ISBA - Isabella Bank Corporation Announces First Quarter 2022 Earnings

April, 21 2022 07:17 PM Isabella Bank Corp

PR Newswire

Solid start to 2022 with net income of $4.7 million

MT. PLEASANT, Mich. , April 21, 2022 /PRNewswire/ -- Isabella Bank Corporation (the "Corporation") (OTCQX: ISBA) has released solid earnings results for the first quarter of 2022. The Corporation reported net income of $4.7 million and earnings per common share of $0.63 .

First quarter 2022 highlights include:

Net interest income improved, compared to first quarter 2021, as interest expense declined 39%.

Credit quality remained strong, with nonperforming loans representing only 0.06% of gross loans.

Deposits grew $53.8 million , or 3.1% compared to December 31, 2021, largely driven by new customer accounts.

Shareholders earned a cash dividend of $0.27 per share, with an annualized dividend yield of 4.18%, as of March 31, 2022.

"We have started the year with solid financial results for the first quarter," said Jae A. Evans , President & CEO. "As we look ahead, there are concerns about the impact inflation and events in other parts of the world may have on the financial services industry. However, as the Federal Reserve considers additional interest rate hikes throughout 2022 and beyond, we expect the yield on loans and investments to rise, enhancing the Bank's net interest margin.

"Amidst this uncertainty, our longstanding focus remains the same - invest in our communities, and in advanced technology that enhances the customer experience while actively pursuing strategies that reward our shareholders with an attractive dividend," Evans added.

Operating Results

Net income: Net income for the first quarter 2022 was $4.7 million , compared to $5.4 million in the first quarter of 2021, largely as the result of changes in loan provision and mortgage originations, as described below.

Net interest income: Net interest income for first quarter 2022 increased $278,000 compared to the same period in 2021. While interest income declined $528,000 due to low interest rates and a decrease in the Paycheck Protection Program fee income, interest expense also decreased $806,000 , or 38.6%, largely due to a reduction in higher-cost borrowings over the last year. During the first quarter, a $37,000 provision for loan losses expense was recorded, compared to a $523,000 provision reversal in the first quarter 2021 as our initial concerns over potential credit quality issues related to the onset of the pandemic did not materialize.

Noninterest income and expenses: Noninterest income increased $15,000 during the first quarter of 2022, compared to the same period in 2021. A $514,000 increase in service charges and fees nearly offset a $521,000 reduction in gain on sale of loans as residential mortgage originations declined by over 60%. Noninterest expenses for the first quarter increased $503,000 , as a result of increased compensation and professional services as well as donations and community relations expenses as charitable organizations resumed activities and events.

Net yield on interest earning assets: The Corporation's fully taxable equivalent net yield on interest earning assets was 2.86% for the first quarter of 2022, flat with the fourth quarter of 2021 and down from 2.98% compared to the same period in 2021. As rates began to decline in 2020, the implementation of strategic programs focused on improving the net yield, which included enhanced loan pricing and a reduced reliance on higher-cost borrowed funds and brokered deposits as funding sources, helped to minimize further declines in our net interest margin. If rates rise as expected, margin improvement is likely.

Balance Sheet

Assets: The Corporation had $2.1 billion in total assets and $2.8 billion of assets under management as of March 31, 2022. Managed assets included loans sold and serviced of $275.6 million and $501.8 million in investment and trust assets managed by Isabella Wealth.

Loans: Loans outstanding as of March 31, 2022 total $1.2 billion . During the first quarter, gross loans declined $82.7 million , largely driven by a $72 million reduction in advances to mortgage brokers, which is included within the commercial loan portfolio.

Deposits: Total deposits climbed to $1.8 billion as of March 31, 2022, an increase of $53.8 million , or 3.1%, since December 31, 2021. Growth in the first quarter is largely the result of new customer accounts.

Capital: The Bank is considered a "well-capitalized" institution, as its capital ratios exceeded the minimum designated requirements. As of March 31, 2022, the Bank's Tier 1 Leverage Ratio was 8.74%, Tier 1 Capital Ratio was 13.83% and Total Capital Ratio was 14.56%. The minimum requirements to be considered well capitalized are a Tier 1 Leverage Ratio of 5.0%, Tier 1 Capital Ratio of 8.0% and Total Capital Ratio of 10.0%.

Dividend: During the first quarter of 2022, the Corporation paid a $0.27 per common share cash dividend. Based on the Corporation's closing stock price of $25.85 as of March 31, 2022, the annualized cash dividend yield was 4.18%.

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 the local banking needs of its customers and communities for 119 years. The Bank offers personal and commercial lending and deposit products, as well as investment, trust, and estate planning services through Isabella Wealth. The Bank has locations throughout seven Mid-Michigan counties: Clare , Gratiot , Isabella, Mecosta , Midland , Montcalm , and Saginaw .

For more information about Isabella Bank Corporation, visit the investors 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 market maker is Boenning & Scattergood, Inc. ( www.boenninginc.com ) and its investor relations firm is Renmark Financial Communications, Inc. ( www.renmarkfinancial.com ).

Forward-Looking Statements

This press release includes forward-looking statements. To the extent that the foregoing information refers to matters that may occur in the future, please be aware that such forward-looking statements may differ materially from the actual results. Additional information concerning some of the factors that could cause materially different results is included in the sections titled "Risk Factors" and "Forward Looking Statements" set forth in Isabella Bank Corporation's filings with the Securities and Exchange Commission, which are available from the Securities and Exchange Commission's Public Reference facilities and from its website at www.sec.gov .

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)


March 31 2022

December 31 2021
ASSETS



Cash and cash equivalents



Cash and demand deposits due from banks
18,611

25,563
Interest bearing balances due from banks
142,575

79,767
Total cash and cash equivalents
161,186

105,330
Available-for-sale securities, at fair value
544,919

490,601
Mortgage loans available-for-sale
969

1,735
Loans



Commercial
727,614

807,439
Agricultural
88,169

93,955
Residential real estate
328,559

326,361
Consumer
74,029

73,282
Gross loans
1,218,371

1,301,037
Less allowance for loan and lease losses
9,204

9,103
Net loans
1,209,167

1,291,934
Premises and equipment
24,339

24,419
Corporate owned life insurance policies
32,341

32,472
Equity securities without readily determinable fair values
15,095

17,383
Goodwill and other intangible assets
48,298

48,302
Accrued interest receivable and other assets
24,619

19,982
TOTAL ASSETS
2,060,933

2,032,158
LIABILITIES AND SHAREHOLDERS' EQUITY



Deposits



Noninterest bearing
461,473

448,352
Interest bearing demand deposits
387,187

364,563
Certificates of deposit under $250 and other savings
843,341

818,841
Certificates of deposit over $250
72,160

78,583
Total deposits
1,764,161

1,710,339
Borrowed funds



Federal funds purchased and repurchase agreements
51,353

50,162
FHLB advances
10,000

20,000
Subordinated debt, net of unamortized issuance costs
29,181

29,158
Total borrowed funds
90,534

99,320
Accrued interest payable and other liabilities
10,396

11,451
Total liabilities
1,865,091

1,821,110
Shareholders' equity



Common stock — no par value 15,000,000 shares authorized; issued and outstanding 7,542,758 shares (including 111,482 shares held in the Rabbi Trust) in 2022 and 7,532,641 shares (including 105,654 shares held in the Rabbi Trust) in 2021
129,189

129,052
Shares to be issued for deferred compensation obligations
4,691

4,545
Retained earnings
78,295

75,592
Accumulated other comprehensive income (loss)
(16,333)

1,859
Total shareholders' equity
195,842

211,048
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
2,060,933

2,032,158

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


Three Months Ended March 31

2022

2021
Interest income



Loans, including fees
12,378

13,097
Available-for-sale securities



Taxable
1,615

1,165
Nontaxable
660

865
Federal funds sold and other
109

163
Total interest income
14,762

15,290
Interest expense



Deposits
936

1,668
Borrowings



Federal funds purchased and repurchase agreements
9

16
FHLB advances
72

405
Subordinated debt, net of unamortized issuance costs
266

—
Total interest expense
1,283

2,089
Net interest income
13,479

13,201
Provision for loan losses
37

(523)
Net interest income after provision for loan losses
13,442

13,724
Noninterest income



Service charges and fees
2,209

1,695
Wealth management fees
754

696
Net gain on sale of mortgage loans
224

745
Earnings on corporate owned life insurance policies
210

186
Gains from redemption of corporate owned life insurance policies
52

146
Other
98

64
Total noninterest income
3,547

3,532
Noninterest expenses



Compensation and benefits
6,074

5,877
Furniture and equipment
1,450

1,373
Occupancy
966

945
Other
2,830

2,622
Total noninterest expenses
11,320

10,817
Income before federal income tax expense
5,669

6,439
Federal income tax expense
935

1,041
NET INCOME
4,734

5,398
Earnings per common share



Basic
0.63

0.68
Diluted
0.62

0.67
Cash dividends per common share
0.27

0.27

AVERAGE BALANCES, INTEREST RATE, AND NET INTEREST INCOME (UNAUDITED)
(Dollars in thousands)

The following schedules present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. These schedules also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a fully taxable equivalent (FTE) basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) restricted equity holdings are included in other interest earning assets.


Three Months Ended

March 31, 2022

March 31, 2021

Average Balance

Tax Equivalent Interest

Average Yield / Rate

Average Balance

Tax Equivalent Interest

Average Yield / Rate
INTEREST EARNING ASSETS











Loans
1,235,788

12,378

4.01 %

1,201,693

13,097

4.36 %
Taxable investment securities
421,503

1,615

1.53 %

190,450

1,165

2.45 %
Nontaxable investment securities
101,604

920

3.62 %

131,850

1,194

3.62 %
Fed funds sold
3

—

0.06 %

2

—

0.01 %
Other
163,353

109

0.27 %

295,104

163

0.22 %
Total earning assets
1,922,251

15,022

3.13 %

1,819,099

15,619

3.43 %
NONEARNING ASSETS











Allowance for loan losses
(9,128)





(9,833)




Cash and demand deposits due from banks
26,839





28,944




Premises and equipment
24,461





25,151




Accrued income and other assets
102,805





113,101




Total assets
2,067,228





1,976,462
















INTEREST BEARING LIABILITIES











Interest bearing demand deposits
383,474

50

0.05 %

315,189

77

0.10 %
Savings deposits
615,335

159

0.10 %

531,302

149

0.11 %
Time deposits
290,146

727

1.00 %

367,892

1,442

1.57 %
Federal funds purchased and repurchase agreements
49,058

9

0.07 %

54,145

16

0.12 %
FHLB advances
14,889

72

1.93 %

90,000

405

1.80 %
Subordinated debt, net of unamortized issuance costs
29,166

266

3.65 %

—

—

— %
Total interest bearing liabilities
1,382,068

1,283

0.37 %

1,358,528

2,089

0.62 %
NONINTEREST BEARING LIABILITIES











Demand deposits
458,343





383,189




Other
16,898





13,910




Shareholders' equity
209,919





220,835




Total liabilities and shareholders' equity
2,067,228





1,976,462




Net interest income (FTE)


13,739





13,530


Net yield on interest earning assets (FTE)




2.86 %





2.98 %

SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in thousands except per share amounts)


Three Months Ended

March 31 2022

March 31 2021

March 31 2020
PER SHARE





Basic earnings
0.63

0.68

0.39
Diluted earnings
0.62

0.67

0.38
Dividends
0.27

0.27

0.27
Tangible book value
19.56

21.35

21.10
Quoted market value





High
26.00

22.50

24.50
Low
24.50

19.45

16.00
Close ⁽¹⁾
25.85

21.75

18.00
Common shares outstanding ⁽¹⁾
7,542,758

7,958,883

7,921,291
Average number of common shares outstanding
7,533,711

7,969,462

7,892,421
Average number of diluted common shares outstanding
7,639,688

8,088,524

8,055,607
PERFORMANCE RATIOS





Return on average total assets
0.92 %

1.09 %

0.68 %
Return on average shareholders' equity
9.02 %

9.78 %

5.68 %
Return on average tangible shareholders' equity
11.72 %

12.53 %

7.35 %
Net interest margin yield (FTE)
2.86 %

2.98 %

2.98 %
ASSETS UNDER MANAGEMENT ⁽¹⁾





Loans sold with servicing retained
275,556

298,514

257,285
Assets managed by Isabella Wealth
501,829

454,459

359,968
Total assets under management
2,838,318

2,768,405

2,433,157
ASSET QUALITY ⁽¹⁾





Nonaccrual status loans
747

4,532

6,913
Performing troubled debt restructurings
22,335

28,947

20,228
Foreclosed assets
187

384

564
Net loan charge-offs (recoveries)
(64)

(50)

30
Nonperforming loans to gross loans
0.06 %

0.38 %

0.59 %
Nonperforming assets to total assets
0.05 %

0.26 %

0.43 %
Allowance for loan and lease losses to gross loans
0.76 %

0.78 %

0.74 %
CAPITAL RATIOS ⁽¹⁾





Shareholders' equity to assets
9.50 %

10.83 %

11.87 %
Tier 1 leverage
8.12 %

8.56 %

9.09 %
Common equity tier 1 capital
12.83 %

13.77 %

12.72 %
Tier 1 risk-based capital
12.83 %

13.77 %

12.72 %
Total risk-based capital
15.84 %

14.54 %

13.41 %

⁽¹⁾ At end of period

SUPPLEMENTAL BALANCE SHEET DATA (UNAUDITED)
(Dollars in thousands)


March 31 2022

December 31 2021

September 30 2021

June 30 2021

March 31 2021
Commercial
727,614

807,439

757,993

723,888

725,540
Agricultural
88,169

93,955

93,782

95,197

91,629
Residential real estate
328,559

326,361

321,620

312,567

305,909
Consumer
74,029

73,282

75,163

75,011

72,840
Gross loans
1,218,371

1,301,037

1,248,558

1,206,663

1,195,918


March 31 2022

December 31 2021

September 30 2021

June 30 2021

March 31 2021
Noninterest bearing demand deposits
461,473

448,352

430,950

428,410

404,710
Interest bearing demand deposits
387,187

364,563

374,137

326,971

328,440
Savings deposits
635,195

596,662

572,136

549,134

555,688
Certificates of deposit
279,708

297,696

312,027

326,214

331,413
Brokered certificates of deposit
—

—

—

—

14,029
Internet certificates of deposit
598

3,066

3,066

5,777

9,301
Total deposits
1,764,161

1,710,339

1,692,316

1,636,506

1,643,581


March 31 2022

December 31 2021

September 30 2021

June 30 2021

March 31 2021
U.S. Treasury
218,268

209,703

192,069

132,593

29,371
States and political subdivisions
114,015

121,205

128,689

130,960

140,329
Auction rate money market preferred
2,867

3,242

3,246

3,260

3,224
Mortgage-backed securities
49,578

56,148

62,030

68,155

75,835
Collateralized mortgage obligations
152,441

92,301

100,767

109,294

116,865
Corporate
7,750

8,002

7,583

4,192

1,700
Available-for-sale securities, at fair value
544,919

490,601

494,384

448,454

367,324


March 31 2022

December 31 2021

September 30 2021

June 30 2021

March 31 2021
Securities sold under agreements to repurchase without stated maturity dates
51,353

50,162

67,519

62,274

51,967
FHLB advances
10,000

20,000

60,000

70,000

90,000
Subordinated debt, net of unamortized issuance costs
29,181

29,158

29,136

29,121

—
Total borrowed funds
90,534

99,320

156,655

161,395

141,967

SUPPLEMENTAL STATEMENTS OF INCOME DATA (UNAUDITED)
(Dollars in thousands)


Three Months Ended March 31

2022

2021
Service charges and fees



ATM and debit card fees
1,093

999
Service charges and fees on deposit accounts
609

436
Net OMSR income (loss)
264

(32)
Freddie Mac servicing fee
171

214
Other fees for customer services
72

78
Total service charges and fees
2,209

1,695
Wealth management fees
754

696
Net gain on sale of mortgage loans
224

745
Earnings on corporate owned life insurance policies
210

186
Gains from redemption of corporate owned life insurance policies
52

146
Other
98

64
Total noninterest income
3,547

3,532


Three Months Ended March 31

2022

2021
Compensation and benefits
6,074

5,877
Furniture and equipment
1,450

1,373
Occupancy
966

945
Other



Audit, consulting, and legal fees
549

436
ATM and debit card fees
434

417
Donations and community relations
287

146
Marketing costs
239

209
Memberships and subscriptions
217

211
Director fees
201

159
Loan underwriting fees
182

190
FDIC insurance premiums
125

231
All other
596

623
Total other noninterest expenses
2,830

2,622
Total noninterest expenses
11,320

10,817

SOURCE Isabella Bank Corporation

Company Name:	Isabella Bank Corp
Stock Symbol:	ISBA
Market:	OTC
Website:	isabellabank.com

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