ChoiceOne Financial Services(COFS) - 2024 Q3 - Quarterly Report

Financial Performance - ChoiceOne reported net income of $7,348,000 for Q3 2024, a 43.5% increase from $5,122,000 in Q3 2023, and $19,568,000 for the nine months ended September 30, 2024, up 22.5% from $15,968,000 in the same period last year [149]. - The annualized return on average assets was 1.09% for Q3 2024, compared to 0.80% for Q3 2023, while the return on average shareholders' equity was 12.36%, up from 11.31% in the same period last year [153]. - Adjusted diluted earnings per share were $0.93 for Q3 2024, compared to $0.68 in Q3 2023, reflecting the impact of the common stock offering [149]. - Noninterest income increased by $2.1 million for the nine months ended September 30, 2024, primarily due to an increase in customer service charges [181]. - Noninterest expense increased by $2.1 million or 5.0% for the nine months ended September 30, 2024, compared to the same period in 2023 [183]. Assets and Liabilities - Total assets increased to $2.7 billion as of September 30, 2024, reflecting a growth of $149.3 million compared to December 31, 2023, primarily due to a $74.2 million increase in core loans [150]. - Total liabilities rose to $2,650,444,000, up from $2,461,358,000, indicating a growth of approximately 11.6% [160]. - Shareholders' equity increased to $237,875,000 from $181,219,000, reflecting a growth of 31.2% [157]. - Total available for sale securities decreased to $497.6 million as of September 30, 2024, from $514.6 million on December 31, 2023 [187]. - Uninsured deposits amounted to $863.3 million or 39.1% of total deposits as of September 30, 2024, up from $769.7 million or 36.3% at the end of 2023 [199]. Loans and Interest Income - Average loans increased to $1,436,277,000 with an interest income of $66,051,000, resulting in an interest rate of 6.14% [159]. - Net interest income (tax-equivalent basis) increased to $56,258,000 from $50,487,000, representing a growth of 14% year-over-year [159]. - Net interest margin (tax-equivalent basis) improved to 3.00% compared to 2.87% in the previous year [159]. - Average loan balances increased to $1.46 billion in Q3 2024, up from $1.36 billion in Q4 2023 and $1.28 billion in Q3 2023, with core loans growing by $74.2 million or 7.1% on an annualized basis [192]. - Tax-equivalent net interest income increased by $5.8 million for the nine months ended September 30, 2024, compared to the same period in 2023 [166]. Deposits and Funding - Deposits, excluding brokered deposits, rose by $102.1 million or an annualized 19.5% in Q3 2024, driven by public funds, and increased by $103.0 million or 4.9% compared to December 31, 2023 [151]. - The cost of deposits to average total deposits increased to an annualized 1.53% in Q3 2024 from 1.36% in Q3 2023, influenced by the Federal Reserve's rate changes [152]. - Total cost of funds increased to an annualized 1.87% in Q3 2024, compared to 1.70% in Q3 2023 [201]. - ChoiceOne experienced $86.2 million in deposit growth in the first nine months of 2024, compared to a decrease of $15.2 million in the same period in 2023 [210]. Mergers and Capital - ChoiceOne completed a public offering of 1,380,000 shares at $25.00 per share, raising approximately $34.5 million to support regulatory capital ratios and the merger with Fentura Financial [146]. - The merger with Fentura Financial is expected to create the third largest publicly traded bank in Michigan with approximately $4.3 billion in total assets and 56 offices, anticipated to close in Q1 2025 [148]. - ChoiceOne's total capital to risk-weighted assets ratio was 15.0% as of September 30, 2024, exceeding the minimum required for capital adequacy purposes of 8.0% [206]. - Common equity Tier 1 capital to risk-weighted assets for ChoiceOne Bank is 212.3 million, or 11.8% [208]. Credit Quality - The provision for credit losses on loans was $1.1 million during the first nine months of 2024, compared to $332,000 in the same period in the prior year [179]. - Nonperforming loans increased to $2.9 million as of September 30, 2024, compared to $1.8 million as of September 30, 2023 [177]. Cash Flow and Liquidity - Net cash provided by operating activities decreased to $25.0 million for the nine months ended September 30, 2024, down from $57.3 million in the same period in 2023 [210]. - Net cash used in investing activities was $56.3 million for the nine months ended September 30, 2024, compared to $96.1 million in the same period in 2023 [210]. - Outstanding borrowings from the BTFP amounted to $170.0 million as of September 30, 2024 [212]. - Total available borrowing capacity from the FHLB and the Federal Reserve Bank was $780.6 million as of September 30, 2024 [212]. - Management believes that capital levels as of September 30, 2024, are adequate for the foreseeable future [208].