Isabella Bank Corporation Reports Third Quarter 2024 Results

Rhea-AI Summary

Isabella Bank (ISBA) reported Q3 2024 net income of $3.3 million ($0.44 per diluted share), down from $4.4 million ($0.58 per diluted share) in Q3 2023. Core earnings reached $4.6 million ($0.61 per diluted share). The quarter saw 12% annualized loan growth and 14% annualized deposit growth. Total assets grew $46.8 million to $2.1 billion, with total loans increasing $42.6 million to $1.42 billion. Net interest margin was 2.98%. The quarter included a $1.6 million charge related to overdrawn deposit accounts from a customer, offset by the recovery of two previously charged-off commercial loans.

Positive

• Core earnings increased 31% over Q2 2024
• Loan growth of 12% annualized
• Deposit growth of 14% annualized
• Recovery of two previously charged-off commercial loans totaling $314,000
• Wealth management income increased 17% due to higher assets under management
• Strong credit quality with nonaccrual loans to total loans ratio of 0.04%

Negative

• Net income decreased to $3.3 million from $4.4 million in Q3 2023
• $1.6 million charge from overdrawn deposit accounts
• Net unrealized losses on securities of $21 million
• Higher noninterest expenses, up from $12.7 million to $13.2 million YoY
• Cost of interest-bearing liabilities increased to 2.43% from 1.77% YoY

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

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SOURCE Isabella Bank Corporation

FAQ

What was Isabella Bank's (ISBA) net income for Q3 2024?

Isabella Bank reported net income of $3.3 million ($0.44 per diluted share) for Q3 2024.

What was ISBA's loan growth rate in Q3 2024?

Isabella Bank achieved a 12% annualized loan growth rate in Q3 2024.

What was Isabella Bank's (ISBA) net interest margin in Q3 2024?

Isabella Bank's net interest margin was 2.98% in Q3 2024.

How much did ISBA's total assets grow in Q3 2024?

Isabella Bank's total assets grew by $46.8 million to $2.1 billion in Q3 2024.