Isabella Bank Corp(ISBA) - 2025 Q2 - Quarterly Report

Securities and Fair Value - As of June 30, 2025, the total amortized cost of AFS securities is $518,154, with a fair value of $500,560, reflecting unrealized losses of $18,594[32] - The U.S. Treasury securities have an amortized cost of $210,588 and a fair value of $204,306, resulting in unrealized losses of $6,282[32] - The total unrealized losses for AFS securities categorized by investment type include $22,176 for securities with losses less than twelve months and $18,014 for those with losses of twelve months or more[35] - The fair value of U.S. Treasury securities decreased from $220,571 on December 31, 2024, to $204,306 on June 30, 2025[32] - The company expects unrealized losses to recover as securities approach their respective maturity dates or if market yields decline[35] - The total number of securities in an unrealized loss position as of June 30, 2025, is 268, compared to 353 on December 31, 2024[35] - The balance of unrealized gains on AFS securities decreased from $(20,958,000) at December 31, 2024, to $(13,990,000) by June 30, 2025[92] - The total fair value of financial instruments recorded at fair value was $504,575 million as of June 30, 2025, with 99.20% classified as Level 2[105] - The total AFS securities fair value increased to $500,560 million as of June 30, 2025, from $489,029 million as of December 31, 2024[105] Loan Portfolio and Credit Quality - Total loan portfolio balance as of June 30, 2025, is $1,397,513 million, a decrease from $1,423,571 million as of December 31, 2024[37] - Commercial real estate loans account for 43.96% of the total loan portfolio, increasing from 41.57% in the previous period[37] - Residential real estate loans represent 28.53% of the total loan portfolio, up from 26.75%[37] - Nonaccrual loans total $1,164 million as of June 30, 2025, with 282 million having no allowance for credit losses (ACL)[47] - Past due loans of 90 days or more amount to $953 million, with a total current loan balance of $1,395,379 million[47] - The company limits direct credit exposure to any one borrower to $18,000, mitigating risk through loan participations with other banks[39] - The company requires personal guarantees and/or life insurance beneficiary assignments from owners of closely held corporations[40] - Interest income is accrued based on the principal amount outstanding unless a loan is in nonaccrual status[38] - The company’s lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value or purchase price[42] - Consumer loans are amortized for a period of up to 15 years, focusing on the borrower's intent and ability to pay rather than collateral value[43] - The total amount of loans past due across all categories is $5,271 million, with a total loan portfolio of $1,423,571 million[48] - The primary credit quality indicator for residential real estate and consumer loans is the individual loan's past due status[61] - The company has seen a total of $41,743 million in indirect secured consumer loans, with a minor past due amount of $8 million[62] - The overall performance indicates a stable loan portfolio with manageable past due and nonaccrual amounts[62] Charge-offs and Allowance for Credit Losses - The year-to-date gross charge-offs for commercial and industrial loans is $22 million[50] - The year-to-date gross charge-offs for unsecured commercial and industrial loans is $50 million[50] - The total gross charge-offs for commercial real estate loans is not specified, but the total for all categories is $72 million[50] - Year-to-date gross charge-offs for agricultural other loans were $29.695 million[51] - Year-to-date gross charge-offs for residential real estate are $1 million, indicating a stable performance[62] - Year-to-date gross charge-offs for secured consumer loans amount to $135 million, reflecting a slight increase[62] - The allowance for credit losses (ACL) for loans increased to $12,977 million as of June 30, 2025, up from $12,895 million at December 31, 2024[80] - The total charge-offs for the three months ended June 30, 2025, amounted to $390 million, while recoveries were $1,822 million[80] Financial Performance - Basic earnings per common share for the three months ended June 30, 2025, were $0.68, an increase from $0.47 for the same period in 2024, reflecting a growth of approximately 44.7%[90] - Net income for the six months ended June 30, 2025, was $8,980 million, compared to $6,612 million for the same period in 2024, representing an increase of about 36.0%[90] - The average number of common shares outstanding for basic calculation during the three months ended June 30, 2025, was 7,383,338, a slight decrease from 7,477,310 in the same period of 2024[90] Capital Ratios and Regulatory Compliance - As of June 30, 2025, Isabella Bank's Common Equity Tier 1 capital to risk-weighted assets ratio is 12.18%, exceeding the minimum requirement of 7.00%[91] - The consolidated Total Capital to risk-weighted assets ratio is 15.34%, significantly above the minimum requirement of 10.50%[91] - The Tier 1 capital to average assets ratio for the consolidated entity is 9.04%, exceeding the minimum requirement of 4.00%[91] - The bank's capital ratios indicate that it is categorized as "well capitalized" under the FDIC's regulatory framework[91] - The company has no significant regulatory constraints on its capital as of June 30, 2025[91] Loan Modifications and Financial Assistance - Loan modifications granted to borrowers experiencing financial difficulty included $2.6 billion in term extensions, representing 1.12% of the total class of financial receivables[65] - The company committed to advance $41 million and $43 million in additional funds for modified loans as of June 30, 2025, and December 31, 2024, respectively[67] - The total amortized cost basis of loans modified due to financial difficulty totaled $6,996 million, with $6,897 million classified as current[70] - The company had no loans that defaulted in the three and six-month periods ended June 30, 2025, which were modified within 12 months prior to the default date[70] Miscellaneous Financial Information - Securities sold under agreements to repurchase without stated maturity dates amounted to $43,208 million as of June 30, 2025, down from $53,567 million as of December 31, 2024[84] - The weighted average interest rate for short-term borrowings during the three months ended June 30, 2025, was 3.14%[83] - The company had the ability to borrow up to an additional $376,974 million without pledging additional collateral as of June 30, 2025[85] - The total subordinated debt, net, as of June 30, 2025, was $29,469 million, slightly up from $29,424 million as of December 31, 2024[88]