COFS 10-K Fiscal year ended Dec. 31, 2024

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

☒		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the fiscal year ended December 31 , 2024
☐		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from__________________ to __________________

Commission File Number: 000-39209

ChoiceOne Financial Services, Inc.
(Exact Name of Registrant as Specified in its Charter)

Michigan (State or Other Jurisdiction of Incorporation or Organization)	38-2659066 (I.R.S. Employer Identification No.)
109 East Division Street , Sparta , Michigan (Address of Principal Executive Offices)	49345 (Zip Code)

( 616 ) 887-7366
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock	COFS	NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☒
Non-accelerated filer	☐		Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2024, the aggregate market value of common stock held by non-affiliates of the Registrant was $ 198.6 million. This amount is based on an average bid price of $28.65 per share for the Registrant's stock as of such date.

As of February 28, 2025, the Registrant had 8,968,784 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

---

ChoiceOne Financial Services, Inc.

Form 10-K ANNUAL REPORT

Contents

		Page
PART 1
Item 1:	Business	3
Item 1A:	Risk Factors	10
Item 1B:	Unresolved Staff Comments	16
Item 1C:	Cybersecurity	16
Item 2:	Properties	17
Item 3:	Legal Proceedings	18
Item 4:	Mine Safety Disclosures	18
PART II
Item 5:	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6:	Reserved	19
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8:	Financial Statements and Supplementary Data	37
Item 9:	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	90
Item 9A:	Controls and Procedures	90
Item 9B:	Other Information	90
Item 9C:	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	90
PART III
Item 10:	Directors, Executive Officers and Corporate Governance	91
Item 11:	Executive Compensation	91
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91
Item 13:	Certain Relationships and Related Transactions, and Director Independence	92
Item 14:	Principal Accountant Fees and Services	92
PART IV
Item 15:	Exhibits and Financial Statement Schedules	93
SIGNATURES		95

---

FORWARD-LOOKING STATEMENTS

This report and the documents incorporated into this report contain forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and ChoiceOne Financial Services, Inc. Words such as “anticipates,” “believes,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “may,” “could,” “estimates,” “look forward,” “continue,” “future,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Management’s determination of the provision and allowance for credit losses, the carrying value of goodwill, loan servicing rights, other real estate owned, and the fair value of investment securities and management’s assumptions concerning pension and other postretirement benefit plans involve judgments that are inherently forward-looking. All of the information concerning interest rate sensitivity is forward-looking. All statements with references to future time periods are forward-looking. These statements are not guarantees of future performance and 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 Financial Services, Inc. undertakes no 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 disclosed in Item 1A of this report. These are representative of the risk factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

---

PART I

It em 1. Business

General

ChoiceOne Financial Services, Inc. (the “Company”) is a financial holding company registered under the Bank Holding Company Act of 1956, as amended (“BHC Act”). The Company was incorporated on February 24, 1986, as a Michigan corporation. The Company was formed to create a bank holding company for the purpose of acquiring all of the capital stock of ChoiceOne Bank, which became a wholly owned subsidiary of the Company on April 6, 1987. Effective November 1, 2006, Valley Ridge Financial Corp., a one-bank holding company for Valley Ridge Bank (“VRB”), merged with and into the Company. In December 2006, VRB was consolidated into ChoiceOne Bank. Effective October 1, 2019, County Bank Corp. ("County"), a one-bank holding company for Lakestone Bank & Trust (“Lakestone”), merged with and into the Company. Lakestone was consolidated into ChoiceOne Bank in May 2020. On July 1, 2020, Community Shores Bank Corporation ("Community Shores"), a one bank holding company for Community Shores Bank, merged with and into the Company. Community Shores Bank was consolidated into ChoiceOne Bank in October 2020. ChoiceOne Bank owns all of the outstanding common stock of ChoiceOne Insurance Agencies, Inc., an independent insurance agency headquartered in Sparta, Michigan (the "Insurance Agency"). On July 18, 2023, the Company organized 109 Technologies, LLC as a wholly owned subsidiary of the Company with the intent to own intellectual property for a fintech product licensed to third party banks and bank holding companies. Effective March 1, 2025, Fentura Financial, Inc., a one bank holding company for The State Bank, merged with and into the Company.

The Company's business is primarily concentrated in a single industry segment, banking. ChoiceOne Bank (referred to as the “Bank”) is a full-service banking institution that offers a variety of deposit, payment, credit and other financial services to all types of customers. These services include time, savings, and demand deposits, safe deposit services, and automated transaction machine services. Loans, both commercial and consumer, are extended primarily on a secured basis to commercial enterprises and individuals. Commercial lending covers such categories as business, industry, agricultural, construction, inventory, and real estate. The Bank’s consumer loan departments make direct and indirect loans to consumers and purchasers of residential and real property. In addition, the Bank offers trust and wealth management services. No material part of the business of the Company or the Bank is dependent upon a single customer or very few customers, the loss of which would have a materially adverse effect on the Company.

The Bank’s primary market areas lie within Kent, Muskegon, Newaygo, and Ottawa counties in western Michigan, and Lapeer, Macomb, and St. Clair counties in southeastern Michigan in the communities where the Bank's respective offices are located. The Bank serves these markets through 29 full-service offices and five loan production offices. The Company and the Bank have no foreign assets or income.

At December 31, 2024, the Company had consolidated total assets of $2.7 billion, net loans of $1.5 billion, total deposits excluding brokered deposits of $2.2 billion and total shareholders' equity of $260.4 million. For the year ended December 31, 2024, the Company recognized consolidated net income of $26.7 million. The principal source of revenue for the Company and the Bank is interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for 64%, 60%, and 59% of total revenues in 2024, 2023, and 2022, respectively. Interest on securities accounted for 19%, 24%, and 24% of total revenues in 2024, 2023, and 2022, respectively. For more information about the Company's financial condition and results of operations, see the consolidated financial statements and related notes included in Item 8 of this report.

Competition

The Bank’s competition primarily comes from other financial institutions located within Kent, Muskegon, Newaygo, and Ottawa counties in western Michigan and Lapeer, Macomb, and St. Clair counties in southeastern Michigan. There are a number of larger commercial banks within the Bank’s primary market areas. The Bank also competes with a large number of other financial institutions, such as savings and loan associations, insurance companies, consumer finance companies, credit unions, internet banks and other financial technology companies, and commercial finance and leasing companies for deposits, loans and service business. Money market mutual funds, brokerage houses and nonfinancial institutions provide many of the financial services offered by the Bank. Many of these competitors have substantially greater resources than the Bank. The principal methods of competition for financial services are price (the rates of interest charged for loans, the rates of interest paid for deposits and the fees charged for services) and the convenience and quality of services rendered to customers.

Supervision and Regulation

Banks and bank holding companies are extensively regulated. The Company is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The Company's activities are generally limited to owning or controlling banks and engaging in such other activities as the Federal Reserve Board may determine to be closely related to banking.

---

Prior approval of the Federal Reserve Board, and in some cases various other government agencies, is required for the Company to acquire control of any additional bank holding companies, banks or other operating subsidiaries. Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support it.

The Bank is chartered under state law and is subject to regulation by the Michigan Department of Insurance and Financial Services (“DIFS”). State banking laws place restrictions on various aspects of banking, including permitted activities, loan interest rates, branching, payment of dividends and capital and surplus requirements. The Bank is a member of the Federal Reserve System and is also subject to regulation by the Federal Reserve Board. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (the “FDIC”) to the maximum extent provided by law. The Bank is a member of the Federal Home Loan Bank system, which provides certain advantages to the Bank, including favorable borrowing rates for certain funds.

The Company is a legal entity separate and distinct from the Bank. The Company's primary source of funds available to pay dividends to shareholders is dividends paid to it by the Bank. There are legal limitations on the extent to which the Bank can lend or otherwise supply funds to the Company. In addition, payment of dividends to the Company by the Bank is subject to various state and federal regulatory limitations.

The Deposit Insurance Funds Act of 1996 authorized the Financing Corporation (“FICO”) to impose periodic assessments on all depository institutions. The purpose of these periodic assessments is to spread the cost of the interest payments on the outstanding FICO bonds issued to recapitalize the Savings Association Insurance Fund (“SAIF”) over a larger number of institutions.

The federal banking agencies have adopted guidelines to promote the safety and soundness of federally-insured depository institutions. These guidelines establish standards for, among other things, internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

The Company and the Bank are subject to regulatory “risk-based” capital guidelines. Failure to meet these capital guidelines could subject the Company or the Bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and other restrictions on its business. In addition, the Bank would generally not receive regulatory approval of any application that requires the consideration of capital adequacy, such as a branch or merger application, unless it could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time.

Under Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank. In addition, if DIFS deems the Bank's capital to be impaired, DIFS may require the Bank to restore its capital by a special assessment on the Company as the Bank's sole shareholder. If the Company fails to pay any assessment, the Company’s directors will be required, under Michigan law, to sell the shares of the Bank's stock owned by the Company to the highest bidder at either a public or private auction and use the proceeds of the sale to restore the Bank's capital.

The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) requires, among other things, federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. FDICIA sets forth the following five capital categories: “well-capitalized,” “adequately-capitalized,” “undercapitalized,” “significantly-undercapitalized” and “critically-undercapitalized.” A depository institution's capital category will depend upon how its capital levels compare with various relevant capital measures as established by regulation, which include a common equity Tier I risk-based capital ratio, Tier 1 risk-based and total risk-based capital ratio measures and a leverage capital ratio measure. In addition, a capital conservation buffer is required. Under certain circumstances, the appropriate banking agency may treat a well-capitalized, adequately-capitalized, or undercapitalized institution as if the institution were in the next lower capital category.

Federal banking regulators are required to take specified mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Subject to a narrow exception, the banking regulator must generally appoint a receiver or conservator for an institution that is critically undercapitalized. An institution in any of the undercapitalized categories is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. An undercapitalized institution is also generally prohibited from paying any dividends, increasing its average total assets, making acquisitions, establishing any branches, accepting or renewing any brokered deposits or engaging in any new line of business, except under an accepted capital restoration plan or with FDIC approval.

Banks are subject to a number of federal and state laws and regulations, which have a material impact on their business. These include, among others, minimum capital requirements, state usury laws, state laws relating to fiduciaries, the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Fair Credit Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment Act, the Real Estate Settlement Procedures Act, the Service Members Civil Relief Act, the USA PATRIOT Act, the Bank Secrecy Act, regulations of the Office of Foreign Assets Controls, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, electronic funds transfer laws, redlining laws, predatory lending laws, antitrust laws, environmental laws, money laundering laws and privacy laws. The monetary policy of the Federal Reserve Board may influence the growth and

---

distribution of bank loans, investments and deposits, and may also affect interest rates on loans and deposits. These policies may have a significant effect on the operating results of banks.

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the Federal Reserve Board has determined to be closely related to the business of banking. In addition, bank holding companies that qualify and elect to be financial holding companies may engage in any activities that are financial in nature or complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system without prior approval of the Federal Reserve Board. Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments. The Company has elected to be a financial holding company.

In order for the Company to maintain financial holding company status, the Bank must be categorized as "well-capitalized" and "well-managed" under applicable regulatory guidelines. If the Company or the Bank ceases to meet these requirements, the Federal Reserve Board may impose corrective capital and/or managerial requirements and place limitations on the Company’s ability to conduct the broader financial activities permissible for financial holding companies. In addition, if the deficiencies persist, the Federal Reserve Board may require the Company to divest of the Bank. The Bank was categorized as "well-capitalized" and "well-managed" as of December 31, 2024.

Bank holding companies may acquire banks and other bank holding companies located in any state in the United States without regard to geographic restrictions or reciprocity requirements imposed by state banking law. Banks may also establish interstate branch networks through acquisitions of and mergers with other banks. The establishment of de novo interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is allowed only if specifically authorized by state law.

Michigan banking laws do not significantly restrict interstate banking. The Michigan Banking Code permits, in appropriate circumstances and with the approval of DIFS, (1) acquisition of Michigan banks by FDIC-insured banks, savings banks or savings and loan associations located in other states, (2) sale by a Michigan bank of branches to an FDIC-insured bank, savings bank or savings and loan association located in a state in which a Michigan bank could purchase branches of the purchasing entity, (3) consolidation of Michigan banks and FDIC-insured banks, savings banks or savings and loan associations located in other states having laws permitting such consolidation, (4) establishment of branches in Michigan by FDIC-insured banks located in other states, the District of Columbia or U.S. territories or protectorates having laws permitting a Michigan bank to establish a branch in such jurisdiction, and (5) establishment by foreign banks of branches located in Michigan.

Banks are subject to the provisions of the Community Reinvestment Act ("CRA"). Under the terms of the CRA, the appropriate federal bank regulatory agency is required, in connection with its examination of a bank, to assess the bank's record in meeting the credit needs of the community served by that bank, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of the institution. Under the CRA, institutions are assigned a rating of "outstanding," "satisfactory," "needs to improve," or "substantial non-compliance." The regulatory agency's assessment of the bank's record is made available to the public. Further, a bank's federal regulatory agency is required to assess the CRA compliance record of any bank that has applied to establish a new branch office that will accept deposits, relocate an office, or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In the case of a bank holding company applying for approval to acquire a bank or another bank holding company, the Federal Reserve Board will assess the CRA compliance record of each subsidiary bank of the applicant bank holding company, and such compliance records may be the basis for denying the application. Upon receiving notice that a subsidiary bank is rated less than "satisfactory," a financial holding company will be prohibited from additional activities that are permitted to be conducted by a financial holding company and from acquiring any company engaged in such activities. The CRA rating of the Bank was "Satisfactory" as of its most recent examination.

Effects of Compliance With Environmental Regulations

The nature of the business of the Bank is such that it holds title, on a temporary or permanent basis, to a number of parcels of real property. These include properties owned for branch offices and other business purposes as well as properties taken in or in lieu of foreclosure to satisfy loans in default. Under current state and federal laws, present and past owners of real property may be exposed to liability for the cost of cleanup of environmental contamination on or originating from those properties, even if they are wholly innocent of the actions that caused the contamination. These liabilities can be material and can exceed the value of the contaminated property. Management is not presently aware of any instances where compliance with these provisions will have a material effect on the capital expenditures, earnings or competitive position of the Company or the Bank, or where compliance with these provisions will adversely affect a borrower's ability to comply with the terms of loan contracts.

---

Employees

As of February 28, 2025, the Company, on a consolidated basis, employed 392 employees, of which 336 were full-time employees. Our employees are not represented by any collective bargaining group. Management considers its employee relations to be good.

Available Information

Our internet address is www.choiceone.bank. We make available free of charge through this website our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after filing or furnishing such reports with the Securities and Exchange Commission. The information on our website address is not incorporated by reference into this report, and the information on the website is not part of this report.

Statistical Information

Additional statistical information describing the business of the Company appears on the following pages and in Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report and in the Consolidated Financial Statements and the notes thereto in Item 8 of this report. The following statistical information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes in this report. Average balances used in statistical information are calculated using daily averages, unless otherwise specified.

The Company did not hold investment securities from any one issuer at December 31, 2024, that were greater than 10% of the Company's shareholders' equity, exclusive of U.S. Government and U.S. Government agency securities.

Presented below is the fair value of securities available for sale and amortized cost for held to maturity securities as of December 31, 2024, a schedule of maturities of securities as of December 31, 2024, and the weighted average yields of securities as of December 31, 2024. Callable securities in the money are presumed called and matured at the callable date.

	Available for Sale Securities maturing within:
																	Fair Value
	Less than				1 Year -				5 Years -				More than				at December 31,
(Dollars in thousands)	1 Year				5 Years				10 Years				10 Years				2024
U.S. Government and federal agency	$	-			$	-			$	-			$	-			$	-
U.S. Treasury notes and bonds		-				80,502				-				-				80,502
State and municipal		1,248				16,732				74,306				135,950				228,236
Corporate		-				-				212				-				212
Asset-backed securities		-				6,702				2,495				-				9,197
Total debt securities		1,248				103,936				77,013				135,950				318,147
Mortgage-backed securities		3,420				81,629				63,212				12,709				160,970
Total Available for Sale	$	4,668			$	185,565			$	140,225			$	148,659			$	479,117

	Available for Sale weighted average yields:
	Less than				1 Year -				5 Years -				More than
	1 Year				5 Years				10 Years				10 Years				Total
U.S. Government and federal agency		-		%		-		%		-		%		-		%		-		%
U.S. Treasury notes and bonds		-				1.16				-				-				1.16
State and municipal		2.68				2.63				2.46				2.51				2.51
Corporate		-				-				3.75				-				3.75
Asset-backed securities		-				5.31				5.42				-				5.34
Mortgage-backed securities		3.60				3.30				2.46				2.03				2.87

Security yields are shown before the impact of interest rate swaps. ChoiceOne holds pay fixed, receive variable swaps with a notional value of $201.0 million which effect the interest earned on securities. Further details can be found in Note 8 - Derivatives and Hedging Activities.

---

	Held to Maturity Securities maturing within:
																	Amortized Cost
	Less than				1 Year -				5 Years -				More than				at December 31,
(Dollars in thousands)	1 Year				5 Years				10 Years				10 Years				2024
U.S. Government and federal agency	$	-			$	2,978			$	-			$	-			$	2,978
U.S. Treasury notes and bonds		-				-				-				-				-
State and municipal		2,517				19,999				102,635				71,359				196,510
Corporate		-				-				20,495				-				20,495
Asset-backed securities		228				-				-				-				228
Total debt securities		2,745				22,977				123,130				71,359				220,211
Mortgage-backed securities		5,300				72,804				96,219				-				174,323
Total Held to Maturity	$	8,045			$	95,781			$	219,349			$	71,359			$	394,534

	Held to Maturity weighted average yields:
	Less than				1 Year -				5 Years -				More than
	1 Year				5 Years				10 Years				10 Years				Total
U.S. Government and federal agency		-		%		1.61		%		-		%		-		%		1.61		%
U.S. Treasury notes and bonds		-				-				-				-				-
State and municipal		3.53				1.99				2.09				2.48				2.24
Corporate		-				-				4.09				-				4.09
Asset-backed securities		1.10				-				-				-				1.10
Mortgage-backed securities		5.03				3.21				2.24				-				2.73

Weighted average yields are calculated based on the fair value of securities available for sale and amortized cost of securities held to maturity which are denoted in the table above. Weighted average yields for tax-exempt securities is computed on a fully tax-equivalent basis at an incremental tax rate of 21% for 2024.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following schedule presents the maturities of loans as of December 31, 2024. Loans are also classified according to the sensitivity to changes in interest rates as of December 31, 2024. Note maturity dates are different than repricing dates used on call report.

(Dollars in thousands)	In one year				After one year				After five years				After fifteen
	or less				through five years				through fifteen years				years				Total
Agricultural	$	13,774			$	16,839			$	14,617			$	2,991			$	48,221
Commercial and industrial		67,117				100,873				59,173				1,093				228,256
Commercial real estate		104,382				579,873				207,700				9,175				901,130
Construction real estate		16,156				363				-				523				17,042
Consumer		1,354				16,971				8,980				2,107				29,412
Residential real estate		1,325				12,939				117,188				150,249				281,701
Loans to other financial institutions		39,878				-				-				-				39,878
Totals	$	243,986			$	727,858			$	407,658			$	166,138			$	1,545,640

(Dollars in thousands)	Fixed or				Floating or
	predetermined rates				variable rates				Total
Loans maturing after one year:
Agricultural	$	33,260			$	1,187			$	34,447
Commercial and industrial		122,686				38,453				161,139
Commercial real estate		593,322				203,426				796,748
Construction real estate		886				-				886
Consumer		27,591				467				28,058
Residential real estate		134,340				146,036				280,376
Loans to other financial institutions		-				-				-
Totals	$	912,085			$	389,569			$	1,301,654

---

Loan maturities are classified according to the contractual maturity date or the anticipated amortization period, whichever is appropriate. The anticipated amortization period is used in the case of loans where a balloon payment is due before the end of the loan’s normal amortization period. At the time the balloon payment is due, the loan can either be rewritten or payment in full can be requested. The decision regarding whether the loan will be rewritten or a payment in full will be requested will be based upon the loan’s payment history, the borrower’s current financial condition, and other relevant factors.

The following table reflects the composition of our allowance for credit losses, non-accrual loans, and nonperforming loans as a percentage of total loans represented by each class of loans as of the dates indicated:

(Dollars in thousands)	Agricultural				Commercial and industrial				Consumer				Commercial real estate				Construction real estate				Residential real estate				Loans to other financial institutions			Totals
Loans
December 31, 2024	$	48,221			$	228,256			$	29,412			$	901,130			$	17,042			$	281,701			$	39,878		$	1,545,640
Allowance for credit losses year ended December 31, 2024	$	90			$	2,260			$	733			$	9,460			$	59			$	3,890			$	60		$	16,552
Allowance as a percentage of loan category		0.19	%			0.99	%			2.49	%			1.05	%			0.35	%			1.38	%			0.15	%		1.07	%
Nonaccrual loans year ended December 31, 2024	$	-			$	-			$	8			$	-			$	229			$	3,467			$	-		$	3,704
Nonaccrual as a percentage of loan category		0.00	%			0.00	%			0.03	%			0.00	%			1.34	%			1.23	%			0.00	%		0.24	%
Allowance as a percentage of nonaccrual loans	NA				NA					9162.50	%		NA					25.76	%			112.20	%		NA				446.87	%
Nonperforming loans year ended December 31, 2024	$	-			$	-			$	8			$	-			$	229			$	3,467			$	-		$	3,704
Nonperforming loans as a percentage of loan category		0.00	%			0.00	%			0.03	%			0.00	%			1.34	%			1.23	%			0.00	%		0.24	%
Net deposit charge-offs during the year ended December 31, 2024	$	-			$	-			$	(237	)		$	-			$	-			$	-			$	-		$	(237	)
Net loan charge-offs during the year ended December 31, 2024	$	-			$	8			$	(189	)		$	-			$	-			$	(15	)		$	-		$	(196	)
Net charge-offs during the year ended December 31, 2024	$	-			$	8			$	(426	)		$	-			$	-			$	(15	)		$	-		$	(433	)
Net charge-offs during the year to average loans outstanding		0.00	%			0.00	%			-0.03	%			0.00	%			0.00	%			0.00	%			0.00	%		-0.03	%

(Dollars in thousands)	Agricultural				Commercial and industrial				Consumer				Commercial real estate				Construction real estate				Residential real estate				Loans to other financial institutions			Totals
Loans
December 31, 2023	$	49,210			$	229,915			$	36,541			$	786,921			$	20,936			$	267,730			$	19,400		$	1,410,653
Allowance for loan losses year ended December 31, 2023	$	94			$	2,216			$	823			$	8,820			$	58			$	3,644			$	30		$	15,685
Allowance as a percentage of loan category		0.19	%			0.96	%			2.25	%			1.12	%			0.28	%			1.36	%			0.15	%		1.11	%
Nonaccrual loans year ended December 31, 2023	$	-			$	1			$	-			$	-			$	-			$	1,722			$	-		$	1,723
Nonaccrual as a percentage of loan category		0.00	%			0.00	%			0.00	%			0.00	%			0.00	%			0.64	%			0.00	%		0.12	%
Allowance as a percentage of nonaccrual loans	NA				NA				NA				NA				NA					211.61	%		NA				910.33	%
Nonperforming loans year ended December 31, 2023					$	61			$	-			$	-			$	-			$	1,851			$	-		$	1,912
Nonperforming loans as a percentage of loan category		0.00	%			0.03	%			0.00	%			0.00	%			0.00	%			0.69	%			0.00	%		0.14	%
Net deposit charge-offs during the year ended December 31, 2023	$	-			$	-			$	(226	)		$	-			$	-			$	-			$	-		$	(226	)
Net loan charge-offs during the year ended December 31, 2023	$	-			$	(92	)		$	(45	)		$	13			$	-			$	(14	)		$	-		$	(138	)
Net charge-offs during the year ended December 31, 2023	$	-			$	(92	)		$	(271	)		$	13			$	-			$	(14	)		$	-		$	(364	)
Net charge-offs during the year to average loans outstanding		0.00	%			-0.01	%			-0.02	%			0.00	%			0.00	%			0.00	%			0.00	%		-0.03	%

NA – No non-accrual loans in the loan category.

Additions to the allowance for credit losses charged to operations during the periods shown were based on management’s judgment after considering the factors laid out in Note 1 “Allowance for Credit Losses” to the consolidated financial statements. ChoiceOne

---

adopted the Financial Accounting Standards Board (the "FASB") Account Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , commonly referred to as "CECL" effective January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts are reported in accordance with the incurred loss accounting standard. The transition adjustment of the CECL adoption included an increase in the ACL of $7.2 million. The evaluation of the loan portfolio is based upon various risk factors such as the financial condition of the borrower, the value of collateral, reasonable and supportable forecasts, and other considerations, which, in the opinion of management, deserve current recognition in estimating credit losses.

The following schedule presents an allocation of the allowance for credit losses to the various loan categories as of the years ended December 31:

	2024				2023				2022
Agricultural	$	90			$	94			$	144
Commercial and industrial		2,260				2,216				1,361
Commercial real estate		9,460				8,820				4,822
Construction real estate		59				58				63
Residential real estate		3,890				3,644				906
Consumer		733				823				310
Loans to other financial institutions		60				30				-
Unallocated		-				-				13
Total allowance for loan losses	$	16,552			$	15,685			$	7,619

Deposits

The following schedule presents the average deposit balances by category and the average rates paid thereon for the respective years:

(Dollars in thousands)
	2024									2023									2022
	Average Balance				Average Rate					Average Balance				Average Rate					Average Balance				Average Rate
Noninterest-bearing demand	$	519,709				-		%		$	546,926				-		%		$	582,992				-		%
Interest-bearing demand and money market deposits		896,060				1.45					852,927				1.18					902,090				0.39
Savings		334,310				0.85					370,074				0.43					452,542				0.16
Certificates of deposit		415,626				4.38					342,043				3.46					196,166				0.83
Total	$	2,165,705				1.57		%		$	2,111,970				1.11		%		$	2,133,790				0.27		%

Amount of time deposits in uninsured accounts as of December 31, 2024 (Dollars in thousands)
Maturing in less than 3 months	$	66,016
Maturing in 3 to 6 months		65,320
Maturing in 6 to 12 months		74,396
Maturing in more than 12 months		4,791
Total uninsured time deposits	$	210,523

At December 31, 2024, the aggregate balance of all deposits exceeding the FDIC insured limit of $250,000 for individual and $500,000 for joint accounts totaled $833.2 million, or 37.6% of total deposits, compared to $769.7 million, or 36.3% of total deposits and $823.2 million, or 38.9% of total deposits at December 31, 2023 and 2022, respectively. Certificate of Deposit Account Registry Service ("CDARs") and Insured Cash Sweep ("ICS") deposits are excluded from the above table as these deposits are 100% guaranteed.

Core deposits, which we define as insured branch deposits less certificates of deposit, totaled $1.1 billion or 51.2% of total deposits at December 31, 2024.

At December 31, 2024, the Bank had no material foreign deposits.

---

Return on Equity and Assets

The following schedule presents certain financial ratios of the Company for the years ended December 31:

	2024				2023				2022
Return on assets (net income divided by average total assets)		1.00		%		0.85		%		1.00		%
Return on equity (net income divided by average equity)		11.80		%		12.00		%		13.25		%
Dividend payout ratio (dividends declared per share divided by net income per share)		33.72		%		37.21		%		32.06		%
Equity to assets ratio (average equity divided by average total assets)		8.49		%		7.11		%		7.52		%

Item 1A. Risk Factors

The Company is subject to many risks and uncertainties. Although the Company seeks ways to manage these risks and develop programs to control risks to the extent that management can control them, the Company cannot predict the future. Actual results may differ materially from management’s expectations. Some of these significant risks and uncertainties are discussed below. The risks and uncertainties described below are not the only ones that the Company faces. Additional risks and uncertainties of which the Company is unaware, or that it currently does not consider to be material, also may become important factors that affect the Company and its business. If any of these risks were to occur, the Company’s business, financial condition or results of operations could be materially and adversely affected.

Risks Related to the Company ’ s Business

Asset quality could be less favorable than expected.

A significant source of risk for the Company arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most loans originated by the Company are secured, but some loans are unsecured depending on the nature of the loan. With respect to secured loans, the collateral securing the repayment of these loans includes a wide variety of real and personal property that may be insufficient to cover the obligations owed under such loans. Collateral values may be adversely affected by changes in prevailing economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, terrorist activity, environmental contamination, public health crisis, and other external events.

The Company’s allowance for credit losses may not be adequate to cover actual credit losses.

The risk of nonpayment of loans is inherent in all lending activities and nonpayment of loans may have a material adverse effect on the Company’s earnings and overall financial condition, and the value of its common stock. The Company makes various assumptions and judgments about the collectability of its loan portfolio and provides an allowance for credit losses based on a number of factors. If its assumptions are wrong, the allowance for credit losses may not be sufficient to cover losses, which could have an adverse effect on the Company’s operating results and may cause it to increase the allowance in the future. The actual amount of future provisions for credit losses cannot now be determined and may exceed the amounts of past provisions for credit losses. Federal and state banking regulators, as an integral part of their supervisory function, periodically review the allowance for credit losses. These regulatory agencies may require the Company to increase its allowance for credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from the Company’s judgments. Any increase in the allowance for credit losses could have a negative effect on the Company’s regulatory capital ratios, net income, financial condition and results of operations.

General economic conditions in the state of Michigan could have a material adverse effect on the Company ’ s results of operations or financial condition.

The Company is affected by general economic conditions in the United States, although most directly within Michigan. An economic downturn within Michigan caused by inflation, recession or a recessionary environment, trade tariffs, unemployment, changes in financial or capital markets or other factors, could negatively impact household and corporate incomes. This impact may lead to decreased demand for both loan and deposit products and increase the number of customers who fail to pay interest or principal on their loans.

We may be adversely affected by risks associated with future mergers and acquisitions, including execution risk, which could disrupt our business and dilute shareholder value.

We plan to grow our business both organically and through mergers and acquisitions. We periodically evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, we may engage in discussions or negotiations that, if they were to result in a transaction, could have a material

---

effect on our operating results and financial condition. Our merger and acquisition activities could be material and could require us to use a substantial amount of common stock, preferred stock, cash, other liquid assets, and/or incur debt. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from our merger and acquisition activities could have a material adverse effect on our financial condition and results of operations.

The Company could be adversely affected by the soundness of other financial institutions, including defaults by larger financial institutions.

The Company's ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of credit, trading, clearing, counterparty or other relationships between financial institutions. The Company has exposure to multiple counterparties, and it routinely executes transactions with counterparties in the financial industry. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by the Company or by other institutions. This is sometimes referred to as "systemic risk" and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which the Company interacts on a daily basis, and therefore could adversely affect the Company.

If the Company does not adjust to changes in the financial services industry, its financial performance may suffer.

The Company’s ability to maintain its financial performance and return on investment to shareholders will depend in part on its ability to maintain and grow its core deposit customer base and expand its financial services to its existing customers. In addition to other banks, competitors include credit unions, securities dealers, brokers, mortgage bankers, investment advisors, internet banks and other financial technology companies, and finance and insurance companies. The increasingly competitive environment is, in part, a result of changes in the economic environment within the state of Michigan, regulation, changes in technology and product delivery systems and consolidation among financial service providers. New competitors may emerge to increase the degree of competition for the Company’s customers and services. Financial services and products are also constantly changing. The Company’s financial performance will also depend in part upon customer demand for the Company’s products and services and the Company’s ability to develop and offer competitive financial products and services.

We are subject to significant government regulation, and any regulatory changes may adversely affect us.

We are subject to extensive government regulation under both federal and state law. We are subject to regulation by the Federal Reserve, the FDIC and the DIFS, in addition to other regulatory and self-regulatory organizations. Current laws and applicable regulations are subject to change and any new regulatory change could make compliance more expensive, difficult, or otherwise adversely affect our business. Specifically, regulation changes to overdraft fees could adversely affect our business. We cannot predict the ultimate effect of any changes to regulations affecting us, but such changes could have a material adverse effect on our results of operation or financial condition.

Changes in interest rates could reduce the Company’s income and cash flow.

The Company’s income and cash flow depends, to a great extent, on the difference between the interest earned on loans and securities, and the interest paid on deposits and other borrowings. Market interest rates are beyond the Company’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies including, in particular, the Federal Reserve Board. Changes in monetary policy, including changes in interest rates and interest rate relationships, will influence the origination of loans, the purchase of investments, the generation of deposits and the rate received on loans and securities and paid on deposits and other borrowings.

The Company is subject to liquidity risk in its operations, which could adversely affect its ability to fund various obligations.

Liquidity risk is the possibility of being unable to meet obligations as they come due or capitalize on growth opportunities as they arise because of an inability to liquidate assets or obtain adequate funding on a timely basis, at a reasonable cost and within acceptable risk tolerances. Liquidity is required to fund various obligations, including credit obligations to borrowers, loan originations, withdrawals by depositors, repayment of debt, dividends to shareholders, operating expenses and capital expenditures. Liquidity is derived primarily from retail deposit growth and earnings retention, principal and interest payments on loans and investment securities, net cash provided from operations and access to other funding. If the Company is unable to maintain adequate liquidity, then its business, financial condition and results of operations would be negatively affected.

If the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operation and financial condition.

---

At December 31, 2024, the Company had $116.6 million in unrealized losses on its investment securities, including $61.1 million in unrealized losses on available for sale securities and $55.5 in unrealized losses on held to maturity securities. If the Company were required to sell investment securities in an unrealized loss position to meet liquidity needs and realize losses, that could have a material adverse impact on its results of operations and financial condition, including a negative impact on net income and a permanent reduction in equity capital. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

Evaluation of investment securities for an allowance for credit losses involves subjective determinations and could have a material adverse impact on our results of operations and financial condition.

The fair value evaluation of investment securities is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of investments require the establishment of an allowance for credit losses. The risks and uncertainties include changes in general economic conditions, the issuer’s financial condition or future recovery prospects and the effects of changes in interest rates or credit spreads. Estimating future cash flows involves incorporating information received from third-party sources and making internal assumptions and judgments regarding the future performance of the underlying collateral and assessing the probability that an adverse change in future cash flows has occurred. The determination of an allowance for credit losses is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Our management considers a wide range of factors about the security issuer and uses reasonable judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Additions to the allowance for credit losses for our investment securities may need to be taken in the future, which could have a material adverse effect on our results of operations and financial condition.

The Company has significant exposure to risks associated with commercial and residential real estate.

A substantial portion of the Company’s loan portfolio consists of commercial and residential real estate-related loans, including real estate development, construction and residential and commercial mortgage loans. As of December 31, 2024, the Company had approximately $918.2 million of commercial and construction real estate loans outstanding, which represented approximately 59.4% of its loan portfolio. As of that same date, the Company had approximately $281.7 million in residential real estate loans outstanding, or approximately 18.2% of its loan portfolio. Consequently, real estate-related credit risks are a significant concern for the Company. The adverse consequences from real estate-related credit risks tend to be cyclical and are often driven by national economic developments that are not controllable or entirely foreseeable by the Company or its borrowers.

Commercial loans may expose the Company to greater financial and credit risk than other loans.

The Company’s commercial and industrial loan portfolio, including commercial mortgages, was approximately $228.3 million at December 31, 2024, comprising approximately 14.8% of its total loan portfolio. Commercial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans. Any significant failure to pay on time by the Company’s customers would hurt the Company’s earnings. The increased financial and credit risk associated with these types of loans are a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the size of loan balances, the effects of general economic conditions on income-producing properties and the increased difficulty of evaluating and monitoring these types of loans.

Legislative or regulatory changes or actions could adversely impact the Company or the businesses in which it is engaged.

The Company and the Bank are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of their operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance fund, and not to benefit the Company’s shareholders. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact the Company or its ability to increase the value of its business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by the institution and the adequacy of an institution’s allowance for credit losses. Future regulatory changes or accounting pronouncements may increase the Company’s regulatory capital requirements or adversely affect its regulatory capital levels. Additionally, actions by regulatory agencies against the Company or the Bank could require the Company to devote significant time and resources to defending its business and may lead to penalties that materially affect the Company.

The Company relies heavily on its management and other key personnel, and the loss of any of them may adversely affect its operations.

---

The Company is and will continue to be dependent upon the services of its management team and other key personnel. Losing the services of one or more key members of the Company’s management team could adversely affect its operations.

The Company ’ s controls and procedures may fail or be circumvented.

Management regularly reviews and updates the Company’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. If the Company fails to identify and remediate control deficiencies, it is possible that a material misstatement of interim or annual financial statements will not be prevented or detected on a timely basis. In addition, any failure or circumvention of the Company’s other controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company may be a defendant in a variety of litigation and other actions, which may have a material adverse effect on the Company’s financial condition and results of operations.

The Company and the Bank are regularly involved in a variety of litigation arising out of the normal course of business. The Company’s insurance may not cover all claims that may be asserted against it, and any claims asserted against it, regardless of merit or eventual outcome, may harm its reputation or cause the Company to incur unexpected expenses, which could be material in amount. Should the ultimate expenses, judgments or settlements in any litigation exceed the Company’s insurance coverage, they could have a material adverse effect on the Company’s financial condition and results of operations. In addition, the Company may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms, if at all.

If the Company cannot raise additional capital when needed, its ability to further expand its operations through organic growth or acquisitions could be materially impaired.

The Company is required by federal and state regulatory authorities to maintain specified levels of capital to support its operations. The Company may need to raise additional capital to support its current level of assets or its growth. The Company’s ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside its control, and on its financial performance. The Company cannot assure that it will be able to raise additional capital in the future on terms acceptable to it or at all. If the Company cannot raise additional capital when needed, its ability to maintain its current level of assets or to expand its operations through organic growth or acquisitions could be materially limited.

Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of computer systems or otherwise, could severely harm the Company’s business.

As part of its business, the Company collects, processes and retains sensitive and confidential client and customer information on behalf of itself and other third parties. Despite the security measures the Company has in place for its facilities and systems, and the security measures of its third party service providers, the Company may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by the Company or by its vendors, could severely damage the Company’s reputation, expose it to the risks of litigation and liability, disrupt the Company’s operations and have a material adverse effect on the Company’s business.

The Company's information systems may experience an interruption or breach in security.

The Company relies heavily on communications and information systems to conduct its business and deliver its products. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of its information systems, there can be no assurance that any such failures, interruptions or security breaches of the Company’s information systems or its customers’ information or computer systems would not damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

---

Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to information technology (IT) systems to sophisticated and targeted measures known as advanced persistent threats, directed at the Company and/or its third party service providers. Although we employ reasonably comprehensive measures to prevent, detect, address and mitigate these threats (including access controls, employee training, data encryption, vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems), cybersecurity incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties and increased cybersecurity protection and remediation costs, which in turn could materially adversely affect our results of operations.

Employee misconduct could adversely impact our reputation and results of operations.

Our reputation is crucial to maintaining and developing relationships with our customers. There is a risk our employees could engage in misconduct that adversely affects our business. For example, if an employee were to engage (or be accused of engaging) in fraudulent, illegal, or suspicious activities, including fraud or theft, we could be subject to regulatory sanctions or penalties, or litigation, and suffer significant harm to our reputation, financial position, and customer relationships as a result. Additionally, our business often requires that we deal with sensitive customer information. If our employees were to improperly use or disclose this information, even inadvertently, we could suffer significant harm to our reputation, financial position and current and future business relationships. We may not be able to deter all employee misconduct, and the precautions we take to detect and prevent this misconduct may not be effective in all circumstances. Misconduct or harassment by our employees (or unsubstantiated allegations of the same), or improper use or disclosure of confidential information by our employees, even inadvertently, could result in a material adverse effect on our business, reputation, or results of operations.

Environmental liability associated with commercial lending could result in losses.

In the course of its business, the Company may acquire, through foreclosure, properties securing loans that are in default. Particularly in commercial real estate lending, there is a risk that hazardous substances could be discovered on these properties. In this event, the Company might be required to remove these substances from the affected properties at the Company’s sole cost and expense. The cost of this removal could substantially exceed the value of affected properties. The Company may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. These events could have an adverse effect on the Company’s business, results of operations and financial condition.

The Company depends upon the accuracy and completeness of information about customers.

In deciding whether to extend credit to customers, the Company relies on information provided to it by its customers, including financial statements and other financial information. The Company may also rely on representations of customers as to the accuracy and completeness of that information and on reports of independent auditors on financial statements. The Company’s financial condition and results of operations could be negatively impacted to the extent that the Company extends credit in reliance on financial statements that do not comply with generally accepted accounting principles or that are misleading or other information provided by customers that is false or misleading.

Our reliance on third party vendors could cause operational losses or business interruptions.

We rely on third party service providers for certain components of our business activity. If these third party service providers experience difficulties or terminate their services and we are unable to replace them with other service providers, our operations could be interrupted. Even if we are able to replace them with another service provider, the replacement may be more expensive or offer an inferior service. Any of these outcomes could have a material adverse effect on our business, financial condition or results of operations.

The Company operates in a highly competitive industry and market area.

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national and regional banks within the various markets where the Company operates, as well as internet banks and other financial technology companies. The Company also faces competition from many other types of financial institutions, including savings and loan associations, credit unions, finance companies, brokerage firms, insurance companies and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. The Company competes with these institutions both in attracting deposits and in making new loans. Technology has lowered barriers to entry into the market and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and

---

automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures, such as credit unions that are not subject to federal income tax. Due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.

Severe weather, natural disasters, acts of war or terrorism, a public health crisis, and other external events could significantly impact the Company’s business.

Severe weather, natural disasters, acts of war or terrorism, risks posed by an outbreak of a widespread epidemic or pandemic of disease (or widespread fear thereof) or other public health crisis, and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses.

The Company relies on dividends from the Bank for most of its revenue.

The Company is a separate and distinct legal entity from the Bank. It receives substantially all of its revenue from dividends from the Bank. These dividends are the principal source of funds to pay cash dividends on the Company’s common stock. Various federal and/or state laws and regulations limit the amount of dividends that the Bank may pay to the Company. If the Bank is unable to pay dividends to the Company, the Company may not be able to pay cash dividends on its common stock. The earnings of the Bank have been the principal source of funds to pay cash dividends to shareholders. Over the long-term, cash dividends to shareholders are dependent upon earnings, as well as capital requirements, regulatory restraints and other factors affecting the Company and the Bank.

Additional risks and uncertainties could have a negative effect on financial performance.

Additional factors could have a negative effect on the financial performance of the Company and the Company’s common stock. Some of these factors are financial market conditions, changes in financial accounting and reporting standards, new litigation or changes in existing litigation, regulatory actions and losses.

Risks Related to the Company ’ s Common Stock

Investments in the Company ’ s common stock involve risk.

The market price of the Company’s common stock may fluctuate significantly in response to a number of factors, including:

The Company’s common stock, while publicly traded, has less liquidity than the average liquidity of stocks listed on the Nasdaq Stock Market.

---

The Company’s common stock is listed for trading on the Nasdaq Capital Market. However, the Company’s common stock has less liquidity than the average liquidity for companies listed in the Nasdaq Stock Market. The public trading market for the Company’s common stock depends on a marketplace of willing buyers and sellers at any given time, which in turn depends on factors outside of the Company’s control, including general economic and market conditions and the decisions of individual investors. The limited market for the Company’s common stock may affect a shareholder’s ability to sell their shares at any given time, and the sale of a large number of shares at one time could temporarily adversely affect the market price of our common stock.

The Company's common stock is not insured by any government entity.

The Company’s common stock is not insured by the FDIC or any other government entity. Investment in the Company’s common stock is subject to risk and potential loss.

A shareholder’s ownership of common stock may be diluted if the Company issues additional shares of common stock in the future.

The Company’s articles of incorporation authorize the Company’s Board of Directors to issue additional shares of common stock or preferred stock without shareholder approval. To the extent the Company issues additional shares of common stock or preferred stock, or issues options or warrants permitting the holder to purchase or acquire common stock in the future and such warrants or options are exercised, the Company’s shareholders may experience dilution in their ownership of the Company’s common stock. Holders of the Company’s common stock do not have any preemptive or similar rights to purchase a pro rata share of any additional shares offered or issued by the Company.

The value of the Company's common stock may be adversely affected if the Company issues debt and equity securities that are senior to the Company's common stock in liquidation or as to distributions.

The Company may increase its capital by issuing debt or equity securities or by entering into debt or debt-like financing. This may include the issuance of common stock, preferred stock, senior notes, or subordinated notes. Upon any liquidation of the Company, the Company’s lenders and holders of its debt securities would be entitled to distribution of the Company’s available assets before distributions to the holders of the Company’s common stock, and holders of preferred stock may be granted rights to similarly receive a distribution upon liquidation prior to distribution to holders of the Company’s common stock. The Company cannot predict the amount, timing or nature of any future debt financings or stock offerings, and the decision of whether to incur debt or issue securities will depend on market conditions and other factors beyond the Company’s control. Future offerings could dilute a shareholder’s interests in the Company or reduce the per-share value of the Company’s common stock.

The Company's articles of incorporation and bylaws, and certain provisions of Michigan law, contain provisions that could make a takeover effort more difficult.

The Michigan Business Corporation Act, and the Company’s articles of incorporation and bylaws, include provisions intended to protect shareholders and prohibit, discourage, or delay certain types of hostile takeover activities. In addition, federal law requires the Federal Reserve Board’s prior approval for acquisition of “control” of a bank holding company such as the Company, including acquisition of 10% or more of the Company’s outstanding securities by any person not defined as a company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). These provisions and requirements could discourage potential acquisition proposals, delay or prevent a change in control, diminish the opportunities for a shareholder to participate in tender offers, prevent transactions in which our shareholders might otherwise receive a premium for their shares, or limit the ability for our shareholders to approve transactions that they may believe to be in their best interests.

An entity or group holding a certain percentage of the Company's outstanding securities could become subject to regulation as a "bank holding company" or may be required to obtain prior approval of the Federal Reserve Board.

Any bank holding company or foreign bank with a presence in the United States may be required to obtain approval of the Federal Reserve Board under the BHC Act to acquire or retain 5% or more of the Company’s outstanding securities. Further, if any entity (including a “group” comprised of individual persons) owns or controls the power to vote 25% or more of the Company’s outstanding securities, or 5% or more of the outstanding securities if the entity otherwise exercises a “controlling influence” over the Company, the entity may become subject to regulation as a “bank holding company” under the BHC Act. An entity that is subject to regulation as a bank holding company would be subject to regulatory and statutory obligations and restrictions, and could be required to divest all or a portion of the entity’s investment in the Company’s securities or in other investments that are not permitted for a bank holding company.

Item 1B. Unreso lved Staff Comments

None.

---

Item 2. Prope rties

The Company’s headquarters are located at 109 East Division, Sparta, Michigan 49345. The headquarters location is owned by the Company and is not subject to any mortgage.

29 of the Company’s 35 locations are designed for use and operation as a bank branch office, are well maintained, and are suitable for current operations. The remaining six locations are comprised of loan production and wealth management offices. Offices generally range in size from 1,200 to 3,200 square feet, based on the location and number of employees located at the facility. All of our offices are owned by the Bank except for seven that are leased under various operating lease agreements. The Company’s management believes all offices are adequately covered by property insurance.

---

Item 3. Legal P roceedings

As of December 31, 2024, there were no significant pending legal proceedings to which the Company or the Bank is a party or to which any of their properties were subject, except for legal proceedings arising in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material adverse effect on the consolidated financial condition of the Company.

Item 4. M ine Safety Disclosures

Not applicable.

---

PART II

Item 5. Mar ket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Information

The Company’s common stock is traded on the NASDAQ Capital Market under the symbol COFS.

As of February 28, 2025, there were approximately 1,095 owners of record and approximately 2,200 beneficial owners of our common stock.

The following table summarizes the quarterly cash dividends declared per share of common stock during 2024 and 2023:

		2024				2023
First Quarter		$	0.27			$	0.26
Second Quarter			0.27				0.26
Third Quarter			0.27				0.26
Fourth Quarter			0.28				0.27
Total		$	1.09			$	1.05

ChoiceOne’s principal source of funds to pay cash dividends is the earnings and dividends paid by the Bank. The Bank is restricted in its ability to pay cash dividends under current banking regulations. See Note 21 – Regulatory Capital to the consolidated financial statements for a description of these restrictions. Based on information presently available, management expects ChoiceOne to declare and pay regular quarterly cash dividends in 2025, although the amount of the quarterly dividends will be dependent on market conditions and ChoiceOne’s requirements for cash and capital, among other things.

Information regarding the Company’s equity compensation plans may be found in Item 12 of this report and is here incorporated by reference.

ISSUER PURCHASES OF EQUITY SECURITIES

ChoiceOne’s common stock repurchase plan announced in April 2021 and amended in 2022, authorizes the repurchase of up to 375,388 shares, representing 5% of the total outstanding shares of common stock as of the date the plan was adopted. No shares were repurchased under this plan in 2024.

As of December 31, 2024, there were 375,388 shares remaining that may yet be repurchased under the plan. There was no stated expiration date.

Item 6. Res erved

---

Item 7. Manag ement's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is designed to provide a review of the consolidated financial condition and results of operations of ChoiceOne Financial Services, Inc. (“ChoiceOne” or the “Company”), and its wholly-owned subsidiaries. This discussion should be read in conjunction with the consolidated financial statements and related footnotes.

We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2023 Annual Report on Form 10-K.

Selected Financial Data

(Dollars in thousands, except per share data)
		2024				2023				2022
For the year
Net interest income		$	74,442			$	65,885			$	67,314
Provision for credit losses, net			625				150				250
Noninterest income			17,995				14,906				14,072
Noninterest expense			58,723				55,074				53,478
Income before income taxes			33,089				25,567				27,658
Income tax expense			6,362				4,306				4,018
Net income			26,727				21,261				23,640
Cash dividends declared			9,012				7,910				7,578
Per share
Basic earnings		$	3.27			$	2.82			$	3.15
Diluted earnings			3.25				2.82				3.15
Cash dividends declared			1.09				1.05				1.01
Shareholders' equity (at year end)			29.05				25.92				22.47
Average for the year
Securities		$	981,454			$	1,042,559			$	1,094,559
Gross loans			1,456,434				1,265,261				1,104,030
Deposits			2,165,705				2,111,970				2,133,790
Borrowings			208,142				141,507				13,537
Subordinated debt			35,627				35,382				35,211
Shareholders' equity			226,547				177,201				178,415
Assets			2,668,556				2,493,840				2,373,374
At year end
Securities		$	896,123			$	939,576			$	972,802
Gross loans			1,552,928				1,415,363				1,194,616
Deposits			2,214,103				2,122,055				2,118,003
Borrowings			175,000				200,000				50,000
Subordinated debt			35,752				35,507				35,262
Shareholders' equity			260,415				195,634				168,874
Assets			2,723,243				2,576,706				2,385,915
Selected financial ratios
Return on average assets			1.00		%		0.85		%		1.00		%
Return on average shareholders' equity			11.80				12.00				13.25
Cash dividend payout as a percentage of net income			33.72				37.21				32.06
Shareholders' equity to assets (at year end)			9.56				7.59				7.08

---

RECENT EVENTS

ChoiceOne and Fentura Financial, Inc., the parent company of The State Bank, entered into a definitive merger agreement on July 25, 2024 pursuant to which ChoiceOne and Fentura would merge in an all-stock transaction (the “Merger”). The Merger was effective on March 1, 2025.

On July 26, 2024, ChoiceOne completed an underwritten public offering of 1,380,000 shares of its common stock at a price to the public of $25.00 per share.

RESULTS OF OPERATIONS

Summary

ChoiceOne's net income for 2024 was $26.7 million, compared to $21.3 million in 2023. Diluted earnings per share were $3.25 in the twelve months ended December 31, 2024, compared to $2.82 per share in the twelve months ended December 31, 2023. Net income adjusted for merger related expenses (non-GAAP) was $27.7 million for the twelve months ended December 31, 2024 with adjusted diluted earnings per share of $3.37.

ChoiceOne's asset mix has shifted from loans held for investment of 66.5% of deposits at December 31, 2023 to 69.8% of deposits at 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 million reduction 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 experienced.

Deposits, excluding brokered deposits increased $79.0 million or 3.8% during 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 increased from 1.14% in 2023 to 1.58% in 2024. During 2023 ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and declined slightly in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the twelve months ended December 31, 2024, increased $3.1 million compared to the same period in the prior year, due to increases in the average balance 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 ChoiceOne's 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.

The provision for credit losses expense on loans was $1.3 million in the full year 2024, due to the significant growth of core loans. Core loan growth was offset by slight improvements in the Federal Open Market Committee ("FOMC") forecast during the full year 2024. 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 net loan charge-offs to average loans of 0.03% and nonperforming loans to total loans (excluding loans held for sale) of 0.24% as of December 31, 2024. Nonperforming loans have increased since the historic lows in 2023, but still remain at low levels and consist entirely of residential loans with strong collateral positions.

---

Noninterest Income

Noninterest income increased $3.1 million in the twelve months ended December 31, 2024, compared to the same period in the prior year. The increase was largely due to an increase in credit and debit card fees of $1.1 million in the full year 2024 compared to the full year 2023 and earnings on life insurance policies in the twelve months ended December 31, 2024, compared to the same period in the prior year. ChoiceOne recognized earnings on two bank owned life insurance death benefit claims for a total of $700,000 during 2024. ChoiceOne also saw an increase in the market value of equity securities in the full year 2024, compared to the prior year. Equity securities include community bank stocks and CRA focused bond mutual funds. ChoiceOne additionally 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 provides incentives to home buyers in the low to moderate income bracket.

Noninterest Expense

Noninterest expense increased by $3.6 million or 6.6% in the twelve months ended December 31, 2024 compared to the same period in 2023. The increase in total noninterest expense was due in part to merger related expenses of $1.0 million during the twelve months ended December 31, 2024, compared to $0 in the same period 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 was offset by a decline in occupancy and equipment cost 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.

Dividends

Cash dividends of $9.0 million or $1.09 per common share were declared in 2024 compared to $7.9 million or $1.05 per common share in 2023. The dividend yield for ChoiceOne’s common stock was 3.06% as of the end of 2024, compared to 3.58% as of the end of 2023. The cash dividend payout as a percentage of net income was 33.7% as of December 31, 2024, compared to 37.2% as of December 31, 2023.

Income Taxes

Income tax expense was $2.1 million higher in 2024 than in 2023. The effective tax rate was 19.2% for the year ended December 31, 2024 compared to 16.8% for the same period in 2023. For 2024, income before income tax, disallowed interest expense (TEFRA) and nondeductible merger expenses increased compared to 2023. For further details, refer to Note 12 - Income Taxes of the Notes to the Consolidated Financial Statements included in Item 8 of this report.

---

Table 1 – Average Balances and Tax-Equivalent Interest Rates

Tables 1 and 2 on the following pages provide information regarding interest income and expense for the years ended December 31, 2024, 2023, and 2022. Table 1 documents ChoiceOne’s average balances and interest income and expense, as well as the average rates earned or paid on assets and liabilities. Table 2 documents the effect on interest income and expense of changes in volume (average balance) and interest rates.

		Year Ended December 31,
		2024												2023												2022
(Dollars in thousands)		Average												Average												Average
		Balance				Interest				Rate				Balance				Interest				Rate				Balance				Interest				Rate
Assets:
Loans (1) (3)(4)(5)(6)		$	1,456,434			$	89,645				6.16		%	$	1,265,261			$	68,437				5.41		%	$	1,104,030			$	52,861				4.79		%
Taxable securities (2)(6)			691,562				21,228				3.07				747,006				21,169				2.83				779,915				15,583				2.00
Nontaxable securities (1)			289,892				7,089				2.45				295,553				7,106				2.40				314,644				7,790				2.48
Other			88,576				4,681				5.29				70,826				3,797				5.36				34,255				491				1.43
Interest-earning assets			2,526,464				122,643				4.85				2,378,646				100,509				4.23				2,232,844				76,725				3.44
Noninterest-earning assets			142,092												115,194												140,530
Total assets		$	2,668,556											$	2,493,840											$	2,373,374
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$	896,060			$	12,997				1.45		%	$	852,927			$	10,028				1.18		%	$	902,090			$	3,514				0.39		%
Savings deposits			334,310				2,828				0.85				370,074				1,609				0.43				452,542				711				0.16
Certificates of deposit			388,724				17,033				4.38				306,999				10,621				3.46				196,063				1,618				0.83
Brokered deposit			26,902				1,315				4.89				35,044				1,732				4.94				103				2				2.48
Borrowings			208,142				9,885				4.75				141,507				6,818				4.82				13,537				410				3.02
Subordinated debentures			35,627				1,642				4.61				35,382				1,636				4.62				35,211				1,491				4.23
Other			18,355				961				5.23				12,258				651				5.31				-				-				0.00
Interest-bearing liabilities			1,908,120				46,661				2.45				1,754,191				33,095				1.89				1,599,546				7,746				0.48
Demand deposits			519,709												546,926												582,992
Other noninterest-bearing liabilities			14,180												15,522												12,421
Total liabilities			2,442,009												2,316,639												2,194,959
Shareholders' equity			226,547												177,201												178,415
Total liabilities and shareholders' equity		$	2,668,556											$	2,493,840											$	2,373,374
Net interest income (tax-equivalent basis) (Non-GAAP) (1)						$	75,981											$	67,415											$	68,979
Net interest margin (tax-equivalent basis) (Non-GAAP) (1)											3.01		%										2.83		%										3.09		%
Reconciliation to Reported Net Interest Income
Net interest income (tax-equivalent basis) (Non-GAAP) (1)						$	75,981											$	67,415											$	68,979
Adjustment for taxable equivalent interest							(1,539	)											(1,530	)											(1665	)
Net interest income (GAAP)						$	74,442											$	65,885											$	67,314
Net interest margin (GAAP)											2.95		%										2.77		%										3.01		%

---

Table 2 – Changes in Tax-Equivalent Net Interest Income

		Year Ended December 31,
(Dollars in thousands)		2024 Over 2023												2023 Over 2022
		Total				Volume				Rate				Total				Volume				Rate
Increase (decrease) in interest income (1)
Loans (2)		$	21,208			$	11,095			$	10,113			$	15,576			$	8,264			$	7,312
Taxable securities			59				(1,645	)			1,704				5,586				(682	)			6,268
Nontaxable securities (2)			(17	)			(144	)			127				(684	)			(455	)			(229	)
Other			884				938				(54	)			3,306				925				2,381
Net change in interest income		$	22,134			$	10,244			$	11,890			$	23,784			$	8,052			$	15,732
Increase (decrease) in interest expense (1)
Interest-bearing demand deposits		$	2,969			$	537			$	2,432			$	6,514			$	(202	)		$	6,716
Savings deposits			1,219				(169	)			1,388				898				(152	)			1,050
Certificates of deposit			6,412				3,205				3,207				9,003				1,364				7,639
Brokered deposit			(417	)			(399	)			(18	)			1,730				1,725				5
Borrowings			3,067				3,169				(102	)			6,408				6,029				379
Subordinated debentures			6				10				(4	)			145				7				138
Other			310				319				(9	)			651				651				-
Net change in interest expense		$	13,566			$	6,672			$	6,894			$	25,349			$	9,422			$	15,927
Net change in tax-equivalent net interest income		$	8,568			$	3,572			$	4,996			$	(1,565	)		$	(1,370	)		$	(195	)

Net Interest Income

GAAP based net interest income increased $8.6 million, and tax-equivalent net interest income increased $8.6 million, respectively, for the full year 2024, compared to the same period in 2023. GAAP based net interest margin increased 18 basis points, and tax equivalent net interest margin increased 18 basis points, respectively, in 2024 compared to 2023.

ChoiceOne has experienced substantial core loan growth from December 31, 2023 to December 31, 2024, leading to an increase in interest income from loans of $21.2 million in the twelve months ended December 31, 2024, compared to the same period in the prior year. Average core loans grew $191.2 million for the twelve months ended December 31, 2024, compared to the same period in the prior year. In addition, the average rate earned on loans increased 75 basis points for the twelve months ended December 31, 2024, compared to the same period in the prior year.

The average balance of total securities decreased $61.1 million in 2024, compared to the same period in 2023. The decrease was due to the paydowns, maturities, and redemptions during 2024. Interest income on securities remained flat in 2024 compared to 2023 despite the decline in average balance as the average rate earned on securities increased 17 basis points for the full year 2024, compared to the same period in the prior year.

Interest expense increased $13.6 million for the full year 2024, compared to the same period in the prior year. The average rate paid on interest bearing-demand deposits and savings deposits increased 33 basis points in the twelve months ended December 31, 2024, compared to the same period in the prior year. This was compounded by the increase in the average balance of interest bearing-demand deposits and savings deposits, of $7.4 million during 2024. The increase in the average balance of certificates of deposit of $81.7 million during 2024, combined with a 92 basis point increase in the rate paid on certificates of deposits during 2024, compared to the same period in the prior year, led to an increase in interest expense of $6.4 million during 2024.

During 2023, ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and has slightly declined in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be

---

muted by the decrease in cash flows from pay-fixed interest rate swaps collected. ChoiceOne has been able to outpace the increased cost of deposits by increased loan originations at higher average interest rates.

ChoiceOne held $170.0 million in borrowings from the Bank Term Funding Program ("BTFP") during the first three quarters of 2024 and 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 the total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%. The net effect of these additional borrowed funds was an increase in interest expense of $3.1 million for the year ended December 31, 2024, compared to the same period in 2023.

In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. In addition, ChoiceOne holds certain subordinated debentures issued in connection with a trust preferred securities offering that were obtained as part of the merger with Community Shores. The average balance of subordinated debentures was relatively flat in 2024 compared to the same period in the prior year.

The following table presents the cost of deposits and the cost of funds for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.

		Year Ended December 31,
		2024				2023				2022
Cost of deposits			1.58	%			1.14	%			0.27	%
Cost of funds			1.92	%			1.44	%			0.35	%

Provision and Allowance For Credit Losses

Table 3 – Provision and Allowance For Credit Losses

---

(Dollars in thousands)
		2024				2023				2022
Allowance for credit losses at beginning of year		$	15,685			$	7,619			$	7,688
Cumulative effect of change in accounting principle			-				7,165				-
Charge-offs:
Agricultural			-				-				-
Commercial and industrial			7				158				177
Consumer			800				554				496
Commercial real estate			-				-
Construction real estate			-				-				-
Residential real estate			30				27				-
Total			837				739				673
Recoveries:
Agricultural			-				-				-
Commercial and industrial			15				66				143
Consumer			374				283				206
Commercial real estate			-				13				3
Construction real estate			-				-				-
Residential real estate			15				13				2
Total			404				375				354
Net charge-offs (recoveries)			433				364				319
Provision for credit losses			1,300				1,265				250
Allowance for credit losses at end of year		$	16,552			$	15,685			$	7,619
Allowance for credit losses as a percentage of:
Total loans as of year end			1.07		%		1.11		%		0.64		%
Nonaccrual loans, accrual loans past due 90 days or more and troubled debt restructurings			447		%		820		%		286		%
Ratio of net charge-offs during the period to average loans outstanding during the period			0.03		%	0.03			%	0.03			%
Loan recoveries as a percentage of prior year's charge-offs			55		%	56			%	52			%

Note: In the table above, "consumer" includes deposit account charge-offs and recoveries.

The ACL consists of general and specific components. The general component covers loans collectively evaluated for credit loss and is based on peer historical loss experience adjusted for current and forecasted factors. Management's adjustment for current and forecasted factors is based on trends in delinquencies, trends in charge-offs and recoveries, trends in the volume of loans, changes in underwriting standards, trends in loan review findings, the experience and ability of lending staff, and a reasonable and supportable economic forecast described further below.

The determination of our loss factors is based, in part, upon benchmark peer loss history adjusted for qualitative factors that, in management's judgment, affect the collectability of the portfolio as of the analysis date. ChoiceOne's lookback period of benchmark peer net charge-off history was from January 1, 2004 through December 31, 2019 for this analysis.

Loans individually evaluated for credit losses increased by $2.0 million to $4.1 million during the year ended December 31, 2024, and the ACL related to these individually evaluated loans increased by $108,000 during the same period largely due to the balance increase.

Nonperforming loans, which includes Other Real Estate Owned ("OREO") but excludes performing troubled loan modifications ("TLM"), increased by $1.9 million to $3.8 million at December 31, 2024, compared to a historically low balance on December 31, 2023. All non-performing loans are retail in nature. The ACL was 1.07% of total loans, excluding loans held for sale, at December 31, 2024, compared to 1.11% as of December 31, 2023. The liability for expected credit losses on unfunded loans and other commitments was $1.5 million on December 31, 2024, compared to $2.2 million as of December 31, 2023.

---

Net charge-offs were $433,000 during the full year 2024, compared to net charge-offs of $364,000 during the same period in 2023. Net charge-offs for checking accounts during the full year 2024 were $237,000 compared to $226,000 for the same period in the prior year. Net charge-offs as a percentage of average loans were 0.03% during the full year 2024 and 2023.

The provision for credit losses on loans was $1.3 million during the full year 2024 and 2023, due to core loan growth, which was partially offset by slight improvements in the Federal Open Market Committee ("FOMC") forecast during the full year 2024. The loan provision expense was offset by the decrease in unfunded commitments provision expense of $675,000 in the full year 2024 due to changes in mix and expected funding rates during the year. Total unfunded commitments decreased $15.9 million in the full year 2024 compared to December 31, 2023.

Net provision for credit losses was $625,000 for the full year 2024.

---

Financial Condition

Summary

Total assets grew $146.5 million in the twelve months ended December 31, 2024. Core loans grew $114.5 million or 8.2% and were offset by a decline in investment securities of $48.9 million. Deposits, excluding brokered deposits, increased by $79.0 million during 2024, while borrowings declined by $25.0 million. Deposit costs rose steadily in the first half of the year followed by a decline in the second half of the year which coincided with the decreases to the federal funds rate starting in September of 2024.

Securities

The Company’s securities balances as of December 31 were as follows:

(Dollars in thousands)
	2024				2023
Equity securities	$	7,782			$	7,505
Available for Sale Securities at fair value
U.S. Government and federal agency	$	-			$	-
U.S. Treasury notes and bonds		80,502				80,194
State and municipal		228,236				234,682
Mortgage-backed		160,970				188,501
Corporate		212				204
Asset-backed securities		9,197				11,017
Total	$	479,117			$	514,598
Held to Maturity Securities at amortized cost
U.S. Government and federal agency	$	2,978			$	2,972
U.S. Treasury notes and bonds		-
State and municipal		196,510				196,098
Mortgage-backed		174,323				188,329
Corporate		20,495				20,013
Asset-backed securities		228				547
Total	$	394,534			$	407,959

Total investment securities declined $48.9 million from December 31, 2023 to December 31, 2024. ChoiceOne purchased $16.8 million of securities in 2024. Securities totaling $11.8 million were called or matured in 2024. ChoiceOne received principal payments for municipal and mortgage-backed securities totaling $48.0 million during 2024.

At December 31, 2024, the Company had $116.6 million in unrealized losses on its investment securities, including $61.1 million in unrealized losses on available for sale securities and $55.5 million in unrealized losses on held to maturity securities. Unrealized losses on corporate and municipal bonds have not been recognized into income because management believes the issuers are of high credit quality, and management does not intend to sell prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

ChoiceOne utilizes interest rate derivatives as part of its asset liability management strategy to help manage its interest rate risk position. In order to hedge the risk of rising rates and unrealized losses on securities resulting from the rising rates, ChoiceOne currently holds pay fixed, receive variable interest rate swaps with a total notional value of $401.0 million. These derivative instruments increase in value as long-term interest rates rise, which partially offsets the reduction in shareholders' equity due to unrealized losses on securities available for sale. Refer to Note 8 - Derivatives and Hedging Activities of the consolidated financial statements for more discussion on ChoiceOne’s derivative position.

Equity securities included a money market preferred security ("MMP") of $1.0 million and common stock of $6.8 million as of December 31, 2024. As of December 31, 2023, equity securities included a MMP of $1.0 million and common stock of $6.5 million.

---

Per U.S. generally accepted accounting principles, unrealized gains or losses on securities available for sale are reflected on the balance sheet in accumulated other comprehensive income (loss), while unrealized gains or losses on securities held to maturity are not reflected on the balance sheet in accumulated other comprehensive income (loss).

Loans

The Company’s loan portfolio by call report code was as follows:

		December 31, 2024							December 31, 2023
(Dollars in thousands)	Call Report Codes	Balance			%				Balance			%
Construction & Development Loans	1A2		61,740			4.0	%			112,877			8.0	%
1-4 Family Loans	1A1, 1C1, 1C2A, 1C2B		380,139			24.6	%			347,036			24.6	%
Multifamily Loans	1D		83,766			5.4	%			56,563			4.0	%
Owner Occupied CRE Loans	1E1		325,966			21.1	%			281,515			20.0	%
Non-Owner Occupied CRE Loans	1E2		387,102			25.0	%			298,265			21.1	%
Commercial & Industrial Loans	2A2, 4A		216,376			14.0	%			219,849			15.6	%
Farm & Agriculture Loans	1B, 3		48,246			3.1	%			46,515			3.3	%
Consumer & Other Loans	6B, 6C, 6D, 8, 9b2,10B		42,305			2.7	%			48,033			3.4	%
Total Loans			1,545,640							1,410,653

Average loan balances increased $191.2 million in the full year 2024 compared to the same period in 2023. Core loans grew organically by $114.5 million or 8.2% during 2024, with growth concentrated in Non-Owner Occupied CRE loans, which grew by $88.8 million, Owner Occupied CRE loans, which grew by $44.5 million, and 1-4 Family Loans, which grew by $33.1 million. The growth in 1-4 Family loans was largely related to growth in loans to other financial institutions which were $39.9 million as of December 31, 2024, compared to $19.4 million as of December 31, 2023. Loans to other financial institutions is comprised of a warehouse line of credit to facilitate mortgage loan originations and the interest rate fluctuates with the national mortgage market. This balance is short term in nature with an average life of under 30 days. Management believes the short-term structure and low credit risk of this asset is advantageous in the current rate environment; however, this balance is volatile and could change based on the third party origination volume or discretion. Loan interest including fee income increased $21.2 million in the full year 2024, compared to the same period in the prior year.

ChoiceOne recorded accretion income related to acquired loans in the amount of $1.2 million in 2024 and $1.7 million during 2023. Remaining credit and yield mark on acquired loans from the mergers with County Bank Corp. and Community Shores will accrete into income as the acquired loans mature. ChoiceOne estimates that roughly $1.3 million will accrete into income over the next one to three years.

As part of its review of the loan portfolio, management also monitors the various nonperforming loans. Nonperforming loans are comprised of loans accounted for on a nonaccrual basis, loans not included in nonaccrual loans, which are contractually past due 90 days or more as to interest or principal payments, and troubled loan modifications which are accruing and initiated in the past year.

The balances of these nonperforming loans as of December 31 were as follows:

(Dollars in thousands)
	2024				2023
Loans accounted for on a nonaccrual basis	$	3,704			$	1,723
Loans contractually past due 90 days or more as to principal or interest payments		-				-
Loans modified to borrowers experiencing financial difficulty at December 31, 2024 and December 31, 2023.		-				189
Total	$	3,704			$	1,912

Nonaccrual loans included $3.5 million in residential real estate loans, $229,000 in construction real estate loans, and $8,000 in consumer loans as of December 31, 2024, compared to $1.7 million in residential real estate loans as of December 31, 2023. There were no troubled loan modifications ("TLM") at December 31, 2024, compared to $60,000 of commercial and industrial TLM loans and $129,000 of residential real estate TLM loans at December 31, 2023.

---

Management also maintains a list of loans that are not classified as nonperforming loans but where some concern exists as to the borrowers’ abilities to comply with the original loan terms. There were 19 loans totaling $375,000 fitting this description as of December 31, 2024, and 22 loans totaling $357,000 fitting this description as of December 31, 2023.

Deposits and Other Funding Sources

The Company’s deposit balances as of December 31 were as follows:

(Dollars in thousands)
	2024				2023
Noninterest-bearing demand deposits	$	524,945			$	547,625
Interest-bearing demand deposits		630,155				599,681
Money market deposits		290,012				247,602
Savings deposits		338,109				336,851
Local certificates of deposit		394,371				366,851
Brokered certificates of deposit		36,511				23,445
Total deposits	$	2,214,103			$	2,122,055

Deposits, excluding brokered deposits increased $79.0 million or 3.8% during 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. Core deposits, which we define as insured branch deposits less certificates of deposit, totaled $1.1 billion or 51.2% of total deposits at December 31, 2024.

ChoiceOne's cost of deposits to average total deposits has increased from 1.14% in 2023 to 1.58% in 2024. During 2023 ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023. ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and has slightly declined in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024. If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected. Interest expense on borrowings for the twelve months ended December 31, 2024, increased $3.1 million compared to the same period in the prior year, due to increases in the average balance 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 ChoiceOne's 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.

In September 2021, ChoiceOne completed a private placement of $32.5 million in aggregate principal amount of 3.25% fixed-to-floating rate subordinated notes due 2031. ChoiceOne used a portion of net proceeds from the private placement to redeem senior debt, fund common stock repurchases, and support bank-level capital ratios. ChoiceOne also holds $3.5 million in subordinated debentures issued in connection with a $4.5 million trust preferred securities offering, which were obtained in the merger with Community Shores, offset by the mark-to-market adjustment.

Shareholders’ Equity

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 at a price to the public of $25.00 per share on July 26, 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.

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.

---

Note 21 to the consolidated financial statements presents regulatory capital information for ChoiceOne and the Bank at the end of 2024 and 2023. Management will monitor these capital ratios during 2025 as they relate to asset growth and earnings retention. ChoiceOne’s Board of Directors and management do not plan to allow capital to decrease below those levels necessary to be considered "well capitalized" by regulatory guidelines.

Table 4 – Contractual Obligations

The following table discloses information regarding the maturity of ChoiceOne’s contractual obligations at December 31, 2024:

	Payment Due by Period
					Less												More
					than				1 - 3				3 - 5				than
(Dollars in thousands)	Total				1 year				Years				Years				5 Years
Time deposits	$	430,882			$	413,786			$	13,110			$	3,719			$	267
Borrowings		175,000				155,000				20,000				-				-
ChoiceOne Capital Trust (1)		4,500				-				-				-				4,500
ChoiceOne Subordinated Debenture (2)		32,500				-				-				-				32,500
Operating leases		759				310				280				50				119
Other obligations		43				11				18				14				-
Total	$	643,684			$	569,107			$	33,408			$	3,783			$	37,386

Liquidity and Interest Rate Risk

Net cash provided by operating activities was $48.5 million in 2024 compared to $46.5 million in 2023. The change was due to higher net proceeds from loan sales and an increase in other liabilities in 2024 compared to 2023. Net cash used in investing activities was $97.9 million in 2024 compared to $181.4 million in 2023. ChoiceOne had loan originations and payments of $136.1 million in the full year 2024, compared to $221.2 million in the full year 2023. Net cash provided by financing activities was $90.7 million in 2024, compared to $146.4 million in 2023. The change was largely due to $150.0 million of higher borrowings in 2023, offset by $32.1 million in net proceeds received from our common stock offering completed on July 26, 2024.

ChoiceOne's market risk exposure occurs in the form of interest rate risk and liquidity risk. ChoiceOne's business is transacted in U.S. dollars with no foreign exchange risk exposure. Agricultural loans comprise a relatively small portion of ChoiceOne's total assets. Management believes that ChoiceOne's exposure to changes in commodity prices is insignificant.

Liquidity risk deals with ChoiceOne's ability to meet its cash flow requirements. These requirements include depositors desiring to withdraw funds and borrowers seeking credit. Longer-term liquidity needs may be met through core deposit growth, maturities of and cash flows from investment securities, normal loan repayments, advances from the FHLB and the Federal Reserve Bank, brokered certificates of deposit, and income retention. ChoiceOne had $175.0 million in outstanding borrowings from the FHLB as of December 31, 2024. The acceptance of brokered certificates of deposit is not limited as long as the Bank is categorized as “well capitalized” under regulatory guidelines. At December 31, 2024, total available borrowing capacity from the FHLB and the Federal Reserve Bank was $837.2 million.

ChoiceOne continues to review its liquidity management and has taken steps in an effort to ensure adequacy. These steps include limiting bond purchases in 2024, pledging securities to FHLB and the Federal Reserve Bank in order to increase borrowing capacity and using alternative funding sources such as brokered deposits.

---

NON-GAAP FINANCIAL MEASURES

This report contains financial measures that are not defined in U.S. generally accepted accounting principles ("GAAP"). Management believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying financial performance 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, we use non-GAAP financial measures as comparative tools, together with GAAP financial measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. ChoiceOne’s method of calculating these non-GAAP financial measures may differ from methods used by other companies. These non-GAAP financial 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.

Income Adjusted for Merger Expenses - Non-GAAP Reconciliation

		2024
(In Thousands, Except Per Share Data)
Net income		$	26,727
Merger related expenses net of tax			1,006
Adjusted net income (Non-GAAP)		$	27,733
Weighted average number of shares			8,166,472
Diluted average shares outstanding			8,221,065
Basic earnings per share		$	3.27
Diluted earnings per share		$	3.25
Adjusted basic earnings per share (Non-GAAP)		$	3.40
Adjusted diluted earnings per share (Non-GAAP)		$	3.37

---

Critical Accounting Policies And Estimates

Management’s discussion and analysis of financial condition and results of operations as well as disclosures found elsewhere in this report are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the market value of securities, the amount of the allowance for credit losses, loan servicing rights, carrying value of goodwill, and income taxes. Actual results could differ from those estimates.

Allowance for Credit Losses ("ACL")

The ACL is a valuation allowance for expected credit losses. The ACL is increased by the provision for credit losses and decreased by loans charged off less any recoveries of charged off loans. As ChoiceOne has had very limited loss experience since 2011, management elected to utilize benchmark peer loss history data to estimate historical loss rates. ChoiceOne identified an appropriate peer group for each loan cohort which shared similar characteristics. Management estimates the ACL required based on the selected peer group loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, a reasonable and supportable economic forecast, and other factors. Allocations of the ACL may be made for specific loans, but the entire ACL is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the ACL when management believes that collection of a loan balance is not possible.

The ACL consists of general and specific components. The general component covers loans collectively evaluated for credit losses and is based on peer historical loss experience adjusted for current and forecasted factors. Management's adjustment for current and forecasted factors is based on trends in delinquencies, trends in charge-offs and recoveries, trends in the volume of loans, changes in underwriting standards, trends in loan review findings, the experience and ability of lending staff, and a reasonable and supportable economic forecast described further below.

The discounted cash flow methodology is utilized for all loan pools. This methodology is supported by our CECL software provider and allows management to automatically calculate contractual life by factoring in all cash flows and adjusting them for behavioral and credit-related aspects.

Reasonable and supportable economic forecasts have to be incorporated in determining expected credit losses. The forecast period represents the time frame from the current period end through the point in time that we can reasonably forecast and support entity and environmental factors that are expected to impact the performance of our loan portfolio. Ideally, the economic forecast period would encompass the contractual terms of all loans; however, the ability to produce a forecast that is considered reasonable and supportable becomes more difficult or may not be possible in later periods. Subsequent to the end of the forecast period, we revert to historical loan data based on an ongoing evaluation of each economic forecast in relation to then current economic conditions as well as any developing loan loss activity and resulting historical data. As of December 31, 2024, we used a one-year reasonable and supportable economic forecast period, with a two year straight-line reversion period.

We are not required to develop and use our own economic forecast model, and we elected to utilize economic forecasts from third-party providers that analyze and develop forecasts of the economy for the entire United States at least quarterly.

Other inputs to the calculation are also updated or reviewed quarterly. Prepayment speeds are updated on a one quarter lag based on the asset liability model from the previous quarter. This model is performed at the loan level. Curtailment is updated quarterly within the ACL model based on our peer group average. The reversion period is reviewed by management quarterly with consideration of the current economic climate. Prepayment speeds and curtailment were updated during the fourth quarter of 2024; however, the effect was insignificant.

We are also required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us. Any allowance for off-balance sheet credit exposures is reported as an other liability on our Consolidated Balance Sheet and is increased or decreased via the provision for credit losses account on our Consolidated Statement of Income. The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives. The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to be funded.

Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. ChoiceOne has determined that any loans which have been placed on non-performing status, loans with a risk rating of 6 or higher, and loans past due more than 60 days will be assessed individually for evaluation. Management's judgment will be used to determine if the

---

loan should be migrated back to pool on an individual basis. Individual analysis will establish a specific reserve for loans in scope. Specific reserves on non-performing loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as appropriate or based on the present value of the expected cash flows from that loan.

ACL for Securities

Securities Available for Sale – For securities AFS in an unrealized loss position, management determines whether they intend to sell or if it is more likely than not that ChoiceOne will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities AFS with unrealized losses not meeting these criteria, management evaluates whether any decline in fair value is due to credit loss factors. In making this assessment, management considers any changes to the rating of the security by rating agencies and adverse conditions specifically related to the issuer of the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses (“ACL”) is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Changes in the ACL under ASC 326-30 are recorded as provisions for (or reversal of) credit loss expense. Losses are charged against the allowance when the collectability of a debt security AFS is confirmed or when either of the criteria regarding intent or requirement to sell is met. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, net of income taxes. At December 31, 2024, there was no ACL related to debt securities AFS.

Securities Held to Maturity – Since the adoption of CECL, ChoiceOne measures credit losses on HTM securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The ACL on securities HTM is a contra asset valuation account that is deducted from the carrying amount of HTM securities to present the net amount expected to be collected. HTM securities are charged off against the ACL when deemed uncollectible. Adjustments to the ACL are reported in ChoiceOne’s Consolidated Statements of Income in the provision for credit losses. Accrued interest receivable totaled $2.0 million and $2.1 million at December 31, 2024, and 2023, respectively, and was reported in other assets on the consolidated balance sheets and is excluded from the estimate of credit losses. With regard to US Treasury securities, these have an explicit government guarantee; therefore, no ACL is recorded for these securities. With regard to obligations of states and political subdivisions and other HTM securities, management considers (1) issuer bond ratings, (2) historical loss rates for given bond ratings, (3) the financial condition of the issuer, and (4) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. At December 31, 2024, the ACL related to securities HTM is insignificant.

Troubled Loan Modifications

FASB also issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This standard eliminated the previous accounting guidance for troubled debt restructurings and added additional disclosure requirements for gross chargeoffs by year of origination. It also prescribes guidance for reporting modifications of loans to borrowers experiencing financial difficulty.

Loan Servicing Rights

Loan servicing rights represent the estimated value of servicing loans that are sold with servicing retained by ChoiceOne and are initially recorded at estimated fair value. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Management’s accounting treatment of loan servicing rights is estimated based on current prepayment speeds that are typically market driven.

Management believes the accounting estimate related to loan servicing rights is a “critical accounting estimate” because (1) the estimate is highly susceptible to change from period to period because of significant changes within long-term interest rates affecting the prepayment speeds for current loans being serviced and (2) the impact of recognizing an impairment loss could have a material effect on ChoiceOne’s net income. Management has obtained a third-party valuation of its loan servicing rights to corroborate its current carrying value at the end of each reporting period.

Goodwill

Goodwill is not amortized but is evaluated annually for impairment and on an interim basis if events or changes in circumstances indicate that goodwill might be impaired. The goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge would be recognized for any amount by which the carrying amount exceeds the reporting unit’s fair value. The Company acquired Valley Ridge Financial Corp. in 2006, County Bank Corp in 2019, and Community Shores in 2020, which resulted in the recognition of goodwill of $13.7 million, $38.9 million and $7.3 million, respectively.

---

ChoiceOne engaged a third party valuation firm to assist in performing a quantitative analysis of goodwill as of June 30, 2024 ("the measurement date"). In deriving the fair value of the reporting unit (the Bank), the third-party firm assessed general economic conditions and outlook; industry and market considerations and outlook; the impact of recent events to financial performance; the market price of ChoiceOne’s common stock and other relevant events. In addition, the valuation relied on financial projections through 2029 and growth rates prepared by management. Based on the valuation prepared, it was determined that ChoiceOne's estimated fair value of the reporting unit at the measurement date was greater than its book value and impairment of goodwill was not required. As of the measurement date and December 31, 2024 the stock price was greater than the book value. No material changes and no triggering events have occurred that indicated impairment from the measurement date through December 31, 2024.

Deferred Tax Assets and Liabilities

Income taxes include both a current and deferred portion. Deferred tax assets and liabilities are recorded to account for differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes. Generally accepted accounting principles require that deferred tax assets be reviewed to determine whether a valuation allowance should be established using a “more likely than not” standard. Based on its review of ChoiceOne’s deferred tax assets as of December 31, 2024, management determined that no valuation allowance was necessary. The valuation of current and deferred income tax assets and liabilities is considered critical, as it requires management to make estimates based on provisions of the enacted tax laws. The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgments concerning certain accounting pronouncements and the federal tax code.

Identification and Classification of Merger-Related Expenses

Merger-related expenses are costs incurred directly in connection with the company's merger and acquisition activities. These expenses include legal fees for negotiation and drafting of merger agreements, accounting and auditing fees related to due diligence and financial statement preparation, consulting fees for strategic advisory services specific to the merger, costs related to regulatory filings and compliance, expenses for integration planning and execution (including IT and systems integration), severance and retention bonuses for employees affected by the merger, and travel and accommodation expenses directly related to merger activities.

To ensure accurate classification and segregation of these expenses, detailed documentation supporting the nature and purpose of each expense is maintained, including invoices, contracts, and internal memos. All merger-related expenses must be reviewed and approved by the CFO or an authorized delegate to ensure they meet the criteria for classification as merger-related. The Accounting Department conducts periodic reviews of these expenses to ensure proper classification and segregation, promptly addressing and correcting any discrepancies. Merger-related expenses are disclosed separately in the financial statements and accompanying notes to provide transparency to investors and stakeholders.

---

Item 7A. Qu antitative and Qualitative Disclosures About Market Risk

Interest rate risk is related to liquidity because each is affected by maturing assets and sources of funds. ChoiceOne’s Risk Committee attempts to stabilize the interest rate spread and avoid possible adverse effects when unusual or rapid changes in interest rates occur. The Risk Committee uses a simulation model to measure the Bank’s interest rate risk. The model incorporates changes in interest rates on rate-sensitive assets and liabilities. The degree of rate sensitivity is affected by prepayment assumptions that exist in the assets and liabilities. One method the Risk Committee uses of measuring interest rate sensitivity is the ratio of rate-sensitive assets to rate-sensitive liabilities. An asset or liability is considered to be rate-sensitive if it matures or otherwise reprices within a given time frame.

Table 5 documents the maturity or repricing schedule for ChoiceOne’s rate-sensitive assets and liabilities for selected time periods:

Table 5 – Maturities and Repricing Schedule

		As of December 31, 2024
(Dollars in thousands)		0 - 3				3 - 12				1 - 5				Over
		Months				Months				Years				5 Years				Total
Assets
Equity securities at fair value		$	7,782			$	-			$	-			$	-			$	7,782
Securities available for sale			63,054				5,948				141,844				268,271				479,117
Securities held to maturity			16,887				3,163				97,906				276,578				394,534
Federal Home Loan Bank stock			9,383				-				-				-				9,383
Federal Reserve Bank stock			-				-				-				5,307				5,307
Loans held for sale			7,288				-				-				-				7,288
Loans to other financial institutions			39,878				-				-				-				39,878
Core Loans			371,533				208,690				763,592				161,947				1,505,762
Cash surrender value of life insurance policies			-				-				-				44,896				44,896
Interest rate derivative contracts			23,649				-				-				-				23,649
Rate-sensitive assets		$	539,454			$	217,801			$	1,003,342			$	756,999			$	2,517,596
Liabilities
Interest-bearing demand deposits		$	630,155			$	-			$	-			$	-			$	630,155
Money market deposits			290,012				-				-				-			$	290,012
Savings deposits			338,109				-				-				-			$	338,109
Certificates of deposit			118,393				260,376				15,335				267			$	394,371
Brokered deposits			29,884				5,133				1,494				-				36,511
Borrowings			135,000				20,000				20,000				-				175,000
Subordinated debentures			3,492				-				32,260				-				35,752
Interest rate derivative contracts			-				-				-				-				-
Rate-sensitive liabilities		$	1,545,045			$	285,509			$	69,089			$	267			$	1,899,910
Rate-sensitive assets less rate-sensitive liabilities:
Asset (liability) gap for the period		$	(1,005,591	)		$	(67,708	)		$	934,253			$	756,732			$	617,686
Cumulative asset (liability) gap		$	(1,005,591	)		$	(1,073,299	)		$	(139,046	)		$	617,686

(1) Interest rate derivative contracts include pay fixed, receive variable swaps with a notional value of $401.0 million. Further details can be found in Note 8 – Derivatives and Hedging Activities.

Under this method, the Risk Committee measures interest rate sensitivity by focusing on the one-year repricing gap. ChoiceOne’s ratio of rate-sensitive assets to rate-sensitive liabilities that matured or repriced within a one-year time frame was 41% at December 31, 2024, compared to 38% at December 31, 2023. Table 5 above shows the entire balance of interest-bearing demand deposits, savings deposits, and money market deposits in the shortest repricing term. Although these categories have the ability to reprice immediately, management has some control over the actual timing or extent of the changes in interest rates on these liabilities. The Risk Committee plans to continue to monitor the ratio of rate-sensitive assets to rate-sensitive liabilities on a quarterly basis in 2025. As interest rates change, the Risk Committee will attempt to match its maturing assets with corresponding liabilities to maximize ChoiceOne’s net interest income.

Another method the Risk Committee uses to monitor its interest rate sensitivity is to subject rate-sensitive assets and liabilities to interest rate shocks. At December 31, 2024, management used a simulation model to subject its assets and liabilities up to an immediate 200 basis point increase and decline. The maturities of loans and mortgage-backed securities were affected by certain prepayment assumptions. Maturities for interest-bearing core deposits were based on an estimate of the period over which they would be outstanding. The maturities of advances from the borrowings were based on their contractual maturity dates. In the case of variable rate assets and

---

liabilities, repricing dates were used to determine their values. The simulation model measures the effect of immediate interest rate changes on both net interest income and shareholders’ equity.

Table 6 provides an illustration of hypothetical interest rate changes as of December 31, 2024 and 2023:

Table 6 – Sensitivity to Changes in Interest Rates

		2024
		Net								Market
(Dollars in thousands)		Interest				Percent				Value of				Percent
		Income				Change				Equity				Change
Change in Interest Rate
200 basis point rise			76,250				-		%		415,500				6		%
100 basis point rise			76,320				-		%		408,000				4		%
Base rate scenario			75,950				-		%		391,800				-		%
100 basis point decline			75,230				-1		%		368,200				-6		%
200 basis point decline			73,080				-4		%		330,800				-16		%

		2023
		Net								Market
(Dollars in thousands)		Interest				Percent				Value of				Percent
		Income				Change				Equity				Change
Change in Interest Rate
200 basis point rise			67,650				-2		%		480,950				8		%
100 basis point rise			68,430				-1		%		469,920				5		%
Base rate scenario			69,100				-		%		446,210				-		%
100 basis point decline			66,660				-4		%		407,940				-9		%
200 basis point decline			66,120				-4		%		350,800				-21		%

As of December 31, 2024, the Bank was within its guidelines for immediate rate shocks of 100 and 200 basis points up and down for net interest income and market value of shareholders’ equity scenarios. As of December 31, 2023, the Bank was within its guidelines for immediate rate shocks of 100 and 200 basis points up and down for net interest income scenarios and was within its guidelines for immediate rate shocks of 100 and 200 basis points up and 100 basis points down for market value of shareholders’ equity scenarios. The immediate rate shock of 200 basis points down for market value of shareholders’ equity scenarios was higher than the policy guidelines. The Risk Committee plans to continue to monitor the effect of changes in interest rates on both net interest income and shareholders’ equity and will make changes in the duration of its rate-sensitive assets and rate-sensitive liabilities where necessary.

Item 8. Financial S tatements and Supplementary Data

---

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of ChoiceOne Financial Services, Inc.

Basis for Opinion

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

---

that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses - Qualitative Adjustment

As described in Notes 1 and 3 to the consolidated financial statements, management’s estimate of the allowance for credit losses (ACL) at December 31, 2024, includes a reserve on collectively evaluated loans. The reserve on collectively evaluated loans is based on an historical average loss rates of peer banks, adjusted for current and forecasted factors, applied over the remaining life of loans. Management applies an adjustment for qualitative factors based on internal and external qualitative and credit market risk factors, as described in Notes 1 and 3 to the financial statements.

Significant judgment was required by management in the selection and measurement of qualitative factor adjustments. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the Company’s estimate of the ACL included, but were not limited to, the following:

/s/ Plante & Moran, PLLC

We have served as the Company’s auditor since 2006.

Grand Rapids, Michigan

March 11, 2025

---

ChoiceOne Financial Services, Inc.

Consolidated Balance Sheets

		December 31,
(Dollars in thousands)		2024				2023
Assets
Cash and due from banks		$	96,401			$	55,083
Time deposits in other financial institutions			350				350
Cash and cash equivalents			96,751				55,433
Equity securities, at fair value (Note 2)			7,782				7,505
Securities available for sale, at fair value (Note 2)			479,117				514,598
Securities held to maturity, at amortized cost (Note 2)			394,534				407,959
Federal Home Loan Bank stock			9,383				4,449
Federal Reserve Bank stock			5,307				5,065
Loans held for sale			7,288				4,710
Loans to other financial institutions			39,878				19,400
Core Loans			1,505,762				1,391,253
Total loans held for investment (Note 3)			1,545,640				1,410,653
Allowance for loan losses (Note 3)			( 16,552	)			( 15,685	)
Loans, net			1,529,088				1,394,968
Premises and equipment, net (Note 5)			27,099				29,750
Other real estate owned, net (Note 7)			473				122
Cash value of life insurance policies			44,896				45,074
Goodwill (Note 6)			59,946				59,946
Core deposit intangible, net (Note 6)			1,096				1,854
Other assets			60,483				45,273
Total assets		$	2,723,243			$	2,576,706
Liabilities
Deposits – noninterest-bearing (Note 9)		$	524,945			$	547,625
Deposits – interest-bearing (Note 9)			1,652,647				1,550,985
Brokered deposits (Note 9)			36,511				23,445
Total deposits			2,214,103				2,122,055
Borrowings (Note 10)			175,000				200,000
Subordinated debentures (Note 11)			35,752				35,507
Other liabilities (Notes 12)			37,973				23,510
Total liabilities			2,462,828				2,381,072
Shareholders’ Equity
Preferred stock; shares authorized: 100,000 ; shares outstanding: none			-				-
Common stock and paid-in capital, no par value; shares authorized: 30,000,000 ; shares outstanding: 8,965,483 at December 31, 2024 and 7,548,217 at December 31, 2023 (Note 16)			206,780				173,513
Retained earnings			91,414				73,699
Accumulated other comprehensive income, net			( 37,779	)			( 51,578	)
Total shareholders’ equity			260,415				195,634
Total liabilities and shareholders’ equity		$	2,723,243			$	2,576,706

See accompanying notes to consolidated financial statements.

---

ChoiceOne Financial Services, Inc.

Consolidated Statements of Income

---

		Year Ended
(Dollars in thousands, except per share data)		December 31,
		2024				2023				2022
Interest income
Loans, including fees		$	89,580			$	68,384			$	52,823
Securities:
Taxable			21,228				21,169				15,583
Tax exempt			5,614				5,629				6,163
Other			4,682				3,798				491
Total interest income			121,104				98,980				75,060
Interest expense
Deposits			34,174				23,990				5,845
Advances from Federal Home Loan Bank			2,041				1,771				117
Other			10,447				7,334				1,784
Total interest expense			46,662				33,095				7,746
Net interest income			74,442				65,885				67,314
Provision for (reversal of) credit losses on loans (Note 3)			1,300				1,265				250
Provision for (reversal of) credit losses on unfunded commitments (Note 3)			( 675	)			( 1,115	)			-
Net Provision for (reversal of) credit losses expense (Note 3)			625				150				250
Net interest income after provision for credit losses			73,817				65,735				67,064
Noninterest income
Customer service charges			4,774				4,601				4,561
Credit and debit card fees			5,797				4,746				4,789
Insurance and investment commissions			742				698				779
Gains on sales of loans (Note 4)			2,439				1,954				2,343
Net (losses) gains on sales of securities (Note 2)			-				( 71	)			( 809	)
Net (losses) gains on sales and write-downs of other assets (Note 7)			198				147				99
Earnings on life insurance policies			1,934				1,096				1,312
Trust income			906				771				734
Change in market value of equity securities			195				( 246	)			( 955	)
Other			1,010				1,210				1,219
Total noninterest income			17,995				14,906				14,072
Noninterest expense
Salaries and benefits (Note 14 and 15)			33,408				31,963				30,391
Occupancy and equipment (Note 5)			5,797				6,048				6,189
Data processing			5,905				5,350				5,488
Communication			1,317				1,268				1,241
Professional fees			2,471				2,198				2,175
Supplies and postage			699				780				719
Advertising and promotional			788				721				764
Intangible amortization (Note 6)			757				955				1,153
FDIC insurance			1,335				1,184				722
Merger related expenses			1,039				-				-
Other			5,207				4,607				4,636
Total noninterest expense			58,723				55,074				53,478
Income before income tax expense			33,089				25,567				27,658
Income tax expense			6,362				4,306				4,018
Net income		$	26,727			$	21,261			$	23,640
Basic earnings per share (Note 16)		$	3.27			$	2.82			$	3.15
Diluted earnings per share (Note 16)		$	3.25			$	2.82			$	3.15
Dividends declared per share		$	1.09			$	1.05			$	1.01

---

See accompanying notes to consolidated financial statements.

---

ChoiceOne Financial Services, Inc.

Consolidated Statements of Comprehensive Income

		Year Ended
(Dollars in thousands)		December 31,
		2024				2023				2022
Net income		$	26,727			$	21,261			$	23,640
Other comprehensive income:
Change in net unrealized gain (loss) on AFS securities			1,362				20,934				( 91,923	)
Income tax benefit (expense)			( 286	)			( 4,396	)			19,304
Reclassification adjustment for net (gain) loss included in net income			-				-				809
Income tax benefit (expense)			-				-				( 170	)
Reclassification adjustment for net gain (loss) for fair value hedge			7,205				( 1,534	)			1,930
Income tax benefit (expense)			( 1,513	)			322				( 405	)
Net unrealized (gains) losses on securities transferred from AFS to HTM			-				-				3,404
Income tax benefit (expense)			-				-				( 715	)
Unrealized gain (loss) on AFS securities, net of tax			6,768				15,326				( 67,766	)
Reclassification of unrealized gain (loss) upon transfer of securities from AFS to HTM			-				-				( 3,404	)
Income tax benefit (expense)			-				-				715
Amortization of net unrealized (gains) losses on securities transferred from AFS to HTM			242				333				351
Income tax benefit (expense)			( 51	)			( 70	)			( 74	)
Unrealized gain (loss) on held to maturity securities, net of tax			191				263				( 2,412	)
Change in net unrealized gain (loss) on cash flow hedge			7,566				3,024				( 558	)
Income tax benefit (expense)			( 1,589	)			( 635	)			117
Reclassification adjustment for net (gain) loss on cash flow hedge			-				-				771
Income tax benefit (expense)			-				-				( 162	)
Amortization of net unrealized (gains) losses included in net income			1,092				2,837				999
Income tax benefit (expense)			( 229	)			( 596	)			( 210	)
Unrealized gain (loss) on cash flow hedge instruments, net of tax			6,840				4,630				957
Other comprehensive income (loss), net of tax			13,799				20,219				( 69,221	)
Comprehensive income (loss)		$	40,526			$	41,480			$	( 45,581	)

See accompanying notes to consolidated financial statements.

---

ChoiceOne Financial Services, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

														Accumulated
						Common								Other
						Stock and								Comprehensive
		Number of				Paid in				Retained				Income/(Loss),
(Dollars in thousands, except per share data)		Shares				Capital				Earnings				Net				Total
Balance, January 1, 2022			7,510,379			$	171,913			$	52,332			$	( 2,576	)		$	221,669
Net income											23,640								23,640
Other comprehensive income (loss)															( 69,221	)			( 69,221	)
Shares issued for directors and employee stock plans			31,618				461												461
Compensation expense for employee stock purchases							31												31
Stock-based compensation expense							554												554
Shares repurchased			( 25,899	)			( 682	)											( 682	)
Cash dividends declared ($ 1.01 per share)											( 7,578	)							( 7,578	)
Balance, December 31, 2022			7,516,098			$	172,277			$	68,394			$	( 71,797	)		$	168,874
Adoption of ASU 2016-13 (CECL ) on January 1, 2023											( 8,046	)							( 8,046	)
Balance January 1, 2023			7,516,098			$	172,277			$	60,348			$	( 71,797	)		$	160,828
Net income											21,261								21,261
Other comprehensive income (loss)															20,219				20,219
Shares issued for directors and employee stock plans			31,472				566												566
Compensation expense for employee stock purchases							41												41
Stock-based compensation expense							629												629
Stock options exercised and issued (1)			647																-
Cash dividends declared ($ 1.05 per share)											( 7,910	)							( 7,910	)
Balance, December 31, 2023			7,548,217			$	173,513			$	73,699			$	( 51,578	)		$	195,634
Net income											26,727								26,727
Other comprehensive income (loss)															13,799				13,799
Shares issued for directors and employee stock plans			36,101				453												453
Compensation expense for employee stock purchases							41												41
Stock options exercised and issued (1)			1,165																-
Stock-based compensation expense							680												680
Common stock offering net of costs			1,380,000				32,093												32,093
Cash dividends declared ($ 1.09 per share)											( 9,012	)							( 9,012	)
Balance, December 31, 2024			8,965,483			$	206,780			$	91,414			$	( 37,779	)		$	260,415

See accompanying notes to consolidated financial statements.

---

ChoiceOne Financial Services, Inc.

Consolidated Statements of Cash Flows

---

	Year Ended
(Dollars in thousands)	December 31,
	2024				2023				2022
Cash flows from operating activities:
Net income	$	26,727			$	21,261			$	23,640
Adjustments to reconcile net income to net cash from operating activities:
Provision for (reversal of provision) credit losses		625				150				250
Depreciation		2,463				2,477				2,658
Amortization		9,870				9,953				10,684
Compensation expense on employee and director stock purchases, stock options, and restricted stock units		720				1,005				958
Net (gains) losses on sales of securities		-				71				809
Net change in market value of equity securities		( 195	)			246				955
Gains on sales of loans and capitalized servicing rights		( 2,439	)			( 1,954	)			( 2,343	)
Loans originated for sale		( 74,299	)			( 56,085	)			( 71,829	)
Proceeds from loan sales		73,107				57,342				77,681
Earnings on bank-owned life insurance		( 1,234	)			( 1,096	)			( 1,038	)
Earnings on death benefit from bank-owned life insurance		( 700	)			-				( 274	)
(Gains) on sales of other real estate owned		( 46	)			( 12	)			( 41	)
Proceeds from sales of other real estate owned		345				157				235
Deferred federal income tax (expense) benefit		( 271	)			( 24	)			( 15	)
Net change in:
Other assets		( 817	)			5,395				( 4,208	)
Other liabilities		14,790				7,596				6,205
Net cash provided by operating activities		48,646				46,482				44,327
Cash flows from investing activities:
Sales of securities available for sale		-				-				47,167
Sales of equity securities		-				887				-
Proceeds from Federal Home Loan Bank stock redemption		-				3,917				-
Maturities, prepayments and calls of securities available for sale		33,782				32,289				51,570
Maturities, prepayments and calls of securities held to maturity		25,988				16,572				8,091
Purchases of securities available for sale		( 2,479	)			( 1,646	)			( 55,053	)
Purchases of securities held to maturity		( 14,279	)			( 597	)			( 7,505	)
Purchases of equity securities		( 82	)			-				( 1,029	)
Purchases of Federal Home Loan Bank stock		( 4,934	)			( 4,849	)			-
Purchase of Federal Reserve Bank stock		( 242	)			-				-
Loan originations and payments, net		( 136,070	)			( 221,245	)			( 130,620	)
Proceeds from bank owned life insurance death benefits claim		2,112								690
Additions to premises and equipment		( 1,706	)			( 4,234	)			( 1,164	)
Proceeds from (payments for) derivative contracts, net		-				1,732				( 1,953	)
Payments for derivative contracts settlements		-				( 4,191	)			-
Net cash (used in)/provided by investing activities		( 97,910	)			( 181,365	)			( 89,806	)
Cash flows from financing activities:
Net change in deposits		92,047				4,052				65,709
Proceeds from borrowings		315,000				420,000				726,000
Payments on borrowings		( 340,000	)			( 270,000	)			( 726,000	)
Issuance of common stock		674				231				172
Repurchase of common stock		-				-				( 682	)
Share based compensation withholding obligation		( 220	)			-				( 85	)
Cash dividends		( 9,012	)			( 7,910	)			( 7,578	)
Cash proceeds from common stock offering		32,093				-				-
Net cash provided by/(used in) financing activities		90,582				146,373				57,536
Net change in cash and cash equivalents		41,318				11,490				12,057
Beginning cash and cash equivalents		55,433				43,943				31,886
Ending cash and cash equivalents	$	96,751			$	55,433			$	43,943
Supplemental disclosures of cash flow information:
Cash paid for interest	$	49,902			$	27,481			$	7,577
Cash paid for income taxes		6,350				4,450				1,989
Loans transferred to other real estate owned		650				267				-

---

See accompanying notes to consolidated financial statements.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

Item 9. C hanges in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Cont rols and Procedures

(a) Evaluation of Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on and as of the time of that evaluation, the Company’s management, including the Chief Executive Officer and principal financial officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods.

(b) Changes in Internal Controls

There was no change in the Company’s internal control over financial reporting that occurred during the three months ended December 31, 2024 that has materially affected, or that is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(c) Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2024, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Management’s assessment is based on the criteria for effective internal control over financial reporting as described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that, as of December 31, 2024, its system of internal control over financial reporting was effective and meets the criteria of the “Internal Control – Integrated Framework."

(d) Report of Independent Registered Public Accounting Firm

Plante & Moran, PLLC, an independent registered public accounting firm that audited the consolidated financial statements included herein, has issued an audit report on our internal control over financial reporting as of December 31, 2024, as stated in their report above under Part II, Item 8 of this report.

Item 9B. Other In formation

None .

Item 9C. Disclos ure Regarding Foreign Jurisdictions that Prevent Inspections

None.

---

PART III

Item 10. Dir ectors, Executive Officers and Corporate Governance

The information under the captions “ChoiceOne's Board of Directors and Executive Officers and “Corporate Governance” in the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 21, 2025, is incorporated herein by reference.

The Company has adopted a Code of Ethics for Executive Officers and Senior Financial Officers, which applies to the Chief Executive Officer and the Chief Financial Officer, as well as all other senior financial and accounting officers. The Code of Ethics is posted on the Company’s website at “ www.choiceone.bank. ” The Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of the Code of Ethics by posting such information on its website at “ www.choiceone.bank. ”

Item 11. Exe cutive Compensation

The information under the captions “Executive Compensation” in the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 21, 2025, is incorporated herein by reference.

Item 12. Secu rity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information under the caption "Ownership of ChoiceOne Common Stock" in the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 21, 2025, is incorporated herein by reference.

The following table presents information regarding the equity compensation plans both approved and not approved by shareholders at December 31, 2024:

Number of securities

remaining available for

Number of securities to

Weighted-average

future issuance under

be issued upon exercise

exercise price of

equity compensation plans

of outstanding options,

outstanding options,

(excluding securities

warrants and rights

warrants and rights

reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by security holders

80,857

$

1.94

314,713

Equity compensation plans not approved by security holders

—

—

137,792

Total

80,857

$

1.94

452,505

Equity compensation plans approved by security holders include the Stock Incentive Plan of 2012, the Equity Incentive Plan of 2022, and the 2022 Employee Stock Purchase Plan. As of December 31, 2024, 141,996 shares remained available for future issuance under the Equity Incentive Plan of 2022 and 172,717 shares remained available for future issuance under the 2022 Employee Stock Purchase Plan, in each case other than upon the exercise of outstanding stock options. The Stock Incentive Plan of 2012 has expired and no further issuance of shares is permitted under the plan other than upon the exercise or vesting of outstanding awards.

The Directors’ Stock Purchase Plan and the Directors’ Equity Compensation Plan are the only equity compensation plans not approved by security holders. The Directors’ Stock Purchase Plan is designed to provide directors of the Company the option of receiving their fees in the Company’s common stock. Directors who elect to participate in the plan may elect to contribute to the plan twenty-five, fifty, seventy-five or one hundred percent of their board of director fees and one hundred percent of their director committee fees earned as directors of the Company. Contributions to the plan are made by the Company on behalf of each electing participant. Plan participants may terminate their participation in the plan at any time by written notice of withdrawal to the Company. The Directors’ Equity Compensation Plan provides for the grant and award of stock options, restricted stock, restricted stock units, stock awards, and other stock-based and stock-related awards as part of director compensation. Participants will cease to be eligible to participate in both plans when they cease to serve as directors of the Company. Shares are distributed to participants on a quarterly basis. The Directors' Equity Compensation Plan provides for the issuance of a maximum of 100,000 shares of the Company's common stock thereunder and the Directors' Stock Purchase Plan provides for issuance of a maximum of 100,000 shares thereunder, in each case subject to adjustments for certain changes in the capital structure of the Company. As of December 31, 2024, 72,341 shares remained available for issuance

---

under the Directors' Equity Compensation Plan and 65,451 shares remained available for issuance under the Directors' Stock Purchase Plan.

Item 13. Cert ain Relationships and Related Transactions, and Director Independence

The information under the captions “Related Matters - Transactions with Related Persons” and “Corporate Governance” in the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 21, 2025, is incorporated herein by reference.

Item 14. P rincipal Accountant Fees and Services

The information under the caption "Related Matters - Independent Certified Public Accountants" in the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 21, 2025, is incorporated herein by reference.

Independent Registered Public Accounting Firm:

Name: Plante & Moran, PLLC

Location: Southfield, Michigan

PCAOB ID: 166

---

PART IV

Item 15. E xhibits and Financial Statement Schedules

(a)	(1)	Financial Statements . The following financial statements and independent auditors' reports are filed as part of this report:
			Consolidated Balance Sheets at December 31, 2024 and 2023.
			Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022.
			Consolidated Statement of Comprehensive Income for the years ended December 31, 2024, 2023, and 2022.
			Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2024, 2023, and 2022.
			Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022.
			Notes to Consolidated Financial Statements.
			Report of Independent Registered Public Accounting Firm dated March 11, 2025.
	(2)	Financial Statement Schedules . None.

Exhibit	Document
3.1	Restated Articles of Incorporation of ChoiceOne Financial Services, Inc.
3.2	Bylaws of ChoiceOne Financial Services, Inc., as currently in effect and any amendments thereto. Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 8-K filed April 21, 2021. Here incorporated by reference.
4.1	Advances, Pledge and Security Agreement between ChoiceOne Bank and the Federal Home Loan Bank of Indianapolis. Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013. Here incorporated by reference.
4.2	Form of 3.25% Fixed-to-Floating Rate Subordinated Note due September 3, 2031. Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 8-K filed September 7, 2021. Here incorporated by reference.
4.3	Form of 3.25% Fixed-to-Floating Rate Global Subordinated Note due September 3, 2031. Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 8-K filed September 7, 2021. Here incorporated by reference.
4.4	Description of Rights of Shareholders. Previously filed as an exhibit to ChoiceOne’s Form 10-K Annual Report for the year ended December 31, 2022. Here incorporated by reference.
10.1	Employment Agreement between ChoiceOne Financial Services, Inc. and Kelly J. Potes, dated as of September 30, 2019. (1) Previously filed as an exhibit to ChoiceOne’s Form 8-K filed October 1, 2019. Here incorporated by reference.
10.2	Employment Agreement between ChoiceOne Financial Services, Inc. and Michael J. Burke, Jr., dated as of March 22, 2019. (1) Previously filed as exhibit to ChoiceOne’s Pre-Effective Amendment No. 2 to Form S-4 filed August 5, 2019. Here incorporated by reference.
10.3	Stock Incentive Plan of 2012. (1) Previously filed as Appendix A to ChoiceOne’s definitive proxy statement for ChoiceOne’s 2018 Annual Meeting of Shareholders, filed on April 19, 2018. Here incorporated by reference.
10.4	2022 Employee Stock Purchase Plan. (1) Previously filed as an exhibit to ChoiceOne’s Form S-8 filed May 27, 2022. Here incorporated by reference.
10.5	Equity Incentive Plan of 2022. (1) Previously filed as an exhibit to ChoiceOne’s Form S-8 filed May 27, 2022. Here incorporated by reference.
10.6	Directors' Stock Purchase Plan, as amended. (1) Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 10-K Annual Report for the year ended December 31, 2019. Here incorporated by reference.

---

10.7	Director Equity Compensation Plan of 2019. (1) Previously filed as an exhibit to ChoiceOne Financial Services, Inc.'s Form 10-K Annual Report for the year ended December 31, 2019. Here incorporated by reference.
10.8	Former Valley Ridge Executive Employee Salary Continuation Agreements, as amended. (1) Previously filed as an exhibit to ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013. Here incorporated by reference.
10.9	Former Valley Ridge Directors’ Deferred Compensation Plan and Agreement. (1) Previously filed as an exhibit to the ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2013. Here incorporated by reference.
19	Insider Trading Policy. Previously filed as an exhibit to the ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2023. Here incorporated by reference.
21	Subsidiaries of ChoiceOne Financial Services, Inc.
23	Consent of Independent Registered Public Accounting Firm.
24	Powers of Attorney.
31.1	Certification of Chief Executive Officer.
31.2	Certification of Chief Financial Officer
32	Certification pursuant to 18 U.S.C. § 1350.
97	Incentive-Based Compensation Recoupment Policy. Previously filed as an exhibit to the ChoiceOne Financial Services, Inc.’s Form 10-K Annual Report for the year ended December 31, 2023. Here incorporated by reference.
101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Copies of any exhibits will be furnished to shareholders upon written request. Requests should be directed to: Adom J. Greenland, Secretary, Chief Financial Officer and Treasurer, ChoiceOne Financial Services, Inc., 109 East Division, Sparta, Michigan, 49345.

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ChoiceOne Financial Services, Inc.
By:	/s/ Kelly J. Potes		March 11, 2025
	Kelly J. Potes Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Kelly J. Potes		Chief Executive Officer and		March 11, 2025
Kelly J. Potes		Director (Principal Executive Officer)
/s/ Adom J. Greenland		Chief Financial Officer and Treasurer (Principal Financial and		March 11, 2025
Adom J. Greenland		Accounting Officer)
*/s/ Jack G. Hendon		Chairman of the Board and Director		March 11, 2025
Jack G. Hendon
*/s/ Greg L. Armock		Director		March 11, 2025
Greg L. Armock
*/s/ Keith Brophy		Director		March 11, 2025
Keith Brophy
*/s/ Michael J. Burke, Jr.		President and Director		March 11, 2025
Michael J. Burke, Jr.
*/s/ Harold J. Burns		Director		March 11, 2025
Harold J. Burns
*/s/ Eric E. Burrough		Director		March 11, 2025
Eric E. Burrough
*/s/ Curt E. Coulter		Director		March 11, 2025
Curt E. Coulter
*/s/ Bruce John Essex, Jr.		Director		March 11, 2025
Bruce John Essex, Jr.
*/s/ Gregory A. McConnell		Director		March 11, 2025
Gregory A. McConnell
*/s/ Bradley F. McGinnis		Director		March 11, 2025
Bradley F. McGinnis
*/s/ Roxanne M. Page		Director		March 11, 2025
Roxanne M. Page
*/s/ Michelle M. Wendling		Director		March 11, 2025
Michelle M. Wendling
*/s/ Randy D. Hicks, M.D.		Director		March 11, 2025
Randy D. Hicks, M.D.
*/s/ Brian P. Petty		Director		March 11, 2025
Brian P. Petty
*By /s/ Adom J. Greenland
Attorney-in-Fact

---