ChoiceOne Financial Services(COFS) - 2025 Q3 - Quarterly Report

Financial Performance - ChoiceOne reported net income of $14.7 million for the three months ended September 30, 2025, compared to $7.3 million for the same period in the prior year, representing a 100.5% increase [154]. - The annualized return on average assets was 1.36% for the third quarter of 2025, up from 1.09% in the same period in 2024 [163]. - Cash dividends declared in the third quarter of 2025 were $4.2 million or $0.28 per share, compared to $2.4 million or $0.27 per share in the same period in 2024 [164]. - Noninterest income increased by $2.3 million and $5.6 million for the three and nine months ended September 30, 2025, compared to the same periods in the prior year [189]. - Income tax expense was $3.6 million and $3.1 million for the three and nine months ended September 30, 2025, with an effective tax rate of 19.9% and 17.8% respectively [192]. Assets and Liabilities - Total assets increased to $4.3 billion as of September 30, 2025, an increase of $1.6 billion compared to the same date in 2024, primarily due to the merger [157]. - Total liabilities stood at $3,869,800, slightly down from $3,870,900 in the previous quarter, a decrease of 0.03% [170]. - As of September 30, 2025, total assets were $4.3 billion, net loans were $2.9 billion, and total deposits were $3.5 billion [195]. - Total available-for-sale securities increased to $544.0 million from $479.1 million as of December 31, 2024, driven by securities acquired through the Merger [197]. Loans and Deposits - Core loans grew by $1.4 billion due to the merger on March 1, 2025, while organic growth was $65.3 million or 4.5% over the twelve months ended September 30, 2025 [158]. - Deposits, excluding brokered deposits, increased by $1.3 billion as of September 30, 2025, compared to the same date in 2024, largely as a result of the merger [159]. - Average loans increased by $1.5 billion and $1.2 billion for the three and nine months ended September 30, 2025, respectively, driven by organic growth and the impact of the Merger [178]. - Nonperforming loans to total loans (excluding loans held for sale) were 0.69% as of September 30, 2025, with 0.39% attributed to PCD loans acquired through the Merger [188]. Interest Income and Expenses - Interest income for the three months ended September 30, 2025, increased by $23.9 million compared to the same period in 2024 [158]. - Total interest expense increased by $5.7 million and $13.4 million for the three and nine months ended September 30, 2025, respectively, primarily due to a $1.2 billion increase in interest-bearing liabilities from the Merger [180]. - Loan interest income increased by $23.9 million in the third quarter of 2025 compared to the same period in 2024 [205]. Capital and Equity - Shareholders' equity rose to $449.6 million as of September 30, 2025, up from $260.8 million on December 31, 2024, primarily driven by the Merger [214]. - As of September 30, 2025, ChoiceOne Financial Services Inc. reported total capital to risk-weighted assets at $418.645 million, representing a ratio of 13.0%, exceeding the minimum required ratio of 8.0% [216]. - Common equity Tier 1 capital to risk-weighted assets for ChoiceOne Financial Services Inc. was $333.388 million, with a ratio of 10.3%, above the minimum requirement of 4.5% [216]. Cash Flow - Net cash provided by operating activities for the nine months ended September 30, 2025, was $17.8 million, a decrease from $24.6 million in the same period in 2024, primarily due to a $15.1 million decrease in other liabilities [217]. - Net cash provided by investing activities increased to $224.9 million for the nine months ended September 30, 2025, compared to a net cash used of $56.3 million in the same period in 2024, driven by the sale of $78.9 million in securities from the Merger with Fentura [217]. - Net cash used in financing activities was $240.5 million for the nine months ended September 30, 2025, compared to $122.2 million provided in the same period in the prior year, reflecting a decrease in borrowing by $147.2 million [217]. Risk Management - ChoiceOne entered into $30.4 million in amortizing pay fix swaps during the third quarter of 2025 to hedge interest rate risk [161]. - The ratio of the allowance for credit losses to total loans was 1.19% on September 30, 2025, compared to 1.07% on December 31, 2024 [162]. - The provision for credit losses on loans was $200,000 and $14.0 million for the three and nine months ended September 30, 2025, respectively [186]. - Nonperforming assets increased by $15.8 million to $19.9 million at September 30, 2025, largely due to non-accrual loans and OREO acquired in the Merger [187]. Operational Metrics - The cost of deposits to average total deposits increased by 4 basis points to 1.57% for the three months ended September 30, 2025 [160]. - The annualized cost of funds decreased by 10 basis points from 1.87% to 1.77% in the three months ended September 30, 2025, compared to the same period in the prior year [181]. - The average rate paid on interest-bearing demand deposits and savings deposits increased by 30 basis points and 20 basis points for the three and nine months ended September 30, 2025, respectively [180]. - Noninterest expense increased by $10.8 million and $44.0 million for the three and nine months ended September 30, 2025, largely due to merger-related expenses of $17.4 million [191].