ChoiceOne Financial Services, Inc. (OTCPK:COFS) entered into definitive merger agreement to acquire Community Shores Bank Corporation (OTCPK:CSHB) from a group of shareholders for $21.9 million on January 3, 2020. Upon completion of the merger, each share of Community Shores common stock outstanding immediately prior to the merger will be converted into the right to receive, at the election of each such shareholder, an amount of cash equal to $5 or 0.17162 shares of ChoiceOne common stock or a combination thereof, in each case subject to the limitation that the total number of shares of Community Shores to be converted into shares of ChoiceOne will equal not less than 50% and not more than 75% of the total outstanding shares of Community Shores as of the effective time of the merger. The share exchange proration range represents Community Shores' pro forma ownership of 6.8% of ChoiceOne Financial Services assuming 75% stock is elected and 4.7% if 50% stock is elected. Upon the terms and subject to the conditions set forth in the agreement, Community Shores will be merged with and into ChoiceOne, the separate corporate existence of Community Shores shall cease, and ChoiceOne will be the surviving corporation. ChoiceOne Bank will be the name of the institution following the consolidation. In the event of termination, Community Shores is required to pay ChoiceOne a termination fee of $0.88 million. Community Shores Bank Chief Executive Officer and President, Heather Brolick, will continue with ChoiceOne Bank as its Senior Vice President – Human Resources. Community Shores Bank Chief Lending Officer, Brent McCarthy, will serve as Vice President -- Muskegon Market Executive for ChoiceOne Bank. As per June 17, 2020 announcement, Upon consolidation of ChoiceOne Bank and Community Shores Bank, Heather Brolick, President and Chief Executive Officer of Community Shores, will serve as the Chief Human Resources Officer for ChoiceOne Bank. Upon consolidation of ChoiceOne Bank and Community Shores Bank, Community Shores director John Essex Jr. will be named to the ChoiceOne Bank Board of Directors. ChoiceOne Financial Services intends to leverage the experience and expertise of both organizations and will maintain some operational departments in Muskegon, Michigan.

The transaction is subject to certain customary closing conditions, including, among others, receipt of the requisite approval by the shareholders of Community Shores at a special meeting to be held on June 17, 2020, receipt of required regulatory approvals, the absence of any law or order prohibiting completion of the merger, the effectiveness of the registration statement to be filed by ChoiceOne with respect to the shares of ChoiceOne common stock to be issued in the merger, the absence of a material adverse effect, ChoiceOne Financial Services having delivered to Community Shores Bank a certificate signed on behalf of ChoiceOne Financial by its Chief Executive Officer or Chief Financial Officer certifying to the effect that the conditions set forth have been satisfied, Community Shores Bank having delivered to ChoiceOne Financial a certificate, dated as of the closing date and signed on behalf of company by its Chief Executive Officer or Chief Financial Officer certifying to the effect that the conditions set forth have been satisfied, Community Shores Bank having received the opinion of Dickinson Wright PLLC, acting as its counsel, Community Shores Bank's consolidated shareholders' equity being at least $14.5 million as of the final statement date, ChoiceOne Financial Services having received the opinion of Warner Norcross & Judd LLP and number of dissenting shares, if any, not exceeding 20% of the shares of Community Shores Bank's Common Stock entitled to vote at the meeting, the receipt by ChoiceOne from Warner Norcross + Judd LLP and by Community Shores from Dickinson Wright PLLC, of a written opinion, dated as of the closing date, to the effect that the merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and other customary closing conditions. During the special meeting of Community Shores, No approval by ChoiceOne shareholders is required.

The transaction has been unanimously approved by the Boards of Directors of both ChoiceOne and Community Shores. The Board of Community Shores unanimously recommended that its shareholders vote in favor of the transaction. As of June 17, 2020, Community Shores' shareholders approved the transaction. In connection with the merger agreement, ChoiceOne entered into voting agreements with the directors of Community Shores and certain other shareholders, holding approximately 64.1% stake in Community Shores, wherein, each director and shareholder has agreed to vote in favor of the approval of the merger agreement, subject to the exceptions set forth in the voting agreements. ProBank Austin rendered its opinion to the Board of Directors of Community Shores, that the merger consideration to be received by the holders of Community Shores common stock pursuant to the merger is fair, from a financial point of view, to the holders of such common stock. The registration statement was declared effective as of May 1, 2020. On May 14, 2020, ChoiceOne received approval from the Federal Reserve Bank of Chicago, acting under authority delegated by the Board of Governors of the Federal Reserve System, to complete the merger. As of June 2, 2020, the deadline for shareholders to return the election form has been extended to June 24, 2020. The transaction is expected to close in the second quarter of 2020. The consolidation of Community Shores Bank with and into ChoiceOne Bank is expected to occur in the second half of 2020. As of April 27, 2020, the transaction is expected to close in the second half of 2020. As of May 29, 2020, the transaction is expected to be effective on July 1, 2020. The transaction is projected to generate approximately 7% to 10% earnings per share accretion when fully phased in and tangible book value dilution is expected to be earned back in approximately 2.5 to 3 years. Bradley J. Wyatt of Dickinson Wright acted as legal advisor to Community Shores. Jeffrey Ott, Charlie Goode, Emily Cantor, Sean Cook, Norbert Kugele, Rodney Martin, Justin Stemple, Scott Hubbard and Karen VanderWerff of Warner Norcross & Judd LLP acted as legal advisors to ChoiceOne Financial. Craig Mancinotti of ProBank Austin acted as financial advisor and provided fairness opinion to Community Shores. Andrew C. Christians, John C. Donnelly and Gregory H. Cunningham of Donnelly Penman & Partners acted as financial advisors and fairness opinion provider to ChoiceOne Financial Services.