Item 1. Financial Statements
Item 1. Financial Statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
March 31
2025 December 31
2024
ASSETS
Cash and demand deposits due from banks $ 28,786 $ 22,830
Fed Funds sold and interest bearing balances due from banks 40,393 1,712
Total cash and cash equivalents 69,179 24,542
AFS securities, at fair value 513,040 489,029
FHLB stock 5,600 12,762
Mortgage loans HFS 127 242
Loans 1,367,724 1,423,571
Less allowance for credit losses 12,735 12,895
Net loans 1,354,989 1,410,676
Premises and equipment 28,108 27,659
Cash surrender value of BOLI 45,833 34,882
Goodwill and other intangible assets 48,282 48,283
Other assets 37,429 38,166
Total assets $ 2,102,587 $ 2,086,241
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Demand deposits $ 404,194 $ 416,373
Interest bearing demand deposits 243,939 237,548
Money market deposits 473,138 423,883
Savings 286,399 281,665
Certificates of deposit 390,239 387,591
Total deposits 1,797,909 1,747,060
Short-term borrowings 47,310 53,567
FHLB advances — 30,000
Subordinated debt, net of unamortized issuance costs 29,447 29,424
Total borrowed funds 76,757 112,991
Other liabilities 12,365 15,914
Total liabilities 1,887,031 1,875,965
Shareholders’ equity
Common stock — no par value 15,000,000 shares authorized: issued and outstanding 7,408,010 shares in 2025 and 7,424,893 shares in 2024
125,547 126,224
Shares to be issued for deferred compensation obligations 2,508 2,383
Retained earnings 104,940 103,024
Accumulated other comprehensive income (loss) ( 17,439 ) ( 21,355 )
Total shareholders’ equity 215,556 210,276
Total liabilities and shareholders' equity $ 2,102,587 $ 2,086,241
See notes to interim condensed consolidated financial statements (unaudited).
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)
Three Months Ended
March 31
2025 2024
Interest income
Loans $ 19,348 $ 18,057
AFS securities 2,643 2,884
FHLB stock 160 146
Federal funds sold and other 482 293
Total interest income 22,633 21,380
Interest expense
Deposits 7,463 7,163
Short-term borrowings 341 321
FHLB advances 38 388
Subordinated debt 266 266
Total interest expense 8,108 8,138
Net interest income 14,525 13,242
(Reversal of) provision for credit losses ( 107 ) 392
Net interest income after provision for credit losses 14,632 12,850
Noninterest income
Service charges and fees 1,974 1,933
Wealth management fees 979 939
Earnings on BOLI 372 243
Net gain on sale of mortgage loans 30 34
Other 173 319
Total noninterest income 3,528 3,468
Noninterest expenses
Compensation and benefits 7,383 7,015
Occupancy and equipment 2,600 2,706
Other professional services 711 513
ATM and debit card fees 486 469
Marketing 459 426
FDIC insurance premiums 303 252
Other 1,357 1,295
Total noninterest expenses 13,299 12,676
Income before income tax expense 4,861 3,642
Income tax expense 912 511
Net income $ 3,949 $ 3,131
Earnings per common share
Basic $ 0.53 $ 0.42
Diluted 0.53 0.42
Cash dividends per common share 0.28 0.28
See notes to interim condensed consolidated financial statements (unaudited).
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 31
2025 2024
Net income $ 3,949 $ 3,131
Unrealized gains (losses) on AFS securities 5,014 ( 2,926 )
Reclassification adjustment for net (gains) losses included in net income — —
Tax effect (1)
( 1,098 ) 632
Unrealized gains (losses) on AFS securities, net of tax 3,916 ( 2,294 )
Comprehensive income (loss) $ 7,865 $ 837
(1) See “Note 6 – Capital Ratios and Shareholders' Equity” for tax effect reconciliation.
See notes to interim condensed consolidated financial statements (unaudited).
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands except per share amounts)
Common Stock
Common Shares
Outstanding Amount Common Shares to be
Issued for
Deferred
Compensation
Obligations Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Totals
December 31, 2023 7,485,889 $ 127,323 $ 3,693 $ 97,282 $ ( 25,896 ) $ 202,402
Comprehensive income (loss) — — — 3,131 ( 2,294 ) 837
Issuance of common stock 22,456 447 — — — 447
Common stock issued for deferred compensation under the RSP 16,240 — — — — —
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 21 ( 21 ) — — —
Share-based payment awards under the Directors Plan — — 218 — — 218
Share-based compensation expense recognized in earnings under the RSP — 25 — — — 25
Common stock purchased for deferred compensation obligations — ( 420 ) — — — ( 420 )
Common stock repurchased ( 36,484 ) ( 740 ) — — — ( 740 )
Cash dividends paid ($ 0.28 per common share)
— — — ( 2,095 ) — ( 2,095 )
March 31, 2024 7,488,101 $ 126,656 $ 3,890 $ 98,318 $ ( 28,190 ) $ 200,674
December 31, 2024 7,424,893 $ 126,224 $ 2,383 $ 103,024 $ ( 21,355 ) $ 210,276
Comprehensive income (loss) — — — 3,949 3,916 7,865
Issuance of common stock 17,332 419 — — — 419
Common stock issued for deferred compensation under the RSP 11,367 — — — — —
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 42 ( 42 ) — — —
Share-based payment awards under the Directors Plan — — 167 — — 167
Share-based compensation expense recognized in earnings under the RSP — 7 — — — 7
Common stock purchased for deferred compensation obligations — — — — — —
Common stock repurchased ( 45,582 ) ( 1,145 ) — — — ( 1,145 )
Cash dividends paid ($ 0.28 per common share)
— — — ( 2,033 ) — ( 2,033 )
March 31, 2025 7,408,010 $ 125,547 $ 2,508 $ 104,940 $ ( 17,439 ) $ 215,556
See notes to interim condensed consolidated financial statements (unaudited).
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 31
2025 2024
Operating activities
Net income $ 3,949 $ 3,131
Reconciliation of net income to net cash provided by operating activities
(Reversal of) provision for credit losses ( 107 ) 392
Depreciation 535 506
Net amortization of AFS securities 307 353
Net gain on sale of mortgage loans ( 30 ) ( 34 )
Increase in cash value of BOLI ( 368 ) ( 239 )
Share-based payment awards 174 243
Origination of loans HFS ( 1,043 ) ( 1,690 )
Proceeds from loan sales 1,188 1,358
Net changes in:
Other assets ( 142 ) ( 114 )
Other liabilities 241 ( 470 )
Net cash provided by (used in) operating activities 4,704 3,436
Investing activities
Proceeds from sales, maturities, calls and prepayments of AFS securities 21,058 7,284
Purchases of AFS securities ( 40,362 ) —
Proceeds from sale of FHLB Stock 7,162 —
Net change in loans HFI 55,576 ( 16,354 )
Purchases of premises and equipment ( 984 ) ( 818 )
Purchases of BOLI policies ( 10,583 ) —
Low income housing tax credit investments ( 3,767 ) ( 3 )
Net cash provided by (used in) investing activities 28,100 ( 9,891 )
Financing activities
Net increase (decrease) in deposits 50,849 44,612
Net increase (decrease) in short-term borrowings ( 6,257 ) ( 3,803 )
Net increase (decrease) in FHLB advances ( 30,000 ) ( 40,000 )
Cash dividends paid on common stock ( 2,033 ) ( 2,095 )
Proceeds from issuance of common stock 419 447
Common stock repurchased ( 1,145 ) ( 740 )
Common stock purchased for deferred compensation obligations — ( 420 )
Net cash provided by (used in) financing activities 11,833 ( 1,999 )
Increase (decrease) in cash and cash equivalents 44,637 ( 8,454 )
Cash and cash equivalents at beginning of period 24,542 33,672
Cash and cash equivalents at end of period $ 69,179 $ 25,218
Supplemental cash flows information
Interest paid $ 7,919 $ 7,844
Supplemental noncash information
Transfers of loans to foreclosed assets 218 199
See notes to interim condensed consolidated financial statements (unaudited).
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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands except per share amounts)
Note 1 – Significant Accounting Policies
BASIS OF PRESENTATION AND CONSOLIDATION: As used in these notes, as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations, references to “the Corporation”, “Isabella”, “we”, “our”, “us”, and similar terms refer to the consolidated entity consisting of Isabella Bank Corporation and its subsidiary. References to Isabella Bank or “the Bank” refers to Isabella Bank Corporation’s subsidiary, Isabella Bank.
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2024.
OPERATING SEGMENTS: Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker (“CODM”), manages our segments, evaluates financial results, and makes key operating decisions. While the CODM monitors the revenue streams of our various products and services, operations are managed, and financial performance is evaluated on a corporate-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the banking-related operations are considered by management to be aggregated in one reportable operating segment.
The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and geographical regions are similar. The CODM will evaluate the financial performance of our business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing our reportable segment and in the determination of allocating resources. Further, the CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets.
Consolidated net income is used to benchmark results against our competitors. Benchmarking and monitoring of budget to actual results are used in assessment performance and in establishing compensation. Revenue from banking operations consists primarily of loan and investment interest, deposit related fees, and wealth fees. Interest expense, provision for credit losses, compensation, and occupancy and equipment costs provide the significant expenses in our banking operations. All operations are domestic.
RECLASSIFICATIONS: Certain amounts reported in the interim 2024 consolidated financial statements have been reclassified to conform with the 2025 presentation. Our accounting policies are materially the same as those discussed in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.
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Note 2 – AFS Securities
The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows at:
March 31, 2025
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
U.S. Treasury $ 220,701 $ — $ 7,918 $ 212,783
States and political subdivisions 78,938 3 4,719 74,222
Auction rate money market preferred 3,200 — 371 2,829
Mortgage-backed securities 27,545 — 1,717 25,828
Collateralized mortgage obligations 195,979 163 6,064 190,078
Corporate 8,150 — 850 7,300
Total $ 534,513 $ 166 $ 21,639 $ 513,040
December 31, 2024
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
U.S. Treasury $ 230,807 $ — $ 10,236 $ 220,571
States and political subdivisions 81,135 9 4,576 76,568
Auction rate money market preferred 3,200 — 156 3,044
Mortgage-backed securities 29,068 — 2,182 26,886
Collateralized mortgage obligations 163,156 — 8,482 154,674
Corporate 8,150 — 864 7,286
Total $ 515,516 $ 9 $ 26,496 $ 489,029
The amortized cost and fair value of AFS securities by contractual maturity at March 31, 2025 are as follows:
Maturing Securities with Variable Monthly Payments or Noncontractual Maturities
Due in
One Year
or Less After One
Year But
Within
Five Years After Five
Years But
Within
Ten Years After
Ten Years Total
U.S. Treasury $ 59,841 $ 160,860 $ — $ — $ — $ 220,701
States and political subdivisions 12,770 21,132 18,223 26,813 — 78,938
Auction rate money market preferred — — — — 3,200 3,200
Mortgage-backed securities — — — — 27,545 27,545
Collateralized mortgage obligations — — — — 195,979 195,979
Corporate — — 8,150 — — 8,150
Total amortized cost $ 72,611 $ 181,992 $ 26,373 $ 26,813 $ 226,724 $ 534,513
Fair value $ 71,223 $ 175,122 $ 24,317 $ 23,643 $ 218,735 $ 513,040
Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.
As the auction rate money market preferred investments have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.
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The information in the following tables pertains to AFS securities with gross unrealized losses at March 31, 2025 and December 31, 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position.
March 31, 2025
Less Than Twelve Months Twelve Months or More
Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Total
Unrealized
Losses
U.S. Treasury $ — $ — $ 7,918 $ 212,783 $ 7,918
States and political subdivisions 176 15,510 4,543 40,418 4,719
Auction rate money market preferred — — 371 2,829 371
Mortgage-backed securities — — 1,717 25,828 1,717
Collateralized mortgage obligations 103 15,649 5,961 143,803 6,064
Corporate 85 1,615 765 5,685 850
Total $ 364 $ 32,774 $ 21,275 $ 431,346 $ 21,639
Number of securities in an unrealized loss position: 95 211 306
December 31, 2024
Less Than Twelve Months Twelve Months or More
Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Total
Unrealized
Losses
U.S. Treasury $ — $ — $ 10,236 $ 220,571 $ 10,236
States and political subdivisions 486 23,553 4,090 36,796 4,576
Auction rate money market preferred — — 156 3,044 156
Mortgage-backed securities — — 2,182 26,886 2,182
Collateralized mortgage obligations 185 5,646 8,297 149,028 8,482
Corporate — — 864 7,286 864
Total $ 671 $ 29,199 $ 25,825 $ 443,611 $ 26,496
Number of securities in an unrealized loss position: 175 178 353
As of March 31, 2025, no allowance for credit losses has been recognized on AFS securities in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality. This is based on our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our AFS securities and consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not intend to sell any of the securities classified as AFS in the table above, and believes it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their respective maturity date or repricing date, or if the market yields for such investments decline.
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Note 3 – Loans and ACL
Loan Composition
The following table provides a detailed listing of our loan portfolio at:
March 31, 2025 December 31, 2024
Balance Percent of Total Balance Percent of Total
Commercial and industrial
Secured $ 220,884 16.15 % $ 221,510 15.56 %
Unsecured 28,336 2.07 % 23,384 1.64 %
Total commercial and industrial 249,220 18.22 % 244,894 17.20 %
Commercial real estate
Commercial mortgage owner occupied 183,228 13.40 % 178,376 12.53 %
Commercial mortgage non-owner occupied 206,976 15.13 % 208,118 14.62 %
Commercial mortgage 1-4 family investor 93,845 6.86 % 92,497 6.50 %
Commercial mortgage multifamily 68,185 4.99 % 68,456 4.81 %
Total commercial real estate 552,234 40.38 % 547,447 38.46 %
Advances to mortgage brokers 3,015 0.22 % 63,080 4.43 %
Agricultural
Agricultural mortgage 65,699 4.80 % 67,550 4.75 %
Agricultural other 28,660 2.10 % 32,144 2.26 %
Total agricultural 94,359 6.90 % 99,694 7.01 %
Residential real estate
Senior lien 337,542 24.68 % 332,743 23.37 %
Junior lien 9,409 0.69 % 8,655 0.61 %
Home equity lines of credit 40,397 2.95 % 39,474 2.77 %
Total residential real estate 387,348 28.32 % 380,872 26.75 %
Consumer
Secured - direct 33,220 2.42 % 35,050 2.46 %
Secured - indirect 45,081 3.30 % 49,136 3.45 %
Unsecured 3,247 0.24 % 3,398 0.24 %
Total consumer 81,548 5.96 % 87,584 6.15 %
Total $ 1,367,724 100.00 % $ 1,423,571 100.00 %
We grant commercial, agricultural, residential real estate, and consumer loans to customers primarily in Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, health care, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. A portion of loans are unsecured.
Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ACL, and deferred fees or costs. Unless a loan has a nonaccrual status, interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate amortization method. Net unamortized deferred loan costs were $ 3,317 and $ 3,330 at March 31, 2025 and December 31, 2024, respectively.
Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $ 18,000 . Borrowers with direct credit needs of more than $ 18,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80 % or less. Depending upon the type of loan, past credit history, and current operating results,
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we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Government agency guarantee may be required. Personal guarantees and/or life insurance beneficiary assignments are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports.
We offer adjustable-rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac.
Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100 % of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80 % unless the loan qualifies for government guarantees.
Underwriting criteria for originated residential real estate loans generally include:
• Evaluation of the borrower’s ability to make monthly payments.
• Evaluation of the value of the property securing the loan.
• Ensuring the payment of principal, interest, taxes, and hazard insurance generally does not exceed 28 % of a borrower’s gross income.
• Ensuring all debt servicing does not exceed 40 % of income.
• Verification of acceptable credit reports.
• Verification of employment, income, and financial information.
Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $ 1,000 require the approval of one or more of the following committees: Internal Loan Committee, the Executive Loan Committee, or the Board of Directors.
Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.
Nonaccrual and Past Due Loans
The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status at an earlier date if collection of principal or interest is considered doubtful.
When a loan is placed in nonaccrual status, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ACL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status. Accrued interest receivable on loans was $ 6,494 and $ 6,384 at March 31, 2025 and December 31, 2024, respectively, which is included in other assets on the consolidated balance sheets.
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The following table summarizes nonaccrual loan data by class of loans as of:
March 31, 2025 December 31, 2024
Total Nonaccrual Loans Nonaccrual Loans with No ACL Total Nonaccrual Loans Nonaccrual Loans with No ACL
Residential real estate
Senior lien $ 173 $ 173 $ 282 $ 282
Total $ 173 $ 173 $ 282 $ 282
The following tables summarize the past due and current loans for the entire loan portfolio as of:
March 31, 2025
Past Due: Accruing Loans 90 or More Days Past Due
30-59
Days 60-89
Days 90 Days
or More Current Total
Commercial and industrial
Secured $ 79 $ — $ — $ 220,805 $ 220,884 $ —
Unsecured — 50 — 28,286 28,336 —
Total commercial and industrial 79 50 — 249,091 249,220 —
Commercial real estate
Commercial mortgage owner occupied 26 304 — 182,898 183,228 —
Commercial mortgage non-owner occupied 1,487 — — 205,489 206,976 —
Commercial mortgage 1-4 family investor 104 — — 93,741 93,845 —
Commercial mortgage multifamily — — — 68,185 68,185 —
Total commercial real estate 1,617 304 — 550,313 552,234 —
Advances to mortgage brokers — — — 3,015 3,015 —
Agricultural
Agricultural mortgage — — — 65,699 65,699 —
Agricultural other 57 — — 28,603 28,660 —
Total agricultural 57 — — 94,302 94,359 —
Residential real estate
Senior lien 3,163 — 56 334,323 337,542 —
Junior lien — — — 9,409 9,409 —
Home equity lines of credit 80 — — 40,317 40,397 —
Total residential real estate 3,243 — 56 384,049 387,348 —
Consumer
Secured - direct 3 — 26 33,191 33,220 26
Secured - indirect 197 — — 44,884 45,081 —
Unsecured 6 — — 3,241 3,247 —
Total consumer 206 — 26 81,316 81,548 26
Total $ 5,202 $ 354 $ 82 $ 1,362,086 $ 1,367,724 $ 26
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December 31, 2024
Past Due: Accruing Loans 90 or More Days Past Due
30-59
Days 60-89
Days 90 Days
or More Current Total
Commercial and industrial
Secured $ 328 $ — $ — $ 221,182 $ 221,510 $ —
Unsecured — 50 — 23,334 23,384 —
Total commercial and industrial 328 50 — 244,516 244,894 —
Commercial real estate
Commercial mortgage owner occupied 25 304 — 178,047 178,376 —
Commercial mortgage non-owner occupied 792 — — 207,326 208,118 —
Commercial mortgage 1-4 family investor — — — 92,497 92,497 —
Commercial mortgage multifamily — — — 68,456 68,456 —
Total commercial real estate 817 304 — 546,326 547,447 —
Advances to mortgage brokers — — — 63,080 63,080 —
Agricultural
Agricultural mortgage — — — 67,550 67,550 —
Agricultural other — — — 32,144 32,144 —
Total agricultural — — — 99,694 99,694 —
Residential real estate
Senior lien 3,846 148 163 328,586 332,743 —
Junior lien 19 — — 8,636 8,655 —
Home equity lines of credit 10 — — 39,464 39,474 —
Total residential real estate 3,875 148 163 376,686 380,872 —
Consumer
Secured - direct 15 — 19 35,016 35,050 19
Secured - indirect 232 — — 48,904 49,136 —
Unsecured 4 — — 3,394 3,398 —
Total consumer 251 — 19 87,314 87,584 19
Total $ 5,271 $ 502 $ 182 $ 1,417,616 $ 1,423,571 $ 19
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Credit Quality Indicators
The following tables display commercial and agricultural loans by credit risk ratings and year of origination as of:
March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving
Loans Revolving Loans Converted to Term Total
Commercial and industrial: Secured
Risk ratings 1-3 $ 781 $ 14,633 $ 14,585 $ 2,780 $ 4,793 $ 4,159 $ 11,474 $ — $ 53,205
Risk rating 4 7,922 36,531 33,149 15,511 13,986 3,487 31,460 — 142,046
Risk rating 5 633 3,549 166 13,434 66 9 4,441 — 22,298
Risk rating 6 102 121 272 59 113 9 2,659 — 3,335
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 9,438 $ 54,834 $ 48,172 $ 31,784 $ 18,958 $ 7,664 $ 50,034 $ — $ 220,884
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial: Unsecured
Risk ratings 1-3 $ 1,498 $ 348 $ 1,905 $ 132 $ 55 $ 431 $ 2,129 $ — $ 6,498
Risk rating 4 3,475 1,371 1,700 1,686 629 347 11,230 — 20,438
Risk rating 5 — 96 66 — 113 — 1,125 — 1,400
Risk rating 6 — — — — — — — — —
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 4,973 $ 1,815 $ 3,671 $ 1,818 $ 797 $ 778 $ 14,484 $ — $ 28,336
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Owner occupied
Risk ratings 1-3 $ — $ 1,935 $ 4,004 $ 1,532 $ 10,984 $ 17,220 $ — $ — $ 35,675
Risk rating 4 9,227 24,689 11,227 28,141 35,106 28,638 1,327 — 138,355
Risk rating 5 1,524 195 1,294 860 71 1,418 372 — 5,734
Risk rating 6 — 1,348 304 — 620 1,096 96 — 3,464
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 10,751 $ 28,167 $ 16,829 $ 30,533 $ 46,781 $ 48,372 $ 1,795 $ — $ 183,228
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Non-owner occupied
Risk ratings 1-3 $ 723 $ 302 $ 738 $ 5,510 $ 5,124 $ 2,078 $ — $ — $ 14,475
Risk rating 4 7,856 7,840 32,756 56,898 35,075 30,764 608 — 171,797
Risk rating 5 — 9,671 809 928 1,663 6,085 500 — 19,656
Risk rating 6 — — 1,000 — — 48 — — 1,048
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 8,579 $ 17,813 $ 35,303 $ 63,336 $ 41,862 $ 38,975 $ 1,108 $ — $ 206,976
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
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March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving
Loans Revolving Loans Converted to Term Total
Commercial real estate: 1-4 family investor
Risk ratings 1-3 $ 121 $ 1,154 $ — $ 2,774 $ 772 $ 1,750 $ 4,213 $ — $ 10,784
Risk rating 4 2,597 9,266 12,164 8,448 28,242 15,711 5,456 — 81,884
Risk rating 5 — — 143 335 70 51 — — 599
Risk rating 6 — — 532 — — 46 — — 578
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 2,718 $ 10,420 $ 12,839 $ 11,557 $ 29,084 $ 17,558 $ 9,669 $ — $ 93,845
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Multifamily
Risk ratings 1-3 $ — $ 638 $ 3,121 $ 1,673 $ 915 $ 1,258 $ 175 $ — $ 7,780
Risk rating 4 50 2,318 1,936 21,115 11,509 20,065 64 — 57,057
Risk rating 5 — 490 — — — — — — 490
Risk rating 6 — — — — — 2,858 — — 2,858
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 50 $ 3,446 $ 5,057 $ 22,788 $ 12,424 $ 24,181 $ 239 $ — $ 68,185
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Advances to mortgage brokers
Risk ratings 1-3 $ 3,015 $ — $ — $ — $ — $ — $ — $ — $ 3,015
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural mortgage
Risk ratings 1-3 $ 230 $ 742 $ — $ 2,688 $ 2,049 $ 3,347 $ 37 $ — $ 9,093
Risk rating 4 583 4,023 4,055 12,762 6,794 13,269 1,384 — 42,870
Risk rating 5 — 278 1,505 1,342 5,741 1,609 1,168 — 11,643
Risk rating 6 — 60 — 975 — 1,058 — — 2,093
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 813 $ 5,103 $ 5,560 $ 17,767 $ 14,584 $ 19,283 $ 2,589 $ — $ 65,699
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural other
Risk ratings 1-3 $ — $ 633 $ 434 $ 86 $ 107 $ 211 $ 2,694 $ — $ 4,165
Risk rating 4 138 1,886 1,192 1,656 1,741 776 11,825 — 19,214
Risk rating 5 — 1,687 — 17 — 460 831 — 2,995
Risk rating 6 — — 172 — 90 — 2,024 — 2,286
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 138 $ 4,206 $ 1,798 $ 1,759 $ 1,938 $ 1,447 $ 17,374 $ — $ 28,660
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
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December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving
Loans Revolving Loans Converted to Term Total
Commercial and industrial: Secured
Risk ratings 1-3 $ 13,303 $ 15,074 $ 3,078 $ 4,975 $ 4,437 $ 368 $ 10,316 $ — $ 51,551
Risk rating 4 38,143 38,393 17,252 15,561 2,035 2,191 28,145 — 141,720
Risk rating 5 3,627 559 11,644 164 137 53 6,626 — 22,810
Risk rating 6 126 288 1,841 71 — 10 3,093 — 5,429
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 55,199 $ 54,314 $ 33,815 $ 20,771 $ 6,609 $ 2,622 $ 48,180 $ — $ 221,510
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial: Unsecured
Risk ratings 1-3 $ 378 $ 1,967 $ 203 $ 69 $ 48 $ 414 $ 1,966 $ — $ 5,045
Risk rating 4 3,073 2,049 2,388 268 370 — 8,896 — 17,044
Risk rating 5 100 — — 121 — — 1,074 — 1,295
Risk rating 6 — — — — — — — — —
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 3,551 $ 4,016 $ 2,591 $ 458 $ 418 $ 414 $ 11,936 $ — $ 23,384
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Owner occupied
Risk ratings 1-3 $ 1,963 $ 4,032 $ 1,694 $ 11,125 $ 13,300 $ 4,421 $ 221 $ — $ 36,756
Risk rating 4 24,878 11,550 29,307 35,974 9,780 20,260 1,590 — 133,339
Risk rating 5 197 487 876 72 653 791 372 — 3,448
Risk rating 6 1,354 1,123 — 636 1,117 504 99 — 4,833
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 28,392 $ 17,192 $ 31,877 $ 47,807 $ 24,850 $ 25,976 $ 2,282 $ — $ 178,376
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Non-owner occupied
Risk ratings 1-3 $ 644 $ 795 $ 5,568 $ 5,178 $ 348 $ 1,781 $ — $ — $ 14,314
Risk rating 4 7,902 34,664 61,524 35,620 4,375 29,178 497 — 173,760
Risk rating 5 9,726 — 218 1,681 6,154 709 500 — 18,988
Risk rating 6 — 1,006 — — 50 — — — 1,056
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 18,272 $ 36,465 $ 67,310 $ 42,479 $ 10,927 $ 31,668 $ 997 $ — $ 208,118
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
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December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving
Loans Revolving Loans Converted to Term Total
Commercial real estate: 1-4 family investor
Risk ratings 1-3 $ 1,165 $ — $ 2,632 $ 791 $ 846 $ 965 $ 3,076 $ — $ 9,475
Risk rating 4 9,399 12,535 8,911 28,666 13,930 3,640 4,750 — 81,831
Risk rating 5 — 145 339 72 — 52 — — 608
Risk rating 6 — 536 — — — 47 — — 583
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 10,564 $ 13,216 $ 11,882 $ 29,529 $ 14,776 $ 4,704 $ 7,826 $ — $ 92,497
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Multifamily
Risk ratings 1-3 $ 638 $ 3,383 $ 1,697 $ 936 $ 545 $ 746 $ 150 $ — $ 8,095
Risk rating 4 2,081 1,957 21,446 11,646 664 19,617 64 — 57,475
Risk rating 5 — — — — — — — — —
Risk rating 6 — — — — — 2,886 — — 2,886
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 2,719 $ 5,340 $ 23,143 $ 12,582 $ 1,209 $ 23,249 $ 214 $ — $ 68,456
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Advances to mortgage brokers
Risk ratings 1-3 $ 63,080 $ — $ — $ — $ — $ — $ — $ — $ 63,080
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural mortgage
Risk ratings 1-3 $ 792 $ — $ 2,700 $ 2,144 $ 2,550 $ 1,250 $ 34 $ — $ 9,470
Risk rating 4 4,410 4,118 12,959 6,968 5,737 8,586 1,322 — 44,100
Risk rating 5 281 1,521 1,342 5,757 — 1,364 1,045 — 11,310
Risk rating 6 60 — 1,550 — — 1,060 — — 2,670
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 5,543 $ 5,639 $ 18,551 $ 14,869 $ 8,287 $ 12,260 $ 2,401 $ — $ 67,550
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural other
Risk ratings 1-3 $ 634 $ 523 $ 106 $ 137 $ 2 $ 210 $ 3,635 $ — $ 5,247
Risk rating 4 1,940 1,328 1,863 1,893 463 550 13,531 — 21,568
Risk rating 5 1,683 — — — 438 — 608 — 2,729
Risk rating 6 — 172 — 90 — — 2,338 — 2,600
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 4,257 $ 2,023 $ 1,969 $ 2,120 $ 903 $ 760 $ 20,112 $ — $ 32,144
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
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We have certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. The Board reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the Board with frequent reports related to loan production, loan quality, and concentration of credit, loan delinquencies, nonperforming loans and potential problem loans. We seek to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions.
Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows:
1. EXCELLENT – Substantially Risk Free
Credit has strong financial condition and solid earnings history, characterized by:
• High liquidity, strong cash flow, low leverage.
• Unquestioned ability to meet all obligations when due.
• Experienced management, with management succession in place.
• Secured by cash.
2. HIGH QUALITY – Limited Risk
Credit with sound financial condition and a positive trend in earnings supplemented by:
• Favorable liquidity and leverage ratios.
• Ability to meet all obligations when due.
• Management with successful track record.
• Steady and satisfactory earnings history.
• If loan is secured, collateral is of high quality and readily marketable.
• Access to alternative financing.
• Well defined primary and secondary source of repayment.
• If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident.
3. HIGH SATISFACTORY – Reasonable Risk
Credit with satisfactory financial condition and further characterized by:
• Working capital adequate to support operations.
• Cash flow sufficient to pay debts as scheduled.
• Management experience and depth appear favorable.
• Loan performing according to terms.
• If loan is secured, collateral is acceptable, and loan is fully protected.
4. SATISFACTORY – Acceptable Risk
Credit with bankable risks, although some signs of weaknesses are shown:
• Would include most start-up businesses.
• Occasional instances of trade slowness or repayment delinquency – may have been 10 - 30 days slow within the past year.
• Management’s abilities are apparent yet unproven.
• Weakness in primary source of repayment with adequate secondary source of repayment.
• Loan structure generally in accordance with policy.
• If secured, loan collateral coverage is marginal.
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To be classified as less than satisfactory, only one of the following criteria must be met.
5. SPECIAL MENTION – Criticized
Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:
• Downward trend in sales, profit levels, and margins.
• Impaired working capital position.
• Cash flow is strained in order to meet debt repayment.
• Loan delinquency ( 30 - 60 days) and overdrafts may occur.
• Shrinking equity cushion.
• Diminishing primary source of repayment and questionable secondary source.
• Management abilities are questionable.
• Weak industry conditions.
• Litigation pending against the borrower.
• Loan may need to be restructured to improve collateral position or reduce payments.
• Collateral or guaranty offers limited protection.
• Negative debt service coverage, however, the credit is well collateralized, and payments are current.
6. SUBSTANDARD – Classified
Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:
• Sustained losses have severely eroded the equity and cash flow.
• Deteriorating liquidity.
• Serious management problems or internal fraud.
• Original repayment terms liberalized.
• Likelihood of bankruptcy.
• Inability to access other funding sources.
• Reliance on secondary source of repayment.
• Litigation filed against borrower.
• Interest non-accrual may be warranted.
• Collateral provides little or no value.
• Requires excessive attention of the loan officer.
• Borrower is uncooperative with loan officer.
7. VULNERABLE – Classified
Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:
• Insufficient cash flow to service debt.
• Minimal or no payments being received.
• Limited options available to avoid the collection process.
• Transition status, expect action will take place to collect loan without immediate progress being made.
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8. DOUBTFUL – Workout
Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:
• Normal operations are severely diminished or have ceased.
• Seriously impaired cash flow.
• Original repayment terms materially altered.
• Secondary source of repayment is inadequate.
• Survivability as a “going concern” is impossible.
• Collection process has begun.
• Bankruptcy petition has been filed.
• Judgments have been filed.
• Portion of the loan balance has been charged off.
9. LOSS – Charge-off
Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:
• Liquidation or reorganization under bankruptcy, with poor prospects of collection.
• Fraudulently overstated assets and/or earnings.
• Collateral has marginal or no value.
• Debtor cannot be located.
• Over 120 days delinquent.
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Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due status. The following tables display residential real estate and consumer loans by payment status and year of origination as of:
March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving
Loans Revolving Loans Converted to Term Total
Residential real estate: Senior lien
Current $ 10,712 $ 58,748 $ 39,681 $ 46,037 $ 72,311 $ 105,685 $ — $ 1,033 $ 334,207
Past due 30-89 days — 202 184 219 499 2,058 — — 3,162
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — 173 — — 173
Total $ 10,712 $ 58,950 $ 39,865 $ 46,256 $ 72,810 $ 107,916 $ — $ 1,033 $ 337,542
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ — $ 1
Residential real estate: Junior lien
Current $ 1,073 $ 4,174 $ 2,929 $ 741 $ 101 $ 391 $ — $ — $ 9,409
Past due 30-89 days — — — — — — — — —
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 1,073 $ 4,174 $ 2,929 $ 741 $ 101 $ 391 $ — $ — $ 9,409
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Residential real estate: Home equity lines of credit
Current $ — $ — $ — $ — $ — $ — $ 40,317 $ — $ 40,317
Past due 30-89 days — — — — — — 80 — 80
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ — $ — $ — $ — $ — $ — $ 40,397 $ — $ 40,397
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Secured - direct
Current $ 2,437 $ 9,227 $ 8,506 $ 5,906 $ 3,550 $ 3,565 $ — $ — $ 33,191
Past due 30-89 days — — — 3 — — — — 3
Past due 90 or more days — — — — — 26 — — 26
Nonaccrual — — — — — — — — —
Total $ 2,437 $ 9,227 $ 8,506 $ 5,909 $ 3,550 $ 3,591 $ — $ — $ 33,220
Current year-to-date gross charge-offs $ — $ 1 $ 19 $ 36 $ — $ 12 $ — $ — $ 68
Consumer: Secured - indirect
Current $ 613 $ 5,850 $ 20,416 $ 6,956 $ 4,507 $ 6,542 $ — $ — $ 44,884
Past due 30-89 days — 47 — — 68 82 — — 197
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 613 $ 5,897 $ 20,416 $ 6,956 $ 4,575 $ 6,624 $ — $ — $ 45,081
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 13 $ — $ — $ 13
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March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving
Loans Revolving Loans Converted to Term Total
Consumer: Unsecured
Current $ 436 $ 1,353 $ 503 $ 136 $ 17 $ 8 $ 788 $ — $ 3,241
Past due 30-89 days — 5 — 1 — — — — 6
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 436 $ 1,358 $ 503 $ 137 $ 17 $ 8 $ 788 $ — $ 3,247
Current year-to-date gross charge-offs $ 80 $ 1 $ 9 $ — $ — $ — $ — $ — $ 90
December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving
Loans Revolving Loans Converted to Term Total
Residential real estate: Senior lien
Current $ 55,991 $ 35,105 $ 45,916 $ 73,607 $ 47,057 $ 62,303 $ — $ 8,579 $ 328,558
Past due 30-89 days 173 162 331 287 907 2,043 — — 3,903
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — 163 28 91 — — 282
Total $ 56,164 $ 35,267 $ 46,247 $ 74,057 $ 47,992 $ 64,437 $ — $ 8,579 $ 332,743
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ — $ 1
Residential real estate: Junior lien
Current $ 4,229 $ 3,092 $ 800 $ 86 $ 71 $ 358 $ — $ — $ 8,636
Past due 30-89 days — — — 19 — — — — 19
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 4,229 $ 3,092 $ 800 $ 105 $ 71 $ 358 $ — $ — $ 8,655
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Residential real estate: Home equity lines of credit
Current $ — $ — $ — $ — $ — $ — $ 39,464 $ — $ 39,464
Past due 30-89 days — — — — — — 10 — 10
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ — $ — $ — $ — $ — $ — $ 39,474 $ — $ 39,474
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Secured - direct
Current $ 10,990 $ 9,498 $ 6,535 $ 3,947 $ 2,166 $ 1,880 $ — $ — $ 35,016
Past due 30-89 days — — 15 — — — — — 15
Past due 90 or more days — — — — 19 — — — 19
Nonaccrual — — — — — — — — —
Total $ 10,990 $ 9,498 $ 6,550 $ 3,947 $ 2,185 $ 1,880 $ — $ — $ 35,050
Current year-to-date gross charge-offs $ — $ 62 $ — $ — $ — $ — $ — $ — $ 62
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December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving
Loans Revolving Loans Converted to Term Total
Consumer: Secured - indirect
Current $ 6,526 $ 22,624 $ 7,682 $ 4,990 $ 4,018 $ 3,064 $ — $ — $ 48,904
Past due 30-89 days 42 51 50 28 54 7 — — 232
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 6,568 $ 22,675 $ 7,732 $ 5,018 $ 4,072 $ 3,071 $ — $ — $ 49,136
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Unsecured
Current $ 1,654 $ 656 $ 211 $ 22 $ 16 $ — $ 835 $ — $ 3,394
Past due 30-89 days — — 2 — — — 2 — 4
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 1,654 $ 656 $ 213 $ 22 $ 16 $ — $ 837 $ — $ 3,398
Current year-to-date gross charge-offs $ 107 $ 7 $ 14 $ — $ — $ — $ — $ — $ 128
Loan Modifications
A loan modification includes terms outside of normal lending practices to a borrower experiencing financial difficulty.
Typical modifications granted include, but are not limited to:
• Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.
• Extending the maturity date or amortization period beyond typical lending guidelines for loans with similar risk characteristics.
• Agreeing to an interest-only payment structure, delaying principal payments, or delaying payments.
• Forgiving principal.
To determine if a borrower is experiencing financial difficulty, factors we consider include:
• The borrower is currently in default on any debt.
• The borrower would likely default on any debt if the concession is not granted.
• The borrower’s cash flow is insufficient to service all debt if the concession is not granted.
• The borrower has declared, or is in the process of declaring, bankruptcy.
• The borrower is unlikely to continue as a going concern (if the entity is a business).
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The following is a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty for the:
Three Months Ended March 31, 2025
Term Extension
Amortized Cost Basis % of Total Class of Financial Receivable
Commercial and industrial
Secured $ 532 0.24 %
Commercial real estate
Commercial mortgage owner occupied 1,524 0.83 %
Total $ 2,056
Three Months Ended March 31, 2024
Other-Than-Insignificant Payment Delay Term Extension
Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable
Commercial and industrial
Secured $ — 0.00 % $ 13 0.01 %
Commercial real estate
Commercial mortgage owner occupied 823 0.46 % — 0.00 %
Consumer
Secured - indirect — 0.00 % 2 0.00 %
Total $ 823 $ 15
We do not modify any loans by forgiving principal or accrued interest. We had committed to advance $ 0 and $ 43 in additional funds to be disbursed in connection with modified loans at March 31, 2025 and December 31, 2024, respectively, as displayed in the tables above.
The following is a summary of the financial effect of the modifications granted to borrowers experiencing financial difficulty for the:
Three Months Ended March 31
2025 2024
Weighted-Average Term Extension (Years) Payment Delay Term Weighted-Average Term Extension (Years)
Commercial and industrial
Secured 4.4 years N/A 3 years
Commercial real estate
Commercial mortgage owner occupied 15 years 7 months N/A
Consumer
Secured - indirect N/A N/A 1.3 years
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We closely monitor the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. The following tables summarize the amortized cost basis of loans that have been modified within the past 12 months prior to:
March 31, 2025
Current 30-59 Days
Past Due 60-89 Days
Past Due 90 Days or
More Past Due Total
Commercial and industrial
Secured $ 2,168 $ — $ — $ — $ 2,168
Commercial real estate
Commercial mortgage owner occupied 2,872 — — — 2,872
Agricultural
Agricultural mortgage 1,584 — — — 1,584
Agricultural other 924 — — — 924
Total $ 7,548 $ — $ — $ — $ 7,548
March 31, 2024
Current 30-59 Days
Past Due 60-89 Days
Past Due 90 Days or
More Past Due Total
Commercial and industrial
Secured $ 12 $ — $ — $ — $ 12
Commercial real estate
Commercial mortgage owner occupied 941 — — — 941
Commercial mortgage non-owner occupied 1,023 — — — 1,023
Commercial mortgage multifamily 2,976 — — — 2,976
Agricultural
Agricultural mortgage 22 — — — 22
Consumer
Secured - indirect 2 — — — 2
Total $ 4,976 $ — $ — $ — $ 4,976
We had no loans that defaulted in the three-month periods ended March 31, 2025 and 2024 which were modified within 12 months prior to the default date.
ACL - Loans
The credit quality of our loan portfolio is continuously monitored and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within our loan portfolio. The ACL is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.
The ACL is evaluated on a regular basis for appropriateness. Our periodic review of the collectability of a loan considers historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The primary factors behind the determination of the level of the ACL are specific allocations for loans individually evaluated, historical loss percentages, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a component of individual loans that do not share risk characteristics with other loans; and a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.
For a loan that does not share risk characteristics with other loans, an individual analysis is performed to measure an allowance. Loans in nonaccrual status are individually evaluated for specific allocation of the allowance using the fair value of collateral,
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less costs to sell if foreclosure is probable, or the discounted cash flow method. We do not recognize interest income on loans in nonaccrual status. For loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding.
In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and credit risk ratings or delinquency bucket. This model calculates an expected loss percentage for each loan class by considering the probability of default, based on the migration of loans from performing to loss by credit risk ratings or delinquency buckets using life-of-loan analysis, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.
The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio. These qualitative factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a reasonable and supportable forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the model reverts back to the historical rates of default and severity of loss. Qualitative factors include:
• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, recovery practices not considered elsewhere in estimating credit losses;
• Changes in the experience, ability, and depth of lending management and other relevant staff;
• Changes in interest rates;
• Changes in international, national, regional, and local economic factors;
• Changes in the nature and volume of the portfolio and in the terms of loans;
• Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;
• Lack of current financial information;
• Competition, legal, and regulatory; and
• Changes in the value of underlying collateral.
A summary of activity in the ACL by portfolio segment and the recorded investment in loans by segments follows for the:
Three Months Ended March 31, 2025
Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total
December 31, 2024 $ 1,316 $ 5,171 $ 287 $ 4,521 $ 1,600 $ 12,895
Charge-offs — — — ( 1 ) ( 171 ) ( 172 )
Recoveries 80 2 — 14 128 224
Reversal of credit losses ( 157 ) 1 ( 21 ) 66 ( 101 ) ( 212 )
March 31, 2025 $ 1,239 $ 5,174 $ 266 $ 4,600 $ 1,456 $ 12,735
Three Months Ended March 31, 2024
Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total
December 31, 2023 $ 968 $ 5,878 $ 270 $ 4,336 $ 1,656 $ 13,108
Charge-offs — — — ( 1 ) ( 190 ) ( 191 )
Recoveries 2 6 2 64 71 145
Provision for credit losses 297 19 ( 7 ) ( 91 ) 110 328
March 31, 2024 $ 1,267 $ 5,903 $ 265 $ 4,308 $ 1,647 $ 13,390
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The following table illustrates the two main components of the ACL as of:
March 31
2025 December 31
2024 September 30
2024 June 30
2024 March 31
2024
ACL
Individually evaluated $ — $ — $ — $ 137 $ 349
Collectively evaluated 12,735 12,895 12,635 12,958 13,041
Total $ 12,735 $ 12,895 $ 12,635 $ 13,095 $ 13,390
ACL to gross loans
Individually evaluated 0.00 % 0.00 % 0.00 % 0.01 % 0.03 %
Collectively evaluated 0.93 % 0.91 % 0.89 % 0.94 % 0.95 %
Total 0.93 % 0.91 % 0.89 % 0.95 % 0.98 %
The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan segment as of:
March 31, 2025 December 31, 2024
Loan Balance Specific Allocation Loan Balance Specific Allocation
Commercial and industrial $ — $ — $ — $ —
Commercial real estate — — — —
Agricultural — — — —
Residential real estate 145 — 254 —
Consumer — — — —
Total $ 145 $ — $ 254 $ —
We have designated loans classified as collateral dependent for which we apply the practical expedient to measure the ACL based on the fair value of the collateral less cost to sell when the repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals are updated every one to two years depending on the type of loan and the total exposure of the borrower. Loans evaluated for expected credit losses on an individual basis as of March 31, 2025 include $ 145 in collateral dependent loans secured by residential real estate.
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Note 4 – Borrowed Funds
Short-term borrowings
Short-term borrowings include securities sold under repurchase agreements without stated maturity dates, federal funds purchased, and FRB Discount Window advances, which all generally mature within one to four days from the transaction date.
A summary of short-term borrowed funds without stated maturity dates was as follows for the:
Three Months Ended March 31
2025 2024
Maximum Month End Balance Average Balance Weighted Average Interest Rate During the Period Maximum Month End Balance Average Balance Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates $ 47,310 $ 43,513 3.21 % $ 43,250 $ 40,621 3.15 %
Federal funds purchased — 21 5.43 % — 2 6.52 %
FRB Discount Window — 29 4.51 % — — 0.00 %
Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction. The securities underlying the agreements have a carrying value and a fair value of $ 58,094 and $ 67,539 at March 31, 2025 and December 31, 2024, respectively. Such securities remain under our control. We may be required to provide additional collateral based on the fair value of underlying securities.
Securities sold under repurchase agreements without stated maturity dates were as follows as of:
March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Securities sold under agreements to repurchase without stated maturity dates $ 47,310 3.08 % $ 53,567 3.18 %
We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at:
March 31
2025 December 31
2024
Pledged to secure borrowed funds $ 394,079 $ 395,286
Pledged to secure repurchase agreements 58,094 67,539
Pledged for public deposits and for other purposes necessary or required by law 67,794 86,162
Total $ 519,967 $ 548,987
AFS securities pledged to repurchase agreements without stated maturity dates consisted of the following at:
March 31
2025 December 31
2024
U.S. Treasury $ 48,114 $ 57,271
Mortgage-backed securities 7,769 7,979
Collateralized mortgage obligations 2,211 2,289
Total $ 58,094 $ 67,539
AFS securities pledged to repurchase agreements are monitored to ensure the appropriate level is collateralized. In the event of maturities, calls, significant principal repayments, or significant decline in market values, we have an adequate level of AFS securities to pledge to satisfy collateral requirements.
As of March 31, 2025, we had the ability to borrow up to an additional $ 377,824 without pledging additional collateral.
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FHLB advances
FHLB advances are collateralized by a blanket lien on all qualified 1-4 family residential real estate loans, specific AFS securities, and FHLB stock.
The following table lists the maturities and weighted average interest rates of FHLB advances as of:
March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Fixed rate due 2025 $ — 0.00 % $ 30,000 4.52 %
Subordinated notes
We have $30,000 in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Notes"). The Notes will initially bear a fixed interest rate of 3.25% until June 15, 2026, after which time until maturity on June 15, 2031, the interest rate will reset quarterly to an annual floating rate equal to the then-current 3-month SOFR plus 256 basis points. The Notes are redeemable by us at our option, in whole or in part, on or after June 15, 2026. The Notes are not subject to redemption at the option of the holders.
The following table summarizes our outstanding notes as of:
March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Fixed rate at 3.25% to floating, due 2031 $ 30,000 3.25 % $ 30,000 3.25 %
Unamortized issuance costs ( 553 ) ( 576 )
Total subordinated debt, net $ 29,447 $ 29,424
Note 5 – Computation of Earnings Per Common Share
Basic earnings per common share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate solely to outstanding shares in the Directors Plan and grant awards under the RSP.
Earnings per common share have been computed based on the following for the:
Three Months Ended
March 31
2025 2024
Average number of common shares outstanding for basic calculation 7,419,739 7,493,334
Average potential effect of common shares in the RSP 12,423 14,405
Average number of common shares outstanding used to calculate diluted earnings per common share 7,432,162 7,507,739
Net income $ 3,949 $ 3,131
Earnings per common share
Basic $ 0.53 $ 0.42
Diluted 0.53 0.42
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Note 6 – Capital Ratios and Shareholders' Equity
As of March 31, 2025 and December 31, 2024, the most recent notifications from the FRB and the FDIC categorized us as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain total risk-based, Tier 1 risk-based, Common Equity Tier 1, and Tier 1 leverage ratios as set forth in the following tables. The minimum requirements presented below include the minimum required capital levels based on the Basel III Capital Rules. Capital requirements to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. There were no conditions or events since the notifications that we believe have changed our categories. The following tables set forth these requirements and our ratios as of:
March 31, 2025
Actual Minimum Capital
Required Plus Capital Conservation Buffer Minimum Capital
Required To Be Considered
Well Capitalized (1)
Amount Ratio Amount Ratio Amount Ratio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank $ 176,720 12.08 % $ 102,391 7.00 % $ 95,077 6.50 %
Consolidated 184,713 12.58 % 102,748 7.00 % N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank 176,720 12.08 % 124,331 8.50 % 117,018 8.00 %
Consolidated 184,713 12.58 % 124,765 8.50 % N/A N/A
Total capital to risk weighted assets
Isabella Bank 190,072 12.99 % 153,586 10.50 % 146,272 10.00 %
Consolidated 227,512 15.50 % 154,121 10.50 % N/A N/A
Tier 1 capital to average assets
Isabella Bank 176,720 8.59 % 82,267 4.00 % 102,834 5.00 %
Consolidated 184,713 8.96 % 82,465 4.00 % N/A N/A
December 31, 2024
Actual Minimum Capital
Required Plus Capital Conservation Buffer Minimum Capital
Required To Be Considered
Well Capitalized (1)
Amount Ratio Amount Ratio Amount Ratio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank $ 172,589 11.53 % $ 104,783 7.00 % $ 97,299 6.50 %
Consolidated 183,348 12.21 % 105,136 7.00 % N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank 172,589 11.53 % 127,237 8.50 % 119,753 8.00 %
Consolidated 183,348 12.21 % 127,665 8.50 % N/A N/A
Total capital to risk weighted assets
Isabella Bank 185,997 12.43 % 157,175 10.50 % 149,691 10.00 %
Consolidated 226,179 15.06 % 157,703 10.50 % N/A N/A
Tier 1 capital to average assets
Isabella Bank 172,589 8.36 % 82,602 4.00 % 103,252 5.00 %
Consolidated 183,348 8.86 % 82,803 4.00 % N/A N/A
(1) "Well-capitalized" minimum Common Equity Tier 1 to Risk-Weighted and Leverage Ratio are not formally defined under applicable regulations for bank holding companies.
Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital includes a permissible portion of the allowances for credit losses and subordinated debt, net of unamortized issuance costs. There are no significant regulatory constraints placed on our capital. At March 31, 2025, the Bank exceeded all minimum capital requirements.
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The following table summarizes the changes in AOCI by component for the:
Three Months Ended March 31
2025 2024
Unrealized
Gains
(Losses) on
AFS
Securities Defined
Benefit
Pension Plan Total Unrealized
Gains
(Losses) on
AFS
Securities Defined
Benefit
Pension Plan Total
Balance, December 31 $ ( 20,958 ) $ ( 397 ) $ ( 21,355 ) $ ( 25,199 ) $ ( 697 ) $ ( 25,896 )
OCI before reclassifications 5,014 — 5,014 ( 2,926 ) — ( 2,926 )
Amounts reclassified from AOCI — — — — — —
Subtotal 5,014 — 5,014 ( 2,926 ) — ( 2,926 )
Tax effect ( 1,098 ) — ( 1,098 ) 632 — 632
OCI, net of tax 3,916 — 3,916 ( 2,294 ) — ( 2,294 )
Balance, March 31 $ ( 17,042 ) $ ( 397 ) $ ( 17,439 ) $ ( 27,493 ) $ ( 697 ) $ ( 28,190 )
Included in OCI for the three-month periods ended March 31, 2025 and 2024 are changes in unrealized gains and losses related to certain auction rate money market preferred stocks. These investments, for federal income tax purposes, have no deferred federal income taxes related to unrealized gains or losses given the nature of the investments.
A summary of the components of unrealized gains on AFS securities included in OCI follows for the:
Three Months Ended March 31
2025 2024
Auction Rate Money Market Preferred All Other AFS Securities Total Auction Rate Money Market Preferred All Other AFS Securities Total
Unrealized gains (losses) arising during the period $ ( 215 ) $ 5,229 $ 5,014 $ 82 $ ( 3,008 ) $ ( 2,926 )
Reclassification adjustment for net (gains) losses included in net income — — — — — —
Net unrealized gains (losses) ( 215 ) 5,229 5,014 82 ( 3,008 ) ( 2,926 )
Tax effect — ( 1,098 ) ( 1,098 ) — 632 632
Unrealized gains (losses), net of tax $ ( 215 ) $ 4,131 $ 3,916 $ 82 $ ( 2,376 ) $ ( 2,294 )
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Note 7 – Fair Value
Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods.
Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally, we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion.
Following is a description of the valuation methodologies, key inputs, and an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.
AFS securities: AFS securities are recorded at fair value on a recurring basis. Level 1 fair value measurement is based upon quoted prices for identical instruments. Level 2 fair value measurement is based upon quoted prices for similar instruments. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss and liquidity assumptions. The values for Level 1 and Level 2 investment securities are generally obtained from an independent third party. On a quarterly basis, we compare the values provided to alternative pricing sources.
Loans: We do not record loans at fair value on a recurring basis. However, some loans are individually evaluated for ACL purposes, and a specific ACL may be established. To measure reserve, the fair value of the loan is estimated using the fair value of the collateral, less costs to sell if foreclosure is probable, or the present value of expected future cash flows discounted at the loan’s effective interest rate. Loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
We review the net realizable values of the underlying collateral for collateral dependent loans on at least a quarterly basis for all loan types. To determine the collateral value, we utilize independent appraisals, broker price opinions, or internal evaluations. We review these valuations to determine whether an additional discount should be applied given the age of market information that may have been considered as well as other factors such as costs to sell an asset if it is determined that the collateral will be liquidated in connection with the ultimate settlement of the loan. We use these valuations to determine if any specific reserves or charge-offs are necessary. We may obtain new valuations in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated.
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The following tables list the quantitative information about loans measured at fair value on a nonrecurring basis as of:
March 31, 2025
Valuation Technique Fair Value Unobservable Input Actual Range Weighted Average
Collateral Dependent Loans Discount applied to collateral:
Discounted value $ 145 Real Estate 20 %
20 %
December 31, 2024
Valuation Technique Fair Value Unobservable Input Actual Range Weighted Average
Collateral Dependent Loans Discount applied to collateral:
Discounted value $ 254 Real Estate 20 %
20 %
Collateral discount rates may have ranges to accommodate differences in the age of the independent appraisal, broker price opinion, or internal evaluation.
OMSR: OMSR (which are included in other assets) are subject to impairment testing. To test for impairment, we utilize a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and discount rates. If the valuation model reflects a value less than the carrying value, OMSR are adjusted to fair value through a valuation allowance as determined by the model. As such, we classify OMSR subject to nonrecurring fair value adjustments as Level 3.
The following table lists the quantitative information about OMSR fair value measurement as of:
March 31, 2025
Valuation Technique Fair Value Unobservable Input Rate
Discounted cash flow $ 2,366 Constant prepayment rate 7 %
Discount rate 11 %
December 31, 2024
Valuation Technique Fair Value Unobservable Input Rate
Discounted cash flow $ 2,483 Constant prepayment rate 7 %
Discount rate 11 %
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.
Estimated Fair Values of Financial Instruments Not Recorded at Fair Value in their Entirety on a Recurring Basis
Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.
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The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis were as follows as of:
March 31, 2025
Carrying
Value Estimated
Fair Value Level 1 Level 2 Level 3
ASSETS
Cash and cash equivalents $ 69,179 $ 69,179 $ 69,179 $ — $ —
FHLB stock (1)
5,600 N/A — — —
Mortgage loans HFS 127 131 — 131 —
Gross loans 1,367,724 1,321,419 — — 1,321,419
Less allowance for credit losses 12,735 12,735 — — 12,735
Net loans 1,354,989 1,308,684 — — 1,308,684
Accrued interest receivable 8,790 8,790 8,790 — —
Equity securities without readily determinable fair values (1)
3,086 N/A — — —
LIABILITIES
Deposits without stated maturities 1,407,670 1,407,670 1,407,670 — —
Deposits with stated maturities 390,239 388,178 — 388,178 —
Short-term borrowings 47,310 47,254 — 47,254 —
FHLB advances — — — — —
Subordinated debt, net of unamortized issuance costs
29,447 27,916 — 27,916 —
Accrued interest payable 997 997 997 — —
December 31, 2024
Carrying
Value Estimated
Fair Value Level 1 Level 2 Level 3
ASSETS
Cash and cash equivalents $ 24,542 $ 24,542 $ 24,542 $ — $ —
FHLB stock (1)
12,762 N/A — — —
Mortgage loans HFS 242 247 — 247 —
Gross loans 1,423,571 1,363,883 — — 1,363,883
Less allowance for credit losses 12,895 12,895 — — 12,895
Net loans 1,410,676 1,350,988 — — 1,350,988
Accrued interest receivable 8,085 8,085 8,085 — —
Equity securities without readily determinable fair values (1)
3,086 N/A — — —
LIABILITIES
Deposits without stated maturities 1,359,469 1,359,469 1,359,469 — —
Deposits with stated maturities 387,591 385,200 — 385,200 —
Short-term borrowings 53,567 53,503 — 53,503 —
FHLB advances 30,000 30,000 — 30,000 —
Subordinated debt, net of unamortized issuance costs
29,424 27,658 — 27,658 —
Accrued interest payable 1,051 1,051 1,051 — —
(1) Due to the characteristics of equity securities without readily determinable fair values, they are not disclosed under a specific fair value hierarchy. When an impairment or write-down related to these securities is recorded, such amount would be classified as a nonrecurring Level 3 fair value adjustment.
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Financial Instruments Recorded at Fair Value
The table below presents the recorded amount of assets and liabilities measured at fair value on:
March 31, 2025 December 31, 2024
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Recurring items
AFS securities
U.S. Treasury $ 212,783 $ — $ 212,783 $ — $ 220,571 $ — $ 220,571 $ —
States and political subdivisions 74,222 — 74,222 — 76,568 — 76,568 —
Auction rate money market preferred 2,829 — 2,829 — 3,044 — 3,044 —
Mortgage-backed securities 25,828 — 25,828 — 26,886 — 26,886 —
Collateralized mortgage obligations 190,078 — 190,078 — 154,674 — 154,674 —
Corporate 7,300 — 7,300 — 7,286 — 7,286 —
Total AFS securities 513,040 — 513,040 — 489,029 — 489,029 —
Nonrecurring items
Collateral dependent (net of ACL) 145 — — 145 254 — — 254
Foreclosed assets 649 — — 649 544 — — 544
Total $ 513,834 $ — $ 513,040 $ 794 $ 489,827 $ — $ 489,029 $ 798
Percent of assets and liabilities measured at fair value 0.00 % 99.85 % 0.15 % 0.00 % 99.84 % 0.16 %
We recorded an impairment related to foreclosed assets of $ 63 through earnings for the three month periods ended March 31, 2025 and $ 0 for the three month period ended March 31, 2024. We had no other assets or liabilities recorded at fair value with changes in fair value recognized through earnings, on a recurring basis or nonrecurring basis, as of March 31, 2025. Further, we had no unrealized gains and losses included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period.
Note 8 – Subsequent Events
On April 2, 2025, we recovered the full contractual balance of overdrawn deposit accounts from one customer. These accounts were charged off during the third quarter of 2024 in the amount of $1,622. Additionally, we collected all legal fees associated with the loss and the full contractual balance of all commercial loans outstanding with this customer. The recovery of losses and fees will be reflected in our second quarter 2025 results.
We evaluated subsequent events after March 31, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure. No other subsequent events require financial statement recognition or disclosure between March 31, 2025 and the date our interim condensed consolidated financial statements were issued.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.