Company: ISBA
Filing Date: 2025-08-11
Form Type: 10-Q
Source: 0000842517-25-000135
Chunk: 44

Company: ISABELLA BANK CORP
Filing Date: 2025-08-11
Form: 10-Q
Item: Part I, Item 1
Chunk 44
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icizedCredit 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.•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 – ClassifiedCredit 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 – ClassifiedCredit 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.

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8. DOUBTFUL – WorkoutCredit 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