Isabella Bank Corp(US:ISBA)2025-11-10 21:39Securities and Fair Value - As of September 30, 2025, the total amortized cost of AFS securities is $524,534, with a fair value of $511,970, reflecting unrealized losses of $13,671[31]. - The U.S. Treasury securities have an amortized cost of $210,462 and a fair value of $206,041, resulting in unrealized losses of $4,421[31]. - The total unrealized losses for AFS securities categorized by investment type include $4,421 for U.S. Treasury, $2,966 for states and political subdivisions, and $1,299 for mortgage-backed securities[34]. - The number of securities in an unrealized loss position as of September 30, 2025, is 183, compared to 353 as of December 31, 2024[34]. - Management does not believe any of the AFS securities are impaired due to credit quality, as issuers continue to make timely principal and interest payments[34]. - The company expects unrealized losses to recover as securities approach their maturity date or if market yields decline[34]. - The total available-for-sale (AFS) securities reached $511,970 million on September 30, 2025, compared to $489,029 million at the end of 2024, reflecting a growth of approximately 4.0%[103]. - The fair value of collateral-dependent loans was $3,426 million with a discount rate of 25% applied to real estate collateral[97]. - The fair value of OMSR (Other Mortgage Servicing Rights) as of September 30, 2025, was $2,164 million, with a constant prepayment rate of 7% and a discount rate of 11%[99]. - The estimated fair value of gross loans as of September 30, 2025, was $1,395,921 million, while the net loans were valued at $1,382,772 million after accounting for an allowance for credit losses of $13,149 million[102]. - The carrying value of deposits without stated maturities was $1,520,804 million, matching the estimated fair value[102]. - The estimated fair value of subordinated debt as of September 30, 2025, was $28,417 million, with a carrying value of $29,492 million[102]. - The company conducts quarterly reviews of net realizable values for collateral-dependent loans to determine if additional reserves or charge-offs are necessary[96]. - The company utilizes independent appraisals and internal evaluations to assess the collateral value for loans, ensuring accurate fair value measurements[96]. - The percentage of assets and liabilities measured at fair value was 98.73% for Level 2 and 1.27% for Level 3 as of September 30, 2025, indicating a stable valuation structure[103]. - The company had no unrealized gains and losses included in other comprehensive income (OCI) for recurring Level 3 fair value measurements at the end of the reporting period[103]. Loan Portfolio and Credit Quality - Total loan portfolio balance as of September 30, 2025, is $1,431,905 million, a slight increase from $1,423,571 million on December 31, 2024[35]. - Commercial and industrial loans account for 15.23% of the total loan portfolio, increasing from 14.09% in the previous period[35]. - Total commercial real estate loans represent 43.77% of the loan portfolio, up from 41.57%[35]. - Residential real estate loans increased to 28.78% of the total portfolio, compared to 26.75% previously[35]. - Nonaccrual loans totaled $3,443 million as of September 30, 2025, with $282 million having no allowance for credit losses (ACL)[45]. - Past due loans include $100 million in the 30-59 days category and $3,000 million in the 90 days or more category for commercial and industrial loans[45]. - The company has a maximum loan-to-value ratio of 100% for residential real estate loans, with private mortgage insurance required for ratios exceeding 80%[40]. - The company reported net unamortized deferred loan costs of $3,129 million as of September 30, 2025[36]. - The company limits direct credit exposure to any one borrower to $18,000, utilizing loan participations for larger amounts[37]. - Consumer loans, which include secured and unsecured personal loans, total $72,225 million, down from $87,584 million[35]. - Total commercial and industrial loans amount to $200,623 million, with $328 million past due in the 30-59 days category[46]. - Total commercial real estate loans stand at $591,718 million, with $817 million past due in the 30-59 days category[46]. - Total agricultural loans are $99,694 million, with no loans past due in the 30-59 days category[46]. - Total residential real estate loans amount to $380,872 million, with $3,875 million past due in the 30-59 days category[46]. - Total consumer loans are $87,584 million, with $251 million past due in the 30-59 days category[46]. - The total amount of loans past due across all categories is $5,271 million, with a total loan portfolio of $1,423,571 million[46]. - The company reported gross charge-offs of $22 million year-to-date for commercial and industrial loans[48]. - For unsecured commercial and industrial loans, total loans amount to $31,826 million, with $10,692 million rated 1-3 risk[48]. - The total for commercial real estate loans (owner-occupied) is $220,233 million, with $21,777 million rated 1-3 risk[48]. - The total for commercial real estate loans (non-owner occupied) is $224,653 million, with $28,501 million rated 1-3 risk[48]. - Total commercial real estate loans reached $97.971 billion, with risk ratings 1-3 contributing $11.202 billion[49]. - Multifamily commercial real estate loans totaled $83.785 billion, with risk rating 4 accounting for $16.633 billion[49]. - Agricultural mortgage loans amounted to $67.726 billion, with risk ratings 1-3 contributing $5.798 billion[49]. - The total for commercial and industrial secured loans was $177.239 billion, with risk rating 4 at $27.530 billion[50]. - Gross charge-offs for commercial and industrial secured loans year-to-date were $327 million[50]. - Owner-occupied commercial real estate loans totaled $213.086 billion, with risk rating 4 at $34.980 billion[50]. - Non-owner occupied commercial real estate loans reached $217.679 billion, with risk rating 1-3 contributing $18.783 billion[50]. - The company reported $5.056 billion in advances to mortgage brokers for 2025 year-to-date[49]. - Risk rating 4 loans in commercial real estate increased significantly, reflecting a total of $160.134 billion[50]. - The company has not reported any gross charge-offs for agricultural mortgages year-to-date[49]. - Total loans for commercial real estate (1-4 family investor) reached $10,564 million in 2024, a decrease of 20% from $13,216 million in 2023[51]. - The total for commercial real estate multifamily loans was $68,456 million year-to-date in 2024, compared to $5,340 million in 2023, indicating a significant increase in risk ratings 1-3[51]. - Agricultural mortgage loans totaled $67,550 million in 2024, with risk ratings showing a mix of performance across different categories[51]. - The company reported a total of $92,497 million in loans across various risk ratings, with risk rating 4 loans amounting to $81,831 million[51]. - The company has implemented lending policies to maximize loan income while managing risk, with regular reviews by the Board of Directors[52]. - Internally assigned credit risk ratings are reviewed at least during loan renewals, ensuring ongoing assessment of credit quality[53]. - The classification of loans includes categories from "Excellent" to "Loss," with specific criteria for each rating to manage credit risk effectively[54][55][56]. - The company aims to diversify its loan portfolio to mitigate risks associated with economic fluctuations[52]. - The total gross charge-offs for agricultural other loans in 2024 were $32,144 million, reflecting the challenges in this segment[51]. - The company emphasizes the importance of cash flow and management capabilities in assessing loan quality and risk ratings[54][56]. Financial Performance - Consolidated net income is used to benchmark results against competitors, with significant revenue streams from loan and investment interest, deposit-related fees, and wealth fees[28]. - The company’s operations are entirely domestic, with all banking-related operations aggregated into one reportable operating segment[26]. - The financial performance is evaluated on a corporate-wide basis, with significant expenses including interest expense, provision for credit losses, and compensation costs[28]. - Basic earnings per common share for the three months ended September 30, 2025, was $0.71, an increase from $0.44 in the same period of 2024, representing a 61.4% growth[88]. - Diluted earnings per common share for the nine months ended September 30, 2025, was $1.92, compared to $1.32 for the same period in 2024, reflecting a 45.5% increase[88]. - The net income for the three months ended September 30, 2025, was $5,240 million, compared to $3,281 million for the same period in 2024, indicating a 59.7% increase[88]. - The average number of common shares outstanding for basic calculation decreased from 7,454,097 in 2024 to 7,357,977 in 2025[88]. - The balance of accumulated other comprehensive income (AOCI) as of September 30, 2025, was $(10,409) million, an improvement from $(14,387) million at the beginning of the quarter[90]. - Unrealized gains on available-for-sale (AFS) securities for the three months ended September 30, 2025, totaled $5,030 million, compared to $13,081 million in the same period of 2024[91]. - The company maintained its "well capitalized" status under the FDIC's regulatory framework as of September 30, 2025, with no changes in conditions or events affecting this status[89]. - Common equity Tier 1 capital to risk-weighted assets ratio for Isabella Bank was 12.26% as of September 30, 2025, exceeding the minimum requirement of 7.00%[89]. - Total capital to risk-weighted assets ratio for consolidated entities was 15.20% as of September 30, 2025, well above the minimum requirement of 10.50%[89]. Allowance for Credit Losses - The allowance for credit losses (ACL) is continuously monitored and adjusted based on expected losses inherent in the loan portfolio[68]. - The ACL is evaluated regularly, considering historical experience and current economic conditions, which may lead to significant changes in future periods[69]. - The methodology for estimating expected credit losses includes both individual loan analysis and pooled components for loans sharing similar risk characteristics[71]. - As of September 30, 2025, the total allowance for credit losses (ACL) was $13,149 million, an increase from $12,977 million as of June 30, 2025, reflecting a 1.32% rise[80]. - The provision for credit losses for the three months ended September 30, 2025, was $246 million, compared to a provision of $899 million for the same period in 2024, indicating a significant decrease[79]. - Charge-offs for the three months ended September 30, 2025, totaled $175 million, while recoveries amounted to $101 million, resulting in a net charge-off of $74 million[77]. - The ACL to gross loans ratio as of September 30, 2025, was 0.92%, slightly down from 0.93% as of June 30, 2025[80]. Loan Modifications and Financial Difficulty - Loan modifications are granted to borrowers experiencing financial difficulty, including interest rate reductions and extended maturity dates[63]. - The company considers various factors to determine financial difficulty, including current defaults and insufficient cash flow to service debt[63]. - The total amortized cost basis for loans modified due to financial difficulty was $9,056 for the three months ended September 30, 2025, with secured commercial and industrial loans at $4,114[67]. - The weighted average payment delay for secured commercial and industrial loans was 6 months, with a term extension of 1.08 years for the three months ended September 30, 2025[66]. - The company committed to advance $79 million in additional funds for modified loans as of September 30, 2025[65]. - No loans modified within 12 months prior to default were reported for the three and nine-month periods ended September 30, 2025, and 2024[67]. - The total amortized cost basis for agricultural mortgage modifications was $914, representing 1.35% of the total class of financial receivables[64]. - The total amortized cost basis for agricultural other loans was $925, representing 3.08% of the total class of financial receivables for the three months ended September 30, 2025[64]. - The company does not modify loans by forgiving principal or accrued interest, ensuring that all modifications are structured to maintain loan integrity[65].