SPARTA, Mich., Jan. 22, 2025 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ((", ChoiceOne", , NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended December 31, 2024.

Highlights

ChoiceOne reported net income of $7,159,000 and $26,727,000 for the three and twelve months ended December 31, 2024, compared to $5,293,000 and $21,261,000 for the same periods in 2023, representing growth of 35.3% and 25.7%, respectively. Net income adjusted for merger related expenses was $7,532,000 and $27,733,000 for the three and twelve months ended December 31, 2024.
Diluted earnings per share were $0.79 and $3.25 in the three and twelve months ended December 31, 2024, compared to $0.70 and $2.82 per share in the same periods in the prior year. The sale of 1,380,000 shares of common stock during the third quarter of 2024 negatively impacted diluted earnings per share for 2024. Diluted earnings per share adjusted for merger expenses were $0.83 and $3.37 in the three and twelve months ended December 31, 2024.
GAAP Net interest margin in the fourth quarter of 2024 decreased to 2.98%, compared to 3.17% in the third quarter of 2024, and increased compared to 2.66% in the fourth quarter of 2023. GAAP net interest income was $19.3 million in the fourth quarter of 2024 compared to $16.6 million in the fourth quarter of 2023. Net interest income was aided by cash settlements from pay-fixed interest rate swaps which started paying in April 2024.
Core loans, which exclude held for sale loans and loans to other financial institutions, grew organically by $40.3 million or 11.0% on an annualized basis during the fourth quarter of 2024 and $114.5 million or 8.2% for the year ended December 31, 2024. Loan interest income increased $3.8 million in the fourth quarter of 2024 and $21.2 million in the year ended December 31, 2024 compared to the same periods in 2023, respectively.
Deposits, excluding brokered deposits, declined by $24.0 million or an annualized 4.4% in the fourth quarter of 2024 and increased $79.0 million or 3.8% during 2024. The decrease in deposits in the fourth quarter of 2024 was due to seasonal outflow of public funds, which includes taxes received by schools and townships during the third quarter of 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.
Asset quality remains strong with only 0.27% of nonperforming loans to total loans (excluding held for sale) as of December 31, 2024.

"ChoiceOne had an outstanding fourth quarter and full year 2024, which underscore the growth in our core loans and deposits, thanks to the dedication and expertise of our team. Our proactive balance sheet management has led to improvements in our net interest margin, positioning us well to navigate changing market conditions. We are also excited about the upcoming anticipated close of our pending merger with Fentura Financial, Inc. and The State Bank expected to occur in the first quarter of 2025, which will further enhance our markets and capabilities," said Kelly Potes, Chief Executive Officer.

ChoiceOne reported net income of $7,159,000 and $26,727,000 for the three and twelve months ended December 31, 2024, compared to $5,293,000 and $21,261,000 for the same periods in 2023, representing growth of 35.3% and 25.7%, respectively. Net income adjusted for merger related expenses was $7,532,000 and $27,733,000 for the three and twelve months ended December 31, 2024. Diluted earnings per share were $0.79 and $3.25 in the three and twelve months ended December 31, 2024, compared to $0.70 and $2.82 per share in the same periods in the prior year. The sale of 1,380,000 shares of common stock during the third quarter of 2024 negatively impacted diluted earnings per share for 2024. Diluted earnings per share adjusted for merger expenses were $0.83 and $3.37 in the three and twelve months ended December 31, 2024.

As of December 31, 2024, total assets were $2.7 billion, an increase of $146.5 million compared to December 31, 2023. The growth is primarily attributed to an increase in core loans of $114.5 million and loans to other financial institutions of $20.5 million. This growth was offset by a $48.9 million reduction 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 observed.

Deposits, excluding brokered deposits, declined by $24.0 million or an annualized 4.4% in the fourth quarter of 2024 and increased $79.0 million or 3.8% during 2024. The decrease in deposits in the fourth quarter of 2024 was due to seasonal outflow of public funds, which includes taxes received by schools and townships during the third quarter of 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.

ChoiceOne's cost of deposits to average total deposits has declined since peaking in the first quarter of 2024 due to positive cash flow from pay-fixed interest rate swaps, hedged against deposits, and decreasing deposit expenses. In addition, the Federal Reserve has decreased the federal funds rate by 50 basis points since September 2024. These factors led to a cost of deposits to average total deposits of an annualized 1.58% in the fourth quarter of 2024 compared to an annualized 1.57% in the fourth quarter of 2023. Cost of deposits to average total deposits peaked in the first quarter of 2024 at an annualized 1.65%. If rates continue to decline, we expect to see slight declines in deposit costs; however, these declines will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the three and twelve months ended December 31, 2024, increased $153,000 and $3.1 million compared to the same periods in the prior year, due to increases in the average balances 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 our 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. Total cost of funds ended flat in the fourth quarter of 2024 with an annualized 1.90% compared to an annualized 1.91% in the fourth quarter of 2023.

The provision for credit losses expense on loans was $200,000 in the fourth quarter of 2024, due in part to loan growth during the quarter. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.07% on December 31, 2024 compared to 1.11% on December 31, 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 0.27% as of December 31, 2024.

ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On December 31, 2024, 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 $23.6 million and an average remaining contract length of 7 to 8 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. Settlements from swaps amounted to $1.5 million for the fourth quarter of 2024 compared to $2.5 million for the third quarter of 2024 and were a contributing factor to the decrease in net interest margin during the fourth quarter of 2024 compared to the third quarter of 2024. Fully tax equivalent net interest margin excluding the swaps was 23 basis points lower than tax equivalent net interest margin reported for the fourth quarter of 2024. Due in part to pay fixed interest rate swaps we have in place, our balance sheet is asset sensitive. In addition to the pay-fixed interest rate swaps, ChoiceOne also employs back-to-back swaps on select commercial loans, with the impact reflected in interest income.

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 stock during the third quarter of 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.

Noninterest income increased $948,000 and $3.1 million in the three and twelve months ended December 31, 2024, compared to the same periods in the prior year. The increase was largely due to an increase in customer service charges of $304,000 and $1.2 million in the three and twelve months ended December 31, 2024 compared to the same periods in 2023 and earnings on life insurance policies in the three and twelve months ended December 31, 2024, compared to the same periods in the prior year. ChoiceOne recognized earnings on a bank owned life insurance death benefit claim in the amount of $504,000 during the fourth quarter of 2024. ChoiceOne also 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 provided incentives to home buyers in the low to moderate income bracket. In addition, there were a number of construction loans which were finalized and written into salable market loans during the fourth quarter of 2024.

Noninterest expense increased by $1.6 million or 11.4% and $3.6 million or 6.6% in the three and twelve months ended December 31, 2024 compared to the same periods in 2023. The increase in total noninterest expense was due in part to merger related expenses of $394,000 and $1.0 million during the three and twelve months ended December 31, 2024, compared to $0 in the same periods 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 were offset by a decline in occupancy and equipment 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.

"I am very pleased with the results of the fourth quarter of 2024, showing core loan growth, solid deposit balances and excellent credit metrics as we get closer to completing the pending merger with Fentura Financial, Inc. and the State Bank, a highly respected community bank in Michigan. We are excited to welcome their customers, communities, and employees to the ChoiceOne team," said Kelly Potes, Chief Executive Officer.

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 35 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 news release contains forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "may," "could," "look forward," "continue", "future" and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of ChoiceOne or Fentura with respect to the planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the proposed transaction on the combined company's future financial performance and the timing of the closing of the proposed transaction. 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 does not undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Such risks, uncertainties and assumptions, include, among others, the following:

the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in a materially burdensome regulatory condition (as defined in the merger agreement));
the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;
the possibility that the anticipated benefits of the proposed transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where ChoiceOne and Fentura do business, or as a result of other unexpected factors or events;
the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;
diversion of management's attention from ongoing business operations and opportunities;
potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; or
the outcome of any legal proceedings that may be instituted against ChoiceOne or Fentura.

Additional risk factors include, but are not limited to, the risk factors described in Item 1A in ChoiceOne's Annual Report on Form 10-K for the year ended December 31, 2023 and in any of ChoiceOne's subsequent SEC filings, which are available on the SEC's website, www.sec.gov.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this presentation includes certain non-GAAP financial measures. ChoiceOne believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand underlying financial performance and condition and trends of ChoiceOne.

Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, non-GAAP measures are used as comparative tools, together with GAAP measures, to assist in the evaluation of operating performance or financial condition. These measures are also calculated using the appropriate GAAP or regulatory components in their entirety and are computed in a manner intended to facilitate consistent period-to-period comparisons. ChoiceOne's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in the tables to this news release under the heading non-GAAP reconciliation.

Condensed Balance Sheets (Unaudited)

(In thousands)	December 31, 2024		September 30, 2024		December 31, 2023
Cash and cash equivalents	$	96,751	$	145,938	$	55,433
Equity securities, at fair value		7,782		7,816		7,505
Securities Held to Maturity		394,534		391,954		407,959
Securities Available for Sale		479,117		497,552		514,598
Federal Home Loan Bank stock		9,383		4,449		4,449
Federal Reserve Bank stock		5,307		5,307		5,065
Loans held for sale		7,288		5,994		4,710
Loans to other financial institutions		39,878		38,492		19,400
Core loans		1,505,762		1,465,458		1,391,253
Total loans held for investment		1,545,640		1,503,950		1,410,653
Allowance for credit losses		(16,552)		(16,490)		(15,685)
Loans, net of allowance for credit losses		1,529,088		1,487,460		1,394,968
Premises and equipment		27,099		27,135		29,750
Cash surrender value of life insurance policies		44,896		45,699		45,074
Goodwill		59,946		59,946		59,946
Core deposit intangible		1,096		1,250		1,854
Other assets		60,956		45,503		45,395

Total Assets	$	2,723,243	$	2,726,003	$	2,576,706

Noninterest-bearing deposits	$	524,945	$	521,055	$	547,625
Interest-bearing deposits		1,652,647		1,680,546		1,550,985
Brokered deposits		36,511		6,627		23,445
Borrowings		175,000		210,000		200,000
Subordinated debentures		35,752		35,691		35,507
Other liabilities		37,973		24,338		23,510

Total Liabilities		2,462,828		2,478,257		2,381,072

Common stock and paid-in capital, no par value; shares authorized: 30,000,000; shares outstanding: 8,965,483 at December 31, 2024, 8,959,664 at September 30, 2024, and 7,548,217 at December 31, 2023		206,780		206,427		173,513
Retained earnings		91,414		86,765		73,699
Accumulated other comprehensive income (loss), net		(37,779)		(45,446)		(51,578)
Shareholders' Equity		260,415		247,746		195,634

Total Liabilities and Shareholders' Equity	$	2,723,243	$	2,726,003	$	2,576,706

Condensed Statements of Income (Unaudited)

	Three Months Ended				Twelve Months Ended
(Dollars in thousands, except per share data)	December 31,				December 31,
	2024		2023		2024		2023
Interest income
Loans, including fees	$	23,571	$	19,759	$	89,580	$	68,384
Securities:
Taxable		4,846		5,532		21,228		21,169
Tax exempt		1,390		1,385		5,614		5,629
Other		1,231		1,286		4,682		3,798
Total interest income		31,038		27,962		121,104		98,980

Interest expense
Deposits		8,710		8,421		34,174		23,990
Advances from Federal Home Loan Bank		669		273		2,041		1,771
Other		2,310		2,712		10,447		7,334
Total interest expense		11,689		11,406		46,662		33,095

Net interest income		19,349		16,556		74,442		65,885
Provision for credit losses on loans		200		933		1,300		1,265
Provision for credit losses on unfunded commitments		-		(558)		(675)		(1,115)
Net Provision for credit losses expense		200		375		625		150
Net interest income after provision		19,149		16,181		73,817		65,735

Noninterest income
Customer service charges		2,731		2,427		10,571		9,347
Insurance and investment commissions		170		157		742		698
Mortgage servicing rights		366		214		1,053		820
Gains on sales of loans		463		261		1,386		1,134
Net gains (losses) on sales of securities		-		-		-		(71)
Net gains (losses) on sales and write downs of other assets		(5)		(2)		198		147
Earnings on life insurance policies		819		286		1,934		1,096
Trust income		241		194		906		771
Change in market value of equity securities		(46)		210		195		(246)
Other		255		299		1,010		1,210
Total noninterest income		4,994		4,046		17,995		14,906

Noninterest expense
Salaries and benefits		8,941		8,005		33,408		31,963
Occupancy and equipment		1,383		1,471		5,797		6,048
Data processing		1,840		1,531		7,222		6,618
Professional fees		653		523		2,471		2,198
Supplies and postage		179		200		699		780
Advertising and promotional		271		148		788		721
Intangible amortization		153		203		757		955
FDIC insurance		180		394		1,335		1,184
Merger related expenses		394		-		1,039		-
Other		1,350		1,303		5,207		4,607
Total noninterest expense		15,344		13,778		58,723		55,074

Income before income tax		8,799		6,449		33,089		25,567
Income tax expense		1,640		1,156		6,362		4,306

Net income	$	7,159	$	5,293	$	26,727	$	21,261

Basic earnings per share	$	0.79	$	0.70	$	3.27	$	2.82
Diluted earnings per share	$	0.79	$	0.70	$	3.25	$	2.82
Dividends declared per share	$	0.28	$	0.27	$	1.09	$	1.05

Income Adjusted for Merger Expenses - Non-GAAP Reconciliation (Unaudited)

	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2024		2023		2024		2023
(In Thousands, Except Per Share Data)
Net income	$	7,159	$	5,293	$	26,727	$	21,261

Merger related expenses net of tax		373		-		1,006		-
Adjusted net income	$	7,532	$	5,293	$	27,733	$	21,261

Weighted average number of shares		8,963,258		7,545,197		8,166,472		7,532,998
Diluted average shares outstanding		9,024,567		7,582,255		8,221,066		7,572,290
Adjusted basic earnings per share	$	0.84	$	0.70	$	3.40	$	2.82
Adjusted diluted earnings per share	$	0.83	$	0.70	$	3.37	$	2.82

Other Selected Financial Highlights (Unaudited)

	Quarterly
Earnings	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
(in thousands except per share data)
Net interest income	$	19,349		$	20,248		$	18,371		$	16,474		$	16,555
Net provision expense		200			425			-			-			375
Noninterest income		4,994			4,867			4,083			4,051			4,046
Noninterest expense		15,344			15,417			14,278			13,684			13,778
Net income before federal income tax expense		8,799			9,273			8,176			6,841			6,449
Income tax expense		1,640			1,925			1,590			1,207			1,156
Net income		7,159			7,348			6,586			5,634			5,293
Basic earnings per share		0.79			0.86			0.87			0.75			0.70
Diluted earnings per share		0.79			0.85			0.87			0.74			0.70
Adjusted basic earnings per share		0.84			0.94			0.87			0.75			0.70
Adjusted diluted earnings per share		0.83			0.93			0.87			0.74			0.70

End of period balances	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
(in thousands)
Gross loans	$	1,552,928		$	1,509,944		$	1,443,473		$	1,424,625		$	1,415,363
Loans held for sale (1)		7,288			5,994			5,946			6,035			4,710
Loans to other financial institutions (2)		39,878			38,492			36,569			30,032			19,400
Core loans (gross loans excluding 1 and 2 above)		1,505,762			1,465,458			1,400,958			1,388,558			1,391,253
Allowance for credit losses		16,552			16,490			16,152			16,037			15,685
Securities available for sale		479,117			497,552			491,670			504,636			514,598
Securities held to maturity		394,534			391,954			392,699			397,981			407,959
Other interest-earning assets		86,185			116,643			84,484			100,175			39,411
Total earning assets (before allowance)		2,512,764			2,516,093			2,412,326			2,427,417			2,377,331
Total assets		2,723,243			2,726,003			2,623,067			2,670,699			2,576,706
Noninterest-bearing deposits		524,945			521,055			517,137			502,685			547,625
Interest-bearing deposits		1,652,647			1,680,546			1,582,365			1,641,193			1,550,985
Brokered deposits		36,511			6,627			27,177			41,970			23,445
Total deposits		2,214,103			2,208,228			2,126,679			2,185,848			2,122,055
Deposits excluding brokered		2,177,592			2,201,601			2,099,502			2,143,878			2,098,610
Total subordinated debt		35,752			35,691			35,630			35,568			35,507
Total borrowed funds		175,000			210,000			210,000			210,000			200,000
Other interest-bearing liabilities		24,003			4,956			22,378			21,512			8,060
Total interest-bearing liabilities		1,923,913			1,937,820			1,877,550			1,950,243			1,817,997
Shareholders' equity		260,415			247,746			214,519			206,756			195,634

Average Balances	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
(in thousands)
Loans	$	1,516,466		$	1,460,033		$	1,435,966		$	1,412,569		$	1,359,643
Securities		965,501			970,913			986,281			1,002,140			1,019,218
Other interest-earning assets		100,864			108,019			80,280			64,064			92,635
Total earning assets (before allowance)		2,582,831			2,538,965			2,502,527			2,478,773			2,471,496
Total assets		2,719,530			2,685,190			2,647,716			2,621,009			2,589,541
Noninterest-bearing deposits		536,653			519,511			516,308			506,175			546,778
Interest-bearing deposits		1,641,102			1,634,255			1,601,020			1,599,509			1,565,493
Brokered deposits		19,620			17,227			34,218			34,708			32,541
Total deposits		2,197,375			2,170,993			2,151,546			2,140,392			2,144,812
Total subordinated debt		35,719			35,658			35,596			35,535			35,474
Total borrowed funds		197,828			210,000			210,000			214,835			185,707
Other interest-bearing liabilities		16,928			11,756			26,426			18,399			25,729
Total interest-bearing liabilities		1,911,197			1,908,896			1,907,260			1,902,986			1,844,944
Shareholders' equity		254,737			237,875			210,742			200,177			187,099

Loan Breakout (in thousands)	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
Agricultural	$	48,221		$	49,147		$	45,274		$	41,950		$	49,210
Commercial and Industrial		228,256			229,232			224,031			231,222			229,915
Commercial Real Estate		901,130			862,773			804,213			794,705			786,921
Consumer		29,412			30,693			32,811			34,268			36,541
Construction Real Estate		17,042			14,555			18,751			17,890			20,936
Residential Real Estate		281,701			279,058			275,878			268,523			267,730
Loans to Other Financial Institutions		39,878			38,492			36,569			30,032			19,400
Gross Loans (excluding held for sale)	$	1,545,640		$	1,503,950		$	1,437,527		$	1,418,590		$	1,410,653

Allowance for credit losses		16,552			16,490			16,152			16,037			15,685

Net loans	$	1,529,088		$	1,487,460		$	1,421,375		$	1,402,553		$	1,394,968

Performance Ratios	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.

Annualized return on average assets		1.05	%		1.09	%		0.99	%		0.86	%		0.82	%
Annualized return on average equity		11.24	%		12.36	%		12.50	%		11.26	%		11.32	%
Annualized return on average tangible common equity		14.54	%		16.29	%		17.22	%		15.81	%		16.40	%
Net interest margin (GAAP)		2.98	%		3.17	%		2.95	%		2.67	%		2.66	%
Net interest margin (fully tax-equivalent)		3.04	%		3.23	%		3.01	%		2.74	%		2.72	%
Efficiency ratio		61.29	%		60.80	%		61.47	%		64.55	%		65.31	%
Annualized cost of funds		1.90	%		1.87	%		1.92	%		2.00	%		1.91	%
Annualized cost of deposits		1.58	%		1.53	%		1.56	%		1.65	%		1.57	%
Cost of interest bearing liabilities		2.43	%		2.38	%		2.44	%		2.53	%		2.45	%
Shareholders' equity to total assets		9.56	%		9.09	%		8.18	%		7.74	%		7.59	%
Tangible common equity to tangible assets		7.49	%		7.00	%		5.98	%		5.56	%		5.32	%
Annualized noninterest expense to average assets		2.26	%		2.30	%		2.16	%		2.09	%		2.13	%
Loan to deposit		70.14	%		68.38	%		67.87	%		65.17	%		66.70	%
Full-time equivalent employees		377			371			368			367			369

Capital Ratios ChoiceOne Financial Services Inc.	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.

Total capital (to risk weighted assets)		14.5	%		15.0	%		13.5	%		13.3	%		13.0	%
Common equity Tier 1 capital (to risk weighted assets)		12.0	%		12.3	%		10.7	%		10.5	%		10.3	%
Tier 1 capital (to risk weighted assets)		12.2	%		12.5	%		10.9	%		10.7	%		10.5	%
Tier 1 capital (to average assets)		9.1	%		9.0	%		7.7	%		7.6	%		7.5	%
Commercial Real Estate Loans as a percentage of total capital		195.6	%		193.3	%		205.1	%		206.8	%		213.6	%

Capital Ratios ChoiceOne Bank	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.

Total capital (to risk weighted assets)		12.7	%		13.1	%		13.2	%		12.6	%		12.4	%
Common equity Tier 1 capital (to risk weighted assets)		12.0	%		12.3	%		12.5	%		11.8	%		11.8	%
Tier 1 capital (to risk weighted assets)		12.0	%		12.3	%		12.5	%		11.8	%		11.8	%
Tier 1 capital (to average assets)		8.9	%		8.9	%		8.8	%		8.3	%		8.4	%
Commercial Real Estate Loans as a percentage of total capital		224.9	%		222.2	%		208.9	%		218.2	%		222.9	%

Asset Quality	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
(in thousands)
Net loan charge-offs (recoveries)	$	138		$	87		$	157		$	51		$	120
Annualized net loan charge-offs (recoveries) to average loans		0.04	%		0.02	%		0.04	%		0.01	%		0.04	%
Allowance for credit losses	$	16,552		$	16,490		$	16,152		$	16,037		$	15,685
Unfunded commitment liability	$	1,485		$	1,485		$	1,485		$	1,757		$	2,160
Allowance to loans (excludes held for sale)		1.07	%		1.10	%		1.12	%		1.13	%		1.11	%
Total funds reserved to pay for loans (includes liability for unfunded commitments and excludes held for sale)		1.17	%		1.20	%		1.23	%		1.25	%		1.27	%
Non-Accruing loans	$	3,704		$	2,355		$	2,086		$	1,715		$	1,723
Nonperforming loans (includes OREO)	$	4,177		$	2,884		$	2,358		$	1,837		$	1,845
Nonperforming loans to total loans (excludes held for sale)		0.27	%		0.19	%		0.16	%		0.13	%		0.13	%
Nonperforming assets to total assets		0.15	%		0.11	%		0.09	%		0.07	%		0.07	%

NON-GAAP Reconciliation	2024 4th Qtr.			2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.
Net interest income (tax-equivalent basis) (Non-GAAP)	$	19,739		$	20,631		$	18,756		$	16,871		$	16,945
Net interest margin (fully tax-equivalent)		3.04	%		3.23	%		3.01	%		2.74	%		2.72	%

Reconciliation to Reported Net Interest Income

Net interest income (tax-equivalent basis) (Non-GAAP)	$	19,739		$	20,631		$	18,756		$	16,871		$	16,945

Adjustment for taxable equivalent interest		(390)			(383)			(385)			(397)			(390)

Net interest income (GAAP)	$	19,349		$	20,248		$	18,371		$	16,474		$	16,555
Net interest margin (GAAP)		2.98	%		3.17	%		2.95	%		2.67	%		2.66	%

	Three Months Ended December 31,
	2024							2023
(Dollars in thousands)	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate
Assets:
Loans (1)(3)(4)(5)	$	1,516,466	$	23,591		6.19	%	$	1,359,643	$	19,782		5.77	%
Taxable securities (2)		677,133		4,846		2.85			726,335		5,532		3.02
Nontaxable securities (1)		288,368		1,760		2.43			292,883		1,753		2.37
Other		100,864		1,231		4.86			92,635		1,284		5.50
Interest-earning assets		2,582,831		31,428		4.84			2,471,496		28,350		4.55
Noninterest-earning assets		136,699							118,045
Total assets	$	2,719,530						$	2,589,541

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	907,631	$	3,389		1.49	%	$	864,689	$	3,667		1.68	%
Savings deposits		336,107		810		0.96			343,766		530		0.61
Certificates of deposit		397,364		4,291		4.30			357,038		3,812		4.24
Brokered deposit		19,620		220		4.46			32,541		413		5.03
Borrowings		197,828		2,374		4.77			185,707		2,221		4.75
Subordinated debentures		35,719		405		4.51			35,474		414		4.63
Other		16,928		200		4.70			25,729		349		5.38
Interest-bearing liabilities		1,911,197		11,689		2.43			1,844,944		11,405		2.45
Demand deposits		536,653							546,778
Other noninterest-bearing liabilities		16,943							10,720
Total liabilities		2,464,793							2,402,442
Shareholders' equity		254,737							187,099
Total liabilities and shareholders' equity	$	2,719,530						$	2,589,541

Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	19,739						$	16,945

Net interest margin (tax-equivalent basis) (Non-GAAP) (1)						3.04	%						2.72	%

Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	19,739						$	16,945
Adjustment for taxable equivalent interest				(390)							(390)
Net interest income (GAAP)			$	19,349						$	16,555
Net interest margin (GAAP)						2.98	%						2.66	%


(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 $3.0 million and $1.7 million in the fourth quarter of 2024 and 2023, respectively.
(5)	Interest on loans included net origination fees and accretion income. Accretion income was $276,000 and $447,000 in the fourth quarter of 2024 and 2023, respectively.

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SOURCE ChoiceOne Financial Services, Inc.

ChoiceOne Reports Fourth Quarter and Year End 2024 Results