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What changed in ISABELLA BANK CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ISABELLA BANK CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+136 added−161 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-07)

Top changes in ISABELLA BANK CORP's 2023 10-K

136 paragraphs added · 161 removed · 103 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor additional information related to our lending strategies and policies, see “Note 4 – Loans and ALLL” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Deposit services offered include checking accounts, savings accounts, certificates of deposit, direct deposits, cash management services, mobile and internet banking, electronic bill pay services, and automated teller machines.
Biggest changeFor additional information related to our lending strategies and policies, see “Note 4 – Loans and ACL” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Deposit services offered include checking accounts, savings accounts, certificates of deposit, direct deposits, cash management services, mobile and internet banking, and ATMs.
These certifications attest that our quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact (see the certifications filed as Exhibits 31.1 and 31.2 to this Form 10-K for such certification of consolidated financial statements and other information for this 2022 Form 10-K).
These certifications attest that our quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact (see the certifications filed as Exhibits 31.1 and 31.2 to this Form 10-K for such certification of consolidated financial statements and other information for this 2023 Form 10-K).
Financial Statements and Supplementary Data, 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.
Financial Statements and Supplementary Data, 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.
We also offer full service investment management, trust and estate services. As of December 31, 2022, we had 347 full-time equivalent employees. We provide group life, health, accident, disability, and other insurance programs as well as a number of other employee benefit programs. None of our workforce is subject to collective bargaining agreements.
We also offer full service investment management, trust and estate services. As of December 31, 2023, we had 356 full-time equivalent employees. We provide group life, health, accident, disability, and other insurance programs as well as a number of other employee benefit programs. None of our workforce is subject to collective bargaining agreements.
Item 1. Business. 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 29 banking offices located throughout Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties.
Item 1. Business. 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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAn operating incident, significant cybersecurity disruption, or other adverse events may have a negative impact on our reputation which could make it more difficult for us to compete successfully for new opportunities, obtain necessary regulatory approvals, or severely reduce consumer demand for our products. 8 Table of Contents Our estimates and assumptions may be incorrect Our consolidated financial statements conform with GAAP, which require us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements.
Biggest changeOur estimates and assumptions may be incorrect Our consolidated financial statements conform with GAAP, which require us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Estimates are based on information available to us at the time the estimates are made. Actual results could differ from estimates.
Our success depends primarily on the general economic conditions of the State of Michigan and the specific local markets in which we operate. We provide banking and financial services to customers located primarily in the Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan.
Our success depends primarily on the general economic conditions of the State of Michigan and the specific local markets in which we operate. We provide banking and financial services to customers located primarily in the Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan.
The determination of the appropriate level of the ALLL inherently involves a high degree of subjectivity and requires us to make significant estimates, all of which may undergo material changes. Changes in economic conditions An economic downturn within our local markets, as well as downturns in the state, national, or global markets, could negatively impact household and corporate incomes.
The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates, all of which may undergo material changes. Changes in economic conditions An economic downturn within our local markets, as well as downturns in the state, national, or global markets, could negatively impact household and corporate incomes.
Changes in credit quality and required allowance for loan and lease losses To manage the credit risk arising from lending activities, our most significant source of credit risk, we maintain sound underwriting policies and procedures. We continuously monitor asset quality in order to determine the appropriateness of valuation allowances.
Changes in credit quality and required allowance for credit losses To manage the credit risk arising from lending activities, our most significant source of credit risk, we maintain sound underwriting policies and procedures. We continuously monitor asset quality in order to determine the appropriateness of valuation allowances.
A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, international or domestic occurrences, a health crisis, 6 Table of Contents unemployment, changes in securities markets or other factors could impact these local economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.
A significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, international or domestic occurrences, a health crisis, unemployment, changes in securities markets or other factors could impact these local economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.
These valuation allowances take into consideration various factors including, but not limited to, local, regional, and national economic conditions. We maintain an ALLL to reserve for estimated incurred loan losses within our loan portfolio. The level of the ALLL reflects our evaluation of industry concentrations; specific credit risks; loan loss experience; loan portfolio quality; and economic, political and regulatory conditions.
These valuation allowances take into consideration various factors including, but not limited to, local, regional, and national economic conditions. We maintain an ACL to reserve for estimated expected credit losses within our loan portfolio. The level of the ACL reflects our evaluation of industry concentrations; specific credit risks; loan loss experience; loan portfolio quality; and economic, political and regulatory conditions.
We consider many factors in determining whether an OTTI exists including the length of time and extent to which fair value has been less than cost, the investment credit rating, and the probability that the issuer will be unable to pay the amount when due. The presence of these factors could lead to impairment charges.
We consider many factors in determining whether a credit-related impairment exists including the length of time and extent to which fair value has been less than cost, the investment credit rating, and the probability that the issuer will be unable to pay the amount when due. The presence of these factors could lead to impairment charges.
We may be required to recognize an impairment of goodwill Goodwill represents the excess of the amounts paid to acquire subsidiaries over the fair value of their net assets at the date of acquisition. The majority of the recorded goodwill is related to acquisitions of other banks, which were subsequently merged into Isabella Bank.
We may be required to recognize an impairment of goodwill Goodwill represents the excess of the amounts paid to acquire subsidiaries over the fair value of their net assets at the date of acquisition. The majority of the recorded goodwill is related to past acquisitions of other banks, which were subsequently 7 Table of Contents merged into Isabella Bank.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution, and the appropriateness of an institution’s ALLL.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution, and the appropriateness of an institution’s ACL. Future regulatory changes or accounting pronouncements may increase our regulatory capital requirements or adversely affect our regulatory capital levels.
Future regulatory changes or accounting pronouncements may increase our regulatory capital requirements or adversely affect 7 Table of Contents our regulatory capital levels. Additionally, actions by regulatory agencies or significant litigation against us could require the dedication of significant time and resources to respond to those actions and may lead to penalties.
Additionally, actions by regulatory agencies or significant litigation against us could require the dedication of significant time and resources to respond to those actions and may lead to penalties.
The value of investment securities may be negatively impacted by fluctuations in the market A volatile, illiquid market or decline in credit quality could require us to recognize an OTTI loss related to the investment securities held in our portfolio.
We have significant borrowing capacity through correspondent banks and the ability to sell certain investments to fund potential cash shortages, which we may use to help mitigate this risk. 6 Table of Contents The value of investment securities may be negatively impacted by fluctuations in the market A volatile, illiquid market or decline in credit quality could require us to recognize credit-related impairment to the investment securities held in our portfolio.
Estimates are based on information available to us at the time the estimates are made. Actual results could differ from estimates. For further discussion regarding significant accounting estimates, see “Note 1 – Nature of Operations and Summary of Significant Accounting Policies” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data.
For further discussion regarding significant accounting estimates, see “Note 1 – Significant Accounting Policies” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Unauthorized disclosure of sensitive or confidential client or customer information, whether through cyber attacks, breach of computer systems or other means See Item 1C. Cybersecurity.
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The COVID-19 pandemic may adversely affect our business Unexpected and unprecedented changes have occurred since early 2020 as the result of COVID-19. The World Health Organization declared the situation a global pandemic. The pandemic created significant market volatility, economic uncertainty, and disruption to normal business operations around the world, with slowdowns and shutdowns affecting entire industries.
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The extent to which COVID-19 impacts our business will depend on future developments, which remain uncertain and cannot be predicted.
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We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other factors, its duration, the success of efforts to contain it, and the impact of actions taken in response.
Removed
Uncertainty created by the COVID-19 pandemic is pervasive, and has impacted our financial results, operations, customers, vendors, and various areas of risk. Areas of risk may include, but are not limited to, cybersecurity, credit, interest rate, litigation, and risk related to vendor services.
Removed
With the uncertainty created by COVID-19, it's challenging to determine the full impact on our ongoing financial and operational results. We continue to closely monitor external events and are in continual discussion with our customers to assess, prepare, and respond to conditions as they evolve.
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We have significant borrowing capacity through correspondent banks and the ability to sell certain investments to fund potential cash shortages, which we may use to help mitigate this risk.
Removed
Unauthorized disclosure of sensitive or confidential client or customer information, whether through cyber attacks, breach of computer systems or other means Our products, services and systems are accessed through critical company or third-party operations. This involves the storage, processing and transmission of sensitive data, including proprietary or confidential data, regulated data, and personal information of employees and customers.
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Successful breaches, employee wrongdoing, or human or technological error could result in unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third party data or systems.
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Examples include theft of sensitive, regulated, or confidential data, including personal information; loss of access to critical data or systems through ransomware, destructive attacks, or other means; and business delays, service or system disruptions, or denials of service. Cybersecurity incidents have increased in number and severity and it is expected that these trends will continue.
Removed
Should we, or third parties we do business with, fall victim to successful cyber attacks or experience other cybersecurity incidents, including the loss of personally identifiable customer or other sensitive data, the result could severely damage our reputation, expose us to the risks of litigation and liability, disrupt our operations, and increase cybersecurity or other insurance premiums.
Removed
We have cybersecurity insurance, in the event a cybersecurity attack were to occur, covering expenses related to notification, credit monitoring, investigation, crisis management, public relations, and legal advice. In addition, we maintain insurance to cover restoration of data, certain physical damage, or third-party injuries caused by potential cybersecurity incidents.
Removed
However, damage and claims arising from such incidents may not be covered or may exceed the amount of any insurance available. Insurance policies are reviewed annually in detail. A strong reputation is vital and requires utmost protection.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur facilities' current, planned, and best use is for conducting our current activities, with the exception of our previous main office location which is vacant. We continually monitor and assess the need for expansion and/or improvement of all facilities. In our opinion, each facility has sufficient capacity and is in good condition.
Biggest changeWe continually monitor and assess the need for expansion and/or improvement of all facilities. In our opinion, each facility has sufficient capacity and is in good condition.
Item 2. Properties. Our executive offices are located at 401 North Main Street in Mount Pleasant, Michigan. In addition to this location, we own 28 branches, two operations centers, our previous main office building and vacant land. We also lease property in Saginaw, Michigan which serves as a full-service branch.
Item 2. Properties. Our executive offices are located at 401 North Main Street in Mount Pleasant, Michigan. In addition to this location, we own 29 branches, two operations centers, and vacant land. We also lease property in Saginaw, Michigan which serves as a full-service branch and Bay City, Michigan which serves as a loan and wealth office.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNot applicable. 9 Table of Contents PART II
Biggest changeNot applicable. 10 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNumber of Common Shares Sale Price Low High 2022 First Quarter 62,813 $ 24.50 $ 26.00 Second Quarter 68,013 23.00 26.25 Third Quarter 80,927 21.39 24.95 Fourth Quarter 118,260 21.00 24.02 330,013 2021 First Quarter 179,524 $ 19.45 $ 22.50 Second Quarter 134,955 21.00 23.90 Third Quarter 356,226 22.55 26.74 Fourth Quarter 130,486 24.75 29.00 801,191 The following table sets forth the cash dividends paid for the quarters indicated: Per Share 2022 2021 First Quarter $ 0.27 $ 0.27 Second Quarter 0.27 0.27 Third Quarter 0.27 0.27 Fourth Quarter 0.28 0.27 Total $ 1.09 $ 1.08 We have adopted and publicly announced a common stock repurchase plan.
Biggest changeNumber of Common Shares Sale Price Low High 2023 First Quarter 131,476 $ 22.08 $ 25.10 Second Quarter 123,123 19.13 26.00 Third Quarter 128,216 19.61 23.00 Fourth Quarter 111,755 19.75 22.00 494,570 2022 First Quarter 62,813 $ 24.50 $ 26.00 Second Quarter 68,013 23.00 26.25 Third Quarter 80,927 21.39 24.95 Fourth Quarter 118,260 21.00 24.02 330,013 The following table sets forth the cash dividends paid for the quarters indicated: Per Share 2023 2022 First Quarter $ 0.28 $ 0.27 Second Quarter 0.28 0.27 Third Quarter 0.28 0.27 Fourth Quarter 0.28 0.28 Total $ 1.12 $ 1.09 We have adopted and publicly announced a common stock repurchase plan.
Our common stock is traded in the over-the-counter market. Our common stock is quoted on the OTCQX market tier of the OTC Markets Group Inc.’s ("OTC Markets") electronic quotation system (www.otcmarkets.com) under the symbol “ISBA”. Other trades in our common stock occur in privately negotiated transactions from time to time of which we may have little or no information.
Our common stock is traded in the over-the-counter market. Our common stock is quoted on the OTCQX market tier of the OTC Markets Group Inc.’s ("OTC Markets") electronic quotation system (www.otcmarkets.com) under the symbol “ISBA”. Other trades in our common stock occur in privately negotiated transactions from time to time for which we may have little or no information.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Item 6. [Reserved] 11 Table of Contents
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Item 6. [Reserved] 12 Table of Contents
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (Dollars in thousands except per share amounts) Common Stock and Dividend Information Our authorized common stock consists of 15,000,000 shares, of which 7,559,421 shares are issued and outstanding as of December 31, 2022. As of that date, there were 2,739 shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. (Dollars in thousands except per share amounts) Common Stock and Dividend Information Our authorized common stock consists of 15,000,000 shares, of which 7,485,889 shares are issued and outstanding as of December 31, 2023. As of that date, there were 2,674 shareholders of record.
As shares are repurchased under this plan, they are retired with the status of authorized, but unissued, shares. 10 Table of Contents The following table provides information for the unaudited three-month period ended December 31, 2022, with respect to our common stock repurchase 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 Per Common Share Balance, September 30 443,649 October 1 - 31 6,503 $ 21.37 6,503 437,146 November 1 - 30 14,173 23.00 14,173 422,973 December 1 - 31 3,147 23.20 3,147 419,826 Balance, December 31 23,823 $ 22.58 23,823 419,826 Information concerning securities authorized for issuance under equity compensation plans appears under Item 12.
As shares are repurchased under this plan, they are retired with the status of authorized, but unissued, shares. 11 Table of Contents The following table provides information for the unaudited three-month period ended December 31, 2023, with respect to our common stock repurchase 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 Per Common Share Balance, September 30 295,505 October 1 - 31 6,671 $ 20.99 6,671 288,834 November 1 - 30 6,684 20.20 6,684 282,150 December 1 - 31 11,344 20.63 11,344 270,806 Balance, December 31 24,699 $ 20.61 24,699 270,806 Information concerning securities authorized for issuance under equity compensation plans appears under Item 12.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table illustrates the two main components of the ALLL as of: December 31 2022 September 30 2022 June 30 2022 March 31 2022 December 31 2021 ALLL Individually evaluated for impairment $ 451 $ 474 $ 515 $ 573 $ 578 Collectively evaluated for impairment 9,399 9,203 9,185 8,631 8,525 Total $ 9,850 $ 9,677 $ 9,700 $ 9,204 $ 9,103 ALLL to gross loans Individually evaluated for impairment 0.04 % 0.04 % 0.04 % 0.05 % 0.04 % Collectively evaluated for impairment 0.74 % 0.74 % 0.72 % 0.71 % 0.66 % Total 0.78 % 0.78 % 0.76 % 0.76 % 0.70 % The following table illustrates the amounts of the ALLL allocated to each loan segment and the percentage of these loan segments to gross loans as of December 31: 2022 2021 2020 2019 2018 ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans Commercial $ 1,321 58.61 $ 1,740 62.07 $ 2,162 61.10 $ 1,914 59.08 $ 2,563 58.43 Agricultural 577 8.25 289 7.22 311 8.11 634 9.85 775 11.27 Residential real estate 617 26.97 747 25.08 1,363 24.84 2,047 25.16 1,992 24.39 Consumer 961 6.17 908 5.63 798 5.95 922 5.91 857 5.91 Total Allocated 3,476 100.00 3,684 100.00 4,634 100.00 5,517 100.00 6,187 100.00 Unallocated 6,374 — 5,419 — 5,110 — 2,422 — 2,188 — Total $ 9,850 100.00 $ 9,103 100.00 $ 9,744 100.00 $ 7,939 100.00 $ 8,375 100.00 While we utilize our best judgment and information available, the ultimate adequacy of the ALLL is dependent upon a variety of factors beyond our control, including the performance of our borrowers, the economy, and changes in interest rates.
Biggest changeThe following table summarizes our charge-offs, recoveries, provision for credit losses, and ACL balances as of, and for the unaudited three month periods ended: December 31 2023 September 30 2023 June 30 2023 March 31 2023 December 31 2022 Total charge-offs $ 452 $ 179 $ 92 $ 101 $ 249 Total recoveries 71 433 95 110 479 Net loan charge-offs (recoveries) 381 (254) (3) (9) (230) Net loan charge-offs (recoveries) to average loans outstanding 0.03 % (0.02) % 0.00 % 0.00 % (0.02) % Provision for credit losses - loans $ 684 $ (320) $ 190 $ 37 $ (57) Provision for credit losses to average loans outstanding 0.05 % (0.02) % 0.01 % 0.00 % 0.00 % ACL $ 13,108 $ 12,767 $ 12,833 $ 12,640 $ 9,850 ACL as a % of loans at end of period 0.97 % 0.96 % 0.96 % 0.99 % 0.78 % 21 Table of Contents The following table summarizes charge-off and recovery activity by loan segment for the year ended December 31, 2023: Commercial and Industrial Commercial Real Estate Agricultural Residential Real Estate Consumer Total Charge-offs $ 276 $ — $ 4 $ 2 $ 542 $ 824 Recoveries 79 26 12 329 263 709 Net loan charge-offs (recoveries) $ 197 $ (26) $ (8) $ (327) $ 279 $ 115 Average loans outstanding $ 203,390 $ 547,166 $ 96,967 $ 345,630 $ 97,485 $ 1,290,638 Net loan charge-offs (recoveries) to average loans outstanding 0.10 % — % (0.01) % (0.09) % 0.29 % 0.01 % The following table summarizes charge-offs, recoveries, and provision for credit loss activity for the years ended December 31: 2023 2022 2021 2020 2019 Allowance at beginning of period $ 9,850 $ 9,103 $ 9,744 $ 7,939 $ 8,375 Adoption of ASC 326 2,744 — — — — Charge-offs 824 619 607 381 948 Recoveries 709 883 484 521 482 Provision for credit losses - loans 629 483 (518) 1,665 30 Allowance at end of period $ 13,108 $ 9,850 $ 9,103 $ 9,744 $ 7,939 Net loan charge-offs (recoveries) $ 115 $ (264) $ 123 $ (140) $ 466 Net loan charge-offs (recoveries) to average loans outstanding 0.01 % (0.02) % 0.01 % (0.01) % 0.04 % ACL as a % of loans at end of period 0.97 % 0.78 % 0.70 % 0.79 % 0.67 % ACL as a % of nonaccrual loans 1334.83 % 2155.36 % 731.16 % 183.40 % 121.48 % The following table illustrates the two main components of the ACL as of: December 31 2023 September 30 2023 June 30 2023 March 31 2023 December 31 2022 ACL Individually evaluated $ 84 $ — $ — $ — $ 451 Collectively evaluated 13,024 12,767 12,833 12,640 9,399 Total $ 13,108 $ 12,767 $ 12,833 $ 12,640 $ 9,850 ACL to gross loans Individually evaluated 0.01 % 0.00 % 0.00 % 0.00 % 0.04 % Collectively evaluated 0.96 % 0.96 % 0.96 % 0.99 % 0.74 % Total 0.97 % 0.96 % 0.96 % 0.99 % 0.78 % 22 Table of Contents The following table illustrates the amounts of the ACL and ALLL allocated to each loan segment and the percentage of these loan segments to gross loans as of December 31: 2023 2022 2021 2020 2019 ACL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans ALLL Allocation % of Gross Loans Commercial and industrial $ 968 15.54 $ 860 14.11 $ 680 13.91 $ 704 17.37 $ 644 14.25 Commercial real estate 5,878 41.82 461 44.78 1,060 42.89 1,458 39.99 1,270 42.22 Advances to mortgage brokers — 1.37 — — — 5.53 — 4.06 — 2.99 Agricultural 270 7.41 577 8.30 289 7.27 311 8.12 634 9.87 Residential real estate 4,336 26.41 617 26.64 747 24.77 1,363 24.51 2,047 24.76 Consumer 1,656 7.45 961 6.17 908 5.63 798 5.95 922 5.91 Total Allocated 13,108 100.00 3,476 100.00 3,684 100.00 4,634 100.00 5,517 100.00 Unallocated — — 6,374 — 5,419 — 5,110 — 2,422 — Total $ 13,108 100.00 $ 9,850 100.00 $ 9,103 100.00 $ 9,744 100.00 $ 7,939 100.00 While we utilize our best judgment and information available, the ultimate adequacy of the ACL is dependent upon a variety of factors beyond our control, including the performance of our borrowers, the economy, and changes in interest rates.
To determine the potential impact, and corresponding estimated losses, we analyze our historical loss trends on loans past due greater than 30 days and nonaccrual status loans for indications of additional deterioration.
To determine the potential impact, and corresponding estimated losses, we analyze our historical loss trends on loans past due greater than 30 days and nonaccrual loans for indications of additional deterioration.
The balance provided above are estimates and reflect the methodologies and assumptions used for regulatory reporting of uninsured deposits. The remaining maturity of estimated uninsured certificates of deposit, by account, as of December 31, 2022 is presented in the table below. Estimated uninsured certificates of deposit is based on individual accounts and does not reflect uninsured balances by account owner.
The balance provided above are estimates and reflect the methodologies and assumptions used for regulatory reporting of uninsured deposits. The remaining maturity of estimated uninsured certificates of deposit, by account, as of December 31, 2023 is presented in the table below. Estimated uninsured certificates of deposit is based on individual accounts and does not reflect uninsured balances by account owner.
Our holdings in mortgage-backed securities and collateralized mortgage obligations include only government agencies and government sponsored agencies as we hold no investments in private label mortgage-backed securities or collateralized mortgage obligations. The following is a schedule of maturities of AFS securities and their weighted average yields as of December 31, 2022.
Our holdings in mortgage-backed securities and collateralized mortgage obligations include only government agencies and government sponsored agencies as we hold no investments in private label mortgage-backed securities or collateralized mortgage obligations. The following is a schedule of maturities of AFS securities and their weighted average yields as of December 31, 2023.
For additional disclosure related to Contractual Obligations and Loan Commitments, see “Note 9 – Off-Balance-Sheet Activities, Commitments and Other Matters” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. 31 Table of Contents Capital Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss).
For additional disclosure related to Contractual Obligations and Loan Commitments, see “Note 9 – Off-Balance-Sheet Activities, Commitments and Other Matters” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Capital Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss).
Reclassifications Certain amounts reported in management's discussion and analysis of financial condition and results of operations for 2021 and 2020 have been reclassified to conform with the 2022 presentation.
Reclassifications Certain amounts reported in management's discussion and analysis of financial condition and results of operations for 2022 and 2021 have been reclassified to conform with the 2023 presentation.
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.
Certificates of deposit have penalties that discourage early withdrawals. 32 Table of Contents 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 have a policy prohibiting investments in securities that we deem unsuitable due to their inherent credit or market risks. Prohibited investments include stripped mortgage-backed securities, zero coupon bonds, nongovernment agency asset-backed securities, and structured notes.
We have a policy prohibiting investments in securities that we deem unsuitable due to their inherent credit or market risks. Prohibited investments include stripped mortgage-backed securities, zero coupon bonds, non-government agency asset-backed securities, and structured notes.
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 $463 and $433 during 2022 and 2021, respectively. We also grant restricted stock awards pursuant to the RSP, effective June 24, 2020.
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 $529 and $463 during 2023 and 2022, respectively. We also grant restricted stock awards pursuant to the RSP, effective June 24, 2020.
We closely monitor overall credit quality indicators and our policies and procedures related to the analysis of the ALLL to ensure that the ALLL remains at an appropriate level. For further discussion of the allocation of the ALLL, see “Note 4 – Loans and ALLL” of “Notes to Consolidated Financial Statements” in Item 8.
We closely monitor overall credit quality indicators and our policies and procedures related to the analysis of the ACL to ensure that the ACL remains at an appropriate level. For further discussion of the allocation of the ACL, see “Note 4 – Loans and ACL” of “Notes to Consolidated Financial Statements” in Item 8.
Changes in economic conditions and other external factors can have a significant impact on the ALLL and, therefore, the provision for loan losses and results of operations. We have developed policies and procedures for assessing the appropriateness of the ALLL, recognizing that this process requires a number of assumptions and estimates with respect to our loan portfolio.
Changes in economic conditions and other external factors can have a significant impact on the ACL and, therefore, the allowance for credit losses and results of operations. We have developed policies and procedures for assessing the appropriateness of the ACL, recognizing that this process requires a number of assumptions and estimates with respect to our loan portfolio.
On June 2, 2021, we completed a private placement of $30,000 in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Notes").
In 2021, we completed a private placement of $30,000 in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Notes").
For more information related to estimates and deferred taxes, refer to “Note 1 – Nature of Operations and Summary of Significant Accounting Policies” and “Note 15 – Federal Income Taxes” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. 29 Table of Contents Deposits Deposits are our primary source of funding.
For more information related to estimates and deferred taxes, refer to “Note 1 – Significant Accounting Policies” and “Note 15 – Federal Income Taxes” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. 28 Table of Contents Deposits Deposits are our primary source of funding.
One specific focus of interest rate sensitivity is the loan portfolio, primarily with commercial and agricultural loans. 34 Table of Contents The following table shows the maturity of loans outstanding at December 31, 2022 based on contractual terms.
One specific focus of interest rate sensitivity is the loan portfolio, primarily with commercial and agricultural loans. The following table shows the maturity of loans outstanding at December 31, 2023 based on contractual terms.
The following table presents estimated balances of uninsured deposits as of December 31: 2022 2021 2020 2019 2018 Uninsured deposits $ 585,901 $ 548,213 $ 461,859 $ 336,399 $ 292,017 Uninsured deposits are the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limits.
The following table presents estimated balances of uninsured deposits as of December 31: 2023 2022 2021 2020 2019 Uninsured deposits $ 600,381 $ 585,901 $ 548,213 $ 461,859 $ 336,399 Uninsured deposits are the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limits.
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, 2022, we had available lines of credit of $344,393.
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, 2023, we had available lines of credit of $338,080.
Loans represent our single largest concentration of risk. The ALLL is our estimation of incurred losses within the existing loan portfolio. We allocate the ALLL throughout the loan portfolio based on our assessment of the underlying risks associated within each loan segment.
Loans represent our single largest concentration of risk. The ACL is our estimation of expected credit losses within the existing loan portfolio. We allocate the ACL throughout the loan portfolio based on our assessment of the underlying risks associated within each loan segment.
This discussion and analysis is intended to provide a better understanding of the consolidated financial statements and statistical data included elsewhere in this Annual Report on Form 10-K. Executive Summary We reported net income of $22,238 and earnings per common share of $2.95 for the year ended December 31, 2022.
This discussion and analysis is intended to provide a better understanding of the consolidated financial statements and statistical data included elsewhere in this Annual Report on Form 10-K. Executive Summary We reported net income of $18,167 and earnings per common share of $2.42 for the year ended December 31, 2023.
Financial Statements and Supplementary Data. Of these significant accounting policies, we consider our policies regarding the ALLL, acquisition intangibles and goodwill, and the determination of the fair value and assessment of OTTI of investment securities to be our most critical accounting policies. The ALLL requires our most subjective and complex judgment.
Financial Statements and Supplementary Data. Of these significant accounting policies, we consider our policies regarding the ACL, acquisition intangibles and goodwill, and the determination of the fair value and assessment of credit related impairments of investment securities to be our most critical accounting policies. The ACL requires our most subjective and complex judgment.
The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources. Our primary sources of liquidity are cash and cash equivalents and unencumbered AFS securities. These categories totaled $488,981 or 24.08% of assets as of December 31, 2022, compared to $495,259 or 24.37% as of December 31, 2021.
The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources. Our primary sources of liquidity are cash and cash equivalents and unencumbered AFS securities. These categories totaled $381,417 or 18.52% of assets as of December 31, 2023, compared to $488,981 or 24.08% as of December 31, 2022.
We experienced a significant increase in loan demand in early 2021 which led to an increase in the number and dollar amount of loans sold; as such, net gain on sale of mortgage loans increased significantly.
The amount of loans sold is driven by customer demand and balance sheet management strategies. We experienced a significant increase in loan demand in early 2021 which led to an increase in the number and dollar amount of loans sold; as such, net gain on sale of mortgage loans increased significantly.
We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases. Pursuant to these authorizations, we issued 74,445 shares or $1,762 of common stock during 2022, and 67,436 shares or $1,593 of common stock in 2021.
We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases. Pursuant to these authorizations, we issued 75,488 shares or $1,617 of common stock during 2023, and 74,445 shares or $1,762 of common stock in 2022.
Although we expect a continuation in deposit account growth in 2023, fee levels may not exceed 2022 due to continued regulatory discussions around the practice of service charges and fees.
Although deposit accounts continued to grow in 2023, we experienced a decline in fees due to the discontinuation of NSF fees. Although we expect a continuation in deposit account growth in 2024, fee levels may not exceed 2023 due to continued regulatory discussions around the practice of service charges and fees.
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.
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.
Treasury $ 208,701 $ 209,703 $ — States and political subdivisions 117,512 121,205 143,656 Auction rate money market preferred 2,342 3,242 3,237 Mortgage-backed securities 39,070 56,148 88,652 Collateralized mortgage obligations 205,728 92,301 101,983 Corporate 7,128 8,002 1,700 Total $ 580,481 $ 490,601 $ 339,228 Excluding those holdings in government sponsored enterprises and municipalities within the State of Michigan, there were no investments in securities of any one issuer that exceeded 10% of shareholders’ equity during 2022, 2021, and 2020.
Treasury $ 214,801 $ 208,701 $ 209,703 States and political subdivisions 92,876 117,512 121,205 Auction rate money market preferred 2,931 2,342 3,242 Mortgage-backed securities 32,815 39,070 56,148 Collateralized mortgage obligations 177,775 205,728 92,301 Corporate 6,950 7,128 8,002 Total $ 528,148 $ 580,481 $ 490,601 Excluding those holdings in government sponsored enterprises and municipalities within the State of Michigan, there were no investments in securities of any one issuer that exceeded 10% of shareholders’ equity during 2023, 2022, and 2021.
Pursuant to this plan, we increased shareholders’ equity by $147 and $86 during 2022 and 2021. We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 47,665 shares or $1,124 of common stock during 2022 and 135,465 shares or $3,050 during 2021.
Pursuant to this plan, we increased shareholders’ equity by $253 and $147 during 2023 and 2022. We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 149,020 shares or $3,415 of common stock during 2023 and 47,665 shares or $1,124 during 2022.
Donations and community relations increased during 2022 as a result of initiatives designed to deepen and strengthen our relationship with the communities in which we operate and serve, which includes an expanded footprint.
Donations and community relations increased during 2022 as a result of initiatives designed to deepen and strengthen our relationship with the communities in which we operate and serve, which includes an expanded footprint. During 2023 we maintained the same level of community support as in 2022. In 2024 we do not expect donations and community relations to exceed 2023 levels.
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 common equity tier 1 capital ratio has a minimum requirement of 4.50%. The minimum standard for primary, or Tier 1 capital is 6.00% and the minimum standard for total capital is 8.00%.
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. 30 Table of Contents The common equity tier 1 capital ratio has a minimum requirement of 4.50%.
As a result of this change in strategy, coupled with a decline in loan demand, net gain on sale of mortgage loans declined in the second half of 2021 and during 2022.
As a result of this change in strategy, coupled with a decline in loan demand due to increased interest rates, net gain on sale of mortgage loans declined in the second half of 2021 and during 2022. During 2023, we experienced a decrease in gain on sale of mortgage loans as loan demand continued to decline.
As interest rates are expected to continue to increase in 2023, growth in residential and consumer loans is anticipated to continue but at a slower pace. Accrued interest receivable and other assets Other assets consist primarily of prepaid expenses, OMSR, and net deferred tax assets.
As interest rates are expected to remain high throughout 2024, growth in residential loans is anticipated to continue, but at a slower pace. We've experienced growth in the consumer portfolio and expect this trend to continue in 2024. Accrued interest receivable and other assets Other assets consist primarily of prepaid expenses, OMSR, and net deferred tax assets.
As demand is expected to remain at reduced levels in 2023, due to the rise in interest rates, net gain on sale of mortgage loans is not expected to exceed 2022 levels during 2023.
As demand is expected to remain at reduced levels in 2024, gain on sale of mortgage loans is not expected to exceed 2023 levels during 2024.
Other We have not received, nor are aware of, any notices of regulatory actions as of March 6, 2023. 13 Table of Contents Results of Operations (Dollars in thousands except per share amounts) The following table outlines the results of operations and provides certain key performance measures as of, and for the years ended, December 31: 2022 2021 2020 INCOME STATEMENT DATA Interest income $ 65,798 $ 60,113 $ 64,172 Interest expense 5,317 7,412 13,825 Net interest income 60,481 52,701 50,347 Provision for loan losses 483 (518) 1,665 Noninterest income 13,666 13,822 14,423 Noninterest expenses 46,820 43,694 51,233 Federal income tax expense 4,606 3,848 987 Net income $ 22,238 $ 19,499 $ 10,885 PER SHARE Basic earnings $ 2.95 $ 2.48 $ 1.37 Diluted earnings $ 2.91 $ 2.45 $ 1.34 Dividends $ 1.09 $ 1.08 $ 1.08 Tangible book value $ 18.25 $ 21.61 $ 21.29 Quoted market value High $ 26.25 $ 29.00 $ 24.50 Low $ 21.00 $ 19.45 $ 15.60 Close (1) $ 23.50 $ 25.50 $ 19.57 Common shares outstanding (1) 7,559,421 7,532,641 7,997,247 PERFORMANCE RATIOS Return on average total assets 1.08 % 0.96 % 0.57 % Return on average shareholders' equity 11.41 % 8.83 % 4.93 % Return on average tangible shareholders' equity 15.17 % 11.31 % 6.34 % Net interest margin yield (FTE) 3.18 % 2.87 % 2.96 % BALANCE SHEET DATA (1) Gross loans $ 1,264,173 $ 1,301,037 $ 1,238,311 AFS securities $ 580,481 $ 490,601 $ 339,228 Total assets $ 2,030,267 $ 2,032,158 $ 1,957,378 Deposits $ 1,744,275 $ 1,710,339 $ 1,566,317 Borrowed funds $ 87,016 $ 99,320 $ 158,747 Shareholders' equity $ 186,210 $ 211,048 $ 218,588 Gross loans to deposits 72.48 % 76.07 % 79.06 % ASSETS UNDER MANAGEMENT (1) Loans sold with servicing retained $ 264,206 $ 278,844 $ 301,377 Assets managed by Isabella Wealth $ 513,918 $ 516,243 $ 443,967 Total assets under management $ 2,808,391 $ 2,827,245 $ 2,702,722 ASSET QUALITY (1) Nonperforming loans to gross loans 0.04 % 0.10 % 0.43 % Nonperforming assets to total assets 0.05 % 0.08 % 0.31 % ALLL to gross loans 0.78 % 0.70 % 0.79 % CAPITAL RATIOS (1) Shareholders' equity to assets 9.17 % 10.39 % 11.17 % Tier 1 leverage 8.61 % 7.97 % 8.37 % Common equity tier 1 capital 12.91 % 12.07 % 12.97 % Tier 1 risk-based capital 12.91 % 12.07 % 12.97 % Total risk-based capital 15.79 % 14.94 % 13.75 % (1) At end of year 14 Table of Contents The following table outlines our interim results of operations and key performance measures as of, and for the unaudited periods ended: Quarter to Date December 31 2022 September 30 2022 June 30 2022 March 31 2022 INCOME STATEMENT DATA Total interest income $ 17,915 $ 17,019 $ 16,102 $ 14,762 Total interest expense 1,643 1,216 1,175 1,283 Net interest income 16,272 15,803 14,927 13,479 Provision for loan losses (57) 18 485 37 Noninterest income 3,272 3,252 3,595 3,547 Noninterest expenses 11,922 11,917 11,661 11,320 Federal income tax expense 1,357 1,233 1,081 935 Net income $ 6,322 $ 5,887 $ 5,295 $ 4,734 PER SHARE Basic earnings $ 0.84 $ 0.78 $ 0.70 $ 0.63 Diluted earnings $ 0.83 $ 0.77 $ 0.69 $ 0.62 Dividends $ 0.28 $ 0.27 $ 0.27 $ 0.27 Quoted market value (1) $ 23.50 $ 21.40 $ 24.80 $ 25.85 Tangible book value $ 18.25 $ 16.96 $ 18.85 $ 19.56 Quarter to Date December 31 2021 September 30 2021 June 30 2021 March 31 2021 INCOME STATEMENT DATA Total interest income $ 15,041 $ 15,142 $ 14,640 $ 15,290 Total interest expense 1,567 1,829 1,927 2,089 Net interest income 13,474 13,313 12,713 13,201 Provision for loan losses 81 (107) 31 (523) Noninterest income 3,608 3,367 3,315 3,532 Noninterest expenses 11,197 11,185 10,495 10,817 Federal income tax expense 1,010 916 881 1,041 Net income $ 4,794 $ 4,686 $ 4,621 $ 5,398 PER SHARE Basic earnings $ 0.63 $ 0.59 $ 0.58 $ 0.68 Diluted earnings $ 0.63 $ 0.58 $ 0.57 $ 0.67 Dividends $ 0.27 $ 0.27 $ 0.27 $ 0.27 Quoted market value (1) $ 25.50 $ 26.03 $ 23.00 $ 21.75 Tangible book value $ 21.61 $ 21.87 $ 21.73 $ 21.35 (1) At end of period 15 Table of Contents CRITICAL ACCOUNTING POLICIES Our significant accounting policies are set forth in “Note 1 – Nature of Operations and Summary of Significant Accounting Policies” of “Notes to Consolidated Financial Statements” in Item 8.
Other We have not received, nor are aware of, any notices of regulatory actions as of March 6, 2024. 14 Table of Contents Results of Operations (Dollars in thousands except per share amounts) The following table outlines the results of operations and provides certain key performance measures as of, and for the years ended, December 31: 2023 2022 2021 INCOME STATEMENT DATA Interest income $ 79,631 $ 65,798 $ 60,113 Interest expense 21,687 5,317 7,412 Net interest income 57,944 60,481 52,701 Provision for credit losses 629 483 (518) Noninterest income 13,827 13,666 13,822 Noninterest expenses 49,310 46,820 43,694 Federal income tax expense 3,665 4,606 3,848 Net income $ 18,167 $ 22,238 $ 19,499 PER SHARE Basic earnings $ 2.42 $ 2.95 $ 2.48 Diluted earnings $ 2.40 $ 2.91 $ 2.45 Dividends $ 1.12 $ 1.09 $ 1.08 Tangible book value (1) $ 20.59 $ 18.25 $ 21.61 Quoted market value High $ 26.00 $ 26.25 $ 29.00 Low $ 19.13 $ 21.00 $ 19.45 Close (1) $ 21.50 $ 23.50 $ 25.50 Common shares outstanding (1) 7,485,889 7,559,421 7,532,641 PERFORMANCE RATIOS Return on average total assets 0.89 % 1.08 % 0.96 % Return on average shareholders' equity 9.52 % 11.41 % 8.83 % Return on average tangible shareholders' equity 12.75 % 15.17 % 11.31 % Net interest margin yield (FTE) 3.05 % 3.18 % 2.87 % BALANCE SHEET DATA (1) Gross loans $ 1,349,463 $ 1,264,173 $ 1,301,037 AFS securities $ 528,148 $ 580,481 $ 490,601 Total assets $ 2,058,968 $ 2,030,267 $ 2,032,158 Deposits $ 1,723,695 $ 1,744,275 $ 1,710,339 Borrowed funds $ 116,136 $ 87,016 $ 99,320 Shareholders' equity $ 202,402 $ 186,210 $ 211,048 Gross loans to deposits 78.29 % 72.48 % 76.07 % ASSETS UNDER MANAGEMENT (1) Loans sold with servicing retained $ 248,756 $ 264,206 $ 278,844 Assets managed by Isabella Wealth $ 641,027 $ 513,918 $ 516,243 Total assets under management $ 2,948,751 $ 2,808,391 $ 2,827,245 ASSET QUALITY (1) Nonperforming loans to gross loans 0.08 % 0.04 % 0.10 % Nonperforming assets to total assets 0.07 % 0.05 % 0.08 % ACL to gross loans 0.97 % 0.78 % 0.70 % CAPITAL RATIOS (1) Shareholders' equity to assets 9.83 % 9.17 % 10.39 % Tier 1 leverage 8.76 % 8.61 % 7.97 % Common equity tier 1 capital 12.54 % 12.91 % 12.07 % Tier 1 risk-based capital 12.54 % 12.91 % 12.07 % Total risk-based capital 15.52 % 15.79 % 14.94 % (1) At end of year 15 Table of Contents The following table outlines our interim results of operations and key performance measures as of, and for the unaudited periods ended: Quarter to Date December 31 2023 September 30 2023 June 30 2023 March 31 2023 INCOME STATEMENT DATA Total interest income $ 21,056 $ 20,485 $ 19,495 $ 18,595 Total interest expense 7,444 6,183 4,816 3,244 Net interest income 13,612 14,302 14,679 15,351 Provision for loan losses 684 (292) 196 41 Noninterest income 3,516 3,414 3,604 3,293 Noninterest expenses 11,915 12,658 12,539 12,198 Federal income tax expense 726 937 918 1,084 Net income $ 3,803 $ 4,413 $ 4,630 $ 5,321 PER SHARE Basic earnings $ 0.51 $ 0.59 $ 0.62 $ 0.70 Diluted earnings $ 0.51 $ 0.58 $ 0.61 $ 0.70 Dividends $ 0.28 $ 0.28 $ 0.28 $ 0.28 Quoted market value (1) $ 21.50 $ 21.05 $ 20.50 $ 24.80 Tangible book value (1) $ 20.59 $ 18.27 $ 18.69 $ 19.24 Quarter to Date December 31 2022 September 30 2022 June 30 2022 March 31 2022 INCOME STATEMENT DATA Total interest income $ 17,915 $ 17,019 $ 16,102 $ 14,762 Total interest expense 1,643 1,216 1,175 1,283 Net interest income 16,272 15,803 14,927 13,479 Provision for loan losses (57) 18 485 37 Noninterest income 3,272 3,252 3,595 3,547 Noninterest expenses 11,922 11,917 11,661 11,320 Federal income tax expense 1,357 1,233 1,081 935 Net income $ 6,322 $ 5,887 $ 5,295 $ 4,734 PER SHARE Basic earnings $ 0.84 $ 0.78 $ 0.70 $ 0.63 Diluted earnings $ 0.83 $ 0.77 $ 0.69 $ 0.62 Dividends $ 0.28 $ 0.27 $ 0.27 $ 0.27 Quoted market value (1) $ 23.50 $ 21.40 $ 24.80 $ 25.85 Tangible book value (1) $ 18.25 $ 16.96 $ 18.85 $ 19.56 (1) At end of period 16 Table of Contents CRITICAL ACCOUNTING POLICIES Our significant accounting policies are set forth in “Note 1 – Significant Accounting Policies” of “Notes to Consolidated Financial Statements” in Item 8.
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.
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.
For additional discussion concerning our ALLL and related matters, see “Allowance for Loan and Lease Losses” and “Note 4 – Loans and ALLL” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data.
For additional discussion concerning our ACL and related matters, see “ACL - Loans” and “Note 4 – Loans and ACL” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data.
The following table sets forth these requirements and our ratios as of December 31: 2022 2021 Actual Minimum Required - BASEL III Required to be Considered Well Capitalized Actual Minimum Required - BASEL III Required to be Considered Well Capitalized Common equity tier 1 capital 12.91 % 7.00 % 6.50 % 12.07 % 7.00 % 6.50 % Tier 1 capital 12.91 % 8.50 % 8.00 % 12.07 % 8.50 % 8.00 % Total capital 15.79 % 10.50 % 10.00 % 14.94 % 10.50 % 10.00 % Tier 1 leverage 8.61 % 4.00 % 5.00 % 7.97 % 4.00 % 5.00 % There are no significant regulatory constraints placed on our capital.
The following table sets forth these requirements and our ratios as of December 31: 2023 2022 Actual Minimum Required - BASEL III Required to be Considered Well Capitalized Actual Minimum Required - BASEL III Required to be Considered Well Capitalized Common equity tier 1 capital 12.54 % 7.00 % 6.50 % 12.91 % 7.00 % 6.50 % Tier 1 capital 12.54 % 8.50 % 8.00 % 12.91 % 8.50 % 8.00 % Total capital 15.52 % 10.50 % 10.00 % 15.79 % 10.50 % 10.00 % Tier 1 leverage 8.76 % 4.00 % 5.00 % 8.61 % 4.00 % 5.00 % Total capital includes Tier 1 capital and Tier 2 capital.
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.
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.
Based on portfolio characteristics and economic conditions and expectations as of January 1, 2023, we recorded a combined increase to the ACL and reserve for unfunded commitments on January 1, 2023 of approximately $3,000 upon the adoption of ASU 2016-13.
Based on portfolio characteristics and economic conditions and expectations as of January 1, 2023, we recorded a combined pre-tax increase of $3,059 to the ACL and reserve for unfunded commitments on January 1, 2023 upon the adoption of ASU 2016-13; this implementation resulted in a reduction to retained earnings of $2,417, net of tax, as of January 1, 2023.
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.
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 the yield curve, interest rate relationships, loan prepayments, and funding sources. These forecasts are compared against net interest income projected in a stable interest rate environment.
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.
As of December 31, 2023, we were authorized to repurchase up to an additional 270,806 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.
The frequency and complexity of our liquidity stress testing has increased since early 2020 and continues to evolve due to economic uncertainly as a result of COVID-19 and changes within the interest rate and economic environment.
The frequency and complexity of our liquidity stress testing has increased due to economic uncertainly and changes within the interest rate and economic environment.
Year Ended December 31 2022 2021 2020 Average Balance Tax Equivalent Interest Average Yield / Rate Average Balance Tax Equivalent Interest Average Yield / Rate Average Balance Tax Equivalent Interest Average Yield / Rate INTEREST EARNING ASSETS Loans (1) $ 1,249,634 $ 53,283 4.26 % $ 1,208,141 $ 51,410 4.26 % $ 1,236,169 $ 54,102 4.38 % Taxable investment securities 477,159 8,294 1.74 % 297,357 4,920 1.65 % 229,468 5,214 2.27 % Nontaxable investment securities 107,158 3,933 3.67 % 117,997 4,235 3.59 % 140,665 5,189 3.69 % Fed funds sold 10 — 2.42 % 5 — 0.02 % 4 — 0.06 % Other 99,301 1,344 1.35 % 255,246 706 0.28 % 142,717 1,026 0.72 % Total earning assets 1,933,262 66,854 3.46 % 1,878,746 61,271 3.26 % 1,749,023 65,531 3.75 % NONEARNING ASSETS Allowance for loan losses (9,477) (9,396) (8,837) Cash and demand deposits due from banks 24,708 29,139 24,987 Premises and equipment 24,648 24,760 25,846 Accrued income and other assets 81,823 109,625 118,195 Total assets $ 2,054,964 $ 2,032,874 $ 1,909,214 INTEREST BEARING LIABILITIES Interest bearing demand deposits $ 374,623 274 0.07 % $ 345,015 216 0.06 % $ 262,188 357 0.14 % Savings deposits 630,574 1,135 0.18 % 558,102 616 0.11 % 456,088 1,212 0.27 % Time deposits 270,296 2,612 0.97 % 336,094 4,610 1.37 % 387,881 7,315 1.89 % Federal funds purchased and repurchase agreements 49,974 79 0.16 % 57,453 53 0.09 % 35,518 36 0.10 % FHLB advances 7,863 152 1.93 % 69,342 1,302 1.88 % 210,451 4,905 2.33 % Subordinated debt, net of unamortized issuance costs 29,200 1,065 3.65 % 17,000 615 3.62 % — — 0.00 % Total interest bearing liabilities 1,362,530 5,317 0.39 % 1,383,006 7,412 0.54 % 1,352,126 13,825 1.02 % NONINTEREST BEARING LIABILITIES Demand deposits 482,781 416,247 320,820 Other 14,695 12,858 15,613 Shareholders’ equity 194,958 220,763 220,655 Total liabilities and shareholders’ equity $ 2,054,964 $ 2,032,874 $ 1,909,214 Net interest income (FTE) $ 61,537 $ 53,859 $ 51,706 Net yield on interest earning assets (FTE) 3.18 % 2.87 % 2.96 % (1) Includes loans and mortgage loans AFS 17 Table of Contents Net interest income is the amount by which interest income on earning assets exceeds the interest expense on interest bearing liabilities.
Year Ended December 31 2023 2022 2021 Average Balance Tax Equivalent Interest Average Yield / Rate Average Balance Tax Equivalent Interest Average Yield / Rate Average Balance Tax Equivalent Interest Average Yield / Rate INTEREST EARNING ASSETS Loans (1) $ 1,308,891 $ 65,670 5.02 % $ 1,249,634 $ 53,283 4.26 % $ 1,208,141 $ 51,410 4.26 % Taxable investment securities 485,718 9,399 1.94 % 477,159 8,294 1.74 % 297,357 4,920 1.65 % Nontaxable investment securities 96,845 3,780 3.90 % 107,158 3,933 3.67 % 117,997 4,235 3.59 % Fed funds sold 12 1 5.04 % 10 — 2.42 % 5 — 0.02 % Other 41,965 1,804 4.30 % 99,301 1,344 1.35 % 255,246 706 0.28 % Total earning assets 1,933,431 80,654 4.17 % 1,933,262 66,854 3.46 % 1,878,746 61,271 3.26 % NONEARNING ASSETS Allowance for credit losses (12,784) (9,477) (9,396) Cash and demand deposits due from banks 24,592 24,708 29,139 Premises and equipment 26,589 24,648 24,760 Accrued income and other assets 74,319 81,823 109,625 Total assets $ 2,046,147 $ 2,054,964 $ 2,032,874 INTEREST BEARING LIABILITIES Interest bearing demand deposits $ 346,875 1,086 0.31 % $ 374,623 274 0.07 % $ 345,015 216 0.06 % Savings deposits 626,027 8,290 1.32 % 630,574 1,135 0.18 % 558,102 616 0.11 % Time deposits 308,699 8,976 2.91 % 270,296 2,612 0.97 % 336,094 4,610 1.37 % Federal funds purchased and repurchase agreements 43,061 961 2.23 % 49,974 79 0.16 % 57,453 53 0.09 % FHLB advances 23,699 1,309 5.52 % 7,863 152 1.93 % 69,342 1,302 1.88 % Subordinated debt, net of unamortized issuance costs 29,287 1,065 3.64 % 29,200 1,065 3.65 % 17,000 615 3.62 % Total interest bearing liabilities 1,377,648 21,687 1.57 % 1,362,530 5,317 0.39 % 1,383,006 7,412 0.54 % NONINTEREST BEARING LIABILITIES Demand deposits 461,689 482,781 416,247 Other 16,043 14,695 12,858 Shareholders’ equity 190,767 194,958 220,763 Total liabilities and shareholders’ equity $ 2,046,147 $ 2,054,964 $ 2,032,874 Net interest income (FTE) $ 58,967 $ 61,537 $ 53,859 Net yield on interest earning assets (FTE) 3.05 % 3.18 % 2.87 % (1) Includes loans and mortgage loans AFS 18 Table of Contents Net interest income is the amount by which interest income on earning assets exceeds the interest expense on interest bearing liabilities.
During 2022, there was strong growth in the portfolio, however the decline in the market offset the increase in fees related to growth. We expect wealth management fees to exceed 2022 levels in 2023, as a result of new business activity. The amount of loans sold is driven by customer demand and balance sheet management strategies.
During 2022, there was strong growth in assets managed by Isabella Wealth, however the decline in the market offset the increase in fees related to growth in new business. We expect wealth management fees to exceed 2023 levels in 2024 as a result of new business activity.
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.
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.
Loans may be placed back on accrual status after six months of continued performance and achievement of current payment status. The level of nonperforming loans continued to improve and remains low in comparison to peer banks.
Loans may be placed back on accrual status after six months of continued performance and achievement of current payment status.
We evaluated subsequent events after December 31, 2022 through the date our condensed consolidated financial statements were issued for potential recognition and disclosure. Outside of the adoption of CECL, no other subsequent events require financial statement recognition or disclosure between December 31, 2022 and the date our condensed consolidated financial statements were issued.
No subsequent events require financial statement recognition or disclosure between December 31, 2023 and the date our condensed consolidated financial statements were issued.
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.
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.
As a result, this change in unrealized losses has reduced our balance of shareholders' equity and negatively impacted our tangible book value. Management does not anticipate the need to sell securities and incur a loss as a result of the sale. Our net yield on interest earning assets (FTE) was 3.18% for 2022 which increased from 2.87% in 2021.
Management does not anticipate the need to sell securities and incur a loss as a result of the sale. Our net yield on interest earning assets (FTE) was 3.05% for 2023, which decreased from 3.18% in 2022.
For further information regarding fair value measurements, see “Note 1 – Nature of Operations and Summary of Significant Accounting Policies” and “Note 17 – Fair Value” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Liquidity Liquidity is monitored regularly by our ALCO, which consists of members of senior management.
For further information regarding the Bank’s capital requirements, see “Note 10 – Minimum Regulatory Capital Requirements” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data. Liquidity Liquidity is monitored regularly by our ALCO, which consists of members of senior management.
OMSR income results are driven, in part, by changes in offering rates on residential mortgage loans, anticipated prepayments in the servicing-retained portfolio, and the volume of loans within the servicing-retained portfolio. During 2021, the volume of loans serviced decreased, while prepayment speeds continued to increase. Both of these factors contributed to the recognition of a loss during 2021.
OMSR income results are driven, in part, by changes in offering rates on residential mortgage loans, anticipated prepayments in the servicing-retained portfolio, and the volume of loans within the servicing-retained portfolio. During 2022, prepayment speeds declined as a result of an increase in interest rates, resulting in income recognized during 2022.
Maturity Within 3 months $ 12,568 Within 3 to 6 months 2,320 Within 6 to 12 months 13,194 Over 12 months 9,050 Total $ 37,132 30 Table of Contents Borrowed Funds Borrowed funds include FHLB advances, securities sold under agreements to repurchase, subordinated debt, and federal funds purchased.
Maturity Within 3 months $ 13,396 Within 3 to 6 months 14,383 Within 6 to 12 months 23,555 Over 12 months 8,350 Total $ 59,684 29 Table of Contents Borrowed Funds Borrowed funds include FHLB advances, securities sold under agreements to repurchase, subordinated debt, and federal funds purchased.
Our assessments include allocations based on specific impairment valuation allowances, historical charge-offs, internally assigned credit risk ratings, and past due and nonaccrual balances.
Our assessments include allocations based on specific valuation allowances, historical charge-offs, internally assigned credit risk ratings, past due and nonaccrual balances, historical loss percentages, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future.
The following table presents borrowed funds balances as of December 31: 2022 2021 2020 Securities sold under agreements to repurchase without stated maturity dates $ 57,771 $ 50,162 $ 68,747 FHLB advances — 20,000 90,000 Subordinated debt, net of unamortized issuance costs 29,245 29,158 — Total $ 87,016 $ 99,320 $ 158,747 Over the last few years, we used excess funds to reduce and payoff FHLB advances.
The following table presents borrowed funds balances as of December 31: 2023 2022 2021 Securities sold under agreements to repurchase without stated maturity dates $ 46,801 $ 57,771 $ 50,162 FHLB advances 40,000 — 20,000 Subordinated debt, net of unamortized issuance costs 29,335 29,245 29,158 Total $ 116,136 $ 87,016 $ 99,320 FHLB advances outstanding as of December 31, 2023 were short-term, with maturities within a week after December 31, 2023.
Financial Statements and Supplementary Data. 23 Table of Contents Nonperforming Assets The following table summarizes our nonperforming assets as of December 31: 2022 2021 2020 2019 2018 Nonaccrual status loans $ 457 $ 1,245 $ 5,313 $ 6,535 $ 7,260 Accruing loans past due 90 days or more — 97 — — 113 Total nonperforming loans 457 1,342 5,313 6,535 7,373 Foreclosed assets 439 211 527 456 355 Debt securities 77 131 230 230 230 Total nonperforming assets $ 973 $ 1,684 $ 6,070 $ 7,221 $ 7,958 Nonperforming loans as a % of total loans 0.04 % 0.10 % 0.43 % 0.55 % 0.65 % Nonperforming assets as a % of total assets 0.05 % 0.08 % 0.31 % 0.40 % 0.42 % 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.
Financial Statements and Supplementary Data. 20 Table of Contents Nonperforming Assets The following table summarizes our nonperforming assets as of December 31: 2023 2022 2021 2020 2019 Nonaccrual loans $ 982 $ 457 $ 1,245 $ 5,313 $ 6,535 Accruing loans past due 90 days or more 87 — 97 — — Total nonperforming loans 1,069 457 1,342 5,313 6,535 Foreclosed assets 406 439 211 527 456 Debt securities 12 77 131 230 230 Total nonperforming assets $ 1,487 $ 973 $ 1,684 $ 6,070 $ 7,221 Nonperforming loans as a % of total loans 0.08 % 0.04 % 0.10 % 0.43 % 0.55 % Nonperforming assets as a % of total assets 0.07 % 0.05 % 0.08 % 0.31 % 0.40 % ACL - Loans The viability of any financial institution is ultimately determined by its management of risk.
Based on these same factors, daily liquidity could vary significantly. Deposit accounts are our primary source of funds. 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.
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.
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.
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.
The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. 2022 Compared to 2021 Increase (Decrease) Due to 2021 Compared to 2020 Increase (Decrease) Due to Volume Rate Net Volume Rate Net Changes in interest income Loans $ 1,769 $ 104 $ 1,873 $ (1,211) $ (1,481) $ (2,692) Taxable investment securities 3,114 260 3,374 1,324 (1,618) (294) Nontaxable investment securities (396) 94 (302) (817) (137) (954) Fed Funds Sold — — — — — — Other (659) 1,297 638 529 (849) (320) Total changes in interest income 3,828 1,755 5,583 (175) (4,085) (4,260) Changes in interest expense Interest bearing demand deposits 20 38 58 90 (231) (141) Savings deposits 89 430 519 227 (823) (596) Time deposits (796) (1,202) (1,998) (889) (1,816) (2,705) Federal funds purchased and repurchase agreements (8) 34 26 20 (3) 17 FHLB advances (1,187) 37 (1,150) (2,793) (810) (3,603) Subordinated debt, net of unamortized issuance costs 445 5 450 615 — 615 Total changes in interest expense (1,437) (658) (2,095) (2,730) (3,683) (6,413) Net change in interest margin (FTE) $ 5,265 $ 2,413 $ 7,678 $ 2,555 $ (402) $ 2,153 The interest rate increases during 2022 alleviated much of the pressure placed on our net interest margin.
The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. 2023 Compared to 2022 Increase (Decrease) Due to 2022 Compared to 2021 Increase (Decrease) Due to Volume Rate Net Volume Rate Net Changes in interest income Loans $ 2,621 $ 9,766 $ 12,387 $ 1,769 $ 104 $ 1,873 Taxable investment securities 151 954 1,105 3,114 260 3,374 Nontaxable investment securities (393) 240 (153) (396) 94 (302) Fed Funds Sold — 1 1 — — — Other (1,130) 1,590 460 (659) 1,297 638 Total changes in interest income 1,249 12,551 13,800 3,828 1,755 5,583 Changes in interest expense Interest bearing demand deposits (22) 834 812 20 38 58 Savings deposits (8) 7,163 7,155 89 430 519 Time deposits 420 5,944 6,364 (796) (1,202) (1,998) Federal funds purchased and repurchase agreements (12) 894 882 (8) 34 26 FHLB advances 602 555 1,157 (1,187) 37 (1,150) Subordinated debt, net of unamortized issuance costs 3 (3) — 445 5 450 Total changes in interest expense 983 15,387 16,370 (1,437) (658) (2,095) Net change in interest margin (FTE) $ 266 $ (2,836) $ (2,570) $ 5,265 $ 2,413 $ 7,678 Over the past several quarters, rising rates on deposit accounts and an increase in borrowed funds have reversed the improvement in our net interest margin.
The following table presents the composition of the deposit portfolio as of December 31: 2022 2021 2020 Noninterest bearing demand deposits $ 494,346 $ 448,352 $ 375,395 Interest bearing demand deposits 372,155 364,563 302,444 Savings deposits 625,734 596,662 505,497 Certificates of deposit 251,541 297,696 358,165 Brokered certificates of deposit — — 14,029 Internet certificates of deposit 499 3,066 10,787 Total $ 1,744,275 $ 1,710,339 $ 1,566,317 The following table presents the change in the deposit categories for the years ended December 31: 2022 2021 $ Change % Change $ Change % Change Noninterest bearing demand deposits $ 45,994 10.26 % $ 72,957 19.43 % Interest bearing demand deposits 7,592 2.08 % 62,119 20.54 % Savings deposits 29,072 4.87 % 91,165 18.03 % Certificates of deposit (46,155) (15.50) % (60,469) (16.88) % Brokered certificates of deposit — 0.00 % (14,029) (100.00) % Internet certificates of deposit (2,567) (83.72) % (7,721) (71.58) % Total $ 33,936 1.98 % $ 144,022 9.19 % Total deposits have increased over the past 12 months with significant growth in non-contractual deposits, such as demand and savings deposits.
The following table presents the composition of the deposit portfolio as of December 31: 2023 2022 2021 Noninterest bearing demand deposits $ 428,505 $ 494,346 $ 448,352 Interest bearing demand deposits 320,737 372,155 364,563 Savings deposits 628,079 625,734 596,662 Certificates of deposit 346,125 251,541 297,696 Internet certificates of deposit 249 499 3,066 Total $ 1,723,695 $ 1,744,275 $ 1,710,339 The following table presents the change in the deposit categories for the years ended December 31: 2023 2022 $ Change % Change $ Change % Change Noninterest bearing demand deposits $ (65,841) (13.32) % $ 45,994 10.26 % Interest bearing demand deposits (51,418) (13.82) % 7,592 2.08 % Savings deposits 2,345 0.37 % 29,072 4.87 % Certificates of deposit 94,584 37.60 % (46,155) (15.50) % Internet certificates of deposit (250) (50.10) % (2,567) (83.72) % Total $ (20,580) (1.18) % $ 33,936 1.98 % Total deposits have decreased over the past 12 months driven by a decline in demand deposits.
Financial Statements and Supplementary Data. 24 Table of Contents Noninterest Income and Noninterest Expenses Significant noninterest income balances are highlighted in the following table for the years ended December 31: Change Change 2022 2021 $ % 2020 $ % Service charges and fees ATM and debit card fees $ 4,774 $ 4,600 $ 174 3.78 % $ 3,723 $ 877 23.56 % Service charges and fees on deposit accounts 2,566 2,139 427 19.96 % 1,847 292 15.81 % Freddie Mac servicing fee 669 747 (78) (10.44) % 625 122 19.52 % Net OMSR income (loss) 435 (184) 619 336.41 % 44 (228) (518.18) % Other fees for customer services 286 312 (26) (8.33) % 305 7 2.30 % Total service charges and fees 8,730 7,614 1,116 14.66 % 6,544 1,070 16.35 % Wealth management fees 3,005 3,071 (66) (2.15) % 2,578 493 19.12 % Earnings on corporate owned life insurance policies 884 800 84 10.50 % 755 45 5.96 % Net gain on sale of mortgage loans 631 1,694 (1,063) (62.75) % 2,716 (1,022) (37.63) % Gains from redemption of corporate owned life insurance policies 57 271 (214) (78.97) % 891 (620) (69.58) % Net income (loss) on joint venture investment — — — 0.00 % 577 (577) (100.00) % Other 359 372 (13) (3.49) % 362 10 2.76 % Total noninterest income $ 13,666 $ 13,822 $ (156) (1.13) % $ 14,423 $ (601) (4.17) % Service charges and fees on deposit accounts declined in 2020 as a result of waived fees.
Financial Statements and Supplementary Data. 23 Table of Contents Noninterest Income and Noninterest Expenses Significant noninterest income balances are highlighted in the following table for the years ended December 31: Change Change 2023 2022 $ % 2021 $ % Service charges and fees ATM and debit card fees $ 5,051 $ 4,774 $ 277 5.80 % $ 4,600 $ 174 3.78 % Service charges and fees on deposit accounts 2,413 2,566 (153) (5.96) % 2,139 427 19.96 % Freddie Mac servicing fee 630 669 (39) (5.83) % 747 (78) (10.44) % Net OMSR income (loss) (137) 435 (572) (131.49) % (184) 619 336.41 % Other fees for customer services 340 286 54 18.88 % 312 (26) (8.33) % Total service charges and fees 8,297 8,730 (433) (4.96) % 7,614 1,116 14.66 % Wealth management fees 3,557 3,005 552 18.37 % 3,071 (66) (2.15) % Earnings on corporate owned life insurance policies 920 884 36 4.07 % 800 84 10.50 % Net gain on sale of mortgage loans 317 631 (314) (49.76) % 1,694 (1,063) (62.75) % Other 736 416 320 76.92 % 643 (227) (35.30) % Total noninterest income $ 13,827 $ 13,666 $ 161 1.18 % $ 13,822 $ (156) (1.13) % During 2022, we experienced an increase in service charges and fees on deposit accounts mainly due to an increase in the number of deposit accounts.
Our liquidity position remained strong at the end of 2022, which is illustrated in the following table: December 31 2022 Total cash and cash equivalents $ 38,924 Available lines of credit Fed funds lines with correspondent banks 93,000 FHLB borrowings 237,407 FRB Discount Window 8,986 Other lines of credit 5,000 Total available lines of credit 344,393 Unencumbered lendable value of FRB collateral, estimated 1 410,000 Total cash and liquidity $ 793,317 (1) Includes estimated unencumbered lendable value of FHLB collateral of $350,000 The following table summarizes our sources and uses of cash for the years ended December 31: 2022 2021 $ Variance Net cash provided by (used in) operating activities $ 26,937 $ 25,501 $ 1,436 Net cash provided by (used in) investing activities (106,255) (229,635) 123,380 Net cash provided by (used in) financing activities 12,912 62,824 (49,912) Increase (decrease) in cash and cash equivalents (66,406) (141,310) 74,904 Cash and cash equivalents January 1 105,330 246,640 (141,310) Cash and cash equivalents December 31 $ 38,924 $ 105,330 $ (66,406) 33 Table of Contents Market Risk Our primary market risks are interest rate risk and liquidity risk.
Our liquidity position remained strong at the end of 2023, which is illustrated in the following table: December 31 2023 Total cash and cash equivalents $ 33,672 Available lines of credit Fed funds lines with correspondent banks 93,000 FHLB borrowings 211,860 FRB Discount Window 28,220 Other lines of credit 5,000 Total available lines of credit 338,080 Unencumbered lendable value of FRB collateral, estimated 1 320,000 Total cash and liquidity $ 691,752 (1) Includes estimated unencumbered lendable value of FHLB collateral of $230,000 31 Table of Contents The following table summarizes our sources and uses of cash for the years ended December 31: 2023 2022 $ Variance Net cash provided by (used in) operating activities $ 23,715 $ 26,937 $ (3,222) Net cash provided by (used in) investing activities (25,779) (106,255) 80,476 Net cash provided by (used in) financing activities (3,188) 12,912 (16,100) Increase (decrease) in cash and cash equivalents (5,252) (66,406) 61,154 Cash and cash equivalents January 1 38,924 105,330 (66,406) Cash and cash equivalents December 31 $ 33,672 $ 38,924 $ (5,252) Fair Value We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.
The decline in the amount and percentage of primary liquidity is a result of investment purchases, with an offset in increased deposits. 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.
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. Deposit accounts are our primary source of funds.
The market values for most AFS investment securities are typically obtained from outside sources and applied to individual securities within the portfolio.
Declines in the fair value of AFS securities below their cost that are other-than-temporary are reflected as realized losses in the consolidated statements of income. The market values for most AFS investment securities are typically obtained from outside sources and applied to individual securities within the portfolio.
Significant noninterest expense balances are highlighted in the following table for the years ended December 31: Change Change 2022 2021 $ % 2020 $ % Compensation and benefits $ 24,887 $ 23,749 $ 1,138 4.79 % $ 23,772 $ (23) (0.10) % Furniture and equipment 6,006 5,462 544 9.96 % 5,787 (325) (5.62) % Occupancy 3,691 3,661 30 0.82 % 3,557 104 2.92 % Losses on extinguishment of debt — — — 0.00 % 7,643 (7,643) (100.00) % Other Audit, consulting, and legal fees 2,358 2,066 292 14.13 % 1,836 230 12.53 % ATM and debit card fees 1,909 1,810 99 5.47 % 1,441 369 25.61 % Marketing costs 1,056 939 117 12.46 % 877 62 7.07 % Loan underwriting fees 1,004 849 155 18.26 % 825 24 2.91 % Donations and community relations 923 705 218 30.92 % 723 (18) (2.49) % Memberships and subscriptions 876 877 (1) (0.11) % 740 137 18.51 % Director fees 790 703 87 12.38 % 695 8 1.15 % FDIC insurance premiums 537 690 (153) (22.17) % 612 78 12.75 % All other 2,783 2,183 600 27.49 % 2,725 (542) (19.89) % Total other 12,236 10,822 1,414 13.07 % 10,474 348 3.32 % Total noninterest expenses $ 46,820 $ 43,694 $ 3,126 7.15 % $ 51,233 $ (7,539) (14.72) % During the fourth quarter of 2020, we incurred expense of $7,643 as a result of the extinguishment of $100,000 of FHLB advances.
The fluctuations in all other income are spread throughout various categories, none of which is individually significant. 24 Table of Contents Significant noninterest expense balances are highlighted in the following table for the years ended December 31: Change Change 2023 2022 $ % 2021 $ % Compensation and benefits $ 25,905 $ 24,887 $ 1,018 4.09 % $ 23,749 $ 1,138 4.79 % Furniture and equipment 6,519 6,006 513 8.54 % 5,462 544 9.96 % Occupancy 3,778 3,691 87 2.36 % 3,661 30 0.82 % Other Audit, consulting, and legal fees 2,340 2,358 (18) (0.76) % 2,066 292 14.13 % ATM and debit card fees 1,767 1,909 (142) (7.44) % 1,810 99 5.47 % Marketing costs 1,159 1,056 103 9.75 % 939 117 12.46 % Memberships and subscriptions 1,042 876 166 18.95 % 877 (1) (0.11) % Loan underwriting fees 927 1,004 (77) (7.67) % 849 155 18.26 % FDIC insurance premiums 922 537 385 71.69 % 690 (153) (22.17) % Donations and community relations 915 923 (8) (0.87) % 705 218 30.92 % Other losses 871 546 325 59.52 % 194 352 181.44 % Director fees 764 790 (26) (3.29) % 703 87 12.38 % All other 2,401 2,237 164 7.33 % 1,989 248 12.47 % Total other noninterest expenses 13,108 12,236 872 7.13 % 10,822 1,414 13.07 % Total noninterest expenses $ 49,310 $ 46,820 $ 2,490 5.32 % $ 43,694 $ 3,126 7.15 % The increase in compensation and benefits has been driven by merit increases and our employee incentive plans.
The fluctuations in all other noninterest expenses are spread throughout various categories, none of which are individually significant. 26 Table of Contents Analysis of Changes in Financial Condition The following table shows the composition and changes in our balance sheet as of December 31: Change 2022 2021 $ % ASSETS Cash and cash equivalents $ 38,924 $ 105,330 $ (66,406) (63.05) % AFS securities Amortized cost of AFS securities 625,605 485,710 139,895 28.80 % Unrealized gains (losses) on AFS securities (45,124) 4,891 (50,015) N/M AFS securities 580,481 490,601 89,880 18.32 % Mortgage loans AFS 379 1,735 (1,356) (78.16) % Loans Gross loans 1,264,173 1,301,037 (36,864) (2.83) % Less allowance for loan and lease losses 9,850 9,103 747 8.21 % Net loans 1,254,323 1,291,934 (37,611) (2.91) % Premises and equipment 25,553 24,419 1,134 4.64 % Corporate owned life insurance policies 32,988 32,472 516 1.59 % Equity securities without readily determinable fair values 15,746 17,383 (1,637) (9.42) % Goodwill and other intangible assets 48,287 48,302 (15) (0.03) % Accrued interest receivable and other assets 33,586 19,982 13,604 68.08 % TOTAL ASSETS $ 2,030,267 $ 2,032,158 $ (1,891) (0.09) % LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits $ 1,744,275 $ 1,710,339 $ 33,936 1.98 % Borrowed funds 87,016 99,320 (12,304) (12.39) % Accrued interest payable and other liabilities 12,766 11,451 1,315 11.48 % Total liabilities 1,844,057 1,821,110 22,947 1.26 % Shareholders’ equity 186,210 211,048 (24,838) (11.77) % TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,030,267 $ 2,032,158 $ (1,891) (0.09) % A discussion of changes in balance sheet amounts by major categories follows: Cash and cash equivalents Included in cash and cash equivalents are funds held with the FRB which fluctuate from period to period.
The fluctuations in all other noninterest expenses are spread throughout various categories, none of which is individually significant. 25 Table of Contents Analysis of Changes in Financial Condition The following table shows the composition and changes in our balance sheet as of December 31: Change 2023 2022 $ % ASSETS Cash and cash equivalents $ 33,672 $ 38,924 $ (5,252) (13.49) % AFS securities Amortized cost of AFS securities 559,974 625,605 (65,631) (10.49) % Unrealized gains (losses) on AFS securities (31,826) (45,124) 13,298 N/M AFS securities 528,148 580,481 (52,333) (9.02) % Mortgage loans AFS — 379 (379) (100.00) % Loans 1,349,463 1,264,173 85,290 6.75 % Less allowance for credit losses 13,108 9,850 3,258 33.08 % Net loans 1,336,355 1,254,323 82,032 6.54 % Premises and equipment 27,639 25,553 2,086 8.16 % Corporate owned life insurance policies 33,892 32,988 904 2.74 % Equity securities without readily determinable fair values 15,848 15,746 102 0.65 % Goodwill and other intangible assets 48,284 48,287 (3) (0.01) % Accrued interest receivable and other assets 35,130 33,586 1,544 4.60 % TOTAL ASSETS $ 2,058,968 $ 2,030,267 $ 28,701 1.41 % LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits $ 1,723,695 $ 1,744,275 $ (20,580) (1.18) % Borrowed funds 116,136 87,016 29,120 33.47 % Accrued interest payable and other liabilities 16,735 12,766 3,969 31.09 % Total liabilities 1,856,566 1,844,057 12,509 0.68 % Shareholders’ equity 202,402 186,210 16,192 8.70 % TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,058,968 $ 2,030,267 $ 28,701 1.41 % A discussion of changes in balance sheet amounts by major categories follows: Cash and cash equivalents Included in cash and cash equivalents are funds held with the FRB which fluctuate from period to period.
Total Past Due and Nonaccrual Loans as of December 31 2022 2021 2020 2019 2018 Commercial $ 7,504 $ 561 $ 2,148 $ 2,477 $ 2,722 Agricultural 234 987 3,786 4,285 5,377 Residential real estate 3,333 2,287 3,580 4,572 3,208 Consumer 59 196 96 71 105 Total $ 11,130 $ 4,031 $ 9,610 $ 11,405 $ 11,412 Total past due and nonaccrual loans to gross loans 0.88 % 0.31 % 0.78 % 0.96 % 1.01 % Past due and nonaccrual status loans, as a percentage of gross loans, has improved in recent years with the exception of 2022.
Total Past Due and Nonaccrual Loans as of December 31 2023 2022 2021 2020 2019 Commercial and industrial $ 656 $ 617 $ 203 $ 1,790 $ 1,936 Commercial real estate — 6,887 358 358 559 Agricultural 205 234 987 3,786 4,285 Residential real estate 3,910 3,333 2,287 3,580 4,554 Consumer 193 59 196 96 71 Total $ 4,964 $ 11,130 $ 4,031 $ 9,610 $ 11,405 Total past due and nonaccrual loans to gross loans 0.37 % 0.88 % 0.31 % 0.78 % 0.96 % The increase in past due and nonaccrual loans within the commercial real estate and residential loan portfolios at the end of 2022 was the result of one past due relationship, which has since improved.
In 2020 wealth management fees decreased mainly due to the decline in market values of assets under management. During 2021, we experienced an increase in wealth management fees driven by a combination of the growth in the stock market and increased new business activity.
During 2023 the volume of loans serviced decreased, resulting in the recognition of losses. OMSR income during 2024 may continue to experience fluctuations and could vary from 2023 levels. During 2023, we experienced an increase in wealth management fees driven by a combination of the growth in the stock market and increased new business activity.
As of December 31, 2022, total assets and assets under management were $2,030,267 and $2,808,391, respectively. Assets under management include loans sold and serviced of $264,206 and investment and trust assets managed by Isabella Wealth of $513,918, in addition to assets on our consolidated balance sheet. Loans outstanding as of December 31, 2022 totaled $1,264,173.
Assets under management include loans sold and serviced of $248,756 and investment and trust assets managed by Isabella Wealth of $641,027, in addition to assets on our consolidated balance sheet. Loans outstanding as of December 31, 2023 totaled $1,349,463. During 2023, gross loans grew $85,290 driven by growth in nearly all loan categories.
Municipal securities for which no readily determinable market values are available are priced using fair value curves which most closely match the securities' characteristics. 16 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 for the last three years.
If these conditions are not met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. 17 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 for the last three years.
Strong credit quality, coupled with improvement in economic factors, such as unemployment rates, resulted in a reduction in the ALLL and a provision reversal during the first quarter of 2021. Credit quality remained strong at December 31, 2022, as evidenced by total past due and nonaccrual loans which were $11,130, or 0.88%, of gross loans.
Credit quality remained strong at December 31, 2023, as evidenced by total past due and nonaccrual loans which were $4,964, or 0.37%, of gross loans. While maintaining strong credit quality, the ACL and provision for loan losses increased during 2023 as a result of core loan growth and economic related risk factors.
While we experienced a decline in certificates of deposit over the past year, the decline has slowed as a result of the recent increase in the interest rate environment. We expect interest rates to continue to rise in 2023 and anticipate a shift of customers moving back to certificates of deposit products.
We have experienced significant growth in certificates of deposit accounts during 2023 as a result of increased interest rates. We expect interest rates on deposits to continue to rise into 2024 due to competitive pressures, and anticipate a continuation in the shift of customers moving to higher interest earning products.
Net income and earnings per common share for the same period of 2021 were $19,499 and $2.48, respectively. Net interest income increased $7,780, or 14.76%, during 2022 compared to 2021.
Net income and earnings per common share for the same period of 2022 were $22,238 and $2.95, respectively. Net interest income decreased $2,537, or 4.19%, during 2023 compared to 2022. Rising interest rates and growth in core loans led to a $13,833, or 21.02%, increase in gross interest income during 2023 compared to 2022.
Cash levels decreased significantly during 2022 as a result of the purchase of AFS securities. These purchases were funded through deposit growth and a decline in loans during 2022. 27 Table of Contents AFS securities The primary objective of our investing activities is to manage our overall exposure to changes in interest rates.
Cash levels declined slightly during 2023 driven by funding for loan growth. 26 Table of Contents AFS securities The primary objective of our investing activities is to manage our overall exposure to changes in interest rates. Secondary considerations include ensuring ample access to liquidity, generating returns, and providing current income.
Average Yield / Rate for the Three-Month Periods Ended: December 31 2022 September 30 2022 June 30 2022 March 31 2022 December 31 2021 Total earning assets 3.77 % 3.53 % 3.41 % 3.13 % 3.19 % Total interest bearing liabilities 0.49 % 0.35 % 0.34 % 0.37 % 0.45 % Net yield on interest earning assets (FTE) 3.43 % 3.28 % 3.16 % 2.86 % 2.86 % 18 Table of Contents Quarter to Date Net Interest Income (FTE) December 31 2022 September 30 2022 June 30 2022 March 31 2022 December 31 2021 Total interest income (FTE) $ 18,183 $ 17,276 $ 16,373 $ 15,022 $ 15,246 Total interest expense 1,643 1,216 1,175 1,283 1,567 Net interest income (FTE) $ 16,540 $ 16,060 $ 15,198 $ 13,739 $ 13,679 Allowance for Loan and Lease Losses The viability of any financial institution is ultimately determined by its management of credit risk.
Average Yield / Rate for the Three-Month Periods Ended: December 31 2023 September 30 2023 June 30 2023 March 31 2023 December 31 2022 Total earning assets 4.38 % 4.30 % 4.11 % 3.89 % 3.77 % Total interest bearing liabilities 2.13 % 1.79 % 1.41 % 0.95 % 0.49 % Net yield on interest earning assets (FTE) 2.85 % 3.02 % 3.11 % 3.22 % 3.43 % 19 Table of Contents Quarter to Date Net Interest Income (FTE) December 31 2023 September 30 2023 June 30 2023 March 31 2023 December 31 2022 Total interest income (FTE) $ 21,302 $ 20,735 $ 19,750 $ 18,867 $ 18,183 Total interest expense 7,444 6,183 4,816 3,244 1,643 Net interest income (FTE) $ 13,858 $ 14,552 $ 14,934 $ 15,623 $ 16,540 Past Due and Nonaccrual Loans Fluctuations in past due and nonaccrual loans can have a significant impact on the ACL.
Treasury $ — — $ 208,701 0.98 $ — — $ — — $ — — States and political subdivisions 19,666 3.47 42,778 2.69 20,575 3.19 34,493 3.57 — — Mortgage-backed securities — — — — — — — — 39,070 2.34 Collateralized mortgage obligations — — — — — — — — 205,728 2.87 Auction rate money market preferred — — — — — — — — 2,342 2.79 Corporate — — — — 7,128 3.78 — — — — Total $ 19,666 3.47 $ 251,479 0.31 $ 27,703 3.34 $ 34,493 3.57 $ 247,140 2.79 28 Table of Contents Loans Loans are the largest component of earning assets.
Treasury $ — — $ 214,801 0.98 $ — — $ — — $ — — States and political subdivisions 15,907 3.65 28,197 3.13 19,450 2.93 29,322 3.58 — — Mortgage-backed securities — — — — — — — — 32,815 2.36 Collateralized mortgage obligations — — — — — — — — 177,775 2.91 Auction rate money market preferred — — — — — — — — 2,931 7.78 Corporate — — — — 6,950 3.78 — — — — Total $ 15,907 3.65 $ 242,998 0.27 $ 26,400 3.15 $ 29,322 3.58 $ 213,521 2.90 27 Table of Contents Loans Loans are the largest component of earning assets.
However, based on balance sheet strategies, excess funds above what is required to retire future maturities of higher-cost funding sources was prudently deployed to purchase AFS securities in future periods. The following is a schedule of the carrying value of AFS securities as of December 31: 2022 2021 2020 U.S.
The following is a schedule of the carrying value of AFS securities as of December 31: 2023 2022 2021 U.S.
The provision for loan losses during the year ended December 31, 2022 was $483, compared to a net provision reversal of $518 for the same period in 2021. During 2020, increased economic and environmental risk factors, predominantly driven by COVID-19, drove a significant increase in the ALLL and provision expense.
Conversely, rising interest rates on deposits and an increase in borrowings led to a $16,370 increase in interest expense for the year ended December 31, 2023 when compared to the same period in 2022. The provision for credit losses during the year ended December 31, 2023 was $629, compared to $483 for the same period in 2022.
Despite strong credit quality, the ALLL and provision for loan losses increased during 2022 as a result of core loan growth and economic related risk factors. Noninterest income decreased $156 during 2022 compared to the same period in 2021. Gain on sale of mortgages decreased $1,063, as residential mortgage originations sold in the secondary market declined.
Noninterest income increased $161 during 2023 compared to the same period in 2022. This increase was driven by wealth management fees and ATM and debit card fee income, offset by a decrease in OMSR income and gain on sale of loans, as residential mortgages sold to the secondary market declined.
Total deposits were $1,744,275 as of December 31, 2022, which was an increase of $33,936 since December 31, 2021. A majority of this growth was in the form of demand deposits. All regulatory capital ratios for the Bank exceeded the minimum thresholds to be considered a "well capitalized" institution.
Total deposits were $1,723,695 as of December 31, 2023, declining $20,580, or 1.2%, during the year as competition for deposits remained strong throughout 2023. All regulatory capital ratios for the Bank exceeded the minimum thresholds to be considered a "well capitalized" institution. Our securities portfolio decreased $52,333 during 2023, predominantly due to maturities and principal paydowns.
Removed
While PPP loan fees declined, rising interest rates and growth in core loans and AFS securities led to a $5,685 or 9.46% increase in gross interest income during 2022 compared to 2021.
Added
Noninterest expenses increased $2,490 in 2023, when compared to the same period in 2022, and was primarily a result of increased compensation, equipment expense, other losses, and FDIC insurance premiums. As of December 31, 2023, total assets and assets under management were $2,058,968 and $2,948,751, respectively.
Removed
We continued to benefit from the significant reduction in higher-cost borrowings as interest expense on deposits and borrowings decreased $2,095, or 28.26%, for the year ended December 31, 2022 when compared to the same period in 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. The information presented in the section captioned “Market Risk” in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference. 35 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk. The information presented in the section captioned “Market Risk” in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference. 33 Table of Contents

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