MT. PLEASANT, Mich., July 25, 2024 /PRNewswire/ -- Isabella Bank Corporation (OTCQX:ISBA) (the "Company") reported second quarter 2024 net income of $3.5 million, or $0.46 per diluted share, compared to $4.6 million or $0.61 per diluted share in the same quarter of 2023. SECOND QUARTER 2024 HIGHLIGHTS (compared to second quarter 2023, unless otherwise stated) Total loans grew by an annualized rate of 5% 4.58% earning asset yield, compared to 4.11% 7% increase in wealth management income 0.07% ratio in nonperforming loans to total loans "We are pleased the negative trend in net interest margin over the past several quarters has reversed, and we gained five basis points over the first quarter of 2024," said Isabella Bank Corporation's Chief Executive Officer Jerome Schwind.  "The repricing of earning assets and continued loan growth have expanded yields beyond the growth of our cost of funds. "While total commercial loans grew 1% during the quarter," he added, "we have a strong loan pipeline going into the third quarter.  Given commercial loan growth prospects and the continued repricing of our book of business, we see a stronger second half of 2024, regardless of how interest rates change."  FINANCIAL CONDITION (June 30, 2024 compared to March 31, 2024) Total assets remained steady at $2.06 billion.  Loan growth during the second quarter was offset by lower cash and security balances and was primarily funded by security amortization and Federal Home Loan Bank borrowings. Securities available-for-sale decreased $11.9 million to $505.6 million at the end of second quarter 2024 due to municipal maturities and principal paydowns on mortgage-related securities.  This was offset in part by a smaller unrealized loss on the total portfolio during the period.  Net losses on securities totaled $34 million and $34.8 million at the end of the second and first quarter, respectively.  Unrealized losses represent 6% of total available-for-sale securities in both periods and will continue to decrease as bonds approach their maturity dates over the next three years. Total loans grew $16.1 million to $1.38 billion at the end of second quarter 2024, led by residential loans, adding $8.5 million in balances due to a slowing of prepayments on steady new volume.  Total commercial loans grew $8.8 million due to higher advances to mortgage brokers.  The commercial pipeline remains strong. The allowance for credit losses decreased $295,000 to $13.1 million at the end of second quarter 2024.  A majority of the decrease was due to a few nonaccrual commercial loans that were settled at book value with specific allowances totaling $212,000.  Nonaccrual loan balances decreased $289,000 for the same reason.  Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.11% compared to 0.58% at the end of first quarter 2024.  The decrease is mostly the result of higher past due balances at the end of March due to a group of residential loans that typically make payments about 30 days in arrears, which become overdue when the 31st day lands on a business day.  Overall, credit quality remains strong, with no negative trends. Total deposits were $1.72 billion at the end of the second quarter, a decline of 2.6% or $46.0 million from the last quarter.  However, demand for retail certificates of deposit accounts (CDs) continues due to the rate environment, resulting in a $2.3 million increase during the second quarter.  The level of total deposits resulted in a funding gap that was filled with short-duration Federal Home Loan bank advances.  The Bank continues to have robust liquidity levels and capital.  As of June 30, 2024, the Bank had $754 million of unencumbered sources of liquidity and strong capital ratios; the Tier 1 Leverage Ratio was 8.83%, Tier 1 risk-based capital was 12.37%, and Total risk-based capital was 15.29%. Tangible book value per share was $20.60 as of June 30, 2024, compared to $20.35 on March 31, 2024.  Net unrealized losses on available-for-sale securities reduced tangible book value per share by $3.60 and $3.67 for the respective periods. RESULTS OF OPERATIONS (June 30, 2024 to June 30, 2023 quarterly comparison) Net interest margin was 2.83%, up from 2.78% last quarter and was 3.11% a year ago.  The decrease from a year ago primarily was driven by a higher cost of funds.  The book yield from securities was 2.23% and 2.26% during second quarter 2024 and 2023, respectively.  The yield includes the effect of the investment of excess cash in shorter term U.S. Treasury securities following the COVID pandemic in 2021 and 2022.  These securities will mature over the next 6 to 30 months, 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 5.49% in second quarter 2024, up from 4.90% in the same quarter of 2023.  The expansion in loan yields is a result of higher rates on new loans and fixed rate commercial loans that have and will continue repricing to variable rates. Cost of interest-bearing liabilities increased to 2.37% from 1.41% in second quarter 2024 due to several interest rate hikes throughout 2023. The provision for credit losses was $170,000 in the second quarter 2024 and $196,000 for the same period in 2023.  The provision for the current year quarter reflects growth in residential loans and a $72,000 increase due to higher unfunded commitments. Noninterest income was $3.6 million in both the second quarter of 2024 and 2023.  Customer service fees grew $81,000 based on a higher number of transactional accounts.  Wealth management income increased $67,000, or 7%, due to higher assets under management (AUM).  AUM increased $54.3 million over the last year driven by growth in new accounts and higher security valuations. Noninterest expenses were $12.9 million in second quarter 2024 compared to $12.5 million in second quarter 2023.  Compensation and benefit expenses increased $409,000 and reflect annual merit increases and medical claim adjustments totaling $190,000.  Higher card usage drove a $78,000 increase in ATM and debit card fees. About the CorporationIsabella 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. Non-GAAP Financial MeasuresThis 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 C Consolidated Statements of Income D Consolidated Statements of Income 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) Three Months Ended June 302024 March 312024 December 312023 September 302023 June 302023 PER SHARE Basic earnings $        0.47 $        0.42 $        0.51 $        0.59 $        0.62 Diluted earnings 0.46 0.42 0.51 0.58 0.61 Dividends 0.28 0.28 0.28 0.28 0.28 Book value (1) 27.06 26.80 27.04 24.71 25.13 Tangible book value (1) 20.60 20.35 20.59 18.27 18.69 Market price (1) 18.20 19.40 21.50 21.05 20.50 Common shares outstanding (1) 7,474,016 7,488,101 7,485,889 7,490,557 7,496,826 Average number of diluted common shares outstanding 7,494,828 7,507,739 7,526,514 7,570,374 7,567,527 PERFORMANCE RATIOS Return on average total assets 0.67 % 0.61 % 0.74 % 0.86 % 0.91 % Return on average shareholders' equity 6.94 % 6.16 % 8.05 % 9.24 % 9.47 % Return on average tangible shareholders' equity 9.14 % 8.07 % 10.82 % 12.37 % 12.58 % Net interest margin yield (fully taxable equivalent) (2) 2.83 % 2.78 % 2.85 % 3.02 % 3.11 % Efficiency ratio (2) 73.93 % 74.84 % 68.41 % 70.56 % 67.90 % Net loan to deposit ratio (1) 79.46 % 74.46 % 77.53 % 74.71 % 77.06 % Shareholders' equity to total assets (1) 9.82 % 9.75 % 9.83 % 8.74 % 9.23 % Tangible shareholders' equity to tangible assets (1) 7.65 % 7.58 % 7.66 % 6.61 % 7.03 % ASSETS UNDER MANAGEMENT Assets managed by Isabella Wealth (1) $ 647,850 $ 660,645 $ 641,027 $ 590,666 $ 593,530 ASSET QUALITY Nonaccrual loans (1) $         994 $     1,283 $         982 $         520 $         414 Foreclosed assets (1) 629 579 406 509 405 Net loan charge-offs (recoveries) 393 46 381 (254) (3) Net loan charge-offs (recoveries) to average loans outstanding 0.03 % 0.00 % 0.03 % (0.02) % 0.00 % Nonperforming loans to gross loans (1) 0.07 % 0.09 % 0.08 % 0.04 % 0.04 % Nonperforming assets to total assets (1) 0.08 % 0.09 % 0.07 % 0.05 % 0.05 % Allowance for credit losses to gross loans (1) 0.95 % 0.98 % 0.97 % 0.96 % 0.96 % CAPITAL RATIOS (1) Tier 1 leverage 8.83 % 8.80 % 8.76 % 8.77 % 8.70 % Common equity tier 1 capital 12.37 % 12.36 % 12.54 % 12.43 % 12.39 % Tier 1 risk-based capital 12.37 % 12.36 % 12.54 % 12.43 % 12.39 % Total risk-based capital 15.29 % 15.31 % 15.52 % 15.39 % 15.37 % (1) At end of period (2) Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I A   CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) June 302024 March 312024 December 312023 September 302023 June 302023 ASSETS Cash and demand deposits due from banks $         22,690 $         22,987 $         25,628 $         48,862 $         25,584 Fed Funds sold and interest bearing balances due from banks 869 2,231 8,044 67,017 4,296 Total cash and cash equivalents 23,559 25,218 33,672 115,879 29,880 Available-for-sale securities, at fair value 505,646 517,585 528,148 516,897 530,497 Federal Home Loan Bank stock 12,762 12,762 12,762 12,762 12,762 Mortgage loans held-for-sale 637 366 — 105 362 Loans 1,381,636 1,365,508 1,349,463 1,334,674 1,334,402 Less allowance for credit losses 13,095 13,390 13,108 12,767 12,833 Net loans 1,368,541 1,352,118 1,336,355 1,321,907 1,321,569 Premises and equipment 27,843 27,951 27,639 26,960 26,383 Bank-owned life insurance policies 34,382 34,131 33,892 33,654 33,433 Goodwill and other intangible assets 48,283 48,284 48,284 48,285 48,285 Other assets 38,486 39,161 38,216 42,041 39,277 Total assets $    2,060,139 $    2,057,576 $    2,058,968 $    2,118,490 $    2,042,448 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Demand deposits $       412,193 $       413,272 $       428,505 $       445,043 $       458,845 Interest bearing demand deposits 338,329 349,401 320,737 363,558 335,922 Savings 603,328 639,491 628,079 628,795 606,644 Certificates of deposit 368,449 366,143 346,374 332,078 313,537 Total deposits 1,722,299 1,768,307 1,723,695 1,769,474 1,714,948 Federal funds purchased and repurchase agreements 44,194 42,998 46,801 52,330 37,102 Federal Home Loan Bank advances 45,000 — 40,000 65,000 55,000 Subordinated debt, net of unamortized issuance costs 29,380 29,357