CHOICEONE FINANCIAL SERVICES INC (COFS)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered strong YoY earnings growth: net income $7.16M (+35.3% YoY) and diluted EPS $0.79 (+12.9% YoY), with adjusted diluted EPS $0.83 reflecting $0.39M merger-related costs .
• Net interest income rose to $19.35M (+16.8% YoY), while GAAP NIM declined sequentially to 2.98% from 3.17% as swap cash settlements fell QoQ ($1.5M vs. $2.5M), partially offset by robust loan growth and lower deposit costs .
• Core loans grew organically $40.3M QoQ (+11.0% annualized) and $114.5M for 2024; asset quality remained excellent with NPLs/loans at 0.27% and net charge-offs at 0.04% annualized .
• Dividend increased to $0.28 for Q4 (+$0.01 QoQ), sustaining capital return momentum amid pending Fentura merger expected to close in Q1 2025 (shareholder approvals obtained Dec 12) .
• Potential stock catalysts: merger close and integration plan clarity, NIM trajectory as rates ease and swaps normalize, continued loan growth with pristine credit, and disciplined funding mix .

What Went Well and What Went Wrong

What Went Well

• Strong earnings and adjusted EPS performance: net income $7.16M; adjusted net income $7.53M, adjusted diluted EPS $0.83; CEO highlighted “outstanding fourth quarter and full year 2024” driven by loan and deposit growth and proactive balance sheet management .
• Robust loan growth with clean credit: core loans +$40.3M QoQ; NPLs/loans 0.27%, charge-offs 0.04% annualized; allowance/loans 1.07%—supporting underwriting strength .
• Funding costs stabilized and cost of deposits remained low: cost of deposits 1.58%; total cost of funds 1.90%; management expects slight declines as rates fall (muted by lower swap settlements) .

What Went Wrong

• Sequential NIM compression: GAAP NIM fell to 2.98% (from 3.17% in Q3) as swap settlements dropped and pay-fixed hedges reduced the benefit; tax-equivalent NIM narrowed to 3.04% .
• Deposit outflows ex-brokered (-$24.0M QoQ) due to seasonal public funds timing (schools/townships), highlighting seasonality and sensitivity to municipal cycles .
• Elevated noninterest expense: +11.4% YoY in Q4, including $0.39M merger-related costs, higher FDIC premiums and employee benefits, partially offset by branch closures .

Financial Results

Core P&L and Margins

Balance Sheet and Credit KPIs (End of Period)

Segment Loan Breakdown (End of Period)

Guidance Changes

No formal quantitative guidance for revenue, margins, OpEx, OI&E, or tax rate was provided in Q4 materials .

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was available in the document catalog. Themes below reflect management disclosures in Q3 and Q4 press releases.

Management Commentary

• “ChoiceOne had an outstanding fourth quarter and full year 2024… Our proactive balance sheet management has led to improvements in our net interest margin… excited about the upcoming anticipated close of our pending merger with Fentura… expected to occur in the first quarter of 2025” — CEO Kelly Potes .
• “Very pleased… showing core loan growth, solid deposit balances and excellent credit metrics as we get closer to completing the pending merger… excited to welcome their customers, communities, and employees” — CEO Kelly Potes .
• CFO contact and non-GAAP reconciliations provided; adjusted diluted EPS $0.83, highlighting merger-related expenses .

Q&A Highlights

The Q4 2024 earnings call transcript was not available in the document catalog; no Q&A details could be reviewed or extracted [ListDocuments none for earnings-call-transcript].

Estimates Context

• Wall Street consensus estimates for COFS Q4 2024 EPS and revenue were unavailable via S&P Global due to data access limits at the time of retrieval. As a result, formal beat/miss vs. consensus cannot be assessed in this report (values unavailable from S&P Global).
• Given strong YoY net income and maintained funding costs, sell-side models may modestly adjust NIM trajectory lower near-term (swap normalization), while raising loan growth and noninterest income assumptions tied to mortgage and BOLI contributions disclosed for Q4 .

Key Takeaways for Investors

• Earnings quality solid: adjusted diluted EPS $0.83; strong loan growth and pristine credit offset swap normalization—focus on sustainable NIM drivers beyond hedging .
• Balance sheet discipline: deposit costs and total cost of funds stable; brokered deposits utilized tactically; contingent liquidity robust at $837.2M capacity .
• Seasonal deposit dynamics matter: Q4 outflows ex-brokered tied to public funds; expect reversal patterns around tax cycles—watch Q1/Q2 flows .
• Merger catalyst: shareholder approvals achieved; Q1 2025 close expected—monitor regulatory clearance, integration plans, purchase accounting impacts, and CRE capital ratios .
• Credit remains a differentiator: NPLs/loans 0.27%, charge-offs 0.04%—supports higher loan growth without impairing earnings quality .
• Capital and dividends: equity strengthened post capital raise; dividend lifted to $0.28 in Q4—assess forward capital priorities post-merger and potential dividend trajectory .
• Trading setup: near-term stock moves may hinge on NIM prints (swap cash flows vs. rate path), deposit trajectory normalization, and concrete merger close updates—positioning around merger milestones could be impactful .