Company: ISBA
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0000842517-25-000053
Chunk: 44

Company: ISABELLA BANK CORP
Filing Date: 2025-03-12
Form: 10-K
Item: Item 7
Chunk 44
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 economic conditions, and the discovery of information with respect to borrowers which is not known to us at the time of the issuance of the consolidated financial statements.  Changes in the factors used by management to determine the appropriateness of the allowance or the availability of new information could cause the allowance to be increased or decreased in future periods. Additionally, changes in circumstances related to individually large credits, or certain macroeconomic forecast assumptions may result in volatility.

Estimating how potential changes in economic factors might affect the overall allowance is challenging because a wide variety of factors and inputs are considered in the allowance estimate.  Changes in the factors and inputs may not occur at the same rate and may not be consistent across all product types.  Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.  However, to consider the impact of a hypothetical stressed forecast, we estimated the ACL using forecast inputs that were severely unfavorable to the expected scenario for the external factors related to economic conditions, the value of underlying collateral, and the volume and severity of past due, nonaccrual, and adversely classified loans.  This stress scenario resulted in an ACL that is approximately $4,500 higher than the recorded ACL as of December 31, 2024.

For additional discussion concerning our ACL and related matters, see “ACL - Loans” and “Note 3 – Loans and ACL” of “Notes to Consolidated Financial Statements” in Item 8. Financial Statements and Supplementary Data.

U.S. generally accepted accounting principles require that we determine the fair value of the assets and liabilities of an acquired entity, and record the fair value on the date of acquisition.  We employ a variety of measures in the determination of the fair value, including the use of discounted cash flow analysis, market appraisals, and projected future revenue streams.  For certain items that we believe we have the appropriate expertise to determine the fair value, we may choose to use our own calculations of the value.  In other cases, where the value is not easily determined, we consult with independent experts to determine the fair value of the identified asset or liability.  Once valuations have been determined, the net difference between the price paid for the acquired entity and the net value of assets acquired on our balance sheet, including identifiable intangibles, is recorded as goodwill.  Acquisition intangibles and goodwill are qualitatively and quantitatively evaluated annually to determine if it is more likely than not that the carrying balance is impaired on at