Company: ISBA
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0000842517-25-000053
Chunk: 77

Company: ISABELLA BANK CORP
Filing Date: 2025-03-12
Form: 10-K
Item: Item 8
Chunk 77
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 and losses, net of the effect of deferred income taxes, excluded from earnings and reported in other comprehensive income (loss). Included in AFS securities are auction rate money market preferred securities. These investments, for federal income tax purposes, have no federal income tax impact given the nature of the investments. Auction rate money market preferred securities are recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Realized gains and losses on the sale of AFS securities are determined using the specific identification method.ACL - AFS SECURITIES: AFS securities are reviewed quarterly for possible credit impairment. In determining whether a credit-related impairment exists for debt securities, we assess whether: (a) we do not have the intent to sell the security; and (b) it is more likely than not we will not have to sell the security before recovery of its cost basis. If either of these conditions are met, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value 

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through income. If these conditions are not met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors.In order to determine the amount of the credit loss for a debt security, we calculate the recovery value by performing a discounted cash flow analysis based on the current cash flows and future cash flows we expect to recover. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. The amount of the impairment related to other risk factors is recognized as a component of other comprehensive income. Adjustments to the allowance are reported in the income statement as a provision for credit losses.We made an accounting policy election to exclude accrued interest receivable on AFS securities from the estimate of credit losses.  Accrued interest receivable on AFS securities was $1,701 and $2,247 at December 31, 2024, and 2023, which is included in other assets.  AFS securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management, or when criteria regarding intent or requirement to sell is met.LOANS: