ChoiceOne Reports Second Quarter 2025 Results
SPARTA, Mich., July 25, 2025 /PRNewswire/ -- ChoiceOne Financial Services, Inc. ((", ChoiceOne", , NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended June 30, 2025. On March 1, 2025, ChoiceOne completed the merger (the "Merger") of Fentura Financial, Inc. ("Fentura"), the former parent company of The State Bank, with and into ChoiceOne with ChoiceOne surviving the merger. On March 14, 2025, the consolidation of The State Bank with and into ChoiceOne Bank with ChoiceOne Bank surviving the consolidation was completed.
Significant items impacting comparable second quarter 2024 and 2025 results include the following:
The total assets, loans and deposits acquired in the Merger were approximately $1.8 billion, $1.4 billion and $1.4 billion, respectively.
Merger related expenses, net of taxes, of approximately $132,000 and $13.9 million ($0.01 and $1.08 per diluted share) for the three and six months ended June 30, 2025, respectively. Management does not anticipate material merger expenses going forward.
Merger related provision for credit losses, net of taxes, of $9.5 million during the first quarter ended March 31, 2025, or $0.73 per diluted share as of June 30, 2025.
Highlights
ChoiceOne reported net income of $13,534,000 and a net loss of $372,000 for the three and six months ended June 30, 2025, compared to net income of $6,586,000 and $12,220,000 for the same periods in the prior year, respectively. Net income excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes was $13,666,000 and $22,976,000 for the three and six months ended June 30, 2025, respectively.
Diluted earnings per share was $0.90 for the three months ended June 30, 2025 and diluted loss per share was $0.03 per share for the six months ended June 30, 2025, compared to diluted earnings per share of $0.87 and $1.61 in the same periods in the prior year. Diluted earnings per share excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes, were $0.91 and $1.78 for the three and six months ended June 30, 2025.
In the second quarter of 2025, ChoiceOne's GAAP net interest margin rose significantly to 3.66%, up from 2.95% in the same period of 2024. GAAP net interest income also saw a substantial increase, reaching $36.3 million compared to $18.4 million in the second quarter of 2024. This growth was primarily due to the additional net interest income added through the Merger beginning on March 1, 2025. Accretion income from purchased loans increased GAAP net interest margin by 36 basis points for the second quarter of 2025.
Core loans, which exclude held for sale loans and loans to other financial institutions, declined by $4.8 million or less than 1% on an annualized basis during the second quarter of 2025 and grew organically by $140.1 million or 10.0% during the twelve months ended June 30, 2025. Core loans grew by $1.4 billion due to the Merger on March 1, 2025. Loan interest income increased $24.6 million in the second quarter of 2025 compared to the same period in 2024. Interest income for the three months ended June 30, 2025 includes $3.5 million of interest income accretion due to loans purchased.
Deposits, excluding brokered deposits, declined by $98.0 million as of June 30, 2025, compared to March 31, 2025, primarily due to seasonal municipal fluctuations and some reduction of higher cost deposits acquired from the Merger.
Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.06% and nonperforming loans to total loans (excluding loans held for sale) of 0.66% as of June 30, 2025. Notably, 0.41% of the nonperforming loans to total loans (excluding loans held for sale) is attributed to loans purchased with credit deterioration acquired through the Merger.
"We are pleased to report another outstanding quarter at ChoiceOne, highlighted by record net income and an expansion in our net interest margin," said Kelly Potes, Chief Executive Officer. "These results reflect the successful execution of our strategic merger with Fentura and The State Bank, which has strengthened our market position and enhanced our ability to serve our communities. As we move forward, we remain focused on delivering long-term value to our customers, employees, and shareholders."
ChoiceOne reported net income of $13,534,000 and a net loss of $372,000 for the three and six months ended June 30, 2025, compared to net income of $6,586,000 and $12,220,000 for the same periods in the prior year, respectively. Net income excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes was $13,666,000 and $22,976,000 for the three and six months ended June 30, 2025, respectively. Diluted earnings per share was $0.90 for the three months ended June 30, 2025 and diluted loss per share was $0.03 per share for the six months ended June 30, 2025, compared to diluted earnings per share of $0.87 and $1.61 in the same periods in the prior year. Diluted earnings per share excluding merger expenses, net of taxes, and merger related provision for credit losses, net of taxes, were $0.91 and $1.78 for the three and six months ended June 30, 2025.
As of June 30, 2025, total assets were $4.3 billion, an increase of $1.7 billion compared to June 30, 2024. The growth is primarily attributed to the Merger. This growth was offset by a $33.5 million reduction in loans to other financial institutions and a $14.5 million reduction in securities on June 30, 2025 compared to June 30, 2024. Loans to other financial institutions consist of a warehouse line of credit used to facilitate mortgage loan originations, with interest rates that fluctuate in line with the national mortgage market. This decline is attributed to ChoiceOne's strategic shift towards a higher percentage of internally driven originations. The reduction in securities occurred as ChoiceOne chose to restructure much of the acquired securities portfolio purchased in the Merger in order to reduce high cost wholesale funding.
Core loans, which exclude held for sale loans and loans to other financial institutions, declined by $4.8 million or less than 1% on an annualized basis during the second quarter of 2025 and grew organically by $140.1 million or 10.0% during the twelve months ended June 30, 2025. Core loans grew by $1.4 billion due to the Merger on March 1, 2025. Loan interest income increased $24.6 million in the second quarter of 2025 compared to the same period in 2024. Interest income for the three months ended June 30, 2025 includes $3.5 million of interest income accretion due to loans purchased. Of this amount, $2.4 million was calculated using the effective interest rate method of amortization, while the remaining $1.1 million resulted from accretion through unexpected payoffs and paydowns of loans with an associated fair value mark. Estimated accretion income from purchased loans for the remainder of 2025 using the effective interest method of amortization is $4.1 million; however, actual results will be dependent on prepayment speeds and other factors.
Deposits, excluding brokered deposits, declined by $98.0 million as of June 30, 2025,compared to March 31, 2025, primarily due to seasonal municipal fluctuations and some reduction of higher cost deposits acquired from the Merger. Deposits, excluding brokered deposits, increased by $1.4 billion as of June 30, 2025, compared to June 30, 2024 as a result of the Merger. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and FHLB advances to ensure ample liquidity. At June 30, 2025, total available borrowing capacity secured by pledged assets was $1.2 billion. ChoiceOne can increase its borrowing capacity by utilizing unsecured federal fund lines and pledging additional assets. Uninsured deposits totaled $1.1 billion or 29.6% of deposits at June 30, 2025.
ChoiceOne's annualized cost of deposits to average total deposits has increased by 9 basis points from June 30, 2024 to June 30, 2025, as higher cost deposits were acquired in the Merger. The increase was slightly offset by the decline in the cost of CD's during the same time period. ChoiceOne has been able to mitigate the increase in the annualized cost of deposits to average total deposits by paying down borrowings in order to decrease the cost of funds to average total deposits to an annualized 1.84% in the second quarter of 2025, down from 1.92% in the second quarter of 2024. If rates continue to decline, we anticipate further reductions in deposit costs, although these will be tempered by decreased cash flows from pay-fixed interest rate swaps. Interest expense on borrowings for the three months ended June 30, 2025, declined by $536,000 compared to the same period in the prior year. As of June 30, 2025, the total borrowed balance at the FHLB was $195.0 million at a weighted average fixed rate of 4.36%, with $155.0 million due within 12 months.
The provision for credit losses on loans was $650,000 in the second quarter of 2025, due primarily to changes in forecast metrics per the Federal Open Market Committee. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.19% on June 30, 2025 compared to 1.07% on December 31, 2024. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.06% and nonperforming loans to total loans (excluding loans held for sale) of 0.66% as of June 30, 2025. Notably, 0.41% of the nonperforming loans to total loans (excluding loans held for sale) is attributed to loans purchased with credit deterioration acquired through the Merger.
ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On June 30, 2025, ChoiceOne held pay-fixed interest rate swaps with a total notional value of $351.0 million, a weighted average coupon of 3.12%, a fair value of $7.9 million and an average remaining contract length of 6.9 years. These derivative instruments change in value as rates rise or fall inverse to the change in unrealized losses of the available for sale portfolio due to rates. Settlements from swaps amounted to $1.3 million for the second quarter of 2025 compared to $1.3 million for the first quarter of 2025. In addition to the pay-fixed interest rate swaps, ChoiceOne also employs back-to-back swaps on select commercial loans, with the impact reflected in interest income.
As of June 30, 2025, shareholders' equity was $431.8 million, a significant increase from $214.5 million on June 30, 2024. This growth was primarily driven by the Merger, in which ChoiceOne issued 6,070,836 shares of common stock on March 1, 2025, valued at $193.0 million. Additionally, the sale of 1,380,000 shares of common stock at $25.00 per share on July 26, 2024, generated $34.5 million in aggregate gross proceeds (before deducting discounts and estimated offering expenses). However, this was slightly offset by a minor decline in retained earnings. ChoiceOne Bank continues to be "well-capitalized," with a total risk-based capital ratio of 12.4% as of June 30, 2025, compared to 13.2% on June 30, 2024, primarily due to the impact of the Merger.
Noninterest income increased by $2.4 million and $3.3 million for the three and six months ended June 30, 2025, compared to the same periods in the prior year. This increase was partly driven by higher credit and debit card fees, which rose due to increased volume from the Merger. Additionally, ChoiceOne recognized income from two death benefit claims during the quarter for an additional $299,000. Trust income also increased as a result of higher estate settlement fees and customers obtained from the Merger.
Noninterest expense increased by $11.2 million and $33.2 million for the three and six months ended June 30, 2025, compared to the same periods in 2024. The year to date increase was largely due to merger-related expenses of $17.4 million during the six months ended June 30, 2025, compared to $0 in the same period in the prior year. Management does not anticipate material merger expenses going forward. The remainder of the increase was primarily due to the addition of Fentura on March 1, 2025. ChoiceOne is committed to managing costs strategically while making prudent investments to sustain our competitive edge and provide exceptional value to our customers, shareholders, and communities.
"Our strong second quarter results, including record net income and a substantial increase in net interest margin, reflect the early benefits of the Merger. As we complete integration efforts, we believe in our ability to unlock long-term value through operational efficiencies, a broader customer base, and the exceptional talent that has joined our team. We remain committed to delivering outstanding service and sustainable growth for our customers, communities, and shareholders," said Kelly Potes, Chief Executive Officer.
About ChoiceOne
ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan, with assets over $4 billion, and the parent corporation of ChoiceOne Bank. Member FDIC. ChoiceOne Bank operates 56 offices in West, Central and Southeast Michigan. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. ChoiceOne Financial Services, Inc. common stock is quoted on the Nasdaq Capital Market under the symbol "COFS." For more information, please visit Investor Relations at ChoiceOne's website choiceone.bank.
Forward-Looking Statements
This news release contains forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "may," "could," "look forward," "continue", "future" and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding the outlook and expectations of ChoiceOne with respect to the Merger, including the strategic benefits and financial benefits of the Merger. These statements reflect current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed, implied or forecasted in such forward-looking statements. Furthermore, ChoiceOne does not undertake any obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
Risk factors include, but are not limited to, the risk factors described in Item 1A in ChoiceOne's Annual Report on Form 10-K for the year ended December 31, 2024 and in any of ChoiceOne's subsequent SEC filings, which are available on the SEC's website, www.sec.gov.
Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this presentation includes certain non-GAAP financial measures. ChoiceOne believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand underlying financial performance and condition and trends of ChoiceOne.
Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, non-GAAP measures are used as comparative tools, together with GAAP measures, to assist in the evaluation of operating performance or financial condition. These measures are also calculated using the appropriate GAAP or regulatory components in their entirety and are computed in a manner intended to facilitate consistent period-to-period comparisons. ChoiceOne's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.
Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in the tables to this news release under the heading non-GAAP reconciliation.
Condensed Balance Sheets(Unaudited)
(In thousands)
June 30, 2025
March 31, 2025
June 30, 2024
Cash and cash equivalents
$
156,280
$
139,421
$
101,002
Equity securities, at fair value
9,582
9,328
7,502
Securities Held to Maturity
390,457
394,434
392,699
Securities Available for Sale
479,426
480,650
491,670
Federal Home Loan Bank stock
18,562
18,562
4,449
Federal Reserve Bank stock
12,547
12,357
5,066
Loans held for sale
7,639
3,941
5,946
Loans to other financial institutions
3,033
2,393
36,569
Core loans
2,917,759
2,922,562
1,400,958
Total loans held for investment
2,920,792
2,924,955
1,437,527
Allowance for credit losses
(34,798)
(34,567)
(16,152)
Loans, net of allowance for credit losses
2,885,994
2,890,388
1,421,375
Premises and equipment
45,667
44,284
27,370
Cash surrender value of life insurance policies
73,673
73,765
45,384
Goodwill
126,730
126,730
59,946
Core deposit intangible
33,421
35,153
1,448
Other assets
70,274
76,378
59,210
Total Assets
$
4,310,252
$
4,305,391
$
2,623,067
Noninterest-bearing deposits
$
943,873
$
912,033
$
517,137
Interest-bearing deposits
2,542,526
2,672,401
1,582,365
Brokered deposits
106,225
67,295
27,177
Borrowings
198,428
137,330
210,000
Subordinated debentures
48,277
48,186
35,630
Other liabilities
39,162
41,078
36,239
Total Liabilities
3,878,491
3,878,323
2,408,548
Common stock and paid-in capital, no par value; shares authorized: 30,000,000; shares outstanding: 15,008,864 at June 30, 2025, 14,975,034 at March 31, 2025, and 7,573,618 at June 30, 2024.
398,201
398,075
173,984
Retained earnings
82,647
73,316
81,836
Accumulated other comprehensive income (loss), net
(49,087)
(44,323)
(41,301)
Shareholders' Equity
431,761
427,068
214,519
Total Liabilities and Shareholders' Equity
$
4,310,252
$
4,305,391
$
2,623,067
Condensed Statements of Operations(Unaudited)
Three Months Ended
Six Months Ended
(Dollars in thousands, except per share data)
June 30,
June 30,
2025
2024
2025
2024
Interest income
Loans, including fees
$
46,533
$
21,971
$
79,174
$
42,757
Securities:
Taxable
5,264
5,471
9,994
10,819
Tax exempt
1,393
1,410
2,802
2,822
Other
735
1,092
1,914
1,978
Total interest income
53,925
29,944
93,884
58,376
Interest expense
Deposits
14,840
8,325
25,556
17,102
Advances from Federal Home Loan Bank
1,659
463
3,711
904
Other
1,104
2,785
1,984
5,525
Total interest expense
17,603
11,573
31,251
23,531
Net interest income
36,322
18,371
62,633
34,845
Provision for credit losses on loans
650
272
13,813
675
Provision for (reversal of) credit losses on unfunded commitments
-
(272)
-
(675)
Net Provision for credit losses expense
650
-
13,813
-
Net interest income after provision
35,672
18,371
48,820
34,845
Noninterest income
Customer service charges
1,401
1,146
2,582
2,289
Credit and debit card fees
2,083
1,516
3,592
2,778
Insurance and investment commissions
540
190
835
388
Gains on sales of loans
355
525
799
979
Net gains (losses) on sales and write downs of other assets
3
11
13
12
Earnings on life insurance policies
844
305
1,233
800
Trust income
596
220
1,102
433
Change in market value of equity securities
239
(71)
346
(36)
Other
442
241
923
491
Total noninterest income
6,503
4,083
11,425
8,134
Noninterest expense
Salaries and benefits
13,731
8,264
24,051
16,095
Occupancy and equipment
2,432
1,477
4,151
2,939
Data processing
2,439
1,468
4,438
2,808
Communication
561
312
941
642
Professional fees
947
593
1,644
1,208
Supplies and postage
305
168
549
346
Advertising and promotional
260
199
516
349
Intangible amortization
1,732
203
2,412
406
FDIC insurance
550
390
1,005
765
Merger related expenses
166
-
17,369
-
Other
2,383
1,204
4,095
2,404
Total noninterest expense
25,506
14,278
61,171
27,962
Income (loss) before income tax
16,669
8,176
(926)
15,017
Income tax expense (benefit)
3,135
1,590
(554)
2,797
Net income (loss)
$
13,534
$
6,586
$
(372)
$
12,220
Basic earnings (loss) per share
$
0.90
$
0.87
$
(0.03)
$
1.62
Diluted earnings (loss) per share
$
0.90
$
0.87
$
(0.03)
