ISABELLA BANK CORPORATION

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1 Section 1: 8-K (8-K) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C 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): March 12, 2018 ISABELLA BANK CORPORATION (Exact name of registrant as specified in its charter) MICHIGAN (State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.) 401 North Main Street, Mt. Pleasant, Michigan (Address of principal executive offices) Registrant s telephone number, including area code: (989) Not Applicable (Former name or former address if changed since last report) (Zip Code) 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 ) 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))

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

3 Section 2 - Financial Information Item 2.02 Results of Operations and Financial Condition. On March 12, 2018, Isabella Bank Corporation issued a press release announcing its results of operations for the year ended December 31, Similarly, on March 12, 2018, the Corporation issued a letter to its shareholders announcing its results of operations for the year ended December 31, Copies of the press release and shareholder letter are filed as Exhibits 99.1 and 99.2, respectively, to this Form 8-K and are incorporated herein by reference. The information in this Item 2.02 of Form 8-K and Exhibits 99.1 and 99.2 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 March 12, Shareholder letter issued March 12, 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: March 12, 2018 By: /s/ Jae A. Evans Jae A. Evans, President & CEO (Back To Top) Section 2: EX-99.1 (EXHIBIT 99.1) For Immediate Release Isabella Bank Corporation 401 North Main Street Mt. Pleasant, MI Exhibit 99.1 FOR MORE INFORMATION, CONTACT: Mary Olivieri, Community Relations Officer Phone: Fax: Isabella Bank Corporation Announces 2017 Results

4 Continued growth in loans and deposits builds momentum for 2018 Mt. Pleasant, Michigan, 03/12/ Jae A. Evans, President and Chief Executive Officer of Isabella Bank Corporation (the Corporation ) (OTCQX: ISBA), announced the Corporation s fourth quarter and full year 2017 earnings results. The Corporation reported net income of $2.7 million or earnings per common share of $0.35 for the fourth quarter of 2017 and $13.2 million or earnings per common share of $1.69 for the year ended December 31, Successes in 2017 include: Total assets surpassed $1.8 billion Year over year loan growth of 8.0% Deposit growth exceeded expectations in the fourth quarter by $46.4 million Investment & trust assets under management grew by $50 million or 11.8% Net interest income increased by $3.1 million or 7.3% Strong capital ratios We are pleased to report our fourth quarter and full year earnings results for 2017, stated Jae Evans. While today s interest rate environment makes it challenging to increase our net interest income and margin, we were successful in providing growth in We continued our focus on serving as trusted advisors for our customers, providing them with a full line of competitive products and services to meet their financial needs. These efforts resulted in significant loan and deposit growth during 2017 in an environment with intense competition. We remain committed to increasing earnings and shareholder value through growth in our loan portfolio, investment and trust services, and deposits while managing operating costs.

5 Net Income Net interest income for the year ended December 31, 2017 increased $3.1 million when compared to the year ended December 31, 2016, primarily as a result of increased interest income driven by significant loan growth during That increase was largely offset by a $2.4 million increase in compensation and benefits related to new positions required for future growth within our markets, merit increases, additional costs related to lending compliance requirements and increased service costs of our defined benefit plan. In addition, the enactment of the Tax Cuts and Jobs Act on December 22, 2017 required a remeasurement to our deferred tax assets and liabilities, resulting in an additional $319,000 of federal income tax expense. The Corporation's fully taxable equivalent net yield on interest earning assets remained low at 3.0% for the year ended December 31, The Federal Reserve Bank increased short-term interest rates in 2017 and projects future increases. The Corporation anticipates improvements in net interest income as a result of a combination of assets repricing faster than liabilities, asset mix shifting to an increasing percentage of loans from investment securities, and strategic growth in loans and other income earning assets. The Tax Cuts and Jobs Act established a lower, flat corporate federal statutory income tax rate of 21%. While the new tax rate is effective January 1, 2018, Accounting Standards Codification ("ASC") Income Taxes requires the effect of income tax law changes on deferred taxes be recognized in the period in which the law is enacted. Furthermore, ASC 740 requires the tax effects of the tax rate change be recorded as a component of income tax expense related to continuing operations. The Corporation s deferred tax assets ( DTA ) represent expected tax benefits anticipated to be used in future periods. The reduction of the federal corporate income tax rate reduces these potential future benefits. The tax effects related to the net DTA were recorded through 2017 income tax expense in accordance with ASC 740. Assets As of December 31, 2017, total assets exceeded $1.8 billion and assets under management grew to a record $2.6 billion - which includes loans sold and serviced, and assets managed by the Corporation's Investment and Trust Services Department of $744.9 million. Assets managed by the Investment and Trust Services Department increased 11.8% during 2017 and ended the year at a record $478.1 million. Loans The Corporation's loan portfolio grew by $80.9 million or 8.0% during This growth was largely driven by the commercial and agricultural loan portfolio which increased $60.9 million during Also contributing to this growth during the year were increases in residential real estate and consumer loans of $20.0 million.

6 Deposits Deposit growth continued throughout 2017 with a strong lift in the fourth quarter. The $49 million growth amount in the last three months was largely related to the demand deposit base as well as certificates of deposit. Product pricing and the high level of customer service continue to attract new business. Total deposits grew $70.2 million during Growth in deposits is essential to increasing net interest income and the net yield on interest earning assets. Deposits continue to be the desired funding source for loan growth given the cost of funding. Capital Isabella Bank, the Corporation s banking subsidiary, continues to be designated as a well capitalized institution as its capital ratios exceeded the minimum requirements for this designation. As of December 31, 2017, the Corporation s Tier 1 Leverage Ratio was 8.5%, Tier 1 Capital Ratio was 12.2% and Total Capital was 12.9%. Dividends During the fourth quarter of 2017, the Corporation paid a $0.26 per common share cash dividend bringing year-to-date dividends paid to $1.02. Cash dividends paid during 2017 represented a 4.1% increase over the cash dividends paid in Based on the Corporation's closing stock price of $28.25 as of December 29, 2017, the annualized cash dividend yield was 3.6%. As recently reported, the Corporation announced its Board of Directors declared a first quarter cash dividend of $0.26 per common share at its regular meeting held on February 28, The dividend will be payable on March 30, 2018 to shareholders of record as of March 28, About the Corporation Isabella Bank Corporation (OTCQX: ISBA) is headquartered in Mt. Pleasant, Michigan and employs more than 400 individuals. Isabella Bank has 29 banking locations and a loan production office throughout seven Mid-Michigan counties and has been recognized on the Detroit Free Press list of Top Workplaces for the past five years. For further information regarding Isabella Bank Corporation, please visit isabellabank.com. 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

7 ISABELLA BANK CORPORATION SELECTED FINANCIAL DATA (Dollars in thousands except per share amounts) INCOME STATEMENT DATA Interest income $ 58,413 $ 53,666 Interest expense 12,494 10,865 Net interest income 45,919 42,801 Provision for loan losses 253 (135) Noninterest income 10,812 11,108 Noninterest expenses 40,225 37,897 Federal income tax expense 3,016 2,348 Net Income $ 13,237 $ 13,799 PER SHARE DATA Basic earnings $ 1.69 $ 1.77 Diluted earnings $ 1.65 $ 1.73 Dividends $ 1.02 $ 0.98 Close* $ $ Common shares outstanding* 7,857,293 7,821,069 BALANCE SHEET DATA* Gross loans $ 1,091,519 $ 1,010,615 Investment securities $ 552,307 $ 558,096 Total assets $ 1,813,130 $ 1,732,151 Deposits $ 1,265,258 $ 1,195,040 Borrowed funds $ 344,878 $ 337,694 Shareholders' equity $ 194,905 $ 187,899 ASSETS UNDER MANAGEMENT* Loans sold with servicing retained $ 266,789 $ 272,882 Assets managed by our Investment and Trust Services Department $ 478,146 $ 427,693 Total assets under management $ 2,558,065 $ 2,432,726 CAPITAL RATIOS* Tier 1 leverage 8.5% 8.6% Tier 1 risk-based capital 12.2% 12.4% Total risk-based capital 12.9% 13.0% * At end of period (Back To Top) Section 3: EX-99.2 (EXHIBIT 99.2) Exhibit 99.2

8 2017 Results March 12, 2018 Dear Shareholder, 2017 was a year of organic growth and positive change for Isabella Bank Corporation. It is my pleasure to report our earnings for the fourth quarter and full year The Corporation reported net income of $2.7 million or earnings per common share of $0.35 for the fourth quarter of 2017 and $13.2 million or earnings per common share of $1.69 for the year ended December 31, During the fourth quarter of 2017, the Corporation paid a $0.26 per common share cash dividend bringing year-to-date dividends paid to $1.02. Cash dividends paid during 2017 represented a 4.1% increase over the cash dividends paid in Based on the Corporation s closing stock price of $28.25, as of December 29, 2017, the annualized cash dividend yield was 3.6%. Net interest income for the year ended December 31, 2017 increased $3.1 million when compared to the year ended December 31, 2016, primarily as a result of increased interest income driven by significant loan growth during Total deposits grew $70.2 million during Growth in deposits is essential to increasing net interest income and the net yield on interest earning assets. Deposits continue to be the desired funding source for loan growth given the cost of funding. As of December 31, 2017, total assets exceeded $1.8 billion and assets under management grew to a record $2.6 billion - which includes loans sold and serviced, and assets managed by the Corporation's Investment and Trust Services Department of $744.9 million. Assets managed by the Investment and Trust Services Department increased 11.8% during 2017 and ended the year at a record $478.1 million. While today s interest rate environment makes it challenging to increase our net interest income and margin, we were successful in providing growth in We continued our focus on serving as trusted advisors for our customers, providing them with a full line of competitive products and services to meet their financial needs. These efforts resulted in significant loan and deposit growth during 2017 in an environment with intense competition. We remain committed to increasing earnings and shareholder value through growth in our loan portfolio, investment and trust services, and deposits while managing operating costs. We are pleased to welcome, Neil McDonnell, as our new Chief Financial Officer. Neil s extensive experience in the financial industry will be a tremendous asset to the Corporation. Neil earned his Bachelor of Science - Finance degree from St. John s University in New York. He built his career over 27 years in the financial services industry, serving as chief financial officer, controller, treasurer, compliance & risk officer, and director of finance at large international banks, local community banks, as well as de novo banks. He was an active member of his community in Fairfield County, Connecticut, serving as chair of the Investment and Finance Committee for The WorkPlace, Inc. for 18 years. Neil also served two years as a board member for WP Ventures, Inc. and a volunteer coordinator for the Service League of Boys. (continued on reverse side) ISABELLA BANK CORPORATION 401 North Main Street, Mt. Pleasant, MI

9 Continued We look forward to new opportunities, relationships, and additional growth in We continue to enhance our portfolio of customer-centered products and services. Our team is dedicated to serving our customers and communities in which they live and work. During 2017, over 8200 volunteer hours with 566 organizations is just a glimpse of our employees' commitment to their communities. You will soon receive a copy of our 2017 annual report and proxy statement, which will include an additional recap of our operational and financial performance from last year. Please return your proxy as soon as you have the opportunity to review the materials. We look forward to visiting with you at our annual shareholder meeting on May 8th at 5 p.m. On behalf of our Board of Directors and all of our employees, I would like to thank you for your continued support. If you have questions or comments, please call me at or me at Jae A. Evans, President & Chief Executive Officer This letter 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 (Back To Top)