ISABELLA BANK CORPORATION
ANNUAL REPORT
2017 Our Vision is to be recognized as the leading independent community bank.
Mission Statement
To provide high quality, personalized service to our customers
To enhance shareholder value through strategic growth and profitability
To be the employer of choice by providing equitable compensation, a positive work
environment, and opportunity for advancement
To promote economic growth, business development, and community service
Core Values
Demonstrate unwavering integrity
Community bank focused
Continued stability and independence
Exceptional customer service delivered in a personal manner
EQUAL EMPLOYMENT OPPORTUNITY
The equal employment opportunity clauses in Section 202 of the Executive Order 11246, as amended; 38 USC 4212, Vietnam Era Veterans
Readjustment Act of 1974; Section 503 of the Rehabilitation Act of 1973, as amended; relative to equal employment opportunity and implement-
ing rules and regulations of the Secretary of Labor are adhered to and supported by Isabella Bank Corporation and its subsidiaries.
YEAR in REVIEW
Jae A. Evans, President & Chief Executive Officer and David J. Maness, Chairman
“Efforts and courage are not enough without purpose & direction.”
~ John F. Kennedy
We are proud to report, 2017 was another solid year
for Isabella Bank Corporation. We recorded earnings
of $13.2 million and earnings per common share of
$1.69. We experienced strong loan and deposit growth
during the year as well as in assets managed by our
Investment and Trust Services team. Cash dividends
paid during the year were increased, and closed the
year with a dividend yield of 3.6% based on the closing
stock price of $28.25 as of December 29, 2017.
ASSET GROWTH
Total assets ended the year over $1.8 billion and our
total assets under management were a record $2.6
billion. Assets under management includes $266.8
million of loans sold and serviced, and $478.1 million
of assets managed by our Investment and Trust
Services team. Assets managed by the Investment
and Trust Services team grew 11.8% during 2017.
Our Investment and Trust Services team has worked
diligently to evolve their strategy from product-based
sales to planning and advice which better aligns with
the change in industry and customer expectations.
loans
Gross loans grew by $80.9 million or 8.0%, with
increasing a
commercial and agricultural
combined total $60.9 million. Recent initiatives to
expand our retail lending line of business increased
both our market presence and share, as loans to
consumers, which includes residential mortgages,
increased $20.0 million during 2017.
In an environment with intense loan competition,
our strategies have resulted in significant loan growth
while upholding our high-level of underwriting
standards. At year-end 2017, the allowance for loan
losses to total loans was 0.7% which is the lowest we
have recorded over the past 40 years. We continued
to see improvement in overall asset quality as our level
of non-performing assets to total assets was 0.2% as
of year-end.
Stability Independence&
NET INTEREST INCOME
Our net interest income continues to be under
pressure due to the extended period of low interest
rates. Our fully taxable equivalent interest rate on
net earning assets was 3.0% for 2017. Despite the
rate environment, a shift on our balance sheet from
investment securities to loans and the growth in assets
previously mentioned resulted in our net interest
income increasing $3.1 million compared to 2016.
Deposit growth of $70.2 million in 2017 also contributed
to this improvement.
In accordance with accounting guidance, we were
required to measure the effect of income tax law
changes on our level of deferred taxes and recognize
these tax effects as a component of income tax
expense in the period in which the law was enacted.
As a result, our federal income tax expense for
the year ended December 31, 2017 included an
additional $319,000 of expense. While this was not
favorable for 2017, we will begin to see the benefits
of the lower tax rate beginning in 2018 which is
expected to have a significant
impact on net income.
Large Business Community Service Award
the banking
At the 61st Annual Mt. Pleasant Chamber
of Commerce Awards
Banquet, Isabella Bank
was
recognized with
the 2017 Large Business
Community
Service
Award. This prestigious
honor recognizes one
large
outstanding
business that has shown support of Chamber
initiatives, and involvement in the community,
including dedicating resources in the form of
financial support, employee volunteer hours,
and leadership to improve the quality of life in
Isabella County.
is still unknown how
It
interest rates
long before
“normalize” and relieve the
pressure on interest margins
industry.
in
During 2017, the Federal
Reserve
increased
Bank
short-term interest rates and
increases.
projected future
We anticipate improvements
in our net interest income
through a combination of
assets repricing faster than
liabilities, our asset mix
increasing
shifting
percentage of
loans from
investment securities, and strategic growth in loans
and other income earning assets. Our commitment
to balance sheet growth continues to be our strategy
to increase net interest income during this time.
NET INCOME
The Corporation’s net income
for 2017 was $13.2 million
compared to $13.8 million
in 2016. While net interest
income increased $3.1 million
in 2017 from the previous year,
an increase in compensation
and benefits expense of
$2.4 million
largely offset
that amount. This expense
increase was related to new
positions required for future
growth within our markets,
increases, additional
merit
costs related to lending compliance requirements and
increased service costs of our defined benefit plan. In
addition, the tax expense related to the new tax law,
as previously stated, also increased 2017 expenses.
to an
TAX CUTS & JOBS ACT OF 2017
On December 22, 2017, the Tax Cuts and Jobs Act was
enacted. The new law establishes a flat corporate
federal statutory income tax rate of 21%, effective
January 1, 2018, and eliminates the corporate
alternative minimum tax. The new tax law provides
for a wide array of changes, only some of which will
have a direct impact on our future federal income
tax expense. Some of these changes include: limits
to the deduction of net interest expense; immediate
expense (for tax purposes) for certain qualified
depreciable assets; elimination or reduction of certain
deductions related to meals and entertainment
expenses; and limits to the deductibility of deposit
insurance premiums.
DIVIDEND GROWTH
During 2017, the Corporation paid $1.02 in cash
dividends. Cash dividends paid during 2017
represented a 4.1% increase over the cash dividends
paid in 2016. In early March of 2018, we announced
that the Board of Directors of the Corporation declared
a first quarter cash dividend of $0.26 per common
share payable on March 30, 2018 to shareholders of
record as of March 28, 2018. The first quarter 2018
dividend represents a 4.0% increase over the cash
dividend paid in the first quarter of 2017.
OVERVIEW
We have been pleased with our success in the
Saginaw market since we increased our presence
there in 2015 with the purchase of a full-service
branch. In 2017, we expanded our presence in Saginaw
with the opening of a loan production office. As a result of
this expansion we experienced significant loan growth of
$26.3 million in this market.
The level of commitment from our employees to the
communities they serve continues to be outstanding.
During 2017, employees donated over 8,200 hours to over
560 different organizations across our footprint. We hold
community service as an important role in our company
culture, mission, and core values.
2018 & BEYOND
Looking ahead to 2018, we are excited to roll out new
products and services designed to enhance the customer
experience.
introduced online account opening
We recently
in
February of this year. Online Account Opening provides
the capability for new and existing customers to open an
account securely from the comfort and convenience of
anywhere they choose.
In March of this year, we launched our new shareholder
portal. Through this new offering, shareholders may view
their account activity, update contact information, view
previous statements, request the purchase or sale of
ISBA stock, and opt-in for electronic Annual Reports and
Proxies.
Through innovative products and services, exceptional
personalized service, community commitment, and
strategic growth and profitability, we will continue
our core value of stability and independence.
On behalf of our Board of Directors, thank you for making an
investment in Isabella Bank Corporation. We look forward
to visiting with you at our annual shareholder meeting on
May 8, 2018 at 5:00 p.m. at the Comfort Inn Conference
Center in Mt. Pleasant.
Jae A. Evans,
President & CEO
David J. Maness,
Chairman
ISABELLA BANK CORPORATION
WELCOMES NEIL MCDONNELL
AS CHIEF FINANCIAL OFFICER
Neil earned his Bachelor of Science –
Finance degree from St. John’s University in
New York. He built his career over 27 years
in the financial services industry. He has
served as chief financial officer, controller,
treasurer, compliance & risk officer, and
director of finance at large international
banks, local community banks, as well as
de novo banks.
“I am pleased to welcome Neil
to the Isabella Bank Corporation
team. Neil’s extensive experience
in
industry will
be a tremendous asset to the
Corporation.” ~Jae Evans
the financial
He was an active member of his community
in Fairfield County, Connecticut, serving
as chair of the Investment and Finance
Committee for The WorkPlace, Inc. for 18
years. The Workplace, Inc. is a workforce
development board created to help people
prepare for careers and strengthen the
Connecticut workforce. Neil also served
two years as a board member for WP
Ventures, Inc. and a volunteer coordinator
for the Service League of Boys through the
local high school. Neil and his wife, Kenda,
have three children. Neil looks forward
to transitioning to the area and getting
involved in the community.
ISABELLA BANK CORPORATION
SELECTED FINANCIAL DATA
(Dollars in thousands except per share amounts)
For the years ended
INCOME STATEMENT DATA
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income
Noninterest expenses
Federal income tax expense
Net income
PER SHARE
Basic earnings
Diluted earnings
Dividends
Tangible book value*
Quoted market value
High
Low
Close*
Common shares outstanding*
PERFORMANCE RATIOS
Return on average total assets
Return on average shareholders' equity
Return on average tangible shareholders' equity
Net interest margin yield (fully taxable equivalent)**
BALANCE SHEET DATA*
Gross loans
Available‐for‐sale securities
Total assets
Deposits
Borrowed funds
Shareholders' equity
Gross loans to deposits
ASSETS UNDER MANAGEMENT*
Loans sold with servicing retained
Assets managed by our Investment and Trust Services
Department
Total assets under management
ASSET QUALITY*
Nonperforming loans to gross loans
Nonperforming assets to total assets
Allowance for loan and lease losses to gross loans
CAPITAL RATIOS*
Shareholders' equity to assets
Tier 1 leverage
Common equity tier 1 capital
Tier 1 risk‐based capital
Total risk‐based capital
2017
2016
2015
2014
2013
58,413
12,494
45,919
253
10,812
40,225
3,016
13,237
1.69
1.65
1.02
18.96
29.95
27.60
28.25
7,857,293
$
$
$
$
$
$
$
$
$
53,666
10,865
42,801
(135)
11,108
37,897
2,348
13,799
1.77
1.73
0.98
18.16
29.90
27.25
27.85
7,821,069
$
$
$
$
$
$
$
$
$
51,502
10,163
41,339
(2,771)
10,359
36,051
3,288
15,130
1.95
1.90
0.94
17.30
29.90
22.00
29.90
7,799,867
$
$
$
$
$
$
$
$
$
51,148
9,970
41,178
(668 )
9,325
35,103
2,344
13,724
1.77
1.74
0.89
16.59
24.00
21.73
22.50
7,776,274
$
$
$
$
$
$
$
$
$
0.7 %
6.7 %
9.1 %
3.0 %
0.8 %
7.1 %
10.0 %
3.0 %
1.0 %
8.3 %
11.5 %
3.1 %
0.9 %
8.1 %
10.8 %
3.2 %
50,418
11,021
39,397
1,111
10,175
33,755
2,196
12,510
1.63
1.59
0.84
15.62
26.00
21.12
23.85
7,723,023
0.9 %
7.7 %
10.7 %
3.2 %
1,091,519
552,307
1,813,130
1,265,258
344,878
194,905
$
$
$
$
$
$
1,010,615
558,096
1,732,151
1,195,040
337,694
187,899
$
$
$
$
$
$
850,492
660,136
1,668,112
1,164,563
309,732
183,971
$
$
$
$
$
$
836,550
567,534
1,549,543
1,074,484
289,709
174,594
$
$
$
$
$
$
810,777
512,062
1,493,137
1,043,766
279,326
160,609
86.3 %
84.6 %
73.0 %
77.9 %
77.7 %
266,789
$
272,882
$
287,029
$
288,639
$
293,665
478,146 $
427,693 $
405,109 $
383,878 $
2,558,065
$
2,432,726
$
2,360,250
$
2,222,060
$
351,420
2,138,222
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.3 %
0.2 %
0.7 %
10.7 %
8.5 %
12.2 %
12.2 %
12.9 %
0.2 %
0.1 %
0.7 %
10.9 %
8.6 %
12.4 %
12.4 %
13.0 %
0.1 %
0.1 %
0.9 %
11.0 %
8.5 %
13.4 %
13.4 %
14.2 %
0.5 %
0.3 %
1.2 %
11.3 %
8.6 %
N/A
14.1 %
15.2 %
0.4 %
0.3 %
1.4 %
10.8 %
8.5 %
N/A
13.7 %
14.9 %
* At end of year
** For all periods reported, the fully taxable equivalent (FTE) adjustment is based on a 34% federal income tax rate. Beginning 2018, the
FTE adjustment will be based on a 21% federal income tax rate as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017.
December 31
Change
2017
2016
$
%
$
25,267 $
5,581
30,848
20,167 $
2,727
22,894
5,100
2,854
7,954
25.3 %
104.7 %
34.7 %
552,307
1,560
558,096
1,816
(5,789)
(1.0 )%
(256)
(14.1 )%
ISABELLA BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
Cash and cash equivalents
ASSETS
Cash and demand deposits due from banks
Interest bearing balances due from banks
Total cash and cash equivalents
Available‐for‐sale securities (amortized cost of $551,712 in 2017
and $557,648 in 2016)
Mortgage loans available‐for‐sale
Loans
Commercial
Agricultural
Residential real estate
Consumer
Gross loans
Less allowance for loan and lease losses
Net loans
Premises and equipment
Corporate owned life insurance policies
Accrued interest receivable
Equity securities without readily determinable fair values
Goodwill and other intangible assets
Other assets
634,759
128,269
272,368
56,123
1,091,519
7,700
1,083,819
28,450
27,026
7,063
23,454
48,547
10,056
575,664
126,492
266,050
42,409
1,010,615
7,400
1,003,215
29,314
26,300
6,580
21,694
48,666
13,576
TOTAL ASSETS
$ 1,813,130 $ 1,732,151 $
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Noninterest bearing
NOW accounts
Certificates of deposit under $250 and other savings
Certificates of deposit over $250
Total deposits
Borrowed funds
Accrued interest payable and other liabilities
Total liabilities
Shareholders’ equity
Common stock — no par value 15,000,000 shares authorized;
issued and outstanding 7,857,293 shares in 2017 and
7,821,069 shares in 2016
Shares to be issued for deferred compensation obligations
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
237,511 $
231,666
728,090
67,991
1,265,258
344,878
8,089
1,618,225
205,071 $
209,325
717,078
63,566
1,195,040
337,694
11,518
1,544,252
140,277
5,502
51,728
(2,602)
194,905
139,525
5,038
46,114
(2,778 )
187,899
59,095
1,777
6,318
13,714
80,904
300
80,604
(864)
726
483
1,760
(119)
(3,520)
80,979
32,440
22,341
11,012
4,425
70,218
7,184
(3,429)
73,973
752
464
5,614
176
7,006
10.3 %
1.4 %
2.4 %
32.3 %
8.0 %
4.1 %
8.0 %
(2.9 )%
2.8 %
7.3 %
8.1 %
(0.2 )%
(25.9 )%
4.7 %
15.8 %
10.7 %
1.5 %
7.0 %
5.9 %
2.1 %
(29.8 )%
4.8 %
0.5 %
9.2 %
12.2 %
(6.3 )%
3.7 %
$ 1,813,130 $ 1,732,151 $
80,979
4.7 %
ISABELLA BANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
Interest income
Loans, including fees
Available‐for‐sale securities
Taxable
Nontaxable
Federal funds sold and other
Total interest income
Interest expense
Deposits
Borrowings
Total interest expense
Net interest income
Provision for loan losses
Year Ended December 31
Change
2017
2016
$
%
$
43,537 $
38,537 $
5,000
13.0 %
8,564
5,570
742
58,413
6,809
5,685
12,494
45,919
253
8,746
5,715
668
53,666
5,836
5,029
10,865
42,801
(135)
(182)
(145)
74
4,747
973
656
1,629
3,118
388
(2.1 )%
(2.5 )%
11.1 %
8.8 %
16.7 %
13.0 %
15.0 %
7.3 %
(287.4 )%
Net interest income after provision for loan
losses
45,666
42,936
2,730
6.4 %
Noninterest income
Service charges and fees
Earnings on corporate owned life insurance policies
Net gain on sale of mortgage loans
Net gains on sale of available‐for‐sale securities
Other
Total noninterest income
Noninterest expenses
Compensation and benefits
Furniture and equipment
Occupancy
Other
Total noninterest expenses
Income before federal income tax expense
Federal income tax expense
NET INCOME
Earnings per common share
Basic
Diluted
Cash dividends per common share
6,013
726
647
142
3,284
10,812
21,525
5,523
3,133
10,044
40,225
16,253
3,016
13,237 $
1.69 $
1.65 $
1.02 $
5,230
761
651
245
4,221
11,108
19,170
5,275
3,227
10,225
37,897
16,147
2,348
13,799 $
1.77 $
1.73 $
0.98 $
783
(35)
(4)
(103)
(937)
(296)
2,355
248
(94)
(181)
2,328
106
668
(562)
(0.08)
(0.08)
0.04
$
$
$
$
15.0 %
(4.6 )%
(0.6 )%
(42.0 )%
(22.2 )%
(2.7 )%
12.3 %
4.7 %
(2.9 )%
(1.8 )%
6.1 %
0.7 %
28.4 %
(4.1 )%
(4.5 )%
(4.6 )%
4.1 %
ISABELLA BANK CORPORATION
AVERAGE BALANCES, INTEREST RATE, AND NET INTEREST INCOME
(Dollars in thousands except per share amounts)
The following table presents the daily average amount outstanding for each major category of interest earning assets, non‐
earning assets, interest bearing liabilities, and noninterest bearing liabilities for the last two years. These schedules also
present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a fully
taxable equivalent (FTE) basis using a 34% federal income tax rate for the periods presented in the table below. Beginning
January 1, 2018, all interest income will be reported on a FTE basis using a 21% federal income tax rate as a result of the Tax
Cuts and Jobs Act enacted on December 22, 2017. Loans in nonaccrual status, for the purpose of the following computations,
are included in the average loan balances. Federal Reserve Bank and Federal Home Loan Bank restricted equity holdings are
included in accrued income and other assets.
Average
Balance
2017
Tax
Equivalent
Interest
Year Ended December 31
Average
Yield /
Rate
Average
Balance
2016
Tax
Equivalent
Interest
Average
Yield /
Rate
1,040,630 $
361,783
202,375
663
26,815
1,632,266
(7,607)
19,309
28,933
99,456
1,772,357
43,537
8,564
9,126
5
737
61,969
4.2 % $
2.4 %
4.5 %
0.8 %
2.8 %
3.8 %
922,333 $
392,810
205,450
—
25,557
1,546,150
38,537
8,746
9,351
—
668
57,302
(7,638)
18,178
28,670
101,995
1,687,355
$
$
213,648
356,963
433,562
352,400
1,356,573
232
1,091
5,486
5,685
12,494
$
0.1 % $
0.3 %
1.3 %
1.6 %
0.9 %
203,198
336,859
429,731
319,049
1,288,837
163
663
5,010
5,029
10,865
4.2 %
2.2 %
4.6 %
— %
2.6 %
3.7 %
0.1 %
0.2 %
1.2 %
1.6 %
0.8 %
INTEREST EARNING ASSETS
Loans
$
Taxable investment securities
Nontaxable investment securities
Fed Funds Sold
Other
Total earning assets
NONEARNING ASSETS
Allowance for loan losses
Cash and demand deposits due from
banks
Premises and equipment
Accrued income and other assets
Total assets
$
INTEREST BEARING LIABILITIES
Interest bearing demand deposits
$
Savings deposits
Time deposits
Borrowed funds
Total interest bearing liabilities
NONINTEREST BEARING LIABILITIES
Demand deposits
Other
Shareholders’ equity
Total liabilities and shareholders’
equity
$
1,772,357
Net interest income (FTE)
Net yield on interest
earning assets (FTE)
208,988
10,641
196,155
194,892
9,841
193,785
$
1,687,355
$
49,475
$
46,437
3.0 %
3.0 %
BOARD of DIRECTORS
Back Row, Pictured left to right: G. Charles Hubscher, W. Michael McGuire, Gregory V. Varner, Jerome E. Schwind, Dr. Jeffrey J. Barnes,
Joseph LaFramboise, Thomas L. Kleinhardt, David J. Maness. Front Row, Pictured left to right: W. Joseph Manifold, Jill Bourland, Jae A.
Evans, Sarah R. Opperman, and Richard J. Barz.
DAVID J. MANESS - Chairman
President,
Maness Petroleum Corporation
JAE A. EVANS
President & Chief Executive Officer,
Isabella Bank Corporation
JEROME E. SCHWIND
President,
Isabella Bank
DR. JEFFREY J. BARNES
Physician and Shareholder,
L.O. Eye Care
RICHARD J. BARZ
Chief Executive Officer (retired),
Isabella Bank Corporation
JILL BOURLAND, CPA, HCCP
Chief Executive Officer & Partner,
Blystone & Bailey, CPAs, PC
G. CHARLES HUBSCHER
President,
Hubscher and Son, Inc.
THOMAS L. KLEINHARDT
President,
McGuire Chevrolet
JOSEPH LAFRAMBOISE
Sales and Marketing Executive (retired),
Ford Motor Company
W. JOSEPH MANIFOLD, CPA
Chief Financial Officer (retired),
Federal Broach & Machine Co.
W. MICHAEL MCGUIRE
Director of the Office of the Corporate Secretary (retired),
The Dow Chemical Company
SARAH R. OPPERMAN
Principal,
Opperman Consulting, LLC
GREGORY V. VARNER
Research Director,
Michigan Bean Commission
SENIOR OFFICERS & DIVISION BOARDS
ISABELLA BANK CORPORATION
OFFICERS
ISABELLA BANK OFFICERS CONT.
BRECKENRIDGE DIVISION BOARD OF
DIRECTORS
JAE A. EVANS
JULIE F. BOLT
President, Chief Executive Officer
Vice President, Collections
NEIL M. McDONNELL
Chief Financial Officer
BARBARA A. PLACE, CPA, CBA, CRCM
Senior Vice President, Internal Audit
MARK K. DENOYELLES
Vice President, Investment & Trust
RANDY J. DICKINSON, CPA, CTFA
Vice President, Investment & Trust
AMY C. VOGEL
JOSHUA A. ELING
Vice President, Chief Risk Officer
Vice President, Commercial Loans
DEBRA A. CAMPBELL
Vice President, Corporate Secretary
DONALD F. FORSTER
Vice President, Collections
CYNDIA S. HEAP, CRCM, CAMS
Vice President, Compliance
PATRICK J. MEASE, SPHR, SHRM-SCP
Vice President, Human Resources
MICHAEL P. PRISBY
Vice President, Treasurer
RHONDA S. TUDOR, CPA
Vice President, Controller
ISABELLA BANK OFFICERS
JEROME E. SCHWIND
President
DAVID J. REETZ
Senior Vice President, Chief Lending Officer
PEGGY L. WHEELER
Senior Vice President, Chief Operations Officer
MICHAEL R. COLBY
President, East Division
BRIAN K. GOWARD
President, Breckenridge Division
KEITH E. KENNEY
President, Mecosta Division
DAVID W. SEPPALA
President, Greenville Division
BARBARA B. DIEHM
Senior Vice President, Branch Administration
THOMAS J. WALLACE
Senior Vice President, Retail Credit
JULIE A. HUBER, CGEIT, CRISC
Vice President, Chief Technology Officer
GREGORY S. MATTHEWS
Vice President, Chief Credit Officer
KIMBERLY K. BETTS
Vice President, Collections
JAMES L. BINDER
Vice President, Commercial Loans
THOMAS N. GROSS
Vice President, Commercial Loans
SHELLEY K. HOBBS
Vice President, Branch Manager
MICHAEL K. HUENEMANN
Vice President, Commercial Loans
KATHY J. KORSON
Vice President, Mortgage Loans
ROBERT K. MADSEN
Vice President, Commercial Loans
GREGORY S. MAPES
Vice President, Financial Services
BARBARA K. MCKENZIE
Vice President, Commercial Loans
MICHELLE L. MEASE
Vice President, Investment & Trust
ERIKA M. ROSS
Vice President, Operations
CARRIE S. SMITH
Vice President, Mortgage Loans
JEFFREY W. SMITH
Vice President, Commercial Loans
LESLIE J. THIELEN
Vice President, Consumer Loans
KARLA A. WALKER
Vice President, Mortgage Loans
LEO R. WICKERT, State Licensed Appraiser
Vice President, Appraisals
TIM M. WILSON
Vice President, Branch Manager
SANDY M. YUNCKER
Vice President, Deposit Operations
TRACY A. ZAYLER
Vice President, Branch Manager
BRIAN K. GOWARD
DAVID J. KING
TIMOTHY M. MILLER
JEROME E. SCHWIND
JEFFREY E. SHERWOOD
KIRK L. SMITH
GREGORY V. VARNER
BRENT C. WILSON
GREENVILLE DIVISION BOARD OF
DIRECTORS
BLAKE R. HOLLENBECK
DEBRA J. HUCH
ALEXANDER R. KEMP
GREGORY D. MILLARD
BRIAN R. SACKETT
JEROME E. SCHWIND
DAVID W. SEPPALA
KATHY J. VANDERLAAN
MECOSTA DIVISION BOARD OF
DIRECTORS
DR. RALPH P. CREW
MATTHEW L. CURRIE
KEVIN J. DEFEVER
KEITH E. KENNEY
JOSEPH LAFRAMBOISE
JEROME E. SCHWIND
NORTHERN DIVISION BOARD OF
DIRECTORS
SHARI R. BUCCILLI
MICHAEL L. JENKINS
THOMAS L. KLEINHARDT
W. MICHAEL MCGUIRE
JEROME E. SCHWIND
STEVEN L. STARK
As of March 2018
EMPLOYEE RECOGNITION
In 2017, we celebrated alongside our employees as they hit both professional and personal milestones. Please
help us recognize the following employees on their recent officer promotions, banking school graduations,
and retirements.
OFFICER PROMOTIONS
Kristen Churchman
Human Resources Officer
Nora Colthorp
Assistant Vice President, Hemlock Office
Kim Lambright
Assistant Vice President, Auditing
Greg Matthews
Chief Credit Officer
Scott Moore
Branch Officer, Clare South Office
Sharon Parks
Human Resources Officer
Paul Scoby
Assistant Vice President, Commercial Loans
Peggy Wheeler
Chief Operations Officer
MBA PERRY SCHOOL OF BANKING
Kristen Churchman
Human Resources Officer
Mike McNeil
Commercial Lender, Breckenridge
RETIREMENTS
Dennis Angner, 33 years
Linda Bragan, 14 years
Robin Cowles, 29 years
Cindy Diehm, 43 years
Kathy Formsma, 41 years
Chris Hafer, 42 years
Jane Kiel, 31 years
Terri O’Hearn, 19 years
Roxanne Schultz, 15 years
Lois Solomon, 12 years
Marilyn Whitehead, 8 years
Nancy Wood, 6 years
Isabella
Our mission is to be an employer of
choice. Our culture and our employees
are
Corporation’s
Bank
greatest assets. We continually invest
in our people, and their personal and
professional development; we do this
by providing equitable compensation,
a positive work environment, and
opportunities for advancement.
One way we strengthen our team
is through a four-phase mentoring
program.
We select mentor and
mentees to participate in our twelve-
month plan designed around our core
strategic objectives.
“Strengthen employee training
increase
and development
internal expertise and employee
engagement.”
to
A few tips we share with our mentor
duos are: help set and achieve goals,
honor your commitments, keep an
open mind, be a positive role model,
the best mentor/mentee
and be
possible. These tips are discussed
openly throughout the introduction,
growth, experimental, and reflection
phases. We recognize by strengthening
our team we will naturally increase
brand
experience
growth, and improve financial success
and shareholder value.
enhancement,
76 employees participated
in our
Mentoring & Growth program in 2017.
ISABELLA BANK CORPORATION
401 N. Main St.
Mt. Pleasant, Michigan 48858
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 8, 2018
Notice is hereby given that the Annual Meeting of Shareholders of Isabella Bank Corporation will be held on Tuesday,
May 8, 2018 at 5:00 p.m. Eastern Daylight Time, at the Comfort Inn Conference Center, 2424 S. Mission Street, Mt.
Pleasant, Michigan. The meeting is for the purpose of considering and acting upon the following items of business:
1. The election of five directors.
2. To transact such other business as may properly come before the meeting, or any adjournment or adjournments
thereof.
The Board of Directors has fixed March 9, 2018 as the record date for determination of shareholders entitled to notice of, and
to vote at, the meeting or any adjournments thereof.
By order of the Board of Directors
Debra Campbell, Secretary
Dated: March 28, 2018
ISABELLA BANK CORPORATION
401 N. Main St.
Mt. Pleasant, Michigan 48858
PROXY STATEMENT
General Information
This Proxy Statement is furnished in connection with the solicitation of proxies, to be voted at our Annual Meeting of
Shareholders (the “Annual Meeting”) which is to be held on Tuesday, May 8, 2018 at 5:00 p.m. at the Comfort Inn Conference
Center, 2424 S. Mission Street, Mt. Pleasant, Michigan, or at any adjournment or adjournments thereof, for the purposes set
forth in the accompanying Notice of the Annual Meeting of Shareholders and in this Proxy Statement.
This Proxy Statement has been mailed on March 28, 2018 to all holders of record of common stock as of the record date. If a
shareholder’s shares are held in the name of a broker, bank, or other nominee, then that party should give the shareholder
instructions for voting the shareholder’s shares.
Voting at the Meeting
We have fixed the close of business on March 9, 2018 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournment thereof. We have only one class of common stock and no preferred
stock. As of March 9, 2018, there were 7,861,737 shares of stock outstanding. Each outstanding share entitles the holder thereof
to one vote on each separate matter presented for vote at the meeting. You may vote on matters that are properly presented at
the Annual Meeting by attending the meeting and casting a vote, signing and returning the enclosed proxy, voting on the
internet, or voting by phone. You may change your vote or revoke your proxy at any time before it is voted at the Annual
Meeting by filing with the Corporation an instrument revoking it, filing a duly executed proxy bearing a later date (including a
proxy given over the internet or by phone) or by attending the meeting and electing to vote in person. You are encouraged to
vote by mail, internet, or phone.
We will hold the Annual Meeting if a majority of the shares of common stock entitled to vote are represented in person or by
proxy. If you execute a proxy, those shares will be counted to determine if there is a quorum, even if you abstain or fail to vote
on any of the proposals.
Your broker may not vote on Proposal 1 if you do not furnish instructions for such proposal. You should use the voting
instruction card provided by us to instruct the broker to vote the shares, or else your shares will be considered “broker non-
votes.” Broker non-votes are shares held by brokers or nominees as to which voting instructions have not been received from
the shares’ beneficial owner or the individual entitled to vote those shares and the broker or nominee does not have
discretionary voting power under rules applicable to broker-dealers. Under these rules, Proposal 1 is not an item on which
brokerage firms may vote in their discretion on your behalf unless you have furnished voting instructions.
At this year’s Annual Meeting, you will elect five directors to serve for a term of three years. You may vote in favor or abstain
with respect to any or all nominees. Directors are elected by a plurality of the votes cast at the Annual Meeting. Abstentions and
shares not voted, including broker non-votes, have no effect on the elections.
Proposal 1 - Election of Directors
The Board of Directors (the “Board”) currently consists of thirteen (13) members divided into three classes, with the directors
in each class being elected for a term of three years. The Board decreased from 12 members to 11 with the retirement of Dennis
P. Angner effective March 31, 2017 and increased from 11 members to 13 with the appointments of Jerome E. Schwind and Jill
Bourland on August 24, 2017. At the Annual Meeting, Richard J. Barz, Jill Bourland, Jae A. Evans, W. Michael McGuire, and
Jerome E. Schwind, whose terms expire at the Annual Meeting, have been nominated for election to serve through the 2021
Annual Meeting.
Except as otherwise specified, proxies will be voted for election of the five nominees. If a nominee becomes unable or
unwilling to serve, proxies will be voted for such other person, if any, as shall be designated. However, we know of no reason
to anticipate that this will occur. The five nominees who receive the greatest number of votes cast will be elected directors.
Each of the nominees has agreed to serve as a director if elected.
Nominees and current directors, including their principal occupation for the last five or more years, age, and length of service
as a director, are listed below.
We unanimously recommend that you vote FOR the election of each of the nominees.
Director Qualifications
Board members are highly qualified and represent your best interests. We select nominees who:
• Have extensive business leadership.
• Bring a diverse perspective and experience.
• Are objective and collegial.
• Have high ethical standards and have demonstrated sound business judgment.
• Are willing and able to commit the significant time and effort to effectively fulfill their responsibilities.
• Are active in and knowledgeable of their respective communities.
Each nominee and current director possesses these qualities and provides a diverse complement of specific business skills and
experience.
The following describes the key qualifications each director brings to the Board, in addition to the general qualifications
described above and the information included in the biographical summaries provided below.
Professional
experience
in chosen
field
Expertise
in financial
or related
field
Audit
Committee
Financial
Expert
Civic and
community
involvement
Leadership
and team
building
skills
Diversity
by race,
gender, or
cultural
Geo-
graphical
diversity
Finance
Tech-
nology
Market-
ing
Govern-
ance
Entre-
preneurial
skills
Human
Resources
Bank
business
segment
represent-
ation
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Director
David J.
Maness
Dr. Jeffrey J.
Barnes
Richard J.
Barz
Jill Bourland
Jae A. Evans
G. Charles
Hubscher
Thomas L.
Kleinhardt
Joseph
LaFramboise
W. Joseph
Manifold
W. Michael
McGuire
Sarah R.
Opperman
Jerome E.
Schwind
Gregory V.
Varner
The following table identifies individual Board members serving on each of our standing committees:
Director
David J. Maness
Dr. Jeffrey J. Barnes
Richard J. Barz
Jill Bourland
Jae A. Evans
G. Charles Hubscher
Thomas L. Kleinhardt
Joseph LaFramboise
W. Joseph Manifold
W. Michael McGuire
Sarah R. Opperman
Jerome E. Schwind
Gregory V. Varner
C — Chairperson
O — Ex-Officio
Audit
Xo
X
X
Xc
X
X
Nominating
and Corporate
Governance
Xo
X
Compensation
and Human
Resource
Xc
X
X
Xc
X
X
X
X
X
X
X
X
X
Director Nominees for Terms Ending in 2021
Richard J. Barz (age 69) has been a director of the Bank since 2000 and of Isabella Bank Corporation since 2002. Mr. Barz
retired as Chief Executive Officer of Isabella Bank Corporation on December 31, 2013 after over 41 years of service with the
Corporation. Mr. Barz was Chief Executive Officer of Isabella Bank Corporation from 2010 to 2013 and President and Chief
Executive Officer of the Bank from 2001 to July 2012. Mr. Barz has been very active in community organizations and events.
He is a past Chairman of the Central Michigan Community Hospital Board of Directors, past Chairman of the Middle Michigan
Development Corporation Board of Directors, and serves on several boards and committees at various volunteer organizations
throughout mid-Michigan.
Jill Bourland (age 47) was appointed to the Board of Directors of Isabella Bank Corporation and the Bank on August 24, 2017.
Ms. Bourland is CEO and Partner of Blystone & Bailey CPAs P.C. Ms. Bourland is a graduate of Central Michigan University
and a Certified Public Accountant. She has over 25 years of audit, tax and accounting experience with a concentration in small
business and affordable housing sectors. She currently serves as President of the Mt. Pleasant Area Community Foundation
where she previously served as Treasurer and Chair of the Finance Committee. She is involved with the Gratiot-Isabella
Technical Education Center Accounting/ Business Advisory Committee. She is also a member of the American Institute of
Certified Public Accountants, Michigan Association of Certified Public Accountants and Home Builders Association.
Jae A. Evans (age 61) was appointed a director of Isabella Bank Corporation and the Bank and elected Chief Executive Officer
of Isabella Bank Corporation effective January 1, 2014. Mr. Evans has been employed by the Corporation since 2008 and
served as Chief Operations Officer of the Bank from June 2011 to December 31, 2013 and President of the Greenville Division
of the Bank from January 1, 2008 to June 2011. He is a graduate of Central Michigan University and has over 40 years of
banking experience. Mr. Evans currently serves as a board member for The Community Bankers of Michigan, McLaren
Central Michigan Hospital, and the Central Michigan University Advancement Board. Mr. Evans is also past Chair of the
Eightcap, Inc. Governing Board, past Vice Chair of the Carson City Hospital, was president of the Greenville Rotary Club, and
past Chair of The Community Bankers of Michigan.
W. Michael McGuire (age 68) has been a director of Isabella Bank Corporation since 2007 and of the Bank since January 1,
2010. Mr. McGuire, an attorney, retired in August 2013 as the Director of the Office of the Corporate Secretary and Assistant
Secretary of The Dow Chemical Company, a manufacturer of chemicals, plastics and agricultural products, headquartered in
Midland, Michigan.
Jerome E. Schwind (age 51) was appointed a director of Isabella Bank Corporation on August 24, 2017 and was appointed a
director of the Bank on May 25, 2017. Mr. Schwind is President of the Bank and has been employed by the Bank since 1999.
He has served in various roles at the Bank including Executive Vice President and Chief Operations Officer. Mr. Schwind
received his undergraduate degree from Ferris State University and his MBA from Lake Superior State University. He is also a
graduate of the Dale Carnegie Executive Development program, the Graduate School of Banking at the University of
Wisconsin-Madison, and the Rollie Denison Leadership Institute. He currently serves as the Chair for the Middle Michigan
Development Corporation, is a member of the Finance Advisory Board for the Ferris State University College of Business,
member of the Michigan Bankers Association Grassroots Advocacy Committee, and the Michigan Bankers Association Board.
Current Directors with Terms Ending in 2019
Thomas L. Kleinhardt (age 63) has been a director of the Bank since 1998 and of Isabella Bank Corporation since 2010.
Mr. Kleinhardt is President of McGuire Chevrolet, active in the Clare Kiwanis Club, and the former coach of the girls Varsity
Basketball team for both Farwell High School and Clare High School.
Joseph LaFramboise (age 68) has been a director of the Bank since 2007 and of Isabella Bank Corporation since 2010. He is a
retired Sales and Marketing Executive of Ford Motor Company. Mr. LaFramboise is an Ambassador of Eagle Village in Evart,
Michigan.
Sarah R. Opperman (age 58) has been a director of the Bank and Isabella Bank Corporation since 2012. Ms. Opperman is the
owner of Opperman Consulting, LLC. She previously was employed for 28 years by The Dow Chemical Company, where she
held leadership roles in public and government affairs. Ms. Opperman is a member of the Central Michigan University
Advancement Board. She also is Chair of the MidMichigan Health Foundation and serves on the United Way of Midland
County Board of Directors.
Gregory V. Varner (age 63) has been a director of the Bank and Isabella Bank Corporation since 2015. Mr. Varner is the
Research Director for the Michigan Bean Commission and currently serves on the Breckenridge Division Board of the Bank.
He received a Bachelor of Science in Agricultural Education and a Master of Science in Crop Science from Michigan State
University.
Current Directors with Terms Ending in 2020
Dr. Jeffrey J. Barnes (age 55) has been a director of the Bank since 2007 and of Isabella Bank Corporation since 2010.
Dr. Barnes is a physician and shareholder in L.O. Eye Care P.C. He is a former member of the Central Michigan Community
Hospital Board of Directors.
G. Charles Hubscher (age 64) has been a director of the Bank since 2004 and of Isabella Bank Corporation since 2010.
Mr. Hubscher is President of Hubscher and Son, Inc., a sand and gravel producer. He is a former director of the National Stone
and Gravel Association, the Michigan Aggregates Association, serves on the Board of Trustees for the Mt. Pleasant Area
Community Foundation, and is a member of the Zoning Board of Appeals for Deerfield Township.
David J. Maness (age 64) has been a director of the Bank since 2003 and of Isabella Bank Corporation since 2004. Mr. Maness
has served as Chairman of the Board for the Corporation and the Bank since 2010. He is President of Maness Petroleum, a
geological and geophysical consulting services company. Mr. Maness is currently serving as a director for the Michigan Oil &
Gas Association, and he previously served on the Mt. Pleasant Public Schools Board of Education.
W. Joseph Manifold (age 66) has been a director of Isabella Bank Corporation since 2003 and of the Bank since 2010.
Mr. Manifold retired as CFO of Federal Broach Holdings LLC, a holding company which operates several manufacturing
companies. Previously, he was a senior manager with Ernst & Young Certified Public Accounting firm working principally on
external bank audits and was CFO of the Delfield Company. Prior to joining the Board, Mr. Manifold served on the Isabella
Community Credit Union Board and was President of the Mt. Pleasant Public Schools Board of Education.
Each of the directors has been engaged in their stated professions for more than five years unless otherwise stated.
Other Named Executive Officers
Neil M. McDonnell (age 54), Chief Financial Officer of the Corporation, joined the Corporation on January 30, 2018. David J.
Reetz (age 57), Senior Vice President and Chief Lending Officer of the Bank, has been employed by the Bank since 1987.
Rhonda S. Tudor (age 53), Vice President and Controller of the Corporation, has been employed by the Corporation since 2015.
Peggy L. Wheeler (age 58), Senior Vice President and Chief Operations Officer of the Bank, has been employed by the Bank
since 1977.
All officers serve at the pleasure of the Board.
Director Independence
Corporate Governance
We have adopted the director independence standards as defined under of the NASDAQ listing requirements. We have
determined that Dr. Jeffrey J. Barnes, Richard J. Barz, Jill Bourland, G. Charles Hubscher, Thomas L. Kleinhardt, Joseph
LaFramboise, David J. Maness, W. Joseph Manifold, W. Michael McGuire, Sarah R. Opperman, and Gregory V. Varner are
independent directors. Jae A. Evans is not independent as he is employed as President and CEO of Isabella Bank Corporation.
Jerome E. Schwind is not independent as he is employed as President of Isabella Bank.
Board Leadership Structure and Risk Oversight
Our Governance Policy provides that only directors who are deemed to be independent as set forth by the NASDAQ listing
requirements and SEC rules are eligible to hold the office of chairperson. Additionally, the chairpersons of Board established
committees must also be independent directors. It is our belief that having a separate chairperson and CEO best serves the
interest of the shareholders. The Board elects its chairperson at the first Board meeting following the Annual Meeting.
Independent members of the Board meet without inside directors at least twice per year.
Management is responsible for our day-to-day risk management and the Board’s role is to engage in informed oversight. The
Board utilizes committees to oversee risks associated with compensation, and governance. The Isabella Bank Board of
Directors is responsible for overseeing credit, investment, information technology, interest rate, and trust risks. The
chairpersons of the respective boards or committees report on their activities on a regular basis.
Our Audit Committee is responsible for overseeing the integrity of our consolidated financial statements, the independent
auditors’ qualifications and independence, the performance of our internal audit function and those of independent auditors, our
system of internal controls, our financial reporting and system of disclosure controls, and our compliance with legal and
regulatory requirements and with our Code of Business Conduct and Ethics.
Committees of the Board of Directors and Meeting Attendance
The Board met 13 times during 2017 and all incumbent directors attended 75% or more of the meetings for which they were a
member. The Board has an Audit Committee, a Nominating and Corporate Governance Committee, and a Compensation and
Human Resource Committee.
Audit Committee
The Audit Committee is composed of independent directors. Information regarding the functions performed by the Audit
Committee, its membership, and the number of meetings held during the year, is set forth in the “Audit Committee Report”
included elsewhere in this Proxy Statement. The Audit Committee is governed by a written charter approved by the Board,
which is available on the Bank’s website: www.isabellabank.com.
In accordance with the provisions of the Sarbanes-Oxley Act of 2002, directors Manifold and McGuire meet the requirements
of Audit Committee Financial Expert and have been so designated. The Audit Committee also consists of directors Bourland,
Kleinhardt, Maness (ex-officio), and Opperman.
Nominating and Corporate Governance Committee
We have a standing Nominating and Corporate Governance Committee consisting of independent directors Barnes, Hubscher,
Maness (ex-officio), and McGuire. The Nominating and Corporate Governance Committee held two meetings in 2017, with all
committee members attending each meeting for which they were a member. The Board has approved a Nominating and
Corporate Governance Committee Charter which is available on the Bank’s website: www.isabellabank.com.
The Nominating and Corporate Governance Committee is responsible for evaluating and recommending individuals for
nomination to the Board for approval. This Committee, in evaluating nominees, including incumbent directors and any
nominees put forth by shareholders, considers business experience, skills, character, judgment, leadership experience, and their
knowledge of the geographical markets, business segments or other criteria the Committee deems relevant and appropriate
based on the current composition of the Board. This Committee considers diversity in identifying members with respect to our
geographical markets served and the business experience of the nominee.
The Nominating and Corporate Governance Committee will consider, as potential nominees, persons recommended by
shareholders. Recommendations should be submitted in writing to the Secretary of the Corporation, 401 N. Main St., Mt.
Pleasant, Michigan 48858 and include the shareholder’s name, address and number of shares of the Corporation owned by the
shareholder. The recommendation should also include the name, age, address and qualifications of the candidate.
Recommendations for the 2019 Annual Meeting of Shareholders should be delivered no later than November 28, 2018. The
Nominating and Corporate Governance Committee evaluates all potential director nominees in the same manner, whether the
nominations are received from a shareholder, or otherwise.
Compensation and Human Resource Committee
The Compensation and Human Resource Committee is responsible for reviewing and recommending to the Board the
compensation of the Chief Executive Officer and other executive officers, benefit plans, and the overall percentage increase in
salaries. This Committee consists of independent directors Barnes, Barz, Bourland, Hubscher, Kleinhardt, LaFramboise,
Maness, Manifold, McGuire, Opperman, and Varner. The Compensation and Human Resource Committee held two meetings
during 2017. With the exception of one committee member who did not attend one meeting, all committee members attended
each meeting for which they were a member. This Committee is governed by a written charter approved by the Board that is
available on the Bank’s website: www.isabellabank.com.
Communications with the Board
Shareholders may communicate with the Board by sending written communications to the attention of the Corporation’s
Secretary, Isabella Bank Corporation, 401 N. Main St., Mt. Pleasant, Michigan 48858. Communications will be forwarded to
the Board or the appropriate committee, as soon as practicable.
Code of Ethics
Our Code of Business Conduct and Ethics, which is applicable to the CEO and CFO, is available on the Bank’s website:
www.isabellabank.com.
Audit Committee Report
The Audit Committee oversees the financial reporting process on behalf of the Board. The 2017 Audit Committee consisted of
directors Bourland, Kleinhardt, Maness (ex-officio), Manifold, McGuire, and Opperman.*
The Audit Committee is responsible for pre-approving all auditing services and permitted non-audit services by our
independent auditors, or any other auditing or accounting firm, if those fees are reasonably expected to exceed 5.0% of the
current year agreed upon fee for independent audit services. The Audit Committee has established general guidelines for the
permissible scope and nature of any permitted non-audit services in connection with its annual review of the audit plan and
reviews the guidelines with the Board.
Management has the primary responsibility for the consolidated financial statements and the reporting process including the
systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited consolidated
financial statements in the Annual Report with management including a discussion of the quality, not just the acceptability, of
the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated
financial statements. The Audit Committee also reviewed with management and the independent auditors, management’s
assertion on the design and effectiveness of our internal control over financial reporting as of December 31, 2017.
The Audit Committee reviewed with our independent auditors, who are responsible for expressing an opinion on the
conformity of those audited consolidated financial statements with accounting principles generally accepted in the United
States of America, their judgments as to the quality, not just the acceptability, of our accounting principles and such other
matters as are required to be discussed with the Audit Committee by the standards of the Public Company Accounting
Oversight Board (United States), including those described in Auditing Standard No. 16 “Communications with Audit
Committees”, as may be modified or supplemented. In addition, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by PCAOB Rule 3526, Communication with Audit Committees Concerning
Independence, as may be modified or supplemented, and has discussed with the independent auditors the independent auditors’
independence.
The Audit Committee discussed with our internal and independent auditors the overall scope and plans for their respective
audits. The Audit Committee meets with the internal and external independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial
reporting process. The Audit Committee held five meetings during 2017, and all committee members attended 75% or more of
the meetings for which they were a member.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and
the Board has approved) that the audited consolidated financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2017 for filing with the Securities and Exchange Commission. The Audit Committee has
appointed Rehmann Robson LLC as the independent auditors for the 2018 audit.
Respectfully submitted,
W. Joseph Manifold, Audit Committee Chairperson
Jill Bourland
Thomas L. Kleinhardt
David J. Maness (ex-officio)
W. Michael McGuire
Sarah R. Opperman
* In September 2017, as part of the Corporation's normal rotation of committee members, Ms. Bourland was appointed to the
Audit Committee in place of Mr. LaFramboise. Mr. LaFramboise did not participate in the Audit Committee's review,
discussion or recommendation with respect to matters covered by the Audit Committee's report in this Proxy Statement.
Compensation Discussion and Analysis
The Compensation and Human Resource Committee is responsible for reviewing and recommending to the Board the
compensation and benefits for the President and CEO. This Committee also evaluates and approves our executive officer and
senior management compensation plans, policies, and programs. The President and CEO is responsible for determining the
compensation and benefits for the CFO and named executive officers based on their annual performance reviews and the
officers' years of service along with competitive market data.
Compensation Objectives
The Compensation and Human Resource Committee considers growth in loans and in market deposits (with the safety and
soundness objectives), the level of net operating expenses, and earnings per share to be the primary ratios in measuring
financial performance. Our philosophy is to maximize long-term return to shareholders consistent with safe and sound banking
practices, while maintaining the commitment to superior customer and community service. We believe that the performance of
executive officers in managing the business should be the basis for determining overall compensation. Consideration is also
given to overall economic conditions and current competitive forces in the market place. The objectives of this Committee are
to effectively balance salaries and potential compensation to an officer’s individual management responsibilities and encourage
each of them to realize their potential for future contributions. The objectives are designed to attract and retain high performing
executive officers who will provide leadership while attaining earnings and performance goals.
What the Compensation Programs are Designed to Reward
Our compensation programs are designed to reward dedicated and conscientious employment, loyalty in terms of continued
employment, attainment of job related goals, and overall growth and profitability. In measuring an executive officer’s
contributions, the Compensation and Human Resource Committee considers numerous factors including, among other things,
our growth in loans and in market deposits, management of the level of net operating expenses, and increase in earnings per
share. In rewarding loyalty and long-term service, we provide competitive retirement benefits.
Review of Risks Associated with Compensation Plans
Based on an analysis conducted by management and reviewed by the Compensation and Human Resource Committee, we do
not believe that compensation programs for employees are reasonably likely to have a material short or long term adverse effect
on our operating results.
Use of Consultants
In 2016, the Compensation and Human Resource Committee directly engaged the services of Blanchard Consulting Group, an
independent compensation consulting firm, to assist with a total compensation review for the President and CEO, CFO, Bank
President, and executive officers of the Corporation. Blanchard Consulting Group does not perform any additional services for
us or any members of senior management. In addition, Blanchard Consulting Group does not have any other personal or
business relationships with any Board members or officers. During 2017 and 2015, the Compensation and Human Resource
Committee did not employ any services of outside compensation or benefit consultants to assist it in compensation related
initiatives.
Elements of Compensation
Our executive compensation program has consisted primarily of base salary and benefits, annual performance incentives,
benefits and perquisites, and participation in our retirement plans.
How Elements Fit into Overall Compensation Objectives
Individual elements of our compensation objectives are structured to reward strong financial performance, continued service,
and to incentivize our leaders to excel in the future. We continually review our compensation objectives to ensure that they are
sufficient to attract and retain exceptional officers.
Why Each of the Elements of Compensation is Chosen and How We Determine Amounts for Each Element
Base Salaries, which include director fees for certain executive officers, are set to provide competitive levels of compensation
to attract and retain officers with strong leadership skills. We also believe it is best to pay a sufficient base salary because we
believe an over-reliance on equity incentive compensation could potentially skew incentives toward short-term maximization of
shareholder value as opposed to building long-term shareholder value. Competitive base salary encourages management to
operate in a safe and sound manner even when incentive goals may prove unattainable.
The Compensation and Human Resource Committee’s approach to determining the annual base salary of executive officers is
to offer competitive salaries in comparison with other similar financial institutions. In 2016, this Committee utilized an
independent compensation consultant, Blanchard Consulting Group. The independent compensation consultant established a
benchmark peer group of 25 midwest financial institutions in non-urban areas with comparable average assets size ($1.2 billion
—$3 billion), number of branch locations, return on average assets, and nonperforming assets. Specific factors used to decide
where an executive officer’s salary should be within the established range include the historical financial performance, financial
performance outlook, years of service, and job performance. The Compensation and Human Resource Committee targeted total
compensation for the President and CEO using ranges obtained from the independent compensation consultant as well as other
published surveys and resources. Compensation for the CFO and other named executive officers was based on the ranges
provided by the other surveys and resources mentioned above.
Annual Performance Incentives are used to reward executive officers based on our overall financial performance. This element
of the compensation program is included in the overall compensation in order to reward employees above and beyond their
base salaries when our performance and profitability exceed established annual targets. The inclusion of this incentive
encourages management to be diligent in managing to achieve specific financial goals without incurring inordinate risks.
Annual performance incentives paid in 2017 were determined by reference to four performance measures that related to
services performed in 2016. The maximum cash award that may be granted to each eligible employee equals 10% of the
employee’s base salary (the “Maximum Award”).
The payment of 35% of the 10% Maximum Award (“personal performance goals”) is based on the achievement of goals set for
each individual. The Compensation and Human Resource Committee is responsible for establishing personal goals and
measuring the achievement of personal goals for the President and CEO. This Committee also reviews the performance of the
President and CEO. The President and CEO is responsible for establishing personal goals and measuring the achievement of
these goals for the CFO and other named executive officers.
The Compensation and Human Resource Committee uses the following quantitative and qualitative factors as measures of
corporate performance in determining annual cash bonus amounts to be paid:
• Development and implementation of strategic initiatives;
• Results of actual annual operating performance as compared to budget;
• Community and industry involvement;
• Results of audit and regulatory exams; and
• Other strategic goals as established by the Board.
Each of the executive officers who were eligible to participate in 2016 accomplished their personal performance goals and were
accordingly paid 35% of the 2016 Maximum Award in 2017.
The payment of the remaining 65% of the 10% Maximum Award (“corporate performance goals”) was conditioned on the
achievement of targets in the following four categories:
• Earnings per share (weighted 40%);
• Net operating expenses to average assets (weighted 10%);
•
• Loan average balance growth (weighted 25%).
In market deposit average balance growth (weighted 25%); and
The following chart provides the 2016 target for each corporate performance goal and the performance attained for each target.
Target
Earnings per share
Net operating expenses to average
assets
In market deposit average balance
growth
Loan average balance growth
(1) Adjusted for incentive calculation measures.
4.47%
25.00%
50.00%
75.00%
100.00%
2016 Targets
2016
Performance
(1)
Target %
Obtained
$
1.65
$
1.67
$
1.70
$
1.72
$
1.77
100.00%
1.58%
1.56%
1.54%
1.52%
1.59%
0.00%
5.27%
5.52%
4.72%
5.77%
4.97%
6.02%
5.22%
5.40%
11.11%
25.00%
100.00%
We have a stock award incentive plan which is an equity-based bonus plan. Under the plan, we may award stock bonuses to
the CEO, the Corporation President, and the Bank President. The plan authorizes the issuance of vested stock to eligible
employees worth up to 10% of the employee’s annualized base wages, on a calendar year basis. The plan imposes several
conditions on the issuance of stock awards and transfers of shares granted under the plan are restricted. The stock bonuses
awarded in 2017 were determined by reference to the same four performance measures used for the annual performance
incentives that related to 2016 results and also the achievement of personal goals.
Benefits and Perquisites. Executive officers are eligible for all of the benefits made available to full-time employees (such as
health insurance, group term life insurance and disability insurance) on the same basis as other full-time employees and are
subject to the same paid time off and other employee policies.
We also provide our executive officers with certain additional perquisites, which we believe are appropriate in order to attract
and retain the proper quality of talent for these positions and to recognize that similar executive perquisites are commonly
offered by comparable financial institutions. We maintain a plan for qualified officers to provide death benefits to each
participant which was amended in 2015 to modify certain participants' benefits and to update certain plan provisions. Insurance
policies, designed primarily to fund death benefits, have been purchased on the life of each participant with the Bank as the sole
owner and beneficiary of the policies. We believe that perquisites provided to our executive officers in 2017 represented a
reasonable percentage of each executive’s total compensation package and are consistent, in the aggregate, with perquisites
provided to executive officers of comparable financial institutions. A description and the cost of these perquisites are included
in footnote 2 to the “Summary Compensation Table,” the table outlining the change in pension value, and the “Nonqualified
Deferred Compensation Table” within the “Executive Officers” section.
Retirement Plans. Our retirement plans are designed to assist executives in providing themselves with a financially secure
retirement. The retirement plans include a 401(k) plan, a frozen defined benefit pension plan, a frozen non-leveraged employee
stock ownership plan (“ESOP”), a retirement bonus plan, a supplemental executive retirement plan, and a stock award
incentive plan.
We provide a 401(k) plan, in which substantially all employees are eligible to participate. Employees may contribute up to
100% of their compensation subject to certain limits based on federal tax laws. The plan was amended in 2013 to provide a
matching safe harbor contribution for all eligible employees equal to 100% of the first 5.0% of an employee's compensation
contributed to the Plan during the year. Employees are 100% vested in the safe harbor matching contributions.
Our defined benefit pension plan was curtailed effective March 1, 2007 and the current participants’ accrued benefits were
frozen as of that date. Participation in the plan was limited to eligible employees as of December 31, 2006.
Our non-leveraged ESOP was frozen effective December 31, 2006 to new participants. Contributions to the plan are
discretionary and approved by the Board. On December 21, 2016, the Board approved the termination of the ESOP effective
December 31, 2016. Actual dissolution of the ESOP is anticipated to occur in mid-2018.
The retirement bonus plan is a nonqualified plan of deferred compensation benefits for eligible employees effective January 1,
2007. Benefit amounts are determined pursuant to the payment schedule adopted at the sole and exclusive discretion of the
Board.
In 2015 we adopted the supplemental executive retirement plan, a nonqualified deferred compensation plan, authorizing annual
and discretionary credits to a participant's plan account. Credits are pursuant to a participant's agreement which sets forth the
amount and timing of any annual credits and the vesting, payment, “clawback” and other terms to which the credits are subject.
Compensation and Human Resource Committee Report
The Compensation and Human Resource Committee Report does not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other Corporation filing under the Securities Act of 1933 or the Exchange Act,
except to the extent the Corporation specifically incorporates this Report by reference therein.
The Compensation and Human Resource Committee, which includes all of the independent directors of the Board, has
reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with
management, and based on such review and discussion, the Compensation and Human Resource Committee recommended to
the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Annual Report on Form
10-K.
Submitted by the Compensation and Human Resource Committee of the Board:
David J. Maness, Chairperson
Dr. Jeffrey J. Barnes
Richard J. Barz
Jill Bourland*
G. Charles Hubscher
Thomas L. Kleinhardt
Joseph LaFramboise
W. Joseph Manifold
W. Michael McGuire
Sarah R. Opperman
Gregory V. Varner
* Ms. Bourland was appointed to the Compensation and Human Resource Committee in September 2017. As such, Ms.
Bourland did not take part in establishing the compensation of the President and CEO; however, she did attend the
Compensation and Human Resource Committee in December 2017 where the President and CEO's performance was reviewed.
Executive Officers
Executive officers are compensated in accordance with their employment with the applicable entity. The following table shows
information on compensation earned in each of the last three fiscal years ended December 31, 2017, for the CEO, CFO, and our
three other most highly compensated executive officers.
Summary Compensation Table
Name and principal position
Jae A. Evans
President and CEO
Isabella Bank Corporation
Dennis P. Angner (3)
President and CFO (retired)
Isabella Bank Corporation
Jerome E. Schwind
President
Isabella Bank
David J. Reetz
Sr. Vice President and CLO
Isabella Bank
Peggy L. Wheeler
Sr. Vice President and COO
Isabella Bank
Year
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
2017
2016
2015
$
$
$
$
$
Salary
($)(1)(5)
402,800
364,473
327,548
173,273
360,722
353,956
293,417
278,164
217,992
164,971
160,166
155,501
142,160
138,020
126,395
Bonus
($)
$ 27,396
21,225
17,894
Stock
Awards
($)
$ 27,396
21,225
—
$ 20,244
21,791
20,818
$ 20,244
21,791
—
$ 19,515
14,943
13,839
$ 19,515
—
—
$
$
$
$
$
$ 13,023
10,642
10,082
$ 11,223
9,481
8,119
— $
—
—
— $
—
—
Change in pension
value and
nonqualified
deferred
compensation
earnings
($)(6)
All other
compensation
($)(2)
— $
—
—
$
$
$
$
34,000
(304,000)
(17,000)
7,000
3,000
(2,000)
28,000
41,777
(9,000)
24,000
29,518
(8,000)
45,598
48,015
40,629
10,577
31,509
30,014
37,081
31,466
31,484
26,883
25,497
22,747
14,172
14,635
14,762
Total
($)
$ 503,190
454,938
386,071
$ 258,338
131,813
387,788
$ 376,528
327,573
261,315
$ 232,877
238,082
179,330
$ 191,555
191,654
141,276
Rhonda S. Tudor (4)
2017
$
122,235
$ 9,650
$
— $
— $
6,649
$ 138,534
Vice President and Controller (4)
Isabella Bank Corporation
(1) Salary amounts are paid on a bi-weekly basis which typically consists of 26 regular pay cycles during the calendar year.
(2) For all named executives all other compensation includes 401(k) matching contributions. For Jae A. Evans, Jerome E.
Schwind, David J. Reetz, and Peggy L. Wheeler, this also includes club dues and auto allowance. For Dennis P. Angner,
this also includes auto allowance.
(3) Changes in pension value in 2016 are the result of execution of domestic relations order for former spouse.
(4) Not a named executive officer prior to 2017. Rhonda S. Tudor served as Interim Chief Financial Officer from March 31,
2017 to January 30, 2018.
(5) Executive officer salary includes compensation voluntarily deferred under our 401(k) plan. Director and advisory board
fees are also included and are displayed in the following table for each the last three fiscal years ended December 31, 2017:
Name
Jae A. Evans
Dennis P. Angner
Jerome E. Schwind
David J. Reetz
Peggy L. Wheeler
Rhonda S. Tudor
Director and advisory board fees ($)
2017
2016
2015
$
27,800
$
27,550
$
14,650
37,098
—
—
—
43,475
23,500
—
—
—
27,550
45,950
—
—
—
—
(6)
Includes the aggregate non-cash change in the actuarial present value of the noted executive’s accumulated benefit under
the Isabella Bank Corporation Pension Plan.
Pay Ratio
In accordance with a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and
Exchange Commission has adopted a rule requiring annual disclosure of the ratio of the median employee’s annual total
compensation to the total annual compensation of the principal executive officer (“PEO”). The Corporation’s PEO is Jae A.
Evans.
PEO total annual compensation for 2017
Median Employee total annual compensation for 2017
Ratio of PEO to Median Employee total annual compensation for 2017
$
$
503,190
34,752
14.5: 1
We determined the median of the annual total compensation of all employees, excluding the PEO. Employees and annual total
compensation were based on employment status as of December 31, 2017. We considered all employees: full-time, part-time,
seasonal and temporary employees. For full-time and part-time employees not employed for the full calendar year, we elected
to annualize their compensation to accurately determine the median of annual total compensation.
Total compensation was calculated consistent with calculation to determine Jae A. Evans' annual total compensation, as
displayed in the Summary Compensation Table on the previous page. Total compensation is largely derived from payroll and
tax records and actuarial values related to our benefit plans. We do not adjust for cost-of-living expenses or any other similar
compensation adjustments.
The following table provides information on grants of plan-based awards under the stock award incentive plan during 2017:
Grants of Plan-Based Awards Table
Name
Jae A. Evans
Dennis P. Angner
Grant date
3/1/2017
3/1/2017
Number of
shares of stock
awarded
Grant date fair
value of stock
awards (1)
$
586
493
16,285
13,700
Jerome E. Schwind
12,533
(1) The fair value of stock awards do not reflect amounts in the “Stock Awards” column in the Summary Compensation Table
3/1/2017
451
due to applicable payroll taxes withheld from the executive officers.
Option Exercises and Stock Vested Table
The following table provides information on vested shares pursuant to the stock award incentive plan as of December 31, 2017:
Name
Jae A. Evans
Dennis P. Angner
Jerome E. Schwind
Number of
shares acquired
on vesting
Value Realized
on Vesting
1,068
$
987
451
29,510
27,272
12,533
The following table indicates the present value of accumulated benefits as of December 31, 2017 for each named executive
officer in the summary compensation table.
Pension Benefits Table
Name
Jae A. Evans
Dennis P. Angner
Plan name
Isabella Bank Corporation Pension Plan
Isabella Bank Corporation Retirement Bonus Plan
Isabella Bank Corporation Pension Plan
Isabella Bank Corporation Retirement Bonus Plan
Jerome E. Schwind
Isabella Bank Corporation Pension Plan
David J. Reetz
Isabella Bank Corporation Retirement Bonus Plan
Isabella Bank Corporation Pension Plan
Isabella Bank Corporation Retirement Bonus Plan
Peggy L. Wheeler
Isabella Bank Corporation Pension Plan
Isabella Bank Corporation Retirement Bonus Plan
Rhonda S. Tudor
Isabella Bank Corporation Pension Plan
Isabella Bank Corporation Retirement Bonus Plan
Number of years
of vesting
service as of
01/01/17
Present value of
accumulated
benefit
($)
Payments
during last fiscal
year
N/A
N/A
34
N/A
19
N/A
31
N/A
39
N/A
N/A
N/A
$
— $
—
371,000
426,130
56,000
—
253,000
262,340
218,000
179,110
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Defined benefit pension plan. We sponsor the Isabella Bank Corporation Pension Plan, a frozen defined benefit pension plan.
The curtailment, which was effective March 1, 2007, froze the current participant’s accrued benefits as of that date and limited
participation in the plan to eligible employees as of December 31, 2006. Due to the curtailment of the plan, the number of years
of credited service was frozen. As such, the years of credited service for the plan may differ from the participant’s actual years
of service.
Annual contributions are made to the plan as required by accepted actuarial principles, applicable federal tax laws, and to pay
expenses related to operating and maintaining the plan. The amount of contributions on behalf of any one participant cannot be
separately or individually computed.
Pension plan benefits are based on years of service and the employees’ five highest consecutive years of compensation out of
the last ten years of service, through December 31, 2006.
A participant may earn a benefit for up to 35 years of accredited service. Earned benefits are 100% vested after five years of
service. Benefit payments normally start when a participant reaches age 65. A participant with more than five years of service
may elect to take early retirement benefits anytime after reaching age 55. Benefits payable under early retirement are reduced
actuarially for each month prior to age 65 in which benefits begin.
David J. Reetz and Peggy L. Wheeler are eligible for early retirement under the plan. Under the provisions of the plan,
participants are eligible for early retirement after reaching the age of 55 with at least 5 years of service. The early retirement
benefit amount is the accrued benefit payable at normal retirement date reduced by 5/9% for each of the first 60 months and
5/18% for each of the next 60 months that the benefit commencement date precedes the normal retirement date.
Retirement bonus plan. We sponsor the Isabella Bank Corporation Retirement Bonus Plan. This nonqualified plan is intended
to provide eligible employees with additional retirement benefits. To be eligible, the employee needed to be an employee on
January 1, 2007, and be a participant in our frozen Executive Supplemental Income Agreement. Participants must also be an
officer with at least 10 years of service as of December 31, 2006. We have sole and exclusive discretion to add new participants
to the plan by authorizing such participation pursuant to action of the Board.
An initial amount was credited for each eligible employee as of January 1, 2007. Subsequent amounts have been credited on
each allocation date thereafter as defined in the plan. The amount of the initial allocation and the annual allocation shall be
determined pursuant to the payment schedule adopted at our sole and exclusive discretion, as set forth in the plan.
David J. Reetz and Peggy L. Wheeler are eligible for early retirement under the plan. Under the provisions of the plan,
participants are eligible for early retirement upon attaining 55 years of age. There is no difference between the calculation of
benefits payable upon early retirement and normal retirement.
The following table shows information concerning non-qualified deferred compensation for 2017.
Nonqualified Deferred Compensation Table
Name
Jae A. Evans
Dennis P. Angner
Jerome E. Schwind
Plan Name
Directors Plan
SERP
Directors Plan
Retirement Bonus Plan
Directors Plan
SERP
Retirement Bonus Plan
Retirement Bonus Plan
Executive
contributions in
2017
($) (1)
Registrant
contributions in
2017
($) (2)
Aggregate
earnings in 2017
($) (3)
Aggregate
balance at
December 31, 2017
($) (4)
$
— $
$
— $
—
7,325
—
37,098
—
—
—
95,000
—
22,609
—
12,000
26,180
16,629
2,105
4,583
9,774
8,246
1,909
204
4,824
3,309
59,634
328,709
276,834
426,130
70,074
22,404
262,340
179,110
David J. Reetz
Peggy L. Wheeler
(1) The amounts shown in this column are the amounts deferred by the officers under the Deferred Compensation Plan for
Directors (“Directors Plan”) and are included in the “Salary” column in the Summary Compensation Table above.
(2) The amounts shown in this column are the amounts we contributed to the officers’ account under the Retirement Bonus
Plan and the SERP. These amounts are not included in the Summary Compensation Table.
(3) The amounts shown in this column are the earnings in the officers’ accounts under the Directors Plan, Retirement Bonus
Plan and the SERP. These amounts are not included in the Summary Compensation Table because the earnings are not
preferential.
(4) The amounts shown in this column are the combined balance of the applicable executive officers’ accounts under the
Directors Plan, Retirement Bonus Plan and the SERP.
Directors Plan. Under the Directors Plan, directors, including named executive officers who serve as directors, are required
to invest at least 25% of their board fees in our common stock and may invest up to 100% of their earned fees based on their
annual election. These amounts are reflected in the above table. These stock investments can be made either through deferred
fees or through the purchase of shares through the Isabella Bank Corporation Stockholder Dividend Reinvestment and
Employee Stock Purchase Plan ("DRIP Plan"). Deferred fees, under the Directors Plan, are converted on a quarterly basis into
shares of our common stock based on the fair market value of shares at that time. Shares credited to a participant’s account are
eligible for stock and cash dividends as paid. DRIP Plan shares are purchased on a monthly basis pursuant to the DRIP Plan.
Distribution of deferred fees from the Directors Plan occurs when the participant retires from the Board, attains age 70, or upon
the occurrence of certain other events. Distributions must take the form of shares of our common stock. Any common stock
issued from deferred fees under the Directors Plan will be considered restricted stock under the Securities Act of 1933, as
amended. Common stock purchased through the DRIP Plan are not considered restricted stock under the Securities Act of
1933, as amended.
SERP. Under the SERP, we may promise deferred compensation benefits to employees who are members of a select group of
management or highly compensated employees, which may include the named executive officers. The SERP authorizes us to
make annual and discretionary credits to a participant’s SERP account pursuant to a participation agreement with the participant
that sets forth the amount and timing of any annual credits and the vesting, payment, “clawback” and other terms to which the
credits are subject.
The SERP provides default terms that may be modified by a participant’s participation agreement, including default vesting,
interest and payment terms. Under the SERP’s default vesting terms, a participant is initially unvested in the participant’s
SERP account and becomes 100% vested upon attaining normal retirement age, retirement, involuntary separation from service
without cause, death, disability or a change in control. Special vesting rules apply to amounts that are credited after a change in
control. Under the SERP’s interest rule, a participant’s account balance is credited with interest annually, the rate of which may
be changed and is initially based on the average rate paid on certificates of deposit with Isabella Bank, updated annually.
Under the SERP’s default payment terms, a participant’s vested and nonforfeited account balance will be paid in a single cash
lump sum within 90 days after the first to occur of the participant’s separation from service (subject to a 6-month delay for a
“specified employee”), death, disability, or any date specified in the participant’s participation agreement. The SERP also
includes restrictive covenants that restrict a participant’s ability to compete with us and certain other activities.
Potential Payments Upon Termination or Change in Control
The estimated amounts payable to each named executive officer upon severance from employment, retirement, termination
upon death or disability or termination following a change in control are described below. For all termination scenarios, the
amounts assume such termination took place as of December 31, 2017.
Any Severance of Employment
Regardless of the manner in which a named executive officer’s employment terminates, he or she is entitled to receive amounts
earned during his or her term of employment. Such amounts include:
• Amounts accrued and vested through the Defined Benefit Pension Plan.
• Amounts accrued and vested through the Retirement Bonus Plan.
• Amounts deferred in the Directors Plan.
• Amounts vested through the Stock Award Incentive Plan.
• Unused vacation pay.
Retirement
In the event of the retirement of an executive officer, the officer would receive the benefits identified above.
Death or Disability
In the event of death or disability of an executive officer, in addition to the benefits listed above, the executive officer will also
receive payments under our life insurance plan or under our disability plan as appropriate.
In addition to potential payments upon termination available to all employees, the estates for the executive officers listed below
would receive the following payments upon death:
Name
Jae A. Evans
Dennis P. Angner
Jerome E. Schwind
David J. Reetz
Peggy L. Wheeler
Rhonda S. Tudor
Change in Control
While an Active
Employee
Subsequent to
Retirement
$
750,000
$
—
512,638
329,942
284,320
—
375,000
158,623
256,319
164,971
142,160
—
We currently do not have a change in control agreement with any of the executive officers; provided, however, pursuant to the
Retirement Bonus Plan each participant would become 100% vested in their benefit under the plan if, following a change in
control, they voluntarily terminate employment or are terminated without just cause. Similarly, under the SERP each
participant would become 100% vested in their SERP account upon a change in control. Also, following a change in control, if
a participant is involuntarily terminated without cause or voluntarily terminates for good reason all uncredited annual credits
would be credited to his or her SERP account. If termination took place on December 31, 2017, that would have resulted in a
credit to Jae Evans’ SERP account of $328,709 and Jerome Schwind's SERP account of $22,404.
The following table summarizes the compensation of each non-employee director who served on the Board during 2017.
Director Compensation
Name
Dr. Jeffrey J. Barnes
Richard J. Barz
Jill Bourland
G. Charles Hubscher
Thomas L. Kleinhardt
Joseph LaFramboise
David J. Maness
W. Joseph Manifold
W. Michael McGuire
Sarah R. Opperman
Fees paid in cash
($)(1)
Fees deferred
under Directors
Plan
($)(1)
Total fees earned
($)
$
— $
29,550
$
33,150
5,704
—
—
18,000
26,402
—
29,853
9,575
—
5,704
33,050
37,100
22,750
26,490
40,500
10,214
29,075
29,550
33,150
11,408
33,050
37,100
40,750
52,892
40,500
40,067
38,650
Gregory V. Varner
44,850
(1) Directors electing to receive all fees in cash, resulting in no contributions to the Directors Plan, invest at least 25% of their
board fees in our common stock under the DRIP Plan as described in our Directors Plan within the “Executive Officers”
section.
44,850
—
We paid $1,350 per board meeting plus a retainer of $10,000 to each member during 2017. Members of the Audit Committee
were paid $650 per Audit Committee meeting attended. Members of the Nominating and Corporate Governance Committee
were paid $350 per meeting attended. The chairperson of the Board is paid a retainer of $35,000, the chairperson for the Audit
Committee is paid a retainer of $6,000, and the vice chairperson for the Audit Committee is paid a retainer of $2,000.
Under the Directors Plan, upon a participant’s attainment of age 70, retirement from the Board, or the occurrence of certain
other events, the participant is eligible to receive a lump-sum, in-kind distribution of all of the stock that is then credited to the
participant's account. The plan does not allow for cash settlement. Stock issued under the Directors Plan is restricted stock
under the Securities Act of 1933, as amended.
We established a Rabbi Trust to supplement the Directors Plan. The Rabbi Trust is an irrevocable grantor trust to which we may
contribute assets for the limited purpose of funding a nonqualified deferred compensation plan. Although we may not reach the
assets of the Rabbi Trust for any purpose other than meeting its obligations under the Directors Plan, the assets of the Rabbi
Trust remain subject to the claims of our creditors. We may contribute cash or common stock to the Rabbi Trust from time-to-
time for the sole purpose of funding the Directors Plan. The Rabbi Trust will use any cash that we may contribute to purchase
shares of our common stock on the open market.
We transferred $419,173 to the Rabbi Trust in 2017, which held 31,769 shares of our common stock for settlement as of
December 31, 2017. As of December 31, 2017, there were 195,140 shares of common stock credited to participants’ accounts,
which credits are unfunded as of such date to the extent that they are in excess of the stock and cash that has been credited to
the Rabbi Trust. All amounts are unsecured claims against our general assets. The net cost of this benefit was $194,930 in 2017.
The following table displays the cumulative number of equity shares credited to the accounts of current directors pursuant to
the terms of the Directors Plan as of March 9, 2018:
Name
Dr. Jeffrey J. Barnes
Richard J. Barz
Jill Bourland
Jae A. Evans
G. Charles Hubscher
Thomas L. Kleinhardt
Joseph LaFramboise
David J. Maness
W. Joseph Manifold
W. Michael McGuire
Sarah R. Opperman
Jerome E. Schwind
Gregory V. Varner
# of shares of
stock credited
13,604
—
203
2,111
18,613
26,454
12,546
29,529
21,683
10,026
3,560
2,481
9,725
Compensation and Human Resource Committee Interlocks and Insider Participation
In 2017, the Compensation and Human Resource Committee members were directors Barnes, Barz, Bourland, Hubscher,
Kleinhardt, LaFramboise, Maness, Manifold, McGuire, Opperman, and Varner. No executive officer of the Corporation serves
on any board of directors or compensation committee of any entity that compensates any member of the Compensation and
Human Resource Committee.
Indebtedness of and Transactions with Management
Certain directors and officers and members of their families were loan customers of the Bank, or have been directors or officers
of corporations, members or managers of limited liability companies, or partners of partnerships which have had transactions
with the Bank. In our opinion, all such transactions were made in the ordinary course of business and were substantially on the
same terms, including collateral and interest rates, as those prevailing at the same time for comparable transactions with
customers not related to the Bank. These transactions do not involve more than normal risk of collectability or present other
unfavorable features. Total loans to these customers were approximately $4,335,000 as of December 31, 2017. We address
transactions with related parties in our Code of Business Conduct and Ethics Policy. Conflicts of interest are prohibited, except
under board approved guidelines.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 9, 2018 as to our common stock owned beneficially by each
director and director nominee, by each named executive officer, and by all directors, director nominees and executive officers
as a group.
Name of Owner
Dennis P. Angner (retired)
Dr. Jeffrey J. Barnes
Richard J. Barz
Jill Bourland
Jae A. Evans
G. Charles Hubscher
Thomas L. Kleinhardt
Joseph LaFramboise
David J. Maness
W. Joseph Manifold
W. Michael McGuire
Sarah R. Opperman
David J. Reetz
Jerome E. Schwind
Rhonda S. Tudor
Gregory V. Varner
Peggy L. Wheeler
All Directors, nominees and Executive Officers as a Group (17) persons
Amount and
Nature of
Beneficial
Ownership (1)
Percent of Class
28,072
20,847
33,903
418
13,600
192,405
80,014
13,908
35,898
26,635
106,387
10,682
10,323
5,033
74
10,777
10,967
599,943
0.35%
0.26%
0.42%
0.01%
0.17%
2.39%
0.99%
0.17%
0.45%
0.33%
1.32%
0.13%
0.13%
0.06%
(2)
0.13%
0.14%
7.48%
(1) Beneficial ownership is defined by rules of the SEC and includes shares that the person has or shares voting or investment
power over and shares that the person has a right to acquire within 60 days from March 9, 2018. Totals for directors
include shares of stock credited under the Directors Plan as of March 9, 2018 as disclosed in the “Director Compensation”
section. Participants in the Directors Plan have a right to acquire shares credited to their accounts upon a distributable
event. A description of the Directors Plan under which these shares of stock were issued is set forth in our Directors Plan
within the “Executive Officers” section.
(2) Percentage is below 0.01%.
Independent Registered Public Accounting Firm
The Audit Committee has appointed Rehmann Robson LLC as our independent auditors for the year ending December 31,
2018.
A representative of Rehmann Robson LLC is expected to be present at the Annual Meeting to respond to appropriate questions
from shareholders and to make any comments Rehmann Robson LLC believes are appropriate.
Fees for Professional Services Provided by Rehmann Robson LLC
The following table shows the aggregate fees billed by Rehmann Robson LLC for the audit and other services provided for:
Audit fees
Audit related fees
Tax fees
Total
2017
2016
304,255
$
295,094
20,651
23,382
28,500
24,410
348,288
$
348,004
$
$
The audit fees were for performing the integrated audit of our consolidated annual financial statements and the internal control
attestation report related to the Federal Deposit Insurance Corporation Improvement Act, reviews of interim quarterly financial
statements included in our Forms 10-Q, and services that are normally provided by Rehmann Robson LLC in connection with
statutory and regulatory filings or engagements.
The audit related fees are typically for various discussions related to the adoption and interpretation of new accounting
pronouncements. During 2017, this includes fees for procedures related to nonrecurring regulatory filings. Also included are
fees for auditing of our employee benefit plans.
The tax fees were for the preparation of our state and federal income tax returns and for consultation on various tax matters.
The Audit Committee has considered whether the services provided by Rehmann Robson LLC, other than the audit fees, are
compatible with maintaining Rehmann Robson LLC’s independence and believes that the other services provided are
compatible.
Pre-Approval Policies and Procedures
All audit and non-audit services over $5,000 to be performed by Rehmann Robson LLC must be approved in advance by the
Audit Committee if those fees are reasonably expected to exceed 5.0% of the current year agreed upon fee for independent
audit services. As permitted by SEC rules, the Audit Committee has authorized its chairperson to pre-approve audit, audit-
related, tax and non-audit services, provided that such approved service is reported to the full Audit Committee at its next
meeting.
As early as practicable in each calendar year, the independent auditor provides to the Audit Committee a schedule of the audit
and other services that the independent auditor expects to provide or may provide during the next twelve months. The schedule
will be specific as to the nature of the proposed services, the proposed fees, timing, and other details that the Audit Committee
may request. The Audit Committee will by resolution authorize or decline the proposed services. Upon approval, this schedule
will serve as the budget for fees by specific activity or service for the next twelve months.
A schedule of additional services proposed to be provided by the independent auditor, or proposed revisions to services already
approved, along with associated proposed fees, may be presented to the Audit Committee for their consideration and approval
at any time. The schedule will be specific as to the nature of the proposed service, the proposed fee, and other details that the
Audit Committee may request. The Audit Committee will by resolution authorize or decline authorization for each proposed
new service.
Applicable SEC rules and regulations permit waiver of the pre-approval requirements for services other than audit, review or
attest services if certain conditions are met. Out of the services characterized above as audit-related, tax and professional
services, none were billed pursuant to these provisions in 2017 and 2016 without pre-approval.
Shareholder Proposals
Any proposals which you intend to present at the next Annual Meeting must be received before November 28, 2018 to be
considered for inclusion in our Proxy Statement and proxy for that meeting. Proposals should be made in accordance with
Securities and Exchange Commission Rule 14a-8.
Directors’ Attendance at the Annual Meeting of Shareholders
Our directors are encouraged to attend the Annual Meeting. At the 2017 Annual Meeting, all directors were in attendance.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and certain officers and persons who own more
than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our
common stock. These officers, directors, and greater than 10% shareholders are required by SEC regulation to furnish us with
copies of these reports.
To our knowledge, based solely on review of the copies of such reports furnished, during the year ended December 31, 2017 all
Section 16(a) filing requirements were satisfied, with respect to the applicable officers, directors, and greater than 10%
beneficial owners with the exception of the following: director Maness filed one late report for one reportable transaction and
director and executive officer Schwind filed one late report for one reportable transaction.
Other Matters
We will bear the cost of soliciting proxies. In addition to solicitation by mail, officers and other employees may solicit proxies
by telephone or in person, without compensation other than their regular compensation.
As to Other Business Which May Come Before the Meeting
We do not intend to bring any other business before the meeting for action. However, if any other business should be presented
for action, it is the intention of the persons named in the enclosed form of proxy to vote in accordance with their judgment on
such business.
By order of the Board of Directors
Debra Campbell, Secretary
SHAREHOLDERS’ INFORMATION
Financial Information and Form 10-K
Copies of the 2017 Annual Report, Isabella Bank Corporation Form 10-K, and other financial information not contained
herein are available on the Bank’s website (www.isabellabank.com) under the Investors tab, or may be obtained, without
charge, by writing to:
Debra Campbell
Secretary
Isabella Bank Corporation
401 N. Main St.
Mt. Pleasant, Michigan 48858
ANNUAL SHAREHOLDER MEETING
May 8, 2018 at 5:00 p.m.
Comfort Inn Conference Center l 2424 South Mission Street, Mt. Pleasant, MI 48858
STOCK INFORMATION
Isabella Bank Corporation common stock is traded in the over-the-counter market. The common stock is quoted on the
OTCQX tier of the OTC Markets Group, Inc.’s electronic quotation system (www.otcmarkets.com) under the symbol “ISBA”.
Other trades in the common stock occur in privately negotiated transactions from time to time of which the Corporation
may have limited or no information. Current stock price and availability can be obtained by contacting Shareholder
Services, the Isabella Bank Investment and Trust Services Department, Boenning & Scattergood, Inc. or a licensed broker.
SHAREHOLDER SER VICES
For more information, contact Debra Campbell
(989) 779-6237 | 401 North Main Street, Mt. Pleasant, MI 48858
or www.isabellabank.com Investors
TRANSFER AGENT
Isabella Bank Corporation
(989) 779-6237 | 401 North Main Street, Mt. Pleasant, MI 48858
CORPORATE BROKER
Boenning & Scattergood, Inc.
(866) 326-8113 | 9922 Brewster Lane, Powell, OH 43065
or www.boenninginc.com
LEGAL COUNSEL
Foster Swift Collins & Smith, PC
313 South Washington Square, Lansing, MI 48933
or www.fosterswift.com
INDEPENDENT CER TIFIED PUBLIC ACCOUNTING FIRM
Rehmann Robson LLC
5800 Gratiot Rd. Suite 201, Saginaw, MI 48638
or www.rehmann.com
This report includes forward-looking statements. To the extent that the foregoing information refers to matters that may occur in the
future, please be aware that such forward-looking statements may differ materially from actual results. Additional information concerning
some of the factors that could cause materially different results is included in the sections entitled “Risk Factors” and “Forward Looking
Statements” set forth in Isabella Bank Corporation’s filings with the Securities and Exchange Commission, which are available from the
Securities and Exchange Commission’s Public Reference facilities and from its website at www.sec.gov.
401 NORTH MAIN STREET, MT. PLEASANT, MI 48858