On January 1, 2022, ChoiceOne reassessed and transferred, at fair value, $428.4 million of securities classified as available for sale to the held to maturity classification. The net unrealized after-tax loss of $2.7 million as of the transfer date remained in accumulated other comprehensive income to be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfer. The remaining net unamortized unrealized loss on transferred securities included in accumulated other comprehensive income was $1.9 million after tax as of June 30, 2025.

ChoiceOne acquired $90.7 million in securities as part of the Merger; however, management chose to sell $78.9 million of those securities to pay down higher cost wholesale funding. The sale of the securities was completed so close to the fair value determination date that no loss was recognized. Consequently, the net increase in securities from the Merger was $11.8 million.

The fair value of equity securities and the related gross unrealized gains and (losses) recognized in noninterest income were as follows:


	June 30, 2025
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	9,563	$	574	$	(555	)	$	9,582


	December 31, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Equity securities	$	8,043	$	397	$	(658	)	$	7,782

The following tables present the amortized cost and fair value of securities available for sale and the gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and the amortized cost and fair value of securities held to maturity and the related gross unrealized gains and losses:


	June 30, 2025
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Treasury notes and bonds	$	94,367	$	18	$	(6,636	)	$	87,749
State and municipal		262,632		-		(45,787	)		216,845
Mortgage-backed		182,811		84		(17,238	)		165,657
Corporate		250		-		(38	)		212
Asset-backed securities		9,159		-		(196	)		8,963
Total	$	549,219	$	102	$	(69,895	)	$	479,426

(Dollars in thousands)
Held to Maturity:
U.S. Government and federal agency	$	2,981	$	-	$	(186	)	$	2,795
State and municipal		197,957		7		(27,563	)		170,401
Mortgage-backed		168,407		16		(16,930	)		151,493
Corporate		21,011		22		(1,768	)		19,265
Asset-backed securities		101		-		(1	)		100
Total	$	390,457	$	45	$	(46,448	)	$	344,054


	December 31, 2024
			Gross		Gross
(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
Available for Sale:	Cost		Gains		Losses			Value
U.S. Treasury notes and bonds	$	89,875	$	-	$	(9,373	)	$	80,502
State and municipal		258,815		-		(30,579	)		228,236
Mortgage-backed		181,863		62		(20,955	)		160,970
Corporate		250		-		(38	)		212
Asset-backed securities		9,387		-		(190	)		9,197
Total	$	540,190	$	62	$	(61,135	)	$	479,117

(Dollars in thousands)
Held to Maturity:
U.S. Government and federal agency	$	2,978	$	-	$	(279	)	$	2,699
State and municipal		196,510		5		(31,477	)		165,038
Mortgage-backed		174,323		7		(21,963	)		152,367
Corporate		20,495		29		(1,803	)		18,721
Asset-backed securities		228		-		(5	)		223
Total	$	394,534	$	41	$	(55,527	)	$	339,048

Available for sale securities with unrealized losses as of June 30, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	June 30, 2025
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale:	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury notes and bonds	$	-	$	-	$	83,003	$	6,636	$	83,003	$	6,636
State and municipal		4,642		608		212,203		45,179		216,845		45,787
Mortgage-backed		7,814		95		139,969		17,143		147,783		17,238
Corporate		-		-		212		38		212		38
Asset-backed securities		-		-		8,963		196		8,963		196
Total temporarily impaired	$	12,456	$	703	$	444,350	$	69,192	$	456,806	$	69,895


	December 31, 2024
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Available for Sale:	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury notes and bonds	$	-	$	-	$	80,502	$	9,373	$	80,502	$	9,373
State and municipal		-		-		228,236		30,579		228,236		30,579
Mortgage-backed		963		1		142,170		20,954		143,133		20,955
Corporate		-		-		212		38		212		38
Asset-backed securities		-		-		9,197		190		9,197		190
Total temporarily impaired	$	963	$	1	$	460,317	$	61,134	$	461,280	$	61,135

Held to maturity securities with unrealized losses as of June 30, 2025 and December 31, 2024, aggregated by investment category and length of time the individual securities have been in an unrealized loss position, were as follows:


	June 30, 2025
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held to Maturity:	Value		Losses		Value		Losses		Value		Losses
U.S. Government and federal agency	$	-	$	-	$	2,795	$	186	$	2,795	$	186
State and municipal		4,326		119		164,819		27,444		169,145		27,563
Mortgage-backed		5,535		41		139,440		16,889		144,975		16,930
Corporate		1,432		5		15,655		1,763		17,087		1,768
Asset-backed securities		-		-		100		1		100		1
Total temporarily impaired	$	11,293	$	165	$	322,809	$	46,283	$	334,102	$	46,448


	December 31, 2024
	Less than 12 months				More than 12 months				Total
(Dollars in thousands)	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Held to Maturity:	Value		Losses		Value		Losses		Value		Losses
U.S. Government and federal agency	$	-	$	-	$	2,699	$	279	$	2,699	$	279
State and municipal		5,262		630		159,558		30,847		164,820		31,477
Mortgage-backed		2,350		11		141,970		21,952		144,320		21,963
Corporate		-		-		16,591		1,803		16,591		1,803
Asset-backed securities		-		-		223		5		223		5
Total temporarily impaired	$	7,612	$	641	$	321,041	$	54,886	$	328,653	$	55,527

ChoiceOne evaluates all securities on a quarterly basis to determine if an ACL and corresponding impairment charge should be recorded. Consideration is given to the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of ChoiceOne to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value of amortized cost basis. ChoiceOne believes that unrealized losses on securities were temporary in nature and were caused primarily by changes in interest rates, increased credit spreads, and reduced market liquidity and were not caused by the credit status of the issuer. No ACL was recorded in the three and six months ended June 30, 2025 and June 30, 2024 on AFS securities.

The majority of unrealized losses at June 30, 2025, are related to U.S. Treasury notes and bonds, state and municipal bonds and mortgage backed securities. The U.S. Treasury notes are guaranteed by the U.S. government and 100% of the notes are rated AA or better. State and municipal bonds are backed by the taxing authority of the bond issuer or the revenues from the bond. On June 30, 2025, 85% of state and municipal bonds held are rated AA or better, 10% are A rated and 5% are not rated. Of the mortgage-backed securities held on June 30, 2025, 43% were issued by US government sponsored entities and agencies, and rated AA, 44% are AAA rated private issue and collateralized mortgage obligation, and 13% are unrated privately issued mortgage-backed securities with structured credit enhancement and collateralized mortgage obligation.

Unrealized losses have not been recognized into income because the issuers’ bonds are of high credit quality, and management does not intend to sell prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

Presented below is a schedule of maturities of securities as of June 30, 2025. Available for sale securities are reported at fair value and held to maturity securities are reported at amortized cost. Callable securities in the money are presumed called and matured at the callable date.


	Available for Sale Securities maturing within:
									Fair Value
	Less than		1 Year -		5 Years -		More than		at June 30,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2025

U.S. Treasury notes and bonds	$	-	$	87,749	$	-	$	-	$	87,749
State and municipal		229		24,666		22,018		169,932		216,845
Corporate		-		-		212		-		212
Asset-backed securities		-		6,541		2,422		-		8,963
Total debt securities		229		118,956		24,652		169,932		313,769

Mortgage-backed securities		2,909		93,344		50,911		18,493		165,657
Total Available for Sale	$	3,138	$	212,300	$	75,563	$	188,425	$	479,426


	Held to Maturity Securities maturing within:
									Amortized Cost
	Less than		1 Year -		5 Years -		More than		at June 30,
(Dollars in thousands)	1 Year		5 Years		10 Years		10 Years		2025

U.S. Government and federal agency	$	-	$	2,981	$	-	$	-	$	2,981
State and municipal		3,019		37,980		80,723		76,235		197,957
Corporate		-		-		21,011		-		21,011
Asset-backed securities		101		-		-		-		101
Total debt securities		3,120		40,961		101,734		76,235		222,050

Mortgage-backed securities		3,893		92,276		72,238		-		168,407
Total Held to Maturity	$	7,013	$	133,237	$	173,972	$	76,235	$	390,457

Following is information regarding unrealized gains and losses on equity securities for the three and six months ended June 30, 2025 and 2024:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2025		2024			2025		2024
(Dollars in thousands)
Net gains and (losses) recognized during the period	$	239	$	(71	)	$	346	$	(36	)
Less: Net gains and (losses) recognized during the period on securities sold		—		—			—		—

Unrealized gains and (losses) recognized during the reporting period on securities still held at the reporting date	$	239	$	(71	)	$	346	$	(36	)