Securities

12 Months Ended

Dec. 31, 2024

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 $2.0 million after tax as of December 31, 2024.

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, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	8,043	$	397	$	(658	)	$	7,782


	December 31, 2023
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	7,960	$	212	$	(667	)	$	7,505

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, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Treasury notes and bonds	$	89,875	$	-	$	(9,373	)	$	80,502
State and municipal		258,815		-		(30,579	)		228,236
Mortgage-backed		181,863		62		(20,955	)		160,970
Corporate		250		-		(38	)		212
Asset-backed securities		9,387		-		(190	)		9,197
Total	$	540,190	$	62	$	(61,135	)	$	479,117


	December 31, 2023
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
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

The amortized cost and fair value of securities held to maturity and the related gross unrealized gains and losses were as follows:


	December 31, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Held to Maturity:	Cost		Gains		Losses			Value
U.S. Government and federal agency	$	2,978	$	-	$	(279	)	$	2,699
State and municipal		196,510		5		(31,477	)		165,038
Mortgage-backed		174,323		7		(21,963	)		152,367
Corporate		20,495		29		(1,803	)		18,721
Asset-backed securities		228		-		(5	)		223
Total	$	394,534	$	41	$	(55,527	)	$	339,048


	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

Information regarding sales of equity and debt securities available for sale for the year ended December 31 follows:


(Dollars in thousands)
	2024		2023			2022
Proceeds from sales of securities	$	-	$	887		$	47,167
Gross realized gains		-		-			-
Gross realized losses		-		(71	)		(809	)

Contractual maturities of securities available for sale at December 31, 2024 were as follows:


(Dollars in thousands)	Amortized		Fair
	Cost		Value
Due within one year	$	1,260	$	1,248
Due after one year through five years		114,506		103,936
Due after five years through ten years		85,429		77,013
Due after ten years		157,132		135,950
Total debt securities		358,327		318,147
Mortgage-backed securities		181,863		160,970
Total	$	540,190	$	479,117

Contractual maturities of securities held to maturity at December 31, 2024 were as follows:


(Dollars in thousands)	Amortized		Fair
	Cost		Value
Due within one year	$	2,745	$	2,726
Due after one year through five years		22,977		20,916
Due after five years through ten years		123,130		106,777
Due after ten years		71,359		56,262
Total debt securities		220,211		186,681
Mortgage-backed securities		174,323		152,367
Total	$	394,534	$	339,048

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)	2024		2023
Securities pledged to Federal Reserve Bank	$	349,861	$	526,413
Securities pledged to Federal Home Loan Bank		265,537		278,503
Securities pledged for Community Reinvestment Act credits		246		250
Total Securities pledged	$	615,644	$	805,166

Securities with unrealized losses at year-end 2024 and 2023, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	2024
	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	$	-	$	-	$	80,502	$	9,373	$	80,502	$	9,373
State and municipal		-		-		228,236		30,579		228,236		30,579
Mortgage-backed		963		1		142,170		20,954		143,133		20,955
Corporate		-		-		212		38		212		38
Asset-backed securities		-		-		9,197		190		9,197		190
Total temporarily impaired	$	963	$	1	$	460,317	$	61,134	$	461,280	$	61,135


	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	$	-	$	-	$	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


	2024
	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	$	-	$	-	$	2,699	$	279	$	2,699	$	279
State and municipal		5,262		630		159,558		30,847		164,820		31,477
Mortgage-backed		2,350		11		141,970		21,952		144,320		21,963
Corporate		-		-		16,591		1,803		16,591		1,803
Asset-backed securities		-		-		223		5		223		5
Total temporarily impaired	$	7,612	$	641	$	321,041	$	54,886	$	328,653	$	55,527


	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

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, 2024 and December 31, 2023 on AFS securities.

The majority of unrealized losses at December 31, 2024, 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, 2024, 85% of state and municipal bonds held are rated AA or better, 10% are A rated and 4% are not rated. Of the mortgage-backed securities held on December 31, 2024, 42% were issued by US government sponsored entities and agencies, and rated AA, 44% are AAA rated private issue and collateralized mortgage obligation, and 14% are unrated privately issued mortgage-backed securities with structured credit enhancement and collateralized mortgage obligation.

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.

Following is information regarding unrealized gains and losses on equity securities for the years ending December 31:


	2024		2023			2022
Net gains and losses recognized during the period	$	195	$	(317	)	$	(955	)
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	$	195	$	(246	)	$	(955	)