ChoiceOne Financial Services, Inc.

What they do

ChoiceOne Financial Services, Inc. is a financial holding company incorporated in Michigan in 1986 and registered under the Bank Holding Company Act. Its principal subsidiary, ChoiceOne Bank, became wholly owned in 1987 and has since absorbed Valley Ridge Bank, Lakestone Bank & Trust and Community Shores Bank. ChoiceOne Bank owns ChoiceOne Insurance Agencies, Inc., an independent insurance agency headquartered in Sparta, Michigan. The company operates as a state commercial bank, funding loans primarily with deposits.

Revenue drivers

• Loans, including fees — The largest revenue line: $91,988 thousand of interest income for the six months ended June 30, 2026, versus $79,174 thousand a year earlier. Core loans were $3.02 billion at June 30, 2026.
• Securities — Taxable securities produced $11,125 thousand and tax-exempt securities $2,881 thousand of interest income in the first six months of 2026. Available-for-sale securities were $555.6 million and held-to-maturity securities $383.3 million at June 30, 2026.
• Mortgage warehouse advances — Advances of $53,535 million at June 30, 2026, versus $58,987 thousand at December 31, 2025; these are short-term advances and are excluded from core loans.
• Other interest income — Other interest income was $1,222 thousand for the six months ended June 30, 2026, down from $1,914 thousand a year earlier.

Recent performance

For the second quarter of 2026, ChoiceOne reported net income of $12.5 million, or $0.83 per diluted share, and for the first six months of 2026 net income of $26.2 million, or $1.74 per diluted share. Second quarter results included a pre-tax securities loss of approximately $1.9 million, which reduced diluted EPS by approximately $0.10, tied to repositioning lower-yielding municipal securities. Core loans rose $87.1 million, or 11.9% annualized, in the quarter, including the purchase of roughly $40 million of seasoned adjustable-rate residential mortgages. GAAP net interest margin was 3.59% for the quarter, versus 3.63% in the first quarter of 2026 and 3.66% in the prior-year quarter. Nonperforming loans to total loans were 1.07% at June 30, 2026, with annualized net charge-offs of 0.04% of average loans.

Strategy

Management said it is repositioning the balance sheet to improve the earning asset mix and interest rate positioning, including selling lower-yielding municipal securities to fund loan growth. The bank grew core loans through organic production and purchased approximately $40 million of seasoned, high-quality adjustable-rate residential mortgages in the second quarter. Deposits excluding brokered deposits declined $55.4 million in the quarter, which management attributed primarily to normal seasonal swings in municipal operating balances. CEO Kelly Potes stated the company is supporting continued momentum through the remainder of 2026. The reported strategic activity is organic loan production, securities repositioning and balance sheet management rather than stated acquisitions or new business lines.

Risks

• Asset quality — The 10-K states that losses may be sustained if borrowers, guarantors and related parties fail to perform under loan agreements, and collateral may be insufficient or decline in value.
• Allowance adequacy — The 10-K warns that the allowance for credit losses is based on assumptions and judgments, and if those assumptions are wrong the allowance may not cover actual losses.
• Unsecured lending — The 10-K notes that while most loans originated are secured, some loans are unsecured depending on the nature of the loan.
• Deposit and funding variability — Deposits excluding brokered deposits declined $55.4 million during the second quarter of 2026, primarily from normal seasonal fluctuations in municipal operating balances.

Outlook

Management did not provide specific earnings or revenue guidance in the excerpts. The earnings release estimates interest income from purchased loan accretion of $3.8 million for the remainder of 2026 using the effective interest method of amortization. CEO Kelly Potes said the company's balance sheet management is improving its earning asset mix and interest rate positioning and supporting momentum through the remainder of 2026. The company also reported that total liquidity and borrowing capacity remained strong.