COFS 10-K & 10-Q changes, risk factors and insider trading
Choiceone Financial Services Inc. · Nasdaq · State Commercial Banks · CIK 803164 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “The Company operates in a highly competitive industry and market area.”
Largest changes
“The Company operates in a highly competitive industry and market area.”see in full comparison
Trade tariffs, trade policy or retaliatory measures by trade partners War or military conflicts, including the recent escalation of conflicts in the middle east New developments, laws or regulations in the banking industry Acquisitions or business combinations involving the Company or its competition Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated Volatility of stock market prices and volumes Changes in market valuations of similar companies New litigation or contingencies or changes in existing litigation or contingencies Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies Rumors or erroneous information Credit and capital availability Issuance of additional shares of common stock or other debt or equity securities of the Company Market conditions General economic conditions Turbulence, uncertainty or a lack of confidence within the banking industrysee in full comparison
“The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and regional banks within the various markets where the Company operates, as well as internet banks and other financial technology companies. The Company also faces competition from many other types of financial institutions, including savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. …”see in full comparison
At December 31,see in full comparison2024,2025, the Company had$116.6$90.4 million in unrealized losses on its investment securities, including$61.1$52.8 million in unrealized losses on available for salesecuritiessecurities,and $55.5$37.2 in unrealized losses on held to maturity securities, and $471,000 in unrealized losses on equity securities. If the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operations and financial condition, including a negative impact on net income and a permanent reduction in equity capital.The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.
A substantial portion of the Company’s loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of December 31,see in full comparison2024,2025, the Company had approximately$918.2$1.8millionbillion of commercial and construction real estate loans outstanding, which represented approximately59.4%59.6% of its loan portfolio. As of that same date, the Company had approximately$281.7$728.0 million in residential real estate loans outstanding, or approximately18.2%24.1% of its loan portfolio. Consequently, real estate-related credit risks are a significant concern for the Company. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by the Company or its borrowers. A downturn in the real estate market, especially in Michigan, could cause us to incur losses and have a material adverse effect on our results of operations or financial condition.
Full comparison: every changed paragraph (10)
The Company is affected by general economic conditions in the United States, although most directly within Michigan. An economic downturn within Michigan caused by inflation, recession or a recessionary environment, trade tariffs, trade policy or retaliatory measures by trade partners, unemployment, changes in financial or capital markets or other factors, could negatively impact household and corporate incomes. This impact may lead to decreased demand for both loan and deposit products and increase the number of customers who fail to pay interest or principal on their loans.
We are subject to extensive government regulation under both federal and state law. We are subject to regulation by the Federal Reserve,Reserve Board, the FDIC and the DIFS, in addition to other regulatory and self-regulatory organizations. Current laws and applicable regulations are subject to change and any new regulatory change could make compliance more expensive, difficult, or otherwise adversely affect our business. Specifically, regulation changes to overdraft fees could adversely affect our business. We cannot predict the ultimate effect of any changes to regulations affecting us, but such changes could have a material adverse effect on our results of operation or financial condition.
At December 31, 2024,2025, the Company had $116.6$90.4 million in unrealized losses on its investment securities, including $61.1$52.8 million in unrealized losses on available for sale securitiessecurities, and $55.5$37.2 in unrealized losses on held to maturity securities, and $471,000 in unrealized losses on equity securities. If the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operations and financial condition, including a negative impact on net income and a permanent reduction in equity capital. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.
The fair value evaluation of investment securities is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of investments require the establishment of an allowance for credit losses. The risks and uncertainties include changes in general economic conditions, the issuer’s financial condition or future recovery prospects and the effects of changes in interest rates or credit spreads. Estimating future cash flows involves incorporating information received from third-party sources and making internal assumptions and judgments regarding the future performance of the underlying collateral and assessing the probability that an adverse change in future cash flows has occurred. The determination of an allowance for credit losses is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Our management considers a wide range of factors about the security issuer and uses reasonable judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Additions to the allowance for credit losses for our investment securities may need to be taken in the future, which could have a material adverse effect on our results of operations andor financial condition.
A substantial portion of the Company’s loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of December 31, 2024,2025, the Company had approximately $918.2$1.8 millionbillion of commercial and construction real estate loans outstanding, which represented approximately 59.4%59.6% of its loan portfolio. As of that same date, the Company had approximately $281.7$728.0 million in residential real estate loans outstanding, or approximately 18.2%24.1% of its loan portfolio. Consequently, real estate-related credit risks are a significant concern for the Company. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by the Company or its borrowers. A downturn in the real estate market, especially in Michigan, could cause us to incur losses and have a material adverse effect on our results of operations or financial condition.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the CompanyCompany, the Bank and/or its third party service providers. Although we employ reasonably comprehensive measures to prevent, detect, address and mitigate these threats (including access controls, employee training, data encryption, vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third partiesparties, regulatory criticism or proceedings and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations.
The Company operates in a highly competitive industry and market area.
The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and regional banks within the various markets where the Company operates, as well as internet banks and other financial technology companies. The Company also faces competition from many other types of financial institutions, including savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. The Company competes with these institutions both in attracting deposits and in making new loans. Technology has lowered barriers to entry into the market and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures, such as credit unions that are not subject to federal income tax. Due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.
Trade tariffs
Trade tariffs, trade policy or retaliatory measures by trade partners War or military conflicts, including the recent escalation of conflicts in the middle east New developments, laws or regulations in the banking industry Acquisitions or business combinations involving the Company or its competition Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated Volatility of stock market prices and volumes Changes in market valuations of similar companies New litigation or contingencies or changes in existing litigation or contingencies Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies Rumors or erroneous information Credit and capital availability Issuance of additional shares of common stock or other debt or equity securities of the Company Market conditions General economic conditions Turbulence, uncertainty or a lack of confidence within the banking industry
Management's Discussion & Analysis (MD&A)
Largest changes
“Acquired loans were recorded at their estimated fair values as of the acquisition date. The fair value of acquired loans reflects the present value of expected future cash flows, discounted at market‑based rates of return, and incorporates assumptions related to credit risk, interest rates, prepayment speeds, and liquidity risk. Key assumptions used in the valuation process include expected default rates, loss severity, prepayment behavior, and the timing of expected cash flows. …”see in full comparison
“ChoiceOne engaged a third party valuation firm to assist in performing a quantitative analysis of goodwill as of June 30, 2024 ("the measurement date"). In deriving the fair value of the reporting unit (the Bank), the third-party firm assessed general economic conditions and outlook; industry and market considerations and outlook; the impact of recent events to financial performance; the market price of ChoiceOne’s common stock and other relevant events. In addition, the valuation relied on financial projections through 2029 and growth rates prepared by management. …”see in full comparison
“Management believes the accounting estimate related to loan servicing rights is a “critical accounting estimate” because (1) the estimate is highly susceptible to change from period to period because of significant changes within long-term interest rates affecting the prepayment speeds for current loans being serviced and (2) the impact of recognizing an impairment loss could have a material effect on ChoiceOne’s net income. Management has obtained a third-party valuation of its loan servicing rights to corroborate its current carrying value at the end of each reporting period.”see in full comparison
“ChoiceOne conducted an annual assessment of goodwill as of June 30, 2025 and no impairment was identified. No material changes and no triggering events have occurred that indicated impairment.”see in full comparison
“Securities Available for Sale – For securities AFS in an unrealized loss position, management determines whether they intend to sell or if it is more likely than not that ChoiceOne will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities AFS with unrealized losses not meeting these criteria, management evaluates whether any decline in fair value is due to credit loss factors. …”see in full comparison
“Deposits, excluding brokered deposits, increased by $1.3 billion as of December 31, 2025, compared to December 31, 2024 largely as a result of the Merger. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and short term FHLB advances to ensure ample liquidity. As of December 31, 2025, the total balance of borrowed funds from the FHLB was $265.0 million at a weighted average rate of 3.83%, with $245.0 million due within 12 months. At December 31, 2025, total available borrowing capacity secured by pledged assets was $1.1 billion. …”see in full comparison
Full comparison: every changed paragraph (90)
On March 1, 2025, ChoiceOne completed the merger (the “Merger”) of Fentura Financial, Inc. (“Fentura”), the former parent company of The State Bank, with and into ChoiceOne with ChoiceOne surviving the merger. On March 14, 2025, ChoiceOne Bank completed the consolidation of The State Bank with and into ChoiceOne Bank with ChoiceOne Bank surviving the consolidation.
ChoiceOne and Fentura Financial, Inc., the parent company of The State Bank, entered into a definitive merger agreement on July 25, 2024 pursuant to which ChoiceOne and Fentura would merge in an all-stock transaction (the “Merger”). The Merger was effective on March 1, 2025.
On July 26, 2024, ChoiceOne completed an underwritten public offering of 1,380,000 shares of its common stock at a price to the public of $25.00 per share.
ChoiceOne reported net income of $28,176,000 for the year ended December 31, 2025, compared to net income of $26,727,000 for the same period in the prior year . Net income excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes, was $51,524,000 for the year ended December 31, 2025. Diluted earnings per share were $2.01 for the year ended December 31, 2025, compared to diluted earnings per share of $3.25 for the same period in the prior year. Diluted earnings per share excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes, were $3.68 for the year ended December 31, 2025.
ChoiceOne's net income for 2024 was $26.7 million, compared to $21.3 million in 2023. Diluted earnings per share were $3.25 in the twelve months ended December 31, 2024, compared to $2.82 per share in the twelve months ended December 31, 2023. Net income adjusted for merger related expenses (non-GAAP) was $27.7 million for the twelve months ended December 31, 2024 with adjusted diluted earnings per share of $3.37.
ChoiceOne's asset mix has shifted from loans held for investment of 66.5% of deposits at December 31, 2023 to 69.8% of deposits at December 31, 2024.2024 to 83.9% of deposits at December 31, 2025. As of December 31, 2024,2025, total assets were $2.7$4.4 billion, an increase of $146.5$1.7 millionbillion compared to December 31, 2023.2024. The growth in total assets is primarily attributed to anthe increaseMerger. In addition to growth related to the Merger, ChoiceOne also grew in core loansloans, securities and mortgage warehouse advances, which consist of $114.5a millionline of credit to fund participated mortgage loans. Interest rates and loansbalances tofrom otherthis financialwarehouse institutionsline of $20.5credit million.fluctuate Thiswith growththe wasnational offsetmortgage bymarket aand $48.9are millionshort reductionterm in securities during the same time period. ChoiceOne has actively managed its balance sheet to support organic loan growth, strategically shifting from lower-yielding assets to higher-yielding loans. This is reflected in the loan growth experienced.nature.
Core loans, which exclude held for sale loans and mortgage warehouse advances, grew organically by $86.1 million or 5.7% during the twelve months ended December 31, 2025. Core loans also grew by $1.4 billion due to the Merger on March 1, 2025. As a result of loan growth and interest income due to accretion from purchased loans, loan interest income increased $83.3 million in the full year 2025 compared to the same period in 2024. Interest income for the year ended December 31, 2025, includes $13.1 million of interest income due to accretion from purchased loans compared to $1.2 million for the same period in 2024. Interest income due to accretion from purchased loans increased GAAP net interest margin by 34 basis points in the full year 2025. Estimated interest income due to accretion from purchased loans for 2026 using the effective interest method of amortization is $8.0 million; however, actual results will be dependent on prepayment speeds and other factors. It is estimated that a total of $53.1 million remains to be recognized as interest income due to accretion from purchased loans over the life of the loan portfolio.
Deposits, excluding brokered depositsdeposits, increased $79.0by million$1.3 orbillion 3.8%as duringof 2024.December The31, increase2025, incompared deposits in the twelve months endedto December 31, 2024 islargely as a combinationresult of new business and recapture of deposit losses from the prior year.Merger. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and short term FHLB advances to ensure ample liquidity. As of December 31, 2025, the total balance of borrowed funds from the FHLB was $265.0 million at a weighted average rate of 3.83%, with $245.0 million due within 12 months. At December 31, 2024,2025, total available borrowing capacity secured by pledged assets was $837.2$1.1 million.billion. ChoiceOne can increase its borrowing capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $833.2$1.2 millionbillion or 37.6%33.2% of deposits at December 31, 2024.2025.
ChoiceOne's cost of deposits to average total deposits has increased from 1.14% in 2023 to 1.58% in 2024. During 2023 ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and declined slightly in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the twelve months ended December 31, 2024, increased $3.1 million compared to the same period in the prior year, due to increases in the average balance borrowed. During the fourth quarter of 2024, ChoiceOne paid down its advance from the Bank Term Funding Program and replaced it with $135.0 million of FHLB borrowings. This increased ChoiceOne's total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%, with the earliest maturity in January 2025.
The provision for credit losses expense on loans was $15.1 million during 2025, due primarily to $12.0 million of expense for the acquisition of $1.3 millionbillion of purchased loans without credit deterioration (“non-PCD loans”) in the fullMerger. yearAdditional 2024,expense duewas recorded to theaccount significantfor growthorganic ofgrowth, corechanges loans.in Corequalitative loanfactors, growthand wasforecast offsetdata by slight improvementsused in the Federalallowance Openfor Marketcredit Committeelosses ("FOMC") forecast during the full year 2024.calculation. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.18% on December 31, 2025 compared 1.07% on December 31, 2024 compared to 1.11% on December 31, 2023.2024. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.03%0.04%. andNonperforming loans to total loans (excluding loans held for sale) increased to 0.98% as of December 31, 2025 compared to 0.24% as of December 31, 2024. Notably, 0.63% of the nonperforming loans to total loans (excluding loans held for sale) ofis 0.24%attributed to certain purchased loans which were identified prior to the Merger as having credit deterioration. Importantly, we believe this uptick is not indicative of Decembera 31,broader 2024.trend, Nonperformingand loanscurrent haveportfolio increasedperformance sincedoes thenot historicsuggest lowsemerging weakness in 2023,underlying butcredit still remain at low levels and consist entirely of residential loans with strong collateral positions.quality.
Noninterest income increased by $6.7 million for the year ended December 31, 2025, compared to the same period in the prior year. This increase was partly driven by higher interchange income, which rose due to increased volume from the Merger. Trust income as well as insurance and investment commissions income also increased as a result of higher estate settlement fees and customers obtained from the Merger. These increases were offset by a decline in gains on sales of loans and losses on sales and write downs of other assets. Gains on sales of loans declined due to a higher mix of loans held on the balance sheet and market conditions.
Noninterest income increased $3.1 million in the twelve months ended December 31, 2024, compared to the same period in the prior year. The increase was largely due to an increase in credit and debit card fees of $1.1 million in the full year 2024 compared to the full year 2023 and earnings on life insurance policies in the twelve months ended December 31, 2024, compared to the same period in the prior year. ChoiceOne recognized earnings on two bank owned life insurance death benefit claims for a total of $700,000 during 2024. ChoiceOne also saw an increase in the market value of equity securities in the full year 2024, compared to the prior year. Equity securities include community bank stocks and CRA focused bond mutual funds. ChoiceOne additionally saw an uptick in gains on sales of loans during the fourth quarter of 2024 due in part to participation in the FHLB Rate Advantage program which provides incentives to home buyers in the low to moderate income bracket.
Noninterest expense increased by $54.0 million for the year ended December 31, 2025, compared to the same period in 2024. The increase in 2025 was largely due to merger-related expenses of $17.4 million during 2025, compared to $1.0 million in the year ended December 31, 2024. Management does not anticipate additional material merger-related expenses. The remainder of the increase was primarily due to the addition of Fentura on March 1, 2025. ChoiceOne will continue to invest in its talented staff, technology and footprint while prioritizing operational efficiency and disciplined investment. ChoiceOne has secured a location in Troy, Michigan and expects to open a full service branch and lending office later in 2026. We believe this new office will help us continue our strong growth in an attractive market. In addition, we are experimenting with automation and AI‑driven solutions designed to modernize processes to augment the ability for our existing staff to manage our growth.
Noninterest expense increased by $3.6 million or 6.6% in the twelve months ended December 31, 2024 compared to the same period in 2023. The increase in total noninterest expense was due in part to merger related expenses of $1.0 million during the twelve months ended December 31, 2024, compared to $0 in the same period in the prior year. Additionally, there was an increase to employee health insurance and other benefit costs, and an increase to FDIC insurance and other costs related to the inflationary environment. The increase in costs was offset by a decline in occupancy and equipment cost related to two branch closures during the first quarter of 2024. ChoiceOne seeks to strategically manage costs while still making thoughtful investments in order to maintain our competitive edge and deliver exceptional value to our customers, shareholders, and communities.
Cash dividends of $16.9 million or $1.13 per common share were declared in 2025 compared to $9.0 million or $1.09 per common share were declared in 2024 compared to $7.9 million or $1.05 per common share in 2023.2024. The dividend yield for ChoiceOne’s common stock was 3.83% as of the end of 2025, compared to 3.06% as of the end of 2024, compared to 3.58% as of the end of 2023.2024. The cash dividend payout as a percentage of net income was 60.2% as of December 31, 2025, compared to 33.7% as of December 31, 2024,2024. comparedThe large increase was due to 37.2%merger-related asexpenses leading to a net income loss during the first quarter of December 31, 2023.2025.
Income tax expense was $2.1$350,000 million higherlower in 20242025 than in 2023.2024. The effective tax rate was 19.2%17.6% for the year ended December 31, 20242025 compared to 16.8%19.2% for the same period in 2023.2024. ForChoiceOne’s 2024,fourth‑quarter 2025 tax expense was reduced by a net of $340,000 as a result of purchasing a transferable tax credit that will be applied to 2025 income beforetaxes, incomewith tax,allowable disallowedcarrybacks interestto prior years. Management is continuing to evaluate additional transferable tax credit opportunities and may pursue further purchases to help offset tax expense (TEFRA)in and nondeductible merger expenses increased compared to 2023.2026. For further details, refer to Note 12 - Income Taxes of the Notes to the Consolidated Financial Statements included in Item 8 of this report.
Loans include both loansmortgage towarehouse other financial institutionsadvances and loans held for sale.
Interest on loans included net origination fees and accretion income. Accretioninterest income due to accretion from purchased loans. Interest income due to accretion from purchased loans was $13.1 million, $1.2 million, $1.7 million, and $2.0$1.7 million for the full year 2025, 2024, and 2023, and 2022, respectively.
(6)
Interest income for 2024 and 2023 was reduced by $1.1 million and $2.8 million, respectively, due to amortization expense related to the March 2023 sale of the pay floating swap derivative.
GAAP based net interest income increased $8.6$62.6 million, and tax-equivalent net interest income increased $8.6$62.7 million, respectively,million for the full year 2024,2025, compared to the same period in 2023.2024. GAAP based net interest margin increased 1866 basis points, and tax equivalent net interest margin increased 1864 basis points, respectively,points in 20242025 compared to 2023.2024.
ChoiceOneCore hasloans, experiencedwhich substantialexclude coreheld for sale loans and mortgage warehouse advances, grew organically by $86.1 million or 5.7% during the twelve months ended December 31, 2025. Core loans also grew by $1.4 billion due to the Merger on March 1, 2025. This loan growth from December 31, 2023 to December 31, 2024, leadingled to an increase in interest income from loans of $21.2$83.3 million in the twelve months ended December 31, 2024,2025, compared to the same period in the prior year. Average core loans grew $191.2$1.3 millionbillion for the twelve months ended December 31, 2024,2025, compared to the same period in the prior year. In addition, the average rate earned on loans increased 7521 basis points for the twelve months ended December 31, 2024,2025, compared to the same period in the prior year. Interest income for the year ended December 31, 2025, includes $13.1 million of interest income due to accretion from purchased loans compared to $1.2 million for the same period in 2024. Interest income due to accretion from purchased loans increased GAAP net interest margin by 34 basis points in the full year 2025.
The average balance of total securities decreasedincreased $61.1$16.2 million in 2024,2025, compared to the same period in 2023.2024. The decreaseincrease wasis largely due to the paydowns,purchase maturities,of $40.6 million of agency mortgage backed securities in the third quarter of 2025. ChoiceOne also entered into $30.4 million in amortizing pay-fixed, receive variable interest rate swaps designed to amortize with the expected cash flow of the bonds and redemptionshold duringa 2024.coupon of 3.52% and a contractual term ending in 2040. Interest income on securities remaineddeclined flat$309,000 in 20242025 compared to 20232024 despite the decline in average balance aswhile the average rate earned on securities increaseddeclined 17by 8 basis points for the full year 2024,2025, compared to the same period in the prior year.
Interest expense increased $13.6$19.2 million for the full year 2024,2025, compared to the same period in the prior year. The average balance of deposits, excluding brokered deposits, increased by $817.9 million during the full year 2025, compared to the full year 2024 largely as a result of the Merger. The average rate paid on interest bearing-demand deposits and savings deposits increased 3321 basis points in the twelve months ended December 31, 2024,2025, compared to the same period in the prior year.year Thisdue wasto compoundedhigher bycost deposit accounts purchased during the increase in the average balance of interest bearing-demand deposits and savings deposits, of $7.4 million during 2024.Merger. The increase in the average balance of certificates of deposit of $81.7$202.6 million during 2024,2025, combinedoffset withby a 9256 basis point increasedecline in the rate paid on certificates of deposits during 2024,2025, compared to the same period in the prior year, led to an increase in interest expense of $6.4$5.5 million during 2024.2025.
The cost of funds decreased by 11 basis points, from 1.92% to 1.81% in 2025 compared to the same period in the prior year, primarily due to a decrease in higher cost local and brokered CDs. Interest expense on borrowings for the year ended December 31, 2025 decreased by $1.3 million compared to the same period in the prior year, due to a $5.5 million decline in the average balance borrowed and a decline in the rate paid on borrowings of 50 basis points in 2025 compared to the rate paid on borrowings in 2024. With ChoiceOne’s already low cost of deposits and market conditions, further reductions in federal funds rates may not immediately offset with savings on reductions in deposits and short term borrowings.
During 2023, ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and has slightly declined in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. ChoiceOne has been able to outpace the increased cost of deposits by increased loan originations at higher average interest rates.
ChoiceOne held $170.0 million in borrowings from the Bank Term Funding Program ("BTFP") during the first three quarters of 2024 and during the fourth quarter of 2024, ChoiceOne paid down its advance from the Bank Term Funding Program and replaced it with $135.0 million of FHLB borrowings. This increased the total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%. The net effect of these additional borrowed funds was an increase in interest expense of $3.1 million for the year ended December 31, 2024, compared to the same period in 2023.
In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. In addition, ChoiceOne holds certain subordinated debentures issued in connection with a trust preferred securities offering that were obtained as part of the merger with Community Shores.Shores and the Merger with Fentura. The average balance of subordinated debentures wasincreased relatively$10.7 flatmillion and the average rate on subordinated debentures increased 144 basis points in 2024the full year 2025, compared to the same period in the prior year due to the additional subordinated debentures obtained in the Merger. The increase led to additional expense of $1.2 million in 2025 compared to the same period in prior year.
Note: In the table above, "consumer" includes deposit account charge-offs and recoveries. Net consumer deposit account charge-offs were $223,000 for the full year 2025 compared to $237,000 and $226,000 for the full year 2024 and 2023, respectively.
The allowance for credit losses ("ACL") consists of general and specific components. The general component covers loans collectively evaluated for credit loss and is based on peer historical loss experience adjusted for current and forecasted factors. Management's adjustment for current and forecasted factors is based on trends in delinquencies, trends in charge-offs and recoveries, trends in the volume of loans, changes in underwriting standards, trends in loan review findings, the experience and ability of lending staff, changes in the value of underlying collateral for collateral dependent loans, industry conditions, and a reasonable and supportable economic forecast described further below.
The determination of our loss factors is based, in part, upon benchmark peer loss history adjusted for qualitative factors that, in management's judgment, affect the collectability of the portfolio as of the analysis date. ChoiceOne'sOur lookback period offor benchmark peer net charge-off history wasexcludes the years 2020 and 2021 due to the COVID-19 pandemic and spans from January 1, 20042004, throughto December 31, 20192019, forand thisJanuary analysis.1, 2022, to December 31, 2024.
Loans individually evaluated for credit losses increased by $2.0$27.1 million to $4.1$31.2 million during the year ended December 31, 2024,2025, and the ACL related to these individually evaluated loans increased by $108,000$5.3 million during the same period largely due to the balance increase. Notably, $23.8 million, or 88.0%, of the increase in individually evaluated loans resulted from loans added through the Merger. Similarly, $5.2 million, or 97.8%, of the increase in the ACL related to individually evaluated loans is attributable to loans acquired in the Merger.
Nonperforming loans, which includes Other Real Estate Owned ("OREO") but excludes performing troubled loan modifications ("TLM"), increased by $1.9$23.4 million to $3.8$27.1 million at December 31, 2024,2025, compared to a historically low balance on December 31, 2023.2024. AllNotably, non-performing$21.8 million or 73.2% of nonperforming loans arewere retailacquired induring nature.the Merger. The ACL was 1.07%1.18% of total loans, excluding loans held for sale, at December 31, 2024,2025, compared to 1.11%1.07% as of December 31, 2023.2024. The liability for expected credit losses on unfunded loans and other commitments was $1.5$1.3 million on December 31, 2024,2025, compared to $2.2$1.5 million as of December 31, 2023.2024.
Net charge-offs were $433,000$1.0 million during the full year 2024,2025, compared to net charge-offs of $364,000$433,000 during the same period in 2023.2024. Net charge-offs for checking accounts during the full year 20242025 were $237,000$223,000 compared to $226,000$237,000 for the same period in the prior year. Net charge-offs as a percentage of average loans were 0.04% in the full year 2025, compared to 0.03% during the full year 2024 and 2023.2024.
Net provision for credit losses was $14.8 million for the full year 2025. The provision for credit losses on loans was $1.3$15.1 million during the full year 2024 and 2023,2025, due primarily to core$12.0 loanmillion growth,of whichexpense wasfor partiallythe offsetacquisition byof slight$1.3 improvementsbillion of non-PCD loans in the FederalMerger. OpenAdditional Marketexpense Committeewas ("FOMC")recorded to account for organic growth, changes in qualitative factors, and forecast duringdata used in the fullallowance yearfor credit losses calculation. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.18% on December 31, 2025 compared 1.07% on December 31, 2024. The loan provision expense was offset by the decrease in unfunded commitments provision expense of $675,000$300,000 in the full year 20242025 due to changes in mix and expected funding rates during the year. Total unfunded commitments decreasedincreased $15.9$208.3 million in the full year 20242025 compared to December 31, 2023.2024.
Net provision for credit losses was $625,000 for the full year 2024.
As of December 31, 2025, total assets were $4.4 billion, an increase of $1.7 billion compared to December 31, 2024. The growth in total assets is primarily attributed to the Merger. Core loans, which exclude held for sale loans and mortgage warehouse advances, grew organically by $86.1 million or 5.7% during the twelve months ended December 31, 2025. Core loans also grew by $1.4 billion due to the Merger on March 1, 2025.
Deposits, excluding brokered deposits, increased by $1.3 billion as of December 31, 2025, compared to December 31, 2024 largely as a result of the Merger, while the total balance of borrowed funds from the FHLB was $265.0 million as of December 31, 2025.
Securities
Total assets grew $146.5 million in the twelve months ended December 31, 2024. Core loans grew $114.5 million or 8.2% and were offset by a decline in investment securities of $48.9 million. Deposits, excluding brokered deposits, increased by $79.0 million during 2024, while borrowings declined by $25.0 million. Deposit costs rose steadily in the first half of the year followed by a decline in the second half of the year which coincided with the decreases to the federal funds rate starting in September of 2024.
Total securities increased $67.5 million as of December 31, 2025, compared to December 31, 2024. The increase is largely due to the purchase of $40.6 million of agency mortgage backed securities in the third quarter of 2025. ChoiceOne also entered into $30.4 million in amortizing pay-fixed, receive variable interest rate swaps designed to amortize with the expected cash flow of the bonds and hold a coupon of 3.52% and a contractual term ending in 2040. ChoiceOne acquired $90.7 million in securities as part of the Merger of which management chose to sell $78.9 million in securities to pay down higher cost wholesale funding. Consequently, the net increase in securities from the Merger was $11.8 million. Securities totaling $15.6 million were called or matured in 2025. ChoiceOne received principal payments for municipal and mortgage-backed securities totaling $24.4 million during 2025.
Total investment securities declined $48.9 million from December 31, 2023 to December 31, 2024. ChoiceOne purchased $16.8 million of securities in 2024. Securities totaling $11.8 million were called or matured in 2024. ChoiceOne received principal payments for municipal and mortgage-backed securities totaling $48.0 million during 2024.
ChoiceOne utilizes interest rate derivatives as part of its asset liability management strategy to help manage its interest rate risk position. In order to hedge the risk of rising rates and unrealized losses on securities resulting from the rising rates, ChoiceOne currently holds pay fixed, receive variable interest rate swaps with a total notional value of $401.0$380.4 million.million as of December 31, 2025. These derivative instruments increase in value as long-term interest rates rise, which partially offsets the reduction in shareholders' equity due to unrealized losses on securities available for sale. Refer to Note 8 - Derivatives and Hedging Activities of the consolidated financial statements for more discussion on ChoiceOne’s derivative position.position and Note 25 - Subsequent Events: Sale of Interest Rate Swaps, which discusses the sale of $201.0 million of pay-fixed interest rate swaps in January 2026.
Core loans, which exclude held for sale loans and mortgage warehouse advances, grew organically by $86.1 million or 5.7% during the twelve months ended December 31, 2025. Core loans also grew by $1.4 billion due to the Merger on March 1, 2025.
AverageGrowth loan balances increased $191.2 million in the full year 2024 compared to the same period in 2023. Core loans grew organically by $114.5 million or 8.2% during 2024, with growthwas concentrated in Non-Owner Occupied CRE loans, which grew by $88.8$530.7 million, 1-4 Family Loans, which grew by $495.7 million, and Owner Occupied CRE loans, which grew by $44.5 million, and 1-4 Family Loans, which grew by $33.1$227.2 million. The growth in 1-4 Family loans was largely related to the Merger with $19.1 million coming from growth in mortgage warehouse advances. The growth in owner occupied and non-owner occupied CRE loans was due to othera financial institutions which were $39.9 million asmixture of Decembergrowth 31,from 2024,the comparedMerger toand $19.4organic milliongrowth. asMortgage ofwarehouse Decemberadvances 31, 2023. Loans to other financial institutions is comprisedconsist of a warehouse line of credit to facilitatefund participated mortgage loanloans originations and thewith interest raterates fluctuateson these advances fluctuating with the national mortgage market. This balance is short term in nature with an average life of under 30 days. Management believes the short-term structure and low credit risk of this asset is advantageous in the current rate environment; however, this balance is volatile and could change based on the third party origination volume or discretion.market Loan interest including fee income increased $21.2 million in the full year 2024, compared to the same period in the prior year.conditions.
As a result of loan growth and interest income due to accretion from purchased loans, loan interest income increased $83.3 million in the full year 2025 compared to the same period in 2024. Interest income for the year ended December 31 2025 includes $13.1 million of interest income due to accretion from purchased loans compared to $1.2 million for the same period in 2024. Interest income due to accretion from purchased loans increased GAAP net interest margin by 34 basis points in the full year 2025. Estimated interest income due to accretion from purchased loans for 2026 using the effective interest method of amortization is $8.0 million; however, actual results will be dependent on prepayment speeds and other factors. It is estimated that a total of $53.1 million remains to be recognized as interest income due to accretion from purchased loans over the life of the loan portfolio.
ChoiceOne recorded accretion income related to acquired loans in the amount of $1.2 million in 2024 and $1.7 million during 2023. Remaining credit and yield mark on acquired loans from the mergers with County Bank Corp. and Community Shores will accrete into income as the acquired loans mature. ChoiceOne estimates that roughly $1.3 million will accrete into income over the next one to three years.
Nonperforming loans, which includes Other Real Estate Owned ("OREO") but excludes performing troubled loan modifications ("TLM"), increased by $23.4 million to $27.1 million at December 31, 2025, compared to a historically low balance on December 31, 2024. Notably, $21.8 million or 73.2% of nonperforming loans were acquired during the Merger. Nonaccrual loans included $10.9 million in residential real estate loans, $8.0 million in commercial real estate loans, $8.0 million in commercial and industrial loans and $101,000 in consumer loans as of December 31, 2025, compared to $3.5 million in residential real estate loans, $229,000 in construction real estate loans, and $8,000 in consumer loans as of December 31, 2024. There were $128,000 and $121,000 of TLM loans at December 31, 2025 and December 31, 2024, respectively.
Nonaccrual loans included $3.5 million in residential real estate loans, $229,000 in construction real estate loans, and $8,000 in consumer loans as of December 31, 2024, compared to $1.7 million in residential real estate loans as of December 31, 2023. There were no troubled loan modifications ("TLM") at December 31, 2024, compared to $60,000 of commercial and industrial TLM loans and $129,000 of residential real estate TLM loans at December 31, 2023.
Management also maintains a list of loans that are not classified as nonperforming loans but where some concern exists as to the borrowers’ abilities to comply with the original loan terms. There were 16 loans totaling $4.1 million fitting this description as of December 31, 2025, and 19 loans totaling $375,000 fitting this description as of December 31, 2024, and 22 loans totaling $357,000 fitting this description as of December 31, 2023.2024.
Deposits, excluding brokered deposits, increased by $1.3 billion as of December 31, 2025, compared to December 31, 2024 largely as a result of the Merger. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and short term FHLB advances to ensure ample liquidity. As of December 31, 2025, the total balance of borrowed funds from the FHLB was $265.0 million at a weighted average rate of 3.83%, with $245.0 million due within 12 months. At December 31, 2025, total available borrowing capacity secured by pledged assets was $1.1 billion. ChoiceOne can increase its borrowing capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $1.2 billion or 33.2% of deposits at December 31, 2025.
Deposits, excluding brokered deposits increased $79.0 million or 3.8% during 2024. The increase in deposits in the twelve months ended December 31, 2024 is a combination of new business and recapture of deposit losses from the prior year. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and FHLB advances to ensure ample liquidity.
At December 31, 2024, total available borrowing capacity secured by pledged assets was $837.2 million. ChoiceOne can increase its capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $833.2 million or 37.6% of deposits at December 31, 2024. Core deposits, which we define as insured branch deposits less certificates of deposit, totaled $1.1 billion or 51.2% of total deposits at December 31, 2024.
ChoiceOne's cost of deposits to average total deposits has increased from 1.14% in 2023 to 1.58% in 2024. During 2023 ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and has slightly declined in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the twelve months ended December 31, 2024, increased $3.1 million compared to the same period in the prior year, due to increases in the average balance borrowed. During the fourth quarter of 2024, ChoiceOne paid down its advance from the Bank Term Funding Program and replaced it with $135.0 million of FHLB borrowings. This increased ChoiceOne's total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%, with the earliest maturity in January 2025.
In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. ChoiceOne used a portion of net proceeds from the private placement to redeem senior debt, fund common stock repurchases, and support bank-level capital ratios. ChoiceOne also holds $3.5$12.5 million in subordinated debentures issued in connection with a $14.0 million trust preferred securities offering, which were obtained in the Merger with Fentura, offset by the mark-to-market adjustment and $3.6 million in subordinated debentures issued in connection with a $4.5 million trust preferred securities offering, which were obtained in the merger with Community Shores, offset by the mark-to-market adjustment.
As of December 31, 2025, shareholders’ equity was $465.4 million, a significant increase from $260.4 million on December 31, 2024. This growth was primarily driven by the Merger, in which ChoiceOne issued 6,070,836 shares of common stock on March 1, 2025, valued at $193.0 million. Additional growth of $2.1 million is the result of improvement to accumulated other comprehensive loss during the year and growth in retained earnings of $11.2 million during the full year 2025. ChoiceOne also repurchased 25,116 shares of stock for a net cost of $775,000 under our existing share repurchase plan. The repurchase plan has 350,272 shares remaining to purchase as of December 31, 2025. The repurchase in 2025 reflects our view that our capital position is healthy and the repurchase of shares is in the best interest of our shareholders. ChoiceOne Bank continues to be “well-capitalized,” with a total risk-based capital ratio of 12.5% as of December 31, 2025, compared to 12.7% on December 31, 2024.
Shareholders’ equity totaled $260.4 million as of December 31, 2024, up from $195.6 million as of December 31, 2023, due in large part to the $34.5 million in aggregate gross proceeds (before deducting discounts and estimated offering expenses) received from the sale of 1,380,000 shares of common at a price to the public of $25.00 per share on July 26, 2024. The additional increase is due to retained earnings and an improvement in accumulated other compressive loss (AOCI) of $13.8 million compared to December 31, 2023. The improvement in AOCI is due to both the shortening duration and maturing (paydowns) of the securities portfolio, offset by the change in unrealized gain of the pay-fixed swap derivatives. The pay-fixed swap derivatives are designed to offset swings in AOCI due to changes in interest rates. ChoiceOne Bank remains “well-capitalized” with a total risk-based capital ratio of 12.7% as of December 31, 2024, compared to 12.4% on December 31, 2023.
ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On December 31, 2024,2025, ChoiceOne hadheld pay-fixedpay-fixed, receive variable interest rate swaps with a total notional value of $401.0$380.4 million, a weighted average coupon of 3.07%,3.15%, a fair value of $23.6$8.4 million and an average remaining contract length of 77.0 years. In addition to 8the years.pay-fixed, receive variable interest rate swaps, ChoiceOne also employs back-to-back swaps on select commercial loans, with the impact reflected in interest income. These derivative instruments increase in value as long-term interest rates rise, which offsets the reduction in equity due to unrealized losses on securities available for sale. Refer to Note 8 - Derivatives and Hedging Activities of the consolidated financial statements for more discussion on ChoiceOne’s derivative position and Note 25 - Subsequent Events: Sale of Interest Rate Swaps, which discusses the sale of $201.0 million of pay-fixed, receive variable interest rate swaps in January 2026.
Cumulative preferred securitiesborrowings on the balance sheet include $1.0 million$212,000 of discount due to a mark to market adjustment which is not reflected in the table above.
Cumulative trust preferred securities on the balance sheet include $2.4 million of discount due to a mark to market adjustment which is not reflected in the table above (3) ChoiceOne subordinated debenture on the balance sheet includes $240,000$96,000 of capitalized issuance cost which is not reflected in the table above.
What changed in the latest 10-Q
Risk Factors
Information concerning risk factors is contained in the discussion in Item 1A, “Risk Factors,” in ChoiceOne’s Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
“Interest income on securities increased $415,000 and $1.2 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily attributable to higher average securities balances, which increased $64.9 million and $61.4 million for the three and six months ended June 30, 2026, respectively. Average securities balances increased as the Company redeployed excess liquidity into agency mortgage-backed securities and other investment securities. …”see in full comparison
“Deposits, excluding brokered deposits, decreased by $55.4 million as of June 30, 2026, compared to March 31, 2026. This decline is largely due to seasonality in municipal deposits as municipal operational balances fluctuate with the timing of tax receipts. Municipal deposits decreased by approximately $95.0 million during the second quarter, which is consistent with historical fluctuations. Deposits, excluding brokered deposits, increased by $13.5 million as of June 30, 2026, compared to December 31, 2025. …”see in full comparison
“Deposits, excluding brokered deposits, increased by $68.9 million as of March 31, 2026, compared to December 31, 2025. This increase is a combination of organic deposit growth and some seasonality in municipal deposits. Deposits, excluding brokered deposits, declined by $20.4 million as of March 31, 2026, compared to March 31, 2025. This decrease is primarily related to runoff of higher cost municipal CDs acquired in the Merger, partially offset by organic growth in other categories. …”see in full comparison
“Loan interest income increased $13.0 million in the first quarter of 2026 compared to the same period in 2025 and decreased $975,000 compared to the fourth quarter of 2025. The decrease from the fourth quarter of 2025 is partially due to a decline in interest income due to accretion from purchased loans during the first quarter of 2026 compared to the fourth quarter of 2025. Interest income for the three months ended March 31, 2026 includes $2.7 million of interest income due to accretion from purchased loans compared to $3.1 million for the three months ended December 31, 2025. …”see in full comparison
Atsee in full comparisonMarchJune31,30, 2026, ChoiceOne had consolidated total assets of$4.4$4.5 billion, net loans of$2.9$3.0 billion, total deposits (excluding brokered deposits) of$3.6$3.5 billion and total shareholders' equity of$470.0$482.7 million. Asset growth was primarily due to growth in the loan portfolio and increases in the cash surrender value of bank-owned life insurance, partially offset by decreases in investment securities and other assets. The Company’s balance sheet is well-positioned to support continued lending activity, customer deposit relationships, and overall liquidity needs.
“ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. During the first quarter of 2026, ChoiceOne exited $351.0 million of pay‑fixed interest rate swaps with an average coupon of approximately 3.12%. This resulted in a small gain that was applied to the basis of the hedged bonds and a $4.6 million realized gain that will be amortized into interest expense over approximately six years. …”see in full comparison
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This discussion and other sections of this quarterly report contain forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and ChoiceOne. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “look forward,” “continue,” “future,” “will” and variations of such words and similar expressions are intended to identify such forward-looking statements. Management’s determination of the provision and allowance for credit losses, the carrying value of goodwill, loan servicing rights, other real estate owned, and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) and management’s assumptions concerning pension and other post-retirement benefit plans involve judgments that are inherently forward-looking. All of the information concerning interest rate sensitivity is forward-looking. All statements with references to future time periods are forward-looking. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
ChoiceOne reported net income of $13,704,000$12,463,000 and $26,167,000 for the three and six months ended MarchJune 31,30, 2026, respectively, compared to net income of $13,867,000$13,534,000 and a net loss of $13,906,000$372,000 for the three months ended December 31, 2025 and March 31, 2025, respectively. Net income excluding Merger expenses, net of taxes, and Merger related provision for credit losses, net of taxes, was $9,310,000 for the threesix months ended MarchJune 31,30, 2025.2025, respectively. Diluted earnings per share were $0.91$0.83 and $1.74 for the three and six months ended MarchJune 31,30, 2026, compared to diluted earnings per share of $0.92$0.90 and diluted loss per share of $1.29$0.03 for the three and six months ended DecemberJune 31, 2025 and March 31,30, 2025, respectively. DilutedSecond quarter results for 2026 included a pre-tax securities loss of approximately $1.9 million, which reduced diluted earnings per share excludingby Mergerapproximately expenses,$0.10, netas ofChoiceOne taxes,repositioned lower-yielding municipal securities to fund loan growth and Mergerimprove relatedits provisioninterest forrate credit losses, net of taxes, was $0.86 for the three months ended March 31, 2025.profile.
A reconciliation for non-GAAP adjusted net income and adjusted earnings per share to GAAP net income and earnings (loss) per share follows:
(1) Merger related provision for credit losses represents the estimated credit loss on loans purchased without credit deterioration in the Merger on March 1, 2025.
As of MarchJune 31,30, 2026, total assets were $4.4$4.5 billion, an increase of $89.2$146.6 million compared to MarchJune 31,30, 2025. The growth in total assets is primarily attributed to growth in core loans, securities and warehouse mortgage advances. This growth was partially offset by a reduction in the cash balance of $55.2$67.6 million as of June 30, 2026, during the twelve months ended MarchJune 31,30, 2026. Interest rates and balances on warehouse mortgage advances fluctuate with the national mortgage market and are short term in nature.
Core loans, which exclude held for sale loans and mortgage warehouse advances, declinedincreased by $30.9$87.1 million or an annualized 4.2%11.9% during the second quarter of 2026 and grew by $101.5 million or 3.5% during the twelve months ended June 30, 2026. Of this growth approximately $40.0 million was due to a purchase of seasoned, high quality adjustable rate mortgages from another community bank made during the second quarter 2026. Loan interest income increased $703,000 in the second quarter of 2026 compared to the first quarter of 2026 and grewdecreased by $9.5 million or 0.3% during the twelve months ended March 31, 2026. Loan interest income increased $13.0 million in the first quarter of 2026$187,000 compared to the same period in 2025 and decreased $975,000 compared to the fourthsecond quarter of 2025. The decrease from the fourthsecond quarter of 2025 is partially due to a decline in interest income due to accretion from purchased loans during the firstsecond quarter of 2026 compared to the fourthsecond quarter of 2025. Interest income for the three months ended March 31, 2026 includes $2.7 million of interest income due to accretion from purchased loans was approximately $2.4 million during the second quarter of 2026 compared to $3.1$3.5 million for the three months ended DecemberJune 31,30, 2025. Interest income due to accretion from purchased loans increased GAAP net interest margin by 2624 and 2936 basis points in the firstsecond quarter of 2026 and fourththe second quarter of 2025, respectively. Of the amount recognized in the firstsecond quarter of 2026, $2.1$2.0 million was calculated using the effective interest rate method of amortization, while the remaining $597,000$433,000 resulted from accretion through unexpected payoffs and paydowns of loans with an associated fair value mark. Estimated interest income due to accretion from purchased loans for the remainder of 2026 using the effective interest method of amortization is $5.8$3.8 million; however, actual results will be dependent on prepayment speeds and other factors. It is estimated that a total of $50.4$48.0 million remains to be recognized as interest income due to accretion from purchased loans over the life of the purchased loans portfolio.
Deposits, excluding brokered deposits, decreased by $55.4 million as of June 30, 2026, compared to March 31, 2026. This decline is largely due to seasonality in municipal deposits as municipal operational balances fluctuate with the timing of tax receipts. Municipal deposits decreased by approximately $95.0 million during the second quarter of 2026, which is consistent with historical fluctuations. Deposits, excluding brokered deposits, increased by $68.9$22.2 million as of MarchJune 31,30, 2026, compared to DecemberJune 31,30, 2025. This increase is a combination of organic deposit growth and some seasonality in municipal deposits. Deposits, excluding brokered deposits, declined by $20.4 million as of March 31, 2026, compared to March 31, 2025. This decrease is primarily related to runoff of higher cost municipal CDs acquired in the Merger, partially offset by organic growth in otherinterest categories.bearing and savings accounts offset by a decline in higher interest certificate of deposit accounts. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and short termshort-term FHLB advances to ensure ample liquidity. As of MarchJune 31,30, 2026, the total balance of borrowed funds from the FHLB was $185.0$295.0 million at a weighted average rate of 3.81%,3.80%, with $165.0$275.0 million due within 12 months. At MarchJune 31,30, 2026, total available borrowing capacity secured by pledged assets was $1.2$1.1 billion. ChoiceOne can increase its borrowing capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $1.1$1.2 billion or 30.7%33.1% of deposits at MarchJune 31,30, 2026.
In the three months ended June 30, 2026, ChoiceOne's annualized cost of deposits to average total deposits increased four basis points to 1.58% from 1.54% for the three months ended March 31, 2026. The annualized cost of funds increased four basis points to 1.77% for the three months ended June 30, 2026, from 1.73% in the prior quarter, primarily driven by higher rates on interest-bearing demand deposits and savings deposits offset by lower rates on certificates of deposit, borrowings, subordinated debentures, and brokered deposits. The average balance of certificates of deposit declined $14.2 million during the second quarter of 2026. Interest expense on borrowings increased $58,000 compared to the first quarter of 2026 as average borrowings increased $5.1 million. ChoiceOne’s deposit costs may have slight upward pressure as new and repriced deposits carry rates above the existing portfolio average.
In the three months ended March 31, 2026, ChoiceOne’s annualized cost of deposits to average total deposits declined 3 basis points compared to the three months ended December 31, 2025 and declined 5 basis points compared to the three months ended March 31, 2025. The annualized cost of funds decreased by 13 basis points, from 1.86% to 1.73% in the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to a decrease in higher cost local and brokered CDs. Interest expense on borrowings for the three months ended March 31, 2026 decreased by $9,000 compared to the same period in the prior year, despite a $32.2 million increase in the average balance borrowed, due to a reduction in rates. In the three months ended March 31, 2026, compared to the three months ended December 31, 2025, annualized cost of funds decreased 6 basis points from 1.79% to 1.73% due to the reductions in the federal funds rate during the fourth quarter of 2025. With ChoiceOne’s already low cost of deposits and market conditions, additional reductions in the federal funds rate may not immediately result in a further reduction in cost of deposits.
ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. During the first quarter of 2026, ChoiceOne exited $351.0 million of pay‑fixed interest rate swaps with an average coupon of approximately 3.12%. This resulted in a small gain that was applied to the basis of the hedged bonds and a $4.6 million realized gain that will be amortized into interest expense over approximately six years. After evaluating multiple rate scenarios, we determined that our interest rate risk profile and overall balance sheet flexibility are improved without the pay‑fixed interest rate swaps, and we believe this action better aligns our interest rate posture with long‑term value creation for shareholders. Following this exit, the asset sensitivity of the bank is reduced and balance sheet derivatives are no longer a significant percentage of assets. ChoiceOne has approximately $29.0 million of pay-fixed interest rate swaps with a weighted average coupon of 3.52%. These swaps were entered into in the third quarter of 2025 to hedge interest rate risk on newly purchased agency mortgage backed securities.
ThereChoiceOne wasincurred noa $550,000 provision for credit losses on loans during the firstsecond quarter of 2026, due to athe declineincrease in loan balances and only $53,000$309,000 in net charge offs. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.16% on June 30, 2026 compared to 1.19% and 1.18% on March 31, 2026 compared to 1.18% onand December 31, 2025.2025, respectively. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.01%0.04% for the firstsecond quarter of 2026. Nonperforming loans to total loans (excluding loans held for sale) increased to 1.07% as of June 30, 2026 compared to 1.01% as of March 31, 2026 compared to 0.98% as of December 31, 2025.2026. Notably, 0.61%0.49% of the nonperforming loans to total loans (excluding loans held for sale) is attributed to certain purchased loans which were identified prior to the Mergeracquisition as having credit deterioration. In addition, 30.6% of the nonperforming loans carry partial government guarantees from the SBA or USDA.
The annualized return on average assets and annualized return on average shareholders’ equity were 1.24%1.13% and 11.65%,10.46%, respectively, for the firstsecond quarter of 2026, compared to an1.26% and 12.66%, respectively, for the same period in 2025. The annualized return on average assets and annualized return on average shareholders’ equity were 1.19% and 11.04%, respectively, for the six months ended June 30 2026, compared to annualized loss on average assets and an annualized loss on average shareholders'shareholders’ equity of (1.680.02)% and (18.390.21)%, respectively, for the same period in 2025.
Cash dividends of $4.3 million or $0.29 per share were declared in the second quarter of 2026, compared to $4.2 million or $0.28 per share in the second quarter of 2025. The cash dividend payout percentage was 34.8% for the second quarter of 2026, compared to 31.1% in the same period in the prior year. Cash dividends declared in the first six months of 2026 were $8.7 million or $0.58 per share, compared to $8.4 million or $0.56 per share in the same period during the prior year. The cash dividend payout percentage was 33.1% for the six months ended June 30, 2026. The Board of Directors’ determination of appropriate cash dividends will be based on, among other things, market conditions and ChoiceOne’s requirements for cash and capital.
Cash dividends of $4.3 million or $0.29 per share were declared in the first quarter of 2026, compared to $4.2 million or $0.28 per share in the first quarter of 2025. The cash dividend payout percentage was 31.6% for the three months ended March 31, 2026.
Tables 1 and 2 on the following pages provide information regarding interest income and expense for the three and six months ended MarchJune 31,30, 2026 and 2025. Table 1 documents ChoiceOne’s average balances and interest income and expense, as well as the average rates earned or paid on assets and liabilities. Table 2 documents the effect on interest income and expense of changes in volume (average balance) and interest rates. These tables are referred to in the discussion of interest income, interest expense and net interest income.
(1)
Taxable securities include dividend income from Federal Home Loan Bank and Federal Reserve Bank stock.
Loans include both mortgage warehouse advances and loans held for sale.
(4)
Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $29.4 million, $27.5 million, and $16.8 million in the second quarter of 2026, the first quarter of 2026 and the second quarter of 2025, respectively.
(5)
Interest on loans included net origination fees and interest income due to accretion from purchased loans. Interest income due to accretion from purchased loans was $2.4 million, $2.7 million and $3.5 million in the second quarter of 2026, the first quarter of 2026 and the second quarter of 2025, respectively.
Adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets. The adjustment uses an incremental tax rate of 21%. The presentation of these measures on a tax-equivalent basis is not in accordance with GAAP, but is customary in the banking industry. These non-GAAP measures ensure comparability with respect to both taxable and tax-exempt loans and securities.
Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $27.5$28.6 million, $22.2 million,million and $10.2$12.4 million in the firstsix quartermonths ofended 2026,June the30, fourth quarter of 20252026 and the first quarter of 2025, respectively.
Interest on loans included net origination fees and interestaccretion income. Accretion income due to accretion from purchased loans. Interest income due to accretion from purchased loans was $2.7 million, $3.1$5.1 million and $2.9$6.4 million in the firstsix quartermonths ofended 2026,June the30, fourth quarter of 20252026 and the first quarter of 2025, respectively.
(1)
Interest on nontaxable investment securities and loans has been adjusted to a fully tax-equivalent basis using an incremental tax rate of 21%.
The volume variance is computed as the change in volume (average balance) multiplied by the previous year’s interest rate. The rate variance is computed as the change in interest rate multiplied by the previous year’s volume (average balance). The change in interest due to both volume and rate has been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
(2)
Net interest income increased $375,000 to $36.7 million for the three months ended June 30, 2026, compared to $36.3 million for the same period in 2025. For the six months ended June 30, 2026, net interest income increased $10.7 million to $73.3 million compared to $62.6 million for the same period in 2025. The increase during both periods was driven primarily by growth in average earning assets, including loans and securities, and a lower cost funding base. These benefits were partially offset by lower yields on earning assets, principally due to the continuing decline in interest income due to accretion from purchased loans and the repricing of variable-rate loans in a lower interest rate environment.
Net interest margin was 3.59% for the second quarter of 2026, compared to 3.66% for the second quarter of 2025, while tax-equivalent net interest margin was 3.63% compared to 3.70% in the prior-year quarter. The seven-basis-point decline in both measures was largely attributable to interest income due to accretion from purchased loans, which contributed approximately 24 basis points to the second quarter of 2026 net interest margin, compared to 36 basis points in the second quarter of 2025. Excluding the impact of interest income due to accretion from purchased loans, underlying margin performance remained relatively stable as lower earning asset yields were substantially offset by continued improvement in funding costs.
For the first six months of 2026, net interest margin increased to 3.61% from 3.56% for the same period in 2025, while tax-equivalent net interest margin increased to 3.65% from 3.60% in the same period in 2025. The improvement was primarily driven by a reduction in funding costs and favorable changes in funding mix, including growth in interest-bearing demand deposits and savings deposits and a reduction in higher-cost certificates of deposit. Average earning assets increased $546.4 million, or 15.4% for the first six months of 2026, compared to the prior-year period, while the annualized cost of deposits declined six basis points to 1.55% and the annualized cost of funds declined ten basis points to 1.73%.
GAAP based net interest income declined $198,000 in the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and increased $10.3 million in the three ended March 31, 2026 compared to the three months ended March 31, 2025. GAAP based net interest margin increased four and 20 basis points in the three months ended March 31 2026, compared to the three months ended December 31, 2025 and March 31, 2025, respectively.
The following table presents the annualized cost of deposits and the annualized cost of funds for the three months ended MarchJune 31,30, 2025, December 31, 2025 and2026, March 31, 2026 and June 30, 2025 for the six months ended June 30, 2026 and 2025.
Average loans increased $62.0 million during the second quarter of 2026 and $508.5 million, during the first six months of 2026 compared to the corresponding periods in 2025. The average yield on loans declined 16 basis points during the second quarter of 2026 and 21 basis points during the first six months of 2026 compared to the corresponding periods in 2025, primarily due to lower interest income due to accretion from purchased loans and the repricing of variable-rate loans in a lower interest rate environment. Interest income due to accretion from purchased loans totaled $2.4 million during the second quarter of 2026, compared to $3.5 million in the prior-year quarter, reducing the benefit to net interest margin to 24 basis points from 36 basis points in the prior-year quarter. As of June 30, 2026, approximately $48.0 million of interest income due to accretion from purchased loans remained to be recognized over the life of the purchased loan portfolio.
Interest income on securities increased $415,000 and $1.2 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. The increase was primarily attributable to higher average securities balances, which increased $64.9 million and $61.4 million for the three and six months ended June 30, 2026, respectively. Average securities balances increased as the Company redeployed excess liquidity into agency mortgage-backed securities and other investment securities. The average yield earned on securities decreased approximately 2 basis points to 2.84% for the three months ended June 30, 2026 compared to 2.86% for the same period in 2025. For the six months ended June 30, 2026, the average yield earned on securities increased approximately 7 basis points to 2.83% compared to 2.76% for the same period in 2025. Securities income and yields continued to be impacted by lower cash settlements from interest rate swaps that matured or were terminated during late 2025 and early 2026 and had previously provided additional income on portions of the securities portfolio.
Deposits and borrowings continued to provide stable funding for balance sheet growth while benefiting from the repricing of liabilities in a lower interest rate environment. Average interest-bearing deposits increased during both the three- and six-month periods ended June 30, 2026, led by growth in interest-bearing demand and savings deposits, while higher-cost certificates of deposit declined as a percentage of total funding. As a result, the annualized cost of deposits decreased to 1.58% for the second quarter of 2026 from 1.65% in the second quarter of 2025 and to 1.55% for the first six months of 2026 from 1.61% in the comparable prior-year period.
Interest expense on borrowings and subordinated debentures increased $270,000 for the three months ended June 30, 2026 compared to the same period in 2025. Average balance of borrowings and subordinated debentures increased $61.6 million, which was offset by a 72 point basis point decrease in rate for borrowings and an 18 basis point decrease in rate for subordinated debentures. Interest expense on borrowings and subordinated debentures increased $403,000 for the six months ended June 30, 2026 compared to the same period in 2025. Average balance of borrowings and subordinated debentures increased $51.3 million, which was offset by a 70 point basis point decrease in rate for borrowings and an 6 basis point increase in rate for subordinated debentures.
Loan interest income increased $13.0 million in the first quarter of 2026 compared to the same period in 2025 and decreased $975,000 compared to the fourth quarter of 2025. The decrease from the fourth quarter of 2025 is partially due to a decline in interest income due to accretion from purchased loans during the first quarter of 2026 compared to the fourth quarter of 2025. Interest income for the three months ended March 31, 2026 includes $2.7 million of interest income due to accretion from purchased loans compared to $3.1 million for the three months ended December 31, 2025. Interest income due to accretion from purchased loans increased GAAP net interest margin by 26 and 29 basis points in the first quarter of 2026 and fourth quarter of 2025, respectively. Of the amount recognized in the first quarter of 2026, $2.1 million was calculated using the effective interest rate method of amortization, while the remaining $597,000 resulted from accretion through unexpected payoffs and paydowns of loans with an associated fair value mark. Estimated interest income due to accretion from purchased loans for the remainder of 2026 using the effective interest method of amortization is $5.8 million; however, actual results will be dependent on prepayment speeds and other factors. It is estimated that a total of $50.4 million remains to be recognized as interest income due to accretion from purchased loans over the life of the purchased loans portfolio.
The average balance of total securities increased $975,000 and $58.2 million for the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and March 31, 2025, respectively. The increase during the first quarter of 2026 compared to the first quarter of 2025 is due in part to $40.6 million of newly purchased agency mortgage backed securities. These securities were purchased in congruence to $30.4 million of amortizing pay fix swaps designed to amortize with the expected cash flow of the bonds and hold a coupon of 3.52%. The average rate earned on securities decreased four basis points and increased 17 basis points for the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and March 31, 2025, respectively. Interest income and rate on securities were impacted by a decline in cash settlements from fixed rate interest rate swaps sold between December of 2025 and February of 2026, which were hedged against securities.
Total interest expense decreased $903,000 and increased $3.0 million for the three months ended March 31, 2026 compared to the three months ended December 31, 2025 and March 31, 2025, respectively. The decrease from the fourth quarter of 2025 compared to the first quarter of 2026 was driven by a decline in the average balance and rate paid on borrowings and CDs. This increase in the first quarter of 2026 compared to the first quarter of 2025 was driven by a $665.6 million dollar increase in the average balance of interest bearing liabilities from the Merger which occurred on March 1, 2025. This was offset by a decline in the rate paid on CDs and borrowings since the first quarter of 2025.
In the three months ended March 31, 2026, ChoiceOne’s annualized cost of deposits to average total deposits declined 3 basis points compared to the three months ended December 31, 2025 and declined 5 basis points compared to the three months ended March 31, 2025. The annualized cost of funds decreased by 13 basis points, from 1.86% to 1.73% in the three months ended March 31, 2026 compared to the same period in the prior year, primarily due to a decrease in higher cost local and brokered CDs. Interest expense on borrowings for the three months ended March 31, 2026 decreased by $9,000 compared to the same period in the prior year, despite a $32.2 million increase in the average balance borrowed, due to a reduction in rates. In the three months ended March 31, 2026, compared to the three months ended December 31, 2025, annualized cost of funds decreased 6 basis points from 1.79% to 1.73% due to the reductions in federal funds rate during the fourth quarter of 2025. With ChoiceOne’s already low cost of deposits and market conditions, additional reductions in the federal funds rate may not immediately result in a further reduction in cost of deposits.
Interest expense on borrowings for the three months ended March 31, 2026 increased by $130,000 compared to the same period in the prior year due to the Merger that took place on March 1, 2025.
The provision for credit losses on loans was $0$550,000 for the threefirst six months of 2026 compared to $13.2$13.8 million in the same period in 2025. The provision for credit losses in the first threesix months of 2025 was due primarily to $12.0 million of expense in the first quarter for the acquisition of $1.3 billion of loans purchased without credit deterioration in the Merger. Additional expense was recorded to account for organic growth, changes in qualitative factors, and forecast data used in the allowance for credit losses calculation. The allowance for credit losses also increased by $4.9 million in the first quarter of 2025 as the credit mark on loans purchased with credit deterioration (“PCD loans”) migrated into the reserve in accordance with CECL guidelines.reserve.
Nonperforming assets, which includes Other Real Estate Owned ("OREO") but excludes performing troubled loan modifications ("TLM"), increased by $595,000$3.2 million during the first six months of 2026 to $30.2$32.8 million at MarchJune 31,30, 2026, compared to the balance on December 31, 2025. All non-accrual loans from the Merger are classified as PCD loans. The ACL was 1.19%1.16% of total loans, excluding loans held for sale, at MarchJune 31,30, 2026, compared to 1.18% as of December 31, 2025. The liability for expected credit losses on unfunded loans and other commitments was $1.3 million for both MarchJune 31,30, 2026 and December 31, 2025.
Charge-offs and recoveries for respective loan categories for the threesix months ended MarchJune 31,30, 2026 and 2025 were as follows:
Net charge-offs were $53,000$362,000 during the first threesix months of 2026, compared to net charge-offs of $71,000$491,000 during the same period in 2025. Net charge-offs for checking accounts during the first threesix months of 2026 were $55,000$161,000 compared to $51,000$132,000 for the same period in the prior year. Annualized net loan charge-offs as a percentage of average loans were 0.01%0.04% for boththe second quarter of 2026 compared to 0.06% for the threesame monthsperiod ended March 31, 2026 andin the threeprior months ended March 31, 2025.year. Nonperforming loans to total loans (excluding loans held for sale) were 1.01%1.07% as of MarchJune 31,30, 2026.2026 compared to 0.66% for the same period last year. Notably, 0.61%0.49% of the nonperforming loans to total loans (excluding loans held for sale) is attributed to PCD loans acquired through the Merger which have a corresponding PCD credit reserve. In addition, 30.6% of the nonperforming loans at June 30, 2026 carry partial government guarantees from the SBA or USDA.
Noninterest income for the three months ended June 30, 2026 decreased $1.6 million to $4.9 million compared to $6.5 million for the same period in 2025. The decline was primarily driven by a $1.9 million loss on the sale of securities during the second quarter of 2026, compared to no gains or losses on the sale of securities in the prior-year period. In late June 2026, ChoiceOne sold approximately $25 million of municipal securities with a tax-equivalent yield of 2.28% for a pre-tax loss of $1.9 million. The sale of securities was undertaken to provide funding for the purchase of adjustable-rate residential mortgages and improve ChoiceOne’s overall interest rate profile. Partially offsetting this decline were increases in customer service charges and interchange income and insurance and investment commissions. Compared to the first quarter of 2026, noninterest income declined $876,000, primarily due to the increase in net losses on sales of securities. Noninterest income for the six months ended June 30, 2026 decreased $671,000, to $10.8 million compared to $11.4 million for the same period in 2025.
Noninterest income increased by $893,000 in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was partly driven by higher customer service charges and interchange income, which rose due to increased volume from the Merger. Insurance and investment commissions income also increased as a result of higher estate settlement fees and customers obtained from the Merger. These increases were partially offset by the loss on sales of securities in the first quarter of 2026.
Noninterest expense for the three months ended June 30, 2026 increased $545,000, or 2.1%, to $26.1 million compared to $25.5 million for the same period in 2025. The increase was primarily attributable to higher salaries and benefits expense, partially offset by lower intangible amortization expense. Compared to the first quarter of 2026, noninterest expense increased $275,000, reflecting higher salaries and benefits expenses and data processing costs, partially offset by lower occupancy and equipment and intangible amortization expenses. Noninterest expense for the six months ended June 30, 2026 decreased $9.3 million, to $51.8 million compared to $61.2 million for the same period in 2025. The decrease was primarily attributable to the absence of $17.4 million of merger-related expenses incurred during the prior-year period. Excluding merger-related expenses, noninterest expense increased due to higher salaries and benefits, occupancy and equipment, data processing, professional fees, and other operating expenses associated with the Company's growth and integration activities. ChoiceOne expects to open a full service branch and lending office in Troy, Michigan later in 2026. ChoiceOne currently serves customers throughout Southeast Michigan and expects the Troy office to further support commercial lending and treasury management growth initiatives.
Noninterest expense declined by $9.9 million for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decline was largely due to merger-related expenses of $17.2 million in the three months ended March 31, 2025, offset by higher salaries and benefits expense, occupancy and equipment expense and intangible amortization expense in the three months ended March 31, 2026, compared to the same period in 2025. ChoiceOne will continue to invest in its talented staff, technology and footprint while prioritizing operational efficiency and disciplined investment. ChoiceOne has secured a location in Troy, MI and expects to open a full service branch and lending office later in 2026. We believe this new office will help us continue our strong growth in an attractive market.
Income tax expense was $3.0$2.6 million in the three months ended MarchJune 31,30, 2026 and $5.5 million in the six months ended June 30, 2026, compared to income tax benefitexpense of $3.7$3.1 million and $554,000 tax benefit for the same periodperiods in 2025. The tax benefit for 2025 was generated by the loss in the first quarter of 2025 due to expenses related to the Merger. The effective tax rate was 17.8%17.1% and 17.5% for the three and six months ended MarchJune 31,30, 2026.2026, respectively, compared to 18.8% and 59.8% for the same periods in 2025. ChoiceOne’s first‑second quarter 2026 tax expense was reduced by $200,000 as a result$1.9 million loss on sale of purchasing a transferable tax credit that will be applied to 2026 income taxes. Management intends to purchase similar sized transferable tax credits in 2026 to reduce tax expense.securities.
At MarchJune 31,30, 2026, ChoiceOne had consolidated total assets of $4.4$4.5 billion, net loans of $2.9$3.0 billion, total deposits (excluding brokered deposits) of $3.6$3.5 billion and total shareholders' equity of $470.0$482.7 million. Asset growth was primarily due to growth in the loan portfolio and increases in the cash surrender value of bank-owned life insurance, partially offset by decreases in investment securities and other assets. The Company’s balance sheet is well-positioned to support continued lending activity, customer deposit relationships, and overall liquidity needs.
On MarchJune 31,30, 2026, total available‑for‑sale securities were $573.5$555.5 million, compared to $554.4 million at December 31, 2025. The modest increase was primarily driven by the purchase of $45.5 million of securities, $34.2 million inof which were agency mortgage‑backedmortgage-backed securities. These purchases weresecurities, partially offset by the sale of $29.5 million of securities and normal portfolio runoff from principal repayments, calls, and maturities.
Total held to maturity securities on MarchJune 31,30, 2026 were $384.3$383.3 million compared to $385.2 million on December 31, 2025. ChoiceOne's held to maturity securities declined during the first threesix months of 2026 due to principal repayments, calls and maturities, which was offset by the purchase of $1.9 million of securities during the first threesix months of 2026.
At MarchJune 31,30, 2026, ChoiceOne had $95.0$87.7 million in gross unrealized losses on its investment securities, including $55.5$48.6 million in unrealized losses on available for sale securities, $39.0 million in unrealized losses on held to maturity securities, and $506,000$528,000 in unrealized losses on equity securities. Unrealized losses on corporate and municipal bonds have not been recognized into income because management believes the issuers are of high credit quality, and management does not intend to sell the bonds prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.
Equity securities included a money market preferred security of $1.0 million and common stock of $8.4 million as of MarchJune 31,30, 2026.2026 and December 31, 2025.
Core loans, which exclude held for sale loans and mortgage warehouse advances, declinedincreased by $30.9$87.1 million or an annualized 4.2%11.9% during the firstsecond quarter of 2026 and grew by $9.5$101.5 million or 0.3%3.5% during the twelve months ended MarchJune 31,30, 2026. Of this growth, approximately $40.0 million was due to a purchase of seasoned, high quality adjustable rate mortgages from another community bank made during the second quarter of 2026.
Mortgage warehouse advances increaseddecreased by $7.8$5.5 million as of MarchJune 31,30, 2026 compared to December 31, 2025. LoansMortgage towarehouse other financial institutionsadvances consist of a warehouse line of credit used to facilitate mortgage loan originations, with interest rates and balances that fluctuate in line with the national mortgage market.
Goodwill is not amortized but is evaluated annually for impairment and on an interim basis if events or changes in circumstances indicate that goodwill might be impaired. The goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge would be recognized for any amount by which the carrying amount exceeds the reporting unit’s fair value. Accounting pronouncements allow a company to first perform a qualitative assessment for goodwill prior to a quantitative assessment (Step 1 assessment). If the results of the qualitative assessment indicate that it is more likely than not that goodwill is impaired, then a quantitative assessment must be performed. If not, there is no further assessment required. The Company acquired Valley Ridge Financial Corp. in 2006, County Bank Corp in 2019, Community Shores Bank Corporation in 2020, and Fentura in 2025, which resulted in the recognition of goodwill of $13.7 million, $38.9 million, $7.3 million and $69.9 million, respectively.
COFS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Wendling Michelle M |
Grant/award | 213 | $32.31 | $6.9K |
| 2026-10-01 | Petty Brian P |
Grant/award | 514 | $32.31 | $16.6K |
| 2026-10-01 | Page Roxanne M |
Grant/award | 213 | $32.31 | $6.9K |
| 2026-10-01 | Mcginnis Bradley F. |
Grant/award | 514 | $32.31 | $16.6K |
| 2026-10-01 | Mcconnell Gregory A |
Grant/award | 213 | $32.31 | $6.9K |
| 2026-10-01 | Krause Steven Theodore |
Grant/award | 514 | $32.31 | $16.6K |
| 2026-10-01 | Hicks Randy D |
Grant/award | 515 | $32.31 | $16.6K |
| 2026-10-01 | Essex Bruce John Jr |
Grant/award | 213 | $32.31 | $6.9K |
| 2026-10-01 | Coulter Curt E |
Grant/award | 213 | $32.31 | $6.9K |
| 2026-10-01 | Burrough Eric E |
Grant/award | 514 | $32.31 | $16.6K |
| 2026-10-01 | Burns Harold J |
Grant/award | 515 | $32.31 | $16.6K |
| 2026-10-01 | Brophy Keith D. |
Grant/award | 364 | $32.31 | $11.8K |
| 2026-10-01 | Armock Greg L. |
Grant/award | 514 | $32.31 | $16.6K |
| 2026-07-01 | Wendling Michelle M |
Grant/award | 202 | $34.00 | $6.9K |
| 2026-07-01 | Petty Brian P |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Page Roxanne M |
Grant/award | 202 | $34.00 | $6.9K |
| 2026-07-01 | Mcginnis Bradley F. |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Mcconnell Gregory A |
Grant/award | 202 | $34.00 | $6.9K |
| 2026-07-01 | Krause Steven Theodore |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Hicks Randy D |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Essex Bruce John Jr |
Grant/award | 202 | $34.00 | $6.9K |
| 2026-07-01 | Coulter Curt E |
Grant/award | 202 | $34.00 | $6.9K |
| 2026-07-01 | Burrough Eric E |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Burns Harold J |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-07-01 | Brophy Keith D. |
Grant/award | 345 | $34.00 | $11.7K |
| 2026-07-01 | Armock Greg L. |
Grant/award | 489 | $34.00 | $16.6K |
| 2026-04-30 | Henion Bradley |
Grant/award | 1,455 | — | — |
| 2026-04-30 | Henion Bradley |
Shares withheld for tax | 137 | $30.03 | $4.1K |
| 2026-04-30 | Greenland Adom |
Shares withheld for tax | 127 | $30.03 | $3.8K |
| 2026-04-30 | Greenland Adom |
Grant/award | 1,506 | — | — |
| 2026-04-30 | Burke Michael J. Jr. |
Shares withheld for tax | 252 | $30.03 | $7.6K |
| 2026-04-30 | Burke Michael J. Jr. |
Grant/award | 2,439 | — | — |
| 2026-04-30 | Potes Kelly |
Grant/award | 4,416 | — | — |
| 2026-04-30 | Potes Kelly |
Shares withheld for tax | 450 | $30.03 | $13.5K |
Well-known investors holding COFS (13F)
None of the 59 investors we track reported a position in their latest 13F.