SPARTA, Mich., Jan. 24, 2024 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ((", ChoiceOne", , NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended December 31, 2023.

Financial Highlights

Founded in 1898, ChoiceOne Bank celebrated its 125^th anniversary serving local Michigan communities. ChoiceOne celebrated this accomplishment by ringing the opening bell on the NASDAQ trading floor on October 30^th, 2023.
ChoiceOne reported net income of $5,293,000 and $21,261,000 for the three and twelve months ended December 31, 2023, compared to $6,684,000 and $23,640,000 for the same periods in 2022.
Diluted earnings per share were $0.70 and $2.82 in the three and twelve months ended December 31, 2023, compared to $0.89 and $3.15 per share in the same periods in the prior year.
Core loans, which exclude held for sale loans, loans to other financial institutions, and Paycheck Protection Program ("PPP") loans, grew organically by $105.2 million or an annualized 32.7% during the fourth quarter of 2023 and $201.5 million or 16.9% since December 31, 2022. This represents the largest core loan growth by dollar amount in a single quarter in ChoiceOne's 125 years in business (excludes loan acquisitions due to mergers and PPP loans).
Deposits, excluding brokered deposits, increased by $14.7 million or an annualized 2.8% in the fourth quarter of 2023. The increase in deposits in the fourth quarter is a combination of new business, recapture of deposit losses from earlier in the year, and some seasonality of municipal balances. Deposits as of December 31, 2023, excluding brokered deposits, decreased $19.4 million or 0.9%, compared to deposits as of December 31, 2022.
Fully tax-equivalent net interest income increased to $16.9 million in the fourth quarter of 2023 compared to $16.6 million in the third quarter of 2023. Net interest margin (fully tax-equivalent) in the fourth quarter was 2.72% an increase from 2.70% in the third quarter of 2023.
Asset quality remains strong with only 0.1% of nonperforming loans to total loans (excluding held for sale) as of December 31, 2023.

"This quarter was a momentous occasion for ChoiceOne Bank as we marked 125 years of empowering our customers and communities. I am thrilled to share that we achieved the largest core loan growth by dollar amount in a single quarter in our entire history (excludes loan acquisitions due to mergers and PPP loans). This is proof of our entire team's commitment to supporting our local communities. I am also very pleased with our full year 2023 results which showcase loan growth in a tough environment. Our results demonstrate the strong management of both credit and interest rate risk as we continue to prioritize mitigation of these risks. We appreciate our customers' trust and loyalty, and we look forward to many more years of success together," said Kelly Potes, Chief Executive Officer.

ChoiceOne reported net income of $5,293,000 and $21,261,000 for the three and twelve months ended December 31, 2023, compared to $6,684,000 and $23,640,000 for the same periods in 2022. Diluted earnings per share were $0.70 and $2.82 in the three and twelve months ended December 31, 2023, compared to $0.89 and $3.15 per share in the same periods in the prior year. During 2023, earnings were negatively affected by increased deposit costs, but this was partially offset by higher interest income from loans with higher interest rates and organic loan growth.

As of December 31, 2023, total assets remained stable compared to September 30, 2023. ChoiceOne used cash balances to fund loans and reduced the net balance of borrowings and brokered deposits by $5.8 million in the fourth quarter of 2023. In addition, core loans increased $105.2 million during the fourth quarter of 2023. Total assets increased by $190.8 million in the twelve months ended December 31, 2023. This increase was driven by core loan growth of $201.5 million or 16.9%, which was partially offset by a decrease in securities of $33.2 million. ChoiceOne management increased liquidity to fund organic loan growth and shifted lower yield assets into higher yield loans, as shown by the loan growth in the fourth quarter of 2023.

Deposits, excluding brokered deposits, increased by $14.7 million or an annualized 2.8% in the fourth quarter of 2023 and decreased $19.4 million or 0.9% as of December 31, 2023 compared to December 31, 2022. The decrease in deposits since December 31, 2022 was largely concentrated in the first quarter of 2023 as a result of a combination of customers using cash on hand for debt payoffs, seasonal tax and municipal bond payments, and customers seeking higher rates in money market securities or other investments. Deposits grew in the third and fourth quarters of 2023 due to new business, recapture of deposit losses, and some seasonality in municipal balances. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits, the Bank Term Funding Program ("BTFP"), and FHLB advances to ensure ample liquidity. At December 31, 2023, total available borrowing capacity from all sources was $933.3 million. Uninsured deposits total $769.7 million or 36.7% of deposits at December 31, 2023.

The increase in short term interest rates has led to higher deposit costs, which rose to 1.57% in the last quarter of 2023, compared to 1.36% in the previous quarter and 0.47% in the fourth quarter of 2022. As deposits reprice and customers shift to CD and other interest bearing products, this trend is likely to persist. ChoiceOne is taking active measures to control these costs and expects to pay lower rates on deposits than the federal funds rate. Interest expense on borrowings for the three and twelve months ended December 31, 2023, increased $2.2 million and $7.2 million, respectively, compared to the same periods in the prior year, due to increases in borrowing amounts and interest rates. Borrowings include $170 million from the BTFP and $30 million of FHLB borrowings at a weighted average fixed rate of 4.7%. Total cost of funds increased to 1.91% in the fourth quarter of 2023 compared to 1.70% in the third quarter of 2023 and 0.59% in the fourth quarter of 2022.

The provision for credit losses expense on loans increased by $933,000 in the last quarter of 2023, due to the significant growth of core loans. Core loan growth was offset by certain payoffs of watch loans, which declined by $425,000 during the fourth quarter of 2023. Net provision for credit losses expense for the fourth quarter 2023 was $375,000. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.11% on December 31, 2023 compared to 1.14% on September 30, 2023. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.04% and nonperforming loans to total loans (excluding loans held for sale) of 0.13% as of December 31, 2023.

ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed assets and variable rate liabilities. On December 31, 2023, ChoiceOne had pay-fixed interest rate swaps with a total notional value of $401.0 million, a weighted average coupon of 3.07%, a fair value of $8.9 million and an average contract length of 8 to 9 years. 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. Included in the total is $200.0 million of forward starting pay-fixed, receive floating interest rate swaps used to hedge interest bearing liabilities. These forward starting swaps will pay a fixed coupon of 2.75% while receiving SOFR starting in late April 2024. At the current SOFR rate of 5.38%, these forward starting swaps would contribute approximately $438,000 monthly starting in May 2024 which will partially offset interest expense. In addition, in March 2023, ChoiceOne eliminated all receive-fix, pay floating swap agreements for a cash payment of $4.2 million. The loss is being amortized in interest income with an expense of approximately $273,000 monthly through April 2024, which was the remaining period of the agreements.

Shareholders' equity totaled $195.6 million as of December 31, 2023, up from $168.9 million as of December 31, 2022. This increase is due to increased retained earnings and an improvement in accumulated other compressive loss (AOCI) of $20.2 million compared to December 31, 2022. The improvement in AOCI despite the rise in interest rates is due to both the shortening duration and maturing (paydowns) of the securities portfolio, as well as an offsetting increase in unrealized gain of the pay-fixed swap derivatives. ChoiceOne Bank remains "well-capitalized" with a total risk-based capital ratio of 12.4% as of December 31, 2023, compared to 13.0% on December 31, 2022.

Noninterest income rose by $297,000 and $834,000 in the three and twelve months ended December 31, 2023, compared to the same periods in the prior year. The increase was largely due to gains in our securities portfolio during 2023 compared to losses in 2022. Gains on sales of loans increased by $255,000 in the fourth quarter of 2023 compared to the fourth quarter of 2022; however, overall volume remains somewhat depressed due to a competitive housing market and higher mortgage rates.

Noninterest expense increased $563,000 or 4.3% and $1.6 million or 3.0% in the three and twelve months ended December 31, 2023 compared to the same periods in 2022. The increase in total noninterest expense was largely related to inflationary pressures on employee wages and benefits and increases to FDIC insurance partially offset by lower occupancy and data processing costs. As part of its ongoing optimization strategy, ChoiceOne intends to consolidate two of its branches by March 2025. Customers who currently use these branches will be able to access nearby ChoiceOne locations that offer the same level of service and convenience. ChoiceOne anticipates a low impact on customer retention and expects to save around $700,000 annually from this decision. Management continues to seek out ways to manage costs, but also recognizes the value of investing in innovation and attracting the best talent in our industry to compete effectively in our markets.

About ChoiceOne

ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank, Member FDIC. ChoiceOne Bank operates 37 offices in parts of Kent, Lapeer, Macomb, Muskegon, Newaygo, Ottawa, and St. Clair counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. For more information, please visit Investor Relations at ChoiceOne's website at choiceone.bank.

Forward-Looking Statements

This release may contain forward-looking statements. 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. These statements reflect current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements 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. Risk factors include, but are not limited to, the risk factors described in Item 1A in ChoiceOne Financial Services, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2022.

Condensed Balance Sheets (Unaudited)

(In thousands)	December 31, 2023		September 30, 2023		December 31, 2022
Cash and cash equivalents	$	55,433	$	144,673	$	43,943
Securities Held to Maturity		407,959		414,743		425,906
Securities Available for Sale		531,617		507,580		546,896
Loans held for sale		4,710		5,222		4,834
Loans to other financial institutions		19,400		23,763		-
Loans, net of allowance for loan losses		1,375,568		1,271,165		1,182,163
Premises and equipment		29,750		29,628		28,232
Cash surrender value of life insurance policies		45,074		44,788		43,978
Goodwill		59,946		59,946		59,946
Core deposit intangible		1,854		2,057		2,809
Other assets		45,395		70,631		47,208

Total Assets	$	2,576,706	$	2,574,196	$	2,385,915

Noninterest-bearing deposits	$	547,625	$	531,962	$	599,579
Interest-bearing deposits		1,550,985		1,551,995		1,518,424
Brokered deposits		23,445		49,238		-
Borrowings		200,000		180,000		50,000
Subordinated debentures		35,507		35,446		35,262
Other liabilities		23,510		44,394		13,776

Total Liabilities		2,381,072		2,393,035		2,217,041

Common stock and paid-in capital, no par value; shares authorized: 15,000,000; shares outstanding: 7,548,217 at December 31, 2023, 7,541,187 at September 30, 2023, and 7,516,098 at December 31, 2022		173,513		173,187		172,277
Retained earnings		73,699		70,444		68,394
Accumulated other comprehensive income (loss), net		(51,578)		(62,470)		(71,797)
Shareholders' Equity		195,634		181,161		168,874

Total Liabilities and Shareholders' Equity	$	2,576,706	$	2,574,196	$	2,385,915

Condensed Statements of Income (Unaudited)

	Three Months Ended				Twelve Months Ended
(Dollars in thousands, except per share data)	December 31,				December 31,
	2023		2022		2023		2022
Interest income
Loans, including fees	$	19,759	$	14,391	$	68,384	$	52,823
Securities:
Taxable		5,532		4,582		21,169		15,583
Tax exempt		1,385		1,485		5,629		6,163
Other		1,286		177		3,798		491
Total interest income		27,962		20,635		98,980		75,060

Interest expense
Deposits		8,421		2,503		23,990		5,845
Advances from Federal Home Loan Bank		273		109		1,771		117
Other		2,712		657		7,334		1,784
Total interest expense		11,406		3,269		33,095		7,746

Net interest income		16,556		17,366		65,885		67,314
Provision for credit losses on loans		933		150		1,265		250
Provision for credit losses on unfunded commitments		(558)		-		(1,115)		-
Net Provision for credit losses expense		375		150		150		250
Net interest income after provision		16,181		17,216		65,735		67,064

Noninterest income
Customer service charges		2,427		2,350		9,347		9,350
Insurance and investment commissions		157		183		698		779
Gains on sales of loans		475		220		1,954		2,343
Net gains (losses) on sales of securities		-		(4)		(71)		(809)
Net gains (losses) on sales and write downs of other assets		(2)		(73)		147		99
Earnings on life insurance policies		286		519		1,096		1,312
Trust income		194		206		771		734
Change in market value of equity securities		210		51		(246)		(955)
Other		299		297		1,210		1,219
Total noninterest income		4,046		3,749		14,906		14,072

Noninterest expense
Salaries and benefits		8,005		7,580		31,963		30,391
Occupancy and equipment		1,471		1,501		6,048		6,189
Data processing		1,531		1,673		6,618		6,729
Professional fees		523		547		2,198		2,175
Supplies and postage		200		178		780		719
Advertising and promotional		148		286		721		764
Intangible amortization		203		252		955		1,153
FDIC insurance		394		77		1,184		722
Other		1,303		1,121		4,607		4,636
Total noninterest expense		13,778		13,215		55,074		53,478

Income before income tax		6,449		7,750		25,567		27,658
Income tax expense		1,156		1,066		4,306		4,018

Net income	$	5,293	$	6,684	$	21,261	$	23,640

Basic earnings per share	$	0.70	$	0.89	$	2.82	$	3.15
Diluted earnings per share	$	0.70	$	0.89	$	2.82	$	3.15
Dividends declared per share	$	0.27	$	0.26	$	1.05	$	1.01

Other Selected Financial Highlights (Unaudited)

	Quarterly
Earnings	2023 4th Qtr.		2023 3rd Qtr.		2023 2nd Qtr.		2023 1st Qtr.		2022 4th Qtr.
(in thousands except per share data)
Net interest income	$	16,556	$	16,226	$	16,091	$	17,012	$	17,366
Net provision expense		375		-		(250)		25		150
Noninterest income		4,046		3,704		3,485		3,671		3,749
Noninterest expense		13,778		13,728		13,573		13,995		13,215
Net income before federal income tax expense		6,449		6,202		6,253		6,663		7,750
Income tax expense		1,156		1,080		1,040		1,030		1,066
Net income		5,293		5,122		5,213		5,633		6,684
Basic earnings per share		0.70		0.68		0.69		0.75		0.89
Diluted earnings per share		0.70		0.68		0.69		0.75		0.89

End of period balances	2023 4th Qtr.		2023 3rd Qtr.		2023 2nd Qtr.		2023 1st Qtr.		2022 4th Qtr.
(in thousands)
Gross loans	$	1,415,363	$	1,315,022	$	1,273,152	$	1,214,186	$	1,194,616
Loans held for sale (1)		4,710		5,222		8,924		3,603		4,834
Loans to other financial institutions (2)		19,400		23,763		38,838		-		-
PPP loans (3)		-		-		-		-		-
Core loans (gross loans excluding 1, 2, and 3 above)		1,391,253		1,286,037		1,225,390		1,210,583		1,189,782
Allowance for loan losses		15,685		14,872		14,582		15,065		7,619
Securities available for sale		531,617		507,580		542,932		554,306		546,896
Securities held to maturity		407,959		414,743		420,549		422,876		425,906
Other interest-earning assets		22,392		113,402		41,032		30,999		15,447
Total earning assets (before allowance)		2,377,331		2,350,747		2,277,665		2,222,367		2,182,866
Total assets		2,576,706		2,574,196		2,483,726		2,409,886		2,385,915
Noninterest-bearing deposits		547,625		531,962		544,925		554,699		599,579
Interest-bearing deposits		1,550,985		1,551,995		1,490,093		1,513,429		1,518,424
Brokered deposits		23,445		49,238		51,370		37,773		-
Total deposits		2,122,055		2,133,195		2,086,388		2,105,901		2,118,003
Deposits excluding brokered		2,098,610		2,083,957		2,035,018		2,068,128		2,118,003
Total subordinated debt		35,507		35,446		35,385		35,323		35,262
Total borrowed funds		200,000		180,000		160,000		85,000		50,000
Other interest-bearing liabilities		8,060		32,204		11,985		-		-
Total interest-bearing liabilities		1,817,997		1,848,883		1,748,833		1,671,525		1,603,686
Shareholders' equity		195,634		181,161		179,240		168,712		168,874

Average Balances	2023 4th Qtr.		2023 3rd Qtr.		2023 2nd Qtr.		2023 1st Qtr.		2022 4th Qtr.
(in thousands)
Loans	$	1,359,643	$	1,278,421	$	1,218,860	$	1,202,268	$	1,169,605
Securities		1,019,218		1,035,785		1,053,191		1,059,747		1,072,594
Other interest-earning assets		92,635		128,704		41,075		19,452		14,809
Total earning assets (before allowance)		2,471,496		2,442,910		2,313,126		2,281,467		2,257,008
Total assets		2,589,541		2,568,240		2,422,567		2,391,344		2,373,851
Noninterest-bearing deposits		546,778		540,497		534,106		566,628		605,318
Interest-bearing deposits		1,565,493		1,550,591		1,472,990		1,530,313		1,522,510
Brokered deposits		32,541		44,868		49,679		12,762		-
Total deposits		2,144,812		2,129,565		2,056,775		2,109,703		2,127,828
Total subordinated debt		35,474		35,413		35,352		35,290		35,230
Total borrowed funds		185,707		181,739		144,231		63,122		36,773
Other interest-bearing liabilities		25,729		20,480		3,763		-		-
Total interest-bearing liabilities		1,844,944		1,833,091		1,706,015		1,641,487		1,594,513
Shareholders' equity		187,099		181,219		171,912		167,952		160,284

Loan Breakout (in thousands)	2023 4th Qtr.		2023 3rd Qtr.		2023 2nd Qtr.		2023 1st Qtr.		2022 4th Qtr.
Agricultural	$	49,211	$	43,290	$	40,684	$	55,995	$	64,159
Commercial and Industrial		229,915		222,357		224,191		217,063		210,210
Commercial Real Estate		786,921		709,960		657,549		648,202		630,953
Consumer		36,540		37,605		38,614		38,891		39,808
Construction Real Estate		20,936		16,477		16,734		13,939		14,736
Residential Real Estate		267,730		256,348		247,618		236,493		229,916
Loans to Other Financial Institutions		19,400		23,763		38,838		-		-
Gross Loans (excluding held for sale)	$	1,410,653	$	1,309,800	$	1,264,228	$	1,210,583	$	1,189,782

Allowance for credit losses		15,685		14,872		14,582		15,065		7,619

Net loans	$	1,394,968	$	1,294,928	$	1,249,646	$	1,195,518	$	1,182,163

Performance Ratios	2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.			2023 1st Qtr.			2022 4th Qtr.
Annualized return on average assets		0.82	%		0.80	%		0.86	%		0.94	%		1.13	%
Annualized return on average equity		11.32	%		11.31	%		12.13	%		13.42	%		16.68	%
Annualized return on average tangible common equity		16.40	%		16.55	%		18.31	%		20.64	%		26.63	%
Net interest margin (fully tax-equivalent)		2.72	%		2.70	%		2.86	%		3.09	%		3.15	%
Efficiency ratio		65.31	%		65.74	%		65.92	%		65.40	%		60.15	%
Annualized cost of funds		1.91	%		1.70	%		1.29	%		0.79	%		0.59	%
Annualized cost of deposits		1.57	%		1.36	%		0.98	%		0.62	%		0.47	%
Cost of interest bearing liabilities		2.45	%		2.18	%		1.70	%		1.08	%		0.81	%
Shareholders' equity to total assets		7.59	%		7.04	%		7.22	%		7.00	%		7.08	%
Tangible common equity to tangible assets		5.32	%		4.74	%		4.83	%		4.52	%		4.57	%
Annualized noninterest expense to average assets		2.13	%		2.14	%		2.24	%		2.34	%		2.23	%
Loan to deposit		66.70	%		61.65	%		61.02	%		57.66	%		56.40	%
Full-time equivalent employees		369			376			380			376			376

Capital Ratios ChoiceOne Financial Services Inc.	2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.			2023 1st Qtr.			2022 4th Qtr.
Total capital (to risk weighted assets)		13.0	%		13.2	%		13.2	%		13.5	%		13.8	%
Common equity Tier 1 capital (to risk weighted assets)		10.3	%		10.4	%		10.5	%		10.7	%		11.1	%
Tier 1 capital (to risk weighted assets)		10.5	%		10.7	%		10.8	%		11.0	%		11.4	%
Tier 1 capital (to average assets)		7.5	%		7.4	%		7.7	%		7.7	%		7.9	%

Capital Ratios ChoiceOne Bank	2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.			2023 1st Qtr.			2022 4th Qtr.
Total capital (to risk weighted assets)		12.4	%		12.7	%		12.7	%		13.0	%		13.0	%
Common equity Tier 1 capital (to risk weighted assets)		11.8	%		12.0	%		12.2	%		12.5	%		12.5	%
Tier 1 capital (to risk weighted assets)		11.8	%		12.0	%		12.2	%		12.5	%		12.5	%
Tier 1 capital (to average assets)		8.4	%		8.3	%		8.7	%		8.7	%		8.7	%

Asset Quality	2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.			2023 1st Qtr.			2022 4th Qtr.
(in thousands)
Net loan charge-offs (recoveries)	$	120		$	148		$	67		$	28		$	(12)
Annualized net loan charge-offs (recoveries) to average loans		0.04	%		0.05	%		0.02	%		0.01	%		0.00	%
Allowance for loan losses	$	15,685		$	14,872		$	14,582		$	15,065		$	7,619
Unfunded commitment liability	$	2,160		$	2,718		$	3,156		$	2,991		$	-
Allowance to loans (excludes held for sale)		1.11	%		1.14	%		1.15	%		1.24	%		0.64	%
Total funds reserved to pay for loans (includes liability for unfunded commitments and excludes held for sale)		1.27	%		1.34	%		1.40	%		1.49	%		0.64	%
Non-Accruing loans	$	1,723		$	1,670		$	1,581		$	1,596		$	1,263
Nonperforming loans (includes OREO)	$	1,845		$	1,792		$	1,847		$	1,726		$	2,666
Nonperforming loans to total loans (excludes held for sale)		0.13	%		0.14	%		0.15	%		0.14	%		0.22	%
Nonperforming assets to total assets		0.07	%		0.07	%		0.07	%		0.07	%		0.11	%

	Three Months Ended December 31,
	2023							2022
(Dollars in thousands)	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate
Assets:
Loans (1)(3)(4)(5)(6)	$	1,359,643	$	19,782		5.77	%	$	1,169,605	$	14,407		4.89	%
Taxable securities (2)(6)		726,335		5,532		3.02			771,878		4,582		2.36
Nontaxable securities (1)		292,883		1,753		2.37			300,716		1,880		2.48
Other		92,635		1,284		5.50			14,809		177		4.73
Interest-earning assets		2,471,496		28,350		4.55			2,257,008		21,045		3.70
Noninterest-earning assets		118,045							116,843
Total assets	$	2,589,541						$	2,373,851

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	864,689	$	3,667		1.68	%	$	852,886	$	1,480		0.69	%
Savings deposits		343,766		530		0.61			442,861		226		0.20
Certificates of deposit		357,038		3,812		4.24			226,359		795		1.39
Brokered deposit		32,541		413		5.03			404		3		2.51
Borrowings		185,707		2,221		4.75			36,773		374		4.03
Subordinated debentures		35,474		414		4.63			35,230		391		4.41
Other		25,729		349		5.38			-		-		-
Interest-bearing liabilities		1,844,944		11,405		2.45			1,594,513		3,268		0.81
Demand deposits		546,778							605,318
Other noninterest-bearing liabilities		10,720							13,736
Total liabilities		2,402,442							2,213,567
Shareholders' equity		187,099							160,284
Total liabilities and shareholders' equity	$	2,589,541						$	2,373,851

Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	16,945						$	17,777

Net interest margin (tax-equivalent basis) (Non-GAAP) (1)						2.72	%						3.12	%

Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	16,945						$	17,777
Adjustment for taxable equivalent interest				(390)							(411)
Net interest income (GAAP)			$	16,555						$	17,366
Net interest margin (GAAP)						2.66	%						3.05	%


(1)	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.
(2)	Taxable securities include dividend income from Federal Home Loan Bank and Federal Reserve Bank stock.
(3)	Loans include both loans to other financial institutions and loans held for sale.
(4)	Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $1.7 million and $1.2 million in the fourth quarter of 2023 and 2022, respectively.
(5)	Interest on loans included net origination fees and accretion income. Accretion income was $447,000 and $378,000 in the fourth quarter of 2023 and 2022, respectively.
(6)	Interest on loans and securities included derivative income and expense. Derivative income in securities was $916,000 and derivative expense in securities was $9,000 in the fourth quarter of 2023 and 2022, respectively. Derivative expense in loan interest income was $673,000 and $459,000 in the fourth quarter of 2023 and 2022, respectively.

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SOURCE ChoiceOne Financial Services, Inc.

ChoiceOne Reports Fourth Quarter 2023 Results