Isabella Bank Signs Grand River Commerce Merger

The Tip Desk · July 23, 2026 · 3 min read

Second-quarter net interest income reached $18.1 million as the fully tax-equivalent margin widened 21 bps sequentially to 3.54%.

Isabella Bank Corporation (ISBA), a state-chartered community bank headquartered in Mt. Pleasant, Michigan, signed a merger agreement with Grand River Commerce, Inc. and its banking subsidiary, Grand River Bank, and was added to the Russell 2000 Index in June.

Chief executive Jerome Schwind said the company believes the acquisition will enable entry into the Grand Rapids market with a strong portfolio and customer base.

The operating story in the second quarter was a faster expansion of the net interest margin. The fully tax-equivalent net interest margin widened 21 bps sequentially to 3.54% from 3.33% in the first quarter, after a 5 bps sequential expansion to 3.33% in that prior quarter. Net interest income rose to $18.1 million from $16.9 million.

The loan yield increased to 5.86% from 5.78% sequentially, which the company attributed to higher rates on new loans and variable-rate commercial loans that continue to reprice. The cost of interest-bearing liabilities fell to 2.09% from 2.14%, with certificate-of-deposit rates down to 3.49% from 3.59% and money-market rates down to 2.33% from 2.37%.

Loans grew $30.7 million in the quarter to $1.6 billion, led by commercial real estate and residential real estate. Most residential originations were adjustable-rate products retained on the balance sheet rather than sold in the secondary market. The consumer loan portfolio continued to decline amid declining demand, competition, and adherence to credit quality standards.

Total deposits reversed to a $49.9 million sequential decline to $1.8 billion after a $40.2 million increase in the first quarter. Money market accounts fell $24.1 million, certificates of deposit $17.0 million, and interest-bearing demand deposits $11.8 million, partly offset by a $0.1 million rise in savings and a $2.8 million rise in noninterest-bearing demand. The loan-to-deposit ratio was 87.83% at June 30, 2026.

Credit quality deteriorated on a sequential basis. Nonaccrual loans rose to $7.8 million from $4.4 million, lifting nonperforming loans to total loans to 0.49% from 0.28%. The provision for credit losses was $895,000, including a $465,000 increase in the allowance for credit losses and $384,000 of net charge-offs, versus a $604,000 provision in the first quarter. The ACL was $14.5 million, or 0.91% of loans, at June 30.

Noninterest income was $4.4 million, essentially unchanged from the prior quarter. Service charges and fees were $2.55 million and wealth management fees $1.22 million. Noninterest expenses rose to $15.4 million from $14.7 million, including $505,000 of merger-related expenses tied to the Grand River Commerce agreement. Compensation and benefits were $8.15 million. The efficiency ratio was 67.84%.

Net income was $5.0 million, or $0.69 a share, for the three months ended June 30, 2026, compared with $5.0 million, or $0.68 a share, a year earlier. Return on average tangible equity was 10.66%.

The company launched an at-the-market stock offering that increased equity by $11.7 million through the issuance of 303,371 shares. Common equity tier 1 capital rose to 12.34% from 11.71%. Tangible book value was $26.27 a share. Total equity was $248.7 million, or $32.60 a share, at June 30.

Available-for-sale securities fell $53.5 million sequentially to $439.3 million, as maturities and principal paydowns of $121.8 million exceeded $64.4 million of purchases. Net unrealized losses on the AFS portfolio were $10.8 million, or 2% of amortized cost. Cash and cash equivalents rose $15.7 million from year-end 2025. Total assets were $2.2 billion.