Securities

12 Months Ended

Dec. 31, 2023

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

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