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Note 8 - Subsequent Events | 3 Months Ended
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Mar. 31, 2022
Notes to Financial Statements |
Subsequent Events [Text Block] | NOTE 8 – SUBSEQUENT EVENTS During the first quarter of 2022, the Federal Reserve increased the federal funds rate by 25 basis points in response to published inflation rates, causing interest rates generally to sharply increase. This change in interest rates increased ChoiceOne's unrealized pre-tax loss on its available for sale securities portfolio from $3.3 million at December 31, 2021 to $42.8 million at March 31, 2022. Additionally, meeting minutes from the Federal Open Market Committee indicated that additional increases in the federal funds rate are expected in order to combat inflation in the coming quarters. As such, ChoiceOne has elected to utilize interest rate derivatives in order to better manage its interest rate risk position. On April 21, 2022, ChoiceOne purchased five forward-starting interest rate caps with a total notional amount of $200 million and entered into a $200 million forward-starting pay-fixed interest rate swap. ChoiceOne also entered into a $200 million receive-fixed interest rate swap, which, in the current environment, offsets the cost of the rising rate protection. The five forward-starting interest rate caps are tied to the Secured Overnight Financing Rate ("SOFR") with a strike price of 2.68%, and are structured as a two-year forward eight year term. The forward-starting pay-fixed interest rate swap is also structured with a two-year forward eight year term, and ChoiceOne will pay a coupon rate of 2.75% while receiving SOFR. The receive-fixed interest rate swap has a two year term with an immediate start date and ChoiceOne is receiving a fixed coupon of 2.41% while paying SOFR. These strategies create accounting symmetry between available-for-sale securities and other comprehensive income (equity), thus protecting tangible capital from further increases in interest rates. These three strategies, in the aggregate, are expected to be modestly accretive to net income in 2022 and better position ChoiceOne Bank should rates continue to rise.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI https://asc.fasb.org/topic&trid=2122774 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6842918&loc=SL6314017-165662 + Details
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