ChoiceOne GAAP Margin Expands 8 bps to 3.67%

The Tip Desk · November 10, 2026 · 4 min read

Net interest income rose to $38.4 million as core loans grew $33.6 million and deposits excluding brokered balances increased $95.7 million.

ChoiceOne Financial Services (COFS), the Sparta, Michigan parent of ChoiceOne Bank, reported GAAP net interest margin of 3.67% for the third quarter of 2026, up 8 basis points from 3.59% in the second quarter, as loan growth and steady funding costs lifted the spread.

Net interest income was $38.4 million, compared with $36.7 million in the second quarter. Net income was $14.5 million, or $0.97 a share, versus $12.5 million, or $0.83 a share, in the prior quarter. Chief Executive Officer Kelly Potes said the improvement reflected disciplined balance-sheet management and continued loan growth.

Core loans, which exclude held-for-sale loans and mortgage warehouse advances, increased $33.6 million, or 4.4% annualized, after an $87.1 million, or 11.9% annualized, increase in the second quarter that included a purchase of about $40 million of seasoned adjustable-rate residential mortgages. Loan interest income rose $1.7 million from the second quarter. Interest income from accretion on purchased loans was $2.7 million, adding 25 basis points to GAAP net interest margin, versus $2.4 million in the second quarter. The company estimated $1.8 million of remaining 2026 accretion using the effective interest method and $6.0 million for 2027, with $45.3 million still to be recognized over the life of the purchased portfolio.

Deposits excluding brokered balances increased $95.7 million, or 10.9% annualized, reversing a $55.4 million decline in the second quarter. The company said the quarter’s lift was primarily seasonal municipal deposits and the timing of tax receipts. Interest-bearing demand deposits rose $100.3 million and savings deposits $8.6 million, partly offset by a $7.0 million decrease in noninterest-bearing deposits and a $6.2 million decrease in certificates of deposit. Brokered deposits ended at $67.5 million after a $25.8 million decline; borrowed funds fell $60.0 million to $234.9 million. Average brokered deposits decreased $68.1 million and average borrowings $11.5 million from the second quarter.

The annualized cost of deposits decreased four basis points to 1.54% from 1.58%, and the cost of funds decreased four basis points to 1.73% from 1.77%. The company attributed the funding-cost improvement primarily to deposit mix, with higher average liquid balances in the third quarter. Cost of interest-bearing liabilities also declined four basis points to 2.28%.

Noninterest income was $6.8 million, up $1.8 million from $4.9 million in the second quarter, primarily because the quarter did not include the $1.9 million pre-tax securities loss recognized in the second quarter when the bank repositioned lower-yielding municipal securities. Noninterest expense increased $494,000 to $26.5 million. The efficiency ratio improved to 54.27% from 55.86%.

The provision for credit losses on loans was $900,000, versus $550,000 in the second quarter, which the company tied to higher loan balances and $647,000 in net charge-offs. Annualized net charge-offs were 0.08% of average loans, versus 0.04% in the second quarter. Nonperforming loans to total loans excluding held-for-sale loans rose to 1.25% at September 30, 2026 from 1.07% at June 30; 0.40% of that ratio was attributed to purchased loans identified before acquisition as having credit deterioration. Nonperforming loans were $38.6 million. The allowance for credit losses to total loans excluding held-for-sale loans was 1.16%.

Shareholders’ equity was $469.8 million at September 30, down from $482.7 million at June 30, primarily a $22.3 million decline in accumulated other comprehensive income from higher long-term rates on available-for-sale securities, partly offset by earnings. The company repurchased 40,000 shares for $1.3 million. ChoiceOne Bank’s total risk-based capital ratio was 12.9%. Potes said the company believes it is well positioned to build on the quarter’s momentum through the remainder of 2026.