equipment

2,645


2,619


2,706


2,554


2,535

Other professional services

588


527


513


576


672

ATM and debit card fees

503


487


469


487


471

FDIC insurance premiums

291


280


252


233


228

Other

1,950


2,012


1,721


1,949


2,113

Total noninterest expenses

13,228


12,895


12,676


11,915


12,658

Income before income tax expense

3,842


4,093


3,642


4,529


5,350

Income tax expense

561


612


511


726


937

Net income

$           3,281


$           3,481


$           3,131


$           3,803


$           4,413

Earnings per common share










Basic

$              0.44


$              0.47


$              0.42


$              0.51


$              0.59

Diluted

0.44


0.46


0.42


0.51


0.58

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, non-earning 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


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

INTEREST EARNING ASSETS









Loans (1)

5.73 %


5.52 %


5.38 %


5.20 %


5.17 %

Available-for-sale securities

2.21 %


2.24 %


2.26 %


2.23 %


2.23 %

Federal Home Loan Bank stock

5.24 %


4.98 %


4.60 %


4.04 %


2.83 %

Fed funds sold

5.55 %


5.51 %


5.72 %


5.71 %


5.47 %

Other

5.29 %


7.53 %


4.67 %


6.20 %


3.62 %

Total interest earning assets

4.77 %


4.61 %


4.47 %


4.35 %


4.27 %

INTEREST BEARING LIABILITIES










Interest bearing demand deposits

0.33 %


0.39 %


0.48 %


0.63 %


0.28 %

Savings

2.28 %


2.18 %


2.11 %


1.76 %


1.44 %

Certificates of deposit

4.13 %


4.01 %


3.84 %


3.60 %


3.20 %

Short-term borrowings

3.17 %


3.18 %


3.18 %


2.83 %


2.42 %

Federal Home Loan Bank advances

5.60 %


5.64 %


5.64 %


5.64 %


5.51 %

Subordinated debt, net of unamortized issuance costs

3.61 %


3.64 %


3.65 %


3.60 %


3.62 %

Total interest bearing liabilities

2.43 %


2.39 %


2.28 %


2.11 %


1.77 %

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

2.98 %


2.85 %


2.79 %


2.83 %


2.99 %











Net interest spread

2.34 %


2.22 %


2.19 %


2.24 %


2.50 %


(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


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

INTEREST EARNING ASSETS








Loans (1)

$      1,403,810


$      1,375,523


$      1,348,749


$      1,340,271


$      1,325,455

Available-for-sale securities (2)

536,379


545,827


557,030


564,068


572,038

Federal Home Loan Bank stock

12,762


12,762


12,762


12,762


12,762

Fed funds sold

4


7


7


13


13

Other (3)

14,597


14,054


25,210


26,823


17,638

Total interest earning assets

1,967,552


1,948,173


1,943,758


1,943,937


1,927,906

NONEARNING ASSETS










Allowance for credit losses

(13,125)


(13,431)


(13,100)


(12,780)


(12,937)

Cash and demand deposits due from banks

25,903


23,931


24,018


23,244


25,287

Premises and equipment

27,868


27,999


28,022


27,444


26,629

Other assets

87,002


80,539


84,059


71,592


74,244

Total assets

$      2,095,200


$    2,067,211


$      2,066,757


$      2,053,437


$      2,041,129

INTEREST BEARING LIABILITIES










Interest bearing demand deposits

$         358,383


$         342,931


$         345,842


$         317,996


$         342,175

Savings

599,679


613,601


633,904


634,539


595,372

Certificates of deposit

375,936


366,440


357,541


338,852


324,399

Short-term borrowings

48,151


40,593


40,623


50,049


46,574

Federal Home Loan Bank advances

40,588


45,510


27,692


29,674


44,429

Subordinated debt, net of unamortized issuance costs

29,388


29,365


29,342


29,320


29,298

Total interest bearing liabilities

1,452,125


1,438,440


1,434,944


1,400,430


1,382,247

NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY

Demand deposits

418,973


411,282


412,228


446,747


451,123

Other liabilities

15,658


16,755


16,151


17,302


16,802

Shareholders' equity

208,444


200,734


203,434


188,958


190,957

Total liabilities and shareholders' equity

$      2,095,200


$      2,067,211


$      2,066,757


$      2,053,437


$      2,041,129


(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:


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

NONPERFORMING ASSETS










Commercial and industrial

$             120


$             271


$             567


$             491


$               17

Commercial real estate

—


—


234


—


—

Agricultural

—


167


189


205


208

Residential real estate

427


556


293


286


295

Consumer

—


—


—


—


—

Total nonaccrual loans

547


994


1,283


982


520

Accruing loans past due 90 days or more

64


15


—


87


—

Total nonperforming loans

611


1,009


1,283


1,069


520

Foreclosed assets

546


629


579


406


509

Debt securities

12


12


12


12


77

Total nonperforming assets

$          1,169


$          1,650


$          1,874


$          1,487


$          1,106

Nonperforming loans to gross loans

0.04 %


0.07 %


0.09 %


0.08 %


0.04 %

Nonperforming assets to total assets

0.06 %


0.08 %


0.09 %


0.07 %


0.05 %

Allowance for credit losses as a % of nonaccrual loans

2,309.87 %


1,317.40 %


1,043.65 %


1,334.83 %


2,455.19 %

ALLOWANCE FOR CREDIT LOSSES










Allowance at beginning of period

$        13,095


$        13,390


$        13,108


$        12,767


$        12,833

Charge-offs

1,767


527


191


452


179

Recoveries

408


134


145


71


433

Net loan charge-offs (recoveries)

1,359


393


46


381


(254)

Provision for credit losses - loans

899


98


328


722


(320)

Allowance at end of period

$        12,635


$        13,095


$        13,390


$        13,108


$        12,767

Allowance for credit losses to gross loans

0.89 %


0.95 %


0.98 %


0.97 %


0.96 %

Reserve for unfunded commitments

498


450


379


315


352

Provision for credit losses - unfunded commitments

47


72


64


(38)


28

Reserve to unfunded commitments

0.15 %


0.14 %


0.11 %


0.10 %


0.11 %

NET LOAN CHARGE-OFFS (RECOVERIES)










Commercial and industrial

$               (6)


$             334


$               (2)


$             242


$             (41)

Commercial real estate

(318)


(29)


(6)


(3)


(3)

Agricultural

—


—


(2)


(6)


—

Residential real estate

(20)


(19)


(63)


(14)


(266)

Consumer

1,703


107


119


162


56

Total

$          1,359


$             393


$               46


$             381


$           (254)

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

0.39 %


0.11 %


0.01 %


0.11 %


(0.08) %

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

0.17 %


0.00 %


0.00 %


0.00 %


(0.03) %

DELINQUENT AND NONACCRUAL LOANS










Accruing loans 30-89 days past due

$          2,226


$          1,484


$          7,938


$          3,895


$             715

Accruing loans past due 90 days or more

64


15


—


87


—

Total accruing past due loans

2,290


1,499


7,938


3,982


715

Nonaccrual loans

547


994


1,283


982


520

Total past due and nonaccrual loans

$          2,837


$          2,493


$          9,221


$          4,964


$          1,235

G

CONSOLIDATED LOAN AND DEPOSIT ANALYSIS (UNAUDITED)

(Dollars in thousands)


Loan Analysis


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023


Annualized Growth %
Quarter to Date

Commercial and industrial

$       240,589


$       238,245


$       226,281


$       209,738


$       195,814


3.94 %

Commercial real estate

547,038


547,005


561,123


564,244


566,639


0.02 %

Advances to mortgage brokers

76,187


39,300


29,688


18,541


24,807


N/M

Agricultural

96,794


94,996


93,695


99,994


99,233


7.57 %

Total commercial loans

960,608


919,546


910,787


892,517


886,493


17.86 %

Residential real estate

369,846


365,188


356,658


356,418


348,196


5.10 %

Consumer

93,829


96,902


98,063


100,528


99,985


(12.68) %

Gross loans

$    1,424,283


$    1,381,636


$    1,365,508


$    1,349,463


$    1,334,674


12.35 %



Deposit Analysis


September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023


Annualized Growth %
Quarter to Date

Noninterest bearing demand deposits

$       421,493


$       412,193


$       413,272


$       428,505


$       445,043


9.02 %

Interest bearing demand deposits

376,592


338,329


349,401


320,737


363,558


45.24 %

Savings

600,150


603,328


639,491


628,079


628,795


(2.11) %

Certificates of deposit

383,597


368,449


366,143


346,374


332,078


16.45 %

Total deposits

$    1,781,832


$    1,722,299


$    1,768,307


$    1,723,695


$    1,769,474


13.83 %

H

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)




Three Months Ended



September 30
2024


June 30
2024


March 31
2024


December 31
2023


September 30
2023

Net income


$        3,281


$        3,481


$        3,131


$        3,803


$        4,413

Nonrecurring items:











Net gains on sale of available-for-sale securities


—


—


—


—


—

Net gains (losses) on foreclosed assets


4


6


69


8


75

Other


(1,622)


—


—


—


—

Income tax impact


340


(1)


(14)


(2)


(16)

Total nonrecurring items


(1,278)


5


55


6


59

Core net income

(A)

$        4,559


$        3,476


$        3,076


$        3,797


$        4,354












Noninterest expenses


$     13,228


$     12,895


$     12,676


$     11,915


$     12,658

Amortization of acquisition intangibles


—


1


—


1


—

Core noninterest expense

(B)

$     13,228


$     12,894


$     12,676


$     11,914


$     12,658












Net interest income


$     14,488


$     13,550


$     13,242


$     13,612


$     14,302

Tax equivalent adjustment for net interest margin


232


237


246


246


250

Net interest income (FTE)

(C)

14,720


13,787


13,488


13,858


14,552

Noninterest income


3,528


3,608


3,468


3,516


3,414

Tax equivalent adjustment for efficiency ratio


53


53


51


50


48

Core revenue (FTE)


18,301


17,448


17,007


17,424


18,014

Nonrecurring items











Net gains on sale of available-for-sale securities


—


—


—


—


—

Net gains (losses) on foreclosed assets


4


6


69


8


75

Total nonrecurring items


4


6


69


8


75

Core revenue

(D)

$     18,297


$     17,442


$     16,938


$     17,416


$     17,939

Efficiency ratio

(B/D)

72.30 %


73.93 %


74.84 %


68.41 %


70.56 %












Average earning assets

(E)

1,967,552


1,948,173


1,943,758


1,943,937


1,927,906

Net yield on interest earning assets (FTE)

(C/E)

2.98 %


2.85 %


2.79 %


2.83 %


2.99 %












Average assets

(F)

2,095,200


2,067,211


2,066,757


2,053,437


2,041,129

Average shareholders' equity

(G)

208,444


200,734


203,434


188,958


190,957

Average tangible shareholders' equity

(H)

160,161


152,451


155,150


140,674


142,672

Average diluted shares outstanding (1)

(I)

7,473,184


7,494,828


7,507,739


7,526,515


7,570,374












Core diluted earnings per share

(A/I)

$          0.61


$          0.46


$          0.41


$          0.50


$          0.58

Core return on average assets

(A/F)

0.87 %


0.68 %


0.60 %


0.73 %


0.85 %

Core return on average shareholders' equity

(A/G)

8.70 %


6.96 %


6.08 %


7.97 %


9.05 %

Core return on average tangible shareholders' equity

(A/H)

11.32 %


9.17 %


7.97 %


10.71 %


12.11 %


Whole shares (1)

I

SOURCE Isabella Bank Corporation