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ISABELLA BANK Corp (ISBA)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered stronger profitability: diluted EPS rose to $0.68 vs $0.46 in Q2 2024 and $0.53 in Q1 2025; core diluted EPS was $0.55, up from $0.46 YoY but down modestly from $0.57 in Q1 .
  • Net interest margin expanded 8 bps sequentially to 3.14% on stable funding costs and repricing of earning assets; loan yield was 5.71% while interest-bearing liability cost fell to 2.24% .
  • Balance sheet growth was healthy but partly transient: total loans rose by $29.8M QoQ (core loan growth led by commercial and residential), deposits increased $51.5M QoQ, including an $89M non-maturity deposit from a not-for-profit expected to be withdrawn by year-end .
  • Asset quality remained strong (NPLs/gross loans 0.09%); the quarter benefited from full recovery of the prior 3Q24 overdraft charge-off, producing a $1.1M credit to provision and boosting GAAP EPS above core levels .
  • Management highlighted the May uplisting to Nasdaq and continued dividends and buybacks (57,824 shares, ~$1.5M); higher stock price and liquidity are viewed as strategic currency for growth .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and funding stability: “NIM increased as expected, expanding 8 basis points over the prior quarter with earning assets continuing to reprice on stable cost of funds” (CEO Jerome Schwind) .
  • Core loan and deposit growth: commercial loans grew ~$23.1M annualized 10.3%; residential mortgages +$11.3M with seasonal construction draws; deposits +$51.5M QoQ, supported by non-maturity inflows .
  • Profitability and fee initiatives: noninterest income increased QoQ; management reiterated focus on growing fee income, including BOLI restructuring and wealth management AUM growth to $679M .

What Went Wrong

  • Transient deposit inflow: the $89M non-maturity deposit from a not-for-profit is expected to be used by the customer by year-end, implying near-term outflow risk .
  • Elevated noninterest expense: expenses rose to $13.7M (+$0.8M YoY) on compensation/benefits (+$526k) and professional/legal fees tied to profitability initiatives and the Nasdaq uplisting .
  • Emerging credit watch items: nonaccruals increased to $1.2M (one commercial real estate downgrade); management continues to flag macro risks (rates, tariffs, inflation) and may need additional provisions in future periods .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Diluted EPS ($)$0.46 $0.53 $0.68
Core diluted EPS ($)$0.46 $0.57 $0.55
Net Income ($MM)$3.48 $3.95 $5.03
Revenue ($MM)$16.99*$18.16*$19.91*
Net Interest Margin (FTE) (%)2.82 3.06 3.14
Efficiency Ratio (%)73.93 72.39 70.53
ROA (%)0.68 0.77 0.96

Values marked with * retrieved from S&P Global.

Segment breakdown – Loans (period-end, $000s)

CategoryQ2 2024Q1 2025Q2 2025
Commercial & Industrial$198,769 $205,172 $207,719
Commercial Real Estate$586,481 $596,282 $614,383
Advances to Mortgage Brokers$39,300 $3,015 $3,005
Agricultural$94,996 $94,359 $96,842
Residential Real Estate$365,188 $387,348 $398,668
Consumer$96,902 $81,548 $76,896
Gross Loans$1,381,636 $1,367,724 $1,397,513

Segment breakdown – Deposits (period-end, $000s)

CategoryQ2 2024Q1 2025Q2 2025
Noninterest Demand$412,193 $404,194 $493,477
Interest-bearing Demand$232,660 $243,939 $223,376
Money Market$429,150 $473,138 $446,845
Savings$279,847 $286,399 $289,746
Certificates of Deposit$368,449 $390,239 $395,932
Total Deposits$1,722,299 $1,797,909 $1,849,376

KPIs and Asset Quality

KPIQ2 2024Q1 2025Q2 2025
Total Assets ($MM)$2,060.1 $2,102.6 $2,156.2
NPLs / Gross Loans (%)0.07 0.01 0.09
Net Charge-offs (Recoveries) ($000)$393 $(52) $(1,432)
Allowance for Credit Losses ($000)$13,095 $12,735 $12,977
Tangible Book Value/Share ($)$20.60 $22.58 $23.39

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginFY 2025 trajectory“Upward trend since Q1’24… earning asset repricing; cost of funds lower” (Q1) “NIM increased 8 bps QoQ; expected to continue to expand as loans reprice and funding costs stabilize” (Q2) Raised (qualitative)
Cost of Interest-bearing LiabilitiesFY 20252.26% in Q1; declining vs prior periods 2.24% in Q2; expected to stabilize Lower/stabilizing
Loan GrowthNear-termRobust pipeline; some Q1 closings extended into Q2 Pipeline strong entering Q3, but future growth could be lower due to timing/demand/macro Tempered
Deposits (non-maturity)2H 2025Non-maturity deposits +14% annualized in Q1 $89M non-maturity deposit expected to be used by customer by year-end Lower near-term visibility
Noninterest Income Initiatives2H 2025BOLI restructuring; fee revenue enhancements expected to launch by end Q3 Ongoing execution; BOLI earnings higher; $120k one-time restructuring expense in Q2 Maintained timeline
DividendsQuarterly$0.28/share maintained $0.28/share maintained Maintained
Share RepurchasesOngoing45,582 shares; ~$1.1M in Q1 57,824 shares; ~$1.5M in Q2 (avg $26.03) Increased activity

Note: No formal numeric guidance ranges were provided; commentary indicates directionality.

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available in our document catalog; themes below reflect consistent management topics across recent quarters’ releases.

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
NIM and repricingNIM 2.99% in Q4 with repricing of fixed-rate loans to variable; continued momentum NIM 3.14%; expected to expand as loans reprice; stable funding costs Improving
Credit qualityCharge-offs modest; recoveries in Q3/Q4; allowance stable Nonaccruals up to $1.2M (one CRE downgrade); provision credit $1.1M from recoveries Stable overall, watch list items
Deposits/mixCDs up on rate environment; seasonal outflows in Q4 Total deposits +$51.5M QoQ; $89M non-maturity deposit expected to be used by year-end Mixed (transient inflows)
Securities portfolioTreasury portfolio approaching maturity; redeployment plan in 2025 AFS down $12.5M; net unrealized losses improved to $17.6M (3% of AFS) Improving AOCI headwind
Fee income/BOLIBOLI restructuring to higher-yield separate account; fee enhancements by end Q3 BOLI earnings +$47k YoY; $120k one-time exchange fees; wealth AUM $679M Building
Capital returns/uplistingQ4 repurchases; targeting shareholder value; awards/recognition Uplisted to Nasdaq in May; buybacks and dividends continue Supportive

Management Commentary

  • “It was a very good second quarter with improvements across most of our performance metrics. Our financial performance centered on growth in NIM, loans, and deposits.” – Jerome Schwind, CEO .
  • “NIM increased as expected… with earning assets continuing to reprice on stable cost of funds… The increase in total deposits was highlighted by an $89 million increase in non-maturity deposits…” .
  • “The Bank also recovered the entire overdraft charge-off that occurred during the third quarter of 2024. This recovery positively affected the provision for credit losses for the quarter.” .
  • “Since uplisting to the Nasdaq in May, our stock volume has increased significantly… We view our higher stock price as an expanded source of potential currency and opportunity for further growth.” .
  • Prior quarter context: “We fully recovered a $1.6 million overdraft charge… Our team continues to focus on fee businesses, balance sheet management, and credit performance.” (Q1) .

Q&A Highlights

No public Q2 2025 earnings call transcript was found in our catalog; Q&A themes and clarifications were therefore not accessible.

Estimates Context

MetricQ2 2024Q1 2025Q2 2025
EPS – Consensus Mean ($)0.40*0.515*0.545*
EPS – Actual (Primary/Normalized) ($)0.46*0.57*0.55*
Revenue – Consensus Mean ($MM)17.20*18.50*18.60*
Revenue – Actual ($MM)16.99*18.16*19.91*
# EPS Estimates2*2*2*
# Revenue Estimates1*1*1*
  • Q2 2025: EPS primary/normalized slightly beat consensus (0.55 vs 0.545; bold) and revenue was a significant beat ($19.91M vs $18.60M; bold).
  • Q1 2025: EPS beat (0.57 vs 0.515; bold), revenue modest miss ($18.16M vs $18.50M; bold).
  • Q2 2024: EPS beat (0.46 vs 0.40; bold), revenue modest miss ($16.99M vs $17.20M; bold).

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • NIM tailwind is intact; ongoing loan repricing and stabilizing funding costs should support margin expansion into 2H 2025, a positive earnings driver .
  • Reported EPS benefited from a provision credit tied to recoveries; core performance (core EPS $0.55) remains the better run-rate anchor for modeling .
  • Commercial loan growth and residential construction draws drove core loan expansion; pipeline strength is encouraging but management tempered near-term growth expectations due to timing and demand factors .
  • Deposit growth included a sizable, temporary non-maturity inflow; plan for potential reversal by year-end in liquidity modeling and funding mix assumptions .
  • AFS portfolio marks improved; as treasuries mature, redeployment into higher-yield assets can further aid NIM while reducing AOCI drag over time .
  • Fee income initiatives (BOLI restructuring, wealth management) are progressing; watch for incremental noninterest income contributions by late Q3/Q4 .
  • Capital returns continue via dividends and buybacks post-Nasdaq uplisting, supporting total shareholder return and providing potential currency for strategic actions .