Accessibility StatementSkip Navigation SPARTA, Mich., Oct. 24, 2025 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ("ChoiceOne", NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended September 30, 2025. Significant items impacting comparable first nine month period of 2024 and 2025 results include the following: Highlights "ChoiceOne continues to deliver exceptional results, driven by the strength of our strategic merger with Fentura and a focus on servi ...

Financial Data and Key Metrics Changes - For Q3 2025, the company reported net earnings of $52.6 million or $0.38 per share, an increase from $50.6 million or $0.37 per share in Q2 2025 and $51.2 million or $0.37 per share in Q3 2024 [4][5] - The return on average tangible common equity was 14.11% and return on average assets was 1.35% for Q3 2025 [4] - Pre-tax pre-provision income increased to $70 million, up 2% from Q2 2025 and 3.5% from Q3 2024 [5] Business Line Data and Key Metrics Changes - Net interest income for Q3 2025 was $115.6 million, compared to $111.6 million in Q2 2025 and $113.6 million in Q3 2024 [13] - Noninterest income was $13 million in Q3 2025, down $1.7 million from Q2 2025, but increased by $260,000 when excluding a legal settlement and loss on sale of AFS [7] - Total loans increased by $112 million or 5% annualized from Q2 2025, with growth in nearly all loan categories [9][11] Market Data and Key Metrics Changes - Total deposits and customer repurchase agreements reached $12.6 billion, a $170 million increase from Q2 2025 and $108 million higher than Q3 2024 [8] - Noninterest-bearing deposits grew by $108 million compared to Q3 2024, while interest-bearing non-maturity deposits and customer repos increased by $100 million [9] - The cost of deposits and repos was 90 basis points for Q3 2025, compared to 87 basis points in Q2 2025 and 101 basis points in Q3 2024 [9] Company Strategy and Development Direction - The company is focused on banking small to medium-sized businesses and their owners through all economic cycles, maintaining a consistent performance over 48 years [49] - A new de novo office is being opened in the Temecula-Murrieta area, with a team of four bankers hired from City National Bank [25] - The company continues to invest in technology infrastructure and automation, with a notable increase in software expenses [20] Management's Comments on Operating Environment and Future Outlook - The economic forecast indicates lower GDP growth and a slightly lower unemployment rate, with real GDP expected to remain below 1.5% until the end of 2027 [15] - Management expressed confidence in maintaining low single-digit loan growth for the year, despite competitive pressures [28] - The company plans to continue matching deposit rate decreases with Fed funds rate cuts [23] Other Important Information - The allowance for credit loss was $79 million at September 30, 2025, or 0.94% of gross loans, reflecting a slight increase from the previous quarter [15] - The unrealized loss on AFS securities decreased by $31.6 million from June 30, 2025, to September 30, 2025 [16] - Shareholders' equity increased to $2.28 billion, with a tangible common equity ratio of 10.1% [18] Q&A Session Summary Question: Interest-bearing deposit costs and beta cycle - Management noted that the recent rate cut impacted the beta cycle, and they plan to reduce rates in line with Fed actions [23][24] Question: M&A updates - There is ongoing dialogue regarding M&A, but no imminent actions; a new office is being opened to enhance market presence [25] Question: Loan growth expectations - Management expects to maintain low single-digit growth, with strong pipelines and opportunities despite seasonal factors [28][29] Question: Pricing competition in loans - The company is willing to compete on pricing for quality relationships, but is cautious about maintaining credit quality [30] Question: Dairy and livestock line utilization - New relationships contributed to increased utilization, and management expects normal seasonal increases in the fourth quarter [33] Question: Interest rate swaps outlook - Management acknowledged potential negative impacts on net interest income from interest rate swaps but plans to maintain the current strategy [34] Question: Deposit gathering competition - Deposit gathering remains strong, with a focus on operating companies rather than high-rate products [38] Question: Cash balances and deployment - The company is preparing for seasonal increases in dairy and evaluating bond market opportunities for cash deployment [44] Question: Expense management heading into 2026 - Management plans to continue closely managing expenses, with a focus on technology investments [46]

Financial Data and Key Metrics Changes - The reported net income available to common shareholders for Q3 2025 was $89.2 million, with earnings per common share at $0.63. Adjusted operating earnings were $119.7 million or $0.84 per common share, resulting in an adjusted operating return on tangible common equity of 20.1% and an adjusted operating return on assets of 1.3% [18][19] - The total allowance for credit losses decreased to $320 million, down from $342.4 million in the previous quarter, with the total allowance as a percentage of total loans held for investment decreasing to 117 basis points from 125 basis points [19] - The tax equivalent net interest income was $323.6 million, a decrease of $2.1 million from the previous quarter, while the net interest margin remained steady at 3.83% [20][21] Business Line Data and Key Metrics Changes - Quarterly loan growth was approximately 0.5% annualized, with average loan growth quarter over quarter at 4.3% annualized. Non-interest bearing deposits grew by approximately 4% annualized in Q3 [9][10] - Non-interest income decreased by $29.7 million to $51.8 million, primarily due to a loss related to the final CRE loan sale settlement [21] - Reported non-interest expense decreased by $41.3 million to $238.4 million, driven by a decline in merger-related costs associated with the Sandy Spring acquisition [22] Market Data and Key Metrics Changes - The Greater Washington DC region showed resilience despite concerns over government employment reductions and the government shutdown, with unemployment rates in Maryland and Virginia at 3.6%, below the national average of 4.3% [14][16] - The company maintains a diversified portfolio, with approximately 23% of total loans in the Washington Metro Area, and the remaining 77% across broader markets [14][16] Company Strategy and Development Direction - The company is focused on delivering sustainable growth and top-tier financial performance, leveraging strategic advantages from the Sandy Spring acquisition while pursuing organic growth opportunities in Virginia and North Carolina [8][17] - The integration of Sandy Spring is progressing smoothly, with expectations to achieve cost savings targets and enhanced earnings power by 2026 [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's asset quality, with non-performing assets at 0.49% of loans held for investment and a forecast for the full year 2025 net charge-off ratio to remain between 15 and 20 basis points [12][13] - The company anticipates mid-single-digit loan growth for 2026, with potential for high single-digit growth in a more normalized environment [31][32] Other Important Information - The company paid a common stock dividend of $0.34 per share, an increase of 6.3% from the previous year's third quarter dividend [24] - The financial outlook for year-end loan balances is projected to be between $27.7 billion and $28 billion, with deposit balances expected between $30.8 billion and $31 billion [25] Q&A Session Summary Question: What are the expectations for loan growth in 2026? - Management expects mid-single-digit loan growth for 2026, with potential for high single-digit growth in a normalized environment [31][32] Question: What is the outlook for expenses and efficiency ratios? - The efficiency ratio is expected to be in the mid-40s for 2026, with a focus on maintaining a flat expense base while expanding in North Carolina [36][37] Question: How is the company addressing competition in the market? - The company is experiencing increased competition, particularly from traditional banks returning to the market, but remains committed to consistent capital provision [90][92] Question: What are the revenue synergies expected from the Sandy Spring acquisition? - The acquisition allows for expanded lending capabilities and additional services such as interest rate hedging, with a focus on new client acquisition [94][96]