Isabella Bank Corporation Reports Fourth Quarter 2024 Results

MT. PLEASANT, Mich., Jan. 30, 2025 Isabella Bank Corporation (OTCQX: ) (the "Company" or "we") reported fourth quarter 2024 net income of $4.0 million, or $0.54 per diluted share, an increase compared to $3.8 million, or $0.51 per diluted share in the same quarter of 2023. The non-GAAP measure of core earnings in the fourth quarter 2024 totaled $3.9 million, or $0.52 per diluted share, an increase compared to $3.8 million, or $0.50 per diluted share for the same quarter of 2023.

For the full year, net income was $13.9 million, or $1.86 per diluted share, compared to $18.2 million, or $2.40 per diluted share for 2023. The non-GAAP measure of 2024 core earnings was $15.0 million, or $2.01 per diluted share, compared to $18.0 million, or $2.37 per diluted share, in 2023.

FOURTH QUARTER 2024 HIGHLIGHTS (compared to fourth quarter 2023, unless otherwise stated)

Return on assets of 0.76%, compared to 0.73% Core loan growth of 4% annualized, compared to 6% Net interest margin of 2.99%, compared to 2.83% Noninterest income growth of 13%, compared to 3% Net loan charge-offs to average loans of 0.01%, compared to 0.03%

"Over the past several quarters we've emphasized that our financial performance is based on the strength of our core operations and maintaining our earnings momentum, and this quarter reflected the same focus," said the Chief Executive Officer Jerome Schwind. He noted that net interest margin expanded again in the fourth quarter, when non-recurring loan recoveries are excluded, and continue to grow core loans while adhering to our disciplined credit culture.

"We enter 2025 looking forward to continued repricing of low fixed rate loans to variable rates, and the redeployment of more than $70 million of securities that will amortize and mature during the year," Schwind added. "Our teams also have been working on initiatives that will drive higher noninterest income, mostly in the second half of 2025. We are well-positioned to deliver long-term value to our shareholders in 2025 and beyond.

"What sets Isabella Bank apart is the talent, dedication, and teamwork of our employees, who continue to deliver exceptional service and financial strength, as noted by reader's choice awards across our market," Schwind added. In September 2024, the Company was honored as the Best Bank in Isabella County by The Morning Sun People's Choice Awards. In December 2024, Midland Daily News recognized Isabella Bank as the Best Bank in Midland County through its Reader's Choice Awards. Most recently, in January 2025, The Pioneer named Isabella Bank the Best Bank in Mecosta County serving the Big Rapids region in its Pioneer All Area Reader's Choice Awards.

FINANCIAL CONDITION (December 31, 2024 compared to September 30, 2024, unless otherwise noted)

Total assets were $2.1 billion, down $20.7 million, primarily due to relatively flat total loans and a decline in available-for-sale (AFS) securities from amortization, maturities and a lower valuation of the portfolio in the fourth quarter.

AFS securities were $489.0 million, down $17.8 million, at the end of fourth quarter 2024. The decrease was due to a $5.5 million increase in the net unrealized loss and $17.7 million of amortization and maturities related to agency and municipal securities, offset by $5,400 of municipal bond purchases. Net unrealized losses on securities totaled $26 million and $21 million at the end of the fourth and third quarters, respectively. Net unrealized losses as a percentage of total AFS securities increased to 5% from 4% at the end of the third quarter of 2024 due to an increase in bond yields. While bond rates may vary from quarter to quarter, unrealized losses are expected to decrease as bonds approach their maturity dates over the next two years.

Total loans remained steady at $1.42 billion at the end of the fourth quarter, due to an increase of $11.0 million in residential loans and $4.3 million in commercial and industrial loans, offset by a $13.1 million decrease in advances to mortgage brokers. The increase in residential loans was related to steady new volume and continued slowing of prepayments. The growth in commercial and industrial loans primarily was in the hotel and construction industries. While commercial real estate loans remained relatively flat with the third quarter of 2024, the fourth quarter included a payoff of a $6.4 million relationship that had an elevated credit risk. Core loans, which excluded advances to mortgage brokers, grew $12.4 million or 4% on an annualized basis.

The allowance for credit losses increased $260 thousand to $12.9 million at the end of the fourth quarter of 2024. The increase mostly reflects $118 thousand from core loan growth, and the impact from a few commercial loans migrating to a special mention risk rating during the quarter. The downgraded loans are well collateralized and are not an indication of a negative trend in the broader portfolio. Nonaccrual loan balances decreased $265 thousand to $282 thousand at the end of the fourth quarter of 2024. Past due and accruing accounts between 30 to 89 days, as a percentage of total loans, was 0.40% compared to 0.16% at the end of third quarter 2024. The increase primarily was due to customers who typically make payments about 30 days in arrears, which becomes overdue in months with 31 days. Accordingly, the increase is not believed to be an indication of deteriorating credit quality.

Total deposits were $1.75 billion, down $34.8 million, at the end of the fourth quarter. The slight decrease primarily was due to an outflow from businesses and municipalities consistent with normal seasonal patterns, in addition to some expected outflows to fund large, regional projects. Certificates of Deposit accounts (CDs) were up $4.0 million, driven by the rate environment that attracted customers and investors as a safe place with a competitive rate.

Tangible book value per share was $21.82 as of December 31, 2024, compared to $22.14 on September 30, 2024. Net unrealized losses on AFS securities reduced tangible book value per share by $2.82 and $2.23 for the respective periods. Share repurchases totaled 27,608 during the fourth quarter for a value of $657 thousand at an average price of $23.80.

RESULTS OF OPERATIONS (December 31, 2024 to December 31, 2023 quarterly comparison, unless otherwise noted)

Net interest margin (NIM) was 2.99%, an increase from 2.98% last quarter and 2.83% in the fourth quarter of 2023. During the third quarter, we recovered the full contractual interest from two commercial loans that previously were charged off, which contributed 6 basis points to NIM. The book yield from securities was 2.18% and 2.23% during fourth quarters of 2024 and 2023, respectively. The weighted average maturity of our U.S. Treasury portfolio is less than 1.4 years, 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 5.67% in fourth quarter, up from 5.20% in the same quarter of 2023. The expansion in loan yields was a result of higher rates on new loans and fixed rate commercial loans that have and continue to reprice to variable rates. At the end of the fourth quarter, approximately 40% of commercial loans were fixed at rates lower than current market rates, but the majority will contractually reprice to variable rates over the next four years. Cost of interest-bearing liabilities increased to 2.38% from 2.11% in the fourth quarter of 2023, but have stabilized compared to the cost in the previous quarter of 2.43%.

The provision for credit losses in the fourth quarter 2024 was $376 thousand, which reflects the $260 thousand change in the allowance for credit losses on loans and net charge-offs totaling $102 thousand. The provision for loan losses in the same period of 2023 was $684 thousand reflecting $200 thousand from growth in core loans and $381 thousand in net charge-offs. Charge-offs in the fourth quarter of 2023 included a $247 thousand write down of a commercial and industrial loan that was recovered in the third quarter of 2024.

Noninterest income was $4.0 million, an increase from $3.5 million in the fourth quarter of 2023. Customer service fees grew $81 thousand based on a higher number of transactional accounts. Wealth management income increased $119 thousand, or 13%, due to higher assets under management (AUM). Average AUM in the fourth quarter 2024 increased $53.6 million, or 9% over the prior year quarter, driven by growth in new accounts and higher security valuations. Other noninterest income in the fourth quarter 2024 included a $103 thousand recovery from a security that was written down in a previous year and $74 thousand from net gains on foreclosed assets.

Noninterest expenses were $13.3 million in the fourth quarter 2024 compared to $11.9 million in same quarter of 2023. The change mostly was due to higher compensation and benefit expenses totaling $1.2 million, which reflect annual merit increases in 2024 and more medical insurance claims compared to the fourth quarter of 2023.

About the Corporation

Isabella Bank Corporation (OTCQX: ) 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 . Isabella Bank Corporation common stock is quoted on the OTCQX tier of the OTC Markets Group, Inc.'s electronic quotation system () under the symbol "ISBA." The Corporation's investor relations firm is Stonegate Capital Partners, Inc. ().

Forward-Looking StatementsInformation in this release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward-looking statements generally relate to losses, impact of events, financial condition, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Company and its future business and operations. Forward-looking statements are typically identified by words or phrases such as "will likely result", "expect", "plan", "believe", "estimate", "anticipate", "strategy", "trend", "forecast", "outlook", "project", "intend", "assume", "outcome", "continue", "remain", "potential", "opportunity", "comfortable", "current", "position", "maintain", "sustain", "seek", "achieve" and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in these forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in or by the forward-looking statements depending on a variety of uncertainties or other factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, or included in any subsequent filing by the Company with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Company cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations, and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

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)

Selected Financial Data

Consolidated Balance Sheets - Quarterly Trend

Consolidated Statements of Income

Consolidated Statements of Income - Quarterly Trend

Average Yields and Costs

Average Balances

Asset Quality Analysis

Consolidated Loan and Deposit Analysis

Reconciliation of Non-GAAP Financial Measures

SELECTED FINANCIAL DATA (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)

Three Months Ended

December 312024

September 302024

June 302024

March 312024

December 312023

PER SHARE

Basic earnings

$ 0.54

$ 0.44

$ 0.47

$ 0.42

$ 0.51

Diluted earnings

0.54

0.44

0.46

0.42

0.51

Core diluted earnings ⁽²⁾

0.52

0.61

0.46

0.41

0.50

Dividends

0.28

Book value⁽¹⁾

28.32

28.63

27.06

26.80

27.04

Tangible book value ⁽¹⁾

21.82

22.14

20.60

20.35

20.59

Market price ⁽¹⁾

25.99

21.21

18.20

19.40

21.50

Common shares outstanding ^{(1) (3)}

7,424,893

7,438,720

7,474,016

7,488,101

7,485,889

Average number of diluted common shares outstanding⁽³⁾

7,453,033

7,473,184

7,494,828

7,507,739

7,526,515

PERFORMANCE RATIOS

Return on average total assets

0.76 %

0.62 %

0.68 %

0.61 %

0.73 %

Core return on average total assets ⁽²⁾

0.74 %

0.87 %

0.68 %

0.60 %

0.73 %

Return on average shareholders' equity

7.47 %

6.26 %

6.97 %

6.19 %

7.98 %

Core return on average shareholders' equity ⁽²⁾

7.29 %

8.70 %

6.96 %

6.08 %

7.97 %

Return on average tangible shareholders' equity

9.66 %

8.15 %

9.19 %

8.12 %

10.73 %

Core return on average tangible shareholders' equity ⁽²⁾

9.43 %

11.32 %

9.17 %

7.97 %

10.71 %

Net interest margin yield (fully taxable equivalent) ⁽²⁾

2.99 %

2.98 %

2.85 %

2.79 %

2.83 %

Efficiency ratio ⁽²⁾

71.20 %

72.30 %

73.93 %

74.84 %

68.41 %

Gross loan to deposit ratio ⁽¹⁾

81.48 %

79.93 %

80.22 %

77.22 %

78.29 %

Shareholders' equity to total assets ⁽¹⁾

10.08 %

10.11 %

9.82 %

9.75 %

9.83 %

Tangible shareholders' equity to tangible assets ⁽¹⁾

7.95 %

8.00 %

7.65 %

7.58 %

7.66 %

ASSETS UNDER MANAGEMENT

Wealth assets under management ⁽¹⁾

658,042

679,858

647,850

660,645

641,027

ASSET QUALITY

Nonaccrual loans⁽¹⁾

282

547

994

1,283

982

Foreclosed assets⁽¹⁾

544

546

629

579

406

Net loan charge-offs (recoveries)

102

1,359

393

381

Net loan charge-offs (recoveries) to average loansoutstanding

0.01 %

0.10 %

0.03 %

0.00 %

0.03 %

Nonperforming loans to gross loans ⁽¹⁾

0.02 %

0.04 %

0.07 %

0.09 %

0.08 %

Nonperforming assets to total assets ⁽¹⁾

0.04 %

0.06 %

0.08 %

0.09 %

0.07 %

Allowance for credit losses to gross loans ⁽¹⁾

0.91 %

0.89 %

0.95 %

0.98 %

0.97 %

CAPITAL RATIOS ⁽¹⁾

Tier 1 leverage

8.86 %

8.77 %

8.83 %

8.80 %

8.76 %

Common equity tier 1 capital

12.21 %

12.08 %

12.37 %

12.36 %

12.54 %

Tier 1 risk-based capital

12.21 %

12.08 %

12.37 %

12.36 %

12.54 %

Total risk-based capital

15.06 %

14.90 %

15.29 %

15.31 %

15.52 %

⁽¹⁾

At end of period

⁽²⁾

Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

⁽³⁾

Whole shares

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

December 312024

September 302024

June 302024

March 312024

December 312023

ASSETS

Cash and demand deposits due from banks

$ 22,830

$ 27,019

$ 22,690

$ 22,987

$ 25,628

Fed Funds sold and interest bearing balancesdue from banks

1,712

359

869

2,231

8,044

Total cash and cash equivalents

24,542

27,378

23,559

25,218

33,672

Available-for-sale securities, at fair value

489,029

506,806

505,646

517,585

528,148

Federal Home Loan Bank stock

12,762

Mortgage loans held-for-sale

242

504

637

366

—

Loans

1,423,571

1,424,283

1,381,636

1,365,508

1,349,463

Less allowance for credit losses

12,895

12,635

13,095

13,390

13,108

Net loans

1,410,676

1,411,648

1,368,541

1,352,118

1,336,355

Premises and equipment

27,659

27,674

27,843

27,951

27,639

Bank-owned life insurance policies

34,882

34,625

34,382

34,131

33,892

Goodwill and other intangible assets

48,283

48,284

Other assets

38,166

37,221

38,486

39,161

38,216

Total assets

$ 2,086,241

$ 2,106,901

$ 2,060,139

$ 2,057,576

$ 2,058,968

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Demand deposits

$ 416,373

$ 421,493

$ 412,193

$ 413,272

$ 428,505

Interest bearing demand deposits

341,366

376,592

338,329

349,401

320,737

Savings

601,730

600,150

603,328

639,491

628,079

Certificates of deposit

387,591

383,597

368,449

366,143

346,374

Total deposits

1,747,060

1,781,832

1,722,299

1,768,307

1,723,695

Short-term borrowings

53,567

52,434

44,194

42,998

46,801

Federal Home Loan Bank advances

30,000

15,000

45,000

—

40,000

Subordinated debt, net of unamortized issuancecosts

29,424

29,402

29,380

29,357

29,335

Total borrowed funds

112,991

96,836

118,574

72,355

116,136

Other liabilities

15,914

15,248

17,017

16,240

16,735

Total liabilities

1,875,965

1,893,916

1,857,890

1,856,902

1,856,566

Shareholders' equity

Common stock

126,224

125,218

126,126

126,656

127,323

Shares to be issued for deferred compensationobligations

2,383

3,981

3,951

3,890

3,693

Retained earnings

103,024

101,065

99,808

98,318

97,282

Accumulated other comprehensive income(loss)

(21,355)

(17,279)

(27,636)

(28,190)

(25,896)

Total shareholders' equity

210,276

212,985

202,249

200,674

202,402

Total liabilities and shareholders' equity

$ 2,086,241

$ 2,106,901

$ 2,060,139

$ 2,057,576

$ 2,058,968

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

Year Ended

December 31

2024

2023

Interest income

Loans

$ 77,295

$ 65,670

Available-for-sale securities

11,093

12,156

Federal Home Loan Bank stock

640

355

Federal funds sold and other

950

1,450

Total interest income

89,978

79,631

Interest expense

Deposits

29,690

18,352

Short-term borrowings

1,439

961

Federal Home Loan Bank advances

1,949

1,309

Subordinated debt, net of unamortized issuance costs

1,065

Total interest expense

34,143

21,687

Net interest income

55,835

57,944

Provision for credit losses

1,884

629

Net interest income after provision for credit losses

53,951

57,315

Noninterest income

Service charges and fees

8,626

8,297

Wealth management fees

4,041

3,557

Earnings on bank-owned life insurance policies

1,007

920

Net gain on sale of mortgage loans

213

317

Other

689

736

Total noninterest income

14,576

13,827

Noninterest expenses

Compensation and benefits

28,576

25,905

Occupancy and equipment

10,524

10,297

Other professional services

2,212

2,340

ATM and debit card fees

1,975

1,767

FDIC insurance premiums

1,132

922

Other

7,710

8,079

Total noninterest expenses

52,129

49,310

Income before income tax expense

16,398

21,832

Income tax expense

2,509

3,665

Net income

$ 13,889

$ 18,167

Earnings per common share

Basic

$ 1.86

$ 2.42

Diluted

1.86

2.40

Cash dividends per common share

1.12

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

Three Months Ended

December 312024

September 302024

June 302024

March 312024

December 312023

Interest income

Loans

$ 20,145

$ 20,230

$ 18,863

$ 18,057

17,580

Available-for-sale securities

2,656

2,749

2,804

2,884

2,926

Federal Home Loan Bank stock

168

158

146

129

Federal funds sold and other

200

194

263

293

421

Total interest income

23,169

23,341

22,088

21,380

21,056

Interest expense

Deposits

7,583

7,631

7,313

7,163

6,399

Short-term borrowings

413

384

321

357

Federal Home Loan Bank advances

352

571

638

388

422

Subordinated debt, net of unamortized issuancecosts

266

267

266

Total interest expense

8,614

8,853

8,538

8,138

7,444

Net interest income

14,555

14,488

13,550

13,242

13,612

Provision for credit losses

376

946

170

392

684

Net interest income after provision for creditlosses

14,179

13,542

13,380

12,850

12,928

Noninterest income

Service charges and fees

2,293

2,159

2,128

2,046

2,212

Wealth management fees

1,051

1,003

1,048

939

932

Earnings on bank-owned life insurance policies

259

252

253

243

239

Net gain on sale of mortgage loans

Other

294

112

206

Total noninterest income

3,972

3,528

3,608

3,468

3,516

Noninterest expenses

Compensation and benefits

7,340

7,251

6,970

7,015

6,116

Occupancy and equipment

2,554

2,645

2,619

2,706

2,554

Other professional services

584

588

527

513

576

ATM and debit card fees

516

503

487

469

487

FDIC insurance premiums

309

291

280

252

233

Other

2,027

1,950

2,012

1,721

1,949

Total noninterest expenses

13,330

13,228

12,895

12,676

11,915

Income before income tax expense

4,821

3,842

4,093

3,642

4,529

Income tax expense

825

561

612

511

726

Net income

$ 3,996

$ 3,281

$ 3,481

$ 3,131

$ 3,803

Earnings per common share

Basic

$ 0.54

$ 0.44

$ 0.47

$ 0.42

$ 0.51

Diluted

0.54

0.44

0.46

0.42

0.51

Cash dividends per common share

0.28

AVERAGE YIELDS AND COSTS (UNAUDITED)

The following schedules present yield and daily average amounts outstanding for each major category of interest earningassets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. For analytical purposes, interestincome is reported on a fully taxable equivalent (FTE) basis using a federal income tax rate of 21%. Federal Reserve Bankrestricted equity holdings are included in other interest earning assets.

Three Months Ended

December 312024

September 302024

June 302024

March 312024

December 312023

INTEREST EARNING ASSETS

Loans ⁽¹⁾

5.67 %

5.73 %

5.52 %

5.38 %

5.20 %

Available-for-sale securities

2.18 %

2.21 %

2.24 %

2.26 %

2.23 %

Federal Home Loan Bank stock

5.24 %

4.98 %

4.60 %

4.04 %

Fed funds sold

4.59 %

5.55 %

5.51 %

5.72 %

5.71 %

Other

5.00 %

5.29 %

7.53 %

4.67 %

6.20 %

Total interest earning assets

4.74 %

4.77 %

4.61 %

4.47 %

4.35 %

INTEREST BEARING LIABILITIES

Interest bearing demand deposits

0.41 %

0.33 %

0.39 %

0.48 %

0.63 %

Savings

2.17 %

2.28 %

2.18 %

2.11 %

1.76 %

Certificates of deposit

4.07 %

4.13 %

4.01 %

3.84 %

3.60 %

Short-term borrowings

3.30 %

3.17 %

3.18 %

2.83 %

Federal Home Loan Bank advances

4.77 %

5.60 %

5.64 %

Subordinated debt, net of unamortized issuancecosts

3.60 %

3.61 %

3.64 %

3.65 %

3.60 %

Total interest bearing liabilities

2.38 %

2.43 %

2.39 %

2.28 %

2.11 %

Net yield on interest earning assets (FTE) ⁽²⁾

2.99 %

2.98 %

2.85 %

2.79 %

2.83 %

Net interest spread

2.36 %

2.34 %

2.22 %

2.19 %

2.24 %

⁽¹⁾

Includes loans held-for-sale and nonaccrual loans

⁽²⁾

Non-GAAP financial measure; refer to the Reconciliation of Non-GAAP Financial Measures (Unaudited) in table I

AVERAGE BALANCES (UNAUDITED)

(Dollars in thousands)

Three Months Ended

December 312024

September 302024

June 302024

March 312024

December 312023

INTEREST EARNING ASSETS

Loans ⁽¹⁾

$ 1,412,578

$ 1,403,810

$ 1,375,523

$ 1,348,749

$ 1,340,271

Available-for-sale securities ⁽²⁾

522,733

536,379

545,827

557,030

564,068

Federal Home Loan Bank stock

12,762

Fed funds sold

Other ⁽³⁾

15,905

14,597

14,054

25,210

26,823

Total interest earning assets

1,963,986

1,967,552

1,948,173

1,943,758

1,943,937

NONEARNING ASSETS

Allowance for credit losses

(12,598)

(13,125)

(13,431)

(13,100)

(12,780)

Cash and demand deposits due from banks

22,800

25,903

23,931

24,018

23,244

Premises and equipment

27,773

27,868

27,999

28,022

27,444

Other assets

92,608

87,002

80,539

84,059

71,592

Total assets

$ 2,094,569

$ 2,095,200

$ 2,067,211

$ 2,066,757

$ 2,053,437

INTEREST BEARING LIABILITIES

Interest bearing demand deposits

$ 345,529

$ 358,383

$ 342,931

$ 345,842

$ 317,996

Savings

599,833

599,679

613,601

633,904

634,539

Certificates of deposit

386,871

375,936

366,440

357,541

338,852

Short-term borrowings

49,777

48,151

40,593

40,623

50,049

Federal Home Loan Bank advances

29,346

40,588

45,510

27,692

29,674

Subordinated debt, net of unamortized issuancecosts

29,410

29,388

29,365

29,342

29,320

Total interest bearing liabilities

1,440,766

1,452,125

1,438,440

1,434,944

1,400,430

NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY

Demand deposits

425,116

418,973

411,282

412,228

446,747

Other liabilities

15,775

15,658

16,755

16,151

17,302

Shareholders' equity

212,912

208,444

200,734

203,434

188,958

Total liabilities and shareholders' equity

$ 2,094,569

$ 2,095,200

$ 2,067,211

$ 2,066,757

$ 2,053,437

⁽¹⁾

Includes loans held-for-sale and nonaccrual loans

⁽²⁾

Average balances for available-for-sale securities are based on amortized cost

⁽³⁾

Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter

ASSET QUALITY ANALYSIS (UNAUDITED)

(Dollars in thousands)

The following table outlines our quarter-to-date asset quality analysis as of, and for the three-month periods ended:

December 312024

September 302024

June 302024

March 312024

December 312023

NONPERFORMING ASSETS

Commercial and industrial

$ —

$ 120

$ 271

$ 567

$ 491

Commercial real estate

—

234

—

Agricultural

—

167

189

205

Residential real estate

282

427

556

293

286

Consumer

—

Total nonaccrual loans

282

547

994

1,283

982

Accruing loans past due 90 days or more

—

Total nonperforming loans

301

611

1,009

1,283

1,069

Foreclosed assets

544

546

629

579

406

Debt securities

—

Total nonperforming assets

$ 845

$ 1,169

$ 1,650

$ 1,874

$ 1,487

Nonperforming loans to gross loans

0.02 %

0.04 %

0.07 %

0.09 %

0.08 %

Nonperforming assets to total assets

0.04 %

0.06 %

0.08 %

0.09 %

0.07 %

Allowance for credit losses as a % of nonaccrualloans⁽¹⁾

N/M

ALLOWANCE FOR CREDIT LOSSES

Allowance at beginning of period

$ 12,635

$ 13,095

$ 13,390

$ 13,108

$ 12,767

Charge-offs

299

1,767

527

191

452

Recoveries

197

408

134

145

Net loan charge-offs (recoveries)

102

1,359

393

381

Provision for credit losses - loans

362

899

328

722

Allowance at end of period

$ 12,895

$ 12,635

$ 13,095

$ 13,390

$ 13,108

Allowance for credit losses to gross loans

0.91 %

0.89 %

0.95 %

0.98 %

0.97 %

Reserve for unfunded commitments

512

498

450

379

315

Provision for credit losses - unfunded commitments

(38)

Reserve to unfunded commitments

0.15 %

0.14 %

0.11 %

0.10 %

NET LOAN CHARGE-OFFS (RECOVERIES)

Commercial and industrial

$ 13

$ (6)

$ 334

$ (2)

$ 242

Commercial real estate

(2)

(318)

(29)

(6)

(3)

Agricultural

(4)

—

(2)

(6)

Residential real estate

(16)

(20)

(19)

(63)

(14)

Consumer

111

1,703

107

119

162

Total

$ 102

$ 1,359

$ 393

$ 46

$ 381

Net (recoveries) charge-offs (Quarter to Dateannualized to average loans)

0.03 %

0.39 %

0.11 %

0.01 %

0.11 %

Net (recoveries) charge-offs (Year to Date annualizedto average loans)

0.14 %

0.17 %

0.00 %

0.01 %

DELINQUENT AND NONACCRUAL LOANS

Accruing loans 30-89 days past due

$ 5,682

$ 2,226

$ 1,484

$ 7,938

$ 3,895

Accruing loans past due 90 days or more

—

Total accruing past due loans

5,701

2,290

1,499

7,938

3,982

Nonaccrual loans

282

547

994

1,283

982

Total past due and nonaccrual loans

$ 5,983

$ 2,837

$ 2,493

$ 9,221

$ 4,964

⁽¹⁾ N/M: Not meaningful

CONSOLIDATED LOAN AND DEPOSIT ANALYSIS (UNAUDITED)

(Dollars in thousands)

Loan Analysis

December 312024

September 302024

June 302024

March 312024

December 312023

AnnualizedGrowth %Quarter to Date

Commercial and industrial

$ 244,894

$ 240,589

$ 238,245

$ 226,281

$ 209,738

7.16 %

Commercial real estate

547,447

547,038

547,005

561,123

564,244

0.30 %

Advances to mortgage brokers

63,080

76,187

39,300

29,688

18,541

(68.81) %

Agricultural

99,694

96,794

94,996

93,695

99,994

11.98 %

Total commercial loans

955,115

960,608

919,546

910,787

892,517

(2.29) %

Residential real estate

380,872

369,846

365,188

356,658

356,418

11.92 %

Consumer

87,584

93,829

96,902

98,063

100,528

(26.62) %

Gross loans

$ 1,423,571

$ 1,424,283

$ 1,381,636

$ 1,365,508

$ 1,349,463

(0.20) %

Deposit Analysis

December 312024

September 302024

June 302024

March 312024

December 312023

AnnualizedGrowth %Quarter to Date

Noninterest bearing demand deposits

$ 416,373

$ 421,493

$ 412,193

$ 413,272

$ 428,505

(4.86) %

Interest bearing demanddeposits

341,366

376,592

338,329

349,401

320,737

(37.42) %

Savings

601,730

600,150

603,328

639,491

628,079

1.05 %

Certificates of deposit

387,591

383,597

368,449

366,143

346,374

4.16 %

Total deposits

$ 1,747,060

$ 1,781,832

$ 1,722,299

$ 1,768,307

$ 1,723,695

(7.81) %

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(Dollars in thousands except per share amounts and ratios)

Three Months Ended

December 312024

September 302024

June 302024

March 312024

December 312023

Net income

$ 3,996

$ 3,281

$ 3,481

$ 3,131

$ 3,803

Nonrecurring items

Net gains (losses) on foreclosed assets

Overdraft (charge-off) recoveries⁽¹⁾

(1,622)

—

Profitability initiative cost

(23)

—

Income tax impact

(25)

340

(1)

(14)

(2)

Total nonrecurring items

(1,278)

Core net income

(A)

$ 3,904

$ 4,559

$ 3,476

$ 3,076

$ 3,797

Noninterest expenses

$ 13,330

$ 13,228

$ 12,895

$ 12,676

$ 11,915

Amortization of acquisition intangibles

—

Core noninterest expense

(B)

$ 13,329

$ 13,228

$ 12,894

$ 12,676

$ 11,914

Net interest income

$ 14,555

$ 14,488

$ 13,550

$ 13,242

$ 13,612

Tax equivalent adjustment for net interestmargin

213

232

237

246

Net interest income (FTE)

(C)

14,768

14,720

13,787

13,488

13,858

Noninterest income

3,972

3,528

3,608

3,468

3,516

Tax equivalent adjustment for efficiencyratio

Core revenue (FTE)

18,794

18,301

17,448

17,007

17,424

Nonrecurring items

Net gains (losses) on foreclosed assets

Total nonrecurring items

Core revenue

(D)

$ 18,720

$ 18,297

$ 17,442

$ 16,938

$ 17,416

Efficiency ratio

(B/D)

71.20 %

72.30 %

73.93 %

74.84 %

68.41 %

Average earning assets

(E)

1,963,986

1,967,552

1,948,173

1,943,758

1,943,937

Net yield on interest earning assets (FTE)

(C/E)

2.99 %

2.98 %

2.85 %

2.79 %

2.83 %

Average assets

(F)

2,094,569

2,095,200

2,067,211

2,066,757

2,053,437

Average shareholders' equity

(G)

212,912

208,444

200,734

203,434

188,958

Average tangible shareholders' equity

(H)

164,629

160,161

152,451

155,150

140,674

Average diluted shares outstanding⁽²⁾

(I)

7,453,033

7,473,184

7,494,828

7,507,739

7,526,515

Core diluted earnings per share

(A/I)

$ 0.52

$ 0.61

$ 0.46

$ 0.41

$ 0.50

Core return on average assets

(A/F)

0.74 %

0.87 %

0.68 %

0.60 %

0.73 %

Core return on average shareholders'equity

(A/G)

7.29 %

8.70 %

6.96 %

6.08 %

7.97 %

Core return on average tangibleshareholders' equity

(A/H)

9.43 %

11.32 %

9.17 %

7.97 %

10.71 %

⁽¹⁾

Includes provision for credit losses related to overdrawn deposit accounts from a single customer in the third quarter of 2024.

⁽²⁾

Whole shares

SOURCE Isabella Bank Corporation