Company: COFS
Filing Date: 2025-03-11
Form Type: 10-K
Source: 0000950170-25-036839
Chunk: 42

Company: CHOICEONE FINANCIAL SERVICES INC
Filing Date: 2025-03-11
Form: 10-K
Item: Item 7
Chunk 42
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58% in 2024.  During 2023 ChoiceOne was able to lag many of the increases to the federal funds rate which increased 425 basis points in 2022 and another 100 basis points in 2023.  ChoiceOne's cost of deposits to average total deposits peaked in the first quarter of 2024, and declined slightly in subsequent quarters due to the Federal Reserve decreasing the federal funds rate by 100 basis points in the last four months of 2024.   If rates continue to decline, we expect to see further reductions in deposit costs; however, these reductions will be muted by the decrease in cash flows from pay-fixed interest rate swaps collected.  Interest expense on borrowings for the twelve months ended December 31, 2024, increased $3.1 million compared to the same period in the prior year, due to increases in the average balance borrowed.  During the fourth quarter of 2024, ChoiceOne paid down its advance from the Bank Term Funding Program and replaced it with $135.0 million of FHLB borrowings.  This increased ChoiceOne's total borrowed balance at the FHLB to $175.0 million at a weighted average fixed rate of 4.5%, with the earliest maturity in January 2025. 

The provision for credit losses expense on loans was $1.3 million in the full year 2024, due to the significant growth of core loans. Core loan growth was offset by slight improvements in the Federal Open Market Committee ("FOMC") forecast during the full year 2024. The ratio of the allowance for credit losses to total loans (excluding loans held for sale) was 1.07% on December 31, 2024 compared to 1.11% on December 31, 2023.  Asset quality continues to remain strong, with net loan charge-offs to average loans of 0.03% and nonperforming loans to total loans (excluding loans held for sale) of 0.24% as of December 31, 2024.  Nonperforming loans have increased since the historic lows in 2023, but still remain at low levels and consist entirely of residential loans with strong collateral positions.    

 21

Noninterest Income

Noninterest income increased $3.1 million in the twelve months ended December 31, 2024, compared to the same period in the prior year.  The increase was largely due to an increase in credit and debit card fees of