ISABELLA BANK CORP
For the period ended Dec 31, 2025. Filed Mar 13, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 13, 2026
ISBA$40.64+0.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-12.
0000842517-25-000053
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-13.
0000842517-26-000069
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 98 previous paragraphs and 94 current paragraphs.
57 unchanged; 24 reworded; 13 added; 17 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 19 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
We believe that, from time to time, these non-GAAP financial measures provide additional understanding of ongoing operations, enhance the comparability of our results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of items or events that may obscure trends in our underlying performance. However, there may be limits in the usefulness of these measures to investors. The way we calculate the non-GAAP financial measures that we discuss in this Annual Report on Form 10-K may differ from that of other companies reporting measures with similar names. Investors should understand how such other banking organizations calculate their financial measures similar to, or with names like, the non-GAAP financial measures we have discussed in this Annual Report on Form 10-K when comparing such non-GAAP financial measures.
Current report
We reported net income for the year ended December 31, 2025 of $18,910, or $2.56 per diluted share, compared with $13,889, or $1.86 per diluted share, for the year ended December 31, 2024. Net income in 2025 was impacted by a $1,556 recovery of an overdrawn deposit account that was charged off in 2024. The impact to diluted earnings per share was a favorable $0.17 in 2025 and an unfavorable $0.16 in 2024.
Current report
The provision for credit losses for the year ended December 31, 2025 was a reversal of $563, compared to a provision of $1,884 for the year ended December 31, 2024. The credit reversal in 2025 includes recoveries of $2,268, which includes a $1,556 recovery related to overdrawn deposit accounts from a single customer that were charged off in 2024. The provision for loan losses in 2025 was also impacted by loan growth. While credit quality remained strong with low levels of past due and nonaccrual loans and net charge offs, we continue to closely monitor credit quality.
Current report
Noninterest income for the year ended December 31, 2025 was $15,966, an increase of $1,390, or 9.5%, compared to 2024. Earnings on BOLI policies increased $618 due to new investments in a separate account BOLI, which was offset in part by a one-time expenses of $120 due to restructuring charges. Service charges and fees increased $583 and was mostly the result of internal initiatives designed to align our fees within our market. Wealth management fees also grew $206 due to growth in assets under management. Managed assets increased $49,076 driven by growth in new accounts and higher security valuations.
Current report
Noninterest expenses for the year ended December 31, 2025 were $54,950, an increase of $2,821, or 5.4%, compared to 2024. Annual merit increases, increased incentives, and higher medical claims resulted in a $1,465 increase in compensation and benefits. Other professional services increased by $1,028 as a result of an increased utilization of outsourced services as well as additional costs related to profitability initiatives.
Current report
Income tax expense for the year ended December 31, 2025 was $5,213, an increase of $2,704, or 107.8%, compared to 2024. The ETR was 22% for the year ended 2025 and 15% for the year ended 2024. Income tax expense in 2025 included a one-time expense totaling $942 to write-off deferred tax assets and a one-time expense totaling $195 related to taxes owed from the lifetime earnings on BOLI policies that were surrendered during the year. Excluding the one-time charges during 2025, the ETR was 17%, which is higher than the prior year due primarily to higher pretax income and a decline in tax credits.
Current report
Total assets were $2,209,448 as of December 31, 2025, an increase of $123,207, or 5.9%, compared to December 31, 2024. This increase is primarily attributable to loan growth, an increase in BOLI policies, and an increase in the fair value of AFS securities.
Current report
Our AFS securities portfolio totaled $497,791 as of December 31, 2025, an increase of $8,762, or 1.8%, since December 31, 2024. The increase during the year was largely driven by purchases of $67,348 and an improvement in unrealized losses of $16,589, partially offset by amortizations, prepayments, and maturities totaling $75,175. Net unrealized losses on our AFS securities portfolio were $9,898 at December 31, 2025 compared to $26,487 at December 31, 2024. Net unrealized losses as a percentage of total AFS securities decreased to 1.9% from 5.1% at the end of 2024 primarily due to the treasury portfolio rapidly approaching maturity.
Current report
Loans outstanding as of December 31, 2025 totaled $1,536,364, an increase of $112,793, or 7.9%, since December 31, 2024. During 2025, the commercial real estate and commercial and industrial portfolios grew $48,040 and $19,827, respectively. Residential mortgages increased $47,008 since year-end 2024. Most residential mortgage originations were adjustable-rate loans, which are retained rather than sold in the secondary market. The growth was offset by a $18,093 decline in consumer loans amid decreasing demand, competition, and an adherence to credit quality standards. Loans, excluding advances to mortgage brokers, grew $99,197 or 7.3%.
Current report
BOLI totaled $46,133 as of December 31, 2025, an increase of $11,251, or 32.3%, from December 31, 2024. The growth was primarily attributed to a $10,583 investment of new policies in 2025. During 2025, we also surrendered and/or exchanged over $13,000 of existing general account policies and redeployed the funds into a separate account BOLI structure, which yields a higher rate compared to existing general account policies.
Current report
Total deposits were $1,819,654 as of December 31, 2025, an increase of $72,594, or 4.2%, from December 31, 2024. Interest bearing demand deposit accounts increased by $28,639 during 2025. Consumer demand for retail certificates of deposit accounts continues to be strong based on the current market interest rate environment, resulting in a $22,474 increase during the year.
Current report
(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.
Current report
(1)Whole shares.
Removed paragraphs (17)
Previous report
Forward-Looking Statements
Previous report
Information in this Annual Report on Form 10-K 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 this report, 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.
Previous report
We reported net income for the year ended December 31, 2024 of $13,889, or $1.86 per diluted share, compared with $18,167, or $2.40 per diluted share, for the same period of 2023. The non-GAAP measure of net income was $15,016, or $2.01 per diluted share, compared to $17,989, or $2.37 per diluted share, for the respective periods. The adjusted net income for 2024 excludes a net charge-off of $1,556 related to overdrawn deposit accounts from a single customer. The decrease in adjusted net income primarily reflects the impact on net interest income due to slower repricing of earning assets as compared to the rising costs of interest bearing liabilities. The decrease in net income for the comparative periods also included an increase in provision for credit losses and compensation expenses.
Previous report
The provision for credit losses for the year ended December 31, 2024 was $1,884, compared to $629 for the same period in 2023. The provision for 2024 includes the recovery of contractual principal of two previously charged-off commercial loans totaling $314. Given these loan recoveries, our historical loss rate experience improved which provided a benefit of $435. The benefits were offset by a $1,556 net charge-off related to an overdrawn deposit account from a single customer and additional reserves for core loan growth.
Previous report
Noninterest income for the year ended December 31, 2024 was $14,576, an increase of $749, or 5.4%, in comparison to 2023. Wealth management fees grew $484, or 13.6%, due to higher assets under management. Managed assets increased $17,015 driven by growth in new accounts and higher security valuations. Customer service fees increased $329, based on a higher number of transaction accounts.
Previous report
Noninterest expenses were $52,129 for the year ended December 31, 2024, increasing $2,819 when compared to the same period in 2023. Annual merit increases and medical claims resulted in a $2,671 increase in compensation and benefits. Our efficiency ratio was 73.01% in 2024 compared to 67.76% in 2023 and the increase primarily reflects lower NIM and a relatively stable base of noninterest expense.
Previous report
Total assets were $2,086,241 at December 31, 2024, increasing $27,273 due to loan growth funded by deposits and amortization of AFS securities.
Previous report
Our AFS securities portfolio totaled $489,029 at December 31, 2024, declining $39,119 due to municipal maturities and principal paydowns on mortgage-related securities. Net unrealized losses on our AFS securities portfolio were $26,487 at December 31, 2024, improving $5,339 since December 31, 2023. Net unrealized losses as a percentage of total AFS securities improved to 5.1% from 5.7% at the end of 2023 due to an increase in bond yields. Bond rates may vary from quarter to quarter, however, unrealized losses are expected to decrease as most of the bond portfolio approaches its maturity over the next two years.
Previous report
Loans outstanding as of December 31, 2024 totaled $1,423,571, increasing $74,108 since December 31, 2023. Growth during 2024 was driven by an increase of $44,539 in advances to mortgage brokers, $35,156 in commercial and industrial loans, and $24,454 in residential loans, offset by a $16,797 decrease in commercial real estate loans. The growth in commercial and industrial loans primarily was in the hotel management and construction industries. The increase in residential loans was related to steady new volume and continued slowing of prepayments. The decline in commercial real estate loans during 2024 included a $6.4 payoff during the fourth quarter on a relationship that had an elevated credit risk as well as declines in the multifamily real estate, healthcare, and hotel industries. Core loans, which excludes advances to mortgage brokers, grew $29,569 or 2.2%.
Previous report
Total deposits were $1,747,060 as of December 31, 2024, increasing $23,365, or 1.4%, from December 31, 2023. Retail certificates of deposit accounts were up $41,217, driven by continued demand due to the rate environment. Interest bearing demand deposits increased $20,629, while savings and demand deposits declined $26,349 and $12,132, respectively. The decline in savings products was driven in part by expected outflows of businesses and municipalities to fund large, regional projects and disintermediation into higher yielding accounts.
Previous report
Reclassifications
Previous report
Certain amounts reported in management's discussion and analysis of financial condition and results of operations for 2023 and 2022 have been reclassified to conform with the 2024 presentation.
Previous report
Subsequent Events
Previous report
We evaluated subsequent events after December 31, 2024 through the date our consolidated financial statements were issued for potential recognition and disclosure. No subsequent events require financial statement recognition or disclosure between December 31, 2024 and the date our consolidated financial statements were issued.
Previous report
The following tables summarize our interest rate sensitivity for 12 and 24 months as of December 31, 2024 and 2023. 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.
Previous report
(1) Includes provision for credit losses related to overdrawn deposit accounts from a single customer in the third quarter of 2024.
Previous report
(2)Whole shares
Reworded paragraphs (24)
Previous wording
The non-GAAP financial measures that we discuss in this Annual Report on Form 10-K 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.
Current wording
As a result, the non-GAAP financial measures that we discuss in this Annual Report on Form 10-K 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.
Previous wording
Comparison of Operating Results for the year ended December 31, 2024 and 2023
Current wording
Comparison of Operating Results for the years ended December 31, 2025 and December 31, 2024
Previous wording
Net interest income was $55,835 in 2024 compared with $57,944 in the same period of 2023. The comparison of NIM and yield on interest earning assets were 2.90% and 4.65% compared to 3.05%, and 4.17% for 2024 and 2023, respectively. The book yield from securities was 2.22% and 2.26% during 2024 and 2023, respectively. The weighted average maturity of our U.S. Treasury portfolio is less than 1.4 years, and the proceeds are expected to be reinvested in market rate loans and securities, or to pay off borrowed funds. The yield on loans expanded to 5.58%, from 5.02% due to higher rates on new loans and fixed rate commercial loans that have and continue to reprice to variable rates. At the end of 2024, approximately 40% of commercial loans were fixed at rates lower than current market rates, but the majority will contractually reprice to variable rates over the next four years. Our cost of interest bearing liabilities increased to 2.37% from 1.57% in 2023, but have stabilized in comparison to the first half of the year.
Current wording
Net interest income was $62,544 for the year ended December 31, 2025 compared with $55,835 for the year ended December 31, 2024. The comparison of NIM and yield on interest earning assets were 3.16% and 4.84% compared to 2.90%, and 4.65% for 2025 and 2024, respectively. The book yield from securities was 2.38% and 2.22% during 2025 and 2024, respectively. The weighted average maturity of our U.S. Treasury portfolio is less than one year, and the proceeds are expected to be reinvested in market rate loans and securities or to pay off borrowed funds. The yield on loans increased to 5.75%, from 5.58% in 2024 due to higher rates on new loans and variable rate commercial loans that continue to reprice. Our cost of interest bearing liabilities decreased to 2.25% from 2.37% in 2024 due to lower rates on the money market and certificate of deposit products.
Previous wording
The ACL was $12,895 at December 31, 2024, a decrease of $213 from $13,108 at December 31, 2023. Most of the decrease is due to improvement in historical loss experience, which was driven by the recovery of previously charged-off loans during the year. This improvement was offset by core loan growth and the impact from a few commercial loans totaling $33,875 that migrated to a special mention risk rating during the fourth quarter. The downgraded loans are well collateralized and are not an indication of a negative trend in the broader portfolio. Nonaccrual loans were $282 as of December 31, 2024 compared to $982 at December 31, 2023. Past due and accruing accounts between 30 to 89 days as a percentage of total loans was 0.40% at December 31, 2024, compared to 0.29% at year-end 2023. Overall, credit quality remains strong, and there are no negative trends.
Current wording
The ACL was $13,727 as of December 31, 2025, an increase of $832, or 6.5%, compared to December 31, 2024. The increase reflects loan growth and an increase of specific reserves, offset by improvement in historical loss experience driven by the recovery of previously charged-off loans during the year. Nonaccrual loans remained low at $4,578 as of December 31, 2025 compared to $282 at December 31, 2024. The increase in nonaccrual loans related to one well-secured loan of $3,000 at December 31, 2025. Past due and accruing accounts between 30 to 89 days, as a percentage of total loans, were 0.44% at December 31, 2025 compared to 0.40% at December 31, 2024. Overall credit quality remains strong.
Previous wording
Total equity was $210,276 at December 31, 2024 compared to $202,402 at year-end 2023. Our tangible book value per share was $21.82 as of December 31, 2024, compared to $20.59 on December 31, 2023. Net unrealized losses on AFS securities reduced tangible book value per share by $2.82 and $3.37 for the respective periods. Share repurchases totaled 152,577 during 2024 for a value of $3,076 at an average price of $20.16.
Current wording
Total equity was $231,396 as of December 31, 2025 compared to $210,276 as of December 31, 2024. Our tangible book value per share (non-GAAP) was $25.01 as of December 31, 2025, compared to $21.82 on December 31, 2024. Net unrealized losses on AFS securities reduced tangible book value per share by $1.09 and $2.82 for the respective periods. Share repurchases totaled 156,957 during 2025 for a value of $4,709 at an average price of $30.00.
Previous wording
We continue to have robust liquidity levels and capital. As of December 31, 2024, we had $776,672 of unencumbered sources of liquidity and strong capital ratios; the Tier 1 Leverage Ratio was 8.86%, Tier 1 risk-based capital was 12.21%, and Total risk-based capital was 15.06%.
Current wording
We continue to have robust liquidity levels and capital. As of December 31, 2025, we had $781,557 of unencumbered sources of liquidity and strong capital ratios; the Tier 1 Leverage Ratio was 8.84%, Tier 1 risk-based capital was 11.73%, and Total risk-based capital was 14.41%.
Previous wording
(1) Non-GAAP financial measure; refer to the "Recconcilation of Non-GAAP Financial Measures" section
Current wording
(2) Non-GAAP financial measure; refer to the "Reconciliation of Non-GAAP Financial Measures" section.
Previous wording
Estimating how potential changes in economic factors might affect the overall allowance is challenging because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. However, to consider the impact of a hypothetical stressed forecast, we estimated the ACL using forecast inputs that were severely unfavorable to the expected scenario for the external factors related to economic conditions, the value of underlying collateral, and the volume and severity of past due, nonaccrual, and adversely classified loans. This stress scenario resulted in an ACL that is approximately $4,500 higher than the recorded ACL as of December 31, 2024.
Current wording
Estimating how potential changes in economic factors might affect the overall allowance is challenging because a wide variety of factors and inputs are considered in the allowance estimate. Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.
Previous wording
U.S. generally accepted accounting principles require that we determine the fair value of the assets and liabilities of an acquired entity, and record the fair value on the date of acquisition. We employ a variety of measures in the determination of the fair value, including the use of discounted cash flow analysis, market appraisals, and projected future revenue streams. For certain items that we believe we have the appropriate expertise to determine the fair value, we may choose to use our own calculations of the value. In other cases, where the value is not easily determined, we consult with independent experts to determine the fair value of the identified asset or liability. Once valuations have been determined, the net difference between the price paid for the acquired entity and the net value of assets acquired on our balance sheet, including identifiable intangibles, is recorded as goodwill. Acquisition intangibles and goodwill are qualitatively and quantitatively evaluated annually to determine if it is more likely than not that the carrying balance is impaired on at least an annual basis. Based on the analysis completed, it was determined that our estimated fair value of Isabella Bank and Isabella Bank Corporation at December 31, 2024 was greater than our recorded book value and no impairment of goodwill was identified.
Current wording
U.S. generally accepted accounting principles require that we determine the fair value of the assets and liabilities of an acquired entity, and record the fair value on the date of acquisition. We employ a variety of measures in the determination of the fair value, including the use of discounted cash flow analysis, market appraisals, and projected future revenue streams. For certain items that we believe we have the appropriate expertise to determine the fair value, we may choose to use our own calculations of the value. In other cases, where the value is not easily determined, we consult with independent experts to determine the fair value of the identified asset or liability. Once valuations have been determined, the net difference between the price paid for the acquired entity and the net value of assets acquired on our balance sheet, including identifiable intangibles, is recorded as goodwill. Acquisition intangibles and goodwill are qualitatively and quantitatively evaluated annually to determine if it is more likely than not that the carrying balance is impaired. Based on the analysis completed, it was determined that our estimated fair value of Isabella Bank and Isabella Bank Corporation at December 31, 2025 was greater than our recorded book value and no impairment of goodwill was identified.
Previous wording
(3)Includes average interest-bearing deposits with other banks, net of Federal Reserve daily cash letter
Current wording
(3)Includes average interest bearing deposits with other banks, net of FRB daily cash letter.
Previous wording
(4) Non-GAAP financial measure; refer to the "Non-GAAP Financial Measures" section
Current wording
(4) Non-GAAP financial measure; refer to the "Reconciliation of Non-GAAP Financial Measures" section.
Previous wording
The following table illustrates the amounts of the ACL and ALLL allocated to each loan segments to gross loans as of December 31:
Current wording
The following table illustrates the amounts of the ACL and ALLL allocated to each loan segments to loans as of December 31:
Previous wording
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 75,341 shares or $1,523 of common stock during 2024, and 75,488 shares or $1,617 of common stock in 2023. 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 $381 and $529 during 2024 and 2023, respectively. We also grant restricted stock awards pursuant to the RSP. Pursuant to this plan, we increased shareholders’ equity by $95 and $253 during 2024 and 2023.
Current wording
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 42,904 shares or $1,331 of common stock during 2025, and 75,341 shares or $1,523 of common stock 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 $277 and $381 during 2025 and 2024, respectively. We also grant restricted stock awards pursuant to the RSP. Pursuant to the RSP, we increased shareholders’ equity by $64 and $95 during 2025 and 2024.
Previous wording
We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 152,577 shares or $3,076 of common stock during 2024 and 149,020 shares or $3,415 during 2023. As of December 31, 2024, we were authorized to repurchase up to an additional 118,229 shares of common stock.
Current wording
We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 156,957 shares or $4,709 of common stock during 2025 and 152,577 shares or $3,076 during 2024. As of December 31, 2025, we were authorized to repurchase up to an additional 461,272 shares of common stock.
Previous wording
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.
Current wording
The FRB has established minimum risk-based capital guidelines. Pursuant to these guidelines, a framework has been established that assigns risk weights to each category of on and off-balance-sheet items to arrive at risk adjusted total assets. Regulatory capital is divided by the risk adjusted assets with the resulting ratio compared to the minimum standard to determine whether a corporation has adequate capital. At December 31, 2025, we and the Bank were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since December 31, 2025 that would materially adversely change such capital classifications. From time to time, we may need to raise additional capital to support our and the Bank’s further growth and to maintain our “well capitalized” status.
Previous wording
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.
Current wording
Liquidity is monitored regularly by our ALCO, which consists of members of senior management. The ALCO reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.
Previous wording
Our primary sources of liquidity are retail deposits, cash and cash equivalents, and unencumbered AFS securities. These categories totaled $330,876 or 15.86% of assets as of December 31, 2024, compared to $381,417 or 18.52% as of December 31, 2023. The decline in the amount and percentage of primary liquidity is a direct result of an increase in loans and a decrease in unencumbered AFS securities collateralizing non-market funding. 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.
Current wording
Our primary sources of liquidity are retail deposits, cash and cash equivalents, and unencumbered AFS securities. Cash, cash equivalents, and unencumbered AFS securities totaled $337,011 or 15.25% of assets as of December 31, 2025, compared to $330,876 or 15.86% as of December 31, 2024. The decline in the percentage of primary liquidity is a direct result of an increase in loans and other assets. 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.
Previous wording
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 a line 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 December 31, 2024, we had available lines of credit of $342,130.
Current wording
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 December 31, 2025, we had available lines of credit of $345,516.
Previous wording
(1) Includes estimated unencumbered lendable value of FHLB collateral of $200,000 and $230,000 as of December 31, 2024 and 2023, respectively.
Current wording
(1) Includes estimated unencumbered lendable value of FHLB collateral of $220,000 and $200,000 as of December 31, 2025 and 2024, respectively.
Previous wording
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, impaired 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.
Current wording
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.
Previous wording
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.
Current wording
As a financial institution, our primary market risks are interest rate risk and liquidity risk. IRR is the exposure of our net interest income to changes in interest rates. IRR results from the difference in the maturity or repricing frequency of a financial institution’s interest earning assets and its interest bearing liabilities. Managing IRR is the fundamental method by which financial institutions earn income and create shareholder value. Excessive exposure to IRR could pose a significant risk to our earnings and capital.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
Gap analysis is also used 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.
Previous wording
The following tables provide a detailed analysis, and reconciliation for, our non-GAAP financial measures as of, and for the years ended December 31:
Current wording
The following table provides a detailed analysis, and reconciliation for, our non-GAAP financial measures as of, and for the years ended December 31: