Risk Factors Update Summary

• Total cost of funds increased significantly from 0.35% in 2022 to 1.44% in 2023.
• ChoiceOne adopted CECL effective January 1, 2023, resulting in an increase in the ACL of $7.2 million.
• Adoption of CECL accounting standard may add volatility to allowance for credit losses. This change might result in increased provisions for credit losses.
• Addition of Troubled Loan Modifications ASU 2022-02 introduces new accounting guidance and disclosure requirements for troubled debt restructurings and gross chargeoffs by origination year.
• Total assets grew by $19.2 million in the twelve months ended December 31, 2023.
• Addition of Stock Based Compensation details for 2023, with a decrease in compensation expense from $4,000 in 2022 to $0 in 2023.
• Changes in fair value of equity securities: $8,566,000 (Dec. 31, 2022) to $7,505,000 (Dec. 31, 2023).
• Goodwill balance decreased from $59,946 in 2022 to $59,506 in 2023.
• Sales of securities significantly increased from $29,742 to $121,942, with gross realized gains of $1,308.
• Added details on stock repurchased during the period, with a significant increase from $1.01 to $1.05 per share.
• Core loans grew by $206.1 million in 2023, excluding PPP loans and loans to other financial institutions.
• Net cash provided by financing activities increased from $7,679 to $8,173.
• Addition of new subtopic (iii) (A) under Paragraph 1A in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1A. This change enhances the specificity of the accounting standards.
• Added details on off-balance sheet credit loss liability commitments, increasing from $57,781 to $54,523.
• Common stock shares outstanding increased from 7,510,379 shares to 7,516,098 shares.
• Disclosed changes in stock options outstanding and exercised, impacting equity structure.
• Increase in Allowance for Credit Losses The cumulative effect of the change in accounting principle led to a significant increase in the allowance for credit losses.
• Added new details on Asset-backed Securities with unrealized losses totaling $28,140, an increase from $23,905.
• Deferred tax assets decreased from $21,130 to $23,810, mainly due to unfunded commitment reserve changes.
• The company changed the accumulated other comprehensive income from $51,578 to $71,797. This change might impact financial stability.
• Increase in liabilities from $31,971 to $32,115. This change might impact financial stability.
• ChoiceOne conducted an annual assessment of goodwill as of June 30, 2023, and no impairment was identified.
• Added risk factors related to consumer credit exposure and credit risk profile.
• Changes in net income: $23,640 in 2022 to $21,261 in 2023. This may impact investor sentiment.
• Addition of new references and details related to accounting standards codification sections 50, 16, and 45.
• Bank Term Funding Program advances increased from $0 in 2022 to $170,000 in 2023.
• Added details on Derivative Instruments, Gain (Loss) line items, with a reclassified amount of $0.
• An additional ACL on unfunded commitments of $3.3 million was recorded due to CECL adoption.
• Increase in Interest rate contracts Other Assets from $204k to $880k. This change might indicate a shift in investment strategy.
• The number of stock options exercisable at year-end decreased from 12,000 to 4,500.
• Significant decrease in Loans and Financing Receivable from $85,913 to $36,450.
• Weighted average common shares outstanding decreased from 846 to 572, potentially impacting EPS.
• Detailed changes in fair values for Equity securities, Interest rate contracts, and US Treasury Securities.
• Shareholders' equity increased by $26.7 million from 2022 to 2023, reaching $195.6 million.
• Increase in Equity securities at fair value from $7,505 to $4,749, a decrease of $2,756.
• Section 50, Paragraph 32 was added to SubTopic 10, increasing the depth of disclosure.
• Real Estate Owned balance decreased significantly from $80,000 to $0.
• ChoiceOne adopted CECL effective January 1, 2023, resulting in an increase in the ACL of $7.2 million.
• Addition of $420,000 proceeds from borrowings and $270,000 payments on borrowings in financing activities.
• The Incentive-Based Compensation Recoupment Policy was adopted to recover Erroneously Awarded Incentive-Based Compensation. This policy applies to all current and former executive officers.
• Addition of "Earnings Per Share - Additional Information" section with details on Employee Stock Option. This enhances transparency.
• Addition of Section 50 - Paragraph 11 - Subparagraph (b) by Publisher FASB. This change is significant.
• Total Allowance for Credit Losses increased from $7,619 to $15,685, a significant rise.
• Addition of $613,000 in securities purchased in 2023 compared to 2022.
• Change from "Loans" to "Credit" in the risk factors disclosure. This change reflects a shift in terminology.
• Change in allowance for credit losses methodology to CECL could increase and add volatility to future provisions.
• Addition of references to various Accounting Standards Codification sections and paragraphs. This enhances clarity and compliance.
• The number of securities with an unrealized loss increased significantly from 247 to 569.
• Significant changes in the balance sheet from 2020 to 2023, with total net income increasing from $22,042 to $22,042.
• Loans increased from $11,000 to $15,000, with a significant rise in outstanding recorded investment.
• Added details on accounting policy for credit loss on financial instruments, including methodology and determination. This change enhances transparency and risk assessment.
• The company adopted ASU 2016-13 (CECL) on January 1, 2023, resulting in an increase in the ACL of $7.2 million.
• Debt securities due after one year through five years increased from $17 to $99.
• Related party deposit liabilities decreased from $30.0 million in 2022 to $21.1 million in 2023.
• Interest income increased from $98,980 in 2022 to $98,980 in 2023.
• Interest income from loans increased significantly from $52,823 in 2022 to $68,384 in 2023.
• Interest rates on Bank Term Funding Program advances rose from 4.71% to 4.83%.
• Individually evaluated loan reserves increased from $131 to $153, a notable change.
• Defined contribution plan cost decreased from $650,000 in 2022 to $594,000 in 2023.
• Transition from Topic 250 to Topic 280. This change may impact reporting requirements.
• Inclusion of 4,500 shares as "Antidilutive Securities Excluded from Earnings Per Share" calculation.
• The percentage of state and municipal bonds rated AA or better increased from 86% to 100%.
• New details on accounting policy for derivatives added, providing insight into risk management strategies.
• Changes in the amortization of intangible assets with values increasing from $955,000 to $1,153,000.
• Increased deposits from executive officers and directors from $24,036 to $30,316 million.
• The Policy will apply to any incentive-based compensation in the event of an accounting restatement due to material noncompliance. The Committee will review all incentive-based compensation.
• Increased nonaccrual loans from $1,263 to $1,723 million, impacting financial stability.
• Loans to other financial institutions decreased from $1,098,885,000 to $529,749,000.
• Increase in Total Loans from $229,916 to $267,730. This indicates a significant growth in loan exposure.
• Increased commitments for interest rate extensions from 2.375% to 2.25% and 9.50% to 6.00%.
• Intangible assets gross carrying amount decreased from $7,120 to $7,120 in 2023.
• Taxable securities income rose from $15,583 to $21,169, while tax-exempt securities decreased from $891 to $629.
• Debt securities held to maturity increased from $407,959 to $425,906, with gross unrealized losses rising to $72,006.
• Noted changes in cash flows from operating activities, with net income decreasing from $23,640 to $21,261.
• Revised the definition of total stockholders' equity, now excluding temporary equity and noncontrolling interests.
• Noted a decrease in deferred tax assets from $23,810 to $20,374 million.
• Net cash from operating activities increased from $45,017 to $46,482.
• Proceeds from borrowings decreased from $36,827 to $10,786.
• Loan commitments increased from $35,789 in 2022 to $90,178 in 2023, a significant rise.
• Included a new line item for the amount of gain or loss reclassified from accumulated other comprehensive income into income.
• Securities pledged for Community Reinvestment Act credits decreased from $273,000 in 2021 to $250,000 in 2022.
• Troubled debt restructuring loans increased from $0 to $619 in the commercial real estate portfolio segment.
• Increase in Net income from $21,261k to $23,640k. This change may indicate improved profitability.
• Change in Cumulative amount of Fair Value Hedging Adjustment from $222,933 to $(396) in Securities available for sale.
• Addition of new sub-paragraphs (c), (d), (e), (f), and (g) under Section 50, Publisher FASB.
• The number of nonvested equity instruments decreased from 10,000 to 5,000.
• The number of restricted stock units (RSUs) granted increased from 6,396 to 23,679.
• The average remaining contractual life of stock options decreased from 6 years to 5 years.
• Business Loan Accounts, Notes, Loans, and Financing Receivable decreased from $177,796 to $133,601.
• Inclusion of specific details regarding adjustments to additional paid-in capital and share-based compensation.
• Interest income increased from $6,135 to $10,845, impacting revenue.
• Diluted earnings per common share decreased from $3.15 to $2.82, affecting profitability.
• Addition of Topic 860 - SubTopic 50 with significant changes in fair values for various assets.
• Introduction of interest income and expense after provision for loan loss specifics with a reference link.
• Introduction of labor and related expense details under topic 220, subtopic 10, section S99, paragraph 2.
• ChoiceOne repurchased 25,899 shares for $683,000 in 2023, using interest rate swaps to manage exposure.
• Net interest income decreased from $65,885 to $55,715.
• Securities available for sale decreased significantly from $514,598 to $80,194, a decrease of $434,404.
• Section 50, Paragraph 31 was added to SubTopic 10, enhancing reporting requirements.
• Commercial Real Estate Loans balance decreased from $80,000 to $0.
• Interest expense on borrowings increased by $7.2 million for the twelve months ended December 31, 2023.
• Other comprehensive income: Net unrealized gain on available-for-sale securities decreased from $20,934 to $15,326.
• Significant decrease in available shares for future grants from 200,000 to 142,000 at December 31, 2023.
• Deferred tax liabilities decreased from $17,163 to $20,374, driven by adjustments in loan servicing rights.
• Shareholders' equity rose from $168,874 to $195,634. This change could affect investor confidence.
• Total debt securities, amortized cost decreased from $382 to $371.
• Preferred stock outstanding decreased from 7,510,379 shares to 7,516,098 shares.
• ChoiceOne engaged a third-party valuation firm to assess acquired intangible assets, resulting in a total of $1 million.
• Management uses benchmark peer loss history data to estimate historical loss rates for the ACL.
• Unrealized Gains and Losses on Equity Securities changed from a loss of $955 to a loss of $317.
• Significant increase in unrealized losses on investment securities from $161 million to $128 million.
• Inclusion of new subtopic (iv) under Paragraph 1B in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B. This addition expands the coverage of the standards.
• Notable adjustments in shares issued, with an increase from 23,301 shares to 23,301 shares.
• Detailed Loan Portfolio Breakdown The loan portfolio breakdown provides a comprehensive view of the credit exposure by category and year-end balances.
• Unrealized gain (loss) on derivative instruments increased from $7,072 to $1,212. This change could affect financial risk.
• Increase in fair value of Equity Securities from $1,768,000 to $2,542,000.
• Added information on the derivative gain or loss statement of income or comprehensive income.
• Section 50, Paragraph 30 was added to SubTopic 10, potentially impacting financial analysis.
• Operating loss carryforwards expiration year changed from $24,000 in 2022 to $30,316 in 2023.
• Collectively evaluated loan reserves increased from $7,466 to $15,625, a substantial increase.
• Addition of new accounting standards codification section 50, paragraph 10, with a reference link.
• Net cash provided by operating activities increased to $46.5 million in 2023 from $45.0 million in 2022.
• Common equity Tier 1 capital increased from $177,916 to $160,338, impacting capital adequacy.
• Loans and Allowance for Loan Losses increased from $1,189,782 to $1,410,653.
• Securities Portfolio Changes The fair value and unrealized gains/losses on equity and debt securities show fluctuations in the investment portfolio.
• Loans, net increased from $1,362,920 to $1,394,968, a net increase of $32,048.
• The number of mortgage-backed securities rated AAA increased from 31% to 39%.
• Held to maturity securities due after five years through ten years, fair value increased from $92 to $108.
• Gains on sales of securities decreased from $71 to $809.
• Increase in Equity securities at fair value from $8,566 to $7,505, impacting financial position.
• Change from Topic 470 to Section 55. This change could affect compliance and disclosures.
• Stock options considered anti-dilutive decreased from 15,000 to 4,500, impacting potential dilution.
• Accumulated deficit changed to undistributed earnings or deficit, impacting equity calculations.
• Added information on stock-based compensation plans and unrecognized costs.
• Reduction in outstanding stock options from 20,631 to 13,131 and a decrease in exercisable options from 20,631 to 13,131 at December 31, 2023.
• Equity securities at fair value increased from $566 to $749, with gross unrealized gains rising to $11,534.
• Net interest income after provision for loan credit losses increased from $67,064 in 2022 to $65,735 in 2023.
• Noted a decrease in net cash provided by operating activities, from $45,017 to $46,482 in the recent period.
• Adjusted provisions for loan losses, with a decrease from $4,000 to $2,042 in the recent period.
• Introduction of subtopic (iii) (B) under Paragraph 1B in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B. This addition provides further clarity on the standards.
• Adjusted dividends declared per share, increasing from $0.94 to $0.01 in the most recent period.
• The weighted average grant date fair value of nonvested equity instruments decreased from $30 to $28.
• Impaired Loans decreased from $5,433,000 to $846,000 in 2023.
• Nonaccrual loans rose from $1,263 to $1,722 in the residential portfolio segment.
• Decrease in Interest rate contracts Other Liabilities from $5,823k to $0. This change may impact the company's financial leverage.
• Deposits increased by $65.7 million in the fourth quarter of 2023 but decreased by $17.7 million compared to December 31, 2022.
• Increase in Interest Income from $10,813k to $10,845k. This change may indicate improved interest-earning assets performance.
• Stock-based compensation expense rose from $629 to $629, reflecting an increase in employee incentives.
• Payments on borrowings increased from $827 to $10,000.
• Amortization expense decreased from $955,757 in 2022 to $560,362 in 2023.
• Total capital to risk-weighted assets increased from $222 million in 2022 to $233 million in 2023.
• Inclusion of a new policy on finance loans and leases receivable provides clarity on financial asset management.
• The weighted average grant date fair value of RSUs decreased from $26 to $24.
• Disclosed loans in the process of foreclosure totaling $846,000 and $1.1 million.
• The weighted average exercise price of outstanding stock options decreased from $26 to $25.
• The core deposit intangible decreased from $7,120 in 2022 to $5,266 in 2023.
• Loans to other financial institutions were suspended at the end of the third quarter of 2022.
• Proceeds from sales of securities increased from $29.7 million in 2021 to $47.2 million in 2022.
• Mortgage loan servicing rights increased from $855,000 to $5,855,000.
• Decrease in Allowance for credit losses from $1,069 to $455. This reduction may impact risk management.
• Increase in Current year-to-date gross write-offs for Loans from $64,819 to $49,210.
• Net interest income decreased from $12,716 to $9,210, affecting profitability.
• The Committee will determine the amount of Erroneously Awarded Incentive-Based Compensation, which exceeds the restated amount. The Committee will promptly recover this amount.
• Incorporation of marketing and advertising expense specifics in topic 220, subtopic 10, section S99, paragraph 2.
• Updates to premises and equipment details, with gross values changing from $46,439 to $46,193.
• Reclassification adjustments for net gain/loss on securities transferred from AFS to HTM changed.
• Commercial Real Estate Loans balance increased from $205,000 to $114,000.
• Incorporation of references to Topic 505, Section S99, Paragraph 1, Subparagraph (SX 210.3-04) for Common Stock Shares Outstanding.
• Inclusion of Level 3 inputs for Interest Rate Contracts and Equity Securities with notable values.
• Long-term debt increased from $3,291 to $3,392. This change may impact debt servicing.
• Share-based compensation options outstanding decreased from 20,631 shares to 13,131 shares in 2023.
• Tax effect on unrealized gain (loss) decreased from $13,711 to $19,085. This change may impact tax liabilities.
• Federal Home Loan Bank Advances decreased from $50,000 to $30,000 by the end of 2023.
• Net cash provided by financing activities increased from $57,536 to $146,373.
• Inclusion of interest income and expense net details under topic 942, subtopic 220, section S99, paragraph 1.
• Net cash used in investing activities more than doubled to $181.4 million in 2023 from $90.5 million in 2022.
• Investment in subsidiaries increased from $192,540 to $216,975, affecting total assets.
• Change in Net interest income from $(1,464) to $9,210. This change might indicate a significant shift in the company's interest income.
• Salaries and benefits decreased from $30,391 to $29,300.
• Net settlements received on pay-fixed/receive-floating swaps were $3.3 million for the year ended December 31, 2023.
• Net income increased from $23,640 to $21,261, impacting overall financial performance.
• Total liabilities and shareholders' equity rose from $204,635 to $231,557. This change reflects overall financial health.
• Addition of interest income and expense net details under topic 942, subtopic 220, section S99, paragraph 1.
• Inclusion of new details on interest and dividend income operating with a reference link.
• Gross realized gains from securities sales increased from $809,000 in 2021 to $1.3 million in 2020.
• Gross unrealized gains on equity securities decreased from $982 to $960. This change might affect investment valuation.
• The Company is prohibited from indemnifying Covered Executive Officers against the loss of Erroneously Awarded Incentive-Based Compensation.
• Trust preferred securities after merger fair value adjustments decreased from $9,953 to $9,801.
• Commercial Real Estate Portfolio Segment loans increased from $630,953 to $786,921.
• Amortization of net unrealized gains/losses on securities transferred from AFS to HTM decreased.
• The average rate paid on deposits rose to 1.57% in the last quarter of 2023, up from 1.36% in the previous quarter.
• Amortized Cost Basis Analysis The analysis of securities held to maturity and available for sale provides insights into the valuation and impairment assessment process.
• Noninterest income saw a decrease from $14,072 in 2022 to $14,906 in 2023.
• Addition of subtopic (v) under Paragraph 1B in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B. This inclusion broadens the scope of the standards.
• Changes in compensation expenses, with a decrease from $801 to $477 in the recent period.
• Change in the balance of nonaccrual loans from $1,016,848 to $1,723,263. This change reflects a shift in loan quality.
• Changes in goodwill and acquired intangible assets details, with ending balance adjustments.
• Introduced a new line item for the amount of gain (loss) recognized in other comprehensive income from assets measured at fair value.
• Accrued interest receivable increased from $8,211,000 to $10,066,000.
• Ending balance for loans increased from $1,410,653 to $1,410,653, remaining stable.
• Gross unrealized losses on equity securities increased from $305 to $721. This change could impact financial performance.
• Credit Risk Management The disclosure on credit risk management highlights the process of monitoring credit quality and risk ratings of the loan portfolio.
• Included details on the fair value measurement with unobservable inputs reconciliation on a recurring basis.
• Unrealized gain/loss on derivative cash flow hedge instruments changed, impacting comprehensive income.
• Total trust preferred securities at December 31, 2023, were $3.4 million, down from $4.5 million due to $1.1 million in merger fair value adjustments.
• Interest rate derivative contracts increased from $172,000 to $8,880,000.
• The Federal Reserve increased short-term interest rates, impacting deposit costs which rose to 1.14% for the full year 2023.
• Inclusion of new subtopic (iii) (A) under Paragraph 1A in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1A. This change enhances the specificity of the accounting standards.
• Noninterest expense increased from $53,478 in 2022 to $55,074 in 2023.
• Increase in individually evaluated loans for impairment from $2,846 to $3,593. This change may indicate higher risk.
• Modifications in operating lease expense values, increasing from $211,000 to $153,000.
• Subordinated debentures increased from $31,827 to $35,923. This change may affect debt maturity.
• Agricultural loans decreased from $64,159 to $49,210, with an allowance for loan losses decreasing from $144 to $94.
• Professional fees decreased from $2,198 to $2,175.
• Unrealized losses on equity securities decreased from $69.7 million in 2022 to $51.6 million in 2023.
• Loan originations and payments decreased to $221.2 million in 2023 from $521.4 million in 2021.
• Commercial and Industrial Pass loans increased from $124,149 to $229,708, a significant rise.
• Subordinated debt interest rate decreased from 7.60% to 5.70%.
• The Committee will determine the method for recouping Erroneously Awarded Incentive-Based Compensation, including reimbursement, offsetting, or canceling outstanding equity awards.
• Changes in adjustment for postretirement benefits and other comprehensive income (loss) affected net income.
• Addition of subtopic (iv) under Paragraph 1B in Section S99 with a reference to URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B. This addition expands the coverage of the standards.
• Net income rose from $23,640 in 2022 to $21,261 in 2023.
• Gross unrealized gains on debt securities decreased from $665 to $505. This change may affect asset valuation.
• Total temporarily impaired securities decreased from $375.5 million in 2022 to $153.1 million in 2023.
• ChoiceOne actively manages liquidity using brokered deposits, the Bank Term Funding Program, and FHLB advances.
• Covered Persons are prohibited from engaging in short-term trading, short sales, and options trading without advance approval from the Compliance Officer.
• Increase in collectively evaluated loans for impairment from $7,185 to $15,625. This change suggests a broader risk assessment.
• Adjustments in total undiscounted cash flows for property, plant, and equipment from $314,230 to $168,650.
• Residential Real Estate Pass loans increased from $642,464 to $785,584, showing growth.
• Added a line item for the gain or loss on derivative instruments net pretax.
• ChoiceOne had net cash from borrowings of $150.0 million in 2023, compared to $436.0 million in 2021.
• Deposits from executive officers, directors, and affiliates increased to $30.3 million at the end of 2023, up from $24.0 million.
• Noninterest-bearing deposits decreased from $599,579,000 to $547,625,000.
• Parent Company Trust Preferred Securities reference changed from Topic 942 to Topic 810. This change may impact reporting requirements.
• Loan Loss Provision Details The breakdown of the provision for loan losses by category and the balance sheet impact provides transparency on credit risk management.
• Subordinated debt issuance increased to $32,500,000 from $32,500.
• Other noninterest income decreased from $1,210 to $1,219.
• Basic earnings per share increased from $3.15 in 2022 to $2.82 in 2023.
• Updates in the weighted average useful life of acquired finite-lived intangible assets to 10 years.
• The 401(k) plan company contributions were $650,000 in 2023, up from $594,000 in 2022.
• Changes in accounting standards codification references. These changes may affect financial reporting compliance.
• Total noninterest expense decreased from $22,698 to $4,716.
• Gross unrealized losses on debt securities increased from $126 to $721. This change might impact asset quality.
• Covered Persons are prohibited from trading in the Company's equity securities during a blackout period imposed under certain retirement or pension plans.
• Total Allowance for Loan Losses remained stable at $786,921, showing no significant change.
• Income tax expense decreased from $4,456 to $3,272 due to changes in tax rates.
• Designated hedging instrument values shifted from $0 to ($405) in 2023.
• Interest-bearing deposits decreased from $1,518,424,000 to $1,550,985,000.
• Change in the balance of loans acquired with deteriorated credit quality from $17,167 to $14,274. This change may impact credit risk assessment.
• Provided information on the hedged asset discontinued fair value hedge cumulative increase/decrease.