SPARTA, Mich., July 25, 2024 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ((", ChoiceOne", , NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended June 30, 2024.

Financial Highlights

ChoiceOne reported net income of $6,586,000 and $12,220,000 for the three and six months ended June 30, 2024, compared to $5,213,000 and $10,846,000 for the same periods in 2023, representing annualized growth of 26.3% and 12.7%, respectively.
Diluted earnings per share were $0.87 and $1.61 in the three and six months ended June 30, 2024, compared to $0.69 and $1.44 per share in the same periods in the prior year.
GAAP Net interest margin in the second quarter of 2024 increased to 2.95%, compared to 2.67% in the first quarter of 2024, and 2.79% in the second quarter of 2023. GAAP net interest income was $18.4 million in the second quarter of 2024 compared to $16.1 million in the second 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 $12.4 million or 3.6% on an annualized basis during the second quarter of 2024 and $175.6 million or 14.3% since June 30, 2023. Loan interest income increased $6.0 million in the second quarter of 2024 compared to the same period in 2023.
Deposits, excluding brokered deposits, decreased $44.4 million or an annualized 8.3% in the second quarter of 2024 and increased $64.5 million or 3.2% during the twelve months since June 30, 2023. The decrease in deposits in the second quarter was largely public funds including schools and townships which historically fluctuate with summer tax bill collection in July. The increase in deposits in the trailing twelve months is a combination of new business and recapture of deposit losses from the prior year.
Asset quality remains strong with only 0.16% of nonperforming loans to total loans (excluding held for sale) as of June 30, 2024.

"As we navigate through the evolving economic landscape, our bank has achieved consistent growth due to our strong team, technology, and relationships we have with our customers. Our strategic efforts have improved our net interest margin, bolstered by the use of derivative instruments which contribute positive cashflow. These steps have strengthened our financial base, so that ChoiceOne is well positioned to handle the market's fluctuations in different rate environments," said Kelly Potes, Chief Executive Officer.

ChoiceOne reported net income of $6,586,000 and $12,220,000 for the three and six months ended June 30, 2024, compared to $5,213,000 and $10,846,000 for the same periods in 2023. Diluted earnings per share were $0.87 and $1.61 in the three and six months ended June 30, 2024, compared to $0.69 and $1.44 per share in the same periods in the prior year. ChoiceOne experienced modest growth in our loan portfolio and a slight reduction in deposit balances. Despite these fluctuations, both net income and net interest margin have increased largely due to the commencement of cash flows from our pay-fixed interest rate swaps.

As of June 30, 2024, total assets were $2.6 billion, an increase of $139.3 million compared to June 30, 2023. The growth is primarily attributed to an increase in core loans of $175.6 million, and an increase in cash of $24.2 million. This growth was offset by a $62.1 million reduction in securities during the same time period. ChoiceOne has actively managed its liquidity to support organic loan growth, strategically shifting from lower-yielding assets to higher-yielding loans. This is reflected in the loan growth observed since June 30, 2023.

Deposits, excluding brokered deposits, decreased $44.4 million or an annualized 8.3% in the second quarter of 2024 and increased $64.5 million or 3.2% during the twelve months since June 30, 2023. The decrease in deposits in the second quarter was largely public funds including schools and townships which historically fluctuate with summer tax bill collection in July. The increase in deposits in the trailing twelve months 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, the Bank Term Funding Program ("BTFP"), and FHLB advances to ensure ample liquidity. At June 30, 2024, total available borrowing capacity from all sources was $759.5 million. Uninsured deposits totaled $754.4 million or 35.5% of deposits at June 30, 2024.

Increases to short term interest rates have led to higher deposit costs, which rose to an annualized 1.56% in the second quarter of 2024, compared to an annualized 0.98% in the second quarter of 2023. As deposits reprice and customers shift to certificates of deposits and other interest bearing products, this trend is likely to persist. Deposit costs have declined since the first quarter of 2024 due to positive cash flow from pay-fixed interest rate swaps, hedged against deposits, decreasing deposit expenses. 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 six months ended June 30, 2024 increased $1.1 million and $3.2 million compared to the same period in the prior year, due to increases in borrowing amounts and interest rates. Borrowings include $170 million from the BTFP and $40 million of FHLB borrowings at a weighted average fixed rate of 4.7%, with the earliest maturity in January 2025. Total cost of funds increased to an annualized 1.92% in the second quarter of 2024 compared to an annualized 2.0% in the first quarter of 2024 and an annualized 1.29% in the second quarter of 2023.

The provision for credit losses expense on loans was $272,000 in the second quarter of 2024, due in part to loan growth during the quarter. This was offset by a reversal of the provision for unfunded commitments leading to net provision for credit losses expense for the second quarter 2024 of $0. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.12% on June 30, 2024 compared to 1.15% on June 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 0.16% as of June 30, 2024.

ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed assets and variable rate liabilities. On June 30, 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. 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 pay a fixed coupon of 2.75% while receiving SOFR. Settlements from these swaps amounted to $974,000 for the second quarter of 2024 and were a contributing factor to the increase in net interest margin during the second quarter of 2024. Fully tax equivalent net interest margin excluding the swaps was 28 basis points lower than tax equivalent net interest margin reported for the second quarter of 2024.

Shareholders' equity totaled $214.5 million as of June 30, 2024, up from $179.2 million as of June 30, 2023. This increase is due to increased retained earnings and an improvement in accumulated other compressive loss (AOCI) of $19.6 million compared to June 30, 2023. 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 increase in unrealized gain of the pay-fixed swap derivatives. ChoiceOne Bank remains "well-capitalized" with a total risk-based capital ratio of 13.2% as of June 30, 2024, compared to 12.7% on June 30, 2023.

Noninterest income increased $598,000 and $978,000 in the three and six months ended June 30, 2024, compared to the same periods in the prior year. The increase was largely due to an increase in customer service charges of $391,000 and $529,000 in the three and six months ended June 30, 2024 compared to the same period in 2023 and changes in the market value of equity securities in the three and six months ended June 30, 2024, compared to the same period in the prior year. In addition, ChoiceOne recognized earnings on a bank owned life insurance death benefit claim in the amount of $196,000 during the first quarter of 2024.

Noninterest expense increased by $705,000 or 5.2% and $394,000 or 1.4% in the three and six months ended June 30, 2024 compared to the same period in 2023. The increase in total noninterest expense was due to an increase in employee health insurance benefits and an increase to FDIC insurance and other costs related to inflationary pressures. This was offset by a decline in occupancy and equipment related to two branch closures during the first quarter of 2024. 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.

"I am very pleased with the results of the second quarter of 2024, showing an improving net interest margin and excellent credit metrics. Our experienced team has positioned ChoiceOne to grow our franchise, improve our technology, and offer a high level of service to customers. We remain committed to our communities, customers, and stakeholders and sincerely appreciate the trust they put in us as their local financial partner." 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 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, 2023.

Condensed Balance Sheets (Unaudited)

(In thousands)	June 30, 2024		March 31, 2024		June 30, 2023
Cash and cash equivalents	$	101,002	$	150,129	$	76,810
Equity securities, at fair value		7,502		7,560		8,299
Securities Held to Maturity		392,699		397,981		420,549
Securities Available for Sale		491,670		504,636		521,202
Federal Home Loan Bank stock		4,449		4,449		8,366
Federal Reserve Bank stock		5,066		5,066		5,065
Loans held for sale		5,946		6,035		8,924
Loans to other financial institutions		36,569		30,032		38,838
Core loans		1,400,958		1,388,558		1,225,390
Total loans held for investment		1,437,527		1,418,590		1,264,228
Allowance for credit losses		(16,152)		(16,037)		(14,582)
Loans, net of allowance for credit losses		1,421,375		1,402,553		1,249,646
Premises and equipment		27,370		28,268		29,085
Cash surrender value of life insurance policies		45,384		45,079		44,510
Goodwill		59,946		59,946		59,946
Core deposit intangible		1,448		1,651		2,304
Other assets		59,210		57,346		49,020

Total Assets	$	2,623,067	$	2,670,699	$	2,483,726

Noninterest-bearing deposits	$	517,137	$	502,685	$	544,925
Interest-bearing deposits		1,582,365		1,641,193		1,490,093
Brokered deposits		27,177		41,970		51,370
Borrowings		210,000		210,000		160,000
Subordinated debentures		35,630		35,568		35,385
Other liabilities		36,239		32,527		22,713

Total Liabilities		2,408,548		2,463,943		2,304,486

Common stock and paid-in capital, no par value; shares authorized: 15,000,000; shares outstanding: 7,573,618 at June 30, 2024, 7,556,137 at March 31, 2024, and 7,534,658 at June 30, 2023		173,984		173,786		172,880
Retained earnings		81,836		77,294		67,281
Accumulated other comprehensive income (loss), net		(41,301)		(44,324)		(60,921)
Shareholders' Equity		214,519		206,756		179,240

Total Liabilities and Shareholders' Equity	$	2,623,067	$	2,670,699	$	2,483,726

Condensed Statements of Income (Unaudited)

	Three Months Ended				Six Months Ended
(Dollars in thousands, except per share data)	June 30,				June 30,
	2024		2023		2024		2023
Interest income
Loans, including fees	$	21,971	$	15,978	$	42,757	$	30,851
Securities:
Taxable		5,471		5,378		10,819		10,291
Tax exempt		1,410		1,389		2,822		2,824
Other		1,092		571		1,978		748
Total interest income		29,944		23,316		58,376		44,714

Interest expense
Deposits		8,325		5,056		17,102		8,332
Advances from Federal Home Loan Bank		463		621		904		1,226
Other		2,785		1,548		5,525		2,053
Total interest expense		11,573		7,225		23,531		11,611

Net interest income		18,371		16,091		34,845		33,103
Provision for credit losses on loans		272		(415)		675		(106)
Provision for credit losses on unfunded commitments		(272)		165		(675)		(119)
Net Provision for credit losses expense		-		(250)		-		(225)
Net interest income after provision		18,371		16,341		34,845		33,328

Noninterest income
Customer service charges		2,662		2,271		5,067		4,538
Insurance and investment commissions		190		172		388		368
Gains on sales of loans		525		540		979		943
Net gains (losses) on sales of securities		-		-		-		-
Net gains (losses) on sales and write downs of other assets		11		133		12		136
Earnings on life insurance policies		305		269		800		532
Trust income		220		196		433		380
Change in market value of equity securities		(71)		(385)		(36)		(322)
Other		241		289		491		581
Total noninterest income		4,083		3,485		8,134		7,156

Noninterest expense
Salaries and benefits		8,264		7,837		16,095		15,920
Occupancy and equipment		1,477		1,507		2,939		3,150
Data processing		1,780		1,681		3,450		3,363
Professional fees		593		619		1,208		1,240
Supplies and postage		168		197		346		388
Advertising and promotional		199		155		349		304
Intangible amortization		203		253		406		505
FDIC insurance		390		220		765		520
Other		1,204		1,104		2,404		2,178
Total noninterest expense		14,278		13,573		27,962		27,568

Income before income tax		8,176		6,253		15,017		12,916
Income tax expense		1,590		1,040		2,797		2,070

Net income	$	6,586	$	5,213	$	12,220	$	10,846

Basic earnings per share	$	0.87	$	0.69	$	1.62	$	1.44
Diluted earnings per share	$	0.87	$	0.69	$	1.61	$	1.44
Dividends declared per share	$	0.27	$	0.26	$	0.54	$	0.52

Other Selected Financial Highlights
(Unaudited)

	Quarterly
Earnings	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
(in thousands except per share data)
Net interest income	$	18,371		$	16,474		$	16,556		$	16,226		$	16,091
Net provision expense		-			-			375			-			(250)
Noninterest income		4,083			4,051			4,046			3,704			3,485
Noninterest expense		14,278			13,684			13,778			13,728			13,573
Net income before federal income tax expense		8,176			6,841			6,449			6,202			6,253
Income tax expense		1,590			1,207			1,156			1,080			1,040
Net income		6,586			5,634			5,293			5,122			5,213
Basic earnings per share		0.87			0.75			0.70			0.68			0.69
Diluted earnings per share		0.87			0.74			0.70			0.68			0.69

End of period balances	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
(in thousands)
Gross loans	$	1,443,473		$	1,424,625		$	1,415,363		$	1,315,022		$	1,273,152
Loans held for sale (1)		5,946			6,035			4,710			5,222			8,924
Loans to other financial institutions (2)		36,569			30,032			19,400			23,763			38,838
Core loans (gross loans excluding 1 and 2 above)		1,400,958			1,388,558			1,391,253			1,286,037			1,225,390
Allowance for credit losses		16,152			16,037			15,685			14,872			14,582
Securities available for sale		491,670			504,636			514,598			490,804			521,202
Securities held to maturity		392,699			397,981			407,959			414,743			420,549
Other interest-earning assets		84,484			100,175			39,411			130,178			62,762
Total earning assets (before allowance)		2,412,326			2,427,417			2,377,331			2,350,747			2,277,665
Total assets		2,623,067			2,670,699			2,576,706			2,574,196			2,483,726
Noninterest-bearing deposits		517,137			502,685			547,625			531,962			544,925
Interest-bearing deposits		1,582,365			1,641,193			1,550,985			1,551,995			1,490,093
Brokered deposits		27,177			41,970			23,445			49,238			51,370
Total deposits		2,126,679			2,185,848			2,122,055			2,133,195			2,086,388
Deposits excluding brokered		2,099,502			2,143,878			2,098,610			2,083,957			2,035,018
Total subordinated debt		35,630			35,568			35,507			35,446			35,385
Total borrowed funds		210,000			210,000			200,000			180,000			160,000
Other interest-bearing liabilities		22,378			21,512			8,060			32,204			11,985
Total interest-bearing liabilities		1,877,550			1,950,243			1,817,997			1,848,883			1,748,833
Shareholders' equity		214,519			206,756			195,634			181,161			179,240

Average Balances	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
(in thousands)
Loans	$	1,435,966		$	1,412,569		$	1,359,643		$	1,278,421		$	1,218,860
Securities		986,281			1,002,140			1,019,218			1,035,785			1,053,191
Other interest-earning assets		80,280			64,064			92,635			128,704			41,075
Total earning assets (before allowance)		2,502,527			2,478,773			2,471,496			2,442,910			2,313,126
Total assets		2,647,716			2,621,009			2,589,541			2,568,240			2,422,567
Noninterest-bearing deposits		516,308			506,175			546,778			540,497			534,106
Interest-bearing deposits		1,601,020			1,599,509			1,565,493			1,550,591			1,472,990
Brokered deposits		34,218			34,708			32,541			44,868			49,679
Total deposits		2,151,546			2,140,392			2,144,812			2,135,956			2,056,775
Total subordinated debt		35,596			35,535			35,474			35,413			35,352
Total borrowed funds		210,000			214,835			185,707			181,739			144,231
Other interest-bearing liabilities		26,426			18,399			25,729			19,180			3,763
Total interest-bearing liabilities		1,907,260			1,902,986			1,844,944			1,831,791			1,706,015
Shareholders' equity		210,742			200,177			187,099			181,219			171,912

Loan Breakout (in thousands)	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
Agricultural	$	45,274		$	41,950		$	49,210		$	43,290		$	40,684
Commercial and Industrial		224,031			231,222			229,915			222,357			224,191
Commercial Real Estate		804,213			794,705			786,921			709,960			657,549
Consumer		32,811			34,268			36,541			37,605			38,614
Construction Real Estate		18,751			17,890			20,936			16,477			16,734
Residential Real Estate		275,878			268,523			267,730			256,348			247,618
Loans to Other Financial Institutions		36,569			30,032			19,400			23,763			38,838
Gross Loans (excluding held for sale)	$	1,437,527		$	1,418,590		$	1,410,653		$	1,309,800		$	1,264,228

Allowance for credit losses		16,152			16,037			15,685			14,872			14,582

Net loans	$	1,421,375		$	1,402,553		$	1,394,968		$	1,294,928		$	1,249,646

Performance Ratios	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
Annualized return on average assets		0.99	%		0.86	%		0.82	%		0.80	%		0.86	%
Annualized return on average equity		12.50	%		11.26	%		11.32	%		11.31	%		12.13	%
Annualized return on average tangible common equity		17.22	%		15.81	%		16.40	%		16.55	%		18.31	%
Net interest margin (GAAP)		2.95	%		2.67	%		2.66	%		2.64	%		2.79	%
Net interest margin (fully tax-equivalent)		3.01	%		2.74	%		2.72	%		2.70	%		2.86	%
Efficiency ratio		61.47	%		64.55	%		65.31	%		65.74	%		65.92	%
Annualized cost of funds		1.92	%		2.00	%		1.91	%		1.70	%		1.29	%
Annualized cost of deposits		1.56	%		1.65	%		1.57	%		1.36	%		0.98	%
Cost of interest bearing liabilities		2.44	%		2.53	%		2.45	%		2.18	%		1.70	%
Shareholders' equity to total assets		8.18	%		7.74	%		7.59	%		7.04	%		7.22	%
Tangible common equity to tangible assets		5.98	%		5.56	%		5.32	%		4.74	%		4.83	%
Annualized noninterest expense to average assets		2.16	%		2.09	%		2.13	%		2.14	%		2.24	%
Loan to deposit		67.87	%		65.17	%		66.70	%		61.65	%		61.02	%
Full-time equivalent employees		368			367			369			376			380

Capital Ratios ChoiceOne Financial Services Inc.	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
Total capital (to risk weighted assets)		13.5	%		13.3	%		13.0	%		13.2	%		13.2	%
Common equity Tier 1 capital (to risk weighted assets)		10.7	%		10.5	%		10.3	%		10.4	%		10.5	%
Tier 1 capital (to risk weighted assets)		10.9	%		10.7	%		10.5	%		10.7	%		10.8	%
Tier 1 capital (to average assets)		7.7	%		7.6	%		7.5	%		7.4	%		7.7	%

Capital Ratios ChoiceOne Bank	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
Total capital (to risk weighted assets)		13.2	%		12.6	%		12.4	%		12.7	%		12.7	%
Common equity Tier 1 capital (to risk weighted assets)		12.5	%		11.8	%		11.8	%		12.0	%		12.2	%
Tier 1 capital (to risk weighted assets)		12.5	%		11.8	%		11.8	%		12.0	%		12.2	%
Tier 1 capital (to average assets)		8.8	%		8.3	%		8.4	%		8.3	%		8.7	%

Asset Quality	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
(in thousands)
Net loan charge-offs (recoveries)	$	157		$	51		$	120		$	148		$	67
Annualized net loan charge-offs (recoveries) to average loans		0.04	%		0.01	%		0.04	%		0.05	%		0.02	%
Allowance for credit losses	$	16,152		$	16,037		$	15,685		$	14,872		$	14,582
Unfunded commitment liability	$	1,485		$	1,757		$	2,160		$	2,718		$	3,156
Allowance to loans (excludes held for sale)		1.12	%		1.13	%		1.11	%		1.14	%		1.15	%
Total funds reserved to pay for loans (includes liability for unfunded commitments and excludes held for sale)		1.23	%		1.25	%		1.27	%		1.34	%		1.40	%
Non-Accruing loans	$	2,086		$	1,715		$	1,723		$	1,670		$	1,581
Nonperforming loans (includes OREO)	$	2,358		$	1,837		$	1,845		$	1,792		$	1,847
Nonperforming loans to total loans (excludes held for sale)		0.16	%		0.13	%		0.13	%		0.14	%		0.15	%
Nonperforming assets to total assets		0.09	%		0.07	%		0.07	%		0.07	%		0.07	%

NON-GAAP Reconciliation	2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.			2023 2nd Qtr.
Net interest income (tax-equivalent basis) (Non-GAAP)	$	18,756		$	16,871		$	16,945		$	16,609		$	16,468
Net interest margin (fully tax-equivalent)		3.01	%		2.74	%		2.72	%		2.70	%		2.86	%

Reconciliation to Reported Net Interest Income

Net interest income (tax-equivalent basis) (Non-GAAP) (1)	$	18,756		$	16,871		$	16,945		$	16,609		$	16,468

Adjustment for taxable equivalent interest		(385)			(397)			(390)			(383)			(377)

Net interest income (GAAP)	$	18,371		$	16,474		$	16,555		$	16,226		$	16,091
Net interest margin (GAAP)		2.95	%		2.67	%		2.66	%		2.64	%		2.79	%

	Three Months Ended June 30,
	2024							2023
(Dollars in thousands)	Average							Average
	Balance		Interest		Rate			Balance		Interest		Rate
Assets:
Loans (1)(3)(4)(5)	$	1,435,966	$	21,981		6.16	%	$	1,218,860	$	15,986		5.26	%
Taxable securities (2)		696,023		5,471		3.16			756,239		5,378		2.85
Nontaxable securities (1)		290,258		1,785		2.47			296,952		1,758		2.38
Other		80,280		1,092		5.47			41,075		571		5.57
Interest-earning assets		2,502,527		30,329		4.87			2,313,126		23,693		4.11
Noninterest-earning assets		145,189							109,441
Total assets	$	2,647,716						$	2,422,567

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	876,344	$	2,921		1.34	%	$	815,179	$	1,905		0.94	%
Savings deposits		333,056		649		0.78			372,651		345		0.37
Certificates of deposit		391,620		4,331		4.45			285,160		2,225		3.13
Brokered deposit		34,218		424		4.98			49,679		581		4.69
Borrowings		210,000		2,480		4.75			144,231		1,717		4.78
Subordinated debentures		35,596		412		4.65			35,352		407		4.62
Other		26,426		356		5.41			3,763		45		4.81
Interest-bearing liabilities		1,907,260		11,573		2.44			1,706,015		7,225		1.70
Demand deposits		516,308							534,106
Other noninterest-bearing liabilities		13,406							10,534
Total liabilities		2,436,974							2,250,655
Shareholders' equity		210,742							171,912
Total liabilities and shareholders' equity	$	2,647,716						$	2,422,567

Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	18,756						$	16,468

Net interest margin (tax-equivalent basis) (Non-GAAP) (1)						3.01	%						2.86	%

Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	18,756						$	16,468
Adjustment for taxable equivalent interest				(385)							(377)
Net interest income (GAAP)			$	18,371						$	16,091
Net interest margin (GAAP)						2.95	%						2.79	%


(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 $1.9 million and $1.6 million in the second quarter of 2024 and 2023, respectively.
(5)	Interest on loans included net origination fees and accretion income. Accretion income was $279,000 and $444,000 in the second quarter of 2024 and 2023, respectively.

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SOURCE ChoiceOne Financial Services, Inc.

ChoiceOne Reports Second Quarter 2024 Results