ChoiceOne Financial Services(US:COFS)2026-03-13 11:31Financial Performance - For the year ended December 31, 2025, the Company recognized consolidated net income of $28.2 million, with interest and fees on loans accounting for 76% of total revenues[20]. - ChoiceOne reported net income of $28.176 million for the year ended December 31, 2025, compared to $26.727 million for the same period in 2024, reflecting an increase of 5.4%[125]. - The Company’s financial performance could be negatively impacted by various factors, including changes in market conditions and regulatory actions[90]. - Basic earnings per share for 2025 was $2.02, down from $3.27 in 2024, while diluted earnings per share was $2.01 compared to $3.25 in the previous year[189]. - Return on assets decreased to 0.69% in 2025 from 1.00% in 2024, indicating a decline in profitability[59]. - Return on equity fell to 7.04% in 2025 compared to 11.80% in 2024, reflecting reduced earnings relative to shareholder equity[59]. - Adjusted net income (Non-GAAP) was $51,524,000 for the year ended December 31, 2025, compared to $27,733,000 for 2024, reflecting a significant increase[189]. - Return on average assets (ROAA) decreased to 0.69% in 2025 from 1.00% in 2024, while adjusted ROAA (Non-GAAP) improved to 1.26% from 1.04%[189]. - Return on average equity (ROAE) fell to 7.04% in 2025 from 11.80% in 2024, but adjusted ROAE (Non-GAAP) rose to 12.87% from 12.24%[189]. Assets and Liabilities - As of December 31, 2025, the Company had consolidated total assets of $4.4 billion, net loans of $3.0 billion, total deposits of $3.5 billion, and total shareholders' equity of $465.4 million[20]. - Total assets increased to $4.4 billion as of December 31, 2025, up $1.7 billion from December 31, 2024, primarily due to the merger with Fentura Financial, Inc.[126]. - The average assets increased to $4,079,074,000 in 2025 from $2,668,556,000 in 2024, indicating substantial growth in the asset base[189]. - The total risk-based capital ratio was 12.5% as of December 31, 2025, compared to 12.7% in 2024, indicating a stable capital position[176]. - The total amount of borrowings was $264,788,000, with $20,000,000 maturing within 3-12 months[215]. Loans and Credit Quality - The total loan portfolio amounted to $3.02 billion, with $402.17 million maturing in one year or less[49]. - The principal source of revenue for the Company is interest and fees on loans, which accounted for 76%, 64%, and 60% of total revenues in 2025, 2024, and 2023, respectively[20]. - The allowance for credit losses at the end of 2025 was $35.6 million, up from $16.6 million at the end of 2024, with the allowance as a percentage of total loans at 1.18%[149]. - Nonaccrual loans amounted to $27,058 thousand in 2025, with a nonaccrual rate of 0.90% across all loan categories[52]. - Net charge-offs during the year ended December 31, 2025, totaled $(1,039) thousand, reflecting increased credit losses[52]. - The allowance for loan losses increased to $35,550 thousand in 2025 from $16,552 thousand in 2024, reflecting a significant rise in credit loss provisions[55]. - Nonperforming loans increased by $23.4 million to $29.6 million as of December 31, 2025, with 73.2% acquired during the Merger[171]. Deposits - Total deposits reached $3,600.0 million as of December 31, 2025, up from $2,214.1 million in 2024, a growth of 62.4%[173]. - Average total deposits reached $3,383,348 thousand in 2025, with an average interest rate of 1.58%[56]. - Core deposits constituted $2.0 billion, representing 55.0% of total deposits as of December 31, 2025[58]. - The total amount of uninsured time deposits was $321,962 thousand, with 33.2% of total deposits exceeding FDIC insurance limits[57]. Mergers and Acquisitions - The Company completed the merger of Fentura Financial, Inc. on March 1, 2025, with the Company surviving the merger[17]. - Core loans grew by $86.1 million or 5.7% organically during the twelve months ended December 31, 2025, and increased by $1.4 billion due to the merger[127]. - Noninterest income rose by $6.7 million for the year ended December 31, 2025, driven by higher interchange income and trust income from the merger[130]. - Noninterest expense increased by $54 million for the year ended December 31, 2025, largely due to merger-related expenses of $17.4 million[131]. Risk Management - The Company is subject to liquidity risk, which could adversely affect its ability to fund obligations and capitalize on growth opportunities[70]. - The Company may need to raise additional capital to support its current level of assets or growth, which depends on market conditions and its financial performance[79]. - The Company faces risks associated with future mergers and acquisitions, which could disrupt business and dilute shareholder value[64]. - The Company relies heavily on its management and key personnel, and the loss of any of them may adversely affect its operations[76]. - The Company relies heavily on information systems for business operations, and any security breach could materially adversely affect its financial condition and results of operations[81]. - Cybersecurity incidents could lead to the loss of critical information and disrupt business operations, potentially resulting in reputational damage and increased costs[82]. - The Company has established a comprehensive cybersecurity risk management program overseen by the Information Technology Committee[105]. Securities and Investments - As of December 31, 2025, the total fair value of available for sale securities was $554.42 million, with $263.44 million maturing within 5 years[46]. - The total amortized cost of held to maturity securities was $385.19 million, with $165.80 million maturing within 5 years[47]. - The total debt securities available for sale included $327.37 million in various categories, with mortgage-backed securities valued at $227.05 million[46]. - The Company had $90.4 million in unrealized losses on its investment securities as of December 31, 2025, including $52.8 million in unrealized losses on available for sale securities[71]. - The average balance of total securities increased by $16.2 million in 2025, primarily due to the purchase of $40.6 million in agency mortgage-backed securities[141]. Interest Rates and Derivatives - The Company holds pay fixed, receive variable swaps with a notional value of $230.4 million, impacting the interest earned on securities[46]. - ChoiceOne holds interest rate derivatives with a total notional value of $380.4 million as of December 31, 2025, to manage interest rate risk[163]. - The average rate paid on interest-bearing demand deposits and savings deposits increased by 21 basis points in 2025 compared to the prior year[142]. - The cost of funds decreased by 11 basis points from 1.92% to 1.81% in 2025 compared to the prior year, primarily due to a decrease in higher cost local and brokered CDs[144]. Operational Highlights - The Bank operates 47 full-service offices, one drive-up office, five loan production offices, and a wealth management office in Michigan[19]. - The Company employed 598 employees as of February 28, 2026, with 505 being full-time employees[41]. - The Company organized 109 Technologies, LLC as a wholly owned subsidiary on July 18, 2023, to own intellectual property for a fintech product[17]. - ChoiceOne plans to open a full-service branch and lending office in Troy, Michigan, later in 2026 to support growth in an attractive market[131].