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Securities | 12 Months Ended
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Dec. 31, 2023
Debt Securities, Trading, and Equity Securities, FV-NI, Cost [Abstract] |
Securities | Note 2 – Securities On January 1, 2022, ChoiceOne reassessed and transferred, at fair value, $428.4 million of securities classified as available for sale to the held to maturity classification. The net unrealized after-tax loss of $2.7 million as of the transfer date remained in accumulated other comprehensive income to be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfer. The remaining net unamortized unrealized loss on transferred securities included in accumulated other comprehensive income was $2.1 million after tax as of December 31, 2023. The fair value of equity securities and the related gross unrealized gains and (losses) recognized in noninterest income at December 31 were as follows:
|  | December 31, 2023 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
(Dollars in thousands) |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Equity securities |  | $ | 7,960 |  |  | $ | 212 |  |  | $ | (667 | ) |  | $ | 7,505 |
|  | 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 fair value of securities available for sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:
|  | December 31, 2023 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
(Dollars in thousands) |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
Available for Sale: |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
U.S. Government and federal agency |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
U.S. Treasury notes and bonds |  |  | 90,345 |  |  |  | - |  |  |  | (10,151 | ) |  |  | 80,194 |
State and municipal |  |  | 269,918 |  |  |  | - |  |  |  | (35,236 | ) |  |  | 234,682 |
Mortgage-backed |  |  | 212,392 |  |  |  | 14 |  |  |  | (23,905 | ) |  |  | 188,501 |
Corporate |  |  | 250 |  |  |  | - |  |  |  | (46 | ) |  |  | 204 |
Asset-backed securities |  |  | 11,334 |  |  |  | - |  |  |  | (317 | ) |  |  | 11,017 |
Total |  | $ | 584,239 |  |  | $ | 14 |  |  | $ | (69,655 | ) |  | $ | 514,598 |
|  | December 31, 2022 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
(Dollars in thousands) |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
Available for Sale: |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
U.S. Government and federal agency |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
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 |
The amortized cost and fair value of securities held to maturity and the related gross unrealized gains and losses were as follows:
|  | December 31, 2023 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
(Dollars in thousands) |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
Held to Maturity: |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
U.S. Government and federal agency |  | $ | 2,972 |  |  | $ | - |  |  | $ | (293 | ) |  | $ | 2,679 |
State and municipal |  |  | 196,098 |  |  |  | 14 |  |  |  | (30,220 | ) |  |  | 165,892 |
Mortgage-backed |  |  | 188,329 |  |  |  | - |  |  |  | (25,796 | ) |  |  | 162,533 |
Corporate |  |  | 20,013 |  |  |  | 21 |  |  |  | (2,864 | ) |  |  | 17,170 |
Asset-backed securities |  |  | 547 |  |  |  | - |  |  |  | (30 | ) |  |  | 517 |
Total |  | $ | 407,959 |  |  | $ | 35 |  |  | $ | (59,203 | ) |  | $ | 348,791 |
|  | December 31, 2022 |
|  |  |  |  | Gross |  |  | Gross |  |  |  |
(Dollars in thousands) |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
Held to Maturity: |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
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 |
Information regarding sales of equity and debt securities available for sale for the year ended December 31 follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Proceeds from sales of securities |  | $ | 887 |  |  | $ | 47,167 |  |  | $ | 29,742 |
Gross realized gains |  |  | - |  |  |  | - |  |  |  | - |
Gross realized losses |  |  | (71 | ) |  |  | (809 | ) |  |  | (40 | )
Contractual maturities of securities available for sale at December 31, 2023 were as follows:
(Dollars in thousands) |  |  |  | Amortized |  |  | Fair |
|  |  |  | Cost |  |  | Value |
Due within one year |  |  |  | $ | 250 |  |  | $ | 250 |
Due after one year through five years |  |  |  |  | 99,159 |  |  |  | 90,209 |
Due after five years through ten years |  |  |  |  | 177,228 |  |  |  | 159,321 |
Due after ten years |  |  |  |  | 95,210 |  |  |  | 76,317 |
Total debt securities |  |  |  |  | 371,847 |  |  |  | 326,097 |
Mortgage-backed securities |  |  |  |  | 212,392 |  |  |  | 188,501 |
Total |  |  |  | $ | 584,239 |  |  | $ | 514,598 |
Contractual maturities of securities held to maturity at December 31, 2023 were as follows:
(Dollars in thousands) |  |  |  | Amortized |  |  | Fair |
|  |  |  | Cost |  |  | Value |
Due within one year |  |  |  | $ | 1,586 |  |  | $ | 1,543 |
Due after one year through five years |  |  |  |  | 12,379 |  |  |  | 11,376 |
Due after five years through ten years |  |  |  |  | 124,644 |  |  |  | 108,371 |
Due after ten years |  |  |  |  | 81,021 |  |  |  | 64,968 |
Total debt securities |  |  |  |  | 219,630 |  |  |  | 186,258 |
Mortgage-backed securities |  |  |  |  | 188,329 |  |  |  | 162,533 |
Total |  |  |  | $ | 407,959 |  |  | $ | 348,791 |
Certain securities were pledged as collateral for participation in a program that provided Community Reinvestment Act credits and for other purposes, as required or permitted by law. ChoiceOne also pledges securities to the FHLB and the FRB. The purpose of this pledging strategy is to enhance the availability of cash and other liquid assets that can be used to meet the operational needs of the organization. This strategy also allows the organization to optimize its asset allocation and diversify its funding sources. The carrying amount of the securities pledged as collateral at December 31 was as follows:
(Dollars in thousands) |  |  |  | 2023 |  |  | 2022 |
Securities pledged to Federal Reserve Bank |  |  |  | $ | 526,413 |  |  | $ | - |
Securities pledged to Federal Home Loan Bank |  |  |  |  | 278,503 |  |  |  | - |
Securities pledged for Community Reinvestment Act credits |  |  |  |  | 250 |  |  |  | 250 |
Total Securities pledged |  |  |  |  | 805,166 |  |  |  | 250 |
Securities with unrealized losses at year-end 2023 and 2022, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:
|  | 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. Government and federal agency |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
U.S. Treasury notes and bonds |  |  | - |  |  |  | - |  |  |  | 80,194 |  |  |  | 10,151 |  |  |  | 80,194 |  |  |  | 10,151 |
State and municipal |  |  | 557 |  |  |  | 6 |  |  |  | 234,125 |  |  |  | 35,230 |  |  |  | 234,682 |  |  |  | 35,236 |
Mortgage-backed |  |  | 1,255 |  |  |  | 23 |  |  |  | 176,400 |  |  |  | 23,882 |  |  |  | 177,655 |  |  |  | 23,905 |
Corporate |  |  | - |  |  |  | - |  |  |  | 204 |  |  |  | 46 |  |  |  | 204 |  |  |  | 46 |
Asset-backed securities |  |  | - |  |  |  | - |  |  |  | 11,017 |  |  |  | 317 |  |  |  | 11,017 |  |  |  | 317 |
Total temporarily impaired |  | $ | 1,812 |  |  | $ | 29 |  |  | $ | 501,940 |  |  | $ | 69,626 |  |  | $ | 503,752 |  |  | $ | 69,655 |
|  | 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. Government and federal agency |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
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 |
|  | 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 |  | $ | - |  |  | $ | - |  |  | $ | 2,679 |  |  | $ | 293 |  |  | $ | 2,679 |  |  | $ | 293 |
State and municipal |  |  | 23 |  |  |  | - |  |  |  | 165,526 |  |  |  | 30,220 |  |  |  | 165,549 |  |  |  | 30,220 |
Mortgage-backed |  |  | - |  |  |  | - |  |  |  | 162,533 |  |  |  | 25,796 |  |  |  | 162,533 |  |  |  | 25,796 |
Corporate |  |  | - |  |  |  | - |  |  |  | 15,509 |  |  |  | 2,864 |  |  |  | 15,509 |  |  |  | 2,864 |
Asset-backed securities |  |  | - |  |  |  | - |  |  |  | 517 |  |  |  | 30 |  |  |  | 517 |  |  |  | 30 |
Total temporarily impaired |  | $ | 23 |  |  | $ | - |  |  | $ | 346,764 |  |  | $ | 59,203 |  |  | $ | 346,787 |  |  | $ | 59,203 |
|  | 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 year ended December 31, 2023 and no other-than-temporary impairment charges were recorded in the year ended December 31, 2022. At December 31, 2023 and December 31, 2022, there were 569 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 December 31, 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 December 31, 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 December 31, 2023, 39% were issued by US government sponsored entities and agencies, and rated AA, 39% are AAA rated private issue and collateralized mortgage obligation, and 22% are unrated privately issued mortgage-backed securities with structured credit enhancement and collateralized mortgage obligation. Following is information regarding unrealized gains and losses on equity securities for the years ending December 31:
|  |  |  |  |  |  |  | 2023 |  |  | 2022 |  |  | 2021 |
Net gains and losses recognized during the period |  |  |  |  |  |  |  | $ | (317 | ) |  | $ | (955 | ) |  | $ | 479 |
Less: Net gains and losses recognized during the period on securities sold |  |  |  |  |  |  |  |  | (71 | ) |  |  | - |  |  |  | - |
Unrealized gains and losses recognized during the reporting period on securities still held at the reporting date |  |  |  |  |  |  |  | $ | (246 | ) |  | $ | (955 | ) |  | $ | 479 |

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