ChoiceOne Financial Services(COFS) - 2025 Q1 - Quarterly Report

Financial Performance - ChoiceOne reported a net loss of $13.9 million for Q1 2025, compared to a net income of $5.6 million in Q1 2024, resulting in a diluted loss per share of $1.29[152] - The annualized return on average assets and average shareholders' equity was (1.68)% and (18.39)%, respectively, for Q1 2025, compared to 0.86% and 11.26% in Q1 2024[160] - Income tax benefit was $3.7 million in the first quarter of 2025, compared to an expense of $1.2 million in the same period of 2024, with an effective tax rate of 21.0%[184] - Net cash used in operating activities was $6.5 million for Q1 2025, a significant decline from $15.3 million net cash provided in Q1 2024, driven by a net loss of $13.9 million[212] Assets and Liabilities - Total assets increased to $4.3 billion as of March 31, 2025, up $1.6 billion from the previous year, primarily due to the merger[154] - Total assets as of March 31, 2025, were $4.3 billion, with net loans of $2.9 billion and total deposits of $3.6 billion[187] - Shareholders' equity increased to $426.9 million as of March 31, 2025, from $206.8 million on March 31, 2024, primarily due to a merger that issued 6,070,836 shares valued at $193.0 million[210] Loans and Deposits - Core loans grew by $40.1 million or 10.6% on an annualized basis in Q1 2025, and by $157.3 million or 11.3% year-over-year[155] - Deposits, excluding brokered deposits, increased by $1.4 billion as of March 31, 2025, driven by the merger and organic growth[156] - The company has total outstanding loans to the automotive sector of $99.3 million, representing 3.4% of gross loans[150] - Average loans increased by $607.1 million in Q1 2025, attributed to both organic growth and the impact of the Merger[170] - Core loans grew by $1.4 billion through acquisition in the first quarter of 2025, with organic growth of $40.1 million or 10.6% on an annualized basis[197] - Uninsured deposits totaled $1.2 billion or 33.9% of total deposits as of March 31, 2025, down from 37.0% at December 31, 2024[206] Interest Income and Expense - Interest income increased by $11.9 million in Q1 2025 compared to Q1 2024, including $2.8 million from purchased loan interest accretion related to the merger[155] - Tax-equivalent net interest income increased by $9.8 million in Q1 2025 compared to Q1 2024, driven by loan growth and higher interest rates[168] - Interest income from loans rose by $11.9 million in Q1 2025, with an average rate increase of 64 basis points compared to Q1 2024[170] - Interest expense increased by $1.7 million in Q1 2025, primarily due to a $321.2 million increase in average balances of interest-bearing demand and savings deposits[172] - The cost of deposits to average total deposits was an annualized 1.59% in Q1 2025, down from 1.65% in Q1 2024[158] Credit Losses and Nonperforming Assets - The provision for credit losses on loans was $13.1 million in Q1 2025, mainly due to $12.0 million related to the acquisition of non-PCD loans in the Merger[177] - Nonperforming assets rose by $15.1 million to $19.3 million at March 31, 2025, largely due to non-accrual loans and OREO acquired in the Merger[178] - The allowance for credit losses (ACL) was 1.18% of total loans at March 31, 2025, up from 1.07% as of December 31, 2024[178] - Net charge-offs for the first three months of 2025 were $72,000, up from $51,000 in the same period of 2024, with annualized net charge-offs as a percentage of average loans remaining at 0.01% for both years[179][180] Noninterest Income and Expense - Noninterest income increased by $871,000 for the three months ended March 31, 2025, driven by higher mortgage servicing rights income and trust income from the Merger[181] - Noninterest expense rose by $22.0 million in the first quarter of 2025, primarily due to $17.2 million in merger-related expenses[183] Capital and Borrowing - Total capital to risk-weighted assets ratio for ChoiceOne Bank was 11.9% as of March 31, 2025, down from 12.6% on March 31, 2024, attributed to the merger impact[211] - ChoiceOne had $130.0 million in outstanding borrowings from the FHLB at a weighted average fixed rate of 4.03% as of March 31, 2025[214] - Total available borrowing capacity from the FHLB and the Federal Reserve Bank was $945.3 million as of March 31, 2025[214] Cash Flow - Net cash provided by investing activities surged to $257.0 million in Q1 2025, compared to $7.6 million net cash used in the same period in 2024, due to the sale of $78.9 million in securities from the merger[212] - Net cash provided by financing activities was $207.8 million for Q1 2025, up from $71.7 million in Q1 2024, with a decrease in borrowing by $207.5 million compared to an increase of $10.0 million in the prior year[212]