ISABELLA BANK CORP 10-Q

Item 1. Financial Statements. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) June 30 2025 December 31 2024 ASSETS Cash and demand deposits due from banks $ 34,246 $ 22,830 Fed Funds sold and interest bearing balances due from banks 74,308 1,712 Total cash and cash equivalents 108,554 24,542 AFS securities, at fair value 500,560 489,029 FHLB stock 5,600 12,762 Mortgage loans HFS 55 242 Loans 1,397,513 1,423,571 Less allowance for credit losses 12,977 12,895 Net loans 1,384,536 1,410,676 Premises and equipment 28,171 27,659 Cash surrender value of BOLI 45,774 34,882 Goodwill and other intangible assets 48,282 48,283 Other assets 34,636 38,166 Total assets $ 2,156,168 $ 2,086,241 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Demand deposits $ 493,477 $ 416,373 Interest bearing demand deposits 223,376 237,548 Money market deposits 446,845 423,883 Savings 289,746 281,665 Certificates of deposit 395,932 387,591 Total deposits 1,849,376 1,747,060 Short-term borrowings 43,208 53,567 FHLB advances — 30,000 Subordinated debt, net of unamortized issuance costs 29,469 29,424 Total borrowed funds 72,677 112,991 Other liabilities 13,615 15,914 Total liabilities 1,935,668 1,875,965 Shareholders’ equity Common stock — no par value, 15,000,000 shares authorized: issued and outstanding 7,361,684 shares at June 30, 2025 and 7,424,893 shares at December 31, 2024 124,607 126,224 Shares to be issued for deferred compensation obligations 2,331 2,383 Retained earnings 107,949 103,024 Accumulated other comprehensive income (loss) ( 14,387 ) ( 21,355 ) Total shareholders’ equity 220,500 210,276 Total liabilities and shareholders' equity $ 2,156,168 $ 2,086,241 See notes to interim condensed consolidated financial statements (unaudited). 4 Table of Contents INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands except per share amounts) Three Months Ended June 30 Six Months Ended June 30 2025 2024 2025 2024 Interest income Loans $ 19,832 $ 18,863 $ 39,180 $ 36,920 AFS securities 3,032 2,804 5,675 5,688 FHLB stock 125 158 285 304 Federal funds sold and other 253 263 735 556 Total interest income 23,242 22,088 45,875 43,468 Interest expense Deposits 7,391 7,313 14,854 14,476 Short-term borrowings 324 321 665 642 FHLB advances 132 638 170 1,026 Subordinated debt 266 266 532 532 Total interest expense 8,113 8,538 16,221 16,676 Net interest income 15,129 13,550 29,654 26,792 (Reversal of) provision for credit losses ( 1,099 ) 170 ( 1,206 ) 562 Net interest income after provision for credit losses 16,228 13,380 30,860 26,230 Noninterest income Service charges and fees 2,071 2,023 4,045 3,956 Wealth management fees 1,084 1,048 2,063 1,987 Earnings on BOLI 300 253 672 496 Net gain on sale of mortgage loans 47 67 77 101 Other 184 217 357 536 Total noninterest income 3,686 3,608 7,214 7,076 Noninterest expenses Compensation and benefits 7,496 6,970 14,879 13,985 Occupancy and equipment 2,650 2,619 5,250 5,325 Other professional services 863 527 1,574 1,040 ATM and debit card fees 555 487 1,041 956 Marketing 469 425 928 851 FDIC insurance premiums 267 280 570 532 Other losses 339 416 454 561 Other 1,106 1,171 2,348 2,321 Total noninterest expenses 13,745 12,895 27,044 25,571 Income before income tax expense 6,169 4,093 11,030 7,735 Income tax expense 1,138 612 2,050 1,123 Net income $ 5,031 $ 3,481 $ 8,980 $ 6,612 Earnings per common share Basic $ 0.68 $ 0.47 $ 1.21 $ 0.88 Diluted 0.68 0.46 1.21 0.88 Cash dividends per common share 0.28 0.28 0.56 0.56 See notes to interim condensed consolidated financial statements (unaudited). 5 Table of Contents INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (Dollars in thousands) Three Months Ended June 30 Six Months Ended June 30 2025 2024 2025 2024 Net income $ 5,031 $ 3,481 $ 8,980 $ 6,612 Unrealized gains (losses) on AFS securities 3,879 703 8,893 ( 2,223 ) Tax effect (1) ( 827 ) ( 149 ) ( 1,925 ) 483 Unrealized gains (losses) on AFS securities, net of tax 3,052 554 6,968 ( 1,740 ) Comprehensive income (loss) $ 8,083 $ 4,035 $ 15,948 $ 4,872 (1) See “Note 6 – Capital Ratios and Shareholders' Equity” of these consolidated financial statements for tax effect reconciliation. See notes to interim condensed consolidated financial statements (unaudited). 6 Table of Contents 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 April 1, 2024 7,488,101 $ 126,656 $ 3,890 $ 98,318 $ ( 28,190 ) $ 200,674 Comprehensive income (loss) — — — 3,481 554 4,035 Issuance of common stock 21,524 393 — — — 393 Share-based payment awards under the Directors Plan — 61 — — 61 Share-based compensation expense recognized in earnings under the RSP — 20 — — — 20 Common stock purchased for deferred compensation obligations — ( 281 ) — — — ( 281 ) Common stock repurchased ( 35,609 ) ( 662 ) — — — ( 662 ) Cash dividends paid ($ 0.28 per common share) — — — ( 1,991 ) — ( 1,991 ) June 30, 2024 7,474,016 $ 126,126 $ 3,951 $ 99,808 $ ( 27,636 ) $ 202,249 April 1, 2025 7,408,010 $ 125,547 $ 2,508 $ 104,940 $ ( 17,439 ) $ 215,556 Comprehensive income (loss) — — — 5,031 3,052 8,083 Issuance of common stock 11,498 340 — — — 340 Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 211 ( 211 ) — — — Share-based payment awards under the Directors Plan — — 34 — — 34 Share-based compensation expense recognized in earnings under the RSP — 14 — — — 14 Common stock repurchased ( 57,824 ) ( 1,505 ) — — — ( 1,505 ) Cash dividends paid ($ 0.28 per common share) — — — ( 2,022 ) — ( 2,022 ) June 30, 2025 7,361,684 $ 124,607 $ 2,331 $ 107,949 $ ( 14,387 ) $ 220,500 7 Table of Contents 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) — — — 6,612 ( 1,740 ) 4,872 Issuance of common stock 43,980 840 — — — 840 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 — — 279 — — 279 Share-based compensation expense recognized in earnings under the RSP — 45 — — — 45 Common stock purchased for deferred compensation obligations — ( 701 ) — — — ( 701 ) Common stock repurchased ( 72,093 ) ( 1,402 ) — — — ( 1,402 ) Cash dividends paid ($ 0.56 per common share) — — — ( 4,086 ) — ( 4,086 ) June 30, 2024 7,474,016 $ 126,126 $ 3,951 $ 99,808 $ ( 27,636 ) $ 202,249 December 31, 2024 7,424,893 $ 126,224 $ 2,383 $ 103,024 $ ( 21,355 ) $ 210,276 Comprehensive income (loss) — — — 8,980 6,968 15,948 Issuance of common stock 28,830 759 — — — 759 Common stock issued for deferred compensation under the RSP 11,367 — — — — — Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 253 ( 253 ) — — — Share-based payment awards under the Directors Plan — — 201 — — 201 Share-based compensation expense recognized in earnings under the RSP — 21 — — — 21 Common stock repurchased ( 103,406 ) ( 2,650 ) — — — ( 2,650 ) Cash dividends paid ($ 0.56 per common share) — — — ( 4,055 ) — ( 4,055 ) June 30, 2025 7,361,684 $ 124,607 $ 2,331 $ 107,949 $ ( 14,387 ) $ 220,500 See notes to interim condensed consolidated financial statements (unaudited). 8 Table of Contents INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) Six Months Ended June 30 2025 2024 Operating activities Net income $ 8,980 $ 6,612 Reconciliation of net income to net cash provided by operating activities (Reversal of) provision for credit losses ( 1,206 ) 562 Depreciation 1,072 1,025 Net amortization of AFS securities 543 692 Net gain on sale of mortgage loans ( 77 ) ( 101 ) Increase in cash value of BOLI ( 667 ) ( 490 ) Share-based payment awards 222 324 Origination of loans HFS ( 3,018 ) ( 4,214 ) Proceeds from loan sales 3,282 3,678 Net changes in: Other assets 1,899 544 Other liabilities 1,513 330 Net cash provided by (used in) operating activities 12,543 8,962 Investing activities Proceeds from maturities, calls and prepayments of AFS securities 47,819 19,587 Purchases of AFS securities ( 51,000 ) — Net change in loans HFI 27,053 ( 33,078 ) Purchases of premises and equipment ( 1,584 ) ( 1,229 ) Purchases of BOLI policies ( 10,225 ) — Proceeds from sale of FHLB Stock 7,162 — Low income housing tax credit investments ( 3,767 ) ( 3 ) Net cash provided by (used in) investing activities 15,458 ( 14,723 ) Financing activities Net increase (decrease) in deposits 102,316 ( 1,396 ) Net increase (decrease) in short-term borrowings ( 10,359 ) ( 2,607 ) Net increase (decrease) in FHLB advances ( 30,000 ) 5,000 Cash dividends paid on common stock ( 4,055 ) ( 4,086 ) Proceeds from issuance of common stock 759 840 Common stock repurchased ( 2,650 ) ( 1,402 ) Common stock purchased for deferred compensation obligations — ( 701 ) Net cash provided by (used in) financing activities 56,011 ( 4,352 ) Increase (decrease) in cash and cash equivalents 84,012 ( 10,113 ) Cash and cash equivalents at beginning of period 24,542 33,672 Cash and cash equivalents at end of period $ 108,554 $ 23,559 Supplemental cash flows information Interest paid $ 16,335 $ 16,651 Supplemental noncash information Transfers of loans to foreclosed assets 293 330 See notes to interim condensed consolidated financial statements (unaudited). 9 Table of Contents 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 “we,” “our,” “us,” and “the Corporation” refer to Isabella Bank Corporation, a Michigan corporation and registered financial holding company, our wholly-owned banking subsidiary, Isabella Bank, and our other consolidated subsidiaries. References to the “Bank” refer to Isabella Bank. The accompanying unaudited interim condensed consolidated financial statements in this Quarterly Report on Form 10-Q for the three and six-month periods ended June 30, 2025 (this “Form 10-Q”) 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 and six-month periods ended June 30, 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, as filed with the SEC on March 12, 2025 (the “2024 Annual Report on Form 10-K”). 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. Additionally, certain amounts reported as commercial and industrial loans have been reclassified as commercial real estate loans to conform to the June 30, 2025 presentation. Our accounting policies are materially the same as those discussed in Note 1 to the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K. 10 Table of Contents Note 2 – AFS Securities The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows at: June 30, 2025 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. Treasury $ 210,588 $ — $ 6,282 $ 204,306 States and political subdivisions 72,933 4 4,617 68,320 Auction rate money market preferred 3,200 — 435 2,765 Mortgage-backed securities 26,093 — 1,436 24,657 Collateralized mortgage obligations 197,190 744 4,694 193,240 Corporate 8,150 — 878 7,272 Total $ 518,154 $ 748 $ 18,342 $ 500,560 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 June 30, 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 $ 110,318 $ 100,270 $ — $ — $ — $ 210,588 States and political subdivisions 11,398 18,614 20,053 22,868 — 72,933 Auction rate money market preferred — — — — 3,200 3,200 Mortgage-backed securities — — — — 26,093 26,093 Collateralized mortgage obligations — — — — 197,190 197,190 Corporate — — 8,150 — — 8,150 Total amortized cost $ 121,716 $ 118,884 $ 28,203 $ 22,868 $ 226,483 $ 518,154 Fair value $ 118,985 $ 115,038 $ 25,551 $ 20,324 $ 220,662 $ 500,560 Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities as 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. 11 Table of Contents The information in the following tables pertains to AFS securities with gross unrealized losses at June 30, 2025 and December 31, 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position. June 30, 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 $ — $ — $ 6,282 $ 204,306 $ 6,282 States and political subdivisions 224 14,716 4,393 37,646 4,617 Auction rate money market preferred — — 435 2,765 435 Mortgage-backed securities — — 1,436 24,657 1,436 Collateralized mortgage obligations 21 5,843 4,673 136,395 4,694 Corporate 83 1,617 795 5,655 878 Total $ 328 $ 22,176 $ 18,014 $ 411,424 $ 18,342 Number of securities in an unrealized loss position: 73 195 268 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 June 30, 2025, no ACL 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. Management does not currently 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. 12 Table of Contents Note 3 – Loans and ACL Loan Composition The following table provides a detailed listing of our loan portfolio at: June 30, 2025 December 31, 2024 Balance Percent of Total Balance Percent of Total Commercial and industrial Secured $ 175,397 12.55 % $ 177,239 12.45 % Unsecured 32,322 2.31 % 23,384 1.64 % Total commercial and industrial 207,719 14.86 % 200,623 14.09 % Commercial real estate Commercial mortgage owner occupied 218,538 15.64 % 213,086 14.97 % Commercial mortgage non-owner occupied 228,720 16.36 % 217,679 15.29 % Commercial mortgage 1-4 family investor 94,740 6.78 % 92,497 6.50 % Commercial mortgage multifamily 72,385 5.18 % 68,456 4.81 % Total commercial real estate 614,383 43.96 % 591,718 41.57 % Advances to mortgage brokers 3,005 0.22 % 63,080 4.43 % Agricultural Agricultural mortgage 67,147 4.81 % 67,550 4.75 % Agricultural other 29,695 2.12 % 32,144 2.26 % Total agricultural 96,842 6.93 % 99,694 7.01 % Residential real estate Senior lien 347,280 24.85 % 332,743 23.37 % Junior lien 9,765 0.70 % 8,655 0.61 % Home equity lines of credit 41,623 2.98 % 39,474 2.77 % Total residential real estate 398,668 28.53 % 380,872 26.75 % Consumer Secured - direct 31,893 2.28 % 35,050 2.46 % Secured - indirect 41,743 2.99 % 49,136 3.45 % Unsecured 3,260 0.23 % 3,398 0.24 % Total consumer 76,896 5.50 % 87,584 6.15 % Total $ 1,397,513 100.00 % $ 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 small 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 $ 3,268 and $ 3,330 at June 30, 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, 13 Table of Contents 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 $ 5,858 and $ 6,384 at June 30, 2025 and December 31, 2024, respectively, which is included in other assets on the consolidated balance sheets. 14 Table of Contents The following table summarizes nonaccrual loan data by class of loans as of: June 30, 2025 December 31, 2024 Total Nonaccrual Loans Nonaccrual Loans with No ACL Total Nonaccrual Loans Nonaccrual Loans with No ACL Commercial and industrial Secured $ 17 $ 17 $ — $ — Commercial real estate Commercial mortgage non-owner occupied 533 533 — — Residential real estate Senior lien 614 614 282 282 Total $ 1,164 $ 1,164 $ 282 $ 282 The following tables summarize the past due and current loans for the entire loan portfolio as of: June 30, 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 $ 221 $ 17 $ — $ 175,159 $ 175,397 $ — Unsecured — — — 32,322 32,322 — Total commercial and industrial 221 17 — 207,481 207,719 — Commercial real estate Commercial mortgage owner occupied 8 — — 218,530 218,538 — Commercial mortgage non-owner occupied — — 533 228,187 228,720 — Commercial mortgage 1-4 family investor 159 — — 94,581 94,740 — Commercial mortgage multifamily — — — 72,385 72,385 — Total commercial real estate 167 — 533 613,683 614,383 — Advances to mortgage brokers — — — 3,005 3,005 — Agricultural Agricultural mortgage 9 — — 67,138 67,147 — Agricultural other 8 — — 29,687 29,695 — Total agricultural 17 — — 96,825 96,842 — Residential real estate Senior lien 52 486 420 346,322 347,280 31 Junior lien — — — 9,765 9,765 — Home equity lines of credit — — — 41,623 41,623 — Total residential real estate 52 486 420 397,710 398,668 31 Consumer Secured - direct 8 66 — 31,819 31,893 — Secured - indirect 139 — — 41,604 41,743 — Unsecured 8 — — 3,252 3,260 — Total consumer 155 66 — 76,675 76,896 — Total $ 612 $ 569 $ 953 $ 1,395,379 $ 1,397,513 $ 31 15 Table of Contents 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 $ — $ — $ 176,911 $ 177,239 $ — Unsecured — 50 — 23,334 23,384 — Total commercial and industrial 328 50 — 200,245 200,623 — Commercial real estate Commercial mortgage owner occupied 25 304 — 212,757 213,086 — Commercial mortgage non-owner occupied 792 — — 216,887 217,679 — Commercial mortgage 1-4 family investor — — — 92,497 92,497 — Commercial mortgage multifamily — — — 68,456 68,456 — Total commercial real estate 817 304 — 590,597 591,718 — 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 16 Table of Contents Credit Quality Indicators The following tables display commercial and agricultural loans by credit risk ratings and year of origination as of: June 30, 2025 2025 2024 2023 2022 2021 Prior Revolving Loans Revolving Loans Converted to Term Total Commercial and industrial: Secured Risk ratings 1-3 $ 2,314 $ 10,899 $ 14,184 $ 2,202 $ 4,244 $ 3,547 $ 12,810 $ — $ 50,200 Risk rating 4 10,471 23,787 12,638 6,591 8,461 2,922 29,251 — 94,121 Risk rating 5 624 3,893 45 17,896 58 4 5,449 — 27,969 Risk rating 6 99 85 20 — 44 8 2,834 — 3,090 Risk rating 7 — — — 17 — — — — 17 Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 13,508 $ 38,664 $ 26,887 $ 26,706 $ 12,807 $ 6,481 $ 50,344 $ — $ 175,397 2025 year-to-date gross charge-offs $ — $ — $ 22 $ — $ — $ — $ — $ — $ 22 Commercial and industrial: Unsecured Risk ratings 1-3 $ 1,569 $ 348 $ 1,857 $ 132 $ 40 $ 422 $ 3,613 $ — $ 7,981 Risk rating 4 5,192 1,358 1,667 1,621 612 324 12,279 — 23,053 Risk rating 5 — 92 64 — 104 — 1,028 — 1,288 Risk rating 6 — — — — — — — — — Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 6,761 $ 1,798 $ 3,588 $ 1,753 $ 756 $ 746 $ 16,920 $ — $ 32,322 2025 year-to-date gross charge-offs $ — $ 50 $ — $ — $ — $ — $ — $ — $ 50 Commercial real estate: Owner occupied Risk ratings 1-3 $ 1,038 $ 5,867 $ 8,841 $ 1,123 $ 10,861 $ 16,860 $ 304 $ — $ 44,894 Risk rating 4 12,667 35,195 20,228 29,196 38,059 27,915 1,835 — 165,095 Risk rating 5 1,511 922 1,282 1,280 70 1,392 372 — 6,829 Risk rating 6 — 1,342 304 — 74 — — — 1,720 Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 15,216 $ 43,326 $ 30,655 $ 31,599 $ 49,064 $ 46,167 $ 2,511 $ — $ 218,538 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate: Non-owner occupied Risk ratings 1-3 $ 1,827 $ 293 $ 733 $ 5,764 $ 5,068 $ 1,977 $ 145 $ — $ 15,807 Risk rating 4 24,267 8,194 36,809 56,470 35,689 29,784 1,115 — 192,328 Risk rating 5 — 9,618 809 919 1,646 6,018 — — 19,010 Risk rating 6 — — 994 — — 48 — — 1,042 Risk rating 7 — — — — — 533 — — 533 Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 26,094 $ 18,105 $ 39,345 $ 63,153 $ 42,403 $ 38,360 $ 1,260 $ — $ 228,720 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — 17 Table of Contents June 30, 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 $ 482 $ 1,145 $ — $ 2,727 $ 751 $ 1,625 $ 2,166 $ — $ 8,896 Risk rating 4 6,236 9,127 8,807 8,289 27,907 15,286 6,210 — 81,862 Risk rating 5 — — 3,141 222 — 50 — — 3,413 Risk rating 6 — — 525 — — 44 — — 569 Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 6,718 $ 10,272 $ 12,473 $ 11,238 $ 28,658 $ 17,005 $ 8,376 $ — $ 94,740 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate: Multifamily Risk ratings 1-3 $ — $ 634 $ 2,881 $ 1,650 $ 894 $ 1,226 $ 65 $ — $ 7,350 Risk rating 4 5,181 2,353 1,915 20,829 11,341 19,852 244 — 61,715 Risk rating 5 — 487 — — — — — — 487 Risk rating 6 — — — — — 2,833 — — 2,833 Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 5,181 $ 3,474 $ 4,796 $ 22,479 $ 12,235 $ 23,911 $ 309 $ — $ 72,385 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Advances to mortgage brokers Risk ratings 1-3 $ 3,005 $ — $ — $ — $ — $ — $ — $ — $ 3,005 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Agricultural mortgage Risk ratings 1-3 $ 1,073 $ 739 $ — $ 2,596 $ 2,012 $ 4,100 $ 21 $ — $ 10,541 Risk rating 4 2,572 3,967 3,995 12,217 6,235 12,439 1,383 — 42,808 Risk rating 5 — 276 1,102 511 5,918 645 1,036 — 9,488 Risk rating 6 535 — — 2,188 69 1,518 — — 4,310 Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 4,180 $ 4,982 $ 5,097 $ 17,512 $ 14,234 $ 18,702 $ 2,440 $ — $ 67,147 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Agricultural other Risk ratings 1-3 $ 874 $ 617 $ 434 $ 724 $ 249 $ 385 $ 3,056 $ — $ 6,339 Risk rating 4 1,652 1,093 971 894 1,497 107 10,233 — 16,447 Risk rating 5 150 82 — 17 29 460 1,304 — 2,042 Risk rating 6 — 1,734 103 — 61 — 2,969 — 4,867 Risk rating 7 — — — — — — — — — Risk rating 8 — — — — — — — — — Risk rating 9 — — — — — — — — — Total $ 2,676 $ 3,526 $ 1,508 $ 1,635 $ 1,836 $ 952 $ 17,562 $ — $ 29,695 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — 18 Table of Contents 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 $ 11,081 $ 10,173 $ 2,352 $ 4,483 $ 4,437 $ 368 $ 10,316 $ — $ 43,210 Risk rating 4 27,530 20,886 14,240 11,014 1,867 2,144 28,109 — 105,790 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 $ 42,364 $ 31,906 $ 30,077 $ 15,732 $ 6,441 $ 2,575 $ 48,144 $ — $ 177,239 2024 year-to-date gross charge-offs $ — $ 277 $ 33 $ — $ 17 $ — $ — $ — $ 327 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 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 8 $ 1 $ — $ 9 Commercial real estate: Owner occupied Risk ratings 1-3 $ 4,185 $ 8,933 $ 1,994 $ 11,617 $ 13,300 $ 4,421 $ 221 $ — $ 44,671 Risk rating 4 34,980 21,586 32,319 39,439 9,924 20,260 1,626 — 160,134 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 $ 40,716 $ 32,129 $ 35,189 $ 51,764 $ 24,994 $ 25,976 $ 2,318 $ — $ 213,086 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate: Non-owner occupied Risk ratings 1-3 $ 644 $ 795 $ 5,994 $ 5,178 $ 348 $ 1,781 $ — $ — $ 14,740 Risk rating 4 8,413 42,135 61,524 36,702 4,399 29,225 497 — 182,895 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 $ 18,783 $ 43,936 $ 67,736 $ 43,561 $ 10,951 $ 31,715 $ 997 $ — $ 217,679 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — 19 Table of Contents 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 2024 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 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Advances to mortgage brokers Risk ratings 1-3 $ 63,080 $ — $ — $ — $ — $ — $ — $ — $ 63,080 2024 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 2024 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 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — 20 Table of Contents We have certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. The Board of Directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the Board of Directors 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. 21 Table of Contents 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. 22 Table of Contents 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. 23 Table of Contents 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: June 30, 2025 2025 2024 2023 2022 2021 Prior Revolving Loans Revolving Loans Converted to Term Total Residential real estate: Senior lien Current $ 27,522 $ 56,290 $ 38,365 $ 44,867 $ 70,814 $ 103,488 $ — $ 4,839 $ 346,185 Past due 30-89 days — — — 318 — 132 — — 450 Past due 90 or more days — — — — — 31 — — 31 Nonaccrual — — — — 186 428 — — 614 Total $ 27,522 $ 56,290 $ 38,365 $ 45,185 $ 71,000 $ 104,079 $ — $ 4,839 $ 347,280 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ — $ 1 Residential real estate: Junior lien Current $ 2,121 $ 3,797 $ 2,757 $ 652 $ 97 $ 341 $ — $ — $ 9,765 Past due 30-89 days — — — — — — — — — Past due 90 or more days — — — — — — — — — Nonaccrual — — — — — — — — — Total $ 2,121 $ 3,797 $ 2,757 $ 652 $ 97 $ 341 $ — $ — $ 9,765 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential real estate: Home equity lines of credit Current $ — $ — $ — $ — $ — $ — $ 41,623 $ — $ 41,623 Past due 30-89 days — — — — — — — — — Past due 90 or more days — — — — — — — — — Nonaccrual — — — — — — — — — Total $ — $ — $ — $ — $ — $ — $ 41,623 $ — $ 41,623 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Secured - direct Current $ 4,727 $ 8,379 $ 7,173 $ 5,279 $ 3,127 $ 3,134 $ — $ — $ 31,819 Past due 30-89 days — — 66 8 — — — — 74 Past due 90 or more days — — — — — — — — — Nonaccrual — — — — — — — — — Total $ 4,727 $ 8,379 $ 7,239 $ 5,287 $ 3,127 $ 3,134 $ — $ — $ 31,893 2025 year-to-date gross charge-offs $ — $ 4 $ 33 $ 36 $ 9 $ 53 $ — $ — $ 135 Consumer: Secured - indirect Current $ 1,276 $ 5,518 $ 18,427 $ 6,277 $ 4,214 $ 5,892 $ — $ — $ 41,604 Past due 30-89 days — 8 102 — — 29 — — 139 Past due 90 or more days — — — — — — — — — Nonaccrual — — — — — — — — — Total $ 1,276 $ 5,526 $ 18,529 $ 6,277 $ 4,214 $ 5,921 $ — $ — $ 41,743 2025 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 13 $ — $ — $ 13 24 Table of Contents June 30, 2025 2025 2024 2023 2022 2021 Prior Revolving Loans Revolving Loans Converted to Term Total Consumer: Unsecured Current $ 880 $ 1,077 $ 366 $ 81 $ 12 $ 3 $ 833 $ — $ 3,252 Past due 30-89 days — 3 2 — — — 3 — 8 Past due 90 or more days — — — — — — — — — Nonaccrual — — — — — — — — — Total $ 880 $ 1,080 $ 368 $ 81 $ 12 $ 3 $ 836 $ — $ 3,260 2025 year-to-date gross charge-offs $ 328 $ 1 $ 10 $ 1 $ 1 $ — $ — $ — $ 341 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 2024 year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 10 $ — $ — $ 10 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 2024 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 2024 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 2024 year-to-date gross charge-offs $ — $ 63 $ — $ — $ 27 $ 2 $ — $ — $ 92 25 Table of Contents 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 2024 year-to-date gross charge-offs $ — $ 24 $ — $ — $ — $ — $ — $ — $ 24 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 2024 year-to-date gross charge-offs $ 223 $ 11 $ 21 $ — $ — $ 1 $ — $ — $ 256 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). The following is a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty for the: Three Months Ended June 30, 2025 Interest Rate Reduction Term Extension Other-Than-Insignificant Payment Delay and Term Extension Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Commercial and industrial Secured $ 20 0.01 % $ 2,600 1.12 % $ 602 0.26 % Total $ 20 $ 2,600 $ 602 26 Table of Contents Six Months Ended June 30, 2025 Interest Rate Reduction Term Extension Other-Than-Insignificant Payment Delay and Term Extension Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Commercial and industrial Secured $ 20 0.01 % $ 3,114 1.34 % $ 602 0.26 % Commercial real estate Commercial mortgage owner occupied — 0.00 % 1,511 0.85 % — 0.00 % Total $ 20 $ 4,625 $ 602 Three Months Ended June 30, 2024 Other-Than-Insignificant Payment Delay Other-Than-Insignificant Payment Delay and Term Extension Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Commercial and industrial Secured $ 2,125 1.03 % $ — 0.00 % Agricultural Agricultural mortgage 1,345 2.00 % 60 0.09 % Agricultural other — 0.00 % 507 1.82 % Total $ 3,470 $ 567 Six Months Ended June 30, 2024 Other-Than-Insignificant Payment Delay Term Extension Other-Than-Insignificant Payment Delay and Term Extension Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable Commercial and industrial Secured $ 2,125 1.03 % $ 11 0.01 % $ — 0.00 % Commercial real estate Commercial mortgage owner occupied 823 0.47 % — 0.00 % — 0.00 % Agricultural Agricultural mortgage 1,345 2.00 % — 0.00 % 60 0.09 % Agricultural other — 0.00 % — 0.00 % 507 1.82 % Consumer Secured - indirect — 0.00 % 2 0.00 % — — % Total $ 4,293 $ 13 $ 567 We do not modify any loans by forgiving principal or accrued interest. We had committed to advance $ 41 and $ 43 in additional funds to be disbursed in connection with modified loans at June 30, 2025 and December 31, 2024, respectively, as displayed in the tables above. 27 Table of Contents The following is a summary of the financial effect of the modifications granted to borrowers experiencing financial difficulty for the: Three Months Ended June 30 2025 2024 Weighted-Average Interest Rate Reduction Payment Delay Term Weighted-Average Term Extension (Years) Payment Delay Term Weighted-Average Term Extension (Years) Commercial and industrial Secured 10.00 % 9.6 months 0.5 years 4 months N/A Agricultural Agricultural mortgage N/A N/A N/A 5 months 0.5 years Agricultural other N/A N/A N/A 4 months 0.3 years Six Months Ended June 30 2025 2024 Weighted-Average Interest Rate Reduction Payment Delay Term Weighted-Average Term Extension (Years) Payment Delay Term Weighted-Average Term Extension (Years) Commercial and industrial Secured 10.00 % 9.6 months 1.0 years 4 months 0.2 years Commercial real estate Commercial mortgage owner occupied N/A N/A 15 years 7 months N/A Agricultural Agricultural mortgage N/A N/A N/A 5 months 0.5 years Agricultural other N/A N/A N/A 4 months 0.3 years Consumer Secured - indirect N/A N/A N/A N/A 1.3 years 28 Table of Contents 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: June 30, 2025 Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Commercial and industrial Secured $ 3,637 $ 99 $ — $ — $ 3,736 Commercial real estate Commercial mortgage owner occupied 2,852 — — — 2,852 Agricultural Agricultural mortgage 276 — — — 276 Agricultural other 132 — — — 132 Total $ 6,897 $ 99 $ — $ — $ 6,996 June 30, 2024 Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Commercial and industrial Secured $ 2,136 $ — $ — $ — $ 2,136 Commercial real estate Commercial mortgage owner occupied 941 — — — 941 Commercial mortgage multifamily 2,947 — — — 2,947 Agricultural Agricultural mortgage 1,405 — — — 1,405 Agricultural other 507 — — — 507 Consumer Secured - indirect 2 — — — 2 Total $ 7,938 $ — $ — $ — $ 7,938 We had no loans that defaulted in each of the three and six-month periods ended June 30, 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, less costs to sell if foreclosure is probable, or the discounted cash flow method. We do not recognize interest income on loans 29 Table of Contents 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 June 30, 2025 Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total April 1, 2025 $ 1,239 $ 5,174 $ 266 $ 4,600 $ 1,456 $ 12,735 Charge-offs ( 72 ) — — — ( 318 ) ( 390 ) Recoveries 4 50 — 16 1,752 1,822 Reversal of credit losses 147 53 50 57 ( 1,497 ) ( 1,190 ) June 30, 2025 $ 1,318 $ 5,277 $ 316 $ 4,673 $ 1,393 $ 12,977 Six Months Ended June 30, 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 ( 72 ) — — ( 1 ) ( 489 ) ( 562 ) Recoveries 84 52 — 30 1,880 2,046 Reversal of credit losses ( 10 ) 54 29 123 ( 1,598 ) ( 1,402 ) June 30, 2025 $ 1,318 $ 5,277 $ 316 $ 4,673 $ 1,393 $ 12,977 30 Table of Contents Three Months Ended June 30, 2024 Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total April 1, 2024 $ 1,267 $ 5,903 $ 265 $ 4,308 $ 1,647 $ 13,390 Charge-offs ( 336 ) — — ( 9 ) ( 182 ) ( 527 ) Recoveries 2 29 — 28 75 134 Reversal of credit losses 331 ( 363 ) ( 7 ) 24 113 98 June 30, 2024 $ 1,264 $ 5,569 $ 258 $ 4,351 $ 1,653 $ 13,095 Six Months Ended June 30, 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 ( 336 ) — — ( 10 ) ( 372 ) ( 718 ) Recoveries 4 35 2 92 146 279 Provision for credit losses 628 ( 344 ) ( 14 ) ( 67 ) 223 426 June 30, 2024 $ 1,264 $ 5,569 $ 258 $ 4,351 $ 1,653 $ 13,095 The following table illustrates the two main components of the ACL as of: June 30 2025 March 31 2025 December 31 2024 September 30 2024 June 30 2024 ACL Individually evaluated $ — $ — $ — $ — $ 137 Collectively evaluated 12,977 12,735 12,895 12,635 12,958 Total $ 12,977 $ 12,735 $ 12,895 $ 12,635 $ 13,095 ACL to gross loans Individually evaluated 0.00 % 0.00 % 0.00 % 0.00 % 0.01 % Collectively evaluated 0.93 % 0.93 % 0.91 % 0.89 % 0.94 % Total 0.93 % 0.93 % 0.91 % 0.89 % 0.95 % 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: June 30, 2025 December 31, 2024 Loan Balance Specific Allocation Loan Balance Specific Allocation Commercial and industrial $ — $ — $ — $ — Commercial real estate 533 — — — Agricultural — — — — Residential real estate 554 — 254 — Consumer — — — — Total $ 1,087 $ — $ 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 June 30, 2025 include $ 1,087 in collateral dependent loans secured by commercial real estate and residential real estate of $ 533 and $ 554 , respectively. 31 Table of Contents 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 three days from the transaction date. A summary of short-term borrowed funds without stated maturity dates was as follows for the: Three Months Ended June 30 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 $ 43,208 $ 40,802 3.14 % $ 44,194 $ 40,593 3.18 % Federal funds purchased — — 0.00 % — — 0.00 % FRB Discount Window — 859 4.50 % — 15 5.52 % Six Months Ended June 30 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 $ 42,150 3.18 % $ 44,194 $ 40,607 3.16 % Federal funds purchased — 11 5.43 % — 1 6.52 % FRB Discount Window — 446 4.50 % — 8 5.52 % 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 $ 58,119 and $ 67,539 at June 30, 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: June 30, 2025 December 31, 2024 Amount Rate Amount Rate Securities sold under agreements to repurchase without stated maturity dates $ 43,208 3.10 % $ 53,567 3.18 % We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at: June 30 2025 December 31 2024 Pledged to secure borrowed funds $ 405,027 $ 395,286 Pledged to secure repurchase agreements 58,119 67,539 Pledged for public deposits and for other purposes necessary or required by law 68,279 86,162 Total $ 531,425 $ 548,987 AFS securities pledged to repurchase agreements consisted of the following at: June 30 2025 December 31 2024 U.S. Treasury $ 48,486 $ 57,271 Mortgage-backed securities 7,508 7,979 Collateralized mortgage obligations 2,125 2,289 Total $ 58,119 $ 67,539 32 Table of Contents 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 June 30, 2025, we had the ability to borrow up to an additional $ 376,974 without pledging additional collateral. 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: June 30, 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 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 any time 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. Additionally, the Notes are intended to qualify for Tier 2 capital treatment, subject to regulatory limitations. The following table summarizes our outstanding subordinated notes as of: June 30, 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 ( 531 ) ( 576 ) Total subordinated debt, net $ 29,469 $ 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 June 30 Six Months Ended June 30 2025 2024 2025 2024 Average number of common shares outstanding for basic calculation 7,383,338 7,477,310 7,400,370 7,485,743 Average potential effect of common shares in the RSP 14,771 17,518 13,604 15,694 Average number of common shares outstanding used to calculate diluted earnings per common share 7,398,109 7,494,828 7,413,974 7,501,437 Net income $ 5,031 $ 3,481 $ 8,980 $ 6,612 Earnings per common share Basic $ 0.68 $ 0.47 $ 1.21 $ 0.88 Diluted 0.68 0.46 1.21 0.88 33 Table of Contents Note 6 – Capital Ratios and Shareholders' Equity As of June 30, 2025 and December 31, 2024, the most recent notifications from the FRB and the FDIC categorized us as “well capitalized” under the FDIC's regulatory framework for prompt corrective action and the Basel III capital guidelines. To be categorized as “well capitalized,” an institution must maintain minimum 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 guidelines. Capital requirements to be considered “well capitalized” are based upon the FDIC's prompt corrective action regulations, as amended to reflect the changes under the Basel III capital guidelines. 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, both on a bank-only and on a consolidated basis, as of: June 30, 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 $ 181,950 12.18 % $ 104,553 7.00 % $ 97,085 6.50 % Consolidated 186,605 12.46 % 104,870 7.00 % N/A N/A Tier 1 capital to risk weighted assets Isabella Bank 181,950 12.18 % 126,958 8.50 % 119,490 8.00 % Consolidated 186,605 12.46 % 127,342 8.50 % N/A N/A Total capital to risk weighted assets Isabella Bank 195,636 13.10 % 156,830 10.50 % 149,362 10.00 % Consolidated 229,759 15.34 % 157,305 10.50 % N/A N/A Tier 1 capital to average assets Isabella Bank 181,950 8.83 % 82,377 4.00 % 102,972 5.00 % Consolidated 186,605 9.04 % 82,580 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 June 30, 2025, the Bank exceeded all minimum Basel III risk-based capital requirements with the capital conservation buffer. 34 Table of Contents State banking regulations place certain restrictions on dividends paid by banks to their shareholders. Dividends paid by the Corporation’s bank subsidiary would be prohibited if the effect thereof would cause the bank subsidiary’s capital to be reduced below applicable minimum capital requirements. The following table summarizes the changes in AOCI by component for the: Three Months Ended June 30 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, April 1 $ ( 17,042 ) $ ( 397 ) $ ( 17,439 ) $ ( 27,493 ) $ ( 697 ) $ ( 28,190 ) OCI before reclassifications 3,879 — 3,879 703 — 703 Tax effect ( 827 ) — ( 827 ) ( 149 ) — ( 149 ) OCI, net of tax 3,052 — 3,052 554 — 554 Balance, June 30 $ ( 13,990 ) $ ( 397 ) $ ( 14,387 ) $ ( 26,939 ) $ ( 697 ) $ ( 27,636 ) Six Months Ended June 30 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 8,893 — 8,893 ( 2,223 ) — ( 2,223 ) Tax effect ( 1,925 ) — ( 1,925 ) 483 — 483 OCI, net of tax 6,968 — 6,968 ( 1,740 ) — ( 1,740 ) Balance, June 30 $ ( 13,990 ) $ ( 397 ) $ ( 14,387 ) $ ( 26,939 ) $ ( 697 ) $ ( 27,636 ) Included in OCI for the three and six-month periods ended June 30, 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 June 30 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 $ ( 64 ) $ 3,943 $ 3,879 $ ( 5 ) $ 708 $ 703 Tax effect — ( 827 ) ( 827 ) — ( 149 ) ( 149 ) Unrealized gains (losses), net of tax $ ( 64 ) $ 3,116 $ 3,052 $ ( 5 ) $ 559 $ 554 Six Months Ended June 30 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 $ ( 279 ) $ 9,172 $ 8,893 $ 77 $ ( 2,300 ) $ ( 2,223 ) Tax effect — ( 1,925 ) ( 1,925 ) — 483 483 Unrealized gains (losses), net of tax $ ( 279 ) $ 7,247 $ 6,968 $ 77 $ ( 1,817 ) $ ( 1,740 ) 35 Table of Contents 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. 36 Table of Contents The following tables list the quantitative information about loans measured at fair value on a nonrecurring basis as of: June 30, 2025 Valuation Technique Fair Value Unobservable Input Actual Range Weighted Average Collateral Dependent Loans Discount applied to collateral: Discounted value $ 1,087 Real Estate 30 % 30 % 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: June 30, 2025 Valuation Technique Fair Value Unobservable Input Rate Discounted cash flow $ 2,261 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. 37 Table of Contents 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: June 30, 2025 Carrying Value Estimated Fair Value Level 1 Level 2 Level 3 ASSETS Cash and cash equivalents $ 108,554 $ 108,554 $ 108,554 $ — $ — FHLB stock (1) 5,600 N/A — — — Mortgage loans HFS 55 56 — 56 — Gross loans 1,397,513 1,353,000 — — 1,353,000 Less allowance for credit losses 12,977 12,977 — — 12,977 Net loans 1,384,536 1,340,023 — — 1,340,023 Accrued interest receivable 7,538 7,538 7,538 — — Equity securities without readily determinable fair values (1) 3,086 N/A — — — LIABILITIES Deposits without stated maturities 1,453,444 1,453,444 1,453,444 — — Deposits with stated maturities 395,932 394,010 — 394,010 — Short-term borrowings 43,208 43,155 — 43,155 — FHLB advances — — — — — Subordinated debt, net of unamortized issuance costs 29,469 27,896 — 27,896 — Accrued interest payable 937 937 937 — — 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. 38 Table of Contents Financial Instruments Recorded at Fair Value The table below presents the recorded amount of assets and liabilities measured at fair value on: June 30, 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 $ 204,306 $ — $ 204,306 $ — $ 220,571 $ — $ 220,571 $ — States and political subdivisions 68,320 — 68,320 — 76,568 — 76,568 — Auction rate money market preferred 2,765 — 2,765 — 3,044 — 3,044 — Mortgage-backed securities 24,657 — 24,657 — 26,886 — 26,886 — Collateralized mortgage obligations 193,240 — 193,240 — 154,674 — 154,674 — Corporate 7,272 — 7,272 — 7,286 — 7,286 — Total AFS securities 500,560 — 500,560 — 489,029 — 489,029 — Nonrecurring items Collateral dependent (net of ACL) 1,087 — — 1,087 254 — — 254 Foreclosed assets 667 — — 667 544 — — 544 OMSR 2,261 — — 2,261 2,185 — — 2,185 Total $ 504,575 $ — $ 500,560 $ 4,015 $ 492,012 $ — $ 489,029 $ 2,983 Percent of assets and liabilities measured at fair value 0.00 % 99.20 % 0.80 % 0.00 % 99.39 % 0.61 % We recorded an impairment related to foreclosed assets of $ 0 and $ 63 through earnings for the three and six-month periods ended June 30, 2025. No impairments related to foreclosed assets were recorded for the three and six month period ended June 30, 2024. We recorded an impairment related to OMSR of $ 2 through earnings for each of the three and six month periods ended June 30, 2025. No impairments related to OMSR were recorded for the three and six month period ended June 30, 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 June 30, 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. 39 Table of Contents