0000842517 false 2020 Q3 12/31 15,000,000 15,000,000 8,007,901 7,910,804 8,007,901 7,910,804 41,307 27,069 0.81 0.78———————P1D 33,375 31,020 21 21 21 21 20 40 20 40 25 50 20 30 20 40 25 50 40 30 20 20——90 90 0000842517 2020-01-01 2020-09-30 xbrli:shares 0000842517 2020-10-27 iso4217:USD 0000842517 2020-09-30 0000842517 2019-12-31 0000842517 2020-07-01 2020-09-30 0000842517 2019-07-01 2019-09-30 0000842517 2019-01-01 2019-09-30 iso4217:USD xbrli:shares 0000842517 us-gaap:CommonStockMember 2018-12-31 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2018-12-31 0000842517 us-gaap:RetainedEarningsMember 2018-12-31 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000842517 2018-12-31 0000842517 us-gaap:RetainedEarningsMember 2019-01-01 2019-09-30 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-09-30 0000842517 us-gaap:CommonStockMember 2019-01-01 2019-09-30 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2019-01-01 2019-09-30 0000842517 us-gaap:CommonStockMember 2019-09-30 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2019-09-30 0000842517 us-gaap:RetainedEarningsMember 2019-09-30 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000842517 2019-09-30 0000842517 us-gaap:CommonStockMember 2019-12-31 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2019-12-31 0000842517 us-gaap:RetainedEarningsMember 2019-12-31 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000842517 us-gaap:RetainedEarningsMember 2020-01-01 2020-09-30 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommonStockMember 2020-01-01 2020-09-30 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommonStockMember 2020-09-30 0000842517 us-gaap:DeferredCompensationShareBasedPaymentsMember 2020-09-30 0000842517 us-gaap:RetainedEarningsMember 2020-09-30 0000842517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember 2020-09-30 0000842517 us-gaap:AuctionRatePreferredSecuritiesMember 2020-09-30 0000842517 us-gaap:MortgageBackedSecuritiesMember 2020-09-30 0000842517 us-gaap:CollateralizedMortgageObligationsMember 2020-09-30 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000842517 us-gaap:AuctionRatePreferredSecuritiesMember 2019-12-31 0000842517 us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000842517 us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 isba:Securities 0000842517 isba:CommercialAgriculturalandResidentialPortfolioSegmentsMember 2020-01-01 2020-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 xbrli:pure 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember us-gaap:CustomerConcentrationRiskMember srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:CommercialAdvancestoMortgageBrokersSegmentMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember 2020-01-01 2020-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:ResidentialPrivatelyInsuredFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember us-gaap:ConsumerPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2020-06-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2020-06-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2020-06-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2020-06-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2020-06-30 0000842517 2020-06-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2020-07-01 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2019-12-31 0000842517 us-gaap:CommercialPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2019-06-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2019-06-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2019-06-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2019-06-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2019-06-30 0000842517 2019-06-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2019-07-01 2019-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2019-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2019-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2019-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2019-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2019-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember 2018-12-31 0000842517 isba:AgriculturalPortfolioSegmentMember 2018-12-31 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2018-12-31 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2018-12-31 0000842517 us-gaap:CommercialPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:AgriculturalPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 us-gaap:UnallocatedFinancingReceivablesMember 2019-01-01 2019-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:ExcellentRatingMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:ExcellentRatingMember 2020-09-30 0000842517 isba:HighQualityRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:HighQualityRatingMember 2020-09-30 0000842517 isba:HighQualityRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:HighQualityRatingMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:HighQualityRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:HighQualityRatingMember 2020-09-30 0000842517 isba:HighQualityRatingMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:HighQualityRatingMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialOtherPortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalOtherPortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:LowSatisfactoryRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2020-09-30 0000842517 isba:LowSatisfactoryRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:LowSatisfactoryRatingMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:LowSatisfactoryRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2020-09-30 0000842517 isba:LowSatisfactoryRatingMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:CommercialOtherPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalOtherPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SpecialMentionMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SubstandardMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:SubstandardMember 2020-09-30 0000842517 us-gaap:SubstandardMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 us-gaap:SubstandardMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:SubstandardMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:SubstandardMember 2020-09-30 0000842517 us-gaap:SubstandardMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember us-gaap:SubstandardMember 2020-09-30 0000842517 isba:VulnerableRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:VulnerableRatingMember 2020-09-30 0000842517 isba:VulnerableRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:VulnerableRatingMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:VulnerableRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:VulnerableRatingMember 2020-09-30 0000842517 isba:VulnerableRatingMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:VulnerableRatingMember 2020-09-30 0000842517 us-gaap:DoubtfulMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:CommercialOtherPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:AgriculturalOtherPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:DoubtfulMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:LossMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:LossMember 2020-09-30 0000842517 isba:LossMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:LossMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:LossMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:LossMember 2020-09-30 0000842517 isba:LossMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:LossMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 us-gaap:CommercialPortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:ExcellentRatingMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:ExcellentRatingMember 2019-12-31 0000842517 isba:HighQualityRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:HighQualityRatingMember 2019-12-31 0000842517 isba:HighQualityRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:HighQualityRatingMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:HighQualityRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:HighQualityRatingMember 2019-12-31 0000842517 isba:HighQualityRatingMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:HighQualityRatingMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialOtherPortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalOtherPortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:HighSatisfactoryRatingMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:LowSatisfactoryRatingMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:CommercialOtherPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalOtherPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SpecialMentionMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SubstandardMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:SubstandardMember 2019-12-31 0000842517 us-gaap:SubstandardMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 us-gaap:SubstandardMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:SubstandardMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:SubstandardMember 2019-12-31 0000842517 us-gaap:SubstandardMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember us-gaap:SubstandardMember 2019-12-31 0000842517 isba:VulnerableRatingMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:VulnerableRatingMember 2019-12-31 0000842517 isba:VulnerableRatingMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:VulnerableRatingMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:VulnerableRatingMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:VulnerableRatingMember 2019-12-31 0000842517 isba:VulnerableRatingMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember isba:VulnerableRatingMember 2019-12-31 0000842517 us-gaap:DoubtfulMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:CommercialOtherPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:AgriculturalOtherPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:DoubtfulMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:LossMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember isba:LossMember 2019-12-31 0000842517 isba:LossMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:LossMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:LossMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember isba:LossMember 2019-12-31 0000842517 isba:LossMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:LossMember isba:CommercialAndAgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAndAgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:LowSatisfactoryRatingMember srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:LowSatisfactoryRatingMember 2020-01-01 2020-09-30 0000842517 us-gaap:SpecialMentionMember srt:MinimumMember 2020-01-01 2020-09-30 0000842517 us-gaap:SpecialMentionMember srt:MaximumMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:CommercialOtherPortfolioSegmentMember 2020-09-30 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2020-09-30 0000842517 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:CommercialPortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalRealEstatePortfolioSegmentMember 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalOtherPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalPortfolioSegmentMember 2020-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialSeniorLiensFinancingReceivableMember 2020-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2020-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialJuniorLiensFinancingReceivableMember 2020-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2020-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2020-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2020-09-30 0000842517 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:ResidentialPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember isba:ConsumerSecuredFinancingReceivableMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ConsumerSecuredFinancingReceivableMember 2020-09-30 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2020-09-30 0000842517 isba:ConsumerUnsecuredFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ConsumerUnsecuredFinancingReceivableMember 2020-09-30 0000842517 isba:ConsumerUnsecuredFinancingReceivableMember 2020-09-30 0000842517 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:ConsumerPortfolioSegmentMember 2020-09-30 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember 2020-09-30 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:CommercialOtherPortfolioSegmentMember 2019-12-31 0000842517 isba:CommercialAdvancestoMortgageBrokersSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:CommercialAdvancestoMortgageBrokersSegmentMember 2019-12-31 0000842517 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:CommercialPortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalRealEstatePortfolioSegmentMember 2019-12-31 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalOtherPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:AgriculturalPortfolioSegmentMember 2019-12-31 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialSeniorLiensFinancingReceivableMember 2019-12-31 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2019-12-31 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialJuniorLiensFinancingReceivableMember 2019-12-31 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2019-12-31 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2019-12-31 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2019-12-31 0000842517 us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:ResidentialPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember isba:ConsumerSecuredFinancingReceivableMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ConsumerSecuredFinancingReceivableMember 2019-12-31 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2019-12-31 0000842517 isba:ConsumerUnsecuredFinancingReceivableMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember isba:ConsumerUnsecuredFinancingReceivableMember 2019-12-31 0000842517 isba:ConsumerUnsecuredFinancingReceivableMember 2019-12-31 0000842517 us-gaap:ConsumerPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember us-gaap:ConsumerPortfolioSegmentMember 2019-12-31 0000842517 us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000842517 us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2020-07-01 2020-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2019-07-01 2019-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2020-07-01 2020-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2019-07-01 2019-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2020-07-01 2020-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2019-07-01 2019-09-30 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2020-07-01 2020-09-30 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2019-07-01 2019-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:AgriculturalRealEstatePortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember 2019-01-01 2019-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 isba:ResidentialJuniorLiensFinancingReceivableMember 2019-01-01 2019-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 isba:ResidentialHomeEquityLineOfCreditFinancingReceivableMember 2019-01-01 2019-09-30 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 isba:ConsumerSecuredFinancingReceivableMember 2019-01-01 2019-09-30 isba:loan 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2020-07-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:CommercialOtherPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2019-07-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:CommercialOtherPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2020-07-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:AgriculturalOtherPortfolioSegmentMember 2020-07-01 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2019-07-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:AgriculturalOtherPortfolioSegmentMember 2019-07-01 2019-09-30 0000842517 us-gaap:InterestRateBelowMarketReductionMember 2020-07-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember 2020-07-01 2020-09-30 0000842517 us-gaap:InterestRateBelowMarketReductionMember 2019-07-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember 2019-07-01 2019-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2020-01-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:CommercialOtherPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:CommercialOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2019-01-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:CommercialOtherPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2020-01-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:AgriculturalOtherPortfolioSegmentMember 2020-01-01 2020-09-30 0000842517 isba:AgriculturalOtherPortfolioSegmentMember us-gaap:InterestRateBelowMarketReductionMember 2019-01-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:AgriculturalOtherPortfolioSegmentMember 2019-01-01 2019-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember us-gaap:InterestRateBelowMarketReductionMember 2020-01-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:ResidentialSeniorLiensFinancingReceivableMember 2020-01-01 2020-09-30 0000842517 isba:ResidentialSeniorLiensFinancingReceivableMember us-gaap:InterestRateBelowMarketReductionMember 2019-01-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember isba:ResidentialSeniorLiensFinancingReceivableMember 2019-01-01 2019-09-30 0000842517 us-gaap:InterestRateBelowMarketReductionMember 2020-01-01 2020-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember 2020-01-01 2020-09-30 0000842517 us-gaap:InterestRateBelowMarketReductionMember 2019-01-01 2019-09-30 0000842517 isba:BelowMarketInterestRateAndExtensionOfAmortizationPeriodMember 2019-01-01 2019-09-30 isba:NumberofLoan 0000842517 us-gaap:FederalHomeLoanBankAdvancesMember 2020-09-30 0000842517 us-gaap:FederalHomeLoanBankAdvancesMember 2019-12-31 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2020-09-30 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2020Member 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2020Member 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2021Member 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2021Member 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesVariableRateDue2021MemberMemberMember 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesVariableRateDue2021MemberMemberMember 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2022Member 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2022Member 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2023Member 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2023Member 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2024MemberMember 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2024MemberMember 2019-12-31 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2026Member 2020-09-30 0000842517 isba:FederalHomeLoanBankAdvancesFixedRateDue2026Member 2019-12-31 0000842517 us-gaap:FederalFundsPurchasedMember srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember us-gaap:FederalFundsPurchasedMember 2020-01-01 2020-09-30 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2020-07-01 2020-09-30 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2019-07-01 2019-09-30 0000842517 us-gaap:FederalFundsPurchasedMember 2020-07-01 2020-09-30 0000842517 us-gaap:FederalFundsPurchasedMember 2019-07-01 2019-09-30 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2020-01-01 2020-09-30 0000842517 us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember 2019-01-01 2019-09-30 0000842517 us-gaap:FederalFundsPurchasedMember 2020-01-01 2020-09-30 0000842517 us-gaap:FederalFundsPurchasedMember 2019-01-01 2019-09-30 0000842517 isba:StateandLocalFundsPurchasedMember 2020-09-30 0000842517 isba:StateandLocalFundsPurchasedMember 2019-12-31 0000842517 us-gaap:MortgageBackedSecuritiesOtherMember 2020-09-30 0000842517 us-gaap:MortgageBackedSecuritiesOtherMember 2019-12-31 0000842517 us-gaap:CollateralizedMortgageObligationsMember 2020-09-30 0000842517 us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CashFlowHedgingMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:InterestRateSwapMember 2020-09-30 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CashFlowHedgingMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:InterestRateSwapMember 2020-01-01 2020-09-30 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherLiabilitiesMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:CashFlowHedgingMember us-gaap:InterestRateSwapMember 2020-09-30 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CashFlowHedgingMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:InterestRateSwapMember 2019-12-31 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CashFlowHedgingMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:InterestRateSwapMember 2019-01-01 2019-12-31 0000842517 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherAssetsMember us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:CashFlowHedgingMember us-gaap:InterestRateSwapMember 2019-12-31 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-06-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2020-06-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-06-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-06-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2019-06-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-07-01 2020-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2020-07-01 2020-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-07-01 2020-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-07-01 2019-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2019-07-01 2019-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-07-01 2019-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2020-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2019-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-12-31 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2019-12-31 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-31 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-12-31 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2018-12-31 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-01-01 2020-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2020-01-01 2020-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-01-01 2020-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-01-01 2019-09-30 0000842517 us-gaap:GainLossOnDerivativeInstrumentsMember 2019-01-01 2019-09-30 0000842517 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-09-30 0000842517 isba:AuctionRateMoneyMarketPreferredStocksMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-07-01 2020-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember isba:AvailableforsaleSecuritiesExcludingAuctionRateMoneyMarketPreferredandPreferredStocksMember 2020-07-01 2020-09-30 0000842517 isba:AuctionRateMoneyMarketPreferredStocksMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-07-01 2019-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember isba:AvailableforsaleSecuritiesExcludingAuctionRateMoneyMarketPreferredandPreferredStocksMember 2019-07-01 2019-09-30 0000842517 isba:AuctionRateMoneyMarketPreferredStocksMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2020-01-01 2020-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember isba:AvailableforsaleSecuritiesExcludingAuctionRateMoneyMarketPreferredandPreferredStocksMember 2020-01-01 2020-09-30 0000842517 isba:AuctionRateMoneyMarketPreferredStocksMember us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-01-01 2019-09-30 0000842517 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember isba:AvailableforsaleSecuritiesExcludingAuctionRateMoneyMarketPreferredandPreferredStocksMember 2019-01-01 2019-09-30 0000842517 isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:LoansReceivableCollateralizedByCashCropInventoryMember 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByLivestockMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:LoansReceivableCollateralizedByOtherInventoryMember 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:LoansReceivableCollateralizedByCashCropInventoryMember 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByLivestockMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:LoansReceivableCollateralizedByOtherInventoryMember 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-09-30 0000842517 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-09-30 0000842517 us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel3Member 2020-09-30 0000842517 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31 0000842517 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31 0000842517 us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member 2019-12-31 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:AuctionRateSecuritiesMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2020-09-30 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2020-09-30 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CollateralizedMortgageObligationsMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel1Member 2020-09-30 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2020-09-30 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel3Member 2020-09-30 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel1Member 2019-12-31 0000842517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000842517 us-gaap:FairValueMeasurementsNonrecurringMember us-gaap:FairValueInputsLevel3Member 2019-12-31 0000842517 isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member 2020-01-01 2020-09-30 0000842517 isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2019-01-01 2019-12-31 0000842517 srt:MaximumMember isba:LoansReceivableCollateralizedByRealEstateMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2019-01-01 2019-12-31 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByEquipmentMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member srt:MinimumMember 2019-01-01 2019-12-31 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember isba:LoansReceivableCollateralizedByAccountsReceivableMember us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-12-31 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:RealEstateOwnedMember 2020-01-01 2020-09-30 0000842517 srt:MaximumMember isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:RealEstateOwnedMember 2019-01-01 2019-12-31 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:RealEstateOwnedMember srt:MinimumMember 2020-01-01 2020-09-30 0000842517 isba:DiscountedAppraisalValueValuationTechniqueMember us-gaap:FairValueInputsLevel3Member isba:RealEstateOwnedMember srt:MinimumMember 2019-01-01 2019-12-31 0000842517 us-gaap:FairValueInputsLevel3Member 2019-01-01 2019-09-30 0000842517 srt:ParentCompanyMember 2020-09-30 0000842517 srt:ParentCompanyMember 2019-12-31 0000842517 srt:ParentCompanyMember 2020-07-01 2020-09-30 0000842517 srt:ParentCompanyMember 2019-07-01 2019-09-30 0000842517 srt:ParentCompanyMember 2020-01-01 2020-09-30 0000842517 srt:ParentCompanyMember 2019-01-01 2019-09-30 0000842517 srt:ParentCompanyMember 2018-12-31 0000842517 srt:ParentCompanyMember 2019-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ | Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020
or

☐ | Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the transition period from to
Commission File Number: 0-18415

Isabella Bank Corporation
(Exact name of registrant as specified in its charter)

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

(989) 772-9471
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of common shares outstanding of the registrant’s Common Stock (no par value) was 8,010,711 as of October 27, 2020.

Table of Contents
ISABELLA BANK CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Table of Contents

PART I – FINANCIAL INFORMATION |  | 4
Item 1. |  | Financial Statements |  | 4
Item 2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 37
Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk |  | 59
Item 4. |  | Controls and Procedures |  | 59
PART II – OTHER INFORMATION |  | 60
Item 1. |  | Legal Proceedings |  | 60
Item 1A. |  | Risk Factors |  | 60
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 60
Item 3. |  | Defaults Upon Senior Securities |  | 61
Item 4. |  | Mine Safety Disclosures |  | 61
Item 5. |  | Other Information |  | 61
Item 6. |  | Exhibits |  | 61
SIGNATURES |  |  |  | 62

2

Table of Contents
Forward Looking Statements
This report contains certain forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended and Rule 3b-6 promulgated thereunder. We intend such forward looking statements to be covered by the safe harbor provisions for forward looking statements contained in the Private Securities Litigation Reform Act of 1995, and are included in this statement for purposes of these safe harbor provisions. Forward looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”, “project”, or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects include, but are not limited to, changes in: interest rates, general economic conditions, federal or state tax laws, monetary and fiscal policy, a health crisis, the quality or composition of the loan or investment portfolio, demand for loan products, fluctuation in the value of collateral securing our loan portfolio, deposit flows, competition, cybersecurity risk, demand for financial services in our market area, and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements. Further information concerning our business, including additional factors that could materially affect our financial results, is included in our filings with the SEC.
Glossary of Acronyms and Abbreviations
The acronyms and abbreviations identified below may be used throughout this Quarterly Report on Form 10-Q or in our other SEC filings. You may find it helpful to refer back to this page while reading this report.

ACL: Allowance for credit losses |  | FTE: Fully taxable equivalent
AFS: Available-for-sale |  | GAAP: U.S. generally accepted accounting principles
ALCO: Asset-Liability Committee |  | IFRS: International Financial Reporting Standards
ALLL: Allowance for loan and lease losses |  | IRR: Interest rate risk
AOCI: Accumulated other comprehensive income |  | ISDA: International Swaps and Derivatives Association
ASC: FASB Accounting Standards Codification |  | LIBOR: London Interbank Offered Rate
ASU: FASB Accounting Standards Update |  | N/A: Not applicable
ATM: Automated teller machine |  | N/M: Not meaningful
BHC Act: Bank Holding Company Act of 1956 |  | NAV: Net asset value
CARES Act: Coronavirus Aid, Relief, and Economic Security Act |  | NSF: Non-sufficient funds
CECL: Current expected credit losses |  | OCI: Other comprehensive income (loss)
CFPB: Consumer Financial Protection Bureau |  | OMSR: Originated mortgage servicing rights
CIK: Central Index Key |  | OREO: Other real estate owned
COVID-19: Coronavirus disease 2019 |  | OTTI: Other-than-temporary impairment
CRA: Community Reinvestment Act |  | PBO: Projected benefit obligation
DIF: Deposit Insurance Fund |  | PCAOB: Public Company Accounting Oversight Board
DIFS: Department of Insurance and Financial Services |  | PPP: Paycheck Protection Program
Directors Plan: Isabella Bank Corporation and Related Companies Deferred Compensation Plan for Directors |  | Rabbi Trust: A trust established to fund our Directors Plan
Dividend Reinvestment Plan: Isabella Bank Corporation Stockholder Dividend Reinvestment Plan and Employee Stock Purchase Plan |  | RSP: Isabella Bank Corporation Restricted Stock Plan
Exchange Act: Securities Exchange Act of 1934 |  | SBA: Small Business Administration
FASB: Financial Accounting Standards Board |  | SEC: U.S. Securities and Exchange Commission
FDIC: Federal Deposit Insurance Corporation |  | SOX: Sarbanes-Oxley Act of 2002
FFIEC: Federal Financial Institutions Examinations Council |  | Tax Act: Tax Cuts and Jobs Act, enacted December 22, 2017
FRB: Federal Reserve Bank |  | TDR: Troubled debt restructuring
FHLB: Federal Home Loan Bank |  | XBRL: eXtensible Business Reporting Language
Freddie Mac: Federal Home Loan Mortgage Corporation |  | Yield Curve: U.S. Treasury Yield Curve

3

Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

| September 30 2020 |  | December 31 2019
ASSETS |  |  |
Cash and cash equivalents |  |  |
Cash and demand deposits due from banks | $ | 29,685 |  |  | $ | 20,311 |
Interest bearing balances due from banks | 136,054 |  |  | 40,261 |
Fed funds sold | 10 |  |  | — |
Total cash and cash equivalents | 165,749 |  |  | 60,572 |
AFS securities, at fair value | 363,054 |  |  | 429,839 |
Mortgage loans AFS | 4,661 |  |  | 904 |
Loans |  |  |
Commercial | 821,102 |  |  | 700,941 |
Agricultural | 102,263 |  |  | 116,920 |
Residential real estate | 304,559 |  |  | 298,569 |
Consumer | 75,384 |  |  | 70,140 |
Gross loans | 1,303,308 |  |  | 1,186,570 |
Less allowance for loan and lease losses | 9,506 |  |  | 7,939 |
Net loans | 1,293,802 |  |  | 1,178,631 |
Premises and equipment | 25,749 |  |  | 26,242 |
Corporate owned life insurance policies | 28,169 |  |  | 28,455 |
Accrued interest receivable | 8,458 |  |  | 6,501 |
Equity securities without readily determinable fair values | 21,690 |  |  | 21,629 |
Goodwill and other intangible assets | 48,341 |  |  | 48,379 |
Other assets | 12,024 |  |  | 13,046 |
TOTAL ASSETS | $ | 1,971,697 |  |  | $ | 1,814,198 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Deposits |  |  |
Noninterest bearing | $ | 353,082 |  |  | $ | 249,152 |
Interest bearing demand deposits | 287,809 |  |  | 229,865 |
Certificates of deposit under $250 and other savings | 754,409 |  |  | 739,023 |
Certificates of deposit over $250 | 99,795 |  |  | 95,811 |
Total deposits | 1,495,095 |  |  | 1,313,851 |
Borrowed funds | 238,349 |  |  | 275,999 |
Accrued interest payable and other liabilities | 15,708 |  |  | 14,166 |
Total liabilities | 1,749,152 |  |  | 1,604,016 |
Shareholders’ equity |  |  |
Common stock — no par value 15,000,000 shares authorized; issued and outstanding 8,007,901 shares (including 41,307 shares held in the Rabbi Trust) in 2020 and 7,910,804 shares (including 27,069 shares held in the Rabbi Trust) in 2019 | 142,745 |  |  | 141,069 |
Shares to be issued for deferred compensation obligations | 4,104 |  |  | 5,043 |
Retained earnings | 67,321 |  |  | 62,099 |
Accumulated other comprehensive income (loss) | 8,375 |  |  | 1,971 |
Total shareholders’ equity | 222,545 |  |  | 210,182 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,971,697 |  |  | $ | 1,814,198 |

See notes to interim condensed consolidated financial statements (unaudited).
4

Table of Contents
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands except per share amounts)

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Interest income |  |  |  |  |  |  |
Loans, including fees | $ | 13,554 |  |  | $ | 14,020 |  |  | $ | 40,105 |  |  | $ | 40,498 |
AFS securities |  |  |  |  |  |  |
Taxable | 1,071 |  |  | 1,691 |  |  | 3,912 |  |  | 5,522 |
Nontaxable | 911 |  |  | 1,151 |  |  | 2,950 |  |  | 3,611 |
Federal funds sold and other | 164 |  |  | 299 |  |  | 803 |  |  | 826 |
Total interest income | 15,700 |  |  | 17,161 |  |  | 47,770 |  |  | 50,457 |
Interest expense |  |  |  |  |  |  |
Deposits | 1,996 |  |  | 2,980 |  |  | 7,034 |  |  | 8,563 |
Borrowings | 1,207 |  |  | 1,570 |  |  | 3,933 |  |  | 4,806 |
Total interest expense | 3,203 |  |  | 4,550 |  |  | 10,967 |  |  | 13,369 |
Net interest income | 12,497 |  |  | 12,611 |  |  | 36,803 |  |  | 37,088 |
Provision for loan losses | 516 |  |  | 193 |  |  | 1,409 |  |  | 48 |
Net interest income after provision for loan losses | 11,981 |  |  | 12,418 |  |  | 35,394 |  |  | 37,040 |
Noninterest income |  |  |  |  |  |  |
Service charges and fees | 1,950 |  |  | 1,705 |  |  | 4,689 |  |  | 4,706 |
Wealth management fees | 649 |  |  | 689 |  |  | 1,877 |  |  | 2,146 |
Net gain on sale of mortgage loans | 1,036 |  |  | 199 |  |  | 1,653 |  |  | 408 |
Gains from redemption of corporate owned life insurance policies | — |  |  | — |  |  | 873 |  |  | — |
Earnings on corporate owned life insurance policies | 187 |  |  | 190 |  |  | 558 |  |  | 564 |
Other | 238 |  |  | 491 |  |  | 654 |  |  | 940 |
Total noninterest income | 4,060 |  |  | 3,274 |  |  | 10,304 |  |  | 8,764 |
Noninterest expenses |  |  |  |  |  |  |
Compensation and benefits | 6,101 |  |  | 5,971 |  |  | 17,763 |  |  | 17,650 |
Furniture and equipment | 1,426 |  |  | 1,427 |  |  | 4,318 |  |  | 4,330 |
Occupancy | 889 |  |  | 830 |  |  | 2,668 |  |  | 2,594 |
Other | 2,534 |  |  | 2,392 |  |  | 7,846 |  |  | 7,584 |
Total noninterest expenses | 10,950 |  |  | 10,620 |  |  | 32,595 |  |  | 32,158 |
Income before federal income tax expense | 5,091 |  |  | 5,072 |  |  | 13,103 |  |  | 13,646 |
Federal income tax expense | 734 |  |  | 630 |  |  | 1,495 |  |  | 1,520 |
NET INCOME | $ | 4,357 |  |  | $ | 4,442 |  |  | $ | 11,608 |  |  | $ | 12,126 |
Earnings per common share |  |  |  |  |  |  |
Basic | $ | 0.55 |  |  | $ | 0.56 |  |  | $ | 1.46 |  |  | $ | 1.53 |
Diluted | $ | 0.54 |  |  | $ | 0.55 |  |  | $ | 1.43 |  |  | $ | 1.50 |
Cash dividends per common share | $ | 0.27 |  |  | $ | 0.26 |  |  | $ | 0.81 |  |  | $ | 0.78 |

See notes to interim condensed consolidated financial statements (unaudited).
5

Table of Contents
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Net income | $ | 4,357 |  |  | $ | 4,442 |  |  | $ | 11,608 |  |  | $ | 12,126 |
Unrealized gains (losses) on AFS securities arising during the period | (66) |  |  | 1,724 |  |  | 8,304 |  |  | 12,554 |
Reclassification adjustment for net (gains) losses included in net income | — |  |  | (6) |  |  | (71) |  |  | (6) |
Tax effect (1) | 58 |  |  | (310) |  |  | (1,714) |  |  | (2,523) |
Unrealized gains (losses) on AFS securities, net of tax | (8) |  |  | 1,408 |  |  | 6,519 |  |  | 10,025 |
Unrealized gains (losses) on derivative instruments arising during the period | 20 |  |  | (37) |  |  | (145) |  |  | (245) |
Tax effect (1) | (4) |  |  | 8 |  |  | 30 |  |  | 51 |
Unrealized gains (losses) on derivative instruments, net of tax | 16 |  |  | (29) |  |  | (115) |  |  | (194) |
Other comprehensive income (loss), net of tax | 8 |  |  | 1,379 |  |  | 6,404 |  |  | 9,831 |
Comprehensive income (loss) | $ | 4,365 |  |  | $ | 5,821 |  |  | $ | 18,012 |  |  | $ | 21,957 |

(1)See “Note 10 – Accumulated Other Comprehensive Income” for tax effect reconciliation.
See notes to interim condensed consolidated financial statements (unaudited).
6

Table of Contents
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(Dollars in thousands except per share amounts)

| Common Stock |  |  |  |  |  |  |  |
| Common Shares Outstanding |  | Amount |  | Common Shares to be Issued for Deferred Compensation Obligations |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Totals
Balance, January 1, 2019 | 7,870,969 |  |  | $ | 140,416 |  |  | $ | 5,431 |  |  | $ | 57,357 |  |  | $ | (7,685) |  |  | $ | 195,519 |
Comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 12,126 |  |  | 9,831 |  |  | 21,957 |
Issuance of common stock | 159,521 |  |  | 3,672 |  |  | — |  |  | — |  |  | — |  |  | 3,672 |
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations | — |  |  | 268 |  |  | (268) |  |  | — |  |  | — |  |  | — |
Share-based payment awards under equity compensation plan | — |  |  | — |  |  | 415 |  |  | — |  |  | — |  |  | 415 |
Common stock purchased for deferred compensation obligations | — |  |  | (898) |  |  | — |  |  | — |  |  | — |  |  | (898) |
Common stock repurchased pursuant to publicly announced repurchase plan | (92,256) |  |  | (2,140) |  |  | — |  |  | — |  |  | — |  |  | (2,140) |
Cash dividends paid ($0.78 per common share) | — |  |  | — |  |  | — |  |  | (6,149) |  |  | — |  |  | (6,149) |
Balance, September 30, 2019 | 7,938,234 |  |  | $ | 141,318 |  |  | $ | 5,578 |  |  | $ | 63,334 |  |  | $ | 2,146 |  |  | $ | 212,376 |
Balance, January 1, 2020 | 7,910,804 |  |  | $ | 141,069 |  |  | $ | 5,043 |  |  | $ | 62,099 |  |  | $ | 1,971 |  |  | $ | 210,182 |
Comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 11,608 |  |  | 6,404 |  |  | 18,012 |
Issuance of common stock | 184,144 |  |  | 3,274 |  |  | — |  |  | — |  |  | — |  |  | 3,274 |
Common stock transferred from the Rabbi Trust to satisfy deferred compensation obligations | — |  |  | 1,273 |  |  | (1,273) |  |  | — |  |  | — |  |  | — |
Share-based payment awards under equity compensation plan | — |  |  | — |  |  | 334 |  |  | — |  |  | — |  |  | 334 |
Common stock purchased for deferred compensation obligations | — |  |  | (1,252) |  |  | — |  |  | — |  |  | — |  |  | (1,252) |
Common stock repurchased pursuant to publicly announced repurchase plan | (87,047) |  |  | (1,619) |  |  | — |  |  | — |  |  | — |  |  | (1,619) |
Cash dividends paid ($0.81 per common share) | — |  |  | — |  |  | — |  |  | (6,386) |  |  | — |  |  | (6,386) |
Balance, September 30, 2020 | 8,007,901 |  |  | $ | 142,745 |  |  | $ | 4,104 |  |  | $ | 67,321 |  |  | $ | 8,375 |  |  | $ | 222,545 |

See notes to interim condensed consolidated financial statements (unaudited).
7

Table of Contents
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

| Nine Months Ended September 30
| 2020 |  | 2019
OPERATING ACTIVITIES |  |  |
Net income | $ | 11,608 |  |  | $ | 12,126 |
Reconciliation of net income to net cash provided by operating activities: |  |  |
Undistributed earnings of equity securities without readily determinable fair values | (61) |  |  | (182) |
Provision for loan losses | 1,409 |  |  | 48 |
Depreciation | 1,958 |  |  | 2,211 |
Amortization of OMSR | 386 |  |  | 201 |
Amortization of acquisition intangibles | 38 |  |  | 55 |
Net amortization of AFS securities | 1,539 |  |  | 1,344 |
Net gains on sale of AFS securities | (71) |  |  | (6) |
Net gain on sale of mortgage loans | (1,653) |  |  | (408) |
OMSR impairment loss | 316 |  |  | 81 |
Net gains on foreclosed assets | (43) |  |  | (213) |
Increase in cash value of corporate owned life insurance policies, net of expenses | (521) |  |  | (528) |
Gains from redemption of corporate owned life insurance policies | (873) |  |  | — |
Share-based payment awards under equity compensation plan | 334 |  |  | 415 |
Origination of loans held-for-sale | (82,464) |  |  | (26,514) |
Proceeds from loan sales | 80,360 |  |  | 25,368 |
Net changes in operating assets and liabilities which provided (used) cash: |  |  |
Accrued interest receivable | (1,957) |  |  | (432) |
Other assets | 261 |  |  | 1,966 |
Accrued interest payable and other liabilities | 370 |  |  | 1,551 |
Net cash provided by (used in) operating activities | 10,936 |  |  | 17,083 |
INVESTING ACTIVITIES |  |  |
Activity in AFS securities |  |  |
Sales | 26,855 |  |  | 33,840 |
Maturities, calls, and principal payments | 72,013 |  |  | 61,170 |
Purchases | (25,318) |  |  | (34,495) |
Net loan principal (originations) collections | (116,878) |  |  | (63,900) |
Proceeds from sales of foreclosed assets | 146 |  |  | 649 |
Purchases of premises and equipment | (1,465) |  |  | (746) |
Purchases of corporate owned life insurance policies | (625) |  |  | — |
Proceeds from redemption of corporate owned life insurance policies | 2,305 |  |  | — |
Funding of low income housing tax credit investments | (403) |  |  | (393) |
Net cash provided by (used in) investing activities | (43,370) |  |  | (3,875) |

8

Table of Contents
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)

| Nine Months Ended September 30
| 2020 |  | 2019
FINANCING ACTIVITIES |  |  |
Net increase (decrease) in deposits | 181,244 |  |  | 16,080 |
Net increase (decrease) in borrowed funds | (37,650) |  |  | (62,913) |
Cash dividends paid on common stock | (6,386) |  |  | (6,149) |
Proceeds from issuance of common stock | 3,274 |  |  | 3,672 |
Common stock repurchased | (1,619) |  |  | (2,140) |
Common stock purchased for deferred compensation obligations | (1,252) |  |  | (898) |
Net cash provided by (used in) financing activities | 137,611 |  |  | (52,348) |
Increase (decrease) in cash and cash equivalents | 105,177 |  |  | (39,140) |
Cash and cash equivalents at beginning of period | 60,572 |  |  | 73,471 |
Cash and cash equivalents at end of period | $ | 165,749 |  |  | $ | 34,331 |
SUPPLEMENTAL CASH FLOWS INFORMATION: |  |  |
Interest paid | $ | 11,164 |  |  | $ | 13,325 |
Income taxes paid | $ | 556 |  |  | $ | — |
SUPPLEMENTAL NONCASH INFORMATION: |  |  |
Transfers of loans to foreclosed assets | $ | 298 |  |  | $ | 722 |

See notes to interim condensed consolidated financial statements (unaudited).
9

Table of Contents
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands except per share amounts)
Note 1 – Basis of Presentation
As used in these notes, as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations, references to the “Corporation”, “Isabella”, “we”, “our”, “us”, and similar terms refer to the consolidated entity consisting of Isabella Bank Corporation and its subsidiary. References to Isabella Bank or the “Bank” refer to Isabella Bank Corporation’s subsidiary, Isabella Bank.
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to our Annual Report on Form 10-K for the year ended December 31, 2019.
Our accounting policies are materially the same as those discussed in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Reclassifications: Certain amounts reported in the interim 2019 consolidated financial statements have been reclassified to conform with the 2020 presentation.
Note 2 – Accounting Standards Updates
Recently Adopted
ASU No. 2018-13: “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”
In August 2018, ASU No. 2018-13 was issued and provided an updated framework related to fair value disclosures. For entities required to make disclosures about recurring or nonrecurring fair value measurements, the update provides disclosure modifications which include the removal, modification and addition of specific disclosure requirements.
The new authoritative guidance was effective January 1, 2020 and did not have a significant impact on our financial statement disclosures.
ASU No. 2018-15: “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract”
In August 2018, ASU No. 2018-15 was issued and provided guidance on the accounting for implementation, setup, and
other upfront costs (collectively referred to as implementation costs) for entities that are a customer in a hosting arrangement that is a service contract. The guidance also provided clarification on requirements to capitalize implementation costs and the required accounting for expenses related to capitalization of implementation costs.
The new authoritative guidance was effective January 1, 2020. We will review arrangements entered into prospectively. These changes are not expected to have a significant impact on our operating results or financial statement disclosures.
Pending
ASU No. 2016-13: “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, as amended
In June 2016, ASU No. 2016-13 was issued and updated the measurement for credit losses for AFS debt securities and assets measured at amortized cost which include loans, trade receivables, and any other financial assets with the contractual right to receive cash. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. Under the incurred loss approach, entities are limited to a probable initial recognition threshold when credit losses are measured; an entity generally only considers past events and current conditions in measuring the incurred loss.
10

Table of Contents
Under the new guidance, the incurred loss impairment methodology is replaced with a methodology that reflects current expected credit losses (CECL). This methodology requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances which applies to assets measured either collectively or individually.
The update allows an entity to revert to historical loss information that is reflective of the contractual term (considering the effect of prepayments) for periods that are beyond the time frame for which the entity is able to develop reasonable and supportable forecasts. In addition, the disclosures of credit quality indicators in relation to the amortized cost of financing receivables, a current disclosure requirement, are further disaggregated by year of origination (or vintage). The vintage information will be useful for financial statement users to better assess changes in underwriting standards and credit quality trends in asset portfolios over time and the effect of those changes on credit losses.
Overall, the update will allow entities the ability to measure expected credit losses without the restriction of incurred or probable losses that exist under current GAAP. For users of the financial statements, the update requires disclosure of decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new authoritative guidance was originally effective for interim and annual periods beginning after December 15, 2019. Effective October 16, 2019, the FASB approved and issued changes to the implementation date of this guidance for some filers. As a smaller reporting company, as defined by the SEC, our implementation date was delayed from January 1, 2020 to January 1, 2023. Early adoption continues to be permissible under the revised implementation date; currently we have no plans for early adoption. This guidance may have a significant impact on the results of our operations and financial statement disclosures as well as that of the banking industry as a whole.
We have invested a considerable amount of effort toward this guidance and will continue to invest considerable effort until our implementation date. An internal committee was formed and is accountable for timely and accurate adoption of the guidance. A service provider that has focused on the ALLL for more than 10 years and serves hundreds of financial institutions has been engaged to provide us with education, advisory, and software solutions exclusively related to the ACL. We will run parallel processes which will help to ensure we are ready to calculate, review, and report the ACL by the required implementation date.
ASU No. 2018-14: “Compensation - Retirement Benefits - Defined Pension Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans”
In August 2018, ASU No. 2018-14 was issued and provided an updated framework related to defined benefit plans. For employers that sponsor defined benefit pension or other postretirement plans, the update provides disclosure modifications which include the removal of six specific requirements, the addition of two specific requirements and clarification to existing requirements.
Disclosure additions include 1) the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; and 2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Clarification items relate to 1) the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets; and 2) the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.
The new authoritative guidance is effective for fiscal years ending after December 15, 2020, with early adoption permitted, and will likely impact our financial statement disclosures.
11

Table of Contents
Note 3 – AFS Securities
The amortized cost and fair value of AFS securities, with gross unrealized gains and losses, are as follows at:

| September 30, 2020
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
States and political subdivisions | $ | 142,547 |  |  | $ | 5,854 |  |  | $ | — |  |  | $ | 148,401 |
Auction rate money market preferred | 3,200 |  |  | — |  |  | 6 |  |  | 3,194 |
Mortgage-backed securities | 100,984 |  |  | 3,181 |  |  | — |  |  | 104,165 |
Collateralized mortgage obligations | 102,231 |  |  | 5,063 |  |  | — |  |  | 107,294 |
Total | $ | 348,962 |  |  | $ | 14,098 |  |  | $ | 6 |  |  | $ | 363,054 |

| December 31, 2019
| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
States and political subdivisions | $ | 165,005 |  |  | $ | 4,747 |  |  | $ | — |  |  | $ | 169,752 |
Auction rate money market preferred | 3,200 |  |  | — |  |  | 81 |  |  | 3,119 |
Mortgage-backed securities | 139,831 |  |  | 933 |  |  | 560 |  |  | 140,204 |
Collateralized mortgage obligations | 115,944 |  |  | 1,007 |  |  | 187 |  |  | 116,764 |
Total | $ | 423,980 |  |  | $ | 6,687 |  |  | $ | 828 |  |  | $ | 429,839 |

The amortized cost and fair value of AFS securities by contractual maturity at September 30, 2020 are as follows:

| Maturing |  | Securities with Variable Monthly Payments or Noncontractual Maturities |  |
| Due in One Year or Less |  | After One Year But Within Five Years |  | After Five Years But Within Ten Years |  | After Ten Years |  |  | Total
States and political subdivisions | $ | 22,709 |  |  | $ | 66,180 |  |  | $ | 27,441 |  |  | $ | 26,217 |  |  | $ | — |  |  | $ | 142,547 |
Auction rate money market preferred | — |  |  | — |  |  | — |  |  | — |  |  | 3,200 |  |  | 3,200 |
Mortgage-backed securities | — |  |  | — |  |  | — |  |  | — |  |  | 100,984 |  |  | 100,984 |
Collateralized mortgage obligations | — |  |  | — |  |  | — |  |  | — |  |  | 102,231 |  |  | 102,231 |
Total amortized cost | $ | 22,709 |  |  | $ | 66,180 |  |  | $ | 27,441 |  |  | $ | 26,217 |  |  | $ | 206,415 |  |  | $ | 348,962 |
Fair value | $ | 22,891 |  |  | $ | 68,188 |  |  | $ | 29,293 |  |  | $ | 28,029 |  |  | $ | 214,653 |  |  | $ | 363,054 |

Expected maturities for government sponsored enterprises and states and political subdivisions may differ from contractual maturities because issuers may have the right to call or prepay obligations.
As the auction rate money market preferred investments have continual call dates, they are not reported by a specific maturity group. Because of their variable monthly payments, mortgage-backed securities and collateralized mortgage obligations are not reported by a specific maturity group.
A summary of the sales activity of AFS securities was as follows for the:

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Proceeds from sales of AFS securities | $ | — |  |  | $ | 33,840 |  |  | $ | 26,855 |  |  | $ | 33,840 |
Realized gains (losses) | $ | — |  |  | $ | 6 |  |  | $ | 71 |  |  | $ | 6 |
Applicable income tax expense (benefit) | $ | — |  |  | $ | 1 |  |  | $ | 15 |  |  | $ | 1 |

12

Table of Contents
The following information pertains to AFS securities with gross unrealized losses at September 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position.

| September 30, 2020
| Less Than Twelve Months |  | Twelve Months or More |  |
| Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Total Unrealized Losses
Auction rate money market preferred | $ | — |  |  | $ | — |  |  | $ | 6 |  |  | $ | 3,194 |  |  | $ | 6 |
Number of securities in an unrealized loss position: |  |  | — |  |  |  |  | 2 |  |  | 2 |

| December 31, 2019
| Less Than Twelve Months |  | Twelve Months or More |  |
| Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Total Unrealized Losses
Auction rate money market preferred | $ | — |  |  | $ | — |  |  | $ | 81 |  |  | $ | 3,119 |  |  | $ | 81 |
Mortgage-backed securities | 3 |  |  | 3,974 |  |  | 557 |  |  | 49,701 |  |  | 560 |
Collateralized mortgage obligations | 43 |  |  | 20,262 |  |  | 144 |  |  | 13,309 |  |  | 187 |
Total | $ | 46 |  |  | $ | 24,236 |  |  | $ | 782 |  |  | $ | 66,129 |  |  | $ | 828 |
Number of securities in an unrealized loss position: |  |  | 9 |  |  |  |  | 19 |  |  | 28 |

The reduction in unrealized losses on our AFS securities portfolio resulted from recent decreases in intermediate-term and long-term benchmark interest rates.
As of September 30, 2020 and December 31, 2019, we conducted an analysis to determine whether any AFS securities currently in an unrealized loss position should be identified as other-than-temporarily impaired. Such analyses considered, among other factors, the following criteria:
•Has the value of the investment declined more than what is deemed to be reasonable based on a risk and maturity adjusted discount rate?
•Is the investment credit rating below investment grade?
•Is it probable the issuer will be unable to pay the amount when due?
•Is it more likely than not that we will have to sell the security before recovery of its cost basis?
•Has the duration of the investment been extended?
Based on our analysis, which included the criteria outlined above and the fact that we have asserted that we do not have to sell any AFS securities in an unrealized loss position, we do not believe that the values of any AFS securities are other-than-temporarily impaired as of September 30, 2020 or December 31, 2019, with the exception of one municipal bond previously identified which had no activity during the period.
13

Table of Contents
Note 4 – Loans and ALLL
We grant commercial, agricultural, residential real estate, and consumer loans to customers situated primarily in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of the borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, health care, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. A portion of loans are unsecured.
Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, and deferred fees or costs. Unless a loan has a nonaccrual status, interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate amortization method.
The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status at an earlier date if collection of principal or interest is considered doubtful.
When a loan is placed in nonaccrual status, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ALLL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status.
Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $15,000. Borrowers with direct credit needs of more than $15,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Government agency guarantee may be required. Personal guarantees and/or life insurance beneficiary assignments are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports.
We entered into a mortgage purchase program in 2016 with a financial institution where we participate in advances to mortgage brokers (“advances”). The mortgage brokers originate residential mortgage loans with the intent to sell them on the secondary market. We participate in the advance to the mortgage broker, which is secured by the underlying mortgage loan, until it is ultimately sold on the secondary market. As such, the average life of each participated advance is approximately 20-30 days. Funds from the sale of the loan are used to pay off our participation in the advance to the mortgage broker. We classify these advances as commercial loans and include the outstanding balance in commercial loans on our consolidated balance sheets. Under the participation agreement, we committed to a maximum outstanding aggregate amount of $80,000. The difference between our outstanding balance and the maximum outstanding aggregate amount is classified as “Unfunded commitments under lines of credit” in the “Contractual Obligations and Loan Commitments” section of the Management's Discussion and Analysis of Financial Condition and Results of Operations of this report.
We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac.
Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees.
14

Table of Contents
Underwriting criteria for originated residential real estate loans generally include:
•Evaluation of the borrower’s ability to make monthly payments.
•Evaluation of the value of the property securing the loan.
•Ensuring the payment of principal, interest, taxes, and hazard insurance does not exceed 28% of a borrower’s gross income.
•Ensuring all debt servicing does not exceed 40% of income.
•Verification of acceptable credit reports.
•Verification of employment, income, and financial information.
Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $1,000 require the approval of our Internal Loan Committee, the Executive Loan Committee, the Board of Directors’ Loan Committee, or the Board of Directors.
Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.
The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Full or partial loan balances are charged against the ALLL when we believe uncollectability is probable. Subsequent recoveries, if any, are credited to the ALLL.
The ALLL is evaluated on a regular basis for appropriateness. Our periodic review of the collectability of a loan considers historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The primary factors behind the determination of the level of the ALLL are specific allocations for impaired loans, historical loss percentages, as well as unallocated components. Specific allocations for impaired loans are primarily determined based on the difference between the loan’s outstanding balance and the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Historical loss allocations are calculated at the loan class and segment levels based on a migration analysis of the loan portfolio, with the exception of advances to mortgage brokers, over the preceding five years. With no historical losses on advances to mortgage brokers, there is no allocation related to this portfolio. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
While we have experienced fluctuations in credit quality indicators in recent periods, credit quality remained strong at September 30, 2020. However, the COVID-19 pandemic led to temporary and some permanent closures of businesses throughout the communities in which we serve, which also led to increased unemployment. Therefore, we increased the ALLL during the first nine months of 2020 to account for inherent risk of probable losses within the loan portfolio as of September 30, 2020. We continue to monitor the economic impact from COVID-19 as it relates to credit risk to ensure the ALLL is appropriate.
Summaries of the ALLL and the recorded investment in loans by segments follows:

| Allowance for Loan Losses
| Three Months Ended September 30, 2020
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
July 1, 2020 | $ | 2,121 |  |  | $ | 356 |  |  | $ | 1,193 |  |  | $ | 825 |  |  | $ | 4,382 |  |  | $ | 8,877 |
Charge-offs | (2) |  |  | — |  |  | (13) |  |  | (31) |  |  | — |  |  | (46) |
Recoveries | 81 |  |  | 2 |  |  | 36 |  |  | 40 |  |  | — |  |  | 159 |
Provision for loan losses | (255) |  |  | (16) |  |  | 90 |  |  | 21 |  |  | 676 |  |  | 516 |
September 30, 2020 | $ | 1,945 |  |  | $ | 342 |  |  | $ | 1,306 |  |  | $ | 855 |  |  | $ | 5,058 |  |  | $ | 9,506 |

15

Table of Contents

| Allowance for Loan Losses
| Nine Months Ended September 30, 2020
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
January 1, 2020 | $ | 1,914 |  |  | $ | 634 |  |  | $ | 2,047 |  |  | $ | 922 |  |  | $ | 2,422 |  |  | $ | 7,939 |
Charge-offs | (7) |  |  | (22) |  |  | (28) |  |  | (213) |  |  | — |  |  | (270) |
Recoveries | 133 |  |  | 37 |  |  | 102 |  |  | 156 |  |  | — |  |  | 428 |
Provision for loan losses | (95) |  |  | (307) |  |  | (815) |  |  | (10) |  |  | 2,636 |  |  | 1,409 |
September 30, 2020 | $ | 1,945 |  |  | $ | 342 |  |  | $ | 1,306 |  |  | $ | 855 |  |  | $ | 5,058 |  |  | $ | 9,506 |

| Allowance for Loan Losses and Recorded Investment in Loans
| September 30, 2020
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
ALLL |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 59 |  |  | $ | 67 |  |  | $ | 743 |  |  | $ | — |  |  | $ | — |  |  | $ | 869 |
Collectively evaluated for impairment | 1,886 |  |  | 275 |  |  | 563 |  |  | 855 |  |  | 5,058 |  |  | 8,637 |
Total | $ | 1,945 |  |  | $ | 342 |  |  | $ | 1,306 |  |  | $ | 855 |  |  | $ | 5,058 |  |  | $ | 9,506 |
Loans |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 11,351 |  |  | $ | 12,903 |  |  | $ | 4,385 |  |  | $ | — |  |  |  |  | $ | 28,639 |
Collectively evaluated for impairment | 809,751 |  |  | 89,360 |  |  | 300,174 |  |  | 75,384 |  |  |  |  | 1,274,669 |
Total | $ | 821,102 |  |  | $ | 102,263 |  |  | $ | 304,559 |  |  | $ | 75,384 |  |  |  |  | $ | 1,303,308 |

| Allowance for Loan Losses
| Three Months Ended September 30, 2019
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
July 1, 2019 | $ | 2,080 |  |  | $ | 612 |  |  | $ | 1,882 |  |  | $ | 927 |  |  | $ | 2,536 |  |  | $ | 8,037 |
Charge-offs | (21) |  |  | (1) |  |  | — |  |  | (121) |  |  | — |  |  | (143) |
Recoveries | 25 |  |  | 1 |  |  | 25 |  |  | 31 |  |  | — |  |  | 82 |
Provision for loan losses | (24) |  |  | (57) |  |  | (38) |  |  | 183 |  |  | 129 |  |  | 193 |
September 30, 2019 | $ | 2,060 |  |  | $ | 555 |  |  | $ | 1,869 |  |  | $ | 1,020 |  |  | $ | 2,665 |  |  | $ | 8,169 |

| Allowance for Loan Losses
| Nine Months Ended September 30, 2019
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
January 1, 2019 | $ | 2,563 |  |  | $ | 775 |  |  | $ | 1,992 |  |  | $ | 857 |  |  | $ | 2,188 |  |  | $ | 8,375 |
Charge-offs | (134) |  |  | (60) |  |  | (96) |  |  | (324) |  |  | — |  |  | (614) |
Recoveries | 98 |  |  | 2 |  |  | 143 |  |  | 117 |  |  | — |  |  | 360 |
Provision for loan losses | (467) |  |  | (162) |  |  | (170) |  |  | 370 |  |  | 477 |  |  | 48 |
September 30, 2019 | $ | 2,060 |  |  | $ | 555 |  |  | $ | 1,869 |  |  | $ | 1,020 |  |  | $ | 2,665 |  |  | $ | 8,169 |

16

Table of Contents

| Allowance for Loan Losses and Recorded Investment in Loans
| December 31, 2019
| Commercial |  | Agricultural |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
ALLL |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 15 |  |  | $ | 26 |  |  | $ | 1,073 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,114 |
Collectively evaluated for impairment | 1,899 |  |  | 608 |  |  | 974 |  |  | 922 |  |  | 2,422 |  |  | 6,825 |
Total | $ | 1,914 |  |  | $ | 634 |  |  | $ | 2,047 |  |  | $ | 922 |  |  | $ | 2,422 |  |  | $ | 7,939 |
Loans |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 7,865 |  |  | $ | 14,840 |  |  | $ | 5,486 |  |  | $ | — |  |  |  |  | $ | 28,191 |
Collectively evaluated for impairment | 693,076 |  |  | 102,080 |  |  | 293,083 |  |  | 70,140 |  |  |  |  | 1,158,379 |
Total | $ | 700,941 |  |  | $ | 116,920 |  |  | $ | 298,569 |  |  | $ | 70,140 |  |  |  |  | $ | 1,186,570 |

The following tables display the internally assigned credit risk ratings for commercial and agricultural credit exposures as of:

| September 30, 2020
| Commercial |  | Agricultural |  |
| Real Estate |  | Other |  | Advances to Mortgage Brokers |  | Total |  | Real Estate |  | Other |  | Total |  | Total
Rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1 - Excellent | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
2 - High quality | 2,909 |  |  | 16,847 |  |  | — |  |  | 19,756 |  |  | 608 |  |  | 13 |  |  | 621 |  |  | 20,377 |
3 - High satisfactory | 89,929 |  |  | 62,014 |  |  | 75,016 |  |  | 226,959 |  |  | 16,382 |  |  | 4,880 |  |  | 21,262 |  |  | 248,221 |
4 - Low satisfactory | 381,347 |  |  | 152,647 |  |  | — |  |  | 533,994 |  |  | 32,794 |  |  | 18,146 |  |  | 50,940 |  |  | 584,934 |
5 - Special mention | 18,127 |  |  | 6,717 |  |  | — |  |  | 24,844 |  |  | 13,140 |  |  | 3,547 |  |  | 16,687 |  |  | 41,531 |
6 - Substandard | 7,047 |  |  | 7,138 |  |  | — |  |  | 14,185 |  |  | 5,914 |  |  | 3,301 |  |  | 9,215 |  |  | 23,400 |
7 - Vulnerable | 27 |  |  | 1,337 |  |  | — |  |  | 1,364 |  |  | 2,911 |  |  | 437 |  |  | 3,348 |  |  | 4,712 |
8 - Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | 190 |  |  | — |  |  | 190 |  |  | 190 |
9 - Loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 499,386 |  |  | $ | 246,700 |  |  | $ | 75,016 |  |  | $ | 821,102 |  |  | $ | 71,939 |  |  | $ | 30,324 |  |  | $ | 102,263 |  |  | $ | 923,365 |

| December 31, 2019
| Commercial |  | Agricultural |  |
| Real Estate |  | Other |  | Advances to Mortgage Brokers |  | Total |  | Real Estate |  | Other |  | Total |  | Total
Rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1 - Excellent | $ | — |  |  | $ | 390 |  |  | $ | — |  |  | $ | 390 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 390 |
2 - High quality | 2,582 |  |  | 8,844 |  |  | — |  |  | 11,426 |  |  | 1,452 |  |  | 99 |  |  | 1,551 |  |  | 12,977 |
3 - High satisfactory | 109,737 |  |  | 42,858 |  |  | 35,523 |  |  | 188,118 |  |  | 16,765 |  |  | 6,769 |  |  | 23,534 |  |  | 211,652 |
4 - Low satisfactory | 377,198 |  |  | 94,847 |  |  | — |  |  | 472,045 |  |  | 42,798 |  |  | 20,861 |  |  | 63,659 |  |  | 535,704 |
5 - Special mention | 15,372 |  |  | 3,470 |  |  | — |  |  | 18,842 |  |  | 7,165 |  |  | 3,754 |  |  | 10,919 |  |  | 29,761 |
6 - Substandard | 4,874 |  |  | 3,625 |  |  | — |  |  | 8,499 |  |  | 9,136 |  |  | 3,836 |  |  | 12,972 |  |  | 21,471 |
7 - Vulnerable | 390 |  |  | 1,231 |  |  | — |  |  | 1,621 |  |  | 2,711 |  |  | 1,574 |  |  | 4,285 |  |  | 5,906 |
8 - Doubtful | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
9 - Loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 510,153 |  |  | $ | 155,265 |  |  | $ | 35,523 |  |  | $ | 700,941 |  |  | $ | 80,027 |  |  | $ | 36,893 |  |  | $ | 116,920 |  |  | $ | 817,861 |

17

Table of Contents
Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows:
1. EXCELLENT – Substantially Risk Free
Credit has strong financial condition and solid earnings history, characterized by:
•High liquidity, strong cash flow, low leverage.
•Unquestioned ability to meet all obligations when due.
•Experienced management, with management succession in place.
•Secured by cash.
2. HIGH QUALITY – Limited Risk
Credit with sound financial condition and a positive trend in earnings supplemented by:
•Favorable liquidity and leverage ratios.
•Ability to meet all obligations when due.
•Management with successful track record.
•Steady and satisfactory earnings history.
•If loan is secured, collateral is of high quality and readily marketable.
•Access to alternative financing.
•Well defined primary and secondary source of repayment.
•If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident.
3. HIGH SATISFACTORY – Reasonable Risk
Credit with satisfactory financial condition and further characterized by:
•Working capital adequate to support operations.
•Cash flow sufficient to pay debts as scheduled.
•Management experience and depth appear favorable.
•Loan performing according to terms.
•If loan is secured, collateral is acceptable and loan is fully protected.
4. LOW SATISFACTORY – Acceptable Risk
Credit with bankable risks, although some signs of weaknesses are shown:
•Would include most start-up businesses.
•Occasional instances of trade slowness or repayment delinquency – may have been 10-30 days slow within the past year.
•Management’s abilities are apparent yet unproven.
•Weakness in primary source of repayment with adequate secondary source of repayment.
•Loan structure generally in accordance with policy.
•If secured, loan collateral coverage is marginal.
To be classified as less than satisfactory, only one of the following criteria must be met.
5. SPECIAL MENTION – Criticized
Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:
•Downward trend in sales, profit levels, and margins.
•Impaired working capital position.
•Cash flow is strained in order to meet debt repayment.
•Loan delinquency (30-60 days) and overdrafts may occur.
•Shrinking equity cushion.
18

Table of Contents
•Diminishing primary source of repayment and questionable secondary source.
•Management abilities are questionable.
•Weak industry conditions.
•Litigation pending against the borrower.
•Loan may need to be restructured to improve collateral position or reduce payments.
•Collateral or guaranty offers limited protection.
•Negative debt service coverage, however the credit is well collateralized and payments are current.
6. SUBSTANDARD – Classified
Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:
•Sustained losses have severely eroded the equity and cash flow.
•Deteriorating liquidity.
•Serious management problems or internal fraud.
•Original repayment terms liberalized.
•Likelihood of bankruptcy.
•Inability to access other funding sources.
•Reliance on secondary source of repayment.
•Litigation filed against borrower.
•Interest non-accrual may be warranted.
•Collateral provides little or no value.
•Requires excessive attention of the loan officer.
•Borrower is uncooperative with loan officer.
7. VULNERABLE – Classified
Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:
•Insufficient cash flow to service debt.
•Minimal or no payments being received.
•Limited options available to avoid the collection process.
•Transition status, expect action will take place to collect loan without immediate progress being made.
8. DOUBTFUL – Workout
Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:
•Normal operations are severely diminished or have ceased.
•Seriously impaired cash flow.
•Original repayment terms materially altered.
•Secondary source of repayment is inadequate.
•Survivability as a “going concern” is impossible.
•Collection process has begun.
•Bankruptcy petition has been filed.
•Judgments have been filed.
•Portion of the loan balance has been charged-off.
19

Table of Contents
9. LOSS – Charge-off
Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:
•Liquidation or reorganization under Bankruptcy, with poor prospects of collection.
•Fraudulently overstated assets and/or earnings.
•Collateral has marginal or no value.
•Debtor cannot be located.
•Over 120 days delinquent.
Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due aging. The following tables summarize the past due and current loans for the entire loan portfolio as of:

| September 30, 2020
| Accruing Interest and Past Due: |  |  |  | Total Past Due and Nonaccrual |  |  |  |
| 30-59 Days |  | 60-89 Days |  | 90 Days or More |  | Nonaccrual |  |  | Current |  | Total
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 151 |  |  | $ | — |  |  | $ | — |  |  | $ | 27 |  |  | $ | 178 |  |  | $ | 499,208 |  |  | $ | 499,386 |
Commercial other | 567 |  |  | — |  |  | — |  |  | 1,337 |  |  | 1,904 |  |  | 244,796 |  |  | 246,700 |
Advances to mortgage brokers | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 75,016 |  |  | 75,016 |
Total commercial | 718 |  |  | — |  |  | — |  |  | 1,364 |  |  | 2,082 |  |  | 819,020 |  |  | 821,102 |
Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |
Agricultural real estate | 270 |  |  | 95 |  |  | — |  |  | 3,101 |  |  | 3,466 |  |  | 68,473 |  |  | 71,939 |
Agricultural other | — |  |  | — |  |  | — |  |  | 437 |  |  | 437 |  |  | 29,887 |  |  | 30,324 |
Total agricultural | 270 |  |  | 95 |  |  | — |  |  | 3,538 |  |  | 3,903 |  |  | 98,360 |  |  | 102,263 |
Residential real estate |  |  |  |  |  |  |  |  |  |  |  |  |
Senior liens | 891 |  |  | 208 |  |  | — |  |  | 44 |  |  | 1,143 |  |  | 267,160 |  |  | 268,303 |
Junior liens | 17 |  |  | — |  |  | — |  |  | — |  |  | 17 |  |  | 4,249 |  |  | 4,266 |
Home equity lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 31,990 |  |  | 31,990 |
Total residential real estate | 908 |  |  | 208 |  |  | — |  |  | 44 |  |  | 1,160 |  |  | 303,399 |  |  | 304,559 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |
Secured | 68 |  |  | — |  |  | — |  |  | — |  |  | 68 |  |  | 71,762 |  |  | 71,830 |
Unsecured | 4 |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | 3,550 |  |  | 3,554 |
Total consumer | 72 |  |  | — |  |  | — |  |  | — |  |  | 72 |  |  | 75,312 |  |  | 75,384 |
Total | $ | 1,968 |  |  | $ | 303 |  |  | $ | — |  |  | $ | 4,946 |  |  | $ | 7,217 |  |  | $ | 1,296,091 |  |  | $ | 1,303,308 |

20

Table of Contents

| December 31, 2019
| Accruing Interest and Past Due: |  |  |  | Total Past Due and Nonaccrual |  |  |  |
| 30-59 Days |  | 60-89 Days |  | 90 Days or More |  | Nonaccrual |  |  | Current |  | Total
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 139 |  |  | $ | 30 |  |  | $ | — |  |  | $ | 390 |  |  | $ | 559 |  |  | $ | 509,594 |  |  | $ | 510,153 |
Commercial other | 531 |  |  | 156 |  |  | — |  |  | 1,231 |  |  | 1,918 |  |  | 153,347 |  |  | 155,265 |
Advances to mortgage brokers | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 35,523 |  |  | 35,523 |
Total commercial | 670 |  |  | 186 |  |  | — |  |  | 1,621 |  |  | 2,477 |  |  | 698,464 |  |  | 700,941 |
Agricultural |  |  |  |  |  |  |  |  |  |  |  |  |
Agricultural real estate | — |  |  | — |  |  | — |  |  | 2,711 |  |  | 2,711 |  |  | 77,316 |  |  | 80,027 |
Agricultural other | — |  |  | — |  |  | — |  |  | 1,574 |  |  | 1,574 |  |  | 35,319 |  |  | 36,893 |
Total agricultural | — |  |  | — |  |  | — |  |  | 4,285 |  |  | 4,285 |  |  | 112,635 |  |  | 116,920 |
Residential real estate |  |  |  |  |  |  |  |  |  |  |  |  |
Senior liens | 3,463 |  |  | 258 |  |  | — |  |  | 557 |  |  | 4,278 |  |  | 253,894 |  |  | 258,172 |
Junior liens | 65 |  |  | — |  |  | — |  |  | — |  |  | 65 |  |  | 5,766 |  |  | 5,831 |
Home equity lines of credit | 157 |  |  | — |  |  | — |  |  | 72 |  |  | 229 |  |  | 34,337 |  |  | 34,566 |
Total residential real estate | 3,685 |  |  | 258 |  |  | — |  |  | 629 |  |  | 4,572 |  |  | 293,997 |  |  | 298,569 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |
Secured | 68 |  |  | — |  |  | — |  |  | — |  |  | 68 |  |  | 66,547 |  |  | 66,615 |
Unsecured | 3 |  |  | — |  |  | — |  |  | — |  |  | 3 |  |  | 3,522 |  |  | 3,525 |
Total consumer | 71 |  |  | — |  |  | — |  |  | — |  |  | 71 |  |  | 70,069 |  |  | 70,140 |
Total | $ | 4,426 |  |  | $ | 444 |  |  | $ | — |  |  | $ | 6,535 |  |  | $ | 11,405 |  |  | $ | 1,175,165 |  |  | $ | 1,186,570 |

Impaired Loans
Loans may be classified as impaired if they meet one or more of the following criteria:
1.There has been a charge-off of its principal balance (in whole or in part);
2.The loan has been classified as a TDR; or
3.The loan is in nonaccrual status.
Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by comparing the loan’s outstanding balance to the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Large groups of smaller-balance, homogeneous residential real estate and consumer loans are collectively evaluated for impairment by comparing the loan’s unpaid principal balance to the present value of expected future cash flows discounted at the loan’s effective interest rate.
We do not recognize interest income on impaired loans in nonaccrual status. For impaired loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding.
21

Table of Contents
The following is a summary of impaired loans as of:

| September 30, 2020 |  | December 31, 2019
| Recorded Balance |  | Unpaid Principal Balance |  | Valuation Allowance |  | Recorded Balance |  | Unpaid Principal Balance |  | Valuation Allowance
Impaired loans with a valuation allowance |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 2,082 |  |  | $ | 2,325 |  |  | $ | 57 |  |  | $ | 517 |  |  | $ | 635 |  |  | $ | 15 |
Commercial other | 883 |  |  | 883 |  |  | 2 |  |  | — |  |  | — |  |  | — |
Agricultural real estate | 2,195 |  |  | 2,244 |  |  | 65 |  |  | 1,509 |  |  | 1,509 |  |  | 12 |
Agricultural other | 1,355 |  |  | 1,355 |  |  | 2 |  |  | 1,355 |  |  | 1,355 |  |  | 14 |
Residential real estate senior liens | 4,385 |  |  | 4,726 |  |  | 743 |  |  | 5,401 |  |  | 5,830 |  |  | 1,073 |
Total impaired loans with a valuation allowance | 10,900 |  |  | 11,533 |  |  | 869 |  |  | 8,782 |  |  | 9,329 |  |  | 1,114 |
Impaired loans without a valuation allowance |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | 2,640 |  |  | 2,714 |  |  |  |  | 4,961 |  |  | 5,224 |  |  |
Commercial other | 5,746 |  |  | 5,746 |  |  |  |  | 2,387 |  |  | 2,387 |  |  |
Agricultural real estate | 7,406 |  |  | 7,406 |  |  |  |  | 8,372 |  |  | 8,422 |  |  |
Agricultural other | 1,947 |  |  | 1,947 |  |  |  |  | 3,604 |  |  | 3,604 |  |  |
Home equity lines of credit | — |  |  | — |  |  |  |  | 85 |  |  | 385 |  |  |
Total impaired loans without a valuation allowance | 17,739 |  |  | 17,813 |  |  |  |  | 19,409 |  |  | 20,022 |  |  |
Impaired loans |  |  |  |  |  |  |  |  |  |  |
Commercial | 11,351 |  |  | 11,668 |  |  | 59 |  |  | 7,865 |  |  | 8,246 |  |  | 15 |
Agricultural | 12,903 |  |  | 12,952 |  |  | 67 |  |  | 14,840 |  |  | 14,890 |  |  | 26 |
Residential real estate | 4,385 |  |  | 4,726 |  |  | 743 |  |  | 5,486 |  |  | 6,215 |  |  | 1,073 |
Total impaired loans | $ | 28,639 |  |  | $ | 29,346 |  |  | $ | 869 |  |  | $ | 28,191 |  |  | $ | 29,351 |  |  | $ | 1,114 |

22

Table of Contents
The following is a summary of impaired loans for the:

| Three Months Ended September 30
| 2020 |  | 2019
| Average Recorded Balance |  | Interest Income Recognized |  | Average Recorded Balance |  | Interest Income Recognized
Impaired loans with a valuation allowance |  |  |  |  |  |  |
Commercial real estate | $ | 1,564 |  |  | $ | 37 |  |  | $ | 1,546 |  |  | $ | 2 |
Commercial other | 442 |  |  | 13 |  |  | 11 |  |  | — |
Agricultural real estate | 2,198 |  |  | 27 |  |  | 1,513 |  |  | 10 |
Agricultural other | 1,355 |  |  | 18 |  |  | 1,292 |  |  | 11 |
Residential real estate senior liens | 4,600 |  |  | 48 |  |  | 6,096 |  |  | 14 |
Residential real estate junior liens | — |  |  | — |  |  | 12 |  |  | — |
Total impaired loans with a valuation allowance | 10,159 |  |  | 143 |  |  | 10,470 |  |  | 37 |
Impaired loans without a valuation allowance |  |  |  |  |  |  |
Commercial real estate | 3,285 |  |  | 43 |  |  | 4,664 |  |  | 12 |
Commercial other | 4,503 |  |  | 59 |  |  | 2,607 |  |  | 7 |
Agricultural real estate | 7,548 |  |  | 68 |  |  | 6,995 |  |  | 45 |
Agricultural other | 1,947 |  |  | 21 |  |  | 3,820 |  |  | 45 |
Home equity lines of credit | 56 |  |  | — |  |  | 63 |  |  | — |
Consumer secured | — |  |  | — |  |  | 4 |  |  | — |
Total impaired loans without a valuation allowance | 17,339 |  |  | 191 |  |  | 18,153 |  |  | 109 |
Impaired loans |  |  |  |  |  |  |
Commercial | 9,794 |  |  | 152 |  |  | 8,828 |  |  | 21 |
Agricultural | 13,048 |  |  | 134 |  |  | 13,620 |  |  | 111 |
Residential real estate | 4,656 |  |  | 48 |  |  | 6,171 |  |  | 14 |
Consumer | — |  |  | — |  |  | 4 |  |  | — |
Total impaired loans | $ | 27,498 |  |  | $ | 334 |  |  | $ | 28,623 |  |  | $ | 146 |

23

Table of Contents

| Nine Months Ended September 30
| 2020 |  | 2019
| Average Recorded Balance |  | Interest Income Recognized |  | Average Recorded Balance |  | Interest Income Recognized
Impaired loans with a valuation allowance |  |  |  |  |  |  |
Commercial real estate | $ | 1,157 |  |  | $ | 83 |  |  | $ | 2,484 |  |  | $ | 58 |
Commercial other | 454 |  |  | 19 |  |  | 11 |  |  | — |
Agricultural real estate | 2,100 |  |  | 77 |  |  | 951 |  |  | 73 |
Agricultural other | 1,355 |  |  | 60 |  |  | 659 |  |  | 20 |
Residential real estate senior liens | 4,998 |  |  | 152 |  |  | 6,406 |  |  | 101 |
Residential real estate junior liens | — |  |  | — |  |  | 12 |  |  | — |
Total impaired loans with a valuation allowance | 10,064 |  |  | 391 |  |  | 10,523 |  |  | 252 |
Impaired loans without a valuation allowance |  |  |  |  |  |  |
Commercial real estate | 3,964 |  |  | 162 |  |  | 3,979 |  |  | 86 |
Commercial other | 3,240 |  |  | 106 |  |  | 2,776 |  |  | 41 |
Agricultural real estate | 7,590 |  |  | 214 |  |  | 7,308 |  |  | 110 |
Agricultural other | 2,529 |  |  | 84 |  |  | 4,913 |  |  | 201 |
Home equity lines of credit | 81 |  |  | 5 |  |  | 47 |  |  | 6 |
Consumer secured | 1 |  |  | — |  |  | 7 |  |  | — |
Total impaired loans without a valuation allowance | 17,405 |  |  | 571 |  |  | 19,030 |  |  | 444 |
Impaired loans |  |  |  |  |  |  |
Commercial | 8,815 |  |  | 370 |  |  | 9,250 |  |  | 185 |
Agricultural | 13,574 |  |  | 435 |  |  | 13,831 |  |  | 404 |
Residential real estate | 5,079 |  |  | 157 |  |  | 6,465 |  |  | 107 |
Consumer | 1 |  |  | — |  |  | 7 |  |  | — |
Total impaired loans | $ | 27,469 |  |  | $ | 962 |  |  | $ | 29,553 |  |  | $ | 696 |

As a result of line of credit agreements with borrowers, we had committed to advance $101 and $175 in additional funds to be disbursed in connection with impaired loans as of September 30, 2020 and December 31, 2019, respectively.
Troubled Debt Restructurings
A loan modification is considered to be a TDR when the modification includes terms outside of normal lending practices to a borrower who is experiencing financial difficulties.
Typical concessions granted include, but are not limited to:
•Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.
•Extending the amortization period beyond typical lending guidelines for loans with similar risk characteristics.
•Agreeing to an interest-only payment structure and delaying principal payments.
•Forgiving principal.
•Forgiving accrued interest.
To determine if a borrower is experiencing financial difficulties, factors we consider include:
•The borrower is currently in default on any debt.
•The borrower would likely default on any debt if the concession is not granted.
•The borrower’s cash flow is insufficient to service all debt if the concession is not granted.
•The borrower has declared, or is in the process of declaring, bankruptcy.
•The borrower is unlikely to continue as a going concern (if the entity is a business).
24

Table of Contents
The following is a summary of TDRs granted for the:

| Three Months Ended September 30
| 2020 |  | 2019
| Number of Loans |  | Pre-Modification Recorded Investment |  | Post-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Post-Modification Recorded Investment
Commercial other | 4 |  |  | $ | 3,740 |  |  | $ | 3,740 |  |  | — |  |  | $ | — |  |  | $ | — |
Agricultural other | — |  |  | — |  |  | — |  |  | 1 |  |  | 25 |  |  | 25 |
Total | 4 |  |  | $ | 3,740 |  |  | $ | 3,740 |  |  | 1 |  |  | $ | 25 |  |  | $ | 25 |

| Nine Months Ended September 30
| 2020 |  | 2019
| Number of Loans |  | Pre-Modification Recorded Investment |  | Post-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Post-Modification Recorded Investment
Commercial other | 6 |  |  | $ | 4,702 |  |  | $ | 4,702 |  |  | 2 |  |  | $ | 184 |  |  | $ | 184 |
Agricultural other | 4 |  |  | 2,361 |  |  | 2,361 |  |  | 4 |  |  | 1,859 |  |  | 1,859 |
Residential real estate | 2 |  |  | 94 |  |  | 94 |  |  | — |  |  | — |  |  | — |
Total | 12 |  |  | $ | 7,157 |  |  | $ | 7,157 |  |  | 6 |  |  | $ | 2,043 |  |  | $ | 2,043 |

The following is a summary of concessions we granted to borrowers experiencing financial difficulty for the:

| Three Months Ended September 30
| 2020 |  | 2019
| Below Market Interest Rate |  | Below Market Interest Rate and Extension of Amortization Period |  | Below Market Interest Rate |  | Below Market Interest Rate and Extension of Amortization Period
| Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment
Commercial other | 1 |  |  | $ | 68 |  |  | 3 |  |  | $ | 3,672 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Agricultural other | — |  |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 25 |  |  | — |  |  | — |
Total | 1 |  |  | $ | 68 |  |  | 3 |  |  | $ | 3,672 |  |  | 1 |  |  | $ | 25 |  |  | — |  |  | $ | — |

| Nine Months Ended September 30
| 2020 |  | 2019
| Below Market Interest Rate |  | Below Market Interest Rate and Extension of Amortization Period |  | Below Market Interest Rate |  | Below Market Interest Rate and Extension of Amortization Period
| Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment |  | Number of Loans |  | Pre-Modification Recorded Investment
Commercial other | 2 |  |  | $ | 987 |  |  | 4 |  |  | $ | 3,715 |  |  | — |  |  | $ | — |  |  | 2 |  |  | $ | 184 |
Agricultural other | — |  |  | — |  |  | 4 |  |  | 2,361 |  |  | 1 |  |  | 25 |  |  | 3 |  |  | 1,834 |
Residential real estate | — |  |  | — |  |  | 2 |  |  | 94 |  |  | — |  |  | — |  |  | — |  |  | — |
Total | 2 |  |  | $ | 987 |  |  | 10 |  |  | $ | 6,170 |  |  | 1 |  |  | $ | 25 |  |  | 5 |  |  | $ | 2,018 |

We did not restructure any loans by forgiving principal or accrued interest in the three and nine-month periods ended September 30, 2020 or 2019.
Based on our historical loss experience, losses associated with TDRs are not significantly different than other impaired loans within the same loan segment. As such, TDRs, including TDRs that have been modified in the past 12 months that subsequently defaulted, are analyzed in the same manner as other impaired loans within their respective loan segment.
25

Table of Contents
We had no loans that defaulted in the three and nine-month periods ended September 30, 2020 and 2019 which were modified within 12 months prior to the default date.
The following is a summary of TDR loan balances as of:

| September 30 2020 |  | December 31 2019
TDRs | $ | 25,954 |  |  | $ | 24,737 |

Measures we have taken to assist our customers in connection with the COVID-19 pandemic include loan programs that provide short-term payment relief. Under these programs, borrowers whose loans were in good standing as of March 1, 2020 could elect to defer full or partial payments for a period not to exceed 180 days. As of September 30, 2020, we had active loan payment deferrals totaling $98,680, or 7.6% of gross loans. This compares favorably to $306,103, or 23.8% of gross loans, as of June 30, 2020 as the majority of borrowers granted loan payment deferrals had reverted back to contractual payments as of September 30, 2020.
Bank regulators issued a statement on March 22, 2020, and a revised statement on April 7, 2020, which provided confirmation that short-term loan modifications made on a good faith basis in response to COVID-19 to borrowers with a current payment status are not categorized as TDRs. Pursuant to this guidance, borrowers granted a short-term loan modification meeting this criteria were not categorized as TDR as of September 30, 2020.
Note 5 – Borrowed Funds
Borrowed funds consist of the following obligations as of:

| September 30, 2020 |  | December 31, 2019
| Amount |  | Rate |  | Amount |  | Rate
FHLB advances | $ | 205,000 |  |  | 2.24 | % |  | $ | 245,000 |  |  | 2.32 | %
Securities sold under agreements to repurchase without stated maturity dates | 33,349 |  |  | 0.09 | % |  | 30,999 |  |  | 0.09 | %
Total | $ | 238,349 |  |  | 1.94 | % |  | $ | 275,999 |  |  | 2.07 | %

FHLB advances are collateralized by a blanket lien on all qualified 1-4 family residential real estate loans, specific AFS securities, and FHLB stock.
The following table lists the maturities and weighted average interest rates of FHLB advances as of:

| September 30, 2020 |  | December 31, 2019
| Amount |  | Rate |  | Amount |  | Rate
Fixed rate due 2020 | $ | 15,000 |  |  | 1.75 | % |  | $ | 55,000 |  |  | 2.18 | %
Fixed rate due 2021 | 50,000 |  |  | 1.91 | % |  | 50,000 |  |  | 1.91 | %
Variable rate due 2021 (1) | 10,000 |  |  | 0.58 | % |  | 10,000 |  |  | 2.20 | %
Fixed rate due 2022 | 20,000 |  |  | 1.97 | % |  | 20,000 |  |  | 1.97 | %
Fixed rate due 2023 | 45,000 |  |  | 2.97 | % |  | 45,000 |  |  | 2.97 | %
Fixed rate due 2024 | 55,000 |  |  | 2.68 | % |  | 55,000 |  |  | 2.68 | %
Fixed rate due 2026 | 10,000 |  |  | 1.17 | % |  | 10,000 |  |  | 1.17 | %
Total | $ | 205,000 |  |  | 2.24 | % |  | $ | 245,000 |  |  | 2.32 | %

(1)Hedged advance (see “Derivative Instruments” section below)
Securities sold under agreements to repurchase are classified as secured borrowings and are reflected at the amount of cash received in connection with the transaction. The securities underlying the agreements have a carrying value and a fair value of $33,375 and $31,020 at September 30, 2020 and December 31, 2019, respectively. Such securities remain under our control. We may be required to provide additional collateral based on the fair value of underlying securities.
Securities sold under repurchase agreements without stated maturity dates, federal funds purchased, and FRB Discount Window advances generally mature within one to four days from the transaction date. We had no FRB Discount Window advances during the three and nine-month periods ended September 30, 2020 and 2019.
26

Table of Contents
A summary of securities sold under repurchase agreements without stated maturity dates and federal funds purchased was as follows for the:

| Three Months Ended September 30
| 2020 |  | 2019
| Maximum Month End Balance |  | Average Balance |  | Weighted Average Interest Rate During the Period |  | Maximum Month End Balance |  | Average Balance |  | Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates | $ | 33,349 |  |  | $ | 30,578 |  |  | 0.10 | % |  | $ | 32,386 |  |  | $ | 32,520 |  |  | 0.09 | %
Federal funds purchased | $ | — |  |  | $ | 5 |  |  | 0.49 | % |  | $ | — |  |  | $ | 317 |  |  | 2.61 | %

| Nine Months Ended September 30
| 2020 |  | 2019
| Maximum Month End Balance |  | Average Balance |  | Weighted Average Interest Rate During the Period |  | Maximum Month End Balance |  | Average Balance |  | Weighted Average Interest Rate During the Period
Securities sold under agreements to repurchase without stated maturity dates | $ | 33,349 |  |  | $ | 30,845 |  |  | 0.10 | % |  | $ | 37,441 |  |  | $ | 31,350 |  |  | 0.10 | %
Federal funds purchased | $ | — |  |  | $ | 2 |  |  | 0.49 | % |  | $ | 7,070 |  |  | $ | 919 |  |  | 2.64 | %

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

| September 30 2020 |  | December 31 2019
Pledged to secure borrowed funds | $ | 340,685 |  |  | $ | 368,310 |
Pledged to secure repurchase agreements | 33,375 |  |  | 31,020 |
Pledged for public deposits and for other purposes necessary or required by law | 40,493 |  |  | 59,537 |
Total | $ | 414,553 |  |  | $ | 458,867 |

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

| September 30 2020 |  | December 31 2019
States and political subdivisions | $ | 17,026 |  |  | $ | 31,020 |
Mortgage-backed securities | 9,081 |  |  | — |
Collateralized mortgage obligations | 7,268 |  |  | — |
Total | $ | 33,375 |  |  | $ | 31,020 |

AFS securities pledged to repurchase agreements are monitored to ensure the appropriate level is collateralized. In the event of maturities, calls, significant principal repayments, or significant decline in market values, we have an adequate level of AFS securities to pledge to satisfy collateral requirements.
As of September 30, 2020, we had the ability to borrow up to an additional $150,819, based on assets pledged as collateral. We had no investment securities that were restricted from being pledged for specific purposes.
Derivative Instruments
We use interest rate swaps to manage exposure to interest rate risk and variability in cash flows. The interest rate swaps, associated with our variable rate borrowings, are designated upon inception as cash flow hedges of forecasted interest payments. We have entered into LIBOR-based interest rate swaps that involve the receipt of variable amounts in exchange for fixed rate payments, in effect converting variable rate debt to fixed rate debt.
Cash flow hedges are assessed for effectiveness using regression analysis. The effective portion of changes in fair value are recorded in OCI and subsequently reclassified into interest expense in the same period in which the related interest on the
27

Table of Contents
variable rate borrowings affects earnings. In the event that a portion of the changes in fair value were determined to be ineffective, the ineffective amount would be recorded in earnings.
The following tables provide information on derivatives related to variable rate borrowings as of:

| September 30, 2020
| Pay Rate |  | Receive Rate |  | Remaining Life (Years) |  | Notional Amount |  | Balance Sheet Location |  | Fair Value
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | 1.56 | % |  | 3-Month LIBOR |  | 0.6 |  | $ | 10,000 |  |  | Other liabilities |  | $ | (78) |

| December 31, 2019
| Pay Rate |  | Receive Rate |  | Remaining Life (Years) |  | Notional Amount |  | Balance Sheet Location |  | Fair Value
Derivatives designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | 1.56 | % |  | 3-Month LIBOR |  | 1.3 |  | $ | 10,000 |  |  | Other assets |  | $ | 67 |

Derivatives contain an element of credit risk which arises from the possibility that we will incur a loss as a result of a counterparty failing to meet its contractual obligations. Credit risk is minimized through counterparty collateral, transaction limits and monitoring procedures. We also manage dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, and the use of counterparty limits. We do not anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.
Note 6 – Computation of Earnings Per Common Share
Basic earnings per common share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued relate solely to outstanding shares in the Directors Plan.
Earnings per common share have been computed based on the following for the:

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Average number of common shares outstanding for basic calculation | 7,966,811 |  |  | 7,925,332 |  |  | 7,945,762 |  |  | 7,904,568 |
Average potential effect of common shares in the Directors Plan (1) | 144,472 |  |  | 181,536 |  |  | 151,040 |  |  | 186,720 |
Average number of common shares outstanding used to calculate diluted earnings per common share | 8,111,283 |  |  | 8,106,868 |  |  | 8,096,802 |  |  | 8,091,288 |
Net income | $ | 4,357 |  |  | $ | 4,442 |  |  | $ | 11,608 |  |  | $ | 12,126 |
Earnings per common share |  |  |  |  |  |  |
Basic | $ | 0.55 |  |  | $ | 0.56 |  |  | $ | 1.46 |  |  | $ | 1.53 |
Diluted | $ | 0.54 |  |  | $ | 0.55 |  |  | $ | 1.43 |  |  | $ | 1.50 |

(1)Exclusive of shares held in the Rabbi Trust
28

Table of Contents
Note 7 – Restricted Stock Plan
On June 24, 2020 we adopted the RSP, an equity-based bonus plan. The primary purpose of the plan is to promote our growth and profitability by attracting and retaining executive officers and key employees of outstanding competence through ownership of equity that provides them with incentives to achieve corporate objectives. In connection with the adoption of the RSP, the Isabella Bank Corporation Stock Award Incentive Plan was terminated.
Under the RSP, we may award restricted stock bonuses to eligible employees on an annual basis that are not fully transferable or vested until certain conditions are met. Currently, the eligible employees are the Corporation's President and CEO, CFO and the Bank's President. The RSP authorizes the issuance of unvested restricted stock to an eligible employee with a maximum award ranging from 25% to 40% of the employee’s annual salary, on a calendar year basis. The employee must also satisfy the annual performance targets and measures established by the Board of Directors. If these grant conditions are not satisfied, then the award of restricted shares will lapse or be adjusted appropriately, at the discretion of the Board of Directors.
Also on June 24, 2020, we made initial grants under the RSP to eligible employees listed above. All Grant Agreements contain vesting conditions and clawback provisions. As of September 30, 2020, we did not believe the achievement of the targets specified in an award pursuant to the RSP to be probable and therefore, did not recognize any compensation expense pursuant to the RSP.
Note 8 – Other Noninterest Expenses
A summary of expenses included in other noninterest expenses is as follows for the:

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Audit, consulting, and legal fees | $ | 417 |  |  | $ | 500 |  |  | $ | 1,348 |  |  | $ | 1,406 |
ATM and debit card fees | 373 |  |  | 308 |  |  | 1,024 |  |  | 854 |
Marketing costs | 209 |  |  | 248 |  |  | 677 |  |  | 561 |
Loan underwriting fees | 199 |  |  | 185 |  |  | 577 |  |  | 669 |
Donations and community relations | 131 |  |  | 330 |  |  | 566 |  |  | 660 |
Memberships and subscriptions | 188 |  |  | 176 |  |  | 546 |  |  | 519 |
Director fees | 168 |  |  | 195 |  |  | 527 |  |  | 592 |
FDIC insurance premiums | 159 |  |  | (282) |  |  | 459 |  |  | 50 |
Postage and freight | 118 |  |  | 112 |  |  | 370 |  |  | 362 |
All other | 572 |  |  | 620 |  |  | 1,752 |  |  | 1,911 |
Total other noninterest expenses | $ | 2,534 |  |  | $ | 2,392 |  |  | $ | 7,846 |  |  | $ | 7,584 |

Note 9 – Federal Income Taxes
The reconciliation of the provision for federal income taxes and the amount computed at the federal statutory tax rate of income before federal income tax expense is as follows for the:

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Income taxes at statutory rate | $ | 1,069 |  |  | $ | 1,065 |  |  | $ | 2,752 |  |  | $ | 2,866 |
Effect of nontaxable income |  |  |  |  |  |  |
Interest income on tax exempt municipal securities | (176) |  |  | (224) |  |  | (570) |  |  | (704) |
Earnings on corporate owned life insurance policies | (40) |  |  | (39) |  |  | (301) |  |  | (118) |
Other | (4) |  |  | (4) |  |  | (12) |  |  | (12) |
Total effect of nontaxable income | (220) |  |  | (267) |  |  | (883) |  |  | (834) |
Effect of nondeductible expenses | 7 |  |  | 14 |  |  | 14 |  |  | 27 |
Effect of tax credits | (122) |  |  | (182) |  |  | (388) |  |  | (539) |
Federal income tax expense | $ | 734 |  |  | $ | 630 |  |  | $ | 1,495 |  |  | $ | 1,520 |

29

Table of Contents
Note 10 – Accumulated Other Comprehensive Income
The following table summarizes the changes in AOCI by component for the:

| Three Months Ended September 30
| 2020 |  | 2019
| Unrealized Gains (Losses) on AFS Securities |  | Unrealized Gains (Losses) on Derivative Instruments |  | Defined Benefit Pension Plan |  | Total |  | Unrealized Gains (Losses) on AFS Securities |  | Unrealized Gains (Losses) on Derivative Instruments |  | Defined Benefit Pension Plan |  | Total
Balance, July 1 | $ | 11,139 |  |  | $ | (77) |  |  | $ | (2,695) |  |  | $ | 8,367 |  |  | $ | 3,417 |  |  | $ | 91 |  |  | $ | (2,741) |  |  | $ | 767 |
OCI before reclassifications | (66) |  |  | 20 |  |  | — |  |  | (46) |  |  | 1,724 |  |  | (37) |  |  | — |  |  | 1,687 |
Amounts reclassified from AOCI | — |  |  | — |  |  | — |  |  | — |  |  | (6) |  |  | — |  |  | — |  |  | (6) |
Subtotal | (66) |  |  | 20 |  |  | — |  |  | (46) |  |  | 1,718 |  |  | (37) |  |  | — |  |  | 1,681 |
Tax effect | 58 |  |  | (4) |  |  |  |  | 54 |  |  | (310) |  |  | 8 |  |  | — |  |  | (302) |
OCI, net of tax | (8) |  |  | 16 |  |  | — |  |  | 8 |  |  | 1,408 |  |  | (29) |  |  | — |  |  | 1,379 |
Balance, September 30 | $ | 11,131 |  |  | $ | (61) |  |  | $ | (2,695) |  |  | $ | 8,375 |  |  | $ | 4,825 |  |  | $ | 62 |  |  | $ | (2,741) |  |  | $ | 2,146 |

| Nine Months Ended September 30
| 2020 |  | 2019
| Unrealized Gains (Losses) on AFS Securities |  | Unrealized Gains (Losses) on Derivative Instruments |  | Defined Benefit Pension Plan |  | Total |  | Unrealized Gains (Losses) on AFS Securities |  | Unrealized Gains (Losses) on Derivative Instruments |  | Defined Benefit Pension Plan |  | Total
Balance, January 1 | $ | 4,612 |  |  | $ | 54 |  |  | $ | (2,695) |  |  | $ | 1,971 |  |  | $ | (5,200) |  |  | $ | 256 |  |  | $ | (2,741) |  |  | $ | (7,685) |
OCI before reclassifications | 8,304 |  |  | (145) |  |  | — |  |  | 8,159 |  |  | 12,554 |  |  | (245) |  |  | — |  |  | 12,309 |
Amounts reclassified from AOCI | (71) |  |  | — |  |  | — |  |  | (71) |  |  | (6) |  |  | — |  |  | — |  |  | (6) |
Subtotal | 8,233 |  |  | (145) |  |  | — |  |  | 8,088 |  |  | 12,548 |  |  | (245) |  |  | — |  |  | 12,303 |
Tax effect | (1,714) |  |  | 30 |  |  | — |  |  | (1,684) |  |  | (2,523) |  |  | 51 |  |  | — |  |  | (2,472) |
OCI, net of tax | 6,519 |  |  | (115) |  |  | — |  |  | 6,404 |  |  | 10,025 |  |  | (194) |  |  | — |  |  | 9,831 |
Balance, September 30 | $ | 11,131 |  |  | $ | (61) |  |  | $ | (2,695) |  |  | $ | 8,375 |  |  | $ | 4,825 |  |  | $ | 62 |  |  | $ | (2,741) |  |  | $ | 2,146 |

Included in OCI for the three and nine-month periods ended September 30, 2020 and 2019 are changes in unrealized gains and losses related to auction rate money market preferred stocks. These investments, for federal income tax purposes, have no deferred federal income taxes related to unrealized gains or losses given the nature of the investments.
30

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

| Three Months Ended September 30
| 2020 |  | 2019
| Auction Rate Money Market Preferred Stocks |  | All Other AFS Securities |  | Total |  | Auction Rate Money Market Preferred Stocks |  | All Other AFS Securities |  | Total
Unrealized gains (losses) arising during the period | $ | 215 |  |  | $ | (281) |  |  | $ | (66) |  |  | $ | 240 |  |  | $ | 1,484 |  |  | $ | 1,724 |
Reclassification adjustment for net (gains) losses included in net income | — |  |  | — |  |  | — |  |  | — |  |  | (6) |  |  | (6) |
Net unrealized gains (losses) | 215 |  |  | (281) |  |  | (66) |  |  | 240 |  |  | 1,478 |  |  | 1,718 |
Tax effect | — |  |  | 58 |  |  | 58 |  |  | — |  |  | (310) |  |  | (310) |
Unrealized gains (losses), net of tax | $ | 215 |  |  | $ | (223) |  |  | $ | (8) |  |  | $ | 240 |  |  | $ | 1,168 |  |  | $ | 1,408 |

| Nine Months Ended September 30
| 2020 |  | 2019
| Auction Rate Money Market Preferred Stocks |  | All Other AFS Securities |  | Total |  | Auction Rate Money Market Preferred Stocks |  | All Other AFS Securities |  | Total
Unrealized gains (losses) arising during the period | $ | 75 |  |  | $ | 8,229 |  |  | $ | 8,304 |  |  | $ | 535 |  |  | $ | 12,019 |  |  | $ | 12,554 |
Reclassification adjustment for net (gains) losses included in net income | — |  |  | (71) |  |  | (71) |  |  | — |  |  | (6) |  |  | (6) |
Net unrealized gains (losses) | 75 |  |  | 8,158 |  |  | 8,233 |  |  | 535 |  |  | 12,013 |  |  | 12,548 |
Tax effect | — |  |  | (1,714) |  |  | (1,714) |  |  | — |  |  | (2,523) |  |  | (2,523) |
Unrealized gains (losses), net of tax | $ | 75 |  |  | $ | 6,444 |  |  | $ | 6,519 |  |  | $ | 535 |  |  | $ | 9,490 |  |  | $ | 10,025 |

31

Table of Contents
Note 11 – Fair Value
Under fair value measurement and disclosure authoritative guidance, we group assets and liabilities measured at fair value into three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value, based on the prioritization of inputs in the valuation techniques. These levels are:

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

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. Transfers between measurement levels are recognized at the end of reporting periods.
Fair value measurement requires the use of an exit price notion which may differ from entrance pricing. Generally we believe our assets and liabilities classified as Level 1 or Level 2 approximate an exit price notion.
Following is a description of the valuation methodologies, key inputs, and an indication of the level of the fair value hierarchy in which the assets or liabilities are classified.
AFS securities: AFS securities are recorded at fair value on a recurring basis. Level 1 fair value measurement is based upon quoted prices for identical instruments. Level 2 fair value measurement is based upon quoted prices for similar instruments. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss and liquidity assumptions. The values for Level 1 and Level 2 investment securities are generally obtained from an independent third party. On a quarterly basis, we compare the values provided to alternative pricing sources.
Loans: We do not record loans at fair value on a recurring basis. However, some loans are classified as impaired and a specific allowance for loan losses may be established. Loans for which it is probable that payment of interest and principal will be significantly different than the contractual terms of the original loan agreement are considered impaired. Once a loan is identified as impaired, we measure the estimated impairment. The fair value of impaired loans is estimated using one of several methods, including the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral, less costs to sell, if the loan is collateral dependent. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
We review the net realizable values of the underlying collateral for collateral dependent impaired loans on at least a quarterly basis for all loan types. To determine the collateral value, we utilize independent appraisals, broker price opinions, or internal evaluations. We review these valuations to determine whether an additional discount should be applied given the age of market information that may have been considered as well as other factors such as costs to sell an asset if it is determined that the collateral will be liquidated in connection with the ultimate settlement of the loan. We use these valuations to determine if any specific reserves or charge-offs are necessary. We may obtain new valuations in certain circumstances, including when there has been significant deterioration in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated.
32

Table of Contents
The following tables list the quantitative fair value information about impaired loans as of:

| September 30, 2020
Valuation Technique | Fair Value | Unobservable Input |  | Actual Range |  | Weighted Average
|  | Discount applied to collateral: |  |  |  |
|  | Real Estate |  | 20% - 40% |  | 25%
|  | Equipment |  | 20% - 40% |  | 32%
Discounted value | $19,333 | Cash crop inventory |  | 40% |  | 40%
|  | Livestock |  | 30% |  | 30%
|  | Other inventory |  | 50% |  | 50%
|  | Accounts receivable |  | 25% - 50% |  | 26%

| December 31, 2019
Valuation Technique | Fair Value | Unobservable Input |  | Actual Range |  | Weighted Average
|  | Discount applied to collateral: |  |  |  |
|  | Real Estate |  | 20% - 30% |  | 22%
|  | Equipment |  | 20% - 40% |  | 32%
Discounted value | $19,135 | Cash crop inventory |  | 40% |  | 40%
|  | Livestock |  | 30% |  | 30%
|  | Other inventory |  | 50% |  | 50%
|  | Accounts receivable |  | 25% - 50% |  | 28%

Collateral discount rates may have ranges to accommodate differences in the age of the independent appraisal, broker price opinion, or internal evaluation.
Derivative instruments: Derivative instruments, consisting solely of interest rate swaps, are recorded at fair value on a recurring basis. Derivatives qualifying as cash flow hedges, when highly effective, are reported at fair value in other assets or other liabilities on our Consolidated Balance Sheets with changes in value recorded in OCI. Should the hedge no longer be considered effective, the ineffective portion of the change in fair value is recorded directly in earnings in the period in which the change occurs. The fair value of a derivative is determined by quoted market prices and model-based valuation techniques. As such, we classify derivative instruments as Level 2.
OMSR: OMSR (which are included in other assets) are subject to impairment testing. To test for impairment, we utilize a discounted cash flow analysis using interest rates and prepayment speed assumptions currently quoted for comparable instruments and discount rates. If the valuation model reflects a value less than the carrying value, OMSR are adjusted to fair value through a valuation allowance as determined by the model. As such, we classify OMSR subject to nonrecurring fair value adjustments as Level 2.
The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.
33

Table of Contents
Estimated Fair Values of Financial Instruments Not Recorded at Fair Value in their Entirety on a Recurring Basis
Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often requires the use of estimates. In cases where quoted market values in an active market are not available, we use present value techniques and other valuation methods to estimate the fair values of our financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.
The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis were as follows as of:

| September 30, 2020
| Carrying Value |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
ASSETS |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 165,749 |  |  | $ | 165,749 |  |  | $ | 165,749 |  |  | $ | — |  |  | $ | — |
Mortgage loans AFS | 4,661 |  |  | 4,701 |  |  | — |  |  | 4,701 |  |  | — |
Gross loans | 1,303,308 |  |  | 1,303,380 |  |  | — |  |  | — |  |  | 1,303,380 |
Less allowance for loan and lease losses | 9,506 |  |  | 9,506 |  |  | — |  |  | — |  |  | 9,506 |
Net loans | 1,293,802 |  |  | 1,293,874 |  |  | — |  |  | — |  |  | 1,293,874 |
Accrued interest receivable | 8,458 |  |  | 8,458 |  |  | 8,458 |  |  | — |  |  | — |
Equity securities without readily determinable fair values (1) | 21,690 |  |  | N/A |  | — |  |  | — |  |  | — |
OMSR | 2,185 |  |  | 2,221 |  |  | — |  |  | 2,221 |  |  | — |
LIABILITIES |  |  |  |  |  |  |  |  |
Deposits without stated maturities | 1,115,374 |  |  | 1,115,374 |  |  | 1,115,374 |  |  | — |  |  | — |
Deposits with stated maturities | 379,721 |  |  | 387,369 |  |  | — |  |  | 387,369 |  |  | — |
Borrowed funds | 238,349 |  |  | 247,211 |  |  | — |  |  | 247,211 |  |  | — |
Accrued interest payable | 663 |  |  | 663 |  |  | 663 |  |  | — |  |  | — |

| December 31, 2019
| Carrying Value |  | Estimated Fair Value |  | Level 1 |  | Level 2 |  | Level 3
ASSETS |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 60,572 |  |  | $ | 60,572 |  |  | $ | 60,572 |  |  | $ | — |  |  | $ | — |
Mortgage loans AFS | 904 |  |  | 925 |  |  | — |  |  | 925 |  |  | — |
Gross loans | 1,186,570 |  |  | 1,170,370 |  |  | — |  |  | — |  |  | 1,170,370 |
Less allowance for loan and lease losses | 7,939 |  |  | 7,939 |  |  | — |  |  | — |  |  | 7,939 |
Net loans | 1,178,631 |  |  | 1,162,431 |  |  | — |  |  | — |  |  | 1,162,431 |
Accrued interest receivable | 6,501 |  |  | 6,501 |  |  | 6,501 |  |  | — |  |  | — |
Equity securities without readily determinable fair values (1) | 21,629 |  |  | N/A |  | — |  |  | — |  |  | — |
OMSR | 2,264 |  |  | 2,264 |  |  | — |  |  | 2,264 |  |  | — |
LIABILITIES |  |  |  |  |  |  |  |  |
Deposits without stated maturities | 906,232 |  |  | 906,232 |  |  | 906,232 |  |  | — |  |  | — |
Deposits with stated maturities | 407,619 |  |  | 409,600 |  |  | — |  |  | 409,600 |  |  | — |
Borrowed funds | 275,999 |  |  | 278,761 |  |  | — |  |  | 278,761 |  |  | — |
Accrued interest payable | 860 |  |  | 860 |  |  | 860 |  |  | — |  |  | — |

(1)Due to the characteristics of equity securities without readily determinable fair values, they are not disclosed under a specific fair value hierarchy. When an impairment or write-down related to these securities is recorded, such amount would be classified as a nonrecurring Level 3 fair value adjustment.
34

Table of Contents
Financial Instruments Recorded at Fair Value
The table below presents the recorded amount of assets and liabilities measured at fair value on:

| September 30, 2020 |  | December 31, 2019
| Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Recurring items |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
AFS securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions | $ | 148,401 |  |  | $ | — |  |  | $ | 148,401 |  |  | $ | — |  |  | $ | 169,752 |  |  | $ | — |  |  | $ | 169,752 |  |  | $ | — |
Auction rate money market preferred | 3,194 |  |  | — |  |  | 3,194 |  |  | — |  |  | 3,119 |  |  | — |  |  | 3,119 |  |  | — |
Mortgage-backed securities | 104,165 |  |  | — |  |  | 104,165 |  |  | — |  |  | 140,204 |  |  | — |  |  | 140,204 |  |  | — |
Collateralized mortgage obligations | 107,294 |  |  | — |  |  | 107,294 |  |  | — |  |  | 116,764 |  |  | — |  |  | 116,764 |  |  | — |
Total AFS securities | 363,054 |  |  | — |  |  | 363,054 |  |  | — |  |  | 429,839 |  |  | — |  |  | 429,839 |  |  | — |
Derivative instruments | 78 |  |  | — |  |  | 78 |  |  | — |  |  | 67 |  |  | — |  |  | 67 |  |  | — |
Nonrecurring items |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Impaired loans (net of the ALLL) | 19,333 |  |  | — |  |  | — |  |  | 19,333 |  |  | 19,135 |  |  | — |  |  | — |  |  | 19,135 |
OMSR | 2,185 |  |  | — |  |  | 2,185 |  |  | — |  |  | 2,264 |  |  | — |  |  | 2,264 |  |  | — |
Total | $ | 384,650 |  |  | $ | — |  |  | $ | 365,317 |  |  | $ | 19,333 |  |  | $ | 451,305 |  |  | $ | — |  |  | $ | 432,170 |  |  | $ | 19,135 |
Percent of assets and liabilities measured at fair value |  |  | — | % |  | 94.97 | % |  | 5.03 | % |  |  |  | — | % |  | 95.76 | % |  | 4.24 | %

We recorded an impairment related to OMSR of $316 and $81 through earnings for the nine-month period ended September 30, 2020 and 2019, respectively. We had no other assets or liabilities recorded at fair value with changes in fair value recognized through earnings, on a recurring basis or nonrecurring basis, as of September 30, 2020. Further, we had no unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period.
Note 12 – Operating Segments
Our reportable segments are based on legal entities that account for at least 10% of net operating results. The Bank as of September 30, 2020 and December 31, 2019 and for the three and nine-month periods ended September 30, 2020 and 2019, represent approximately 90% or more of our consolidated total assets and operating results. As such, no additional segment reporting is presented.
Note 13 – Parent Company Only Financial Information
Interim Condensed Balance Sheets

| September 30 2020 |  | December 31 2019
ASSETS |  |  |
Cash on deposit at the Bank | $ | 627 |  |  | $ | 1,360 |
Investments in subsidiaries | 170,268 |  |  | 157,415 |
Premises and equipment | 1,505 |  |  | 1,539 |
Other assets | 50,184 |  |  | 49,887 |
TOTAL ASSETS | $ | 222,584 |  |  | $ | 210,201 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Other liabilities | $ | 39 |  |  | $ | 19 |
Shareholders' equity | 222,545 |  |  | 210,182 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 222,584 |  |  | $ | 210,201 |

35

Table of Contents
Interim Condensed Statements of Income

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
Income |  |  |  |  |  |  |
Dividends from subsidiaries | $ | 2,600 |  |  | $ | 2,400 |  |  | $ | 6,200 |  |  | $ | 5,500 |
Interest income | — |  |  | 1 |  |  | 1 |  |  | 5 |
Other income (loss) | 181 |  |  | 181 |  |  | 308 |  |  | 394 |
Total income | 2,781 |  |  | 2,582 |  |  | 6,509 |  |  | 5,899 |
Expenses |  |  |  |  |  |  |
Occupancy and equipment | 15 |  |  | 15 |  |  | 45 |  |  | 44 |
Audit, consulting, and legal fees | 119 |  |  | 110 |  |  | 426 |  |  | 355 |
Director fees | 86 |  |  | 90 |  |  | 269 |  |  | 277 |
Other | 282 |  |  | 254 |  |  | 885 |  |  | 872 |
Total expenses | 502 |  |  | 469 |  |  | 1,625 |  |  | 1,548 |
Income before income tax benefit and equity in undistributed earnings of subsidiaries | 2,279 |  |  | 2,113 |  |  | 4,884 |  |  | 4,351 |
Federal income tax benefit | 67 |  |  | 60 |  |  | 276 |  |  | 239 |
Income before equity in undistributed earnings of subsidiaries | 2,346 |  |  | 2,173 |  |  | 5,160 |  |  | 4,590 |
Undistributed earnings of subsidiaries | 2,011 |  |  | 2,269 |  |  | 6,448 |  |  | 7,536 |
Net income | $ | 4,357 |  |  | $ | 4,442 |  |  | $ | 11,608 |  |  | $ | 12,126 |

Interim Condensed Statements of Cash Flows

| Nine Months Ended September 30
| 2020 |  | 2019
Operating activities |  |  |
Net income | $ | 11,608 |  |  | $ | 12,126 |
Adjustments to reconcile net income to cash provided by operations |  |  |
Undistributed earnings of subsidiaries | (6,448) |  |  | (7,536) |
Undistributed earnings of equity securities without readily determinable fair values | (61) |  |  | (182) |
Share-based payment awards under equity compensation plan | 334 |  |  | 415 |
Depreciation | 34 |  |  | 34 |
Changes in operating assets and liabilities which provided (used) cash |  |  |
Other assets | (236) |  |  | (35) |
Other liabilities | 19 |  |  | 641 |
Net cash provided by (used in) operating activities | 5,250 |  |  | 5,463 |
Investing activities - none |  |  |
Financing activities |  |  |
Cash dividends paid on common stock | (6,386) |  |  | (6,149) |
Proceeds from the issuance of common stock | 3,274 |  |  | 3,672 |
Common stock repurchased | (1,619) |  |  | (2,140) |
Common stock purchased for deferred compensation obligations | (1,252) |  |  | (898) |
Net cash provided by (used in) financing activities | (5,983) |  |  | (5,515) |
Increase (decrease) in cash and cash equivalents | (733) |  |  | (52) |
Cash and cash equivalents at beginning of period | 1,360 |  |  | 2,499 |
Cash and cash equivalents at end of period | $ | 627 |  |  | $ | 2,447 |

36

Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
ISABELLA BANK CORPORATION FINANCIAL REVIEW
(Dollars in thousands except per share amounts)
The following is management's discussion and analysis of our financial condition and results of operations for the unaudited three and nine-month periods ended September 30, 2020 and 2019. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019 and with the unaudited interim condensed consolidated financial statements and notes, beginning on page 4 of this report.
Executive Summary
During the three and nine months ended September 30, 2020, we reported net income of $4,357 and $11,608 and earnings per common share of $0.55 and $1.46, respectively. Net income and earnings per common share for the same periods of 2019 were $4,442 and $12,126 and $0.56 and $1.53, respectively. A decline in the interest rate environment was a large driver of a $2,687 decrease in interest income for the first nine months of 2020 compared to the same period in 2019. Interest expense on deposits and borrowings decreased $2,402 for the nine-month period ended September 30, 2020 compared to the same period in 2019 primarily due to reduced interest rates and reduced reliance on higher-cost borrowings. Net interest income decreased by $285 for the nine-month period ended September 30, 2020 in comparison to the same period in 2019. The provision for loan losses increased by $1,361 for the nine-month period ended September 30, 2020 compared to the same period in 2019 as the result of increased economic and environmental risk factors, predominantly driven by COVID-19. Noninterest income increased $1,540 during the first nine months of 2020 compared to the same period in 2019, mainly as a result of gains from the redemption of corporate owned life insurance policies and net gain on sold mortgage loans. Noninterest expenses for the first nine months of 2020 exceeded the same period in 2019 by $437, primarily due to an FDIC assessment credit recognized during the third quarter of 2019.
As of September 30, 2020, total assets and assets under management were $1,971,697 and $2,664,951, respectively. Assets under management include loans sold and serviced of $289,524 and investment and trust assets managed by Isabella Wealth of $403,730, in addition to assets on our consolidated balance sheet. In the first half of 2020, the Bank’s investment and trust services business was re-engineered and rebranded as Isabella Wealth to enhance the client experience, build scalability and expand market awareness.
Our securities portfolio has strategically declined $66,785 since December 31, 2019, predominantly as a result of maturities and sales of AFS securities. Due to the flat yield curve that has existed for over a year, the opportunity to identify new investment securities for purchase at an acceptable yield has been minimal. Loans outstanding as of September 30, 2020 totaled $1,303,308. During the first nine months of 2020, gross loans increased $116,738 which was largely driven by SBA PPP loans. Total deposits were $1,495,095 as of September 30, 2020 and increased $181,244 during the first nine months of 2020. Demand and savings deposits were the main drivers of the increase in deposits, largely as a result of SBA PPP and government stimulus funds. All regulatory capital ratios for the Bank exceeded the minimum thresholds to be considered a “well capitalized” institution.
Our net yield on interest earning assets (FTE) was 2.89% and 2.93% for the three and nine months ended September 30, 2020. This compares to 3.13% and 3.07% for the three and nine months ended September 30, 2019. Management has put in place strategic programs focused on improving our net yield on interest earning assets, which includes enhanced pricing related to loans and deposits and a reduced reliance on higher-cost borrowed funds and brokered deposits as funding sources. However, the current interest rate environment has had a negative impact on our net yields on interest earning assets and future improvement may be gradual. We are actively committed to increasing earnings and shareholder value through growth in our loan portfolio while maintaining strong underwriting standards, growth in our wealth management services, managing operating costs and increasing our presence within our geographical footprint.
Recent Events and Legislation
Restricted Stock Plan: On June 24, 2020 we adopted the RSP, an equity-based bonus plan. Under the RSP, we may award restricted stock bonuses to eligible employees on an annual basis that are not fully transferable or vested until certain conditions are met. The RSP authorizes the issuance of unvested restricted stock to an eligible employee with a maximum award ranging from 25% to 40% of the employee’s annual salary, on a calendar year basis. The employee must also satisfy the annual performance targets and measures established by the Board of Directors. If these grant conditions are not satisfied, then the award of restricted shares will lapse or be adjusted appropriately, at the discretion of the Board of Directors. In connection with the adoption of the RSP, the Isabella Bank Corporation Stock Award Incentive Plan was terminated.
37

Table of Contents
Also on June 24, 2020, we made initial grants under the RSP to the Corporation's President and CEO, CFO and the Bank's President. All Grant Agreements contain vesting conditions and clawback provisions. As of September 30, 2020, we did not believe the achievement of the targets specified in an award pursuant to the RSP to be probable and therefore, did not recognize any compensation expense pursuant to the RSP.
Impact of COVID-19: Unexpected and unprecedented changes have occurred during the year as the result of COVID-19. This aggressive and persistent virus causes a respiratory disease that currently has no approved vaccine or antiviral treatment and can result in serious illness or death. The World Health Organization has declared the situation a global pandemic.
The pandemic has created significant market volatility, economic uncertainty, and disruption to normal business operations around the world, with slowdowns and shutdowns affecting entire industries. The Michigan governor issued on March 23, 2020 a stay-at-home order, which limited gatherings and travel, and required those in select businesses who were not deemed essential to sustain or protect life to stay home. The Michigan stay-at-home order was in effect until early June. The orders, as the result of COVID-19, led to financial stress for many businesses and their employees throughout the communities we serve.
The CARES Act, a massive and unprecedented federal government support program, was enacted on March 27, 2020. It is a $2 trillion stimulus package intended to provide financial relief across the country. The CARES Act includes the PPP, which enables businesses to obtain a forgivable SBA loan to meet payroll, rent, utility, and mortgage interest obligations for the 24-week period following the loan origination, and re-open quickly once the public health crisis ends. The first applications for PPP funds, with a term of two years, were accepted April 3, 2020. We are proud to facilitate SBA PPP loans to businesses throughout the communities in which we serve. As of September 30, 2020, we funded more than 950 SBA PPP loans for a total of $99,459. Bank regulators issued an interim rule that neutralizes the regulatory capital effects by allowing a zero percent risk weight, for capital purposes, to loans originated under the PPP. The capital rule was issued April 9, 2020, with an immediate effective date.
Many of our customers have expressed their general concern about the uncertain economic conditions, but it is premature to reasonably predict the magnitude of the impact. One measure we took to assist our customers included reduced service charges and fees on deposit accounts. Since the COVID-19 pandemic led to an increase in the need for electronic services and products, we elected to temporarily waive certain charges and fees to ease the financial stress of our customers. Other measures we have taken to assist our customers include loan programs that provide short-term payment relief. Under these programs, borrowers whose loans were in good standing as of March 1, 2020 could elect to defer full or partial payments for a period not to exceed 180 days. As of September 30, 2020, we had active loan payment deferrals totaling $98,680, or 7.6% of gross loans. This compares favorably to $306,103, or 23.8% of gross loans as of June 30, 2020, as the majority of borrowers granted loan payment deferrals had reverted back to contractual payments as of September 30, 2020.
Bank regulators issued a statement on March 22, 2020, and a revised statement on April 7, 2020, which provided confirmation that short-term loan modifications made on a good faith basis in response to COVID-19 to borrowers with a current payment status are not categorized as TDRs. Pursuant to this guidance, borrowers granted a short-term loan modification meeting this criteria were not categorized as TDR as of September 30, 2020. These programs, along with the SBA PPP, could mask or delay the detection or reporting of deterioration in credit quality indicators.
The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with any accuracy. Future developments include new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others. 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. Uncertainty created by the COVID-19 pandemic is pervasive, and the pandemic has impacted our operations, customers, and various areas of risk. With the uncertainty created by COVID-19, it's challenging to determine the full impact of the COVID-19 pandemic 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.
Reclassifications
Certain amounts reported in the interim 2019 consolidated financial statements have been reclassified to conform to the 2020 presentation.
Subsequent Events
We evaluated subsequent events after September 30, 2020 through the date our consolidated financial statements were issued for potential recognition and disclosure. No subsequent events require financial statement recognition or disclosure between September 30, 2020 and the date our consolidated financial statements were issued.
38

Table of Contents
Results of Operations
The following table outlines our quarter-to-date results of operations and provides certain performance measures as of, and for the three-month periods ended:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
INCOME STATEMENT DATA |  |  |  |  |  |  |  |  |
Interest income | $ | 15,700 |  |  | $ | 15,869 |  |  | $ | 16,201 |  |  | $ | 16,849 |  |  | $ | 17,161 |
Interest expense | 3,203 |  |  | 3,565 |  |  | 4,199 |  |  | 4,492 |  |  | 4,550 |
Net interest income | 12,497 |  |  | 12,304 |  |  | 12,002 |  |  | 12,357 |  |  | 12,611 |
Provision for loan losses | 516 |  |  | 105 |  |  | 788 |  |  | (18) |  |  | 193 |
Noninterest income | 4,060 |  |  | 3,246 |  |  | 2,998 |  |  | (725) |  |  | 3,274 |
Noninterest expenses | 10,950 |  |  | 10,700 |  |  | 10,945 |  |  | 10,892 |  |  | 10,620 |
Federal income tax expense (benefit) | 734 |  |  | 558 |  |  | 203 |  |  | (140) |  |  | 630 |
Net income | $ | 4,357 |  |  | $ | 4,187 |  |  | $ | 3,064 |  |  | $ | 898 |  |  | $ | 4,442 |
PER SHARE |  |  |  |  |  |  |  |  |
Basic earnings | $ | 0.55 |  |  | $ | 0.53 |  |  | $ | 0.39 |  |  | $ | 0.12 |  |  | $ | 0.56 |
Diluted earnings | $ | 0.54 |  |  | $ | 0.52 |  |  | $ | 0.38 |  |  | $ | 0.11 |  |  | $ | 0.55 |
Dividends | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.26 |
Tangible book value | $ | 21.75 |  |  | $ | 21.52 |  |  | $ | 21.10 |  |  | $ | 20.45 |  |  | $ | 20.66 |
Quoted market value |  |  |  |  |  |  |  |  |
High | $ | 19.00 |  |  | $ | 19.50 |  |  | $ | 24.50 |  |  | $ | 24.80 |  |  | $ | 23.45 |
Low | $ | 15.75 |  |  | $ | 15.60 |  |  | $ | 16.00 |  |  | $ | 22.25 |  |  | $ | 22.01 |
Close (1) | $ | 16.74 |  |  | $ | 18.25 |  |  | $ | 18.00 |  |  | $ | 24.31 |  |  | $ | 22.30 |
Common shares outstanding (1) | 8,007,901 |  |  | 7,977,019 |  |  | 7,921,291 |  |  | 7,910,804 |  |  | 7,938,234 |
PERFORMANCE RATIOS |  |  |  |  |  |  |  |  |
Return on average total assets | 0.90 | % |  | 0.89 | % |  | 0.68 | % |  | 0.20 | % |  | 0.98 | %
Return on average shareholders' equity | 7.78 | % |  | 7.63 | % |  | 5.68 | % |  | 1.66 | % |  | 8.37 | %
Return on average tangible shareholders' equity | 9.93 | % |  | 9.81 | % |  | 7.35 | % |  | 2.18 | % |  | 10.87 | %
Net interest margin yield (FTE) | 2.89 | % |  | 2.92 | % |  | 2.98 | % |  | 3.06 | % |  | 3.13 | %
BALANCE SHEET DATA (1) |  |  |  |  |  |  |  |  |
Gross loans | $ | 1,303,308 |  |  | $ | 1,284,385 |  |  | $ | 1,175,936 |  |  | $ | 1,186,570 |  |  | $ | 1,191,804 |
AFS securities | $ | 363,054 |  |  | $ | 380,414 |  |  | $ | 407,189 |  |  | $ | 429,839 |  |  | $ | 445,529 |
Total assets | $ | 1,971,697 |  |  | $ | 1,913,227 |  |  | $ | 1,815,904 |  |  | $ | 1,814,198 |  |  | $ | 1,813,684 |
Deposits | $ | 1,495,095 |  |  | $ | 1,440,678 |  |  | $ | 1,322,083 |  |  | $ | 1,313,851 |  |  | $ | 1,308,773 |
Borrowed funds | $ | 238,349 |  |  | $ | 236,268 |  |  | $ | 263,171 |  |  | $ | 275,999 |  |  | $ | 277,386 |
Shareholders' equity | $ | 222,545 |  |  | $ | 219,991 |  |  | $ | 215,498 |  |  | $ | 210,182 |  |  | $ | 212,376 |
Gross loans to deposits | 87.17 | % |  | 89.15 | % |  | 88.95 | % |  | 90.31 | % |  | 91.06 | %
ASSETS UNDER MANAGEMENT (1) |  |  |  |  |  |  |  |  |
Loans sold with servicing retained | $ | 289,524 |  |  | $ | 263,332 |  |  | $ | 257,285 |  |  | $ | 259,375 |  |  | $ | 258,873 |
Assets managed by Isabella Wealth | $ | 403,730 |  |  | $ | 395,214 |  |  | $ | 359,968 |  |  | $ | 436,181 |  |  | $ | 475,574 |
Total assets under management | $ | 2,664,951 |  |  | $ | 2,571,773 |  |  | $ | 2,433,157 |  |  | $ | 2,509,754 |  |  | $ | 2,548,131 |
ASSET QUALITY (1) |  |  |  |  |  |  |  |  |
Nonperforming loans to gross loans | 0.38 | % |  | 0.42 | % |  | 0.59 | % |  | 0.55 | % |  | 0.59 | %
Nonperforming assets to total assets | 0.30 | % |  | 0.33 | % |  | 0.43 | % |  | 0.40 | % |  | 0.42 | %
ALLL to gross loans | 0.73 | % |  | 0.69 | % |  | 0.74 | % |  | 0.67 | % |  | 0.69 | %
CAPITAL RATIOS (1) |  |  |  |  |  |  |  |  |
Shareholders' equity to assets | 11.29 | % |  | 11.50 | % |  | 11.87 | % |  | 11.59 | % |  | 11.71 | %
Tier 1 leverage | 8.76 | % |  | 8.86 | % |  | 9.09 | % |  | 9.01 | % |  | 9.16 | %
Common equity tier 1 capital | 12.90 | % |  | 12.90 | % |  | 12.72 | % |  | 12.56 | % |  | 12.58 | %
Tier 1 risk-based capital | 12.90 | % |  | 12.90 | % |  | 12.72 | % |  | 12.56 | % |  | 12.58 | %
Total risk-based capital | 13.64 | % |  | 13.60 | % |  | 13.41 | % |  | 13.18 | % |  | 13.21 | %

(1) At end of period
39

Table of Contents
The following table outlines our year-to-date results of operations and provides certain performance measures as of, and for the nine-month periods ended:

| September 30 2020 |  | September 30 2019 |  | September 30 2018
INCOME STATEMENT DATA |  |  |  |  |
Interest income | $ | 47,770 |  |  | $ | 50,457 |  |  | $ | 47,253 |
Interest expense | 10,967 |  |  | 13,369 |  |  | 11,373 |
Net interest income | 36,803 |  |  | 37,088 |  |  | 35,880 |
Provision for loan losses | 1,409 |  |  | 48 |  |  | 636 |
Noninterest income | 10,304 |  |  | 8,764 |  |  | 8,116 |
Noninterest expenses | 32,595 |  |  | 32,158 |  |  | 31,982 |
Federal income tax expense (benefit) | 1,495 |  |  | 1,520 |  |  | 887 |
Net income | $ | 11,608 |  |  | $ | 12,126 |  |  | $ | 10,491 |
PER SHARE |  |  |  |  |
Basic earnings | $ | 1.46 |  |  | $ | 1.53 |  |  | $ | 1.33 |
Diluted earnings | $ | 1.43 |  |  | $ | 1.50 |  |  | $ | 1.30 |
Dividends | $ | 0.81 |  |  | $ | 0.78 |  |  | $ | 0.78 |
Tangible book value | $ | 21.75 |  |  | $ | 20.66 |  |  | $ | 17.89 |
Quoted market value |  |  |  |  |
High | $ | 24.50 |  |  | $ | 24.50 |  |  | $ | 28.25 |
Low | $ | 15.60 |  |  | $ | 22.01 |  |  | $ | 26.05 |
Close (1) | $ | 16.74 |  |  | $ | 22.30 |  |  | $ | 26.75 |
Common shares outstanding (1) | 8,007,901 |  |  | 7,938,234 |  |  | 7,830,940 |
PERFORMANCE RATIOS |  |  |  |  |
Return on average total assets | 0.82 | % |  | 0.89 | % |  | 0.77 | %
Return on average shareholders' equity | 7.04 | % |  | 7.85 | % |  | 7.22 | %
Return on average tangible shareholders' equity | 9.05 | % |  | 10.29 | % |  | 9.69 | %
Net interest margin yield (FTE) | 2.93 | % |  | 3.07 | % |  | 2.97 | %
BALANCE SHEET DATA (1) |  |  |  |  |
Gross loans | $ | 1,303,308 |  |  | $ | 1,191,804 |  |  | $ | 1,139,930 |
AFS securities | $ | 363,054 |  |  | $ | 445,529 |  |  | $ | 501,139 |
Total assets | $ | 1,971,697 |  |  | $ | 1,813,684 |  |  | $ | 1,833,663 |
Deposits | $ | 1,495,095 |  |  | $ | 1,308,773 |  |  | $ | 1,276,806 |
Borrowed funds | $ | 238,349 |  |  | $ | 277,386 |  |  | $ | 359,776 |
Shareholders' equity | $ | 222,545 |  |  | $ | 212,376 |  |  | $ | 188,536 |
Gross loans to deposits | 87.17 | % |  | 91.06 | % |  | 89.28 | %
ASSETS UNDER MANAGEMENT (1) |  |  |  |  |
Loans sold with servicing retained | $ | 289,524 |  |  | $ | 258,873 |  |  | $ | 257,400 |
Assets managed by Isabella Wealth | $ | 403,730 |  |  | $ | 475,574 |  |  | $ | 504,371 |
Total assets under management | $ | 2,664,951 |  |  | $ | 2,548,131 |  |  | $ | 2,595,434 |
ASSET QUALITY (1) |  |  |  |  |
Nonperforming loans to gross loans | 0.38 | % |  | 0.59 | % |  | 0.65 | %
Nonperforming assets to total assets | 0.30 | % |  | 0.42 | % |  | 0.42 | %
ALLL to gross loans | 0.73 | % |  | 0.69 | % |  | 0.71 | %
CAPITAL RATIOS (1) |  |  |  |  |
Shareholders' equity to assets | 11.29 | % |  | 11.71 | % |  | 10.28 | %
Tier 1 leverage | 8.76 | % |  | 9.16 | % |  | 8.49 | %
Common equity tier 1 capital | 12.90 | % |  | 12.58 | % |  | 12.18 | %
Tier 1 risk-based capital | 12.90 | % |  | 12.58 | % |  | 12.18 | %
Total risk-based capital | 13.64 | % |  | 13.21 | % |  | 12.83 | %

(1) At end of period
40

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

| Three Months Ended
| September 30, 2020 |  | June 30, 2020 |  | September 30, 2019
| 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 | $ | 1,275,297 |  |  | $ | 13,554 |  |  | 4.25 | % |  | $ | 1,241,856 |  |  | $ | 13,297 |  |  | 4.28 | % |  | $ | 1,177,257 |  |  | $ | 14,020 |  |  | 4.76 | %
Taxable investment securities | 223,119 |  |  | 1,071 |  |  | 1.92 | % |  | 237,769 |  |  | 1,352 |  |  | 2.27 | % |  | 288,374 |  |  | 1,691 |  |  | 2.35 | %
Nontaxable investment securities | 135,168 |  |  | 1,238 |  |  | 3.66 | % |  | 141,229 |  |  | 1,333 |  |  | 3.78 | % |  | 164,159 |  |  | 1,557 |  |  | 3.79 | %
Fed funds sold | — |  |  | — |  |  | — | % |  | 12 |  |  | — |  |  | 0.04 | % |  | 218 |  |  | 2 |  |  | 2.83 | %
Other | 140,042 |  |  | 164 |  |  | 0.47 | % |  | 111,702 |  |  | 234 |  |  | 0.84 | % |  | 32,694 |  |  | 297 |  |  | 3.63 | %
Total earning assets | 1,773,626 |  |  | 16,027 |  |  | 3.61 | % |  | 1,732,568 |  |  | 16,216 |  |  | 3.74 | % |  | 1,662,702 |  |  | 17,567 |  |  | 4.23 | %
NONEARNING ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses | (8,996) |  |  |  |  |  |  | (8,769) |  |  |  |  |  |  | (8,072) |  |  |  |  |
Cash and demand deposits due from banks | 29,311 |  |  |  |  |  |  | 20,389 |  |  |  |  |  |  | 21,078 |  |  |  |  |
Premises and equipment | 25,627 |  |  |  |  |  |  | 25,854 |  |  |  |  |  |  | 26,749 |  |  |  |  |
Accrued income and other assets | 122,279 |  |  |  |  |  |  | 120,444 |  |  |  |  |  |  | 111,927 |  |  |  |  |
Total assets | $ | 1,941,847 |  |  |  |  |  |  | $ | 1,890,486 |  |  |  |  |  |  | $ | 1,814,384 |  |  |  |  |
INTEREST BEARING LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest bearing demand deposits | $ | 277,695 |  |  | $ | 94 |  |  | 0.14 | % |  | $ | 249,735 |  |  | $ | 86 |  |  | 0.14 | % |  | $ | 234,164 |  |  | $ | 76 |  |  | 0.13 | %
Savings deposits | 462,867 |  |  | 173 |  |  | 0.15 | % |  | 447,416 |  |  | 257 |  |  | 0.23 | % |  | 381,458 |  |  | 644 |  |  | 0.68 | %
Time deposits | 375,916 |  |  | 1,729 |  |  | 1.84 | % |  | 387,636 |  |  | 1,904 |  |  | 1.96 | % |  | 429,407 |  |  | 2,260 |  |  | 2.11 | %
Borrowed funds | 235,583 |  |  | 1,207 |  |  | 2.05 | % |  | 253,838 |  |  | 1,318 |  |  | 2.08 | % |  | 300,120 |  |  | 1,570 |  |  | 2.09 | %
Total interest bearing liabilities | 1,352,061 |  |  | 3,203 |  |  | 0.95 | % |  | 1,338,625 |  |  | 3,565 |  |  | 1.07 | % |  | 1,345,149 |  |  | 4,550 |  |  | 1.35 | %
NONINTEREST BEARING LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Demand deposits | 349,212 |  |  |  |  |  |  | 317,035 |  |  |  |  |  |  | 242,092 |  |  |  |  |
Other | 16,441 |  |  |  |  |  |  | 15,355 |  |  |  |  |  |  | 14,753 |  |  |  |  |
Shareholders’ equity | 224,133 |  |  |  |  |  |  | 219,471 |  |  |  |  |  |  | 212,390 |  |  |  |  |
Total liabilities and shareholders’ equity | $ | 1,941,847 |  |  |  |  |  |  | $ | 1,890,486 |  |  |  |  |  |  | $ | 1,814,384 |  |  |  |  |
Net interest income (FTE) |  |  | $ | 12,824 |  |  |  |  |  |  | $ | 12,651 |  |  |  |  |  |  | $ | 13,017 |  |  |
Net yield on interest earning assets (FTE) |  |  |  |  | 2.89 | % |  |  |  |  |  | 2.92 | % |  |  |  |  |  | 3.13 | %

41

Table of Contents

| Nine Months Ended
| September 30, 2020 |  | September 30, 2019
| Average Balance |  | Tax Equivalent Interest |  | Average Yield / Rate |  | Average Balance |  | Tax Equivalent Interest |  | Average Yield / Rate
INTEREST EARNING ASSETS |  |  |  |  |  |  |  |  |  |  |
Loans | $ | 1,228,579 |  |  | $ | 40,105 |  |  | 4.35 | % |  | $ | 1,154,715 |  |  | $ | 40,498 |  |  | 4.68 | %
Taxable investment securities (1) | 237,509 |  |  | 3,912 |  |  | 2.20 | % |  | 305,880 |  |  | 5,522 |  |  | 2.41 | %
Nontaxable investment securities | 142,893 |  |  | 3,989 |  |  | 3.72 | % |  | 172,091 |  |  | 4,867 |  |  | 3.77 | %
Fed funds sold | 4 |  |  | — |  |  | 0.07 | % |  | 82 |  |  | 2 |  |  | 2.51 | %
Other | 114,108 |  |  | 803 |  |  | 0.94 | % |  | 32,846 |  |  | 824 |  |  | 3.34 | %
Total earning assets | 1,723,093 |  |  | 48,809 |  |  | 3.78 | % |  | 1,665,614 |  |  | 51,713 |  |  | 4.14 | %
NONEARNING ASSETS |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses | (8,580) |  |  |  |  |  |  | (8,274) |  |  |  |  |
Cash and demand deposits due from banks | 23,772 |  |  |  |  |  |  | 19,793 |  |  |  |  |
Premises and equipment | 25,911 |  |  |  |  |  |  | 27,257 |  |  |  |  |
Accrued income and other assets | 117,852 |  |  |  |  |  |  | 106,304 |  |  |  |  |
Total assets | $ | 1,882,048 |  |  |  |  |  |  | $ | 1,810,694 |  |  |  |  |
INTEREST BEARING LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Interest bearing demand deposits | $ | 254,283 |  |  | $ | 263 |  |  | 0.14 | % |  | $ | 233,484 |  |  | $ | 227 |  |  | 0.13 | %
Savings deposits | 445,702 |  |  | 1,064 |  |  | 0.32 | % |  | 379,116 |  |  | 1,845 |  |  | 0.65 | %
Time deposits | 389,375 |  |  | 5,707 |  |  | 1.95 | % |  | 431,959 |  |  | 6,491 |  |  | 2.00 | %
Borrowed funds | 253,292 |  |  | 3,933 |  |  | 2.07 | % |  | 314,430 |  |  | 4,806 |  |  | 2.04 | %
Total interest bearing liabilities | 1,342,652 |  |  | 10,967 |  |  | 1.09 | % |  | 1,358,989 |  |  | 13,369 |  |  | 1.31 | %
NONINTEREST BEARING LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Demand deposits | 304,322 |  |  |  |  |  |  | 232,996 |  |  |  |  |
Other | 15,314 |  |  |  |  |  |  | 12,665 |  |  |  |  |
Shareholders’ equity | 219,760 |  |  |  |  |  |  | 206,044 |  |  |  |  |
Total liabilities and shareholders’ equity | $ | 1,882,048 |  |  |  |  |  |  | $ | 1,810,694 |  |  |  |  |
Net interest income (FTE) |  |  | $ | 37,842 |  |  |  |  |  |  | $ | 38,344 |  |  |
Net yield on interest earning assets (FTE) |  |  |  |  | 2.93 | % |  |  |  |  |  | 3.07 | %

Net interest income is the amount by which interest income on earning assets exceeds the interest expense on interest bearing liabilities. Net interest income is influenced by changes in the balance and mix of assets and liabilities, as well as market interest rates. While we exert some control over these factors, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to an FTE basis by including the income tax savings from interest on tax exempt loans and nontaxable investment securities, thus making year to year comparisons more meaningful.
42

Table of Contents
Volume and Rate Variance Analysis
The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. Changes in interest due to volume and rate were determined as follows:
Volume—change in volume multiplied by the previous period's rate.
Rate—change in the FTE rate multiplied by the previous period's volume.
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.

| Three Months Ended September 30, 2020 Compared to June 30, 2020 Increase (Decrease) Due to |  | Three Months Ended September 30, 2020 Compared to September 30, 2019 Increase (Decrease) Due to |  | Nine Months Ended September 30, 2020 Compared to September 30, 2019 Increase (Decrease) Due to
| Volume |  | Rate |  | Net |  | Volume |  | Rate |  | Net |  | Volume |  | Rate |  | Net
Changes in interest income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans | $ | 356 |  |  | $ | (99) |  |  | $ | 257 |  |  | $ | 1,112 |  |  | $ | (1,578) |  |  | $ | (466) |  |  | $ | 2,504 |  |  | $ | (2,897) |  |  | $ | (393) |
Taxable investment securities | (80) |  |  | (201) |  |  | (281) |  |  | (344) |  |  | (276) |  |  | (620) |  |  | (1,157) |  |  | (453) |  |  | (1,610) |
Nontaxable investment securities | (56) |  |  | (39) |  |  | (95) |  |  | (267) |  |  | (52) |  |  | (319) |  |  | (816) |  |  | (62) |  |  | (878) |
Fed Funds Sold | — |  |  | — |  |  | — |  |  | (1) |  |  | (1) |  |  | (2) |  |  | (1) |  |  | (1) |  |  | (2) |
Other | 50 |  |  | (120) |  |  | (70) |  |  | 304 |  |  | (437) |  |  | (133) |  |  | 902 |  |  | (923) |  |  | (21) |
Total changes in interest income | 270 |  |  | (459) |  |  | (189) |  |  | 804 |  |  | (2,344) |  |  | (1,540) |  |  | 1,432 |  |  | (4,336) |  |  | (2,904) |
Changes in interest expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest bearing demand deposits | 9 |  |  | (1) |  |  | 8 |  |  | 15 |  |  | 3 |  |  | 18 |  |  | 21 |  |  | 15 |  |  | 36 |
Savings deposits | 9 |  |  | (93) |  |  | (84) |  |  | 114 |  |  | (585) |  |  | (471) |  |  | 282 |  |  | (1,063) |  |  | (781) |
Time deposits | (56) |  |  | (119) |  |  | (175) |  |  | (264) |  |  | (267) |  |  | (531) |  |  | (627) |  |  | (157) |  |  | (784) |
Borrowed funds | (94) |  |  | (17) |  |  | (111) |  |  | (331) |  |  | (32) |  |  | (363) |  |  | (948) |  |  | 75 |  |  | (873) |
Total changes in interest expense | (132) |  |  | (230) |  |  | (362) |  |  | (466) |  |  | (881) |  |  | (1,347) |  |  | (1,272) |  |  | (1,130) |  |  | (2,402) |
Net change in interest margin (FTE) | $ | 402 |  |  | $ | (229) |  |  | $ | 173 |  |  | $ | 1,270 |  |  | $ | (1,463) |  |  | $ | (193) |  |  | $ | 2,704 |  |  | $ | (3,206) |  |  | $ | (502) |

The flattening of the yield curve and recent rate reductions placed pressure on our net interest margin and led to a decline in our net yield on interest earning assets. Given the uncertainty in rates and the economic environment as a result of COVID-19, improvement in our net yield on interest earning assets could be gradual or may not occur during the remainder of 2020.

| Average Yield / Rate for the Three-Month Periods Ended:
| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Total earning assets | 3.61 | % |  | 3.74 | % |  | 3.99 | % |  | 4.13 | % |  | 4.23 | %
Total interest bearing liabilities | 0.95 | % |  | 1.07 | % |  | 1.26 | % |  | 1.34 | % |  | 1.35 | %
Net yield on interest earning assets (FTE) | 2.89 | % |  | 2.92 | % |  | 2.98 | % |  | 3.06 | % |  | 3.13 | %

| Quarter to Date Net Interest Income (FTE)
| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Total interest income (FTE) | $ | 16,027 |  |  | $ | 16,216 |  |  | $ | 16,566 |  |  | $ | 17,245 |  |  | $ | 17,567 |
Total interest expense | 3,203 |  |  | 3,565 |  |  | 4,199 |  |  | 4,492 |  |  | 4,550 |
Net interest income (FTE) | $ | 12,824 |  |  | $ | 12,651 |  |  | $ | 12,367 |  |  | $ | 12,753 |  |  | $ | 13,017 |

43

Table of Contents
Allowance for Loan and Lease Losses
The viability of any financial institution is ultimately determined by its management of credit risk. 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. Our assessments include allocations based on specific impairment valuation allowances, historical charge-offs, internally assigned credit risk ratings, and past due and nonaccrual balances. A portion of the ALLL is not allocated to any one loan segment, but is instead a representation of other qualitative risks that reflect the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
The following table summarizes our charge-offs, recoveries, provision for loan losses, and ALLL balances as of, and for the:

| Three Months Ended September 30 |  | Nine Months Ended September 30
| 2020 |  | 2019 |  | 2020 |  | 2019
ALLL at beginning of period | $ | 8,877 |  |  | $ | 8,037 |  |  | $ | 7,939 |  |  | $ | 8,375 |
Charge-offs |  |  |  |  |  |  |
Commercial | 2 |  |  | 21 |  |  | 7 |  |  | 134 |
Agricultural | — |  |  | 1 |  |  | 22 |  |  | 60 |
Residential real estate | 13 |  |  | — |  |  | 28 |  |  | 96 |
Consumer | 31 |  |  | 121 |  |  | 213 |  |  | 324 |
Total charge-offs | 46 |  |  | 143 |  |  | 270 |  |  | 614 |
Recoveries |  |  |  |  |  |  |
Commercial | 81 |  |  | 25 |  |  | 133 |  |  | 98 |
Agricultural | 2 |  |  | 1 |  |  | 37 |  |  | 2 |
Residential real estate | 36 |  |  | 25 |  |  | 102 |  |  | 143 |
Consumer | 40 |  |  | 31 |  |  | 156 |  |  | 117 |
Total recoveries | 159 |  |  | 82 |  |  | 428 |  |  | 360 |
Net loan charge-offs (recoveries) | (113) |  |  | 61 |  |  | (158) |  |  | 254 |
Provision for loan losses | 516 |  |  | 193 |  |  | 1,409 |  |  | 48 |
ALLL at end of period | $ | 9,506 |  |  | $ | 8,169 |  |  | $ | 9,506 |  |  | $ | 8,169 |
Net loan charge-offs (recoveries) to average loans outstanding | (0.01) | % |  | 0.01 | % |  | (0.01) | % |  | 0.02 | %

The following table summarizes our charge-offs, recoveries, provisions for loan losses, and ALLL balances as of, and for the three-month periods ended:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Total charge-offs | $ | 46 |  |  | $ | 66 |  |  | $ | 158 |  |  | $ | 334 |  |  | $ | 143 |
Total recoveries | 159 |  |  | 141 |  |  | 128 |  |  | 122 |  |  | 82 |
Net loan charge-offs (recoveries) | (113) |  |  | (75) |  |  | 30 |  |  | 212 |  |  | 61 |
Net loan charge-offs (recoveries) to average loans outstanding | (0.01) | % |  | (0.01) | % |  | — | % |  | 0.02 | % |  | 0.01 | %
Provision for loan losses | $ | 516 |  |  | $ | 105 |  |  | $ | 788 |  |  | $ | (18) |  |  | $ | 193 |
Provision for loan losses to average loans outstanding | 0.04 | % |  | 0.01 | % |  | 0.07 | % |  | — | % |  | 0.02 | %
ALLL | $ | 9,506 |  |  | $ | 8,877 |  |  | $ | 8,697 |  |  | $ | 7,939 |  |  | $ | 8,169 |
ALLL as a % of loans at end of period | 0.73 | % |  | 0.69 | % |  | 0.74 | % |  | 0.67 | % |  | 0.69 | %

While we have experienced fluctuations in credit quality indicators in recent periods, credit quality remained strong at September 30, 2020. However, the COVID-19 pandemic led to the temporary and some permanent closures of businesses throughout the communities in which we serve, which also led to increased unemployment. We increased the ALLL during the first and third quarters of this year as a result of increased economic and environmental related risk factors, primarily driven by
44

Table of Contents
COVID-19. While these same risk factors resulted in an increase to the ALLL during the second quarter as well, improvement in credit quality indicators and reserves for loans individually evaluated for impairment offset much of the increase.
The economic impact from the COVID-19 crisis could pose significant credit risk due to the potential inability of consumer and commercial borrowers to make contractual payments. In late March 2020, we implemented payment programs for borrowers to alleviate the financial setback due to the temporary closure of businesses and lost wages. These programs, along with the SBA PPP, could mask or delay the detection or reporting of deterioration in credit quality indicators. We continue to monitor the economic impact from COVID-19 as it relates to credit risk to ensure the ALLL is appropriate.
The following table illustrates the two main components of the ALLL as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
ALLL |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 869 |  |  | $ | 950 |  |  | $ | 1,309 |  |  | $ | 1,114 |  |  | $ | 1,333 |
Collectively evaluated for impairment | 8,637 |  |  | 7,927 |  |  | 7,388 |  |  | 6,825 |  |  | 6,836 |
Total | $ | 9,506 |  |  | $ | 8,877 |  |  | $ | 8,697 |  |  | $ | 7,939 |  |  | $ | 8,169 |
ALLL to gross loans |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | 0.07 | % |  | 0.07 | % |  | 0.11 | % |  | 0.09 | % |  | 0.11 | %
Collectively evaluated for impairment | 0.66 | % |  | 0.62 | % |  | 0.63 | % |  | 0.58 | % |  | 0.58 | %
Total | 0.73 | % |  | 0.69 | % |  | 0.74 | % |  | 0.67 | % |  | 0.69 | %

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. 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 our interim condensed consolidated financial statements.
Loans Past Due and Loans in Nonaccrual Status
Fluctuations in past due and nonaccrual status loans can have a significant impact on the ALLL. 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.

| Total Past Due and Nonaccrual Loans
| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Commercial | $ | 2,082 |  |  | $ | 1,986 |  |  | $ | 6,180 |  |  | $ | 2,477 |  |  | $ | 3,175 |
Agricultural | 3,903 |  |  | 4,455 |  |  | 4,870 |  |  | 4,285 |  |  | 4,800 |
Residential real estate | 1,160 |  |  | 384 |  |  | 3,426 |  |  | 4,572 |  |  | 1,999 |
Consumer | 72 |  |  | 45 |  |  | 366 |  |  | 71 |  |  | 162 |
Total | $ | 7,217 |  |  | $ | 6,870 |  |  | $ | 14,842 |  |  | $ | 11,405 |  |  | $ | 10,136 |
Total past due and nonaccrual loans to gross loans | 0.55 | % |  | 0.53 | % |  | 1.26 | % |  | 0.96 | % |  | 0.85 | %

The increase in past due and nonaccrual status loans during the first quarter of 2020 was primarily the result of deterioration in credit quality for a small number of commercial loans. This increase was not a result of the economic impact of COVID-19 or any other apparent factor. During the last two quarters, past due and nonaccrual status loans declined in comparison to the recent periods.
We have implemented payment programs for borrowers to alleviate the financial setback due to the temporary closure of businesses and lost wages. These programs, along with the SBA PPP, could mask or delay the detection or reporting of deterioration in credit quality indicators such as the balance of past due and nonaccrual status loans.
A summary of loans past due and in nonaccrual status, including the composition of the ending balance of nonaccrual status loans by type, is included in “Note 4 – Loans and ALLL” of our interim condensed consolidated financial statements.
45

Table of Contents
Troubled Debt Restructurings
We have taken a proactive approach to assist borrowers who are willing to work with us in modifying their loans, thus making them less likely to default, and to avoid foreclosure. This approach has permitted certain borrowers to accept a payment structure that will allow them to continue making payments in lieu of foreclosure. The modifications have been successful for us and our customers as very few of the modified loans have resulted in foreclosures. The majority of modifications result in terms that satisfy our criteria for continued interest accrual. TDRs that have been placed in nonaccrual status may be placed back on accrual status after six months of continued performance and achievement of current payment status.
We restructure debt with borrowers who, due to financial difficulties, are unable to service their debt under the original terms. We may extend the amortization period, reduce interest rates, allow temporary interest-only payment structures, forgive principal, forgive interest, or grant a combination of these modifications. Typically, the modifications are for a period of three years or less. There were no TDRs that were government sponsored as of September 30, 2020 or December 31, 2019.
Losses associated with TDRs, if any, are included in the estimation of the ALLL during the quarter in which a loan is identified as a TDR, and we review the analysis of the ALLL estimation each reporting period thereafter to ensure its continued appropriateness.
The following tables provide roll-forwards of TDRs for the:

| Three Months Ended September 30, 2020
| Accruing Interest |  | Nonaccrual |  | Total
| Number of Loans |  | Balance |  | Number of Loans |  | Balance |  | Number of Loans |  | Balance
July 1, 2020 | 111 |  |  | $ | 20,589 |  |  | 5 |  |  | $ | 2,596 |  |  | 116 |  |  | $ | 23,185 |
New modifications | 3 |  |  | 3,630 |  |  | 1 |  |  | 110 |  |  | 4 |  |  | 3,740 |
Principal advances (payments) | — |  |  | (206) |  |  | — |  |  | (9) |  |  | — |  |  | (215) |
Loans paid off | (7) |  |  | (756) |  |  | — |  |  | — |  |  | (7) |  |  | (756) |
September 30, 2020 | 107 |  |  | $ | 23,257 |  |  | 6 |  |  | $ | 2,697 |  |  | 113 |  |  | $ | 25,954 |

| Nine Months Ended September 30, 2020
| Accruing Interest |  | Nonaccrual |  | Total
| Number of Loans |  | Balance |  | Number of Loans |  | Balance |  | Number of Loans |  | Balance
January 1, 2020 | 122 |  |  | $ | 21,194 |  |  | 9 |  |  | $ | 3,543 |  |  | 131 |  |  | $ | 24,737 |
New modifications | 10 |  |  | 6,554 |  |  | 2 |  |  | 603 |  |  | 12 |  |  | 7,157 |
Principal advances (payments) | — |  |  | (1,280) |  |  | — |  |  | (139) |  |  | — |  |  | (1,419) |
Loans paid off | (26) |  |  | (3,315) |  |  | (2) |  |  | (850) |  |  | (28) |  |  | (4,165) |
Transfers to OREO | — |  |  | — |  |  | (2) |  |  | (356) |  |  | (2) |  |  | (356) |
Transfers to accrual status | 1 |  |  | 104 |  |  | (1) |  |  | (104) |  |  | — |  |  | — |
September 30, 2020 | 107 |  |  | $ | 23,257 |  |  | 6 |  |  | $ | 2,697 |  |  | 113 |  |  | $ | 25,954 |

| Three Months Ended September 30, 2019
| Accruing Interest |  | Nonaccrual |  | Total
| Number of Loans |  | Balance |  | Number of Loans |  | Balance |  | Number of Loans |  | Balance
July 1, 2019 | 122 |  |  | $ | 20,310 |  |  | 22 |  |  | $ | 5,655 |  |  | 144 |  |  | $ | 25,965 |
New modifications | 1 |  |  | 25 |  |  | — |  |  | — |  |  | 1 |  |  | 25 |
Principal advances (payments) | — |  |  | (260) |  |  | — |  |  | (120) |  |  | — |  |  | (380) |
Loans paid off | (4) |  |  | (294) |  |  | (2) |  |  | (617) |  |  | (6) |  |  | (911) |
Transfers to accrual status | 8 |  |  | 1,142 |  |  | (8) |  |  | (1,142) |  |  | — |  |  | — |
Transfers to nonaccrual status | (1) |  |  | (30) |  |  | 1 |  |  | 30 |  |  | — |  |  | — |
September 30, 2019 | 126 |  |  | $ | 20,893 |  |  | 13 |  |  | $ | 3,806 |  |  | 139 |  |  | $ | 24,699 |

46

Table of Contents

| Nine Months Ended September 30, 2019
| Accruing Interest |  | Nonaccrual |  | Total
| Number of Loans |  | Balance |  | Number of Loans |  | Balance |  | Number of Loans |  | Balance
January 1, 2019 | 133 |  |  | $ | 23,400 |  |  | 28 |  |  | $ | 3,551 |  |  | 161 |  |  | $ | 26,951 |
New modifications | 6 |  |  | 2,043 |  |  | — |  |  | — |  |  | 6 |  |  | 2,043 |
Principal advances (payments) | — |  |  | (980) |  |  | — |  |  | (380) |  |  | — |  |  | (1,360) |
Loans paid off | (16) |  |  | (1,487) |  |  | (11) |  |  | (1,335) |  |  | (27) |  |  | (2,822) |
Partial charge-offs | — |  |  | — |  |  | — |  |  | (65) |  |  | — |  |  | (65) |
Transfers to OREO | — |  |  | — |  |  | (1) |  |  | (48) |  |  | (1) |  |  | (48) |
Transfers to accrual status | 9 |  |  | 1,219 |  |  | (9) |  |  | (1,219) |  |  | — |  |  | — |
Transfers to nonaccrual status | (6) |  |  | (3,302) |  |  | 6 |  |  | 3,302 |  |  | — |  |  | — |
September 30, 2019 | 126 |  |  | $ | 20,893 |  |  | 13 |  |  | $ | 3,806 |  |  | 139 |  |  | $ | 24,699 |

The following table summarizes our TDRs as of:

| September 30, 2020 |  | December 31, 2019 |  |
| Accruing Interest |  | Nonaccrual |  | Total |  | Accruing Interest |  | Nonaccrual |  | Total |  | Total Change
Current | $ | 23,150 |  |  | $ | 591 |  |  | $ | 23,741 |  |  | $ | 20,847 |  |  | $ | 507 |  |  | $ | 21,354 |  |  | $ | 2,387 |
Past due 30-59 days | 66 |  |  | — |  |  | 66 |  |  | 346 |  |  | — |  |  | 346 |  |  | (280) |
Past due 60-89 days | 41 |  |  | 2,106 |  |  | 2,147 |  |  | 1 |  |  | — |  |  | 1 |  |  | 2,146 |
Past due 90 days or more | — |  |  | — |  |  | — |  |  | — |  |  | 3,036 |  |  | 3,036 |  |  | (3,036) |
Total | $ | 23,257 |  |  | $ | 2,697 |  |  | $ | 25,954 |  |  | $ | 21,194 |  |  | $ | 3,543 |  |  | $ | 24,737 |  |  | $ | 1,217 |

Bank regulators issued a statement on March 22, 2020, and a revised statement on April 7, 2020, which provided confirmation that short-term loan modifications made on a good faith basis in response to COVID-19 to borrowers with a current payment status are not categorized as TDRs. Pursuant to this guidance, borrowers granted a short-term loan modification meeting this criteria were not categorized as TDR as of September 30, 2020.
Additional disclosures about TDRs are included in “Note 4 – Loans and ALLL” of our interim condensed consolidated financial statements.
47

Table of Contents
Impaired Loans
The following is a summary of information pertaining to impaired loans as of:

| September 30, 2020 |  | December 31, 2019
| Recorded Balance |  | Unpaid Principal Balance |  | Valuation Allowance |  | Recorded Balance |  | Unpaid Principal Balance |  | Valuation Allowance
TDRs |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 4,579 |  |  | $ | 4,833 |  |  | $ | 57 |  |  | $ | 5,325 |  |  | $ | 5,643 |  |  | $ | 15 |
Commercial other | 5,398 |  |  | 5,398 |  |  | 2 |  |  | 1,156 |  |  | 1,156 |  |  | — |
Agricultural real estate | 8,894 |  |  | 8,893 |  |  | 60 |  |  | 9,182 |  |  | 9,181 |  |  | 12 |
Agricultural other | 3,033 |  |  | 3,033 |  |  | 2 |  |  | 4,421 |  |  | 4,421 |  |  | 14 |
Residential real estate senior liens | 4,050 |  |  | 4,244 |  |  | 687 |  |  | 4,641 |  |  | 4,923 |  |  | 922 |
Home equity lines of credit | — |  |  | — |  |  | — |  |  | 12 |  |  | 312 |  |  | — |
Total TDRs | 25,954 |  |  | 26,401 |  |  | 808 |  |  | 24,737 |  |  | 25,636 |  |  | 963 |
Other impaired loans |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | 143 |  |  | 206 |  |  | — |  |  | 153 |  |  | 216 |  |  | — |
Commercial other | 1,231 |  |  | 1,231 |  |  | — |  |  | 1,231 |  |  | 1,231 |  |  | — |
Agricultural real estate | 707 |  |  | 757 |  |  | 5 |  |  | 699 |  |  | 750 |  |  | — |
Agricultural other | 269 |  |  | 269 |  |  | — |  |  | 538 |  |  | 538 |  |  | — |
Residential real estate senior liens | 335 |  |  | 482 |  |  | 56 |  |  | 760 |  |  | 907 |  |  | 151 |
Home equity lines of credit | — |  |  | — |  |  | — |  |  | 73 |  |  | 73 |  |  | — |
Total other impaired loans | 2,685 |  |  | 2,945 |  |  | 61 |  |  | 3,454 |  |  | 3,715 |  |  | 151 |
Total impaired loans | $ | 28,639 |  |  | $ | 29,346 |  |  | $ | 869 |  |  | $ | 28,191 |  |  | $ | 29,351 |  |  | $ | 1,114 |

We continue to devote considerable attention to identifying impaired loans and adjusting the net carrying value of these loans to their current net realizable values through the establishment of a specific reserve or the recognition of a charge-off.
We have implemented payment programs for borrowers to alleviate the financial setback due to the temporary closure of businesses and lost wages. These programs, along with the SBA PPP, could mask or delay the detection or reporting of deterioration in credit quality indicators.
Additional disclosures related to impaired loans are included in “Note 4 – Loans and ALLL” of our interim condensed consolidated financial statements.
48

Table of Contents
Nonperforming Assets
The following table summarizes our nonperforming assets as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Nonaccrual status loans | $ | 4,946 |  |  | $ | 5,319 |  |  | $ | 6,913 |  |  | $ | 6,535 |  |  | $ | 6,962 |
Accruing loans past due 90 days or more | — |  |  | 53 |  |  | 40 |  |  | — |  |  | 40 |
Total nonperforming loans | 4,946 |  |  | 5,372 |  |  | 6,953 |  |  | 6,535 |  |  | 7,002 |
Foreclosed assets | 651 |  |  | 776 |  |  | 564 |  |  | 456 |  |  | 468 |
Debt securities | 230 |  |  | 230 |  |  | 230 |  |  | 230 |  |  | 230 |
Total nonperforming assets | $ | 5,827 |  |  | $ | 6,378 |  |  | $ | 7,747 |  |  | $ | 7,221 |  |  | $ | 7,700 |
Nonperforming loans as a % of total loans | 0.38 | % |  | 0.42 | % |  | 0.59 | % |  | 0.55 | % |  | 0.59 | %
Nonperforming assets as a % of total assets | 0.30 | % |  | 0.33 | % |  | 0.43 | % |  | 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. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged-off no later than 180 days past due. Loans may be placed back on accrual status after six months of continued performance and achievement of current payment status. While the level of nonperforming loans has fluctuated in recent periods, it remains low in comparison to peer banks.
The following table summarizes nonaccrual loans as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Commercial | $ | 1,364 |  |  | $ | 1,367 |  |  | $ | 1,643 |  |  | $ | 1,621 |  |  | $ | 1,632 |
Agricultural | 3,538 |  |  | 3,656 |  |  | 4,606 |  |  | 4,285 |  |  | 4,520 |
Residential real estate | 44 |  |  | 296 |  |  | 661 |  |  | 629 |  |  | 810 |
Consumer | — |  |  | — |  |  | 3 |  |  | — |  |  | — |
Total | $ | 4,946 |  |  | $ | 5,319 |  |  | $ | 6,913 |  |  | $ | 6,535 |  |  | $ | 6,962 |

Included in the nonaccrual loan balances above were loans currently classified as TDR as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Commercial | $ | 134 |  |  | $ | 28 |  |  | $ | 304 |  |  | $ | 390 |  |  | $ | 390 |
Agricultural | 2,563 |  |  | 2,568 |  |  | 3,441 |  |  | 3,048 |  |  | 3,309 |
Residential real estate | — |  |  | — |  |  | 104 |  |  | 105 |  |  | 107 |
Total | $ | 2,697 |  |  | $ | 2,596 |  |  | $ | 3,849 |  |  | $ | 3,543 |  |  | $ | 3,806 |

We have implemented payment programs for borrowers to alleviate the financial setback due to the temporary closure of businesses and lost wages. These programs, along with the SBA PPP, could mask or delay the detection or reporting of deterioration in credit quality indicators.
Additional disclosures about nonaccrual status loans are included in “Note 4 – Loans and ALLL” of our interim condensed consolidated financial statements.
49

Table of Contents
Noninterest Income and Noninterest Expenses
Significant noninterest income balances are highlighted in the following tables for the:

| Three Months Ended September 30
|  |  |  |  | Change
| 2020 |  | 2019 |  | $ |  | %
Service charges and fees |  |  |  |  |  |  |
ATM and debit card fees | $ | 1,003 |  |  | $ | 867 |  |  | $ | 136 |  |  | 15.69 | %
Service charges and fees on deposit accounts | 436 |  |  | 621 |  |  | (185) |  |  | (29.79) | %
Freddie Mac servicing fee | 162 |  |  | 160 |  |  | 2 |  |  | 1.25 | %
Net OMSR income (loss) | 271 |  |  | (22) |  |  | 293 |  |  | N/M
Other fees for customer services | 78 |  |  | 79 |  |  | (1) |  |  | (1.27) | %
Total service charges and fees | 1,950 |  |  | 1,705 |  |  | 245 |  |  | 14.37 | %
Wealth management fees | 649 |  |  | 689 |  |  | (40) |  |  | (5.81) | %
Net gain on sale of mortgage loans | 1,036 |  |  | 199 |  |  | 837 |  |  | 420.60 | %
Earnings on corporate owned life insurance policies | 187 |  |  | 190 |  |  | (3) |  |  | (1.58) | %
All other | 238 |  |  | 491 |  |  | (253) |  |  | (51.53) | %
Total noninterest income | $ | 4,060 |  |  | $ | 3,274 |  |  | $ | 786 |  |  | 24.01 | %

| Nine Months Ended September 30
|  |  |  |  | Change
| 2020 |  | 2019 |  | $ |  | %
Service charges and fees |  |  |  |  |  |  |
ATM and debit card fees | $ | 2,680 |  |  | $ | 2,332 |  |  | $ | 348 |  |  | 14.92 | %
Service charges and fees on deposit accounts | 1,373 |  |  | 1,717 |  |  | (344) |  |  | (20.03) | %
Freddie Mac servicing fee | 476 |  |  | 471 |  |  | 5 |  |  | 1.06 | %
Net OMSR income (loss) | (79) |  |  | (60) |  |  | (19) |  |  | (31.67) | %
Other fees for customer services | 239 |  |  | 246 |  |  | (7) |  |  | (2.85) | %
Total service charges and fees | 4,689 |  |  | 4,706 |  |  | (17) |  |  | (0.36) | %
Wealth management fees | 1,877 |  |  | 2,146 |  |  | (269) |  |  | (12.53) | %
Net gain on sale of mortgage loans | 1,653 |  |  | 408 |  |  | 1,245 |  |  | 305.15 | %
Gains from redemption of corporate owned life insurance policies | 873 |  |  | — |  |  | 873 |  |  | N/M
Earnings on corporate owned life insurance policies | 558 |  |  | 564 |  |  | (6) |  |  | (1.06) | %
All other | 654 |  |  | 940 |  |  | (286) |  |  | (30.43) | %
Total noninterest income | $ | 10,304 |  |  | $ | 8,764 |  |  | $ | 1,540 |  |  | 17.57 | %

ATM and debit card fees fluctuate from period to period based primarily on usage. While we do not anticipate significant changes to our ATM and debit card fee structure, we do expect that fee income will continue to increase during the remainder of 2020 as the usage of ATM and debit cards continues to increase.
Service charges and fees on deposit accounts have declined as a result of waived fees. In response to COVID-19, which has led to an increase in the need for electronic services and products, we elected to temporarily waive certain charges and fees to ease the financial stress of our customers. Overall, 2020 income may decrease when compared to 2019.
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. Increased prepayment speeds, as a result of a decline in interest rates, were the primary driver of the losses recognized during the first and second quarters of the year. During the third quarter, prepayment speeds decreased and the volume of loans serviced increased. As a result, income increased during the third quarter. Income during the remainder of 2020 may continue to experience fluctuations and could vary from 2019 levels based on changes in the various factors driving income.
50

Table of Contents
The decrease in wealth management fees, primarily during the first quarter of this year, was driven by a reduction in the market value of investment assets under management. While strategic additions to staff have already led to new accounts with Isabella Wealth, wealth management fees during the remainder of 2020 may not exceed 2019 levels due to the uncertainty in the stock market as a result of COVID-19.
Net gain on sale of mortgage loans fluctuates primarily as the result of a change in the amount of loans sold. The amount of loans sold can fluctuate based on customer demand and balance sheet management strategies. We experienced a significant increase in loan demand during the second and third quarters, which led to an increase in the balance of loans sold during the year. As such, net gain on sale of mortgage loans is expected to exceed 2019 during 2020.
We recognized income during the first and second quarters of 2020 due to the redemption of corporate owned life insurance policies in connection with the passing of two retired bank employees.
The fluctuations in all other income are spread throughout various categories, none of which are individually significant.
51

Table of Contents
Significant noninterest expense balances are highlighted in the following tables for the:

| Three Months Ended September 30
|  |  |  |  | Change
| 2020 |  | 2019 |  | $ |  | %
Compensation and benefits | $ | 6,101 |  |  | $ | 5,971 |  |  | $ | 130 |  |  | 2.18 | %
Furniture and equipment | 1,426 |  |  | 1,427 |  |  | (1) |  |  | (0.07) | %
Occupancy | 889 |  |  | 830 |  |  | 59 |  |  | 7.11 | %
Other |  |  |  |  |  |  |
Audit, consulting, and legal fees | 417 |  |  | 500 |  |  | (83) |  |  | (16.60) | %
ATM and debit card fees | 373 |  |  | 308 |  |  | 65 |  |  | 21.10 | %
Marketing costs | 209 |  |  | 248 |  |  | (39) |  |  | (15.73) | %
Loan underwriting fees | 199 |  |  | 185 |  |  | 14 |  |  | 7.57 | %
Donations and community relations | 131 |  |  | 330 |  |  | (199) |  |  | (60.30) | %
Memberships and subscriptions | 188 |  |  | 176 |  |  | 12 |  |  | 6.82 | %
Director fees | 168 |  |  | 195 |  |  | (27) |  |  | (13.85) | %
FDIC insurance premiums | 159 |  |  | (282) |  |  | 441 |  |  | N/M
Postage and freight | 118 |  |  | 112 |  |  | 6 |  |  | 5.36 | %
All other | 572 |  |  | 620 |  |  | (48) |  |  | (7.74) | %
Total other noninterest expenses | 2,534 |  |  | 2,392 |  |  | 142 |  |  | 5.94 | %
Total noninterest expenses | $ | 10,950 |  |  | $ | 10,620 |  |  | $ | 330 |  |  | 3.11 | %

| Nine Months Ended September 30
|  |  |  |  | Change
| 2020 |  | 2019 |  | $ |  | %
Compensation and benefits | $ | 17,763 |  |  | $ | 17,650 |  |  | $ | 113 |  |  | 0.64 | %
Furniture and equipment | 4,318 |  |  | 4,330 |  |  | (12) |  |  | (0.28) | %
Occupancy | 2,668 |  |  | 2,594 |  |  | 74 |  |  | 2.85 | %
Other |  |  |  |  |  |  |
Audit, consulting, and legal fees | 1,348 |  |  | 1,406 |  |  | (58) |  |  | (4.13) | %
ATM and debit card fees | 1,024 |  |  | 854 |  |  | 170 |  |  | 19.91 | %
Marketing costs | 677 |  |  | 561 |  |  | 116 |  |  | 20.68 | %
Loan underwriting fees | 577 |  |  | 669 |  |  | (92) |  |  | (13.75) | %
Donations and community relations | 566 |  |  | 660 |  |  | (94) |  |  | (14.24) | %
Memberships and subscriptions | 546 |  |  | 519 |  |  | 27 |  |  | 5.20 | %
Director fees | 527 |  |  | 592 |  |  | (65) |  |  | (10.98) | %
FDIC insurance premiums | 459 |  |  | 50 |  |  | 409 |  |  | N/M
Postage and freight | 370 |  |  | 362 |  |  | 8 |  |  | 2.21 | %
All other | 1,752 |  |  | 1,911 |  |  | (159) |  |  | (8.32) | %
Total other noninterest expenses | 7,846 |  |  | 7,584 |  |  | 262 |  |  | 3.45 | %
Total noninterest expenses | $ | 32,595 |  |  | $ | 32,158 |  |  | $ | 437 |  |  | 1.36 | %

As a result of a $440 assessment credit received during the third quarter of 2019, FDIC insurance premiums declined during 2019. As a result, FDIC insurance premiums for 2019 were significantly lower than expenses for 2020.
The fluctuations in all other expenses are spread throughout various categories, none of which are individually significant.
52

Table of Contents
Analysis of Changes in Financial Condition

| September 30 2020 |  | December 31 2019 |  | $ Change |  | % Change (unannualized)
ASSETS |  |  |  |  |  |  |
Cash and cash equivalents | $ | 165,749 |  |  | $ | 60,572 |  |  | $ | 105,177 |  |  | 173.64 | %
AFS securities |  |  |  |  |  |  |
Amortized cost of AFS securities | 348,962 |  |  | 423,980 |  |  | (75,018) |  |  | (17.69) | %
Unrealized gains (losses) on AFS securities | 14,092 |  |  | 5,859 |  |  | 8,233 |  |  | 140.52 | %
AFS securities | 363,054 |  |  | 429,839 |  |  | (66,785) |  |  | (15.54) | %
Mortgage loans AFS | 4,661 |  |  | 904 |  |  | 3,757 |  |  | N/M
Loans |  |  |  |  |  |  |
Gross loans | 1,303,308 |  |  | 1,186,570 |  |  | 116,738 |  |  | 9.84 | %
Less allowance for loan and lease losses | 9,506 |  |  | 7,939 |  |  | 1,567 |  |  | 19.74 | %
Net loans | 1,293,802 |  |  | 1,178,631 |  |  | 115,171 |  |  | 9.77 | %
Premises and equipment | 25,749 |  |  | 26,242 |  |  | (493) |  |  | (1.88) | %
Corporate owned life insurance policies | 28,169 |  |  | 28,455 |  |  | (286) |  |  | (1.01) | %
Accrued interest receivable | 8,458 |  |  | 6,501 |  |  | 1,957 |  |  | 30.10 | %
Equity securities without readily determinable fair values | 21,690 |  |  | 21,629 |  |  | 61 |  |  | 0.28 | %
Goodwill and other intangible assets | 48,341 |  |  | 48,379 |  |  | (38) |  |  | (0.08) | %
Other assets | 12,024 |  |  | 13,046 |  |  | (1,022) |  |  | (7.83) | %
TOTAL ASSETS | $ | 1,971,697 |  |  | $ | 1,814,198 |  |  | $ | 157,499 |  |  | 8.68 | %
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |
Deposits | $ | 1,495,095 |  |  | $ | 1,313,851 |  |  | $ | 181,244 |  |  | 13.79 | %
Borrowed funds | 238,349 |  |  | 275,999 |  |  | (37,650) |  |  | (13.64) | %
Accrued interest payable and other liabilities | 15,708 |  |  | 14,166 |  |  | 1,542 |  |  | 10.89 | %
Total liabilities | 1,749,152 |  |  | 1,604,016 |  |  | 145,136 |  |  | 9.05 | %
Shareholders’ equity | 222,545 |  |  | 210,182 |  |  | 12,363 |  |  | 5.88 | %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,971,697 |  |  | $ | 1,814,198 |  |  | $ | 157,499 |  |  | 8.68 | %

As shown above, total assets increased $157,499 from December 31, 2019. Cash and cash equivalents increased as a result of maturities and sales of AFS securities and an increase in customer deposits during 2020. We experienced a $116,738 increase in loans during the first nine months of 2020 which was largely driven by SBA PPP loans in the commercial loan portfolio.
The following table outlines the changes in loan balances:

| September 30 2020 |  | December 31 2019 |  | $ Change |  | % Change (unannualized)
Commercial | $ | 821,102 |  |  | $ | 700,941 |  |  | $ | 120,161 |  |  | 17.14 | %
Agricultural | 102,263 |  |  | 116,920 |  |  | (14,657) |  |  | (12.54) | %
Residential real estate | 304,559 |  |  | 298,569 |  |  | 5,990 |  |  | 2.01 | %
Consumer | 75,384 |  |  | 70,140 |  |  | 5,244 |  |  | 7.48 | %
Total | $ | 1,303,308 |  |  | $ | 1,186,570 |  |  | $ | 116,738 |  |  | 9.84 | %

53

Table of Contents
The following table displays loan balances as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Commercial | $ | 821,102 |  |  | $ | 799,632 |  |  | $ | 695,278 |  |  | $ | 700,941 |  |  | $ | 708,735 |
Agricultural | 102,263 |  |  | 103,162 |  |  | 108,856 |  |  | 116,920 |  |  | 118,460 |
Residential real estate | 304,559 |  |  | 307,926 |  |  | 302,016 |  |  | 298,569 |  |  | 292,311 |
Consumer | 75,384 |  |  | 73,665 |  |  | 69,786 |  |  | 70,140 |  |  | 72,298 |
Total | $ | 1,303,308 |  |  | $ | 1,284,385 |  |  | $ | 1,175,936 |  |  | $ | 1,186,570 |  |  | $ | 1,191,804 |

The competition for commercial loan opportunities continues to be strong in the current interest rate environment. Growth during the second quarter of 2020 was driven primarily by SBA PPP loans while growth during the third quarter was largely driven by an increase in advances to mortgage brokers. As a result of the short-term nature of SBA PPP loans, the commercial loan portfolio could decline during the remainder of 2020. During the third quarter, and over the past 12 months, agricultural loans have declined due to the competitive environment. Residential real estate and consumer loans experienced overall growth during the past year. While residential real estate loans declined during the third quarter, further declines are not expected during the remainder of 2020. Growth is expected to continue in the consumer loan portfolio during the remainder of 2020.
The following table outlines the changes in deposit balances:

| September 30 2020 |  | December 31 2019 |  | $ Change |  | % Change (unannualized)
Noninterest bearing demand deposits | $ | 353,082 |  |  | $ | 249,152 |  |  | $ | 103,930 |  |  | 41.71 | %
Interest bearing demand deposits | 287,809 |  |  | 229,865 |  |  | 57,944 |  |  | 25.21 | %
Savings deposits | 474,483 |  |  | 427,215 |  |  | 47,268 |  |  | 11.06 | %
Certificates of deposit | 354,210 |  |  | 365,049 |  |  | (10,839) |  |  | (2.97) | %
Brokered certificates of deposit | 14,029 |  |  | 27,458 |  |  | (13,429) |  |  | (48.91) | %
Internet certificates of deposit | 11,482 |  |  | 15,112 |  |  | (3,630) |  |  | (24.02) | %
Total | $ | 1,495,095 |  |  | $ | 1,313,851 |  |  | $ | 181,244 |  |  | 13.79 | %

The following table displays deposit balances as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
Noninterest bearing demand deposits | $ | 353,082 |  |  | $ | 340,321 |  |  | $ | 249,424 |  |  | $ | 249,152 |  |  | $ | 242,179 |
Interest bearing demand deposits | 287,809 |  |  | 263,567 |  |  | 237,392 |  |  | 229,865 |  |  | 230,579 |
Savings deposits | 474,483 |  |  | 458,167 |  |  | 435,207 |  |  | 427,215 |  |  | 409,930 |
Certificates of deposit | 354,210 |  |  | 352,118 |  |  | 358,534 |  |  | 365,049 |  |  | 357,984 |
Brokered certificates of deposit | 14,029 |  |  | 14,029 |  |  | 27,458 |  |  | 27,458 |  |  | 52,744 |
Internet certificates of deposit | 11,482 |  |  | 12,476 |  |  | 14,068 |  |  | 15,112 |  |  | 15,357 |
Total | $ | 1,495,095 |  |  | $ | 1,440,678 |  |  | $ | 1,322,083 |  |  | $ | 1,313,851 |  |  | $ | 1,308,773 |

Deposit growth during the second and third quarters of 2020 was largely driven by SBA PPP loan and government stimulus funds. Total deposits have increased over the past 12 months with significant growth in non-contractual deposits, such as demand and savings deposits. This trend is anticipated to continue during the remainder of 2020 as the financial markets continue to exhibit significant signs of instability. We experienced fluctuations in certificates of deposit over the past year while higher-cost brokered certificates of deposit have significantly declined. Brokered certificates of deposit offer another source of funding and may fluctuate from period to period based on our funding needs, including changes in assets such as loans and investments. During 2019 and 2020, we used excess funds to reduce higher-cost deposits, such as brokered certificates of deposit.
54

Table of Contents
The primary objective of our investing activities is to provide for safety of the principal invested. Secondary considerations include providing earnings and liquidity while managing our overall exposure to changes in interest rates. The current flat yield curve encourages using excess funds to reduce higher-cost borrowings and therefore, AFS securities balances are not expected to rise significantly in the near term. The following table displays fair values of AFS securities as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
States and political subdivisions | $ | 148,401 |  |  | $ | 146,785 |  |  | $ | 163,116 |  |  | $ | 169,752 |  |  | $ | 175,575 |
Auction rate money market preferred | 3,194 |  |  | 2,979 |  |  | 2,726 |  |  | 3,119 |  |  | 3,089 |
Mortgage-backed securities | 104,165 |  |  | 119,029 |  |  | 126,554 |  |  | 140,204 |  |  | 150,120 |
Collateralized mortgage obligations | 107,294 |  |  | 111,621 |  |  | 114,793 |  |  | 116,764 |  |  | 116,745 |
Total | $ | 363,054 |  |  | $ | 380,414 |  |  | $ | 407,189 |  |  | $ | 429,839 |  |  | $ | 445,529 |

Borrowed funds include FHLB advances, securities sold under agreements to repurchase, and federal funds purchased. The balance of borrowed funds fluctuates from period to period based on our funding needs that arise from changes in loans, investments, and deposits. To provide balance sheet growth, we may utilize borrowings and brokered deposits to fund earning assets. The following table displays borrowed funds balances as of:

| September 30 2020 |  | June 30 2020 |  | March 31 2020 |  | December 31 2019 |  | September 30 2019
FHLB advances | $ | 205,000 |  |  | $ | 205,000 |  |  | $ | 235,000 |  |  | $ | 245,000 |  |  | $ | 245,000 |
Securities sold under agreements to repurchase without stated maturity dates | 33,349 |  |  | 31,268 |  |  | 28,171 |  |  | 30,999 |  |  | 32,386 |
Total | $ | 238,349 |  |  | $ | 236,268 |  |  | $ | 263,171 |  |  | $ | 275,999 |  |  | $ | 277,386 |

Contractual Obligations and Loan Commitments
We have various financial obligations, including contractual obligations and commitments related to deposits and borrowings, which may require future cash payments. We also have loan related commitments that may impact liquidity. The commitments include unused lines of credit, commercial and standby letters of credit, and commitments to grant loans. These commitments to grant loans include residential mortgage loans with the majority committed to be sold to the secondary market. Many of these commitments historically have expired without being drawn upon and do not necessarily represent our future cash requirements.
We are party to credit related financial instruments with off-balance-sheet risk. These financial instruments are entered into in the normal course of business to meet the financing needs of our customers. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The contractual or notional amounts of these instruments reflect the extent of involvement we have in a particular class of financial instrument.
Our exposure to credit-related loss in the event of nonperformance by the counter parties to the financial instruments for commitments to extend credit and standby letters of credit could be up to the contractual notional amount of those instruments. We use the same credit policies as we do for extending loans to customers. No significant losses are anticipated as a result of these commitments.
55

Table of Contents
Capital
Capital consists solely of common stock, retained earnings, and accumulated other comprehensive income (loss). We are authorized to raise capital through dividend reinvestment, employee and director stock purchases, and shareholder stock purchases. Pursuant to these authorizations, we issued 184,144 shares or $3,274 of common stock during the first nine months of 2020, as compared to 159,521 shares or $3,672 of common stock during the same period in 2019. We also 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 $334 and $415 during the nine-month periods ended September 30, 2020 and 2019, respectively.
We have publicly announced a common stock repurchase plan. Pursuant to this plan, we repurchased 87,047 shares or $1,619 of common stock during the first nine months of 2020 and 92,256 shares or $2,140 during the first nine months of 2019. As of September 30, 2020, we were authorized to repurchase up to an additional 160,859 shares of common stock.
The FRB has established minimum risk based capital guidelines. Pursuant to these guidelines, a framework has been established that assigns risk weights to each category of on and off-balance-sheet items to arrive at risk adjusted total assets. Regulatory capital is divided by the risk adjusted assets with the resulting ratio compared to the minimum standard to determine whether a corporation has adequate capital.
The 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%. 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. The following table sets forth these requirements and our ratios as of:

| September 30, 2020 |  | December 31, 2019
| 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 | 12.90 | % |  | 7.00 | % |  | 6.50 | % |  | 12.56 | % |  | 7.000 | % |  | 6.50 | %
Tier 1 capital | 12.90 | % |  | 8.50 | % |  | 8.00 | % |  | 12.56 | % |  | 8.500 | % |  | 8.00 | %
Total capital | 13.64 | % |  | 10.50 | % |  | 10.00 | % |  | 13.18 | % |  | 10.500 | % |  | 10.00 | %
Tier 1 leverage | 8.76 | % |  | 4.00 | % |  | 5.00 | % |  | 9.01 | % |  | 4.00 | % |  | 5.00 | %

There are no significant regulatory constraints placed on our capital. At September 30, 2020, the Bank exceeded minimum capital requirements.
Liquidity
Liquidity is monitored regularly by our ALCO, which consists of members of senior management. The committee reviews projected cash flows, key ratios, and liquidity available from both primary and secondary sources.
Our primary sources of liquidity are cash and cash equivalents and unencumbered AFS securities. These categories totaled $388,301 or 19.69% of assets as of September 30, 2020, compared to $291,190 or 16.05% as of December 31, 2019. The increase in the amount and percentage of primary liquidity is a direct result of an increase in market deposits and a deliberate reduction in non-market funding which required collateralization. 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. 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. In recent periods, we have elected to use excess funds and proceeds from the sale of AFS securities to reduce borrowings and other higher-cost funding sources. 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 September 30, 2020, we had available lines of credit of $150,819.
56

Table of Contents
Our stress testing of liquidity increased during 2020 and continues to evolve due to economic uncertainly as a result of COVID-19. Our liquidity position remained strong at the end of the third quarter of 2020 which is illustrated in the following table:

| September 30 2020
Total cash and cash equivalents | $ | 165,749 |
Available lines of credit |
Fed funds lines with correspondent banks | 93,000 |
FHLB borrowings | 42,174 |
FRB Discount Window | 10,645 |
Other lines of credit | 5,000 |
Total available lines of credit | 150,819 |
Unencumbered lendable value of FRB collateral, estimated 1 | 178,000 |
Total cash and liquidity | $ | 494,568 |

(1)Includes estimated unencumbered lendable value of FHLB collateral of $127,000
The following table summarizes our sources and uses of cash for the nine-month period ended September 30:

| 2020 |  | 2019 |  | $ Variance
Net cash provided by (used in) operating activities | $ | 10,936 |  |  | $ | 17,083 |  |  | $ | (6,147) |
Net cash provided by (used in) investing activities | (43,370) |  |  | (3,875) |  |  | (39,495) |
Net cash provided by (used in) financing activities | 137,611 |  |  | (52,348) |  |  | 189,959 |
Increase (decrease) in cash and cash equivalents | 105,177 |  |  | (39,140) |  |  | 144,317 |
Cash and cash equivalents January 1 | 60,572 |  |  | 73,471 |  |  | (12,899) |
Cash and cash equivalents September 30 | $ | 165,749 |  |  | $ | 34,331 |  |  | $ | 131,418 |

Fair Value
We utilize fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. AFS securities, cash flow hedge derivative instruments and certain liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as mortgage loans AFS, 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.
For further information regarding fair value measurements see “Note 11 – Fair Value” of our interim condensed consolidated financial statements.
57

Table of Contents
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. IRR is the fundamental method by which financial institutions earn income and create shareholder value. Excessive exposure to IRR could pose a significant risk to our earnings and capital.
The FRB has adopted a policy requiring banks to effectively manage the various risks that can have a material impact on safety and soundness. The risks include credit, interest rate, liquidity, operational, and reputational. We have policies, procedures, and internal controls for measuring and managing these risks. Specifically, our Funds Management 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.
The primary technique to measure IRR is simulation analysis. Simulation analysis forecasts the effects on the balance sheet structure and net interest income under a variety of scenarios that incorporate changes in interest rates, the shape of yield curves, interest rate relationships, loan prepayments, and funding sources. These forecasts are compared against net interest income projected in a stable interest rate environment. While many assets and liabilities reprice either at maturity or in accordance with their contractual terms, several balance sheet components demonstrate characteristics that require an evaluation to more accurately reflect their repricing behavior. Key assumptions in the simulation analysis include prepayments on loans, probable calls of investment securities, changes in market conditions, loan volumes and loan pricing, deposit sensitivity, and customer preferences. These assumptions are inherently uncertain as they are subject to fluctuation and revision in a dynamic rate environment. As a result, the simulation analysis cannot precisely forecast the impact of rising and falling interest rates on net interest income. Actual results will differ from simulated results due to many other factors, including changes in balance sheet components, interest rate changes, changes in market conditions, and management strategies. We regularly monitor our projected net interest income sensitivity to ensure that it remains within established limits.
Gap analysis, the secondary method to measure IRR, measures the cash flows and/or the earliest repricing of our interest bearing assets and liabilities. This analysis is useful for measuring trends in the repricing characteristics of the balance sheet. Significant assumptions are required in this process because of the embedded repricing options contained in assets and liabilities. Residential real estate and consumer loans allow the borrower to repay the balance prior to maturity without penalty, while commercial and agricultural loans may have prepayment penalties. The amount of prepayments is dependent upon many factors, including the interest rate of a given loan in comparison to the current offering rates, the level of home sales, and the overall availability of credit in the market place. Generally, a decrease in interest rates will result in an increase in cash flows from these assets. A significant portion of our securities are callable or have prepayment options. The call and prepayment options are more likely to be exercised in a period of decreasing interest rates. Savings and demand accounts may generally be withdrawn on request without prior notice. The timing of cash flows from these deposits is estimated based on historical experience. Certificates of deposit have penalties that discourage early withdrawals.
Our primary market risk exposures related to the COVID-19 crisis remain uncertain. A review of our market risk methods are ongoing and modeling is incorporating additional assumptions to account for this uncertainty related to this crisis. Repricing, cash flows, and prepayment projections for loans and mortgage-backed securities are not expected to behave as they would be expected to in a more stable interest rate environment. The SBA PPP loan is a new instrument and has payment characteristics that are still uncertain. In late March 2020, we implemented loan payment programs for customers to alleviate the financial setback caused by the temporary closure of businesses and lost wages. Under these programs, borrowers whose loans were in good standing as of March 1, 2020 could elect to defer full or partial payments for a short period of time. Customer deposit flows may experience unusual fluctuations due to government support programs, customer and business stress, and general money supply. We continue to closely monitor customer and economic indicators to develop more precise market risk assumptions as the economic impact of this crisis begins to reveal itself.
58

Table of Contents
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The information presented in the section captioned “Market Risk” in Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.
Item 4. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of September 30, 2020, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of September 30, 2020, were effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the most recent fiscal quarter, no change occurred in our internal control over financial reporting that materially affected, or is likely to materially affect, our internal control over financial reporting.
59

Table of Contents
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not involved in any material legal proceedings. We are involved in ordinary, routine litigation incidental to our business; however, no such routine proceedings are expected to result in any material adverse effect on operations, earnings, financial condition, or cash flows.
Item 1A. Risk Factors.
Other than the addition of risk related to COVID-19, as described below, there have been no material changes to the risk factors disclosed in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2019.
The COVID-19 pandemic may adversely affect our business
Unexpected and unprecedented changes have occurred during the year as the result of COVID-19. This aggressive and persistent virus causes a respiratory disease that currently has no approved vaccine or antiviral treatment and can result in serious illness or death. The World Health Organization has declared the situation a global pandemic.
The pandemic has created significant market volatility, economic uncertainty, and disruption to normal business operations around the world, with slowdowns and shutdowns affecting entire industries. The Michigan governor issued on March 23, 2020 a stay-at-home order, which limited gatherings and travel, and required those in select businesses who were not deemed essential to sustain or protect life to stay home. The Michigan stay-at-home order was in effect until early June. The orders led to financial stress for many businesses and their employees throughout the communities we serve.
The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with any accuracy. Future developments include new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others. 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. Uncertainty created by the COVID-19 pandemic is pervasive, and the pandemic has impacted our operations, customers, vendors and various areas of risk. Other areas of risk may include, but are not limited to, cybersecurity, credit, interest rate, litigation and risk related to vendor services. With the uncertainty created by COVID-19, it's challenging to determine the full impact of the COVID-19 pandemic 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(A)None
(B)None
(C)Repurchases of Common Stock
We have adopted and publicly announced a common stock repurchase plan. The plan was last amended on December 23, 2019, to allow for the repurchase of an additional 250,000 shares of common stock after that date. These authorizations do not have expiration dates. As common shares are repurchased under this plan, they are retired and revert back to the status of authorized, but unissued common shares.
The following table provides information for the three-month period ended September 30, 2020, with respect to this plan:

| Common Shares Repurchased |  | Total Number of Common Shares Purchased as Part of Publicly Announced Plan or Program |  | Maximum Number of Common Shares That May Yet Be Purchased Under the Plans or Programs
| Number |  | Average Price Per Common Share |  |
Balance, June 30 |  |  |  |  |  |  | 186,905 |
July 1 - 31 | 634 |  |  | $ | 17.35 |  |  | 634 |  |  | 186,271 |
August 1 - 31 | 5,583 |  |  | 16.66 |  |  | 5,583 |  |  | 180,688 |
September 1 -30 | 19,829 |  |  | 16.14 |  |  | 19,829 |  |  | 160,859 |
Balance, September 30 | 26,046 |  |  | $ | 16.28 |  |  | 26,046 |  |  | 160,859 |

60

Table of Contents
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits.
(a) Exhibits

Exhibit Number |  | Exhibits
31(a) |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Executive Officer
31(b) |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by the Principal Financial Officer
32 |  | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
101.1* |  | 101.INS (XBRL Instance Document)
|  | 101.SCH (XBRL Taxonomy Extension Schema Document)
|  | 101.CAL (XBRL Calculation Linkbase Document)
|  | 101.LAB (XBRL Taxonomy Label Linkbase Document)
|  | 101.DEF (XBRL Taxonomy Linkbase Document)
|  | 101.PRE (XBRL Taxonomy Presentation Linkbase Document)

* In accordance with Rule 406T of Regulations S-T, the XBRL related information shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
61

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

|  | Isabella Bank Corporation
Date: | October 28, 2020 |  |  | /s/ Jae A. Evans
|  |  |  | Jae A. Evans
|  |  |  | President, Chief Executive Officer
|  |  |  | (Principal Executive Officer)
Date: | October 28, 2020 |  |  | /s/ Neil M. McDonnell
|  |  |  | Neil M. McDonnell
|  |  |  | Chief Financial Officer
|  |  |  | (Principal Financial Officer)

62