Loan, Deposit and Wealth Asset Growth continue in 2024 MT. PLEASANT, Mich., April 18, 2024 /PRNewswire/ -- Isabella Bank Corporation (OTCQX:ISBA) (the "Company") reported first quarter 2024 net income of $3.1 million or $0.42 per diluted share compared to $5.3 million or $0.70 per diluted share in the same quarter of 2023. FIRST QUARTER 2024 HIGHLIGHTS (compared to first quarter 2023, unless otherwise stated) Total commercial loan growth of 8% annualized, compared to 0.4% Earning asset yield of 4.45%, compared to 3.89% Wealth management income increased 19% Nonperforming loans to total loans ratio of 0.09% "Earnings declined year-over-year because of continued interest rate pressure.  However, the bank recorded positive results in loans, deposits and wealth management assets as a result of continuing to attract new customers while retaining strong loyalty among our current customers," according to Chief Executive Officer Jerome Schwind.  "We've also maintained excellent liquidity and strong credit quality among loan customers, factors that fuel our underlying strength and resilience during continued high interest rates. "As previously announced, the corporation paid a quarterly cash dividend of $0.28 per share of common stock, which continues to provide an attractive dividend yield for shareholders." FINANCIAL CONDITION (March 31, 2024 compared to December 31, 2023)Total assets were $2.06 billion at the end of both the first quarter 2024 and year-end 2023, primarily due to loan growth, which were offset by lower balances in cash and securities.  Excess cash, security amortization, and strong deposit growth provided the funding for loan growth and borrowing payoffs during the quarter. Total loans grew $16 million to $1.37 billion at the end of first quarter 2024.  Total commercial loans, which include advances to mortgage brokers and agricultural loans, increased $18.3 million as the Company selectively expanded its book of business across many industries, but most notably in construction and real estate sectors.  Residential loan volume remained stable during the quarter as originations kept pace with paydowns, as well as a few sales in the secondary market.  Demand for mortgages remains low given prevailing market rates, housing prices and low inventory. Securities available for sale decreased $10.6 million to $517.6 million at the end of the first quarter 2024, primarily due to amortization from collateralized mortgage obligations and higher unrealized losses on the total portfolio.  Unrealized losses on securities totaled $34.8 million, or 6.3% of the portfolio, at the end of the first quarter 2024 versus $31.8 million at year-end 2023, reflecting an increase in market rates. The allowance for credit losses increased $282 thousand to $13.4 million at the end of the first quarter 2024 due to loan growth and specific reserves on a few small commercial loans whose credit ratings were downgraded.  Nonaccruing loans increased $301 thousand to $1.3 million, principally due to one commercial credit that is expected to be settled in the near-term.  Past due accounts between 30 to 89 days as a percentage of total loans was 0.62% during the first quarter 2024, compared to 0.31% at year-end 2023.  The increase primarily is due to a group of customers that typically make payments about 30 days in arrears, which becomes overdue when the 31st day lands on a business day.  Accordingly, the increase is not believed to be an indication of deteriorating credit quality.  Overall, credit quality remains strong, and there are not any negative trends. Total deposits increased $44.6 million to $1.77 billion at the end of the first quarter 2024.  Demand for retail certificates of deposits (CDs) continues based on the rate environment, resulting in a $19.8 million increase in the balance during the quarter.  Other interest-bearing deposits increased $40.1 million, which underscores strong relationships the bank continues to build in the communities in which it serves.  Demand deposits decreased $15.2 million, which is consistent in seasonal trends in the markets.  Additionally, the strong inflow of deposits provided the opportunity to payoff $40.0 million of higher cost Federal Home Loan Bank advances during the quarter. The Company's tangible book value per share was $20.35 as of March 31, 2024, compared to $20.59 on December 31, 2023.  Unrealized losses on securities, net of taxes, reduced tangible book value per share by $3.67 and $3.36 at the end of those respective periods. The Bank is considered a "well-capitalized" institution, as its capital ratios exceeded the minimum designated requirements.  As of March 31, 2024, the Bank's Tier 1 Leverage Ratio was 8.61%, Tier 1 Capital Ratio was 12.10%, and Total Capital Ratio was 13.05% — well above the minimum requirements of 5.0%, 8.0%, and 10.0%, respectively. RESULTS OF OPERATIONS (March 31, 2024 to March 31, 2023 quarterly comparison)Net interest margin was 2.78% compared to 3.22% in the first quarter 2023.  The decrease was primarily driven by a higher cost of funds.  The book yield from securities was 2.25% and 2.29% at March 31, 2024 and 2023.  The yield includes the effect of the investment of excess cash in shorter term US treasury securities following the COVID pandemic in 2021 and 2022.  As a result, these securities will mature over the next 2 to 5 years, and the proceeds are expected to be reinvested in market rate loans and securities.  The yield on loans expanded to 5.36% in the first quarter 2024, up from 4.70% in the same quarter of 2023.  Approximately 46% of commercial loans are fixed at rates that are lower than current market rates but will contractually reprice to variable rates over the next 3 to 5 years which will improve the overall yield on earning assets.  Costs of interest-bearing liabilities increased to 2.27% from 0.95% in the first quarter 2023, reflecting a higher level of retail CDs and overall deposit relationship pricing. The provision for credit losses was $392 thousand in the first quarter of 2024 and was $41 thousand in the same quarter of 2023.  The change was largely due to loan growth and a few specific reserves on commercial loans that were downgraded in the first quarter of 2024. Noninterest income was $3.5 million in the first quarter 2024, up 5% as compared to the same quarter 2023.  Customer service fees grew by $68 thousand to $2.0 million as compared to the same quarter of 2023 on a higher number of transactional accounts.  Wealth management income increased by $153 thousand to $939 thousand from the prior year quarter due to an increase of $89.2 million in assets under management (AUM).  Wealth AUM increased by $19.6 million to $660.6 million from $641.0 million as of fourth quarter 2023 primarily due to new accounts and higher security valuations in the first quarter 2024. Noninterest expense was $12.7 million in the first quarter 2024 compared to $12.2 million in the first quarter 2023.  Compensation and benefit expenses increased $426 thousand from the comparative quarter in 2023.  The increase reflects annual merit increases and medical claim adjustments totaling $225 thousand. 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 StatementsThis 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 312024 December 312023 ASSETS Cash and cash equivalents Cash and demand deposits due from banks $           22,987 $           25,628 Fed Funds sold and interest bearing balances due from banks 2,231 8,044 Total cash and cash equivalents 25,218 33,672 Available-for-sale securities, at fair value 517,585 528,148 Mortgage loans available-for-sale 366 — Loans 1,365,508 1,349,463 Less allowance for credit losses 13,390 13,108 Net loans 1,352,118 1,336,355 Premises and equipment 27,951 27,639 Bank owned life insurance policies 34,131 33,892 Equity securities without readily determinable fair values 15,848 15,848 Goodwill and other intangible assets 48,284 48,284 Accrued interest receivable and other assets 36,075 35,130 TOTAL ASSETS $      2,057,576 $      2,058,968 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest bearing $         413,272 $         428,505 Interest bearing demand deposits 349,401 320,737 Certificates of deposit under $250 and other savings 881,528 857,768 Certificates of deposit over $250 124,106 116,685 Total deposits 1,768,307 1,723,695 Borrowed funds Federal funds purchased and repurchase agreements 42,998 46,801 Federal Home Loan Bank advances — 40,000 Subordinated debt, net of unamortized issuance costs 29,357 29,335 Total borrowed funds 72,355 116,136 Accrued interest payable and other liabilities 16,240 16,735 Total liabilities 1,856,902 1,856,566 Shareholders' equity Common stock — no par value 15,000,000 shares authorized; issued and outstanding 7,488,101 shares (including 169,677 shares held in the Rabbi Trust) in 2024 and 7,485,889 shares (including 150,581 shares held in the Rabbi Trust) in 2023 126,656 127,323 Shares to be issued for deferred compensation obligations 3,890 3,693 Retained earnings 98,318 97,282 Accumulated other comprehensive income (loss) (28,190) (25,896) Total shareholders' equity 200,674 202,402 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $      2,057,576 $      2,058,968   CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands except per share amounts) Three Months Ended   March 31 2024 2023 Interest income Loans, including fees $           18,057 $           14,889 Available-for-sale securities Taxable 2,258 2,502 Nontaxable 626 718 Federal funds sold and other 439 486 Total interest income 21,380 18,595 Interest expense Deposits 7,163 2,829 Borrowings Federal funds purchased and repurchase agreements 321 149 Federal Home Loan Bank advances 388 — Subordinated debt, net of unamortized issuance costs 266 266 Total interest expense 8,138 3,244 Net interest income 13,242 15,351 Provision for credit losses 392 41 Net interest income after provision for credit losses 12,850 15,310 Noninterest income Service charges and fees 2,046 1,978 Wealth management fees 939 786 Earnings on bank owned life insurance policies 243 226 Net gain on sale of mortgage loans 34 67 Other 206 236 Total noninterest income 3,468 3,293 Noninterest expenses Compensation and benefits 7,015 6,589 Furniture and equipment 1,675 1,597 Occupancy 1,031 1,005 Other 2,955 3,007 Total noninterest expenses 12,676 12,198 Income before federal income tax expense 3,642 6,405 Federal income tax expense 511 1,084 NET INCOME $              3,131 $              5,321 Earnings per common share Basic $                0.42 $                0.70 Diluted $                0.42 $                0.70 Cash dividends per common share $                0.28 $                0.28 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 restricted equity holdings are included in other interest earning assets. Three Months Ended March 31, 2024 March 31, 2023 Average Balance Tax Equivalent Interest Average Yield / Rate Average Balance Tax Equivalent Interest Average Yield / Rate INTEREST EARNING ASSETS