Company: ISBA
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0000842517-25-000099
Chunk: 104

Company: ISABELLA BANK CORP
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 2
Chunk 104
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. constant rate(3.44)%(1.55)%1.45 %2.83 %(4.67)%(2.18)%1.22 %2.00 %

Gap analysis, the secondary method to measure IRR, measures the cash flows and/or the earliest repricing of our interest-bearing assets and liabilities.  This analysis is useful for measuring trends in the repricing characteristics of the balance sheet.  Significant assumptions are required in this process because of the embedded repricing options contained in assets and liabilities.  Residential real estate and consumer loans allow the borrower to repay the balance prior to maturity without penalty, while commercial and agricultural loans may have prepayment penalties.  The amount of prepayments is dependent upon many factors, including the interest rate of a given loan in comparison to the current offering rates, the level of home sales, and the overall availability of credit in the marketplace.  Generally, a decrease in interest rates will result in an increase in cash flows from these assets. Savings and demand accounts may generally be withdrawn on request without prior notice.  The timing of cash flows from these deposits is estimated based on historical experience.  Certificates of deposit have penalties that discourage early withdrawals.

We do not believe there has been a material change in the nature or categories of our primary market risk exposure, or the particular markets that present the primary risk of loss. We do not know of or expect there to be any material change in the general nature of our primary market risk exposure in the near term, and we do not expect to make material changes to our market risk methods in the near term. We may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

Gap analysis is also utilized as a method to measure interest rate sensitivity. Interest rate sensitivity is determined by the amount of earning assets and interest-bearing liabilities repricing within a specific time period, and their relative sensitivity to a change in interest rates. We strive to achieve reasonable stability in the net interest margin through periods of changing interest rates.

Contractual Obligations and Loan Commitments

We have various financial obligations, including contractual obligations and commitments related to deposits and borrowings, which may require future cash payments.  We also have loan related commitments that may impact liquidity.  The commitments include unused lines of credit, commercial and standby letters of credit, and commitments to grant loans.  These commitments to grant loans include residential mortgage loans with the majority committed to be sold to the secondary market.  Many of these commitments historically have