Choiceone Financial Services, Inc. · NASDAQ:COFS
Choiceone Financial Services — Investor Presentation (November 2023)
28 slides from Choiceone Financial Services's investor presentation, Nov 2, 2023
Slide 1: ChoiceOne Financial Services, Inc.
Slide 2: Forward-Looking Statements
2 2 2 FORWARD - LOOKING STATEMENTS • This presentation contains forward - looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and ChoiceOne. Words such as “anticipates,” “believes,
Slide 3: Vision and Mission
3 Our vision is to be the best bank in Michigan. Our mission is to provide superior service, quality advice, and show utmost respect to everyone we meet.
Slide 4: Company Profile
4 COMPANY PROFILE ChoiceOne Financial Services, Inc. (“COFS”) was incorporated in 1986 as a Michigan corporation. ChoiceOne Bank was founded in 1898 (then called Sparta State Bank) in Sparta, MI at the corner of Division and Union Street. Over its more than 125 - year history, COFS has grown signifi
Slide 5: Awards & Accomplishments
5 Award Nominee ( West MI Hispanic Chamber of Commerce – 2018 ) AWARDS & ACCOMPLISHMENTS With an abundance of accolades & awards, ChoiceOne Bank has been recognized as a top - tier community bank in Michigan and in the banking industry. Named Best Small Bank by Newsweek 3 Years in a row. 2021 – 2022
Slide 6: Management Team
6 Mr. Michael J. Burke Jr. has served as President at ChoiceOne since May 2020 and oversees lending and operations. Previously, he served as President, CEO, COO and Director at Lakestone Bank & Trust which was merged into ChoiceOne. Mr. Burke is highly involved in organizations in Southeast Michigan
Slide 7: Management Team (continued)
7 Ms. Shelly M. Childers has served as Senior Vice President and Chief Information Officer at ChoiceOne Bank since 2019. Prior to that Ms. Childers was the Senior Vice President and Chief Information Officer at Lakestone Bank and Trust. Ms. Childers has over 25 years of experience leading both the o
Slide 8: Geographic Footprint
8 GRAND RAPIDS - KENTWOOD, MI Locations 10 Deposits $755,651 Market Share 2.57% Market Rank 11 SOUTHEASTERN MI (DETROIT MSA) Locations 13 Deposits $824,609 Market Share 0.45% Market Rank 13 MUSKEGON, MI Locations 5 Deposits $350,225 Market Share 16.84% Market Rank 3 Other, MI (1) Locations 3 Deposit
Slide 9: M&A History
9 Transaction Overview Deal Profile (Announcement) Target Operating Metrics (Quarter Before Announcement) Target Target City, State Announcement Date Deal Value ($M) Consideration Total Assets Gross Loans LTM ROAA Muskegon, MI 1/6/2020 $21.9 76.5% Stock / 23.5% Cash $185.1 $147.2 0.49% Lapeer, MI 3/
Slide 10: Financial Summary
FINANCIAL SUMMARY
Slide 11: Historic Balance Sheet Growth
11 Note: All dollars in thousands (1) Includes $138.0 million, $33.1 million and $0 million in PPP loans in 2020, 2021 and 2022, respectively. All PPP loans are assumed to be deposits for "Total Deposits" graphic. (2) Core loans - exclude Paycheck Protection Program (“PPP”) loans, held for sale loan
Slide 12: Attractive Deposit Mix
12 Deposit Commentary : ▪ Diverse local deposit franchise of retail, business, and municipal accounts ▪ Launched new treasury management platform in 2023 with best - in - class functionality ▪ At 9/30/2023 Non - interest - bearing deposit base of $532.0 million or 25.0% of deposits ▪ 34.7% of total
Slide 13: Deposit Trends and Cost of Deposits
13 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 Q4 2022 Q1 2023 Q2 2023 Q3 2023 NIB Deposits IB Deposits 0.20% 1.81% 0.25% 5.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% Q4 2021 Q3 2023 Current Cycle to date Cost of IB Deposits Fed Funds 0.27% 0.91% 0.25% 2.
Slide 14: Loan Mix and Detail
14 Loan Commentary : ▪ Strong commercial real estate portfolio - 51% of CRE loans are owner occupied ▪ QTD Yield on loans of 5.5% ▪ $371 million of variable loans or 28% of portfolio ▪ Weighted average duration of loan portfolio of 2.2 years ▪ Active residential real estate lending with sold (primar
Slide 15: Investment Portfolio
15 Commercial Mortgage Backed 25% Mortgage - Backed 16% Asset - Backed Securities 1% Corporate 2% State and MUNI - Tax Exempt 29% State and MUNI - Taxable 18% US Treasury Bonds and Agency 9% Numbers based on ChoiceOne internal data as of 9/30/2023 except where specifically identified. (1) Securities
Slide 16: Interest Rate Swaps Income Impact
16 Note: Dollars in thousands (1) Derivatives income impact assumes a SOFR rate of 5.31% in perpetuity INTEREST RATE SWAPS INCOME IMPACT ChoiceOne uses interest rate swaps as part of our interest rate risk management strategy. ChoiceOne has pay - fixed interest rate swaps with a total notional value
Slide 17: Financial Performance Trends
17 FINANCIAL PERFORMANCE TRENDS – COFS Efficiency Ratio & Noninterest Expense to Average Assets NIM (1) ROAE ROAA Numbers based on ChoiceOne internal data as of 9/30/2023 except where specifically identified. (1) Net interest margin (tax - equivalent basis) See Non - GAAP reconciliation 0.85% 0.94%
Slide 18: Noninterest Income
18 Gain on Sale of Loans Service Charges Wealth BOLI Revenue Other Fees Gain on Sale of Loans Service Charges BOLI Revenue Wealth Other Fees Gain on Sale of Loans Service Charges Wealth BOLI Revenue Other Fees 36% 8% 5% 5% 46% of equ ity sec uriti es NONINTEREST INCOME – COFS Diversified sources of
Slide 19: Asset Quality
19 ASSET QUALITY Historically strong credit metrics Net Charge - Offs / Average Loans (2) NPLs/ Loans (1) Texas Ratio NPAs/ Total Assets Numbers based on ChoiceOne internal data as of 09/30/2023 except where specifically identified. 1. Excluding held for sale loans 2. Annualized quarter data 5.35% 5
Slide 20: Allowance for Credit Losses and Unfunded Commitments Reserve
20 $14,784 $15,065 $14,582 $14,872 $3,275 $2,991 $3,156 $2,718 $ - $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Jan 1 2023 CECL Q1 2023 Q2 2023 Q3 2023 Note: All dollars in Graph are in thousands (1) Remaining yield Mark related to the mark against loans acquired in th
Slide 21: Strong Risk Management
21 STRONG RISK MANAGEMENT Interest Rate Risk Management • ChoiceOne uses interest rate swaps as part of our interest rate risk management strategy. ChoiceOne has pay - fixed interest rate swaps with a total notional value of $401.0 million, a fair value of $29.9 million and a weighted average coupon
Slide 22: Capital
22 (1) See Non - GAAP Reconciliation CAPITAL Regulatory Ratios Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 ChoiceOne Financial Services Inc. Total capital (to risk weighted assets) 14.6% 13.8% 13.7% 13.8% 13.5% 13.2% 13.2% Common equity Tier 1 capital (to risk weighted assets) 11.5% 11.0
Slide 23: Other Selected Highlights
23 (1) See Non - GAAP Reconciliation OTHER SELECTED HIGHLIGHTS Quarterly Performance Ratios 2022 2nd Qtr. 2022 3rd Qtr. 2022 4th Qtr. 2023 1st Qtr. 2023 2nd Qtr. 2023 3rd Qtr. Return on average assets 0.95% 0.97% 1.13% 0.94% 0.86% 0.80% Return on average equity 12.68% 14.11% 16.68% 13.42% 12.13% 11.
Slide 24: COFS Trades on the NASDAQ
C OF S T R ADES ON TH E NAS D A Q ® Market Makers in ChoiceOne Stock D. A. Davidson & Co. Nick Bi cking 800.394.9230 Raymond James & Associates Anthony LanFranca 312.655.2961 Stock Registrar & Transfer Agent Continental Stock Transfer & Trust Company 1 State Street Plaza, 30th Floor New York, NY 100
Slide 25: Appendix: Non-GAAP Reconciliation
25 (1) Adjusted to a fully tax - equivalent basis to facilitate comparison to the taxable interest - earning assets. The adjustment uses an incremental tax rate of 21%. The presentation of these measures on a tax equivalent basis is not in accordance with GAAP but is customary in the banking industr
Slide 26: Appendix: Non-GAAP Reconciliation
26 (1) Adjusted to a fully tax - equivalent basis to facilitate comparison to the taxable interest - earning assets. The adjustment use s an incremental tax rate of 21%. The presentation of these measures on a tax - equivalent basis is not in accordance with GAAP but is customary in the banking indu
Slide 27: Appendix: Non-GAAP Reconciliation
27 APPENDIX NON - GAAP RECONCILIATION (dollars in thousands) Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Shareholders' equity $ 191,118 $ 166,460 $ 156,657 $ 168,874 $ 168,712 $ 179,240 $ 181,161 Less: goodwill 59,946 59,946 59,946 59,946 59,946 59,946 59,946 Less: core deposit intangibl
Slide 28: Appendix: Loans by Loan Category
28 APPENDIX LOANS BY LOAN CATEGORY Numbers based on ChoiceOne internal data as of 9/30/2023 except where specifically identified Excludes loans held for sale (Dollars in thousands) Loans: 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Agricultural $ 43,290 $ 40,684 $ 55,995 $ 64,159 $ 63,347 Com
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