UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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ISABELLA BANK CORPORATION
401 N. Main St.
Mt. Pleasant, Michigan 48858
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 8, 2018
9, 2023
Notice is hereby given that the Annual Meeting of Shareholders of Isabella Bank Corporation will be held on Tuesday, May 8, 20189, 2023 at 5:00 p.m. Eastern Daylight Time, at the Comfort Inn Conference Center, 2424 S. Mission Street,Courtyard by Marriott, 2400 East Campus Drive, Mt. Pleasant, Michigan. The meeting is for the purpose of considering and acting upon the following items of business:
1.The election of three directors.
2.To hold an advisory, non-binding vote on executive compensation of named executive officers.
3.To hold an advisory, non-binding vote on how frequently advisory votes on the executive compensation of named executive officers should be held.
4.To ratify the appointment of Rehmann Robson LLC as the independent registered public accounting firm for the year ending December 31, 2023.
5.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, 201817, 2023 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
27, 2023
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, 20189, 2023 at 5:00 p.m. at the Comfort Inn Conference Center, 2424 S. Mission Street,Courtyard by Marriott, 2400 East Campus Drive, 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, 201827, 2023 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, 201817, 2023 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or adjournments thereof. We have only one class of common stock and no preferred stock. As of March 9, 2018,17, 2023, there were 7,861,7377,561,422 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 theIsabella Bank Corporation (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.
Your broker may not vote on Proposal 1Proposals 1-3 if you do not furnish instructions for such proposal.proposals. 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 isProposals 1-3 are not an itemitems on which brokerage firms may vote in their discretion on your behalf unless you have furnished voting instructions. On the other hand, under these rules your broker will be able to vote on Proposal 4- ratification of the appointment of Rehmann Robson LLC (“Rehmann”) as our independent registered public accounting firm.
At this year’s Annual Meeting, you will elect fivethree directors to serve for a term of three years. You may vote in favor or abstainwithhold your vote 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.
In voting on the advisory, non-binding proposal to approve the executive compensation disclosed in this proxy statement, a shareholder may vote in favor of the advisory proposal, vote against the advisory proposal or abstain from voting. A majority of the shares represented at the annual meeting and entitled to vote on this advisory proposal must be voted in favor of the proposal for it to pass. While this vote is required by law, it will neither be binding on the Board of Directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on the Board of Directors. In counting votes on the advisory, non-binding proposal to approve executive compensation matters, abstentions will have the same effect as a vote against the proposal and broker non-votes will have no effect on the outcome of the vote.
In voting on the advisory, non-binding proposal to approve the frequency of the advisory vote on executive compensation described in this proxy statement, a shareholder may vote for one year, two years or three years or may abstain from voting. The option of one year, two years or three years that receives a plurality of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. While this vote is also required by law, it will neither be binding on the Board of Directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on the Board of Directors. In counting votes on the advisory, non-binding proposal to approve the frequency of the advisory vote on executive compensation, abstentions and broker non-votes will have no effect on the outcome of the vote.
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Ratification of the appointment of Rehmann requires that the number of votes cast “FOR” the proposal exceed the number of votes cast “AGAINST” such proposal. In counting votes on the ratification of the appointment of Rehmann as our independent registered public accounting firm, abstentions and broker non-votes will have no effect on the outcome of the vote.
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 decreasedincreased from 12 to 13 members with the appointment of Melinda M. Coffin, effective November 30, 2022. In 2023, the Board will decrease from 13 to 11 withmembers as G. Charles Hubscher and David J. Maness, whose current terms expire at the retirement of Dennis P. Angner effective March 31, 2017 and increasedAnnual Meeting, will retire from 11 members to 13 with the appointments of Jerome E. Schwind and Jill Bourland on August 24, 2017.Board. At the Annual Meeting, RichardDr. Jeffery J. Barz, Jill Bourland, Jae A. Evans, W. Michael McGuire,Barnes, Melinda M. Coffin, and Jerome E. Schwind,Vicki L. Rupp, whose current terms expire at the Annual Meeting, have been nominated for election to serve through the 20212026 Annual Meeting.
Except as otherwise specified, proxies will be voted for the election of the fivethree 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 table identifies individual Board members serving on each of our standing committees:
| Director | |||||||||||||||||||||||||||||||||||||||
| Sarah R. Opperman | Xo | Xo | Xo | ||||||||||||||||||||||||||||||||||||
| Dr. Jeffrey J. Barnes | |||||||||||||||||||||||||||||||||||||||
| Jill Bourland | Xc | Xc | |||||||||||||||||||||||||||||||||||||
| Melinda M. Coffin | |||||||||||||||||||||||||||||||||||||||
| Jae A. Evans | |||||||||||||||||||||||||||||||||||||||
| G. Charles Hubscher | Xc | ||||||||||||||||||||||||||||||||||||||
| Thomas L. Kleinhardt | X | X | |||||||||||||||||||||||||||||||||||||
| David J. Maness | X | X | |||||||||||||||||||||||||||||||||||||
| Richard L. McGuirk | |||||||||||||||||||||||||||||||||||||||
| Chad R. Payton | X | X | |||||||||||||||||||||||||||||||||||||
| Jerome E. Schwind | |||||||||||||||||||||||||||||||||||||||
| Gregory V. Varner | X | X | |||||||||||||||||||||||||||||||||||||
| C — Chairperson | |||||||||||||||||
| O — Ex-Officio | |||||||||||||||||
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Director Nominees for Terms Ending in 20212026
Melinda M. Coffin (age 48) was appointed a director of Isabella Bank Corporation and of the Bank at the October 26, 2022 Board meeting, effective November 30, 2022. Ms. Coffin has been the CEO of Soaring Eagle Gaming Enterprises since October 2021. She received her undergraduate degree and MBA from Central Michigan University. Ms. Coffin's knowledge and experience in compliance and regulatory matters, as well as her community involvement, adds value to the Board.
Vicki L. Rupp (age 63) has been a director of Isabella Bank Corporation and of the Bank since 2019. Ms. Rupp retired from The Dow Chemical Company after a successful thirty-five year career in various positions, including her final position of Corporate Director of Business Services. Her experience includes specialty research and development, environmental, health and safety, global corporate service management, mergers and acquisition implementation, and organizational management. Ms. Rupp owns her own consulting company, Vicki Rupp Consulting, for companies seeking operational improvements. She also serves on the Saginaw Valley State University Foundation Board and is chair of the Saginaw Valley State University Board of Control. Ms. Rupp brings experience in operations and strategic development and a commitment to community service.
Current Directors with Terms Ending in 2023
G. Charles Hubscher (age 69) has been a director of the Bank since 20002004 and of Isabella Bank Corporation since 2002.2010. Mr. Barz retiredHubscher is President of Hubscher and Son, Inc., a sand and gravel producer. He is a former director of the National Stone, Sand and Gravel Association, the Michigan Aggregates Association, and has served on the Mt. Pleasant Area Community Foundation Board of Trustees for 20 years. Mr. Hubscher is a former member of the Zoning Board of Appeals for Deerfield Township. Mr. Hubscher's experience in business operations and management, as Chief Executive Officerwell as his knowledge of the communities we serve, have been valuable to the Board over his 19 years of service to the Board.
David J. Maness (age 69) has been a director of the Bank since 2003 and of Isabella Bank Corporation on December 31, 2013 after over 41 yearssince 2004. Mr. Maness served as Chairman of service with the Corporation. Mr. Barz was Chief Executive Officer of IsabellaBoard for the Corporation and the 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.May 2021. He is President of Maness Petroleum, a past Chairman ofgeological and geophysical consulting services company. Mr. Maness is currently serving as a director for the Central Michigan Community HospitalOil & Gas Association, and he previously served on the Mt. Pleasant Public Schools Board of Education. The business experience and community involvement that Mr. Maness added to the Board over the last 20 years was invaluable.
Current 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.with Terms Ending in 2024
Jill Bourland (age 47) was appointed to the Board of Directors52) has been a director of Isabella Bank Corporation and of the Bank on August 24,since 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.Accountant, and a Housing Credit Certified Professional. 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 William and Janet Strickler Nonprofit Center. Jill also serves on the Mid Michigan College Foundation Board of Directors. She formerly served as President of the Mt. Pleasant Area Community Foundation where she previously servedand also as Treasurer and Chair of theits 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. Ms. Bourland has expertise in accounting, business experience and a strong commitment to community involvement.
Jae A. Evans (age 61) was appointed66) has been a director of Isabella Bank Corporation and of the Bank since 2014. He has been President and elected Chief Executive Officer of Isabellathe Corporation since 2014 and Chief Executive Officer of the Bank Corporation effective January 1, 2014.since 2018. 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 4046 years of banking experience. Mr. Evans currently serves as a board member for The Community Bankers of Michigan, McLaren Central Michigan Hospital,United Bankers Bank, and the Central Michigan University Advancement Board. Mr. Evans is also past Chair of the Eightcap,EightCap, Inc. Governing Board, past Vice Chair of the Carson City Hospital, past board member of the McLaren Central Michigan Hospital, was president of the Greenville Rotary Club, and past Chair of The Community Bankers of Michigan. Mr. Evans provides the Board with executive leadership, knowledge of commercial banking, and strong community involvement.
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a licensed real estate broker in Michigan and Florida. He currently serves as a board member for the Central Michigan University Advancement Board, and is past board member of the Mt. Pleasant Area Community Foundation. Mr. McGuirk has expertise in business, and a strong commitment to community involvement.
Jerome E. Schwind (age 56) has been a director of Isabella Bank Corporation and of the Bank on May 25,since 2017. Mr. Schwind is President of the Bank and Vice President of the Corporation. He has been employed by the Bank since 1999. He1999 and 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. Mr. Schwind is the current chair of the Michigan Bankers Association. He currentlyalso 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,Perry School of Banking Board, and also the Michigan Bankers AssociationGreat Lakes Bay Alliance Board. Mr. Schwind brings his experience in banking and his many years at Isabella Bank to the Board in addition to his knowledge of the markets we serve.
Current Directors with Terms Ending in 20192025
Thomas L. Kleinhardt (age 63)68) 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.
Sarah R. Opperman (age 58)63) has been a director of the Bank and Isabella Bank Corporation and of the Bank since 2012.2012 and has served as chair of both boards since May 2021. 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. She served as interim President and Chief Executive Officer of the Midland Business Alliance from March 1 to December 2018. Ms. Opperman is a member of the Central Michigan University Advancement Board, the MyMichigan Health Foundation Board, and the Michigan Baseball Foundation Board. She also is ChairMs. Opperman's business and leadership expertise, as well as her depth of community relationships, benefit Board discussions and decisions.
Chad R. Payton (age 54) has been a director of Isabella Bank Corporation and of the MidMichigan Health FoundationBank since March 2021. Mr. Payton is a Certified Public Accountant and serves onPartner of Roslund, Prestage & Company, PC, with over 30 years of tax and accounting experience. Mr. Payton is a member of the United WayAmerican Institute of Midland County BoardCertified Public Accountants and Michigan Association of Directors.Certified Public Accountants. Mr. Payton's expertise in accounting and business experience are valuable to the Board.
Gregory V. Varner (age 63)68) has been a director of the Bank and Isabella Bank Corporation and of the Bank since 2015. Mr. Varner iswas the Research Director for the Michigan Bean Commission for 40 years and currently serves onretired in 2019. He has advised both national and international dry bean research programs in the Breckenridge Division Board of the Bank.United States, Africa, and Central America. He received a Bachelor of Science in Agricultural Education and a Master of Science in Crop Science from Michigan State University.
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)59), Chief Financial Officer of Isabella Bank Corporation and of the Corporation,Bank, joined theIsabella Bank Corporation on January 30, 2018. Mr. McDonnell has over 30 years of banking experience and has served as chief financial officer, controller, treasurer, compliance and risk officer, and director of finance at large international banks, local community banks, as well as de novo banks. He serves on the Board of Mid-Michigan Industries and on the finance committee of Habitat for Humanity of Isabella County.
David J. Reetz (age 57)62), Senior Vice President and Chief Lending Officer of the Bank, has over 40 years of lending experience and has been employed by the Bank since 1987. Rhonda S. Tudor (age 53), Vice1987, serving in his current role since 2003. He is a past President and Controller of the Corporation, has been employed byExchange Club of Isabella County, served as Treasurer of the Corporation since 2015. Isabella County Co-Expo Board, and serves as a member of the Summit Clubhouse Advisory Board and the Mt. Pleasant Rotary Club.
Peggy L. Wheeler (age 58)63), Senior Vice President and Chief Operations Officer of the Bank, has been employed by the Bank since 1977. She has over 45 years of banking experience with Isabella Bank, holding various positions including customer service, accounting, Controller, and Senior Vice President of Operations. Ms. Wheeler serves on the Board for the Michigan Bankers Association Service Corporation, RISE Advocacy, Inc., and is a member of the grant review committee for the Mt. Pleasant Area Community Foundation.
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Proposal 2 - Advisory Vote on Executive Compensation
The compensation of the Corporation’s principal executive officer, principal financial officer, and our next most highly compensated executive officer (named executive officers) is provided under the heading “Executive Officers”. Shareholders are urged to read that section of this proxy statement.
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act") shareholders will be asked at the pleasureAnnual Meeting to provide their support with respect to the compensation of the Board.Corporation’s named executive officers by voting on the following advisory, non-binding resolution:
RESOLVED, that the shareholders of Isabella Bank Corporation approve, on an advisory basis, the compensation paid to the Corporation’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation table and narrative discussion, for purposes of Section 14A of the Securities Exchange Act of 1934.
The advisory vote on executive compensation, commonly referred to as a say-on-pay advisory vote, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation and Human Resource Committee value constructive dialogue on executive compensation and other important governance topics with the Corporation’s shareholders and encourage all shareholders to vote their shares on this matter. The Board of Directors and the Compensation and Human Resource Committee will review the voting results and take them into consideration when making future decisions regarding executive compensation programs.
The Board believes shareholders should consider the following in determining whether to approve this proposal:
•Each member of the Compensation and Human Resource Committee is independent under the NASDAQ listing requirements;
•The Compensation and Human Resource Committee continually monitors the Corporation’s performance and adjusts compensation practices accordingly; and
•The Compensation and Human Resource Committee regularly assesses the Corporation’s individual and total compensation programs against peer companies, the general marketplace and other industry data points.
Unless otherwise instructed, validly executed proxies will be voted “FOR” this resolution.
We unanimously recommend that you vote FOR the non-binding advisory resolution approving the executive compensation of the named executive officers.
Proposal 3 - Frequency of Advisory Votes On Executive Compensation
In accordance with Section 14A of the Exchange Act, the Corporation is providing a shareholder advisory vote to approve the compensation of our named executive officers (the say-on-pay advisory vote in Proposal 2 above) this year and will do so at least once every three years thereafter. Pursuant to Section 14A of the Exchange Act, at the 2023 Annual Meeting, the Corporation is also asking shareholders to vote on whether future say-on-pay advisory votes on executive compensation should occur every year, every two years or every three years.
After careful consideration, the Board of Directors recommends that future shareholder say-on-pay advisory votes on executive compensation be conducted every three years.
Although the Board of Directors recommends a say-on-pay vote every three years, shareholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. Shareholders are not voting to approve or disapprove the Board of Directors’ recommendation. Although this advisory vote regarding the frequency of say-on-pay votes is non-binding on the Board of Directors, the Board of Directors and the Compensation and Human Resource Committee will review the voting results and take them into consideration when deciding how often to conduct future say-on-pay shareholder advisory votes.
Unless otherwise instructed, validly executed proxies will be voted “FOR” the Three Year frequency option.
We unanimously recommend that you vote FOR the Three Year frequency option.
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Proposal 4 - Ratification of Independent Registered Public Accounting Firm
The Audit Committee is directly responsible for the appointment, compensation, retention, and oversight of our independent registered public accounting firm. The Audit Committee engages in an annual evaluation of the independent registered public accounting firm’s qualifications, assessing a wide variety of factors.
After assessing the performance and independence of Rehmann, the Corporation's current independent registered public accounting firm, the Audit Committee believes it is in the best interest of the Corporation and its shareholders to retain Rehmann. The Audit Committee has appointed Rehmann as our independent auditors for the year ending December 31, 2023. The Audit Committee seeks shareholder ratification of this appointment. Rehmann has served as our independent registered public accounting firm since 1996.
For information related to the Audit Committee's process and Rehmann's fees, refer to the “Independent Registered Public Accounting Firm” section of this report. A representative of Rehmann is expected to be present at the Annual Meeting to respond to appropriate questions from shareholders and to make any comments Rehmann believes are appropriate.
In the event shareholders do not ratify the appointment, the appointment will be reconsidered by the Audit Committee and the Board of Directors. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Corporation and its shareholders.
Unless otherwise instructed, validly executed proxies will be voted “FOR” this resolution.
We unanimously recommend that you vote FOR this proposal to ratify the appointment of Rehmann Robson LLC as our independent registered public accounting firm for the year ending December 31, 2023.
Corporate Governance
Director Independence
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, Melinda M. Coffin, G. Charles Hubscher, Thomas L. Kleinhardt, Joseph LaFramboise, David J. Maness, W. Joseph Manifold, W. Michael McGuire,Richard L. McGuirk, Sarah R. Opperman, Chad R. Payton, Vicki L. Rupp, 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.Corporation and CEO of Isabella Bank. Jerome E. Schwind is not independent as he is employed as President of Isabella Bank.Bank and Vice President of Isabella Bank Corporation.
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 Business Ethics.
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Committees of the Board of Directors and Meeting Attendance
The Board met 1314 times during 20172022. No current member of the Board attended less than 75% of the aggregate meetings of the Board and all incumbent directors attended 75% or more of the meetings forcommittees on which they were a member.such director served during 2022. 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 ManifoldBourland and McGuire meetPayton met 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.Opperman (ex-officio).
Nominating and Corporate Governance Committee
We have a standing Nominating and Corporate Governance Committee consisting of independent directors Barnes, Hubscher, Maness, Opperman (ex-officio), and McGuire.Varner. The Nominating and Corporate Governance Committee held twofour meetings in 2017,2022, 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.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 businessindustry knowledge and experience of the nominee, and community relations 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 20192024 Annual Meeting of Shareholders should be delivered no later than November 28, 2018.2023. 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,directors and the overall percentage increase in salaries.compensation of the President and CEO, Bank President, and CFO, including benefit plans. This Committee consists of independent directors Barnes, Barz, Bourland, Hubscher, Kleinhardt, LaFramboise, Maness, Manifold, McGuire, Opperman (ex-officio), Payton, and Varner. The Compensation and Human Resource Committee held twofive 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.2022. This Committee is governed by a written charter approved by the Board that is available on the Bank’s website: www.isabellabank.com.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 48858.48858. Communications will be forwarded to the Board or the appropriate committee, as soon as practicable.
Code of Ethics
Our Code of Business Conduct and Business Ethics, which is applicable to the CEO, CFO, and CFO,Controller, is available on the Bank’s website: www.isabellabank.com.
www.isabellabank.com.
7
Audit Committee Report
The Audit Committee oversees the financial reporting process on behalf of the Board. The 20172022 Audit Committee consisted of directors Bourland, Kleinhardt, Maness, Opperman (ex-officio), Manifold, McGuire, and Opperman.*Payton.
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, 2017.2022.
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) (“PCAOB”), including those described in Auditing Standard No. 161301, “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“Communication with Audit Committees Concerning Independence,Independence”, as may be modified or supplemented, and has discussed this issue with the independent auditors the independent auditors’ independence.auditors.
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.2022.
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, 20172022 for filing with the Securities and Exchange Commission. The Audit Committee has appointed Rehmann Robson LLC as the independent auditors for the 20182023 audit.
Respectfully submitted,
| 2016 Targets | 2016 Performance (1) | Target % Obtained | ||||||||||||||||||||
| Target | 25.00% | 50.00% | 75.00% | 100.00% | ||||||||||||||||||
| Earnings per share | $ | 1.65 | $ | 1.67 | $ | 1.70 | $ | 1.72 | $ | 1.77 | 100.00 | % | ||||||||||
| Net operating expenses to average assets | 1.58 | % | 1.56 | % | 1.54 | % | 1.52 | % | 1.59 | % | 0.00 | % | ||||||||||
| In market deposit average balance growth | 5.27 | % | 5.52 | % | 5.77 | % | 6.02 | % | 5.40 | % | 25.00 | % | ||||||||||
| Loan average balance growth | 4.47 | % | 4.72 | % | 4.97 | % | 5.22 | % | 11.11 | % | 100.00 | % | ||||||||||
Thomas L. Kleinhardt
Sarah R. Opperman (ex-officio)
8
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 fiscaltwo years ended December 31, 2017,2022, for the CEO, CFO, and our three othernext most highly compensated executive officers.officer, collectively the named executive officers (“NEOs”).
Summary Compensation Table
| Name and principal position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Change in pension value and nonqualified deferred compensation earnings ($)(4) | All other compensation ($)(5) | Total ($) | ||||||||||||||||||||||||||||||||||
| Jae A. Evans | 2022 | 478,250 | 130,500 | 89,600 | 168 | 54,171 | 752,689 | ||||||||||||||||||||||||||||||||||
| President and CEO of Isabella Bank Corporation and CEO of Isabella Bank | 2021 | 463,000 | 89,250 | 174,000 | 421 | 50,387 | 777,058 | ||||||||||||||||||||||||||||||||||
| Neil M. McDonnell | 2022 | 289,000 | 55,137 | 36,125 | 11 | 35,146 | 415,419 | ||||||||||||||||||||||||||||||||||
CFO of Isabella Bank Corporation and Isabella Bank(6) | 2021 | 275,687 | 30,946 | 69,250 | 23 | 149,832 | 525,738 | ||||||||||||||||||||||||||||||||||
| Jerome E. Schwind | 2022 | 362,321 | 68,141 | 48,065 | (26,978) | 51,056 | 502,605 | ||||||||||||||||||||||||||||||||||
| President of Isabella Bank and Vice President of Isabella Bank Corporation | 2021 | 349,209 | 44,616 | 93,120 | (3,950) | 51,263 | 534,258 | ||||||||||||||||||||||||||||||||||
| Name and principal position | Year | Salary ($)(1)(5) | Bonus ($) | Stock Awards ($) | Change in pension value and nonqualified deferred compensation earnings ($)(6) | All other compensation ($)(2) | Total ($) | ||||||||||||||||||
| Jae A. Evans | 2017 | $ | 402,800 | $ | 27,396 | $ | 27,396 | $ | — | $ | 45,598 | $ | 503,190 | ||||||||||||
| President and CEO | 2016 | 364,473 | 21,225 | 21,225 | — | 48,015 | 454,938 | ||||||||||||||||||
| Isabella Bank Corporation | 2015 | 327,548 | 17,894 | — | — | 40,629 | 386,071 | ||||||||||||||||||
| Dennis P. Angner (3) | 2017 | $ | 173,273 | $ | 20,244 | $ | 20,244 | $ | 34,000 | $ | 10,577 | $ | 258,338 | ||||||||||||
| President and CFO (retired) | 2016 | 360,722 | 21,791 | 21,791 | (304,000 | ) | 31,509 | 131,813 | |||||||||||||||||
| Isabella Bank Corporation | 2015 | 353,956 | 20,818 | — | (17,000 | ) | 30,014 | 387,788 | |||||||||||||||||
| Jerome E. Schwind | 2017 | $ | 293,417 | $ | 19,515 | $ | 19,515 | $ | 7,000 | $ | 37,081 | $ | 376,528 | ||||||||||||
| President | 2016 | 278,164 | 14,943 | — | 3,000 | 31,466 | 327,573 | ||||||||||||||||||
| Isabella Bank | 2015 | 217,992 | 13,839 | — | (2,000 | ) | 31,484 | 261,315 | |||||||||||||||||
| David J. Reetz | 2017 | $ | 164,971 | $ | 13,023 | $ | — | $ | 28,000 | $ | 26,883 | $ | 232,877 | ||||||||||||
| Sr. Vice President and CLO | 2016 | 160,166 | 10,642 | — | 41,777 | 25,497 | 238,082 | ||||||||||||||||||
| Isabella Bank | 2015 | 155,501 | 10,082 | — | (9,000 | ) | 22,747 | 179,330 | |||||||||||||||||
| Peggy L. Wheeler | 2017 | $ | 142,160 | $ | 11,223 | $ | — | $ | 24,000 | $ | 14,172 | $ | 191,555 | ||||||||||||
| Sr. Vice President and COO | 2016 | 138,020 | 9,481 | — | 29,518 | 14,635 | 191,654 | ||||||||||||||||||
| Isabella Bank | 2015 | 126,395 | 8,119 | — | (8,000 | ) | 14,762 | 141,276 | |||||||||||||||||
| Rhonda S. Tudor (4) | 2017 | $ | 122,235 | $ | 9,650 | $ | — | $ | — | $ | 6,649 | $ | 138,534 | ||||||||||||
| Vice President and Controller (4) | |||||||||||||||||||||||||
| Isabella Bank Corporation | |||||||||||||||||||||||||
(1) |
| Executive officer salary includes compensation voluntarily deferred under our 401(k) plan. Director |
| Director and advisory board fees ($) | |||||||||||
| Name | 2017 | 2016 | 2015 | ||||||||
| Jae A. Evans | $ | 27,800 | $ | 27,550 | $ | 27,550 | |||||
| Dennis P. Angner | 14,650 | 43,475 | 45,950 | ||||||||
| Jerome E. Schwind | 37,098 | 23,500 | — | ||||||||
| David J. Reetz | — | — | — | ||||||||
| Peggy L. Wheeler | — | — | — | ||||||||
| Rhonda S. Tudor | — | — | — | ||||||||
| PEO total annual compensation for 2017 | $ | 503,190 | ||
| Median Employee total annual compensation for 2017 | $ | 34,752 | ||
| Ratio of PEO to Median Employee total annual compensation for 2017 | 14.5: 1 | |||
| Director fees ($) | |||||||||||
| Name | 2022 | 2021 | |||||||||
| Jae A. Evans | 30,250 | 28,000 | |||||||||
| Jerome E. Schwind | 30,250 | 28,000 | |||||||||
(2)Includes payouts granted pursuant to the Isabella Bank Corporation Executive Cash Incentive Plan.
(3)Includes shares granted pursuant to the Isabella Bank Corporation Restricted Stock Plan disclosed as the aggregate grant date fair value of the awards computed, in accordance with ASC Topic 718.
(4)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.
(5)For all named executives, all other compensation is largely derivedincludes 401(k) matching contributions and auto allowance. For Neil M. McDonnell all other compensation includes relocation payment in 2021.
(6)Neil M. McDonnell served as Interim Controller from payroll and tax records and actuarial values relatedNovember 5, 2020 to our benefit plans. We do not adjust for cost-of-living expenses or any other similar compensation adjustments.March 1, 2021.
The following table provides information on grantsthe unvested shares of plan-based awards under therestricted stock award incentive plan during 2017:
| Name | Grant date | Number of shares of stock awarded | Grant date fair value of stock awards (1) | ||||
| Jae A. Evans | 3/1/2017 | 586 | $ | 16,285 | |||
| Dennis P. Angner | 3/1/2017 | 493 | 13,700 | ||||
| Jerome E. Schwind | 3/1/2017 | 451 | 12,533 | ||||
| Name | Number of shares acquired on vesting | Value Realized on Vesting | ||||
| Jae A. Evans | 1,068 | $ | 29,510 | |||
| Dennis P. Angner | 987 | 27,272 | ||||
| Jerome E. Schwind | 451 | 12,533 | ||||
| Stock awards | |||||||||||||||||
| Name | Grant Date | Number of shares or units of stock that have not vested (#)(1) | Market value of shares or units of stock that have not vested ($)(2) | ||||||||||||||
| Jae A. Evans | 3/28/2022 | 3,583 | 84,201 | ||||||||||||||
| 4/1/2021 | 8,000 | 188,000 | |||||||||||||||
| 6/24/2020 | 2,427 | 57,035 | |||||||||||||||
| Neil M. McDonnell | 3/28/2022 | 1,444 | 33,934 | ||||||||||||||
| 4/1/2021 | 3,184 | 74,824 | |||||||||||||||
| 6/24/2020 | 952 | 22,372 | |||||||||||||||
| Jerome E. Schwind | 3/28/2022 | 1,922 | 45,167 | ||||||||||||||
| 4/1/2021 | 4,281 | 100,604 | |||||||||||||||
| 6/24/2020 | 1,279 | 30,057 | |||||||||||||||
(2)Based on the closing price of the Corporation's common stock as of December 31, 2017 for each named executive officer in the summary compensation table.2022 which was $23.50.
9
| Name | Plan name | Number of years of vesting service as of 01/01/17 | Present value of accumulated benefit ($) | Payments during last fiscal year | |||||||
| Jae A. Evans | Isabella Bank Corporation Pension Plan | N/A | $ | — | $ | — | |||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | — | — | ||||||||
| Dennis P. Angner | Isabella Bank Corporation Pension Plan | 34 | 371,000 | — | |||||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | 426,130 | — | ||||||||
| Jerome E. Schwind | Isabella Bank Corporation Pension Plan | 19 | 56,000 | — | |||||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | — | — | ||||||||
| David J. Reetz | Isabella Bank Corporation Pension Plan | 31 | 253,000 | — | |||||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | 262,340 | — | ||||||||
| Peggy L. Wheeler | Isabella Bank Corporation Pension Plan | 39 | 218,000 | — | |||||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | 179,110 | — | ||||||||
| Rhonda S. Tudor | Isabella Bank Corporation Pension Plan | N/A | — | — | |||||||
| Isabella Bank Corporation Retirement Bonus Plan | N/A | — | — | ||||||||
Defined benefit pension planBenefit Pension Plan. We sponsor the Isabella Bank Corporation Pension Plan (“Defined Benefit 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.
Retirement bonus planBonus Plan. We sponsor the Isabella Bank Corporation Retirement Bonus Plan.Plan (“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 mustwere also required to 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 planRetirement Bonus 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.Retirement Bonus 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.Retirement Bonus Plan.
Nonqualified Deferred Compensation Table
| Name | Plan Name | Executive contributions in 2017 ($) (1) | Registrant contributions in 2017 ($) (2) | Aggregate earnings in 2017 ($) (3) | Aggregate balance at December 31, 2017 ($) (4) | |||||||||||
| Jae A. Evans | Directors Plan | $ | — | $ | — | $ | 2,105 | $ | 59,634 | |||||||
| SERP | — | 95,000 | 4,583 | 328,709 | ||||||||||||
| Dennis P. Angner | Directors Plan | 7,325 | — | 9,774 | 276,834 | |||||||||||
| Retirement Bonus Plan | — | 22,609 | 8,246 | 426,130 | ||||||||||||
| Jerome E. Schwind | Directors Plan | 37,098 | — | 1,909 | 70,074 | |||||||||||
| SERP | — | 12,000 | 204 | 22,404 | ||||||||||||
| David J. Reetz | Retirement Bonus Plan | — | 26,180 | 4,824 | 262,340 | |||||||||||
| Peggy L. Wheeler | Retirement Bonus Plan | — | 16,629 | 3,309 | 179,110 | |||||||||||
Directors Plan. Under the Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors Plan,(“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 footnote 1 to the above table.Summary Compensation Table on the previous page. 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"Plan”). Deferred fees, under the Directors Plan, are converted on a quarterly basis into sharesstock units of our common stock based on the fair market value of shares at that time. Sharesa share of our common stock as of the relevant valuation date. Stock units 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 takeThe participant is eligible to receive distributions in the form of shares of our common stock.stock of all of the stock units that are then in his or her account, and any unconverted cash will be converted to and rounded up to a whole share of stock and distributed, as well. 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.
10
SERP. Under the SERP,supplemental executive retirement plan (“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 Federated Investor's Institutional Money Market Management Fund yield (MMPXX) for the average rate paid on certificates of deposit with Isabella Bank,current plan year, 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-monthsix-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.
Executive Cash Incentive Plan. The Executive Cash Incentive Plan provides potential payouts for the President and CEO, Bank President, and CFO based on achievement of personal and corporate goals. The maximum potential payouts under the plan range from 20% to 30% of the employee's annual salary. 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 recommends to the Compensation and Human Resource Committee the measurement and achievement of personal and corporate goals for the Bank President and CFO.
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, 2017.2022.
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 credited and vested through the SERP.
•Amounts deferred in the Directors Plan.
•Amounts granted and vested through the Restricted Stock Award Incentive Plan.
Retirement
In the event of the retirement of an executive officer, the officer would receive the benefits identified above.
11
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.
| Name | While an Active Employee | Subsequent to Retirement | |||||
| Jae A. Evans | $ | 750,000 | $ | 375,000 | |||
| Dennis P. Angner | — | 158,623 | |||||
| Jerome E. Schwind | 512,638 | 256,319 | |||||
| David J. Reetz | 329,942 | 164,971 | |||||
| Peggy L. Wheeler | 284,320 | 142,160 | |||||
| Rhonda S. Tudor | — | — | |||||
Change in Control
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, underofficers. Under the SERP, each participant would become 100% vested in their SERP account upon a change in control. Also,Under certain conditions, 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, 2017,2022, that would have resulted in aan additional credit to Jae A. Evans’ SERP account of $328,709$0, Neil M. McDonnell's SERP account of $175,000, and Jerome E. Schwind's SERP account of $22,404.$456,000 and a total credit for each individual of $837,800, $250,694, and $602,926, respectively.
Under the RSP, each participant would become 100% vested in their RSP account upon a change in control. Under certain conditions, following a change in control, if a participant is involuntarily terminated without cause or voluntarily terminates for good reason all nonvested shares would be fully vested. If termination took place on December 31, 2022, that would have resulted in vested shares to Jae A. Evans’ RSP account of 10,427 ($329,236), Neil M. McDonnell's RSP account of 4,136 ($131,130), and Jerome E. Schwind's RSP account of 5,560 ($175,828).
Pay Versus Performance
The following table presents certain information regarding compensation paid and certain financial performance measures in each of the last two years ended December 31, 2022, for the CEO and other NEOs, as disclosed in the Summary Compensation table above.
| Year | Summary compensation table total for CEO ($) | Compensation actually paid to CEO ($)(1) | Average summary compensation table total for non-CEO NEOs ($) | Average compensation actually paid to non-CEO NEOs ($)(2) | Value of initial fixed $100 investment based on total shareholder return ($) | Net income (in thousands)($) | ||||||||||||||||||||||||||||||||
| 2022 | 752,689 | 726,436 | 459,012 | 446,772 | 131 | 22,238 | ||||||||||||||||||||||||||||||||
| 2021 | 777,058 | 821,451 | 529,998 | 550,607 | 136 | 19,499 | ||||||||||||||||||||||||||||||||
(1)In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to total compensation for each year to determine the compensation actually paid:
| Equity Award Adjustments | ||||||||||||||||||||||||||||||||
| Year | Summary compensation table total for CEO ($) | Reported Value of Granted Equity Awards ($) | Year end fair value of outstanding and unvested equity awards granted in the year ($) | Change in fair value of outstanding and unvested equity awards granted in prior years ($) | Compensation actually paid to CEO ($) | |||||||||||||||||||||||||||
| 2022 | 752,689 | (89,600) | 84,201 | (20,854) | 726,436 | |||||||||||||||||||||||||||
| 2021 | 777,058 | (174,000) | 204,000 | 14,393 | 821,451 | |||||||||||||||||||||||||||
(2)In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to total compensation for each year to determine the compensation actually paid:
| Equity Award Adjustments | ||||||||||||||||||||||||||||||||
| Year | Average summary compensation table total for non-CEO NEOs ($) | Reported Value of Granted Equity Awards ($) | Year end fair value of outstanding and unvested equity awards granted in the year ($) | Change in fair value of outstanding and unvested equity awards granted in prior years ($) | Average compensation actually paid to non-CEO NEOs ($) | |||||||||||||||||||||||||||
| 2022 | 459,012 | (42,095) | 39,551 | (9,696) | 446,772 | |||||||||||||||||||||||||||
| 2021 | 529,998 | (81,185) | 95,179 | 6,615 | 550,607 | |||||||||||||||||||||||||||
12
Relationship Between Pay and Performance
Compensation actually paid to the CEO from 2021 to 2022 decreased by $95,015, or 12%, and average compensation actually paid to the other NEOs decreased $103,835, or 19%. The change in compensation actually paid was driven by a decline in stock awards, as a result of the achievement of less than 100% of the financial performance goals in connection to the stock awards and changes in the fair value of unvested awards. Compensation paid to the other NEOs was also impacted by a one-time relocation payment to the CFO in 2021. Over this same period, cumulative total shareholder return decreased by 4% and net income increased by 14%.
The following graphs illustrate the relationship during 2021-2022 between compensation actually paid to our CEO and other NEOs and total shareholder return (“TSR”):
The following graphs illustrate the relationship during 2021-2022 between compensation actually paid to our CEO and other NEOs and net income (in thousands):
Under our cash and equity incentive plans, financial performance goals are established by the Compensation and Human Resource Committee and the Board of Directors. For 2021 and 2022, these financial measures included TSR and net income, in addition to other metrics as established by the Compensation and Human Resource Committee and the Board of Directors.
13
Director Compensation
The following table summarizes the compensation of each non-employee director who served on the Board during 2017.2022.
| Name | Fees paid in cash ($)(1) | Fees deferred under Directors Plan ($)(1) | Total fees earned ($) | ||||||||||||||
| Dr. Jeffrey J. Barnes | — | 36,200 | 36,200 | ||||||||||||||
| Jill Bourland | 44,900 | — | 44,900 | ||||||||||||||
Melinda M. Coffin (2) | — | 1,667 | 1,667 | ||||||||||||||
| G. Charles Hubscher | — | 34,450 | 34,450 | ||||||||||||||
| Thomas L. Kleinhardt | — | 43,550 | 43,550 | ||||||||||||||
| David J. Maness | — | 27,118 | 27,118 | ||||||||||||||
| Richard L. McGuirk | 31,962 | 7,321 | 39,283 | ||||||||||||||
| Sarah R. Opperman | 54,500 | — | 54,500 | ||||||||||||||
| Chad R. Payton | 44,983 | 9,000 | 53,983 | ||||||||||||||
| Vicki L. Rupp | 40,850 | — | 40,850 | ||||||||||||||
| Gregory V. Varner | 37,950 | 12,650 | 50,600 | ||||||||||||||
| Name | Fees paid in cash ($)(1) | Fees deferred under Directors Plan ($)(1) | Total fees earned ($) | ||||||||
| Dr. Jeffrey J. Barnes | $ | — | $ | 29,550 | $ | 29,550 | |||||
| Richard J. Barz | 33,150 | — | 33,150 | ||||||||
| Jill Bourland | 5,704 | 5,704 | 11,408 | ||||||||
| G. Charles Hubscher | — | 33,050 | 33,050 | ||||||||
| Thomas L. Kleinhardt | — | 37,100 | 37,100 | ||||||||
| Joseph LaFramboise | 18,000 | 22,750 | 40,750 | ||||||||
| David J. Maness | 26,402 | 26,490 | 52,892 | ||||||||
| W. Joseph Manifold | — | 40,500 | 40,500 | ||||||||
| W. Michael McGuire | 29,853 | 10,214 | 40,067 | ||||||||
| Sarah R. Opperman | 9,575 | 29,075 | 38,650 | ||||||||
| Gregory V. Varner | — | 44,850 | 44,850 | ||||||||
(2) Director Coffin was appointed to the Board of Directors effective November 30, 2022.
We paid $1,350$1,500 per board meeting plus a retainer of $10,000 to each member during 2017.2022. Members of the Audit Committee were paid $650$750 per Audit Committee meeting attended. Members of the Nominating and Corporate Governance Committee were paid $350 per meeting attended. Members of the Compensation and Human Resource Committee were paid $350 per meeting attended. The chairperson of the Board is paid a retainer of $35,000, and 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.$6,000.
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 in the form of shares of our common stock of all of the stock units that isare 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 itsour 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-timetime 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$1,045,958 to the Rabbi Trust in 2017,2022, which held 31,769154,879 shares of our common stock for settlement as of December 31, 2017.2022. As of December 31, 2017,2022, there were 195,140 shares of common52,961 stock units credited to participants’ accounts, whichaccounts; such 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$219,374 in 2017.
2022.
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The following table displays the cumulative number of equity sharesstock units of our common stock credited to the accounts of current directors pursuant to the terms of the Directors Plan as of March 9, 2018:17, 2023:
| Name | # of | ||||
| Dr. Jeffrey J. Barnes | |||||
| Jill Bourland | |||||
| Melinda M. Coffin | 1,844 | ||||
| Jae A. Evans | |||||
| G. Charles Hubscher | |||||
| Thomas L. Kleinhardt | |||||
| David J. Maness | |||||
| Sarah R. Opperman | |||||
| Chad R. Payton | 1,790 | ||||
| Vicki L. Rupp | 1,663 | ||||
| Jerome E. Schwind | |||||
| Gregory V. Varner | |||||
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$20,963,000 and $22,558,000 as of December 31, 2017. We address transactions with related parties in our Code of Business Conduct2022 and Ethics Policy2021.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 9, 201817, 2023 as to our common stock owned beneficially by persons known by us to be beneficial owners of more than 5% of our common stock.
(1) Includes 377,278 shares held by McGuirk Investments LLC which Mr. McGuirk has sole investment power over.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | |||||||||
| Richard L. McGuirk | 391,792 | (1) | 5.18 | % | |||||||
| P.O. Box 222 | |||||||||||
| Mt. Pleasant, MI 48804 | |||||||||||
The following table sets forth certain information as of March 17, 2023 as to our common stock owned beneficially by: 1) each director and director nominee, 2) by each named executive officer,NEO, and 3) by all directors, director nominees and executive officersNEOs as a group.
(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 17, 2023. Consequently, with respect to shares acquired under the Directors Plan, participants may not be eligible to convert their stock units to shares within 60 days from March 17, 2023 as a result of distribution elections and plan conditions. For stock units credited to each participant's account as of March 17, 2023, refer to the “Director Compensation” section of this report.
| Name of Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class | |||||||||
| Dr. Jeffrey J. Barnes | 8,947 | 0.12 | % | ||||||||
| Jill Bourland | 2,787 | 0.04 | % | ||||||||
| Melinda M. Coffin | — | — | % | ||||||||
| Jae A. Evans | 19,962 | 0.26 | % | ||||||||
| G. Charles Hubscher | 203,782 | 2.70 | % | ||||||||
| Thomas L. Kleinhardt | 56,841 | 0.75 | % | ||||||||
| David J. Maness | 7,978 | 0.11 | % | ||||||||
| Neil M. McDonnell | 1,656 | 0.02 | % | ||||||||
| Richard L. McGuirk | 391,792 | 5.18 | % | ||||||||
| Sarah R. Opperman | 15,451 | 0.20 | % | ||||||||
| Chad R. Payton | 2,263 | 0.03 | % | ||||||||
| Vicki L. Rupp | 5,157 | 0.07 | % | ||||||||
| Jerome E. Schwind | 6,069 | 0.08 | % | ||||||||
| Gregory V. Varner | 10,875 | 0.14 | % | ||||||||
| All Directors, nominees and Executive Officers as a Group (14) persons | 733,560 | 9.70 | % | ||||||||
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| Name of Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class | |||
| Dennis P. Angner (retired) | 28,072 | 0.35 | % | ||
| Dr. Jeffrey J. Barnes | 20,847 | 0.26 | % | ||
| Richard J. Barz | 33,903 | 0.42 | % | ||
| Jill Bourland | 418 | 0.01 | % | ||
| Jae A. Evans | 13,600 | 0.17 | % | ||
| G. Charles Hubscher | 192,405 | 2.39 | % | ||
| Thomas L. Kleinhardt | 80,014 | 0.99 | % | ||
| Joseph LaFramboise | 13,908 | 0.17 | % | ||
| David J. Maness | 35,898 | 0.45 | % | ||
| W. Joseph Manifold | 26,635 | 0.33 | % | ||
| W. Michael McGuire | 106,387 | 1.32 | % | ||
| Sarah R. Opperman | 10,682 | 0.13 | % | ||
| David J. Reetz | 10,323 | 0.13 | % | ||
| Jerome E. Schwind | 5,033 | 0.06 | % | ||
| Rhonda S. Tudor | 74 | (2) | |||
| Gregory V. Varner | 10,777 | 0.13 | % | ||
| Peggy L. Wheeler | 10,967 | 0.14 | % | ||
| All Directors, nominees and Executive Officers as a Group (17) persons | 599,943 | 7.48 | % | ||
Independent Registered Public Accounting Firm
The Audit Committee has appointed Rehmann Robson LLC as our independent auditors for the year ending December 31, 2018.
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:
| 2022 | 2021 | ||||||||||
| Audit fees | $ | 354,486 | $ | 335,579 | |||||||
| Audit related fees | 24,500 | 18,250 | |||||||||
| Tax fees | 21,725 | 36,425 | |||||||||
| All other fees | — | 2,250 | |||||||||
| Total | $ | 400,711 | $ | 392,504 | |||||||
| 2017 | 2016 | ||||||
| Audit fees | $ | 304,255 | $ | 295,094 | |||
| Audit related fees | 20,651 | 28,500 | |||||
| Tax fees | 23,382 | 24,410 | |||||
| Total | $ | 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 FormsQuarterly Reports on Form 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 2017,2022, this includesincluded 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. All other fees were training and consultant related services.
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’sRehmann’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.services, so long as such services were recognized by the Corporation at the time of engagement to be non-audit services, and such services are promptly brought to the attention of the Audit Committee subsequent to completion of the audit. 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 other professional services, none were billed pursuant to these provisions in 20172022 and 20162021 without pre-approval.
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Shareholder Proposals
Any proposals which you intend to present at the next Annual Meeting must be received before November 28, 20182023 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 20172022 Annual Meeting, all directors, with the exception of Mr. Kleinhardt, were in attendance.
Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
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.
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 Annual Report on Form 10-K
Copies of the 20172022 Annual Report, Isabella Bank Corporation Annual Report on Form 10-K, and other financial information not contained herein are available on the Bank’s website (www.isabellabank.com)(www.isabellabank.com) under the InvestorsInvestor Relations tab, or may be obtained, without charge, by writing to:
Debra Campbell
Secretary
Isabella Bank Corporation
401 N. Main St.
Mt. Pleasant, Michigan 48858
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