v3.25.2
Business combination
 6 Months Ended
Jun. 30, 2025
Business Combination [Abstract]  
Business Combinations

NOTE 11 – BUSINESS COMBINATION

On March 1, 2025, ChoiceOne completed the Merger, in an all stock transaction, of Fentura, the former parent company of The State Bank, with and into ChoiceOne, with ChoiceOne surviving the Merger. The primary reason for the Merger was to expand ChoiceOne's market presence and enhance its financial strength by integrating Fentura's substantial customer base. On March 14, 2025, ChoiceOne Bank completed the consolidation of The State Bank with and into ChoiceOne Bank, with ChoiceOne Bank surviving the consolidation. Fentura had 20 branch offices and one loan production office as of the date of the Merger. Total assets acquired in the Merger were approximately $1.8 billion, including total loans of approximately $1.4 billion. Total deposits acquired in the Merger, the majority of which were core deposits, totaled approximately $1.4 billion. The impact of the Merger has been included in ChoiceOne’s results of operations since March 1, 2025. As consideration in the Merger, ChoiceOne issued 6,070,836 shares of ChoiceOne common stock with an approximate total value of $193.0 million. Transaction costs incurred after the merger date were primarily in salaries and employee benefits and legal and consulting in the Consolidated Statements of Operations, as well as a $12.0 million provision for credit losses. The initial accounting for the business combination has been determined provisionally for the fair value of certain assets and liabilities, including loans, core deposit intangible, and deferred taxes. Management expects to finalize calculations supporting the fair value of these assets and liabilities during the measurement period.

The table below presents the allocation of purchase price for the Merger with Fentura (dollars in thousands):

 

Purchase Price

 

 

 

 

 

Consideration

$

192,992

 

 

 

 

Net assets acquired:

 

 

Cash and cash equivalents

 

173,082

 

Securities available for sale

 

90,696

 

Federal Home Loan Bank and Federal Reserve Bank stock

 

9,179

 

Originated loans

 

1,376,721

 

Premises and equipment

 

16,664

 

Other real estate owned

 

1,735

 

Intangible assets

 

34,737

 

Other assets

 

48,815

 

Total assets

 

1,751,629

 

 

 

 

Non-interest bearing deposits

 

404,497

 

Interest bearing deposits

 

1,027,384

 

Total deposits

 

1,431,881

 

Borrowing

 

169,786

 

Subordinated debentures

 

12,344

 

Other liabilities

 

11,410

 

Total liabilities

 

1,625,421

 

 

 

 

Net assets acquired

 

126,208

 

 

 

 

Goodwill

$

66,784

 

 

The following pro forma presentation of net income (loss) for the three- and six-month periods ended June 30, 2025, gives effect to completion of the Merger as if it had occurred on January 1, 2024. This pro forma presentation excludes the impact of after-tax merger-related expenses totaling $132,000 and $13.9 million for the three- and six-month periods ended June 30, 2025, respectively, as well as a non-recurring provision for credit losses on acquired loans of $9.5 million and includes these expenses for the six month period ended June 30, 2024.

Additional adjustments include estimated accretion of fair value marks on acquired loans, which increased net interest income by $1.6 million in 2025 and by $2.4 million and $4.8 million for the three- and six-month periods ended June 30, 2024, respectively. Net income (loss) was further adjusted to reflect the after-tax impact of incremental interest income and intangible amortization, resulting in after-tax adjustments of $433,000 in 2025 and $649,000 and $1.3 million for the three- and six-month periods ended June 30, 2024, respectively.