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Note 20 - Regulatory Capital

12 Months Ended

Dec. 31, 2020

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 20 – Regulatory Capital

ChoiceOne and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. Depending upon the capital category to which an institution is assigned, the regulators' corrective powers include: prohibiting the acceptance of brokered deposits; requiring the submission of a capital restoration plan; placing limits on asset growth and restrictions on activities; requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; restricting transactions with affiliates; restricting the interest rate the institution may pay on deposits; ordering a new election of directors of the institution; requiring that senior executive officers or directors be dismissed; prohibiting the institution from accepting deposits from correspondent banks; requiring the institution to divest certain subsidiaries; prohibiting the payment of principal or interest on subordinated debt; and ultimately, appointing a receiver for the institution. At year-end 2020 and 2019, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action.

Actual capital levels and minimum required levels for ChoiceOne and the Bank were as follows:

							Minimum Required
							to be Well
				Minimum Required			Capitalized Under
				for Capital			Prompt Corrective
(Dollars in thousands)	Actual			Adequacy Purposes			Action Regulations
	Amount	Ratio		Amount	Ratio		Amount	Ratio
December 31, 2020
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$ 162,558	13.2	%	$ 98,835	8.0	%	N/A	N/A
Common equity Tier 1 capital (to risk weighted assets)	150,465	12.2		55,595	4.5		N/A	N/A
Tier 1 capital (to risk weighted assets)	150,465	12.2		74,126	6.0		N/A	N/A
Tier 1 capital (to average assets)	150,465	8.3		72,281	4.0		N/A	N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$ 159,684	12.9	%	$ 98,683	8.0	%	$ 123,353	10.0	%
Common equity Tier 1 capital (to risk weighted assets)	152,091	12.3		55,509	4.5		80,180	6.5
Tier 1 capital (to risk weighted assets)	152,091	12.3		74,012	6.0		98,683	8.0
Tier 1 capital (to average assets)	152,091	8.4		72,208	4.0		90,259	5.0

December 31, 2019
ChoiceOne Financial Services Inc.
Total capital (to risk weighted assets)	$ 135,836	14.2	%	$ 76,288	8.0	%	N/A	N/A
Common equity Tier 1 capital (to risk weighted assets)	131,785	13.8		42,912	4.5		N/A	N/A
Tier 1 capital (to risk weighted assets)	131,785	13.8		57,216	6.0		N/A	N/A
Tier 1 capital (to average assets)	131,785	9.6		54,646	4.0		N/A	N/A

ChoiceOne Bank
Total capital (to risk weighted assets)	$ 69,412	13.2	%	$ 42,039	8.0	%	$ 52,549	10.0	%
Common equity Tier 1 capital (to risk weighted assets)	65,362	12.4		23,647	4.5		34,157	6.5
Tier 1 capital (to risk weighted assets)	65,362	12.4		31,530	6.0		42,039	8.0
Tier 1 capital (to average assets)	65,362	10.0		26,179	4.0		32,724	5.0

Lakestone Bank & Trust
Total capital (to risk weighted assets)	$ 63,885	15.0	%	$ 34,056	8.0	%	$ 42,570	10.0	%
Common equity Tier 1 capital (to risk weighted assets)	63,885	15.0		19,156	4.5		27,670	6.5
Tier 1 capital (to risk weighted assets)	63,885	15.0		25,542	6.0		34,056	8.0
Tier 1 capital (to average assets)	63,885	9.0		28,338	4.0		35,423	5.0

Banking regulations limit capital distributions by state-chartered banks. Generally, capital distributions are limited to undistributed net income for the current and prior two years. At December 31, 2020, approximately $14.9 million was available for the banks to pay dividends to ChoiceOne. ChoiceOne’s ability to pay dividends to shareholders is dependent on the payment of dividends from the Bank, which is restricted by state law and regulations.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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