Company: ISBA
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0000842517-25-000053
Chunk: 132

Company: ISABELLA BANK CORP
Filing Date: 2025-03-12
Form: 10-K
Item: Item 8
Chunk 132
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 for collateral dependent 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in the condition of the collateral, if the foreclosure process has begun, or if the existing valuation is deemed to be outdated.The following tables list the quantitative fair value information about loans measured at fair value on a nonrecurring basis as of December 31:2024Valuation TechniqueFair ValueUnobservable InputActual RangeWeighted AverageCollateral Dependent LoansDiscount applied to collateral:Discounted value$254 Real Estate20 %20 %2023Valuation TechniqueFair ValueUnobservable InputActual RangeWeighted AverageCollateral Dependent LoansDiscount applied to collateral:Discounted value$1,083 Real Estate20 %20 %Equipment25% - 35%33 %Accounts receivable25 %25 %Collateral discount rates may have ranges to accommodate differences in the age of the independent appraisal, broker price opinion, or internal evaluation.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 3.The following table lists the quantitative information about OMSR fair value measurement as of December 31:2024Valuation TechniqueFair ValueUnobservable InputRateDiscounted cash flow$2,483 Constant prepayment rate7 %Discount rate11 %During the third quarter of 2024, the classification of OMSR was changed from Level 2 to Level 3.  We elected to reevaluate our process for testing for impairment, which included a change in the third-party