Choiceone Financial Services, Inc. · NASDAQ:COFS
Choiceone Financial Services — Merger or Acquisition (July 2024)
22 slides from Choiceone Financial Services's merger presentation, Jul 25, 2024
Slide 1: Merger with Fentura Financial, Inc. Transaction Overview
MERGER WITH FENTURA FINANCIAL, INC. TRANSACTION OVERVIEW JULY 25, 2024
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the federal securities laws relating to the proposed merger with Fentura Financial, Inc. (“Fentura”) by ChoiceOne Financial Services, Inc. (“ChoiceOne” or “COFS”), the integration of Fentura with C
Slide 3: Important Information for Investors and Security Holders
IMPORTANT INFORMATION FOR INVESTORS AND SECURITY HOLDERS This communication is being made in respect of the proposed merger transaction involving ChoiceOne and Fentura. This material is not a solicitation of any vote or approval of the ChoiceOne or Fentura shareholders and is not a substitute for th
Slide 4: Our mission and vision
Our mission is to provide superior service, quality advice, Our vision is to be the and show utmost respect to best bank in Michigan. everyone we meet. 4
Slide 5: Combined Franchise Overview
COMBINED FRANCHISE OVERVIEW L O G I C A L M A R K E T E X PA N S I O N 1 $4.3B $2.9B $3.6B Assets Loans Deposits E X PA N D E D M I C H I G A N F R A N C H I S E 56 #3 Largest Public Bank Locations HQ’d in Michigan E X P E C T E D S T R O N G P R O F I TA B I L I T Y 2 >1.30% >20% >30% 2025 2025 202
Slide 6: Overview of Fentura Financial, Inc.
OVERVIEW OF FENTURA FINANCIAL, INC. • OTCQX:FETM M ICHIGAN DEPOSIT M ARKET SHARE (TOP 25)2 Deposits in Market Share Rank Institution (State) Locations Market ($000) (%) • Headquartered in Fenton, Michigan 1 JPMorgan Chase & Co. (NY) 177 68,496,222 23.38 2 Huntington Bancshares Inc. (OH) 303 36,512,6
Slide 7: A Combination of Two 125+ Year Financial Institutions
A COMBINATION OF TWO 125+ YEAR FINANCIAL INSTITUTIONS 2006 2019 Acquisition of Valley Ridge Financial Bank assets Corporation 2019 Surpass $1B 2020 ChoiceOne Bank Uplisted to Est. 1898 Acquisition of County NASDAQ Bank Corp & Acquisition of Community Shores 250+ Years 1898 Combined Banking History 2
Slide 8: A Combination of Two Similar Long Standing Community Banks
A COMBINATION OF TWO SIMILAR LONG STANDING COMMUNITY BANKS I. 125+ year franchise built over time in stable markets ✓ ✓ II. Attractive commercial loan portfolio boasting strong historical credit quality ✓ ✓ III. Culture of customer service and community commitment ✓ ✓ IV. Strong deposit franchise wi
Slide 9: Financially Compelling Strategic Expansion
FINANCIALLY COMPELLING STRATEGIC EXPANSION P R U D E N T T R A N S A C T I O N R AT I O N A L E E X P E C T E D F I N A N C I A L I M PA C T 2 GAAP Excluding • The proposed transaction will be COFS' third in the last six years Proven Metrics Rate Marks3 • COFS management has recent experience succes
Slide 10: Strong Ratios at Closing and Expected Capital Appreciation
STRONG RATIOS AT CLOSING AND EXPECTED CAPITAL APPRECIATION P R O J E C T E D C O N S O L I D AT E D C A P I TA L P R O J E C T E D B A N K - L E V E L C A P I TA L 13.9 13.9 12.9 12.9 12.4 13.3 11.8 11.8 11.3 12.2 11.9 10.0 10.1 11.0 10.8 9.4 9.3 9.1 8.6 8.4 9.5 8.1 8.2 7.6 7.2 7.3 6.2 Closing 2025E
Slide 11: Transaction Overview
TRANSACTION OVERVIEW • Fentura Financial, Inc. to merge into ChoiceOne Financial Services, Inc.; followed by the merger of The State Bank into ChoiceOne Bank • 100% stock consideration (shares issued in exchange for the approximately 38,020 FETM shares held by the ESOP will be redeemed by COFS for c
Slide 12: FETM: Strong Credit Profile and Comprehensive Due Diligence Process
FETM: STRONG CREDIT PROFILE AND COMPREHENSIVE DUE DILIGENCE PROCESS F E T M N E T C H A R G E - O F F S / AV E R A G E L O A N S DUE DILIGENCE OVERVIEW ▪ Discussions were collaborative and completed with the common goal of structuring a shareholder-oriented transaction that positions the combined co
Slide 13: MRQ & Combined Deposit Composition
MRQ & COMBINED DEPOSIT COMPOSITION COFS FETM COMBINED Jumbo Time Jumbo Time Noninterest- Jumbo Time Noninterest- (>$100K) Noninterest- (>$100K) bearing Deposits (>$100K) bearing Deposits 12.5% bearing Deposits 13.3% 28.3% 12.8% 26.3% 24.3% Retail Time Retail Time Retail Time (<$100K) (<$100K) (<$100
Slide 14: MRQ & Combined Loan Composition
MRQ & COMBINED LOAN COMPOSITION COFS FETM COMBINED Other Commercial Other 2.5% 1-4 Family 8.2% Commercial 1.3% 1-4 Family 14.3% 13.4% 1-4 Family 28.7% 21.5% Commercial 18.7% Consumer 3.9% Consumer 6.2% Consumer 8.5% $1.4B $1.5B $2.9B Loans Loans Loans MultiFamily & MultiFamily & MultiFamily & CRE CR
Slide 15: FETM: Commercial Real Estate Portfolio Details
FETM: COMMERCIAL REAL ESTATE PORTFOLIO DETAILS CRE COMPOSITION DIVERSIFIED CRE PORTFOLIO Industrial Retail Mixed Use Medical Office 2.9% 2.7% 2.0% 2.0% Land & Construction $10.8MM $1.2MM 6.02% Self Storage 0.8% Largest Average Loan Top 10 Relationships 3.8% Loan Size / Total Loans Gov. Guarantee 1-4
Slide 16: COFS: Profitability Driven by Strong Income Accretion
COFS: PROFITABILITY DRIVEN BY STRONG INCOME ACCRETION C O M PA R I S O N W I T H $ 1 B - $ 1 0 B M I D W E S T P E E R S 1 LT M C O R E R E T U R N O N AV E R A G E A S S E T S ( % ) 2 2.50 2.00 1.50 1.00 0.50 0.00 LT M C O R E R E T U R N O N AV E R A G E TA N G I B L E C O M M O N E Q U I T Y ( %
Slide 17: Financial Assumptions
FINANCIAL ASSUMPTIONS • Net income for COFS based on consensus analyst estimates • Net income for FETM based on management estimates Earnings, Synergies & Cost Savings • Cost savings of 28% of FETM’s noninterest expense base (75% realized in 2025, 100% thereafter) inclusive of 3% savings identified
Slide 18: Common Equity Offering Term Sheet
COMMON EQUITY OFFERING TERM SHEET Issuer • ChoiceOne Financial Services, Inc. (the “Company”) NASDAQ Symbol • COFS Issuance Type • Registered underwritten follow-on offering of shares of common stock, no par value per share, of the Company Base Offering Size • $30.0 million or 1.2 million shares (ex
Slide 19: COFS: Experienced Acquiror
COFS: EXPERIENCED ACQUIROR T O TA L A S S E T S $4.4 $1.8 $2.6 $2.4 $2.4 $1.9 $0.2 $1.4 $2.6 $2.6 $2.4 $2.4 $0.7 $0.6 $0.7 $1.7 $0.6 $0.7 $0.7 2017 2018 2019 2020 2021 2022 2023 Q2'24 COFS Assets ($B) Acquired Assets ($B) 19 Source: S&P Capital IQ Pro 1 Assumes combined assets for COFS and FETM as o
Slide 20: A Winning Combination
A WINNING COMBINATION ✓ A Strong Presence in Great Markets ✓ Excellent Asset Quality ✓ A Deeper Management Team ✓ Greater Shareholder Liquidity Expanded Growth Opportunities for Both Banks’ ✓ Employees ✓ An Enhanced Ability to Serve Customers and Compete ✓ Strong Projected Profitability 20
Slide 21: FETM: Non-GAAP Reconciliations
FETM: NON-GAAP RECONCILIATIONS ($ in 000's, unless otherwise indicated) As of December 31, MRQ 2019 2020 2021 2022 2023 Q2'24 Tangible common equity to tangible assets Total common stockholders' equity $101,444 $115,868 $124,455 $126,087 $138,702 $143,301 Less: Goodwill 3,219 3,219 8,853 8,853 8,853
Slide 22: FETM: Non-GAAP Reconciliations (Continued)
FETM: NON-GAAP RECONCILIATIONS (CONTINUED) ($ in 000's, unless otherwise indicated) For the Year Ended December 31, 5-Year LTM 2019 2020 2021 2022 2023 Median Q2'24 Return on average tangible common equity Net Income $11,578 $15,464 $16,579 $14,933 $14,629 $12,329 Add: Intangible amortization expens
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