CHOICEONE FINANCIAL SERVICES INC
For the period ended Dec 31, 2025. Filed Mar 13, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 13, 2026
COFS$36.69-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-11.
0000950170-25-036839
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-13.
0001193125-26-105046
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 117 previous paragraphs and 116 current paragraphs.
52 unchanged; 32 reworded; 31 added; 33 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
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.
Current report
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.
Current report
ChoiceOne's asset mix has shifted from loans held for investment of 69.8% of deposits at December 31, 2024 to 83.9% of deposits at December 31, 2025. 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. In addition to growth related to the Merger, ChoiceOne also grew in core loans, securities and mortgage warehouse advances, which consist of a line of credit to fund participated mortgage loans. Interest rates and balances from this warehouse line of credit fluctuate with the national mortgage market and are short term in nature.
Current report
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.
Current report
The provision for credit losses on loans was $15.1 million during 2025, due primarily to $12.0 million of expense for the acquisition of $1.3 billion of purchased loans without credit deterioration (“non-PCD loans”) 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 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. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.04%. Nonperforming 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) is 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 a broader trend, and current portfolio performance does not suggest emerging weakness in underlying credit quality.
Current report
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.
Current report
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.
Current report
The average balance of total securities increased $16.2 million in 2025, compared to the same period in 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. Interest income on securities declined $309,000 in 2025 compared to 2024 while the average rate earned on securities declined by 8 basis points for the full year 2025, compared to the same period in the prior year.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
Net cash provided by operating activities was $32.9 million in 2025, compared to $47.4 million in 2024. The decrease was primarily attributable to higher amortization and accretion on purchased loans, as well as a decrease in other liabilities in 2025 compared to 2024. Net cash provided by investing activities increased significantly to $105.6 million in 2025, compared to net cash used of $96.7 million in 2024. The increase was driven primarily by $173.1 million of cash received in connection with the Merger. During 2025, ChoiceOne purchased $95.6 million of securities, which was partially offset by the sale of $78.9 million of securities acquired through the Merger. In addition, ChoiceOne experienced lower net loan activity, with loan originations and payments totaling $89.3 million in 2025, compared to $134.9 million in 2024. Net cash used in financing activities was $147.3 million in 2025, compared to net cash provided of $90.6 million in 2024. The year‑over‑year change was primarily due to changes in deposits and continued repayments of borrowings and other financing obligations. In contrast, financing cash flows in 2024 benefited from stronger net inflows, including capital‑raising and borrowing activity that did not recur in 2025.
Current report
(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.
Current report
ACL for Purchased Loans: With and Without Credit Deterioration
Current report
Purchased loans are initially recorded at fair value. ChoiceOne’s accounting treatment for these loans depends on whether they exhibit significant credit deterioration since origination at the time of purchase. As part of the Merger, ChoiceOne recognized a valuation adjustment on the purchased loans, which included two distinct categories: loans purchased with credit deterioration and those without. A substantial portion of this adjustment is expected to be recognized as interest income over time.
Current report
Purchased Loans with Credit Deterioration
Current report
Purchased loans that reflect a more than insignificant credit deterioration since origination at the date of purchase are classified as purchased credit deteriorated (PCD) loans. PCD loans are recorded at fair value plus the ACL expected at the time of purchase. Under this method, there is no provision for credit losses on purchase of PCD loans. The allowance for credit losses was recorded as the credit mark on PCD loans. PCD loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. The non-credit-related difference between fair value and the unpaid principal balance at the purchase date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method.
Current report
Purchased Loans Without Credit Deterioration
Current report
Loans not considered purchased credit deteriorated (Non-PCD) loans do not reflect more than insignificant credit deterioration since origination at the date of purchase. These loans are recorded at fair value and an increase to the allowance for credit losses (ACL) is recorded with a corresponding increase to the provision for credit losses at the date of purchase. The difference between fair value and the unpaid principal balance at the purchase date is amortized or accreted to interest income over the contractual life of the loan using the effective interest method. Purchased loans from the Merger were brought into the model and segmented into classes on the same basis as ChoiceOne originated loans.
Current report
Purchase Price Allocation
Current report
The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under this method, the assets acquired and liabilities assumed are recorded at their estimated fair values as of the acquisition date, with the excess of consideration transferred over the net fair value of identifiable assets acquired and liabilities assumed recorded as goodwill. The determination of fair values requires management to make significant estimates and assumptions, particularly with respect to acquired loans and the core deposit intangible.
Current report
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. These assumptions involve significant judgment and are sensitive to changes in economic conditions and borrower performance.
Current report
Acquired loans were classified as either purchased credit deteriorated (“PCD”) or non‑PCD in accordance with ASC 326. For PCD loans, the Company recorded an allowance for expected credit losses at the acquisition date, with a corresponding increase to the amortized cost basis of the loans. This approach results in no immediate impact to earnings at acquisition for expected credit losses. For non‑PCD loans, no allowance for credit losses was recorded at acquisition; instead, the fair value discount attributable to credit and non‑credit factors is accreted into interest income over the remaining life of the loans using the effective interest method.
Current report
The core deposit intangible ("CDI") represents the estimated economic benefit derived from the acquired non‑maturity deposit relationships. The CDI was recognized as an identifiable intangible asset and recorded at fair value as of the acquisition date. The fair value of the CDI was determined using an income‑based valuation approach, which estimates the present value of future cost savings associated with the acquired deposit base compared to alternative market funding sources.
Current report
Significant assumptions used in the valuation of the CDI include projected deposit attrition rates, maintenance costs, alternative funding rates, and discount rates. These assumptions require judgment and are influenced by competitive factors, customer behavior, interest rate environments, and overall market conditions. Management believes the assumptions used are reasonable; however, changes in these assumptions could materially impact the estimated fair value of the CDI.
Current report
The CDI is amortized on an accelerated basis over its estimated useful life, which reflects the expected pattern of economic benefit derived from the acquired deposit relationships. The amortization period and method are reviewed periodically and adjusted if necessary based on updated experience and expectations.
Removed paragraphs (33)
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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. 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 experienced.
Previous report
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.
Previous report
The provision for credit losses expense on loans was $1.3 million in the full year 2024, due to the significant growth of core loans. Core loan growth was offset by slight improvements in the Federal Open Market Committee ("FOMC") forecast during the full year 2024. 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 net loan charge-offs to average loans of 0.03% and nonperforming loans to total loans (excluding loans held for sale) of 0.24% as of December 31, 2024. Nonperforming loans have increased since the historic lows in 2023, but still remain at low levels and consist entirely of residential loans with strong collateral positions.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
The average balance of total securities decreased $61.1 million in 2024, compared to the same period in 2023. The decrease was due to the paydowns, maturities, and redemptions during 2024. Interest income on securities remained flat in 2024 compared to 2023 despite the decline in average balance as the average rate earned on securities increased 17 basis points for the full year 2024, compared to the same period in the prior year.
Previous report
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.
Previous report
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.
Previous report
Net provision for credit losses was $625,000 for the full year 2024.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Net cash provided by operating activities was $48.5 million in 2024 compared to $46.5 million in 2023. The change was due to higher net proceeds from loan sales and an increase in other liabilities in 2024 compared to 2023. Net cash used in investing activities was $97.9 million in 2024 compared to $181.4 million in 2023. ChoiceOne had loan originations and payments of $136.1 million in the full year 2024, compared to $221.2 million in the full year 2023. Net cash provided by financing activities was $90.7 million in 2024, compared to $146.4 million in 2023. The change was largely due to $150.0 million of higher borrowings in 2023, offset by $32.1 million in net proceeds received from our common stock offering completed on July 26, 2024.
Previous report
ACL for Securities
Previous report
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. In making this assessment, management considers any changes to the rating of the security by rating agencies and adverse conditions specifically related to the issuer of the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses (“ACL”) is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Changes in the ACL under ASC 326-30 are recorded as provisions for (or reversal of) credit loss expense. Losses are charged against the allowance when the collectability of a debt security AFS is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, net of income taxes. At December 31, 2024, there was no ACL related to debt securities AFS.
Previous report
Securities Held to Maturity – Since the adoption of CECL, ChoiceOne measures credit losses on HTM securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of HTM securities to present the net amount expected to be collected. HTM securities are charged off against the ACL when deemed uncollectible. Adjustments to the ACL are reported in ChoiceOne’s Consolidated Statements of Income in the provision for credit losses. Accrued interest receivable totaled $2.0 million and $2.1 million at December 31, 2024, and 2023, respectively, and was reported in other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. With regard to US Treasury securities, these have an explicit government guarantee; therefore, no ACL is recorded for these securities. With regard to obligations of states and political subdivisions and other HTM securities, management considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. At December 31, 2024, the ACL related to securities HTM is insignificant.
Previous report
Troubled Loan Modifications
Previous report
FASB also issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This standard eliminated the previous accounting guidance for troubled debt restructurings and added additional disclosure requirements for gross chargeoffs by year of origination. It also prescribes guidance for reporting modifications of loans to borrowers experiencing financial difficulty.
Previous report
Loan Servicing Rights
Previous report
Loan servicing rights represent the estimated value of servicing loans that are sold with servicing retained by ChoiceOne and are initially recorded at estimated fair value. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Management’s accounting treatment of loan servicing rights is estimated based on current prepayment speeds that are typically market driven.
Previous report
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.
Previous report
Goodwill
Previous report
Identification and Classification of Merger-Related Expenses
Previous report
Merger-related expenses are costs incurred directly in connection with the company's merger and acquisition activities. These expenses include legal fees for negotiation and drafting of merger agreements, accounting and auditing fees related to due diligence and financial statement preparation, consulting fees for strategic advisory services specific to the merger, costs related to regulatory filings and compliance, expenses for integration planning and execution (including IT and systems integration), severance and retention bonuses for employees affected by the merger, and travel and accommodation expenses directly related to merger activities.
Previous report
To ensure accurate classification and segregation of these expenses, detailed documentation supporting the nature and purpose of each expense is maintained, including invoices, contracts, and internal memos. All merger-related expenses must be reviewed and approved by the CFO or an authorized delegate to ensure they meet the criteria for classification as merger-related. The Accounting Department conducts periodic reviews of these expenses to ensure proper classification and segregation, promptly addressing and correcting any discrepancies. Merger-related expenses are disclosed separately in the financial statements and accompanying notes to provide transparency to investors and stakeholders.
Reworded paragraphs (32)
Previous wording
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.
Current wording
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.
Previous wording
Cash dividends of $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. The dividend yield for ChoiceOne’s common stock was 3.06% as of the end of 2024, compared to 3.58% as of the end of 2023. The cash dividend payout as a percentage of net income was 33.7% as of December 31, 2024, compared to 37.2% as of December 31, 2023.
Current wording
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 in 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. 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. The large increase was due to merger-related expenses leading to a net income loss during the first quarter of 2025.
Previous wording
Income tax expense was $2.1 million higher in 2024 than in 2023. The effective tax rate was 19.2% for the year ended December 31, 2024 compared to 16.8% for the same period in 2023. For 2024, income before income tax, disallowed interest expense (TEFRA) and nondeductible merger expenses increased compared to 2023. For further details, refer to Note 12 - Income Taxes of the Notes to the Consolidated Financial Statements included in Item 8 of this report.
Current wording
Income tax expense was $350,000 lower in 2025 than in 2024. The effective tax rate was 17.6% for the year ended December 31, 2025 compared to 19.2% for the same period in 2024. ChoiceOne’s 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 taxes, with allowable carrybacks to prior years. Management is continuing to evaluate additional transferable tax credit opportunities and may pursue further purchases to help offset tax expense in 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.
Previous wording
Loans include both loans to other financial institutions and loans held for sale.
Current wording
Loans include both mortgage warehouse advances and loans held for sale.
Previous wording
Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $2.3 million, $1.6 million, and $1.3 million for the year ended 2024, 2023, and 2022, respectively.
Current wording
Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $16.4 million, $2.3 million, and $1.6 million for the year ended 2025, 2024, and 2023, respectively.
Previous wording
Interest on loans included net origination fees and accretion income. Accretion income was $1.2 million, $1.7 million, and $2.0 million for the full year 2024, 2023, and 2022, respectively.
Current wording
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 $13.1 million, $1.2 million, and $1.7 million for the full year 2025, 2024, and 2023, respectively.
Previous wording
GAAP based net interest income increased $8.6 million, and tax-equivalent net interest income increased $8.6 million, respectively, for the full year 2024, compared to the same period in 2023. GAAP based net interest margin increased 18 basis points, and tax equivalent net interest margin increased 18 basis points, respectively, in 2024 compared to 2023.
Current wording
GAAP based net interest income increased $62.6 million, and tax-equivalent net interest income increased $62.7 million for the full year 2025, compared to the same period in 2024. GAAP based net interest margin increased 66 basis points, and tax equivalent net interest margin increased 64 basis points in 2025 compared to 2024.
Previous wording
ChoiceOne has experienced substantial core loan growth from December 31, 2023 to December 31, 2024, leading to an increase in interest income from loans of $21.2 million in the twelve months ended December 31, 2024, compared to the same period in the prior year. Average core loans grew $191.2 million for the twelve months ended December 31, 2024, compared to the same period in the prior year. In addition, the average rate earned on loans increased 75 basis points for the twelve months ended December 31, 2024, compared to the same period in the prior year.
Current wording
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. This loan growth led to an increase in interest income from loans of $83.3 million in the twelve months ended December 31, 2025, compared to the same period in the prior year. Average core loans grew $1.3 billion for the twelve months ended December 31, 2025, compared to the same period in the prior year. In addition, the average rate earned on loans increased 21 basis points for the twelve months ended December 31, 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.
Previous wording
Interest expense increased $13.6 million for the full year 2024, compared to the same period in the prior year. The average rate paid on interest bearing-demand deposits and savings deposits increased 33 basis points in the twelve months ended December 31, 2024, compared to the same period in the prior year. This was compounded by the increase in the average balance of interest bearing-demand deposits and savings deposits, of $7.4 million during 2024. The increase in the average balance of certificates of deposit of $81.7 million during 2024, combined with a 92 basis point increase in the rate paid on certificates of deposits during 2024, compared to the same period in the prior year, led to an increase in interest expense of $6.4 million during 2024.
Current wording
Interest expense increased $19.2 million for the full year 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 21 basis points in the twelve months ended December 31, 2025, compared to the same period in the prior year due to higher cost deposit accounts purchased during the Merger. The increase in the average balance of certificates of deposit of $202.6 million during 2025, offset by a 56 basis point decline in the rate paid on certificates of deposits during 2025, compared to the same period in the prior year, led to an increase in interest expense of $5.5 million during 2025.
Previous wording
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. The average balance of subordinated debentures was relatively flat in 2024 compared to the same period in the prior year.
Current wording
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 trust preferred securities that were obtained as part of the merger with Community Shores and the Merger with Fentura. The average balance of subordinated debentures increased $10.7 million and the average rate on subordinated debentures increased 144 basis points in the 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.
Previous wording
Note: In the table above, "consumer" includes deposit account charge-offs and recoveries.
Current wording
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.
Previous wording
The 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, and a reasonable and supportable economic forecast described further below.
Current wording
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.
Previous wording
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's lookback period of benchmark peer net charge-off history was from January 1, 2004 through December 31, 2019 for this analysis.
Current wording
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. Our lookback period for benchmark peer net charge-off history excludes the years 2020 and 2021 due to the COVID-19 pandemic and spans from January 1, 2004, to December 31, 2019, and January 1, 2022, to December 31, 2024.
Previous wording
Loans individually evaluated for credit losses increased by $2.0 million to $4.1 million during the year ended December 31, 2024, and the ACL related to these individually evaluated loans increased by $108,000 during the same period largely due to the balance increase.
Current wording
Loans individually evaluated for credit losses increased by $27.1 million to $31.2 million during the year ended December 31, 2025, and the ACL related to these individually evaluated loans increased by $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.
Previous wording
Nonperforming loans, which includes Other Real Estate Owned ("OREO") but excludes performing troubled loan modifications ("TLM"), increased by $1.9 million to $3.8 million at December 31, 2024, compared to a historically low balance on December 31, 2023. All non-performing loans are retail in nature. The ACL was 1.07% of total loans, excluding loans held for sale, at December 31, 2024, compared to 1.11% as of December 31, 2023. The liability for expected credit losses on unfunded loans and other commitments was $1.5 million on December 31, 2024, compared to $2.2 million as of December 31, 2023.
Current wording
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. The ACL was 1.18% of total loans, excluding loans held for sale, at December 31, 2025, compared to 1.07% as of December 31, 2024. The liability for expected credit losses on unfunded loans and other commitments was $1.3 million on December 31, 2025, compared to $1.5 million as of December 31, 2024.
Previous wording
Net charge-offs were $433,000 during the full year 2024, compared to net charge-offs of $364,000 during the same period in 2023. Net charge-offs for checking accounts during the full year 2024 were $237,000 compared to $226,000 for the same period in the prior year. Net charge-offs as a percentage of average loans were 0.03% during the full year 2024 and 2023.
Current wording
Net charge-offs were $1.0 million during the full year 2025, compared to net charge-offs of $433,000 during the same period in 2024. Net charge-offs for checking accounts during the full year 2025 were $223,000 compared to $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.
Previous wording
The provision for credit losses on loans was $1.3 million during the full year 2024 and 2023, due to core loan growth, which was partially offset by slight improvements in the Federal Open Market Committee ("FOMC") forecast during the full year 2024. The loan provision expense was offset by the decrease in unfunded commitments provision expense of $675,000 in the full year 2024 due to changes in mix and expected funding rates during the year. Total unfunded commitments decreased $15.9 million in the full year 2024 compared to December 31, 2023.
Current wording
Net provision for credit losses was $14.8 million for the full year 2025. The provision for credit losses on loans was $15.1 million during 2025, due primarily to $12.0 million of expense for the acquisition of $1.3 billion of non-PCD loans 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 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 $300,000 in the full year 2025 due to changes in mix and expected funding rates during the year. Total unfunded commitments increased $208.3 million in the full year 2025 compared to December 31, 2024.
Previous wording
At December 31, 2024, the Company had $116.6 million in unrealized losses on its investment securities, including $61.1 million in unrealized losses on available for sale securities and $55.5 million in unrealized losses on held to maturity 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 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.
Current wording
At December 31, 2025, the Company had $90.0 million in unrealized losses on its investment securities, including $52.8 million in unrealized losses on available for sale securities and $37.2 million in unrealized losses on held to maturity 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 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.
Previous wording
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 million. 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.
Current wording
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 $380.4 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 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.
Previous wording
Equity securities included a money market preferred security ("MMP") of $1.0 million and common stock of $6.8 million as of December 31, 2024. As of December 31, 2023, equity securities included a MMP of $1.0 million and common stock of $6.5 million.
Current wording
Equity securities included a money market preferred security ("MMP") of $1.0 million and common stock of $8.4 million as of December 31, 2025. As of December 31, 2024, equity securities included a MMP of $1.0 million and common stock of $6.8 million.
Previous wording
Average 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 growth concentrated in Non-Owner Occupied CRE loans, which grew by $88.8 million, Owner Occupied CRE loans, which grew by $44.5 million, and 1-4 Family Loans, which grew by $33.1 million. The growth in 1-4 Family loans was largely related to growth in loans to other financial institutions which were $39.9 million as of December 31, 2024, compared to $19.4 million as of December 31, 2023. Loans to other financial institutions is comprised of a warehouse line of credit to facilitate mortgage loan originations and the interest rate fluctuates 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. Loan interest including fee income increased $21.2 million in the full year 2024, compared to the same period in the prior year.
Current wording
Growth was concentrated in Non-Owner Occupied CRE loans, which grew by $530.7 million, 1-4 Family Loans, which grew by $495.7 million, and Owner Occupied CRE loans, which grew by $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 a mixture of growth from the Merger and organic growth. Mortgage warehouse advances consist of a line of credit to fund participated mortgage loans with interest rates on 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 third party origination volume or market conditions.
Previous wording
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.
Current wording
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.
Previous wording
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 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.
Current wording
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.
Previous wording
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 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.
Current wording
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 $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.
Previous wording
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.
Current wording
ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On December 31, 2025, ChoiceOne held pay-fixed, receive variable interest rate swaps with a total notional value of $380.4 million, a weighted average coupon of 3.15%, a fair value of $8.4 million and an average remaining contract length of 7.0 years. In addition to the 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.
Previous wording
Cumulative preferred securities on the balance sheet include $1.0 million of discount due to a mark to market adjustment which is not reflected in the table above.
Current wording
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
Previous wording
ChoiceOne subordinated debenture on the balance sheet includes $240,000 of capitalized issuance cost which is not reflected in the table above.
Current wording
ChoiceOne subordinated debenture on the balance sheet includes $96,000 of capitalized issuance cost which is not reflected in the table above.
Previous wording
Liquidity risk deals with ChoiceOne's ability to meet its cash flow requirements. These requirements include depositors desiring to withdraw funds and borrowers seeking credit. Longer-term liquidity needs may be met through core deposit growth, maturities of and cash flows from investment securities, normal loan repayments, advances from the FHLB and the Federal Reserve Bank, brokered certificates of deposit, and income retention. ChoiceOne had $175.0 million in outstanding borrowings from the FHLB as of December 31, 2024. The acceptance of brokered certificates of deposit is not limited as long as the Bank is categorized as “well capitalized” under regulatory guidelines. At December 31, 2024, total available borrowing capacity from the FHLB and the Federal Reserve Bank was $837.2 million.
Current wording
Liquidity risk deals with ChoiceOne's ability to meet its cash flow requirements. These requirements include depositors desiring to withdraw funds and borrowers seeking credit. Longer-term liquidity needs may be met through core deposit growth, maturities of and cash flows from investment securities, normal loan repayments, advances from the FHLB and the Federal Reserve Bank, brokered certificates of deposit, and income retention. ChoiceOne had $265.0 million in outstanding borrowings from the FHLB as of December 31, 2025. The acceptance of brokered certificates of deposit is not limited as long as the Bank is categorized as “well capitalized” under regulatory guidelines. At December 31, 2025, total available borrowing capacity from the FHLB and the Federal Reserve Bank was $410.7 million.
Previous wording
The ACL is a valuation allowance for expected credit losses. The ACL is increased by the provision for credit losses and decreased by loans charged off less any recoveries of charged off loans. As ChoiceOne has had very limited loss experience since 2011, management elected to utilize benchmark peer loss history data to estimate historical loss rates. ChoiceOne identified an appropriate peer group for each loan cohort which shared similar characteristics. Management estimates the ACL required based on the selected peer group loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, a reasonable and supportable economic forecast, and other factors. Allocations of the ACL may be made for specific loans, but the entire ACL is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the ACL when management believes that collection of a loan balance is not possible.
Current wording
The ACL is a valuation allowance for expected credit losses. The ACL is increased by the provision for credit losses and decreased by loans charged off less any recoveries of charged off loans. As ChoiceOne has had very limited loss experience since 2011, management elected to utilize benchmark peer loss history data to estimate historical loss rates. ChoiceOne identified an appropriate peer group for each loan pool which shared similar characteristics. Management estimates the ACL required based on the selected peer group loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, a reasonable and supportable economic forecast, and other factors. Allocations of the ACL may be made for specific loans, but the entire ACL is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the ACL when management believes that collection of a loan balance is not possible.
Previous wording
The discounted cash flow methodology is utilized for all loan pools. This methodology is supported by our CECL software provider and allows management to automatically calculate contractual life by factoring in all cash flows and adjusting them for behavioral and credit-related aspects.
Current wording
The discounted cash flow methodology is utilized for all loan pools included in the general component. This methodology is supported by our current expected credit loss ("CECL") software provider and allows management to automatically calculate contractual life by factoring in all cash flows and adjusting them for behavioral and credit-related aspects.
Previous wording
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. The Company acquired Valley Ridge Financial Corp. in 2006, County Bank Corp in 2019, and Community Shores in 2020, which resulted in the recognition of goodwill of $13.7 million, $38.9 million and $7.3 million, respectively.
Current wording
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 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.
Previous wording
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. Based on the valuation prepared, it was determined that ChoiceOne's estimated fair value of the reporting unit at the measurement date was greater than its book value and impairment of goodwill was not required. As of the measurement date and December 31, 2024 the stock price was greater than the book value. No material changes and no triggering events have occurred that indicated impairment from the measurement date through December 31, 2024.
Current wording
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Cumulative borrowings on the balance sheet include $212,000 of discount due to a mark to market adjustment which is not reflected in the table above.