A Smooth Transition: Why ChoiceOne Financial's Leadership Shift Positions It for Long-Term Growth

Albert FoxWednesday, May 21, 2025 9:30 am ET
28min read

The departure of Jack G. Hendon as Chairman of

ChoiceOne Financial
(NASDAQ: COFS) on July 5, 2025, marks a pivotal moment for the bank. While leadership transitions often raise questions about institutional stability, this shift is anything but uncertain. Backed by meticulous succession planning, a seasoned incoming leader, and a transformative merger with Fentura Financial, Inc., ChoiceOne is positioned to build on its recent successes and deliver long-term value to shareholders.

A Planned Succession Ensures Continuity

Hendon’s retirement, mandated by the company’s policy, follows a 12-year tenure that saw ChoiceOne grow into one of Michigan’s leading community banks. His successor, Gregory C. McConnell, brings over three decades of banking expertise, including his prior role as Chairman of Capac Bancorp Inc., and a deep understanding of insurance and risk management. This experience aligns seamlessly with ChoiceOne’s post-merger strategy, which prioritizes operational integration, capital efficiency, and community-focused growth.

Roxanne M. Page, appointed Vice Chairwoman, adds critical financial oversight as a CPA and long-serving director. Together, McConnell and Page form a leadership team equipped to navigate the challenges and opportunities arising from the merger with Fentura.

The Merger: A Strategic Masterstroke

The merger with Fentura, completed in Q1 2025, added $1.8 billion in assets and expanded ChoiceOne’s footprint to 56 branches across Michigan. While the integration has incurred short-term costs—Q1 2025 saw a net loss of $13.9 million, largely due to merger-related expenses—the long-term benefits are undeniable:

  • Loan Portfolio Strength: Core loans surged by $1.4 billion post-merger, with organic growth of $40.1 million in Q1 2025. This shift toward higher-yielding loans underscores a strategic pivot away from securities, boosting net interest income.
  • Deposit Growth: Total deposits rose by $1.4 billion, enhancing liquidity and enabling the bank to maintain a robust loan-to-deposit ratio of 80.2%.
  • Capital Resilience: Shareholders’ equity jumped to $426.9 million, with a “well-capitalized” status (11.9% risk-based capital ratio), despite merger dilution effects.

Strategic Priorities: Growth, Efficiency, and Risk Management

  1. Post-Merger Integration: Leadership is prioritizing seamless integration of Fentura’s operations, leveraging synergies to reduce costs and enhance service. The merger’s $4.3 billion combined asset base creates economies of scale, particularly in lending and digital banking.
  2. Cost Discipline: While Q1 2025 noninterest expenses rose by $22 million due to merger costs, the bank remains focused on long-term efficiency. Branch closures and automation efforts aim to offset inflationary pressures.
  3. Asset Quality: Loan portfolios remain pristine, with nonperforming loans at a minimal 0.65% of total loans. The inclusion of PCD loans from Fentura has been fully provisioned, ensuring transparency.
  4. Interest Rate Strategy: Pay-fixed interest rate swaps ($351 million notional value) are mitigating exposure to rate fluctuations, stabilizing net interest margins at 3.43%.

Risks and Mitigation

  • Merger Integration Challenges: While risks exist, McConnell’s banking experience and Page’s financial rigor provide a strong foundation for smooth execution.
  • Economic Uncertainties: A potential downturn in Michigan’s automotive sector (which accounts for 3.4% of loans) is mitigated by diversification into other industries.
  • Regulatory and Competitive Pressures: ChoiceOne’s “well-capitalized” status and community focus differentiate it in a competitive landscape.

Conclusion: A Compelling Investment Case

ChoiceOne’s leadership transition and merger with Fentura represent a strategic inflection point. With a seasoned new leadership team, a strengthened balance sheet, and a clear path to organic and inorganic growth, COFS is positioned to outperform peers.

Action to Take: Investors seeking exposure to a resilient regional bank with a growth catalyst should consider initiating a position in COFS. The stock’s current valuation, combined with its post-merger upside, makes it a compelling buy for long-term investors.

Final Note: Leadership transitions are often a test of institutional strength. In this case, ChoiceOne has passed with flying colors. The future looks bright—for shareholders, customers, and the communities it serves.