Securities

9 Months Ended

Sep. 30, 2023

Debt Securities, Trading, and Equity Securities, FV-NI, Cost [Abstract]

NOTE 2 – SECURITIES

The fair value of equity securities and the related gross unrealized gains and (losses) recognized in noninterest income were as follows:


	September 30, 2023
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	7,928	$	208	$	(874	)	$	7,262


	December 31, 2022
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	8,982	$	305	$	(721	)	$	8,566

The following tables present the amortized cost and fair value of securities available for sale and the gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and the amortized cost and fair value of securities held to maturity and the related gross unrealized gains and losses. Mortgage backed security and collateralized mortgage obligation maturities are based on the average life at the prepayment speed and all other security types are based on the pre-refund date, call date, or maturity date:


	September 30, 2023
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Treasury notes and bonds	$	90,463	$	-	$	(13,431	)	$	77,032
State and municipal		260,976		-		(48,262	)		212,714
Mortgage-backed		219,113		9		(30,058	)		189,064
Corporate		760		-		(51	)		709
Asset-backed securities		11,675		-		(390	)		11,285
Total	$	582,987	$	9	$	(92,192	)	$	490,804

Held to Maturity:
U.S. Government and federal agency	$	2,971	$	-	$	(396	)	$	2,575
State and municipal		196,580		3		(42,986	)		153,597
Mortgage-backed		194,545		-		(33,599	)		160,946
Corporate		20,005		16		(3,117	)		16,904
Asset-backed securities		642		-		(39	)		603
Total	$	414,743	$	19	$	(80,137	)	$	334,625


	December 31, 2022
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Treasury notes and bonds	$	90,810	$	-	$	(12,606	)	$	78,204
State and municipal		277,489		-		(47,551	)		229,938
Mortgage-backed		236,703		-		(28,140	)		208,563
Corporate		757		-		(46	)		711
Asset-backed securities		13,031		-		(698	)		12,333
Total	$	618,790	$	-	$	(89,041	)	$	529,749

Held to Maturity:
U.S. Government and federal agency	$	2,966	$	-	$	(421	)	$	2,545
State and municipal		201,890		1		(39,355	)		162,536
Mortgage-backed		200,473		-		(29,868	)		170,605
Corporate		19,603		-		(2,285	)		17,318
Asset-backed securities		974		-		(77	)		897
Total	$	425,906	$	1	$	(72,006	)	$	353,901

Available for sale securities with unrealized losses as of September 30, 2023 and December 31, 2022, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	September 30, 2023
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale:	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury notes and bonds	$	-	$	-	$	77,032	$	13,431	$	77,032	$	13,431
State and municipal		529		35		212,185		48,227		212,714		48,262
Mortgage-backed		4,099		160		174,956		29,898		179,055		30,058
Corporate		-		-		709		51		709		51
Asset-backed securities		-		-		11,285		390		11,285		390
Total temporarily impaired	$	4,628	$	195	$	476,167	$	91,997	$	480,795	$	92,192


	December 31, 2022
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale:	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury notes and bonds	$	-	$	-	$	78,204	$	12,606	$	78,204	$	12,606
State and municipal		89,158		12,612		140,390		34,939		229,548		47,551
Mortgage-backed		63,249		3,093		144,318		25,047		207,567		28,140
Corporate		711		46		-		-		711		46
Asset-backed securities		-		-		12,333		698		12,333		698
Total temporarily impaired	$	153,118	$	15,751	$	375,245	$	73,290	$	528,363	$	89,041

Held to maturity securities with unrealized losses as of September 30, 2023 and December 31, 2022, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	September 30, 2023
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held to Maturity:	Value		Losses		Value		Losses		Value		Losses
U.S. Government and federal agency	$	-	$	-	$	2,575	$	396	$	2,575	$	396
State and municipal		125		6		153,293		42,980		153,418		42,986
Mortgage-backed		-		-		160,946		33,599		160,946		33,599
Corporate		-		-		15,251		3,117		15,251		3,117
Asset-backed securities		-		-		603		39		603		39
Total temporarily impaired	$	125	$	6	$	332,668	$	80,131	$	332,793	$	80,137


	December 31, 2022
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held to Maturity:	Value		Losses		Value		Losses		Value		Losses
U.S. Government and federal agency	$	-	$	-	$	2,545	$	421	$	2,545	$	421
State and municipal		13,457		1,899		149,016		37,456		162,473		39,355
Mortgage-backed		25,582		822		145,024		29,046		170,606		29,868
Corporate		5,296		603		10,771		1,682		16,067		2,285
Asset-backed securities		-		-		897		77		897		77
Total temporarily impaired	$	44,335	$	3,324	$	308,253	$	68,682	$	352,588	$	72,006

ChoiceOne evaluates all securities on a quarterly basis to determine if an ACL and corresponding impairment charge should be recorded. Consideration is given to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of ChoiceOne to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value of amortized cost basis. ChoiceOne believes that unrealized losses on securities were temporary in nature and were caused primarily by changes in interest rates, increased credit spreads, and reduced market liquidity and were not caused by the credit status of the issuer. No ACL was recorded in the three and nine months ended September 30, 2023, and no other-than-temporary impairment charges were recorded in the same periods in 2022.

At September 30, 2023 and December 31, 2022, there were 591 and 611 securities with an unrealized loss, respectively. Unrealized losses have not been recognized into income because the issuers’ bonds 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.

The majority of unrealized losses at September 30, 2023, are related to U.S. Treasury notes and bonds, state and municipal bonds and mortgage backed securities. The U.S. Treasury notes are guaranteed by the U.S. government and 100% of the notes are rated AA or better. State and municipal bonds are backed by the taxing authority of the bond issuer or the revenues from the bond. On September 30, 2023, 86% of state and municipal bonds held are rated AA or better, 11% are A rated and 3% are not rated. Of the mortgage-backed securities held on September 30, 2023, 38% were issued by US government sponsored entities and agencies, and rated AA, 39% are AAA rated private issue and collateralized mortgage obligation, and 23% are unrated privately issued mortgage-backed securities with structured credit enhancement and collateralized mortgage obligation.

Presented below is a schedule of maturities of securities as of September 30, 2023. Available for sale securities are reported at fair value and held to maturity securities are reported at amortized cost. 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 September 30,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2023

U.S. Government and federal agency	$	-	$	-	$	-	$	-	$	-
U.S. Treasury notes and bonds		-		55,662		21,370		-		77,032
State and municipal		1,854		9,677		36,082		165,101		212,714
Corporate		509		-		200		—		709
Asset-backed securities		—		8,195		3,090		—		11,285
Total debt securities		2,363		73,534		60,742		165,101		301,740

Mortgage-backed securities		14,001		59,091		109,991		5,981		189,064
Total Available for Sale	$	16,364	$	132,625	$	170,733	$	171,082	$	490,804


	Held to Maturity Securities maturing within:
									Amortized Cost
	Less than		1 Year -		5 Years -		More than		at September 30,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2023

U.S. Government and federal agency	$	—	$	2,971	$	-	$	—	$	2,971
State and municipal		1,056		9,425		80,002		106,097		196,580
Corporate		—		-		20,005		-		20,005
Asset-backed securities		—		642		—		—		642
Total debt securities		1,056		13,038		100,007		106,097		220,198

Mortgage-backed securities		14,753		30,664		149,128		—		194,545
Total Held to Maturity	$	15,809	$	43,702	$	249,135	$	106,097	$	414,743

Following is information regarding unrealized gains and losses on equity securities for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022

Net gains and (losses) recognized during the period	$	(205	)	$	(323	)	$	(527	)	$	(1,006	)
Less: Net gains and (losses) recognized during the period on securities sold		(71	)	—				(71	)		—

Unrealized gains and (losses) recognized during the reporting period on securities still held at the reporting date	$	(134	)	$	(323	)	$	(456	)	$	(1,006	)