Company: ISBA
Filing Date: 2025-11-10
Form Type: 10-Q
Source: 0000842517-25-000210
Chunk: 116

Company: ISABELLA BANK CORP
Filing Date: 2025-11-10
Form: 10-Q
Item: Part I, Item 2
Chunk 116
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,000 Total cash and liquidity$975,856 $925,528 $907,003 $776,672 $797,818 Uninsured deposits$726,514 $726,240 $687,341 $645,764 $687,990 Coverage ratio of uninsured deposits with total cash and liquidity134 %127 %132 %120 %116 %(1) Includes estimated unencumbered lendable value of FHLB collateral of $230,000 as of September 30, 2025.

Fair Value

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

For further information regarding fair value measurements see “Note 7 – Fair Value” of our interim condensed consolidated financial statements included with this Form 10-Q.

Interest Rate Sensitivity and Market Risk

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

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

The primary technique to measure IRR is simulation analysis. Simulation analysis forecasts the effects on the balance