Isabella Bank Corporation Announces Fourth Quarter and 2023 Earnings
Continued growth in loans, Isabella Wealth; outpaced by continued interest rate pressure
MT. PLEASANT, Mich., Feb. 16, 2024 /PRNewswire/ — Isabella Bank Corporation (the “Corporation”) (OTCQX: ISBA) reported fourth quarter and year-end 2023 earnings, demonstrating resilience during a year buffeted by rising interest rates on deposit accounts. Net income for the fourth quarter was $3.8 million and $18.2 million for the year ended December 31, 2023. Earnings per common share were $0.51 in the fourth quarter and $2.42 for the year.
Among the 2023 highlights:
Gross loans increased more than $85 million, or 7%.Isabella Wealth assets grew 25% to $641 million, leading to an increase in wealth management fees of $552,000, or 18%, over 2022.Interest income increased $13.8 million, or 21%, over 2022, offset by an increase in interest expense of $16.4 million.Shareholders earned a cash dividend of $1.12 per share in 2023, with an annualized dividend yield of 5.21%.
“Our 2023 financial results demonstrate Isabella Bank’s ability to come out of a tough year still delivering strong results for shareholders,” said Jerome E. Schwind, President and Chief Executive Officer. “Our liquidity and capital ratios remain strong and we delivered results against our strategic plan based on our strength in the marketplace.
“We continued to grow our footprint — including adding our eighth mid-Michigan county — and customers continued to turn to Isabella Bank, driving our growth in loans and our wealth management business,” he added.
Operating Results
Net income: Net income for the fourth quarter of 2023 was $3.8 million, a decrease of $2.5 million compared to the same period in 2022. For the year ended December 31, 2023, net income was $18.2 million, compared to $22.2 million in 2022. The declines were driven by a rise in interest expense resulting largely from increased interest rates on deposit accounts.
Net interest income, fourth quarter 2023: Net interest income for the fourth quarter 2023 declined $2.7 million, or 16%, compared to the fourth quarter of 2022. Interest income increased $3.1 million, or 17.5%, driven by core loan growth, while continued interest rate pressure was the primary cause of a $5.8 million increase in interest expense over the same period in 2022.
Net interest income, year-end 2023: Net interest income for the year ended December 31, 2023 decreased $2.5 million, or 4.2%, compared to 2022. Rising interest rates and growth in core loans led to a $13.8 million, or 21%, increase in gross interest income during 2023, compared to 2022. At the same time, rising interest rates on deposits and an increase in borrowings led to a $16.4 million increase in interest expense for 2023, compared to 2022.
Noninterest income and expenses, fourth quarter 2023: Noninterest income increased $244,000 compared to the fourth quarter of 2022, primarily driven by wealth management fees and ATM and debit card income. Noninterest expenses for the quarter were essentially unchanged in comparison to the fourth quarter of 2022.
Noninterest income and expenses, year-end 2023: Noninterest income for the year ended December 31, 2023 increased $161,000 compared to 2022. The increase was driven by wealth management fees and ATM and debit card fee income, offset by a decrease in mortgage servicing rights and gain on sale of loans, as residential mortgages sold to the secondary market declined. Noninterest expense increased $2.5 million compared to 2022, primarily the result of increased compensation, equipment expense, other losses, and FDIC insurance premiums.
Net yield on interest earning assets: The Corporation’s fully taxable equivalent net yield on interest earning assets was 2.85% and 3.05% for the fourth quarter and year ended December 31, 2023, respectively, compared to 3.43% and 3.18% for the same periods in 2022. To maintain a competitive edge in the rising interest rate environment, rates on several deposit products began to increase in the fourth quarter of 2022 and continued throughout 2023. Over the last year, the level of borrowings increased to fund loan growth. These factors have negatively impacted the net yield on interest earning assets slowing its rate of growth.
Balance Sheet
Assets: Total assets were $2.06 billion and assets under management were $2.95 billion as of December 31, 2023. Managed assets included loans sold and serviced of $249 million as well as $641 million in investment and trust assets managed by our wealth business.
Loans: Loans outstanding as of December 31, 2023 totaled $1.35 billion, growing $85.3 million since December 31, 2022. Credit quality remained strong, as evidenced by total past due and nonaccrual loans which were 0.37% of gross loans as of December 31, 2023.
Deposits: Deposits were $1.72 billion as of December 31, 2023, declining $20.6 million, or 1.2%, since December 31, 2022. A decline in demand deposits was driven by contraction in money supply as the Federal Reserve Bank pulled money out of the banking system.
Capital: The Bank continues to be considered a “well-capitalized” institution, as its capital ratios exceeded the minimum designated requirements. As of December 31, 2023, the Bank’s Tier 1 Leverage Ratio was 8.71%, Tier 1 Capital Ratio was 12.48% and Total Capital Ratio was 13.42%, compared to minimum requirements to be considered well capitalized of 5.0%, 8.0% and 10.0%, respectively.
Dividend: The Corporation paid a $0.28 per common share cash dividend for the fourth quarter of 2023. Total cash dividends paid for the year ended December 31, 2023 totaled $1.12, a 2.75% increase over dividends paid in 2022. Based on the Corporation’s closing stock price of $21.50 as of December 29, 2023, the annualized cash dividend yield was 5.21%.
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
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)
December 31
2023
December 31
2022
ASSETS
Cash and cash equivalents
Cash and demand deposits due from banks
$ 25,628
$ 27,420
Fed Funds sold and interest bearing balances due from banks
8,044
11,504
Total cash and cash equivalents
33,672
38,924
Available-for-sale securities, at fair value
528,148
580,481
Mortgage loans available-for-sale
—
379
Loans
1,349,463
1,264,173
Less allowance for credit losses
13,108
9,850
Net loans
1,336,355
1,254,323
Premises and equipment
27,639
25,553
Corporate owned life insurance policies
33,892
32,988
Equity securities without readily determinable fair values
15,848
15,746
Goodwill and other intangible assets
48,284
48,287
Accrued interest receivable and other assets
35,130
33,586
TOTAL ASSETS
$ 2,058,968
$ 2,030,267
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest bearing
$ 428,505
$ 494,346
Interest bearing demand deposits
320,737
372,155
Certificates of deposit under $250 and other savings
857,768
810,642
Certificates of deposit over $250
116,685
67,132
Total deposits
1,723,695
1,744,275
Borrowed funds
Federal funds purchased and repurchase agreements
46,801
57,771
Federal Home Loan Bank advances
40,000
—
Subordinated debt, net of unamortized issuance costs
29,335
29,245
Total borrowed funds
116,136
87,016
Accrued interest payable and other liabilities
16,735
12,766
Total liabilities
1,856,566
1,844,057
Shareholders’ equity
Common stock — no par value 15,000,000 shares authorized; issued and outstanding
7,485,889 shares (including 150,581 shares held in the Rabbi Trust) in 2023 and
7,559,421 shares (including 154,879 shares held in the Rabbi Trust) in 2022
127,323
128,651
Shares to be issued for deferred compensation obligations
3,693
5,005
Retained earnings
97,282
89,748
Accumulated other comprehensive income (loss)
(25,896)
(37,194)
Total shareholders’ equity
202,402
186,210
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$ 2,058,968
$ 2,030,267
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
2023
2022
Interest income
Loans, including fees
$ 17,580
$ 14,163
$ 65,670
$ 53,283
Available-for-sale securities
Taxable
2,303
2,512
9,514
8,363
Nontaxable
623
718
2,642
2,808
Federal funds sold and other
550
522
1,805
1,344
Total interest income
21,056
17,915
79,631
65,798
Interest expense
Deposits
6,399
1,323
18,352
4,021
Borrowings
Federal funds purchased and repurchase agreements
357
53
961
79
Federal Home Loan Bank advances
422
—
1,309
152
Subordinated debt, net of unamortized issuance costs
266
267
1,065
1,065
Total interest expense
7,444
1,643
21,687
5,317
Net interest income
13,612
16,272
57,944
60,481
Provision for credit losses
684
(57)
629
483
Net interest income after provision for credit losses
12,928
16,329
57,315
59,998
Noninterest income
Service charges and fees
2,212
2,115
8,297
8,730
Wealth management fees
932
788
3,557
3,005
Earnings on corporate owned life insurance policies
239
229
920
884
Net gain on sale of mortgage loans
85
63
317
631
Other
48
77
736
416
Total noninterest income
3,516
3,272
13,827
13,666
Noninterest expenses
Compensation and benefits
6,116
6,407
25,905
24,887
Furniture and equipment
1,697
1,624
6,519
6,006
Occupancy
857
878
3,778
3,691
Other
3,245
3,013
13,108
12,236
Total noninterest expenses
11,915
11,922
49,310
46,820
Income before federal income tax expense
4,529
7,679
21,832
26,844
Federal income tax expense
726
1,357
3,665
4,606
NET INCOME
$ 3,803
$ 6,322
$ 18,167
$ 22,238
Earnings per common share
Basic
$ 0.51
$ 0.84
$ 2.42
$ 2.95
Diluted
$ 0.51
$ 0.83
$ 2.40
$ 2.91
Cash dividends per common share
$ 0.28
$ 0.28
$ 1.12
$ 1.09
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
December 31, 2023
December 31, 2022
Average
Balance
Tax
Equivalent
Interest
Average
Yield /
Rate
Average
Balance
Tax
Equivalent
Interest
Average
Yield /
Rate
INTEREST EARNING ASSETS
Loans (1)
$ 1,340,271
$ 17,580
5.25 %
$ 1,244,972
$ 14,163
4.55 %
Taxable investment securities
473,660
2,274
1.92 %
520,139
2,499
1.92 %
Nontaxable investment securities
90,408
899
3.98 %
107,508
999
3.72 %
Fed funds sold
13
—
5.76 %
14
—
4.00 %
Other
39,585
549
5.55 %
56,142
522
3.72 %
Total earning assets
1,943,937
21,302
4.38 %
1,928,775
18,183
3.77 %
NONEARNING ASSETS
Allowance for credit losses
(12,780)
(9,792)
Cash and demand deposits due from banks
23,244
24,312
Premises and equipment
27,444
25,382
Accrued income and other assets
71,592
63,553
Total assets
$ 2,053,437
$ 2,032,230
INTEREST BEARING LIABILITIES
Interest bearing demand deposits
$ 317,996
$ 504
0.63 %
$ 358,809
$ 104
0.12 %
Savings deposits
634,539
2,819
1.78 %
635,771
535
0.34 %
Time deposits
338,852
3,076
3.63 %
254,604
684
1.07 %
Federal funds purchased and repurchase agreements
50,049
357
2.85 %
55,478
53
0.38 %
Federal Home Loan Bank advances
29,674
422
5.69 %
—
—
— %
Subordinated debt, net of unamortized issuance costs
29,320
266
3.63 %
29,233
267
3.65 %
Total interest bearing liabilities
1,400,430
7,444
2.13 %
1,333,895
1,643
0.49 %
NONINTEREST BEARING LIABILITIES
Demand deposits
446,747
504,791
Other
17,302
13,103
Shareholders’ equity
188,958
180,441
Total liabilities and shareholders’ equity
$ 2,053,437
$ 2,032,230
Net interest income (FTE)
$ 13,858
$ 16,540
Net yield on interest earning assets (FTE)
2.85 %
3.43 %
(1) Includes loans and mortgage loans available-for-sale
Year Ended
December 31, 2023
December 31, 2022
Average
Balance
Tax
Equivalent
Interest
Average
Yield /
Rate
Average
Balance
Tax
Equivalent
Interest
Average
Yield /
Rate
INTEREST EARNING ASSETS
Loans (1)
$ 1,308,891
$ 65,670
5.02 %
$ 1,249,634
$ 53,283
4.26 %
Taxable investment securities
485,718
9,399
1.94 %
477,159
8,294
1.74 %
Nontaxable investment securities
96,845
3,780
3.90 %
107,158
3,933
3.67 %
Fed funds sold
12
1
5.04 %
10
—
2.42 %
Other
41,965
1,804
4.30 %
99,301
1,344
1.35 %
Total earning assets
1,933,431
80,654
4.17 %
1,933,262
66,854
3.46 %
NONEARNING ASSETS
Allowance for credit losses
(12,784)
(9,477)
Cash and demand deposits due from banks
24,592
24,708
Premises and equipment
26,589
24,648
Accrued income and other assets
74,319
81,823
Total assets
$ 2,046,147
$ 2,054,964
INTEREST BEARING LIABILITIES
Interest bearing demand deposits
$ 346,875
$ 1,086
0.31 %
$ 374,623
$ 274
0.07 %
Savings deposits
626,027
8,290
1.32 %
630,574
1,135
0.18 %
Time deposits
308,699
8,976
2.91 %
270,296
2,612
0.97 %
Federal funds purchased and repurchase agreements
43,061
961
2.23 %
49,974
79
0.16 %
Federal Home Loan Bank advances
23,699
1,309
5.52 %
7,863
152
1.93 %
Subordinated debt, net of unamortized issuance costs
29,287
1,065
3.64 %
29,200
1,065
3.65 %
Total interest bearing liabilities
1,377,648
21,687
1.57 %
1,362,530
5,317
0.39 %
NONINTEREST BEARING LIABILITIES
Demand deposits
461,689
482,781
Other
16,043
14,695
Shareholders’ equity
190,767
194,958
Total liabilities and shareholders’ equity
$ 2,046,147
$ 2,054,964
Net interest income (FTE)
$ 58,967
$ 61,537
Net yield on interest earning assets (FTE)
3.05 %
3.18 %
(1) Includes loans and mortgage loans available-for-sale
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in thousands except per share amounts)
Year Ended
December 31
2023
December 31
2022
December 31
2021
PER SHARE
Basic earnings
$ 2.42
$ 2.95
$ 2.48
Diluted earnings
$ 2.40
$ 2.91
$ 2.45
Dividends
$ 1.12
$ 1.09
$ 1.08
Tangible book value
$ 20.59
$ 18.25
$ 21.61
Quoted market value
High
$ 26.00
$ 26.25
$ 29.00
Low
$ 19.13
$ 21.00
$ 19.45
Close (1)
$ 21.50
$ 23.50
$ 25.50
Common shares outstanding (1)
7,485,889
7,559,421
7,532,641
Average number of common shares outstanding
7,511,591
7,549,878
7,853,398
Average number of diluted common shares outstanding
7,575,492
7,647,612
7,965,961
PERFORMANCE RATIOS
Return on average total assets
0.89 %
1.08 %
0.96 %
Return on average shareholders’ equity
9.52 %
11.41 %
8.83 %
Return on average tangible shareholders’ equity
12.75 %
15.17 %
11.31 %
Net interest margin yield (FTE)
3.05 %
3.18 %
2.87 %
ASSETS UNDER MANAGEMENT (1)
Loans sold with servicing retained
$ 248,756
$ 264,206
$ 278,844
Assets managed by Isabella Wealth
$ 641,027
$ 513,918
$ 516,243
Total assets under management
$ 2,948,751
$ 2,808,391
$ 2,827,245
ASSET QUALITY (1)
Nonaccrual loans
$ 982
$ 457
$ 1,245
Foreclosed assets
$ 406
$ 439
$ 211
Net loan charge-offs (recoveries)
$ 115
$ (264)
$ 123
Nonperforming loans to gross loans
0.08 %
0.04 %
0.10 %
Nonperforming assets to total assets
0.07 %
0.05 %
0.08 %
Allowance for credit losses to gross loans
0.97 %
0.78 %
0.70 %
CAPITAL RATIOS (1)
Shareholders’ equity to assets
9.83 %
9.17 %
10.39 %
Tier 1 leverage
8.76 %
8.61 %
7.97 %
Common equity tier 1 capital
12.54 %
12.91 %
12.07 %
Tier 1 risk-based capital
12.54 %
12.91 %
12.07 %
Total risk-based capital
15.52 %
15.79 %
14.94 %
(1) At end of period
SUPPLEMENTAL BALANCE SHEET DATA (UNAUDITED)
(Dollars in thousands)
December 31
2023
September 30
2023
June 30
2023
March 31
2023
December 31
2022
Commercial and industrial
$ 209,738
$ 195,814
$ 194,914
$ 189,185
$ 178,428
Commercial real estate
564,244
566,639
564,254
566,410
566,012
Advances to mortgage brokers
18,541
24,807
39,099
—
—
Agricultural
99,994
99,233
96,689
94,760
104,985
Residential real estate
356,418
348,196
343,474
336,186
336,694
Consumer
100,528
99,985
95,972
84,110
78,054
Gross loans
$ 1,349,463
$ 1,334,674
$ 1,334,402
$ 1,270,651
$ 1,264,173
December 31
2023
September 30
2023
June 30
2023
March 31
2023
December 31
2022
Noninterest bearing demand deposits
$ 428,505
$ 445,043
$ 458,845
$ 478,829
$ 494,346
Interest bearing demand deposits
320,737
363,558
335,922
383,602
372,155
Savings deposits
628,079
628,795
606,644
662,495
625,734
Certificates of deposit
346,125
331,829
313,288
288,103
251,541
Internet certificates of deposit
249
249
249
499
499
Total deposits
$ 1,723,695
$ 1,769,474
$ 1,714,948
$ 1,813,528
$ 1,744,275
December 31
2023
September 30
2023
June 30
2023
March 31
2023
December 31
2022
U.S. Treasury
$ 214,801
$ 209,182
$ 209,353
$ 212,086
$ 208,701
States and political subdivisions
92,876
89,773
95,242
108,719
117,512
Auction rate money market preferred
2,931
2,570
2,637
2,716
2,342
Mortgage-backed securities
32,815
32,923
35,532
37,797
39,070
Collateralized mortgage obligations
177,775
175,630
180,996
200,252
205,728
Corporate
6,950
6,819
6,737
7,080
7,128
Available-for-sale securities, at fair value
$ 528,148
$ 516,897
$ 530,497
$ 568,650
$ 580,481
December 31
2023
September 30
2023
June 30
2023
March 31
2023
December 31
2022
Securities sold under agreements to
repurchase without stated maturity dates
$ 46,801
$ 52,330
$ 37,102
$ 31,995
$ 57,771
Federal Home Loan Bank advances
40,000
65,000
55,000
—
—
Subordinated debt, net of unamortized issuance costs
29,335
29,312
29,290
29,267
29,245
Total borrowed funds
$ 116,136
$ 146,642
$ 121,392
$ 61,262
$ 87,016
SUPPLEMENTAL STATEMENTS OF INCOME DATA (UNAUDITED)
(Dollars in thousands)
Three Months Ended
December 31
Year Ended
December 31
2023
2022
2023
2022
Service charges and fees
ATM and debit card fees
$ 1,397
$ 1,267
$ 5,051
$ 4,774
Service charges and fees on deposit accounts
616
653
2,413
2,566
Freddie Mac servicing fee
155
163
630
669
Net mortgage servicing rights income (loss)
(40)
(42)
(137)
435
Other fees for customer services
84
74
340
286
Total service charges and fees
2,212
2,115
8,297
8,730
Wealth management fees
932
788
3,557
3,005
Earnings on corporate owned life insurance policies
239
229
920
884
Net gain on sale of mortgage loans
85
63
317
631
Other
48
77
736
416
Total noninterest income
$ 3,516
$ 3,272
$ 13,827
$ 13,666
Three Months Ended
December 31
Year Ended
December 31
2023
2022
2023
2022
Compensation and benefits
$ 6,116
$ 6,407
$ 25,905
$ 24,887
Furniture and equipment
1,697
1,624
6,519
6,006
Occupancy
857
878
3,778
3,691
Other
Audit, consulting, and legal fees
576
609
2,340
2,358
ATM and debit card fees
487
424
1,767
1,909
Marketing costs
276
244
1,159
1,056
Memberships and subscriptions
313
222
1,042
876
Loan underwriting fees
290
364
927
1,004
FDIC insurance premiums
233
143
922
537
Donations and community relations
223
258
915
923
Other losses
101
137
871
546
Director fees
183
192
764
790
All other
563
420
2,401
2,237
Total other noninterest expenses
3,245
3,013
13,108
12,236
Total noninterest expenses
$ 11,915
$ 11,922
$ 49,310
$ 46,820
View original content:https://www.prnewswire.com/news-releases/isabella-bank-corporation-announces-fourth-quarter-and-2023-earnings-302064510.html
SOURCE Isabella Bank Corporation
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