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  4. [10-Q] ISABELLA BANK CORP Quarterly Earnings Report

[10-Q] ISABELLA BANK CORP Quarterly Earnings Report

Filing Impact
(Neutral)
Filing Sentiment
(Neutral)
Form Type
10-Q
Rhea-AI Filing Summary

Isabella Bank Corporation reported stronger results for the quarter ended September 30, 2025. Net income rose to $5.24 million from $3.28 million a year ago, and diluted EPS increased to $0.71 from $0.44. Net interest income improved to $16.16 million from $14.49 million as loan interest grew, while the provision for credit losses was $0.21 million versus $0.95 million last year. Noninterest income increased to $4.31 million, and noninterest expenses were $13.99 million.

Total assets were $2.26 billion and deposits were $1.93 billion at September 30, 2025. Cash and cash equivalents rose to $161.30 million. Shareholders’ equity increased to $227.42 million, aided by lower accumulated other comprehensive loss. For the nine months, net income was $14.22 million with diluted EPS of $1.92. The company paid a quarterly cash dividend of $0.28 per share. Common shares outstanding were 7,350,567 at September 30, 2025, and 7,335,096 were outstanding as of November 6, 2025.

Positive
  • None.
Negative
  • None.

Insights

Quarter shows higher earnings and stronger liquidity; neutral impact.

Isabella Bank delivered higher quarterly earnings as net interest income reached $16.16 million and loan yields supported revenue. The provision for credit losses was modest at $0.21 million, contributing to net income of $5.24 million. Noninterest income also improved, while expenses remained contained relative to revenue growth.

Balance sheet metrics were stable to stronger. Deposits totaled $1.93 billion and cash and cash equivalents rose to $161.30 million. Accumulated other comprehensive loss narrowed, lifting shareholders’ equity to $227.42 million. Actual impact on future performance depends on funding costs and credit trends disclosed in subsequent periods.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the quarterly period ended September 30, 2025
or
☐Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the transition period from                      to                     
Commission File Number: 0-18415
Isabella Bank Corporation
(Exact name of registrant as specified in its charter)
Michigan38-2830092
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
401 N. Main StMt. Pleasant MI48858
(Address of principal executive offices)(Zip code)
(989) 772-9471
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par value per shareISBA
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☒  No
The number of common shares outstanding of the registrant’s Common Stock (no par value) was 7,335,096 as of November 6, 2025.

Table of Contents
ISABELLA BANK CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Table of Contents
PART I – FINANCIAL INFORMATION
4
Item 1.
Financial Statements
4
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
40
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
54
Item 4.
Controls and Procedures
54
PART II – OTHER INFORMATION
55
Item 1.
Legal Proceedings
55
Item 1A.
Risk Factors
55
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
55
Item 3.
Defaults Upon Senior Securities
55
Item 4.
Mine Safety Disclosures
55
Item 5.
Other Information
56
Item 6.
Exhibits
56
SIGNATURES
57
2
Table of Contents
Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q for the three and nine-month periods ended September 30, 2025 or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.
ACL: Allowance for credit lossesFreddie Mac: Federal Home Loan Mortgage Corporation
AFS: Available-for-saleFTE: Fully taxable equivalent
ALCO: Asset-Liability CommitteeGAAP: U.S. generally accepted accounting principles
AOCI: Accumulated other comprehensive incomeHFS: Held-for-sale
ASC: FASB Accounting Standards CodificationIRR: Interest rate risk
ASU: FASB Accounting Standards UpdateN/A: Not applicable
ATM: Automated teller machineN/M: Not meaningful
AUM: Assets under managementNASDAQ: NASDAQ Stock Market Index
BOLI: Bank-owned life insuranceNAV: Net asset value
CECL: Current expected credit lossesNIM: Net interest margin
CIK: Central Index KeyNSF: Non-sufficient funds
DIF: Deposit Insurance FundOBBBA: One Big Beautiful Bill Act
DIFS: Department of Insurance and Financial ServicesOCI: Other comprehensive income (loss)
Directors Plan: Isabella Bank Corporation and Related Companies Deferred Compensation Plan for DirectorsOMSR: Originated mortgage servicing rights
Dividend Reinvestment Plan: Isabella Bank Corporation Stockholder Dividend Reinvestment Plan and Employee Stock Purchase PlanOREO: Other real estate owned
ETR: Effective tax rateRabbi Trust: A trust established to fund our Directors Plan
Exchange Act: Securities Exchange Act of 1934, as amendedRSP: Isabella Bank Corporation Restricted Stock Plan
FASB: Financial Accounting Standards BoardSOFR: Secured Overnight Financing Rate
FDIC: Federal Deposit Insurance CorporationSEC: U.S. Securities and Exchange Commission
FFIEC: Federal Financial Institutions Examinations CouncilSOX: Sarbanes-Oxley Act of 2002
FHLB: Federal Home Loan BankXBRL: eXtensible Business Reporting Language
FRB: Federal Reserve BankYield Curve: U.S. Treasury Yield Curve
3
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
September 30
2025		December 31
2024
ASSETS
Cash and demand deposits due from banks$32,124 $22,830 
Fed Funds sold and interest bearing balances due from banks129,177 1,712 
Total cash and cash equivalents161,301 24,542 
AFS securities, at fair value511,970 489,029 
FHLB stock5,600 12,762 
Mortgage loans HFS737 242 
Loans1,431,905 1,423,571 
Less allowance for credit losses13,149 12,895 
Net loans1,418,756 1,410,676 
Premises and equipment28,659 27,659 
Cash surrender value of BOLI45,651 34,882 
Goodwill and other intangible assets48,282 48,283 
Other assets38,698 38,166 
Total assets$2,259,654 $2,086,241 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Demand deposits$421,027 $416,373 
Interest bearing demand deposits248,666 237,548 
Money market deposits558,212 423,883 
Savings292,899 281,665 
Certificates of deposit404,798 387,591 
Total deposits1,925,602 1,747,060 
Short-term borrowings62,022 53,567 
FHLB advances— 30,000 
Subordinated debt, net of unamortized issuance costs29,492 29,424 
Total borrowed funds91,514 112,991 
Other liabilities15,118 15,914 
Total liabilities2,032,234 1,875,965 
Shareholders’ equity
Common stock — no par value, 15,000,000 shares authorized: issued and outstanding 7,350,567 shares at September 30, 2025 and 7,424,893 shares at December 31, 2024
124,284 126,224 
Shares to be issued for deferred compensation obligations2,373 2,383 
Retained earnings111,172 103,024 
Accumulated other comprehensive loss(10,409)(21,355)
Total shareholders’ equity227,420 210,276 
Total liabilities and shareholders' equity$2,259,654 $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 
 September 30		Nine Months Ended 
 September 30
 2025202420252024
Interest income
Loans$20,583 $20,230 $59,763 $57,150 
AFS securities2,994 2,749 8,669 8,437 
FHLB stock70 168 355 472 
Federal funds sold and other1,235 194 1,970 750 
Total interest income24,882 23,341 70,757 66,809 
Interest expense
Deposits8,012 7,631 22,866 22,107 
Short-term borrowings441 384 1,106 1,026 
FHLB advances— 571 170 1,597 
Subordinated debt267 267 799 799 
Total interest expense8,720 8,853 24,941 25,529 
Net interest income16,162 14,488 45,816 41,280 
Provision (reversal) for credit losses209 946 (997)1,508 
Net interest income after provision for credit losses15,953 13,542 46,813 39,772 
Noninterest income
Service charges and fees2,352 2,133 6,397 6,089 
Wealth management fees1,074 1,003 3,137 2,990 
Earnings on BOLI468 252 1,140 748 
Net gain on sale of mortgage loans38 37 115 138 
Other376 103 733 639 
Total noninterest income4,308 3,528 11,522 10,604 
Noninterest expenses
Compensation and benefits7,630 7,251 22,509 21,236 
Occupancy and equipment2,628 2,645 7,878 7,970 
Other professional services851 588 2,425 1,628 
ATM and debit card fees595 503 1,636 1,459 
Marketing514 403 1,442 1,254 
FDIC insurance premiums271 291 841 823 
Other losses47 347 501 908 
Other1,449 1,200 3,797 3,521 
Total noninterest expenses13,985 13,228 41,029 38,799 
Income before income tax expense6,276 3,842 17,306 11,577 
Income tax expense1,036 561 3,086 1,684 
Net income$5,240 $3,281 $14,220 $9,893 
Earnings per common share
Basic$0.71 $0.44 $1.93 $1.32 
Diluted0.71 0.44 1.92 1.32 
Cash dividends per common share0.28 0.28 0.84 0.84 




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 
 September 30		Nine Months Ended 
 September 30
 2025202420252024
Net income$5,240 $3,281 $14,220 $9,893 
Unrealized gains on AFS securities5,030 13,081 13,923 10,858 
Tax effect (1)
(1,052)(2,724)(2,977)(2,241)
Unrealized gains on AFS securities, net of tax3,978 10,357 10,946 8,617 
Comprehensive income$9,218 $13,638 $25,166 $18,510 
(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		AmountCommon Shares to be
Issued for
Deferred
Compensation
Obligations		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Totals
June 30, 20247,474,016 $126,126 $3,951 $99,808 $(27,636)$202,249 
Comprehensive income (loss)— — — 3,281 10,357 13,638 
Issuance of common stock17,580 350 — — — 350 
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations— 23 (23)— — — 
Share-based payment awards under the Directors Plan— — 53 — — 53 
Share-based compensation expense recognized in earnings under the RSP— 26 — — — 26 
Common stock purchased for deferred compensation obligations— (290)— — — (290)
Common stock repurchased(52,876)(1,017)— — — (1,017)
Cash dividends paid ($0.28 per common share)
— — — (2,024)— (2,024)
September 30, 20247,438,720 $125,218 $3,981 $101,065 $(17,279)$212,985 
June 30, 20257,361,684 $124,607 $2,331 $107,949 $(14,387)$220,500 
Comprehensive income (loss)— — — 5,240 3,978 9,218 
Issuance of common stock7,979 272 — — — 272 
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations— (10)10 — — — 
Share-based payment awards under the Directors Plan— — 32 — — 32 
Share-based compensation expense recognized in earnings under the RSP— 24 — — — 24 
Common stock repurchased(19,096)(609)— — — (609)
Cash dividends paid ($0.28 per common share)
— — — (2,017)— (2,017)
September 30, 20257,350,567 $124,284 $2,373 $111,172 $(10,409)$227,420 
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Common Stock
Common Shares
Outstanding		AmountCommon Shares to be
Issued for
Deferred
Compensation
Obligations		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Totals
December 31, 20237,485,889 $127,323 $3,693 $97,282 $(25,896)$202,402 
Comprehensive income (loss)— — — 9,893 8,617 18,510 
Issuance of common stock61,560 1,190 — — — 1,190 
Common stock issued for deferred compensation under the RSP16,240 — — — — — 
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations— 44 (44)— — — 
Share-based payment awards under the Directors Plan— — 332 — — 332 
Share-based compensation expense recognized in earnings under the RSP— 71 — — — 71 
Common stock purchased for deferred compensation obligations— (991)— — — (991)
Common stock repurchased(124,969)(2,419)— — — (2,419)
Cash dividends paid ($0.84 per common share)
— — — (6,110)— (6,110)
September 30, 20247,438,720 $125,218 $3,981 $101,065 $(17,279)$212,985 
December 31, 20247,424,893 $126,224 $2,383 $103,024 $(21,355)$210,276 
Comprehensive income (loss)— — — 14,220 10,946 25,166 
Issuance of common stock36,809 1,031 — — — 1,031 
Common stock issued for deferred compensation under the RSP11,367 — — — — — 
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations— 243 (243)— — — 
Share-based payment awards under the Directors Plan— — 233 — — 233 
Share-based compensation expense recognized in earnings under the RSP— 45 — — — 45 
Common stock repurchased(122,502)(3,259)— — — (3,259)
Cash dividends paid ($0.84 per common share)
— — — (6,072)— (6,072)
September 30, 20257,350,567 $124,284 $2,373 $111,172 $(10,409)$227,420 












See notes to interim condensed consolidated financial statements (unaudited).
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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Nine Months Ended 
 September 30
 20252024
Operating activities
Net income$14,220 $9,893 
Reconciliation of net income to net cash provided by operating activities
(Reversal of) provision for credit losses(997)1,508 
Depreciation1,601 1,555 
Net amortization of AFS securities771 1,017 
Net gain on sale of mortgage loans(115)(138)
Increase in cash value of BOLI(1,125)(733)
Share-based payment awards278 403 
Origination of loans HFS(4,881)(6,168)
Proceeds from loan sales4,501 5,802 
Net changes in:
Other assets(2,002)(895)
Other liabilities3,039 270 
Net cash provided by (used in) operating activities15,290 12,514 
Investing activities
Proceeds from maturities, calls and prepayments of AFS securities52,359 31,183 
Purchases of AFS securities(62,148)— 
Net change in loans HFI(8,008)(77,151)
Purchases of premises and equipment(2,601)(1,590)
Purchases of BOLI policies(10,225)— 
Proceeds from sale of FHLB stock7,162 — 
Low income housing tax credit investments(3,767)(1,690)
Net cash provided by (used in) investing activities(27,228)(49,248)
Financing activities
Net increase (decrease) in deposits178,542 58,137 
Net increase (decrease) in short-term borrowings8,455 5,633 
Net increase (decrease) in FHLB advances(30,000)(25,000)
Cash dividends paid on common stock(6,072)(6,110)
Proceeds from issuance of common stock1,031 1,190 
Common stock repurchased(3,259)(2,419)
Common stock purchased for deferred compensation obligations— (991)
Net cash provided by (used in) financing activities148,697 30,440 
Increase (decrease) in cash and cash equivalents136,759 (6,294)
Cash and cash equivalents at beginning of period24,542 33,672 
Cash and cash equivalents at end of period$161,301 $27,378 
Supplemental cash flows information
Interest paid$24,769 $25,203 
Income taxes paid1,900 1,800 
Supplemental noncash information
Transfers of loans to foreclosed assets925 350 

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 and ratios, unless otherwise noted)
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 nine-month periods ended September 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 nine-month periods ended September 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”). All financial data presented in these notes, as well as in Management’s Discussion and Analysis of Financial Condition and Results of Operations, including financial data presented in the tables and explanations thereof, are expressed in thousands except per share amounts and ratios and unless otherwise noted.
OPERATING SEGMENTS: Segment information is prepared on the same basis that our Chief Executive Officer, 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 2024 Annual Report on Form 10-K.
SUBSEQUENT EVENTS: We evaluated subsequent events after September 30, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure. We determined that no subsequent events require financial statement recognition or disclosure between September 30, 2025 and the date our interim condensed consolidated financial statements were issued.
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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:
 September 30, 2025
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
U.S. Treasury$210,462 $— $4,421 $206,041 
States and political subdivisions74,042 26 2,966 71,102 
Auction rate money market preferred3,200 — 410 2,790 
Mortgage-backed securities24,696 — 1,299 23,397 
Collateralized mortgage obligations203,984 1,081 3,852 201,213 
Corporate8,150 — 723 7,427 
Total$524,534 $1,107 $13,671 $511,970 
 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 subdivisions81,135 9 4,576 76,568 
Auction rate money market preferred3,200 — 156 3,044 
Mortgage-backed securities29,068 — 2,182 26,886 
Collateralized mortgage obligations163,156 — 8,482 154,674 
Corporate8,150 — 864 7,286 
Total$515,516 $9 $26,496 $489,029 
The amortized cost and fair value of AFS securities by contractual maturity at September 30, 2025 are as follows:
MaturingSecurities 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$160,417 $50,045 $— $— $— $210,462 
States and political subdivisions12,796 18,459 20,048 22,739 — 74,042 
Auction rate money market preferred— — — — 3,200 3,200 
Mortgage-backed securities— — — — 24,696 24,696 
Collateralized mortgage obligations— — — — 203,984 203,984 
Corporate— — 8,150 — — 8,150 
Total amortized cost$173,213 $68,504 $28,198 $22,739 $231,880 $524,534 
Fair value$170,246 $66,903 $26,153 $21,268 $227,400 $511,970 
Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities as issuers may have the right to call or prepay obligations.
As the auction rate money market preferred investments have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.
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The information in the following tables pertains to AFS securities with gross unrealized losses at September 30, 2025 and December 31, 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position for which an allowance for credit losses has not been recorded.
 September 30, 2025
 Less Than Twelve MonthsTwelve Months or More 
Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Total
Unrealized
Losses
U.S. Treasury$— $— $4,421 $206,041 $4,421 
States and political subdivisions449 6,642 2,517 31,820 2,966 
Auction rate money market preferred— — 410 2,790 410 
Mortgage-backed securities— — 1,299 23,397 1,299 
Collateralized mortgage obligations59 8,991 3,793 125,753 3,852 
Corporate60 1,640 663 5,787 723 
Total$568 $17,273 $13,103 $395,588 $13,671 
Number of securities in an unrealized loss position:39 144 183 
 December 31, 2024
 Less Than Twelve MonthsTwelve Months or More
Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses		Fair
Value		Total
Unrealized
Losses
U.S. Treasury$— $— $10,236 $220,571 $10,236 
States and political subdivisions486 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 obligations185 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 September 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 generally due to a continued elevated market interest rate environment compared to 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:
September 30, 2025December 31, 2024
BalancePercent of TotalBalancePercent of Total
Commercial and industrial
Secured$186,306 13.01 %$177,239 12.45 %
Unsecured31,826 2.22 %23,384 1.64 %
Total commercial and industrial218,132 15.23 %200,623 14.09 %
Commercial real estate
Commercial mortgage owner occupied220,233 15.38 %213,086 14.97 %
Commercial mortgage non-owner occupied224,653 15.70 %217,679 15.29 %
Commercial mortgage 1-4 family investor97,971 6.84 %92,497 6.50 %
Commercial mortgage multifamily83,785 5.85 %68,456 4.81 %
Total commercial real estate626,642 43.77 %591,718 41.57 %
Advances to mortgage brokers5,056 0.35 %63,080 4.43 %
Agricultural
Agricultural mortgage67,726 4.73 %67,550 4.75 %
Agricultural other30,068 2.10 %32,144 2.26 %
Total agricultural97,794 6.83 %99,694 7.01 %
Residential real estate
Senior lien358,755 25.05 %332,743 23.37 %
Junior lien10,674 0.75 %8,655 0.61 %
Home equity lines of credit42,627 2.98 %39,474 2.77 %
Total residential real estate412,056 28.78 %380,872 26.75 %
Consumer
Secured - direct29,952 2.09 %35,050 2.46 %
Secured - indirect38,922 2.72 %49,136 3.45 %
Unsecured3,351 0.23 %3,398 0.24 %
Total consumer72,225 5.04 %87,584 6.15 %
Total$1,431,905 100.00 %$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 $3,129 and $3,330 at September 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
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require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, 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 $6,592 and $6,384 at September 30, 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:
 September 30, 2025December 31, 2024
 Total Nonaccrual LoansNonaccrual Loans with No ACLTotal Nonaccrual LoansNonaccrual Loans with No ACL
Commercial and industrial
Secured$16 $16 $— $— 
Commercial real estate
Commercial mortgage 1-4 family investor3,000 3,000 — — 
Residential real estate
Senior lien427 427 282 282 
Total$3,443 $3,443 $282 $282 
The following tables summarize the past due and current loans for the entire loan portfolio as of:
 September 30, 2025
 Past Due:  Accruing Loans 90 or More Days Past Due
30-59
Days		60-89
Days		90 Days
or More		CurrentTotal
Commercial and industrial
Secured$100 $— $16 $186,190 $186,306 $— 
Unsecured— — — 31,826 31,826 — 
Total commercial and industrial100 — 16 218,016 218,132 — 
Commercial real estate
Commercial mortgage owner occupied— — — 220,233 220,233 — 
Commercial mortgage non-owner occupied139 — — 224,514 224,653 — 
Commercial mortgage 1-4 family investor— 3,000 — 94,971 97,971 — 
Commercial mortgage multifamily— — — 83,785 83,785 — 
Total commercial real estate139 3,000 — 623,503 626,642 — 
Advances to mortgage brokers— — — 5,056 5,056 — 
Agricultural
Agricultural mortgage— — — 67,726 67,726 — 
Agricultural other— — — 30,068 30,068 — 
Total agricultural— — — 97,794 97,794 — 
Residential real estate
Senior lien51 125 18 358,561 358,755 18 
Junior lien— — — 10,674 10,674 — 
Home equity lines of credit— — — 42,627 42,627 — 
Total residential real estate51 125 18 411,862 412,056 18 
Consumer
Secured - direct7 — — 29,945 29,952 — 
Secured - indirect70 — — 38,852 38,922 — 
Unsecured8 — — 3,343 3,351 — 
Total consumer85 — — 72,140 72,225 — 
Total$375 $3,125 $34 $1,428,371 $1,431,905 $18 
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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		CurrentTotal
Commercial and industrial
Secured$328 $— $— $176,911 $177,239 $— 
Unsecured— 50 — 23,334 23,384 — 
Total commercial and industrial328 50 — 200,245 200,623 — 
Commercial real estate
Commercial mortgage owner occupied25 304 — 212,757 213,086 — 
Commercial mortgage non-owner occupied792 — — 216,887 217,679 — 
Commercial mortgage 1-4 family investor— — — 92,497 92,497 — 
Commercial mortgage multifamily— — — 68,456 68,456 — 
Total commercial real estate817 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 lien3,846 148 163 328,586 332,743 — 
Junior lien19 — — 8,636 8,655 — 
Home equity lines of credit10 — — 39,464 39,474 — 
Total residential real estate3,875 148 163 376,686 380,872 — 
Consumer
Secured - direct15 — 19 35,016 35,050 19 
Secured - indirect232 — — 48,904 49,136 — 
Unsecured4 — — 3,394 3,398 — 
Total consumer251 — 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:
 September 30, 2025
20252024202320222021PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial and industrial: Secured
Risk ratings 1-3$4,620 $10,717 $14,511 $2,312 $3,930 $2,927 $19,994 $— $59,011 
Risk rating 419,291 22,202 10,594 7,197 7,530 2,601 29,246 — 98,661 
Risk rating 52,392 2,278 225 15,553 25 — 4,422 — 24,895 
Risk rating 691 520 20 — 39 7 3,046 — 3,723 
Risk rating 7— — — 16 — — — — 16 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$26,394 $35,717 $25,350 $25,078 $11,524 $5,535 $56,708 $— $186,306 
2025 year-to-date gross charge-offs$— $— $22 $— $— $— $— $— $22 
Commercial and industrial: Unsecured
Risk ratings 1-3$1,544 $348 $2,496 $160 $25 $412 $1,936 $— $6,921 
Risk rating 49,145 1,333 985 1,369 594 299 9,899 — 23,624 
Risk rating 53 — 63 — 96 — 1,031 — 1,193 
Risk rating 6— 88 — — — — — — 88 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$10,692 $1,769 $3,544 $1,529 $715 $711 $12,866 $— $31,826 
2025 year-to-date gross charge-offs$— $50 $— $— $— $— $— $— $50 
Commercial real estate: Owner occupied
Risk ratings 1-3$2,627 $4,178 $8,979 $1,433 $10,697 $16,331 $838 $— $45,083 
Risk rating 417,653 34,711 20,676 28,358 37,301 26,896 1,907 — 167,502 
Risk rating 51,497 193 452 1,259 69 1,369 372 — 5,211 
Risk rating 6— 2,060 304 — 73 — — — 2,437 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$21,777 $41,142 $30,411 $31,050 $48,140 $44,596 $3,117 $— $220,233 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Non-owner occupied
Risk ratings 1-3$2,564 $283 $729 $6,060 $5,651 $65 $139 $— $15,491 
Risk rating 425,717 8,233 26,229 54,700 34,622 29,205 1,490 — 180,196 
Risk rating 5220 9,565 7,620 935 1,629 7,497 466 — 27,932 
Risk rating 6— — 988 — — 46 — — 1,034 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$28,501 $18,081 $35,566 $61,695 $41,902 $36,813 $2,095 $— $224,653 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
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September 30, 2025
20252024202320222021PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial real estate: 1-4 family investor
Risk ratings 1-3$477 $1,135 $226 $2,679 $959 $1,432 $2,857 $— $9,765 
Risk rating 410,725 8,790 7,848 8,175 27,307 14,141 7,175 — 84,161 
Risk rating 5— — 139 219 — 123 — — 481 
Risk rating 6— — 521 — — 43 — — 564 
Risk rating 7— — 3,000 — — — — — 3,000 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$11,202 $9,925 $11,734 $11,073 $28,266 $15,739 $10,032 $— $97,971 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Multifamily
Risk ratings 1-3$— $992 $2,378 $1,627 $874 $1,167 $188 $— $7,226 
Risk rating 416,633 4,466 1,893 20,533 10,235 19,371 137 — 73,268 
Risk rating 5— 484 — — — 2,807 — — 3,291 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$16,633 $5,942 $4,271 $22,160 $11,109 $23,345 $325 $— $83,785 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Advances to mortgage brokers
Risk ratings 1-3$5,056 $— $— $— $— $— $— $— $5,056 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural mortgage
Risk ratings 1-3$2,169 $729 $— $3,026 $2,000 $4,067 $35 $— $12,026 
Risk rating 42,544 4,039 3,934 11,242 6,029 12,025 1,681 — 41,494 
Risk rating 5550 271 1,097 511 5,836 645 1,048 — 9,958 
Risk rating 6535 — — 2,127 69 1,517 — — 4,248 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$5,798 $5,039 $5,031 $16,906 $13,934 $18,254 $2,764 $— $67,726 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural other
Risk ratings 1-3$874 $617 $434 $677 $221 $385 $2,989 $— $6,197 
Risk rating 41,682 864 769 830 576 89 9,970 — 14,780 
Risk rating 5206 244 133 31 910 391 2,282 — 4,197 
Risk rating 63,625 — 103 — 61 — 1,105 — 4,894 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$6,387 $1,725 $1,439 $1,538 $1,768 $865 $16,346 $— $30,068 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
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December 31, 2024
 20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
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 427,530 20,886 14,240 11,014 1,867 2,144 28,109 — 105,790 
Risk rating 53,627 559 11,644 164 137 53 6,626 — 22,810 
Risk rating 6126 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 43,073 2,049 2,388 268 370 — 8,896 — 17,044 
Risk rating 5100 — — 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 434,980 21,586 32,319 39,439 9,924 20,260 1,626 — 160,134 
Risk rating 5197 487 876 72 653 791 372 — 3,448 
Risk rating 61,354 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 48,413 42,135 61,524 36,702 4,399 29,225 497 — 182,895 
Risk rating 59,726 — 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 $— $217,679 
2024 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
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December 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial real estate: 1-4 family investor
Risk ratings 1-3$1,165 $— $2,632 $791 $846 $965 $3,076 $— $9,475 
Risk rating 49,399 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 42,081 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 44,410 4,118 12,959 6,968 5,737 8,586 1,322 — 44,100 
Risk rating 5281 1,521 1,342 5,757 — 1,364 1,045 — 11,310 
Risk rating 660 — 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 41,940 1,328 1,863 1,893 463 550 13,531 — 21,568 
Risk rating 51,683 — — — 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 $— $32,144 
2024 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 

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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 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.
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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:
September 30, 2025
 20252024202320222021PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Residential real estate: Senior lien
Current$51,300 $49,468 $37,117 $43,219 $68,435 $98,849 $— $9,746 $358,134 
Past due 30-89 days— — — — — 176 — — 176 
Past due 90 or more days— — — 18 — — — — 18 
Nonaccrual— — — — 180 247 — — 427 
Total$51,300 $49,468 $37,117 $43,237 $68,615 $99,272 $— $9,746 $358,755 
2025 year-to-date gross charge-offs$— $— $— $— $— $1 $— $— $1 
Residential real estate: Junior lien
Current$3,671 $3,681 $2,317 $603 $94 $308 $— $— $10,674 
Past due 30-89 days— — — — — — — — — 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$3,671 $3,681 $2,317 $603 $94 $308 $— $— $10,674 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate: Home equity lines of credit
Current$— $— $— $— $— $— $42,585 $42 $42,627 
Past due 30-89 days— — — — — — — — — 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$— $— $— $— $— $— $42,585 $42 $42,627 
2025 year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer: Secured - direct
Current$6,776 $6,952 $6,301 $4,560 $2,576 $2,780 $— $— $29,945 
Past due 30-89 days— — 7 — — — — — 7 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$6,776 $6,952 $6,308 $4,560 $2,576 $2,780 $— $— $29,952 
2025 year-to-date gross charge-offs$2 $3 $93 $38 $9 $53 $— $— $198 
Consumer: Secured - indirect
Current$2,500 $4,904 $16,456 $5,670 $3,891 $5,431 $— $— $38,852 
Past due 30-89 days— — — — 18 52 — — 70 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$2,500 $4,904 $16,456 $5,670 $3,909 $5,483 $— $— $38,922 
2025 year-to-date gross charge-offs$— $8 $— $— $— $13 $— $— $21 
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September 30, 2025
20252024202320222021PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Consumer: Unsecured
Current$1,302 $867 $256 $47 $9 $— $862 $— $3,343 
Past due 30-89 days4 4 — — — — — — 8 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$1,306 $871 $256 $47 $9 $— $862 $— $3,351 
2025 year-to-date gross charge-offs$427 $4 $12 $1 $1 $— $— $— $445 
December 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
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 days173 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 $— $— $35,050 
2024 year-to-date gross charge-offs$— $73 $— $— $27 $2 $— $— $102 
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 December 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Consumer: Secured - indirect
Current$6,526 $22,624 $7,682 $4,990 $4,018 $3,064 $— $— $48,904 
Past due 30-89 days42 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 $— $— $49,136 
2024 year-to-date gross charge-offs$— $43 $— $— $— $— $— $— $43 
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$1,939 $12 $21 $— $— $1 $21 $— $1,994 
Loan Modifications
A loan modification includes terms outside of normal lending practices to a borrower experiencing financial difficulty.
Typical modifications granted include, but are not limited to:
•Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.
•Extending the maturity date or amortization period beyond typical lending guidelines for loans with similar risk characteristics.
•Agreeing to an interest-only payment structure, delaying principal payments, or delaying payments.
•Forgiving principal.
To determine if a borrower is experiencing financial difficulty, factors we consider include:
•The borrower is currently in default on any debt.
•The borrower would likely default on any debt if the concession is not granted.
•The borrower’s cash flow is insufficient to service all debt if the concession is not granted.
•The borrower has declared, or is in the process of declaring, bankruptcy.
•The borrower is unlikely to continue as a going concern (if the entity is a business).
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The following is a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty for the:
Three Months Ended September 30, 2025
Other-Than-Insignificant Payment DelayTerm ExtensionOther-Than-Insignificant Payment Delay and Term Extension
Amortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial Receivable
Commercial and industrial
Secured$— 0.00 %$— 0.00 %$443 0.18 %
Agricultural
Agricultural mortgage914 1.35 %— 0.00 %— 0.00 %
Agricultural other— 0.00 %925 3.08 %— 0.00 %
Total$914 $925 $443 
Nine Months Ended September 30, 2025
Interest Rate ReductionOther-Than-Insignificant Payment DelayTerm ExtensionOther-Than-Insignificant Payment Delay and Term Extension
 Amortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial Receivable
Commercial and industrial
Secured$19 0.01 %$— 0.00 %$3,087 1.26 %$1,006 0.41 %
Commercial real estate
Commercial mortgage owner occupied— 0.00 %— 0.00 %1,497 0.84 %— 0.00 %
Agricultural
Agricultural mortgage— 0.00 %914 1.35 %— 0.00 %— 0.00 %
Agricultural other— 0.00 %— 0.00 %925 3.08 %— 0.00 %
Total$19 $914 $5,509 $1,006 
Three Months Ended September 30, 2024
Interest Rate Reduction
Amortized Cost Basis% of Total Class of Financial Receivable
Agricultural
Agricultural other$181 0.60 %
Total$181 
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Nine Months Ended September 30, 2024
Interest Rate ReductionOther-Than-Insignificant Payment DelayTerm ExtensionOther-Than-Insignificant Payment Delay and Term Extension
 Amortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial Receivable
Commercial and industrial
Secured$— 0.00 %$1,926 0.88 %$11 0.01 %$— 0.00 %
Commercial real estate
Commercial mortgage owner occupied— 0.00 %823 0.48 %— 0.00 %— 0.00 %
Agricultural
Agricultural mortgage— 0.00 %1,305 1.95 %— 0.00 %— 0.00 %
Agricultural other181 0.60 %— 0.00 %— 0.00 %1,038 3.46 %
Consumer
Secured - indirect— 0.00 %— 0.00 %1 0.00 %— 0.00 %
Total$181 $4,054 $12 $1,038 
We do not modify any loans by forgiving principal or accrued interest. We had committed to advance $79 and $43 in additional funds to be disbursed in connection with modified loans at September 30, 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 September 30
20252024
Payment Delay TermWeighted-Average Term Extension (Years)Weighted-Average Interest Rate Reduction
Commercial and industrial
Secured6 months1.08N/A
Agricultural
Agricultural mortgage4 monthsN/AN/A
Agricultural otherN/A0.500.50%
Nine Months Ended September 30
20252024
Weighted-Average Interest Rate ReductionPayment Delay TermWeighted-Average Term Extension (Years)Weighted-Average Interest Rate ReductionPayment Delay TermWeighted-Average Term Extension (Years)
Commercial and industrial
Secured10.00%8.1 months1.05N/A4 months3.00
Commercial real estate
Commercial mortgage owner occupiedN/AN/A15.00N/A7 monthsN/A
Agricultural
Agricultural mortgageN/A4 monthsN/AN/A5 months0.50
Agricultural otherN/AN/A0.500.50%4 months0.33
Consumer
Secured - indirectN/AN/AN/AN/AN/A1.33
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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:
September 30, 2025
Current30-59 Days
Past Due		60-89 Days
Past Due		90 Days or
More Past Due		Total
Commercial and industrial
Secured$4,114 $— $— $— $4,114 
Commercial real estate
Commercial mortgage owner occupied2,832 — — — 2,832 
Agricultural
Agricultural mortgage1,185 — — — 1,185 
Agricultural other925 — — — 925 
Total$9,056 $— $— $— $9,056 
September 30, 2024
Current30-59 Days
Past Due		60-89 Days
Past Due		90 Days or
More Past Due		Total
Commercial and industrial
Secured$1,937 $— $— $— $1,937 
Commercial real estate
Commercial mortgage owner occupied823 — — — 823 
Commercial mortgage multifamily2,917 — — — 2,917 
Agricultural
Agricultural mortgage1,305 — — — 1,305 
Agricultural other1,219 — — — 1,219 
Consumer
Secured - indirect1 — — — 1 
Total$8,202 $— $— $— $8,202 
We had no loans that defaulted in each of the three and nine-month periods ended September 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 over established dollar thresholds 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
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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 for loans, excluding unfunded commitments, by portfolio segment and the recorded investment in loans by segments follows for the:
Three Months Ended September 30, 2025
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerTotal
June 30, 2025$1,318 $5,277 $316 $4,673 $1,393 $12,977 
Charge-offs— — — — (175)(175)
Recoveries6 4 — 16 75 101 
Provision for credit losses29 102 1 107 7 246 
September 30, 2025$1,353 $5,383 $317 $4,796 $1,300 $13,149 
Nine Months Ended September 30, 2025
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerTotal
December 31, 2024$1,316 $5,171 $287 $4,521 $1,600 $12,895 
Charge-offs(72)— — (1)(664)(737)
Recoveries90 56 — 46 1,955 2,147 
Reversal of credit losses19 156 30 230 (1,591)(1,156)
September 30, 2025$1,353 $5,383 $317 $4,796 $1,300 $13,149 
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Three Months Ended September 30, 2024
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerTotal
June 30, 2024$1,264 $5,569 $258 $4,351 $1,653 $13,095 
Charge-offs— — — — (1,767)(1,767)
Recoveries6 318 — 20 64 408 
Provision for credit losses(46)(710)— (40)1,695 899 
September 30, 2024$1,224 $5,177 $258 $4,331 $1,645 $12,635 
Nine Months Ended September 30, 2024
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerTotal
December 31, 2023$968 $5,878 $270 $4,336 $1,656 $13,108 
Charge-offs(336)— — (10)(2,139)(2,485)
Recoveries10 353 2 112 210 687 
Provision for credit losses582 (1,054)(14)(107)1,918 1,325 
September 30, 2024$1,224 $5,177 $258 $4,331 $1,645 $12,635 
The following table illustrates the two main components of the ACL as of:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024
ACL
Individually evaluated$— $— $— $— $— 
Collectively evaluated13,149 12,977 12,735 12,895 12,635 
Total$13,149 $12,977 $12,735 $12,895 $12,635 
ACL to gross loans
Individually evaluated0.00 %0.00 %0.00 %0.00 %0.00 %
Collectively evaluated0.92 %0.93 %0.93 %0.91 %0.89 %
Total0.92 %0.93 %0.93 %0.91 %0.89 %
The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan segment as of:
 September 30, 2025December 31, 2024
Loan BalanceSpecific AllocationLoan BalanceSpecific Allocation
Commercial and industrial$— $— $— $— 
Commercial real estate3,000 — — — 
Agricultural— — — — 
Residential real estate426 — 254 — 
Consumer— — — — 
Total$3,426 $— $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 September 30, 2025 include $3,426 in collateral dependent loans secured by commercial real estate and residential real estate of $3,000 and $426, respectively.

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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 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 September 30
20252024
Maximum Month End BalanceAverage BalanceWeighted Average Interest Rate During the PeriodMaximum Month End BalanceAverage BalanceWeighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates$62,022 $52,700 3.17 %$56,051 $48,151 3.18 %
Federal funds purchased— — 0.00 %— — 0.00 %
FRB Discount Window— — 0.00 %5,300 153 5.18 %
Nine Months Ended September 30
20252024
Maximum Month End BalanceAverage BalanceWeighted Average Interest Rate During the PeriodMaximum Month End BalanceAverage BalanceWeighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates$62,022 $45,705 3.18 %$56,051 $43,140 3.17 %
Federal funds purchased— 7 5.43 %— 1 6.52 %
FRB Discount Window— 296 4.50 %5,300 56 5.21 %
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 $87,641 and $67,539 at September 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:
September 30, 2025December 31, 2024
AmountRateAmountRate
Securities sold under agreements to repurchase without stated maturity dates$62,022 3.45 %$53,567 3.18 %
We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at:
September 30
2025		December 31
2024
Pledged to secure borrowed funds$413,680 $395,286 
Pledged to secure repurchase agreements87,641 67,539 
Pledged for public deposits and for other purposes necessary or required by law68,847 86,162 
Total$570,168 $548,987 
AFS securities pledged to repurchase agreements consisted of the following at:
September 30
2025		December 31
2024
U.S. Treasury$78,547 $57,271 
Mortgage-backed securities7,192 7,979 
Collateralized mortgage obligations1,902 2,289 
Total$87,641 $67,539 
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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 September 30, 2025, we had the ability to borrow up to an additional $384,555 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:
September 30, 2025December 31, 2024
AmountRateAmountRate
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:
September 30, 2025December 31, 2024
AmountRateAmountRate
Fixed rate at 3.25% to floating, due 2031
$30,000 3.25 %$30,000 3.25 %
Unamortized issuance costs(508)(576)
Total subordinated debt, net$29,492 $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 
 September 30		Nine Months Ended 
 September 30
2025202420252024
Average number of common shares outstanding for basic calculation7,357,977 7,454,097 7,385,813 7,475,571 
Average potential effect of common shares in the RSP13,675 19,087 13,628 16,833 
Average number of common shares outstanding used to calculate diluted earnings per common share7,371,652 7,473,184 7,399,441 7,492,404 
Net income$5,240 $3,281 $14,220 $9,893 
Earnings per common share
Basic$0.71 $0.44 $1.93 $1.32 
Diluted0.71 0.44 1.92 1.32 

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Note 6 – Capital Ratios and Shareholders' Equity
As of September 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:
September 30, 2025
ActualMinimum Capital
Required Plus Capital Conservation Buffer
Minimum Capital
Required To Be Considered
Well Capitalized (1)
AmountRatioAmountRatioAmountRatio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank$187,258 12.26 %$106,874 7.00 %$99,240 6.50 %
Consolidated189,547 12.37 %107,266 7.00 %N/AN/A
Tier 1 capital to risk weighted assets
Isabella Bank187,258 12.26 %129,776 8.50 %122,142 8.00 %
Consolidated189,547 12.37 %130,251 8.50 %N/AN/A
Total capital to risk weighted assets
Isabella Bank201,078 13.17 %160,311 10.50 %152,677 10.00 %
Consolidated232,859 15.20 %160,898 10.50 %N/AN/A
Tier 1 capital to average assets
Isabella Bank187,258 8.63 %86,788 4.00 %108,486 5.00 %
Consolidated189,547 8.71 %87,019 4.00 %N/AN/A
December 31, 2024
ActualMinimum Capital
Required Plus Capital Conservation Buffer
Minimum Capital
Required To Be Considered
Well Capitalized (1)
AmountRatioAmountRatioAmountRatio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank$172,589 11.53 %$104,783 7.00 %$97,299 6.50 %
Consolidated183,348 12.21 %105,136 7.00 %N/AN/A
Tier 1 capital to risk weighted assets
Isabella Bank172,589 11.53 %127,237 8.50 %119,753 8.00 %
Consolidated183,348 12.21 %127,665 8.50 %N/AN/A
Total capital to risk weighted assets
Isabella Bank185,997 12.43 %157,175 10.50 %149,691 10.00 %
Consolidated226,179 15.06 %157,703 10.50 %N/AN/A
Tier 1 capital to average assets
Isabella Bank172,589 8.36 %82,602 4.00 %103,252 5.00 %
Consolidated183,348 8.86 %82,803 4.00 %N/AN/A
(1) "Well-capitalized" minimum common equity Tier 1 to risk-weighted and leverage ratio are not formally defined under applicable regulations for bank holding companies.
Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital includes a permissible portion of the allowances for credit losses and subordinated debt, net of unamortized issuance costs. There are no significant regulatory constraints placed on our capital. At September 30, 2025, the Bank exceeded all minimum Basel III risk-based capital requirements with the capital conservation buffer.
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State banking regulations place certain restrictions on dividends paid by banks to their shareholders. Dividends paid by the Corporation’s bank subsidiary would be prohibited if the effect thereof would cause the bank subsidiary’s capital to be reduced below applicable minimum capital requirements.
The following table summarizes the changes in AOCI by component for the:
Three Months Ended September 30
20252024
Unrealized
Gains
(Losses) on
AFS
Securities		Defined
Benefit
Pension Plan		TotalUnrealized
Gains
(Losses) on
AFS
Securities		Defined
Benefit
Pension Plan		Total
Balance, July 1$(13,990)$(397)$(14,387)$(26,939)$(697)$(27,636)
OCI before reclassifications5,030 — 5,030 13,081 — 13,081 
Tax effect(1,052)— (1,052)(2,724)— (2,724)
OCI, net of tax3,978 — 3,978 10,357 — 10,357 
Balance, September 30$(10,012)$(397)$(10,409)$(16,582)$(697)$(17,279)
Nine Months Ended September 30
20252024
Unrealized
Gains
(Losses) on
AFS
Securities		Defined
Benefit
Pension Plan		TotalUnrealized
Gains
(Losses) on
AFS
Securities		Defined
Benefit
Pension Plan		Total
Balance, December 31$(20,958)$(397)$(21,355)$(25,199)$(697)$(25,896)
OCI before reclassifications13,923 — 13,923 10,858 — 10,858 
Tax effect(2,977)— (2,977)(2,241)— (2,241)
OCI, net of tax10,946 — 10,946 8,617 — 8,617 
Balance, September 30$(10,012)$(397)$(10,409)$(16,582)$(697)$(17,279)
Included in OCI for the three and nine-month periods ended September 30, 2025 and 2024 are changes in unrealized gains and losses related to certain auction rate money market preferred stocks. These investments, for federal income tax purposes, have no deferred federal income taxes related to unrealized gains or losses given the nature of the investments.
A summary of the components of unrealized gains on AFS securities included in OCI follows for the:
Three Months Ended September 30
 20252024
Auction Rate Money Market PreferredAll Other AFS SecuritiesTotalAuction Rate Money Market PreferredAll Other AFS SecuritiesTotal
Unrealized gains (losses) arising during the period$(64)$5,094 $5,030 $109 $12,972 $13,081 
Tax effect— (1,052)(1,052)— (2,724)(2,724)
Unrealized gains (losses), net of tax$(64)$4,042 $3,978 $109 $10,248 $10,357 
 Nine Months Ended September 30
 20252024
Auction Rate Money Market PreferredAll Other AFS SecuritiesTotalAuction Rate Money Market PreferredAll Other AFS SecuritiesTotal
Unrealized gains (losses) arising during the period$(279)$14,202 $13,923 $186 $10,672 $10,858 
Tax effect— (2,977)(2,977)— (2,241)(2,241)
Unrealized gains (losses), net of tax$(279)$11,225 $10,946 $186 $8,431 $8,617 
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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:
September 30, 2025
Valuation TechniqueFair ValueUnobservable InputActual RangeWeighted Average
Collateral Dependent LoansDiscount applied to collateral:
Discounted value$3,426 Real Estate
25%
25%
December 31, 2024
Valuation TechniqueFair ValueUnobservable InputActual RangeWeighted Average
Collateral Dependent LoansDiscount 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:
September 30, 2025
Valuation TechniqueFair ValueUnobservable InputRate
Discounted cash flow$2,164 Constant prepayment rate7%
Discount rate11%
December 31, 2024
Valuation TechniqueFair ValueUnobservable InputRate
Discounted cash flow$2,483 Constant prepayment rate7%
Discount rate11%
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:
 September 30, 2025
Carrying
Value		Estimated
Fair Value		Level 1Level 2Level 3
ASSETS
Cash and cash equivalents$161,301 $161,301 $161,301 $— $— 
FHLB stock (1)
5,600 N/A— — — 
Mortgage loans HFS737 737 — 737 — 
Gross loans1,431,905 1,395,921 — — 1,395,921 
Less allowance for credit losses13,149 13,149 — — 13,149 
Net loans1,418,756 1,382,772 — — 1,382,772 
Accrued interest receivable8,901 8,901 8,901 — — 
Equity securities without readily determinable fair values (1)
3,086 N/A— — — 
LIABILITIES
Deposits without stated maturities1,520,804 1,520,804 1,520,804 — — 
Deposits with stated maturities404,798 403,407 — 403,407 — 
Short-term borrowings62,022 59,196 — 59,196 — 
FHLB advances— — — — — 
Subordinated debt, net of unamortized issuance costs
29,492 28,417 — 28,417 — 
Accrued interest payable980 980 980 — — 
 December 31, 2024
 Carrying
Value		Estimated
Fair Value		Level 1Level 2Level 3
ASSETS
Cash and cash equivalents$24,542 $24,542 $24,542 $— $— 
FHLB stock (1)
12,762 N/A— — — 
Mortgage loans HFS242 247 — 247 — 
Gross loans1,423,571 1,363,883 — — 1,363,883 
Less allowance for credit losses12,895 12,895 — — 12,895 
Net loans1,410,676 1,350,988 — — 1,350,988 
Accrued interest receivable8,085 8,085 8,085 — — 
Equity securities without readily determinable fair values (1)
3,086 N/A— — — 
LIABILITIES
Deposits without stated maturities1,359,469 1,359,469 1,359,469 — — 
Deposits with stated maturities387,591 385,200 — 385,200 — 
Short-term borrowings53,567 53,503 — 53,503 — 
FHLB advances30,000 30,000 — 30,000 — 
Subordinated debt, net of unamortized issuance costs
29,424 27,658 — 27,658 — 
Accrued interest payable1,051 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:
 September 30, 2025December 31, 2024
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Recurring items
AFS securities
U.S. Treasury$206,041 $— $206,041 $— $220,571 $— $220,571 $— 
States and political subdivisions71,102 — 71,102 — 76,568 — 76,568 — 
Auction rate money market preferred2,790 — 2,790 — 3,044 — 3,044 — 
Mortgage-backed securities23,397 — 23,397 — 26,886 — 26,886 — 
Collateralized mortgage obligations201,213 — 201,213 — 154,674 — 154,674 — 
Corporate7,427 — 7,427 — 7,286 — 7,286 — 
Total AFS securities511,970 — 511,970 — 489,029 — 489,029 — 
Nonrecurring items
Collateral dependent (net of ACL)3,426 — — 3,426 254 — — 254 
OMSR2,164 — — 2,164 2,185 — — 2,185 
Foreclosed assets1,018 — — 1,018 544 — — 544 
Total$518,578 $— $511,970 $6,608 $492,012 $— $489,029 $2,983 
Percent of assets and liabilities measured at fair value0.00 %98.73 %1.27 %0.00 %99.39 %0.61 %
We recorded an impairment related to OMSR of $1 and $3 through earnings for the three and nine month periods ended September 30, 2025, respectively, and $21 for each of the three and nine month periods ended September 30, 2024. We recorded impairments related to foreclosed assets of $26 and $89 for three and nine month periods ended September 30, 2025, respectively. No impairments related to foreclosed assets were recorded for three and nine month periods ended September 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 September 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.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Dollars in thousands except per share amounts and ratios, unless otherwise noted)
The following is management's discussion and analysis of our financial condition and results of operations for the unaudited periods covered by this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025 (this “Form 10-Q”). This analysis should be read in conjunction with 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”) and with the unaudited interim condensed consolidated financial statements and notes, beginning on page 4 of this Form 10-Q. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q 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.
General
Isabella Bank Corporation is a registered financial holding company that was incorporated in September 1988 under Michigan law. The Corporation's wholly owned subsidiary, Isabella Bank, has 31 offices located throughout Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties. The area includes significant agricultural production, manufacturing, retail, gaming and tourism, and several colleges and universities.
Cautionary Notice Regarding Forward-Looking Statements
This Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
•slower economic growth rates or potential recession in the United States and our market areas;
•the impacts related to or resulting from uncertainty in the banking industry as a whole;
•increased competition for deposits among traditional and nontraditional financial services companies, and related changes in deposit customer behavior;
•the lingering inflationary pressures, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas, and its impact on market interest rates, the economy and credit quality;
•our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating suitable acquisitions;
•business and economic conditions, particularly those affecting our market areas, as well as the concentration of our business in such market areas;
•adverse changes in customer spending, borrowing, and savings habits;
•the impact of pandemics, epidemics, or any other health-related crisis;
•high concentrations of loans secured by real estate located in our market areas;
•changes in unemployment rates in the United States and our market areas;
•risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business assets that secure such loans;
•potential changes in the prices, values and sales volumes of commercial and residential real estate securing our real estate loans;
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•risks associated with our agricultural loan portfolio, including the heightened sensitivity to weather conditions, commodity prices, and other factors generally outside the borrowers and our control;
•risks related to the significant amount of credit that we have extended to a limited number of borrowers and in a limited geographic area;
•public funds deposits comprising a relatively high percentage of our deposits;
•potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;
•our ability to maintain our reputation;
•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit losses;
•our ability to attract, hire and retain qualified management personnel;
•our dependence on our management team, including our ability to retain executive officers and key employees and their customer and community relationships;
•interest rate fluctuations, which could have an adverse effect on our profitability;
•competition from banks, credit unions and other financial services providers;
•our ability to keep pace with technological change or difficulties we may experience when implementing new technologies;
•cybersecurity risk, including cyber incidents or other failures, disruptions or breaches of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of a cyber-attack, could impact the Corporation’s reputation, increase regulatory oversight, and impact the financial results of the Corporation;
•our ability to maintain effective internal control over financial reporting;
•employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers and counterparties;
•increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;
•our ability to maintain adequate liquidity and to raise necessary capital to fund our acquisition strategy and operations or to meet increased minimum regulatory capital levels;
•costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our reputation;
•natural disasters, severe weather, acts of god, acts of war or terrorism, geopolitical instability, public health outbreaks (such as coronavirus), other international or domestic calamities, and other events beyond our control, including as a result of in the policies of the current U.S. presidential administration or Congress;
•a deterioration of the credit rating for United States long-term sovereign debt or uncertainty regarding United States fiscal debt, deficit and budget matters;
•the impacts of tariffs, sanctions and other trade policies of the United States and its global trading counterparts and the resulting impact on the Corporation and its customers;
•compliance with governmental and regulatory requirements, including the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (“EGRRCPA”), and others relating to banking, consumer protection, securities and tax matters;
•changes in the laws, rules, regulations, interpretations or policies that apply to the Corporation’s business and operations, and any additional regulations, or repeals that may be forthcoming as a result thereof, which could cause the Corporation to incur additional costs and adversely affect the Corporation’s business environment, operations and financial results; and
•our ability to navigate the uncertain impacts of current and future governmental monetary and fiscal policies, including the current and future policies of the Board of Governors of the Federal Reserve System (“Federal Reserve”) and as a result of initiatives of the Trump administration.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Form 10-Q and the risk factors set forth in our 2024 Annual Report on Form 10-K. Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this Form 10-Q. In addition, our past results of operations are not
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necessarily indicative of our future results. Accordingly, you should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which such forward-looking statements were made. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law.
Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP and the prevailing practices in the financial services industry. However, we also evaluate our performance by reference to certain additional financial measures discussed in this Quarterly Report on Form 10-Q that we identify as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios, or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.
We believe that, from time to time, these non-GAAP financial measures provide additional understanding of ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. However, there may be limits in the usefulness of these measures to investors. The way we calculate the non-GAAP financial measures that we discuss in this Quarterly Report on Form 10-Q may differ from that of other companies reporting measures with similar names. Investors should understand how such other banking organizations calculate their financial measures similar to, or with names like, the non-GAAP financial measures we have discussed in this Quarterly Report on Form 10-Q when comparing such non-GAAP financial measures.
As a result, the non-GAAP financial measures that we discuss in this Quarterly Report on Form 10-Q should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this report may differ from that of other companies reporting measures with similar names.
Available Information
The Corporation maintains an Internet web site at ir.isabellabank.com. The Corporation makes available, free of charge, on its web site (under ir.isabellabank.com/sec-filings/default) the Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Exchange Act as soon as reasonably practicable after the Corporation files such material with, or furnishes it to, the SEC. The Corporation also makes available, free of charge, through its web site (under ir.isabellabank.com/governance/governance-documents/default) links to the Corporation’s Code of Conduct and Business Ethics and the charters for its board committees. In addition, the SEC maintains an Internet site (at www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The Corporation routinely posts important information for investors on its web site (under ir.isabellabank.com and, more specifically, under the News tab at ir.isabellabank.com/news/default). The Corporation intends to use its web site as a means of disclosing material non-public information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Corporation’s web site, in addition to following the Corporation’s press releases, SEC filings, public conference calls, presentations and webcasts.
The information contained on, or that may be accessed through, the Corporation’s web site is not incorporated by reference into, and is not a part of, this Form 10-Q.
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Executive Summary
Comparison of Operating Results for the three and nine months ended September 30, 2025, and 2024, unless otherwise noted
Net income in the third quarter of 2025 was $5,240, or $0.71 per diluted share, compared with $3,281, or $0.44 per diluted share, in the same quarter of 2024. Net income for the year-to-date period of 2025 was $14,220, or $1.92 per diluted share, compared with $9,893, or $1.32 per diluted share, in the same period of 2024.
Net interest income was $16,162 in the third quarter of 2025 and $14,488 in the same quarter of 2024, representing 3.15% and 2.96% of earning assets, or NIM on an FTE basis, respectively. The book yield from securities was 2.42% and 2.17% during the third quarters of 2025 and 2024, respectively. Our yield on loans expanded to 5.78% in the third quarter of 2025, up from 5.72% in the same quarter of 2024. The expansion in loan yields was a result of higher rates on new loans and variable rate commercial loans that continue to reprice. Our cost of interest-bearing liabilities in the third quarter of 2025 decreased to 2.25% from 2.42% in the third quarter of 2024 due to reductions to rates in the money market and certificate of deposit products. NIM is expected to continue to expand as assets reprice and the cost of interest-bearing liabilities stabilizes.
For the first nine months of 2025, net interest income was $45,816 compared with $41,280 in the same period of 2024. The comparison of NIM and yield on interest earning assets for the nine months ending September 30, 2025 were 3.12% and 4.80%, respectively, compared to 2.87% and 4.62%, respectively, for the same period in 2024. The yield on loans expanded to 5.75%, from 5.55%, and our cost of interest bearing liabilities decreased to 2.25% from 2.36% for the first nine months of 2025 and 2024, respectively. The explanations for the improvement in NIM are consistent with those provided in the year-over-year three month comparison above.
The provision for credit losses was a credit of $209 in the third quarter of 2025, which reflects a $172 increase in the ACL on loans, net charge offs totaling $74, and an increase in the reserve for unfunded commitments. The provision for loan losses in the same period of 2024 was $946 due to growth in core loans (non-GAAP), which excludes advances to mortgage brokers, unfunded commitments, and $1,767 in charge offs. The increase in charge offs was related to overdrawn deposit accounts from a single customer.
For the first nine months of 2025, the provision for credit losses was a credit of $997 compared to a provision of $1,508 in the same period of 2024. Recoveries totaled $2,147, of which $1,556 were related to the overdrawn deposit accounts from a single customer charged off during the third quarter of 2024. Credit quality remains strong with low levels of past due and nonaccrual loans and net charge offs. The Corporation continues to closely monitor credit quality in light of the continued economic uncertainty caused by, among other factors, the interest rate environment, employment data in recent periods, continued uncertainty regarding U.S. trade and tariff policy, and the risk of the resurgence of elevated levels of inflation, in the United States and our market areas. Accordingly, additional provisions for credit losses may be necessary in future periods.
Noninterest income for the three months ended September 30, 2025 and 2024 was $4,308 and $3,528, respectively. Service charges and fees increased $219 as a result of profitability initiatives designed to increase fee income. Wealth management fees grew $71 due to growth in assets under management throughout the year. Earnings on BOLI policies increased $216 over the prior year quarter due to new investments in a separate account BOLI, which was offset in part by a one-time expense of $120 due to restructuring charges. Other noninterest income includes a $163 gain on the redemption of a BOLI policy. For the first nine months of 2025, noninterest income was $11,522, compared to $10,604 in the same period of 2024. Service charges and fees, wealth management fees, earnings on BOLI policies, and other income increased $308, $147, $392, and $94, respectively. The reasons for the increase in noninterest income for the nine month comparison are the same as the three month comparison.
Noninterest expenses for the three-month period ended September 30, 2025 increased $757 in comparison to the same period in 2024. Compensation and benefit expenses increased $379 reflecting annual merit increases in 2025, incentives, and higher medical insurance claims compared to the third quarter of 2024. Other professional services increased $263 primarily due to a temporary increase in outsourced services. For the first nine months of 2025, noninterest expenses were $41,029, compared to $38,799 in the same period of 2024. Compensation and benefits increased $1,273 for the same reasons as the three month comparison. Other professional service fees increased $797 principally due to $173 of profitability initiative costs, $168 in legal fees related to our Nasdaq uplisting, and temporary increases in outsourced services. Offsetting these increases was a $407 decline in other losses, largely due to fraudulent related activity.
Income tax expense for the three months ended September 30, 2025 and 2024 was $1,036 and $561 and the ETR was 17% and 15%, respectively. The increase in the ETR was primarily due to a higher annual forecast of pretax income. Income tax expense for the first nine months of 2025 was $3,086, compared to $1,684 in the same period of 2024 and the ETR was 18% and 15%, respectively. The ETR in the first nine months of 2025 included a one-time tax expense totaling $166 due to the taxes owed from the lifetime earnings on BOLI policies that were surrendered during the first quarter of 2025. Excluding the one-
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time charge, the ETR was 17% for the first nine months of 2025, which is higher than the prior year due to a higher annual forecast of pretax income.
Financial Condition (September 30, 2025 to December 31, 2024 comparison)
Total assets increased $173,413 to $2,259,654 as of September 30, 2025, primarily due to an increase of $127,465 in interest bearing cash, a $22,941 increase in AFS securities, and a $10,769 increase in BOLI policies.
Our AFS securities portfolio totaled $511,970 at September 30, 2025, increasing $22,941 at the end of third quarter 2025. The increase was driven by $62,148 in purchases, offset by amortization and maturities of $52,359. Net unrealized losses at September 30, 2025 totaled $12,564, or 2.40%, of the portfolio and improved during the quarter due to the treasury portfolio rapidly approaching maturity and an increase in bond prices.
Gross loans increased $8,334 to $1,431,905 as of September 30, 2025. While core loans (non-GAAP) grew $66,358, advances to mortgage brokers decreased $58,024 due to lower participation demand from our counterparty. Core loans (non-GAAP) grew $66,358, led by growth in the commercial and industrial and commercial real estate portfolios of $17,509 and $34,924, respectively. Residential mortgages increased $31,184 since year-end 2024 with $13,388 of growth in the third quarter as construction drawdowns and seasonal patterns occurred. Most residential originations were adjustable rate products, which are put on the balance sheet rather than sold in the secondary market. The consumer loan portfolio continues to slowly roll off amid decreasing demand, competition, and our adherence to credit quality standards.
The ACL was $13,149 at September 30, 2025, an increase of $254 from $12,895 at December 31, 2024. The increase is due to core loan growth (non-GAAP), offset by improvement in historical loss experience driven by the recovery of previously charged-off loans during the year. Nonaccrual loans were $3,443 as of September 30, 2025 compared to $282 at December 31, 2024. This increase relates to one commercial real estate loan. Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.03% at September 30, 2025, compared to 0.40% at year-end 2024. Overall, credit quality remains strong.
BOLI assets were $45,651 at September 30, 2025, an increase of $10,769 from December 31, 2024. The growth was mostly driven by a $10,583 investment of new policies in a separate account product at the beginning of January. In the first half of 2025, we also surrendered and/or exchanged over $13,000 of existing general account policies and redeployed the funds into a separate account BOLI structure, which yields a higher rate compared to existing general account policies.
Total deposits increased $178,542 from December 31, 2024, to $1,925,602 at September 30, 2025. The growth was driven by demand and money market deposits. Approximately half of the $134,329 increase in money market deposits was driven by one customer with large deposits during the second and third quarters that are expected to be withdrawn by the customer by the end of the year. Consumer demand for retail certificates of deposit accounts continues based on the rate environment, resulting in a $17,207 increase in the balance during the first nine months of 2025.
Total equity was $227,420, or $30.94 per share, at September 30, 2025 compared to $210,276, or $28.32 per share, at year-end 2024. Our tangible book value per share (non-GAAP) was $24.37 as of September 30, 2025, compared to $21.82 on December 31, 2024. Net unrealized losses on AFS securities reduced tangible book value per share (non-GAAP) by $1.36 and $2.82 for the respective periods. Share repurchases totaled 122,502 during the first nine months of 2025 for a value of $3,259 at an average price of $26.60.
We continue to have robust liquidity levels and capital. As of September 30, 2025, we had $975,856 of unencumbered sources of liquidity and strong capital ratios; the Tier 1 Leverage Ratio was 8.71%, Tier 1 risk-based capital was 12.37%, and Total risk-based capital was 15.20%.

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Recent Events
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law by President Trump, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key provisions from the Tax Cuts and Jobs Act of 2017 and expanding certain incentives from the Inflation Reduction Act of 2022 while accelerating the phase-out of others. The Corporation continues to evaluate the OBBBA but does not anticipate that the OBBBA will have a material impact on the Corporation’s Consolidated Financial Statements.
Nasdaq Listing
Beginning with the opening of trading on Monday, May 12, 2025, our shares of common stock were listed for trading on The Nasdaq Capital Market under our current symbol, “ISBA.” Prior to this listing on Nasdaq, our shares of common stock were listed on the OTCQX under the same symbol through May 9, 2025.
Reclassifications
Certain amounts reported in the interim 2024 consolidated financial statements have been reclassified to conform to the 2025 presentation.
Subsequent Events
We evaluated subsequent events after September 30, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure. We determined that no subsequent events require financial statement recognition or disclosure between September 30, 2025 and the date our interim condensed consolidated financial statements were issued.
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Selected Financial Data (Unaudited)
The following table outlines our results of operations and provides certain performance measures as of, and for the:
Three Months EndedNine Months Ended
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024		September 30
2025		September 30
2024
PER SHARE
Basic earnings$0.71 $0.68 $0.53 $0.54 $0.44 $1.93 $1.32 
Diluted earnings0.71 0.68 0.53 0.54 0.44 1.92 1.32 
Dividends0.28 0.28 0.28 0.28 0.28 0.84 0.84 
Book value (1)
30.94 29.95 29.10 28.32 28.63 30.94 28.63 
Tangible book value (1) (2)
24.37 23.39 22.58 21.82 22.14 24.37 22.14 
Market price (1)
35.25 30.15 23.59 25.99 21.21 35.25 21.21 
PERFORMANCE RATIOS
Return on average total assets0.94 %0.96 %0.77 %0.76 %0.62 %0.89 %0.64 %
Return on average shareholders' equity9.28 %9.19 %7.48 %7.47 %6.26 %8.67 %6.47 %
Return on average tangible shareholders' equity (2)
11.83 %11.78 %9.65 %9.66 %8.15 %11.12 %8.48 %
Net interest margin yield (FTE)3.15 %3.14 %3.06 %2.98 %2.96 %3.12 %2.87 %
Efficiency ratio67.51 %70.53 %71.73 %71.08 %72.30 %69.80 %73.65 %
Gross loan to deposit ratio (1)
74.36 %75.57 %76.07 %81.48 %79.93 %74.36 %79.93 %
Shareholders' equity to total assets (1)
10.06 %10.23 %10.25 %10.08 %10.11 %10.06 %10.11 %
Tangible shareholders' equity to tangible assets (1) (2)
8.10 %8.17 %8.14 %7.95 %8.00 %8.10 %8.00 %
FINANCIAL DATA (in millions)
Total assets (1)
$2,260 $2,156 $2,103 $2,086 $2,107 $2,260 $2,107 
AFS securities (1)
512 501 513 489 507 512 507 
Gross loans (1)
1,432 1,398 1,368 1,424 1,424 1,432 1,424 
ACL (1)
13 13 13 13 13 13 13 
Deposits (1)
1,926 1,849 1,798 1,747 1,782 1,926 1,782 
Borrowed funds (1)
92 73 77 113 97 92 97 
Shareholders' equity (1)
227 221 216 210 213 227 213 
Wealth assets under management (1)
680 679 657 658 680 680 680 
Net income5 5 4 4 3 14 10 
Interest income25 23 23 23 23 71 67 
Interest expense9 8 8 9 9 25 26 
Net interest income16 15 15 15 14 46 41 
Provision for (reversal of) credit losses— (1)— — 1 (1)2 
Noninterest income4 4 4 4 4 12 11 
Noninterest expenses14 14 13 13 13 41 39 
(1) At end of period.
(2) Non-GAAP financial measure; refer to the "Reconciliation of Non-GAAP Financial Measures" section of this Form 10-Q.
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Average Balances, Interest Rates, and Net Interest Income
The following schedules present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. These schedules also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. FRB restricted equity holdings are included in other interest earning assets.
Three Months Ended
September 30, 2025June 30, 2025September 30, 2024
Average
Balance		Tax
Equivalent
Interest		Average
Yield /
Rate		Average
Balance		Tax
Equivalent
Interest		Average
Yield /
Rate		Average
Balance		Tax
Equivalent
Interest		Average
Yield /
Rate
INTEREST EARNING ASSETS
Loans (1)
$1,409,928 $20,583 5.78 %$1,388,684 $19,832 5.71 %$1,403,810 $20,230 5.72 %
AFS securities (2)
517,286 3,172 2.42 %534,352 3,210 2.38 %536,379 2,981 2.17 %
FHLB stock5,600 70 4.95 %5,600 125 8.94 %12,762 168 5.26 %
Fed funds sold186 2 4.35 %6 — 3.83 %4 — 5.36 %
Other (3)
123,183 1,233 3.92 %20,487 253 4.92 %14,597 194 5.18 %
Total interest earning assets2,056,183 25,060 4.83 %1,949,129 23,420 4.81 %1,967,552 23,573 4.75 %
NONEARNING ASSETS
Allowance for credit losses(13,057)(13,369)(13,125)
Cash and demand deposits due from banks25,591 22,026 25,903 
Premises and equipment28,313 28,306 27,868 
Other assets109,692 106,595 87,002 
Total assets$2,206,722 $2,092,687 $2,095,200 
INTEREST BEARING LIABILITIES
Interest bearing demand deposits$234,105 144 0.24 %$236,076 220 0.37 %$232,018 161 0.28 %
Money market deposits534,127 3,533 2.63 %449,110 2,857 2.55 %451,216 3,148 2.77 %
Savings289,442 560 0.77 %286,434 544 0.76 %274,828 423 0.61 %
Certificates of deposit399,781 3,775 3.75 %395,450 3,770 3.82 %375,936 3,899 4.13 %
Short-term borrowings52,700 441 3.32 %41,661 324 3.11 %48,304 384 3.17 %
FHLB advances— — — %11,539 132 4.53 %40,435 571 5.52 %
Subordinated debt, net of unamortized issuance costs
29,477 267 3.61 %29,455 266 3.61 %29,388 267 3.62 %
Total interest bearing liabilities1,539,632 8,720 2.25 %1,449,725 8,113 2.24 %1,452,125 8,853 2.42 %
NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits428,144 409,262 418,973 
Other liabilities14,976 14,158 15,658 
Shareholders’ equity223,970 219,542 208,444 
Total liabilities and shareholders’ equity$2,206,722 $2,092,687 $2,095,200 
Net interest income (FTE)$16,340 $15,307 $14,720 
Net yield on interest earning assets (FTE)3.15 %3.14 %2.96 %

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Nine Months Ended
September 30, 2025September 30, 2024
Average BalanceTax Equivalent InterestAverage Yield/RateAverage BalanceTax Equivalent InterestAverage Yield/Rate
INTEREST EARNING ASSETS
Loans (1)
$1,389,936 $59,763 5.75 %$1,376,122 $57,150 5.55 %
AFS securities (2)
522,049 9,210 2.34 %546,376 9,153 2.23 %
FHLB stock7,384 355 6.41 %12,762 472 4.93 %
Fed funds sold66 2 4.35 %6 — 5.35 %
Other (3)
63,959 1,968 3.92 %17,941 750 5.49 %
Total interest earning assets1,983,394 71,298 4.80 %1,953,207 67,525 4.62 %
NONEARNING ASSETS
Allowance for credit losses(13,104)(13,216)
Cash and demand deposits due from banks23,844 24,623 
Premises and equipment28,195 27,962 
Other assets106,430 83,878 
Total assets$2,128,759 $2,076,454 
INTEREST BEARING LIABILITIES
Interest bearing demand deposits$236,989 606 0.34 %$238,703 542 0.30 %
Money market deposits481,571 9,319 2.59 %445,604 9,437 2.83 %
Savings287,425 1,642 0.76 %280,447 1,154 0.55 %
Certificates of deposit394,395 11,299 3.83 %366,672 10,974 4.00 %
Short-term borrowings46,008 1,106 3.21 %43,197 1,026 3.18 %
FHLB advances4,945 170 4.53 %37,883 1,597 5.54 %
Subordinated debt, net of unamortized issuance costs
29,455 799 3.61 %29,365 799 3.63 %
Total interest bearing liabilities1,480,788 24,941 2.25 %1,441,871 25,529 2.36 %
NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits413,568 414,179 
Other liabilities15,131 16,183 
Shareholders’ equity219,272 204,221 
Total liabilities and shareholders’ equity$2,128,759 $2,076,454 
Net interest income (FTE)$46,357 $41,996 
Net yield on interest earning assets (FTE)3.12 %2.87 %
(1) Includes loans HFS and nonaccrual loans.
(2) Average balances for AFS securities are based on amortized cost.
(3) Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter.
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Loans
The following table displays loan balances as of:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024		Annualized Growth %
Quarter to Date		Annualized Growth %
Year to Date
Commercial and industrial$218,132 $207,719 $205,172 $200,623 $197,372 20.05 %11.64 %
Commercial real estate626,642 614,383 596,282 591,718 590,255 7.98 %7.87 %
Advances to mortgage brokers5,056 3,005 3,015 63,080 76,187 N/M(122.65)%
Agricultural97,794 96,842 94,359 99,694 96,794 3.93 %(2.54)%
Total commercial loans947,624 921,949 898,828 955,115 960,608 11.14 %(1.05)%
Residential real estate412,056 398,668 387,348 380,872 369,846 13.43 %10.92 %
Consumer72,225 76,896 81,548 87,584 93,829 (24.30)%(23.38)%
Total$1,431,905 $1,397,513 $1,367,724 $1,423,571 $1,424,283 9.84 %0.78 %
The following table presents the composition of our commercial real estate portfolio by industry as of:
September 30, 2025December 31, 2024
BalancePercent of TotalBalancePercent of Total
Residential
1-4 family investor$91,307 14.57 %$86,736 14.66 %
Multifamily71,148 11.35 %61,033 10.31 %
Real estate171,139 27.31 %158,739 26.83 %
Hotels85,935 13.71 %83,756 14.15 %
Health care55,397 8.84 %50,083 8.46 %
Retail trade33,139 5.29 %35,063 5.93 %
Manufacturing19,129 3.05 %17,030 2.88 %
Accommodation services15,781 2.52 %16,804 2.84 %
Construction14,259 2.28 %12,825 2.17 %
Educational services10,727 1.71 %11,160 1.89 %
Wholesale trade11,262 1.80 %11,073 1.87 %
Other47,419 7.57 %47,416 8.01 %
Total commercial real estate$626,642 100.00 %$591,718 100.00 %
Commercial real estate loans are subject to a varying degree of risk from changes in interest rates and economic conditions. To control these risks, we maintain strict underwriting standards, lending limits to a single borrower, loan to collateral value limits, and a defined market area. We also monitor and limit loan concentrations to specific industries. Our practices also include appropriate loan reviews, and monitoring of past due levels, concentrations, industry trends, and other qualitative factors.
Deposits
The following table displays deposit balances as of:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024		Annualized Growth %
Quarter to Date		Annualized Growth %
Year to Date
Noninterest bearing demand deposits$421,027 $493,477 $404,194 $416,373 $421,493 (58.73)%1.49 %
Interest bearing demand deposits248,666 223,376 243,939 237,548 228,902 45.29 %6.24 %
Money market deposits558,212 446,845 473,138 423,883 471,745 99.69 %42.25 %
Savings292,899 289,746 286,399 281,665 276,095 4.35 %5.32 %
Certificates of deposit404,798 395,932 390,239 387,591 383,597 8.96 %5.92 %
Total$1,925,602 $1,849,376 $1,797,909 $1,747,060 $1,781,832 16.49 %13.63 %
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Asset Quality Analysis
The following table outlines our asset quality analysis as of, and for the three-month periods ended:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024
NONPERFORMING ASSETS
Commercial and industrial$16 $17 $— $— $120 
Commercial real estate3,000 533 — — — 
Agricultural— — — — — 
Residential real estate427 614 173 282 427 
Consumer— — — — — 
Total nonaccrual loans3,443 1,164 173 282 547 
Accruing loans past due 90 days or more18 31 26 19 64 
Total nonperforming loans3,461 1,195 199 301 611 
Foreclosed assets1,018 667 649 544 546 
Debt securities— — — — 12 
Total nonperforming assets$4,479 $1,862 $848 $845 $1,169 
Nonperforming loans to gross loans0.24 %0.09 %0.01 %0.02 %0.04 %
Nonperforming assets to total assets0.20 %0.09 %0.04 %0.04 %0.06 %
Nonaccrual loans to gross loans 0.24 %0.08 %0.01 %0.02 %0.04 %
ACL as a % of nonaccrual loans381.91 %N/MN/MN/MN/M
ALLOWANCE FOR CREDIT LOSSES
Allowance at beginning of period$12,977 $12,735 $12,895 $12,635 $13,095 
Charge-offs175 390 172 299 1,767 
Recoveries101 1,822 224 197 408 
Net loan charge-offs (recoveries)74 (1,432)(52)102 1,359 
(Reversal of) provision for credit losses - loans246 (1,190)(212)362 899 
Allowance at end of period$13,149 $12,977 $12,735 $12,895 $12,635 
ACL to gross loans0.92 %0.93 %0.93 %0.91 %0.89 %
Reserve for unfunded commitments671 708 617 512 498 
Provision for credit losses - unfunded commitments(37)91 105 14 47 
Reserve to unfunded commitments0.16 %0.16 %0.14 %0.15 %0.15 %
NET LOAN CHARGE-OFFS (RECOVERIES)
Commercial and industrial$(6)$68 $(80)$13 $(6)
Commercial real estate(4)(50)(2)(2)(318)
Agricultural— — — (4)— 
Residential real estate(16)(16)(13)(16)(20)
Consumer100 (1,434)43 111 1,703 
Total$74 $(1,432)$(52)$102 $1,359 
Net (recoveries) charge-offs (Quarter to Date annualized to average loans)0.02 %(0.41)%(0.02)%0.03 %0.39 %
Net (recoveries) charge-offs (Year to Date annualized to average loans)(0.14)%(0.22)%(0.02)%0.14 %0.17 %
DELINQUENT AND NONACCRUAL LOANS
Accruing loans 30-89 days past due$500 $1,076 $5,555 $5,682 $2,226 
Accruing loans past due 90 days or more18 31 26 19 64 
Total accruing past due loans518 1,107 5,581 5,701 2,290 
Nonaccrual loans3,443 1,164 173 282 547 
Total past due and nonaccrual loans$3,961 $2,271 $5,754 $5,983 $2,837 

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Capital
Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss). We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases. Pursuant to these authorizations, we issued 36,809 shares or $1,031 of common stock during the first nine months of 2025, as compared to 61,560 shares or $1,190 of common stock during the same period in 2024. We offer the Directors Plan in which participants purchase stock units through deferred fees, in lieu of cash payments. Pursuant to this plan, we increased shareholders’ equity by $233 and $332 during the nine-month periods ended September 30, 2025 and 2024, respectively. We also grant restricted stock awards pursuant to the RSP. Pursuant to this plan, we increased shareholders’ equity by $45 during the first nine months of 2025, as compared to $71 during the same period in 2024.
We have publicly announced a common stock repurchase program. Pursuant to this repurchase program, we repurchased 122,502 shares or $3,259 of common stock during the first nine months of 2025 and 124,969 shares or $2,419 of common stock during the first nine months of 2024. As of September 30, 2025, we were authorized to repurchase up to an additional 495,727 shares of common stock under the repurchase program.
The FRB has established minimum risk-based capital guidelines. Pursuant to these guidelines, a framework has been established that assigns risk weights to each category of on and off-balance-sheet items to arrive at risk adjusted total assets. Regulatory capital is divided by the risk adjusted assets with the resulting ratio compared to the minimum standard to determine whether a corporation has adequate capital. At September 30, 2025, we and the Bank were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since September 30, 2025 that would materially adversely change such capital classifications. From time to time, we may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.
The following table sets forth our consolidated capital ratios as of:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024
Common equity tier 1 capital12.37 %12.46 %12.58 %12.21 %12.08 %
Tier 1 capital12.37 %12.46 %12.58 %12.21 %12.08 %
Total capital15.20 %15.34 %15.50 %15.06 %14.90 %
Tier 1 leverage8.71 %9.04 %8.96 %8.86 %8.77 %
Liquidity
Liquidity is monitored regularly by our ALCO, which consists of members of senior management. The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.
Our primary sources of liquidity are retail deposits, cash and cash equivalents, and unencumbered AFS securities. Cash, cash equivalents and unencumbered AFS securities totaled $487,212, or 21.56% of assets, as of September 30, 2025, compared to $330,876, or 15.86%, as of December 31, 2024. The increase in the amount and percentage of primary liquidity is a direct result of an increase in cash, driven by deposit growth. Liquidity is important for financial institutions because of their need to meet loan funding commitments, depositor withdrawal requests, and various other commitments including expansion of operations, investment opportunities, and payment of cash dividends. Based on these same factors, daily liquidity could vary significantly.
Our secondary sources include the ability to borrow from the FHLB, from the FRB, and through various correspondent banks in the form of federal funds purchased and lines of credit. These funding methods typically carry a higher interest rate than traditional market deposit accounts. Some borrowed funds, including FHLB advances, FRB Discount Window advances, and repurchase agreements, require us to pledge assets, typically in the form of AFS securities or loans, as collateral. As of September 30, 2025, we had available lines of credit of $384,555.
We monitor our daily liquidity position to meet our cash flow needs. We also forecast anticipated funding needs for changes in interest rates and economic conditions, the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits, and regulatory capital requirements. Our liquidity stress testing is designed with consideration of these and other factors that could pose undue risk to liquidity.
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Our liquidity position remained strong at September 30, 2025, which is illustrated in the following table:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024
Total cash and cash equivalents$161,301 $108,554 $69,179 $24,542 $27,378 
Brokered CD capacity130,000 120,000 120,000 120,000 120,000 
Available lines of credit
Fed funds lines with correspondent banks93,000 93,000 93,000 93,000 93,000 
FHLB borrowings257,288 249,890 250,884 215,432 233,552 
FRB Discount Window29,267 29,084 28,940 28,698 28,888 
Other lines of credit5,000 5,000 5,000 5,000 5,000 
Total available lines of credit384,555 376,974 377,824 342,130 360,440 
Unencumbered lendable value of FRB collateral, estimated (1)
300,000 320,000 340,000 290,000 290,000 
Total cash and liquidity$975,856 $925,528 $907,003 $776,672 $797,818 
Uninsured deposits$726,514 $726,240 $687,341 $645,764 $687,990 
Coverage ratio of uninsured deposits with total cash and liquidity134 %127 %132 %120 %116 %
(1) Includes estimated unencumbered lendable value of FHLB collateral of $230,000 as of September 30, 2025.
Fair Value
We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. AFS securities, cash flow hedge derivative instruments and certain liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as mortgage loans AFS, collateral dependent loans, goodwill, foreclosed assets, OMSR, and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets.
For further information regarding fair value measurements see “Note 7 – Fair Value” of our interim condensed consolidated financial statements included with this Form 10-Q.
Interest Rate Sensitivity and Market Risk
As a financial institution, our primary market risks are interest rate risk and liquidity risk. IRR is the exposure of our net interest income to changes in interest rates. IRR results from the difference in the maturity or repricing frequency of a financial institution's interest earning assets and its interest-bearing liabilities. Managing IRR is the fundamental method by which financial institutions earn income and create shareholder value. Excessive exposure to IRR could pose a significant risk to our earnings and capital.
The FRB has adopted a policy requiring banks to effectively manage the various risks that can have a material impact on safety and soundness. The risks include credit, interest rate, liquidity, operational, and reputational. We have policies, procedures, and internal controls for measuring and managing these risks. Specifically, our ALCO policy and procedures include defining acceptable types and terms of investments and funding sources, liquidity requirements, limits on investments in long-term assets, limiting the mismatch in repricing opportunities of assets and liabilities, and the frequency of measuring and reporting to our Board of Directors.
The primary technique to measure IRR is simulation analysis. Simulation analysis forecasts the effects on the balance sheet structure and net interest income under a variety of scenarios that incorporate changes in interest rates, the shape of yield curves, interest rate relationships, loan prepayments, and funding sources. These forecasts are compared against net interest income projected in a stable interest rate environment. While many assets and liabilities reprice either at maturity or in accordance with their contractual terms, several balance sheet components demonstrate characteristics that require an evaluation to more accurately reflect their repricing behavior. Key assumptions in the simulation analysis include prepayments on loans, probable calls of investment securities, changes in market conditions, loan volumes and loan pricing, deposit sensitivity, and customer preferences. These assumptions are inherently uncertain as they are subject to fluctuation and revision in a dynamic rate environment. As a result, the simulation analysis cannot precisely forecast the impact of rising and falling interest rates on net interest income. Actual results will differ from simulated results due to many other factors, including changes in balance
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sheet components, interest rate changes, changes in market conditions, and management strategies. We regularly monitor our projected net interest income sensitivity to ensure that it remains within established limits.
Gap analysis, the secondary method to measure IRR, measures the cash flows and/or the earliest repricing of our interest-bearing assets and liabilities. This analysis is useful for measuring trends in the repricing characteristics of the balance sheet. Significant assumptions are required in this process because of the embedded repricing options contained in assets and liabilities. Residential real estate and consumer loans allow the borrower to repay the balance prior to maturity without penalty, while commercial and agricultural loans may have prepayment penalties. The amount of prepayments is dependent upon many factors, including the interest rate of a given loan in comparison to the current offering rates, the level of home sales, and the overall availability of credit in the marketplace. Generally, a decrease in interest rates will result in an increase in cash flows from these assets. Savings and demand accounts may generally be withdrawn on request without prior notice. The timing of cash flows from these deposits is estimated based on historical experience. Certificates of deposit have penalties that discourage early withdrawals.
Gap analysis is also utilized as a method to measure interest rate sensitivity. Interest rate sensitivity is determined by the amount of earning assets and interest-bearing liabilities repricing within a specific time period, and their relative sensitivity to a change in interest rates. We strive to achieve reasonable stability in the net interest margin through periods of changing interest rates.
We do not believe there has been a material change in the nature or categories of our primary market risk exposure, or the particular markets that present the primary risk of loss. We do not know of or expect there to be any material change in the general nature of our primary market risk exposure in the near term, and we do not expect to make material changes to our market risk methods in the near term. We may change those methods in the future to adapt to changes in circumstances or to implement new techniques.
Contractual Obligations and Loan Commitments
We have various financial obligations, including contractual obligations and commitments related to deposits and borrowings, which may require future cash payments. We also have loan related commitments that may impact liquidity. The commitments include unused lines of credit, commercial and standby letters of credit, and commitments to grant loans. These commitments to grant loans include residential mortgage loans with the majority committed to be sold to the secondary market. Many of these commitments historically have expired without being drawn upon and do not necessarily represent our future cash requirements.
We are party to credit related financial instruments with off-balance-sheet risk. These financial instruments are entered into in the normal course of business to meet the financing needs of our customers. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The contractual or notional amounts of these instruments reflect the extent of involvement we have in a particular class of financial instrument.
Our exposure to credit-related loss in the event of nonperformance by the counterparties to the financial instruments for commitments to extend credit and standby letters of credit could be up to the contractual notional amount of those instruments. We use the same credit policies when analyzing the creditworthiness of counterparties as we do for extending loans to customers. No significant losses are anticipated as a result of these commitments.
Reconciliation of Non-GAAP Financial Measures
The following tables provide a detailed analysis, and reconciliation for, our non-GAAP financial measures as of:
September 30
2025		June 30
2025		March 31
2025		December 31
2024		September 30
2024
Gross loans$1,431,905 $1,397,513 $1,367,724 $1,423,571 $1,424,283 
Advances to mortgage brokers5,056 3,005 3,015 63,080 76,187 
Core loans$1,426,849 $1,394,508 $1,364,709 $1,360,491 $1,348,096 
Total shareholders’ equity$227,420 $220,500 $215,556 $210,276 $212,985 
Goodwill and other intangible assets48,282 48,282 48,282 48,283 48,283 
Tangible equity(A)179,138 172,218 167,274 161,993 164,702 
Common shares outstanding (1)
(B)7,350,567 7,361,684 7,408,010 7,424,893 7,438,720 
Tangible book value per share(A/B)$24.37 $23.39 $22.58 $21.82 $22.14 
(1) Whole shares.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The information presented in the section captioned “Interest Rate Sensitivity and Market Risk” in Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-Q is incorporated herein by reference.
Item 4. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of September 30, 2025, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of September 30, 2025, were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent fiscal quarter, no change occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not involved in any material legal proceedings. We are involved in ordinary, routine litigation incidental to our business; however, no such routine proceedings are expected to result in any material adverse effect on operations, earnings, financial condition, or cash flows.
Item 1A. Risk Factors.
In evaluating an investment in any of our securities, investors should consider carefully, among other things, information under the heading “Cautionary Notice Regarding Forward-Looking Statements” in Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-Q and the risk factors previously disclosed under the heading “Risk Factors” in Part I, Item 1A of our 2024 Annual Report on Form 10-K. Management believes there have been no material changes in the risk factors disclosed by the Corporation in Part I, Item 1A, “Risk Factors,” of the 2024 Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
During 2025, the Corporation identified and added the following risk factor. This risk factor should be considered when reviewing the risk factors previously disclosed by the Corporation under the heading “Risk Factors” in Part I, Item 1A of our 2024 Annual Report on Form 10-K.
An active public trading market may not be sustained.
We completed our Nasdaq uplisting, and the Company’s common stock began trading on the Nasdaq Capital Market, on May 12, 2025. An active trading market for shares of our common stock may not be sustained. If an active trading market is not sustained, you may have difficulty selling your shares of our common stock at an attractive price, or at all. Consequently, you may not be able to sell your shares of our common stock at or above an attractive price at the time that you would like to sell.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
(A)None
(B)None
(C)Repurchases of Common Stock
We have adopted and publicly announced a common stock repurchase program. The repurchase program was last amended on April 30, 2025, to allow for the repurchase of an additional 500,000 shares of common stock after that date. These authorizations do not have expiration dates. As common shares are repurchased under this repurchase program, they are retired with the status of authorized, but unissued, shares.
The following table provides information for the three-month period ended September 30, 2025, with respect to the Corporation's share repurchase activity:
 Common Shares RepurchasedTotal Number of Common Shares Purchased as Part of Publicly Announced Plan or ProgramMaximum Number of Common Shares That May Yet Be Purchased Under the Plans or Programs
NumberAverage Price
Per Common Share
June 30, 2025514,823 
July 1 - 315,953 $30.91 5,953 508,870 
August 1 - 312,757 32.64 2,757 506,113 
September 1 - 3010,386 32.45 10,386 495,727 
September 30, 202519,096 $32.00 19,096 495,727 
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Other Information.
Securities Trading Plans of Executive Officers
During the fiscal quarter ended September 30, 2025, none of the Corporation’s directors or officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” in each case as defined in Item 408 of Regulation S-K.
Item 6. Exhibits.
(a) Exhibits
Exhibit NumberExhibits
3.1
Amended Articles of Incorporation (1)
3.2
Amendment to the Articles of Incorporation (2)
3.3
Amendment to the Articles of Incorporation (3)
3.4
Amendment to the Articles of Incorporation (4)
3.5
Amendment to the Articles of Incorporation (5)
3.6
Second Amended and Restated Bylaws, as amended on September 24, 2025 (6)
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Executive Officer
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Financial Officer
32
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
101.1*101.INS (Inline XBRL Instance Document)
101.SCH (Inline XBRL Taxonomy Extension Schema Document)
101.CAL (Inline XBRL Calculation Linkbase Document)
101.LAB (Inline XBRL Taxonomy Label Linkbase Document)
101.DEF (Inline XBRL Taxonomy Linkbase Document)
101.PRE (Inline XBRL Taxonomy Presentation Linkbase Document)
104Cover Page Interactive Data File
*
In accordance with Rule 406T of Regulations S-T, the XBRL related information shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
(1)Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 12, 1991, and incorporated herein by reference
(2)Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 26, 1994, and incorporated herein by reference.
(3)Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 22, 2000, and incorporated herein by reference.
(4)Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 27, 2001, and incorporated herein by reference.
(5)Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed May 16, 2008, and incorporated herein by reference.
(6)Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed September 30, 2025, and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Isabella Bank Corporation
Date:November 10, 2025/s/ Jerome E. Schwind
Jerome E. Schwind
President and Chief Executive Officer
(Principal Executive Officer)
Date:November 10, 2025/s/ Neil M. McDonnell
Neil M. McDonnell
Isabella Bank President and Interim Chief Financial Officer
(Principal Financial Officer)
57

Source: View Original Filing on SEC EDGAR

FAQ

How did ISBA’s Q3 2025 earnings compare to last year?

Net income was $5.24 million vs. $3.28 million in Q3 2024; diluted EPS was $0.71 vs. $0.44.

What was Isabella Bank’s net interest income in Q3 2025?

Net interest income was $16.16 million, up from $14.49 million a year earlier.

What were ISBA’s total deposits and assets at September 30, 2025?

Deposits were $1.93 billion and total assets were $2.26 billion.

How did liquidity change in Q3 2025 for ISBA?

Cash and cash equivalents increased to $161.30 million, up from $24.54 million at December 31, 2024.

What dividend did ISBA pay in the quarter?

The company paid a cash dividend of $0.28 per common share.

What was ISBA’s nine-month 2025 performance?

Nine-month net income was $14.22 million with diluted EPS of $1.92.

How many ISBA shares were outstanding?

Shares outstanding were 7,350,567 at September 30, 2025; 7,335,096 as of November 6, 2025.
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Isabella

NASDAQ:ISBA

ISBA Rankings

#3978 Ranked by Market Cap
#1213 Ranked by Dividends

ISBA Latest News

Oct 27, 2025
Isabella Bank Corporation Reports Third Quarter 2025 Results
Oct 9, 2025
Isabella Bank Appoints Financial Executive Brian Tessin to its Boards of Directors
Aug 28, 2025
Isabella Bank Corporation Announces Third Quarter 2025 Dividend
Jul 24, 2025
Isabella Bank Corporation Reports Second Quarter 2025 Results
May 29, 2025
Isabella Bank Corporation Announces Second Quarter 2025 Dividend

ISBA Latest SEC Filings

Oct 27, 2025
[8-K] ISABELLA BANK CORP Reports Material Event
Oct 17, 2025
[Form 3] ISABELLA BANK CORP Initial Statement of Beneficial Ownership
Oct 9, 2025
[8-K] ISABELLA BANK CORP Reports Material Event
Sep 30, 2025
[8-K] ISABELLA BANK CORP Reports Material Event
Sep 8, 2025
[Form 4] Isabella Bank Corporation Common stock Insider Trading Activity

ISBA Stock Data

283.73M
6.78M
7.41%
3.96%
0.52%
Banks - Regional
State Commercial Banks
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