EX-99.1

EX-99.1 2 cofs-ex99_1.htm EX-99.1 EX-99.1

EXHIBIT 99.1

News Release

ChoiceOne Reports Third Quarter 2024 Results

Sparta, Michigan – October 23, 2024 – ChoiceOne Financial Services, Inc. ("ChoiceOne", NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended September 30, 2024.

Quarterly Highlights

•

ChoiceOne reported net income of $7,348,000 and $19,568,000 for the three and nine months ended September 30, 2024, compared to $5,122,000 and $15,968,000 for the same periods in 2023, representing growth of 43.5% and 22.6%, respectively. Net income adjusted for merger related expenses was $7,981,000 and $20,201,000 for the three and nine months ended September 30, 2024.

•

ChoiceOne entered into a definitive merger agreement with Fentura Financial, Inc. ("Fentura") on July 25, 2024. Fentura is the parent company of The State Bank, with $1.8 billion in assets as of June 30, 2024 and has 20 branches and a loan production office in the following counties of Michigan: Genesee, Ingham, Jackson, Livingston, Oakland, Saginaw, and Shiawassee.

•

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 for aggregate gross proceeds of approximately $34.5 million before deducting underwriting discounts and estimated offering expenses (the “Capital Raise”).

•

Diluted earnings per share were $0.85 and $2.46 in the three and nine months ended September 30, 2024, compared to $0.68 and $2.12 per share in the same periods in the prior year. Diluted earnings per share was negatively impacted by the sale of 1,380,000 shares of common stock in the Capital Raise. Diluted earnings per share adjusted for merger expenses was $0.93 and $2.54 in the three and nine months ended September 30, 2024.

•

GAAP Net interest margin in the third quarter of 2024 increased to 3.17%, compared to 2.95% in the second quarter of 2024, and 2.64% in the third quarter of 2023. GAAP net interest income was $20.2 million in the third quarter of 2024 compared to $16.2 million in the third quarter of 2023. Net interest income was aided by cash settlements from pay-fixed interest rate swaps which started paying in April 2024.

•

Core loans, which exclude held for sale loans and loans to other financial institutions, grew organically by $64.5 million or 18.4% on an annualized basis during the third quarter of 2024 and $179.4 million or 14.0% since September 30, 2023. Loan interest income increased $5.5 million in the third quarter of 2024 compared to the same period in 2023.

•

Asset quality remains strong with only 0.19% of nonperforming loans to total loans (excluding held for sale) as of September 30, 2024.

“I am very pleased with the results of the third quarter of 2024, which highlight the growth in core loans and deposits driven by the success of our experienced team. The proactive management of our balance sheet has also resulted in improvements in our net interest margin in the third quarter and positions us to manage changing market conditions. We remain committed to our communities, customers, and stakeholders, and sincerely appreciate the trust they place in us as their local financial partner," said Kelly Potes, Chief Executive Officer.

same periods in the prior year. Earnings per share was negatively impacted by the sale of 1,380,000 shares of common stock in the Capital Raise completed on July 26, 2024.

As of September 30, 2024, total assets were $2.7 billion, an increase of $151.8 million compared to September 30, 2023. The growth is primarily attributed to an increase in core loans of $179.4 million and loans to other financial institutions of $14.7 million. This growth was offset by a $16.0 million reduction in securities during the same time period. ChoiceOne has actively managed its balance sheet to support organic loan growth, strategically shifting from lower-yielding assets to higher-yielding loans. This is reflected in the loan growth observed.

Deposits, excluding brokered deposits, increased $102.1 million or an annualized 19.5% in the third quarter of 2024 and $117.6 million or 5.7% during the twelve months since September 30, 2023. The increase in deposits in the third quarter was driven by public funds including schools and townships which historically increase in the third quarter of each year due to the timing of tax collection. The increase in deposits in the twelve months ended September 30, 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, the Bank Term Funding Program (“BTFP”), and FHLB advances to ensure ample liquidity. At September 30, 2024, total available borrowing capacity secured by pledged assets was $780.6 million. ChoiceOne can increase its capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $863.3 million or 39.1% of deposits at September 30, 2024.

ChoiceOne's cost of deposits to average total deposits has declined since peaking in the first quarter of 2024 due to positive cash flow from pay-fixed interest rate swaps, hedged against deposits, decreasing deposit expenses. In addition, the Federal Reserve decreased the federal funds rate by 50 basis points in September 2024 and signaled potential further rate drops in the future. These factors led to a slight decline in the cost of deposits to average total deposits to an annualized 1.53% in the third quarter of 2024 compared to an annualized 1.56% in the second quarter of 2024 and an annualized 1.65% in the first quarter of 2024. Due to hedge instruments we have in place, our balance sheet is asset sensitive. If rates decline, we expect to see slight declines in deposit costs; however these declines will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the three and nine months ended September 30, 2024 increased $239,000 and $3.4 million compared to the same period in the prior year, due to increases in borrowing amounts and interest rates. Borrowings include $170 million from the BTFP and $40 million of FHLB borrowings at a weighted average fixed rate of 4.7%, with the earliest maturity in January 2025. Total cost of funds decreased to an annualized 1.87% in the third quarter of 2024 compared to an annualized 1.92% in the second quarter of 2024, and increased compared to an annualized 1.70% in the third quarter of 2023.

The provision for credit losses expense on loans was $425,000 in the third quarter of 2024, due in part to loan growth during the quarter. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.10% on September 30, 2024 compared to 1.14% on September 30, 2023. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.02% and nonperforming loans to total loans (excluding loans held for sale) of 0.19% as of September 30, 2024.

ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On September 30, 2024, ChoiceOne had pay-fixed interest rate swaps with a total notional value of $401.0 million, a weighted average coupon of 3.07%, a fair value of $4.4 million and an average remaining contract length of 7 to 8 years. These derivative instruments increase in value as long-term interest rates rise, which offsets the reduction in equity due to unrealized losses on securities available for sale. Included in the total is $200.0 million of forward starting pay-fixed, receive floating interest rate swaps used to hedge interest bearing liabilities. These forward starting swaps pay a fixed coupon of 2.75% while receiving SOFR. Settlements from these swaps amounted to $1.3 million for the third quarter of 2024 and were a contributing factor to the increase in net interest margin during the third quarter of 2024. Fully tax equivalent net interest margin excluding the swaps was 39 basis points lower than tax equivalent net interest margin reported for the third quarter of 2024. In addition to the pay-fixed interest rate swaps, ChoiceOne also employs back-to-back swaps on a commercial loans, with the impact reflected in interest income.

Shareholders’ equity totaled $247.7 million as of September 30, 2024, up from $181.2 million as of September 30, 2023, due in large part to the $34.5 million in aggregate gross proceeds (before deducting discounts and estimated offering expenses) received in the Capital Raise. The additional increase is due to retained earnings and an improvement in accumulated other compressive loss (AOCI) of $17.0 million compared to September 30, 2023. The improvement in AOCI, is due to both the shortening duration and maturing (paydowns) of the securities portfolio, offset by the change in unrealized gain of the pay-fixed swap derivatives. ChoiceOne Bank remains “well-capitalized” with a total risk-based capital ratio of 13.1% as of September 30, 2024, compared to 12.7% on September 30, 2023.

Noninterest income increased $1.2 million and $2.1 million in the three and nine months ended September 30, 2024, compared to the same periods in the prior year. The increase was largely due to an increase in customer service charges of $391,000 and $920,000 in the three and nine months ended September 30, 2024 compared to the same periods in 2023 and changes in the market value of equity securities in the three and nine months ended September 30, 2024, compared to the same periods in the prior year. Equity securities

include community bank stocks and CRA focused bond mutual funds. In addition, ChoiceOne recognized earnings on a bank owned life insurance death benefit claim in the amount of $196,000 during the first quarter of 2024.

Noninterest expense increased by $1.7 million or 12.3% and $2.1 million or 5.0% in the three and nine months ended September 30, 2024 compared to the same period in 2023. The increase in total noninterest expense was due in part to merger related expenses of $645,000 during the quarter compared to $0 in the prior year. Additionally, there was an increase to employee health insurance and other benefit costs, and an increase to FDIC insurance and other costs related to the inflationary environment. The year to date increase in costs were offset by a decline in occupancy and equipment related to two branch closures during the first quarter of 2024. Management continues to seek out ways to manage costs, but also recognizes the value of investing in innovation and attracting the best talent in our industry to compete effectively in our markets.

“I am very pleased with the results of the third quarter of 2024, showing core loan growth, an improving net interest margin and excellent credit metrics. In addition, we announced completion of the Capital Raise to supplement regulatory capital ratios, and the pending merger with Fentura and the State Bank, a highly respected community bank in Michigan. We are excited to welcome their customers, communities, and employees to the ChoiceOne team,” said Kelly Potes, Chief Executive Officer.

About ChoiceOne

ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank, Member FDIC. ChoiceOne Bank operates 35 offices in parts of Kent, Lapeer, Macomb, Muskegon, Newaygo, Ottawa, and St. Clair counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. For more information, please visit Investor Relations at ChoiceOne’s website at choiceone.bank.

Forward-Looking Statements

This news release contains forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “look forward,” “continue”, “future” and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of ChoiceOne or Fentura with respect to the planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the proposed transaction on the combined company’s future financial performance and the timing of the closing of the proposed transaction. These statements reflect current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions (“risk factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne does not undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Such risks, uncertainties and assumptions, include, among others, the following:

•

the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in a materially burdensome regulatory condition (as defined in the merger agreement));

•

the failure of Fentura to obtain shareholder approval, for ChoiceOne to obtain the shareholder approval, or for either party to satisfy any of the other closing conditions to the proposed transaction on a timely basis or at all;

•

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

•

the possibility that the anticipated benefits of the proposed transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where ChoiceOne and Fentura do business, or as a result of other unexpected factors or events;

•

the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;

•

diversion of management’s attention from ongoing business operations and opportunities;

•

potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; or

•

the outcome of any legal proceedings that may be instituted against ChoiceOne or Fentura.

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

Non-GAAP Financial Measures

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

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

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

For Further Information:

Adom Greenland

Executive Vice President & CFO

(616) 887 – 2334

IR@ChoiceOne.bank

Important Additional Information and Where to Find It

This communication is being made in respect of the proposed merger between ChoiceOne and Fentura. This material is not a solicitation of any vote or approval of the ChoiceOne or Fentura shareholders and is not a substitute for the proxy statement/prospectus or any other documents that ChoiceOne and Fentura may send to their respective shareholders in connection with the proposed transaction.

In connection with the proposed Merger, ChoiceOne has filed with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement and Prospectus of ChoiceOne and Fentura, as well as other relevant documents regarding the proposed Merger. A definitive Proxy Statement and Prospectus will be sent to ChoiceOne and Fentura shareholders when available. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND PROSPECTUS REGARDING THE PROPOSED MERGER WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

A free copy of the Proxy Statement and Prospectus, once available, as well as other filings containing information about ChoiceOne, Fentura, and the proposed transaction may be obtained at the SEC’s Internet site http://www.sec.gov. You will also be able to obtain these documents, free of charge, from ChoiceOne under the "Investor Relations" section of its website, www.choiceone.bank (which website is not incorporated herein by reference). In addition, investors and security holders may obtain free copies of the documents ChoiceOne has filed with the SEC by directing a request to ChoiceOne Financial Services, Inc., Attn: Adom Greenland, 109 E. Division Street, Sparta, Michigan 49345 or by phone at (616) 887-2334.

Participants in Solicitation

ChoiceOne, Fentura, and certain of their respective directors, executive officers and other members of management or employees may, under the SEC’s rules, be deemed to be participants in the solicitation of proxies from ChoiceOne and Fentura shareholders in respect of the proposed merger, which will be described in the Proxy Statement and Prospectus. Information about ChoiceOne’s directors and executive officers is available in its definitive proxy statement relating to its 2024 annual meeting of shareholders, which was filed with the SEC on April 11, 2024, and other documents filed by ChoiceOne with the SEC. Information about the directors and executive officers of Fentura and their ownership of Fentura common stock and those participants and other persons who may, under the SEC’s rules, be deemed participants in the proposed transaction may be obtained by reading the Proxy Statement and Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

Condensed Balance Sheets
(Unaudited)


(In thousands)	September 30, 2024			June 30, 2024			September 30, 2023
Cash and cash equivalents	$	145,938		$	101,002		$	144,673
Equity securities, at fair value		7,816			7,502			7,262
Securities Held to Maturity		391,954			392,699			414,743
Securities Available for Sale		497,552			491,670			490,804
Federal Home Loan Bank stock		4,449			4,449			4,449
Federal Reserve Bank stock		5,307			5,066			5,065
Loans held for sale		5,994			5,946			5,222
Loans to other financial institutions		38,492			36,569			23,763
Core loans		1,465,458			1,400,958			1,286,037
Total loans held for investment		1,503,950			1,437,527			1,309,800
Allowance for credit losses		(16,490	)		(16,152	)		(14,872	)
Loans, net of allowance for credit losses		1,487,460			1,421,375			1,294,928
Premises and equipment		27,135			27,370			29,628
Cash surrender value of life insurance policies		45,699			45,384			44,788
Goodwill		59,946			59,946			59,946
Core deposit intangible		1,250			1,448			2,057
Other assets		45,503			59,210			70,631

Total Assets	$	2,726,003		$	2,623,067		$	2,574,196

Noninterest-bearing deposits	$	521,055		$	517,137		$	531,962
Interest-bearing deposits		1,680,546			1,582,365			1,551,995
Brokered deposits		6,627			27,177			49,238
Borrowings		210,000			210,000			180,000
Subordinated debentures		35,691			35,630			35,446
Other liabilities		24,338			36,239			44,394

Total Liabilities		2,478,257			2,408,548			2,393,035

Common stock and paid-in capital, no par value; shares authorized: 15,000,000; shares outstanding: 8,959,664 at September 30, 2024, 7,573,618 at June 30, 2024, and 7,541,187 at September 30, 2023		206,427			173,984			173,187
Retained earnings		86,765			81,836			70,444
Accumulated other comprehensive income (loss), net		(45,446	)		(41,301	)		(62,470	)
Shareholders' Equity		247,746			214,519			181,161

Total Liabilities and Shareholders’ Equity	$	2,726,003		$	2,623,067		$	2,574,196

Condensed Statements of Income
(Unaudited)


	Three Months Ended					Nine Months Ended
(Dollars in thousands, except per share data)	September 30,					September 30,
	2024		2023			2024			2023
Interest income
Loans, including fees	$	23,252	$	17,774		$	66,009		$	48,625
Securities:
Taxable		5,563		5,346			16,382			15,637
Tax exempt		1,402		1,420			4,224			4,244
Other		1,473		1,764			3,451			2,512
Total interest income		31,690		26,304			90,066			71,018

Interest expense
Deposits		8,362		7,237			25,464			15,569
Advances from Federal Home Loan Bank		468		272			1,372			1,498
Other		2,612		2,569			8,137			4,622
Total interest expense		11,442		10,078			34,973			21,689

Net interest income		20,248		16,226			55,093			49,329
Provision for credit losses on loans		425		438			1,100			332
Provision for credit losses on unfunded commitments		-		(438	)		(675	)		(557	)
Net Provision for credit losses expense		425		-			425			(225	)
Net interest income after provision		19,823		16,226			54,668			49,554

Noninterest income
Customer service charges		2,773		2,382			7,840			6,920
Insurance and investment commissions		184		173			572			541
Gains on sales of loans		631		536			1,610			1,479
Net gains (losses) on sales of securities		-		(71	)		-			(71	)
Net gains (losses) on sales and write downs of other assets		191		13			203			149
Earnings on life insurance policies		315		278			1,115			810
Trust income		232		197			665			577
Change in market value of equity securities		277		(134	)		241			(456	)
Other		264		330			755			911
Total noninterest income		4,867		3,704			13,001			10,860

Noninterest expense
Salaries and benefits		8,372		8,038			24,467			23,958
Occupancy and equipment		1,475		1,427			4,414			4,577
Data processing		1,932		1,724			5,382			5,087
Professional fees		610		435			1,818			1,675
Supplies and postage		174		192			520			580
Advertising and promotional		168		269			517			573
Intangible amortization		198		247			604			752
FDIC insurance		390		270			1,155			790
Merger related expenses		645		-			645			-
Other		1,453		1,126			3,857			3,304
Total noninterest expense		15,417		13,728			43,379			41,296

Income before income tax		9,273		6,202			24,290			19,118
Income tax expense		1,925		1,080			4,722			3,150

Net income	$	7,348	$	5,122		$	19,568		$	15,968

Basic earnings per share	$	0.86	$	0.68		$	2.48		$	2.12
Diluted earnings per share	$	0.85	$	0.68		$	2.46		$	2.12
Dividends declared per share	$	0.27	$	0.26		$	0.81		$	0.78

Income Adjusted for Merger Expenses - Non-GAAP Reconciliation

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
(In Thousands, Except Per Share Data)
Net income	$	7,348	$	5,122	$	19,568	$	15,968

Merger related expenses net of tax		633		-		633		-
Adjusted net income	$	7,981	$	5,122	$	20,201	$	15,968

Weighted average number of shares		8,567,548		7,537,996		7,898,938		7,528,887
Diluted average shares outstanding		8,615,500		7,568,034		7,944,143		7,562,160
Adjusted basic earnings per share	$	0.94	$	0.68	$	2.56	$	2.12
Adjusted diluted earnings per share	$	0.93	$	0.68	$	2.54	$	2.12

Other Selected Financial Highlights

(Unaudited)


	Quarterly
Earnings	2024 3rd Qtr.		2024 2nd Qtr.		2024 1st Qtr.		2023 4th Qtr.		2023 3rd Qtr.
(in thousands except per share data)
Net interest income	$	20,248	$	18,371	$	16,474	$	16,555	$	16,226
Net provision expense		425		-		-		375		-
Noninterest income		4,867		4,083		4,051		4,046		3,704
Noninterest expense		15,417		14,278		13,684		13,778		13,728
Net income before federal income tax expense		9,273		8,176		6,841		6,449		6,202
Income tax expense		1,925		1,590		1,207		1,156		1,080
Net income		7,348		6,586		5,634		5,293		5,122
Basic earnings per share		0.86		0.87		0.75		0.70		0.68
Diluted earnings per share		0.85		0.87		0.74		0.70		0.68
Adjusted basic earnings per share		0.94		0.87		0.75		0.70		0.68
Adjusted diluted earnings per share		0.93		0.87		0.74		0.70		0.68


End of period balances	2024 3rd Qtr.		2024 2nd Qtr.		2024 1st Qtr.		2023 4th Qtr.		2023 3rd Qtr.
(in thousands)
Gross loans	$	1,509,944	$	1,443,473	$	1,424,625	$	1,415,363	$	1,315,022
Loans held for sale (1)		5,994		5,946		6,035		4,710		5,222
Loans to other financial institutions (2)		38,492		36,569		30,032		19,400		23,763
Core loans (gross loans excluding 1 and 2 above)		1,465,458		1,400,958		1,388,558		1,391,253		1,286,037
Allowance for credit losses		16,490		16,152		16,037		15,685		14,872
Securities available for sale		497,552		491,670		504,636		514,598		490,804
Securities held to maturity		391,954		392,699		397,981		407,959		414,743
Other interest-earning assets		116,643		84,484		100,175		39,411		130,178
Total earning assets (before allowance)		2,516,093		2,412,326		2,427,417		2,377,331		2,350,747
Total assets		2,726,003		2,623,067		2,670,699		2,576,706		2,574,196
Noninterest-bearing deposits		521,055		517,137		502,685		547,625		531,962
Interest-bearing deposits		1,680,546		1,582,365		1,641,193		1,550,985		1,551,995
Brokered deposits		6,627		27,177		41,970		23,445		49,238
Total deposits		2,208,228		2,126,679		2,185,848		2,122,055		2,133,195
Deposits excluding brokered		2,201,601		2,099,502		2,143,878		2,098,610		2,083,957
Total subordinated debt		35,691		35,630		35,568		35,507		35,446
Total borrowed funds		210,000		210,000		210,000		200,000		180,000
Other interest-bearing liabilities		4,956		22,378		21,512		8,060		32,204
Total interest-bearing liabilities		1,937,820		1,877,550		1,950,243		1,817,997		1,848,883
Shareholders' equity		247,746		214,519		206,756		195,634		181,161


Average Balances	2024 3rd Qtr.		2024 2nd Qtr.		2024 1st Qtr.		2023 4th Qtr.		2023 3rd Qtr.
(in thousands)
Loans	$	1,460,033	$	1,435,966	$	1,412,569	$	1,359,643	$	1,278,421
Securities		970,913		986,281		1,002,140		1,019,218		1,035,785
Other interest-earning assets		108,019		80,280		64,064		92,635		128,704
Total earning assets (before allowance)		2,538,965		2,502,527		2,478,773		2,471,496		2,442,910
Total assets		2,685,190		2,647,716		2,621,009		2,589,541		2,568,240
Noninterest-bearing deposits		519,511		516,308		506,175		546,778		540,497
Interest-bearing deposits		1,634,255		1,601,020		1,599,509		1,565,493		1,550,591
Brokered deposits		17,227		34,218		34,708		32,541		44,868
Total deposits		2,170,993		2,151,546		2,140,392		2,144,812		2,135,956
Total subordinated debt		35,658		35,596		35,535		35,474		35,413
Total borrowed funds		210,000		210,000		214,835		185,707		181,739
Other interest-bearing liabilities		11,756		26,426		18,399		25,729		20,480
Total interest-bearing liabilities		1,908,896		1,907,260		1,902,986		1,844,944		1,833,091
Shareholders' equity		237,875		210,742		200,177		187,099		181,219


Loan Breakout (in thousands)	2024 3rd Qtr.		2024 2nd Qtr.		2024 1st Qtr.		2023 4th Qtr.		2023 3rd Qtr.
Agricultural	$	49,147	$	45,274	$	41,950	$	49,210	$	43,290
Commercial and Industrial		229,232		224,031		231,222		229,915		222,357
Commercial Real Estate		862,773		804,213		794,705		786,921		709,960
Consumer		30,693		32,811		34,268		36,541		37,605
Construction Real Estate		14,555		18,751		17,890		20,936		16,477
Residential Real Estate		279,058		275,878		268,523		267,730		256,348
Loans to Other Financial Institutions		38,492		36,569		30,032		19,400		23,763
Gross Loans (excluding held for sale)	$	1,503,950	$	1,437,527	$	1,418,590	$	1,410,653	$	1,309,800

Allowance for credit losses		16,490		16,152		16,037		15,685		14,872

Net loans	$	1,487,460	$	1,421,375	$	1,402,553	$	1,394,968	$	1,294,928


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

Annualized return on average assets		1.09	%		0.99	%		0.86	%		0.82	%		0.80	%
Annualized return on average equity		12.36	%		12.50	%		11.26	%		11.32	%		11.31	%
Annualized return on average tangible common equity		16.29	%		17.22	%		15.81	%		16.40	%		16.55	%
Net interest margin (GAAP)		3.17	%		2.95	%		2.67	%		2.66	%		2.64	%
Net interest margin (fully tax-equivalent)		3.23	%		3.01	%		2.74	%		2.72	%		2.70	%
Efficiency ratio		60.80	%		61.47	%		64.55	%		65.31	%		65.74	%
Annualized cost of funds		1.87	%		1.92	%		2.00	%		1.91	%		1.70	%
Annualized cost of deposits		1.53	%		1.56	%		1.65	%		1.57	%		1.36	%
Cost of interest bearing liabilities		2.38	%		2.44	%		2.53	%		2.45	%		2.18	%
Shareholders' equity to total assets		9.09	%		8.18	%		7.74	%		7.59	%		7.04	%
Tangible common equity to tangible assets		7.00	%		5.98	%		5.56	%		5.32	%		4.74	%
Annualized noninterest expense to average assets		2.30	%		2.16	%		2.09	%		2.13	%		2.14	%
Loan to deposit		68.38	%		67.87	%		65.17	%		66.70	%		61.65	%
Full-time equivalent employees		371			368			367			369			376


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

Total capital (to risk weighted assets)		15.0	%		13.5	%		13.3	%		13.0	%		13.2	%
Common equity Tier 1 capital (to risk weighted assets)		12.3	%		10.7	%		10.5	%		10.3	%		10.4	%
Tier 1 capital (to risk weighted assets)		12.5	%		10.9	%		10.7	%		10.5	%		10.7	%
Tier 1 capital (to average assets)		9.0	%		7.7	%		7.6	%		7.5	%		7.4	%
Commercial Real Estate Loans as a percentage of total capital		193.3	%		205.1	%		206.8	%		213.6	%		186.3	%


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

Total capital (to risk weighted assets)		13.1	%		13.2	%		12.6	%		12.4	%		12.7	%
Common equity Tier 1 capital (to risk weighted assets)		12.3	%		12.5	%		11.8	%		11.8	%		12.0	%
Tier 1 capital (to risk weighted assets)		12.3	%		12.5	%		11.8	%		11.8	%		12.0	%
Tier 1 capital (to average assets)		8.9	%		8.8	%		8.3	%		8.4	%		8.3	%
Commercial Real Estate Loans as a percentage of total capital		221.8	%		208.9	%		218.2	%		222.9	%		194.4	%


Asset Quality	2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.
(in thousands)
Net loan charge-offs (recoveries)	$	87		$	157		$	51		$	120		$	148
Annualized net loan charge-offs (recoveries) to average loans		0.02	%		0.04	%		0.01	%		0.04	%		0.05	%
Allowance for credit losses	$	16,490		$	16,152		$	16,037		$	15,685		$	14,872
Unfunded commitment liability	$	1,485		$	1,485		$	1,757		$	2,160		$	2,718
Allowance to loans (excludes held for sale)		1.10	%		1.12	%		1.13	%		1.11	%		1.14	%
Total funds reserved to pay for loans (includes liability for unfunded commitments and excludes held for sale)		1.20	%		1.23	%		1.25	%		1.27	%		1.34	%
Non-Accruing loans	$	2,355		$	2,086		$	1,715		$	1,723		$	1,670
Nonperforming loans (includes OREO)	$	2,884		$	2,358		$	1,837		$	1,845		$	1,792
Nonperforming loans to total loans (excludes held for sale)		0.19	%		0.16	%		0.13	%		0.13	%		0.14	%
Nonperforming assets to total assets		0.11	%		0.09	%		0.07	%		0.07	%		0.07	%


NON-GAAP Reconciliation	2024 3rd Qtr.			2024 2nd Qtr.			2024 1st Qtr.			2023 4th Qtr.			2023 3rd Qtr.
Net interest income (tax-equivalent basis) (Non-GAAP)	$	20,631		$	18,756		$	16,871		$	16,945		$	16,609
Net interest margin (fully tax-equivalent)		3.23	%		3.01	%		2.74	%		2.72	%		2.70	%

Reconciliation to Reported Net Interest Income

Net interest income (tax-equivalent basis) (Non-GAAP)	$	20,631		$	18,756		$	16,871		$	16,945		$	16,609

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

Net interest income (GAAP)	$	20,248		$	18,371		$	16,474		$	16,555		$	16,226
Net interest margin (GAAP)		3.17	%		2.95	%		2.67	%		2.66	%		2.64	%


	Three Months Ended September 30,
	2024								2023
(Dollars in thousands)	Average								Average
	Balance		Interest			Rate			Balance		Interest			Rate
Assets:
Loans (1)(3)(4)(5)	$	1,460,033	$	23,262			6.34	%	$	1,278,421	$	17,779			5.52	%
Taxable securities (2)		681,578		5,563			3.25			741,287		5,345			2.86
Nontaxable securities (1)		289,335		1,775			2.44			294,498		1,797			2.42
Other		108,019		1,473			5.43			128,704		1,766			5.44
Interest-earning assets		2,538,965		32,073			5.03			2,442,910		26,687			4.33
Noninterest-earning assets		146,225								125,330
Total assets	$	2,685,190							$	2,568,240

Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	916,459	$	3,111			1.35	%	$	856,485	$	2,885			1.34	%
Savings deposits		329,613		728			0.88			357,687		462			0.51
Certificates of deposit		388,183		4,296			4.40			336,419		3,308			3.90
Brokered deposit		17,227		227			5.25			44,868		582			5.15
Borrowings		210,000		2,508			4.75			181,739		2,171			4.74
Subordinated debentures		35,658		413			4.61			35,413		413			4.62
Other		11,756		159			5.37			20,480		257			4.97
Interest-bearing liabilities		1,908,896		11,442			2.38			1,833,091		10,078			2.18
Demand deposits		519,511								540,497
Other noninterest-bearing liabilities		18,908								13,433
Total liabilities		2,447,315								2,387,021
Shareholders' equity		237,875								181,219
Total liabilities and shareholders' equity	$	2,685,190							$	2,568,240

Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	20,631							$	16,609

Net interest margin (tax-equivalent basis) (Non-GAAP) (1)							3.23	%							2.70	%

Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)			$	20,631							$	16,609
Adjustment for taxable equivalent interest				(383	)							(383	)
Net interest income (GAAP)			$	20,248							$	16,226
Net interest margin (GAAP)							3.17	%							2.64	%

(1)

Adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets. The adjustment uses an incremental tax rate of 21%. The presentation of these measures on a tax-equivalent basis is not in accordance with GAAP, but is customary in the banking industry. These non-GAAP measures ensure comparability with respect to both taxable and tax-exempt loans and securities.

(2)

Taxable securities include dividend income from Federal Home Loan Bank and Federal Reserve Bank stock.

(3)

Loans include both loans to other financial institutions and loans held for sale.

(4)

Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $2.2 million and $1.9 million in the third quarter of 2024 and 2023, respectively.

(5)

Interest on loans included net origination fees and accretion income. Accretion income was $275,000 and $362,000 in the third quarter of 2024 and 2023, respectively.