Bank Corporation Announces First Quarter 2021 Earnings: Strong results reflect strategic moves; loan portfolio metrics remain strong
Isabella Bank Corporation (the "Corporation") (OTCQX: ISBA) released its earnings results for the first quarter of 2021. The Corporation reported net income of $5.4 million and earnings per common share of $0.68.
First Quarter 2021 Highlights Include
- Net interest income was $13.2 million in the first quarter of 2021 and increased $1.2 million when compared to the same period in 2020.
- Elimination of debt and higher-cost funding throughout 2020 and a decline in interest rates led to a $2.1 million decline in interest expenses in the first quarter of 2021 compared to the same period in 2020.
- Provision for loan losses decreased $1.3 million compared to the first quarter of 2020 due largely to improving credit quality indicators and economic factors.
- Total deposits increased $77.3 million in the first quarter of 2021.
- Outstanding shares of ISBA stock have declined nearly 40,000 since December 31, 2020, as part of a buyback program and changes in the dividend reinvestment plan. The goal is to improve key metrics that positively affect shareholder value and price.
“Isabella Bank Corporation started 2021 with a strong first quarter that reflects the rebounding strength of our communities and the positive returns from the intentional actions we’ve taken in alignment with our five-year strategic plan,” said Jae A. Evans, President and Chief Executive Officer of the Corporation.
“New initiatives designed to support the changing needs of our customers, leverage the interest rate environment and improve key metrics were leading contributors to our excellent results in the first quarter.”
Net income
Net income for the first quarter 2021 was $5.4 million compared to $3.1 million in the first quarter of 2020.
Net interest income: Net interest income for the first quarter increased by $1.2 million compared to the same period in 2020. Net interest income has been up from March 2020 in each of the last four quarters due largely to PPP loans. Income from PPP interest totaled $2.3 million in 2020 and $1.2 million in the first quarter of 2021.
Noninterest income and expenses: Net gain on sold mortgage loans is a key reason noninterest income increased $534,000 in the first quarter compared to the same period in 2020. Ongoing operating expense controls led to noninterest expenses declining $128,000 compared to the first quarter of 2020.
Net yield on interest earning assets: The Corporation’s fully taxable equivalent net yield on interest earning assets was 2.98% for the first quarter of 2021, the same percentage recorded in the first quarter of 2020. The Corporation’s banking subsidiary, Isabella Bank (the “Bank”), implemented strategic programs focused on improving the net yield on interest-earning assets, which included enhanced pricing related to loans and a reduced reliance on higher-cost borrowed funds and brokered deposits. These efforts have helped offset the year-long, low-interest-rate environment. As the economy recovers and interest rates rise, improvement in the yield on interest-earning assets is expected.
Assets
Total assets were $2 billion as of March 31, 2021, and assets under management were $2.8 billion. Assets under management are up $335.2 million, or 13.8%, in comparison to March 31, 2020.
Assets under management include loans sold and serviced of $298.5 million, investment and trust assets managed by Isabella Wealth of $454.5 million and assets on the consolidated balance sheet.
The securities portfolio increased $28.1 million in the first quarter of 2021 due primarily to purchases of U.S. Treasury securities.
Loans
Loans outstanding as of March 31, 2021, totaled $1.2 billion. During the first quarter 2021, gross loans declined $42.4 million, largely driven by reduced volume in advances to mortgage brokers. A second round of participation in the Small Business Administration's Paycheck Protection Program resulted in advances of more than 650 PPP loans totaling $49.9 million in the first quarter of 2021.
Deposits
Total deposits were $1.6 billion at the end of the first quarter 2021, an increase of $321.5 million compared to the same period in 2020. The increase of deposits is largely the result of PPP loan proceeds and from customers receiving government stimulus checks.
Liquidity
The Corporation's liquidity position remains strong as evidenced by its $740 million of cash and available funds as of March 31, 2021. This total is comprised of $322 million in cash and cash equivalents, $219 million in available lines of credit and approximately $200 million in unencumbered investment securities.
Capital
The Bank is designated as a “well capitalized” institution, as its capital ratios exceeded the minimum requirements for this designation. As of March 31, 2021, the Bank’s Tier 1 Leverage Ratio was 8.3%, Tier 1 Capital Ratio was 13.2% and Total Capital Ratio was 14.0%. From a consolidated perspective, the Corporation's Tier 1 Leverage Ratio was 8.6%, Tier 1 Capital Ratio was 13.8% and Total Capital Ratio was 14.5% as of March 31, 2021. 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 2021, the Corporation paid a $0.27 per common share cash dividend. Based on the Corporation's closing stock price of $21.75 as of March 31, 2021, the annualized cash dividend yield was 4.97%.
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 118 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), its investor relations firm is Renmark Financial Communications, Inc. (www.renmarkfinancial.com), and analyst coverage is provided by Piper Sander Companies (www.pipersandler.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 actual results. Additional information concerning some of the factors that could cause materially different results is included in the sections entitled "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.