Securities

3 Months Ended

Mar. 31, 2025

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 $1.9 million after tax as of March 31, 2025.

ChoiceOne acquired $90.7 million in securities as part of the Merger; however, management chose to sell $78.9 million to pay down higher cost wholesale funding. The sale of the securities was completed so close to the fair value determination date that no loss was recognized. Consequently, the net increase in securities from the Merger was $11.8 million.

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


	March 31, 2025
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	9,549	$	375	$	(596	)	$	9,328


	December 31, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	8,043	$	397	$	(658	)	$	7,782

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:


	March 31, 2025
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Government and federal agency	$	993	$	-	$	-		$	993
U.S. Treasury notes and bonds		94,451		6		(7,704	)		86,753
State and municipal		263,464		-		(39,224	)		224,240
Mortgage-backed		177,779		63		(18,502	)		159,340
Corporate		250		-		(38	)		212
Asset-backed securities		9,267		-		(155	)		9,112
Total	$	546,204	$	69	$	(65,623	)	$	480,650

(Dollars in thousands)
Held to Maturity:
U.S. Government and federal agency	$	2,979	$	-	$	(224	)	$	2,755
State and municipal		199,997		4		(29,025	)		170,976
Mortgage-backed		170,795		4		(19,244	)		151,555
Corporate		20,503		26		(1,750	)		18,779
Asset-backed securities		160		-		(2	)		158
Total	$	394,434	$	34	$	(50,245	)	$	344,223


	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

(Dollars in thousands)
Held to Maturity:
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

Available for sale securities with unrealized losses as of March 31, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	March 31, 2025
	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	$	-	$	-	$	82,054	$	7,704	$	82,054	$	7,704
State and municipal		849		-		223,246		39,224		224,095		39,224
Mortgage-backed		6,694		41		140,863		18,461		147,557		18,502
Corporate		-		-		212		38		212		38
Asset-backed securities		-		-		9,112		155		9,112		155
Total temporarily impaired	$	7,543	$	41	$	455,487	$	65,582	$	463,030	$	65,623


	December 31, 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

Held to maturity securities with unrealized losses as of March 31, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	March 31, 2025
	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	$	-	$	-	$	2,756	$	224	$	2,756	$	224
State and municipal		6,100		126		164,156		28,899		170,256		29,025
Mortgage-backed		4,347		23		140,699		19,221		145,046		19,244
Corporate		-		-		16,650		1,750		16,650		1,750
Asset-backed securities		-		-		157		2		157		2
Total temporarily impaired	$	10,447	$	149	$	324,418	$	50,096	$	334,865	$	50,245


	December 31, 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

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 months ended March 31, 2025 and March 31, 2024 on AFS securities.

The majority of unrealized losses at March 31, 2025, 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 March 31, 2025, 85% of state and municipal bonds held are rated AA or better, 10% are A rated and 5% are not rated. Of the mortgage-backed securities held on March 31, 2025, 43% were issued by US government sponsored entities and agencies, and rated AA, 44% are AAA rated private issue and collateralized mortgage obligation, and 13% 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.

Presented below is a schedule of maturities of securities as of March 31, 2025. 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 March 31,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2025

U.S. Government and federal agency	$	993	$	-	$	-	$	-	$	993
U.S. Treasury notes and bonds	$	-	$	86,753	$	-	$	-	$	86,753
State and municipal		2,250		13,660		33,334		174,996		224,240
Corporate		-		-		212		-		212
Asset-backed securities		-		6,646		2,466		-		9,112
Total debt securities		3,243		107,059		36,012		174,996		321,310

Mortgage-backed securities		3,179		79,133		58,288		18,740		159,340
Total Available for Sale	$	6,422	$	186,192	$	94,300	$	193,736	$	480,650


	Held to Maturity Securities maturing within:
									Amortized Cost
	Less than		1 Year -		5 Years -		More than		at March 31,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2025

U.S. Government and federal agency	$	-	$	2,979	$	-	$	-	$	2,979
State and municipal		3,570		21,577		94,989		79,861		199,997
Corporate		-		-		20,503		-		20,503
Asset-backed securities		160		-		-		-		160
Total debt securities		3,730		24,556		115,492		79,861		223,639

Mortgage-backed securities		5,512		85,893		79,390		-		170,795
Total Held to Maturity	$	9,242	$	110,449	$	194,882	$	79,861	$	394,434

Following is information regarding unrealized gains and losses on equity securities for the three months ended March 31, 2025 and 2024:


	Three Months Ended
	March 31,
	2025		2024
(Dollars in thousands)
Net gains and (losses) recognized during the period	$	107	$	35
Less: Net gains and (losses) recognized during the period on securities sold		—		—

Unrealized gains and (losses) recognized during the reporting period on securities still held at the reporting date	$	107	$	35