8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 21, 2022

ISABELLA BANK CORPORATION

(Exact name of registrant as specified in its charter)

Michigan	000-18415	38-2830092
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

401 North Main Street	Mt. Pleasant	Michigan	48858-1649
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (989) 772-9471

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.l4a-l2)

☐ Pre-commencement communications pursuant to Rule l4d-2(b) under the Exchange Act (17 CFR 240.l4d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.l3e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 - Financial Information

Item 2.02 Results of Operations and Financial Condition.

On April 21, 2022, Isabella Bank Corporation issued a press release announcing its results of operations for the quarter ended March 31, 2022.

A copy of the press release is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

The information in this Item 2.02 of Form 8-K and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing made by the registrant under the Securities Act of 1933, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such filing.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

Exhibit No.	Description
99.1	Press release issued April 21, 2022
104	Cover page interactive data file - the cover page XBRL tags are embedded within the inline XBRL document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		ISABELLA BANK CORPORATION
Dated:	April 21, 2022	By:	/s/ Jae A. Evans
			Jae A. Evans, President & CEO

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press release issued April 21, 2022
104	Cover page interactive data file - the cover page XBRL tags are embedded within the inline XBRL document

EX-99.1

Exhibit 99.1

For Immediate Release

Isabella Bank Corporation

401 North Main Street

Mt. Pleasant, MI 48858-1649

FOR MORE INFORMATION CONTACT:

Amber Zaske, Community Relations

Phone: 989-779-6309Fax: 989-775-5501

Isabella Bank Corporation Announces First Quarter 2022 Earnings

Solid start to 2022 with net income of $4.7 million

Mt. Pleasant, Michigan, April 21, 2022 — 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 ofMarch 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

XML

Cover	Apr. 21, 2022
Cover [Abstract]
Document Type	8-K
Document Period End Date	Apr. 21, 2022
Entity Registrant Name	ISABELLA BANK CORP
Entity Incorporation, State or Country Code	MI
Entity File Number	000-18415
Entity Tax Identification Number	38-2830092
Entity Address, Address Line One	401 North Main Street
Entity Address, City or Town	Mt. Pleasant
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48858-1649
City Area Code	989
Local Phone Number	772-9471
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000842517
Amendment Flag	false