Neil McDonnell
About Neil McDonnell
Neil M. McDonnell (age 61) is President of Isabella Bank and a director of Isabella Bank Corporation and Isabella Bank since January 31, 2024. He joined the company in 2018 as Chief Financial Officer and was appointed President effective January 5, 2024, bringing 30+ years of banking experience across CFO, controller, treasurer, compliance/risk, and finance roles at international and community banks . He is an employee director (not independent under Nasdaq standards) while the Board Chair is an independent director, with independent sessions held at least twice per year—mitigating typical dual-role concerns . Company performance context: total shareholder return on a $100 initial investment declined from 131 (2022) to 127 (2023) to 119 (2024), and net income fell from $22.2M (2022) to $18.2M (2023) to $13.9M (2024), underscoring tighter earnings as his role transitioned from CFO to President .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Isabella Bank Corporation / Isabella Bank | Chief Financial Officer | 2018–2024 | Led initiatives advancing strategic plan and improving key metrics, including shareholder value |
| Isabella Bank | Interim Controller | Nov 5, 2020–Mar 1, 2021 | Supported finance controls during transition period |
| Isabella Bank | President | Jan 5, 2024–Present | Executive leadership through 2024; named NEO with updated pay structure |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Community Bankers of Michigan | Director | Current | Industry voice; governance perspective to regional banking |
| Mid-Michigan Industries | Director | Current | Community-focused oversight |
| Habitat for Humanity of Isabella County | Finance Committee Volunteer | Current | Local community engagement |
Fixed Compensation
Multi-year summary compensation (salary, bonus, stock awards, all other, total):
| Metric ($) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|---|
| Base Salary | 258,250 | 266,773 | 275,687 | 289,000 | 301,300 | 365,000 |
| Bonus | 10,800 | 46,253 | 30,946 | 55,137 | 49,130 | 16,572 |
| Stock Awards (grant-date fair value) | 10,800 | 46,253 | — | 36,125 | — | 25,125 |
| Change in Pension/Deferred Comp Value | — | — | — | 11 | 3,331 | 12,270 |
| All Other Compensation | 13,564 | 22,379 | 149,832 (includes relocation) | 35,146 | 39,636 | 52,950 |
| Total Compensation | 293,414 | 381,658 | 456,465 | 415,419 | 393,397 | 471,917 |
Additional director fees: $30,000 paid in 2024 as an employee director; none in 2023 . Non-employee director annual retainer was $40,000; employee director retainer $30,000; chair/chair fees as disclosed .
Performance Compensation
Executive incentive structures and recent grants:
- Executive Cash Incentive Plan: Max payout range 22%–35% of annual salary for President/CEO, Bank President, and CFO; goals include personal and corporate metrics; financial measures included net income across 2022–2024 .
- Restricted Stock Plan (RSP): Annual equity-based bonus with max award 25%–40% of annual salary; awards granted based on achievement of performance targets; three-year vesting; subject to clawback .
- Clawback Policy: Adopted effective for awards granted/paid on or after Jan 1, 2024; applies to SERP, Cash Incentive, and RSP .
Recent RSP awards to McDonnell:
| Year | Grant Date | Target Award (% of salary) | Vesting | Status |
|---|---|---|---|---|
| 2021 | Apr 1, 2021 | 25% | 3-year from grant | Granted; unvested shares outstanding |
| 2022 | Mar 28, 2022 | 25% | 3-year from grant | Granted; unvested shares outstanding |
| 2023 | Feb 16, 2023 | 25% | 3-year from grant | Not achieved; award lapsed |
| 2024 | Mar 26, 2024 | 30% | 3-year from grant | Granted; unvested shares outstanding |
Outstanding unvested restricted stock as of Dec 31, 2024:
| Grant Date | Unvested Shares (#) | Market Value ($) | Notes |
|---|---|---|---|
| 4/1/2021 | 3,184 | 82,752 | 3-year vest from grant |
| 3/28/2022 | 1,444 | 37,530 | 3-year vest from grant |
| 3/26/2024 | 1,290 | 33,527 | 3-year vest from grant |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial ownership | 3,230 shares; 0.04% of class; includes 27 shares shared with son |
| Director stock units | 397 stock units credited under Directors Plan as of Mar 14, 2025 |
| Unvested restricted stock | 5,918 shares total (3/26/2024: 1,290; 3/28/2022: 1,444; 4/1/2021: 3,184) |
| Ownership/holding policies | Directors required to invest ≥25% of board fees in common stock via DRIP or deferral; distributions in stock only; Rabbi Trust funded plan . Executive-specific ownership guideline multiples not disclosed. |
| Hedging/pledging | No pledging/hedging disclosures identified in the proxy sections reviewed. |
Employment Terms
| Provision | Key Terms |
|---|---|
| SERP participation | Initial participation effective Jan 23, 2019 ; restated in 2024 to include clawback; McDonnell eligible for credits totaling $600,000 . |
| SERP vesting/payment | Default 100% vest upon normal retirement, retirement, involuntary termination without cause, death, disability, or change in control; paid as lump sum per plan/participation agreement; includes restrictive covenants (non-compete and related restrictions) . |
| Change-in-control agreements | No individual CIC agreements with executive officers . |
| CIC economics (SERP) | If terminated in connection with CIC, additional credit $382,500; total credit $618,265 (as of 12/31/2024 assumption) . |
| CIC economics (RSP) | Unvested shares fully vest upon CIC with qualifying termination; McDonnell would vest 5,918 shares ($153,809) at 12/31/2024 . |
| Clawback | Applies to SERP, Executive Cash Incentive Plan, and RSP for financial misreporting restatements; effective for awards on/after Jan 1, 2024 . |
| Non-compete/solicit | SERP includes restrictive covenants limiting competition and certain activities; specifics not detailed beyond plan summary . |
Board Governance
- Board service: Appointed director effective Jan 31, 2024; nominated for a term ending at the 2028 annual meeting .
- Committee roles: Not listed on Audit, Nominating & Corporate Governance, or Compensation & Human Resource committees; chairs and members are independent directors .
- Independence: Not independent due to employment; board chair is independent; independent directors meet without inside directors at least twice per year .
- Attendance: Board met 14 times in 2024; each director attended ≥75% of meetings; all directors attended 2024 annual meeting except one .
- Director compensation: Employee director retainer $30,000; McDonnell received $30,000 in 2024 . Accrued 397 stock units under Directors Plan .
Compensation Structure Analysis
- Shift in cash vs equity: 2024 base salary increased to $365,000 with modest RS award ($25,125) and lower cash bonus ($16,572) versus 2023—suggests more fixed pay as President with equity still performance-based .
- RS award target increased: Target RS award moved from 25% of salary (2021–2023) to 30% in 2024, tightening alignment but with three-year vesting and clawback .
- Performance control: 2023 RSP goals not met—equity grant lapsed; underscores disciplined pay-for-performance and potential retention risk if multi-year goals are stringent .
- Governance safeguards: Broad clawback coverage across SERP, cash incentives, and RSP; no executive CIC agreements; independent chair and committee leadership .
Performance Compensation – Plan Details
| Plan | Metric Types | Max Payout | Weighting/Targets | Payout Determination | Vesting |
|---|---|---|---|---|---|
| Executive Cash Incentive | Personal and corporate goals; includes net income | 22%–35% of salary | Not disclosed | Committee/CEO assessment per role | N/A |
| Restricted Stock Plan | Financial performance targets (Board-set) | 25%–40% of salary | Not disclosed | Grant lapses/adjusts if targets not met (e.g., 2023) | 3-year from grant |
| SERP | Deferred credits with vest triggers | Credits per participation agreement (e.g., $600k total credits) | N/A | Vest per plan triggers; CIC additional credit | N/A |
Additional Disclosures
- Pay vs Performance (Company context): TSR values of a $100 investment—2022: 131; 2023: 127; 2024: 119; Net income (thousands)—2022: 22,238; 2023: 18,167; 2024: 13,889 .
- Director ownership: Individual/director group beneficial ownership presented; McDonnell 3,230 shares (0.04%) .
- Rabbi Trust/Directors Plan funding: $1,113,229 transferred in 2024; 142,535 shares held for settlement; 101,493 stock units outstanding across participants .
Investment Implications
- Alignment: Increased 2024 base pay with maintained—but disciplined—equity incentives (2023 RSP lapsed) and broad clawback coverage point to conservative pay governance; unvested RS tranches (5,918 shares) and SERP credit accruals align retention with performance .
- Retention/CIC risk: No individual CIC agreements reduce windfall risk; however, SERP additional credit ($382,500) and full RSP vesting at CIC with qualifying termination are meaningful; monitor potential retention levers vs. takeover dynamics .
- Trading signals: Watch vesting calendars (expected vest completions: 4/1/2024, 3/28/2025, 3/26/2027) and cash incentive payouts for performance signal; 2023 equity lapse indicates stricter hurdle rates—any improvement in net income/TSR could translate to resumed equity issuance and lower selling pressure from award lapses .
- Governance: Dual role as employee director with independent chair and independent committee leadership mitigates independence concerns; strong committee structure and attendance support oversight quality .