Equibles

10-Q

ISABELLA BANK CORP (ISBA)

10-Q 2025-05-08 For: 2025-03-31
View Original
Added on April 07, 2026

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)

Michigan 38-2830092
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
401 N. Main St Mt. Pleasant MI 48858
(Address of principal executive offices) (Zip code)

(989) 772-9471

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
None N/A N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☒  No

The number of common shares outstanding of the registrant’s Common Stock (no par value) was 7,382,358 as of May 7, 2025.

Table of Contents

ISABELLA BANK CORPORATION

QUARTERLY REPORT ON FORM 10-Q

Table of Contents

PART I – FINANCIAL INFORMATION 4
Item 1. Financial Statements 4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38
Item 3. Quantitative and Qualitative Disclosures About Market Risk 49
Item 4. Controls and Procedures 49
PART II – OTHER INFORMATION 50
Item 1. Legal Proceedings 50
Item 1A. Risk Factors 50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 50
Item 3. Defaults Upon Senior Securities 50
Item 4. Mine Safety Disclosures 50
Item 5. Other Information 50
Item 6. Exhibits 51
SIGNATURES 53

Table of Contents

Glossary of Acronyms and Abbreviations

The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.

ACL: Allowance for credit losses FRB: Federal Reserve Bank
AFS: Available-for-sale Freddie Mac: Federal Home Loan Mortgage Corporation
ALCO: Asset-Liability Committee FTE: Fully taxable equivalent
AOCI: Accumulated other comprehensive income GAAP: U.S. generally accepted accounting principles
ASC: FASB Accounting Standards Codification HFS: Held-for-sale
ASU: FASB Accounting Standards Update IRR: Interest rate risk
ATM: Automated teller machine N/A: Not applicable
AUM: Assets under management N/M: Not meaningful
BOLI: Bank-owned life insurance NAV: Net asset value
CECL: Current expected credit losses NIM: Net interest margin
CIK: Central Index Key NSF: Non-sufficient funds
DIF: Deposit Insurance Fund OCI: Other comprehensive income (loss)
DIFS: Department of Insurance and Financial Services OMSR: Originated mortgage servicing rights
Directors Plan: Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors OREO: Other real estate owned
Dividend Reinvestment Plan: Isabella Bank Corporation Stockholder Dividend Reinvestment Plan and Employee Stock Purchase Plan Rabbi Trust: A trust established to fund our Directors Plan
ETR: Effective tax rate RSP: Isabella Bank Corporation Restricted Stock Plan
Exchange Act: Securities Exchange Act of 1934 SOFR: Secured Overnight Financing Rate
FASB: Financial Accounting Standards Board SEC: U.S. Securities and Exchange Commission
FDIC: Federal Deposit Insurance Corporation SOX: Sarbanes-Oxley Act of 2002
FFIEC: Federal Financial Institutions Examinations Council XBRL: eXtensible Business Reporting Language
FHLB: Federal Home Loan Bank Yield Curve: U.S. Treasury Yield Curve

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in thousands)

March 31<br>2025 December 31<br>2024
ASSETS
Cash and demand deposits due from banks $ 28,786 $ 22,830
Fed Funds sold and interest bearing balances due from banks 40,393 1,712
Total cash and cash equivalents 69,179 24,542
AFS securities, at fair value 513,040 489,029
FHLB stock 5,600 12,762
Mortgage loans HFS 127 242
Loans 1,367,724 1,423,571
Less allowance for credit losses 12,735 12,895
Net loans 1,354,989 1,410,676
Premises and equipment 28,108 27,659
Cash surrender value of BOLI 45,833 34,882
Goodwill and other intangible assets 48,282 48,283
Other assets 37,429 38,166
Total assets $ 2,102,587 $ 2,086,241
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Demand deposits $ 404,194 $ 416,373
Interest bearing demand deposits 243,939 237,548
Money market deposits 473,138 423,883
Savings 286,399 281,665
Certificates of deposit 390,239 387,591
Total deposits 1,797,909 1,747,060
Short-term borrowings 47,310 53,567
FHLB advances — 30,000
Subordinated debt, net of unamortized issuance costs 29,447 29,424
Total borrowed funds 76,757 112,991
Other liabilities 12,365 15,914
Total liabilities 1,887,031 1,875,965
Shareholders’ equity
Common stock — no par value 15,000,000 shares authorized: issued and outstanding 7,408,010 shares in 2025 and 7,424,893 shares in 2024 125,547 126,224
Shares to be issued for deferred compensation obligations 2,508 2,383
Retained earnings 104,940 103,024
Accumulated other comprehensive income (loss) (17,439) (21,355)
Total shareholders’ equity 215,556 210,276
Total liabilities and shareholders' equity $ 2,102,587 $ 2,086,241

See notes to interim condensed consolidated financial statements (unaudited).

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share amounts)

Three Months Ended <br> March 31
2025 2024
Interest income
Loans $ 19,348 $ 18,057
AFS securities 2,643 2,884
FHLB stock 160 146
Federal funds sold and other 482 293
Total interest income 22,633 21,380
Interest expense
Deposits 7,463 7,163
Short-term borrowings 341 321
FHLB advances 38 388
Subordinated debt 266 266
Total interest expense 8,108 8,138
Net interest income 14,525 13,242
(Reversal of) provision for credit losses (107) 392
Net interest income after provision for credit losses 14,632 12,850
Noninterest income
Service charges and fees 1,974 1,933
Wealth management fees 979 939
Earnings on BOLI 372 243
Net gain on sale of mortgage loans 30 34
Other 173 319
Total noninterest income 3,528 3,468
Noninterest expenses
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

See notes to interim condensed consolidated financial statements (unaudited).

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands)

Three Months Ended <br> March 31
2025 2024
Net income $ 3,949 $ 3,131
Unrealized gains (losses) on AFS securities 5,014 (2,926)
Reclassification adjustment for net (gains) losses included in net income — —
Tax effect (1) (1,098) 632
Unrealized gains (losses) on AFS securities, net of tax 3,916 (2,294)
Comprehensive income (loss) $ 7,865 $ 837

(1) See “Note 6 – Capital Ratios and Shareholders' Equity” for tax effect reconciliation.

See notes to interim condensed consolidated financial statements (unaudited).

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands except per share amounts)

Common Stock
Common Shares<br>Outstanding Amount Common Shares to be<br>Issued for<br>Deferred<br>Compensation<br>Obligations Retained<br>Earnings Accumulated<br>Other<br>Comprehensive<br>Income (Loss) Totals
December 31, 2023 7,485,889 $ 127,323 $ 3,693 $ 97,282 $ (25,896) $ 202,402
Comprehensive income (loss) — — — 3,131 (2,294) 837
Issuance of common stock 22,456 447 — — — 447
Common stock issued for deferred compensation under the RSP 16,240 — — — — —
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 21 (21) — — —
Share-based payment awards under the Directors Plan — — 218 — — 218
Share-based compensation expense recognized in earnings under the RSP — 25 — — — 25
Common stock purchased for deferred compensation obligations — (420) — — — (420)
Common stock repurchased (36,484) (740) — — — (740)
Cash dividends paid ($0.28 per common share) — — — (2,095) — (2,095)
March 31, 2024 7,488,101 $ 126,656 $ 3,890 $ 98,318 $ (28,190) $ 200,674
December 31, 2024 7,424,893 $ 126,224 $ 2,383 $ 103,024 $ (21,355) $ 210,276
Comprehensive income (loss) — — — 3,949 3,916 7,865
Issuance of common stock 17,332 419 — — — 419
Common stock issued for deferred compensation under the RSP 11,367 — — — — —
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations — 42 (42) — — —
Share-based payment awards under the Directors Plan — — 167 — — 167
Share-based compensation expense recognized in earnings under the RSP — 7 — — — 7
Common stock purchased for deferred compensation obligations — — — — — —
Common stock repurchased (45,582) (1,145) — — — (1,145)
Cash dividends paid ($0.28 per common share) — — — (2,033) — (2,033)
March 31, 2025 7,408,010 $ 125,547 $ 2,508 $ 104,940 $ (17,439) $ 215,556

See notes to interim condensed consolidated financial statements (unaudited).

Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

Three Months Ended <br> March 31
2025 2024
Operating activities
Net income $ 3,949 $ 3,131
Reconciliation of net income to net cash provided by operating activities
(Reversal of) provision for credit losses (107) 392
Depreciation 535 506
Net amortization of AFS securities 307 353
Net gain on sale of mortgage loans (30) (34)
Increase in cash value of BOLI (368) (239)
Share-based payment awards 174 243
Origination of loans HFS (1,043) (1,690)
Proceeds from loan sales 1,188 1,358
Net changes in:
Other assets (142) (114)
Other liabilities 241 (470)
Net cash provided by (used in) operating activities 4,704 3,436
Investing activities
Proceeds from sales, maturities, calls and prepayments of AFS securities 21,058 7,284
Purchases of AFS securities (40,362) —
Proceeds from sale of FHLB Stock 7,162 —
Net change in loans HFI 55,576 (16,354)
Purchases of premises and equipment (984) (818)
Purchases of BOLI policies (10,583) —
Low income housing tax credit investments (3,767) (3)
Net cash provided by (used in) investing activities 28,100 (9,891)
Financing activities
Net increase (decrease) in deposits 50,849 44,612
Net increase (decrease) in short-term borrowings (6,257) (3,803)
Net increase (decrease) in FHLB advances (30,000) (40,000)
Cash dividends paid on common stock (2,033) (2,095)
Proceeds from issuance of common stock 419 447
Common stock repurchased (1,145) (740)
Common stock purchased for deferred compensation obligations — (420)
Net cash provided by (used in) financing activities 11,833 (1,999)
Increase (decrease) in cash and cash equivalents 44,637 (8,454)
Cash and cash equivalents at beginning of period 24,542 33,672
Cash and cash equivalents at end of period $ 69,179 $ 25,218
Supplemental cash flows information
Interest paid $ 7,919 $ 7,844
Supplemental noncash information
Transfers of loans to foreclosed assets 218 199

See notes to interim condensed consolidated financial statements (unaudited).

Table of Contents

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands except per share amounts)

Note 1 – Significant Accounting Policies

BASIS OF PRESENTATION AND CONSOLIDATION: As used in these notes, as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations, references to “the Corporation”, “Isabella”, “we”, “our”, “us”, and similar terms refer to the consolidated entity consisting of Isabella Bank Corporation and its subsidiary. References to Isabella Bank or “the Bank” refers to Isabella Bank Corporation’s subsidiary, Isabella Bank.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2024.

OPERATING SEGMENTS: Segment information is prepared on the same basis that our CEO, who is our Chief Operating Decision Maker (“CODM”), manages our segments, evaluates financial results, and makes key operating decisions. While the CODM monitors the revenue streams of our various products and services, operations are managed, and financial performance is evaluated on a corporate-wide basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all of the banking-related operations are considered by management to be aggregated in one reportable operating segment.

The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products and services, and geographical regions are similar. The CODM will evaluate the financial performance of our business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing our reportable segment and in the determination of allocating resources. Further, the CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets.

Consolidated net income is used to benchmark results against our competitors. Benchmarking and monitoring of budget to actual results are used in assessment performance and in establishing compensation. Revenue from banking operations consists primarily of loan and investment interest, deposit related fees, and wealth fees. Interest expense, provision for credit losses, compensation, and occupancy and equipment costs provide the significant expenses in our banking operations. All operations are domestic.

RECLASSIFICATIONS: Certain amounts reported in the interim 2024 consolidated financial statements have been reclassified to conform with the 2025 presentation. Our accounting policies are materially the same as those discussed in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Table of Contents

Note 2 – AFS Securities

The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows at:

March 31, 2025
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Fair<br>Value
U.S. Treasury $ 220,701 $ — $ 7,918 $ 212,783
States and political subdivisions 78,938 3 4,719 74,222
Auction rate money market preferred 3,200 — 371 2,829
Mortgage-backed securities 27,545 — 1,717 25,828
Collateralized mortgage obligations 195,979 163 6,064 190,078
Corporate 8,150 — 850 7,300
Total $ 534,513 $ 166 $ 21,639 $ 513,040
December 31, 2024
--- --- --- --- --- --- --- --- ---
Amortized<br>Cost Gross<br>Unrealized<br>Gains Gross<br>Unrealized<br>Losses Fair<br>Value
U.S. Treasury $ 230,807 $ — $ 10,236 $ 220,571
States and political subdivisions 81,135 9 4,576 76,568
Auction rate money market preferred 3,200 — 156 3,044
Mortgage-backed securities 29,068 — 2,182 26,886
Collateralized mortgage obligations 163,156 — 8,482 154,674
Corporate 8,150 — 864 7,286
Total $ 515,516 $ 9 $ 26,496 $ 489,029

The amortized cost and fair value of AFS securities by contractual maturity at March 31, 2025 are as follows:

Maturing Securities with Variable Monthly Payments or Noncontractual Maturities
Due in<br>One Year<br>or Less After One<br>Year But<br>Within<br>Five Years After Five<br>Years But<br>Within<br>Ten Years After<br>Ten Years Total
U.S. Treasury $ 59,841 $ 160,860 $ — $ — $ — $ 220,701
States and political subdivisions 12,770 21,132 18,223 26,813 — 78,938
Auction rate money market preferred — — — — 3,200 3,200
Mortgage-backed securities — — — — 27,545 27,545
Collateralized mortgage obligations — — — — 195,979 195,979
Corporate — — 8,150 — — 8,150
Total amortized cost $ 72,611 $ 181,992 $ 26,373 $ 26,813 $ 226,724 $ 534,513
Fair value $ 71,223 $ 175,122 $ 24,317 $ 23,643 $ 218,735 $ 513,040

Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.

As the auction rate money market preferred investments have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.

Table of Contents

The information in the following tables pertains to AFS securities with gross unrealized losses at March 31, 2025 and December 31, 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position.

March 31, 2025
Less Than Twelve Months Twelve Months or More
Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Total<br>Unrealized<br>Losses
U.S. Treasury $ — $ — $ 7,918 $ 212,783 $ 7,918
States and political subdivisions 176 15,510 4,543 40,418 4,719
Auction rate money market preferred — — 371 2,829 371
Mortgage-backed securities — — 1,717 25,828 1,717
Collateralized mortgage obligations 103 15,649 5,961 143,803 6,064
Corporate 85 1,615 765 5,685 850
Total $ 364 $ 32,774 $ 21,275 $ 431,346 $ 21,639
Number of securities in an unrealized loss position: 95 211 306
December 31, 2024
--- --- --- --- --- --- --- --- --- --- ---
Less Than Twelve Months Twelve Months or More
Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Total<br>Unrealized<br>Losses
U.S. Treasury $ — $ — $ 10,236 $ 220,571 $ 10,236
States and political subdivisions 486 23,553 4,090 36,796 4,576
Auction rate money market preferred — — 156 3,044 156
Mortgage-backed securities — — 2,182 26,886 2,182
Collateralized mortgage obligations 185 5,646 8,297 149,028 8,482
Corporate — — 864 7,286 864
Total $ 671 $ 29,199 $ 25,825 $ 443,611 $ 26,496
Number of securities in an unrealized loss position: 175 178 353

As of March 31, 2025, no allowance for credit losses has been recognized on AFS securities in an unrealized loss position, as management does not believe any of the securities are impaired due to reasons of credit quality. This is based on our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our AFS securities and consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not intend to sell any of the securities classified as AFS in the table above, and believes it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their respective maturity date or repricing date, or if the market yields for such investments decline.

Table of Contents

Note 3 – Loans and ACL

Loan Composition

The following table provides a detailed listing of our loan portfolio at:

March 31, 2025 December 31, 2024
Balance Percent of Total Balance Percent of Total
Commercial and industrial
Secured $ 220,884 16.15 % $ 221,510 15.56 %
Unsecured 28,336 2.07 % 23,384 1.64 %
Total commercial and industrial 249,220 18.22 % 244,894 17.20 %
Commercial real estate
Commercial mortgage owner occupied 183,228 13.40 % 178,376 12.53 %
Commercial mortgage non-owner occupied 206,976 15.13 % 208,118 14.62 %
Commercial mortgage 1-4 family investor 93,845 6.86 % 92,497 6.50 %
Commercial mortgage multifamily 68,185 4.99 % 68,456 4.81 %
Total commercial real estate 552,234 40.38 % 547,447 38.46 %
Advances to mortgage brokers 3,015 0.22 % 63,080 4.43 %
Agricultural
Agricultural mortgage 65,699 4.80 % 67,550 4.75 %
Agricultural other 28,660 2.10 % 32,144 2.26 %
Total agricultural 94,359 6.90 % 99,694 7.01 %
Residential real estate
Senior lien 337,542 24.68 % 332,743 23.37 %
Junior lien 9,409 0.69 % 8,655 0.61 %
Home equity lines of credit 40,397 2.95 % 39,474 2.77 %
Total residential real estate 387,348 28.32 % 380,872 26.75 %
Consumer
Secured - direct 33,220 2.42 % 35,050 2.46 %
Secured - indirect 45,081 3.30 % 49,136 3.45 %
Unsecured 3,247 0.24 % 3,398 0.24 %
Total consumer 81,548 5.96 % 87,584 6.15 %
Total $ 1,367,724 100.00 % $ 1,423,571 100.00 %

We grant commercial, agricultural, residential real estate, and consumer loans to customers primarily in Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, health care, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. A portion of loans are unsecured.

Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ACL, and deferred fees or costs. Unless a loan has a nonaccrual status, interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate amortization method. Net unamortized deferred loan costs were $3,317 and $3,330 at March 31, 2025 and December 31, 2024, respectively.

Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $18,000. Borrowers with direct credit needs of more than $18,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results,

Table of Contents

we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Government agency guarantee may be required. Personal guarantees and/or life insurance beneficiary assignments are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports.

We offer adjustable-rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac.

Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees.

Underwriting criteria for originated residential real estate loans generally include:

•Evaluation of the borrower’s ability to make monthly payments.

•Evaluation of the value of the property securing the loan.

•Ensuring the payment of principal, interest, taxes, and hazard insurance generally does not exceed 28% of a borrower’s gross income.

•Ensuring all debt servicing does not exceed 40% of income.

•Verification of acceptable credit reports.

•Verification of employment, income, and financial information.

Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $1,000 require the approval of one or more of the following committees: Internal Loan Committee, the Executive Loan Committee, or the Board of Directors.

Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.

Nonaccrual and Past Due Loans

The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status at an earlier date if collection of principal or interest is considered doubtful.

When a loan is placed in nonaccrual status, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ACL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status. Accrued interest receivable on loans was $6,494 and $6,384 at March 31, 2025 and December 31, 2024, respectively, which is included in other assets on the consolidated balance sheets.

Table of Contents

The following table summarizes nonaccrual loan data by class of loans as of:

March 31, 2025 December 31, 2024
Total Nonaccrual Loans Nonaccrual Loans with No ACL Total Nonaccrual Loans Nonaccrual Loans with No ACL
Residential real estate
Senior lien $ 173 $ 173 $ 282 $ 282
Total $ 173 $ 173 $ 282 $ 282

The following tables summarize the past due and current loans for the entire loan portfolio as of:

March 31, 2025
Past Due: Accruing Loans 90 or More Days Past Due
30-59<br>Days 60-89<br>Days 90 Days<br>or More Current Total
Commercial and industrial
Secured $ 79 $ — $ — $ 220,805 $ 220,884 $ —
Unsecured — 50 — 28,286 28,336 —
Total commercial and industrial 79 50 — 249,091 249,220 —
Commercial real estate
Commercial mortgage owner occupied 26 304 — 182,898 183,228 —
Commercial mortgage non-owner occupied 1,487 — — 205,489 206,976 —
Commercial mortgage 1-4 family investor 104 — — 93,741 93,845 —
Commercial mortgage multifamily — — — 68,185 68,185 —
Total commercial real estate 1,617 304 — 550,313 552,234 —
Advances to mortgage brokers — — — 3,015 3,015 —
Agricultural
Agricultural mortgage — — — 65,699 65,699 —
Agricultural other 57 — — 28,603 28,660 —
Total agricultural 57 — — 94,302 94,359 —
Residential real estate
Senior lien 3,163 — 56 334,323 337,542 —
Junior lien — — — 9,409 9,409 —
Home equity lines of credit 80 — — 40,317 40,397 —
Total residential real estate 3,243 — 56 384,049 387,348 —
Consumer
Secured - direct 3 — 26 33,191 33,220 26
Secured - indirect 197 — — 44,884 45,081 —
Unsecured 6 — — 3,241 3,247 —
Total consumer 206 — 26 81,316 81,548 26
Total $ 5,202 $ 354 $ 82 $ 1,362,086 $ 1,367,724 $ 26

Table of Contents

December 31, 2024
Past Due: Accruing Loans 90 or More Days Past Due
30-59<br>Days 60-89<br>Days 90 Days<br>or More Current Total
Commercial and industrial
Secured $ 328 $ — $ — $ 221,182 $ 221,510 $ —
Unsecured — 50 — 23,334 23,384 —
Total commercial and industrial 328 50 — 244,516 244,894 —
Commercial real estate
Commercial mortgage owner occupied 25 304 — 178,047 178,376 —
Commercial mortgage non-owner occupied 792 — — 207,326 208,118 —
Commercial mortgage 1-4 family investor — — — 92,497 92,497 —
Commercial mortgage multifamily — — — 68,456 68,456 —
Total commercial real estate 817 304 — 546,326 547,447 —
Advances to mortgage brokers — — — 63,080 63,080 —
Agricultural
Agricultural mortgage — — — 67,550 67,550 —
Agricultural other — — — 32,144 32,144 —
Total agricultural — — — 99,694 99,694 —
Residential real estate
Senior lien 3,846 148 163 328,586 332,743 —
Junior lien 19 — — 8,636 8,655 —
Home equity lines of credit 10 — — 39,464 39,474 —
Total residential real estate 3,875 148 163 376,686 380,872 —
Consumer
Secured - direct 15 — 19 35,016 35,050 19
Secured - indirect 232 — — 48,904 49,136 —
Unsecured 4 — — 3,394 3,398 —
Total consumer 251 — 19 87,314 87,584 19
Total $ 5,271 $ 502 $ 182 $ 1,417,616 $ 1,423,571 $ 19

Table of Contents

Credit Quality Indicators

The following tables display commercial and agricultural loans by credit risk ratings and year of origination as of:

March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Commercial and industrial: Secured
Risk ratings 1-3 $ 781 $ 14,633 $ 14,585 $ 2,780 $ 4,793 $ 4,159 $ 11,474 $ — $ 53,205
Risk rating 4 7,922 36,531 33,149 15,511 13,986 3,487 31,460 — 142,046
Risk rating 5 633 3,549 166 13,434 66 9 4,441 — 22,298
Risk rating 6 102 121 272 59 113 9 2,659 — 3,335
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 9,438 $ 54,834 $ 48,172 $ 31,784 $ 18,958 $ 7,664 $ 50,034 $ — $ 220,884
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial: Unsecured
Risk ratings 1-3 $ 1,498 $ 348 $ 1,905 $ 132 $ 55 $ 431 $ 2,129 $ — $ 6,498
Risk rating 4 3,475 1,371 1,700 1,686 629 347 11,230 — 20,438
Risk rating 5 — 96 66 — 113 — 1,125 — 1,400
Risk rating 6 — — — — — — — — —
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 4,973 $ 1,815 $ 3,671 $ 1,818 $ 797 $ 778 $ 14,484 $ — $ 28,336
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Owner occupied
Risk ratings 1-3 $ — $ 1,935 $ 4,004 $ 1,532 $ 10,984 $ 17,220 $ — $ — $ 35,675
Risk rating 4 9,227 24,689 11,227 28,141 35,106 28,638 1,327 — 138,355
Risk rating 5 1,524 195 1,294 860 71 1,418 372 — 5,734
Risk rating 6 — 1,348 304 — 620 1,096 96 — 3,464
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 10,751 $ 28,167 $ 16,829 $ 30,533 $ 46,781 $ 48,372 $ 1,795 $ — $ 183,228
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Non-owner occupied
Risk ratings 1-3 $ 723 $ 302 $ 738 $ 5,510 $ 5,124 $ 2,078 $ — $ — $ 14,475
Risk rating 4 7,856 7,840 32,756 56,898 35,075 30,764 608 — 171,797
Risk rating 5 — 9,671 809 928 1,663 6,085 500 — 19,656
Risk rating 6 — — 1,000 — — 48 — — 1,048
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 8,579 $ 17,813 $ 35,303 $ 63,336 $ 41,862 $ 38,975 $ 1,108 $ — $ 206,976
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Table of Contents

March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Commercial real estate: 1-4 family investor
Risk ratings 1-3 $ 121 $ 1,154 $ — $ 2,774 $ 772 $ 1,750 $ 4,213 $ — $ 10,784
Risk rating 4 2,597 9,266 12,164 8,448 28,242 15,711 5,456 — 81,884
Risk rating 5 — — 143 335 70 51 — — 599
Risk rating 6 — — 532 — — 46 — — 578
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 2,718 $ 10,420 $ 12,839 $ 11,557 $ 29,084 $ 17,558 $ 9,669 $ — $ 93,845
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Multifamily
Risk ratings 1-3 $ — $ 638 $ 3,121 $ 1,673 $ 915 $ 1,258 $ 175 $ — $ 7,780
Risk rating 4 50 2,318 1,936 21,115 11,509 20,065 64 — 57,057
Risk rating 5 — 490 — — — — — — 490
Risk rating 6 — — — — — 2,858 — — 2,858
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 50 $ 3,446 $ 5,057 $ 22,788 $ 12,424 $ 24,181 $ 239 $ — $ 68,185
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Advances to mortgage brokers
Risk ratings 1-3 $ 3,015 $ — $ — $ — $ — $ — $ — $ — $ 3,015
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural mortgage
Risk ratings 1-3 $ 230 $ 742 $ — $ 2,688 $ 2,049 $ 3,347 $ 37 $ — $ 9,093
Risk rating 4 583 4,023 4,055 12,762 6,794 13,269 1,384 — 42,870
Risk rating 5 — 278 1,505 1,342 5,741 1,609 1,168 — 11,643
Risk rating 6 — 60 — 975 — 1,058 — — 2,093
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 813 $ 5,103 $ 5,560 $ 17,767 $ 14,584 $ 19,283 $ 2,589 $ — $ 65,699
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural other
Risk ratings 1-3 $ — $ 633 $ 434 $ 86 $ 107 $ 211 $ 2,694 $ — $ 4,165
Risk rating 4 138 1,886 1,192 1,656 1,741 776 11,825 — 19,214
Risk rating 5 — 1,687 — 17 — 460 831 — 2,995
Risk rating 6 — — 172 — 90 — 2,024 — 2,286
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 138 $ 4,206 $ 1,798 $ 1,759 $ 1,938 $ 1,447 $ 17,374 $ — $ 28,660
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Table of Contents

December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Commercial and industrial: Secured
Risk ratings 1-3 $ 13,303 $ 15,074 $ 3,078 $ 4,975 $ 4,437 $ 368 $ 10,316 $ — $ 51,551
Risk rating 4 38,143 38,393 17,252 15,561 2,035 2,191 28,145 — 141,720
Risk rating 5 3,627 559 11,644 164 137 53 6,626 — 22,810
Risk rating 6 126 288 1,841 71 — 10 3,093 — 5,429
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 55,199 $ 54,314 $ 33,815 $ 20,771 $ 6,609 $ 2,622 $ 48,180 $ — $ 221,510
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and industrial: Unsecured
Risk ratings 1-3 $ 378 $ 1,967 $ 203 $ 69 $ 48 $ 414 $ 1,966 $ — $ 5,045
Risk rating 4 3,073 2,049 2,388 268 370 — 8,896 — 17,044
Risk rating 5 100 — — 121 — — 1,074 — 1,295
Risk rating 6 — — — — — — — — —
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 3,551 $ 4,016 $ 2,591 $ 458 $ 418 $ 414 $ 11,936 $ — $ 23,384
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Owner occupied
Risk ratings 1-3 $ 1,963 $ 4,032 $ 1,694 $ 11,125 $ 13,300 $ 4,421 $ 221 $ — $ 36,756
Risk rating 4 24,878 11,550 29,307 35,974 9,780 20,260 1,590 — 133,339
Risk rating 5 197 487 876 72 653 791 372 — 3,448
Risk rating 6 1,354 1,123 — 636 1,117 504 99 — 4,833
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 28,392 $ 17,192 $ 31,877 $ 47,807 $ 24,850 $ 25,976 $ 2,282 $ — $ 178,376
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Non-owner occupied
Risk ratings 1-3 $ 644 $ 795 $ 5,568 $ 5,178 $ 348 $ 1,781 $ — $ — $ 14,314
Risk rating 4 7,902 34,664 61,524 35,620 4,375 29,178 497 — 173,760
Risk rating 5 9,726 — 218 1,681 6,154 709 500 — 18,988
Risk rating 6 — 1,006 — — 50 — — — 1,056
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 18,272 $ 36,465 $ 67,310 $ 42,479 $ 10,927 $ 31,668 $ 997 $ — $ 208,118
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Table of Contents

December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Commercial real estate: 1-4 family investor
Risk ratings 1-3 $ 1,165 $ — $ 2,632 $ 791 $ 846 $ 965 $ 3,076 $ — $ 9,475
Risk rating 4 9,399 12,535 8,911 28,666 13,930 3,640 4,750 — 81,831
Risk rating 5 — 145 339 72 — 52 — — 608
Risk rating 6 — 536 — — — 47 — — 583
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 10,564 $ 13,216 $ 11,882 $ 29,529 $ 14,776 $ 4,704 $ 7,826 $ — $ 92,497
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial real estate: Multifamily
Risk ratings 1-3 $ 638 $ 3,383 $ 1,697 $ 936 $ 545 $ 746 $ 150 $ — $ 8,095
Risk rating 4 2,081 1,957 21,446 11,646 664 19,617 64 — 57,475
Risk rating 5 — — — — — — — — —
Risk rating 6 — — — — — 2,886 — — 2,886
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 2,719 $ 5,340 $ 23,143 $ 12,582 $ 1,209 $ 23,249 $ 214 $ — $ 68,456
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Advances to mortgage brokers
Risk ratings 1-3 $ 63,080 $ — $ — $ — $ — $ — $ — $ — $ 63,080
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural mortgage
Risk ratings 1-3 $ 792 $ — $ 2,700 $ 2,144 $ 2,550 $ 1,250 $ 34 $ — $ 9,470
Risk rating 4 4,410 4,118 12,959 6,968 5,737 8,586 1,322 — 44,100
Risk rating 5 281 1,521 1,342 5,757 — 1,364 1,045 — 11,310
Risk rating 6 60 — 1,550 — — 1,060 — — 2,670
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 5,543 $ 5,639 $ 18,551 $ 14,869 $ 8,287 $ 12,260 $ 2,401 $ — $ 67,550
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Agricultural other
Risk ratings 1-3 $ 634 $ 523 $ 106 $ 137 $ 2 $ 210 $ 3,635 $ — $ 5,247
Risk rating 4 1,940 1,328 1,863 1,893 463 550 13,531 — 21,568
Risk rating 5 1,683 — — — 438 — 608 — 2,729
Risk rating 6 — 172 — 90 — — 2,338 — 2,600
Risk rating 7 — — — — — — — — —
Risk rating 8 — — — — — — — — —
Risk rating 9 — — — — — — — — —
Total $ 4,257 $ 2,023 $ 1,969 $ 2,120 $ 903 $ 760 $ 20,112 $ — $ 32,144
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —

Table of Contents

We have certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. The Board reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the Board with frequent reports related to loan production, loan quality, and concentration of credit, loan delinquencies, nonperforming loans and potential problem loans. We seek to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions.

Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows:

  1. EXCELLENT – Substantially Risk Free

Credit has strong financial condition and solid earnings history, characterized by:

•High liquidity, strong cash flow, low leverage.

•Unquestioned ability to meet all obligations when due.

•Experienced management, with management succession in place.

•Secured by cash.

  1. HIGH QUALITY – Limited Risk

Credit with sound financial condition and a positive trend in earnings supplemented by:

•Favorable liquidity and leverage ratios.

•Ability to meet all obligations when due.

•Management with successful track record.

•Steady and satisfactory earnings history.

•If loan is secured, collateral is of high quality and readily marketable.

•Access to alternative financing.

•Well defined primary and secondary source of repayment.

•If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident.

  1. HIGH SATISFACTORY – Reasonable Risk

Credit with satisfactory financial condition and further characterized by:

•Working capital adequate to support operations.

•Cash flow sufficient to pay debts as scheduled.

•Management experience and depth appear favorable.

•Loan performing according to terms.

•If loan is secured, collateral is acceptable, and loan is fully protected.

  1. SATISFACTORY – Acceptable Risk

Credit with bankable risks, although some signs of weaknesses are shown:

•Would include most start-up businesses.

•Occasional instances of trade slowness or repayment delinquency – may have been 10-30 days slow within the past year.

•Management’s abilities are apparent yet unproven.

•Weakness in primary source of repayment with adequate secondary source of repayment.

•Loan structure generally in accordance with policy.

•If secured, loan collateral coverage is marginal.

Table of Contents

To be classified as less than satisfactory, only one of the following criteria must be met.

  1. SPECIAL MENTION – Criticized

Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:

•Downward trend in sales, profit levels, and margins.

•Impaired working capital position.

•Cash flow is strained in order to meet debt repayment.

•Loan delinquency (30-60 days) and overdrafts may occur.

•Shrinking equity cushion.

•Diminishing primary source of repayment and questionable secondary source.

•Management abilities are questionable.

•Weak industry conditions.

•Litigation pending against the borrower.

•Loan may need to be restructured to improve collateral position or reduce payments.

•Collateral or guaranty offers limited protection.

•Negative debt service coverage, however, the credit is well collateralized, and payments are current.

  1. SUBSTANDARD – Classified

Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:

•Sustained losses have severely eroded the equity and cash flow.

•Deteriorating liquidity.

•Serious management problems or internal fraud.

•Original repayment terms liberalized.

•Likelihood of bankruptcy.

•Inability to access other funding sources.

•Reliance on secondary source of repayment.

•Litigation filed against borrower.

•Interest non-accrual may be warranted.

•Collateral provides little or no value.

•Requires excessive attention of the loan officer.

•Borrower is uncooperative with loan officer.

  1. VULNERABLE – Classified

Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:

•Insufficient cash flow to service debt.

•Minimal or no payments being received.

•Limited options available to avoid the collection process.

•Transition status, expect action will take place to collect loan without immediate progress being made.

Table of Contents

  1. DOUBTFUL – Workout

Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:

•Normal operations are severely diminished or have ceased.

•Seriously impaired cash flow.

•Original repayment terms materially altered.

•Secondary source of repayment is inadequate.

•Survivability as a “going concern” is impossible.

•Collection process has begun.

•Bankruptcy petition has been filed.

•Judgments have been filed.

•Portion of the loan balance has been charged off.

  1. LOSS – Charge-off

Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:

•Liquidation or reorganization under bankruptcy, with poor prospects of collection.

•Fraudulently overstated assets and/or earnings.

•Collateral has marginal or no value.

•Debtor cannot be located.

•Over 120 days delinquent.

Table of Contents

Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due status. The following tables display residential real estate and consumer loans by payment status and year of origination as of:

March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Residential real estate: Senior lien
Current $ 10,712 $ 58,748 $ 39,681 $ 46,037 $ 72,311 $ 105,685 $ — $ 1,033 $ 334,207
Past due 30-89 days — 202 184 219 499 2,058 — — 3,162
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — 173 — — 173
Total $ 10,712 $ 58,950 $ 39,865 $ 46,256 $ 72,810 $ 107,916 $ — $ 1,033 $ 337,542
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ — $ 1
Residential real estate: Junior lien
Current $ 1,073 $ 4,174 $ 2,929 $ 741 $ 101 $ 391 $ — $ — $ 9,409
Past due 30-89 days — — — — — — — — —
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 1,073 $ 4,174 $ 2,929 $ 741 $ 101 $ 391 $ — $ — $ 9,409
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Residential real estate: Home equity lines of credit
Current $ — $ — $ — $ — $ — $ — $ 40,317 $ — $ 40,317
Past due 30-89 days — — — — — — 80 — 80
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ — $ — $ — $ — $ — $ — $ 40,397 $ — $ 40,397
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Secured - direct
Current $ 2,437 $ 9,227 $ 8,506 $ 5,906 $ 3,550 $ 3,565 $ — $ — $ 33,191
Past due 30-89 days — — — 3 — — — — 3
Past due 90 or more days — — — — — 26 — — 26
Nonaccrual — — — — — — — — —
Total $ 2,437 $ 9,227 $ 8,506 $ 5,909 $ 3,550 $ 3,591 $ — $ — $ 33,220
Current year-to-date gross charge-offs $ — $ 1 $ 19 $ 36 $ — $ 12 $ — $ — $ 68
Consumer: Secured - indirect
Current $ 613 $ 5,850 $ 20,416 $ 6,956 $ 4,507 $ 6,542 $ — $ — $ 44,884
Past due 30-89 days — 47 — — 68 82 — — 197
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 613 $ 5,897 $ 20,416 $ 6,956 $ 4,575 $ 6,624 $ — $ — $ 45,081
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 13 $ — $ — $ 13

Table of Contents

March 31, 2025
2025 2024 2023 2022 2021 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Consumer: Unsecured
Current $ 436 $ 1,353 $ 503 $ 136 $ 17 $ 8 $ 788 $ — $ 3,241
Past due 30-89 days — 5 — 1 — — — — 6
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 436 $ 1,358 $ 503 $ 137 $ 17 $ 8 $ 788 $ — $ 3,247
Current year-to-date gross charge-offs $ 80 $ 1 $ 9 $ — $ — $ — $ — $ — $ 90 December 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
2024 2023 2022 2021 2020 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Residential real estate: Senior lien
Current $ 55,991 $ 35,105 $ 45,916 $ 73,607 $ 47,057 $ 62,303 $ — $ 8,579 $ 328,558
Past due 30-89 days 173 162 331 287 907 2,043 — — 3,903
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — 163 28 91 — — 282
Total $ 56,164 $ 35,267 $ 46,247 $ 74,057 $ 47,992 $ 64,437 $ — $ 8,579 $ 332,743
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ 1 $ — $ — $ 1
Residential real estate: Junior lien
Current $ 4,229 $ 3,092 $ 800 $ 86 $ 71 $ 358 $ — $ — $ 8,636
Past due 30-89 days — — — 19 — — — — 19
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 4,229 $ 3,092 $ 800 $ 105 $ 71 $ 358 $ — $ — $ 8,655
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Residential real estate: Home equity lines of credit
Current $ — $ — $ — $ — $ — $ — $ 39,464 $ — $ 39,464
Past due 30-89 days — — — — — — 10 — 10
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ — $ — $ — $ — $ — $ — $ 39,474 $ — $ 39,474
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Secured - direct
Current $ 10,990 $ 9,498 $ 6,535 $ 3,947 $ 2,166 $ 1,880 $ — $ — $ 35,016
Past due 30-89 days — — 15 — — — — — 15
Past due 90 or more days — — — — 19 — — — 19
Nonaccrual — — — — — — — — —
Total $ 10,990 $ 9,498 $ 6,550 $ 3,947 $ 2,185 $ 1,880 $ — $ — $ 35,050
Current year-to-date gross charge-offs $ — $ 62 $ — $ — $ — $ — $ — $ — $ 62

Table of Contents

December 31, 2024
2024 2023 2022 2021 2020 Prior Revolving<br>Loans Revolving Loans Converted to Term Total
Consumer: Secured - indirect
Current $ 6,526 $ 22,624 $ 7,682 $ 4,990 $ 4,018 $ 3,064 $ — $ — $ 48,904
Past due 30-89 days 42 51 50 28 54 7 — — 232
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 6,568 $ 22,675 $ 7,732 $ 5,018 $ 4,072 $ 3,071 $ — $ — $ 49,136
Current year-to-date gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Consumer: Unsecured
Current $ 1,654 $ 656 $ 211 $ 22 $ 16 $ — $ 835 $ — $ 3,394
Past due 30-89 days — — 2 — — — 2 — 4
Past due 90 or more days — — — — — — — — —
Nonaccrual — — — — — — — — —
Total $ 1,654 $ 656 $ 213 $ 22 $ 16 $ — $ 837 $ — $ 3,398
Current year-to-date gross charge-offs $ 107 $ 7 $ 14 $ — $ — $ — $ — $ — $ 128

Loan Modifications

A loan modification includes terms outside of normal lending practices to a borrower experiencing financial difficulty.

Typical modifications granted include, but are not limited to:

•Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.

•Extending the maturity date or amortization period beyond typical lending guidelines for loans with similar risk characteristics.

•Agreeing to an interest-only payment structure, delaying principal payments, or delaying payments.

•Forgiving principal.

To determine if a borrower is experiencing financial difficulty, factors we consider include:

•The borrower is currently in default on any debt.

•The borrower would likely default on any debt if the concession is not granted.

•The borrower’s cash flow is insufficient to service all debt if the concession is not granted.

•The borrower has declared, or is in the process of declaring, bankruptcy.

•The borrower is unlikely to continue as a going concern (if the entity is a business).

Table of Contents

The following is a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty for the:

Three Months Ended March 31, 2025
Term Extension
Amortized Cost Basis % of Total Class of Financial Receivable
Commercial and industrial
Secured $ 532 0.24 %
Commercial real estate
Commercial mortgage owner occupied 1,524 0.83 %
Total $ 2,056
Three Months Ended March 31, 2024
--- --- --- --- --- --- --- --- ---
Other-Than-Insignificant Payment Delay Term Extension
Amortized Cost Basis % of Total Class of Financial Receivable Amortized Cost Basis % of Total Class of Financial Receivable
Commercial and industrial
Secured $ — 0.00 % $ 13 0.01 %
Commercial real estate
Commercial mortgage owner occupied 823 0.46 % — 0.00 %
Consumer
Secured - indirect — 0.00 % 2 0.00 %
Total $ 823 $ 15

We do not modify any loans by forgiving principal or accrued interest. We had committed to advance $0 and $43 in additional funds to be disbursed in connection with modified loans at March 31, 2025 and December 31, 2024, respectively, as displayed in the tables above.

The following is a summary of the financial effect of the modifications granted to borrowers experiencing financial difficulty for the:

Three Months Ended March 31
2025 2024
Weighted-Average Term Extension (Years) Payment Delay Term Weighted-Average Term Extension (Years)
Commercial and industrial
Secured 4.4 years N/A 3 years
Commercial real estate
Commercial mortgage owner occupied 15 years 7 months N/A
Consumer
Secured - indirect N/A N/A 1.3 years

Table of Contents

We closely monitor the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. The following tables summarize the amortized cost basis of loans that have been modified within the past 12 months prior to:

March 31, 2025
Current 30-59 Days<br>Past Due 60-89 Days<br>Past Due 90 Days or<br>More Past Due Total
Commercial and industrial
Secured $ 2,168 $ — $ — $ — $ 2,168
Commercial real estate
Commercial mortgage owner occupied 2,872 — — — 2,872
Agricultural
Agricultural mortgage 1,584 — — — 1,584
Agricultural other 924 — — — 924
Total $ 7,548 $ — $ — $ — $ 7,548
March 31, 2024
--- --- --- --- --- --- --- --- --- --- ---
Current 30-59 Days<br>Past Due 60-89 Days<br>Past Due 90 Days or<br>More Past Due Total
Commercial and industrial
Secured $ 12 $ — $ — $ — $ 12
Commercial real estate
Commercial mortgage owner occupied 941 — — — 941
Commercial mortgage non-owner occupied 1,023 — — — 1,023
Commercial mortgage multifamily 2,976 — — — 2,976
Agricultural
Agricultural mortgage 22 — — — 22
Consumer
Secured - indirect 2 — — — 2
Total $ 4,976 $ — $ — $ — $ 4,976

We had no loans that defaulted in the three-month periods ended March 31, 2025 and 2024 which were modified within 12 months prior to the default date.

ACL - Loans

The credit quality of our loan portfolio is continuously monitored and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within our loan portfolio. The ACL is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

The ACL is evaluated on a regular basis for appropriateness. Our periodic review of the collectability of a loan considers historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The primary factors behind the determination of the level of the ACL are specific allocations for loans individually evaluated, historical loss percentages, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.

The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a component of individual loans that do not share risk characteristics with other loans; and a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.

For a loan that does not share risk characteristics with other loans, an individual analysis is performed to measure an allowance. Loans in nonaccrual status are individually evaluated for specific allocation of the allowance using the fair value of collateral,

Table of Contents

less costs to sell if foreclosure is probable, or the discounted cash flow method. We do not recognize interest income on loans in nonaccrual status. For loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding.

In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and credit risk ratings or delinquency bucket. This model calculates an expected loss percentage for each loan class by considering the probability of default, based on the migration of loans from performing to loss by credit risk ratings or delinquency buckets using life-of-loan analysis, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.

The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio. These qualitative factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a reasonable and supportable forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the model reverts back to the historical rates of default and severity of loss. Qualitative factors include:

•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, recovery practices not considered elsewhere in estimating credit losses;

•Changes in the experience, ability, and depth of lending management and other relevant staff;

•Changes in interest rates;

•Changes in international, national, regional, and local economic factors;

•Changes in the nature and volume of the portfolio and in the terms of loans;

•Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

•Lack of current financial information;

•Competition, legal, and regulatory; and

•Changes in the value of underlying collateral.

A summary of activity in the ACL by portfolio segment and the recorded investment in loans by segments follows for the:

Three Months Ended March 31, 2025
Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total
December 31, 2024 $ 1,316 $ 5,171 $ 287 $ 4,521 $ 1,600 $ 12,895
Charge-offs — — — (1) (171) (172)
Recoveries 80 2 — 14 128 224
Reversal of credit losses (157) 1 (21) 66 (101) (212)
March 31, 2025 $ 1,239 $ 5,174 $ 266 $ 4,600 $ 1,456 $ 12,735
Three Months Ended March 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total
December 31, 2023 $ 968 $ 5,878 $ 270 $ 4,336 $ 1,656 $ 13,108
Charge-offs — — — (1) (190) (191)
Recoveries 2 6 2 64 71 145
Provision for credit losses 297 19 (7) (91) 110 328
March 31, 2024 $ 1,267 $ 5,903 $ 265 $ 4,308 $ 1,647 $ 13,390

Table of Contents

The following table illustrates the two main components of the ACL as of:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024
ACL
Individually evaluated $ — $ — $ — $ 137 $ 349
Collectively evaluated 12,735 12,895 12,635 12,958 13,041
Total $ 12,735 $ 12,895 $ 12,635 $ 13,095 $ 13,390
ACL to gross loans
Individually evaluated 0.00 % 0.00 % 0.00 % 0.01 % 0.03 %
Collectively evaluated 0.93 % 0.91 % 0.89 % 0.94 % 0.95 %
Total 0.93 % 0.91 % 0.89 % 0.95 % 0.98 %

The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan segment as of:

March 31, 2025 December 31, 2024
Loan Balance Specific Allocation Loan Balance Specific Allocation
Commercial and industrial $ — $ — $ — $ —
Commercial real estate — — — —
Agricultural — — — —
Residential real estate 145 — 254 —
Consumer — — — —
Total $ 145 $ — $ 254 $ —

We have designated loans classified as collateral dependent for which we apply the practical expedient to measure the ACL based on the fair value of the collateral less cost to sell when the repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals are updated every one to two years depending on the type of loan and the total exposure of the borrower. Loans evaluated for expected credit losses on an individual basis as of March 31, 2025 include $145 in collateral dependent loans secured by residential real estate.

Table of Contents

Note 4 – Borrowed Funds

Short-term borrowings

Short-term borrowings include securities sold under repurchase agreements without stated maturity dates, federal funds purchased, and FRB Discount Window advances, which all generally mature within one to four days from the transaction date.

A summary of short-term borrowed funds without stated maturity dates was as follows for the:

Three Months Ended March 31
2025 2024
Maximum Month End Balance Average Balance Weighted Average Interest Rate During the Period Maximum Month End Balance Average Balance Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates $ 47,310 $ 43,513 3.21 % $ 43,250 $ 40,621 3.15 %
Federal funds purchased — 21 5.43 % — 2 6.52 %
FRB Discount Window — 29 4.51 % — — 0.00 %

Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction. The securities underlying the agreements have a carrying value and a fair value of $58,094 and $67,539 at March 31, 2025 and December 31, 2024, respectively. Such securities remain under our control. We may be required to provide additional collateral based on the fair value of underlying securities.

Securities sold under repurchase agreements without stated maturity dates were as follows as of:

March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Securities sold under agreements to repurchase without stated maturity dates $ 47,310 3.08 % $ 53,567 3.18 %

We had pledged AFS securities and 1-4 family residential real estate loans in the following amounts at:

March 31<br>2025 December 31<br>2024
Pledged to secure borrowed funds $ 394,079 $ 395,286
Pledged to secure repurchase agreements 58,094 67,539
Pledged for public deposits and for other purposes necessary or required by law 67,794 86,162
Total $ 519,967 $ 548,987

AFS securities pledged to repurchase agreements without stated maturity dates consisted of the following at:

March 31<br>2025 December 31<br>2024
U.S. Treasury $ 48,114 $ 57,271
Mortgage-backed securities 7,769 7,979
Collateralized mortgage obligations 2,211 2,289
Total $ 58,094 $ 67,539

AFS securities pledged to repurchase agreements are monitored to ensure the appropriate level is collateralized. In the event of maturities, calls, significant principal repayments, or significant decline in market values, we have an adequate level of AFS securities to pledge to satisfy collateral requirements.

As of March 31, 2025, we had the ability to borrow up to an additional $377,824 without pledging additional collateral.

Table of Contents

FHLB advances

FHLB advances are collateralized by a blanket lien on all qualified 1-4 family residential real estate loans, specific AFS securities, and FHLB stock.

The following table lists the maturities and weighted average interest rates of FHLB advances as of:

March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Fixed rate due 2025 $ — 0.00 % $ 30,000 4.52 %

Subordinated notes

We have $30,000 in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Notes"). The Notes will initially bear a fixed interest rate of 3.25% until June 15, 2026, after which time until maturity on June 15, 2031, the interest rate will reset quarterly to an annual floating rate equal to the then-current 3-month SOFR plus 256 basis points. The Notes are redeemable by us at our option, in whole or in part, on or after June 15, 2026. The Notes are not subject to redemption at the option of the holders.

The following table summarizes our outstanding notes as of:

March 31, 2025 December 31, 2024
Amount Rate Amount Rate
Fixed rate at 3.25% to floating, due 2031 $ 30,000 3.25 % $ 30,000 3.25 %
Unamortized issuance costs (553) (576)
Total subordinated debt, net $ 29,447 $ 29,424

Note 5 – Computation of Earnings Per Common Share

Basic earnings per common share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate solely to outstanding shares in the Directors Plan and grant awards under the RSP.

Earnings per common share have been computed based on the following for the:

Three Months Ended <br> March 31
2025 2024
Average number of common shares outstanding for basic calculation 7,419,739 7,493,334
Average potential effect of common shares in the RSP 12,423 14,405
Average number of common shares outstanding used to calculate diluted earnings per common share 7,432,162 7,507,739
Net income $ 3,949 $ 3,131
Earnings per common share
Basic $ 0.53 $ 0.42
Diluted 0.53 0.42

Table of Contents

Note 6 – Capital Ratios and Shareholders' Equity

As of March 31, 2025 and December 31, 2024, the most recent notifications from the FRB and the FDIC categorized us as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain total risk-based, Tier 1 risk-based, Common Equity Tier 1, and Tier 1 leverage ratios as set forth in the following tables. The minimum requirements presented below include the minimum required capital levels based on the Basel III Capital Rules. Capital requirements to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. There were no conditions or events since the notifications that we believe have changed our categories. The following tables set forth these requirements and our ratios as of:

March 31, 2025
Actual Minimum Capital<br>Required Plus Capital Conservation Buffer Minimum Capital<br><br>Required To Be Considered<br><br>Well Capitalized (1)
Amount Ratio Amount Ratio Amount Ratio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank $ 176,720 12.08 % $ 102,391 7.00 % $ 95,077 6.50 %
Consolidated 184,713 12.58 % 102,748 7.00 % N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank 176,720 12.08 % 124,331 8.50 % 117,018 8.00 %
Consolidated 184,713 12.58 % 124,765 8.50 % N/A N/A
Total capital to risk weighted assets
Isabella Bank 190,072 12.99 % 153,586 10.50 % 146,272 10.00 %
Consolidated 227,512 15.50 % 154,121 10.50 % N/A N/A
Tier 1 capital to average assets
Isabella Bank 176,720 8.59 % 82,267 4.00 % 102,834 5.00 %
Consolidated 184,713 8.96 % 82,465 4.00 % N/A N/A
December 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- ---
Actual Minimum Capital<br>Required Plus Capital Conservation Buffer Minimum Capital<br><br>Required To Be Considered<br><br>Well Capitalized (1)
Amount Ratio Amount Ratio Amount Ratio
Common equity Tier 1 capital to risk weighted assets
Isabella Bank $ 172,589 11.53 % $ 104,783 7.00 % $ 97,299 6.50 %
Consolidated 183,348 12.21 % 105,136 7.00 % N/A N/A
Tier 1 capital to risk weighted assets
Isabella Bank 172,589 11.53 % 127,237 8.50 % 119,753 8.00 %
Consolidated 183,348 12.21 % 127,665 8.50 % N/A N/A
Total capital to risk weighted assets
Isabella Bank 185,997 12.43 % 157,175 10.50 % 149,691 10.00 %
Consolidated 226,179 15.06 % 157,703 10.50 % N/A N/A
Tier 1 capital to average assets
Isabella Bank 172,589 8.36 % 82,602 4.00 % 103,252 5.00 %
Consolidated 183,348 8.86 % 82,803 4.00 % N/A N/A

(1) "Well-capitalized" minimum Common Equity Tier 1 to Risk-Weighted and Leverage Ratio are not formally defined under applicable regulations for bank holding companies.

Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital includes a permissible portion of the allowances for credit losses and subordinated debt, net of unamortized issuance costs. There are no significant regulatory constraints placed on our capital. At March 31, 2025, the Bank exceeded all minimum capital requirements.

Table of Contents

The following table summarizes the changes in AOCI by component for the:

Three Months Ended March 31
2025 2024
Unrealized<br>Gains<br>(Losses) on<br>AFS<br>Securities Defined<br>Benefit<br>Pension Plan Total Unrealized<br>Gains<br>(Losses) on<br>AFS<br>Securities Defined<br>Benefit<br>Pension Plan Total
Balance, December 31 $ (20,958) $ (397) $ (21,355) $ (25,199) $ (697) $ (25,896)
OCI before reclassifications 5,014 — 5,014 (2,926) — (2,926)
Amounts reclassified from AOCI — — — — — —
Subtotal 5,014 — 5,014 (2,926) — (2,926)
Tax effect (1,098) — (1,098) 632 — 632
OCI, net of tax 3,916 — 3,916 (2,294) — (2,294)
Balance, March 31 $ (17,042) $ (397) $ (17,439) $ (27,493) $ (697) $ (28,190)

Included in OCI for the three-month periods ended March 31, 2025 and 2024 are changes in unrealized gains and losses related to certain auction rate money market preferred stocks. These investments, for federal income tax purposes, have no deferred federal income taxes related to unrealized gains or losses given the nature of the investments.

A summary of the components of unrealized gains on AFS securities included in OCI follows for the:

Three Months Ended March 31
2025 2024
Auction Rate Money Market Preferred All Other AFS Securities Total Auction Rate Money Market Preferred All Other AFS Securities Total
Unrealized gains (losses) arising during the period $ (215) $ 5,229 $ 5,014 $ 82 $ (3,008) $ (2,926)
Reclassification adjustment for net (gains) losses included in net income — — — — — —
Net unrealized gains (losses) (215) 5,229 5,014 82 (3,008) (2,926)
Tax effect — (1,098) (1,098) — 632 632
Unrealized gains (losses), net of tax $ (215) $ 4,131 $ 3,916 $ 82 $ (2,376) $ (2,294)

Table of Contents

Note 7 – Fair Value

Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:

Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3: Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods.

Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally, we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion.

Following is a description of the valuation methodologies, key inputs, and an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.

AFS securities: AFS securities are recorded at fair value on a recurring basis. Level 1 fair value measurement is based upon quoted prices for identical instruments. Level 2 fair value measurement is based upon quoted prices for similar instruments. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss and liquidity assumptions. The values for Level 1 and Level 2 investment securities are generally obtained from an independent third party. On a quarterly basis, we compare the values provided to alternative pricing sources.

Loans: We do not record loans at fair value on a recurring basis. However, some loans are individually evaluated for ACL purposes, and a specific ACL may be established. To measure reserve, the fair value of the loan is estimated using the fair value of the collateral, less costs to sell if foreclosure is probable, or the present value of expected future cash flows discounted at the loan’s effective interest rate. Loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.

We review the net realizable values of the underlying collateral for collateral dependent loans on at least a quarterly basis for all loan types. To determine the collateral value, we utilize independent appraisals, broker price opinions, or internal evaluations. We review these valuations to determine whether an additional discount should be applied given the age of market information that may have been considered as well as other factors such as costs to sell an asset if it is determined that the collateral will be liquidated in connection with the ultimate settlement of the loan. We use these valuations to determine if any specific reserves or charge-offs are necessary. We may obtain new valuations in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated.

Table of Contents

The following tables list the quantitative information about loans measured at fair value on a nonrecurring basis as of:

March 31, 2025
Valuation Technique Fair Value Unobservable Input Actual Range Weighted Average
Collateral Dependent Loans Discount applied to collateral:
Discounted value $ 145 Real Estate 20% 20%
December 31, 2024
--- --- --- --- --- ---
Valuation Technique Fair Value Unobservable Input Actual Range Weighted Average
Collateral Dependent Loans Discount applied to collateral:
Discounted value $ 254 Real Estate 20% 20%

Collateral discount rates may have ranges to accommodate differences in the age of the independent appraisal, broker price opinion, or internal evaluation.

OMSR: OMSR (which are included in other assets) are subject to impairment testing. To test for impairment, we utilize a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and discount rates. If the valuation model reflects a value less than the carrying value, OMSR are adjusted to fair value through a valuation allowance as determined by the model. As such, we classify OMSR subject to nonrecurring fair value adjustments as Level 3.

The following table lists the quantitative information about OMSR fair value measurement as of:

March 31, 2025
Valuation Technique Fair Value Unobservable Input Rate
Discounted cash flow $ 2,366 Constant prepayment rate 7%
Discount rate 11%
December 31, 2024
--- --- --- --- ---
Valuation Technique Fair Value Unobservable Input Rate
Discounted cash flow $ 2,483 Constant prepayment rate 7%
Discount rate 11%

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

Estimated Fair Values of Financial Instruments Not Recorded at Fair Value in their Entirety on a Recurring Basis

Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.

Table of Contents

The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis were as follows as of:

March 31, 2025
Carrying<br>Value Estimated<br>Fair Value Level 1 Level 2 Level 3
ASSETS
Cash and cash equivalents $ 69,179 $ 69,179 $ 69,179 $ — $ —
FHLB stock (1) 5,600 N/A — — —
Mortgage loans HFS 127 131 — 131 —
Gross loans 1,367,724 1,321,419 — — 1,321,419
Less allowance for credit losses 12,735 12,735 — — 12,735
Net loans 1,354,989 1,308,684 — — 1,308,684
Accrued interest receivable 8,790 8,790 8,790 — —
Equity securities without readily determinable fair values (1) 3,086 N/A — — —
LIABILITIES
Deposits without stated maturities 1,407,670 1,407,670 1,407,670 — —
Deposits with stated maturities 390,239 388,178 — 388,178 —
Short-term borrowings 47,310 47,254 — 47,254 —
FHLB advances — — — — —
Subordinated debt, net of unamortized issuance costs 29,447 27,916 — 27,916 —
Accrued interest payable 997 997 997 — —
December 31, 2024
--- --- --- --- --- --- --- --- --- --- ---
Carrying<br>Value Estimated<br>Fair Value Level 1 Level 2 Level 3
ASSETS
Cash and cash equivalents $ 24,542 $ 24,542 $ 24,542 $ — $ —
FHLB stock (1) 12,762 N/A — — —
Mortgage loans HFS 242 247 — 247 —
Gross loans 1,423,571 1,363,883 — — 1,363,883
Less allowance for credit losses 12,895 12,895 — — 12,895
Net loans 1,410,676 1,350,988 — — 1,350,988
Accrued interest receivable 8,085 8,085 8,085 — —
Equity securities without readily determinable fair values (1) 3,086 N/A — — —
LIABILITIES
Deposits without stated maturities 1,359,469 1,359,469 1,359,469 — —
Deposits with stated maturities 387,591 385,200 — 385,200 —
Short-term borrowings 53,567 53,503 — 53,503 —
FHLB advances 30,000 30,000 — 30,000 —
Subordinated debt, net of unamortized issuance costs 29,424 27,658 — 27,658 —
Accrued interest payable 1,051 1,051 1,051 — —

(1) Due to the characteristics of equity securities without readily determinable fair values, they are not disclosed under a specific fair value hierarchy. When an impairment or write-down related to these securities is recorded, such amount would be classified as a nonrecurring Level 3 fair value adjustment.

Table of Contents

Financial Instruments Recorded at Fair Value

The table below presents the recorded amount of assets and liabilities measured at fair value on:

March 31, 2025 December 31, 2024
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Recurring items
AFS securities
U.S. Treasury $ 212,783 $ — $ 212,783 $ — $ 220,571 $ — $ 220,571 $ —
States and political subdivisions 74,222 — 74,222 — 76,568 — 76,568 —
Auction rate money market preferred 2,829 — 2,829 — 3,044 — 3,044 —
Mortgage-backed securities 25,828 — 25,828 — 26,886 — 26,886 —
Collateralized mortgage obligations 190,078 — 190,078 — 154,674 — 154,674 —
Corporate 7,300 — 7,300 — 7,286 — 7,286 —
Total AFS securities 513,040 — 513,040 — 489,029 — 489,029 —
Nonrecurring items
Collateral dependent (net of ACL) 145 — — 145 254 — — 254
Foreclosed assets 649 — — 649 544 — — 544
Total $ 513,834 $ — $ 513,040 $ 794 $ 489,827 $ — $ 489,029 $ 798
Percent of assets and liabilities measured at fair value 0.00 % 99.85 % 0.15 % 0.00 % 99.84 % 0.16 %

We recorded an impairment related to foreclosed assets of $63 through earnings for the three month periods ended March 31, 2025 and $0 for the three month period ended March 31, 2024. We had no other assets or liabilities recorded at fair value with changes in fair value recognized through earnings, on a recurring basis or nonrecurring basis, as of March 31, 2025. Further, we had no unrealized gains and losses included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period.

Note 8 – Subsequent Events

On April 2, 2025, we recovered the full contractual balance of overdrawn deposit accounts from one customer. These accounts were charged off during the third quarter of 2024 in the amount of $1,622. Additionally, we collected all legal fees associated with the loss and the full contractual balance of all commercial loans outstanding with this customer. The recovery of losses and fees will be reflected in our second quarter 2025 results.

We evaluated subsequent events after March 31, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure. No other subsequent events require financial statement recognition or disclosure between March 31, 2025 and the date our interim condensed consolidated financial statements were issued.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Dollars in thousands except per share amounts and ratios, unless otherwise noted)

The following is management's discussion and analysis of our financial condition and results of operations for the unaudited three months ended March 31, 2025 and 2024. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 and with the unaudited interim condensed consolidated financial statements and notes, beginning on page 4 of this report.

General

Isabella Bank Corporation is a registered financial services holding company that was incorporated in September 1988 under Michigan law. The Corporation's wholly owned subsidiary, Isabella Bank, has 31 offices located throughout Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties. The area includes significant agricultural production, manufacturing, retail, gaming and tourism, and several colleges and universities.

Forward-Looking Statements

Information in this Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward-looking statements generally relate to losses, impact of events, financial condition, plans, objectives, outlook for earnings, revenues, expenses, capital and liquidity levels and ratios, asset levels, asset quality, financial position, and other matters regarding or affecting the Corporation and its future business and operations. Forward-looking statements are typically identified by words or phrases such as “will likely result", “expect”, “plan”, “believe”, “estimate”, “anticipate”, “strategy”, “trend”, “forecast”, “outlook”, “project”, “intend”, “assume”, “outcome”, “continue”, “remain”, “potential”, “opportunity”, “comfortable”, “current”, “position”, “maintain”, “sustain”, “seek”,“achieve” and variations of such words and similar expressions, or future or conditional verbs such as will, would, should, could or may. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The matters discussed in 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 or by the forward-looking statements depending on a variety of uncertainties or other factors described in Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, or included in any subsequent filing by the Corporation with the Securities and Exchange Commission. Forward-looking statements are based on beliefs and assumptions using information available at the time the statements are made. The Corporation cautions you not to unduly rely on forward-looking statements because the assumptions, beliefs, expectations and projections about future events may, and often do, differ materially from actual results. Any forward-looking statement speaks only as to the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect developments occurring after the statement is made.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to GAAP and the prevailing practices in the financial services industry. However, we also evaluate our performance by reference to certain additional financial measures discussed in this Quarterly Report on Form 10-Q that we identify as being “non-GAAP financial measures.” In accordance with SEC rules, we classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios, or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that we discuss in this Quarterly Report on Form 10-Q should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this report may differ from that of other companies reporting measures with similar names.

Table of Contents

Executive Summary

Comparison of Operating Results for the three months ended March 31, 2025, and 2024, unless otherwise noted

Net income in the first quarter of 2025 was $3,949, or $0.53 per diluted share, compared with $3,131, or $0.42 per diluted share, in the same quarter 2024. The non-GAAP measure of adjusted net income in the first quarter 2025 totaled $4,254, or $0.57 per diluted share, compared to $3,076 or $0.41 per diluted share, in the same quarter of 2024.The increase in net income for the comparative periods includes an increase in core loan interest income and a decline in provision for credit losses, offset by an increase in noninterest expenses.

Net interest income was $14,525 in the first quarter of 2025 and $13,242 in the same quarter of 2024, representing 3.06% and 2.79% of earning assets, or NIM on an FTE basis, respectively. The current year quarter NIM included a four basis point benefit due to the recovery of contractual interest from nonaccruing loans that paid off during the quarter. The book yield from securities was 2.20% and 2.25% during the first quarters of 2025 and 2024, respectively. Our yield on loans expanded to 5.71% in the first quarter 2025, up from 5.38% in the same quarter of 2024. Excluding loan recoveries, the yield on loans was 5.65%. The expansion in loan yields was a result of higher rates on new loans and variable rate commercial loans that have, and continue to, reprice. At the end of the first quarter 2025, approximately 39% of commercial loans are fixed at rates that are lower than current market rates. Most of those fixed rate loans will contractually reprice to variable rates over the next four years. Our cost of interest-bearing liabilities decreased to 2.26% from 2.28% in the first quarter 2024 due to reductions to rates in the money market and certificate of deposit products. NIM continues to expand as loans reprice and the cost of interest bearing liabilities stabilizes.

The provision for credit losses was a credit of $107 in the first quarter of 2025, which reflects the $160 change in the allowance for credit losses on loans and net recoveries totaling $52, offset by an increase in the reserve for unfunded commitments. The provision for loan losses in the same period of 2024 was $392 reflecting $265 for specific reserves and $46 in net charge offs.

Noninterest income for the three months ended March 31, 2025 and 2024 was $3,528 and $3,468, respectively. Wealth management fees grew $40, or 4%, on relatively flat assets under management as compared to the first quarter of 2024, due to a change in product mix that generated higher administrative fees. AUM in the first quarter 2025 decreased 0.22% while the S&P 500 declined 4.6% in the same period. Earnings on BOLI policies increased $129 over the prior year quarter due to new investments in a separate account BOLI. Other noninterest income in the first quarter included a $55 loss on foreclosed assets, compared to a $69 gain in the first quarter 2024.

Noninterest expenses for the three-month period ended March 31, 2025 increased $623, or 4.9%, in comparison to the same period in 2024. Compensation and benefit expenses increased $368 reflecting annual merit increases and higher medical insurance claims compared to the first quarter of 2024. Other professional services included $121 in legal fees related to our previously announced Nasdaq uplisting application.

Income tax expense was $912, compared to $511 in the first quarter of 2024 and the ETR was 19% and 14%, respectively. The ETR in the first quarter 2025 included a one-time expense totaling $166 due to the taxes owed from the lifetime earnings on BOLI policies that were surrendered during the quarter. Excluding the one-time charge, the ETR was 15%, which is higher than the prior year quarter on higher pretax income.

Financial Condition (March 31, 2025 to December 31, 2024 comparison)

Total assets increased $16,346 to $2,102,587 as of March 31, 2025, primarily due to an increase of $38,681 in interest bearing cash, $18,997 in gross securities, and $10,951 increase in BOLI assets, offset by a $60,065 decrease in advances to mortgage brokers.

Our AFS securities portfolio totaled $513,040 at March 31, 2025, increasing $24,011 at the end of first quarter 2025. The increase was driven by $40,362 in purchases of collateralized mortgage obligation securities with a weighted-average yield of 4.56%. Amortization and maturities of $21,058 partially offset the increase from purchases. Net unrealized losses at March 31, 2025 totaled $21,473, or 4.02%, of the portfolio and improved during the quarter due to the treasury portfolio rapidly approaching maturity and a decrease in market yields. The par value and corresponding book yields that are estimated to mature or payoff by year include: $54,500 in principal with a weighted-average book yield of 2.34% over the remainder of 2025; $217,400 at 1.17% in 2026; and $63,400 at 1.86% in 2027. Some of these securities amortize so the actual principal paydown may differ from these estimates.

Loans outstanding as of March 31, 2025 totaled $1,367,724. Since December 31, 2024, gross loans have decreased $55,847 as a result of a reduction in advance to mortgage brokers. However, the decline in this non-core loan product has provided liquidity and the opportunity to refocus on loans that can be recorded on our balance sheet for longer terms and help to mitigate interest rate risk.

Table of Contents

Core loans, which excludes advances to mortgage brokers, grew $4,218, driven by the commercial real estate and commercial and industrial loan portfolios of $4,787 and $4,326, respectively. Loan growth during the first quarter primarily was in the construction, real estate, and hospitality industries. The commercial pipeline is robust, with some anticipated loan closings in the first quarter extended into the second quarter 2025. Residential mortgages increased $6,476 as customers are favoring adjustable-rate loans, which are put on the balance sheet rather than sold in the secondary market. Core loan growth during the quarter was offset by a decline in agricultural and consumer loan portfolios that continue to roll off amid decreasing demand, competition and our adherence to credit quality standards.

The ACL was $12,735 at March 31, 2025, a decrease of $160 from $12,895 at December 31, 2024. Most of the decline is due to improvement in historical loss experience, driven by the recovery of three previously charged-off loans during the quarter totaling $136, which led to an $88 reduction in the allowance. Nonaccrual loans were $173 as of March 31, 2025 compared to $282 at December 31, 2024. Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.41% at March 31, 2025, compared to 0.40% at year-end 2024. Overall, credit quality remains strong, and there are no negative trends.

BOLI assets were $45,833 at March 31, 2025, an increase of $10,951 from December 31, 2024. The growth was mostly driven by a $10,583 investment of new policies in a separate account product at the beginning of January. The investment transaction included a surrender of $5,431 of existing general account policies and redeployment into a separate account BOLI. As part of BOLI restructuring, another $9,045 of general account policies will be exchanged for separate account BOLI, which is expected to be completed by the end of the third quarter. The separate account BOLI currently yields 5.4%, compared to a weighted-average yield of 2.9% from existing general account policies.

Total deposits increased $50,849 from December 31, 2024, to $1,797,909 at March 31, 2025. The growth was driven by the interest-bearing demand, money market, and savings deposits, collectively increasing $60,380 as we continue to deepen customer relationships. Consumer demand for retail certificates of deposit accounts continues based on the rate environment, resulting in a $2,648 increase in the balance during the first three months of 2025. Adversely, demand deposits declined $12,179 during the first quarter 2025.

Total equity was $215,556 at March 31, 2025 compared to $210,276 at year-end 2024. Our tangible book value per share was $22.58 as of March 31, 2025, compared to $21.82 on December 31, 2024. Net unrealized losses on AFS securities reduced tangible book value per share by $2.30 and $2.82 for the respective periods. Share repurchases totaled 45,582 during the first three months of 2025 for a value of $1,145 at an average price of $25.12.

We continue to have robust liquidity levels and capital. As of March 31, 2025, we had $907,003 of unencumbered sources of liquidity and strong capital ratios; the Tier 1 Leverage Ratio was 8.96%, Tier 1 risk-based capital was 12.58%, and Total risk-based capital was 15.50%.

Reclassifications

Certain amounts reported in the interim 2024 consolidated financial statements have been reclassified to conform to the 2025 presentation.

Subsequent Events

On April 2, 2025, we recovered the full contractual balance of overdrawn deposit accounts from one customer. These accounts were charged off during the third quarter of 2024 in the amount of $1,622. Additionally, we collected all legal fees associated with the loss and the full contractual balance of all commercial loans outstanding with this customer. The recovery of losses and fees will be reflected in our second quarter 2025 results.

We evaluated subsequent events after March 31, 2025 through the date our interim condensed consolidated financial statements were issued for potential recognition and disclosure. No other subsequent events require financial statement recognition or disclosure between March 31, 2025 and the date our interim condensed consolidated financial statements were issued.

Table of Contents

Selected Financial Data (Unaudited)

The following table outlines our results of operations and provides certain performance measures as of, and for the:

Three Months Ended
March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>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
Adjusted diluted earnings (1) 0.57 0.52 0.61 0.46 0.41
Dividends 0.28 0.28 0.28 0.28 0.28
Book value (2) 29.10 28.32 28.63 27.06 26.80
Tangible book value (2) 22.58 21.82 22.14 20.60 20.35
Market price (2) 23.59 25.99 21.21 18.20 19.40
PERFORMANCE RATIOS
Return on average total assets 0.77 % 0.76 % 0.62 % 0.68 % 0.61 %
Adjusted return on average total assets (1) 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 %
Adjusted return on average shareholders' equity (1) 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 %
Adjusted return on average tangible shareholders' equity (1) 10.40 % 9.43 % 11.32 % 9.17 % 7.97 %
Net interest margin yield (FTE) (1) 3.06 % 2.98 % 2.96 % 2.82 % 2.79 %
Efficiency ratio (1) 72.39 % 71.20 % 72.30 % 73.93 % 74.84 %
Gross loan to deposit ratio (2) 76.07 % 81.48 % 79.93 % 80.22 % 77.22 %
Shareholders' equity to total assets (2) 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 %
FINANCIAL DATA (in millions)
Total assets (2) 2,103 2,086 2,107 2,060 2,058
AFS securities (2) 513 489 507 506 518
Gross loans (2) 1,368 1,424 1,424 1,382 1,366
ACL (2) 13 13 13 13 13
Deposits (2) 1,798 1,747 1,782 1,722 1,768
Borrowed funds (2) 77 113 97 119 72
Shareholders' equity (2) 216 210 213 202 201
Wealth assets under management (2) 657 658 680 648 661
Net income 4 4 3 3 3
Interest income 23 23 23 22 21
Interest expense 8 9 9 9 8
Net interest income 15 15 14 14 13
Provision for credit losses — — 1 — —
Noninterest income 4 4 4 4 3
Noninterest expenses 13 13 13 13 13

(1) Non-GAAP financial measure; refer to the "Reconciliation of Non-GAAP Financial Measures" section

(2) At end of period

Table of Contents

Average Balances, Interest Rates, and Net Interest Income

The following schedules present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. These schedules also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances. FRB restricted equity holdings are included in other interest earning assets.

Three Months Ended
March 31, 2025 December 31, 2024 March 31, 2024
Average<br>Balance Tax<br>Equivalent<br>Interest Average<br>Yield /<br>Rate Average<br>Balance Tax<br>Equivalent<br>Interest Average<br>Yield /<br>Rate Average<br>Balance Tax<br>Equivalent<br>Interest Average<br>Yield /<br>Rate
INTEREST EARNING ASSETS
Loans (1) $ 1,370,765 $ 19,348 5.71 % $ 1,412,578 $ 20,145 5.66 % $ 1,348,749 $ 18,057 5.38 %
AFS securities (2) 514,479 2,827 2.20 % 522,733 2,869 2.15 % 557,030 3,130 2.25 %
FHLB stock 11,011 160 5.82 % 12,762 168 5.25 % 12,762 146 4.57 %
Fed funds sold 4 — 4.32 % 8 — 4.54 % 7 — 5.43 %
Other (3) 47,374 482 4.06 % 15,905 200 4.94 % 25,210 293 4.66 %
Total interest earning assets 1,943,633 22,817 4.75 % 1,963,986 23,382 4.72 % 1,943,758 21,626 4.47 %
NONEARNING ASSETS
Allowance for credit losses (12,884) (12,598) (13,100)
Cash and demand deposits due from banks 23,899 22,800 24,018
Premises and equipment 27,962 27,773 28,022
Other assets 102,927 92,608 84,059
Total assets $ 2,085,537 $ 2,094,569 $ 2,066,757
INTEREST BEARING LIABILITIES
Interest bearing demand deposits $ 240,860 $ 242 0.41 % $ 232,271 $ 212 0.36 % $ 245,299 $ 201 0.33 %
Money market deposits 460,663 2,929 2.58 % 436,235 2,970 2.71 % 451,476 3,212 2.86 %
Savings 286,364 538 0.76 % 276,856 446 0.64 % 282,971 333 0.47 %
Certificates of deposit 387,820 3,754 3.93 % 386,871 3,955 4.07 % 357,541 3,417 3.84 %
Short-term borrowings 43,563 341 3.18 % 50,862 413 3.22 % 40,623 321 3.17 %
FHLB advances 3,333 38 4.53 % 28,261 352 4.88 % 27,692 388 5.54 %
Subordinated debt, net of unamortized issuance costs 29,433 266 3.62 % 29,410 266 3.62 % 29,342 266 3.63 %
Total interest bearing liabilities 1,452,036 8,108 2.26 % 1,440,766 8,614 2.38 % 1,434,944 8,138 2.28 %
NONINTEREST BEARING LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits 403,024 425,116 412,228
Other liabilities 16,265 15,775 16,151
Shareholders’ equity 214,212 212,912 203,434
Total liabilities and shareholders’ equity $ 2,085,537 $ 2,094,569 $ 2,066,757
Net interest income (FTE) $ 14,709 $ 14,768 $ 13,488
Net yield on interest earning assets (FTE) (4) 3.06 % 2.98 % 2.79 %

(1) Includes loans HFS and nonaccrual loans

(2) Average balances for AFS securities are based on amortized cost

(3) Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter

(4) Non-GAAP financial measure; refer to the "Non-GAAP Financial Measures" section

Table of Contents

Loans

The following table displays loan balances as of:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024 Annualized Growth %<br>Quarter to Date
Commercial and industrial $ 249,220 $ 244,894 $ 240,589 $ 238,245 $ 226,281 7.07 %
Commercial real estate 552,234 547,447 547,038 547,005 561,123 3.50 %
Advances to mortgage brokers 3,015 63,080 76,187 39,300 29,688 N/M
Agricultural 94,359 99,694 96,794 94,996 93,695 (21.41) %
Total commercial loans 898,828 955,115 960,608 919,546 910,787 (23.57) %
Residential real estate 387,348 380,872 369,846 365,188 356,658 6.80 %
Consumer 81,548 87,584 93,829 96,902 98,063 (27.57) %
Total $ 1,367,724 $ 1,423,571 $ 1,424,283 $ 1,381,636 $ 1,365,508 (15.69) %

The following table presents the composition of our commercial real estate portfolio by industry as of:

March 31, 2025 December 31, 2024
Balance Percent of Total Balance Percent of Total
Real estate
1-4 family investor $ 87,760 15.89 % $ 86,736 15.84 %
Multifamily 60,846 11.02 % 61,033 11.15 %
All other 153,050 27.71 % 147,566 26.96 %
Hotels 83,511 15.12 % 83,426 15.24 %
Health care 42,482 7.69 % 43,197 7.89 %
Retail trade 33,266 6.02 % 33,586 6.14 %
Manufacturing 13,686 2.48 % 12,381 2.26 %
Accommodation services 11,597 2.10 % 11,786 2.15 %
Construction 11,252 2.04 % 10,901 1.99 %
Educational services 11,018 2.00 % 11,160 2.04 %
Wholesale trade 10,720 1.94 % 10,918 1.99 %
Other 33,046 5.99 % 34,757 6.35 %
Total commercial real estate $ 552,234 100.00 % $ 547,447 100.00 %

Commercial real estate loans are subject to a varying degree of risk from changes in interest rates and economic conditions. To control these risks, we maintain strict underwriting standards, lending limits to a single borrower, loan to collateral value limits, and a defined market area. We also monitor and limit loan concentrations to specific industries. Our practices also include appropriate loan reviews, and monitoring of past due levels, concentrations, industry trends, and other qualitative factors.

Deposits

The following table displays deposit balances as of:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024 Annualized Growth %<br>Quarter to Date
Noninterest bearing demand deposits $ 404,194 $ 416,373 $ 421,493 $ 412,193 $ 413,272 (11.70) %
Interest bearing demand deposits 243,939 237,548 228,902 232,660 250,314 10.76 %
Money market deposits 473,138 423,883 471,745 429,150 453,014 46.48 %
Savings 286,399 281,665 276,095 279,847 285,564 6.72 %
Certificates of deposit 390,239 387,591 383,597 368,449 366,143 2.73 %
Total $ 1,797,909 $ 1,747,060 $ 1,781,832 $ 1,722,299 $ 1,768,307 11.64 %

Table of Contents

Asset Quality Analysis

The following table outlines our quarter-to-date asset quality analysis as of, and for the three-month periods ended:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024
NONPERFORMING ASSETS
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 %
Nonaccrual loans to gross loans 0.01 % 0.02 % 0.04 % 0.07 % 0.09 %
ACL as a % of nonaccrual loans N/M N/M N/M N/M N/M
ALLOWANCE FOR CREDIT LOSSES
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
(Reversal of) 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
ACL 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)
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
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

Table of Contents

Capital

Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss). We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases. Pursuant to these authorizations, we issued 17,332 shares or $419 of common stock during the first three months of 2025, as compared to 22,456 shares or $447 of common stock during the same period in 2024. We offer the Directors Plan in which participants purchase stock units through deferred fees, in lieu of cash payments. Pursuant to this plan, we increased shareholders’ equity by $167 and $218 during the three-month periods ended March 31, 2025 and 2024, respectively. We also grant restricted stock awards pursuant to the RSP. Pursuant to this plan, we increased shareholders’ equity by $7 during the first three months of 2025, as compared to $25 during the same period in 2024.

We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 45,582 shares or $1,145 of common stock during the first three months of 2025 and 36,484 shares or $740 during the first three months of 2024. As of March 31, 2025, we were authorized to repurchase up to an additional 72,647 shares of common stock.

The FRB has established minimum risk-based capital guidelines. Pursuant to these guidelines, a framework has been established that assigns risk weights to each category of on and off-balance-sheet items to arrive at risk adjusted total assets. Regulatory capital is divided by the risk adjusted assets with the resulting ratio compared to the minimum standard to determine whether a corporation has adequate capital.

The following table sets forth our ratios as of:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024
Common equity tier 1 capital 12.58 % 12.21 % 12.08 % 12.37 % 12.36 %
Tier 1 capital 12.58 % 12.21 % 12.08 % 12.37 % 12.36 %
Total capital 15.50 % 15.06 % 14.90 % 15.29 % 15.31 %
Tier 1 leverage 8.96 % 8.86 % 8.77 % 8.83 % 8.80 %

Liquidity

Liquidity is monitored regularly by our ALCO, which consists of members of senior management. The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.

Our primary sources of liquidity are retail deposits, cash and cash equivalents, and unencumbered AFS securities. Cash, cash equivalents and unencumbered AFS securities totaled $427,091, or 20.31% of assets, as of March 31, 2025, compared to $330,876, or 15.86%, as of December 31, 2024. The increase in the amount and percentage of primary liquidity is a direct result of an increase in cash, driven by loan payoffs and deposit growth, and an increase in unencumbered AFS securities. Liquidity is important for financial institutions because of their need to meet loan funding commitments, depositor withdrawal requests, and various other commitments including expansion of operations, investment opportunities, and payment of cash dividends. Based on these same factors, daily liquidity could vary significantly.

Our secondary sources include the ability to borrow from the FHLB, from the FRB, and through various correspondent banks in the form of federal funds purchased and lines of credit. These funding methods typically carry a higher interest rate than traditional market deposit accounts. Some borrowed funds, including FHLB advances, FRB Discount Window advances, and repurchase agreements, require us to pledge assets, typically in the form of AFS securities or loans, as collateral. As of March 31, 2025, we had available lines of credit of $377,824.

We monitor our daily liquidity position to meet our cash flow needs. We also forecast anticipated funding needs for changes in interest rates and economic conditions, the scheduled maturity and interest rate sensitivity of the investment and loan portfolios and deposits, and regulatory capital requirements. Our liquidity stress testing is designed with consideration of these and other factors that could pose undue risk to liquidity.

Table of Contents

Our liquidity position remained strong at March 31, 2025, which is illustrated in the following table:

March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024
Total cash and cash equivalents $ 69,179 $ 24,542 $ 27,378 $ 23,559 $ 25,218
Brokered CD capacity 120,000 120,000 120,000 120,000 120,000
Available lines of credit
Fed funds lines with correspondent banks 93,000 93,000 93,000 93,000 93,000
FHLB borrowings 250,884 215,432 233,552 194,403 248,624
FRB Discount Window 28,940 28,698 28,888 28,148 28,083
Other lines of credit 5,000 5,000 5,000 5,000 5,000
Total available lines of credit 377,824 342,130 360,440 320,551 374,707
Unencumbered lendable value of FRB collateral, estimated (1) 340,000 290,000 290,000 290,000 310,000
Total cash and liquidity $ 907,003 $ 776,672 $ 797,818 $ 754,110 $ 829,925
Uninsured deposits $ 687,341 $ 645,764 $ 687,990 $ 623,245 $ 658,564
Coverage ratio of uninsured deposits with total cash and liquidity 132 % 120 % 116 % 121 % 126 %

(1) Includes estimated unencumbered lendable value of FHLB collateral of $260,000 as of March 31, 2025.

Fair Value

We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. AFS securities, cash flow hedge derivative instruments and certain liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as mortgage loans AFS, collateral dependent loans, goodwill, foreclosed assets, OMSR, and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write downs of individual assets.

For further information regarding fair value measurements see “Note 7 – Fair Value” of our interim condensed consolidated financial statements.

Market Risk

Our primary market risks are interest rate risk and liquidity risk. IRR is the exposure of our net interest income to changes in interest rates. IRR results from the difference in the maturity or repricing frequency of a financial institution's interest earning assets and its interest-bearing liabilities. Managing IRR is the fundamental method by which financial institutions earn income and create shareholder value. Excessive exposure to IRR could pose a significant risk to our earnings and capital.

The FRB has adopted a policy requiring banks to effectively manage the various risks that can have a material impact on safety and soundness. The risks include credit, interest rate, liquidity, operational, and reputational. We have policies, procedures, and internal controls for measuring and managing these risks. Specifically, our ALCO policy and procedures include defining acceptable types and terms of investments and funding sources, liquidity requirements, limits on investments in long-term assets, limiting the mismatch in repricing opportunities of assets and liabilities, and the frequency of measuring and reporting to our Board of Directors.

The primary technique to measure IRR is simulation analysis. Simulation analysis forecasts the effects on the balance sheet structure and net interest income under a variety of scenarios that incorporate changes in interest rates, the shape of yield curves, interest rate relationships, loan prepayments, and funding sources. These forecasts are compared against net interest income projected in a stable interest rate environment. While many assets and liabilities reprice either at maturity or in accordance with their contractual terms, several balance sheet components demonstrate characteristics that require an evaluation to more accurately reflect their repricing behavior. Key assumptions in the simulation analysis include prepayments on loans, probable calls of investment securities, changes in market conditions, loan volumes and loan pricing, deposit sensitivity, and customer preferences. These assumptions are inherently uncertain as they are subject to fluctuation and revision in a dynamic rate environment. As a result, the simulation analysis cannot precisely forecast the impact of rising and falling interest rates on net interest income. Actual results will differ from simulated results due to many other factors, including changes in balance sheet components, interest rate changes, changes in market conditions, and management strategies. We regularly monitor our projected net interest income sensitivity to ensure that it remains within established limits.

Table of Contents

The following tables summarize our interest rate sensitivity for 12 and 24 months as of March 31, 2025 and December 31, 2024. The results displayed in the tables reflect the modeling of immediate shifts in the yield curve and a flat balance sheet and do not reflect actual or expected changes.

March 31, 2025
12 Months 24 Months
Immediate basis point change assumption (short-term) -200 -100 100 200 -200 -100 100 200
Percent change in net interest income vs. constant rate (4.74) % (2.14) % 2.00 % 3.99 % (6.32) % (3.14) % 1.98 % 3.48 %
December 31, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
12 Months 24 Months
Immediate basis point change assumption (short-term) -200 -100 100 200 -200 -100 100 200
Percent change in net interest income vs. constant rate (3.44) % (1.55) % 1.45 % 2.83 % (4.67) % (2.18) % 1.22 % 2.00 %

Gap analysis, the secondary method to measure IRR, measures the cash flows and/or the earliest repricing of our interest-bearing assets and liabilities. This analysis is useful for measuring trends in the repricing characteristics of the balance sheet. Significant assumptions are required in this process because of the embedded repricing options contained in assets and liabilities. Residential real estate and consumer loans allow the borrower to repay the balance prior to maturity without penalty, while commercial and agricultural loans may have prepayment penalties. The amount of prepayments is dependent upon many factors, including the interest rate of a given loan in comparison to the current offering rates, the level of home sales, and the overall availability of credit in the marketplace. Generally, a decrease in interest rates will result in an increase in cash flows from these assets. Savings and demand accounts may generally be withdrawn on request without prior notice. The timing of cash flows from these deposits is estimated based on historical experience. Certificates of deposit have penalties that discourage early withdrawals.

We do not believe there has been a material change in the nature or categories of our primary market risk exposure, or the particular markets that present the primary risk of loss. We do not know of or expect there to be any material change in the general nature of our primary market risk exposure in the near term, and we do not expect to make material changes to our market risk methods in the near term. We may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

Gap analysis is also utilized as a method to measure interest rate sensitivity. Interest rate sensitivity is determined by the amount of earning assets and interest-bearing liabilities repricing within a specific time period, and their relative sensitivity to a change in interest rates. We strive to achieve reasonable stability in the net interest margin through periods of changing interest rates.

Contractual Obligations and Loan Commitments

We have various financial obligations, including contractual obligations and commitments related to deposits and borrowings, which may require future cash payments. We also have loan related commitments that may impact liquidity. The commitments include unused lines of credit, commercial and standby letters of credit, and commitments to grant loans. These commitments to grant loans include residential mortgage loans with the majority committed to be sold to the secondary market. Many of these commitments historically have expired without being drawn upon and do not necessarily represent our future cash requirements.

We are party to credit related financial instruments with off-balance-sheet risk. These financial instruments are entered into in the normal course of business to meet the financing needs of our customers. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The contractual or notional amounts of these instruments reflect the extent of involvement we have in a particular class of financial instrument.

Our exposure to credit-related loss in the event of nonperformance by the counterparties to the financial instruments for commitments to extend credit and standby letters of credit could be up to the contractual notional amount of those instruments. We use the same credit policies when analyzing the creditworthiness of counterparties as we do for extending loans to customers. No significant losses are anticipated as a result of these commitments.

Table of Contents

Reconciliation of Non-GAAP Financial Measures

The following tables provide a detailed analysis, and reconciliation for, our non-GAAP financial measures as of, and for the:

Three Months Ended
March 31<br>2025 December 31<br>2024 September 30<br>2024 June 30<br>2024 March 31<br>2024
Net income $ 3,949 $ 3,996 $ 3,281 $ 3,481 $ 3,131
Net gains (losses) on foreclosed assets (55) 74 4 6 69
Overdraft (charge-off) recoveries (1) — 66 (1,622) — —
Profitability initiative cost — (23) — — —
Legal fees related to Nasdaq (2) (121) — — — —
Income tax impact on items above 37 (25) 340 (1) (14)
Income tax expense on BOLI surrender (3) (166) — — — —
Adjusted net income (A) $ 4,254 $ 3,904 $ 4,559 $ 3,476 $ 3,076
Noninterest expenses $ 13,299 $ 13,330 $ 13,228 $ 12,895 $ 12,676
Amortization of acquisition intangibles 1 1 — 1 —
Adjusted noninterest expense (B) $ 13,298 $ 13,329 $ 13,228 $ 12,894 $ 12,676
Net interest income $ 14,525 $ 14,555 $ 14,488 $ 13,550 $ 13,242
Tax equivalent adjustment for net interest margin 184 213 232 237 246
Net interest income (FTE) (C) 14,709 14,768 14,720 13,787 13,488
Noninterest income 3,528 3,972 3,528 3,608 3,468
Tax equivalent adjustment for efficiency ratio 78 54 53 53 51
Adjusted revenue (FTE) 18,315 18,794 18,301 17,448 17,007
Nonrecurring items
Net gains (losses) on foreclosed assets (55) 74 4 6 69
Total nonrecurring items (55) 74 4 6 69
Adjusted revenue (D) $ 18,370 $ 18,720 $ 18,297 $ 17,442 $ 16,938
Efficiency ratio (B/D) 72.39 % 71.20 % 72.30 % 73.93 % 74.84 %
Average earning assets (E) 1,943,633 1,963,986 1,967,552 1,948,173 1,943,758
Net yield on interest earning assets (FTE) (C/E) 3.06 % 2.98 % 2.96 % 2.82 % 2.79 %
Average assets (F) 2,085,537 2,094,569 2,095,200 2,067,211 2,066,757
Average shareholders' equity (G) 214,212 212,912 208,444 200,734 203,434
Average tangible shareholders' equity (H) 165,929 164,629 160,161 152,451 155,150
Average diluted shares outstanding (4) (I) 7,432,162 7,451,718 7,473,184 7,494,828 7,507,739
Adjusted diluted earnings per share (A/I) $ 0.57 $ 0.52 $ 0.61 $ 0.46 $ 0.41
Adjusted return on average assets (A/F) 0.83 % 0.74 % 0.87 % 0.68 % 0.60 %
Adjusted return on average shareholders' equity (A/G) 8.05 % 7.29 % 8.70 % 6.96 % 6.08 %
Adjusted return on average tangible shareholders' equity (A/H) 10.40 % 9.43 % 11.32 % 9.17 % 7.97 %

(1) Includes provision for credit losses related to overdrawn deposit accounts from a single customer in the third quarter of 2024

(2) Included in Other professional services in the consolidated statements of income

(3) Income tax expense on life to date earnings on BOLI policies surrendered

(4) Whole shares

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The information presented in the section captioned “Market Risk” in Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

Item 4. Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of March 31, 2025, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of March 31, 2025, were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the most recent fiscal quarter, no change occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not involved in any material legal proceedings. We are involved in ordinary, routine litigation incidental to our business; however, no such routine proceedings are expected to result in any material adverse effect on operations, earnings, financial condition, or cash flows.

Item 1A. Risk Factors.

There have been no material changes to the risk factors disclosed in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

(A)None

(B)None

(C)Repurchases of Common Stock

We have adopted and publicly announced a common stock repurchase plan. The plan was last amended on April 30, 2025, to allow for the repurchase of an additional 500,000 shares of common stock after that date. These authorizations do not have expiration dates. As common shares are repurchased under this plan, they are retired with the status of authorized, but unissued, shares.

The following table provides information for the three-month period ended March 31, 2025, with respect to this plan:

Common Shares Repurchased Total Number of Common Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number of Common Shares That May Yet Be Purchased Under the Plans or Programs
Number Average Price<br>Per Common Share
December 31, 2024 118,229
January 1 - 31 16,336 $ 25.77 16,336 101,893
February 1 - 28 24,127 24.95 24,127 77,766
March 1 - 31 5,119 23.83 5,119 72,647
March 31, 2025 45,582 $ 25.12 45,582 72,647

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Securities Trading Plans of Executive Officers

During the fiscal quarter ended March 31, 2025, none of the Corporation’s directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement, or a non-Rule 10b5-1 trading arrangement, in each case as defined in Item 408 of Regulation S-K.

Table of Contents

Item 6. Exhibits.

(a) Exhibits

Exhibit Number Exhibits
3.1 Amended Articles of Incorporation (1)
3.2 Amendment to the Articles of Incorporation (2)
3.3 Amendment to the Articles of Incorporation (3)
3.4 Amendment to the Articles of Incorporation(4)
3.5 Amendment to the Articles of Incorporation(7)
3.6 Amended Bylaws(5)
3.7 Amendment to Bylaws(6)
3.8 Amendment to Bylaws(8)
3.9 Amendment to Bylaws(9)
4.1 Indenture, dated as of June 2, 2021, by and between Isabella Bank Corporation and UMB Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 2, 2021)https://www.sec.gov/Archives/edgar/data/842517/000095012309072945/k48695exv3w1.htm(10)
4.2 Form of 3.25% Fixed-to-Floating Rate Subordinated Note due 2031 (included in the Indenture included as Exhibit 4.1 to this Quarterly Report on Form 10-Q)https://www.sec.gov/Archives/edgar/data/842517/000095012309072945/k48695exv3w1.htm(10)
10.1 Isabella Bank Corporation Executive Cash Incentive Plan*
10.2 Form of Subordinated Note Purchase Agreement, dated as of June 2, 2021, by and among the Corporation and the several Purchasers (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 2, 2021)https://www.sec.gov/Archives/edgar/data/842517/000095012309072945/k48695exv3w1.htm(10)
10.3 Form of Registration Rights Agreement, dated as of June 2, 2021, by and among the Corporation and the several Purchasers (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 2, 2021)https://www.sec.gov/Archives/edgar/data/842517/000095012309072945/k48695exv3w1.htm(10)
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Executive Officer
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Financial Officer
32 Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
101.1** 101.INS (Inline XBRL Instance Document)
101.SCH (Inline XBRL Taxonomy Extension Schema Document)
101.CAL (Inline XBRL Calculation Linkbase Document)
101.LAB (Inline XBRL Taxonomy Label Linkbase Document)
101.DEF (Inline XBRL Taxonomy Linkbase Document)
101.PRE (Inline XBRL Taxonomy Presentation Linkbase Document)
104 Cover Page Interactive Data File * Management Contract or Compensatory Plan or Arrangement.
--- ---
** In accordance with Rule 406T of Regulations S-T, the XBRL related information shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
(1) Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 12, 1991, and incorporated herein by reference
(2) Previously filed as an Exhibit to the Isabella Bank Corporation Form 10-K, filed March 26, 1994, and incorporated herein by reference.
(3) Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 22, 2000, and incorporated herein by reference.
(4) Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 27, 2001, and incorporated herein by reference.

Table of Contents

(5) Previously filed as an Exhibit to Isabella Bank Corporation Form 10-K, filed March 16, 2005, and incorporated herein by reference.
(6) Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed November 22, 2006, and incorporated herein by reference.
(7) Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed May 16, 2008, and incorporated herein by reference.
(8) Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed August 28, 2009, and incorporated herein by reference.
(9) Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed December 23, 2009, and incorporated herein by reference.
(10) Previously filed as an Exhibit to Isabella Bank Corporation Form 8-K, filed June 2, 2021, and incorporated herein by reference.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Isabella Bank Corporation
Date: May 8, 2025 /s/ Jerome E. Schwind
Jerome E. Schwind
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 8, 2025 /s/ William M. Schaefer
William M. Schaefer
Chief Financial Officer
(Principal Financial Officer)

53

Document

Exhibit 10.1

stockawardincentivepl_imag.jpg

Executive Cash Incentive Plan

Isabella Bank Corporation and each of its subsidiaries, which include Isabella Bank, adopted the Isabella Bank Corporation Executive Cash Incentive Plan effective January 1, 2020. The primary purpose of the plan, which provides Executives with incentive to achieve corporate objectives, is to promote the growth and profitability of the bank by attracting and retaining Executives of outstanding competence.

General Eligibility Requirements:

•The plan is based on the calendar year.

•Eligible Executives include the Isabella Bank Corporation President and Chief Executive Officer; the Isabella Bank President; and, the Isabella Bank Chief Financial Officer.

•Executives hired during the plan year prior to October 1st will be eligible to participate. In order to receive an award, a Participant must be employed on December 31st of the plan year. Participants that retire during the plan year are eligible for an award.

•No award will be granted under this plan to a Participant who has been terminated for misconduct.

•To receive an award, a Participant must receive a rating of “effective” or higher on their individual plan year performance evaluation.

•The award is calculated using salary earned by the Participant during the plan year. Other incentives, bonuses, commissions, or payments made to the Participant will be excluded from the award calculation.

•All cash awards under the plan shall be subject to any Company clawback policy, including any clawback policy adopted to comply with applicable law (including, without limitations, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) (the "Clawback Policy") as set forth in such Clawback Policy.

Isabella Bank Corporation President and Chief Executive Officer Plan Details

The cash award potential is 35.00% of salary earned.

•31.50% of the award potential is based on the corporate performance objectives established by the Board of Directors.

•3.50% of the award potential is based on completion of individual performance goals established by the Board of Directors.

Bank President Plan Details

The cash award potential is 30.00% of salary earned.

•27.00% of the award potential is based on the corporate performance objectives established by the Board of Directors.

•3.00% of the award potential is based on completion of individual performance goals established by a Participant’s supervisor or the Board of Directors.

Chief Financial Officer Plan Details

The cash award potential is 22.80% of salary earned.

•19.80% of the award potential is based on the corporate performance objectives established by the Board of Directors.

•3.00% of the award potential is based on completion of individual performance goals established by a Participant’s supervisor or the Board of Directors.

Plan goals and rules are established annually and subject to change at the discretion of the Board of Directors.

The Company, acting through its authorized officer, has adopted this Plan effective as of January 1, 2025.

By: /s/ Sarah Opperman
Name: Sarah Opperman
Title: Chair, Isabella Bank Corporation Board of Directors
Date: April 15, 2025

Document

Exhibit 31.1

I, Jerome E. Schwind, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Isabella Bank Corporation (the “registrant”).

2.Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report.

3.Based on my knowledge, the consolidated financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2025 /s/ Jerome E. Schwind
President and Chief Executive Officer
(Principal Executive Officer)

Document

Exhibit 31.2

I, William M. Schaefer, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Isabella Bank Corporation (the “registrant”).

2.Based on my knowledge, this Quarterly Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Quarterly Report.

3.Based on my knowledge, the consolidated financial statements, and other financial information included in this Quarterly Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Quarterly Report.

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Quarterly Report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2025 /s/ William M. Schaefer
Chief Financial Officer
(Principal Financial Officer)

Document

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Isabella Bank Corporation (the “Corporation”) on Form 10-Q for the quarterly period ended March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jerome E. Schwind, President and Chief Executive Officer and William M. Schaefer, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Corporation.

/s/ Jerome E. Schwind
President and Chief Executive Officer
(Principal Executive Officer)
May 8, 2025
/s/ William M. Schaefer
Chief Financial Officer
(Principal Financial Officer)
May 8, 2025

Report a Problem

Category
Description
Email (optional, for follow-up)