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 June 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) (State or other jurisdiction of incorporation or organ ...

Group 1: Earnings Performance - Isabella Bank Corporation reported quarterly earnings of $0.55 per share, matching the Zacks Consensus Estimate, and an increase from $0.46 per share a year ago [1] - The company had a surprise of +9.62% in the previous quarter, posting earnings of $0.57 per share against an expected $0.52 [1] - Over the last four quarters, Isabella Bank has surpassed consensus EPS estimates three times [1] Group 2: Revenue Performance - For the quarter ended June 2025, Isabella Bank posted revenues of $18.82 million, exceeding the Zacks Consensus Estimate by 2.26%, compared to $17.16 million in the same quarter last year [2] - The company has topped consensus revenue estimates two times over the last four quarters [2] Group 3: Stock Performance and Outlook - Isabella Bank shares have increased by approximately 26.9% since the beginning of the year, outperforming the S&P 500's gain of 8.1% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for future stock performance [4] - The current consensus EPS estimate for the next quarter is $0.59 on revenues of $19.2 million, and for the current fiscal year, it is $2.31 on revenues of $75.35 million [7] Group 4: Industry Context - The Banks - Northeast industry, to which Isabella Bank belongs, is currently in the top 23% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Second Quarter 2025 Financial Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance%20Overview) Isabella Bank Corporation reported a significant increase in net income and diluted EPS for Q2 2025 compared to Q2 2024, with core net income also showing growth **Q2 2025 vs. Q2 2024 Financial Performance:** | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------- | :---------- | :---------- | :------- | | Net Income | $5.0 million | $3.5 million | +$1.5 million | | Diluted EPS | $0.68 | $0.46 | +$0.22 | | Core Net Income (non-GAAP) | $4.1 million | $3.5 million | +$0.6 million | | Core Diluted EPS (non-GAAP) | $0.55 | $0.46 | +$0.09 | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Jerome Schwind highlighted strong Q2 2025 performance driven by growth in Net Interest Margin (NIM), loans, and deposits, alongside a focus on profitability and non-interest income. The Nasdaq uplisting has also increased stock volume and potential for growth - **NIM expanded by 8 basis points** over the prior quarter due to repricing earning assets and stable cost of funds[4](index=4&type=chunk) - Loan growth was primarily driven by the commercial loan portfolio, supported by a strong pipeline and concentrated efforts[4](index=4&type=chunk) - Total deposits increased, notably an **$89 million rise in non-maturity deposits** from a not-for-profit entity, demonstrating strong community relationships[4](index=4&type=chunk) - The Company recovered the entire overdraft charge-off from Q3 2024, positively impacting the provision for credit losses[4](index=4&type=chunk) - Management continues to focus on operational profitability and initiatives to enhance non-interest income[5](index=5&type=chunk) - Since uplisting to Nasdaq in May, stock volume has significantly increased, viewed as an expanded source of currency and opportunity for growth, with a continued focus on building shareholder value through earnings, repurchases, and dividends[6](index=6&type=chunk) [Financial Condition](index=1&type=section&id=Financial%20Condition) [Balance Sheet Overview](index=1&type=section&id=Balance%20Sheet%20Overview) Total assets increased to $2.2 billion, primarily driven by higher interest-bearing cash balances and core loan growth, partially offset by a decline in gross securities **Key Balance Sheet Changes (QoQ):** | Metric | Q2 2025 | Change from Q1 2025 | | :-------------------------- | :---------- | :------------------ | | Total Assets | $2.2 billion | +$53.6 million | | Interest Bearing Cash Balances | N/A | +$33.9 million | | Core Loans (non-GAAP) | N/A | +$29.8 million | | Gross Securities | N/A | -$16.4 million | **Performance Ratios (QoQ):** | Metric | Q2 2025 | Q1 2025 | Change | | :-------------------------- | :------ | :------ | :----- | | Return on Average Assets (ROA) | 0.96% | 0.68% | +0.28% | | Core ROA (non-GAAP) | 0.79% | 0.68% | +0.11% | | Total Loan Growth (annualized) | 9% | N/A | N/A | | Total Deposit Growth (annualized) | 11% | N/A | N/A | | Net Interest Margin (NIM) (non-GAAP) | 3.14% | 2.82% | +0.32% | | Noninterest Income Growth (QoQ) | 4% | N/A | N/A | | Nonperforming Loans to Total Loans | 0.09% | N/A | N/A | [Available-for-Sale Securities](index=2&type=section&id=Available-for-Sale%20Securities) Available-for-sale (AFS) securities decreased to $501 million, primarily due to amortization and maturities, partially offset by new purchases. Net unrealized losses improved, decreasing to 3% of total AFS securities **Available-for-Sale Securities (QoQ):** | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | AFS Securities at Fair Value | $501 million | $513.5 million | -$12.5 million | | Decline Drivers: | | | | | - Amortization and Maturities | N/A | N/A | -$26.8 million | | - Purchases | N/A | N/A | +$10.6 million | | Net Unrealized Losses | $17.6 million | $21.5 million | -$3.9 million | | Net Unrealized Losses as % of AFS Securities | 3% | 4% | -1% | - The decrease in net unrealized losses was primarily due to the treasury portfolio rapidly approaching maturity[8](index=8&type=chunk) [Loans Portfolio](index=2&type=section&id=Loans%20Portfolio) Total loans reached $1.4 billion, driven by strong growth in commercial and residential loans. This growth was partially offset by declines in agricultural and consumer loan portfolios **Loan Portfolio Growth (QoQ):** | Loan Category | June 30, 2025 | Change from Q1 2025 | | :-------------------------------- | :------------ | :------------------ | | Total Loans | $1.4 billion | +$29.8 million | | Commercial Loans (excl. mortgage brokers) | N/A | +$23.1 million (10.3% annualized) | | Residential Mortgages | N/A | +$11.3 million | - Outsized commercial loan growth resulted from closing several loans expected in Q1 and executing a robust Q2 pipeline[9](index=9&type=chunk) - Residential mortgage increases were due to construction loan drawdowns and seasonal origination patterns[9](index=9&type=chunk) - Agricultural and consumer loan portfolios continued to decline due to decreasing demand[9](index=9&type=chunk) - Future loan growth could be lower due to changes in timing, funding, customer demand, and overall economic conditions, despite a strong commercial pipeline[9](index=9&type=chunk) [Allowance for Credit Losses](index=2&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses increased to $13.0 million, reflecting core loan growth and changes in historical loss rates. Nonaccrual loans also rose due to a specific commercial real estate loan downgrade **Credit Loss Metrics (QoQ):** | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | Allowance for Credit Losses | $13.0 million | $12.735 million | +$242 thousand | | Nonaccrual Loan Balances | $1.2 million | $0.173 million | +$991 thousand | | Past Due & Accruing (30-89 days) to Total Loans | 0.08% | 0.41% | -0.33% | - The increase in nonaccrual loans was primarily due to the downgrade of one unique commercial real estate loan[10](index=10&type=chunk) [Deposits](index=2&type=section&id=Deposits) Total deposits grew to $1.85 billion, primarily driven by a significant increase in demand deposits from a single large customer. This growth was partially offset by declines in money market and interest-bearing demand deposits due to seasonal trends **Deposit Growth (QoQ):** | Deposit Type | June 30, 2025 | Change from Q1 2025 | | :-------------------------- | :------------ | :------------------ | | Total Deposits | $1.85 billion | +$51.5 million | | Demand Deposits | N/A | +$89.3 million | | Retail Certificates of Deposit | N/A | +$5.7 million | | Money Market Deposits | N/A | -$26.3 million | | Interest-Bearing Demand Deposits | N/A | -$20.6 million | - The increase in demand deposits was largely due to one customer with large deposits expected to be withdrawn by year-end[11](index=11&type=chunk) - Consumer demand for retail certificates of deposit accounts continued due to the elevated market interest rate environment[11](index=11&type=chunk) [Shareholder Equity & Repurchases](index=2&type=section&id=Shareholder%20Equity%20%26%20Repurchases) Tangible book value per share increased to $23.39, despite the negative impact of net unrealized losses on AFS securities. The company also repurchased shares totaling approximately $1.5 million during the quarter **Shareholder Metrics (QoQ):** | Metric | June 30, 2025 | March 31, 2025 | Change | | :------------------------------------ | :------------ | :------------- | :----- | | Tangible Book Value Per Share (non-GAAP) | $23.39 | $22.58 | +$0.81 | | Reduction to TBV per Share from Unrealized Losses | $1.90 | $2.30 | -$0.40 | | Shares Repurchased (Q2 2025) | 57,824 | N/A | N/A | | Aggregate Purchase Price (Q2 2025) | ~$1.5 million | N/A | N/A | | Average Per Share Purchase Price (Q2 2025) | ~$26.03 | N/A | N/A | [Results of Operations](index=2&type=section&id=Results%20of%20Operations) [Net Interest Margin (NIM)](index=2&type=section&id=Net%20Interest%20Margin%20(NIM)) Net Interest Margin (NIM) expanded to 3.14% in Q2 2025, showing improvement both quarter-over-quarter and year-over-year. This was driven by higher yields on loans and securities, coupled with a decrease in the cost of interest-bearing liabilities **Net Interest Margin & Yields:** | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | :------ | | NIM (fully taxable equivalent) | 3.14% | 3.06% | 2.82% | | Book Yield from Securities | 2.38% | N/A | 2.17% | | Yield on Loans | 5.71% | N/A | 5.50% | | Cost of Interest-Bearing Liabilities | 2.24% | 2.26% | 2.38% | - The expansion in loan yields resulted from higher interest rates on new loans and repricing variable-rate commercial loans[13](index=13&type=chunk) - Approximately **38% of commercial loans were fixed at rates lower than current market rates**, with the majority contractually repricing to variable rates over the next four years[13](index=13&type=chunk) - Cost of interest-bearing liabilities decreased due to reductions in money market and certificate of deposit product rates[13](index=13&type=chunk) - NIM is expected to continue expanding as loans reprice and the cost of interest-bearing liabilities stabilizes[13](index=13&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The Company recorded a credit of $1.1 million for the provision for credit losses in Q2 2025, primarily due to significant net recoveries, particularly from previously charged-off overdraft accounts. Credit quality continues to be closely monitored amidst economic uncertainties **Provision for Credit Losses:** | Metric | Q2 2025 | Q2 2024 | | :------------------------------------ | :------------ | :---------- | | Provision for Credit Losses | -$1.1 million (credit) | $170 thousand | | Net Recoveries (Q2 2025) | $1.4 million | N/A | | Specific Recoveries (Q2 2025) | $1.6 million | N/A | - The net recoveries in Q2 2025 included **$1.6 million related to overdrawn deposit accounts** from a single customer that were charged off in Q3 2024[14](index=14&type=chunk)[15](index=15&type=chunk) - The Company continues to closely monitor credit quality due to ongoing economic uncertainties, including elevated interest rates, employment data, trade policy, and inflationary pressures[16](index=16&type=chunk) - Additional provisions for credit losses may be necessary in future periods[16](index=16&type=chunk) [Noninterest Income](index=4&type=section&id=Noninterest%20Income) Noninterest income increased to $3.7 million in Q2 2025, driven by higher service charges and fees, increased earnings on bank-owned life insurance (BOLI) policies, and growth in wealth management fees **Noninterest Income (QoQ):** | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------------ | :---------- | :----- | | Total Noninterest Income | $3.7 million | $3.6 million | +$0.1 million | | Service Charges and Fees | N/A | N/A | +$48 thousand | | Earnings on BOLI Policies | N/A | N/A | +$47 thousand | | Wealth Management Fees | N/A | N/A | +$36 thousand | | Assets Under Management (AUM) | $679 million | $648 million | +$31 million | - Service charges and fees increased due to profitability initiatives[17](index=17&type=chunk) - BOLI earnings increased from new investments in a separate account BOLI, partially offset by a one-time **$120 thousand restructuring expense**[17](index=17&type=chunk) - Wealth management fees grew due to an increase in assets under management (AUM)[17](index=17&type=chunk) [Noninterest Expenses](index=4&type=section&id=Noninterest%20Expenses) Noninterest expenses increased to $13.7 million in Q2 2025, primarily due to higher compensation and benefits, reflecting annual merit increases, incentives, and increased medical insurance claims. Professional services also rose due to profitability initiatives and Nasdaq uplisting legal fees **Noninterest Expenses (QoQ):** | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------------------ | :------------ | :---------- | :----- | | Total Noninterest Expenses | $13.7 million | $12.9 million | +$0.8 million | | Compensation and Benefit Expenses | N/A | N/A | +$526 thousand | | Professional Services | N/A | N/A | N/A | - Higher compensation and benefit expenses were driven by annual merit increases, incentives, and increased medical insurance claims[18](index=18&type=chunk) - Professional services included **$173 thousand for profitability initiative costs** and **$47 thousand in legal fees** related to the Nasdaq uplisting[18](index=18&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) [About Isabella Bank Corporation](index=4&type=section&id=About%20Isabella%20Bank%20Corporation) Isabella Bank Corporation is the parent holding company of Isabella Bank, a community bank established in 1903. It provides a range of personal and commercial banking services across eight Mid-Michigan counties - Isabella Bank Corporation (Nasdaq: ISBA) is the parent holding company of Isabella Bank, a state-chartered community bank[19](index=19&type=chunk) - Isabella Bank was established in 1903 and has served its communities for over 120 years[19](index=19&type=chunk) - The Bank offers personal and commercial lending and deposit products, as well as investment, trust, and estate planning services[19](index=19&type=chunk) - It operates across eight Mid-Michigan counties: Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw[19](index=19&type=chunk) [Investor Relations & Available Information](index=4&type=section&id=Investor%20Relations%20%26%20Available%20Information) The Company provides investor information, including annual and quarterly reports, and press releases, on its dedicated Investor Relations website. This website is also used for disclosing material non-public information in compliance with Regulation FD - The Company's Investor Relations website (ir.isabellabank.com/overview) provides annual reports, quarterly earnings reports, and other press releases[21](index=21&type=chunk) - The Company uses its website (www.isabellabank.com and ir.isabellabank.com/news) as a means of disclosing material non-public information and complying with Regulation FD[22](index=22&type=chunk) - Investors should monitor the Company's website in addition to other public disclosures[22](index=22&type=chunk) [Legal & Financial Disclosures](index=4&type=section&id=Legal%20%26%20Financial%20Disclosures) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the Company's forward-looking statements, emphasizing that they are subject to risks and uncertainties and are not guarantees of future results. Investors are cautioned not to unduly rely on them and are directed to SEC filings for more information on risks - The press release contains forward-looking statements intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[24](index=24&type=chunk) - These statements relate to future events, financial condition, plans, objectives, and other matters affecting the Company's future business and operations[24](index=24&type=chunk) - Forward-looking statements are based on current information and management's good faith beliefs, but assumptions could be inaccurate, and results may not be realized[25](index=25&type=chunk) - Investors are cautioned not to unduly rely on these statements, and additional risks are detailed in the Company's Form 10-K and 10-Q filings with the SEC[25](index=25&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect developments after the statement is made, except as required by law[25](index=25&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) The Company uses non-GAAP financial measures to provide a more complete understanding of its financial position and performance, noting that these are supplemental and not a substitute for GAAP measures. A reconciliation to GAAP is provided - Non-GAAP financial measures are used to provide management and investors with a more complete understanding of the Company's financial position and performance[26](index=26&type=chunk) - These measures are supplemental and not a substitute for GAAP financial measures[26](index=26&type=chunk) - The Company defines non-GAAP measures as those excluding or including amounts that are included or excluded in the most directly comparable GAAP measure[27](index=27&type=chunk) - A reconciliation of non-GAAP financial measures to GAAP financial measures is provided at the end of the press release[28](index=28&type=chunk) [Consolidated Financial Schedules (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Schedules%20(Unaudited)) [Selected Financial Data](index=7&type=section&id=Selected%20Financial%20Data) This table presents key selected financial data, including per share amounts, performance ratios, assets under management, asset quality, and capital ratios, for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | PER SHARE | | | | | | | | | | | | Basic earnings | $ | 0.68 | $ | 0.53 | $ | 0.54 | $ | 0.44 | $ | 0.47 | | Diluted earnings | | 0.68 | | 0.53 | | 0.54 | | 0.44 | | 0.46 | | (1) Core diluted earnings | | 0.55 | | 0.57 | | 0.52 | | 0.61 | | 0.46 | | Dividends | | 0.28 | | 0.28 | | 0.28 | | 0.28 | | 0.28 | | (2) Book value | | 29.95 | | 29.10 | | 28.32 | | 28.63 | | 27.06 | | (1) (2) Tangible book value | | 23.39 | | 22.58 | | 21.82 | | 22.14 | | 20.60 | | (2) Market price | | 30.15 | | 23.59 | | 25.99 | | 21.21 | | 18.20 | | (2) (3) Common shares outstanding | | 7,361,684 | | 7,408,010 | | 7,424,893 | | 7,438,720 | | 7,474,016 | | Average number of diluted common shares | | | | | | | | | | | | (3) outstanding | | 7,398,109 | | 7,432,162 | | 7,451,718 | | 7,473,184 | | 7,494,828 | | PERFORMANCE RATIOS | | | | | | | | | | | | Return on average total assets | | 0.96 % | | 0.77 % | | 0.76 % | | 0.62 % | | 0.68 % | | (1) Core return on average total assets | | 0.79 % | | 0.83 % | | 0.74 % | | 0.87 % | | 0.68 % | | Return on average shareholders' equity | | 9.19 % | | 7.48 % | | 7.47 % | | 6.26 % | | 6.97 % | | Core return on average shareholders' equity | (1) | 7.48 % | | 8.05 % | | 7.29 % | | 8.70 % | | 6.96 % | | Return on average tangible shareholders' equity (1) | | | | | | | | | | | | | | 11.78 % | | 9.65 % | | 9.66 % | | 8.15 % | | 9.19 % | | Core return on average tangible shareholders' | | | | | | | | | | | | (1) equity | | 9.59 % | | 10.40 % | | 9.43 % | | 11.32 % | | 9.17 % | | Net interest margin yield (fully taxable | | | | | | | | | | | | (1) equivalent) | | 3.14 % | | 3.06 % | | 2.98 % | | 2.96 % | | 2.82 % | | (1) Efficiency ratio | | 70.53 % | | 71.73 % | | 71.08 % | | 72.30 % | | 73.93 % | | (2) Gross loan to deposit ratio | | 75.57 % | | 76.07 % | | 81.48 % | | 79.93 % | | 80.22 % | | (2) Shareholders' equity to total assets | | 10.23 % | | 10.25 % | | 10.08 % | | 10.11 % | | 9.82 % | | Tangible shareholders' equity to tangible assets | | | | | | | | | | | | (1) (2) | | 8.17 % | | 8.14 % | | 7.95 % | | 8.00 % | | 7.65 % | | ASSETS UNDER MANAGEMENT | | | | | | | | | | | | (2) Wealth assets under management (thousands) | | 678,959 | | 656,617 | | 658,042 | | 679,858 | | 647,850 | | ASSET QUALITY | | | | | | | | | | | | (2) Nonaccrual loans (thousands) | | 1,164 | | 173 | | 282 | | 547 | | 994 | | (2) Foreclosed assets (thousands) | | 667 | | 649 | | 544 | | 546 | | 629 | | Net loan charge-offs (recoveries) (thousands) | | (1,432) | | (52) | | 102 | | 1,359 | | 393 | | Net loan charge-offs (recoveries) to average | | | | | | | | | | | | loans outstanding | | (0.10)% | | 0.00 % | | 0.01 % | | 0.10 % | | 0.03 % | | (2) Nonperforming loans to gross loans | | 0.09 % | | 0.01 % | | 0.02 % | | 0.04 % | | 0.07 % | | (2) Nonperforming assets to total assets | | 0.09 % | | 0.04 % | | 0.04 % | | 0.06 % | | 0.08 % | | (2) Allowance for credit losses to gross loans | | 0.93 % | | 0.93 % | | 0.91 % | | 0.89 % | | 0.95 % | | (2) CAPITAL RATIOS | | | | | | | | | | | | Tier 1 leverage | | 9.04 % | | 8.96 % | | 8.86 % | | 8.77 % | | 8.83 % | | Common equity tier 1 capital | | 12.46 % | | 12.58 % | | 12.21 % | | 12.08 % | | 12.37 % | | Tier 1 risk-based capital | | 12.46 % | | 12.58 % | | 12.21 % | | 12.08 % | | 12.37 % | | Total risk-based capital | | 15.34 % | | 15.50 % | | 15.06 % | | 14.90 % | | 15.29 % | [Consolidated Balance Sheets - Quarterly Trend](index=8&type=section&id=Consolidated%20Balance%20Sheets%20-%20Quarterly%20Trend) This table provides a quarterly trend of the Company's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity from June 30, 2025, back to June 30, 2024 | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | ASSETS (thousands) | | | | | | | | | | | | Cash and demand deposits due from banks | $ | 34,246 | $ | 28,786 | $ | 22,830 | $ | 27,019 | $ | 22,690 | | Fed Funds sold and interest bearing balances due | | | | | | | | | | | | from banks | | 74,308 | | 40,393 | | 1,712 | | 359 | | 869 | | Total cash and cash equivalents | | 108,554 | | 69,179 | | 24,542 | | 27,378 | | 23,559 | | Available-for-sale securities, at fair value | | 500,560 | | 513,040 | | 489,029 | | 506,806 | | 505,646 | | Federal Home Loan Bank stock | | 5,600 | | 5,600 | | 12,762 | | 12,762 | | 12,762 | | Mortgage loans held-for-sale | | 55 | | 127 | | 242 | | 504 | | 637 | | Loans | | 1,397,513 | | 1,367,724 | | 1,423,571 | | 1,424,283 | | 1,381,636 | | Less allowance for credit losses | | 12,977 | | 12,735 | | 12,895 | | 12,635 | | 13,095 | | Net loans | | 1,384,536 | | 1,354,989 | | 1,410,676 | | 1,411,648 | | 1,368,541 | | Premises and equipment | | 28,171 | | 28,108 | | 27,659 | | 27,674 | | 27,843 | | Cash surrender value of bank-owned life | | | | | | | | | | | | insurance policies | | 45,774 | | 45,833 | | 34,882 | | 34,625 | | 34,382 | | Goodwill and other intangible assets | | 48,282 | | 48,282 | | 48,283 | | 48,283 | | 48,283 | | Other assets | | 34,636 | | 37,429 | | 38,166 | | 37,221 | | 38,486 | | Total assets | $ | 2,156,168 | $ | 2,102,587 | $ | 2,086,241 | $ | 2,106,901 | $ | 2,060,139 | | LIABILITIES AND SHAREHOLDERS' EQUITY (thousands) | | | | | | | | | | | | Liabilities | | | | | | | | | | | | Demand deposits | $ | 493,477 | $ | 404,194 | $ | 416,373 | $ | 421,493 | $ | 412,193 | | Interest bearing demand deposits | | 223,376 | | 243,939 | | 237,548 | | 228,902 | | 232,660 | | Money market deposits | | 446,845 | | 473,138 | | 423,883 | | 471,745 | | 429,150 | | Savings | | 289,746 | | 286,399 | | 281,665 | | 276,095 | | 279,847 | | Certificates of deposit | | 395,932 | | 390,239 | | 387,591 | | 383,597 | | 368,449 | | Total deposits | | 1,849,376 | | 1,797,909 | | 1,747,060 | | 1,781,832 | | 1,722,299 | | Short-term borrowings | | 43,208 | | 47,310 | | 53,567 | | 52,434 | | 44,194 | | Federal Home Loan Bank advances | | — | | — | | 30,000 | | 15,000 | | 45,000 | | Subordinated debt, net of unamortized issuance | | | | | | | | | | | | costs | | 29,469 | | 29,447 | | 29,424 | | 29,402 | | 29,380 | | Total borrowed funds | | 72,677 | | 76,757 | | 112,991 | | 96,836 | | 118,574 | | Other liabilities | | 13,615 | | 12,365 | | 15,914 | | 15,248 | | 17,017 | | Total liabilities | | 1,935,668 | | 1,887,031 | | 1,875,965 | | 1,893,916 | | 1,857,890 | | Shareholders' equity | | | | | | | | | | | | Common stock | | 124,607 | | 125,547 | | 126,224 | | 125,218 | | 126,126 | | Shares to be issued for deferred compensation | | | | | | | | | | | | obligations | | 2,331 | | 2,508 | | 2,383 | | 3,981 | | 3,951 | | Retained earnings | | 107,949 | | 104,940 | | 103,024 | | 101,065 | | 99,808 | | Accumulated other comprehensive income (loss) | | (14,387) | | (17,439) | | (21,355) | | (17,279) | | (27,636) | | Total shareholders' equity | | 220,500 | | 215,556 | | 210,276 | | 212,985 | | 202,249 | | Total liabilities and shareholders' equity | $ | 2,156,168 | $ | 2,102,587 | $ | 2,086,241 | $ | 2,106,901 | $ | 2,060,139 | [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) This table presents the consolidated statements of income for the six months ended June 30, 2025, and June 30, 2024, showing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income | | | Six Months Ended June 30 | | | | --- | --- | --- | --- | --- | | | | 2025 | | 2024 | | Interest income (thousands) | | | | | | Loans | $ | 39,180 | $ | 36,920 | | Available-for-sale securities | | 5,675 | | 5,688 | | Federal Home Loan Bank stock | | 285 | | 304 | | Federal funds sold and other | | 735 | | 556 | | Total interest income | | 45,875 | | 43,468 | | Interest expense (thousands) | | | | | | Deposits | | 14,854 | | 14,476 | | Short-term borrowings | | 665 | | 642 | | Federal Home Loan Bank advances | | 170 | | 1,026 | | Subordinated debt | | 532 | | 532 | | Total interest expense | | 16,221 | | 16,676 | | Net interest income (thousands) | | 29,654 | | 26,792 | | (Reversal of) provision for credit losses (thousands) | | (1,206) | | 562 | | Net interest income after provision for credit losses (thousands) | | 30,860 | | 26,230 | | Noninterest income (thousands) | | | | | | Service charges and fees | | 4,045 | | 3,956 | | Wealth management fees | | 2,063 | | 1,987 | | Earnings on bank-owned life insurance policies | | 672 | | 496 | | Net gain on sale of mortgage loans | | 77 | | 101 | | Other | | 357 | | 536 | | Total noninterest income | | 7,214 | | 7,076 | | Noninterest expenses (thousands) | | | | | | Compensation and benefits | | 14,879 | | 13,985 | | Occupancy and equipment | | 5,250 | | 5,325 | | Other professional services | | 1,574 | | 1,040 | | ATM and debit card fees | | 1,041 | | 956 | | Marketing | | 928 | | 851 | | FDIC insurance premiums | | 570 | | 532 | | Other losses | | 454 | | 561 | | Other | | 2,348 | | 2,321 | | Total noninterest expenses | | 27,044 | | 25,571 | | Income before income tax expense (thousands) | | 11,030 | | 7,735 | | Income tax expense (thousands) | | 2,050 | | 1,123 | | Net income (thousands) | $ | 8,980 | $ | 6,612 | | Earnings per common share | | | | | | Basic | $ | 1.21 | $ | 0.88 | | Diluted | | 1.21 | | 0.88 | | Cash dividends per common share | | 0.56 | | 0.56 | [Consolidated Statements of Income - Quarterly Trend](index=10&type=section&id=Consolidated%20Statements%20of%20Income%20-%20Quarterly%20Trend) This table provides a quarterly trend of the Company's consolidated statements of income, detailing interest income, interest expense, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | Interest income (thousands) | | | | | | | | | | | | Loans | $ | 19,832 | $ | 19,348 | $ | 20,145 | $ | 20,230 | | 18,863 | | Available-for-sale securities | | 3,032 | | 2,643 | | 2,656 | | 2,749 | | 2,804 | | Federal Home Loan Bank stock | | 125 | | 160 | | 168 | | 168 | | 158 | | Federal funds sold and other | | 253 | | 482 | | 200 | | 194 | | 263 | | Total interest income | | 23,242 | | 22,633 | | 23,169 | | 23,341 | | 22,088 | | Interest expense (thousands) | | | | | | | | | | | | Deposits | | 7,391 | | 7,463 | | 7,583 | | 7,631 | | 7,313 | | Short-term borrowings | | 324 | | 341 | | 413 | | 384 | | 321 | | Federal Home Loan Bank advances | | 132 | | 38 | | 352 | | 571 | | 638 | | Subordinated debt | | 266 | | 266 | | 266 | | 267 | | 266 | | Total interest expense | | 8,113 | | 8,108 | | 8,614 | | 8,853 | | 8,538 | | Net interest income (thousands) | | 15,129 | | 14,525 | | 14,555 | | 14,488 | | 13,550 | | (Reversal of) provision for credit losses (thousands) | | (1,099) | | (107) | | 376 | | 946 | | 170 | | Net interest income after provision for credit | | | | | | | | | | | | losses (thousands) | | 16,228 | | 14,632 | | 14,179 | | 13,542 | | 13,380 | | Noninterest income (thousands) | | | | | | | | | | | | Service charges and fees | | 2,071 | | 1,974 | | 2,186 | | 2,133 | | 2,023 | | Wealth management fees | | 1,084 | | 979 | | 1,051 | | 1,003 | | 1,048 | | Earnings on bank-owned life insurance policies | | 300 | | 372 | | 259 | | 252 | | 253 | | Net gain on sale of mortgage loans | | 47 | | 30 | | 75 | | 37 | | 67 | | Other | | 184 | | 173 | | 401 | | 103 | | 217 | | Total noninterest income | | 3,686 | | 3,528 | | 3,972 | | 3,528 | | 3,608 | | Noninterest expenses (thousands) | | | | | | | | | | | | Compensation and benefits | | 7,496 | | 7,383 | | 7,340 | | 7,251 | | 6,970 | | Occupancy and equipment | | 2,650 | | 2,600 | | 2,554 | | 2,645 | | 2,619 | | Other professional services | | 863 | | 711 | | 584 | | 588 | | 527 | | ATM and debit card fees | | 555 | | 486 | | 516 | | 503 | | 487 | | Marketing | | 469 | | 459 | | 458 | | 403 | | 425 | | FDIC insurance premiums | | 267 | | 303 | | 309 | | 291 | | 280 | | Other losses | | 339 | | 115 | | 209 | | 347 | | 416 | | Other | | 1,106 | | 1,242 | | 1,360 | | 1,200 | | 1,171 | | Total noninterest expenses | | 13,745 | | 13,299 | | 13,330 | | 13,228 | | 12,895 | | Income before income tax expense (thousands) | | 6,169 | | 4,861 | | 4,821 | | 3,842 | | 4,093 | | Income tax expense (thousands) | | 1,138 | | 912 | | 825 | | 561 | | 612 | | Net income (thousands) | $ | 5,031 | $ | 3,949 | $ | 3,996 | $ | 3,281 | $ | 3,481 | | Earnings per common share | | | | | | | | | | | | Basic | $ | 0.68 | $ | 0.53 | $ | 0.54 | $ | 0.44 | $ | 0.47 | | Diluted | | 0.68 | | 0.53 | | 0.54 | | 0.44 | | 0.46 | | Cash dividends per common share | | 0.28 | | 0.28 | | 0.28 | | 0.28 | | 0.28 | [Average Yields and Costs](index=11&type=section&id=Average%20Yields%20and%20Costs) This table presents the average yields on interest-earning assets and costs of interest-bearing liabilities, reported on a fully taxable equivalent (FTE) basis, for the three-month periods ended June 30, 2025, and prior quarters | | | | Three Months Ended | | | | --- | --- | --- | --- | --- | --- | | | June 30 | March 31 | December 31 | September 30 | June 30 | | | 2025 | 2025 | 2024 | 2024 | 2024 | | INTEREST EARNING ASSETS (%) | | | | | | | (1) Loans | 5.71 % | 5.71 % | 5.66 % | 5.72 % | 5.50 % | | Available-for-sale securities | 2.38 % | 2.20 % | 2.15 % | 2.17 % | 2.17 % | | Federal Home Loan Bank stock | 8.94 % | 5.82 % | 5.25 % | 5.26 % | 4.97 % | | Fed funds sold | 3.83 % | 4.32 % | 4.54 % | 5.36 % | 5.30 % | | Other | 4.92 % | 4.06 % | 4.94 % | 5.18 % | 7.38 % | | Total interest earning assets | 4.81 % | 4.75 % | 4.72 % | 4.75 % | 4.59 % | | INTEREST BEARING LIABILITIES (%) | | | | | | | Interest bearing demand deposits | 0.37 % | 0.41 % | 0.36 % | 0.28 % | 0.30 % | | Money market deposits | 2.55 % | 2.58 % | 2.71 % | 2.77 % | 2.85 % | | Savings | 0.76 % | 0.76 % | 0.64 % | 0.61 % | 0.56 % | | Certificates of deposit | 3.82 % | 3.93 % | 4.07 % | 4.13 % | 4.01 % | | Short-term borrowings | 3.11 % | 3.18 % | 3.22 % | 3.17 % | 3.18 % | | Federal Home Loan Bank advances | 4.53 % | 4.53 % | 4.88 % | 5.52 % | 5.55 % | | Subordinated debt, net of unamortized | | | | | | | issuance costs | 3.61 % | 3.62 % | 3.62 % | 3.62 % | 3.63 % | | Total interest bearing liabilities | 2.24 % | 2.26 % | 2.38 % | 2.42 % | 2.38 % | | Net yield on interest earning assets (FTE) (2) | 3.14 % | 3.06 % | 2.98 % | 2.96 % | 2.82 % | | Net interest spread | 2.57 % | 2.49 % | 2.34 % | 2.33 % | 2.21 % | [Average Balances](index=12&type=section&id=Average%20Balances) This table provides the average daily amounts outstanding for interest-earning assets, non-earning assets, interest-bearing liabilities, and noninterest-bearing liabilities for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | INTEREST EARNING ASSETS (thousands) | | | | | | | | | | | | (1) Loans | $ | 1,388,684 | $ | 1,370,765 | $ | 1,412,578 | $ | 1,403,810 | $ | 1,375,523 | | (2) Available-for-sale securities | | 534,352 | | 514,479 | | 522,733 | | 536,379 | | 545,827 | | Federal Home Loan Bank stock | | 5,600 | | 11,011 | | 12,762 | | 12,762 | | 12,762 | | Fed funds sold | | | 6 | 4 | | 8 | | 4 | | 7 | | (3) Other | | 20,487 | | 47,374 | | 15,905 | | 14,597 | | 14,054 | | Total interest earning assets | | 1,949,129 | | 1,943,633 | | 1,963,986 | | 1,967,552 | | 1,948,173 | | NONEARNING ASSETS (thousands) | | | | | | | | | | | | Allowance for credit losses | | (13,369) | | (12,884) | | (12,598) | | (13,125) | | (13,431) | | Cash and demand deposits due from banks | | 22,026 | | 23,899 | | 22,800 | | 25,903 | | 23,931 | | Premises and equipment | | 28,306 | | 27,962 | | 27,773 | | 27,868 | | 27,999 | | Other assets | | 106,595 | | 102,927 | | 92,608 | | 87,002 | | 80,539 | | Total assets | $ | 2,092,687 | $ | 2,085,537 | $ | 2,094,569 | $ | 2,095,200 | $ | 2,067,211 | | INTEREST BEARING LIABILITIES (thousands) | | | | | | | | | | | | Interest bearing demand deposits | $ | 236,076 | $ | 240,860 | $ | 232,271 | $ | 232,018 | $ | 238,866 | | Money market deposits | | 449,110 | | 460,663 | | 436,235 | | 451,216 | | 434,061 | | Savings | | 286,434 | | 286,364 | | 276,856 | | 274,828 | | 283,605 | | Certificates of deposit | | 395,450 | | 387,820 | | 386,871 | | 375,936 | | 366,440 | | Short-term borrowings | | 41,661 | | 43,563 | | 50,862 | | 48,304 | | 40,609 | | Federal Home Loan Bank advances | | 11,539 | | 3,333 | | 28,261 | | 40,435 | | 45,494 | | Subordinated debt, net of unamortized issuance | | | | | | | | | | | | costs | | 29,455 | | 29,433 | | 29,410 | | 29,388 | | 29,365 | | Total interest bearing liabilities | | 1,449,725 | | 1,452,036 | | 1,440,766 | | 1,452,125 | | 1,438,440 | | NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY (thousands) | | | | | | | | | | | | Demand deposits | | 409,262 | | 403,024 | | 425,116 | | 418,973 | | 411,282 | | Other liabilities | | 14,158 | | 16,265 | | 15,775 | | 15,658 | | 16,755 | | Shareholders' equity | | 219,542 | | 214,212 | | 212,912 | | 208,444 | | 200,734 | | Total liabilities and shareholders' equity | $ | 2,092,687 | $ | 2,085,537 | $ | 2,094,569 | $ | 2,095,200 | $ | 2,067,211 | [Asset Quality Analysis](index=13&type=section&id=Asset%20Quality%20Analysis) This table provides a detailed analysis of the Company's asset quality, including nonperforming assets, allowance for credit losses, and net loan charge-offs (recoveries) for the three-month periods ended June 30, 2025, and prior quarters | | | June 30 2025 | | March 31 2025 | | December 31 2024 | | September 30 2024 | | June 30 2024 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | NONPERFORMING ASSETS (thousands) | | | | | | | | | | | | Commercial and industrial | $ | 17 | $ | — | $ | — | $ | 120 | $ | 271 | | Commercial real estate | | 533 | | — | | — | | — | | — | | Agricultural | | — | | — | | — | | — | | 167 | | Residential real estate | | 614 | | 173 | | 282 | | 427 | | 556 | | Consumer | | — | | — | | — | | — | | — | | Total nonaccrual loans | | 1,164 | | 173 | | 282 | | 547 | | 994 | | Accruing loans past due 90 days or more | | 31 | | 26 | | 19 | | 64 | | 15 | | Total nonperforming loans | | 1,195 | | 199 | | 301 | | 611 | | 1,009 | | Foreclosed assets | | 667 | | 649 | | 544 | | 546 | | 629 | | Debt securities | | — | | — | | — | | 12 | | 12 | | Total nonperforming assets | $ | 1,862 | $ | 848 | $ | 845 | $ | 1,169 | $ | 1,650 | | Nonperforming loans to gross loans | | 0.09 % | | 0.01 % | | 0.02 % | | 0.04 % | | 0.07 % | | Nonperforming assets to total assets | | 0.09 % | | 0.04 % | | 0.04 % | | 0.06 % | | 0.08 % | | Allowance for credit losses as a % of nonaccrual | | | | | | | | | | | | (1) loans | | N/M | | N/M | | N/M | | N/M | | N/M | | ALLOWANCE FOR CREDIT LOSSES (thousands) | | | | | | | | | | | | Allowance at beginning of period | $ | 12,735 | $ | 12,895 | $ | 12,635 | $ | 13,095 | $ | 13,390 | | Charge-offs | | 390 | | 172 | | 299 | | 1,767 | | 527 | | Recoveries | | 1,822 | | 224 | | 197 | | 408 | | 134 | | Net loan charge-offs (recoveries) | | (1,432) | | (52) | | 102 | | 1,359 | | 393 | | (Reversal of) provision for credit losses - loans | | (1,190) | | (212) | | 362 | | 899 | | 98 | | Allowance at end of period | $ | 12,977 | $ | 12,735 | $ | 12,895 | $ | 12,635 | $ | 13,095 | | Allowance for credit losses to gross loans | | 0.93 % | | 0.93 % | | 0.91 % | | 0.89 % | | 0.95 % | | Reserve for unfunded commitments (thousands) | | 708 | | 617 | | 512 | | 498 | | 450 | | Provision for credit losses - unfunded | | | | | | | | | | | | commitments (thousands) | | 91 | | 105 | | 14 | | 47 | | 72 | | Reserve to unfunded commitments | | 0.16 % | | 0.14 % | | 0.15 % | | 0.15 % | | 0.14 % | | NET LOAN CHARGE-OFFS (RECOVERIES) (thousands) | | | | | | | | | | | | Commercial and industrial | $ | 68 | $ | (80) | $ | 13 | $ | (6) | $ | 334 | | Commercial real estate | | (50) | | (2) | | (2) | | (318) | | (29) | | Agricultural | | — | | — | | (4) | | — | | — | | Residential real estate | | (16) | | (13) | | (16) | | (20) | | (19) | | Consumer | | (1,434) | | 43 | | 111 | | 1,703 | | 107 | | Total | $ | (1,432) | $ | (52) | $ | 102 | $ | 1,359 | $ | 393 | | Net (recoveries) charge-offs (Quarter to Date | | | | | | | | | | | | annualized to average loans) | | (0.41)% | | (0.02)% | | 0.03 % | | 0.39 % | | 0.11 % | | Net (recoveries) charge-offs (Year to Date | | | | | | | | | | | | annualized to average loans) | | (0.22)% | | (0.02)% | | 0.14 % | | 0.17 % | | 0.06 % | | DELINQUENT AND NONACCRUAL LOANS (thousands) | | | | | | | | | | | | Accruing loans 30-89 days past due | $ | 1,076 | $ | 5,555 | $ | 5,682 | $ | 2,226 | $ | 1,484 | | Accruing loans past due 90 days or more | | 31 | | 26 | | 19 | | 64 | | 15 | | Total accruing past due loans | | 1,107 | | 5,581 | | 5,701 | | 2,290 | | 1,499 | | Nonaccrual loans | | 1,164 | | 173 | | 282 | | 547 | | 994 | | Total past due and nonaccrual loans | $ | 2,271 | $ | 5,754 | $ | 5,983 | $ | 2,837 | $ | 2,493 | [Consolidated Loan and Deposit Analysis](index=14&type=section&id=Consolidated%20Loan%20and%20Deposit%20Analysis) This table provides a detailed breakdown of the Company's loan and deposit portfolios, including annualized growth rates, for the three-month periods ended June 30, 2025, and prior quarters **Loan Analysis:** | | | | | | | | | | | | | Annualized Growth | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | % | | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | Quarter to Date | | Commercial and industrial (thousands) | (1) | $ | 207,719 | $ | 205,172 | $ | 200,623 | $ | 197,372 | $ | 198,769 | 4.97 % | | (1) Commercial real estate (thousands) | | | 614,383 | | 596,282 | | 591,718 | | 590,255 | | 586,481 | 12.14 % | | Advances to mortgage | | | | | | | | | | | | | | brokers (thousands) | | | 3,005 | | 3,015 | | 63,080 | | 76,187 | | 39,300 | (1.33)% | | Agricultural (thousands) | | | 96,842 | | 94,359 | | 99,694 | | 96,794 | | 94,996 | 10.53 % | | Total commercial loans (thousands) | | | 921,949 | | 898,828 | | 955,115 | | 960,608 | | 919,546 | 10.29 % | | Residential real estate (thousands) | | | 398,668 | | 387,348 | | 380,872 | | 369,846 | | 365,188 | 11.69 % | | Consumer (thousands) | | | 76,896 | | 81,548 | | 87,584 | | 93,829 | | 96,902 | (22.82)% | | Gross loans (thousands) | | $ | 1,397,513 | $ | 1,367,724 | $ | 1,423,571 | $ | 1,424,283 | $ | 1,381,636 | 8.71 % | **Deposit Analysis:** | | | | | | | | | | | | Annualized Growth | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | June 30 | | March 31 | December 31 | | | September 30 | | June 30 | % | | | | 2025 | | 2025 | 2024 | | | 2024 | | 2024 | Quarter to Date | | Noninterest bearing demand | | | | | | | | | | | | | deposits (thousands) | $ | 493,477 | $ | 404,194 | $ | 416,373 | $ | 421,493 | $ | 412,193 | 88.36 % | | Interest bearing demand | | | | | | | | | | | | | deposits (thousands) | | 223,376 | | 243,939 | | 237,548 | | 228,902 | | 232,660 | (33.72)% | | Money market deposits (thousands) | | 446,845 | | 473,138 | | 423,883 | | 471,745 | | 429,150 | (22.23)% | | Savings (thousands) | | 289,746 | | 286,399 | | 281,665 | | 276,095 | | 279,847 | 4.67 % | | Certificates of deposit (thousands) | | 395,932 | | 390,239 | | 387,591 | | 383,597 | | 368,449 | 5.84 % | | Total deposits (thousands) | $ | 1,849,376 | $ | 1,797,909 | $ | 1,747,060 | $ | 1,781,832 | $ | 1,722,299 | 11.45 % | [Reconciliation of Non-GAAP Financial Measures](index=15&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This table provides a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures, including core net income, core noninterest expense, net interest income (FTE), and various core performance ratios, for the three-month periods ended June 30, 2025, and prior quarters | | | | | | | | Three Months Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | June 30 | | March 31 | | December 31 | | September 30 | | June 30 | | | | | 2025 | | 2025 | | 2024 | | 2024 | | 2024 | | Net income (thousands) | | $ | 5,031 | $ | 3,949 | $ | 3,996 | $ | 3,281 | $ | 3,481 | | Net gains (losses) on foreclosed assets (thousands) | | | — | | (55) | | 74 | | 4 | | 6 | | (1) Overdraft (charge-off) recoveries (thousands) | | | 1,556 | | — | | 66 | | (1,622) | | — | | (2) Profitability initiative cost (thousands) | | | (173) | | — | | (23) | | — | | — | | (2) Legal fees related to Nasdaq (thousands) | | | (47) | | (121) | | — | | — | | — | | Income tax impact on items above (thousands) | | | (281) | | 37 | | (25) | | 340 | | (1) | | Exchange fees on bank-owned life | | | | | | | | | | | | | (3) insurance transfers (thousands) | | | (120) | | — | | — | | — | | — | | Income tax expense on bank-owned | | | | | | | | | | | | | (4) life insurance surrender (thousands) | | | — | | (166) | | — | | — | | — | | Core net income (thousands) | (A) | $ | 4,096 | $ | 4,254 | $ | 3,904 | $ | 4,559 | $ | 3,476 | | Noninterest expenses (thousands) | | $ | 13,745 | $ | 13,299 | $ | 13,330 | $ | 13,228 | $ | 12,895 | | Amortization of acquisition | | | | | | | | | | | | | intangibles (thousands) | | | — | | 1 | | 1 | | — | | 1 | | Non-core expenses (thousands) | | | 220 | | 121 | | 23 | | — | | — | | Core noninterest expense (thousands) | (B) | $ | 13,525 | $ | 13,177 | $ | 13,306 | $ | 13,228 | $ | 12,894 | | Net interest income (thousands) | | $ | 15,129 | $ | 14,525 | $ | 14,555 | $ | 14,488 | $ | 13,550 | | Tax equivalent adjustment for net | | | | | | | | | | | | | interest margin (thousands) | | | 178 | | 184 | | 213 | | 232 | | 237 | | Net interest income (FTE) (thousands) | (C) | | 15,307 | | 14,709 | | 14,768 | | 14,720 | | 13,787 | | Noninterest income (thousands) | | | 3,686 | | 3,528 | | 3,972 | | 3,528 | | 3,608 | | Tax equivalent adjustment for | | | | | | | | | | | | | efficiency ratio (thousands) | | | 63 | | 78 | | 54 | | 53 | | 53 | | Core revenue (FTE) (thousands) | | | 19,056 | | 18,315 | | 18,794 | | 18,301 | | 17,448 | | Non-core revenue (loss) (thousands) | | | (120) | | (55) | | 74 | | 4 | | 6 | | Core revenue (thousands) | (D) | $ | 19,176 | $ | 18,370 | $ | 18,720 | $ | 18,297 | $ | 17,442 | | Efficiency ratio | (B/D) | | 70.53 % | | 71.73 % | | 71.08 % | | 72.30 % | | 73.93 % | | Average earning assets (thousands) | (E) | | 1,949,129 | | 1,943,633 | | 1,963,986 | | 1,967,552 | | 1,948,173 | | Net yield on interest earning assets | | | | | | | | | | | | | (FTE) | (C/E) | | 3.14 % | | 3.06 % | | 2.98 % | | 2.96 % | | 2.82 % | | Average assets (thousands) | (F) | | 2,092,687 | | 2,085,537 | | 2,094,569 | | 2,095,200 | | 2,067,211 | | Average shareholders' equity (thousands) | (G) | | 219,542 | | 214,212 | | 212,912 | | 208,444 | | 200,734 | | Average tangible shareholders' | | | | | | | | | | | | | equity (thousands) | (H) | | 171,260 | | 165,929 | | 164,629 | | 160,161 | | 152.451 | | Average diluted shares outstanding (5) | (I) | | 7,398,109 | | 7,432,162 | | 7,451,718 | | 7,473,184 | | 7,494,828 | | Core diluted earnings per share | (A/I) $ | | 0.55 | $ | 0.57 | $ | 0.52 | $ | 0.61 | $ | 0.46 | | Core return on average assets | (A/F) | | 0.79 % | | 0.83 % | | 0.74 % | | 0.87 % | | 0.68 % | | Core return on average | | | | | | | | | | | | | shareholders' equity | (A/G) | | 7.48 % | | 8.05 % | | 7.29 % | | 8.70 % | | 6.96 % | | Core return on average tangible | | | | | | | | | | | | | shareholders' equity | (A/H) | | 9.59 % | | 10.40 % | | 9.43 % | | 11.32 % | | 9.17 % |

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 March 31, 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) (State or other jurisdiction of incorporation or orga ...

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [First Quarter 2025 Performance Overview](index=1&type=section&id=First%20Quarter%202025%20Performance%20Overview) Isabella Bank Corporation achieved strong performance in Q1 2025, with significant year-over-year increases in net income and core earnings | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :---------- | :---------- | :----------- | | Net Income | $3.9 million | $3.1 million | +$0.8 million | | Diluted EPS | $0.53 | $0.42 | +$0.11 | | Core Earnings (non-GAAP) | $4.3 million | $3.1 million | +$1.2 million | | Core Diluted EPS (non-GAAP) | $0.57 | $0.41 | +$0.16 | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Jerome Schwind highlighted strong Q1 2025 performance driven by expanded Net Interest Margin (NIM), increased fee income, and improved credit quality - Net Interest Margin (NIM) has consistently risen since Q1 2024, attributed to the repricing of interest-earning assets and reduced funding costs[2](index=2&type=chunk) - Credit quality remains strong, with the recovery of contractual interest on nonaccrual loans contributing four basis points to the net interest margin[3](index=3&type=chunk) - The company executed a strategy to restructure a majority of Bank-Owned Life Insurance (BOLI) policies into higher-yielding separate accounts, with full impact expected by Q3 2025[3](index=3&type=chunk) - Research on all other fee income components is complete, with revenue enhancement initiatives anticipated to launch by the end of Q3 2025[3](index=3&type=chunk) [Financial Condition](index=1&type=section&id=Financial%20Condition) [Balance Sheet Overview](index=1&type=section&id=Balance%20Sheet%20Overview) Total assets increased by $16.3 million to $2.1 billion as of March 31, 2025, driven by higher interest-bearing cash, securities, and BOLI assets, partially offset by a reduction in mortgage broker advances | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Total Assets | $2.1 billion | $2.086 billion | +$16.3 million | | Interest Bearing Cash | N/A | N/A | +$38.7 million | | Gross Securities | N/A | N/A | +$19.0 million | | BOLI Assets | N/A | N/A | +$11.0 million | | Advances to Mortgage Brokers | N/A | N/A | -$60.1 million | [Securities Portfolio](index=1&type=section&id=Securities%20Portfolio) Available-for-sale (AFS) securities grew by $24 million to $513 million by the end of Q1 2025, primarily due to mortgage-backed securities purchases, while net unrealized losses decreased from 5% to 4% of total AFS securities | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | AFS Securities (fair value) | $513.0 million | $489.0 million | +$24.0 million | | CMO Purchases | N/A | N/A | +$40.4 million | | Net Unrealized Losses | $21.5 million | $26.5 million | -$5.0 million | | Unrealized Losses % of AFS | 4% | 5% | -1 percentage point | - The reduction in net unrealized losses is attributed to the treasury portfolio rapidly approaching maturity and declining market yields[7](index=7&type=chunk) [Loan Portfolio](index=3&type=section&id=Loan%20Portfolio) Total loans decreased by $55.8 million to $1.4 billion by the end of Q1, primarily due to a $60.1 million reduction in mortgage broker advances, though core loans (excluding mortgage broker advances) grew by $4.2 million | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Total Loans | $1.4 billion | $1.423 billion | -$55.8 million | | Advances to Mortgage Brokers | $3.015 million | $63.080 million | -$60.065 million | | Core Loans Growth | N/A | N/A | +$4.2 million | | CRE Loan Growth | N/A | N/A | +$4.8 million | | C&I Loan Growth | N/A | N/A | +$4.3 million | | Residential Mortgages | N/A | N/A | +$6.5 million | | Agricultural Loans | $94.359 million | $99.694 million | -$5.335 million | | Consumer Loans | $81.548 million | $87.584 million | -$6.036 million | - Loan growth in the first quarter was concentrated in construction, real estate, and hospitality sectors[9](index=9&type=chunk) - Customers are increasingly favoring adjustable-rate loans, which are retained on the balance sheet rather than sold in the secondary market[9](index=9&type=chunk) [Allowance for Credit Losses](index=3&type=section&id=Allowance%20for%20Credit%20Losses) The allowance for credit losses decreased by $160 thousand to $12.7 million by the end of Q1 2025, reflecting improved historical loss experience and $136 thousand in recoveries from three previously charged-off loans | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Allowance for Credit Losses | $12.7 million | $12.895 million | -$160 thousand | | Nonaccrual Loan Balances | $173 thousand | $282 thousand | -$109 thousand | | Past Due & Accruing (30-89 days) % of Total Loans | 0.41% | 0.40% | +0.01 percentage point | - Recoveries of $136 thousand from three previously charged-off loans contributed to an $88 thousand reduction in the allowance[10](index=10&type=chunk) [Bank-Owned Life Insurance (BOLI)](index=3&type=section&id=Bank-Owned%20Life%20Insurance%20%28BOLI%29) Bank-Owned Life Insurance (BOLI) assets increased by $11 million from December, primarily due to a $10.6 million investment in new separate account policies in early January, including a $5.4 million redemption and redeployment from existing general account policies | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | BOLI Assets | $45.833 million | $34.882 million | +$10.951 million | | New Separate Account Investment | N/A | N/A | +$10.6 million | | Separate Account BOLI Yield | 5.4% | N/A | N/A | | General Account BOLI Yield | 2.9% | N/A | N/A | - An additional $9 million of general account policies are slated for conversion to separate account BOLI, expected to be completed by the end of Q3[11](index=11&type=chunk) [Deposits](index=3&type=section&id=Deposits) Total deposits increased by $50.8 million to $1.8 billion by the end of Q1, driven by growth in interest-bearing demand, money market, and savings deposits | Deposit Category | March 31, 2025 | December 31, 2024 | Change | Annualized Growth (QoQ) | | :--------------------- | :------------- | :---------------- | :------- | :---------------------- | | Total Deposits | $1.798 billion | $1.747 billion | +$50.8 million | 11.64% | | Interest Bearing Demand | $243.939 million | $237.548 million | +$6.391 million | 10.76% | | Money Market Deposits | $473.138 million | $423.883 million | +$49.255 million | 46.48% | | Savings | $286.399 million | $281.665 million | +$4.734 million | 6.72% | | Certificates of Deposit | $390.239 million | $387.591 million | +$2.648 million | 2.73% | | Noninterest Bearing Demand | $404.194 million | $416.373 million | -$12.179 million | (11.70)% | [Shareholders' Equity & Capital Ratios](index=3&type=section&id=Shareholders%27%20Equity%20%26%20Capital%20Ratios) Tangible book value per share increased to $22.58 as of March 31, 2025, despite a $2.30 negative impact from unrealized losses on available-for-sale securities, with capital ratios remaining strong and slightly improved | Metric | March 31, 2025 | December 31, 2024 | Change | | :--------------------- | :------------- | :---------------- | :------- | | Tangible Book Value per Share | $22.58 | $21.82 | +$0.76 | | AFS Unrealized Losses Impact on TBV per Share | -$2.30 | -$2.82 | +$0.52 | | Share Repurchases (Q1 2025) | 45,582 shares | N/A | N/A | | Value of Repurchases | $1.1 million | N/A | N/A | | Tier 1 Leverage Ratio | 8.96% | 8.86% | +0.10 percentage point | | Common Equity Tier 1 Capital | 12.48% | 12.21% | +0.27 percentage point | | Total Risk-Based Capital | 15.37% | 15.06% | +0.31 percentage point | [Results of Operations](index=3&type=section&id=Results%20of%20Operations) [Net Interest Income & Margin](index=3&type=section&id=Net%20Interest%20Income%20%26%20Margin) Net Interest Margin (NIM) expanded to 3.06% in Q1 2025, up from 2.79% in Q1 2024 and 2.98% in Q4 2024, driven by rising loan yields to 5.71% and a decrease in the cost of interest-bearing liabilities to 2.26% | Metric | Q1 2025 | Q4 2024 | Q1 2024 | Change (QoQ) | Change (YoY) | | :--------------------- | :------ | :------ | :------ | :----------- | :----------- | | Net Interest Margin (NIM) | 3.06% | 2.98% | 2.79% | +0.08 pp | +0.27 pp | | Yield on Loans | 5.71% | 5.66% | 5.38% | +0.05 pp | +0.33 pp | | Cost of Interest-Bearing Liabilities | 2.26% | 2.38% | 2.28% | -0.12 pp | -0.02 pp | - The expansion in loan yields is due to higher rates on new loans and the repricing of variable-rate commercial loans[14](index=14&type=chunk) - Approximately 39% of commercial loans are fixed-rate below current market rates but are contractually set to reprice to variable rates over the next four years[14](index=14&type=chunk) [Provision for Credit Losses](index=5&type=section&id=Provision%20for%20Credit%20Losses) In Q1 2025, the company recorded a $107 thousand credit for provision for credit losses, a significant improvement compared to the $392 thousand expense in Q1 2024, reflecting a $160 thousand reduction in the allowance for loan credit losses and $52 thousand in net recoveries | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Provision for Credit Losses | -$107 thousand | $392 thousand | -$499 thousand | | Change in Allowance for Credit Losses on Loans | -$160 thousand | N/A | N/A | | Net Recoveries | $52 thousand | N/A | N/A | [Noninterest Income](index=5&type=section&id=Noninterest%20Income) Total noninterest income in Q1 2025 was $3.5 million, consistent with Q1 2024, with increases in wealth management income and BOLI earnings offset by a $55 thousand loss on foreclosed assets | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Total Noninterest Income | $3.5 million | $3.5 million | $0 | | Wealth Management Income | $979 thousand | $939 thousand | +$40 thousand | | Earnings on BOLI Policies | $372 thousand | $243 thousand | +$129 thousand | | Net Gain (Loss) on Foreclosed Assets | -$55 thousand | $69 thousand | -$124 thousand | [Noninterest Expenses](index=5&type=section&id=Noninterest%20Expenses) Noninterest expenses increased to $13.3 million in Q1 2025 from $12.7 million in Q1 2024, primarily due to a $368 thousand rise in compensation and benefits and $121 thousand in legal fees related to a Nasdaq listing application | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Total Noninterest Expenses | $13.3 million | $12.7 million | +$0.6 million | | Compensation and Benefits | $7.383 million | $7.015 million | +$368 thousand | | Other Professional Services | $711 thousand | $513 thousand | +$198 thousand | - Professional services expenses include $121 thousand in legal fees associated with the Nasdaq listing application[17](index=17&type=chunk) [Income Tax Expense](index=5&type=section&id=Income%20Tax%20Expense) Income tax expense increased to $912 thousand in Q1 2025 from $511 thousand in Q1 2024, with the effective tax rate (ETR) rising from 14% to 19%, including a one-time $166 thousand tax expense from BOLI policy redemptions | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--------------------- | :------ | :------ | :----------- | | Income Tax Expense | $912 thousand | $511 thousand | +$401 thousand | | Effective Tax Rate (ETR) | 19% | 14% | +5 percentage points | | One-time BOLI Tax Expense | $166 thousand | N/A | N/A | | ETR (excluding one-time charge) | 15% | N/A | N/A | [Company Information](index=6&type=section&id=Company%20Information) [About Isabella Bank Corporation](index=6&type=section&id=About%20Isabella%20Bank%20Corporation) Isabella Bank Corporation (OTCQX: ISBA) is the parent company of Isabella Bank, a state-chartered community bank established in 1903 and headquartered in Mount Pleasant, Michigan - Isabella Bank Corporation (OTCQX: ISBA) is the parent company of Isabella Bank, a state-chartered community bank headquartered in Mount Pleasant, Michigan[19](index=19&type=chunk) - Founded in 1903, the bank offers personal and commercial loans, deposit products, and investment, trust, and estate planning services across eight counties in central Michigan[19](index=19&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from projections, and investors are cautioned not to place undue reliance on these statements - Forward-looking statements typically involve losses, event impacts, financial condition, plans, objectives, earnings prospects, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters related to the company's future business and operations[21](index=21&type=chunk) - These forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results and trends to differ materially from those made, projected, or implied in the statements[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) This document includes non-GAAP financial measures to provide readers with additional supplementary perspectives on operating results, performance trends, and financial condition - Non-GAAP metrics are intended to provide readers with additional supplementary perspectives on operating results, performance trends, and financial condition[22](index=22&type=chunk) - Non-GAAP financial measures are not a substitute for GAAP measures and should be read and used in conjunction with the company's GAAP financial information[22](index=22&type=chunk) - Reconciliations of non-GAAP financial measures to GAAP measures are provided in this press release[22](index=22&type=chunk) [Financial Statements & Supplementary Data](index=6&type=section&id=Financial%20Statements%20%26%20Supplementary%20Data) [Selected Financial Data](index=7&type=section&id=Selected%20Financial%20Data) This table provides a comprehensive overview of key financial metrics, including per-share data, performance ratios, assets under management, asset quality indicators, and capital ratios, presented quarterly for the past five quarters | Metric | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------- | :------------ | :--------------- | :---------------- | :----------- | :------------ | | **PER SHARE** | | | | | | | Basic earnings | $0.53 | $0.54 | $0.44 | $0.47 | $0.42 | | Diluted earnings | 0.53 | 0.54 | 0.44 | 0.46 | 0.42 | | (1) Core diluted earnings | 0.57 | 0.52 | 0.61 | 0.46 | 0.41 | | Dividends | 0.28 | 0.28 | 0.28 | 0.28 | 0.28 | | (2) Book value | 29.10 | 28.32 | 28.63 | 27.06 | 26.80 | | (2) Tangible book value | 22.58 | 21.82 | 22.14 | 20.60 | 20.35 | | (2) Market price | 23.59 | 25.99 | 21.21 | 18.20 | 19.40 | | (2) (3) Common shares outstanding | 7,408,010 | 7,424,893 | 7,438,720 | 7,474,016 | 7,488,101 | | Average number of diluted common shares (3) outstanding | 7,432,162 | 7,451,718 | 7,473,184 | 7,494,828 | 7,507,739 | | **PERFORMANCE RATIOS** | | | | | | | Return on average total assets | 0.77 % | 0.76 % | 0.62 % | 0.68 % | 0.61 % | | (1) Core return on average total assets | 0.83 % | 0.74 % | 0.87 % | 0.68 % | 0.60 % | | Return on average shareholders' equity | 7.48 % | 7.47 % | 6.26 % | 6.97 % | 6.19 % | | (1) Core return on average shareholders' equity | 8.05 % | 7.29 % | 8.70 % | 6.96 % | 6.08 % | | Return on average tangible shareholders' equity | 9.65 % | 9.66 % | 8.15 % | 9.19 % | 8.12 % | | Core return on average tangible shareholders' (1) equity | 10.40 % | 9.43 % | 11.32 % | 9.17 % | 7.97 % | | Net interest margin yield (fully taxable (1) equivalent) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | (1) Efficiency ratio | 72.39 % | 71.20 % | 72.30 % | 73.93 % | 74.84 % | | (2) Gross loan to deposit ratio | 76.07 % | 81.48 % | 79.93 % | 80.22 % | 77.22 % | | (2) Shareholders' equity to total assets | 10.25 % | 10.08 % | 10.11 % | 9.82 % | 9.75 % | | Tangible shareholders' equity to tangible assets (2) | 8.14 % | 7.95 % | 8.00 % | 7.65 % | 7.58 % | | **ASSETS UNDER MANAGEMENT** | | | | | | | (2) Wealth assets under management | 656,617 | 658,042 | 679,858 | 647,850 | 660,645 | | **ASSET QUALITY** | | | | | | | (2) Nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | (2) Foreclosed assets | 649 | 544 | 546 | 629 | 579 | | Net loan charge-offs (recoveries) | (52) | 102 | 1,359 | 393 | 46 | | Net loan charge-offs (recoveries) to average loans outstanding | 0.00 % | 0.01 % | 0.10 % | 0.03 % | 0.00 % | | (2) Nonperforming loans to gross loans | 0.01 % | 0.02 % | 0.04 % | 0.07 % | 0.09 % | | (2) Nonperforming assets to total assets | 0.04 % | 0.04 % | 0.06 % | 0.08 % | 0.09 % | | (2) Allowance for credit losses to gross loans | 0.93 % | 0.91 % | 0.89 % | 0.95 % | 0.98 % | | **CAPITAL RATIOS** | | | | | | | (2) Tier 1 leverage | 8.96 % | 8.86 % | 8.77 % | 8.83 % | 8.80 % | | Common equity tier 1 capital | 12.48 % | 12.21 % | 12.08 % | 12.37 % | 12.36 % | | Tier 1 risk-based capital | 12.48 % | 12.21 % | 12.08 % | 12.37 % | 12.36 % | | Total risk-based capital | 15.37 % | 15.06 % | 14.90 % | 15.29 % | 15.31 % | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) This table presents the consolidated balance sheets for Isabella Bank Corporation over the past five quarters, detailing the composition of assets (cash, securities, loans, BOLI), liabilities (deposits, borrowings), and shareholders' equity | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | **ASSETS (in thousands)** | | | | | | | Cash and demand deposits due from banks | $28,786 | $22,830 | $27,019 | $22,690 | $22,987 | | Fed Funds sold and interest bearing balances due from banks | 40,393 | 1,712 | 359 | 869 | 2,231 | | Total cash and cash equivalents | 69,179 | 24,542 | 27,378 | 23,559 | 25,218 | | Available-for-sale securities, at fair value | 513,040 | 489,029 | 506,806 | 505,646 | 517,585 | | Federal Home Loan Bank stock | 5,600 | 12,762 | 12,762 | 12,762 | 12,762 | | Mortgage loans held-for-sale | 127 | 242 | 504 | 637 | 366 | | Loans | 1,367,724 | 1,423,571 | 1,424,283 | 1,381,636 | 1,365,508 | | Less allowance for credit losses | 12,735 | 12,895 | 12,635 | 13,095 | 13,390 | | Net loans | 1,354,989 | 1,410,676 | 1,411,648 | 1,368,541 | 1,352,118 | | Premises and equipment | 28,108 | 27,659 | 27,674 | 27,843 | 27,951 | | Cash surrender value of bank-owned life insurance policies | 45,833 | 34,882 | 34,625 | 34,382 | 34,131 | | Goodwill and other intangible assets | 48,282 | 48,283 | 48,283 | 48,283 | 48,284 | | Other assets | 37,429 | 38,166 | 37,221 | 38,486 | 39,161 | | Total assets | $2,102,587 | $2,086,241 | $2,106,901 | $2,060,139 | $2,057,576 | | **LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands)** | | | | | | | **Liabilities** | | | | | | | Demand deposits | $404,194 | $416,373 | $421,493 | $412,193 | $413,272 | | Interest bearing demand deposits | 243,939 | 237,548 | 228,902 | 232,660 | 250,314 | | Money market deposits | 473,138 | 423,883 | 471,745 | 429,150 | 453,014 | | Savings | 286,399 | 281,665 | 276,095 | 279,847 | 285,564 | | Certificates of deposit | 390,239 | 387,591 | 383,597 | 368,449 | 366,143 | | Total deposits | 1,797,909 | 1,747,060 | 1,781,832 | 1,722,299 | 1,768,307 | | Short-term borrowings | 47,310 | 53,567 | 52,434 | 44,194 | 42,998 | | Federal Home Loan Bank advances | — | 30,000 | 15,000 | 45,000 | — | | Subordinated debt, net of unamortized issuance costs | 29,447 | 29,424 | 29,402 | 29,380 | 29,357 | | Total borrowed funds | 76,757 | 112,991 | 96,836 | 118,574 | 72,355 | | Other liabilities | 12,365 | 15,914 | 15,248 | 17,017 | 16,240 | | Total liabilities | 1,887,031 | 1,875,965 | 1,893,916 | 1,857,890 | 1,856,902 | | **Shareholders' equity (in thousands)** | | | | | | | Common stock | 125,547 | 126,224 | 125,218 | 126,126 | 126,656 | | Shares to be issued for deferred compensation obligations | 2,508 | 2,383 | 3,981 | 3,951 | 3,890 | | Retained earnings | 104,940 | 103,024 | 101,065 | 99,808 | 98,318 | | Accumulated other comprehensive income (loss) | (17,439) | (21,355) | (17,279) | (27,636) | (28,190) | | Total shareholders' equity | 215,556 | 210,276 | 212,985 | 202,249 | 200,674 | | Total liabilities and shareholders' equity | $2,102,587 | $2,086,241 | $2,106,901 | $2,060,139 | $2,057,576 | [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) This section provides consolidated statements of income, including quarterly comparisons and trends over five quarters, detailing interest income and expenses, net interest income, provision for credit losses, noninterest income, noninterest expenses, and net income | | Three Months Ended | | | :------------------------------------------ | :---------------- | :---------------- | | | March 31 2025 | 2024 | | **Interest income (in thousands)** | | | | Loans | $19,348 | $18,057 | | Available-for-sale securities | 2,643 | 2,884 | | Federal Home Loan Bank stock | 160 | 146 | | Federal funds sold and other | 482 | 293 | | Total interest income | 22,633 | 21,380 | | **Interest expense (in thousands)** | | | | Deposits | 7,463 | 7,163 | | Short-term borrowings | 341 | 321 | | Federal Home Loan Bank advances | 38 | 388 | | Subordinated debt | 266 | 266 | | Total interest expense | 8,108 | 8,138 | | Net interest income | 14,525 | 13,242 | | Provision for credit losses | (107) | 392 | | Net interest income after provision for credit losses | 14,632 | 12,850 | | **Noninterest income (in thousands)** | | | | Service charges and fees | 1,974 | 1,933 | | Wealth management fees | 979 | 939 | | Earnings on bank-owned life insurance policies | 372 | 243 | | Net gain on sale of mortgage loans | 30 | 34 | | Other | 173 | 319 | | Total noninterest income | 3,528 | 3,468 | | **Noninterest expenses (in thousands)** | | | | Compensation and benefits | 7,383 | 7,015 | | Occupancy and equipment | 2,600 | 2,706 | | Other professional services | 711 | 513 | | ATM and debit card fees | 486 | 469 | | Marketing | 459 | 426 | | FDIC insurance premiums | 303 | 252 | | Other | 1,357 | 1,295 | | Total noninterest expenses | 13,299 | 12,676 | | Income before income tax expense | 4,861 | 3,642 | | Income tax expense | 912 | 511 | | Net income | $3,949 | $3,131 | | **Earnings per common share** | | | | Basic | $0.53 | $0.42 | | Diluted | 0.53 | 0.42 | | Cash dividends per common share | 0.28 | 0.28 | | | Three Months Ended | | | | | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | **Interest income (in thousands)** | | | | | | | Loans | $19,348 | $20,145 | $20,230 | $18,863 | $18,057 | | Available-for-sale securities | 2,643 | 2,656 | 2,749 | 2,804 | 2,884 | | Federal Home Loan Bank stock | 160 | 168 | 168 | 158 | 146 | | Federal funds sold and other | 482 | 200 | 194 | 263 | 293 | | Total interest income | 22,633 | 23,169 | 23,341 | 22,088 | 21,380 | | **Interest expense (in thousands)** | | | | | | | Deposits | 7,463 | 7,583 | 7,631 | 7,313 | 7,163 | | Short-term borrowings | 341 | 413 | 384 | 321 | 321 | | Federal Home Loan Bank advances | 38 | 352 | 571 | 638 | 388 | | Subordinated debt | 266 | 266 | 267 | 266 | 266 | | Total interest expense | 8,108 | 8,614 | 8,853 | 8,538 | 8,138 | | Net interest income | 14,525 | 14,555 | 14,488 | 13,550 | 13,242 | | Provision for credit losses | (107) | 376 | 946 | 170 | 392 | | Net interest income after provision for credit losses | 14,632 | 14,179 | 13,542 | 13,380 | 12,850 | | **Noninterest income (in thousands)** | | | | | | | Service charges and fees | 1,974 | 2,186 | 2,133 | 2,023 | 1,933 | | Wealth management fees | 979 | 1,051 | 1,003 | 1,048 | 939 | | Earnings on bank-owned life insurance policies | 372 | 259 | 252 | 253 | 243 | | Net gain on sale of mortgage loans | 30 | 75 | 37 | 67 | 34 | | Other | 173 | 401 | 103 | 217 | 319 | | Total noninterest income | 3,528 | 3,972 | 3,528 | 3,608 | 3,468 | | **Noninterest expenses (in thousands)** | | | | | | | Compensation and benefits | 7,383 | 7,340 | 7,251 | 6,970 | 7,015 | | Occupancy and equipment | 2,600 | 2,554 | 2,645 | 2,619 | 2,706 | | Other professional services | 711 | 584 | 588 | 527 | 513 | | ATM and debit card fees | 486 | 516 | 503 | 487 | 469 | | Marketing | 459 | 458 | 403 | 425 | 426 | | FDIC insurance premiums | 303 | 309 | 291 | 280 | 252 | | Other | 1,357 | 1,569 | 1,547 | 1,587 | 1,295 | | Total noninterest expenses | 13,299 | 13,330 | 13,228 | 12,895 | 12,676 | | Income before income tax expense | 4,861 | 4,821 | 3,842 | 4,093 | 3,642 | | Income tax expense | 912 | 825 | 561 | 612 | 511 | | Net income | $3,949 | $3,996 | $3,281 | $3,481 | $3,131 | | **Earnings per common share** | | | | | | | Basic | $0.53 | $0.54 | $0.44 | $0.47 | $0.42 | | Diluted | 0.53 | 0.54 | 0.44 | 0.46 | 0.42 | | Cash dividends per common share | 0.28 | 0.28 | 0.28 | 0.28 | 0.28 | [Average Yields and Costs](index=11&type=section&id=Average%20Yields%20and%20Costs) This table presents the average yields on interest-earning assets and average costs of interest-bearing liabilities, calculated on a fully taxable equivalent (FTE) basis, along with the net yield on interest-earning assets (FTE) and net interest spread for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | **INTEREST EARNING ASSETS** | | | | | | | (1) Loans | 5.71 % | 5.66 % | 5.72 % | 5.50 % | 5.38 % | | Available-for-sale securities | 2.20 % | 2.15 % | 2.17 % | 2.17 % | 2.25 % | | Federal Home Loan Bank stock | 5.82 % | 5.25 % | 5.26 % | 4.97 % | 4.57 % | | Fed funds sold | 4.32 % | 4.54 % | 5.36 % | 5.30 % | 5.43 % | | Other | 4.06 % | 4.94 % | 5.18 % | 7.38 % | 4.66 % | | Total interest earning assets | 4.75 % | 4.72 % | 4.75 % | 4.59 % | 4.47 % | | **INTEREST BEARING LIABILITIES** | | | | | | | Interest bearing demand deposits | 0.41 % | 0.36 % | 0.28 % | 0.30 % | 0.33 % | | Money market deposits | 2.58 % | 2.71 % | 2.77 % | 2.85 % | 2.86 % | | Savings | 0.76 % | 0.64 % | 0.61 % | 0.56 % | 0.47 % | | Certificates of deposit | 3.93 % | 4.07 % | 4.13 % | 4.01 % | 3.84 % | | Short-term borrowings | 3.18 % | 3.22 % | 3.17 % | 3.18 % | 3.17 % | | Federal Home Loan Bank advances | 4.53 % | 4.88 % | 5.52 % | 5.55 % | 5.54 % | | Subordinated debt, net of unamortized issuance costs | 3.62 % | 3.62 % | 3.62 % | 3.63 % | 3.63 % | | Total interest bearing liabilities | 2.26 % | 2.38 % | 2.42 % | 2.38 % | 2.28 % | | Net yield on interest earning assets (FTE) (2) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | Net interest spread | 2.49 % | 2.34 % | 2.33 % | 2.21 % | 2.19 % | [Average Balances](index=13&type=section&id=Average%20Balances) This table provides the average daily balances for interest-earning assets, non-earning assets, interest-bearing liabilities, non-interest-bearing liabilities, and shareholders' equity over the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | **INTEREST EARNING ASSETS (in thousands)** | | | | | | | (1) Loans | $1,370,765 | $1,412,578 | $1,403,810 | $1,375,523 | $1,348,749 | | (2) Available-for-sale securities | 514,479 | 522,733 | 536,379 | 545,827 | 557,030 | | Federal Home Loan Bank stock | 11,011 | 12,762 | 12,762 | 12,762 | 12,762 | | Fed funds sold | 4 | 8 | 4 | 7 | 7 | | (3) Other | 47,374 | 15,905 | 14,597 | 14,054 | 25,210 | | Total interest earning assets | 1,943,633 | 1,963,986 | 1,967,552 | 1,948,173 | 1,943,758 | | **NONEARNING ASSETS (in thousands)** | | | | | | | Allowance for credit losses | (12,884) | (12,598) | (13,125) | (13,431) | (13,100) | | Cash and demand deposits due from banks | 23,899 | 22,800 | 25,903 | 23,931 | 24,018 | | Premises and equipment | 27,962 | 27,773 | 27,868 | 27,999 | 28,022 | | Other assets | 102,927 | 92,608 | 87,002 | 80,539 | 84,059 | | Total assets | $2,085,537 | $2,094,569 | $2,095,200 | $2,067,211 | $2,066,757 | | **INTEREST BEARING LIABILITIES (in thousands)** | | | | | | | Interest bearing demand deposits | $240,860 | $232,271 | $232,018 | $238,866 | $245,299 | | Money market deposits | 460,663 | 436,235 | 451,216 | 434,061 | 451,476 | | Savings | 286,364 | 276,856 | 274,828 | 283,605 | 282,971 | | Certificates of deposit | 387,820 | 386,871 | 375,936 | 366,440 | 357,541 | | Short-term borrowings | 43,563 | 50,862 | 48,304 | 40,609 | 40,623 | | Federal Home Loan Bank advances | 3,333 | 28,261 | 40,435 | 45,494 | 27,692 | | Subordinated debt, net of unamortized issuance costs | 29,433 | 29,410 | 29,388 | 29,365 | 29,342 | | Total interest bearing liabilities | 1,452,036 | 1,440,766 | 1,452,125 | 1,438,440 | 1,434,944 | | **NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands)** | | | | | | | Demand deposits | 403,024 | 425,116 | 418,973 | 411,282 | 412,228 | | Other liabilities | 16,265 | 15,775 | 15,658 | 16,755 | 16,151 | | Shareholders' equity | 214,212 | 212,912 | 208,444 | 200,734 | 203,434 | | Total liabilities and shareholders' equity | $2,085,537 | $2,094,569 | $2,095,200 | $2,067,211 | $2,066,757 | [Asset Quality Analysis](index=14&type=section&id=Asset%20Quality%20Analysis) This table provides a detailed asset quality analysis, including nonperforming assets (commercial, real estate, agricultural, residential, consumer), total nonaccrual loans, accruing loans past due, foreclosed assets, and debt securities, along with credit loss allowance and net loan charge-offs (recoveries) for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | **NONPERFORMING ASSETS (in thousands)** | | | | | | | Commercial and industrial | $— | $— | $120 | $271 | $567 | | Commercial real estate | — | — | — | — | 234 | | Agricultural | — | — | — | 167 | 189 | | Residential real estate | 173 | 282 | 427 | 556 | 293 | | Consumer | — | — | — | — | — | | Total nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | Accruing loans past due 90 days or more | 26 | 19 | 64 | 15 | — | | Total nonperforming loans | 199 | 301 | 611 | 1,009 | 1,283 | | Foreclosed assets | 649 | 544 | 546 | 629 | 579 | | Debt securities | — | — | 12 | 12 | 12 | | Total nonperforming assets | $848 | $845 | $1,169 | $1,650 | $1,874 | | Nonperforming loans to gross loans | 0.01 % | 0.02 % | 0.04 % | 0.07 % | 0.09 % | | Nonperforming assets to total assets | 0.04 % | 0.04 % | 0.06 % | 0.08 % | 0.09 % | | Allowance for credit losses as a % of nonaccrual (1) loans | N/M | N/M | N/M | N/M | N/M | | **ALLOWANCE FOR CREDIT LOSSES (in thousands)** | | | | | | | Allowance at beginning of period | $12,895 | $12,635 | $13,095 | $13,390 | $13,108 | | Charge-offs | 172 | 299 | 1,767 | 527 | 191 | | Recoveries | 224 | 197 | 408 | 134 | 145 | | Net loan charge-offs (recoveries) | (52) | 102 | 1,359 | 393 | 46 | | Provision for credit losses - loans | (212) | 362 | 899 | 98 | 328 | | Allowance at end of period | $12,735 | $12,895 | $12,635 | $13,095 | $13,390 | | Allowance for credit losses to gross loans | 0.93 % | 0.91 % | 0.89 % | 0.95 % | 0.98 % | | Reserve for unfunded commitments | 617 | 512 | 498 | 450 | 379 | | Provision for credit losses - unfunded commitments | 105 | 14 | 47 | 72 | 64 | | Reserve to unfunded commitments | 0.14 % | 0.15 % | 0.15 % | 0.14 % | 0.11 % | | **NET LOAN CHARGE-OFFS (RECOVERIES) (in thousands)** | | | | | | | Commercial and industrial | $(80) | $13 | $(6) | $334 | $(2) | | Commercial real estate | (2) | (2) | (318) | (29) | (6) | | Agricultural | — | (4) | — | — | (2) | | Residential real estate | (13) | (16) | (20) | (19) | (63) | | Consumer | 43 | 111 | 1,703 | 107 | 119 | | Total | $(52) | $102 | $1,359 | $393 | $46 | | Net (recoveries) charge-offs (Quarter to Date annualized to average loans) | (0.02)% | 0.03 % | 0.39 % | 0.11 % | 0.01 % | | Net (recoveries) charge-offs (Year to Date annualized to average loans) | (0.02)% | 0.14 % | 0.17 % | 0.00 % | 0.01 % | | **DELINQUENT AND NONACCRUAL LOANS (in thousands)** | | | | | | | Accruing loans 30-89 days past due | $5,555 | $5,682 | $2,226 | $1,484 | $7,938 | | Accruing loans past due 90 days or more | 26 | 19 | 64 | 15 | — | | Total accruing past due loans | 5,581 | 5,701 | 2,290 | 1,499 | 7,938 | | Nonaccrual loans | 173 | 282 | 547 | 994 | 1,283 | | Total past due and nonaccrual loans | $5,754 | $5,983 | $2,837 | $2,493 | $9,221 | [Consolidated Loan and Deposit Analysis](index=16&type=section&id=Consolidated%20Loan%20and%20Deposit%20Analysis) This section provides a detailed analysis of the loan portfolio (categorized by commercial and industrial, commercial real estate, advances to mortgage brokers, agricultural, residential real estate, and consumer) and the deposit portfolio (categorized by noninterest-bearing demand, interest-bearing demand, money market, savings, and certificates of deposit), including quarterly balances and annualized growth rates for the past five quarters | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | Annualized Growth Quarter to Date | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | :-------------------------------- | | Commercial and industrial (in thousands) | $249,220 | $244,894 | $240,589 | $238,245 | $226,281 | 7.07 % | | Commercial real estate (in thousands) | 552,234 | 547,447 | 547,038 | 547,005 | 561,123 | 3.50 % | | Advances to mortgage brokers (in thousands) | 3,015 | 63,080 | 76,187 | 39,300 | 29,688 | N/M | | Agricultural (in thousands) | 94,359 | 99,694 | 96,794 | 94,996 | 93,695 | (21.41)% | | Total commercial loans (in thousands) | 898,828 | 955,115 | 960,608 | 919,546 | 910,787 | (23.57)% | | Residential real estate (in thousands) | 387,348 | 380,872 | 369,846 | 365,188 | 356,658 | 6.80 % | | Consumer (in thousands) | 81,548 | 87,584 | 93,829 | 96,902 | 98,063 | (27.57)% | | Gross loans (in thousands) | $1,367,724 | $1,423,571 | $1,424,283 | $1,381,636 | $1,365,508 | (15.69)% | | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | Annualized Growth Quarter to Date | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | :-------------------------------- | | Noninterest bearing demand deposits (in thousands) | $404,194 | $416,373 | $421,493 | $412,193 | $413,272 | (11.70)% | | Interest bearing demand deposits (in thousands) | 243,939 | 237,548 | 228,902 | 232,660 | 250,314 | 10.76 % | | Money market deposits (in thousands) | 473,138 | 423,883 | 471,745 | 429,150 | 453,014 | 46.48 % | | Savings (in thousands) | 286,399 | 281,665 | 276,095 | 279,847 | 285,564 | 6.72 % | | Certificates of deposit (in thousands) | 390,239 | 387,591 | 383,597 | 368,449 | 366,143 | 2.73 % | | Total deposits (in thousands) | $1,797,909 | $1,747,060 | $1,781,832 | $1,722,299 | $1,768,307 | 11.64 % | [Reconciliation of Non-GAAP Financial Measures](index=18&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This table provides a detailed reconciliation of non-GAAP financial measures, including core net income, core diluted EPS, core return on average assets, core return on average shareholders' equity, and core return on average tangible shareholders' equity, to their most directly comparable GAAP metrics for the past five quarters, along with nonrecurring adjustment items | | March 31 2025 | December 31 2024 | September 30 2024 | June 30 2024 | March 31 2024 | | :------------------------------------------ | :------------ | :--------------- | :---------------- | :----------- | :------------ | | Net income (in thousands) | $3,949 | $3,996 | $3,281 | $3,481 | $3,131 | | **Nonrecurring items (in thousands)** | | | | | | | Net gains (losses) on foreclosed assets | (55) | 74 | 4 | 6 | 69 | | (1) Overdraft (charge-off) recoveries | — | 66 | (1,622) | — | — | | Profitability initiative cost | — | (23) | — | — | — | | (2) Legal fees related to Nasdaq | (121) | — | — | — | — | | Income tax impact | 37 | (25) | 340 | (1) | (14) | | Tax expense on bank-owned life (3) insurance surrender | (166) | — | — | — | — | | Total nonrecurring items | (305) | 92 | (1,278) | 5 | 55 | | Core net income (in thousands) | $4,254 | $3,904 | $4,559 | $3,476 | $3,076 | | Noninterest expenses (in thousands) | $13,299 | $13,330 | $13,228 | $12,895 | $12,676 | | Amortization of acquisition intangibles (in thousands) | 1 | 1 | — | 1 | — | | Core noninterest expense (in thousands) | $13,298 | $13,329 | $13,228 | $12,894 | $12,676 | | Net interest income (in thousands) | $14,525 | $14,555 | $14,488 | $13,550 | $13,242 | | Tax equivalent adjustment for net interest margin (in thousands) | 184 | 213 | 232 | 237 | 246 | | Net interest income (FTE) (in thousands) | 14,709 | 14,768 | 14,720 | 13,787 | 13,488 | | Noninterest income (in thousands) | 3,528 | 3,972 | 3,528 | 3,608 | 3,468 | | Tax equivalent adjustment for efficiency ratio (in thousands) | 78 | 54 | 53 | 53 | 51 | | Core revenue (FTE) (in thousands) | 18,315 | 18,794 | 18,301 | 17,448 | 17,007 | | Nonrecurring items (in thousands) | | | | | | | Net gains (losses) on foreclosed assets | (55) | 74 | 4 | 6 | 69 | | Total nonrecurring items | (55) | 74 | 4 | 6 | 69 | | Core revenue (in thousands) | $18,370 | $18,720 | $18,297 | $17,442 | $16,938 | | Efficiency ratio | 72.39 % | 71.20 % | 72.30 % | 73.93 % | 74.84 % | | Average earning assets (in thousands) | 1,943,633 | 1,963,986 | 1,967,552 | 1,948,173 | 1,943,758 | | Net yield on interest earning assets (FTE) | 3.06 % | 2.98 % | 2.96 % | 2.82 % | 2.79 % | | Average assets (in thousands) | 2,085,537 | 2,094,569 | 2,095,200 | 2,067,211 | 2,066,757 | | Average shareholders' equity (in thousands) | 214,212 | 212,912 | 208,444 | 200,734 | 203,434 | | Average tangible shareholders' equity (in thousands) | 165,929 | 164,629 | 160,161 | 152,451 | 155,150 | | Average diluted shares outstanding (4) | 7,432,162 | 7,451,718 | 7,473,184 | 7,494,828 | 7,507,739 | | Core diluted earnings per share | $0.57 | $0.52 | $0.61 | $0.46 | $0.41 | | Core return on average assets | 0.83 % | 0.74 % | 0.87 % | 0.68 % | 0.60 % | | Core return on average shareholders' equity | 8.05 % | 7.29 % | 8.70 % | 6.96 % | 6.08 % | | Core return on average tangible shareholders' equity | 10.40 % | 9.43 % | 11.32 % | 9.17 % | 7.97 % |

[PART I](index=4&type=section&id=PART%20I) [Business Overview](index=5&type=section&id=Item%201.%20Business) Isabella Bank Corporation is a Michigan-based financial services holding company providing community banking and wealth management services, subject to extensive regulatory oversight - **Isabella Bank Corporation**, incorporated in September 1988, operates **31 offices** through its wholly-owned subsidiary, Isabella Bank, across eight Michigan counties[14](index=14&type=chunk) - The company offers personalized community banking and wealth management services, encompassing commercial, agricultural, real estate, and consumer loans, alongside diverse deposit and digital banking options[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - As of December 31, 2024, the company employed **368 full-time equivalent employees**[19](index=19&type=chunk) - The Corporation is regulated by the FRB, and Isabella Bank by DIFS and the FRB, with operations influenced by monetary policies and subject to capital and dividend restrictions[22](index=22&type=chunk)[23](index=23&type=chunk)[28](index=28&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) The company faces inherent credit, interest rate, liquidity, operational, reputational, strategic, and regulatory risks that could impact its financial stability and growth - Credit risks include potential deterioration in loan portfolio quality due to economic conditions, borrower health, and industry concentrations, which could lead to increased loan losses and an inadequate Allowance for Credit Losses (ACL)[37](index=37&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Interest rate and liquidity risks stem from interest rate fluctuations impacting net interest income, potential negative impacts on investment securities, inability to meet obligations, and restrictions on capital and dividend payments[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Operational and reputational risks encompass losses from internal process failures, employee misconduct, reliance on external vendors, increasing fraud, and potential goodwill impairment[55](index=55&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) - Strategic and external risks include adverse economic conditions, monetary policy changes, wealth management industry volatility, strong competition, rapid technological changes, soundness of other financial institutions, and challenges in growth/acquisitions[63](index=63&type=chunk)[66](index=66&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Legal, regulatory, and compliance risks involve extensive government regulation, potential fines or penalties, legal proceedings, and the adverse effects of societal responses to climate change[76](index=76&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - General risk factors include the impact of changes in accounting policies, potential ineffectiveness of internal controls, challenges in attracting and retaining key personnel, and limited liquidity of the common stock traded on the OTC market[83](index=83&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [Unresolved Staff Comments](index=14&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - The company has **no unresolved staff comments**[88](index=88&type=chunk) [Cybersecurity](index=14&type=section&id=Item%201C.%20Cybersecurity) The company faces significant and evolving cybersecurity risks, managed through a multi-layered framework and governance to mitigate potential operational and financial impacts - The company is a target for cybersecurity attacks, with risks increasing due to mobile banking, internet services, new products, and third-party software, potentially leading to operational disruptions, data loss, and reputational damage[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - Cybersecurity insurance is maintained, but damages and claims may exceed coverage[93](index=93&type=chunk) - The company utilizes a multi-layered Enterprise Risk Management Framework, including internal controls, reputable security partners, and proactive programs like Vendor Management, Incident Response, and Business Continuity, to manage cybersecurity risk[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - Cybersecurity governance involves IT staff with specialized training and committees at both management and board levels (Information Technology Risk Management Committee, Board Risk Committee) to oversee and escalate risks[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Properties](index=15&type=section&id=Item%202.%20Properties) The company's executive offices are in Mount Pleasant, Michigan, owning 29 branches and two operations centers, with all facilities deemed sufficient and in good condition - Executive offices are at **401 North Main Street, Mount Pleasant, Michigan**[104](index=104&type=chunk) - The company owns **29 branches**, **two operations centers**, and vacant land, and leases property in Saginaw and Bay City[104](index=104&type=chunk) - All facilities are considered to have **sufficient capacity** and are in **good condition**[104](index=104&type=chunk) [Legal Proceedings](index=15&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any material legal proceedings, and routine litigation is not expected to materially impact its financial condition or operations - The company is **not involved in any material legal proceedings**[105](index=105&type=chunk) - Routine litigation is not expected to result in any material adverse effect on consolidated operations, earnings, financial condition, or cash flows[105](index=105&type=chunk) [Mine Safety Disclosures](index=15&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Isabella Bank Corporation - This item is **not applicable**[106](index=106&type=chunk) [PART II](index=16&type=section&id=PART%20II) [Market for Common Equity, Stockholder Matters & Equity Security Purchases](index=16&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) As of December 31, 2024, the company had **7,424,893 common shares outstanding** traded on OTCQX, paid **$1.12 cash dividend per share**, and repurchased **152,577 shares** in 2024 - As of December 31, 2024, **7,424,893 common shares outstanding** were held by **2,590 shareholders**, trading on the OTCQX market under **"ISBA"**[108](index=108&type=chunk)[109](index=109&type=chunk) Common Stock Sale Price (OTC Markets) | Year | Quarter | Low ($) | High ($) | | :--- | :--- | :--- | :--- | | 2024 | First Quarter | 18.25 | 21.74 | | 2024 | Second Quarter | 17.75 | 19.85 | | 2024 | Third Quarter | 17.55 | 22.00 | | 2024 | Fourth Quarter | 20.10 | 26.23 | | 2023 | First Quarter | 22.08 | 25.10 | | 2023 | Second Quarter | 19.13 | 26.00 | | 2023 | Third Quarter | 19.61 | 23.00 | | 2023 | Fourth Quarter | 19.75 | 22.00 | Cash Dividends Paid Per Share | Year | Total ($) | | :--- | :--- | | 2024 | 1.12 | | 2023 | 1.12 | - The company repurchased **152,577 shares for $3,076** in 2024 and **149,020 shares for $3,415** in 2023, with **118,229 additional shares authorized** for repurchase as of December 31, 2024[111](index=111&type=chunk)[112](index=112&type=chunk)[129](index=129&type=chunk)[158](index=158&type=chunk) [Reserved]](index=17&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is **reserved**[113](index=113&type=chunk) [Management's Discussion and Analysis](index=18&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2024, net income decreased to **$13.9 million** due to lower net interest income and higher expenses, while total assets grew to **$2.09 billion** with strong liquidity and capital ratios Net Income and EPS (GAAP & Non-GAAP) | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Income (GAAP) | 13,889 | 18,167 | -4,278 (-23.5%) | | Diluted EPS (GAAP) | 1.86 | 2.40 | -0.54 (-22.5%) | | Adjusted Net Income (Non-GAAP) | 15,016 | 17,989 | -2,973 (-16.5%) | | Adjusted Diluted EPS (Non-GAAP) | 2.01 | 2.37 | -0.36 (-15.2%) | Net Interest Income and Margin | Metric | 2024 | 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Interest Income | $55,835 | $57,944 | -$2,109 (-3.6%) | | Net Interest Margin (FTE) | 2.90% | 3.05% | -0.15 pp | | Yield on Interest Earning Assets | 4.65% | 4.17% | +0.48 pp | | Cost of Interest Bearing Liabilities | 2.37% | 1.57% | +0.80 pp | - Provision for credit losses increased to **$1,884** in 2024 (vs. **$629** in 2023), including a **$1,556 net charge-off** related to an overdrawn deposit account, partially offset by loan recoveries[120](index=120&type=chunk) Noninterest Income and Expenses | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Noninterest Income | 14,576 | 13,827 | +749 (+5.4%) | | Wealth Management Fees Growth | +13.6% | N/A | N/A | | Customer Service Fees Growth | +4.0% | N/A | N/A | | Noninterest Expenses | 52,129 | 49,310 | +2,819 (+5.7%) | | Compensation & Benefits Increase | +2,671 (+10.3%) | N/A | N/A | | Efficiency Ratio | 73.01% | 67.76% | +5.25 pp | Financial Condition Highlights (as of December 31) | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Assets | 2,086,241 | 2,058,968 | +27,273 (+1.3%) | | AFS Securities | 489,029 | 528,148 | -39,119 (-7.4%) | | Net Unrealized Losses on AFS Securities | 26,487 | 31,826 | -5,339 (-16.8%) | | Loans Outstanding (Gross) | 1,423,571 | 1,349,463 | +74,108 (+5.5%) | | ACL | 12,895 | 13,108 | -213 (-1.6%) | | Total Deposits | 1,747,060 | 1,723,695 | +23,365 (+1.4%) | | Total Equity | 210,276 | 202,402 | +7,874 (+3.9%) | | Tangible Book Value Per Share | 21.82 | 20.59 | +1.23 (+6.0%) | - The company maintained robust liquidity with **$776,672** of unencumbered sources and strong capital ratios (Tier 1 Leverage: **8.86%**, Tier 1 Risk-Based: **12.21%**, Total Risk-Based: **15.06%**) as of December 31, 2024[130](index=130&type=chunk)[159](index=159&type=chunk)[164](index=164&type=chunk) [Executive Summary](index=19&type=section&id=Executive%20Summary) Net Income and EPS (GAAP & Non-GAAP) | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Income (GAAP) | 13,889 | 18,167 | -4,278 (-23.5%) | | Diluted EPS (GAAP) | 1.86 | 2.40 | -0.54 (-22.5%) | | Adjusted Net Income (Non-GAAP) | 15,016 | 17,989 | -2,973 (-16.5%) | | Adjusted Diluted EPS (Non-GAAP) | 2.01 | 2.37 | -0.36 (-15.2%) | Net Interest Income and Margin | Metric | 2024 | 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Interest Income | $55,835 | $57,944 | -$2,109 (-3.6%) | | Net Interest Margin (FTE) | 2.90% | 3.05% | -0.15 pp | | Yield on Loans | 5.58% | 5.02% | +0.56 pp | | Cost of Interest Bearing Liabilities | 2.37% | 1.57% | +0.80 pp | - Provision for credit losses increased to **$1,884** in 2024 (vs. **$629** in 2023), including a **$1,556 net charge-off** for an overdrawn deposit account[120](index=120&type=chunk) Noninterest Income and Expenses | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Noninterest Income | 14,576 | 13,827 | +749 (+5.4%) | | Wealth Management Fees Growth | +13.6% | N/A | N/A | | Customer Service Fees Growth | +4.0% | N/A | N/A | | Noninterest Expenses | 52,129 | 49,310 | +2,819 (+5.7%) | | Compensation & Benefits Increase | +2,671 (+10.3%) | N/A | N/A | | Efficiency Ratio | 73.01% | 67.76% | +5.25 pp | Financial Condition Highlights (as of December 31) | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Assets | 2,086,241 | 2,058,968 | +27,273 (+1.3%) | | AFS Securities | 489,029 | 528,148 | -39,119 (-7.4%) | | Net Unrealized Losses on AFS Securities | 26,487 | 31,826 | -5,339 (-16.8%) | | Loans Outstanding (Gross) | 1,423,571 | 1,349,463 | +74,108 (+5.5%) | | ACL | 12,895 | 13,108 | -213 (-1.6%) | | Total Deposits | 1,747,060 | 1,723,695 | +23,365 (+1.4%) | | Total Equity | 210,276 | 202,402 | +7,874 (+3.9%) | | Tangible Book Value Per Share | 21.82 | 20.59 | +1.23 (+6.0%) | - As of December 31, 2024, the company maintained robust liquidity with **$776,672** of unencumbered sources and strong capital ratios (Tier 1 Leverage: **8.86%**, Tier 1 Risk-Based: **12.21%**, Total Risk-Based: **15.06%**)[130](index=130&type=chunk) [Critical Accounting Policies](index=22&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) - The Allowance for Credit Losses (ACL) requires subjective judgment, with a hypothetical stress scenario indicating a potential **$4,500 higher ACL** than recorded as of December 31, 2024[136](index=136&type=chunk)[137](index=137&type=chunk) - Acquisition intangibles and goodwill are evaluated annually for impairment using discounted cash flows and market-based approaches; **no impairment was identified in 2024**[139](index=139&type=chunk) - Available-for-sale (AFS) securities are carried at fair value and reviewed quarterly for credit impairment, with unrealized gains and losses reported in other comprehensive income[140](index=140&type=chunk) [Average Balances, Interest Rates, and Net Interest Income](index=23&type=section&id=Average%20Balances%2C%20Interest%20Rates%2C%20and%20Net%20Interest%20Income) Average Balances, Interest Income/Expense, and Yields (FTE) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | **Interest Earning Assets** | | | | | Loans (Avg Balance) | $1,385,287 | $1,308,891 | $1,249,634 | | Loans (Interest) | $77,295 | $65,670 | $53,283 | | Loans (Yield) | 5.58% | 5.02% | 4.26% | | AFS Securities (Avg Balance) | $540,433 | $582,563 | $584,317 | | AFS Securities (Interest) | $12,023 | $13,179 | $12,227 | | AFS Securities (Yield) | 2.22% | 2.26% | 2.09% | | Total Interest Earning Assets (Avg Balance) | $1,955,919 | $1,933,431 | $1,933,262 | | Total Interest Earning Assets (Interest) | $90,908 | $80,654 | $66,854 | | Total Interest Earning Assets (Yield) | 4.65% | 4.17% | 3.46% | | **Interest Bearing Liabilities** | | | | | Total Interest Bearing Liabilities (Avg Balance) | $1,441,595 | $1,377,648 | $1,362,530 | | Total Interest Bearing Liabilities (Interest) | $34,143 | $21,687 | $5,317 | | Total Interest Bearing Liabilities (Rate) | 2.37% | 1.57% | 0.39% | | **Net Interest Income (FTE)** | $56,765 | $58,967 | $61,537 | | **Net Yield on Interest Earning Assets (FTE)** | 2.90% | 3.05% | 3.18% | Volume and Rate Variance Analysis (2024 Compared to 2023) | Change in Interest Income | Volume ($) | Rate ($) | Net ($) | | :--- | :--- | :--- | :--- | | Loans | 3,980 | 7,645 | 11,625 | | AFS securities | (940) | (216) | (1,156) | | Total changes in interest income | 2,410 | 7,844 | 10,254 | | **Change in Interest Expense** | | | | | Interest bearing demand deposits | 4 | 308 | 312 | | Savings | (194) | 5,267 | 5,073 | | Certificates of deposit | 2,078 | 3,875 | 5,953 | | Total changes in interest expense | 2,586 | 9,870 | 12,456 | | **Net change in interest margin (FTE)** | (176) | (2,026) | (2,202) | [Loans](index=25&type=section&id=Loans) Loan Balances by Category (as of December 31) | Loan Category | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Commercial and industrial | 244,894 | 209,738 | 178,428 | | Commercial real estate | 547,447 | 564,244 | 566,012 | | Advances to mortgage brokers | 63,080 | 18,541 | — | | Agricultural | 99,694 | 99,994 | 104,985 | | Residential real estate | 380,872 | 356,418 | 336,694 | | Consumer | 87,584 | 100,528 | 78,054 | | **Total** | **1,423,571** | **1,349,463** | **1,264,173** | Change in Loan Portfolio Categories (YoY) | Loan Category | 2024 ($ Change) | 2024 (% Change) | 2023 ($ Change) | 2023 (% Change) | | :--- | :--- | :--- | :--- | :--- | | Commercial and industrial | 35,156 | 16.76% | 31,310 | 17.55% | | Commercial real estate | (16,797) | (2.98)% | (1,768) | (0.31)% | | Advances to mortgage brokers | 44,539 | N/M | 18,541 | 100.00% | | Agricultural | (300) | (0.30)% | (4,991) | (4.75)% | | Residential real estate | 24,454 | 6.86% | 19,724 | 5.86% | | Consumer | (12,944) | (12.88)% | 22,474 | 28.79% | | **Total** | **74,108** | **5.49%** | **85,290** | **6.75%** | Commercial Real Estate Portfolio by Industry (as of December 31, 2024) | Industry | Balance ($) | Percent of Total | | :--- | :--- | :--- | | Non-owner occupied | 122,280 | 22.34% | | 1-4 family investor | 92,497 | 16.90% | | Multifamily | 68,456 | 12.50% | | Hotels | 83,318 | 15.22% | | Health care | 36,493 | 6.67% | | Retail trade | 33,508 | 6.12% | | Manufacturing | 12,238 | 2.24% | | Construction | 8,422 | 1.54% | ACL Allocation to Gross Loans (as of December 31) | Loan Segment | 2024 ACL Allocation ($) | 2024 % of Gross Loans | 2023 ACL Allocation ($) | 2023 % of Gross Loans | | :--- | :--- | :--- | :--- | :--- | | Commercial and industrial | 1,316 | 17.20 | 968 | 15.54 | | Commercial real estate | 5,171 | 38.46 | 5,878 | 41.82 | | Advances to mortgage brokers | — | 4.43 | — | 1.37 | | Agricultural | 287 | 7.01 | 270 | 7.41 | | Residential real estate | 4,521 | 26.75 | 4,336 | 26.41 | | Consumer | 1,600 | 6.15 | 1,656 | 7.45 | | **Total** | **12,895** | **100.00** | **13,108** | **100.00** | [AFS Securities](index=27&type=section&id=AFS%20Securities) Maturity of AFS Securities and Weighted Average Yields (as of December 31, 2024, FTE basis) | Maturity | Amount ($) | Yield (%) | | :--- | :--- | :--- | | Within One Year | 43,882 | 0.76 | | After One Year But Within Five Years | 211,893 | 0.24 | | After Five Years But Within Ten Years | 24,305 | 3.25 | | After Ten Years | 24,345 | 3.65 | | Securities with Variable Monthly Payments or Noncontractual Maturities | 184,604 | 2.92 | | **Total** | **489,029** | N/A | [Deposits](index=27&type=section&id=Deposits) Deposit Balances by Type (as of December 31) | Deposit Type | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Noninterest bearing demand deposits | 416,373 | 428,505 | 494,346 | | Interest bearing demand deposits | 341,366 | 320,737 | 372,155 | | Savings | 601,730 | 628,079 | 625,734 | | Certificates of deposit | 387,591 | 346,374 | 252,040 | | **Total** | **1,747,060** | **1,723,695** | **1,744,275** | Change in Deposit Balances (YoY) | Deposit Type | 2024 ($ Change) | 2024 (% Change) | 2023 ($ Change) | 2023 (% Change) | | :--- | :--- | :--- | :--- | :--- | | Noninterest bearing demand deposits | (12,132) | (2.83)% | (65,841) | (13.32)% | | Interest bearing demand deposits | 20,629 | 6.43% | (51,418) | (13.82)% | | Savings | (26,349) | (4.20)% | 2,345 | 0.37% | | Certificates of deposit | 41,217 | 11.90% | 94,334 | 37.43% | | **Total** | **23,365** | **1.36%** | **(20,580)** | **(1.18)%** | Estimated Uninsured Deposits (as of December 31) | Year | Amount ($) | | :--- | :--- | | 2024 | 645,764 | | 2023 | 600,381 | | 2022 | 585,901 | Remaining Maturity of Estimated Uninsured Certificates of Deposit (as of December 31, 2024) | Maturity | Amount ($) | | :--- | :--- | | Within 3 months | 25,046 | | Within 3 to 6 months | 9,536 | | Within 6 to 12 months | 26,186 | | Over 12 months | 4,425 | | **Total** | **65,193** | [Asset Quality Analysis](index=29&type=section&id=Asset%20Quality%20Analysis) Nonperforming Assets (as of December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Total nonaccrual loans | 282 | 982 | 457 | | Accruing loans past due 90 days or more | 19 | 87 | — | | **Total nonperforming loans** | **301** | **1,069** | **457** | | Foreclosed assets | 544 | 406 | 439 | | Debt securities | — | 12 | 77 | | **Total nonperforming assets** | **845** | **1,487** | **973** | | Nonperforming loans to gross loans | 0.02% | 0.08% | 0.04% | | Nonperforming assets to total assets | 0.04% | 0.07% | 0.05% | Allowance for Credit Losses (ACL) (as of December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Allowance at beginning of period | 13,108 | 9,850 | 9,103 | | Net loan charge-offs (recoveries) | 1,900 | 115 | (264) | | Provision for credit losses - loans | 1,687 | 629 | 483 | | **Allowance at end of period** | **12,895** | **13,108** | **9,850** | | ACL to gross loans | 0.91% | 0.97% | 0.78% | Net Loan Charge-offs (Recoveries) (as of December 31) | Loan Category | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Commercial and industrial | 339 | 197 | (336) | | Commercial real estate | (355) | (26) | (29) | | Agricultural | (6) | (8) | (9) | | Residential real estate | (118) | (327) | (150) | | Consumer | 2,040 | 279 | 260 | | **Total** | **1,900** | **115** | **(264)** | | Net (recoveries) charge-offs to average loans | 0.14% | 0.01% | (0.02)% | Delinquent and Nonaccrual Loans (as of December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Accruing loans 30-89 days past due | 5,682 | 3,895 | 10,673 | | Accruing loans past due 90 days or more | 19 | 87 | — | | **Total accruing past due loans** | **5,701** | **3,982** | **10,673** | | Nonaccrual loans | 282 | 982 | 457 | | **Total past due and nonaccrual loans** | **5,983** | **4,964** | **11,130** | [Capital](index=30&type=section&id=Capital) Capital Ratios (as of December 31) | Ratio | 2024 Actual | 2024 Minimum Required | 2024 Well Capitalized | 2023 Actual | 2023 Minimum Required | 2023 Well Capitalized | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common equity tier 1 capital | 12.21% | 7.00% | 6.50% | 12.54% | 7.00% | 6.50% | | Tier 1 capital | 12.21% | 8.50% | 8.00% | 12.54% | 8.50% | 8.00% | | Total capital | 15.06% | 10.50% | 10.00% | 15.52% | 10.50% | 10.00% | | Tier 1 leverage | 8.86% | 4.00% | 5.00% | 8.76% | 4.00% | 5.00% | - The company issued **75,341 shares ($1,523)** in 2024 and repurchased **152,577 shares ($3,076)** in 2024, with **118,229 additional shares authorized** for repurchase as of December 31, 2024[157](index=157&type=chunk)[158](index=158&type=chunk) [Liquidity](index=30&type=section&id=Liquidity) Primary Sources of Liquidity (as of December 31) | Metric | 2024 ($) | 2023 ($) | Change (YoY) | | :--- | :--- | :--- | :--- | | Retail deposits, cash & cash equivalents, unencumbered AFS securities | 330,876 | 381,417 | -50,541 (-13.2%) | | As % of assets | 15.86% | 18.52% | -2.66 pp | Total Cash and Liquidity (as of December 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Total cash and cash equivalents | 24,542 | 33,672 | | Brokered CD capacity | 120,000 | 120,000 | | Total available lines of credit | 342,130 | 338,080 | | Unencumbered lendable value of FRB collateral (estimated) | 290,000 | 320,000 | | **Total cash and liquidity** | **776,672** | **811,752** | Uninsured Deposits & Coverage Ratio (as of December 31) | Metric | 2024 | 2023 | | :--- | :--- | | Uninsured deposits | $645,764 | $600,381 | | Coverage ratio of uninsured deposits with total cash and liquidity | 120% | 135% | [Fair Value](index=31&type=section&id=Fair%20Value) - Fair value measurements are used for recurring adjustments (AFS securities, cash flow hedge derivatives) and nonrecurring adjustments (mortgage loans HFS, impaired loans, goodwill, foreclosed assets, OMSR)[165](index=165&type=chunk) - The company maximizes observable inputs (Level 1, 2) and minimizes unobservable inputs (Level 3) in fair value measurements, grouping assets and liabilities based on input reliability[219](index=219&type=chunk)[222](index=222&type=chunk) [Market Risk](index=31&type=section&id=Market%20Risk) - Primary market risks are interest rate risk (IRR) and liquidity risk, managed through simulation analysis and gap analysis to forecast effects on net interest income and balance sheet structure[167](index=167&type=chunk)[169](index=169&type=chunk)[171](index=171&type=chunk) Interest Rate Sensitivity (Percent change in net interest income vs. constant rate) | Immediate Basis Point Change (Short-term) | 12 Months (2024) | 24 Months (2024) | 12 Months (2023) | 24 Months (2023) | | :--- | :--- | :--- | :--- | :--- | | -200 | (3.44)% | (4.67)% | 0.94% | 1.41% | | -100 | (1.55)% | (2.18)% | 0.49% | 0.97% | | 100 | 1.45% | 1.22% | (0.54)% | (0.61)% | | 200 | 2.83% | 2.00% | (1.07)% | (1.37)% | Loan Maturity and Interest Rate Sensitivity (as of December 31, 2024) | Loan Type | 1 Year or Less ($) | 1 to 5 Years ($) | 5 to 15 Years ($) | Over 15 Years ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Loans** | **149,828** | **246,527** | **383,128** | **644,088** | **1,423,571** | | Fixed interest rates | 95,900 | 186,852 | 168,815 | 27,046 | 478,613 | | Variable interest rates | 53,928 | 59,675 | 214,313 | 617,042 | 944,958 | [Contractual Obligations and Loan Commitments](index=33&type=section&id=Contractual%20Obligations%20and%20Loan%20Commitments) - The company has various financial obligations and loan-related commitments, including unused lines of credit, commercial and standby letters of credit, and commitments to grant loans, many of which may expire without being drawn upon[177](index=177&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=34&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Adjusted Net Income Reconciliation | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Net income | 13,889 | 18,167 | 22,238 | | Nonrecurring items (net) | (1,127) | 178 | 10 | | **Adjusted net income** | **15,016** | **17,989** | **22,228** | Efficiency Ratio Reconciliation | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Noninterest expenses | 52,129 | 49,310 | 46,820 | | Amortization of acquisition intangibles | 1 | 3 | 15 | | **Adjusted noninterest expense (B)** | **52,128** | **49,307** | **46,805** | | Net interest income (FTE) (C) | 56,765 | 58,967 | 61,537 | | Noninterest income | 14,576 | 13,827 | 13,666 | | Tax equivalent adjustment for efficiency ratio | 211 | 193 | 186 | | Nonrecurring items (net) | 153 | 225 | 13 | | **Adjusted revenue (D)** | **71,399** | **72,762** | **75,376** | | **Efficiency ratio (B/D)** | **73.01%** | **67.76%** | **62.10%** | Adjusted Performance Ratios | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Adjusted diluted earnings per share | $2.01 | $2.37 | $2.91 | | Adjusted return on average assets | 0.72% | 0.88% | 1.08% | | Adjusted return on average shareholders' equity | 7.28% | 9.43% | 11.40% | | Adjusted return on average tangible shareholders' equity | 9.50% | 12.63% | 15.16% | [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the market risk disclosures from Item 7, detailing the company's interest rate and liquidity risk management strategies - The information presented in the "Market Risk" section of Item 7 is **incorporated by reference**[180](index=180&type=chunk) [Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2022-2024, including balance sheets, income statements, cash flows, and detailed notes, along with the independent auditor's report - This section includes the **Report of Independent Registered Public Accounting Firm**, Consolidated Balance Sheets, Statements of Income, Comprehensive Income (Loss), Changes in Shareholders' Equity, Cash Flows, and detailed Notes to Consolidated Financial Statements[181](index=181&type=chunk) [Report of Independent Registered Public Accounting Firm](index=36&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) - Rehmann Robson LLC audited the consolidated financial statements for the three-year period ended December 31, 2024, and the internal control over financial reporting as of December 31, 2024[184](index=184&type=chunk) - Issued an **unqualified opinion** that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP[185](index=185&type=chunk) - Issued an **unqualified opinion** that Isabella Bank Corporation maintained effective internal control over financial reporting as of December 31, 2024, based on COSO criteria[185](index=185&type=chunk) - Identified "Allowance for Credit Losses" as a **critical audit matter** due to high subjectivity in qualitative adjustments and complexity of models (PD, PA, LGD, EAD)[192](index=192&type=chunk)[193](index=193&type=chunk) [Consolidated Balance Sheets](index=39&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Consolidated Balance Sheets (as of December 31) | Asset/Liability/Equity | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | **ASSETS** | | | | Total cash and cash equivalents | 24,542 | 33,672 | | AFS securities, at fair value | 489,029 | 528,148 | | Loans, net | 1,410,676 | 1,336,355 | | Goodwill and other intangible assets | 48,283 | 48,284 | | **Total assets** | **2,086,241** | **2,058,968** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Total deposits | 1,747,060 | 1,723,695 | | Total borrowed funds | 112,991 | 116,136 | | **Total liabilities** | **1,875,965** | **1,856,566** | | Total shareholders' equity | 210,276 | 202,402 | | **Total liabilities and shareholders' equity** | **2,086,241** | **2,058,968** | [Consolidated Statements of Income](index=40&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated Statements of Income Highlights (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Total interest income | 89,978 | 79,631 | 65,798 | | Total interest expense | 34,143 | 21,687 | 5,317 | | **Net interest income** | **55,835** | **57,944** | **60,481** | | Provision for credit losses | 1,884 | 629 | 483 | | Total noninterest income | 14,576 | 13,827 | 13,666 | | Total noninterest expenses | 52,129 | 49,310 | 46,820 | | Income before income tax expense | 16,398 | 21,832 | 26,844 | | Income tax expense | 2,509 | 3,665 | 4,606 | | **Net income** | **13,889** | **18,167** | **22,238** | | Basic earnings per common share | $1.86 | $2.42 | $2.95 | | Diluted earnings per common share | $1.86 | $2.40 | $2.91 | | Cash dividends per common share | $1.12 | $1.12 | $1.09 | [Consolidated Statements of Comprehensive Income](index=41&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive Income (Loss) (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Net income | 13,889 | 18,167 | 22,238 | | Unrealized gains (losses) on AFS securities, net of tax | 4,241 | 10,629 | (39,701) | | Change in unrealized pension cost, net of tax | 300 | 669 | 648 | | **Comprehensive income (loss)** | **18,430** | **29,465** | **(16,815)** | [Consolidated Statements of Changes in Shareholders' Equity](index=43&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%27%20EQUITY) Shareholders' Equity Changes (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Balance, beginning of period | 202,402 | 186,210 | 211,048 | | Comprehensive income (loss) | 18,430 | 29,465 | (16,815) | | Issuance of common stock | 1,523 | 1,617 | 1,762 | | Common stock repurchased | (3,076) | (3,415) | (1,124) | | Cash dividends paid | (8,147) | (8,216) | (8,082) | | **Balance, end of period** | **210,276** | **202,402** | **186,210** | [Consolidated Statements of Cash Flows](index=44&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flow Summary (for the year ended December 31) | Activity | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 19,637 | 24,182 | 26,886 | | Net cash provided by (used in) investing activities | (37,866) | (26,246) | (106,204) | | Net cash provided by (used in) financing activities | 9,099 | (3,188) | 12,912 | | **Increase (decrease) in cash and cash equivalents** | **(9,130)** | **(5,252)** | **(66,406)** | | Cash and cash equivalents at end of period | 24,542 | 33,672 | 38,924 | [Notes to Consolidated Financial Statements](index=45&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - The consolidated financial statements include Isabella Bank Corporation and its wholly-owned subsidiary, Isabella Bank, with operating segments aggregated into one reportable segment[209](index=209&type=chunk)[211](index=211&type=chunk) - Material estimates include the Allowance for Credit Losses (ACL), fair value of AFS investment securities, and valuation of goodwill and other intangible assets[216](index=216&type=chunk) - Fair value measurements prioritize observable inputs (Level 1, 2) and minimize unobservable inputs (Level 3) in valuation techniques[218](index=218&type=chunk)[219](index=219&type=chunk)[222](index=222&type=chunk) - AFS securities are recorded at fair value with unrealized gains/losses in OCI and are reviewed quarterly for credit impairment; no allowance for credit losses was recognized on AFS securities in an unrealized loss position as of December 31, 2024[225](index=225&type=chunk)[226](index=226&type=chunk)[271](index=271&type=chunk) - Loans held for investment are reported at amortized cost, with interest accrual discontinued for nonperforming loans (90+ days past due or doubtful)[230](index=230&type=chunk)[231](index=231&type=chunk) - The ACL is established through a provision for credit losses, considering historical experience, portfolio nature, borrower ability, collateral value, and economic conditions; it consists of individually and collectively evaluated components[232](index=232&type=chunk)[233](index=233&type=chunk)[309](index=309&type=chunk)[313](index=313&type=chunk) - Loan modifications are granted to borrowers experiencing financial difficulty, but principal or accrued interest is not forgiven; no modified loans defaulted in 2024 or 2023 within 12 months of modification[236](index=236&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[305](index=305&type=chunk) - Goodwill is not amortized but evaluated annually for impairment; core deposit intangibles are amortized[252](index=252&type=chunk) - Revenue recognition follows ASC 606 for service charges, fees, and gains on loan/security sales, excluding interest income[255](index=255&type=chunk)[356](index=356&type=chunk) - Deferred income tax assets and liabilities are determined using the liability method[257](index=257&type=chunk) - Recently adopted ASU No. 2023-07 (Segment Reporting) had no material impact; pending ASU No. 2023-09 (Income Tax Disclosures) and ASU No. 2024-03 (Expense Disaggregation) are not expected to have a significant impact[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) AFS Securities (as of December 31) | Security Type | 2024 Amortized Cost ($) | 2024 Fair Value ($) | 2024 Gross Unrealized Losses ($) | 2023 Amortized Cost ($) | 2023 Fair Value ($) | 2023 Gross Unrealized Losses ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury | 230,807 | 220,571 | 10,236 | 231,218 | 214,801 | 16,417 | | States and political subdivisions | 81,135 | 76,568 | 4,576 | 94,837 | 92,876 | 2,993 | | Mortgage-backed securities | 29,068 | 26,886 | 2,182 | 35,321 | 32,815 | 2,506 | | Collateralized mortgage obligations | 163,156 | 154,674 | 8,482 | 187,248 | 177,775 | 9,473 | | Corporate | 8,150 | 7,286 | 864 | 8,150 | 6,950 | 1,200 | | **Total** | **515,516** | **489,029** | **26,496** | **559,974** | **528,148** | **32,858** | Loan Composition (as of December 31, 2024) | Loan Type | Balance ($) | Percent of Total | | :--- | :--- | :--- | | Commercial and industrial | 244,894 | 17.20% | | Commercial real estate | 547,447 | 38.46% | | Advances to mortgage brokers | 63,080 | 4.43% | | Agricultural | 99,694 | 7.01% | | Residential real estate | 380,872 | 26.75% | | Consumer | 87,584 | 6.15% | | **Total** | **1,423,571** | **100.00%** | Nonaccrual Loans (as of December 31) | Loan Class | 2024 Total Nonaccrual ($) | 2023 Total Nonaccrual ($) | | :--- | :--- | :--- | | Commercial and industrial (Secured) | — | 491 | | Agricultural | — | 205 | | Residential real estate (Senior lien) | 282 | 286 | | **Total** | **282** | **982** | Past Due and Current Loans (as of December 31, 2024) | Loan Class | 30-59 Days Past Due ($) | 60-89 Days Past Due ($) | 90 Days or More Past Due ($) | Current ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Commercial and industrial | 328 | 50 | — | 244,516 | 244,894 | | Commercial real estate | 817 | 304 | — | 546,326 | 547,447 | | Advances to mortgage brokers | — | — | — | 63,080 | 63,080 | | Agricultural | — | — | — | 99,694 | 99,694 | | Residential real estate | 3,875 | 148 | 163 | 376,686 | 380,872 | | Consumer | 251 | — | 19 | 87,314 | 87,584 | | **Total** | **5,271** | **502** | **182** | **1,417,616** | **1,423,571** | - Internally assigned credit risk ratings for commercial and agricultural loans range from 'Excellent' (1-3) to 'Loss' (9), with 'Special Mention' (5) and 'Substandard' (6) indicating increasing risk[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) Changes in ACL (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Beginning balance | 13,108 | 9,850 | | Charge-offs | (2,784) | (824) | | Recoveries | 884 | 709 | | Credit loss expense | 1,687 | 629 | | **Ending balance** | **12,895** | **13,108** | Premises and Equipment (as of December 31) | Asset | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | Land | 6,309 | 6,309 | | Buildings and improvements | 36,370 | 34,984 | | Furniture and equipment | 33,960 | 35,528 | | Less: accumulated depreciation | 48,980 | 49,182 | | **Net premises and equipment** | **27,659** | **27,639** | - Goodwill carrying amount was **$48,282** for both 2024 and 2023; net identifiable intangible assets (core deposit premium) were **$1** in 2024 and **$2** in 2023, with amortization expense of **$1** in 2024[317](index=317&type=chunk) Scheduled Annual Maturities of Time Deposits (as of December 31, 2024) | Maturity | Amount ($) | | :--- | :--- | | 2025 | 340,229 | | 2026 | 28,909 | | 2027 | 8,451 | | 2028 | 5,836 | | 2029 | 4,102 | | Thereafter | 64 | | **Total** | **387,591** | Pledged Assets (as of December 31) | Pledged For | 2024 ($) | 2023 ($) | | :--- | :--- | :--- | | To secure borrowed funds | 395,286 | 391,529 | | To secure repurchase agreements | 67,539 | 67,764 | | For public deposits and other purposes | 86,162 | 84,099 | | **Total** | **548,987** | **543,392** | - FHLB advances outstanding as of December 31, 2024, were short-term, with maturities within one week, including **$30,000** at a **4.52% fixed rate** due in 2025[323](index=323&type=chunk) - The company has **$30,000** in **3.25% Fixed-to-Floating Rate Subordinated Notes due 2031**, redeemable at the company's option on or after June 15, 2026[324](index=324&type=chunk)[325](index=325&type=chunk) - The Defined Benefit Pension Plan had a funded status (surplus) of **$900** in 2024 (vs. **$438** in 2023), with plan assets of **$7,303** (2024) primarily in common collective trusts[329](index=329&type=chunk)[334](index=334&type=chunk) - The Directors Plan had **101,493 shares** eligible for distribution in 2024, and the Restricted Stock Plan had **14,733 nonvested shares ($323 fair value)** at year-end 2024[340](index=340&type=chunk)[345](index=345&type=chunk) Consolidated Capital Ratios (as of December 31) | Ratio | 2024 Actual | 2023 Actual | | :--- | :--- | :--- | | Common equity Tier 1 capital to risk weighted assets | 12.21% | 12.54% | | Tier 1 capital to risk weighted assets | 12.21% | 12.54% | | Total capital to risk weighted assets | 15.06% | 15.52% | | Tier 1 capital to average assets | 8.86% | 8.76% | Accumulated Other Comprehensive Income (Loss) (AOCI) (net of tax) | Component | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Unrealized Gains (Losses) on AFS Securities | (20,958) | (25,199) | (35,828) | | Unrecognized Pension Cost on Defined Benefit Pension Plan | (397) | (697) | (1,366) | | **Total AOCI** | **(21,355)** | **(25,896)** | **(37,194)** | Revenue from Contracts with Customers (subject to ASC 606) (for the year ended December 31) | Category | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Debit card income | 4,151 | 4,063 | 3,783 | | Trust service fees | 3,438 | 3,110 | 2,622 | | Investment advisory fees | 603 | 447 | 383 | | Service charges and fees related to deposit accounts | 450 | 362 | 345 | Income Tax Expense (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Federal tax expense | 2,819 | 2,657 | 4,593 | | Deferred expense (benefit) | (310) | 1,008 | 13 | | **Income tax expense** | **2,509** | **3,665** | **4,606** | Deferred Tax Assets and Liabilities (as of December 31) | Category | 2024 ($) | 2023 ($) | | :--- | :--- | | Total deferred tax assets | 11,683 | 13,020 | | Total deferred tax liabilities | 4,589 | 5,101 | | **Net deferred tax assets (liabilities)** | **7,094** | **7,919** | Financial Instruments Recorded at Fair Value (as of December 31, 2024) | Asset/Liability | Total ($) | Level 1 ($) | Level 2 ($) | Level 3 ($) | | :--- | :--- | :--- | :--- | :--- | | Total AFS securities | 489,029 | — | 489,029 | — | | Collateral dependent (net of ACL) | 254 | — | — | 254 | | OMSR | 2,185 | — | — | 2,185 | | Foreclosed assets | 544 | — | — | 544 | | **Total** | **492,012** | **—** | **489,029** | **2,983** | - The classification of Originated Mortgage Servicing Rights (OMSR) changed from Level 2 to Level 3 in Q3 2024 due to a reevaluation of the valuation process and reliance on unobservable assumptions[369](index=369&type=chunk) Credit Related Financial Instruments (as of December 31) | Instrument | 2024 ($) | 2023 ($) | | :--- | :--- | | Unfunded commitments under lines of credit | 312,577 | 313,646 | | Commercial and standby letters of credit | 2,125 | 1,624 | | Commitments to originate new loans | 26,558 | 6,460 | | **Total** | **341,260** | **321,730** | - The allowance for credit losses related to off-balance-sheet credit exposure was **$512** in 2024 (vs. **$315** in 2023)[389](index=389&type=chunk) - As of January 1, 2025, approximately **$3,700** was available to the Corporation for dividends from the Bank without regulatory approval[391](index=391&type=chunk) Related Party Loans and Deposits (as of December 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | | Loans to principal officers, directors, and affiliates | 2,951 | 19,527 | | Deposits from principal officers, directors, and affiliates | 4,024 | 7,735 | - The Isabella Bank Foundation owned **20,000 shares** of the company's common stock as of December 31, 2024 and 2023[394](index=394&type=chunk) Parent Company Only Condensed Balance Sheets (as of December 31) | Metric | 2024 ($) | 2023 ($) | | :--- | :--- | | Total assets | 239,787 | 231,826 | | Total liabilities | 29,511 | 29,424 | | Shareholders' equity | 210,276 | 202,402 | Parent Company Only Condensed Statements of Income (for the year ended December 31) | Metric | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Dividends from subsidiaries | 22,000 | 30,000 | 6,000 | | Total income | 22,522 | 30,204 | 6,029 | | Total expenses | 3,533 | 3,356 | 3,243 | | Net income | 13,889 | 18,167 | 22,238 | Parent Company Only Condensed Statements of Cash Flows (for the year ended December 31) | Activity | 2024 ($) | 2023 ($) | 2022 ($) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 20,520 | 28,200 | 5,613 | | Net cash provided by (used in) investing activities | — | (77) | 10 | | Net cash provided by (used in) financing activities | (11,032) | (11,638) | (8,633) | | **Increase (decrease) in cash and cash equivalents** | **9,488** | **16,485** | **(3,010)** | | Cash and cash equivalents at end of period | 34,498 | 25,010 | 8,525 | [Changes in and Disagreements With Accountants](index=92&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants regarding accounting and financial disclosure matters - There were **no changes in or disagreements with accountants** on accounting and financial disclosure[402](index=402&type=chunk) [Controls and Procedures](index=92&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and officers concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no material changes - Disclosure controls and procedures were **effective** as of December 31, 2024, as concluded by the Principal Executive Officer and Principal Financial Officer[403](index=403&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended December 31, 2024[404](index=404&type=chunk) - Management assessed its internal control over financial reporting as **effective** as of December 31, 2024, based on the COSO 2013 framework[407](index=407&type=chunk) - Rehmann Robson LLC issued an **unqualified audit opinion** on the 2024 consolidated financial statements and an **unqualified opinion** on the effectiveness of internal controls[408](index=408&type=chunk)[410](index=410&type=chunk) [Other Information](index=93&type=section&id=Item%209B.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended December 31, 2024 - No directors or officers adopted, modified, or terminated **Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** during the fiscal quarter ended December 31, 2024[410](index=410&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=93&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to Isabella Bank Corporation - This item is **not applicable**[411](index=411&type=chunk) [PART III](index=94&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=94&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and audit committee financial experts is incorporated by reference from the Proxy Statement - Information on directors, executive officers, corporate governance, and Audit Committee financial experts is **incorporated by reference** from the Proxy Statement[413](index=413&type=chunk)[414](index=414&type=chunk) - The company has adopted a Code of Conduct and Business Ethics for principal executive, financial, and accounting officers, and an insider trading policy for directors, executive officers, and designated individuals[415](index=415&type=chunk)[416](index=416&type=chunk) [Executive Compensation](index=94&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the Proxy Statement - Executive compensation information is **incorporated by reference** from the Proxy Statement[417](index=417&type=chunk) [Security Ownership and Related Stockholder Matters](index=94&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated by reference from the Proxy Statement, alongside details on equity compensation plans for directors and employees - Security ownership information of certain beneficial owners and management is **incorporated by reference** from the Proxy Statement[418](index=418&type=chunk) Equity Compensation Plan Information (as of December 31, 2024) | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (A) | Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights (B) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (C) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders: None | — | — | — | | Equity compensation plans not approved by shareholders: Deferred director compensation plan | 101,493 | — | — | | Equity compensation plans not approved by shareholders: Restricted Stock Plan | 14,733 | — | — | | **Total** | **116,226** | N/A | N/A | - The Deferred Director Compensation Plan requires directors to invest at least **25% of their fees** in common stock units, and the Restricted Stock Plan awards unvested restricted stock to eligible employees based on performance targets[420](index=420&type=chunk)[422](index=422&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=95&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement - Information on indebtedness of and transactions with management and director independence is **incorporated by reference** from the Proxy Statement[423](index=423&type=chunk) [Principal Accountant Fees and Services](index=95&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees, services, and pre-approval policies is incorporated by reference from the Proxy Statement - Information concerning fees for professional services provided by Rehmann and pre-approval policies is **incorporated by reference** from the Proxy Statement[424](index=424&type=chunk) [PART IV](index=96&type=section&id=PART%20IV) [Exhibit and Financial Statement Schedules](index=96&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8, omits schedules, and provides a comprehensive list of Regulation S-K exhibits, including corporate governance and XBRL data - The financial statements listed in Item 8 are filed as part of this report, and all financial statement schedules are omitted as not applicable or included in the consolidated financial statements or related notes[426](index=426&type=chunk) - A comprehensive list of exhibits required by Regulation S-K is provided, including corporate governance documents, benefit plans, and XBRL Interactive Data Files[426](index=426&type=chunk)[427](index=427&type=chunk) [Form 10-K Summary](index=97&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to Isabella Bank Corporation - This item is **not applicable**[428](index=428&type=chunk) [SIGNATURES](index=98&type=section&id=SIGNATURES) - The report is signed by Jerome E. Schwind (President and CEO) and William M. Schaefer (CFO), along with other directors, affirming compliance with the Securities Exchange Act of 1934[432](index=432&type=chunk)

Exhibit 99.1 Isabella Bank Corporation Reports Fourth Quarter 2024 Results MT. PLEASANT, MICHIGAN — January 30, 2025 — Isabella Bank Corporation (OTCQX: ISBA) (the "Company" or "we") reported fourth quarter 2024 net income of $4.0 million, or $0.54 per diluted share, an increase compared to $3.8 million, or $0.51 per diluted share in the same quarter of 2023. The non-GAAP measure of core earnings in the fourth quarter 2024 totaled $3.9 million, or $0.52 per diluted share, an increase compared to $3.8 millio ...

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, 2024 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) Indicate by check mark whether the registrant (1) ...

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 June 30, 2024 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) (State or other jurisdiction of incorporation or organ ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part contains the unaudited interim condensed consolidated financial statements and management's discussion and analysis of Isabella Bank Corporation for the reporting period [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited interim condensed consolidated financial statements of Isabella Bank Corporation, including balance sheets, income statements, statements of comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Interim Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) Condensed Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | **Assets** | | | | Total cash and cash equivalents | $25,218 | $33,672 | | AFS securities, at fair value | $517,585 | $528,148 | | Net loans | $1,352,118 | $1,336,355 | | TOTAL ASSETS | $2,057,576 | $2,058,968 | | **Liabilities** | | | | Total deposits | $1,768,307 | $1,723,695 | | Total borrowed funds | $72,355 | $116,136 | | Total liabilities | $1,856,902 | $1,856,566 | | **Shareholders' Equity** | | | | Total shareholders' equity | $200,674 | $202,402 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,057,576 | $2,058,968 | [Interim Condensed Consolidated Statements of Income (Unaudited)](index=5&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(UNAUDITED)) Condensed Consolidated Statements of Income Highlights (Three Months Ended March 31, Dollars in thousands except per share amounts) | Item | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Total interest income | $21,380 | $18,595 | | Total interest expense | $8,138 | $3,244 | | Net interest income | $13,242 | $15,351 | | Provision for credit losses | $392 | $41 | | Total noninterest income | $3,468 | $3,293 | | Total noninterest expenses | $12,676 | $12,198 | | Income before federal income tax expense | $3,642 | $6,405 | | Federal income tax expense | $511 | $1,084 | | NET INCOME | $3,131 | $5,321 | | Basic earnings per common share | $0.42 | $0.70 | | Diluted earnings per common share | $0.42 | $0.70 | | Cash dividends per common share | $0.28 | $0.28 | [Interim Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=6&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(UNAUDITED)) Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Net income | $3,131 | $5,321 | | Unrealized gains (losses) on AFS securities, net of tax | $(2,294) | $6,880 | | Comprehensive income (loss) | $837 | $12,201 | [Interim Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited)](index=8&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS'%20EQUITY%20(UNAUDITED)) - Total shareholders' equity decreased from **$202,402 thousand** at January 1, 2024, to **$200,674 thousand** at March 31, 2024, primarily due to cash dividends paid and common stock repurchases, partially offset by net income and issuance of common stock[21](index=21&type=chunk) Key Changes in Shareholders' Equity (Three Months Ended March 31, 2024, Dollars in thousands) | Item | Amount | | :------------------------------------------ | :----- | | Balance, January 1, 2024 | $202,402 | | Comprehensive income (loss) | $837 | | Issuance of common stock | $447 | | Common stock repurchased | $(740) | | Cash dividends paid | $(2,095) | | Balance, March 31, 2024 | $200,674 | [Interim Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=INTERIM%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, Dollars in thousands) | Activity Type | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $3,341 | $7,569 | | Net cash provided by (used in) investing activities | $(9,796) | $11,802 | | Net cash provided by (used in) financing activities | $(1,999) | $40,428 | | Increase (decrease) in cash and cash equivalents | $(8,454) | $59,799 | | Cash and cash equivalents at end of period | $25,218 | $98,723 | [Note 1 – Basis of Presentation](index=13&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, not including all footnotes required for complete annual statements[29](index=29&type=chunk) - Operating results for Q1 2024 are not necessarily indicative of the full year[29](index=29&type=chunk) [Note 2 – AFS Securities](index=13&type=section&id=Note%202%20%E2%80%93%20AFS%20Securities) AFS Securities Fair Value and Unrealized Losses (Dollars in thousands) | Category | March 31, 2024 Fair Value | December 31, 2023 Fair Value | Gross Unrealized Losses (March 31, 2024) | | :--------------------------------- | :-------------------------- | :--------------------------- | :--------------------------------------- | | U.S. Treasury | $214,226 | $214,801 | $16,888 | | States and political subdivisions | $90,470 | $92,876 | $3,904 | | Mortgage-backed securities | $31,044 | $32,815 | $2,718 | | Collateralized mortgage obligations | $171,831 | $177,775 | $10,711 | | Corporate | $7,001 | $6,950 | $1,149 | | Total | $517,585 | $528,148 | $35,557 | - The unrealized loss on the AFS securities portfolio increased due to rising short-term and intermediate-term interest rates[35](index=35&type=chunk) - Management does not believe any securities are credit-impaired and does not intend to sell them before recovery of cost[36](index=36&type=chunk) [Note 3 – Loans and ACL](index=16&type=section&id=Note%203%20%E2%80%93%20Loans%20and%20ACL) Loan Portfolio Composition (Dollars in thousands) | Loan Type | March 31, 2024 Balance | Percent of Total (2024) | December 31, 2023 Balance | Percent of Total (2023) | | :--------------------------------- | :--------------------- | :---------------------- | :------------------------ | :---------------------- | | Commercial and industrial | $226,281 | 16.58% | $209,738 | 15.54% | | Commercial real estate | $561,123 | 41.09% | $564,244 | 41.82% | | Advances to mortgage brokers | $29,688 | 2.17% | $18,541 | 1.37% | | Agricultural | $93,695 | 6.86% | $99,994 | 7.41% | | Residential real estate | $356,658 | 26.12% | $356,418 | 26.41% | | Consumer | $98,063 | 7.18% | $100,528 | 7.45% | | Total | $1,365,508 | 100.00% | $1,349,463 | 100.00% | - Nonaccrual loans increased to **$1,283 thousand** at March 31, 2024, from **$982 thousand** at December 31, 2023, primarily driven by an increase in secured commercial and industrial loans and commercial mortgage owner-occupied loans[47](index=47&type=chunk) Allowance for Credit Losses (ACL) Activity (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | ACL at beginning of period | $13,108 | $9,850 | | Charge-offs | $(191) | $(101) | | Recoveries | $145 | $110 | | Credit loss expense | $328 | $37 | | ACL at end of period | $13,390 | $12,640 | [Note 4 – Borrowed Funds](index=33&type=section&id=Note%204%20%E2%80%93%20Borrowed%20Funds) Borrowed Funds Balances (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :---------------- | | Securities sold under agreements to repurchase | $42,998 | $46,801 | | FHLB advances | $— | $40,000 | | Subordinated debt, net | $29,357 | $29,335 | | Total borrowed funds | $72,355 | $116,136 | - The company had **no FHLB advances** at March 31, 2024, compared to **$40,000 thousand** at December 31, 2023, indicating a paydown of these higher-cost borrowings[13](index=13&type=chunk)[82](index=82&type=chunk) - Subordinated notes bear a fixed interest rate of **3.25%** until June 15, 2026, then reset quarterly to a floating rate of 3-month SOFR plus **256 basis points** until maturity on June 15, 2031[83](index=83&type=chunk) [Note 5 – Computation of Earnings Per Common Share](index=35&type=section&id=Note%205%20%E2%80%93%20Computation%20of%20Earnings%20Per%20Common%20Share) Earnings Per Common Share (Three Months Ended March 31, Dollars in thousands except per share amounts) | Item | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Net income | $3,131 | $5,321 | | Basic earnings per common share | $0.42 | $0.70 | | Diluted earnings per common share | $0.42 | $0.70 | | Average number of common shares outstanding for basic calculation | 7,493,334 | 7,556,585 | | Average number of common shares outstanding used to calculate diluted earnings per common share | 7,507,739 | 7,634,417 | [Note 6 – Restricted Stock Plan](index=35&type=section&id=Note%206%20%E2%80%93%20Restricted%20Stock%20Plan) - The Restricted Stock Plan (RSP) awards restricted stock bonuses to eligible employees (currently CEO and President) based on annual performance targets, with vesting conditions and clawback provisions[87](index=87&type=chunk) Nonvested Restricted Stock Awards (Three Months Ended March 31) | Item | 2024 Number of Shares | 2024 Fair Value ($) | 2023 Number of Shares | 2023 Fair Value ($) | | :--------------------------------- | :-------------------- | :------------------ | :-------------------- | :------------------ | | Balance, January 1 | 27,072 | 592 | 27,072 | 592 | | Granted | 6,686 | 130 | 3,705 | 91 | | Vested | (16,240) | (345) | — | — | | Balance, March 31 | 17,518 | 377 | 30,777 | 683 | - Compensation expense related to RSP awards was **$25 thousand** for Q1 2024, down from **$42 thousand** in Q1 2023[88](index=88&type=chunk) - Remaining unrecognized compensation expense is **$202 thousand**, expected to be recognized over **2.11 years**[88](index=88&type=chunk) [Note 7 – Other Noninterest Expenses](index=36&type=section&id=Note%207%20%E2%80%93%20Other%20Noninterest%20Expenses) Other Noninterest Expenses (Three Months Ended March 31, Dollars in thousands) | Expense Category | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Audit, consulting, and legal fees | $513 | $535 | | ATM and debit card fees | $469 | $400 | | FDIC insurance premiums | $252 | $228 | | Marketing costs | $244 | $245 | | Memberships and subscriptions | $228 | $240 | | Loan underwriting fees | $183 | $215 | | Donations and community relations | $182 | $184 | | Director fees | $176 | $204 | | All other | $708 | $756 | | Total other noninterest expenses | $2,955 | $3,007 | [Note 8 – Federal Income Taxes](index=36&type=section&id=Note%208%20%E2%80%93%20Federal%20Income%20Taxes) Federal Income Tax Expense Reconciliation (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Income taxes at statutory rate (21%) | $765 | $1,345 | | Effect of nontaxable income | $(178) | $(202) | | Effect of nondeductible expenses | $8 | $9 | | Effect of tax credits | $(84) | $(68) | | Federal income tax expense | $511 | $1,084 | [Note 9 – Accumulated Other Comprehensive Income](index=37&type=section&id=Note%209%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Income) Changes in AOCI (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Balance, January 1 | $(25,896) | $(37,194) | | OCI before reclassifications | $(2,926) | $8,610 | | Tax effect | $632 | $(1,729) | | OCI, net of tax | $(2,294) | $6,880 | | Balance, March 31 | $(28,190) | $(30,314) | - Unrealized losses on AFS securities, net of tax, contributed **$(2,294) thousand** to OCI in Q1 2024, compared to unrealized gains of **$6,880 thousand** in Q1 2023[92](index=92&type=chunk)[93](index=93&type=chunk) [Note 10 – Fair Value](index=37&type=section&id=Note%2010%20%E2%80%93%20Fair%20Value) - Fair value measurements are categorized into three levels based on input observability: **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1 quoted prices), and **Level 3** (unobservable inputs)[94](index=94&type=chunk) Assets Measured at Fair Value on a Recurring Basis (March 31, 2024, Dollars in thousands) | Item | Total | Level 1 | Level 2 | Level 3 | | :--------------------------------- | :---- | :------ | :------ | :------ | | AFS securities | $517,585 | $— | $517,585 | $— | | Collateral dependent (net of ACL) | $1,168 | $— | $— | $1,168 | | Total | $518,753 | $— | $517,585 | $1,168 | - Collateral dependent loans measured at fair value on a nonrecurring basis use discounted value techniques with unobservable inputs (Level 3), applying discounts of **20%** for real estate, **25%-35%** for equipment, and **50%** for accounts receivable as of March 31, 2024[101](index=101&type=chunk) [Note 11 – Operating Segments](index=40&type=section&id=Note%2011%20%E2%80%93%20Operating%20Segments) - Isabella Bank, the Corporation's subsidiary, represents approximately **90% or more** of consolidated total assets and operating results, thus no additional segment reporting is presented[107](index=107&type=chunk) [Note 12 – Parent Company Only Financial Information](index=41&type=section&id=Note%2012%20%E2%80%93%20Parent%20Company%20Only%20Financial%20Information) Parent Company Only Condensed Balance Sheets (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | TOTAL ASSETS | $230,386 | $231,826 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $230,386 | $231,826 | Parent Company Only Condensed Statements of Income (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | | :--------------------------------- | :----- | :----- | | Total income | $6,111 | $5,025 | | Total expenses | $895 | $825 | | Net income | $3,131 | $5,321 | Parent Company Only Condensed Statements of Cash Flows (Three Months Ended March 31, Dollars in thousands) | Activity Type | 2024 | 2023 | | :------------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $5,700 | $4,706 | | Net cash provided by (used in) financing activities | $(2,808) | $(3,049) | | Increase (decrease) in cash and cash equivalents | $2,892 | $1,657 | | Cash and cash equivalents at end of period | $27,902 | $10,182 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three months ended March 31, 2024, compared to the same period in 2023 and December 31, 2023. It highlights key trends in net interest income, loan growth, credit quality, deposit changes, and capital adequacy [Executive Summary](index=43&type=section&id=Executive%20Summary) Q1 2024 vs. Q1 2023 Performance Highlights (Dollars in thousands except per share amounts) | Metric | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--------------------------------- | :------ | :------ | :--------- | :--------- | | Net Income | $3,131 | $5,321 | $(2,190) | (41.16%) | | EPS (Basic) | $0.42 | $0.70 | $(0.28) | (40.00%) | | Net Interest Income | $13,242 | $15,351 | $(2,109) | (13.74%) | | Provision for Credit Losses | $392 | $41 | $351 | 856.10% | | Noninterest Income | $3,468 | $3,293 | $175 | 5.31% | | Noninterest Expenses | $12,676 | $12,198 | $478 | 3.92% | - Net interest income decreased due to higher interest rates causing a slower repricing of earning assets compared to interest-bearing liabilities[116](index=116&type=chunk) - The net yield on interest-earning assets decreased from **3.22%** in Q1 2023 to **2.78%** in Q1 2024, while the cost of interest-bearing liabilities increased from **0.95%** to **2.27%**[117](index=117&type=chunk) - Total assets were **$2,057,576 thousand** at March 31, 2024[121](index=121&type=chunk) - Gross loans increased by **$16,045 thousand** since December 31, 2023, driven by commercial portfolio growth and advances to mortgage brokers[123](index=123&type=chunk) - Total deposits increased by **$44,612 thousand**, allowing for the paydown of **$40,000 thousand** in FHLB advances[125](index=125&type=chunk) - The AFS securities portfolio had net unrealized losses of **$34,752 thousand** at March 31, 2024, impacting tangible book value per share, which decreased to **$20.35** from **$20.59** at December 31, 2023[122](index=122&type=chunk) [Results of Operations (Unaudited)](index=45&type=section&id=Results%20of%20Operations%20(Unaudited)) Quarter-to-Date Performance Trends (Dollars in thousands except per share amounts) | Metric | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net income | $3,131 | $3,803 | $4,413 | $4,630 | $5,321 | | Basic earnings per share | $0.42 | $0.51 | $0.59 | $0.62 | $0.70 | | Net interest margin yield (FTE) | 2.78% | 2.85% | 3.02% | 3.11% | 3.22% | | Return on average total assets | 0.61% | 0.74% | 0.86% | 0.91% | 1.04% | | Return on average shareholders' equity | 6.16% | 8.05% | 9.24% | 9.47% | 11.35% | - Net income and profitability ratios (Return on average total assets, Return on average shareholders' equity, Net interest margin yield) have shown a **declining trend** over the past five quarters, with Q1 2024 being the lowest[127](index=127&type=chunk) Year-to-Date Performance (Three Months Ended March 31, Dollars in thousands) | Metric | 2024 | 2023 | 2022 | | :--------------------------------- | :----- | :----- | :----- | | Interest income | $21,380 | $18,595 | $14,762 | | Interest expense | $8,138 | $3,244 | $1,283 | | Net interest income | $13,242 | $15,351 | $13,479 | | Net income | $3,131 | $5,321 | $4,734 | [Average Balances, Interest Rates, and Net Interest Income](index=47&type=section&id=Average%20Balances,%20Interest%20Rates,%20and%20Net%20Interest%20Income) Average Balances and Yields/Rates (Three Months Ended March 31, 2024 vs. 2023, Dollars in thousands) | Item | Average Balance (2024) | Yield/Rate (2024) | Average Balance (2023) | Yield/Rate (2023) | | :--------------------------------- | :--------------------- | :---------------- | :--------------------- | :---------------- | | **Interest Earning Assets** | | | | | | Loans | $1,348,749 | 5.36% | $1,268,269 | 4.70% | | Total earning assets | $1,943,758 | 4.45% | $1,939,998 | 3.89% | | **Interest Bearing Liabilities** | | | | | | Interest bearing demand deposits | $345,842 | 0.48% | $379,717 | 0.15% | | Savings deposits | $633,904 | 2.10% | $645,987 | 0.91% | | Time deposits | $357,541 | 3.82% | $267,463 | 1.82% | | Total interest bearing liabilities | $1,434,944 | 2.27% | $1,362,129 | 0.95% | | Net interest income (FTE) | $13,488 | | $15,623 | | | Net yield on interest earning assets (FTE) | | 2.78% | | 3.22% | [Volume and Rate Variance Analysis](index=48&type=section&id=Volume%20and%20Rate%20Variance%20Analysis) Net Change in Interest Margin (FTE) Due to Volume and Rate (Three Months Ended March 31, 2024 vs. 2023, Dollars in thousands) | Item | Volume Change | Rate Change | Net Change | | :--------------------------------- | :------------ | :---------- | :--------- | | Total changes in interest income | $419 | $2,340 | $2,759 | | Total changes in interest expense | $867 | $4,027 | $4,894 | | Net change in interest margin (FTE) | $(448) | $(1,687) | $(2,135) | - The net interest margin decreased by **$2,135 thousand** from Q1 2023 to Q1 2024, primarily driven by a larger increase in interest expense due to rising rates on deposit accounts and borrowed funds, outpacing the increase in interest income[134](index=134&type=chunk) [Past Due and Nonaccrual Loans](index=49&type=section&id=Past%20Due%20and%20Nonaccrual%20Loans) Total Past Due and Nonaccrual Loans (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Commercial and industrial | $1,182 | $656 | $291 | | Commercial real estate | $3,356 | $— | $2,844 | | Agricultural | $217 | $205 | $588 | | Residential real estate | $4,279 | $3,910 | $2,365 | | Consumer | $187 | $193 | $43 | | Total | $9,221 | $4,964 | $6,131 | | Total past due and nonaccrual loans to gross loans | 0.68% | 0.37% | 0.48% | - Total past due and nonaccrual loans significantly increased to **$9,221 thousand** at March 31, 2024, from **$4,964 thousand** at December 31, 2023, mainly due to a large increase in commercial real estate and residential real estate past due loans[137](index=137&type=chunk) Nonaccrual Loans (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Commercial and industrial | $567 | $491 | $20 | | Commercial real estate | $234 | $— | $57 | | Agricultural | $189 | $205 | $232 | | Residential real estate | $293 | $286 | $179 | | Total | $1,283 | $982 | $488 | | Nonaccrual loans as a % of loans at end of period | 0.09% | 0.07% | 0.04% | [Nonperforming Assets](index=49&type=section&id=Nonperforming%20Assets) Nonperforming Assets (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | Nonaccrual loans | $1,283 | $982 | $488 | | Accruing loans past due 90 days or more | $— | $87 | $— | | Total nonperforming loans | $1,283 | $1,069 | $488 | | Foreclosed assets | $579 | $406 | $414 | | Debt securities | $12 | $12 | $77 | | Total nonperforming assets | $1,874 | $1,487 | $979 | | Nonperforming loans as a % of total loans | 0.09% | 0.08% | 0.04% | | Nonperforming assets as a % of total assets | 0.09% | 0.07% | 0.05% | - Total nonperforming assets increased to **$1,874 thousand** at March 31, 2024, from **$1,487 thousand** at December 31, 2023, and **$979 thousand** at March 31, 2023, indicating a deteriorating trend in asset quality[139](index=139&type=chunk) [ACL - Loans](index=50&type=section&id=ACL%20-%20Loans) ACL Balances and Ratios (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | March 31, 2023 | | :--------------------------------- | :------------- | :---------------- | :------------- | | ACL | $13,390 | $13,108 | $12,640 | | ACL as a % of loans at end of period | 0.98% | 0.97% | 0.99% | | ACL as a % of nonaccrual loans | 1,043.65% | 1,334.83% | 2,590.16% | | Net loan charge-offs (recoveries) to average loans outstanding | 0.00% | 0.03% | 0.00% | | Provision for credit losses - loans | $328 | $722 | $37 | | Provision for credit losses to average loans outstanding | 0.02% | 0.05% | 0.00% | - The ACL increased to **$13,390 thousand** at March 31, 2024, from **$13,108 thousand** at December 31, 2023, and **$12,640 thousand** at March 31, 2023[141](index=141&type=chunk) - The provision for credit losses was **$328 thousand** in Q1 2024, significantly higher than **$37 thousand** in Q1 2023[141](index=141&type=chunk) - The ACL coverage of nonaccrual loans decreased substantially from **2,590.16%** in Q1 2023 to **1,043.65%** in Q1 2024, reflecting the increase in nonaccrual loans[141](index=141&type=chunk) [Noninterest Income and Noninterest Expenses](index=51&type=section&id=Noninterest%20Income%20and%20Noninterest%20Expenses) Noninterest Income (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------- | :----- | :----- | :--------- | :--------- | | Total service charges and fees | $2,046 | $1,978 | $68 | 3.44% | | Wealth management fees | $939 | $786 | $153 | 19.47% | | Earnings on corporate owned life insurance policies | $243 | $226 | $17 | 7.52% | | Net gain on sale of mortgage loans | $34 | $67 | $(33) | (49.25%) | | Total noninterest income | $3,468 | $3,293 | $175 | 5.31% | - Wealth management fees increased by **19.47%** due to new accounts and higher market valuations, and are expected to exceed 2023 levels for the remainder of 2024[144](index=144&type=chunk)[145](index=145&type=chunk) Noninterest Expenses (Three Months Ended March 31, Dollars in thousands) | Item | 2024 | 2023 | Change ($) | Change (%) | | :--------------------------------- | :----- | :----- | :--------- | :--------- | | Compensation and benefits | $7,015 | $6,589 | $426 | 6.47% | | Furniture and equipment | $1,675 | $1,597 | $78 | 4.88% | | Occupancy | $1,031 | $1,005 | $26 | 2.59% | | ATM and debit card fees | $469 | $400 | $69 | 17.25% | | Total noninterest expenses | $12,676 | $12,198 | $478 | 3.92% | - Compensation and benefits increased by **$426 thousand** due to annual merit increases and medical claim adjustments, and are expected to exceed 2023 levels for the remainder of 2024[147](index=147&type=chunk) [Analysis of Changes in Financial Condition](index=53&type=section&id=Analysis%20of%20Changes%20in%20Financial%20Condition) Balance Sheet Changes (March 31, 2024 vs. December 31, 2023, Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | Change ($) | Change (%) | | :--------------------------------- | :------------- | :---------------- | :--------- | :--------- | | TOTAL ASSETS | $2,057,576 | $2,058,968 | $(1,392) | (0.07%) | | Net loans | $1,352,118 | $1,336,355 | $15,763 | 1.18% | | Total deposits | $1,768,307 | $1,723,695 | $44,612 | 2.59% | | Borrowed funds | $72,355 | $116,136 | $(43,781) | (37.70%) | | Shareholders' equity | $200,674 | $202,402 | $(1,728) | (0.85%) | - Total assets slightly decreased, driven by a decline in cash and investment securities to fund loan growth[150](index=150&type=chunk) - Total loans grew by **$16,045 thousand**, primarily in commercial and industrial loans (**7.89% increase**) and advances to mortgage brokers (**60.12% increase**)[152](index=152&type=chunk) - Total deposits increased by **$44,612 thousand**, with significant growth in interest-bearing demand deposits (**8.94%**) and certificates of deposit (**5.71%**), which helped fund the paydown of borrowed funds[150](index=150&type=chunk)[153](index=153&type=chunk) [Contractual Obligations and Loan Commitments](index=55&type=section&id=Contractual%20Obligations%20and%20Loan%20Commitments) - The company has various financial obligations and loan commitments, including unused lines of credit, commercial and standby letters of credit, and commitments to grant loans[156](index=156&type=chunk) - Many of these commitments historically expire without being drawn upon[156](index=156&type=chunk) - Credit-related financial instruments with off-balance-sheet risk are managed using the same credit policies as for extending loans, and no significant losses are anticipated from these commitments[157](index=157&type=chunk)[158](index=158&type=chunk) [Capital](index=56&type=section&id=Capital) Regulatory Capital Ratios (March 31, 2024 vs. December 31, 2023) | Capital Ratio | March 31, 2024 Actual | Minimum Required (BASEL III) | Required to be Well Capitalized | December 31, 2023 Actual | | :--------------------------------- | :-------------------- | :--------------------------- | :------------------------------ | :----------------------- | | Common equity tier 1 capital | 12.36% | 7.00% | 6.50% | 12.54% | | Tier 1 capital | 12.36% | 8.50% | 8.00% | 12.54% | | Total capital | 15.31% | 10.50% | 10.00% | 15.52% | | Tier 1 leverage | 8.80% | 4.00% | 5.00% | 8.76% | - The Bank exceeded all minimum capital requirements at March 31, 2024, indicating a **strong capital position**[162](index=162&type=chunk) - The company repurchased **36,484 shares** (**$740 thousand**) of common stock in Q1 2024, and as of March 31, 2024, was authorized to repurchase an additional **234,322 shares**[160](index=160&type=chunk) [Liquidity](index=56&type=section&id=Liquidity) - Primary liquidity sources (cash and cash equivalents, unencumbered AFS securities) decreased to **$353,893 thousand** (**17.20% of assets**) at March 31, 2024, from **$381,417 thousand** (**18.52% of assets**) at December 31, 2023, due to increased loans and decreased unencumbered AFS securities[164](index=164&type=chunk) Total Cash and Liquidity (Dollars in thousands) | Item | March 31, 2024 | December 31, 2023 | | :--------------------------------- | :------------- | :---------------- | | Total cash and cash equivalents | $25,218 | $33,672 | | Total available lines of credit | $374,707 | $338,080 | | Unencumbered lendable value of FRB collateral, estimated | $310,000 | $320,000 | | Total cash and liquidity | $709,925 | $691,752 | | Uninsured deposits | $658,564 | $600,381 | | Coverage ratio of uninsured deposits with total cash and liquidity | 108% | 115% | - The coverage ratio of uninsured deposits with total cash and liquidity remained strong at **108%** at March 31, 2024, despite a slight decrease from **115%** at December 31, 2023[166](index=166&type=chunk) [Fair Value](index=57&type=section&id=Fair%20Value) - The company uses fair value measurements for recurring adjustments to AFS securities and certain liabilities, and nonrecurring adjustments for assets like mortgage loans AFS, collateral dependent loans, and OMSR[167](index=167&type=chunk) [Market Risk](index=57&type=section&id=Market%20Risk) - Primary market risks are interest rate risk (IRR) and liquidity risk[169](index=169&type=chunk) - IRR is managed through simulation analysis and gap analysis, which forecast effects on the balance sheet and net interest income under various interest rate scenarios[171](index=171&type=chunk)[172](index=172&type=chunk) - The Asset-Liability Committee (ALCO) regularly monitors projected net interest income sensitivity to ensure it remains within established limits and manages risks according to FRB policies[170](index=170&type=chunk)[171](index=171&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the market risk disclosures provided in the Management's Discussion and Analysis of Financial Condition and Results of Operations, specifically the 'Market Risk' subsection - The information regarding quantitative and qualitative disclosures about market risk is incorporated by reference from the 'Market Risk' section within Management's Discussion and Analysis of Financial Condition and Results of Operations[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the most recent fiscal quarter - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2024[176](index=176&type=chunk) - No material changes occurred in internal control over financial reporting during the most recent fiscal quarter[177](index=177&type=chunk) [PART II – OTHER INFORMATION](index=59&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes information on legal proceedings, risk factors, equity security sales, defaults, mine safety, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not involved in any material legal proceedings and that routine litigation is not expected to have a material adverse effect on operations, earnings, financial condition, or cash flows - The company is not involved in any material legal proceedings[180](index=180&type=chunk) - Routine litigation incidental to business is not expected to result in any material adverse effect on operations, earnings, financial condition, or cash flows[180](index=180&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[181](index=181&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchase plan, including the number of shares repurchased during the first quarter of 2024 and the remaining authorization - The company has a publicly announced common stock repurchase plan, last amended on April 28, 2021, authorizing an additional **500,000 shares** with no expiration date[182](index=182&type=chunk) Common Stock Repurchases (Three Months Ended March 31, 2024) | Period | Number of Shares Repurchased | Average Price Per Share ($) | Maximum Shares That May Yet Be Purchased | | :---------------- | :--------------------------- | :-------------------------- | :--------------------------------------- | | January 1 - 31 | 8,711 | 21.58 | 262,095 | | February 1 - 29 | 12,945 | 20.47 | 249,150 | | March 1 - 31 | 14,828 | 19.36 | 234,322 | | Total (Q1 2024) | 36,484 | 20.28 | 234,322 | [Item 3. Defaults Upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no applicable defaults upon senior securities - Not applicable[184](index=184&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that there are no applicable mine safety disclosures - Not applicable[185](index=185&type=chunk) [Item 5. Other Information](index=59&type=section&id=Item%205.%20Other%20Information) This section reports that none of the company's directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2024 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024[186](index=186&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including indentures, purchase agreements, registration rights agreements, and certifications required by the Sarbanes-Oxley Act - Exhibits include Indenture and Form of Subordinated Note due 2031, Subordinated Note Purchase Agreement, Registration Rights Agreement, and Section 302 and 1350 Certifications[188](index=188&type=chunk)