Isabella Bank Extends Margin Expansion to Record Profit

The Tip Desk · October 29, 2026 · 3 min read

Net interest margin reached 3.71% in the third quarter as net income hit a record $6.6 million, or $0.86 a share.

Isabella Bank Corporation (ISBA), a state-chartered community bank headquartered in Mt. Pleasant, Michigan, reported record net income of $6.6 million, or $0.86 a share, for the third quarter of 2026, up from $5.2 million, or $0.71 a share, a year earlier. The result included $657,000 of after-tax expenses related to the proposed acquisition of Grand River Commerce, Inc.

The expansion in net interest margin was the operating driver. The fully tax-equivalent NIM widened 17 basis points sequentially to 3.71% in the three months ended Sept. 30, 2026, after a 21 bps sequential expansion to 3.54% in the second quarter, continuing a multi-quarter widening from 3.33% in the first quarter. Net interest income rose to $19.4 million from $18.1 million in the prior quarter. Average interest-earning assets increased to $2.09 billion from $2.06 billion.

Loan yield increased to 5.95% from 5.86% in the prior quarter, 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 declined to 2.08% from 2.09%, with money-market deposit cost at 2.39% and certificates of deposit at 3.34%.

The balance sheet moved in the opposite direction from the second quarter. Loans reversed from growth to a $53.9 million sequential decline to $1.54 billion at Sept. 30, 2026, after a $53.3 million increase to $1.59 billion at June 30. Commercial real estate and residential real estate still grew, while advances to mortgage brokers fell $37.5 million and consumer loans fell $3.3 million. The company said most residential originations were adjustable-rate products retained on the balance sheet, and that the consumer portfolio continues to decrease amid declining demand, competition, and credit-quality standards.

Deposits reversed a second-quarter decline. Total deposits rose $82.7 million sequentially to $1.89 billion at Sept. 30, 2026, led by a $125.0 million rise in money-market accounts, partially offset by a $30.6 million drop in certificates of deposit. Cash and cash equivalents increased $112.5 million from year-end 2025, while the available-for-sale securities portfolio declined $88.3 million, or 17.7%, to $409.5 million. Net unrealized losses on AFS securities were $21.7 million, or 5.0% of amortized cost.

Credit costs eased. Net loan charge-offs were $207,000, or 0.01% of average loans, down from $384,000, or 0.02%, in the second quarter. The provision for credit losses was $50,000 versus $895,000 in the prior quarter. Nonaccrual loans were $7.5 million, essentially unchanged from $7.8 million at June 30, after a $3.4 million sequential increase in the second quarter; nonperforming loans to total loans held at 0.49%. The allowance for credit losses was $14.4 million, with ACL-to-loans at 0.94%.

Noninterest income was $4.6 million, up from $4.4 million in the prior quarter. Service charges and fees were $2.43 million and wealth-management fees $1.17 million. Noninterest expenses were $15.6 million, including $672,000 of merger-related expenses versus $505,000 in the prior quarter; compensation and benefits were $8.50 million. The efficiency ratio improved to 64.74% from 67.84%.

Capital rose with the at-the-market offering. CET1 capital was 12.96% at Sept. 30, 2026, after the issuance of 322,685 shares added $12.5 million of equity net of expenses. Tangible book value was $25.78 a share. Return on average tangible equity was 12.90%.

All required regulatory and shareholder approvals have been received to complete the Grand River acquisition, which the company said is expected to close on Nov. 2, 2026, subject to customary closing conditions. President and CEO Jerome Schwind said the merger supports a disciplined growth strategy by expanding the customer base and presence in West Michigan.