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What changed in CHOICEONE FINANCIAL SERVICES INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CHOICEONE FINANCIAL SERVICES INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+202 added−196 removedSource: 10-K (2026-03-13) vs 10-K (2025-03-11)

Top changes in CHOICEONE FINANCIAL SERVICES INC's 2025 10-K

202 paragraphs added · 196 removed · 125 edited across 8 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

24 edited+4 added−8 removed86 unchanged
Biggest changeIf the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operation and financial condition. 11 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 in unrealized losses on held to maturity securities.
Biggest changeIf the Company is unable to maintain adequate liquidity, then its business, financial condition and results of operations would be negatively affected. 11 If the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operation and financial condition.
Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. The Company relies on dividends from the Bank for most of its revenue.
Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. 14 The Company relies on dividends from the Bank for most of its revenue.
We are subject to regulation by the Federal Reserve, the FDIC and the DIFS, in addition to other regulatory and self-regulatory organizations. Current laws and applicable regulations are subject to change and any new regulatory change could make compliance more expensive, difficult, or otherwise adversely affect our business. Specifically, regulation changes to overdraft fees could adversely affect our business.
We are subject to regulation by the Federal Reserve Board, the FDIC and the DIFS, in addition to other regulatory and self-regulatory organizations. Current laws and applicable regulations are subject to change and any new regulatory change could make compliance more expensive, difficult, or otherwise adversely affect our business. Specifically, regulation changes to overdraft fees could adversely affect our business.
Additions to the allowance for credit losses for our investment securities may need to be taken in the future, which could have a material adverse effect on our results of operations and financial condition. The Company has significant exposure to risks associated with commercial and residential real estate.
Additions to the allowance for credit losses for our investment securities may need to be taken in the future, which could have a material adverse effect on our results of operations or financial condition. The Company has significant exposure to risks associated with commercial and residential real estate.
The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations. Employee misconduct could adversely impact our reputation and results of operations. Our reputation is crucial to maintaining and developing relationships with our customers.
The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, regulatory criticism or proceedings and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations. Employee misconduct could adversely impact our reputation and results of operations. Our reputation is crucial to maintaining and developing relationships with our customers.
The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, including: • Variations in quarterly or annual operating results • Changes in dividends per share • Changes in interest rates • Changes in inflation levels • Trade tariffs • New developments, laws or regulations in the banking industry • Acquisitions or business combinations involving the Company or its competition • Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated • Volatility of stock market prices and volumes • Changes in market valuations of similar companies • New litigation or contingencies or changes in existing litigation or contingencies • Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies • Rumors or erroneous information • Credit and capital availability • Issuance of additional shares of common stock or other debt or equity securities of the Company • Market conditions • General economic conditions • Turbulence, uncertainty or a lack of confidence within the banking industry The Company’s common stock, while publicly traded, has less liquidity than the average liquidity of stocks listed on the Nasdaq Stock Market. 15 The Company’s common stock is listed for trading on the Nasdaq Capital Market.
The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, including: • Variations in quarterly or annual operating results • Changes in dividends per share • Changes in interest rates • Changes in inflation levels • Trade tariffs, trade policy or retaliatory measures by trade partners • War or military conflicts, including the recent escalation of conflicts in the middle east • New developments, laws or regulations in the banking industry • Acquisitions or business combinations involving the Company or its competition • Regulatory actions, including changes to regulatory capital levels, the components of regulatory capital and how regulatory capital is calculated • Volatility of stock market prices and volumes • Changes in market valuations of similar companies • New litigation or contingencies or changes in existing litigation or contingencies • Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies • Rumors or erroneous information • Credit and capital availability • Issuance of additional shares of common stock or other debt or equity securities of the Company • Market conditions • General economic conditions • Turbulence, uncertainty or a lack of confidence within the banking industry The Company’s common stock, while publicly traded, has less liquidity than the average liquidity of stocks listed on the Nasdaq Stock Market.
An economic downturn within Michigan caused by inflation, recession or a recessionary environment, trade tariffs, unemployment, changes in financial or capital markets or other factors, could negatively impact household and corporate incomes.
An economic downturn within Michigan caused by inflation, recession or a recessionary environment, trade tariffs, trade policy or retaliatory measures by trade partners, unemployment, changes in financial or capital markets or other factors, could negatively impact household and corporate incomes.
While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches of the Company’s information systems or its customers’ information or computer systems would not damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.
While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches of the Company’s information systems or its customers’ information or computer systems would not damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations. 13 Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
An entity that is subject to regulation as a bank holding company would be subject to regulatory and statutory obligations and restrictions, and could be required to divest all or a portion of the entity’s investment in the Company’s securities or in other investments that are not permitted for a bank holding company.
An entity that is subject to regulation as a bank holding company would be subject to regulatory and statutory obligations and restrictions, and could be required to divest all or a portion of the entity’s investment in the Company’s securities or in other investments that are not permitted for a bank holding company. Item 1B. Unreso lved Staff Comments None.
Even if we are able to replace them with another service provider, the replacement may be more expensive or offer an inferior service. Any of these outcomes could have a material adverse effect on our business, financial condition or results of operations. The Company operates in a highly competitive industry and market area.
Even if we are able to replace them with another service provider, the replacement may be more expensive or offer an inferior service. Any of these outcomes could have a material adverse effect on our business, financial condition or results of operations.
However, the Company’s common stock has less liquidity than the average liquidity for companies listed in the Nasdaq Stock Market.
The Company’s common stock is listed for trading on the Nasdaq Capital Market. However, the Company’s common stock has less liquidity than the average liquidity for companies listed in the Nasdaq Stock Market.
As of that same date, the Company had approximately $281.7 million in residential real estate loans outstanding, or approximately 18.2% of its loan portfolio. Consequently, real estate-related credit risks are a significant concern for the Company.
As of that same date, the Company had approximately $728.0 million in residential real estate loans outstanding, or approximately 24.1% of its loan portfolio. Consequently, real estate-related credit risks are a significant concern for the Company.
The Company’s commercial and industrial loan portfolio, including commercial mortgages, was approximately $228.3 million at December 31, 2024, comprising approximately 14.8% of its total loan portfolio. Commercial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans.
The Company’s commercial and industrial loan portfolio, including commercial mortgages, was approximately $352.6 million at December 31, 2025, comprising approximately 11.7% of its total loan portfolio. Commercial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans.
The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by the Company or its borrowers. Commercial loans may expose the Company to greater financial and credit risk than other loans.
The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by the Company or its borrowers.
A substantial portion of the Company’s loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of December 31, 2024, the Company had approximately $918.2 million of commercial and construction real estate loans outstanding, which represented approximately 59.4% of its loan portfolio.
A substantial portion of the Company’s loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of December 31, 2025, the Company had approximately $1.8 billion of commercial and construction real estate loans outstanding, which represented approximately 59.6% of its loan portfolio.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Management regularly reviews and updates the Company’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations. 13 Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company and/or its third party service providers.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company, the Bank and/or its third party service providers.
The Company’s common stock is not insured by the FDIC or any other government entity. Investment in the Company’s common stock is subject to risk and potential loss. A shareholder’s ownership of common stock may be diluted if the Company issues additional shares of common stock in the future.
The Company’s common stock is not insured by the FDIC or any other government entity. Investment in the Company’s common stock is subject to risk and potential loss.
Losing the services of one or more key members of the Company’s management team could adversely affect its operations. The Company ’ s controls and procedures may fail or be circumvented. Management regularly reviews and updates the Company’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures.
The Company is and will continue to be dependent upon the services of its management team and other key personnel. Losing the services of one or more key members of the Company’s management team could adversely affect its operations. The Company ’ s controls and procedures may fail or be circumvented.
The Company’s articles of incorporation authorize the Company’s Board of Directors to issue additional shares of common stock or preferred stock without shareholder approval.
A shareholder’s ownership of common stock may be diluted if the Company issues additional shares of common stock in the future. 15 The Company’s articles of incorporation authorize the Company’s Board of Directors to issue additional shares of common stock or preferred stock without shareholder approval.
As a result, we may engage in discussions or negotiations that, if they were to result in a transaction, could have a material 10 effect on our operating results and financial condition.
We periodically evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, we may engage in discussions or negotiations that, if they were to result in a transaction, could have a material effect on our operating results and financial condition.
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. Evaluation of investment securities for an allowance for credit losses involves subjective determinations and could have a material adverse impact on our results of operations and financial condition.
Evaluation of investment securities for an allowance for credit losses involves subjective determinations and could have a material adverse impact on our results of operations and financial condition.
Future regulatory changes or accounting pronouncements may increase the Company’s regulatory capital requirements or adversely affect its regulatory capital levels. Additionally, actions by regulatory agencies against the Company or the Bank could require the Company to devote significant time and resources to defending its business and may lead to penalties that materially affect the Company.
Additionally, actions by regulatory agencies against the Company or the Bank could require the Company to devote significant time and resources to defending its business and may lead to penalties that materially affect the Company. 12 The Company relies heavily on its management and other key personnel, and the loss of any of them may adversely affect its operations.
This impact may lead to decreased demand for both loan and deposit products and increase the number of customers who fail to pay interest or principal on their loans. We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.
This impact may lead to decreased demand for both loan and deposit products and increase the number of customers who fail to pay interest or principal on their loans.
Removed
We plan to grow our business both organically and through mergers and acquisitions. We periodically evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies.
Added
We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value. 10 We plan to grow our business both organically and through mergers and acquisitions.
Removed
If the Company is unable to maintain adequate liquidity, then its business, financial condition and results of operations would be negatively affected.
Added
At December 31, 2025, the Company had $90.4 million in unrealized losses on its investment securities, including $52.8 million in unrealized losses on available for sale securities, $37.2 in unrealized losses on held to maturity securities, and $471,000 in unrealized losses on equity securities.
Removed
The Company relies heavily on its management and other key personnel, and the loss of any of them may adversely affect its operations. 12 The Company is and will continue to be dependent upon the services of its management team and other key personnel.
Added
A downturn in the real estate market, especially in Michigan, could cause us to incur losses and have a material adverse effect on our results of operations or financial condition. Commercial loans may expose the Company to greater financial and credit risk than other loans.
Removed
The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and regional banks within the various markets where the Company operates, as well as internet banks and other financial technology companies.
Added
Future regulatory changes or accounting pronouncements may increase the Company’s regulatory capital requirements or adversely affect its regulatory capital levels.
Removed
The Company also faces competition from many other types of financial institutions, including savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation.
Removed
Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. The Company competes with these institutions both in attracting deposits and in making new loans.
Removed
Technology has lowered barriers to entry into the market and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and 14 automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures, such as credit unions that are not subject to federal income tax.
Removed
Due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOn a regular basis, the technology steering committee, led by management, receives comprehensive reports summarizing cybersecurity threat monitoring and incident management activities. These reports also include details about remediation efforts to address identified threats and incidents. Additionally, both internal and external assessments of our company’s cybersecurity threat monitoring capabilities are shared with the committee.
Biggest changeWe also engage with industry consultants to assist with our risk assessments. 16 On a regular basis, the technology steering committee, led by management, receives comprehensive reports summarizing cybersecurity threat monitoring and incident management activities. These reports also include details about remediation efforts to address identified threats and incidents.
The committee receives periodic updates from the Chief Information Officer, including information on social engineering risks, the effectiveness of cybersecurity training, and results from vulnerability and penetration assessments conducted both internally and by external parties. Audit reports related to information systems and cybersecurity threat monitoring are also part of this reporting process.
The committee receives periodic updates from the Chief Technology Officer, including information on social engineering risks, the effectiveness of cybersecurity training, and results from vulnerability and penetration assessments conducted both internally and by external parties. Audit reports related to information systems and cybersecurity threat monitoring are also part of this reporting process.
While we have experienced, and expect to continue to experience, cybersecurity threats, we have not experienced a material cybersecurity incident in the three year period ended December 31, 2024.
While we have experienced, and expect to continue to experience, cybersecurity threats, we have not experienced a material cybersecurity incident in the three year period ended December 31, 2025.
Key members of ChoiceOne’s cybersecurity team include: Chief Information Officer (“CIO”) has extensive experience in managing complex IT environments and mitigating cybersecurity risks. The CIO is responsible for overseeing cybersecurity and technology vendors, assessing risks in these areas, and ensuring the effective execution of the information security program.
Key members of ChoiceOne’s cybersecurity team include: Chief Technology Officer (“CTO”) has extensive experience in managing complex IT environments and mitigating cybersecurity risks. The CTO is responsible for overseeing cybersecurity and technology vendors, assessing risks in these areas, and ensuring the effective execution of the information security program.
The Board of Directors delegates the oversight of cybersecurity risk management to the Information Technology Committee of the Board. The Information Technology Committee, in turn, reviews reports on our cybersecurity risk management processes. These reports cover assessments of management’s handling of cybersecurity threats and incident management functions.
They also supervise management’s overall approach to securing the company’s information systems. The Board of Directors delegates the oversight of cybersecurity risk management to the Information Technology Committee of the Board. The Information Technology Committee, in turn, reviews reports on our cybersecurity risk management processes. These reports cover assessments of management’s handling of cybersecurity threats and incident management functions.
This program includes regular risk assessments, third party risk provider reviews, and implementation of security measures such as encryption and firewalls, and ongoing monitoring of our systems for potential threats. We also engage with industry consultants to assist with our risk assessments.
This program includes regular risk assessments, third party risk provider reviews, and implementation of security measures such as encryption and firewalls, and ongoing monitoring of our systems for potential threats.
Meeting minutes from these committee sessions are diligently maintained and provided to the Board of Directors. The Board of Directors has responsibility for approving and overseeing management’s policies related to information system security and cybersecurity threats and incidents. They also supervise management’s overall approach to securing the company’s information systems.
Additionally, both internal and external assessments of our company’s cybersecurity threat monitoring capabilities are shared with the committee. Meeting minutes from these committee sessions are diligently maintained and provided to the Board of Directors. The Board of Directors has responsibility for approving and overseeing management’s policies related to information system security and cybersecurity threats and incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe remaining six locations are comprised of loan production and wealth management offices. Offices generally range in size from 1,200 to 3,200 square feet, based on the location and number of employees located at the facility. All of our offices are owned by the Bank except for seven that are leased under various operating lease agreements.
Biggest changeThe remaining seven facilities consist of loan production offices, a drive‑up office, and a wealth management office. Office facilities generally range in size from approximately 1,200 to 3,200 square feet, depending on location and staffing levels. All of our offices are owned by the Bank except for seven that are leased under various operating lease agreements.
The Company’s management believes all offices are adequately covered by property insurance. 17
The Company’s management believes all offices are adequately covered by property insurance.
Item 2. Prope rties The Company’s headquarters are located at 109 East Division, Sparta, Michigan 49345. The headquarters location is owned by the Company and is not subject to any mortgage. 29 of the Company’s 35 locations are designed for use and operation as a bank branch office, are well maintained, and are suitable for current operations.
Item 2. Prope rties The Company’s headquarters are located at 109 East Division, Sparta, Michigan 49345. The headquarters location is owned by the Company and is not subject to any mortgage. Forty‑seven of the Bank’s facilities are designed, operated, and maintained as full‑service bank branch offices and are suitable for current operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal P roceedings As of December 31, 2024, there were no significant pending legal proceedings to which the Company or the Bank is a party or to which any of their properties were subject, except for legal proceedings arising in the ordinary course of business.
Biggest changeItem 3. Legal P roceedings As of December 31, 2025, there were no significant pending legal proceedings to which the Company or the Bank is a party or to which any of their properties were subject, except for legal proceedings arising in the ordinary course of business.
In the opinion of management, pending legal proceedings will not have a material adverse effect on the consolidated financial condition of the Company. Item 4. M ine Safety Disclosures Not applicable. 18 PART II
In the opinion of management, pending legal proceedings will not have a material adverse effect on the consolidated financial condition of the Company. Item 4. M ine Safety Disclosures Not applicable. 17 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4: Mine Safety Disclosures 18 PART II Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 19 Item 6: Reserved 19 Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A: Quantitative and Qualitative Disclosures About Market Risk 36 Item 8: Financial Statements and Supplementary Data 37
Biggest changeItem 4: Mine Safety Disclosures 17 PART II Item 5: Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 Item 6: Reserved 18 Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A: Quantitative and Qualitative Disclosures About Market Risk 36 Item 8: Financial Statements and Supplementary Data 37

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−0 removed2 unchanged
Biggest changeAs of December 31, 2024, there were 375,388 shares remaining that may yet be repurchased under the plan. There was no stated expiration date.
Biggest changeDuring 2025, ChoiceOne repurchased 25,116 shares of stock for a net cost of $775,000 under the repurchase plan. The repurchase plan has 350,272 shares remaining to purchase as of December 31, 2025. There was no stated expiration date.
Based on information presently available, management expects ChoiceOne to declare and pay regular quarterly cash dividends in 2025, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.
Based on information presently available, management expects ChoiceOne to declare and pay regular quarterly cash dividends in 2026, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.
The following table summarizes the quarterly cash dividends declared per share of common stock during 2024 and 2023: 2024 2023 First Quarter $ 0.27 $ 0.26 Second Quarter 0.27 0.26 Third Quarter 0.27 0.26 Fourth Quarter 0.28 0.27 Total $ 1.09 $ 1.05 ChoiceOne’s principal source of funds to pay cash dividends is the earnings and dividends paid by the Bank.
The following table summarizes the quarterly cash dividends declared per share of common stock during 2025 and 2024: 2025 2024 First Quarter $ 0.28 $ 0.27 Second Quarter 0.28 0.27 Third Quarter 0.28 0.27 Fourth Quarter 0.29 0.28 Total $ 1.13 $ 1.09 ChoiceOne’s principal source of funds to pay cash dividends is the earnings and dividends paid by the Bank.
ISSUER PURCHASES OF EQUITY SECURITIES ChoiceOne’s common stock repurchase plan announced in April 2021 and amended in 2022, authorizes the repurchase of up to 375,388 shares, representing 5% of the total outstanding shares of common stock as of the date the plan was adopted. No shares were repurchased under this plan in 2024.
ISSUER PURCHASES OF EQUITY SECURITIES ChoiceOne’s common stock repurchase plan announced in April 2021 and amended in 2022, authorizes the repurchase of up to 375,388 shares, representing 5% of the total outstanding shares of common stock as of the date the repurchase plan was adopted.
Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Information The Company’s common stock is traded on the NASDAQ Capital Market under the symbol COFS. As of February 28, 2025, there were approximately 1,095 owners of record and approximately 2,200 beneficial owners of our common stock.
Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Information The Company’s common stock is traded on the NASDAQ Capital Market under the symbol COFS. As of February 28, 2026, there were approximately 1,103 owners of record and approximately 3,161 beneficial owners of our common stock.
Added
The repurchase of shares during 2025 reflects our view that our capital position is healthy and the repurchase of shares is in the best interest of our shareholders. There were no repurchases during 2024.
Added
Total Number Maximum of Shares Number of Total Purchased as Shares that Number Average Part of a May Yet be of Shares Price Paid Publicly Purchased Period Purchased per Share Announced Plan Under the Plan October 1 - October 31, 2025 Employee Transactions — $ — — Repurchase Plan — $ — — 375,388 November 1 - November 30, 2025 Employee Transactions — $ — — Repurchase Plan — $ — — 375,388 December 1 - December 31, 2025 Employee Transactions (1) 93 $ 30.44 — Repurchase Plan 25,116 $ 30.86 25,116 350,272 (1) Shares surrendered for the “net exercise” of stock options.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+70 added−60 removed26 unchanged
Biggest change(6) Interest income for 2024 and 2023 was reduced by $1.1 million and $2.8 million, respectively, due to amortization expense related to the March 2023 sale of the pay floating swap derivative. 23 Table 2 – Changes in Tax-Equivalent Net Interest Income Year Ended December 31, (Dollars in thousands) 2024 Over 2023 2023 Over 2022 Total Volume Rate Total Volume Rate Increase (decrease) in interest income (1) Loans (2) $ 21,208 $ 11,095 $ 10,113 $ 15,576 $ 8,264 $ 7,312 Taxable securities 59 (1,645 ) 1,704 5,586 (682 ) 6,268 Nontaxable securities (2) (17 ) (144 ) 127 (684 ) (455 ) (229 ) Other 884 938 (54 ) 3,306 925 2,381 Net change in interest income $ 22,134 $ 10,244 $ 11,890 $ 23,784 $ 8,052 $ 15,732 Increase (decrease) in interest expense (1) Interest-bearing demand deposits $ 2,969 $ 537 $ 2,432 $ 6,514 $ (202 ) $ 6,716 Savings deposits 1,219 (169 ) 1,388 898 (152 ) 1,050 Certificates of deposit 6,412 3,205 3,207 9,003 1,364 7,639 Brokered deposit (417 ) (399 ) (18 ) 1,730 1,725 5 Borrowings 3,067 3,169 (102 ) 6,408 6,029 379 Subordinated debentures 6 10 (4 ) 145 7 138 Other 310 319 (9 ) 651 651 - Net change in interest expense $ 13,566 $ 6,672 $ 6,894 $ 25,349 $ 9,422 $ 15,927 Net change in tax-equivalent net interest income $ 8,568 $ 3,572 $ 4,996 $ (1,565 ) $ (1,370 ) $ (195 ) (1) The volume variance is computed as the change in volume (average balance) multiplied by the previous year’s interest rate.
Biggest changeInterest 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. 22 Table 2 – Changes in Tax-Equivalent Net Interest Income Year Ended December 31, (Dollars in thousands) 2025 Over 2024 2024 Over 2023 Total Volume Rate Total Volume Rate Increase (decrease) in interest income (1) Loans (2) $ 83,350 $ 80,137 $ 3,213 $ 21,208 $ 11,095 $ 10,113 Taxable securities (322 ) 555 (877 ) 59 (1,645 ) 1,704 Nontaxable securities (2) 13 (46 ) 59 (17 ) (144 ) 127 Other (1,165 ) (347 ) (818 ) 884 938 (54 ) Net change in interest income $ 81,876 $ 80,299 $ 1,577 $ 22,134 $ 10,244 $ 11,890 Increase (decrease) in interest expense (1) Interest-bearing demand deposits $ 10,331 $ 6,637 $ 3,694 $ 2,969 $ 537 $ 2,432 Savings deposits 1,434 1,725 (291 ) 1,219 (169 ) 1,388 Certificates of deposit 5,548 7,957 (2,409 ) 6,412 3,205 3,207 Brokered deposit 2,484 2,682 (198 ) (417 ) (399 ) (18 ) Borrowings (1,275 ) (256 ) (1,019 ) 3,067 3,169 (102 ) Subordinated debentures 1,156 566 590 6 10 (4 ) Other (451 ) (307 ) (144 ) 310 319 (9 ) Net change in interest expense $ 19,227 $ 19,004 $ 223 $ 13,566 $ 6,672 $ 6,894 Net change in tax-equivalent net interest income $ 62,649 $ 61,295 $ 1,354 $ 8,568 $ 3,572 $ 4,996 (1) The volume variance is computed as the change in volume (average balance) multiplied by the previous year’s interest rate.
Agricultural loans comprise a relatively small portion of ChoiceOne's total assets. Management believes that ChoiceOne's exposure to changes in commodity prices is insignificant. 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.
Agricultural loans comprise a relatively small portion of ChoiceOne's total assets. Management believes that ChoiceOne's exposure to changes in commodity prices is insignificant. 30 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.
These steps include limiting bond purchases in 2024, pledging securities to FHLB and the Federal Reserve Bank in order to increase borrowing capacity and using alternative funding sources such as brokered deposits. 31 NON-GAAP FINANCIAL MEASURES This report contains financial measures that are not defined in U.S. generally accepted accounting principles ("GAAP").
These steps include limiting bond purchases in 2026, pledging securities to FHLB and the Federal Reserve Bank in order to increase borrowing capacity and using alternative funding sources such as brokered deposits. 31 NON-GAAP FINANCIAL MEASURES This report contains financial measures that are not defined in U.S. generally accepted accounting principles ("GAAP").
Prepayment speeds and curtailment were updated during the fourth quarter of 2024; however, the effect was insignificant. We are also required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us.
Prepayment speeds and curtailment were updated during the fourth quarter of 2025; however, the effect was insignificant. We are also required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us.
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.
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.
We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2023 Annual Report on Form 10-K.
We have omitted discussion of 2024 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2024 Annual Report on Form 10-K.
For further details, refer to Note 12 - Income Taxes of the Notes to the Consolidated Financial Statements included in Item 8 of this report. 22 Table 1 – Average Balances and Tax-Equivalent Interest Rates Tables 1 and 2 on the following pages provide information regarding interest income and expense for the years ended December 31, 2024, 2023, and 2022.
For further details, refer to Note 12 - Income Taxes of the Notes to the Consolidated Financial Statements included in Item 8 of this report. 21 Table 1 – Average Balances and Tax-Equivalent Interest Rates Tables 1 and 2 on the following pages provide information regarding interest income and expense for the years ended December 31, 2025, 2024, and 2023.
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.
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.
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.
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.
As of December 31, 2024, we used a one-year reasonable and supportable economic forecast period, with a two year straight-line reversion period.
As of December 31, 2025, we used a one-year reasonable and supportable economic forecast period, with a two year straight-line reversion period.
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. ChoiceOne continues to review its liquidity management and has taken steps in an effort to ensure adequacy.
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. ChoiceOne continues to review its liquidity management and has taken steps in an effort to ensure adequacy.
(2) Interest on tax-exempt securities and loans has been adjusted to a fully tax-equivalent basis using an incremental tax rate of 21% for 2024, 2023, and 2022. Net Interest Income 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.
(2) Interest on tax-exempt securities and loans has been adjusted to a fully tax-equivalent basis using an incremental tax rate of 21% for 2025, 2024, and 2023. Net Interest Income 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.
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.
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.
Securities The Company’s securities balances as of December 31 were as follows: (Dollars in thousands) 2024 2023 Equity securities $ 7,782 $ 7,505 Available for Sale Securities at fair value U.S. Government and federal agency $ - $ - U.S.
Securities The Company’s securities balances as of December 31 were as follows: (Dollars in thousands) 2025 2024 Equity securities $ 9,353 $ 7,782 Available for Sale Securities at fair value U.S. Government and federal agency $ - $ - U.S.
(2) Interest on taxable securities includes dividends on 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.
(2) Interest on taxable securities includes dividends on Federal Home Loan Bank and Federal Reserve Bank stock. (3) Loans include both mortgage warehouse advances and loans held for sale. (4) Non-accruing loan balances are included in the balances of average loans.
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.
The general component covers loans collectively evaluated for credit loss and is based on peer historical loss experience adjusted for current and forecasted factors.
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.
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.
Specific reserves on non-performing loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate or based on the present value of the expected cash flows from that loan.
Specific reserves on non-performing loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate or based on the present value of the expected cash flows from that loan. ACL for Purchased Loans: With and Without Credit Deterioration Purchased loans are initially recorded at fair value.
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.
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.
The forecast period represents the time frame from the current period end through the point in time that we can reasonably forecast and support entity and environmental factors that are expected to impact the performance of our loan portfolio.
Reasonable and supportable economic forecasts have to be incorporated in determining expected credit losses. The forecast period represents the time frame from the current period end through the point in time that we can reasonably forecast and support entity and environmental factors that are expected to impact the performance of our loan portfolio.
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.
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 25 increase.
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. Reasonable and supportable economic forecasts have to be incorporated in determining expected credit losses.
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.
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.
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.
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. (5) 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.
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. (5) Interest on loans included net origination fees and interest income due to accretion from purchased loans.
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.
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.
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. 29 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 $128,000 and $121,000 of TLM loans at December 31, 2025 and December 31, 2024, respectively. 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.
Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Loans (1) (3)(4)(5)(6) $ 1,456,434 $ 89,645 6.16 % $ 1,265,261 $ 68,437 5.41 % $ 1,104,030 $ 52,861 4.79 % Taxable securities (2)(6) 691,562 21,228 3.07 747,006 21,169 2.83 779,915 15,583 2.00 Nontaxable securities (1) 289,892 7,089 2.45 295,553 7,106 2.40 314,644 7,790 2.48 Other 88,576 4,681 5.29 70,826 3,797 5.36 34,255 491 1.43 Interest-earning assets 2,526,464 122,643 4.85 2,378,646 100,509 4.23 2,232,844 76,725 3.44 Noninterest-earning assets 142,092 115,194 140,530 Total assets $ 2,668,556 $ 2,493,840 $ 2,373,374 Liabilities and Shareholders' Equity: Interest-bearing demand deposits $ 896,060 $ 12,997 1.45 % $ 852,927 $ 10,028 1.18 % $ 902,090 $ 3,514 0.39 % Savings deposits 334,310 2,828 0.85 370,074 1,609 0.43 452,542 711 0.16 Certificates of deposit 388,724 17,033 4.38 306,999 10,621 3.46 196,063 1,618 0.83 Brokered deposit 26,902 1,315 4.89 35,044 1,732 4.94 103 2 2.48 Borrowings 208,142 9,885 4.75 141,507 6,818 4.82 13,537 410 3.02 Subordinated debentures 35,627 1,642 4.61 35,382 1,636 4.62 35,211 1,491 4.23 Other 18,355 961 5.23 12,258 651 5.31 - - 0.00 Interest-bearing liabilities 1,908,120 46,661 2.45 1,754,191 33,095 1.89 1,599,546 7,746 0.48 Demand deposits 519,709 546,926 582,992 Other noninterest-bearing liabilities 14,180 15,522 12,421 Total liabilities 2,442,009 2,316,639 2,194,959 Shareholders' equity 226,547 177,201 178,415 Total liabilities and shareholders' equity $ 2,668,556 $ 2,493,840 $ 2,373,374 Net interest income (tax-equivalent basis) (Non-GAAP) (1) $ 75,981 $ 67,415 $ 68,979 Net interest margin (tax-equivalent basis) (Non-GAAP) (1) 3.01 % 2.83 % 3.09 % Reconciliation to Reported Net Interest Income Net interest income (tax-equivalent basis) (Non-GAAP) (1) $ 75,981 $ 67,415 $ 68,979 Adjustment for taxable equivalent interest (1,539 ) (1,530 ) (1665 ) Net interest income (GAAP) $ 74,442 $ 65,885 $ 67,314 Net interest margin (GAAP) 2.95 % 2.77 % 3.01 % (1) Adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets.
Year Ended December 31, 2025 2024 2023 (Dollars in thousands) Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate Assets: Loans (1) (3)(4)(5) $ 2,714,377 $ 172,995 6.37 % $ 1,456,434 $ 89,645 6.16 % $ 1,265,261 $ 68,437 5.41 % Taxable securities (2) 709,890 20,906 2.94 691,562 21,228 3.07 747,006 21,169 2.83 Nontaxable securities (1) 287,739 7,102 2.47 289,892 7,089 2.45 295,553 7,106 2.40 Other 81,599 3,516 4.31 88,576 4,681 5.29 70,826 3,797 5.36 Interest-earning assets 3,793,605 204,519 5.39 2,526,464 122,643 4.85 2,378,646 100,509 4.23 Noninterest-earning assets 285,469 142,092 115,194 Total assets $ 4,079,074 $ 2,668,556 $ 2,493,840 Liabilities and Shareholders' Equity: Interest-bearing demand deposits $ 1,291,528 $ 23,328 1.81 % $ 896,060 $ 12,997 1.45 % $ 852,927 $ 10,028 1.18 % Savings deposits 554,110 4,262 0.77 334,310 2,828 0.85 370,074 1,609 0.43 Certificates of deposit 591,358 22,581 3.82 388,724 17,033 4.38 306,999 10,621 3.46 Brokered deposit 89,691 3,799 4.24 26,902 1,315 4.89 35,044 1,732 4.94 Borrowings 202,631 8,610 4.25 208,142 9,885 4.75 141,507 6,818 4.82 Subordinated debentures 46,277 2,798 6.05 35,627 1,642 4.61 35,382 1,636 4.62 Other 11,746 510 4.34 18,355 961 5.23 12,258 651 5.31 Interest-bearing liabilities 2,787,341 65,888 2.36 1,908,120 46,661 2.45 1,754,191 33,095 1.89 Demand deposits 856,661 519,709 546,926 Other noninterest-bearing liabilities 34,801 14,180 15,522 Total liabilities 3,678,803 2,442,009 2,316,639 Shareholders' equity 400,271 226,547 177,201 Total liabilities and shareholders' equity $ 4,079,074 $ 2,668,556 $ 2,493,840 Net interest income (tax-equivalent basis) (Non-GAAP) (1) $ 138,631 $ 75,981 $ 67,415 Net interest margin (tax-equivalent basis) (Non-GAAP) (1) 3.65 % 3.01 % 2.83 % Reconciliation to Reported Net Interest Income Net interest income (tax-equivalent basis) (Non-GAAP) (1) $ 138,631 $ 75,981 $ 67,415 Adjustment for taxable equivalent interest (1,561 ) (1,539 ) (1,530 ) Net interest income (GAAP) $ 137,070 $ 74,442 $ 65,885 Net interest margin (GAAP) 3.61 % 2.95 % 2.77 % (1) Adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets.
ChoiceOne received principal payments for municipal and mortgage-backed securities totaling $48.0 million during 2024. 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.
ChoiceOne received principal payments for municipal and mortgage-backed securities totaling $24.4 million during 2025. 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.
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.
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.
Year Ended December 31, 2024 2023 2022 Cost of deposits 1.58 % 1.14 % 0.27 % Cost of funds 1.92 % 1.44 % 0.35 % Provision and Allowance For Credit Losses Table 3 – Provision and Allowance For Credit Losses 25 (Dollars in thousands) 2024 2023 2022 Allowance for credit losses at beginning of year $ 15,685 $ 7,619 $ 7,688 Cumulative effect of change in accounting principle - 7,165 - Charge-offs: Agricultural - - - Commercial and industrial 7 158 177 Consumer 800 554 496 Commercial real estate - - Construction real estate - - - Residential real estate 30 27 - Total 837 739 673 Recoveries: Agricultural - - - Commercial and industrial 15 66 143 Consumer 374 283 206 Commercial real estate - 13 3 Construction real estate - - - Residential real estate 15 13 2 Total 404 375 354 Net charge-offs (recoveries) 433 364 319 Provision for credit losses 1,300 1,265 250 Allowance for credit losses at end of year $ 16,552 $ 15,685 $ 7,619 Allowance for credit losses as a percentage of: Total loans as of year end 1.07 % 1.11 % 0.64 % Nonaccrual loans, accrual loans past due 90 days or more and troubled debt restructurings 447 % 820 % 286 % Ratio of net charge-offs during the period to average loans outstanding during the period 0.03 % 0.03 % 0.03 % Loan recoveries as a percentage of prior year's charge-offs 55 % 56 % 52 % Note: In the table above, "consumer" includes deposit account charge-offs and recoveries.
Year Ended December 31, 2025 2024 2023 Cost of deposits 1.60 % 1.58 % 1.14 % Cost of funds 1.81 % 1.92 % 1.44 % Provision and Allowance For Credit Losses Table 3 – Provision and Allowance For Credit Losses 24 (Dollars in thousands) 2025 2024 2023 Allowance for credit losses at beginning of year $ 16,552 $ 15,685 $ 7,619 Cumulative effect of change in accounting principle - - 7,165 Acquisition related allowance for credit loss (PCD) 4,924 - - Charge-offs: Agricultural - - - Commercial and industrial 245 7 158 Consumer loans 159 193 74 Consumer deposits 561 607 480 Commercial real estate 416 - - Construction real estate - - - Residential real estate 76 30 27 Total 1,457 837 739 Recoveries: Agricultural - - - Commercial and industrial 9 15 66 Consumer loans 41 5 29 Consumer deposits 339 369 254 Commercial real estate - - 13 Construction real estate - - - Residential real estate 29 15 13 Total 418 404 375 Net charge-offs (recoveries) 1,039 433 364 Provision for credit losses 15,113 1,300 1,265 Allowance for credit losses at end of year $ 35,550 $ 16,552 $ 15,685 Allowance for credit losses as a percentage of: Total loans as of year end 1.18 % 1.07 % 1.11 % Nonaccrual loans, accrual loans past due 90 days or more and troubled debt restructurings 120 % 447 % 820 % Ratio of net charge-offs during the period to average loans outstanding during the period 0.04 % 0.03 % 0.03 % Loan recoveries as a percentage of prior year's charge-offs 50 % 55 % 56 % Note: In the table above, "consumer" includes deposit account charge-offs and recoveries.
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.
The increase in the average balance of certificates of deposit of $202.6 million during 2025, offset by a 56 basis 23 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.
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.
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.
Management will monitor these capital ratios during 2025 as they relate to asset growth and earnings retention. ChoiceOne’s Board of Directors and management do not plan to allow capital to decrease below those levels necessary to be considered "well capitalized" by regulatory guidelines.
ChoiceOne’s Board of Directors and management do not plan to allow capital to decrease below those levels necessary to be considered "well capitalized" by regulatory guidelines.
As of December 31, 2023, equity securities included a MMP of $1.0 million and common stock of $6.5 million. 28 Per U.S. generally accepted accounting principles, unrealized gains or losses on securities available for sale are reflected on the balance sheet in accumulated other comprehensive income (loss), while unrealized gains or losses on securities held to maturity are not reflected on the balance sheet in accumulated other comprehensive income (loss).
Per U.S. generally accepted accounting principles, unrealized gains or losses on securities available for sale are reflected on the balance sheet in accumulated other comprehensive income (loss), while unrealized gains or losses on securities held to maturity are not reflected on the balance sheet in accumulated other comprehensive income (loss).
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.
These derivative instruments increase in value as long-term interest rates rise, which partially offsets the reduction in shareholders' equity due 27 to unrealized losses on securities available for sale.
Treasury notes and bonds 80,502 80,194 State and municipal 228,236 234,682 Mortgage-backed 160,970 188,501 Corporate 212 204 Asset-backed securities 9,197 11,017 Total $ 479,117 $ 514,598 Held to Maturity Securities at amortized cost U.S. Government and federal agency $ 2,978 $ 2,972 U.S.
Treasury notes and bonds 89,035 80,502 State and municipal 227,574 228,236 Mortgage-backed 227,054 160,970 Corporate 222 212 Asset-backed securities 10,535 9,197 Total $ 554,420 $ 479,117 Held to Maturity Securities at amortized cost U.S. Government and federal agency $ 2,984 $ 2,978 U.S.
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.
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.
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.
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.
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.
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.
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.
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.
Selected Financial Data (Dollars in thousands, except per share data) 2024 2023 2022 For the year Net interest income $ 74,442 $ 65,885 $ 67,314 Provision for credit losses, net 625 150 250 Noninterest income 17,995 14,906 14,072 Noninterest expense 58,723 55,074 53,478 Income before income taxes 33,089 25,567 27,658 Income tax expense 6,362 4,306 4,018 Net income 26,727 21,261 23,640 Cash dividends declared 9,012 7,910 7,578 Per share Basic earnings $ 3.27 $ 2.82 $ 3.15 Diluted earnings 3.25 2.82 3.15 Cash dividends declared 1.09 1.05 1.01 Shareholders' equity (at year end) 29.05 25.92 22.47 Average for the year Securities $ 981,454 $ 1,042,559 $ 1,094,559 Gross loans 1,456,434 1,265,261 1,104,030 Deposits 2,165,705 2,111,970 2,133,790 Borrowings 208,142 141,507 13,537 Subordinated debt 35,627 35,382 35,211 Shareholders' equity 226,547 177,201 178,415 Assets 2,668,556 2,493,840 2,373,374 At year end Securities $ 896,123 $ 939,576 $ 972,802 Gross loans 1,552,928 1,415,363 1,194,616 Deposits 2,214,103 2,122,055 2,118,003 Borrowings 175,000 200,000 50,000 Subordinated debt 35,752 35,507 35,262 Shareholders' equity 260,415 195,634 168,874 Assets 2,723,243 2,576,706 2,385,915 Selected financial ratios Return on average assets 1.00 % 0.85 % 1.00 % Return on average shareholders' equity 11.80 12.00 13.25 Cash dividend payout as a percentage of net income 33.72 37.21 32.06 Shareholders' equity to assets (at year end) 9.56 7.59 7.08 20 RECENT EVENTS 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”).
Selected Financial Data (Dollars in thousands, except per share data) 2025 2024 2023 For the year Net interest income $ 137,070 $ 74,442 $ 65,885 Provision for credit losses, net 14,813 625 150 Noninterest income 24,666 17,995 14,906 Noninterest expense 112,735 58,723 55,074 Income before income taxes 34,188 33,089 25,567 Income tax expense 6,012 6,362 4,306 Net income 28,176 26,727 21,261 Cash dividends declared 16,949 9,012 7,910 Per share Basic earnings $ 2.02 $ 3.27 $ 2.82 Diluted earnings 2.01 3.25 2.82 Cash dividends declared 1.13 1.09 1.05 Shareholders' equity (at year end) 31.02 29.05 25.92 Average for the year Securities $ 997,629 $ 981,454 $ 1,042,559 Gross loans 2,714,377 1,456,434 1,265,261 Deposits 3,383,348 2,165,705 2,111,970 Borrowings 202,631 208,142 141,507 Subordinated debt 46,277 35,627 35,382 Shareholders' equity 400,271 226,547 177,201 Assets 4,079,074 2,668,556 2,493,840 At year end Securities $ 980,082 $ 896,123 $ 939,576 Gross loans 3,029,219 1,552,928 1,415,363 Deposits 3,600,025 2,214,103 2,122,055 Borrowings 264,788 175,000 200,000 Subordinated debt 48,460 35,752 35,507 Shareholders' equity 465,353 260,415 195,634 Assets 4,410,551 2,723,243 2,576,706 Selected financial ratios Return on average assets 0.69 % 1.00 % 0.85 % Return on average shareholders' equity 7.04 11.80 12.00 Cash dividend payout as a percentage of net income 60.15 33.72 37.21 Shareholders' equity to assets (at year end) 10.55 9.56 7.59 19 RECENT EVENTS On March 1, 2025, ChoiceOne completed the merger (the “Merger”) of Fentura Financial, Inc.
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.
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.
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.
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.
The average balance of subordinated debentures was relatively flat in 2024 compared to the same period in the prior year. The following table presents the cost of deposits and the cost of funds for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.
The increase led to additional expense of $1.2 million in 2025 compared to the same period in prior year. The following table presents the cost of deposits and the cost of funds for the years ended December 31, 2025, December 31, 2024, and December 31, 2023.
The pay-fixed swap derivatives are designed to offset swings in AOCI due to changes in interest rates. ChoiceOne Bank remains “well-capitalized” with a total risk-based capital ratio of 12.7% as of December 31, 2024, compared to 12.4% on December 31, 2023. ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities.
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. ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities.
Income Adjusted for Merger Expenses - Non-GAAP Reconciliation 2024 (In Thousands, Except Per Share Data) Net income $ 26,727 Merger related expenses net of tax 1,006 Adjusted net income (Non-GAAP) $ 27,733 Weighted average number of shares 8,166,472 Diluted average shares outstanding 8,221,065 Basic earnings per share $ 3.27 Diluted earnings per share $ 3.25 Adjusted basic earnings per share (Non-GAAP) $ 3.40 Adjusted diluted earnings per share (Non-GAAP) $ 3.37 32 Critical Accounting Policies And Estimates Management’s discussion and analysis of financial condition and results of operations as well as disclosures found elsewhere in this report are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Income Adjusted for Merger Expenses - Non-GAAP Reconciliation Year Ended December 31, For the year ended: 2025 2024 (In Thousands, Except Per Share Data) Net income $ 28,176 $ 26,727 Merger related expenses net of tax 13,885 1,006 Merger related provision for credit losses, net of tax (1) 9,463 - Adjusted net income (Non-GAAP) $ 51,524 $ 27,733 Weighted average number of shares 13,941,260 8,166,472 Diluted average shares outstanding 13,992,099 8,221,065 Basic earnings per share $ 2.02 $ 3.27 Diluted earnings per share $ 2.01 $ 3.25 Adjusted basic earnings per share (Non-GAAP) $ 3.70 $ 3.40 Adjusted diluted earnings per share (Non-GAAP) $ 3.68 $ 3.37 Average assets $ 4,079,074 $ 2,668,556 Average shareholder equity $ 400,271 $ 226,547 Return on average assets ("ROAA") 0.69 % 1.00 % Adjusted ROAA (Non-GAAP) 1.26 % 1.04 % Return on Average Equity ("ROAE") 7.04 % 11.80 % Adjusted ROAE (Non-GAAP) 12.87 % 12.24 % (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. 32 Critical Accounting Policies And Estimates Management’s discussion and analysis of financial condition and results of operations as well as disclosures found elsewhere in this report are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
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.
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 1.07% of total loans, excluding loans held for sale, at December 31, 2024, compared to 1.11% as of December 31, 2023.
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.
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.
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.
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.
Noninterest Expense 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 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. 34 ChoiceOne engaged a third party valuation firm to assist in performing a quantitative analysis of goodwill as of June 30, 2024 ("the measurement date").
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. ChoiceOne conducted an annual assessment of goodwill as of June 30, 2025 and no impairment was identified.
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.
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%.
Loans The Company’s loan portfolio by call report code was as follows: December 31, 2024 December 31, 2023 (Dollars in thousands) Call Report Codes Balance % Balance % Construction & Development Loans 1A2 61,740 4.0 % 112,877 8.0 % 1-4 Family Loans 1A1, 1C1, 1C2A, 1C2B 380,139 24.6 % 347,036 24.6 % Multifamily Loans 1D 83,766 5.4 % 56,563 4.0 % Owner Occupied CRE Loans 1E1 325,966 21.1 % 281,515 20.0 % Non-Owner Occupied CRE Loans 1E2 387,102 25.0 % 298,265 21.1 % Commercial & Industrial Loans 2A2, 4A 216,376 14.0 % 219,849 15.6 % Farm & Agriculture Loans 1B, 3 48,246 3.1 % 46,515 3.3 % Consumer & Other Loans 6B, 6C, 6D, 8, 9b2,10B 42,305 2.7 % 48,033 3.4 % Total Loans 1,545,640 1,410,653 Average loan balances increased $191.2 million in the full year 2024 compared to the same period in 2023.
Loans The Company’s loan portfolio by call report code was as follows: December 31, 2025 December 31, 2024 (Dollars in thousands) Call Report Codes Balance % Balance % Construction & Development Loans 1A2 89,394 3.0 % 61,740 4.0 % 1-4 Family Loans 1A1, 1C1, 1C2A, 1C2B 875,818 29.0 % 380,139 24.6 % Multifamily Loans 1D 150,380 5.0 % 83,766 5.4 % Owner Occupied CRE Loans 1E1 553,208 18.3 % 325,966 21.1 % Non-Owner Occupied CRE Loans 1E2 917,758 30.4 % 387,102 25.0 % Commercial & Industrial Loans 2A2, 4A 339,272 11.2 % 216,376 14.0 % Farm & Agriculture Loans 1B, 3 57,525 1.9 % 48,246 3.1 % Consumer & Other Loans 6B, 6C, 6D, 8, 9b2,10B 38,679 1.3 % 42,305 2.7 % Total Loans 3,022,034 1,545,640 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.
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.
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. Interest expense increased $19.2 million for the full year 2025, compared to the same period in the prior year.
Deposits and Other Funding Sources The Company’s deposit balances as of December 31 were as follows: (Dollars in thousands) 2024 2023 Noninterest-bearing demand deposits $ 524,945 $ 547,625 Interest-bearing demand deposits 630,155 599,681 Money market deposits 290,012 247,602 Savings deposits 338,109 336,851 Local certificates of deposit 394,371 366,851 Brokered certificates of deposit 36,511 23,445 Total deposits $ 2,214,103 $ 2,122,055 Deposits, excluding brokered deposits increased $79.0 million or 3.8% during 2024.
Deposits and Other Funding Sources The Company’s deposit balances as of December 31 were as follows: (Dollars in thousands) 2025 2024 Noninterest-bearing demand deposits $ 907,007 $ 524,945 Interest-bearing demand deposits 910,502 630,155 Money market deposits 454,385 290,012 Savings deposits 607,045 338,109 Local certificates of deposit 616,180 394,371 Brokered certificates of deposit 104,906 36,511 Total deposits $ 3,600,025 $ 2,214,103 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.
Table 4 – Contractual Obligations The following table discloses information regarding the maturity of ChoiceOne’s contractual obligations at December 31, 2024: Payment Due by Period Less More than 1 - 3 3 - 5 than (Dollars in thousands) Total 1 year Years Years 5 Years Time deposits $ 430,882 $ 413,786 $ 13,110 $ 3,719 $ 267 Borrowings 175,000 155,000 20,000 - - ChoiceOne Capital Trust (1) 4,500 - - - 4,500 ChoiceOne Subordinated Debenture (2) 32,500 - - - 32,500 Operating leases 759 310 280 50 119 Other obligations 43 11 18 14 - Total $ 643,684 $ 569,107 $ 33,408 $ 3,783 $ 37,386 (1) 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.
Table 4 – Contractual Obligations The following table discloses information regarding the maturity of ChoiceOne’s contractual obligations at December 31, 2025: Payment Due by Period Less More than 1 - 3 3 - 5 than (Dollars in thousands) Total 1 year Years Years 5 Years Time deposits $ 721,086 $ 687,274 $ 28,883 $ 4,929 - Borrowings (1) 265,000 245,000 20,000 - - ChoiceOne Trust Preferred (2) 18,500 - - - 18,500 ChoiceOne Subordinated Debenture (3) 32,500 - - - 32,500 Operating leases 3,548 688 1,139 629 1,092 Other obligations 3,437 1,100 295 289 1,753 Total $ 1,044,071 $ 934,062 $ 50,317 $ 5,847 $ 53,845 (1) 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.
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.
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.
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.
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.
Based on its review of ChoiceOne’s deferred tax assets as of December 31, 2024, management determined that no valuation allowance was necessary. The valuation of current and deferred income tax assets and liabilities is considered critical, as it requires management to make estimates based on provisions of the enacted tax laws.
The valuation of current and deferred income tax assets and liabilities is considered critical, as it requires management to make estimates based on provisions of the enacted tax laws. The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgments concerning certain accounting pronouncements and the federal tax code. 35
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.
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 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. 26 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.
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.
Deferred tax assets and liabilities are recorded to account for differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes. Generally accepted accounting principles require that deferred tax assets be reviewed to determine whether a valuation allowance should be established using a “more likely than not” standard.
Generally accepted accounting principles require that deferred tax assets be reviewed to determine whether a valuation allowance should be established using a “more likely than not” standard. Based on its review of ChoiceOne’s deferred tax assets as of December 31, 2025, management determined that no valuation allowance was necessary.
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.
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.
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. Goodwill 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 amortization period and method are reviewed periodically and adjusted if necessary based on updated experience and expectations. Goodwill 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.
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. Deferred Tax Assets and Liabilities Income taxes include both a current and deferred portion.
No material changes and no triggering events have occurred that indicated impairment. Deferred Tax Assets and Liabilities Income taxes include both a current and deferred portion. Deferred tax assets and liabilities are recorded to account for differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes.
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. 30 Note 21 to the consolidated financial statements presents regulatory capital information for ChoiceOne and the Bank at the end of 2024 and 2023.
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.
The balances of these nonperforming loans as of December 31 were as follows: (Dollars in thousands) 2024 2023 Loans accounted for on a nonaccrual basis $ 3,704 $ 1,723 Loans contractually past due 90 days or more as to principal or interest payments - - Loans modified to borrowers experiencing financial difficulty at December 31, 2024 and December 31, 2023. - 189 Total $ 3,704 $ 1,912 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.
Nonperforming loans are comprised of loans accounted for on a nonaccrual basis, loans not included in nonaccrual loans, which are contractually past due 90 days or more as to interest or principal payments, and troubled loan modifications which are accruing and initiated in the past year. 28 The balances of these nonperforming loans as of December 31 were as follows: (Dollars in thousands) 2025 2024 Loans accounted for on a nonaccrual basis $ 27,058 $ 3,704 Loans contractually past due 90 days or more as to principal or interest payments - - Loans defined as "troubled loan modifications" which are not included above - - Other real estate owned, net 2,524 473 Total $ 29,582 $ 4,177 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.
ChoiceOne estimates that roughly $1.3 million will accrete into income over the next one to three years. As part of its review of the loan portfolio, management also monitors the various nonperforming loans.
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. As part of its review of the loan portfolio, management also monitors the various nonperforming loans.
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.
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.
Treasury notes and bonds - State and municipal 196,510 196,098 Mortgage-backed 174,323 188,329 Corporate 20,495 20,013 Asset-backed securities 228 547 Total $ 394,534 $ 407,959 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.
Treasury notes and bonds - - State and municipal 196,448 196,510 Mortgage-backed 164,820 174,323 Corporate 20,941 20,495 Asset-backed securities - 228 Total $ 385,193 $ 394,534 Total securities increased $67.5 million as of December 31, 2025, compared to December 31, 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.
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.
This increased ChoiceOne's total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%, with the earliest maturity in January 2025. In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031.
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.
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.
Core loans also grew by $1.4 billion due to the Merger on March 1, 2025. 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.
(2) ChoiceOne subordinated debenture on the balance sheet includes $240,000 of capitalized issuance cost which is not reflected in the table above. Liquidity and Interest Rate Risk Net cash provided by operating activities was $48.5 million in 2024 compared to $46.5 million in 2023.
(2) Cumulative trust preferred securities on the balance sheet include $2.4 million of discount due to a mark to market adjustment which is not reflected in the table above (3) ChoiceOne subordinated debenture on the balance sheet includes $96,000 of capitalized issuance cost which is not reflected in the table above.
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. ChoiceOne's market risk exposure occurs in the form of interest rate risk and liquidity risk. ChoiceOne's business is transacted in U.S. dollars with no foreign exchange risk exposure.
In contrast, financing cash flows in 2024 benefited from stronger net inflows, including capital‑raising and borrowing activity that did not recur in 2025. ChoiceOne's market risk exposure occurs in the form of interest rate risk and liquidity risk. ChoiceOne's business is transacted in U.S. dollars with no foreign exchange risk exposure.
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.
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. Income Taxes Income tax expense was $350,000 lower in 2025 than in 2024.
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.
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.
Removed
The Merger was effective on March 1, 2025. On July 26, 2024, ChoiceOne completed an underwritten public offering of 1,380,000 shares of its common stock at a price to the public of $25.00 per share. RESULTS OF OPERATIONS Summary ChoiceOne's net income for 2024 was $26.7 million, compared to $21.3 million in 2023.
Added
(“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.
Removed
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTable 5 documents the maturity or repricing schedule for ChoiceOne’s rate-sensitive assets and liabilities for selected time periods: Table 5 – Maturities and Repricing Schedule As of December 31, 2024 (Dollars in thousands) 0 - 3 3 - 12 1 - 5 Over Months Months Years 5 Years Total Assets Equity securities at fair value $ 7,782 $ - $ - $ - $ 7,782 Securities available for sale 63,054 5,948 141,844 268,271 479,117 Securities held to maturity 16,887 3,163 97,906 276,578 394,534 Federal Home Loan Bank stock 9,383 - - - 9,383 Federal Reserve Bank stock - - - 5,307 5,307 Loans held for sale 7,288 - - - 7,288 Loans to other financial institutions 39,878 - - - 39,878 Core Loans 371,533 208,690 763,592 161,947 1,505,762 Cash surrender value of life insurance policies - - - 44,896 44,896 Interest rate derivative contracts 23,649 - - - 23,649 Rate-sensitive assets $ 539,454 $ 217,801 $ 1,003,342 $ 756,999 $ 2,517,596 Liabilities Interest-bearing demand deposits $ 630,155 $ - $ - $ - $ 630,155 Money market deposits 290,012 - - - $ 290,012 Savings deposits 338,109 - - - $ 338,109 Certificates of deposit 118,393 260,376 15,335 267 $ 394,371 Brokered deposits 29,884 5,133 1,494 - 36,511 Borrowings 135,000 20,000 20,000 - 175,000 Subordinated debentures 3,492 - 32,260 - 35,752 Interest rate derivative contracts - - - - - Rate-sensitive liabilities $ 1,545,045 $ 285,509 $ 69,089 $ 267 $ 1,899,910 Rate-sensitive assets less rate-sensitive liabilities: Asset (liability) gap for the period $ (1,005,591 ) $ (67,708 ) $ 934,253 $ 756,732 $ 617,686 Cumulative asset (liability) gap $ (1,005,591 ) $ (1,073,299 ) $ (139,046 ) $ 617,686 (1) Interest rate derivative contracts include pay fixed, receive variable swaps with a notional value of $401.0 million.
Biggest changeTable 5 documents the maturity or repricing schedule for ChoiceOne’s rate-sensitive assets and liabilities for selected time periods: Table 5 – Maturities and Repricing Schedule As of December 31, 2025 (Dollars in thousands) 0 - 3 3 - 12 1 - 5 Over Months Months Years 5 Years Total Assets Equity securities at fair value $ 9,353 $ - $ - $ - $ 9,353 Securities available for sale 79,791 989 136,322 337,318 554,420 Securities held to maturity 21,340 15,898 43,069 304,886 385,193 Federal Home Loan Bank stock 18,562 - - - 18,562 Federal Reserve Bank stock - - - 12,554 12,554 Loans held for sale 7,185 - - - 7,185 Mortgage warehouse advances 58,987 - - - 58,987 Core Loans 1,250,474 119,351 717,182 876,040 2,963,047 Cash surrender value of life insurance policies - - - 74,798 74,798 Interest rate derivative contracts (1) 8,446 - - - 8,446 Interest rate swaps 1,815 - - - 1,815 Rate-sensitive assets $ 1,455,953 $ 136,238 $ 896,573 $ 1,605,596 $ 4,094,360 Liabilities Interest-bearing demand deposits $ 910,502 $ - $ - $ - $ 910,502 Money market deposits 454,385 - - - 454,385 Savings deposits 607,045 - - - 607,045 Certificates of deposit 223,403 359,214 33,563 - 616,180 Brokered deposits 72,737 31,920 249 - 104,906 Borrowings 224,788 20,000 20,000 - 264,788 Subordinated debentures 16,056 32,404 - - 48,460 Interest rate derivative contracts (1) - - - - - Interest rate swaps 1,826 1,826 Rate-sensitive liabilities $ 2,510,742 $ 443,538 $ 53,812 $ - $ 3,008,092 Rate-sensitive assets less rate-sensitive liabilities: Asset (liability) gap for the period $ (1,054,789 ) $ (307,300 ) $ 842,761 $ 1,605,596 $ 1,086,268 Cumulative asset (liability) gap $ (1,054,789 ) $ (1,362,089 ) $ (519,328 ) $ 1,086,268 (1) Interest rate derivative contracts include pay fixed, receive variable swaps with a notional value of $380.4 million.
Further details can be found in Note 8 – Derivatives and Hedging Activities. Under this method, the Risk Committee measures interest rate sensitivity by focusing on the one-year repricing gap. ChoiceOne’s ratio of rate-sensitive assets to rate-sensitive liabilities that matured or repriced within a one-year time frame was 41% at December 31, 2024, compared to 38% at December 31, 2023.
Further details can be found in Note 8 – Derivatives and Hedging Activities. Under this method, the Risk Committee measures interest rate sensitivity by focusing on the one-year repricing gap. ChoiceOne’s ratio of rate-sensitive assets to rate-sensitive liabilities that matured or repriced within a one-year time frame was 54% at December 31, 2025, compared to 41% at December 31, 2024.
In the case of variable rate assets and 36 liabilities, repricing dates were used to determine their values. The simulation model measures the effect of immediate interest rate changes on both net interest income and shareholders’ equity.
The maturities of advances from the borrowings were based on their contractual maturity dates. In the case of variable rate assets and liabilities, repricing dates were used to determine their values. The simulation model measures the effect of immediate interest rate changes on both net interest income and shareholders’ equity.
Table 6 provides an illustration of hypothetical interest rate changes as of December 31, 2024 and 2023: Table 6 – Sensitivity to Changes in Interest Rates 2024 Net Market (Dollars in thousands) Interest Percent Value of Percent Income Change Equity Change Change in Interest Rate 200 basis point rise 76,250 - % 415,500 6 % 100 basis point rise 76,320 - % 408,000 4 % Base rate scenario 75,950 - % 391,800 - % 100 basis point decline 75,230 -1 % 368,200 -6 % 200 basis point decline 73,080 -4 % 330,800 -16 % 2023 Net Market (Dollars in thousands) Interest Percent Value of Percent Income Change Equity Change Change in Interest Rate 200 basis point rise 67,650 -2 % 480,950 8 % 100 basis point rise 68,430 -1 % 469,920 5 % Base rate scenario 69,100 - % 446,210 - % 100 basis point decline 66,660 -4 % 407,940 -9 % 200 basis point decline 66,120 -4 % 350,800 -21 % As of December 31, 2024, the Bank was within its guidelines for immediate rate shocks of 100 and 200 basis points up and down for net interest income and market value of shareholders’ equity scenarios.
Table 6 provides an illustration of hypothetical interest rate changes as of December 31, 2025 and 2024: Table 6 – Sensitivity to Changes in Interest Rates 2025 Net Market (Dollars in thousands) Interest Percent Value of Percent Income Change Equity Change Change in Interest Rate 200 basis point rise 151,060 -2 % 710,900 1 % 100 basis point rise 152,880 -1 % 711,900 1 % Base rate scenario 154,440 - % 703,200 - % 100 basis point decline 152,810 -1 % 680,100 -3 % 200 basis point decline 149,320 -3 % 638,900 -9 % 2024 Net Market (Dollars in thousands) Interest Percent Value of Percent Income Change Equity Change Change in Interest Rate 200 basis point rise 76,250 - % 415,500 6 % 100 basis point rise 76,320 - % 408,000 4 % Base rate scenario 75,950 - % 391,800 - % 100 basis point decline 75,230 -1 % 368,200 -6 % 200 basis point decline 73,080 -4 % 330,800 -16 % As of December 31, 2025 and December 31, 2024, the Bank was within its guidelines for immediate rate shocks of 100 and 200 basis points up and down for net interest income and market value of shareholders’ equity scenarios.
The Risk Committee plans to continue to monitor the ratio of rate-sensitive assets to rate-sensitive liabilities on a quarterly basis in 2025. As interest rates change, the Risk Committee will attempt to match its maturing assets with corresponding liabilities to maximize ChoiceOne’s net interest income.
As interest rates change, the Risk Committee will attempt to match its maturing assets with corresponding liabilities to maximize ChoiceOne’s net interest income. 36 Another method the Risk Committee uses to monitor its interest rate sensitivity is to subject rate-sensitive assets and liabilities to interest rate shocks.
The maturities of loans and mortgage-backed securities were affected by certain prepayment assumptions. Maturities for interest-bearing core deposits were based on an estimate of the period over which they would be outstanding. The maturities of advances from the borrowings were based on their contractual maturity dates.
At December 31, 2025, management used a simulation model to subject its assets and liabilities up to an immediate 200 basis point increase and decline. The maturities of loans and mortgage-backed securities were affected by certain prepayment assumptions. Maturities for interest-bearing core deposits were based on an estimate of the period over which they would be outstanding.
Removed
Another method the Risk Committee uses to monitor its interest rate sensitivity is to subject rate-sensitive assets and liabilities to interest rate shocks. At December 31, 2024, management used a simulation model to subject its assets and liabilities up to an immediate 200 basis point increase and decline.
Added
The Risk Committee plans to continue to monitor the ratio of rate-sensitive assets to rate-sensitive liabilities on a quarterly basis in 2026.
Removed
As of December 31, 2023, the Bank was within its guidelines for immediate rate shocks of 100 and 200 basis points up and down for net interest income scenarios and was within its guidelines for immediate rate shocks of 100 and 200 basis points up and 100 basis points down for market value of shareholders’ equity scenarios.
Removed
The immediate rate shock of 200 basis points down for market value of shareholders’ equity scenarios was higher than the policy guidelines.

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