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IB

ISABELLA BANK Corp (ISBA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered higher profitability: GAAP net income was $3.95M and diluted EPS $0.53; core diluted EPS was $0.57, with NIM rising to 3.06% and ROA to 0.77% .
  • Relative to S&P Global consensus, ISBA posted an EPS beat (Primary EPS $0.57 vs $0.515*) and a slight revenue miss ($18.16M vs $18.50M*); EPS strength was aided by loan recoveries and lower cost of funds, while revenue was impacted by security yield and loan mix .
  • Credit quality improved: nonaccrual loans fell to $173K; Q1 provision was a credit of $107K, and net loan recoveries were $52K, supporting margin expansion and earnings resilience .
  • Catalysts ahead: Nasdaq uplisting executed (trading began May 12, 2025) and BOLI restructuring to higher-yield separate accounts expected to be fully in place by Q3 2025, with fee-income enhancements launching by end of Q3 2025 .
  • Dividend maintained at $0.28 per share; share repurchases of 45,582 shares ($1.1M at $25.12) in Q1 signal capital return discipline .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion: NIM rose to 3.06% (up from 2.98% in Q4’24 and 2.79% in Q1’24), aided by earning asset repricing, lower funding costs, and contractual interest recoveries (+4bps) .
  • Strong credit performance: provision was a credit of $107K; nonaccrual loans decreased to $173K; net recoveries of $52K supported earnings quality .
  • Management execution and outlook: “We expanded net interest margin, increased fee-based income and continued to improve credit quality… full [BOLI] transition and impact is expected by the third quarter 2025” — CEO Jerome Schwind .

What Went Wrong

  • Noninterest expense drift: total noninterest expenses rose to $13.3M (+$623K YoY), driven by compensation/benefits (+$368K) and $121K in legal fees related to the Nasdaq uplisting application .
  • One-time tax headwind: ETR climbed to 19% (from 14% YoY) due to a $166K one-time tax on surrendered BOLI policies; excluding this, ETR was 15% .
  • Securities book yields remain low: AFS book yield was 2.20% (down slightly YoY), constraining revenue relative to consensus; offsetting tailwinds expected as treasuries approach maturity and are redeployed .

Financial Results

Income Statement Summary (USD)

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Interest Income ($000s)$13,242 $14,488 $14,555 $14,525
Provision for Credit Losses ($000s)$392 $946 $376 $(107)
Noninterest Income ($000s)$3,468 $3,528 $3,972 $3,528
Net Income ($000s)$3,131 $3,281 $3,996 $3,949
Diluted EPS (GAAP)$0.42 $0.44 $0.54 $0.53
Core Diluted EPS (Non-GAAP)$0.41 $0.61 $0.52 $0.57

Margins and Ratios

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Net Interest Margin (FTE) %2.79% 2.96% 2.98% 3.06%
Net Interest Spread %2.19% 2.33% 2.34% 2.49%
Return on Avg Assets %0.61% 0.62% 0.76% 0.77%
Efficiency Ratio %74.84% 72.30% 71.20% 72.39%
Loan Yield %5.38% 5.72% 5.66% 5.71%
Cost of Interest-Bearing Liabilities %2.28% 2.42% 2.38% 2.26%

Balance-Sheet Segment Breakdown

Loans (Quarter-End)

Loan Type ($000s)Q4 2024Q1 2025
Commercial & Industrial$244,894 $249,220
Commercial Real Estate$547,447 $552,234
Advances to Mortgage Brokers$63,080 $3,015
Agricultural$99,694 $94,359
Residential Real Estate$380,872 $387,348
Consumer$87,584 $81,548
Gross Loans$1,423,571 $1,367,724

Deposits (Quarter-End)

Deposit Category ($000s)Q4 2024Q1 2025
Noninterest Demand$416,373 $404,194
Interest-Bearing Demand$237,548 $243,939
Money Market$423,883 $473,138
Savings$281,665 $286,399
Certificates of Deposit$387,591 $390,239
Total Deposits$1,747,060 $1,797,909

Asset Quality KPIs

KPIQ1 2024Q3 2024Q4 2024Q1 2025
Nonaccrual Loans ($000s)$1,283 $547 $282 $173
Nonperforming Assets ($000s)$1,874 $1,169 $845 $848
NPL / Gross Loans %0.09% 0.04% 0.02% 0.01%
NPA / Total Assets %0.09% 0.06% 0.04% 0.04%
Net Charge-offs (Recoveries) ($000s)$46 $1,359 $102 $(52)
ACL / Gross Loans %0.98% 0.89% 0.91% 0.93%

Estimates vs Actual (Q1 2025)

MetricQ1 2025 EstimateQ1 2025 ActualBeat/Miss
Primary EPS$0.515*$0.57*Beat
Revenue ($)$18,500,000*$18,160,000*Miss
Primary EPS – # of Estimates2*——
Revenue – # of Estimates1*——
Target Price Consensus Mean$38.50*$38.50*—
Target Price – # of Estimates1*1*—

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareQ1 2025$0.28 (ongoing quarterly dividend) $0.28 declared (paid Mar 31) Maintained
Nasdaq ListingQ2 2025Application filed; listing could be as soon as end of April 2025 Trading began on Nasdaq May 12, 2025 Executed
AFS Securities Maturities2025–2027Expected >$70M amortize/mature during 2025 Par maturities: $54.5M (2.34% book yield) in 2025; $217.4M (1.17%) in 2026; $63.4M (1.86%) in 2027 Clarified schedule
BOLI RestructuringBy Q3 2025—$10.6M invested in separate account in Jan; additional ~$9M to be exchanged by end of Q3; separate account yield ~5.4% vs 2.9% prior New initiative
NIM OutlookOngoingMargin expansion from repricing highlighted NIM continues upward trend; +4bps from interest recoveries in Q1 Positive narrative (no formal quantitative guidance)

Earnings Call Themes & Trends

No Q1 2025 earnings call transcript was found; we searched the document catalog for “earnings-call-transcript” and none were available for the period, so themes are derived from company releases.

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Net Interest MarginQ3: NIM 2.98%, aided by recoveries; Q4: NIM ~2.98–2.99% stabilization NIM 3.06%; +4bps from contractual interest recoveries; lower cost of funds Improving
Credit QualityQ3: Nonaccruals down; recoveries; single-customer overdraft charge offset core; Q4: nonaccruals fell to $282K; provision $376K Nonaccruals $173K; provision credit $(107)K; net recoveries $52K Strengthening
Loan RepricingQ3/Q4: Fixed-rate CRE/C&I repricing to variable; loan yields up Loan yield 5.71% (ex-recoveries 5.65%); 39% of commercial loans fixed and expected to reprice over 4 years Ongoing tailwind
AFS PortfolioQ3: Unrealized losses improved (yields down); Q4: unrealized losses increased with yield rise Unrealized losses down to $21.5M (from $26.5M); maturity schedule detailed Improving
Deposits/MixQ3: seasonal inflows; CD demand; Q4: seasonal outflows; CDs up $4M Total deposits +$50.8M; growth in interest-bearing demand, money market, savings Positive mix shift
Strategic InitiativesQ4: planned fee-income initiatives in H2’25 BOLI restructure to 5.4% yield; fee-income enhancements expected by end of Q3’25 Advancing
Listing & Liquidity—Nasdaq listing effective May 12, 2025 Completed (post-quarter)

Management Commentary

  • “The Company had a strong first quarter as we expanded net interest margin (NIM), increased fee-based income and continued to improve credit quality. NIM has continued an upward trend… because of earning asset repricing and a lower cost of funds.” — CEO Jerome Schwind .
  • “We recovered a significant amount of contractual interest related to nonperforming loans, which improved NIM by four basis points. Additionally… we fully recovered a $1.6 million overdraft charge incurred in the third quarter of 2024. All loans to the overdrawn customer have been paid in full.” — CEO Jerome Schwind .
  • “We executed a strategy… to restructure a large portion of our bank-owned life insurance policies into a higher-yielding separate account… the full transition and impact is expected by the third quarter 2025… fee-based income… revenue enhancements are expected to launch by the end of the third quarter 2025.” — CEO Jerome Schwind .
  • “We continue to focus on our fee businesses, balance sheet management, and credit performance… expanding both return on assets and return on capital for the long term.” — CEO Jerome Schwind .

Q&A Highlights

No Q1 2025 earnings call transcript was available; therefore, no Q&A highlights or clarifications could be retrieved from a call. We relied on the detailed press release and 8-K Exhibit 99.1 for management’s narrative and data .

Estimates Context

  • EPS: ISBA’s EPS beat SPGI consensus (Primary EPS $0.57 vs $0.515*), underpinned by improved NIM, recoveries, and disciplined funding costs. Note: GAAP diluted EPS was $0.53; the $0.57 reflects core diluted EPS reported by the company .
  • Revenue: Slight miss vs SPGI consensus ($18.16M vs $18.50M*), with AFS yields at ~2.20% and revenue mix limiting upside; redeployment of maturing treasuries may provide future tailwinds .
  • Coverage depth: Consensus based on 1–2 estimates, suggesting limited sell-side coverage; target price consensus stood at $38.50 (1 estimate*) [GetEstimates].

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin trajectory favorable: NIM rose to 3.06% on repricing tailwinds and lower funding costs; management indicates continued upward trend, with recoveries adding 4bps in Q1 .
  • Credit quality resilient: Provision credit $(107)K, nonaccruals at $173K, and net recoveries support earnings durability and lower risk profile .
  • Balance sheet optionality: AFS maturities ($54.5M in 2025, $217.4M in 2026, $63.4M in 2027) plus treasury runoff can be redeployed to higher-yield assets or to reduce borrowings, potentially lifting NIM and earnings .
  • Fee-income initiatives: BOLI yield reset to ~5.4% with full transition by Q3’25; revenue enhancements targeted by end of Q3’25 could diversify earnings and improve efficiency .
  • Capital return and listing: Dividend maintained at $0.28/share and ongoing buybacks; Nasdaq listing (effective May 12) may enhance liquidity, broaden investor base, and serve as a near-term stock catalyst .
  • Expense vigilance: Watch compensation/benefits inflation and nonrecurring legal costs; one-time BOLI-related tax lifted ETR to 19% (15% ex-one-time) — monitor normalized tax rate ahead .
  • Estimate dynamics: Low estimate counts mean print-to-consensus outcomes can be volatile; Q1’s EPS beat and minor revenue miss suggest upside sensitivity to margin and mix shifts going forward [GetEstimates].