Isabella Bank Corporation Announces Strong Fourth Quarter and 2021 Earnings: Record assets, loans and net income of $19.5 million in 2021; EPS jumps 81%

Isabella Bank Corporation (the “Corporation”) (OTCQX: ISBA) has released positive earnings results for the fourth quarter and year ended December 31, 2021. The Corporation reported net income of $4.8 million for the quarter and a record $19.5 million for the year. Both figures reflect increases over the same periods a year ago. Earnings per common share were $0.63 in the fourth quarter and $2.48 for the year 2021, also increases from the same periods of 2020.

2021 Highlights

• Net income in 2021 reached a record $19.5 million, increasing 79%, compared to 2020.
• Net interest income in 2021 improved by $2.4 million compared to 2020, enabled by interest expense declining $6.4 million.
• Total assets reached a record $2 billion and total assets under management reached a record $2.8 billion at the end of 2021.
• Loans increased $62.7 million, or 5.1%, reaching a record $1.3 billion during 2021, driven by growth in the commercial and residential mortgage loan portfolios.
• Deposits increased $144 million, or 9.2%, during 2021, largely the result of new customer accounts, Paycheck
• Protection Program (PPP) loans, and government stimulus funds.
• Successful subordinated debt issuance of $30 million at a rate of 3.25%.
• Completion of a tender offer during the fourth quarter, resulting in the Corporation purchasing 5% of outstanding shares at $27.00 per share for a total of $10.7 million.

“Our successful subordinated debt issuance in 2021 aligns with our strategic initiatives to deliver long-term shareholder value,” said Jae A. Evans, President and Chief Executive Officer. “A portion of the proceeds from the issuance were used for our subsequent tender offer, and the remaining proceeds may be used to support continued stock repurchases and expansion activity.

“Our successful Dutch auction tender offer reduced ISBA shares outstanding and will likely improve several key metrics for shareholders,” Evans said. “Our ongoing stock repurchase plan and this tender offer both align with our ongoing commitment to improve shareholder value.

“Overall, we continue to grow our customer base through trusted, quality service as an independent, community bank,” Evans said. “Our 2021 results, which set multiple records, are a testament to our continued focus on meeting the needs of our customers while pursuing strategic initiatives that benefit our shareholders, customers and communities over the long-term.”

Operating Results

Net income: Net income for the fourth quarter 2021 was $4.8 million, compared to a net loss of $723,000 in 2020. For the year ended December 31, 2021, net income was $19.5 million, compared to $10.9 million in 2020.

Net interest income, fourth quarter 2021: Net interest income for fourth quarter 2021 decreased $70,000 compared to the same period in 2020. While interest income declined $1.4 million due to continued low interest rates, interest expense also decreased $1.3 million, or 45.2%, largely due to a reduction in higher-cost borrowings over the last year. Provision for loan losses decreased $175,000 compared to 2020 and was the result of improvement in credit quality.

Net interest income: Net interest income for the year ended December 31, 2021, increased $2.4 million, or 4.7%, compared to the same period in 2020. Lower interest rates and a reduction in higher-cost borrowing benefited the Corporation with a $6.4 million, or 46.4%, decrease in interest expense during 2021. The decrease in interest expense outpaced a gross interest income decline of $4.1 million during 2021 caused by the lower interest rates and a pause in advances to mortgage brokers. The provision for loan losses also contributed to a positive net interest income result through a $2.2 million decrease compared to 2020, as a result of continued strong credit quality.

Noninterest income and expenses, fourth quarter 2021: Noninterest income decreased $511,000 compared to the fourth quarter of 2020, driven by a reduction in gain on sale of loans. Noninterest expenses for the quarter decreased $7.4 million, attributed to a $7.6 million cost to extinguish $100 million of FHLB advances during the fourth quarter of 2020.

Noninterest income and expenses: Noninterest income of $13.8 million for the year ended December 31, 2021, decreased $601,000 compared to 2020. While service charges and fees increased $1.1 million when compared to the previous year, 2020 also included an additional $1.0 million related to gain on sale of loans and $620,000 related to gains from redemption of corporate owned life insurance policies.  Noninterest expenses decreased for the year ended December 31, 2021, by $7.5 million compared to 2020, tied to the $100 million FHLB debt extinguishment in 2020.

Net yield on interest earning assets: The Corporation’s fully taxable equivalent net yield on interest earning assets was 2.86% and 2.87% for the fourth quarter and year ended 2021, respectively, compared to 3.04% and 2.96% for the same periods in 2020. The net yield for 2021 reflected a full year's impact of the decline in interest rates that occurred in the first half of 2020.

Balance Sheet

Assets: Total assets were $2.0 billion and assets under management were $2.8 billion as of December 31, 2021, both record levels.  Assets under management include loans sold and serviced of $278.8 million and investment and trust assets managed by Isabella Wealth of $516.2 million, in addition to assets on the consolidated balance sheet. Assets under management increased $124.5 million, or 4.6%, compared to December 31, 2020. Isabella Wealth also reached record levels during 2021 and increased 16.3% during the year.

Loans: During 2021, total loans increased $62.7 million and totaled a record $1.3 billion at December 31, 2021.  As customer demand increased, along with advances to mortgage brokers, the commercial loan portfolio increased $50.8 million, or 6.7%, during 2021.  Competition for agricultural loans continued to be strong in 2021 and the portfolio declined $6.5 million during the year.  Residential mortgage loans increased $18.8 million, or 6.1%, during 2021, while consumer loans recorded a slight decline.

Deposits: Total deposits were a record $1.7 billion as of December 31, 2021, an increase of $144 million, or 9.2%, since December 31, 2020.  Growth in 2021 was largely the result of new customer accounts, funding from PPP loans, and government stimulus funds.

Capital: The Bank is considered a “well-capitalized” institution, as its capital ratios exceeded the minimum designated requirements. As of December 31, 2021, the Bank’s Tier 1 Leverage Ratio was 8.54%, Tier 1 Capital Ratio was 12.91% and Total Capital Ratio was 13.60%. 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 fourth quarter of 2021, the Corporation paid a $0.27 per common share cash dividend. Based on the Corporation’s closing stock price of $25.50 as of December 31, 2021, the annualized cash dividend yield was 4.24%.

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.