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Section 1: 8-K (8-K)

Document


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 23, 2020
  
 
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 23, 2020, Isabella Bank Corporation issued a press release announcing its results of operations for the three-month period ended March 31, 2020.
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
 

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 23, 2020
 
By:
 
/s/ Jae A. Evans
 
 
 
 
 
Jae A. Evans, President & CEO


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
For Immediate Release
Isabella Bank Corporation
401 North Main Street
Mt. Pleasant, MI 48858-1649

FOR MORE INFORMATION, CONTACT:
Mary Olivieri, Community Relations Officer
Phone: 989-779-6309    Fax: 989-775-5501
Isabella Bank Corporation Announces First Quarter 2020 Results
Capital and Liquidity in Position of Strength

Mt. Pleasant, Michigan, April 23, 2020 - Isabella Bank Corporation (the "Corporation") (OTCQX: ISBA) released its earnings results for the first quarter of 2020. The Corporation reported net income of $3.1 million and earnings per common share of $0.39 for the first quarter of 2020.
“First and foremost, our thoughts and prayers go out to everyone as we navigate the challenges created by COVID-19,” stated Jae A. Evans, President and Chief Executive Officer of the Corporation. “At Isabella Bank Corporation, we have a history of assisting our customers and communities in a time of need and today is no different. We are doing everything we can to help those we serve get through this crisis."
"As we share our results of the first quarter of 2020," he added, "you can rest assured that Isabella Bank Corporation has strong capital and liquidity positions to weather this crisis.”
First quarter 2020 highlights include:
Annualized cash dividend yield of 6.0%
Deposit growth of $8.2 million
Grew noninterest income $508,000, or 20.4% compared to the first quarter of 2019
Limited noninterest expense increase to 1.3% compared to the first quarter of 2019

Net Income
Net income for the first quarter of 2020 was $3.1 million compared to $3.5 million in the first quarter of 2019. A combination of reduced interest rates and loan volume drove a $280,000 decrease in interest income for the first three months of 2020 compared to the first quarter of 2019. Interest expense on deposits and borrowings decreased $93,000 for the three-month period ended March 31, 2020 compared to the same period in 2019 primarily due to reduced interest rates. Net interest income decreased by $187,000 for the first quarter compared to the same period in 2019. The provision for loan losses increased by $754,000 for the three-month period ended March 31, 2020 from the same period in 2019, as the result of increased economic and environmental risk factors, primarily driven by COVID-19, and an increase in impaired loan reserves. Noninterest income increased $508,000 during the first quarter compared to the same period in 2019, largely due to a gain from the redemption of a corporate insurance





policy. Noninterest expenses for the first three months of 2020 modestly exceeded the same period in 2019 by $145,000, primarily due to compensation, community relations and donation-related expenses.
The Corporation's fully taxable equivalent net yield on interest earning assets was 2.98% for the first quarter of 2020. This compares to 3.02% for the same period last year. The Corporation's banking subsidiary, Isabella Bank (the "Bank"), has implemented various initiatives to improve the net yield on interest earning assets, which include enhanced pricing strategies related to loan and deposit products and a reduced reliance on borrowings and brokered deposits as funding sources. However, the current interest rate environment has had a negative impact on the net yield on interest earning assets and future improvement may be gradual.
Assets
As of March 31, 2020, total assets were $1.8 billion and assets under management were $2.4 billion. Assets under management include loans sold and serviced of $257.3 million, investment and trust assets managed by Isabella Wealth of $360.0 million, in addition to assets on the consolidated balance sheet. In 2020, the Bank’s investment and trust services business was re-engineered and rebranded as Isabella Wealth to enhance the client experience, build scalability and expand market awareness.
The Bank's securities portfolio has declined by $22.7 million since December 31, 2019, primarily as a result of the sale of available-for-sale securities. The opportunity to identify new investment securities for purchase at an acceptable yield has been minimal as a result of the flat yield curve that has existed for over a year. Based on strategic objectives, the Corporation utilized this available cash flow to reduce higher-cost funding sources and other borrowings as they matured which strengthened the Bank’s liquidity position. Borrowed funds have declined $48.5 million since March 31, 2019.
Loans
Loans outstanding as of March 31, 2020, totaled $1.2 billion. During the first three months of 2020, gross loans decreased by $10.6 million, largely driven by an $8.06 million decline in the agricultural loan portfolio. During the first quarter of 2020, the commercial loan portfolio declined $5.66 million while residential real estate and consumer loans experienced growth totaling $3.09 million. Loans grew $31.1 million since March 31, 2019.
Deposits
Total deposits increased $8.2 million during the first quarter of 2020 to $1.3 billion and grew $44.1 million over the last twelve months. This increase was largely attributed to growth in interest bearing demand and savings deposits as a result of an attractive product offering, strategic product pricing and focused customer-service. Over the last year, excess funds were used to reduce higher-cost deposits such as brokered certificates of deposit balances. Since March 31, 2019, the Bank reduced brokered certificates of deposits $22.8 million, or 45.4%, which was favorable to the Bank's net interest margin and liquidity position.





Capital
The Bank continues to be designated as a “well capitalized” institution as its capital ratios exceeded the minimum requirements for this designation. As of March 31, 2020, the Bank’s Tier 1 Leverage Ratio was 8.7%, Tier 1 Capital Ratio was 12.1% and Total Capital Ratio was 12.8%. From a consolidated perspective, the Corporation's Tier 1 Leverage Ratio was 9.1%, Tier 1 Capital Ratio was 12.7% and Total Capital Ratio was 13.4% as of March 31, 2020.
Dividend
During the first quarter of 2020, the Corporation paid a $0.27 per common share cash dividend, an increase of 3.85% compared to the first quarter of 2019. Based on the Corporation's closing stock price of $18.00 as of March 31, 2020, the annualized cash dividend yield was 6.0%.
About the Corporation
Isabella Bank Corporation (OTCQX: ISBA) is the parent holding company of Isabella Bank, a state chartered 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 117 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 30 banking locations throughout seven Mid-Michigan counties: Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw. The Corporation has been recognized on the Detroit Free Press list of “Top Workplaces”.
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 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.





ISABELLA BANK CORPORATION
SELECTED FINANCIAL DATA (UNAUDITED)
(Dollars in thousands except per share amounts)
 
Three Months Ended 
 March 31
INCOME STATEMENT DATA
2020
 
2019
Interest income
$
16,201

 
$
16,481

Interest expense
4,199

 
4,292

Net interest income
12,002

 
12,189

Provision for loan losses
788

 
34

Noninterest income
2,998

 
2,490

Noninterest expenses
10,945

 
10,800

Federal income tax expense
203

 
349

Net income
$
3,064

 
$
3,496

 
 
 
 
Net interest margin yield (fully taxable equivalent)
2.98
%
 
3.02
%
 
 
 
 
PER SHARE DATA
 
 
 
Basic earnings
$
0.39

 
$
0.44

Diluted earnings
$
0.38

 
$
0.43

Dividends
$
0.27

 
$
0.26

Quoted market value
 
 
 
High
$
24.50

 
$
24.50

Low
$
16.00

 
$
22.25

Close (1)
$
18.00

 
$
23.75

Common shares outstanding (1)
7,921,291

 
7,906,078

 
 
 
 
(1) At end of period
 
 
 
 
March 31
2020
 
December 31
2019
 
March 31
2019
BALANCE SHEET DATA
 
 
 
 
 
Gross loans
$
1,175,936

 
$
1,186,570

 
$
1,144,832

Investment securities
$
407,189

 
$
429,839

 
$
494,842

Total assets
$
1,815,904

 
$
1,814,198

 
$
1,806,974

Deposits
$
1,322,083

 
$
1,313,851

 
$
1,277,963

Borrowed funds
$
263,171

 
$
275,999

 
$
311,684

Shareholders' equity
$
215,498

 
$
210,182

 
$
202,413

 
 
 
 
 
 
ASSETS UNDER MANAGEMENT
 
 
 
 
 
Loans sold with servicing retained
$
257,285

 
$
259,375

 
$
259,127

Assets managed by Isabella Wealth
$
359,968

 
$
436,181

 
$
475,560

Total assets under management
$
2,433,157

 
$
2,509,754

 
$
2,541,661

 
 
 
 
 
 
CAPITAL RATIOS
 
 
 
 
 
Tier 1 leverage
9.1
%
 
9.0
%
 
8.9
%
Tier 1 risk-based capital
12.7
%
 
12.6
%
 
12.5
%
Total risk-based capital
13.4
%
 
13.2
%
 
13.1
%


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