ChoiceOne Reports Fourth Quarter and Year End 2024 Results

ChoiceOne Financial Services, Inc. (“ChoiceOne”, NASDAQ:COFS), the parent company for ChoiceOne Bank, reported financial results for the quarter ended December 31, 2024.

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Highlights

— ChoiceOne reported net income of $7,159,000 and $26,727,000 for the three and twelve months ended December 31, 2024, compared to $5,293,000 and $21,261,000 for the same periods in 2023, representing growth of 35.3% and 25.7%, respectively. Net income adjusted for merger related expenses was $7,532,000 and $27,733,000 for the three and twelve months ended December 31, 2024.

— Diluted earnings per share were $0.79 and $3.25 in the three and twelve months ended December 31, 2024, compared to $0.70 and $2.82 per share in the same periods in the prior year. The sale of 1,380,000 shares of common stock during the third quarter of 2024 negatively impacted diluted earnings per share for 2024. Diluted earnings per share adjusted for merger expenses were $0.83 and $3.37 in the three and twelve months ended December 31, 2024.

— GAAP Net interest margin in the fourth quarter of 2024 decreased to 2.98%, compared to 3.17% in the third quarter of 2024, and increased compared to 2.66% in the fourth quarter of 2023. GAAP net interest income was $19.3 million in the fourth quarter of 2024 compared to $16.6 million in the fourth quarter of 2023. Net interest income was aided by cash settlements from pay-fixed interest rate swaps which started paying in April 2024.

— Core loans, which exclude held for sale loans and loans to other financial institutions, grew organically by $40.3 million or 11.0% on an annualized basis during the fourth quarter of 2024 and $114.5 million or 8.2% for the year ended December 31, 2024. Loan interest income increased $3.8 million in the fourth quarter of 2024 and $21.2 million in the year ended December 31, 2024 compared to the same periods in 2023, respectively.

— Deposits, excluding brokered deposits, declined by $24.0 million or an annualized 4.4% in the fourth quarter of 2024 and increased $79.0 million or 3.8% during 2024. The decrease in deposits in the fourth quarter of 2024 was due to seasonal outflow of public funds, which includes taxes received by schools and townships during the third quarter of 2024. The increase in deposits in the twelve months ended December 31, 2024 is a combination of new business and recapture of deposit losses from the prior year.

— Asset quality remains strong with only 0.27% of nonperforming loans to total loans (excluding held for sale) as of December 31, 2024.

“ChoiceOne had an outstanding fourth quarter and full year 2024, which underscore the growth in our core loans and deposits, thanks to the dedication and expertise of our team. Our proactive balance sheet management has led to improvements in our net interest margin, positioning us well to navigate changing market conditions. We are also excited about the upcoming anticipated close of our pending merger with Fentura Financial, Inc. and The State Bank expected to occur in the first quarter of 2025, which will further enhance our markets and capabilities,” said Kelly Potes, Chief Executive Officer.

ChoiceOne reported net income of $7,159,000 and $26,727,000 for the three and twelve months ended December 31, 2024, compared to $5,293,000 and $21,261,000 for the same periods in 2023, representing growth of 35.3% and 25.7%, respectively. Net income adjusted for merger related expenses was $7,532,000 and $27,733,000 for the three and twelve months ended December 31, 2024. Diluted earnings per share were $0.79 and $3.25 in the three and twelve months ended December 31, 2024, compared to $0.70 and $2.82 per share in the same periods in the prior year. The sale of 1,380,000 shares of common stock during the third quarter of 2024 negatively impacted diluted earnings per share for 2024. Diluted earnings per share adjusted for merger expenses were $0.83 and $3.37 in the three and twelve months ended December 31, 2024.

As of December 31, 2024, total assets were $2.7 billion, an increase of $146.5 million compared to December 31, 2023. The growth is primarily attributed to an increase in core loans of$114.5 million and loans to other financial institutions of $20.5 million. This growth was offset by a$48.9 millionreduction in securities during the same time period. ChoiceOne has actively managed its balance sheet to support organic loan growth, strategically shifting from lower-yielding assets to higher-yielding loans. This is reflected in the loan growth observed.

Deposits, excluding brokered deposits, declined by $24.0 million or an annualized 4.4% in the fourth quarter of 2024 and increased $79.0 million or 3.8% during 2024. The decrease in deposits in the fourth quarter of 2024 was due to seasonal outflow of public funds, which includes taxes received by schools and townships during the third quarter of 2024. The increase in deposits in the twelve months ended December 31, 2024 is a combination of new business and recapture of deposit losses from the prior year. ChoiceOne continues to be proactive in managing its liquidity position by using brokered deposits and FHLB advances to ensure ample liquidity. At December 31, 2024, total available borrowing capacity secured by pledged assets was $837.2 million. ChoiceOne can increase its capacity by utilizing unsecured federal fund lines and pledging additional assets.Uninsured deposits totaled $833.2 million or 37.6% of deposits at December 31, 2024.

ChoiceOne's cost of deposits to average total deposits has declined since peaking in the first quarter of 2024 due to positive cash flow from pay-fixed interest rate swaps, hedged against deposits, and decreasing deposit expenses. In addition, the Federal Reserve has decreased the federal funds rate by 50 basis points since September 2024. These factors led to a cost of deposits to average total deposits of an annualized 1.58% in the fourth quarter of 2024 compared to an annualized 1.57% in the fourth quarter of 2023. Cost of deposits to average total deposits peaked in the first quarter of 2024 at an annualized 1.65%. If rates continue to decline, we expect to see slight declines in deposit costs; however, these declines will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected.Interest expense on borrowings for the three and twelve months ended December 31, 2024, increased $153,000 and $3.1 million compared to the same periods in the prior year, due to increases in the average balances borrowed. During the fourth quarter of 2024, ChoiceOne paid down its advance from the Bank Term Funding Program and replaced it with $135.0 million of FHLB borrowings. This increased our total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%, with the earliest maturity in January 2025. Total cost of funds ended flat in the fourth quarter of 2024 with an annualized 1.90% compared to an annualized 1.91% in the fourth quarter of 2023.

The provision for credit losses expense on loans was $200,000 in the fourth quarter of 2024, due in part to loan growth during the quarter. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.07% on December 31, 2024 compared to 1.11% on December 31, 2023. Asset quality continues to remain strong, with annualized net loan charge-offs to average loans of 0.04% and nonperforming loans to total loans (excluding loans held for sale) of 0.27% as of December 31, 2024.

ChoiceOne uses interest rate swaps to manage interest rate exposure to certain fixed rate assets and variable rate liabilities. On December 31, 2024, ChoiceOne had pay-fixed interest rate swaps with a total notional value of $401.0 million, a weighted average coupon of 3.07%, a fair value of $23.6 million and an average remaining contract length of 7 to 8 years. These derivative instruments increase in value as long-term interest rates rise, which offsets the reduction in equity due to unrealized losses on securities available for sale. Settlements from swaps amounted to $1.5 million for the fourth quarter of 2024 compared to $2.5 million for the third quarter of 2024 and were a contributing factor to the decrease in net interest margin during the fourth quarter of 2024 compared to the third quarter of 2024. Fully tax equivalent net interest margin excluding the swaps was 23 basis points lower than tax equivalent net interest margin reported for the fourth quarter of 2024. Due in part to pay fixed interest rate swaps we have in place, our balance sheet is asset sensitive. 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.

Shareholders' equity totaled $260.4 million as of December 31, 2024, up from $195.6 million as of December 31, 2023, due in large part to the $34.5 million in aggregate gross proceeds (before deducting discounts and estimated offering expenses) received from the sale of 1,380,000 shares of common stock during the third quarter of 2024. The additional increase is due to retained earnings and an improvement in accumulated other compressive loss (AOCI) of $13.8 million compared to December 31, 2023. The improvement in AOCI is due to both the shortening duration and maturing (paydowns) of the securities portfolio, offset by the change in unrealized gain of the pay-fixed swap derivatives. The pay-fixed swap derivatives are designed to offset swings in AOCI due to changes in interest rates. ChoiceOne Bank remains “well-capitalized” with a total risk-based capital ratio of 12.7% as of December 31, 2024, compared to 12.4% on December 31, 2023.

Noninterest income increased $948,000 and $3.1 million in the three and twelve months ended December 31, 2024, compared to the same periods in the prior year. The increase was largely due to an increase in customer service charges of $304,000 and $1.2 million in the three and twelve months ended December 31, 2024 compared to the same periods in 2023 and earnings on life insurance policies in the three and twelve months ended December 31, 2024, compared to the same periods in the prior year. ChoiceOne recognized earnings on a bank owned life insurance death benefit claim in the amount of $504,000 during the fourth quarter of 2024. ChoiceOne also saw an uptick in gains on sales of loans during the fourth quarter of 2024 due in part to participation in the FHLB Rate Advantage program which provided incentives to home buyers in the low to moderate income bracket. In addition, there were a number of construction loans which were finalized and written into salable market loans during the fourth quarter of 2024.

Noninterest expense increased by $1.6 million or 11.4% and $3.6 million or 6.6% in the three and twelve months ended December 31, 2024 compared to the same periods in 2023.The increase in total noninterest expense was due in part to merger related expenses of $394,000 and $1.0 million during the three and twelve months ended December 31, 2024, compared to $0 in the same periods in the prior year. Additionally, there was an increase to employee health insurance and other benefit costs, and an increase to FDIC insurance and other costs related to the inflationary environment. The increase in costs were offset by a decline in occupancy and equipment related to two branch closures during the first quarter of 2024. ChoiceOne seeks to strategically manage costs while still making thoughtful investments in order to maintain our competitive edge and deliver exceptional value to our customers, shareholders, and communities.

“I am very pleased with the results of the fourth quarter of 2024, showing core loan growth, solid deposit balances and excellent credit metrics as we get closer to completing the pending merger with Fentura Financial, Inc. and the State Bank, a highly respected community bank in Michigan. We are excited to welcome their customers, communities, and employees to the ChoiceOne team,” said Kelly Potes, Chief Executive Officer.

About ChoiceOne

ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank, Member FDIC. ChoiceOne Bank operates 35 offices in parts of Kent, Lapeer, Macomb, Muskegon, Newaygo, Ottawa, and St. Clair counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. For more information, please visit Investor Relations at ChoiceOne's website at 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 or Fentura with respect to the planned merger, the strategic benefits and financial benefits of the merger, including the expected impact of the proposed transaction on the combined company's future financial performance and the timing of the closing of the proposed transaction. 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.Such risks, uncertainties and assumptions, include, among others, the following:

— the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in a materially burdensome regulatory condition (as defined in the merger agreement));

— the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

— the possibility that the anticipated benefits of the proposed transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where ChoiceOne and Fentura do business, or as a result of other unexpected factors or events;

— the impact of purchase accounting with respect to the proposed transaction, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;

— diversion of management's attention from ongoing business operations and opportunities;

— potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; or

— the outcome of any legal proceedings that may be instituted against ChoiceOne or Fentura.

Additional 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, 2023 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) December31, September30, December31, 2024 2024 2023Cash and cash equivalents $ 96,751 $ 145,938 $ 55,433Equity securities, at fair value 7,782 7,816 7,505Securities Held to Maturity 394,534 391,954 407,959Securities Available for Sale 479,117 497,552 514,598Federal Home Loan Bank stock 9,383 4,449 4,449Federal Reserve Bank stock 5,307 5,307 5,065Loans held for sale 7,288 5,994 4,710Loans to other financial institutions 39,878 38,492 19,400Core loans 1,505,762 1,465,458 1,391,253Total loans held for investment 1,545,640 1,503,950 1,410,653Allowance for credit losses (16,552) (16,490) (15,685)Loans, net of allowance for credit losses 1,529,088 1,487,460 1,394,968Premises and equipment 27,099 27,135 29,750Cash surrender value of life insurance policies 44,896 45,699 45,074Goodwill 59,946 59,946 59,946Core deposit intangible 1,096 1,250 1,854Other assets 60,956 45,503 45,395Total Assets $ 2,723,243 $ 2,726,003 $ 2,576,706Noninterest-bearing deposits $ 524,945 $ 521,055 $ 547,625Interest-bearing deposits 1,652,647 1,680,546 1,550,985Brokered deposits 36,511 6,627 23,445Borrowings 175,000 210,000 200,000Subordinated debentures 35,752 35,691 35,507Other liabilities 37,973 24,338 23,510Total Liabilities 2,462,828 2,478,257 2,381,072Common stock and paid-in capital, no par value; shares authorized: 206,780 206,427 173,51330,000,000; shares outstanding: 8,965,483 at December 31, 2024, 8,959,664 atSeptember 30, 2024, and 7,548,217 at December 31, 2023Retained earnings 91,414 86,765 73,699Accumulated other comprehensive income (loss), net (37,779) (45,446) (51,578)Shareholders' Equity 260,415 247,746 195,634Total Liabilities and Shareholders' Equity $ 2,723,243 $ 2,726,003 $ 2,576,706Condensed Statements of Income(Unaudited) Three Months Ended Twelve Months Ended(Dollars in thousands, except per share data) December31, December31, 2024 2023 2024 2023Interest incomeLoans, including fees $ 23,571 $ 19,759 $ 89,580 $ 68,384Securities:Taxable 4,846 5,532 21,228 21,169Tax exempt 1,390 1,385 5,614 5,629Other 1,231 1,286 4,682 3,798Total interest income 31,038 27,962 121,104 98,980Interest expenseDeposits 8,710 8,421 34,174 23,990Advances from Federal Home Loan Bank 669 273 2,041 1,771Other 2,310 2,712 10,447 7,334Total interest expense 11,689 11,406 46,662 33,095Net interest income 19,349 16,556 74,442 65,885Provision for credit losses on loans 200 933 1,300 1,265Provision for credit losses on unfunded commitments – (558) (675) (1,115)Net Provision for credit losses expense 200 375 625 150Net interest income after provision 19,149 16,181 73,817 65,735Noninterest incomeCustomer service charges 2,731 2,427 10,571 9,347Insurance and investment commissions 170 157 742 698Mortgage servicing rights 366 214 1,053 820Gains on sales of loans 463 261 1,386 1,134Net gains (losses) on sales of securities – – – (71)Net gains (losses) on sales and write downs of other assets (5) (2) 198 147Earnings on life insurance policies 819 286 1,934 1,096Trust income 241 194 906 771Change in market value of equity securities (46) 210 195 (246)Other 255 299 1,010 1,210Total noninterest income 4,994 4,046 17,995 14,906Noninterest expenseSalaries and benefits 8,941 8,005 33,408 31,963Occupancy and equipment 1,383 1,471 5,797 6,048Data processing 1,840 1,531 7,222 6,618Professional fees 653 523 2,471 2,198Supplies and postage 179 200 699 780Advertising and promotional 271 148 788 721Intangible amortization 153 203 757 955FDIC insurance 180 394 1,335 1,184Merger related expenses 394 – 1,039 -Other 1,350 1,303 5,207 4,607Total noninterest expense 15,344 13,778 58,723 55,074Income before income tax 8,799 6,449 33,089 25,567Income tax expense 1,640 1,156 6,362 4,306Net income $ 7,159 $ 5,293 $ 26,727 $ 21,261Basic earnings per share $ 0.79 $ 0.70 $ 3.27 $ 2.82Diluted earnings per share $ 0.79 $ 0.70 $ 3.25 $ 2.82Dividends declared per share $ 0.28 $ 0.27 $ 1.09 $ 1.05Income Adjusted for Merger Expenses – Non-GAAP Reconciliation(Unaudited) Three Months Ended Twelve Months Ended December31, December31, 2024 2023 2024 2023(In Thousands, Except Per Share Data)Net income $ 7,159 $ 5,293 $ 26,727 $ 21,261Merger related expenses net of tax 373 – 1,006 -Adjusted net income $ 7,532 $ 5,293 $ 27,733 $ 21,261Weighted average number of shares 8,963,258 7,545,197 8,166,472 7,532,998Diluted average shares outstanding 9,024,567 7,582,255 8,221,066 7,572,290Adjusted basic earnings per share $ 0.84 $ 0.70 $ 3.40 $ 2.82Adjusted diluted earnings per share $ 0.83 $ 0.70 $ 3.37 $ 2.82Other Selected Financial Highlights(Unaudited) QuarterlyEarnings 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.(in thousands except per share data)Net interest income $ 19,349 $ 20,248 $ 18,371 $ 16,474 $ 16,555Net provision expense 200 425 – – 375Noninterest income 4,994 4,867 4,083 4,051 4,046Noninterest expense 15,344 15,417 14,278 13,684 13,778Net income before federal income tax expense 8,799 9,273 8,176 6,841 6,449Income tax expense 1,640 1,925 1,590 1,207 1,156Net income 7,159 7,348 6,586 5,634 5,293Basic earnings per share 0.79 0.86 0.87 0.75 0.70Diluted earnings per share 0.79 0.85 0.87 0.74 0.70Adjusted basic earnings per share 0.84 0.94 0.87 0.75 0.70Adjusted diluted earnings per share 0.83 0.93 0.87 0.74 0.70End of period balances 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.(in thousands)Gross loans $ 1,552,928 $ 1,509,944 $ 1,443,473 $ 1,424,625 $ 1,415,363Loans held for sale (1) 7,288 5,994 5,946 6,035 4,710Loans to other financial institutions (2) 39,878 38,492 36,569 30,032 19,400Core loans (gross loans excluding 1 and 2 above) 1,505,762 1,465,458 1,400,958 1,388,558 1,391,253Allowance for credit losses 16,552 16,490 16,152 16,037 15,685Securities available for sale 479,117 497,552 491,670 504,636 514,598Securities held to maturity 394,534 391,954 392,699 397,981 407,959Other interest-earning assets 86,185 116,643 84,484 100,175 39,411Total earning assets (before allowance) 2,512,764 2,516,093 2,412,326 2,427,417 2,377,331Total assets 2,723,243 2,726,003 2,623,067 2,670,699 2,576,706Noninterest-bearing deposits 524,945 521,055 517,137 502,685 547,625Interest-bearing deposits 1,652,647 1,680,546 1,582,365 1,641,193 1,550,985Brokered deposits 36,511 6,627 27,177 41,970 23,445Total deposits 2,214,103 2,208,228 2,126,679 2,185,848 2,122,055Deposits excluding brokered 2,177,592 2,201,601 2,099,502 2,143,878 2,098,610Total subordinated debt 35,752 35,691 35,630 35,568 35,507Total borrowed funds 175,000 210,000 210,000 210,000 200,000Other interest-bearing liabilities 24,003 4,956 22,378 21,512 8,060Total interest-bearing liabilities 1,923,913 1,937,820 1,877,550 1,950,243 1,817,997Shareholders' equity 260,415 247,746 214,519 206,756 195,634Average Balances 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.(in thousands)Loans $ 1,516,466 $ 1,460,033 $ 1,435,966 $ 1,412,569 $ 1,359,643Securities 965,501 970,913 986,281 1,002,140 1,019,218Other interest-earning assets 100,864 108,019 80,280 64,064 92,635Total earning assets (before allowance) 2,582,831 2,538,965 2,502,527 2,478,773 2,471,496Total assets 2,719,530 2,685,190 2,647,716 2,621,009 2,589,541Noninterest-bearing deposits 536,653 519,511 516,308 506,175 546,778Interest-bearing deposits 1,641,102 1,634,255 1,601,020 1,599,509 1,565,493Brokered deposits 19,620 17,227 34,218 34,708 32,541Total deposits 2,197,375 2,170,993 2,151,546 2,140,392 2,144,812Total subordinated debt 35,719 35,658 35,596 35,535 35,474Total borrowed funds 197,828 210,000 210,000 214,835 185,707Other interest-bearing liabilities 16,928 11,756 26,426 18,399 25,729Total interest-bearing liabilities 1,911,197 1,908,896 1,907,260 1,902,986 1,844,944Shareholders' equity 254,737 237,875 210,742 200,177 187,099Loan Breakout (in thousands) 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.Agricultural $ 48,221 $ 49,147 $ 45,274 $ 41,950 $ 49,210Commercial and Industrial 228,256 229,232 224,031 231,222 229,915Commercial Real Estate 901,130 862,773 804,213 794,705 786,921Consumer 29,412 30,693 32,811 34,268 36,541Construction Real Estate 17,042 14,555 18,751 17,890 20,936Residential Real Estate 281,701 279,058 275,878 268,523 267,730Loans to Other Financial Institutions 39,878 38,492 36,569 30,032 19,400Gross Loans (excluding held for sale) $ 1,545,640 $ 1,503,950 $ 1,437,527 $ 1,418,590 $ 1,410,653Allowance for credit losses 16,552 16,490 16,152 16,037 15,685Net loans $ 1,529,088 $ 1,487,460 $ 1,421,375 $ 1,402,553 $ 1,394,968Performance Ratios 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.Annualized return on average assets 1.05 % 1.09 % 0.99 % 0.86 % 0.82 %Annualized return on average equity 11.24 % 12.36 % 12.50 % 11.26 % 11.32 %Annualized return on average tangible common equity 14.54 % 16.29 % 17.22 % 15.81 % 16.40 %Net interest margin (GAAP) 2.98 % 3.17 % 2.95 % 2.67 % 2.66 %Net interest margin (fully tax-equivalent) 3.04 % 3.23 % 3.01 % 2.74 % 2.72 %Efficiency ratio 61.29 % 60.80 % 61.47 % 64.55 % 65.31 %Annualized cost of funds 1.90 % 1.87 % 1.92 % 2.00 % 1.91 %Annualized cost of deposits 1.58 % 1.53 % 1.56 % 1.65 % 1.57 %Cost of interest bearing liabilities 2.43 % 2.38 % 2.44 % 2.53 % 2.45 %Shareholders' equity to total assets 9.56 % 9.09 % 8.18 % 7.74 % 7.59 %Tangible common equity to tangible assets 7.49 % 7.00 % 5.98 % 5.56 % 5.32 %Annualized noninterest expense to average assets 2.26 % 2.30 % 2.16 % 2.09 % 2.13 %Loan to deposit 70.14 % 68.38 % 67.87 % 65.17 % 66.70 %Full-time equivalent employees 377 371 368 367 369Capital Ratios ChoiceOne Financial Services Inc. 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.Total capital (to risk weighted assets) 14.5 % 15.0 % 13.5 % 13.3 % 13.0 %Common equity Tier 1 capital (to risk weighted assets) 12.0 % 12.3 % 10.7 % 10.5 % 10.3 %Tier 1 capital (to risk weighted assets) 12.2 % 12.5 % 10.9 % 10.7 % 10.5 %Tier 1 capital (to average assets) 9.1 % 9.0 % 7.7 % 7.6 % 7.5 %Commercial Real Estate Loans as a percentage of total capital 195.6 % 193.3 % 205.1 % 206.8 % 213.6 %Capital Ratios ChoiceOne Bank 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.Total capital (to risk weighted assets) 12.7 % 13.1 % 13.2 % 12.6 % 12.4 %Common equity Tier 1 capital (to risk weighted assets) 12.0 % 12.3 % 12.5 % 11.8 % 11.8 %Tier 1 capital (to risk weighted assets) 12.0 % 12.3 % 12.5 % 11.8 % 11.8 %Tier 1 capital (to average assets) 8.9 % 8.9 % 8.8 % 8.3 % 8.4 %Commercial Real Estate Loans as a percentage of total capital 224.9 % 222.2 % 208.9 % 218.2 % 222.9 %Asset Quality 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.(in thousands)Net loan charge-offs (recoveries) $ 138 $ 87 $ 157 $ 51 $ 120Annualized net loan charge-offs (recoveries) to average loans 0.04 % 0.02 % 0.04 % 0.01 % 0.04 %Allowance for credit losses $ 16,552 $ 16,490 $ 16,152 $ 16,037 $ 15,685Unfunded commitment liability $ 1,485 $ 1,485 $ 1,485 $ 1,757 $ 2,160Allowance to loans (excludes held for sale) 1.07 % 1.10 % 1.12 % 1.13 % 1.11 %Total funds reserved to pay for loans (includes liability for unfunded commitments and excludes held for sale) 1.17 % 1.20 % 1.23 % 1.25 % 1.27 %Non-Accruing loans $ 3,704 $ 2,355 $ 2,086 $ 1,715 $ 1,723Nonperforming loans (includes OREO) $ 4,177 $ 2,884 $ 2,358 $ 1,837 $ 1,845Nonperforming loans to total loans (excludes held for sale) 0.27 % 0.19 % 0.16 % 0.13 % 0.13 %Nonperforming assets to total assets 0.15 % 0.11 % 0.09 % 0.07 % 0.07 %NON-GAAP Reconciliation 2024 4th 2024 3rd 2024 2nd 2024 1st 2023 4th Qtr. Qtr. Qtr. Qtr. Qtr.Net interest income (tax-equivalent basis) (Non-GAAP) $ 19,739 $ 20,631 $ 18,756 $ 16,871 $ 16,945Net interest margin (fully tax-equivalent) 3.04 % 3.23 % 3.01 % 2.74 % 2.72 %Reconciliation to Reported Net Interest IncomeNet interest income (tax-equivalent basis) (Non-GAAP) $ 19,739 $ 20,631 $ 18,756 $ 16,871 $ 16,945Adjustment for taxable equivalent interest (390) (383) (385) (397) (390)Net interest income (GAAP) $ 19,349 $ 20,248 $ 18,371 $ 16,474 $ 16,555Net interest margin (GAAP) 2.98 % 3.17 % 2.95 % 2.67 % 2.66 % Three Months Ended December31, 2024 2023(Dollars in thousands) Average Average Balance Interest Rate Balance Interest RateAssets:Loans (1)(3)(4)(5) $ 1,516,466 $ 23,591 6.19 % $ 1,359,643 $ 19,782 5.77 %Taxable securities (2) 677,133 4,846 2.85 726,335 5,532 3.02Nontaxable securities (1) 288,368 1,760 2.43 292,883 1,753 2.37Other 100,864 1,231 4.86 92,635 1,284 5.50Interest-earning assets 2,582,831 31,428 4.84 2,471,496 28,350 4.55Noninterest-earning assets 136,699 118,045Total assets $ 2,719,530 $ 2,589,541Liabilities and Shareholders' Equity:Interest-bearing demand deposits $ 907,631 $ 3,389 1.49 % $ 864,689 $ 3,667 1.68 %Savings deposits 336,107 810 0.96 343,766 530 0.61Certificates of deposit 397,364 4,291 4.30 357,038 3,812 4.24Brokered deposit 19,620 220 4.46 32,541 413 5.03Borrowings 197,828 2,374 4.77 185,707 2,221 4.75Subordinated debentures 35,719 405 4.51 35,474 414 4.63Other 16,928 200 4.70 25,729 349 5.38Interest-bearing liabilities 1,911,197 11,689 2.43 1,844,944 11,405 2.45Demand deposits 536,653 546,778Other noninterest-bearing liabilities 16,943 10,720Total liabilities 2,464,793 2,402,442Shareholders' equity 254,737 187,099Total liabilities and shareholders' equity $ 2,719,530 $ 2,589,541Net interest income (tax-equivalent basis) (Non-GAAP) (1) $ 19,739 $ 16,945Net interest margin (tax-equivalent basis) (Non-GAAP) (1) 3.04 % 2.72 %Reconciliation to Reported Net Interest IncomeNet interest income (tax-equivalent basis) (Non-GAAP) (1) $ 19,739 $ 16,945Adjustment for taxable equivalent interest (390) (390)Net interest income (GAAP) $ 19,349 $ 16,555Net interest margin (GAAP) 2.98 % 2.66 %(1) Adjusted to a fully tax-equivalent basis to facilitate comparison to the taxable interest-earning assets. The adjustment uses an incremental tax rate of 21%. The presentation of these measures on a tax-equivalent basis is not in accordance with GAAP, but is customary in the banking industry. These non-GAAP measures ensure comparability with respect to both taxable and tax-exempt loans and securities.(2) Taxable securities include dividend income from Federal Home Loan Bank and Federal Reserve Bank stock.(3) Loans include both loans to other financial institutions and loans held for sale.(4) Non-accruing loan balances are included in the balances of average loans. Non-accruing loan average balances were $3.0 million and $1.7 million in the fourth quarter of 2024 and 2023, respectively.(5) Interest on loans included net origination fees and accretion income. Accretion income was $276,000 and $447,000 in the fourth quarter of 2024 and 2023, respectively.

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